MATRIX SERVICE CO
For the period ended Jun 30, 2026. Filed Sep 3, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2026 · Filed Sep 3, 2026
MTRX$9.64+11.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2025-06-30; filed 2025-09-10.
0000866273-25-000069
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2026-06-30; filed 2026-09-03.
0000866273-26-000057
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 130 previous paragraphs and 123 current paragraphs.
67 unchanged; 37 reworded; 19 added; 26 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 9 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (19)
Current report
•Utility and Power Infrastructure: delivers comprehensive construction, maintenance, upgrades and fabrication services for power generation facilities and power infrastructure systems for a variety of customers, including public and private utilities, energy producers and data center customers. We also deliver integrated EPC, fabrication, and upgrade services for LNG peak shaving facilities.
Current report
•Process and Industrial Facilities: delivers engineering, construction, maintenance, and repair services across diverse heavy industrial and energy transition markets, including midstream and downstream energy, chemicals, mining and minerals, renewable fuels, and hydrogen. We also engineer and construct highly specialized infrastructure, notably thermal vacuum test chambers for the aerospace and defense sectors.
Current report
Effective July 1, 2026, Shawn P. Payne assumed the role of President and Chief Executive Officer. His appointment reflects the Board's commitment to improving performance and delivering sustainable growth and profitability.
Current report
While we believe Matrix is well positioned to benefit from significant investment across its core and emerging markets, the Company's historical results have not consistently reflected the strength of its capabilities, customer relationships, and market opportunities. To address this, Mr. Payne led the development and implementation of Matrix's WIN, EXECUTE, DELIVER strategic framework, which is designed to accelerate growth, strengthen project execution, enhance organizational efficiency, and deliver sustainable profitability.
Current report
Under his leadership, Matrix is focused on converting its competitive advantages into stronger financial performance, improved operational outcomes, and long-term shareholder value.
Current report
Under our Win strategy, we continue to focus on securing projects that align with our capabilities, experience, and demonstrated track record of execution. We are focused on growing and diversifying our revenue base through expansion into attractive end markets, broadening relationships with existing customers, and accelerating new customer acquisition efforts across North America. We are pursuing opportunities across our traditional energy and industrial infrastructure markets, including LNG and NGL storage and terminal infrastructure, while selectively expanding into attractive growth markets such as power generation, utility infrastructure, data center-related power infrastructure, and mining and minerals. We believe demand in these markets is supported by increasing domestic electricity demand, growth in data center development, investment in power generation and related infrastructure, and continued demand for critical minerals essential to energy, technology, defense, and AI-related infrastructure. We are also expanding our geographic reach across strategically important regions and pursuing additional construction-only opportunities that complement our full-service capabilities and broaden the range of project delivery models we offer customers. We believe these efforts, combined with our focus on strengthening existing customer relationships and expanding our customer base, contributed to fiscal 2026 revenue growth of 14% to $873.6 million compared to $769.3 million in fiscal 2025.
Current report
Under our Execute strategy, our focus remains on delivering projects safely, efficiently, and with a high degree of quality while strengthening profitability and operational performance. During fiscal 2026, we advanced a variety of initiatives designed to improve project execution and drive greater consistency across the enterprise, including enhancing project proposal and contracting discipline, strengthening project controls and change management processes, improving engineering and construction execution, reinforcing quality management systems, and further developing our safety culture and performance. We also continued efforts to streamline internal processes, refine organizational workflows, support continuous improvement initiatives across the enterprise, and reinforce accountability throughout the organization with a continued focus on execution, performance, and measurable outcomes. We believe these initiatives contributed to improved project outcomes and operating performance, as evidenced by an increase in gross margin to 7.3% in fiscal 2026 from 5.2% in fiscal 2025.
Current report
Under our Deliver strategy, we remain committed to converting profitable growth and operational improvements into sustainable value creation for shareholders. During fiscal 2026, we continued to benefit from actions taken to simplify the organization, streamline operations, and create a flatter and more efficient operating structure. These efforts contributed to a more efficient operating structure and improved performance across the enterprise. As a result, selling, general and administrative expenses declined 11% to $63.6 million in fiscal 2026 compared to $71.2 million in fiscal 2025. Combined with revenue growth and improved profitability, we believe these results demonstrate meaningful progress in executing our strategy, strengthening financial performance, and positioning the Company to pursue both organic and acquisition-related growth opportunities. Supported by a strong balance sheet and liquidity, we believe Matrix remains well positioned to create sustainable value for all stakeholders.
Current report
(2)Previous project awards removed from backlog. During the first quarter of fiscal 2026, backlog was adjusted to reflect the removal of two projects. Backlog in the Utility and Power Infrastructure segment was impacted by the removal of an award originally added to backlog in the fourth quarter of fiscal 2025. Our unwillingness to accept an increased risk profile caused the client to change their award decision. Our backlog in the Process and Industrial Facilities segment was impacted by the removal of an award originally added to backlog in the third quarter of fiscal 2023. The project was removed from backlog as the ultimate customer is now planning to change the project execution and sourcing strategy for the project. While we ultimately may perform some of this work, we determined inclusion of the award in backlog was no longer appropriate.
Current report
In the Process and Industrial Facilities segment, we booked $185.3 million of project awards in fiscal 2026, including a major mining construction project in the western United States. We continue to see increasing opportunities in chemicals, renewable fuels, and refinery maintenance and turnarounds. Additionally, after an extended period of limited investment, activity in the U.S. non-ferrous mining sector has increased significantly, supported by demand growth in copper and higher gold prices, as well as policy initiatives related to critical minerals.
Current report
Selling, general and administrative expenses - The decrease in selling, general and administrative ("SG&A") expenses of $7.6 million, or 11%, is due in part to cost reductions resulting from our organizational restructuring plan, which decreased salaries and wages expense as well as facilities costs. Stock compensation also decreased by $1.8 million, due in part to certain executive separations occurring during the third quarter of fiscal 2026. Additionally, SG&A decreased $1.8 million associated with the variable accounting for cash-settled stock-based compensation, primarily as a result of declines in our stock price.
