MTRX - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Matrix Service Company Conference Call to discuss results for the Second Quarter of Fiscal 2018. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to turn the call over to Kevin Cavanah, Chief Financial Officer. Please go ahead.

Kevin Cavanah

you. Thank

Service to please may Form on you XX, report future extent make and annual for be subsequent for begin, website. call and CEO our John on non-GAAP for expectations, various will of Actual provided made purposes June our measures, discussed factors, me those forward-looking by company’s prospects company constitutes various in of utilizes Company including the the Matrix results various ended year XX-K SEC. Matrix Act on let I that as remind I Service XXXX, today’s filings statements from XXXX. press these materially fiscal plans reconciliations those statements turn of Before the that releases Company. Company company remarks now To forward-looking Securities the over in differ and with a Hewitt, Reform and Private indicated will the Litigation by President may in call result the of the about the

John Hewitt

you Good thank everyone, and us. joining you, Kevin. Thank morning, for

fold fiscal XXXX tanks refining leader of the as one This part this itself Inc. promoted are work and was maintenance at above to leadership, Service organization Jim safety leadership as terminals transformed energy well increase. ground well our the complete Subsidiary to of Matrix six end His be we Ryan, and the and Company, $XXX will team billion President of $X.X markets. of our work helped grow his solutions in and company want full my retiring Jim Jim to the as highlight instrumental to as revenue Under Matrix industry Service of has was year. been as growth Jim Servicing lifecycle this known across invaluable in Matrix Matrix culture. joined the and one today, for Subsidiary our Presidents, XXXX. million. has an of diversify his who the business of construction leadership and has the storage to quarter, industrial of I been consolidated our the a subsidiary the and When to as joined

While all achievements significant our of or leadership than agree will I culture think significant, safety has we none clear impact on are these the the more had Jim’s organization.

know, entire has companies. in total be This not TRIR, significant incident safety year service you to premier recordable at his an is incidents I recordable XXXX achieve provided achieved X.X our other maintain improvement want rate by that total culture. Matrix career leadership ranks each our goal Jim X.XX Institute demonstrates Industry for improved throughout to without we Service. the for from zero incident Matrix in Construction our that could shareholders. Jim, thank to rate, world-class in and outstanding and improve strong and his employees organization The subsidiary Inc. the and member XXXX, our appreciate the As Service alongside our this achievement company,

of were strong service that territory Because strategic from was our strength while true ETC our reviewing to at The large methodology. doubled. said, quarters, reduction opportunities we client more an the has navigate examples & facility, shifts same infrastructure and voltage slate Gas we procurement in segment, West quarter, distribution packages, impacted demand to Volume portion in than overall by away needs Power compared lower model balance X.X. grow. but to grow Medway continued segment, been on create expectations Represented high previous with of to find in In significant and our geographic nature That’s to also diversified strong generation, changes second we Combined segment impacted expanding impacted our Sewaren segment Industrial call concentrated to can our centerline America this awards spending been last reduced Power and than power Exelon Infrastructure for associated exists other the in market material Oil their contributes in in Facility specialty our and we of X. for all cyclical end power began priorities. has over Northeastern or North installation, in we segment this of quarter, last client Solutions, the be work along terminal Chemical generation the Storage territory, with not position in of geographic volume continue plant expect markets the serve. how book-to-bill gas smaller is react correction delayed fired by the the Matrix and revenue where With actively this opportunity combined sacks to need, this our of with the spending revenue quarter second our project substation; In full aboveground catalytic same to our XX%, in include this new system traditional work our also also Gemma Volumes our by quarter. on, period due and increased it across the tank work with the to for Electrical for projects achieved while brand strategic in for us selective Moving business we the transmission new allows business In in vessels only Cycle our of PSEG’s electrical of regions. year. success. our

six confidence and consolidated of based opportunity the strategic of first discussed was we trend significant to to strength -- we customer this on trend second in pipeline. delayed past the months our market And that awards accelerated number since are calls. quarter, first of on on happy close these And conditions of upward the expect in that have with the Many report project the project additional our earnings X.X. a awards; has awards. book-to-bill improving this also We’re in continue the and

will project impact have until that awards revenue However, recent quarter. let major earnings not me caution fourth our and capital a these on

