Matrix Service Q4 2025 Earnings Call Transcript

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Provided by Quartr
September 10, 2025

Key Takeaways

  • Positive Sentiment: Safety metrics improved in fiscal 2025 with TRIR down to 0.51 from 0.91 and DART rate improving to 0.21 from 0.28, highlighting the company’s commitment to zero-incident culture.
  • Negative Sentiment: Reported fourth-quarter revenue of $216.4 million and an adjusted EBITDA loss of $4.8 million along with a $0.40 loss per share, largely due to a $6.4 million legacy dispute, $3.8 million labor productivity impact, a $1.3 million court ruling and $3.4 million of restructuring costs.
  • Positive Sentiment: Entering fiscal 2026 with a near-record $1.4 billion backlog and a $5.9 billion opportunity pipeline, with over 85% of projected revenue already booked or underway.
  • Positive Sentiment: Organizational realignment is expected to yield $12 million in annual cost savings, lowering the quarterly breakeven revenue threshold to $210–215 million.
  • Positive Sentiment: Fiscal 2026 revenue guidance is $875–925 million, implying 17% year-over-year growth supported by solid backlog coverage and a healthy bidding environment.
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Earnings Conference Call
Matrix Service Q4 2025
00:00 / 00:00

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Operator

Good morning. Welcome to the Matrix Service Company conference call to discuss the results for the fourth quarter of fiscal 2025. Currently, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. If you require any assistance at any time, please press star one-one on your telephone. As a reminder, this conference call is being recorded. I will now turn the conference over to today's host, Ms. Kellie Smythe, Senior Director of Investor Relations for Matrix Service Company.

Kellie Smythe
Kellie Smythe
Senior Director of Investor Relations at Matrix Service Company

Thank you. Good morning and welcome to Matrix Service Company's fourth quarter fiscal 2025 earnings call. Participants on today's call include John Hewitt, President and Chief Executive Officer, and Kevin Cavanah, Vice President and Chief Financial Officer. Following our prepared remarks, we will open the call up for questions. The presentation materials referred to during the webcast today can be found under Events and Presentations on the Investor Relations section of matrixservicecompany.com. As a reminder, on today's call, we may make various remarks about future expectations, plans, and prospects for Matrix Service Company that constitute forward-looking statements for the purposes of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements because of various factors, including those discussed in our most recent annual report on Form 10-K and in subsequent filings made by the company with the SEC.

Kellie Smythe
Kellie Smythe
Senior Director of Investor Relations at Matrix Service Company

The forward-looking statements made today are effective only as of today. To the extent we utilize non-GAAP measures, reconciliations will be provided in various press releases, periodic SEC filings, and on our website. Finally, all comparisons today are for the same period of the prior year unless specifically stated. Related to investor conferences and corporate access opportunities, we will be participating in the D.A. Davidson 24th Annual Diversified Industrials and Services Conference in Nashville, Tennessee, September 17th through the 19th. If you would like additional information on this event or would like to have a conversation with management, I invite you to contact me through the Matrix Service Company Investor Relations website. I will now turn the call over to John.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

Thank you, Kellie. Starting with safety, at Matrix, the physical and mental safety of our employees, as well as that of anyone on our project sites or in our offices, is core to who we are, an expectation for all employees, and a commitment we uphold for all stakeholders. Today, I want to talk about, similar to airport security today, if you see something that does not look right, that could create a hazard for yourself or fellow employees, then please say something. At Matrix, this is not only a right our employees have when they come to work for us, but it is an obligation and expectation for everyone. We expect our leaders to listen and act without retribution. This authority is a critical part of our culture and creates a safer work environment.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

