Matrix Service Company (Nasdaq: MTRX), through its
subsidiaries, is a leading North American industrial engineering,
construction, and maintenance contractor headquartered in Tulsa,
Oklahoma with offices located throughout the United States and
Canada, as well as Sydney, Australia and Seoul, South Korea.
Key highlights:
- Project
awards of $308.7 million produced a book-to-bill of 1.7 for the
quarter; year-to-date awards of $862.0 million produced a
book-to-bill of 1.5
- Backlog
increased by 12% to $832.4 million compared to the second quarter
of fiscal 2023, up 41% since the beginning of the fiscal
year
- Third
quarter revenue of $186.9 million, an increase of 6% compared to
the third quarter of fiscal 2022
- Loss per
share of $0.47; adjusted loss per share of
$0.33(1)
- Adjusted
EBITDA loss of $7.7 million(1)
for the third quarter of fiscal 2023
“We continued to see strong award momentum in
our third fiscal quarter, which is reflected in a book-to-bill of
1.7, our seventh consecutive quarter at or above 1.0. We have now
received $862.0 million of project awards, up 35 percent over the
same period in the prior fiscal year, and bidding activity
continues to be strong. We expect the trend in backlog growth to
continue in the coming quarters,” said Matrix Service Company
president and CEO John R. Hewitt. "As we begin work on several
recently awarded large projects, especially in the Storage and
Terminal Solutions segment, we expect our financial performance to
significantly improve in our fourth fiscal quarter."
Earnings Summary
Revenue of $186.9 million during the third
quarter of fiscal 2023 was lower than revenue of $193.8 million
during the second quarter of fiscal 2023 as certain projects
awarded in prior periods continue to work off while the
contribution to revenue of newly awarded projects is still limited
as they progress through engineering and planning stages.
Gross margin was 2.4% in the third quarter of
fiscal 2023 compared to a negative gross margin of (0.7%) in the
second quarter of fiscal 2023. Our results of
operations were primarily impacted by revenue levels, which led to
under-recovery of construction overhead costs in some operating
units. In addition, our results were impacted by increased
forecasted costs to complete and close out certain midstream gas
processing work, which was partly offset by the net positive impact
of strong performance of other projects.
In the Storage and Terminals Solutions segment,
revenue decreased to $52.2 million in the third quarter as compared
to $62.5 million in the second quarter. Project awards, which have
been strong with a year-to-date book-to-bill of 1.6, will begin to
substantially impact revenue in the fourth quarter. Negative gross
margin of (1.6%) for the quarter was primarily caused by low
revenue volume, which led to the under recovery of construction
overhead costs. Revenue volumes during the quarter were
lower as the strong storage project awards received in the first
nine months of fiscal 2023 are not expected to positively impact
revenue until the fourth quarter of fiscal 2023.
In the Process and Industrial Facilities
segment, revenue increased 23% to $99.7 million in the third
quarter compared to $80.8 million in the second quarter. The
increase was primarily related to refinery turnarounds and
maintenance. Third quarter gross margin of 3.2% was negatively
impacted by increased forecasted costs to complete and close out
midstream gas processing capital work, which resulted in reducing
gross profit by $3.3 million for the quarter. We expect
this work to be mechanically complete by the beginning of July
2023. Segment gross margin was also negatively impacted
by the under-recovery of construction overhead costs.
Other work in the segment, including refinery turnaround and
maintenance, aerospace, and mining and minerals, which amounted to
approximately 80% of segment revenue, produced a gross margin of
approximately 10% on strong project execution.
In the Utility and Power Infrastructure segment,
revenue decreased to $35.0 million in the third quarter compared to
$50.5 million in the second quarter following completion of peak
shaver work which positively impacted revenue in the first half of
the year. Revenue from a peak shaver project added to backlog in
the second quarter will not begin to benefit revenue until late in
the fourth quarter of fiscal 2023. Third quarter gross margin was
8.0%. This margin was driven by good execution on of a
mix of work that that was primarily comprised of reimbursable power
delivery work. As the volume of LNG peak shaving work increases in
this segment, we will be able to sustain and exceed this gross
margin level.
Consolidated SG&A expenses were $16.9
million in the third quarter, consistent with the first two
quarters of the year. The Company continued its focus on cost
control and expects to leverage the cost structure as revenues
improve beginning in the fourth quarter.
