Matrix Service Company (Nasdaq: MTRX) today
reported its financial results for the fourth quarter and year
ended June 30, 2021.
- Fourth
quarter revenue increased 18% to $174.9 million compared to $148.3
million in the third quarter; full year revenue of $673.4
million
- $99.1
million of project awards in the quarter resulting in backlog of
$462.6 million at June 30, 2021
- Project
awards accelerating as we moved into the first quarter of fiscal
2022, with an expected book-to-bill of over 1.0
- Balance
sheet is strong with no outstanding debt and cash of $83.9 million
at June 30, 2021
“Fourth quarter revenue in all three segments
increased over the third quarter, and the pace of awards has begun
to accelerate in the new fiscal year,” said the Company’s President
and Chief Executive Officer, John R. Hewitt. “This acceleration of
awards reflects the growing confidence of our customers and
improvement in our end-markets. Small- to mid-size project award
activity is increasing across all our segments, and we expect to
benefit from increased investment across the clean energy markets
including renewable fuels, battery storage, and hydrogen, along
with pent up demand in our traditional energy and industrial
markets. Importantly, we are well positioned to execute on these
opportunities due to our strong financial position.
“In addition, following reductions in overhead
achieved over the last 18 months, we have begun a review of our
organizational structure, with the support of a third party, to
align the organization with the strategic direction of the business
and changes in our end markets. We expect this effort will maximize
our organizational structure, leading to improved project capture
rates and bottom-line results as we move through fiscal 2022.
“In closing, in spite of the challenges during
this fiscal year, our employees were able to achieve a total
recordable incident rate of 0.28 which represents a record for us
and world-class safety performance.”
Operational Update
Revenue in the fourth quarter of fiscal 2021 was
$174.9 million, an increase of $26.6 million over third quarter
revenue of $148.3 million. Although revenue has increased, the
COVID-19 pandemic and the resulting disruption to the energy and
industrial markets continued to negatively impact the timing of
project awards and our financial results. Although we have made
significant reductions to our overhead cost structure, at this
current revenue volume, we did not fully leverage overhead
costs.
The fourth quarter included additional costs on
a large capital project in the Utility and Power Infrastructure
segment to achieve critical schedule completion milestones for our
client. As a result, the expected outcome on the project resulted
in a gross profit reduction of $6.6 million. The project is
currently in start-up and commissioning, and while we expect that
the forecasted financial outcome of the project will remain
positive, it is well below our original expectations.
We settled a long-term dispute with a customer
related to a crude terminal that was completed in 2018. As a result
of the settlement, we recorded a reduction to gross margin of $2.9
million in the Storage and Terminal Solutions segment and received
cash of $8.9 million in fiscal 2022. The settlement allowed us to
avoid future legal costs and eliminated any litigation risk.
Based primarily on the factors discussed above,
we recognized a net loss in the quarter of $10.7 million and a loss
per share of $0.40.
Backlog
Our backlog as of June 30, 2021 was $462.6
million. Project awards in the fourth quarter of 2021 and fiscal
2021 totaled $99.1 million and $451.7 million, respectively,
resulting in book-to-bill ratios of 0.6 and 0.7, respectively. As
discussed above, award activity in the first quarter of fiscal 2022
has accelerated and we are expecting increasing awards and
improving backlog as we move through the fiscal year.
Financial Position
At June 30, 2021, we had a cash balance of $83.9
million and no borrowings. In addition, on September 9, 2021 we
entered into a $100.0 million asset-backed credit facility with
Bank of Montreal. This new facility replaces the previous facility
and provides more flexibility and support for our strategic
direction while reducing the expected cost of borrowing.
Conference Call Details
In conjunction with the earnings release, Matrix
Service Company will host a conference call / webcast 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 14, 2021 and will be simultaneously
broadcast live over the Internet which can be accessed at our
website at matrixservicecompany.com under Investor Relations,
Events and Presentations. Please allow extra time prior to the call
to visit the site and download the streaming media software
required to listen to the Internet broadcast. 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.
Dial in - Toll-Free 1-888-660-6127Dial in - Toll
1-973-890-8355Audience Passcode 2214178
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: Utility and Power Infrastructure,
Process and Industrial Facilities, and Storage and Terminal
Solutions.
