MATRIX SERVICE CO 10-Q

Item 1. Financial Statements Matrix Service Company Condensed Consolidated Statements of Income (In thousands, except per share data) (unaudited) Three Months Ended Six Months Ended December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 Revenue $ 187,169 $ 175,042 $ 352,748 $ 372,701 Cost of revenue 176,277 164,453 334,043 350,253 Gross profit 10,892 10,589 18,705 22,448 Selling, general and administrative expenses 17,286 15,731 35,866 32,844 Operating loss ( 6,394 ) ( 5,142 ) ( 17,161 ) ( 10,396 ) Other income (expense): Interest expense ( 145 ) ( 319 ) ( 234 ) ( 644 ) Interest income 1,578 162 3,150 312 Other (Note 3) ( 556 ) 2,454 ( 495 ) 4,716 Loss before income tax expense ( 5,517 ) ( 2,845 ) ( 14,740 ) ( 6,012 ) Provision for federal, state and foreign income taxes 16 6 16 6 Net loss $ ( 5,533 ) $ ( 2,851 ) $ ( 14,756 ) $ ( 6,018 ) Basic loss per common share $ ( 0.20 ) $ ( 0.10 ) $ ( 0.53 ) $ ( 0.22 ) Diluted loss per common share $ ( 0.20 ) $ ( 0.10 ) $ ( 0.53 ) $ ( 0.22 ) Weighted average common shares outstanding: Basic 27,801 27,377 27,680 27,314 Diluted 27,801 27,377 27,680 27,314 See accompanying notes. -1- Table of Contents Matrix Service Company Condensed Consolidated Statements of Comprehensive Income (In thousands) (unaudited) Three Months Ended Six Months Ended December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 Net loss $ ( 5,533 ) $ ( 2,851 ) $ ( 14,756 ) $ ( 6,018 ) Other comprehensive income (loss), net of tax: Foreign currency translation gain (loss) ( 1,363 ) 562 ( 927 ) 24 Comprehensive loss $ ( 6,896 ) $ ( 2,289 ) $ ( 15,683 ) $ ( 5,994 ) See accompanying notes. -2- Table of Contents Matrix Service Company Condensed Consolidated Balance Sheets (In thousands) (unaudited) December 31, 2024 June 30, 2024 Assets Current assets: Cash and cash equivalents $ 156,777 $ 115,615 Accounts receivable, net of allowance for credit losses 134,726 138,987 Costs and estimated earnings in excess of billings on uncompleted contracts 34,711 33,893 Inventories 7,157 8,839 Income taxes receivable 179 180 Prepaid expenses and other current assets 10,372 4,077 Total current assets 343,922 301,591 Restricted cash 25,000 25,000 Property, plant and equipment, net 41,392 43,498 Operating lease right-of-use assets 18,160 19,150 Goodwill 28,883 29,023 Other intangible assets, net of accumulated amortization 1,103 1,651 Other assets, non-current (Note 2) 55,385 31,438 Total assets $ 513,845 $ 451,351 See accompanying notes. -3- Table of Contents Matrix Service Company Condensed Consolidated Balance Sheets (In thousands, except share data) (unaudited) December 31, 2024 June 30, 2024 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 79,976 $ 65,629 Billings on uncompleted contracts in excess of costs and estimated earnings 237,537 171,308 Accrued wages and benefits 13,288 15,878 Accrued insurance 4,473 4,605 Operating lease liabilities 3,781 3,739 Other accrued expenses 2,044 3,956 Total current liabilities 341,099 265,115 Deferred income taxes 23 25 Operating lease liabilities 18,194 19,156 Other liabilities, non-current 2,595 2,873 Total liabilities 361,911 287,169 Commitments and contingencies (Note 6) Stockholders’ equity: Common stock — $ 0.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued at December 31, 2024 and June 30, 2024, respectively; 27,602,825 and 27,308,795 shares outstanding as of December 31, 2024 and June 30, 2024, respectively; 279 279 Additional paid-in capital 145,608 145,580 Retained earnings 19,185 33,941 Accumulated other comprehensive loss ( 10,462 ) ( 9,535 ) Treasury stock, at cost — 285,392 and 579,422 shares as of December 31, 2024 and June 30, 2024, respectively; ( 2,676 ) ( 6,083 ) Total stockholders' equity 151,934 164,182 Total liabilities and stockholders’ equity $ 513,845 $ 451,351 See accompanying notes. -4- Table of Contents Matrix Service Company Condensed Consolidated Statements of Cash Flows (In thousands) (unaudited) Six Months Ended December 31, 2024 December 31, 2023 Operating activities: Net loss $ ( 14,756 ) $ ( 6,018 ) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation and amortization 5,025 5,692 