What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2025-02-06 · 173 added, 127 removed, 260 unchanged (54% of the section changed)

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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 perform power delivery work for public and private utilities, including construction of new substations, upgrades of existing substations, and maintenance.

We also provide construction services to a variety of power generation facilities, including natural gas fired facilities in simple or combined cycle configurations.

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Operational Update

Operating activity increased during the second quarter of fiscal 2025 as revenues showed a 13% increase from first quarter of 2025.

This increase marks the beginning of a ramp in activity, and was fueled by growth primarily in the Storage and Terminal Solutions segment, as well as the Utility and Power Infrastructure segment.

We believe these positive trends will continue as we progress through the remainder of the fiscal year.

Combined with strong project execution, we believe the continued increase in activity will result in enhanced leverage of our cost structure, improved operating margins, and bottom-line results.

Project awards during the quarter were $90.5 million.

We have experienced lower levels of project awards as many customers delayed spending decisions pending the outcome of the 2024 presidential election.

It is not uncommon for awards to shift from one period to another as the timing of awards is dependent on a number of factors, and while project awards in the quarter is the lowest quarterly awards in over three years, demand in the markets we serve remains strong based upon significant market trends, and recent and anticipated actions by the new administration.

Operating activity increased during the third quarter of fiscal 2025 as revenues showed a 13% increase from second quarter of 2025.

The increase was driven primarily by an increase in activity for refinery maintenance and turnaround services.

As we move forward through the coming quarters, we believe activity levels will rise for projects currently in backlog.

Project awards during the quarter were $301.2 million, resulting in a current quarter book-to-bill of 1.5x.

Award activity was driven by our Storage and Terminal Solutions segment, and included the award of a large specialty storage project.

The market drivers for each of our segments are strong and include increased oil and gas demand, the clean energy transition, low-cost feed stock, data center energy demand, industrial reshoring/onshoring, grid reliability and electrical supply assurance.

As a result, we believe we will have strong award activity in the coming quarters.

While our award activity in the quarter was strong, heightened macroeconomic uncertainty and the evolving impact of U.S.

trade policy on infrastructure economics has impacted the timing of customer decisions in the near term.

We believe customer delays in project starts and final investment decisions to be a short-term disruption, while an overall favorable regulatory environment for our customers underpins long-term momentum for our business.

We continue to sharpen and better align our business for the current and coming marketplace.

Accordingly, during the third and fourth quarters, we are consolidating certain aspects of the business to further improve our performance and create a flatter, leaner management structure.

In addition, we continue to evaluate our business lines and, where appropriate, reallocate resources to those businesses that present the best opportunities.

We remain focused on delivering sustainable, long-term shareholder value by building a resilient, growth-oriented platform aligned with the evolving needs of our customers.

We define backlog as the total dollar amount of revenue that we expect to recognize as a result of performing work that has been awarded to us through a signed contract, limited notice to proceed ("LNTP") or other type of assurance that we consider firm.

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For all other arrangements, we calculate backlog as the estimated contract amount less revenue recognized as of the reporting date.

The following table provides a summary of changes in our backlog for the three months ended December 31, 2024:

The following table provides a summary of changes in our backlog for the three months ended March 31, 2025:

Storage and Terminal Solutions Utility and Power Infrastructure Process and Industrial Facilities Total

(In thousands)

Backlog as of September 30, 2024 $ 801,667 $ 358,150 $ 252,054 $ 1,411,871

Backlog as of December 31, 2024 $ 738,986 $ 318,516 $ 253,632 $ 1,311,134

Project awards 204,839 37,686 58,667 301,192

Other adjustment (2)

— — (4,106) (4,106)

Revenue recognized (96,054) (58,676) (45,431) (200,161)

Backlog as of December 31, 2024 $ 738,986 $ 318,516 $ 253,632 $ 1,311,134

Backlog as of March 31, 2025 $ 847,771 $ 297,526 $ 266,868 $ 1,412,165

Book-to-bill ratio (1)

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(1) Calculated by dividing project awards by revenue recognized.

(2) Backlog was reduced as a result of the closure of a customer's facility.

This customer has historically represented less than 1% of our consolidated revenues.

The following table provides a summary of changes in our backlog for the six months ended December 31, 2024:

The following table provides a summary of changes in our backlog for the nine months ended March 31, 2025:

Storage and Terminal Solutions Utility and Power Infrastructure Process and Industrial Facilities Total

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Revenue recognized (269,800) (175,664) (107,445) (552,909)

Backlog as of December 31, 2024 $ 738,986 $ 318,516 $ 253,632 $ 1,311,134

Backlog as of March 31, 2025 $ 847,771 $ 297,526 $ 266,868 $ 1,412,165

Book-to-bill ratio (1)

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This customer has historically represented less than 1% of our consolidated revenues.

In the Storage and Terminal Solutions segment, we booked $32.8 million of project awards during the second quarter of fiscal 2025.

