Ladies and gentlemen, thank you for standing by, and welcome to the Matrix Service Company conference call to discuss results for the first quarter fiscal 2020. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session.

[Operator Instructions] I would now like to hand the conference over to your host, Kellie Smythe, Senior Director of Investor Relations. Thank you. Please go ahead, madam..

Good morning, and welcome to Matrix Service Company's first quarter earnings call. Participants on today's call will include John Hewitt, President and Chief Executive Officer; and Kevin Cavanah, Vice President and Chief Financial Officer.

The presentation materials we will be using during the webcast today can also be found on the Investor Relations section of the Matrix Service Company website.

Before we begin, please let me remind you that on today's call, the Company may make various remarks about future expectations, plans and prospects for Matrix Service Company that constitute forward-looking statements for the purposes of the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various factors, including those discussed in our annual report on Form 10-K for our fiscal year ended June 30, 2019, and in subsequent filings made by the Company with the SEC.

To the extent the Company utilizes non-GAAP measures, reconciliations will be provided in various press releases, periodic SEC filings, and on the Company's website. I will now turn the call over to John Hewitt, President and CEO of Matrix Service Company..

Thank you, Kellie. Good morning, everyone, and thank you for joining us. Historically, we have started our calls with a safety topic.

Beginning with this call, we are expanding the topics we will discuss to include a broader focus on environment, social and governance topics, which includes safety as well as other areas of importance to long-term sustainability.

On this call, I'd like to highlight the obligation that I believe we as business leaders have to ensuring that those around us feel safe, both physically and psychologically, in the environments in which they work.

In the past week, I was honored to join the CEO Action for Diversity & Inclusion initiative, the largest CEO-driven business commitment to advancing inclusion and diversity in the workplace.

In doing so, we have pledged to cultivate a workplace where diverse perspectives and experiences are valued, expand education about unconscious bias, learn from and share both successful and unsuccessful practices aimed at creating an inclusive work environment, and engage our board of directors in the development and implementation of strategic action plans that drive accountability around inclusion and diversity.

Across our organization, and in keeping with our core values, we are committed to ensuring an environment where our people feel safe and empowered and can openly address challenges, present opportunities and share perspectives.

Doing so will not only fuel innovation, it will enrich our individual and collective experiences and drive success in every aspect of our business. Turning now to our business discussion, we were generally pleased with our first quarter results and, in particular, the strong performance and opportunity pipeline in our storage solutions segment.

The performance of storage solutions this past quarter is a great example of the benefits we derive from our diversified business platform. This diversity is an asset that helps to protect our bottom line from both the expected and the unexpected.

It has also contributed to the strength of our balance sheet, which we are pleased to be able to deploy as a resource to return value to our shareholders through share repurchases, such as the repurchase announced yesterday, and to create ongoing value through growth initiatives.

Over the past several years, Matrix has strategically focused on investing in expertise and scale across our organization, positioning the Company to execute an expanding portfolio of energy-related storage terminal, refinery and midstream gas processing projects, provide our diversified project and maintenance services across a larger geographic footprint with more clients, and deliver solutions that support our clients' requirements across all of our segments.

The results of our efforts are evident in the types of projects that comprise our current backlog as well as those that are included in our opportunity pipeline, both of which support our current fiscal year guidance.

In storage solutions, our teams are currently executing multi-year capital projects across North America that include new and expanding storage facilities in crude, refined products, LNG and NGLs for both domestic use and export.

Examples include Keyera's Wildhorse Terminal at Cushing, a 4.5-million barrel crude oil storage and blending terminal expected to be in operation by mid-calendar year 2020; Moda Midstream's Ingleside Energy Center, a 12-million barrel export terminal where our teams are providing EPC services for not only additional storage tanks, but also the terminal infrastructure as well as improvements to the terminal marine docks.

When complete, these improvements will allow the concurrent loading of up to 160,000 barrels of crude an hour across the center's three deep-water berths. Duke Energy's Piedmont Natural Gas LNG peak shaving facility, which will provide for 1 billion cubic feet of LNG storage to ensure a reliable supply of natural gas during peak demand.

Construction began on this facility in May of this year and is expected to be complete in mid-calendar year 2021.

Other projects across the Gulf Coast and elsewhere include tanks and related infrastructure for LNG and NGLs such as ethane, ethylene, butane and propane, as well as additional crude-related logistical infrastructure to support increased U.S. energy production.