Our effective tax rates for the third quarter of
fiscal 2023 was 2.8% compared to 0.0% in second
quarter. The effective tax rates for both periods were
impacted by the valuation allowance placed on all our deferred tax
assets due to the existence of a cumulative loss over a three-year
period. As a result, we expect the effective tax rate
to be around zero throughout the fiscal year.
For the third quarter of fiscal 2023, we had a
net loss of $12.7 million, or $0.47 per share, compared to a net
loss of $32.8 million, or $1.22 per share, in the second
quarter. For the third quarter of fiscal 2023, we had
an adjusted net loss of $8.9 million, or $0.33 per share, compared
to an adjusted net loss of $14.4 million, or $0.53 per share, in
the second quarter(1).
Backlog
Our backlog increased by $91.9 million from the
end of the prior quarter to $832.4 million as of March 31, 2023.
Project awards totaled $308.7 million in the third quarter of
fiscal 2023, leading to a book-to-bill ratio of 1.7. On a segment
basis, the third quarter book-to-bill was 0.7 for Utility and Power
Infrastructure, driven largely by bookings of power delivery work.
For Process and Industrial Facilities, the book-to-bill was 2.2,
driven largely by the award of a significant construction project
to upgrade a natural gas compressor station. For Storage and
Terminal Solutions, the quarterly book-to-bill was 1.3, driven by a
mix of smaller awards for capital projects as well as various tank
maintenance and repair work. The table below summarizes our awards,
book-to-bill ratios and backlog by segment for our third fiscal
quarter (amounts are in thousands, except for book-to-bill
ratios):
|
|
Three Months Ended March 31,
2023 |
|
Nine Months Ended March 31,
2023 |
|
Backlog as of March 31,
2023(2) |
Segment: |
|
Awards |
|
Book-to-Bill(1) |
|
Awards |
|
Book-to-Bill(1) |
|
Utility and Power Infrastructure |
|
$ |
25,598 |
|
0.7 |
|
$ |
166,249 |
|
1.3 |
|
$ |
137,879 |
Process and Industrial Facilities |
|
|
217,491 |
|
2.2 |
|
|
382,626 |
|
1.4 |
|
|
401,099 |
Storage and Terminal Solutions |
|
|
65,657 |
|
1.3 |
|
|
313,151 |
|
1.6 |
|
|
293,379 |
Total |
|
$ |
308,746 |
|
1.7 |
|
$ |
862,026 |
|
1.5 |
|
$ |
832,357 |
__________________ |
(1) |
Calculated by dividing project awards by revenue recognized during
the period. |
(2) |
Backlog was reduced by $30.0 million to account for a reduction of
work available to us in an existing facility upgrade and service
program. |
Financial Position
As of March 31, 2023, we had total liquidity of
$92.4 million and $15.0 million in debt. Liquidity is
comprised of $48.2 million of unrestricted cash and cash
equivalents and $44.2 million of borrowing availability under the
ABL Facility. The company also has $25.0 million of
restricted cash to support the ABL Facility.
(1)Non-GAAP Financial
Measure
Adjusted loss and adjusted loss per share are
non-GAAP financial measures which exclude goodwill impairment,
restructuring costs, the accelerated amortization of deferred debt
amendment fees associated with the prior credit agreement, the tax
impact of these first three items, and the financial impact of a
valuation allowance placed on our deferred tax assets.
Adjusted EBITDA is a non-GAAP financial measure which excludes
goodwill impairment, restructuring costs, stock-based compensation,
interest expense, provision for income taxes and depreciation and
amortization expense. See the Non-GAAP Financial
Measures section included at the end of this release for a
reconciliation to net loss and net loss per share.
Conference Call Details
In conjunction with the earnings release, Matrix
Service Company will host a conference call with John R. Hewitt,
President and CEO, and Kevin S. Cavanah, Vice President and CFO.
The call will take place at 10:30 a.m. (Eastern) / 9:30 a.m.
(Central) on Tuesday, May 9, 2023.
A live webcast of the conference call will be
available on the Investor Relations page of the Company's website
at matrixservicecompany.com under Events and Presentations.
Investors and other interested parties can access a live
audio-visual webcast using this webcast link, or through the
Company’s website at www.matrixservicecompany.com on the Investors
Relations page under Events & Presentations.
