Primoris Services Corp (PRIM) 2016 Q1 法說會逐字稿

Greetings and welcome to the Primoris Services Corporation of 2016 first-quarter financial results conference call. (Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kate Tholking, Director of Investor Relations for Primoris Services Corporation. Thank you. Ms. Tholking, you may begin.

Thank you, Chris. Good morning, everyone. Thank you for joining us today. Our speakers today are going to be David King, the President and Chief Executive Officer of Primoris Services Corporation; and Pete Moerbeek, our Executive Vice President and Chief Financial Officer.

Before we begin I would like to remind everyone that statements made during today's call may contain certain forward-looking statements including with regards to the Company's future performance. Words such as estimated, beliefs, expects, projects, may and future or similar expressions are intended to identify forward-looking statements. Forward-looking statements inherently involve risks and uncertainties including without limitation those discussed in this morning's press release, those detailed in the risk factors section and other portions in our annual report on Form 10-K for the period ended December 31, 2015; our quarterly report on Form 10-Q, which we plan on filing in the next day or two; and other filings with the Securities and Exchange Commission.

Primoris does not undertake any obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

And now I would like to turn the call over to our CEO, David King.

Thanks, Kate. Good morning, everyone. I know it's a busy day for many of you and we really appreciate your time.

We had a solid first quarter with the improved revenue and net income over same period in 2015 Q1. Our backlog has increased to almost $2.2 billion. Our earnings in the first quarter, as many of you know, are usually lumpy since many of our West segment group starts slowly due to weather and other factors. Our first quarter was a positive start to the year even with many of our large projects not scheduled to kick off until the second half of this year. We're pleased to continue Primoris's unblemished record of profitable quarters, a trend that we believe sets us apart and only further demonstrates our balanced market portfolio of work and capabilities.

Before I get into our operations in individual business lines I want to highlight two areas where we had strong success in the quarter. One, lowering our SG&A expense and increasing our master service agreement work. These are both topics we discussed at some length last quarter, and I'm pleased with the progress we are making.

Our first-quarter SG&A expense is the lowest quarterly SG&A we've had in two years. All of our employees joined us in our efforts to cut overhead expenses and we continue to look for ways to bring down our costs without sacrificing the safety, quality or performance in any of our work.

We announced over $800 million in new business awards this quarter including a $500 million master service agreement that not only joins or covers work for our ARB underground group but also our ARB industrial group, which further demonstrates our ability to combine the capabilities of Primoris business units for the maximum benefit to our clients and our shareholders.

Master service agreements or MSAs continue to be a growing portion of our overall business. While MSAs do not guarantee work, they generally provide a good base of revenue that's more predictable and reoccurring than project-focused awards. Primoris' MSA work is with financially sound companies, and we are predicting that our MSA revenue will continue to grow.

Last year Primoris's safety results were the best in our history. I'm pleased to report that we are continuing that trend into 2016 with our first-quarter results. Year-to-date our lost time incident rate is zero and our total reportable incident rate is 0.71, clearly placing Primoris in the top quartile of industry leaders in safety performance.

Now I will walk you through some of our operating segments, aligning the larger units. In the East operating segment we had generally solid results. James Heavy Civil increased their crews on the Texas job to over 275 workers, bringing our JCG group up to approximately 2,200 employees. This is allowing them to increase billings on the jobs and help expedite the completion of some of the major project along the I-35 corridor here in Texas.

During the quarter, the group announced $62 million in new awards including the $44 million in airport awards that we announced shortly after our last call. We continue to expect substantial growth in the Texas heavy civil market, especially once Prop 7 money starts to flow, which should be sometime late next year.

Our Louisiana, Mississippi and Arkansas markets are expected to remain steady but soft for the next few years.

Cardinal Contractors have struggled to finish two of their Dallas, Texas water projects, partly due to subcontractor performance and manpower production. Both of these projects should be completed late second quarter or early third quarter. Cardinal is starting to pursue larger $20 million-plus projects, which tend to be more profitable because the mom and pop-sized companies don't have the capabilities to bid on them.

We have also strengthened this group from an operations management perspective and begun adding additional capabilities therein. Overall, I am pleased with the prospect for this group.

Results in the East were largely driven by the James I&M division. The large petrochemicals project in Lake Charles continues to be one of their key contributors. While this has been a very successful job for both of our business units working on it, for our I&M group we are discussing here, their portion of the project will begin ramping up late this summer. And as we noted over the last couple of quarters, our next challenge is to find work to replace it.

