Good afternoon, everybody. My name is John Farnsworth. I'm an analyst here at Sidoti & Company. Our next presentation today is Matrix Service Company, ticker MTRX. For those who are not familiar with the name, Matrix is an engineering and construction company to the oil, gas, utility, and industrial marketplaces. With us today, we have CFO Kevin Cavanah and Director of Investor Relations, Kellie Smythe. Following the presentation, there will be time for Q&A. Please utilize the Q&A icon to submit questions, and I will present them to management. With that said, thank you, everybody, for being here. The floor is yours.
Thank you, John. I have Kevin Cavanah here with me, and so I'm going to present some slides to you on Matrix Service Company, and then we'll open it up for questions. We always start all of our presentations with the safety moment. Our core values are what we run the company on, what we really live and breathe, and safety is our number one core value. So I know it's super cold across the country right now, colder in some areas than others. So just want to make sure that everybody is paying attention to the weather outside. These are just some safety tips. I won't read the slides to you, but just be aware of your surroundings, have a plan, and make sure you don't get caught in a bad situation. Okay, so let's kind of talk about the business. A few important takeaways here.
John mentioned that we're an experienced specialty engineering and construction company. We provide end-to-end services across the entire asset life cycle. We're uniquely positioned to capitalize on multi-year spending cycles within LNG and NGL infrastructure, data centers, advanced manufacturing, and utility infrastructure investment. We're in a transformational multi-year backlog to revenue conversion amid continued infrastructure investment growth, and our increased revenue supports expectations for operating leverage and margin realization, and last, we have a strong balance sheet and a disciplined capital allocation strategy to support both organic and inorganic growth, so a little bit about who we are. A specialty E&C company serving the energy and industrial markets. We're a leading provider of infrastructure solutions across multiple end markets. We're focused on complex infrastructure projects that require integrated solutions expertise, and our clients are mainly large energy companies and blue-chip clients in North America and international markets.
Approximately 90% of our revenue is with recurring customers. So let me bring your attention to the right side of this slide. We report our financial results in three operating segments: storage and terminal solutions. That's the legacy in our business. It represents 49% of our revenue over the trailing 12 months. Utility and Power Infrastructure representing 33% of our revenue over the last 12 months. And Process and Industrial Facilities at 18%. I'll kind of go into what each of these are in just a minute. Across the bottom of the slide, we've been in business for over 40 years and have 2,000 employees. We generated just shy of $770 million in fiscal 2025. Our year-end is June 30. We're guiding the street to $875-$925 million in fiscal 2026, which is a growth of 14%-20%. And we have $1.2 billion in backlog.
In terms of the work that we do, we provide full life cycle solutions in core end markets. Projects can be from feasibility and FEED studies through ongoing maintenance, repair, and upgrades, or can just be engineering or construction-only projects. In Storage and Terminal Solutions, our largest and fastest-growing segment, we provide services for liquid storage tanks and terminals. These include specialty vessels, including complex cryogenic infrastructure. This can include LNG bunkering, ammonia, NGLs, renewable fuels, carbon capture, and refined products. We also engineer and construct flat-bottom tanks and provide maintenance and repair services. In our Utility and Power Infrastructure segment, our revenues mainly come from LNG peak shaving storage facilities and traditional electrical work, but we also work in power generation and for data centers.
In the LNG peak shaving facilities, these are storage facilities like what we would do in storage and terminal solution segment, but this is work specifically for utility companies to build LNG peak shaving facilities. Our traditional electrical work includes substations, facility electrical and instrumentation, and grid upgrades, and then in power generation, services can include centerline erection, boilers and stacks, balance of plant, mechanical, and civil construction, and in data centers, we would engineer and construct storage tanks and balance of plant for backup fuel, backup power generation, and electrical interconnect for renewable power generation, and last, our Process and Industrial Facilities segment. We work in upstream, midstream, and downstream oil and gas.
