Team Inc (TISI) 2011 Q2 法說會逐字稿

Welcome to the Team IR call. My name is Sandra, and I will be your operator for today's call. At this time, all participants are in a listen only mode. Later we will conduct a question and answer session. Please note that this conference is being recorded. And we'll now turn the call over to Mr. Phil Hawk. Mr. Hawk, you may begin.

Thank you, Sandra, and good morning, and happy new year. It is my pleasure to welcome you to the Team web conference call. Again, my name is Phil Hawk. I'm the Chairman and Chief Executive Officer of Team. Joining me again today is Mr. Ted Owen, the Company's Executive 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 second fiscal quarter ending November 30, 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, 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. I will then follow Ted with a few remarks and observations about our performance and prospects. Following our remarks, we will take questions from our listeners. With that, Ted, let me turn it over to you.

Thank you, Phil. First, I want to remind everyone as usual that any forward-looking information we discuss today is being provided in accordance with the provisions of the Private Securities Litigation Reform Act of 1995. We have made reasonable efforts to insure 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, for a discussion of the financial results. Revenues in the second quarter were $133.1 million, which is up 8% compared to last year's second quarter. Net income available to common stockholders was $8.1 million in the current quarter versus $5.8 million in last year's second quarter. Excluding non-routine charges to SG&A of $600,000 in the current quarter and $1.2 million in the prior year quarter, adjusted net income was $8.4 million and $6.6 million respectively, or $0.43 per share versus $0.34 per share in the prior year quarter, an improvement of 26%.

Clearly, the highlight of the quarter was the completion of the acquisition of 95% of Quest Integrity Group on November 1 for a total consideration of $44 million, including $39.1 million of cash, $2.3 million of debt assumed and $2.6 million of restricted common stock. In 2015, we expect to acquire the remaining 5% of Quest non-controlling interest which has a current valuation of $4.9 million.

Let me comment for a moment about the impact of Quest on the current quarter's financial statements. First, remember that Quest results were only included for one month in the quarter or in other words, from the date of acquisition or November 1, so total revenues contributed by Quest were $1.6 million just for the month of November. Additionally, we incurred $600,000 of transaction costs associated with the acquisition which were expensed in the quarter pursuant to the new accounting rules for acquisitions.

Additionally, you will notice a new line item in our income statement pertaining to the Quest acquisition. On the income statement, you'll see a line item for the separate Quest net income or loss that's attributable to the 5% non-controlling interest. This is added or subtracted from net income to result in net income available to common shareholders. For the current quarter, that amounted to a $25,000 loss due to the inclusion of only one month of operations and due to the expensing of the transaction cost associated with the transaction -- for the acquisition. That line item will continue to appear in our financial statements until that 5% non-controlling interest is acquired in 2015.

Now, just a few more cash flow related items. Capital expenditures for the quarter were $2.8 million, depreciation and amortization was $3.3 million and non-cash compensation expense was $1.5 million. Adjusted EBITDA for the quarter, that is, excluding the non-recurring items, was $19.3 million and adjusted EBITDA for the trailing 12 months was $52.6 million.

At November 30, our total debt was $77.7 million. Our cash balances were $14.3 million, and so net debt was $63.4 million. Even with the use of approximately $41 million of cash in the Quest Integrity acquisition, our net debt to adjusted EBITDA was still only about 1.2 to 1. And at the end of the quarter, the availability under our credit agreements was in excess of $66 million. So with that, Phil, I'll turn it back to you.

Thanks, Ted. Now, I would like to provide some additional perspectives on our recent performance and outlook. In my remarks, I will be mentioning several comparisons of operating results for this fiscal year and the prior year. To present apples-to-apples comparison, my comments will be based on adjusted financial results that exclude non-routine charges.

