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
ended March 31, 2019.
Key highlights:
- Revenue increased 46.1% to $358.9 million compared to
$245.6 million in the third quarter of the prior fiscal
year
- Fully diluted earnings per share of $0.33 in the third
quarter
- Backlog increased 25.4% to $1.146 billion compared to
$914.2 million at the same period a year ago; book-to-bill of 1.3
for the quarter on $458.9 million of project awards
- Liquidity of $180.0 million, up 34.6% compared to
$133.7 million for the same period a year ago
- Company narrows revenue guidance to between $1.375 and
$1.425 billion and earnings per fully diluted share to between
$0.90 to $1.10
“We are pleased with our third quarter results,
which, as previously forecasted, reflect continued improvement in
revenue, gross margins, and earnings per share. This was led by
strong performance in Storage Solutions and Oil Gas & Chemical,
which was reinforced by increased scope on refinery turnaround
projects and engineering work on a number of gas processing
facilities,” said John R. Hewitt, President and Chief Executive
Officer.
“As previously indicated, achieving full year
guidance was dependent upon producing strong results in the back
half of the fiscal year. With the performance produced this
quarter, and our fourth quarter expectations, we are confident in
narrowing our revenue guidance to between $1.375 and $1.425 billion
and our earnings guidance to between $0.90 and $1.10 per fully
diluted share."
Third Quarter Fiscal 2019 Results
Consolidated revenue was $358.9 million for the
three months ended March 31, 2019, compared to $245.6 million
in the same period of the prior fiscal year. Storage
Solutions segment revenue increased $57.5 million primarily as a
result of increased tank and terminal construction work, and higher
levels of repair and maintenance spending. Industrial segment
revenue increased $39.3 million due to higher volumes of iron and
steel work. Oil Gas & Chemical segment revenue increased
$14.2 million due to higher volumes of turnaround and maintenance
work. Electrical Infrastructure segment revenue increased
$2.3 million due to an increase in power generation package work,
largely offset by reductions in power delivery and our strategic
shift away from larger power generation EPC work.
Consolidated gross profit was $36.9 million in
the three months ended March 31, 2019 compared to $14.9
million in the three months ended March 31, 2018. The
gross margin was 10.3% in the three months ended March 31,
2019 compared to 6.1% in the same period in the prior fiscal
year. Fiscal 2019 gross margin was positively impacted by
higher revenues, which led to improved recovery of construction
overhead costs, and improved project execution.
Consolidated SG&A expenses were $24.1
million in the three months ended March 31, 2019 compared to
$20.8 million in the same period a year earlier. The increase
was primarily due to improved operating results, which led to
higher incentive compensation expense, and higher stock
compensation cost.
Our effective tax rate for the three months
ended March 31, 2019 was 30.5% which was higher than our
expected fiscal 2019 effective tax rate of approximately
27.0%. The effective tax rate in fiscal 2019 was negatively
impacted by a valuation allowance of $0.6 million placed on foreign
tax credits which we do not believe will be utilized prior to their
expiration.
The Company earned net income of $8.9 million,
or $0.33 per fully diluted share, in the third quarter of fiscal
2019 compared to a net loss of $5.2 million, or $0.19 per fully
diluted share, in the third quarter of fiscal 2018.
Nine Month Fiscal 2019 Results
Consolidated revenue was $1.018 billion for the
nine months ended March 31, 2019, compared to $798.5 million
in the same period of the prior fiscal year. Storage
Solutions revenue increased $154.5 million primarily as a result of
increased tank and terminal construction work, and higher levels of
repair and maintenance spending. Industrial segment revenue
increased $102.7 million due to higher volumes of iron and steel
spending and increased thermal vacuum chamber work. Oil Gas
& Chemical segment revenue increased $1.9 million due to higher
volumes of turnaround and maintenance work, largely offset by a
decrease in capital work. Electrical Infrastructure segment
revenue decreased $39.7 million primarily due to the strategic
shift away from larger EPC power generation work to smaller
packages, as well as a lower volume of power delivery projects.
Consolidated gross profit was $88.2 million in
the nine months ended March 31, 2019 compared to $70.5 million
in the nine months ended March 31, 2018. The gross
margin was 8.7% in the nine months ended March 31, 2019
compared to 8.8% in the same period in the prior fiscal year.
For the first and second quarters of fiscal 2019, the gross margin
was negatively impacted by the wind down of lower margin work
awarded in a highly competitive environment and lower than
previously forecasted margins on a limited number of those
projects.