Specific to LNG, Matrix is uniquely qualified as one of very few contractors with the expertise and capacity to provide concept-to-completion services for the engineering, procurement, fabrication and construction of small- to mid-size terminals.

In fact, our teams are currently in active bidding on several LNG infrastructure projects that include tanks, terminals and marine structures supporting LNG for export, peak shaving, marine fuel and off-grid power generation.

We are also working in partnership with large EPC firms to support their bidding processes for LNG storage tank design, fabrication and construction on various large-scale export terminals. Across the storage solutions segment, our teams are pursuing in excess of $4 billion in real and active opportunities.

Over the past several years, Matrix has invested heavily in our people, processes and infrastructure to effectively execute the growth opportunities we foresaw in storage solutions. Results in our industrial segment was driven by a strong performance in iron and steel, where we are the leading contractor to the integrated iron and steel providers.

This quarter's results continue to benefit from various capital construction projects, the large of which commenced in late 2017 and is nearing completion.

Keep in mind that this segment also includes work in other industries, including aerospace, mining and minerals, fertilizer, cement, grain and general manufacturing, all of which provide opportunities of engineering, capital construction, maintenance and repair.

The fertilizer industry is another area where our cryogenic and marine structure expertise offers opportunity. In aerospace, the demand for testing of next-gen satellites continues to create engineering and construction opportunities for thermal vacuum chambers.

This is a niche market with limited competition that requires specialized expertise in storage, cryogenics and facility infrastructure, and is a market where Matrix enjoys longstanding customer and technology relationships.

It is important to note that the markets in this segment are inherently cyclical and highly sensitive to commodity pricing, specifically for ferrous and non-ferrous metals.

The wind down this calendar year of the major capital project I mentioned previously, combined with softness in global commodity pricing, will result in reduced revenue opportunities for this segment in calendar 2020.

However, based on our knowledge of these markets and the capital spending needs of our customers, we remain positive about additional and future opportunities and our position in these markets. In oil, gas and chemical, with the exception of the margin fade on a capital construction project, the year is shaping up as expected.

This quarter's results reflected normally low seasonal refinery volumes in the summer months and less capital project activity across the segment. That said, the fall refinery turnaround season is fully booked, and capital project activity is starting to ramp up. We have also continued to expand our market penetration with new and existing customers.

Strong customer satisfaction is driving even more opportunities as we execute against our strategy to increase revenue from fixed-base refinery maintenance operations.

For example, because of the consistent, quality work of our turnaround maintenance and repair teams, we were recently awarded a five year contract as the primary onsite mechanical contractor at Shell's Puget Sound refinery providing a variety of embedded services, including daily onsite maintenance, small-cap projects and turnaround support.

In addition, we have entered the West Coast market with our building trade solution to support refinery clients impacted by California's Senate Bill 54. Now in our second full year, this strategy is gaining strong traction for the business.

Besides our strong position inside North America's refineries, we have and continue to strategic expand our service offering to other markets, including natural gas processing, the recovery processing and handling of sulfur, and the petrochemical industry.

Ongoing strategic positioning across each of these markets continues to create multiple opportunities, and accordingly, we expect this segment's revenue to grow, producing margins within our target range.

Our electrical infrastructure segment was impacted by anticipated low seasonal volumes creating under-recovery of construction overhead costs and a charge on a transmission and distribution project that we are executing outside of our historical service territory.

The last 2 fiscal years have been challenging for our substation transmission and distribution portion of our electrical infrastructure segment, but I would remind you that this business has a strong history of performance for Matrix since the early 2000s.

We are confident that we can return the power delivery portion of this segment to its strong historical operating characteristics through investment in capital equipment and talent, operational improvements and geographic expansion to drive scale and leverage that will bring higher revenues, client diversity and improved margins.

Against this backdrop, our vision to expand this line of our portfolio continues to be an important part of our long-term strategy.

Doing so supports our vision to grow the enterprise and our markets with long-term infrastructure spending needs, diversify revenue streams to include markets that are not as commodity price sensitive, and create a better connection to the growing renewable energy market.

On the power generation side of our business, the strategic shift we made some time ago to focus on specific subcontract services, such as centerline erection, electrical and other mechanical services, has proven successful. These projects typically represent individual project revenue opportunities below $75 million with a better risk profile.

One such example is work recently completed at PSE&G's Bridgeport Harbor generating station, where based on the outstanding performance of our teams, we were selected for project work that included not only the centerline erection, but preliminary site work, electrical underground, [indiscernible] mechanical and startup and support.

