Mistras Group Inc (MG) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen. And welcome to your Q1 2010 Mistras Group, Inc. earnings conference call. My name is Solomon. And I'll be your event manager today. Throughout the conference, you remain on listen only.

(Operator Instructions)

We will be accepting audio questions after the presentation. And now I'd like to hand the conference over to CEO Sotirios Vahaviolos and CFO Pete Peterik. Please proceed.

Solomon, thank you very much. And good morning. Welcome to the Mistras Group first ever web conference call to discuss our recent company performance. First, let me thank any of you listening that may have invested in our company. Since we met with many of you recently, we hope that our comments are not too repetitive. And we expect this call to be brief.

As indicated, my name is Sotirios Vahaviolos. And I'm the Founder, Chairman, and Chief Executive Officer of Mistras. Joining me today is Mr. Pete Peterik, the Company's Chief Financial Officer. The purpose of today's conference call is to discuss our recently released financial results for the Company's first fiscal quarter that ended August 31st, 2009. Our primary objective with this call is to provide our shareholders and potential shareholders with an enhanced understanding of our company's performance and prospects.

This discussion is intended to supplement our quarterly earnings release and our filings with the Securities and Exchange Commission. Pete will begin with a review of our financial results as well as provide you with our annual guidance. I will then follow Pete with a few remarks and observations about our performance, marketing activity, and prospects. We will then answer any questions you may have. With that, Pete, let me turn it over to you.

Thank you, Sotirios. First, I want to remind everyone that any forward-looking information we discuss today is being provided in accordance with the provision of the Private Securities Litigation Reform Act of 1995. We have made reasonable efforts to ensure that the information, assumptions, and beliefs upon which this forward-looking information is based are current, reasonable, and complete. However, a variety of factors could cause actual results to differ materially from those anticipated in any forward-looking information.

Description of these factors is set forth in the last paragraph of our press release and in our company's SEC filings. Accordingly, there can be no assurance that the forward-looking information discussed today will occur or that our objectives will be achieved. We assume no obligation to publicly update or revise any forward-looking statements made today or any other forward-looking statements made by the Company, whether as a result of new information, future events, or otherwise.

Now I'd like to present the financial results for our first quarter. As a reminder, we have a May 31st year end. And our first quarter ended August 31st. We also want to remind everyone that our first quarter is typically seasonally slower and represents a smaller percentage of our total annual revenues and net income compared to our second and fourth quarters. Our actual results were within the range presented in the prospectus for our IPO filed with the Securities and Exchange Commission on October 7th.

Revenues were $56.1 million for the first quarter compared to $47 million for the first quarter of fiscal 2009. The increase of $9.1 million, or 19.3%, was primarily attributed to revenue increases in our services segment. These increases, however, were partially offset by decreases in revenues in our other segments, which were more impacted by the soft economy and adverse foreign exchange impacts.

In the first quarter of fiscal 2010, our services segment revenues were $45.7 million, which is an increase of $9.9 million, or 27.7%, compared to $35.8 million for the first quarter of fiscal 2009. The increase was evenly divided between organic growth and growth from several small acquisitions. The organic growth was largely driven by increased customer demand for mechanical integrity and software services as well as several new multi-year contracts.

On a local currency basis, our international segments generated 11.8% growth in the first quarter of fiscal 2010 compared to the first quarter of fiscal 2009. However, adverse foreign exchange impacts offset this entire growth and reduced segment revenues $0.7 million to $7.8 million compared to $8.4 million for the first quarter of fiscal 2009.

Our product and system segment revenues of $3.6 million were down approximately 10% due to reduced capital spending by our customers. We believe this decrease to be less than that experienced by other product and system companies and continue to see good proposal activity.

Recently, we received a sizable contract to develop an imaging system to test advanced composite materials for the new F35 Lightening II program, also known as JFS or Joint Strike Fighter.

As indicated in the income statement issued in yesterday's press release, gross margins for the business in our first quarter this fiscal year decreased by 4.7 points versus the prior year quarter. This gross margin decrease was primarily due to the large growth in services revenue, which historically has a lower gross margin percentage than our other segments. Lower product and system sales and mix changes were also a factor.

In our services segment, our gross margins also declined. There were a number of factors contributing to the 2.3 percentage point decrease in the quarter compared to the first quarter of fiscal 2009. Approximately one percentage point can be attributed to the reduction or deferral of pipeline inspection work in several of our locations, including Canada and Denver, caused by the lower price of oil.