We provide services to support refinery maintenance, repair and turnarounds, upgrades, and retrofits for renewable fuels, natural gas facilities, and we also leverage our cryogenic specialty vessel work within the aerospace industry where we have a leadership position in engineering and constructing thermal vacuum chambers, and lastly, we work in mining and minerals, which is critical to supporting demand for semiconductors and other electronic devices. A couple of key takeaways from this slide. We're committed to building and fostering safe and reliable operations and always delivering excellence and safety. We're focused on expanding our services in higher margin, high-growth end markets. We're building high-quality backlog that will translate into strong, consistent margin realization and will create multi-year revenue and visibility. We're committed to improved operating leverage, quality project execution, and we have a strong reputation for a disciplined capital allocation strategy.
We're hyper-focused on our current markets and our new high-growth markets where we have a big role to play. That said, across the end markets we serve, spending remains elevated. There are multi-industry tailwinds driving sustainable growth, and Matrix has a key part to play in each of these areas, whether it's in the data center, energy demand, low-carbon infrastructure, oil and gas demand, low-cost Feed stock, industrial manufacturing resurgence, or grid reliability and supply assurance. Matrix is one of the few contractors with deep experience required to design, construct, integrate, and maintain this complex infrastructure. In our high-growth markets, as I mentioned, in these high-growth markets, Matrix has a big role to play in data centers and semiconductors and advanced computer manufacturing.
Our services include engineering and constructing of storage tanks and balance of plant for backup fuel and backup power generation and more, and in power generation, that's centerline erection, boilers and stacks, balance of plant, mechanical, and civil construction. Let me talk a little bit about Q1 results. These are as of September 30. Our project teams are executing well. Our direct gross project profit is in the 10%-12% target range. We're growing revenue as expected and expect this to continue and translate into improving profitability. $187 million in awards in Q1. Strong backlog of $1.2 billion. This supports our fiscal 2026 outlook. The opportunity pipeline is healthy and is supported by investment in domestic energy and industrial infrastructure and favorable regulatory environment. Our streamlined organization further strengthens us to deliver on consistent performance, and we have reaffirmed our guidance of $875-$925 million.
Let me talk about the pipeline. We've had a consistent and strong opportunity pipeline across our core operating segments. The $6.7 billion pipeline of project opportunities gives us confidence in achieving sustainable and profitable growth as we move through fiscal 2026 and beyond. The opportunity pipeline consists of projects that are squarely in our wheelhouse. Many of these projects that we're currently pursuing are expected to be bid and awarded in the next 12-18 months, and once awarded, many of these projects will unfold over multi-year construction timelines, providing us with long-term revenue visibility and improved earnings consistency. While the timing of awards can be fluid, we expect that the level of awards will be similar to what we saw during the first quarter over the next couple of quarters.
This award portfolio will be made up of mid-sized projects on top of our normal cadence of small projects and maintenance work. These projects will reinforce our strong backlog, continue to provide more predictable revenue flow, and build our resource base as the business grows. And as we move into late fiscal 2026 and into 2027, we anticipate a re-acceleration in award activity on the larger multi-year projects. A little bit about our strategic framework. Our strategy remains anchored in three pillars: win, execute, and deliver. Through this framework, we will continue to focus on project discipline with the right clients, commercial structure, and timing of delivery. We'll apply our resume and brand leadership to not only our core markets and industrial and power infrastructure, but also expand into those new high-value verticals I discussed.
We'll deliver projects safely, on time, and on budget, and we'll enhance our operating leverage to drive strong profitability, cash generation, and a disciplined capital deployment. Our strategy is designed to create growth and stakeholder value. Our growth will come from a balance of both organic and inorganic investments across current and high-growth markets while ensuring we maintain a strong balance sheet. Specifically, in our core markets, we're looking to grow market share and geographic reach in our ENC services, in our core liquid storage terminals, enhance our operations depth, reach, and capabilities, target businesses that add skills and support growth in energy and industrial services, and expand our footprint in electrical and end market work, and finally, to expand our fixed-based maintenance work.
