Matrix Service Company

Good morning, and welcome to the Matrix Service Company conference call to discuss results for the third quarter of fiscal 2024. Currently, all participants are on a listen-only mode. Later, we conduct a question and answer session. 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 Smyth, Senior Director of Investor Relations for Matrix Service Company.

Thank you, Justin. Good morning, and welcome to Matrix Service Company's third quarter fiscal 2024 earnings call. Participants on today's call include John Hewitt, President and Chief Executive Officer, and Kevin Cavanaugh, Vice President and Chief Financial Officer. The presentation materials referred to during the webcast today can be found under Events and Presentations on the Investor Relations section at MatrixServiceCompany.com. As a reminder, on today's call, we may make various remarks about future expectations, plans, and prospects for major service companies 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 results, 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 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. Related to investor conferences and corporate access opportunities, Matrix will be participating in the upcoming CFIL Cross-Sector Insights Conference on June 4th and 5th in Boston. If you would like additional information on this event or would like to have a conversation with management, I invite you to contact me through the Patriot Service Company Investor Relations website. Before I turn the call over to John, I would also like to share our safety moment. At Matrix, there is nothing more important than the safety and health of our employees, both physical and mental, and that's why safety is our number one core value. On our last call, John highlighted the work being done across our industry and at Matrix to identify and provide support for addressing mental health issues, especially given the significantly higher level of suicide experienced in the construction industry when compared to others. But mental health issues are something we all grapple with at one time or another in our lives. As the month of May is Mental Health Awareness Month, we thought it would be a good time for a reminder that each of us should periodically take time to assess our own mental health, just as we do our physical health. In doing so, it's important to identify the root causes of any issues we may be experiencing, and above all, remember, it's okay to ask for help. At Matrix, our people are our greatest asset. By ensuring the mental and physical well-being of our people, we are better equipped to do the important work our customers and shareholders count on us to deliver. I will now turn the call over to John.

Thank you, Kelly, and good morning, everyone. We delivered mixed third quarter results. Execution performance was good. We maintained our record backlog. The opportunity pipeline continues to be strong, and liquidity expanded. However, revenue was the low point for the year, driven by the convergence of three key issues. First, the conversion of backlog to revenue on some of our major projects continued to push to the right. This shift does not represent an uncertainty in the projects proceeding. but it does highlight the complexity of finalizing large capital construction project contracts and the impact our clients have on the timing of those project starts. We expect these projects to finally begin contributing additional revenue in Q4 and grow in a more meaningful way throughout fiscal year 25 and beyond. Second, a long-term multi-decade refinery client changes spending priorities and contracted labor demand in the third quarter and for the balance of the current contract. And finally, there were two areas of softness in our core markets, crude tank new build and maintenance and repair in the lower 48, as well as electrical infrastructure in our predominately northeast sector. In both cases, we believe this softness is transitory and will begin to firm up moving into fiscal 25. given the market dynamics we are seeing and how we approach those markets. In short, we expect revenue to improve from here and continue to build through fiscal 2025. As this increased volume of projects and backlog and new awards convert to revenue, we expect to drive improved fixed cost absorption and margin expansion toward our historical double digit levels. Backlog in the third quarter increased nearly 75% on a year over year basis And we held our all-time high of $1.45 billion, driven by a diverse mix of high-value, multi-year projects that will support improved profitability moving into fiscal 2025. Our backlog, bookings, and bidding activity remain very strong as we enter the fourth quarter, which has already produced additional specialty vessel storage bookings. This is also our 11th consecutive quarter with a book-to-bill greater than or equal to one led by robust demand within our storage and terminal solution segment, where book-to-bill was 2.5 in the third quarter compared to 1.3 a year ago. We continue to maintain strong fitting discipline, consistent with our strategic focus on profitable organic growth. Our opportunity pipeline clearly supports the long-term trend to maintain a strong backlog. While the financial impact of the timing of projects starts are a reality for our industry, it is important to keep in mind that the work will get built and that the underlying demand thesis remains unchanged. Matrix is in the right markets at the right time with the right expertise and strategy to drive value creation for our shareholders. I will ask Kevin to provide more detail around the third quarter results, and then I'll provide more color on our outlook for the business entering fiscal 2025 and why we remain confident that our business is moving toward a positive inflection of profitability over the coming quarters. Kevin?