Matrix Service NASDAQ: MTRX reported a return to profitability in its fiscal third quarter of 2026, even as revenue was held back by project timing issues tied to client delays and weather, according to executives on the company’s earnings call.
President and CEO John Hewitt said the company earned $0.13 per fully diluted share on an adjusted basis and expects revenue to rise in the fourth quarter while “profitable performance” continues. Hewitt attributed the quarter’s profitability to a “quality backlog,” improved operating performance, and organizational streamlining carried out over the past 12 months.
Q3 profitability despite revenue timing headwinds
Chief Financial Officer Kevin Cavanah said third-quarter revenue was $206.7 million, up from $200.2 million in the year-ago period. Gross margin improved to $17.2 million, or 8.3%, compared to $12.9 million, or 6.4%, in the prior-year quarter. Cavanah said the improvement was driven by “higher direct project margins and lower under-recovered overhead.”
SG&A expense was $15.2 million, down from $17.7 million a year earlier. Cavanah said the decrease reflected lower compensation-related costs tied to continued efficiency efforts, as well as lower stock compensation expense “as a result of executive separations during the quarter.”
On a GAAP basis, Matrix posted net income of $0.8 million, or $0.03 per diluted share, compared with a net loss of $3.4 million, or $0.12 per diluted share, in the third quarter of fiscal 2025. The company recorded $3 million in restructuring charges during the quarter; excluding those, adjusted earnings were $0.13 per share. Adjusted EBITDA was $4.9 million versus breakeven in the prior-year quarter.
Hewitt also said revenue was affected by “abnormal and unforeseeable weather events and late client deliverables,” adding that delayed revenue is moving into later quarters. On the Q&A, Cavanah estimated the revenue deferred out of the third quarter at about $20 million to $25 million, with weather the “biggest piece,” along with some permitting issues.
Guidance midpoint trimmed; Q4 expected to improve
Hewitt said the timing shift contributed to a 2.2% reduction in the midpoint of revenue guidance, moving the midpoint to $880 million from $900 million. Even with the change, he said fourth-quarter revenue is expected to “turn upwards” and support continued profitability.
Asked whether deferred work would fall into Q4 or fiscal 2027, Hewitt said “both,” describing the dynamic as a “push” in project staffing and activity rather than a one-quarter catch-up. He said Q4 revenue is expected to increase, while the delays also “push more revenue into… fiscal 2027.”
Cavanah provided additional color on segment expectations for Q4 during the Q&A. He said he expects the Process and Industrial Facilities and Utility and Power Infrastructure segments to be “relatively flat” from Q3 to Q4, with growth coming from Storage.
Segment results: Storage posts strongest quarter in six years
Cavanah said growth in the quarter was driven primarily by the company’s Storage and Terminal Solutions segment, partially offset by lower revenue in Process and Industrial Facilities.
- Storage and Terminal Solutions: Revenue rose 16% to $111.6 million from $96.1 million. Cavanah said this was the segment’s highest quarterly revenue in six years. Segment gross margin increased to 7% from 3.9%. He said the company expects this trend to continue, driven by “specialty vessel storage projects,” including LNG, ethane, and butane.
- Utility and Power Infrastructure: Revenue was $60.0 million versus $58.7 million a year ago. Cavanah said project execution was strong in peak shaving and electrical work, producing a 13.6% gross margin compared with 9.4% last year. In response to an analyst question about sequential dynamics, Cavanah said revenue declined as manpower needs eased on a peak shaver project that has been underway for more than two years, but performance was strong across the segment. He also said peak shaving opportunities remain in the company’s funnel, though it may “take… a little bit of time” to book the next one.
- Process and Industrial Facilities: Revenue declined to $35.1 million from $45.4 million. Gross margin was 2.5%, down from 8.3%, which Cavanah attributed primarily to “mix of work and the settlement of a legacy legal matter.” He said revenue and margins in the segment are expected to rebound in fiscal 2027, “due in large part” to a mining project discussed on the call.
Legal resolutions, balance sheet, and leadership transitions
Hewitt said the company reached positive resolution on two legacy legal issues: a collection matter involving an industrial client working toward commercial viability and a contract dispute with a midstream company tied to a crude terminal built during the COVID outbreak. Hewitt said the collective result was in line with Matrix’s balance sheet position, will increase cash by nearly $20 million, and should reduce legal spend going forward.
On the Q&A, Cavanah said those disputes were project-related and that the associated legal expense ran through “construction overhead,” contributing to under-recovery of overhead. While he did not quantify the legal costs, he said the resolutions should improve the company’s ability to fully recover overheads.
Matrix ended the quarter with cash of $258 million, up $34 million sequentially, and liquidity of $297 million. Cavanah attributed the higher cash and liquidity to project cash flow timing and positive earnings, while noting the company expects some cash usage as fiscal 2026 concludes and the company moves into fiscal 2027.
Hewitt also detailed leadership changes underway. Chief Operating Officer Shawn Payne is set to succeed him as president and CEO on July 1. In addition, Cavanah will depart in September after more than 23 years with the company, including 15 as CFO; Hewitt said Matrix has started an internal and external search and that Cavanah will support the transition through year-end reporting. Hewitt also said Chief Administrative Officer Nancy Austin will depart and that her responsibilities are being redistributed, with the position not backfilled as part of the company’s effort to flatten its organizational structure.
Pipeline and market commentary: mining, data centers, and energy infrastructure
Hewitt said Matrix’s opportunity pipeline stands at $6.9 billion, spanning traditional LNG business as well as mining minerals, power generation, and data center-related work. He said awards during the quarter came in below expectations due largely to timing of client decisions, but highlighted two developments: a limited notice to proceed received after quarter-end for a major mining construction project in the Western U.S., and more than $30 million of electrical-related awards in the quarter tied to data center build-outs and rising power demand. Hewitt said book-to-bill in the electrical business for the quarter was “well over a 1.0x.”
Payne said the mining project is expected to start in Q4 and continue throughout fiscal 2027, and he described a growing pipeline in the mining sector as demand and nonferrous metal prices rise after “nearly a decade of limited capital spending.” Payne also said he is streamlining the organization ahead of his CEO transition and that the company does not plan to add a COO role after he assumes the top job, with operations reporting directly to him. He said he will share a “first 100-day roadmap” on the fourth-quarter earnings call.
Hewitt said the impact of the Iran conflict on Matrix has been “minimal to date,” but added that global pressures could reinforce the need for secure supplies of oil, gas, LNG, and NGLs—conditions he said may support infrastructure designed and built by Matrix. In response to a question about oil and gas dynamics, Hewitt said the company believes global issues are likely to “drive continued and increased investment in the United States” for LNG and natural gas liquids facilities, areas he said fit within Matrix’s core capabilities.
About Matrix Service NASDAQ: MTRX
Matrix Service Company NASDAQ: MTRX is a provider of engineered construction, fabrication and maintenance services to the energy, industrial and power markets. The firm offers a full suite of engineering, procurement and construction (EPC) solutions for clients in the oil and gas, petrochemical, refining, mining, fertilizer and power generation industries. Its capabilities span from front-end engineering design through plant commissioning, with specializations in modular process skid fabrication, structural steel erection and complex piping systems.
The company's service portfolio includes onshore and offshore pipe fabrication, equipment setting, industrial maintenance and shutdown services, electrical and instrumentation installation, and skid-mount and modular construction.
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