Hill International CEO Discusses Q3 2010 Results - Earnings Call Transcript

Nov. 6.10 | About: Hill International, (HIL)

Hill International, Inc. (NYSE:HIL)

Q3 2010 Earnings Call Transcript

November 4, 2010 11:00 am ET

Executives

Devin Sullivan – IR

David Richter – President and COO

John Fanelli – SVP and CFO

Analysts

Richard Paget – Morgan Joseph

Tim McHugh – William Blair & Company

David Gold – Sidoti

Jeff Rossetti – Janney Montgomery Scott

Arnold Ursaner – CJS Securities

Mark Swaha [ph]

Operator

Good day, everyone, and welcome to the Hill International 2010 third quarter conference call. At this time, I would like to inform you that this conference is being recorded and that all participants are currently in a listen-only mode. I will now turn the conference over to Devin Sullivan. Sir, please go ahead.

Devin Sullivan

Thank you, Tunisia. Good morning, everyone, and thank you for joining us today. Our speakers on today’s call will be David Richter, President and Chief Operating Officer of Hill International, and John Fanelli, Senior Vice President and Chief Financial Officer.

Before we get started, I’d like to remind everyone that certain statements contained in today’s call may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and it is our intent that any such statements be protected by the safe harbor created thereby. Except for historical information, the matters set forth herein including, but not limited to, any projections of earnings or other financial items; any statements concerning our plans, strategies and objectives for future operations; and any statements regarding future economic conditions or performance, are forward-looking statements.

These forward-looking statements are based on our current expectations, estimates and assumptions and are subject to certain risks and uncertainties. Although we believe that the expectations, estimates and assumptions reflected in forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any forward-looking statements.

Important factors that could cause actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in the forward-looking statements include, modifications and termination of client contracts; control and operational issues pertaining to business activities that we conduct on our own behalf or pursuant to joint ventures with other parties; difficulties incurred in implementing our acquisition strategy; the need to retain and recruit key technical and management personnel; and unexpected adjustments and cancellations related to backlog.

Additional factors that could cause actual results to differ materially from forward-looking statements are set forth in the reports filed with the Securities and Exchange Commission. We do not intend, and undertake no obligation, to update any forward-looking statement.

Having said that, now I’d like to turn the call over to David Richter, President and Chief Operating Officer of Hill. Please go ahead, David.

David Richter

Thank you, Devin. And good morning to everyone joining us this morning for our quarterly earnings conference call. Yesterday we announced our financial results for the third quarter and first nine months of 2010. First, we will review the results in detail relative to our year-over-year quarterly performance, meaning third quarter 2010 versus third quarter 2009. Then we will look more closely on our sequential performance, third quarter 2010 versus the second quarter of 2010, which is really what we focus on more closely internally, see how our business has changed over the past 90 days.

For the third quarter of 2010, Hill’s total revenue grew to a record $111 million, a 7.6% increase from the third quarter of 2009. Consulting fee revenue for the third quarter was also a record at $97.4 million, up 12.4% from last year’s quarter. This was due to 3.1% organic growth plus 9.2% growth from acquisitions.

Primary reasons for our change in CFR year-over-year included increases of $6.4 million of North African projects; $2.2 million in Asia-Pacific claims, which was primarily the result of our recent acquisition in the McLachlan Lister in Australia; $2.3 million in New York projects; and $1.8 million in Western US projects; all offset by declines of $5 million in Iraq and $1.7 million in Middle East projects.

Our work in Iraq essentially ended this past quarter after our Stanley Baker Hill JV, spent 6.5 years as the primary construction management advisor to the US Army Corps of Engineers and the Iraq Reconstruction Program, an assignment we are all very proud of.

Operating profit for the third quarter of 2010 was $6.3 million, a 22.6% decrease from the third quarter of 2009. Our operating margin as a percentage of our consulting fees was 6.5%, down from what was a very strong 9.4% in last year’s third quarter. Our overall SG&A as a percentage of consulting fees was higher in the third quarter at 38.7%, which was 36.1% a year ago.

This was primarily driven by the four acquisitions that we closed in the last year’s quarter, adding the SG&A of the acquired businesses which were mostly higher than Hill’s on a percentage basis, plus the related legal and accounting expenses for those deals, plus the higher amortization cost that resulted following the closing of those deals. Our net earnings for the third quarter were $5.1 million or $0.13 per diluted share based on 39.1 million diluted shares outstanding. That number is down 12.6% from last year number.

Looking at our financial performance sequentially, meaning versus the prior quarter, that’s a much clear picture of where our business is heading on a short-term. And the figures I just gave earlier are for year-over-year performance. From the second quarter 2010 to the third quarter, Hill’s total revenues were up 2.6% and our consulting fees were up 6.4%. Our gross profit was up by 12.6%, and even more importantly, as a percentage of consulting fees, increased 250 basis points to 44.9% in the third quarter from 42.4% in the second quarter.

