Executive Summary
Overview: Matrix Service Company reported a mixed Q3 2024, with revenue of $166.0 million (down 11% YoY, down 5% QoQ) and a net loss of $14.6 million ($0.53 per fully diluted share). The quarter featured a record backlog of $1.45 billion, up ~75% YoY, underscoring the strength of long-duration, high-value projects even as revenue recognition lags awards. Gross margin improved to 3.4% (+100 bp YoY), but was depressed by under-recovered fixed overhead from lower-than-anticipated activity and a retroactive margin adjustment tied to a three-year refinery maintenance contract. The company generated $24.8 million of cash from operations and ended the period with net cash (no outstanding debt) and about $69.7 million in cash, supporting optionality to fund backlog-driven growth.
Outlook: Management expects a material revenue and profitability ramp in the fourth quarter and into fiscal 2025 as backlog projects convert to revenue. The Storage & Terminal Solutions and Utility & Power Infrastructure segments are expected to be the growth engines, while Process & Industrial Facilities is anticipated to remain softer in the near term. The company emphasized its exposure to megatrends (LNG/NGL, hydrogen, data centers, and higher-quality electrical infrastructure), a robust opportunity pipeline (~$6.1 billion), and ongoing cost discipline. While execution risk and timing of project starts remain, the company believes it is well-positioned to move toward a positive earnings inflection as backlog begins to contribute meaningfully to revenue and margins.
Strategic posture: Matrix has narrowed its focus to higher-margin, higher-growth end-markets, expanded cryogenic and balance-of-plant capabilities, and maintained a disciplined approach to pricing and project selection. The long-run thesis rests on a diversified portfolio of multiyear projects and a strengthening backlog, supported by a resilient balance sheet and strong liquidity.
Key Performance Indicators
QoQ: -5.16% | YoY:-11.17%
QoQ: -47.32% | YoY:26.23%
QoQ: -179.46% | YoY:-12.63%
QoQ: -411.43% | YoY:-14.94%
QoQ: -430.00% | YoY:-12.77%
Key Insights
Revenue: $166.0M, YoY -11.17%, QoQ -5.16%
Gross Profit: $5.58M, Gross Margin 3.36% (YoY up ~100bp; limited by under-recovered overhead and contract mechanics)
Operating Income: -$14.37M, Margin -8.66%
Net Income: -$14.58M, Net Margin -8.78%
EPS (Diluted): -$0.53
Backlog: $1.45B (record); Storage & Terminal Solutions backlog $738M (+150% YoY); 11th straight quarter with book-to-bill ≥ 1; Awards in quarter: $187M
Cash flow: Operating cash flow $24.84M; Free cash flow $20.01M
Liquidity & ...
Financial Highlights
Revenue: $166.0M, YoY -11.17%, QoQ -5.16%
Gross Profit: $5.58M, Gross Margin 3.36% (YoY up ~100bp; limited by under-recovered overhead and contract mechanics)
Operating Income: -$14.37M, Margin -8.66%
Net Income: -$14.58M, Net Margin -8.78%
EPS (Diluted): -$0.53
Backlog: $1.45B (record); Storage & Terminal Solutions backlog $738M (+150% YoY); 11th straight quarter with book-to-bill ≥ 1; Awards in quarter: $187M
Cash flow: Operating cash flow $24.84M; Free cash flow $20.01M
Liquidity & Leverage: Cash at end of period $69.66M; Net cash positive with no outstanding debt (per management commentary); Current ratio 1.16; Debt to capitalization ~0.12; DSO ~112.7 days
Segment highlights: Storage & Terminal Solutions revenue $54.0M; Gross margin 4.3% (strong execution but under-recovery of fixed costs due to low revenue); Utility & Power Infrastructure revenue $46.0M; Process & Industrial Facilities revenue $66.0M; Combined impact: segment margins modest, with timing-driven revenue mix effects.
