Matrix Service Company (Nasdaq: MTRX), through its
subsidiaries, is a leading North American industrial engineering,
construction, and maintenance contractor headquartered in Tulsa,
Oklahoma with offices located throughout the United States and
Canada, as well as Sydney, Australia and Seoul, South Korea.
Key highlights:
- Backlog increased to $1.45
billion, the highest level in the company's history; project awards
in the quarter of $230.8 million resulted in a book-to-bill ratio
of 1.3.
- Revenue of $175.0 million
in the second quarter of fiscal 2024.
- Direct gross margins have
returned to historical double-digit levels in the first half of
fiscal 2024; impact of under-recovery is expected to resolve as
revenue volumes increase.
- Adjusted EBITDA of $0.3
million(1) for
the second quarter of fiscal 2024.
- Liquidity increased to
$106.3 million as of December 31, 2023. All outstanding borrowings
under the credit facility were repaid during the
quarter.
“With a backlog at an all-time high, a
streamlined cost structure, and a strong balance sheet, we expect
that our financial performance will begin to increase significantly
over the coming quarters,” said John R. Hewitt, President and CEO.
“As we have noted before the start timing of large construction
projects can be difficult to judge but they will have a direct
impact on improving our quarter-to-quarter performance. Further,
our opportunity pipeline remains strong, giving us confidence that
we will ultimately be able to maintain higher revenue levels over
the long term.”
Earnings Summary
Overall operating results were in line with our
expectations. Revenue was $175.0 million during the second quarter
of fiscal 2024, as the contribution to revenue of newly awarded
projects was limited as they progress through scope finalization,
engineering and planning stages.
Gross margins in the second quarter of fiscal
2024 were positively impacted by strong project execution partially
offset by the under-recovery of construction overhead costs. On a
consolidated basis, we expect to achieve full recovery of
construction overhead costs on higher revenue volumes in the fourth
quarter of fiscal 2024.
In the Storage and Terminals Solutions segment,
revenue decreased to $62.4 million in the second quarter of fiscal
2024 compared to $90.1 million in the first quarter of fiscal 2024
as a result of the normal flow of work on projects awarded in
previous periods. Strong direct margins were offset by
under-recovery of construction overhead costs due to lower revenue
volumes, resulting in a gross margin of 2.9%. We have allocated
additional resources to this segment to support recent awards and
anticipated higher revenue volume in the second half of fiscal
2024. We expect continued award strength in this segment in the
next two quarters that will increase revenue volumes and provide
more stability in future quarters. With revenue increases in this
segment, we expect to reach full recovery of construction overhead
costs in the fourth quarter of fiscal 2024.
_____________________
(1) |
Adjusted net loss and adjusted loss per share are non-GAAP
financial measures which exclude restructuring costs and gain on
sale of non-core assets. Adjusted EBITDA is a non-GAAP financial
measure which excludes restructuring costs, gain on sale of
non-core assets, stock-based compensation, interest expense, 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. |
|
|
In the Utility and Power Infrastructure segment,
revenue increased to $40.1 million in the second quarter of fiscal
2024 compared to $32.4 million in the first quarter of fiscal 2024
due to higher volumes of power delivery work, LNG peak shaving
projects and power generation projects. Gross margin of 3.5% was
impacted by under-recovery of construction overhead costs as we
have shifted resources to this segment to support large
construction projects which are in their early stages.
In the Process and Industrial Facilities
segment, revenue decreased to $71.3 million in the second quarter
of fiscal 2024 compared to $75.1 million in the first quarter of
fiscal 2024 primarily due to lower volumes of work for a renewable
energy facility, refinery capital projects and midstream gas
processing capital projects. These decreases were partially offset
by higher volumes of refinery maintenance work. Second quarter
gross margin of 9.4% improved compared to prior quarter as a result
of an improvement in project execution and reduced construction
overhead costs as we have shifted resources to other segments to
support large construction projects.
Consolidated SG&A expenses were $15.7
million in the second quarter of fiscal 2024 compared to $17.1
million in the first quarter of fiscal 2024. The decrease was
primarily attributable to a reduction in expense associated with
the variable accounting for cash-settled stock compensation.
