Q1 2025 Matrix Service Co Earnings Call
Speaker Change: If you require assistance at any time, please press star zero on your telephone. As a reminder, this conference is being recorded.
Speaker Change: Call is being recorded. I would now like to turn the conference over to today's host, Ms. Kellie Smythe, Senior Director of Investor Relations for Matrix Service Company.
Speaker Change: Thank you, Stephen. Good morning, and welcome to Matrix Service Company's first quarter fiscal 2025 earnings call. Participants on today's call include John Hewitt, President and Chief Executive Officer, and Kevin Cavanah, Vice President and Chief Financial Officer.
Speaker Change: The presentation materials referred to during the webcast today can be found under Events, Presentations.
on the Investor Relations section at MatrixServiceCompany.com.
Speaker Change: As a reminder, 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.
Speaker Change: Actual results may differ materially from those indicated by these forward-looking statements because of various factors, including those discussed in our most recent annual report on Form 10-K and in subsequent filings made by the company with the SEC.
Speaker Change: To the extent we utilize non-GAAP measures, reconciliations will be provided in various press releases, periodic SEC filings, and on our website.
Speaker Change: Related to investor corporate access opportunities, if you would like to have a conversation with management, I invite you to contact me through the Matrix Service Company Investor Relations website. You may also sign up to receive MTRX news by scanning the QR code on the screen.
Turning now to our safety moment.
Speaker Change: At Matrix, our safety culture is at the forefront of all the work we do. And while we work in challenging environments and markets, we believe a zero-incident workplace is achievable.
Speaker Change: As we have seen our end markets improve, employee headcounts rise, and workloads increase. We must also be mindful of the fact that in our business, nothing is more important than the safety and the health of our employees and those around us.
Speaker Change: It's also important to remember that safety extends far beyond just occupational safety. It means making sure the people around us are safe from discrimination and harassment of any form and feel safe sharing ideas or speaking up about issues or concerns.
Speaker Change: In every instance, our focus on safety has to be unwavering, regardless of any background noise.
Speaker Change: So, as we look forward to a much stronger fiscal 2025, we must all remember, the individual choices we make can and do make a difference.
Speaker Change: Please, own safety for yourself, your loved ones, your co-workers, and the community. In doing so, you can make an impact. I'm going to call over to John now.
Thank you, Kellie, and good morning, everyone.
John: As communicated on our last call, we began fiscal 2025 with backlog of $1.4 billion, providing us with a strong degree of visibility into the current year and beyond.
Speaker Change: We expected the current year to have a slow start, comparatively, due to the impact of the summer months, as well as completion of a large renewable diesel project in fiscal 2024, and as we begin to ramp up our large capital work.
Our first quarter results reflect those expectations.
Speaker Change: On strong project execution, we exited the first quarter maintaining our near-record backlog and expect our conversion of backlog to revenue to increase as we move through fiscal 2025.
Speaker Change: As backlog conversion accelerates and revenue improves, we will realize improved fixed-cost absorption, operating leverage, and margins.
Speaker Change: We continue to anticipate a return to profitability in fiscal 2025.
Speaker Change: The company's cash and barring position remains strong, consistent with our disciplined approach to balance sheet management. Our strategic focus is on higher margin specialty engineering and construction opportunities, the lean operating model, and returns-driven approach toward capital allocation.
Speaker Change: This focus provides Matrix a foundation for long-term value creation as we enter this next chapter for our business.
Speaker Change: Overall, there remain multiple variables that can affect the timing of awards and project starts, including the current presidential election, the legislative and regulatory environment, and the timing of customer investment decisions.
Speaker Change: Given both the strength of our backlog and opportunity pipeline, we are reaffirming our revenue guidance for fiscal 2025 at between $900 and $950 million, which is a year-over-year increase of 24 to 30 percent.
Speaker Change: Looking forward, the key megatrends driving the demand for our services provide significant long-term advantages and support our overall growth strategy.
Our teams continue to see robust...
Speaker Change: Increasing demand for LNG, NGL, and ammonia storage and terminal infrastructure.
Speaker Change: This demand encompasses a variety of projects, including greenfield facilities, expansions, upgrades and retrofits.
all aimed at supporting lower carbon initiatives.
Speaker Change: Enhancing system reliability and resilience, ensuring energy supply assurance, and meeting the growing global demand for low-cost feedstocks.
Speaker Change: During the quarter, and in partnership with another contractor, we were awarded the engineering and construction of a dual-service specialty vessel storage tank by Delaware River Partners.
