Mistras Group, Inc. (MG) Q2 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Q2 Fiscal Year 2013 Mistras Group, Inc. Earnings Conference Call. My name is Chandra, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would like to now turn the call over to CEO and Chairman of Mistras, Sotirios Vahaviolos. You may proceed, sir.

The purpose of today's call is to review our financial results for the company's fiscal 2013 second quarter and to discuss our prospects going forward. This discussion is intended to supplement our quarterly earnings release and our filings with the Securities and Exchanges Commission. Frank will begin with a brief disclaimer about the information we're providing today and a summary review of our financial results. I will then follow Frank with a few remarks and observations about our performance, marketing activity and prospects. We will then answer any questions you may have. Let me start off by saying that we had another very good year and actually a record quarter with the growth nearly in all financial metrics for the group particularly in light of the U.S. and global economic situation and outlook. While the organic growth is not as strong as I would have liked, it indicates a conscious effort to improve profitability, which is reflected in the services performance of 130 basis points increase in gross profit margin and 120 basis points improvement in EBITDA margin. The overall activity, together with progress on our key initiatives and the outlook for the rest of the year, is such that I feel very confident that we will have a very strong second half of the year. Accordingly, as we stated in our earnings release, we're increasing the bottom of the range at midpoint of our guidance for both revenues and adjusted EBITDA. With that, Frank, let me turn it over to you.

Thank you, Sotirios. First, I want to remind everyone that our discussions during this conference call will include forward-looking statements. Actual results could differ materially from those projected and factors that could cause actual results to differ are discussed in our annual report on Form 10-K and in other reports filed with the SEC. Also, the discussions during this call will include certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles. Reconciliations of those non-U.S. GAAP financial measures to the most directly comparable U.S. GAAP financial measures can be found in Mistras Group's current report on Form 8-K dated January 8, 2013. These reports are available on our website at www.mistrasgroup.com and on the SEC website. Now, I am very pleased to present summary financial results for the second quarter of fiscal 2013, which includes record revenues, net income and EPS. Revenues for the second quarter of fiscal 2013 were $137.7 million, up 21% from $114.2 million reported in the second quarter of fiscal '12. Revenue growth in the quarter was achieved through a combination of organic growth of 2% and acquisition growth of 19% with the balance of the revenue flux due to foreign exchange. Gross profit grew by 19% in the second quarter of fiscal 2013 to $41.9 million versus $35.2 million in Q2 of 2012. Gross margins at 30.4% in the current quarter were relatively unchanged when compared to the 30.8% in Q2 of last year. During the quarter, services gross margins increased by 120 basis points and products gross margins increased by 20 basis points, but these increases were offset by a decline in the international segment. The decline in international gross margins was due to our recent acquisitions in Europe where we added more services business to a mix, which previously was mostly a higher-margin products business. Operating income increased 14% to $16.0 million in Q2 2013 versus $14.1 million in the prior quarter. SG&A in Q2 of 2013 rose to $23.4 million versus $19.4 million in the prior year. And, consistent with prior quarters, the vast majority of the increase was due to acquisitions completed within the last 12 months. SG&A as a percentage of revenue held constant at 17% for both periods. Net income rose by 15% in the second quarter of fiscal '13 to $9.2 million or $0.32 a share versus $8 million and $0.28 a share in Q2 of last year. Adjusted EBITDA increased by 16% to $23.9 million in Q2 2013 versus $20.6 million in the second quarter of the prior year. Our top 10 customers represented 31% of revenues during the second quarter of fiscal 2013 versus 43% in the prior year quarter. In the current quarter, oil and gas revenues represented approximately 52% of total revenues, down from 57% Q2 2012. And this change was once again due to revenue growth of more than 30% in end markets outside of oil and gas. The advanced services revenue represented approximately 16% of the service segment revenues in both periods. And now a few comments on the company's balance sheet and cash flows. In the first 6 months of fiscal 2013, the company generated net cash provided by operating activities of $27.8 million. In addition, we spent $5.2 million in cash on capital expenditures and leased another $2.5 million of capital equipment, bringing our total capital expenditure outlays for the first 6 months to $7.7 million or 3.1% of revenues. This compares to a total capital expenditure outlay of $10.3 million or 5% of revenues through the first 6 months of fiscal 2012. So I think no matter how you calculate free cash flows, I think you'll determine that we had pretty significant free cash flows during the first 6 months. Our net debt increased to $71.3 million as of November 30, 2012, up from $50.9 million at the end of fiscal '12. The increase of approximately $20 million is due to the acquisition of GMA Group in Germany where we paid approximately $28 million. Our net debt-to-EBITDA ratio increased to 1x versus 0.8x at the end of the fiscal year. As of November 30, '12, the company had cash and cash equivalents of $8 million and an undrawn revolver capacity of about $85 million. And with that, Sotirios, I'd like to turn it back to you.