Other income during the three months ended
December 31, 2023 included a gain of $2.0 million on the sale of a
facility in Catoosa, Oklahoma. The facility was previously utilized
for our industrial cleaning business, which was sold during the
fourth quarter of fiscal 2023. This completes the divestiture and
closure of a non-core service offering of the business as part of
our strategy to focus the business on core markets.
Our effective tax rate for the second quarter of
fiscal 2024 was zero, impacted by the valuation allowance placed on
all our deferred tax assets due to the existence of a cumulative
loss over a three-year period. As a result, we expect the effective
tax rate to be around zero throughout fiscal 2024.
For the second quarter of fiscal 2024, we had a
net loss of $2.9 million, or $0.10 per share, compared to a net
loss of $3.2 million, or $0.12 per share, in the first quarter of
fiscal 2024. For the second quarter of fiscal 2024, we had an
adjusted net loss of $4.9 million, or $0.18 per share, compared to
an adjusted net loss of $5.7 million, or $0.21 per share, in the
first quarter of fiscal 2024(1).
Backlog
Our backlog reached an all-time high of $1.45
billion as of December 31, 2023. Project awards totaled $230.8
million in the second quarter of fiscal 2024, resulting in a
book-to-bill ratio of 1.3. The table below summarizes our awards,
book-to-bill ratios and backlog by segment for our second fiscal
quarter (amounts are in thousands, except for book-to-bill
ratios):
|
Three Months Ended December 31,
2023 |
|
Six Months Ended December 31,
2023 |
|
Backlog as of December 31, 2023 |
Segment: |
Awards |
|
Book-to-Bill(1) |
|
Awards |
|
Book-to-Bill(1) |
|
Storage and Terminal Solutions |
$ |
125,249 |
|
2.0 |
|
$ |
539,894 |
|
3.5 |
|
$ |
658,049 |
Utility and Power Infrastructure |
|
41,374 |
|
1.0 |
|
|
64,463 |
|
0.9 |
|
|
451,442 |
Process and Industrial Facilities |
|
64,176 |
|
0.9 |
|
|
123,836 |
|
0.8 |
|
|
337,332 |
Total |
$ |
230,799 |
|
1.3 |
|
$ |
728,193 |
|
2.0 |
|
$ |
1,446,823 |
____________________
(1) |
Calculated by dividing project awards by revenue recognized during
the period. |
|
|
Financial Position
We increased cash by $19.8 million and liquidity
by $26.0 million, and paid off all outstanding borrowings in the
second quarter of fiscal 2024. As of December 31, 2023, we had
total liquidity of $106.3 million. Liquidity is comprised of $47.2
million of unrestricted cash and cash equivalents and $59.1 million
of borrowing availability under the credit facility. The company
also has $25.0 million of restricted cash to support the
facility.
Conference Call Details
In conjunction with the earnings release, Matrix
Service Company will host a conference call 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, February 8, 2024.
A live webcast of the conference call will be
available on the Investor Relations page of the Company's website
at matrixservicecompany.com under Events and Presentations.
Investors and other interested parties can access a live
audio-visual webcast using this webcast link, or through the
Company’s website at www.matrixservicecompany.com on the Investors
Relations page under Events & Presentations.
For those unable to participate in the
conference call, a replay of the webcast will be available on the
Investor Relations page of the Company's website.
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
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: Storage and Terminal Solutions,
Utility and Power Infrastructure, and Process and Industrial
Facilities.
