Pike Electric Management Discusses Q3 2013 Results - Earnings Call Transcript

May. 7.13 | About: Pike Corporation (PIKE)

Pike Electric (NYSE:PIKE)

Q3 2013 Earnings Call

May 07, 2013 11:00 am ET

Executives

Frank Milano

J. Eric Pike - Chairman, Chief Executive Officer and President

Anthony K. Slater - Chief Financial Officer and Executive Vice President

Analysts

Min Cho - FBR Capital Markets & Co., Research Division

Saagar Parikh - KeyBanc Capital Markets Inc., Research Division

Adam R. Thalhimer - BB&T Capital Markets, Research Division

Liam D. Burke - Janney Montgomery Scott LLC, Research Division

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Operator

Good day, everyone, and welcome to the Pike Electric Corporation Fiscal Third Quarter 2013 Results Conference. Today's conference is being recorded. And at this time, I would like to turn things over to Mr. Frank Milano, Vice President of Investor Relations for Pike Electric Corporation. Mr. Milano, please go ahead.

Frank Milano

Thank you, Sarah. Good morning, and welcome to Pike's earnings conference call to review the results for our fiscal third quarter 2013, which ended March 31, 2013.

Joining me this morning are Eric Pike, our Chairman and Chief Executive Officer; and Anthony Slater, our Executive Vice President and Chief Financial Officer. Our Chief Accounting Officer, Jeff Calhoun, will also be available for the Q&A portion of today's call.

We will be referencing a slide presentation throughout the call today. For those of you accessing today's call through the webcast, the slides are automatically available. For those of you that have dialed in to today's call, you can download an Adobe PDF version of the slides from the Investor Center section of our website at www.pike.com. Please turn to Slide 2.

During this call, the company will make forward-looking statements. These are statements that are either not historical facts or represent statements regarding the company's intents, beliefs or expectations with respect to trends affecting the company's operations, financial, general, economic and market conditions and growth and operating strategies. Financial expectations and estimates, for example, are forward-looking estimates.

During the call, the company will reference certain non-GAAP financial information. In accordance with Regulation G, we have included a reconciliation of the GAAP to non-GAAP financial information in today's presentation. We also routinely include the GAAP to non-GAAP reconciliation in our Form 10-Q and Form 10-K filings. The risk factors and management discussion and analysis sections of the company's annual report on Form 10-K, quarterly reports on Form 10-Q and other SEC filings describe the factors that may affect future results of the company's operations.

Any forward-looking statements made today contained in Pike's public statements or made by management should be considered in light of these factors. The company undertakes no obligation to revise these forward-looking statements to reflect events or circumstances after today's call.

We filed our earnings release on Form 8-K last night and a copy of that release is also available in the Investor Center section of our website. A replay of today's call will also be available online later today.

And with that, I'll now turn the call over to Eric Pike, our Chairman and Chief Executive Officer. Eric?

J. Eric Pike

Thanks, Frank. Good morning, everyone. Thank you for joining us. I'll start by providing a short financial overview and some business highlights from the quarter and after my comments, Anthony will provide a complete financial review before we open the call to your questions. If you'll please turn to Slide 3.

Pike's fiscal third quarter represents a challenging quarter to describe. In many regards, it was a very positive quarter, with total revenues up 23% year-over-year to $200.2 million and diluted earnings per share up 33% year-over-year. Additionally, we reduced our debt position by $16.5 million during the quarter. However, the gross profit of $25 million and net income of $2.7 million or $0.08 a share don't correlate to the revenue growth in the additional storm response. This quarter's gross profit and earnings performance were negatively affected by 3 primary factors. First, snow and wet weather conditions impacted our distribution workforce. Second, we incurred a high level of training cost for our distribution workforce; and third, we absorbed a large amount of expansion cost during the quarter.

The most significant of these were the weather impact on our distribution crews. I would invite you, while I speak, to look at the photos we've included on Slides 4 and 5.

