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Aegion Corporation (NASDAQ:AEGN)

Definitive Agreement to Acquire Brinderson Conference

June 25, 2013 10:00 am ET

Executives

J. Joseph Burgess - Chief Executive Officer, President, Executive Director and Member of Strategic Planning & Finance Committee

David A. Martin - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Analysts

Glenn Wortman - Sidoti & Company, LLC

Arnold Ursaner - CJS Securities, Inc.

Eric Stine - Craig-Hallum Capital Group LLC, Research Division

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

Gerard J. Sweeney - Boenning and Scattergood, Inc., Research Division

Operator

Good morning, and welcome to this Aegion Corporation Conference Call. [Operator Instructions] As a reminder, this event is being recorded.

Management has provided a presentation to further explain strategic rationale for this announcement. The presentation can be found on Aegion's website at www.aegion.com. Any financial or fiscal information presented during this call, including any non-GAAP information, the most directly comparable GAAP measures and a reconciliation to GAAP results will also be available in Aegion's website at www.aegion.com.

During this conference call, the company will make forward-looking statements, which are inherently subject to risks and uncertainties. Results could differ materially from those currently anticipated due to the number of factors described in our SEC filings and throughout this conference call. The company does not assume the duty to update forward-looking statements. Please use caution and do not rely on such statement.

I will now like to turn the call over to Joe Burgess, President and CEO of Aegion. Sir, you may begin

J. Joseph Burgess

Thank you, and welcome to our call this morning to discuss a significant move we plan to take to broaden our presence in the U.S. energy market. With me today are David Martin, Senior Vice President and Chief Financial Officer; David Morris, Senior Vice President and General Counsel; Brian Clark, Senior Vice President of Business Integration; and Ruben Mella, Vice President of Investor Relations and Corporate Communication.

Earlier this morning, we announced the execution of a definitive agreement to acquire Brinderson, L.P. and its related entities for $150 million. We expect to close the transaction on or around July 1, 2013. This transaction is a continuation of our strategy to expand our earnings by transforming our company from a $450 million wastewater contractor to a diversified provider of infrastructure protection and rehabilitation. Aegion surpassed $1 billion in revenues last year. Soon, we'll become a $1.3 billion company with an even better outlook for value creation and sustainable growth.

We've been transparent about our desire to increase our participation in the long-term growth of U.S. energy markets, while also securing new sources of recurring revenues. We believe the addition of Brinderson to our Energy and Mining platform furthers these objectives. Brinderson is a leading integrated service provider of maintenance, construction, engineering and turnaround activities for upstream and downstream oil and gas facilities, primarily on the West Coast. In other words, Brinderson is responsible for keeping its clients' facilities running in a safe and reliable manner. The integrated solutions it provides involve anticipated and unanticipated repair of mission-critical systems and equipment, excavation and rigging and subcontracting management, which can include anything from new construction to turnaround or plant shutdown maintenance and replacement activities. Brinderson has approximately 2,000 employees, 200 of whom are program management and engineering professionals across the chemical, civil, structural, electrical and mechanical disciplines. While facility maintenance is the company's core competency, it also successfully cross-sells other services its professionals are known to perform exceptionally well. These attributes have allowed Brinderson to build a strong reputation for quality, reliability, and perhaps most notably, safety. The company's exceptional track record has resulted in long-term associations with blue-chip names such as Chevron, ExxonMobil, Occidental Petroleum, Valero and BP, to name a few. What most attracted us to Brinderson was its successful transformation from a project-based construction business into a much stronger maintenance service-oriented company. Today, Brinderson derives nearly 75% of its annual $230 million in revenues from recurring activities. That's compared to 45% for our current Energy and Mining platform. After this transaction closes, Brinderson's annual revenue contribution will boost recurring revenues for our Energy and Mining platform to more than 50%. Brinderson will also add significant scale with Energy and Mining set to become an $800 million to $900 million revenue platform.