During the six months ended December 31, 2024, we booked $114.5 million of project awards.

This segment includes significant opportunities for storage infrastructure projects related to natural gas, LNG, ammonia, NGLs and other forms of renewable energy.

In the Storage and Terminal Solutions segment, we booked $204.8 million of project awards during the third quarter of fiscal 2025.

Project awards included a project for the engineering and construction of large refrigerated propane and butane tanks as well as spheres for related NGL products.

During the nine months ended March 31, 2025, we booked $319.3 million of project awards.

This segment includes significant opportunities for storage infrastructure projects related to natural gas, LNG, ammonia, NGLs and other forms of low carbon energy.

We believe LNG and ammonia projects in particular will be key growth drivers for this segment.

Bidding activity on LNG and ammonia projects has been strong and we expect that to continue.

In the Utility and Power Infrastructure segment, we booked $21.4 million of project awards during the second quarter of fiscal 2025.

During the six months ended December 31, 2024, we booked $55.8 million of project awards.

In the Utility and Power Infrastructure segment, we booked $37.7 million of project awards during the third quarter of fiscal 2025.

During the nine months ended March 31, 2025, we booked $93.5 million of project awards.

Our opportunity pipeline for LNG peak shaving projects continues to be promising;

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Project opportunities and bidding activity are strong for both the power delivery portion of the business and LNG peak shaving.

In the Process and Industrial Facilities segment, we booked $36.3 million of project awards during the second quarter of fiscal 2025.

During the six months ended December 31, 2024, we booked $68.2 million of project awards, and were notified of a five-year renewal of a refinery maintenance contract.

We continue to see demand for thermal vacuum chambers in the coming quarters, as well as increasing opportunities in mining and minerals, chemicals, renewables and refinery turnarounds.

In the Process and Industrial Facilities segment, we booked $58.7 million of project awards during the third quarter of fiscal 2025.

During the nine months ended March 31, 2025, we booked $126.9 million of project awards, and were notified of a five-year renewal of a refinery maintenance contract.

We continue to see demand for thermal vacuum chambers in the coming quarters, as well as increasing opportunities in mining and minerals, chemicals, low carbon and refinery turnarounds.

Project awards in all segments are cyclical and are typically the result of a sales process that can take several months or years to complete.

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Additionally, awards for larger construction projects may be recognized as revenue over a multi-year period as the projects may take a few years to complete.

Three months ended December 31, 2024 Compared to the Three months ended December 31, 2023

The information below is an analysis of our consolidated results for the three months ended December 31, 2024, compared to the three months ended December 31, 2023.

Three months ended March 31, 2025 Compared to the Three months ended March 31, 2024

The information below is an analysis of our consolidated results for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

See Results of Operations by Business Segment below for additional information describing the performance of each of our reportable segments.

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Three Months Ended

December 31, 2024 v 2023

2024 2023 $ %

March 31, 2025 v 2024

Dollars in thousands 2025 2024 Change %

Revenue $ 200,161 $ 166,013 $ 34,148 21 %

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Selling, general and administrative expenses 17,726 19,948 (2,222) (11) %

Restructuring costs 124 — 124 — %

Operating loss (5,000) (14,370) 9,370 65 %

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Other 182 (235) 417 177 %

Loss before income tax expense (3,434) (14,583) 11,149 76 %

Provision for federal, state and foreign income taxes — (2) 2 — %

Net loss $ (3,434) $ (14,581) $ 11,147 76 %

Revenue - The increase in consolidated revenue of $12.1 million, or 7%, was primarily attributable to increased revenue volumes in our Storage and Terminal Solutions and Utility and Power Infrastructure segments, partially offset by reduced revenue volumes in Process and Industrial Facilities.

Gross profit - Gross profit in the second quarter of fiscal 2025 increased $0.3 million, or 3%, compared to the second quarter of fiscal 2024.

Gross margin of 5.8% for the second quarter of fiscal 2025 decreased slightly compared with gross margin of 6.0% for the second quarter of fiscal 2024.

While project execution remained strong, gross margins were negatively impacted by the under-recovery of construction overhead costs.

Selling, general and administrative expenses - The increase in SG&A expenses of $1.6 million, or 10%, is due to several factors, including an increase in salaries and wages of $0.6 million and an increase in project pursuit costs of $0.6 million, all necessitated to support conversion of backlog to revenue and expected growth of the business.

Revenue - The increase in consolidated revenue of $34.1 million, or 21%, was primarily attributable to higher revenue volumes in our Storage and Terminal Solutions and Utility and Power Infrastructure segments, partially offset by reduced revenue volumes in Process and Industrial Facilities.

Gross profit - Gross profit in the third quarter of fiscal 2025 increased $7.3 million, or 130%, compared to the third quarter of fiscal 2024.

Gross margin of 6.4% for the third quarter of fiscal 2025 increased compared with gross margin of 3.4% for the third quarter of fiscal 2024.

