MATRIX SERVICE CO 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations FORWARD-LOOKING STATEMENTS This Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this Form 10-Q which address activities, events or developments which we expect, believe or anticipate will or may occur in the future are forward-looking statements. The words “believes,” “intends,” “expects,” “anticipates,” “projects,” “estimates,” “predicts” and similar expressions are also intended to identify forward-looking statements. Although we believe that our expectations regarding future events are based on reasonable assumptions, we can give no assurance that such expectations or assumptions will be achieved. Important factors that could cause actual results to differ materially from those in the forward-looking statements are described under Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended June 30, 2025. These forward-looking statements include, among others, such things as: • amounts and nature of future project awards, revenue and margins from each of our segments; • our ability to generate sufficient cash from operations, access our credit facility, or raise cash in order to meet our short and long-term capital requirements; • our ability to comply with the covenants in our credit agreement; • the impact to our business from economic, market or business conditions in general and in the natural gas, oil, petrochemical, industrial and power industries in particular; • the impact of interest rates and inflation on our operating expenses and our business operations; • the likely impact of new or existing regulations or market forces on the demand for our services; • the impact to our business from disruptions to supply chains, inflation and availability of materials and labor; • our expectations with respect to the likelihood of a future impairment; • our expectations regarding pending litigation; and • expansion and other trends of the industries we serve. These statements are based on certain assumptions and analyses we made in light of our experience and our historical trends, current conditions and expected future developments as well as other factors we believe are appropriate. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties which could cause actual results to differ materially from our expectations, including: • any risk factors discussed in this Form 10-Q, Form 10-K for the fiscal year ended June 30, 2025, and in our other filings with the Securities and Exchange Commission; • economic, market or business conditions in general and in the natural gas, power, oil, petrochemical, industrial and power industries in particular; • the transition to renewable energy sources and its impact on our current customer base; • the under- or over-utilization of our work force; • unexpected adjustments to our remaining performance obligations or backlog; • delays in the commencement or progression of major projects, whether due to permitting issues or other factors; • reduced creditworthiness of our customer base and the higher risk of non-payment of receivables; • the inherently uncertain outcome of current and future litigation; • the adequacy of our reserves for claims and contingencies; and • changes in laws or regulations, including the imposition, cancellation or delay of tariffs on imported goods. -15- Table of Contents Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business operations. We assume no obligation to update, except as required by law, any such forward-looking statements, whether as a result of new information, future events or otherwise. -16- Table of Contents RESULTS OF OPERATIONS Overview We operate our business through a number of different operating subsidiaries, which are organized into three reportable segments based on the type of work performed and the markets serviced: • 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 such as butane, propane, ethane, ethylene, and other liquid petroleum products, as well as hydrogen and ammonia. 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, 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 for base load, peaking, and backup power supply. • 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, cement, agriculture, wastewater treatment facilities and other industrial customers. Operational Update Operating activity increased during the first quarter of fiscal 2026 as revenues showed a 28% increase compared to the first quarter of 2025. The increase was driven primarily by an increase in activity for LNG storage, LNG peak-shaver, and specialty vessel projects. Strong project execution on our projects, along with improved overhead cost absorption, generated higher gross margins compared to the same period in prior year. As we move forward through the coming quarters of fiscal 2026, we believe activity levels will rise for projects currently in backlog. Project awards during the quarter were $187.8 million, resulting in a current quarter book-to-bill of 0.9x. Award activity was driven by our Storage and Terminal Solutions segment, and included the award for the construction for the balance of plant supporting a dual service full containment storage tank. 