Matrix Service Company Announces Fiscal 2022 Fourth Quarter and Full Year Results
Matrix Service Company (Nasdaq: MTRX) reported a 13% revenue increase in Q4 2022, totaling $200.7 million, with full-year revenue at $707.8 million. Project awards reached $196 million in Q4, achieving a book-to-bill ratio of 1.0 and a full-year ratio of 1.2. Despite a backlog growth of 27%, gross margins were low, with Q4 at 0.4%. The company recorded a net income of $13.5 million, or $0.50 per diluted share. A significant sale of a facility generated a $32.4 million gain. Liquidity stood at $94.8 million, contributing to an optimistic outlook for future growth.
- Q4 2022 revenue increased by 13% to $200.7 million.
- Full-year project awards totaled $834.7 million, leading to a book-to-bill ratio of 1.2.
- Backlog increased by 27% to $589.5 million compared to the start of the fiscal year.
- Net income of $13.5 million in Q4, compared to a net loss of $10.7 million in Q4 2021.
- Generated a gain of $32.4 million from the sale of a facility.
- Gross margin for Q4 2022 was only 0.4%, impacted by competitive market conditions and increased project costs.
- Adjusted net loss of $13.8 million, or $0.52 per diluted share, in Q4 2022.
- Utility and Power Infrastructure segment reported a gross margin loss of (3.1)%.
TULSA, Okla., Oct. 07, 2022 (GLOBE NEWSWIRE) -- Matrix Service Company (Nasdaq: MTRX) today reported its financial results for the fourth quarter and year ended June 30, 2022.
Key highlights:
- Fourth quarter revenue increased
13% to$200.7 million compared to$177.0 million in the third quarter; full year revenue of$707.8 million $196.0 million of project awards during the fourth quarter, resulting in a book-to-bill ratio of 1.0; full year project awards of$834.7 million, resulting in a book-to-bill ratio of 1.2 for the year- Backlog of
$589.5 million, a27% increase since the start of the fiscal year, excluding subsequent award for a 600-to-800-thousand barrel ethylene tank for a long-term Gulf Coast client - Earnings per fully diluted share of
$0.50 in the fourth quarter; adjusted loss per fully diluted share of$0.52 (1) excluding gain on the sale of facilities and other non-cash items - Liquidity of
$94.8 million as of June 30, 2022 - Subsequent to the end of the quarter, signed MOU with Korea Gas to develop large-scale hydrogen storage
“The revenue growth, expanding opportunity pipeline, and the continued strong award cycle reflect the growing momentum in Matrix’s business, as we move through the challenges experienced over the past two years. While still impacted by lower than historical revenue, we ended the year with our strongest revenue quarter since March 2020. Our book-to-bill was 1.0 and 1.2 for the quarter and fiscal year, respectively. The dollar value of project awards year-over-year increased
“We believe we are near an inflection point, and that our competitive strengths and strong brand will allow us to realize the full benefits of the business transformation that we are implementing. This optimization will ensure our evolving business is best positioned to take advantage of the significant opportunities ahead,” concluded Mr. Hewitt.
Earnings Summary
Revenue in the fourth quarter of fiscal 2022 was
In the Storage and Terminals Solutions segment, a gross margin of
In the Process and Industrial Facilities segment, fourth quarter gross margin of
In the Utility and Power Infrastructure segment, fourth quarter gross margin (loss) was (3.1)% as a result of increased forecasted costs to complete a large capital project which is now in start-up and commissioning. Additionally, gross margins were impacted by under recovery of construction overhead costs and lower margins on competitively bid work.
To take advantage of elevated real estate market valuations, we sold our regional office and fabrication and warehouse facility located in Orange, California during the fourth quarter for net proceeds of
We continued to implement our previously announced business improvement plan during the fourth quarter. The current phase of our plan is focused on the consolidation of transactional services, procedures and operational talent to increase our efficiency, execution quality, competitiveness, and profitability. To date, we estimate that we have reduced our cost structure in excess of
Our effective tax rate for the three months ended June 30, 2022 was
For the three months ended June 30, 2022, we had net income of
Backlog
Our backlog as of June 30, 2022 was
The table below summarizes our awards, book-to-bill ratios and backlog by segment for our fourth fiscal quarter and full year (in thousands, except for book-to-bill ratios):
| Three Months Ended | Twelve Months Ended | Backlog as of June 30, 2022 | |||||||||||
| Segment: | Awards | Book-to-Bill(1) | Awards | Book-to-Bill(1) | |||||||||
| Utility and Power Infrastructure | $ | 36,461 | 0.7 | $ | 152,109 | 0.7 | $ | 102,059 | |||||
| Process and Industrial Facilities | 97,215 | 1.1 | 412,358 | 1.6 | 292,287 | ||||||||
| Storage and Terminal Solutions | 62,276 | 1.0 | 270,212 | 1.2 | 195,114 | ||||||||
| Total | $ | 195,952 | 1.0 | $ | 834,679 | 1.2 | $ | 589,460 | |||||
___________
(1) Calculated by dividing project awards by revenue recognized.
