Q3 2022 Matrix Service Co Earnings Call
Good day, ladies and gentlemen, thank you for standing by.
Instead of Matrix Service Company Conference call Today's conference call for the third quarter fiscal 2022 at this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press. The Star then the one key on your Touchtone telephone.
If you can offer assistance. Please press Star then zero I would now like to hand, the conference over to your speaker host Kellie Smythe.
Good morning, and welcome to Matrix service company's third quarter of fiscal 2022 earnings call participants on today's call will include John Hewitt, President and Chief Executive Officer, and Kevin Cavanah, Vice President and Chief Financial Officer. The presentation materials, we will be referring to you Jane.
The webcast today can be found under events and presentations on the Investor Relations section of Matrix Service company Dot com.
Before we begin please let me remind you that on today's call. We may make various remarks about future expectations plans and prospects for matrix service company that constitute forward looking statements for the purposes of the private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those indicated by these forward looking statements as a result of various factors, including those discussed in our annual report on Form 10-K for our fiscal year ended June 32021, and in subsequent filings made by the company with the SEC.
To the extent, we utilize non-GAAP measures reconciliations will be provided in various press releases periodic SEC filings and on our website I will now turn the call over to John Hewitt, President and CEO of Matrix Service company.
Thank you Kelly and good morning, everyone and thank you for joining us.
Reflecting on the business challenges, our customers and matrix have experienced over the last couple of years and how important is in times like these not to lose focus on the safety of our workforce with our end markets improving comes increasing workloads and project activity, our focus leadership and expectations and driving a zero incident safety outcome.
Must be even greater as activity increases.
To remind all of us at matrix that zero incentive performance as possible and then theres a level of performance that we have demonstrated can be delivered on for our employees and ourselves.
If we act or better said, our accountable for our outcomes communicate the expectations and trained with passion I am confident we can achieve our safety vision.
Now before I turn the call to Kevin to discuss results I wanted to briefly comment on our performance during the quarter, which is not yet reflective of the strong momentum growing in our end markets or the organizational changes that are underway at matrix. Our revenues grew by nearly 20% in the quarter compared to the same quarter last year.
Revenues are clearly trending up but at a slower pace than we anticipated impacted in part by delayed starts or previously awarded work.
Our revenue in the quarter were driven by smaller project activity, a higher percentage of lower margin Reimbursable work and the execution of low margin projects won during the competitive market environment, which we have experienced over the last few years. This growth in revenue is an encouraging indicator of returning market stress.
But currently it does not fulfill our historical gross margin expectations limits complete recovery of overheads and leaves little room for error.
While this growing revenue environment has not yet created the Bottomline improvement. We expect we are optimistic that given the significant tailwind across all our markets. The award strength, we are experiencing and the near term booking opportunities Bottomline improvement is on the horizon.
Okay.
I do want to highlight that this was our third consecutive quarter with a book to bill greater than one and through the first nine months of the year. We have achieved a book to Bill of one three on awards of nearly $640 million to put this in context year to date awards are 81% higher than awards in the first nine months of <unk>.
2021, our backlog now stands at 594 million, 20% higher than our backlog at the start of the fiscal year.
This acceleration and awards has primarily come from projects with individual values of less $25 million. So while we expect the volume of smaller awards to continue there is a clear path to a larger project awards beginning in the next two quarters. We therefore anticipate a material increase in the size of our bank.
ACOG as we move through the remainder of the calendar year. During the quarter. We also continued to work on organizational improvements that will result in a company that is more competitive efficient and produces better bottom line results.
Let me hand, the call over to Kevin to discuss our segment and consolidated results and I'll be back to share our outlook and go through some of the organizational improvements taking place within matrix. Thanks.
Thanks, John I'll start with the consolidated results revenue was $177 million for the third quarter, which is a sequential increase of 10% over the second quarter and a 19% increase over the third quarter of the prior fiscal year.
While we are expecting larger capital project awards to accelerate in the next couple of quarters revenue volumes have increased along with backlog on smaller project activity.
The company was just below breakeven from a gross margin perspective as performance was impacted by three issues.
First the competitive environment. The last couple of years has resulted in a temporary reduction in the margin opportunity of awarded work.
Our revenue volume has not been sufficient to fully recover construction overhead, which negatively impacted gross margins by 400 basis points in the quarter.
Third we incurred increases in forecasted costs on two projects one in the very competitive environment. During the height of the pandemic one in the process and industrial facilities segment and the other in the utility and power infrastructure segment. These two projects impacted gross margins by over 400 basis points in the third.