Consolidated SG&A expenses were $67.7
million in the nine months ended March 31, 2019 compared to
$63.9 million in the same period a year earlier. The increase
was primarily due to improved operating results, which led to
higher incentive compensation expense, and higher stock
compensation cost. These increases were partially offset by
lower amortization expense on intangible assets that fully
amortized in fiscal 2018.
The Company earned net income of $15.2 million,
or $0.55 per fully diluted share, during the nine months ended
March 31, 2019 compared to net income of $3.2 million, or
$0.12 per fully diluted share in the prior year.
Backlog
Backlog at March 31, 2019 was $1.146
billion compared to $1.046 billion at December 31, 2018. The
quarterly book-to-bill ratio was 1.3 on project awards of $458.9
million. The year-to-date book-to-bill ratio was 0.9 on
project awards of $945.8 million.
Financial Position
The Company had borrowings of $2.2 million
outstanding and a cash balance of $49.7 million at March 31,
2019. The cash balance combined with availability under the
credit facility provides the Company with liquidity of $180.0
million at March 31, 2019, an increase of $42.7 million since
December 31, 2018. The Company expects continued liquidity
improvement as we work through fourth quarter of fiscal 2019.
Earnings Guidance
The Company is narrowing fiscal 2019 revenue
guidance to between $1.375 billion and $1.425 billion and earnings
per fully diluted share to between $0.90 and $1.10.
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, May 9, 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. CavanahVice President and CFOT: 918-838-8822Email:
kcavanah@matrixservicecompany.com
Kellie SmytheSenior Director, Investor RelationsT:
918-359-8267Email: ksmythe@matrixservicecompany.com
|
Matrix Service Company |
Condensed Consolidated Statements of Income |
(unaudited) |
(In thousands, except per share data) |
|
|
Three Months Ended |
|
Nine Months Ended |
|
March 31, 2019 |
|
March 31, 2018 |
|
March 31, 2019 |
|
March 31, 2018 |
Revenues |
$ |
358,887 |
|
|
$ |
245,645 |
|
|
$ |
1,017,966 |
|
|
$ |
798,466 |
|
Cost of revenues |
321,981 |
|
|
230,754 |
|
|
929,753 |
|
|
727,981 |
|
Gross profit |
36,906 |
|
|
14,891 |
|
|
88,213 |
|
|
70,485 |
|
Selling, general and
administrative expenses |
24,112 |
|
|
20,753 |
|
|
67,672 |
|
|
63,852 |
|
Operating income (loss) |
12,794 |
|
|
(5,862 |
) |
|
20,541 |
|
|
6,633 |
|
Other income (expense): |
|
|
|
|
|
|
|
Interest expense |
(301 |
) |
|
(643 |
) |
|
(954 |
) |
|
(2,080 |
) |
Interest income |
307 |
|
|
130 |
|
|
863 |
|
|
234 |
|
Other |
58 |
|
|
370 |
|
|
582 |
|
|
384 |
|
Income (loss) before income tax
expense |
12,858 |
|
|
(6,005 |
) |
|
21,032 |
|
|
5,171 |
|
Provision (benefit) for federal,
state and foreign income taxes |
3,925 |
|
|
(852 |
) |
|
5,862 |
|
|
1,968 |
|
Net income (loss) |
$ |
8,933 |
|
|
$ |
(5,153 |
) |
|
$ |
15,170 |
|
|
$ |
3,203 |
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common
share |
$ |
0.33 |
|
|
$ |
(0.19 |
) |
|
$ |
0.56 |
|
|
$ |
0.12 |
|
Diluted earnings (loss) per
common share |
$ |
0.33 |
|
|
$ |
(0.19 |
) |
|
$ |
0.55 |
|
|
$ |
0.12 |
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
Basic |
26,788 |
|
|
26,817 |
|
|
26,918 |
|
|
26,747 |
|
Diluted |
27,417 |
|
|
26,817 |
|
|
27,587 |
|
|
