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Dec 31, 2022
Matrix Service Q2 2023 Earnings Report
Reported financial results for the second quarter of fiscal 2023.
Key Takeaways
Matrix Service Company's second quarter revenue increased by 20% compared to the previous year, driven by a surge in project awards, the highest since Q1 2020, leading to a strong book-to-bill ratio. However, results were negatively impacted by a $9.6 million adjustment on a legacy project and a $12.3 million goodwill impairment, resulting in a loss per share of $1.22.
Second quarter revenue reached $193.8 million, a 20% increase year-over-year.
Project awards for the quarter totaled $318.7 million, the highest since Q1 2020, resulting in a book-to-bill ratio of 1.6.
Backlog increased by 25% to $740.5 million compared to the second quarter of fiscal 2022.
Loss per share was $1.22, with an adjusted loss per share of $0.53, impacted by a legacy project adjustment and goodwill impairment.
Matrix Service
Matrix Service
Forward Guidance
Matrix Service Company anticipates revenue volumes in the third quarter of fiscal 2023 to remain relatively unchanged from the second quarter, with a meaningful increase expected in the fourth quarter as newly awarded projects contribute to revenue. The company expects quarterly book-to-bill ratios to be at or above 1.0 for each of the last two fiscal quarters of 2023.
Positive Outlook
- Expected improved operating results in the fourth fiscal quarter.
- Receipt of approximately $13 million of tax refunds in the third fiscal quarter.
- Positive cash flow from newly-awarded capital projects.
- Quarterly book-to-bill ratios to be at or above 1.0 for each of the last two fiscal quarters of 2023.
- Meaningful increase expected in the fourth quarter as newly awarded projects contribute to revenue.
Challenges Ahead
- Legacy project awarded in calendar 2021 resulted in an unexpected negative adjustment in the quarter due to a breakdown in commercial negotiations over excessive scope changes, global supply chain issues and inflation.
- A large LNG project that was expected to be awarded in the first half of fiscal 2023 has not been awarded and award timing is unknown.
- Normal seasonality resulted in lower volumes of work as we moved through the quarter.
- Gross margins during the second quarter of fiscal 2023 were also negatively impacted by the under recovery of construction overhead costs due to lower revenue and continued work on previously-booked projects with reduced gross margins awarded in a highly competitive time period.
- The company incurred a $12.3 million impairment of goodwill during the quarter.