Speaker Change: This tank, when completed in 2026, will provide service to LPG and ammonia markets on a global basis.
Speaker Change: The surge in demand for electric power to support data centers, AI, electrification of everything, as well as on-shoring and upgrading of industrial facilities and advanced manufacturing, supports a diverse mix of client project opportunities for Matrix over the coming decade.
Speaker Change: First, our traditional electrical work, which includes not only short-haul transmission and distribution and substations and interconnects, but also industrial electrical construction services, which all create growth opportunities beyond our traditional clients and geographies.
Second.
Speaker Change: Our legacy experience in gas fire generation can be applied to the construction of baseload, peaking, and backup generating facilities.
Speaker Change: Third, our market-leading specialty vessel and balsam plant capability for the use of LNG, ammonia, and hydrogen as backup and peak-shaving fuel storage provides us with project opportunities where Matrix is clearly differentiated from the competition.
Speaker Change: All of these substantial demands require the enterprise-wide expertise for which Matrix is known and are represented in our opportunity pipeline, which remains strong at approximately $6 billion.
Speaker Change: Given the strength of this pipeline, while book-to-bill may vary quarter-to-quarter, we expect to continue our book-to-bill trend at a ratio of 1.0 or greater on an annual basis.
Speaker Change: As a reminder, many of the opportunities we are currently pursuing are expected to be bid and awarded within the next 12 to 18 months. Once awarded, many of these projects will require an 18 to 30-month time frame to complete, providing continued long-term visibility in the revenue.
Speaker Change: This does not include smaller capital projects and maintenance activities performed under master service agreements and individual contracts that lay the foundation for many parts of the business and play a key role in leveraging SG&A and construction overhead costs.
Speaker Change: This, too, is an area where we are seeing increasing interest and opportunity for process facility turnarounds and plant maintenance, including nested services, all based on our reputation for quality and safety and our focus on building long-term relationships with our clients.
Speaker Change: In summary, with exceptional project execution, we started the year on a strong note, backlog remains near record levels, and we are maintaining our fiscal 2025 financial guidance, which includes a return to profitability this fiscal year.
Kevin Cavanah: consistent with our focus on long-term value creation for our shareholders. With that, I'll turn the call over to Kevin.
Kevin Cavanah: Thank you, John. The first quarter of the year went about as we anticipated from an operating results, backlog, and balance sheet perspective.
Kevin Cavanah: Revenue of $165.6 million was lower as compared to the $197.7 million in the first quarter of fiscal 2024.
Speaker Change: This is due mainly to the completion of a large renewable diesel project in fiscal 2024, which made for a challenging prior year comparison.
Speaker Change: Excluding this project, revenue declined 3% when compared to the prior year period. We expect this trend to reverse itself as our major capital project provides increasing revenue over the next few quarters.
Speaker Change: Due to reduced volumes of work for flat-bottom tank new build and repair and maintenance work, partially offset by increases in LNG storage and specialty vessel projects.
Speaker Change: Utility and Power Infrastructure segment revenue increased from over 70% to $55.9 million in the first quarter of fiscal 2025, compared to $32.4 million in the first quarter of fiscal 2024.
Speaker Change: benefiting from higher volumes of work associated with LNG peak shaving projects.
Speaker Change: And process and industrial facility segment revenue was $31.4 million in the first quarter of fiscal 2025.
Speaker Change: compared to $75.1 million in the first quarter of fiscal 2024. A large two-year renewable diesel project reached completion in the fourth quarter of fiscal 2024, resulting in a significant year-over-year revenue decline in our first quarter.
Speaker Change: The company believes this reduction is temporary given our strong backlog and opportunity funnel.
Speaker Change: Consolidated gross margin was $7.8 million, or 4.7% in the first quarter of fiscal 2025, compared to $11.9 million, or 6% in the first quarter of fiscal 2024.
Speaker Change: While project execution remained strong in all three segments, gross margins were negatively impacted by the under-recovery of construction overhead costs.
Speaker Change: The quarterly impact was over 600 basis points as a result of the lower revenue.
Speaker Change: Construction overhead resources for the enterprise have been structured to support the heavy proposal environment and anticipated revenue growth in each of our segments created by the strong market demand.
Speaker Change: We remain focused on continued high-quality project execution and efficient utilization of the cost structure. The negative construction overhead impact is expected to diminish quarter over quarter as revenue increases throughout the year.
