Matrix Service’s Earnings Call: Growth Amid Challenges

Matrix Service ((MTRX)) has held its Q3 earnings call. Read on for the main highlights of the call.

Matrix Service Company recently held its third-quarter earnings call, revealing a blend of positive and negative developments. The company reported significant revenue growth and improved financial performance, alongside a record backlog. However, challenges arose from the decision to exit a business line and a reduction in revenue guidance due to macroeconomic uncertainties and project timing issues.

Revenue Growth

Matrix Service Company experienced a notable revenue increase in the third quarter, with figures rising by 21% to $200.2 million compared to $166 million in the same period last year. This growth highlights the company’s ability to expand its business despite facing certain challenges.

Record Backlog in Storage and Terminal Solutions

The company’s Storage and Terminal Solutions segment achieved a record backlog, with $205 million in quarterly awards, boosting the total backlog to $848 million. This marks the highest level in the company’s history, underscoring the strength and demand in this area of their operations.

Improved Financial Performance

Matrix Service reported an improved financial performance, with adjusted EBITDA reaching breakeven compared to a $10 million loss in the previous year. Additionally, the net loss decreased significantly to $3.4 million from $14.6 million, reflecting the company’s efforts to enhance its financial health.

Strong Liquidity Position

The company maintained a strong liquidity position, with available liquidity increasing to $247.1 million. This includes $185.5 million in unrestricted cash and $61.5 million in borrowing availability, providing a solid financial foundation for future operations.

Exit from Northeast Transmission and Distribution Service Line

Matrix Service decided to wind down its Northeast transmission and distribution service line due to competitive disadvantages and insufficient awards. This strategic move is expected to impact full-year revenue by approximately $50 million.

Revised Revenue Guidance

The company revised its revenue guidance for fiscal 2025, reducing it by 10% to a range of $770 million to $800 million. This adjustment is attributed to the exit from the transmission and distribution business and delays in project awards caused by macroeconomic uncertainties.

Under-Recovery of Construction Overhead Costs

Matrix Service faced challenges with under-recovered overhead costs, which decreased to 280 basis points but continued to affect the gross margin. This remains an area of concern for the company.

Temporary Reduction in Process and Industrial Facilities Revenue

The Process and Industrial Facilities segment saw a temporary revenue decline due to the completion of a large renewable diesel project. This decrease is expected to be a short-term issue as the company adjusts its operations.

Forward-Looking Guidance

Despite revising its revenue guidance downward, Matrix Service remains optimistic about the future. The company achieved a year-to-date book-to-bill ratio of 1.0 and expects quarter-over-quarter growth of 20% to 25% in the second half of fiscal 2025. The strong market outlook is supported by projections from the U.S. Energy Information Administration, indicating a significant increase in U.S. LNG export demand and natural gas demand over the next six years.

In summary, Matrix Service Company’s earnings call presented a mixed bag of outcomes. While revenue growth and financial performance showed positive trends, challenges such as exiting a business line and revised revenue guidance due to external factors were notable. The company’s strong backlog and liquidity position, along with a positive market outlook, provide a foundation for future growth.