Good morning, and welcome to the Matrix Service Company conference call to discuss the results for the fourth quarter of fiscal 2025. [Operator Instructions] As a reminder, this conference call is being recorded. I'll 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. Good morning, and welcome to Matrix Service Company's Fourth Quarter Fiscal 2025 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 the call up for questions. 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 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. 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 of the prior year, unless specifically stated. Related to investor conferences and corporate access opportunities, we will be participating in the D.A. Davidson 24th Annual Diversified Industrials & Services Conference in Nashville, Tennessee, September 17th through the 19th. If you would like additional information on this event, I would like to have a conversation with management, I invite you to contact me through the Matrix Service Company Investor Relations website. I will now turn the call over to John.

Thank you, Kellie. Starting with safety at Matrix, the physical and mental safety of our employees as well as that of anyone on our project sites or in our offices is core to who we are, an expectation for all employees and a commitment we uphold for all stakeholders. Today, I want to talk [Technical Difficulty] similar to airport security today, if you see something that does not look right, that could create a hazard for yourself or fellow employees, then please say something. At Matrix, this is not only a right our employees have when they come to work for us, but it is an obligation and expectation for everyone, and we expect our leaders to listen and act without retribution. This authority is a critical part of our culture and creates a safer work environment. And we find many times in near misses and incidents that the use of Stop Work Authority or the honoring of that authority by leadership could have been avoided an incident. In fiscal 2025, we made significant improvements in both our total recordable incident rate, or TRIR, and our DART rate, which is a measure of injury severity and stands for days away, restricted or transferred due to an injury. Our TRIR improved from 0.91 in fiscal 2024 to 0.51 in fiscal 2025, and our DART rate improved from 0.28 to 0.21 for the same period. And while we are proud of these achievements, we understand that achieving and maintaining a 0 incident safety performance is a relentless journey, and we will continue to prioritize safety in everything we do as we work towards this goal. So as we conclude fiscal 2025, on behalf of the company's leadership team, I would like to thank everyone at Matrix as well as our subcontractors and…

Thank you, John. Yesterday, we released our results for the fourth quarter of fiscal 2025. Those results were revenue of $216.4 million, EPS of a $0.40 loss and adjusted EBITDA of a $4.8 million loss. Those results included 4 items that masked the continued improvement in the ongoing business. First, we lowered our recovery expectations on a legacy project that is currently in a dispute resolution process, which resulted in a $6.4 million reduction of revenue and operating income. This was related to a crude terminal project that we completed back in calendar 2021. The project was impacted by the COVID pandemic and incurred significant project scope changes directed by the owner. We've been pursuing our outstanding contract balance from the customer since that time. Arbitration proceedings occurred last month, and we are awaiting that final decision in fiscal 2026. While the outcome of legal proceedings is uncertain, we believe we have appropriately reserved for our exposure on this issue and expect a positive cash inflow upon resolution. Second, we incurred an additional $3.8 million charge on a crude project impacted by lower-than-anticipated labor productivity. You may recall we discussed this project last quarter when we began to incur productivity issues. While we work hard to avoid any issues during our projects and our industry, issues will occur from time to time. When they do, our focus is on reducing any financial impact and maintaining our strong relationship with our customer. We are pleased to report that the team worked through the issues, completed the project earlier this quarter as planned and did so in a manner that further solidified our relationship with an important customer. Third, we incurred a $1.3 million charge related to an unexpected court decision on a project completed in calendar 2021. In this case, a…

Thank you, Kevin. In closing, I'd like to reiterate the following takeaways: First, despite some legacy legal issues and other noise during the fourth quarter, our team grew revenue consistently quarter after quarter, through the year and is executing above plan from a direct gross profit perspective on the work on hand. Second, our strategy is working. We are winning work in our key focus areas, maintaining our near-record backlog even in the face of the uncertain macroeconomic environment, our organizational realignment is strengthening our platform and positioning the company for sustained profitable growth, both organically and inorganically. And third, our momentum into fiscal 2026 is strong with robust backlog and a strong opportunity pipeline. We're guiding to 70% revenue growth next year with 85% of that revenue from backlog that is already in progress. So with the tremendous momentum that exists across the business, we believe we are entering a prolonged period of growth. Above all, we remain committed to delivering sustainable shareholder value by building a platform capable of consistent profitability, backlog growth and cash generation. I'm proud of what our team accomplished in fiscal 2025 and even more excited about the road ahead. By remaining disciplined, focusing on safety and quality and continuing to improve our operations, we are confident in our ability to drive growth, create long-term value for our shareholders as we successfully win, execute and deliver. With that, we'll open the call for questions.

[Operator Instructions] And our first question comes from the line of John Franzreb of Sidoti & Co.

