TULSA, Okla., Feb. 06, 2019 (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 second quarter ended December 31, 2018.

Key highlights:

  • Revenue increased 20.4% to $340.6 million compared to $282.9 million in the second quarter of the prior fiscal year, driven by increases of 78.5% and 18.8%, respectively, in the Storage Solutions and Industrial segments

  • Fully diluted earnings per share were $0.14 in the second quarter and $0.23 year-to-date

  • Backlog at $1.046 billion, up 44.3% compared to $725.0 million for the same period a year ago

  • Company increases revenue guidance from $1.250 to $1.350 billion to $1.350 to $1.425 billion; maintains earnings guidance of $0.85 to $1.15 per fully diluted share

“We are pleased with our continued improvement in revenue. Consistent with past commentary, our gross margins in the quarter were lower than our long-term targets. However, quarter-over-quarter results are trending in the right direction. With an improving quality of backlog and new projects, we expect to see revenue, gross margins, and earnings per share increase as we move through the second half of the year," said John R. Hewitt, President and Chief Executive Officer. "However, the impact of higher revenue volumes and continuing margin improvement in the second half of the year is offset by the lower margin performance in the first half. As a result, while we are increasing our revenue guidance, earnings per share guidance remains unchanged.

"Looking forward, based on the strength of our backlog, end markets, and project opportunity pipeline across all of our operating segments, we expect to end Fiscal 2019 in a strong backlog position. Our confidence in the Company and our end markets is reinforced by the fact that we bought back over $5 million in stock late in this second quarter."

Second Quarter Fiscal 2019 Results

Consolidated revenue was $340.6 million for the three months ended December 31, 2018, compared to $282.9 million in the same period of the prior fiscal year.  Storage Solutions segment revenue increased $55.3 million primarily as a result of increased tank and terminal construction work.  Industrial segment revenue increased $11.2 million due to a higher volume of thermal vacuum chamber work.  Electrical Infrastructure segment revenue decreased $6.7 million due to the expected reduction in power generation EPC work, partially offset by an increase in power delivery work.  Oil Gas & Chemical segment revenue decreased $2.1 million due to lower levels of capital and engineering work partially offset by higher volumes of turnaround and maintenance work.

Consolidated gross profit was $27.9 million in the three months ended December 31, 2018 compared to $26.7 million in the three months ended December 31, 2017.  The gross margin was 8.2% in the three months ended December 31, 2018 compared to 9.4% in the same period in the prior fiscal year.  Fiscal 2019 gross margin was negatively impacted by the wind down of the lower margin work bid in a highly competitive environment in prior periods.  Gross margins in fiscal 2018 benefited from strong project execution on a capital project in the Oil Gas & Chemical segment.

Consolidated SG&A expenses were $22.4 million in the three months ended December 31, 2018 compared to $21.5 million in the same period a year earlier.

Our effective tax rate for the three months ended December 31, 2018 was 27.4% compared to (5.8%) in the same period last year. The effective tax rate in fiscal 2019 was in line with our expected tax rate of 27.0%. The effective tax rate in fiscal 2018 was positively impacted by a one-time $1.2 million adjustment in connection with accounting for the Tax Cut and Jobs Act.

The Company earned net income of $3.9 million, or $0.14 per fully diluted share, in the second quarter of fiscal 2019 compared to net income of $4.5 million, or $0.17 per fully diluted share, in the second quarter of fiscal 2018.

Six Month Fiscal 2019 Results

Consolidated revenue was $659.1 million for the six months ended December 31, 2018, compared to $552.8 million in the same period of the prior fiscal year.  Storage Solutions revenue increased $97.0 million primarily as a result of increased tank and terminal construction work.  Industrial segment revenue increased $63.4 million due to higher volumes of iron and steel and thermal vacuum chamber work.  Electrical Infrastructure segment revenue decreased $41.9 million primarily due to an expected reduction in the volume of power generation EPC work, partially offset by an increase in power delivery work.  Oil Gas & Chemical segment revenue decreased $12.3 million due to lower levels of capital and engineering work, partially offset by higher volumes of turnaround and maintenance work.

Consolidated gross profit was $51.3 million in the six months ended December 31, 2018 compared to $55.6 million in the six months ended December 31, 2017.  The gross margin was 7.8% in the six months ended December 31, 2018 compared to 10.1% in the same period in the prior fiscal year.  The gross margin in fiscal 2019 was impacted by the wind down of lower margin work bid in a highly competitive environment in prior periods and lower than previously forecasted margins on a limited number of those projects. Gross margins in fiscal 2018 benefited from strong project execution on a capital project in the Oil Gas & Chemical segment.

Consolidated SG&A expenses were $43.6 million in the six months ended December 31, 2018 compared to $43.1 million in the same period a year earlier.

The Company earned net income of $6.2 million, or $0.23 per fully diluted share, during the six months ended December 31, 2018 compared to net income of $8.4 million, or $0.31 per fully diluted share in the prior year.

