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 in a listen only mode. Later we’ll conduct a question-and-answer session and instructions will be given at that time [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the conference over to today's host, Ms. Kellie Smythe, 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 Cavanah, 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 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 Web site. Related to investor conferences and corporate access opportunities, 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 Web site. 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, Kellie, for this important message about sacrifice, safety and 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. And 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 our already booked multiyear 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 Solutions segment, activity was robust…

Thank you, John. The results for the fourth quarter were in line with our expectations. As anticipated, revenue improved from the third quarter, increasing 14% to $189 million. We have previously discussed that the growth in our backlog has been fueled by long term construction projects, which have an inherent lag between the time a project is awarded and when it begins to translate to revenue. These contracts make up a significant portion of our backlog and are just now beginning to benefit revenue. We expect that trend to continue in fiscal 2025. As John mentioned, the year will have a slow start. Once we get past the first quarter, revenue growth should accelerate through the remainder of the year, driven by the Storage and Terminal Solutions and Utility and Power Infrastructure segments. I will discuss revenue trends further when I get to the segment discussion. Project execution was strong in the quarter, particularly in the Process and Industrial Facilities segment. While consolidated revenue increased, the company still has underrecovered construction overheads, which impacted the gross margin by over 400 basis points, resulting in a gross margin of 6.6%. Moving down the income statement. SG&A was $17.3 million in the quarter, which is in line with our targeted levels. For the fourth quarter of fiscal 2024, we had a net loss of $4.4 million or $0.16 per fully diluted share. Now for the operating segments. In the Storage and Terminal Solutions segment, revenue increased 30% to $70 million as work began on previously awarded specialty vessel projects compared to $54 million in the third quarter. We expect this trend to continue as we move through fiscal 2025, resulting in significant revenue growth. Gross margin was 3.1% in the quarter as margins were impacted by under recovered construction overhead costs as…

Thank you, Kevin. As mentioned, our fourth quarter represented an important turning point for what has been a challenging period for the company. With clear visibility into revenue growth and improved profitability in 2025 and beyond, we continue to advance our growth strategy for creating long term shareholder value. In closing, I'm deeply grateful for the hard work, innovation and commitment of our employees for their continued confidence placed in us by our clients whose loyalty inspires us to push the boundaries of excellence in every critical infrastructure project we undertake and for you, our shareholders, who remain committed to Matrix Service Company. With that, I'll open the call for questions.

[Operator Instructions] Our first question comes from John Franzreb from Sidoti & Company.

I'd actually like to start with the gross margins that you reported in the quarter. I guess I want to start with the good. Can you talk a little bit about why the Process gross margin was still outstanding at 15.4% in the quarter, and how does that look like on a go-forward basis?

So the fourth quarter performance in the Process Industrial Facilities segment was extremely strong and what we saw was just about every operating unit in that segment significantly exceed normal performance. So that's the result of strong execution throughout all phases of projects from the starter projects through the closeout of projects. Normally, that's not the case where everything just is working on like clockwork. I think for the long term, our expectations for that segment are to get consistently 9% to 11% gross margins. Remember, this segment includes a lot of reimbursable activity and so the mix of work in the quarter, the reimbursable refinery maintenance activity, wasn't as high as it normally is. So that also contributed to the higher margins in the quarter.

And on a go forward basis when we think about the gross margin profile, are the jobs that we're executing now on, are they back to normalized gross margins or are there still some jobs that you'll be delivering that are still under recovery of absorbed costs?

So if you look at the portfolio of projects we've got today, we're past those issues where we had unusually competitively bid margins. The projects we've been adding in the last 18, 24 months are in that historical range for the most part of that historical 10% to 12% range. Now there will be -- certainly be projects we strategically bid a little more aggressively to get either win that project for various reasons, including maybe it's we want to expand our relationship with that -- with the client. And then there's always a mix of projects. You get into smaller projects, there may be a higher level of competition, more people that are capable of doing that work. And so you may have to be a little more aggressive on that type of work versus larger projects. But I would say we're back to a normal overall normal mix of work that supports the margins we expect.

As we think about the cadence of revenue recognition in the coming year, it seems two things to me. One, we're looking at a sizable uptick in the Storage business. Is that the case and is that completely weighted in the second half of the year? And secondly, that -- it looks like the Process is going to probably be at a lower diminished level through much of 2025. Am I reading that right?

