Exchange: NASDAQ | Sector: Industrials | Industry: Engineering Construction
Q4 2024
Published: Sep 10, 2024
Earnings Highlights
Revenue of $189.50M down 7.9% year-over-year
EPS of $-0.16 decreased by 1% from previous year
Gross margin of 6.6%
Net income of -4.38M
"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." - John Hewitt, Chief Executive Officer
Matrix Service Company (MTRX) QQ4 2024 Results: Backlog Expansion, Moderate Near‑Term Margin Pressure, and a Clear 2025 Growth Path Amid Energy Infrastructure Demand
Executive Summary
Matrix Service Company delivered a revenue rebound in Q4 2024 with $189.5 million of top line, up 14% from Q3 2024 but down 7.9% year over year. The quarter produced a consolidated gross margin of 6.57% and a net loss of $4.38 million ($0.16 per fully diluted share), reflecting underrecovery of construction overhead amidst a lean revenue base. Backlog expanded more than 30% YoY to approximately $1.4 billion, supported by $176 million of awards in the quarter and a 1.5x book-to-bill, underscoring a robust near‑term pipeline. Management emphasized a strong multi‑segment growth trajectory into fiscal 2025 driven by Storage & Terminal Solutions and Utility & Power Infrastructure, with a total opportunity pipeline of about $6.1 billion and a 12– to 30‑month project cadence. The company reaffirmed its revenue guidance for fiscal 2025 of $900–$950 million, representing a 24%–30% YoY rise, and highlighted a lean balance sheet with zero debt and expanding liquidity, underpinning a return to profitability as overhead absorption improves with higher activity. Looking ahead, management cited megatrends in LNG, NGLs, ammonia, hydrogen and other renewable fuels as meaningful secular drivers across all segments, while signaling seasonality in Process & Industrial Facilities and ongoing improvements in the Electrical Infrastructure footprint. This report synthesizes the quarter’s financials with management commentary to provide a forward-looking view on margins, backlog conversion, cash generation and the risk/return profile for investors.
Net Income: -$4.378 million; Net Margin -2.31%; EPS -$0.16
EBITDA: -$1.389 million; EBITDA Margin -0.73%
Financial Highlights
- Q4 2024 Revenue: $189.499 million; QoQ +14.15%, YoY -7.94%
- Gross Profit: $12.447 million; Gross Margin 6.57%; YoY Gross Profit -15.3%; QoQ +123.1%
- Operating Income: -$4.846 million; Operating Margin -2.56%
- Net Income: -$4.378 million; Net Margin -2.31%; EPS -$0.16
- EBITDA: -$1.389 million; EBITDA Margin -0.73%
- Backlog: ~$1.4 billion; YoY backlog growth >30%; Book-to-Bill: 1.5; Q4 new awards: $176 million
- Cash Flow: Operating cash flow $46.904 million; Free cash flow $45.599 million; Cash end of period $115.615 million; Liquidity $170 million; Net debt: -$92.72 million (zero debt)
- Segment mix (Q4 2024): Storage & Terminal Solutions $70M, Utility & Power Infrastructure $65M, Process & Industrial Facilities $54M; Storage backlog ~$800M; Process backlog ~$252M; Total capex: $1.305 million
- 2025 Guidance: Revenue guidance $900–$950 million (YoY growth 24–30%) with expectation of improved profitability as revenue ramps; backlog conversion and overhead absorption to drive margin improvement
- Balance sheet health: Strong liquidity, zero debt, and a cash-rich balance sheet that supports anticipated revenue growth
- Key ratios: Current ratio 1.14, Quick ratio 1.10, Debt to capitalization ~0.12, Price-to-book ~1.58, Price-to-sales ~1.37, Net cash position supporting capex and working capital needs
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
189.50M
-7.94%
14.15%
Gross Profit
12.45M
-15.30%
123.14%
Operating Income
-4.85M
-86.60%
66.28%
Net Income
-4.38M
-1 202.68%
69.98%
EPS
-0.16
-1 190.32%
69.81%
Key Financial Ratios
currentRatio
1.14
grossProfitMargin
6.57%
operatingProfitMargin
-2.56%
netProfitMargin
-2.31%
returnOnAssets
-0.97%
returnOnEquity
-2.67%
debtEquityRatio
0.14
operatingCashFlowPerShare
$1.71
freeCashFlowPerShare
$1.66
priceToBookRatio
1.58
priceEarningsRatio
-14.83
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Strategy and Growth: Management emphasizes a strong backlog and a large opportunity pipeline (Backlog up >30% YoY to $1.4B; $6.1B pipeline) and expects 2025 revenue growth to accelerate as projects move from awards to revenue. Quote: “Backlog has increased by more than 30% on a year-over-year basis… a book-to-bill of 1.5” and “we began fiscal 2025 with a backlog of $1.4 billion and a $6.1 billion opportunity pipeline.” (John Hewitt)
- Margin dynamics and overhead: CFO Kevin Cavanah explains that gross margins were compressed by underrecovered construction overhead due to low revenue in Q4, but expects a return to normalized margins as revenue rises. Quote: “gross margin was 6.6% in the fourth quarter as margins were impacted by under recovered construction overhead costs… we expect higher revenue levels to allow for full recovery of construction overhead cost.”