Financial Position
At June 30, 2022, we had total liquidity of
(1)Non-GAAP Financial Measure
Adjusted loss per share is a non-GAAP financial measure that excludes restructuring costs, goodwill impairment, gain on sale of facilities, the accelerated amortization of deferred debt amendment fees associated with the prior credit agreement, and the financial impact of a valuation allowance placed on our deferred tax assets. See the Non-GAAP Financial Measures section included at the end of this release for a reconciliation to earnings (loss) per share.
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 11:30 a.m. (Eastern) / 10:30 a.m. (Central) on Friday, October 7, 2022, 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.
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. Cavanah
Vice President and CFO
T: 918-838-8822
Email:kcavanah@matrixservicecompany.com
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 | Twelve Months Ended | |||||||||||||||
| June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||
| Revenue | $ | 200,719 | $ | 174,899 | $ | 707,780 | $ | 673,398 | ||||||||
| Cost of revenue | 199,861 | 173,357 | 708,986 | 640,633 | ||||||||||||
| Gross profit (loss) | 858 | 1,542 | (1,206 | ) | 32,765 | |||||||||||
| Selling, general and administrative expenses | 18,098 | 17,725 | 67,690 | 69,756 | ||||||||||||
| Goodwill impairment | — | — | 18,312 | — | ||||||||||||
| Restructuring costs | 924 | 171 | 646 | 6,756 | ||||||||||||
| Operating loss | (18,164 | ) | (16,354 | ) | (87,854 | ) | (43,747 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (246 | ) | (504 | ) | (2,951 | ) | (1,559 | ) | ||||||||
| Interest income | 21 | 30 | 90 | 126 | ||||||||||||
| Other | 31,898 | 68 | 32,432 | 1,917 | ||||||||||||
| Income (loss) before income tax expense | 13,509 | (16,760 | ) | (58,283 | ) | (43,263 | ) | |||||||||
| Provision (benefit) for federal, state and foreign income taxes | 53 | (6,037 | ) | 5,617 | (12,039 | ) | ||||||||||
| Net income (loss) | $ | 13,456 | $ | (10,723 | ) | $ | (63,900 | ) | $ | (31,224 | ) | |||||
| Basic income (loss) per common share | $ | 0.50 | $ | (0.40 | ) | $ | (2.39 | ) | $ | (1.18 | ) | |||||
| Diluted income (loss) per common share | $ | 0.50 | $ | (0.40 | ) | $ | (2.39 | ) | $ | (1.18 | ) | |||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | 26,791 | 26,538 | 26,733 | 26,451 | ||||||||||||
| Diluted | 26,870 | 26,538 | 26,733 | 26,451 | ||||||||||||
Matrix Service Company
Consolidated Balance Sheets
(In thousands)
| June 30, 2022 | June 30, 2021 | |||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 52,371 | $ | 83,878 | ||
| Accounts receivable, less allowances (2022 - | 153,879 | 148,030 | ||||
| Costs and estimated earnings in excess of billings on uncompleted contracts | 44,752 | 30,774 | ||||
| Inventories | 9,974 | 7,342 | ||||
| Income taxes receivable | 13,547 | 16,965 | ||||
| Other current assets | 12,889 | 4,230 | ||||
| Total current assets | 287,412 | 291,219 | ||||
| Restricted cash | 25,000 | — | ||||
| Property, plant and equipment - net | 53,869 | 69,407 | ||||
| Operating lease right-of-use assets | 22,067 | 22,412 | ||||
| Goodwill | 42,135 | 60,636 | ||||
| Other intangible assets, net of accumulated amortization | 4,796 | 6,614 | ||||
| Deferred income taxes | — | 5,295 | ||||
| Other assets, non-current | 5,514 | 11,973 | ||||
| Total assets | $ | 440,793 | $ | 467,556 | ||
Matrix Service Company
Consolidated Balance Sheets (continued)
(In thousands, except share data)
| June 30, 2022 | June 30, 2021 | |||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 74,886 | $ | 60,920 | ||||
| Billings on uncompleted contracts in excess of costs and estimated earnings | 65,106 | 53,832 | ||||||
