Mistras Group Inc (MG) 2013 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q2 fiscal year 2013 Mistras Group Inc. earnings conference call. My name is Shanda, and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a Q&A session towards the end of the conference. (Operator Instructions).

As a reminder, this call is being recorded for replay purposes. I would like to now turn the call over to CEO and Chairman of Mistras, Sotirios Vahaviolos. You may proceed, sir.

The purpose of today's call is to review our financial results for the Company's fiscal 2013 second quarter and to discuss our prospects going forward. This discussion is intended to supplement our quarterly earnings release and our filings with the Securities and Exchange Commission.

Frank will begin with a brief disclaimer about the information we are providing today and a summary view of our financial results. I will then follow Frank with a few remarks and observations about our performance, marketing activity and prospects. We will then answer any questions you may have.

Let me start off by saying that we had another very good year, actually, a record quarter, with growth nearly in all financial metrics for the Group, particularly in light of the US and global economic situation and outlook. While the organic growth is not as strong as I would have liked, it indicates a conscious effort to improve profitability which, is reflected in the services performance of 130 basis points increase in gross profit margin and 120 basis points improvement in EBITDA margin.

The overall activity together with progress on our key initiatives and the outlook for the rest of the year is such that I feel very confident that we will have a very strong second half of the year. Accordingly, as we stated in our earnings release, we are increasing the bottom of the range and midpoint of our guidance for both revenues and adjusted EBITDA. With that, Frank, let me turn it over to you.

Thank you, Sotirios. First I want to remind everyone that our discussions during this conference call will include forward-looking statements. Actual results could differ materially from those projected and factors that could cause actual results to differ are discussed in our annual report on Form 10-K and in other reports filed with the SEC.

Also, the discussions during this call will include certain financial measures that were not prepared in accordance with 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's current report on Form 8-K dated January 8, 2013. These reports are available on our website at www.MistrasGroup.com and on the SEC website.

Now, I am very pleased to present summary financial results for the second quarter of fiscal 2013, which includes record revenues, net income and EPS. Revenues for the second quarter of fiscal 2013 were $137.7 million, up 21% from $114.2 million reported in the second quarter of fiscal 2012. Revenue growth in the quarter was achieved through a combination of organic growth of 2% and acquisition growth of 19%, with the balance of the revenue flux due to foreign exchange. Gross profit improved by 19% in the second quarter of fiscal 2013 to $41.9 million versus $35.2 million in Q2 of 2012.

Gross margins at 30.4% in the current quarter were relatively unchanged when compared to the 30.8% in Q2 of last year.

During the quarter, services gross margins increased by 120 basis points and products gross margins increased by 20 basis points. But these increases were offset by a decline in the international segment. The decline in international gross margins was due to our recent acquisitions in Europe, where we added more services business to a mix which previously was mostly a higher-margin products business.

Operating income increased 14% to $16.0 million in Q2 2013 versus $14.1 million in the prior quarter. SG&A in Q2 of 2013 rose to $23.4 million versus $19.4 million in the prior year. And, consistent with prior quarters, the vast majority of the increase was due to acquisitions completed within the last 12 months. SG&A as a percentage of revenues held constant at 17% for both periods.

Net income rose by 15% in the second quarter of fiscal 2013 to $9.2 million or $0.32 a share versus $8 million and $0.28 a share in Q2 of last year.

Adjusted EBITDA increased by 16% to $23.9 million in Q2 2013 versus $20.6 million in the second quarter of the prior year.

Our top 10 customers represented 31% of revenues during the second quarter of fiscal 2013 versus 43% in the prior-year quarter. In the current quarter, oil and gas revenues represented approximately 52% of total revenues, down from 57% in Q2 2012, and this change was once again due to revenue growth of more than 30% in end markets outside of oil and gas.

Advanced services revenue represented approximately 16% of service segment revenues in both periods.

