Financial Performance - The company's Q1 FY2022 revenue was $168093 million[15] - The company's Q1 FY2022 gross profit was -$3508 million, resulting in a gross profit margin of -21%[15] - The company's Q1 FY2022 net loss was $17538 million, with an EPS loss of $066[15] - Adjusted EBITDA for Q1 FY2022 was -$14278 million[15, 30] Segment Performance - Utility & Power Infrastructure revenue was $57204 million in Q1 FY2022[8], with a gross profit margin of -107%[8] - Process & Industrial Facilities revenue was $43905 million in Q1 FY2022[11], with a gross profit margin of 65%[11] - Storage & Terminal Solutions revenue was $66984 million in Q1 FY2022[13], with a gross profit margin of 06%[13] Awards and Backlog - Project awards totaled $267 million in 1Q FY2022[6] - The company's ending backlog was $561 million in 1Q FY2022[6] - The company has implemented approximately $70 million of cost reductions on an annualized basis, translating to approximately a 27% decrease in overhead cost structure over the past two years[17] Cash Flow and Liquidity - The company ended 1st Quarter FY 2022 with cash of $62 million and no debt[19] - The company has a credit facility borrowing base of $75 million[19] Market Outlook - The company's opportunity pipeline is strong across all segments, with LNG and NGLs representing 321% and Gas representing 123% of the pipeline[22]

FY 2021 | FOURTH QUARTER AND FULL YEAR RESULTS 2 MATRIX SERVICE COMPANY Move to a higher standard" SAFE HARBOR | --- | --- | --- | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

Financial Data and Key Metrics Changes - The fourth quarter revenue was $53 million for the Utility and Power Infrastructure segment, up almost 18% over the third quarter, but gross profit was a negative $6.3 million due to project charges and under-recovery of overheads [10][11] - Consolidated revenue for the fourth quarter was up 18% over the third quarter, but overall revenue levels were about $30 million short of expectations, resulting in a gross profit of $1.5 million or 0.9% [15][18] - The EPS loss for the quarter was $0.40, compared to expectations of near breakeven performance, impacted by project charges and lower-than-expected revenue [15][18] Business Line Data and Key Metrics Changes - The Process and Industrial Facilities segment had revenue of $60 million, up almost 40% over the third quarter, with gross profit of $6.3 million and operating income of $2.7 million [12] - The Storage and Terminal Solutions segment reported revenue of $62 million, impacted by a $2.9 million charge from a project settlement, resulting in a gross profit of $1.6 million and an operating loss of just over $3 million [13][14] Market Data and Key Metrics Changes - The company ended fiscal 2021 with a backlog of $463 million, negatively impacted by the pandemic and reduced spending by customers [17] - Award activity has accelerated in the first 60 days of fiscal 2022, with approximately $180 million in new contracts booked, the highest award level since the fourth quarter of fiscal 2020 [33] Company Strategy and Development Direction - The company’s strategy focuses on four key areas: safety, people and communication, clients and growth, and execution excellence [23] - The company aims to strengthen its core markets, expand within existing end markets, and grow into new markets, particularly in renewable energy infrastructure and hydrogen [24][26] - The organization is undergoing a redesign to improve efficiency and effectiveness across all reporting segments [29][30] Management's Comments on Operating Environment and Future Outlook - The management noted that fiscal 2021 was challenging due to uncertainty around economic recovery and client spending, but the bidding environment is now strong with a significant uptick in awards [21][22] - The company expects to see improved revenue and earnings as project awards increase and the backlog grows [17][33] Other Important Information - The company has implemented nearly $70 million in cost reductions, resulting in a 27% decrease in overhead costs, which positions it for significant earnings improvement as revenue volumes improve [16] - The company ended fiscal 2021 with cash of $84 million and zero debt, having paid off $10 million of debt during the year [18] Q&A Session Summary Question: Utility and Power Group revenue pressure - Management explained that revenue development is influenced by electrical infrastructure work and LNG-related peak shaving terminals, with opportunities in the pipeline for upgrades and maintenance [41][42] Question: Crude storage market competitiveness - Management assessed that the crude storage market remains competitive, with smaller awards currently being pursued, but larger opportunities are expected to emerge in the coming months [44] Question: Hydrogen-related work progress - Management indicated that