Mistras Group Inc (MG) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second-quarter 2012 Mistras Group Inc. earnings conference call. My name is Shantalay, and I will be your facilitator for today's call. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference.

(Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Mr. Sotirios Vahaviolos, Chief Executive Officer. Please proceed, sir.

Shantalay, thank you very much, and good morning and happy new year to everyone. Welcome to the Mistras Group earnings conference call. Again, my name is Sotirios Vahaviolos, I'm the Founder, Chairman, and Chief Executive Officer of Mistras Group. Also joining me today is Frank Joyce, our Company's Chief Financial Officer. The purpose of today's call is to review our financial results for the [commonest] fiscal second quarter ended November 30, 2011, and to discuss our prospects going forward. This discussion is intended to supplement our quarterly earnings release, and our filings with the Securities and Exchange Commission. Frank will begin with a brief disclaimer about the information we are providing today, and a summary review of our financial results. I will then follow Frank with a few remarks and observations about our performance and prospects going forward. We will then answer any questions you may have.

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 conference call will include certain financial measures that were not prepared in accordance with US Generally Accepted Accounting Principles. Reconciliations of those non-US GAAP financial measures to the most directly comparable US GAAP financial measures can be found in Mistras Group Inc.'s current report on Form 8-K dated January 9, 2012. These reports are available on our website at www.MistrasGroup.com in the investor section.

Now, I would like to present summary financial results for our fiscal second quarter ending November 30. I'm very pleased to report that revenues for the second quarter of fiscal 2012 were $114.2 million, representing an increase of 29% over the $88.8 million reported in the second quarter of fiscal 2011. Organic growth of 19% was once again the principle driver behind our revenue growth, followed by acquisition growth of 9%, with the balance due to foreign exchange. Each of our operating segments contributed to the revenue increase, with Services posting a 27% increase over the prior year, Products and Systems posting a 74% increase, and International a 27% increase. Advanced Services revenues were 16% of total Service revenues for the quarter versus 15% in the same quarter last year.

Gross profit in the second quarter of fiscal '12 grew by 27% to $35.2 million, versus $27.8 million in Q2 2011. Gross margin in the second quarter was 30.8% of revenues versus 31.3% in the prior year. The drop of 50 basis points in gross margin was due to a combination of factors, including the mix of revenues billed in the quarter, and approximately $0.6 million in higher, unbilled direct labor expense, which also includes training.

SG&A for the second quarter of 2012 was $19.4 million versus $15.6 million in the second quarter of fiscal 2011. However, SG&A as a percentage of revenues continued its decline in the second quarter, where it represented 17% of revenues versus 17.6% in the second quarter of fiscal 2011. SG&A in the current quarter includes approximately $1 million from companies acquired in the last 12 months, and also includes $0.5 million in higher stock comp charges versus the prior year.

Operating income in the second quarter of fiscal '12 increased by 38% to $14.1 million, versus $10.2 million in the prior year. During the quarter, the Company recognized a net benefit of $0.3 million from acquisition related activities, which included a valuation adjustment to certain acquisition contingencies. And this was partially offset by acquisition related transaction costs incurred during the quarter. Excluding this benefit, the Company's operating income margin was 12% in Q2 2012 versus 11.5% in the prior year quarter. Net income attributable to Mistras Group increased by 40% during the second quarter of fiscal '12 to $8 million, versus $5.7 million in Q2 2011.

Diluted earnings per share rose to $0.28 in Q2 versus $0.21 in the prior quarter. EPS in the second quarter was increased by approximately $0.01 due to the acquisition-related benefit mentioned above. Adjusted EBITDA increased by 29% to $20.6 million in Q2 2012, versus $15.9 million in the second quarter of fiscal 2011. Adjusted EBITDA margins, adjusted for the acquisition-related benefit mentioned above, increased to 18% versus 17.9% in the prior-year quarter. Our top 10 customers represented 44% of revenues in the second quarter of fiscal '12 versus 42% in the second quarter of fiscal '11.