And now, a few comments on the Company's balance sheet and cash flows. In the first six months of fiscal 2013, the Company generated net cash provided by operating activities of $27.8 million. In addition, we spent $5.2 million in cash on capital expenditures and leased another $2.5 million of capital equipment, bringing our total capital expenditure outlays for the first six months to $7.7 million, or 3.1% of revenues. This compares to a total capital expenditure outlay of $10.3 million or 5% of revenues for the first six months of fiscal 2012. So I think no matter how you calculate free cash flows, I think you will determine that we had pretty significant free cash flows during the first six months.

Our net debt increased to $71.3 million as of November 30, 2012, up from $50.9 million at the end of fiscal 2012. The increase of approximately $20 million is due to the acquisition of GMA Group in Germany, where we paid approximately $28 million. Our net debt to EBITDA ratio increased to one times versus 0.8 times at the end of the fiscal year. As of November 30, 2012, the Company had cash and cash equivalents of $8 million and an undrawn revolver capacity of about $85 million.

With that, Sotirios, I would like to turn it back to you.

I want to start out by commenting in our financial results in the second quarter, by saying that while I am very pleased with these record results, our focus on improving margins and profitability led to lower organic growth. I think it is important to stress that the Mistras model delivered strong results in the quarter, where much of the national debate focused on economic uncertainties surrounding the fiscal cliff, contributing to lower product sales, especially to military, and much of the international debate focused on the prospects of nominal growth at best, with a possibility of recession looming in the background. As you know, the Mistras business model has consistently delivered superior revenue growth by relying on a combination of organic and acquisition revenue growth. Our fiscal second quarter was a good example of this, and in the quarter, revenues grew by more than 20%.

In other key financial metrics, such as operating income, net income, EPS and EBITDA all grew in the mid-teens. We believe that our fiscal second-quarter results demonstrate the consistency of the Mistras model. However, we believe that the broad economic concerns that I outlined above tend to impact customers' spending levels in the short term.

In the second quarter, our organic growth rate in revenues dropped to 2%, which is much lower than we anticipated, but in concert with our serious effort of margin improvement in the services sector. Turnaround spending at a number of our large clients declined sharply in the quarter from the prior year. These clients were in a number of industries, including refining, chemical and some of the other process industries. So at least these clients were not isolated to just one sector. These declines are customer-specific and may not be related to a particular industry.

Looking forward, I can say that those large customers where we saw reductions in turnaround spending during the second quarter, we don't believe these reductions are permanent. And when we step back and look more broadly at turnaround activity, both the independent industry statistics that we review, such as Industrial Info Resources, IIR, along with feedback we receive from our customers, seem to suggest that calendar 2013 turnaround activity will be very strong.

Now, I would like to give you some highlights from the (inaudible) operations during the fiscal second quarter. Our services division experienced normal activity this quarter, with the chemical and downstream and midstream segments of oil and gas. Power generation in our [space] markets also had good results in the quarter, and with planned outage work in alloy and advanced composite materials inspection [are] five in-house lot facilities across the country. As a result of our complete asset protection offering, our outstanding safety and quality record and commercial performance, during this quarter, we were awarded the upcoming pre-turnaround and turnaround work at several new customer sites which had not yet been committed to.

Our experience has shown that excellent performance on new turnaround service opportunities often results in customers awarding Mistras an evergreen contract for the facility.

During the second quarter, a global energy company renewed two evergreen contracts with Mistras for an additional three years of these premier refineries. We are also excited that another major energy firm awarded Mistras a contract to perform turnaround work at all of its major refineries across the USA as a result of outstanding performance in our first turnaround with the firm. We expect to average eight turnarounds per year for this new customer.

Our midstream pipeline business continues to expand within the Marcellus, Eagle Ford, Barnett and Bakken shale plays (inaudible) and inside. In the quarter, we were awarded a significant contract for a new 190-mile pipeline construction project in Texas from one of the largest energy firms in the region. During the quarter, our Asset Integrity Management Service, AIMS, organization again continued its heavy market penetration, receiving close to $1 million in licensing, training and the implementation of our PCMS enterprise software and risk-based inspection RBI services from a mix of oil and gas companies.

