Cover Page
Cover Page - shares | 3 Months Ended | |
Sep. 30, 2024 | Nov. 06, 2024 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2024 | |
Document Transition Report | false | |
Entity File Number | 1-15461 | |
Entity Registrant Name | MATRIX SERVICE CO | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 73-1352174 | |
Entity Address, Address Line One | 15 East 5th Street, Suite 1100 | |
Entity Address, City or Town | Tulsa | |
Entity Address, State or Province | OK | |
Entity Address, Postal Zip Code | 74103 | |
City Area Code | 918 | |
Local Phone Number | 838-8822 | |
Title of 12(b) Security | Common Stock, par value $0.01 per share | |
Trading Symbol | MTRX | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Emerging Growth Company | false | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 27,554,879 | |
Document Fiscal Year Focus | 2025 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0000866273 | |
Current Fiscal Year End Date | --06-30 | |
Amendment Flag | false |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Sep. 30, 2024 | Sep. 30, 2023 | |
Income Statement [Abstract] | ||
Revenue | $ 165,579 | $ 197,659 |
Cost of revenue | 157,766 | 185,800 |
Gross profit | 7,813 | 11,859 |
Selling, general and administrative expenses | 18,580 | 17,113 |
Operating loss | (10,767) | (5,254) |
Other income (expense): | ||
Interest expense | (89) | (325) |
Interest income | 1,572 | 150 |
Other | 61 | 2,262 |
Loss before income tax expense | (9,223) | (3,167) |
Provision for federal, state and foreign income taxes | 0 | 0 |
Net loss | $ (9,223) | $ (3,167) |
Basic loss per common share (in dollars per share) | $ (0.33) | $ (0.12) |
Diluted loss per common share (in dollars per share) | $ (0.33) | $ (0.12) |
Weighted Average Number of Shares Outstanding, Basic | 27,559 | 27,113 |
Weighted Average Number of Shares Outstanding Diluted | 27,559 | 27,113 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2024 | Sep. 30, 2023 | |
Statement of Other Comprehensive Income [Abstract] | ||
Net income (loss) | $ (9,223) | $ (3,167) |
Other comprehensive income (loss), net of tax: | ||
Foreign currency translation gain (loss) | 436 | (538) |
Comprehensive loss | $ (8,787) | $ (3,705) |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2024 | Jun. 30, 2024 |
Current assets: | ||
Cash and cash equivalents | $ 124,610 | $ 115,615 |
Accounts receivable, net of allowance for credit losses | 132,541 | 138,987 |
Costs and estimated earnings in excess of billings on uncompleted contracts | 31,818 | 33,893 |
Inventories | 7,508 | 8,839 |
Income taxes receivable | 180 | 180 |
Prepaid expenses and other current assets | 12,236 | 4,077 |
Total current assets | 308,893 | 301,591 |
Restricted cash | 25,000 | 25,000 |
Property, plant and equipment, net | 43,247 | 43,498 |
Operating lease right-of-use assets | 19,155 | 19,150 |
Goodwill | 29,077 | 29,023 |
Other intangible assets, net of accumulated amortization | 1,377 | 1,651 |
Other assets, non-current (Note 2) | 43,408 | 31,438 |
Total assets | 470,157 | 451,351 |
Current liabilities: | ||
Accounts payable | 61,668 | 65,629 |
Billings on uncompleted contracts in excess of costs and estimated earnings | 204,612 | 171,308 |
Accrued wages and benefits | 13,910 | 15,878 |
Accrued insurance | 4,932 | 4,605 |
Operating lease liabilities | 3,782 | 3,739 |
Other accrued expenses | 3,247 | 3,956 |
Total current liabilities | 292,151 | 265,115 |
Deferred income taxes | 25 | 25 |
Operating lease liabilities | 19,149 | 19,156 |
Other liabilities, non-current | 2,315 | 2,873 |
Total liabilities | 313,640 | 287,169 |
Commitments and contingencies (Note 6) | ||
Stockholders’ equity: | ||
Common stock — $0.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued at September 30, 2024 and June 30, 2024, respectively; 27,550,202 and 27,308,795 shares outstanding as of September 30, 2024 and June 30, 2024, respectively; | 279 | 279 |
Additional paid-in capital | 143,765 | 145,580 |
Retained earnings | 24,718 | 33,941 |
Accumulated other comprehensive loss | (9,099) | (9,535) |
Treasury stock, at cost — 338,015 and 579,422 shares as of September 30, 2024 and June 30, 2024, respectively; | (3,146) | (6,083) |
Total stockholders' equity | 156,517 | 164,182 |
Total liabilities and stockholders’ equity | $ 470,157 | $ 451,351 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2024 | Jun. 30, 2024 |
Statement Condensed Consolidated Balance Sheets [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 60,000,000 | 60,000,000 |
Common stock, shares issued (in shares) | 27,888,217 | 27,888,217 |
Common stock, shares, outstanding (in shares) | 27,550,202 | 27,308,795 |
Treasury stock, common, shares (in shares) | 338,015 | 579,422 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2024 | Sep. 30, 2023 | |
Operating activities: | ||
Net income (loss) | $ (9,223) | $ (3,167) |
Adjustments to reconcile net loss to net cash provided (used) by operating activities: | ||
Depreciation and amortization | 2,515 | 2,911 |
Stock-based compensation expense | 2,311 | 1,755 |
Loss (gain) on disposal of property, plant and equipment (Note 3) | 68 | (2,366) |
Other | 38 | 72 |
Changes in operating assets and liabilities increasing (decreasing) cash: | ||
Accounts receivable, net of allowance for credit losses | (5,110) | (6,543) |
Costs and estimated earnings in excess of billings on uncompleted contracts | 2,075 | 2,519 |
Inventories | 1,331 | (1,716) |
Other assets and liabilities | (8,580) | (7,669) |
Accounts payable | (3,903) | (2,173) |
Billings on uncompleted contracts in excess of costs and estimated earnings | 33,304 | (12,303) |
Accrued expenses | (2,908) | (195) |
Net Cash Provided by (Used in) Operating Activities, Total | 11,918 | (28,875) |
Investing activities: | ||
Capital expenditures | (1,944) | (478) |
Proceeds from asset sales | 0 | 2,618 |
