Press Release

Matrix Service Company Reports First Quarter Results; Affirms Fiscal 2019 Guidance

Nov 7, 2018 at 4:10 PM EST

TULSA, Okla., Nov. 07, 2018 (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 ended September 30, 2018.

Key highlights:

  • Revenue increased 18.0% to $318.5 million compared to $269.9 million in the first quarter of the prior fiscal year
  • Company earned $0.08 per fully diluted share in the first quarter
  • Backlog at $1.109 billion with first quarter project awards of $209.4 million
  • Company expects improving quarter over quarter revenue and earnings; affirms fiscal 2019 guidance

“Our first quarter results reflected improved revenue which met our expectations, however gross margins were impacted by the continued work-off of lower margin projects awarded during the recent market downturn,” said Matrix Service Company President and Chief Executive Officer John R. Hewitt. “We expect continued improvement in revenue, gross margins, and earnings per share as we move through the year and are maintaining our Fiscal 2019 guidance.

“Based on the quality and commitment of our people, the strength of our diversified business model, and the increased volume of quality projects in our opportunity pipeline, we are enthusiastic about our ability to achieve our long-term growth aspirations.”

First Quarter Fiscal 2019 Results

Consolidated revenue was $318.5 million for the three months ended September 30, 2018, compared to $269.9 million in the same period of the prior fiscal year.  Industrial segment revenue increased $52.3 million due to higher business volumes in the iron and steel industry and increased thermal vacuum chamber work.  Storage Solutions segment revenue increased $41.8 million primarily as a result of increased tank and terminal construction revenue and higher volumes of tank repair and maintenance work.  Electrical Infrastructure segment revenue decreased $35.3 million due to the expected reduction in power generation EPC work.  Oil Gas & Chemical segment revenue decreased $10.2 million due to lower levels of capital and engineering work partially offset by higher volumes of turnaround and maintenance work.

Consolidated gross profit was $23.4 million in the three months ended September 30, 2018 compared to $28.9 million in the three months ended September 30, 2017.  The gross margin was 7.4% in the three months ended September 30, 2018 compared to 10.7% in the same period in the prior fiscal year.  The fiscal 2019 gross margin was impacted by the work-off of lower margin work bid in a highly competitive environment in prior periods as well as lower than previously forecasted margins on a limited number of those projects.

Consolidated SG&A expenses were $21.2 million in the three months ended September 30, 2018 compared to $21.6 million in the same period a year earlier.  The decrease was attributable to lower amortization expense on intangible assets that fully amortized
in fiscal 2018 and lower professional fees, partially offset by higher compensation expense.

Fiscal 2019 income tax expense included $0.3 million of excess tax benefits related to the vesting of stock-based compensation awards, which resulted in an effective tax rate of 16.4%.  We expect our effective tax rate to be approximately 27.0% for the balance of fiscal 2019.

The Company reported net income of $2.3 million, or $0.08 per fully diluted share, in the first quarter of fiscal 2019 compared to net income of $3.8 million, or $0.14 per fully diluted share, in the first quarter of fiscal 2018.


Backlog at September 30, 2018 was $1.109 billion compared to $1.219 billion at June 30, 2018.  The quarterly book-to-bill ratio was 0.7 on project awards of $209.4 million.

Financial Position

The cash balance of  $74.7 million combined with availability under the credit facility provides the Company with liquidity of $129.3 million at September 30, 2018. Based on the Company's current financial forecasts, liquidity is expected to increase in the second half of fiscal 2019.

Earnings Guidance

The Company reaffirms fiscal 2019 revenue to be between $1.250 billion and $1.350 billion and earnings to be between $0.85 and $1.15 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 10:30 a.m. (Eastern) / 9:30 a.m. (Central) on Thursday, November 8, 2018 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 is parent to a family of companies that include Matrix Service Inc., Matrix NAC, Matrix PDM Engineering and Matrix Applied Technologies.  Our subsidiaries design, build and maintain infrastructure critical to North America's energy 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

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   $ 318,511     $ 269,910  
Cost of revenues   295,090     241,019  
Gross profit   23,421     28,891  
Selling, general and administrative expenses   21,201     21,570  
Operating income   2,220     7,321  
Other income (expense):        
Interest expense   (292 )   (618 )
Interest income   282     39  
Other   546     149  
Income before income tax expense   2,756     6,891  
Provision for federal, state and foreign income taxes   451     3,067  
Net income   $ 2,305     $ 3,824  
Basic earnings per common share   $ 0.09     $ 0.14  
Diluted earnings per common share   $ 0.08     $ 0.14  
Weighted average common shares outstanding:        
Basic   26,921     26,655  
Diluted   27,589     26,762  

