Good day and thank you for joining us. Welcome to the Matrix Service Company Conference Call to review the results for the First Quarter Fiscal 2023. All participants are currently in listen-only mode. Following the presentations from our speakers, there will be a question-and-answer session. I will now turn the call over to your speaker for today, Kellie Smythe, you may begin.

Thank you. Good morning and welcome to Matrix Service Company’s first quarter fiscal 2023 earnings call. Participants on today’s call will include John Hewitt, President and Chief Executive Officer; and Kevin Cavanah, Vice President and Chief Financial Officer. The presentation materials we will be referring to during the webcast today can be found under Events and Presentations on the Investor Relations section of www.matrixservicecompany.com. Before we begin, please let me remind you that 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 as a result 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. I will turn the call over to John Hewitt, President and CEO of Matrix Service Company.

Thank you, Kellie. And good morning, everyone. And thank you for joining us. Today is the day the United States is holding its midterm elections. Let’s remember the voting is the right not afforded to so many people elsewhere in the world. Regardless of your party affiliation, get out and vote, make your voice heard. This coming Friday, November 11 is also Veterans Day in the U.S. and Remembrance Day in Canada, Australia and elsewhere. It’s a day that has been set aside since the end of the First World War to honor our military veterans and give thanks for their willingness to sacrifice for the common good. I’d like to thank the men and women of our military for their dedication and commitment to keeping us all safe. Now to our business update. During our last earnings call, we spent substantial time reviewing the key macro drivers to our markets as well as our project opportunity pipeline and confidence in our strategy and outlook for the future. We also stated that we expected to see a significant near-term uptick in project awards. I’m pleased to report that our expectations are unfolding as reflected in the awards of $235 million in our first quarter, which resulted in a book-to-bill of 1.1, and in the month of October, we have already received awards of $150 million. Project awards in the first quarter were the second highest we have achieved in the last eight quarters and backlog is the highest it has been in over two years. In Storage and Terminal Solutions where we are seeing the largest individual opportunities, our first quarter book-to-bill was 1.7 on awards of $132 million. Included in these awards is a large-scale specialty vessel for a long-standing client. In our Utility and Power Infrastructure segment, our book-to-bill was 0.9 on awards of $43 million, the majority of which is for electrical infrastructure work. Finally, in Process and Industrial facilities, our book-to-bill was 0.7 on awards of $60 million. Among the projects received during the month of October are two large capital awards; these projects will be included in our second quarter backlog and include a second large-scale specialty vessel of similar size and scope as that received in the first quarter and the upgrade of an existing LNG Peak Shaving facility for a large public utility located in the Mid-Atlantic region which was recently announced by press release. These projects, which are only a portion of the awards expected in the second quarter, are very encouraging particularly since these types of projects provide better margins, cash flow and long-term foundational support to our backlog. As we discussed in our last call, concerns about energy security globally and reliability domestically have come to the forefront to drive many of our clients' spending decisions. Also, the call to action for cleaner forms of energy and renewables is a strong driver of spending. We continue to see increases in our project opportunity pipeline, and as of September 30, this pipeline has increased to $6.5 billion. Our clients' low carbon objectives are evident in the types of infrastructure projects that comprise most of our opportunity pipeline. These projects, which include increased infrastructure investment supporting LNG, ammonia, hydrogen and other renewable fuels as well as midstream gas and electric infrastructure, are all projects that Matrix is well equipped to support. From an operating perspective, first quarter results, which Kevin will discuss further, continue to underscore the increasing momentum in our business. We expect this momentum will be reflected in improving performance as we move through the fiscal year and beyond. Based on the commitment of our people and their attention to quality, the benefits provided by our streamlined organization and increasing volume of quality projects in both backlog and the opportunity pipeline, we are confident in our ability to deliver. I will now turn the call over to Kevin to discuss our results. And then we will open for questions.

