Good morning, and welcome to the Matrix Service Company conference call to discuss results for the second quarter of fiscal 2026. [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, Victor. Good morning, and welcome to Matrix Service Company's Second Quarter Fiscal 2026 Earnings Call. Participants on today's call include John Hewitt, President and Chief Executive Officer; and Kevin Cavanah, Vice President and Chief Financial Officer. Following our prepared remarks, we will open up the call for questions. The presentation materials referred to during the webcast today can be found under Events and Presentations on the Investor Relations section of matrixserviccompany.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 results 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. The forward-looking statements made today are effective only as of today. To the extent we utilize non-GAAP measures, reconciliations will be provided in various press releases, periodic SEC filings and on our website. Finally, all comparisons today are for the same period as the prior year, unless specifically stated. As we open today's earnings call, let's take a brief moment to focus on what matters most, keeping ourselves and each other safe. With about 6 weeks to go before the official start of spring, this winter has already brought a range of extreme weather across the country from blizzard and ice storms to record-breaking cold snaps and heavy rainfall. These conditions disrupt daily life and create serious safety challenges for everyone, especially those working outdoors. But the challenges go beyond just physical safety, shorter days and colder temperatures take this toll, not just physically, but mentally and emotionally. Challenges to mental health are as real and as important as physical risk. This is especially true for those in construction and field work, where teams often face harsh outdoor working conditions and are also far from home and their personal support networks, all of which can lead to increased stress, fatigue and isolation. That said, regardless of where we work, it's important to take time to check in with ourselves and those around us. Watch for signs of stress, start a conversation, listen and offer support. When we look out for one another and use the resources available, we help keep our teams and workplaces safe, healthy and strong. If you or a colleague needs help, reach out to someone you trust or use the support resources available. Let's keep safety, both physical and mental, at the forefront, especially during challenging times. Together, we can make sure everyone goes home safe every day. I will now turn the call over to John.

Thank you, Kellie, and good morning, everyone. Before we address our second quarter results, I want to highlight important developments announced yesterday regarding our succession planning at Matrix. Over the past year, Matrix is focused on actively advancing our strategic objectives and our leadership succession plan while continuing to evolve our organizational structure to support long-term growth and success. As you might recall, as part of this effort, Sean Payne was promoted to President of E&C in May of 2025. Yesterday, in our leadership transition release, we announced that Sean has now been elevated to the Chief Operating Officer of Matrix. And then per our succession plan, I will step down as President and Chief Executive Officer on June 30, 2026. At that time, Sean will assume the role of Chief Executive Officer, ensuring a seamless leadership transition. I've worked alongside Sean for nearly 30 years, first at a previous employer and later by recruiting him to Matrix in 2012. Sean is a proven leader with exceptional operational expertise and unwavering commitment to our people and our stakeholders. He has been instrumental in the growth of our backlog, our business turnaround, organizational streamlining and strategic planning, and he will actively participate in future calls and investor meetings throughout this transition period. I'm confident in Sean's leadership, and I'm excited about the future of Matrix as well as our market strength and the unprecedented generational infrastructure investment underway across the country. Now moving on to second quarter results, which reflect continued positive execution across our business and culminated in revenue growth of 12% compared to the second quarter of last year. And while our underlying results for the quarter reflect strong growth and solid execution, we did record an unfavorable adjustment related to warranty responsibilities and miscellaneous subcontractor and vendor commercial…

