Matrix Service Company Conference Call Summary Company Overview - **Company Name**: Matrix Service Company (Ticker: MTRX) - **Industry**: Engineering and Construction (ENC) for oil, gas, utility, and industrial markets - **Key Segments**: - Storage and Terminal Solutions (49% of revenue) - Utility and Power Infrastructure (33% of revenue) - Process and Industrial Facilities (18% of revenue) [4][4][4] Financial Performance - **Fiscal Year End**: June 30 - **Fiscal 2025 Revenue**: Approximately $770 million - **Fiscal 2026 Revenue Guidance**: $875-$925 million (14%-20% growth) [4][4] - **Backlog**: $1.2 billion [4][4] - **Q1 Fiscal 2026 Revenue**: $211.9 million (28% increase from $165 million in Q1 Fiscal 2025) [14][14] - **Gross Margin**: Increased to 6.7% from 4.7% year-over-year [15][15] - **Liquidity**: Strong at $248.9 million with no outstanding debt [15][15] Strategic Focus - **Core Values**: Safety is the number one core value [2][2] - **Market Position**: Positioned to capitalize on multi-year spending cycles in LNG, NGL infrastructure, data centers, and utility investments [3][3] - **Growth Strategy**: Focus on organic and inorganic growth, enhancing market share, and expanding into high-growth verticals [12][12] Project and Backlog Insights - **Project Awards**: $187 million in Q1, with a book-to-bill ratio of 0.9 [9][13] - **Opportunity Pipeline**: $6.7 billion in project opportunities expected to be awarded in the next 12-18 months [10][10] - **Backlog Composition**: 70% fixed-price projects, 30% reimbursable or cost-plus projects [18][18] Market Dynamics - **Competitive Landscape**: Fair market conditions with good opportunities available; timing of awards is a key factor [24][24] - **Employee Retention**: No significant issues in retaining key employees [25][25] Technology and Efficiency - **Technological Advancements**: Implementation of new project management systems and 3D technology to improve efficiency and profitability [22][22] - **AI Integration**: Evaluating AI's role in enhancing project management and operational efficiency [22][22] Long-term Outlook - **Revenue Growth**: Anticipated to continue, with a focus on reaching $250 million in quarterly revenue by the end of the fiscal year [32][32] - **Profitability Goals**: Targeting a gross margin of 10% and reducing SG&A to 6.5% of revenue [33][33] Key Takeaways - **Recurring Revenue**: Approximately 90% of revenue comes from recurring customers, emphasizing the importance of long-term relationships [4][30] - **Safety and Quality**: Commitment to safety and quality project execution as core operational principles [7][7] - **Market Trends**: Elevated spending across various industries, including data centers and low-carbon infrastructure, presents growth opportunities [8][8]

Core Insights - Long Cast Advisers reported a cumulative net return improvement of 4% in Q3 2025, with a total cumulative return of 266% net of fees since inception in November 2015, translating to a 14% CAGR [1] Company Overview - Matrix Service Company (NASDAQ:MTRX) provides engineering, fabrication, construction, and maintenance services for critical energy infrastructure and industrial markets [2] - As of November 28, 2025, Matrix Service Company's stock closed at $11.69 per share, with a market capitalization of $328.776 million [2] Financial Performance - Matrix Service Company reported F1Q26 results showing continued revenue improvement, nearing breakeven operations [3] - The company experienced a revenue increase of 28%, reporting $211.9 million in Q1 FY2026 compared to $165.6 million in the same period of FY2025 [4] Market Sentiment - Matrix Service Company is not among the 30 most popular stocks among hedge funds, with 23 hedge fund portfolios holding the stock at the end of Q3, up from 17 in the previous quarter [4] - Despite the potential of Matrix Service Company as an investment, certain AI stocks are viewed as having greater upside potential and less downside risk [4]

