Matrix Service Company Reports Fourth Quarter and Full-Year Fiscal 2024 Results; Issues Fiscal 2025 Revenue Guidance

TULSA, Okla., Sept. 09, 2024 (GLOBE NEWSWIRE) — Matrix Service Company (Nasdaq: MTRX), a leading North American industrial engineering, construction, and maintenance contractor, today announced results for the fourth quarter and year ended June 30, 2024.

FOURTH QUARTER FISCAL 2024 RESULTS
(all comparisons versus the prior year quarter unless otherwise noted)

  • Total backlog of $1.4 billion, +31% on a year-over-year basis
  • Total project awards in the quarter of $175.9 million, resulting in a book-to-bill ratio of 0.9x
  • Revenue of $189.5 million
  • Net loss per share of $(0.16) versus $(0.01); adjusted net loss per share of $(0.14)(1) versus $(0.11)
  • Adjusted EBITDA of $0.2 million(1) versus $2.2 million
  • Cash flow from operations of $47.0 million
  • Liquidity at June 30, 2024 of $169.6 million with no outstanding debt

FULL-YEAR FISCAL 2024 RESULTS
(all comparisons versus the prior year unless otherwise noted)

  • Total project awards of $1.1 billion, resulting in a book-to-bill ratio of 1.5x
  • Revenue of $728.2 million
  • Net loss per share of $(0.91) versus $(1.94); adjusted net loss per share of $(1.03) versus $(1.48)
  • Adjusted EBITDA of $(10.5) million versus $(18.0) million
  • Cash flow from operations of $72.6 million

FULL-YEAR FISCAL 2025 REVENUE GUIDANCE

  • Revenue between $900 and $950 million

_______________
(1) Adjusted net loss and adjusted loss per share are non-GAAP financial measures which exclude restructuring costs and gain on sale of non-core assets, Adjusted EBITDA is a non-GAAP financial measure which excludes interest expense, interest income, income taxes, depreciation and amortization expense, impairments to goodwill, gain on asset sales, restructuring costs, and stock-based compensation. See the Non-GAAP Financial Measures section included at the end of this release for a reconciliation to net loss and net loss per share.

“We advanced work on multiple large projects during the quarter, which contributed to meaningful cash generation to close-out the fiscal year,” said John Hewitt, President and Chief Executive Officer. “As a reminder, we are still in the early phases of these multi-year projects.

“Demand within our core markets remains robust and bidding activity continues to be strong. We ended the year with a book to bill of 1.5x which drove backlog growth of 31% on a year-over-year basis.

“As we enter fiscal 2025, Matrix is well-positioned to achieve significant improvement in revenue, a return to historical margins, and improved earnings. The Company begins the year with a backlog of $1.4 billion, an opportunity pipeline of over $6 billion, and a streamlined organization that will efficiently leverage the Company’s cost structure as it continues to grow.

“We have reached an inflection point and, as we move through the year, we believe revenues from strong project execution and conversion of backlog put the company on a trajectory of upward growth and profitability.

“Based on the activity in our business, we are providing full-year revenue guidance that reflects the strength of the business and our expectations for growth.”

Financial Summary
Fiscal fourth quarter revenue was $189.5 million, compared to $205.9 million in the fiscal fourth quarter of 2023. The decline was due to lower revenues from refinery maintenance and turnarounds, and midstream gas processing projects, offset by increases in revenues from peak shaver projects and LNG storage projects.

Gross margin was $12.4 million, or 6.6%, in the fourth quarter of fiscal 2024 compared to $14.7 million, or 7.1% for fourth quarter fiscal 2023. Strong project execution in the fiscal fourth quarter was partly offset by lower revenue volumes due to slower than expected project start-ups.

SG&A expenses were $17.3 million in the fourth quarter of fiscal 2024 compared to $17.0 million in the fourth quarter of fiscal 2023.

The Company’s effective tax rate for the fourth quarter of fiscal 2024 was 0.9%, compared to the fourth quarter fiscal 2023 rate of 9.9%, impacted by the valuation allowance placed on all our deferred tax assets due to the existence of a cumulative loss over a three-year period. The Company’s effective tax rate for fiscal 2024 was 0.1%, compared to 0.8% for fiscal 2023.