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. While we always strive to maximize efficiency, we commenced an initiative in the fourth quarter of fiscal 2025 to sharpen and better align our business for the current and coming marketplace. Accordingly, we have consolidated 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 believe actions taken in the fourth quarter of fiscal 2025 and the first quarter of fiscal 2026 will reduce our overall cost structure, improving our overhead recovery and operating leverage. -17- Table of Contents Backlog 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. The following arrangements are considered firm: • fixed-price awards; • minimum customer commitments on cost plus arrangements; and • certain time and material arrangements in which the estimated value is firm or can be estimated with a reasonable amount of certainty in both timing and amounts. For long-term maintenance contracts with no minimum commitments and other established customer agreements, we include only the amounts that we expect to recognize as revenue over the next 12 months. For arrangements in which we have received a LNTP, we include the entire scope of work in our backlog if we conclude that the likelihood of the full project proceeding is probable. For all other arrangements, we calculate backlog as the estimated contract amount less revenue recognized as of the reporting date. Backlog differs from the amount of our remaining performance obligations, which are described in Note 2 - Revenue in the notes to the unaudited consolidated financial statements. Differences are due primarily to the inclusion within our backlog of estimates of future revenue under long-term maintenance contracts; future revenue for the full scope of work for certain arrangements where we have received an LNTP; and future revenue for arrangements where we have received assurance that we consider firm, but the associated contract has not been fully executed. The following table provides a summary of changes in our backlog for the three months ended September 30, 2025: Storage and Terminal Solutions Utility and Power Infrastructure Process and Industrial Facilities Total (In thousands) Backlog as of June 30, 2025 $ 770,095 $ 346,384 $ 265,629 $ 1,382,108 Project awards 136,077 34,744 16,934 187,755 Other adjustments (2) — (44,239) (152,720) (196,959) Revenue recognized (109,459) (74,501) (27,924) (211,884) Backlog as of September 30, 2025 $ 796,713 $ 262,388 $ 101,919 $ 1,161,020 Book-to-bill ratio (1) 1.2 x 0.5 x 0.6 x 0.9 x (1) Calculated by dividing project awards by revenue recognized. (2) Previous project awards removed from backlog. In the Storage and Terminal Solutions segment, we booked $136.1 million of project awards during the first quarter of fiscal 2026. Project awards included a large award for the construction for the balance of plant supporting a dual service full containment storage tank. 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, NGLS and ammonia projects in particular will be key growth drivers for this segment. Bidding activity in these markets has been strong and we expect that to continue. In the Utility and Power Infrastructure segment, we booked $34.7 million of project awards during the first quarter of fiscal 2026. Our backlog in this segment was impacted by the removal of an award, originally added to backlog in the fourth quarter of fiscal 2025. The removal is the result of a change in certain contractual terms and conditions that significantly increased our risk profile on the project. Considering the strength of the opportunities available in our markets, particularly in this segment, as well as the high quality financial and commercial risk profile of our current backlog, we deemed that it was unnecessary for us to accept an award that deteriorates that position. Our unwillingness to accept this modified risk profile caused the client to change their award decision. Our opportunity pipeline for LNG peak shaving projects continues to be promising, with both greenfield facility projects as well as the projects for the upgrade, maintenance, and repair to existing infrastructure. The timing between the major greenfield awards can be extended due to the client activity and bidding diligence, but their addition to backlog is significant and will drive long-term sustainable growth in the segment. The smaller upgrade projects are key measures of our brand power and strength in the market, keeping key resources active while creating opportunities to strengthen execution and engineering teams. Power generation and delivery infrastructure opportunities are expected to be driven over the long-term by -18- Table of Contents increasing electrical demand and the related electrical grid requirements. Project opportunities and bidding activity are strong across the segment. In the Process and Industrial Facilities segment, we booked $16.9 million of project awards during the first quarter of fiscal 2026. Our backlog in this segment was impacted by the removal of an award, originally added to backlog in the third quarter of fiscal 2023. Field work on this construction-only project has continued to be delayed as our client and the ultimate customer work to finalize the scope and engineering for the project. The project was removed from backlog as the ultimate customer is now planning to change the project execution and sourcing strategy for the project. While we ultimately may perform some of this work, we determined inclusion of the award in backlog was no longer appropriate. We continue to see increasing opportunities in mining and minerals, chemicals, renewable fuels, refinery maintenance and turnarounds, and thermal vacuum chambers in this segment. 