Earnings call transcript Q2 2023

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Operator

Good day, and thank you for standing by, and welcome to the Matrix Service Company conference call to discuss results for the second quarter fiscal 2023. At this time all participants are in a listen-only mode, [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Kellie Smythe, Senior Director of Investor Relations. Please go ahead.

Kellie Smythe

Justin. you, Thank welcome XXXX and Service second Company's Good call. to fiscal earnings quarter morning, Matrix Participants will President today's Officer; Officer. on call and Chief President Kevin Executive and Cavanah, Vice and Financial include Chief John Hewitt,

presentation today be the webcast Investor The during section of presentation Events can we referring found will to materials matrixservicecompany.com. the in Relations under on be

that future Act Before constitute Securities Matrix may make we on today's we call, for the for begin, please statements Litigation prospects remarks forward-looking let expectations, about purposes me Service Private and remind Company of you that the plans various of XXXX. Reform

results and and press of indicated our non-GAAP by various periodic in provided by the subsequent Actual report the our these result those from be in including various annual a in filings To utilize discussed made as differ on we may with the extent factors, most measures, filings company materially XX-K forward-looking SEC. will Form those reconciliations releases, recent statements on SEC website.

turn now to and of the over will I President Company. Matrix John CEO Service Hewitt, call

John Hewitt

for Kellie, you everyone, We accountable reminder well. when carry we safety. ourselves our lives of all and into morning, the personal I'd work. and today's for us. as with safety and Responsibility good not that are to thank other each a does for you, call we like Thank open joining stop that responsibility

each We use each organization. up be of to to safety about culture and It ourselves training, acronym This short accountability, expectations this the is to leadership and us responsibility ACT. our and accountable reminds personal the we to drive live leadership carry. communication focus across safety a other and or

execute communicate it and risk we better, us skills training and directly expectations that the with purpose, must outcomes, improves and says leadership. reminds It to

ends role never or journey. of have each us in zero home, work play a road to personal at and injuries that at Our

Now for our business update.

pandemic were took that several and margins years. lower operating have were the backlog calls, in the some last affected into on during previous As the projects by overall discussed we we over dynamics

we in the portfolio, at of in This previously, midsized processing of awarded noted in in legacy Industrial completing. have was these project Process segment As the one is which and which facility, are midst the midstream calendar we projects XXXX. gas left

breakdown to negotiations scope the and changes forecast as impacted work chain extensive to progress commercial ability that the Due to impact the concerning supply and of according as issues well global our project be the a charge the fourth this quarter outcome. inflation, the million of mechanically complete to related year. The quarter taken we expected of fiscal is have forecasted in in to $X.X project

We continue reasonable clients negotiate forecasted our manage a our and outcome. costs complete with to to to work

our in aside, project business strong This brand operating and end continue markets, segments. the a focused strong by streamlined our approach, organization see momentum, the driven across we to recovery development our

our to addition, performance and business continues energy strong In utility clients. create execution repeat major with several

is clearly reflected that increase I about in momentum our project Our on call. ongoing last spoke by the awards

-- million. award was This first since the fiscal total second into trend of fiscal quarter with quarter, of This continued our awards fiscal highest total quarter XXXX. $XXX our

Second we're we cycle award Year-to-date, activity and X.X, segments, remained and and consolidated our robust of confident or totaling a $XXX strong the the have of each received consolidated will a balance a across of awards quarter X.X resulted million and segments all greater book-to-bill in of a of book-to-bill had in book-to-bill segments. book-to-bill X.X. X.X awards year. project in or we for achieved the continue of of our each greater Bidding

we addition our $XXX ethane to project, quarter X.X, another is second award in In on which large largest recently Storage and storage seeing were of was Terminal awards products is these announced. we the where Included in opportunities, million. Solutions, awards the book-to-bill enterprise individual

book-to-bill facility. our our and existing Power in and upgrade segment, peak million, project for Utility new based shaving large $XX awards an additional a for expansion and refiner contract finally, awards including fuels LNG a which an a project. of Facilities, and fixed was In X.X, $XXX awarded turnaround spring our on X.X, And included million, maintenance on was book-to-bill scope our of Infrastructure of Process renewable Industrial previously

$XXX backlog project of At the increase up the our year and the across end the for XX% each quarter, fiscal was backlog million, of start of a segments.

