Oil States International Inc (OIS) 2018 Q4 法說會逐字稿

Welcome to the Oil States International Fourth Quarter Earnings Conference Call. My name is Vanessa, and I will be your operator for today's call. (Operator Instructions) Please note that this conference is being recorded, and I will now turn the call over to Patricia Gil, Investor Relations.

Thank you, Vanessa, and good morning, and welcome to Oil States' Fourth Quarter 2018 Earnings Conference Call. Our call today will be led by Cindy Taylor, Oil States' President and Chief Executive Officer; Lloyd Hajdik, Oil States' Executive Vice President and Chief Financial Officer; and we are joined by Chris Cragg, Oil States' Executive Vice President, Operations.

Before we begin, we would like to caution listeners regarding forward-looking statements. To the extent that our remarks today contain information other than historical information, please note that we are relying on the safe harbor protections afforded by federal law. Any such remarks should be weighed in the context of the many factors that affect our businesses, including those risks disclosed in our Form 10-K along with other SEC filings.

This call is being webcast and can be accessed at Oil States' website. A replay of the conference call will be available 1.5 hours after the completion of the call and will be available for 1 month. I will now turn the call over to Cindy

Thank you, Patricia. Good morning to all of you and thank you for joining us today to participate in our Fourth Quarter 2018 Earnings Conference Call. For the fourth quarter, we reported operating results largely in line with prior guidance provided in connection with our third quarter earnings conference call. In our Well Site Services segment, we exceeded the upper end of our guidance in terms of revenue and were near the high end of our guided range for reported EBITDA. Further, our Offshore/Manufactured Products segment results improved sequentially and exceeded the high end of our guided range led by greater service activity and military product sales.

Backlog in our Offshore/Manufactured Products segment totaled $179 million at December 31, 2018, and our book-to-bill ratio for both the fourth quarter and full year 2018 was 1.1x.

Largely offsetting these positive results, our Downhole Technology segment was negatively impacted by lower customer demand for our perforating products along with reduced downhole composite product sales.

Our fourth quarter results were achieved in spite of the extreme volatility that we witnessed in the fourth quarter with respect to crude oil prices. The WTI spot price peaked at $76.40 per barrel early in the quarter, only to subsequently fall to below $50 per barrel by year-end. While our fourth quarter activity held up reasonably well, the Energy industry volatility has created uncertainty early this year as our customers reassess their 2019 budgets and plans. However, crude oil prices have improved 16% since year-end 2018, indicating a more constructive commodity price environment.

Lloyd will take you through additional details of our consolidated results and also provide you with highlights of our financial position.

I will follow with more details by segment and provide additional comments on our guidance and market outlook.

Thanks, Cindy. Good morning, everyone. During the fourth quarter, we generated revenues of $274 million, while reporting a net loss of $14 million or $0.24 per share.

Our fourth quarter EBITDA totaled $24 million with an EBITDA margin percentage of 9%. Reported EBITDA was negatively impacted by litigation costs incurred for patent defense totaling $2.4 million, transaction-related costs of $0.7 million and $0.8 million of severance and other downsizing charges.

As we communicated on the third quarter call, our guidance for the fourth quarter excluded these patent defense litigation costs. We recognized an effective tax rate provision of 5.1% in the fourth quarter, bringing the overall annual effective tax rate benefit to 12.1% for the full year.

During the fourth quarter, we generated $23 million in cash flow from operations. Our capital expenditures totaled $17 million, bringing the full year total to $88 million. Since March 31, 2018, we've reduced our outstanding borrowings under our revolving credit facility by $52 million. And as of December 31, our net debt leverage ratio was 2.4x and our senior secured leverage ratio was 1.2x, well below the allowable maximum ratios of 4.0x and 2.25x, respectively.

Beginning in 2019, our allowable maximum ratio for net debt leverage declined to 3.75x for the duration of the credit agreement. At December 31, our net debt to book capitalization ratio was 18% and our available liquidity position at the end of the fourth quarter was approximately $176 million, inclusive of cash on hand totaling $19 million.

In terms of our first quarter 2019 consolidated guidance, we expect depreciation and amortization expense to total approximately $32 million. Further, we expect net interest expense to total $4.8 million and corporate expenses are projected to total $12.7 million. Total company CapEx for the full year 2019 is expected to decline year-over-year and range between $65 million and $70 million.

