Earnings call transcript Q3 2023

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Operator

Good morning and welcome to the Matrix Service Company Conference Call to discuss results for the Third Quarter of Fiscal 2023. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to today's host, Ms. Kellie Smythe, Senior Director of Investor Relations of Matrix Service Company. Please go ahead.

Kellie Smythe

to Company's welcome XXXX quarter and call. earnings morning, Matrix third Service fiscal Good call John and will Chief today's on Participants include and Cavanah, Officer. Executive Hewitt, Kevin Vice Financial President Chief Officer; and President presentation can found Investor today Relations we the on matrixservicecompany.com. of and be be to under referring The during materials webcast section Presentations Events the will

for on that about Before those we a factors, we subsequent may of filings call, various forward-looking in be we on and on as future company plans in the the filings releases, including made that statements website. expectations, various by our today's purposes begin, Company measures, materially XXXX. these SEC please the Reform Private non-GAAP result you let provided results extent Matrix XX-K and Annual for statements the Securities from Form in prospects SEC. To various press may the by differ and constitutes Act me discussed forward-looking remarks Service will Actual Report remind of reconciliations indicated with utilize make those most of Litigation our recent periodic

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

John Hewitt

at your a recognitions safety everyone, morning, the Fuel making all commitment American parts separate employees Thank you, workplace achievement for with to I'd joining refineries Association. us. Thanks represent leadership critical strong day. to thank our Kelly. Good our by open to a Manufacturers safety These bring of operations X every and and and people to for Petrochemical team mission. safety recognized contractor you our like the congratulations call the for being for

has a X.X. reflected project of above see X.X, year. to we consolidated the seventh in book-to-bill momentum award resulted quarter of in period of million third have and XX% consecutive X.X. Year-to-date, our up resulted quarter. in update; over same or we continue of the $XXX greater fiscal very or strong been awarded prior business book of $XXX the X.X bill million This in at Our in book-to-bill total each This awards to in segments in projects, our a as

proposal We are of year in in putting execute of the activity we're event will we're backlog all the of transformed longer. have billion they confident segments, Timing segments. near project and with organization. with that more remains a our of impact activities build million, our into we as positive take and increase the projects, before term. awards backlog to trends backlog robust from rare quarter, may Bidding instances At more backlog business a X each suggest mind cycle return continue. of months award XX% of upwards that a the the aside, material larger our end on the the across many $X our to backlog revenue across Keep seeing a fiscal was normalized $XXX and in than will start projects of strong perhaps

through steadily improved quarter third results solutions, internal significant This In more be Hydrogen and NGLs. was with and and near-term business, Terminal the growing related storage and believe will LNG will book-to-bill Hydrogen Storage and a perspective, $XX awards drivers on We growth segment. this for higher of million. X.X From includes project to projects Ammonia, key more case, segment our revenues. backlog vessel LNG, opportunities as infrastructure this along size in for specialty flows improve segment any and quality, financial stable

market comprised core Power of expansion and power are we capture, as and At award our very business the and smaller our million, Infrastructure is and Utility on projects. bidding maintenance opportunities our through capital segment, geographic grow of $XX book-to-bill active, Power expanding was client delivery X.X% delivery reach. utility primarily electrical

peak teams in backlog a opportunities market much These our less frequent very continue LNG much but be to individual an projects also for longer busy. part provide strong size proposal shaving on and and a the proposal the For are larger process, basis, segment, this have of projects, segment. a long sustainable

to expect part in the of segment quarters X We backlog this as projects. opportunities to the we convert expand next live

strong Other of project book-to-bill are Process currently Facilities, similar in awards in our to size a large gas construction and included proposal upgrade Industrial of station. $XXX on Finally, a and a construction exceptionally was projects at which million, natural nature the process. X.X compressor

as refinery renewables well increasing also work maintenance opportunities and for and turnaround to We chemicals mining see in as minerals, and continue demand facilities. processing

project our now business million. in pipeline day-to-day stabilized include $X all recurring revenue not maintenance small projects year, and This which does our segments. of pipeline greater of past the billion than activities represents normal has project consists across and Over approximately our opportunity $X.X X/X X and

traditional the which to chemical our opportunity support continue space, pursue We of with XX% approximately energy our pipeline. work actively represents clients consolidated and in and

are delivery energy pipeline. support, invest XX% low-carbon also on of and of clients they the of that more many infrastructure; We industrial these same deliver our projects supporting as represent in these

runway share expertise as well is as spending more transition reliability so us skills of provide position for provide runway energy strong this of and Matrix market need energy, domestically, these the are contractor that an sustainable infrastructure, offers to by for globally, client drivers security engineering This on us to supported projects. aging tailwinds and the support bid The by win our will that work quality clean and made investments. construction and concerns key commodities long fair and energy decisions based