Quarter.
Consolidated SG&A expenses were in line with expectations at $17 million for the quarter. We also incurred noncash items that impacted earnings in the quarter.
The first item was an impairment charge to goodwill.
While we normally perform our annual impairment test during the fourth quarter of each year during the third quarter, we concluded that goodwill impairment indicators existed.
The decline in the price of our stock was a significant indicator as we're operating results that have underperformed our forecast during the year. Accordingly, we performed an interim impairment test as of March 31, 2022, and concluded that an impairment of $18 3 million should be recorded.
The economic.
Environment. The past couple of years has impacted our entire business and as a result, the charge impacted all three segments.
We should be clear clear here that the impairment charge is not indicative of our view of the future.
As John discussed project Awards, and our backlog has increased significantly this fiscal year and we expect that trend to continue as larger capital projects are awarded.
We also believe the lower gross margins.
We have experienced this year, we will return to our historical range of 10% to 12% as higher quality work is booked and recovery of critically important construction overheads improvement.
The second item was the reversal of $1 6 million of restructuring costs due to a favorable settlement on a previously recorded restructuring obligation.
The third item relates to income taxes, our effective tax rate was 0.4% for the quarter as the tax benefit generated in the quarter was largely offset by additional valuation allowances of $7 7 million.
Most of these assets do not expire and the company expects to utilize these federal and state Nols when we returned to profitability the value valuation allowance was required.
Utilizing these nols as well as previously reserved Nols will have a positive impact on future earnings by significantly lowering.
Active tax rate as a result, we now expect our effective tax rate to be in the single digits until we utilize the deferred tax assets.
For the three months ended March 31, 2022, we had an adjusted net loss of $13 4 million and an adjusted loss per share of <unk> 50.
Including the impact of the impairment tax asset valuation allowance and restructuring costs. The quarterly net loss was $34 9 million.
And the loss per share was $1 30.
Moving to segment results revenue for the utility and power infrastructure segment was $59 million in the third quarter.
Which is an increase of 8% over the second quarter.
<unk> gross margin of negative 8% was impacted by the following first.
Low volumes led to under recovery of construction overhead costs and impacted gross margins by 380 basis points.
Second we recorded a $2 5 million adjustment to the forecasted outcome of our capital project, which is nearing completion and third we are also working through competitively bid projects.
And projects that were marked down in previous periods, and therefore present lower margin opportunity.
Moving to the process and industrial facilities segment third quarter revenue of $69 million represents a 37% increase over the second quarter and the highest quarterly revenue since the third quarter of fiscal 2020.
While the revenue increase primarily relates to improved refinery maintenance activity.
Year to date, we have also booked over $315 million of awards, including a number of capital projects, resulting in a book to Bill of one nine.
We expect to see continued revenue growth in the fourth quarter due to these strong project awards.
The quarterly segment gross margin was just below breakeven as this segment was negatively impacted by a $4 8 million increase in forecasted cost to complete of midstream gas processing project.
The mix of work.
Which was impacted by increased Reimbursable maintenance activity also contributed to lower margins.
The higher revenue led to improvement in recovery of overhead, but the segment still had some under recovery that impacted margins in excess of 100 basis points.
The storage and terminal solutions segment produced $49 million of revenue in the third quarter storage revenue volume has been impacted by both delays in construction starts of awarded projects as well as delays in the award of larger projects.
We expect quarterly revenue to improve.
Based on recent awards and our pipeline of opportunities Awards have produced a quarterly book to Bill of one one and a year to date book to Bill of one two.
The segment gross margin was a negative 9% in the third quarter due to under recovery of construction overhead costs, which impacted margins almost 740 basis points. In addition segment gross margin was impacted by competitively bid smaller projects, which present, a lower margin opportunity.
Moving on to the balance sheet and cash flow.
At the start of the quarter, the company had $93 million of cash which decreased to $59 million during the quarter.
$34 million decrease was primarily the result of cash invested in working capital to support the mix of work in the quarter, which saw an increase in reimbursable work the net loss in the quarter adjusted for noncash items also contributed to cash usage.
Regarding liquidity as of the end of the quarter. The company has not drawn on its revolving credit facility.
Which has a borrowing base of $77 million.
We have utilized $24 million for letters of credit so we have availability of $53 million.
