Mistras Group Inc (MG) 2016 Q3 法說會逐字稿

Good morning, ladies and gentlemen and welcome to Mistras Group's earnings conference call for its third quarter ended February 29, 2016. My name is Lauren and I will be your event manager today. We will be accepting questions after management's prepared remarks. Participating on the call from Mistras Group will be Dr. Sotirios Vahaviolos, Chairman and CEO; Jon Wolk, Executive Vice President and CFO; and Dennis Bertolotti, EVP and President of the Company's Services segment. I will now hand the conference over to Dr. Vahaviolos. Please proceed, sir.

Lauren, thank you very much and good morning to all. On today's call, we will review Mistras Group's financials, results for the third quarter of our fiscal year 2016 that ended on February 29 and discuss our prospects going forward. I'm very pleased that Mistras followed up its record first half with yet another record [for energy] in the third quarter even though revenue continued to be roughly flat in a challenging market.

During this call, one year ago, we spoke at length about the challenging market conditions imposed by a decline in oil prices. Since that time, our management team has worked closely with many of our customers who are seeking to spend less. At the same time, we have worked hard to reduce our cost base and drive process efficiencies throughout our business.

Headcounts have been reduced in some locations, some [managers] are being changed, utilization of (inaudible) has improved, waste has been eliminated and two international subsidiaries were closed.

Based on our strong value productivity, safety and reliability, our customer attachment has been close to 100%. In addition, we have managed to win some important new run and maintain evergreen contracts. However, our year-to-date revenues are flat with prior year primarily because of adverse foreign exchanges and dispositions. Excluding these items, year-to-date revenue are up by 4.4%, which indicates that Mistras has gained marketshare in a market where many customers are seeking to spend less.

As in the first half of the fiscal year, we gained strong bottom-line average in Q3. Our adjusted EBITDA margin improved by 250 basis points compared with the prior year in Q3 and by 244 basis points during the nine months year to date. This now makes three consecutive record quarters in which Mistras has exceeded prior-year profit [margins], providing strong validation of our focus on delivering profitable growth faster than revenues. Because of these actions and because of our [favorable] outlook of Q4, we have once again raised our expectations for the amount of profit that we will earn in the fiscal year.

Jon will now explain our results and our guidance in more detail and then Dennis will provide more color on our operations. Afterwards, I will close with questions. Jon.

Thank you, Sotirios. I remind everyone that remarks made during this call will include some forward-looking statements. The Company's actual results could differ materially from those projected. Some of the factors that could cause actual results to differ are discussed in the Company's most recent Annual Report on Form 10-K and in other reports filed with the SEC.

The discussion in this conference call will include certain financial measures that were not prepared in accordance with US GAAP. Reconciliations of this non-US GAAP financial measure to the most directly comparable US GAAP financial measures can be found in the Company's current report on Form 8-K filed yesterday. These reports are available on the Company's website in the investors section and on the SEC website.

Revenues for the third quarter of fiscal year 2016 were $160.4 million, 1.7% lower than the prior year's Q3. Excluding the impacts of FX and dispositions, that 1.7% revenue decline would have been a 2% increase. Services revenues increased by 1.5% above the prior year's Q3 driven by a combination of organic and acquisition growth that each improved by low single digits, but were partially offset by the impact of a weaker Canadian dollar.

International segment revenues declined by 5% as mid-single digit organic growth was more than offset by FX declines and the impact of dispositions. Products and systems revenues had an organic contraction in Q3 driven by timing.

Despite the challenging revenue picture, the profit picture continued to be much better. Operating income, exclusive of acquisition-related income from changes in contingent consideration, more than doubled the prior year's Q3 level, growing by more than $3 million and grew by over $14 million or 64% above the first nine months year-to-date. The Company's third-quarter gross profit margin improved by 300 basis points to 26.7% compared with the prior year's 23.7%. The gross margin improvement dropped almost entirely down to the operating income line, enabling our operating income margin exclusive of income related to changes in contingent consideration to improve by over 210 basis points.