I want to start out by commenting in our financial results. For the second quarter, by saying that while I am very pleased with these record results, our focus on improving margins and profitability led to lower organic growth. I think it's important to stress that the Mistras model delivered strong results in the quarter where much of the national debate focus on economic uncertainties surrounding the fiscal cliff, contributing to lower product sales, especially to military, and much of the international debate focus on the prospects of nominal growth at best with the possibility of recession looming in the background. As you know, the Mistras business model has consistently delivered superior revenue growth by relying on a combination of organic and acquisition revenue growth. Our fiscal second quarter was a good example of this. And in the quarter, revenues grew by more than 20%. And all the key financial metrics, such as operating income, net income, EPS and EBITDA, all grew in the mid-teens. We believe that our fiscal second quarter results demonstrate the consistency of the Mistras model. However, we believe that the broad economic concerns that outlined above tend to impact customer spending levels in the short term. In the second quarter, our organic growth rate in revenues dropped to 2%, which is much lower than we anticipated, but in concert with our serious effort of margin improvement in the services sector. Turnaround spending. The number of our large clients declined sharply in the quarter for the period -- from the prior year. These clients were a number of industries including refinery, chemical and some of the other process industries, so these declines were not isolated to just one sector. These declines are customer-specific and may not be related to a particular industry. Looking forward, I can say that those large customers where we saw reductions in turnaround spending during the second quarter, we don't believe these reductions are permanent. And when we step back and look more broadly at our turnaround activity, both the independent industry statistics that we review such as Industrial Info Resources, IIR, along with feedback we receive from our customers seem to suggest that calendar 2013 turnaround activity will be very strong. And now I would like to give you some highlights from the company's operations during the fiscal second quarter. Our services division experienced normal activity this quarter with the chemical and downstream and midstream segments of oil and gas. Power generation and aerospace markets also had a good results in the quarter, and we planned outage work in alloy and advanced composite materials inspection, our 5 in-house lab facilities across the country. As a result of our complete asset protection offering, our outstanding safety and quality record and commercial performance during this quarter, we were awarded the upcoming pre-turnaround and turnaround work at several new customer sites, which had not yet been committed to. Our experience has shown that excellent performance for new turnaround service opportunities often results in customers awarding this trust and evergreen contract for the facility. During the second quarter, a global energy company renewed 2 evergreen contracts with Mistras for an additional 3 years of this premier refineries. We're also excited that another major energy firm awarded Mistras a contract to perform turnaround work at all of its major refineries across the U.S.A. as a result of outstanding performance in our first turnaround with the firm. We expect to average 8 turnarounds per year for this new customer. Our midstream pipeline business continues to expand within the Marcellus, Eagle Ford, Barnett and Bakken shale plays while north and in-site. In the quarter, we were awarded a significant contract for a new 190-mile pipeline construction project in Texas from one of the largest energy firms in the region. During the quarter, our Asset Integrity Management Services, AIMS organization, again continued its heavy market penetration, receiving close to $1 million in licensing, training and the implementation of our PCMS enterprise software and risk-based inspection, RBI services, from a mix of oil and gas companies. And now, a few words for our products systems division. Due to the uncertainty in contracted capital spending were off-the-sale products to military, has been delayed in the end of calendar year 2012. We're optimistic that the situation will change in the first half of calendar year 2013 and growth in this product area will resume to typical annual