Matrix Service Company

and thank you for standing by. Welcome to the Matrix Service Company conference call to discuss results for the fourth quarter and full year fiscal 2022. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 11 on your telephone. you will then hear an automated message advising your hand has been raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Kelly Smyth, Senior Director of Investor Relations. Please go ahead.

Thank you, Carmen. Good morning, and welcome to Matrix Service Company's fourth quarter and fiscal 2022 conference. Earnings Call. Participants on today's call will include John Hewitt, President and Chief Executive Officer, and Kevin Cavanaugh, Vice President and Chief Financial Officer. The presentation materials we will be referring to during the webcast today can be found under Events and Presentations on the Investor Relations section of matrixservicecompany.com. Before we begin, please let me remind you that on today's call, we may make various remarks about future expectations, plans and prospects for Matrix Service Company that constitute forward-looking statements for the purposes of the Private Securities Litigation Reform Act of 1995. Actual results may vary materially from those indicated by these forward-looking statements as a result of various factors, including those discussed in our most recent annual report on Form 10-K and in subsequent filings made by the company with the SEC. To the extent we utilize non-GAAP measures, reconciliations will be provided in various press releases, periodic SEC filings, and on our website. I will now turn the call over to John Hewitt, President and CEO of Matrix Service Company.

Thank you, Kelly, and good morning, everyone, and thank you for joining us. I'd like to open with a brief comment on the delay in filing our 10-K. As we stated in our press release on September 12th, we believed the review of the misallocated project employee hours to construction overhead would be confirmed to be immaterial, an isolated incident, and that the company's internal controls environment would be in good shape. I am pleased to report this is the case. As a result of the company's internal controls, the issue was previously identified and corrected within the fiscal year, and the investigation did not result in any additional adjustments. We expect to file our 10-K early next week. Beginning with a safety moment, as Florida and surrounding states recover from Hurricane Ian, I want to thank our electrical storm response teams who, along with so many others, answered the call for help to restore power as quickly as possible. The safety of all involved remains top of mind, and I encourage everyone to stay situationally aware, look out for one another, and follow the direction provided by local authorities. I also want to briefly mention that we will be publishing our sustainability report in mid-October. We have made great progress in establishing the framework we use to report on these efforts. Our ESG strategy includes foundational principles such as leading positive, lasting impacts in our community, implementing an action plan for reducing the carbon footprint of our facilities, promoting diversity, equity, and inclusion, and maintaining high standards and governance including the adoption of the Task Force on Climate-Related Financial Disclosure recommendations. I want to get started by acknowledging what we all know. These last couple of years for Matrix have been extremely challenging. However, because of the resilience of our people and based on the strength of our opportunity pipeline, the strong award cycle that is occurring, the investment we have made in our resources, and our organizational transformation, I am confident the business is at an inflection point where we will achieve better performance, bottom line results, and long-term sustainable value. In today's earnings call, I will briefly review the positive trends we're seeing in our end markets and the work we've been doing to ensure that Matrix is well positioned to support our clients and deliver long-term value. Over fiscal 2022, we began to see positive trends emerging from each of our core energy and industrial markets. From a macro perspective, this improvement is being driven by greater focus on global energy security, domestic energy supply assurance, supply chain security, the clean energy transition and demand for commodities supporting a low carbon economy, and most recently the enactment of House Bill 5376 or the Inflation Reduction Act supporting federal infrastructure investment. Effective in August 2022, The Act provides $369 billion of investments to energy and climate programs with the goal to achieve 40% emissions reductions by 2030. Of particular importance to Matrix, the Act will drive funding to domestic energy production, manufacturing, and clean energy technologies such as hydrogen, biofuels, and sustainable aviation fuel. Other programs included in the Act, combined with last year's Infrastructure Investment and Jobs Act, will provide for investment in industrial manufacturing facilities, energy infrastructure, and electric transmission projects. Overall, the macro trends, energy demand growth, a move to a lower carbon economy, and federal spending will positively impact Matrix by clearly aligning with our strategy, capabilities, and growth ambitions in providing increased opportunities for project awards and improved bottom line results. We are leaving fiscal 2022 with a few verbal awards in hand. And as contract details are finalized, we expect to report a significant uptick in project backlog. For example, we are finalizing negotiations on a contract to upgrade an existing LNG peak shaving facility with new gasification and liquefaction equipment. Additionally, another verbal award has moved to formal contract in the first quarter of fiscal 2023 for a large-scale, full-containment ethane tank along the Gulf Coast from a long-standing client. This award represents our largest single award since the spring of 2020. We expect to announce both these projects by press release in the near term. Today, the largest individual opportunities in our pipeline are in our storage and terminal solutions space, where we enjoy a long-standing reputation as a leading solutions provider. The specialty vessel market today, where our brand is a leader, is extremely active with large-scale storage opportunities in LNG, ammonia, ethylene, ethane, propane, hydrogen, and butane, with in some cases the terminal or balance of plant work included. While we will be strategic about the projects we take on, we expect the next few quarters to be very active in the storage bidding and awards cycle. With many individual project values greater than $75 million, these opportunities will use resources from our engineering, construction, and fabrication business lines and will benefit from our newly streamlined support organization. Even with this expected near-term strong award cycle, our opportunity pipeline has and will continue to strengthen month over month. The expertise and skill sets provided by our engineering and field personnel is applicable across all the end markets we serve, and are transferable across an increasing number of clients whose operations are vertically integrated and geographically diverse. The services we provide are integrated internally and interconnected throughout our client base. Through the application of our expertise in services and relationships with leading technology providers, Matrix is well-positioned to support our clients' low-carbon