Share-based compensation was higher than the unusually low prior-year Q3 level and was the primary reason, along with higher legal costs, that operating income didn't increase by an even greater amount. For the nine months year-to-date, gross margins have improved by 220 basis points to 28.2% while operating income margins, again excluding changes in contingent consideration, improved by nearly 70% or 270 basis points to 7% in the current fiscal year.

Breaking this down by segment, services operating income grew by 39% in Q3 on revenue growth of only 1%. Gross and operating margins exceeded the prior year's Q3 by 200 basis points and 210 basis points respectively. Year-to-date, services operating income has increased 22% on a 2% revenue increase. Year-to-date gross margins improved by 110 basis points and operating margin by 150 basis points driven by sound execution and managing contracts, improved staff utilization and better matching of changes in labor rates with changes in pricing.

International gross and operating margins each improved by over 800 basis points compared with the prior year's Q3. For the nine months year-to-date, gross margins improved by nearly 600 basis points while operating income improved by over 600 basis points. Drivers included improved utilization of personnel, organic growth, an improved sales mix and cost reductions made in the prior fiscal year. However, our international operating income margin was 6.5% for the first nine months of fiscal year 2016 compared with 10.5% for services, so there is still plenty of room for improvement.

Products and systems had a challenging quarter compared with a tough prior year comp. But year-to-date gross margins are 170 basis points better than in prior year while the operating income margin improved by over 500 basis points driven by strong cost control and an improved sales mix.

The Company's adjusted EBITDA margin was 9.5% in Q3 compared with 7.0% in the prior year. Year-to-date adjusted EBITDA was $66.7 million or 12.5% of revenue compared with $54.2 million or 10.1% in the prior year. Net income for Q3 was $3.6 million or $0.12 per diluted share, up more than double the prior year's levels. EPS was aided by favorable tax discrete items in Q3 of nearly $0.02 per share. Net income was $21.9 million or $0.74 per diluted share for the first nine months, both amounts up over 56% above prior-year levels on flat revenues.

Cash flow was yet another strong positive. Operating cash flow was $55.8 million year-to-date compared with $34.5 million in the prior year's first nine months. Free cash flow improved to $43.5 million compared with $22.2 million in the prior year. Drivers to the approximately $21 million improvement were the improved earnings, as well as a three-day reduction in days sales outstanding that reduced working capital outlays.

Total capital expenditures, including non-cash capital lease outlays, were $16.3 million or 3.0% of revenue compared with 3.2% in the prior year. Total debt and capital lease obligations net of cash was $87 million at February 29, 2016 compared with $133 million one year ago. Net debt to adjusted EBITDA was 1.0 times at February 29, down from 2.0 times at one point last year. We did not buy back shares during Q3.

Our improved results have been driven by decisive actions and strong execution by our entire team in every country and in every line of business. These results have been delivered despite the difficult market conditions. Because of the actions we have taken, we are earning greater profits in areas of our business where we are able to grow and we are maintaining or slightly improving profitability in the areas of our business that are more directly challenged by market conditions.

And now I will briefly update the Company's financial guidance. We continue to expect that revenues will be similar to those of prior year, but we have narrowed the range to $710 million to $715 million from a previous range of from $710 million to $725 million. As Sotirios mentioned, these revenues are net of about 4.4% of headwinds from foreign currency and dispositions of two small businesses.

As stated in our press release, we have once again raised our adjusted EBITDA expectations to a new range of from $84 million to $87 million for the fiscal year, up about $4 million from our previous range of from $79 million to $83 million. So we expect that adjusted EBITDA will finish from 17% to 21% higher than last year on relatively flat revenues.

Given how the Company is performing, there is a decent chance that we may finish at the higher end of that range. And with that, I turn this over to Dennis Bertolotti, EVP and President of our Services segment.