hydrogen project opportunities are still 6 to 12 months out, with ongoing discussions with clients for potential infrastructure expansions [45][46] Question: M&A versus liquidity considerations - Management emphasized a focus on organic growth in the near term, with potential for acquisitions considered later as market conditions improve [47] Question: Process and Industrial Facilities gross margin assumptions - Management raised margin expectations for this segment due to a diverse mix of projects and anticipated recovery in revenue volumes [52] Question: Timing of recent awards - Management noted that most of the $180 million in awards will impact revenue starting in the second quarter, with a mix of short-term and multi-year projects [63]

Part I [Business](index=2&type=section&id=Item%201.%20Business) Matrix Service Company provides engineering, fabrication, construction, and maintenance services, realigning into three reportable segments as of July 1, 2020 - The company provides engineering, fabrication, infrastructure, construction, and maintenance services to various markets including oil, natural gas, power, and industrial sectors[18](index=18&type=chunk) - Effective July 1, 2020, the company restructured its financial reporting into three new segments: Utility and Power Infrastructure, Process and Industrial Facilities, and Storage and Terminal Solutions[24](index=24&type=chunk) FY 2021 Backlog Summary (in thousands) | | Utility and Power Infrastructure | Process and Industrial Facilities | Storage and Terminal Solutions | Total | | :--- | :--- | :--- | :--- | :--- | | **Backlog as of June 30, 2020** | $272,816 | $145,725 | $339,924 | $758,465 | | **Project awards** | $107,279 | $188,969 | $155,465 | $451,713 | | **Revenue recognized** | ($210,052) | ($199,917) | ($263,429) | ($673,398) | | **Backlog as of June 30, 2021** | $170,043 | $134,777 | $157,741 | $462,561 | | **Book-to-bill ratio** | 0.5 | 0.9 | 0.6 | 0.7 | - The company expects to recognize approximately **85%** of its total backlog as of June 30, 2021, as revenue within fiscal 2022[37](index=37&type=chunk) - In fiscal 2021, the company achieved a record **Total Recordable Incident Rate (TRIR) of 0.28**, indicating world-class safety performance[50](index=50&type=chunk) - As of June 30, 2021, the company had **2,717 employees** worldwide, with **48%** of the overall workforce represented by women and minorities[47](index=47&type=chunk) [Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including the ongoing impact of the COVID-19 pandemic, financial restrictions, operational challenges, and cybersecurity threats - The COVID-19 pandemic has caused unpredictable reductions in demand, project delays, and disruptions to labor and global supply chains, leading to higher material prices and increased risk in bidding and executing work profitably[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) - The company's Credit Agreement imposes restrictions that may limit business alternatives, such as acquisitions and equity repurchases, and requires compliance with financial covenants[75](index=75&type=chunk) - Demand for the company's services is cyclical and vulnerable to capital spending levels of customers in the oil, natural gas, petrochemical, industrial, and power industries, which are influenced by commodity prices and economic conditions[84](index=84&type=chunk)[85](index=85&type=chunk) - A significant portion of work is performed under fixed-price contracts, exposing the company to the risk of cost overruns if estimates for project scope, materials, and labor prove inaccurate[90](index=90&type=chunk)[91](index=91&type=chunk) - Backlog is not a reliable indicator of future earnings, as it is subject to unexpected fluctuations, adjustments, and cancellations; projects may be delayed, or their scope may be adjusted[97](index=97&type=chunk) - The company faces cybersecurity risks, including attacks on its operational systems; while prior incidents have not been material, future threats could harm the business and reputation[102](index=102&type=chunk)[103](index=103&type=chunk) - The use of percentage-of-completion accounting for fixed-price contracts could result in a reduction or elimination of previously reported profits if cost estimates change[107](index=107&type=chunk)[109](index=109&type=chunk) [Unresolved Staff Comments](index=21&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[137](index=137&type=chunk) [Properties](index=22&type=section&id=Item%202.