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. It is common for awards to shift from one period to another as the timing of awards is dependent upon a number of factors including changes in market conditions, permitting, off take agreements, project financing and other factors. Backlog volatility may increase for some segments from time to time when individual project awards are less frequent, but more significant. There is an inherent lag between the time a project is awarded and when it begins to have a material impact on revenue. This lag can vary and can extend up to six months or longer in unique circumstances, depending on finalization of scopes, contracts, permits, and facility process requirements. 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. -19- Table of Contents Three months ended September 30, 2025 Compared to the Three months ended September 30, 2024 The information below is an analysis of our consolidated results for the three months ended September 30, 2025, compared to the three months ended September 30, 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 Three Months Ended September 30, 2025 v 2024 Dollars in thousands 2025 2024 Change % Revenue $ 211,884 $ 165,579 $ 46,305 28 % Cost of revenue 197,702 157,766 39,936 25 % Gross profit 14,182 7,813 6,369 82 % Selling, general and administrative expenses 16,334 18,580 (2,246) (12) % Restructuring costs 3,348 — 3,348 — % Operating loss (5,500) (10,767) 5,267 49 % Other income (expense): Interest expense (127) (89) (38) (43) % Interest income 1,802 1,572 230 15 % Other 231 61 170 279 % Loss before income tax expense (3,594) (9,223) 5,629 61 % Provision for federal, state and foreign income taxes 69 — 69 — % Net loss $ (3,663) $ (9,223) $ 5,560 60 % Revenue - The increase in consolidated revenue of $46.3 million, or 28%, was primarily attributable to higher revenue volumes in our Storage and Terminal Solutions and Utility and Power Infrastructure segments. Gross profit - Gross profit in the first quarter of fiscal 2026 increased $6.4 million, or 82%, compared to the first quarter of fiscal 2025. The increase was primarily attributable to the Utility and Power Infrastructure and Storage and Terminal Solutions segments. Gross margin of 6.7% for the first quarter of fiscal 2026 increased compared with gross margin of 4.7% for the first quarter of fiscal 2025. The increase in gross margin for the quarter is attributable to higher gross margins in our Utility and Power Infrastructure segment. Selling, general and administrative expenses - The decrease in SG&A expenses of $2.2 million, or 12%, is primarily due to cost reductions resulting from our organizational realignment. Restructuring costs - The Company incurred $3.3 million of restructuring costs during the first quarter of fiscal 2026 related to organizational restructuring. See Part I, Item 1. Financial Statements (Unaudited), Note 8 - Restructuring Costs, for more information about our organizational restructuring plan. Interest income - The increase in interest income of $0.2 million is primarily due to an increase in our cash balance. Provision for income taxes - Income tax expense for both periods was insignificant. The effective tax rates during both periods were impacted by valuation allowances of $1.4 million and $1.3 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. -20- Table of Contents Results of Operations by Business Segment Three Months Ended September 30, 2025 v 2024 Dollars in thousands 2025 2024 Change % Favorable (Unfavorable) Revenue Storage and Terminal Solutions $ 109,459 $ 78,239 $ 31,220 40 % Utility and Power Infrastructure 74,501 55,912 18,589 33 % Process and Industrial Facilities 27,924 31,428 (3,504) (11) % Total revenue $ 211,884 $ 165,579 $ 46,305 28 % Gross profit (loss) Storage and Terminal Solutions $ 6,497 $ 4,697 $ 1,800 38 % Utility and Power Infrastructure 6,784 1,307 5,477 419 % Process and Industrial Facilities 1,429 1,997 (568) (28) % Corporate (528) (188) (340) 181 % Total gross profit $ 14,182 $ 7,813 $ 6,369 82 % Gross margin % Storage and Terminal Solutions 5.9 % 6.0 % (0.1)% (2) % Utility and Power Infrastructure 9.1 % 2.3 % 6.8% 296 % Process and Industrial Facilities 5.1 % 6.4 % (1.3)% (20) % Corporate — % — % —% — % Total gross margin % 6.7 % 4.7 % 2.0% 43 % Operating income (loss) Storage and Terminal Solutions $ (810) $ (872) $ 62 7 % Utility and Power Infrastructure 3,167 (2,669) 5,836 219 % Process and Industrial Facilities (607) 231 (838) (363) % Corporate (7,250) (7,457) 207 3 % Total Operating Loss $ (5,500) $ (10,767) $ 5,267 49 % Storage and Terminal Solutions Storage and Terminal Solutions revenues increased by $31.2 million, or 40%, in the three months ended September 30, 2025 compared to the same period last year, driven by an increased volume of work for LNG storage and specialty vessel projects. Storage and Terminal Solutions gross profit increased by $1.8 million, or 38%, in the three months ended September 30, 2025 compared to the same period last year. The segment gross margin of 5.9% for the three months ended September 30, 2025 was consistent with segment gross margin of 6.0% in the same period