Thank you, John. Let's start with the results for the second quarter of fiscal 2026. Revenue was $210.5 million, an increase of $23.3 million or 12% over the second quarter of last year, driven by growth in all 3 segments with utility and power infrastructure accounting for over 60% of the increase. We expect to achieve our full year revenue guidance of $875 million to $925 million on strong growth in the second half of the fiscal year, particularly in the fourth quarter. This growth will be driven by large LNG and NGL projects already underway in the Storage and Terminal Solutions segment. Consolidated gross profit increased 21% to $13.1 million in the second quarter compared to $10.9 million in the prior year. Second quarter gross margin was 6.2% as compared to 5.8% for the second quarter of fiscal 2025. Higher revenues resulted in improved recovery of overhead costs and project execution was generally strong throughout the business. That said, costs associated with items arising during commissioning of a specialty tank project in the Storage and Terminal Solutions segment resulted in a $3.6 million reduction of gross profit during the quarter or about $0.13 per share. Adjustments to project cost estimates and therefore, direct margin, both positive and negative, are a normal aspect of our business, especially as we work to close out a project. During the course of the year, these variations generally net to a positive and improved direct margin across the portfolio, which we expect to occur this year as well. Year-to-date, the direct margin performance, including this issue is above plan. As backlog converts to revenue and activity levels continue to ramp, if these types of project level dynamics occur, we expect them to be absorbed more efficiently across the P&L, reducing quarter-to-quarter variability. Moving down…

[Operator Instructions] Our first question will come from the line of John Franzreb from Sidoti.

I'd like to start with that onetime issue or the issue you called out, the $3.6 million in storage. I'm curious, is that bleeding into the current quarter? And is there any other large issues similar to that, that we should be cognizant about?

No. I mean we think we've captured the issues associated there and that we would not expect anything leading, as you said, leading over into the third quarter. We think we've got our hands around what the issues are and a path to get them resolved.

And is there anything similar...

Nothing similar hanging around someplace else.

Okay. Good to know. You also called out in your prepared remarks the opportunity pipeline. It looks like it's up roughly 10% or $600 million from last quarter. What's driving that growth?

I think probably -- I don't have the statistics in front of me, John. I think a lot of it is -- a lot of it is in the LNG market space and NGL space, but we're also seeing more activity in mining and minerals, and we're seeing more activity in, I think, in electrical. And while those projects aren't necessarily as big, but they're strategically significant for the business.

Okay. Got it. And again, you did reference this in your prepared remarks about the backlog. I'm kind of curious, not only in aggregate, has the backlog kind of been weak the last couple of quarters, but also notably in utility, which I really thought would have been stronger. Can you kind of talk about what's going on in the overall marketplace?

Yes. I think the award cycle, obviously, we feel as though it's been a little muted. And I think some of the uncertainty in energy markets and permitting, the process of permitting is difficult. I think some of those things is just taking a little bit longer for a lot of those projects to get from our opportunity pipeline into a situation of FID and award. We think all the projects in there are good solid projects that we're going to have an opportunity to bid and win our fair share of them. There has not been -- so we track what comes in and out of our opportunity pipeline on a monthly basis. And so if you go look at that, that isn't a lot of those things are getting won by someone. It's not a high percentage of them that are getting won by competitors, right? They're either moving out of our opportunity pipeline back into our prospects because of some permitting delay or a client's investment decision. And then we have projects moving in out of prospects into opportunities. But I can't tell you, we're looking at our statistics every month, every quarter and it's saying, oh, wow, we're not winning any of this work. The stuff is just kind of moving around on us. And you got to remember, too, a decent chunk, and I think we've said in the past, probably $70 million to $100 million worth of stuff happens for us every quarter. It's just small projects and maintenance activity and all that. It just -- it's not in that opportunity pipeline. Because we don't think it's relevant to have mixed in with all that other stuff. So we have this baseline of awards and work that comes in and out of -- can come in and out in the quarter, not in that opportunity pipeline. And so it makes it sort of -- it almost makes it sort of invisible. And -- but that stuff is continuing to happen for us. And we're focused to continue to expand our maintenance operations and maintenance work, and we're geographically looking into new areas to expand our refinery maintenance and some of the other maintenance activities we have. So while we certainly would like to have big book-to-bills every quarter, but I think we've communicated to you guys in the past that we're going to have a quarter with a big book-to-bill and then we could have 2, 3, 4 quarters where it's going to be below one. So I think it's okay. I think we're in a good spot. I would say, if you look at the details, the book-to-bill for the year, the book-to-bill in storage is above one. So we're continuing to have a strong bookings in that, and it represents a big chunk of the business.