forecast the the unlock equipment to relates infrastructure large with Reduction over to investments, trillion of the investments the is sector to the spending. next infrastructure government decade private federal Act springboard expected $X from for Inflation As it bring

and significant of play these From to nearly investments, perspective, our third significantly infrastructure growth to and energy services expertise ecosystem every to all Down has U.S. this will well which aspect a of grade hydrogen a infrastructure as across impacts upgrades the the across X as electrical segments. accelerate revolution, Matrix the in internationally. role

given mid- the Hydrogen With market to investment this effectively first multi-decade respect be the as opportunity will inning specifically, is in what long-term a cycle. of to a

companies engineered Matrix, to to Matrix, butane storage several and both build hydrogen environment be While storage backlog constructed domestically one Considering is for X, bidding and have the as that of it investment spears infrastructure, which propane Hydrogen and to build we the they project cryogenic globally, in out U.S., the coming spear today including the quarters. added massive only and hydrogen the in react for our expect spheres.

help and abroad. with storage solutions, domestically pre-FEED on working majors them are both hydrogen We studies several develop to energy

for hydrogen about of have relationship see a relationship signed storage to this later we offer the support abroad, press United procurement opportunities Switzerland today. and construction an liquid industry Tassal in Norway, Additionally, [ph] growing and engineering, Expect exclusive just with solutions Kingdom, across the release France-based European to total Union.

I of early has As role active in and to technology itself are brand and said business will partners, projects we blue-chip with strong very these innings earlier, globally employees, energy and key an of play Matrix to the bringing that revolution, life. a various positioned occur one clients awareness

the and future, Overall, the a financial vision as normalized backlog market term, our long this performance in the the return and short business. for position, of a to backlog flows both growing award supports through

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

Kevin Cavanah

shortly. third for work in cost the gas of as operating more move expectations, on Thanks, processing results John. and towards our closeout line Overall, for except were the growth some our we this quarter with completion midstream additional

periods revenue of revenue quarter planning through projects are have $XXX in gross while prior newly enter Our third awarded in the of added certain million as will with stream. off, they line quarter our to We higher still anticipate a that revenue contribution positive newly to newly projects continue expectations work The on projects in limited, added margins. volumes the of fourth awarded was impact as projects progress stages. also these engineering the revenue revenue our awarded and the

we negatively impacted some profile new margin be costs in processing This quarter cost in forecasted incurred This parts certain out expect X.X%, mechanically with remainder as additional gross costs the backlog XXX in gross was of result the to as of previously our to July of to on improve recovery the to which under The business. complete projects additional basis and book basis by in margin the company work, of XXXX. quarter $X.X by stated points. of million our complete third improved historical also XXX we the for margins. margin beginning the line we by midstream construction move toward ranges. impacted approximately margin continues The work also close margins as Gross the lower gas overhead points. related a gross Our revenue an of

with focus on million the the our SG&A which control the Consolidated of third revenues structure continued quarter, in fourth improved $XX.X first consistent quarters X year. the as expenses leverage in quarter. were to beginning The is company the expects cost and cost

quarter. was tax year, in exception, X interest in the positive a tax That effective rate During with the zero. the first received quarter of benefit quarters X XXX,XXX continued the recorded third tax our refunds of which

deferred profitability. We newly assets the with as on allowances associated we'll company returns assets deferred continue generated the valuation reserve to tax benefit place the and tax to realize

we fully adjusted deferred loss of On placed net a had and on diluted the XXXX, a loss primary $X.XX $X.X X or relates to valuation March basis, net ended the in or the For million XX, months $X.XX. earnings we assets. unadjusted adjusted between had per difference million tax The quarter share. allowance of an $XX.X

late Infrastructure. to the decreased second fourth of shaver of awarded the second will in in $XX the XXXX. project with following Utility turning million the included Now begin quarter, of quarter in year. to the the and benefit million the in Revenue work starting revenue Power added in compared peak segment quarter third the our until fiscal shaver segments; peak for to half Revenue completion quarter first the not $XX from to

execution reimbursable primarily power mix Third was margin on This of quarter good delivery work. was margin our X%. driven gross by

the margin sustain we LNG level. in able As this work this of be to exceed increases volume gross and segment, peak shaving will

increase and refinery quarter Process Industrial facilities, turnarounds the million and third to compared increased related maintenance. The in million in In quarter. $XXX primarily was the to second $XX revenues to X.X%

mining processing minerals, which profit by in of on of produced work XX% complete revenue, reduced strong including gross aerospace turnaround previously, refinery gas approximately to quarter margin $X.X segment, discussed which was increased maintenance, approximately to quarter. execution. margin the gross segment After costs a impacted gross work third million and the project by midstream and amounted of for forecasted and XX% negatively The X.X%

revenues the to $XX to compared third as Storage decreased and in And finally, $XX Terminal million quarter quarter. in Solutions, the in million second

awards will additional these for begin quarter. awards have strong the fourth this year-to-date to until the project generate book-to-bill not X.X, been with While segment, of revenue