Total capital expenditures for the first six months of fiscal '12 were $10.3 million, or 5% of revenues, versus $6.5 million, or 4.1% of revenues in the first six months of the prior year. The increased capital expenditure level in the current year reflects spending on a number of new business opportunities, including projects in the US shale and oil sands areas, the construction of two new nuclear facilities, and a multi-year pipeline construction project in the Southeast. As of November 30, 2011, our net debt was $49.5 million, and our net debt to trailing 12-month EBITDA was 0.8 times. As of November 30, the Company had cash and cash equivalents of approximately $10 million, and an undrawn revolver balance of about $28 million. In December, the Company replaced its $55 million credit facility with a new $125 million credit facility, which will help support our future growth and acquisitions.

And now, a few comments on the six-month results. Revenues grew by 31% during the first six months of fiscal '12, driven by a 19% organic growth rate. Gross profit margins dropped by 40 basis points to $30.5 million, again, due to the mix of revenues in the quarter, and higher unbilled direct labor. Operating income margins increased by 110 basis points to 9.7%, and SG&A as a percentage of revenues declined by 100 basis points to 18.8%. Diluted EPS increased by 45% to $0.39 per share.

And with that, Sotirios, I will turn it back to you.

Thanks, Frank. I'm very pleased with our second quarter's result, which included record levels of revenue, net income, EPS, and adjusted EBITDA. Once again, in this quarter we saw solid revenue growth across all our three business segments. A closer look at the numbers that Frank just reported are indicative of the continuing growth in revenues and profits that Mistras has had over several years. The 29% revenue growth over the second quarter follows a five-year CAGR of 29%. Similarly, the 29% adjusted EBITDA growth in the second quarter follows a five-year CAGR of 33%. It should be noted that organic growth was 19.4%, and acquisition growth was 9%. As in the past, almost one-third of the acquisition growth is synergistic. Our revenue growth trends over the past five years continue to be two-thirds organic, one-third acquisitions. We believe that strong organic and synergistic growth is the best indicator of how our one-source asset protection solutions are being received by our customers.

As previously discussed, oil and gas is our largest target market. I am pleased to report that in our second quarter, oil and gas revenues grew by 21%. However, continuing the trend we have seen over the last several quarters, revenues from all markets other than oil and gas, taken together, grew by 40%. We view our growth in other markets as a positive development, as we continue to extend our asset protection solutions across a broader platform of customers and industries, while maintaining increasing growth momentum in the oil and gas.

I would like to now give you a brief update of some of the underlying trends we are seeing across our business segments. In our Products and Systems segment, revenue across our target markets remained strong in the second quarter, especially in the power generation, nuclear, fossil, and alternative energy, manufacturing, commercial and defense aerospace, and the oil and gas segments. Spending in these areas continues to include our larger advanced composites and specialty metals gantry and UT immersion inspection systems, our software-based expert systems, and our popular advanced portable instruments and proprietary sensors. As an example, during the second quarter we have experienced strong demand for our Acoustic Combustion Turbine Monitoring System, ACTMS, from several large electric utilities. The ACTMS is a 24/7 real time speed data acquisition and analysis system that detects cracking in stator blades in megawatt class industrial gas turbines that can help to prevent several million dollars in collateral damage and lost revenue for the utility. With the now favorable economics associated with using gas turbines, we expect the healthy demand for our ACTMS system to continue.

We have also seen sales of our new next generation portable VPAC II through valve leak detection system to continue to grow as a result of the EPA-mandated 40 CFR greenhouse gas inspection requirements for the oil and gas industry. Users also benefit by realizing significant documented cost savings in the millions of dollars directly attributable to the ability to identify the loss of high value process products through a damaged valve.