objectives, which is reflected in our current mix of project opportunities. Seventy-three percent of the projects in our Opportunity Pipeline support our clients' objectives toward a low-carbon economy. These projects, including infrastructure that supports the transition to lower-carbon fuels such as LNG and natural gas, renewables including hydrogen and biofuels, low-carbon chemicals such as ammonia, electrification investments, and the commodities that support these initiatives such as copper, lithium, and other mineral resources. In the transition toward lower carbon fuels, we continue to see project opportunities from our clients for small to midsize LNG peak shaving facilities to support utility and power infrastructure, as well as terminals for LNG export and bunkering as a replacement for diesel and fuel oil. Midstream gas has seen more investment to support the increasing demand growth for natural gas supply as international and domestic markets look to the U.S. for LNG. This demand is driving opportunities for greenfield construction, natural gas processing facilities, as well as expansion of existing facilities. It's also leading to the upgrade of facilities to improve efficiency and achieve carbon footprint reductions. Many of these projects are supported by federal tax credits. In no or low carbon infrastructure, we believe the world is on the cusp of substantial investments in hydrogen that we expect to drive fundamental change across the energy industry. Matrix will play a major role in this evolution, as demonstrated by the significant project opportunities we see in hydrogen. Recognizing this coming wave, in addition to our longstanding expertise and leadership position in cryogenic infrastructure, we have continued to strengthen our position through investments of both people and relationships, including Chart Technologies and the Hydrogen Council. Most recently, supported by our office in South Korea, we signed an MOU with Korea Gas Corporation, or COGAS, South Korea's public natural gas company. This MOU is for the development of new technology for onshore large-scale liquid hydrogen storage to support South Korea's plans to achieve carbon neutrality by 2050. This technology development activity can be further levered to support hydrogen initiatives anywhere in the world. as demand for the development of large-scale hydrogen storage continues to grow to support power generation and transportation fueling. Domestically, achieving a low-carbon economy is dependent upon massive infrastructure investments being made to upgrade inefficient, aging electrical infrastructure, address the interconnected world of electrical and renewable generation, and ensure reliable and adequate power availability. This creates significant growth potential for our electrical business currently operating in the Northeast, the Ohio Valley, and Mid-Atlantic, which delivered nearly 20% of the company's revenue in fiscal 2022. We expect to see an increase in project opportunities as our public and private utility customers take advantage of tax credits and other opportunities offered by the previously mentioned federal infrastructure legislation. Currently, our contractor of choice position and existing electrical business continues to be a reliable source of revenue for Matrix, as utility substation work shifts from new substations and major rebuilds to equipment control technology upgrades and security protections. We also continue to pursue larger opportunities expanding our work in electrical transmission and distribution, electrical services, and other energy applications that support industrial facilities. Our work for town energy subsidiary Cumulus Data is one such example. Matrix teams are currently at work on the greenfield construction of a substation as well as transmission and distribution to support town's investment. This center is used for data storage and cryptocurrency processing and is powered by a nearby nuclear facility, which provides reliable, carbon-free energy. As technology adoption grows and the demand for energy increases to support data storage and processing activities, we expect these types of industrial projects to increase. Long-term, we remain strategically focused on growing our electrical business in size, resources, and footprint, which is further supported by the U.S. infrastructure demand. Low-carbon chemicals like ammonia also have a role to play in the clean energy transition, as well as helping to address food scarcity as a feedstock for fertilizer. This is also an area where we are seeing significant increase in storage projects, many of which we are currently bidding. In the mining and mineral sector, global demand for elements such as copper, lithium, and It is increasing in direct response to the energy transition and infrastructure investment and is expected to continue following the recent enactment of H.R. As a well-established and respected contractor to this end market, we are seeing and expect to see increasing opportunities here where we can apply our traditional construction capabilities. We are currently working with 5E Advanced Materials on the first phase of construction at this facility in Southern California. This facility, which will be followed in subsequent phases with a large-scale boron and lithium complex, is home to one of the largest known new conventional boron deposits globally and the first new US-based source of boron production in more than 50 years. Boron, as you may know, is used in several critical applications that support electrical transportation, clean energy, food scarcity, and domestic supply chain security. As a reminder, in thermal vacuum chambers, Our niche position is supported by our extensive specialty vessel cryogenic and steel plate structures experience, reinforced through our relationship with key technology provider DynaVac. This relationship continues to create opportunities for new construction, like our two recently announced projects with Northrop Grumman. The use of satellites to monitor and track the effects of climate change, increased demand for data communications, and an aging space-based communication infrastructure are all reasons we expect to see continued spending on new and existing thermal vacuum chambers. Finally, in traditional energy markets, storage opportunities in NGLs, such as ethane and ethylene, have increased significantly for their benefit as chemical feedstocks to support high domestic demand and growing export volumes. The global need for propane and butane is also increasing, creating further demand for our storage solution services. With strong relationships inside several North American refineries, We benefit from our embedded position, providing turnaround and other plant services, including maintenance and repair, as well as small capital project work for new investments in decarbonization projects and retrofitting facilities to meet increasing demand for alternative fuels. Before I turn the call over to Kevin, I want to briefly comment on our award performance during the quarter and share a couple of data points to underscore the momentum in our business. The fourth quarter completed a year-long trend of significant project award activity, up 85% from last year to $835 million. As a result, our backlog has increased 27% over the year. In addition, the quality and size of project opportunities in our pipeline support our key market strategies and competencies, as well as the prospects of returning to historical margins. For now, let me hand the call over to Kevin to discuss our results.