mtrx-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________________________

FORM 10-Q

_______________________________________

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2022


☐			Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File No. 1-15461

__________________________________________

MATRIX SERVICE COMPANY

(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, including area code: (918) 838-8822

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

___________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	MTRX	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☐

Accelerated Filer

☒

Non-accelerated Filer

☐

Smaller Reporting Company

☒

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 7, 2022 there were 27,027,323 shares of the Company's common stock, $0.01 par value per share, outstanding.

Table of Contents

TABLE OF CONTENTS


		PAGE
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Income for the Three Months Ended September 30, 2022 and 2021	1

	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended September 30, 2022 and 2021	2

	Condensed Consolidated Balance Sheets as of September 30, 2022 and June 30, 2022	3

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2022 and 2021	5

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended September 30, 2022 and 2021	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	33

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3.	Defaults Upon Senior Securities	34

Item 4.	Mine Safety Disclosures	35

Item 5.	Other Information	35

Item 6.	Exhibits	35

Signature		36

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Matrix Service Company

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(unaudited)


	Three Months Ended
	September 30, 2022		September 30, 2021
Revenue	$	208,431	$	168,093
Cost of revenue	195,423		171,601
Gross profit (loss)	13,008		(3,508)
Selling, general and administrative expenses	16,811		16,629

Restructuring costs	1,287		605
Operating loss	(5,090)		(20,742)
Other income (expense):
Interest expense	(372)		(1,999)
Interest income	24		21
Other	(1,074)		(83)
Loss before income tax benefit	(6,512)		(22,803)
Benefit for federal, state and foreign income taxes	—		(5,265)
Net loss	$	(6,512)	$	(17,538)

Basic loss per common share	$	(0.24)	$	(0.66)
Diluted loss per common share	$	(0.24)	$	(0.66)
Weighted average common shares outstanding:
Basic	26,862		26,611
Diluted	26,862		26,611

See accompanying notes.

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Table of Contents

Matrix Service Company

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(unaudited)


	Three Months Ended
	September 30, 2022		September 30, 2021
Net loss	$	(6,512)	$	(17,538)
Other comprehensive loss, net of tax:
Foreign currency translation loss (net of tax expense of $0 and $54 for the three months ended September 30, 2022 and 2021, respectively)	(1,753)		(795)
Comprehensive loss	$	(8,265)	$	(18,333)

See accompanying notes.

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Table of Contents

Matrix Service Company

Condensed Consolidated Balance Sheets

(In thousands)

(unaudited)


	September 30, 2022		June 30, 2022
Assets
Current assets:
Cash and cash equivalents (Note 1)	$	14,342	$	52,371
Accounts receivable, less allowances (September 30, 2022—$1,222 and June 30, 2022—$1,320)	149,345		153,879
Costs and estimated earnings in excess of billings on uncompleted contracts	59,609		44,752
Inventories	8,379		9,974
Income taxes receivable	13,546		13,547
Prepaid expenses	9,833		4,024
Other current assets	5,550		8,865
Total current assets	260,604		287,412
Restricted cash (Note 1)	25,000		25,000
Property, plant and equipment - net	51,659		53,869
Operating lease right-of-use assets	21,185		22,067
Goodwill	41,916		42,135
Other intangible assets, net of accumulated amortization	4,364		4,796

Other assets, non-current	6,184		5,514
Total assets	$	410,912	$	440,793

See accompanying notes.

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Table of Contents

Matrix Service Company

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(unaudited)


	September 30, 2022		June 30, 2022
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	68,557	$	74,886
Billings on uncompleted contracts in excess of costs and estimated earnings	53,286		65,106
Accrued wages and benefits	16,643		21,526

Accrued insurance	6,981		6,125
Operating lease liabilities	4,895		5,715

Other accrued expenses	4,236		4,427
Total current liabilities	154,598		177,785
Deferred income taxes	23		26
Operating lease liabilities	19,698		19,904
Borrowings under asset-backed credit facility	15,000		15,000
Other liabilities, non-current	342		372
Total liabilities	189,661		213,087
Commitments and contingencies
Stockholders’ equity:

Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of September 30, 2022 and June 30, 2022; 26,955,510 and 26,790,514 shares outstanding as of September 30, 2022 and June 30, 2022, respectively	279		279
Additional paid-in capital	137,651		139,854
Retained earnings	104,766		111,278
Accumulated other comprehensive loss	(9,928)		(8,175)
	232,768		243,236
Treasury stock, at cost — 932,707 shares as of September 30, 2022, and 1,097,703 shares as of June 30, 2022	(11,517)		(15,530)
Total stockholders' equity	221,251		227,706
Total liabilities and stockholders’ equity	$	410,912	$	440,793

See accompanying notes.

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Table of Contents

Matrix Service Company

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


	Three Months Ended
	September 30, 2022		September 30, 2021
Operating activities:
Net loss	$	(6,512)	$	(17,538)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization	3,642		4,052

Stock-based compensation expense	2,055		1,869

Deferred income tax	—		(5,343)

Loss (gain) on sale of property, plant and equipment	65		(101)
Provision for uncollectible accounts	(88)		4
Accelerated amortization of deferred debt amendment fees	—		1,518
Other	63		—
Changes in operating assets and liabilities increasing (decreasing) cash:
Accounts receivable	4,622		3,134
Costs and estimated earnings in excess of billings on uncompleted contracts	(14,857)		(2,992)
Inventories	1,595		1,028
Other assets and liabilities	(3,370)		(5,921)
Accounts payable	(6,376)		5,108
Billings on uncompleted contracts in excess of costs and estimated earnings	(11,820)		(2,859)
Accrued expenses	(4,248)		(1,112)
Net cash used by operating activities	(35,229)		(19,153)
Investing activities:
Capital expenditures	(1,578)		(219)


Proceeds from asset sales	4		103
Net cash used by investing activities	$	(1,574)	$	(116)

See accompanying notes.

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Matrix Service Company

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


	Three Months Ended
	September 30, 2022		September 30, 2021
Financing activities:


Payment of debt amendment fees	$	—	$	(922)



Proceeds from issuance of common stock under employee stock purchase plan	65		76
Repurchase of common stock for payment of statutory taxes due on equity-based compensation	(310)		(853)
Other	—		(118)



Net cash used by financing activities	(245)		(1,817)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(981)		(514)
Decrease in cash, cash equivalents and restricted cash	(38,029)		(21,600)
Cash, cash equivalents and restricted cash, beginning of period (Note 1)	77,371		83,878
Cash, cash equivalents and restricted cash, end of period (Note 1)	$	39,342	$	62,278
Supplemental disclosure of cash flow information:
Cash paid during the period for:

Interest, including payment of debt amendment fees	$	421	$	1,603

Non-cash investing and financing activities:
Purchases of property, plant and equipment on account	$	101	$	51

See accompanying notes.

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Table of Contents

Matrix Service Company

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share data)

(unaudited)


	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balances, June 30, 2022	$	279	$	139,854	$	111,278	$	(8,175)	$	(15,530)	$	227,706
Net loss	—		—		(6,512)		—		—		(6,512)
Other comprehensive loss	—		—		—		(1,753)