Let me elaborate more on the market opportunity we see for this business. Brinderson opens a whole new end market for us. It allows us to take our first major step inside the fence of what we believe is a growing segment of the energy market. There is a remarkable transformation occurring in the U.S. where unconventional extraction methods are driving growth in the upstream and downstream end markets. Investment is growing rapidly to maintain, refurbish and expand production, flow lines, gas processing, terminals and other upstream facilities. Nearly all of the expected growth in U.S. production over the next few years will come from the Lower 48 states, including California, which is the fourth largest oil-producing state and Brinderson's home market. The demand for petroleum products is expected to grow 20% by 2020 compared to 2008. Refinery utilization is growing at a market where no new refineries have been constructed since 1976. California alone has 20 operable refineries, making it the third largest market for crude oil refinement in the U.S. In short, refineries are running harder to process new mixtures of crude with their existing assets. There are no greenfield opportunities and brownfield expansion space strict land constraints. These emerging, longer-term trends compound the current base investment needed to address aging infrastructure and increasingly stringent regulatory requirements. We are pleased that Brinderson's senior management team has agreed to join us after the close. The outlook in the company's core California market remains robust, and Brinderson is in negotiations on a significant amount of new work. Because of its sustained presence at the facilities it serves, Brinderson also developed a great track record for cross-selling its multiple services. Upstream investments by the major players in California doubled in 2013 from 2012, some of which is for deferred maintenance. The downstream market is defined by centralization of the procurement process, which we believe benefits Brinderson because of its integrated service profile.

Brinderson has also made an initial move into the Texas Permian Basin through the completion of maintenance contracts for upstream clients. Some of the company's large customers are inviting it to do more in this region, a positive indicator in an industry where customer relationships are paramount. Aegion's entry into the downstream and upstream segments of the U.S. energy market is a first step toward a more complete technology and service portfolio for our customers, some of whom we share in common with Brinderson. We believe Corrpro and Fibrwrap will complement Brinderson's service portfolio with their corrosion engineering and structural strengthening capabilities, including seismic and blast protection. Our efforts to add complementary technologies and services from Energy and Mining will take time to develop, but I believe there are many cross-selling opportunities ahead.

I think the best way to view Brinderson is through the lens of our acquisition of Corrpro. Although each serves different segments of the energy market, both Brinderson and Corrpro share similar traits for successfully building long-term relationships. Both companies maintain on-site presence and are on the front-end of the planning process with their clients. Both companies depend on long-term contracts and master service agreements as their source for recurring revenues. You need highly skilled engineers and technical staff to plan and execute the complex task both companies perform. Energy customers also place a premium on safety, and both companies have proven safety records. We've been very successful in expanding Corrpro's operating margins from 8% when we acquired it in 2008 to an expected 12% to 13% in 2013. We are accomplishing this through our focused effort to expand higher-margin services, while streamlining the business where it needed to reduce operating expenses. Brinderson, too, has a strong outlook for growth and opportunities to expand margins through services such as turnaround, shop fabrication and hydro excavation, where gross margins are in the low- to mid-20s compared to its core maintenance margins in the mid- to high-teens.

We've recently formed an internal integration team with more than 60 years of combined experience in energy and chemical procurement, as well as human resources integration. This team is establishing a plan to bring our 2 companies together in a way that ensures Brinderson's bright future and allows it to maintain its strong customer relationships. These efforts will allow the Energy and Mining platform to remain focused on executing this business plans with little or no disruption. From a financial perspective, this transaction was expected to be modestly accretive in 2013 to earnings per share. We affirm our 2013 earnings per share guidance of $1.60 to $1.80 now on a non-GAAP basis because of the $4 million to $7 million in pretax acquisition-related expenses. It's premature to give guidance for 2014, but we fully expect the transaction to be significantly more accretive in 2014 beyond just the full year contribution.

In terms of cash flow from operating activities, the Brinderson acquisition will also be accretive this year, supporting our expectation for generating more than $100 million in 2013. Brinderson is a low capital-intensive business, and therefore, very efficient in translating earnings into free cash flow. They have a free cash flow conversion rate of 24% of gross profit. This is considerably better than the peer average of 20%. With Brinderson's positive growth outlook, we believe the transaction would be accretive to return on invested capital, inclusive of goodwill and other intangibles within 2 years. For 2013, Aegion's return on invested capital is expected to be in the range of 7% to 8%, exclusive of acquisition-related expenses.

This announcement today marks an important step forward for Aegion. It enables us to broaden our participation in a growing segment of the U.S. energy market, filling the gap we currently have in the upstream and downstream markets. It also allows us to reduce earnings volatility from the project-oriented segments of our Energy and Mining business. Brinderson has a great outlook in a fast-growing segment of the energy value chain. Aegion is in the business of protecting and rehabilitating infrastructure, primarily pipelines. With today's announcements of the definitive agreement to have Brinderson become part of our company, we are in a better position to fulfill that vision.

