Team Inc (TISI) 2010 Q3 法說會逐字稿

Good morning. Good morning and welcome to the Team third quarter earnings call.

(Operator Instructions).

I will now turn the call over to Mr. Phil Hawk, CEO. Mr. Hawk, you may begin.

Thank you, Hilda, and good morning, and welcome to the Team Inc. web conference call to discuss recent Company performance. Again, my name is Phil Hawk. I'm the Chairman and CEO of Team. Joining me again this morning is Mr. Ted Owen, the Company's Senior Vice President and Chief Financial Officer. The purpose of today's conference call is to discuss our recently released financial results for the Company's third fiscal quarter ending February 28, 2010. As with past calls, our primary objective is to provide our shareholders and potential shareholders with an enhanced understanding of our Company's performance and prospects. This discussion is intended to supplement our quarterly earnings releases, our 8-K, 10-Q, and 10-K filings to the SEC, as well as our annual report. Ted will begin with a review of the financial results, and I will then follow Ted with a few additional remarks and observations about our performance and prospects. With that introduction, Ted, let me turn it over to you.

Thank you, Phil. First, I want to remind everyone listening today, that any forward-looking information we discuss is being provided in accordance with the provisions of the Private Securities Litigation Reform Act of 1995. We've made reasonable efforts to ensure that the information, assumptions and beliefs, upon which this forward-looking information is based, are current, reasonable, and complete. However, a variety of factors could cause actual results to differ materially from those anticipated in any forward-looking information. A description of those factors is set forth in the last paragraph of our press release, and in the Company's SEC filings. Accordingly, there can be no assurance that the forward-looking information discussed today will occur, or that our objectives will be achieved. We assume no obligation to publicly update or revise any forward-looking statements made today, or any other forward-looking statements made by the Company, whether as a result of new information, future events, or otherwise.

Now, to the financial results. Results for Q3 and the year-to-date period are impacted by two separate non-routine charges which have been previously disclosed. First, is the impact of costs associated with the FCPA investigation, and second, is the charge associated with the devaluation of Venezuelan currency. I'll talk more about each of these charges in just a moment, but my following comments about operating results will be on an adjusted basis, excluding the impact of those non-routine costs. We have included a table in our press release that reconciles reported earnings to adjusted earnings for the quarter and for the year-to-date period. Revenues for the third quarter were $104 million, which is virtually identical to last year's quarter. Adjusted net income was $1.2 million for the current quarter, versus $2.2 million in last year's third quarter. Adjusted earnings per diluted share were $0.06 versus $0.11 in last year's third quarter.

Keep in mind, though, that in last year's quarter, we benefited from a reduced tax provision as a result of the recognition of tax credits totaling $600,000. That caused our tax provision in the prior quarter to be about 6% of pretax income rather than the more typical 39% to 40%. Those credits amounted to $0.03 per share in last year's quarter. The story of the current quarter is really about the continued pressures on margins caused by weak end market -- caused by a weak end market environment. While revenues were flat, we lost about a point of margin due to continued pricing pressures, which was partially offset by a reduction in SG&A costs. On a year-to-date basis, revenues were $328 million and adjusted earnings were $9.5 million, or $0.49 a share.

Now let me discuss the two non-routine charges that affect our -- the results for the quarter and the year-to-date period. First, with respect to the FCPA matter, as previously reported, our audit committee in connection with the SEC and the Department of Justice has been conducting an independent investigation into improper payments made by employees of our Trinidad TMS subsidiary, which may constitute violations of the Foreign Corrupt Practices Act. The independent investigator has delivered the investigation report to the audit committee in March of this year, just a couple of weeks ago. And we expect the investigation results to be communicated to SEC and to the DOJ in our fourth quarter. The investigation concluded that improper payments of a limited size were made to employees of foreign government-owned enterprises in Trinidad, but determined that the improper payments were not made or authorized by employees, outside of that one TMS Trinidad branch. The investigation of our other foreign operations resulted in no significant findings, and management has remediated, or is undertaking remedial action on all matters identified in the investigation.

