Good day, ladies and gentlemen, and welcome to the Matrix Service Company’s Sets Date to for the Fourth Quarter and Fiscal Year Ended June 30th Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to introduce your host for today’s conference Mr. Kevin Cavanah, Chief Financial Officer. Please go ahead, sir.

Thank you. Before I begin, please let me remind you that on today's call the Company may make various remarks about future expectations, plans and prospects for Matrix Service Company constitute forward-looking statements for purposes of the Private Securities 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 annual report on Form 10-K for our fiscal year ended June 30, 2016 and in subsequent filings made by the Company with the SEC. To the extent the Company utilizes non-GAAP measures, reconciliations will be provided in various press releases and on the Company’s website. Further please be advised the Matrix its directors and certain of the executive officers are participants in the solicitation of proxy from the Company shareholders in connection with the upcoming 2017 Annual Meeting of Shareholders. As we disclosed in our preliminary proxy statement filed yesterday, Engine Capital, L.P. has notified Matrix of it intends to nominate two director candidates for election to the Board at the 2017 Annual Meeting. Shareholders are strongly encouraged to read the proxy statement, our company proxy card and all other documents filed with the SEC carefully and in their entirety as they contained important information, information regarding the identity of accompanying participants and their direct and indirect interests by security holdings or otherwise is set forth in the proxy statements and other materials filed by the Company with the SEC. These materials can be found for free to the Company's website in the section Investor Relations or through the SEC website. We will not comment further on the director nomination notice of Engine Capital on this call. I will now turn the call over to John Hewitt, President and CEO of Matrix Service Company.

Thank you, Kevin, good morning everyone and thank you for joining us. We have a lot of business results and strategic information to cover this morning, so I want to apologize to you ahead of time to today's prepared remarks will be slightly longer than normal. First, I would like to extend our heartfelt thoughts and prayers to all those impacted by Hurricane Harvey and as of those in the path of Irma after heed those warnings. The catastrophic damage infected by Harvey along the Gulf will be felt for some time to come and the people affected by it including our own employees and customers will all need our help and support. As they began the path to recovery, it is also heartwarming to experience the resiliency of the human spirit and to see our people from across the country have come together to help so many in need. That's all joined together to do what we can. On a positive note, I want to congratulate our team at the Matrix Service fabrication facility at the Port of Catoosa outside of Tulsa for achieving OSHA's Voluntary Protection Program or VPP star designation. This designation which is the highest designation given by OSHA is reserved for employers and for employees who demonstrate exemplary achievement in the prevention and control of Occupational safety and healthy, and health hazards. Finally, I would like to take a moment to also congratulate all of our employees for achieving a consolidated total recordable incident rate of 0.49 in fiscal 2017. This is a record for our company and represents [audio gap] for our diverse portfolio of businesses. Thanks to all of our employees for putting our core value of safety first. It differentiates us from our competitors and in turn results in greater long-term value…

Thank you, John. As John discussed earlier, the fourth quarter and full year results I'm about to discuss with you were driven primarily by a revenue shortfall across our end markets. In addition to the loss direct margin opportunity, the revenue shortfall resulted in the under recovery of construction overhead and SG&A cost. During the year, we took definitive steps to minimize this under recovery through a thorough review of the entire cost structure that resulted in reductions in work force, consolidation of offices, minimization of capital expenditures and other cost reductions. Specifically on a consolidated basis, we adjusted our business plans which allowed us to reduce expenses by over 10% in fiscal 2017. These decisions were balanced against the need to maintain the infrastructure necessary to successfully bid, win and execute on revenue opportunities. We will continue to focus on cost control throughout our business and specifically in areas of our business experiencing lower revenue volume as we move through fiscal 2018. Now let's move on to discussing these specific results. Consolidated revenue for the quarter was $292 million, which compared to $360 million in the prior year, a decrease of approximately $68 million or 18.9%. The decrease in revenue on a year-over-year basis was primarily due to the revenue decline in Storage Solutions that was partially offset by higher revenue in the Oil Gas & Chemical segment. As John discussed earlier, from a project execution standpoint, our people turned in a strong quarter. On a consolidated basis, direct margin performance met or exceeded our targets. The Company reported gross profit of $23.1 million for the quarter compared to gross profit of $34.1 million in the prior year quarter. Consolidated gross margins were 7.9% and 9.5% for the same period respectively. The decline in gross profit and margins was…

Thank you. [Operator Instructions] Our first question is from the line of Tahira Afzal of KeyBanc Capital Markets. Your line is open.