last year. Gross margins for this segment continue to be primarily impacted by under-recovery of overhead costs. We believe overhead cost absorption will improve as activity on awards currently in backlog increases through the remainder of fiscal 2026. Utility and Power Infrastructure Utility and Power Infrastructure revenues increased by $18.6 million, or 33%, in the three months ended September 30, 2025 compared to the same period last year. The increase is primarily attributable to a higher volume of work for power delivery and natural gas peak shaving projects. Utility and Power Infrastructure gross profit increased by $5.5 million, or 419%, in the three months ended September 30, 2025 compared to the same period last year. The segment gross margin was 9.1% for the three months ended September 30, 2025 compared to 2.3% in the same period last year, an increase of 6.8% due to strong project execution and improved construction overhead cost absorption as a result of higher revenues. -21- Table of Contents Process and Industrial Facilities Process and Industrial Facilities revenues decreased by $3.5 million, or 11%, in the three months ended September 30, 2025 compared to the same period last year. The decrease is primarily attributable to lower revenue volumes for the engineering and construction of thermal vacuum chambers. Process and Industrial Facilities gross profit decreased by $0.6 million, or 28%, in the three months ended September 30, 2025 compared to the same period last year. The segment gross margin was 5.1% for the three months ended September 30, 2025 compared to 6.4% in the same period last year. The decrease is primarily attributable to mix of work. Segment gross margins in both periods were impacted by under-recovery of construction overhead costs due to lower revenue volumes. LIQUIDITY AND CAPITAL RESOURCES Overview 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 September 30, 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, 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 September 30, 2025 totaled $192.3 million and availability under the ABL Facility totaled $56.6 million, resulting in total liquidity of $248.9 million. During the first quarter of fiscal 2026, liquidity decreased $35.5 million primarily as a result of cash used 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): September 30, 2025 June 30, 2025 Total cash, cash equivalents and restricted cash $ 217,307 $ 249,641 Less: Restricted cash 25,000 25,000 Unrestricted cash 192,307 224,641 Availability under ABL Facility 56,617 59,815 Total Liquidity $ 248,924 $ 284,456 The following table provides a summary of changes in our liquidity for the three months ended September 30, 2025 (in thousands): Liquidity at June 30, 2025 $ 284,456 Cash used by operating activities (25,899) Capital expenditures (2,011) Proceeds from asset sales 222 Decrease in availability under ABL Facility (3,198) Cash used by financing activities (4,329) Effect of exchange rate changes on cash (317) Liquidity at September 30, 2025 $ 248,924 -22- Table of Contents The following table provides a summary of changes in our liquidity for the three months ended September 30, 2024 (in thousands): Liquidity at June 30, 2024 $ 169,603 Cash provided by operating activities 11,918 Capital expenditures (1,944) Increase in availability under ABL Facility 2,654 Cash used by financing activities (1,189) Effect of exchange rate changes on cash 210 Liquidity at September 30, 2024 $ 181,252 Factors that routinely impact our short-term liquidity and may impact our long-term liquidity include, but are not limited to: • changes in costs and estimated earnings in excess of billings on uncompleted contracts and billings on uncompleted contracts in excess of costs due to contract terms that determine the timing of billings to customers and the collection of those billings: ◦ some fixed-price customer contracts allow for significant upfront billings at the beginning of a project, which increases liquidity near term; ◦ some cost-plus and fixed-price customer contracts are billed based on milestones which may increase or decrease liquidity in the near term depending on the timing of when we incur significant expenditures and when we collect from our customers; ◦ time and material contracts are normally billed in arrears. Therefore, we are routinely required to carry these costs until they can be billed and collected; and ◦ some of our large construction projects may require security in the form of significant retentions. Retentions are normally held until certain contractual milestones are achieved; therefore, collection may extend beyond one year; • the mix of work can impact liquidity. 