Stantec Inc (STN) 2014 Q3 法說會逐字稿

Welcome to Stantec Inc.'s third-quarter 2014 earnings results conference call. With us today from Stantec management are Bob Gomes, President and Chief Executive Officer; and Dan Lefaivre, Chief Financial Officer. (Operator Instructions)

As a reminder, today is November 6, 2014, and this conference call is being recorded as well as broadcast live over the Internet. It will be archived for future reference at stantec.com under the investor section. Therefore, any members of the media who are joining the call today in a listen-only mode and who wish to quote anyone other than Mr. Gomes or Mr. Lefaivre are asked to please request permission to do so from the individual concerned.

Stantec management would like to caution you that this call will include forward-looking statements and forward-looking information within the meaning of the applicable US and Canadian securities laws. By their very nature, forward-looking statements require Stantec management to make assumptions and are subject to inherent risks and uncertainties. In addition, Stantec management will be mentioning additional and non-IFRS measures.

I will now like to introduce your host, Bob Gomes. Please go ahead, sir.

Thank you. Good afternoon, everyone, and welcome to our 2014 third-quarter results conference call. Dan will provide a brief summary of our financial results for the quarter and I will follow with an outline of our market outlook. We will then address individual questions.

Today, we released the results of Stantec's operations for the third quarter of 2014. I am pleased to report we had a positive quarter, supported by organic revenue growth across all our geographic regions and business operating units. This now marks three years in a row in which we have recorded positive organic growth.

Our performance this quarter results from the diversity of our business model, the disciplined strategic approach we take to expanding our ability to serve our communities, and from managing our business effectively.

We are proud of these results, given that they compare to the third quarter of last year, which, as you may recall, was a record quarter for us, so it is nice that we can report today that we improved upon those record results.

Dan will now provide a review of our third-quarter financial results. Dan?

Think you, Bob. Good afternoon, everyone. Overall, Q3 2014, as Bob just mentioned, was a good quarter for Stantec. Our gross revenue increased 16.1% to CAD674.7 million compared to CAD581.2 million in Q3 2013.

Of that increase in Q3 2014, 5.9% was organic revenue growth, with 5.1% organic revenue growth year to date. Q3 2014 growth was mainly due to increased activity in our power, transportation, water, and community development sectors and our buildings business operating unit.

As discussed in prior quarters, the anticipated pace of organic growth in our oil and gas sector has tempered, but it was still positive in Q3 2014. Our net revenue grew less than our gross revenue. This was due to an increase in subconsultants and direct costs charged to client projects in Q3 2014 compared to Q3 2013.

This was as a result of securing larger projects, which tend to have a greater percentage of subconsultants and direct project-related costs, such as field and lab work.

Administrative and marketing expenses at 13 -- 39.3%, excuse me, of net revenue were higher in Q3 2014 compared to Q3 2013, due primarily to lower staff utilization on client projects and higher IT-related costs. The lower utilization and the higher SG&A costs resulted partly from the increased integration activities from our recent acquisitions.

On a year-to-date basis, our EBITDA as a percentage of net revenue was 14.5%, which is well within our expected annual range of 13% to 15%. Our net income increased 5.9% to CAD48.6 million compared to CAD45.9 million in Q3 2013.

Diluted earnings per share increased 5.1% to CAD1.03 from CAD0.98 in Q3 2013 and our backlog grew to approximately CAD1.8 billion at the end of Q3 2014 from CAD1.4 billion at December 31, 2013, and was approximately 2% higher compared to Q2 2014.

Lastly, yesterday, the Company declared a quarterly dividend of CAD0.185 per share to shareholders of record on December 31, 2014. After taking into consideration two-for-one share split payable on November 14, 2014, the cash dividend will be CAD0.925 per share.

Overall, we are pleased with our performance in Q3 2014 and look forward to achieving our targets for the remainder of the year. Bob?

Thanks, Dan. As Dan just outlined, our results demonstrate positive performance for our third quarter. We had a very active quarter and we remain on track to meet our expectations for 2014.