%20Properties) The company's principal properties include its leased corporate headquarters in Tulsa, Oklahoma, and various owned and leased facilities globally - The company's corporate headquarters are located in a leased facility in Tulsa, Oklahoma[138](index=138&type=chunk) - Matrix Service Company operates from various owned and leased properties in the United States (Washington, Pennsylvania, Oklahoma, Ohio, Texas, California, Michigan, Arizona), Canada (Ontario, Alberta), South Korea, and Australia[138](index=138&type=chunk) [Legal Proceedings](index=23&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings, none of which are expected to materially affect its financial condition or operations - The company is involved in a number of legal proceedings but does not expect them to have a material effect on its financial condition or operations[140](index=140&type=chunk) [Mine Safety Disclosures](index=23&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Required disclosures regarding mine safety violations are included in Exhibit 95 of the Form 10-K - Information regarding mine safety violations as required by the Dodd-Frank Act is included in Exhibit 95 to this Annual Report[142](index=142&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=24&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under 'MTRX', with no history of cash dividends and share repurchases limited by its Credit Agreement - The company's common stock is traded on the NASDAQ Global Select Market under the symbol "MTRX"[145](index=145&type=chunk) - The company has never paid cash dividends and its Credit Agreement limits dividends to stock dividends only[146](index=146&type=chunk) - Share repurchases are limited to **$2.5 million** per fiscal year by the Credit Agreement; as of June 30, 2021, **1,349,037 shares** remained available for purchase under the Stock Buyback Program, with no repurchases made in the fourth quarter of fiscal 2021[147](index=147&type=chunk) [Selected Financial Data](index=26&type=section&id=Item%206.%20Selected%20Financial%20Data) Selected financial data for the past five fiscal years shows significant declines in revenue, gross margin, and backlog, resulting in net losses for fiscal years 2020 and 2021 Selected Financial Data (In thousands, except percentages and per share data) | | FY 2021 | FY 2020 | FY 2019 | FY 2018 | FY 2017 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $673,398 | $1,100,938 | $1,416,680 | $1,091,553 | $1,197,509 | | **Gross profit** | $32,765 | $102,176 | $131,951 | $91,936 | $81,003 | | **Gross margin %** | 4.9% | 9.3% | 9.3% | 8.4% | 6.8% | | **Operating income (loss)** | ($43,747) | ($36,625) | $37,930 | ($10,479) | $4,859 | | **Net income (loss)** | ($31,224) | ($33,074) | $27,982 | ($11,480) | ($183) | | **Earnings (loss) per share-diluted** | ($1.18) | ($1.24) | $1.01 | ($0.43) | ($0.01) | | **Total assets** | $467,556 | $517,310 | $633,394 | $558,033 | $586,030 | | **Backlog** | $462,561 | $758,465 | $1,098,349 | $1,218,596 | $682,273 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2021 saw consolidated revenue decline to **$673.4 million** and a net loss of **$31.2 million**, driven by pandemic impacts and project issues, with liquidity maintained through cash and a new ABL facility [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Fiscal 2021 consolidated revenue decreased to **$673.4 million**, with gross profit falling to **$32.8 million** and a net loss of **$31.2 million**, primarily due to segment declines and overhead under-recovery Consolidated Revenue and Gross Profit by Segment (FY2021 vs. FY2020, in thousands) | Segment | FY2021 Revenue | FY2020 Revenue | Change | FY2021 Gross Profit | FY2020 Gross Profit | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Utility and Power Infrastructure | $210,052 | $212,001 | ($1,949) | $1,506 | $7,081 | ($5,575) | | Process and Industrial Facilities | $199,917 | $421,871 | ($221,954) | $17,642 | $36,349 | ($18,707) | | Storage and Terminal Solutions | $263,429 | $467,066 | ($203,637) | $13,617 | $61,413 | ($47,796) | | **Total** | **$673,398** | **$1,100,938** | **($427,540)** | **$32,765** | **$102,176** | **($69,411)** | - Consolidated SG&A expenses decreased to **$69.8 million** in fiscal 2021 from **$86.3 million** in fiscal 2020, primarily due to implemented cost reductions[176](index=176&type=chunk) - The company incurred restructuring costs of **$6.8 million** in fiscal 2021 and **$14.0 million** in fiscal 2020 to reduce its cost structure[177](index=177&type=chunk) - The effective tax rate was **27.8%** in fiscal 2021, benefiting from a **$5.2 million** tax benefit under the CARES Act allowing for a net operating loss carryback to a period with a higher statutory rate[179](index=179&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Primary liquidity sources include **$83.9 million** in cash and a new **$100.0 million** ABL facility, with fiscal 2021 showing net cash used in operating, investing, and financing activities - Primary sources of liquidity as of June 30, 2021, were cash and cash equivalents of **$83.9 million** and cash flows from operations[203](index=203&type=chunk) - On September 9, 2021, the company entered into a new asset-backed