As you are aware, significant storms can generate great returns for our company. Likewise, sustained rain and snow conditions without power outages significantly impact our ability to be productive on the job. Often, we're able to pull off jobs during difficult weather conditions with just a few hours of lost time. However, because our crews have been gone for so many days during the major storm events in Q1 and Q2, several of our customers insisted we catch their work plans back up. We did this, but it was not profitable work for Pike.

Our productivity dropped to one of the lowest levels we've seen as our crews worked through extremely muddy conditions, day after day, to get our customer jobs back on schedule. These actions were further affected by the additional storm work we performed during the quarter. These quarter's storm reflected several smaller and more scattered events and they occurred largely during the regular work week. As a result, the displacement effect was much higher than we had experienced when we had storm work over the weekends.

While our fiscal third quarter or calendar first quarter is normally the most challenging from a weather versus productivity perspective, this year proved to be more widespread and impacting than we've seen in many years. Measuring against last year's unseasonably warm dry weather makes for especially difficult financial comparison.

The second major area of impact involve the training costs within our distribution workforce. Consistent with our remarks on prior earnings calls, we continue to see significant growth opportunities for our distribution crews. We anticipate this strength will continue throughout the summer months and into the fall based on the current business climate.

In addition, we see the potential for sustained improvement in housing, which will benefit our Underground Distribution business, and we are now actively negotiating several new customer contracts.

We believe this growth, for the first time in several years, will challenge the available labor market for talent. For that reason, we decided to increase our workforce training during the third quarter. This training will enable us to promote from within, by preparing individuals in our workforce for crew leadership positions and advancements in lineman classification. This investment in training should also allow us to generate new crews from our existing workforce and hire more entry-level help to rapidly expand our crews as opportunities arise.

Some of these growth opportunities are already happening, and as a result, the third component affecting our returns this quarter was start-up cost for tools, equipment mobilization, as well as new office locations for both Pine Valley and UC Synergetic.

Pine Valley has continued to expand its footprint and now will be working in Texas, Colorado and Hawaii. UCS has just secured a significant telecom engineering contract in Southern Florida, and is rapidly expanding in acquiring local talent to meet this customer's needs.

Considering these 3 items, I'm very pleased with the quarter's performance. And in no way do I feel that we have diverted from our strategy or our long-term margin profile. The simple truth is that several of our customers that routinely allow us to utilize their pipe crews on storm asked that we help catch up their work plans and we did.

Unfortunately, the weather was extremely wet and snowy this year compared to the same quarter last year. The bad weather eroded the additional margins we would have generated by the increased amount of storm work in the quarter. And additionally, we chose to invest in our people and we continued our expansion during the quarter.

That's the bad news. The good news is that each of these 3 factors is behind us. The weather in our fiscal fourth quarter has been milder and our productivity has normalized. We also continued to see strong growth in our transmission and substation businesses, and we're poised to execute on the increased demand we're seeing year-over-year from our customers, particularly for our diversified services platform.

In addition to this quarter's positive cash flow, we expect to realize strong cash flow next quarter as we continue to collect outstanding storm receivables. Debt reduction remains our primary focus, and we will continue to fund our organic expansion opportunities as we work to complete the integration of UC Synergetic. We will continue to execute on our strategy and fully expect our fiscal 2013 to be the record year for the company in size of service territory, total revenues and earnings.

This concludes my comments for now. And I'll turn the call over to Anthony for a more in-depth review of the financials. Anthony?

Anthony K. Slater

Thanks, Eric, and good morning, everyone. If you would please turn to Slide 6, I will begin with a review of our consolidated results.

Despite a difficult comparison against what was, at that time, a record core performance in fiscal third quarter 2012, we have now increased year-over-year revenues for 11 consecutive quarters. You may recall that last year's unseasonably warm, dry, winter and spring weather helped us grow revenue sequentially in the fiscal third quarter last year, which is not a customary trend for our business.

Core revenue increased $18.3 million to $174.8 million and storm-related revenue increased $19.1 million to $25.4 million this quarter.

Fiscal 2013 now ranks as the second highest storm year with storm revenue of $158.6 million for the 9 months ended March 31, 2013.