Stock-based compensation expense 4,568 3,785 Gain on disposal of property, plant and equipment (Note 3) ( 64 ) ( 4,589 ) Other ( 19 ) 125 Changes in operating assets and liabilities increasing (decreasing) cash: Accounts receivable, net of allowance for credit losses ( 18,930 ) ( 19,752 ) Costs and estimated earnings in excess of billings on uncompleted contracts ( 818 ) 4,462 Inventories 1,682 ( 1,004 ) Other assets and liabilities ( 6,963 ) ( 1,763 ) Accounts payable 14,474 ( 14,303 ) Billings on uncompleted contracts in excess of costs and estimated earnings 66,229 31,837 Accrued expenses ( 4,912 ) 2,257 Net cash provided by operating activities 45,516 729 Investing activities: Capital expenditures ( 2,859 ) ( 859 ) Proceeds from sale of property, plant and equipment (Note 3) 163 2,806 Net cash provided (used) by investing activities ( 2,696 ) 1,947 Financing activities: Advances under asset-backed credit facility — 10,000 Repayments of advances under asset-backed credit facility — ( 20,000 ) Proceeds from issuance of common stock under employee stock purchase plan 102 91 Repurchase of common stock for payment of statutory taxes due on equity-based compensation ( 1,235 ) ( 456 ) Net cash used by financing activities ( 1,133 ) ( 10,365 ) Effect of exchange rate changes on cash ( 525 ) 37 Net increase (decrease) in cash and cash equivalents 41,162 ( 7,652 ) Cash, cash equivalents and restricted cash, beginning of period 140,615 79,812 Cash, cash equivalents and restricted cash, end of period $ 181,777 $ 72,160 Supplemental disclosure of cash flow information: Cash paid (received) during the period for: Income taxes $ 18 $ ( 43 ) Interest $ 232 $ 647 Non-cash investing and financing activities: Purchases of property, plant and equipment on account $ 13 $ 71 See accompanying notes. -5- Table of Contents Matrix Service Company Condensed Consolidated Statements of Changes in Stockholders’ Equity (In thousands, except share data) (unaudited) Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Shares Amount Shares Amount Total September 30, 2024 27,888,217 $ 279 $ 143,765 $ 24,718 $ ( 9,099 ) 338,015 $ ( 3,146 ) $ 156,517 Net loss — — — ( 5,533 ) — — — ( 5,533 ) Other comprehensive income — — — — ( 1,363 ) — — ( 1,363 ) Issuance of restricted stock — — ( 428 ) — — ( 47,946 ) 428 — Treasury shares sold to Employee Stock Purchase Plan — — 14 — — ( 4,677 ) 42 56 Stock-based compensation expense — — 2,257 — — — — 2,257 December 31, 2024 27,888,217 $ 279 $ 145,608 $ 19,185 $ ( 10,462 ) 285,392 $ ( 2,676 ) $ 151,934 September 30, 2023 27,888,217 $ 279 $ 139,773 $ 55,750 $ ( 9,307 ) 678,379 $ ( 7,372 ) $ 179,123 Net loss — — — ( 2,851 ) — — — ( 2,851 ) Other comprehensive loss — — — — 562 — — 562 Issuance of restricted stock — — ( 1,131 ) — — ( 86,783 ) 1,131 — Treasury shares sold to Employee Stock Purchase Plan — — ( 4 ) — — ( 3,864 ) 50 46 Stock-based compensation expense — — 2,030 — — — — 2,030 December 31, 2023 27,888,217 $ 279 $ 140,668 $ 52,899 $ ( 8,745 ) 587,732 $ ( 6,191 ) $ 178,910 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Shares Amount Shares Amount Total June 30, 2024 27,888,217 $ 279 $ 145,580 $ 33,941 $ ( 9,535 ) 579,422 $ ( 6,083 ) $ 164,182 Net loss — — — ( 14,756 ) — — ( 14,756 ) Other comprehensive income — — — — ( 927 ) — ( 927 ) Issuance of restricted stock — — ( 4,537 ) — — ( 408,406 ) 4,537 — Treasury shares sold to Employee Stock Purchase Plan — ( 3 ) — — ( 9,474 ) 105 102 Treasury shares purchased to satisfy tax withholding obligations — — — — — 123,850 ( 1,235 ) ( 1,235 ) Stock-based compensation expense — — 4,568 — — — 4,568 December 31, 2024 27,888,217 $ 279 $ 145,608 $ 19,185 $ ( 10,462 ) 285,392 $ ( 2,676 ) $ 151,934 June 30, 2023 27,888,217 $ 279 $ 140,810 $ 58,917 $ ( 8,769 ) 840,899 $ ( 9,753 ) $ 181,484 Net loss — — — ( 6,018 ) — — — ( 6,018 ) Other comprehensive loss — — — — 24 — — 24 Issuance of restricted stock — — ( 3,868 ) — — ( 297,026 ) 3,868 — Treasury shares sold to Employee Stock Purchase Plan — — ( 59 ) — — ( 11,465 ) 150 91 Treasury shares purchased to satisfy tax withholding obligations — — — — — 55,324 ( 456 ) ( 456 ) Stock-based compensation expense — — 3,785 — — — — 3,785 December 31, 2023 27,888,217 $ 279 $ 140,668 $ 52,899 $ ( 8,745 ) 587,732 $ ( 6,191 ) $ 178,910 -6- Table of Contents Matrix Service Company Notes to Condensed Consolidated Financial Statements (unaudited) Note 1 – Basis of Presentation and Significant Accounting Policies Basis of Presentation The condensed consolidated financial statements include the accounts of Matrix Service Company and its subsidiaries (“Matrix”, “we”, “our”, “us”, “its” or the “Company”), unless otherwise indicated. Intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission and do not include all information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. The information furnished reflects all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair statement of the results of operations, cash flows and financial position for the interim periods presented. The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended June 30, 2024, included in our Annual Report on Form 10-K. The results of operations for the three and six month periods ended December 31, 2024 may not necessarily be indicative of the results of operations for the full year ending June 30, 2025. Significant Accounting Policies Our significant accounting policies are detailed in “Note 1 - Basis of Presentation and Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended June 30, 2024. Accounting Standards Not Yet Adopted In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands disclosures about a public entity’s reportable segments and requires enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. The update will be effective for annual periods beginning after December 15, 2023 (fiscal 2025). Adoption of this ASU will result in additional disclosure, but will not impact the Company's consolidated financial position, results of operations or cash flows. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024 (fiscal 2026). Adoption of this ASU will result in additional disclosure, but will not impact the Company's consolidated financial position, results of operations or cash flows. In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, requiring companies to provide more detailed and organized disclosures of their expenses. Disclosures will include disaggregation of expense captions presented on the face of the income statement into specific categories, such as purchases of inventory, employee compensation, and costs related to depreciation and amortization. The new requirements will take effect for annual reporting periods beginning after December 15, 2026 (fiscal 2028) and for interim periods within fiscal years beginning after December 15, 2027 (fiscal 2029), with early adoption permitted. Adoption of this ASU will result in additional disclosure, but will not impact the Company's consolidated financial position, results of operations or cash flows. Other accounting pronouncements issued but not effective until after December 31, 2024 are not expected to have a material impact on the Company's consolidated financial position, results of operations, or cash flows. Note 2 – Revenue Remaining Performance Obligations We had $ 1.0 billion of remaining performance obligations yet to be satisfied as of December 31, 2024. We expect to recognize $ 558.9 million of our remaining performance obligations as revenue within the next twelve months. -7- Table of Contents Contract Balances Contract terms with customers include the timing of billing and payments, which usually differs from the timing of revenue recognition. As a result, we carry contract assets and liabilities in our balance sheet. These contract assets and liabilities are calculated on a contract-by-contract basis and are classified as current. We present our contract assets in the balance sheet as Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts ("CIE"). CIE consists of revenue recognized in excess of billings. We present our contract liabilities in the balance sheet as Billings on Uncompleted Contracts in Excess of Costs and Estimated Earnings ("BIE"). BIE consists of billings in excess of revenue recognized. The following table provides information about CIE