Good day, ladies and gentlemen, and welcome to the Matrix Service Company Conference Call to discuss results for the Second Quarter of Fiscal 2018. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to turn the call over to Kevin Cavanah, Chief Financial Officer. Please go ahead.

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 that constitutes 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, 2017, 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. 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. This quarter, I want to highlight the work of one of our Subsidiary Presidents, Jim Ryan, who will be retiring at the end of this fiscal year. His leadership of the Matrix Servicing Subsidiary as well as his work as part of my leadership team has been invaluable to the growth of the organization as well as our safety culture. Jim joined Matrix in 1999 and was promoted as the President of Matrix Service Inc. in 2005. Under his leadership, this subsidiary has transformed itself to one known for the construction of above ground storage tanks and refining maintenance to an industry leader and full terminals and complete lifecycle solutions across the energy and industrial markets. When Jim joined Matrix Service Company, our consolidated revenue was $211 million. Jim has been instrumental and helped to grow and diversify our business to the $1.2 billion company we are today, a six fold increase. While I think we will all agree these clear achievements are significant, none or more significant than the impact Jim’s leadership has had on the safety culture of our organization. As you know, our goal each year is to achieve zero incidents and maintain and improve our premier safety culture. The total recordable incident rate, TRIR, for the Matrix Service Inc. subsidiary has improved from 1.4 in 2005 to 0.29 in 2017, an achievement that ranks this organization alongside other world-class Construction Industry Institute member companies. This demonstrates significant improvement in our total recordable incident rate that could not be achieved without the strong leadership provided by Jim throughout his entire career at Matrix Service. I want to thank Jim, and we appreciate his outstanding service for the company, our employees and our shareholders. Moving on,…

Thank you, John. Before we get into the specifics, I will give a high level overview of our quarter. Results for our second quarter were mixed. We had strong results in both our Oil Gas & Chemical and Industrial segments. The Oil Gas & Chemical segment has good revenue volume throughout the segment combined with strong project execution. The Industrial segment has significant revenue growth resulting in noteworthy operating income improvement. In Storage Solutions, revenues continued to be impacted by delays in project awards, but the same time, we recorded the largest volume of awards in this segment in 10 quarters. Volume in the high voltage portion of our Electrical Infrastructure segment was lower than expected as a result of reduced client spending and our strategic shift in power generation away from large EPC projects and smaller work packages. Solid project execution along with year-over-year improved construction overhead cost recovery resulted in a consolidated gross margin of 9.4%. The company continued our focus on balancing overhead cost levels, while making sure we maintain the infrastructure needed for the project opportunities we see ahead of us. SG&A cost were higher this quarter than the same period last year, as a result of our engineering acquisition for mid fiscal 2017. Legacy SG&A cost are flat quarter-over-quarter. Our tax expense was lower than originally forecasted as a result of the passage of the Tax Cuts and Jobs Act. I’ll discuss this impact in more detail later in the call. The bottom-line is we delivered earnings per share of $0.17 in the quarter. Now let’s move on to discussing more specific results. Consolidated revenue for the quarter was $283 million as compared to $313 million in the prior year, a decrease of $30 million. The decrease in revenue on the year-over-year basis was primarily…

Thank you, Kevin. Before we open up for questions, let me share with you more about our market outlook and opportunities that exist as end markets continue to improve. In energy market, as the U.S. develops the share resources, it’s ability is not only supply some energy but play significant role in global energy markets is creating billions of dollars in new infrastructure construction, maintenance and repair opportunities across North America, Mexico and the Caribbean. As a top tier EPC contractor with an industry leading position in storage tanks, specialty vessels and associated terminals as well as a strong brand in refinery maintenance and turnarounds and gas processes systems makes us for earn of share this business. Our Storage Solutions segment will not only benefit from continued crude oil and natural gas pipeline buildout, which will require storage and terminal infrastructure, but also the extensive buildout of energy export infrastructure to meet global demand. Our Oil Gas & Chemical segment will benefit from gas pipeline expansion with the capital construction of new gas processing infrastructure as well as the maintenance and repair of gas processing assets. Additionally in North American refineries where a substantial part of the Oil Gas & Chemical work has been generated positive market dynamics as well as compliance with environmental regulatory requirements are driving significant capital spending. At the same time the typical cycles for heavy and mechanical turnarounds, all pointed to our improving market conditions in the spring of our fiscal 2018 and a busy fiscal 2019. We’ve also established leading offices in California to meet the requirements of the State Senate Bill 54 and the needs of our refinery customers in this State who choose the new installations. In the chemical industry, our market segment in which Matrix has not previously held the material…

[Operator Instructions] Our first question is from Tahira Afzal with KeyBanc Capital Markets. Your line is now open.

Hi, good morning guys. This is Patrick on for Tahira. Congrats on the quarter.

Good morning, Pat.

Good morning.

I guess, first looking at Oil Gas & Chemical. How much of the work this quarter was related to storm work versus reoccurring work? And then, I know, you mentioned a little bit about turnaround activity, but how robust you see this spring turnaround season being and maybe? Any additional colour around this year’s spring and fall turnaround would be appreciated.

So I’ll answer the first part and then turn it -- just turn over to John for turnaround. Storm work in the quarter was really not material. I don’t think it had a significant impact on revenues these days related to work for our customers. Now, there was a decrease in spending in the Northeast and that could have been partially the result of resources being allocated down in Caribbean, take some of that revenue volume away from this affecting that some impact. It definitely wasn’t a positive impact in the quarter.