Net Cash Provided by (Used in) Investing Activities, Total | (1,944) | 2,140 |
Net Cash Provided by (Used in) Financing Activities [Abstract] | ||
Proceeds from issuance of common stock under employee stock purchase plan | 46 | 45 |
Repurchase of common stock for payment of statutory taxes due on equity-based compensation | (1,235) | (456) |
Net Cash Provided by (Used in) Financing Activities, Total | (1,189) | (411) |
Effect of exchange rate changes on cash | 210 | (307) |
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents, Period Increase (Decrease), Including Exchange Rate Effect, Total | 8,995 | (27,453) |
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Beginning of Period | 140,615 | 79,812 |
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, End of Period | 149,610 | 52,359 |
Supplemental disclosure of cash flow information: | ||
Income taxes | 0 | (27) |
Interest | 145 | 389 |
Non-cash investing and financing activities: | ||
Purchases of property, plant and equipment on account | $ 197 | $ 6 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | AOCI Attributable to Parent | Treasury Stock, Common |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Treasury stock, common, shares (in shares) | 840,899 | |||||
Common stock, shares, outstanding (in shares) | 27,888,217 | |||||
Balances, beginning at Jun. 30, 2023 | $ 181,484 | $ 279 | $ 140,810 | $ 58,917 | $ (8,769) | $ (9,753) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net loss | (3,167) | (3,167) | ||||
Other comprehensive income (loss) | (538) | (538) | ||||
Treasury shares sold to Employee Stock Purchase Plan | (45) | (54) | (99) | |||
Treasury shares purchased to satisfy tax withholding obligations | 456 | 456 | ||||
Stock-based compensation expense | 1,755 | 1,755 | ||||
Balances, ending at Sep. 30, 2023 | 179,123 | $ 279 | 139,773 | 55,750 | (9,307) | $ (7,372) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Treasury Stock, Shares, Acquired | 55,324 | |||||
Treasury shares sold to Employee Stock Purchase Plan (in shares) | (7,601) | |||||
Restricted Stock, Value, Shares Issued Net of Tax Withholdings | $ 0 | (2,738) | $ 2,738 | |||
Restricted Stock, Shares Issued Net of Shares for Tax Withholdings | (210,243) | |||||
Treasury stock, common, shares (in shares) | 678,379 | |||||
Common stock, shares, outstanding (in shares) | 27,888,217 | |||||
Treasury stock, common, shares (in shares) | 579,422 | 579,422 | ||||
Common stock, shares, outstanding (in shares) | 27,308,795 | 27,888,217 | ||||
Balances, beginning at Jun. 30, 2024 | $ 164,182 | $ 279 | 145,580 | 33,941 | (9,535) | $ (6,083) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net loss | (9,223) | (9,223) | ||||
Other comprehensive income (loss) | 436 | 436 | ||||
Treasury shares sold to Employee Stock Purchase Plan | (46) | 17 | (63) | |||
Treasury shares purchased to satisfy tax withholding obligations | 1,235 | 1,235 | ||||
Stock-based compensation expense | 2,311 | 2,311 | ||||
Balances, ending at Sep. 30, 2024 | 156,517 | $ 279 | 143,765 | $ 24,718 | $ (9,099) | $ (3,146) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Treasury Stock, Shares, Acquired | 123,850 | |||||
Treasury shares sold to Employee Stock Purchase Plan (in shares) | 4,797 | |||||
Restricted Stock, Value, Shares Issued Net of Tax Withholdings | $ 0 | $ (4,109) | $ 4,109 | |||
Restricted Stock, Shares Issued Net of Shares for Tax Withholdings | (360,460) | |||||
Treasury stock, common, shares (in shares) | 338,015 | 338,015 | ||||
Common stock, shares, outstanding (in shares) | 27,550,202 | 27,888,217 |
Condensed Consolidated Statem_5
Condensed Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |||
Sep. 30, 2024 | Sep. 30, 2023 | Jun. 30, 2024 | Jun. 30, 2023 | |
Statement of Stockholders' Equity [Abstract] | ||||
Other comprehensive income (loss) | $ 436 | $ (538) | ||
Total stockholders' equity | 156,517 | 179,123 | $ 164,182 | $ 181,484 |
Net loss | (9,223) | (3,167) | ||
Treasury shares sold to Employee Stock Purchase Plan | 46 | 45 | ||
Stock-based compensation expense | 2,311 | 1,755 | ||
Restricted Stock, Value, Shares Issued Net of Tax Withholdings | $ 0 | $ 0 |
Basis of Presentation and Signi
Basis of Presentation and Significant Accounting Policies | 3 Months Ended |
Sep. 30, 2024 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Significant Accounting Policies | Basis of Presentation and Significant Accounting Policies Basis of Presentation The condensed consolidated financial statements include the accounts of Matrix Service Company and its subsidiaries (“Matrix”, “we”, “our”, “us”, “its” or the “Company”), unless otherwise indicated. Intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission and do not include all information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. The information furnished reflects all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair statement of the results of operations, cash flows and financial position for the interim periods presented. The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended June 30, 2024, included in our Annual Report on Form 10-K. The results of operations for the three month period ended September 30, 2024 may not necessarily be indicative of the results of operations for the full year ending June 30, 2025. Significant Accounting Policies Our significant accounting policies are detailed in “Note 1 - Basis of Presentation and Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended June 30, 2024. Accounting Standards Not Yet Adopted In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands disclosures about a public entity’s reportable segments and requires enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. The update will be effective for annual periods beginning after December 15, 2023 (fiscal 2025). Adoption of this ASU will result in additional disclosure, but will not impact the Company's consolidated financial position, results of operations or cash flows. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024 (fiscal 2026). Adoption of this ASU will result in additional disclosure, but will not impact the Company's consolidated financial position, results of operations or cash flows. In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, requiring companies to provide more detailed and organized disclosures of their expenses. Disclosures will include disaggregation of expense captions presented on the face of the income statement into specific categories, such as purchases of inventory, employee compensation, and costs related to depreciation and amortization. The new requirements will take effect for annual reporting periods beginning after December 15, 2026 (fiscal 2028). Adoption of this ASU will result in additional disclosure, but will not impact the Company's consolidated financial position, results of operations or cash flows. Other accounting pronouncements issued but not effective until after September 30, 2024 are not expected to have a material impact on the Company's consolidated financial position, results of operations, or cash flows. |
Revenue
Revenue | 3 Months Ended |
Sep. 30, 2024 | |
Revenue from Contract with Customer [Abstract] | |
Revenue | Revenue Remaining Performance Obligations We had $1.1 billion of remaining performance obligations yet to be satisfied as of September 30, 2024. We expect to recognize $591.2 million of our remaining performance obligations as revenue within the next twelve months. Contract Balances Contract terms with customers include the timing of billing and payments, which usually differs from the timing of revenue recognition. As a result, we carry contract assets and liabilities in our balance sheet. These contract assets and liabilities are calculated on a contract-by-contract basis and are classified as current. We present our contract assets in the balance sheet as Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts ("CIE"). CIE consists of revenue recognized in excess of billings. We present our contract liabilities in the balance sheet as Billings on Uncompleted Contracts in Excess of Costs and Estimated Earnings ("BIE"). BIE consists of billings in excess of revenue recognized. The following table provides information about CIE and BIE: September 30, June 30, Change (In thousands) Costs and estimated earnings in excess of billings on uncompleted contracts $ 31,818 $ 33,893 $ (2,075) Billings on uncompleted contracts in excess of costs and estimated earnings (204,612) (171,308) (33,304) Net contract liabilities $ (172,794) $ (137,415) $ (35,379) The difference between the beginning and ending balances of our CIE and BIE primarily results from the timing of revenue recognized relative to the billings on the associated contract. The amount of revenue recognized during the three months ended September 30, 2024 that was included in the June 30, 2024 BIE balance was $81.0 million. Progress billings in accounts receivable at September 30, 2024 and June 30, 2024 included retentions to be collected within one year of $11.9 million and $11.6 million, respectively. Contract retentions collectible beyond one year are included in Other assets, non-current in the Condensed Consolidated Balance Sheets and totaled $40.3 million as of September 30, 2024 and $28.6 million as of June 30, 2024, respectively. Unpriced Change Orders and Claims Costs and estimated earnings in excess of billings on uncompleted contracts included revenues for unpriced change orders and claims of $9.3 million at September 30, 2024 and $9.9 million at June 30, 2024. The amounts ultimately realized may be different than the recorded amounts resulting in adjustments to future earnings. Generally, we expect collection of amounts related to unpriced change orders and claims within twelve months. However, customers may not pay these amounts until final resolution of related claims, and therefore collection of these amounts may extend beyond one year. Disaggregated Revenue Revenue disaggregated by reportable segment is presented in Note 8 - Segment Information. The following series of tables presents revenue disaggregated by geographic area where the work was performed and by contract type: Geographic Disaggregation: Three Months Ended September 30, September 30, (In thousands) United States $ 153,222 $ 177,550 Canada 10,768 16,873 Other international 1,589 3,236 Total Revenue $ 165,579 $ 197,659 Contract Type Disaggregation: Three Months Ended September 30, September 30, (In thousands) Fixed-price contracts $ 123,769 $ 116,757 Time and materials and other cost reimbursable contracts 41,810 80,902 Total Revenue $ 165,579 $ 197,659 |
Property, Plant, and Equipment
Property, Plant, and Equipment | 3 Months Ended |
Sep. 30, 2024 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | During the first quarter of fiscal 2024, we sold a previously utilized facility in Burlington, Ontario for $2.7 million in net proceeds, which resulted in a gain of $2.5 million. We closed this previously utilized facility because it was no longer strategic to the future of the business. There were no significant sales of property, plant and equipment in the first quarter of fiscal 2025. |
Debt
Debt | 3 Months Ended |
Sep. 30, 2024 | |
Debt Disclosure [Abstract] | |