I guess first question is, if I look at the fourth quarter and just multiply let's say by four. My revenues end up a little below your guidance range, but my profitability seems to be much higher than what your EPS guidance would suggest. Is that just your conservatism around utilization? Or is it something around the mix that I should be taking into account of maybe tax rate et cetera? Anything will be helpful there.

It's a number of things, Tahira. So, the tax rate is a big impact, but I think a bigger impact is more of the mix of work. And if you think about fiscal '17, we had two large capital projects ongoing. And the revenues associated from those projects for the Dakota Access were essentially done, so there is very little revenue that will come through in Fiscal '18. For the power generation project, the revenues will be little much lower next year and as a result of scope reduction. So that's being replaced by revenues in portions of our business where we've experienced under recovery of construction overhead cost. So I think that has an effect of improving the overall results that we'll report.

Got it, okay. And I guess the next question is, Kevin, you gave us -- you've always given that very helpful range in terms of segment margins. I guess you've given us an update on industrial margins maybe ticking up now versus that range is good to go. But it seems again as all three of the segments maybe you're assuming some level of under utilization, as you said largely on maybe lower cap close projects in the mix right now. If you look at the other three segments, any update on the segment margins there? And what should we look for -- is there a chance that the margins could end up hitting over in that range?

So I think that if you look at Storage, we continued to perform well and I'd say from a direct margin performance, the last half of the year the gross margin was lower because of the under recovery a dip in revenue volume. John mentioned the book to bill of 0.55, but we have also got some projects awards that we are anticipating that would help that segment. So I think our expected range long-term from Storage hasn’t changed, it's still under 11 to 13. Now with that said, I think the first part of the year, it will be below that because of the volume will be at the level that, that will allow for fully achieving that margin. If you look at Oil Gas & Chemical, we are anticipating improvement in the maintenance and repair and turnaround business that volume comes up we will start moving toward that 10% to 12%. I'm not saying that for full year we would achieve that, but I think we will start moving back at toward that level. The Electrical segment, we said 11 to 13 is our long-term range. Current mix, it might be a little lower and it will be lower this year as we complete the power generation project specifically during the first half of the year.

Our next question is from the line of John Franzreb of Sidoti. Your line is open.

I want to stick a little bit within the revenue theme here. First, on the fourth quarter results, how much the Houston Interests contributed to the top line?

The Houston Interests revenues for the first six months -- it was little less than -- is 40 million to 50 million. So I would say it was 20 or so in the fourth quarter.

And Kevin is your expectation similar kind of revenue contribution in 2018?

Above that or a little better, I mean they have been impacted by the same -- both same things that have been impacted in the rest of our business.

I want to sure I understand what's going on Electrical infrastructure. If I heard you correctly John, it sounds like that yours part of the scope will be done by the end of this calendar year. I actually thought it was going to be mid calendar 2018. A, you will hear that properly and B does that mean that the revenue profile also had compared months properly kind of gets in half in the march quarter for Electrical infrastructure?

