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. -16- 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. -17- 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 During the quarter, we advanced execution on several large, strategically important projects. These projects are delivering both revenue growth and margin stability, supported by disciplined project management. As these projects advance through key milestones, they are providing increased visibility into revenue conversion and operating margin performance. We expect activity to accelerate over the remainder of the fiscal year, driven by our strong backlog as well as a growing opportunity pipeline and healthy demand across our core markets. Our balance sheet remains a competitive advantage, providing the financial capacity and flexibility to pursue high‑quality opportunities, invest in execution excellence, and manage risk responsibly. These attributes also position us to continue executing on existing projects and to support long-term growth initiatives. Looking longer term, structural macrotrends continue to support durable growth in our end markets. The clean energy transition, rapidly increasing power requirements from data centers, ongoing industrial reshoring and onshoring activity, and heightened focus on grid reliability are all creating sustained demand for the solutions we provide. These trends reinforce the strength of our strategic positioning and our confidence in the company’s ability to deliver long‑term value for shareholders. -18- 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 December 31, 2025: Storage and Terminal Solutions Utility and Power Infrastructure Process and Industrial Facilities Total (In thousands) Backlog as of September 30, 2025 $ 796,713 $ 262,388 $ 101,919 $ 1,161,020 Project awards 124,547 15,795 36,219 176,561 Revenue recognized (99,852) (75,406) (35,250) (210,508) Backlog as of December 31, 2025 $ 821,408 $ 202,777 $ 102,888 $ 1,127,073 Book-to-bill ratio (1) 1.2x 0.2x 1.0x 0.8x (1) Calculated by dividing project awards by revenue recognized. The following table provides a summary of changes in our backlog for the six months ended December 31, 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 260,624 50,539 53,153 364,316 Other adjustments (2) — (44,239) (152,720) (196,959) Revenue recognized (209,311) (149,907) (63,174) (422,392) Backlog as of December 31, 2025 $ 821,408 $ 202,777 $ 102,888 $ 1,127,073 Book-to-bill ratio (1) 1.2x 0.3x 0.8x 0.9x (1) Calculated by dividing project awards by revenue recognized. (2) Previous project awards removed from backlog. -19- Table of Contents In the Storage and Terminal Solutions segment, we booked $124.5 million of project awards during the second quarter of fiscal 2026, including an award for the construction of an LNG tank. During the six months ended December 31, 2025, we booked $260.6 million of project awards, including 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 $15.8 million of project awards during the second quarter of fiscal 2026. During the six months ended December 31, 2025, we booked $50.5 million of project awards. 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 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 $36.2 million of project awards during the second quarter of fiscal 2026. During the six months ended December 31, 2025, we booked $53.2 million of project awards. We continue to see increasing opportunities in mining and minerals, chemicals, renewable fuels, refinery maintenance and turnarounds, and thermal vacuum chambers in this segment. During the first quarter of fiscal 2026, backlog was adjusted to reflect the removal of two projects. Backlog in the Utility and Power Infrastructure segment was impacted by the removal of an award originally added to backlog in the fourth quarter of fiscal 2025. The removal was 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 backlog in the Process and Industrial Facilities 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. 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. -20- Table of Contents Three months ended December 31, 2025 Compared to the Three months ended December 31, 2024 The information below is an analysis of our consolidated results for the three months ended December 31, 2025, compared to the three months ended December 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 Three Months Ended December 31, 2025 v 2024 Dollars in thousands 2025 2024 Change % Revenue $ 210,508 $ 187,169 $ 23,339 12 % Cost of revenue 197,373 176,277 21,096 12 % Gross profit 13,135 10,892 2,243 21 % Gross margin % 6.2 % 5.8 % 0.4 % 6.9 % Selling, general and administrative expenses 15,112 17,286 (2,174) (13) % Restructuring costs 202 — 202 — % Operating loss (2,179) (6,394) 4,215 66 % Other income (expense): Interest expense (118) (145) 27 19 % Interest income 1,543 1,578 (35) (2) % Other income (expense) 23 (556) 579 104 % Loss before income tax expense (731) (5,517) 4,786 87 % Provision for federal, state and foreign income taxes 163 16 147 — % Net loss $ (894) $ (5,533) $ 4,639 84 % Revenue - The increase in consolidated revenue of $23.3 million, or 12%, was attributable to higher revenue volumes in each of our segments. Gross profit - Gross profit in the second quarter of fiscal 2026 increased $2.2 million, or 21%, compared to the second quarter of fiscal 2025. Gross margin was 6.2% for the second quarter of fiscal 2026 compared to gross margin of 5.8% for the second quarter of fiscal 2025. The increase in gross margin was due to higher revenues which resulted in improved recovery of overhead costs, as well as strong project execution throughout