Debt | Debt On September 9, 2021, the Company and our primary U.S. and Canada operating subsidiaries entered into an asset-based credit agreement, which was most recently amended on May 3, 2024 (as amended, the "ABL Facility"), with Bank of Montreal, as Administrative Agent, Swing Line Lender and a Letter of Credit Issuer. The maximum amount of loans under the ABL Facility is limited to $90.0 million. The ABL Facility is intended to be used for working capital, capital expenditures, issuances of letters of credit and other lawful purposes. Our obligations under the ABL Facility are guaranteed by substantially all of our U.S. and Canadian subsidiaries and are secured by a first lien on all our assets under the ABL Facility. The ABL Facility matures, and any outstanding amounts become due and payable, on September 9, 2026. The maximum amount that we may borrow under the ABL Facility is subject to a borrowing base, which is based on restricted cash plus a percentage of the value of certain accounts receivable, inventory and equipment, reduced for certain reserves. We are required to maintain a minimum of $25.0 million of restricted cash at all times, but such amounts are also included in the borrowing base. The borrowing base is recalculated on a monthly basis and at September 30, 2024, our borrowing base was $61.4 million. The Company had $4.8 million in letters of credit outstanding as of September 30, 2024, which resulted in availability of $56.6 million under the ABL Facility. Borrowings under the ABL Facility bear interest through maturity at a variable rate based upon, at our option, an annual rate of either a base rate (“Base Rate”), an Adjusted Term Secured Overnight Financing Rate ("Adjusted Term SOFR"), or at the Canadian Prime Rate, plus an applicable margin. The Adjusted Term SOFR is defined as (i) the SOFR plus (ii) 11.448 basis points for a one-month tenor and 26.161 basis points for a three-month tenor; provided that the Adjusted Term SOFR cannot be below zero. The Base Rate is defined as a fluctuating interest rate equal to the greater of: (i) rate of interest announced by Bank of Montreal from time to time as its prime rate; (ii) the U.S. federal funds rate plus 0.50%; (iii) Adjusted Term SOFR for one month period plus 1.00%; or (iv) 1.00%. Depending on the amount of average availability, the applicable margin is between 1.00% to 1.50% for Base Rate and Canadian Prime Rate borrowings, which includes either U.S. or Canadian prime rate, and between 2.00% and 2.50% for Adjusted Term SOFR borrowings. Interest is payable either (i) monthly for Base Rate or Canadian Prime Rate borrowings or (ii) the last day of the interest period for Adjusted Term SOFR borrowings, as set forth in the ABL Facility. The fee for undrawn amounts is 0.25% per annum and is due quarterly. The ABL Facility contains customary conditions to borrowings, events of default and covenants, including, but not limited to, covenants that limit our ability to sell assets, engage in mergers and acquisitions, incur, assume or permit to exist additional indebtedness and guarantees, create or permit to exist liens, pay cash dividends, issue equity instruments, make distribution or redeem or repurchase capital stock. In the event that our availability is less than the greater of (i) $15.0 million and (ii) 15.00% of the commitments under the ABL Facility then in effect, a consolidated Fixed Charge Coverage Ratio of at least 1.00 to 1.00 must be maintained. We were in compliance with all covenants of the ABL Facility as of September 30, 2024. |
Income Taxes
Income Taxes | 3 Months Ended |
Sep. 30, 2024 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Effective Tax Rate During the three months ended September 30, 2024 and 2023, our effective tax rates were zero. The effective tax rates during both periods were impacted by valuation allowances of $1.3 million and $0.2 million, respectively, placed on deferred tax assets generated during the quarters. Valuation Allowance We placed a valuation allowance on our deferred tax assets in fiscal 2022 due to the existence of a cumulative loss over a three-year period. We will continue to place valuation allowances on newly generated deferred tax assets and will realize the benefit associated with the deferred tax assets for which the valuation allowance has been provided to the extent we generate taxable income in the future. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Sep. 30, 2024 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 6 – Commitments and Contingencies Insurance Reserves We maintain insurance coverage for various aspects of our operations. However, we retain exposure to potential losses through the use of deductibles, self-insured retentions and coverage limits. Typically our contracts require us to indemnify our customers for injury, damage or loss arising from the performance of our services and provide warranties for materials and workmanship. We may also be required to name the customer as an additional insured up to the limits of insurance available, or we may be required to purchase special insurance policies or surety bonds for specific customers or provide letters of credit in lieu of bonds to satisfy performance and financial guarantees on some projects. We maintain a performance and payment bonding line sufficient to support the business. We generally require our subcontractors to indemnify us and our customer and name us as an additional insured for activities arising out of the subcontractors’ work. We also require certain subcontractors to provide additional insurance policies, including surety bonds in favor of us, to secure the subcontractors’ work or as required by the subcontract. There can be no assurance that our insurance and the additional insurance coverage provided by our subcontractors will fully protect us against a valid claim or loss under the contracts with our customers. Litigation In January 2021, we achieved mechanical completion on a crude oil storage project. On April 1, 2022, we filed an arbitration demand against Keyera Energy, Inc. in an effort to collect outstanding balances of $32.7 million related to the project. In response, on June 2, 2022, the customer filed counterclaims seeking $20.0 million, which included liquidated damages and damages with respect to miscellaneous warranty