credit agreement (ABL Facility) providing for borrowings up to **$100.0 million**, which matures on September 9, 2026[211](index=211&type=chunk) Cash Flow Summary for FY 2021 (in thousands) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash used by operating activities | ($2,971) | | Net cash used by investing activities | ($2,264) | | Net cash used by financing activities | ($12,324) | Off-Balance Sheet Arrangements as of June 30, 2021 (in thousands) | Arrangement | Amount | | :--- | :--- | | Letters of credit | $41,314 | | Surety bonds | $96,824 | | **Total** | **$138,138** | [Critical Accounting Policies](index=41&type=section&id=Critical%20Accounting%20Policies) Critical accounting policies involve significant judgment in revenue recognition for fixed-price contracts and annual goodwill impairment testing, with four reporting units at higher risk of future impairment - Revenue for fixed-price contracts is recognized over time using the percentage-of-completion method, based on costs incurred to date compared to total estimated costs at completion; this process requires significant judgment[230](index=230&type=chunk)[233](index=233&type=chunk) - Goodwill is tested for impairment annually by comparing the fair value of a reporting unit to its carrying value; fair value is determined using income and market approaches, which involve significant assumptions[239](index=239&type=chunk)[240](index=240&type=chunk) - The annual goodwill impairment test as of May 31, 2021, resulted in no impairment; however, four reporting units with a combined **$37.7 million** of goodwill were identified as having a higher risk of future impairment[241](index=241&type=chunk) Goodwill Headroom Sensitivity Analysis for High-Risk Reporting Units | Reporting Unit | Goodwill as of June 30, 2021 (in thousands) | Baseline Headroom | Headroom if Gross Margin Declines by 100 Basis Points | Headroom if Discount Rate Increases by 100 Basis Points | | :--- | :--- | :--- | :--- | :--- | | Reporting Unit 1 | $16,821 | 40% | 23% | 30% | | Reporting Unit 2 | $14,233 | 6% | -5% | -4% | | Reporting Unit 3 | $3,946 | 12% | -52% | -6% | | Reporting Unit 4 | $2,659 | 24% | 0% | 15% | [Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from foreign currency fluctuations and commodity price changes, with mitigation strategies in place but heightened risk from supply chain disruptions - The company has foreign currency risk from its operations in Canada and South Korea, but does not currently use derivative instruments to hedge this exposure as it has not been historically material[247](index=247&type=chunk)[249](index=249&type=chunk) - The company has indirect exposure to commodity price risk for materials such as steel and copper; this risk is managed through procurement strategies and contract clauses, but has been heightened by global supply chain disruptions[250](index=250&type=chunk)[251](index=251&type=chunk) [Financial Statements and Supplementary Data](index=44&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for fiscal 2021, including a net loss of **$31.2 million** on **$673.4 million** revenue, with detailed notes on accounting policies and segment performance [Consolidated Financial Statements](index=50&type=section&id=Consolidated%20Financial%20Statements) Fiscal 2021 consolidated financial statements show **$673.4 million** revenue, a **$31.2 million** net loss, and total assets of **$467.6 million**, with cash used in operations Consolidated Statement of Income Summary (in thousands) | | FY 2021 | FY 2020 | FY 2019 | | :--- | :--- | :--- | :--- | | **Revenue** | $673,398 | $1,100,938 | $1,416,680 | | **Gross Profit** | $32,765 | $102,176 | $131,951 | | **Operating Income (Loss)** | ($43,747) | ($36,625) | $37,930 | | **Net Income (Loss)** | ($31,224) | ($33,074) | $27,982 | | **Diluted EPS** | ($1.18) | ($1.24) | $1.01 | Consolidated Balance Sheet Summary (in thousands) | | June 30, 2021 | June 30, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $291,219 | $335,160 | | **Total Assets** | $467,556 | $517,310 | | **Total Current Liabilities** | $153,402 | $175,947 | | **Total Liabilities** | $182,017 | $209,421 | | **Total Stockholders' Equity** | $285,539 | $307,889 | Consolidated Statement of Cash Flows Summary (in thousands) | | FY 2021 | FY 2020 | FY 2019 | | :--- | :--- | :--- | :--- | | **Net cash provided (used) by operating activities** | ($2,971) | $44,085 | $41,394 | | **Net cash used by investing activities** | ($2,264) | ($17,116) | ($14,448) | | **Net cash used by financing activities** | ($12,324) | ($16,039) | ($1,107) | | **Net increase (decrease) in cash** | ($16,158) | $10,321 | $25,658 | [Notes to Consolidated Financial Statements](index=57&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, segment changes, goodwill impairment (none in FY2021, significant in FY2020), the new ABL facility, CARES