Thanks, John. Before I review the first quarter, I want to start by reminding everyone about the three issues that impacted our results in the prior two fiscal years. First, the competitive environment the last couple of years resulted in a temporary reduction in the margin opportunity of awarded work. Second, our revenue volume being insufficient to fully recover construction overhead, which has negatively impacted gross margins. We right-sized our overhead to fit the opportunity pipeline in front of us, but the timing of those awards is only now catching up with the projected revenue level. And third, increased forecasted costs on certain projects during fiscal 2022, which were competitively won and then executed during a very difficult environment created by the pandemic and its resulting disruption to supply chain and other business conditions. All three of these issues have negatively impacted our gross margins and profitability. As I go through the first quarter results, I will discuss how we are progressing on each of these issues. Our first quarter revenue increased to $208 million, which is up 24% from the past year. The revenue growth to-date has primarily been the result of increased reimbursable work. As we move through fiscal 2023, we expect a similar level of revenue in the second quarter and then expect growth from the recent and pending awards. As expected, our gross margins improved to 6.2% in the quarter, which is the highest it has been in more than two years. The drivers to higher gross margin are directly related to improvement in the three issues I previously outlined. The strong project bookings are resulting in an improved backlog profile. We continue to increase revenue volume, which has reduced the negative impact of under-recovered overhead, under-recovery of construction overhead costs improved significantly impacting gross margins by 2.8%, as compared to an average of 4.1% in fiscal 2022, and project outcomes have improved, especially in the Storage and Terminal Solutions segment. Our SG&A was $16.8 million in the quarter as we worked to continue to hold overhead costs low, despite the negative impact of inflation. We also incurred $1.3 million of restructuring costs as we continue our transformation efforts toward increasing the efficiency and effectiveness of our back-office support services. We expect to incur a similar level of costs in the second quarter. Finally, we incurred other expenses of $1.1 million associated with currency fluctuations. As expected, our effective tax rate was zero in the quarter, which is our projection for the full fiscal year. Our continued revenue growth and improved margins produced bottom line results significantly better than prior periods. Our net loss for the quarter was $6.5 million or $0.24 per share. On an adjusted basis, our net loss was $4.2 million and EPS was a loss of $0.15. Finally, our adjusted EBITDA improved to a positive $0.8 million. Now turning to our segments. In Utility and Power Infrastructure, revenue was $44.9 million, which was lower than previous quarters as we are in the final completion stages of a couple of Peak Shaving projects that are carrying low margins. We expect modest revenue volume improvement in this segment in fiscal 2023 as new capital projects ramp up. The first quarter gross margin was 3.8%, which was an improvement from previous quarters due to an improving backlog portfolio and strong execution on electrical and T&D work. As a result, the segment operating income almost returned to a breakeven level. In Process and Industrial facilities, revenue of $86.6 million continued at a strong level. Gross margin improved to 5% due to strong execution on refinery, renewable diesel, mining and minerals and thermal vacuum chamber work, partially offset by work on gas processing. The segment produced operating income that was slightly positive. And finally, in Storage and Terminal Solutions, which produced the strongest results for the quarter, revenue increased to $76.9 million related to LNG and other capital projects. We expect to see revenue increase further in this segment in the second half of the year based on new and expected project awards. The gross margin improved significantly to 9.8% in the quarter. This was driven by strong execution, an improving portfolio mix and better recovery of construction overhead costs. In addition, the tank products business produced a record quarter. The increased revenue and strong margins resulted in a positive operating income of 4.4% in the quarter, which is the highest since the third quarter of fiscal 2020. Now turning to liquidity. At September 30, 2022, we had total liquidity of $56.6 million and $15 million in debt. Liquidity is comprised of $14.3 million of unrestricted cash and cash equivalents and $42.3 million of borrowing availability under the ABL facility. The company also has $25 million of restricted cash to support the ABL facility. As a result of rising revenue volumes, especially for cost reimbursable and maintenance type work, our investment in working capital has increased during the first quarter of fiscal 2023, which is the primary driver of a temporary decrease in liquidity since June 30, 2022. We have previously communicated that we will experience significant fluctuation in working capital demands based upon the mix of work and timing of project cash flows. This is why we strive to maintain a conservative balance sheet. Based on the forecasted and mix of work, including increased capital projects, the company expects its liquidity position to improve through the remainder of the fiscal year. Overall, we are pleased to see the improvements achieved in the first quarter and expect to see additional improvement as we move through the fiscal year. On a consolidated basis, we expect the second quarter revenue and profitability to be at a level similar to the first quarter. As we move through the second half of the fiscal year, we should see additional benefit from recent and anticipated project awards that will result in strong revenue growth as well as improving margins and profitability. We will now open for questions.

Thank you. Our first question comes from John Franzreb with Sidoti. Your line is open.

Good morning, everyone, and thanks for taking the questions.

Hi John!

I guess I’d like to start with the opportunity pipeline. It’s up nearly $1 billion from the previous quarter. Kevin, what’s driving the opportunity pipeline such a significant sequential increase?

So we’re seeing a lot of activity in specialty vessel storage. We’re seeing a lot of activity in hydrogen-related projects. We’re seeing a lot of activity in LNG-related projects around peak shaving, and so some of those projects that we knew were in the works with some of our core clients are starting to come in-house now as requests for pricing, and so they are adding into our opportunity portfolio. I would just generally say that across a majority of our segments we’re seeing more projects come out of our clients' engineering departments as ready-to-go projects that they are interested in, so that’s the reason for the increase.

Okay. Since you brought that up, what’s the outlook on the utility side of the business? Is that set to improve or is it still going to be a little bit tough in the near term?

No, I think from a volume perspective, as Kevin said in his comments, in that segment is both electrical infrastructure work we do, but also utility peak shavers. We’ve got one job that we’re wrapping up. It’s in startup and commissioning now, that’s going well. We’re going to be substantially complete there by the end of the calendar year, and so those revenues are diminished. We just booked, as we said in the press release, another peak shaving facility, albeit a little smaller than the ones we had booked in the past. We expect the revenues from that engineering and materials to start flowing into that segment here over the next two quarters. There’s also opportunity for us to start booking some other peak shaving facilities probably into our third quarter, starting the fourth. A lot of revenues in that segment, at least in the near term, are going to be more from Electrical Infrastructure work. But certainly, we have an expectation that as we look out over the next two or three quarters, we will see backlog there improve and revenues.