We find many times in near-misses and incidents that the use of stop-work authority or the honoring of that authority by leadership could have avoided an incident. In fiscal 2025, we made significant improvements in both our Total Recordable Incident Rate, or TRIR, and our DART rate, which is a measure of injury severity and stands for days away, restricted, or transferred due to an injury. Our TRIR improved from 0.91 in fiscal 2024 to 0.51 in fiscal 2025. Our DART rate improved from 0.28 to 0.21 for the same period. While we are proud of these achievements, we understand that achieving and maintaining a zero-incident safety performance is a relentless journey. We will continue to prioritize safety in everything we do as we work towards this goal.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

As we conclude fiscal 2025, on behalf of the company's leadership team, I would like to thank everyone at Matrix, as well as our subcontractors and others on our project sites and offices, for your unwavering commitment to our safety journey and building the kind of culture that we expect. The effort you invest in fostering a safe work environment at work and at home makes a profound difference, and together we can achieve our goal of zero incidents. To our team members, remember, stop-work authority is a right, an obligation, and an expectation for everyone. As I reflect on fiscal 2025, the financial results certainly did not meet the expectations we had at the start of the year, nor does it accurately portray the positive underlying performance of the business.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

It is essential to look behind the numbers to recognize the progress achieved and the fundamental strength in the business. It is important to understand that the impact from a single isolated event, alongside a couple of legacy legal issues from 2021 and restructuring costs, encouraged to improve the organization, does not reflect the company's underlying performance or its future potential. Kevin will provide more detail on these impacts in his remarks. Before he does, I want to highlight a few key takeaways. First, our project teams are executing well and producing strong, consolidated results on our projects and maintenance activities across the enterprise, as evidenced by an above-plan direct gross profit level, even including the labor productivity issues from a crude storage project that was noted in our earnings release. In short, we are executing on the backlog and new awards above plan on a consolidated basis.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

Second, while the full year's revenue was below our expectations, over half of the revenue shortfall was related to the late start on previously booked work, which is now in full flight, and significant weakness in the planned growth for our T&D service line, which led us to exit that service line in the back half of the fiscal year. The trend of growing revenue did occur as expected, quarter over quarter, just not to the level we anticipated. We expect revenue to continue to grow in fiscal 2026. Third, awards in the year of $726 million allowed us to maintain a near-record backlog of approximately $1.4 billion. As a result, we are entering fiscal 2026 with approximately 85% of the planned revenue booked, but nearly all of it underway.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

Additionally, this year's awards support our core market objectives, especially storage, LNG facilities, and electrical infrastructure, some of which are directly associated with the East Coast data center buildout and its demand for reliable power. These new awards and performance on existing backlog are creating new and reinforcing existing client relationships, which will lead to more award opportunities as the demand for energy, power, and industrial infrastructure continues to heat up. Many of our clients are looking to commit to contractors that they trust and have high-performing teams to ensure their work gets built. Finally, as the year unfolded, we took steps to make sure the business is prepared for what we see as a strong future, a future of opportunities and growth in our target markets.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

We looked at the business core strategic pillars of win, execute, and deliver to assure that every part of the business, from sales to operations, to shared services, to administrative support, is properly aligned. In the end, we flattened the organization, closed underperforming offices, consolidated operational support services, restructured business development to better align with core market and growth objectives, and integrated our engineering and construction operations to improve competitiveness, market alignment, and delivery. While we did incur some costs associated with these initiatives, the changes are crucial to ensuring Matrix Service Company can capitalize on the significant opportunities ahead. As these efforts begin to bear fruit, they will serve as key catalysts for our continued strategic growth and solid execution in 2026 and beyond. Now let's talk about strategy. Our strategy begins with our people, our purpose, and the core values of who we are as a company.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

To deliver on this purpose, we must ensure a culture of safety, both physical and mental, an imperative to our business. Maintain our great place-to-work environment, especially considering the demand for talent, both professional and craft. Remain growth-focused to gain scale and durability. Achieve consistent performance, excellence in all aspects of our operations, including safety, quality, timeliness, and margin outcomes. Innovate and lead in the application of technology, including AI, and face change with a positive attitude. Finally, create value for all of our stakeholders. These objectives are central to how we lead, set expectations, and create value, and are embedded in the pillars of win, execute, and deliver, which underpins our strategy. Our win pillar is not only about awards, building backlog, and growing organically, but also making sure we pursue awards with the right risk and financial profile aligned to our strategic market focus areas.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