In this quarter, we continued to strengthen our expertise and reach into local communities by acquiring ADD, Inc., based in Boston and Miami, and we recently closed acquisition of Penfield & Smith Engineers of California. And we also entered into an agreement to acquire the Canadian engineering operations of Dessau Inc., based in Montreal, Quebec.

With ADD, Inc. and Penfield & Smith Engineers joining the Stantec community, we've strengthened the depth of our expertise, with approximately 1,350 new employees year to date. We expect to close the acquisition of the Canadian engineering assets of Quebec-based Dessau in early Q1 2015, adding an additional 1,300 staff to the Stantec community.

Looking at our performance across our business operating units, I would like to provide you with some highlights from the third quarter. In the quarter, we demonstrated the flexibility of our diversified business model and the strength of our community positioning.

Strong organic growth in buildings and infrastructure more than offset the reduced pace of growth in energy and resources, which we anticipated. Further, with our consistent focus on enhancing our capabilities and presence in the United States, we are well positioned to leverage the strengthening US market.

In our buildings business operating unit, improved healthcare -- improvement in our healthcare and our strength in the education sector has resulted in securing projects in response to the increased activity in the United States. For example, during the quarter, we secured a project to provide the programming, planning, architecture, and interior design services for the Academic Building for the University of Texas in Brownsville, Texas.

In our energy and resources business operating unit in the third quarter, we experienced strong growth in our power sector in the United States due in part to the need to replace aging infrastructure, such as substations and switchyards.

In Canada, where Stantec is a top provider of regulatory and environmental scoping for power projects, we continue to work on transmission and distribution projects, especially in Western Canada.

In our infrastructure business operating unit, all of our sectors throughout North America gained momentum in the third quarter. Due to the Company's expertise in flood protection, including a growing portfolio of major water projects, we continue to secure significant projects across Canada and the United States.

One example from the third quarter is the Springbank Off-stream Storage Protection project west of Calgary, Alberta, one of the largest flood mitigation projects in Alberta's history.

In our transportation sector, strong client relationships, together with stable infrastructure spending, are resulting in new projects. For example, in the third quarter, we secured work on the Louisiana I-49 Connector, which is a 5.5 mile or 8.9 kilometers partly elevated six-lane highway.

Now I would like to comment briefly on potential market conditions going forward. Our overall outlook for the 2014 remains as a moderate to strong increase in organic revenue, with a target of approximately 5%. We are still on track to meet this target.

Our outlook for the Canadian operations is to end 2014 with moderate to strong organic growth. This is mainly due to ongoing strength in the private sector, a stable public sector, and private and continued activity in the infrastructure markets.

In our US operations, we are expecting to end 2014 with moderate organic growth. The public sector's stable level of spending on infrastructure is positive for our water and transportation sectors.

The private sector is responding to the strengthening economy in the United States -- for example, in community development, where the housing market is responding to improved confidence.

We anticipate the buildings market will continue to recover, benefiting, in particular, our healthcare and education sectors. In our international operations, we are expecting to end 2014 with strong organic growth, mainly due to increased activity in the Middle East, resulting from recent awards in healthcare and institutional projects.

Looking at our individual business operating units, we expect the following for the remainder of 2014. As anticipated, we are seeing some recovery in our buildings business operating unit and expect to end the year stable compared to 2013.

Our backlog in buildings continues to increase and are translating into projects. We're recognizing, however, the ramp-up time to revenue generation will continue to come slowly.

We continue to anticipate ending 2014 with strong performance in our energy and resources business operating unit. We experienced strong activity in energy and resource related work in the first part of the year and activity continues to be strong, even with the impact of low oil prices. Mining companies continue to slow down on major projects and exploration due to soft -- the soft market.

We expect moderate to organic revenue growth for 2014 in our infrastructure business operating unit. We anticipate our infrastructure business will continue to benefit from the backlog of rehabilitation needs and a need for expertise in areas like flood management.

In summary, we are confident with the strength of our diversified business model and the consistent disciplined execution of our strategy.

