Matrix Service Co (MTRX) Q2 2025 Earnings Call Highlights: Navigating Challenges with Strong Revenue Growth

Despite a net loss, Matrix Service Co (MTRX) reports robust revenue growth and a promising opportunity pipeline, setting the stage for a return to profitability.

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Feb 07, 2025
Summary
  • Revenue: $187.2 million in Q2, a 7% increase over the prior year and a 13% increase over Q1 of fiscal 2025.
  • Gross Margin: $10.9 million or 5.8% in Q2 compared to $10.6 million or 6% in the prior year period.
  • Net Loss: $5.5 million or $0.20 per share in Q2, compared to a net loss of $2.9 million or $0.10 per share in the prior year.
  • Storage and Terminal Solutions Revenue: Increased 53% to $95.5 million in Q2.
  • Utility and Power Infrastructure Revenue: Increased 52% to $61.1 million in Q2.
  • Process and Industrial Facilities Revenue: Decreased to $30.6 million in Q2 from $71.3 million in the prior year.
  • Backlog: $1.3 billion as of December 31, 2024.
  • Net Cash Provided by Operating Activities: $45.5 million in the first half of fiscal 2025.
  • Total Liquidity: $211.7 million, including $156.8 million of unrestricted cash and $54.9 million of borrowing availability.
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Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Matrix Service Co (MTRX, Financial) reported strong organic revenue growth in the second quarter, driven by Storage and Terminal Solutions and Utility and Power Infrastructure segments.
  • The company's opportunity pipeline increased significantly from $5.7 billion to $7 billion, indicating a strong potential for future growth.
  • Matrix Service Co (MTRX) expects to generate organic revenue growth of over 40% in the second half of fiscal 2025 compared to the same period in fiscal 2024.
  • The company anticipates returning to profitability in the second half of fiscal 2025 due to improved fixed cost absorption and operating leverage.
  • Matrix Service Co (MTRX) maintains a strong balance sheet with a liquidity position of $211.7 million and no debt, supporting future growth initiatives.

Negative Points

  • The delay in the award of a major energy project negatively impacted the book-to-bill ratio for the quarter.
  • Planned mobilization for a major project was postponed to the second half of the year, leading to a reduction in the full-year revenue forecast by approximately 5%.
  • The company reported a net loss of $5.5 million for the second quarter, compared to a net loss of $2.9 million in the prior year.
  • Gross margins continue to be impacted by the under-recovery of construction overhead costs, although the impact is decreasing.
  • The Process and Industrial Facilities segment experienced a significant revenue decrease due to the completion of a large project and lower revenue volumes.

Q & A Highlights

Q: With the guidance reduction, which business segments does the $50 million revenue adjustment reflect this push out?
A: That was primarily in the storage and terminal solutions segment.

Q: How confident are you in reaching profitability in the second half of 2025? Do you expect any other work delays to affect revenue growth?
A: We feel confident about growing our revenue quarter over quarter, which will support overhead absorption and return to profitability. We believe the organization can achieve a profitable run rate in the back half of the year.

Q: Regarding the energy project expected to move to the third quarter, how do you see backlog growth through the second half given the decrease from $1.4 billion to $1.3 billion?
A: Our book-to-bill ratio should be viewed long-term. We have a strong opportunity pipeline, which increased to over $7 billion. Our backlog remains strong, and we expect to maintain and build it as we move through subsequent quarters.

Q: Can you provide more color on the type of conversations you're having with clients in the current environment?
A: Our energy clients feel positive about the regulatory environment and global demand for their products. While the presidential election cycle might have influenced decision-making, our clients are optimistic about their businesses and capital investments.

Q: Regarding expectations to return to profitability in the second half, is your comfort level more in the fourth quarter than the third?
A: Yes, the fourth quarter is expected to have higher revenue and more profit due to the ramp-up in revenue throughout the year.

Q: Are you seeing any better margins in new jobs, particularly in storage, compared to process?
A: The demand for our services and project size, which limits competition, should allow us to maintain a strong margin profile. We are entering a market where we can win the right jobs with the right financial profile.

Q: The opportunity pipeline increased to $7 billion from $5.7 billion. Is this due to a few large jobs or many smaller ones?
A: The increase is primarily due to more LNG peak shaving projects, where we have a strong market position. There are also smaller projects in ammonia and mining, as well as power generation opportunities.

Q: Can you provide more details on inorganic growth opportunities and potential timelines?
A: Our focus is on returning to profitability and building a strong backlog. We aim to strengthen our business and position as a specialized E&C provider, taking advantage of infrastructure spending. Specific details are not available at this time.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.