管理層發言
Good morning. And welcome to the Matrix Service Company Conference Call to discuss results from the Fourth Quarter of Fiscal 2024. Currently all participants are in a listen only mode. Later we’ll conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference 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.
Thank you, Justin. Good morning. And welcome to Matrix Service Company's fourth quarter fiscal 2024 earnings call. 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 and Presentations on the Investor Relations section of matrixservicecompany.com. 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. 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.
To the extent we utilize non-GAAP measures, reconciliations will be provided in various press releases, periodic SEC filings and on our website. Related to investor conferences and corporate access opportunities, Matrix will be participating at the upcoming D.A. Davidson 23rd Annual Diversified Industrials and Service Conference in Nashville, Tennessee, September 18th through the 20th. If you would like additional information on this event or would like to have a conversation with management, I invite you to contact me through Matrix Service Company Investor Relations website. Before I turn the call over to John, I want to acknowledge that tomorrow marks the 23rd anniversary of 9/11 and the terrorist attacks that took place in New York at the US Pentagon and on Flight 93. 2,977 people died because of those acts and thousands more were injured. Among them, the first responders who sacrificed their own safety to save others.
As we begin our call today, I'd like for us to remember them and our veterans who, because of this event, actively engaged in the war on terrorism that we still fight today. It is through their actions and sacrifice that all of us are kept safe. As we remember them, I also ask that each of us contemplate the fact that except for extraordinary events like 9/11, through our own behaviors and actions, we have the ability and the responsibility to protect the physical and mental safety of ourselves and those around us. I will now turn the call over to John.
Thank you, Kellie, for this important message about sacrifice, safety and leadership to keep others safe. Our actions and behaviors matter. Please choose to own safety for yourself as well as those around you. I'd also like to personally thank our nation's military and first responders, past and present, for their unwavering commitment and service to protecting all of us. As we close out fiscal 2024, our fourth quarter represented an important inflection point for our business. We advanced work on multiple large projects during the quarter, which contributed to meaningful cash generation to close out the fiscal year. As we have seen through the course of fiscal 2024, project performance in the fourth quarter continued to be strong. And we fully expect that as revenues improve into fiscal 2025, so will the absorption of construction overhead costs. Backlog has increased by more than 30% on a year-over-year basis.
We added $176 million in new project awards in the fourth quarter, bringing total awards for the year to $1.1 billion and a book-to-bill of 1.5. And our opportunity pipeline continues to have significant strength, particularly in storage and storage-related facilities, which we expect to continue adding to backlog in the new fiscal year. These factors, combined with our strategic changes to the organization and our already booked multiyear projects, which are beginning to ramp up, give us visibility into revenue growth and improved profitability in 2025 and beyond. The key megatrends that are driving the demand for our services provide healthy long-term tailwinds for our business and continue to be a catalyst for infrastructure investment for LNG, NGLs, ammonia, hydrogen and other renewable fuels, providing significant opportunity across each of our reporting segments. As we enter fiscal 2025, in our Storage and Terminal Solutions segment, activity was robust in the quarter as we advanced work on a large backup fuel supply facility and a boil-off gas compressor project at an LNG storage facility in the Southeast.
We also added another Gulf Coast NGL storage project to backlog where we are already executing on several other NGL storage projects. In addition, our teams are currently pursuing approximately $3.2 billion of near-term projects supporting LNG, NGLs, ammonia, hydrogen and other products. In our Utility and Power Infrastructure segment, the need for system reliability and resilience is driving investments in utility generation and electrical infrastructure to meet power demand during peak periods as well as transmission and distribution, substation and other system upgrades to support the energy load growth, including energy-intensive data centers. Again, our expertise in all things LNG, terminals and related infrastructure have positioned Matrix as a leader in meeting demand for LNG peak shaving. Specifically, in the fourth quarter, we continued to work on two LNG peak shaving facilities along the East Coast, one of which is well underway, while in the other, we've broken ground and are beginning civil work.
Our team is also pursuing more than $1.2 billion in near-term projects in the Utility and Power Infrastructure space in support of system reliability and resilience, including an additional LNG peak shaver and multiple upgrades as well as substations, transmission and distribution systems and other infrastructure. Within our Process and Industrial Facilities segment, the clean energy transition is supporting project investment, along with continued demand for traditional hydrocarbon and other industrial infrastructure. Of note in the quarter, we completed work on a two-year refinery retrofit project on the West Coast for renewable diesel that grew in scope through the life of the project due to the quality of work of our team. We advanced work on a new state-of-the-art thermal vacuum chamber, and an existing refinery client extended our multiyear contract for providing embedded turnaround and plant services maintenance and repair work.