Regarding project awards and backlog, project awards in the first quarter were consistent with what we had anticipated at almost $188 million, with a book-to-bill of 0.9. Backlog remains strong at $1.2 billion and is supportive of our revenue guidance at the $875-$925 million. When we started the year, we mentioned that we were going into the year with 85% of our revenue booked at the midpoint of our guidance range. As a result of the awards during the first quarter, this percentage has increased to more than 90%, and we continue to be confident in our ability to achieve our revenue guidance. Just a couple of minutes on our performance. Revenue in the first quarter was $211.9 million, representing a 28% increase compared to $165 million in the first quarter of fiscal 2025.
This is mainly due to growth driven by our larger new construction projects in storage and terminal solution segment and also in the Utility and Power Infrastructure segment. We expect this revenue growth to continue as we move through the rest of the fiscal year. Consolidated gross margin increased to 6.7% versus 4.7% last year, driven by strong project execution and increased revenue volumes. As expected, the company incurred $3.3 million of restructuring costs in the first quarter related to organizational improvement actions, and the company has completed the bulk of the restructuring activity and expects minimal restructuring costs during the remainder of fiscal 2026. Liquidity remains strong at $248.9 million with no outstanding debt, and adjusted EBITDA in the first quarter was a positive $2.5 million compared to a loss of $5.9 million in the first quarter of last year. We have a disciplined balance sheet.
As expected, our cash decreased in the first quarter, ending at $217 million, down $32 million from the start of the quarter as the company continues to make progression on large projects and backlog that were in a prepaid position. Exiting the quarter, the balance sheet and liquidity remain in a strong position with liquidity of $249 million, and as I said before, no outstanding debt. We will continue to proactively manage the balance sheet and have the financial strength and liquidity needed to support the positive earnings inflection we anticipate as we progress through the fiscal year. To summarize, Matrix is a proven specialty ENC service provider. We have a track record of excellence and strong relationships with recurring clients. We have a well-capitalized balance sheet, strong backlog. We're poised for conversion to revenue and are in a multi-year infrastructure investment cycle and have a focus strategy.
To achieve our long-term targets, revenue level is critical to our earnings. We anticipate revenue growth to continue throughout the year. And with that, I'll open it up for questions. John?
Thank you very much, Kellie. If you have a question, please utilize the Q&A icon, and I can present it to management. With that said, can you talk a little bit about the backlog profile? It's been elevated for quite some time. Maybe you could discuss the composition of the backlog and how it's changed over time.
John, I'll take that. So yeah, so when I look at the backlog of $1 billion, first of all, the margin profile of that backlog is back up to our targeted 10% or greater gross margin. So if you just look at the weighted average of all the projects in backlog, it's above that 10%. So that's positive.
If you go back a few years, especially during the pandemic, that gross margin profile was 6%-7%. So significant improvement there. And when you look at the direct margin performance of the business, it's been at that 10% or better range the last year or so. We just haven't had enough revenue. Now, when you look at that backlog, it is supportive of the revenue guidance that we've put out there and the continued growth in revenue that we started in the beginning of fiscal 2025. So at that point, our revenue was $165 million, and now we've grown to over $210 million, and we expect that growth to continue through the remaining three quarters of the year. Now, the profile has changed. When you look at that backlog today, it's probably 70% weighted toward fixed-price projects and the other 30% being reimbursable or cost-plus type projects.
That profile was quite closer to 50/50 a few years ago. So the growth in the backlog and the growth in revenue is coming from larger new construction, greenfield construction projects, specifically in the Storage and Terminal Solutions and in the Utility and Power Infrastructure segments. So those two segments will lead the way in the growth that we expect through the rest of the fiscal year.
Makes sense. Makes sense. And regarding the opportunity pipeline that you presented, what's your typical hit rate on new jobs, and are some of the markets more favorable than others?
