EX-99 2 a93018exhibit99.htm EXHIBIT 99 Exhibit
Exhibit 99


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MATRIX SERVICE COMPANY REPORTS FIRST QUARTER RESULTS; AFFIRMS FISCAL 2019 GUIDANCE
TULSA, OK – November 7, 2018 – Matrix Service Company (Nasdaq: MTRX), a leading contractor to the energy and industrial markets across North America, today reported financial results for its first quarter ended September 30, 2018.
Key highlights:
•
Revenue increased 18.0% to $318.5 million compared to $269.9 million in the first quarter of the prior fiscal year
•
Company earned $0.08 per fully diluted share in the first quarter
•
Backlog at $1.109 billion with first quarter project awards of $209.4 million
•
Company expects improving quarter over quarter revenue and earnings; affirms fiscal 2019 guidance

“Our first quarter results reflected improved revenue which met our expectations, however gross margins were impacted by the continued work-off of lower margin projects awarded during the recent market downturn,” said Matrix Service Company President and Chief Executive Officer John R. Hewitt. “We expect continued improvement in revenue, gross margins, and earnings per share as we move through the year and are maintaining our Fiscal 2019 guidance.
“Based on the quality and commitment of our people, the strength of our diversified business model, and the increased volume of quality projects in our opportunity pipeline, we are enthusiastic about our ability to achieve our long-term growth aspirations.”
First Quarter Fiscal 2019 Results
Consolidated revenue was $318.5 million for the three months ended September 30, 2018, compared to $269.9 million in the same period of the prior fiscal year. Industrial segment revenue increased $52.3 million due to higher business volumes in the iron and steel industry and increased thermal vacuum chamber work. Storage Solutions segment revenue increased $41.8 million primarily as a result of increased tank and terminal construction revenue and higher volumes of tank repair and maintenance work. Electrical Infrastructure segment revenue decreased $35.3 million due to the expected reduction in power generation EPC work. Oil Gas & Chemical segment revenue decreased $10.2 million due to lower levels of capital and engineering work partially offset by higher volumes of turnaround and maintenance work.
Consolidated gross profit was $23.4 million in the three months ended September 30, 2018 compared to $28.9 million in the three months ended September 30, 2017. The gross margin was 7.4% in the three months ended September 30, 2018 compared to 10.7% in the same period in the prior fiscal year. The fiscal 2019 gross margin was impacted by the work-off of lower margin work bid in a highly competitive environment in prior periods as well as lower than previously forecasted margins on a limited number of those projects.
Consolidated SG&A expenses were $21.2 million in the three months ended September 30, 2018 compared to $21.6 million in the same period a year earlier. The decrease was attributable to lower amortization expense on intangible assets that fully amortized
in fiscal 2018 and lower professional fees, partially offset by higher compensation expense.
Fiscal 2019 income tax expense included $0.3 million of excess tax benefits related to the vesting of stock-based compensation awards, which resulted in an effective tax rate of 16.4%. We expect our effective tax rate to be approximately 27.0% for the balance of fiscal 2019.
The Company reported net income of $2.3 million, or $0.08 per fully diluted share, in the first quarter of fiscal 2019 compared to net income of $3.8 million, or $0.14 per fully diluted share, in the first quarter of fiscal 2018.



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Backlog
Backlog at September 30, 2018 was $1.109 billion compared to $1.219 billion at June 30, 2018. The quarterly book-to-bill ratio was 0.7 on project awards of $209.4 million.
Financial Position
The cash balance of $74.7 million combined with availability under the credit facility provides the Company with liquidity of $129.3 million at September 30, 2018. Based on the Company's current financial forecasts, liquidity is expected to increase in the second half of fiscal 2019.
Earnings Guidance
The Company reaffirms 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 / 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, November 8, 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
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

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Matrix Service Company
Condensed Consolidated Statements of Income
(unaudited)
(In thousands, except per share data) 
 
 
Three Months Ended
 
 
September 30,
2018
 
September 30,
2017
Revenues
 
$
318,511

 
$
269,910

Cost of revenues
 
295,090

 
241,019

Gross profit
 
23,421

 
28,891

Selling, general and administrative expenses
 
21,201

 
21,570

Operating income
 
2,220

 
7,321

Other income (expense):
 
 
 
 
Interest expense
 
(292
)
 
(618
)
Interest income
 
282

 
39

Other
 
546

 
149

Income before income tax expense
 
2,756

 
6,891

Provision for federal, state and foreign income taxes
 
451

 
3,067

Net income
 
$
2,305

 
$
3,824

 
 
 
 
 
Basic earnings per common share
 
$
0.09

 
$
0.14

Diluted earnings per common share
 
$
0.08

 
$
0.14

Weighted average common shares outstanding:
 
 
 
 
Basic
 
26,921

 
26,655

Diluted
 
27,589

 
26,762


3

Matrix Service Company
Condensed Consolidated Balance Sheets
(unaudited)
(In thousands) 

