Executive Summary

Revenue rose 13% sequentially to $200.2M in Q3 after Q2’s $187.2M (+7% YoY), with gross margin improving from 5.8% in Q2 to 6.4% in Q3; Q2 EPS was $(0.20), Q3 EPS $(0.12). Backlog stayed elevated ($1.31B in Q2; $1.41B in Q3).
Guidance was cut twice: at Q2 from $900–$950M to $850–$900M (-~5% at midpoint), then at Q3 to $770–$800M (-~10% vs prior). Management cited delays in awards/mobilization and exiting a small T&D service line as drivers.
Q2 segment strength: Storage & Terminal Solutions and Utility & Power Infrastructure both up >50% YoY; Process & Industrial down on project completion. Under-recovery of construction overhead remained a margin headwind but was improving as revenue ramps.
Management expects a return to profitability in H2 FY25, with more confidence in Q4 given revenue ramp and overhead absorption; pipeline increased to ~$7B, driven by LNG peak shaving opportunities.
Potential stock catalysts: backlog conversion and award pace (book-to-bill ≥1.0x target), margin recovery as overhead under-recovery declines, and clarity on macro/tariff/regulatory environment influencing project starts.

What Went Well and What Went Wrong

What Went Well

Storage & Terminal Solutions revenue +53% YoY to $95.5M; gross margin improved to 7.6% on strong execution and better overhead absorption. “We delivered year-over-year revenue growth within both our Storage and Terminal Solutions and Utility and Power Infrastructure segments.”
Utility & Power Infrastructure revenue +52% YoY to $61.1M; gross margin rose to 5.6% on improved mix and execution; management highlighted strong multiyear demand in LNG peak shaving.
Liquidity remained strong with $211.7M at Q2 and $247.1M at Q3, no debt; cash from operations was $33.6M in Q2 and $31.2M in Q3, underscoring backlog quality and cash conversion.

What Went Wrong

Full-year revenue guidance lowered ~5% at Q2 due to delayed project awards and mobilization; a singular large project timing pushed ~$50M from FY25 to FY26.
Under-recovery of construction overhead compressed gross margins; CFO quantified ~440bps impact in Q2, though improving vs >600bps prior-year.
Process & Industrial Facilities revenue fell to $30.6M (from $71.3M YoY) with gross margin down to 1.2% due to mix shift and lower volumes after completion of a large renewable diesel project.

Financial Results

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$165.579	$187.169	$200.161
Net Loss ($USD Millions)	$(9.223)	$(5.533)	$(3.434)
Diluted EPS ($USD)	$(0.33)	$(0.20)	$(0.12)
Gross Profit ($USD Millions)	$7.813	$10.892	$12.850
Gross Margin %	4.7%	5.8%	6.4%
Adjusted EBITDA ($USD Millions)	$(5.880)	$(2.183)	$0.005

Segment breakdown (Q2 2025 vs prior year Q2 2024):

Segment	Revenue Q2 2025 ($M)	Gross Margin Q2 2025 (%)	Revenue Q2 2024 ($M)	Gross Margin Q2 2024 (%)
Storage & Terminal Solutions	$95.507	7.6%	$62.360	2.9%
Utility & Power Infrastructure	$61.076	5.6%	$40.144	3.5%
Process & Industrial Facilities	$30.586	1.2%	$71.305	9.4%

KPIs and balance sheet/trend:

KPI	Q1 2025	Q2 2025	Q3 2025
Backlog ($USD Millions)	$1,411.871	$1,311.134	$1,412.165
Quarterly Awards ($USD Millions)	$147.977	$90.538	$301.192
Book-to-Bill (x)	0.9x	0.5x	1.5x
Cash from Operations ($USD Millions)	$11.918	$33.598	$31.247
Liquidity ($USD Millions)	$181.2	$211.7	$247.1
Debt Outstanding	$0	$0	$0

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2025 (as of Nov 6, 2024)	$900–$950M	—	—
Revenue	FY 2025 (updated Feb 5, 2025)	$900–$950M	$850–$900M	Lowered (~5% midpoint)
Revenue	FY 2025 (updated May 7, 2025)	$850–$900M	$770–$800M	Lowered (~10%)

Management context: reduction tied to delayed awards/mobilization and exit of Northeast transmission & distribution service line (~$50M revenue impact).

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 FY25 and Q3 FY25)	Current Period (Q2 FY25)	Trend
Tariffs/macro/regulatory	Q3: Monitoring U.S. trade/environmental policy uncertainty; proposals/contract formats mitigate pricing risk; collaborating with customers and suppliers; clients aim to advance projects under favorable regulatory environment.	Q2: Pre-election policy uncertainty slowed awards/starts in core energy markets; expected to conclude.	Uncertainty elevated in H1 but easing; mitigation actions in place.
Power demand/data centers	Q3: Elevated electrical infrastructure needs; opportunities in power generation, substations, data centers.	Q2: U.S. power demand expected +55% by 2040 (IHS Markit); Matrix positioned via cryogenic fuel storage.	Strengthening demand narrative; broader opportunity set.
LNG/NGL/ammonia storage	Q3: Storage backlog at record; awards for refrigerated propane/butane tanks and spheres.	Q2: Demand favorable; LNG export capacity on track to grow 85% by 2028; pipeline grew to $7B driven by LNG peak shaving.	Sustained multi-year growth drivers; pipeline expanding.
Backlog/book-to-bill	Q1: Near-record backlog ($1.4B); book-to-bill 0.9x.	Q2: Backlog $1.31B; book-to-bill 0.5x; expectation for ≥1.0x FY book-to-bill.	Q3 improved to 1.5x and backlog $1.41B; YTD book-to-bill 1.0x.
Overhead recovery/margins	Q1: Under-recovery pressured margins; ramp expected to improve.	Q2: Under-recovery impact ~440bps (vs >600bps prior-year); improving with revenue ramp.	Q3: Under-recovery down to 280bps, lowest in 2 years; targeting 10–12% consolidated GM as ramp continues.