Yeah, it definitely varies by the type of job. If you look at LNG peak shaving opportunities or larger specialty storage tanks, we're usually one of two or three people competing for those projects, and our win percentage represents that. We're a 30%-40% type win rate on those types of projects.
You get to smaller projects, that win rate can be at 10%. So I'd say the weighted average win rate of our total backlog is a little bit better than 20%.
Got it. Makes sense. Question from the audience about technology and its potential impacting on gross margins, profit-to-free cash flow, and growing at TAM. Kellie, try to tackle that one.
Yeah. So technology is important. If you look back at what we've done, we've been working to become more efficient as a business and to translate that efficiency into added profit. So I think that technology is going to allow us to do a better job of day-to-day managing projects. We are implementing new systems related to project management, all aspects of a project. That's ongoing right now.
I think it will help us as we continue to advance our backup support systems, whether that be accounting system, HR systems, engineering systems. A couple of years ago, we implemented 3D technology in our engineering, a new aspect of that. So it's definitely helping us improve the business. Obviously, AI is a fairly new thing, and we continue to evaluate that as, "Okay, how does that help us? What makes sense?" You got to be careful with that and make sure that you don't sacrifice your quality of what you're delivering. So it's definitely an important part of our strategy as we move forward. We also see it as a growth driver into the market opportunities we have as a business.
When you think about what's required to provide all the infrastructure needed for all the advancements in AI and all the new data centers and what's required there, whether that be how we're getting power to the data centers, the generation of power for the data centers, of the interconnects, of renewables to grow the power base. That's all things that play right into our wheelhouse and present new opportunities. So right now, if you look at the backlog, it's a lot of LNG or specialty storage projects, but I think power generation and data center-related projects will become a bigger percentage of our revenue going forward. And so that is definitely a growth driver from a revenue perspective.
I guess in light of that, do you think your overhead structure is optimal given the backlog profile and the current delivery cycle?
I think our overhead profile supports a billion-dollar business, so we've got to continue to grow revenues. Once we get to a billion plus, then I'll tell you it's optimal, and if you look at the revenue guidance that Kellie mentioned, it definitely implies good revenue growth quarter over quarter through the rest of the year, and we'll be approaching that billion-dollar run rate by the end of the year based upon our projections.
You discussed maintaining a book-to-bill around 1.0 for the balance of the year. Can you talk a little bit about the competitive landscape in light of those expectations?
Yeah, I don't think the competitive landscape has changed too much. I think when I think about the market today and the types of terms and conditions we're being asked to sign up for, I think they're fair.
It's not really a buyer's market or a seller's market. It seems to be a lot of good opportunities to go around. So I don't think the competitive market is that big of a driver. I think the bigger driver is just the timing of specific awards. I think Kellie mentioned in her comments that when we look at project awards that are anticipated, some of the larger projects are two or three quarters out. There's still good mid-size projects available over the next two or three quarters, but the bigger projects will be toward the end of our fiscal year or the beginning of next fiscal year.
Well, how about the flip side of that question? Is it becoming more difficult to retain some key employees and improving revenue profile?
No. No, I think that was a bigger issue a while back.
I mean, always you got to challenge yourselves to keep and maintain the right people. But I don't think that's an impediment to our growth right now.
Fair enough. Last quarter, you had an unusual item, if you will. We removed two jobs from the backlog. For those who don't know about it, maybe you can kind of talk about it because it's so unusual in nature, and maybe just address that a little bit.
Yeah, so we removed two projects from backlog, and it wasn't unusual. The last time we removed a project of size from backlog was back in fiscal 2021. We removed a $74 million project from backlog in fiscal 2021. What's interesting about that is that project got resurfaced and was awarded to us, and we're now executing on that project. So what we've had this last so this is infrequent, what happened in Q1.