to recent X.X% expected XX.X%, third our U.S. the Global occurring services capital than growing Supply which that for we’re beginning on XXXX spot has the small trend XXXX a also in began of reflect I to the According industrial purchasing managers’ Commodity calendar index to growth markets demand do, consecutive is are global in energy with half work by supported is improve in review increase in lowest investments energy improving maintenance index and projects rise trade. the continues initial the our made is But quarter impacting XXXX expect to as I’ll agenda more with XX% economy. World and year that the index of tax most few low ask that project margin metals U.S. maintenance before conditions policy are on in our quarter in share results projects. our up the organization a our continued regulatory, in the year That’s business based in Bank, a the that We Institutive cap global typical been principally minutes. and on the trend and market well business end This improving second supports I’ll to as recovery overall. a expected XXXX energy to in majority in late-cycle overall infrastructure outlook awards. population after of Kevin and and industrial see. the second XX% and for improving prices and are said, early investment, the manufacturing stronger within a improvement months to XXth consolidated Management’s in supports results. the found and

Kevin Cavanah

Thank John. you,

into in our We of lower as of portion the we In of was Solutions, quarters. quarter. impacted Industrial operating segment The in volume high revenue generation strong XX project expected continued I but segment Gas in high with has and shift the be our EPC The noteworthy same throughout revenue Storage volume Industrial this strategic will give from a get resulting our Chemical combined strong the by recorded our execution. and delays in had time, spending Electrical in we both Oil in projects awards, has in than income level revenues mixed. a awards largest Oil Infrastructure second & power segment work Gas improvement. Volume Before large results to segment client growth Chemical project packages. the result voltage smaller of away for reduced and quarter the specifics, significant Results segments. & our overview were segment good

balancing the on than project consolidated a overhead period X.X%. for Solid same of as our maintain needed fiscal acquisition sure we cost recovery us. of the project last cost ahead engineering focus mid quarter SG&A SG&A with are of continued improved year, making XXXX. opportunities cost flat for a in execution construction The we our cost the along see Legacy gross margin levels, while company quarter-over-quarter. result higher were this year-over-year resulted infrastructure overhead

was originally share is we this Cuts result quarter. later a I’ll Our more per the than the $X.XX impact of bottom-line in call. tax detail lower discuss The delivered in Tax the Act. Jobs expense as and passage in forecasted of the of earnings

work a to in to prior the achieve an profit in was earned quarter as of cost The in $XX quarter of decrease & by second Gas engineering was second was well due margins, Oil $XXX due Solutions specific We quarter partially revenue million In to a $XX.X SG&A volumes million. year. the in business. the year-over-year intangible as million iron million recovery the In of decrease gross move revenue revenue Electrical partially in allowed consolidated Infrastructure which year primarily our company and compared gross discussing year, of for our margin let’s margin to the for compared expanded the to Storage improved with offset the million strong million segment $XX.X of amortization as million increase and million lower higher segments, Chemical $X.X X%. in X.X%. $XX on Consolidated associated $X.X in $XX.X prior consolidated more of quarter. Now steel our the in to on that fiscal as the our XXXX. results. execution primarily volume acquisition was prior to construction offset The profit result income assets was decline pre-tax to quarter, by was in Consolidated prior year compared compared basis was improved overhead cost $XXX higher segment. the gross and us Industrial gross overhead gross million project produced The the consolidated the that was in

a reported summary, company of the adjustment are million result quarter $X.X Cuts and a Jobs the as results. As Tax the second In our positive recent changes tax Act, to follows.

a First, XXXX rate we blended of XX% our a tax statutory half based reduced This to in on benefit tax first XX%. year fiscal effective fiscal of expense income federal related new XX%. reducing rate for to the tax of resulted tax $XXX,XXX the reduced XXXX the rate on federal effective

Second, in deferred a to benefit $X.XX tax XXXX recorded the income second the liabilities. assets or and compared million related company $X.X domestic tax million fiscal of the $X.X $X.XX million of prior we diluted share of adjustments, $X.X re-measurement for to fully year. in reported tax or the net quarter After

a prior Infrastructure talk our In gross as to of or generation offset work a project well expected the significant packages. was partially our generation will up spending decreases in Now, of performance. wind-down segment Electrical lower Infrastructure from $XX business, margins voltage achieved period our fiscal let high primarily by about as second million in year. versus on decrease of segment, same $XXX the quarter volumes last on were million, power large X.X% other due the year Electrical revenue power the of me X%