The FCPA and related statutes provide for potential monetary penalties, disgorgement and interest, as well as criminal and civil sanctions in connection with FCPA violations. It is possible that monetary penalties will be assessed, or a settlement resulting in a monetary payment will be reached with the federal government in connection with this matter. However, because the amount if any, of any monetary penalty cannot reasonably be estimated at this time, we have not recorded any provision for monetary penalties. The total professional cost associated with the investigation are projected to be approximately $3 million, the bulk of which have been incurred through our third quarter.

Now, with respect to the Venezuelan currency devaluation. We operate a small service location in Punto Fijo,Venezuela, whose annual revenues have historically been less than 1% of Team's consolidated revenues, using the previously fixed exchange rate of 2.15 Bolivars per US dollar. Effective as of the beginning of this current quarter in Q3, in December of 2009, we began to account for Venezuela as a highly inflationary economy pursuant to some requirements of the SEC. Accordingly, any currency fluctuations between the Bolivar and the US dollar after December of 2009, are now recording in the Company's statement of operations. In January of 2010, the Venezuelan government announced a significant devaluation of the Bolivar. And as a result, we have recorded $2.1 million in foreign currency translation losses in the third quarter, which is reflected as an element of other expense below the operating income line. And again, both of these non-routine charges have been adjusted in the reconciliation table that's included in our press release.

Now with respect to our balance sheet and cash flows, capital expenditures was $1.6 million in the quarter, and $5.5 million year-to-date. That's down from $13.3 million in the first three quarters of last year. G&A was $3.2 million in the quarter, and $9.2 million year-to-date. Noncash compensation cost was $1.2 million in the quarter and $3.9 million year-to-date. So total adjusted EBITDA was $7.1 million in the quarter, $30.9 million year-to-date, and trailing 12 months adjusted EBITDA is $45.1 million. Please note that adjusted EBITDA reflects the add-back of both noncash compensation expense and nonroutine charges. We continue to be very pleased with our financial position during this difficult economic environment. Our net debt that, is total debt less cash was $44 million at the end of the quarter, a reduction of $23 million since our May 31st year-end. In fact, in the 15 months since the recession began for us, that is at the end of Q2 of fiscal 2009, we have reduced our debt by more than half. So with that, Phil, I'll turn it back to you.

Thanks, Ted, excuse me. Now I would like to add several observations and comments to Ted's remarks. I will begin with a look at third quarter activity and performance, and then follow up with a look ahead to the remainder of this year, as well as the next fiscal year 2011. We continue to work through a difficult market environment that now appears likely to recover later, and more slowly than we originally expected. In my view, the primary driver of this slower than expected recovery is the continuing poor economic environment for most of the customer segments we serve. While maintenance activity must and is taking place, many customers are maintaining a very tight minimalist approach, where all or nearly all deferrable activities are being pushed back. Current overall demand for our services continues to be below, both historical levels and required steady state levels.

As Ted indicated, total revenues for the quarter were about even with the weak revenues for the comparable prior year quarter. As reported, our TCM division volumes were actually up about 7%, reflecting a modest increase in domestic project work, as well as a significant Canadian heat treating project. TMS division volumes were down approximately 8%, reflecting continued weakness and turnaround work. I should point out that all is not doom and gloom. We did see some improvement in prior year comparisons, as we progressed through the quarter, just not at the rate that we had expected. Also, we had some nice project work and good overall performance in several of our regions.

Five of our 16 regions actually exceeded their plan and prior year performance for the quarter. As Ted indicated, our profit performance in this seasonally difficult third quarter reflected a number of challenges. We estimate that about 1 percentage point of the gross margin decline reflects lower job margins due to lower pricing. The remainder of the difference is a combination of mix effects, related to the lower relative TMS revenues. On the plus side, our management of field labor expenses continues to be solid. Field labor utilization, a key measure of labor productivity, continues to run ahead of last year.