Management Commentary

“We’ve lowered our full-year revenue forecast by approximately 5% at the midpoint…as approximately $50 million in projected revenue was pushed from fiscal 2025 to fiscal 2026.” — John Hewitt, CEO.
“The quarterly [overhead under-recovery] impact was approximately 440 basis points in the current quarter…We expect the negative impact to continue to decrease in the second half of fiscal 2025 as revenue increases.” — Kevin Cavanah, CFO.
“We expect Matrix will generate organic revenue growth in the second half of fiscal 2025 of greater than 40%…and expect to deliver a book-to-bill ratio of at least 1.0x for the full year.” — John Hewitt, CEO.
“Our pipeline…has since grown to more than $7 billion, primarily driven by LNG peak shaving opportunities where we hold a leading brand position.” — John Hewitt, CEO.
“We feel pretty good about…the organization [returning] to a profitable run rate within the back half of the year…more in the fourth quarter.” — John Hewitt & Kevin Cavanah.

Q&A Highlights

Profitability timing: Management reiterated H2 return to profitability, with higher confidence in Q4 versus Q3 due to revenue ramp.
Backlog/awards cadence: Book-to-bill can be non-linear; pipeline over $7B supports award momentum; Q3 awards expected to strengthen.
Revenue pushout: A singular large project mobilization timing shifted revenue into FY26; expected spread into Q1–Q2 FY26.
Margin outlook: Competitive dynamics and project size support maintaining strong margin profiles on new wins; storage segment margins targeted at 10–12% once under-recovery eliminated.
Strategy/inorganic growth: Focused first on profitability and backlog; building a specialty E&C platform; exploring complementary inorganic opportunities to strengthen regions and capabilities.

Estimates Context

Wall Street consensus (S&P Global) for Q2 FY2025 revenue and EPS was unavailable through our S&P Global interface at the time of retrieval (rate limit exceeded). As a result, we cannot present an actual vs consensus comparison for Q2 in this report. [Values retrieved from S&P Global, but unavailable due to system limit.]

Where estimates may need to adjust:

Following the Q2 guidance cut to $850–$900M and subsequent Q3 reduction to $770–$800M, Street models likely need lower FY25 revenue and margin assumptions, with higher Q4 weighting and FY26 carryover for delayed mobilizations.

Key Takeaways for Investors

Positive trajectory: Revenue ramp from $165.6M (Q1) to $187.2M (Q2) to $200.2M (Q3) with improving gross margin and adjusted EBITDA approaching breakeven; H2 profitability guide intact (more likely in Q4).
Backlog durability: Elevated backlog ($1.31B → $1.41B) and a $7B pipeline with LNG/storage strength support multi-year growth; near-term award timing remains the swing factor.
Margin mechanics: Overhead under-recovery declining (Q2 ~440bps → Q3 ~280bps) should ease gross margin pressure as volumes rise; long-term GM target 10–12%.
Guidance risk and reset: FY25 revenue guidance cut twice; exit of Northeast T&D (~$50M impact) and delayed mobilizations push some revenue into FY26—models should reflect lower FY25 but higher FY26.
Segment mix: Strength in Storage & UPI segments (both up >50% YoY in Q2) offsets PIF softness from project completion; mix and execution key to margin recovery.
Macro watch: Clients assessing tariffs/trade and environmental policy; management indicates mitigation via contracting and supply chain actions and sees 4-year window for accelerated energy infrastructure spend.
Trading implications: Near-term sentiment hinges on award cadence and Q4 profitability delivery; positive inflections in book-to-bill and margins could drive rerating, while further policy-related delays would be a headwind.

Appendix: Q2 2025 Primary Docs Read

8-K 2.02 and press release: revenue $187.2M, EPS $(0.20), adjusted EBITDA $(2.2)M, backlog $1.31B, FY25 guidance cut to $850–$900M.
Earnings call transcript: delays in awards/mobilization; under-recovery ~440bps; H2 profitability (Q4-weighted); pipeline to $7B.
Other Q2 press release: release timing and call access details.
Prior quarters for trend: Q1 FY25 press release (near-record backlog, under-recovery pressure); Q3 FY25 press release/call (revenue $200.2M, book-to-bill 1.5x, FY25 revenue guidance lowered to $770–$800M).

MATRIX SERVICE CO (MTRX)·Q2 2025 Earnings Summary