Total revenue increased 23% year-over-year to $200.2 million. Gross profit totaled $25 million or 12.5% of revenue this quarter. As Eric discussed, the higher gross profit from this quarter's storm-related services was offset by the increased snow and extremely wet weather, which caused lower productivity in our Construction segment.

In addition, we incurred an unusually high amount of training cost this quarter following the significant storm quarters in September and December. Expansion costs for Pine Valley and UCS also affected gross profit as we purchased tools, mobilized equipment and incurred start-up costs in our telecom engineering business. These additional telecom engineering costs were related to a significant geographic expansion for one of our existing customers.

General and administrative expense increased 15% year-over-year to $18.7 million this quarter. As a percent of revenue, general and administrative expenses totaled 9.3% of revenue this quarter, an improvement of 70 basis points year-over-year. The acquisition of UCS added approximately $700,000 to G&A this quarter.

We also invested approximately $900,000 to support the fiscal expansion and revenue growth in our business, primarily in the western United States for compensation and benefits, plus other people-based expenses such as recruiting and travel.

Income from operations totaled $6.5 million or 3.2% of revenue, an improvement of 30 basis points compared to the same quarter last year. Our effective tax rate this quarter was 44.1%, based on our year-to-date tax rate of 38.5%. We suggest that you use 38.5% tax rate in your models for the fiscal fourth quarter and full year 2013.

Net income totaled $2.7 million or $0.08 per diluted share. Now please turn to Slide 7.

Total storm revenue includes both storm restoration, as well as storm assessment and inspection services. We only include storm restoration revenues in our Construction segment. Total Construction segment revenue of $166.7 million was up 16% year-over-year. Distribution and Other totaled $104.7 million, which was down 2% year-over-year. As Eric mentioned, there were several items that affected revenue in the distribution portion of our business.

Storm displacement and lower revenue associated with the wet and snowy weather was the most significant factor affecting distribution revenues. In addition, Tanzania, which was substantially complete at December 31, 2012, accounted for a $3.1 million reduction in distribution revenue year-over-year.

Transmission revenue totaled $23 million, up 24% year-over-year. This quarter marked the first year-over-year comparison with revenue from the South Carolina Electric & Gas project included in both the current quarter and the year-ago period.

Substation revenue totaled $15 million, up 21% year-over-year. This was the second highest quarterly substation revenue in our company's history. The timing of several projects contributed to the strong growth this quarter.

As we've said in the past, the majority of our transmission and substation business is site-specific, fixed-price contracts and the timing of projects, including the start date and the specific phases of work can affect revenue on a quarter-to-quarter basis.

Please turn to Slide 8 for our review of our All Other Operations segment, which encompasses our engineering businesses. Total engineering-related revenue increased 82% to $33.5 million in the fiscal third quarter. The acquisition of UCS contributed core engineering revenue of $16.9 million and storm assessment and inspection revenue of $1.4 million in the third quarter.

On Slide 9, we provide a reconciliation of the 2 reporting segments and the year-to-date information was included in the table with our earnings release. This quarter's Form 10-Q filing, which should be available later today, will also reflect both the quarterly and year-to-date segment information.

Turning to Slide 10. We will provide a reconciliation of quarterly GAAP net income to non-GAAP earnings before interest taxes, depreciation and amortization or EBITDA.

This quarter's EBITDA totaled $16.4 million, an increase of $2.2 million over the same quarter last year. As a percent of revenue, EBITDA totaled 8.2% this quarter, down 50 basis points compared to the same quarter last year. Our EBITDA margin was impacted by the 3 items impacting gross profit discussed earlier on this call.

In addition to the quarterly reconciliation shown here, we also provide the reconciliation of annualized results on Slide 16 in the appendix, and we include a reconciliation in our Form 10-Q and Form 10-K filings.

Please turn to Slide 11 for a few balance sheet highlights. Total receivables, including accounts receivable and costs and estimated earnings in excess of billings, improved $28.7 million sequentially to $186.1 million at March 31. We ended the quarter with storm-related receivables of $22.2 million, which is included in that total.