the majority of the business. However, costs associated with warranty-type items and with third-party commercial matters arising during commissioning of specialty tank work resulted in a $3.6 million reduction of gross profit during the quarter. Selling, general and administrative expenses - The decrease in selling, general and administrative expenses ("SG&A") of $2.2 million, or 13%, is primarily due to cost reductions resulting from our organizational realignment, including a decrease in salaries and wages of $0.8 million, year over year. Additionally, SG&A decreased $0.7 million associated with the variable accounting for cash-settled stock-based compensation as a result of fluctuations in our stock price. Interest income - Interest income during the second quarter of fiscal 2026 was consistent with the second quarter of fiscal 2025. Other income (expense) - Other income (expense) increased $0.6 million due primarily to a reduction foreign currency transaction losses associated with our Australian and South Korean subsidiaries. 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 $(0.7) million and $1.8 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. -21- Table of Contents Results of Operations by Business Segment Three Months Ended December 31, 2025 v 2024 Dollars in thousands 2025 2024 Change % Favorable (Unfavorable) Revenue Storage and Terminal Solutions $ 99,852 $ 95,507 $ 4,345 5 % Utility and Power Infrastructure 75,406 61,076 14,330 23 % Process and Industrial Facilities 35,250 30,586 4,664 15 % Total revenue $ 210,508 $ 187,169 $ 23,339 12 % Gross profit (loss) Storage and Terminal Solutions $ 4,754 $ 7,272 $ (2,518) (35) % Utility and Power Infrastructure 7,228 3,409 3,819 112 % Process and Industrial Facilities 1,219 370 849 229 % Corporate (66) (159) 93 (58) % Total gross profit $ 13,135 $ 10,892 $ 2,243 21 % Gross margin % Storage and Terminal Solutions 4.8 % 7.6 % (2.8)% (37) % Utility and Power Infrastructure 9.6 % 5.6 % 4.0% 71 % Process and Industrial Facilities 3.5 % 1.2 % 2.3% 192 % Corporate — % — % —% — % Total gross margin % 6.2 % 5.8 % 0.4% 7 % Operating income (loss) Storage and Terminal Solutions $ (788) $ 1,705 $ (2,493) (146) % Utility and Power Infrastructure 4,952 (152) 5,104 3358 % Process and Industrial Facilities (401) (1,307) 906 69 % Corporate (5,942) (6,640) 698 11 % Total Operating Loss $ (2,179) $ (6,394) $ 4,215 66 % Storage and Terminal Solutions Storage and Terminal Solutions revenues increased by $4.3 million, or 5%, in the three months ended December 31, 2025 compared to the same period last year, driven by an increased volume of work for LNG and NGL projects, partially offset by lower volumes for crude oil projects. Storage and Terminal Solutions gross profit decreased by $2.5 million, or (35)%, in the three months ended December 31, 2025 compared to the same period last year. The segment gross margin of 4.8% for the three months ended December 31, 2025 was lower than segment gross margin of 7.6% in the same period last year. During the second quarter of fiscal 2026, costs associated with warranty-type items and with third-party commercial matters arising during commissioning of specialty tank work resulted in a $3.6 million reduction of gross profit. Additionally, 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 $14.3 million, or 23%, in the three months ended December 31, 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 $3.8 million, or 112%, in the three months ended December 31, 2025 compared to the same period last year. The segment gross margin was 9.6% for the three months ended December 31, 2025 compared to 5.6% in the same period last year, an increase of 4.0% due to strong project execution and improved construction overhead cost absorption as a result of higher revenues. -22- Table of Contents Process and Industrial Facilities Process and Industrial Facilities revenues increased by $4.7 million, or 15%, in the three months ended December 31, 2025 compared to the same period last year. The increase is primarily attributable to higher revenue volumes for refinery turnarounds and maintenance work. Process and Industrial Facilities gross profit increased by $0.8 million, or 229%, in the three months ended December 31, 2025 compared to the same period last year. The segment gross margin was 3.5% for the three months ended December 31, 2025 compared to 1.2% in the same period last year. The increase is primarily attributable to improved construction overhead cost absorption as a result of higher revenues. -23- Table of Contents Six months ended December 31, 2025 Compared to the Six months ended December 31, 2024 The information below is an analysis of our consolidated results for the six months ended December 31, 2025, compared to the six months ended December 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, 2025 v 2024 Dollars in thousands 2025 2024 Change % Revenue $ 422,392 $ 352,748 $ 69,644 20 % Cost of revenue 395,075 334,043 61,032 18 % Gross profit 27,317 18,705 8,612 46 % Gross margin % 6.5 % 5.3 % 1.2 % 22.6 % Selling, general and administrative expenses 31,446 35,866 (4,420) (12) % Restructuring costs 3,550 — 3,550 — % Operating loss (7,679) (17,161) 9,482 55 % Other income (expense): Interest expense (245) (234) (11) (5) % Interest income 3,345 3,150 195 6 % Other income (expense) 254 (495) 749 (151) % Loss before income tax expense (4,325) (14,740) 10,415 71 % Provision for federal, state and foreign income taxes 232 16 216 — % Net loss $ (4,557) $ (14,756) $ 10,199 71 % Revenue - The increase in overall revenue of $69.6 million, or 20%, was primarily attributable to increased revenue volumes in our Storage