In addition, win also means hiring the best talent, having an industry-leading brand, and building strong client relationships. Our strategic market focus can be broken into two categories. Our current business, with the opportunities for consistent and stable revenue, combined with specific growth opportunities that are available in markets that fit our brand profile, skill sets, and leadership in engineering, construction, and maintenance for LNG storage, NGL storage, ammonia storage, midstream and downstream energy products, mining and minerals, aerospace, and electrical. New high-growth markets where our presence is currently limited, but opportunities are significant. Our experience and skill sets overlap for base load and backup power generation, fuel storage, electrical interconnects, and mechanical systems that are being driven by growth and power demand from fleet retirements, electrification of everything, expansion of AI and data centers, and advanced manufacturing projects.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

Our opportunity pipeline of $5.9 billion is largely made up of our current business market focus areas. Over time, we'll add to this pipeline with new high-growth markets, which will provide further strength. Both our current and new high-growth markets are supported by numerous multi-year megatrends that align with our long-term financial targets and provide the expectation for organic and inorganic growth of the business in 2026 and beyond. Moving on to our execute pillar, we must take the work that we win and execute it with zero safety incidents, high quality, in line or better than budget, on time, and with overall outcomes that strengthen our brand and client relationships. The realignment and streamlining of our organization, which has been strategic and intentional, has been key to ensuring we continue to win and execute at a high level.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

Finally, the deliver pillar of our strategy is really the culmination of the first two. Winning and executing our work in a consistent and high-quality manner that allows us to deliver value to all of our stakeholders, invest in our company, our people, and fixed assets, providing a fuel for inorganic growth, growth opportunities for our people, support to the community, and a return to our shareholders. As it relates to inorganic growth, we have said previously that our focus has been on returning to profitability. We are at that inflection point now. Looking forward, our priority is to ensure durable, return-focused growth through organic, supplemented with focused M&A. As we move through the year, we'll become more intentional and active in the search for inorganic opportunities that meet the strategic needs of the business to support our market objectives.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

We expect fiscal year 2026 full-year revenue to be between $875 million to $925 million, representing year-over-year growth of 17% at the midpoint of the range. This outlook is underpinned by the strength of our current business, a healthy bidding environment, and a robust backlog. As mentioned earlier, at the midpoint of our guidance, approximately 85% of expected fiscal 2026 revenue is supported by backlog already in hand, and nearly all that backlog is related to projects that have already broken ground or risk of delay is minimal. 2026 will be a crucial year in our strategic journey, marked by revenue growth, return to profitability, and continued execution against our strategic priorities. We are forecasting the first quarter of the year to be similar revenue level to the fourth quarter of fiscal 2025, with a steady improvement in revenue and profitability through the course of the year.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

With our strong financial position, a realigned organizational structure, backlog, and robust opportunity pipeline, we are confident in our ability to leverage the significant ongoing infrastructure investment cycle to continue our transformation into a scalable and resilient growth platform. Kevin will now provide more details on the numbers.

Kevin Cavanah
Kevin Cavanah
VP, CFO & Treasurer at Matrix Service Company

Thank you, John. Yesterday, we released our results for the fourth quarter of fiscal 2025. Those results were revenue of $216.4 million, EPS of a $0.40 loss, and adjusted EBITDA of a $4.8 million loss. Those results included four items that masked the continued improvement in the ongoing business. First, we lowered our recovery expectations on a legacy project that is currently in a dispute resolution process, which resulted in a $6.4 million reduction of revenue and operating income. This was related to a crude terminal project that we completed back in calendar 2021. The project was impacted by the COVID pandemic and incurred significant project scope changes directed by the owner. We've been pursuing our outstanding contract balance from the customer since that time. Arbitration proceedings occurred last month, and we are awaiting that final decision in fiscal 2026.