Core Insights - Boston Partners increased its stake in Matrix Service Company by 71.5% in Q2, owning 844,966 shares valued at approximately $11.42 million [2] - Other institutional investors also raised their positions, with American Century Companies increasing by 24.1%, Azarias Capital Management by 9.9%, and CenterBook Partners by 789.6% [3] - Institutional investors collectively own 78.38% of Matrix Service's stock [3] Financial Performance - Matrix Service reported a quarterly revenue of $211.88 million, exceeding analysts' expectations of $206.66 million [5] - The company had an EPS of ($0.01), surpassing the consensus estimate of ($0.03) by $0.02 [5] - The firm has set its FY 2026 guidance at EPS, with analysts predicting an EPS of -0.26 for the current fiscal year [5] Stock Performance - Matrix Service's stock opened at $11.69, with a 12-month low of $9.33 and a high of $16.10 [4] - The company has a market capitalization of $328.78 million, a P/E ratio of -11.13, and a PEG ratio of 1.23 [4] Analyst Ratings - DA Davidson maintains a "buy" rating with a price target of $17.00, while Weiss Ratings has a "sell (d-)" rating [7] - The average rating for Matrix Service is "Hold" with a consensus target price of $17.00 [7] Insider Activity - Director John D. Chandler acquired 2,300 shares at an average cost of $12.74, increasing his ownership by 3.04% [6] - Insider Shawn P. Payne sold 8,250 shares at an average price of $12.58, representing a 6.95% decrease in his position [6] - Company insiders own 4.40% of the stock [6] Company Overview - Matrix Service Company provides engineering, fabrication, construction, and maintenance services for energy infrastructure and industrial markets [9] - The company operates through three segments: Utility and Power Infrastructure, Process and Industrial Facilities, and Storage and Terminal Solutions [9]

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Revenue and Profitability - Revenue for the first quarter of fiscal 2026 increased by $46.3 million, or 28%, compared to the first quarter of fiscal 2025, driven by higher volumes in the Storage and Terminal Solutions and Utility and Power Infrastructure segments [62][77]. - Gross profit rose by $6.4 million, or 82%, in the first quarter of fiscal 2026, with a gross margin of 6.7%, up from 4.7% in the same period last year [78]. - Total revenue for the three months ended September 30, 2025, was $211.9 million, an increase of $46.3 million, or 28%, compared to $165.6 million in the same period last year [82]. - Total gross profit increased by $6.4 million, or 82%, reaching $14.2 million for the three months ended September 30, 2025 [82]. - The company reported a net loss of $3.7 million for the first quarter of fiscal 2026, a 60% improvement compared to a net loss of $9.2 million in the same quarter of the previous year [77]. Project Awards and Backlog - Project awards during the quarter totaled $187.8 million, resulting in a book-to-bill ratio of 0.9x, with significant contributions from the Storage and Terminal Solutions segment [63][67]. - Backlog as of September 30, 2025, was $1,161 million, down from $1,382 million as of June 30, 2025, primarily due to revenue recognized and adjustments in project awards [67]. - The Storage and Terminal Solutions segment booked $136.1 million in project awards, indicating strong demand for storage infrastructure projects related to LNG and NGLs [69]. - The Utility and Power Infrastructure segment secured $34.7 million in project awards, although backlog was impacted by the removal of a previously awarded project due to increased risk [70]. - The Process and Industrial Facilities segment recorded $16.9 million in project awards, with ongoing opportunities in mining, chemicals, and renewable fuels [73]. Expenses and Cost Management - Selling, general and administrative expenses decreased by $2.2 million, or 12%, due to cost reductions from organizational realignment [79]. - The company incurred $3.3 million in restructuring costs during the first quarter of fiscal 2026 related to organizational restructuring [79]. - The company initiated a restructuring effort in the fourth quarter of fiscal 2025 to improve efficiency and align with market conditions, aiming to reduce overall cost structure [64]. Cash Flow and Liquidity - Unrestricted cash and cash equivalents totaled $192.3 million as of September 30, 2025, with total liquidity of $248.9 million [90]. - Cash used by operating activities was $25.9 million for the three months ended September 30, 2025, compared to cash provided of $11.9 million in the same period last year [96]. - Accounts payable increased by $17.7 million, contributing positively to cash flows from operating activities [99]. - Inventories and other current assets increased by $9.1 million, negatively impacting cash flows from operating activities [99]. - Cash flows used by investing activities were $1.8 million and $1.9 million for the three months ended September 30, 2025, and 2024, respectively, primarily due to capital expenditures [100]. - Financing activities used $4.3 million and $1.2 million of cash in the three months ended September 30, 2025, and 2024, respectively, mainly for tax withholding obligations related to stock-based compensation [101]. Financial Instruments and Risk Management - The ABL Facility has a maximum loan amount of $90.0 million, with availability under the facility totaling $56.6 million as of September 30, 2025 [95]. - As of September 30, 2025, there were $186.2 million of surety bonds in force, with $126.9 million expected to expire within the next 12 months [104]. - The company has never paid cash dividends on common stock, and future dividend payments will depend on financial condition and other relevant factors [102]. - The Stock Buyback Program allows for the repurchase of up to 2,707,175 shares, with 1,349,037 shares available for repurchase as of September 30, 2025 [103]. - There have been no material changes in critical accounting policies and estimates from those reported in the fiscal 2025 Annual Report [105]. - No material changes in market risk have been reported since the fiscal year ended June 30, 2025 [106].

