mtrx-20230930

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, 2023


☐			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.)

15 East 5th Street, Suite 1100, Tulsa, Oklahoma 74103

(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 8, 2023 there were 27,213,702 shares of the Company's common stock, $0.01 par value per share, outstanding.


		PAGE
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Income for the Three Months Ended September 30, 2023 and 2022	1

	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended September 30, 2023 and 2022	2

	Condensed Consolidated Balance Sheets as of September 30, 2023 and June 30, 2023	3

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2023 and 2022	5

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended September 30, 2023 and 2022	6

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	27

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3.	Defaults Upon Senior Securities	28

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	29

Signature		30


	Three Months Ended
	September 30, 2023		September 30, 2022
Revenue	$	197,659	$	208,431
Cost of revenue	185,800		195,423
Gross profit	11,859		13,008
Selling, general and administrative expenses	17,113		16,811

Restructuring costs	—		1,287
Operating loss	(5,254)		(5,090)
Other income (expense):
Interest expense	(325)		(372)
Interest income	150		24
Other (Note 3)	2,262		(1,074)
Loss before income tax expense	(3,167)		(6,512)
Provision for federal, state and foreign income taxes	—		—
Net loss	$	(3,167)	$	(6,512)

Basic loss per common share	$	(0.12)	$	(0.24)
Diluted loss per common share	$	(0.12)	$	(0.24)
Weighted average common shares outstanding:
Basic	27,113		26,862
Diluted	27,113		26,862


	September 30, 2023		June 30, 2023
Assets
Current assets:
Cash and cash equivalents	$	27,359	$	54,812
Accounts receivable, less allowances (September 30, 2023—$402 and June 30, 2023—$1,061)	152,300		145,764
Costs and estimated earnings in excess of billings on uncompleted contracts	42,369		44,888
Inventories	9,153		7,437
Income taxes receivable	496		496
Prepaid expenses	10,136		5,741
Other current assets	3,235		3,118
Total current assets	245,048		262,256
Restricted cash	25,000		25,000
Property, plant and equipment - net	45,027		47,545
Operating lease right-of-use assets	20,641		21,799
Goodwill	29,055		29,120
Other intangible assets, net of accumulated amortization	2,635		3,066

Other assets, non-current	14,872		11,718
Total assets	$	382,278	$	400,504


	September 30, 2023		June 30, 2023
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	74,094	$	76,365
Billings on uncompleted contracts in excess of costs and estimated earnings	73,133		85,436
Accrued wages and benefits	11,511		13,679

Accrued insurance	5,749		5,579
Operating lease liabilities	4,281		4,661

Other accrued expenses	2,641		1,815
Total current liabilities	171,409		187,535
Deferred income taxes	25		26
Operating lease liabilities	19,945		20,660
Borrowings under asset-backed credit facility	10,000		10,000
Other liabilities, non-current	1,776		799
Total liabilities	203,155		219,020
Commitments and contingencies
Stockholders’ equity:
Matrix Service Company stockholders' equity:
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of September 30, 2023 and June 30, 2023; 27,209,838 and 27,047,318 shares outstanding as of September 30, 2023 and June 30, 2023, respectively	279		279
Additional paid-in capital	139,773		140,810
Retained earnings	55,750		58,917
Accumulated other comprehensive loss	(9,307)		(8,769)
	186,495		191,237
Treasury stock, at cost — 678,379 shares as of September 30, 2023, and 840,899 shares as of June 30, 2023	(7,372)		(9,753)
Total stockholders' equity	179,123		181,484
Total liabilities and stockholders’ equity	$	382,278	$	400,504


	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balances, June 30, 2023	$	279	$	140,810	$	58,917	$	(8,769)	$	(9,753)	$	181,484
Net loss	—		—		(3,167)		—		—		(3,167)
Other comprehensive loss	—		—		—		(538)		—		(538)


Issuance of restricted stock (210,243 shares)	—		(2,738)		—		—		2,738		—
Treasury shares sold to Employee Stock Purchase Plan (7,601 shares)	—		(54)		—		—		99		45

Treasury shares purchased to satisfy tax withholding obligations (55,324 shares)	—		—		—		—		(456)		(456)
Stock-based compensation expense	—		1,755		—		—		—		1,755
Balances, September 30, 2023	$	279	$	139,773	$	55,750	$	(9,307)	$	(7,372)	$	179,123

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)		—		(1,753)