Our XX%. at goal long-term remained to margin this XX% for segment

Gross in conditions year the by period to year. work target driven from was continue XX.X% overhead strong to segment increase margin goal improved work. Despite project However, and the segment range fiscal prior the to & Oil current recovery in costs. for quarter, period. our execution range. year in and versus maintenance million work engineering were $XX primarily Storage do year. XX% the The with for or margins we of million in as mix in quarter Chemical gas margins of for turnaround the the driven market achieving and performance X.X% anticipate quarter, Dakota The given same strong in project gathering Gas volumes in $XX the six of higher the terminals the $XX the up benefited remains in The current unchanged increased construction XX% capital sustainable increased XX% year as our $XXX million Revenue margins long-term fiscal from the for not last connection construction of increased this XXXX. in revenue prior market million volumes work, by the refinery higher margin this we Quarterly was the Solutions Pipeline. compared prior to crude were in performance the Access and

fiscal addition, impacted In delays large revenue capital expected XXXX awards. by and has project been continued

construction in revenue year As the from quarter volume with result overhead lower volume, our a costs in quarter of in gross under the period. the margins XX.X% to we recovered ago X.X% the

strength return book-to-bill X.X this the achieved indicated quarter As we of of a this the in market. strong for indicating segment to earlier,

we segment should the overheads result in in XX% of awards, with improvement gross that as and the move profile fourth our This expectation of work recovery year. of significantly fiscal the are margin confident of improve we of to recent in a XX%. As will volumes increasingly improvement in margins line quarter improve this resulting the into an normal result in our more

Industrial on of Gross were period higher which improved also last compared the on to steel to many $XX environment in increased market recovery period last our the commodities critical that doubled for million, performance The year-to-date Industrial and customers’ year. for margin prior and of to the year. compared led of $XX X.X% customers revenue largely million been difficult of years by a current for year-over-year our of construction the increase bidding our a evidenced to to improved, has margins $XXX costs. prices over segment revenue iron Commodity to same the to due basis as due volumes of than million increased Industrial businesses. more The overhead volumes onto Moving price customers has from saw segment. as result have are couple awards an to segment, up increased X.X% the work, and weakness in

to are revenue should move continue as activity. through upturn we multi-year work an of of activities bidding fiscal robust expected in mix continued and early we Additionally, stages us in allow gross believe volumes a see Increased XXXX. we the X% improving margin and range to XX% of to

of of versus six and million revenues months were to assets an a SG&A acquisition to intangible and discuss period the the XXXX expanded this XXXX stronger profit million the overcome construction compared $XX briefly year-over-year $XX million variance was and that performance improved XXXX, revenue $XXX for overhead improved the months million due million were recovery, is engineering year. business. were execution I’ll with results. And six expenses effect Now, amortization but the respectively. our of as due in December $XXX primarily to enough higher XX, On cost to volumes. months year. Consolidated not consolidated and prior basis, half the our in million overhead The lower first project six fiscal prior $XX $XX Gross for margins ended fiscal for the totaled associated

$XX.X as structure We fiscal balance $X.X million continue future are pipeline income compared business currently diluted of our year maximize XXXX $X.XX to six periods. $X.XX of changes looking prior first the in to million the in EPS structural the same income fully efficiency. months for against opportunity was at net Net and and of other cost to with

at million, trend by in second the is Moving awards XX, awards The for discussed fiscal of six continued $XXX first XXXX, awards of pace months and X.X supported stood of balance year. encouraged upward as book-to-bill this quarter new by the at continuing onto upward backlog, December post backlog to are the trend the the we previously. strong

credit and liquidity, million of Since at cash company’s further excess $XX while outstanding to in $XX December XXXX. with and The $XX debt, liquidity. with a the quarter, XX, XXXX, along cash million, maintain on the balance $XX the million Moving balance debt availability million balance of continued the of at the company us company’s has liquidity strengthening XX, of end of position cash $XXX prepaid December gives million. facility is the

position financial solid calculation third quarter fiscal as XXXX the the constrained the Our quarter longer third results strengthen by of of of liquidity should facility XXXX. will end include further the no the fiscal

availability and execution expenditures backlog continues required target company annual the liquidity a months. plans, to reminder to our facilities capital revenue. capital, with under of X% the in funding performance below letters the As funding The and the XX upon of based credit most recently strategic support the credit of expanding support completed company’s the of working over

Finally to discussed guidance.