Act tax impact, and **$6.8 million** in restructuring costs - In FY2020, the company recorded goodwill impairments of **$24.9 million** in the Utility and Power Infrastructure segment and **$8.0 million** in a Process and Industrial Facilities reporting unit; no goodwill impairment was recorded in FY2021[357](index=357&type=chunk) - The CARES Act provided a **$5.2 million** income tax benefit in FY2021 from the carryback of the federal net operating loss; the company also deferred **$11.1 million** of U.S. payroll tax as of June 30, 2021[375](index=375&type=chunk)[376](index=376&type=chunk) - In FY2021, one customer accounted for **12.9%** of consolidated revenue, all within the Utility and Power Infrastructure segment[26](index=26&type=chunk)[440](index=440&type=chunk) - The company incurred **$6.8 million** in restructuring costs in fiscal 2021, primarily for severance and facility closures, as part of a business improvement plan initiated in fiscal 2020[442](index=442&type=chunk)[446](index=446&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=87&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None reported[456](index=456&type=chunk) [Controls and Procedures](index=87&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting - The company's CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2021[457](index=457&type=chunk) - No material changes were made to the company's internal control over financial reporting during the fourth quarter of fiscal 2021[459](index=459&type=chunk) [Other Information](index=87&type=section&id=Item%209B.%20Other%20Information) On September 10, 2021, the Board approved the 2021 Severance Plan for Executives, replacing prior individual agreements - On September 10, 2021, the Board approved the Matrix Service Company 2021 Severance Plan for Executives, which replaces prior severance agreements for Named Executive Officers[460](index=460&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Compensation, and Security Ownership](index=88&type=section&id=Items%2010%2C%2011%2C%2012%2C%2013%2C%20and%2014) Information for Items 10 through 14 is incorporated by reference from the company's definitive Proxy Statement for the 2021 Annual Meeting of Stockholders - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's 2021 Proxy Statement[463](index=463&type=chunk)[465](index=465&type=chunk)[466](index=466&type=chunk)[467](index=467&type=chunk)[468](index=468&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=89&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K - This section provides a list of all financial statements, schedules, and exhibits filed with the Form 10-K[471](index=471&type=chunk)[474](index=474&type=chunk) [Form 10-K Summary](index=91&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates no Form 10-K summary is provided - None[477](index=477&type=chunk)

Matrix Service Co (NASDAQ:MTRX) Q3 2021 Earnings Conference Call May 11, 2021 10:30 AM ET Company Participants Kellie Smythe - Senior Director, IR John Hewitt - CEO, President & Director Kevin Cavanah - VP, CFO & Treasurer Conference Call Participants Zane Karimi - D.A. Davidson & Co. Operator Ladies and gentlemen, thank you for standing by, and welcome to the Matrix Service Company conference call to discuss the results for the third quarter fiscal 2021. [Operator Instructions]. I would now like to hand th ...

FISCAL 2021 I THIRD QUARTER MARCH 31, 2021 » MATRIX SERVICE COMPANY Move to a higher standard®" SAFE HARBOR 2 This presentation contains certain forward-looking statements concerning Matrix Service Company's operations, economic performance and management's best judgment as to what may occur in the future. The actual results for the current and future periods and other corporate developments will depend upon a number of economic, competitive and other influences, many of which are beyond the control of the ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________________________________ FORM 10-Q _______________________________________ (Mark One) (Exact name of registrant as specified in its charter) __________________________________________ Delaware 73-1352174 (State of incorporation) (I.R.S. Employer Identification No.) 5100 East Skelly Drive, Suite 500, Tulsa, Oklahoma 74135 (Address of principal executive offices and zip code) Registrant's telephone number, ...

Second Quarter Fiscal 2021 December 30, 2020 MATRIX SERVICE COMPANY Move to a higher standard® SAFE HARBOR 2 This presentation contains certain forward-looking statements concerning Matrix Service Company's operations, economic performance and management's best judgment as to what may occur in the future. The actual results for the current and future periods and other corporate developments will depend upon a number of economic, competitive and other influences, many of which are beyond the control of the C ...