In our Services segment, demand for our complete asset protection solutions continues to be strong in the upstream and midstream areas of oil and gas due to the continuing expansion of the US shale plays in Marcellus, Eagle Ford, Barnett, and Bakken, and the Canadian oil sands operations. Outside of the shale business, we were awarded a multi-year new construction pipeline project from a major Southeastern natural gas utility provider that will deliver natural gas to two large power generating stations. Specifically related to upstream, a major global leader in oil and gas exploration and production selected our PCMS enterprise software and risk-based inspection services to be implemented for two of their prime offshore platforms based in the Gulf of Mexico with the intention of implementing their global fleet.

Our chemical plant inspection business remains strong, as we recently executed a global master services agreement with a major multinational chemical company to provide NDT and engineering services at their facilities worldwide. Our nuclear services business continues to develop, with orders ranging from new construction inspection services to relicensing and general inspection maintenance at existing plants, advance service and inspection of buried piping, and inspection services for the US nuclear naval fleet. As you may have seen in the recent press release, Mistras was awarded a multi-year contract to provide traditional and advanced entity services by the sole group for the new nuclear reactor unit expansions, units three and four of the Vogtle plant nuclear generating station in Waynesboro, Georgia. Since then, we have also been awarded a second two-unit nuclear reactor expansion project similar in scope for the new units two and three at V.C. Summer nuclear generating station in Fairfield County, South Carolina. We are very proud of the fact that Mistras was selected for these milestone projects, since these are the first new nuclear units awarded construction license in the US in the last three decades.

In our [10 advantages] segment, our Mistras ropework services team completed their second phase of a multi-phase contract in Europe for a major wind turbine OEM providing maintenance and [intervening] services on a large number of their offshore units. Here in the US, Mistras ropework secured a large contract for performing UT blade inspection of over 170 wind turbines throughout the US and Canada, with the opportunity to perform the same services on over 200 additional units in the future.

And now, we'll turn to the International segment of our business. As mentioned in the last two earnings calls, the Mistras Group is pursuing growth opportunities in Europe and South America. Since the start of fiscal year '12, we have acquired five small companies in Europe, doing entity services, with one designing and building ultrasonic automated systems. We're excited with these acquisitions. They are bolt-on acquisitions, and complement our successful USA business model, that now gives us the opportunity to compete for [evergreens] in Europe. Two of these companies closed in December. Similarly, we are increasing our business in Canada organically, and with a December acquisition in Eastern Canada. As in the past, these acquisitions are accretive, but it takes some time to align them with our business model.

Now, let me discuss our international successes, and future opportunities that we have created due to our geographic expansion, more complete entity offerings, and certified employees to perform the work locally. In France, we have been awarded a number of introductory evergreen contracts. For the first time in Europe, we are responsible or will participate on a number of turnarounds starting in the Spring. These contracts will spread over the three-years period, and in one company, over six years. We're also excited to now have in-house testing capabilities in France, where in December we received a multi-year contract from a major aerospace engine manufacturer to inspect key components.

In another European country, government regulators have helped us accelerate sales of our PCMS RBI software, and the use of Phased Array Time of Flight Diffraction in new town construction. Our UK operation continues to expand into a remote 24/7 asset monitoring business in bridge infrastructure and offshore platform applications. Our Russian business continues its expansion in PCMS software implementation, with wins at the new refinery in Moscow, and three new large refineries from an existing customer. Instrumentation sales continue in China, as well as in Japan's slow-moving economy. Our Brazilian business continues on a robust pace in services, with organic revenue growth due to our introduction of new technologies into the market. All in all, we're excited about international business outlook as we continue to expand our USA business model to the rest of the world.

And now, I would like to spend a minute on the Company's outlook for fiscal 2012. As mentioned in the earnings release, the Company is increasing its previously issued guidance for fiscal 2012. We now expect revenues to be in the range of $400 million to $415 million up from the previous range of $375 million to $390 million. Similarly, we now expect adjusted EBITDA to be in the range of $64 million to $68 million, up from the previous range of $59 million to $64 million. The Company does not give guidance for individual quarters, but will update annual guidance each quarter.

