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 the ABL Facility; • 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 risks discussed in this Form 10-Q, our 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, disruptions in the global supply chain, 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. Investors should note that we announce material financial information in SEC filings, press releases, presentations and public conference calls. Based on guidance from the SEC, we may use the Investors section of our website (www.matrixservicecompany.com) to communicate with investors and we intend to post presentations and other materials there. It is possible that the financial and other information posted to our website could be deemed to be material information. The information on our website is not part of, and is not incorporated into, this report. -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 NGLs. 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 The third quarter of fiscal 2026 marked a significant inflection point for our business, as we returned to profitability. For the three months ended March 31, 2026, we reported net income of $0.8 million, compared to a net loss of $3.4 million in the same period last year. This improvement reflects the successful execution of our strategic initiatives, including disciplined project management and targeted restructuring actions. Our gross margin increased to 8.3% in the third quarter of fiscal 2026, up from 6.4% in the same period last year, driven by improved project execution in our Storage and Terminal Solutions and Utility and Power Infrastructure segments. These results demonstrate the positive impact of our efforts to enhance operational efficiency and optimize our project portfolio. Additionally, the reduction in selling, general and administrative (SG&A) expenses, which are down 14% year-over-year, reflects the benefits of our organizational restructuring and ongoing cost discipline. While our return to profitability is an important milestone, we recognize that further work is required to achieve our long-term financial objectives. Overhead cost absorption remains an area of focus. We continue to pursue opportunities to better align our cost structure with current and anticipated business volumes, including the reallocation of resources and the streamlining of support functions. Moreover, although SG&A leverage improved this quarter, we are committed to driving additional efficiencies to ensure that our overhead costs scale appropriately as revenue grows. To that end, in the fourth quarter of fiscal 2026, we have taken a number of actions aimed at further reducing our cost structure by reducing our workforce, including the elimination of our Chief Administrative Officer position. In addition to these actions, during the fourth quarter of fiscal 2026, we announced the planned departure of our Chief Financial Officer, Kevin Cavanah, which is expected to occur in September 2026. We have retained a leading executive search firm to conduct a comprehensive search for our next Chief Financial Officer who will work alongside our incoming President and Chief Executive Officer Shawn Payne to lead the organization in fiscal 2027 and beyond. Looking ahead, we will maintain our focus on revenue and profitability growth through disciplined project selection, operational execution, and cost management. These priorities are essential to sustaining profitability, improving returns on invested capital, and positioning the company for long-term growth. We believe that the actions we are taking will further strengthen our competitive position and enhance value for our stockholders. -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 March 31, 2026: Storage and Terminal Solutions Utility and Power Infrastructure Process and Industrial Facilities Total (In thousands) Backlog as of December 31, 2025 $ 821,408 $ 202,777 $ 102,888 $ 1,127,073 Project awards 37,535 46,633 24,135 108,303 Revenue recognized (111,621) (59,963) (35,125) (206,709) Backlog as of March 31, 2026 $ 747,322 $ 189,447 $ 91,898 $ 1,028,667 Book-to-bill ratio (1) 0.3x 0.8x 0.7x 0.5x (1) Calculated by dividing project awards by revenue recognized. The following table provides a summary of changes in our backlog for the nine months ended March 31, 2026: 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 298,159 97,172 77,288 472,619 Other adjustments (2) — (44,239) (152,720) (196,959) Revenue recognized (320,932) (209,870) (98,299) (629,101) Backlog as of March 31, 2026 $ 747,322 $ 189,447 $ 91,898 $ 1,028,667 Book-to-bill ratio (1) 0.9x 0.5x 0.8x 0.8x (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 $37.5 million of project awards during the third quarter of fiscal 2026. During the nine months ended March 31, 2026, we booked $298.2 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, 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 $46.6 million of project awards during the third quarter of fiscal 2026. During the nine months ended March 31, 2026, we booked $97.2 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 $24.1 million of project awards during the third quarter of fiscal 2026. During the nine months ended March 31, 2026, we booked $77.3 million of project awards. We continue to see increasing opportunities in chemicals, renewable fuels, and refinery maintenance and turnarounds. Additionally, after an extended period of limited investment, activity in the U.S. non-ferrous mining sector has begun to improve, supported by demand growth in copper and higher gold prices, as well as policy initiatives related to critical minerals. 