Wajax Corp

TSX:WJX

Earnings Call Transcript 2018-Q3

[Operator]

Thank you for attending Wajax Corporation's 2018 Third Quarter Results Webcast. On today's webcast, will be Mark Foote, Wajax President and Chief Executive Officer; Mr. Darren Yaworsky, Senior Vice President, Finance and Chief Financial Officer; and Mr. Trevor Carson, Vice President, Financial Planning and Risk Management.Please be advised that this webcast is being recorded. Please note that this webcast contains forward-looking statements. Actual future results may differ from expected results.I will now turn the call over to Trevor Carson.

[Trevor Carson]

Thank you, operator. Good afternoon, everyone, and thank you for participating in our third quarter results call. This afternoon, we will be following a webcast, which includes a summary presentation of Wajax's Q3 2018 financial results. The presentation can be found on our website under Investor Relations, Events & Presentations.To begin, I'd like to draw your attention to our cautionary statement regarding forward-looking information on Slide 2. Additionally, non-GAAP and additional GAAP measures are summarized on slides 13 through 16 for your reference.Please turn to Slide 3, and at this point, I'd like to turn the call over to Mark.

[A. Mark Foote, President, CEO & Director]

Good afternoon, and thank you for joining us. So I'm looking at Page 3, and we had a reasonably strong third quarter. Obviously, revenue was a good story at up 23%. We'll talk about the regional breakdown about that in just a second, and the categories. EBIT was an 11% increase to $16.5 million. We're pointing out, I think, in the commentary there that the SG&A percentage of sales was a bit higher than we'd like to see. And if you've had a chance to read the MD&A, you'll see this referenced in there to a couple of things that added to SG&A, probably the most noteworthy of which was an increase in incentive compensation accrual, which was worth pretty close to $3 million inside of that number. So that's 80 basis points of the 14.8% of sales.Adjusted basic EPS was up about 20% to $0.54 a share. And we're very, very pleased to thank the team and report that our safety performance in the third quarter was quite good. We saw a TRIF rate of 0.84, and the recordable incidents down being -- down 48% compared to the same quarter last year. So thank you very much to the team for the people who are listening. That was an excellent performance in safety in the quarter.Turning to Page 4. Those are -- that's the regional view of revenue. Just focus primarily in the third quarter on the left-hand side of the page. You can see that both in Western and Eastern Canada, we saw some very nice increases, so that -- we're very pleased with that. I think we continue to push hard on our performance from a revenue standpoint in Central. We were marginally up in the third quarter, and we're marginally up for the year. But that is a key area of focus for the business right now is improving the rate of growth and the stability of growth in Central Canada. To that point, we've -- it's probably worth mentioning that we've changed some of the senior sales leadership structure. Historically, we have run our general sales teams for Québec and Ontario under 1 leadership structure. We've actually split those regions into 2 so that we've got a real strong focus in Québec, Atlantic, and a renewed focused in Ontario. On a year-to-date basis, you can see how the regions breakdown. Pretty consistent growth between Western and Eastern Canada. And as I said, a big focus on that 3% growth in Central Canada, primarily Ontario improving as we go forward.On the next page, from a revenue analysis standpoint, you can see the breakdown between the equipment sales, industrial parts and product support. Fairly balanced quarter from a sales growth standpoint. Obviously, equipment sales are carrying the day for the quarter and on a year-to-date basis, which obviously bodes well for product support in the future. And that said, in the third quarter, we had a very strong quarter for product support in the third quarter, driven primarily by some increases in mining, which was very positive.Turning to the page on revenue by category. This page you see every quarter, so I won't go over too, too much of it. I think 2 points to make on this page. We've positioned the business looking forward on the basis of the majority of growth coming from our construction, material handling and the ERS businesses. And we have achieved our budget on a consolidated basis on those businesses on a year-to-date basis. So we're reasonably pleased with the total performance of those 3 businesses together.What's helping our revenue line and some of our results as we kind of look forward is that, in the other businesses, our core strength categories, which are listed in the center from industrial parts down to power and marine and our more cyclical categories between mining and crane & utility, those businesses are performing in aggregate a bit better than our original expectations. And we continue to be reasonably confident that the types of business -- the types of volumes we're seeing in mining are something that may be a bit better going forward in our strategic plan than we originally anticipated.I think, at this point, I'm going to turn it over to Darren.

