Matrix Service Company

Good morning, and welcome to the Matrix Service Company conference call to discuss results for the third quarter of fiscal 2023. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to today's host, Ms. Kelly Smythe. Senior Director of Investor Relations of Matrix Service Company. Please go ahead.

Good morning and welcome to Matrix Service Company's third quarter fiscal 2023 earnings call. Participants on today's call will include John Hewitt, President and Chief Executive Officer, and Kevin Kavanaugh, 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 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 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. Good morning, everyone, and thank you for joining us. quite open a call with a congratulations to our operations teams for being recognized for contractor safety achievement at five separate refineries by the American Fuel and Petrochemical Manufacturers Association. These safety recognitions represent the strong commitment and leadership our people bring to the workplace every day. Thanks to all our employees for making safety a critical part of your mission. On our business update, we continue to see very strong award momentum as reflected in total project awards of $309 million in the third quarter. This resulted in a book-to-bill of 1.7, our seventh consecutive quarter, at or above 1.0. Year-to-date, we have been awarded $862 million in projects, up 35% over the same period in the prior fiscal year. This has resulted in a book-to-bill of 1.3 or greater in each of our segments and a consolidated book-to-bill of 1.5. We are seeing positive trends in our business as event projects build backlog and execute with our transformed organization. Bidding activity remains robust across all segments, and we're confident the strong award cycle will continue. At the end of the quarter, project backlog was $832 million, a 42% increase from the start of the fiscal year, with backlog up across each of our segments. Timing of awards aside, Our proposal activities suggest that we will return to a more normalized backlog of more than $1 billion in the near term. Keep in mind that many of the larger projects we're putting into backlog may take upwards of six months before they have a material impact on revenue, and in rare instances, perhaps longer. In any case, as this improved quality, size, and growing backlog flows more steadily through the business, financial results will improve along with higher and more stable revenue. From a segment perspective in storage and terminal solutions, our third quarter book to build was 1.3 on awards of $66 million. This segment includes significant near-term opportunities for storage infrastructure projects related to LNG, ammonia, hydrogen, and NGLs. We believe specialty vessel and terminal projects in LNG and NGLs and hydrogen will be key growth drivers for this segment. In our utility and power and infrastructure segment, Our book-to-bill was 0.7 on awards of $26 million, primarily comprised of power delivery maintenance and smaller capital projects. Power delivery bidding is very active, and the opportunities are expanding as we grow our core utility electrical business through market capture, client expansion, and geographic reach. For LG peak shading projects, also part of this segment, the market opportunities continue to be strong, and our proposal teams are very busy. These projects have a long proposal process, a much larger in size on an individual basis, and less frequent, but provide a much longer sustainable backlog for the segment. We expect to expand this part of the segment backlog in the next two quarters as we convert opportunities to live projects. Finally, in process and industrial facilities, our book to build was exceptionally strong at 2.2 on awards of $217 million, which include a large construction project, to upgrade a natural gas compressor station. Other construction projects of a similar size in nature are currently in the proposal process. We also continue to see demand for refinery maintenance and turnaround work, as well as increasing opportunities in mining and minerals, chemicals, and renewables processing facilities. Over the past year, our project opportunity pipeline has stabilized and now consists of 5.6 billion projects greater than 5 million. This pipeline does not include our normal day-to-day and recurring maintenance and small project activities, which represents approximately a third of our business revenue across all three segments. We continue to actively support and pursue work with our clients in the traditional energy and chemical space, which represents approximately 26% of our consolidated opportunity pipeline. We are also supporting many of these same clients as they invest in projects that deliver on or support the delivery of low-carbon energy and industrial infrastructure. These represent 72% of our pipeline. The skills and expertise that Matrix offers as an engineering and construction contractor position us well to bid and win our fair share of this work, and more so will provide us with a long, sustainable runway of quality projects. This runway is supported by key market drivers that provide strong tailwinds as client spending decisions are made based on concerns about energy globally, aging infrastructure, energy reliability domestically, the clean energy transition, and the need for commodities to support these investments. As it relates to the federal infrastructure investment, the Inflation Reduction Act is forecast to unlock $3 trillion of infrastructure investments over the next decade, with a large commitment from the government expected to bring the springboard for private sector spending. Dubbed the Third Great Energy Revolution, This will significantly accelerate upgrades to electrical infrastructure, as well as growth across the hydrogen ecosystem in the U.S. and internationally. From a services and expertise perspective, Matrix has a significant role to play across nearly every aspect of these infrastructure investments, which impacts all three of our segments. With respect to hydrogen specifically, this is a mid- to long-term opportunity, given the market is effectively in the first inning of what will be a multi-decade investment cycle. While several companies in the U.S., including Matrix, have built cryogenic storage spheres for butane and propane, only two, one of which is Matrix, have engineered and constructed cryogenic hydrogen spheres. Considering the massive investment to build out the hydrogen infrastructure, both domestically and globally, today the bidding environment for hydrogen sphere storage is very active, and we expect it to be added to our backlog in the coming quarters. We are working on pre-feed studies with several energy majors, to help them develop hydrogen storage solutions both domestically and abroad. Additionally, in support of growing opportunities abroad, we have just signed an exclusive relationship with France-based Tissot Industries to offer total engineering, procurement, and construction solutions for liquid hydrogen storage across the United Kingdom, Norway, Switzerland, and the European Union. Expect to see a press release about this relationship later today. As I said earlier, we are in the early innings of an energy revolution, one that will occur globally, and Matrix has positioned itself with technology and business partners, key employees, strong brand awareness, and blue-chip clients to play a very active role in bringing these various projects to life. Overall, in both the short and long term, the market supports our vision for the future, a growing award and backlog position, and a return to normalized financial performance as this backlog flows through the business. I'll now turn the call to Kevin to discuss our results, and then we'll open to questions.