UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________
FORM 8-K
__________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) May 9, 2022
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Act of 1934 (17 CFR §240.12b-2).
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| Item 2.02 | Results of Operations and Financial Condition. | ||||
On May 9, 2022, Matrix Service Company (the “Company”) issued a press release announcing financial results for the third quarter of fiscal 2022. The full text of the press release is attached as Exhibit 99 to this Current Report on Form 8-K. The information in this Item 2.02 and Exhibit 99 attached hereto is being furnished pursuant to Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
| Item 9.01 | Financial Statements and Exhibits. | ||||
The following exhibits are furnished herewith:
| Exhibit No. | Description | |||||||
| 99 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Matrix Service Company | ||||||||||||||
| Dated: May 9, 2022 | By: | /s/ Kevin S. Cavanah | ||||||||||||
| Kevin S. Cavanah | ||||||||||||||
| Vice President and Chief Financial Officer | ||||||||||||||
Exhibit 99
MATRIX SERVICE COMPANY REPORTS THIRD QUARTER FISCAL 2022 RESULTS
TULSA, OK – May 9, 2022 – Matrix Service Company (Nasdaq: MTRX), a leading contractor to the energy and industrial markets across North America, today reported financial results for its third quarter of fiscal 2022.
Key highlights:
•Project awards in the quarter of $179.7 million bring year-to-date awards to $638.7 million, an 81% increase compared to first nine months of the prior year, resulting in a book-to-bill of 1.3 year-to-date
•Recent notable awards include thermal vacuum chambers, electrical infrastructure projects, construction of a borate mining facility, and early engineering for an LNG export terminal
•Backlog increased to $594.2 million, an increase of 28% compared to the start of the fiscal year
•Liquidity of $86.8 million and no debt
•Third quarter revenue of $177.0 million and loss per fully diluted share of $1.30; adjusted loss per fully diluted share of $0.50(1) excluding one-time non-cash items
“Our revenue volume and financial performance have been impacted by delays in project starts on certain projects in our backlog as well as delays in awards of larger project work. While I am pleased that we achieved our third consecutive quarter with a book-to-bill of greater than 1.0 and have a book-to-bill of 1.3 through the first nine months of our fiscal year, I am more excited by our near-term project pipeline, which should lead to material increases in backlog over the next two quarters as larger energy infrastructure projects are awarded. In addition to the long-term need for reliable natural gas supply, recent global events underscore the urgency of accelerating these projects to support the world’s need for enhanced energy security by increasing the availability of LNG globally. Many of these projects are in our sales pipeline, and we expect them to materialize over the next six months," said John R. Hewitt, President and CEO.
"We continue to strengthen Matrix through the expansion of our shared service model to include enterprise-wide finance, accounting and human resources, and creation of a center of operational excellence to initially optimize procurement and quality, health and safety and ultimately include various project management and proposal services. This will allow us to better deliver against the opportunity set that lies ahead and also mitigate execution risk going forward.”
Earnings Summary
Revenue in the third quarter of fiscal 2022 was $177.0 million, an increase of $15.0 million compared to second quarter fiscal 2022 revenue of $162.0 million. Gross margin (loss) was (1.0%) in the third quarter of fiscal 2022 primarily due to under recovered overheads as well as an increase in forecasted cost on two projects won in the very competitive environment during the height of the pandemic.
In the Storage and Terminals Solutions segment, a gross margin (loss) of (0.9%) for the quarter was primarily the result of under recovered overheads and the execution of smaller competitively priced capital projects.
In the Process and Industrial Facilities segment, third quarter gross margin (loss) of (0.6%) was primarily due to an increase in forecasted costs to complete a midstream gas processing project. The increase in forecasted costs was primarily due to poor performance of a, now terminated, subcontractor, which will require rework in order to meet our client's expectations.
1
In the Utility and Power Infrastructure segment, third quarter gross margin was (0.8%) as a result of under recovery of construction overhead costs, lower margins on capital work bid competitively, and an increase in forecasted cost on a capital project.
In the third quarter, we recorded a non-cash impairment to goodwill of $18.3 million.