So John, just a follow-up. Do you expect these awards to be moved to the right such that they're going to be awarded in the second half of the fiscal year? Or they move to the right that they're going to be a fiscal 2027 award? I'm just kind of curious about maybe the exit velocity of backlog in fiscal 2026. Because we kind of talked about it being around 1.0 overall and maybe if that dynamic has changed at all.

Right. I think what we've said and what we've communicated in the past and I'll use an NFL term chunk place, so like chunk projects, right? So the big chunk projects that drive -- really drive a big book-to-bill in the quarter, they're out there. We're positioned for them. Those big chunk projects are the ones that I think are going to be -- we're going to see in our award cycle in fiscal '27, which starts July 1. And -- but we're going to see some -- probably some strategic awards, some smaller awards that are going to be in the next 2 quarters, but it probably isn't likely that we're going to exit the quarter over 1.0 collectively across the business. But you continue to see a strong book-to-bill in any one of the segments.

Our next question will come from the line of Brent Thielman from D.A. Davidson.

John, maybe just to follow up on the conversation about all the things you can do around data centers, I sort of bundle things you can do directly on those sites with the power component of that as well, which just seems to be sort of feverish demand here. Why wouldn't that be more influential to your bookings here in the next few quarters, just given the appetite and the fact that you have these capabilities that seem to be in the sweet spot of that.

Yes. So I think it's a good question. We're -- we've been focused on that market here. It didn't just start yesterday, right? So we've been working on it probably over the last 12 months and we recognize like everybody else that there's a significant amount of spend there. But you got to remember, a lot of those clients are new clients to us. Yes, we've got a power generation capability in-house. We've built some significant power plants that's on our resume. And obviously, the electrical connectivity issues that our electrical connectivity capabilities that's principally in the Northeast and then all the backup fuel and all that stuff. So -- but we're kind of entering that market, and we've got to sell our resume. We've got to build relationships with those clients. We have got to want to make sure we're positioning ourselves for work that's fits our risk profile and our financial profile. We need to appreciate how we compete and how we win in that market. And so all that stuff is going on. And I think we're starting to see some fruits of that work by our business development and operations people. And so as we said in the prepared remarks, my thoughts are that we're going to start to see some growth in the opportunity pipeline as some of this stuff gets to -- hits where we can -- are going to be choose deciding to bid or being invited to bid on certain projects. But we're already bidding projects from an electrical infrastructure standpoint on new substations that are directly connected to a data center power needs. And so we have several of those that we're bidding now, and I would hope that we're going to be able to put some of those into backlog in this second half of the year. And so we're also working with EPC power plant constructors where we can come in and provide our services and any one of the things that I mentioned there, whether it's putting the turbines in or doing the mechanical work or electrical work or erecting the boilers or whatever that is, all those things we've got capabilities and skills for. And so we're -- so we're -- I think we're doing a good job. We're working into those markets. And I think we're going to see here over the -- we're going to start to see some impact to that effort in our opportunity pipeline and to a small degree into our award cycle this fiscal year, but it's going to really start to grow, I think, as we move into '27.

Appreciate that, John. Any thoughts on the midstream side? I mean, as you talk about all the demand around gas power coming, I mean it's becoming pretty evident with some other companies. Is there -- are there things that you're starting to see in the midstream arena pop up for you that could also be an opportunity?

So when you say midstream, are you talking about crude oil or are you talking about gas?

Yes. Yes.

Yes to both.

Yes.

Yes. So I think the crude market is fairly muted. There's some new tanks getting built. There's certainly tank maintenance repair works going on all the time. We do that work. But I think a lot of our storage resources have been a little more focused on the specialty vessel stuff we're doing, where it's more complex construction, better margins for us, less competition. And so while we're still doing -- we continue to offer services on the crude storage and midstream side of the company, it's become a smaller and smaller piece of the revenue of the business. So there's activity out there. On the natural gas side, certainly, we've got a great position in gas storage in LNG and in NGLs, both from a storage perspective, but also the balance of plant construction for those facilities and whether they're utility connection or there for fueling or whatever. So I think we're -- the activity level there, I think, related to gas is strong, getting stronger. A lot of permitting issues around that. As we said in the prepared remarks, there's a lot of pipeline issues out there in the marketplace because of permitting challenges. And so you have companies that are unsure about tying up dollars when they're uncertain about the ability to get a permit pushed through. So one of the projects that we announced an award last quarter, we're building the balance of plant for NGL facility, which we're also building the storage tank for. And we had expected more revenues in Q2 on that project, but the permitting delays have kind of pushed has slid the [indiscernible] our ability to go burn revenue into the back half of this fiscal year. The project is in flight. We're starting to get permits. We're starting to work through it. But that's certainly one of the issues, I think that's impacting probably a lot of people in the midstream market.

