Matrix Service Co (MTRX) 2010 Q2 法說會逐字稿

Greetings and welcome to the Matrix Service Company second-quarter and fiscal year 2010 ended December 31, 2009, results conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Truc Nguyen, Investor Relations for Matrix Service Company. Thank you, Ms. Nguyen. You may now begin.

Thank you, Sherry. I would now like to take a moment to read the following. Various remarks that the Company may make about future expectations, plans, and prospects for Matrix Service Company constitute forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various factors, including those discussed in our annual report on Form 10-K for our last fiscal year and in subsequent filings made by the Company with the SEC.

I will now turn the call over to Michael Bradley, President and CEO of Matrix Service Company. Mike?

Thanks, Truc, and good morning, everyone. Tom Long, our Chief Financial Officer, is with me on the call this morning, and we appreciate you joining us to discuss our recently completed second quarter of fiscal 2010.

Before I turn the call over to Tom to discuss the financial results, I would like to comment on our operating performance and highlight our progress in reducing our cost structure and further diversifying our business. I will conclude my remarks with a brief discussion of our outlook for the remainder of fiscal 2010.

This morning we announced our fiscal 2010 earnings for the quarter and year-to-date, which were in line with our projections at the beginning of the fiscal year and reflect the challenging environment that we anticipated and discussed during previous calls.

I'm pleased with the execution of our employees in this tough market and competitive environment. Our project teams continue to deliver solid gross profits and excellent safety performance.

Our backlog was essentially flat quarter over quarter as we added $100 million in new construction projects during the quarter, which is the highest quarter in almost two years. This was driven primarily from new awards in the power and electrical and instrumentation or E&I market, which has been a focus of our growth and diversification strategy.

The repair and maintenance backlog was down quarter over quarter due to continued soft aboveground storage tank and downstream petroleum markets, partially offset by increases in the E&I services market, which again highlights our diversification.

Bid activity for our fiscal year 2011 turnaround business has picked up significantly, which is a positive indicator of the longer-term outlook for our downstream petroleum business. However, near term the environment remains challenging.

We continue to improve on our financial position, which remains very strong, with over $60 million in cash and no debt. We have ample bonding capacity and are more encouraged today with what we see developing in new construction opportunities across several of our markets.

Our project opportunities are of greater scale, with many opportunities exceeding $50 million. Many of these new opportunities really result from our expanded and diversified capabilities, plus our continued investment in business development and project personnel.

We are now tracking projects in excess of $3 billion in our traditional North American market and over $600 million of projects in international markets. Overall, the level of debt activity has increased significantly with extensive opportunities in power, E&I, aboveground storage tank, alternative energy, and, as I just mentioned, turnarounds for our fiscal year 2011.

We remain well positioned to grow significantly as the economy improves for expanding our customer base; leveraging our capabilities in E&I, power, and steel-plate structures; maximizing the scope of our engineering and construction capabilities; and identifying potential acquisitions.

We're focused on geographic expansion in the US, Canada, and select international markets. These expanded capabilities also enable us to pursue a broad range of renewable energy projects and support air quality control programs for domestic utilities.

This increased scope of our engineering organization allows us to provide front-end engineering and design studies to a number of mature and emerging market sectors. We are really pleased with the results of our diversification efforts. At the same time, we remain committed to serving and expanding our core customers and markets.

It is clear that, against the backdrop of a stabilizing domestic economy, each of the market sectors we serve will recover at a different rate. Increasing activity for new storage, gas-fired generation, and a commitment to lower greenhouse gases creates significant new business prospects in the near term. The development of next-generation nuclear power stations and clean coal technology creates opportunities to materially expand our capital construction for really the intermediate and long term.

We also have the capability to deliver EPC solutions for renewable energy programs, including conceptual design, detailed engineering, construction, and overall program management. In conjunction with their development, many renewable projects require the design and construction of new electrical infrastructure, for which we are also well positioned.

We remain cautious as to the timing of the recovery in the downstream petroleum market, as there continued to be global market dynamics and domestic legislative agendas that could impact capital spending decisions in refinery operations.