Speaker Change: SG&A expenses were $18.6 million in the first quarter of fiscal 2025 compared to $17.1 million in the first quarter of fiscal 2024.
The company continues to leverage its overhead cost structure while...
Speaker Change: while also investing in a new and existing talent to support strong market demand and growth in our business.
Speaker Change: For the first quarter of fiscal 2025, the company had a net loss of $9.2 million, or $0.33 per share, compared to an adjusted net loss of $5.7 million, or $0.21 a share, for the first quarter of fiscal 2024.
Now let's discuss backlog.
Speaker Change: The company's backlog remained at near record levels in the first quarter of fiscal 2025, ending at $1.4 billion. Project awards totaled $148 million in the first quarter, in part due to continued strength in the storage and terminal solutions segment, resulting in a consolidated book-to-bill ratio of 0.9.
Speaker Change: for the quarter, and a thriving 12-month book-to-bill of $1.1 million.
Speaker Change: This backlog also includes first-year revenue from a recently renewed five-year contract at a Northwestern refinery where our teams have been on-site for more than 40 years.
Speaker Change: While this long-term refinery maintenance customer had previously reduced labor demand and turnaround services in fiscal 2024, this contract, which benefits our process and industrial facility segment, solidifies our on-site position for the coming years.
Speaker Change: It also provides matrix with additional opportunities for capital construction projects related to the refinery's sustainable energy program focused on producing sustainable aviation fuel.
As John mentioned earlier.
Speaker Change: The importance of MSAs and individual contracts like this play a key role in allowing us to leverage SG&A and construction overhead costs.
Speaker Change: Exiting quarter, the balance sheet and liquidity remain in a strong position. We generated $12 million in cash from operations, increasing our quarter-end cash balance to $150 million and our liquidity to $181 million. Our debt position remains at zero.
Speaker Change: We will continue to proactively manage the balance sheet and the financial strength and liquidity needed to support positive revenue inflection we anticipate as we progress through fiscal 2025.
Speaker Change: We also utilize a disciplined approach to capital allocation, one that seeks to maximize our return on invested capital over time while minimizing business risk.
Speaker Change: Finally, I want to take a minute to expand on our outlook. As Sean mentioned, we are maintaining our revenue guidance of $900 million to $950 million.
Speaker Change: In storage and thermal solutions, we expect revenue to increase each quarter as we move through the remainder of fiscal 2025.
Speaker Change: driven by projects already in backlog as well as the strong opportunity funnel.
Speaker Change: This activity is driven primarily by LNG, NGL, and ammonia storage and terminal infrastructure, and, as John mentioned, encompasses a variety of projects, including greenfield facilities, expansions, upgrades, and retrofits.
Speaker Change: In the utility and power infrastructure, we expect the growth trend to continuously move through fiscal 2025, driven by LNG peak-shaving projects as customers continue to prioritize investment.
Speaker Change: in Power Generation Reliability, Resilience, and Load Growth. This segment will also benefit from the increasing demand for power to support a diverse mix of projects for end markets that include data centers, AI, advanced manufacturing, and industrial reshoring.
and in Process and Industrial Facilities.
Speaker Change: We expect to improve primarily in the second half of the year as we enter turnaround season, begin work on projects already in backlog, and continue to pursue and capture additional project opportunities.
The improvement in our consolidated revenue
combined with a continued focus on execution excellence.
The Leverage of our Construction Overhead and Estimated Cost Structures.
Speaker Change: will allow us to return to profitability in the fiscal year and make significant progress towards the achievement of our long-term financial targets.
Speaker Change: This concludes our prepared remarks and we will now open for questions.
Speaker Change: Thank you. At this time, we will conduct the question and answer session. To ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster.
Thank you.
Speaker Change: Our first question comes from the line of John Fransrup of Sidoti. Your line is now open.
Good morning, everyone, and thanks for taking the questions.
Speaker Change: I'd like to start with the quarter. I was a little surprised, I guess, with the lower revenue that you got in the utility business. Was there anything unusual in the business, especially when compared to the fourth quarter tracking?
Speaker Change: are underway and, you know, we would expect a trend of increasing revenues quarter over quarter for the rest of the year.
Speaker Change: Okay and also on the quarter the SG&A line jumped up sequentially by a noticeable amount eighteen and a half million dollars versus
Speaker Change: Close with 17 and Q4. Can you just touch on that a bit?