As North American base load power generation market transitions from coal and nuclear to one that is gas fired combined with renewables, our strategic positioning is key, and our long-term opportunity pipeline is strong.

Across the Company, we continue to make investments in areas that help create differentiation and enhance our competitiveness, such as safety, leadership and professional development, as well as equipment, systems and process improvements.

At the same time, we continuously monitor the current economic and political environment, which can impact the timing of project awards and starts. With that said, we do not anticipate any significant impact on the current fiscal year and are confident in our guidance. I'll now turn the call over to Kevin..

Thank you, John. In the first quarter, we produced revenue of $338 million, which was a modest increase of 6.2% over the first quarter revenue of $319 million last year. Our gross margin in the quarter was 9.6%, as compared to 7.4% in the first quarter of fiscal 2019.

Overall, project execution was strong, but the consolidated gross margin was impacted by lower-than-expected margins on 2 projects as well as under-recovery of construction overhead costs in a couple of segments. Our SG&A costs were $23.7 million in the quarter, as compared to $21.2 million last year.

The increase resulted from personnel investments to support our growing business as well as higher incentive compensation costs resulting from the improved operating performance.

As a result of the revenue increase and the higher gross margins, pretax earnings improved 222%, from $2.8 million in the first quarter of last year to $8.9 million this quarter. Our tax rate this quarter of 30.6% was higher than the 27% we normally expect as a result of excess tax expense related to divesting of stock-based compensation.

We still expect our fiscal 2020 tax rate to be 27% for the remainder of the fiscal year. Fully diluted -- the bottom line is the Company produced net income of $6.2 million, compared to $2.3 million in the first quarter last year. Fully-diluted earnings per share improved 175%. Our EPS was $0.22 this quarter, as compared to $0.08 last year.

EBITDA for the quarter was $14 million, or 4.1% of revenue, and the prior year, our EBITDA was $7.6 million. Our backlog performance in the quarter was in line with our expectations. We had $322 million of project awards, which produced a book-to-bill of 1. We ended the quarter with backlog of 1.1.

We have continued to capture a good volume of small- and medium-sized projects. Our project funnel remains strong with many sizable project opportunities, and our expectation is to end the year with a backlog position as strong or better than we entered the year. Now let's talk about the specific results of each of our segments.

The performance in our electrical infrastructure segment was below our expectations. Revenue was $31.5 million in the quarter, as compared to $44.7 million in the first quarter last year. As expected, revenue volume was impacted by normally low spending during the summer months as well as resulted levels of power generation work.

The book-to-bill for electrical was 1.0 on project awards of $30 million. Gross margins were 0.3% in the quarter, as compared to 7.6% in the first quarter of fiscal 2019. Project execution was good for our power generation package work. However, 2 items negatively impacted the margin performance in this segment.

First, we incurred a charge of $1.8 million related to lower-than-expected productivity and craft retention costs on a power delivery project in the new territory. Second, we under-recovered our construction overhead costs as a result of the low revenue volume.

Excluding these 2 items, combined with the good performance of our power generation work, this segment performed at a level approaching our target margin range. We will keep you updated on the results of our efforts to grow our revenue base and improve the operating performance. This is a top priority for the Company.

Next we will discuss the oil, gas and chemical segment, which performed as expected, with the exception of one item, which clouds the underlying strength in this segment. Revenue was $58 million in the quarter, as compared to $76 million in the first quarter last year.

Volumes were impacted by lower capital project activity across the segment, as well as low refinery spend during the summer months. This lower spending is a seasonal occurrence as U.S. refinery runs typically reach their highest points in the summer and demand for petroleum products, especially motor gasoline, tends to peak.

Gross margins were only 6.3% in the quarter, as compared to 7.5% in the first quarter of fiscal 2019. The quality of work and margin performance in the quarter were in line with our expectations for most of the segment.

However, the first quarter segment gross margin was negatively impacted by a lower-than-previously-expected margin on a capital project, where a piece of purchased process equipment was found to be underperforming during the startup and commissioning stage.

We also experienced under-recovery of construction overhead costs resulting from the lower summer revenue volumes. Oil, gas and chemical had $91 million of project awards in the quarter, resulting in a strong book-to-bill of 1.6.