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:
Kellie SmytheSenior Director, Investor
RelationsT: 918-359-8267Email: ksmythe@matrixservicecompany.com
Matrix Service
CompanyCondensed Consolidated Statements of
Income(unaudited)(In thousands,
except per share data)
|
Three Months Ended |
|
Six Months Ended |
|
December 31,2023 |
|
December 31,2022 |
|
December 31,2023 |
|
December 31,2022 |
Revenue |
$ |
175,042 |
|
|
$ |
193,840 |
|
|
$ |
372,701 |
|
|
$ |
402,271 |
|
Cost of revenue |
|
164,453 |
|
|
|
195,142 |
|
|
|
350,253 |
|
|
|
390,565 |
|
Gross profit (loss) |
|
10,589 |
|
|
|
(1,302 |
) |
|
|
22,448 |
|
|
|
11,706 |
|
Selling, general and
administrative expenses |
|
15,731 |
|
|
|
17,545 |
|
|
|
32,844 |
|
|
|
34,356 |
|
Goodwill impairment |
|
— |
|
|
|
12,316 |
|
|
|
— |
|
|
|
12,316 |
|
Restructuring costs |
|
— |
|
|
|
1,278 |
|
|
|
— |
|
|
|
2,565 |
|
Operating loss |
|
(5,142 |
) |
|
|
(32,441 |
) |
|
|
(10,396 |
) |
|
|
(37,531 |
) |
Other income (expense): |
|
|
|
|
|
|
|
Interest expense |
|
(319 |
) |
|
|
(916 |
) |
|
|
(644 |
) |
|
|
(1,288 |
) |
Interest income |
|
162 |
|
|
|
46 |
|
|
|
312 |
|
|
|
70 |
|
Other |
|
2,454 |
|
|
|
484 |
|
|
|
4,716 |
|
|
|
(590 |
) |
Loss before income tax
expense |
|
(2,845 |
) |
|
|
(32,827 |
) |
|
|
(6,012 |
) |
|
|
(39,339 |
) |
Provision for federal, state and
foreign income taxes |
|
6 |
|
|
|
— |
|
|
|
6 |
|
|
|
— |
|
Net loss |
$ |
(2,851 |
) |
|
$ |
(32,827 |
) |
|
$ |
(6,018 |
) |
|
$ |
(39,339 |
) |
|
|
|
|
|
|
|
|
Basic loss per common share |
$ |
(0.10 |
) |
|
$ |
(1.22 |
) |
|
$ |
(0.22 |
) |
|
$ |
(1.46 |
) |
Diluted loss per common
share |
$ |
(0.10 |
) |
|
$ |
(1.22 |
) |
|
$ |
(0.22 |
) |
|
$ |
(1.46 |
) |
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
Basic |
|
27,377 |
|
|
|
26,999 |
|
|
|
27,314 |
|
|
|
26,916 |
|
Diluted |
|
27,377 |
|
|
|
26,999 |
|
|
|
27,314 |
|
|
|
26,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matrix Service
CompanyCondensed Consolidated Balance
Sheets(unaudited)(In
thousands)
|
December 31,2023 |
|
June 30,2023 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
47,160 |
|
$ |
54,812 |
Accounts receivable, less allowances (December 31, 2023—$408 and
June 30, 2023—$1,061) |
|
158,182 |
|
|
145,764 |
Costs and estimated earnings in excess of billings on uncompleted
contracts |
|
40,426 |
|
|
44,888 |
Inventories |
|
8,441 |
|
|
7,437 |
Income taxes receivable |
|
449 |
|
|
496 |
Prepaid expenses |
|
8,470 |
|
|
5,741 |
Other current assets |
|
4,184 |
|
|
3,118 |
Total current assets |
|
267,312 |
|
|
262,256 |
Restricted cash |
|
25,000 |
|
|
25,000 |
Property, plant and equipment
- net |
|
42,486 |
|
|
47,545 |
Operating lease right-of-use
assets |
|
18,992 |
|
|
21,799 |
Goodwill |
|
29,131 |
|
|
29,120 |
Other intangible assets, net
of accumulated amortization |
|
2,202 |
|
|
3,066 |