SG&A expenses as a percentage of consulting fees were up slightly by 70 basis points to 38.7% in the third quarter from 38.0% in the second quarter. This was primarily the result of the two acquisitions of McLachlan Lister in June and DCK in July, although it was offset significantly by a strong increase in our professional utilization during the quarter, which was up 210 basis points companywide versus the second quarter. This is the result of a combination of two events; our overhead cost cutting at the beginning of the second quarter and an increase in work during the third quarter.

As a result of the above, our operating profit improved dramatically of 48.6% in the third quarter versus the second quarter. As a result of that plus an effective tax rate in the third quarter of zero, our net earnings were up by even more, 76.8%.

Looking at the sequential performance of our two operating segments separately, they each had substantial improved performance in the third quarter. Total revenues for the Project Management Group in the third quarter were $85.5 million, an increase of 0.9% compared to the second quarter. Consulting fees for the Projects Group were $72.9 million in the third quarter, an increase of 3.7% versus the second quarter.

Higher gross margin by 270 basis points drove operating profit higher to $10.8 million, a 19.1% increase. Operating margin for the Projects Group increased 14.8% in the third quarter, up from 12.9% in the second quarter. This is also versus 7.6% in the first quarter that we have seen significantly improving profitability in that group throughout the year so far. Again, this was despite a significant drop over the course of the year and our high margin work in Iraq.

For our Construction Claims Group in the second quarter, total revenue was 25.5%, a 16.2% increase from the second quarter. Consulting fee revenue for the Claims Group was $24.5 million in the third quarter, 15.1% increase. And operating profit for the Claims Group was $2.4 million, a strong 59.6% increase versus the second quarter of this year. Operating margin for the group also improved to 9.9% of CFR in the third quarter from 7.1% in the second quarter.

As you can see, both groups, despite the economic headwinds, are very nearly back into the normal ranges for operating margin that we historically saw for each of them, which were 15% to 20% of Project Management and 10% to 15% for Construction Claims.

With respect to backlog, Hill’s total backlog at the end of the quarter rose to $599 million, up from $569 million at June 30. 12-month backlog at the end of the third quarter was $255 million, up from $241 million at the end of the second quarter. Our increase in total backlog was primarily driven by the acquisition of DCK, which added $32 million to our backlog. We also had one major project cancellation, which removed $50 million from our backlog. Aside from these two events, we saw net bookings for the quarter of $112 million, an excellent sales quarter for the company and even better than a strong sales performance in the second quarter.

Major new contracts publicly announced since our last conference call included a $22 million contract with the San Francisco MTA; a $19 million to manage construction of the Jabal Omar Development in Saudi Arabia; a $6 million contract to manage a hospital expansion program in Kuwait; five major new contracts in Poland totaling over $5 million in fees; contract to help manage a $4 billion capital plan with the PATH system in New York City; contract to manage construction of the Zoofenster Skyscraper in Berlin, which includes the new Waldorf-Astoria Hotel; and quite a few others that we haven’t yet been able to announce that we expect to in the forthcoming week.

During the third quarter, we purchased approximately 631,000 shares of our common stock in the open market, about 1.6% of our total outstanding shares. This is pursuant to our previously announced $40 million stock repurchase program. Cost of the shares of $2.6 million on an average purchase price of $4.15 per share.

Beginning the program in November 2008, we have purchased approximately 5.8 million shares or about 13% of our then total outstanding shares for a total purchase price of $24.4 million on an average price of $4.19 per share. With our stock most recently trading at, the last time we looked, $5.75 a share today. We view our repurchases over the past two years as having been highly value-added and a good use of our cash during these challenging economic times.

With that, John Fanelli, our CFO, and I are happy to take your questions. Operator, do we have any questions?

Question-and-Answer Session

Operator

(Operator instructions) Our first question comes from Richard Paget with Morgan Joseph.

Richard Paget – Morgan Joseph

Margins in the PM Group, if you kind of look historically and ex out any of the impact from Stanley Baker Hill, they are the highest they have been in a while. Is this kind of where the ceiling is or do you think there is a little bit more juice to be squeezed out there?

David Richter

No. We think we can certainly continue to improve, I think, back to the range we were at. Certainly, 15% to 20% is not extraordinary. That was our historical average. I think as time goes forward, I think we can get back into that range and hopefully the higher end of that range. The performance of the Project Management Group in the quarter was 14.8%. So we’re very nearly there.

Richard Paget – Morgan Joseph

Okay. And then getting back – while we are on that topic, with Afghanistan, are you guys still actively bidding there? I know – I guess your former partner is saying there has not been a lot of activity and some of the kind of risk structure has changed over there. What's your take on potential work to be won?

David Richter

Yes. We get a lot of questions about Afghanistan. I think a lot of investors think that it potentially could be the next Iraq. Our experience has not been that. There is some work over there for us. We are working with Michael Baker on some work for the US government in Afghanistan. It’s relatively small certainly compared to the work that we had in Iraq. And we continue to perform work there. We’ll continue to chase work there, if we can do it. But I don’t expect it to be a needle mover. Certainly that – I think the situation there for employees is probably a little more dangerous than it was in Iraq, if you can believe that. But like Iraq, we’ve had no issues at all regarding the safety of our employees.

