Matrix Service Company - Q4 2024

Transcript

Operator (participant)

Good morning, and welcome to the Matrix Service Company conference call to discuss results from the fourth quarter of fiscal 2024. Currently, all participants are on a listen-only mode. Later, we conduct a question-and-answer session, and instructions will be given at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to today's host, Ms. Kellie Smythe, Senior Director of Investor Relations for Matrix Service Company.

Kellie Smythe (Senior Director of Investor Relations)

Thank you, Justin. Good morning, and welcome to Matrix Service Company's fourth quarter fiscal 2024 earnings call. Participants on today's call include John Hewitt, President and Chief Executive Officer, and Kevin Cavanah, Vice President and Chief Financial Officer. 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 the 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.

To the extent we utilize non-GAAP measures, reconciliations will be provided in various press releases, periodic SEC filings, and on our website. Related to investor conferences and corporate access opportunity, Matrix will be participating at the upcoming D.A. Davidson 23rd Annual Diversified Industrials and Service Conference in Nashville, Tennessee, September eighteenth through the twentieth. If you would like additional information on this event or would like to have a conversation with management, I invite you to contact me through Matrix Service Company Investor Relations website. Before I turn the call over to John, I want to acknowledge that tomorrow marks the 23rd anniversary of 9/11 and the terrorist attacks that took place in New York, at the U.S. Pentagon, and on Flight 93.

Two thousand nine hundred and 77 people died because of those acts, and thousands more were injured, among them, the first responders who sacrificed their own safety to save others. As we begin our call today, I'd like for us to remember them and our veterans who, because of this event, actively engaged in the war on terrorism that we still fight today. It is through their actions and sacrifice that all of us are kept safe. As we remember them, I also ask that each of us contemplate the fact that except for extraordinary events like 9/11, through our own behaviors and actions, we have the ability and the responsibility to protect the physical and mental safety of ourselves and those around us. I will now turn the call over to John.

John Hewitt (CEO)

Thank you, Kellie, for this important message about sacrifice, safety, and the leadership to keep others safe. Our actions and behaviors matter. Please choose to own safety for yourself as well as those around you. I'd also like to personally thank our nation's military and first responders, past and present, for their unwavering commitment and service to protecting all of us. As we close out fiscal 2024, our fourth quarter represented an important inflection point for our business. We advanced work on multiple large projects during the quarter, which contributed to meaningful cash generation to close out the fiscal year. As we have seen through the course of fiscal 2024, project performance in the fourth quarter continued to be strong, but we fully expect that as revenues improve into fiscal 2025, so will the absorption of construction overhead costs.

Backlog has increased by more than 30% on a year-over-year basis. We added $176 million in new project awards in the fourth quarter, bringing total awards for the year to $1.1 billion and a book-to-bill of 1.5, and our opportunity pipeline continues to have significant strength, particularly in storage and storage-related facilities, which we expect to continue adding to backlog in the new fiscal year. These factors, combined with our strategic changes to the organization and our already booked multiyear projects, which are beginning to ramp up, give us visibility into revenue growth and improved profitability in 2025 and beyond.

The key mega trends that are driving the demand for our services provide healthy long-term tailwinds for our business and continue to be a catalyst for infrastructure investment for LNG, NGLs, ammonia, hydrogen, and other renewable fuels, providing significant opportunity across each of our reporting segments. As we enter fiscal 2025, in our Storage and Terminal Solutions segment, activity was robust in the quarter as we advanced work on a large backup fuel supply facility and a boil-off gas compressor project at an LNG storage facility in the Southeast. We also added another Gulf Coast NGL storage project to backlog, where we are already executing on several other NGL storage projects. In addition, our teams are currently pursuing approximately $3.2 billion of near-term projects supporting LNG, NGLs, ammonia, hydrogen, and other products.

