Press Release

Matrix Service Company Reports First Quarter 2020 Results

Nov 6, 2019 at 4:05 PM EST
Announces share repurchase of up to $20.0 million

TULSA, Okla., Nov. 06, 2019 (GLOBE NEWSWIRE) -- Matrix Service Company (Nasdaq: MTRX), a leading contractor to the energy and industrial markets across North America, today reported financial results for its first quarter of fiscal 2020.

Key highlights:

  • Revenue increased by 6.2% to $338.1 million compared to $318.5 million in the first quarter of the prior fiscal year
  • Fully diluted earnings per share increased 175.0% to $0.22 in the first quarter compared to $0.08 in the first quarter of the prior fiscal year
  • Backlog at $1.082 billion compared to $1.098 billion at June 30, 2019; book-to-bill of 1.0 for the quarter on $321.7 million of project awards, led by Storage Solutions and Oil Gas & Chemical
  • Liquidity increased by 27.5% to $308.3 million at September 30, 2019 from $241.9 million at June 30, 2019, and by 138.5% from $129.3 million at September 30, 2018
  • Affirms guidance of $1.40 to $1.55 billion of revenue and earnings per fully diluted share of $1.10 to $1.40

“Our first quarter results were led by continued strong operating performance in our Storage Solutions and Industrial segments. These strong results were partially offset by a lower than anticipated margin on a project in the Oil Gas & Chemical segment and continued under-performance in the power delivery portion of our Electrical Infrastructure segment,” said John R. Hewitt, President and Chief Executive Officer.

“The diversity of our business coupled with our current backlog and project opportunity pipeline, supports the current fiscal year guidance and longer-term growth strategy. Looking forward, our healthy liquidity profile will allow us to both return value to shareholders through our planned share repurchase, which will occur throughout the remainder of the second quarter, as well as leverage our broad capabilities to grow the business.”

First Quarter Fiscal 2020 Results

Consolidated revenue was $338.1 million for the three months ended September 30, 2019, compared to $318.5 million in the same period in the prior year.  On a segment basis, consolidated revenue increased in the Storage Solutions and Industrial segments by $37.3 million and $13.4 million, respectively.  These increases were partially offset by decreases in consolidated revenue in the Oil Gas & Chemical and Electrical Infrastructure segments of $18.0 million and $13.2 million, respectively.

Consolidated gross profit increased to $32.5 million in the three months ended September 30, 2019 compared to $23.4 million in the same period in the prior year.  The gross margin increased to 9.6% in the three months ended September 30, 2019 compared to 7.4% in the same period in the prior year.  The fiscal 2020 gross margin was positively impacted by strong project execution in the Storage Solutions segment.  The Oil Gas & Chemical segment performed well with the exception of under recovery of construction overhead costs caused by lower revenue and lower than expected margin on one project. The performance of the power delivery portion of the Electrical Infrastructure segment was impacted by a transmission and distribution project charge and low revenue volumes which led to under recovery of construction overhead costs.

Consolidated SG&A expenses were $23.7 million in the three months ended September 30, 2019 compared to $21.2 million in the same period in the prior year.  This increase was primarily due to improved operating results, which led to higher incentive compensation expense, and investments in personnel to support the ongoing growth of our business.

Our effective tax rate for the three months ended September 30, 2019 was 30.6% compared to 16.4% for the same period a year ago.  The effective tax rate in fiscal 2020 was negatively impacted by $0.3 million of excess tax expense related to the vesting of stock-based compensation.  The effective tax rate for the three months ended September 30, 2018 was positively impacted by $0.3 million of excess tax benefits related to the vesting of stock-based compensation. We still expect our effective tax rate to be approximately 27.0% for the remainder of the fiscal year.

For the three months ended September 30, 2019 net income was $6.2 million, or $0.22 per fully diluted share, compared to $2.3 million or $0.08 per fully diluted share in the prior year.


Backlog at September 30, 2019 was $1.082 billion compared to $1.098 billion at June 30, 2019.  The quarterly book-to-bill ratio was 1.0 on project awards of $321.7 million.

Financial Position

At September 30, 2019 the Company had total liquidity of $308.3 million, which includes a cash balance of $139.9 million and availability under the credit facility.  This represents an increase of $66.4 million since June 30, 2019.  The Company's outstanding borrowings were $11.4 million at September 30, 2019.

The Company announces a share repurchase of up to $20.0 million to be executed through open market purchases of the Company's common shares during the remainder of the second quarter of fiscal 2020.

Outlook and Guidance

The outlook for our Storage Solutions and Oil Gas & Chemical segments remain positive.  We expect Storage Solutions volumes to remain strong throughout the fiscal year.  Increasing work on capital construction projects as well as increased maintenance and repair work should lead to increasing Oil Gas & Chemical revenue as we move through the rest of the fiscal year.  Our Industrial segment, which has performed well over the last two years, will likely soften in the second half of the year due to weakness in pricing of certain commodities. However, our long-term outlook for this segment remains positive. Finally, in our Electrical Infrastructure segment, we continue to focus on operating improvements in the power delivery portion of the business.