Speaker Change: Yeah, so I, you know, overall I think the cost structure will continue to try to, you know, manage that. The only additions we would expect to the cost structure are really going to be around what we need to do to support growth. So when you look at the fourth quarter, the first quarter,
Speaker Change: We didn't have to add a lot of resources. The difference primarily was related to LTI, which our long-term incentive compensation, which is stock compensation, which is tied to
Speaker Change: I'm going to talk a little bit about the price of the stock. Our stock price increased from the fourth quarter to the first quarter. That increased our compensation expense. That was the primary driver.
Speaker Change: You know, I would expect when we're thinking about SG&A, it's going to be in that 18 million range would be my expectation based on everything I know for the rest of the year.
Speaker Change: Thanks, Kevin. And John, I think in your prepared remarks you said something along the lines that small project demand is maybe improving. Can you just talk to that? Because from what I recall, small projects was where it was most price competitive. Maybe just an overview of what's going on there.
Speaker Change: I don't know that the demand necessarily is increasing there. I just think we're at a stable demand level. I think one of the things we're trying to message here is that with Fiscal 24, we had
Speaker Change: some lower demand and some of our refinery maintenance work. And while those refiners was going through some
contract changes with their suppliers. We're through that now.
Speaker Change: And that's why I think we've got a little better visibility into, as Kevin has noted, we have a little better visibility.
not only for this year, but from a long-term basis.
Speaker Change: with specifically one of our clients in the refinery maintenance business that has stabilized as well. And we expect to see some opportunities on some capital work to add to that maintenance activity that we carry on for them on a weekly, monthly basis.
Speaker Change: Got it, understood. And just one last question, I'll get back into queue. Just your general thoughts of the changeover in the administration. It'd be nice to hear your thoughts about the puts and takes both positive and negative, as you see it on a go forward basis.
but the
Speaker Change: Each side says about what they're planning to do, you know, both economically and, you know, from a global trade perspective.
Speaker Change: My sense is that the change in administrations will be net positive for us from a business perspective.
Speaker Change: I think a reduced regulatory environment will be good for our clients, opening up more opportunities for infrastructure investment.
Um...
Speaker Change: And, you know, it's yet to be seen what's going to happen from a tax perspective.
Speaker Change: And yet to be seen, I think, on how the IRA, the Inflation Reduction Act, which supports a lot of renewable and hydrogen projects, where that ends up in the whole legislative
Speaker Change: One of the things that I would like to say is that I think there's a lot of bargaining that's probably going to go on related to my opinion related to tax laws. So my sense would be there will be a lot of give and take.
Speaker Change: across the across the markets, but I think immediate impact immediate impact for us will be
You know the
Speaker Change: The cancelling of the pause on new FERC permits for LNG for export.
Speaker Change: And we've got a couple projects in our queue that have been sort of lingering, waiting for that to happen.
Speaker Change: And so we expect, you know, you know, soon after the...
Speaker Change: Soon after the inauguration, that would be one of the first things that gets cancelled.
Speaker Change: And so we think that, you know, on a long-term basis, you know, would be a good thing.
Speaker Change: So, again, timing is always something that drives our awards backlog, but I think from a long-term basis, that will be good for us.
Speaker Change: Great, that's good to hear. Okay, I'll get back to you. Thanks for taking the questions.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Brent Thielman of DA Davidson. Your line is now open.
Speaker Change: Thanks, good morning. Hey John, I guess I was a little surprised the book to burn, it wasn't a little stronger this quarter especially just given kind of lower revenue levels.
Speaker Change: And I guess I'm just wondering if maybe there's a little bit of hesitation in moving things forward due to the election, or is it it's just simply timing here?
Speaker Change: Yeah, I mean, so it's timing, you know, we've got a couple of projects.
Speaker Change: We've got a lot of projects going on, but the bigger ones that create more momentum in the quarterly award cycle, we had anticipated at least one of those to hit the first quarter.
more than likely now to be in the second quarter.
Speaker Change: And so I think to some extent that's just the timing of the awards that we live with.
But the other
Speaker Change: As it relates to the whole election cycle, kind of mixed opinions from our clients. Some, you know, specifically said, yeah, well, we're kind of waiting around to see what happens. And we had a couple other clients that were pretty agnostic to whoever won from a business standpoint.
Speaker Change: It's hard to say, I'm sure it's got to be reflected a little bit in some of the decision making, I would think.
Yeah, understood.
Speaker Change: And I guess, I mean, look, you know, that just given the revenue start here, you know.