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:
Kevin S. CavanahVice President and CFOT:
918-838-8822Email:kcavanah@matrixservicecompany.com
Kellie SmytheSenior Director, Investor RelationsT:
918-359-8267Email: ksmythe@matrixservicecompany.com
Matrix Service Company
Consolidated Statements of
Income
(In thousands, except per share
data)
|
Three Months Ended |
|
Twelve Months Ended |
|
June 30, 2021 |
|
June 30, 2020 |
|
June 30, 2021 |
|
June 30, 2020 |
Revenue |
$ |
174,899 |
|
|
|
$ |
195,837 |
|
|
|
$ |
673,398 |
|
|
|
$ |
1,100,938 |
|
|
Cost of revenue |
173,357 |
|
|
|
176,604 |
|
|
|
640,633 |
|
|
|
998,762 |
|
|
Gross profit |
1,542 |
|
|
|
19,233 |
|
|
|
32,765 |
|
|
|
102,176 |
|
|
Selling, general and
administrative expenses |
17,725 |
|
|
|
19,702 |
|
|
|
69,756 |
|
|
|
86,276 |
|
|
Goodwill and other intangible
asset impairment |
— |
|
|
|
— |
|
|
|
— |
|
|
|
38,515 |
|
|
Restructuring costs |
171 |
|
|
|
7,451 |
|
|
|
6,756 |
|
|
|
14,010 |
|
|
Operating loss |
(16,354 |
) |
|
|
(7,920 |
) |
|
|
(43,747 |
) |
|
|
(36,625 |
) |
|
Other income (expense): |
|
|
|
|
|
|
|
Interest expense |
(504 |
) |
|
|
(366 |
) |
|
|
(1,559 |
) |
|
|
(1,597 |
) |
|
Interest income |
30 |
|
|
|
23 |
|
|
|
126 |
|
|
|
1,270 |
|
|
Other |
68 |
|
|
|
676 |
|
|
|
1,917 |
|
|
|
308 |
|
|
Loss before income tax
expense |
(16,760 |
) |
|
|
(7,587 |
) |
|
|
(43,263 |
) |
|
|
(36,644 |
) |
|
Benefit for federal, state and
foreign income taxes |
(6,037 |
) |
|
|
(1,865 |
) |
|
|
(12,039 |
) |
|
|
(3,570 |
) |
|
Net loss |
$ |
(10,723 |
) |
|
|
$ |
(5,722 |
) |
|
|
$ |
(31,224 |
) |
|
|
$ |
(33,074 |
) |
|
Basic loss per common share |
$ |
(0.40 |
) |
|
|
$ |
(0.22 |
) |
|
|
$ |
(1.18 |
) |
|
|
$ |
(1.24 |
) |
|
Diluted loss per common
share |
$ |
(0.40 |
) |
|
|
$ |
(0.22 |
) |
|
|
$ |
(1.18 |
) |
|
|
$ |
(1.24 |
) |
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
Basic |
26,538 |
|
|
|
26,140 |
|
|
|
26,451 |
|
|
|
26,621 |
|
|
Diluted |
26,538 |
|
|
|
26,140 |
|
|
|
26,451 |
|
|
|
26,621 |
|
|
Matrix Service Company
Consolidated Balance Sheets
(In thousands)
|
June 30, 2021 |
|
June 30, 2020 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
83,878 |
|
|
|
$ |
100,036 |
|
|
Accounts receivable, less allowances (2021 - $898; 2020 -
$905) |
148,030 |
|
|
|
160,671 |
|
|
Costs and estimated earnings in excess of billings on uncompleted
contracts |
30,774 |
|
|
|
59,548 |
|
|
Inventories |
7,342 |
|
|
|
6,460 |
|
|
Income taxes receivable |
16,965 |
|
|
|
3,919 |
|
|
Other current assets |
4,230 |
|
|
|
4,526 |
|
|
Total current assets |
291,219 |
|
|
|
335,160 |
|
|
Property, plant and equipment, at