The I&M group is currently chasing over $150 million in opportunities and I am confident that we will win our fair share.

Overall results in the West operating segment were lower than we would have liked, mainly due to challenges at ARB Structures and ARB Industrial. Structures had an execution issue with one of their projects, which had an impact on their margins for the quarter. The issue has been rectified. Their bookings were strong and they have nearly reached their new bookings goal for the entire year. Many of the new awards are with repeat private sector customers, where we genuinely expect higher margins and less risk.

ARB Industrial's challenges in the quarter were mainly due to late shipments by an electrical supplier and engineering issues on one of our power projects. We have taken steps to correct the issues. And as you know, that we are of a very conservative nature when it comes to our project accounting. And so, we chose to take write-downs on the project although we expect to recover some costs from our supplier and engineering contractor.

ARB Industrial is tracking several billions of dollars of work spanning traditional power, renewables, refineries. And this includes additional MSA opportunities, similar to the one they signed in the fourth quarter of last year.

They are still in early stages of work on a large 500 megawatt peaking plant in California that we announced last year. They are working under a limited notice to proceed until the project clears its final challenges, which, as you know, being California, could be this month or could be later. And while we fully anticipate that this project will move forward, until we get our shovels in the ground we will remain conservative in our outlook.

ARB Underground had a slow start to the year, as is usual for them. But their MSA work continues to grow.

The new MSA they announced jointly with ARB Industrial should start kicking in soon, adding to their already substantial MSA business. In addition to MSA announcement, they added over $110 million of other new work this past quarter.

Q3C was able to get to work a little earlier than normal, thanks to a slightly more mild winter. And as we know, an earlier start date helps them cover their overhead and can really turn the quarter around for them. Last year we reported they lost 40 days to weather in the first quarter. This year, they lost only 12. The group continues to perform well with a solid base of MSA work.

Some of the utility clients are scaling back budgets, so we might not see the explosive growth this year that we've come to expect from Q3C, but we anticipate they will still grow at a good pace.

Rockford had a quiet first quarter, as expected, but both of their large Florida jobs remain on schedule for June and July starts. They are already mobilizing on the jobs, delivering mats and equipment to the construction side. While we see nothing at this time that tells us these projects are going to be delayed, we have taken a conservative approach in waiting until our crews start digging.

Once these two jobs are in progress, Rockford will be getting near capacity for the remainder of year. So we are concentrating on the quality of the project, the customer and the contract for all remaining capacity, since some of our additional capacity is already slated for projects that we are currently negotiating but not yet finalized.

In the energy segment we had mixed results. OnQuest is seeing new opportunities in the mini-LNG market, waste heat recovery units and LNG for peak shaving. While there are multiple opportunities for the group, the timing of the release of many of these projects will depend on the client's willingness to commit to capital spending in uncertain economic times.

In OnQuest heater market, a large heater award was delayed due to the client being in the middle of a challenging acquisition deal. However, outside this delay the heater market remains strong and margins are holding up. The majority of individual awards in the heater market are under $10 million, so we typically don't announce them. But our target market is several hundred million dollars.

After a challenging 2015, Primoris Pipeline turned the corner this quarter, announcing over $38 million in new awards, which has set them up for a good second quarter. While the open shop pipeline market continues to be extremely competitive, we are seeing ample opportunities for bidding in several large spreads in Texas and the Midwest. Our Primoris facilities and maintenance team is having success also with their T&M work. They are currently working on several smaller campus facilities and compressor projects. They are actively working on over $250 million in project proposals, so there is ample opportunity in this market if the jobs can be won at the right price.

James Industrial had a great quarter. Their large petrochemicals project in Lake Charles continues to perform well as we are ramping our workforce up each week, and we anticipate revenue from this project will continue into the first half of 2017. James Industrial has also identified over $2 billion worth of industrial work opportunities, the majority along the Texas-Louisiana Gulf Coast. But there remains uncertainty on which projects, particularly of the larger scale, will go or not.

We are seeing some of the larger EPC companies tried to reenter the self-performed construction market but with only limited success. Competition is putting pressure on margin expansion, keeping them flat relative to current prices. But still, they are higher than they were several years ago.