For the fourth quarter of fiscal 2024, the Company had a net loss of $4.4 million, or $(0.16) per share, compared to a net loss of $0.3 million, or $(0.01) per share, in the fourth quarter of fiscal 2023. Net loss for the full year fiscal 2024 was $25.0 million, or $(0.91) per share, compared to a net loss of $52.4 million, or $(1.94) per share for fiscal year 2023. Adjusted net loss for the fourth quarter fiscal 2024 was $3.9 million, or $(0.14) per share compared to $3.0 million, or $(0.11) per share for the fourth quarter fiscal 2023. Adjusted net loss for fiscal 2024 was $29.0 million, or $(1.06) per share, compared to $39.8 million, or $(1.48) per share for fiscal 2023.

Segment Results
Storage and Terminals Solutions segment revenue increased to $70.0 million in the fourth quarter compared to $64.1 million in the fourth quarter of fiscal 2023, due to increased activity on NGL storage projects. Gross margin was 3.1% in the fourth quarter of fiscal 2024, compared to 3.2% in the fourth quarter fiscal 2023.

Utility and Power Infrastructure segment revenue increased to $65.3 million in the fourth quarter of fiscal 2024 compared to $39.1 million in the fourth quarter of fiscal 2023, benefiting from higher volumes of work associated with LNG peak shaving projects. Gross margin decreased to 4.2% in the fourth quarter fiscal 2024, compared to 9.6% for the fourth quarter fiscal 2023, due to lower margins on power delivery work for competitively bid projects. Margins were also impacted during the period by the under-recovery of construction overhead costs due to the allocation of resources to this segment in support of early-stage activity on large construction projects.

Process and Industrial Facilities segment revenue decreased to $54.2 million in the fourth quarter of fiscal 2024 compared to $102.7 million in the fourth quarter of fiscal 2023, primarily due to lower revenue for midstream gas processing projects, refinery maintenance and turnarounds, and a recently completed large renewable diesel project. Fourth quarter gross margin increased to 15.4%, compared to 8.2% for the fourth quarter fiscal 2023 due to overall strong project execution across the entire portfolio of projects.

Outlook

The following forward-looking guidance reflects the Company’s current expectations and beliefs as of September 9, 2024. Various factors outside of the Company’s control may impact the Company’s revenue and business. This includes the timing of project awards and starts which may be impacted by market fundamentals, client decision-making, and the regulatory environment in which they operate. The following statements apply only as of the date of this disclosure and are expressly qualified in their entirety by the cautionary statements included elsewhere in this document:

  Fiscal Year 2024   Fiscal Year 2025    
  Actual   Guidance   % Change
Revenue $728.2 million   $900 – $950 million   24% – 30%
           

On an overall basis, the quality of the Company’s backlog remains strong, and its revenue is expected to increase in fiscal 2025 as the current backlog converts to revenue.

On a segment basis:

  • In Storage and Terminal Solutions segment, the Company expects revenue to increase as the level of work increases on specialty vessel and related facility projects currently in backlog.
  • In the Utility and Power Infrastructure segment, the Company expects revenue to increase as the level of work accelerates on LNG peak shaving projects currently in backlog.
  • In the Process and Industrial Facilities segment, the Company expects revenue to decrease on a year over year basis as existing projects near completion and we await the start of new projects both in backlog and in our opportunity pipeline.