and BIE: December 31, 2024 June 30, 2024 Change (In thousands) Costs and estimated earnings in excess of billings on uncompleted contracts $ 34,711 $ 33,893 $ 818 Billings on uncompleted contracts in excess of costs and estimated earnings ( 237,537 ) ( 171,308 ) ( 66,229 ) Net contract liabilities $ ( 202,826 ) $ ( 137,415 ) $ ( 65,411 ) The difference between the beginning and ending balances of our CIE and BIE primarily results from the timing of revenue recognized relative to the billings on the associated contracts. The amount of revenue recognized during the six months ended December 31, 2024 that was included in the June 30, 2024 BIE balance was $ 149.9 million. Progress billings in accounts receivable at December 31, 2024 and June 30, 2024 included retentions to be collected within one year of $ 12.9 million and $ 11.6 million, respectively. Contract retentions collectible beyond one year are included in Other assets, non-current in the Condensed Consolidated Balance Sheets and totaled $ 51.9 million as of December 31, 2024 and $ 28.6 million as of June 30, 2024, respectively. Unpriced Change Orders and Claims Costs and estimated earnings in excess of billings on uncompleted contracts included revenues for unpriced change orders and claims of $ 8.4 million at December 31, 2024 and $ 9.9 million at June 30, 2024. The amounts ultimately realized may be different than the recorded amounts resulting in adjustments to future earnings. Generally, we expect collection of amounts related to unpriced change orders and claims within twelve months. However, customers may not pay these amounts until final resolution of related claims, and therefore collection of these amounts may extend beyond one year. Disaggregated Revenue Revenue disaggregated by reportable segment is presented in Note 8 - Segment Information. The following series of tables presents revenue disaggregated by geographic area where the work was performed and by contract type: Geographic Disaggregation: Three Months Ended Six Months Ended December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 (In thousands) United States $ 175,489 $ 156,409 $ 328,711 $ 333,959 Canada 10,048 14,548 20,816 31,421 Other international 1,632 4,085 3,221 7,321 Total Revenue $ 187,169 $ 175,042 $ 352,748 $ 372,701 Contract Type Disaggregation: Three Months Ended Six Months Ended December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 (In thousands) Fixed-price contracts $ 137,950 $ 97,711 $ 261,719 $ 214,468 Time and materials and other cost reimbursable contracts 49,219 77,331 91,029 158,233 Total Revenue $ 187,169 $ 175,042 $ 352,748 $ 372,701 -8- Table of Contents Note 3 – Property, Plant and Equipment During the first quarter of fiscal 2024, we sold a previously utilized facility in Burlington, Ontario for $ 2.7 million in net proceeds, which resulted in a gain of $ 2.5 million. The gain was included in Other income in the Condensed Consolidated Statements of Income. We closed this previously utilized facility during the second quarter of fiscal 2023 because it was no longer strategic to the future of the business. During the second quarter of fiscal 2024, we sold a facility in Catoosa, Oklahoma for $ 2.7 million in net proceeds, which resulted in a gain of $ 2.0 million. Proceeds were received in January 2024. The gain was included in Other income in the Condensed Consolidated Statements of Income. The facility was previously utilized for our industrial cleaning business, which was sold during the fourth quarter of fiscal 2023. The Catoosa, Oklahoma facility was closed as it was no longer strategic to the future of the business. There were no significant sales of property, plant and equipment in the first half of fiscal 2025. Note 4 – Debt On September 9, 2021 , the Company and our primary U.S. and Canada operating subsidiaries entered into an asset-based credit agreement, which was most recently amended on May 3, 2024 (as amended, the "ABL Facility"), with Bank of Montreal, as Administrative Agent, Swing Line Lender and a Letter of Credit Issuer. The maximum amount of loans under the ABL Facility is limited to $ 90.0 million. The ABL