In closing, while we continue to operate in a competitive environment, we were pleased with the healthy activity across most of our target markets in the second quarter and beyond. I am also very pleased with Mistras' performance during the first six months of fiscal 2012, and I'm very optimistic about the balance of the year. This is the net result of our 3,200 hardworking fellow employees performing diligently as a team worldwide.

That concludes my remarks, and I would like to open up the floor for questions. Shantalay?

(Operator Instructions) Scott Levine of JP Morgan.

Scott Levine, JPMorgan. Hi, good morning guys.

Hi, Scott.

When we think about the guidance raise that you have here this morning, and we think about or you think about what's driving that, is that really a function of maybe more success with contracting, wins, evergreens? Or is maybe the business environment proving to be stronger than you had in initially expected? If you could elaborate a little bit on the drivers of the upside versus your initial outlook as you laid it out six months ago or so?

It's basically more of the acceptance of our asset protection solutions in general. People now are accepting more our software, as I mentioned in some of the wins that I mentioned in this call. And also, our existing customers also are using more and more our services that they never used before, especially the Advanced Services. You notice we had increase in the Advanced Services over the quarter.

Got it. And you talked a little bit as well about some of the international markets that are more important to you at the present time. Could you talk about your expectations for growth overseas and how you expect that to come in relative to your performance in the US, and maybe any changes we can expect in terms of your international mix over the next six to 12 months?

As I mentioned before, Scott, is that it takes some time when you make an acquisition to really bring them up to our own style of doing business. We believe that the growth in the International in the future will probably match that of the United States in the same model that we have here will match it.

Got it. One last one on pipeline inspection, we've heard of tightening regulations out of [Senza] and you'd elaborated I think a little bit about nuclear and some of the additional markets associated with gas. Do you see opportunities emerging within the pipeline business because it's growing importance for you over the next year?

Right now, the most important factor is really the construction of new pipelines as we mentioned. And obviously the remaining that you just said will come with the future. I think usually regulations don't really give us business instantly. It takes some time to really get that business.

Okay, what kind of timeframe are we talking about do you think?

We are talking basically in some cases more than year.

More than year? Okay, great. Thanks, nice quarter.

Thank you very much, Scott.

William Stein, Credit Suisse.

Thanks. I missed part of the call so I apologize if this has already been answered, but can you talk about M&A activity in the quarter and what you expect for the remainder of the year? And perhaps just comment generally on the pipeline of M&A please?

Sure, I'll just start off. In the quarter, we completed one acquisition for about $5.2 million. And then subsequent to the quarter, mostly in December, we completed three other small other acquisitions for a total of about $13 million. The pipeline is robust for the types of acquisitions we're looking at, smaller acquisitions that build-out our existing frame.

Most of that, as I mentioned, is really bolt-ons.

Okay, great. And maybe then we can just talk about the guidance little bit. I appreciate the fact that you had a beat quarter and you raised for the full year, but the guidance does suggest a pretty material slowdown in the back half. I'm thinking that that's more a reflection of your conservative nature than anything that you actually see in the markets. But if you could comment on -- just maybe remind us of what your visibility is into your backlog and how that's perhaps changed over the last quarter or two? Maybe it hasn't, but an update there would be helpful.

First of all, we would like to remain conservative in our predictions, and we see the third than the fourth quarter very robust in the business, especially in the turnaround business as we saw that in the previous quarter. But we will always really discuss, as I have mentioned before, double-digit growth. And I think that's our conservatism that you see on the numbers.

If I can ask one more, in the Product and Systems segment, can you talk about the mix in PCMS versus advanced sensors and other hardware components and maybe if there's a long-term target as far as the mix of those go?

First of all, PCMS is really reported in the Service organization, not in the Products. The Products basically, what we report software in the products is the one that we do 24/7 online monitoring software and the ones that we sell with our products. Okay?

Got it.