For those unable to participate in the
conference call, a replay of the webcast will be available on the
Investor Relations page of the Company's website.
The conference call will be recorded and will be
available for replay within one hour of completion of the live call
and can be accessed following the same link as the live call.
About Matrix Service Company
Matrix Service Company (Nasdaq: MTRX), through
its subsidiaries, is a leading North American industrial
engineering and construction contractor headquartered in Tulsa,
Oklahoma with offices located throughout the United States and
Canada, as well as Sydney, Australia and Seoul, South Korea.
The Company reports its financial results in
three key operating segments: Utility and Power Infrastructure,
Process and Industrial Facilities, and Storage and Terminal
Solutions.
With a focus on sustainability, building strong
Environment, Social and Governance (ESG) practices, and living our
core values, Matrix ranks among the Top Contractors by
Engineering-News Record, was recognized for its Board
diversification, is an active signatory to CEO Action for Diversity
and Inclusion, and is consistently recognized as a Great Place to
Work®. To learn more about Matrix Service Company, visit
matrixservicecompany.com and read our inaugural Sustainability
Report.
This release contains forward-looking statements
that are made in reliance upon the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These statements
are generally accompanied by words such as “anticipate,”
“continues,” “expect,” “forecast,” “outlook,” “believe,”
“estimate,” “should” and “will” and words of similar effect that
convey future meaning, concerning the Company’s operations,
economic performance and management’s best judgment as to what may
occur in the future. Future events involve risks and uncertainties
that may cause actual results to differ materially from those we
currently anticipate. The actual results for the current and future
periods and other corporate developments will depend upon a number
of economic, competitive and other influences, including the
successful implementation of the Company's business improvement
plan and the factors discussed in the “Risk Factors” and “Forward
Looking Statements” sections and elsewhere in the Company’s reports
and filings made from time to time with the Securities and Exchange
Commission. Many of these risks and uncertainties are beyond the
control of the Company, and any one of which, or a combination of
which, could materially and adversely affect the results of the
Company's operations and its financial condition. We undertake no
obligation to update information contained in this release, except
as required by law.
For more information, please contact:
Kevin S. CavanahVice President and CFOT:
918-838-8822Email:kcavanah@matrixservicecompany.com
Kellie SmytheSenior Director, Investor RelationsT:
918-359-8267Email: ksmythe@matrixservicecompany.com
|
Matrix Service CompanyCondensed
Consolidated Statements of
Income(unaudited)(In thousands,
except per share data) |
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
March 31,2023 |
|
March 31,2022 |
|
March 31,2023 |
|
March 31,2022 |
Revenue |
|
$ |
186,895 |
|
|
$ |
177,003 |
|
|
$ |
589,166 |
|
|
$ |
507,061 |
|
Cost of
revenue |
|
|
182,476 |
|
|
|
178,766 |
|
|
|
573,041 |
|
|
|
509,125 |
|
Gross
profit (loss) |
|
|
4,419 |
|
|
|
(1,763 |
) |
|
|
16,125 |
|
|
|
(2,064 |
) |
Selling,
general and administrative expenses |
|
|
16,862 |
|
|
|
17,041 |
|
|
|
51,218 |
|
|
|
49,592 |
|
Goodwill
impairment |
|
|
— |
|
|