Excluding restricted cash of $25 million, our liquidity is $87 million, which is adequate to support our needs I will now turn the call back to John .
Thank you Kevin.
Prior quarters, we spoke about delays in capital project spending and reduced maintenance activity and this fiscal year, we are seeing maintenance volume begin to expand in a water smaller projects gained momentum.
As energy markets have stabilized with the answer and with the onset of current global events. The sentiment has absolutely turned for energy infrastructure investment as such we expect larger capital project award activity to accelerate over the next couple of quarters.
Concerns about energy security globally, and reliability domestically has created a transformation in the opportunity set and its timing. In addition to call to action for cleaner forms of energy and renewables is creating significant business opportunities for matrix finally, the supply chain disruption in demand.
For commodity assurance is building what many in our industry believe will be an industrial investment Renaissance here at home.
It is indisputable that natural gas is an extremely important role to play in the clean energy transition and to other solutions are commercially viable and broadly available natural gas will be needed as a bridge fuel at the same time the need for energy security is put natural gas and more specifically LNG under the globe.
Spotlight.
This will likely lead to an increasing number of long term supply agreements backed by a regulatory environment that will almost certainly support decisions to move forward with new LNG projects and support the continued growth of the LNG market. It is important to note. The LNG has relevance in both domestic and international markets.
Extreme temperature conditions in some parts of North America limited pipeline capacity and volatile natural gas prices over the last 12 months has driven a further interest and LNG peak shaving facilities by most utilities. These facilities offer our utility clients significant flexibility to meet peak demand for electricity and can.
<unk> gas supply, while managing our exposure to fluctuations in natural gas spot prices, we are actively performing supporting and pricing multiple feed studies for the maintenance repair and upgrade to existing facilities as well as the construction of new infrastructure.
As I mentioned last quarter. There has also been a significant uptick in bidding and midstream gas processing and we expect to see capital investment in natural gas infrastructure to continue based on the growth in global demand and recent increases in gas prices. In addition, many of our clients are planning capital expenditures to upgrade the compression.
<unk> and processing stations to minimize our carbon footprint of those facilities, while increasing capacity.
Midstream natural gas and LNG markets have certainly been capitalized in the last several months, but these are not the only areas. We are seeing strong momentum the bidding environment is extremely active across all of our segments and we've added resources to handle the increase in activity, we've been tactically building our operational tactical teams.
To support the pursuit and execution of these opportunities and recently awarded projects.
Among these awards are thermal vacuum chambers used for satellite testing electrical infrastructure projects. The construction of a boring mining facility as well as early engineering for our new mid scale LNG export terminal.
The distribution of projects in our opportunity pipeline highlights not just the growing demand for traditional and renewable energy related projects, but also a sharp increase in planned capital spending across our diverse end markets. Our market position supports both our short and long term opportunity pipeline.
We have a very strong brand in storage and terminals for all things energy LNG, including peak shaving facilities, Bunkering and export terminals as well as Ngls and renewable fuels are just starting our strong growth cycle driven by a favorable energy macro the doors also opened for international opportunities across the America.
<unk> investment in hydrogen infrastructure will increase over time, our global reputation and cryogenic storage capabilities as well as our relationship with chart industries will lead to opportunities for us to play a major role in hydrogen infrastructure expansion. For example, the feed study currently underway on a small scale hydrogen liquefaction in store.
Supply facility when sanctioned will lead to multiple project installations.
Our brand leading cryogenic storage capabilities are tracking several global energy and utility companies interested in the creation of large scale hydrogen storage solutions.
We are continuing to build our brand and midstream gas by strengthening our existing client relationships and capabilities as well as expanding our technical knowledge platform in this critical low carbon gas supply market.
We continue to support our refining clients as they ramp up maintenance and capital spending to support traditional operations and continue to retrofit their facilities to process lower carbon fuels.
Awards and bidding opportunities continue to be strong in aerospace or matrix has a niche position in the design and construction of thermal vacuum chambers used for satellite and other equipment testing destined for space in.
In our mining and minerals sector copper precious metals and rare earth metals prices are sustaining at higher levels and our customers are moving forward with capital spending and delayed maintenance programs to meet the long term demand for these commodities and more.
Finally, the interconnector role of electrical and renewable generation, along with an aging infrastructure system creates significant growth potential for our electrical business currently operate in the northeast.
Ali and mid Atlantic long term, we remain strategically focused on growing our coast to coast delivery offerings.