| Accrued wages and benefits | 21,526 | 21,008 | ||||||
| Accrued insurance | 6,125 | 6,568 | ||||||
| Operating lease liabilities | 5,715 | 5,747 | ||||||
| Other accrued expenses | 4,427 | 5,327 | ||||||
| Total current liabilities | 177,785 | 153,402 | ||||||
| Deferred income taxes | 26 | 34 | ||||||
| Operating lease liabilities | 19,904 | 20,771 | ||||||
| Borrowings under asset-backed credit facility | 15,000 | — | ||||||
| Other liabilities, non-current | 372 | 7,810 | ||||||
| Total liabilities | 213,087 | 182,017 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of June 30, 2022 and June 30, 2021; 26,790,514 and 26,549,438 shares outstanding as of June 30, 2022 and June 30, 2021, respectively | 279 | 279 | ||||||
| Additional paid-in capital | 139,854 | 137,575 | ||||||
| Retained earnings | 111,278 | 175,178 | ||||||
| Accumulated other comprehensive income | (8,175 | ) | (6,749 | ) | ||||
| 243,236 | 306,283 | |||||||
| Treasury stock, at cost — 1,097,703 and 1,338,779 shares as of June 30, 2022 and June 30, 2021, respectively | (15,530 | ) | (20,744 | ) | ||||
| Total stockholders' equity | 227,706 | 285,539 | ||||||
| Total liabilities and stockholders’ equity | $ | 440,793 | $ | 467,556 | ||||
Results of Operations
(In thousands)
| Utility and Power Infrastructure | Process and Industrial Facilities | Storage and Terminal Solutions | Corporate | Total | ||||||||||||||||
| Three Months Ended June 30, 2022 | ||||||||||||||||||||
| Gross revenue | $ | 48,795 | $ | 91,656 | $ | 61,086 | $ | — | $ | 201,537 | ||||||||||
| Less: inter-segment revenue | — | — | 818 | — | 818 | |||||||||||||||
| Consolidated revenue | 48,795 | 91,656 | 60,268 | — | 200,719 | |||||||||||||||
| Gross profit (loss) | (1,497 | ) | 2,607 | 478 | (730 | ) | 858 | |||||||||||||
| Selling, general and administrative expenses | 2,662 | 3,754 | 4,434 | 7,248 | 18,098 | |||||||||||||||
| Restructuring costs | 41 | 28 | 37 | 818 | 924 | |||||||||||||||
| Operating loss | $ | (4,200 | ) | $ | (1,175 | ) | $ | (3,993 | ) | $ | (8,796 | ) | $ | (18,164 | ) | |||||
| 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 | ) | ||||||
| Twelve Months Ended June 30, 2022 | ||||||||||||||||||||
| Gross revenue | $ | 220,093 | $ | 258,497 | $ | 236,260 | $ | — | $ | 714,850 | ||||||||||
| Less: inter-segment revenue | — | 3,649 | 3,421 | — | 7,070 | |||||||||||||||
| Consolidated revenue | 220,093 | 254,848 | 232,839 | — | 707,780 | |||||||||||||||
| Gross profit (loss) | (8,586 | ) | 9,270 | 262 | (2,152 | ) | (1,206 | ) | ||||||||||||
| Selling, general and administrative expenses | 11,771 | 12,506 | 17,284 | 26,129 | 67,690 | |||||||||||||||
| Goodwill impairment and restructuring costs | 2,746 | 6,867 | 7,330 | 2,015 | 18,958 | |||||||||||||||
| Operating loss | $ | (23,103 | ) | $ | (10,103 | ) | $ | (24,352 | ) | $ | (30,296 | ) | $ | (87,854 | ) | |||||
| 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 | ) | |||||
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, 2022
The following table provides a summary of changes in our backlog for the three months ended June 30, 2022:
| Utility and Power Infrastructure | Process and Industrial Facilities | Storage and Terminal Solutions | Total | |||||||||||||
| (In thousands) | ||||||||||||||||
| Backlog as of March 31, 2022 | $ | 114,393 | $ | 286,728 | $ | 193,106 | $ | 594,227 | ||||||||
| Project awards | 36,461 | 97,215 | 62,276 | 195,952 | ||||||||||||
| Revenue recognized | (48,795 | ) | (91,656 | ) | (60,268 | ) | (200,719 | ) | ||||||||
| Backlog as of June 30, 2022 | $ | 102,059 | $ | 292,287 | $ | 195,114 | $ | 589,460 | ||||||||
| Book-to-bill ratio(1) | 0.7 | 1.1 | 1.0 | 1.0 | ||||||||||||
___________
(1) Calculated by dividing project awards by revenue recognized.