Facility is intended to be used for working capital, capital expenditures, issuances of letters of credit and other lawful purposes. Our obligations under the ABL Facility are guaranteed by substantially all of our U.S. and Canadian subsidiaries and are secured by a first lien on all our assets under the ABL Facility. The ABL Facility matures, and any outstanding amounts become due and payable, on September 9, 2026. The maximum amount that we may borrow under the ABL Facility is subject to a borrowing base, which is based on restricted cash plus a percentage of the value of certain accounts receivable, inventory and equipment, reduced for certain reserves. We are required to maintain a minimum of $ 25.0 million of restricted cash at all times, but such amounts are also included in the borrowing base. The borrowing base is recalculated on a monthly basis and at December 31, 2024, our borrowing base was $ 59.7 million. The Company had $ 4.8 million in letters of credit outstanding as of December 31, 2024, which resulted in availability of $ 54.9 million under the ABL Facility. Borrowings under the ABL Facility bear interest through maturity at a variable rate based upon, at our option, an annual rate of either a base rate (“Base Rate”), an Adjusted Term Secured Overnight Financing Rate ("Adjusted Term SOFR"), or at the Canadian Prime Rate, plus an applicable margin. The Adjusted Term SOFR is defined as (i) the SOFR plus (ii) 11.448 basis points for a one-month tenor and 26.161 basis points for a three-month tenor; provided that the Adjusted Term SOFR cannot be below zero. The Base Rate is defined as a fluctuating interest rate equal to the greater of: (i) rate of interest announced by Bank of Montreal from time to time as its prime rate; (ii) the U.S. federal funds rate plus 0.50 %; (iii) Adjusted Term SOFR for one month period plus 1.00 %; or (iv) 1.00 %. Depending on the amount of average availability, the applicable margin is between 1.00 % to 1.50 % for Base Rate and Canadian Prime Rate borrowings, which includes either U.S. or Canadian prime rate, and between 2.00 % and 2.50 % for Adjusted Term SOFR borrowings. Interest is payable either (i) monthly for Base Rate or Canadian Prime Rate borrowings or (ii) the last day of the interest period for Adjusted Term SOFR borrowings, as set forth in the ABL Facility. The fee for undrawn amounts is 0.25 % per annum and is due quarterly. The ABL Facility contains customary conditions to borrowings, events of default and covenants, including, but not limited to, covenants that limit our ability to sell assets; engage in mergers and acquisitions; make investments, including investments in certain international subsidiaries; incur, assume or permit to exist additional indebtedness and guarantees; create or permit to exist liens; pay cash dividends or make distributions; issue equity instruments; or redeem or repurchase capital stock. In the event that our availability is less than the greater of (i) $ 15.0 million and (ii) 15.00 % of the commitments under the ABL Facility then in effect, a consolidated Fixed Charge Coverage Ratio of at least 1.00 to 1.00 must be maintained. We were in compliance with all covenants of the ABL Facility as of December 31, 2024. Note 5 – Income Taxes Effective Tax Rate During the three and six months ended December 31, 2024, our effective tax rates were ( 0.3 %) and ( 0.1 )%, respectively. During the three and six months ended December 31, 2023 our effective tax rates were zero. The effective tax rates during fiscal 2025 were impacted by valuation allowances of $ 1.8 million and $ 3.1 million, respectively, placed on deferred tax assets -9- Table of Contents generated during the three and six months ended December 31, 2024. The effective tax rates during fiscal 2024 were impacted by valuation allowances of $ 1.2 million and $ 1.4 million, respectively, placed on deferred tax assets during the three and six months ended December 31, 2023. Valuation Allowance We placed a valuation allowance on our deferred tax assets in fiscal 2022 due to the existence of a cumulative loss over a three-year period. Currently, we place valuation allowances