cost: |
|
|
|
Land and buildings |
41,633 |
|
|
|
42,695 |
|
|
Construction equipment |
94,453 |
|
|
|
94,154 |
|
|
Transportation equipment |
50,510 |
|
|
|
55,864 |
|
|
Office equipment and software |
42,706 |
|
|
|
39,356 |
|
|
Construction in progress |
493 |
|
|
|
4,427 |
|
|
Total property, plant and equipment - at cost |
229,795 |
|
|
|
236,496 |
|
|
Accumulated depreciation |
(160,388 |
) |
|
|
(155,748 |
) |
|
Property, plant and equipment - net |
69,407 |
|
|
|
80,748 |
|
|
Operating lease right-of-use
assets |
22,412 |
|
|
|
21,375 |
|
|
Goodwill |
60,636 |
|
|
|
60,369 |
|
|
Other intangible assets |
6,614 |
|
|
|
8,837 |
|
|
Deferred income taxes |
5,295 |
|
|
|
5,988 |
|
|
Other assets |
11,973 |
|
|
|
4,833 |
|
|
Total assets |
$ |
467,556 |
|
|
|
$ |
517,310 |
|
|
Matrix Service Company
Consolidated Balance Sheets
(continued)
(In thousands, except share
data)
|
June 30,2021 |
|
June 30,2020 |
Liabilities and stockholders’ equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
60,920 |
|
|
|
$ |
73,094 |
|
|
Billings on uncompleted contracts in excess of costs and estimated
earnings |
53,832 |
|
|
|
63,889 |
|
|
Accrued wages and benefits |
21,008 |
|
|
|
16,205 |
|
|
Accrued insurance |
6,568 |
|
|
|
7,301 |
|
|
Operating lease liabilities |
5,747 |
|
|
|
7,568 |
|
|
Other accrued expenses |
5,327 |
|
|
|
7,890 |
|
|
Total current liabilities |
153,402 |
|
|
|
175,947 |
|
|
Deferred income taxes |
34 |
|
|
|
61 |
|
|
Operating lease liabilities |
20,771 |
|
|
|
19,997 |
|
|
Borrowings under senior secured revolving credit facility |
— |
|
|
|
9,208 |
|
|
Other liabilities |
7,810 |
|
|
|
4,208 |
|
|
Total liabilities |
182,017 |
|
|
|
209,421 |
|
|
Commitments and
contingencies |
|
|
|
Stockholders’ equity: |
|
|
|
Common stock—$.01 par value; 60,000,000 shares authorized;
27,888,217 shares issued as of June 30, 2021 and June 30,
2020; 26,549,438 and 26,141,528 shares outstanding as of June 30,
2021 and June 30, 2020 |
279 |
|
|
|
279 |
|
|
Additional paid-in capital |
137,575 |
|
|
|
138,966 |
|
|
Retained earnings |
175,178 |
|
|
|
206,402 |
|
|
Accumulated other comprehensive income |
(6,749 |
) |
|
|
(8,373 |
) |
|
|
306,283 |
|
|
|
337,274 |
|
|
Less treasury stock, at cost — 1,338,779 and 1,746,689 shares as of
June 30, 2021 and June 30, 2020 |
(20,744 |
) |
|
|
(29,385 |
) |
|
Total stockholders' equity |
285,539 |
|
|
|
307,889 |
|
|
Total liabilities and
stockholders’ equity |
$ |
467,556 |
|
|
|
$ |
517,310 |
|
|
Results of Operations(In
thousands)
|
|
|
|
|
|
|
Utility and Power Infrastructure |
|
Process and Industrial Facilities |
|
Storage and
Terminal Solutions |
|