Other assets, non-current |
|
19,711 |
|
|
11,718 |
Total assets |
$ |
404,834 |
|
$ |
400,504 |
|
|
|
|
|
|
|
|
|
|
|
|
Matrix Service
CompanyCondensed Consolidated Balance Sheets
(continued)(unaudited)(In
thousands, except share data)
|
December 31,2023 |
|
June 30,2023 |
Liabilities and
stockholders’ equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
61,887 |
|
|
$ |
76,365 |
|
Billings on uncompleted contracts in excess of costs and estimated
earnings |
|
117,273 |
|
|
|
85,436 |
|
Accrued wages and benefits |
|
13,804 |
|
|
|
13,679 |
|
Accrued insurance |
|
5,781 |
|
|
|
5,579 |
|
Operating lease liabilities |
|
3,981 |
|
|
|
4,661 |
|
Other accrued expenses |
|
2,339 |
|
|
|
1,815 |
|
Total current liabilities |
|
205,065 |
|
|
|
187,535 |
|
Deferred income taxes |
|
26 |
|
|
|
26 |
|
Operating lease liabilities |
|
18,655 |
|
|
|
20,660 |
|
Borrowings under asset-backed credit facility |
|
— |
|
|
|
10,000 |
|
Other liabilities, non-current |
|
2,178 |
|
|
|
799 |
|
Total liabilities |
|
225,924 |
|
|
|
219,020 |
|
Commitments and
contingencies |
|
|
|
Stockholders’ equity: |
|
|
|
Common stock—$.01 par value; 60,000,000 shares authorized;
27,888,217 shares issued as of December 31, 2023 and June 30, 2023;
27,300,485 and 27,047,318 shares outstanding as of December 31,
2023 and June 30, 2023, respectively |
|
279 |
|
|
|
279 |
|
Additional paid-in capital |
|
140,668 |
|
|
|
140,810 |
|
Retained earnings |
|
52,899 |
|
|
|
58,917 |
|
Accumulated other comprehensive loss |
|
(8,745 |
) |
|
|
(8,769 |
) |
|
|
185,101 |
|
|
|
191,237 |
|
Treasury stock, at cost — 587,732 shares as of December 31, 2023,
and 840,899 shares as of June 30, 2023 |
|
(6,191 |
) |
|
|
(9,753 |
) |
Total stockholders'
equity |
|
178,910 |
|
|
|
181,484 |
|
Total liabilities and
stockholders’ equity |
$ |
404,834 |
|
|
$ |
400,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matrix Service
CompanyResults of
Operations(unaudited)(In
thousands)
|
Three Months Ended |
|
Six months ended |
|
December 31,2023 |
|
December 31,2022 |
|
December 31,2023 |
|
December 31,2022 |
Gross
revenue |
|
|
|
|
|
|
|
Storage and Terminal Solutions |
|
63,074 |
|
|
|
63,130 |
|
|
|
154,053 |
|
|
|
140,420 |
|
Utility and Power
Infrastructure |
|
40,144 |
|
|
|
50,589 |
|
|
|
72,539 |
|
|
|
95,459 |
|
Process and Industrial
Facilities |
|
71,526 |
|
|
|
80,789 |
|
|
|
146,664 |
|
|
|
167,526 |
|
Corporate |
|
1,233 |
|
|
|
— |
|
|
|
1,233 |
|
|
|
— |
|
Total gross revenue |
$ |
175,977 |
|
|
$ |
194,508 |
|
|
$ |
374,489 |
|
|
$ |
403,405 |
|
Less: Inter-segment
revenue |
|
|
|
|
|
|
|
Storage and Terminal
Solutions |
|
714 |
|
|
|
614 |
|
|
|
1,549 |
|
|
|
971 |
|
Utility and Power
Infrastructure |
|
— |
|
|
|
54 |
|
|
|
— |
|
|
|
54 |
|
Process and Industrial
Facilities |
|
221 |
|
|
|
— |
|
|
|
239 |
|
|
|
109 |
|
Corporate |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total inter-segment revenue |