We are very pleased with the performance of SM Electric and are optimistic about the growth potential of our E&I business. SM typifies our diversification strategy, which complemented our existing E&I business. This is a market I'm excited about as we continue to see emerging opportunities as reflected in our backlog growth of $32 million during the quarter for both new construction and repair and maintenance.

In addition, our Gulf Coast business continues to add key resources and is leading our expansion in turnarounds, specialty, and steel-plate structure projects outside of North America. Further, growth efforts in Canada are taking hold, with annual revenues more than doubling since fiscal year 2008, with several encouraging opportunities on the horizon.

Recently, larger aboveground storage tank construction opportunities have started to emerge and may be an indication of a more stable market and a return to investment in storage. With our expanding capabilities, we're able to self-perform a larger scope of engineering, procurement, fabrication, construction, and E&I services.

These broader capabilities have enabled us to pursue new clients and new geographies, both domestically and internationally. We believe our continued emphasis on strengthening our business development efforts will lead to an even broader range of project opportunities.

As I mentioned, our bid activity for the fiscal year 2011 turnaround business is up significantly and is reflective of our project execution and the capabilities we have added. We were very successful with a large cat cracker turnaround this past fall, which we expect will lead to future opportunities and expanded market share.

The aboveground storage tank repair and maintenance business has been softer than expected, and we see it remaining soft and highly competitive in the near term. Project flow is steady, but it is down from a year ago at this time and lower than we anticipated. This business can recover quickly, but we are expecting a slower pace of spending for the near term.

In response to the challenging economic environment over the last year, we have increased our focus on managing administrative and overhead costs. In the past year, we have reduced our SG&A costs by an average of $1.5 million per quarter despite completing two acquisitions, along with adding strategic personnel to support our Gulf Coast, Canadian, and international platforms.

While we see some indications the business climate is improving, we remain focused on controlling costs through improved efficiencies, better organizational alignment, and asset utilization.

Our gross margins have been impacted by under-absorption of construction overhead, and we will continue to look at paring costs where it makes sense. However, we continue to take a long-term view of our business and will not cut costs to the extent it impairs our ability to pursue new awards, perform projects safely and effectively, or limits our ability to achieve our growth strategy.

As we enter the second half of fiscal year 2010, we remain cautious for the near term as we continue to experience strong competition and the possibility that project awards could occur slower than expected. Increased competition, coupled with a tough economic environment, will continue to put pressure on our margins. However, the recent success of our diversification strategy provides support for our long-term plan and outlet.

As I mentioned previously, our earnings performance during the first half of fiscal 2010 was in line with our original projections. We remain disciplined in our pursuit of new work and not taking unnecessary risk for the sake of higher revenue volume.

Consolidated backlog was relatively flat compared to the first quarter and includes a greater diversity of projects. The construction services segment experienced the largest quarterly volume of new construction awards in almost two years, and we are optimistic that the remainder of fiscal 2010 will show continued improvement.

While our construction services segment is more encouraging, repair and maintenance continues to be impacted by the economic slowdown, particularly the AST and refinery markets.

The downstream petroleum market continues to be challenging, with refiners tightening spending in light of weak demand and lower refinery margins, resulting in less demand for services and lower margins in our repair and maintenance services segment.

This has limited new awards in our repair and maintenance services segment, as evidenced by the backlog decline during the second quarter. As a result, Matrix Service expects to achieve earnings toward the lower end of our previously stated EPS guidance of $0.80 to $1.10 per fully diluted share, excluding first-half charges of $0.05 per fully diluted share.

However, given our financial strength, the Company is well positioned to continue moving forward on our growth plans and take advantage of opportunities to add key talent and complete strategic acquisitions.

I will now turn the call over to Tom to discuss our financial results.

Thanks, Mike. In the second quarter, we earned $0.17 per fully diluted share on $150 million of revenue. The second-quarter results included charges of $900,000, or $0.02 per fully diluted share, related to costs associated with our collection efforts on claims acquired in an acquisition. While we do not discuss the specifics of any litigation, the significance of the charge is important to understanding our results for the quarter.