The increase in gross margin for the quarter is attributable to higher gross margins in our Utility and Power Infrastructure and Process and Industrial Facility segments.

Selling, general and administrative expenses - The decrease in SG&A expenses of $2.2 million, or 11%, is primarily due to a decrease in cash-settled stock-based compensation of $1.6 million.

Interest income - The increase in interest income of $1.4 million is primarily due to an increase in our cash balance.

In late fiscal 2024, as a result of increasing cash balances, we invested excess cash balances in interest-bearing cash accounts.

Other income - Other income decreased $3.0 million compared to the second quarter of fiscal 2024.

Other income during the three months ended December 31, 2023 included a gain of $2.0 million on the sale of a facility in Catoosa, Oklahoma.

Additionally, the Company incurred a foreign currency loss of $0.7 million for the three months ended December 31, 2024 compared to a gain of $0.3 million for the three months ended December 31, 2023.

Provision for income taxes - Our effective tax rates for the three months ended December 31, 2024 and December 31, 2023 were (0.3%) and zero, respectively.

Provision for income taxes - Our effective tax rates for the three months ended March 31, 2025 and March 31, 2024 were zero.

The effective tax rates during both periods were impacted by valuation allowances of $1.2 million and $4.4 million respectively, placed on deferred tax assets generated during the quarters.

We placed a valuation allowance on our deferred tax assets 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.

Currently, we place valuation allowances on newly generated deferred tax assets.

We will realize the benefit associated with the deferred tax assets for which the valuation allowance has been provided as we generate taxable income.

Results of Operations by Business Segment

Three Months Ended

December 31, 2024 v 2023

Dollars in thousands 2024 2023 $ %

March 31, 2025 v 2024

Dollars in thousands 2025 2024 Change % Favorable (Unfavorable)

Storage and Terminal Solutions $ 96,054 $ 54,304 $ 41,750 77 %

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Process and Industrial Facilities 45,431 65,589 (20,158) (31) %

Corporate — 1,233 (1,233) (100) %

Total revenue (1)

$ 200,161 $ 166,013 $ 34,148 21 %

(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.

(1) Total revenues are net of inter-segment revenues which are primarily Process and Industrial Facilities and were $1.1 million for the three months ended March 31, 2025.

Gross profit (loss)

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Total gross profit $ 12,850 $ 5,578 $ 7,272 130 %

Gross margin %

Storage and Terminal Solutions 3.9 % 4.3 % (.4)% (9) %

Utility and Power Infrastructure 9.4 % 3.1 % 6.3% 203 %

Process and Industrial Facilities 8.3 % 2.7 % 5.6% 207 %

Total gross margin % 6.4 % 3.4 % 3.0% 88 %

Operating income (loss)

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Storage and Terminal Solutions

Storage and Terminal Solutions revenues increased by $33.1 million, or 53%, in the three months ended December 31, 2024 compared to the same period last year, driven by an increased volume of work for specialty vessel and LNG storage.

Storage and Terminal Solutions gross profit increased by $5.4 million, or 296%, in the three months ended December 31, 2024 compared to the same period last year.

The segment gross margin was 7.6% for the three months ended December 31, 2024 compared to segment gross margin of 2.9% in the same period last year.

The improved gross margin relative to the prior year period reflects consistent project execution and improved construction overhead cost absorption as a result of higher revenues.

Storage and Terminal Solutions revenues increased by $41.8 million, or 77%, in the three months ended March 31, 2025 compared to the same period last year, driven by an increased volume of work for specialty vessel and LNG storage projects.

Storage and Terminal Solutions gross profit increased by $1.4 million, or 61%, in the three months ended March 31, 2025 compared to the same period last year.

The segment gross margin was 3.9% for the three months ended March 31, 2025 compared to segment gross margin of 4.3% in the same period last year.

Although higher revenue resulted in improved leverage of our cost structure, segment gross margin continues to be impacted by under-recovery as we allocate more resources to this segment in anticipation of continuing revenue growth.

Additionally, gross margin for the third quarter of fiscal 2025 was negatively impacted by lower than anticipated labor productivity on a crude terminal project.

Utility and Power Infrastructure

Utility and Power Infrastructure revenues increased by $20.9 million, or 52%, in the three months ended December 31, 2024 compared to the same period last year.

The increase is primarily attributable to a higher volume of work for LNG peak shaving projects, partially offset by decreases in power delivery work.

Utility and Power Infrastructure gross profit increased by $2.0 million, or 141%, in the three months ended December 31, 2024 compared to the same period last year.

The segment gross margin was 5.6% for the three months ended December 31, 2024 compared to 3.5% in the same period last year, an increase of 2.1% due to an improved mix of work.

Gross margins in both periods were negatively impacted by the under-recovery of construction overhead costs.