[Darren Julian Yaworsky, Senior VP of Finance & CFO]

Sorry about that, folks. That was my technical error. On Slide 7 -- and thanks Mark for turning it over to me. As Mark previously mentioned, we experienced a strong improvement in our EPS year-over-year on a year-to-date basis. And in the third quarter of 2018, adjusted basic EPS improved to $0.54 from $0.45 for the same period, same quarter in the prior year, representing an approximate 20% increase. The earnings improvement relates primarily to higher revenue, improved SG&A productivity and lower financing costs, which were partially offset by lower gross profit margins, which were in line with our expectations.Overall, SG&A as a percentage of revenue declined 120 basis points to 14.8% from 16% in the prior year. On a year-to-date basis, adjusted EPS improved approximately $0.51 (sic) [ 51% ] to $0.74 from -- $1.74 from $1.15 from the prior period. The earnings improvement relates primarily to higher revenue, improved SG&A productivity and lower finance costs. SG&A as a percentage of revenue declined 140 basis points to 14.2% from 15.6% in the prior year. Overall, our year-to-date finance cost decreased $1.9 million, or approximately 25%, given the lower average interest rates associated with calling our senior notes in October of last year and using our enhanced credit facilities in their place. This amount was partially offset by higher average debt levels.I'm moving to Slide 8. Our Q3 2018 backlog increased $69.9 million or 41% on a year-over-year basis and decreased to $16.7 million or 7% sequentially from Q2. The year-over-year increase relates primarily to higher mining, power generation and forestry orders. The quarterly decrease relates primarily to the fulfillment of construction, material handling and mining orders. We remain encouraged by the strength and breadth of our sales pipeline as we enter the fourth quarter. I'd like to note that these backlog figures do not include RPO equipment, which is currently classified as inventory and expected to convert prior to the year-end.I'm now moving to Slide 9. Inventory, including consignment, increased $74.6 million compared to Q3 of '17 or $16.1 million sequentially from Q2. And it's high across all product categories as a result of the strong market conditions. I will note that the majority of that $16 million relates to inventory held for RPO as well as a temporary location in which we're holding material handling product before it gets converted into our rental fleet.This reflects our higher revenue expectation for 2018 relative to 2017. However, growth in inventory has slowed relative to the previous quarter.We continue to be proactive as possible with our manufacturing partners to order to satisfy customers' demand. Manufacturing lead times have extended in certain categories, including construction and large engine systems and are continuing to work to secure sufficient supply to achieve our targets with a particular focus on the second half of 2019.We do not have any concerns with our current inventory levels, which align with our growth objectives for the year. That said, we are expecting that inventory levels will decrease in the fourth quarter as the RPO conversions materialize, which we anticipate will be a net positive impact on working capital, cash flow and leverage.Now moving to Slide 10. Our Q3 leverage ratio decreased slightly compared to Q2 from 2.18x to 2.6 -- 2.16x, primarily related to higher debt levels offset by higher trailing 12-month EBITDA. While we are marginally above our target range of 1.5 to 2x leverage, we're not concerned with this as largely it's a result of continued investment in inventory and CapEx, which we expect to drive growth and higher cash flow in the future. On October 16 and subsequent to quarter-end, we drew on our credit facilities to fund the acquisition of Groupe Delom, which Mark will speak to in a moment.Considering this, plus the expected impact on the reduction of working capital over the fourth quarter, we expect our leverage ratio to be below 2.5x by year-end. We're also continuing our focus on working capital efficiency, which is a key component in managing our overall leverage targets. Our working capital to sales ratio and inventory turns have remained stable over the past 12 months. As our financial performance continues to improve, we're seeing a return on net assets increase on a trailing 12-month basis. Our long-term strategic plans calls for investments above historic levels and higher net assets. However, we're committed to increasing RONA on both the short and the long term as we continue to focus on enhancing or EBIT margins.Finally, the board has approved our fourth quarter dividend at $0.25, payable on January 3, 2019, to shareholders of records on December 14 of this year. We remain confident in the sustainability of our dividend across the business cycles.With that, I will turn it back over to Mark.