And now a few words for our product systems division. Due to the uncertainty in contracted capital spending, our off-the-shelf products to military has been delayed in the end of the calendar year 2012. We are optimistic that the situation will change in the first half of calendar year 2013 and growth in this product area will resume to typical annual spending. Overall, we continue to see a steady increase in quotation activity. However, conversion of the defense-related quotations are being throttled by the outcome of the fiscal cliff negotiations at this time.

One system of note that has been delivered was an ultrasonic-based system for a division of General Electric. Receiving General Electric certifications allows us to build additional (inaudible) sub-suppliers and extends to our own services divisions in-house inspection facilities for performing outsourced inspection of GE components.

We were awarded a large contract for a major electric utility in the Midwest to outfit their fleet of 12 gas-fueled boilers with an online AMS boiler acoustic leak detection system. We also received additional orders from two other electric utilities for our new AMS-3 system that adapts the proven AMS boiler monitoring systems to new gas turbine-driven plants using heat recovery steam generation units. For these applications, the AMS systems are being used to maximize utilities in market availability by reducing unplanned outages that impact profit due to high maintenance costs and lost revenue generation.

Our acoustic emission proprietary 24/7, 365 online monitoring systems continue to expand, with new orders internationally for permanent installations in chemical processing vessels, offshore wind turbines and gas turbines. The division will be introducing some new products this quarter, which will both generate third-party sales and support our services division in the areas of active corrosion detection using acoustic emission and integrated proprietary software and the introduction of UT tablet capable of supporting both traditional and advanced inspection methods.

I will now turn to the international segment of our business. With several strategic acquisitions made, the international segment is now growing to become 25% of our total revenues. The integration of GMA, our recent acquisition in Germany, is proceeding smoothly and is on track to meet and exceed our expectations. GMA is an established company that has already adapted their financial reporting to our existing Group financials platform.

In France and Brazil, we are leveraging our model and are focusing on integration with our existing operations, as well as improving margins and profitability with the right management in place. As a result of the restart of the business for oil and gas in Brazil in the first calendar quarter of 2013, we see our business there returning to normal margins and profitability.

Reference to France, we see a natural partnership with our new German operations in the aerospace industry, especially for both Airbus and Snecma. Due to our expanded workforce of technicians in France, for the first time, a large oil company invited us to the final list to compete for evergreen worked in eight refineries there and another two in the rest of Europe. We are also excited for our French company, ASCOT, being a finalist for the Areva nuclear work.

During the quarter, in the UK, we received multiple unit orders for offshore online monitoring systems of structural integrity of wind turbines as a result of the successful performance of our initial five-unit installations.

Similarly, a Middle East power-generating company is considering purchasing multiple gas turbine online monitors for successful predictive maintenance of their units. The successful multimillion dollar online monitoring installation of key units of (inaudible) chemical plant (inaudible) last year has just led to another multimillion dollar order for monitoring additional key vessels at the plant. Due to weather conditions, most of the online systems permanent installations will probably fall in the first quarter of fiscal 2014.

And now, I would like to spend a minute on the Company's outlook for fiscal 2013. Based on our current activity level and increasing confidence in our near-term outlook, the Company is raising the lower end of its guidance range slightly and now expects fiscal year 2013 revenue to be in the range of $525 million to $535 million, and adjusted EBITDA to be in the range of $78 million to $85 million. Consistent with prior years, we do not give guidance for individual quarters, but will update annual guidance each quarter.

In closing, the Mistras model has demonstrated its consistency, with record revenues and profits during the second quarter, and I am confident that it will continue to deliver consistent growth in revenue and earnings going forward. That concludes my remarks, and I would like to open up the floor for questions.

(Operator Instructions) Rodney Clayton.