Days sales outstanding or DSOs for total account receivables, including costs and estimated earnings in excess of billings averaged 84 days in the March quarter. This was 3 days better than last year but 13 days higher than the December quarter. DSOs can fluctuate based on the level of storm revenues in the period and the amount of storm-related receivables outstanding at the end of any period.

Working capital improved $13.9 million sequentially, our second consecutive quarterly improvement, and totaled $125.6 million at the end of March. Working capital turnover improved nearly 1 full term to 7.1 terms this quarter.

Debt totaled $191 million at March 31, representing a $16.5 million reduction compared to the prior quarter. All of our outstanding debt is on the revolving credit facility and we continue to expect that our primary use of cash will be to pay down our revolver balance.

Please turn to Slide 12 for a few cash flow highlights. We generated $29 million in cash flow from operating activities this quarter, increasing our year-to-date total to $65.9 million. Capital expenditures totaled $9.9 million this quarter, increasing our year-to-date total to $27.6 million.

Both the quarterly and year-to-date amounts primarily reflect our investment, vehicles and equipment used to service our customers and support our growth. We continue to expect fiscal 2013 capital expenditures, for the period ended June 30, 2013, will total between $35 million and $40 million.

That completes my remarks. Eric, I'll now turn the call back over to you for closing remarks before we open the call to questions. Eric?

J. Eric Pike

Thanks, Anthony. As I mentioned in my opening remarks, this was a challenging quarter from an earnings perspective, but not from an overall health of the business perspective. I'm particularly pleased with the way our crews responded to our customers' needs and how we invested in the future. I believe these investments in our business will pay out in the near future as we continue to see improvement in housing, and as we finalize the negotiations related to several new contracts that could involve good headcount additions.

Our transmission work continues to grow and we see an active pipeline of bid opportunity, which bodes well for the future. Our engineering companies continue to be on schedule for the full integration of UC Synergetic by the end of the calendar year, which should sustain the cross-selling momentum we have seen in both our Construction business as well as our engineering businesses. These facts, coupled with strong cash flow and debt paydown, position Pike's family of companies for continued strong growth and performance in the future. That concludes my prepared remarks. Sarah, we'll now open the call up to questions.

Question-and-Answer Session

Operator

[Operator Instructions] We'll hear first from Min Cho of FBR Capital Markets.

Min Cho - FBR Capital Markets & Co., Research Division

A couple of quick questions. So it sounds like -- I mean, I understand the reason that your distribution business was down, but outside of the storm displacement and some of the weather impact, that business looks like it continues to move forward and it sounds like you're making some good headway even on the underground side ahead of housing. Can you give us a sense for what your headcount is there, even on a year-over-year or sequential basis?

Anthony K. Slater

Total headcount for the company is approximately 5,900, which is down just slightly compared to the end of the calendar year, which is really more just a seasonal change.

Min Cho - FBR Capital Markets & Co., Research Division

Okay. And do you expect that headcount on the distribution side to continue to increase? I know that you had talked about headcount being an important, kind of, measure on the growth of that business.

J. Eric Pike

Yes, we do, Min. I mean, we think that in our fiscal Q4 and Q1 next year, I mean, those are the sort of peak construction seasons, that's when you're going to see more crew adds, which is really the reason for the training cost that we incurred. I mean, we -- from a productivity, from a knowledge standpoint, we would rather have the leadership on our crews be generated from in-house and bring in lower skilled talent than we would try to go out and try to acquire talent because we do think that there's certain markets that we're going to be in, that the rebound is going to be pretty strong and we won't be able to meet that demand, but also not be too constrained on the labor side.

Min Cho - FBR Capital Markets & Co., Research Division

Okay. And then, in terms of your training cost, should we expect that to continue through the next couple of quarters or do you view that more as a onetime impact?

