Matrix Service Company (Nasdaq: MTRX) today
reported its financial results for the fourth quarter and year
ended June 30, 2023.
Key highlights:
- Project awards of $463.6 million and a book-to-bill
ratio of 2.3 for the quarter; full fiscal year awards of $1.3
billion and a book-to-bill ratio of 1.7; highest quarterly project
awards in five years
- Backlog increased by 31% to $1.1 billion compared to
the third quarter of fiscal 2023, and by 85% since the start of the
fiscal year; highest backlog level since June 30,
2019
- Fourth quarter revenue of $205.9 million, an increase
of 10% compared to the third quarter of fiscal 2023; full fiscal
year revenue of $795.0 million
- Loss per fully diluted share of $0.01 in the fourth
quarter; adjusted loss per fully diluted share of $0.11(1)
excluding gain on the sale of non-core assets and other non-cash
items
- Adjusted EBITDA of $2.3 million(1) for the fourth
quarter of fiscal 2023 compared to $(7.7) million in the third
quarter of fiscal 2023
“I am extremely pleased with the progress Matrix
made over the last year and excited about the prospects for the
company. We ended our fiscal year on a very strong note with
backlog of $1.1 billion. In the fourth quarter alone, awards of
nearly $464 million resulted in a book-to-bill ratio of 2.3. The
company is positioned with high quality backlog which will generate
significantly improved results in fiscal 2024 and the next several
years,” said John R. Hewitt, president and CEO. “As we commence
work on recently awarded large capital projects, we have strong
visibility into our revenue and are focused on maximizing our
profitability after undergoing an internal transformation that has
optimized our cost structure. Our strategic approach to end markets
supported by strong tailwinds will lead to continued backlog growth
and strong performance for the foreseeable future.”
Earnings Summary
Revenue of $205.9 million during the fourth
quarter of fiscal 2023 was higher than revenue of $186.9 million
during the third quarter of fiscal 2023 as the contribution to
revenue of newly awarded projects has begun to make an impact.
Gross margin was 7.1% in the fourth quarter of
fiscal 2023 compared to a gross margin of 2.4% in the third quarter
of fiscal 2023. Our margins improved sequentially due to strong
project execution and improved construction overhead cost
recovery.
In the Storage and Terminals Solutions segment,
revenue increased to $64.1 million in the fourth quarter as
compared to $52.2 million in the third quarter as a result of
revenue contribution from recently awarded capital projects. Gross
margin of 3.2% was negatively impacted by low revenue volume, which
led to the under recovery of construction overhead costs.
In the Utility and Power Infrastructure segment,
revenue increased to $39.1 million in the fourth quarter compared
to $35.0 million in the third quarter. Fourth quarter gross margin
was 9.6%, primarily driven by strong execution on power delivery
projects and a peak shaver project added to backlog during the
second quarter of fiscal 2023. This segment fully recovered
construction overhead costs, which contributed to margin
performance.
In the Process and Industrial Facilities
segment, revenue increased to $102.7 million in the fourth quarter
compared to $99.7 million in the third quarter. Fourth quarter
gross margin of 8.2% was negatively impacted by continued work to
close out a midstream gas processing project with a reduced margin
profile. This project reached mechanical completion in line with
our previous forecast, and we will be demobilized in the first
quarter of fiscal 2024. Other work in the segment, including
refinery turnaround and maintenance, aerospace, and a renewable
diesel project, which amounted to approximately 80% of segment
revenue, produced a gross margin of approximately 10% on strong
project execution. This segment fully recovered construction
overhead costs, which contributed to margin performance.
Consolidated SG&A expenses were $17.0
million in the fourth quarter, consistent with the first three
quarters of the year. The company continues to focus on cost
control and expects to leverage its optimized cost structure as
revenue improves.
Our effective tax rate for the fourth quarter
was 9.9% compared to 2.8% in third 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.