Although uncertainty surrounding the current economic and political environment can impact the timing and volume of project awards and starts, we do not anticipate any significant impact on the current fiscal year.  Therefore, the Company is maintaining fiscal 2020 guidance of revenue between $1.40 billion and $1.55 billion and earnings per fully diluted share of between $1.10 and $1.40.

Conference Call / Webcast Details

In conjunction with the earnings release, Matrix Service Company will host a conference call / webcast with John R. Hewitt, President and CEO, and Kevin S. Cavanah, Vice President and CFO.  The call will take place at 10:30 a.m. (Eastern) / 9:30 a.m. (Central) on Thursday, November 7, 2019 and will be simultaneously broadcast live over the Internet which can be accessed at the Company’s website at on the Investors’ page under Conference Calls/Events.  Please allow extra time prior to the call to visit the site and download the streaming media software required to listen to the Internet broadcast.  The conference call will be recorded and will be available for replay within one hour of completion of the live call and can be accessed following the same link as the live call.

About Matrix Service Company

Founded in 1984, Matrix Service Company (Nasdaq: MTRX) is parent to a family of companies that includes Matrix PDM Engineering, Matrix Service Inc., Matrix NAC, and Matrix Applied Technologies. Our companies design, build and maintain infrastructure critical to North America's energy and industrial markets. Matrix Service Company is headquartered in Tulsa, Oklahoma with offices located throughout the United States and Canada, as well as Sydney, Australia and Seoul, South Korea.

The Company reports its financial results based on four key operating segments: Electrical Infrastructure, Storage Solutions, Oil Gas & Chemical and Industrial.  To learn more about Matrix Service Company, visit

With a culture driven by its core values of safety, integrity, stewardship, positive relationships, community involvement and delivering the best, Matrix has twice been named to Forbes Top 100 Most Trustworthy Companies in America and is consistently recognized as a Great Place to Work®.

This release contains forward-looking statements that are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are generally accompanied by words such as “anticipate,” “continues,” “expect,” “forecast,” “outlook,” “believe,” “estimate,” “should” and “will” and words of similar effect that convey future meaning, concerning the Company’s operations, economic performance and management’s best judgment as to what may occur in the future. Future events involve risks and uncertainties that may cause actual results to differ materially from those we currently anticipate. The actual results for the current and future periods and other corporate developments will depend upon a number of economic, competitive and other influences, including those factors discussed in the “Risk Factors” and “Forward Looking Statements” sections and elsewhere in the Company’s reports and filings made from time to time with the Securities and Exchange Commission. Many of these risks and uncertainties are beyond the control of the Company, and any one of which, or a combination of which, could materially and adversely affect the results of the Company's operations and its financial condition. We undertake no obligation to update information contained in this release, except as required by law.

For more information, please contact:

Kevin S. Cavanah
Vice President and CFO
T: 918-838-8822

Kellie Smythe
Senior Director, Investor Relations
T: 918-359-8267

Matrix Service Company
Condensed Consolidated Statements of Income
(In thousands, except per share data)

  Three Months Ended
  September 30,
  September 30,
Revenues $ 338,097     $ 318,511  
Cost of revenues 305,632     295,090  
Gross profit 32,465     23,421  
Selling, general and administrative expenses 23,691     21,201  
Operating income 8,774     2,220  
Other income (expense):      
Interest expense (389 )   (292 )
Interest income 474     282  
Other 3     546  
Income before income tax expense 8,862     2,756  
Provision for federal, state and foreign income taxes 2,711     451  
Net income $ 6,151     $ 2,305  
Basic earnings per common share $ 0.23     $ 0.09  
Diluted earnings per common share $ 0.22     $ 0.08  
Weighted average common shares outstanding:      
Basic 26,935     26,921  
Diluted 27,575     27,589  

Matrix Service Company
Condensed Consolidated Balance Sheets
(In thousands)

  September 30,
  June 30,
Current assets:      
Cash and cash equivalents $ 139,889     $ 89,715  
Accounts receivable, less allowances (September 30, 2019— $1,091 and June 30, 2019—$923) 214,614     218,432  
Costs and estimated earnings in excess of billings on uncompleted contracts 65,996     96,083  
Inventories 7,561     8,017  
Income taxes receivable 1,337     29  
Other current assets 9,969     5,034  
Total current assets 439,366     417,310  
Property, plant and equipment at cost:      
Land and buildings 41,057     41,179  
Construction equipment 92,142     91,793  
Transportation equipment 55,179     52,526  
Office equipment and software 44,164     43,632  
Construction in progress 7,563     7,619  
Total property, plant and equipment - at cost 240,105     236,749  
Accumulated depreciation (158,589 )   (157,414 )
Property, plant and equipment - net 81,516     79,335  
Operating lease right-of-use assets 23,595      
Goodwill 93,300     93,368  
Other intangible assets 18,516     19,472  
Deferred income taxes 2,719     2,683  
Other assets 13,742     21,226  
Total assets $ 672,754     $ 633,394  

