Matrix Service Company

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

Thank you, Justin. Good morning and welcome to Matrix Service Company's fourth quarter fiscal 2024 earnings call. Participants on today's call include John Hewitt, President and Chief Executive Officer, and Kevin Kavanaugh, 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 of MatrixServiceCompany.com. As a reminder on today's call, we may make various remarks about future expectations, plans, and prospects for a 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 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 opportunity, Matrix will be participating at the upcoming D.A. Davidson 23rd Annual Diversified Industrials and Service Conference in Nashville, Tennessee, September 18th through the 20th. 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 Matrix Service Company, Investor Relations website. Before I turn the call over to John, I want to acknowledge that tomorrow marks the 23rd anniversary of 9-11 and the terrorist attacks that took place in New York at the US Pentagon and on Flight 93. 2,977 people died because of those acts and thousands more were injured. Among them, the first responders who sacrificed their own safety to save others. As we begin our call today, I'd like for us to remember them and our veterans who, because of this event, actively engaged in the war on terrorism that we still fight today. It is through their actions and sacrifice that all of us are kept safe. As we remember them, I also ask that each of us contemplate the fact that except for extraordinary events like 9-11, Through our own behaviors and actions, we have the ability and the responsibility to protect the physical and mental safety of ourselves and those around us. I will now turn the call over to John.

Thank you, Kelly, for this important message about sacrifice, safety, and the leadership to keep others safe. Our actions and behaviors matter. Please choose to own safety for yourself as well as those around you. I'd also like to personally thank our nation's military, and first responders, past and present, for their unwavering commitment and service to protecting all of us. As we close out fiscal 2024, our fourth quarter represented an important inflection point for our business. We advanced work on multiple large projects during the quarter, which contributed to meaningful cash generation to close out the fiscal year. As we have seen through the course of fiscal 2024, project performance in the fourth quarter continued to be strong. We fully expect that as revenues improve into fiscal 2025, so will the absorption of construction overhead costs. Backlog has increased by more than 30% on a year-over-year basis. We added $176 million in new project awards in the fourth quarter, bringing total awards for the year to $1.1 billion and a book-to-bill of $1.5. And our opportunity pipeline continues to have significant strength particularly in storage and storage-related facilities, which we expect to continue adding to backlog in the new fiscal year. These factors, combined with our strategic changes to the organization and already booked multi-year projects, which are beginning to ramp up, give us visibility into revenue growth and improved profitability in 2025 and beyond. The key megatrends that are driving the demand for our services provide healthy long-term tailwinds for our business and continue to be a catalyst for infrastructure investment for LNG, NGLs, ammonia, hydrogen, and other renewable fuels, providing significant opportunity across each of our reporting segments. As we enter fiscal 2025 in our storage and terminal solution segment, activity was robust in the quarter, as we advanced work on a large backup fuel supply facility and a boil-off gas compressor project at an LNG storage facility in the southeast. We also added another Gulf Coast NGL storage project to backlog, where we are already executing on several other NGL storage projects. In addition, our teams are currently pursuing approximately $3.2 billion of near-term projects supporting LNG, NGLs, ammonia, hydrogen, and other products. our utility and power infrastructure segment the need for system reliability and resilience is driving investments in utility generation and electrical infrastructure to meet power demand during peak periods as well as transmission and distribution substation and other system upgrades to support the energy load growth including energy intensive data centers again our expertise in all things lng terminals and related infrastructure have positioned Matrix as a leader in meeting demand for LNG peak shaving. Specifically, in the fourth quarter, we continued work on two LNG peak shaving facilities along the East Coast, one of which is well underway, while on the other we've broken ground and are beginning civil work. Our team is also pursuing more than $1.2 billion in near-term projects in the utility and power infrastructure space in support of system reliability and resilience, including an additional LNG peak shaver, and multiple upgrades as well as substations, transmission distribution systems, and other infrastructure. Within our process and industrial facility segment, the clean energy transition is supporting project investment along with continued demand for traditional hydrocarbon and other industrial infrastructure. Of note, in the quarter, we completed work on a two-year refinery retrofit project on the West Coast for renewable diesel that grew in scope through the life of the project due to the quality of work of our team. We advanced work on a new state-of-the-art thermal vacuum chamber. An existing refinery extended our multi-year contract for providing embedded turnaround and plant services, maintenance, and repair work. And we were awarded a refinery turnaround for another long-standing client. We are currently pursuing $1.7 billion in near-term projects in this segment in multiple end markets, including natural gas, chemicals, petrochemicals, and mining minerals. Overall, our opportunity pipeline remains strong at $6.1 billion, a key indicator of the strength across end markets and the ability to continue our long-term trend of backlog growth. As we have previously communicated, we expect the trend in our backlog to continue at a ratio of 1-0 or greater on an annual basis. We keep this opportunity list, which contains projects we have bid, are bidding, and will bid, updated monthly. While there can be movement in and out of this pipeline for various reasons, the long-term volume of opportunities has been stable, and we expect that to continue. In general, the opportunities we are currently pursuing are expected to be bid and awarded within the next 12 to 18 months. Once awarded, many of these projects will require an 18 to 30-month timeframe to complete. As a reminder, this does not include smaller capital projects and maintenance activities performed on our MSAs or individual contracts that lay the foundation for many parts of the business while supporting our strong customer relationships. As our profitability and free cash flow conversion improve, we will continue to prioritize maintaining that lean balance sheet and a strong liquidity position to support the growth of our business. Matrix is indeed at a critical turning point following several years of low revenue that began with the energy demand destruction during the pandemic and was followed by a protracted period with a limited number of projects available in our core markets were bid in a highly competitive environment. During this time, we meaningfully transformed the company to focus on the end markets that present the best opportunities, set our unique capabilities, and are supported by strong macroeconomic and industrial drivers. We streamlined the organization with a focus on reducing costs, enhancing project execution, and building backlogs. We began fiscal 2025 with a backlog of $1.4 billion and, as noted, a $6.1 billion opportunity pipeline. Finding continued strong project execution with accelerating revenues, a conversion of backlog, we believe the company is now on a trajectory of upward growth and profitability. Our visibility into this upward trajectory is significantly clearer today given the schedule status of our portfolio of projects. That said, The business will always be impacted by the timing of awards and starts, which is dependent upon market fundamentals, our clients' decision-making, and the regulatory environment in which they operate. In consideration of all these factors, our revenue guidance for fiscal 2025 is between $900 and $950 million, which represents a year-over-year increase of 24% to 30%. As I mentioned, the projects that support our outlook for 2025 are in the early stages and will continue to ramp up as we progress through the year. Given the estimated cadence of project activity during the year, we expect to recognize improved profitability as revenue increases. The year will have a slow start with the impact of the summer months, as well as the recent completion of the large renewable diesel project noted earlier. Once we get past the first quarter, revenue growth should accelerate through the remainder of the year, along with the associated operating results. Considering many of these projects will contribute to revenue for up to three years and the strong opportunity pipeline the company is positioned for improved operating performance to extend into fiscal year 2026 and beyond. During this period of growth, we are committed to upholding the highest standards of safety, quality, and service. We will stay focused on our strategy, maintain a strong balance sheet, and deliver outstanding quality service to our customers. Doing so will allow us to take advantage of the opportunities we see in the market and support our long-term growth objectives. With that, I'll turn the call over to Kevin.