Current report
Storage and Terminal Solutions gross profit increased by $13.2 million, or 90%, in fiscal 2026 compared to fiscal 2025. The segment gross margin was 6.1% for fiscal 2026 compared to 4.0% for fiscal 2025. Higher revenue volumes improved overhead recovery. In addition, in the fourth quarter of fiscal 2025, we lowered our recovery expectations on a legacy project completed in fiscal 2021 that was in arbitration which resulted in a $6.4 million decrease to gross margin. The matter was fully resolved in fiscal 2026.
Current report
•Accounts payable increased by $27.7 million from fiscal 2025, which increased cash flows from operating activities. These operating liabilities can fluctuate based on business volumes, the timing of vendor payments; accruals; and other timing differences.
Current report
•Changes in other operating assets and liabilities decreased cash flows from operating activities by $2.1 million. These operating assets and liabilities can fluctuate based on business volumes and timing of certain cash receipts and payments.
Current report
•Changes in other operating assets and liabilities increased cash flows from operating activities by $5.3 million. These operating assets and liabilities can fluctuate based on business volumes and timing of certain cash receipts and payments.
Current report
Investing activities used $3.5 million and $7.4 million of cash in fiscal 2026 and fiscal 2025, respectively. Capital expenditures were $5.5 million and $7.7 million in fiscal 2026 and fiscal 2025, respectively. During fiscal 2026, we also received $1.9 million of proceeds from the sale of property, plant and equipment, primarily associated with our transmission and distribution service line which we began winding down in the fourth quarter of fiscal 2025.
Current report
Financing activities used $4.2 million and $1.0 million of cash in fiscal 2026 and fiscal 2025, respectively, primarily due to payments of $4.2 million and $1.2 million respectively, to satisfy tax withholding obligations associated with stock-based compensation.
Current report
Deferred Income Tax Assets
Current report
The Company regularly evaluates the need for valuation allowances related to deferred tax assets for which future realization is uncertain. The Company performs this evaluation quarterly. In assessing the realizability of deferred tax assets, it must consider whether it is more likely than not some portion, or all, of the deferred tax assets will not be realized. The Company considers all available evidence, both positive and negative, in determining whether a valuation allowance is required. Such evidence includes the scheduled reversal of deferred tax liabilities, projected future taxable income, taxable income in prior carryback years and tax planning strategies in making this assessment, and judgment is required in considering the relative weight of negative and positive evidence.
Removed paragraphs (26)
Previous report
•Utility and Power Infrastructure: primarily consists of engineering, procurement, fabrication, and construction services to support growing demand for LNG utility peak shaving facilities. We also perform power delivery work for public and private utilities, including construction of new substations, upgrades of existing substations, and maintenance. We also provide construction services to a variety of power generation facilities, including natural gas fired facilities in simple or combined cycle configurations.
Previous report
•Process and Industrial Facilities: primarily consists of plant maintenance, repair, and turnarounds in the downstream and midstream markets for energy clients including refining and processing of crude oil, fractionating, and marketing of natural gas and natural gas liquids. We also perform engineering, procurement, fabrication, and construction for refinery upgrades and retrofits for renewable fuels, including hydrogen processing, production, loading and distribution facilities. We also engineer and construct thermal vacuum test chambers for aerospace and defense industries and other infrastructure for industries including chemicals, petrochemical, sulfur, mining and minerals primarily in the extraction of non-ferrous metals, cement, agriculture, wastewater treatment facilities and other industrial customers.
Previous report
Operating activity increased each quarter during fiscal 2025 as quarterly revenues grew from $165.6 million in the first quarter of fiscal 2025 to $216.4 million in the fourth quarter of fiscal 2025, an increase of 31% and the highest levels since the third quarter of fiscal 2020, which marked the beginning of the COVID-19 pandemic. The increase was the result of advancing work on several multiyear projects currently in backlog.
Previous report
Project awards during fiscal 2025 were $726.0 million, resulting in a current year book-to-bill ratio of 0.9x, and maintaining our backlog at near-record levels of $1.4 billion. Award activity was driven by our Storage and Terminal solutions segment, and included the award of a large specialty storage project. The market drivers for each of our segments are strong and include increased oil and gas demand, the clean energy transition, low-cost feed stock, increased power demands associated with data centers, industrial reshoring/onshoring, grid reliability and electrical supply assurance. As a result, we believe we will have strong award activity in the coming year. While our award activity during the year was strong, heightened macroeconomic uncertainty and the evolving impact of U.S. trade policy on infrastructure economics has impacted the timing of customer decisions in the near term. We believe customer delays in project starts and final investment decisions to be a short-term disruption, while an overall favorable regulatory environment for our customers underpins long-term momentum for our business.
Previous report
We continue to sharpen and better align our business for the current and coming marketplace. Accordingly, we have consolidated certain aspects of the business to further improve our performance and create a flatter, leaner management structure. In addition, we continue to evaluate our business lines and, where appropriate, reallocate resources to those businesses that present the best opportunities. We remain focused on delivering sustainable, long-term shareholder value by building a resilient, growth-oriented platform aligned with the evolving needs of our customers. We believe actions taken in the fourth quarter of fiscal 2025 and the first quarter of fiscal 2026 will reduce our overall cost structure, improving our overhead recovery and operating leverage.
Previous report
(2)Backlog was reduced as a result of the closure of a customer's facility. This customer has historically represented less than 1% of our consolidated revenues.
Previous report
In the Process and Industrial Facilities segment, we booked $172.9 million of project awards in fiscal 2025, and were notified of a five-year renewal of a refinery maintenance contract. We continue to see demand for thermal vacuum chambers in the coming quarters, as well as increasing opportunities in mining and minerals, chemicals, low carbon projects and refinery turnarounds.
Previous report
Selling, general and administrative expenses - SG&A expenses were consistent with prior year.
Previous report
Interest expense - Thedecrease in interest expense of $0.6 million, or 54%, is primarily due to lower average outstanding borrowings as the Company repaid all outstanding borrowings under its revolving credit facility during fiscal 2024.
