MTRX

Matrix Service Company (MTRX)

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Exchange: NASDAQ
Industry: Basic Industries
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Matrix Service (MTRX)

Q3 2011 Earnings Call

May 04, 2011 11:00 am ET

Executives

Michael Hall - Chairman

Kevin Cavanah - Chief Financial Officer and Vice President

John Hewitt -

Analysts

Steven Schwartz - First Analysis Securities Corporation

Tahira Afzal - KeyBanc Capital Markets Inc.

Fred Buonocore - CJS Securities, Inc.

Michael Harrison - First Analysis

Matt Duncan - Stephens Inc.

Martin Malloy - Johnson Rice & Company, L.L.C.

Richard Wesolowski - Sidoti & Company, LLC

Presentation

Operator

Greetings, and welcome to the Matrix Service Co. Third Quarter 2011 Results. [Operator Instructions] It is now my pleasure to introduce your host, Kevin Cavanah, CFO. Thank you, sir. You may begin.

Kevin Cavanah

Thank you, Dan. I would now like to take a moment to read the following. Various remarks that the company may make about future expectations, plans and prospects for Matrix Service Co. 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 as a result of various factors, including those discussed in our annual report on Form 10-K for our fiscal year ended June 30, 2010, and in subsequent filings made by the company with the SEC.

I would now like to turn the call over to Mike Hall, Chairman of the Board of Directors of Matrix Service Co. Mike?

Michael Hall

Thank you, Kevin, and good morning to everybody. We appreciate you joining us today to discuss the results of our third quarter ended March 31, 2011. Joining me on the call today, along with Kevin Cavanah, is John Hewitt, the company's newly appointed President and Chief Executive Officer.

Throughout his career, John has demonstrated his strong leadership and extensive industry experience through the successful management of many large and diverse EPC companies. John brings a strategic vision for the future direction and growth of the company and the Board of Directors believes John is highly qualified and well-prepared to lead Matrix Service. I'm pleased to have John as a key member of our management team.

I would now like to turn the call over to John for a few comments.

John Hewitt

Thank you very much, Mike, for the kind introduction. I'm very pleased to be joining the outstanding team here at Matrix Service Co, and look forward to working with our leadership as we continue to execute on the company's strategic growth plans. I cannot tell you how excited I am to become part of the Matrix Service Co. family. I've spent my entire career in the Industrial Engineering and Construction business, working throughout North America and in some international locations.

Over the past 25 years, I've held various operating and leadership positions at Aker Solutions ASA and its predecessor companies. Most recently, I served as Senior Vice President of Aker Solutions where I was responsible for providing executive oversight on major capital projects in the Power and LNG markets. Prior to that, in 2007 to 2009, I served as President, Aker Solutions Engineering and Construction, U.S. operations, where I was responsible for managing all their Construction Services in North America.

In 2004 to 2007, I served as President, Aker Construction, where I had complete P&L responsibility for a multidiscipline Industrial Construction business operating once again throughout North America. My market experience is spread among power, oil and gas, metals, chemicals and other miscellaneous industrial arenas. I have executed capital and maintenance projects in excess of $2 billion.

Over the next 3 months, I will be spending time in all the company's offices to meet managers and employees to get a deeper understanding of the company. I'll also be visiting some of our project sites and meeting our key clients. Once again, I am very excited to be part of the excellent management team at Matrix Service Company and working with them to achieve our growth ambitions. I'll be happy to answer any questions at the conclusion of our call today and look forward to meeting many of you in the coming months.

Michael Hall

Thanks, John. The company continues to experience generally improving market conditions and strong bid volume in both the Construction Services and Repair and Maintenance Services segments. As we discussed in our last call, our long-term outlook for backlog is positive, which is reflected in the backlog growth in both segments in the third quarter and from the fiscal year ended June 30, 2010. Safety performance remains a critical focus area and is essential to our long-term success.

As we mentioned on our last conference call, we completed calendar year 2010 with the lowest total recordable incident rate in the company's history. Further, our results for the 9 months to-date in fiscal 2011 are also positive with a recordable rate trending below that achieved in fiscal 2010.

Revenues for the 3 month and 9 month periods increased over the same periods last year with backlog also up over the 3 and 9-month periods. The operating results for the quarter are in line with our expectations driven by stronger demand for Construction Services in the Aboveground Storage Tank market and Repair and Maintenance Services in the Electrical and Instrumentation and Downstream Petroleum markets. AST Construction revenues increased 42% in the third quarter compared to the same period last year. And the Electrical and Instrumentation, Repair and Maintenance business increased 210% over the same period.

The Repair and Maintenance Service segment, which has been soft during the past few quarters, experienced strong growth in the third quarter compared to the same period last year. Consolidated gross margins improved in the third quarter, driven by better recovery of overhead cost due to higher business volume and a lower cost structure. We realize strong gross margins in the Construction Service segment, largely to due to outstanding project execution and project-specific performance bonuses, which resulted in the recognition of margins above historic levels.

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