Activity that is happening today as potential to dramatically increase backlog in the near term larger energy infrastructure projects progressing through our pipeline combined with a normalized cadence smaller capital projects and maintenance activity could conceivably put us in a position to execute one of fiscal 2023 with the highest.
Backlog in several years.
These expected awards will provide a strong foundation for the future as we expect the next heavy award cycle and LNG peak shaving terminals and other large projects to continue into calendar 2023 and beyond.
This improving backlog position will come better margins full recovery of overhead SG&A leverage scale and positive bottom line results.
It is critically important that matrix is appropriately positioned to capitalize on the opportunity ahead of us by ensuring that we have the correct resources in place an organizational structure that supports business efficiency and then centered around delivering high quality solutions and services to our clients. We continue to strengthen the company through the consolidation of all fine.
Nance accounting and human resource functions into our shared services model. We have also created a center of operational excellence is to initially optimize procurement quality health and safety with the ultimate goal of providing various internal project management and proposal services across the organization.
Long range planning of our fabrication facilities and resources has been completed which will lead to investments to improve efficiency quality and markets served.
Also given changes in the current commercial office market. We are reviewing our fixed office environment for size location and capital efficiency and context to our strategic growth plans.
We have been on a multiyear mission to not just enhance our cost structure, but also to create an optimized and efficient organization prepared to support the company's growth plan aligned with the market opportunity and ultimately delivering better and consistent bottomline results in short we are highly confident in the market backdrop and continue to take.
Proactive steps to ensure a matrix is optimally positioned to deliver against it with that I'll open the call for questions.
Yes.
Ladies and gentlemen asked a question at this time please.
Jordan.
Thanks, Tom.
Thanks, Dan.
Jim.
No first question coming from the line of John <unk> with Sidoti. Your line is now open.
Good morning, John Kevin Thanks for taking the questions.
Good morning, John .
Let's start with the revenue that was deferred.
Specifically mentioned in the storage, but how much companywide was deferred and give me the magnitude when it's been deferred to.
So Kevin million kind of on the numbers. So we had a number of projects that were awarded.
In Q1 Q2.
And.
Early part of Q3 that we had anticipated starting to burn dollars on both the engineering and procurement that got delayed in some cases upwards of five months.
<unk>.
While our clients work through some re scoping.
In some cases, they had supply of critical pieces of equipment that they had to make choices on that affected our design and our ability to move on with design in order to materials.
And so.
The amount of that I'm not sure I can quantify Kevin might have a number of his head but.
In each of those cases.
It pushed it.
It pushed revenues that we thought we were going to start to burn into <unk> Q. We didn't start in some cases didn't start actually burning those revenues into a couple of weeks ago and so all of that has an impact against the organization.
Diminishing our revenues that we had anticipated specifically in the fourth quarter, yes. So John on the on the awarded projects I would say it primarily impacted the process and industrial facilities segment, and the storage and terminal solutions segment.
The exact amount, it's probably about a 10% impact plus 10% to 15% impact on each of those segments in the quarters My best estimate.
Okay, Okay fair enough.
The two problematic projects.
That you had in the quarter in utility and process.
Can you talk a little bit about what the issues were and are they fully resolved or is that something that you're worried about in coming quarters.
So one project the issue there so so.
Olympic both project in perspective, both those projects were fundamentally one during the height of the pandemic. So we we're we like our competition was very aggressive on winning that work.
To maintain our resources and as we move through the however, long this pandemic inspired downturn was going to last.
A kind of an overall statement too.
The project in the <unk>.
The process in industrial we had in that case.
We're not self performing to work.
<unk> has sub contracted the majority of the work to general contractor.
That caught that general contractor did not do their job and so we had to make a replacement of that contractor.
And then fundamentally in the middle of the job.
And as a result of that there were issues around the quality of work that was in place that we had to fix.
The supply of materials that werent paid for and so a variety of issues. There that we had to deal with that caused excess costs on the project.
We think we have that captured we understand what that is we've moved our own construction forces into the job to finish it.
So we are and where the job itself is probably 50% complete round numbers and but we think we've captured captured what the pain is associated with the direct cost on the job.
We still got to have fisticuffs with the general contractor on the job, but thats come in a later day.
Second job.
In the utilities and <unk>.
In power infrastructure.
That project.
In General I think has been challenged a little bit with supply chain issues.
We've said on previous calls that we really hadn't had material impact from inflationary.
Escalations, where we're starting to see that as we're rounding that job out.