Well, that concludes my remarks, and I'd like to turn the call over to the operator for Q&A. Thank you very much.

Question-and-Answer Session

Operator

[Operator Instructions] We have a question from Glenn Wortman of Sidoti.

Glenn Wortman - Sidoti & Company, LLC

What was Brinderson's top line growth over the last year, and then also looking back, say, over the past 5 years, and then if you could speak to the growth opportunity you see going forward?

J. Joseph Burgess

In the last couple of years, they've grown dramatically based on acquisition of maintenance contracts. I think the company over the last 3 or 4 years has gone through a pretty dramatic conversion, as I said in my remarks, around being a basically a contracting company who would show up and bid on works, on projects inside the fence on either a lump sum or a time-and-material basis and converted -- they've converted themselves into a maintenance contractor, which is really what attracted us to them. During that conversion, if you look back to 2008, they were roughly, over the last 5 years, they're roughly the same size company they are now because they took the company through a strategic change that was very, very significant. But we think that was very, very appropriate. So we see it, and I think this is in our presentation, we think, really, with just to focus on their primarily California markets, we think they have a plus 10% growth opportunity near term.

Glenn Wortman - Sidoti & Company, LLC

Okay, okay. Now, do you find using any cash on hand to fund the transaction or just the credit facility?

J. Joseph Burgess

What was that question? Sorry, I didn't hear you.

Glenn Wortman - Sidoti & Company, LLC

Do you plan on using any of your cash on hand to fund the transaction?

David A. Martin

Certainly for the cost of the acquisition, the transaction costs and so forth, we will use it. It will be a funded barrier and credit facility, the purchase price.

Glenn Wortman - Sidoti & Company, LLC

Okay, then. Also, if you could speak to the competitive environment or Brinderson's major competitors? It sounds like they're gaining share on the maintenance side, if you could just talk generally about those things?

J. Joseph Burgess

Yes, I mean, it's a fairly competitive market, as most things are. So the competition in this arena ranges from larger firms like Jacobs, Babcock & Wilcox to smaller more regional firms, certainly in Northern California, that have kind of migrated from labor shops to more maintenance and turnaround orientations. So it's a mixed bag, but we certainly feel like the package of services that Brinderson has put together with a focus on integrated services, which include engineering combined with maintenance service gives them has shown a competitive advantage really over the last 2 to 3 years, and we think that will continue into the future.

Operator

Our next question is from Arnold Ursaner of CJS Securities.

Arnold Ursaner - CJS Securities, Inc.

I guess, I want to try to focus on the MSA agreements which have jumped and tie it together back within maintenance contracts. Maybe that it'll help us better understand the business you're buying, Joe. You could walk us through a typical MSA agreement and what is covered in a maintenance contract?

J. Joseph Burgess

Sure. What they do on some of their typical maintenance contracts and, Brian, you could jump in with details, is they put together a master service agreement, which will include pricing for basically providing a standalone maintenance department, if you will. So it includes everything from the project management and administrative on that function on down to wage rates. You'll get into things like certainly the cost for particular tools, whether they own them or don't own them. And then, of course, applying those as they generate work orders throughout the year. And of course, Brinderson provides and has paid for providing, and I think this is one of the larger advantages, productivity measures and key metrics, time with the fixed assets, whether we're the owners or theirs, overall productivity measures, and those things combined to kind of create a costed bid, if you will, that offers best value for the customer. And then they're selected for either a 2- or 3-year period. Then on top of that, you will tend to price, provide pricing for line item things that will be additive to the base code, and that's -- to the base contract, and that's where really there are engineering that then leads to small capital project construction comes in. So obviously, when you're in these facilities, when you open up the assets to maintain them, you see other things that might -- that can drive additional revenue opportunities. And I think Brinderson's getting a lot of traction by bringing in both engineering and then, of course, they have a long history of capital projects execution capability that they add to that mix. So that integration -- that integrated approach, in our view, is driving the growth, which is really been spectacular in their space.

Arnold Ursaner - CJS Securities, Inc.

Joe, you were asked before about competition. Isn't it really the game here that they are replacing in-house capabilities and perhaps doing it in a more cost-effective basis? And if so, if that is the case, what typically can Brinderson provide in the way of cost savings for our customer?

