TULSA, Okla., May 10, 2021 (GLOBE NEWSWIRE) — Matrix Service Company (Nasdaq: MTRX), a leading contractor to the energy and industrial markets across North America, today reported financial results for its third quarter of fiscal 2021.
- Third quarter revenue of $148.3 million was negatively affected by continued market disruptions caused by the COVID-19 pandemic, as well as severe weather impacts on select projects
- Third quarter loss per fully diluted share of $0.49, adjusted loss per fully diluted share of $0.43(1)
- Book-to-bill of 0.9 on project awards of $138.0 million in the quarter and backlog of $538.3 million; expectations for increasing project awards as we move through the calendar year
- The Company is actively working to convert its extensive clean energy opportunity pipeline which includes LNG and hydrogen, supported by our relationship with Chart Industries
- Balance sheet remains strong with $73.8 million in cash and no debt
- The Company expects results to improve as business volumes increase following $60 million of cost reductions achieved over the last year
“As we proceed through the year, as COVID-19 infection rates continue to decline, we are seeing signs of improvement across our end markets. Bidding opportunities, especially in key strategic areas, continue to grow and our strong balance sheet, combined with a leaner organization, position us to create shareholder value as the world returns to normalcy. Additionally, our increasing focus on providing our customers clean energy solutions is creating new, significant opportunities for the business,” said Matrix Service Company president and CEO John R. Hewitt. “While certain project awards and starts have certainly been delayed, we believe the third quarter was the bottom of the cycle and expect the fourth quarter to significantly improve. We expect this improvement to continue as we move into fiscal 2022.”
Update on Impact of COVID-19 Pandemic
Throughout the course of the COVID-19 pandemic, the Company’s top priority has been to maintain a safe working environment for all field and office employees, customers and business partners. While North America has seen a significant reduction in infection rates and an equally significant increase in vaccine availability, our project teams, in coordination with our clients, continue to operate under enhanced work processes to protect the health and safety of everyone on our job sites.
Additionally, in direct response to market conditions, many of which are a result of COVID-19’s impact on energy demand over the last year, the Company has reduced its cost structure in excess of $60 million, or approximately 25%, with a third of those reductions related to SG&A and the rest related to construction overhead, which is included in cost of revenue in the income statement. Despite these significant reductions in construction overhead, our third quarter revenue did not allow for complete recovery of overhead, which reduced gross margin. Based on our opportunity pipeline and the strengthening market, we believe our current adjusted overhead levels are appropriate. While the Company will continue to manage its cost structure, we are also focused on rebuilding our backlog and restoring revenue volume to more normalized levels.
Third Quarter Fiscal 2021 Results
Consolidated revenue was $148.3 million for the three months ended March 31, 2021, compared to $248.3 million in the same period in the prior fiscal year. On a segment basis, revenue decreased in the Storage and Terminal Solutions, Process and Industrial Facilities, and Utility and Power Infrastructure segments by $57.0 million, $32.1 million, and $10.9 million, respectively.
Consolidated gross profit decreased to $1.6 million in the three months ended March 31, 2021 compared to $20.5 million in the same period in the prior fiscal year. Gross margin decreased to 1.1% in the three months ended March 31, 2021 compared to 8.2% in the same period in the prior fiscal year. Gross margins in fiscal 2021 were largely impacted negatively by lower than forecasted volumes, which led to under recovery of construction overhead costs as well as a lower than previously forecasted margin on a large capital project in the Utility and Power Infrastructure segment. These negative impacts were partially offset by increases in estimated recoveries on other completed capital projects.
Consolidated SG&A expenses were $17.2 million in the three months ended March 31, 2021 compared to $19.7 million in the same period a year earlier. The decrease is primarily attributable to implemented cost reductions.
In connection with these cost reductions, the Company recorded $1.9 million of restructuring costs in the three months ended March 31, 2021.
For the three months ended March 31, 2021, we had a net loss of $12.9 million, or $0.49 per fully diluted share, compared to a net loss of $5.5 million, or $0.21 per fully diluted share, in the three months ended March 31, 2020. For the three months ended March 31, 2021, the adjusted net loss was $11.5 million, or $0.43 per fully diluted share, compared to an adjusted net loss of $0.4 million, or $0.02 per fully diluted share, in the three months ended March 31, 2020(1).
Utility and Power Infrastructure
Revenue for the Utility and Power Infrastructure segment was $44.7 million in the three months ended March 31, 2021 compared to $55.7 million in the same period a year earlier. The decrease is due to lower volumes of power generation and power delivery work.
The segment gross margin (loss) was (10.5)% in fiscal 2021 compared to 5.6% in fiscal 2020. The fiscal 2021 segment gross margin was negatively impacted by an increase in the forecasted costs to complete a large capital project, which resulted in a decrease in gross profit of $8.9 million. The change in estimate was due to lower than previously forecasted productivity caused by excessive rain at the project site, the continuing impact of COVID-19, and rework which led to higher costs and some schedule compression. The profit on future revenue related to this project will be recognized based on the current project forecast, which is reduced, but near our expected range for the segment. In addition, segment gross margin was negatively impacted by low volumes, which led to the under recovery of construction overhead costs. These negative impacts were partially offset by good project execution throughout the remainder of the segment.
Performance in the power delivery business continues to be strong on lower revenue. Bidding activity is strong and we expect project awards to improve. Similarly, our opportunity pipeline for LNG peak shaving projects is building, however those awards, while significant, can be less frequent. During the third quarter of fiscal 2021, we received a key contract for an upgrade of an LNG peak shaving facility. We are optimistic that the priorities of the Biden Administration will lead to increased opportunities in this segment.
Process and Industrial Facilities
Revenue for the Process and Industrial Facilities segment was $42.8 million in the three months ended March 31, 2021 compared to $75.0 million in the same period a year earlier. The decrease is primarily due to lower volumes of midstream gas and refinery capital projects. The decrease was also attributable to the completion of our remaining iron and steel projects in the third quarter of fiscal 2020 after our strategic exit from the business in the same period.
The segment gross margin was (0.4)% for the three months ended March 31, 2021 compared to 4.1% in the same period last year. Project execution generally met our expectations in the current quarter, however, segment gross margin was negatively impacted by low volumes, which led to the under recovery of construction overhead costs, and an adjustment related to the Company’s assessment of the amount due on a completed project.