|
18,312 |
|
|
|
12,316 |
|
|
|
18,312 |
|
Restructuring costs |
|
|
316 |
|
|
|
(1,578 |
) |
|
|
2,881 |
|
|
|
(278 |
) |
Operating loss |
|
|
(12,759 |
) |
|
|
(35,538 |
) |
|
|
(50,290 |
) |
|
|
(69,690 |
) |
Other
income (expense): |
|
|
|
|
|
|
|
|
Interest expense |
|
|
(268 |
) |
|
|
(204 |
) |
|
|
(1,556 |
) |
|
|
(2,705 |
) |
Interest income |
|
|
94 |
|
|
|
19 |
|
|
|
164 |
|
|
|
69 |
|
Other |
|
|
(116 |
) |
|
|
677 |
|
|
|
(706 |
) |
|
|
534 |
|
Loss
before income tax expense (benefit) |
|
|
(13,049 |
) |
|
|
(35,046 |
) |
|
|
(52,388 |
) |
|
|
(71,792 |
) |
Provision (benefit) for federal, state and foreign income
taxes |
|
|
(363 |
) |
|
|
(147 |
) |
|
|
(363 |
) |
|
|
5,564 |
|
Net
loss |
|
$ |
(12,686 |
) |
|
$ |
(34,899 |
) |
|
$ |
(52,025 |
) |
|
$ |
(77,356 |
) |
|
|
|
|
|
|
|
|
|
Basic
loss per common share |
|
$ |
(0.47 |
) |
|
$ |
(1.30 |
) |
|
$ |
(1.93 |
) |
|
$ |
(2.90 |
) |
Diluted
loss per common share |
|
$ |
(0.47 |
) |
|
$ |
(1.30 |
) |
|
$ |
(1.93 |
) |
|
$ |
(2.90 |
) |
Weighted
average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
27,038 |
|
|
|
26,783 |
|
|
|
26,969 |
|
|
|
26,714 |
|
Diluted |
|
|
27,038 |
|
|
|
26,783 |
|
|
|
26,969 |
|
|
|
26,714 |
|
|
Matrix Service CompanyCondensed
Consolidated Balance
Sheets(unaudited)(In
thousands) |
|
|
March 31,2023 |
|
June 30,2022 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
48,204 |
|
$ |
52,371 |
Accounts receivable, less allowances (March 31, 2023—$1,100 and
June 30, 2022—$1,320) |
|
163,426 |
|
|
153,879 |
Costs and estimated earnings in excess of billings on uncompleted
contracts |
|
53,398 |
|
|
44,752 |
Inventories |
|
8,027 |
|
|
9,974 |
Income taxes receivable |
|
539 |
|
|
13,547 |
Prepaid expenses |
|
6,369 |
|
|
4,024 |
Other current assets |
|
4,801 |
|
|
8,865 |
Total current assets |
|
284,764 |
|
|
287,412 |
Restricted cash |
|
25,000 |
|
|
25,000 |
Property, plant and equipment
- net |
|
50,541 |
|
|
53,869 |
Operating lease right-of-use
assets |
|
22,889 |
|
|
22,067 |
Goodwill |
|
29,712 |
|
|
42,135 |
Other intangible assets, net
of accumulated amortization |
|
3,499 |
|
|
4,796 |
Other assets, non-current |
|
9,542 |
|
|
5,514 |
Total assets |
$ |
425,947 |
|
$ |
440,793 |
|
Matrix Service CompanyCondensed
Consolidated Balance Sheets
(continued)(unaudited)(In
thousands, except share data) |
|
|
March 31,2023 |
|
June 30,2022 |
Liabilities and
stockholders’ equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
65,518 |
|
|
$ |
74,886 |
|
Billings on uncompleted contracts in excess of costs and estimated
earnings |
|
114,729 |
|
|
|
65,106 |
|
Accrued wages and benefits |
|
13,257 |
|
|
|
21,526 |
|
Accrued insurance |
|
5,823 |
|
|
|
6,125 |
|
Operating lease liabilities |
|
4,605 |
|
|
|
5,715 |
|
Other accrued expenses |
|
4,477 |
|
|
|
4,427 |
|
Total current liabilities |
|
208,409 |
|
|
|
177,785 |
|
Deferred income taxes |
|
26 |
|
|
|
26 |
|
Operating lease liabilities |
|
21,727 |
|
|
|
19,904 |
|
Borrowings under asset-backed credit facility |
|
15,000 |
|
|
|
15,000 |
|
Other liabilities, non-current |
|
782 |
|
|
|
372 |
|
Total liabilities |
|
245,944 |
|
|
|
213,087 |
|
Commitments and
contingencies |
|
|
|
Stockholders’ equity: |
|
|
|
Common stock—$.01 par value; 60,000,000 shares authorized;
27,888,217 shares issued as of March 31, 2023 and June 30, 2022;
27,037,556 and 26,790,514 shares outstanding as of March 31, 2023
and June 30, 2022, respectively |
|
279 |
|
|
|
279 |
|
Additional paid-in capital |
|
139,257 |
|
|
|
139,854 |
|
Retained earnings |
|
59,253 |
|
|
|
111,278 |
|