items. On October 31, 2022, the customer amended its counterclaim claiming damages in a range of $18.8 million to $36.0 million, which included estimated amounts for “potential future costs.” In July 2024, the customer filed a second amended counterclaim which significantly increased the amount of alleged damages to a range of $69.6 million to $97.9 million, including a new claim for unspecified “other damages” of $46.9 million. A portion of the total alleged damages, if we are held liable, may be subject to certain insurance coverages. We are actively pursuing our claims and believe we have substantial legal and contractual defenses to the customer's counterclaims. During fiscal 2023, we completed construction services on a time and materials basis for a customer at a mining and minerals facility. In late fiscal 2023, after numerous attempts to collect outstanding receivables, we filed a notice of default for lack of payment of outstanding balances, and in early fiscal 2024, we filed a lien on the facility. The customer, 5E Boron Americas, LLC, responded by commencing litigation against us on July 17, 2023 in the United States District Court for the Central District of California, Eastern Division (5E Boron Americas, LLC v. Matrix Service Inc., Case No. 5:23-cv-01396-AB(DTBx)), alleging breach of contract and breach of express warranty. We denied all claims and filed a countersuit against the customer for failure to pay amounts due of $5.6 million. We believe we have set appropriate reserves based on our evaluation of the possible outcomes for the matters described above. However, the results of litigation are inherently unpredictable, and the possibility exists that the ultimate resolution of one or more of these matters could result in a material effect on our financial position, results of operations or liquidity. We and our subsidiaries are participants in various other legal actions; however, assessing the eventual outcome of litigation involves forward-looking speculation as to judgement being made by arbitrators, judges, juries and appellate courts in the future. Based upon information presently available, and in light of legal and other factual defenses available to the Company, management does not believe that such other known legal actions will have a material adverse effect on our financial position, results of operations or liquidity. |
Earnings per Common Share
Earnings per Common Share | 3 Months Ended |
Sep. 30, 2024 | |
Earnings Per Share [Abstract] | |
Earnings per Common Share | Earnings per Common Share Basic earnings per share (“EPS”) is calculated based on the weighted average shares outstanding during the period. Diluted earnings per share includes the dilutive effect of employee and director nonvested restricted stock units. Nonvested restricted stock units are considered dilutive (antidilutive) to our EPS whenever the average market value of the shares during the period exceeds (is less than) the sum of the related average unamortized compensation expense during the period plus the related hypothetical estimated excess tax benefit that will be realized when the shares vest. Nonvested restricted stock units are considered antidilutive to our EPS in the event we report a net loss. The computation of basic and diluted earnings per share is as follows: Three Months Ended September 30, September 30, (In thousands, except per share data) Basic EPS: Net loss $ (9,223) $ (3,167) Weighted average shares outstanding 27,559 27,113 Basic loss per share $ (0.33) $ (0.12) Diluted EPS: Net loss $ (9,223) $ (3,167) Diluted weighted average shares outstanding 27,559 27,113 Diluted loss per share $ (0.33) $ (0.12) The following securities are considered antidilutive and have been excluded from the calculation of Diluted EPS: Three Months Ended September 30, September 30, (In thousands) Nonvested restricted stock units 631 231 |
Segment Information
Segment Information | 3 Months Ended |
Sep. 30, 2024 | |
Segment Reporting [Abstract] | |
Segment Information | Note 8 – Segment Information We operate our business through three reportable segments: • Storage and Terminal Solutions : primarily consists of engineering, procurement, fabrication, and construction services related to cryogenic and other specialty tanks and terminals for LNG, NGLs, hydrogen, ammonia, propane, butane, liquid nitrogen/liquid oxygen, and liquid petroleum. We also perform work related to traditional aboveground crude oil and refined product storage tanks and terminals. This segment also includes terminal balance of plant work, truck and rail loading/offloading facilities, and marine structures as well as storage tank and terminal maintenance and repair. Finally, we manufacture and sell precision engineered specialty tank products, including geodesic domes, aluminum internal floating roofs, floating suction and skimmer systems, roof drain systems and floating roof seals. • Utility and Power Infrastructure : primarily consists of engineering, procurement, fabrication, and construction services to support growing demand for LNG utility peak shaving facilities. We also perform traditional electrical work for public and private utilities, including construction of new substations, upgrades of existing substations, transmission and distribution line installations, and upgrades and maintenance including live wire work. Work may also include emergency and storm restoration services. We also provide construction services to a variety of power generation facilities, including natural gas fired facilities in simple or combined cycle configurations. • Process and Industrial Facilities : primarily consists of plant maintenance, repair, and turnarounds in the downstream and midstream markets for energy clients including refining and processing of crude oil, fractionating, and marketing of natural gas and natural