Now let me shift the discussion to our outlook. As you may be aware, about two weeks ago, we revised our adjusted earnings guidance for the current fiscal year ending May 31st, down to $0.80 to $0.90 per share. The primary driver of this revision is a reduced revenue outlook for the second half of the fiscal year, that is now approximately equal to the revenues in the first half. The 10% uptick in second half volumes that we had anticipated as the basis of our previous earnings guidance, is developing more slowly than we expected. Our view on ultimate market recovery remains unchanged. We continue to believe that we will not see significant net reductions in the number of plants operating in North America. And we see no indication that there are any new approaches to maintenance that will significantly change historical maintenance practices. Therefore, we believe the market will recover to historical steady state maintenance demand levels.

However, based on our recent experience, our posture now is that recovery will take place a little later and more gradually than we originally expected. Despite some unfavorable performance comparisons in this quarter, we really don't see a significant shift in our business model or profit potential. We continue to expect overall margin performance in the second half of the fiscal year to be similar to that achieved in the first half. This more conservative revenue outlook on the timing and rate of the market's recovery implies that we will need to stay appropriately conservative in the management of our business. We are already doing that in many respects. We have already reduced SG&A about 10% from prior year levels, and have maintained a strong focus on field labor utilization. And we continue to take opportunities to fine tune our business and performance. This conservative business management posture is not forced upon us by financial weakness.

As Ted indicated, our balance sheet and financial flexibility are as strong as ever. Rather, it reflects our belief that Team can maintain attractive profit margins and profit performance in any business environment. Over the past decade, our business has grown from $50 million in revenue to nearly $500 million, and our EBIT profit margins exceeded 8% during nearly that entire period. We see no reason why we cannot perform at that margin level with the current business volumes, and we are committed to doing so. Our conservative management posture also does not mean that we have lowered our long-term expectations for our business. Over the past decade, Team has been a high growth Company in a mature industry. Despite our historical growth, our market penetration is still less than 20%. The long-term market fundamentals remain as attractive as ever. Our growth opportunities remain very exciting, both in North America and in Europe.

Now, let me offer some initial perspective for the next fiscal year ending May 31, 2011. As mentioned earlier, we think it is prudent to take a conservative posture toward the rate of market recovery. We will not expand our resources ahead of increased activity levels. Yet we also see many reasons to be cautiously optimistic about our revenue growth opportunities in the coming year. As time passes, we believe the likelihood of overall industry maintenance spending returning to higher steady state levels increases. Also, we have seen early indications that several major Canadian oil sands projects, that were deferred one year ago, are likely to be restarted. We are aware of early planning currently taking place on several previously deferred projects. Our work related to these projects could begin as early as this fall.

Finally, we continue to pursue a number of business development initiatives to expand our business and market share, regardless of market conditions. Specific initiatives currently underway include the launch of a full range of insert valve fittings, which enables the installation of a new valve with the proprietary fitting using hot tap techniques, the initial sale and installation of a newly designed pig launching system for pipelines, that is significantly less expensive than traditional approaches, the introduction of enhanced wireless field heat treating and induction heating systems with industry-leading capabilities, the continued expansion of our advanced inspection services, and the implementation of new account management information tools and sales training across the Company.

While we are maintaining a conservative posture, we are still playing offense. I don't have specific revenue and earnings guidance for fiscal year 2011 at this point in time. For the reasons outlined earlier, we do expect revenue growth during the year. And we expect significant operating leverage from any revenue growth that is achieved, due to the fact that we are still operating well below current capacity levels. Before significant new investment in infrastructure and support costs is required, total business activity levels will need to get back to the peak levels achieved in 2008.