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; • other changes in working capital, including the timing of tax payments and refunds; • release of contract retentions, and • capital expenditures. Other factors that may impact both short and long-term liquidity include: • contract disputes; • collection issues, including those caused by weak commodity prices, economic slowdowns or other factors which can lead to credit deterioration of our customers; • borrowing constraints under our ABL Facility and maintaining compliance with all covenants contained in the ABL Facility; • letters of credit. We have certain contracts with customers, and may have future contracts, that permit the customer to obtain, at the customer's expense, letters of credit as a form of security under the contract. Letters of credit reduce our borrowing availability under the Company's ABL Facility; • acquisitions and disposals of businesses or assets; and -23- Table of Contents • purchases of shares under our stock buyback program. ABL Credit Facility We have an asset-based credit agreement, which was most recently amended on August 22, 2025 (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's available borrowings may be increased by an amount not to exceed $15.0 million, subject to certain conditions, including obtaining additional commitments. 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, 2029. The borrowing base is recalculated on a monthly basis and at September 30, 2025, our borrowing base was $61.4 million. We had no borrowings outstanding and $4.8 million in letters of credit outstanding, which resulted in availability of $56.6 million under the ABL Facility. For additional information regarding our ABL Facility, see Item I of Part I, "Financial Statements - Note 3 - Debt." CASH FLOW ANALYSIS The following table summarizes our changes in cash flow activities for the periods indicated (in thousands): Three Months Ended September 30, 2025 2024 Cash flows provided (used) by operating activities $ (25,899) $ 11,918 Cash flows used in investing activities (1,789) (1,944) Cash flows used in financing activities (4,329) (1,189) Effect of exchange rate changes on cash (317) 210 Change in cash and cash equivalents (32,334) 8,995 Cash and cash equivalents at beginning of period 249,641 140,615 Cash and cash equivalents at end of period $ 217,307 $ 149,610 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): Three Months Ended September 30, 2025 2024 Net loss $ (3,663) $ (9,223) Loss (gain) on disposal of property, plant and equipment (217) 68 Depreciation and amortization 2,461 2,515 Stock-based compensation expense 1,921 2,311 Operating lease impairment due to restructuring 1,529 — Other non-cash expenses 94 38 Cash effect of changes in operating assets and liabilities (28,024) 16,209 Net cash provided (used) by operating activities $ (25,899) $ 11,918 The significant components of the $28.0 million change in operating assets and liabilities for the three months ended September 30, 2025 are summarized as follows: • Accounts receivable, excluding credit losses recognized during the period and including retention amounts -24- Table of Contents classified as non-current, increased by $15.1 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 $8.1 million which decreased cash flows from operating activities. Billings on uncompleted contracts in excess of costs and estimated earnings ("BIE") decreased $6.0 million which decreased 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. Some fixed-price customer contracts allow for significant upfront billings at the beginning of a project, which increases liquidity near-term. • Accounts payable increased by $17.7 million which increased cash flows from operating activities. These operating liabilities can fluctuate based on business volumes; the timing of vendor payments; accruals; 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, increased $9.1 million which decreased 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. We generally prepay our annual insurance premiums in the first quarter of the fiscal year. • Accrued wages and benefits, accrued insurance, operating lease liabilities, other accrued expenses, and other liabilities, non-current decreased by $7.3 million which decreased cash flows from operating activities. These operating liabilities can fluctuate based on the timing of payroll, distributions, business volumes; vendor payments; accruals; lease commencement, lease payments, expiration, or termination of operating leases; and other timing differences. The significant components of the $16.2 million change in operating assets and liabilities for the three months ended September 30, 2024 are summarized as follows: • Accounts receivable, excluding credit losses recognized during the period and including retention amounts classified as non-current, increased by $5.1 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") decreased $2.1 million which increased cash flows from operating activities. Billings on uncompleted contracts in excess of costs and estimated earnings ("BIE") increased $33.3 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. Some fixed-price customer contracts allow for significant upfront billings at the beginning of a project, which increases liquidity near-term. • Accounts payable decreased by $3.9 million which decreased cash flows from operating activities. These operating liabilities can fluctuate based on business volumes; the timing of vendor payments; accruals; 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, increased $7.3 million which decreased 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. We generally prepay our annual insurance premiums in the first quarter of the fiscal year. • Accrued wages and benefits, accrued insurance, operating lease liabilities, other accrued expenses, and other liabilities, non-current decreased by $2.9 million which decreased cash flows from operating activities. These operating liabilities can fluctuate based on the timing