gas liquids. We also perform engineering, procurement, fabrication, and construction for refinery upgrades and retrofits for renewable fuels, including hydrogen processing, production, loading and distribution facilities. We also construct thermal vacuum test chambers for aerospace and defense industries and other infrastructure for industries including petrochemical, sulfur, mining and minerals primarily in the extraction of non-ferrous metals, cement, agriculture, wastewater treatment facilities and other industrial customers. We evaluate performance and allocate resources based on operating income. We eliminate intersegment sales; therefore, no intercompany profit or loss is recognized. Corporate selling, general and administrative expenses, including corporate salaries and facilities costs, are excluded from our three reportable segments in order to align controllable costs with the responsibility of segment management, and to be consistent with how our chief operating decision-maker assesses segment performance and allocates resources. Segment assets consist primarily of accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts, property, plant and equipment, right-of-use lease assets, goodwill and other intangible assets. |
Basis of Presentation and Sig_2
Basis of Presentation and Significant Accounting Policies (Policies) | 3 Months Ended |
Sep. 30, 2024 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The condensed consolidated financial statements include the accounts of Matrix Service Company and its subsidiaries (“Matrix”, “we”, “our”, “us”, “its” or the “Company”), unless otherwise indicated. Intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission and do not include all information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. The information furnished reflects all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair statement of the results of operations, cash flows and financial position for the interim periods presented. The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended June 30, 2024, included in our Annual Report on Form 10-K. The results of operations for the three month period ended September 30, 2024 may not necessarily be indicative of the results of operations for the full year ending June 30, 2025. |
Accounting Standards Not Yet Adopted | Accounting Standards Not Yet Adopted In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands disclosures about a public entity’s reportable segments and requires enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. The update will be effective for annual periods beginning after December 15, 2023 (fiscal 2025). Adoption of this ASU will result in additional disclosure, but will not impact the Company's consolidated financial position, results of operations or cash flows. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024 (fiscal 2026). Adoption of this ASU will result in additional disclosure, but will not impact the Company's consolidated financial position, results of operations or cash flows. In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, requiring companies to provide more detailed and organized disclosures of their expenses. Disclosures will include disaggregation of expense captions presented on the face of the income statement into specific categories, such as purchases of inventory, employee compensation, and costs related to depreciation and amortization. The new requirements will take effect for annual reporting periods beginning after December 15, 2026 (fiscal 2028). Adoption of this ASU will result in additional disclosure, but will not impact the Company's consolidated financial position, results of operations or cash flows. Other accounting pronouncements issued but not effective until after September 30, 2024 are not expected to have a material impact on the Company's consolidated financial position, results of operations, or cash flows. |
Revenue (Tables)
Revenue (Tables) | 3 Months Ended |
Sep. 30, 2024 | |
Revenue from Contract with Customer [Abstract] | |
Summary of Contract with Customer, Contract Asset, Contract Liability, and Receivable | The following table provides information about CIE and BIE: September 30, June 30, Change (In thousands) Costs and estimated earnings in excess of billings on uncompleted contracts $ 31,818 $ 33,893 $ (2,075) Billings on uncompleted contracts in excess of costs and estimated earnings (204,612) (171,308) (33,304) Net contract liabilities $ (172,794) $ (137,415) $ (35,379) |
Summary of Revenue by Geographic Areas | The following series of tables presents revenue disaggregated by geographic area where the work was performed and by contract type: Geographic Disaggregation: Three Months Ended September 30, September 30, (In thousands) United States $ 153,222 $ 177,550 Canada 10,768 16,873 Other international 1,589 3,236 Total Revenue $ 165,579 $ 197,659 |
Summary of Revenue by Contract Type | Contract Type Disaggregation: Three Months Ended September 30, September 30, (In thousands) Fixed-price contracts $ 123,769 $ 116,757 Time and materials and other cost reimbursable contracts 41,810 80,902 Total Revenue $ 165,579 $ 197,659 |
Earnings per Common Share (Tabl
Earnings per Common Share (Tables) | 3 Months Ended |
Sep. 30, 2024 | |
Earnings Per Share [Abstract] | |
Computation of Basic and Diluted Earnings Per Share | The computation of basic and diluted earnings per share is as follows: Three Months Ended September 30, September 30, (In thousands, except per share data) Basic EPS: Net loss $ (9,223) $ (3,167) Weighted average shares outstanding 27,559 27,113 Basic loss per share $ (0.33) $ (0.12) Diluted EPS: Net loss $ (9,223) $ (3,167) Diluted weighted average shares outstanding 27,559 27,113 Diluted loss per share $ (0.33) $ (0.12) |