Accumulated other comprehensive loss |
|
(8,897 |
) |
|
|
(8,175 |
) |
|
|
189,892 |
|
|
|
243,236 |
|
Treasury stock, at cost — 850,661 shares as of March 31, 2023, and
1,097,703 shares as of June 30, 2022 |
|
(9,889 |
) |
|
|
(15,530 |
) |
Total stockholders'
equity |
|
180,003 |
|
|
|
227,706 |
|
Total liabilities and
stockholders’ equity |
$ |
425,947 |
|
|
$ |
440,793 |
|
|
Matrix Service CompanyResults of
Operations(unaudited)(In
thousands) |
|
|
Three Months Ended |
|
Nine months ended |
|
March 31,2023 |
|
March 31,2022 |
|
March 31,2023 |
|
March 31,2022 |
Gross
revenue |
|
|
|
|
|
|
|
Utility and Power Infrastructure |
$ |
35,024 |
|
|
$ |
59,341 |
|
|
$ |
130,483 |
|
|
$ |
171,298 |
|
Process and Industrial
Facilities |
|
99,706 |
|
|
|
69,786 |
|
|
|
267,232 |
|
|
|
167,033 |
|
Storage and Terminal
Solutions |
|
53,871 |
|
|
|
49,254 |
|
|
|
194,291 |
|
|
|
175,174 |
|
Total gross revenue |
$ |
188,601 |
|
|
$ |
178,381 |
|
|
$ |
592,006 |
|
|
$ |
513,505 |
|
Less: Inter-segment
revenue |
|
|
|
|
|
|
|
Utility and Power
Infrastructure |
$ |
— |
|
|
$ |
— |
|
|
$ |
54 |
|
|
$ |
— |
|
Process and Industrial
Facilities |
|
— |
|
|
|
815 |
|
|
|
109 |
|
|
|
3,841 |
|
Storage and Terminal
Solutions |
|
1,706 |
|
|
|
563 |
|
|
|
2,677 |
|
|
|
2,603 |
|
Total inter-segment revenue |
$ |
1,706 |
|
|
$ |
1,378 |
|
|
$ |
2,840 |
|
|
$ |
6,444 |
|
Consolidated
revenue |
|
|
|
|
|
|
|
Utility and Power
Infrastructure |
$ |
35,024 |
|
|
$ |
59,341 |
|
|
$ |
130,429 |
|
|
$ |
171,298 |
|
Process and Industrial
Facilities |
|
99,706 |
|
|
|
68,971 |
|
|
|
267,123 |
|
|
|
163,192 |
|
Storage and Terminal
Solutions |
|
52,165 |
|
|
|
48,691 |
|
|
|
191,614 |
|
|
|
172,571 |
|
Total consolidated revenue |
$ |
186,895 |
|
|
$ |
177,003 |
|
|
$ |
589,166 |
|
|
$ |
507,061 |
|
Gross profit
(loss) |
|
|
|
|
|
|
|
Utility and Power
Infrastructure |
$ |
2,790 |
|
|
$ |
(492 |
) |
|
$ |
6,929 |
|
|
$ |
(7,089 |
) |
Process and Industrial
Facilities |
|
3,160 |
|
|
|
(441 |
) |
|
|
2,359 |
|
|
|
6,663 |
|
Storage and Terminal
Solutions |
|
(810 |
) |
|
|
(458 |
) |
|
|
8,403 |
|
|
|
(216 |
) |
Corporate |
|
(721 |
) |
|
|
(372 |
) |
|
|
(1,566 |
) |
|
|
(1,422 |
) |
Total gross profit (loss) |
$ |
4,419 |
|
|
$ |
(1,763 |
) |
|
$ |
16,125 |
|
|
$ |
(2,064 |
) |
Selling, general and
administrative expenses |
|
|
|
|
|
|
|
Utility and Power
Infrastructure |
$ |
1,869 |
|
|
|
2,910 |
|
|
$ |
5,394 |
|
|
$ |
9,109 |
|
Process and Industrial
Facilities |
|
3,556 |
|
|
|
3,198 |
|
|
|
11,308 |
|
|
|
8,752 |
|
Storage and Terminal
Solutions |
|
5,735 |
|
|
|
4,063 |
|
|
|
15,342 |
|
|
|
12,850 |
|
Corporate |
|
5,702 |
|
|
|
6,870 |
|
|
|
19,174 |
|
|
|
18,881 |
|
Total selling, general and administrative expenses |
$ |
16,862 |
|
|
$ |
17,041 |
|
|
$ |
51,218 |
|
|
$ |
49,592 |
|
Goodwill impairment
and restructuring costs |
|
|
|
|
|
|
|
Utility and Power
Infrastructure |
$ |
— |
|
|
$ |
2,659 |
|
|
$ |
37 |
|
|
$ |
2,705 |
|
Process and Industrial
Facilities |
|
106 |
|
|
|
6,856 |
|
|
|
13,119 |
|
|
|
6,839 |
|
Storage and Terminal
Solutions |
|
79 |
|
|
|
7,219 |
|
|
|
984 |
|
|
|
7,293 |
|
Corporate |
|
131 |
|
|
|
— |
|
|
|
1,057 |
|
|
|
1,197 |
|
Total goodwill impairment and restructuring costs |
$ |
316 |
|
|
$ |
16,734 |
|
|
$ |
15,197 |
|
|
$ |
18,034 |
|
Operating income
(loss) |
|
|
|
|
|
|
|
Utility and Power
Infrastructure |
$ |
921 |
|
|
$ |
(6,061 |
) |
|
$ |
1,498 |
|
|
$ |
(18,903 |
) |
Process and Industrial
Facilities |
|
(502 |
) |
|
|
(10,495 |
) |
|
|
(22,068 |
) |
|
|
(8,928 |
) |
Storage and Terminal
Solutions |
|
(6,624 |