Awards included engineering projects in the gas value chain, as well as long-term refinery maintenance contracts and refinery capital work. Now let's move to our storage solutions segment, which produced outstanding results. Revenue of $150 million in the quarter increased 33% over the $113 million in the first quarter of fiscal 2019.

The increase was driven by tank and terminal construction work, as well as higher levels of repair and maintenance spending by our customers. Strong project execution led to a segment gross margin of 14% in the 3 months ended September 30, 2019. The margin in the prior year was 8.5%.

In addition to the high revenue volumes and strong operating performance, storage solutions booked $143.5 million in project awards, resulting in a book-to-bill of 1 for the quarter. The awards include both LNG and crude storage projects. To close out our review of the segments, we will discuss industrial.

Operating performance was strong, but, as expected, project awards in the quarter were light. Revenue was $99 million in the first quarter, as compared to $86 million in the same quarter last year. The increase in revenue is from higher volumes of iron and steel work, including the continued execution on a large capital project in Ohio.

This project will be substantially complete as we reach the middle of the fiscal year. The strong volumes of iron and steel were partially offset by lower volumes of thermal vacuum chamber work. Gross margins were 7.8% in the quarter, as compared to 5.7% in the first quarter of fiscal 2019.

The improved segment gross margins resulted from solid project execution on both capital and repair and maintenance work. The book-to-bill for industrial was 0.6 on project awards of $57 million. As we have discussed, project spending by our iron and steel customers is expected to be lower in the current environment.

Moving on to our balance sheet and liquidity, we ended the quarter with a cash balance of $140 million. This represented an increase of $50 million in the quarter that resulted primarily from cash flows from operations. We currently have only $11 million borrowed on our credit facility.

Our capital expenditures in the quarter were $80.7 million, which is about 2.6% of revenue. This is somewhat higher than our full year fiscal 2020 capital expectation of 1.5% to 2%. As a result of the increase in cash and higher availability under the credit facility, our liquidity increased $66 million in the quarter to $308 million.

Our approach of maintaining a strong balance sheet and good liquidity remains. We intend to continue to pursue acquisitions, but will do so in a manner that allows us to maintain a strong financial position. Our primary uses of cash are designed to strengthen shareholder value.

These uses include acquisitions, funding working capital, investing in organic growth initiatives, and share repurchases. As previously mentioned, we will execute a stock repurchase in the second quarter. We expect to commence the repurchase next week through the open market and will buy up to $20 million of stock during the remainder of the quarter.

Now let's discuss guidance. The outlook for our storage solutions and oil, gas and chemical segments are positive. We expect storage volumes to remain strong throughout the fiscal year.

Increasing work on capital construction projects as well as repair and maintenance work should lead to growth in our oil, gas and chemical revenue as we move through the rest of the fiscal year.

Our industrial segment, which has performed well over the last two years, will likely soften in the second half of the year due to the completion of a large capital project and the cyclical weakness in commodity pricing.

However, as commodity prices improve, it is our expectation that our iron and steel and mining and minerals clients will return to higher spending levels. As such, our long-term outlook for this segment remains positive.

Finally, in our electrical infrastructure segment, we continue to focus on operating improvements to impact margin performance while actively pursuing organic and acquisitive growth to move beyond our current Northeastern U.S. footprint, which is a key element of our improvement plan.

On a consolidated basis, our second quarter revenue and earnings should improve modestly from Q1 and then continue to improve as the year progresses. In closing, the Company is maintaining fiscal 2020 guidance with revenue of $1.4 billion to $1.55 billion and fully-diluted earnings per share of $1.10 to $1.40. We will now open the call for questions..

[Operator Instructions] Our first question comes from the line of John Franzreb with Sidoti & Company. Your line is open..

I want to start with the storage side of the business, 2 consecutive great gross margin quarters.

Can you talk a little bit about what's driving that and the sustainability at above the target range?.

We've got a very good workload flowing through storage solutions currently, and it's a mix -- coming from a mix of a variety of different things and markets.

So it's not only EPC work on full terminals, but it's also individual tank packages and maintenance and repair work and primarily includes storage tanks, which has really picked up over the last couple of quarters.

So it's a combination I think of all those things coming together, and based on the pipeline of opportunities in front of us, we think we've got a good shot of that kind of level of performance to continue for the rest of the fiscal year..

And you kind of alluded to the fact that you expect to exit fiscal 2020 with backlog similar to where you began the year.

Given your commentary about what's going on in the industrial side of the business and the recent results we're seeing in electrical infrastructure, that would kind of suggest that storage and oil and gas and chemical would have to pretty much carry the backlog bookings profile from now to then.

