MATRIX SERVICE COMTRX
MATRIX SERVICE CO Income Taxes Disclosure
Income Taxes
| Sources of Pretax Income (Loss) | Fiscal Years Ended | |||||||||||||||||||
| June 30, 2025 | June 30, 2024 | June 30, 2023 | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Domestic | $ | (26,917) | $ | (27,119) | $ | (52,636) | ||||||||||||||
| Foreign | (2,081) | 2,107 | (125) | |||||||||||||||||
| Total | $ | (28,998) | $ | (25,012) | $ | (52,761) | ||||||||||||||
| Components of the Provision for Income Tax Expense (Benefit) | Fiscal Years Ended | |||||||||||||||||||
| June 30, 2025 | June 30, 2024 | June 30, 2023 | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | 91 | $ | (80) | $ | (369) | ||||||||||||||
| State | 354 | 44 | (31) | |||||||||||||||||
| Foreign | 19 | — | — | |||||||||||||||||
| Current Total | 464 | (36) | (400) | |||||||||||||||||
| Deferred Total | — | — | — | |||||||||||||||||
| Total | $ | 464 | $ | (36) | $ | (400) | ||||||||||||||
| Reconciliation Between the Expected Income Tax Provision Applying the Domestic Federal Statutory Tax Rate and the Reported Income Tax Provision | Fiscal Years Ended | |||||||||||||||||||
| June 30, 2025 | June 30, 2024 | June 30, 2023 | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Expected benefit for federal income taxes at the statutory rate | $ | (6,089) | $ | (5,253) | $ | (11,080) | ||||||||||||||
| State income taxes, net of federal benefit | (716) | (2,065) | (2,320) | |||||||||||||||||
| Charges without tax benefit, net of non-taxable income | 1,042 | 384 | 358 | |||||||||||||||||
Change in valuation allowance(1) | 6,472 | 8,542 | 12,595 | |||||||||||||||||
| Excess tax expense (benefit) on stock-based compensation | 1,063 | (61) | 1,216 | |||||||||||||||||
| Research and development and other tax credits | (952) | (1,299) | (1,175) | |||||||||||||||||
| Foreign tax differential | 88 | 388 | 50 | |||||||||||||||||
| Change in uncertain tax positions | — | (81) | (90) | |||||||||||||||||
| Other | (444) | (591) | 46 | |||||||||||||||||
| Provision (benefit) for federal, state and foreign income taxes | $ | 464 | $ | (36) | $ | (400) | ||||||||||||||
(1)Due to the existence of a cumulative loss over a three-year period, we recorded a full valuation allowance against our deferred tax assets in fiscal 2022 and recorded additional valuation allowances against newly generated deferred tax assets in fiscal 2023, 2024, and 2025. These assets are primarily comprised of federal net operating losses, which have an indefinite carryforward, federal tax credits and state net operating losses. To the extent we generate taxable income in the future, or cumulative losses are no longer present and our future projections for growth or tax planning strategies are demonstrated, we will realize the benefit associated with the net operating losses for which the valuation allowance has been provided.
Significant Components of our Deferred Tax Assets and Liabilities
| June 30, 2025 | June 30, 2024 | |||||||||||||
| (In thousands) | ||||||||||||||
| Deferred tax assets: | ||||||||||||||
| Accruals and reserves | $ | 2,267 | $ | 283 | ||||||||||
| Bad debt reserve | 65 | 52 | ||||||||||||
| Insurance reserve | 971 | 941 | ||||||||||||
| Net operating loss benefit and credit carryforwards | 32,043 | 29,626 | ||||||||||||
| Accrued compensation and pension | 1,487 | 1,273 | ||||||||||||
| Stock compensation expense on nonvested restricted stock units | 3,353 | 3,438 | ||||||||||||
| Book over tax amortization | 4,033 | 5,607 | ||||||||||||
| Research and development capitalization | 14,882 | 12,425 | ||||||||||||
| Foreign currency translation and other | 1,271 | 1,324 | ||||||||||||
| Total deferred tax assets | 60,372 | 54,969 | ||||||||||||
| Valuation allowance | (55,973) | (49,434) | ||||||||||||
| Deferred tax assets, net | 4,399 | 5,535 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Tax over book depreciation | 3,920 | 5,081 | ||||||||||||
| Other | 504 | 479 | ||||||||||||
| Total deferred tax liabilities | 4,424 | 5,560 | ||||||||||||
| Net deferred tax liability | $ | (25) | $ | (25) | ||||||||||
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.
Operating Loss and Tax Credit Carryforwards
We have net operating loss carryforwards and tax credit carryforwards in federal, state and foreign jurisdictions. The valuation allowance at June 30, 2025 and June 30, 2024 reduces the recognized tax benefit of these carryforwards to an amount that is more likely than not to be realized. The gross carryforwards will generally expire as shown below for each jurisdiction:
| Operating Loss and Tax Credit Carryforwards | Expiration Period | Amount (in thousands) | ||||||
| Federal net operating loss | Indefinite | $ | 41,388 | |||||
| Federal tax credits | June 2041 to June 2045 | $ | 6,056 | |||||
| Federal foreign tax credits | June 2035 | $ | 16 | |||||
| State net operating losses | June 2026 to indefinite | $ | 120,732 | |||||
| State tax credits | June 2033 to indefinite | $ | 641 | |||||
| Foreign net operating losses | June 2029 to June 2045 | $ | 34,117 | |||||
| Foreign tax credits | June 2035 to June 2045 | $ | 701 | |||||
Other
In general, it is our practice and intention to reinvest the earnings of our foreign subsidiaries in our foreign operations. We do not provide for outside basis differences under the indefinite reinvestment assertion of ASC 740-30.
We file tax returns in multiple domestic and foreign taxing jurisdictions. With a few exceptions, we are no longer subject to examination by taxing authorities through fiscal 2020. At June 30, 2025, we updated our evaluation of our open tax years in all known jurisdictions. As of June 30, 2025, we have a $0.1 million liability for unrecognized tax positions and the payment of related interest and penalties. We treat the related interest and penalties as income tax expense. Due to the uncertainties related to these tax matters, we are unable to make a reasonably reliable estimate as to when cash settlement with a taxing authority will occur.
On July 4, 2025, a budget and reconciliation package commonly known as the One Big Beautiful Bill Act (“OBBBA”) was signed into law. Under United States GAAP, changes in tax law are accounted for in the period of enactment, our fiscal 2026. OBBBA is not expected to have a material impact on our fiscal 2026 financial statements due to our valuation allowance. We expect to benefit primarily from changes which include the immediate expensing of United States research and development expenditures and 100 percent bonus depreciation for certain capital expenditures.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Sep 10, 2025 | Showing above |
| 2024 | Sep 10, 2024 | |
| 2023 | Sep 12, 2023 | |
| 2022 | Oct 11, 2022 | |
| 2021 | Sep 13, 2021 | |
| 2020 | Sep 3, 2020 | |
| 2019 | Sep 4, 2019 | |
| 2018 | Sep 12, 2018 | |
| 2017 | Sep 11, 2017 | |
| 2016 | Sep 1, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.