Backlog

The Company’s backlog remained at near record levels in the fourth quarter of fiscal 2024, ending at $1.4 billion as of June 30, 2024. Project awards totaled $175.9 million in the fourth quarter of fiscal 2024, resulting in a full year book-to-bill ratio of 1.5x. Project awards in the quarter included a significant butane storage project. The table below summarizes our awards, book-to-bill ratios and backlog by segment for our fourth fiscal quarter (amounts are in thousands, except for book-to-bill ratios):

  Three Months Ended   Fiscal Year Ended    
  June 30, 2024   June 30, 2024   Backlog as of
Segment: Awards     Book-to-Bill(1)     Awards     Book-to-Bill(1)     June 30, 2024
Storage and Terminal Solutions $ 129,911       1.9x     $ 804,396       2.9x     $ 798,255  
Utility and Power Infrastructure   12,543       0.2x       104,099       0.6x       379,697  
Process and Industrial Facilities   33,432       0.6x       182,382       0.7x     $ 251,521  
Total $ 175,886       0.9x     $ 1,090,877       1.5x     $ 1,429,473  

_______________
(1) Calculated by dividing project awards by revenue recognized during the period.

Financial Position

Net cash provided by operating activities during fiscal 2024 was $72.6 million, compared to $10.2 million during fiscal 2023. Net cash provided by operating activities during the year primarily reflect scheduled payments from customers associated with project awards in backlog.

As of June 30, 2024, Matrix had total liquidity of $169.6 million. Liquidity is comprised of $115.6 million of unrestricted cash and cash equivalents and $54.0 million of borrowing availability under the credit facility. The Company also has $25.0 million of restricted cash to support the facility. As of June 30, 2024, we had no outstanding borrowings under the facility.

Conference Call Details

In conjunction with the earnings release, Matrix Service Company will host a conference call with John R. Hewitt, President and CEO, and Kevin S. Cavanah, Vice President and CFO. The call will take place at 10:30 a.m. (Eastern) / 9:30 a.m. (Central) on Tuesday, September 10, 2024.

Investors and other interested parties can access a live audio-visual webcast using this webcast link: https://edge.media-server.com/mmc/p/9dfxb3ch, or through the Company’s website at www.matrixservicecompany.com on the Investors Relations page under Events & Presentations.

If you would like to dial in to the conference call, please register at https://register.vevent.com/register/BI896f05552b1f480eac6c6f77492cc225 at least 10 minutes prior to the start time. Upon registration, participants will receive a dial-in number and unique PIN to join the call as well as an e-mail confirmation with the details.

For those unable to participate in the conference call, a replay of the webcast will be available on the Investor Relations page of the Company’s website.

The conference call will be recorded and will be available for replay within one hour of completion of the live call and can be accessed following the same link as the live call.

About Matrix Service Company

Matrix Service Company (Nasdaq: MTRX), through its subsidiaries, is a leading North American industrial engineering, construction, and maintenance contractor headquartered in Tulsa, Oklahoma with offices located throughout the United States and Canada, as well as Sydney, Australia and Seoul, South Korea.

The Company reports its financial results in three key operating segments: Storage and Terminal Solutions, Utility and Power Infrastructure, and Process and Industrial Facilities.

With a focus on sustainability, building strong Environment, Social and Governance (ESG) practices, and living our core values, Matrix ranks among the Top Contractors by Engineering-News Record, was recognized for its Board diversification by 2020 Women on Boards, is an active signatory to CEO Action for Diversity and Inclusion, and is consistently recognized as a Great Place to Work®.   To learn more about Matrix Service Company, visit matrixservicecompany.com

This release contains forward-looking statements that are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are generally accompanied by words such as “anticipate,” “continues,” “expect,” “forecast,” “outlook,” “believe,” “estimate,” “should” and “will” and words of similar effect that convey future meaning, concerning the Company’s operations, economic performance and management’s best judgment as to what may occur in the future. Future events involve risks and uncertainties that may cause actual results to differ materially from those we currently anticipate. The actual results for the current and future periods and other corporate developments will depend upon a number of economic, competitive and other influences, including the successful implementation of the Company’s business improvement plan and the factors discussed in the “Risk Factors” and “Forward Looking Statements” sections and elsewhere in the Company’s reports and filings made from time to time with the Securities and Exchange Commission. Many of these risks and uncertainties are beyond the control of the Company, and any one of which, or a combination of which, could materially and adversely affect the results of the Company’s operations and its financial condition. We undertake no obligation to update information contained in this release, except as required by law.