Is there enough demand out there? What are your thoughts, John, about the opportunity pipeline now versus a few months ago? Has it firmed up in those 2 segments?.

I think really the -- so storage and oil, gas and chemical certainly will provide good backlog growth. We believe storage will provide some of the larger project awards that are going to build in the backlog and provide more long-term visibility. But I think electrical has got -- I wouldn't sell electrical short.

I think that we have a good run of opportunities there to have some good awards in electrical, both on the project -- on the power delivery side, but also on the power gen side. And industrial will be lighter for sure, especially for our mining and minerals and iron and steel clients, but we have some other things going on in industrial too.

There are some fertilizer opportunities out there, and we're looking at working some for -- grain for export and some other things. But if you look through our business, storage and oil, gas and chemical will be good backlog builders for the organization, and electrical will come in behind them..

I guess one last question, on the share repurchase. Can you kind of talk about what your expected timing of the share repurchase is? And what does that say about the M&A pipeline? I know it doesn't take a lot of dry powder out, but is it saying that maybe just the multiples out there just aren't attractive? I guess address those 2 comments..

Sure. So we're -- as Kevin said, our intention is to purchase the $20 million worth of stock through the end of the second quarter.

We do have limitations on how many shares we can buy on a daily basis, and -- but we think we can get to the total number of shares that the $20 million will provide us by the end of the fiscal year -- I'm sorry, by the end of the fiscal quarter. On the M&A front, we're continuing. This does not change our perspective on finding the right M&A targets.

We've had -- this quarter, we've had a couple of deals that we've looked at, have done a bit of work on, but the -- either we did not like the pricing fundamentals or were unsure of the culture fit into our organization.

So this doesn't change our desire to do that, but what it does say is we don't have anything imminent within the next quarter that we're going to have to go plop a lot of money down on. But we continue to be active, and we're continuing to look..

Okay, thanks guys. I'll get back in the queue..

Thank you. And our next question comes from the line of Bill Newby with D.A. Davidson. Your line is open..

Good morning thank you.

I guess any more color on the -- I guess the capital project that caused the shortfall in oil, gas and chemical and industrial? Kevin, I think you said that oil, gas and chemical was kind of in the middle of commissioning, so maybe that one is completely behind us, but just I guess expected timelines in terms of finishing both of those projects?.

This is John. In the oil, gas and chemical segment, the project that we're talking about, which we really can't give a lot more information on, but that -- we're going to be substantially complete by the end of this calendar year with that.

So when we were in startup phase and commissioning, we had a piece of skidded equipment that had some technical issues, and I'll leave it at that, that we are working through, and so -- but the result of that caused us to take a charge on the project so that we could get that thing fixed and get the client up and running..

But I would like to add that that's still a good project for us..

Yes. Yes, still has double-digit margins..

Yes..

And on the electrical side, the transmission and distribution project as part of our organic expansion strategy, a project that we picked up, has had some challenges with weather, labor availability and some other things, and so it's caused pressure on the margin, obviously, that we had to -- felt as though we had to take a charge on.

And that job is 60%-ish kind of completed, but it'll be continuing to work through the second quarter and I think partially into the third quarter..

John, does that -- I mean, just with the difficulties you guys have had on that project, do you re-think how you're approaching the organic expansion of that business?.

I don't think so. I mean, when you're doing inorganic expansion for businesses and you're moving into service territories that maybe you haven't worked in before or with clients you haven't worked with before, they're going to create a little more challenges than you would if you're kind of a hometown contractor.

So it's unfortunate and certainly is not what we want, but it's not something that changes our vision, long-term vision, for the business. It may heighten -- I mean, it heightens the need for acquisitions in that space to be able to attract labor, client, experience, geographic experience.

So it highlights -- I think it highlights the importance of the M&A side of that expansion, but it certainly doesn't change our vision for what the future of that segment looks like..

And then just another one on the storage business, if I could.

Is there -- I understand that execution has been great across the board over the last couple quarters, but is there maybe a pricing element to these margins? I mean, we've talked a lot about the competitive environment with some of the kind of issues that the bigger competitors in the space -- I guess I'm wondering if we're starting to see you guys benefit from kind of being the only ones in this space that haven't experienced issues..