In our Utility and Power Infrastructure segment, the need for system reliability and resilience is driving investments in utility generation and electrical infrastructure to meet power demand during peak periods, as well as transmission and distribution, substation, and other system upgrades to support the energy load growth, including energy-intensive data centers. Again, our expertise in all things LNG, terminals, and related infrastructure have positioned Matrix as a leader in meeting demand for LNG peak shaving. Specifically, in the fourth quarter, we continued work on two LNG peak shaving facilities along the East Coast, one of which is well underway, while on the other, we've broken ground and are beginning civil work.

Our team is also pursuing more than $1.2 billion in near-term projects in the utility and power infrastructure space in support of system reliability and resilience, including an additional LNG peak shaver and multiple upgrades, as well as substations, transmission and distribution systems, and other infrastructure. Within our process and industrial facilities segment, the clean energy transition is supporting project investment, along with continued demand for traditional hydrocarbon and other industrial infrastructure. Of note, in the quarter, we completed work on a two-year refinery retrofit project on the West Coast for renewable diesel that grew in scope through the life of the project due to the quality of work of our team. We advanced work on a new state-of-the-art thermal vacuum chamber.

An existing refinery client extended our multiyear contract for providing embedded turnaround and plant services, maintenance, and repair work, and we were awarded a refinery turnaround for another long-standing client. We are currently pursuing $1.7 billion in near-term projects in this segment in multiple end markets, including natural gas, chemicals, petrochemicals, and mining minerals. Overall, our opportunity pipeline remains strong at $6.1 billion, a key indicator of the strength across end markets and the ability to continue our long-term trend of backlog growth. As we have previously communicated, we expect the trend in our backlog book-to-bill to continue at a ratio of 1.0 or greater on an annual basis. We keep this opportunity list, which contains projects we have bid, are bidding, and will bid, updated monthly.

While there can be movement in and out of this pipeline for various reasons, the long-term volume of opportunities has been stable, and we expect that to continue. In general, the opportunities we are currently pursuing are expected to be bid and awarded within the next twelve to eighteen months. Once awarded, many of these projects will require an eighteen to thirty-month timeframe to complete. As a reminder, this does not include smaller capital projects and maintenance activities performed on our MSAs or individual contracts that lay the foundation for many parts of the business while supporting our strong customer relationships. As our profitability and free cash flow conversion improve, we will continue to prioritize maintaining a lean balance sheet and a strong liquidity position to support the growth of our business.

Matrix is indeed at a critical turning point following several years of low revenue that began with the energy demand destruction during the pandemic and was followed by a protracted period with a limited number of projects available in our core markets where bid in a highly competitive environment. During this time, we meaningfully transformed the company to focus on the end markets that present the best opportunities, fit our unique capabilities, and are supported by strong macroeconomic and industrial drivers. We streamlined the organization with a focus on reducing costs, enhancing project execution, and building backlog. We began fiscal 2025 with a backlog of $1.4 billion, and as noted, a $6.1 billion opportunity pipeline. Combining continued strong project execution with accelerating revenues and conversion of backlog, we believe the company is now on a trajectory of upward growth and profitability.

Our visibility into this upward trajectory is significantly clearer today, given the schedule status of our portfolio of projects. That said, the business will always be impacted by the timing of awards and starts, which is dependent upon market fundamentals, our clients' decision-making, and the regulatory environment in which they operate. In consideration of all these factors, our revenue guidance for fiscal 2025 is between $900 million and $950 million, which represents a year-over-year increase of 24% to 30%. As I mentioned, the projects that support our outlook for 2025 are in the early stages and will continue to ramp up as we progress through the year. Given the estimated cadence of project activity during the year, we expect to recognize improved profitability as revenue increases.

The year will have a slow start with the impact of the summer months, as well as the recent completion of the large renewable diesel project noted earlier. Once we get past the first quarter, revenue growth should accelerate through the remainder of the year, along with the associated operating results. Considering many of these projects will contribute to revenue for up to three years and the strong opportunity pipeline, the company is positioned for improved operating performance to extend into fiscal year 2026 and beyond. During this period of growth, we are committed to upholding the highest standards of safety, quality, and service. We will stay focused on our strategy, maintain a strong balance sheet, and deliver outstanding quality service to our customers. Doing so will allow us to take advantage of the opportunities we see in the market and support our long-term growth objectives.