For the first quarter, our estimated income taxes will primarily be dependent upon the level of pretax results realized, compared to the level of nondeductible items in our tax provision. We expect to report an income tax benefit in the first quarter of 2019 of approximately $1 million.

Longer term, we expect our effective tax rate to trend towards the U.S. corporate tax rate of 21% as our U.S. operations return to profitability.

And at this time, I'd like to turn the call back over to Cindy, who will take you through the details for each of our business segments.

Thanks, Lloyd. Leading off with our Well Site Services segment. We generated $126 million of revenues while EBITDA totaled $19 million in the fourth quarter. Activity declines led to a 7% quarter-over-quarter decrease in the number of completion services jobs performed, partially offset by a 4% increase in revenue for our completion services job as a result of improved job mix.

The revenue decline was concentrated in the Permian Basin and was likely driven by the significant decline in crude oil prices in the fourth quarter, along with holiday downtime, partially offset by increased revenues from U.S. Gulf of Mexico projects.

Segment EBITDA margins averaged 15% in the fourth quarter, compared to 12% reported in the third quarter of 2018. Excluding a prior year charge for FLSA claim settlements in the third quarter, segment EBITDA increased 5% quarter-over-quarter.

Utilization in the land drilling business was flat sequentially, averaging 30% in the fourth quarter, while day rates and cash margins improved 10% and 17% sequentially, respectively.

In our Downhole Technologies segment, we generated revenues of $52 million and EBITDA of $6 million, resulting in an EBITDA margin of 12% reported in the fourth quarter. Segment results were negatively impacted during the quarter by reduced demand for perforating and downhole composite products, increased manufacturing facility cost underabsorption due to the lower levels of throughput experienced late in the quarter and the incurrence of $2.4 million of patent defense costs.

These legal actions were settled during the fourth quarter, and we do not expect these patent defense costs to recur in 2019. We attribute weaker sales in our engineered perforating solutions business to competitors introducing their integrated gun systems to the market ahead of us as we discussed on our third quarter call, along with holiday downtime and customer budget uncertainty.

We expect to recover sales in our engineered perforating solutions business once our proprietary integrated gun system gains broader market penetration, which continues to be estimated for the second quarter.

Results in the fourth quarter were partially offset by improved demand for our completion tools. We recently implemented a technical solutions group, which will provide tailored support to our wireline and operator customers, delivering our product offerings from a manufacturing location to the well site.

This group is an investment in our future and affords us the opportunity to deploy both personnel and integrated product solutions directly to the well site to ensure product quality and performance is maintained. This group is currently working in support of field trials for our newer technology, which led to about $1 million of unabsorbed costs during the fourth quarter of 2018 related to this effort.

Ultimately, as trialed products are brought to market, the group will generate revenue sufficient to offset their cost.

In our Offshore/Manufactured Products segment, we generated revenues of $96 million, segment EBITDA of $13 million and segment EBITDA margins of 13% during the fourth quarter. This equates to a 7% sequential increase in segment revenues driven by higher service revenues and military product sales, a portion of which pulled forward from the first quarter 2019, partially offset by 5% sequential decrease in sales of our shorter cycle products, which are primarily levered to U.S. land customers.

Orders booked totaled $104 million during the quarter, resulting in a book-to-bill ratio of 1.1x for both the fourth quarter and full year 2018. During the fourth quarter, we booked one major award of over $10 million for connector products orders destined for Africa.

Our customer conversations and visibility regarding select project sanctions for 2019 remain constructive. Additional project FIDs and order bookings growth will be needed before we see a noticeable recovery in sales of our products used in offshore production infrastructure and accordingly, our major project revenues. I would now like to share our thoughts on the outlook for the first quarter.

Similar to our peers in the industry, we have experienced a slower start in the first quarter as lower crude oil prices had negatively impacted our customers 2019 budgets, both in terms of timing and planned spending.

As a result, we expect activity levels in the first half of 2019 for our onshore domestic businesses to see some softness due to deterioration in North American market conditions. Although our first quarter 2019 results are projected lower due to customer spending uncertainty, we believe that our full year results for 2019 should approximate current consensus estimates as the markets in which we operate should improve as the year progresses.

Accordingly, our consolidated first quarter results are expected to decline sequentially, driven largely by expectations for lower levels of completions-related activity in the U.S.

This reduction in activity by our customers is perceived to be temporary, with a resumption of higher activity levels in the second half of 2019.

WTI crude prices have already recovered 16% on year-end to a price of about $52.43 per barrel. We are estimating that first quarter revenues for our Well Site Services segment should range between $104 million and $109 million, with segment EBITDA margins expected to average 12%.

