Matrix Service Company Q1 FY2026 earnings call

• Safety is a core value, ingrained in the company's culture. - First quarter had double-digit revenue growth and highest quarterly gross margin in over 2 years. - Bidding activity healthy, backlog at $1.2 billion. - Opportunity pipeline at $6.7 billion, mostly in storage and related facilities for LNG, NGLs, and ammonia. - Storage and Terminal Solutions and Utility and Power Infrastructure segments showing growth; Process and Industrial Facilities segment has market opportunities to improve revenue. - Organization structure changes enhanced agility, competitiveness, and performance. - Committed to disciplined capital allocation with strong balance sheet.

Storage and Terminal Solutions segment: First quarter revenue was $109.5 million, representing 52% of consolidated revenue, a 40% increase from the prior year. Segment gross profit increased by $1.8 million. Utility and Power Infrastructure segment: Accounted for 35% of consolidated revenue, with first quarter revenue of $74.5 million, a 33% increase from the prior year. Segment gross profit increased by $5.5 million. Process and Industrial Facilities segment: Represented 13% of consolidated revenue at $27.9 million in the first quarter of fiscal 2026, down from $31.4 million in the prior year. Segment gross profit decreased to $0.6 million.

• Reiterated full year revenue guidance of $875 million to $925 million. - Revenue in first quarter was $211.9 million, a 28% increase from prior year. - Consolidated gross margin improved to 6.7% from 4.7% in prior year. - Adjusted EBITDA in first quarter was a positive $2.5 million compared to a loss of $5.9 million in prior year. - Expect to achieve breakeven on a GAAP net income basis at a quarterly revenue level of $210 million to $215 million.

• Removed $197 million from backlog related to 2 projects. One in Process and Industrial Facilities segment due to client adjusting execution and contracting structure to rebid construction portion. Another in Utility and Power Infrastructure segment due to client modifying terms and conditions to increase risk, leading to rescission of award.

Q: How do the two removed projects relate to the competitive landscape?

A: The first project's situation was due to client changing execution strategy, not competitive landscape. The second project was because client modified terms increasing risk, and the company chose not to take on higher risk. There's strong brand position and many opportunities in the marketplace.

Q: When can we expect large jobs to be let out again?

A: It's a timing issue related to development of bigger energy facilities. There are many mid-scale projects available now, and larger projects will come through the opportunity pipeline as they develop.

Q: How does restructuring change breakeven dynamics?

A: Restructuring decreased cost structure, lowering breakeven point. Previously, it took $225 million quarterly revenue to breakeven, now it's between $210 million and $215 million. Also decreased revenue required for full construction overhead cost recovery and to get SG&A down to 6.5% target, both now around $250 million.

Q: What are the capabilities in the gas power project space?

A: The company has legacy skill sets from being involved in combined cycle gas-fired power plant build out in the past, including general contracting, centerline erection, boiler erection, mechanical piping systems. Capabilities are applicable in new power generation construction, backup fueling, natural gas and LNG, and peak shaving terminals.

Q: Should we continue to view backlog in the $1 billion-plus range moving forward?

A: After removal of the two projects, backlog remains strong at $1.2 billion. The situation with the Process and Industrial Facilities project being removed is a one-off for now, and clients are looking at alliances and partnering agreements, but it's a one-off for the projects the company is involved in.