Overall, we are pleased with our performance, both in the second quarter and year-to-date. In many respects, the second quarter results reflect a continuation of several positive trends from the first quarter. For the third consecutive quarterly period, Team posted organic revenue growth. Organic growth in the recently completed second quarter was about 7%, slightly higher than the 4% rate of organic growth achieved in the first quarter.

Similar to the first quarter, Team's growth occurred primarily in US markets where the overall organic growth rate was 12% for the quarter. Within the US, while we achieved modest growth in on stream services, the big driver of growth was expanded turnaround activity versus prior year levels. We experienced the most robust turnaround season since the fall of 2008.

While the total number of turnaround projects wasn't significantly larger than in the most recent turnaround seasons, we did experience many situations this fall for the volume of work provided by Team expanded significantly from the original turnaround project scope. Traditionally, this circumstance is quite normal. Some types of equipment wear, or damage cannot be determined until physically inspected at the beginning of a turnaround. Therefore, these additional repair items are added after the turnaround has begun.

In contrast, for the previous three turnaround seasons, expansion of turnaround scope was the exception and in some situations, we even experienced some shrinkage of scope as work initially planned for particular turnaround was deferred after the turnaround began. The key question for our customers during this downturn has been, can we run safely until the next planned turnaround? If yes, let's defer the repair until that time. I think the greater prevalence of expanded scope turnarounds in this most recent period reflects both the reduced ability to defer the specific repairs any longer as well as a shift back toward a somewhat longer time horizon and maintenance planning.

Our business growth, combined with good cost management across our Company has generated attractive profit growth during both the current quarter and the year-to-date. Overall operating profit margins increased in both of these periods. For the second quarter, EBIT margins were 10.9%, up approximately 1.5 percentage points from the prior year period. Year-to-date, EBIT margins were 8.9%, up approximately two points. About one percentage point of this improvement in both periods occurred at the gross margin level.

For the second quarter, gross margin improved to 32.9%. Year-to-date, gross margin improved to 31.7%. All of this gross margin improvement was the result of lower indirect costs due to previous cost reduction actions, improved labor utilization and volume leverage on the fixed costs. The remainder of the operating margin improvement came from lower SG&A expenses as a percentage of revenue. Total SG&A expenses net of non-routine charges and the addition of Quest were approximately flat in the second quarter and year-to-date versus the prior year periods. Due to the business growth, SG&A expenses as a percentage of revenue declined about one half percentage point to 22.2% in the quarter.

The improving revenue growth, combined with steady margins and our cost good management resulted in attractive operating leverage for Team. In the second quarter, incremental operating profit was $2.9 million, and incremental revenue was about $9.9 million, yielding incremental operating leverage of about 30%. We are pleased with these results and are expecting continued attractive operating leverage as we continue to grow. My expectation is that Team will achieve operating leverage in the 30% range for our organic revenue growth over the next few quarters while we grow back to past peak activity levels. The incremental leverage related to the acquired Quest business is not expected to be material this year, consistent with our modest near-term earnings expectations for this new business.

Now, let me just say another word or two about our recent acquisitions of Quest Integrity Group. We remain delighted with the new acquisition and are off to a good start. We continue to be extremely excited about our longer term growth potential both within Quest as well as with its potential impact on Team's other field service businesses. It will take a little time for us to build the momentum and capitalize on specific opportunities.

Summarizing our outlook for the remainder of the year, we expect a continuation of the business growth and performance achieved in the first half of the year. Reflecting the strong first half results and these positive expectations for the remainder of the year, we have revised upward our forecast for the full fiscal year 2011 that ends May 31 in that year, 2011. We are now projecting that full year revenue will be $485 million to $510 million. This revenue estimate reflects our expectations that the organic growth rates for second half revenues for Team's legacy businesses will be similar to the first half levels plus the addition of Quest Integrity Group revenues. We are now projecting that full year earnings will be between $1.10 and $1.25 per fully diluted share, up $0.10 per share from our earlier guidance.