With that, I'll turn the call over to Kevin.

Kevin Cavanah (VP and CFO)

Thank you, John. The results for the fourth quarter were in line with our expectations. As anticipated, revenue improved from the third quarter, increasing 14% to $189 million. We have previously discussed that the growth in our backlog has been fueled by long-term construction projects, which have an inherent lag between the time a project is awarded and when it begins to translate to revenue. These contracts make up a significant portion of our backlog and are just now beginning to benefit revenue. We expect that trend to continue in fiscal 2025. As John mentioned, the year will have a slow start. Once we get past the first quarter, revenue growth should accelerate through the remainder of the year, driven by the Storage and Terminal Solutions and Utility and Power Infrastructure segments.

I will discuss revenue trends further when I get to the segment discussion. Project execution was strong in the quarter, particularly in the Process and Industrial Facilities segment. While consolidated revenue increased, the company still has under-recovered construction overheads, which impacted the gross margin by over four hundred basis points, resulting in a gross margin of 6.6%. Moving down the income statement, SG&A was $17.3 million in the quarter, which is in line with our targeted levels. For the fourth quarter of fiscal 2024, we had a net loss of $4.4 million, or $0.16 per fully diluted share. Now for the operating segments. In the Storage and Terminal Solutions segment, revenue increased 30% to $70 million as work began on previously awarded specialty vessel projects, compared to $54 million in the third quarter.

We expect this trend to continue as we move through fiscal 2025, resulting in significant revenue growth. Gross margin was 3.1% in the quarter, as margins were impacted by under-recovered construction overhead costs as a result of the low revenue and allocation of more construction resources to this segment to support the large backlog. We expect revenue growth will eliminate the negative impact of this issue as we move through fiscal 2025. In the Utility and Power Infrastructure segment, fourth quarter revenue increased over 40% to $65 million as compared to the third quarter. The growth was driven by increased activity on previously awarded peak shaving projects. As we get through the seasonally slow first quarter, we expect the growth trend to continue through the remainder of fiscal 2025.

Overall, we are expecting significant revenue, revenue growth for the utility and power infrastructure segment in fiscal 2025. That growth will be driven by peak shaving projects. We also continue to focus on the power delivery business, which has experienced a softer market in the northeastern geographic areas we serve. Our operations and business development leadership is expanding the footprint and client base to address this softness, with the goal of improving revenues in this market over the next few quarters. Gross margin was 4.2% in the fourth quarter, as margins were impacted by under-recovered construction overhead costs due to the low revenue in the power delivery business and allocation of additional resources to support the large peak shaving backlog. As we move through fiscal 2025, we expect higher revenue levels to allow for full recovery of construction overhead cost.

In the Process and Industrial Facilities segment, fourth quarter revenue decreased 17% to $54 million as compared to the third quarter. As John noted, during the fourth quarter, the company successfully completed a large renewable diesel project. This project highlights the application of our traditional energy capabilities to renewable projects. The prospects in the Process and Industrial Facilities segment are strong and include refining, natural gas, chemicals and petrochemicals, and mining and minerals. We expect substantially lower revenue for this segment over the next couple of quarters due to the combination of seasonality, timing on the kickoff of previously awarded projects, and the award cycle for new projects.

We believe this reduction in revenue is temporary, given a strong opportunity pipeline and backlog of $252 million, including a significant gas processing construction project that is expected to commence in late fiscal 2025. The segment gross margin in the fourth quarter was significantly higher than normal expectations, at 15.4%, due to overall strong project execution across the entire portfolio of projects. Now let's discuss the balance sheet and liquidity. Our balance sheet continued to strengthen during the fourth quarter as we generated $47 million in cash from operations, increasing our year-end cash balance 48% in the quarter to $141 million. This cash increase also drove a 26% increase in liquidity to $170 million. Our debt position remains zero.

