Team Inc (TISI) 2013 Q1 法說會逐字稿

Good day, ladies and gentlemen. And welcome to the first quarter 2013 Team Incorporated earnings conference call. My name is Janeda and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Phil Hawk, Chairman and CEO of Team. Please proceed.

Thank you, Janeda. And good morning everyone. It's my pleasure to welcome you to the Team 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 Executive Vice President and Chief Financial Officer.

The purpose of today's call is to discuss our recently released financial results for the Company's first fiscal quarter ending August 31, 2012. As with past calls, our primary objective is to provide our shareholders with an enhanced understanding of our Company's performance and prospects. This discussion is intended to supplement our quarterly earnings releases, SEC filings, 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. And then following our remarks, we'll take questions from our listeners. With that introduction, Ted, let me turn it over to you.

Thank you, Phil. First, as always, I want to remind everyone 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 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 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, with that out of the way, for the financial results. Once again, I am pleased to report the best first quarter of operating results in our history. For the first quarter, net income was $7.6 million or $0.36 per share on revenues of $161 million, which was an increase of $20 million or 14% over last year. About 80% of that growth was organic. We are off to a great start for the year. Now, with respect to some cash flow related items, capital expenditures for the quarter were $5.7 million. Depreciation and amortization was about $4.6 million. And non-cash compensation expense was $900,000. So EBITDA for the quarter was $18.3 million, and was $80 million on a trailing 12 month basis. At August 31, our total debt was $87 million, cash was $22 million, and net debt therefore was $65 million. Our net debt to trailing 12 month EBITDA continued to be less than 1 to 1. With that, Phil, I will turn it back to you.

Thanks, Ted. Let me add a couple of additional comments to Ted's summary. We are off to a good start in this fiscal year. And we remain on track with respect to our full year performance expectations and previously issued earnings guidance. As Ted indicated, total revenues for the quarter were $161 million, up about $20 million. We are delighted with our 14% revenue growth in this quarter, especially considering that we are comparing to a very strong first quarter last year, which was itself up 35% versus the prior year quarter.

Let's now discuss a more detailed review of our revenue results by geographic segment and by service line over the past two years, which both highlight the sources of our recent growth as well as the impact of our strong growth in the prior year quarter. On a regional basis, the US was the primary source of our revenue growth this quarter with a growth rate of over 20% versus 18% last year. Other regions had weaker growth rates, due primarily to the very strong comps to last year's first quarter. For instance, Canadian revenues were up 4% this quarter, but they had increased 77% in the comparable quarter last year. Our Eurasia region experienced a slight decline in revenues this quarter that compares to a 57% quarterly growth last year.

On a service line basis, a similar growth picture exists. Inspection and assessment service revenues grew more than 40% in the first quarter versus 25% in the prior year quarter. Turnaround services were flat this year, but that compares to a 75% growth rate last year. Our expectations of Team's overall revenue growth rate for our full year are roughly comparable to our overall first quarter rate, in the 10% to 15% range. However, we do expect the mix of growth for the full year to be more similar to the relative growth rates we achieved over the past couple of years. On a geographic basis, we expect balanced overall growth from all major regions. On a service line basis, we expect 5% to 10% growth in on-stream services, with 10% to 20% growth in turnaround services, and 20% plus growth in inspection and assessment services.

Let's now shift the discussion to operating profit performance. As Ted indicated, Team achieved record first quarter net income, up about 11% from last year. This is a solid start for the year. Similar to our discussion of revenues, our strong profit growth in the prior year quarter also made for some tough comparisons as well. As examples, while operating profit for the quarter was 9% higher than last year, it was 91% higher than the first quarter results two years ago.

Similarly, while the 7.9% operating profit margin was slightly below last year's 8.3% level, it was well ahead of the 6.4% profit margin achieved in the first quarter two years ago. The source of the decline in the operating profit margin versus last year is a 0.8 percentage point decline in gross margin, partially offset by an improved SG&A expense ratio as a percentage of revenue. We do not believe this quarter's lower gross margin is indicative of any trend, but rather, it reflects the composite impact of project mix and activity distribution across our service network. We expect comparable gross margins and improved operating profit margins over the course of our full fiscal year, compared to last year.