- Segment outlook and cadence: Storage & Terminal Solutions and Utility & Power Infrastructure are expected to lead revenue growth in 2025; Process & Industrial Facilities will experience seasonality and a slower first half with a stronger second half. Quote: “we expect significant revenue growth for the Storage & Terminal Solutions segment in fiscal 2025” and “the first couple of quarters … will be pretty low” for Process & Industrial Facilities.
- Liquidity and balance sheet: Management stresses zero debt and solid cash generation, enabling the company to fund growth initiatives. Quote: “our debt position remains zero… the balance sheet and liquidity is strong and supports the anticipated revenue growth.”
- Hydrogen and energy transition: Management reiterates hydrogen and LNG-related opportunities and the company’s role in infrastructure for backup power and storage, while noting some development timing and policy headwinds. Quote: “hydrogen is going to be part of the global fuel mix… we have an opportunity to play a role in building that infrastructure… FEED studies” and “developers have slowed down activity due to policy credits.”
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.
— John Hewitt, Chief Executive Officer
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.
— Kevin Cavanah, Chief Financial Officer
Forward Guidance
- Revenue trajectory: FY2025 revenue guide of $900–$950 million implies 24–30% YoY growth, with revenue growth expected to accelerate after the first quarter as higher activity in Storage & Terminal Solutions and Utility & Power Infrastructure materializes.
- Margin trajectory: The company expects improved profitability as revenue increases and overhead absorption normalizes; management targets consolidated gross margins in the 10–12% range over time, with Process & Industrial Facilities historically in the 9–11% range.
- Backlog and cadence: Book-to-bill ≥1.0 annually remains a core objective, with the 12–18 month bid/award window supporting revenue visibility into 2025 and beyond.
- Capital discipline: Maintain a lean balance sheet and strong liquidity to fund backlog execution; no mandatory capex acceleration beyond project needs.
- Key monitoring factors for investors: speed of backlog conversion into revenue, progression of Storage & Terminal Solutions and LNG/NGL projects, recovery of overhead costs, oil/gas market demand cycles, regulatory Landscape affecting hydrogen rollouts, and geographic diversification of Electrical Infrastructure opportunities.
- Assessment: The 2025 outlook is achievable if overhead absorption continues to improve and storage/infrastructure projects ramp as anticipated; upside potential depends on faster award activity, favorable macro conditions, and execution efficiency across all segments.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
MTRX Focus
6.57%
-2.56%
-2.67%
-14.83%
EME
18.00%
8.41%
8.56%
11.99%
FIX
19.90%
8.81%
7.17%
20.07%
PRIM
10.30%
4.94%
3.05%
11.76%
GVA
10.10%
0.01%
2.66%
21.49%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Matrix Service is at a pivotal turning point with a clear path to a higher-revenue, higher-margin profile in fiscal 2025 driven by a substantial backlog, a broad and diversified opportunity pipeline, and secular energy-transition tailwinds. The zero-debt balance sheet and robust cash generation provide a solid foundation to fund backlog execution and pursue growth opportunities in LNG, NGLs, ammonia, hydrogen and data-center infrastructure. The key to unlocking value is to accelerate overhead absorption in line with the revenue ramp, stabilize the margin profile (targeting a 10–12% consolidated gross margin over time), and convert the sizable backlog into revenue across the Storage & Terminal Solutions and Utility & Power Infrastructure segments. Investors should monitor: (i) the pace of awards and backlog conversion, (ii) the trajectory of margin improvement as overhead absorption normalizes, (iii) the expansion of the Electrical Infrastructure footprint in the Northeast and Ohio Valley, (iv) regulatory and policy developments affecting hydrogen infrastructure and renewable fuels, and (v) the evolution of the company's capital allocation and free cash flow generation through 2025 and beyond. Given the 2025 revenue guide of $900–$950 million and a long-term pipeline of $6.1 billion, the stock presents optionality on a coming‑in‑line recovery of profitability and a multi-year growth runway, albeit with execution and market-cycle risk that investors should price in.
