• Fourth quarter revenue of $293.1 million and full year revenue of $1.092 billion
  • Company recorded impairment charges of $18.0 million in quarter, resulting in a fully diluted EPS of $(0.55) and $(0.43) for the fourth quarter and fiscal year, respectively
  • Exclusive of this impairment, adjusted fully diluted EPS for the quarter and fiscal year were $0.03 and $0.15, respectively
  • Book-to-bill was 2.0 on project awards of $597.5 million in the fourth quarter and 1.5 on project awards of $1.628 billion for the full year
  • Backlog is $1.219 billion, an increase of 33% in the fourth quarter and 79% for the full year
  • Fiscal 2019 guidance set at $1.250 to $1.350 billion in revenue and $0.85 to $1.15 for fully diluted earnings per share

TULSA, Okla., Sept. 10, 2018 (GLOBE NEWSWIRE) -- Matrix Service Company (Nasdaq: MTRX) today reported its financial results for the fourth quarter and year ended June 30, 2018.

"As we progressed through fiscal 2018, we saw significant improvement in the end markets we serve, reflected in part by the strong project awards received in our Storage Solutions and Industrial segments and by improving levels of higher margin work across most of the business. Backlog at June 30, 2018 increased 79% to $1.219 billion during the year," said John R. Hewitt, President and Chief Executive Officer. "That said, the majority of these awards came later than expected, pushing revenue into fiscal 2019 and beyond.

"In addition to the strong project award activity, as we indicated on our third quarter call, we saw improvement in our revenue volumes and operating results in the fourth quarter.

"However, our fourth quarter results were impacted by impairment charges totaling $18.0 million. This includes a goodwill impairment charge of $17.3 million in the Electrical Infrastructure segment and a $0.7 million write off of an amortizing intangible asset in the Oil Gas & Chemical segment.  The goodwill impairment was triggered by the Company’s decision to shift its strategy away from EPC power generation projects to smaller individual packages that better fit the Company’s risk profile, combined with the recent trend of increased competition and sluggish maintenance and capital spending by some key clients in the Northeast and Mid Atlantic high voltage markets."

Including these impairment charges, the Company reported a net loss in the fourth quarter of fiscal 2018 of $0.55 per fully diluted share and a full year loss of $0.43 per fully diluted share. Excluding these non-cash charges, the adjusted earnings per fully diluted share (a non-GAAP measure) were $0.03 and $0.15 for the three months and year ending June 30, 2018.  The Company has included a reconciliation of this non-GAAP measure in this earnings release.

Looking forward, Hewitt said, "We expect activity in our Storage Solutions, Industrial, and Oil, Gas & Chemical segments to be strong in fiscal 2019. Further, we also expect improvement in our Electrical Infrastructure segment as our core markets in the Northeast and Mid Atlantic strengthen and we execute on our strategic growth plans through focused organic expansion and targeted acquisitions to increase our geographic footprint in high voltage electrical.  We will also continue to pursue smaller power generation construction packages.

"In short, we are very optimistic about the outlook for our business across all of the market segments we serve.  We expect our business volume to build quarter over quarter throughout the year, with fiscal 2019 being considerably stronger than fiscal 2018."

Fourth Quarter Fiscal 2018 Results

Revenue for the fourth quarter ended June 30, 2018 was $293.1 million compared to $291.8 million in the same quarter a year earlier.  On a segment basis, revenue increased $34.7 million and $17.0 million in the Industrial and Storage Solutions segments, respectively.  These increases were driven primarily by higher volumes of iron and steel work in the Industrial segment and higher volumes of tank construction work in the Storage Solutions segment. These increases were largely offset by a decrease of $47.4 million in the Electrical Infrastructure segment due to a reduction in power generation capital construction work and lower high voltage volumes.

Consolidated gross profit was $21.5 million in the three months ended June 30, 2018 compared to $23.1 million in the three months ended June 30, 2017.  Gross margin for the fourth quarter of fiscal 2018 was 7.3% compared to 7.9% in the same period a year earlier as both periods were impacted by lower direct margin opportunities previously booked in a challenging market environment.