But just to add, PCMS, we don't break that out separately, but it continues to grow well above the overall Company's revenue growth rate. So that is a consistent trait we've seen over the last several quarters.

There is a lot of Services software. When I mention and I talk about RBI, implementation of RBI is a lot more money than selling a software package.

Okay, great. Thank you very much.

John Inch, Bank of America.

Thanks, good morning everyone.

Good morning, John.

Morning, guys. Just curious, the rise of the US dollar in recent months, how is that actually affecting your business if it is that all? How are you thinking about it, planning for it, maybe a little color in terms of the impact? It may not be significant, but I'm just wondering what you're thinking.

John, on the revenue side it was net net, probably less than 1% of revenues. On the P&L side in the quarter, it cost us probably about a penny a share, but it's not a huge -- it hasn't been a huge impact on us thus far.

And so there's de minimis impact competitively do you think?

The products that we sell, John, mostly where we have a dominant position worldwide, and we are selling applications, more than anything else were selling solutions. I'm sorry not -- were selling solutions. And with solutions, at times you can really increase the prices accordingly.

No, that make sense. Could you guys talk a little bit too about competitively what's going on with respect to the landscape? Are you seeing M&A pick up on the part of other companies that may be active in this space? Just how that's being reflected in your processes if you will for bidding these projects? What's happening right now? Because obviously the market is good, it's strong with oil and gas, but are you seeing any kind of competitive response?

Competition will always exist, John. In our case, especially with some of the larger companies from Europe, we might see them bidding for some of the larger companies. But the small bolt-on acquisitions we buy are more really more geared towards relating to our kind of business, that number one. And we're basically, competition will always exist, but we believe that we have a more complete service offering to the customer and we see more customers coming to our side.

So Sotirios, you're not seeing competition change in any respect? That's kind of what I was driving at.

In terms of acquisitions, John, the company's we look at our much smaller and generally under the range of private equity firms. So we haven't seen a huge increase in the multiples there if that is your question.

Kind of, that's sort of part of the question. Sure, that's helpful.

So that we can really put this to rest, John, our model continues, what we have said before, we're looking for $5 million to $10 million in small companies. And we're looking basically on multiples that are really below 6.

And just lastly, you mentioned your deals in Europe. As Europe looks now to be in a recession, are you guys thinking possibly opportunistically of stepping up M&A if there are going to be more possible properties available for sale or does the a macro concern perhaps make you --.

We don't make all of these things public, John. That's exactly the issue, okay? We are going to be more aggressive, as we have been more aggressive in hiring employees and we increased the last -- since the beginning of the year by 600 employees. So we think that the future is very good in our market and we will continue to be optimistic.

Right. Thanks very much, appreciate it.

Thanks.

Matt Duncan, Stephens Inc.

Congrats on another great quarter.

Thanks, Matt.

The first question I've got going back to the guidance, if I look at the way you guys have grown in the first half of the year on an organic basis, it's been right around 20% for the first six months. And if I'm doing my math right, even at the high end of the new guidance, assuming about $6 million a quarter in acquired sales, you're guiding to maybe 10% type organic growth. If I'm hearing you correctly, there is really no reason to believe the growth would slow that much, but you'd rather be a bit conservative and just let this play out? It's probably the right way to think about the guide.

I think that's a fair observation. Although my sense is that acquisitions will probably be maybe a little bit more of a contributing factor in the second half. But within the guidance range out there, your statement is correct.

Okay. And then Frank, on the gross margin in the quarter, I appreciate you giving us a little backdrop on sort of what's going on there with year-over-year decline. I guess the big question I've got is, is that really a function of your competitive success? The mix shifting to traditional NDT seems to sink up with you winning evergreens, and the unbilled labor cost again seems to point to you're having a hire people for the growth. So, do you feel like the gross margin decline is more a function of competitive success versus maybe anything ominous?