John, last quarter, you kind of referenced the fact that some of the jobs are being pushed to the right due to economic uncertainty. Are you still seeing that?

Yes. I mean it's -- I would say there's kind of an overhang across our industry. And -- but we're only really -- I say we're really only able to point a finger at a couple of projects that were in our sites that you could say we're directly impacted by what's going on with tariffs and some of the global events and I think it just sort of feels like there's an overhang. And most of those projects are probably really related to things that have more of a global involvement, meaning things that are exporting some kind of energy product, let's say, the internal stuff, the LNG peak-shaving and backup fuel supply, there continues to be a lot of energy around those, no pun intended, and that I think the large -- we're still seeing a lot of smaller projects kind of come through the pipeline, the major projects. Those are just timing things, and they come and go and they take a while for those to germinate. But we have some of the larger LNG peak-shaving projects in our sites. And it just takes some time for those projects to develop. So from a domestic standpoint, I think we see -- we feel pretty good about the timing of an opportunity for rewards there. Certainly, there's more attention from our clients around material escalation from tariffs and those kinds of things become part of how we price and how we negotiate our contracts with various clients. But we've been fairly successful working through those risks with our new and existing clients.

Got it. And when you look at the opportunity profile and you just referenced some larger jobs that are out there maybe, do you expect to exit fiscal 2026 at a near 1.0 book-to-bill or is that too much to ask?

No, I think -- I certainly think that opportunity is out there. You've been around us long enough that you know the timing of those awards certainly have a major impact if things can slip a month here or there. And -- but certainly, what we see in our pipeline, the opportunity for us to book inside the, let's just say, our guidance range -- revenue guidance range. I think those projects are out there. And the thing -- when we have these big upticks in our backlog, they come from a major project that we booked that's in the $300 million, $400 million kind of range where we have a couple of those in our backlog today, and we're looking for opportunities to replace those and build on those moving forward. So this year, I think our award cycle is going to be made up of smaller kind of -- or normal sort of bread-and-butter projects, but smaller projects that are in $50 million to $150 million kind of range. But we think those are out there and the opportunity for us to windows and hit a book-to-bill of 1 is certainly available to us.

That's good to hear. And -- just what's your confidence level of returning to profitability and that kind of time line? How does that play out as the year progresses?

I would say our confidence is high. We feel good about the quality of the backlog we have and the fact that the high-quality backlog is in flight and that how that backlog is going to roll out over the course of the year plus even some of the backlog that we added in fiscal '25 helps to fill some of the holes in fiscal '26 already. And so I think we feel pretty good about our revenue levels and after revenue levels we're projecting, we're going to be in a position to be able to return to profitability.

And one last question, I'll get back in the queue. The cash position is building. Just could you just talk a little bit about how much is that advance payment from customers and how much is Matrix?

So I'll take that. The cash position has built considerably this year. We've got a lot of long-term projects where we have seen some upfront money, but the balance sheet is strong. So we'll definitely use a good portion of that $250 million of cash for the projects. But we probably have cash available for just a normal level. If you look at what the working capital investment is currently what the cash level is of $50 million to $70 million that's kind of built up cash for just operating the business and it could also support growth activity. So we feel good about where we've got this balance sheet.

And our next question comes from the line of Brent Thielman of D.A. Davidson.

I guess first question just would be kind of back to some of the moving pieces of the quarter. Are you able to comment on other potential COVID era legacy jobs that you're in dispute that we need to keep in the back of our minds? Or do we feel like we're kind of beyond this at this point?

I think we're -- I think anything of any materiality works pretty much beyond. This one -- Particularly this one particular project that we're talking about that took the $6 million charge as Kevin had noted, we've been fighting that. We reached mechanical completion on the job back in early '21. And we've been in a dispute with a client since then. And we have attempted numerous occasions to get that settled and was unable to do that and ended up in, as Kevin said, in arbitration last month, but yes, that's really kind of the final material legacy pandemic issue that we've got.

And then maybe a 2-parter to the restructuring actions you're taking would be, one, Kevin, if you don't mind just your expectations for the cost savings impact you should get from this and I guess, two, any early indications or evidence of some of the things that you're doing that's allowing you to win more work. Where are you seeing the positives of what you've been doing here to potentially, I guess, the bookings or any other measure we can look at?