We estimate the remainder for approximately 1.3 percentage points to be accommodation of the type or mix of projects we completed and some price sensitivity, as well as startup costs incurred on a new multi-year contract. However, we are encouraged by 129 basis point reduction in our nonbillable time as a percentage of our services revenues compared to the same quarter last year. We would expect to see further improvement during the year.

We also see opportunities to reduce or leverage our costs as we continue to grow. Selling, general, and administrative expenses included in the determination of income from operations in the first quarter of fiscal 2010 were 23.4% of revenues compared to 23.2% of revenues in the first quarter of fiscal 2009. These costs increased by $2.2 million and included a provision of $0.8 million for bad debt expense related to the remaining receivable of a customer in bankruptcy. The remainder of the increase primarily represents additional infrastructure to support our growth from acquisitions in our centers of excellence.

Our income from operations was $2.8 million for the first quarter of fiscal 2010 compared to $3.7 million for the first quarter of fiscal 2009. Net income attributed to Mistras Group, Inc. was $0.8 million in the current quarter compared to $1.5 million in last year's first quarter.

Earnings per diluted share before the impact of our public offering were $0.04 versus $0.06 in the last year's quarter. For your information, the share count used in these computations was 20.4 million and 17.3 million shares, respectively. With our public offering, we increased our common shares by 6.7 million shares for a current total of 26.5 million shares, excluding any stock options outstanding.

Now with respect to our balance sheet and cash flows, we continue to be very pleased with our cash flows during this economic slowdown. Our cash flow from operations in the quarter was $4.5 million. Capital expenditures and cash used for acquisitions for the quarter was $14.4 million.

We did acquire two companies in our services segment. One company specializes in API or American Institute of Petroleum Inspectors, which will help Mistras in our further expansion in mechanical integrity applications and services.

The other acquisition was the purchase of a company that specializes in guided wave technology and makes Mistras a premier service provider for the inspection of liquid and gas pipelines, including those that are varied or insulated.

The source for the cash required for these acquisitions was primarily from bank financing, which has since been repaid with the proceeds of our initial public offering. In connection with these acquisitions, we also incurred $5 million in notes payable in other obligations.

Depreciation and amortization for the quarter was $3.5 million. Non-cash compensation costs were $0.3 million. And other non-recurring charges were net of $0.6 million. Our adjusted EBITDA, which includes an add back for these items as well as the add back of interest and taxes, was $7 million in the quarter, nearly identical to the adjusted EBITDA in the first quarter of fiscal 2009. On a trailing 12-month basis, adjusted EBITDA is $31.1 million.

After the closing of our initial public offering earlier this month, Mistras has a pro forma equity of $116.5 million as of August 31, 2009. On a pro forma basis, reflecting the proceeds of our offering, our net debt was $18.2 million. And we have full availability under our $55 million revolver.

At this time, we would like to provide our initial annual guidance on our outlook for fiscal 2010 for revenues and adjusted EBITDA. For revenues, the range is $250 million to $280 million. For adjusted EBITDA, our range is $39 million to $45 million. And with that, Sotirios, I'll turn it back over to you.

Thanks, Pete. Now I would like to add several observations and comments to Pete's remarks. Let's start with our first quarter performance. In this economy, we are very proud of our $19.3 million revenue growth. Customer acceptance of our unique and comprehensive asset protection solutions provided us with solid first quarter growth and tempered the effects of the economy.

Our strong services growth was driven by several new multi-year contracts, continued growth in mechanical integrity and software services, and two small acquisitions. We also executed several BCMS planned conditioning monitor software, enterprise software contracts that should provide continued growth for the future, especially in the computer services area.

We experienced similar challenges that we faced in the second half of 2009 fiscal year, which ended in May. But our management and employees continue to excel in working through this difficult market. For our first quarter, this led to lower revenues in our products and systems and international segments. However, we appear to be performing better than many other companies in our market space.

Our running maintained multi-year contracts, where we provide technician labor on an outsourced basis for daily inspection activities as well as for our customer turnarounds and outages, provides predictable and consistent revenue, less vulnerability to more cyclical capital projects, and are the base for leveraging our growth. We intend to continue our growth by utilizing and even expanding toolbox of our technology and asset protection solutions, providing differentiated value to our customers.