We booked a $1.6 credit to restructuring costs due to a favorable settlement of a restructuring obligation related to our exit from the domestic iron and steel industry in fiscal 2020. We continued to implement our previously announced business improvement plan during the third quarter. The current phase of our plan is focused on the consolidation of transactional services, procedures and operational talent to increase our efficiency, competitiveness and profitability. Since we implemented the plan in fiscal 2020, we estimate that we have reduced our cost structure by approximately $82 million, or 30%, with one third of those reductions related to SG&A and the rest related to construction overhead, which is included in cost of revenue in the Condensed Consolidated Statements of Income.
Our effective tax rates for the three months ended March 31, 2022 and March 31, 2021 were 0.4% and 28.2%, respectively. The effective tax rate was impacted by a $7.7 million valuation allowance placed on our deferred tax assets during the third quarter of fiscal 2022.
For the three months ended March 31, 2022, we had a net loss of $34.9 million, or $1.30 per fully diluted share, compared to a net loss of $12.9 million, or $0.49 per fully diluted share, in the three months ended March 31, 2021. For the three months ended March 31, 2022, we had and adjusted net loss of $13.4 million, or $0.50 per fully diluted share compared to an adjusted loss of $11.5 million, or $0.43 per diluted share, for the three months ended March 31, 2021.
Backlog
Our backlog as of March 31, 2022 was $594.2 million. Project awards totaled $179.7 million and $638.7 million during the three and nine months ended March 31, 2022, respectively, leading to book-to-bill ratios of 1.0 and 1.3 for the three and nine-month periods. On a segment basis, the third quarter book-to-bill was 0.4 for Utility and Power Infrastructure (0.7 year-to-date), driven largely by bookings in electrical infrastructure. For Process and Industrial Facilities, the book-to-bill was 1.5 (1.9 year-to-date) led by key awards for two thermal vacuum chamber projects, a midstream gas processing plant, a borate mining facility, and other renewable energy capital projects. For Storage and Terminal Solutions, the quarterly book-to-bill was 1.1 (1.2 year-to-date) led by midstream storage and other renewables projects. Bidding activity is strong, and while the timing of project awards can fluctuate, we expect the trend of improving backlog to continue.
The table below summarizes our awards, book-to-bill ratios and backlog by segment for our third fiscal quarter and year-to-date (in thousands, except for book-to-bill ratios):
| Three Months Ended March 31, 2022 | Nine Months Ended March 31, 2022 | Backlog as of March 31, 2022 | ||||||||||||||||||||||||||||||
| Segment: | Awards | Book-to-Bill | Awards | Book-to-Bill | ||||||||||||||||||||||||||||
Utility and Power Infrastructure | $ | 23,366 | 0.4 | $ | 115,648 | 0.7 | $ | 114,393 | ||||||||||||||||||||||||
Process and Industrial Facilities | 104,729 | 1.5 | 315,143 | 1.9 | 286,728 | |||||||||||||||||||||||||||
Storage and Terminal Solutions | 51,575 | 1.1 | 207,936 | 1.2 | 193,106 | |||||||||||||||||||||||||||
Total | $ | 179,670 | 1.0 | $ | 638,727 | 1.3 | $ | 594,227 | ||||||||||||||||||||||||
| Three Months Ended March 31, 2021 | Nine Months Ended March 31, 2021 | Backlog as of March 31, 2021 | ||||||||||||||||||||||||||||||
| Segment: | Awards | Book-to-Bill | Awards | Book-to-Bill | ||||||||||||||||||||||||||||
Utility and Power Infrastructure | $ | 49,808 | 1.1 | $ | 87,898 | 0.6 | $ | 203,300 | ||||||||||||||||||||||||
Process and Industrial Facilities | 40,836 | 1.0 | 149,732 | 1.1 | 155,430 | |||||||||||||||||||||||||||
Storage and Terminal Solutions | 47,399 | 0.8 | 114,960 | 0.6 | 179,607 | |||||||||||||||||||||||||||
Total | $ | 138,043 | 0.9 | $ | 352,590 | 0.7 | $ | 538,337 | ||||||||||||||||||||||||
2
Financial Position
At March 31, 2022, we had no debt and total liquidity of $86.8 million. Liquidity is comprised of $34.1 million of unrestricted cash and cash equivalents and $52.7 million of borrowing availability under the ABL Facility. The Company has $25.0 million of restricted cash to support the ABL Facility.
(1)Non-GAAP Financial Measure
Adjusted loss per share is a non-GAAP financial measure which excludes 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. See the Non-GAAP Financial Measures section included at the end of this release for a reconciliation to loss per share.