We had two projects we took out of backlog, one in the Utility and Power Infrastructure segment and one in the process and industrial facility segment. The project in utility and power was a project that was awarded in the fourth quarter of our fiscal 2025, so just a few months ago, and as we were going through the contract negotiations, our customer effectively tried to transfer risk to us that we weren't getting compensated for, and so we held firm on our proposal that the project was awarded based on and did not accept that additional risk for no compensation, so we ended up pulling that project out of backlog. That's unusual. We've talked about being disciplined, and we've got to sign up for good projects, and we bid a project based on every project we bid. We based on the terms and conditions, the risk profile.
And when that risk profile changes, that's not related to something we did. That's something we've got to be compensated for. So that came out. And then the other one was a project that was awarded back in the third quarter of fiscal 2023. This was in the process industrial facility segment. It was a gas processing project. One, we were just doing the construction only. The customer was doing the engineering. We were supposed to be out in the field on that project two years ago, but the engineering didn't get completed, and the scope kept changing. So as a result, the price of the project went up. And I think the customer is taking a different approach, trying to decrease the cost of the project by breaking the project up into smaller components and rebidding them. So as a result, we took the project out of backlog.
Now, we will be pursuing certain aspects of that project as those bids come out, but based upon the changes, it didn't meet our definition of firm, and so we decided we had to take that out.
Another question from the audience regarding the competitive landscape. They're curious about how do you compete and win projects when there are so many companies much larger than you in scale and maybe have more flexibility in their margins to outbid you?
Yeah, so the construction business is a competitive business, and because of that, Kellie mentioned our core values. We live those core values, and one of those is positive relationships, and we try to make sure we develop good long-term relationships with our clients. Well over 90% of our revenue comes from recurring customers, so we don't want to just do one project for a customer.
We want to do continual work for a customer. And so we deliver what we say we're going to do and try to make sure that the customer is happy with the quality of what they're getting with each and every project so that we can get the recurring work. The construction business is a relationship business. And anybody who's ever engaged a contractor, whether it be for a small project in your home or a large project within your business, you want to trust that contractor to do what they say they're going to do when they say they're going to do it and in the manner they say they're going to do it. And so that's important. I think we really try to live that.
And then I think the other thing is when you look at the types of projects we're pursuing, the types of projects we're putting in backlog. These are things we've done that we've got the experience in. We've really leveraged the 40-plus years we've been in business, and most of that's in strong storage background, plus some we've added capabilities. And we've leveraged that into the types of projects we pursue so that we're pursuing projects where we have the know-how, capabilities. We've been there. We've done that. Helps give the customer more confidence that we're going to do what we say we're going to do.
I guess one last question. I'm going to sneak it in here. Just talk a little bit about what investors should be thinking about in calendar 2026 in regards to your company.
I guess one of the things everyone's going to focus in on is the potential return to profitability and what's your confidence level of that?
Yeah. Well, I'm a big investor too. And so I'll tell you what I'm focusing on. And that's us doing what we said we were going to do. Delivering on the revenue growth is key. We started the first quarter of last year at $165 million of revenue, and we're trying to grow that to get to $250 million or above and get close to that $250 million by the end of the year. So I think us continuing to deliver what we said we're going to do is important. We've also indicated in previous calls that we've kind of got this financial model for this business. We know that if we do $210-$215 million of revenue, that's kind of break-even performance for us.
And that's what the first quarter was. And the first quarter came in in line with what we thought it would be. We've maintained guidance. And so we're focusing on that revenue growth. We know that our margins are going to continue to improve as that revenue grows. We get the revenues to 250 a quarter. Now we're fully recovering overheads in that 10% gross margin I've talked about in backlog comes through. And it also leverages that SG&A. Another important metric we're focused on is getting that SG&A percentage down to 6.5% of revenue. So at 250, we do that. So that revenue growth and doing what we said we're going to do is what I'm focused on.
Okay. Fair enough. Kevin, Kellie, thank you for your time today. With that, we'll close off the presentation, and I hope you'll have a great day. Great. Thank you. Thank you.
All right.