Matrix Service Company (NASDAQ:MTRX), a leading contractor to the energy, power and industrial markets across North America, today reported financial results for its first quarter ended September 30, 2016.

Key highlights:

“We are pleased with our first quarter results which reflect strong revenue and earnings per share, led by very strong operational performance in our Storage Solutions segment,” said Matrix Service Company President and Chief Executive Officer John R. Hewitt. “Additionally, project awards of almost $260 million support our fiscal 2017 revenue guidance.”

Related to the Company’s pipeline of project opportunities, Hewitt indicated that as the commodity markets begin to show signs of recovery, customers in the Company’s Storage and Oil Gas & Chemical segments are showing cautious optimism as demonstrated by their proposal activity, FEED work and planning requirements. The Electrical Infrastructure segment continues to have a strong contracting environment in both delivery and generation.

“Based on our long-term macro view of our business markets and the bidding environment we currently see, we expect capital projects and maintenance spending to increase over the next several quarters and into our fiscal 2018. Based on our strategic position in the marketplace and our strong client relationships, we remain confident in our ability to win projects that support our growth objectives and strategic vision,” he said.

First Quarter Fiscal 2017 Results

Consolidated revenue was $341.8 million for the three months ended September 30, 2016, compared to $319.3 million in the same period in the prior fiscal year. The 7.0% increase resulted from the strength of the Storage Solutions and Electrical Infrastructure segments. The Company earned $9.3 million, or $0.35 per fully diluted share in the first quarter of fiscal 2017 compared to $9.9 million, or $0.37 per fully diluted share in the prior year.

Consolidated gross profit was $32.3 million in the three months ended September 30, 2016 compared to $34.6 million in the three months ended September 30, 2015. The gross margin was 9.4% in the three months ended September 30, 2016 compared to 10.8% in the same period in the prior fiscal year. The difference in gross margin in fiscal 2017 was primarily caused by increased under recovery of construction overhead costs in certain segments due to lower business volume. It was also impacted by unsettled change orders, which have been recognized at zero margin, on a major electrical infrastructure project.

On a segment basis, Storage Solutions revenue increased 38.3% to $199.5 million in the three months ended September 30, 2016 as compared to $144.2 million in the same quarter last year. The growth resulted from continued progress on the six terminal project in North Dakota. Segment gross profit increased by $6.2 million due to higher revenue. The fiscal 2017 gross margin was 13.3% compared to 14.0% in the same period a year earlier as both periods benefited from effective project execution.

Electrical Infrastructure revenue increased to $88.0 million in the quarter as compared to $65.6 million in the same quarter last year. The 34.1% increase resulted from continued work on the gas fired power generating facility being constructed in Canada. Gross profit increased by $0.5 million in this segment as the impact of higher revenue was largely offset by a lower gross margin which decreased to 6.0% compared to 7.2% in the same period last year. The current year margin was impacted by a combination of lower margin work in our high voltage distribution business and, while improved, the under recovery of overhead costs. In addition, margins were effected by unsettled change orders as noted above.

Oil Gas & Chemical segment revenue was $32.5 million in the three months ended September 30, 2016 as refiners continue to limit spending as the result of continued volatility in commodity prices. In the first quarter of last year revenue was $68.3 million. Gross profit and margin were break-even for the three months ended September 30, 2016 compared to $5.7 million and 8.3%, respectively, in the same period last year. Current year gross profit and margin were affected by significantly lower volume which led to the under recovery of overhead costs.

Revenue in the Industrial segment decreased to $21.8 million in the three months ended September 30, 2016 as compared to $41.2 million in the prior year as a result of continued customer spending limitations in the metals industries. Gross profit decreased by $3.4 million to $0.6 million due to lower revenue and gross margin. The current year gross margin of 2.6% was negatively affected by lower volumes which led to under recovery of construction overhead costs. The fiscal 2016 first quarter gross margin of 9.6% was positively impacted by a stronger spending environment and solid project execution.

Consolidated SG&A expenses were $18.0 million in the three months ended September 30, 2016 compared to $19.5 million in the same period a year earlier. Lower SG&A expenses in the current quarter are primarily due to a reduction in the IT costs charged to the administrative portion of the business. In addition to this reduction, the Company contained SG&A spending, with no significant variances in the three months ended September 30, 2016 compared to the prior fiscal year.

Backlog

Backlog at September 30, 2016 was $786.6 million compared to $868.7 million at June 30, 2016 on project awards of $259.7 million.

Financial Position

Availability under the Company’s credit facility of $137.6 million along with the Company’s cash balance of $35.6 million provided liquidity of $173.2 million at September 30, 2016, a decrease of $57.6 million, or 25.0%, since June 30, 2016. The variance in liquidity is primarily attributable to the investment of working capital on projects in process.

Earnings Guidance

The Company is reaffirming fiscal 2017 revenue guidance of between $1.30 billion and $1.45 billion and earnings guidance of between $1.10 and $1.40 per fully diluted share.

Conference Call Details

In conjunction with the earnings release, Matrix Service Company will host a conference call with John R. Hewitt, President and CEO, and Kevin S. Cavanah, Vice President and CFO. The call will take place at 10:30 a.m. (Eastern) / 9:30 a.m. (Central) on Monday, November 7, 2016 and will be simultaneously broadcast live over the Internet which can be accessed at the Company’s website at matrixservicecompany.com on the Investors’ page under Conference Calls/Events. Please allow extra time prior to the call to visit the site and download the streaming media software required to listen to the Internet broadcast. The conference call will be recorded and will be available for replay within one hour of completion of the live call and can be accessed following the same link as the live call.

About Matrix Service Company

Matrix Service Company provides engineering, fabrication, construction and repair and maintenance services to the Electrical Infrastructure, Oil Gas & Chemical, Storage Solutions and Industrial markets.

The Company is headquartered in Tulsa, Oklahoma, with regional operating facilities throughout the United States, Canada and other international locations.