Good morning, gentlemen. On for Scott this morning. So first of all, in the products -- or actually in the services segment, it looked like we saw a nice sequential uptick in margin there. I think in the past, you talked about some mix issues and just some general lumpiness that had driven some recent pressure on those segment margins. Could you kind of just go into detail about what happened this quarter, why you were able to see a rebound there?

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

Basically (inaudible) is really true focus, and in some cases walk away from jobs -- for projects that are not very profitable.

Okay, all right. That makes sense. Secondly, you talked about some -- I guess less turnaround activity in the second quarter here. Could that mean that some of that work, that turnaround work gets pushed into the fourth quarter, where you have maybe a little bit more of a sizable turnaround activity in that Q4, or is this effectively lost revenue? How should we think about that?

Let me just start off first and then see what Sotirios has to say. Anecdotally, we looked at four customers in the quarter whose revenues were down by about $7 million. If they had stayed flat, it would have been another 5% increase to organic growth. There is probably 100 reasons amongst those four customers why that spending was down. Those customers are in both -- they are in refining, they are in chemical and they are in what we call other process industry.

So in looking at them, we don't think those declines are permanent. And as Sotirios mentioned in his speech, in stepping back and looking at what we see as turnaround activity coming in fiscal 2013, we think that is going to be strong. But we did have four customers that actually had significant drops in turnaround and related activity in the quarter, and they are names that you would all recognize.

I will summarize, Clayton, by saying there was really both. It was really a [push] in some cases, and we already are trying -- are associated with doing the work. And some of them might be delayed even further on 2013, at the end of 2013 to 2014. Okay, Rodney?

Okay, all right. That sounds good. And finally, if I may, it seems like you announced today a number of new contracts or at least new prospects across a lot of different businesses and geographies. Obviously, though, it would appear that your customers are realizing the value that you provide. But is there anything that you are doing on the sales side that you would attribute some of this recent success to?

If we talk about in the US, for instance, it was really performance of some of the small turnarounds that they gave us in the fall. We performed very well and they just opened the market for us; and these are new customers that we never had before.

In the case of international, and I mentioned in France, it was very simple. We did not have the technicians before that a large company can give us a big turnaround, let's say, or an evergreen contract. Now we have the technicians there, after the acquisitions that we made last year, and the strength that we also have from Germany. So now basically they are confident we can do the job. And in the case of the nuclear work that we really will obtain in France, it is again a conviction by them that we have the talent to do the job.

All right. Thank you.

Justin Hauke.

Good morning, guys. Thank you for walking through all of the dynamics on the quarter on the organic growth. I guess I was curious -- one thing you mentioned was more of a focus on the bottom-line contribution. And I guess I was wondering how much of the growth decline would you attribute to actions that the Company took, maybe cutting unprofitable work or walking away from jobs that maybe you weren't earning an acceptable margin on? How much of the growth decline this quarter was attributed to those actions?

I think the word I would like to use would be substantial. We walked away -- for instance, we walked away for an evergreen that we had for many years.

Okay. And then I guess -- I mean, with that -- I think that is a little bit of a newer way of thinking about the top line in the business. And I guess as we think longer-term, you're focused on preserving the gross margins. Should we still think of your organic growth on a normalized basis being in the double-digit range? Or have things kind of moved more to high single digits is kind of the new norm and then any acquisitions on top of that?

I think given the fact that we are very pleased with the current results, we thought that (inaudible), we saw softness in spending in four customers. I think for the near term, certainly in the second half, our guidance projects that organic growth is going to be in the mid to upper single digits. So -- and we are going to watch that very closely.

I don't think anyone in the Company believes that it couldn't hit double digits in the future again. But for the very near-term, second half, mid to upper single digits in organic growth.

The other thing I wanted to add also is that some of the hardware, especially in the products area, some of them I see in the first quarter of 2014, because we cannot really -- we cannot really install a lot of the systems in areas like in the North Sea for instance, or in Russia, because of the weather conditions. So that will also delay a little bit -- it will delay the growth for us.