Utility and Power Infrastructure revenues increased by $12.6 million, or 27%, in the three months ended March 31, 2025 compared to the same period last year.

The increase is primarily attributable to a higher volume of work for natural gas peak shaving projects.

Utility and Power Infrastructure gross profit increased by $4.1 million, or 293%, in the three months ended March 31, 2025 compared to the same period last year.

The segment gross margin was 9.4% for the three months ended March 31, 2025 compared to 3.1% in the same period last year, an increase of 6.3% due to strong project execution and improved construction overhead cost absorption as a result of higher revenues.

Process and Industrial Facilities

Process and Industrial Facilities revenues decreased by $40.7 million, or 57%, in the three months ended December 31, 2024 compared to the same period last year.

The decrease is primarily attributable to lower revenue volumes resulting from the completion of a large renewable diesel project, and to lower revenue volumes for thermal vacuum chambers.

We believe this reduction in revenue is temporary given our strong backlog, including a significant gas processing construction project that is expected to commence in late fiscal 2025.

Process and Industrial Facilities gross profit decreased by $6.3 million, or 94%, in the three months ended December 31, 2024 compared to the same period last year.

The segment gross margin was 1.2% for the three months ended December 31, 2024 compared to 9.4% in the same period last year.

Gross margins decreased due to changes in the mix of work, as well as an increase in under-recovery of construction overhead costs due to lower revenues.

Unallocated corporate expenses net to $6.6 million during the three months ended December 31, 2024 compared to $6.5 million in the same period last year.

Six months ended December 31, 2024 Compared to the Six months ended December 31, 2023

The information below is an analysis of our consolidated results for the six months ended December 31, 2024, compared to the six months ended December 31, 2023.

Process and Industrial Facilities revenues decreased by $20.2 million, or 31%, in the three months ended March 31, 2025 compared to the same period last year.

The decrease is primarily attributable to lower revenue volumes resulting from the completion of a large renewable diesel project.

We believe this reduction in revenue is temporary given our strong backlog, including a significant gas processing construction project that is expected to commence in early fiscal 2026.

Process and Industrial Facilities gross profit increased by $2.0 million, or 113%, in the three months ended March 31, 2025 compared to the same period last year.

The segment gross margin was 8.3% for the three months ended March 31, 2025 compared to 2.7% in the same period last year.

Gross margin in the prior period was adversely impacted by reduced labor demand for turnaround and maintenance services in the final year of a three-year refinery maintenance contract which has since been renewed.

The accounting for this change resulted in a cumulative catch-up adjustment over the life of the contract, which impacted gross margins during the prior year period.

Nine months ended March 31, 2025 Compared to the Nine months ended March 31, 2024

The information below is an analysis of our consolidated results for the nine months ended March 31, 2025, compared to the nine months ended March 31, 2024.

See Results of Operations by Business Segment below for additional information describing the performance of each of our reportable segments.

Consolidated Results of Operations

Six Months Ended

December 31, 2024 v 2023

2024 2023 $ %

Nine Months Ended

March 31, 2025 v 2024

Dollars in thousands 2025 2024 Change %

Revenue $ 552,909 $ 538,714 $ 14,195 3 %

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Selling, general and administrative expenses 53,592 52,792 800 2 %

Restructuring costs 124 — 124 — %

Operating loss (22,161) (24,766) 2,605 11 %

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Net loss $ (18,190) $ (20,599) $ 2,409 0 12 %

Revenue - The decrease in overall revenue of $20.0 million, or 5%, was primarily attributable to reduced revenue volumes in our Process and Industrial Facilities segment, partially offset by increases in Storage and Terminal Solutions and Utility and Power Infrastructure.

Gross profit - Gross profit in the first half of fiscal 2025 decreased $3.7 million, or 17%, compared to the first half of fiscal 2024.

Gross margin decreased to 5.3% for the first half of fiscal 2025 compared to 6.0% for the first half of fiscal 2024.

While project execution remained strong, gross margins were negatively impacted by the under-recovery of construction overhead costs, which increased for the first half of fiscal 2025 due to lower revenues.

Selling, general and administrative expenses - The increase in SG&A expenses of $3.0 million, or 9%, is primarily due to several factors including an increase in salaries and wages of $1.6 million and an increase in pursuit costs of $0.6 million, all necessitated to support conversion of backlog to revenue and expected growth of the business.

Revenue - The increase in overall revenue of $14.2 million, or 3%, was primarily attributable to increased revenue volumes in our Storage and Terminal Solutions and Utility and Power Infrastructure segments, partially offset by a decrease in Process and Industrial Facilities.

Gross profit - Gross profit in the nine months ended March 31, 2025 increased $3.5 million, or 13%, compared to the same period prior year.

Gross margin increased to 5.7% for the nine months ended March 31, 2025 compared to 5.2% for the same period prior year.