Overall, Primoris has a very robust prospect opportunity list, and we are actively pursuing several billion dollars of new work across the entire Company, much of it with existing clients across all of our end markets. We continue to look for opportunities where our subsidiaries can work together on projects, and our current prospect list includes numerous opportunity that combine the talents of the various groups.

We are continuing to diligently pursue acquisition opportunities. Multiples in the marketplace are beginning to become more rational, in our opinion, and in line with our expectations. And we are guardedly optimistic that we will complete a deal this year.

That being said, when I look at our current new awards prospects, I see plenty of opportunity for organic growth that will allow us to hit our targets and grow revenues nicely without the need for an acquisition.

Before I turn it over to Pete Moerbeek, I would like to take a moment to welcome Tom McCormick to the Primoris team as our new Chief Operating Officer. I have known Tom for many years and worked closely with him on a wide range of projects, and I can think of no one better suited to oversee the broad range of projects and end markets that Primoris is involved in helping build.

With that I will turn it over to Pete to review the financial highlights. Pete?

Thank you, David. We expect to file our Form 10-Q either early Monday or perhaps late tomorrow. So I will give you some additional color to the financial statements that were attached to this morning's earnings release. The good news is that my color of choice is black ink.

Our total revenue for the first quarter 2016 grew by $38 million to $430 million from last year's first quarter. The revenue gain came at the Eason Energy segment, which benefited from an increase in revenue of $44 million at the large petrochemical project in South Louisiana and a $20 million increase from Texas heavy civil work.

Unfortunately, Rockford had a very difficult comparison to the first quarter of 2015, when they were working on an Houston area pipeline project. And as a result, overall West segment revenues declined by $20 million. Our expectation remains that this summer Rockford will begin construction on two large pipeline projects. Our revenues from MSAs continue to grow with the first-quarter MSA revenue growing 16% to 105 million.

Our largest customer for the quarter was [Techstock], representing 13.5% of our total revenue. And the large southern Louisiana petrochemical project was the second largest customer.

As normal in the first quarter of the year, on a sequential basis our revenues decreased. This year the decrease was $67 million from the fourth quarter of 2015 with most of that decline occurring in the West segment and about two thirds of the overall decline coming from the usual reductions at our three largest utility customers.

Our overall gross margin for the quarter declined to 9.1% compared to 9.7% in the first quarter of 2015, mainly due to a decline in the West segment gross margin from 11.5% to 8.3%.

Several factors contributed to the West margin decline: the reduction in revenue at Rockford, the change in mix of work done by ARB Underground at its largest Northern California utility customer and an increase in expected cost that ARB Industrial's smaller power plant project in Southern California.

We view the first quarter as a bit of an anomaly and expect to see a return to the more traditional gross margin percentages in the West segment for the rest of the year.

Gross margins improved in the East from 7.4% to 7.8% and in the energy segment from 9.0% to 12.0%, both benefiting from the large petrochemicals project in southern Louisiana.

For the first quarter our SG&A expenses were down to $33 million or a $1 million year-over-year decrease and a sequential decrease of $8.6 million. We will continue to look for ways to reduce expenses throughout the year.

Unfortunately, one SG&A expense item that we are not totally in control of is litigation expenses. We remain in litigation as we work to collect the two large 2014 receivable balances totaling approximately $51 million. The customer associated with the largest of the two receivables, $32.9 million, has given us a very unneeded opportunity to learn about Chapter 15 of the Bankruptcy Code. We have started litigation against the sureties who provided us with bonds. On the other receivable collection issue we made progress on a very small portion. At this time we remain scheduled for a fall 2016 court date.

Intangible amortization expense was $1.6 million during the quarter, resulting in an intangibles balance at quarter end of $34.8 million. We expect to amortize an additional $4.9 million over the remaining three quarters of 2016.

Our effective tax rate on income attributable to Primoris for the quarter was 40.5%. We anticipate that for the whole year the rate will end up being somewhat under 40%.

Net income attributable to Primoris was $2.7 million or $0.05 per fully diluted share in the first quarter compared to $1.7 million or $0.03 per share in the first quarter of 2015. Our backlog at quarter end was at near-record level. We ended the quarter with fixed backlog of $1.6 billion, MSA backlog of $631 million and total backlog of $2.2 billion.