We will continue to proactively manage the balance sheet and have the financial strength and liquidity needed to support the significant revenue growth we are anticipating in fiscal 2025. Before I turn the call back to John, I want to take a minute for a high-level recap. First, our backlog increased 31% on $1.1 billion in awards. This is the second consecutive year that the company exceeded $1 billion in project awards. This current backlog of $1.4 billion supports our 10%-12% consolidated gross margin range. The company also continues to have a robust funnel of future opportunities. Our revenue was $728 million in fiscal 2024, and impacted primarily by delays in converting project awards into active projects.

With many of those projects now having commenced, we believe the backlog and opportunity funnel we have supports significant revenue growth in fiscal 2025 and beyond. The company successfully improved project execution during fiscal 2024, with all three segments producing direct gross margins approaching our consolidated target range of 10%-12%. The issue for margin performance in fiscal 2024 was related to the recovery of construction overheads, which impacted gross margins by almost 400 basis points, primarily as a result of the timing of backlog conversion to revenue. Our visibility into higher future revenue provides the company confidence the overhead recovery issue will be significantly diminished in fiscal 2025. The company continues disciplined cost structure management, with the goal of limiting cost growth to the capture and execution of projects to the extent possible.

This will allow for the leverage of the cost structure. Finally, the company's balance sheet and liquidity is strong and supports the anticipated revenue growth. In summary, the company expects revenue of $900 million-$950 million in fiscal 2025. We believe the combination of revenue growth, together with continued focus on execution excellence and the leverage of our cost structure, will allow us to return to profitability in the fiscal year and make significant progress towards the achievement of our long-term financial targets. I'll now turn the call back to John.

John Hewitt (CEO)

Thank you, Kevin. As mentioned, our fourth quarter represented an important turning point in what has been a challenging period for the company. With clear visibility into revenue growth and improved profitability in 2025 and beyond, we continue to advance our growth strategy for creating long-term shareholder value. In closing, I'm deeply grateful for the hard work, innovation, and commitment of our employees, for their continued confidence placed in us by our clients, whose loyalty inspires us to push the boundaries of excellence in every critical infrastructure project we undertake, and for you, our shareholders, we remain committed to Matrix Service Company. With that, I'll open the call for questions.

Operator (participant)

And thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. One moment for our first question. And our first question comes from John Franzreb from Sidoti & Company. Your line is now open.

John Franzreb (Senior Equity Analyst)

Good morning, everyone, and thanks for taking the questions. I'd actually like to start with the gross margins that you reported in the quarter. I guess I wanna start with the good. Can you talk a little bit about why the process gross margin was so outstanding at 15.4% in the quarter, and how does that look like on a go-forward basis?

Kevin Cavanah (VP and CFO)

So the fourth quarter performance in the Process and Industrial Facilities segment was extremely strong, and what we saw was just about every operating unit in that segment significantly exceed normal performance. So that's the result of strong execution throughout all phases of projects, from the start of projects through the closeout of projects. Normally, you know, that's not the case where everything just is working like clockwork. I think the long term, our expectations for that segment are to get to consistently 9%-11% gross margins.

John Franzreb (Senior Equity Analyst)

Mm-hmm.

Kevin Cavanah (VP and CFO)

Remember, this segment includes a lot of reimbursable activity, and so the mix of work in the quarter, the reimbursable refinery maintenance activity wasn't as high as it normally is, so that also contributed to the higher margins in the quarter.

John Franzreb (Senior Equity Analyst)

Got it. And, on a go-forward basis, when we think about the gross margin profile, are the jobs that we're executing now on, are they back to normalized gross margins, or are there still some jobs that you'll be delivering that are still under recovery of absorbed costs?

Kevin Cavanah (VP and CFO)

Yeah, so if you look at the portfolio of projects we've got today, we're past those issues where we had, you know, unusually competitively bid margins. You know, the projects we've been adding the last eighteen, twenty-four months are in that historical range, for the most part, of that historical 10%-12% range. Now, there'll certainly be projects we strategically bid a little more aggressively to, you know, to get either win that project for various reasons, including, you know, maybe it's we wanna expand our relationship with that with the client. And then there's always a mix of projects.