and Terminal Solutions and Utility and Power Infrastructure segments. Gross profit - Gross profit in the six months ended December 31, 2025 increased $8.6 million, or 46%, compared to the same period prior year. Gross margin increased to 6.5% for the six months ended December 31, 2025 compared to 5.3% for the same period prior year. The increase in gross margin for the quarter is attributable to higher gross margins in our Utility and Power Infrastructure and Process and Industrial Facilities segments, partially offset by lower margins in our Storage and Terminal Solutions segment. Selling, general and administrative expenses - The decrease in SG&A expenses of $4.4 million, or 12%, is due in part to cost reductions resulting from our organizational realignment, including a decrease in salaries and wages of $1.3 million. Additionally, facilities costs decreased $1.2 million, and SG&A decreased $1.0 million associated with the variable accounting for cash-settled stock-based compensation as a result of fluctuations in our stock price. Interest income - The increase in interest income of $0.2 million is primarily due to an increase in our cash balance, partially offset by lower average interest rates. Other income (expense) - Other income increased $0.7 million in the six months ended December 31, 2025 as compared to the same period prior year due primarily to a reduction foreign currency transaction losses associated with our Australian and South Korean subsidiaries. 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 $0.6 million and $3.1 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. -24- Table of Contents Results of Operations by Business Segment Six Months Ended December 31, 2025 v 2024 Dollars in thousands 2025 2024 Change % Favorable (Unfavorable) Revenue Storage and Terminal Solutions $ 209,311 $ 173,746 $ 35,565 20 % Utility and Power Infrastructure 149,907 116,988 32,919 28 % Process and Industrial Facilities 63,174 62,014 1,160 2 % Total revenue (1) $ 422,392 $ 352,748 $ 69,644 20 % (1) Total revenues are net of inter-segment revenues which are primarily Storage and Terminal Solutions and were $1.6 million for the six months ended December 31, 2025. Gross profit (loss) Storage and Terminal Solutions $ 11,251 $ 11,969 $ (718) (6) % Utility and Power Infrastructure 14,012 4,716 9,296 197 % Process and Industrial Facilities 2,648 2,367 281 12 % Corporate (594) (347) (247) (71) % Total gross profit $ 27,317 $ 18,705 $ 8,612 46 % Gross margin % Storage and Terminal Solutions 5.4 % 6.9 % (1.5)% (22) % Utility and Power Infrastructure 9.3 % 4.0 % 5.3% 133 % Process and Industrial Facilities 4.2 % 3.8 % 0.4% 11 % Corporate — % — % —% — % Total gross margin % 6.5 % 5.3 % 1.2% 23 % Operating income (loss) Storage and Terminal Solutions $ (1,598) $ 833 $ (2,431) (292) % Utility and Power Infrastructure 8,119 (2,821) 10,940 388 % Process and Industrial Facilities (1,008) (1,076) 68 6 % Corporate (13,192) (14,097) 905 6 % Total Operating Loss $ (7,679) $ (17,161) $ 9,482 55 % -25- Table of Contents Storage and Terminal Solutions Storage and Terminal Solutions revenues increased by $35.6 million, or 20%, in the six months ended December 31, 2025 compared to the same period last year, driven by increased volume of work for LNG peak shaving, partially offset by decreases in tanks and terminal work. Storage and Terminal Solutions gross profit decreased by $0.7 million, or 6%, in the six months ended December 31, 2025 compared to the same period last year. The segment gross margin was 5.4% for the six months ended December 31, 2025 compared to segment gross margin of 6.9% in the same period last year. During the second quarter of fiscal 2026, costs associated with warranty-type items and third-party commercial matters arising during commissioning of specialty tank work resulted in a $3.6 million reduction of gross profit. Additionally, 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 $32.9 million, or 28%, in the six months ended December 31, 2025 compared to the same period last year. The increase is primarily attributable to higher volumes of work for LNG peak shaving projects and power delivery work. Utility and Power Infrastructure gross profit increased by $9.3 million, or 197%, in the six months ended December 31, 2025 compared to the same period last year. The segment gross margin was 9.3% for the six months ended December 31, 2025 compared to 4.0% in the same period last year 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 increased by $1.2 million, or 2%, in the six months ended December 31, 2025 compared to the same period last year. The increase is primarily attributable to higher revenue volumes for refinery work, partially offset by lower volumes of work for thermal vacuum chambers. Process and Industrial gross profit increased by $0.3 million, or 12%, in the six months ended December 31, 2025 compared to the same period last year. The segment gross margin was 4.2% for the six months ended December 31, 2025 compared to segment gross margin of 3.8% in the same period last year. Improved overhead cost absorption associated with reallocation of resources to other segments was partially offset by reductions in gross margin due to mix of work. 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 December 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, 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 December 31, 2025 totaled $199.0 million and availability under the ABL Facility totaled $58.6 million, resulting in total liquidity of $257.6 million. During the second quarter of fiscal 2026, liquidity increased $8.7 million primarily as a result of changes in working capital. During the six months ended December 31, 2025, liquidity decreased by $26.9 million as a result of changes in working capital, as well as payments made for tax withholdings for stock compensation and capital expenditures. 