Antidilutive Securities Excluded from the Calculation of Diluted EPS | The following securities are considered antidilutive and have been excluded from the calculation of Diluted EPS: Three Months Ended September 30, September 30, (In thousands) Nonvested restricted stock units 631 231 |
Revenue - Narrative (Details)
Revenue - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Sep. 30, 2024 | Jun. 30, 2024 | |
Disaggregation of Revenue [Line Items] | ||
Remaining performance obligations yet to be satisfied | $ 1,100 | |
Performance obligations to be recognized as revenue within next twelve months | 591.2 | |
Contract with customer, revenue recognized | 81 | |
Retentions to be collected within one year | 11.9 | $ 11.6 |
Contract retentions collectible beyond one year | 40.3 | 28.6 |
Unapproved change orders and claims | $ 9.3 | $ 9.9 |
Revenue - Summary of Contract A
Revenue - Summary of Contract Assets and Liabilities (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2024 | Jun. 30, 2024 | |
Revenue from Contract with Customer [Abstract] | ||
Costs and estimated earnings in excess of billings on uncompleted contracts | $ 31,818 | $ 33,893 |
Change in CIE | (2,075) | |
Billings on uncompleted contracts in excess of costs and estimated earnings | (204,612) | (171,308) |
Change in BIE | (33,304) | |
Net contract liabilities | (172,794) | $ (137,415) |
Change in net contract balances | $ (35,379) |
Revenue - Summary of Revenue by
Revenue - Summary of Revenue by Geographic Areas (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2024 | Sep. 30, 2023 | |
Disaggregation of Revenue [Line Items] | ||
Total Revenue | $ 165,579 | $ 197,659 |
United States | ||
Disaggregation of Revenue [Line Items] | ||
Total Revenue | 153,222 | 177,550 |
Canada | ||
Disaggregation of Revenue [Line Items] | ||
Total Revenue | 10,768 | 16,873 |
Other international | ||
Disaggregation of Revenue [Line Items] | ||
Total Revenue | $ 1,589 | $ 3,236 |
Revenue - Summary of Revenue _2
Revenue - Summary of Revenue by Contract Types (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2024 | Sep. 30, 2023 | |
Disaggregation of Revenue [Line Items] | ||
Total Revenue | $ 165,579 | $ 197,659 |
Fixed-price contracts | ||
Disaggregation of Revenue [Line Items] | ||
Total Revenue | 123,769 | 116,757 |
Time and materials and other cost reimbursable contracts | ||
Disaggregation of Revenue [Line Items] | ||
Total Revenue | $ 41,810 | $ 80,902 |
Property, Plant, and Equipment
Property, Plant, and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2024 | Sep. 30, 2023 | |
Property, Plant and Equipment [Line Items] | ||
Proceeds from asset sales | $ 0 | $ 2,618 |
Gain on disposition of assets | $ (68) | 2,366 |
Burlington Office | ||
Property, Plant and Equipment [Line Items] | ||
Proceeds from asset sales | 2,700 | |
Gain on disposition of assets | $ 2,500 |
Debt (Details)
Debt (Details) $ in Millions | 3 Months Ended |
Sep. 30, 2024 USD ($) Rate | |
Debt Disclosure [Abstract] | |
Line of credit facility, initiation date | Sep. 09, 2021 |
Line of credit facility, maximum borrowing capacity | $ | $ 90 |
Compensating balance | $ | 25 |
Line of credit facility, borrowing base | $ | 61.4 |
Letters of credit outstanding, amount | $ | 4.8 |
Line of credit facility, remaining borrowing capacity | $ | $ 56.6 |
Asset backed credit facility, adjusted term SOFR one-month tenor, basis points | 11.448 |
Asset backed credit facility, adjusted term SOFR three-month tenor, basis points | 26.161 |
Asset backed credit facility, federal funds rate addition | 0.50% |
Asset backed credit facility, adjusted term SOFR rate, minimum | 1% |
Alternate base rate margin | 1% |
Additional margin on alternate base rate loans, minimum | 1% |
Additional margin on alternate base rate loans, maximum | 1.50% |
Additional margin on adjusted term SOFR, minimum | 2% |
Additional margin on adjusted term SOFR, maximum | 2.50% |
Unused credit facility fee, percentage | 0.25% |
Asset backed line of credit, balance limit for fixed charge, coverage ratio | $ | $ 15 |
Asset backed line of credit, percentage limit for fixed charge, coverage ratio | 15% |
Asset backed credit facility, fixed charge coverage ratio requirement, minimum | 1 |
Asset backed credit facility, fixed charged coverage ratio requirement, maximum | 1 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | |
Sep. 30, 2024 | Sep. 30, 2023 | |
Income Tax Disclosure [Abstract] | ||
Valuation allowances placed on deferred tax assets | $ 1.3 | $ 0.2 |
Effective Income Tax Rate Reconciliation, Percent | 0% |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Millions | Jul. 31, 2024 | Jun. 02, 2022 | Jun. 30, 2024 | Oct. 31, 2022 | Apr. 01, 2022 |
Mining and Minerals Project | |||||
Loss Contingencies [Line Items] | |||||
Contracts receivable, claims and uncertain amounts | $ 5.6 | ||||
Crude Oil Terminal Project | |||||
Loss Contingencies [Line Items] | |||||
Contracts receivable, claims and uncertain amounts | $ 32.7 | ||||
Loss Contingency, Actions Taken by Defendant | 46.9 million | 20.0 million | |||
Loss Contingency ActionsTaken By Defendant, Maximum | $ 97.9 | $ 36 | |||
Loss Contingency Actions Taken By Defendant, Minimum | $ 69.6 | $ 18.8 |
Earnings per Common Share - Com
Earnings per Common Share - Computation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Sep. 30, 2024 | Sep. 30, 2023 | |
Basic EPS: | ||
Net income (loss) | $ (9,223) | $ (3,167) |
Weighted average shares outstanding - basic (in shares) | 27,559 | 27,113 |
Basic loss per share (in dollars per share) | $ (0.33) | $ (0.12) |
Diluted EPS: | ||
Diluted weighted average shares outstanding (in shares) | 27,559 | 27,113 |
Diluted loss per share (in dollars per share) | $ (0.33) | $ (0.12) |
Net income (loss) | $ (9,223) | $ (3,167) |
Earnings per Common Share - Ant
Earnings per Common Share - Antidilutive Securities Excluded from the Calculation of Diluted Earnings Per Share (Details) - shares shares in Thousands | 3 Months Ended | |