This concludes our comments for today. Dan and I are now available to answer any questions you may have. Conference call operator Duane will now explain the question procedure. Duane?

(Operator Instructions) John Rogers, Davidson.

Bob, the last time -- and it was a number of years ago, when oil prices came down pretty substantially -- there was slowing and they came down much more severely than what we've seen so far.

But there was a lot of slowing in Alberta and it rippled through to some of your work, but yet, you are talking about accelerating activity in Canada. And I'm just wondering maybe you could just expand on that a little bit. How you're thinking about that and the risks?

Well, I don't know if we used the word accelerating. I think we're still looking for Canada to continue. In --

Sorry, Bob, to -- but it wasn't in -- didn't you improve it from moderate growth to strong growth in Canada or --

Yes, we did that, I think, after our first-quarter results, John, is where we --

Okay. Fair enough, Dan. But it's still strong growth.

Yes, strong growth, but was -- that change was made at the end of the first quarter. And just to address the issue with regards to the oil and gas sector, which certainly does have an impact, like you said, it's not nearly as severe as it was in the past. It is significant, no doubt, but the midstream business is probably the one part that's not going to get affected as much as, say, the upstream portion.

The production side of it -- and that tends to react fairly quickly to any volatility in the oil prices, but the midstream sector, which is really pipelines, the transportation part of the oil and gas sector, is really been under the gun for the last couple years to catch up to the production side.

So even a little volatility in the oil and gas price does not have as much of an impact in the midstream business as it does in the upstream. That's not to say that it isn't -- there is still some slowing of that, for sure, but the impact isn't as great as the upstream side of the business.

So that gives us a bit of confidence that we're not going to see a significant retraction. It's just not going to grow as fast as it has in the past.

Okay. Thank you. I appreciate that.

Mona Nazir, Laurentian Bank Securities.

So just following on the last question, Canadian Pure SNC announced today that they are cutting 4,000 employees, 9% of their workforce, on the back of faster commodity prices and ultimately a collapse in global mining.

I'm just wondering your take on that announcement? Does it concern you? And I know you said on the Dessau call that you could stand to add people soon after the acquisition closes. Is this still the case?

Okay, with respect to SNC's, I really don't have enough information to determine. I think from a quick review, many of their layoffs are really affected by more of their international operation, but I'm not sure.

I do know that there is no doubt that the mining operations -- and I think, again, that a lot of it was associated with the commodity market. The mining operations certainly has decreased over the years in Stantec. We are seeing signs of that as well.

We've been somewhat insulated from that as a result of the fact that the two major projects we are working on were still underway and they will continue into next year, but we do see signs that there will be potential delays to those projects -- one in Indonesia for our Freeport and the one -- the Jansen project for BHP. But certainly, our slowdown is not anticipating any kind of significant layoffs as SNC has had.

With regards to our messaging previously about the Dessau transaction and the possibility or anticipation that we would be looking at hiring people shortly after the transaction closed, we're still anticipating that. But that transaction won't close until next year in January.

But from all our due diligence underway, our conversations underway, we certainly see opportunities for further work, being one, in Quebec, and in as a result of the expertise, so we're still anticipating that we would be hopeful for a quick hiring of staff.

Don't see the possibility of layoffs shortly after that, but it really comes down to winning work. But we see -- we are pretty optimistic about that.

Okay, perfect. And just now turning to the increase in your subcontract costs. How do we view this going forward? Is it going to be a more elevated level? And the larger projects that you did sign, what's the timeframe for these?

I don't see this as being a trend, let's put it that way. I think it just -- it happened to be just higher costs this quarter than we normally had. I don't see significant increase of major projects in the future that would then trend towards us having a bigger subconsultant costs or expenses.

The tendency for these jobs, especially during the summer months, is that's where a lot of the fieldwork is going on, that's where a lot of the laboratory work is done. So I don't see that extending into the fourth quarter or into next year in any significant way. So I would look at it more as an oddity than a trend.

Okay. And now just turning to your buildings segment, which was struggling a bit for the first half of the year. Really turned it around with some very strong growth. I know you spoke to some of the projects on the healthcare and education side, so you view this growth is sustainable, and how is utilization now versus last quarter?