For the fourth quarter, we had a net loss of
$0.3 million, or $0.01 per share, compared to a net loss of $12.7
million, or $0.47 per share, in the third quarter. For the fourth
quarter, we had an adjusted net loss of $3.1 million, or $0.11 per
share, which excluded the gain on the sale of non-core assets and
other non-cash items. This compares to an adjusted net loss of $8.9
million, or $0.33 per share, in the third quarter(1).
Backlog
Our backlog of $1.1 billion as of June 30,
2023 represents an 85% year-over-year increase and the largest
backlog since June 30, 2019. Project awards totaled $463.6 million
and $1.3 billion during the three and twelve months ended June 30,
2023, respectively, leading to book-to-bill ratios of 2.3 and 1.7
for the three and twelve-month periods, respectively. Bidding
activity remains strong, and while the timing of project awards can
fluctuate, we expect the trend of improving backlog to
continue.
The table below summarizes our awards,
book-to-bill ratios and backlog by segment for our fourth fiscal
quarter and full year (in thousands, except for book-to-bill
ratios):
|
|
Three Months EndedJune 30,
2023 |
|
Twelve Months EndedJune 30,
2023 |
|
Backlog as of June 30, 2023 |
Segment: |
|
Awards |
|
Book-to-Bill(1) |
|
Awards |
|
Book-to-Bill(1) |
|
Storage and Terminal Solutions |
|
$ |
41,359 |
|
0.6 |
|
$ |
354,510 |
|
1.4 |
|
$ |
270,659 |
Utility and Power Infrastructure |
|
|
360,714 |
|
9.2 |
|
|
526,963 |
|
3.1 |
|
|
459,518 |
Process and Industrial Facilities |
|
|
61,522 |
|
0.6 |
|
|
444,148 |
|
1.2 |
|
|
359,921 |
Total |
|
$ |
463,595 |
|
2.3 |
|
$ |
1,325,621 |
|
1.7 |
|
$ |
1,090,098 |
____________________
(1) Calculated by dividing project awards by
revenue recognized.
Financial Position
At June 30, 2023, we had total liquidity of
$92.5 million. Liquidity is comprised of $54.8 million of
unrestricted cash and cash equivalents and $37.7 million of
borrowing availability under the ABL Facility. At June 30,
2023, we also had $25.0 million of restricted cash to support the
ABL Facility and have reduced borrowings under the facility from
$15.0 million to $10.0 million.
(1)Non-GAAP Financial
Measure
Adjusted loss per share is a non-GAAP financial
measure that excludes restructuring costs, goodwill impairment,
gain on sale of assets, the accelerated amortization of deferred
debt amendment fees associated with the prior credit agreement, and
the financial impact of a valuation allowance placed on our
deferred tax assets. See the Non-GAAP Financial Measures section
included at the end of this release for a reconciliation to
earnings (loss) per share.
Conference Call Details
In conjunction with the earnings release, Matrix
Service Company will host a conference call / webcast 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, September 12, 2023, and will be
simultaneously broadcast live over the Internet which can be
accessed at our website at matrixservicecompany.com under Investor
Relations, Events and Presentations or using this webcast link.
Please allow extra time prior to the call to visit the site and
download the streaming media software required to listen to the
Internet broadcast. 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, 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.
The Company reports its financial results in
three key operating segments: Storage and Terminal Solutions,
Utility and Power Infrastructure, and Process and Industrial
Facilities.