Matrix Service Company
Condensed Consolidated Balance Sheets
(In thousands) 
  September 30,
  June 30,
Current assets:      
Cash and cash equivalents $ 74,736     $ 64,057  
Accounts receivable, less allowances (September 30, 2018— $6,359 and June 30, 2018—$6,327) 214,763     203,388  
Costs and estimated earnings in excess of billings on uncompleted contracts 75,972     76,632  
Inventories 6,514     5,152  
Income taxes receivable 3,350     3,359  
Other current assets 10,214     4,458  
Total current assets 385,549     357,046  
Property, plant and equipment at cost:      
Land and buildings 40,508     40,424  
Construction equipment 89,482     89,036  
Transportation equipment 47,913     48,339  
Office equipment and software 41,622     41,236  
Construction in progress 2,411     1,353  
Total property, plant and equipment - at cost 221,936     220,388  
Accumulated depreciation (150,438 )   (147,743 )
Property, plant and equipment - net 71,498     72,645  
Goodwill 93,451     96,162  
Other intangible assets 22,007     22,814  
Deferred income taxes 5,559     4,848  
Other assets 9,130     4,518  
Total assets $ 587,194     $ 558,033  

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 $ 94,845     $ 79,439  
Billings on uncompleted contracts in excess of costs and estimated earnings 118,380     120,740  
Accrued wages and benefits 29,151     24,375  
Accrued insurance 9,689     9,080  
Income taxes payable     7  
Other accrued expenses 9,079     4,824  
Total current liabilities 261,144     238,465  
Deferred income taxes 1,440     429  
Borrowings under senior secured revolving credit facility 1,549      
Other liabilities 280     296  
Total liabilities 264,413     239,190  
Commitments and contingencies      
Stockholders’ equity:      
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of September 30, 2018 and June 30, 2018; 27,019,817 and 26,853,823 shares outstanding as of September 30, 2018 and June 30, 2018 279     279  
Additional paid-in capital 129,885     132,198  
Retained earnings 213,799     211,494  
Accumulated other comprehensive loss (7,010 )   (7,411 )
  336,953     336,560  
Less: Treasury stock, at cost — 868,400 shares as of September 30, 2018, and 1,034,394 shares as of June 30, 2018 (14,172 )   (17,717 )
Total stockholders' equity 322,781     318,843  
Total liabilities and stockholders’ equity $ 587,194     $ 558,033  

 Matrix Service Company
Results of Operations
(In thousands)
    Three Months Ended
    September 30,
  September 30,
Gross revenues        
Electrical Infrastructure   $ 44,701     $ 79,971  
Oil Gas & Chemical   75,562     85,861  
Storage Solutions   113,767     71,572  
Industrial   85,557     33,271  
Total gross revenues   $ 319,587     $ 270,675  
Less: Inter-segment revenues        
Oil Gas & Chemical   $ 71     $ 208  
Storage Solutions   1,005     557  
Total inter-segment revenues   $ 1,076     $ 765  
Consolidated revenues        
Electrical Infrastructure   $ 44,701     $ 79,971  
Oil Gas & Chemical   75,491     85,653  
Storage Solutions   112,762     71,015  
Industrial   85,557     33,271  
Total consolidated revenues   $ 318,511     $ 269,910  
Gross profit        
Electrical Infrastructure   $ 3,383     $ 8,267  
Oil Gas & Chemical   5,625     11,038  
Storage Solutions   9,553     7,540  
Industrial   4,860     2,046  
Total gross profit   $ 23,421     $ 28,891  
Operating income (loss)        
Electrical Infrastructure   $ 657     $ 3,577  
Oil Gas & Chemical   514     4,134  
Storage Solutions   285     (75 )
Industrial   764     (315 )
Total operating income   $ 2,220     $ 7,321  


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 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 the notice is significant relative to the overall project and 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 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, 2018:

  Oil Gas &
  Industrial   Total
  (In thousands)
Backlog as of June 30, 2018 $ 113,957     $ 227,452     $ 613,360     $ 263,827     $ 1,218,596  
Project awards 39,589     37,531     85,139     47,128     209,387  
Revenue recognized (44,701 )   (75,491 )   (112,762 )   (85,557 )   (318,511 )
Backlog as of September 30, 2018 $ 108,845     $ 189,492     $ 585,737     $ 225,398     $ 1,109,472  
Book-to-bill ratio(1) 0.9     0.5     0.8     0.6     0.7  


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


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Source: Matrix Service Company