The increase in gross margin for the quarter is attributable to higher gross margins in our Storage and Terminal Solutions and Utility and Power Infrastructure segments, partially offset by lower margins in our Process and Industrial Facility segment.

Selling, general and administrative expenses - The increase in SG&A expenses of $0.8 million, or 2%, is primarily due to an increase in salaries and wages of $2.3 million, all necessitated to support conversion of backlog to revenue and expected growth of the business.

The increase was partially offset by a decrease in cash-settled stock-based compensation expense of $2.1 million.

Interest income - The increase in interest income of $4.2 million is primarily due to an increase in our cash balance.

In late fiscal 2024, as a result of increasing cash balances, we invested excess cash balances in interest-bearing cash accounts.

Other income - Other income decreased $5.2 million in the first half of fiscal 2025 as compared to the first half of fiscal 2024.

Other income during the six months ended December 31, 2023, included a gain of $2.0 million from the sale of a facility in Catoosa, Oklahoma for $2.7 million in net proceeds.

Other income - Other income decreased $4.8 million in the nine months ended March 31, 2025 as compared to the same period prior year.

Other income during the nine months ended March 31, 2024 included a gain of $2.0 million from the sale of a facility in Catoosa, Oklahoma.

Additionally, in the first quarter of fiscal 2024, we recognized a gain of $2.5 million on the sale of a previously utilized facility in Burlington, Ontario.

Provision for income taxes - Our effective tax rates for the six months ended December 31, 2024 and December 31, 2023 were (0.1%) and zero, respectively.

Provision for income taxes - Our effective tax rates for the nine months ended March 31, 2025 and March 31, 2024 were (0.1%) and zero, respectively.

The effective tax rates during both periods were impacted by valuation allowances of $4.3 million and $5.8 million, respectively, placed on deferred tax assets generated during the quarters.

We placed a valuation allowance on our deferred tax assets due to the existence of a cumulative loss over a three-year period.

Currently, we place valuation allowances on newly generated deferred tax assets.

We will realize the benefit associated with the deferred tax assets for which the valuation allowance has been provided as we generate taxable income.

Results of Operations by Business Segment

Six Months Ended

December 31, 2024 v 2023

Dollars in thousands 2024 2023 $ %

Nine Months Ended

March 31, 2025 v 2024

Dollars in thousands 2025 2024 Change % Favorable (Unfavorable)

Storage and Terminal Solutions $ 269,800 $ 206,808 $ 62,992 30 %

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$ 552,909 $ 538,714 $ 14,195 3 %

(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.

(1) Total revenues are net of inter-segment revenues which are primarily Process and Industrial Facilities and were $2.8 million for the nine months ended March 31, 2025.

Gross profit (loss)

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Total gross profit $ 31,555 $ 28,026 $ 3,529 13 %

Gross margin %

Storage and Terminal Solutions 5.8 % 4.4 % 1.4% 32 %

Utility and Power Infrastructure 5.8 % 5.5 % 0.3% 5 %

Process and Industrial Facilities 5.7 % 6.4 % (0.7)% (11) %

Corporate — % (90.3) % 90.3% (100) %

Total gross margin % 5.7 % 5.2 % 0.5% 10 %

Operating income (loss)

5 unchanged sentences

Storage and Terminal Solutions

Storage and Terminal Solutions revenues increased by $21.2 million, or 14%, in the six months ended December 31, 2024 compared to the same period last year, driven by increased volume of work for specialty vessel and LNG storage, partially offset by decreases in tank repair and maintenance work.

Storage and Terminal Solutions gross profit increased by $5.2 million, or 76%, in the six months ended December 31, 2024 compared to the same period last year.

The segment gross margin was 6.9% for the six months ended December 31, 2024 compared to segment gross margin of 4.5% in the same period last year.

Storage and Terminal Solutions revenues increased by $63.0 million, or 30%, in the nine months ended March 31, 2025 compared to the same period last year, driven by increased volume of work for specialty vessel and LNG storage, partially offset by decreases in tank repair and maintenance work.

Storage and Terminal Solutions gross profit increased by $6.6 million, or 72%, in the nine months ended March 31, 2025 compared to the same period last year.

The segment gross margin was 5.8% for the nine months ended March 31, 2025 compared to segment gross margin of 4.4% in the same period last year.

The improved gross margin relative to the prior year period reflects consistent project execution and improved construction overhead cost absorption as a result of higher revenues.

Utility and Power Infrastructure

Utility and Power Infrastructure revenues increased by $44.4 million, or 61%, in the six months ended December 31, 2024 compared to the same period last year.

Utility and Power Infrastructure revenues increased by $57.0 million, or 48%, in the nine months ended March 31, 2025 compared to the same period last year.

The increase is primarily attributable to higher volumes of work for LNG peak shaving projects, partially offset by decreases in power delivery work.

Utility and Power Infrastructure gross profit decreased by $0.4 million, or 8%, in the six months ended December 31, 2024 compared to the same period last year.