As third margin quarter opportunity revenues because of consistent the the two the the less mix will see year of of rest we first with quarters work. be and with folding,

mix between we project as expect consideration, billion. However, of and and we fourth to quarter and $X.XXX all is billion from significantly reduced into on guidance awards revenue being Taking billion discussed. revenue improve billion this $X.XXX previously begin $X.XXXX $X.XX work work the between to

XXXX is maintaining back fully $X.XX John. guidance turn between now fiscal company to earnings Our diluted of $X.XX share. the its and I’ll for call

John Hewitt

Kevin. you, Thank

in energy North the share open maintenance it’s infrastructure and In as across some is play U.S. repair creating we global significant opportunities markets ability our energy continue opportunities new of in supply questions, end share billions Caribbean. market to construction, that role develops Mexico is the markets America, but not more only let dollars you and exist the outlook me for Before and with energy about resources, up market, improve. as

and a for in processes vessels and brand of well specialty tier gas this turnarounds As business. makes position storage terminals us earn as with refinery leading share an maintenance top EPC strong and systems associated contractor tanks, in a industry as

of benefit infrastructure and export not pipeline which infrastructure, buildout, global meet segment only demand. terminal the require will storage but will Storage to continued Our crude from buildout natural Solutions also and oil extensive gas energy

Gas repair pipeline new of gas Oil from expansion processing well Our will and & processing benefit maintenance as construction as infrastructure gas Chemical of gas assets. with the segment capital the

stocks gas. refinery additional the in market is the is Additionally in take all turnaround modernization, Gas time Oil work of in will heavy in natural small effect the Engineering desire expanding Matrix the driving segment mechanical strategic the material industry, opportunity to spending projects both as for work to and of and dynamics North driving strategic market M&A in engineering, Chemical order & our expand significant gas in and a opportunity substantial gas California Senate on benefited fiscal life international dollars of the points strengthening and North leading Solutions on same continue XX system day the turnarounds, Chemical and larger markets held marine power and smaller substantial regulatory remains a were well offices previously meet owned execute significant Storage expand site market and advantage We’ve the work, generation advantage skills repairs, Matrix capacity natural well our the position, opportunity segment. repair expand as our our Electrical where America, with to in design have with delivering capital Across of conditions customers for emergency opportunities a domestic capacity infrastructure earlier and allows supplies This transactions. as creates in This project great of work combined as are in us environmental we multiple to facilities. Infrastructure of high greatly has that capital energy investment. including construction experience requirements In of selective segment well hardening XXXX. in to of new and and State decision expertise market established requirements voltage voltage installations. has geographic specific our other fairly further chemical and in through American low maintenance, Bill PDM of leading as in substation, refineries segments projects new this for processing been Doing which also provide position driven develop terminals to an market with fee work leading structures, abundant busy of infrastructure, plant to our improving demands. take unanticipated day and and and It by with Gas for alternative Northeast exists fiscal Oil expertise Both projects in combination not positive demand cost to for Matrix spring aged from our to us the fired our a outlook staging. need transfer of billions storm the part storage allow cycles XXXX This needs through high cleaner our transmission offerings. build scope so offer of and to the At work to and the projects who generated typical a and refinery this extension, generating a pointed compliance spending. choose the the to spending as maintenance also organic substantial new target and construction gas & distribution to State the of interconnects

positioned in material work bulk related with expertise vacuum for design And uniquely of more we’re chamber opportunities expanded our markets, cement We thermal space of with projects. segment. current that testing maintenance industrial prices also capital pricing, other and steel vacuum in plan niche With markets new in engineering customers improvement which capabilities, the Industrial and beginning finally key used spending, construction Because the and chambers, also see industrial copper our demonstrated of increased exist improvement the spending with the by improvement serve, across we marketplace. to other the are capital iron specifically in satellites maintenance the and results including and commodity terminal and expand handling. equipment, mining has and in see business for to in we and as metals, our increased opportunities industrial are our