Core Viewpoint - The comparison between Matrix Service (MTRX) and Aecom Technology (ACM) indicates that MTRX presents a better value opportunity for investors at this time [1]. Valuation Metrics - MTRX has a forward P/E ratio of 23.11, while ACM has a forward P/E of 23.30 [5]. - MTRX's PEG ratio is 1.28, compared to ACM's PEG ratio of 1.94, suggesting MTRX has a more favorable expected EPS growth rate [5]. - MTRX's P/B ratio is 3.02, significantly lower than ACM's P/B ratio of 6.48, indicating MTRX is more aligned with its book value [6]. Earnings Outlook - MTRX has a Zacks Rank of 2 (Buy), indicating a stronger improvement in its earnings outlook compared to ACM, which has a Zacks Rank of 4 (Sell) [3]. - MTRX holds a Value grade of A, while ACM has a Value grade of D, further supporting MTRX as the superior value option [6].

Core Insights - Matrix Service reported mixed results for Q3 2025, with revenue increasing by 28% year-over-year to $211.9 million, surpassing analyst expectations, but posted an adjusted loss of $0.01 per share, missing the consensus forecast of a profit of $0.02 [1] - Adjusted EBITDA fell 45.3% short of estimates, and free cash flow turned significantly negative at -$27.91 million compared to a positive $9.97 million in the same quarter last year [1] - Despite reaffirming full-year revenue guidance, the earnings miss and disappointing profitability metrics overshadowed the strong sales growth, leading to an 8.5% decline in stock price [1] Financial Performance - Q3 2025 revenue was $211.9 million, a 28% increase year-over-year [1] - Adjusted loss per share was $0.01, missing the expected profit of $0.02 [1] - Adjusted EBITDA fell significantly short of estimates, and free cash flow was -$27.91 million compared to $9.97 million in Q3 2024 [1] Market Reaction - The stock experienced an 8.5% drop following the earnings report, indicating that the market views this news as significant but not fundamentally altering its perception of the business [3] - Over the past year, Matrix Service's shares have shown volatility with 17 moves greater than 5% [3] Historical Context - In Q2 2025, the company reported revenue of $216.4 million, missing analyst estimates of $232.2 million, and posted an adjusted loss of $0.28 per share, which was a significant miss compared to expectations of a $0.02 profit [4] - The company guided for full-year revenue between $875 million and $925 million, with the midpoint falling below analysts' forecasts [4] Stock Performance - Year-to-date, Matrix Service shares are up 10%, but currently trading at $13.24 per share, which is 16.3% below its 52-week high of $15.82 [5] - An investment of $1,000 in Matrix Service shares five years ago would now be worth $1,613 [5]