Thank you, Jon. I will now provide updates on our business segments. We are very proud of our global team and its resilience in a tough market. Our plan is working in North America and in all of our key countries as reflected in the performance numbers that Jon just shared with you. I will provide some color on key developments in our business.

In our services segment, approximately 60% of services revenues are in the oil and gas sector and that market remains challenged. Although the price of oil has rallied lately, many of our customers in this space are clearly trying to spend less given the market uncertainties. We are regularly meeting and speaking with our customers, exploring ways to improve that productivity and provide even more value from our wide-ranging inspection services.

Our partnership with our customers is built upon the solid foundation of providing them with terrific value, flexibility and safety for their operations. On last quarter's call, we mentioned that we had won an important new customer in the Canadian oil sands. This multi-year on-site contract commenced during the third quarter and is off to a great start. Importantly, this contract positions Mistras to be both the day-to-day inspection provider for our new customer and through good performance should also position us to support them on their turnarounds and other projects. This contract also helps to establish Mistras as a top NDT services provider in this market.

Also during the third quarter, services won an important new multiyear evergreen site within the United States that through strong performance should position us to support this new customer on turnarounds and other maintenance projects.

Our nature subsidiary primarily performs maintenance and inspection services for offshore platforms and had a challenging third quarter given difficult market conditions upstream. But on the other hand, nature has demonstrated that it provides substantial productivity and breadth of services versus competitors. And there is a significant pickup in conversations to potentially take on additional work for both existing and new customers.

Turnaround volume has been relatively consistent for us year-to-date. Some of our labs have done very well and some have seen lower turnaround spend in the prior year. Overall, this part of the business has been slightly positive compared with the prior year, similar to our overall services organic revenue trend thus far.

Our international business has had a dramatic improvement, swinging from a year-to-date operating loss in the prior year to a year-to-date operating profit of $6.5 million. We are proud of our international team, which undertook an aggressive plan and has executed that plan to make strong inroads on our cost structure. We have implemented our corporate ERP system in France and in the UK and we have correspondingly seen an improvement in their understanding of contract profitability and continues to improve further.

Our international subsidiaries are increasingly sharing technicians and working together to gain additional evergreen sites from flagship customers even if they are located in different countries. Most of our international improvement has occurred in our two largest subsidiaries in France and Germany. Our new CEO in France has driven a strong combination of cost reductions and organic growth, which has greatly improved utilization of our service technicians and led to improved profits.

In Germany, our business is picking up from Airbus and some of its key suppliers, improving our sales mix and positioning us well for future growth. Our UK subsidiary has experienced organic growth from both offshore and onshore customers and profits are up nicely. And our Brazilian subsidiary has made a nice improvement despite the continuing challenges presented in that economy, avoiding the loss from the prior year and maintaining good utilization of our customer base.

As Jon mentioned, our products and systems business had a slow Q3, but is up nicely year-to-date. This part of our business will have a tough comparison to prior year's Q4, but the momentum is starting to build with new product introductions and a focus on building a recurring revenue base. And now I will return to Sotirios for closing remarks.

Thank you, Dennis. One year ago, we assessed this market from what it is. We chose not to run our business hoping that the oil market would rebound quickly. Instead, we pushed aggressively to accelerate our [production] plans. We have made management changes needed and have been running our business assuming that the present oil price range will be the new normal for the foreseeable future.

In this environment, we are focused on operating as efficiently as possible, maximizing our staff utilization and minimizing our capital outlays. We are showing this year that Mistras can thrive even in a very difficult market. Our customers have big challenges and Mistras is the solution provider that can help them. We are looking at adjacent services that can complement our inspection services. A terrific example is nature where we've hired some top guys in the installation field. Offshore bed space is limited and this added discipline helps our customers be more efficient and improves our results.

But it's important to note that many of our leading services [natural] employees offshore can be applied onshore as well and installation is just one of these areas. Our goal is to be the solution provider that can be most counted on to protect our customers' assets and help maintain them in certain key areas.