J. Joseph Burgess

Well, outsourcing has been the norm in this space for a while, so there's not a lot of their sales processes going and saying, How about we take your guys and just to it with fewer guys. They really -- they certainly are competing with, Hey, how can you save me dollars? But it's as much, it's a more qualitative sale with that with, How can you help me maintain the uptime and the utilization rates of my facility, while doing that, by the way, in a 0 tolerance for any injuries, safety environment. So from that standpoint, people are interested in transferring the workers. But it's really about cost and uptime as combined as a value proposition versus, Hey, we've got 70 guys, can you figure out how to do it with 58? That's not really what they're selling.

Arnold Ursaner - CJS Securities, Inc.

Real quick question for David, seasonality of the business?

David A. Martin

It's very similar to ours. I would say that their fourth quarter is their strongest quarter, but it's not like significant variations to other quarters.

Operator

Our next question is from Eric Stine of Craig-Hallum.

Eric Stine - Craig-Hallum Capital Group LLC, Research Division

Okay. I just wanted to touch on the growth. Can you talked about 10%-plus that these are given under long-term contracts, I mean, should we think about this as Brinderson adding new customers, or is it more about just expanding within the footprint of current customers?

J. Joseph Burgess

Yes, I think it's a mixture of a few things. Certainly, we think that they have upside in the primary California market. We're obviously buying them, so we know they're in significant negotiations with both the mix of existing and potentially new customers of long-term maintenance opportunities. We also think that we've been -- we see a trend in those markets to consolidate procurement on the maintenance side which again, I think, creates advantage for Brinderson because they can provide both the basic level of maintenance services, but then they have engineering resources and the execution capability to, once issues are identified, to translate that into execution around capital projects and potentially turnarounds. So we actually expect the capital projects side of their business to grow. But unlike the past where they just kind of shown up to bid on projects that are announced, this is very much something that I think they have the ability to drive through being on the ground, providing the maintenance function and then using there engineering capability to sell into capital projects. I also think that expansion will come by moving into different geographies. I think that they've already followed on the coattails of some of their larger clients into the Permian Basin, which of course has just seen an enormous amount of investment in the upstream markets, which are just now turning their attention to maintenance and capital programs. So they've already leveraged that into some pretty significant work, the first of its kind for them anyway in 2013. We would think that they could also get to the Bakken from their base of operations on the West Coast. And of course, as I suggested, we certainly see both the opportunity to create a leverage off of the OpEx base that you have here and essentially growing ROIC by capturing revenue growth within their current system.

Eric Stine - Craig-Hallum Capital Group LLC, Research Division

Okay. Maybe this, on the topic of expanding the different geographies, how should we think about that in terms of the type of investment that would require on your end?

J. Joseph Burgess

It's a pretty low -- as we said, it's a very low CapEx business, mainly because most of the capital is basically provided by the customer base as they go into it. Now that changes as you get to other aspects of the business, maybe more sophisticated turnarounds and that type of thing. So I think as you go to geographies, you're really talking about being able to project your project management capability and demonstrate to people that you can bring the same level of project management, craft labor management, and of course, wrap all of that in a program that a customer feels like will come off safely, which is a primarily concern in these facilities. So it's really, it's more of an OpEx play, I would say, for geographic expansion.

Eric Stine - Craig-Hallum Capital Group LLC, Research Division

Okay, that's helpful. Maybe just one last one for me. I guess, you didn't really hint at it, but you talked about this. It sounds like this is just the beginning. I'm just curious what another areas in Energy and Mining you feel like you could add that could make a lot of sense?

J. Joseph Burgess

Well, yes, I talked a little bit about the drivers in this market and they're multifaceted. The -- first and foremost, the U.S. and I would expect that to North America, is really just an incredible place in terms of transitioning from severe energy dependence to sprinting towards energy independence. And of course, that's around some of these unconventional sources that have spawned just a tremendous, tremendous investment both certainly in upstream to extract it, and those facilities have to be maintained and we see enormous opportunity there; and then downstream, as I discussed in my remarks. You've seen actually pretty large growth in refining -- overall refining capacity in terms of produced products, but you've seen shrinkage in the number -- in the overall footprint and there's a number of refineries, and that's putting -- that's obviously putting upward extreme upward pressure on utilization rates, which always puts extreme upward pressure on maintenance spend. So we very much view that this is just a tremendous long-term market, with an opportunity for us to get to the P&L side of our clients' spend rates as opposed to the mix that we've seen in some of our businesses that are more dependent on the capital side. I would say then in other geographies, I think you're going to see the same dynamic on the petrochemical side of the ledger, where cheap natural gas is really changing the cost profile of the U.S. petrochemical production costs. And that's -- those utilization rates are driving up as well, so I think you're going to see increased spend in those areas. So when you put all that together, it's -- we think it's a very powerful formula for sustaining growth in these maintenance sectors as we go through, really, the foreseeable future.