Speaker Change: seemingly would be contemplated in context of what you're expecting for the full year, which you're retaining, which is great. I think
Speaker Change: Is there anything else you can speak to in terms of this big ramp that you're projecting? What sort of progress you're really starting to see on projects, picking up, John or Kevin? I think anything you can kind of relay there I think would be helpful in just getting some more confidence around that range.
Thanks for tuning in.
Where they were.
Speaker Change: And, you know, at this point, some of that was tied up with some permitting issues from our clients that they were trying to get.
Speaker Change: completed, you know, those permitting issues then would hold up a full notice to proceed to us, you know, so while we were working on engineering and procurement getting into the, onto the job sites was certainly delayed.
Speaker Change: longer than we had expected. And so, you know, I think one of the probably one of the positive things in the quarter was a lot of that got resolved in the quarter, so that we now have more clarity as we look out over the
Speaker Change: over the next couple of years, certainly this year, about our ability to ramp the work up on those projects. And so I think for us, the big chunks of our backlog,
that are going to drive higher revenues.
The
Speaker Change: The things that were holding up our ability to really get rolling there, for the most part, are pretty much out of the way. And so that's why we feel better about, you're gonna see a consistent increase in revenues through the succeeding quarters here, through the course of this fiscal year, and frankly, into 2026.
Speaker Change: And on top of that, we've got a strong opportunity pipeline. We see more opportunities to book more work across all of our segments.
Speaker Change: And, you know, again, that's that's a timing thing, which is normal for our business. But, you know, that's going to also support, based on what we're seeing there, you know, that's also going to support increased revenues.
John: Okay, John, maybe just one more. You did speak to, you know, a lot of things still to try and predict here with election results, but...
Speaker Change: Yeah, certainly, you know, moratorium being lifted on LNG terminals, you know, I think might be a consensus to you there that that's going to happen. I guess that maybe is there any way to frame how much work you have tied up in that opportunity relative to some of the other things that you're pursuing out there?
there.
From an opportunity perspective, I think on a near-term basis,
Yeah, there's...
Probably a couple hundred million dollars worth of work.
Speaker Change: for us on a near-term basis, long-term, you know, could be quite a bit more, you know. So, you know, as we've consistently said, these larger-scale LNG export terminals
Speaker Change: Our role in those projects is going to be around the storage tank and so as those projects get
Speaker Change: get funded and they get released to start, you know, we would expect to be providing pricing to larger EPC contractors for the storage.
Speaker Change: and potentially, in some cases, for maybe some of the other disciplined work on those job sites.
Speaker Change: You know, whether that could be mechanical work or structural work or whatever.
Speaker Change: So I think, you know, as those projects get released, I think the opportunity for us will grow in our pipeline. But like I said, the near-term opportunity maybe is a couple hundred million bucks.
Very good. Thanks, guys.
Thank you.
Speaker Change: For our next question, we'll welcome back John Franzreth of Sudoti. Please go ahead.
Speaker Change: Yes, I guess it's worth touching on the flip side of the argument here. Can you just talk a little bit about your exposure to the wind and solar and other renewable markets?
Speaker Change: Yeah, we don't really have any direct exposure to wind and solar, so what I mean by that is we're not...
Speaker Change: There's nothing material in our Opportunity Pipeline or in our current backlog that we're installing wind turbines or we're putting in solar farms. So there's probably some indirect exposure through some of the electrical work we do in the Northeast.
Speaker Change: and, uh, but there's the, the, so that that's renewable generation, right? So, renewable fuels, like we said, we completed a pretty sizable project that was in 23 and 24.
Speaker Change: And I think we have other opportunities on a renewable fuels basis.
Speaker Change: in our Opportunity Pipeline. I can't speak to the volume of what that is, but...
Speaker Change: But that is an opportunity set where we've got involvement in.
Speaker Change: and with some of our refinery clients that we provide maintenance and turnaround services to. Some of those clients are looking to find ways to create more renewable fuel production and some of it around the lines of sustainable aviation fuels.
Speaker Change: I think, you know, where we see the opportunities for us to work in the renewable fuels market and sustainable aviation fuels, I don't know that that, I don't know that I have a sense that that's going to change.
Speaker Change: Got it. And I recognize that you reallocated some personnel from some process to some of the other businesses.
Speaker Change: But I'm just curious about staffing levels as revenues ramp up. Do you think you'll be able to have what you need or are you going to have to add to overhead? How does that kind of look as the projects start to execute?
Yeah, so we've taken, you know, from a...