Well, certainly, utilization is directly connected to the revenue growth, so it is definitely increasing as well. We are getting project awards, so we are comfortable that this is going to continue.

The one proviso that I had in the script was the fact that sometimes you can't control the timeframe between an awarding a project in that project actually ramping up to generating revenue. So there's always that risk of project delays before getting the go-ahead from the client.

The good news is we are winning projects, clients are awarding us work, and we see a lot of that now transferring into revenue. So we are pretty confident that this is a trend that the -- we've been messaging for a number of quarters that we felt where the end was in sight. And we were really happy and pleased to see that turnaround and we expect that to continue into 2014.

Okay. And just lastly -- oh, sorry. And then just lastly and then I will step back in the queue. On the acquisitions front, you have a lot of capital that you can use. Although Dessau has yet to close, is the pipeline still full? And is there any change to the purchase price and the multiples that you're seeing?

So quick answers to that is yes, the pipeline is still full. We're always talking to a number of companies, so that there's always conversations going on and we are always looking for new companies to engage with.

And from a multiples perspective, we really have not seen a trend or a change in that. There's obviously a wide range of those multiples, depending on the type of company, the sector, the type of firm you are acquiring, but we really haven't seen any variation or trends going up, especially in the sizes and the sectors that we're looking at.

Okay, perfect. Thank you, I will step back in queue.

Paul Lechem, CIBC.

Just wondering if you have any early views on 2015? It might be a little early, but given your backlog stretches into next year, do you have any thoughts on how organic growth and the other trends might continue in the next year?

No, that's actually in the fourth quarter is when we do our deep dive into that, when we are just finalizing our budget reviews now with the Board and with leadership. We will be -- probably have better visibility into that in the fourth quarter.

Don't see any significant changes from our business. It's pretty diversified, so we would have to walk through each one, but at this point in time, we don't have those details yet.

Is there any difference in terms of the pace of contract signings right now, the profitability of contract signings, the stuff that's going into backlog today that might be delivered six, nine months from now? Is there any change to that that you're seeing?

No. No, I don't see any significant change to the type of work we are winning and the type of margins expected from that work.

Okay, that's good to know. Any changes in the markets, given a number of major acquisitions among your competitors. Has that created any changes in the competitive landscape? Has it created any outflow of employees? Have you seen any impact from that yet?

Not yet. I'll say not yet. I would expect that as a result of those two major transactions, there's going to be -- it will be interesting landscape out there in the industry, but we haven't seen any significant changes or impacts as a result of that as yet.

Is there anything you are doing differently to position yourselves against these competitors because of their acquisitions? How do you compete against them? Has anything changed or what's the message you put out?

The simple message is really, nothing's changed. It's pretty early days for both of those two significant ones we are referencing. But no, I don't even see long term that -- that competitive environment. We don't see changing dramatically.

It's going to take some time to -- for those firms to leverage and integrate and how successfully they do that will depend on how it -- what changes our environment, but we don't anticipate anything changing.

All right, well, just the last thing, maybe, if I can ask -- is there any -- can you comment on the thought of having these large integrated companies with large integrated service offerings across multiple regions, multiple markets.

Is that something that is of value? Do you see yourself needing to become more integrated across more places or is that just a marketing pitch? Is there actual value in what they are trying to portray?

Now, that's a good question for much longer discussion, Paul, I would love to have. A short answer to that is we believe our model is very, very sustainable. We feel it differentiates us in a crowd of a lot of integrated firms. We are a great partner in design builds and P3s with construction companies across North America in numerous different sectors.

So all we can say is we are really comfortable and really confident of our position and our strategic plan and where we are positioned in the industry. But yes, it's an interesting question where this is going to continue to.

Okay, well, we will have that another time. Thanks, Bob.

Tahira Afzal, KeyBanc Capital.

I guess my first question is another one on M&A. Given the changing dynamic we've seen on the macro side in terms of oil prices and gas prices and global growth, could you comment on if there's been any shift in how you look at what regions and which end markets to look at over the next six to nine months?