I am pleased with our profitable improvement and with the team's execution of our strategy. We are looking forward for the fourth quarter to finish our strong year. I want to personally thank our management team, our loyal employees who have a commitment to safety and quality and our loyal and vital customers and shareholders. Now I will open the floor for questions.

(Operator Instructions). Edward Marshall, Sidoti & Company.

Good morning, guys. What do you guys do for an encore? I assume the low-hanging fruit has already been taken this year and how much room do you have left on the cost side of the business? I understand you are continuing to prune and so forth, but as you look at the individual segments, how do we think about the cost side of the business going forward?

I think it's broader than a cost focus for us. That's part of it, but really it's gross margin expansion. It's on sales mix. It's on value-added services and expanding our relevance to customers to help them solve big challenges that they've got. So as we look at this, we think we are still in the early innings and we still think that there's a lot of margin expansion that will still come. It won't come necessarily as much as we've had in this year with over 200 basis points of margin improvement, but we think there's still more to come.

Okay. Into 2017, when I look at the business, driving EPS -- a lot of the heavy lifting is done this year. Do you think it's more about the market and then maybe whatever spread you get over the market due to your marketshare gains that's really going to be the mover to the bottom line?

As we look forward to 2017, I think that certainly we are cautiously expanding certain service offerings and got a couple of toes in the water for some exciting adjacent services that we think can be accretive. And also the acquisition pipeline is filling up again too for some interesting smaller companies that can help augment our services platform. So we are kind of excited about 2017. Certainly we don't think we've maxed out in 2016. We think there's a lot more to come.

Got it. And a competitor said recently you are facing the toughest environment since 2009. Do you kind of agree with that?

Yes, it's a challenging market out there. We still have control over what we can do inside our business, but the market, especially in the oil and gas sector, is one of the more challenging ones we've seen in a long time.

The opportunity really is when the market rebounds and all the actions you've taken thus far.

Yes, and whenever there's a challenging market, customers are looking for new ways to get opportunities and get cost controls, so even in a challenging market like this, there's ways to look inside a market and see what you can do.

Got it. And then the fourth-quarter comparison that you talked about, you said it was difficult. I just want to get some clarity. Didn't you have some revenue push-outs into Q1 this year following the strikes from last year? So I guess from a top-line perspective and maybe from the cost perspective, it wouldn't be as tough a comparison as it could have been?

I don't think I'd characterize last year's Q4 as a tough comparison. I think it was a reasonable comparison. To your point, there were a bunch of moving parts going on.

I think, Ed, we were speaking to that about for the products group specifically.

Yes.

I see, got it. Okay. Thanks, guys, very much. Appreciate it.

Andy Wittmann, Robert W. Baird.

I guess I wanted to drill in a little bit more on the margins. It looks like, as you move here into the fourth quarter and then into 2017, particularly international, it looks like margins will have, based on the run rate that you are putting up an easy margin comp. So it looks like the visibility for the next quarter or two is pretty clear, but, Jon, you said that there's more here, not as much as you delivered in 2016, which would be around 200 basis points, but just wondering if you can give us some detail as to what the buckets are where the further margin improvement comes from, what you are eyeing down, where you think the opportunity still rests, not just in the international section, but also in the services segment?

Yes, I think, Andy, in terms of geography and the balance sheet, I think gross margins can continue to expand and I think we can continue to get leverage on operating expenses. If you look across the segments -- I will comment on services and international -- I'll let Dennis do that in a moment. I think services has done a really nice job improving contract margins on some large contracts and will continue to do so.

Also, I think there are some exciting, as I said earlier, adjacent service categories that we are starting to get into that can have nice margin implications for us. And I just think that the services business is doing a real good job of focusing on margin opportunities and managing to those.

Internationally, we've seen a great stepup versus last year's poor year. If you look back a couple of years, this kind of puts us in line with where we really should have been compared to two years ago. The difference here is that, two years ago when we had decent margins internationally, we had some big projects that were helping drive that. And this year, we really haven't had that. It's just sustainable, steady-state business.

