Matrix Service Company Reports First Quarter Results; Affirms Fiscal 2018 Guidance
TULSA, Okla., Nov. 07, 2017 (GLOBE NEWSWIRE) -- Matrix Service Company (Nasdaq:MTRX), a leading contractor to the energy, power and industrial markets across North America, today reported financial results for its first quarter ended September 30, 2017.
Key highlights:
- Company earned $0.14 per fully diluted share in the first quarter
- Solid book-to-bill of 1.2 achieved on project awards of $316.4 million, up 21.8% over the same period a year ago
- Backlog increased to $728.8 million at September 30, 2017 compared to $682.3 million at June 30, 2017
- Consolidated gross margins are 10.7% on strong project execution
- Balance sheet remains strong; liquidity increased to $131.8 million
"We are pleased with our first quarter results," said Matrix Service Company President and Chief Executive Officer John R. Hewitt. "Across all segments, our people exhibited solid project execution and we continue to focus on improved efficiencies while maintaining the resources needed to meet strong project opportunity demands. As expected, we are seeing improved work volume across most of the business, demonstrating the value of our strategic diversification as well as improving market conditions."
Hewitt added, "While pleased with our first quarter results and our position in the market, the timing of project awards and starts continues to be a risk and, accordingly, we are maintaining our fiscal 2018 guidance."
First Quarter Fiscal 2018 Results
Consolidated revenue was $269.9 million for the three months ended September 30, 2017, compared to $341.8 million in the same period in the prior fiscal year. The decrease is primarily attributable to our Storage Solutions segment, which is experiencing lower volumes. Specifically, prior year's revenue was higher than normal due to an historically large amount of work performed in connection with the construction of crude gathering terminals that support the Dakota Access pipeline. This decrease is partially offset by higher volumes in our Oil Gas & Chemical segment as well as higher iron and steel work in our Industrial segment.
Consolidated gross profit was $28.9 million in the three months ended September 30, 2017 compared to $32.3 million in the three months ended September 30, 2016. The gross margin was 10.7% in the three months ended September 30, 2017 compared to 9.4% in the same period in the prior fiscal year. The increase in gross margin in fiscal 2018 is primarily attributable to strong project execution and close-outs, the inclusion of higher margin engineering work as well as improved construction overhead cost recovery. Consolidated SG&A expenses were $21.6 million in the three months ended September 30, 2017 compared to $18.0 million in the same period a year earlier. The increase in fiscal 2018 is primarily attributable to the addition of the Houston Interests operations in December 2016, including the amortization on intangible assets associated with the acquisition.
Our effective tax rate for the three months ended September 30, 2017 was 44.5% compared to 33.6% in the same period last year. The fiscal 2018 effective tax rate was negatively affected by a stock compensation tax adjustment of $0.5 million, while the fiscal 2017 effective tax rate benefited from a favorable stock compensation tax adjustment of $0.4 million.
As a result of the factors discussed above, the Company earned net income of $3.8 million, or $0.14 per fully diluted share in the first quarter of fiscal 2018 compared to $9.3 million, or $0.35 in the prior year.
Backlog
Backlog at September 30, 2017 was $728.8 million compared to $682.3 million at June 30, 2017 on project awards of $316.4 million. Project awards during the three months ended September 30, 2017 were 20.4% higher than the three months ended June 30, 2017 and 21.8% higher than the three months ended September 30, 2016.
Financial Position
Availability under the Company's credit facility of $85.7 million along with the Company's cash balance of $46.1 million provided liquidity of $131.8 million at September 30, 2017, an increase of $9.6 million since June 30, 2017. This increase is primarily attributable to a reduction in the capacity constraint triggered by the Company's financial performance in the quarter and operating cash flows. The Company's liquidity continues to support its long-term strategic growth plans.
Earnings Guidance
The Company is maintaining fiscal 2018 guidance with revenue between $1.225 billion and $1.325 billion and earnings between $0.55 and $0.75 per fully diluted share.
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 1:00 p.m. (Eastern) / 12:00 p.m. (Central) on Tuesday, November 7, 2017 and will be simultaneously broadcast live over the Internet which can be accessed at the Company's website at matrixservicecompany.com 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 is parent to a family of companies that include Matrix Service, Matrix NAC, Matrix PDM Engineering and Matrix Applied Technologies. Our subsidiaries design, build and maintain infrastructure critical to North America's energy, power and industrial markets. Matrix Service Company is headquartered in Tulsa, Oklahoma with subsidiary 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 matrixservicecompany.com.