Let me wrap up my remarks with a couple of final comments before we take your questions. We are pleased with our performance and confident about our prospects. The second quarter represents the third consecutive quarter of organic revenue growth and attractive profit growth for Team. This is a good start, but only a start. We have an attractive business position from which we can be successful in both the near term and longer term. I see continued attractive growth opportunities for Team in virtually all of our service lines and in all geographic regions, both within North America and beyond.

Yet, we also understand that we have to earn it. The key to being successful in our business is our continued focus on the basics, providing great service with every service opportunity, continuing to capitalize on our service network advantages, continuing aggressive business development initiatives and focus and conducting our business all of the time in all activities in a manner that fosters pride for all Team colleagues and respect from our customers. That concludes my remarks. Let's now open it up for questions. Sandra?

Thank you. We will now begin the question and answer session. (Operator Instructions) First question is from Arnie Ursaner from CJS Securities. Please go ahead.

Hi, good morning, and congratulations on the good quarter. One mechanical question I have. Can you give us your headcount number, please, for trained technicians?

Well, I have a total Company headcount number, and the difference would be -- our total headcount number is just slightly under 3,200. We're increased about 150, 160 since the end of the first quarter, and those would all be virtually all technicians.

Okay, and focusing on Quest a little bit, you gave us the one month contribution from Quest. How should we think about the seasonality of their business and the full year contribution you expect from Quest?

Well, as we said, for this first kind of stub year for them, if you will, for the first kind of half year, our planning expectation is zero contribution. It will be just basically a break even business on an EBIT basis when you take in consideration all of the amortization charges that -- again, we haven't finalized valuations and all of that, but once we get all of those done, that's when we expect kind of modest to no contribution in the very short run.

And next year, how should we think about it?

Well, I think the kind of EBITDA margins are, as we pointed out, are attractive, and we expect it to be a big contributor. What I'd like to suggest is that as we look forward to next year, just kind of look at our overall revenue growth rates and leverage on that would be kind of a good way to think about it. But we'll be providing more specific guidance to that as we get to know them better and understand where the leverage is going to be.

My final question, you had domestic growth of 12%, and yet your overall organic growth was 7%. What's holding back your growth rate, and what factors do you attribute to causing it?

Okay, so we were down $2 million, or about 4% in the non-US markets. Half of that was in Canada and half in the rest of the world. In both instances, it relates to the absence of big projects that were there in the prior year period, so we view it as just timing and the lumpiness of our business. I will tell you, my expectations for kind of long term organic growth are at least as high in non-US markets as they are in US markets including Canada.

I'll jump back in queue. Thank you very much.

Thank you. The next question is from Matt Duncan from Stephens Inc. Please go ahead.

Good morning. This is Jack Atkins on the call for Matt. Congrats on a very good quarter here.

Good morning, Jack.

Just real quick, Ted, could you give us the updated sales guidance again? Is it $480 million to $510 million, is that what you said?

$485 million to $510 million.

$485 million, okay, that's great, that's helpful. And then moving on quickly here to the gross margin performance, which I thought was pretty strong in the quarter. I know you talked about solid execution on your indirect cost expenses and making sure your technician utilization rates were high in the quarter. Could you also comment on the pricing environment? Have you seen pricing for your services begin to stabilize, or is it -- does it continue to be a challenging pricing environment for you?

I think the latter is the operative kind of view. It's continuing to be a challenging environment. None of our improvement in margins was a reflection of, I'm going to say job margin improvement or related to pricing. So, what it really -- all of the improvements I mentioned in that margin was as a result of, I'm going to say productivity or efficiency.

Okay, and then looking out to the spring refinery turnaround season, could you maybe give us your outlook for that season, and do you expect a strong period for turnaround activity this spring as well?

Yes.

Okay. That's all I've got. Thanks.

Thanks, Jack.

Thank you. The next question is from Rich Wesolowski from Sidoti & Company. Please go ahead.