Let me end with a few final perspectives and comments. In the short run, we are continuing to manage our way through a difficult market environment. I am pleased how our organization has adapted and responded to the market challenges. Yet we realize we still have opportunities to fine tune our business, and are continuing to address them. Longer term, we continue to have outstanding growth opportunities. We are very proud of our historical growth record, 40 consecutive quarters of revenue growth, and a 10 year compound annual growth rate of more than 20%.

The drivers of this performance are clear and straightforward to me, build and maintain a great organization, and stay focused on the basics of the business. With regard to the former, we are blessed to have an outstanding group of colleagues across our organization, who we feel are the most skilled and best trained, and who have the best support in our industry. As always, we also intend to maintain a diligent focus on the basics of our business, providing great service with every service opportunity, continuing to capitalize on our service network advantages, managing the profitability of our business job by job, and balancing our resources with current activity levels. In our business, outstanding execution remains the key to success regardless of the market environment. That concludes my kind of initial remarks. Let's now open it up for questions. Hilda, can I turn it back to you?

Thank you.

(Operator Instructions).

And our first question comes from Matt Duncan from Stephens.

Good morning, guys.

Good morning, Matt.

The first question I've got is with regard to your gross margins. I'm just curious, is pricing getting any worse over the past 6 to 12 months, or has it been sort of consistent over that time frame of 100 basis points below the year-ago period?

Matt, I think it's kind of hanging in there about the same. It varies by customer and job situation and circumstance, and therefore you have mix effect affecting kind of the results on that. If I look at a kind of aggregate direct profit margin, which is my best metric for that, our direct profit margins are kind of maintaining approximately a 100-basis point negative differential to the prior period, or pre kind of pre-recession, if you will.

Okay, and along that line, Phil, are you guys seeing more pricing pressure in some service lines than you are in others?

I'm not sure that it's service line specific. I think we have -- there's different levels of intensity and different kind of market customer circumstances. And that kind of -- I think that's a little more prevalent of just kind of posture of different customers, and in some of the different segments.

Okay, and the last thing on the gross margin, and I know this may be comparing apples and oranges a bit. But if I look at your gross margin in August, it was 29.2%, and it was 27.4% in February with revenues about $3 million higher than they were in August. Some of that may be explained by mix, but if pricing's not getting any worse, what else explains that 180-basis point gap in gross margin?

I think the two main things are -- and then we're going to -- then I'm going to ask you to move to the back of the line after the response here, Matt, just so we give everybody a chance here. I think the two big items is, it's the holiday season, so you have different -- with basically the two-week holiday period changes your indirect cost positions, kind of really over that holiday. Secondly, the, say the restart costs of FUTA and SUTA -- which by the way, because of the unemployment rates in the US are dramatically higher rates of FUTA -- of state and federal unemployment taxes, kind of restart the beginning of the calendar year. So we have that effect of that also, affects gross margin in our indirect costs. But we -- if you have more details, you can kind of ask Ted offline on that. Let's -- if you don't mind, we'll move to the next questioner, just to give everybody a chance.

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

Thanks. Good morning, everyone.

Good morning, Rich.

So along the same lines of the last question, your TCM margins over the last couple of years have been about flat. They have always been about 30% gross. And all of the gross margin reduction has come from the TMS. So if the pricing pressure you face has been about equal for all the service lines, what would explain why TMS has come down, why TCM has been flat?

Well, I think the impact of some of the turnaround activities has been more heavily weighted toward TMS activities, because they're -- they have again, a relatively higher mix of turnaround activities. So that the -- I mean if you look, you can see it in the volumes. And the volume issue, and frankly based on kind of a support infrastructure that's a little bit higher, because of -- so you have a little bit of a job margin, kind of support margins, a little bit higher support activities related to engineering, manufacturing, technical support activities. So the impact of the volume declines are are more telling, and more I guess impactful to the gross margin level. But I will say, I think it is a fair statement that, and I think it reflects some of that kind of volume declines. That if you look at the -- I don't know that I say that it's just because they are picking on service lines and TMS, but I think the job margins have been more affected in TMS than TCM. Although I think that's just the sum of -- it's the consequence of other activities, not that there's a trend that way.