Issuance of restricted stock (204,827 shares)	—		(4,064)		—		—		4,064		—
Treasury shares sold to Employee Stock Purchase Plan (13,033 shares)	—		(194)		—		—		259		65

Treasury shares purchased to satisfy tax withholding obligations (52,864 shares)	—		—		—		—		(310)		(310)
Stock-based compensation expense	—		2,055		—		—		—		2,055
Balances, September 30, 2022	$	279	$	137,651	$	104,766	$	(9,928)	$	(11,517)	$	221,251


	September 30, 2023		June 30, 2023		Change
	(in thousands)
Costs and estimated earnings in excess of billings on uncompleted contracts	$	42,369	$	44,888	$	(2,519)
Billings on uncompleted contracts in excess of costs and estimated earnings	(73,133)		(85,436)		12,303
Net contract liabilities	$	(30,764)	$	(40,548)	$	9,784


	September 30, 2023		June 30, 2023
Storage and Terminal Solutions	$	148,791	$	139,333
Utility and Power Infrastructure	52,143		67,630
Process and Industrial Facilities	99,673		90,514
Corporate	81,671		103,027
Total segment assets	$	382,278	$	400,504


	Three Months Ended
		September 30, 2023		September 30, 2022
Net loss, as reported		$	(3,167)	$	(6,512)

Restructuring costs		—		1,287
Gain on sale of assets(2)		(2,536)		—

Tax impact of adjustments(3)		—		—

Adjusted net loss		$	(5,703)	$	(5,225)

Loss per share, as reported		$	(0.12)	$	(0.24)
Adjusted loss per share		$	(0.21)	$	(0.19)


Liquidity at June 30, 2023	$	92,554
Cash used by operating activities	(28,875)
Proceeds from asset sales	2,618
Capital expenditures	(478)
Increase in availability under ABL Facility	15,151
Cash used by financing activities	(411)
Effect of exchange rate changes on cash	(307)
Liquidity at September 30, 2023	$	80,252


Net loss	$	(3,167)
Depreciation and amortization	2,911

Stock-based compensation	1,755
Other non-cash expenses	(2,294)


Cash effect of changes in operating assets and liabilities	(28,080)

Net cash used by operating activities	$	(28,875)


	Storage and Terminal Solutions		Utility and Power Infrastructure		Process and Industrial Facilities		Total
	(In thousands)
Backlog as of June 30, 2023	$	270,659	$	459,518	$	359,921	$	1,090,098
Project awards	414,645		23,089		59,660		497,394


Revenue recognized	(90,144)		(32,395)		(75,120)		(197,659)
Backlog as of September 30, 2023	$	595,160	$	450,212	$	344,461	$	1,389,833
Book-to-bill ratio(1)	4.6		0.7		0.8		2.5


	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (C)
July 1 to July 31, 2023
Stock Buyback Program (A)	—	$	—	—	1,349,037
Employee Transactions (B)	—	$	—	—	—
August 1 to August 31, 2023
Stock Buyback Program (A)	—	$	—	—	1,349,037
Employee Transactions (B)	55,324	$	8.25	—	—
September 1 to September 30, 2023
Stock Buyback Program (A)	—	$	—	—	1,349,037
Employee Transactions (B)	—	$	—	—	—


Exhibit No.						Description

Exhibit 31.1:						Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 – CEO.

Exhibit 31.2:						Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 – CFO.

Exhibit 32.1:						Certification Pursuant to 18 U.S.C. 1350 (section 906 of Sarbanes-Oxley Act of 2002) – CEO.

Exhibit 32.2:						Certification Pursuant to 18 U.S.C. 1350 (section 906 of Sarbanes-Oxley Act of 2002) – CFO.

Exhibit 95:						Mine Safety Disclosure.

Exhibit 101.INS:						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Exhibit 101.SCH:						XBRL Taxonomy Schema Document.

Exhibit 101.CAL:						XBRL Taxonomy Extension Calculation Linkbase Document.

Exhibit 101.DEF:						XBRL Taxonomy Extension Definition Linkbase Document.

Exhibit 101.LAB:						XBRL Taxonomy Extension Labels Linkbase Document.

Exhibit 101.PRE:						XBRL Taxonomy Extension Presentation Linkbase Document.

Exhibit 104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


		MATRIX SERVICE COMPANY

Date:	November 9, 2023	By: /s/ Kevin S. Cavanah
		Kevin S. Cavanah Vice President and Chief Financial Officer

SEC Form 10-Q filed by Matrix Service Company