$ |
935 |
|
|
$ |
668 |
|
|
$ |
1,788 |
|
|
$ |
1,134 |
|
Consolidated
revenue |
|
|
|
|
|
|
|
Storage and Terminal
Solutions |
$ |
62,360 |
|
|
$ |
62,516 |
|
|
$ |
152,504 |
|
|
$ |
139,449 |
|
Utility and Power
Infrastructure |
|
40,144 |
|
|
|
50,535 |
|
|
|
72,539 |
|
|
|
95,405 |
|
Process and Industrial
Facilities |
|
71,305 |
|
|
|
80,789 |
|
|
|
146,425 |
|
|
|
167,417 |
|
Corporate |
|
1,233 |
|
|
|
— |
|
|
|
1,233 |
|
|
|
— |
|
Total consolidated revenue |
$ |
175,042 |
|
|
$ |
193,840 |
|
|
$ |
372,701 |
|
|
$ |
402,271 |
|
Gross profit
(loss) |
|
|
|
|
|
|
|
Storage and Terminal
Solutions |
$ |
1,838 |
|
|
$ |
1,648 |
|
|
$ |
6,790 |
|
|
$ |
9,213 |
|
Utility and Power
Infrastructure |
|
1,415 |
|
|
|
2,426 |
|
|
|
5,111 |
|
|
|
4,139 |
|
Process and Industrial
Facilities |
|
6,671 |
|
|
|
(5,131 |
) |
|
|
11,749 |
|
|
|
(801 |
) |
Corporate |
|
665 |
|
|
|
(245 |
) |
|
|
(1,202 |
) |
|
|
(845 |
) |
Total gross profit |
$ |
10,589 |
|
|
$ |
(1,302 |
) |
|
$ |
22,448 |
|
|
$ |
11,706 |
|
Selling, general and
administrative expenses |
|
|
|
|
|
|
|
Storage and Terminal
Solutions |
$ |
4,338 |
|
|
$ |
5,450 |
|
|
$ |
8,967 |
|
|
$ |
9,608 |
|
Utility and Power
Infrastructure |
|
1,978 |
|
|
|
1,787 |
|
|
|
3,526 |
|
|
|
3,525 |
|
Process and Industrial
Facilities |
|
2,206 |
|
|
|
3,682 |
|
|
|
5,293 |
|
|
|
7,752 |
|
Corporate |
|
7,209 |
|
|
|
6,626 |
|
|
|
15,058 |
|
|
|
13,471 |
|
Total selling, general and administrative expenses |
$ |
15,731 |
|
|
$ |
17,545 |
|
|
$ |
32,844 |
|
|
$ |
34,356 |
|
Goodwill impairment
and restructuring costs |
|
|
|
|
|
|
|
Storage and Terminal
Solutions |
$ |
— |
|
|
$ |
383 |
|
|
$ |
— |
|
|
$ |
906 |
|
Utility and Power
Infrastructure |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
37 |
|
Process and Industrial
Facilities |
|
— |
|
|
|
12,698 |
|
|
|
— |
|
|
|
13,012 |
|
Corporate |
|
— |
|
|
|
513 |
|
|
|
— |
|
|
|
926 |
|
Total goodwill impairment and restructuring costs |
$ |
— |
|
|
$ |
13,594 |
|
|
$ |
— |
|
|
$ |
14,881 |
|
Operating income
(loss) |
|
|
|
|
|
|
|
Storage and Terminal
Solutions |
$ |
(2,500 |
) |
|
$ |
(4,185 |
) |
|
$ |
(2,177 |
) |
|
$ |
(1,301 |
) |
Utility and Power
Infrastructure |
|
(563 |
) |
|
|
639 |
|
|
|
1,585 |
|
|
|
577 |
|
Process and Industrial
Facilities |
|
4,465 |
|
|
|
(21,511 |
) |
|
|
6,456 |
|
|
|
(21,565 |
) |
Corporate |
|
(6,544 |
) |
|
|
(7,384 |
) |
|
|
(16,260 |
) |
|
|
(15,242 |
) |
Total operating loss |
$ |
(5,142 |
) |
|
$ |
(32,441 |
) |
|
$ |
(10,396 |
) |
|
$ |
(37,531 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 ("LNTP") 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 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 December 31,
2023:
|
Storage and Terminal Solutions |
|
Utility and Power Infrastructure |
|
Process and Industrial Facilities |
|