Hi, thanks, good morning.

Good morning, Rich.

On the piggyback on the last question, are you still being forced to reduce service prices on newly signed agreements?

I'm not aware of any reductions recently, but I think of the -- it's a hold the line environment that we're in.

Okay, would you mind going into more detail regarding the combination of Quest's engineering assessment with your own NDT business line? How does that tandem change your offering from a customer's point of view, and is there anyone else out there offering something similar?

Well, I think that our view is that what it gives us is a more comprehensive set of capabilities to provide our customers as it relates to their activities to manage the mechanical integrity of their facilities. Our traditional field services are the measurement services of condition, of equipment condition in terms of using a variety of technologies to do that.

The engineering assessment capabilities are kind of the engineering or kind of higher level evaluation approaches and techniques for evaluating what a particular level or condition or situation means or how to interpret that or how frequently to perform those conditions and services. So, we think we have an opportunity to link those and provide a more productive and more efficient solution to our customers, and we've gotten comments to that effect, that they're very receptive to that enhanced capabilities. We're still going to operate them separately from one another so some customers will want them kind of in a more combined basis. Others may -- perhaps may not. We will kind of evolve that more fully.

In terms of the major customer competitors of Team -- or excuse me, of Quest Integrity Group today, the major competitors that they identify are not companies that do the field assessment services or field measurement services that we do, so we don't think there's a lot of direct competitors already doing this on an integrated basis. That is not to say that there's no technical capabilities by the other of our field service competitors.

So, in the past, you would gather that the customers to whom you offer the measurement services would turnaround to another company for the higher end engineering assessment rather than not getting that latter service at all?

They would either do it in house or be provide -- getting assistance from other engineering firms, right.

Okay. Now that you've taken a harder look at Quest since you purchased the company, do you still expect them to post margins similar to your own TCM group?

Honestly, it was the amount of time we have -- yes is the answer, and maybe even superior to that if you look at a long term potential given the aspect. But to think that we have any kind of real clear understanding that since we bought it, we've had two holidays and a transition, we're just getting settled in. I don't have any new insights to share.

Okay, good point. And then lastly, did you buy back any stock during the quarter?

No.

Okay, thank you.

Yes.

Thank you. The next question is from Adam Thalhimer from BB&T. Please go ahead.

Good morning, congrats on a good quarter.

Adam.

Maybe you can give us a sense for, you told us that the recent turnaround season was the best since the fall of '08. How much better can it get from that? Is this as good as it gets, or is there still room for improvement in the cycle so to speak?

Yes, I think so. I think we have -- I think we still have a very cautious environment on the part of our customers. And so in terms of the -- it's by no means back to, I'm going to say business as usual. So, can the markets -- can the -- can we go back to activity levels that we had several years ago? I think that's a distinct possibility.

I will say this though, Adam, is that we're not hanging our hat on the notion that the market's going to get better, because our point of view has always been that the market growth itself is pretty doggone modest, if at all, and that all of our growth is market share growth. And we continue to believe that this is a consolidating industry, and there's a lot of very powerful reasons why that is so and why it will continue to be so, and we expect a benefit from that. Not solely, there aren't other companies that also will benefit. But again, we have hundreds of mom and pops active in our business, and that is the basic premise for growth, is our premise is that we're going to see continuing consistent long term share growth.

So, when you -- okay, that makes sense. And then when you were in a cycle, you said maybe three years ago, what were you seeing that you still aren't seeing today?

I think the number of enhancement projects is way down, half of what it was when we were booming. I don't think there's a lot of talk about it. There's not none, but there's not very many expansion projects -- or future expansion projects being talked about at this point.

The exception would be Fort Mac. I think there's certainly an understanding expectation that that will ramp back up. Probably not as hot as it was, but certainly considerably more than it's going on right now. There are a lot of projects there, and I think just tone. I think the whole downturn has been tough on -- and it's not just in our industry but I think on everybody, there's just a conservatism of approach and posture right now that a little bit of wait and see. We share that by the way, just to -- I think cautious optimism is the watch word.