Corporate |
|
Total |
Three Months Ended
June 30, 2021 |
|
|
|
|
|
|
|
|
|
Gross revenue |
$ |
52,638 |
|
|
|
$ |
59,902 |
|
|
|
$ |
63,410 |
|
|
|
$ |
— |
|
|
|
$ |
175,950 |
|
|
Less: inter-segment
revenue |
— |
|
|
|
12 |
|
|
|
1,039 |
|
|
|
— |
|
|
|
1,051 |
|
|
Consolidated revenue |
52,638 |
|
|
|
59,890 |
|
|
|
62,371 |
|
|
|
— |
|
|
|
174,899 |
|
|
Gross profit (loss) |
(6,312 |
) |
|
|
6,290 |
|
|
|
1,564 |
|
|
|
— |
|
|
|
1,542 |
|
|
Selling, general and
administrative expenses |
2,728 |
|
|
|
3,437 |
|
|
|
4,790 |
|
|
|
6,770 |
|
|
|
17,725 |
|
|
Restructuring costs |
86 |
|
|
|
162 |
|
|
|
147 |
|
|
|
(224 |
) |
|
|
171 |
|
|
Operating income (loss) |
$ |
(9,126 |
) |
|
|
$ |
2,691 |
|
|
|
$ |
(3,373 |
) |
|
|
$ |
(6,546 |
) |
|
|
$ |
(16,354 |
) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2020 |
|
|
|
|
|
|
|
|
|
Gross revenue |
$ |
59,449 |
|
|
|
$ |
49,192 |
|
|
|
$ |
88,151 |
|
|
|
$ |
— |
|
|
|
$ |
196,792 |
|
|
Less: inter-segment
revenue |
— |
|
|
|
51 |
|
|
|
904 |
|
|
|
— |
|
|
|
955 |
|
|
Consolidated revenue |
59,449 |
|
|
|
49,141 |
|
|
|
87,247 |
|
|
|
— |
|
|
|
195,837 |
|
|
Gross profit (loss) |
5,337 |
|
|
|
5,851 |
|
|
|
8,738 |
|
|
|
(693 |
) |
|
|
19,233 |
|
|
Selling, general and
administrative expenses |
2,556 |
|
|
|
4,600 |
|
|
|
6,444 |
|
|
|
6,102 |
|
|
|
19,702 |
|
|
Restructuring costs |
1,790 |
|
|
|
5,212 |
|
|
|
245 |
|
|
|
204 |
|
|
|
7,451 |
|
|
Operating income (loss) |
$ |
991 |
|
|
|
$ |
(3,961 |
) |
|
|
$ |
2,049 |
|
|
|
$ |
(6,999 |
) |
|
|
$ |
(7,920 |
) |
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
June 30, 2021 |
|
|
|
|
|
|
|
|
|
Gross revenue |
$ |
210,052 |
|
|
|
$ |
201,472 |
|
|
|
$ |
267,982 |
|
|
|
$ |
— |
|
|
|
$ |
679,506 |
|
|
Less: inter-segment
revenue |
— |
|
|
|
1,555 |
|
|
|
4,553 |
|
|
|
— |
|
|
|
6,108 |
|
|
Consolidated revenue |
210,052 |
|
|
|
199,917 |
|
|
|
263,429 |
|
|
|
— |
|
|
|
673,398 |
|
|
Gross profit |
1,506 |
|
|
|
17,642 |
|
|
|
13,617 |
|
|
|
— |
|
|
|
32,765 |
|
|
Selling, general and
administrative expenses |
9,882 |
|
|
|
14,756 |
|
|
|
18,644 |
|
|
|
26,474 |
|
|
|
69,756 |
|
|
Restructuring costs |
1,312 |
|
|
|
3,807 |
|
|
|
1,391 |
|
|
|
246 |
|
|
|
6,756 |
|
|
Operating loss |
$ |
(9,688 |
) |
|
|
$ |
(921 |
) |
|
|
$ |
(6,418 |
) |
|
|
$ |
(26,720 |
) |
|
|
$ |
(43,747 |
) |
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
June 30, 2020 |
|
|
|
|
|
|
|
|
|
Gross revenue |
$ |
212,001 |
|
|
|
$ |
424,710 |
|
|
|
$ |
470,871 |
|
|
|
$ |
— |
|
|
|
$ |
1,107,582 |
|
|
Less: inter-segment
revenue |
— |
|
|
|
2,839 |
|
|
|
3,805 |
|
|
|
— |
|
|
|
6,644 |
|
|
Consolidated revenue |
212,001 |
|
|
|