And by that, just wanted to get an insight into whether it's created opportunities that we call sentiments overcorrected or whether you generally, fundamentally, would look at something different?

So if I rephrase the question, if you are saying if the M&A activity is some of the more major things going on, the shift that we are starting to see in the size of the change in oil and gas prices, is all of that affecting what we feel or what we're looking at?

The answer would -- absolutely not. I think we are looking at a much longer viewpoint. Our strategy has always been much longer term. Things like oil prices reducing, that means projects will slow down. We just try to get as close to our clients as we can and continue to flow with that. The diversity of our model allows other parts of our business to pick up the slack, which is exactly what's happening right now.

The M&A activity that is surrounding us really reinforces our plan and we feel that our plan is much -- significantly different than that. Much smaller companies, much more localized firms that are very strong in a region or strong in a sector and just continued discipline along that.

So we actually feel that what's going on around us is not affecting us at all. It's actually confirming that our strategy is very solid and is very sustainable. So it really doesn't change our outlook at all.

Got it. Okay. Second question is in regards to the US, Bob. Clearly, we've seen some election fear and I've been getting a lot of calls from investors on what that means for the sector.

Would love to get a sense -- you know, you are on the front end of a lot of this activity, so you might see changes coming in first versus others, so I would love to get your thoughts on that.

Well, I think just from a very high level, the change in the Senate and the results of the elections should refocus the government on investment of infrastructure. I think that's probably the biggest theme or the biggest positive we see is that the focus will be on infrastructure.

I think governments will get a little bit more aligned and a little bit more in tune with further investments in infrastructure. That's been a -- something we've see in the past, so that's our expectation and so that's a very positive, we think, for our industry is that focus on infrastructure.

Thank you very much.

Sara O'Brien, RBC.

Hi, good afternoon. Can you guys comment on the US growth opportunity following nonresidential construction outlook that's somewhat positive right now? Where do you see the biggest opportunity among your segments for 2015?

So definitely, it's going to be affecting the buildings group. That's the one sector it's going to have an impact on. I think our recent acquisition of ADD, Inc. is where we are starting to see some -- I'd almost call it a remarkable response to the ability of taking the expertise of a company like Add, Inc. and launching it over a larger platform.

They are very focused in that commercial market, the hospitality market. They have a very strong position in a sector that we were not represented well before, but yet they were operating out of two offices.

We now give them a platform and together, that platform allows them to leverage that expertise across a much wider group of clients. So we are pretty excited about that, because it brings a new sector to us and the other sectors that we are working on are all starting to show strength, even healthcare.

So certainly, that's -- I think we showed that the last quarter with the growth in that business operating unit and we see that continuing. So certainly all the indicators are pointing towards that being a much stronger sector, a much stronger business unit for us going forward.

Okay, and I apologize -- I missed some of the call, but just wondered on the productivity level, if there were any particular issues in Q3 and what the expectation is on the staff productivity level going forward.

No, there was really no surprises there, Sara, in terms of the utilization of staff. I think we did mention on the call that we have some higher SG&A costs as a result of all the acquisitions we've done and the integration activities that are going on.

But would that be expected to be repeated in Q1 with the Dessau closing?

Certainly. I think we will experience a lot of activity with Dessau. It's a fairly large acquisition, so we will be busy with the integration in Q1.

Okay, I will leave it there. Thanks.

David Rochow, Desjardins Capital Markets.

Thank you. Good afternoon, gentlemen. Just wanted to dig a little bit deeper following up on the ADD, Inc. acquisition. When you talk about their growth potential, just curious if you could put this in the context to the broader industry. Is it like the industry or above industry growth rate?

No, we certainly expect it to be above the industry growth rate. If they would -- I think that sort of speaks to the heart of why you do an acquisition is if they would have just stayed where they are, I think they would have grown at or slightly above the industry's growth rate. They are a well positioned firm and do great work.