Kevin Cavanah
Kevin Cavanah
VP, CFO & Treasurer at Matrix Service Company

While the outcome of legal proceedings is uncertain, we believe we have appropriately reserved for our exposure on this issue and expect a positive cash inflow upon resolution. Second, we incurred an additional $3.8 million charge on a crude project impacted by lower than anticipated labor productivity. You may recall we discussed this project last quarter when we began to incur productivity issues. While we work hard to avoid any issues during our projects, in our industry, issues will occur from time to time. When they do, our focus is on reducing any financial impact and maintaining a strong relationship with our customer. We are pleased to report that the team worked through the issues, completed the project early this quarter as planned, and did so in a manner that further solidified our relationship with an important customer.

Kevin Cavanah
Kevin Cavanah
VP, CFO & Treasurer at Matrix Service Company

Third, we incurred a $1.3 million charge related to an unexpected court decision on a project completed in calendar 2021. In this case, a subcontractor of ours failed to pay certain vendors, even though we had paid the subcontractor. As a subcontractor is no longer able to pay their obligations, the court ruled we had to make good on the amounts owed to the vendors, effectively requiring us to pay the obligations twice. Finally, we incurred $3.4 million in restructuring costs related to the organizational improvement actions John previously discussed. As those actions continue to fiscal 2026, we expect to incur a similar amount of restructuring costs in the first quarter. These actions were mainly designed to improve operational efficiencies, but they also reduced our annual overhead cost structure by approximately $12 million.

Kevin Cavanah
Kevin Cavanah
VP, CFO & Treasurer at Matrix Service Company

As we have experienced higher inflation for the past couple of years and other cost pressures, these changes will allow us to keep our annual cost structure flat during a period of strong revenue growth. The combined impact of these items was significant to the quarter. It decreased our revenue by $6.4 million to the reported $216.4 million, which was just below our implied fourth quarter guidance range. It negatively impacted EPS by $0.53, which resulted in the $0.40 loss I previously referenced, and it decreased our adjusted EBITDA by $11.5 million to a $4.8 million loss. We believe discussing the results in this manner is necessary to demonstrate the fundamental performance and improvement in the underlying business.

Kevin Cavanah
Kevin Cavanah
VP, CFO & Treasurer at Matrix Service Company

We have previously discussed our fiscal 2025 focus was to improve operating results and return to profitable performance through the growth in our revenue run rate, effective project execution, and leverage of our overhead cost structure. The revenue grew each quarter of the year as large projects ramped. That growth continued in the fourth quarter, with revenue being 31% higher than the start of the year. The revenue run rate has now reached a level that supports positive earnings. As previously mentioned, our project execution was strong enterprise-wide, as the underlying business produced double-digit direct margins, excluding the items discussed. We have a quality backlog and will continue to focus on effective project execution. The leverage of our cost structure improved throughout the year, with the impact of the under-recovered construction overhead reducing from 620 basis points in the first quarter to 160 basis points in the fourth quarter.

Kevin Cavanah
Kevin Cavanah
VP, CFO & Treasurer at Matrix Service Company

The final SG&A leverage also improved from 11.2% of revenue in the first quarter to 8.1% in the fourth. As we move through fiscal 2026, additional revenue growth combined with the efficiency actions taken will allow us to materially eliminate the under-recovery of construction overhead and further leverage SG&A toward our 6.5% target. Moving to the segments, Storage and Terminal Solutions segment revenue increased 37% to $96.1 million in the fourth quarter of fiscal 2025, compared to $70 million last year due to increased volume of work for specialty vessel and LNG storage projects. Gross margin in the fourth quarter of fiscal 2025 reflects improved operating leverage resulting from higher revenue.