For more information, please contact:

Kellie Smythe
Senior Director, Investor Relations
T: 918-359-8267
Email: ksmythe@matrixservicecompany.com

Matrix Service Company
Consolidated Statements of Income

(In thousands, except per share data)

 
  Three Months Ended   Fiscal Years Ended
  June 30,
2024
  June 30,
2023
  June 30,
2024
  June 30,
2023
Revenue $ 189,499     $ 205,854     $ 728,213     $ 795,020  
Cost of revenue   177,052       191,159       687,740       764,200  
Gross profit   12,447       14,695       40,473       30,820  
Selling, general and administrative expenses   17,293       17,031       70,085       68,249  
Goodwill impairment                     12,316  
Restructuring costs   501       261       501       3,142  
Operating loss   (5,347 )     (2,597 )     (30,113 )     (52,887 )
Other income (expense):              
Interest expense   (343 )     (468 )     (1,130 )     (2,024 )
Interest income   862       126       1,339       290  
Other   411       2,566       4,892       1,860  
Loss before income tax expense (benefit)   (4,417 )     (373 )     (25,012 )     (52,761 )
Provision (benefit) for federal, state and foreign income taxes   (40 )     (37 )     (36 )     (400 )
Net loss $ (4,377 )   $ (336 )   $ (24,976 )   $ (52,361 )
Basic loss per common share $ (0.16 )   $ (0.01 )   $ (0.91 )   $ (1.94 )
Diluted loss per common share $ (0.16 )   $ (0.01 )   $ (0.91 )   $ (1.94 )
Weighted average common shares outstanding:              
Basic   27,447       27,047       27,379       26,988  
Diluted   27,447       27,047       27,379       26,988  
                               

Matrix Service Company
Consolidated Balance Sheets

(In thousands)

 
  June 30,
2024
  June 30,
2023
Assets      
Current assets:      
Cash and cash equivalents $ 115,615     $ 54,812  
Accounts receivable, net of allowance for credit losses   138,987       145,764  
Costs and estimated earnings in excess of billings on uncompleted contracts   33,893       44,888  
Inventories   8,839       7,437  
Income taxes receivable   180       496  
Prepaid expenses   4,065       5,741  
Other current assets   12       3,118  
Total current assets   301,591       262,256  
Restricted cash   25,000       25,000  
Property, plant and equipment – net   43,498       47,545  
Operating lease right-of-use assets   19,150       21,799  
Goodwill   29,023       29,120  
Other intangible assets, net of accumulated amortization   1,651       3,066  
Other assets, non-current   31,438       11,718  
Total assets $ 451,351     $ 400,504  
               

Matrix Service Company
Consolidated Balance Sheets (continued)

(In thousands, except share data)

 
  June 30,
2024
  June 30,
2023
Liabilities and stockholders’ equity      
Current liabilities:      
Accounts payable $ 65,629     $ 76,365  
Billings on uncompleted contracts in excess of costs and estimated earnings   171,308       85,436  
Accrued wages and benefits   15,878       13,679  
Accrued insurance   4,605       5,579  
Operating lease liabilities   3,739       4,661  
Other accrued expenses   3,956       1,815  
Total current liabilities   265,115       187,535  
Deferred income taxes   25       26  
Operating lease liabilities   19,156       20,660  
Borrowings under asset-backed credit facility         10,000  
Other liabilities, non-current   2,873       799  
Total liabilities   287,169       219,020  
Commitments and contingencies      
Stockholders’ equity:      
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of June 30, 2024 and June 30, 2023; 27,308,795 and 27,047,318 shares outstanding as of June 30, 2024 and June 30, 2023, respectively   279       279  
Additional paid-in capital   145,580       140,810  
Retained earnings   33,941       58,917  
Accumulated other comprehensive loss   (9,535 )     (8,769 )
Treasury stock, at cost — 579,422 and 840,899 shares as of June 30, 2024 and June 30, 2023, respectively   (6,083 )     (9,753 )
Total stockholders’ equity   164,182       181,484  
Total liabilities and stockholders’ equity $ 451,351     $ 400,504  
               

Matrix Service Company
Condensed Consolidated Statements of Cash Flows

(In thousands)