So for Storage, I mean, if you think about it, we've got close to $800 million of backlog for that segment. Those projects are in their early stages and commencing, and so we expect significant growth in that segment. And it's going to -- it should trend that way throughout the entire year. So it should start off the first quarter strong and continue to grow as the year progresses. Now on the Process and Industrial Facilities segment, we are kind of in a lag period here. We just completed a significant project that we talked about a couple of times on the -- in the script. And we're in a traditionally summer months, which are slower for refinery. And then we've got backlog projects that don't start until later in fiscal '25. So the first couple of quarters of this -- for that segment are going to be pretty low. So we expect a substantial decrease in the first half of the year and then you'll see it start to pick up again in the third and fourth quarters.

[Operator Instructions] And our next question comes from Brent Thielman from D.A. Davidson.

Just wanted to follow up on just kind of the sequencing of that revenue as we work through fiscal 2025. I appreciate the revenue guidance, by the way. But sounds like maybe you're expecting still some more difficult or challenging kind of year-on-year compares in the first fiscal quarter. But your revenue did grow in this fourth quarter relative to the third quarter. So it seems like things are picking up for you. Would you expect some sequential revenue growth into the first fiscal quarter?

No, I think it's -- there's a couple of things working against that from happening. First of all, you've got summer month activity for both the power delivery business and the refining business. And then secondly, we've got the completion of the large project that we have in the -- had in the Process Industrial Facilities segment. Surely, that's offset somewhat by growth in Storage, particularly in the first quarter. But I think overall, I wouldn't expect growth in -- maybe a little bit lower in the first quarter.

And then John, I guess -- I mean, just back to the electrical delivery business, I mean, all we hear is about investment and what needs to happen to the grid. So it's a bit surprising still to hear some challenges in that business. Maybe if you could just talk through that, what's the challenge there with those particular customers? And then how quickly do you think we can get this business back on a better footing just as some of the actions you're taking to refocus with some new customers?

So our Electrical Infrastructure business is in a fairly tight geography as you compare that to the entire United States. And so we've got some long term clients that we work for in there, both on -- in a contract or choice arrangements, MSAs and projects that we bid. And I think what we're seeing by some of those principal clients is their spending patterns, which happens, it seems to happen in cycles for a lot of our clients, is down a little bit and size of the projects are smaller. The competitive set continues to be challenging that we deal with. So our teams over the last six months, we've seen this trend start restarting again. And so if we're continuing -- we continue to focus in the Northeast but expand our footprint in the Northeast, into other areas, into other client geographies and where we're seeing larger capital spend in transmission, distribution and substation work. And so we've been in a process there where we're working on and developing those relationships and getting into that bidding cycle with those clients. So that work is ongoing. We're seeing some great fruit there on the opportunities that are affording themselves to our business. In addition, there's a lot of industrial electrical work in the region that we work in whether those are in power generating facilities or data centers [Technical Difficulty] midstream work, LNG facility upgrades. And so we're actively attacking those markets as well to work to expand our business. So that's going to take some time. But I think over the next two, three quarters, we're going to see some more strength return into our Electrical Infrastructure business. And we're continuing to look at new geographies for that business. We have been active in the Ohio Valley, but I think there's opportunities for us there to expand that footprint into that region of the country as well. So we think long term, electrical piece of our business is a growth element and is an important part of our business moving out into the future. And we're going to continue to work from a business development and a resource standpoint to find avenues to grow that business.

And John, maybe just one more. I mean a lot of conversations, obviously, about the demand consumption of data centers on the power grid, on power in general. As you're looking at your pipeline of prospects, $6 billion-plus, are you starting to identify projects that may be associated with meeting those needs, particularly serving the power sector?

Yes, absolutely. So I mean our initial work related to data centers will certainly be in the transmission distribution work and the connection of data center into a local grid system. We did a fairly sizable project for a client in Pennsylvania a couple of years ago. We finished where we built the -- connected it, put the substation and did all the grid interconnect. And so there continues to be some opportunities out there that's driving some of our opportunity pipeline. I think the other thing we're seeing there is the -- with this demand, this huge demand that data centers themselves are creating for on -- for power, these data centers need continuous guaranteed power. They need to be able to guarantee to their clients that they're going to be able to have their systems up and running no matter what. And so the other thing we're starting to see is more small scale power generating turbines put in at data center sites, LNG and/or hydrogen backup fuel for their individual power generation on, these are those aero derivative turbines. So all that work is work that fits within our skill sets, whether it's installation of those turbines, certainly all the electrical work certainly, anything related with LNG and hydrogen, infrastructure that needs to put in to service that backup power supply for those data centers. So there's more there than just building the data center and connecting it to the grid. And so we think those opportunities are going to be growing out into the future and we're really well situated to take advantage of that.