Conference Call 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 Tuesday, May 10, 2022 and will be simultaneously broadcast live over the Internet which can be accessed at our website at matrixservicecompany.com under Investor Relations, Events and Presentations. 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.
Dial in - Toll-Free 1-888-660-6127
Dial in - Toll 1-973-890-8355
Audience Passcode 8678241
3
About Matrix Service Company
Matrix Service Company (Nasdaq: MTRX), through its subsidiaries, is a leading North American industrial engineering and construction contractor 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 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 Great Place to Work®. To learn more about Matrix Service Company, visit matrixservicecompany.com and read our inaugural Sustainability Report.
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 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
Email:kcavanah@matrixservicecompany.com
Kellie Smythe
Senior Director, Investor Relations
T: 918-359-8267
Email: ksmythe@matrixservicecompany.com
4
Matrix Service Company
Condensed Consolidated Statements of Income
(unaudited)
(In thousands, except per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| March 31, 2022 | March 31, 2021 | March 31, 2022 | March 31, 2021 | |||||||||||||||||||||||
| Revenue | $ | 177,003 | $ | 148,260 | $ | 507,061 | $ | 498,499 | ||||||||||||||||||
| Cost of revenue | 178,766 | 146,700 | 509,125 | 467,276 | ||||||||||||||||||||||
| Gross profit (loss) | (1,763) | 1,560 | (2,064) | 31,223 | ||||||||||||||||||||||
| Selling, general and administrative expenses | 17,041 | 17,179 | 49,592 | 52,031 | ||||||||||||||||||||||
| Goodwill impairment | 18,312 | — | 18,312 | — | ||||||||||||||||||||||
| Restructuring costs | (1,578) | 1,860 | (278) | 6,585 | ||||||||||||||||||||||
| Operating loss | (35,538) | (17,479) | (69,690) | (27,393) | ||||||||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||||
| Interest expense | (204) | (322) | (2,705) | (1,055) | ||||||||||||||||||||||
| Interest income | 19 | 25 | 69 | 96 | ||||||||||||||||||||||
| Other | 677 | (157) | 534 | 1,849 | ||||||||||||||||||||||
| Loss before income tax expense (benefit) | (35,046) | (17,933) | (71,792) | (26,503) | ||||||||||||||||||||||
| Provision (benefit) for federal, state and foreign income taxes | (147) | (5,060) | 5,564 | (6,002) | ||||||||||||||||||||||
| Net loss | $ | (34,899) | $ | (12,873) | $ | (77,356) | $ | (20,501) | ||||||||||||||||||
| Basic loss per common share | $ | (1.30) | $ | (0.49) | $ | (2.90) | $ | (0.78) | ||||||||||||||||||
| Diluted loss per common share | $ | (1.30) | $ | (0.49) | $ | (2.90) | $ | (0.78) | ||||||||||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||||||||||||
| Basic | 26,783 | 26,515 | 26,714 | 26,422 | ||||||||||||||||||||||
| Diluted | 26,783 | 26,515 | 26,714 | 26,422 | ||||||||||||||||||||||
5
Matrix Service Company
Condensed Consolidated Balance Sheets
(unaudited)
(In thousands)
| March 31, 2022 | June 30, 2021 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 34,092 | $ | 83,878 | |||||||
| Accounts receivable, less allowances (March 31, 2022—$634 and June 30, 2021—$898) | 137,690 | 148,030 | |||||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts | 46,393 | 30,774 | |||||||||
| Inventories | 6,907 | 7,342 | |||||||||
| Income taxes receivable | 13,734 | 16,965 | |||||||||
| Other current assets | 7,322 | 4,230 | |||||||||
| Total current assets | 246,138 | 291,219 | |||||||||
| Property, plant and equipment at cost: | |||||||||||
| Land and buildings | 41,745 | 41,633 | |||||||||
| Construction equipment | 93,862 | 94,453 | |||||||||
| Transportation equipment | 49,532 | 50,510 | |||||||||
