Matrix Service pany(MTRX) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported third-quarter revenue of $187 million, which was in line with expectations, with a net loss of $12.7 million or $0.47 per fully diluted share, and an adjusted net loss of $8.9 million or $0.33 [10][11] - The gross margin for the third quarter was 2.4%, impacted by under-recovery of construction overhead costs and additional costs related to midstream gas processing work [28][30] - The company’s liquidity increased to $11.9 million, with total liquidity of $92.4 million, including $48.2 million of unrestricted cash [30] Business Line Data and Key Metrics Changes - In the Process and Industrial Facilities segment, revenues increased by 0.3% to $100 million compared to the previous quarter, with a gross margin of approximately 10% [12] - The Utility and Power Infrastructure segment saw revenue decrease to $35 million, with a gross margin of 8% driven by good execution on power delivery work [29] - The Storage and Terminal Solutions segment's revenues decreased to $52 million, with a negative gross margin of 1.6% due to low revenue volume and substantial under-recovered construction overhead costs [43] Market Data and Key Metrics Changes - The company reported total project awards of $309 million in the third quarter, resulting in a book-to-bill ratio of 1.7, marking the seventh consecutive quarter above 1.0 [22] - The project opportunity pipeline stabilized at $5.6 billion, with 72% of the pipeline focused on low-carbon energy and industrial infrastructure projects [6][24] - The company anticipates returning to a normalized backlog of over $1 billion in the near term, with project backlog at $832 million, a 42% increase from the start of the fiscal year [22][31] Company Strategy and Development Direction - The company is strategically focused on sustainable growth opportunities in existing and new markets, with a significant emphasis on low-carbon energy projects [44] - The management highlighted the importance of leveraging technology and partnerships to capitalize on the energy revolution, particularly in hydrogen infrastructure [8][25] - The company aims to improve operational efficiency and competitiveness while managing costs effectively as revenues increase [44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong award cycle continuing, with expectations for higher revenue volumes in the fourth quarter as newly awarded projects enter the revenue stream [10][22] - The company is positioned to achieve a revenue run rate of $1 billion by the second or third quarter of 2024, with anticipated acceleration in revenues [37][39] - Management noted that the current bidding environment for hydrogen projects is promising, with expectations to add more hydrogen projects to the backlog in fiscal 2024 [40] Other Important Information - The company has signed an exclusive relationship with France-based Tassal to offer engineering, procurement, and construction solutions for liquid hydrogen storage across Europe [57] - The company continues to focus on cost control, with SG&A expenses remaining consistent at $16.9 million in the third quarter [61] Q&A Session Summary Question: Impact of low-margin business on third-quarter results - Management indicated that approximately 15% to 20% of revenue was from lower-margin work in the third quarter, which is expected to decrease to low single digits in the fourth quarter [32] Question: Revenue profile for Storage and Utility segments - Management noted that the Utility segment is seeing active bidding and expanding client base, while the Storage segment is expected to bounce back significantly in the fourth quarter [46] Question: Bookings and gross margin profile - Management confirmed that the majority of larger project work booked this fiscal year aligns with historical gross margin profiles, with expectations for improvement [48] Question: Annual revenue run rate expectations - Management anticipates reaching a $1 billion annual revenue run rate by the second or third quarter of 2024, with a gradual increase in revenue expected [37][39]