Okay, and then I guess kind of the last question I have is -- I think a long-term goal has been to move your mix of advanced service revenue to closer to 20%, 25%, from 15%, where it has been for a long time. And I guess as the growth kind of downshifts a little bit, should we expect that mix to move higher, just as there is less maybe new low-margin business that comes in as part of the top-line strategy?

That is really exactly our planning, okay? But we will really know more as we are moving in the first calendar, let's say, quarter of 2013.

Okay, great. All right. Thank you very much.

Andrew Obin, Bank of America Merrill Lynch.

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

First of all, when we talk about products, it really affected us very drastically. Because since September, as you probably heard from a lot of our competitors, like General Electric and others were reporting the same, capital for off-the-shelf items that were very good for us usually in the fourth quarter stopped coming. But at the same time, we have seen an increased activity for quotations. So really, we think this is really temporary; it is not really permanent. Because people need our systems; our systems are really are helping our customers to produce in some cases. So we see a growth in that area. Okay?

Now, the same thing can be said, because there were also -- we do also some military services that we don't talk a lot about it, but we do some of that. That also has been delayed. It has not been canceled, it has been delayed. So from our point of view, in our business segment, military has affected us because they are really peripheral companies that are depending on the military that now had to delay.

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

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

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

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

It was just great to see some of the best margins in a long while; but just trying to see what the trajectory is. Thank you.

You bet.

Thank you very much, Andrew.

Tahira Afzal.

Good morning, gentlemen. I guess I had a couple of questions on the evergreen projects you had (inaudible). Are you seeing more competition in your business, or is this generally a trend that we are going to see going forward, where is no pricing has been challenged a little more when you go into (technical difficulty)?

There is always tight competition, especially because a lot of these jobs are very large. But if you look at the end of the day, you will see that we obtain more evergreens every year. So therefore, we feel that it is really priced tightening, but because of our superior work and advanced technologies and the way we do business and the way we approach evergreens, I think we are still the company of choice and I think this will continue.

Okay. And I guess there is -- my question basically comes from the [back] of one of your peers that reported yesterday, and reported very strong growth in their inspection business. So I guess I'm trying to see if that's because they are just a new entrant and they just had easier comparisons? Are you just seeing more competition because your (inaudible) is fairly different?

We lost not business to a large competitor. We just basically -- as I said, what we did is we just -- the beginning of the year, we walked away from a large contract that basically the margins were very, very poor. We cannot tolerate that continuously.

Also, what I had mentioned a little bit earlier, is four big-name customers, there was a decline of about $7 million in the quarter on what I would recall turnaround and related activity. I don't think we really know all the reasons for that. But the sense here is that it is not permanent. So that is a factor that we look at.

In some areas, we are now planning turnaround activities, so therefore, that is not long.

Got it. And (inaudible) Sotirios that you had to -- (inaudible) how much of the weakness came from the four clients? Was it letting go of some of these evergreen projects? Is it half and half? Or is it more just in these four accounts?

I'm sorry. Could you repeat that (multiple speakers)?

Sure. Sorry about that. I'm on my cell phone. So I apologize. If you were to break down the weakness on the organic growth side between the four (inaudible) versus accounts you let go, would you say it is half and half, or can you give us an idea of the split?

Off the top of my head, it is mostly in the accounts that we have where the spending went down. Down dramatically across three different segments, refining, chemical and other process, and amongst four customers who are big, big names that you would recognize.

Got it. Okay. And I guess last question and I'll hop back in the queue. You talked a bit earlier on about inspection of wind farms (technical difficulty). Even in the US now the wind farms are becoming fairly aged. When I go to industry conferences, there is some talk of really ramping up the inspection process (inaudible) that is a very fragmented industry.