We were awarded a refinery turnaround for another long-standing client. We are currently pursuing $1.7 billion in near-term projects in this segment in multiple end markets, including natural gas, chemicals, petrochemicals, and mining and minerals. Overall, our opportunity pipeline remains strong at $6.1 billion, a key indicator of the strength across end markets and the ability to continue our long-term trend of backlog growth. As we have previously communicated, we expect the trend in our backlog, book-to-bill to continue at a ratio of 1.0 or greater on an annual basis. We keep this opportunity list, which contains projects we have bid, are bidding, and will bid updating monthly. While there can be movement in and out of this pipeline for various reasons, the long-term volume of opportunities has been stable and we expect that to continue. In general, 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. As a reminder, this does not include smaller capital projects and maintenance activities performed on our MSAs or individual contracts that lay the foundation for many parts of the business while supporting our strong customer relationships. As our profitability and free cash flow conversion improve, we will continue to prioritize maintaining a lean balance sheet and a strong liquidity position to support the growth of our business. Matrix is indeed at a critical turning point, following several years of low revenue that began with energy demand destruction during the pandemic and was followed by a protracted period with a limited number of projects available in our core markets that were bid in a highly competitive environment. During this time, we meaningfully transformed the company to focus on the end markets that present the best opportunities, fit our unique capabilities and are supported by strong macroeconomic and industrial drivers.
We streamlined the organization with a focus on reducing costs, enhancing project execution, and building backlog. We began fiscal 2025 with a backlog of $1.4 billion and as noted, a $6.1 billion opportunity pipeline. Combining continued strong project execution with accelerating revenues, the conversion of backlog, we believe the company is now on a trajectory of upward growth and profitability. Our visibility into this upward trajectory is significantly clear today, given the scheduled status of our portfolio of projects. That said, the business will always be impacted by the timing of awards on starch, which is dependent upon market fundamentals, our clients' decision-making and the regulatory environment in which they operate. In consideration of all these factors, our revenue guidance for fiscal 2025 is between $900 million and $950 million, which represents a year-over-year increase of 24% to 30%.
As I mentioned, the projects that support our outlook for 2025 are in the early stages and will continue to ramp up as we progress through the year. Given the estimated cadence of project activity during the year, we expect to recognize improved profitability as revenue increases. The year will have a slow start with the impact of the summer months as well as the recent completion of the large renewable diesel project noted earlier. Once we get past the first quarter, revenue growth should accelerate through the remainder of the year along with the associated operating results. Considering many of these projects will contribute to revenue for up to three years and the strong opportunity pipeline, the company is positioned for improved operating performance to extend into fiscal year 2026 and beyond. During this period of growth, we are committed to upholding the highest standards of safety, quality, and service.
We will stay focused on our strategy, maintain a strong balance sheet, and deliver outstanding quality service to our customers. Doing so will allow us to take advantage of the opportunities we see in the market and support our long-term growth objectives. With that, I'll turn the call over to Kevin.
Thank you, John. The results for the fourth quarter were in line with our expectations. As anticipated, revenue improved from the third quarter, increasing 14% to $189 million. We have previously discussed that the growth in our backlog has been fueled by long-term construction projects, which have an inherent lag between the time a project is awarded and when it begins to translate to revenue. These contracts make up a significant portion of our backlog and are just now beginning to benefit revenue. We expect that trend to continue in fiscal 2025. As John mentioned, the year will have a slow start. Once we get past the first quarter, revenue growth should accelerate through the remainder of the year, driven by the Storage and Terminal Solutions and Utility and Power Infrastructure segments. I will discuss revenue trends further when I get to the segment discussion. Project execution was strong in the quarter, particularly in the Process and Industrial Facilities segment.
While consolidated revenue increased, the company still has under-recovered construction overhead costs, which impacted the gross margin by over 400 basis points, resulting in a gross margin of 6.6%. Moving down the income statement. SG&A was $17.3 million in the quarter, which is in line with our targeted levels. For the fourth quarter of fiscal 2024, we had a net loss of $4.4 million or $0.16 per fully diluted share. Now for the operating segments. In the Storage and Terminal Solutions segment, revenue increased 30% to $70 million as work began on previously awarded specialty vessel projects compared to $54 million in the third quarter. We expect this trend to continue as we move through fiscal 2025, resulting in significant revenue growth. Gross margin was 3.1% in the quarter as margins were impacted by under-recovered construction overhead costs as a result of the low revenue and allocation of more construction resources to this segment to support the large backlog.