) |
|
|
(11,740 |
) |
|
|
(7,923 |
) |
|
|
(20,359 |
) |
Corporate |
|
(6,554 |
) |
|
|
(7,242 |
) |
|
|
(21,797 |
) |
|
|
(21,500 |
) |
Total operating loss |
$ |
(12,759 |
) |
|
$ |
(35,538 |
) |
|
$ |
(50,290 |
) |
|
$ |
(69,690 |
) |
Backlog
We define backlog as the total dollar amount of
revenue that we expect to recognize as a result of performing work
that has been awarded to us through a signed contract, limited
notice to proceed ("LNTP") or other type of assurance that we
consider firm. The following arrangements are considered firm:
- fixed-price awards;
- minimum customer commitments on cost plus arrangements;
and
- certain time and material arrangements in which the estimated
value is firm or can be estimated with a reasonable amount of
certainty in both timing and amounts.
For long-term maintenance contracts with no
minimum commitments and other established customer agreements, we
include only the amounts that we expect to recognize as revenue
over the next 12 months. For arrangements in which we have received
a LNTP, we include the entire scope of work in our backlog if we
conclude that the likelihood of the full project proceeding as
high. For all other arrangements, we calculate backlog as the
estimated contract amount less revenue recognized as of the
reporting date.
The following table provides a summary of changes in our backlog
for the three months ended March 31, 2023:
|
Utility and Power Infrastructure |
|
Process and Industrial Facilities |
|
Storage and Terminal Solutions |
|
Total |
|
(In thousands) |
Backlog as of December 31, 2022 |
$ |
147,305 |
|
|
$ |
290,005 |
|
|
$ |
303,159 |
|
|
$ |
740,469 |
|
Project
awards |
|
25,598 |
|
|
|
217,491 |
|
|
|
65,657 |
|
|
|
308,746 |
|
Other
adjustment(1) |
|
— |
|
|
|
(6,691 |
) |
|
|
(23,272 |
) |
|
|
(29,963 |
) |
Revenue
recognized |
|
(35,024 |
) |
|
|
(99,706 |
) |
|
|
(52,165 |
) |
|
|
(186,895 |
) |
Backlog
as of March 31, 2023 |
$ |
137,879 |
|
|
$ |
401,099 |
|
|
$ |
293,379 |
|
|
$ |
832,357 |
|
Book-to-bill ratio(2) |
|
0.7 |
|
|
|
2.2 |
|
|
|
1.3 |
|
|
|
1.7 |
|
__________________ |
(1) |
Backlog was reduced by $30.0 million to account for a reduction of
work available to us in an existing facility upgrade and service
program. |
(2) |
Calculated by dividing project awards by revenue recognized during
the period. |
The following table provides a summary of changes in our backlog
for the nine months ended March 31, 2023:
|
Utility and Power Infrastructure |
|
Process and Industrial Facilities |
|
Storage and Terminal Solutions |
|
Total |
|
(In thousands) |
Backlog as of June 30, 2022 |
$ |
102,059 |
|
|
$ |
292,287 |
|
|
$ |
195,114 |
|
|
$ |
589,460 |
|
Project
awards |
|
166,249 |
|
|
|
382,626 |
|
|
|
313,151 |
|
|
|
862,026 |
|
Other
adjustment(1) |
|
— |
|
|
|
(6,691 |
) |
|
|
(23,272 |
) |
|
|
(29,963 |
) |
Revenue
recognized |
|
(130,429 |
) |
|
|
(267,123 |
) |
|
|
(191,614 |
) |
|
|
(589,166 |
) |
Backlog
as of March 31, 2023 |
$ |
137,879 |
|
|
$ |
401,099 |
|
|
$ |
293,379 |
|
|
$ |
832,357 |
|
Book-to-bill ratio(2) |
|
1.3 |
|
|
|
1.4 |
|
|
|
1.6 |
|
|
|
1.5 |
|
__________________ |
(1) |
Backlog was reduced by $30.0 million to account for a reduction of
work available to us in an existing facility upgrade and service
program. |
(2) |
Calculated by dividing project awards by revenue recognized during
the period |
Non-GAAP Financial Measures
In order to more clearly depict our core
profitability, the following tables present our operating results
after certain adjustments:
|
Reconciliation of Net Loss to Adjusted Net
