EX-99 2 a063019exhibit99.htm EXHIBIT 99 Exhibit
Exhibit 99


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MATRIX SERVICE COMPANY ANNOUNCES FISCAL 2019 FOURTH QUARTER AND FULL YEAR RESULTS; PROVIDES FISCAL 2020 GUIDANCE

•
Fourth quarter revenue of $398.7 million and full year revenue of $1.417 billion
•
Fully diluted EPS for the quarter and fiscal year were $0.47 and $1.01, respectively
•
Project awards of $350.6 million in the fourth quarter and $1.296 billion for the year
•
Backlog was $1.098 billion as of June 30, 2019
•
Liquidity increased to $241.9 million, an increase of 76.3% for the year
•
Fiscal 2020 guidance set at $1.40 billion to $1.55 billion in revenue and $1.10 to $1.40 for fully diluted earnings per share


TULSA, OK – August 28, 2019 – Matrix Service Company (Nasdaq: MTRX) today reported its financial results for the fourth quarter and year ended June 30, 2019 and provides guidance for fiscal 2020.
“The fourth quarter marked a strong closeout to our year, as our previously forecasted outlook for an improved second half of fiscal 2019 came to fruition. Strong operating performance, combined with high maintenance volumes and favorable capital project timing across the Storage Solutions, Oil Gas & Chemical and Industrial segments resulted in the best quarter in the Company's history from a revenue and earnings perspective.” said John Hewitt, President and Chief Executive Officer.
“The current economic environment creates uncertainty in the short-term with regard to the timing of future awards and the continuation of the high maintenance volumes we are experiencing. With that said, we are entering fiscal 2020 with strong momentum in many of the key end-markets we serve, a healthy backlog level and robust bidding activity that will continue to support our business and strategic growth initiatives.”
Fourth Quarter Fiscal 2019 Results
Revenue for the fourth quarter ended June 30, 2019 was $398.7 million compared to $293.1 million in the same quarter a year earlier. On a segment basis, revenue increased $56.6 million, $52.7 million and $1.1 million in the Industrial, Storage Solutions and Electrical Infrastructure segments, respectively. The increase in Industrial revenue is primarily attributable to higher volumes of iron and steel work while the increase in Storage Solutions revenue is primarily a result of increased tank and terminal construction work. These increases in revenue were partially offset by a decrease of $4.8 million in the Oil Gas & Chemical segment due to lower volumes of capital work.
Consolidated gross profit was $43.7 million in the three months ended June 30, 2019 compared to $21.5 million in the three months ended June 30, 2018. Gross margin for the fourth quarter of fiscal 2019 was 11.0% compared to 7.3% in the same period a year earlier. The increase in gross margin in fiscal 2019 is primarily attributable to increased volumes of higher margin capital work and improved project execution. The fiscal 2018 gross margin was negatively impacted by the wind down of lower margin work awarded in a highly competitive environment.
Selling, general and administrative costs were $26.3 million in the fourth quarter of fiscal 2019 compared to $20.6 million in the same period a year earlier. The increase in fiscal 2019 was primarily due to improved operating results which led to higher incentive compensation expense, higher stock compensation expense as well as investments in personnel to support increased revenue.

1

Fiscal 2019 Results
Revenue for the fiscal year ended June 30, 2019 was $1.417 billion compared to $1.092 billion in the same period a year earlier, an increase of $325.1 million. On a segment basis, revenue increased in the Storage Solutions and Industrial segments by $207.2 million and $159.3 million, respectively. The increase in Storage Solutions revenue is primarily a result of increased tank and terminal construction work, and higher levels of repair and maintenance spending from our customers. The increase in Industrial revenue is primarily attributable to higher volumes of iron and steel spending and increased thermal vacuum chamber work. These increases were partially offset by decreases in revenue in the Electrical Infrastructure and Oil Gas & Chemical segments of $38.5 million and $2.9 million, respectively. The decrease in Electrical Infrastructure revenue is primarily due to the strategic shift away from larger EPC power generation and lower power delivery volumes partially offset by higher volumes of power generation package work. The decrease in Oil Gas & Chemical revenue is primarily due to lower volumes of engineering and capital work, largely offset by higher volumes of turnaround and maintenance work.
Consolidated gross profit was $132.0 million in fiscal 2019 compared to $91.9 million in fiscal 2018. Fiscal 2019 gross margin was 9.3% compared to 8.4% in fiscal 2018. The increase in gross margin in fiscal 2019 is primarily attributable to higher revenue volumes, which led to improved recovery of construction overhead costs. Additionally, during the first half of fiscal 2019, the gross margin was negatively impacted by the wind down of lower margin work awarded in a highly competitive environment. In the second half of fiscal 2019, the gross margin was positively impacted by strong project execution on increased volumes of capital work awarded in an improved business environment.
Consolidated SG&A expenses were $94.0 million in fiscal 2019 compared to $84.4 million in fiscal 2018. The increase in fiscal 2019 was primarily due to improved operating results which led to higher incentive compensation expense, higher stock compensation expense as well as investments in personnel to support increased revenue. These increases were partially offset by lower amortization expense on intangible assets that fully amortized in fiscal 2018.
Income Tax Expense

The effective tax rates were 26.3% and 27.2% for the three months and fiscal year ended June 30, 2019, respectively. The Company estimates that its fiscal 2020 effective tax rate will approximate 27.0%.