I think that's part of it, right, and part of it, I think it's opened up some more opportunities for our business on some projects, small and large, that before we might not have gotten a second look from, from some clients. So I think that has benefited us. There's a lot of activity, which is helpful on the margins.

You get -- especially on the tank work, you sort of get into a cadence and run when you're going from tank job to tank job to tank job. It keeps our people together, they continue to gain more experience, we can continue to look at better ways to do things, and I think that has a lot to help -- does a lot to help with the overall performance as well.

On some of the larger capital projects, we're -- it's generally a shorter list of competitors, and many times we're involved upfront with the client on the feed work.

We're doing the engineering, so we're able to kind of control our destiny a little bit better when we have control over the engineering, all the fabrication and all the equipment deliveries, and I think -- so when we do a very, very good job on the front end of those projects, they really help us perform well when we're in the field..

I also think this demonstrates why we held onto talent during the downturn and why we've been adding talent into the organization over the last 12, 18 months as we saw backlog increasing..

I guess just on that topic, one more, if I could. I mean, that business is expected to kind of keep growing here through the end of the year.

Is there -- are you bumping up against capacity constraints from a labor perspective at all, or do you feel pretty comfortable about you guys' just capacity to keep growing that business?.

No, we feel very good about where we are from a capacity standpoint. Plus, a lot of these projects, it's timing of how they all flow together.

And as projects are -- or as pieces of projects are unwinding, our crews move from a project to a project where they're maybe winding up, and so, no, we feel very good about our capacity, and we're looking for more. So we've got plenty of people, and we want to keep them busy..

And our next question comes from the line of Noelle Dilts with Stifel. Your line is open..

So, John, I think you maybe talked about this with us when you reported the fourth quarter, but as you look at the higher end of your guidance versus the lower end, what are some of the things that have to come through to get to the higher end, and what are some of the concerns that are kind of built into the lower end of that guidance?.

Concerns would be how is the current economic and political environment going to affect the spending plans for many of our key clients. And so we're in pretty good shape this year for -- as we move into the year from where we are from a backlog level, and for us to -- for this fiscal year.

So the question really is how is that going to impact bookings and then those bookings going into our fiscal 2021. The upside of it is we need to not have a couple of margin fades on projects. Some of the projects out there that we see, actually their bookings accelerate where we're able to move some of those revenues into the back half of the year.

That'll create opportunity on the upside of the guidance range. So it's really about -- it's probably really about the -- more than anything, it's about the timing of awards. So we're in good shape for the year, and we'll continue to have sort of what we like to call a ham-and-egg quarter, quarter-over-quarter, like we had this quarter.

I mean, having a multiple of 1 in this quarter, there wasn't really a lot of big projects in that. It was just kind of smaller stuff and maintenance deals and expansion on some of our existing projects. So those would be the kinds of quarters I think we're going to have here until we get into the second half of the year.

So then the timing of awards on some of the bigger projects we're tracking and bidding on and working with clients on, if that stuff comes sooner than what we currently are planning, it'll have a tendency then to drive up, of course, revenues and margins..

And then could you just expand a little bit in terms of what you're seeing around labor availability and any wage inflation and your ability to pass that through? Just trying to get a sense of what you're seeing generally in the labor markets..

We've been -- in general across our business, we've been pretty effective at attracting labor to all of our projects. With a national footprint, we're able to really draw labor from coast to coast. Wage pressure has been -- wages have climbed up, but they haven't been -- hasn't been extreme changes in wages that were unexpected.

In general, we're either able to build escalation into our projects or we pass that escalation risk onto our clients in our contracts.

And where we're probably having some of the most pressure on labor is related to linemen, and so that's some of the things this year that we've seen on this project in electrical infrastructure that we took a charge on, and linemen are a very scarce resource. In the country, the demand is very, very high with all the infrastructure needs.

Again, when you move into a new service territory, the linemen that work in that area are pretty much wed to the local contractors that have a steady base of operations there, and that's what makes the acquisition piece of this so important.

In our Northeast part of our business where we've got a steady presence, we've got steady crews, and we're able to combine our linemen with what we call inside electricians on a lot of our projects to get a kind of more robust labor pool.

But I think it's something we're continuing to watch for -- across the entirety of our business, and we're -- to date, we've done a pretty good job of managing the -- our demands of labor..

Thank you. And I'm not showing any further remarks. I'll now turn the call over for closing remarks..

I want to thank everybody for joining us today, and I appreciate the good questions. And we look forward to talking to everybody at the end of next quarter. Thank you..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..