J. Eric Pike

They'll be a little bit -- additionally in Q4, just as we cover the entire sort of south -- the old Pike Electric workgroup, but nothing on the scale of what we did. We hit a lot of people in that quarter because it was a time when we had a lot of them down, we couldn't work in some positions. So we tried to take advantage of it even though it was a bit of an earnings hit.

Min Cho - FBR Capital Markets & Co., Research Division

Okay. And then, on your engineering business, it looks like excluding the UCS, and this is just on your core services, that revenues were down about 17% year-over-year. Is that mostly an impact from SCANA's mix shift or can you talk to any project timing or seasonality associated with your engineering business?

J. Eric Pike

Yes. The vast majority of the revenue swing is going to be on the material procurement side. We're not seeing it as a dramatic shift in the underlying core services revenue in that legacy engineering business. As we've mentioned in the past, some of the material procurement for our EPC projects flow through that group and it can vary quarter to quarter.

Min Cho - FBR Capital Markets & Co., Research Division

Okay. Yes, it looked like that was actually a little bit lighter than it's been in the last couple of quarters but -- okay. And then, just finally, I was wondering if you were doing anything internally. I know the clean line energy project is a big kind of project that's out there, still waiting for permits and approvals and things. But are you doing anything internally in preparation for that and how are you feeling about the project getting -- moving forward?

J. Eric Pike

Min, we're not doing a tremendous amount internally in terms of positioning or right now acquiring equipment, that sort of thing. Right now our development group and our engineering group are working really closely with Clean Line and Fluor as we go through the final siting positions and the initial design phase. So there's a good bit of work that's going on there, but there's nothing as far as, like, to assemble a workforce yet.

Operator

Our next question today will come from Tahira Afzal of KeyBanc Capital Markets.

Saagar Parikh - KeyBanc Capital Markets Inc., Research Division

This is actually Saagar on for Tahira. First off, looking at your gross margins, I know you qualitatively explained the 3 reasons why. Is there a way to -- Anthony, give more of a quantitative number around what the impact was from all 3 combined or the 3 individually. And then, also was there any impact from fuel hedge, your fuel hedging programs on the margins?

Anthony K. Slater

Yes. I'll start with the fuel hedging. Fuel hedging impact this quarter was very immaterial. It was around $300,000 of an impact. So nothing that we would've called out in our scripted remarks. As far as the impact of the other 3 items, I think the best way for us to try to give you some sense of scale is that as we've noted in our scripted remarks, the impact of those 3 items pretty much offset the favorable margin impact from the storm activity this quarter. So it was a material impact from those 3 items.

Saagar Parikh - KeyBanc Capital Markets Inc., Research Division

Okay. In terms of -- Eric, in terms of pricing, you're saying that in your markets, you're starting to think more about labor being more constrained as the distribution market heaps up. Are you seeing any changes in pricing? You said that you're actively pursuing contracts. Are you able to get that pricing power yet or is that something that's still maybe 6 months to 12 months off or farther than that?

J. Eric Pike

You're starting to see some -- a little bit of movement in pricing, not a tremendous amount. I think, if the labor becomes constrained, you will see more movement in that. But with some of the accounts that we are negotiating with right now, if we were able to get even a modest amount of pricing improvement plus add heads now, we'll see that have positive leverage on the margin.

Saagar Parikh - KeyBanc Capital Markets Inc., Research Division

Okay. And last question for me, and I think you mentioned that you are expanding your Pine Valley operations into Texas, Hawaii, Colorado. Could you give us some more color on that, exactly what they're going to be doing there, how -- do you guys already have a presence in those markets? What's enabling them to get into those markets and be successful?

J. Eric Pike

Yes. Right now this would all be expansion -- distribution crew expansion. And it is really building on their momentum and success that they've had on the West Coast with customers there, both through their own organic efforts and also, through some combined efforts with sort of the senior management of Pike. We've been able to open some doors and there's just been some opportunity there. Actually, the Colorado opportunity stemmed out of the UCS work that we're doing. That was a cross-selling opportunity that the customer they were providing engineering for wanted additional distribution crews, and Mike was able to step up and answer that. So that's where we're seeing it right now.