Through an acquisition, what you wanted to be able to do is accelerate that above the industry growth rate just by leveraging our platform, our locations, and by them being able to then leverage that over a wider platform, would have the expectations -- and we have that -- of having an accelerated growth rate over the industry.

Okay. And this acceleration would be in line with the acceleration you've seen on previous acquisitions or is this truly exceptionally above the other acquisitions you done in the past?

Well, it all comes down to execution. It all comes down to winning work. We see the opportunity is as good or better than any acquisition we've done, but certainly, you still have to get out there, you have to compete, you have to win the work.

But I would say just because of a brand-new sector that we now are well positioned in that we weren't before and the combination of our breadth of offices across North America, that combination, I would say, is -- makes it -- it's a little bit more optimistic than the average acquisition. But certainly, every acquisition we do has that very similar type of strategy, the same idea and the same expectation.

Okay, that's good to hear. Switching just then from buildings to water, you've mentioned now for the last couple of quarters about a fairly good strong momentum in your booking for the water.

Two questions on this front. Is it mostly in Canada or is it across North America? And can you quantify a run rate in terms of your new bookings in this space?

It is across North America, I would say. We are winning projects, as we mentioned, in Calgary. We are working on major projects in the United States -- a lot of flood control projects, a lot of water treatment projects.

So I would say that the projects are well balanced on both sides of the border. Our run rate -- no, can't really think of that number off the top of my head.

Okay, then. I guess -- I mean, maybe asking another similar question. You noted in the outlook about the United States pointing to the Water Resources Reform and Development Act, is there a number that you've perhaps internally quote -- thought to yourself that there might be an opportunity here?

Not really. I think that act is providing some opportunities in funding. A lot of that really hasn't translated into projects yet. It's more future opportunities. So no, I can't simply say that that Act has resulted in a 10% increase in opportunities or something. That would be hard to quantify.

All right, all right. Well, I appreciate your thinking about it.

Maxim Sytchev, Dundee Capital Markets.

Just a quick question for you. Obviously, given your very strong presence in midstream and LNG world, especially on the permitting inside, I was wondering if maybe you can please provide some color in relation to how that market is evolving in Canada?

Specifically, if you are seeing any slowdown in terms of activity and any read through from your clients in relation to the recent tax announcements.

The tax announcements are positive. There's no doubt about that. So I think that our clients are probably going through their analysis of that, but that was certainly positive news.

But the oil prices -- any time there is reduction and it's insignificant, as it has been in the last few months, I think clients just start thinking about their projects and they just become slower in the awards and slower in the progress, so we have experienced that.

We see that as relatively short term. And we are not overly concerned, but certainly that has had an impact and that's reflected in our results with the slower growth in that sector.

But we're not overly concerned. Again, as I said earlier in the call, that midstream is an area that's a little bit more insulated from the volatility of the oil prices, just because of the backlog of projects necessary. But we have seen our clients slow down in their decision-making and slow down in their advancements of projects and that's to be expected.

All right, okay. That's helpful. And then, was wondering if you maybe can comment on just reacceleration of organic growth in the US. I mean, this is something that people have been watching for very closely.

Obviously, this is geography-specific and by segment specific, but any outstanding dynamics that you feel are worth highlighting to explain this newfound growth in the US?

No, it's -- we've been messaging this -- I was going to say hoping for this for a long time -- but I think there's been increasing optimism, month by month, quarter by quarter, in the United States. We are finally starting to see that translate into real organic growth.

So it is very widespread. It is not just in one specific sector or one specific geography. A lot of it is focused in our infrastructure area, so that would be water, transportation, and community development. The bulk of it, I would say, would be focused in that area, but certainly we are also winning projects in our buildings group.

So it is fairly widespread. It is fairly widespread from a sectorial perspective as well. So it's good to see. I think it's just generally overriding better confidence in the United States and I think the elections put that in even a more positive spin for the next couple years with regards to the changes there. So we're looking forward to a much stronger 2015, I would have to say, at this point.

And here you are just talking about the US or in general?

No, just the US. I think we've been messaging that we were looking for strong organic growth. We are starting to finally see that. Basically, we think that's in a sustainable position.