Total |
|
(In thousands) |
Backlog as of September 30, 2023 |
$ |
595,160 |
|
|
$ |
450,212 |
|
|
$ |
344,461 |
|
|
$ |
1,389,833 |
|
Project awards |
|
125,249 |
|
|
|
41,374 |
|
|
|
64,176 |
|
|
|
230,799 |
|
Revenue recognized |
|
(62,360 |
) |
|
|
(40,144 |
) |
|
|
(71,305 |
) |
|
|
(173,809 |
) |
Backlog as of December 31,
2023 |
$ |
658,049 |
|
|
$ |
451,442 |
|
|
$ |
337,332 |
|
|
$ |
1,446,823 |
|
Book-to-bill ratio(1) |
|
2.0 |
|
|
|
1.0 |
|
|
|
0.9 |
|
|
|
1.3 |
|
____________________
(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 six months ended December 31,
2023:
|
Storage and Terminal Solutions |
|
Utility and Power Infrastructure |
|
Process and Industrial Facilities |
|
Total |
|
(In thousands) |
Backlog as of June 30, 2023 |
$ |
270,659 |
|
|
$ |
459,518 |
|
|
$ |
359,921 |
|
|
$ |
1,090,098 |
|
Project awards |
|
539,894 |
|
|
|
64,463 |
|
|
|
123,836 |
|
|
|
728,193 |
|
Revenue recognized |
|
(152,504 |
) |
|
|
(72,539 |
) |
|
|
(146,425 |
) |
|
|
(371,468 |
) |
Backlog as of December 31,
2023 |
$ |
658,049 |
|
|
$ |
451,442 |
|
|
$ |
337,332 |
|
|
$ |
1,446,823 |
|
Book-to-bill ratio(1) |
|
3.5 |
|
|
|
0.9 |
|
|
|
0.8 |
|
|
|
2.0 |
|
____________________
(1) |
Calculated by dividing project awards by revenue recognized during
the period. |
|
|
Non-GAAP Financial Measures
Adjusted Net Loss
We have presented Adjusted net loss, which we
define as Net loss before restructuring costs, gain on sale of
assets, and the tax impact of these adjustments because we believe
it better depicts our core operating results. We believe that the
line item on our Condensed Consolidated Statements of Income
entitled “Net loss” is the most directly comparable GAAP measure to
Adjusted net loss. Since Adjusted net loss 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 loss as an
indicator of operating performance. Adjusted net loss, 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 net loss
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. Our non-GAAP performance measure,
Adjusted net loss, has certain material limitations as follows:
- It does not include impairments to
goodwill. While impairments to intangible assets are non-cash
expenses in the period recognized, cash or other consideration was
still transferred in exchange for the intangible assets in the
period of the acquisition. Any measure that excludes impairments to
intangible assets has material limitations since these expenses
represent 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 were
incurred and are oftentimes cash expenses. Therefore, any measure
that excludes restructuring costs has material limitations.
- It does not include gain on the
sale of assets. While this sale occurred outside the normal course
of business, any measure that excludes this gain has inherent
limitations since the sale resulted in a material inflow of
cash.