Operator

Our next question is from Steven [ph] of Stifel.

Unknown Analyst

First question, you guys have referred to kind of the increasing utilization rates in refineries across the U.S. That definitely seems to be occurring. It seems like California, thus far, has been a little bit isolated from the rest of the country, and it's had a little bit less access to kind of some of the cheaper supply of domestic crude coming on board, and consequently, their utilization rates are, on of the West Coast, have lagged a little bit behind some of the other regions. Do you see any sort of dynamics, be it railroad or increasing supply in California that, in the near to medium term, will kind of bring those utilization rates on the West Coast kind of on par with some of the other regions?

J. Joseph Burgess

Well, there's certainly been new rig capacity in the Central Valley. Brian, you can detail that, yes, the statistics. So that has spawned pretty significant investment upstream. I think what you're describing is the ability to get some of these products to the downstream refining capacity, which of course, problematic is the wrong term, but it has been limited. I guess what I would say is, California, the oil business, this capacity out there has made progress. We think it'll continue to make progress. I mean, certainly, certainly, if you look long term, there's certainly more to be done in the upstream market, and that's just what's existing. And, we're not even talking yet about, of course, the opportunities in the Monterey Shale, which is projected to be the largest formation in the U.S. But we're not talking about that because big well against the state of California would be -- that'll be a big square off, and we wouldn't predict how that turns out. But the state of California and the business up there has been -- is toggled between the third and the fourth largest production state in the U.S. We don't think that's changing. We do think that there's growth. It's certainly not Texas-sized growth because they obviously have a different perspective on that business. But we think that there'll be basic growth in the market. And then we also think Brinderson's model will allow it to capture a good share of that, as well as increase their holdings in the existing market.

Unknown Analyst

Great. And then just to kind of touch on potential growth opportunities within Brinderson, you guys had mentioned several opportunities, the Permian and then potentially moving into the Bakken. But what about the potential in the Gulf Coast, especially on the petrochemical side, is it -- I know that's a pretty competitive market there, but do you see that as a longer-term opportunity for Brinderson?

J. Joseph Burgess

Well, for Aegion, we see it as a long-term opportunity. We certainly -- I mean, we would certainly like to be there. And I was talking earlier about petrochem and you're correct to point out that most of that -- a good proportion of that is on the Gulf Coast. So to participate in what we think will be a very dynamic market for these services, we would have to do something about that. I'd also add that I think that the Brinderson model of providing integrated services and really a second-to-none safety program would work there. It would be -- we just don't know yet whether it's going to be transportable -- just transportable easily from the West Coast to the Texas Gulf Coast because they really are different. They can be, even though it's the same business, they can be different animals, to some extent. But it's certainly a target for us, yes.

Operator

Our next question is from Liam Burke of Janie Capital.

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

Joe, you mentioned a couple of times culturally, Brinderson has a strong cross-selling culture. Do you see the opportunity on the other side of the Corrpro engineers being able to take advantage of Brinderson's relationships?

J. Joseph Burgess

Yes, we do. We talked about a little bit of this in the presentation. We certainly see this as an opportunity to move Corrpro inside the fence, if you will, whereas they've been mainly a -- mostly a pipeline play and mostly midstream on those pipelines. We also think that it's an opportunity for Fyfe to kind of join Tite Liner certainly in the upstream markets, and hopefully, the downstream markets as the technology of choice. And I think it'll help Tite Liner. That business is well established, as you know, but it's not everywhere. And to the extent that we now have engineers and maintenance people that will have a deep understanding of that, could be an increased opportunity for them as well.

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

Now typically, these are longer-cycle sales. Do you have any sense as to how long the integration and cross-selling process can begin?

