• 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.

• Warning! GuruFocus has detected 5 Warning Sign with MTRX.

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 (NASDAQ:MTRX) 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 (NASDAQ: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 (NASDAQ: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.