Revenues for both segments continued to be negatively impacted by the economic downturn, which has slowed capital spending and impacted the timing and scope of maintenance and construction work in the markets we serve.

Our construction services segment revenues were $80 million in the quarter, as compared to $100 million in the same quarter last year, while our repair and maintenance services segment revenues were $70 million in the quarter, compared to $77 million in the prior year.

Consolidated gross profit was $18 million in the quarter, versus $26 million in the second quarter last year. While we have maintained effective project execution, the lower volume of business is not sufficient to fully recover construction overhead cost, leading to reductions in gross margins.

Our gross margins were 12.3% in the quarter, as compared to 14.9% in the prior-year period. For the six months, net income was $9 million, or $0.34 per fully diluted share, on total revenues of $288 million. The six months results included charges of $2.1 million, or $0.05 per fully diluted share, related to legal costs and costs associated with our collection efforts on the claims acquired in an acquisition.

The comparable prior-year results were revenues of $364 million and net income of $20 million, or $0.74 per fully diluted share.

Since the end of fiscal 2009, we have increased our cash position by $26 million, to $61 million. We did not borrow against our $75 million revolving credit facility during the fiscal year. Our financial position remains strong, and total liquidity exceeds $125 million as of December 31, 2009.

Our bonding capacity is adequate to support our current volume of business as well as the domestic and international opportunities that we are pursuing.

Capital expenditures for the six months were $2.8 million, and we project capital spending to be less than $10 million for the fiscal year.

And with that, we'll open the call up for questions.

Thank you. We'll now be conducting a question-and-answer session. (Operator Instructions). Our first question comes from Matt Duncan from Stephens Inc.

Morning, guys.

Hi, Matt.

Good morning.

The first question I've got for you guys is kind of about this increase in backlog awards this quarter, I guess, in bookings on the construction side. As you look at sort of how that's been trending, did that sort of gain a little bit of steam end of the holidays and I guess probably slow down around the holidays? And then maybe more importantly, how does that look through January? Is that still sort of the trend line you guys are on? Are things still looking better in terms of contract award stuff through today?

Well, in terms of the bookings in the second quarter, obviously things picked up in terms of awards during that quarter. Some of that were awards I think we really expected earlier on, and I think it's just a reflection of the lag in timing of some of the awards that we're anticipating. It was a good quarter for construction pickup, and we're very pleased about that.

As I stated, we're optimistic that we'll continue to see good awards for the remainder of 2010 based on the activity that we see occurring today. I can't comment on awards since January 1, but as I stated in my opening remarks, we're encouraged that we could see some continued improvement.

Okay, Mike, that's helpful. And then a question about downstream repair and maintenance. I guess what we've heard from competitors in the industry is that the spring of 2010 in terms of downstream repair and maintenance looks better than the spring of 2009 due to the deferrals from spring '09 that really kind of need to be done for safety reasons at this point. It sounds like maybe you guys are seeing something a little bit different in your business. So I'm wondering if you can kind of help put that in context for us of what appears to be going on in the broader industry. Is downstream repair and maintenance activity sort of better than last year but still weak, or is it weaker than last year for you guys?

Well, let me -- yes, that's a good question, Matt. I think, first of all, last spring was one of the strongest turnaround seasons that we had ever experienced. It has to do with the clients we serve and the cycle of activity. You made the comment that turnarounds had been pushed out from what were planned a year ago into later this year and into -- or into later last year and then, obviously, into this spring. Typically, on the turnarounds they're bid way in advance. And so a lot of the projects that were awarded last year and got pushed back are occurring this spring.

So what we are seeing -- we anticipated a lower spring this year than last year due to the cycle of our turnaround activity. But what we see and what we're excited about is we did pick up a cat cracker award and executed it very successfully in Q2. And we're seeing our bid activity for fiscal year 2011 really pick up, which is encouraging. So it's a little bit out of cycle for us, but, again, what we're seeing right now for fiscal year 2011 is pretty good.