We're also encouraged by our quotation activity. And at this time, we do not see any evidence that overall market demand is deteriorating. We would expect trends in our products and systems and international segments to improve in the last half of the fiscal year, especially with some of the strategic actions we have taken to date. These include our expanded sales channels with additional product representatives, identifying new business services opportunities in Europe and South America, and leveraging our international relationships with long-term customers.

To better promote the extensive products and system solutions that we have to offer, we have recently implemented an indirect alternative distribution channel for our lower-cost but function-rich products. Our own direct sales channel will focus more on larger projects and major accounts. Our strategy is to sell high-value integrated industry-focused applications in growth markets, such as infrastructure, advanced composites, and power generation.

We continue to view the softness in the economy as an opportunity to show our valued customers our unique solutions powered by our PCMS enterprise management software, which can provide them improved asset protection and mechanical integrity management.

Last fiscal year, Mistras invested in future growth by creating four new centers of excellence, which are the incubators of new technology and customer solutions. The centers of excellence we launched last year were, one, a tube inspection group, primarily for oil, gas, and chemical industries; a line-scanning thermography group, a patented technology to inspect composite materials and large boiler-tube walls; three, an offshore services unit equipped with new instrumentation to inspect drill pipes; and four, and asset mechanical integrity group to provide services for our PCMS software applications.

We're just now beginning to see the returns of these investments with several new customers and projects. One major company has already selected PCMS to be used in all their refineries and plant locations. And we expect similar opportunities from other companies.

Longer-term drivers of our growth, particularly for products and systems, will come from several research contracts and grants that we have in the United States and abroad. For example, in March 2009, the National Institute of Standards and Technology, known as NIST, awarded Mistras and its university partners with a $6.9 million research contract under their new technology innovation program for the development and research of advanced technology to enable monitoring and inspection of the structural health of bridges, roadways, and water systems.

With 28% of bridges graded as structurally deficient by the government, Mistras and its partners plan to develop a system for continuously monitoring the structural health of bridges using our wireless sensors powered by structural vibration and wind. The self-powered wireless central network for structural bridge health prognosis project will assemble data from a variety of sensors and interpret them through damage assessment and reliability algorithms.

The outcome of the project along with our own current proprietary central fusion systems currently used in our own line 24/7 monitoring applications could be a breakthrough in the structural health monitoring area and lead to an increase in opportunities for Mistras.

In the first quarter of fiscal 2010, we saw an increase in our infrastructure revenues and continue to view this market as a growth opportunity. We continue to develop new technologies for monitoring wind turbines and hope to be a major player in this space.

Our new Executive Vice President of Sales and Marketing Ralph Genesi, who was formerly a VP of Siemens, is championing this effort. We call our sales and marketing strategy the more principle -- more technologies, more customers, more business, more revenues, and, of course, more profits.

Our business plan and strategy has always been to complement the more nondisruptive testing, the more traditional nondistruptive testing, of entity services model with technology-enabled engineering services to create the one-plus-one-equal-four Mistras model. Currently, our revenue mix biased to a growth in services combined with a soft economy has produced both growth and operating margins lower than our targets.

As Pete noted, we see a number of ways to improve our margins going forward, including increasing our revenues for advanced entity, 24/7 online monitoring, software services, and to fully leverage our most recent growth investments.

Our traditional services, which have lower margins, are a very important component of our service offering and give us the secular platform to increase high-value added services to our customers. Accordingly, for these traditional services, we'll be competitive but focused on our customers and prospects on the total productivity and value proposition that we bring to the table.

We always seek collaborative approaches that combine our comprehensive portfolio services to work to our mutual advantage. Although we employ this customer first strategy, we do occasionally lose a customer solely on price as we did in the first quarter. No matter what the economy, our customers are sensitive to price. But at the end of the day, selection by our customers as they are outsource provider comes from mutual trust and their confidence in the quality of services provided, safety and technical competence.

We believe this approach as well as our emphasis on technology, higher margin engineering, and advanced asset protection solutions and services will drive changes in our mix and over time improve our margins while providing maximum benefit to our customers.

As we look forward, we continue to see challenging market conditions and uncertain market fundamentals for our customers. At the same time, given our strong base of recurring revenues, new contracts obtained today, scheduled turnarounds and completed acquisitions, our second quarter revenues will show continuous sequential growth. Our major plan turnaround schedule for the spring also appears to be busy.