on newly generated deferred tax assets and will realize the benefit associated with the deferred tax assets for which the valuation allowance has been provided as we generate taxable income. Note 6 – Commitments and Contingencies Insurance Reserves We maintain insurance coverage for various aspects of our operations. However, we retain exposure to potential losses through the use of deductibles, self-insured retentions and coverage limits. Typically our contracts require us to indemnify our customers for injury, damage or loss arising from the performance of our services and provide warranties for materials and workmanship. We may also be required to name the customer as an additional insured up to the limits of insurance available, or we may be required to purchase special insurance policies or surety bonds for specific customers or provide letters of credit in lieu of bonds to satisfy performance and financial guarantees on some projects. We maintain a performance and payment bonding line sufficient to support the business. We generally require our subcontractors to indemnify us and our customer and name us as an additional insured for activities arising out of the subcontractors’ work. We also require certain subcontractors to provide additional insurance policies, including surety bonds in favor of us, to secure the subcontractors’ work or as required by the subcontract. There can be no assurance that our insurance and the additional insurance coverage provided by our subcontractors will fully protect us against a valid claim or loss under the contracts with our customers. Litigation In January 2021, we achieved mechanical completion on a crude oil storage project. On April 1, 2022, we filed an arbitration demand against Keyera Energy, Inc. in an effort to collect outstanding balances of $ 32.7 million related to the project. In response, on June 2, 2022, the customer filed counterclaims seeking $ 20.0 million , which included liquidated damages and damages with respect to miscellaneous warranty items. On October 31, 2022, the customer amended its counterclaim claiming damages in a range of $ 18.8 million to $ 36.0 million, which included estimated amounts for “potential future costs.” In July 2024, the customer filed a second amended counterclaim which significantly increased the amount of alleged damages to a range of $ 69.6 million to $ 97.9 million, including a new claim for unspecified “other damages” of $ 46.9 million . A portion of the total alleged damages, if we are held liable, may be subject to certain insurance coverages. We are actively pursuing our claims and believe we have substantial legal and contractual defenses to the customer's counterclaims. During fiscal 2023, we completed construction services on a time and materials basis for a customer at a mining and minerals facility. In late fiscal 2023, after numerous attempts to collect outstanding receivables, we filed a notice of default for lack of payment of outstanding balances, and in early fiscal 2024, we filed a lien on the facility. The customer, 5E Boron Americas, LLC, responded by commencing litigation against us on July 17, 2023 in the United States District Court for the Central District of California, Eastern Division (5E Boron Americas, LLC v. Matrix Service Inc., Case No. 5:23-cv-01396-AB(DTBx)), alleging breach of contract and breach of express warranty. We denied all claims and filed a countersuit against the customer for failure to pay amounts due of $ 5.6 million. We believe we have set appropriate reserves based on our evaluation of the possible outcomes for the matters described above. However, the results of litigation are inherently unpredictable, and the possibility exists that the ultimate resolution of one or more of these matters could result in a material effect on our financial position, results of operations or liquidity. We and our subsidiaries are participants in various other legal actions; however, assessing the eventual outcome of litigation involves forward-looking speculation as to judgement being made by arbitrators, judges, juries and appellate courts in the future. Based upon information