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 by 2020 Women on Boards, 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
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 CompanyConsolidated
Statements of Income(In thousands, except per
share data) |
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
June 30,2023 |
|
June 30,2022 |
|
June 30,2023 |
|
June 30,2022 |
Revenue |
|
$ |
205,854 |
|
|
$ |
200,719 |
|
|
$ |
795,020 |
|
|
$ |
707,780 |
|
Cost of revenue |
|
|
191,159 |
|
|
|
199,861 |
|
|
|
764,200 |
|
|
|
708,986 |
|
Gross profit (loss) |
|
|
14,695 |
|
|
|
858 |
|
|
|
30,820 |
|
|
|
(1,206 |
) |
Selling, general and
administrative expenses |
|
|
17,031 |
|
|
|
18,098 |
|
|
|
68,249 |
|
|
|
67,690 |
|
Goodwill impairment |
|
|
— |
|
|
|
— |
|
|
|
12,316 |
|
|
|
18,312 |
|
Restructuring costs |
|
|
261 |
|
|
|
924 |
|
|
|
3,142 |
|
|
|
646 |
|
Operating loss |
|
|
(2,597 |
) |
|
|
(18,164 |
) |
|
|
(52,887 |
) |
|
|
(87,854 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
Interest expense |
|
|
(468 |
) |
|
|
(246 |
) |
|
|
(2,024 |
) |
|
|
(2,951 |
) |
Interest income |
|
|
126 |
|
|
|
21 |
|
|
|
290 |
|
|
|
90 |
|
Other |
|
|
2,566 |
|
|
|
31,898 |
|
|
|
1,860 |
|
|
|
32,432 |
|
Income (loss) before income tax
expense (benefit) |
|
|
(373 |
) |
|
|
13,509 |
|
|
|
(52,761 |
) |
|
|
(58,283 |
) |
Provision (benefit) for federal,
state and foreign income taxes |
|
|
(37 |
) |
|
|
53 |
|
|
|
(400 |
) |
|
|
5,617 |
|
Net income (loss) |
|
$ |
(336 |
) |
|
$ |
13,456 |
|
|
$ |
(52,361 |
) |
|
$ |
(63,900 |
) |
Basic income (loss) per common
share |
|
$ |
(0.01 |
) |
|
$ |
0.50 |
|
|
$ |
(1.94 |
) |
|
$ |
(2.39 |
) |
Diluted income (loss) per common
share |
|
$ |
(0.01 |
) |
|
$ |
0.50 |
|
|
$ |
(1.94 |
) |
|
$ |
(2.39 |
) |
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
27,047 |
|
|
|
26,791 |
|
|
|
26,988 |
|
|
|
26,733 |
|
Diluted |
|
|
27,047 |
|
|
|
26,870 |
|
|
|
26,988 |
|
|
|
26,733 |
|
Matrix Service CompanyConsolidated Balance
Sheets(In thousands) |
|
|
June 30,2023 |
|
June 30,2022 |
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
54,812 |
|
$ |
52,371 |
Accounts receivable, less allowances (2023 - $1,061; 2022 -
$1,320) |
|
|
145,764 |
|
|
153,879 |
Costs and estimated earnings in excess of billings on uncompleted
contracts |
|
|
44,888 |
|
|
44,752 |
Inventories |
|
|
7,437 |
|
|
9,974 |
Income taxes receivable |
|
|
496 |
|
|
13,547 |
Prepaid expenses |
|
|
5,741 |
|
|
4,024 |
Other current assets |
|
|
3,118 |
|
|
8,865 |
Total current assets |
|
|
262,256 |
|
|
287,412 |
Restricted cash |
|
|
25,000 |
|
|
25,000 |
Property, plant and equipment -
net |
|
|
47,545 |
|
|
53,869 |
Operating lease right-of-use
assets |
|
|