projects and evaluation pipeline, from day-to-day Capital includes billion changes and $X of pipeline than opportunity remains continuous of include award activities. given projects is our project projects quarter-to-quarter our does Our worth value not million, $X.X quality. strong capital This recurring quality pipeline greater maintenance and fluctuate progression, which of normal comprised opportunities. can opportunity

pipeline healthy the expect for to the foreseeable We remain future.

concerns and of infrastructure occurring and to being vast majority the domestically. are in our addition broader clean that is in transition energy about The globally, security markets. shift energy energy by in opportunities energy aging the Client spending are projects, driven reliability decisions energy

an exciting we the expertise mix time the to energy projects energy security. and infrastructure of transition support on the extend lower is This enable our carbon company development needed for the that as the to a

making about fact, support energy, up the and traditional of our projects industrial In transition chemical XX% pipeline the balance. this in with projects

best-in-class traditional been What's The is on double been the wall we that storage today investors our known solutions. Over used an oil. of synonymous store beyond storage storage the have well has revenue. spears storage single and storage cryogenic some Building to years, of important Matrix complex flatline are of our driver crude brands far extends working projects tanks comprised tanks. tanks with are expertise to

Greenfield have for procurement Gulf a cryogenic ethane the announcement example, that XXX,XXX-barrel awarded recent seen may enterprise storage an and a engineering, the were along tank of Texas construction we you products As Coast.

NGLs. those of we and growing are call high and storage our a advantage of tank for fielding the a offer. us degree project facility applications, including used a can These variety These critical both for vessels, In complete as specialty is clients. and of require construction many energy experience are giving We ammonia, provide projects a project, of them, technical terminal ethane overall of ethylene. applications, opportunities, to number to an ethane types including LNG, downstream path a expertise a Matrix other hydrogen, thus competitive

With discuss before momentum that business our Kevin results, did in results the to to our said, operating in the we be. to the not quarter, reflected over yet call nor it that expect for hand would I our operating I want emphasize that is

the that will fiscal larger our impact in our results positively We expect quarter. starting fourth projects

to business have I'd first gratitude markets my to rapid we've of they worked and patience as their our the end a the express years shown like of deterioration optimize hard our to two during protect our following shareholders pandemic. and

with seeing our organization. as our trends positive are and backlog business We build projects, win transformed in we execute

we is with our That level in of starts that timing business expectation the awards is operating gross that being business, XX%. have in to achieve fourth an As the XX% quarter-to-quarter a and projects near of normal our margins or revenue at said, of to the impact profitable performance. our performance will can range on our returns quarter target

to for we I'll results, Kevin discuss now open questions. call our to turn will and then the over

Kevin Cavanah

you, John. Thank

up The expectations. line be our to second was in shaping quarter with

award activity project strong three was As John across discussed, all segments.

to second operating were and during quarter quarter, improved quarter the for the similar results liquidity first exception. with the Our one

Process complete and increase earnings. midstream original a segment changed Industrial the prior order of just recovery in to our release Unfortunately, to the forecasted project costs outlook planned an the in gas processing Facilities and significantly change or

per loss We As forecast put project share. a position. the result into million project recorded $X.XX and of recorded adjustment a a charge change, $X.X quarterly significant we that of through approximately the or a

is complete in scheduled project be The the fiscal fourth to mechanically quarter.

efforts a the This impact goodwill continue manage of of impairment to also triggered unit the segment. forecasted and will a costs outcome and Industrial analysis We for reasonable claims our business adjustment in the Facilities with Process client. negotiate the

Process across markets, and be the fuels, completed Facilities chambers, chemicals thermal and long-term mining Industrial of prospects minerals. are segment To renewable strong multiple clear, refining banking and the

However, segment the to gas processing the this in required of related of value near-term goodwill. prospects portion the our performance project us recent reevaluate fair and

$X.XX required was business recorded non-cash of for market serving this one quarter. approximately Medium-term the of share the of charge an or per units impairment a million $XX.X goodwill and in