Matrix Service Company (NASDAQ:MTRX) Q2 2021 Earnings Conference Call February 9, 2021 10:30 AM ET Company Participants Kellie Smythe - Senior Director, IR John Hewitt - President and CEO Kevin Cavanah - VP and CFO Conference Call Participants John Franzreb - Sidoti & Company Zane Karimi - D.A. Davidson Operator Ladies and gentlemen, thank you for standing-by and welcome to the Matrix Service Company Conference Call to discuss results for the Second Quarter Fiscal 2021. At this time, all participant lines a ...

PART I FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Matrix Service Company's unaudited condensed consolidated financial statements, including income, balance sheet, cash flow, and equity statements, with accompanying notes [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The company reported significant revenue decreases and net losses for the three and six months ended December 31, 2020, compared to the prior year Condensed Consolidated Statements of Income (In thousands, except per share data) | Metric | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $167,468 | $318,677 | $350,239 | $656,774 | | **Gross Profit** | $15,313 | $30,001 | $29,663 | $62,466 | | **Operating Loss** | $(6,456) | $(31,679) | $(9,914) | $(22,905) | | **Net Loss** | $(4,591) | $(28,008) | $(7,628) | $(21,857) | | **Diluted Loss Per Share** | $(0.17) | $(1.04) | $(0.29) | $(0.81) | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of December 31, 2020, total assets decreased to $479.9 million, while total liabilities also decreased to $175.6 million, with stockholders' equity remaining stable Balance Sheet Summary (In thousands) | Metric | December 31, 2020 | June 30, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $304,767 | $335,160 | | **Total Assets** | $479,910 | $517,310 | | **Total Current Liabilities** | $150,127 | $175,947 | | **Total Liabilities** | $175,621 | $209,421 | | **Total Stockholders' Equity** | $304,289 | $307,889 | - Cash and cash equivalents decreased to **$93.5 million** as of December 31, 2020, from **$100.0 million** as of June 30, 2020[16](index=16&type=chunk) - Borrowings under the senior secured revolving credit facility were fully paid off, down from **$9.2 million** at June 30, 2020[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly decreased to $5.8 million for the six months ended December 31, 2020, leading to a $6.6 million decrease in cash and cash equivalents Cash Flow Summary for Six Months Ended (In thousands) | Cash Flow Activity | December 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $5,824 | $38,625 | | **Net Cash used by Investing Activities** | $(1,434) | $(14,115) | | **Net Cash used by Financing Activities** | $(11,845) | $(3,978) | | **(Decrease) Increase in Cash** | $(6,555) | $20,780 | | **Cash and Cash Equivalents, End of Period** | $93,481 | $110,495 | [Notes to Condensed Consolidated Financial Statements](index=16&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies, including a new credit loss standard, segment realignment, revenue recognition, debt covenants, and business improvement plan costs - Effective July 1, 2020, the company realigned its financial reporting into three new segments: Utility and Power Infrastructure, Process and Industrial Facilities, and Storage and Terminal Solutions[40](index=40&type=chunk)[79](index=79&type=chunk) - The company had **$418.0 million** of remaining performance obligations as of December 31, 2020, with **$315.3 million** expected to be recognized as revenue within the next twelve months[43](index=43&type=chunk) - On November 2, 2020, the company entered into a new three-year, **$200.0 million** senior secured revolving credit facility, replacing its prior agreement[60](index=60&type=chunk)[61](index=61&type=chunk) - The company incurred **$4.7 million** in restructuring costs during the first half of fiscal 2021 as part of a business improvement plan initiated in fiscal 2020, with total costs since inception at **$18.7 million**[86](index=86&type=chunk)[89](index=89&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the COVID-19 pandemic's impact, leading to reduced revenue, decreased backlog, and restructuring costs, while maintaining a strong liquidity position [Results of Operations](index=32&type=section&id=Results%20of%20Operations) For the six months ended December 31, 2020, consolidated revenue decreased by 46.7%, and gross profit fell significantly, primarily due to project completions and industry exits, despite a net loss improvement Consolidated Performance (Six Months Ended Dec 31) | Metric | 2020 (in millions) | 2019 (in millions) | Change | | :--- | :--- | :--- | :--- | | **Revenue** | $350.2 | $656.8 | -46.7% | | **Gross Profit** | $29.7 | $62.5 | -52.5% | | **SG&A Expenses** | $34.9 | $46.9 | -25.6% | | **Net Loss** | $(7.6) | $(21.9) | N/A | | **Adjusted Net