Okay, Mike, thank you. That's very helpful. As I look at your guys' margins, the construction segment gross margin, it's been doing very well. You've had in the 14% -- the 15% range the last two quarters. I'm wondering, is there a little bit of solid project execution on projects that closed out that might have helped inflate that a little bit, or is this 14 percent gross margin level something you guys think you can maintain, given it appears as though your execution discipline has been very good and it's driving better margins? I'm just trying to get a sense of how sustainable this gross margin level in construction may be.

Number one, our execution has been very good on lump some projects and even on some of our cost-plus projects where we begin to earn incentives. I think generally speaking, Matt, the execution has just gone very well, and so we're very pleased with how the project execution's gone throughout the Company. Margin fades are down. So I think it's a focus that we've had in terms of improving our overall execution. I mean, obviously, it's hard to predict quarter over quarter, but I think you're seeing some better execution by the Matrix team in general, and I think that's reflective of the margins.

Okay, thanks. And last thing here, and I'll jump back in queue. You guys, on the last couple of conference calls, have given us some rough framework for revenue guidance. I don't know if you're prepared to do that today just to kind of help us think about how the top line's trending versus where you guys had expected it to be.

Yes, that's a good question, Matt. I think how I would describe that is, currently the top line for the remainder of fiscal 2010 is trending lower than what we expected. However, based on some activity we're working on now and timing of project awards, that could have a positive impact. So I say for right now, in terms of our guidance and what we're looking at, the revenues are trending lower than what we expected.

All right. Thank you for the advice, guys. Appreciate it.

Thank you. Our next question is coming from Mike Harrison from First Analysis Corporation.

Hi, good morning.

Hey, Mike.

Good morning.

We've heard from some people that the only companies out there that are benefiting from stimulus spending are concrete producers. Are you seeing any impact from stimulus spending, and do you expect to in this fiscal year or calendar year?

I would say, for us it's minimal, if any. So I don't think we're really seeing the impact of any stimulus money in our business.

What about expectations? Are you seeing any pickup in bidding activity related to stimulus-related projects?

I don't know if they're related to stimulus or not, but our bid activity in alternative energy is up, whether it's biomass, landfill, energy, those sorts of things. That bid activity is definitely up. We've got some wind activity that's picked up. So if that's related to stimulus, then that activity I think is picked up.

All right. And I had a question on the international side. This is, I believe, the first time you've talked about the actual amount of contracts internationally that you're chasing. You put a $600 million number on that, if I --

Yes. That's correct.

Can you talk about specifically what type of projects you're looking at and the location of any of those projects and maybe give us an idea of the timing when we can start to see that come through?

The primary focus of our international push right now is in steel-plate structures, whether it's aboveground storage, LNG, those sorts of projects. And this is an effort we've been talking about. We picked up some pretty good talent with experience in the Caribbean, Central America, and South America, and I would say that's the primary focus of our efforts right now.

All right. And the last question I have is on plans for cash on the balance sheet. I understand the desire to remain flexible and opportunistic, but particularly given where your stock is trading, I'd have to think that a buyback is looking increasingly attractive. Can you just comment on that?

Well, obviously, from a valuation standpoint, we're definitely undervalued from what we see. On the other hand, I would say that acquisition opportunities have picked up a little bit, and we're looking hard at some possibilities there. So we prefer to use our cash to grow our business, and that's where we're focused on right now.

All right, thanks very much.

Thank you. Our next question comes from Rich Wesolowski from Sidoti & Company.

Thanks, good morning.

Hey, Rich.

Good morning.

Where was the $0.02 charge for the acquisition receivable? Where was that in the segment data?

It was in the SG&A, Rich.

Okay.

$900,000.

And it was in the corporate SG&A and not the either segment SG&A?

No, it just -- it's a little bit in both.

Okay. Was there any difference in your project-bidding criteria in the December quarter versus September? Did you turn more aggressive with the big margins or maybe the level of risks you're willing to accept?

No. I just -- really what started to drive it is awards that we were really expecting earlier just started to occur. So some of these projects that we were awarded in second quarter, we had been bidding on for several months.

Okay. You had some encouraging comments regarding new tank storage, and then you had talked about internationally. I just wanted to confirm that you were citing an improvement in your typical North American tank market and not just a broadened capability to do that work internationally.