Backlog-to-revenue dynamics: Growth in backlog has not yet translated into proportionate revenue in 2024; management expects revenue ramp starting in Q4 and intensifying in FY2025.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
166.01M |
-11.17% |
-5.16% |
| Gross Profit |
5.58M |
26.23% |
-47.32% |
| Operating Income |
-14.37M |
-12.63% |
-179.46% |
| Net Income |
-14.58M |
-14.94% |
-411.43% |
| EPS |
-0.53 |
-12.77% |
-430.00% |
Key Financial Ratios
operatingProfitMargin
-8.66%
operatingCashFlowPerShare
$0.91
freeCashFlowPerShare
$0.73
Management Commentary
Theme: Backlog strength and long-cycle execution
- John Hewitt: “Backlog in the third quarter increased nearly 75% on a year-over-year basis, and we held our all-time high of $1.45 billion… We expect revenue to improve from here and continue to build through fiscal 2025.”
- John Hewitt: “We expect revenue to improve in Q4 and grow in a more meaningful way throughout fiscal year '25 and beyond.”
- Kevin Cavanah: “Total revenue was down to $166 million… We anticipate revenue improvement as we move from the third quarter into the fourth quarter. 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 have a material impact on revenue.”
- Kevin Cavanah: “Gross margin was 3.1% in the Utility & Power Infrastructure segment… the under-recovery of production overhead costs is temporary as the backlog is expected to drive higher revenue in the fourth quarter.”
- John Hewitt: “The large contracts are taking longer to convert to start dates due to internal governance and scope reviews; this is a timing issue, not a cancellation risk.”
Theme: Megatrends and market positioning
- John Hewitt: “Matrix is in the right markets at the right time with the right expertise and strategy to drive value creation for our shareholders.”
- John Hewitt: “We are benefiting from megatrends such as clean energy transition, LNG/NGL infrastructure, hydrogen, and data-center growth, with a long runway of multibillion-dollar project opportunities.”
Theme: Margin drivers and one-time effects
- Kevin Cavanah: “Gross margin would have been almost 600 basis points higher… due to under-recovered fixed costs from low revenue and a 200 bp impact from retroactive accounting on a three-year refinery maintenance contract.”
- Kevin Cavanah: “Stock compensation expense increased about $2.5 million due to a 33% rise in stock price, linked to cash-settled awards.”
Theme: Forward guidance and risk
- John Hewitt: “In the fourth quarter and fiscal 2025, we expect to see improvement in top and bottom line results as projects currently in backlog begin to benefit revenue.”
- John Hewitt: “The ramp is supported by backlog consisting of multiyear projects, strong markets and a robust opportunity; the company believes the earnings improvement trajectory remains intact.”
TranscriptQuotes:{
We expect revenue to improve from here and continue to build through fiscal 2025.
— John Hewitt, President & CEO
The opportunity pipeline clearly supports the long-term trend to maintain a strong backlog. Our opportunity pipeline remains strong at $6.1 billion.
— John Hewitt, President & CEO
Forward Guidance
Matrix framed a constructive near-term recovery thesis anchored in backlog-to-revenue conversion as major multiyear projects move from contracting/engineering to field execution. The company projects improved top-line growth in Q4 2024 and into FY2025, led by Storage & Terminal Solutions and Utility & Power Infrastructure, with Process & Industrial Facilities projected to be softer near term but offset by the other two segments. Management highlighted a number of risk factors that investors should monitor, including: (1) timing of project starts and the extent of backlog conversion into revenue; (2) potential under-recovery of overhead in periods of muted activity; (3) contract renegotiations and the impact of long-term maintenance agreements on margins; (4) market cyclicality in crude-tank, MRO, and electrical infrastructure markets; and (5) macro energy demand dynamics (LNG, NGL, hydrogen) and data-center growth.
Assessment: The guidance is cautiously constructive, contingent on project starts aligning with the company’s backlog and opportunity pipeline. Achievability hinges on a sustained revamp of revenue recognition timing and continued cost discipline; a meaningful margin expansion back toward historical double-digit levels will require a faster revenue ramp and absorption of fixed costs as backlog converts.