And we have a follow-up question. One moment, please. And our follow-up question comes from John Franzreb from Sidoti Company.

I got a question about -- you called out the opportunity pipeline, does it include service revenue or jobs less than $5 million? I'm just curious what percentage of say, fiscal 2024 as revenue, is that service component and smaller, maybe we would characterize as book and turn business? And is that a normal run rate or is that abnormally higher or low? Just wanted to put that in context.

I mean we traditionally -- our business runs in the 40% book and burn maintenance activity, 60% lump sum projects and those could be lump sum projects from anywhere from $5 million to $10 million up to $300 million. So that mix in that portfolio generally runs in the 40-60 kind of range. I would say today, because of the size of our lump sum portfolio spread across our Storage business and spread across our UPI business, that's probably more like 30-70 to what that looks like. And so good news for that is it's more sustainable revenue for us long term and it helps to drive better consolidated margins.

And I also noticed in the presentation and this might be just me, I don't know, nitpicking, but you change the characterization of the opportunity pipeline, kind of reported it on a segment basis as opposed to like a more granular breakdown by end markets. Any particular reason why?

Well, we report the business in our segments and we were trying to provide some -- over the past couple of years, trying to provide some color on our -- the work that we're doing that's in this energy transition mode to give investors the opportunity to see what our impact was there. And so we just kind of just generally felt that, hey, maybe it's just time to go back to our -- how we report the rest of the business in our segments. And so that was really the -- really, to me, our main thinking when we did that. Nothing subversive, John.

And can you just talk a little bit about the competitive landscape? Are you seeing any changes in the pricing environment, either one way or the other?

No, I think competitive landscape still lays itself out like it normally does for us. The smaller projects, the reimbursable stuff, there continues to be -- it continues to be a highly competitive market out there. I wouldn't say it's gotten better or worse. It's sort of, I'd say, back to normal. And -- but as the project sizes get larger, as the type of projects in Storage with our specialty vessel were connected into full facilities, the competitive set dropped significantly as those projects get -- not only get larger but the fact that those are the kind of projects that are out there where you've got a mix of specialty storage with facility infrastructure wrapped around it. And I think that's an important point for us that those projects are back and they allow -- those projects allow a much better margins, better risk profile. Generally, the people we compete against in those projects, which is probably less than a handful, they don't do stupid stuff and so to drive the risk in those jobs outside of something that any one of us think we can control. So it's just a better landscape, I think, as those projects [Technical Difficulty] on a lot of these Storage and UPI projects.

And one last question then. Just only because I recently heard this and this topic hasn't [come] up in a while. Could you give us an update on your thoughts of the hydrogen market? Only because I just recently heard it come back in vogue a little bit. What are you hearing there, John?

I think -- I mean, for me, I still think hydrogen is going to be -- out into the future, is going to be part of the global fuel mix. I think it could be, as most things across through the social media, I don't think it's -- we're going to be 100% hydrogen economy in the future. But I think it's going to be part of the fuel mix. And I think that we're going to -- we have an opportunity to play a role in building that infrastructure with our specialty vessel capabilities, our cryogenic capabilities, ability to wrap our infrastructure around that. We're continuing to see opportunities in FEED studies, preliminary engineering work for various hydrogen projects. I think, to some extent, a little bit got slowed down with how the Federal Infrastructure Act was legislated related to the credits that were coming out of that act and the need for renewable fuel to power, the hydrogen facilities. And so I think that's kind of set back some of the people that were focused on that. We're also related to hydrogen and the other work we do, one of the changes that we made when we sort of reorganized our business development group and our focus on our markets was to be cautious about developers, developer led projects. And so we're much more focused on long term clients, blue chip clients, clients that have balance sheets, whether those utilities or energy companies or industrial companies. And so there's been a fair amount of activity here over the last couple of years of developer type hydrogen projects and we're pretty cautious about, today about our interaction with developers.

And I am showing no further questions. I would now like to turn the call back over to Kellie Smythe, Senior Director of Investor Relations, for closing remarks.

Thank you. As a reminder, Matrix will be participating at the upcoming D.A. Davidson Conference, September 18th through the 20th in Nashville. And if you'd like additional information on our attendance at that conference or conversation with management, please contact me through Matrix Service Company Investor Relations Web site. Thank you for your time.

This concludes today's conference call. Thank you for participating. You may now disconnect.