Backlog

We finished fiscal 2019 with backlog of $1.098 billion. Project awards in the three months and year ended June 30, 2019 totaled $350.6 million and $1.296 billion, resulting in book-to-bill ratios of 0.9 for both periods.
Financial Position
At June 30, 2019, the Company had a cash balance of $89.7 million, borrowings of $5.3 million and liquidity of $241.9 million. Liquidity increased by $61.9 million, or 34.4%, in the fourth quarter of fiscal 2019 and $104.7 million, or 76.3%, for the full year.

Earnings Guidance
The Company expects fiscal 2020 revenue to be between $1.40 billion and $1.55 billion and earnings to be between $1.10 and $1.40 per fully diluted share. As is normal, we expect a slower first quarter with revenue and earnings improvement as the year progresses.


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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 Thursday, August 29, 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
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    
Kevin S. Cavanah                
Vice President and CFO
T: 918-838-8822        
E: kcavanah@matrixservicecompany.com

Kellie Smythe
Senior Director, Investor Relations
T: 918-359-8267
E: ksmythe@matrixservicecompany.com




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Matrix Service Company
Consolidated Statements of Income
(In thousands, except per share data)
 
 
Three Months Ended
 
Twelve Months Ended
 
 
June 30,
2019
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
Revenues
 
$
398,714

 
$
293,087

 
$
1,416,680

 
$
1,091,553

Cost of revenues
 
354,976

 
271,636

 
1,284,729

 
999,617

Gross profit
 
43,738

 
21,451

 
131,951

 
91,936

Selling, general and administrative expenses
 
26,349

 
20,565

 
94,021

 
84,417

Goodwill and other intangible asset impairment
 
—

 
17,998

 
—

 
17,998

Operating income (loss)
 
17,389

 
(17,112
)
 
37,930

 
(10,479
)
Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(342
)
 
(520
)
 
(1,296
)
 
(2,600
)
Interest income
 
304

 
147

 
1,167

 
381

Other
 
29

 
166

 
611

 
550

Income (loss) before income tax expense
 
17,380

 
(17,319
)
 
38,412

 
(12,148
)
Provision (benefit) for federal, state and foreign income taxes
 
4,568

 
(2,636
)
 
10,430

 
(668
)
Net income (loss)
 
$
12,812

 
$
(14,683
)
 
$
27,982

 
$
(11,480
)
Basic earnings (loss) per common share
 
$
0.48

 
$
(0.55
)
 
$
1.04

 
$
(0.43
)
Diluted earnings (loss) per common share
 
$
0.47

 
$
(0.55
)
 
$
1.01

 
$
(0.43
)
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
26,807

 
26,833

 
26,891

 
26,769

Diluted
 
27,521

 
26,833

 
27,587

 
26,769


4

Matrix Service Company
Consolidated Balance Sheets
(In thousands)
 

 
 
June 30,
2019
 
June 30,
2018
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
89,715

 
$
64,057

Accounts receivable, less allowances (2019 - $923; 2018 - $6,327)
 
218,432

 
203,388

Costs and estimated earnings in excess of billings on uncompleted contracts
 
96,083

 
76,632

Inventories
 
8,017

 
5,152

Income taxes receivable
 
29

 
3,359

Other current assets
 
5,034

 
4,458

Total current assets
 
417,310

 
357,046

Property, plant and equipment, at cost:
 
 
 
 
Land and buildings
 
41,179

 
40,424

Construction equipment
 
91,793

 
89,036

Transportation equipment
 
52,526

 
48,339

Office equipment and software
 
43,632

 
41,236

Construction in progress
 
7,619

 
1,353

Total property, plant and equipment - at cost
 
236,749

 
220,388

Accumulated depreciation
 
(157,414
)
 
(147,743
)
Property, plant and equipment - net
 
79,335

 
72,645

Goodwill
 
93,368

 
96,162

Other intangible assets
 
19,472

 
22,814

Deferred income taxes
 
2,683

 
4,848

Other assets
 
21,226

 
4,518

Total assets
 
$
633,394

 
$
558,033


5

Matrix Service Company
Consolidated Balance Sheets (continued)
(In thousands, except share data)
 