And when you talk about some of the lower priced jobs that you booked during the downturn, they were supposed to all be worked through by the end of this quarter that we’re currently in. Is that still the case? Are they largely in the Utility and Power Infrastructure business or are they spread out more than I give credit to?

No, the projects that we had the most concern about were in the Utility, the UPI segment and in Process and Industrial Facilities. We’re continuing to work through really one of those projects, but it will be complete here in the third quarter, substantially complete in the third quarter.

In the third quarter, got it. And just one last question, I guess Kevin kind of finished on this note. If I heard correctly, working capital requirements were troughing during this quarter and it should be improving for the balance of the year. Did I understand that properly?

Yes, you got that right. During the first quarter, a lot of reimbursable activity. Reimbursable work is a higher percentage of revenue than normal. I think moving forward, looking back at the growth in fiscal '22 of revenue and what we’ve had so far in the first part of the year, it’s all been reimbursable activity. From this point forward, I think the growth is going to be all capital type work. That will be the bulk of it, and so that’s got a different cash flow curve than the reimbursable stuff. You are correct, and I think that change in mix will result in you seeing positive cash beginning in Q2.

Okay, perfect! Thanks guys. I’ll get back in the queue.

Thank you. Please stand by for our next question. Our next question comes from the line of Brent Thielman with D.A. Davidson. Your line is open.

Great! Thanks, good morning. Hey John! One of the things I guess I remember was sort of an absence of larger project opportunities, you know, call it 12 months or the last couple of years that, you know, allow you to better leverage the workforce. I’m just wondering if you could compare the visibility you have into those types of prospects today and the pipeline you spoke about maybe versus what you had seen previously.

I’d say the average size of the projects in the opportunity pipeline has increased over the last probably 12 months, and the readiness of those clients and the quality of those clients has accelerated and improved. It’s a combination of all of those things, and it’s coming together at a good time for us to start adding some quality and larger scale, longer-term backlog.

Yes, and I think if you look at it just numerically, we’ve already got two projects awarded in this fiscal year that are larger than any award in either fiscal '21 or fiscal '22.

Yes, yes, that’s helpful. And then I seem to remember, you know, previously the LNG peak shaving prospects were pretty selected. It sounds like you got a host of opportunities kind of opening up now. Maybe if you could just shed any light on how many of those you’re potentially pursuing versus what you saw 12 months ago and have historically been good opportunities for you?

Yes, I think there was probably a gap of about 18 months without any large-scale peak shaving opportunities in our opportunity pipeline. Today, there’s a full combination. There are the full LNG peak shaving facility or an upgrade to a facility, and there’s probably a handful of those. Then there’s a lot of opportunity for small-scale repair and upgrade projects that are out there in the market. Many of those existing utility fleets have around 100 peak shaving facilities built in the ‘70s and ‘80s, and many of those are becoming more important to the local utilities now to operate, and they need upgrading. One fortunate thing about this is our engineering group, which has a specialty in cryogenic storage, built or designed a lot of those facilities. This gives us a competitive advantage because our clients will come directly to us, knowing there’s a legacy associated with their facility. They’re not necessarily huge projects but can range from $5 million to $15 million, and then there are a handful of projects ranging from $70 million, $80 million up to $350 million.

Okay. And I know business sort of evolved towards LNG, hydrogen, NGL, things like that. But just curious if there’s any sort of green shoots on the crude side and whether any project prospects are starting to pop up there.

Yes, we have some prospects in our system for crude storage. One of the factors affecting that market a little is that storage for crude is currently quite cheap. Our office here is about 30 to 45 minutes from Cushing, and the majority of the storage in Cushing is empty. Crude is flowing in and out with very little retention. We do have the occasional new crude storage tanks we are bidding and have probably a couple in our backlog, but it’s nowhere near the volume that it used to be. However, there are some clients we have been talking with about either expanding their storage or building new storage to connect into the logistics network as it makes sense. Some of them are trying to create a connection to Europe for crude based on what’s happening in Eastern Europe. So there is some talk and activity out there, but nothing significant in the near term.

Yes, okay. And then John, one of the kind of repeating themes this earnings season in the industry has been delays in equipment and other factors in the supply chain moving project schedules around. I’m just wondering, as you’re starting to pick up a lot more work, can you talk about what you all are doing to protect yourselves from these ongoing challenges?

Yes, sure. We caught and were certainly impacted by various challenges over the last 18 months. We encountered supply chain issues when the global economy rebounded from the pandemic. We are now starting to see some prices come down. However, delivery, particularly for anything with high alloy metal content or electrical components continues to be delayed. We know that and we're including that in our project pricing and schedules. In many cases, we’re uncomfortable with our ability to meet those commitments. We’ve been able to work with our clients on protecting that risk to our business.

Okay, okay. I appreciate all the comments. Best of luck!

Sure.

Thank you. I’m showing no further questions in the queue. I would now like to turn the call back over to John Hewitt for closing remarks.

Well, I appreciate everybody joining us for today’s call, and I certainly appreciate your commitment and continued support of Matrix Service Company. We look forward to talking to you further as we move through the year. Thank you.

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.