Kevin Cavanah
Kevin Cavanah
VP, CFO & Treasurer at Matrix Service Company

However, gross margin was a negative 1.1% in the fourth quarter compared to a positive 3.1% last year as a result of labor productivity issues on a primitive terminal project and lower recovery expectation on a legacy project, both of which were discussed previously. Utility and power infrastructure segment revenue increased 12% to $73 million in the fourth quarter, compared to $65.3 million in the same period a year ago, benefiting from a higher volume of work associated with natural gas heat shaving projects. Gross margin was 9.1% in the fourth quarter, compared to 4.2% last year, an increase of 4.9% due to strong project execution and improved construction overhead cost absorption. The fourth quarter gross margin was also impacted by the $1.3 million charge related to the unfavorable court decision discussed previously.

Kevin Cavanah
Kevin Cavanah
VP, CFO & Treasurer at Matrix Service Company

Process and industrial facility segment revenue decreased to $47.3 million in the fourth quarter, compared to $54.2 million last year, primarily due to lower revenue resulting from the completion of a large renewable diesel project last year. In addition, we have lower revenue from thermal vacuum chambers, partially offset by higher revenue volumes or refinery work. Due to the change in mix of work, gross margin was 5.9% in the fourth quarter of fiscal 2025, compared to 15.4% last year. Now let's discuss backlog, which stands at almost $1.4 billion as of June 30, 2025. Project awards totaled $186.3 million in the fourth quarter, resulting in a book-to-bill ratio of 0.9. While economic uncertainty has impacted the timing of project awards overall, the utility and power infrastructure segment had a strong quarter with $121.9 million in awards and a book-to-bill of 1.7.

Kevin Cavanah
Kevin Cavanah
VP, CFO & Treasurer at Matrix Service Company

These awards were related to LNG heat shaving projects and substations. The year-end backlog level is supportive of strong revenue growth in fiscal 2026. Moving to the balance sheet, our cash increased an additional $39.1 million in the fourth quarter, related primarily to working capital changes. For the year, our cash balance has increased $109 million to $249.6 million as of June 30, 2025. Available liquidity has increased to $284.5 million and is comprised of $224.6 million of unrestricted cash and $59.8 million of borrowing availability under the credit facility. The company also has $25 million of restricted cash to support the credit facility, and our debt position remains at zero. Subsequent to year-end, the company executed an amendment to the credit facility, which extends its term until September of 2029.

Kevin Cavanah
Kevin Cavanah
VP, CFO & Treasurer at Matrix Service Company

The company entered fiscal 2026 in a strong financial position that provides the liquidity needed to support the execution of our backlog and to deploy capital toward growth. With that, I would like to turn the call over to John for some final remarks.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

Thank you, Kevin. In closing, I'd like to reiterate the following takeaways. First, despite some legacy legal issues and other noise during the fourth quarter, our team grew revenue consistently quarter after quarter through the year and is executing above plan from a direct gross profit perspective on the work in hand. Second, our strategy is working. We are winning work in our key focus areas, maintaining our near-record backlog, even in the face of the uncertain macroeconomic environment. Our organizational realignment is strengthening our platform and positioning the company for sustained profitable growth, both organically and inorganically. Third, our momentum into fiscal 2026 is strong with a robust backlog and a strong opportunity pipeline. We are guiding to 70% revenue growth next year with 85% of that revenue from backlog that is already in progress.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

With the tremendous momentum that exists across the business, we believe we are entering a prolonged period of growth. Above all, we remain committed to delivering sustainable shareholder value by building a platform capable of consistent profitability, backlog growth, and cash generation. I'm proud of what our team accomplished in fiscal 2025 and even more excited about the road ahead. By remaining disciplined, focusing on safety and quality, and continuing to improve our operations, we are confident in our ability to drive growth, create long-term value for our shareholders as we successfully win, execute, and deliver. With that, we'll open the call for questions.