421,871 |
|
|
|
467,066 |
|
|
|
— |
|
|
|
1,100,938 |
|
|
Gross profit (loss) |
7,081 |
|
|
|
36,349 |
|
|
|
61,413 |
|
|
|
(2,667 |
) |
|
|
102,176 |
|
|
Selling, general and
administrative expenses |
10,047 |
|
|
|
24,266 |
|
|
|
26,386 |
|
|
|
25,577 |
|
|
|
86,276 |
|
|
Intangible asset impairments
and restructuring costs |
27,625 |
|
|
|
22,914 |
|
|
|
1,066 |
|
|
|
920 |
|
|
|
52,525 |
|
|
Operating income (loss) |
$ |
(30,591 |
) |
|
|
$ |
(10,831 |
) |
|
|
$ |
33,961 |
|
|
|
$ |
(29,164 |
) |
|
|
$ |
(36,625 |
) |
|
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, 2021
The following table provides a summary of changes in our backlog
for the three months ended June 30, 2021:
|
Utility and Power Infrastructure |
|
Process and Industrial Facilities |
|
Storage and
Terminal Solutions |
|
Total |
|
(In thousands) |
Backlog as of March 31, 2021 |
$ |
203,300 |
|
|
|
$ |
155,430 |
|
|
|
$ |
179,607 |
|
|
|
$ |
538,337 |
|
|
Project awards |
19,381 |
|
|
|
39,237 |
|
|
|
40,505 |
|
|
|
99,123 |
|
|
Revenue recognized |
(52,638 |
) |
|
|
(59,890 |
) |
|
|
(62,371 |
) |
|
|
(174,899 |
) |
|
Backlog as of June 30, 2021 |
$ |
170,043 |
|
|
|
$ |
134,777 |
|
|
|
$ |
157,741 |
|
|
|
$ |
462,561 |
|
|
Book-to-bill ratio(1) |
0.4 |
|
|
|
0.7 |
|
|
|
0.6 |
|
|
|
0.6 |
|
|
__________
(1) Calculated by dividing
project awards by revenue recognized.
Twelve Months Ended June 30, 2021
The following table provides a summary of changes in our backlog
for the twelve months ended June 30, 2021:
|
Utility and Power Infrastructure |
|
Process and Industrial Facilities |
|
Storage and
Terminal Solutions |
|
Total |
|
(In thousands) |
Backlog as of June 30, 2020 |
$ |
272,816 |
|
|
|
$ |
145,725 |
|
|
|
$ |
339,924 |
|
|
|
$ |
758,465 |
|
|
Project awards |
107,279 |
|
|
|
188,969 |
|
|
|
155,465 |
|
|
|
451,713 |
|
|
Other adjustment(1) |
— |
|
|
|
— |
|
|
|
(74,219 |
) |
|
|
(74,219 |
) |
|
Revenue recognized |
(210,052 |
) |
|
|
(199,917 |
) |
|
|
(263,429 |
) |
|
|
(673,398 |
) |
|
Backlog as of June 30,
2021 |
$ |
170,043 |
|
|
|
$ |
134,777 |
|
|
|
$ |
157,741 |
|
|
|
$ |
462,561 |
|
|
Book-to-bill ratio(2) |
0.5 |
|
|
|
0.9 |
|
|
|
0.6 |
|
|
|
0.7 |
|
|
__________
(1) The other
adjustment in the Storage and Terminal Solutions segment was due to
a customer's decision not to renew our existing LNTP for a storage
tank capital project. We were paid for all work performed on the
project. This project is still active and we will be required to
update pricing when the customer makes its final investment
decision, which we expect will occur in fiscal
2022.(2) Calculated by dividing
project awards by revenue recognized.