Previous report
Other income -Thedecrease in other income of $5.0 million, is primarily due to gains on sales of assets recorded during fiscal 2024. In the first quarter of fiscal 2024, we recognized a gain of $2.5 million on the sale of a previously utilized facility in Burlington, Ontario. We received $2.5 million in net proceeds from the sale. During the second quarter of fiscal 2024, we recognized a gain of $2.0 million from the sale of a facility in Catoosa, Oklahoma for $2.7 million in net proceeds. The facility was previously utilized for our industrial cleaning business, which was sold during the fourth quarter of fiscal 2023.
Previous report
Storage and Terminal Solutions gross profit increased by $3.4 million, or 30%, in fiscal 2025 compared to fiscal 2024. The segment gross margin was 4.0% for fiscal 2025 compared to 4.1% for fiscal 2024. Gross margin in fiscal 2025 compared to fiscal 2025 reflects improved operating leverage resulting from higher revenues. This improved leverage was offset in fiscal 2025 by lower than anticipated labor productivity on a crude terminal project, which resulted in a reduction in gross profit during the year of $5.1 million. This project was completed in early fiscal 2026. Additionally, gross profit was negatively impacted by a $6.4 million reduction in revenue related to a legacy project completed in fiscal 2021 discussed above.
Previous report
(1)Includes $5.4 million of net proceeds in total from the sale of our Burlington, Ontario facility and Catoosa, Oklahoma facility that were disposed of in the first and second quarter of fiscal 2024, respectively. See Part II. Item 8, Financial Statements, Note 3 - Property, Plant and Equipment, for more information. The remaining asset sales comprised of equipment sold in the normal course of business.
Previous report
(1)Gain on sale of property, plant and equipment includes a $4.5 million total gain on the sale of our Burlington, Ontario facility and Catoosa, Oklahoma facility that were disposed of in the first quarter of fiscal 2024 and the second quarter of fiscal 2024, respectively. (see Part II. Item 8-Financial Statements and Supplementary Data, Note 3 - Property, Plant and Equipment, for more information.) The remaining gain on the sale of property, plant and equipment comprised of equipment sold in the normal course of business.
Previous report
•Inventories, income taxes receivable, prepaid expenses, other current assets, operating right-of-use lease assets and other assets, non-current, decreased $2.1 million from fiscal 2024, which increased cash flows from operating activities. These operating assets can fluctuate based on the timing of inventory builds and draw-downs, accrual and receipt of income taxes receivable; prepayments of certain expenses; lease commencement, passage of time, expiration, or termination of operating leases; business volumes; and other timing differences.
Previous report
•Accrued wages and benefits, accrued insurance, operating lease liabilities, other accrued expenses, and other liabilities, non-current increased $3.3 million from fiscal 2024, which increased cash flows from operating activities. These operating liabilities can fluctuate based on the timing of vendor payments; accruals; lease commencement, lease payments, expiration, or termination of operating leases; business volumes; and other timing differences.
Previous report
•Accounts payable decreased $10.4 million from fiscal 2023, which decreased cash flows from operating activities. These operating liabilities can fluctuate based on the timing of vendor payments; accruals; lease commencement, lease payments, expiration, or termination of operating leases; business volumes; and other timing differences.
Previous report
•Inventories, income taxes receivable, prepaid expenses, other current assets, operating right-of-use lease assets and other assets, non-current, decreased $4.9 million from fiscal 2023, which increased cash flows from operating activities. These operating assets can fluctuate based on the timing of inventory builds and draw-downs, accrual and receipt of income taxes receivable; prepayments of certain expenses; lease commencement, passage of time, expiration, or termination of operating leases; business volumes; and other timing differences.
Previous report
•Accrued wages and benefits, accrued insurance, operating lease liabilities, other accrued expenses, and other liabilities, non-current increased $3.0 million from fiscal 2023, which increased cash flows from operating activities. These operating liabilities can fluctuate based on the timing of vendor payments; accruals; lease commencement, lease payments, expiration, or termination of operating leases; business volumes; and other timing differences.
Previous report
Investing activities used $7.4 million of cash in fiscal 2025 due to capital expenditures associated with improvements at a fabrication facility in Bakersfield, California that we purchased in fiscal 2024, as well as the purchase of construction equipment to support our projects.
Previous report
Investing activities used $0.9 million of cash in fiscal 2024 due to capital expenditures partially offset by proceeds from asset sales. In the first quarter of fiscal 2024, we sold a previously utilized facility in Burlington, Ontario for $2.7 million in net proceeds. In the second quarter of fiscal 2024, we sold a facility in Catoosa, Oklahoma. We closed these previously utilized facilities as they were no longer strategic to the future of the business. In the third quarter of fiscal 2024 we purchased a fabrication facility in Bakersfield, California for $4.1 million to replace a facility currently being leased by the Company.
Previous report
Financing activities used $1.0 million of cash in fiscal 2025 primarily due to the repurchase of common stock for payment of statutory taxes due on equity-based compensation.
Previous report
Financing activities used $10.4 million of cash in fiscal 2024 primarily due to $10.0 million in advances and $20.0 million in net repayments under our ABL facility. As of June 30, 2024 and June 30, 2025, we had no outstanding borrowings under our ABL facility.
Previous report
Treasury Shares
Previous report
We had 277,731 treasury shares as of June 30, 2025 and intend to utilize these treasury shares in connection with equity awards under our stock incentive plans and for sales to the Employee Stock Purchase Plan.
Previous report
Income Taxes
Previous report
We use the asset and liability approach for financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances based on our judgments and estimates are established when necessary to reduce deferred tax assets to the amount expected to be realized in future operating results. Our estimates are based on facts and circumstances in existence as well as interpretations of existing tax regulations and laws applied to the facts and circumstances, with the help of professional tax advisors. Therefore, we estimate and provide for amounts of additional income taxes that may be assessed by the various taxing authorities.
Reworded paragraphs (37)
Previous wording
Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). GAAP represents a comprehensive set of accounting and disclosure rules and requirements, the application of which requires management judgments and estimates including, in certain circumstances, choices between acceptable GAAP alternatives. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions. Note 1 - Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Part II, Item 8 - Financial Statements and Supplementary Data in this Annual Report on Form 10-K, contains a comprehensive summary of our significant accounting policies. The following is a discussion of our most critical accounting policies, estimates, judgments and uncertainties that are inherent in our application of GAAP.