Backlog

Backlog at December 31, 2018 was $1.046 billion compared to $1.109 billion at September 30, 2018.  The quarterly book-to-bill ratio was 0.8 on project awards of $277.5 million.  The year-to-date book-to-bill ratio was 0.7 on project awards of $486.9 million.

Share Repurchase

In December 2018, the Company repurchased 310,532 shares of its common stock for $5.2 million at an average price of $16.71 per share under its previously approved plan.

Financial Position

The Company had zero debt and a cash balance of $71.5 million at December 31, 2018. The cash balance combined with availability under the credit facility provides the Company with liquidity of $137.3 million at December 31, 2018, an increase of $8.0 million since September 30, 2018. The Company expects liquidity improvement as we work through the third and fourth quarters of fiscal 2019.

Earnings Guidance

The Company is increasing fiscal 2019 revenue guidance from between $1.250 billion and $1.350 billion to between $1.350 billion and $1.425 billion. The impact of increased revenue volumes and margin improvement in the second half of the year is offset by the lower margin performance in the first half of the year. As a result, the earnings per share guidance remains unchanged at $0.85 to $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, February 7, 2019 and will be simultaneously broadcast live over the Internet which can be accessed at the Company’s website at matrixservicecompany.com on the Investors’ page under Conference Calls/Events.  Please allow extra time prior to the call to visit the site and download the streaming media software required to listen to the Internet broadcast.  The conference call will be recorded and will be available for replay within one hour of completion of the live call and can be accessed following the same link as the live call.

About Matrix Service Company

Founded in 1984, Matrix Service Company is parent to a family of companies that include Matrix Service 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 matrixservicecompany.com.

This release contains forward-looking statements that are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are generally accompanied by words such as “anticipate,” “continues,” “expect,” “forecast,” “outlook,” “believe,” “estimate,” “should” and “will” and words of similar effect that convey future meaning, concerning the Company’s operations, economic performance and management’s best judgment as to what may occur in the future. Future events involve risks and uncertainties that may cause actual results to differ materially from those we currently anticipate. The actual results for the current and future periods and other corporate developments will depend upon a number of economic, competitive and other influences, including those factors discussed in the “Risk Factors” and “Forward Looking Statements” sections and elsewhere in the Company’s reports and filings made from time to time with the Securities and Exchange Commission. Many of these risks and uncertainties are beyond the control of the Company, and any one of which, or a combination of which, could materially and adversely affect the results of the Company's operations and its financial condition. We undertake no obligation to update information contained in this release, except as required by law.

For more information, please contact:

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

     
Matrix Service Company
Condensed Consolidated Statements of Income
(unaudited)
(In thousands, except per share data)
     
  Three Months Ended Six Months Ended
  December 31,
 2018
 December 31,
 2017
 December 31,
 2018
 December 31,
 2017
Revenues $340,568  $282,911  $659,079  $552,821 
Cost of revenues 312,682  256,208  607,772  497,227 
Gross profit 27,886  26,703  51,307  55,594 
Selling, general and administrative expenses 22,359  21,529  43,560  43,099 
Operating income 5,527  5,174  7,747  12,495 
Other income (expense):        
Interest expense (361) (819) (653) (1,437)
Interest income 274  65  556  104 
Other (22) (135) 524  14 
Income before income tax expense 5,418  4,285  8,174  11,176 
Provision (benefit) for federal, state and foreign income taxes 1,486  (247) 1,937  2,820 
Net income $3,932  $4,532  $6,237  $8,356 
         
Basic earnings per common share $0.15  $0.17  $0.23  $0.31 
Diluted earnings per common share $0.14  $0.17  $0.23  $0.31 
Weighted average common shares outstanding:        
Basic 27,043  26,771  26,982  26,713 
Diluted 27,582  27,078  27,628  26,933 
             


 
Matrix Service Company
Condensed Consolidated Balance Sheets
(unaudited)
(In thousands)
 
 
 December 31,
 2018
 June 30,
 2018
Assets   
Current assets:   
Cash and cash equivalents$71,489  $64,057 
Accounts receivable, less allowances (December 31, 2018— $6,249 and June 30, 2018—$6,327)203,574  203,388 
Costs and estimated earnings in excess of billings on uncompleted contracts72,694  76,632 
Inventories7,961  5,152 
Income taxes receivable1,543  3,359 
Other current assets7,578  4,458 
Total current assets364,839  357,046 
Property, plant and equipment at cost:   
Land and buildings40,517  40,424 
Construction equipment89,321  89,036 
Transportation equipment48,805  48,339 
Office equipment and software42,297  41,236 
Construction in progress3,040  1,353 
Total property, plant and equipment - at cost223,980  220,388 
Accumulated depreciation(152,387) (147,743)
Property, plant and equipment - net71,593  72,645 
Goodwill93,263  96,162 
Other intangible assets21,096  22,814 
Deferred income taxes5,598  4,848 
Other assets13,163  4,518 
Total assets$569,552  $558,033 
    