21,799 |
|
|
22,067 |
Goodwill |
|
|
29,120 |
|
|
42,135 |
Other intangible assets, net of
accumulated amortization |
|
|
3,066 |
|
|
4,796 |
Other assets, non-current |
|
|
11,718 |
|
|
5,514 |
Total assets |
|
$ |
400,504 |
|
$ |
440,793 |
Matrix Service CompanyConsolidated Balance
Sheets (continued)(In thousands, except share
data) |
|
|
June 30,2023 |
|
June 30,2022 |
Liabilities and stockholders’ equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
76,365 |
|
|
$ |
74,886 |
|
Billings on uncompleted contracts in excess of costs and estimated
earnings |
|
|
85,436 |
|
|
|
65,106 |
|
Accrued wages and benefits |
|
|
13,679 |
|
|
|
21,526 |
|
Accrued insurance |
|
|
5,579 |
|
|
|
6,125 |
|
Operating lease liabilities |
|
|
4,661 |
|
|
|
5,715 |
|
Other accrued expenses |
|
|
1,815 |
|
|
|
4,427 |
|
Total current liabilities |
|
|
187,535 |
|
|
|
177,785 |
|
Deferred income taxes |
|
|
26 |
|
|
|
26 |
|
Operating lease liabilities |
|
|
20,660 |
|
|
|
19,904 |
|
Borrowings under asset-backed credit facility |
|
|
10,000 |
|
|
|
15,000 |
|
Other liabilities, non-current |
|
|
799 |
|
|
|
372 |
|
Total liabilities |
|
|
219,020 |
|
|
|
213,087 |
|
Commitments and
contingencies |
|
|
|
|
Stockholders’ equity: |
|
|
|
|
Common stock—$.01 par value; 60,000,000 shares authorized;
27,888,217 shares issued as of June 30, 2023 and June 30,
2022; 27,047,318 and 26,790,514 shares outstanding as of June 30,
2023 and June 30, 2022, respectively |
|
|
279 |
|
|
|
279 |
|
Additional paid-in capital |
|
|
140,810 |
|
|
|
139,854 |
|
Retained earnings |
|
|
58,917 |
|
|
|
111,278 |
|
Accumulated other comprehensive income |
|
|
(8,769 |
) |
|
|
(8,175 |
) |
|
|
|
191,237 |
|
|
|
243,236 |
|
Treasury stock, at cost — 840,899 and 1,097,703 shares as of
June 30, 2023 and June 30, 2022, respectively |
|
|
(9,753 |
) |
|
|
(15,530 |
) |
Total stockholders' equity |
|
|
181,484 |
|
|
|
227,706 |
|
Total liabilities and
stockholders’ equity |
|
$ |
400,504 |
|
|
$ |
440,793 |
|
Results of Operations(In
thousands) |
|
|
Storage and
TerminalSolutions |
|
Utility and Power Infrastructure |
|
Process and Industrial Facilities |
|
Corporate |
|
Total |
Three Months Ended
June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
Gross revenue |
|
$ |
66,953 |
|
|
$ |
39,075 |
|
|
$ |
102,844 |
|
|
$ |
— |
|
|
|
208,872 |
|
Less: inter-segment
revenue |
|
|
2,874 |
|
|
|
— |
|
|
|
144 |
|
|
|
— |
|
|
|
3,018 |
|
Consolidated revenue |
|
|
64,079 |
|
|
|
39,075 |
|
|
|
102,700 |
|
|
|
— |
|
|
|
205,854 |
|
Gross profit |
|
|
2,067 |
|
|
|
3,770 |
|
|
|
8,397 |
|
|
|
461 |
|
|
|
14,695 |
|
Selling, general and
administrative expenses |
|
|
4,712 |
|
|
|
1,651 |
|
|
|
3,601 |
|
|
|
7,067 |
|
|
|
17,031 |
|