Selling, general and administrative costs were $20.6 million in the fourth quarter of fiscal 2018 compared to $19.6 million in the same period a year earlier.

Fiscal 2018 Results

Revenue for the fiscal year ended June 30, 2018 was $1.092 billion compared to $1.198 billion in the same period a year earlier, a decrease of $106.0 million.  On a segment basis, revenue decreased in the Storage Solutions and Electrical Infrastructure segments by $167.0 million and $117.5 million, respectively, which were partially offset by higher revenues in the Industrial and Oil Gas & Chemical segments of $96.3 million and $82.3 million, respectively.  The decrease in Storage Solutions segment revenue is primarily the result of delays in project awards during fiscal 2017 and the first half of fiscal 2018.  The decrease in Electrical Infrastructure segment revenue is due to a reduction in power generation capital construction work and lower high voltage volumes.  The increase in Industrial segment revenue is primarily attributable to improved market conditions for our iron and steel customers.  Oil Gas & Chemical segment revenue increased primarily as a result of higher construction volumes, combined with an improved turnaround and maintenance environment.

Consolidated gross profit was $91.9 million in fiscal 2018 compared to $81.0 million in fiscal 2017.  Fiscal 2018 gross margin was 8.4% compared 6.8% in fiscal 2017.  The increase in gross margin in fiscal 2018 is primarily attributable to the financial impact of a large power generation project in the Electrical Infrastructure segment in fiscal 2017 and better recovery of overhead costs in fiscal 2018.

Consolidated SG&A expenses were $84.4 million in fiscal 2018 compared to $76.1 million in fiscal 2017.  The increase in fiscal 2018 is primarily attributable to overhead associated with a fiscal 2017 acquisition that expanded the Company's engineering business, as well as higher project pursuit costs across the business.

Income Tax Expense

The effective tax rates were 15.2% and 5.5% for the three months and fiscal year ended June 30, 2018, respectively.  As a result of the Tax Cuts and Jobs Act and its transitional application to our June 30 fiscal year end, we expected our effective income tax rate to be approximately 32% in fiscal 2018.  Our effective income tax rate in fiscal 2018 was negatively impacted by $8.3 million of non-deductible goodwill being impaired in the fourth quarter.  The Company estimates that its fiscal 2019 effective tax rate will approximate 27%.

Backlog

The June 30, 2018 backlog balance increased by $536.3 million to $1.219 billion, a 79% increase, as a result of strong project awards, particularly in the Storage Solutions and Industrial segments. This balance compares to $682.3 million at June 30, 2017 and $914.2 million at March 31, 2018.  Project awards in the three months ended June 30, 2018 totaled $597.5 million compared to $262.9 million during the same period a year ago, an increase of 127.3%.  Project awards for the fiscal year ended June 30, 2018 totaled $1.628 billion compared to $1.061 billion during the same period a year ago, an increase of 53.5%.

Financial Position

At June 30, 2018, the Company has zero outstanding debt, a cash balance of $64.1 million and liquidity of $137.2 million.

Earnings Guidance

The strength of our backlog and opportunity pipeline, tempered by the wind up of these projects will drive continuous improvement of our top and bottom line performance as we move through the fiscal year.  The Company expects 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 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 Tuesday, September 11, 2018 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

Matrix Service Company provides engineering, fabrication, construction and repair and maintenance services to the Electrical Infrastructure, Oil Gas & Chemical, Storage Solutions and Industrial markets.

The Company is headquartered in Tulsa, Oklahoma, with regional operating facilities throughout the United States, Canada and other international locations.

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.