These estimates include lower levels of Permian Basin activity for our land drilling business, which has come under pressure and is expected to contribute little to no EBITDA during the first quarter.

As stated, we believe that activity in the U.S. shale plays in which we operate should improve in the second half of 2019 with higher crude oil prices expected leading to better full year results for the segment.

For our Downhole Technologies segment, we currently estimate that our revenues will range between $48 million and $52 million as customer budgets are resetting flat to lower year-over-year, with the expectation of continued unabsorbed manufacturing costs coupled with the cost of our technical solutions group, we believe that our segment EBITDA margins will average 14% to 16% in the first quarter.

In our Offshore/Manufactured Products segment, we are forecasting that first quarter military product sales and services revenues will reset to a more normalized level, resulting in forecasted revenues for the segment ranging between $82 million and $90 million, while segment EBITDA margins are expected to average 10% to 13%, depending on product and service mix.

To conclude, we continue to believe the opportunity set for major deepwater project sanctions is trending more positively in 2019, which will benefit our Offshore/Manufactured Products segment.

Further, we are committed to developing technology advancements focused on helping our customers make better wells, while carefully controlling our cost and generating positive free cash flow. Free cash flow generation, which we define as cash flow from operations less CapEx is not new to us.

We generated free cash flow in each of the past 5 years and plan to do so and again in 2019. That completes our prepared comments. Vanessa, would you open up the call for question and answers at this time?

(Operator Instructions) And we have our first question from Marshall Adkins with Raymond James.

Cindy, let me jump right in on the downhole side. Obviously, that was the one area where our model missed. You mentioned 2 issues there. One is that others came to market before you did with the integrated gun and then, obviously, we had to slow down the industry in Q4 that's carrying through to Q1. So could you parse out for us kind of which of those issues is probably more important, or at least a bigger driver in Q4? And then kind of give us a little more color on the -- I guess you mentioned Q2 is when you expect to roll out yours and how you see that playing out?

Marshall, it's good to hear from you. So there are a few things going on in the quarter without a doubt first and foremost, when we gave guidance in Q3, we excluded legal cost. We just didn't know what that was. I think you got a good picture of what that was. Our fourth quarter was actually kind of progressing pretty normally and I used the comment, late in the quarter, and then we just had what I would characterize as kind of a December falloff. And the problem with that is when your customer activity slows that quickly, you don't really have an ability to respond from an absorption perspective, particularly around the holidays. And so that had a little more negative impact than we would have thought, and I don't want to kind of overblow the integrated gun, although it's critical to our success, we're still filming perforating solution products but we think customers are migrating to a more integrated solution, which we are -- we've had under development. We're beginning field trials. As you do that, you're going to find things that you need to tweak a bit, and we're in that process and probably will be throughout the first quarter leading into what -- there's no reason for us to expect that we're not going to be successful and get that to market in the second quarter, but it's kind of hard to say one versus the other. But I would really say the falloff in activity, particularly suddenly, and kind of late in the quarter, partially holiday, you got Thanksgiving and Christmas, but I think it's also this overwhelming -- gee, crude oil prices dropped 40%. And I'll tell you, it's really a lot of timing because many of our customers had already really finished their budgets and plans and I can say they were -- I talked to all of them and you can say they're really doing -- and they're really doing some aerial planning end of January just trying to say we don't know what crude prices look like. We don't really know what that late quarter, fourth quarter fall off even meant and I really sense that we're stabilizing. People are beginning to kind of get back to work, but -- by the way, happy Valentines to everybody. It's mid-quarter already and you we've lost some traction in January. And we're not alone. This is an industry comment, not an Oil States comment. But I'll also tell you, all of these things are controllable, and we'll be able to kind of recover activity and stabilize our cost structure accordingly, now that we've had some time to digest the fairly drastic changes we saw late in the quarter, fourth quarter.

Let me -- just one quick follow-up on that. I think most of us are looking for a pretty weak first half of this year due to the issues you've already highlighted and you gave very good guidance on Q1 on that Downhole Technology side. Historically, kind of mid-20% margin, EBITDA margin business, assuming that we see a rebound in the back half of the year and everything plays out with your integrated gun, can we get back to the mid-20% by the end of the year? Or is that a little too aggressive?