spending. Overall, we continue to see a steady increase in quotation activity. However, conversion of the defense-related quotations are being cut [ph] through by the outcome of the fiscal cliff negotiations at this time. One system of note that has been deliberate was an ultrasonic base system for a division of General Electric. Receiving General Electric certification allows us to build additional systems for GE, GE sub-suppliers and extends to our own services divisions, in-house inspection facilities while performing outsourced inspection of GE components. We're awarded a large contract for a major electric utility in the Midwest to outfit their fleet of 12 gas-fuel boilers with an online AMS boiler acoustic leak detection system. We also received additional orders from 2 other electric utilities for our new AMS 3 [ph] systems that adopts the proven AMS boiler monitoring systems to new gas turbine driven plants using heat recovery steam generation units. These applications, the AMS systems, are being used to maximize utilities in market availability by reducing unplanned outages that impact profit due to high maintenance, cost and lost revenue generation. Our acoustic emission proprietary, 24/7, 365, online monitoring systems continue to expand with new orders internationally for permanent installations in chemical processing vessels offshore, wind turbines and gas turbines. The division will be introducing some new products this quarter, which will both generate third-party sales and support our services division in the areas of active corrosion detection using acoustic emission and integrated proprietary software, and the introduction of a UT tablet capable of supporting both traditional and advanced inspection methods. I will now turn to the international segment of our business. With several strategic acquisitions made, the international segment has now grown to become 25% of our total revenues. The integration of GMA, our recent acquisition in Germany, has proceeded smoothly and is on track to meet and exceed our expectations. GMA is an established company and has already adopted their financial reporting to our existing group financial platform. In France and Brazil, we are leveraged in our model and are focusing on integration with our existing operations, as well as improving margins and profitability with the right management in place. As a result of the restart of the business for oil and gas in Brazil in the first calendar quarter of 2013, we see our business there returning to normal margins and profitability. In reference to France, we see a natural partnership with our new German operations in the aerospace industry especially for both Airbus and Snecma. Due to our expanded workforce of technicians in France, for the first time, a large oil company invite us to the final list to compete for evergreen work in 8 refineries there and another 2 in the rest of Europe. We're also excited for our French company, Ascot, being a finalist for the Areva nuclear work. During the quarter, in the U.K., we received multiple unit orders for offshore online monitoring systems of structural integrity of wind turbines as a result of the successful performance of our initial 5 unit installations. Similarly, a Middle East power-generating company is considering purchasing multiple gas turbine online monitors for successful predictive maintenance of their units. The successful multimillion dollar online monitoring installation of key units of Turbos [ph] chemical plant in Russia [ph] last year has just led to another multimillion-dollar order for monitoring additional key vessels of the plant. Due to weather conditions, most of the online systems' permanent installations will probably fall in the first quarter of fiscal 2014. And now I would like to spend a minute on the company's outlook for fiscal 2013. Based on our current activity level and increasing confidence in our near-term outlook, the company is raising the lower end of its guidance range slightly and now expects fiscal year '13 revenue to be in the range of $525 million to $535 million and adjusted EBITDA to be in the range of $78 million to $85 million. Consistent with prior years, we do not give guidance for individual quarters, but will update annual guidance each quarter. In closing, the Mistras model has demonstrated its consistency with record revenues and profits during the second quarter, and I'm confident that it will continue to deliver consistent growth in revenue and earnings going forward. That concludes my remarks and I would like to open up the floor for questions. Chandra?

