Matrix Service Company

Good day and thank you for standing by and welcome to the Matrix Service Company conference call to discuss results for the second quarter fiscal 2023. At this time all participants are on a listen-only mode. After the speaker's presentation there'll be a question and answer session. To ask a question during the session you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press Star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kelly Smyth, Senior Director of Investor Relations. Please go ahead.

Thank you, Justin. Good morning, and welcome to Matrix Service Company's second quarter fiscal 2023 earnings call. Participants on today's call will include John Hewitt, President and Chief Executive Officer, 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 come of the Private Security Litigation Reform Act of 1995. Actual results may differ 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 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. Good morning, everyone. Thank you for joining us. I'd like to open today's call with a reminder that we are all accountable for safety. Responsibility for the safety of ourselves and each other does not stop when we work. We carry that responsibility into our personal lives as well. This personal safety responsibility is about accountability, communication, and training, or in short, ACT. We use this acronym to focus our leadership and drive a culture of safety across the organization. It reminds us to be accountable to ourselves and each other and live up to the leadership expectations we each carry. It says we must communicate directly with purpose, the expectations, and risks to execute better. And it reminds us that training improves outcomes, skills, and leadership. Our road to zero injuries never ends at work or at home, and each of us have a personal role to play in that journey. Now for our business update. As we've discussed on previous calls, some projects that we took into backlog during the pandemic were lower in overall margins and were affected by the operating dynamics over the last several years. As noted previously, we have one of these midsize legacy projects left in the portfolio, which we are in the midst of completing. This project at Midstream Gas Processing Facility, which is in the process and industrial segment, was awarded in calendar 2021. Due to breakdown in commercial negotiations concerning excessive scope changes that impacted our ability to progress the project work according to forecast, as well as the impact of global supply chain issues and inflation, we have taken a charge of $9.6 million in the quarter related to the forecasted outcome. The project is expected to be mechanically complete in the fourth quarter of this fiscal year. We continue to manage our forecasted costs to complete and work with our clients to negotiate a reasonable outcome. This project aside, we continue to see strong momentum driven by the recovery in our end markets, our focused business development approach, a streamlined organization, and our strong brand across the operating segments. In addition, our strong execution performance continues to create repeat business with several major energy and utility clients. Our momentum is clearly reflected by the ongoing increase in project awards that I spoke about on our last call. This trend continued into our second fiscal quarter with total awards of 319 million. This was our highest award total since the first fiscal quarter of 2020. Second quarter awards resulted in a consolidated book to bill of 1.6 and we had a book-to-bill of 1.3 or greater in each of our segments. Year-to-date, we have received project awards totaling $553 million and achieved a book-to-bill of 1.0 or greater in each of our segments and a consolidated book-to-bill of 1.4. Vending activity remains robust across all segments, and we're confident the strong award cycle will continue for the balance of the year. In storage and terminal solutions, where we are bill was 1.8 on awards for $115 million. Included in these awards is another large effing storage project, which is in addition to the enterprise products award we recently announced. In our utility and power infrastructure segment, our book to bill was 1.9 on awards of $98 million, including an upgrade project for an existing LNG peak shading facility. And finally, in process and industrial facilities, Our book-to-bill was 1.3 on awards of $105 million, which included a new fixed-base maintenance contract, an additional spring turnaround for a large refiner, and a scope expansion of a previously awarded renewable fuels project. At the end of the quarter, project backlog was $740 million, a 26% increase with a start of the fiscal year, and backlog up across each of our segments. Our calendar projects opportunity pipeline price of projects greater than $5 million remains strong and includes $5.5 billion worth of quality opportunities. This pipeline does not include our normal day-to-day and recurring maintenance activities. The capital projects pipeline value can fluctuate from quarter to quarter given award progression, opportunity changes, and our continuous evaluation of project quality. We expect the pipeline to remain healthy for the foreseeable future. The vast majority of our opportunities are in clean energy, and energy transition projects. In addition to the broader shift that is occurring in the energy markets, client spending decisions are being driven by concerns about energy security globally, aging infrastructure, and energy reliability domestically. This is an exciting time for the company as we extend our expertise into projects that support the development of the infrastructure needed to enable the transition to a lower carbon energy mix and energy security. In fact, about 70% of the projects in our pipeline support this transition, with traditional energy, industrial, and chemical projects making up the balance. Over the years, Matrix brands have been synonymous with best-in-class storage solutions. Building storage tanks has been an important driver of our revenue. What's less well-known to some investors is that our storage expertise extends far beyond the traditional flat-bottom storage tanks used to store crude oil. The storage projects we are working on today are comprised of complex, single, and double-walled cryogenic spheres and tanks. As an example, you may have seen a recent announcement that we were awarded the Greenfield Engineering Procurement and Construction of a 600,000-barrel cryogenic ethane storage tank for enterprise products along the Texas Gulf Coast. We are fielding a growing number of downstream project opportunities, including those for both ethane and ethylene. These types of projects require the high degree of technical expertise and experience Matrix can offer. These specialty vessels, as we call them, are used for a variety of applications, including LNG, hydrogen, ammonia, ethane, and other NGLs. In many applications, a storage tank is the critical construction path of an overall terminal project, thus giving us a competitive advantage to provide a complete facility to our energy clients. With that said, before I hand the call over to Kevin to discuss our operating results for the quarter, I want to emphasize that the momentum in our business is not yet reflected in our operating results, nor did we expect that it would be. We expect that the larger projects will positively impact our results starting in our fourth fiscal quarter. I'd like to express my gratitude to our shareholders for their patience. They have shown as we've worked hard to optimize and protect our business following a rapid deterioration of our end markets during the first three years of the pandemic. We are seeing positive trends in our business as we win projects, build backlog, and execute with our transformed organization. As is normal in our business, the timing of awards and starts of projects can have an impact on our quarter-to-quarter operating performance. That being said, our expectation is that we will achieve a revenue level in the fourth quarter that returns the business to profitable performance with gross margins at or near our target range of 10% to 12%. I'll now turn the call over to Kevin to discuss our results, and then we will look for questions.