I've been very careful in our modeling and you're right. And I did make the comment. We've kind of looked at where first call is particularly, the analysts that have already updating. We're pretty comfortable with the total. The progression through the quarters is a little different. What you always worry about is that it's all on a hope and a prayer and it's so back-end loaded. That's not really the case for us and -- in my completion services business, we've got a bit of a ramp obviously, from first half to second. I would generally kind of say that's more market-driven, particularly, given the slow first quarter that we have. When I look at Offshore/Manufactured Products, maybe a little more ramp, but that should be backlog-driven in our view. And then in Downhole, it's a combination of both market-driven but also things we need to do internally, particularly product-driven. When I'm looking at my progression through the quarters, I'm looking at low 20s EBITDA margin exit rate, not mid-20s. I would say hopefully, we can do better than that but in my internal planning, it's more exit rate of about 21%, 22% EBITDA margin, not 25%.

And we have our next call, our next question from Stephen Gengaro with Stifel.

So I guess 2 things, please. If we start with -- on the completion services side, how has pricing been within those product lines? Can you give us sort of a sense for kind of where you stand now versus maybe 2 quarters ago, and how you think it plays out?

Well, I mean, it's no surprise when you have the volatility we experienced in the fourth quarter. We've got customers coming with it -- with either standard letters requesting price decreases or direct conversations, and we're processing through those. At this point in time, our pricing has been competitive. That really hadn't changed, and it's not going to change. I just believe that you have to be a great supplier to your customers, quality people, quality results and be the low cost provider, and I kind of envision fairly stable pricing at this point. We're not collapsing any of the individual product lines, but it is without a doubt, a process that we have to go through, and it's a value proposition to the customers that we really work on, I'd say almost every single day. The trends -- the macro trend tend to favor us and so I always want the same part of the stability, is driven by the fact that these highly complex completions that we're doing on these multiwell pads does favor our equipment. It favors our higher-end more proprietary equipment. Again, just an industry activity slowdown, we've seen in the last 6 weeks. Yes, we experienced some of that. The other thing I would say is the fourth quarter benefited that from modestly better Gulf of Mexico contribution that can leverage our margins a little higher and international, which feels like it's firming just a little bit will also help lever our overall margin. So when you put all of that into context, we're not really expecting a significant average price degradation or margin degradation in that business, with again, some recovery, both in terms of revenue and margin in the back half.

Great, that's great color. And my other question was around Offshore/Manufactured Products. What would be your guess on '19 book-to-bill? But it sounds like you're pretty optimistic but...

Well, and a lot of that comes -- we just -- we talk every week and the bidding and quoting activity and even more follow-up towards what we believe to be our letters of intent, our contracts are just more favorable than they've been. And I was prepared. I actually very much appreciate the question, Stephen. But we're prepared to give guidance. This is for a year that quarter-by-quarter varies a lot. But our guidance is for our book to bill of 1.3 to 1.5x for the full year 2019, which on the back of roughly 1 to 1.1 for the last 2 years obviously feels better. This is not a directly up into the right, but these projects alone will help us improve our margins.

And we have our next question from Sean Meakim with JPMorgan.

Cindy, so I know the move to higher well pads supports the use of that wellhead isolation tool. But just curious how demand has fared year-to-date relative to prior expectations. So in other words, as budgets getting a little bit tighter and the budget dollars may go as far, is there risk of any negative mix shift towards cheaper alternatives? Just curious how you're seeing that in that product line.

I will answer that in the best way that I can and I would not characterize it as a mix shift to cheaper alternatives. I think what we've seen is while everybody's reassessing budgets and plans, they're just kind of slow playing some of the completions. And Chris has kind of told me that to some degree, we've seen some of the easier-type completions rather than more of the complex i.e. the smaller pad-type activity and I think that's just the reaction to gee, I don't have a budget and a plan yet. I need to kind of -- I don't want to call it slow playing my spending, but to some degree, I think that's what we've seen the last 6 weeks or so. And so that's not really a mix shift, that's just more gee, I got to control my spending till I get better visibility, what my leadership team and my management team and boards are approving in terms of spending. And the other thing I've heard from customers is they've gotten a message from the Street that they have to generate free cash flow and the other thing, I mean, every quarter becomes a higher ramp in terms of producing incremental production growth and to some degree, they're trying to take out some of the lumpiness and plan more of a stable program that leads to more of a steady ramp in production than the ups and downs that some of the companies have seen but because of timing of these large pads coming on production. So there's kind of a multitude of things, but I don't think it's a shift away from higher technology products and services.