of payroll, distributions, business volumes; vendor payments; accruals; lease commencement, lease payments, expiration, or termination of operating leases; and other timing differences. -25- Table of Contents Cash Flows Used by Investing Activities Investing activities used $1.8 million and $1.9 million of cash primarily due to capital expenditures in the three months ended September 30, 2025 and 2024, respectively. Cash Flows Used by Financing Activities Financing activities used $4.3 million and $1.2 million of cash in the three months ended September 30, 2025 and 2024, respectively, primarily due to payments of $4.2 million and $1.2 million, respectively, to satisfy tax withholding obligations associated with stock-based compensation. -26- Table of Contents Dividend Policy We have never paid cash dividends on our common stock and the terms of our ABL Facility limit dividends to stock dividends only. Any future dividend payments will depend on the terms of our ABL Facility, our financial condition, capital requirements and earnings as well as other relevant factors. Stock Repurchase Program We may repurchase common stock pursuant to the Stock Buyback Program, which was approved by the board of directors in November 2018. Under the program, the aggregate number of shares repurchased may not exceed 2,707,175 shares. We may repurchase our stock from time to time in the open market at prevailing market prices or in privately negotiated transactions and are not obligated to purchase any shares. 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 September 30, 2025 and have no current plans to repurchase stock. As of September 30, 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. Off-Balance Sheet Arrangements and Other Commitments We enter into certain off-balance sheet arrangements in the ordinary course of business that result in risks not directly reflected on our balance sheet. The following represents transactions, obligations or relationships that could be considered material off-balance sheet arrangements. • Surety Bonds : The terms of our construction contracts frequently require that we obtain from surety companies, and provide to our customers, surety bonds as a condition to the award of such contracts. These surety bonds are issued in return for premiums, which vary depending on the size and type of the bond, and secure our payment and performance obligations under such contracts. We have agreed to indemnify the surety companies for amounts, if any, paid by them in respect of surety bonds issued on our behalf. Surety bonds expire at various times ranging from final completion of a project to a period extending beyond contract completion in certain circumstances. Such amounts can also fluctuate from period to period based upon the mix and level of our bonded operating activity. As of September 30, 2025, there were $186.2 million of surety bonds in force, of which we expect $126.9 million to expire within the next 12 months. Of the bonds in force, $113.3 million related to performance bonds for ongoing projects and the remainder related to contractor licensing, liens, and other bonds. In October 2025, we obtained an additional surety bond to support a recent award, bringing our total surety bonds in force to $277.1 million. We are not aware of any losses in connection with surety bonds that have been posted on our behalf, and we do not expect to incur significant losses in the foreseeable future. • Multiemployer pension plan s: We contribute to a number of multiemployer defined benefit pension plans in the U.S. and Canada under the terms of collective-bargaining agreements that cover our union-represented employees, who are represented by more than 100 local unions. Benefits under these plans are generally based on compensation levels and years of service. Under federal legislation regarding multiemployer pension plans, in the event of a withdrawal from a plan or plan termination, companies are required to continue funding their proportionate share of such plan’s unfunded vested benefits. Withdrawal liabilities or requirements for increased future contributions could negatively impact our results of operations and liquidity. For more information on our Multiemployer pension plans, see Part II, Item 8 “Note 12 - Employee Benefit Plans” of our Annual Report on Form 10-K for the year ended June 30, 2025. • Letters of credit: We issue letters of credit under our ABL Facility in the normal course of business to support workers' compensation insurance programs or certain construction contracts. As of September 30, 2025, we had $4.8 million of letters of credit outstanding. The letters of credit that support our workers’ compensation programs are expected to renew annually through the term of our credit facility. -27- Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES There have been no material changes in our critical accounting policies and estimates from those reported in our fiscal 2025 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 2025 Annual Report on Form 10-K. Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes in market risk faced by us from those reported in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, filed with the Securities and Exchange Commission. For more information on market risk, see Part II, Item 7A in our fiscal 2025 Annual Report on Form 10-K.