[A. Mark Foote, President, CEO & Director]

Thank you, Darren. 2 pages left. We thought we would call out the Groupe Delom acquisition that was confirmed on October 16. So very pleased to welcome the management team and the staff of Groupe Delom to Wajax. We'll start reporting on Groupe Delom's results effective the fourth quarter. And as a reminder, the business is roughly about $70 million trailing 12-month revenue business with some reasonably strong EBITDA, so -- and it's ticked the boxes on all of the acquisition criteria that we have. So that's something we're very pleased with.And we're quite excited about the revenue opportunities. We looked at the return on the investment in Groupe Delom, simply on Delom's organic growth and some minor cost synergies that we expect to materialize over the course of the first 24 months. That said, Wajax's sales force in front of what Groupe Delom is capable of doing and access to a larger base of customers that Delom can support on their own previous to joining Wajax gives us some real optimism that that's going to be a very, very solid extension of our products and services to -- particularly to our large resource and industrial customers and help Groupe Delom grow quite nicely.Okay. And just turning, finally, to the outlook, and we're reasonably close to the end of the year, so the outlook is fairly self-evident. We had called this year to be an increase in earnings by the end of the year. So that's, obviously, going to be the case. We've enjoyed some reasonably good market conditions. So -- and we've also seen some good market share increases according to our expectations in the inventory investments that we made. And I would call it in particular that Western and Eastern Canada have had some pretty solid market conditions, a bit more stable in Central Canada, so not as obvious market increase across all of our categories when viewed for -- through the entire year, but we wanted to thank the team for the fact that in addition to generally positive market conditions, the company has done an excellent job of gaining share in the categories where it was focused, and we're reasonably comfortable with how the year is going to play out for the remainder of the 2 months.And thank you very much. And we're going to, I think, turn it back to you, Trevor, and open it up for questions -- operator, sorry.

[Operator]

[Operator Instructions] Our first question comes from Derek Spronck of RBC.

[Derek Spronck, Analyst]

My first question -- as you're pursuing market share gain in targeted and select areas, are you seeing any sort of competitive response rate now to your approach?

[A. Mark Foote, President, CEO & Director]

I guess, the short answer is yes. Although it's not -- I think it depends on which particular category and deal. I think the market share increases that we are focused on are in construction and material handling. With -- the construction equipment business by definition is pretty competitive every day. So I don't think that we've seen a fundamental adjustment on the part of competitors and how deals are being priced or how aggressive the market is in general. I think you might have seen a little bit more competitive reaction in material handling, but at least, to this point in time, not something that's affected our ability to grow that business. So I think the market conditions have been generally positive. So that may, to some extent, change the dynamic the extent to which that was to change. But so far, we feel reasonably comfortable that we can maintain the kinds of growths that we originally expected.

[Derek Spronck, Analyst]

In terms of your competitive positioning, outside of price, what are you offering in terms of capturing that additional market share? And is it smaller players than Wajax that is the key focus? Or is it some of the larger players or a bit of both? Or is it kind of a market-to-market, product-to-product kind of situations?

[A. Mark Foote, President, CEO & Director]

If I understand the question, typically, the people we are trying to wrestle share away from would be larger than Wajax. So the price is certainly a factor in the equation, but product support is a much bigger deal. So we, I think, are doing a reasonably good job of -- the product is excellent, very competitively comparable in both construction and material handling and in other categories, put them in the context of this question. But the real requirement for Wajax to gain share is to develop a high degree of confidence on the part of the customers that our parts and services will be there to support them. And so far that's working out reasonably well.

[Derek Spronck, Analyst]

Okay. And maybe just, I think, Mark, one more for myself, and I'll turn it over. Your outlook that you provided in March, to a certain extent, has a fairly wide range of potential outcomes that you've highlighted. How do you feel -- I know it's still fairly early days, but how do you feel in terms of how you're tracking to that -- to your outlook that you provided in March? And it appears that consensus is below that. Any way to just kind of triangulate that?

[A. Mark Foote, President, CEO & Director]

I think it's reasonable for people outside of the company thinking about the guide rules we've set up from an expectation standpoint to discount them a bit because those are higher rates of growth than the company has typically put up. I would say, when we think about the next 2 years of our business, we were just deep into this topic this morning. I think when we look at the next 2 years of our business, we're fairly comfortable with the internal targets that we've set for ourselves. But we acknowledge when we launch the strategy that 2019 and 2020 were bigger years for growth than 2018 was expected to be. We've done a bit better in 2018, I think, than we originally expected. So the gap to the following years is maybe a wee bit less. But we've got a lot of work to do to deliver on those things, but we certainly haven't changed our minds about what we think we're capable of.

