Matrix Service Company (MTRX) Earnings Call Transcript & Summary

Now that everyone has had an opportunity to vote, I now declare the polls for the 2020 Matrix Service Company annual meeting closed at 10:10 a.m. Central time on November 3, 2020. We have been informed by the Inspector of Elections that the preliminary vote report shows that the nominees for election to the Board have been duly elected. The selection of Deloitte & Touche as our independent registered public accounting firm for fiscal 2021 has been ratified. The compensation of the named Executive Officers has been approved by advisory vote, and the Matrix Service Company 2020 stock and incentive compensation plan has been approved. We will be reporting the final results in an SEC filing within 4 business days. There being no further business. The 2020 Matrix Service Company annual meeting of Shareholders is now adjourned. I will now turn the floor over to Mr. John Hewitt, CEO of Matrix Service Company.

Thank you, Justin. I want to begin by thanking the Board of Directors, shareholders for your guidance and support, as our leadership teams have managed against what has been an extremely challenging period and market environment, largely brought on by the global pandemic. As I communicated during our year-end earnings call, despite the turbulence in fiscal 2020, our employees achieved strong safety performance with a consolidated total recordable incident rate of 0.5, while also implementing and adhering to increased health and safety protocols to help mitigate the spread of COVID-19. We transitioned nearly 1,200 employees to a remote work environment while remaining fully operational. Our conservative capital allocation approach has created a strong balance sheet that will enable us to successfully manage these challenging markets. Our project site teams implemented COVID-19 specific job site health and safety protocols. Because of our comprehensive approach in those instances where our client temporary closed the job site, we were often asked to return ahead of any other contractor. Our restructured power delivery business is now returning strong direct margins as a result of the performance improvement plan we implemented. Revenue growth is the next step in this process to fully return this part of our business to historical operating characteristics. We also exited the iron and steel business, which on a long-term basis, should improve safety outcomes, reduce portfolio cyclicality, open the door for more focused growth opportunities and other sustainable businesses and improve the consolidated financial performance of the enterprise. We performed a comprehensive cost structure review and streamline the business and reduce costs as a result of the anticipated temporary reduction in business volume in the short term. The uncertainty regarding the timing of recovery from COVID-19 and the transformational changes happening across our markets. The outcome of that review improved our planned overhead costs by approximately $45 million or 18%. We reorganized our business development efforts to create better collaboration across our operating platform in order to bring the full strength and diversity of the enterprise to our blue-chip client base anywhere in North America and beyond. We expect these changes as well as other ongoing organization adjustments to contribute to a more competitive, expanding and profitable business the future. During the year, we worked on several important infrastructure projects, including the Piedmont LNG facility for Duke Energy, the alkylation unit at Chevron Salt Lake City Refinery, Keyera’s Wildhorse Marketing Terminal at Cushing, Oklahoma, an expansion of Moda Midstream's Ingleside Export Terminal, the natural gas reliability project using stored LNG for Southwest Gas in Tucson, Arizona, the Thermal Vacuum Chamber at Lockheed Martin's New Gateway Center in Littleton, Colorado. We were also awarded the EPC contract on another LNG peak shaving facility in the western U.S., provided feed work on other LNG-related infrastructure projects and were awarded several storage projects in the growing renewable energy space, including hydrogen, biofuels, renewable natural gas and thermal energy storage. We took a heightened approach to diversity, equity and inclusion across the company as we expanded bias training, provide data transparency, engage our communities and set expectations across the company. We take seriously our responsibility to deal with the social and racial injustices that we believe are embedded in society, and we will do our part to help affect positive change. Recognizing the critical importance of environmental, social and governance to company performance and long-term strategy, we also commenced formalization of our ESG reporting framework with oversight by the Nominating and Corporate Governance Committee of our Board of Directors. And finally, as we previously announced, results in fiscal 2021 will be reported under 3 new operating segments, which we believe will provide greater perspective into existing and new end markets, the growth areas where we are strategically focused and better represent our long-term vision. Our utility and power infrastructure segment includes traditional work in power delivery and generation, which will benefit from the significant demand for upgraded North American electrical infrastructure. We'll also benefit from EPC services for utility grade LNG peak shaving, where we will continue to expand our industry-leading position in this portion of the clean energy market. In this segment, our upgraded business development model will open opportunities for a true coast-to-coast delivery. Our process and industrial facilities segment will include front-end engineering design or feed studies, EPC, capital construction, maintenance and repair work across a variety of industries, including midstream natural gas, refineries, chemicals, biofuels, fertilizer, sulfur, mining and minerals and aerospace. Our storage and terminal solutions segment will include our market-leading position in storage terminals and storage terminals and import export infrastructure, including our legacy crude oil, but will also be highly focused on cleaner energy such as LNG, NGLs as well as renewables, including hydrogen, biofuels, renewable natural gas and thermal energy storage, which are areas where we see an opportunity for strong organic growth. As the global energy markets and economics stabilize and the effects of the pandemic, we will also provide these storage and terminal services in select international markets, such as the Caribbean, Mexico and Latin America as these economies move to cleaner and renewable energy sources. Overall, we will grow our non-crude based businesses such that our other offerings in gas, LNG, NGLs, electrical, renewable energy, chemicals and other process related industries will represent an increasing share of overall business portfolio. Today, crude related business represents approximately 40% of the revenue stream. This is not to say that we will walk away from this business or industry-leading position store or refinery turnarounds, maintenance and capital projects, nor we will we stop looking for growth opportunities, only that will be less reliant on it in the future compared to the balance of the portfolio. Closing, despite the challenges of fiscal 2020 and the continuing challenges presented by the ongoing pandemic, moving forward, we are confident in our ability to exit this period as a stronger company and in the long-term opportunities we have in the markets we serve. I'm extremely proud of our leadership team and our employees whose commitment and resolve, fulfilling our purpose and vision and to living our core values is commendable. I would also like to thank our shareholders, clients and Board of Directors for your continued trust, confidence and support. I would like to open things up for shareholder questions. Please note that we will attempt to answer as many questions as time allows, but only questions addressed to the meeting will be addressed. If you have a question outside of the scope of this meeting or you have a question that is not addressed during our time today, please e-mail us at ir@matrixservicecompany.com. I will now turn the call back over to Mr. Mogg.

Thank you, John, and thank you all for attending our 2020 Annual Meeting. Thank you very much, and goodbye.

This now concludes the meeting. Thank you for joining, and have a pleasant day.