27,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matrix Service Company |
Condensed Consolidated Balance Sheets |
(unaudited) |
(In thousands) |
|
|
March 31, 2019 |
|
June 30, 2018 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
49,676 |
|
|
$ |
64,057 |
|
Accounts receivable, less allowances (March 31, 2019— $938 and
June 30, 2018—$6,327) |
274,904 |
|
|
203,388 |
|
Costs and estimated earnings in excess of billings on uncompleted
contracts |
75,353 |
|
|
76,632 |
|
Inventories |
8,637 |
|
|
5,152 |
|
Income taxes receivable |
489 |
|
|
3,359 |
|
Other current assets |
6,171 |
|
|
4,458 |
|
Total current assets |
415,230 |
|
|
357,046 |
|
Property, plant and equipment
at cost: |
|
|
|
Land and buildings |
41,091 |
|
|
40,424 |
|
Construction equipment |
90,759 |
|
|
89,036 |
|
Transportation equipment |
49,719 |
|
|
48,339 |
|
Office equipment and software |
43,036 |
|
|
41,236 |
|
Construction in progress |
5,860 |
|
|
1,353 |
|
Total property, plant and equipment - at cost |
230,465 |
|
|
220,388 |
|
Accumulated depreciation |
(154,653 |
) |
|
(147,743 |
) |
Property, plant and equipment - net |
75,812 |
|
|
72,645 |
|
Goodwill |
93,316 |
|
|
96,162 |
|
Other intangible assets |
20,282 |
|
|
22,814 |
|
Deferred income taxes |
6,169 |
|
|
4,848 |
|
Other assets |
20,624 |
|
|
4,518 |
|
Total assets |
$ |
631,433 |
|
|
$ |
558,033 |
|
|
|
|
|
|
Matrix Service Company |
Condensed Consolidated Balance Sheets
(continued) |
(unaudited) |
(In thousands, except share data) |
|
|
|
March 31, 2019 |
|
June 30, 2018 |
Liabilities and
stockholders’ equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
110,502 |
|
|
$ |
79,439 |
|
Billings on uncompleted contracts in excess of costs and estimated
earnings |
122,235 |
|
|
120,740 |
|
Accrued wages and benefits |
41,823 |
|
|
24,375 |
|
Accrued insurance |
9,459 |
|
|
9,080 |
|
Income taxes payable |
907 |
|
|
7 |
|
Other accrued expenses |
4,618 |
|
|
4,824 |
|
Total current liabilities |
289,544 |
|
|
238,465 |
|
Deferred income taxes |
3,391 |
|
|
429 |
|
Borrowings under senior secured revolving credit facility |
2,172 |
|
|
— |
|
Other liabilities |
232 |
|
|
296 |
|
Total liabilities |
295,339 |
|
|
239,190 |
|
Commitments and
contingencies |
|
|
|
Stockholders’ equity: |
|
|
|
Common stock—$.01 par value; 60,000,000 shares authorized;
27,888,217 shares issued as of March 31, 2019 and June 30, 2018;
26,803,422 and 26,853,823 shares outstanding as of March 31, 2019
and June 30, 2018 |
279 |
|
|
279 |
|
Additional paid-in capital |
134,836 |
|
|
132,198 |
|
Retained earnings |
226,664 |
|
|
211,494 |
|
Accumulated other comprehensive loss |
(7,863 |
) |
|
(7,411 |
) |
|
353,916 |
|
|
336,560 |
|
Less: Treasury stock, at cost — 1,084,795 shares as of March 31,
2019, and 1,034,394 shares as of June 30, 2018 |
(17,822 |
) |
|
(17,717 |
) |
Total stockholders'
equity |
336,094 |
|
|
318,843 |
|
Total liabilities and
stockholders’ equity |
$ |
631,433 |
|
|
$ |
558,033 |
|
|
|
|
|
|
Matrix Service Company |
Results of Operations |
(unaudited) |
(In thousands) |
|
|
Three Months Ended |
|
Nine Months Ended |
|
March 31, 2019 |
|
March 31, 2018 |
|
March 31, 2019 |
|
March 31, 2018 |
Gross
revenues |
|
|
|
|
|
|
|
Electrical Infrastructure |
$ |
60,669 |
|
|
$ |
58,378 |
|
|
$ |
163,543 |
|
|
$ |
203,201 |
|
Oil Gas & Chemical |
83,414 |
|
|
68,689 |
|
|
246,497 |
|
|
242,946 |