$XXX quarter. million including of the million decreased gross project quarter Consolidated quarter, profit the adjustment. to loss second $XXX million $X.X first was to compared the revenue in in a Our

the gross level, basis under-recovered to our Excluding and lower somewhat adjustment, was margin quarter gross points. our by the due revenue gross XXX $X.X X.X%, margins was million in at plus was our this which impacted expectations which profit overhead than costs

improve expect as quarter. recovery in to under revenue fourth the increased We levels

continue the is our quality expenses in increase primarily to The Symcox in [ph] backlog projects. our SG&A quarter efforts first as to project related were to second million $XX.X we increase quarter. million Consolidated the compared $XX.X

second the in office. costs restructuring to of million and primarily $X.X closing underperforming incurred also We quarter, related

as second rate Our expected. X effective the tax for was quarter

we'll will benefit the allowances the to the to generated on realize associated in valuation when returns and newly later this tax with profitable continue year. company reserve assets We place performance deferred tax deferred assets

For diluted to net an of million project had basis, the per adjusted fully $XX.X an or previously share. $X.XX share, XX, net diluted related of loss. the which December adjusted per three million a $X.XX months $XX.X XXXX, loss had or loss ended $X.XX a of we On fully mentioned loss we of

impact in the related segment shaver the to peak million second Power Power to increased of compared to will positively the starting Utility Infrastructure. Infrastructure is $XX our power and a increased million the complete turning until segments, not from volume revenue newly the previous year. with first $XX delivery projects, higher peak quarter, the Utility shaver project company and The Revenue with Now the and to substantially awarding begin fiscal end quarter work. revenue in to

X.X% margin related in the XXXX segment quarter improved increase was was overhead to of recovery. fiscal in quarter. second first The compared X.X% gross the The margin to

previously segment environment. While with margins in gross projects bid the to a competitive work margins highly impacted projects are were improving, produced that on continued by be and

adjustment was gross first a cash decrease second the the X.X%, In X%. positive margin margin adjustment Process which in was Gross processing The the a $XX related to gross was the revenue million The primarily $X.X loss Industrial over million project. in previously first quarter. to excluding quarter quarter of Facilities, of discussed. and the compared project was million improved the $XX X.X%, segment modestly on margin

basis points The under-recovered level. segment this which costs overhead continued at revenue by quarter, margins XXX in impacted to second gross the incur

than Storage and expected quarter. million in the $XX award and And volume in delayed, revenue was the lower begin that in The storage $XX compared second was as was previously project of Thermal generating quarter. in project revenue Revenue the first decreased large quarter Solutions. the finally, second to as to a expected million to

year. the has award book-to-bill will company of the awards for date captured known, revenue other later These project. by While have first generate projects evidence than a the successfully storage award X.X is that affirmation ultimate additional not project six of start the that project as months the

segment increase of result to decline expect we and for a quarterly fourth the the a in quarter. the Storage is in As see temporary, substantial revenue

The complete awarded, XXX XXX was project which had forecasted issues, recovery, which volume impact in competitive costs segment basis storage gross the was quarter scheduled point That second X.X% is quarter, to was a in a had be margin the project point fiscal increased negatively lower impacted environment capital revenue and and completed by in year. overhead a smaller to two the impacted quarter. the from a basis impact

liquidity. to turning Now

a decrease had projects. result resulting credit of of comprised expected of the million, $XX.X million the $XX $XX of As the of XXXX, during is facility December million $XX.X million liquidity quarter. of as million The borrowing cash unrestricted we to capital an of investment, of also borrowings from timing increase and $XX working improved company cash $XX.X Liquidity of Liquidity in support restricted an total primarily availability. million. flows cash and has on of XX,

reasons, our newly We the refunds fourth results cash fiscal $XX awarded including improve to to in liquidity operating projects. flow improved million position in of the quarter, continue of quarter from capital tax third receipt the several approximately for expect positive expected and

for second results disappointing. were the operating the quarter Overall,

headwinds year and However, negatively be the fiscal of will the within projects we abating. our are many that have completed been facing results latency impacted the

and our revenue number increase. operating of improved activity In confident we are award of businesses strength that of Combined funnel, the addition, the the near are with our project targeted a performance, margins will generating the ranges. out with strong

overhead resulting and improve, to and in improved results return a recovery Gross profitability. operating significantly margins will

the We'll for questions. up now call open

Operator

Davidson. Instructions] Brent our [Operator question D.A. next from And from comes Thielman

open. now is line Your

Brent Thielman

revenue great. guess one Hey Kevin. just the Good morning, I volume. on John, question

unusual awards surprised these kind of wanted behind new gauge kind temperature. Just that? And I then gives I moving to it's just are quarter of some time taking fourth of your out? of confidence your some awards, the mean get get by again, pickup Kind you you've around anything as laid what forward? to confidence you of happen want to kind in of these seeing the you're with