As it relates to the refinery turnarounds, we’re seeing a trend either continued improvement in higher spending by our refinery clients or our turnarounds, there is more turnaround both heavy in chemical and the size of the turnarounds have also corrected out. So we’re expecting this spring’s turnaround cycle to be greater than last years. And as moving into our fiscal 2019, we’re expecting next fall’s turnaround cycle and the spring of 2019 to be better than this year. We like a lot of turnaround contractors were able to get out in front with our refinery clients and started doing planning and scope development with those clients. And that gives us some whole side into the future of what it looks like, what their spending patterns going to be.

Okay, great. And then I guess as we’ve seen the continued softness in the electrical segment, do you think you have to peel back any portions of that business bringing gross margin back to double-digits? Or I guess, what initiatives or plans would you have to consider to improve that segment?

So the strategic thing for -- first of all, we’ve got a -- again, we’ve got a great brand positioning in the Northeast. There continues to be opportunities for us to spread our client base within the Northeast and we’re continuing to do that to make investments in people and equipment to expand those services. And we’re also, currently organically moving into Western Pennsylvania, Ohio, Chicago area as we sign MSAs with local power generating companies to provide similar services that we provide in the Northeast. And then we are -- we will be actively looking for acquisition in 10 targets where we can also expand our Electrical Infrastructure business. So we’re -- the issue for us is while we get a great brand position in the Northeast, couple of our clients there, our key pieces of our business, and if they, for whatever reason, happened to change their spending priorities either to support storm repair and emergency services into areas of the country, they have got -- they have been affected by a hurricane or if they’re managing interim capital spending plans, that could have an effect on our performance. And I think that’s principally what you’re seeing -- and what we’ve seen in the first six months of this fiscal year. The spending volumes were down for what is historical run rate in projects and revenue spending that we see in this period of the year.

One of the things to add on is that, if you recall, we’re still completing the work on the power generation facility up in Canada, and that -- we restructured that contract in mid calendar 2017. And as a result, all the work we’re completing is now on, especially a reimbursable basis. Lower risk it is for also low -- we’re not making a lot of that operating profit because of that.

Thanks for the colour guys. I’ll halt back into queue.

Thank you.

Our next question is from John Franzreb with Sidoti. Your line is now open.

John, [indiscernible] worked with us. Please explain your comments?

Yes, we were curious if they’re going to put the Tesla in one of those vacuum chambers before we shut it off.

I’d just like to check on your most recent commentary about the spring turnaround season. Could you say the fall is looking better than the spring as spring size up right now? And if you still feel that the spring is a fully booked to really healthy turnaround season for you?

We’re expecting this strength that we’re entering here in another month will be stronger than last year based on what we -- the bookings that we have for turnarounds. And we’re anticipating the fall of this calendar year to be even stronger not only than the spring but also the fall of last year. So yes, we’re seeing strength return in the refinery turnaround cycle. We actually had -- fortunately or unfortunately we had a fairly large turnaround for one of our key refinery clients to move out of the spring because they were having some problems getting their equipment available and moved into next fall. So that’s just compounded for us the amount of work that we’re going to have in next fall.

Got it. And when you lower your revenue guidance, I assume its deferral some of these lowest projects, you alluded to the storage side of the business, maybe you guys most of it or not. But, I guess, my question is, is that on what way you’ve seen sort of deferrals or is it in other segments and there will be some sort of cash protect in the year or so?

So with the big revenue volumes are associated with some of the larger terminal projects that we have been bidding and talking about for some time, we’re starting to see those come through actually, as Kevin had -- one of us noted earlier that in the – since the close of the quarter, we’ve had some uptake there on some of those projects. And so we’re starting to see those things actually come through to the organization. And so, while that’s good news from an award cycle, it does take some time for the heavy revenue of those projects to start to impact your bottom line of the business. So while those initially as well as a lot of engineering work, renewing activity before we get into the field and start heavy construction. So that’s why we’re advising this -- as these awards start to come in, it’s not an immediate next day impact of the bottom line of the business.

Yes. And when we started the year, we thought that these awards would start happening in the first half and we will start to see in revenue volume really picked up in the third quarter. So the awards haven’t happened quite quickly as we anticipated. And so now that revenue uptake is now shifted from the third to the fourth and even revenues that basement shifted out to fiscal 2019 and beyond relate to those, because really we haven’t seen the anticipated awards go away at this point, it’s just slower awards than we anticipated.

So is the backlog sufficiently now to hit the low end of your revenue guidance?

Yes, I think that we’ve spend a lot of time looking at where we’re seeing for the rest of the year and we feel good at that from the revenue guidance have to end, we’ve adjusted it because of the awards. I don’t think we’ve – there is always risk, uncertainty in forecasting revenues, but we feel like we’ve accounted for the delays that have happened.

Got it. And despite the lower revenue profile and EPS outlook, I wonder if you could kind of quantify how much of that is the effectively lower tax and or how much is that maybe on somewhat higher margin implications? We’re starting to see it in the oil and gas side part of the business maybe [Indiscernible] so maybe little bit start to begin at the moment?

Yeah. So, you’re right, we’ve left the EPS guidance unchanged, and the tax acts helped us do this. Obviously, we’re -- with revenues going to pushed out, margins going to pushed out. And we also have an impact on recovery. So, we have $1.9 million positive benefit in the first six months from the tax act. A big piece of that was a onetime impact, but our effective tax rate going forward, we previously forecasted a 38% of effective tax rate, now we’re looking at something like 32%, so that’s going to have a few cents to the back half of the year maybe $0.03, $0.04. So you’re – we would have been toward the lower end of the range on EPS and we would have to consider safety net down without the tax act.

Okay. Okay. Thank you. I’ll get back in the queue.

Okay.

Thanks, John.

And I’m currently showing no further questions. I will now like to turn the call back to John Hewitt for any further remarks.

I just want to thank everybody who attended today’s call. And we look forward to talking to you sometime in the near future.

Ladies and gentlemen, thank you for participating in today’s conference. You may all disconnect. Everyone have a great day.