You get into smaller projects, there may be a higher level of competition, more people that are capable of doing that work, and so you may have to be a little more aggressive on that type of work versus larger projects. But I would say we're back to a normal, overall normal mix of work that supports the margins we expect.

John Franzreb (Senior Equity Analyst)

Understood. As we think about the cadence of revenue recognition in the coming year, it seems two things to me. One, we're looking at a sizable uptick in the storage business. Is that the case? And is that completely weighted in the second half of the year? And secondly, that it looks like the process is gonna probably be at a lower diminished level through much of 2025. Am I reading that right?

Kevin Cavanah (VP and CFO)

Yeah. So for storage, I mean, if you think about it, we've got close to $800 million of backlog for that segment. Those projects are in the early stages and commencing, and so we expect significant growth in that segment, and it's gonna. It should trend that way throughout the entire year. So, it should start off the first quarter strong and continue to grow as the year progresses. Now, on the process and industrial facilities segment, we are kind of in a lag period here. We just completed a significant project that we talked about a couple of times on the, in the script. And, you know, we're in a traditionally summer months, which are slower for refinery, and then we've got backlog projects that don't start till later in fiscal 2025.

So the first couple of quarters of this, for that segment, are gonna be pretty low. So we expect a substantial decrease in the first half of the year, and then you'll see it start to pick up again in the third and fourth quarters.

John Hewitt (CEO)

... Okay. You know what? With that, I'll give it up and get back into queue. Thank you, guys.

Operator (participant)

Thank you. And if you have a question, that is star one one. Again, if you have a question, that is star one one. And one moment for our next question. And our next question comes from Brent Thielman from D.A. Davidson. Your line is now open.

Brent Thielman (Managing Director and Senior Research Analyst)

Hey, thanks. Good morning. We just wanted to follow up, just thinking of-

John Hewitt (CEO)

Hey, good morning.

Brent Thielman (Managing Director and Senior Research Analyst)

Hey, good morning. Just wanna follow up on just kind of the sequencing of that revenue as we work through fiscal 2025. Appreciate the revenue guidance, by the way, but sounds like maybe you're expecting still some more difficult or challenging kind of year-on-year compares in the first fiscal quarter. But your revenue did grow in this fourth quarter relative to the third quarter, so it seems like things are picking up for you. Would you expect some sequential revenue growth into the first fiscal quarter?

John Hewitt (CEO)

No, I think it's you know, there's a couple things working against that from happening. First of all, you've got summer month activity for both the power delivery business and the refining business. And then secondly, we've got the completion of the large project that we had in the Process and Industrial Facilities segment. You know, surely, that's offset somewhat by growth in storage, particularly, in the first quarter. But I think overall, I wouldn't expect growth and maybe a little bit lower in the first quarter.

Brent Thielman (Managing Director and Senior Research Analyst)

Got it. And then, John, I guess—I mean, just back to the electrical delivery business. I mean, all we hear is about investment and what needs to happen to the grid. So it's a bit surprising still to hear some challenges in that business. Maybe if you could just talk through that. What's the challenge there with those particular customers? And then, you know, how quickly do you think we can get this business back on a better footing just with some of the actions you're taking to refocus with some new customers?

John Hewitt (CEO)

Yeah, so our electrical infrastructure business is in a fairly tight geography, as you compare that to the entire, you know, United States. And so, you know, we've got some long-term clients that we work for in there, both contract or choice arrangements, MSAs and projects that we bid. And I think what we're seeing by some of those principal clients is their spending patterns, which happens, it seems to happen in cycles, for a lot of our clients, is down a little bit, and the size of the projects are smaller. You know, the competitive set continues to be challenging that we deal with. So our teams, over the last six months, you know, we've seen this trend start restarting again.