And so that job is continues to be operating net out at a profit although at a lower profit than than what we had anticipated. It is on schedule on track for mechanical completion. This summer our client is extremely happy with us in fact, they're talking to us about some other projects.
And.
So where are we.
We are working through that.
So fairly comfortable that we think we've got the most of the risks manage there.
Okay, just thinking about how you referenced that you're still working through.
<unk> lower priced bookings.
When does the scale that you're going to have more repriced jobs that are more favorable margin and less of the low price unfavorable of launching that causes you to have under absorption just a general timeline. When you think that's going to materialize.
So John that's not a bright line right. So I can tell you that we've put projects into backlog over the last quarter that have margins that are in our our normal expected range.
But we've got some projects in some segments that are still at these sort of depressed.
<unk> margins, so it's going to be a transition I think that transition will occur as we move through the balance of this calendar year and so I would think by the time, we get to the.
Probably get into the second quarter of next fiscal year, we will see a higher percentage of the projects that we've got in backlog of new projects that we've got backlog at getting back to more of our traditional gross margin rates.
Okay, Thanks, guys I'll get back into queue.
Okay.
Sure.
I wanted to ask a question. Please proceed.
Our next question coming from the line of Jin Ramirez with D. A Davidson your line is open.
Good morning. This is John <unk> mirrors for Brent Thielman.
Good morning morning.
My first question is.
Given the inflationary environment is 200 million to $2 <unk> and revenue still the right ballpark.
To get to breakeven.
Or is it higher today.
So.
Our cost structure is still basically where we had planned it to be so but the margin opportunity as we talk.
<unk> is a bit lower so forever.
Percent.
Direct margin opportunity decreases it means we've got to do an additional $10 million of revenue to kind of cover cover that issue to get to breakeven. So it has increased a bit in this environment.
As John said as we move back toward.
The more normal margins that will come back down closer towards that $200 million breakeven level.
And just a follow up to that.
What is the timeline for that great Keith.
Or.
As you mentioned to the normal margins when do you expect to hit that point.
So throughout this fiscal year, it's been it's hard to predict the timing of awards and the delays we've had on capital projects and so it's been hard for us to predict exactly what the revenue level is going to be in that in that in the future quarters, but we do have a.
We did have good growth in <unk> I think that will continue in <unk>. So there is still a potential that we could reach breakeven in <unk>.
But if we don't <unk>, then I would expect it at some point in the first half of fiscal 'twenty three year.
Okay.
One more question.
Regarding your bid opportunities could you just give us some more color on the LNG and hydrogen market as well.
So we've got.
<unk>.
A fair amount of projects in the LNG.
Sector that we are.
These are proposing on.
In some cases like I said, we have started engineering on a mid scale.
LNG export terminal.
Where we see our greatest role in the future here will be really associated with LNG peak shaving terminals that we see that there is a significant amount of interest across the U S.
Utility market.
And so we have several new clients there that we're in the early stages of discussing.
So pre feed with.
You've also got a significant amount of the utilities across the U S already have some form of LNG storage or peak shaving facility in place that was built probably in the 70% <unk> debt needs.
Upgraded reviewed.
And studies done and so we have spent some time are doing some work for utilities on.
On that and in fact, I've had a couple of projects that have run through the system with some small repairs and some upgrades on them. So.
On a on a large scale LNG export facilities, which we think there will be several more come to market our role on those will be principally around the storage.
And the construction the engineering design and fabrication of the storage facilities. If they if they get added to those facilities and then there's opportunities for us on the import side and the Caribbean.
Other other.
Other Americas markets that we're tracking.
On the hydrogen side.
We see that again as a long term growth opportunity to hydrogen will be a play a major part in.
And the energy environment.
Across the across the globe, but specifically in the U S.
And so as we said in our prepared remarks, we have.
Feed study that we're executing on right now will come to a close here. This summer that we expect.
Will could get sanctioned into a project and there are smaller smaller level capital project, but there could be a few of them built by this client and so that creates opportunity plus we've been approached by.
Number of global energy companies to find a solution for large scale hydrogen storage.
Larger than what we've the market set traditionally designed and installed and then kind of on top of that to John's a cryogenic type topics. There is also a lot of work around ethane and ethylene and propane.
Both for export and for.
Domestic use so overall, we see a lot of growth.
So the cryogenic related energy storage and terminal markets.
And I feel we're very well positioned to take advantage of that growth.
Great. Thank you so much.