[Derek Spronck, Analyst]

So you feel -- not putting words in your mouth, but you're tracking a little bit ahead. And so as of right now, we're kind of -- can point towards the midpoint of that outlook? Or is it still too early to say it really?

[A. Mark Foote, President, CEO & Director]

You're the pro. I'm going to -- you asked, so I'm going to let you figure that one out. I would say that we -- the 2 things to keep in mind, 1 is we have pretty consistently said that the growth rate expectations on the part of the company were higher in 2019 and 2020 than they were in 2018. And we have a lot of work to do to achieve those. Having said that, we haven't changed our thinking on what targets we should be shooting for.

[Operator]

Your next question comes from Michael Doumet of Scotiabank.

[Michael Doumet, Analyst]

Mark, maybe I'll just follow up last question there. I mean, you talked about your internal targets and external targets or external views. In your opinion as you think about '19 and '20, what do you think major disconnects are in terms of expectations?

[A. Mark Foote, President, CEO & Director]

I don't know, Michael, to be perfectly honest with you. I think it's reasonable if you're looking at the company from the outside to discount the company's internal targets. I think that's a pretty reasonable thing to do from your side of the table. I'll just go back to what I just said, I mean, we're driving this business towards generally the outlook we previously provided and that's what we're really focused on. So I would suggest that if there is a difference between what the expectations are outside the company or inside the company, it's an execution risk issue. And I understand that because there's a lot of moving parts in Wajax that have to work in order for those numbers to be true. But our entire team is focused on delivering the outlook we previously provided.

[Michael Doumet, Analyst]

I appreciate that, and it's a fair comment. Maybe another way to address it is really just going about it in terms of market share growth. If you could sort of recap how your market share in 2018 has sort of evolved throughout the year and maybe what the expectations are going forward.

[A. Mark Foote, President, CEO & Director]

We don't publish the absolute levels of share. The market share numbers in our plan that are important are in the construction business and the material handling business. And I think, roughly speaking, there is about a 50% increase in market share from where we are today to the end of that outlook period in construction excavators. And it's less significant in material handling. There's a couple of other moving parts there. So those 2 things are really where we focus a lot of our energy. The trick for us is we have tried -- because the company has had a history of being reasonably tied to commodity cycles, our focus in the plan for the business for the long term has been to really drive growth in categories that provided more stable outcomes and so that's why we're focused. I think if you think about the outlook and the company's performance, the extent to which we fall short on 1 category where we have the opportunity to make it up in other places. So if, as an example, you thought that our construction market shares were too aggressive, you'll recall that we planned some of our other businesses at near trough levels. And so the extent to which they perform better, then the numbers at the bottom of the P&L kind of tumble out perhaps in roughly the same fashion. So we've tried to mitigate the risk inherent in growth of a commodity-sensitive business by focusing on categories that are -- where we can gain share and have high inherent profitability. And the extent to which we have execution risks there, hopefully, we can make that up in some of the other categories we've been much more conservative with. We don't worry too, too much about the productivity of the business. That's something we focus on quite a bit. And we haven't planned the gross margins in a very aggressive way at all. So that -- all that being said, we feel pretty comfortable with our ability to do it sans some significant shock that we're not expecting and, hopefully, doesn't affect us as much as it used to because we've really focused on businesses that aren't as susceptible to the change.

[Michael Doumet, Analyst]

That's great color, Mark. Appreciate it. Maybe just moving on to the SG&A rate, specifically, in the quarter. That crept up. And I think you commented that incentive accruals was the primary driver behind that. Can you just elaborate on that increase? And just for us maybe should we think that as, call it, a step function increase to accommodate more business? Or is that, really, a onetime expense item in the quarter?

[A. Mark Foote, President, CEO & Director]

You'd said -- there's about $6.5 million or so increase in SG&A in absolute dollars on a year-over-year basis and about $3 million of that relates to an increase in the accrual for incentive compensation across fairly wide range of employees, and that's just because the business is tracking better than was originally anticipated when we kind of built those expense plans. So that's a legitimate cost. So it's not like I'm saying it's not part of SG&A, but I would say that that's probably more of a one-timer than necessarily a function of run rate. When we reset the budgets and targets for the business and we build our budgets for a year, we will plan the incentive part of the business just basically on hitting budget. And we, typically, don't adjust that until we have reasonably high confidence about where the business will end. So we took the adjustment in Q3 to increase the incentive comp. It is a material portion of the increase in absolute expenses. There's a bunch of higher personnel costs in there, obviously, because the business is growing reasonably quickly, and it is a people business, so there is more people that we need, there's more techs that we need, et cetera. But it's arguable that you can take about 40% of that increase in absolute costs or, roughly, 80 basis points and call that not necessarily a run time expense -- a run rate expense.