Current wording
Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). GAAP represents a comprehensive set of accounting and disclosure rules and requirements, the application of which requires management judgments and estimates including, in certain circumstances, choices between acceptable GAAP alternatives. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions. Note 1 - Business, Basis of Presentation and Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Part II, Item 8 - Financial Statements and Supplementary Data in this Annual Report on Form 10-K, contains a comprehensive summary of our significant accounting policies.
Previous wording
•Storage and Terminal Solutions: primarily consists of engineering, procurement, fabrication, and construction services related to cryogenic and other specialty tanks and terminals for LNG, NGLs, hydrogen, ammonia, propane, butane, liquid nitrogen/liquid oxygen, and liquid petroleum. We also perform work related to traditional aboveground crude oil and refined product storage tanks and terminals. This segment also includes terminal balance of plant work, truck and rail loading/offloading facilities, and marine structures as well as storage tank and terminal maintenance and repair. Finally, we manufacture and sell precision engineered specialty tank products, including geodesic domes, aluminum internal floating roofs, floating suction and skimmer systems, roof drain systems and floating roof seals.
Current wording
•Storage and Terminal Solutions: delivers integrated engineering, procurement and construction ("EPC") services, along with repair, maintenance and fabrication services for bulk liquid, cryogenic, and refrigerated storage and terminal facilities supporting both traditional and emerging energy markets, including LNG, NGLs, petroleum products, chemicals, hydrogen, and ammonia. We also manufacture and sell specialty, precision-engineered tank products, including geodesic domes, aluminum internal floating roofs, floating suction and skimmer systems, roof drain systems and floating roof seals.
Previous wording
Significant period to period changes in revenue, gross profits and operating results between fiscal 2025 and fiscal 2024 are discussed below on a consolidated basis for each segment. A discussion of results of operations changes between fiscal 2024 and fiscal 2023 is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended June 30, 2024, which was filed with the SEC on September 10, 2024.
Current wording
Significant period to period changes in revenue, gross profits and operating results between fiscal 2026 and fiscal 2025 are discussed below on a consolidated basis and for each segment. A discussion of results of operations changes between fiscal 2025 and fiscal 2024 is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended June 30, 2025, which was filed with the SEC on September 10, 2025.
Previous wording
For long-term maintenance contracts with no minimum commitments and other established customer agreements, we include only the amounts that we expect to recognize as revenue over the next 12 months. For arrangements in which we have received a LNTP, we include the entire scope of work in our backlog if we conclude that the likelihood of the full project proceeding is high. For all other arrangements, we calculate backlog as the estimated contract amount less revenue recognized as of the reporting date. Backlog differs from the amount of our remaining performance obligations, which are described in Note 2 - Revenue in the notes to the audited consolidated financial statements. Differences are due primarily to the inclusion within our backlog of estimates of future revenue under long-term maintenance contracts; future revenue for the full scope of work for certain arrangements where we have received an LNTP; and future revenue for arrangements where we have received assurance that we consider firm, but the associated contract has not been fully executed.
Current wording
For long-term maintenance contracts with no minimum commitments and other established customer agreements, we include only the amounts that we expect to recognize as revenue over the next 12 months. For arrangements in which we have received a LNTP, we include the entire scope of work in our backlog if we conclude that the likelihood of the full project proceeding has a high probability. For all other arrangements, we calculate backlog as the estimated contract amount less revenue recognized as of the reporting date. Backlog differs from the amount of our remaining performance obligations, which are described in Note 2 - Revenue in the notes to the audited consolidated financial statements. Differences are due primarily to the inclusion within our backlog of estimates of future revenue under long-term maintenance contracts; future revenue for the full scope of work for certain arrangements where we have received an LNTP; and future revenue for arrangements where we have received assurance that we consider firm, but the associated contract has not been fully executed.
Previous wording
In the Storage and Terminal Solutions segment, we booked $337.7 million of project awards during fiscal 2025. Project awards included a project for the engineering and construction of large refrigerated propane and butane tanks as well as spheres for related NGL products. This segment includes significant opportunities for storage infrastructure projects related to natural gas, LNG, ammonia, NGLs and other forms of low carbon energy. We believe LNG and ammonia projects in particular will be key growth drivers for this segment. Bidding activity on LNG and ammonia projects has been strong and we expect that to continue.
Current wording
In the Storage and Terminal Solutions segment, we booked $329.4 million of project awards during fiscal 2026. Project awards included a large award for the construction of the balance of plant supporting a dual service full containment storage tank, and an award for the construction of an LNG tank. This segment includes significant opportunities for storage infrastructure projects related to natural gas, LNG, ammonia, NGLs and other forms of low carbon energy. We believe LNG, NGLs and ammonia projects in particular will be key growth drivers for this segment. Bidding activity in these markets has been strong and we expect that to continue.
Previous wording
In the Utility and Power Infrastructure segment, we booked $215.4 million of project awards in fiscal 2025. Our opportunity pipeline for LNG peak shaving projects continues to be promising; however those awards, while significant, can be less frequent. Power delivery opportunities are expected to be driven over the long-term by increasing electrical demand and the related electrical grid requirements. Project opportunities and bidding activity are strong for both the power delivery portion of the business and LNG peak shaving.
Current wording
In the Utility and Power Infrastructure segment, we booked $127.0 million of project awards in fiscal 2026. Our opportunity pipeline for LNG peak shaving projects continues to be promising, with both greenfield facility projects as well as the projects for the upgrade, expansion, maintenance, and repair to existing infrastructure. The timing between the major greenfield and expansion awards can be extended due to client activity and bidding diligence. However, their addition to backlog is significant and we expect it to drive long-term sustainable growth in the segment. The smaller upgrade projects are key measures of our brand power and strength in the market, keeping key resources active while creating opportunities to strengthen execution and engineering teams. Power generation and delivery infrastructure opportunities are expected to be driven over the long-term by increasing electrical demand and the related electrical grid requirements associated with data centers and other demands. Project opportunities and bidding activity are strong across the segment.