We expect revenue growth will eliminate the negative impact of this issue as we move through fiscal 2025. In the Utility and Power Infrastructure segment, fourth quarter revenue increased over 40% to $65 million as compared to the third quarter. The growth was driven by increased activity on previously awarded peak shaver projects. As we get through the seasonally slow first quarter, we expect the growth trend to continue through the remainder of fiscal 2025. Overall, we are expecting significant revenue growth for the Utility and Power Infrastructure segment in fiscal 2025. That growth will be driven by peak shaver projects. We also continue to focus on the power delivery business, which has experienced a softer market in the Northeastern geographic areas we serve. Our operations and business development leadership is expanding the footprint and client base to address this softness with the goal of improving revenues in this market over the next few quarters.
Gross margin was 4.2% in the fourth quarter as margins were impacted by under-recovered construction overhead costs due to the low revenue in the power delivery business and allocation of additional resources to support the large peak shaver backlog. As we move through fiscal 2025, we expect higher revenue levels to allow for full recovery of construction overhead costs. In the Process and Industrial Facilities segment, fourth quarter revenue decreased 17% to $54 million as compared to the third quarter. As John noted, during the fourth quarter, the company successfully completed a large renewable diesel project. This project highlights the application of our traditional energy capabilities to renewable projects. The prospects in the Process and Industrial Facilities segment are strong and include refining natural gas, chemicals, petrochemicals, and mining and minerals. We expect substantially lower revenue for this segment over the next couple of quarters due to the combination of seasonality, timing on the kickoff of previously awarded projects and the award cycle for new projects.
We believe this reduction in revenue is temporary given a strong opportunity pipeline and backlog of $252 million, including a significant gas processing construction project that is expected to commence in late fiscal 2025. The segment gross margin in the fourth quarter was significantly higher than normal expectations of 15.4% due to overall strong project execution across the entire portfolio of projects. Now let's discuss the balance sheet and liquidity. Our balance sheet continued to strengthen during the fourth quarter as we generated $47 million in cash from operations, increasing our year-end cash balance to 48% in the quarter to $141 million. This cash increase also drove a 26% increase in liquidity to $170 million. Our debt position remains zero. We will continue to proactively manage the balance sheet and have the financial strength and liquidity needed to support the significant revenue growth we are anticipating in fiscal 2025.
Before I turn the call back to John, I want to take a minute for a high-level recap. First, our backlog increased 31% on $1.1 billion in awards. This is the second consecutive year that the company exceeded $1 billion in project awards. This current backlog of $1.4 billion supports our 10% to 12% consolidated gross margin range. The company also continues to have a robust funnel of future opportunities. Our revenue was $728 million in fiscal 2024, impacted primarily by delays in converting project awards into active projects. With many of those projects now having commenced, we believe the backlog and opportunity funnel we have supports significant revenue growth in fiscal 2025 and beyond. The company successfully improved project execution during fiscal 2024 with all three segments producing direct gross margins approaching our consolidated target range of 10% to 12%. The issue for margin performance in fiscal 2024 was related to the recovery of construction overhead, which impacted gross margins by almost 400 basis points, primarily as a result of the timing of backlog conversion to revenue.
Our visibility into higher future revenue provides the company confidence the overhead recovery issue will be significantly diminished in fiscal 2025. The company continues disciplined cost structure management with the goal of limiting cost growth to the capture and execution of projects to the extent possible. This will allow for the leverage of the cost structure. And finally, the company's balance sheet and liquidity is strong and supports the anticipated revenue growth. In summary, the company expects revenue of $900 million to $950 million in fiscal 2025. We believe the combination of revenue growth, together with continued focus on execution excellence and the leverage of our cost structure will allow us to return to profitability in the fiscal year and make significant progress towards the achievement of our long-term financial targets. I'll now turn the call back to John.
Thank you, Kevin. As mentioned, our fourth quarter represented an important turning point for what has been a challenging period for the company. With clear visibility into revenue growth and improved profitability in 2025 and beyond, we continue to advance our growth strategy for creating long-term shareholder value. In closing, I'm deeply grateful for the hard work, innovation, and commitment of our employees, for their continued confidence placed in us by our clients whose loyalty inspires us to push the boundaries of excellence in every critical infrastructure project we undertake and for you, our shareholders, who remain committed to Matrix Service Company. With that, I'll open the call for questions.
分析師問答
Our first question comes from John Franzreb from Sidoti & Company.
I'd actually like to start with the gross margins that you reported in the quarter. I guess I want to start with the good. Can you talk a little bit about why the Process gross margin was still outstanding at 15.4% in the quarter, and how does that look like on a go-forward basis?