Matrix Service Company
Condensed Consolidated Balance Sheets (continued)
(In thousands, except share data)

  September 30,
  June 30,
Liabilities and stockholders’ equity      
Current liabilities:      
Accounts payable $ 96,984     $ 114,647  
Billings on uncompleted contracts in excess of costs and estimated earnings 130,191     105,626  
Accrued wages and benefits 34,214     38,357  
Accrued insurance 9,539     9,021  
Operating lease liabilities 8,660      
Income taxes payable     2,517  
Other accrued expenses 5,721     5,331  
Total current liabilities 285,309     275,499  
Deferred income taxes 2,346     298  
Operating lease liabilities 15,998      
Borrowings under senior secured revolving credit facility 11,366     5,347  
Other liabilities 308     293  
Total liabilities 315,327     281,437  
Commitments and contingencies      
Stockholders’ equity:      
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of September 30, 2019 and June 30, 2019; 27,131,446 and 26,807,203 shares outstanding as of September 30, 2019 and June 30, 2019 279     279  
Additional paid-in capital 132,936     137,712  
Retained earnings 245,627     239,476  
Accumulated other comprehensive loss (8,145 )   (7,751 )
  370,697     369,716  
Less: Treasury stock, at cost — 756,771 shares as of September 30, 2019, and 1,081,014 shares as of June 30, 2019 (13,270 )   (17,759 )
Total stockholders' equity 357,427     351,957  
Total liabilities and stockholders’ equity $ 672,754     $ 633,394  

Matrix Service Company
Results of Operations
(In thousands)

  Three Months Ended
  September 30,
  September 30,
Gross revenues      
Electrical Infrastructure $ 31,532     $ 44,701  
Oil Gas & Chemical 57,786     75,562  
Storage Solutions 150,752     113,767  
Industrial 99,287     85,557  
Total gross revenues $ 339,357     $ 319,587  
Less: Inter-segment revenues      
Oil Gas & Chemical $ 256     $ 71  
Storage Solutions 685     1,005  
Industrial 319      
Total inter-segment revenues $ 1,260     $ 1,076  
Consolidated revenues      
Electrical Infrastructure $ 31,532     $ 44,701  
Oil Gas & Chemical 57,530     75,491  
Storage Solutions 150,067     112,762  
Industrial 98,968     85,557  
Total consolidated revenues $ 338,097     $ 318,511  
Gross profit      
Electrical Infrastructure $ 104     $ 3,383  
Oil Gas & Chemical 3,635     5,625  
Storage Solutions 21,055     9,553  
Industrial 7,671     4,860  
Total gross profit $ 32,465     $ 23,421  
Operating income (loss)      
Electrical Infrastructure $ (1,844 )   $ 657  
Oil Gas & Chemical (1,773 )   514  
Storage Solutions 9,452     285  
Industrial 2,939     764  
Total operating income $ 8,774     $ 2,220  


We define backlog as the total dollar amount of revenue that we expect to recognize as a result of performing work that has been awarded to us through a signed contract, limited notice to proceed or other type of assurance that we consider firm.  The following arrangements are considered firm:

  • fixed-price awards;

  • minimum customer commitments on cost plus arrangements; and

  • certain time and material arrangements in which the estimated value is firm or can be estimated with a reasonable amount of certainty in both timing and amounts.

For long-term maintenance contracts with no minimum commitments and other established customer agreements, we include only the amounts that we expect to recognize as revenue over the next 12 months.  For arrangements in which we have received a limited notice to proceed, we include the entire scope of work in our backlog if  we conclude that the likelihood of the full project proceeding is high.  For all other arrangements, we calculate backlog as the estimated contract amount less revenues recognized as of the reporting date.

The following table provides a summary of changes in our backlog for the three months ended September 30, 2019:

  Oil Gas &
  Industrial   Total
  (In thousands)
Backlog as of June 30, 2019 $ 73,883     $ 134,563     $ 641,295     $ 248,608     1,098,349  
Project awards 30,312     91,160     143,467     56,749     321,688  
Revenue recognized (31,532 )   (57,530 )   (150,067 )   (98,968 )   (338,097 )
Backlog as of September 30, 2019 $ 72,663     $ 168,193     $ 634,695     $ 206,389     $ 1,081,940  
Book-to-bill ratio(1) 1.0     1.6     1.0     0.6     1.0  

(1)     Calculated by dividing project awards by revenue recognized during the period.

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Source: Matrix Service Company