Speaker Change: From an overhead perspective, you know, we've taken the opportunity to add some talent here and there
Speaker Change: and in the organization as we, not only as we ramp up execution on our book work, but as we see opportunities in the future in our opportunity pipeline.
Speaker Change: You know, our main focus has been over the last 12 months is to make sure that we've got the resources to execute the projects, and a lot of those costs are either in construction overhead or they go directly to the jobs.
Speaker Change: and so whether those are construction managers or project engineers or
discipline engineers, cost people or schedulers.
Speaker Change: which is sort of normal. I would say the market is tighter than it has been historically, but we are finding the resources that we need.
Okay, thank you for taking my follow-ups, John. Appreciate it.
Thank you. Bye.
Thank you.
Speaker Change: As a reminder, to ask a question, you'll need to press star 1 1.
Please stand by while we wait for additional questions.
Speaker Change: Okay, I'm showing no further questions at this time. I would now like to turn it back to Kellie Smythe for closing remarks.
Kellie Smythe: Thank you. As a reminder, if you'd like to have a conversation with management, please contact me through Matrix Service Company Investor Relations website. You may also sign up to receive the MTRX news by scanning the QR code on your screen. Thank you very much for your time.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Lana. Uh huh huh? Uh huh. Yeah. Mm.
We are all in this together.
Speaker Change: and Host Pareeh will explain together how do you play the game and how you find answers to your questions about the potential
Speaker Change: Good morning, and welcome to the Matrix Surface Company conference call to discuss results for the first quarter of fiscal 2025. Currently, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be given at that time.
Speaker Change: If you require assistance at any time, please press star zero on your telephone. As a reminder, this conference's call is being recorded. I would now like to turn the conference over to today's host, Ms. Kellie Smythe, Senior Director of Investor Relations for Matrix Service Company.
Speaker Change: Thank you, Stephen. Good morning and welcome to Matrix Service Company's first quarter fiscal 2025 earnings call.
Speaker Change: Participants on today's call include John Hewitt, President and Chief Executive Officer, and Kevin Cavanah, Vice President and Chief Financial Officer. The presentation materials referred to during the webcast today can be found under Events, Presentations on the Investor Relations section of MatrixServiceCompany.com.
Speaker Change: As a reminder, 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.
Speaker Change: Actual results may differ materially from those indicated by these forward-looking statements because of various factors, including those discussed in our most recent annual report on Form 10-K and in subsequent filings made by the company with the SEC.
Speaker Change: To the extent we utilize non-GAAP measures, reconciliations will be provided in various press releases, periodic SEC filings, and on our website.
Speaker Change: Related to investor corporate access opportunities, if you would like to have a conversation with management, I invite you to contact me through the Matrix Service Company Investor Relations website. You may also sign up to receive MTRX news by scanning the QR code on the screen.
Turning now to our safety moment.
Speaker Change: At Matrix, our safety culture is at the forefront of all the work we do. And while we work in challenging environments and markets, we believe a zero-incident workplace is achievable.
Speaker Change: As we have seen our end markets improve, employee headcounts rise, and workloads increase. We must also be mindful of the fact that in our business, nothing is more important than the safety and the health of our employees and those around us.
Speaker Change: It's also important to remember that safety extends far beyond just occupational safety. It means making sure that people around us are safe from discrimination and harassment of any form and feel safe sharing ideas or speaking up about issues or concerns.
Speaker Change: In every instance our focus on safety has to be unwavering regardless of any background noise.
Speaker Change: So, as we look forward to a much stronger fiscal 2025, we must all remember, the individual choices we make can and do make a difference.
Speaker Change: Please, own safety for yourself, your loved ones, your co-workers, and the community. In doing so, you can make an impact. I'm going to call over to John now.
Thank you, Kellie, and good morning, everyone.
Speaker Change: As communicated on our last call, we began fiscal 2025 with backlog of $1.4 billion, providing us with a strong degree of visibility into the current year and beyond.
Speaker Change: We expected the current year to have a slow start, comparatively, due to the impact of the summer months, as well as completion of a large renewable diesel project in fiscal 2024, and as we begin to ramp up our large capital work. Our first quarter results reflect those expectations.
Speaker Change: On strong project execution, we exited the first quarter maintaining our near-record backlog and expect our conversion of backlogs to revenue to increase as we move through fiscal 2025.
Speaker Change: As backlog conversion accelerates and revenue improves, we will realize improved fixed cost absorption, operating leverage, and margins.
Speaker Change: We continue to anticipate a return to profitability in fiscal 2025.