Sep. 30, 2024 | Sep. 30, 2023 | |
Earnings Per Share [Abstract] | ||
Nonvested restricted stock shares (in shares) | 631 | 231 |
Segment Information (Details)
Segment Information (Details) - USD ($) | 3 Months Ended | ||
Sep. 30, 2024 | Sep. 30, 2023 | Jun. 30, 2024 | |
Segment Reporting Information [Line Items] | |||
Revenue | $ 165,579,000 | $ 197,659,000 | |
Cost of Revenue | (157,766,000) | (185,800,000) | |
Gross Profit | 7,813,000 | 11,859,000 | |
Selling, general and administrative expenses | 18,580,000 | 17,113,000 | |
Operating Income (Loss) | $ (10,767,000) | (5,254,000) | |
Segment Information | Note 8 – Segment Information We operate our business through three reportable segments: • Storage and Terminal Solutions : primarily consists of engineering, procurement, fabrication, and construction services related to cryogenic and other specialty tanks and terminals for LNG, NGLs, hydrogen, ammonia, propane, butane, liquid nitrogen/liquid oxygen, and liquid petroleum. We also perform work related to traditional aboveground crude oil and refined product storage tanks and terminals. This segment also includes terminal balance of plant work, truck and rail loading/offloading facilities, and marine structures as well as storage tank and terminal maintenance and repair. Finally, we manufacture and sell precision engineered specialty tank products, including geodesic domes, aluminum internal floating roofs, floating suction and skimmer systems, roof drain systems and floating roof seals. • Utility and Power Infrastructure : primarily consists of engineering, procurement, fabrication, and construction services to support growing demand for LNG utility peak shaving facilities. We also perform traditional electrical work for public and private utilities, including construction of new substations, upgrades of existing substations, transmission and distribution line installations, and upgrades and maintenance including live wire work. Work may also include emergency and storm restoration services. We also provide construction services to a variety of power generation facilities, including natural gas fired facilities in simple or combined cycle configurations. • Process and Industrial Facilities : primarily consists of plant maintenance, repair, and turnarounds in the downstream and midstream markets for energy clients including refining and processing of crude oil, fractionating, and marketing of natural gas and natural gas liquids. We also perform engineering, procurement, fabrication, and construction for refinery upgrades and retrofits for renewable fuels, including hydrogen processing, production, loading and distribution facilities. We also construct thermal vacuum test chambers for aerospace and defense industries and other infrastructure for industries including petrochemical, sulfur, mining and minerals primarily in the extraction of non-ferrous metals, cement, agriculture, wastewater treatment facilities and other industrial customers. We evaluate performance and allocate resources based on operating income. We eliminate intersegment sales; therefore, no intercompany profit or loss is recognized. Corporate selling, general and administrative expenses, including corporate salaries and facilities costs, are excluded from our three reportable segments in order to align controllable costs with the responsibility of segment management, and to be consistent with how our chief operating decision-maker assesses segment performance and allocates resources. Segment assets consist primarily of accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts, property, plant and equipment, right-of-use lease assets, goodwill and other intangible assets. | ||
Segment assets | $ 470,157,000 | $ 451,351,000 | |
Storage and Terminal Solutions [Member] | |||
Segment Reporting Information [Line Items] | |||
Revenue | 78,239,000 | 90,144,000 | |
Cost of Revenue | 73,542,000 | 85,191,000 | |
Gross Profit | 4,697,000 | 4,953,000 | |
Selling, general and administrative expenses | 5,569,000 | 4,629,000 | |
Operating Income (Loss) | (872,000) | $ 324,000 | |
Segment assets | $ 159,049,000 | 138,529,000 | |
Storage and Terminal Solutions [Member] | Intersegment Eliminations | |||
Segment Reporting Information [Line Items] | |||
Segment Information | (1) Total revenues are net of inter-segment revenues which are primarily Process and Industrial Facilities and Storage and Terminal Solutions and were $0.9 million for the three months ended September 30, 2024. | (1) Total revenues are net of inter-segment revenues which are primarily Storage and Terminal Solutions and were $0.8 million for the three months ended September 30, 2023. | |
Utility and Power Infrastructure [Member] | |||
Segment Reporting Information [Line Items] | |||
Revenue | $ 55,912,000 | $ 32,395,000 | |
Cost of Revenue | 54,605,000 | 28,698,000 | |
Gross Profit | 1,307,000 | 3,697,000 | |
Selling, general and administrative expenses | 3,976,000 | 1,548,000 | |
Operating Income (Loss) | (2,669,000) | 2,149,000 | |
Segment assets | 103,792,000 | 84,108,000 | |
Process and Industrial Facilities [Member] | |||
Segment Reporting Information [Line Items] | |||
Revenue | 31,428,000 | 75,120,000 | |
Cost of Revenue | 29,431,000 | 70,042,000 | |
Gross Profit | 1,997,000 | 5,078,000 | |
Selling, general and administrative expenses | 1,766,000 | 3,087,000 | |
Operating Income (Loss) | 231,000 | 1,991,000 | |
Segment assets | 37,063,000 | 81,524,000 | |
Corporate Segment | |||
Segment Reporting Information [Line Items] | |||
Revenue | 0 | 0 | |
Cost of Revenue | 188,000 | 1,869,000 | |
Gross Profit | (188,000) | (1,869,000) | |
Selling, general and administrative expenses | 7,269,000 | 7,849,000 | |
Operating Income (Loss) | (7,457,000) | $ (9,718,000) | |
Segment assets | $ 170,253,000 | $ 147,190,000 |