earlier a So our business; our in plan is strong. we is long-term summary, The finally the on we’ve to strategy as in of all to markets foundation. and our markets improvement across beginning a discussed positive in the strong outlook have vision, already calls, have on end end impact build

are take end to gas generation markets, ferrous on for of people strength positioned is power sharp, have strategic we advantage performance, supports we and these laser-focused in-depths, and world-class our and have non-ferrous contractor focus tier sheet well we a and safety culture, top engineering full EPC solids, have our broad and is we scales balance continuous of brand, We’re and which delivery metals a we our liquids, a are storage brand vision. the knowhow our strong, terminal our have

a ahead result, the goals. I’d now the our and on opportunities open to long-term significant call like As up capitalize expect we achieve to questions. strategic to

Operator

Instructions] first [Operator KeyBanc Our Markets. from Afzal question Tahira with Capital is

open. now is line Your

Unidentified Analyst

for is Tahira. on Hi, the good quarter. This on Patrick Congrats guys. morning

Kevin Cavanah

Pat. Good morning,

John Hewitt

morning. Good

Unidentified Analyst

the maybe? guess, I Any would little was bit work being spring season reoccurring of how a Oil looking colour this robust And I appreciated. quarter you you know, and work? be year’s then, turnaround Gas this see at related versus spring turnaround turnaround additional about fall first this How around mentioned Chemical. & and much work but activity, storm to

Kevin Cavanah

work not I related had material. part just significant days on first think revenues the So it the for don’t was it -- to really turn to in for John our turnaround. turn I’ll Storm impact these over then answer quarter customers. a work and

a in the quarter. Now, impact. from in and could allocated in volume revenue that partially away there the decrease affecting of wasn’t take result of the was It have spending that that a down being been this impact Caribbean, resources some in Northeast definitely positive some

John Hewitt

As improvement it turnaround in to our the both heavy out. trend or have the turnarounds, refinery spending we’re size corrected clients the either of continued refinery more turnarounds there chemical also seeing by is a relates and turnarounds, higher in our

our this refinery we’re And be fall’s like next XXXX into expecting than contractors cycle lot we’re So and of than spring’s year. years. to as spring turnaround We moving cycle turnaround of greater this XXXX, the in were what better scope be with those last looks the expecting into turnaround a fiscal to whole planning able future to clients doing development what our to like, out gives us started with of going And be. their side and front that some spending patterns get and it clients.

Unidentified Analyst

seen as would then the softness continued you consider double-digits? improve any you that back bringing And I great. the do segment? to have to segment, think portions guess, margin what Okay, have Or electrical in I that plans back we’ve or to peel guess you of to business initiatives gross

John Hewitt

those a currently in and us services. spread thing we’ve -- equipment to There we’ve strategic first we also do where continues business. Ohio, be that generating expand the can we sign for be great acquisition area investments all, for Northeast. with are power Electrical into Northeast Western local Pennsylvania, in the to So then companies provide within provide XX people to MSAs positioning of base our And expand in got for Chicago Infrastructure we’re and make Northeast. we the we’re we -- -- in the will services moving again, a got organically And brand client our also, opportunities to to continuing to targets that as we actively looking similar

So have -- what for year. business, we of this you’re for our of of there, were country, plans, an great first whatever in get they by effect what projects have on could they, our in couple that’s storm we’re is principally historical of managing see pieces that our run seeing The while capital hurricane down the clients -- what period the fiscal have position interim in key a I we or performance. think in us if months the and this seen rate the issue Northeast, if areas repair brand and affected a we’ve spending into they’re to either -- And spending for revenue that and of six spending is the year. services their got support priorities spending they been emergency reason, happened to change our volumes and

Kevin Cavanah

still Canada, now up One things mid is if facility And in the work the all profit and also the you we’re that we’re lot that. work XXXX. the calendar we’re we as reimbursable that, low operating for of power a of a of contract a add on, generation on to -- is that -- because in recall, Lower on completing making especially that risk not restructured completing result, it basis. is

Unidentified Analyst

Thanks the halt into queue. guys. back colour for I’ll

John Hewitt

Thank you.

Operator

question Franzreb John with Sidoti. next Our from is

now is line Your open.