[Michael Doumet, Analyst]

I'm going to squeeze in one last question -- I've been on the mic for some time, but you -- just going into '18, you stocked up pretty well on inventory, right? And I think that's been a good call given the strong demand. I think you've got some orders secured well into '19 as well. But just as we think about fiscal 2019, just on the whole, how should we think about free cash flow and working capital? And if there's any sort of level that you're targeting to either pay back the debt or reinvest back in the business for M&A?

[Darren Julian Yaworsky, Senior VP of Finance & CFO]

Michael, probably 2 angles to be able to respond to that question. The first is supplier constraints. So if we are seeing the limitations on the OEMs to be able to provide us with the supply to be able to hit our back end of '19 target, there may be a need for us to pre-buy like we did last year. Absent that and assuming that there is normalized supply-and-demand balance, we probably would see ourselves actually reducing the level of inventories as we convert. Again, that is subject to whether or not there is some sort of anomaly in the market either to the good or to the bad. With regards to overall leverage targets, fully anticipate by, likely, mid next year, we'll be back within our leverage target. If -- the caveat again to that is, if we have to buy up inventory, that leverage target achievement will probably be pushed out. And when I say within our leverage target, it's taking into consideration the Delom acquisition.

[Operator]

Your next question comes from Michael Tupholme with TD Securities.

[Michael Tupholme, Research Analyst]

Just with respect to SG&A expenses and SG&A as a percentage of revenue, recognizing you called out the incentive comp impact on the quarter. But nevertheless, you've seen good improvement in terms of SG&A as a percentage of revenue this year relative to the last. Just wondering how we should think about the potential improvement into '19 apart from some efficiencies you're in pursuit of now. If you can comment on that.

[A. Mark Foote, President, CEO & Director]

Michael, we've said that 14.5% to 15.5% is the range. I think probably a good walking-around number is closer to 14% as we think about how we're building some of our internal expectations. It's a function of where the revenue lands, but that's probably a good walking-around number.

[Michael Tupholme, Research Analyst]

Are you not lower than that already though for this year, Mark, or at the bottom end? So do you think everything is sort of already in there?

[A. Mark Foote, President, CEO & Director]

No, so a range, I think, in the outlook was 14.5% to 15.5%, and we're saying that you can probably build a model based on 14.0%. And that -- we don't want to say where we're going to end up for the whole year, but that's not too, too far off where we are year-to-date.

[Michael Tupholme, Research Analyst]

Right. Okay. So I guess, just what I wanted to clarify is that it sounds like you're already close to the lower end of that range. Is there anything else you're in pursuit of right now as far as efficiencies that could help further? Or is sort of everything already in there at this point?

[A. Mark Foote, President, CEO & Director]

No. We're always looking, Michael. There's a couple of -- and you would know this, I think, from our investor presentation, there are 2 major projects that go into operation in 2019: one is the ERP and the second is the customer support centers. They both have an effect on SG&A rates that are positive. But just because of the phasing of those projects and managing the risks associated with them, it's probably best to make the assumption that the extent to which they're positive for the run rate SG&A, that's more of a 2020 argument than a 2019 argument. I mean, we're always looking for different forms of efficiencies that are tactical, but kind of the structural changes relate to major programs, where the delivery dates, because of the risks associated with those projects, are things that we carefully phase in over the course of next year. And I would suspect that any major effect on expenses would be after that.

[Michael Tupholme, Research Analyst]

Okay. That's helpful. If I look at the disaggregated revenue breakdown that you provide, we've seen very strong growth in equipment sales on a year-over-year for 4 consecutive quarters now. Just wondered if you can talk about how we should be thinking about the ability to continue to drive growth there going forward, given that the comps do start to get somewhat tougher starting at the fourth quarter this year?