Right. And then just a quick question in relation to M&A. I mean historically, you've been extremely sensitive in terms of obviously value creation, what you're paying for.

Given the dislocation that we see in the capital markets right now and on some public co's, have we seen some compression in terms of expectations for the sellers in the private market or people are assuming that it's business as usual for the time being?

I'd say business as usual for the time being. We haven't seen a significant change in the market.

Yes, we aren't seeing any real change in expectations around pricing, if that's what you're asking, Maxim.

Yes, that's right. Yes. Okay, no, that's for now. Thanks a lot.

John Rogers, Davidson.

Just wanted to follow up on some of the end market drivers. Within the US, the growth that you are seeing, Bob, is it private sector or public sector?

It's actually a little bit of both. Certainly, the -- a lot of the water business we are getting is from the public sector. A lot of the transportation work is from the public sector.

I wouldn't say it's a significant increase in the opportunities. I think we're getting better at just winning some projects, so that's always good. In the buildings, it's much more in the private sector that we are starting to see some of the improvements. So if I had to look at it overall, probably slightly skewed towards the public sector.

Okay. And then on the electrical grid work that you're doing, both the transmission and the power plants, I think you mentioned, is that incrementally getting stronger than what we've seen? Because others have talked about that business slowing down or the end markets slowing down and I know you are at the front end, so --

We are at the front end on some of it. We are doing a lot of engineering work and mainly a lot of it is improvements and expansion and capacity expansion for a lot of coal plants.

Right now with the price of natural gas, we're seeing a lot of the coal providers augmenting their ability by basically throwing in a couple turbines -- gas-fired turbines to generate. So we do a lot of that work. A lot of it is smaller projects, which I think some of the bigger players don't really pay attention to.

But for us, you do enough of those, it has a significant impact to our revenue generation. So we have a pretty good sweet spot in that business where we are seeing an awful lot of projects come forward to us there.

Okay. And on the transmission side?

Transmission, not as much. A lot of that is more of the environmental side. I would say probably the biggest growth we've had is more in the gas turbine generation side.

Okay. And then as far as the mining business goes, still difficult? Any signs of life there?

No, we haven't seen any significant changes. The good thing is we are also in the front end of that, so we do a lot of small feasibility studies and analysis as well, so the slowdown in the capital program of a lot of our clients sometimes means they move money towards the exploration side, which assists us well.

They are not nearly as large projects, certainly. But we don't see any immediate change in that market. There really needs to be some changes in the commodity prices to get the mining companies excited again.

Okay. And lastly, how far away are you -- I know you're going to tell me you're always looking -- but from moving more international, and by that I mean outside of Canada and the US?

Yes, you're right, we are always looking. But no, it's still a few years away. I think the messaging we've always had is that we're still very focused in the United States. We feel that we have a huge investment here, but that investment still isn't mature enough for us to feel that it's in a long-term basis sustainable. So we would like to continue to invest here in the United States over the next couple years -- two to three years.

Beyond that, that's probably when you will see us start looking at maybe potentially some actual acquisitions in the international space. It's not to say that we're not going to acquire companies that may have a presence in international market, but our focus would still be US firms that have a good presence here in the United States. So we're still a couple years out before we are -- would be called a significant looker at the international space.

Okay. Thanks again.

(Operator Instructions) Mona Nazir, Laurentian Bank Securities.

Hi. I don't know if you disclosed this, but I'm just wondering what your percent -- the percentage of revenues that stem from Western Canada?

Yes, no, Mona, we don't provide that breakdown of revenues. We only provide it on the broader Canada, US, and international business units.

Okay, perfect. Thanks.

There are no further questions at this time. You may proceed.

Okay, thanks, Duane. If there are no more further questions, I would like to close our call by saying that we are confident in our ability to achieve our growth and deliver consistent value to our shareholders.

We look forward to speaking to you again in the near future. Thanks very much.

Thank you. Ladies and gentlemen, this concludes the conference call for today. We thank you for your participation. You may now disconnect your lines and have yourselves a great day.