|
Storage Solutions |
134,822 |
|
|
78,859 |
|
|
374,787 |
|
|
221,664 |
|
Industrial |
81,283 |
|
|
41,976 |
|
|
237,225 |
|
|
134,507 |
|
Total gross revenues |
$ |
360,188 |
|
|
$ |
247,902 |
|
|
$ |
1,022,052 |
|
|
$ |
802,318 |
|
Less: Inter-segment
revenues |
|
|
|
|
|
|
|
Oil Gas & Chemical |
$ |
870 |
|
|
$ |
299 |
|
|
$ |
2,175 |
|
|
$ |
544 |
|
Storage Solutions |
431 |
|
|
1,958 |
|
|
1,911 |
|
|
3,307 |
|
Industrial |
— |
|
|
— |
|
|
— |
|
|
1 |
|
Total inter-segment revenues |
$ |
1,301 |
|
|
$ |
2,257 |
|
|
$ |
4,086 |
|
|
$ |
3,852 |
|
Consolidated
revenues |
|
|
|
|
|
|
|
Electrical Infrastructure |
$ |
60,669 |
|
|
$ |
58,378 |
|
|
$ |
163,543 |
|
|
$ |
203,201 |
|
Oil Gas & Chemical |
82,544 |
|
|
68,390 |
|
|
244,322 |
|
|
242,402 |
|
Storage Solutions |
134,391 |
|
|
76,901 |
|
|
372,876 |
|
|
218,357 |
|
Industrial |
81,283 |
|
|
41,976 |
|
|
237,225 |
|
|
134,506 |
|
Total consolidated revenues |
$ |
358,887 |
|
|
$ |
245,645 |
|
|
$ |
1,017,966 |
|
|
$ |
798,466 |
|
Gross
profit |
|
|
|
|
|
|
|
Electrical Infrastructure |
$ |
6,210 |
|
|
$ |
1,759 |
|
|
$ |
13,155 |
|
|
$ |
15,567 |
|
Oil Gas & Chemical |
10,736 |
|
|
4,744 |
|
|
25,518 |
|
|
27,550 |
|
Storage Solutions |
14,575 |
|
|
4,166 |
|
|
35,275 |
|
|
17,004 |
|
Industrial |
5,385 |
|
|
4,222 |
|
|
14,265 |
|
|
10,364 |
|
Total gross profit |
$ |
36,906 |
|
|
$ |
14,891 |
|
|
$ |
88,213 |
|
|
$ |
70,485 |
|
Operating income
(loss) |
|
|
|
|
|
|
|
Electrical Infrastructure |
$ |
2,882 |
|
|
$ |
(2,422 |
) |
|
$ |
3,977 |
|
|
$ |
2,234 |
|
Oil Gas & Chemical |
4,796 |
|
|
(648 |
) |
|
8,895 |
|
|
8,684 |
|
Storage Solutions |
3,730 |
|
|
(4,025 |
) |
|
5,371 |
|
|
(6,709 |
) |
Industrial |
1,386 |
|
|
1,233 |
|
|
2,298 |
|
|
2,424 |
|
Total operating income (loss) |
$ |
12,794 |
|
|
$ |
(5,862 |
) |
|
$ |
20,541 |
|
|
$ |
6,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 March 31, 2019:
|
ElectricalInfrastructure |
|
Oil Gas &Chemical |
|
StorageSolutions |
|
Industrial |
|
Total |
|
|
|
(In thousands) |
Backlog as of December 31, 2018 |
$ |
102,738 |
|
|
$ |
177,861 |
|
|
$ |
545,204 |
|
|
$ |
220,593 |
|
|
$ |
1,046,396 |
|
Project awards |
59,151 |
|
|
72,434 |
|
|
242,004 |
|
|
85,342 |
|
|
458,931 |
|
Revenue recognized |
(60,669 |
) |
|
(82,544 |
) |
|
(134,391 |
) |
|
(81,283 |
) |
|
(358,887 |
) |
Backlog as of March 31,
2019 |
$ |
101,220 |
|
|
$ |
167,751 |
|
|
$ |
652,817 |
|
|
$ |
224,652 |
|
|
$ |
1,146,440 |
|
Book-to-bill ratio(1) |
1.0 |
|
|
0.9 |
|
|
1.8 |
|
|
1.0 |
|
|
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 nine months ended March 31, 2019:
|
ElectricalInfrastructure |
|
Oil Gas &Chemical |
|
StorageSolutions |
|
Industrial |
|
Total |
|
|
|
(In thousands) |
Backlog as of June 30, 2018 |
$ |
113,957 |
|
|
$ |
227,452 |
|
|
$ |
613,360 |
|
|
$ |
263,827 |
|
|
1,218,596 |
|
Project awards |
150,806 |
|
|
184,621 |
|
|
412,333 |
|
|
198,050 |
|
|
945,810 |
|
Revenue recognized |
(163,543 |
) |
|
(244,322 |
) |
|
(372,876 |
) |
|
(237,225 |
) |
|
(1,017,966 |
) |
Backlog as of March 31, 2019 |
$ |
101,220 |
|
|
$ |
167,751 |
|
|
$ |
652,817 |
|
|
$ |
224,652 |
|
|
$ |
1,146,440 |
|
Book-to-bill ratio(1) |
0.9 |
|
|
0.8 |
|
|
1.1 |
|
|
0.8 |
|
|
0.9 |
|
________(1) Calculated by dividing project awards by revenue
recognized during the period.
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