Okay. And then you did mention minerals and mining. Obviously, critical materials become more topical here lately. your positioning there and kind of maybe waited for us to size the opportunity for you?

Yes. So we've got a legacy history in mining and minerals. We used to -- we had -- when that market was stronger, we had an operation in Arizona and did work for some of the big miners down there. And then that market kind of fell apart. And so we've kind of kept our hand in there from a sales perspective, but really haven't done any work. That market is coming back strongly, copper, rare earth minerals, gold. And so we're seeing a lot more opportunities finally get off the drawing board. And we've got a couple of really nice projects that we're bidding now in the mining and minerals market. And again, we're -- we think our brands continues to be strong there. And so we're kind of rebuilding those relationships and I think there's a real opportunity for us here. Plus you got the -- besides the demand for those kind of nonferrous metals related to what's going on with all this infrastructure build-out, you've also got the federal government now that is -- again, from a national security issue is investing money in rare earth minerals to make sure that from a national security issue that we've got those minerals here in this country. So I think there's a lot of good tailwinds associated with that market. And I think we've got a resume and the relationships to be able to take advantage of it.

Okay. And just last one, guys. I appreciate you taking all these. I think about the outlook for the rest of the year, the return to profitability you're anticipating and what seems to me like a lot of green shoots here in the business, notwithstanding some of the uncertainty in some of your markets here in the short term. And you got a lot of cash on the balance sheet. I mean, John, just to refresh on buybacks, why wouldn't they make sense here? It just seems like business is heading in the right direction. You've got some good things coming for you. Maybe just update on your thoughts there?

I think as we've always said, I think our -- as we want to -- as we return to profitability, yes, we have cash on the balance sheet. We're going to be focused on -- we've been pretty lean as an organization on how we spend our capital internally for our operations. And so there's some catch-up for us to do there. We are going to be looking for inorganic opportunities that round out our business offering. And certainly, the inability to find inorganic opportunities to add to the business could result in us making the decision that maybe we buy back shares. So I would say all that stuff is on the table. And so we're -- as we've said in previous calls, we're waiting -- we're driving the business to return to profitability to win, execute and deliver. And as that happens, then we're going to be looking for more expanded things to do with the cash on the balance sheet.

We have a follow-up question from John Franzreb from Sidoti.

Yes. I'm just actually curious about the competitive landscape. Are new jobs being written at target margins? Or is there pressure in certain end markets versus others? And I guess on the flip side of that, are some being written at above target? Can you just kind of talk a little bit about that?

Yes. I mean the work that we're booking on a collective basis is falling within our targeted margin ranges. So I would say we're not -- it's not the same as it was 3 years ago where contractors are out chasing projects and driving margins to the bottom. That's -- we're not experiencing that.

And any of the markets above target margins at all?

Yes. I mean it depends on which piece of our business. Some pieces will get a higher margin. Some of the bigger the job, sometimes we're able to get a higher margin. So I think we've talked about a margin range of 10% to 12%. Some pieces of our business are in the high end of that range, some are a little bit above. And -- but some more of the maintenance activities and those things are certainly at the lower end of those margin range or even below. So -- but the portfolio overall, I think the margin ranges there in the backlog is well within our expected range.

I'm not showing any further questions in the queue. I'd like to turn it back over to Kellie for any closing remarks.

Thank you. As always, our approach is to be open and transparent with our investors. And as such, I would like to invite you if you'd like to have a conversation with management to contact me through Matrix Service Company Investor Relations website. You can also sign up for MTRX News by scanning the QR code on your screen. Thank you so much for your time.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.