Appreciate it I'll jump back into queue.
And we have a follow up question from John <unk> with Sidoti Your line is open.
Yeah, John you seem fairly confident about holding high booking profile over the next couple of quarters.
You clearly outlined some of the programs.
Bidding on but if I look at it on a segment basis, given the different margin profiles, I'm curious, which segments are going to have the best order intake over the next two quarters and what's going to drive those orders.
I would say that the storage.
Storage and Pis.
And longer term Daniel then it will be.
There will be increased and the.
Upi.
Okay.
The big driver the big the big backlog driver in Upi as LNG peak shaving terminals.
Because it's a utility generally are utility based project.
Alright.
And I guess I want to go back listen to the hydrogen question a little bit.
I would've thought we would've been farther along by now as far as the.
The magnitude of project work.
Could you talk a little bit about you had the same anticipation perception that you'd have more project work right now or has something changed in the marketplace that is not coming as quickly as you would hope.
Well I think when you're talking about these sort of new energy transitional LMA assay.
They take a little bit longer to get put in place to get from a tactical standpoint, and from a financing perspective, we've bid and and our bidding.
Yes.
A few hydrogen.
Storage projects.
Some developer led projects that were unable to get to a financial close.
Some of the storage projects, we were not successful in winning.
Rob.
Again super competitive market.
And the people that want those one those storage projects took them for a price that we were willing to go to so.
So there has been activity there and so we've been.
In some cases have been caution.
Caution about our.
Our our aggressiveness.
Sure.
In other cases, it's just timing.
Plenty of activity out there is just timing.
Okay.
And maybe this one's for you Kevin Thanks move next to.
Cash took a hit in the quarter working capital I imagined the key indicator I haven't seen the cash flow statement yet.
Just curious how does the cash position change in the fourth quarter.
Little bit thoughts about what's going on in the puts and takes in cash.
Yes, so I'll address fourth quarter, let's talk about third quarter one.
If you look back at the start of the quarter. We ended with we started the quarter with what $92 million of cash.
That was really high because we have got some upfront payments from some customers and so during this quarter. When we think about the mix of work we've got going on.
We were working off of.
On capital projects that have been prepaid effectively.
And we have increased revenue volume and Reimbursable work.
And so.
Which we've got a fund so that's the combination that causes that.
Increase our investment in working capital.
In the quarter now a lot of that Reimbursable work that.
Increase continues on in the first let's say the first two months of the.
Fourth quarter, because it's a lot of us refinery related.
The traditional turnaround season, so when we think about <unk> cash flows I think we will see some some additional investment in working capital, but then that comes back towards the last month month and a half of the.
Of the quarter and then we've also.
We've talked about before we've got $13 million of tax refunds do.
Sometime in May or June .
That's still supposed to happen and then I think John mentioned in this call. We're trying to make sure that we're doing the right thing with our facilities and so there could be some cash flow that comes out of that activity. So I feel good about where we stand overall I think youre going to see cash.
<unk> increased significantly in the fourth quarter.
If everything goes as planned.
Okay. Good.
You just touched on this a little bit.
The tax line.
I think I heard in the prepared remarks.
We should be thinking about a high single digit.
Yes, I'm not sure. If you said for the balance of the year would you say until you return to profitability.
Just walk me through what you were trying to get out with that message.
So right now what you should expect on taxes as.
Any additional.
Tax assets that are generated right now are going to we're going to really put a valuation allowance on those so thankfully our tax rate is going to be near zero and then as we start as we returned to profitability.
We will get to utilize those Nols at at a high rate and so as a result, we'll probably going to have a tax rate in the mid single digits until those Nols.
Are utilized and we've got.
Over $20 million of Nols right now so.
That's a lot of income.
We'll basically have the zero tax on it.
Or minimal tax on it until those Nols are utilized.
Alright, thanks for the clarity I appreciate it guys.
Yes.
And I'm showing no further questions at this time I would now like to turn the conference call back over to Mr. John Hewitt for any closing remarks.
Thank you everybody for attending today's call.
I appreciate your confidence and an investment in <unk> and matrix.
And wish everybody a great summer. Thank you.
Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.
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Okay.
Sure.
Sure.
Yes.
Okay.
Thank you.
[music].
Yes.
Okay.
Sure.
Okay.
[music].
Thank you.
Okay.
Okay.
Yes.
Okay.
Yes.
Okay.
Okay.
Okay.
Okay.
[music].
[music].
[music].