presently available, and in light of legal and other factual defenses available to the Company, management does not believe that such other known legal actions will have a material adverse effect on our financial position, results of operations or liquidity. -10- Table of Contents Note 7 – Earnings per Common Share Basic earnings per share (“EPS”) is calculated based on the weighted average shares outstanding during the period. Diluted earnings per share includes the dilutive effect of employee and director nonvested restricted stock units. Nonvested restricted stock units are considered dilutive (antidilutive) to our EPS whenever the average market value of the shares during the period exceeds (is less than) the sum of the related average unamortized compensation expense during the period plus the related hypothetical estimated excess tax benefit that will be realized when the shares vest. Nonvested restricted stock units are considered antidilutive to our EPS in the event we report a net loss. The computation of basic and diluted earnings per share is as follows: Three Months Ended Six Months Ended December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 (In thousands, except per share data) Basic EPS: Net loss $ ( 5,533 ) $ ( 2,851 ) $ ( 14,756 ) $ ( 6,018 ) Weighted average shares outstanding 27,801 27,377 27,680 27,314 Basic loss per share $ ( 0.20 ) $ ( 0.10 ) $ ( 0.53 ) $ ( 0.22 ) Diluted EPS: Net loss $ ( 5,533 ) $ ( 2,851 ) $ ( 14,756 ) $ ( 6,018 ) Diluted weighted average shares outstanding 27,801 27,377 27,680 27,314 Diluted loss per share $ ( 0.20 ) $ ( 0.10 ) $ ( 0.53 ) $ ( 0.22 ) The following securities are considered antidilutive and have been excluded from the calculation of Diluted EPS: Three Months Ended Six Months Ended December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 (In thousands) Nonvested restricted stock units 917 949 926 757 -11- Table of Contents Note 8 – Segment Information We operate our business through three reportable segments: • Storage and Terminal Solutions : primarily consists of engineering, procurement, fabrication, and construction services related to cryogenic and other specialty tanks and terminals for LNG, NGLs, hydrogen, ammonia, propane, butane, liquid nitrogen/liquid oxygen, and liquid petroleum. We also perform work related to traditional aboveground crude oil and refined product storage tanks and terminals. This segment also includes terminal balance of plant work, truck and rail loading/offloading facilities, and marine structures as well as storage tank and terminal maintenance and repair. Finally, we manufacture and sell precision engineered specialty tank products, including geodesic domes, aluminum internal floating roofs, floating suction and skimmer systems, roof drain systems and floating roof seals. • Utility and Power Infrastructure : primarily consists of engineering, procurement, fabrication, and construction services to support growing demand for LNG utility peak shaving facilities. We also perform power delivery work for public and private utilities, including construction of new substations, upgrades of existing substations, transmission and distribution line installations, and upgrades and maintenance including live wire work. Work may also include emergency and storm restoration services. We also provide construction services to a variety of power generation facilities, including natural gas fired facilities in simple or combined cycle configurations. • Process and Industrial Facilities : primarily consists of plant maintenance, repair, and turnarounds in the downstream and midstream markets for energy clients including refining and processing of crude oil, fractionating, and marketing of natural gas and natural gas liquids. We also perform engineering, procurement, fabrication, and construction for refinery upgrades and retrofits for renewable fuels, including hydrogen processing, production, loading and distribution facilities. We also engineer and construct thermal vacuum test chambers for aerospace and defense industries and other infrastructure for industries including chemicals, petrochemical, sulfur, mining