We maintain a positive view of our markets and our growth prospects. As a reminder, the seasonally most active quarters for our business are the second and fourth quarters, when the bulk of customers' turnaround activity takes place. We expect normal turnaround and project activity levels within the US this fall and above normal activity levels in the spring. In Canada, we expect very active above normal project and turnaround activity for the remainder of our year. And we expect stable market conditions in our service territories in both Europe and the rest of the world. As a reminder, Team's growth prospects are not primarily driven by the growth of our markets. Instead, Team's growth is mainly the result of market share growth opportunities from our expanding service presence, service capabilities, and the inherent advantages from our large service network. Reflecting the good start to our year and our positive outlook, we are affirming our current full fiscal year earnings forecast of $1.85 to $2 per fully diluted share.

As mentioned in our earnings release, we are pleased to report that we acquired two small companies in the past couple of months that extend Team's presence and capabilities in interesting related markets. In August, Team's subsidiary, Quest Integrity Group, acquired a specialty remote digital video inspection company, based in New Zealand. The company's involved both with the upfront engineering of new facilities to accommodate remote inspection approaches, as well as with providing remote inspection services. While our near term opportunities will be primarily in the Eastern Hemisphere, the Company has strong relationships with several major energy companies which could provide the basis for future expansions in other geographic markets.

On Monday, we completed the acquisition of TCI Services, a Tulsa, Oklahoma based Company specializing in the inspection and repair of above ground storage tanks. While Team has participated to a minor extent in this segment historically, TCI provides Team with industry-leading capabilities in this large market segment. With the aging of existing tank infrastructure, as well as the projected future growth due to dramatically changing pipeline and storage network within North America, we are excited to have a very strong base from which we expect to build and expand our presence in this segment.

On a combined basis, the trailing 12 month revenues of these two companies are approximately $24 million. Combined EBITDA for the two companies are approximately $4 million. Total purchase consideration is expected to be about $25 million, subject to working capital true-ups and future performance of the businesses. While these acquisitions will be modestly accretive in the near term, our primary interest and focus is the opportunity to drive additional organic growth by extending these new capabilities across the Team network, or to use the combination of our new and existing capabilities to provide higher value services to our customers. In sum, we are delighted with our new Team colleagues.

To wrap up, we are pleased with our start to this new fiscal year. It reflects the continued positive business momentum and the attractive market opportunities available to us. We continue to believe we are very well positioned going forward. That now concludes my remarks. Janeda, let's now open it up for questions.

Thank you.

(Operator Instructions)

We respectfully request that you limit your question to one and one follow-up. You may rejoin the queue for any additional questions you may have.

(Operator Instructions)

Matt Duncan, Stephens, Incorporated.

Good morning, guys. Ted, a question on the gross margin. Perhaps you could give us a little bit more detail around sort of the impact of service line mix, and then maybe how it impacted you with your Eurasia region being down. That's got to have a negative impact on gross margin. Just trying to get a little bit better handle for some of the puts and takes there.

Matt, I don't think it had a lot to do with Eurasia, in particular. Again, remember that Eurasia, relatively speaking, is a small piece of our business. It's only about 5% to 6% of our total revenues.

Certainly it was impacted a little bit more by Canada, where we had some significant projects a year ago. You'll recall kind of an unplanned outage at one of the big facilities in Canada, certainly would have contributed to higher margins a year ago than this year. But moreover, as Phil said, we, just kind of in looking at it, we think it's generally a different mix than existed a year ago, but we don't see any change in our overall job margins and any particular expectation of any -- or we're not seeing any margin decline, and would expect margins to be relatively the same for the year.

Okay. And then the other question I've got for you is -- Phil, you guys have gotten back to adding service lines maybe at a bit higher pace more recently. As I look at the history of Team, other than that '05 to '08 window where the whole industry was just booming and price was way up, in your history you have grown your fastest when you've been adding service lines. Is there any way to strip out the impact on your growth right now that you're seeing from these new service line additions?

Well, I think Ted alluded to that a little bit. Of our growth in the first quarter, the $20 million, about 20% of that or $4 million of that was related to acquisitions in the past year. That was the -- would have been the EA and the pipeline PMI acquisitions. So, again, the bulk of our growth this quarter, historically, and what we expect prospectively will be organic growth.