And so if we're continuing you know, we continue to, you know, to focus in the Northeast, but expand our footprint in the Northeast into other areas, into other client geographies, and where we're seeing, you know, larger capital spend and transmission and distribution and substation work. And so, you know, we've been in a process there where we're, you know, working on developing those relationships and getting into that bidding cycle with those clients. That work is ongoing. We're seeing some great fruit there on the opportunities that are affording themselves to our business. In addition, there's, you know, a lot of industrial electrical work in that region that we work in, whether those are in power generating facilities or data centers, midstream work, LNG facility upgrades.

And so we're actively attacking those markets as well to work to expand our business. So, you know, it's gonna take some time, but I think over the next two, three quarters, we're gonna see some more strength returning to our electrical infrastructure business. And we're continuing to look at new geographies for that business. You know, we have been active in the Ohio Valley, but I think there's opportunities for us there to expand that footprint into that region of the country as well. So, you know, we think, you know, long term, the electrical piece of our business is a growth element and is an important part of our business moving out into the future.

You know, we're gonna continue to work from a business development and a resource standpoint to find avenues to grow that business.

Brent Thielman (Managing Director and Senior Research Analyst)

Yep, understood. And John, maybe just one more. I mean, a lot of conversations, obviously, about you know, the demand consumption of data centers on the power grid, on power in general. You know, as you're looking at your pipeline of prospects, $6-plus billion, are you starting to identify projects that may be associated with meeting those needs, particularly serving the power sector?

John Hewitt (CEO)

Yeah, absolutely. So I mean, you know, our initial work related to data centers would certainly be in the transmission distribution work and the connection of a data center into a to a local grid system. You know, we did a fairly sizable project for a client in Pennsylvania a couple of years ago. We finished where we built the connected it, put the substation in, did all the grid interconnect. And so there continues to be some opportunities out there that's driving some of our opportunity pipeline. I think the other thing we're seeing there is, you know, with this demand, this huge demand that data centers themselves are creating for power, they, you know, these data centers need continuous guaranteed power.

They need to be able to guarantee to their clients that they're gonna be able to have their systems up and running no matter what, and so the other thing we're starting to see is more small-scale power-generating turbines put in at data center sites, LNG and/or hydrogen backup fuel for their individual power generation on. These are those aeroderivative turbines, so all that work is work there that fits within our skill sets, whether it's installation of those turbines, certainly all the electrical work, certainly anything related with LNG and hydrogen infrastructure that needs to put in to service that backup power supply for those data centers, so there's more there than just building the data center and connecting it to the grid.

And so we think those opportunities are gonna be growing out into the future, and we're really well situated to take advantage of that.

John Franzreb (Senior Equity Analyst)

Excellent. Thank you, guys.

Operator (participant)

Thank you. We have a follow-up question. One moment, please. Our follow-up question comes from John Franzreb from Sidoti & Company. Your line is now open.

John Franzreb (Senior Equity Analyst)

Yeah. I got a question about... You called out the opportunity pipeline doesn't include service revenue or jobs less than five million dollars. I'm just curious, what percentage of, say, fiscal 2024's revenue is that service component and smaller, maybe we would characterize as book-and-turn business? And is that a normal run rate, or is that abnormally high or low? Just wanna put that in context.

John Hewitt (CEO)

I mean, we traditionally, our business runs in the 40% book-to-bill maintenance activity, 60% lump sum projects, and those could be lump sum projects from anywhere from, you know, $5 million to $10 million, up to $300 million. So that, that mix and that portfolio generally runs in the 40-60 kind of range. I would say today, because of the size of our lump sum portfolio spread across our storage business and spread across our UPI business, that that's probably more like 30-70, is what that looks like. And, so, good news for that, it's more sustainable revenue for us long term, and it helps to drive better consolidated margins.

John Franzreb (Senior Equity Analyst)

Got it. And I also noticed in the presentation, and this might be just me, I don't know, nitpicking, but you changed the characterization of the opportunity pipeline, kind of reported it on a segment basis as opposed to, like, a more granular breakdown by end markets. Any particular reason why?