| Office equipment and software | 43,447 | 42,706 | |||||||||
| Construction in progress | 564 | 493 | |||||||||
| Total property, plant and equipment - at cost | 229,150 | 229,795 | |||||||||
| Accumulated depreciation | (168,672) | (160,388) | |||||||||
| Property, plant and equipment - net | 60,478 | 69,407 | |||||||||
| Restricted cash | 25,000 | — | |||||||||
| Operating lease right-of-use assets | 20,811 | 22,412 | |||||||||
| Goodwill | 42,240 | 60,636 | |||||||||
| Other intangible assets, net of accumulated amortization | 5,228 | 6,614 | |||||||||
| Deferred income taxes | — | 5,295 | |||||||||
| Other assets, non-current | 13,185 | 11,973 | |||||||||
| Total assets | $ | 413,080 | $ | 467,556 | |||||||
6
Matrix Service Company
Condensed Consolidated Balance Sheets (continued)
(unaudited)
(In thousands, except share data)
| March 31, 2022 | June 30, 2021 | ||||||||||
| Liabilities and stockholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 68,161 | $ | 60,920 | |||||||
| Billings on uncompleted contracts in excess of costs and estimated earnings | 73,868 | 53,832 | |||||||||
| Accrued wages and benefits | 23,073 | 21,008 | |||||||||
| Accrued insurance | 6,310 | 6,568 | |||||||||
| Operating lease liabilities | 4,928 | 5,747 | |||||||||
| Other accrued expenses | 3,841 | 5,327 | |||||||||
| Total current liabilities | 180,181 | 153,402 | |||||||||
| Deferred income taxes | 32 | 34 | |||||||||
| Operating lease liabilities | 19,630 | 20,771 | |||||||||
| Other liabilities, non-current | 401 | 7,810 | |||||||||
| Total liabilities | 200,244 | 182,017 | |||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
| Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of March 31, 2022 and June 30, 2021; 26,783,265 and 26,549,438 shares outstanding as of March 31, 2022 and June 30, 2021, respectively | 279 | 279 | |||||||||
| Additional paid-in capital | 137,886 | 137,575 | |||||||||
| Retained earnings | 97,822 | 175,178 | |||||||||
| Accumulated other comprehensive loss | (7,477) | (6,749) | |||||||||
| 228,510 | 306,283 | ||||||||||
| Less: Treasury stock, at cost — 1,104,952 shares as of March 31, 2022, and 1,338,779 shares as of June 30, 2021 | (15,674) | (20,744) | |||||||||
| Total stockholders' equity | 212,836 | 285,539 | |||||||||
| Total liabilities and stockholders’ equity | $ | 413,080 | $ | 467,556 | |||||||
7
Matrix Service Company
Results of Operations
(unaudited)
(In thousands)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| March 31, 2022 | March 31, 2021 | March 31, 2022 | March 31, 2021 | |||||||||||||||||||||||
| Gross revenue | ||||||||||||||||||||||||||
| Utility and Power Infrastructure | $ | 59,341 | $ | 44,720 | $ | 171,298 | $ | 157,414 | ||||||||||||||||||
| Process and Industrial Facilities | 69,786 | 43,095 | 167,033 | 141,570 | ||||||||||||||||||||||
| Storage and Terminal Solutions | 49,254 | 61,542 | 175,174 | 204,572 | ||||||||||||||||||||||
| Total gross revenue | $ | 178,381 | $ | 149,357 | $ | 513,505 | $ | 503,556 | ||||||||||||||||||
| Less: Inter-segment revenue | ||||||||||||||||||||||||||
| Process and Industrial Facilities | $ | 815 | $ | 261 | $ | 3,841 | $ | 1,543 | ||||||||||||||||||
| Storage and Terminal Solutions | 563 | 836 | 2,603 | 3,514 | ||||||||||||||||||||||
| Total inter-segment revenue | $ | 1,378 | $ | 1,097 | $ | 6,444 | $ | 5,057 | ||||||||||||||||||
| Consolidated revenue | ||||||||||||||||||||||||||
| Utility and Power Infrastructure | $ | 59,341 | $ | 44,720 | $ | 171,298 | $ | 157,414 | ||||||||||||||||||
| Process and Industrial Facilities | 68,971 | 42,834 | 163,192 | 140,027 | ||||||||||||||||||||||
| Storage and Terminal Solutions | 48,691 | 60,706 | 172,571 | 201,058 | ||||||||||||||||||||||