The segment gross margin was 4.0% for the six months ended December 31, 2024 compared to 7.0% in the same period last year.

The segment gross margin in the current period was impacted by higher levels of under-recovery of construction overhead costs.

Utility and Power Infrastructure gross profit increased by $3.7 million, or 57%, in the nine months ended March 31, 2025 compared to the same period last year.

The segment gross margin was 5.8% for the nine months ended March 31, 2025 compared to 5.5% in the same period last year.

Process and Industrial Facilities

Process and Industrial Facilities revenues decreased by $84.4 million, or 58%, in the six months ended December 31, 2024 compared to the same period last year.

Process and Industrial Facilities revenues decreased by $104.6 million, or 49%, in the nine months ended March 31, 2025 compared to the same period last year.

The decrease is primarily attributable to lower revenue volumes for a now completed large renewable diesel project, in addition to lower revenue volumes for thermal vacuum chambers.

We believe this reduction in revenue is temporary given our strong backlog, including a significant gas processing construction project that is expected to commence in late fiscal 2025.

Process and Industrial gross profit decreased by $9.4 million, or 80%, in the six months ended December 31, 2024 compared to the same period last year.

The segment gross margin was 3.8% for the six months ended December 31, 2024 compared to 8.0% in the same period last year.

We believe this reduction in revenue is temporary given our strong backlog, including a significant gas processing construction project that is expected to commence in early fiscal 2026.

Process and Industrial gross profit decreased by $7.4 million, or 55%, in the nine months ended March 31, 2025 compared to the same period last year.

The segment gross margin was 5.7% for the nine months ended March 31, 2025 compared to 6.4% in the same period last year.

The segment gross margin in the current period was impacted by higher levels of under-recovery of construction overhead costs due to lower revenue.

Unallocated corporate revenue and expenses net to $14.1 million during the six months ended December 31, 2024 compared to $16.3 million in the same period last year.

The decrease of $2.2 million was primarily due to reduced legal expenses year over year.

Legal expenses incurred during the first half of fiscal 2024 included costs related to a jury trial that resulted in a verdict in our favor.

LIQUIDITY AND CAPITAL RESOURCES

We assess liquidity based on the ongoing ability to pay our liabilities as they become due, fund business operations and meet all monetary contractual obligations.

Our primary sources of liquidity at December 31, 2024 were unrestricted cash and cash equivalents on hand, capacity under our ABL Facility, and cash generated from operations.

Our primary sources of liquidity at March 31, 2025 were unrestricted cash and cash equivalents on hand, capacity under our ABL Facility, and cash generated from operations.

Our primary operational uses of capital are expenditures required to execute our projects, fund business operations and fulfill our contractual obligations.

We believe that for at least the next 12 months, anticipated cash generated by operating activities, along with our availability under the ABL Facility and cash position, is sufficient to support our operating requirements.

Unrestricted cash and cash equivalents at December 31, 2024 totaled $156.8 million and availability under the ABL Facility totaled $54.9 million, resulting in total liquidity of $211.7 million.

During the second quarter of fiscal 2025, liquidity increased $30.4 million primarily as a result of cash provided by operating activities.

We believe that for at least the next 12 months, our cash position, anticipated cash generated by operating activities, along with our availability under the ABL Facility, is sufficient to support our operating requirements.

Unrestricted cash and cash equivalents at March 31, 2025 totaled $185.5 million and availability under the ABL Facility totaled $61.5 million, resulting in total liquidity of $247.1 million.

During the third quarter of fiscal 2025, liquidity increased $35.4 million primarily as a result of cash provided by operating activities.

The following table provides a reconciliation of restricted cash and unrestricted cash in the Consolidated Balance Sheets to the total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows, as well as availability and total liquidity (in thousands):

2025 December 31,

2024 September 30,

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Unrestricted cash 185,541 156,777 124,610 115,615

Availability 54,920 56,642 53,988

Availability under ABL Facility 61,543 54,920 56,642 53,988

Total Liquidity $ 247,084 $ 211,697 $ 181,252 $ 169,603

The following table provides a summary of changes in our liquidity for the three months ended December 31, 2024 (in thousands):

Liquidity at September 30, 2024 $ 181,252

The following table provides a summary of changes in our liquidity for the three months ended March 31, 2025 (in thousands):

Liquidity at December 31, 2024 $ 211,697

Cash provided by operating activities 31,247

1 unchanged sentence

Proceeds from asset sales 74

Decrease in availability under ABL Facility (1,722)

Increase in availability under ABL Facility 6,623

Cash provided by financing activities 47

Effect of exchange rate changes on cash (38)

Liquidity at December 31, 2024 $ 211,697

The following table provides a summary of changes in our liquidity for the six months ended December 31, 2024 (in thousands):

Liquidity at March 31, 2025 $ 247,084

The following table provides a summary of changes in our liquidity for the nine months ended March 31, 2025 (in thousands):

Liquidity at June 30, 2024 $ 169,603

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Effect of exchange rate changes on cash (563)

Liquidity at December 31, 2024 $ 211,697

Liquidity at March 31, 2025 $ 247,084

Factors that routinely impact our short-term liquidity and may impact our long-term liquidity include, but are not limited to:

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• the mix of work can impact liquidity.