So, I think at one point, 85% of your business was maintenance. That's 15% project.

It dropped down to 85%, yes.

Where are you today, do you think?

Probably 90% to 95%.

And then what's the outlook for project work? You said it's still kind of limited?

I think it's generally limited -- it's certainly limited in refining and petro chem. I think pipeline is positive. Power is positive, and again, I think the oil sands is very positive, so.

But even that business that's lumped into maintenance sounds like it can get a little better.

Well, see, that's the beauty of our business, isn't it? There's so much of it is tied to just the fact that plants run. The degradation that occurs due to operation. So, that's why we have a much more stable demand environment than, I'm going to say ENC companies or companies that are principally related to new construction or new capacity. So, I think it's a very healthy thing that we have so much maintenance activity, and we continue to have it in all of these markets and in all of these plants, so that's a good thing.

Thanks for the color, Phil. Thanks.

Thank you. The next question is from Matt Tucker from KeyBanc Capital Markets. Please go ahead.

Congrats on the good quarter, and good morning.

Good morning.

You mentioned that you think the spring turnaround season will be, I guess, as strong as the fall, or at least as strong. Was wondering how much of the spending in the spring turnaround season do you think will be driven by still this need to catch up on deferred maintenance versus maybe your customers are feeling a little better about the environment. And then with respect to the deferred maintenance coming back, I guess how much do you think is kind of still left? Are we going to be catching up for a while here, or do you think your customers largely caught up in this fall turnaround season?

Well, those are difficult questions. I guess our optimism about the spring is the number of turnarounds that we're working and planning to work and the expected size based on the planning scopes that we have that we're working with. Whether those expand still further or contract, time will tell.

It's very difficult for us. After the fact we can look back and say these things happened, and we think that's because there was -- the scopes expanded or didn't, and we think this is the reason why. To have any comprehensive view to say that we're all caught up or not, I just don't have -- I'm not in a position to have a view on that. I would say that it wouldn't, because all units aren't kind of down every quarter, every season, I think that -- to think that we would completely catch up in one season doesn't make sense to me, that I think they would just be a catch up over frankly several seasons where you go through the whole cycle to, even if you had a complete return, to old practices.

Okay, thanks. That seems to make sense. Over the past couple years during the downturn, I believe you had indicated that it's difficult to determine whether Team was gaining market share, and you highlighted market share gain as kind of a key to growth. So, is now that this environment is improving, do you have a better sense whether Team won or lost market share over the past couple years?

No, I don't, really. Not -- I guess that it wouldn't be our view. If we look at our view, we don't have an internal view that we've gained a significant amount of share in the last year or so as we're dealing with changes in procurement practices with our major accounts. We think that we've held our own, but there hadn't been a major transition in that time period. We think we've gained a lot of share over a five to 10 year period, but I can't say that I can point to very specific things in the short run that would be indicative of big share gain.

Okay, thanks. And then would you be able to provide the expectation for the Quest revenue contribution in the second half that's built into your revised revenue guidance?

It's $10 million. I mean, it's really -- it's not very -- it's just taking trailing revenue rates.

Sure, that's about what I expected. Thanks. Thanks for taking my questions.

Thank you. The next question is from Craig Bell from Enerecap Partners.

Yes, good morning.

Good morning.

Phil, just wanted to sort of clarify again on some of the turnaround activity that you saw in the quarter and just maybe rephrase it a little bit. In terms of the work you're talking about, some of the catch up that's happened. Do you think that that's really -- your seeing spending come back to sort of normal levels, and that's what was driving your -- the expanded scope or is this, do you think it's more we've deferred some of this work so long, we've just got to do it now?