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): -26- Table of Contents December 31, 2025 September 30, 2025 June 30, 2025 Total cash, cash equivalents and restricted cash $ 223,964 $ 217,307 $ 249,641 Less: Restricted cash 25,000 25,000 25,000 Unrestricted cash 198,964 192,307 224,641 Availability under ABL Facility 58,615 56,617 59,815 Total Liquidity $ 257,579 $ 248,924 $ 284,456 The following table provides a summary of changes in our liquidity for the three months ended December 31, 2025 (in thousands): Liquidity at September 30, 2025 $ 248,924 Cash provided by operating activities 7,454 Capital expenditures (1,176) Proceeds from sale of assets 262 Increase in availability under ABL Facility 1,998 Cash provided by financing activities 55 Effect of exchange rate changes on cash 62 Liquidity at December 31, 2025 $ 257,579 The following table provides a summary of changes in our liquidity for the six months ended December 31, 2025 (in thousands): Liquidity at June 30, 2025 $ 284,456 Cash used by operating activities (18,445) Capital expenditures (3,187) Proceeds from sale of assets 484 Decrease in availability under ABL Facility (1,200) Cash used by financing activities (4,274) Effect of exchange rate changes on cash (255) Liquidity at December 31, 2025 $ 257,579 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; -27- Table of Contents • the mix of work can impact liquidity. In periods where fixed-price contracts comprise a larger portion of revenue, liquidity 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 • 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 December 31, 2025, our borrowing base was $63.1 million. We had no borrowings outstanding and $4.5 million in letters of credit outstanding, which resulted in availability of $58.6 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): -28- Table of Contents Six Months Ended December 31, 2025 2024 Cash flows provided (used) by operating activities $ (18,445) $ 45,516 Cash flows used in investing activities (2,703) (2,696) Cash flows used in financing activities (4,274) (1,133) Effect of exchange rate changes on cash (255) (525) Change in cash and cash equivalents (25,677) 41,162 Cash and cash equivalents at beginning of period 249,641 140,615 Cash and cash equivalents at end of period $ 223,964 $ 181,777 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): Six Months Ended December 31, 2025 2024 Net loss $ (4,557) $ (14,756) Depreciation and amortization 4,693 5,025 Stock-based compensation expense 4,063 4,568 Operating lease impairment due to restructuring 1,529 — Loss on disposal of property, plant and equipment (327) (64) Other non-cash expenses 339 (19) Cash effect of changes in operating assets and liabilities (24,185) 50,762 Net cash provided (used) by operating activities $ (18,445) $ 45,516 The significant components of the $24.2 million change in operating assets and liabilities for the six months ended December 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 $77.0 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 $4.5 million which increased cash flows from operating activities. Billings on uncompleted contracts in excess of costs and estimated earnings ("BIE") increased $59.3 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 increased by $7.6 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 $6.8 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. -29- Table of Contents • Accrued wages and benefits, accrued insurance, operating lease liabilities, other accrued expenses, and other liabilities, non-current decreased by $11.9 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. The significant components of the $50.8 million change in operating assets and liabilities for the six months ended December 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 $18.9 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 $0.8 million which decreased cash flows from operating activities. Billings on uncompleted contracts in excess of costs and estimated earnings ("BIE") increased $66.2 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. 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 $14.5 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 $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. -30- Table of Contents Cash Flows Used by Investing Activities Investing activities used $2.7 million and $2.6 million of cash primarily due to capital expenditures in the six months ended December 31, 2025 and 2024, respectively. Cash Flows Used by Financing Activities Financing activities used $4.3 million and $1.1 million of cash in the six months ended December 31, 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. -31- 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 December 31, 2025 and have no current plans to repurchase stock. As of December 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. 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 December 31, 2025, there were $274.8 million of surety bonds in force, of which we expect $125.6 million to expire within the next 12 months. Of the bonds in force, $116.1 million related to performance bonds for ongoing projects and the remainder related to contractor licensing, liens, and other bonds. 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 December 31, 2025, we had $4.5 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. -32- 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.