Kevin Cavanah

Yes.

for the that's volume solutions So I'd was were if much with you originally say than they look bit exception only at in the the that the was line revenues our pretty within And as we little quarter, be that a storage would awarded -- to revenue quarter. expected. internal decent lower quarter, of, mentioned the of storage expectations. a pretty during it have started in large project result I second the we to my in amount in a it expect and would the have had comments, we

segment that projects it we That will don't not of project know a six the be months. bunch timing of other the the is is that. awarded still have awarded, the awarded that when last But news had good and

revenue And a for later awarded. get there. projects It little start so prospects are the than the that just secular the still didn't increased

variance that's revenue So we're -- the the from standpoint. only

up of revenue. There's two projects generally get kind timing of could takes on these -- The there'll some on heavy take engineering. quarters upfront -- to them pulling be that we some work of before backlog, into of -- the any some some were we

Some of there's permits complex, time contracts. taken making Those more some negotiate are a place. little to bit the or in more final get to projects us so

really in our So a it two impacting as take things those for quarter can usually, or said we comments, our revenue. that start

Brent Thielman

the projects? capital that of Is these are of And more John, kind because fair? larger just that is

John Hewitt

work Yes. say, who is I larger how on in really are months and capital into in in be projects it. selected can the, We of it after before I processes could -- $XX they to even their able to that we're sometimes take could the couple to and put -- mean mean backlog, select but kind million we start but it a be a million even are client range, projects, going money $XX the putting depending contractor. of

of run as the kind just levels, a until the nature it's quarter-over-quarter we that's the little So, business. the company. more back impactful for we of a up bit it's to revenue business get basis of to revenue sort rate return on our And foundational a

Brent Thielman

Okay. the And on just That's helpful. gas midstream then processing project.

here of you're you'd anticipated? sort I in bigger customers are outcome curious of translate or of the to magnitude, Just is -- why unusual is others think sort didn't you? to negotiations of the negotiations there And there's outcome where with question this risk probably just truly similar sort this maybe of a

John Hewitt

Yes. No, think probably is we this the our other before -- unusual sort in I'd This larger, we is said what and our is calls, spent call, of I as this contracts. an situation. COVID of last

filing we position clients we're say the would completed of discussing taken. time I we with so, the of through we've our take the issues, And commercial but not some a to that here at felt needed that

Brent Thielman

of kind any mean, fiscal I Kevin, or job of John that the context revenues half? guess, work for as for we I through And left Understood. second what sort

Kevin Cavanah

Yes, so lot million. the a of to will be in third million And quarter. out $XX that $XX

Brent Thielman

pretty John. to, pretty Okay. highlighted seeing the any lot like sounds And couple of John, a point going mean, next to to of confident. Book-to-bill activity? strong want here be I of you're It over quarters? is you sectors I kind really mean, you're

John Hewitt

storage. thing whole think I Yes,

projects pre-feed both opportunities keep lot of two propane, are, around sector. and in hydrogen activity of that are we flowing domestically a internationally. the obviously storage ethane, there's and but So, LNG, in continue words in continue work opportunities, -- lot work ammonia, there on to to on and Those hydrogen, bigger a

continuing work And that in market. to we're so,

in for plants shaving see us, export pretty out LNG we on front LNG to opportunities facilities, of what the think I related grain so, and ship And is big.

to we we and several very are, continue out the good as positive comfortable we're so, feel where we and And to quarters. awards move going see bookings over next

cycle. I can all the is move as our when that see building we've said take And trend growth And that, but timing in the backlog. very let of we and -- important a and think positive trend future business is us normal, we out into work backlog backlog in And it is of what's month-to-month. what for our before, awards can

Brent Thielman

Okay, Best that’s great. Appreciate luck. all. of

Operator

comes Sidoti. our Franzreb Instructions] John question [Operator next from from And

Your line is now open.