Twelve Months Ended June 30, 2022
The following table provides a summary of changes in our backlog for the twelve months ended June 30, 2022:
| Utility and Power Infrastructure | Process and Industrial Facilities | Storage and Terminal Solutions | Total | |||||||||||||
| (In thousands) | ||||||||||||||||
| Backlog as of June 30, 2021 | $ | 170,043 | $ | 134,777 | $ | 157,741 | $ | 462,561 | ||||||||
| Project awards | 152,109 | 412,358 | 270,212 | 834,679 | ||||||||||||
| Revenue recognized | (220,093 | ) | (254,848 | ) | (232,839 | ) | (707,780 | ) | ||||||||
| Backlog as of June 30, 2022 | $ | 102,059 | $ | 292,287 | $ | 195,114 | $ | 589,460 | ||||||||
| Book-to-bill ratio(1) | 0.7 | 1.6 | 1.2 | 1.2 | ||||||||||||
___________
(1) 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 Net Income (Loss) to Adjusted Net Loss(1)
(In thousands, except per share data)
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||
| Net income (loss), as reported | $ | 13,456 | $ | (10,723 | ) | $ | (63,900 | ) | $ | (31,224 | ) | |||||
| Restructuring costs incurred | 924 | 171 | 646 | 6,756 | ||||||||||||
| Goodwill and intangible asset impairments | — | — | 18,312 | — | ||||||||||||
| Gain on sale of facilities(2) | (32,392 | ) | — | (32,392 | ) | — | ||||||||||
| Accelerated amortization of deferred debt amendment fees(3) | — | — | 1,518 | — | ||||||||||||
| Deferred tax valuation allowance(4) | (3,926 | ) | — | 17,943 | — | |||||||||||
| Tax impact of adjustments and other net tax items | 8,100 | (44 | ) | 4,464 | (1,739 | ) | ||||||||||
| Adjusted net loss | $ | (13,838 | ) | $ | (10,596 | ) | $ | (53,409 | ) | $ | (26,207 | ) | ||||
| Earnings (loss) per fully diluted share, as reported | $ | 0.50 | $ | (0.40 | ) | $ | (2.39 | ) | $ | (1.18 | ) | |||||
| Adjusted loss per fully diluted share | $ | (0.52 | ) | $ | (0.40 | ) | $ | (2.00 | ) | $ | (0.99 | ) | ||||
____________
(1) This table presents non-GAAP financial measures of our adjusted net loss and adjusted loss per fully diluted share for the fourth quarters and fiscal years of 2022 and 2021. The most directly comparable financial measures are net income (loss) and earnings (loss) per fully 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 loss and adjusted loss per fully diluted 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.
(2) Gain on sale of property, plant and equipment included a
(3) Interest expense in fiscal 2022 included
(4) In determining the need for a valuation allowance on deferred tax assets, the accounting standards provide that the existence of a cumulative loss over a three-year period generally precludes the use of management’s projections of future taxable income. Consequently, we have recorded a full valuation allowance against the deferred tax assets in the U.S. taxable jurisdiction in the amount of
Reconciliation of Net Income (Loss) to Adjusted EBITDA(1)
| Three Months Ended | Twelve Months Ended | ||||||||||||||
| June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | ||||||||||||
| (in thousands) | |||||||||||||||
| Net income (loss) | $ | 13,456 | $ | (10,723 | ) | $ | (63,900 | ) | $ | (31,224 | ) | ||||
| Goodwill impairment | — | — | 18,312 | — | |||||||||||
| Gain on sale of facilities(2) | (32,392 | ) | — | (32,392 | ) | — | |||||||||
| Restructuring costs | 924 | 171 | 646 | 6,756 | |||||||||||
| Stock-based compensation | 2,054 | 1,743 | 7,877 | 8,156 | |||||||||||
| Interest expense | 246 | 504 | 2,951 | 1,559 | |||||||||||
| Provision (benefit) for federal, state and foreign income taxes | 53 | (6,037 | ) | 5,617 | (12,039 | ) | |||||||||
| Depreciation and amortization | 3,697 | 4,219 | 15,254 | 17,858 | |||||||||||
| Adjusted EBITDA | $ | (11,962 | ) | $ | (10,123 | ) | $ | (45,635 | ) | $ | (8,934 | ) | |||
____________
(1) This table presents Adjusted EBITDA, which we define as net loss before goodwill and other intangible asset impairments, restructuring costs, gain on sale of facilities, stock-based compensation, interest expense, 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 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. Our non-GAAP performance measure, 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 gain on sale of facilities. While the sale occurred outside the normal course of business and similar sales are not expected to be recurring or sustainable, 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 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.
(2) Gain on sale of property, plant and equipment included a
FAQ
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