That's correct.

Okay. What are some key examples of projects that you have the capacity to bid today that were perhaps out of your scope in '07-'08?

Obviously, today we can bid turnkey on large-scale terminals. We've got the ability to bid turnkey on LNG cryogenics that we didn't have before. We've got process capabilities. And along with that, I think the scale of a project that we can handle today has gone up significantly with the talent we have in this organization. So we've really been able to advance our EPC work in general across steel-plate structures and larger-scale projects -- thermal vacuum chambers, those sorts of things.

Okay. And then lastly, on SME, can you discuss the new awards and the outlook? I mean, is their backlog now considerably above or below where it was when you bought them?

Our backlog is considerably above from where we -- from a year ago when we purchased it.

Okay, and would you expect the power market specifically -- I know you do E&I across a lot of different industries. Would you expect power to be a meaningfully higher share of your revenue a year or two from now than it is today?

Yes. Yes, we're seeing good activity in our market, so we're pretty encouraged.

Okay, thank you.

Thank you. Our next question is coming from Martin Malloy from Johnson Rice & Company.

Good morning.

Hey, Marty.

Hey, Marty.

If I could ask on the aboveground storage tank business, in terms of your customer behavior there. The [MLPs], it looks like their cost of capital has become more reasonable recently. Are you seeing a change in terms of projects that perhaps have been on the drawing boards for a while and that look like they might be moving forward?

We're just seeing a lot more activity today than we have compared to a year ago. I think obviously several of the storage companies have healthier balance sheets, but we're also seeing some new players get into storage. There's a lot of activity in imports, ethanol, so right now we're just a lot more encouraged on the new construction part of aboveground storage than we were a year ago.

Okay. And then within the power area, could you talk a little bit about what you're seeing for pollution-control equipment projects?

Well, we're already involved in scrubbers, SCRs, FGDs, and we're continuing to bid on projects of a similar nature. So we're seeing steady -- I'd say it's a mature market, but we're seeing pretty steady opportunities in that area. We're starting to get more excited about gas-fired generation opportunities, material handling. So in general, as I said, that market for us is -- we're much more encouraged. And it's been part of our growth and diversification focus in this Company.

Okay. And then in Canada, you mentioned that revenues have doubled here over the last year. So is that due to improving -- sending customer activity up there, or is it expansion of your capabilities?

Primarily expansion of our capabilities. The market really fell off in general last year, but we've continued to add projects and revenue in that -- in Canada. And we continue to see some pretty encouraging opportunities for us going forward. So I expect it to become a more meaningful part of our revenue, so that, the power is really right now offsetting some of the challenges we're seeing in the aboveground storage business. But now we're starting to see some interesting opportunities pop up there.

Thank you.

Thank you. Our next question comes from Tahira Afzal from KeyBanc Capital Markets.

Good morning, gentlemen.

Hi, Tahira.

Good morning.

I had a couple of questions. Number one, if you look at the bookings you just had in the quarter, it was a nice quarter in terms of bookings. Assuming good execution, how would the margins in that compare and how would the mix compare to what you're really seeing run through your revenues and P&L right now?

The mix that we picked up in the quarter is quite a bit different than our mix historically because of the added electrical and instrumentation infrastructure projects, power, so I'd say the mix was changed quite a bit, which is good. That's been part of our focus. I'd say that the market's competitive, but we still feel good about the margin opportunities on our project, particularly if our execution continues to be as good as it has been, so that's a big factor.

Got it. And the under-absorption, from what I can gather, came more from your more fixed cost in terms of businesses than perhaps [from] fabrication-intensive businesses. Would that be correct, and is that really what's causing the under-absorption?

I think part of the under-absorption is we've really reduced costs in our fab operations. I think what we're looking at right now, Tahira, is you sit there and we always take a six-month or a 12-month view of project activity and discussions with clients and what we're bidding on and what we feel good about. And so based on those sorts of outlooks, we'll make a decision on how much construction overhead we'll continue to carry.