Okay, and then secondly, have you seen any evidence since the recession started, of a meaningful number of operating plants being shut down? Or consolidated to the point where it would dent your potential market size when the economy gets back to normal?

The short answer is no. There have been some closures, that are in a couple high profile midsize refinery closures on the East Coast. But when you look at the effect, impact of all those on our business historically, they really negligible. And we just don't see a significant -- there will be some closures, but they just won't be meaningful in total.

Our next question comes from Max Barrett from Tudor Pickering.

Hey, good morning, guys.

Good morning, Max.

First, just on customer behavior, have you started to get any indications from customers during the current turnaround season, that maybe some of those discretionary items might get done in the fall?

I, I think it's hard for me to make an estimate of when they might get done or activity. I think, just candidly, my observation is -- and this may be a few weeks old -- that most of our customer segments continue to see a margin environment right today, current margin environment that is as bad as it has been. And the evidence I would point to, is just the public announcement of Chevron a few weeks ago following at the beginning of this kind of downturn a year ago, they announced and implemented a 10% personnel reduction in their downstream operations, which would be a very, very significant cut. They announced a few weeks ago they are going to do it again and take another 10% out of their operation, kind of in view of just the current kind of margin or profit environment, their business environment they are looking at. Others are not quite as aggressive as Chevron has been.

But I think that kind of tells you the tone they have with regard to cost management, and their need for cost management in this environment. So I think what we see is in the turnarounds, is they are happening, but the whole -- the balance of kind of -- if you think about the things that are really important in a turnaround, one is schedule, get back up and running as quickly as you can. Secondly, be able to run as hard as you can, as long as you can once, by taking care of all the critical items and really anything else that could be in the way kind of a few months down the road. And three, maintaining budgets and kind of doing it efficiently. That's probably historically the rate, the order of priority, but more recently, I think they have been flipped. Or certainly the maintained budgets or minimized budgets at the -- has become the top priority in those, in those criteria. And it's reflected just in how discretionary items or discoverables are handled in these turnarounds.

Okay, and then on Canada, it seems to be emerging as sort of a bright spot in the near term. Could you give us a little bit more color as far as the scope of work for 2011? And sort of how much of that is firm, and how much is potential?

I think it's all potential at this point. What we are seeing, again, one year ago, I don't have the precise estimates, but I believe crude oil was about $40 a barrel a year ago. At that time, all existing kind of capital projects in the Canadian oil sands, the tar sands, were basically the existing ones were being wrapped up. All new ones, or where the ground hadn't been broken or just preliminary planning had been done, were being kind of shut down or deferred. And that was the environment we had and we had very little project work really the second half of the year last year, and that was a significant kind of opportunity for us prior to that.

What we are seeing now, is there is probably four to five kind of major expansion projects and new capacity projects in the oil sands areas that we know -- have -- are in active planning and we are kind of providing kind of information to those projects. And we would expect to participate in many of them as they go forward. We don't think they are doing it for practice. So I think that activity level to us suggestion they are ramping up, and certainly the economics of the have improved markedly with today's crude oil price environment. So we anticipate -- we think it's likely, or probable that some or many of those projects will start and that will participate. But precisely what services, how much, what quarter, I think that remains to be seen.

Thank you. Our next question comes from Martin Malloy from Johnson Rice.

Good morning.

Good morning, Marty.

When you think about returning to a steady state in terms of maintenance spending versus 2009, or I'm sorry, fiscal year 2010 revenues, would that result in kind of an 8% to 10% increase in revenues?

Yes, I would say that. Maybe I would have said 10 to 15 would be kind of the range, but, yes, something in that order of magnitude. It's hard to estimate precisely, yes.