In periods where fixed-price contracts comprise a larger portion of revenue, liquidity may increase.

In periods where fixed-price contracts comprise a larger portion of revenue, l iquidity may increase depending on the timing of the billing schedule in relation to project cash outflows.

In periods where time and material contracts comprise a larger portion of revenue, liquidity may decrease;

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The ABL Facility matures, and any outstanding amounts become due and payable, on September 9, 2026.

The borrowing base is recalculated on a monthly basis and at December 31, 2024, our borrowing base was $59.7 million.

We had no borrowings outstanding and $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.

The borrowing base is recalculated on a monthly basis and at March 31, 2025, our borrowing base was $66.3 million.

We had no borrowings outstanding and $4.8 million in letters of credit outstanding as of March 31, 2025, which resulted in availability of $61.5 million under the ABL Facility.

For additional information regarding our ABL Facility, see Item I of Part I, "Financial Statements - Note 4 - Debt."

CASH FLOW ANALYSIS

The following table summarizes our changes in cash flow activities for the periods indicated (in thousands):

Nine Months Ended

Cash flows provided by operating activities $ 76,763 $ 25,567

Cash provided by operating activities for the six months ended December 31, 2024 totaled $45.5 million.

Major components of cash flows provided by operating activities for the six months ended December 31, 2024 are as follows:

Net Cash Provided by Operating Activities

(In thousands)

Cash flows used in investing activities (5,188) (154)

Cash flows used in financing activities (1,086) (10,324)

Effect of exchange rate changes on cash (563) (243)

Change in cash and cash equivalents 69,926 14,846

Cash and cash equivalents at beginning of period 140,615 79,812

Cash and cash equivalents at end of period $ 210,541 $ 94,658

Cash Flows Provided by Operating Activities

The following table summarizes the components of cash flows provided by operating activities for the periods indicated (in thousands):

Nine Months Ended

Net loss $ (18,190) $ (20,599)

Loss on sale of property, plant and equipment

Gain on sale of property, plant and equipment (122) (4,530)

Depreciation and amortization 7,538 8,337

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Net cash provided by operating activities $ 76,763 $ 25,567

Cash effect of changes in operating assets and liabilities at December 31, 2024 in comparison to June 30, 2024 include the following:

• Accounts receivable, excluding credit losses recognized during the period and including retention amounts classified as non-current, increased by $18.9 million during the six months ended December 31, 2024, which decreased cash flows from operating activities.

The variance is primarily attributable to the timing of billing and collections.

The significant components of the $80.7 million change in operating assets and liabilities for the nine months ended March 31, 2025 are summarized as follows:

• Accounts receivable, excluding credit losses recognized during the period and including retention amounts classified as non-current, increased by $88.8 million which decreased cash flows from operating activities.

The increases are primarily attributable to the timing of billing and collections.

• Costs and estimated earnings in excess of billings on uncompleted contracts ("CIE") increased $4.7 million which decreased cash flows from operating activities.

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CIE and BIE balances can experience significant fluctuations based on business volumes and the timing of when job costs are incurred and the timing of customer billings and payments.

• Accounts payable increased by $14.5 million during the six months ended December 31, 2024, which increased cash flows from operating activities.

• Accounts payable increased by $13.0 million which increased cash flows from operating activities.

These operating liabilities can fluctuate based on business volumes;

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and other timing differences.

• Inventories, income taxes receivable, prepaid expenses, other current assets, operating right-of-use lease assets and other assets, non-current, increased $4.4 million during the six months ended December 31, 2024, which decreased cash flows from operating activities.

• Inventories, income taxes receivable, prepaid expenses, other current assets, operating right-of-use lease assets and other assets, non-current, increased $1.2 million which decreased cash flows from operating activities.

These operating assets can fluctuate based on business volumes;

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and other timing differences.

• Accrued wages and benefits, accrued insurance, operating lease liabilities, other accrued expenses, and other liabilities, non-current decreased by $5.8 million during the six months ended December 31, 2024, which decreased cash flows from operating activities.

• Accrued wages and benefits, accrued insurance, operating lease liabilities, other accrued expenses, and other liabilities, non-current increased by $1.1 million which increased cash flows from operating activities.

These operating liabilities can fluctuate based on the timing of payroll, distributions, business volumes;

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and other timing differences.

The significant components of the $36.4 million change in operating assets and liabilities for the nine months ended March 31, 2024 are summarized as follows:

• Accounts receivable, excluding credit losses recognized during the period and including retention amounts classified as non-current, increased by $43.1 million, which decreased cash flows from operating activities.