Well, I guess those to me are a little bit the same, maybe just put a little more color on it. I think what's happening is that -- and in fairness, if you watch margins, I think for most it will depend -- it will be highly refinery specific in terms of the crude slate and product slate, et cetera. But if you look at generic refining margins on the board the three, two, one cracks over the last half of the year, certainly last quarter, they've been good.

They've been better than they have been in the last several years for refiners. So, I think that's a little bit of a positive, but I think what we find in specific instances is that as we got into it, they expanded because things that had been passed on, repairs had been passed on and to say the last year and year and a half has not been passed on, that things have been added back. And so is that because they can afford it or because they can't defer anymore, they didn't tell us which is which on that.

It just stands to reason to me though that things you defer, there's a limit to how long you can defer them or maybe you didn't have to repair them in the first place, and I don't think there's a whole lot of that happening. So, that's where I think it's kind of driven by deferrals and again, I think the fact that we have a little bit improvement in margins in the short run that probably helps the attitude a little bit, certainly for the refining group.

Okay, and then as you look towards the spring, are you seeing differences in what your initial scope is looking like versus what you were seeing coming into the fall/ Just on the initial look, not on what --how it expanded.

Because we're talking about so many different individual projects, I don't have a real good read on that. The tone I get from our field guys is that they are optimistic about the spring, that they were optimistic about the fall, but I think they are at least as optimistic about the spring, so we are positive about it.

Okay, and then just lastly on -- I know its only been two months since the acquisition but have you really started selling the entire suite of services across the group, or is it still to some degree operating as the old Team and the old Quest?

I think the latter. We're just getting started. We have -- it is resident in our TCM division, so we have kind of common management. We have key managers that are the liaisons and coordinators for kind of coordinating our commercial presence and looking for the synergies across our groups. But they are going to continue our expectation for many years that they will be closely coordinated, but operating independent of one another, I should say the Quest from our field service groups because of the nature of the capability.

We're talking about scientists and engineers more than a field service organization, so it just needs a different level of support from -- but we're going to coordinate them commercially. But that's kind of a rest of this year activity is to sort out the best way to do that and again, our expectation ,we start moving the needle a little bit as we look to next year, not this year.

Great. Thanks a lot.

Yes.

Thank you. The next question is from Tim Kang from Olstein Capital Management. Please go ahead.

Hi, good morning. I just have a couple of just follow-up questions, I guess. Have you seen any wage pressure in any of your guys on the field?

No.

And so your margin expectations, you said came in in fairly good margins. Your margin expectations sort of on a go forward basis, obviously market permitting, is still kind of what your run rate is basically, right?

Yes, I think by and large.

And on your -- this is more of a technical thing. On your other current assets -- non-current assets, I should say ,that is just related to the acquisition, right?

The big increase, yes.

Okay, thank you.

Thank you. The next question is from Martin Malloy from Johnson Rice. Please go ahead.

Good morning.

Good morning, Marty.

Could you talk a little bit about what you're seeing in terms of customer approach to maintenance spending in the utility and petrochemical areas?

I'm afraid because those are smaller segments, I'm afraid I don't have a lot of specific color to offer. I think it's generally positive, but -- in both areas. I think there are segments of petro chem that, with the weaker dollar, that are actually are doing quite well. So, their economic circumstance is improved, but I don't have any real color on the segments in detail.

Okay, thank you.

Yes.

The next question is from Max Barrett from Tudor, Pickering, Holt. Please go ahead.

Hi, good morning. Most of my questions have been answered, but Phil, you mentioned Fort McMurray. Just hoping to get an update on the timing for the oil sands expansion projects. Do we start seeing impact this spring/summer, or is it further out than that?

I think it's going to likely be further out. The -- everything is still happening. I'm not aware of anything that's cancelled, but it all seems to be going slower. That's just kind of a -- I haven't been briefed project by project recently, but that's just kind of a viewpoint. So, we're not counting on it as some big windfall this year, this fiscal year although we're well positioned to participate in whatever happens.