Operator

Thank you. At this time, we'll conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one-one on your telephone and wait for your name to be announced. To withdraw your question, please press star one-one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of John Franzreb of Sidoti & Company. Your line is now open.

John Franzreb
John Franzreb
Senior Equity Analyst at Sidoti & Company

Good morning, everyone, and thanks for taking the questions. John, last quarter, you kind of referenced the fact that some of the jobs are being pushed to the right due to economic uncertainty. Are you still seeing that?

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

Yeah, I mean, I would say there's kind of an overhang across our industry, but we're really only able to point a finger at a couple of projects that were in our sites that you could say were directly impacted by what's going on with tariffs and some of the global events. I think it just sort of feels like there's an overhang, and most of those projects are probably really related to things that have more of a global involvement, meaning things that are exporting some kind of an energy product. Let's say the internal stuff, the LNG heat shaving and backup fuel supply, there continues to be a lot of energy around those, no pun intended. I think the large, we're still seeing a lot of smaller projects kind of come through the pipeline.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

The major projects, those are just timing things, and they come and go, and they take a while for those to germinate. We have some of the larger LNG heat shaving projects in our sites, and it just takes some time for those projects to develop. From a domestic standpoint, I think we feel pretty good about the timing of an opportunity for awards there. Certainly, there's more attention from our clients around material escalation from tariffs, and those kinds of things become part of how we price and how we negotiate our contracts with various clients. We've been fairly successful working through those risks with our new and existing clients.

John Franzreb
John Franzreb
Senior Equity Analyst at Sidoti & Company

Got it. When you look at the opportunity profile, and you just referenced some larger jobs that are out there, maybe, do you expect to exit fiscal 2026 at a near 1.0 book-to-bill, or is that too much to ask?

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

No, I think I certainly think that opportunity is out there. You know, you've been around this long enough that you know the timing of those awards certainly have a major impact. When things can slip a month here or there, certainly what we see in our pipeline, the opportunity for us to book inside the, let's just say, our guidance range, revenue guidance range, I think those projects are out there. The big, and we have these big upticks in our backlog, they come from a major project that we booked that's in the $300-400 million kind of range, where we have a couple of those in our backlog today, and we're looking for opportunities to replace those and build on those moving forward.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

This year, I think our award cycle is going to be made up of smaller kind of size, our normal sort of bread-and-butter projects, but smaller projects that are in the $50 to $150 million kind of range. We think those are out there, and the opportunity for us to win those and handle book-to-bill of one is certainly available to us.

John Franzreb
John Franzreb
Senior Equity Analyst at Sidoti & Company

That's good to hear. What's your confidence level on returning to profitability and that kind of timeline? How does that play out as the year progresses?

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

I would say our confidence is high. We feel good about the quality of the backlog we have and the fact that the high-quality backlog is in flight and how that backlog is going to roll out over the course of the year. Plus, even some of the backlog that we added in fiscal 2025 helps to fill some of the holes in fiscal 2026 already. I think we feel pretty good about our revenue levels. At the revenue levels we're projecting, we're going to be in a position to be able to return to profitability.

John Franzreb
John Franzreb
Senior Equity Analyst at Sidoti & Company

All right. One last question. I'll get back into the queue. The cash position is building. Could you just talk a little bit about how much is that advance payment from customers and how much is Matrix?

Kevin Cavanah
Kevin Cavanah
VP, CFO & Treasurer at Matrix Service Company

I'll take that. The cash position has built considerably this year. We've got a lot of long-term projects where we have seen some upfront money, but the balance sheet is strong. We'll definitely use a good portion of that $250 million of cash for the projects. We probably have cash available for just a normal level. If you look at what the working capital investment is currently, what the cash level is of $50 to $70 million, that's kind of built-up cash for just operating the business. It could also support growth activity. I feel good about where we've got this balance sheet.