So the fourth quarter performance in the Process Industrial Facilities segment was extremely strong and what we saw was just about every operating unit in that segment significantly exceed normal performance. So that's the result of strong execution throughout all phases of projects from the starter projects through the closeout of projects. Normally, that's not the case where everything just is working like clockwork. I think for the long term, our expectations for that segment are to get consistently 9% to 11% gross margins. Remember, this segment includes a lot of reimbursable activity and so the mix of work in the quarter, the reimbursable refinery maintenance activity, wasn't as high as it normally is. So that also contributed to the higher margins in the quarter.
And on a go-forward basis when we think about the gross margin profile, are the jobs that we're executing now on, are they back to normalized gross margins or are there still some jobs that you'll be delivering that are still under-recovery of absorbed costs?
So if you look at the portfolio of projects we've got today, we're past those issues where we had unusually competitively bid margins. The projects we've been adding in the last 18, 24 months are in that historical range for the most part of that historical 10% to 12% range. Now there will certainly be projects we strategically bid a little more aggressively to win that project for various reasons, including maybe it's we want to expand our relationship with that client. And then there's always a mix of projects. You get into smaller projects, there may be a higher level of competition, more people that are capable of doing that work. And so you may have to be a little more aggressive on that type of work versus larger projects. But I would say we're back to a normal overall normal mix of work that supports the margins we expect.
As we think about the cadence of revenue recognition in the coming year, it seems two things to me. One, we're looking at a sizable uptick in the Storage business. Is that the case and is that completely weighted in the second half of the year? And secondly, it looks like the Process is going to probably be at a lower diminished level through much of 2025. Am I reading that right?
For the Storage segment, we currently have nearly $800 million in backlog. These projects are just starting, and we anticipate strong growth in this area, especially throughout the year. We expect a strong start in the first quarter, with continued growth as the year goes on. On the other hand, the Process and Industrial Facilities segment is experiencing a slowdown. We recently finished a significant project, as mentioned previously, and we're in the slower summer months for refinements. Additionally, some backlog projects won't kick off until later in fiscal year '25. Therefore, the first half of the year for this segment will likely see lower activity, with a notable decline expected before it starts to improve in the third and fourth quarters.
Our next question comes from Brent Thielman from D.A. Davidson.
Just wanted to follow up on just kind of the sequencing of that revenue as we work through fiscal 2025. I appreciate the revenue guidance, by the way. But sounds like maybe you're expecting still some more difficult or challenging kind of year-on-year compares in the first fiscal quarter. But your revenue did grow in this fourth quarter relative to the third quarter. So it seems like things are picking up for you. Would you expect some sequential revenue growth into the first fiscal quarter?
No, I think there are a couple of factors that might prevent that from happening. First, we have seasonal activity in both the power delivery and refining businesses during the summer months. Additionally, we are completing a large project in the Process Industrial Facilities segment. While growth in Storage, particularly in the first quarter, may offset this somewhat, overall, I wouldn't anticipate growth. It might be slightly lower in the first quarter.
And then John, returning to the electrical delivery business, there has been much discussion about the need for investment and improvements to the grid. It's somewhat unexpected to hear about challenges in that area. Could you explain what those specific challenges are with those customers? Also, how quickly do you believe we can improve this business as you implement actions to refocus and attract new customers?
Our Electrical Infrastructure business operates in a relatively limited geographic area compared to the whole United States. We have several long-term clients in that region, engaging with them through contracts, choice arrangements, and bids for projects. Recently, we've observed a slight decrease in their spending patterns, which seem to occur cyclically, along with a reduction in the size of projects. The competitive landscape remains tough. Over the past six months, we've recognized this trend starting to reverse. We're concentrating our efforts in the Northeast while also expanding into new areas and engaging with clients where there is increased capital investment in transmission, distribution, and substation projects. We're actively fostering those relationships and participating in their bidding processes. We're seeing promising opportunities arising for our business. Moreover, there is considerable industrial electrical work in our operating region, particularly in power generation facilities and data centers, which we are also targeting to grow our business.
While this will require time, we anticipate that within the next two to three quarters, our Electrical Infrastructure business will show significant improvement. We're also exploring new regions for expansion. We've been involved in the Ohio Valley and see potential for further growth in that area. We believe that the electrical segment of our business is a vital growth component for the future, and we will continue to pursue business development and resource strategies to expand this sector.
And John, maybe just one more. I mean a lot of conversations, obviously, about the demand consumption of data centers on the power grid, on power in general. As you're looking at your pipeline of prospects, $6 billion-plus, are you starting to identify projects that may be associated with meeting those needs, particularly serving the power sector?