    
Matrix Service Company
Condensed Consolidated Balance Sheets (continued)
(unaudited)
(In thousands, except share data)
    
 December 31,
 2018
 June 30,
 2018
Liabilities and stockholders’ equity   
Current liabilities:   
Accounts payable$90,712  $79,439 
Billings on uncompleted contracts in excess of costs and estimated earnings115,366  120,740 
Accrued wages and benefits24,735  24,375 
Accrued insurance8,921  9,080 
Income taxes payable  7 
Other accrued expenses4,698  4,824 
Total current liabilities244,432  238,465 
Deferred income taxes1,272  429 
Other liabilities258  296 
Total liabilities245,962  239,190 
Commitments and contingencies   
Stockholders’ equity:   
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of December 31, 2018 and June 30, 2018; 26,778,398 and 26,853,823 shares outstanding as of December 31, 2018 and June 30, 2018279  279 
Additional paid-in capital131,889  132,198 
Retained earnings217,731  211,494 
Accumulated other comprehensive loss(8,079) (7,411)
 341,820  336,560 
Less: Treasury stock, at cost — 1,109,819 shares as of December 31, 2018, and 1,034,394 shares as of June 30, 2018(18,230) (17,717)
Total stockholders' equity323,590  318,843 
Total liabilities and stockholders’ equity$569,552  $558,033 
    


 
Matrix Service Company
Results of Operations
(unaudited)
(In thousands)
 
  Three Months Ended Six Months Ended
  December 31,
 2018
 December 31,
 2017
 December 31,
 2018
 December 31,
 2017
Gross revenues        
Electrical Infrastructure $58,173  $64,852  $102,874  $144,823 
Oil Gas & Chemical 87,521  88,396  163,083  174,257 
Storage Solutions 126,198  71,233  239,965  142,805 
Industrial 70,385  59,260  155,942  92,531 
Total gross revenues $342,277  $283,741  $661,864  $554,416 
Less: Inter-segment revenues        
Oil Gas & Chemical $1,234  $37  $1,305  $245 
Storage Solutions 475  792  1,480  1,349 
Industrial   1    1 
Total inter-segment revenues $1,709  $830  $2,785  $1,595 
Consolidated revenues        
Electrical Infrastructure $58,173  $64,852  $102,874  $144,823 
Oil Gas & Chemical 86,287  88,359  161,778  174,012 
Storage Solutions 125,723  70,441  238,485  141,456 
Industrial 70,385  59,259  155,942  92,530 
Total consolidated revenues $340,568  $282,911  $659,079  $552,821 
Gross profit        
Electrical Infrastructure $3,562  $5,541  $6,945  $13,808 
Oil Gas & Chemical 9,157  11,768  14,782  22,806 
Storage Solutions 11,147  5,298  20,700  12,838 
Industrial 4,020  4,096  8,880  6,142 
Total gross profit $27,886  $26,703  $51,307  $55,594 
Operating income (loss)        
Electrical Infrastructure $438  $1,079  $1,095  $4,656 
Oil Gas & Chemical 3,585  5,198  4,099  9,332 
Storage Solutions 1,356  (2,609) 1,641  (2,684)
Industrial 148  1,506  912  1,191 
Total operating income $5,527  $5,174  $7,747  $12,495 
                 

Backlog

We define backlog as the total dollar amount of revenue that we expect to recognize as a result of performing work that has been awarded to us through a signed contract, notice to proceed or other type of assurance that we consider firm.  The following arrangements are considered firm:

  • fixed-price awards;

  • minimum customer commitments on cost plus arrangements; and

  • certain time and material arrangements in which the estimated value is firm or can be estimated with a reasonable amount of certainty in both timing and amounts.

For long-term maintenance contracts 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 December 31, 2018:

 Electrical
Infrastructure
 Oil Gas &
Chemical
 Storage
Solutions
 Industrial Total
  
 (In thousands)
Backlog as of September 30, 2018$108,845  $189,492  $585,737  $225,398  $1,109,472 
Project awards52,066  74,656  85,190  65,580  277,492 
Revenue recognized(58,173) (86,287) (125,723) (70,385) (340,568)
Backlog as of December 31, 2018$102,738  $177,861  $545,204  $220,593  $1,046,396 
Book-to-bill ratio(1)0.9  0.9  0.7  0.9  0.8 

____________
  (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, 2018:

 Electrical
Infrastructure
 Oil Gas &
Chemical
 Storage
Solutions
 Industrial Total
  
 (In thousands)
Backlog as of June 30, 2018$113,957  $227,452  $613,360  $263,827  1,218,596 
Project awards91,655  112,187  170,329  112,708  486,879 
Revenue recognized(102,874) (161,778) (238,485) (155,942) (659,079)
Backlog as of December 31, 2018$102,738  $177,861  $545,204  $220,593  $1,046,396 
Book-to-bill ratio(1)0.9  0.7  0.7  0.7  0.7 

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