Yes, I think -- I'll let Kevin give you maybe some of the numbers, but strategically we have decided that we are not going to be chasing as a general contractor or as an EPC contractor of the full projects on a gas power generation. And while we still think there is opportunities out there for us to provide specific packages around either the electrical work or the piping work or the boiler erection to take on a whole project is something there is not -- there is no longer in our strategic plans. As part of the modification to the contract and our agreement with our client, some of the work that we had anticipated we would complete, they will be doing with in a direct subcontractor situation. So that removed -- that’s the reason for the backlog reduction for us and the fact that that workers come away from our responsibility and gone to our clients responsibility also minimizes the amount of time that we're going to have to spend on the job site. So while we may have some folks on the job pass January 2018 and majority of our work will be completed by Christmas of this calendar year. So the balance of the work in that segment evolves around our high voltage business where we're doing a lot of substation work, we do transmission distribution work, we provide other electrical services and to generating facilities whether its repair maintenance or small capital projects. I think we announced a few months ago, we're providing all the electrical services on a combined cycle job at PSE&G in the North East. So the balance of those services are the demand in our markets continue to be very strong, we got a very strong brand position there. And so our expectation is to continue -- is continued at those levels and grow those levels frankly strategically as we expand our services offering outside of the North East. And we're already starting to see some pull into the Midwest for us to do that.

So John, when you look at the fourth quarter, our revenues for that segment were 100 billion. That’s going to be a high mark. We're not going to -- I wouldn’t expect us to see that revenue volume as we in any quarter in fiscal '18. I think you will see a higher level of revenue as we complete that project in the first half of the year and then it will get down to a more normal level. And as John said, the ongoing business has been more than somewhat more than half of the revenue in that segment. So you should expect quarterly revenue of -- it could range from 50 million to 70 million depended on what projects are going on.

Perfect, just sort of looking for Kevin. And how much was the adjustment in scope to the backlog number? What was that number?

It was 79.2 I believe.

So I guess one follow-up question then is, is you looking for growth in revenue year-over-year, you're going to have a drop in second half of revenues from the Electrical Infrastructure business. I think you've kind of indicated that the turnaround business is not going to be particularly strong recently in parts of the delays from Harvey and so in the oil and gas side of the business. Can you kind of reconcile your confidence in the top line growing year-over-year given some of these puts and takes you kind of put out there?

Right, I would tell you that I think that the Electrical Infrastructure piece of the business will be up slightly from what would be traditionally our business. If you take out the power generation activity, the Oil Gas & chemical and the Industrial businesses, we think will be up significantly not only from the impact of our expanded engineering capabilities and the new markets that bring, but also we're seeing a lot of strength returning in our mining and minerals and minerals business. And then in from a Storage prospective while it's been sort of flat because that's we haven't been able to replace the Dakota Access Project completely, but we have replaced with several projects that we're working on currently and some of the larger projects that are in our current pipeline that we didn't expect it to bring in the backlog in '17. We're nearing the -- we’re nearing the point where we think some of those projects will in our backlog in this calendar year. So, we will start to see some more growth in the back half. The other thing is in the -- didn't want to mislead on the turnaround that so the -- what we're seeing in the turnaround markets based on the bookings and expectations from our clients is both the fall and the spring will be some of the strongest turnaround seasons that we’ve had for a couple of years. We’re just being cautionary on Harvey that it could delay the start of some of the turnarounds that we’re working that we’ve got plan to do in the fall, it could move from our second quarter into our third quarter or could move later into our second quarter, but we don’t see any of those getting permanently delayed. It’s just kind of moving around those revenues. So our expectations this year on a consolidated basis through the course of the whole year that our turnaround business will be a lot higher than it’s been in the past few years.

Thank you. Our next question is from Matt Duncan of Stephens. Your line is open.

So just sticking with the question on guidance. I am hoping maybe you can give us a little more comfort around the storage business. I know you’ve been expecting John these awards to come in. For some time they have been slow to materialize and I guess they haven’t yet because your backlogs still are really low level there. Where does the degree of confidence come from that these things are about to go into backlog? And when they do, how bigger projects are we talking here? I mean you see multiple hundreds of millions of dollars some of the large type or sort of what type of stuff are we looking at?