 
September 30,
2018
 
June 30,
2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
74,736

 
$
64,057

Accounts receivable, less allowances (September 30, 2018— $6,359 and June 30, 2018—$6,327)
214,763

 
203,388

Costs and estimated earnings in excess of billings on uncompleted contracts
75,972

 
76,632

Inventories
6,514

 
5,152

Income taxes receivable
3,350

 
3,359

Other current assets
10,214

 
4,458

Total current assets
385,549

 
357,046

Property, plant and equipment at cost:
 
 
 
Land and buildings
40,508

 
40,424

Construction equipment
89,482

 
89,036

Transportation equipment
47,913

 
48,339

Office equipment and software
41,622

 
41,236

Construction in progress
2,411

 
1,353

Total property, plant and equipment - at cost
221,936

 
220,388

Accumulated depreciation
(150,438
)
 
(147,743
)
Property, plant and equipment - net
71,498

 
72,645

Goodwill
93,451

 
96,162

Other intangible assets
22,007

 
22,814

Deferred income taxes
5,559

 
4,848

Other assets
9,130

 
4,518

Total assets
$
587,194

 
$
558,033

 
 
 
 


4

Matrix Service Company
Condensed Consolidated Balance Sheets (continued)
(unaudited)
(In thousands, except share data)
 
September 30,
2018
 
June 30,
2018
Liabilities and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
94,845

 
$
79,439

Billings on uncompleted contracts in excess of costs and estimated earnings
118,380

 
120,740

Accrued wages and benefits
29,151

 
24,375

Accrued insurance
9,689

 
9,080

Income taxes payable
—

 
7

Other accrued expenses
9,079

 
4,824

Total current liabilities
261,144

 
238,465

Deferred income taxes
1,440

 
429

Borrowings under senior secured revolving credit facility
1,549

 
—

Other liabilities
280

 
296

Total liabilities
264,413

 
239,190

Commitments and contingencies


 


Stockholders’ equity:
 
 
 
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of September 30, 2018 and June 30, 2018; 27,019,817 and 26,853,823 shares outstanding as of September 30, 2018 and June 30, 2018
279

 
279

Additional paid-in capital
129,885

 
132,198

Retained earnings
213,799

 
211,494

Accumulated other comprehensive loss
(7,010
)
 
(7,411
)
 
336,953

 
336,560

Less: Treasury stock, at cost — 868,400 shares as of September 30, 2018, and 1,034,394 shares as of June 30, 2018
(14,172
)
 
(17,717
)
Total stockholders' equity
322,781

 
318,843

Total liabilities and stockholders’ equity
$
587,194

 
$
558,033

 
 
 
 



5

Matrix Service Company
Results of Operations
(unaudited)
(In thousands)
 

 
 
Three Months Ended
 
 
September 30,
2018
 
September 30,
2017
Gross revenues
 
 
 
 
Electrical Infrastructure
 
$
44,701

 
$
79,971

Oil Gas & Chemical
 
75,562

 
85,861

Storage Solutions
 
113,767

 
71,572

Industrial
 
85,557

 
33,271

Total gross revenues
 
$
319,587

 
$
270,675

Less: Inter-segment revenues
 
 
 
 
Oil Gas & Chemical
 
$
71

 
$
208

Storage Solutions
 
1,005

 
557

Total inter-segment revenues
 
$
1,076

 
$
765

Consolidated revenues
 
 
 
 
Electrical Infrastructure
 
$
44,701

 
$
79,971

Oil Gas & Chemical
 
75,491

 
85,653

Storage Solutions
 
112,762

 
71,015

Industrial
 
85,557

 
33,271

Total consolidated revenues
 
$
318,511

 
$
269,910

Gross profit
 
 
 
 
Electrical Infrastructure
 
$
3,383

 
$
8,267

Oil Gas & Chemical
 
5,625

 
11,038

Storage Solutions
 
9,553

 
7,540

Industrial
 
4,860

 
2,046

Total gross profit
 
$
23,421

 
$
28,891

Operating income (loss)
 
 
 
 
Electrical Infrastructure
 
$
657

 
$
3,577

Oil Gas & Chemical
 
514

 
4,134

Storage Solutions
 
285

 
(75
)
Industrial
 
764

 
(315
)
Total operating income
 
$
2,220

 
$
7,321



6

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 September 30, 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 awards
39,589

 
37,531

 
85,139

 
47,128

 
209,387

Revenue recognized
(44,701
)
 
(75,491
)
 
(112,762
)
 
(85,557
)
 
(318,511
)
Backlog as of September 30, 2018
$
108,845

 
$
189,492

 
$
585,737

 
$
225,398

 
$
1,109,472

Book-to-bill ratio(1)
0.9

 
0.5

 
0.8

 
0.6

 
0.7

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












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