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. Our unwillingness to accept an increased 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. 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 March 31, 2026 Compared to the Three months ended March 31, 2025 The information below is an analysis of our consolidated results for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. 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 March 31, 2026 v 2025 Dollars in thousands 2026 2025 Change % Revenue $ 206,709 $ 200,161 $ 6,548 3 % Cost of revenue 189,556 187,311 2,245 1 % Gross profit 17,153 12,850 4,303 33 % Gross margin % 8.3 % 6.4 % 1.9 % 29.7 % Selling, general and administrative expenses 15,215 17,726 (2,511) (14) % Restructuring costs and other 2,986 124 2,862 2308 % Operating loss (1,048) (5,000) 3,952 79 % Other income (expense): Interest expense (85) (134) 49 37 % Interest income 2,190 1,518 672 44 % Other income (expense) (187) 182 (369) (203) % Income (loss) before income tax expense 870 (3,434) 4,304 125 % Provision for federal, state and foreign income taxes 35 — 35 — % Net income (loss) $ 835 $ (3,434) $ 4,269 124 % Revenue - The increase in consolidated revenue of $6.5 million, or 3%, was attributable to higher revenue volumes in our Storage and Terminal Solutions segment, partially offset by lower revenue volumes in our Processing and Industrial Facilities segment. Gross profit - Gross profit in the third quarter of fiscal 2026 increased $4.3 million, or 33%, compared to the third quarter of fiscal 2025. Gross margin was 8.3% for the third quarter of fiscal 2026 compared to gross margin of 6.4% for the third quarter of fiscal 2025. The increase in gross margin was due to higher gross margins in the Storage and Terminal Solutions and Utility and Power Infrastructure segments, partially offset by lower gross margins in the Process and Industrial Facility segment. Overall, gross margins during the period benefited from strong project execution and improved overhead recovery. Selling, general and administrative expenses - The decrease in selling, general and administrative expenses ("SG&A") of $2.5 million, or 14%, primarily due to cost reductions resulting from our organizational restructuring plan. Additionally, stock compensation expense decreased by $1.0 million primarily as a result of executive separations during the period. Restructuring costs and other - The Company incurred $3.0 million of restructuring and other costs during the third quarter of fiscal 2026. Costs included $2.0 million related to the CEO transition and $0.9 million associated with a lease impairment. See Part I, Item 1. Financial Statements (Unaudited), Note 9 - Restructuring Costs, for further details. Interest income - Interest income increased $0.7 million during the third quarter of fiscal 2026, compared to the third quarter of fiscal 2025, primarily due to an increase in our cash balance. Other income (expense) - Other income (expense) decreased $0.4 million due primarily to an increase in foreign currency translation 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 $0.2 million and $1.2 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 March 31, 2026 v 2025 Dollars in thousands 2026 2025 Change % Favorable (Unfavorable) Revenue Storage and Terminal Solutions $ 111,621 $ 96,054 $ 15,567 16 % Utility and Power Infrastructure 59,963 58,676 1,287 2 % Process and Industrial Facilities 35,125 45,431 (10,306) (23) % Total revenue $ 206,709 $ 200,161 $ 6,548 3 % Gross profit (loss) Storage and Terminal Solutions $ 7,772 $ 3,731 $ 4,041 108 % Utility and Power Infrastructure 8,162 5,537 2,625 47 % Process and Industrial Facilities 887 3,759 (2,872) (76) % Corporate 332 (177) 509 (288) % Total gross profit $ 17,153 $ 12,850 $ 4,303 33 % Gross margin % Storage and Terminal Solutions 7.0 % 3.9 % 3.1% 79 % Utility and Power Infrastructure 13.6 % 9.4 % 4.2% 45 % Process and Industrial Facilities 2.5 % 8.3 % (5.8)% (70) % Total gross margin % 8.3 % 6.4 % 1.9% 30 % Operating income (loss) Storage and Terminal Solutions $ 2,456 $ (2,613) $ 5,069 194 % Utility and Power Infrastructure 5,186 2,877 2,309 80 % Process and Industrial Facilities (710) 1,617 (2,327) (144) % Corporate (7,980) (6,881) (1,099) (16) % Total operating loss $ (1,048) $ (5,000) $ 3,952 79 % Storage and Terminal Solutions Storage and Terminal Solutions revenues increased by $15.6 million, or 16%, in the three months ended March 31, 2026 compared to the same period last year, driven by an increased volume of work for LNG projects. Storage and Terminal Solutions