Matrix Service pany(MTRX) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated revenue for Q1 fiscal 2021 was $183 million, down from $338 million in the same period last year, reflecting a significant decrease due to market conditions [33][49] - Consolidated gross profit decreased to $14.4 million, with a gross margin of 7.9%, down from 9.6% in the prior year [35] - The company incurred an operating loss of $3.5 million compared to an operating income of $8.8 million in the prior year [37] - Net loss for the quarter was $3 million or $0.12 per diluted share, compared to net income of $6.2 million or $0.22 per diluted share in the prior year [37] Business Line Data and Key Metrics Changes - Utility and Power Infrastructure segment revenue increased to $61 million from $48 million year-over-year, driven by higher LNG utility peak shaving work [40] - Process and Industrial Facilities segment revenue fell to $46 million from $155 million, impacted by the exit from the domestic iron and steel industry and lower turnaround maintenance work [43] - Storage and Terminal Solutions segment revenue decreased to $76 million from $136 million, primarily due to lower volumes of tank and crude oil terminal work [45] Market Data and Key Metrics Changes - The project pipeline includes over $8 billion in projects, with $4 billion expected to be awarded in fiscal 2021 [18][50] - The company anticipates improved project awards and increased revenues in the second half of the fiscal year [50] - Market conditions have been particularly challenging in crude storage and refinery work, while clean energy and natural gas infrastructure requests remain robust [17] Company Strategy and Development Direction - The company is focused on maintaining a strong balance sheet, controlling costs, and minimizing capital expenditures while managing cash flow [7][28] - Strategic restructuring and cost reduction efforts have been implemented to position the company for better results as market conditions improve [28] - The company aims to capitalize on long-term opportunities in LNG peak shaving and renewable energy markets [15][54] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the pandemic and its impact on global energy demand, but expressed confidence in emerging as a stronger company [52] - The company is proactively adjusting its cost structure to align with market opportunities and is optimistic about the project pipeline [53][50] - Management expects bookings and revenue to improve as the fiscal year progresses, with a goal of achieving a consolidated book-to-bill ratio above 1.0 by year-end [27][50] Other Important Information - The company successfully reduced annual overhead costs by $45 million, with a quarterly reduction of $11 million [30] - Cash balance at the end of Q1 was $82 million, with debt of $9 million, indicating a strong liquidity position [47] - The credit facility was extended to November 2023, providing flexibility for capital allocation decisions [48] Q&A Session Summary Question: How much of the revenue decrease year-over-year represents the exiting of the steel and iron business? - Approximately half of the revenue decrease of $155 million is related to the exit from the iron and steel business, with the other half attributed to current market conditions [58] Question: Why is the utility business operating at the higher end of gross margin bandwidth? - The strong performance in peak shaving projects and improvements in the power delivery business contributed to the higher margins [60] Question: What is the expected hit rate for the $4 billion opportunity pipeline? - The expected hit rate is between 20% to 30%, with larger projects having a potentially higher hit rate due to fewer competitors [62] Question: Was the $18 million cash outflow this quarter all attributable to milestone billings? - Yes, the cash outflow was primarily due to milestone billings, and it is expected to return in the second and third quarters [65] Question: How are managers incentivized in terms of compensation? - Manager compensation is fundamentally based on operating income [68] Question: What is the Board's appetite for repurchasing stock? - The company is considering stock repurchases opportunistically, with flexibility provided by the updated credit agreement [71]