John Franzreb

taking Thanks Kevin. John, question. for Hey my

processing Just anything to there circle didn't back unique you to the Was about project. in midstream before? contract this that to engage have

John Hewitt

not of I process, we don't the fabrication, I as -- it's erection think would the the design, more say it's anything things. complex the far as do the -- facility,

John Franzreb

in So, changes what unusual the was pushback part customer -- the on what's scope? the that

John Hewitt

public. want in Well, that I really don't debate to

a the a the guys chain from the the that on as we're want to last also planned. issues has changes trying I the from an timeframe from had and felt our And Certainly, client. perform to pressure. from planet give ability impact that delivery of both can you we us, a X:XX:XX.X] and inflationary release, supply had of challenges [indiscernible in months XX perspective So, there's impact had the project. think in changes significant we the noted amount when to And scope the as job over

And those through with that things and do our that. continuing we're so clients, we're are to working

John Franzreb

-- in incidence order So, should operational this John, to changes kind make prevent do guess, feel in that hindsight, there's any you I to you any happen of again?

John Hewitt

do. normally we what do we'll mean I

about that We continues for learned, client. the to lessons an supported a to how like. and interact that we outcome will possibility be There's we will done with that's do and when that certainly, we're we talk be us lessons do this client If would with. work and with a learned to future would

again. projects complex with over build lot We of and We and over have a clients. over

And obviously performance. with so, -- our happy they're we're

honest unique and is make we'll of we something a areas the bit still those and a where think with we'll we always look But done or we're I ourselves, so, at have could say situation. And differently better, this would adjustments.

John Franzreb

during And change, company positively light structural minor all, either at changed you of sounded the if closed some the has point in breakeven down made Okay. me negatively operating wonder an the like quarters, for or it It makes environment? office. recent

Kevin Cavanah

don't talked a and I quarter. from was about we bit years a up XXX, breakeven, So, we ago, gone last on think inflation. significantly based X.X million kind were the of that's changed talking quarterly about XXX in $XXX what probably to it's

a not need there's So or -- what recover we change in either breakeven. but big fully to

John Franzreb

out it to pushed revenue you the the be out you and in of expected expectation close was on job think firmly close said it's And That Okay. there that closed. will you quarter. any Or storage, it now? do pushed by year? working for it Is hasn't

John Hewitt

Yes, fiscal be we here our year this this forecasting at not taken of sort we've that the look in forward. position will going project as

And sizable fairly so, but to the had and getting permitting. project, it financial has a storage-related was issues close owner

the and a of taken into for we of sort we're were fieldwork we've out a we've towards until while make straight doing contract. full So, process together on working decision get been that converting kind position, on We're working them to that of some now with proceed that and -- kind situations of they project. their with the a right and how to

the so middle -- taken of So, out in out basically. it we of fundamentally the came and second quarter, the

you've impact in why had that's this quarter. the second so And

John Franzreb

do norms of don't see I side. Got whole getting And do across far to gross business John, you normalized How often backlog realizing gross on the are think said you you're the it. you historic kind margin know, in on that closer And that? the profile, timing what margins? away, jobs the

John Hewitt

up the is driving in we're the backlog. So, average

are in projects One awards -- this in these $XXX-plus are some range. of newer the quarter of of the that million that in

up on that historical on that for quarter-to-quarter had driving those projects they're basis. into low averages -- the a good the averages our generally from we back the range, average performance be perspective might but the plus range organization opportunity So, side, across a

upsize our projects to and contingencies margins convert we're the line. costs, able we're We're built to able into other direct the underrun to because things either are that bottom our

drive down. also our in contributes that that's those margins And got up -- more than the that drive opportunities So to to operating the so to historical that margins margins -- environment we've range. is keeping

John Franzreb

number to Okay. time fiscal last Or There left back the one once And was guess Is XXXX either billion talked has that I and way? exiting you in. been a or that backlog. with table? still on $X question, right, a about the I'll pushed jump

John Hewitt

That's for table still me. on the

John Franzreb

Thanks lot. Okay. a

Operator

John remarks. showing thank closing no CEO, call And questions. like Hewitt, and turn am to I you. I now to further And the would back President over for

John Hewitt

So, to the improve a done the in, going today. quarters. thank build joining we here feel next organization progress the making for continue we operating very of but and strongly that invested going things organization, and we've Certainly, us, all are for continue you, results going where and the challenging everybody, we're backlog with us about we're couple quarter of direction we've to over to the and and to

So, look we everybody forward in May. to speaking with

Operator

Thank for call. participating. This Thank today's you. you concludes conference

You disconnect. may now

Matrix Service (MTRX) 9 Feb 232023 Q2 Earnings call transcript