[A. Mark Foote, President, CEO & Director]

I don't want to get into the category-specific stuff because, I think, we got a couple of moving parts where our focus on equipment sales will be. I mean, it'll remain in construction and material handling, but it's also possible our mining numbers will be better than we originally expected. And our primary numbers have actually turned out pretty well. So we continue to be -- we think it's realistic to think about our growth rates being reasonably consistent into next year. The -- so we do come up against tougher comps, but our internal forecasts are based on that continuing for a wee bit. I think our bigger issue is external to the company in that there's 2 factors to consider: one is, obviously, we've got some decent market conditions, so that's helpful; and secondly, we have to land the inventory in order to sell it. And so we're working pretty closely with major manufacturers right now to make sure that they can keep up, which is a kind of a day-to-day discussion. So feel reasonably good about the revenue. Maybe the shift between categories is a bit different than we originally expected, but we're comfortable with the growth rates we're putting right now in aggregate. And so they may shift between categories, but in aggregate, we think we can keep going.

[Michael Tupholme, Research Analyst]

Okay. And then just lastly, you touched, Mark, on opportunities associated with bringing Groupe Delom into the fold in terms of -- [ by project ], capabilities and customer bases and whatnot. I'm just wondering if you can talk about how quickly you might be able to start to get some of those opportunities or synergies now that you have the acquisition completed?

[A. Mark Foote, President, CEO & Director]

You know what, I think the short answer is, reasonably quickly. We're going to report Delom as part of our ERS business. So we may not specifically show Delom's growth go forward. I would be happy to comment on it. We're not going to necessarily publish the numbers exactly the way the business is structured today, but I'd say, reasonably quickly. Delom operates -- 60% of its sales are in Canada, 40% are outside of Canada, but the inside of Canada sales are typically Central and Eastern Canada focused and, obviously, our biggest business is in the West. So the type of work that Delom does, access to the customer base that we have and access to the sales teams that we have should take advantage of the latent capacity in some of Delom's operations reasonably quickly. That said, the return investment for Wajax just at the rates of growth that Delom is effectively at today made it a pretty good investment for us. So I think we can do better than that, but it's just that we've got Wajax people embedded in Delom today. We're very close to the management team there. We're quite excited about what the folks there are capable of doing. And we're hopeful that we can drive a much higher rate of growth than our business case was at least based on.

[Operator]

[Operator Instructions] Your next question comes from Devin Dodge of BMO Capital Markets.

[Devin Dodge, Analyst]

Just wanted to start with the market share growth strategy. My understanding of the strategy is that it was at least in part supported by the limited availability of products from other OEMs. Now we heard from the Canadian cat dealers this morning, they suggested availability has started to get better. Have you noticed, I guess, broadly speaking, that some of your competitors' availability is improving. And then as a follow-on, as availability improves across the sector, do you expect to make any material adjustments to your plans to go after market share?

[A. Mark Foote, President, CEO & Director]

I can't say with 100% certainty that we're the best people to comment on competitors' availability. I think that they typically run bigger productions than we do from a manufacturing standpoint. So I think their availability -- I would assume their availability has improved through the year, but that's an assumption on my part. But none of that really changes what the focus of our business is. We've got market share gains to go after, and regardless of what their availability is, our plans wouldn't really change.

[Devin Dodge, Analyst]

Okay, fair enough. Can you talk about your sales pipeline in the mining sector? I think you alluded to it in your prepared remarks. But I think last quarter, you were hopeful that some mining shovel orders could come forward. Just any update you can provide there would be helpful.

[A. Mark Foote, President, CEO & Director]

Yes, we're working on -- the list of mining opportunities right now is actually pretty long. So there are some fairly significant new developments that we're working quite hard on with customers in both the power generation and the equipment side. And we've got some excellent oil sands based customers that were reasonably comfortable will be requiring some additional equipment under some deals that were struck earlier this year. They're multi-unit deals. We haven't seen the subsequent orders to those just yet. But we're reasonably comfortable that we will see them come through sometime in the next 3 to 6 months, we believe. So now those don't turn into money until late 2019 and into 2020 just because of the lead time associated with that kind of gear. But the mining pipeline for Wajax is quite strong right now. It has not turned into backlog yet, so it's important to recognize those are deals we work real hard on, and sometimes we win and sometimes we don't. But the activity levels in mining are quite strong across a fairly broad range of businesses.

[Operator]

There are no further questions at this time. I will now return the call to our presenters.

[A. Mark Foote, President, CEO & Director]

Okay. Well, thank you very much for your time today. We appreciate that, and we look forward to talking to you with our fourth quarter call in March. Thank you.

[Operator]

This concludes today's webcast. You may now disconnect.