Loss(1)(In thousands, except per
share data) |
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
March 31, 2023 |
|
March 31, 2022 |
|
March 31, 2023 |
|
March 31, 2022 |
Net loss, as reported |
|
$ |
(12,686 |
) |
|
$ |
(34,899 |
) |
|
$ |
(52,025 |
) |
|
$ |
(77,356 |
) |
Goodwill impairment |
|
|
— |
|
|
|
18,312 |
|
|
|
12,316 |
|
|
|
18,312 |
|
Restructuring costs |
|
|
316 |
|
|
|
(1,578 |
) |
|
|
2,881 |
|
|
|
(278 |
) |
Accelerated amortization of deferred debt amendment fees(2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,518 |
|
Tax impact of goodwill impairment, restructuring costs and
accelerated amortization of debt amendment fees |
|
|
(81 |
) |
|
|
(2,911 |
) |
|
|
(3,912 |
) |
|
|
(3,636 |
) |
Deferred tax asset valuation allowance(3) |
|
|
3,583 |
|
|
|
7,671 |
|
|
|
13,347 |
|
|
|
21,869 |
|
Adjusted net loss |
|
$ |
(8,868 |
) |
|
$ |
(13,405 |
) |
|
$ |
(27,393 |
) |
|
$ |
(39,571 |
) |
|
|
|
|
|
|
|
|
|
Loss per share, as
reported |
|
$ |
(0.47 |
) |
|
$ |
(1.30 |
) |
|
$ |
(1.93 |
) |
|
$ |
(2.90 |
) |
Adjusted loss per share |
|
$ |
(0.33 |
) |
|
$ |
(0.50 |
) |
|
$ |
(1.02 |
) |
|
$ |
(1.48 |
) |
__________________ |
(1) |
This table presents non-GAAP financial measures of our adjusted net
loss and adjusted loss per share for the three and nine months
ended March 31, 2023 and 2022. The most directly comparable
financial measures are net loss and loss per share, respectively,
presented in the Condensed Consolidated Statements of Income. We
have presented these non-GAAP financial measures because we believe
they more clearly depict our core operating results during the
periods presented and provide a more comparable measure of our
operating results to other companies considered to be in similar
businesses. Since adjusted net loss and adjusted loss per share are
not measures of performance calculated in accordance with GAAP,
they should be considered in addition to, rather than as a
substitute for, the most directly comparable GAAP financial
measures. |
(2) |
Interest expense in fiscal 2022 included $1.5 million of
accelerated amortization of deferred debt amendment fees. |
(3) |
We placed a valuation allowance on our deferred tax assets in the
second quarter of fiscal 2022 due to the existence of a cumulative
loss over a three-year period. We will continue to place valuation
allowances on newly generated deferred tax assets and will realize
the benefit associated with the deferred tax assets for which the
valuation allowance has been provided to the extent we generate
taxable income in the future, or cumulative losses are no longer
present and our future projections for growth or tax planning
strategies are demonstrated. We placed valuation allowances of $3.6
million and $13.3 million on newly created net operating loss carry
forwards generated from losses in the three and nine months ended
March 31, 2023, respectively. |
|
Reconciliation of Net Loss to Adjusted
EBITDA(1) |
|
|
Three Months Ended |
|
Nine months ended |
|
March 31,2023 |
|
March 31,2022 |
|
March 31,2023 |
|
March 31,2022 |
|
(In thousands) |
Net loss |
$ |
(12,686 |
) |
|
$ |
(34,899 |
) |
|
$ |
(52,025 |
) |
|
$ |
(77,356 |
) |
Goodwill impairment |
|
— |
|
|
|
18,312 |
|
|
|
12,316 |
|
|
|
18,312 |
|
Restructuring costs |
|
316 |
|
|
|
(1,578 |
) |
|
|
2,881 |
|
|
|
(278 |
) |
Stock-based compensation |
|
1,407 |
|
|
|
2,088 |
|
|
|
5,154 |
|
|
|
5,823 |
|
Interest expense |
|
268 |
|
|
|
204 |
|
|
|
1,556 |
|
|
|
2,705 |
|
Provision for federal, state and foreign income taxes |
|
(363 |
) |
|
|
(147 |
) |
|
|
(363 |
) |
|
|
5,564 |
