Matrix Service Company Reports First Quarter Fiscal 2023 Results
Key highlights:
- First quarter revenue of
$208.4 million , an increase of 24% compared to the first quarter of fiscal 2022 and a 4% increase compared to the fourth quarter of fiscal 2022 - Project awards in the quarter of
$234 .6 million, a 20% increase compared to the fourth quarter of fiscal 2022, resulting in a book-to-bill of 1.1 for the quarter; backlog increased to$615.7 million - Additional notable project awards subsequent to the end of the quarter, include a recently announced LNG peak shaving upgrade project as well as a large-scale specialty vessel
- Adjusted EBITDA of
$0.8 million (1) for the first quarter of fiscal 2023 on improving margins, an increase from$(12.0) million in the prior quarter - Loss per share of
$0.24 ; adjusted loss per share of$0.15 (1) excluding one-time items
“Our first quarter results demonstrate the improving performance of our business,” said
Earnings Summary
Revenue in the first quarter of fiscal 2023 was
In the Storage and Terminals Solutions segment, gross margin of 9.8% for the quarter was primarily the result of strong execution across the storage business, including projects supporting lower carbon investments, partially offset by under recovered overhead costs.
In the Process and Industrial Facilities segment, first quarter gross margin of 5.0% improved but was negatively impacted by under recovered overhead costs and work on a midstream gas processing project that experienced increases in forecasted costs to complete in the prior year, which reduced the remaining margin realized on the project.
In the Utility and Power Infrastructure segment, first quarter gross margin was 3.8%, also due to under recovered overhead costs and work on a large capital project that experienced increases in forecasted costs to complete in the prior year, which reduced the remaining margin realized on the project.
We had
Our effective tax rates for the three months ended
For the three months ended
Backlog
Our backlog as of
The table below summarizes our awards, book-to-bill ratios and backlog by segment for our first fiscal quarter (amounts are in thousands, except for book-to-bill ratios):
| Three Months Ended |
Backlog as of | |||||||
| Segment: | Awards | Book-to-Bill(1) | ||||||
| Utility and Power Infrastructure | $ | 42,618 | 0.9 | $ | 99,807 | |||
| Process and Industrial Facilities | 59,982 | 0.7 | 265,641 | |||||
| Storage and Terminal Solutions | 132,028 | 1.7 | 250,209 | |||||
| Total | $ | 234,628 | 1.1 | $ | 615,657 | |||
_______________
(1) Calculated by dividing project awards by revenue recognized during the period.
Subsequent to the end of the quarter, during the month of October, the Company has already been awarded greater than
Financial Position
At
As a result of rising revenue volumes, especially for cost-reimbursable and maintenance-type work, our investment in working capital has increased during the first quarter of fiscal 2023, which is the primary driver of the decrease in liquidity since
(1)Non-GAAP Financial Measure
Adjusted loss and adjusted loss per share are non-GAAP financial measures which exclude the financial impact of a valuation allowance placed on our deferred tax assets, the accelerated amortization of deferred debt amendment fees associated with the prior credit agreement and restructuring costs. Adjusted EBITDA is a non-GAAP financial measure which excludes restructuring costs, stock-based compensation, interest expense, provision for income taxes and depreciation and amortization expense. See the Non-GAAP Financial Measures section included at the end of this release for a reconciliation to net loss and net loss per share.
Conference Call Details
In conjunction with the earnings release,
About
The Company reports its financial results in three key operating segments: Utility and Power Infrastructure, Process and Industrial Facilities, and Storage and Terminal Solutions.