Restructuring costs |
|
|
(15 |
) |
|
|
— |
|
|
|
169 |
|
|
|
107 |
|
|
|
261 |
|
Operating income (loss) |
|
$ |
(2,630 |
) |
|
$ |
2,119 |
|
|
$ |
4,627 |
|
|
$ |
(6,713 |
) |
|
|
(2,597 |
) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
Gross revenue |
|
$ |
61,086 |
|
|
$ |
48,795 |
|
|
$ |
91,656 |
|
|
$ |
— |
|
|
$ |
201,537 |
|
Less: inter-segment
revenue |
|
|
818 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
818 |
|
Consolidated revenue |
|
|
60,268 |
|
|
|
48,795 |
|
|
|
91,656 |
|
|
|
— |
|
|
|
200,719 |
|
Gross profit (loss) |
|
|
478 |
|
|
|
(1,497 |
) |
|
|
2,607 |
|
|
|
(730 |
) |
|
|
858 |
|
Selling, general and
administrative expenses |
|
|
4,434 |
|
|
|
2,662 |
|
|
|
3,754 |
|
|
|
7,248 |
|
|
|
18,098 |
|
Restructuring costs |
|
|
37 |
|
|
|
41 |
|
|
|
28 |
|
|
|
818 |
|
|
|
924 |
|
Operating loss |
|
$ |
(3,993 |
) |
|
$ |
(4,200 |
) |
|
$ |
(1,175 |
) |
|
$ |
(8,796 |
) |
|
$ |
(18,164 |
) |
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
Gross revenue |
|
$ |
261,244 |
|
|
$ |
169,558 |
|
|
$ |
370,076 |
|
|
$ |
— |
|
|
$ |
800,878 |
|
Less: inter-segment
revenue |
|
|
5,551 |
|
|
|
54 |
|
|
|
253 |
|
|
|
— |
|
|
|
5,858 |
|
Consolidated revenue |
|
|
255,693 |
|
|
|
169,504 |
|
|
|
369,823 |
|
|
|
— |
|
|
|
795,020 |
|
Gross profit (loss) |
|
|
10,470 |
|
|
|
10,699 |
|
|
|
10,756 |
|
|
|
(1,105 |
) |
|
|
30,820 |
|
Selling, general and
administrative expenses |
|
|
20,054 |
|
|
|
7,045 |
|
|
|
14,909 |
|
|
|
26,241 |
|
|
|
68,249 |
|
Goodwill impairment and
restructuring costs |
|
|
969 |
|
|
|
37 |
|
|
|
13,288 |
|
|
|
1,164 |
|
|
|
15,458 |
|
Operating income (loss) |
|
$ |
(10,553 |
) |
|
$ |
3,617 |
|
|
$ |
(17,441 |
) |
|
$ |
(28,510 |
) |
|
$ |
(52,887 |
) |
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
Gross revenue |
|
$ |
236,260 |
|
|
$ |
220,093 |
|
|
$ |
258,497 |
|
|
$ |
— |
|
|
$ |
714,850 |
|
Less: inter-segment
revenue |
|
|
3,421 |
|
|
|
— |
|
|
|
3,649 |
|
|
|
— |
|
|
|
7,070 |
|
Consolidated revenue |
|
|
232,839 |
|
|
|
220,093 |
|
|
|
254,848 |
|
|
|
— |
|
|
|
707,780 |
|
Gross profit (loss) |
|
|
262 |
|
|
|
(8,586 |
) |
|
|
9,270 |
|
|
|
(2,152 |
) |
|
|
(1,206 |
) |
Selling, general and
administrative expenses |
|
|
17,284 |
|
|
|
11,771 |
|
|
|
12,506 |
|
|
|
26,129 |
|
|
|
67,690 |
|
Goodwill impairment and
restructuring costs |
|
|
7,330 |
|
|
|
2,746 |
|
|
|
6,867 |
|
|
|
2,015 |
|
|
|
18,958 |
|
Operating loss |
|
$ |
(24,352 |
) |
|
$ |
(23,103 |
) |
|
$ |
(10,103 |
) |
|
$ |
(30,296 |
) |
|
$ |
(87,854 |
) |
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 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 limited notice to proceed, 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.