That's really helpful. I appreciate that feedback. It makes a lot of sense. On the offshore side, can you maybe give us a little more detail how you see things specifically in Brazil? We've gotten some -- somewhat conflicting data points between the drillers and some of the EPC folks, just wanted to hear your take on how you see Brazil in 2019.

Well, we believe long term, that's going to be one of the greatest areas in investment. We all know it's been slower. We'll tell you and our guided book-to-bill ratio, it is not heavily weighted to Brazil, although we're seeing a slow increase in ramp and activity. And so I guess what I'm going to say, if Brazil accelerates any, that should probably be upside for us. So we're planning on more of a -- I'll call it a service support, small repair type ramping activity, inspection repair service out of our Macaé facility as opposed to a lot of large project FIDs around subsea products. I'd love to think I get some upside from there, but it's really not embedded in our backlog and bookings guidance.

We have our next question from George O'Leary with Tudor, Pickering, Holt.

Sorry about that guys, I was muted. Quick question just on the CapEx. Good to see CapEx down year-over-year and good commentary around continued free cash flow generation which obviously may have been well over the last 5 years plus. Could you break down the spending and kind of where you guys are spending? I know there is -- you guys are spending at that facility (inaudible) on a perforating business, if you kind of breakdown your CapEx, it would be really helpful?

Yes, I'm letting Lloyd kind of find that, and I'll just generalize that as it relates to Well Site Services, we're really thinking more about maintenance CapEx, but of course, that is predicated on the consensus outlook that suggest spending might be down in kind of the 5% to 7% range. And so again, think about maintenance CapEx in that business as it relates to GEODynamics, just recall that we had some onetime acquisitions of property and facilities embedded in our acquisition economics that we completed in 2018 that does not need to repeat in 2019. We do still have some carryover expansionary spending associated with our new charge manufacturing, building and related facilities and so they will be both maintenance CapEx but also expansionary CapEx in our Downhole Technologies segment. And then in our offshore products, these are oftentimes customer-specific projects. They are certainly a little bit of maintenance and a little bit of expansionary, but that's the general overview of what to expect and I'll let Lloyd give you a little more color on the detailed breakdown by business.

Yes, absolutely. So just regarding the $65 million to $70 million for 2019. Probably, it breaks down about 2/3, 1/3 maintenance versus growth and the Offshore/Manufactured Products around $17 million, $18 million and that's largely maintenance. As Cindy said on GEO, there's some carryover CapEx there, we're guiding to about $15 million and in completion services, it's about 2/3, 1/3 maintenance versus growth around $30 million, maybe a little bit drilling and a slight amount in our corporate group. So that's how you get to the $65 million to $70 million. I guess that's a 2/3, 1/3 maintenance versus growth.

Okay. All right. That's super helpful. And then Cindy, following on to your commentary around that -- the book to bill in Offshore/Manufactured Products, you had obviously a notable uptick versus the last 2 years. Do you think geographically, it seems, like, to us, activity will be up year-on-year in the North Sea? Starting to see some green shoots in Mexico even in terms of rigs getting some contracts, Australia as well. What geographies do you think drive the orders that gets you about 1.3, 1.5x in 2018?

Yes, I love the fact that you named all those potential geographies because that's not in my guidance. But for us, we have a mix between kind of subsea production, infrastructure production products and also military, as it relates to the offshore production products, we're really looking at South China Sea and Guyana.

We have our next question from Ian MacPherson with Simmons.

Cindy, I wanted to follow-up on the field trials for your integrated gun. If you could maybe talk a little bit more about where you are technically with that? What remains to be accomplished before you're fully commercially deployed in Q2 and sort of how you risk the completion time frame for that from here forward?

Well, yes. I'm just happy to do that. And again, I want to point out that the integrated gun system is more of a well site delivery system. We are already selling the components and field trialing the components that will go into the integrated gun. So what we're really trying to do is make sure that all of the components work in unison with each other successfully. And so it's just going to take us doing repeated field trials to ensure a high degree of accuracy in those field trials before we want to conclusively go ahead and assemble all the pieces together and put it out on the well site. So I view this more as a process and timing and I think we are on schedule. We also just have to work with our customers, drilling and completion plan, because if they're a little bit slower in the 6 -- first 6 weeks, we might have had a delay of a week or 2 on some of the field trials. But there's nothing for to -- that suggests to me that I should be concerned about this.

We will move forward to our next question from Marc Bianchi with Cowen.