[Operator Instructions] And your first question comes from the line of Rodney Clayton. Rodney C. Clayton - JP Morgan Chase & Co, Research Division: So your first of all, in the products -- or actually in the services segment, it looks like we saw a nice sequential uptick in margin there. I think in the past, you talked about some mixed issues and there are some general lumpiness that had driven some recent pressure on those segment margins. Could you kind of just go into detail about what happened this quarter, why you were able to see a rebound there?

Sure. It's really a question of mix of services delivered in the quarter, but also better utilization of labor. So our unbilled was flat and didn't cause a drag. So we always look at the mix of projects delivered and unbilled, and that's what it was this quarter. So it was up both in the quarter and it's up in the year-to-date.

Basically, Clayton, it's really through focus and in some case, walk away from jobs -- for projects that are not very profitable. Rodney C. Clayton - JP Morgan Chase & Co, Research Division: Okay. All right. That make sense. Secondly, you talked about some, I guess, left turnaround activity in the second quarter here. Could that mean that some of the work, that turnaround work, gets pushed into the fourth quarter where you have maybe a little bit more of a sizable turnaround activity in the Q4? Or is this effectively lost revenue? How should we think about that?

Well, let me just start off first and then see what Sotirios has to say. I mean, anecdotally, we looked at 4 customers in the quarter whose revenues were down by about $7 million. If they had stayed flat, it would have been another 5% increase to organic growth. There's probably 100 reasons amongst those 4 customers why those -- why that spending was down. Those customers are in both -- they're in refining, they're in chemical and they're in, in what we call other process industry. So in looking at them, we don't think that those declines are permanent. And as Sotirios mentioned in his speech, in stepping back and looking at what we see as turnaround activity coming in fiscal '13, we think that's going to be strong. But we did have 4 customers that actually had significant drops in turnaround and in related activity in the quarter. And they're names that you would all recognize.

Yes. I would summarize, Clayton, by saying, "It was really both." It was really a boost in some cases and we are already trying to -- are associated with doing the work, and some of them might be delayed even further on 2013, at the end of 2013 to 2014. Okay, Rodney? Rodney C. Clayton - JP Morgan Chase & Co, Research Division: Okay. All right. That sounds good. And then finally, if I may, it seems like you announced today a number of new contracts or at least new prospects across a lot of different businesses and geographies. Obviously, it would appear that your customers are realizing the value that you provide. But is there anything that you're doing on the sales side that you would attribute some of this recent success to?

We talk about in the U.S., for instance, it was really performance. So some of the small turnarounds that they gave us in the fall, we performed very well, and they just opened the market for us and these are new customers that we never had before. In the case of international, as I mentioned, in France, it was very simple. We do not have the technicians before that the large company can give us a big turnaround or, let's say, an evergreen contract. Now we have the technicians there after the acquisitions that we made last year and the strength that we also have from Germany. So now, basically, we are confident we can do the job. And in the case of the nuclear work that we're really -- we obtained in France is, again, a conviction by them that we have the talent to do the job.

Your next question comes from the line of Justin Hauke. Justin P. Hauke - Robert W. Baird & Co. Incorporated, Research Division: So thank you for walking through all of the dynamics on the quarter on the organic growth. I guess, I was curious. One thing you mentioned was more of a focus on the bottom line contribution. And I guess I was wondering, how much of the growth decline would you attribute to actions that the company took? I mean, maybe cutting unprofitable work or just walking away from jobs that maybe you weren't earning an acceptable margin on. How much of the growth decline this quarter was attributed to those actions?

I think the word I would like to use would be substantial, okay? We walked away for -- for instance, we walked away for an evergreen that we had for many years. Justin P. Hauke - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then, I guess, I mean, with that, I think that's a little bit of a newer way of thinking about the top line of the business. And I guess, as we think longer term, your focus on preserving the gross margin -- I mean, should we still think of your organic growth on a normalized basis being in the double-digits range? Or has things kind of moved more to high single digit is kind of the new norm and then in the acquisition on top of that?