Okay, and then could you talk about incrementals that you might see, as customer spending would return to a steady state without adding resources, as you discussed in your prepared comments?

You mean in terms of how much we could handle?

Well, the incremental margins that you might achieve.

I see. Operating leverage?

Yes.

I think we -- I think I spoke at the last call and incremental operating margins in the 30% range, as we stay within our current capacity band. And I'm still comfortable with that estimate.

Our next question comes from Arnie Ursaner from CJS Securities.

Good morning, Arnie.

Hi, good morning. How are you? First question relates to, you mentioned utilization was above last year. Can you give us your tech count, and perhaps give us some feel for what the utilization was in the quarter?

Hold on, just one second here. There's the utilization. I think that -- our total field count right there, is 2900.

Okay. That's not just not tech -- that's total field and that's down --

200.

That's down 200 from what --

From the second quarter.

That's down 200 from the second quarter. Some of that's the seasonality of the weaker third quarter. And utilization rate's the next page there, Ted. Sorry. Right here. I'm going to give you utilization rate, which is kind of billed hours to total paid hours. Our TMS division running about 71%, and in TCM, which is a little more labor intensive business, running about 81%. That would be, that would be hours charged to customers as a percentage of total field hours, including all support groups, field-based support groups.

And for Q3, which is normally a very quiet period, how would that compare?

That is Q3.

But Q3 is normally a seasonally quiet period.

Right. Is it lower than the -- hold on here. Yes, it's, let's see, that's 4 points lower than second quarter for TMS. It's about 4 points lower in both divisions.

Okay.

But that's just because you're going to have higher -- you obviously don't -- we don't increase our support activity with seasonality.

Sure. One of your key messages, Phil, is that the recovery is later and more slow. Can you speak to how the Q4 turnaround season bookings are going, meaning typically at this point, if anyone were planning a major turnaround, they would probably have given you a strong indication, you would be booking targeted numbers of people for certain amounts of time. How much of Q4 turnaround work is sort of in-hand at the moment?

Well, I think we're going to have an active fourth quarter. We -- a year ago we saw a significant number of turnarounds that were planned were canceled or deferred, canceled from that time period. I'm aware of only one that was canceled this year, a significant one. That was due to a mechanical issue, not related to the environment. So we're not seeing cancellations. What I think -- what we're seeing -- again, we're early in the quarter, the period. So we'll see how it bears out on average. But what we've seen is, back to my kind of comment in, to one of the earlier callers, that just the prioritization, the priority of criteria, and kind of how they are managing turnarounds tends to be much more focused on kind of minimizing required cost expenditure,rather than kind of maximizing plant improvement, which I think historically has been on the balance, it's let's fix it.

If we have doubts or concerns about it, let's fix it now so we can run hard, hard and long, would be kind of the mindset. And now it's -- if we don't have to fix it, let's wait. And just do what we have to do, to be prudent in the short run. So that's, that little tone and minimalzation is what we're seeing. And that affects the volumes and work levels related to these turnarounds. It's not that I've added up all the numbers, and have a precise estimate. It's just that we are concerned, based on the tone we seen to date, that we're not going to see the volumes that we originally thought with these turnarounds.

Our next question comes from Tahira Afzal from KeyBanc.

Good morning, gentlemen.

Good morning, Tahira.

I've got two questions. Number one, if you look at the shortfall in terms of expectations on the turnaround side, are there any particular clients, group of clients where you feel the shortfall has been more? So, for example, have the Exxon's and BP's, perhaps when they lowered their work and scope last year, maybe they feel that level is something they can maintain, while Valero might have got more because of financial distress, and hence having to spend more at this point? Or do you think it's a fairly even bucket?