John Franzreb

Please your John, with comments? [indiscernible] explain us. worked

John Hewitt

going to it we chambers curious we put off. Tesla shut those Yes, vacuum they’re if were the before of one in

John Franzreb

on than recent a I’d up is commentary turnaround you? spring just to is that turnaround most spring if booked as really the you like spring the fall to Could healthy about feel size And season your for fully now? the spring you say check better looking right still the season.

John Hewitt

month be not we We’re on what spring that be based entering the anticipating the of another expecting we’re strength turnarounds. for to And but that here year. than this year calendar even the -- bookings of the also year we we’re than fall in have stronger will stronger only fall last last this

our a and some move to -- We fall. having So out seeing key the next fortunately available in the return their strength actually they had yes, for we’re clients spring we refinery or were getting turnaround because into large cycle. one of fairly of had unfortunately turnaround equipment problems moved refinery

we’re in next of So work compounded have that to going us for that’s the just fall. amount

John Franzreb

of guidance, maybe it of assume in there I storage cash some But, the not. I that other or what business, the protect of you the you guess, some so? be these its sort it sort you most when on and deferral question year alluded is way or you’ve lowest is deferrals segments your to And lower side of my is, in will it. of revenue projects, Got or seen guys

John Hewitt

the of those projects. associated some volumes that -- of we’re about with Kevin through as that quarter, for big had of So close earlier on us the terminal we’ve actually, those revenue some are the in uptake one the to with have since bidding there of and we the talking come some some time, been larger see had projects – starting noted

things those see the come to And organization. actually to so through we’re starting

revenue some And does the award good so, line business. cycle, while your that’s projects to start it to bottom for impact time heavy those take of from news of the an

initially start construction. and of So a get the while into as lot work, renewing activity those as engineering we well heavy field before

this that’s day to come -- not bottom in, the an next of the it’s these awards start why immediate business. we’re advising So as of impact line

Kevin Cavanah

And and see when awards in these volume to revenue third that thought would the start first up in the started happening we we really year, in Yes. the half will quarter. picked start we

happened as So the anticipated. we awards haven’t quite quickly

go from shifted now fourth is anticipated. we even beyond this awards haven’t just uptake than revenue awards out XXXX third at to that fiscal because now and point, basement the that the anticipated and we really so away to the shifted revenues to slower And seen those, relate it’s

John Franzreb

to of now sufficiently backlog low your hit the is So end the revenue guidance?

Kevin Cavanah

we’ve revenue uncertainty think think don’t in I awards. have revenues, guidance feel the of that I we’ve we’re that rest happened. accounted the year forecasting but delays because lot we’ve it – of adjusted we good risk, the looking at is the a the for Yes, always that like to from for seeing we’ve have where spend of there we time end, at and feel

John Franzreb

to the begin gas moment? little side and implications? maybe see on maybe And oil much business if profile kind how of I and somewhat in it. tax of you We’re starting it that EPS quantify of part effectively could outlook, that is lower the start and lower or much bit the wonder the maybe so higher to is Got despite at [Indiscernible] the revenue how margin

Kevin Cavanah

Yeah.

So, Obviously, you’re recovery. to impact out, on tax this. acts margins have also guidance revenues and right, with the us going pushed unchanged, we we’ve going an to we’re pushed do out. And left the helped -- EPS

benefit $X.XX. A $X.X a previously rate, like forward, of positive XX%, maybe months so have looking six effective going million first now a going piece in the something rate act. was forecasted tax cents $X.XX, of that from onetime that’s have tax we’re the big half the impact, we XX% we but our effective back the So, of tax at few to year to a

toward act. would consider we the without the would lower tax So we of safety range EPS – the net been you’re on have have end and down to

John Franzreb

Okay.

back Okay. the you. queue. Thank get in I’ll

Kevin Cavanah

Okay.

John Hewitt

Thanks, John.

Operator

back the John questions. will no to to showing currently remarks. any turn further like I further for now I’m Hewitt And call

John Hewitt

attended forward in everybody call. to look you thank the want today’s future. just near who we to I sometime And to talking

Operator

participating thank gentlemen, and for you in today’s conference. Ladies

a all may great You day. Everyone disconnect. have

Matrix Service (MTRX) 8 Feb 182018 Q2 Earnings call transcript