I'm not sure what you mean by competitive success, but in any given quarter the mix of revenues can change. So even the second quarter versus the second quarter of last year, and even within target markets the job margins can change. When we picked through it for the this quarter, the answer really is higher unbilled direct labor, and that probably is a function of our growth as we are hiring more people. And then in that, we had 0.6 and higher unbilled direct labor. In that 0.6 is also higher training. So, that's the most we could put on it, still a very competitive environment, no question about it.

Okay, that's helpful. And then the last thing I've got, looking at your various end markets, you grew 20% in oil and gas, you grew 40% other places. It sounds like there's pretty broad based strength. Are there any markets that stand out as maybe being stronger or weaker than the rest? And then as far as Europe goes, obviously there's some macro concerns there, but your customers in Europe in a lot of cases are the same customers you've got here. They're multinational companies with big balance sheets and have a lot of cash after good 2011. So do you feel like maybe your business is a bit more insulated in Europe than the broader macro backdrop?

First of all, Matt, in order to be able to do what we do in American Europe, we need to have the employees, the trained, certified employees. And I think slowly we're achieving that in several countries in Europe, okay? As far as the strategy in Europe, it's nothing different than what we do in the States. As you realize, we have always discussed that we are in the run and maintain business. We really don't depend as much as others in the turnaround or shutdown kind of business. We're more on the run and maintain business, what we like to call them evergreens. And it's really the outsourced inspection business, and that's really what we're going after in Europe. And that's basically, it's not depending as much on the economy, as I said the capital expenditures and everything else.

Okay, thanks guys.

Thanks.

Matt Tucker, KeyBanc Capital Markets.

Good morning, guys, and congrats on a nice first half.

Thanks, Matt.

First question, just a little detail thing. The number you disclosed for the gain from the acquisition contingencies, was that net of the transaction costs that you mentioned? And if so, could you give the full amount of the gain and then the offsetting costs?

Sure, we had a contingency fair value adjustment of about 0.7, and we had transaction cost going the other way of about a 0.4.

Okay, thanks. That's helpful. And then, just on the gross margins again, the headwind from unbilled revenue is something you also mentioned last quarter. If we continue to see growth at the rate you've seen in the first half, should we expect that this headwind from unbilled revenue related to training, et cetera is going to continue as you're going to continue to have to hire people at a similar rate?

If I had to forecast it, I'd have to say yes. That would be my best guess at this point.

Okay, thanks. And then just noticed the net debt was up about $22 million sequentially. You mentioned making a $5 million acquisition in the quarter, but was curious what else was driving the increase in borrowing in the quarter?

Just really working capital financing and acquisitions.

It's really mostly, Matt, preparing for the -- we had an excellent quarter in the second quarter with a lot of new business and we're continuing on that. So by having new business and evergreens, you have to spend more capital, because that capital is not for one year, that capital could be the three to five years.

Thanks, guys. I'll jump back in the queue.

You bet, thanks.

Rich Wesolowski, Sidoti and Company.

Thanks, good morning everybody.

Good morning, Rich.

Frank, can I ask you to offer or maybe repeat if I missed them, a few stats in your Service segment if you're at liberty to give them. The share of the revenue in Advanced Services?

It was 16% versus about 15% in the prior quarter.

Okay, and then how about from oil and gas?

Oil and gas was about 56% versus around 60% in the prior quarter.

Okay, and then last one, rents from evergreens?

About 50% of Services revenues and about 47% of total Company.

Great, thank you for that.

Sure.

Sotirios, I imagine the recent growth, especially since Mistras has become a publicly traded company is prompting others to attempt to get into the advanced inspection realm. Is Mistras still the only company pitching the use of advanced services, in many cases project by project? Or is there always one or two others alongside you?

In a certain area in our offerings you have some competitors. Just keep in mind that I don't think anybody in the world has the complete offering that we have. Because we don't offer only services, we offer services, we offer hardware, we offer also software services. Our PCMS software is not only that we sell packages to customers as you heard in some of my statements, but it's also in implementing RBI, Risk Based Inspection programs, so the customer can really catalog their assets by risk and spend the money carefully. Because you don't have the big [send-downs] you used to have in the 2006 era. This is really something of the past.