So could you talk a bit about your potential opportunities here in the US? The fact it seems the maintenance is fairly fragmented, does that allow you to really ratchet up your market share there?

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

Got it. Okay. And last question I promise, and then I'll hop back. At the recent PowerGen conference, there was a lot of talk on nuclear maintenance and safety, new safety standards. Any commentary, Sotirios, on whether you are seeing any feedback from your nuclear clients or utilities here on whether that could mean some opportunity for you?

Actually, in the United States, it is really hard to say. But when it comes to Europe, we expect in the next two or three years to get some serious business from Areva in France.

Got it. Thank you very much.

Matt Duncan.

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

Let me also be very cautious and say that really was only one. There was no really a second or a third. There was only one customer. And it was not a walked away; we basically decided to not bid. Okay?

Okay.

And it was really substantial. It was really close -- it was really -- it can be anywhere from $5 million and $10 million, depending on the year.

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

First of all, you are trying to convince the customer to use more techniques that can save them money, what we call key performance indicators, so that by using more (inaudible) boxes, we can save more money to the customer.

And there is a lot of other things that we do that really -- that helps the customer pay less for the services that it used to pay before. And that is really what we are doing. And I think we are successful because we really have obtained a lot of new customers in the last quarter that are going to come with us that we never had before.

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

First of all, the international businesses with us also carry products. So in this particular quarter, capital expenditures both in Europe and here, they were way, way down. So that really affected our margins in the international business. Okay? Because the products division, it is combined together with the services division in the international business.

Now, what we have seen basically in Europe -- and a lot of the capital projects in general are down in Europe. But keep in mind, what we are doing in Europe really is run and maintain work. That is what we are going after. It is not we are going after the large capital projects.

The fact that we are really becoming an important player in the aerospace industry, especially in Germany, and now we combine a lot of the resources that I said together with our French operations, I think that will really help us not only grow the business, but also improve our margin.

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

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

Okay. Thanks for all the color. I appreciate it.

Rich Wesolowski, Sidoti & Company.

Thank you. Good morning, everyone. I'm curious -- when was the contract -- the evergreen contract you had mentioned awarded to a competitor? When did you decide not to bid?

First of all, we don't discuss precisely -- I mean, (inaudible) the beginning of the year. That's in the first -- beginning of the year. It is an evergreen contract.

Second, it is not competitor; it was competitors who really obtained that. And the decision was very simple. There are many times that you cannot afford -- we are very busy. We need more technicians, as we are talking today. The market basically for technicians is okay, but not as good as some people think, especially for talented and knowledgeable technicians, certified in multiple methods. So we decided that it's best for us to move ahead and look.

Now, I also wanted to tell you that we are also doing work for the same refinery because they really need our talent. We continue to do some work, small, of course, but especially for a difficult -- on the callout basis, especially for difficult applications, they call on us, because we are the experts in the area.

It sounds like a sensible move. I'm just curious as to the change, given you had aimed for double-digit organic growth in fiscal 2013 three months ago, seemingly after this job was awarded to another company. I'm wondering whether the change -- the moderated growth outlook is based more on the shift in turnaround spending rather than this one contract or the effort to raise margin.

It's on both, because every quarter, you have business with a company. It's really on both, okay?

Okay. Are you surprised that this business has remained so aggressively priced now that refiners and others in the process industry are some two years into recovery mode and most people are talking about the degree to which labor is getting tighter?

I really have a different opinion of that, and I think they are doing their job. I think a lot of the large companies are combining the contracts. They are looking for large suppliers like us dedicated. And they are doing their job in cutting the prices, and we have to do our job in basically saying if you want the talent that we have, you have to pay more.

Someone had asked earlier what is a satisfactory margin for the service a couple years out. And I was hoping to ask the same question for the international.

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

Okay. Lastly, I'm wondering if you bought any companies during the quarter aside from GMA.

No.

No.

Okay, great. Thank you very much.

You have no further questions at this time. (Operator Instructions).

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

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

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