I guess, Phil, maybe what I'm looking at is you've added heat exchanger repair in the last couple of years. You've obviously been adding to the capabilities at Quest. I guess that's what I'm getting at, is the changes that you guys are making internally an organic basis to add capabilities, if there's any way to quantify what those are doing for your growth.

I don't have a -- they are exciting additions of our capability, to be sure. And obviously you see the effect of that in just our inspection and assessment growth that that reflects the very attractive activities that are underway, both with Quest, but with our other inspection activities as well. I think the tough comparison, when you just look at a quarter, as Ted mentioned, we had a huge project in Canada a year ago. We had a big project in Europe a year ago -- a little surprise project. We had extended turnaround activities into June a year ago. So, when you compare our turnaround activities and service lines with a year ago, frankly, to be flat you've got some kind of basic organic growth built into it. It's just the timing of the markets were a little different.

I think we would expect higher growth rates on these newer services, the ones that you mentioned, something like the heat exchanger repair, principally because we have such a low base in those activities. But we're continuing to grow really across the board. One of the things I'm proud of, if you look at our -- I'm going to take a decade-long look here. We have double-digit revenue growth over the last decade in all of our service lines. So, again, the strength of our network and all that still continues to be a very positive thing.

Just another comment on gross margin, which makes it, again, tough to draw too many conclusions in a single quarter, is that we're always in the process of kind of ramping up or ramping down from big projects, and just the timing of those can make a difference. We didn't have the presence of those big project activity in June like we did a year ago, but candidly, we are cranking up for a very big Fall. And we had -- particularly in Canada, we have several increased personnel levels where we're adding personnel in advance of what we expect to be very active Fall activity. Those things can, on the margin, kind of tweak margins a little bit. So, again, drawing too many -- and that's really what our guidance is, is don't draw conclusions about gross margin changes in a quarter, but I think what you should be planning on or looking to -- or at least what we're planning on is pretty comparable margins for the year.

Okay. Thanks for all the color.

Sure.

Rich Wesolowski, Sidoti & Company.

Thank you. Good morning, Phil and Ted. This is the first time I've heard you segment your growth expectations for the inspection, the turns and the online mechanical, and I'm wondering if those businesses are on different growth tracks in your mind, looking beyond fiscal '13 to the next three years?

I think so. I think the on-stream services are the areas where we have the highest share, and we're adding the fewest new services, if you will. So, I think, hence the lower but still positive growth rate. Turnaround services, I guess I would just say that we're excited about what we have opportunity there, double-digit growth rates that we're looking for, and I think it's both market share gain plus expanded services. I think when you get to an inspection and assessment, candidly, you have not only that market share gain, expanded service capabilities, but I think you also have growth in market that if you think about the highest value activity for our customers, it's kind of more insight into plant condition. And our inspection assessment services really are targeted right at that need, if you will -- customer need. So, we would expect there to be continuing growth in demand for the types of services that we offer.

Is there a material difference in the profitability among any of these service lines for Team?

No, not by service line roughly. I think the higher the, if you will, the value-added or the intellectual distinctions that we have versus competitors, the more profit inherent job margin there will be. For example, use of proprietary inspection techniques from Quest have higher margins on a job level than our more traditional NDE services. But they're also much higher development expenses associated with them.

Okay. And then second, is it still feasible for the Company in any extended period of time to still target a 20% incremental operating margin?

Yes. I absolutely think so. Again, you have to look at a little longer timeframe than a quarter, but that would be our -- continue to be our expectation. Now, when you acquire companies, you're not going to get incremental 20% because the Company doesn't -- you're more in the 10% range of kind of companies we're acquiring. So, we're talking about organic growth.

Great. Thanks again.

Arnie Ursaner, CJS securities.

It's CJS Securities. Good morning. On the acquisitions you made in New Zealand and TCI Services, I think you said there was no revenue contribution in this quarter from the acquisition in New Zealand. Is that correct?

Well, the acquisition was in August.

Late August.

It was de minimis in the quarter.

Was there any amortization expense related to it?

No.

No.

Okay. And you mentioned the $24 million in combined annual revenue. What sort of growth rate have the two companies had? And can you remind us, is there any seasonality in the business?