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:
Matrix Service Company
Kevin S. Cavanah
Vice President and CFO
T: 918-838-8822
Email: kcavanah@matrixservicecompany.com
| Matrix Service Company Condensed Consolidated Statements of Income (unaudited) (In thousands, except per share data) | ||||||||
| Three Months Ended | ||||||||
| September 30, | September 30, | |||||||
| 2017 | 2016 | |||||||
| Revenues | $ | 269,910 | $ | 341,781 | ||||
| Cost of revenues | 241,019 | 309,503 | ||||||
| Gross profit | 28,891 | 32,278 | ||||||
| Selling, general and administrative expenses | 21,570 | 17,977 | ||||||
| Operating income | 7,321 | 14,301 | ||||||
| Other income (expense): | ||||||||
| Interest expense | (618 | ) | (243 | ) | ||||
| Interest income | 39 | 12 | ||||||
| Other | 149 | 7 | ||||||
| Income before income tax expense | 6,891 | 14,077 | ||||||
| Provision for federal, state and foreign income taxes | 3,067 | 4,735 | ||||||
| Net income | $ | 3,824 | $ | 9,342 | ||||
| Basic earnings per common share | $ | 0.14 | $ | 0.35 | ||||
| Diluted earnings per common share | $ | 0.14 | $ | 0.35 | ||||
| Weighted average common shares outstanding: | ||||||||
| Basic | 26,655 | 26,387 | ||||||
| Diluted | 26,762 | 26,796 | ||||||
| Matrix Service Company Condensed Consolidated Balance Sheets (unaudited) (In thousands) | ||||||||
| September 30, | June 30, | |||||||
| 2017 | 2017 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 46,085 | $ | 43,805 | ||||
| Accounts receivable, less allowances (September 30, 2017— $9,889 and June 30, 2017—$9,887) | 218,678 | 210,953 | ||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts | 65,953 | 91,180 | ||||||
| Inventories | 4,269 | 3,737 | ||||||
| Income taxes receivable | 3,649 | 4,042 | ||||||
| Other current assets | 8,991 | 4,913 | ||||||
| Total current assets | 347,625 | 358,630 | ||||||
| Property, plant and equipment at cost: | ||||||||
| Land and buildings | 39,397 | 38,916 | ||||||
| Construction equipment | 96,325 | 94,298 | ||||||
| Transportation equipment | 48,645 | 48,574 | ||||||
| Office equipment and software | 36,702 | 36,556 | ||||||
| Construction in progress | 3,459 | 5,952 | ||||||
| Total property, plant and equipment - at cost | 224,528 | 224,296 | ||||||
| Accumulated depreciation | (146,603 | ) | (144,022 | ) | ||||
| Property, plant and equipment - net | 77,925 | 80,274 | ||||||
| Goodwill | 113,860 | 113,501 | ||||||
| Other intangible assets | 24,831 | 26,296 | ||||||
| Deferred income taxes | 2,568 | 3,385 | ||||||
| Other assets | 5,645 | 3,944 | ||||||
| Total assets | $ | 572,454 | $ | 586,030 | ||||
| Matrix Service Company Condensed Consolidated Balance Sheets (continued) (unaudited) (In thousands, except share data) | ||||||||
| September 30, | June 30, | |||||||
| 2017 | 2017 | |||||||
| Liabilities and stockholders' equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 90,894 | $ | 105,649 | ||||
| Billings on uncompleted contracts in excess of costs and estimated earnings | 65,559 | 75,127 | ||||||
| Accrued wages and benefits | 26,357 | 20,992 | ||||||
| Accrued insurance | 9,033 | 9,340 | ||||||
| Income taxes payable | 17 | 169 | ||||||
| Other accrued expenses | 7,660 | 7,699 | ||||||
| Total current liabilities | 199,520 | 218,976 | ||||||
| Deferred income taxes | 2,006 | 128 | ||||||
| Borrowings under senior revolving credit facility | 42,076 | 44,682 | ||||||
| Other liabilities | 414 | 435 | ||||||
| Total liabilities | 244,016 | 264,221 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' equity: | ||||||||
| Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of September 30, 2017, and June 30, 2017; 26,727,975 and 26,600,562 shares outstanding as of September 30, 2017 and June 30, 2017 | 279 | 279 | ||||||
| Additional paid-in capital | 127,526 | 128,419 | ||||||
| Retained earnings | 226,798 | 222,974 | ||||||
| Accumulated other comprehensive loss | (6,217 | ) | (7,324 | ) | ||||
| 348,386 | 344,348 | |||||||
| Less: Treasury stock, at cost — 1,160,242 shares as of September 30, 2017, and 1,287,655 shares as of June 30, 2017 | (19,948 | ) | (22,539 | ) | ||||
| Total stockholders' equity | 328,438 | 321,809 | ||||||
| Total liabilities and stockholders' equity | $ | 572,454 | $ | 586,030 | ||||
| Matrix Service Company Results of Operations (unaudited) (In thousands) | |||||||||||
| Three Months Ended | |||||||||||
| September 30, | September 30, | ||||||||||
| 2017 | 2016 | ||||||||||
| Gross revenues | |||||||||||
| Electrical Infrastructure | $ | 79,971 | $ | 88,025 | |||||||
| Oil Gas & Chemical | 85,861 | 37,828 | |||||||||
| Storage Solutions | 71,572 | 199,650 | |||||||||
| Industrial | 33,271 | 22,727 | |||||||||
| Total gross revenues | $ | 270,675 | $ | 348,230 | |||||||
| Less: Inter-segment revenues | |||||||||||
| Oil Gas & Chemical | $ | 208 | $ | 5,286 | |||||||
| Storage Solutions | 557 | 128 | |||||||||
| Industrial | — | 1,035 | |||||||||
| Total inter-segment revenues | $ | 765 | $ | 6,449 | |||||||
| Consolidated revenues | |||||||||||
| Electrical Infrastructure | $ | 79,971 | $ | 88,025 | |||||||
| Oil Gas & Chemical | 85,653 | 32,542 | |||||||||
| Storage Solutions | 71,015 | 199,522 | |||||||||
| Industrial | 33,271 | 21,692 | |||||||||
| Total consolidated revenues | $ | 269,910 | $ | 341,781 | |||||||
| Gross profit | |||||||||||
| Electrical Infrastructure | $ | 8,267 | $ | 5,250 | |||||||
| Oil Gas & Chemical | 11,038 | 1 | |||||||||
| Storage Solutions | 7,540 | 26,453 | |||||||||
| Industrial | 2,046 | 574 | |||||||||
| Total gross profit | $ | 28,891 | $ | 32,278 | |||||||
| Operating income (loss) | |||||||||||
| Electrical Infrastructure | $ | 3,577 | $ | 1,057 | |||||||
| Oil Gas & Chemical | 4,134 | (2,905 | ) | ||||||||
| Storage Solutions | (75 | ) | 16,773 | ||||||||
| Industrial | (315 | ) | (624 | ) | |||||||
| Total operating income | $ | 7,321 | $ | 14,301 | |||||||
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, 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 and other established customer arrangements, we include only the amounts that we expect to recognize into revenue over the next 12 months. 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 September 30, 2017:
| Electrical Infrastructure | Oil Gas & Chemical | Storage Solutions | Industrial | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Backlog as of June 30, 2017 | $ | 162,637 | $ | 287,007 | $ | 141,551 | $ | 91,078 | $ | 682,273 | ||||||||||
| Project awards | 36,976 | 34,195 | 62,602 | 182,661 | 316,434 | |||||||||||||||
| Revenue recognized | (79,971 | ) | (85,653 | ) | (71,015 | ) | (33,271 | ) | (269,910 | ) | ||||||||||
| Backlog as of September 30, 2017 | $ | 119,642 | $ | 235,549 | $ | 133,138 | $ | 240,468 | $ | 728,797 | ||||||||||
| Book-to-bill ratio(1) | 0.5 | 0.4 | 0.9 | 5.5 | 1.2 | |||||||||||||||
| _______________ | ||||||||||||||||||||
| (1) Calculated by dividing project awards by revenue recognized during the period. | ||||||||||||||||||||
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