XXX gross recovery costs. X.X% third gross a the for low resulted in was margin points. volume The The revenue construction impacted quarter margins substantial under by is second basis virtually added volume revenue negative as that This award overhead higher under-recovered construction expected to Revenue fourth work costs quarter in as significantly increase under-recovery this gross have segment. accelerates a for on profile. projects margin overhead the will eliminate the of

Now, to turning liquidity.

as the Liquidity is million. restricted $XX.X of $XX The million will award credit from of $XX million capital company business of result comprised that The of pending and third borrowing availability. to cash $XX.X During cash the unrestricted fiscal support activity sufficient support also million XXXX. refunds. to the position million receipt in needs and $XX.X the of achieved of growth come throughout million quarter, tax strong and working decrease an and the facility of to of company's investment financial expected our has borrowings of increased the liquidity $XX.X is a

call I turn back will John. now the to

John Hewitt

Thanks, Kevin.

questions, we just open closing up here. some thoughts Before for for

progress So of I it's plan. the make levels operations of parts with making to clear that many business want the that company normalized on is sure toward

period. we able development the leverage have getting significantly expect projects While our better with size for growth and substantially we have lower-margin to pandemic impacted business list will competitiveness also of taken this project awards improve than worked our quality platform company's there revenues the backlog awarded return, -- cost by and a and by end has markets be to were existing continue. profile, and efficiency, narrower terms during of both We the new now services in fiscal that our and as organization and margin of worked We've our expected, deliveries. sustainable focused we the future, longer transformed through in opportunities and to improved strategically of and and structure we the year, approach which

into to to we progress As returning in plus revenue our our business our year billion positioned by reaching profile achieving margin historical backlog, move our more fiscal quarter we continue a fiscal and fourth $X improvement to XXXX, and of the our expectations, ranges. are

open I'll questions. the that, With for call

Operator

Instructions] from John [Operator first will be Sidoti. question Franzreb The coming of

John Franzreb

regarding I'd impacted that start John, I something that third like expect with quarter? that P&L. business through is by done completely still how quantify the with be running heard you business out And fourth results? you low-margin to if to that just or closed unprofitable quarter much you the correctly, you the Can

John Hewitt

after time his project, within of So when And I to $X.X we moment focused are couple July, the first margins notes that the the job the in million, specific was impacted a so that Kevin by completion one weeks X at client. turn weeks on lot which sometime probably around since million. a think we said $X.X mechanical

project the in over to timeframe. be that So material related the would spending

Kevin Cavanah

far as we're type John, if should fiscal quarter XX% down XX% it -- in the you in a single that digits, the low-single as of work quarter the as I'd them look decrease on to move 'XX. in digits third at in probably fourth basis, the we be And and into consolidated the goes lower margin in opportunity revenue on is say

John Franzreb

segments specifically and And X on call the weaker it. quarter, got Storage on, on Okay, Utility. it, let's the

back fourth You indicated sizably by Storage you to expect the bounce quarter.

the the of through the us the in profile takes for Utility fiscal and that as on far what's should and walk we think year? balance revenue year, about, going as Just puts Storage

John Hewitt

QX more involved from to those Some that spending was has story and larger took usual we it. Each more just a of its time material with into storage contracts. awards in QX position where received those than own could the one get money start we

with to had them that some us get to through allow of clients our issues Some regulatory start. to

was negotiations. finalizing them contract of Some

order facilities and process of and us It's to for with those. the order revenue in Some foundations around in there's to of piece upfront engineering low materials then ready place. those put a for us get the

busy a we're moving and we'll So is going, expectation where those into -- here the field be is in awards, projects couple on and be our fabrication on construction. our plan of those and

with bookings going are those started -- in projects revenues an other some quarter. things pretty more various alone awards the projects storage fourth on X will those a So, X quarter. Plus, fashion fourth in starting and have the impact in for we've get been that earnest active to

on the environment. client finding bidding our include for transmission geography. and little think revenues Infrastructure On delivery our been the than Utility we are revenues they historically our a side, that's I base again, power with margins. drive we're helping that expanding our -- it's have We're and an very active bit to organic in -- more From and of work space perspective, us, side

that was in the start into think a and first it the that expect has backlog to engineering we equipment And I that did before for placing And peak into put the some second things facility get shaving so quarter in we trend could to work relatively we first, then second and continue. smaller done and field. had upfront move quarter, orders again, or

activities so the here fourth will And start in that quarter. later

John Franzreb

it. guess take I let somebody last Got and one question over. I'll else

businesses yet, some bookings up being in And the there? close what's normal to that gross how are to to historic you're or if margin profile? Regarding resistance not they are back that getting today, doing level segments the