I think, given the fact that we're very pleased with the current results, we thought that they hire -- we saw softness in spending in 4 customers. I think that for the near term, certainly in the second half, our guidance projects that organic growth is going to be in the mid to upper single digits. So -- and we're going to watch that very closely. I don't think anyone in the company believes that it couldn't hit double digits in the future again, but for the very near term, of the second half, mid to upper single digit in organic growth.

The other thing I wanted to add also is that some of the hardware, especially in the products area, some of them might cease in the first quarter of 2014 because we cannot really install a lot of the systems in areas like in the North Sea, for instance, or in Russia because of the weather conditions. So that will also delay a little bit -- it would delay the growth for us. Justin P. Hauke - Robert W. Baird & Co. Incorporated, Research Division: Okay. And I guess, kind of the last question I have is I think the long-term goal has been to move your mix of advanced service revenue to -- closer to 20%, 25% from 15%, where it's been for a long time. And I guess, as this -- the growth kind of downshifts a little bit, should we expect that mix to move higher just as there's less maybe new, low-margin business that comes in as part of the top line strategy?

That's really exactly our planning, okay? What we really know more is that we're moving in the first calendar, let's say, quarter of 2013.

Our next question comes from the line of Andrew Obin, Bank of America Merrill Lynch.

Just trying to get more sense if you -- and I know it's early but -- in the year, but have you seen any change in your dialogue with the customer post, I guess, this temporary resolution of the fiscal cliff? And do you think customer behavior will be impacted until the final resolution?

Well, first of all, when we -- Andrew, when we talk about products, it really affected us very drastically. Because since September, as you probably heard from a lot of our competitors like General Electrics and others who reported the same capital for off-the-sale of items that were very good for us usually in the fourth quarter, stopped coming. But at the same time, we have seen an increased activity for quotations. So really, we think that this is really a temporary, it's not really a permanent. Because people need our systems, and our systems really are helping our customers to produce. In some cases, so we see growth in that area, okay? Now the same thing can be said, because there were also -- we do also some military services, okay, but we don't talk a lot about it, but we do some of that. That also has been delayed, it has not been canceled, it has been delayed. So from our point of view, in our business segment, military has affected us because they are really a peripheral comment is that depending on the military that now had to delay.

Right. But I guess what I'm trying to say, is this resolution that we've had in late December, is that a -- do you think if you've had any conversations with your customers over the past week, is there a sense that people are ready to sort of start spending again? Or do people want to wait and see until we have the final resolution?

I think people are waiting for the end of January for the final resolution.

And then a follow-up question on margin sustainability, particularly in the service business. Taking a 2-, 3-year view as you become more selective with the customer base, where do think the margins can go in a couple of years, gross margins on services?

I think that they're stable to up a bit. We're not projecting any major changes in those. But we think that due to the mix of business and also the mix of industries as we grow outside of oil and gas, that we have the potential to increase that a bit. But we're not projecting any major ups or downs there.

Your next question comes from the line of Tahira Afzal.

I guess, I had a couple of questions on the evergreen project you had built. Are you seeing more competition in your business? Or is this generally a trend that we're going to see going forward where the pricing has been challenged with more when you go into these specific type of sponsors?

Well, based -- there are all those tight competitions here, especially because a lot of these jobs are very large. But if you look at the end of the day, you will see that we obtain more evergreens every year, so therefore we feel that it's really price tightening, but because of our superior work in advanced technologies and the way we do business and the way we approach evergreens, I think we're still the company of choice and I think this will continue.

Okay. I guess, Sotirios, my question was basically -- come from the back of all of your bills reported yesterday and reported very strong growth in their inspection business. So I guess I'm trying to see, is that because they're just the new interns [ph] and they're just -- have easier comparisons? Or are they -- are you just seeing more competition because you're firm [ph], when compared, is fairly different?