Loss/Income** | $(4.1) | $11.4 | N/A | - The company implemented cost reductions resulting in an annual reduction in construction overhead and SG&A costs of approximately **$60 million**[113](index=113&type=chunk) - The Storage and Terminal Solutions segment gross margin was negatively impacted by a **$7.7 million** charge on a large crude oil storage terminal project, reducing the segment's gross margin by **7.3%** to **4.0%** for the six-month period[138](index=138&type=chunk) [Backlog](index=37&type=section&id=Backlog) The company's backlog decreased to $622.8 million by December 31, 2020, reflecting a book-to-bill ratio of 0.6 due to pandemic-driven project deferrals and conservative customer spending Backlog Changes (Six Months Ended Dec 31, 2020, In thousands) | Metric | Amount | | :--- | :--- | | **Backlog as of June 30, 2020** | $758,465 | | **Project Awards** | $214,547 | | **Revenue Recognized** | $(350,239) | | **Backlog as of December 31, 2020** | $622,773 | - The book-to-bill ratio for the six months ended December 31, 2020 was **0.6**, indicating that more revenue was recognized than new work was awarded[142](index=142&type=chunk) - Market conditions remain challenging, with customers delaying discretionary spending, though the company sees strong opportunity pipelines in specific sectors like LNG and clean energy infrastructure[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2020, the company maintained strong liquidity of $126.9 million, comprising cash and available credit, and repaid all outstanding borrowings on its credit facility Liquidity Position (As of Dec 31, 2020, In millions) | Component | Amount | | :--- | :--- | | **Cash and Cash Equivalents** | $93.5 | | **Availability under Credit Facility** | $33.4 | | **Total Available Liquidity** | $126.9 | - The company entered into a new Fifth Amended and Restated Credit Agreement on November 2, 2020, providing a three-year, **$200.0 million** senior secured revolving credit facility[162](index=162&type=chunk)[163](index=163&type=chunk) - The company is managing liquidity by controlling costs, eliminating non-critical capital expenditures, and maintaining little to no debt[157](index=157&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that there have been no material changes in the market risks it faces since those reported in its Annual Report on Form 10-K for the fiscal year ended June 30, 2020 - No material changes in market risk were reported compared to the fiscal year-end 2020 Form 10-K[177](index=177&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020, with remote work arrangements not materially affecting internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2020[181](index=181&type=chunk) - The company assessed the impact of its remote work arrangement due to COVID-19 and determined that its internal controls over financial reporting remain effective[180](index=180&type=chunk) PART II OTHER INFORMATION [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings typical for its business, none of which are expected to have a material effect on its financial condition or operations - The company does not expect any current legal proceedings to have a material impact on its financial position or operations[185](index=185&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) There were no material changes to the company's risk factors from those disclosed in its Annual Report on Form 10-K for the fiscal year ended June 30, 2020 - No material changes in Risk Factors were reported since the last Annual Report on Form 10-K[186](index=186&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the second quarter of fiscal 2021, the company did not repurchase shares, withheld shares for tax obligations, and has never paid cash dividends due to credit agreement limitations - No shares were repurchased under the stock buyback program during the quarter ended December 31, 2020[188](index=188&type=chunk) - The company has never paid a cash dividend and is limited in its ability to do so by its credit agreement[190](index=190&type=chunk) [Item 4. Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) As a contractor at mine sites, the company is considered a mine "operator" under the Mine Act and provides required safety information in Exhibit 95 - The company is subject to Mine Safety Disclosures due to its role as a contractor at mine sites, with relevant information included in Exhibit 95[191](index=191&type=chunk)[192](index=192&type=chunk) [Item 6. Exhibits](index=50&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the new credit agreement, CEO and CFO certifications, Mine Safety Disclosures, and XBRL data files - Key exhibits filed include the new credit agreement (Exhibit 10.1), Sarbanes-Oxley certifications (Exhibits 31.1, 31.2, 32.1, 32.2), and Mine Safety Disclosure (Exhibit 95)[195](index=195&type=chunk)