I don't know that I have in hand what the natural growth rates are for those two companies. I guess I'm more focused on what we will make it, when we add it to our network, in terms of the things that we can add to it. Yes, there is seasonality to the businesses. The one in New Zealand, I have to tell you, I don't have a real strong clarity about that, but the tank inspection and maintenance business has seasonality that's not dissimilar to our business.

And the margins on both similar to your existing business?

Roughly, yes.

Okay. Thank you very much.

Adam Thalhimer, BB&T Capital Markets.

Hi, good morning, guys. I wanted to ask about pricing more specifically, and are you guys seeing any labor shortages within any of your business lines?

I think we are seeing tightening markets -- depends on where you are and what projects are going on. But I think I would say that particularly in Canada right now with our activity levels, but even in parts of the US, that there are tighter markets than we saw a couple years ago. To say that we have not been able to find people or to cover work I don't think would be true -- that we have covered our work.

Certainly tighter with more senior, experienced technicians that, as you might expect, is a tighter market.

Okay. That's helpful. And then I wanted to ask about the turnaround outlook that you gave for the US. You said Fall normal, Spring above normal. What do you think the reason for that is in terms of the Spring being stronger than the Fall?

I don't know. I think it's just the schedule of projects that we see. I think there's just natural lumpiness, what plants are going to turn around what units and where we're strong, and that's just the kind of feedback from our field that, again, we're feeling good about the Fall, but see a lot of activity, a lot, coming in the Spring and that's a plus.

Okay. And then, in North America, are you seeing any refinery expansion projects on the drawing board?

You mean new ones or existing ones? There's -- I think it's called the OCC BP [Whiting] is continuing to develop one right now. It's under construction. I'm not aware of other major --.

There's some restarts, as you probably know, in the east.

That's right, good point.

The Delta refinery. There's a Motiva restart, if you will, relative to the issues --.

Some of their performance issues, yes.

-- in that plant. Those are the ones that just come to mind.

But as it relates to, say, getting construction back to 15% of revenue, there's nothing on the drawing board that would suggest that?

No, I don't think so.

Okay.

I think it's a pretty healthy environment in North America actually, when you look across all of our segments, but I don't think any -- it wouldn't be my planning premise that there's going to be a lot of new capacity added in refining. Where we're going to see capacity -- I think we've talked about this in other calls, is going to be in the petrochem area, again, driven by the shale gas, shale gas liquids opportunities that it's generating for North America.

And that continues to develop how you thought it would or --?

Yes, I think so.

Okay.

I think there's just a lot of indications that it's going to be really just more broadly even than just shale gas that energy and low-cost energy in North America is going to be a very significant competitive advantage for the continent versus rest of world. And I think that has some implications for long-term economic development for the area, and it certainly has positive implications for energy providers and big energy users, which are going to be our customer base.

You guys are in a good spot, to be sure. Thanks so much.

Yes, thank you.

You bet.

Matt Tucker, KeyBanc Capital Markets.

Good morning, gentlemen. Thanks for taking my questions. Was hoping you could give a little more color on the turnaround outlook and, in particular, what you mean by normal. I feel like it's been so long since things have felt normal that maybe that word's lost a little bit of meaning. So, maybe if you could compare it to last year, to the lows or peaks of activity in the past?

I think it would be [softly] comparable to last year, would be normal.

Okay. Thanks. (multiple speakers) Apologies if I missed this, but on the revenue guidance, are you guys changing the revenue guidance to account for the acquisitions, did you keep it the same? I know you mentioned 10% to 15%. Is that what we should use now? Does that include the acquisitions?

Honestly, we didn't really revisit, with any precision, our revenue guidance for the year. I think we're trying to remember what it was, $685 million to $700 million, or something of that order of magnitude. We'll have a slight impact from the -- I guess we probably should add the revenue from our acquisitions to that for the remainder of the year. The reason we're not changing our -- we don't think it has much effect on our EPS guidance is that when you -- once you take care of the amortizations and some of the transaction costs, I think the accretion in the near term, on a historical basis, will be pretty modest and probably be offset by the transaction expenses, or roughly.