 
 
June 30,
2019
 
June 30,
2018
Liabilities and stockholders’ equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
114,647

 
$
79,439

Billings on uncompleted contracts in excess of costs and estimated earnings
 
105,626

 
120,740

Accrued wages and benefits
 
38,357

 
24,375

Accrued insurance
 
9,021

 
9,080

Income taxes payable
 
2,517

 
7

Other accrued expenses
 
5,331

 
4,824

Total current liabilities
 
275,499

 
238,465

Deferred income taxes
 
298

 
429

Borrowings under senior secured revolving credit facility
 
5,347

 
—

Other liabilities
 
293

 
296

Total liabilities
 
281,437

 
239,190

Commitments and contingencies
 
 
 
 
Stockholders’ equity:
 
 
 
 
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of June 30, 2019 and June 30, 2018; 26,807,203 and 26,853,823 shares outstanding as of June 30, 2019 and June 30, 2018
 
279

 
279

Additional paid-in capital
 
137,712

 
132,198

Retained earnings
 
239,476

 
211,494

Accumulated other comprehensive income
 
(7,751
)
 
(7,411
)
 
 
369,716

 
336,560

Less treasury stock, at cost — 1,081,014 and 1,034,394 shares as of June 30, 2019 and June 30, 2018
 
(17,759
)
 
(17,717
)
Total stockholders' equity
 
351,957

 
318,843

Total liabilities and stockholders’ equity
 
$
633,394

 
$
558,033


6

Results of Operations
(In thousands)
 
 
 
 
 
 
 
 
 
 
Electrical
Infrastructure
 
Oil Gas &
Chemical
 
Storage
Solutions
 
Industrial
 
Total
Three Months Ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
Gross revenues
 
$
53,874

 
$
75,568

 
$
149,543

 
$
120,239

 
$
399,224

Less: inter-segment revenues
 
—

 
23

 
487

 
—

 
510

Consolidated revenues
 
53,874

 
75,545

 
149,056

 
120,239

 
398,714

Gross profit
 
2,315

 
10,469

 
20,736

 
10,218

 
43,738

Operating income (loss)
 
$
(309
)
 
$
4,089

 
$
8,726

 
$
4,883

 
$
17,389

 
 
 
 
 
 
 
 
 
 
 
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
)
 
 
 
 
 
 
 
 
 
 
 
Twelve Months Ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
Gross revenues
 
$
217,417

 
$
322,065

 
$
524,330

 
$
357,464

 
$
1,421,276

Less: inter-segment revenues
 
—

 
2,198

 
2,398

 
—

 
4,596

Consolidated revenues
 
217,417

 
319,867

 
521,932

 
357,464

 
1,416,680

Gross profit
 
15,470

 
35,987

 
56,011

 
24,483

 
131,951

Operating income
 
$
3,668

 
$
12,984

 
$
14,097

 
$
7,181

 
$
37,930

 
 
 
 
 
 
 
 
 
 
 
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
)

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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, limited 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 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 revenue recognized as of the reporting date.
Three Months Ended June 30, 2019

The following table provides a summary of changes in our backlog for the three months ended June 30, 2019:
 
 
Electrical
Infrastructure
 
Oil Gas &
Chemical
 
Storage
Solutions
 
Industrial
 
Total
 
 
(In thousands)
Backlog as of March 31, 2019
 
$
101,220

 
$
167,751

 
$
652,817

 
$
224,652

 
$
1,146,440

Project awards
 
26,537

 
42,357

 
137,534

 
144,195

 
350,623

Revenue recognized
 
(53,874
)
 
(75,545
)
 
(149,056
)
 
(120,239
)
 
(398,714
)
Backlog as of June 30, 2019
 
$
73,883

 
$
134,563

 
$
641,295

 
$
248,608

 
$
1,098,349

Book-to-bill ratio(1)
 
0.5

 
0.6

 
0.9

 
1.2

 
0.9

 
 
 
 
 
(1)
Calculated by dividing project awards by revenue recognized.
Twelve Months Ended June 30, 2019

The following table provides a summary of changes in our backlog for the twelve months ended June 30, 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
 
177,343

 
226,978

 
549,867

 
342,245

 
1,296,433

Revenue recognized
 
(217,417
)
 
(319,867
)
 
(521,932
)
 
(357,464
)
 
(1,416,680
)
Backlog as of June 30, 2019
 
$
73,883

 
$
134,563

 
$
641,295

 
$
248,608

 
$
1,098,349

Book-to-bill ratio(1)
 
0.8

 
0.7

 
1.1

 
1.0

 
0.9

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


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