 
  Three Months Ended   Fiscal Years Ended
  June 30,
2024
  June 30,
2023
  June 30,
2024
  June 30,
2023
Operating activities:              
Net loss $ (4,377 )   $ (336 )   $ (24,976 )   $ (52,361 )
Adjustments to reconcile net loss to net cash provided (used) by operating activities              
Depreciation and amortization   2,686       3,195       11,023       13,694  
Goodwill impairment                     12,316  
Stock-based compensation expense   1,980       1,637       7,745       6,791  
Gain on sale of property, plant and equipment   (393 )     (2,820 )     (4,923 )     (2,841 )
Other   1,193       21       1,362       147  
Changes in operating assets and liabilities increasing (decreasing) cash:              
Accounts receivable, net of allowance for credit losses   31,003       18,147       (12,077 )     8,663  
Costs and estimated earnings in excess of billings on uncompleted contracts   707       8,510       10,995       (136 )
Inventories   218       559       (1,402 )     2,506  
Other assets and liabilities   2,244       137       3,897       10,538  
Accounts payable   10,538       10,554       (10,385 )     1,210  
Billings on uncompleted contracts in excess of costs and estimated earnings   3,651       (29,293 )     85,872       20,330  
Accrued expenses   (2,446 )     (2,467 )     5,440       (10,610 )
Net cash provided by operating activities   47,004       7,844       72,571       10,247  
Investing activities:              
Capital expenditures   (1,305 )     (2,797 )     (6,994 )     (9,009 )
Proceeds from asset sales   514       6,356       6,049       6,466  
Net cash provided (used) by investing activities   (791 )     3,559       (945 )     (2,543 )
Financing activities:              
Advances under asset-backed credit facility               10,000       10,000  
Repayments of advances under asset-backed credit facility         (5,000 )     (20,000 )     (15,000 )
Payment of debt amendment fees   (100 )           (100 )      
Proceeds from issuance of common stock under employee stock purchase plan   52       52       184       252  
Repurchase of common stock for payment of statutory taxes due on equity-based compensation               (456 )     (310 )
Net cash used by financing activities   (48 )     (4,948 )     (10,372 )     (5,058 )
Effect of exchange rate changes on cash   (208 )     153       (451 )     (205 )
Net increase in cash and cash equivalents   45,957       6,608       60,803       2,441  
Cash, cash equivalents, and restricted cash, beginning of period   94,658       73,204       79,812       77,371  
Cash, cash equivalents, and restricted cash, end of period $ 140,615     $ 79,812     $ 140,615     $ 79,812  
Supplemental disclosure of cash flow information:              
Cash paid (received) during the period for:              
Income taxes $ (17 )   $ (51 )   $ (165 )   $ (13,337 )
Interest $ 104     $ 418     $ 880     $ 2,093  
Non-cash investing and financing activities:              
Purchases of property, plant and equipment on account $ 101     $ 74     $ 140     $ 104  
                               

Matrix Service Company
Results of Operations

(In thousands)

 
  Storage and Terminal Solutions   Utility and Power Infrastructure   Process and Industrial Facilities   Corporate   Total
  Three Months Ended June 30, 2024
Total revenue (1) $ 69,992     $ 65,261     $ 54,246     $     $ 189,499  
Cost of revenue   (67,799 )     (62,549 )     (45,910 )     (794 )     (177,052 )
Gross profit (loss)   2,193       2,712       8,336       (794 )     12,447  
Selling, general and administrative expenses   5,461       2,585       2,470       6,777       17,293  
Restructuring costs         52       215       234     $ 501  
Operating income (loss) $ (3,268 )   $ 75     $ 5,651     $ (7,805 )   $ (5,347 )
(1) Total revenues are net of inter-segment revenues which are primarily Process and Industrial Facilities and were $0.4 million for the three months ended June 30, 2024.
 