With a focus on sustainability, building strong Environment, Social and Governance (ESG) practices, and living our core values, Matrix ranks among the Top Contractors by Engineering-News Record, was recognized for its Board diversification, is an active signatory to CEO Action for Diversity and Inclusion, and is consistently recognized as a
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 the successful implementation of the Company's business improvement plan and the 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
For more information, please contact:
Vice President and CFO
T: 918-838-8822
Email:kcavanah@matrixservicecompany.com
Senior Director, Investor Relations
T: 918-359-8267
Email: ksmythe@matrixservicecompany.com
Condensed Consolidated Statements of Income (unaudited) (In thousands, except per share data) |
||||||||
| Three Months Ended | ||||||||
2022 |
2021 |
|||||||
| Revenue | $ | 208,431 | $ | 168,093 | ||||
| Cost of revenue | 195,423 | 171,601 | ||||||
| Gross profit (loss) | 13,008 | (3,508 | ) | |||||
| Selling, general and administrative expenses | 16,811 | 16,629 | ||||||
| Restructuring costs | 1,287 | 605 | ||||||
| Operating loss | (5,090 | ) | (20,742 | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | (372 | ) | (1,999 | ) | ||||
| Interest income | 24 | 21 | ||||||
| Other | (1,074 | ) | (83 | ) | ||||
| Loss before income tax benefit | (6,512 | ) | (22,803 | ) | ||||
| Benefit for federal, state and foreign income taxes | — | (5,265 | ) | |||||
| Net loss | $ | (6,512 | ) | $ | (17,538 | ) | ||
| Basic loss per common share | $ | (0.24 | ) | $ | (0.66 | ) | ||
| Diluted loss per common share | $ | (0.24 | ) | $ | (0.66 | ) | ||
| Weighted average common shares outstanding: | ||||||||
| Basic | 26,862 | 26,611 | ||||||
| Diluted | 26,862 | 26,611 | ||||||
Condensed Consolidated Balance Sheets (unaudited) (In thousands) |
|||||
2022 |
2022 |
||||
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents | $ | 14,342 | $ | 52,371 | |
| Accounts receivable, less allowances ( |
149,345 | 153,879 | |||
| Costs and estimated earnings in excess of billings on uncompleted contracts | 59,609 | 44,752 | |||
| Inventories | 8,379 | 9,974 | |||
| Income taxes receivable | 13,546 | 13,547 | |||
| Prepaid expenses | 9,833 | 4,024 | |||
| Other current assets | 5,550 | 8,865 | |||
| Total current assets | 260,604 | 287,412 | |||
| Restricted cash | 25,000 | 25,000 | |||
| Property, plant and equipment - net | 51,659 | 53,869 | |||
| Operating lease right-of-use assets | 21,185 | 22,067 | |||
| 41,916 | 42,135 | ||||
| Other intangible assets, net of accumulated amortization | 4,364 | 4,796 | |||
| Other assets, non-current | 6,184 | 5,514 | |||
| Total assets | $ | 410,912 | $ | 440,793 | |
Condensed Consolidated Balance Sheets (continued) (unaudited) (In thousands, except share data) |
|||||||
2022 |
2022 |
||||||
| Liabilities and stockholders’ equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 68,557 | $ | 74,886 | |||
| Billings on uncompleted contracts in excess of costs and estimated earnings | 53,286 | 65,106 | |||||
| Accrued wages and benefits | 16,643 | 21,526 | |||||
| Accrued insurance | 6,981 | 6,125 | |||||
| Operating lease liabilities | 4,895 | 5,715 | |||||
| Other accrued expenses | 4,236 | 4,427 | |||||
| Total current liabilities | 154,598 | 177,785 | |||||
| Deferred income taxes | 23 | 26 | |||||
| Operating lease liabilities | 19,698 | 19,904 | |||||
| Borrowings under asset-backed credit facility | 15,000 | 15,000 | |||||
| Other liabilities, non-current | 342 | 372 | |||||
| Total liabilities | 189,661 | 213,087 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ equity: | |||||||
| Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of |
279 | 279 | |||||
| Additional paid-in capital | 137,651 | 139,854 | |||||
| Retained earnings | 104,766 | 111,278 | |||||
| Accumulated other comprehensive loss | (9,928 | ) | (8,175 | ) | |||
| 232,768 | 243,236 | ||||||
| (11,517 | ) | (15,530 | ) | ||||
| Total stockholders' equity | 221,251 | 227,706 | |||||
| Total liabilities and stockholders’ equity | $ | 410,912 | $ | 440,793 | |||
Results of Operations (unaudited) (In thousands) |
|||||||
| Three Months Ended | |||||||
2022 |
2021 |
||||||
| Gross revenue | |||||||
| Utility and Power Infrastructure | $ | 44,870 | $ | 57,204 | |||
| Process and Industrial Facilities | 86,745 | 45,210 | |||||
| Storage and Terminal Solutions | 77,290 | 68,312 | |||||
| Total gross revenue | $ | 208,905 | $ | 170,726 | |||
| Less: Inter-segment revenue | |||||||
| Process and Industrial Facilities | $ | 117 | $ | 1,305 | |||
| Storage and Terminal Solutions | 357 | 1,328 | |||||
| Total inter-segment revenue | $ | 474 | $ | 2,633 | |||
| Consolidated revenue | |||||||
| Utility and Power Infrastructure | $ | 44,870 | $ | 57,204 | |||
| Process and Industrial Facilities | 86,628 | 43,905 | |||||
| Storage and Terminal Solutions | 76,933 | 66,984 | |||||
| Total consolidated revenue | $ | 208,431 | $ | 168,093 | |||
| Gross profit (loss) | |||||||
| Utility and Power Infrastructure | $ | 1,714 | $ | (6,107 | ) | ||
| Process and Industrial Facilities | 4,330 | 2,871 | |||||
| Storage and Terminal Solutions | 7,564 | 413 | |||||
| Corporate | (600 | ) | (685 | ) | |||
| Total gross profit (loss) | $ | 13,008 | $ | (3,508 | ) | ||
| Selling, general and administrative expenses | |||||||
| Utility and Power Infrastructure | $ | 1,738 | $ | 3,050 | |||
| Process and Industrial Facilities | 4,070 | 2,762 | |||||
| Storage and Terminal Solutions | 4,158 | 4,506 | |||||
| Corporate | 6,845 | 6,311 | |||||
| Total selling, general and administrative expenses | $ | 16,811 | $ | 16,629 | |||
| Restructuring costs | |||||||
| Utility and Power Infrastructure | $ | 37 | $ | 9 | |||
| Process and Industrial Facilities | 315 | 7 | |||||
| Storage and Terminal Solutions | 522 | (33 | ) | ||||
| Corporate | 413 | 622 | |||||
| Total restructuring costs | $ | 1,287 | $ | 605 | |||
| Operating income (loss) | |||||||
| Utility and Power Infrastructure | $ | (61 | ) | $ | (9,166 | ) | |
| Process and Industrial Facilities | (55 | ) | 102 | ||||
| Storage and Terminal Solutions | 2,884 | (4,060 | ) | ||||
| Corporate | (7,858 | ) | (7,618 | ) | |||
| Total operating loss | $ | (5,090 | ) | $ | (20,742 | ) | |
Backlog
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 ("LNTP"), we include the entire scope of work in our backlog if we conclude that the likelihood of the full project proceeding as high. For all other arrangements, we calculate backlog as the estimated contract amount less revenue recognized as of the reporting date.
The following table provides a summary of changes in our backlog for the three months ended
| Utility and Power Infrastructure |
Process and Industrial Facilities |
Storage and Terminal Solutions |
Total | ||||||||||||
| (In thousands) | |||||||||||||||
| Backlog as of |
$ | 102,059 | $ | 292,287 | $ | 195,114 | $ | 589,460 | |||||||
| Project awards | 42,618 | 59,982 | 132,028 | 234,628 | |||||||||||
| Revenue recognized | (44,870 | ) | (86,628 | ) | (76,933 | ) | (208,431 | ) | |||||||
| Backlog as of |
$ | 99,807 | $ | 265,641 | $ | 250,209 | $ | 615,657 | |||||||
| Book-to-bill ratio(1) | 0.9 | 0.7 | 1.7 | 1.1 | |||||||||||
_______________
(1) Calculated by dividing project awards by revenue recognized during the period.