I didn't catch, Cindy, as you were talking through the expectation for '19 kind of to be in line with consensus. How you see Offshore/Manufactured progressing from the first quarter?

Yes, I can't comment on any individual analyst. But when I look at how it kind of rolled off, I was just kind of generally saying that we're in the ballpark on the total and I'm generally focusing on EBITDA, I suspect revenues are pretty close, too. I think if I were to color it a little more, I'd say I was probably a little more optimistic on Offshore/Manufactured Products and I cushion Downhole just a little bit because part of this is reliant on 2 things. Number one is new product introduction that kind of our customers are looking for. And also just a bit of a shifting mix, some of our plug sales from service companies to E&P direct sales, and we're just kind of working to get that manufacturing process efficient some of the shifting there. And so that's maybe the added color I would give you in the total, and that pretty much as I've said in the ballpark there may be a little allocation differences in the business.

Okay. That's helpful. Kind of where I'm trying to get to is, if we're talking about a book-to-bill number for the offshore business, it's helpful to really to get a better handle on what the total revenue would be for the year. I mean, is it fair to think that something close to flat or not down dramatically from '18 is how you're seeing it shape up? Just to try to do the math on what that could mean for orders?

Are you talk about total company? Are you talking about...

I'm talking about within offshore, yes. within offshore, could you give us book-to-bill ratio? I need to know what the revenue number is to figure out what the orders number is.

Yes, we'll be flat to up. I should never say we will, we think we will be flat to up and offshore -- and again, it's predicated on continuity of our short-cycle products. We think we'll see a little bit of upside in service work that we've seen before. And then again, if I'm guiding to a higher book to bill, part of it is depending when I get the projects in backlog, but that will increase our major project revenue and it will also help me with absorption.

And we have our next question from Connor Lynagh with Morgan Stanley.

Just wanted to continue on the Offshore/Manufactured products. Given that you've obviously had some mix shift away from the project-driven revenues and now potentially coming back towards it. Could you comment on the relative profitability of those different revenue pies that you disclosed there?

Well, I mean there is a huge variation, obviously, whether these are -- when you go subsea production infrastructure, it is our higher-margin more proprietary product. So that's always a plus, but I would also focus on the fact that if we can just get stabilized about roughly a $100 million of revenue per quarter in that business, it really does help us with absorption. So you tend to have decent incrementals, assuming that all else remains flat in times of -- particularly in tough times of our short-cycle products.

Okay. And so we've seen that business kind of hold in the low to mid-teens EBITDA margin wise and so I guess, it wouldn't be fair to say that you'd expect that to be trending higher as you put more revenue backlog here?

Yes, Connor. Absolutely, we are -- our planning has us exiting the year more in line with outside high teens EBITDA margins, which are up. We guided to 10% to 13%. Again, revenue guidance is kind of below the $100 million range and not much in the way of major project contribution in Q1. But if our bookings play out as we are projecting, we should end up our exit figure with EBITDA margins about 15%.

Got it, great. And maybe just one more for me here. I -- we obviously spend a lot of time on the energy side of things, but the government side here seems to have taken on a more important piece. So can you just talk about the influx sort of where in the cycle are we? Are you guys gaining share? What's sort of the trend we should expect over the next couple of years here?

Well, it's interesting that you asked that. We've always had military contributions in the past. I'll tell you what's different here. And this is some of our high-end legacy, very specifically designed the livestream of products that are used by the military. What's maybe different about this, is that we're getting more multiyear-type orders that give us longer-term visibility, and it helps us from a manufacturing standpoint and absorption standpoint to have a bit more come into backlog at one point in time. And I can't even remember when the last large military order came into our backlog. But it's lengthened out. It used to be about 85% of our backlog would turn into revenues in the forward 12 months, that's lengthened out a bit, and that was largely because it was more of a multiyear-type military order, and we are kind of expecting a resumption of some of that activity that's factored in that stronger book-to-bill ratio this year.

(Operator Instructions) And I see that we have no further questions at this time. I will now turn the call over to the company for closing remarks.

Okay, great. Vanessa, thank you so much for coordinating the call this morning and I appreciate all of you who've dialed in. And again, kind of a lengthy and busy quarter time frame, so we'll be in touch after the call and look forward to the next one which will be here shortly. So thanks so much.

And thank you, ladies and gentlemen, this concludes today's conference. We thank you for participating. You may now disconnect. Speakers, please stand by for your post-conference.