|
Depreciation and
amortization |
|
3,322 |
|
|
|
3,716 |
|
|
|
10,499 |
|
|
|
11,557 |
|
Adjusted EBITDA |
$ |
(7,736 |
) |
|
$ |
(12,304 |
) |
|
$ |
(19,982 |
) |
|
$ |
(33,673 |
) |
__________________ |
(1) |
This table presents Adjusted EBITDA, which we define as net loss
before goodwill impairment, restructuring costs, stock-based
compensation expense, interest expense, income taxes, and
depreciation and amortization, because it is used by the financial
community as a method of measuring our performance and of
evaluating the market value of companies considered to be in
similar businesses. We believe that the line item on our
Consolidated Statements of Income entitled “Net loss” is the most
directly comparable GAAP measure to Adjusted EBITDA. Since Adjusted
EBITDA is not a measure of performance calculated in accordance
with GAAP, it should not be considered in isolation of, or as a
substitute for, net earnings as an indicator of operating
performance. Adjusted EBITDA, as we calculate it, may not be
comparable to similarly titled measures employed by other
companies. In addition, this measure is not a measure of our
ability to fund our cash needs. As Adjusted EBITDA excludes certain
financial information compared with net loss, the most directly
comparable GAAP financial measure, users of this financial
information should consider the type of events and transactions
that are excluded. Adjusted EBITDA has certain material limitations
as follows: |
- It does not include impairment to goodwill. While impairment to
goodwill is a non-cash expense in the period recognized, cash or
other consideration was still transferred in exchange for goodwill
in the period of the acquisition. Any measure that excludes
impairment to goodwill has material limitations since this expense
represents the loss of an asset that was acquired in exchange for
cash or other assets.
- It does not include restructuring costs. Restructuring costs
represent material costs that we incurred and are oftentimes cash
expenses. Therefore, any measure that excludes restructuring costs
has material limitations.
- It does not include stock-based compensation. Stock-based
compensation represents material amounts of equity that are awarded
to our employees and directors for services rendered. While the
expense is non-cash, we release vested shares out of our treasury
stock, which has historically been replenished by using cash to
periodically repurchase our stock. Therefore, any measure that
excludes stock-based compensation has material limitations.
- It does not include interest expense. Because we have borrowed
money to finance our operations and to acquire businesses, pay
commitment fees to maintain our senior secured revolving credit
facility, and incur fees to issue letters of credit under the
senior secured revolving credit facility, interest expense is a
necessary and ongoing part of our costs and has assisted us in
generating revenue. Therefore, any measure that excludes interest
expense has material limitations.
- It does not include income taxes. Because the payment of income
taxes is a necessary and ongoing part of our operations, any
measure that excludes income taxes has material limitations.
- It does not include depreciation or amortization expense.
Because we use capital and intangible assets to generate revenue,
depreciation and amortization expense is a necessary element of our
cost structure. Therefore, any measure that excludes depreciation
or amortization expense has material limitations.
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