Non-GAAP Financial Measures
In order to more clearly depict our core profitability, the following tables present our operating results after certain adjustments:
| Reconciliation of Net Loss to Adjusted Net Loss(1) (In thousands, except per share data) |
||||||||
| Three Months Ended | ||||||||
2022 |
2021 |
|||||||
| Net loss, as reported | $ | (6,512 | ) | $ | (17,538 | ) | ||
| Restructuring costs | 1,287 | 605 | ||||||
| Accelerated amortization of deferred debt amendment fees(2) | — | 1,518 | ||||||
| Tax impact of above adjustments | (331 | ) | (546 | ) | ||||
| Deferred tax asset valuation allowance(3) | 1,394 | — | ||||||
| Adjusted net loss | $ | (4,162 | ) | $ | (15,961 | ) | ||
| Loss per share, as reported | $ | (0.24 | ) | $ | (0.66 | ) | ||
| Adjusted loss per share | $ | (0.15 | ) | $ | (0.60 | ) | ||
_______________
(1) This table presents non-GAAP financial measures of our adjusted net loss and adjusted loss per share for the three months ended
(2) Interest expense in fiscal 2022 included
(3) We placed a full valuation allowance on our deferred tax assets in the second quarter of fiscal 2022 due to the existence of a cumulative loss over a three-year period. We will continue to place valuation allowances on newly generated deferred tax assets and will realize the benefit associated with the deferred tax assets for which the valuation allowance has been provided to the extent we generate taxable income in the future, or cumulative losses are no longer present and our future projections for growth or tax planning strategies are demonstrated. We placed a valuation allowance of
| Three Months Ended | |||||||
2022 |
2021 |
||||||
| (In thousands) | |||||||
| Net loss | $ | (6,512 | ) | $ | (17,538 | ) | |
| Restructuring costs | 1,287 | 605 | |||||
| Stock-based compensation | 2,055 | 1,869 | |||||
| Interest expense | 372 | 1,999 | |||||
| Provision (benefit) for income taxes | — | (5,265 | ) | ||||
| Depreciation and amortization | 3,642 | 4,052 | |||||
| Adjusted EBITDA | $ | 844 | $ | (14,278 | ) | ||
_______________
(1) This table presents Adjusted EBITDA, which we define as net loss before restructuring costs, stock-based compensation expense, interest expense, income taxes, and depreciation and amortization, because it is used by the financial community as a method of measuring our performance and of evaluating the market value of companies considered to be in similar businesses. We believe that the line item on our Consolidated Statements of Income entitled “Net loss” is the most directly comparable GAAP measure to Adjusted EBITDA. Since Adjusted EBITDA is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net earnings as an indicator of operating performance. Adjusted EBITDA, as we calculate it, may not be comparable to similarly titled measures employed by other companies. In addition, this measure is not a measure of our ability to fund our cash needs. As Adjusted EBITDA excludes certain financial information compared with net loss, the most directly comparable GAAP financial measure, users of this financial information should consider the type of events and transactions that are excluded. Adjusted EBITDA has certain material limitations as follows:
- It does not include restructuring costs. Restructuring costs represent material costs that we incurred and are oftentimes cash expenses. Therefore, any measure that excludes restructuring costs has material limitations.
- It does not include stock-based compensation. Stock-based compensation represents material amounts of equity that are awarded to our employees and directors for services rendered. While the expense is non-cash, we release vested shares out of our treasury stock, which has historically been replenished by using cash to periodically repurchase our stock. Therefore, any measure that excludes stock-based compensation has material limitations.
- It does not include interest expense. Because we have borrowed money to finance our operations and to acquire businesses, pay commitment fees to maintain our senior secured revolving credit facility, and incur fees to issue letters of credit under the senior secured revolving credit facility, interest expense is a necessary and ongoing part of our costs and has assisted us in generating revenue. Therefore, any measure that excludes interest expense has material limitations.
- It does not include income taxes. Because the payment of income taxes is a necessary and ongoing part of our operations, any measure that excludes income taxes has material limitations.
- It does not include depreciation or amortization expense. Because we use capital and intangible assets to generate revenue, depreciation and amortization expense is a necessary element of our cost structure. Therefore, any measure that excludes depreciation or amortization expense has material limitations.
Source: Matrix Service Company
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