John Hewitt (CEO)

Well, we report the business in our segments, and we were trying to provide some, you know, over the past couple of years, trying to provide some color on our, the work that we're doing that's in this energy transition mode, to give investors the opportunity to see, you know, what our impact was there. And so we just kind of just generally felt that, you know, hey, maybe it's just time to go back to our, how we report the rest of the business in our segments. And so that was really our main thinking when we did that. Nothing, nothing subversive, John.

John Franzreb (Senior Equity Analyst)

Fair enough. And can you just talk a little bit about the competitive landscape? Are you seeing any changes in the pricing environment, either one way or the other?

John Hewitt (CEO)

No, I think competitive landscape still unfolds itself out like it normally does for us. You know, the smaller projects, the reimbursable stuff, you know, it continues to be a highly competitive market out there. I wouldn't say it's gotten better or worse. It's sort of, I'd say, back to normal. And but as the project sizes get larger, as the type of projects in storage with our specialty vessel, we're connected into full facilities, the competitive set drops significantly as those projects get, not only get larger, but the fact that those are the kind of projects that are out there, where you've got a mix of specialty storage with facility infrastructure wrapped around it.

I think that's an important point for us, that those projects are back, and they allow – those projects allow a much better margins, better risk profile. Generally, the people we compete against in those projects, which is probably less than a handful, they don't, you know, they don't do stupid stuff. And so to derive the risk in those jobs, you know, outside of something that any one of us think we can control. So it's just a better landscape, I think, as those projects spent on a lot of these storage and UPI projects.

John Franzreb (Senior Equity Analyst)

Okay, and one last question, just only because I've recently heard this, and this topic hasn't come up in a while. Can you give us an update on your thoughts of the hydrogen market? Only because I just recently heard it come back in vogue a little bit. What are you hearing there, John?

John Hewitt (CEO)

Yeah, I think, I mean, for me, I still think hydrogen is gonna be, out into the future, is gonna be part of the global fuel mix. I think, you know, it could be as most things across through the social media, I don't think it's we're gonna be 100% hydrogen economy in the future, but I think it's gonna be part of the fuel mix. I think that, you know, we're gonna have we have an opportunity to play a role in building that infrastructure with our, especially vessel capabilities, our cryogenic capabilities, ability to wrap our infrastructure around that. You know, we're continuing to see, you know, opportunities in feed studies, preliminary engineering work for various hydrogen projects.

I think, you know, I think to some extent, a little bit got slowed down with how the, the, Federal Infrastructure Act was, legislated related to, the credits that were coming out of, out of that act and the need for, renewable fuel to power the hydrogen facilities. And so I, I think, you know, that's kind of set back some of the people that were, that were focused on that. We're also, you know, related to hydrogen and the other work we do, you know, one of the changes that we made when we sort of reorganized our business development group and our focus on our markets was to be cautious about developers, developer-led projects.

And so we're, you know, we're much more focused on long-term clients, blue-chip clients, clients that have balance sheets, whether those utilities or energy companies or industrial companies. And so, you know, there's been, you know, a fair amount of activity here over the last couple of years of developer-type hydrogen projects, and we're pretty cautious about today about our interaction with developers.

John Franzreb (Senior Equity Analyst)

Got it. Understood.

John Hewitt (CEO)

Yeah.

John Franzreb (Senior Equity Analyst)

Thanks for the clarity and the additional color.

John Hewitt (CEO)

Welcome.

Operator (participant)

Thank you. I'm showing no further questions. I would now like to turn the call back over to Kellie Smythe, Senior Director of Investor Relations, for closing remarks.

Kellie Smythe (Senior Director of Investor Relations)

Thank you. As a reminder, Matrix will be participating at the upcoming D.A. Davidson conference, September eighteenth through the twentieth in Nashville. And if you'd like additional information on our attendance at that conference or conversation with management, please contact me through Matrix Service Company Investor Relations website. Thank you for your time.