J. Joseph Burgess

It's probably going to be different for each situation. Our initial plans would be to certainly to pair some assets in Corrpro with the engineering assets within Brinderson, get them exposure to the market and then see what low-hanging fruit would be around there. The more product-oriented plays, Fyfe and Tite Liner, others are, of course, oriented to what problem there trying to solve, so we'll take those opportunities as they come. Yes, I would hope that within 6 months or so, we'll kind of understand the lay of the land there and have a more focused business plan of what that could mean in terms of incremental revenue in profits.

Operator

[Operator Instructions] Our next question is from Gerry Sweeney from Boenning.

Gerard J. Sweeney - Boenning and Scattergood, Inc., Research Division

Following up a little bit on William's note about just the opportunity to cross-sell, but just kind of from a different angle, next year, you said acquisition is going to be significantly more accretive. Is this a function of maybe some of the redundant HR, legal processes being removed from Brinderson? Or just to get a better understanding, does that include any cross-selling opportunities? You've also mentioned some large projects potentially out there in the wings, just a little bit more thought on that accretion?

J. Joseph Burgess

No, it's strictly on what we anticipate to be Brinderson's growth and Brinderson's performance.

Gerard J. Sweeney - Boenning and Scattergood, Inc., Research Division

Okay. And then looking at the contracts, are these annual contracts that Brinderson is involved in, or are there longer-term or even longer-term than that?

J. Joseph Burgess

On the maintenance side, they tend to sign multiple-year contracts. They can be 2 years or 3 years. And then as we were saying earlier, they can also operate and maybe even with the long-term contract, there might be what's called a Master Service Agreement that would provide a lot of line item pricing for additional services. So a lot of the way their business works is, they get the base contract and then as they're going about their day-to-day business, they can identify different opportunities that will then reference a pricing that's already been provided and obviously with the inflation adjusted, as you go through time.

David A. Martin

And they are able to adjust their pricing for wage rates on an as-needed basis. They generally do that annually even in the multi-year contracts.

Gerard J. Sweeney - Boenning and Scattergood, Inc., Research Division

So wage rates are filled in as part of the contract?

David A. Martin

Yes.

Gerard J. Sweeney - Boenning and Scattergood, Inc., Research Division

Okay. And then, any, I guess, contracts in particular that are outsized or larger than others, or is it pretty evenly spread out?

J. Joseph Burgess

No. I would say Chevron is easily the largest customer and then they have large contracts with Tesoro, Oxy Petroleum. Yes, so -- which is, by the way, what they're driving for. I mean, they want to capture what I think the strategic shift that they made here is, again, rather than showing up and working on $1 million or $10 million or whatever the size of the contract was, they wanted to capture a 2- or 3-year maintenance contract that may have a starting value of, pick a number, $7 million, $8 million. I think we have a case study in there that shows how they started with maintenance on a piece of a plant and then grew that to really the entire inside the fence operation and then tack on top of that the small capital works in conjunction with their Engineering Services. And that's a much more efficient commercial model than carrying all the fixed cost to try to bid capital or program work.

Operator

The next question is from Glenn Wortman of Sidoti.

Glenn Wortman - Sidoti & Company, LLC

Just a couple of quick questions to help us with modeling. What was the operating profit for Brinderson over the last 12 months? And then what do you project for total D&A types of that business going forward?

J. Joseph Burgess

I'm going to pump that to David because you know I can't help you with your model.

David A. Martin

Operating profit, I have to get back to you, Glenn. I don't have it in front of me so.

J. Joseph Burgess

Yes, we're all looking at EBITDA numbers.

David A. Martin

And as far as modeling the D&A, we still have to do our purchase price allocation. We haven't closed the transaction yet, so it'd be difficult for me to give you an exact figure, but I would imagine it's around, $65 million or more.

Glenn Wortman - Sidoti & Company, LLC

Okay. And then just also one more just on a quarterly interest expense that you expect going forward?

David A. Martin

Quarterly interest would be about 750 more.

Operator

Thank you. There are no further questions at this time. I'd like to turn the call over to management for any closing remarks.

J. Joseph Burgess

Well, thank you for joining us this morning. I'll just reiterate, we're very pleased to take this step. We've been talking for some time about trying to drive certainly a higher percentage of recurring earnings, but what we're really excited about is now expanding our service portfolio into the downstream and upstream maintenance markets. And we think the drivers there are going to spur significant, significant growth as we go through the near and medium term here. So a big step for Aegion. We're very excited about it, and we really appreciate you guys taking the time to talk to us about it. Good day.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Have a wonderful day.

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