| Total consolidated revenue | $ | 177,003 | $ | 148,260 | $ | 507,061 | $ | 498,499 | ||||||||||||||||||
| Gross profit (loss) | ||||||||||||||||||||||||||
| Utility and Power Infrastructure | $ | (492) | $ | (4,692) | $ | (7,089) | $ | 7,818 | ||||||||||||||||||
| Process and Industrial Facilities | (441) | (171) | 6,663 | 11,352 | ||||||||||||||||||||||
| Storage and Terminal Solutions | (458) | 6,423 | (216) | 12,053 | ||||||||||||||||||||||
| Corporate | (372) | — | (1,422) | — | ||||||||||||||||||||||
| Total gross profit (loss) | $ | (1,763) | $ | 1,560 | $ | (2,064) | $ | 31,223 | ||||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||||||||||
| Utility and Power Infrastructure | $ | 2,910 | $ | 2,356 | $ | 9,109 | $ | 7,154 | ||||||||||||||||||
| Process and Industrial Facilities | 3,198 | 3,882 | 8,752 | 11,319 | ||||||||||||||||||||||
| Storage and Terminal Solutions | 4,063 | 4,792 | 12,850 | 13,854 | ||||||||||||||||||||||
| Corporate | 6,870 | 6,149 | 18,881 | 19,704 | ||||||||||||||||||||||
| Total selling, general and administrative expenses | $ | 17,041 | $ | 17,179 | $ | 49,592 | $ | 52,031 | ||||||||||||||||||
| Goodwill impairment and restructuring costs | ||||||||||||||||||||||||||
| Utility and Power Infrastructure | $ | 2,659 | $ | 403 | $ | 2,705 | $ | 1,226 | ||||||||||||||||||
| Process and Industrial Facilities | 6,856 | 781 | 6,839 | 3,645 | ||||||||||||||||||||||
| Storage and Terminal Solutions | 7,219 | 590 | 7,293 | 1,244 | ||||||||||||||||||||||
| Corporate | — | 86 | 1,197 | 470 | ||||||||||||||||||||||
| Total goodwill impairment and restructuring costs | $ | 16,734 | $ | 1,860 | $ | 18,034 | $ | 6,585 | ||||||||||||||||||
| Operating income (loss) | ||||||||||||||||||||||||||
| Utility and Power Infrastructure | $ | (6,061) | $ | (7,451) | $ | (18,903) | $ | (562) | ||||||||||||||||||
| Process and Industrial Facilities | (10,495) | (4,834) | (8,928) | (3,612) | ||||||||||||||||||||||
| Storage and Terminal Solutions | (11,740) | 1,041 | (20,359) | (3,045) | ||||||||||||||||||||||
| Corporate | (7,242) | (6,235) | (21,500) | (20,174) | ||||||||||||||||||||||
| Total operating loss | $ | (35,538) | $ | (17,479) | $ | (69,690) | $ | (27,393) | ||||||||||||||||||
8
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 March 31, 2022:
| Utility and Power Infrastructure | Process and Industrial Facilities | Storage and Terminal Solutions | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Backlog as of December 31, 2021 | $ | 150,368 | $ | 250,970 | $ | 190,222 | $ | 591,560 | |||||||||||||||
| Project awards | 23,366 | 104,729 | 51,575 | 179,670 | |||||||||||||||||||
| Revenue recognized | (59,341) | (68,971) | (48,691) | (177,003) | |||||||||||||||||||
| Backlog as of March 31, 2022 | $ | 114,393 | $ | 286,728 | $ | 193,106 | $ | 594,227 | |||||||||||||||
| Book-to-bill ratio(1) | 0.4 | 1.5 | 1.1 | 1.0 | |||||||||||||||||||
(1)Calculated by dividing project awards by revenue recognized during the period.
The following table provides a summary of changes in our backlog for the nine months ended March 31, 2022:
| Utility and Power Infrastructure | Process and Industrial Facilities | Storage and Terminal Solutions | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Backlog as of June 30, 2021 | $ | 170,043 | $ | 134,777 | $ | 157,741 | $ | 462,561 | |||||||||||||||
| Project awards | 115,648 | 315,143 | 207,936 | 638,727 | |||||||||||||||||||
| Revenue recognized | (171,298) | (163,192) | (172,571) | (507,061) | |||||||||||||||||||
| Backlog as of March 31, 2022 | $ | 114,393 | $ | 286,728 | $ | 193,106 | $ | 594,227 | |||||||||||||||
Book-to-bill ratio(1) | 0.7 | 1.9 | 1.2 | 1.3 | |||||||||||||||||||
(1)Calculated by dividing project awards by revenue recognized during the period.