  Storage and Terminal Solutions   Utility and Power Infrastructure   Process and Industrial Facilities   Corporate   Total
  Three Months Ended June 30, 2023
Total revenue (1) $ 64,079     $ 39,075     $ 102,700     $     $ 205,854  
Cost of revenue   (62,012 )     (35,305 )     (94,303 )     461       (191,159 )
Gross profit   2,067       3,770       8,397       461       14,695  
Selling, general and administrative expenses   4,712       1,651       3,601       7,067       17,031  
Restructuring costs   (15 )           169       107       261  
Operating income (loss) $ (2,630 )   $ 2,119     $ 4,627     $ (6,713 )   $ (2,597 )
(1) Total revenues are net of inter-segment revenues which are primarily Storage and Terminal Solutions and were $2.8 million for the three months ended June 30, 2023.
 
  Storage and Terminal Solutions   Utility and Power Infrastructure   Process and Industrial Facilities   Corporate   Total
  Fiscal Year Ended June 30, 2024
Total revenue (1) $ 276,800     $ 183,920     $ 266,260     $ 1,233     $ 728,213  
Cost of revenue   (265,503 )     (174,688 )     (244,408 )     (3,141 )     (687,740 )
Gross profit (loss)   11,297       9,232       21,852       (1,908 )     40,473  
Selling, general and administrative expenses   19,823       8,844       10,354       31,064       70,085  
Restructuring costs         52       215       234       501  
Operating income (loss) $ (8,526 )   $ 336     $ 11,283     $ (33,206 )   $ (30,113 )
(1) Total revenues are net of inter-segment revenues which are primarily Storage and Terminal Solutions and were $2.4 million for the year ended June 30, 2024.
 
  Storage and Terminal Solutions   Utility and Power Infrastructure   Process and Industrial Facilities   Corporate   Total
  Fiscal Year Ended June 30, 2023
Total revenue (1) $ 255,693     $ 169,504     $ 369,823     $     $ 795,020  
Cost of revenue   (245,223 )     (158,805 )     (359,067 )     (1,105 )     (764,200 )
Gross profit (loss)   10,470       10,699       10,756       (1,105 )     30,820  
Selling, general and administrative expenses   20,054       7,045       14,909       26,241       68,249  
Goodwill impairment               12,316             12,316  
Restructuring costs   969       37       972       1,164       3,142  
Operating income (loss) $ (10,553 )   $ 3,617     $ (17,441 )   $ (28,510 )   $ (52,887 )
(1) Total revenues are net of inter-segment revenues which are primarily Storage and Terminal Solutions and were $5.6 million for the year ended June 30, 2023.
 

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 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 limited notice to proceed, we include the entire scope of work in our backlog if we conclude that the likelihood of the full project proceeding as high. For all other arrangements, we calculate backlog as the estimated contract amount less revenue recognized as of the reporting date.

Three Months Ended June 30, 2024

The following table provides a summary of changes in our backlog for the three months ended June 30, 2024:

  Storage and Terminal
Solutions
  Utility and Power Infrastructure   Process and Industrial Facilities   Total
  (In thousands)
Backlog as of March 31, 2024 $ 738,337     $ 432,415     $ 279,486     $ 1,450,238  
Project awards   129,911       12,543       33,432       175,886  
Other adjustment               (7,152 )     (7,152 )
Revenue recognized   (69,993 )     (65,261 )     (54,245 )     (189,499 )
Backlog as of June 30, 2024 $ 798,255     $ 379,697     $ 251,521     $ 1,429,473  
Book-to-bill ratio (1)   1.9x       0.2x       0.6x       0.9x  

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

Fiscal Year Ended June 30, 2024

The following table provides a summary of changes in our backlog for the fiscal year ended June 30, 2024:

  Storage and Terminal
Solutions
  Utility and Power Infrastructure   Process and Industrial Facilities   Total
  (In thousands)
Backlog as of June 30, 2023 $ 270,659     $ 459,518     $ 359,921     $ 1,090,098  
Project awards   804,396       104,099       182,382       1,090,877  
Other adjustment (2)               (24,522 )     (24,522 )
Revenue recognized   (276,800 )     (183,920 )     (266,260 )     (726,980 )
Backlog as of June 30, 2024 $ 798,255     $ 379,697     $ 251,521     $ 1,429,473  
Book-to-bill ratio (1)   2.9x       0.6x       0.7x       1.5x  

_______________
(1) Calculated by dividing project awards by revenue recognized.
(2) Backlog was reduced primarily to account for a reduction of work available to us under an existing refinery maintenance program.

