EX-99 2 a33119exhibit99.htm EXHIBIT 99 Exhibit
Exhibit 99


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MATRIX SERVICE COMPANY REPORTS THIRD QUARTER RESULTS
TULSA, OK – May 8, 2019 – 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.


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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.

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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
 
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


4

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

 
 
 
 


5

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

 
 
 
 



6

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



7

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: 
 
Electrical
Infrastructure
 
Oil Gas &
Chemical
 
Storage
Solutions
 
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: 

 
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
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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