That makes sense. But just to clarify, you did not include the $24 million when you gave the guidance initially?

No, we did not.

No, we did not.

Okay. Thanks. And then, I think earlier on, perhaps in the prepared commentary, you mentioned that margins will be up year-over-year. That's your expectation. I missed if you were referring to just operating margins, gross margins, or both.

I was actually referring to operating margin. Just, again, to clarify. Our (inaudible) expectation is that when it's all said and done for the full fiscal year, which I think is a much more helpful time perspective than an individual month or quarter, that we'll see gross margins that are comparable to what we had last year. And because of the inherent operating leverage in our business, which is principally in the SG&A area, that we'll have improved operating profit margins as a result of leverage in those components. So, similar gross margins, improved SG&A ratios, which will lead to modest improvement in margin percentages, operating profit margin percentages for the full year compared to the last year's full year. If that's helpful.

Thanks. That is very helpful. And just last question -- were there any meaningful acquisition-related expenses in the quarter that are worth mentioning?

I don't think so.

Thanks a lot, guys. I'll jump back in the queue.

Tristan Richardson with D.A. Davidson.

Good morning, guys. Just a question. In terms of the tank market, the acquisition there, you talked about just seeing a lot of opportunity there. Could you just expand on that a little bit further, what you're seeing in that market?

Well, there are literally millions of above-ground storage tanks in the US, and there will be a whole lot more built because of the changing logistical network, again, because of a lot of the E&P activities. As those change, where that occurs, then the tank farms to support, stage, and ship that product will also change. TCI Services is one of the leading companies, particularly on the inspection side, principally in the Midcontinent area in terms of their technology and inspection approaches and reputation. What we see is a market that is growing because of, again, the aging infrastructure and the changes in the infrastructure I just mentioned. And we see TCI as a very exciting new partner and colleague because of their experience and depth of reputation and approaches, particularly as it relates to the inspection services, or tank assessment.

There's also some great synergies with the Quest Engineering groups, in terms of more deeper follow-up and follow-through, engineering follow-through on some of -- if there's some defaults or defective issues identified during the inspection activity. As well as linkages to the Team mechanical services activities as it relates to tank repair, which is, again, another segment, a business for TCI. It hasn't been the core of the business historically, but has some exciting opportunities. So, what we have is a Company very experienced and focused on tank inspection and repair with principally a Midcontinent presence because of their -- they're really down to two or three locations along the Midcontinent area. When you look at our North American-wide presence and some of our other capabilities, both in other comparable inspection-related areas, but also on the mechanical side, it's a pretty exciting possibility.

And I guess just using TCI again as an example, when you talk about incorporating some of their service offerings across your national network, what is the typical timeline take for one of this size to fully expand those services across the network?

I think it will go gradually because what will happen is, just as has been the case with other acquisitions and Quest and some of the things working together, we develop understanding of how to transfer that capability and how to support beyond our core, be in a couple areas first, and then we'll evolve from there. And as you get critical mass in other areas, then maybe the rate of growth is the same, but the absolute level of growth gets to be greater and greater.

Okay.

So, I would not expect that we're going to triple this business in one year or anything like that, but candidly, if five years from now we haven't doubled or tripled the business, it would be pretty disappointing.

Okay. Thank you guys very much.

You bet.

Rich Wesolowski, Sidoti & Company.

Thanks. If you mentioned before, I apologize, but how many employees do you have?

About 4,000. We added 200 in the quarter, actually. Again, a little better talk about ramping up for activities in the second quarter.

I understand you, and also your peers, begin looking among the temporary help for full-time hires. I'm curious how far you've dug into that list. Is there an endless supply of temps, certified techs, or are your ready-made labor prospects already starting to wear thin?

I think to an earlier question, I think the market's definitely tighter than it was a couple years ago, but I wouldn't say that -- and it's certainly not an endless supply, but what we do is adapt. You adapt. You train. The pool keeps getting built a little bit just by the opportunities that we're creating for people. So, it is tighter. And so that affects wages and some pressures in that regard, but I guess we don't have a view that we're going to have to take alternative approaches to cover our business.

Does the fact that your specific business is beginning to do well, and labor is starting to tighten amid a time when the broader economy is doing poorly and unemployment is high, color your idea of when the Company would, if ever, get the sort of pricing power that you had in '07 and '08?