Key Investment Factors
Growth Potential
Backlog at $1.4B with a $6.1B opportunity pipeline supports multi-year revenue visibility. Management targets a 24–30% revenue rise in fiscal 2025 to $900–$950M, driven by Storage & Terminal Solutions and Utility & Power Infrastructure. The megatrends in LNG, NGLs, ammonia, hydrogen and related storage assets underpin a constructive long‑term growth trajectory across segments.
Profitability Risk
Near-term profitability hinges on overhead absorption as revenue ramps; seasonality in Process & Industrial Facilities may damp early-year margins; regulatory and policy uncertainty around hydrogen subsidies and infrastructure credits; dependence on project awards timing and macro energy demand cycles; competitive pressures on smaller, reimbursable projects.
Financial Position
Zero debt and a cash-positive balance sheet (end of period cash $115.6M; liquidity $170M; net debt of -$92.7M) provide fiscal resilience to fund backlog execution and growth investments. Operational cash flow of $46.9M in Q4 supports ongoing capex and working capital needs. The company maintains a lean cost structure to monetize higher activity.
SWOT Analysis
Strengths
Significant backlog expansion (+31% YoY) to ~$1.4B and a robust $6.1B near-term opportunity pipeline.
Zero debt and strong liquidity supporting growth and working capital needs.
Diversified segment profile (Storage & Terminal Solutions, Utility & Power Infrastructure, Process & Industrial Facilities) with exposure to LNG, NGLs, ammonia, hydrogen, renewable fuels and data-center related infrastructure.
Improved project execution delivering direct gross margins across segments and a trajectory toward the 10–12% consolidated gross margin target.
Free cash flow generation ($45.6M in Q4) and improving operating cash flow (~$46.9M in the quarter) enable deleveraging of overheads and capex funding.
Strategic emphasis on lean organization, cost control, and disciplined backlog management to sustain margin improvement and capital efficiency.
Weaknesses
Near-term negative earnings in Q4 2024 due to under recovered construction overhead from low revenue base.
Seasonality impact in Process & Industrial Facilities leading to lower near-term revenue and margin variability.
Short-term margin compression in Storage & Terminal Solutions due to under recovered overhead in a low-revenue quarter.
Dependence on timing of project awards and geopolitical energy demand cycles, which can affect backlog conversion and revenue ramp.
Concentration of growth in energy/infrastructure segments may expose the company to commodity cyclicality and regulatory shifts.
Opportunities
Growth in LNG peak shaving and LNG/ Storage projects that align with the energy transition and storage infrastructure demand.
Expansion of Electrical Infrastructure footprint to address Northeast softness and opportunities in transmission/distribution and data-center power needs.
Hydrogen ecosystem development (FEED studies, hydrogen infrastructure) and related cryogenic/corrosion/industrial capabilities to capture future projects.
Data center power resilience upgrades and small-scale power generation (LNG/hydrogen backup) leveraging existing capabilities.
Strengthening backlog-to-revenue conversion as larger lump-sum projects commence and ramp in 2025–2026.
Threats
Continued variability in award timing and regulatory environment affecting large energy projects.
Competitive pressure in smaller, reimbursable projects; price erosion risk in a crowded market.
Macroeconomic deceleration or energy price volatility that could dampen capex cycles and demand for LNG/NGL/storage facilities.
Execution risk in multiyear, multi-site projects that could impact margins if overruns occur.