  
For more information, please contact: 
  
Matrix Service Company       Alpha IR Group
Kevin S. Cavanah     Investor Relations
Vice President and CFO       Bobby Winters
T: 918-838-8822       T: 312-445-2870
E: kcavanah@matrixservicecompany.com     E: MTRX@alpha-ir.com
  


 
Matrix Service Company
 
Consolidated Statements of Income
 
(In thousands, except per share data)
 
  Three Months Ended Twelve Months Ended
  June 30,
 2018
 June 30,
 2017
 June 30,
 2018
 June 30,
 2017
Revenues $293,087  $291,836  $1,091,553  $1,197,509 
Cost of revenues 271,636  268,709  999,617  1,116,506 
Gross profit 21,451  23,127  91,936  81,003 
Selling, general and administrative expenses 20,565  19,596  84,417  76,144 
Goodwill and other intangible asset impairment 17,998    17,998   
Operating income (loss) (17,112) 3,531  (10,479) 4,859 
Other income (expense):        
Interest expense (520) (638) (2,600) (2,211)
Interest income 147  21  381  132 
Other 166  (337) 550  (334)
Income (loss) before income tax expense (17,319) 2,577  (12,148) 2,446 
Provision (benefit) for federal, state and foreign income taxes (2,636) 3,531  (668) 2,308 
Net income (loss) (14,683) (954) (11,480) 138 
Less: Net income attributable to noncontrolling interest       321 
Net loss attributable to Matrix Service Company $(14,683) $(954) $(11,480) $(183)
Basic loss per common share $(0.55) $(0.04) $(0.43) $(0.01)
Diluted loss per common share $(0.55) $(0.04) $(0.43) $(0.01)
Weighted average common shares outstanding:        
Basic 26,833  26,600  26,769  26,533 
Diluted 26,833  26,600  26,769  26,533 
             


 
Matrix Service Company
 
Consolidated Balance Sheets
 
(In thousands) 
 
 June 30, June 30,
20182017
Assets   
Current assets:   
Cash and cash equivalents$64,057  $43,805 
Accounts receivable, less allowances (2018 - $6,327; 2017 - $9,887)203,388  210,953 
Costs and estimated earnings in excess of billings on uncompleted contracts76,632  91,180 
Inventories5,152  3,737 
Income taxes receivable3,359  4,042 
Other current assets4,458  4,913 
Total current assets357,046  358,630 
Property, plant and equipment, at cost:   
Land and buildings40,424  38,916 
Construction equipment89,036  94,298 
Transportation equipment48,339  48,574 
Office equipment and software41,236  36,556 
Construction in progress1,353  5,952 
Total property, plant and equipment - at cost220,388  224,296 
Accumulated depreciation(147,743) (144,022)
Property, plant and equipment - net72,645  80,274 
Goodwill96,162  113,501 
Other intangible assets22,814  26,296 
Deferred income taxes4,848  3,385 
Other assets4,518  3,944 
Total assets$558,033  $586,030 
    
Liabilities and stockholders’ equity   
Current liabilities:   
Accounts payable$79,439  $105,649 
Billings on uncompleted contracts in excess of costs and estimated earnings120,740  75,127 
Accrued wages and benefits24,375  20,992 
Accrued insurance9,080  9,340 
Income taxes payable7  169 
Other accrued expenses4,824  7,699 
Total current liabilities238,465  218,976 
Deferred income taxes429  128 
Borrowings under senior secured revolving credit facility  44,682 
Other liabilities296  435 
Total liabilities239,190  264,221 
Commitments and contingencies   
Stockholders’ equity:   
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares
issued as of June 30, 2018 and June 30, 2017; 26,853,823 and 26,600,562 shares
outstanding as of June 30, 2018 and June 30, 2017
279  279 
Additional paid-in capital132,198  128,419 
Retained earnings211,494  222,974 
Accumulated other comprehensive income(7,411) (7,324
 336,560  344,348 
Less treasury stock, at cost — 1,034,394 and 1,287,655 shares as of June 30, 2018 and
June 30, 2017
(17,717) (22,539
Total stockholders' equity318,843  321,809 
Total liabilities and stockholders’ equity$558,033  $586,030 
        


 
Results of Operations
(In thousands)
       
  Electrical
Infrastructure
 Oil Gas &
Chemical
 Storage
Solutions
 Industrial Total
Three Months Ended June 30, 2018          
Gross revenues $52,730  $81,600  $97,442  $63,648  $295,420 
Less: inter-segment revenues   1,230  1,103    2,333 
Consolidated revenues 52,730  80,370  96,339  63,648  293,087 
Gross profit 2,733  5,873  8,774  4,071  21,451 
Operating income (loss) $(18,765) $114  $802  $737  $(17,112)
           
