Matrix Service Company reiterates $875M-$925M revenue guidance for fiscal 2026 as backlog holds at $1.2B

Earnings Call Insights: Matrix Service Company (MTRX) Q1 2026

MANAGEMENT VIEW

* John Hewitt, CEO, reported strong execution to start fiscal 2026, highlighting "double-digit revenue growth and our highest quarterly gross margin in over 2 years." He attributed the results to maturation of backlog and disciplined project bidding, emphasizing a robust opportunity pipeline and reiterating full year revenue guidance of $875 million to $925 million. Hewitt stated, "Award activity in the quarter was stable, resulting in a book-to-bill of 0.9, and we ended the quarter with a total backlog of $1.2 billion."
* Hewitt addressed the removal of approximately $197 million from backlog related to two projects, clarifying "these removals do not reflect the reduction in demand, changes in the market or business performance issues. In both cases, the clients changed their commercial strategy and neither project had mobilized."
* Hewitt described recent organizational changes as having "enhanced our agility, competitiveness and performance," and reaffirmed commitment to disciplined capital allocation with a "strong balance sheet." He noted, "We have plenty of opportunities ahead of us, which will not only support this fiscal year, but will continue to create growth in fiscal 2027 and beyond."
* Kevin Cavanah, CFO, stated, "Revenue of $211.9 million represented a 28% increase compared to $165.6 million in the first quarter of fiscal 2025." He added, "Consolidated gross profit increased 82% to $14.2 million... Consolidated gross margin improved to 6.7% versus 4.7%."

OUTLOOK

* Hewitt reiterated fiscal 2026 full year revenue guidance of $875 million to $925 million, citing strong backlog and project pipeline. He stated, "We are reiterating our full year revenue guidance of $875 million to $925 million."
* Management expects continued gross margin improvement as backlog converts to revenue throughout the year. Hewitt highlighted anticipation for "a reacceleration in award activity for larger multiyear projects" in late fiscal 2026 and into fiscal 2027.
* The company expects the level of project awards to be "similar to what we saw during the fourth quarter" and maintains confidence in achieving revenue targets due to "more than 90%" of guidance midpoint already booked.

FINANCIAL RESULTS

* Revenue for the quarter was $211.9 million, up from $165.6 million, mainly driven by larger new construction projects in Storage and Terminal Solutions and Utility and Power Infrastructure.
* Gross profit climbed to $14.2 million from $7.8 million, with gross margin at 6.7% compared to 4.7% in the previous year.
* SG&A expenses dropped to $16.3 million or 7.7% of revenue, down from $18.6 million or 11.3% of revenue, attributed to recent efficiency changes.
* Net loss for the quarter was ($3.7 million), including $3.3 million in restructuring costs. Adjusted EPS excluding restructuring was a loss of ($0.01). Adjusted EBITDA was a positive $2.5 million, reversing a loss of ($5.9 million) last year.
* Backlog after project removals stands at $1.2 billion, with project awards totaling $187.8 million for a 0.9 book-to-bill. Cash ended the quarter at $217 million, down $32 million, with liquidity at $249 million and no debt.

Q&A

* John Franzreb, Sidoti & Company, LLC: Asked if the removal of two projects from backlog signaled a tougher competitive landscape for larger projects. CEO Hewitt replied, "I don't think both those situations were really not associated with...the competitive landscape," attributing removals to client strategy changes and risk profile.
* Franzreb asked about growth in midsized projects versus expected timing for large jobs. CEO Hewitt explained, "as the bigger projects come down through the opportunity pipeline...we're really comfortable about our positioning there," expecting midsized projects to maintain backlog until larger projects are awarded.
* Franzreb inquired about restructuring impact on breakeven. CFO Cavanah stated, "That's decreased to somewhere between $210 million and $215 million to get to breakeven."
* Augie Smith, D.A. Davidson & Co.: Asked about targeting gas power projects and company capabilities. CEO Hewitt detailed Matrix's legacy experience in gas-fired power plant builds and current skills, suggesting increasing opportunity as "more power generating related projects come into -- move from our prospects phase into our opportunity pipeline."
* Smith questioned if project removals would affect backlog trend. CEO Hewitt considered the split-bid situation a "one-off" and noted an industry shift toward contractors being locked up for infrastructure projects, calling it "a pretty good place to be in."

SENTIMENT ANALYSIS

* Analysts' tone was probing but not overtly negative, focusing on backlog removals, project pipeline, and restructuring effects, with repeated questions on the competitive environment and future project mix.
* Management's sentiment was confident and assertive in both prepared remarks and Q&A, using phrases like "we are reiterating our full year revenue guidance" and expressing comfort with the opportunity pipeline and project mix. CFO Cavanah highlighted cost structure improvement and impact on breakeven with clear, factual responses.
* Compared to the previous quarter, management maintained a similar level of confidence but provided more detailed explanations for backlog adjustments and cost management, while analysts maintained a neutral, information-seeking approach.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for fiscal 2026 revenue remains unchanged at $875 million to $925 million, consistent with Q4 2025's outlook.
* Backlog was reduced from $1.4 billion last quarter to $1.2 billion due to two project removals, though management stressed this does not reflect market weakness.
* Gross margin improved to 6.7% from negative margins in some segments last quarter, and SG&A as a percentage of revenue decreased, reflecting restructuring benefits.
* Management's tone remained confident, emphasizing execution, backlog quality, and opportunity pipeline, while analysts continued to focus on the sustainability of growth and risk of delays or competitive shifts.
* Strategic focus remains on disciplined bidding, operational efficiency, and capitalizing on infrastructure demand, with added clarity on risk management regarding project selection.

RISKS AND CONCERNS

* Management cited client-driven project removals from backlog, emphasizing strategic discipline and risk avoidance rather than market weakness.
* The company remains exposed to timing delays for large project awards, though a robust pipeline of midsized projects offers near-term stability.
* Analysts raised questions about the potential for competitive pressures and recurring project rebids but were reassured by management's view that such instances are isolated.
* Management highlighted ongoing focus on operational efficiency and cost control to maintain profitability targets.

FINAL TAKEAWAY

Matrix Service Company began fiscal 2026 with strong revenue growth, improved gross margins, and disciplined execution, supported by a healthy $1.2 billion backlog and robust opportunity pipeline. Management reiterated full year revenue guidance and emphasized confidence in achieving profitability, citing efficiency improvements and strategic project selection as central to driving long-term shareholder value.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/mtrx/earnings/transcripts]

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