So I think there's always the opportunity for a big project or two internationally, which could help propel things forward. I'm not sure we are necessarily counting on that for next year, but I think we will continue to see sustained and steady improvement in international, albeit not at this rate. Dennis, you want to --?

I agree with that.

Are you getting any help from the products business mixing the margin higher in the international? In other words, as you look at core services, is that a driver and not a mix shift at all?

I think that's always an opportunity, but, as you know, the products business sort of comes in big chunks. So when it does come, it moves the needle a bit and then the absence of it makes you notice it as well. But we are not really planning on any big things for the next fiscal year, although they may come.

And Andy, for this year, for international, I think there's just a lot more managing the business and making sure that utilization was more aligned to what we had versus what we expected. I think that was the biggest driver.

That makes sense. It's, obviously, a clear trend that the gross margin has been the driver here, but I think over the last year or two even, Jon, you've talked about SG&A being something that you are looking at. What are you seeing in that bucket? Is there opportunity there too, or should we really continue to expect it all in that gross margin line?

I think more of it will come from gross margin. The nice thing about operating expenses is that when you do better, you've got to increase your incentive compensation and that goes into SG&A, so that kind of mitigates the amount of improvement we will see there. So that's for a good reason though. But still I think that there's opportunities as we resume growing to lever on that fixed cost base.

Got it. Maybe my last question then just in terms of the marketplace. It's been well-documented that it's difficult out there. You guys have talked a lot about customers looking to save money. Does that mean they are pushing you on price, or are you just having to get more creative?

A lot of it is about the spend. So they want to make sure that they are watching their spend. So what we have to do is we have to push value in that formula, so it's about who are the people on-site; what can we do to manage how many steps it takes to get something done; what can we do to get their base work done. They may drop off on some of the things that aren't essential, but they still have to get the essential stuff done. So we really are making the conversation about what's our value to you and how do we reduce the spend, and it's been very well-received.

Got it. All right, thanks, guys.

Jeff Volshteyn, JPMorgan.

Good morning. Thank you for taking my question. Sotirios mentioned some interesting marketshare gains and what I'm interested in is maybe a little bit of color of where the marketshare gains might be coming from. Are there certain end markets, are there certain types of services that you've been more successful in than others?

It's difficult to say if there's any one segment. Obviously, our biggest portion is in oil and gas so we have had some successes in there in oil and gas. There are other business sectors such as aerospace and things like that that continue to grow and be strong, but they are a smaller percent of it. So I would think it's primarily in oil and gas and there's opportunities both up and downstream in that. Like I was saying earlier, customers want to reduce their spend. They are trying to find ways to find value and there's opportunities for our type of services with combined inspection and capabilities to do something. So it's really in our core markets where we are finding it.

Thanks. That's helpful. Just one more follow-up on the housekeeping side of the business. When I look at the tax rate, it was a little bit lower in the third quarter because of some discrete items. How do we think about tax rate and really all the below-operating income line items for the fourth quarter and perhaps another indication for 2017? Is it tax rate, interest, D&A, etc.?

Okay, well, there's a lot of items there. The tax rate I think for Q4 next year -- if you are in the 36% to 37% range, that's typically where we've been operating absent the discrete items, so I would continue to expect something along those lines. Depreciation and amortization, it's been edging -- depreciation has been edging a little bit lower because our CapEx has been less than our depreciation for the last year or so. I would expect that to continue. On the other hand, amortization could rise next year because of acquisitions, so it's a little bit early to be commenting on that with any more granularity than that.

Interest expense will continue to go down obviously as the debt goes down. And we are generating a lot of cash. We've been paying down the debt primarily with that cash. As we continue to do that, that will obviously have a corresponding interest expense impact. If we start redeploying that cash for acquisitions, that may halt some of the decline in interest expense, but I would still expect it to drift downward. Does that answer it?

That's perfect. Thank you.

Matt Duncan, Stephens.

