Matrix Service Co (MTRX) Reports Increased Backlog and Revenue in Q2 Fiscal 2024
Backlog: Reached a record $1.45 billion with a book-to-bill ratio of 1.3.
Revenue: Reported $175.0 million in Q2 fiscal 2024.
Gross Margins: Returned to historical double-digit levels in the first half of fiscal 2024.
Adjusted EBITDA: Achieved $0.3 million in Q2 fiscal 2024.
Liquidity: Increased to $106.3 million as of December 31, 2023.
Net Loss: Recorded a net loss of $2.9 million, or $0.10 per share in Q2 fiscal 2024.
On February 7, 2024, Matrix Service Co (NASDAQ:MTRX) released its 8-K filing, detailing its financial performance for the second quarter of fiscal year 2024. The company, a leading North American industrial engineering, construction, and maintenance contractor, operates across three segments: Utility and Power Infrastructure; Process and Industrial Facilities; and Storage and Terminal Solutions.
Matrix Service Co (NASDAQ:MTRX) reported a significant increase in its backlog to $1.45 billion, the highest in the company's history, driven by project awards totaling $230.8 million in the quarter. This achievement is crucial as it indicates potential future revenue and stability for the company. Despite this, the company faced a net loss of $2.9 million, or $0.10 per share, an improvement from the first quarter's net loss of $3.2 million, or $0.12 per share.
Financial Performance and Challenges
Matrix Service Co (NASDAQ:MTRX)'s revenue for the quarter was $175.0 million, a reflection of the company's ability to secure new projects, although the contribution from these projects was limited as they are still in the early stages. The company's direct gross margins have seen a return to historical double-digit levels, a positive indicator for profitability. However, the under-recovery of construction overhead costs remains a challenge, expected to resolve with increased revenue volumes.
Adjusted EBITDA stood at $0.3 million for the quarter, a modest figure that underscores the company's efforts to streamline operations and improve financial performance. Liquidity also saw a boost, reaching $106.3 million as of December 31, 2023, with all outstanding borrowings under the credit facility repaid during the quarter.
Segment Performance
In the Storage and Terminals Solutions segment, revenue decreased to $62.4 million compared to $90.1 million in the previous quarter, with a gross margin of 2.9%. The Utility and Power Infrastructure segment saw revenue increase to $40.1 million with a gross margin of 3.5%. The Process and Industrial Facilities segment experienced a decrease in revenue to $71.3 million but improved its gross margin to 9.4%.
Consolidated SG&A expenses were reduced to $15.7 million from $17.1 million in the previous quarter, reflecting the company's cost management efforts. Other income included a gain of $2.0 million from the sale of a facility, contributing positively to the financial results.
Analysis and Outlook
Matrix Service Co (NASDAQ:MTRX) President and CEO, John R. Hewitt, expressed confidence in the company's financial performance improvement over the coming quarters, citing the high backlog and strong opportunity pipeline. The company anticipates achieving full recovery of construction overhead costs on higher revenue volumes in the fourth quarter of fiscal 2024.
The company's effective tax rate for the quarter was zero, influenced by a valuation allowance on deferred tax assets due to a cumulative loss over a three-year period. This is expected to remain around zero throughout fiscal 2024.
Matrix Service Co (NASDAQ:MTRX) is positioning itself for future stability and growth, with a focus on maintaining higher revenue levels over the long term. The company's record backlog and improved liquidity are positive signs, but the net loss indicates ongoing challenges that need to be addressed for sustained profitability.
For more detailed information, investors are encouraged to review the full earnings report and listen to the earnings call, which provides additional insights into the company's strategies and expectations.
Value investors and potential GuruFocus.com members interested in the construction sector and industrial services may find Matrix Service Co (NASDAQ:MTRX)'s journey towards improved financial performance and operational efficiency a compelling case to follow.
Explore the complete 8-K earnings release (here) from Matrix Service Co for further details.
This article first appeared on GuruFocus.