Three Months Ended June 30, 2023
The following table provides a summary of changes in our backlog
for the three months ended June 30, 2023:
|
|
Storage and
TerminalSolutions |
|
Utility and Power Infrastructure |
|
Process and Industrial Facilities |
|
Total |
|
|
(In thousands) |
Backlog as of March 31, 2023 |
|
$ |
293,379 |
|
|
$ |
137,879 |
|
|
$ |
401,099 |
|
|
$ |
832,357 |
|
Project awards |
|
|
41,359 |
|
|
|
360,714 |
|
|
|
61,522 |
|
|
|
463,595 |
|
Revenue recognized |
|
|
(64,079 |
) |
|
|
(39,075 |
) |
|
|
(102,700 |
) |
|
|
(205,854 |
) |
Backlog as of June 30, 2023 |
|
$ |
270,659 |
|
|
$ |
459,518 |
|
|
$ |
359,921 |
|
|
$ |
1,090,098 |
|
Book-to-bill ratio(1) |
|
|
0.6 |
|
|
|
9.2 |
|
|
|
0.6 |
|
|
|
2.3 |
|
____________________
(1) Calculated by dividing project awards by
revenue recognized.
Twelve Months Ended June 30, 2023
The following table provides a summary of changes in our backlog
for the twelve months ended June 30, 2023:
|
|
Storage and
TerminalSolutions |
|
Utility and Power Infrastructure |
|
Process and Industrial Facilities |
|
Total |
|
|
(In thousands) |
Backlog as of June 30, 2022 |
|
$ |
195,114 |
|
|
$ |
102,059 |
|
|
$ |
292,287 |
|
|
$ |
589,460 |
|
Project awards |
|
|
354,510 |
|
|
|
526,963 |
|
|
|
444,148 |
|
|
|
1,325,621 |
|
Other adjustment(1) |
|
|
(23,272 |
) |
|
|
— |
|
|
|
(6,691 |
) |
|
|
(29,963 |
) |
Revenue recognized |
|
|
(255,693 |
) |
|
|
(169,504 |
) |
|
|
(369,823 |
) |
|
|
(795,020 |
) |
Backlog as of June 30,
2023 |
|
$ |
270,659 |
|
|
$ |
459,518 |
|
|
$ |
359,921 |
|
|
$ |
1,090,098 |
|
Book-to-bill ratio(2) |
|
|
1.4 |
|
|
|
3.1 |
|
|
|
1.2 |
|
|
|
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.
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 Income (Loss) to Adjusted Net
Loss(1)(In thousands, except per share data) |
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
June 30, 2023 |
|
June 30, 2022 |
|
June 30, 2023 |
|
June 30, 2022 |
Net income (loss), as reported |
|
$ |
(336 |
) |
|
$ |
13,456 |
|
|
$ |
(52,361 |
) |
|
$ |
(63,900 |
) |
Restructuring costs incurred |
|
|
261 |
|
|
|
924 |
|
|
|
3,142 |
|
|
|
646 |
|
Goodwill impairment |
|
|
— |
|
|
|
— |
|
|
|
12,316 |
|
|
|
18,312 |
|
Gain on sale of assets(2) |
|
|
(2,905 |
) |
|
|
(32,392 |
) |
|
|
(2,905 |
) |
|
|
(32,392 |
) |
Accelerated amortization of deferred debt amendment fees(3) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,518 |
|
Deferred tax valuation allowance(4) |
|
|
(752 |
) |
|
|
(3,926 |
) |
|
|
12,595 |
|
|
|
17,943 |
|
Tax impact of adjustments and other net tax items |
|
|
681 |
|
|
|
8,100 |
|
|
|
(3,231 |
) |
|
|
4,464 |
|
Adjusted net loss |
|
$ |
(3,051 |
) |
|
$ |
(13,838 |
) |
|
$ |
(30,444 |
) |
|
$ |
(53,409 |
) |
|
|
|
|
|
|
|
|
|
Earnings (loss) per fully
diluted share, as reported |
|
$ |
(0.01 |
) |
|
$ |
0.50 |
|
|
$ |
(1.94 |
) |
|
$ |
(2.39 |
) |
Adjusted loss per fully
diluted share |
|
$ |
(0.11 |
) |
|
$ |
(0.52 |
) |
|
$ |
(1.13 |
) |
|
$ |
(2.00 |
) |
____________________
(1) This table presents non-GAAP financial measures of our
adjusted net loss and adjusted loss per fully diluted share for
fiscal 2023, 2022 and 2021. The most directly comparable financial
measures are net income (loss) and earnings (loss) per fully
diluted share, respectively, presented in the 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 fully diluted 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) In fiscal
2023, we booked a $2.9 million gain on the sale of our
industrial cleaning business in the fourth quarter of fiscal 2023.