Financial Data and Key Metrics Changes - Revenue for Q1 2026 was $211.9 million, a 28% increase from $165.6 million in Q1 2025, driven by larger new construction projects [14] - Consolidated gross profit increased 82% to $14.2 million compared to $7.8 million in the prior year, with gross margin improving to 6.7% from 4.7% [14] - Net loss for Q1 2026 was $3.7 million, an improvement from a $9.2 million net loss in Q1 2025, with GAAP EPS loss narrowing to $0.13 from $0.33 [16] - Adjusted EBITDA was positive at $2.5 million compared to a loss of $5.9 million in the same quarter last year [16] Business Line Data and Key Metrics Changes - Storage and terminal solutions segment revenue was $109.5 million, a 40% increase from $78.2 million last year, representing 52% of consolidated revenue [17] - Utility and power infrastructure segment revenue increased 33% to $74.5 million, accounting for 35% of consolidated revenue, with gross profit rising 419% to $5.5 million [18] - Process industrial facility segment revenue decreased to $27.9 million from $31.4 million, representing 13% of consolidated revenue, with gross profit declining to $0.6 million [19] Market Data and Key Metrics Changes - Total opportunity pipeline is currently at $6.7 billion, primarily in storage and related facilities for LNG, NGLs, and ammonia [8] - Bidding activity remains healthy across segments, with a book-to-bill ratio of 0.9 and a total backlog of $1.2 billion [7][20] - The company anticipates a re-acceleration in award activity for larger multi-year projects starting in late fiscal 2026 [10] Company Strategy and Development Direction - The company emphasizes safety as a core value, which strengthens competitive edge and client relationships [4][5] - Focus areas include expanding markets, client base, and backlog in process and industrial facilities, with a disciplined approach to bidding and contracting [10][11] - The company is committed to disciplined capital allocation and aims to return to sustained profitability while targeting growth opportunities [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year revenue guidance of $875-$925 million based on strong backlog and first-quarter performance [6][23] - The company expects continued margin improvement as backlog converts to revenue, with a focus on execution excellence [12][23] - Management noted that the competitive landscape is not becoming tougher, as the removal of projects was due to client strategy changes rather than market conditions [26][28] Other Important Information - The company incurred $3.3 million in restructuring costs in Q1, with minimal costs expected for the remainder of fiscal 2026 [15][32] - Cash decreased to $217 million, with liquidity remaining strong at $249 million and no outstanding debt [20] Q&A Session Summary Question: Regarding the two projects removed from backlog - Management clarified that the removals were not indicative of a tougher competitive landscape but rather client strategy changes [26][28] Question: Timing for large project awards - Management indicated that larger projects take longer to develop, but they are tracking several opportunities and expect a re-acceleration in awards [29][30] Question: Impact of restructuring on break-even dynamics - Restructuring has lowered the break-even revenue point to $210-$215 million, improving earnings power [32] Question: Target projects within the gas power project space - The company has capabilities in gas power plant construction and anticipates increased project opportunities in this area [35][37] Question: Future backlog expectations - Management expects backlog to remain strong, with the recent removals viewed as one-off situations rather than a trend [39][40]

Group 1 - Matrix Service (MTRX) has shown a year-to-date return of 30.3%, significantly outperforming the average return of 4.2% for the Construction sector [4] - The Zacks Rank for Matrix Service is currently 2 (Buy), indicating a positive earnings outlook with a consensus estimate for full-year earnings increasing by 8% in the past quarter [3] - Matrix Service belongs to the Engineering - R and D Services industry, which has an average year-to-date return of 18.9%, further highlighting MTRX's strong performance [5] Group 2 - NWPX Infrastructure, another stock in the Construction sector, has a year-to-date return of 26.1% and also holds a Zacks Rank of 2 (Buy) [4][5] - The Building Products - Miscellaneous industry, which includes NWPX Infrastructure, has underperformed with a year-to-date return of -3% [6] - Investors should closely monitor both Matrix Service and NWPX Infrastructure for continued strong performance in the Construction sector [6]

Financial Performance & Backlog - FY25 total revenue was $769 million[7] - Q1 FY26 revenue reached $211.9 million, a 28% increase compared to Q1 FY25's $165.4 million[43, 56] - Gross margin improved to 6.7% in Q1 FY26 from 4.7% in Q1 FY25[44, 56] - The company reaffirms FY26 revenue guidance between $875 million and $925 million[23, 40] - Project awards in Q1 FY26 totaled $187.8 million, resulting in a book-to-bill ratio of 0.9x[23, 44, 40] - Backlog remains strong at approximately $1.2 billion[7, 23, 39, 40, 44] Market & Strategy - The company projects FY26 growth between 14% and 20%[7] - The company has a $6.7 billion opportunity pipeline as of September 30, 2025, with Storage & Terminal Solutions accounting for 64%, Utility & Power Infrastructure for 22%, and Process & Industrial Facilities for 14%[23, 25] - Approximately 90% of revenue is with recurring customers[5, 40] - The company targets a long-term Return on Invested Capital (ROIC) greater than 12%[34, 48]