At this time, we are very confident in our projections and guidance and hope to earn the trust of our new investors as a family company. These near-term questions about the economy or a particular industry as to maintenance spending, et cetera, do not change the overall broad drivers of the Mistras business model. But private and public infrastructure continues to age and needs to be assessed and monitored. Plants need to be safe and productive. And their operators want to extend the useful life of assets but comply with regulations, managed risk, and avoid any catastrophic disasters. We believe our solutions to these needs are not optional but critical. Delays in spending only increase the risks. It will not eliminate these needs.

Further trends in customer outsourcing, due in part to the aging demographics of their own workforce, will continue. And purchasing inspection and engineering services as needed will likely be the norm for customers as they evaluate alternatives.

New technologies, including online monitoring, line-scanning thermography, guided ultrasonic -- the guided waves that Pete talked about -- will require talent and expertise that quite frankly many of our customers and competitors do not possess. We believe that over the longer term there is simply no alternative to our services. At the same time, we'll not rely upon or expect to see large capital or new construction projects for the foreseeable future.

The one exception may be in the nuclear industry, where the license activity for new construction remains high. Currently, these new construction projects represent less than 10% of our business.

Especially after our successful IPO, we have a strong balance sheet and plan to continue our highly disciplined approach to implementing our business model. Our historic growth over our last three years, fiscal years, was 31% CAGR. And our organic growth rate has averaged 19%.

Going forward, we're targeting 20% annual revenue growth. We believe it is not only achievable but sustainable. Mistras growth has been driven by market share gains not only from new customers but also by selling more systems, software, and services to our existing customers, and leveraging our international footprint and comprehensive toolbox of solutions.

Our local customer support achieved through our highly trained and skilled engineers and technicians provide outstanding service to our valued customers. We will be aggressive in our business development and are committed to using technology and software to expand our business and market share. Finally, we expect to continue to be unique, technology-enabled services company with high growth and intend to deliver strong returns to our new and old shareholders for their investment in Mistras.

Before we take questions, let me thank all of our employees around the globe, who have helped us become a public company. After the recent events related to our IPO, including ringing the opening bell on the New York Stock Exchange, we all are energized to achieve our goals of continued growth and profitability. With our global reach, comprehensive suite of technology-enabled services, including software, products and systems, compelling market dynamics for inspection of aging infrastructure, new materials and applications, diversified blue chip customers, attractive financial model, and a strong, experienced management team, we believe there's no limit to our potential growth and opportunity. And truly, the best is yet to come. That concludes our initial remarks. Let us now open it to questions. Solomon, can you help us?

(Operator Instructions)

Your first question comes from the line of William Stein with Credit Suisse. Please proceed.

Great. Thank you. Sotirios, I think you said you closed two acquisitions in fiscal first quarter. I'm wondering if you can elaborate on future opportunity for acquisitions. Were there any -- have any been closed so far in fiscal Q2? And what does the pipeline look like?

Well, first of all, Will, nothing has closed except these two that we discussed. Nothing has closed in the second Q. As you know and we have always discussed with all of you is our business model includes small acquisition, which really in our case really is acquiring certified employees and geographic locations. We always have in our pipeline in the future small acquisitions. And that's really our answer to that.

Okay. And then, Pete, for you, perhaps you can remind us what normal seasonality looks like for the fiscal second quarter and any reason that we should expect a meaningful departure from that this year.

Our normal seasonality is our second and fourth quarters, which is the fall and the spring, are our two busiest quarters. And we are seeing significant activity in the current quarter. So there's no departure there. And as Sotirios mentioned earlier, there was also a significant book of business that we see coming in the spring.

Great. Thank you very much.

Thank you, Will.

Your next question comes from the line of Richard Eastman from Robert W. Baird. Please proceed.

Yes, good morning. Just a couple questions -- one is -- could you just spend a second, Pete, on the services business from your description of the gross profit margin there and the decline? It sounds like that 230 basis point decline year over year is maybe attributed to a couple issues that potentially drag into the fiscal year '10 here. It sounds like utilization was good. So how should we think of that gross margin for the services business as we move into the back three quarters of the year?