A reconciliation of Net loss to Adjusted net
loss follows:
Reconciliation of Net Loss to Adjusted
Net Loss(1)(In
thousands, except per share data)
|
Three Months Ended |
|
Six Months Ended |
|
December 31, 2023 |
|
December 31, 2022 |
|
December 31, 2023 |
|
December 31, 2022 |
Net loss, as reported |
$ |
(2,851 |
) |
|
$ |
(32,827 |
) |
|
$ |
(6,018 |
) |
|
$ |
(39,339 |
) |
Goodwill impairment |
|
— |
|
|
|
12,316 |
|
|
|
— |
|
|
|
12,316 |
|
Restructuring costs |
|
— |
|
|
|
1,278 |
|
|
|
— |
|
|
|
2,565 |
|
Gain on sale of assets(2) |
|
(2,006 |
) |
|
|
— |
|
|
|
(4,542 |
) |
|
|
— |
|
Tax impact of adjustments(3) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Adjusted net loss |
$ |
(4,857 |
) |
|
$ |
(19,233 |
) |
|
$ |
(10,560 |
) |
|
$ |
(24,458 |
) |
|
|
|
|
|
|
|
|
Loss per share, as
reported |
$ |
(0.10 |
) |
|
$ |
(1.22 |
) |
|
$ |
(0.22 |
) |
|
$ |
(1.46 |
) |
Adjusted loss per share |
$ |
(0.18 |
) |
|
$ |
(0.71 |
) |
|
$ |
(0.39 |
) |
|
$ |
(0.91 |
) |
____________________
(1) |
Beginning with the first quarter of fiscal 2024, the definition of
Adjusted net loss and Adjusted loss per share was updated to no
longer include changes in the valuation allowance of deferred tax
assets. Prior period information has been adjusted to conform to
the updated definition of Adjusted net loss and Adjusted loss per
share. |
(2) |
Represents gain on the sale of our Burlington, ON office in the
first quarter of FY24 and the gain on the sale of our Catoosa, OK
facility in the second quarter of FY24. See Item 1, Note 3 -
Property, Plant and Equipment, Building Disposals, for more
information. |
(3) |
Represents the tax impact of the adjustments to Net loss,
calculated using the applicable effective tax rate of the
adjustment, including the impacts related to our valuation
allowance on deferred tax assets. |
|
|
Adjusted EBITDA
We have presented Adjusted EBITDA, which we
define as Net loss before restructuring costs, gain on sale of
assets, stock-based compensation, interest expense, 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 Condensed
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 loss 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. Our non-GAAP
performance measure, Adjusted EBITDA, has certain material
limitations as follows:
- It does not include impairments to
goodwill. While impairments to intangible assets are non-cash
expenses in the period recognized, cash or other consideration was
still transferred in exchange for the intangible assets in the
period of the acquisition. Any measure that excludes impairments to
intangible assets has material limitations since these expenses
represent 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 were
incurred and are oftentimes cash expenses. Therefore, any measure
that excludes restructuring costs has material limitations.
- It does not include gain on the
sale of assets. While this sale occurred outside the normal course
of business, any measure that excludes this gain has inherent
limitations since the sale resulted in a material inflow of
cash.
- 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 acquisitions, pay commitment fees to maintain our credit
facility, and incur fees to issue letters of credit under the
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 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.
A reconciliation of Net loss to Adjusted EBITDA
follows:
|
Three Months Ended |
|
Six Months Ended |
|
December 31,2023 |
|
December 31,2022 |
|
December 31,2023 |
|
December 31,2022 |
|
(In thousands) |
Net loss |
$ |
(2,851 |
) |
|
$ |
(32,827 |
) |
|
$ |
(6,018 |
) |
|
$ |
(39,339 |
) |
Goodwill impairment |
|
— |
|
|
|
12,316 |
|
|
|
— |
|
|
|
12,316 |
|
Restructuring costs |
|
— |
|
|
|
1,278 |
|
|
|
— |
|
|
|
2,565 |
|
Gain on sale of assets(1) |
|
(2,006 |
) |
|
|
— |
|
|
|
(4,542 |
) |
|
|
— |
|
Stock-based
compensation(2) |
|
2,030 |
|
|
|
1,692 |
|
|
|
3,785 |
|
|
|
3,747 |
|
Interest expense |
|
319 |
|
|
|
916 |
|
|
|
644 |
|
|
|
1,288 |
|
Provision (benefit) for federal,
state and foreign income taxes |
|
6 |
|
|
|
— |
|
|
|
6 |
|
|
|
— |
|
Depreciation and
amortization |
|
2,781 |
|
|
|
3,535 |
|
|
|
5,692 |
|
|
|
7,177 |
|
Adjusted EBITDA |
$ |
279 |
|
|
$ |
(13,090 |
) |
|
$ |
(433 |
) |
|
$ |
(12,246 |
) |
____________________
(1) |
Represents gain on the sale of our Burlington, ON office in the
first quarter of FY24 and the gain on the sale of our Catoosa, OK
facility in the second quarter of FY24. See Item 1, Note 3 -
Property, Plant and Equipment, Building Disposals, for more
information. |
(2) |
Represents only the equity-settled portion of our stock-based
compensation expense. |
|
|
Matrix Service (NASDAQ:MTRX)
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