Speaker Change: The company's cash and borrowing position remains strong, consistent with our disciplined approach to balance sheet management.
Speaker Change: Our strategic focus is on higher-margin specialty engineering and construction opportunities, the lean operating model, and returns-driven approach toward capital allocation. This focus provides Matrix a foundation for long-term value creation as we enter this next chapter for our business.
Speaker Change: Overall, there remain multiple variables that can affect the timing of awards and project starts, including the current presidential election, the legislative and regulatory environment, and the timing of customer investment decisions.
Speaker Change: Given both the strength of our backlog and opportunity pipeline, we are reaffirming our revenue guidance for fiscal 2025 at between $900 and $950 million, which is a year-over-year increase of 24 to 30 percent.
Speaker Change: Looking forward, the key megatrends driving the demand for our services provide significant long-term advantages and support our overall growth strategy.
Our teams continue to see robust...
Speaker Change: Increasing demand for LNG, NGL, and ammonia storage and terminal infrastructure.
Speaker Change: This demand encompasses a variety of projects, including greenfield facilities, expansions, upgrades, and retrofits.
all aimed at supporting lower carbon initiatives.
Speaker Change: Enhancing system reliability and resilience, ensuring energy supply assurance, and meeting the growing global demand for low-cost feedstocks.
Speaker Change: During the quarter, and in partnership with another contractor, we were awarded the engineering and construction of a dual-service specialty vessel storage tank by Delaware River Partners.
Speaker Change: This tank, when completed in 2026, will provide service to LPG and ammonia markets on a global basis.
Speaker Change: The surge in demand for electric power to support data centers, AI, electrification of everything, as well as on-shoring and upgrading of industrial facilities and advanced manufacturing, supports a diverse mix of client project opportunities for Matrix over the coming decade.
Speaker Change: First, our traditional electrical work, which includes not only short-haul transmission and distribution and substations and interconnects, but also industrial electrical construction services, which all create growth opportunities beyond our traditional clients and geographies.
Second.
Speaker Change: Our legacy experience in gas fire generation can be applied to the construction of base load, peaking, and backup generating facilities.
Speaker Change: Third, our market-leading specialty vessel and balancer plant capability for the use of LNG, ammonia, and hydrogen as backup and peak-shaving fuel storage provides us with project opportunities where Matrix is clearly differentiated from the competition.
Speaker Change: All of these substantial demands require the enterprise-wide expertise for which Matrix is known and are represented in our opportunity pipeline which remains strong at approximately six billion.
Speaker Change: Given the strength of this pipeline, while book-to-bill may vary quarter-to-quarter, we expect to continue our book-to-bill trend at a ratio of 1-0 or greater on an annual basis.
Speaker Change: As a reminder, many of the opportunities we are currently pursuing are expected to be bid and awarded within the next 12 to 18 months. Once awarded, many of these projects will require an 18 to 30-month time frame to complete, providing continued long-term visibility in the revenue.
Speaker Change: This does not include smaller capital projects and maintenance activities performed under master service agreements and individual contracts that lay the foundation for many parts of the business and play a key role in leveraging SG&A and construction overhead costs.
Speaker Change: This, too, is an area where we are seeing increasing interest and opportunity for process facility turnarounds and plant maintenance, including nested services, all based on our reputation for quality and safety and our focus on building long-term relationships with our clients.
Speaker Change: consistent with our focus on long-term value creation for our shareholders. With that, I'll turn the call over to Kevin.
Kevin Cavanah: Thank you, John. The first quarter of the year went about as we anticipated from an operating results, backlog, and balance sheet perspective. Revenue of $165.6 million was lower as compared to the $197.7 million in the first quarter of fiscal 2024.
Kevin Cavanah: This is due mainly to the completion of a large renewable diesel project in fiscal 2024, which made for a challenging prior year comparison.
Kevin Cavanah: Excluding this project, revenue declined 3% when compared to the prior year period.
Kevin Cavanah: We expect this trend to reverse itself as our major capital project providing increasing revenue over the next few quarters.
Kevin Cavanah: Due to reduced volumes of work for flat-bottom tank new build and repair and maintenance work, partially offset by increases in LNG storage and specialty vessel projects.
Kevin Cavanah: Utility and Power Infrastructure segment revenue increased from over 70% to $55.9 million in the first quarter of fiscal 2025, compared to $32.4 million in the first quarter of fiscal 2024.
Speaker Change: benefiting from higher volumes work associated with the LNG peak shaving projects.