By segment, the West total backlog increased by $207 million to $1.28 billion compared to 2015 year end numbers. The East total backlog declined by $32 million to $724 million and the Energy total backlog declined by $67 million to $187 million.

During the quarter we received several significant multiyear MSA awards. But it is our practice to include only estimated revenues for the next four quarters in our MSA backlog.

At quarter end our tangible net worth was $324 million, a 12% increase over tangible net worth a year ago. Net capital expenditures in the quarter were $8.9 million compared to $13.8 million in the first quarter of 2015, and we remain on track for full-year CapEx of $55 million to $60 million. Adding $15.3 million of depreciation expense for the quarter to the amortization expense, our net CapEx is below our D&A so far for the year.

We have been quiet on the acquisition front for the past few quarters and it has been nice not to have to do acquisition or earnout accounting. But as anyone who knows our Company and especially anyone who knows Brian Pratt, our Chairman, the lull will end. This lull has not been from a lack of effort as we are actively working on expanding our portfolio.

From a cash perspective at the end of the quarter, our cash balance was $99 million. We had a negative cash flow from operations of $36 million during the order as we invested working capital in receivables and unbilled revenue. This investment is primarily the result of the large petrochemicals project, which accounted for all of the increase in accounts receivable for the quarter, based on the timing of billings. The customer remains in compliance with the terms of the contract.

We expect to see cash flow turn throughout the year. In addition to our cash balance, we also have available over $100 million on our credit facilities.

Let me conclude with the comment about our guidance. We expect earnings of $1.15 to $1.30 per share for the next four quarters. We started giving guidance reluctantly a year ago.

The guidance has not changed for the past year and is obviously not quite accurate from a historical point of view. The abysmal weather in Q2 last year, the continuing delays with the large California power project and the possibility of delays on some other large projects have kept us cautious with our guidance. Stay tuned for next quarter's call.

With that, I will turn it back over to the operator for your questions.

(Operator Instructions) Lee Jagoda, CJS Securities.

Just to start on the SG&A, do you have the litigation expenses incurred in Q1?

We don't break those out separately, but they are somewhat less. Total professional fees are less between our accounting fees expected for the year and the litigation. So that's part of the decrease. But part of the decrease is also due to we literally reduced SG&A expenses.

And my next question was, if I look at the sequential declines we have had, Q3 and Q4 compared to Q1, what are the major items or buckets that the declines are made up of?

Obviously, a Company of our size -- part of it is people costs. We are trying to manage that a lot more carefully.

I think you will start to see us hopefully it to the point as we complete some of our installation of our IT systems that those costs will stay fairly constant going through. So it has been a mixed bag. We have been around -- obviously, part of it is litigation, too.

I'll add a comment on for your question on the litigation side. Obviously, the Bridgetex lawsuit and the ATM lawsuit -- we have spent quite a bit of legal costs getting prepared for those, going through depositions and things. And of course, with all both of those all of our upfront legal cost has an spent. At least on Bridgetex there has been a court-ordered -- which we expected that, a court-ordered mediation request that will be coming up in June. I don't think it will be resolved at mediation. I think they are getting the reality of the situation but I think it will probably end up going to the jury trial, which is still set September.

So we won't be having quite as much costs in the second quarter, we don't think, on some of those legal side.

And same way with ATM. As we said now, from the bankruptcy issue now we are going after the sureties that provided the bonds. And so, although we will still see legal costs I don't think we'll see quite as much legal costs from that perspective.

On some of the other things that Pete was talking to I'll add a little bit of flavor for you. Some of the tools that Pete mentioned that we are beginning to combine, we are seeing some savings there and across business units. And obviously, in some of the combined services things that we are doing, we are seeing some.

We've still got a ways to go on SG&A. Pete and I are not satisfied yet. We think we've got some more that we can cut out and will cut out. That will give you a little bit of flavor on the situation.

Sure. And then shifting gears to the West margins in the quarter, assuming that the power project write-down was one of the bigger factors, can you give us some more details about what caused the write-down specifically and where you are in terms of your current position on that job today?

Sure. That job is nearing completion. There were two aspects of it. One, one of the suppliers on the power distribution center, big motor control center, if I can put it in those terms, Lee, they were late, substantially late in delivering that equipment. That caused us to have to do some work around costs. And then obviously, once it did get shipped, it caused us to have to accelerate for insulation purposes.

That's why there will be some back charges going back, as I mentioned in my opening notes, on that particular supplier.