gross profit increased by $4.0 million, or 108%, in the three months ended March 31, 2026 compared to the same period last year. The segment gross margin of 7.0% for the three months ended March 31, 2026 was higher than segment gross margin of 3.9% in the same period last year. Margin improvement was driven by improved project execution overall as well as an improvement in overhead cost absorption. Utility and Power Infrastructure Utility and Power Infrastructure revenues were largely consistent with prior year, increasing by $1.3 million, or 2%, in the three months ended March 31, 2026 compared to the same period last year. Utility and Power Infrastructure gross profit increased by $2.6 million, or 47%, in the three months ended March 31, 2026 compared to the same period last year. The segment gross margin was 13.6% for the three months ended March 31, 2026 compared to 9.4% in the same period last year, an increase of 4.2% due to strong project execution throughout the segment. -22- Table of Contents Process and Industrial Facilities Process and Industrial Facilities revenues decreased by $10.3 million, or 23%, in the three months ended March 31, 2026 compared to the same period last year. The decrease is primarily attributable to lower revenue volumes for thermal vacuum chambers, refinery work, and industrial facilities. Process and Industrial Facilities gross profit decreased by $2.9 million, or 76%, in the three months ended March 31, 2026 compared to the same period last year. The segment gross margin was 2.5% for the three months ended March 31, 2026 compared to 8.3% in the same period last year. The decrease is attributable to mix of work and the settlement of a legal matter, which reduced gross margin by $1.1 million. See Part I, Item 1. Financial Statements (Unaudited), Note 6 - Commitments and Contingencies, for more details. -23- Table of Contents Nine months ended March 31, 2026 Compared to the Nine months ended March 31, 2025 The information below is an analysis of our consolidated results for the nine months ended March 31, 2026, compared to the nine months ended March 31, 2025. See Results of Operations by Business Segment below for additional information describing the performance of each of our reportable segments. Consolidated Results of Operations Nine Months Ended March 31, 2026 v 2025 Dollars in thousands 2026 2025 Change % Revenue $ 629,101 $ 552,909 $ 76,192 14 % Cost of revenue 584,631 521,354 63,277 12 % Gross profit 44,470 31,555 12,915 41 % Gross margin % 7.1 % 5.7 % 1.4 % 24.6 % Selling, general and administrative expenses 46,661 53,592 (6,931) (13) % Restructuring costs and other 6,536 124 6,412 5171 % Operating loss (8,727) (22,161) 13,434 61 % Other income (expense): Interest expense (330) (368) 38 10 % Interest income 5,535 4,668 867 19 % Other income (expense) 67 (313) 380 (121) % Loss before income tax expense (3,455) (18,174) 14,719 81 % Provision for federal, state and foreign income taxes 267 16 251 1569 % Net loss $ (3,722) $ (18,190) $ 14,468 80 % Revenue - The increase in overall revenue of $76.2 million, or 14%, 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 nine months ended March 31, 2026 increased $12.9 million, or 41%, compared to the same period in the prior year. Gross margin increased to 7.1% for the nine months ended March 31, 2026 compared to 5.7% for the same period prior year. The increase in gross margin for the nine months 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 Facilities segment. Overall, gross margins during the period benefited from strong project execution and improved overhead recovery. Selling, general and administrative expenses - The decrease in SG&A expenses of $6.9 million, or 13%, is due in part to cost reductions resulting from our organizational restructuring plan. Stock compensation also decreased by $1.5 million, due in part to executive separations occurring during the third quarter of fiscal 2026. Additionally, SG&A decreased $1.7 million associated with the variable accounting for cash-settled stock-based compensation, primarily as a result of fluctuations in our stock price. Restructuring costs and other - The Company incurred $6.5 million of costs during the nine months ended March 31, 2026 related to organizational restructuring and other related costs. This included $2.0 million of expense related to the CEO transition, as well as severance for other personnel and lease impairments for exited leases. See Part I, Item 1. Financial Statements (Unaudited), Note 9 - Restructuring Costs, for further details. Interest income - The increase in interest income of $0.9 million is primarily due to an increase in our cash balance. Other income (expense) - Other income increased $0.4 million in the nine months ended March 31, 2026 as compared to the same period prior year due primarily to a reduction in foreign currency transaction losses associated with our Australian and South Korean subsidiaries. -24- Table of Contents 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 $0.8 million and $4.3 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. -25- Table