Speaker Change: And processing industrial facility segment revenue was $31.4 million in the first quarter of fiscal 2025.
Speaker Change: compared to $75.1 million in the first quarter of fiscal 2024. A large two-year renewable diesel project reached completion in the fourth quarter of fiscal 2024, resulting in a significant year-over-year revenue decline in our first quarter.
Speaker Change: The company believes this reduction is temporary given our strong backlog and opportunity funnel.
Speaker Change: Consolidated gross margin was $7.8 million, or 4.7% in the first quarter of fiscal 2025, compared to $11.9 million, or 6% in the first quarter of fiscal 2024.
Speaker Change: While project execution remained strong in all three segments, gross margins were negatively impacted by the under-recovery of construction overhead costs.
Speaker Change: The quarterly impact was over 600 basis points as a result of the lower revenue.
Speaker Change: Construction overhead resources for the enterprise have been structured to support the heavy proposal environment and anticipated revenue growth in each of our segments created by the strong market demand.
Speaker Change: We remain focused on continued high-quality project execution and efficient utilization of the cost structure. The negative construction overhead impact is expected to diminish quarter over quarter as revenue increases throughout the year.
Speaker Change: SG&A expenses were $18.6 million in the first quarter of fiscal 2025 compared to $17.1 million in the first quarter of fiscal 2024.
The company continues to leverage its overhead cost structure while...
Speaker Change: excuse me, while also investing in new and existing talent to support strong market demand and growth in our business.
Speaker Change: For the first quarter of fiscal 2025, the company had a net loss of $9.2 million, or $0.33 per share, compared to an adjusted net loss of $5.7 million, or $0.21 a share, for the first quarter of fiscal 2024.
Now let's discuss backlog.
Speaker Change: The company's backlog remained at near record levels in the first quarter of fiscal 2025, ending at $1.4 billion.
Speaker Change: Project awards totaled $148 million in the first quarter, in part due to continued strength in the storage and terminal solutions segment, resulting in a consolidated book-to-bill ratio of 0.9 for the quarter, and a trending 12-month book-to-bill of 1.1.
Speaker Change: This backlog also includes first-year revenue from a recently renewed five-year contract at a Northwestern refinery where our teams have been on-site for more than 40 years.
Speaker Change: While this long-term refinery maintenance customer had previously reduced labor demand and turnaround services in fiscal 2024, this contract, which benefits our process and industrial facility segment, solidifies our on-site position for the coming years.
Speaker Change: It also provides matrix with additional opportunities for capital construction projects related to the refineries.
Sustainable Energy Program focused on producing sustainable aviation fuel.
As John mentioned earlier.
Speaker Change: The importance of MSAs and individual contracts like this play a key role in allowing us to leverage SG&A and construction overhead costs.
Speaker Change: Exiting quarter, the balance sheet and liquidity remain in a strong position. We generated $12 million in cash from operations, increasing our quarter-end cash balance to $150 million.
Speaker Change: and our liquidity to 181 million. Our debt position remains at zero.
Speaker Change: We will continue to proactively manage the balance sheet, have the financial strength and liquidity needed to support positive revenue inflection we anticipate as we progress through fiscal 2025.
Speaker Change: We also utilize a disciplined approach to capital allocation, one that seeks to maximize our return on invested capital over time while minimizing business risk.
Speaker Change: Finally, I want to take a minute to expand on our outlook.
Speaker Change: As Sean mentioned, we are maintaining our revenue guidance of $900 to $950 million.
Speaker Change: In storage and thermal solutions, we expect revenue to increase each quarter as we move through the remainder of fiscal 2025.
Speaker Change: driven by projects already in backlog as well as the strong opportunity funnel.
Speaker Change: This activity is driven primarily by LNG, NGL, and ammonia storage and terminal infrastructure, and, as John mentioned, encompasses a variety of projects, including greenfield facilities, expansions, upgrades, and retrofits.
Speaker Change: In utility and power infrastructure, we expect the growth trend to continue as we move through fiscal 2025, driven by L&G peak-shaving projects as customers continue to prioritize investment.
Speaker Change: Empowered Generation Reliability, Resilience, and Load Growth. This segment will also benefit from the increasing demand for power to support a diverse mix of projects for end markets that include data centers, AI, advanced manufacturing, and industrial reshoring.
and in process and industrial facilities.
Speaker Change: We expect to improve primarily in the second half of the year as we enter turnaround season, begin work on projects already in backlog, and continue to pursue and capture additional project opportunities.