We’re working on just our traditional tank business which is seeing a very strong demand for just the construction -- engineering and construction, fabrication of our normal flat bottom tank business and that’s going on little bit of everywhere. We are seeing on full terminal projects, which is where we strategically seeing the growth in our business. Those are projects anywhere from say 10 million to 250 million kind of projects. And so, one or two of the larger ones obviously make up -- will make up dramatic change in our backlog in that segment. And I will tell you that we’re at -- hopefully, because of our strategic shift and the things we have done to our business, I think it’s also because of what’s going on in the market. We are seeing a very, very large demand for full terminal applications and storage whether that’s crude whether it's refined products, whether that’s chemicals, whether that’s LNG for export or it’s small scale LNG for export or for fueling stations. And so this is just a very large demand. And I think a lot of the people that are looking at these projects and they are not all developer projects, some of them are by very well-funded special purpose companies there by blue-chip companies that we do business with all the time that -- but I think they are all being a little bit more robust. And their process are getting to financial close, making sure their off-take agreements were signed up, make sure they got the right financing in place, make sure all the permitting is completed. So there is just a little more diligence that we are finding around, getting these projects to completion that we maybe we would have seen two or three years ago. And so, we think that there market demands out there. We think our position in the market is really, really good. And based on some of the things that we have been working on, as I mentioned before we are in some final negotiations on some contracts on some storage related projects, so that’s kind of why we have said that we feel the backend of our year will be stronger than the front end as we bring these things to close, and we're being just probably a little bit more cautious on the timing to get those across the finish line.

Okay. That makes sense. And in the Oil Gas & Chemical segment, you've obviously had a very nice progression of revenues there throughout fiscal '17. Can you talk about sort of what you think the trend line is going to be there in fiscal '18? Is that momentum is going to continue? And what kinds of revenue do you think that segment is capable of producing this year, if you see turnaround work start to come back? I assume that you're getting access to work you didn't have before the Houston Interests acquisition. What is that segment now capable of from a top-line perspective?

So, we're probably -- could probably have a run-rate of somewhere over a $110 million per quarter in that at the back end of the year. We're seeing -- we're getting access into gas processing cryo plants through their capabilities where like I said we're seeing more strength in our turnaround business and we expect tempered by Harvey's impact where we were expecting a higher turnaround season in the spring that's even higher than what we were expected as a improved turnaround season in the fall. And then there is a lot of other opportunities for us and sulfur processing, we're seeing a lot of that work as a result of the expanded Matrix's PDM design capabilities coming in. So, we expect through the course of the year for this our revenues there to continue to trend up.

Thank you. And it looks like we have a follow-up question from Tahira Afjal of KeyBanc Capital Markets. Your line is open.

Thank you. I guess as a first question, follow-up question John. When we were sitting around this time last year, there was a lot of enthusiasm that we were going to see a record spring turnaround season and that didn't happen. And I guess, is there something different in your conversations from where you are in terms of ready of process of turnarounds that giving you this confidence?

So, I would tell you that from the fall perspective is that we're fully booked. And from the turnaround work that we've seen and some of the planning work that we've done through the spring although it was light, it's we can tell the intentionality from our clients is that the turnarounds that they're going to do will have largest scopes associated with them that we've seen. So while we've been active in the turnaround market for the last couple of years, the amount of money that was being spent was significantly lower than what we were used to. So based on the bookings that we're seeing for our turnaround services based on our appreciation for the environments that our clients are in, all lead us to the conclusion that our turnaround markets will be stronger this fiscal year than they were last year.

And then John, to the extent Magnolia LNG gets pushed out let's say another year. Can you still meet the lower end of your revenue guidance?

Yes. So, Magnolia is an opportunity -- it's a positive opportunity for us, if we were selective to be the storage contractor for that project, but it's not anticipated as a project in this fiscal year.

Thank you. And that concludes our Q&A session for today. I'd like to turn the call back over to Mr. John Hewitt for any closing remarks.

Yes, thanks everyone for listening to this call. As a final note, I just want to ask you not to judge the performance of our people and the business on the last 12 months. We have a 30-year history of growth and successful operations built on our core values. These core values are the bedrock of our culture. They are essential to every decision we make and as by living our core values that we have earned the trust and respect of our employees who believe Matrix is a great place to work. Our customer base and that includes some of the largest blue-chip companies in the world and our shareholders. I want to thank you again for your continued trust and support and I look forward to speaking with you all in the near future.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone have a great day.