The second part of it, our engineering contractor that we are working with on that project busted some of their quantities as far as piping was concerned and some of their engineering costs, relative to start-up costs with the facility. Again, same situation there.

We will be going back with them on some of the added costs. But those were the two major issues.

But that project is basically nearing completion. We are at the 90 percentile range on the completion. We've taken all the write-down that's going to be necessary and kind of optimistic we will get a little bit of it back. But as you know, with our accounting we write it down. We take our beating one time.

Got it. Okay, I'll hop back in queue. Thank you very much, guys.

Dan Mannes, Avondale.

I want to follow up, actually, about the West segment margins again. Sorry to beat the dead horse. Can you maybe break out the margin delta in terms of severity of the impact, whether it's from underutilization at Rockford, the hit from the power job, the mix at Underground? Can you just help us out because, again, it's a pretty different margin structure than I think we've ever seen in the segment.

I think it's a combination. You are probably not going to be that far wrong if you take the total dollar change and split it into three ways. So, order of magnitude, you are going to be pretty close.

The challenge that we had at ARB Underground was that we did not do a lot of work on the integrity program for either of the two California utilities, and that tends to be higher margin work than the work we traditionally have.

So we are also seeing in the West some decline in work for a lot of the traditional gas company, work that we do for non-utility work. It's kind of a combination. It's really a combination of all, the underutilization, the fact the mix changed, the fact we had the write-down on the one job and the fact that Rockford's down for the quarter.

So, as I said, you're not going to be very far wrong if you take the delta and divide it by 3.

Any weather impact in California? I know that was the one place in the country that actually, unfortunately, had a lot of water.

Yes, but that did not have a significant impact for us. First quarter working for the utilities tends to be low, to begin with and they didn't surprise us this year by asking for more. It was a pretty significant delta from Q4 to Q1.

Okay. And my second question -- as it relates to guidance, I want to touch on the point that you made. Obviously you kept the same guidance number for a while. I know you entered into it reluctantly.

But just given what has gone on the last three or four quarters, we want to make sure what the grounding is of that guidance number and how much of maybe your reticence to move it up is really just rooted in the timeline of when these projects start, whether it's Carl's bad or the big pipeline work.

Answer is yes to all of those. I think that our challenge is, that the big impact we had -- we give guidance and then end up with the horrible second quarter, last year. So I think it's a little -- it's a combination of all of it, Dan. We are trying to be very careful.

Certainly, as we model what this year is going to look like and what the next four quarters look like, we think at this point that it looks like it could be a really good year. But we're also not there yet.

So that was my comment, that if we see things happening the way that we are expecting, over the next three months, that we might be able to change it. Don't want to do that yet, until we get a little bit further along.

Yes. Then, I tried to give a little bit in that opening comment. As Pete said, with that project, power project out in California, we've been working on those limited notices to proceed and they keep increasing it a little bit, and we are kind of slow walking it along. So until I really see us out there with dozers and equipment things like that, I get nervous to go ahead and say the forecast should include that or not include it, because it's continuing to slide a little bit.

I've never been worried, as you know, about our two projects, two major pipeline project. But at the same point in time -- and again, for the particular reason that we mentioned, the economics on them are good, the customers are good, all the above. But there were so many other pipeline projects that were getting canceled and delayed in midstream. And I said, look, guys, until we are really out there putting things in the ground, let's be a little careful.

So anyway, I think that's why you don't see us -- you see us a little bit reluctant to ease that accordingly.

Fair enough. Thanks for the color.

(Operator Instructions) Jason Wangler, Wunderlich.

Was curious, living down here in Houston and being underwater for the last two weeks, if you guys have seen much impact just as we look at the second quarter and the time that seasonality starts to get on our side, if you are seeing any impact from everything that has gone on in Texas and even, I think, Louisiana in the last few weeks.

We really haven't, Jason. Obviously, we saw the effect of the water where we would have a job shut down for a day or so. But that rain was not anywhere near like what we were seeing in first and second quarter of last year.

And if you remember, last year we had a large pipeline project that was underway. The pipeline projects that we have currently underway were really not down in the Houston area that got impacted so badly, so really didn't see much there. We saw a little bit on the highway department work in Texas. But if you live in Texas you've got to expect that have some.