Three Months Ended June 30, 2017          
Gross revenues $100,169  $83,387  $80,246  $29,195  $292,997 
Less: inter-segment revenues   8  881  272  1,161 
Consolidated revenues 100,169  83,379  79,365  28,923  291,836 
Gross profit 8,033  5,910  6,671  2,513  23,127 
Operating income (loss) $4,776  $(1,729) $(535) $1,019  $3,531 
           
Twelve Months Ended June 30, 2018          
Gross revenues $255,931  $324,546  $319,106  $198,155  $1,097,738 
Less: inter-segment revenues   1,774  4,410  1  6,185 
Consolidated revenues 255,931  322,772  314,696  198,154  1,091,553 
Gross profit 18,300  33,423  25,778  14,435  91,936 
Operating income (loss) $(16,531) $8,798  $(5,907) $3,161  $(10,479)
           
Twelve Months Ended June 30, 2017          
Gross revenues $373,384  $247,423  $483,254  $103,449  $1,207,510 
Less: inter-segment revenues   6,900  1,558  1,543  10,001 
Consolidated revenues 373,384  240,523  481,696  101,906  1,197,509 
Gross profit 7,137  12,675  55,651  5,540  81,003 
Operating income (loss) $(8,309) $(8,783) $22,928  $(977) $4,859 
                     

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 amount.

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.

Three Months Ended June 30, 2018

The following table provides a summary of changes in our backlog for the three months ended June 30, 2018:

           
  Electrical
Infrastructure
 Oil Gas &
Chemical
 Storage
Solutions
 Industrial Total
      (In thousands)    
Backlog as of March 31, 2018 $81,147  $213,638  $338,424  $281,000  $914,209 
Project awards 85,540  94,184  371,275  46,475  597,474 
Revenue recognized (52,730) (80,370) (96,339) (63,648) (293,087)
Backlog as of June 30, 2018 $113,957  $227,452  $613,360  $263,827  $1,218,596 
Book-to-bill ratio(1) 1.6  1.2  3.9  0.7  2.0 


     
(1) Calculated by dividing project awards by revenue recognized.
 

Twelve Months Ended June 30, 2018

The following table provides a summary of changes in our backlog for the twelve months ended June 30, 2018:

           
  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 207,251  263,217  786,505  370,903  1,627,876 
Revenue recognized (255,931) (322,772) (314,696) (198,154) (1,091,553)
Backlog as of June 30, 2018 $113,957  $227,452  $613,360  $263,827  $1,218,596 
Book-to-bill ratio(1) 0.8  0.8  2.5  1.9  1.5 


     
(1) Calculated by dividing project awards by revenue recognized.
 

Non-GAAP Financial Measure

The following table presents a non-GAAP financial measure of our adjusted diluted earnings per share for the three and twelve months ended June 30, 2018.  The most directly comparable financial measure is diluted earnings (loss) per common share presented in the Statements of Consolidated Income.  We have presented this financial measure because we believe it more clearly depicts the core operating results of the Company during the periods presented and provides a more comparable measure of the Company's operating results to other companies considered to be in similar businesses.  Since adjusted diluted earnings per share is not a measure of performance calculated in accordance with GAAP, it should be considered in addition to, rather than as a substitute for, the most directly comparable GAAP financial measure.

 
Matrix Service Company
 
Reconciliation of GAAP to Non-GAAP Financial Measures
 
(In thousands, except per share data)
 
(Unaudited)
 
  Three Months Ended
June 30, 2018
 Twelve Months Ended
June 30, 2018
Diluted earnings (loss) per common share:    
As reported $(0.55) $(0.43)
Goodwill and other intangible asset impairment, net of tax 0.58  0.58 
Adjusted diluted earnings per common share $0.03  $0.15 
     
Weighted average common shares outstanding - diluted:    
As reported 26,833  26,769 
Dilutive potential of previously anti-dilutive common shares 600  401 
Adjusted weighted average common shares outstanding - diluted 27,433  27,170