I think -- good morning, Rick. A couple things to mention here -- one, certainly one percentage point of the quarter-over-quarter comparison was due to impacts of the economy in terms of a decrease in the pipeline business, particularly in the oil sands in Canada. That activity is certainly picking up in the current quarter. At the same time, the other drivers of the margin are always going to be the proportion of traditional versus advanced services that we have. And by adding some new customers into our mix in the second -- in the first quarter of this fiscal year, some of those lower margins will carry over for a period of time. The offset, though, will be the fact that our utilization of labor will be much stronger going into the second quarter.

Okay. So with that stronger utilization, that's probably the key then. Your gross margin should -- the bias would be up from here.

Absolutely. And obviously, as we drive more advanced solutions to our customers, there's some slowdown in terms of capital spending. Those decisions take longer. But certainly, we're confident that we're going to sell more advanced services to our customers in the remainder of the year.

Okay. And then so curious when you had mentioned and you laid out your centers of excellence, I'm a little bit curious around how you formed those four. Is this around a Mistras core competency? Or is this around markets that have the biggest potential? Or how is it that we picked the tube inspection line scanning, asset mechanical?

Basically, there are many factors on that, Rick. One of that, of course, is -- and the most important, of course -- is the customer and what really the customer needs. The customer need for us was always to be more and more aggressive in tube inspection. These are really the heat exchanger tubes that we have to do. And in our contracts, the evergreen contracts that we're discussing that we had over the years, they were really competitors who would come to do that type of work. Now we invested a lot of money, not only in equipment but also in people. And that's why basically in 2009 our profitability was lower because to train people like that it might take a couple of months, okay, which is really unbillable labor. So that's one.

The thermography part is something that really is driven -- the infrared thermography is really a patented technology. And it's really driven by the need in advanced composite testing, such as let's say the new 787. The fuselages are not composite material. How do you test that? That's number one.

And number two, how do you bring a technology like this into the boiler tube walls -- the wall's tubular -- and you inspect it? So all of these things then was really market need from our customers and, of course, seeing the better market. All of those, by the way, four that I mentioned, was a very big investment for us in 2009 that now already is start paying dividends.

Okay. Okay. And just one last question for Pete, sorry -- Pete, in the international business, obviously FX had a significant impact on the reported sales number and the I guess decline. What impact, Pete, did FX have on the margin there because margin declined more than sales in reported terms? And I'm curious. Did the weak dollar have an impact on that gross margin as well?

It did. It had a -- actually the dollar strengthened in the quarter-over-quarter comparison. Now with a weaker dollar, we're going to see a reversal that going forward I would expect, although we do deal in a large number of different currencies. And a -- but for the most part, the cost of the international operations tend to be fixed. So it's certainly -- the margins should hold to be pretty steady. The other impact in the international margins were there were fewer product sales, which carry a higher margin.

I see. Okay. Okay. So mix impact. Okay. Well, thank you very much.

Thank you, Rick.

Your next question comes from the line of [Justin Spear] with [Van Cappin]. Please proceed.

Good morning, gentlemen.

Good morning.

Just another question on the typical seasonality, particularly looking at your full-year guidance implies a pretty decent ramp in profitability in coming quarters. I don't know how that typically -- how that pattern works and where you potentially get the leverage. Is it on the SG&A side as revenues ramp seasonally? Or is there something with mix that you see beyond seasonal that gives you confidence on the margin side?

There's a combination of factors. We would see improved process billing, both on the gross margin line as the unbillable time of our technicians decrease and we leverage some of the fixed costs within the cost of sales structure. And obviously, that same impact would flow down to the operating income line. Historically, if you look at the profitability cycle, you'll see heavy profits in both the second and fourth quarter that will certainly bring up the slower quarters that we do have seasonally.

Thanks. And also, on the product side, on the operating line -- and I know it's not necessarily large enough to move the needle -- but you lost money on the operating line on the product side. How do I think about that? Obviously, it's a high gross margin content or driver but on the operating line. Was that surprising to you? And how do we need to think about that going forward? And where do you see the mix of product offering going as you grow the business?

I'll let Sotirios answer the mix question. But as to the operating income question, part of that's a function simply of volume. The volume -- and because it is a smaller operation, volume will have more significant impacts. Additionally, we've made investments in engineering and sales staff to help grow the business. And we see signs of that going forward. As to the mix of products, I'll let Sotirios handle that one.