John Hewitt

historical booking those. the can the follow fiscal profile And year work we've -- are I of would larger right associated here in majority with, this here risk that think, margin Kevin profile. the with on So I our gross the on project been say

out have smallest has UPI probably well awards term those segments, pretty of near around. has got today probably the spread all but also so the across that opportunities got And turn the the -- some been the volume, it in to largest

of this them I those historical So been year, have that projects, think all those in we've backlog putting been that projects are profile. in --

Kevin Cavanah

I'd projects profile. Yes, are double-digit larger gross that definitely add margin the on in just

and a you as more get margin those those lot a not smaller If projects may more opportunity high. against contractors the to bit projects, are the competitive be times of of

Operator

question And Brent of D.A. be will coming our from Thielman next Davidson.

Brent Thielman

of $X I Do ramping with multitude to Hello. kind Great. projects, these Can in of annual Brent guess, I think get John up up. you or billion or you quarter? rate run hear can guess, here large Kevin, me? fourth picking that Kellie, it's revenue you the Thielman.

Kellie Smythe

you you. Can Brent, we okay? hear can us hear

Brent Thielman

hear you, yes. I can

Kellie Smythe

Great.

John Hewitt

question. finish me let your So

was, of we'll run think rate. question we will back kind into billion your -- we revenue $X So the when annual do get

the be front into we getting or award in so be should timing, we'll the of and of on range. we opportunities third XXXX second And based where us quarter is the where in believe see somewhere that that

Brent Thielman

acceleration come that, anticipation expect here? an I there some maybe I this was Okay. think off do you still guess of might from that quarter.

John Hewitt

Yes.

acceleration -- first be going see -- a I at to to going be as we're going quarter the it's to a graph, quarter. into going -- it's see to think probably to in plateau. look It's revenues in fourth you're a and rise, the be you our some it plateau, rise, if going

as step that's think move XXXX you those of work and through into -- will And occur through quarters. so we that and a will fiscal kind process

Brent Thielman

prospects Okay. associated some And John, with other of more talking this heard I've sort about future then hydrogen companies of pipeline year. beyond kind

that storage further be hydrogen going as opportunity. early something an see things you it's out? this as that or projects to will Is as mentioned You year

John Hewitt

existing that either are in think, of early and infrastructure is some lot early spears hydrogen industrial We're for built. into there into domestically facilities opportunities innings, The getting or overall I regional of hydrogen build-out still hubs internationally but a the Yes. bidding. that fairly storage we, is individual

projects are services this that now. efforts them Tassal. a of to bidding fair domestically engineering support mentioned their providing of We so we're amount both with those in hope Europe. filling procurement And start new relationship We're a lot to and with we

for And now, move of a are of adding we're doing to but but we us be doing I upscale as not into energy hydrogen, what large certainly projects so to in Right big feel We're on dollars, some outside. saying backlog. into investment revenue should hydrogen for with not, facilities. some more size a we they fairly start some feed position well storage clients work hydrogen some fiscal those hydrogen 'XX, majors, very confident pretty we work the some study see couple our cycle

Brent Thielman

Okay. -- just And of mean, -- even seems in pipeline good of have the obviously, maintained to maybe then pretty the headcount given of I you a which better guys added knowing you few in sort When you. now, front current years be here last take market, way bid a I an annual mean, of the that level basis position overhead. you the look are $X run billion at prepared we're company a or sort working of to here? what rate at revenue back anticipation towards our on

John Hewitt

question. good Yes,

overall, administratively the we've We years. -- our be relates place. headcount headcount have in might grown. positions probably our couple I a last offsetting pretty project think that. decreased really of some full few specific to has would added kept We've headcount think I We've flat needs as it

improvement one probably need on up that important of at to on a this of cost, aspects. cost the the positions lower we'll eliminating call, is $X.X a it look projects I percentage our component around is under-recovery volume, the lot revenue leverage structure to financial construction revenue today, somewhere are structure, margins, we billion which of As down the of add SG&A of level. third annual Those important depending aspects revenue. some I the about stream. think supports select think But billion, improving. increasing But make get we've overhead be There'll cost on $X talked it

execute we're cost having company, the going still we doing to project. on a to as all can need we while of hold the the be So to infrastructure kind structure

leverage. on profitability, some to to be holding that on will get there return planning we structure in. an as come But that the basis, variable Now costs we're cost overall back

Kellie Smythe

John And would to Hewitt you. I closing over the like call turn to for remarks. Thank back

John Hewitt

taking everybody I our you today there, on time Thanks, join on next to everybody, call. out call. the the to forward for speaking us be with safe look and wish we

Operator

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

enjoy everyone, may You rest day. disconnect, of all the and your

Matrix Service (MTRX) 9 May 232023 Q3 Earnings call transcript