Well, I guess I'm going to answer the question, it's a difficult question to answer because the actual turnaround activity is also highly dependent on the timing of just cycles, repair cycles for individual facilities. So kind of taking your scenario, are some companies kind of maintaining versus others cutting back to a more, greater or lesser degree? I suspect that is true. But it's hard to see that .Because even, even companies that may be maintaining are being more, similar to where they have been historically, the timing of major turnarounds just due to when the last ones were performed. Recall, we don't -- there's not major activities in every facility or every unit, every year. So that's kind of, kind of reflected in the number. So if I look at kind of our activity levels by customer, and I'm not going to go into specific customers. We don't share that level of detail. There's high variability in the -- we're up with many customers, and we're down with many customers. But to me that's not a function so much of their, their I guess cost management posture, as it is reflects more significantly just the particular timing of the repair cycles for their respective facilities.

Okay, thank you. And, Phil, the second question is -- you've pointed out you've got a good balance sheet, a very strong balance sheet. Even though you are seeing near-term pressures, obviously with the petro chemical side, and the chemical and industrial side in the US showing fairly material recovery. And your business being more maintenance, i.e., obviously your business is going to start to come back as we progress to 2010. As you look towards the strategic initiatives, and you see some of your smaller peers perhaps being more distressed on the public and private side, when would you feel comfortable stepping in that your internal ship is in order and perhaps you can take a more aggressive stance?

That's a fair question. Would we consider a -- to rephrase -- to paraphrase a little bit, when would we consider -- I think you're saying kind of acquisitions is a supplement or component of our kind of business approach and strategy? And I think my answer to that is, one, we haven't not considered it over the last 12 months because of the environment. We continue to have the capacity to kind of add businesses that, that, and add kind of -- make purchases or acquisitions that support our growth and business development. And we continue to feel that way. Again, I think buying, buying small competitors in areas we're already operating, as I think as we've talked before, doesn't tend to have a lot of appeal to us. Because we don't know what we're really adding to our business by doing that.

But kind of competitors or companies that can accelerate our growth, or get us access and capabilities in areas where we're not present today, or not present in a significant way, those continue to be interesting opportunities, and ones that we continue to identify and look at. The problem with any acquisition is they are -- it requires consenting adults. They are hard to find, and difficult to predict the timing of. So we don't estimate those or forecast those happening. But we continue to be receptive to opportunities and view that as a -- a way to supplement or organic development of our business. Having said all of that, the thing I'm excited about our business and believe is so healthy is that, we don't need acquisitions to be a successful company. They would be accelerators or augmentation to what we can really control in our own domain here.

Thank you.

(Operator Instructions).

We have a follow-up question from Matt Duncan. Please go ahead.

Hey, guys. I want to look at Europe for a second. You guys bought LRS a little over two years ago. I know your long-term plan is to try to build the business over there, to be as big as it is here. First of all, I'm curious how the European business has performed over the last year relative to the business here in North America? And then secondly, can you talk a little bit about the plan for growing that business in Europe?

Yes, to your first question, how has it performed? It's actually done very well. I would contend that the European environment has been at least as bad as that in North America from a market environment, yet our revenues are up in Europe, not great amount. I think it's about 12% year-to-date, something like that. Our margins are flat to improving there, so we're quite pleased with the business. We are looking at -- and I didn't speak to it, because again, when we have specific ideas, that we're implementing those, we'll share those. But we're pursuing a number of ideas that would both increase the service line breadth, or the breadth of services we're offering in our current kind of market areas of focus, the Netherlands and Belgium, as well as expanding our geographic footprint in Europe. So it's, it's kind of high on our list and getting a lot of attention right now.

All right. Thanks, Phil.

Yes.

At this moment, I'm not showing further questions in queue.

Well, then, with that, let me just wrap up the -- our -- our conference call then. I want to just wrap up by thanking everyone for your participation in the call, and continuing interest in Team. And we look forward to our next conference call with you. In the meantime, everyone, have a good day.

Thank you. And ladies and gentlemen, this concludes your conference call. We thank you for participating. You may now disconnect.