Matrix Service Company

Good morning, and welcome to the Matrix Service Company conference call to discuss results for the second quarter of fiscal 2024. Currently, all participants are on a listen-only mode. Later, we'll 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 your host today, Ms. Kelly Smythe, Senior Director of Investor Relations for Matrix Service Company.

Thank you, Valerie. Good morning, and welcome to Matrix Service Company's second quarter fiscal 2024 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 Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements because of various factors, including those discussed in our most recent annual report on Form 10-K, and in subsequent filings made by this 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. Before I turn the call over to John Hewitt, I'd like to share that Matrix will be presenting at the upcoming Sidoti Small Cap Virtual Conference on March 13th and 14th. If you'd like additional information on this event or would like to have a conversation with management, I invite you to contact me through Matrix Service Company Investor Relations website. I'll now turn it all over to John.

Thank you, Kelly, and good morning, everyone. When we think about the safety risks present in the construction industry, we often think about the physical risks to people, but there are equally significant risks that have to do with mental health and well-being. Mental health issues arise for a variety of reasons, loneliness, high pressure work environments, seasonal layoffs, loss of a family member or friend, and can manifest in different ways, including loneliness, anxiety, depression, suicidal thoughts, and substance abuse. The construction industry has one of the highest suicide rates of any industry, and when compared to all other construction fatalities, suicide occurs five times more often. This is why the construction industry is taking a collaborative approach to better understand mental health issues by providing research-based solutions. Through our participation in the Construction Industry Institute and Construction Safety Research Alliance, Matrix is directly involved in this effort. Matrix is also committed to doing all we can across our job sites and office locations, and we're doing so through a cross-functional internal initiative, Matrix Cares. We believe that together we can make a difference for our own employees and others across our industry. And I believe the mental and physical safety of our employees, as well as those visiting our offices or job sites, is the most important thing we can do as coworkers and leaders. Now let's talk about the business. I'm proud to announce that with awards of $233 million and a quarter, we have achieved a record backlog for Matrix of $1.45 billion. This is an all-time high for the company in its 40-year history. and is an achievement that is a result of the hard work of our people and our focused strategic approach in our core markets. We have transformed our organization to be more cost efficient while ensuring our skills, expertise, and strong brand are aligned with our core markets. We are positioned to safely execute projects with improved operating processes while continuing to deliver best-in-class quality for our customers. As you will see when Kevin walks through our results, Matrix has resolved the primary issues that have plagued us the last few years. We have completed projects that were bid in the highly competitive pandemic environment, which resulted in limited margin opportunity. We also streamlined and refocused the company, restored our direct gross margins to our historical double-digit range, rebuilt our backlog to historic levels to support higher revenue volumes in the coming quarters, and improved our liquidity position and reduced our debt to zero. dramatic improvement in both the volume and quality of the projects in our backlog we expect revenue volume to grow and as such leverage our streamlined cost structure which will resolve our final issue now i want to spend a few minutes on our work in the energy markets recently president biden paused pending and future permits to export lng to non-free trade agreement countries Generally, we do not expect this pause to impact our opportunity pipeline or backlog. The small to mid-scale LNG facilities we have won and are pursuing are domestic in nature, providing backup fuel supply, peak shaving, or ship buckering. Any LNG tank projects that are related to large-scale export facilities that might be associated with the current White House permit position are more of an opportunistic pursuit for Matrix. We have significant opportunities in the small to mid-scale LNG market I just described, as well as NGLs, ammonia, and hydrogen, and expect these opportunities to continue contributing to backlog. While the transition to a low-carbon energy mix has been the focus of global energy policy, the world is still heavily dependent on fossil fuel and will be for the foreseeable future. At the same time, energy companies are actively at work developing longer-term, more sustainable energy solutions. For Matrix, our expertise in both the traditional and emerging energy markets, together with our longstanding reputation for safe, quality delivery, positions us as a leading contractor across the entire industry and puts us in an advantageous position. Our opportunity pipeline remains steady at $5 billion, demonstrating the strength of our markets and our ability to continue a long-term trend of backlog growth. We remain a contractor of choice for work in traditional oil and gas, including the engineering and construction of crude storage tanks and terminals, ongoing maintenance and repair work, refinery turnarounds, retrofitting for renewable fuels, and the installation of natural gas processing infrastructure. With increasing use of LNG as a low carbon solution for ensuring reliable and affordable power for electricity, heating and cooling, and also an alternative fuel for high horsepower applications, Matrix has emerged as a leader in the design, construction, maintenance, and repair of energy storage tanks and balance of plant facilities. Major energy companies also rely on us for NGL storage tanks and terminals such as ethane, ethylene, propane, and butane that feed the global marketplace because of our country's vast, safe, and dependable natural gas availability. Looking forward, the transition to sustainable energy is a broad initiative that will include, among others, hydrogen. This is a market that, while not presently a significant revenue driver for us, will be as we assume a major leadership role in fulfilling the significant infrastructure needs that will evolve. Just as creation of our strong market position in LNG was made possible because of our specialty vessel cryogenic capabilities, the hydrogen market requires these same specialized skill sets. It is not a market It will develop overnight, nor is it one that any contractor can simply step into once it's developed. The same is true for ammonia and methanol as energy carriers and a means of transporting hydrogen. Drawing on our extensive cryogenic engineering and construction expertise, Matrix is already at work laying the foundation needed to ensure we are at the forefront in providing the needed solutions in this space. For example, we have completed construction of a hydrogen sphere in the southwestern U.S. and are beginning the engineering for a liquid hydrogen storage sphere for a client on the West Coast, which we will also construct. We're also actively at work on a feed study for a hydrogen production and distribution facility and working on a feasibility study for a global energy company to develop large-scale liquid hydrogen storage solutions. With an increasing number of hydrogen and ammonia opportunities internationally, We are building a strategic relationship with construction organizations like that recently announced with Tissot Industries and other European partners, which provide the ability to offer complete EPC solutions across the European Union, United Kingdom, Norway, Switzerland, and elsewhere. As shared last quarter, we are in communication with several of our longstanding clients who are also part of the hydrogen hub teams identified to receive funding under the bipartisan infrastructure law. Of course, we continue to be active in our other end markets with robust opportunities and growth potential across each of our reporting segments. As I've said before, our organization has been meaningfully transformed over the past few years, and that transformation is showing up on our performance. We continue to fine-tune the organization and are investing in the technology, systems, and personnel needed to execute our strategy and grow the business. I'll hand the call over to Kevin to give you the results.