So, not speaking of evergreens where you typically go in traditional and then sell into Advanced over time, but the jobs where you, either in oil and gas or elsewhere, go directly to the Advanced Services. Is this a customer soliciting Advanced Services, or is it Mistras going in and saying let's do a different way?

Well it's both. I think, we mentioned basically in using PCMS in offshore platforms. It's really the customer asks the question and we have the answers.

Okay. And then lastly, you mentioned one, I noticed you made a deal in the UK post quarter. That's a very consolidated market on the mechanical services side, but can you comment on the competitive landscape regarding both traditional NDT and also the advanced inspection?

The UK basically offers us radiography. That was a very important issue for us. It's very difficult to get the license, radiography licenses in Europe especially these days. Because you don't use only x-ray, you use also gamma ray for your radiography. So that was very key bolt-on type of acquisitions for us that would really enhance our possibilities in going after evergreens in Europe, and specifically in UK.

Great, best of luck in 2012.

Thank you, Rich.

(Operator Instructions) Andrew Wittmann, Robert W. Baird and Company.

Thanks. Just on the receivables, days were up about 10 days sequentially. Obviously, I get the growth in receivables with the growth of the Company, but this one seems like a little bit bigger growth. Should we expect that to reverse? Was there just something in the quarter, and we should come back down to the low 70s where you'd been? Or was there something unique here?

I would expect that to reverse. There was something somewhat unique. If you look at this -- the second quarter, generally, you expect revenues in the first month to be higher and then trailing off after that, and that was the case in the fourth quarter of last year. In the second quarter, our high water mark was the second month, and it was up by about $12 million to $15 million. So in comparison to the fourth quarter, where the highest month was let's say month one and then trailing down, we had our highest in the middle which means that that's not going to be collected by the end of the quarter. So, just looking at Services' receivables in December very briefly, they are down by about $14 million. So, I would expect it to turn around.

Okay, great. And then, Sotirios, you kind of touched on this a couple of different ways a little bit, but on the 19% organic, can you just give a sense about how much of that was driven by really truly new customers to Mistras versus deeper penetration of existing customers? Where are you getting the bulk of that growth from?

Basically we -- it comes from both areas, and that's an item really we don't discuss very much. Some of that came from new customers, some of that came from existing customers.

But as we say all the time, our top 10 customers provide a substantial portion of our organic growth and that's where we've been seeing it. So a very good part of it came from our largest customers.

Okay, so really not a material change in how that organic growth is being derived?

No.

Okay, that's really what I'm really after. Sotirios, the new nukes being built here in the United States seem like a really great opportunity and clearly multi-year construction -- I just was hoping if you could give us a little bit of a sense as to how that's going to come through for you? Is this going to be a very nice few years while they are constructed, or is there a tail to this that goes on with an evergreen contract after the plants are up and running? Can you just give us a sense about how we should expect those to flow through to you?

Sure, if you wanted to be conservative you are talking about a five to seven year kind of business. And then obviously, since we are there, we would attempt to make an effort to obtain the Evergreen work also after that.

Okay. But right now, the work that you've signed for today is really just installing your systems and equipment and then hopefully you will get that --?

We're doing services. We're talking about doing service for them. You do services because they are making wells, they are making parts in there, and therefore you need to inspect them. And that's what we are going to be doing there. We're going to have inspectors at the beginning.

Okay, I think I will leave it there. Thank you very much.

Thank you, Andrew.

At this time, there are no further questions in queue, and I would like to turn the conference back over to Mr. Vahaviolos for closing remarks.

Thank you, Shantalay. I would like to thank everyone for listening in to our call and for your continued interest in the Company. May I wish everyone a healthy and most prosperous 2012. Thank you very much.

Thank you for your participation in today's conference. This concludes the presentation, you may now disconnect. Have a wonderful day.