We've lost no business to a large competitor. We just basically, as I said, what we did is we just -- at the beginning of the year, we walked away from a large contract. They're basically -- their margins are very, very poor. We cannot tolerate that continuously.

Also, Tahira, just what I mentioned a little bit earlier, is 4 big-named customers, there was a decline of about $7 million in the quarter on, what I would call, turnaround and related activity. I don't think we really know all the reasons for that, but the sense here is that it's not permanent. So, I mean, that's a factor that we look at.

In some areas, we are now planning for any turnaround activity. So therefore, that's not lost.

Got it. And -- but, Frank and Sotirios, if you had to -- basically how much of the weakness came from the fault lines versus letting go of some of these evergreen projects? Is it half and half? Or is it [indiscernible] towards these 4 accounts?

I'm sorry, Tahira, could you repeat that? I know it's...

Sure. If you were to break down the weakness on organic growth side between the 4 sponsors that just spends less versus accounts you let go, would you see it half and half? Or can you give us an idea of the split?

I mean, off the top of my head, it's mostly in the accounts that we'd have where the spending went down. Down dramatically across 3 different segments, refining, chemical and other process, in amongst 4 customers who are big, big names that you'd recognize.

Got it, okay. And I guess last question, and then I'll hop back in the queue. Sotirios, you talked about earlier on about wind -- inspection of wind farms north. Even in the U.S., now the wind farms are becoming fairly aged. When I go to industry conferences, there are some talk of really ramping up the inspection process then to that fragmented industry. So could you talk about -- a bit about your potential opportunities there in the U.S. The fact it seems the maintenance are fairly fragmented, would that allow you to really ratchet up your market share there?

Let me say a couple of words in general and then Frank can tie that with numbers. We see, basically, nothing more than growth in the years to come. Okay, we saw some, as I said, some with delays, but I think the industry that we're servicing continues to grow and we believe that the market is a lot larger than what all is probably thinking in the marketplace, especially if you really are combining both services, products and software.

Got it. Okay. And last question, I promise, and I'll hop back. At a recent [indiscernible] conference, there was a lot of talk on nuclear maintenance and safety, new safety standards. Any commentary, Sotirios, on whether you're seeing any feedback from you're nuclear clients or your deliveries there, on whether that means some opportunities for you?

Yes. Actually in the United States, it's nearly hard to say, but it when it comes to Europe, we expect in the next 2 or 3 years to get some serious business from our Areva in France.

Your next question comes from vote line of Matt Duncan.

Sotirios, the first question I've got, just to help us size the impact on your growth, the business that you guys -- it sounds like you let some business walk away because the customer was asking you to take a margin that was just unacceptable. Can you give us some sense in total how much revenue that was and then what the margin profile is they were asking you to take?

Let me -- first, I'll be very cautious in saying that, really, there was only one, there was no really a second or a third, okay, it's only one customer that -- and it was not we walked away, we basically decided to not bid, okay? And it was really substantial. It was really close. It was really -- it can be anywhere between $5 million and $10 million depending on the year.

Okay. And then can you talk a little bit more about -- it sounds like you guys are obviously being very careful with your gross margins right now. How -- exactly what steps, other than clearly not bidding on jobs where the margins are too low, are you managing your tech headcount lower? Or what exactly are you guys doing on the margin front other than sort of watching the margins of the jobs you're bidding for?

Well, first of all, you are trying to convince the customer to use more techniques that can save the money, what we call key performance indicators. So that by using more boxes, we can save more money to the customer. And there's a lot of other things that we do that really helps the customer pay less for the services they are used to pay before. And that's really what we're doing and I think we're successful because we really have obtained a lot of new customers in the last quarter that are going to come to us that we never had before.