Operator

Our next question will come from Adam Thalhimer, BB&T Capital Markets.

Adam R. Thalhimer - BB&T Capital Markets, Research Division

Eric, what exactly happened in the quarter in terms of -- you said your utility customers -- was it that you asked your normal customers to release guys to go work on storms and they wouldn't let you do that or they released their people for storms but then said, hightail back here so you can finish these projects or what exactly happened on that front?

J. Eric Pike

No. Basically, those guys were gone so much during Q1 and Q2 that the work plan got behind and basically, we were -- if you saw some of the pictures in the slide deck, that was the type of conditions that, normally, had we been up pretty close, we might have just shut the crews down for a few weeks. But the customers said, "Look, you were gone for 2 quarters working storm, we need to get our work caught up. We've got to have you go ahead and work, even in these conditions." And so that was the result. These are customers that are good customers of ours, they're generally happy to release our crews to go help along storm and generate extra margins, but their work plans, because of such big storms in Q1 and Q2, we had to take -- and bite the bullet a bit to get them called up in Q3 in very adverse weather conditions.

Adam R. Thalhimer - BB&T Capital Markets, Research Division

Okay. That makes a lot of sense. And then, you commented a little bit on how -- what the flow was between Q3 and Q4. I mean, are you caught up now from the storms or are you still trying to catch up but now the weather is better?

J. Eric Pike

For the majority of it, we're fairly caught up. There may be still a little bit, but when the weather improves, we're back in the more normal productivity levels.

Adam R. Thalhimer - BB&T Capital Markets, Research Division

Okay. And can you quantify at all or just maybe give us a sense for just your base distribution business. It sounds like you -- do you see the crew counts going up, you see the labor hours going up. I mean, how much up do you think the labor hours might be over the next couple of quarters?

J. Eric Pike

Well it really depends on if we see the construction and housing growth that we feel like is coming based on dialogue with our customers. I mean, right now we've added some crews in the early part of Q4 and we feel like we will add substantially more over the end of Q4 and into Q1. But we've got to see if those materialize or not. Right now all the indicators are good, but I couldn't give you a number right now.

Adam R. Thalhimer - BB&T Capital Markets, Research Division

Okay. And then, what about what the -- well, it just seems like you have a lot of irons in the fire in terms of the expansions at Pine Valley and UCS, housing, distribution, maintenance getting better. I mean, when -- do you feel like that all comes together for you in Q4 or is that more of a fiscal '14 event?

J. Eric Pike

Well, I would say that the consolidation of our engineering group will really be at the end of the calendar year. That's -- we're on schedule for that, for PES and UC Synergetic to combine as one entity and also UCS to be fully integrated. So there'll be some of that over it, but really, as I mentioned to Saagar a little bit earlier, we're already getting benefits from these in terms of cross-selling opportunities on the Construction side and vice versa on the engineering side. So I think it's coming together pretty well right now. We'll just have to see if it just continues to pick up pace as we go across the summer.

Operator

[Operator Instructions] Moving on, we'll hear next from Liam Burke with Janney Capital Markets.

Liam D. Burke - Janney Montgomery Scott LLC, Research Division

Eric, you saw a lot of -- obviously you saw a lot of storm activity in the first 3 quarters of the year. Have you seen any conversion of storm customers in the more permanent contracts in terms of maintenance?

J. Eric Pike

Yes. Yes, we have, Liam. I mean, there are several customers that have -- there are some smaller new customers that we have served, that we have been able to introduce our engineering group in after the assessment in the Northeast, and there have been some smaller co-ops that we've added some crews on that we assisted during the various storms, but probably more importantly, there've been some customers that have added several crews because of the level of storm work in just getting their system back up to specifications. So you do see some downstream effect of that and that's really what we look for, long term, in the storm work. It's just Q3 has been such a sloppy quarter on the distribution side for general work.

Liam D. Burke - Janney Montgomery Scott LLC, Research Division

Sure. Now I just -- in the fourth quarter, I mean, you highlighted exactly what the problems were on a profitability side on the distribution. As we go into the fourth quarter, are you seeing the trends on the profitability of that business improving?