Previous wording
Project awards in all segments are cyclical and are typically the result of a sales process that can take several months or years to complete. It is common for awards to shift from one period to another as the timing of awards is dependent upon a number of factors including changes in market conditions, permitting, off take agreements, project financing and other factors. Backlog volatility may increase for some segments from time to time when individual project awards are less frequent, but more significant. There is an inherent lag between the time a project is awarded and when it begins to have a material impact on revenue. This lag can vary and can extend up to six months or longer in unique circumstances, depending on finalization of scopes, contracts, permits, and facility process requirements. Additionally, awards for larger construction projects may be recognized as revenue over a multi-year period as the projects may take a few years to complete. We expect to recognize approximately 55% of our total backlog reported as of June 30, 2025 as revenue within fiscal 2026.
Current wording
Project awards in all segments are cyclical and are typically the result of a sales process that can take several months or years to complete. It is common for awards to shift from one period to another as the timing of awards is dependent upon a number of factors including changes in market conditions, permitting, off take agreements, project financing and other factors. Backlog volatility may increase for some segments from time to time when individual project awards are less frequent, but more significant. There is an inherent lag between the time a project is awarded and when it begins to have a material impact on revenue. This lag can vary and can extend up to six months or longer in unique circumstances, depending on finalization of scopes, contracts, permits, and facility process requirements. Additionally, awards for larger construction projects may be recognized as revenue over a multi-year period as the projects may take a few years to complete. We expect to recognize approximately 79% of our total backlog reported as of June 30, 2026 as revenue within fiscal 2027.
Previous wording
Revenue - The increase in overall revenue of $41.1 million, or 6%, was primarily attributable to higher revenue volumes in our Storage and Terminal Solutions and Utility and Power Infrastructure segments, partially offset by reduced revenue volumes in Process and Industrial Facilities.
Current wording
Revenue - The increase in overall revenue of $104.3 million, or 14%, was attributable to higher revenue volumes in our Storage and Terminal Solutions and Utility and Power Infrastructure segments, partially offset by lower revenue volumes in our Process and Industrial Facilities segment.
Previous wording
Gross profit - Gross profit during fiscal 2025 decreased by $(0.8) million, or (2)%, compared to fiscal 2024. Gross margin of 5.2% for fiscal 2025 decreased compared with gross margin of 5.6% for fiscal 2024. The decrease in gross margin for the year is attributable to lower gross margins in our Process and Industrial segment, partially offset by higher gross margins in our Utility and Power Infrastructure segment.
Current wording
Gross profit - Gross profit during fiscal 2026 increased by $24.3 million, or 61%, compared to fiscal 2025. Gross margin of 7.3% for fiscal 2026 increased compared with gross margin of 5.2% for fiscal 2025. The increase in gross margin for the year is attributable to higher gross margins in our Storage and Terminal Solutions and Utility and Power Infrastructure segments, partially offset by lower margins in our Process and Industrial Facilities segment. Overall, gross margins during the year benefitted from strong project execution and improved overhead recovery.
Previous wording
Restructuring costs - The Company incurred $3.6 million of restructuring costs during fiscal 2025 related to organizational restructuring. See Part II, Item 8. Financial Statement and Supplementary Data, Note 14 - Restructuring Costs, for more information about our organizational restructuring plan.
Current wording
Restructuring costs and other - The Company incurred $10.0 million of costs during fiscal 2026 related to organizational restructuring and other related costs. This included $3.6 million of expense related to the CEO and CFO transitions, as well as severance for other personnel and lease impairments for exited leases. See Part II, Item 8. Financial Statements and Supplementary Data, Note 14 - Restructuring Costs and Other, for more information about our organizational restructuring plan.
Previous wording
Interest income - The increase in interest income of $5.3 million is primarily due to an increase in our cash balance.
Current wording
Interest income - The increase in interest income of $1.1 million is primarily due to an increase in our average cash balance during the year.
Previous wording
Provision for income taxes - Our effective tax rates for the fiscal years 2025 and 2024 were (1.6)% and 0.1%, respectively. The effective tax rates during both periods were impacted by valuation allowances of $6.5 million and $8.5 million, respectively, placed on deferred tax assets generated during the fiscal year. We placed a valuation allowance on our deferred tax assets due to the existence of a cumulative loss over a three-year period. Currently, we place valuation allowances on newly generated deferred tax assets. We will realize the benefit associated with the deferred tax assets for which the valuation allowance has been provided as we generate taxable income.
Current wording
Provision for income taxes - Income tax expense for both fiscal 2026 and 2025 was insignificant. The effective tax rates during both periods were impacted by changes in valuation allowances of ($1.3) million and $6.5 million, respectively, placed on deferred tax asset changes during the fiscal years. We placed a valuation allowance on our deferred tax assets due to the existence of a cumulative loss over a three-year period. Currently, we place valuation allowances on newly generated deferred tax assets. We will realize the benefit associated with the deferred tax assets for which the valuation allowance has been provided as we generate taxable income.
Previous wording
Storage and Terminal Solutions revenues increased by $89.1 million, or 32%, in fiscal 2025 compared to fiscal 2024, driven by an increased volume of work for specialty vessel and LNG storage projects, partially offset by decreases in tank repair and maintenance work. In addition, we lowered our recovery expectations on a legacy project completed in fiscal 2021 that is currently in arbitration which resulted in a $6.4 million decrease to revenue during fiscal 2025.
Current wording
Storage and Terminal Solutions revenues increased by $92.4 million, or 25%, in fiscal 2026 compared to fiscal 2025, driven by an increased volume of work for specialty storage projects.
Previous wording
Utility and Power Infrastructure revenues increased by $64.8 million, or 35%, in fiscal 2025 compared to fiscal 2024. The increase is primarily attributable to higher volumes of work for LNG peak shaving projects, partially offset by decreases in power delivery work.
Current wording
Utility and Power Infrastructure revenues increased by $34.7 million, or 14%, in fiscal 2026 compared to fiscal 2025. The increase is primarily attributable to higher volumes of work for LNG peak shaving projects and power delivery work.