Okay. And then last thing I've got, Sotirios, I want to focus on your international business a little bit, it's clearly gotten to be a bigger piece of the business through some of the recent acquisitions. Can you talk a little bit about what the international market looks like in relation to the domestic market? Sort of what your market share opportunity is there and what the margin profile is internationally relative to domestic?

Well, first of all, the international business with us also carry products. So in this particular quarter, capital expenditures, both in Europe and here, were way, way down. So that really affected our margins in the international business, okay, because the products division is combined together with what the services division in the international business. Now what we have seen basically in Europe -- and a lot of the capital projects in general are done in Europe. But keep in mind, what we're doing in Europe really is run and maintain work, that's what we're going after, okay, it's not that we're going after the large capital projects. The fact that we're really becoming an important player in the aerospace industry, especially in Germany and now we combined a lot of the resources and, as I said, together with our friends operations, I think that will really help us not only grow the business but also improve our margin.

Okay. Do you have a goal, Sotirios, for what percentage of the business you'd like to see the international piece be?

The only thing that I have basically that I would like to say publicly is that the international base of the -- gross profit margin must be higher than the services business in the U.S.

Your next question comes from the line of Rich Wesolowski from Sidoti & Company. Richard Wesolowski - Sidoti & Company, LLC: I'm curious, when was a contract, the evergreen contract, that you had mentioned, awarded to a competitor or when did you decide not to bid?

Well, first of all, we don't discuss precisely -- I mean, besides the beginning of the year, okay, that's in the first -- the beginning of the year. It's an evergreen contract. And second, it's not a competitor, it was competitors who really obtained that. And the decision was very simple. There are many times that you cannot afford -- we have -- we're very busy, we need more technicians as we're talking today. The market basically for technicians is okay, but not as good as some people think, okay, especially for talented and knowledgeable technicians, certified in multiple methods. So we decided that it's best for us to move ahead and look. Now I also wanted to tell you that we're also doing work for the same refinery because they really need in our talent. We continue to do some work, small, of course, but especially for a difficult -- for the -- on a call out basis, especially for difficult obligations, they call on us because we're the experts in the area. Richard Wesolowski - Sidoti & Company, LLC: No, it sounds like a sensible move. I'm just curious as to the change given that you had aimed for double-digit organic growth in fiscal '13, 3 months ago, seemingly after this job was awarded to another company, I'm wondering whether the change in moderated growth outlook is based more on the shift in turnaround spending rather than this one contract? Or you have it to raise margin?

No, it's on both. Because every quarter, you have business with the common. It's really on both, okay. Richard Wesolowski - Sidoti & Company, LLC: Okay. Are you surprised that this business has remained so aggressively priced now that refiners and others in the process industry are some 2 years into recovery mode and most people are talking about the degree to which labor is getting tighter?

Well, Rich, I really have a different opinion on that, and I think they are doing their job. I think a lot of the large companies are combining the contract. They are looking for large suppliers like us, dedicated, and they are doing their job in cutting the prices. And we have to do our job in basically saying, "If you want the talent we have, you have to pay more." Richard Wesolowski - Sidoti & Company, LLC: Right. Someone had asked earlier what is the satisfactory margin for the service a couple of years out? And I was hoping to ask the same question for the international.

What you've heard is that it should be higher than services, which services, I think, in the quarter was around 29, something like that. So...

Yes. Richard Wesolowski - Sidoti & Company, LLC: Okay. And then lastly, I'm wondering if you bought any companies during the quarter aside from GMA?

No.

No.

You have no further questions at this time. [Operator Instructions].

Okay. That's it, right?

I'd like to now turn the call back over to Sotirios Vahaviolos. Please proceed.

I would like to thank everyone for listening in our call and hope that you have a great day. Thank you very much. Bye-bye. Thank you, Chandra.

You're welcome. Ladies and gentlemen, this concludes today's conference. Thank you for you're participation. You may now disconnect and have a great day.