Yes, definitely. Our initial efforts regarding data centers will focus on the transmission distribution work and the integration of a data center into a local grid system. We completed a significant project for a client in Pennsylvania a couple of years ago where we connected the facility, installed the substation, and handled all the grid interconnection. There are still opportunities in this area driving our project pipeline. Additionally, we’re observing that the substantial demand created by data centers for power necessitates a continuous and guaranteed power supply. These data centers must assure their clients that their systems will remain operational at all times. Consequently, we are also starting to see the installation of small-scale power generating turbines at data center locations, including LNG and hydrogen backup fuel for their individual power generation, utilizing aero-derivative turbines. All this work aligns with our expertise, whether it involves the installation of these turbines, various electrical tasks, or infrastructure related to LNG and hydrogen to support backup power for those data centers. The scope extends beyond merely building a data center and connecting it to the grid, and we believe these opportunities will continue to grow in the future, positioning us well to capitalize on them.
And we have a follow-up question. One moment, please. And our follow-up question comes from John Franzreb from Sidoti & Company.
I have a question about the opportunity pipeline. Does it include service revenue or projects under $5 million? I'm curious what percentage of revenue for fiscal 2024 comes from that service component and smaller projects, which we might consider as book and turn business. Is that a normal run rate, or is it unusually high or low? I just wanted to provide some context.
Our business typically consists of 40% maintenance activity and 60% lump sum projects, which can range from $5 million to $10 million up to $300 million. Generally, this portfolio mix falls within the 40-60 range. However, currently, due to the size of our lump sum portfolio in both our Storage and UPI businesses, it is closer to 30-70. The positive aspect of this shift is that it leads to more sustainable revenue for us in the long term and contributes to improved consolidated margins.
And I also noticed in the presentation and this might be just me, I don't know, nitpicking, but you changed the characterization of the opportunity pipeline, kind of reported it on a segment basis as opposed to like a more granular breakdown by end markets. Any particular reason why?
We organize our business into segments, and over the past couple of years, we’ve aimed to highlight our efforts in the energy transition to help investors understand our impact. We felt it was the right time to return to how we report on the rest of the business within our segments. That was really our main rationale behind the change. It wasn’t anything controversial, John.
And can you just talk a little bit about the competitive landscape? Are you seeing any changes in the pricing environment, either one way or the other?
The competitive landscape appears to be consistent with our usual experience. The smaller projects and reimbursable work remain highly competitive, but I wouldn't say it has improved or worsened; it seems to have returned to normal. However, as project sizes increase, particularly in Storage where we integrate our specialty vessel with full facilities, the competition significantly diminishes. These larger projects, which combine specialty storage with facility infrastructure, are crucial for us. They not only return, but they also provide better margins and an improved risk profile. The competitors we face in these projects are limited, and they typically do not engage in irrational practices that could increase risk beyond what we can manage. Overall, the landscape appears more favorable as these Storage and UPI projects come online.
And one last question, then. Just only because I recently heard this and this topic hasn't come up in a while. Could you give us an update on your thoughts of the hydrogen market? Only because I just recently heard it come back in vogue a little bit. What are you hearing there, John?
I believe hydrogen will play a role in the global fuel mix in the future. However, I don't expect a completely hydrogen-based economy. It's going to be part of the overall energy landscape, and we have a chance to contribute to the development of that infrastructure through our specialty and cryogenic vessel capabilities, as well as our ability to integrate our infrastructure. We are noticing ongoing opportunities in front-end engineering and design studies, and preliminary engineering work for various hydrogen projects. Some of this may have slowed down due to the recent Federal Infrastructure Act and its impact on the credits associated with renewable fuels needed for hydrogen facilities, which has temporarily set back stakeholders focused on hydrogen. Additionally, since reorganizing our business development group, we have adopted a more cautious approach towards developer-led projects. Our focus has shifted to long-term, reputable clients with solid financial foundations, such as utilities, energy companies, and industrial firms. There has been considerable activity in developer-led hydrogen projects in recent years, but we are currently exercising caution in our dealings with developers.
And I am showing no further questions. I would now like to turn the call back over to Kellie Smythe, Senior Director of Investor Relations for closing remarks.
Thank you. As a reminder, Matrix will be participating at the upcoming D.A. Davidson Conference, September 18th through the 20th in Nashville. And if you'd like additional information on our attendance at that conference or conversation with management, please contact me through Matrix Service Company Investor Relations website. Thank you for your time.
This concludes today's conference call. Thank you for participating. You may now disconnect.