of Contents Results of Operations by Business Segment Nine Months Ended March 31, 2026 v 2025 Dollars in thousands 2026 2025 Change % Favorable (Unfavorable) Revenue Storage and Terminal Solutions $ 320,932 $ 269,800 $ 51,132 19 % Utility and Power Infrastructure 209,870 175,664 34,206 19 % Process and Industrial Facilities 98,299 107,445 (9,146) (9) % Total revenue (1) $ 629,101 $ 552,909 $ 76,192 14 % (1) Total revenues are net of inter-segment revenues which are primarily Storage and Terminal Solutions and were $3.0 million for the nine months ended March 31, 2026. Gross profit (loss) Storage and Terminal Solutions $ 19,023 $ 15,700 $ 3,323 21 % Utility and Power Infrastructure 22,174 10,253 11,921 116 % Process and Industrial Facilities 3,535 6,126 (2,591) (42) % Corporate (262) (524) 262 50 % Total gross profit $ 44,470 $ 31,555 $ 12,915 41 % Gross margin % Storage and Terminal Solutions 5.9 % 5.8 % 0.1% 2 % Utility and Power Infrastructure 10.6 % 5.8 % 4.8% 83 % Process and Industrial Facilities 3.6 % 5.7 % (2.1)% (37) % Corporate — % — % —% — % Total gross margin % 7.1 % 5.7 % 1.4% 25 % Operating income (loss) Storage and Terminal Solutions $ 858 $ (1,780) $ 2,638 148 % Utility and Power Infrastructure 13,305 56 13,249 23659 % Process and Industrial Facilities (1,718) 541 (2,259) (418) % Corporate (21,172) (20,978) (194) (1) % Total operating loss $ (8,727) $ (22,161) $ 13,434 61 % -26- Table of Contents Storage and Terminal Solutions Storage and Terminal Solutions revenues increased by $51.1 million, or 19%, in the nine months ended March 31, 2026 compared to the same period last year, driven by increased volume of work for specialty storage projects. Storage and Terminal Solutions gross profit increased by $3.3 million, or 21%, in the nine months ended March 31, 2026 compared to the same period last year. The segment gross margin was 5.9% for the nine months ended March 31, 2026 compared to segment gross margin of 5.8% in the same period last year. During the second and third 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 and a $2.6 million reduction of gross profit, respectively. The impact of this work was offset by strong project execution across the remainder of the segment. Utility and Power Infrastructure Utility and Power Infrastructure revenues increased by $34.2 million, or 19%, in the nine months ended March 31, 2026 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 $11.9 million, or 116%, in the nine months ended March 31, 2026 compared to the same period last year. The segment gross margin was 10.6% for the nine months ended March 31, 2026 compared to 5.8% 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 decreased by $9.1 million, or 9%, in the nine months ended March 31, 2026 compared to the same period last year. The decrease is primarily attributable to lower revenue volumes for thermal vacuum chambers and industrial facilities, partially offset by higher volumes of refinery work. Process and Industrial gross profit decreased by $2.6 million, or 42%, in the nine months ended March 31, 2026 compared to the same period last year. The segment gross margin was 3.6% for the nine months ended March 31, 2026 compared to segment gross margin of 5.7% 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. Additionally, the settlement of a legal matter reduced gross margin during the third quarter of fiscal 2026 by $1.1 million. See Part I, Item 1. Financial Statements (Unaudited), Note 6 - Commitments and Contingencies, for more details. 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 March 31, 2026 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 March 31, 2026 totaled $233.0 million and availability under the ABL Facility totaled $64.2 million, resulting in total liquidity of $297.2 million. During the third quarter of fiscal 2026, liquidity increased $39.6 million primarily as a result of changes in working capital. During the nine months ended March 31, 2026, liquidity increased by $12.7 million primarily as a result of changes in working capital. 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): -27- Table of Contents March 31, 2026 December 31, 2025 September 30, 2025 June 30, 2025 Total cash, cash equivalents and restricted cash $ 258,021 $ 223,964 $ 217,307 $ 249,641 Less: Restricted cash 25,000 25,000 25,000 25,000 Unrestricted cash 233,021 198,964 192,307 224,641 Availability under ABL Facility 64,150 58,615 56,617 59,815 Total Liquidity $ 297,171 $ 257,579 $ 248,924 $ 284,456 The following table provides a summary of changes in our liquidity for the three months ended March 31, 2026 (in thousands): Liquidity at December 31, 2025 $ 257,579 Cash provided by operating activities 34,162 Capital expenditures (917) Proceeds from sale of assets 999 Increase in availability under ABL Facility 5,535 Cash provided by financing activities 46 Effect of exchange rate changes on cash (233) Liquidity at March 31, 2026 $ 297,171 The following table provides a summary of changes in our liquidity for the nine months ended March 31, 2026 (in thousands): Liquidity at June 30, 2025 $ 284,456 Cash provided by operating