Non-GAAP Financial Measures
In order to more clearly depict our core
profitability, the following tables present our operating results
after certain adjustments:
Reconciliation of Adjusted Net Income
(Loss) and Diluted Earnings (Loss) per Common
Share(1)(In thousands, except per
share data)
|
Three Months Ended |
|
Twelve Months Ended |
|
June 30, 2021 |
|
June 30, 2020 |
|
June 30, 2021 |
|
June 30, 2020 |
Net loss, as reported |
$ |
(10,723 |
) |
|
|
$ |
(5,722 |
) |
|
|
$ |
(31,224 |
) |
|
|
$ |
(33,074 |
) |
|
Restructuring costs incurred |
171 |
|
|
|
7,451 |
|
|
|
6,756 |
|
|
|
14,010 |
|
|
Goodwill and intangible asset impairments |
— |
|
|
|
— |
|
|
|
— |
|
|
|
38,515 |
|
|
Tax impact of adjustments and other net tax items |
(44 |
) |
|
|
(1,907 |
) |
|
|
(1,739 |
) |
|
|
(8,644 |
) |
|
Adjusted net income
(loss) |
$ |
(10,596 |
) |
|
|
$ |
(178 |
) |
|
|
$ |
(26,207 |
) |
|
|
$ |
10,807 |
|
|
|
|
|
|
|
|
|
|
Loss per fully diluted share,
as reported |
$ |
(0.40 |
) |
|
|
$ |
(0.22 |
) |
|
|
$ |
(1.18 |
) |
|
|
$ |
(1.24 |
) |
|
Adjusted earnings (loss) per
fully diluted share |
$ |
(0.40 |
) |
|
|
$ |
(0.01 |
) |
|
|
$ |
(0.99 |
) |
|
|
$ |
0.40 |
|
|
__________
(1) This table
presents non-GAAP financial measures of our adjusted net income
(loss) and adjusted diluted earnings (loss) per common share for
the fourth quarters and fiscal years of 2021 and 2020. The most
directly comparable financial measures are net loss and net loss
per diluted share, respectively, presented in the Consolidated
Statements of Income. We have presented these non-GAAP financial
measures because we believe they more clearly depict our core
operating results during the periods presented and provide a more
comparable measure of our operating results to other companies
considered to be in similar businesses. Since adjusted net income
(loss) and adjusted diluted earnings (loss) per common share are
not measures of performance calculated in accordance with GAAP,
they should be considered in addition to, rather than as a
substitute for, the most directly comparable GAAP financial
measures.
Reconciliation of Net Income (Loss) to
Adjusted EBITDA(1)
|
Three Months Ended |
|
Twelve Months Ended |
|
June 30, 2021 |
|
June 30, 2020 |
|
June 30, 2021 |
|
June 30, 2020 |
|
(in thousands) |
Net loss |
$ |
(10,723 |
) |
|
|
$ |
(5,722 |
) |
|
|
$ |
(31,224 |
) |
|
|
$ |
(33,074 |
) |
|
Goodwill and other intangible
asset impairment |
— |
|
|
|
— |
|
|
|
— |
|
|
|
38,515 |
|
|
Restructuring costs |
171 |
|
|
|
7,451 |
|
|
|
6,756 |
|
|
|
14,010 |
|
|
Stock-based compensation |
1,743 |
|
|
|
1,762 |
|
|
|
8,156 |
|
|
|
9,877 |
|
|
Interest expense |
504 |
|
|
|
366 |
|
|
|
1,559 |
|
|
|
1,597 |
|
|
Benefit for federal, state and
foreign income taxes |
(6,037 |
) |
|
|
(1,865 |
) |
|
|
(12,039 |
) |
|
|
(3,570 |
) |
|
Depreciation and
amortization |
4,219 |
|
|
|
4,736 |
|
|
|
17,858 |
|
|
|
19,124 |
|
|
Adjusted EBITDA |
$ |
(10,123 |
) |
|
|
$ |
6,728 |
|
|
|
$ |
(8,934 |
) |
|
|
$ |
46,479 |
|
|
__________
(1) This table
presents Adjusted EBITDA, which we define as net income (loss)
before impairment of goodwill and other intangible assets,
restructuring costs, stock-based compensation expense, interest
expense, income taxes, 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 income
(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 income (loss), the most
directly comparable GAAP financial measure, users of this financial
information should consider the type of events and transactions
that are excluded. Adjusted EBITDA has certain material limitations
as follows:
- It does not include impairments to goodwill and other
intangible assets. While impairments to intangible assets 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 we incurred and are oftentimes cash
expenses. Therefore, any measure that excludes restructuring costs
has material limitations.
- It does not include stock-based compensation. 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 release vested shares out of our treasury
stock, which has historically been replenished by using cash to
periodically repurchase our stock. Therefore, any measure that
excludes stock-based compensation has material limitations.
- 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 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.
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