Good morning, guys and nice job this quarter. I want to go back, Jon, to a little more detail on the gross margin. So one of the things that you mentioned was the wage increase that you guys put through last year and then the price pressure that you then subsequently faced, I think, put a lot of pressure on margin. How much of the increase in gross margin this year is just a better match of wages versus the pricing environment versus some of the other actions that you guys have been taking?

Matt, I think that if you line out all the causal factors, I think that the wage movement and so forth is relatively a small component. It might be 20 or 30 basis points, but services is up, gross margin over 110 basis points. I think that the operating actions that they are doing outweighs that.

Okay. And then go looking back in time, I remember -- I've been around you guys for a long time -- I remember a time when services gross margins were north of 27%. International gross margins were north of 30% and at times even in the mid-30%s. Are those levels that you feel like you can achieve again?

Well, year-to-date international is at 29%. Sorry, I said 30% year-to-date. It was 29% in the third quarter, so I think we are fairly close to that now and the difference is is that in the past when we did it in international, we did it with product sales primarily and now we are doing it really a lot more with services. So I think if anything, we've really improved the efficiency that we are operating with and are matching costs and revenues to a much greater extent than we would have in those past years. So I'm very bullish on the direction that things are going internationally.

On the services side, we've seen margins move up in the right direction now for several quarters and we are feeling very good about that direction as well because of our value focus and really working closely with customers to align those costs with revenues, not getting ahead of our skis in terms of laying on costs before revenues come on. I think the team is really doing a good job there. So I think it's all going in the right direction.

Okay, great. And then again sort of looking out to 2017, are you guys thinking at this point about planning for 2017 as though the end market environment is going to pretty much stay where it is so that your revenues are certainly facing headwinds from the market, marketshare gains and maybe some acquisitions you can get some growth out of that? Is that sort of the way you are planning for next year?

Yes, that's absolutely the way that we are looking out over the next several years to be honest with you. We've got sort a view on how things -- how we need to perform and what market conditions may be for the next several years and we are not really assuming that the market is going to help any of us. We are not assuming it's going to hurt us compared to where today's conditions are, but we are not assuming any help from the market.

And even despite that, we believe that the way we are operating, the initiatives that we have in place, the business development activities that we have in place, etc., we think that we can grow. It won't be heroic growth next year, but we think that we can grow in a tough market and importantly we think we can continue to grow profits faster than revenues.

And also the adjacent markets that we are developing, that will help us also too.

Absolutely, yes. So the right way we should be thinking about next year then is probably a low single digit revenue growth rate, certainly a faster EBITDA growth rate, maybe high single digits and there is the potential you can do better than that. It just depends on a variety of factors, but is that the right setup to be thinking about for now?

Dennis is nodding yes. Sotirios is nodding yes and I will tell you yes. That's the way we are looking at it right now. Unless something changes significantly, that's kind of how we are viewing the world.

The market changed a lot last year. We expect this year it'll be in the normal. We don't expect the volatility of the oil prices, but we don't think it's going to go that much dramatically up either. So we can work inside this market; we really can. We know what we need to do and we know what the customers need, so we know how to operate in this space.

Okay. And then the last question I've got just about this market backdrop, I would think one of the things that your customers could do is to use some more advanced inspection techniques to learn more about their assets and help them defer maintenance spend, which is a higher cost. So it seems like there may be an opportunity to capitalize on that for you guys. Are you seeing that type of mentality coming from your customers at this point?

It's absolutely the type of thing we are referring to. When we speak of value and finding new ways for cost savings, that's all part of it. It's all what can you do while we are operating online, what can you do before we come off line, what can we know in advance. So I mean all these things make the customers start thinking a little bit more cost-consciously. Where before they had a little bit more money to throw bodies at it, now they have to throw ideas in technology.

So we can do it through what we do with our software. We can do it through with our advanced techniques. We can do it by combining services that are complementary to what we are doing. There's a lot of ways to create value. What you are speaking to is exactly part of it.

Great, okay. Thanks, guys. Appreciate it.