So I'll hit the second part of your question, and Kevin can hit the first part. So we made a lot of significant changes over the last 5 months. And right now, we are kind of settling in -- so we moved people around in the seats and got rid of some of the seats and so it created opportunities for some of the people in the organization to step up and take some different new leadership roles. So I think we've created a lot of energy in the organization. You can feel a lot of energy in the organization. Like we said, we've flattened and streamlined the decision-making process and so we are still kind of settling in the key strategies and objectives with the organization. We just met with the Board 2 weeks ago and reviewed our strategy and our plans with them. And so -- but I think we're already seeing an improved alignment between different elements of the business and what we need to do to support each other, what we need to do to win work, what our real focus areas are from a market perspective. And so I think this change and as recalling a realignment in the organization is really going to bear some fruit for not only on how we win work but our ability to execute work, particularly around work that's EPC-related where we've got the critical engineering deliverables and then the -- our ability to execute that work on our projects.

And when you look at the cost, we -- as I mentioned, we've cut out about $12 million with these most recent actions. That's split about 50-50 between construction overhead and SG&A. So it will -- we -- our SG&A has been running just under $18 million a quarter in fiscal 2025. I think you'll see it in the $16.5 million range per quarter in fiscal '26. The construction overhead impact will help us address the construction overhead, combine a little bit lower cost structure with the increasing revenues. We'll continue to focus on eliminating the COH. So I think we made the right steps in the last couple of quarters.

Okay. I guess my last question is a little bigger picture, John. There's been some fairly significant announcements here over the last few days and then related to the data center theme. And I guess the question for me would be, maybe if you could just elaborate. Where does Matrix play into this, whether directly or kind of second derivative of the things that are happening in that market that only seem to be getting bigger and bigger as we look out over the next few years. Where do your cards deploy? And how does that pipeline that you have? What is it -- how does it inform you about your opportunity there?

Yes. Good question. So I mean, we are not going to be the person who builds the data center, right? That's just not -- that's not who we are. We don't envision being out there doing that. That's a fairly highly competitive light industrial kind of market. And so to make that step would be a pretty big leap. But where we are going to play a role in both directly and indirectly is the demand for additional power generation everywhere and the demand for backup power and the fuel for that power related -- directly related to data centers the AI computing, advanced manufacturing. So we see significant opportunities there. And if you recall, you've been around us long enough, I mean, we had a position in the gas-fired turbine construction market, both for in simple cycle mode and in combined cycle for baseload generation. So we have those skill sets. We turned our focus to other areas of construction as that market 5, 6 years ago kind of went in hibernation. But this growing demand for power, which we don't see as something that's going to stop. And so it's related not only to the increased demand related to what we talked about here in data centers and AI. But just in general, the general electrification of everything, it's just requiring more power generation, you've got more -- in spite of some of the rhetoric coming out of Washington, we're still probably going to be retiring coal fleets and moving more to our gas-based power generation economy. So -- and then you got the opportunity for interconnect, for substation work, we've done -- for a couple of data centers, we've done the substation work and the interconnect work for them. A lot of those data centers have high demand for cooling. And so some of that is more of a -- more complex process installation than what you might normally have in a light industrial facility, which could create opportunities for us. So our opportunities and our work around there will be a little bit more on the fringe. And then just the demand for generation, not only the installation of baseload generation and backup generation, but also the gas required to fuel it, pushing that back into the utilities with the work that we're doing and peak-shaving facilities, the work that we're doing in and backup fuel supply for utilities, the upgrading -- a couple of our awards in the quarter here were related to existing LNG peak shaving facilities that hadn't been updated for 30 years. And so we're going in and doing -- in some cases, the full EPC to update the process equipment and not even necessarily the storage, but the process equipment of those existing LNG [Technical Difficulty].

I'm showing no further questions at this time. I would now like to turn it back to Kellie Smythe for closing remarks. [Technical Difficulty] Please standby. Your call will begin momentarily. And I see you are back in line. You may begin.

Marvin, this is Matrix. Can you hear us okay?

Yes. You're back.

Okay. We think you have dropped off the call.

Okay. No closing remarks?

Yes, we do. We were still answering our question. Kevin was still answering our question. We're going to finish the answer to that question.

Okay. You're back on that.

Well, so I think we're back online. Sorry about that. We had some technical difficulties. Brent, I was going to follow up on if you're still there, a follow-up on the cost question you had. An important aspect of what those actions do it is also decreases our breakeven point. The amount of revenue we need in order to get to breakeven performance. In the past, we've talked about that. It was around $225 million per quarter with these reductions. Now it's down to $210 million to $215 million per quarter and so that's definitely a benefit to us increasing the earnings power of the business as we move forward. So I just want to follow up with that and turn it over to Kellie for closing remarks.

Thank you, Kevin. As a reminder, we will be participating in the D.A. Davidson 24th Annual Diversified Industrial & Services Conference in Nashville next week, September 17 through the 19. If you are attending, we look forward to seeing you there. Additionally, if you'd like to have a conversation with management, please contact me through Matrix Service Company Investor Relations website. You may also sign up to receive 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.