I think there's a little bit of a false premise in the question, Rich, in the sense that we -- it suggests that we had pricing power in '07 and '08. This is a very fragmented market that we're in. Our customers have multiple choices, so, for us it's about being a great service company, focusing on our technicians. We believe that we are indeed an employer of choice because we offer careers to technicians and not just a job. And therefore, that's going to give us an advantage in a tight labor market. But I don't see that that's going to translate into pricing power, per se.

Very good.

I think just kind of elaborating on that, the positive that we have structurally is the service we provide to our customers. It's critically important to their performance and their uptime. They won't necessarily always be with Team, we wish it would, but they're going to have a strong preference to work with a company that they have the most confidence in, from a service and a performance perspective. So, that's a fair bet when we're saying our ability to recover costs and maintain I'm going to say a balanced margin relationship with our customers. It's not a pure commodity in our view, at least that's how we approach it. But on the other side of the equation, these are very large, very sophisticated customers, and the notion that we can dictate margins or prices just isn't going to be so.

Okay. Last one. I was hoping you'd discuss a little bit how your marketing pitch of Quest's products has changed since you took on the Houston-based company, the project pipeline management company. Are you selling project management across the board, or does Quest still predominantly pitch the sale of its inspection tool exclusively?

No, I think that's an exciting part of Quest's growth is that they're utilizing that project management skill, and actually they're working with some of the other Team groups as well to significantly expand our pipeline project management activity. And that project management activity might include, and in many instances does include, the tools, [the inline inspection] tools, but not exclusively. It depends on what the requirements of the customer are. We're excited about Quest's growth in a number of dimensions where they're, again, continuing to expand and leverage their skills in exciting ways.

Great. Best of luck with the remainder of the year.

Thanks.

Thanks, Rich.

(Operator Instructions)

Matt Duncan, Stephens, Incorporated.

Hi, guys. Just a clarification on the revenue guidance. The two acquisitions that are $24 million in annual revenues, given that you bought them both at quarter end, how many of that should we think about? Is it just divide it by four, and so you've got about $18 million of that left in this year? Or is that something you think you can grow now that you've bought those businesses?

I think for planning -- we just haven't really focused that much. $18 million to $20 million is a good number.

Okay. And then, I'm hoping maybe you can talk a bit about your business in the midstream market. That's been a good growth area for you. Has the Pipeline Safety Act that passed back in January created some business for you guys? Or maybe talk a little bit more about how you're going after that market, and what your growth there has looked like.

Well, just to go back for just clarity purposes, if you're going to -- remember, we're suggesting on these acquisitions is, don't add much with regard to accretion for the rest of this year, just because of start-up costs and the transaction costs associated. And we haven't yet calculated the amount, but there will be amortization of intangibles associated with those. So, we're not really expecting a big -- what we would normally expect would be -- it's not the same as 20% or $20 million of incremental revenue -- just being clear about that.

Now, moving on to the midstream, I don't know what exactly that a particular legislative act is driving demand, but there's no question that the pipeline world is very interested and increasingly interested in their whole system integrity and looking for help to do inspection activity and to do follow-up activity when anomalies or issues arise. So, that's been a big plus to us, really not only for Quest but some of the related activities of Team that's supporting the Quest activities. In addition, there's a lot of new pipeline construction as related to the shale plays, and that has opportunities for us, both in traditional inspection activities, radiography, just inspecting new construction, as well as some mechanical services, hot tapping in particular, where we're doing line isolations in order to install or add some of this new capacity. It's still -- (multiple speakers)

Okay. Is there any way to break out how fast that market's growing for you guys relative to the whole business? Is it growing faster?

I think it's growing faster, but it's a small base. It's probably -- I don't have precise numbers, but I would swag it, it's 10%, something like that, of our activity level, something like that.

Okay. Thanks.

Yes.

And at this time I'm showing we have no further questions. I would now like to turn the call back over to Mr. Phil Hawk for any closing remarks.

Thank you, Janeda. And I want to thank all of you for your participation in this call and your continuing interest in Team. We look forward to updating you on our progress with our second-quarter call in early January. In the meantime, have a good day.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.