I think that right now, as I stated, we're much more encouraged about construction opportunities and turnaround opportunities over the next six to 12 months. I think on some of the repair and maintenance business, there's definitely a slowdown in activity there. But we've got very -- we've got excellent people and crews, and if we see some pickup, then we'll go ahead and carry some of that for several months because we think it's going to turn back up.

But I think, all in all, it's something we watch closely and pay attention to. But on the other hand, we really are more encouraged, so we're going to continue to carry some of this because of the opportunities that we see.

And then if you look at some of the larger opportunities you have on the tank side, you mentioned ethanol, and I have seen more ethanol projects really come up on the storage side. But generally, as you see these pushbacks kind of on a quarterly basis, when you talk to customers, what sense are you getting from them in terms of what the push-outs are due to, and what would really trigger them starting construction, going ahead with these projects? Is it more just the general macro environment, or are they also looking at the cost structure and trying to time it more so with the commodity markets dropping?

I think everybody's just been more cautious in terms of releasing dollars to spend. I think obviously calendar 2009 was very difficult. We've seen some capital budgets open up after the first of the year, a lot more activity. I think pricing right now is pretty good. Steel prices are starting to inch up. We're seeing capacity at the mills tight right now, price increases being enforced. I don't know how long that's going to continue, but that's kind of the environment right now, so I think pricing right now is pretty good.

Also, I think with people having better balance sheets is important. A lot of these projects that have been -- they've been hanging out there for a considerable time, and they're starting -- some of them are starting to move forward now.

Got it. Okay. If you look at the nuclear and the gas-fired side, would you comment a bit on the progress towards a nuclear stamp, because clearly nuclear's back in the picture now? And number two, going back historically, and I know you guys weren't there in a sense when the gas-fired subcontracting activities really happened for Matrix, but to the extent you can comment on the market size and opportunity on the gas-fired power plant, that would be helpful.

In terms of the nuclear activity, we still are on track to get our N stamp this spring. That was delayed not because of anything that -- activity we've got going on. It was just a backup in terms of getting the appropriate people out to review, but we still feel good about getting that N stamp this spring.

On the gas-fired generation, we've really seen some indications of increasing opportunities in that market for us. We're primarily focused in the Northeast and mid-Atlantic, but activity has picked up. We're starting to see bid opportunities and encouraged by what we see there.

Got it.

They're fairly decent-scale projects. These are pretty decent-sized projects.

And I mean, the nuclear stamp getting pushed out a bit quarter on quarter, is that more because of the bottlenecks at the agency, or is there anything on the company-specific side, information you needed to provide or something the agencies have not been comfortable with?

No. It's really been the bottleneck in getting people available to do the final reviews.

Got it. Last question in terms of acquisitions. Clearly, the refinery industry domestically is going to be challenged for a couple of years. As you look to invest, what are the opportunities you're looking at, and which areas would you like to focus on?

Well, I won't talk about specific opportunities, but we continue to look at opportunities to expand a certain part of our service business. We're also -- we like the diversification progress on our E&I and power, so we'll continue to look along those arenas. Engineering capabilities to expand we see as a pretty interesting opportunity right now. International opportunities we would look at on a select basis. So I think generally we're just continuing to build out our platform to here in terms of the diversification we've already begun on, so some interesting opportunities out there.

Yes, thank you.

Thank you. Our next question comes from David Yuschak from Madison Williams & Company.

Hey, good morning, gentlemen. I'd just like to drill down a little bit on your power. You mentioned how well it's been since the acquisition. You really haven't owned it all that long given some of the successes you've had. If you look at the maintenance side versus the new construction side, is there anything that kind of stands out as far as what key things have helped you drive the kind of success you've had there to date?

Well, I think as we stated when we first acquired, SM Electric is a very well-respected company, and they do an excellent job. And combined with the Matrix E&I business, we've got a stronger platform. But we're recognized as a high-quality provider of services, and that's why we targeted it in the beginning, and it's playing out well.