9
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 Adjusted Net Loss and Diluted Loss per Common Share(1)
(In thousands, except per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| March 31, 2022 | March 31, 2021 | March 31, 2022 | March 31, 2021 | |||||||||||||||||||||||
| Net loss, as reported | $ | (34,899) | $ | (12,873) | $ | (77,356) | $ | (20,501) | ||||||||||||||||||
| Restructuring costs incurred | (1,578) | 1,860 | (278) | 6,585 | ||||||||||||||||||||||
| Goodwill impairment | 18,312 | — | 18,312 | — | ||||||||||||||||||||||
Accelerated amortization of deferred debt amendment fees(2) | — | — | 1,518 | — | ||||||||||||||||||||||
Deferred tax asset valuation allowance(3) | 7,671 | — | 21,869 | — | ||||||||||||||||||||||
| Tax impact of adjustments | (2,911) | (479) | (3,636) | (1,695) | ||||||||||||||||||||||
| Adjusted net loss | $ | (13,405) | $ | (11,492) | $ | (39,571) | $ | (15,611) | ||||||||||||||||||
| Loss per fully diluted share, as reported | $ | (1.30) | $ | (0.49) | $ | (2.90) | $ | (0.78) | ||||||||||||||||||
| Adjusted loss per fully diluted share | $ | (0.50) | $ | (0.43) | $ | (1.48) | $ | (0.59) | ||||||||||||||||||
(1)This table presents non-GAAP financial measures of our adjusted net loss and adjusted diluted loss per common share for the three and nine months ended March 31, 2022 and 2021. The most directly comparable financial measures are net loss and net loss per diluted share, respectively, presented in the Condensed Consolidated Statements of Income. We have presented these non-GAAP financial measures because we believe they more clearly depict our core operating results during the periods presented and provide a more comparable measure of our operating results to other companies considered to be in similar businesses. Since adjusted net loss and adjusted diluted loss per common share are not measures of performance calculated in accordance with GAAP, they should be considered in addition to, rather than as a substitute for, the most directly comparable GAAP financial measures.
(2)Interest expense in fiscal 2022 included $1.5 million of accelerated amortization of deferred debt amendment fees.
(3)In determining the need for a valuation allowance on deferred tax assets, the accounting standards provide that the existence of a cumulative loss over a three-year period generally precludes the use of management’s projections of future taxable income. Consequently, we have recorded a full valuation allowance against the deferred tax assets in the U.S. taxable jurisdiction in the amount of $21.9 million during fiscal 2022. These assets are primarily comprised of federal net operating losses, which have an indefinite carryforward, federal tax credits and state net operating losses. To the extent the Company generates 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 will realize the benefit associated with the net operating losses for which the valuation allowance has been provided.
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Reconciliation of Net Loss to Adjusted EBITDA(1)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| March 31, 2022 | March 31, 2021 | March 31, 2022 | March 31, 2021 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Net loss | $ | (34,899) | $ | (12,873) | $ | (77,356) | $ | (20,501) | |||||||||||||||
| Goodwill impairment | 18,312 | — | 18,312 | — | |||||||||||||||||||
| Restructuring costs | (1,578) | 1,860 | (278) | 6,585 | |||||||||||||||||||
| Stock-based compensation | 2,088 | 2,214 | 5,823 | 6,413 | |||||||||||||||||||
| Interest expense | 204 | 322 | 2,705 | 1,055 | |||||||||||||||||||
| Provision (benefit) for income taxes | (147) | (5,060) | 5,564 | (6,002) | |||||||||||||||||||
| Depreciation and amortization | 3,716 | 4,352 | 11,557 | 13,639 | |||||||||||||||||||
| Adjusted EBITDA | $ | (12,304) | $ | (9,185) | $ | (33,673) | $ | 1,189 | |||||||||||||||
(1)This table presents Adjusted EBITDA, which we define as net loss before impairment of goodwill and other intangible assets, 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 impairment to goodwill. While impairment to goodwill is a non-cash expense in the period recognized, cash or other consideration was still transferred in exchange for goodwill in the period of the acquisition. Any measure that excludes impairment to goodwill has material limitations since this expense represents the loss of an asset that was acquired in exchange for cash or other assets.
•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.
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