(Operator Instructions). Matt Tucker, KeyBanc Capital.

Morning, gentlemen. Nice quarter. I wanted to follow up on your comment on the M&A pipeline filling up. I guess, first, is that a function of -- are you seeing companies get into distress? Are you just seeing valuations coming down? If you could just add a little more color there. Then I guess secondly, could you just give us a sense for what type of opportunities that you are finding attractive? Should we assume these are mostly your traditional kind of tuck-ins, or is there anything larger on your radar?

I will say this, we never really had a lack of opportunities even in the last year or so when we really changed our focus to make sure we digested those that we had in the past and work on the base business. But there's always been a strong pipeline of M&A opportunities. We just started thinking that it's time to start refocusing on that.

We are not trying to pick up distressed or anything like that. We are just picking up the best opportunity for us if it's geography or more likely if it's a technology or a complementary fit. So I think really the core thing is it's always been there. We just kind of decided that it wasn't where we needed to focus over the last year or so to get ourselves back on. And now we think it's time to start adding new things to what we've got.

Yes, I agree with Dennis, Matt. I'd say also in addition to that that we are very interested in services that are a little bit different, but they are adjacent to what we've been doing that we can apply to the same customer base. We've got this terrific customer base and if we can be even more relevant to them, help them solve even more problems with different ways of doing things, different technologies, different service lines, etc., that's an appealing idea, but we are mindful that we can't get too far out of our swim lane too. So there's a lot of considerations going into this, but those are some of them.

Thanks, guys. And then just thinking about the overall top-line outlook, I think it makes sense to assume that current market conditions are what we are going to be living with for a while, but, I guess, how should we think about what's going to ultimately drive a positive inflection there? Does it pretty much come down to oil prices, or are there other factors that we should be considering?

Well, from a market perspective, oil prices would certainly psychologically help a lot of people feel better about spending more. So I think that might be the single biggest market inflection point that may come or not come. I think from a company performance perspective, we've almost already had the big inflection point this fiscal year because we have emphasized this direction of not chasing revenues, but really growing the bottom line faster than the top line. We've been emphasizing that for a year and a half and for the last three quarters now, we've really seen us starting to print results that reflect that emphasis. So I think that that inflection point has come and that's been a big one for us.

In the future, we are still very interested in growing, but growing in order to grow the bottom line at a very fast rate and cash flows and so forth and expand our usefulness and utility to the market. And those are the growth objectives there and I think that as Dennis was saying earlier, we feel in this environment that we can do those things and we will do those things. We don't need the market inflection point in order to achieve that. We believe that with our direction and our assets and our market position and our great team that we can achieve those things even absent a market inflection.

Obviously, oil price will drive capital spend. It will take a while after oil price were to change capital spend will follow behind it, but we live a lot more in a maintenance and regulatory day-to-day portion of it, so we think we can find our niche inside here very well as well.

Thanks. That's helpful. And then I just wanted to ask about products and systems. The revenues there have been relatively flat for the past few years. Could you talk about any opportunities or initiatives that you have to bring growth back to that segment, or is that largely dependent on the market?

I think that there's a market factor and there's an us factor in that. The market factor is not necessarily -- in an environment where people are trying to spend less, the market is not necessarily helping, but I think also we are focused on really re-examining ways that we can provide value. We've got a little bit of a new focus and we are very interested in building a recurring revenue base based on solutions that will continue to provide value to customers over time. We are focusing on a couple of new product launches and we think that we've got some nice things brewing in products, so we are optimistic about the future.

Yes, we are trying to control our future. We can do a little bit, but certainly as spend goes up for that group so would their revenue.

Thanks for the color, guys.

I'm showing no further questions at this time. I would like to turn the call back over to Dr. Vahaviolos for closing remarks.

I would like to thank everyone for listening and wish you a great day.

Ladies and gentlemen, thank you for your participation in today's call. This does conclude the program. You may all disconnect. Everyone have a great day.