J. Eric Pike

Yes. I mean, we're going to certainly have much less training cost there. We've absorbed, unless we get another good opportunity to expand, we've absorbed just about all the expansion cost for PV and UC Synergetic in Q3, and we're seeing both the weather and the productivity levels both improved substantially over Q3 and Q4.

Operator

Our next question comes from Noelle Dilts of Stifel.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Can you just talk a little bit more about your engineering business and kind of just general demand trends, what you're seeing there in terms of inquiries, if they're meeting or exceeding your expectations. And then, could you remind us what your procurement revenue was for 4Q '12 and if you have any thoughts on what you're expecting in the fourth quarter of '13?

J. Eric Pike

Anthony, do you know the procurement revenue?

Anthony K. Slater

Yes. I mean, really -- once we really try to split out the segment information, we really pull back on our disclosure of the material procurement as an individual business line. It certainly is a driver for part of the business including the EPC work.

J. Eric Pike

And we don't have it broken out any more.

Anthony K. Slater

Noelle, in terms of the engineering, I mean, engineering is -- we're very pleased with it. I mean, obviously, it's going through some integration. Part of what we're doing is because that procurement piece is lower-margin, we're tending to focus the more legacy PES unit of trying to find more opportunities to do engineering and construct rather than with the procurement piece, if we can do that. But as we have brought on the UC Synergetic group, and as they're combining the 2 entities, we've continued to be extremely pleased because this is now layered over the top of our distribution construction, much more visibility into the workloads that are out there. It's put us much more in tune with sort of sidebar pieces that are additional revenue lines, whether they center around Smart Grid, whether they center around relay and control installation, all of that's cross-selling real nicely and we're also moving the distribution engineering farther and farther west. So as far as their momentum right now and what they're doing, I'm real pleased with where they're going.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Okay, great. Second on -- you talked a little bit about your housing exposure on the call. I just like you to go into that in more detail, if you can talk about where you're seeing pockets of housing strength. I know that you're kind of exposed to a specific type of homebuilding, so maybe you could touch on that. And then, if you could also -- given some of this expansion into new geographic territories, could you just talk about how you think your exposure to housing compares to the last cycle?

J. Eric Pike

Well, I think with the expansion, it just improves because if we are expanding in the distribution front and housing comes back, we will be in more markets than we were historically. So I mean, I can't see that as anything but a positive. In terms of where we're seeing housing growth, I would tell you that we're seeing pockets around different metro areas start to come back, but the more telling piece to me, and part of the reason why we chose to do the acquisition of UCS is UCS has added, for several of our major utilities for the first time in many years, underground subdivision designers. So that tells me the work is coming, which is a much more concrete piece of data for me than just trying to see where there's a little bit of activity.

Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And the last question. We talked about, for the fourth quarter, if there's still any catch-up on some of these projects or some of the work where you've got a little bit behind. We kind of talked about that from -- I think if there could be a hindrance or if that could be a negative going into the fourth quarter. But do you think that given all of this, just the wet weather and some of the delays, do you think you could see more of a seasonal pickup in the fourth quarter than you would traditionally, do you think there's any kind of positive amount of deferred work that might be coming out?

J. Eric Pike

I don't know if I would say it was deferred work. I think there's certainly some chance that if some of the contracts that we're looking and what we are at least hearing dialogue of increased distribution spend come to fruition, that you could see a little more robust fourth quarter than maybe we have in the past. But by and large, our fiscal fourth quarter and first quarter tend to pick up in work just because they are the more seasonal construction down periods.

Operator

With that, we have no further questions. Mr. Pike, I'll turn the call back to you.

J. Eric Pike

All right, thank you, Sarah. We just like to thank everybody for joining in on our third quarter call, and we look forward to updating you shortly on our fourth quarter results. Thanks, everyone.

Operator

Ladies and gentlemen, that does conclude today's conference. Again, we do thank you all for joining us.

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