I think the other piece of it is, is we did anticipate increased spend in these markets. We've already expanded our markets a bit beyond what we had planned, which is good. So everything that we expected is coming together here. It probably got delayed three or four months from what we originally planned. We had a very cool summer in the Northeast, but it's all falling into place. And we feel very good about what the SME team combined with the Matrix team and the opportunities we see continuing to develop there.

As far as your resources, as you continue to develop those opportunities, do you have -- as you look at your landscape -- have enough internally to take care of what you needed to do here right now or you can maybe -- because of the success you've had, are you going to need to look for other resources to help complement that success?

I think right now, as we build it, we'll continue to have to look at adding resources, which is a good thing. I mean, we've got -- we can handle what we have, but we're still looking at expanding some resources and growing that business.

Okay, just another quick question now on resources. So as you look at the landscape as where opportunities are, whether they are domestic/Canada/international. How do you feel about your resource allocation in each of those kinds of markets to where you may think some of the best markets may be that you may be underutilized in those markets for the opportunities? Is there anything like that out there at all?

Well, I think we're seeing -- our progress in Canada is across multiple provinces. It's not just in a single province. And we continue to be encouraged by the opportunities that we see developing. The oilfield sands activity is picking up a little bit, which is good. So I think we're in a mode there where we'll look at adding resources as the business continues to pick up.

I think the Gulf Coast is an area which has really been the focal point of growing our turnaround business as well as our international business. And that's where I think we see -- we've got resources to do a lot more, and that's, again, the focus of part of our growth efforts in the Gulf Coast right now. But that will be -- that's primarily --

So you're thinking that Gulf Coast/international, you've got -- because of the way you've structured the business, you've got plenty of capacity there right now.

Yes.

Okay. Got it. That's all I need. Thanks.

Thank you. (Operator Instructions). Our next question is a follow-up from Rich Wesolowski from Sidoti & Company.

Thanks. Lastly, I was just hoping you would describe what role Matrix could play in the eventual build-out of the nation's natural gas delivery network and maybe give a sense of how important that market is relative to the other opportunities. Thanks.

Sure. In terms of our natural gas infrastructure, Rich, we've got capabilities in terms of constructing aboveground facilities. We're not an underground pipeline, but we do have full capabilities on aboveground infrastructure. I think also what's encouraging, again, what we're looking at is the end-use opportunities that are associated with some of the increases in access to gas in this country, particularly in the Northeast. So we're very focused on the end-use markets and how we position for that, but we also have capabilities for aboveground infrastructure.

Thank you.

Thank you. Our next question is a follow-up from Tahira Afzal from KeyBanc Capital Markets.

Thank you, gentlemen. All my questions have been answered.

Thank you. (Operator Instructions). We appear to have no further questions. I'd like to turn the call back over to the speakers for any closing comments.

Well, again, thanks, everyone, for joining us this morning. And in closing, I want to continue to emphasize that we have advanced and continue to advance on our long-term strategy and growth objectives.

As we look forward, we remain committed to the growth of our core AST and refinery maintenance business in North America. While it's down, I think it still creates some opportunities for Matrix over the long term.

Additionally, our strengthened capabilities in engineering, procurement, fabrication, and construction for aboveground storage tanks and large-scale terminals have positioned us well to move into select international markets.

We're leveraging our capabilities to diversify further, as I mentioned, into power, electrical and instrumentation, specialty structures, renewable energy, and industrial construction, including a focus on broadening our overall repair and maintenance service offerings.

Our expanded engineering capabilities really enable us to pursue, as I mentioned, much larger-scale turnkey terminal projects and more complex steel-plate structure projects such as thermal vacuum chambers, nuclear, and cryogenics.

Finally, as I mentioned, we will continue to pursue acquisitions to facilitate and support these long-term strategic objectives. We have the financial strength, capabilities, and talent to facilitate and support growth in our business. We remain committed to our strong safety culture and high-quality project execution for our clients.

I think these sound fundamentals enable us to be disciplined, selective, and strategic in our pursuits. This market has its challenges, as we all know, but we also believe it presents some interesting opportunities. And we are confident that with the steps we have taken and remain strategically focused on the long-term growth and diversification of our business.

Again, thank you for joining us today. We look forward to talking with you in the future.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.