activities 15,717 Capital expenditures (4,104) Proceeds from sale of assets 1,483 Increase in availability under ABL Facility 4,335 Cash used by financing activities (4,228) Effect of exchange rate changes on cash (488) Liquidity at March 31, 2026 $ 297,171 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; -28- 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 March 31, 2026, our borrowing base was $68.6 million. We had no borrowings outstanding and $4.4 million in letters of credit outstanding, which resulted in availability of $64.2 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): -29- Table of Contents Nine Months Ended March 31, 2026 2025 Cash flows provided by operating activities $ 15,717 $ 76,763 Cash flows used in investing activities (2,621) (5,188) Cash flows used in financing activities (4,228) (1,086) Effect of exchange rate changes on cash (488) (563) Change in cash and cash equivalents 8,380 69,926 Cash and cash equivalents at beginning of period 249,641 140,615 Cash and cash equivalents at end of period $ 258,021 $ 210,541 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 March 31, 2026 2025 Net loss $ (3,722) $ (18,190) Depreciation and amortization 6,704 7,538 Stock-based compensation expense 5,476 6,754 Operating lease impairment due to restructuring 2,415 — Gain on disposal of property, plant and equipment (457) (122) Other non-cash expenses 236 108 Cash effect of changes in operating assets and liabilities 5,065 80,675 Net cash provided by operating activities $ 15,717 $ 76,763 The significant components of the $5.1 million change in operating assets and liabilities for the nine months ended March 31, 2026 are summarized as follows: • Accounts receivable, excluding credit losses recognized during the period and including retention amounts classified as non-current, increased by $16.0 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 $4.8 million which increased cash flows from operating activities. Billings on uncompleted contracts in excess of costs and estimated earnings ("BIE") increased $17.1 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 $9.2 million which increased cash flows from operating activities. These operating liabilities can fluctuate based on business volumes; the timing of vendor payments; accruals; and other timing differences. • Changes in other operating assets and liabilities decreased cash flows from operating activities by $10.0 million. These operating assets and liabilities can fluctuate based on business volumes and timing of certain cash receipts and payments. Additionally, we generally prepay our annual insurance premiums in the first quarter of the fiscal year. 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: -30- Table of Contents • 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. Billings on uncompleted contracts in excess of costs and estimated earnings ("BIE") increased $161.3 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 $13.0 million which increased cash flows from operating activities. These operating liabilities can fluctuate based on business volumes; the timing of vendor payments; accruals; and other timing differences. • Changes in other operating assets and liabilities decreased cash flows from operating activities by $0.1 million. These operating assets and liabilities can fluctuate based on business volumes and timing of certain cash receipts and payments. Additionally, we generally prepay our annual insurance premiums in the first quarter of the fiscal year. -31- Table of Contents Cash Flows Used by Investing Activities Investing activities used $2.6 million and $5.2 million of cash in the nine months ended March 31, 2026 and 2025, respectively. Capital expenditures were $4.1 million and $5.4 million in the nine months ended March 31, 2026 and 2025, respectively. During the nine months ended March 31, 2026, we also received $1.5 million of proceeds from the sale of property plant and equipment, primarily associated with our transmission and distribution service line, which we began winding down in the fourth quarter of fiscal 2025. Cash Flows Used by Financing Activities Financing activities used $4.2 million and $1.1 million of cash in the nine months ended March 31, 2026 and 2025, respectively, primarily due to payments of $4.2 million and $1.2 million, respectively, to satisfy tax withholding obligations associated with stock-based compensation. -32- 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 March 31, 2026 and have no current plans to repurchase stock. As of March 31, 2026, 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 March 31, 2026, there were $286.9 million of surety bonds in force, of which we expect $269.9 million to expire within the next 12 months. Of the bonds in force, $265.4 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 March 31, 2026, we had $4.4 million of letters of credit outstanding. The letters of credit that support our workers’ compensation insurance programs are expected to renew annually through the term of our credit facility. -33- 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.