In fiscal 2022, we booked a $32.4 million gain on the
sale-leaseback of our regional office and fabrication and warehouse
facility located in Orange, California.(3) Interest expense in
fiscal 2022 included $1.5 million of accelerated amortization of
deferred debt amendment fees.(4) 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.
Reconciliation of Net Income (Loss) to Adjusted
EBITDA(1) |
|
Three Months Ended |
|
Twelve Months Ended |
|
June 30,2023 |
|
June 30,2022 |
|
June 30,2023 |
|
June 30,2022 |
|
(in thousands) |
Net income (loss) |
$ |
(336 |
) |
|
$ |
13,456 |
|
|
$ |
(52,361 |
) |
|
$ |
(63,900 |
) |
Goodwill impairment |
|
— |
|
|
|
— |
|
|
|
12,316 |
|
|
|
18,312 |
|
Gain on sale of assets(2) |
|
(2,905 |
) |
|
|
(32,392 |
) |
|
|
(2,905 |
) |
|
|
(32,392 |
) |
Restructuring costs |
|
261 |
|
|
|
924 |
|
|
|
3,142 |
|
|
|
646 |
|
Stock-based compensation |
|
1,637 |
|
|
|
2,054 |
|
|
|
6,791 |
|
|
|
7,877 |
|
Interest expense |
|
468 |
|
|
|
246 |
|
|
|
2,024 |
|
|
|
2,951 |
|
Provision (benefit) for
federal, state and foreign income taxes |
|
(37 |
) |
|
|
53 |
|
|
|
(400 |
) |
|
|
5,617 |
|
Depreciation and
amortization |
|
3,195 |
|
|
|
3,697 |
|
|
|
13,694 |
|
|
|
15,254 |
|
Adjusted EBITDA |
$ |
2,283 |
|
|
$ |
(11,962 |
) |
|
$ |
(17,699 |
) |
|
$ |
(45,635 |
) |
____________________
(1) This table presents Adjusted EBITDA, which we define as net
loss before goodwill impairments, gain on sale of assets,
restructuring costs, stock-based compensation, 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 income (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 income (loss), the most
directly comparable GAAP financial measure, users of this financial
information should consider the type of events and transactions
that are excluded. Our non-GAAP performance measure, Adjusted
EBITDA, has certain material limitations as follows:
- It does not include impairments to goodwill. While impairments
to intangible assets are non-cash expenses in the period
recognized, cash or other consideration was still transferred in
exchange for the intangible assets in the period of the
acquisition. Any measure that excludes impairments to intangible
assets has material limitations since these expenses represent the
loss of an asset that was acquired in exchange for cash or other
assets.
- It does not include gain on sale of assets. While the sale
occurred outside the normal course of business and similar sales
are not expected to be recurring or sustainable, any measure that
excludes this gain has inherent limitations since the sale resulted
in a material inflow of cash.
- 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.
(2) In fiscal 2023, we booked a $2.9 million gain on the
sale of our industrial cleaning business in the fourth quarter of
fiscal 2023. In fiscal 2022, we booked a $32.4 million gain on the
sale-leaseback of our regional office and fabrication and warehouse
facility located in Orange, California.
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