John Franzreb
John Franzreb
Senior Equity Analyst at Sidoti & Company

All right. Good to hear. Thank you, Kevin. Thank you, John. I'll get back to the queue.

Kevin Cavanah
Kevin Cavanah
VP, CFO & Treasurer at Matrix Service Company

Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from a line of Brent Thielman of D.A. Davidson. Your line is now open.

Brent Thielman
Brent Thielman
MD & Senior Research Analyst at D.A. Davidson

All right. Thanks. Good morning, John, Kevin.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

Brent.

Brent Thielman
Brent Thielman
MD & Senior Research Analyst at D.A. Davidson

I guess first question just would be, you know, kind of back to some of the moving pieces of the quarter. Are you able to comment on, you know, other potential COVID-era legacy jobs that you're in dispute that we need to keep in the back of our minds, or do we feel like we're kind of beyond this at this point?

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

I think anything of any materiality works pretty much beyond that. This one particular project that we're talking about that took the $6 million charge, as Kevin had noted, we've been fighting that. We reached mechanical completion on the job back in early 2021, and we've been in dispute with a client since then. We have attempted numerous occasions to get that settled and were unable to do that and ended up, as Kevin said, in arbitration last month. That's really kind of the final material legacy pandemic issue that we've got.

Brent Thielman
Brent Thielman
MD & Senior Research Analyst at D.A. Davidson

Okay. Maybe a two-parter to the restructuring actions you're taking would be, you know, one, Kevin, if you don't mind, just your expectations for the cost savings impact you should get from this. I guess, two, any early indications or evidence of some of the things that you're doing that's, you know, allowing you to win more work? Where are you seeing the positives of what you've been doing here to, you know, potentially, I guess, the bookings or any other measure we can look at?

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

I'll hit the second part of your question, and Kevin can hit the first part. We've made a lot of significant changes over the last five months. Right now we are kind of settling in. We've moved people around in the seats and gotten rid of some of the seats, and created opportunities for some of the people in the organization to step up and take some different new leadership roles. I think we've created a lot of energy in the organization. You feel a lot of energy in the organization. Like we said, we've flattened and streamlined the decision-making process. We are still kind of settling in the key strategies and objectives with the organization. We just met with the board two weeks ago and reviewed our strategy and our plans with them.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

I think we're already seeing an improved alignment between different elements of the business and what we need to do to support each other, what we need to do to win work, what our real focus areas are from a market perspective. I think this change, and as we're calling a realignment in the organization, is really going to bear some fruit not only on how we win work, but our ability to execute work, particularly around work that's EPC related, where we've got the critical engineering deliverables and then our ability to execute that work on our projects.

Kevin Cavanah
Kevin Cavanah
VP, CFO & Treasurer at Matrix Service Company

Yeah. When you look at the cost, we've, as I mentioned, cut out about $12 million with these most recent actions. That's split about 50/50 between construction overhead and SG&A. Our SG&A has been running just under $18 million a quarter in fiscal 2025. I think you'll see it in the $16.5 million range per quarter in fiscal 2026. The construction overhead impact will help us address the construction overhead, combine a little bit lower cost structure with the increasing revenues. We'll continue to focus on eliminating the COH. I think we made the right steps in the last couple of quarters.

Brent Thielman
Brent Thielman
MD & Senior Research Analyst at D.A. Davidson

Okay. I guess my last question is a little bigger picture, John. You know, there's been some fairly significant announcements here in the last few days related to the data center theme. I guess the question for me would be, maybe if you could just elaborate, where does Matrix play into this, you know, whether directly or kind of second derivative of the things that are happening in that market that only seem to be getting bigger and bigger as we look out over the next few years? What are your cards to play and how does that pipeline that you have, what is it, how does it inform you about your opportunity there?

