Ladies and gentlemen, thank you for standing by, and welcome to the Matrix Service Company conference call to discuss the results for the third quarter fiscal 2021. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Kellie Smythe, Senior Director of Investor Relations. Please go ahead.

Thank you, Josh. Good morning, and welcome to Matrix Service Company's Third Quarter of Fiscal 2021 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 & Presentations on the Investor Relations section of matrixservicecompany.com. Before we 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 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 annual report on Form 10-K for our fiscal year ended June 30, 2020, 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, periodic SEC filings 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, Kellie. Good morning, everyone, and thanks for joining us. As we begin our call, I would once again like to open with a thank you to our employees for their continued focus on maintaining the safest possible working environment, which directly translates to a strong performance in the reduction of incidents and injuries. Even with the increased pressure and safety protocols demanded by COVID-19, our employees achieved a year-to-date consolidated total recordable incident rate of 0.25. This continued excellent performance is truly a testament to the strong leadership and focus on safety by our teams. Turning now to our business discussion. I want to be very clear about the profound impact that COVID-19 pandemic has had on our business. The last 13 months have been extremely challenging for both Matrix and our customers as we've managed through continued energy demand disruption, business uncertainty and global economic conditions brought about by the pandemic. More specifically, in this extreme business climate, our customers, particularly those in oil and gas, have continued to restrain CapEx spending and minimize all but routine maintenance, resulting in ongoing delays in project award starts and overall revenue volume. We have been seriously impacted by not only these worldwide events, but the pandemic has affected overall decision-making processes, efficiencies and productivity for our core customers. Many of them are like us only just now returning en masse to the traditional office environments. This business environment has further contributed to an extended and unpredictable award cycle and drastically impacted our revenue volumes over the past 4 quarters. The impact to our third quarter was severe as a third unanticipated wave of COVID-19 reached levels multiple times higher than previous peaks across North America and severe weather outbreaks across the country from Texas to the East Coast all…

Thanks, John. During the quarter, the most significant item that impacted our operating results is the low revenue volume of $148 million as project awards continue to be delayed. We continue to see a healthy funnel of project opportunities throughout our business, but final project awards have taken longer than normal. As a result of the low revenue, we don't have the opportunity to earn gross margins on that work and we incur unrecovered overhead costs. As a result of these prolonged award cycles, our quarterly revenue has trended down during the year. As John mentioned earlier, we believe we have hit the bottom of the cycle and are confident that in our fourth quarter, we will have significant improvement in our revenue volume and recovery of overheads. This chart provides a revenue trend through the recently completed quarter as well as the anticipated improvement in our fourth quarter. Since the COVID-19 pandemic hit the United States, our revenue has significantly decreased. At the beginning of the pandemic, we understood that our business would be negatively affected and implemented cost reductions based on our estimate of the impact. Accordingly, we implemented measures which reduced -- which resulted in an annual reduction to our overhead cost of over $60 million. And those efforts continue in a targeted manner today. The biggest portion of those savings have reduced our construction overhead. In total, our quarterly construction overhead costs are down 30% -- are 30% lower today as compared to our pre-pandemic level. We have tried to balance between reducing the cost structure or lower revenue volume and being positioned to execute projects as the revenue volume improved. We will continue to look for areas to improve cost efficiency in underperforming niches of the business through the fourth quarter and into fiscal year…

Thank you, Kevin. As mentioned earlier, fiscal 2021 has been extremely challenging, not only for Matrix but for our customers. During this period of unprecedented challenges, we continue to advance our growth initiatives and make strategic transitions in the business. We have continued to provide our customers with flexible and innovative solutions. We have advanced our growth initiatives in the chemical and petrochemicals by signing MSAs that offer the opportunity for a significant level of future revenue generation for major blue-chip producers and our engineering teams, which will also lead to increased revenues for our fabrication and construction brands as well. We are pursuing a growing list of opportunities for our storage tank and terminal brand in international locations, such as the Caribbean, Mexico and Latin America, as these countries move to secure their sources of energy, reduce their carbon footprint through LNG and open up their countries following the significant impacts of COVID-19. We are further developing strategic partnerships with clients, technology providers and other contractors to address various business opportunities in growth markets such as LNG and hydrogen. We continue to advance our domestic market position in LNG, NGLs and natural gas, which are critical energy, power and industrial feedstocks as well as bridging fuel to the future that support our customers' moves towards clean energy solutions. We have stayed focused on key sustainability issues important to our stakeholders and on telling our story on the progress we are making on ESG initiatives. We have maintained the talent necessary to support our customers as they begin to advance projects that have effectively been on pause across all of our segments. As we look forward to fiscal 2022, we expect to see continued recovery and improvement in margins and overall results. Our opportunity pipeline is strong. And by remaining…

[Operator Instructions]. Our first question comes from Zane Karimi with D.A. Davidson.

So first off, thanks for the color around the cost structure. And I was thinking about a little more in the ability you have to cut out both SG&A cost and construction overhead. So how much of that construction overhead looks to return with the growing work and activity in the coming months? And how should we think about SG&A as a percent of revenue as this develops?

So when we reduced our cost structure, we treat almost all of those reductions as permanent reductions. Now surely, as volume picks back up, there will be some costs that need to come back in. I mean, over the last year, for example, travel costs have been very minimal. It's important for us to be out in the field. And so that will be one cost that kind of comes back in a bit. The other area that I expect to see cost would be primarily related to revenue-producing positions. As our backlog grows, we'll have to make sure that we've got the adequate staff in-house to continue to execute the jobs that we've got. So overall, I'd say that, I don't know, 80% of the costs are probably more permanent reductions in nature would be my best estimate there. And when you're thinking about SG&A as a percent of revenue, our goal is to get SG&A down 6% of revenue. So we'll begin approaching that when we pass $1 billion a year in revenue. It will take us a little bit of time to get there, but that is the goal we're striving to achieve.

Okay. Great. And then as we look at a more robust return in demand, are there any segments that might require additional investments from here? How are you thinking about how best to utilize and take advantage of this return?

So I think most of our segments right now, as we think about here and there over the next 12 months, most of the investments there are going to be people to deal with the opportunity pipeline, improving -- increasing bench strength for people that are directly tied into projects. As Kevin mentioned, we don't see big increases pointing at SG&A. We've kept CapEx pretty low. So in our world, we're a big capital help on our equipment. And so as business starts to return and get a little stronger, we're going to be -- we'll be increasing the amount of money we spend on an annual basis on our CapEx. We're still looking for opportunities to expand our engineering capabilities into the Gulf Coast or each of our footprint rather into the Gulf Coast so that -- we're talking one of the near term, if you're thinking about some acquisition, would be -- again the closest-term acquisition that we would be interested in, but that would be several quarters down.

[Operator Instructions]. And I'm not showing any further questions at this time. I would now like to turn the call back over to John Hewitt for any further remarks.

Now thank you, everybody, for joining us today, and I appreciate you taking the time to be with us. I hope everybody stays healthy and safe as we continue to see improvements in all this pandemic environment. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.