Previous wording
Utility and Power Infrastructure gross profit increased by $7.7 million, or 83%, in fiscal 2025 compared to fiscal 2024. The segment gross margin was 6.8% for fiscal 2025 compared to 5.0% in fiscal 2024, an increase of 1.8% due to mix of work.
Current wording
Utility and Power Infrastructure gross profit increased by $14.7 million, or 87%, in fiscal 2026 compared to fiscal 2025. The segment gross margin was 11.1% for fiscal 2026 compared to 6.8% in fiscal 2025, an increase of 4.3% due to strong project execution and improved construction overhead cost absorption as a result of higher revenues.
Previous wording
Process and Industrial Facilities revenues decreased by $111.6 million, or 42%, in fiscal 2025 compared to fiscal 2024. The decrease is primarily attributable to lower revenue volumes for a now completed large renewable diesel project and lower revenue volumes for thermal vacuum chambers. We believe this reduction in revenue is temporary given our strong backlog, including a significant gas processing construction project that is expected to commence in fiscal 2026.
Current wording
Process and Industrial Facilities revenues decreased by $22.8 million, or 15%, in fiscal 2026 compared to fiscal 2025. The decrease is primarily attributable to lower revenue volumes for refineries, thermal vacuum chambers, and industrial facilities.
Previous wording
Process and Industrial Facilities gross profit decreased by $12.9 million, or 59% in fiscal 2025 compared to fiscal 2024. The segment gross margin was 5.8% for fiscal 2025 compared to 8.2% for fiscal 2024. The segment gross margin in fiscal 2025 was impacted by increased under-recovery of construction overhead costs due to lower revenue volumes.
Current wording
Process and Industrial Facilities gross profit decreased by $4.4 million, or 49% in fiscal 2026 compared to fiscal 2025. The segment gross margin was 3.4% for fiscal 2026 compared to 5.8% for fiscal 2025. Gross margins decreased primarily due to mix of work.
Previous wording
Unallocated corporate gross profit (loss) was $0.8 million during fiscal 2025 compared to a loss of $1.9 million in fiscal 2024, an increase of $1.1 million primarily due to lower legal costs associated with a jury trial in fiscal 2024 that resulted in a verdict in our favor. See Note 7 - Commitments and Contingencies, Litigation, for more information.
Current wording
Unallocated corporate gross profit was $0.03 million during fiscal 2026 compared to a loss of $0.8 million in fiscal 2025, an increase of $0.8 million primarily due to a reduction in cost for certain support functions as a result of our organizational restructuring.
Previous wording
We assess liquidity as the ongoing ability to pay our liabilities as they become due, fund business operations and meet all monetary contractual obligations. Our primary sources of liquidity at June 30, 2025 were unrestricted cash and cash equivalents on hand, capacity under our ABL Facility (see "ABL Credit Facility" in this Liquidity and Capital Resources section and See Part II, Item 8. Financial Statement and Supplementary Data, Note 5 - Debt, for more information), and cash generated from operations. Our primary operational uses of capital are expenditures to execute our projects, fund business operations and fulfill our contractual obligations. We believe that for at least the next 12 months, our cash position, anticipated cash generated by operating activities, along with our availability under the ABL Facility, is sufficient to support our operating requirements.
Current wording
We assess liquidity as the ongoing ability to pay our liabilities as they become due, fund business operations and meet all monetary contractual obligations. Our primary sources of liquidity at June 30, 2026 were unrestricted cash and cash equivalents on hand, capacity under our ABL Facility (see "ABL Credit Facility" in this Liquidity and Capital Resources section and See Part II, Item 8. Financial Statements and Supplementary Data, Note 5 - Debt, for more information), and cash generated from operations. Our primary operational uses of capital are expenditures to execute our projects, fund business operations and fulfill our contractual obligations. We believe that for at least the next 12 months, our cash position, anticipated cash generated by operating activities, along with our availability under the ABL Facility, is sufficient to support our operating requirements.
Previous wording
Unrestricted cash and cash equivalents at June 30, 2025 totaled $224.6 million and availability under the ABL Facility totaled $59.8 million, resulting in total liquidity of $284.5 million. During fiscal 2025, liquidity increased $114.9 million, primarily as a result of cash provided by operations.
Current wording
Unrestricted cash and cash equivalents at June 30, 2026 totaled $223.0 million and availability under the ABL Facility totaled $60.9 million, resulting in total liquidity of $283.9 million. During fiscal 2026, liquidity decreased by $0.6 million.
Previous wording
Factors that routinely impact our short-term liquidity and may impact our long-term liquidity include, but are not limited to:
Current wording
Factors that routinely impact our short-term liquidity and may impact our long-term liquidity include:
Previous wording
•some fixed-price customer contracts allow for significant upfront billings at the beginning of a project, which increases liquidity near term;
Current wording
•some fixed-price customer contracts allow for upfront billings at the beginning of a project, which increases liquidity near term;
Previous wording
The borrowing base is recalculated on a monthly basis and at June 30, 2025, our borrowing base was $64.6 million. We had no borrowings outstanding and $4.8 million in letters of credit outstanding, which resulted in availability of $59.8 million under the ABL Facility. Our borrowing base has ranged from $57.8 million to $73.8 million during fiscal 2025. For additional information regarding our ABL Facility, see Item I of Part I, "Financial Statements - Note 5 - Debt."
Current wording
The borrowing base is recalculated on a monthly basis and at June 30, 2026, our borrowing base was $65.4 million. We had no borrowings outstanding and $4.5 million in letters of credit outstanding, which resulted in availability of $60.9 million under the ABL Facility. Our borrowing base availability has ranged from $55.6 million to $65.0 million during fiscal 2026. Subsequent to June 30, 2026, we issued an additional $20.0 million project-related letter of credit. The letter of credit resulted in a release of $20.0 million of contract retention, which we collected in August 2026. For additional information regarding our ABL Facility, see Part II, Item 8. Financial Statements and Supplementary Data, Note 5 - Debt.