Non-GAAP Financial Measures

Adjusted Net Loss

We have presented Adjusted net loss, which we define as Net loss before restructuring costs, goodwill and intangible asset impairments, and gain on sale of assets, and the tax impact of these adjustments, because we believe it better depicts our core operating results. We believe that the line item on our Consolidated Statements of Income entitled “Net loss” is the most directly comparable GAAP measure to Adjusted net loss. Since Adjusted net loss is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, Net loss as an indicator of operating performance. Adjusted net loss, as we calculate it, may not be comparable to similarly titled measures employed by other companies. In addition, this measure is not a measure of our ability to fund our cash needs. As Adjusted net loss excludes certain financial information compared with Net loss, the most directly comparable GAAP financial measure, users of this financial information should consider the type of events and transactions that are excluded. Our non-GAAP performance measure, Adjusted net loss, has certain material limitations as follows:

  • It does not include impairments to goodwill. While impairments to intangible assets including goodwill are non-cash expenses in the period recognized, cash or other consideration was still transferred in exchange for the intangible assets in the period of the acquisition. Any measure that excludes impairments to intangible assets has material limitations since these expenses represent the loss of an asset that was acquired in exchange for cash or other assets.
  • It does not include restructuring costs. Restructuring costs represent material costs that were incurred and are oftentimes cash expenses. Therefore, any measure that excludes restructuring costs has material limitations.
  • It does not include gain on the sale of assets. While these sales occurred outside the normal course of business, any measure that excludes this gain has inherent limitations since the sales resulted in material inflows of cash.

A reconciliation of Net loss to Adjusted net loss follows:

Reconciliation of Net Loss to Adjusted Net Loss(1)
(In thousands, except per share data)
 
  Three Months Ended   Fiscal Years Ended
  June 30, 2024   June 30, 2023   June 30, 2024   June 30, 2023
Net loss, as reported $ (4,377 )   $ (336 )   $ (24,976 )   $ (52,361 )
Restructuring costs   501       261       501       3,142  
Goodwill impairment                     12,316  
Gain on sale of assets(2)         (2,905 )     (4,542 )     (2,905 )
Tax impact of adjustments and other net tax items(3)                      
Adjusted net loss $ (3,876 )   $ (2,980 )   $ (29,017 )   $ (39,808 )
               
Loss per fully diluted share, as reported $ (0.16 )   $ (0.01 )   $ (0.91 )   $ (1.94 )
Adjusted loss per fully diluted share $ (0.14 )   $ (0.11 )   $ (1.06 )   $ (1.48 )

_______________
(1) Beginning with fiscal 2024, the definition of Adjusted net loss and Adjusted loss per share was updated to no longer include changes in the valuation allowance of deferred tax assets. Prior period information has been adjusted to conform to the updated definition of Adjusted net loss and Adjusted loss per share.
(2) In fiscal 2024, we sold our Burlington, ON office in the first quarter and recorded a gain of $2.5 million. In the second quarter of fiscal 2024 we sold our Catoosa, OK facility and recorded a gain of $2.0 million. In fiscal 2023, we recorded a $2.9 million gain on the sale of our industrial cleaning business in the fourth quarter of fiscal 2023.
(3) Represents the tax impact of the adjustments to Net loss, calculated using the applicable effective tax rate of the adjustment. Due to the existence of valuation allowances on our deferred tax assets and net operating losses, there was no tax impact of any of the adjustments in any period presented.