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

Yeah, good question. I mean, we are not going to be the person who builds the data center, right? That's just not, that's not who we are. We don't envision being out there doing that. That's a fairly highly competitive light industrial kind of market. To make that step would be a pretty big leap. Where we are going to play a role, both directly and indirectly, is the demand for additional power generation everywhere, and the demand for backup power and the fuel for that power related directly to data centers, the AI computing, advanced manufacturing. We see significant opportunities there. If you recall, you've been around this long enough, we had a position in the gas-fired turbine construction market, both in simple cycle mode and in combined cycle for base load generation. We have those skill sets.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

We turned our focus to other areas of construction as that market, five, six years ago, kind of went in hibernation. This growing demand for power, which we don't see as something that's going to stop, is related not only to the increased demand related to what we talked about here in data centers and AI, but just in general, the general electrification of everything. It's just requiring more power generation. You've got more, more in spite of some of the rhetoric coming out of Washington, we're still probably going to be retiring coal fleets and moving more to a gas-based power generation economy. Then you have the opportunity for interconnect for substation work. We've done for a couple of data centers, we've done the substation work and the interconnect work for them.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

A lot of those data centers have high demand for cooling, and some of that is more of a more complex process installation than what you might normally have in a light industrial facility, which could create opportunities for us. Our opportunities and our work around there will be a little bit more on the fringe. The demand for generation, not only the installation of base load generation and backup generation, but also the gas required to fuel it, pushing that back into the utilities with the work that we're doing in heat shaving facilities, the work that we're doing in backup fuel supply for utilities, the upgrading. A couple of our awards in the quarter here were related to existing LNG heat shaving facilities that hadn't been updated for 30 years.

John Hewitt
John Hewitt
CEO, President & Director at Matrix Service Company

We're going in and doing, in some cases, the full EPC to update the process equipment and not even necessarily the storage, but the process equipment of those existing LNG.

Operator

Thank you. I'm showing no further questions at this time. I'll now turn it back to Kellie Smythe for closing remarks. Please stand by. Your call will begin momentarily.

John Franzreb
John Franzreb
Senior Equity Analyst at Sidoti & Company

I wanted to cut.

Operator

I see you are back online. You may begin.

Kevin Cavanah
Kevin Cavanah
VP, CFO & Treasurer at Matrix Service Company

Okay.

Kellie Smythe
Kellie Smythe
Senior Director of Investor Relations at Matrix Service Company

We did hear John?

Hi Marvin, this is Matrix. Can you hear us okay?

Operator

Yes, we're back.

Okay, we have dropped off the call.

Operator

Okay. No closing remarks?

Yes, we did. We were still answering a question. Kevin was still answering a question. We are going to finish the answer to that question.

Operator

Okay, you're back online.

Kevin Cavanah
Kevin Cavanah
VP, CFO & Treasurer at Matrix Service Company

Hey, Prince Smith. Hello. I think we're back online. Sorry about that. We had some technical difficulties. Brent, I was going to follow up on, if you're still there, follow up on the cost question you had. An important aspect of what those actions do is also decreases our break-even point, the amount of revenue we need in order to get to break-even performance. In the past, we've talked about that. It was around $225 million per quarter. With these reductions, now it's down to $210 to $215 million per quarter. That's definitely a benefit to us, increasing the earnings power of the business as we move forward. I just wanted to follow up with that and turn it over to Kellie for closing remarks.

Kellie Smythe
Kellie Smythe
Senior Director of Investor Relations at Matrix Service Company

Thank you, Kevin. As a reminder, we will be participating in the D.A. Davidson 24th Annual Diversified Industrials and Services Conference in Nashville, Tennessee next week, September 17th through the 19th. If you are attending, we look forward to seeing you there. Additionally, if you'd like to have a conversation with management, please contact me through the Matrix Service Company Investor Relations website. You may also sign up to receive MTRX news by scanning the QR code on your screen. Thank you so much for your time.

Operator

Thank you for your participation in today's conference. To conclude the program, you may now disconnect.

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