and minerals primarily in the extraction of non-ferrous metals, cement, agriculture, wastewater treatment facilities and other industrial customers. We evaluate performance and allocate resources based on operating income. We eliminate intersegment sales; therefore, no intercompany profit or loss is recognized. Corporate selling, general and administrative expenses, including corporate salaries and facilities costs, are excluded from our three reportable segments in order to align controllable costs with the responsibility of segment management, and to be consistent with how our chief operating decision-maker assesses segment performance and allocates resources. Segment assets consist primarily of accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts, property, plant and equipment, right-of-use lease assets, goodwill and other intangible assets. Corporate assets consist primarily of cash, restricted cash, prepaid expenses, corporate fixed assets, and corporate operating lease right-of-use assets. -12- Table of Contents Operating Segment Information - The following tables set forth certain selected financial information for our operating segments for the periods indicated: (In thousands) Storage and Terminal Solutions Utility and Power Infrastructure Process and Industrial Facilities Corporate Total Three Months Ended December 31, 2024 Total revenue (1) $ 95,507 $ 61,076 $ 30,586 $ — $ 187,169 Cost of revenue ( 88,235 ) ( 57,667 ) ( 30,216 ) ( 159 ) ( 176,277 ) Gross profit (loss) 7,272 3,409 370 ( 159 ) 10,892 Selling, general and administrative expenses 5,567 3,561 1,677 6,481 17,286 Operating income (loss) $ 1,705 $ ( 152 ) $ ( 1,307 ) $ ( 6,640 ) $ ( 6,394 ) (1) Total revenues are net of inter-segment revenues which are primarily Process and Industrial Facilities and were $0.8 million for the three months ended December 31, 2024. Storage and Terminal Solutions Utility and Power Infrastructure Process and Industrial Facilities Corporate Total Three Months Ended December 31, 2023 Total revenue (1) $ 62,360 $ 40,144 $ 71,305 $ 1,233 $ 175,042 Cost of revenue ( 60,522 ) ( 38,729 ) ( 64,634 ) ( 568 ) ( 164,453 ) Gross profit 1,838 1,415 6,671 665 10,589 Selling, general and administrative expenses 4,338 1,978 2,206 7,209 15,731 Operating income (loss) $ ( 2,500 ) $ ( 563 ) $ 4,465 $ ( 6,544 ) $ ( 5,142 ) (1) Total revenues are net of inter-segment revenues which are primarily Storage and Terminal Solutions and were $0.9 million for the three months ended December 31, 2023. Storage and Terminal Solutions Utility and Power Infrastructure Process and Industrial Facilities Corporate Total Six Months Ended December 31, 2024 Total revenue (1) $ 173,746 $ 116,988 $ 62,014 $ — $ 352,748 Cost of revenue ( 161,777 ) ( 112,272 ) ( 59,647 ) ( 347 ) ( 334,043 ) Gross profit (loss) 11,969 4,716 2,367 ( 347 ) 18,705 Selling, general and administrative expenses 11,136 7,537 3,443 13,750 35,866 Operating income (loss) $ 833 $ ( 2,821 ) $ ( 1,076 ) $ ( 14,097 ) $ ( 17,161 ) (1) Total revenues are net of inter-segment revenues which are primarily Process and Industrial Facilities and were $1.7 million for the six months ended December 31, 2024. Storage and Terminal Solutions Utility and Power Infrastructure Process and Industrial Facilities Corporate Total Six Months Ended December 31, 2023 Total revenue (1) $ 152,504 $ 72,539 $ 146,425 $ 1,233 $ 372,701 Cost of revenue ( 145,714 ) ( 67,428 ) ( 134,676 ) ( 2,435 ) ( 350,253 ) Gross profit (loss) 6,790 5,111 11,749 ( 1,202 ) 22,448 Selling, general and administrative expenses 8,967 3,526 5,293 15,058 32,844 Operating income (loss) $ ( 2,177 ) $ 1,585 $ 6,456 $ ( 16,260 ) $ ( 10,396 ) (1) Total revenues are net of inter-segment revenues which are primarily Storage and Terminal Solutions and were $1.8 million for the six months ended December 31, 2023. -13- Table of Contents Total assets by segment December 31, 2024 June 30, 2024 Storage and Terminal Solutions $ 172,932 $ 138,529 Utility and Power Infrastructure 108,865 84,108 Process and Industrial Facilities 34,379 81,524 Corporate 197,669 147,190 Total Segment Assets $ 513,845 $ 451,351 -14- Table of Contents