Well, first of all, in the products group, that's not only really produced things that we sell to third parties. We also make products that are niche products that our service organization is using for their own use. So somehow, basically some of the profitability there for the -- it's hurting some of the profitability in the products. The first -- doing a nice breakeven analysis, you can see very clearly that in the first quarter, our product sales were really weak. We see that really to be reversed. We see a lot of more quotations now. And things will be reversed in the future. And you will see also the gross profit of the products group to always lead the international as well as the service organization. And that's all I can say.

Thanks, guys. Last question, on the R&D front -- I know you didn't break it out or else I didn't see it in the press release -- how did that compare as a percentage of sales? Or maybe you could break it out because I guess it's a bucket in the SG&A?

Basically, as I discussed with a lot of you on my road show, the R&D organization that we have also performs applications for the customer. So therefore, the numbers really that you see as R&D there is not always very -- it's not always representative of the R&D we do around the world. For instance, we do R&D in France. We do R&D in Greece. We do R&D in Japan. And these really are research projects and applications projects for our customers, where our [PHCs] will perform that for pay. And so therefore, they're really -- the R&D goes as a cost of sales. And that's why basically it's not representative the way we have it.

I see. All right, I appreciate it. I appreciate the time, guys. Thanks a lot.

(Operator Instructions)

Your next question comes from the line of Evan Marwell with Criterion. Please proceed.

Morning, gentlemen.

Good morning.

Hey, Evan. How you doing?

Good. I'm wondering if you can expand a little bit on the margin expansion opportunities. When you were on your road show, you talked a lot about ultimately getting to a 20% operating margin. And I'm wondering, given the growth of lower margin traditional services, how you expect to get there. And which of the things you talked about will be the primary drivers?

Pete, it's yours.

Yes, there certainly -- I mean, as in any expansion of margin in most companies, it comes from a combination of areas. Certainly, we touched upon one earlier, which is the control and the decrease of unbillable time, as we added some acquisitions and increased our employee base. That becomes certainly an opportunity for us going forward. We -- scale is always there because with growth, we leverage the fixed cost, whether it's in operating margins or in gross margins. And then finally, we're always looking at ways to reduce and eliminate costs in our organization.

Okay. So but what about the things that Sotirios was talking about earlier in terms of increasing the product mix to advanced technology services, the software services, and those things?

Yes, over time, that clearly is the -- can be a primary driver for us to improve the margin profile and margin expansion. In the first quarter of this fiscal year, our advanced services were not as high as they were in the previous quarter. So that had an impact.

Yes, I mean, you really look at the computer services. So far, it was really expense because we billed it. We now start seeing that to become an income. And slowly, especially, as I mentioned, one of the largest refineries in the country, they really gave us -- they really adapted PCMS as in all of their refineries. That will really result in better profitability because as you realize, computer service is a lot more profitable than additional nondisruptive service business.

Okay. So the 18.5% margins that you guys had in 2008, do you expect to be able to get back to those this year?

Certainly, we are not necessarily providing guidance on individual margins. But if you take a look on the -- certainly the EBITDA number that we have provided, you're clearly going to see a 750 to 150 basis point improvement. And obviously, that's going to come from improved margins.

Okay. But if I look at your EBITDA margins, it looks like you're only getting back a sort of roughly 16% according to your guidance this year.

Based on what you saw in 2009, we're a little bit cautious, okay? But the one point I want to do and just leave it alone is basically only thing I wanted to say is that we have done it before and will do it again.

Okay. And then my last question is -- on the acquisitions, can you give us some insight into sort of what you paid for those in terms of multiples of EBITDA?

The multiples have been pretty consistent through the years. And it's been in a range of three to five times. But it's really the accretive value of those acquisitions that we look to.

And were the most recent ones in that range?

Certainly.

And please, we really do not discuss a lot about acquisitions because these are really relationships that we build. There's not the classical acquisition you see. The people -- you can look and see all the acquisitions we made over the years. And the first thing you find out is no one left us. No one of the previous owners left us. These are really agreements between us. And the only point we can make is that we definitely do not pay what private equity people and others pay, okay, in the space. It was really on the low side. But that's also a relationship, as I pointed out.

Okay. Thank you.

You're welcome. Thank you very much for the questions.

(Operator Instructions)

At this time, there are no further questions in queue. I would like to turn it over to Mr. Sotirios for closing remarks.

Okay. To all of you, we thank you for your participation in our first earnings call as a public company and for your interest in Mistras. And we look forward to our next conference call with you. In the meantime, have a great day. Thank you very much, everybody.

This concludes the presentation. You may now disconnect. Good day.