The increases are primarily attributable to the timing of billing and collections, partially offset by $16.8 million we received as full payment for the favorable resolution of a legal matter.

• Costs and estimated earnings in excess of billings on uncompleted contracts ("CIE") decreased $10.3 million which increased cash flows from operating activities.

Billings on uncompleted contracts in excess of costs and estimated earnings ("BIE") increased $82.2 million which increased cash flows from operating activities.

CIE and BIE balances can experience significant fluctuations based on business volumes and the timing of when job costs are incurred and the timing of customer billings and payments.

• Accounts payable decreased by $20.9 million which decreased cash flows from operating activities.

These operating liabilities can fluctuate based on business volumes;

the timing of vendor payments;

lease commencement, lease payments, expiration, or termination of operating leases;

and other timing differences.

• Inventories, income taxes receivable, prepaid expenses, other current assets, operating right-of-use lease assets and other assets, non-current, decreased $3.8 million, which increased cash flows from operating activities.

These operating assets can fluctuate based on business volumes;

the timing of inventory builds and draw-downs, accrual and receipt of income taxes receivable;

prepayments of certain expenses;

lease commencement, passage of time, expiration, or termination of operating leases;

and other timing differences.

• Accrued wages and benefits, accrued insurance, operating lease liabilities, other accrued expenses, and other liabilities, non-current increased by $4.1 million increased cash flows from operating activities.

These operating liabilities can fluctuate based on the timing of payroll, distributions, business volumes;

vendor payments;

lease commencement, lease payments, expiration, or termination of operating leases;

and other timing differences.

Cash Flows Used by Investing Activities

Investing activities used $2.7 million of cash in the six months ended December 31, 2024 due to capital expenditures associated with improvements at a fabrication facility in Bakersfield, California that we purchased in fiscal 2024, as well as the purchase of construction equipment to support our projects.

Investing activities used $5.2 million of cash in the nine months ended March 31, 2025 due to capital expenditures associated with improvements at a fabrication facility in Bakersfield, California that we purchased in fiscal 2024, as well as the purchase of construction equipment to support our projects.

Investing activities used $0.2 million of cash in the nine months ended March 31, 2024 due to capital expenditures partially offset by proceeds from asset sales.

In the first quarter of fiscal 2024, we sold a previously utilized facility in Burlington, Ontario for $2.7 million in net proceeds.

In the second quarter of fiscal 2024, we sold a facility in Catoosa, Oklahoma for $2.7 million in net proceeds.

We closed these previously utilized facilities as they were no longer strategic to the future of the business.

In the third quarter of fiscal 2024 we purchased a fabrication facility in Bakersfield, California for $4.1 million to replace a facility being leased by the Company.

Cash Flows Used by Financing Activities

Financing activities used $1.1 million of cash in the six months ended December 31, 2024 primarily due to the repurchase of common stock for payment of statutory taxes due on equity-based compensation.

Financing activities used $1.1 million of cash in the nine months ended March 31, 2025 primarily due to the repurchase of common stock for payment of statutory taxes due on equity-based compensation.

Financing activities used $10.3 million of cash in the nine months ended March 31, 2024 primarily due to $10.0 million in net repayments under our ABL facility.

Dividend Policy

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The program will continue unless and until it is modified or revoked by the Board of Directors.

We made no repurchases under the program in the three months ended December 31, 2024 and have no current plans to repurchase stock.

As of December 31, 2024, there were 1,349,037 shares available for repurchase under the Stock Buyback Program.

We made no repurchases under the program in the three months ended March 31, 2025 and have no current plans to repurchase stock.

As of March 31, 2025, there were 1,349,037 shares available for repurchase under the Stock Buyback Program.

The terms of our ABL Facility limit share repurchases to $2.5 million per fiscal year provided that we meet certain availability thresholds and do not violate our Fixed Charge Coverage Ratio financial covenant.

Treasury Shares

We had 285,392 treasury shares as of December 31, 2024 and intend to utilize these treasury shares in connection with equity awards under our stock incentive plans and for sales to the Employee Stock Purchase Plan.

CRITICAL ACCOUNTING POLICIES

There have been no material changes in our critical accounting policies from those reported in our fiscal 2024 Annual Report on Form 10-K filed with the SEC.

For more information on our critical accounting policies, see Part II, Item 7 of our fiscal 2024 Annual Report on Form 10-K.

We had 281,365 treasury shares as of March 31, 2025 and intend to utilize these treasury shares in connection with equity awards under our stock incentive plans and for sales to the Employee Stock Purchase Plan.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes in our critical accounting policies and estimates from those reported in our fiscal 2024 Annual Report on Form 10-K filed with the SEC.

For more information on our critical accounting policies and estimates, see Part II, Item 7 of our fiscal 2024 Annual Report on Form 10-K.

Quantitative and Qualitative Disclosures about Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis