MATRIX SERVICE CO

Note 1 –Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements include the accounts of Matrix Service Company and its subsidiaries (“Matrix”, “we”, “our”, “us”, “its” or the “Company”), unless otherwise indicated. Intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission and do not include all information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. The information furnished reflects all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair statement of the results of operations, cash flows and financial position for the interim periods presented. The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended June 30, 2026, included in our Annual Report on Form 10-K. The results of operations for the three month period ended September 30, 2026 may not necessarily be indicative of the results of operations for the full year ending June 30, 2027.

Significant Accounting Policies

Our significant accounting policies are detailed in “Note 1 - Basis of Presentation and Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended June 30, 2026.

Accounting Standards Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, requiring companies to provide more detailed and organized disclosures of their expenses. Disclosures will include disaggregation of expense captions presented on the face of the income statement into specific categories, such as purchases of inventory, employee compensation, and costs related to depreciation and amortization. The new requirements will take effect for annual reporting periods beginning after December 15, 2026 (fiscal 2028) and for interim periods within fiscal years beginning after December 15, 2027 (fiscal 2029), with early adoption permitted. Adoption of this ASU will result in additional disclosure, but will not impact our consolidated financial position, results of operations or cash flows.

Other accounting pronouncements issued but not effective until after September 30, 2026 are not expected to have a material impact on our consolidated financial position, results of operations, or cash flows.

Note 2 – Revenue

Remaining Performance Obligations

We had $731.1 million of remaining performance obligations yet to be satisfied as of September 30, 2026. We expect to recognize $576.8 million of our remaining performance obligations as revenue within the next twelve months.

Contract Balances

Our billing practices are governed by the contract terms of each project based upon costs incurred, achievement of milestones or predetermined schedules. Billings do not necessarily correlate with revenue recognized over time using the percentage-of-completion method. As a result, we carry contract assets and liabilities in our balance sheet. These contract assets and liabilities are calculated on a contract-by-contract basis and are classified as current. We present our contract assets in the balance sheet as Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts ("CIE"). CIE consists of revenue recognized in excess of billings. We present our contract liabilities in the balance sheet as Billings on Uncompleted Contracts in Excess of Costs and Estimated Earnings ("BIE"). BIE consists of billings in excess of revenue recognized. The following table provides information about CIE and BIE:

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The difference between the beginning and ending balances of our CIE and BIE primarily results from the timing of revenue recognized relative to our billings. The amount of revenue recognized during the three months ended September 30, 2026 that was included in the June 30, 2026 BIE balance was $124.2 million.

Progress billings in accounts receivable at September 30, 2026 and June 30, 2026 included retentions to be collected within one year of $74.2 million and $68.2 million, respectively. Contract retentions collectable beyond one year are included in Other assets, non-current in the Condensed Consolidated Balance Sheets and totaled $31.9 million as of September 30, 2026 and $56.1 million as of June 30, 2026.

Unpriced Change Orders and Claims

Costs and estimated earnings in excess of billings on uncompleted contracts included revenues for unpriced change orders and claims of $11.7 million at September 30, 2026 and $8.1 million at June 30, 2026. The amounts ultimately realized may be different than the recorded amounts resulting in adjustments to future earnings. Generally, we expect collection of amounts related to unpriced change orders and claims within twelve months. However, customers may not pay these amounts until final resolution of related claims, which may extend beyond one year.

Disaggregated Revenue

Revenue disaggregated by reportable segment is presented in Note 8 - Segment Information. The following series of tables presents revenue disaggregated by geographic area where the work was performed and by contract type:

Geographic Disaggregation:

Contract Type Disaggregation:

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Revisions in Estimates

We recognize changes in contract estimates on a cumulative catch-up basis in the period in which the changes are identified. Such changes in contract estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially satisfied in a prior period. Changes in contract estimates may also result in the reversal of previously recognized revenue if the current estimate differs from the previous estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the period it is identified.

During the three months ended September 30, 2026, based on an evaluation of projects that had revisions to total estimated costs or anticipated contract value that individually resulted in a change to gross profit in excess of $1.0 million, we recognized a net increase of gross profit of $0.7 million.

Note 3 – Assets Held for Sale

As of September 30, 2026 and June 30, 2026, we classified $0.6 million and $0.9 million, respectively, of property, plant and equipment as held for sale. The assets include primarily transportation equipment associated with our transmission and distribution service line in the Utility and Power Infrastructure segment. We began winding down this service line in the fourth quarter of fiscal 2025. We expect to sell this equipment during the remainder of fiscal 2027.

Note 4 – Debt

On September 9, 2021, the Company and our primary U.S. and Canada operating subsidiaries entered into an asset-based credit agreement, which was most recently amended on November 3, 2026 (as amended, the "ABL Facility"), with Bank of Montreal, as Administrative Agent, Swing Line Lender and a Letter of Credit Issuer. The maximum amount of loans under the ABL Facility is limited to $90.0 million. The ABL Facility's available borrowings may be increased by an amount not to exceed $15.0 million, subject to certain conditions, including obtaining additional commitments. The ABL Facility is intended to be used for working capital, capital expenditures, issuances of letters of credit and other lawful purposes. Our obligations under the ABL Facility are guaranteed by substantially all of our U.S. and Canadian subsidiaries and are secured by a first lien on all our assets under the ABL Facility. The ABL Facility matures, and any outstanding amounts become due and payable, on September 9, 2029.

The maximum amount that we may borrow under the ABL Facility is subject to a borrowing base, which is based on restricted cash plus a percentage of the value of certain accounts receivable, inventory and equipment, reduced for certain reserves. We are required to maintain a minimum of $25.0 million of restricted cash at all times, but such amounts are also included in the borrowing base. The borrowing base is recalculated on a monthly basis and at September 30, 2026, our borrowing base was $61.8 million. The Company had $22.4 million in letters of credit outstanding as of September 30, 2026, which resulted in availability of $39.4 million under the ABL Facility.

Borrowings under the ABL Facility bear interest through maturity at a variable rate based upon, at our option, an annual rate of either a base rate (“Base Rate”), a Term Secured Overnight Financing Rate ("Term SOFR"), or at the Canadian Prime Rate, plus an applicable margin. The Term SOFR rate, whether for one-month or three-month tenor, is provided by a third party defined in the ABL Facility ("Term SOFR Administrator"). The Term SOFR Administrator publishes a daily set of forward-looking interest rates for various tenors, provided that the Term SOFR cannot be below zero. The Base Rate is defined as a fluctuating interest rate equal to the greater of: (i) rate of interest announced by Bank of Montreal from time to time as its prime rate; (ii) the U.S. federal funds rate plus 0.50%; (iii) Term SOFR for one month period plus 1.00%; or (iv)1.00%. Depending on the amount of average availability, the applicable margin is between 1.00% and 1.50% for Base Rate and Canadian Prime Rate borrowings, which includes either U.S. or Canadian prime rate, and between 2.00% and 2.50% for Term SOFR borrowings. Interest is payable either (i) monthly for Base Rate or Canadian Prime Rate borrowings or (ii) the last day of the interest period for Term SOFR borrowings, as set forth in the ABL Facility. The fee for undrawn amounts is 0.25% per annum and is due quarterly.

The ABL Facility contains customary conditions to borrowings, events of default and covenants, including, but not limited to, covenants that limit our ability to sell assets, engage in mergers and acquisitions, incur, assume or permit to exist additional indebtedness and guarantees, create or permit to exist liens, pay cash dividends, issue equity instruments, make distributions or redeem or repurchase capital stock. In the event that our availability is less than the greater of (i) $13.5 million and (ii)15.00% of the commitments under the ABL Facility then in effect, a consolidated Fixed Charge Coverage Ratio financial covenant of at least 1.00 to 1.00 must be maintained. We were in compliance with all financial covenants of the ABL Facility as of September 30, 2026.

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Note 5 –Income Taxes

Effective Tax Rate

During the three months ended September 30, 2026, our effective tax rate was zero. The effective tax rate during the period was impacted by decreases in valuation allowances of $(2.0) million placed on deferred tax asset changes during the period. During the three months ended September 30, 2025, our effective tax rate was (1.9)%. The effective tax rate during the period was impacted by increases in valuation allowances of $1.4 million placed on deferred tax asset changes during the period.

Valuation Allowance

We recorded a valuation allowance on our deferred tax assets due to the existence of a cumulative loss over a three-year period. We will continue to 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.

Note 6 –Commitments and Contingencies

We are party to various legal actions, claims and other contingencies that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged workers’ compensation claims, personal injury claims, and contract disputes, some of which may be subject to certain insurance coverage. With respect to all such matters, we record a loss when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, we disclose matters for which management believes a material loss is at least reasonably possible.

Litigation

On July 10, 2026, we were served with two complaints filed in the Superior Court of the State of Washington alleging certain employment claims for unpaid wages and violations of Washington statutes addressing moonlighting restrictions for low-wage employees, and nondisclosure and non-disparagement provisions in employment agreements (Malachi Ridley v. Matrix Service Inc., No. 26-2-01375-37 and Malachi Ridley v. Matrix Service Inc., No. 26-2-01384-1). The complaints were filed by an individual that was employed by Matrix Service Inc. between March 2024 and April 2024, but each complaint seeks class certification. We believe we have substantial legal defenses to class certifications and the claims presented. Additionally, certain claims asserted in the complaints may be subject to insurance coverage. Damages for the claims, if any, have not yet been quantified. Any potential losses associated with this matter cannot be estimated at this time.

We and our subsidiaries are participants in various other legal actions. Assessing the eventual outcome of litigation involves forward-looking speculation as to judgment being made by arbitrators, judges, juries and appellate courts in the future. The results of litigation are inherently unpredictable; however, based upon information presently available, and in light of legal and other factual defenses available to the Company, management does not believe that such other known legal actions will have a material adverse effect on our financial position, results of operations or liquidity.

Insurance Reserves

We maintain insurance coverage for various aspects of our operations. However, we retain exposure to potential losses through the use of deductibles, self-insured retentions and coverage limits.

Typically, our contracts require us to indemnify our customers for injury, damage or loss arising from the performance of our services and provide warranties for materials and workmanship. We may also be required to name the customer as an additional insured up to the limits of insurance available. We generally require our subcontractors to indemnify us and our customer and name us as an additional insured for activities arising out of the subcontractors’ work. We also require certain subcontractors to provide additional insurance policies, including surety bonds in favor of us, to secure the subcontractors’ work or as required by the subcontract.

There can be no assurance that our insurance and the additional insurance coverage provided by our subcontractors will fully protect us against a valid claim or loss under the contracts with our customers.

We establish reserve accruals for claims using a combination of actuarially determined estimates and case-by-case evaluations of the underlying claim data and update our evaluations as further information becomes known. Judgments and assumptions are inherent in our reserve accruals; as a result, changes in assumptions or claims experience could result in changes to these estimates in the future. If actual results of claim settlements are different than the amounts estimated, we may be exposed to future gains and losses that could be material.

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Bonding

Many customers, particularly in connection with new construction, require the Company to post performance and payment bonds. These bonds provide a guarantee that the Company will perform under the terms of a contract and pay its subcontractors and vendors. In certain circumstances, the customer may demand that the surety make payments or provide services under the bond, and the Company must reimburse the surety for any expenses or outlays it incurs. As of September 30, 2026, the Company is not aware of any outstanding material obligations for payments related to bond obligations. However, to the extent future reimbursements are required, the amounts could be material and could adversely affect the Company’s consolidated business, financial condition, results of operations and cash flows.

Letters of credit

We issue letters of credit under our ABL Facility to support workers' compensation programs. In addition, from time to time, certain customers require the Company to post letters of credit to ensure payment of subcontractors and vendors and guarantee performance under contracts. Each letter of credit commits the lender to pay specified amounts to the holder of the letter of credit if the holder claims that the Company has failed to perform specified actions. If this were to occur, the Company would be required to reimburse the lender under the ABL Facility. Depending on the circumstances of such a reimbursement, the Company may also be required to record a charge to earnings for the reimbursement. The Company is not aware of any claims currently asserted or threatened under any of these letters of credit that are material, individually or in the aggregate. However, to the extent payment is required for any such claims, the amount paid could be material and could adversely affect the Company’s consolidated business, financial condition, results of operations and cash flows.

Note 7 –Earnings per Common Share

Basic earnings per share (“EPS”) is calculated based on the weighted average shares outstanding during the period. Diluted earnings per share includes the dilutive effect of employee and director nonvested restricted stock units. Nonvested restricted stock units are considered antidilutive to our EPS in the event we report a net loss.

The computation of basic and diluted EPS is as follows:

The following securities are considered antidilutive and have been excluded from the calculation of Diluted EPS:

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Note 8 – Segment Information

We operate our business through a number of different operating subsidiaries, which are organized into three reportable segments based on the type of work performed and the markets serviced:

•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.

•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.

•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.

Our Chief Operating Decision Maker ("CODM") is our President and Chief Executive Officer, who regularly reviews operating and financial performance based on our segments. The Company's CODM uses segment operating income as the key metric in evaluating segment performance. The CODM uses this metric in the budget and forecasting processes. The CODM considers budget-to-actual and forecast-to-actual variances when making decisions about allocating resources, including capital and personnel, to the segments.

We incur certain expenses at the corporate level that relate to our business as a whole. A portion of these expenses are allocated to our business segments. The balance of the corporate level expenses are reported in the Corporate "Selling, general and administrative expenses" line, which is primarily comprised of corporate facility expense, the cost of the executive management team, and other expenses pertaining to certain centralized functions that benefit the entire Company but are not directly attributable to any specific business segment, such as corporate human resources, legal, governance, compliance and finance functions. The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies (see Note 1). We eliminate intersegment sales; therefore, no intercompany profit or loss is recognized. Segment assets consist primarily of accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts, property, plant and equipment, right-of-use lease assets, goodwill and other intangible assets. Corporate assets consist primarily of centrally managed cash, restricted cash, prepaid expenses, corporate fixed assets, and corporate operating lease right-of-use assets.

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Operating Segment Information - The following tables set forth certain selected financial information for our operating segments for the periods indicated:

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Note 9 – Restructuring Costs and other

In the fourth quarter of fiscal 2025, we commenced an organizational restructuring plan to create a flatter, leaner organization by eliminating certain senior-level positions, streamlining our engineering and construction services, and decentralizing elements of our business development organization. In the first quarter of fiscal 2026, we continued the organizational restructuring plan to further integrate our engineering and construction services, consolidate service lines, and close an under-performing office, among other changes. We incurred $3.3 million of restructuring costs during the first quarter of fiscal 2026 associated with these actions. These costs included $1.5 million of operating lease and fixed asset impairments associated with certain real estate leases that we exited as part of our restructuring plan. The fair values of the assets associated with these leases were determined based on Level 3 fair value measurements, utilizing a discounted cash flow method based in part on projected sublease income. Remaining costs incurred during the first quarter of fiscal 2026 consisted primarily of severance and other personnel-related costs.

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