Okay, that's it for me. Thanks.

Okay, Max.

Thank you. The next question is a follow-up question from Rich Wesolowski from Sidoti & Company. Please go ahead.

Hi. Were there any completed contracts that boosted Quest's revenue during the past year that would perhaps create a tough comp for next year's growth?

No, I don't think so.

Okay. And then lastly, and this might be a category too early to have a real view, but can you talk about the makeup of the market for what you do in New Zealand as something that's kind of off the map for us, estimated market size, number of refineries? Does it look like it does everywhere else?

Yes, but I think really the -- when you say New Zealand and Australia, again, what we have is an assessment group that's kind of based for some historical reasons, I think they serve with those services a much broader environment than just New Zealand and Australia.

So that's just their base?

That's just their base and where they're located. We do provide a lot of assessment services in the utilities, kind of power industry in both of those markets. There's not -- I haven't actually bothered to study much of the refining markets, but they're fairly limited, I think, in those markets just based on their population.

Great. Thank you.

Yes.

Matt Duncan is online with a follow-up question from Stephens. Please go ahead.

Thanks. Just one quick follow-up here. I know you just completed the Quest acquisition in November, but I was wondering if you could provide some color on your appetite for future acquisitions and what type of transactions and targets you'll be looking for?

I think our appetite remains unchanged following the Quest acquisition. As Ted mentioned, we have, I think, without even having to rework any credit agreements, we have what, $60 million some available, cash available, should a good opportunity come around. I think our attitude is what it has always been, is that we think we have a very exciting organic growth opportunity. That's the heart of our Company. That's what our primary focus is on. If we do that well, we'll be -- we think we're really going to like it and our shareholders are really going to like it.

Having said that, if we can supplement that or accelerate that with an attractive acquisitions, we would do so, and what would be attractive is something that would allow our growth to accelerate the growth rates or get us in the markets that we couldn't otherwise get into effectively or attractively organically. I think new geographic areas step out service lines would be the categories of kind of things that would be in those buckets.

Okay, great. Thanks.

Yes.

(Operator Instructions) We have Matt Tucker back online with a follow-up question from KeyBanc Capital markets. Please go ahead.

Hi. The TMS division revenues, the growth was a lot stronger in the quarter in the TCM division. I assume that relates to the more robust turnaround season that you saw, but could you maybe just tie that back a little bit to kind of the end market picture, and would you expect the TCM growth to start catching up in the near term, or when would you expect to see that?

Fair question. You're exactly right. The growth rate's much higher on a division basis in TMS than TCM for both the quarter and year-to-date. It reflects a couple of things, and you referred to one of them.

First, if you look at US only, the growth rates are much closer, although still somewhat higher. I think it was, I have my numbers in mind, 15% and 7% I think were the two numbers for TMS and TCM respectively in the US. So, what we have is a bigger non-US presence, particularly Canada, but also in the Caribbean area for the TCM division, and that's where some of the presence or the lack of projects from the prior year.

Secondly, the point you make is I think the turnaround, the concentration of turnaround services is greater in TMS and TCM. Remember TCM is both inspection services and heat treating. Heat treating is almost predominantly a turnaround service, much like field machining, bolting, field valve repair, but inspection services is a blend. And so if you recall back, looking back a year ago, it did not decline like TMS did because of the on stream services and similarly, it's not rebounding today.

I think that just reflects a little bit of the fact our little cautious optimism is that the world just isn't exploding here. What we've had is just more robust turnaround activity, particularly, again, in the US markets that have been driving our growth, so I don't know if that's a little more flavor or color that's helpful.

No, that's very helpful. Thanks again.

Gentlemen, at this time there are no further questions.

All right, thank you, Sandra. Then I'll just wrap up. I want to thank everyone for your participation on this call and your continuing interest in Team. We look forward to updating you on our progress with our third quarter call in early April. In the meantime, have a good day.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.