Previous wording
The significant components of the $127.8 million cash effect of changes in operating assets and liabilities for the fiscal year ended June 30, 2025 include the following:
Current wording
The significant components of the $8.8 million cash effect of changes in operating assets and liabilities for the fiscal year ended June 30, 2026 are summarized as follows:
Previous wording
•Accounts receivable, excluding credit losses recognized during the period and including retention amounts classified as non-current, increased $12.1 million from fiscal 2023, which decreased cash flows from operating activities. The increase is primarily attributable to the timing of billing and collections, partially offset by $16.8 million we received as full payment for the favorable resolution of a legal matter.
Current wording
•Accounts receivable, excluding credit losses recognized during the period and including retention amounts classified as non-current, increased $11.3 million from fiscal 2025, which decreased cash flows from operating activities. The increases are primarily attributable to the timing of billings and collections. The increase in accounts receivable was partially offset by the collection of $19.5 million of accounts receivable associated with matters that had been in litigation.
Previous wording
•Costs and estimated earnings in excess of billings on uncompleted contracts ("CIE") decreased $4.1 million from fiscal 2024, which increased cash flows from operating activities. Billings on uncompleted contracts in excess of costs and estimated earnings ("BIE") increased $152.3 million from fiscal 2024, which increased cash flows from operating activities. CIE and BIE balances can experience significant fluctuations based on business volume and the timing of when job costs are incurred and the timing of customer billings and payments. Some fixed-price customer contracts allow for significant upfront billings at the beginning of a project.
Current wording
•Costs and estimated earnings in excess of billings on uncompleted contracts ("CIE") decreased $0.5 million from fiscal 2025, which increased cash flows from operating activities. Billings on uncompleted contracts in excess of costs and estimated earnings ("BIE") decreased $23.6 million from fiscal 2025, which decreased cash flows from operating activities. CIE and BIE balances can experience significant fluctuations based on business volume and the timing of when job costs are incurred and the timing of customer billings and payments. Some fixed-price customer contracts allow for significant upfront billings at the beginning of a project, which increases liquidity near-term.
Previous wording
The significant components of the $82.3 million change in operating assets and liabilities for the fiscal year ended June 30, 2024 include the following:
Current wording
The significant components of the $127.8 million change in operating assets and liabilities for the fiscal year ended June 30, 2025 include the following:
Previous wording
•Accounts receivable, excluding credit losses recognized during the period and including retention amounts classified as non-current, increased $48.8 million from fiscal 2024, which decreased cash flows from operating activities. The variance is primarily attributable to the timing of billing and collections.
Current wording
•Accounts receivable, excluding credit losses recognized during the period and including retention amounts classified as non-current, increased $48.8 million from fiscal 2024, which decreased cash flows from operating activities. The increases are primarily attributable to the timing of billing and collections.
Previous wording
•Costs and estimated earnings in excess of billings on uncompleted contracts ("CIE") decreased $11.0 million from fiscal 2023, which increased cash flows from operating activities. Billings on uncompleted contracts in excess of costs and estimated earnings ("BIE") increased $85.9 million from fiscal 2023, which increased cash flows from operating activities. CIE and BIE balances can experience significant fluctuations based on business volume and the timing of when job costs are incurred and the timing of customer billings and payments. Some fixed-price customer contracts allow for significant upfront billings at the beginning of a project, which increases liquidity near term.
Current wording
•Costs and estimated earnings in excess of billings on uncompleted contracts ("CIE") decreased $4.1 million from fiscal 2024, which increased cash flows from operating activities. Billings on uncompleted contracts in excess of costs and estimated earnings ("BIE") increased $152.3 million from fiscal 2024, which increased cash flows from operating activities. CIE and BIE balances can experience significant fluctuations based on business volume and the timing of when job costs are incurred and the timing of customer billings and payments. Some fixed-price customer contracts allow for significant upfront billings at the beginning of a project, which increases liquidity near term.
Previous wording
•Accounts payable increased by $14.8 million from fiscal 2024, which increased cash flows from operating activities. These operating liabilities can fluctuate based on the timing of vendor payments; accruals; lease commencement, lease payments, expiration, or termination of operating leases; business volumes; and other timing differences.
Current wording
•Accounts payable increased by $14.8 million from fiscal 2024, which increased cash flows from operating activities. These operating liabilities can fluctuate based on business volumes, the timing of vendor payments; accruals; and other timing differences.
Previous wording
We have never paid cash dividends on our common stock and the terms of our Credit Agreement prohibit us from paying cash dividends. Any future dividend payments will depend on the terms of our ABL Facility, our financial condition, capital requirements and earnings as well as other relevant factors.
Current wording
We have never paid cash dividends on our common stock and the terms of our ABL Facility prohibit us from paying cash dividends. Any future dividend payments will depend on the terms of our ABL Facility, our financial condition, capital requirements and earnings as well as other relevant factors.
Previous wording
We may repurchase common stock pursuant to the Stock Buyback Program, which was approved by the board of directors in November 2018. Under the program, the aggregate number of shares repurchased may not exceed 2,707,175 shares. We may repurchase our stock from time to time in the open market at prevailing market prices or in privately negotiated transactions and are not obligated to purchase any shares. The program will continue unless and until it is modified or revoked by the Board of Directors. We made no repurchases under the program during fiscal 2025 and have no current plans to repurchase stock. As of June 30, 2025, there were 1,349,037 shares available for repurchase under the Stock Buyback Program. The terms of our ABL Facility limit share repurchases to $2.5 million per fiscal year provided that we meet certain availability thresholds and do not violate our Fixed Charge Coverage Ratio financial covenant.
Current wording
We may repurchase common stock pursuant to the Stock Buyback Program, which was approved by the board of directors in November 2018. Under the program, the aggregate number of shares repurchased may not exceed 2,707,175 shares. We may repurchase our stock from time to time in the open market at prevailing market prices or in privately negotiated transactions and are not obligated to purchase any shares. The program will continue unless and until it is modified or revoked by the Board of Directors. We made no repurchases under the program during fiscal 2026. As of June 30, 2026, there were 1,349,037 shares available for repurchase under the Stock Buyback Program. The terms of our ABL Facility limit share repurchases to $2.5 million per fiscal year provided that we meet certain availability thresholds.
Previous wording
•Operating Leases: In the normal course of business, we lease real estate and equipment under various arrangements which are classified as operating leases. Future payments for such leases, excluding leases with initial terms of one year or less, were $25.9 million at June 30, 2025, with $5.8 million payable within the next 12 months. Refer to Part II. Item 8, Financial Statements, Note 8 - Leases, for more information about our lease obligations and the timing of expected future payments.
Current wording
•Operating Leases: In the normal course of business, we lease real estate and equipment under various arrangements which are classified as operating leases. Future payments for such leases, excluding leases with initial terms of one year or less, were $22.9 million at June 30, 2026, with $5.4 million payable within the next 12 months. Refer to Part II. Item 8, Financial Statements, Note 8 - Leases, for more information about our lease obligations and the timing of expected future payments.
Previous wording
•Surety bonds: The terms of our construction contracts frequently require that we obtain from surety companies, and provide to our customers, surety bonds as a condition to the award of such contracts. These surety bonds are issued in return for premiums, which vary depending on the size and type of the bond, and secure our payment and performance obligations under such contracts. We have agreed to indemnify the surety companies for amounts, if any, paid by them in respect of surety bonds issued on our behalf. Surety bonds expire at various times ranging from final completion of a project to a period extending beyond contract completion in certain circumstances. Such amounts can also fluctuate from period to period based upon the mix and level of our bonded operating activity. As of June 30, 2025, there were $154.6 million of surety bonds in force, of which we expect $93.7 million to expire within the next 12 months. Of the bonds in force, $68.4 million related to performance bonds for ongoing projects and the remainder related to contractor licensing, liens, and other bonds. We are not aware of any losses in connection with surety bonds that have been posted on our behalf, and we do not expect to incur significant losses in the foreseeable future.
Current wording
•Surety bonds: The terms of our construction contracts frequently require that we obtain from surety companies, and provide to our customers, surety bonds as a condition to the award of such contracts. These surety bonds are issued in return for premiums, which vary depending on the size and type of the bond, and secure our payment and performance obligations under such contracts. We have agreed to indemnify the surety companies for amounts, if any, paid by them in respect of surety bonds issued on our behalf. Surety bonds expire at various times ranging from final completion of a project to a period extending beyond contract completion in certain circumstances. Such amounts can also fluctuate from period to period based upon the mix and level of our bonded operating activity. As of June 30, 2026, there were $237.2 million of surety bonds in force, of which we expect $226.3 million to expire within the next 12 months. Of the bonds in force, $214.5 million related to performance bonds for ongoing projects and the remainder related to contractor licensing, liens, and other bonds. We are not aware of any losses in connection with surety bonds that have been posted on our behalf, and we do not expect to incur significant losses in the foreseeable future.
Previous wording
•Letters of credit: We issue letters of credit under our ABL Facility in the normal course of business to support workers' compensation insurance programs or certain construction contracts. As of June 30, 2025, we had $4.8 million of letters of credit outstanding.The letters of credit that support our workers’ compensation programs are expected to renew annually through the term of our credit facility.
Current wording
•Letters of credit: We issue letters of credit under our ABL Facility in the normal course of business to support workers' compensation insurance programs or certain construction contracts. As of June 30, 2026, we had $4.5 million of letters of credit outstanding. The letters of credit that support our workers’ compensation programs are expected to renew annually through the term of our credit facility. Subsequent to June 30, 2026, we issued an additional $20.0 million project-related letter of credit. The letter of credit resulted in a release of $20.0 million of contract retention, which we collected in August 2026.
Previous wording
The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become known, including, to the extent required, the reversal of profit recognized in prior periods and the recognition of losses expected to be incurred on performance obligations in progress. Due to the various estimates inherent in contract accounting, actual results could differ from those estimates, which could result in material changes to the Company’s Consolidated Financial Statements and related disclosures. See Part II, Item 8. Financial Statement and Supplementary Data, Note 2 - Revenue for further discussion.
Current wording
The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become known, including, to the extent required, the reversal of profit recognized in prior periods and the recognition of losses expected to be incurred on performance obligations in progress. Due to the various estimates inherent in contract accounting, actual results could differ from those estimates, which could result in material changes to the Company’s Consolidated Financial Statements and related disclosures. See Part II, Item 8. Financial Statements and Supplementary Data, Note 2 - Revenue for further discussion.
Previous wording
We utilize a discounted cash flow analysis, referred to as an income approach, and market multiples, referred to as a market approach, to determine the estimated fair value of our reporting units. For the income approach, significant judgments and assumptions including forecasted project awards, discount rate, anticipated revenue growth rate, gross margins, operating expenses, working capital needs and capital expenditures are inherent in the fair value estimates, which are based on our operating and capital budgets and on our strategic plan. As a result, actual results may differ from the estimates utilized in our income approach. For the market approach, significant judgments and assumptions include the selection of guideline companies, forecasted guideline company EBITDA (as defined in Note 4 - Goodwill) and our forecasted EBITDA (as defined in Note 4 - Goodwill). The use of alternate judgments and/or assumptions could result in a fair value that differs from our estimate and could result in the recognition of additional impairment charges in the financial statements. As a test for reasonableness, we also consider the combined fair values of our reporting units to our market capitalization.
Current wording
We utilize a discounted cash flow analysis, referred to as an income approach, and market multiples, referred to as a market approach, to determine the estimated fair value of our reporting units. For the income approach, significant judgments and assumptions including forecasted project awards, discount rate, anticipated revenue growth rate, gross margins, operating expenses, working capital needs and capital expenditures are inherent in the fair value estimates, which are based on our operating and capital budgets and on our strategic plan. As a result, actual results may differ from the estimates utilized in our income approach. For the market approach, significant judgments and assumptions include the selection of guideline companies, forecasted guideline company EBITDA (as defined in Note 4 - Goodwill and Other Intangible Assets) and our forecasted EBITDA (as defined in Note 4 - Goodwill and Other Intangible Assets). The use of alternate judgments and/or assumptions could result in a fair value that differs from our estimate and could result in the recognition of additional impairment charges in the financial statements. As a test for reasonableness, we also compare the combined fair values of our reporting units to our market capitalization.