And so we're beginning to get more accustomed to the one- , two-day storm type things. So really I guess in general, to answer your question, we didn't see much of an effect on it.

That's good to hear. And then Pete talked about the M&A front and still being pretty aggressive. I did see, I think, that there was maybe a small one during the order. Just curious if there's any color around that.

Outcome of a small one was a little one, was Mueller. What we were doing there -- as you remember, I guess it was about a year ago we purchased a company called Aevenia up in the Minnesota area, basically to do power in transmission work up in the Balkan and things of that nature. Of course, we knew the Balkan was dropping off but it gave us a good opportunity to make what we thought was a really pretty unique purchase.

And part of what they do is they would subcontract out a lot of their foundation work around some of their T&D work.

And so this little company did that type of work for them and we just saw an opportunity to do a little quick purchase and add to the scope and capabilities to keep it more in-house as opposed to having to subcontract it. We typically like to self perform all of our work, and so that was just adding another complement to it.

That's great. Thanks for the color. I'll turn it back.

(Operator Instructions) Matt Tucker, KeyBanc.

David, you provided some great color at the start of the call. Came at me a little bit fast. So apologies if I ask something you have already addressed.

I was hoping you could talk a little bit more about the outlook at Rockford for larger projects, how we should think about utilization as the year progresses based on what is already in the backlog and then what kind of bidding opportunities you are seeing for the rest of the year.

Sure, Matt, not a problem. As you know, we've got the announcement on the two larger projects, the Florida connector project and then, obviously, the Sabal Trail project. We have been, obviously, pursuing along with some other contractors the ACP project. So that's one that we are obviously still looking at. That one's not awarded. We hope, like a lot of other contractors, that we will be awarded that project later this year.

But there's a lot of other opportunities that we are still looking at. But as I mentioned on the call at the start, we want to make sure it's with the right customer, with the right contractor, contract. Williams has been an extremely good customer for us. We're still looking at some work for Williams. A lot of people know which the projects are, but we are also looking at some work with Danbury and Gulf South. Those are two projects that we intended to look at.

We're also looking at a Pacific connector project which would go in well beyond the 2017 timeframe. So as we begin to utilize our Rockford group, we are taking those little holes when we know we will be coming down in certain areas, and see where can we plug those. And then, as I've mentioned, we're going into a very robust pipeline business right now in 2016, 2017 and into 2018.

And so, we are looking now at what we can do in the 2018 and beyond timeframe. So, for us, that's an extremely good position to be in.

I don't know if that's added enough color. But I don't want to go too far on the color because obviously I don't want my competitors to know what I'm going after.

That's great, David. Thank you. And as a follow-up to that -- and again, apologies if I missed it. But any color you can provide on the timing of construction start on those projects down in Florida that you have in your backlog?

Both of them right now -- we're looking at starting this year, starting in the June-July timeframe. We've already started moving mats and equipment and things of that nature over there, so we are already seeing costs in our system to get prepared so that when the clock starts ticking we've got materials, man and mats there to blow and go, so to speak, because that's how we make our money, by moving rather quickly on it. So those we don't see any issue with at all.

I think most people out of the marketplace still think ACP is going to be a later this year award and start sometime in 2017 and go over into 2018. And I see nothing that makes us feel any differently about that.

The others are smaller projects that are sprinkled through. Some later this year might begin, some in 2017 and some into the 2018 timeframe.

Thanks again. And then shifting gears, a couple of your competitors or peers on the pipeline side have commented this week that they may start pursuing some telecom type work. Given your underground capabilities I'm curious if that's an area of interest or you, if you have given that much thought.

Yes, we've given it some thought. Let me -- I'll add some -- there is some areas that we are looking at in our pipeline network where, again, we subcontract out certain functions, whether it be some tunneling or boring and things like that. And so we are obviously looking at maybe how we can self perform some of that work through maybe a little smaller acquisition therein.

But really, as far as your specific question, we are looking at more of what the work we've got and how much more of it we can self-perform and how we can add additional spreads on from a capabilities perspective.

Thanks a lot for the color. That's all for me.

Gentlemen, it appears that we have been further questions. I would like to hand the call back to Mr. David King.

Thank you very much. First of all, I want to say thank you for joining us on our call today. We continue to see what I think are high-quality project in opportunities for our services with their customers. We really appreciate your interest in our Company. And again, thanks again and have a good day.

Thank you very much, sir. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.