Adjusted EBITDA

We have presented Adjusted EBITDA, which we define as net loss before goodwill impairments, gain on sale of assets, restructuring costs, stock-based compensation, interest expense, interest income, income taxes, and depreciation and amortization, because it is used by the financial community as a method of measuring our performance and of evaluating the market value of companies considered to be in similar businesses. We believe that the line item on our Consolidated Statements of Income entitled “Net loss” is the most directly comparable GAAP measure to Adjusted EBITDA. Since Adjusted EBITDA is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net earnings as an indicator of operating performance. Adjusted EBITDA, as we calculate it, may not be comparable to similarly titled measures employed by other companies. In addition, this measure is not a measure of our ability to fund our cash needs. As Adjusted EBITDA excludes certain financial information compared with net loss, the most directly comparable GAAP financial measure, users of this financial information should consider the type of events and transactions that are excluded. Our non-GAAP performance measure, Adjusted EBITDA, has certain material limitations as follows:

  • It does not include interest expense. Because we have borrowed money to finance our operations and to acquire businesses, pay commitment fees to maintain our senior secured revolving credit facility, and incur fees to issue letters of credit under the senior secured revolving credit facility, interest expense is a necessary and ongoing part of our costs and has assisted us in generating revenue. Therefore, any measure that excludes interest expense has material limitations.
  • It does not include interest income. Because we have money invested in money market depository accounts and we will have earned interest income on these investments, any measure that excludes interest income has material limitations.
  • It does not include income taxes. Because the payment of income taxes is a necessary and ongoing part of our operations, any measure that excludes income taxes has material limitations.
  • It does not include depreciation or amortization expense. Because we use capital and intangible assets to generate revenue, depreciation and amortization expense is a necessary element of our cost structure. Therefore, any measure that excludes depreciation or amortization expense has material limitations.
  • It does not include impairments to goodwill. While impairments to intangible assets including goodwill are non-cash expenses in the period recognized, cash or other consideration was still transferred in exchange for the intangible assets in the period of the acquisition. Any measure that excludes impairments to intangible assets has material limitations since these expenses represent the loss of an asset that was acquired in exchange for cash or other assets.
  • It does not include gain on asset sales. While these sales occurred outside the normal course of business and are not expected to be recurring, any measure that excludes this gain has inherent limitations since the sale resulted in a material inflow of cash.
  • It does not include restructuring costs. Restructuring costs represent material costs that we incurred and are oftentimes cash expenses. Therefore, any measure that excludes restructuring costs has material limitations.
  • It does not include equity-settled stock-based compensation expense. Stock-based compensation represents material amounts of equity that are awarded to our employees and directors for services rendered. While the expense is non-cash, we historically release vested shares out of our treasury stock, which has been replenished by using cash to periodically repurchase our stock. Therefore, any measure that excludes stock-based compensation has material limitations.

A reconciliation of Net loss to Adjusted EBITDA follows:

Reconciliation of Net Loss to Adjusted EBITDA
(In thousands)

  Three Months Ended   Fiscal Years Ended
  June 30,
2024
  June 30,
2023
  June 30,
2024
  June 30,
2023
Net loss $ (4,377 )   $ (336 )   $ (24,976 )   $ (52,361 )
Interest expense   343       468       1,130       2,024  
Interest income(1)   (862 )     (126 )     (1,339 )     (290 )
Provision (benefit) for federal, state and foreign income taxes   (40 )     (37 )     (36 )     (400 )
Depreciation and amortization   2,686       3,195       11,023       13,694  
Goodwill impairment                     12,316  
Gain on sale of assets(2)         (2,905 )     (4,542 )     (2,905 )
Restructuring costs   501       261       501       3,142  
Stock-based compensation(3)   1,980       1,637       7,745       6,791  
Adjusted EBITDA $ 231     $ 2,157     $ (10,494 )   $ (17,989 )

_______________
(1) Beginning with fiscal 2024, to be more consistent with our peers, we updated our calculation methodology of adjusted EBITDA to include interest income, prior periods have been adjusted to the new methodology.
(2) In fiscal 2024, we sold our Burlington, ON office in the first quarter and recorded a gain of $2.5 million. In the second quarter of fiscal 2024 we sold our Catoosa, OK facility and recorded a gain of $2.0 million. In fiscal 2023, we booked a $2.9 million gain on the sale of our industrial cleaning business in the fourth quarter of fiscal 2023.
(3) Represents only the equity-settled portion of our stock-based compensation expense.

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