Richard Paget – Morgan Joseph

Okay. And then getting back to your share buyback program, you've mentioned your average cost has been a little higher than $4. I mean, is that in your mind for you to continue with that buyback program that you are only going to be opportunistic when the stock is down that low, or will you continue to buy even at these levels?

David Richter

No, there has been no magic number under which we’re going to buy. It’s a constant reevaluation regarding the market price of the stock, our cash position, and ability to buy back shares. And we’ll continue to make that decision going forward. I wouldn’t view $4.15 or whatever the average price was, it’s $4.15 in the quarter, $4.19 over the last two years, as a magic circuit point at all.

Richard Paget – Morgan Joseph

Okay. And then is it possible to get backlog broken down by PM and Claims?

John Fanelli

Yes, Richard. I have those available. The total backlog broken down as follow. Project Management $561 million, Construction Claims $38 million, for a total of $599 million. The 12-month backlog for Project Management is $220 million and Construction Claims $36 million, for a total of $255 million.

Richard Paget – Morgan Joseph

Okay. And one more housekeeping on the tax rate, if you could just give us a reason why it was so low in this quarter and what should we expect for the balance of the year and going into 2011?

John Fanelli

Sure. We incurred a tax benefit in the third quarter, which related to a reversal of a tax reserve that we had on prior filings of certain income tax returns that the statute of limitation expired. That’s almost offset 100% of our accrued expense. So without that, our effective tax rate would have been around 15%, and that’s what we are forecasting in the fourth quarter anywhere between 15% and 20%.

Richard Paget – Morgan Joseph

Okay. And then, is it a good number to use for 2011?

John Fanelli

At this point, yes.

Richard Paget – Morgan Joseph

All right. Thanks. I'll get back in queue.

Operator

Our next question is from Tim McHugh, William Blair & Company.

Tim McHugh – William Blair & Company

Yes. First, just a quick numbers question first. First, do you have cash flow? And then, is it possible to get the kind of consulting fee revenue by region for the quarter?

David Richter

The cash flow based on what we’re going to be filing on our 10-Q was a use of cash from operations of around $12 million. And that was driven primarily by the increase in accounts receivable. What was your second?

Tim McHugh – William Blair & Company

The consulting fee revenue by region. You usually give it in the Q.

David Richter

Yes. I’ve actually got it right here, Tim. It was $97.4 million in total. Of that, $25.5 million was from the Americas; $23.5 million was from Europe; $24.4 million was from the Middle East; $18.2 million was from North Africa; and $3.8 million was from Asia-Pacific.

Tim McHugh – William Blair & Company

Okay. And David, just can you give us a sense of the environment as you get to kind of the new contract, once you talked about some of the anecdotal contracts, maybe by the different geographic regions or types of projects, what's – and less – you know, talking less here about the revenue than necessarily the most of the backlog trends? How are you feeling about different areas of your business as we move forward here? Which ones have picked up, which ones are lagging more so still?

David Richter

I would say, right now, the strongest performer recently is the United States in Project Management. We continue to see a lot of work come in the door. The bulk of that work is in transportation and infrastructure. And I would say, followed by that, going forward, our biggest expectations for new work are in the United States, in North Africa, in the Middle East. And we are beginning to see some significant traction in Latin America. I think that next year that will be a bigger component of our business. In fact, we may break out Latin America. We had worked in the Panama Canal several months ago, and we think we’ll grow to be significant. We had a recent win in Mexico that we’ll hopefully announce it soon. We see some opportunities in South America as well.

Tim McHugh – William Blair & Company

Is it still primarily most of your work, buildings-related or are you having success moving into some of the other areas you've wanted to target over the years?

David Richter

It’s pretty much along the lines of our current mix, about 75% buildings, about 25% everything else, with transportation being the biggest component at about 10%. I think transportation will continue to grow certainly in this country, but also potentially outside this country as well.

Tim McHugh – William Blair & Company

Okay. And within that environment where you say – you mentioned which regions are doing well, is it – do you think the demand environment broadly is improving in those sectors or do you think you guys are just capitalizing on opportunities better than others? What's your sense of what's driving that?

David Richter

I think both things are happening. There certainly is getting to be a lot more projects out there, lot more opportunities for us to pursue work out there. On the claims side, we have certainly seen lawyers getting busier and ourselves getting busier, as conflicts, claims, disputes on projects get back to more of an adversary mode, I think, in late 2008 and probably most of 2009, I think people sitting back and not doing what they needed to do, sort of waiting for the world to settle down. So we see a world continuing to return to normal, and we’re seeing the work come in the door as a result.

Tim McHugh – William Blair & Company

Okay. And then my last question would be tying back to the cash flow. Any sense when we'll start to see the receivables issue start to normalize there and start to get a little better conversion on that into the cash? I know it's – or is there anything else going on that's been holding it back as well lately?

David Richter

There really is one big driver of that. We have a significant amount of work in Libya. And Libya has for about the last six months not been paying for contractors. And we are working through the Libya bureaucracy. Essentially what happened was they have set up an internal – essentially a commission to review foreign contracts, both the bidding process, the contract terms themselves and payments some of those contracts as a means to fight corruption within the country. And unfortunately, it’s had a major slowdown in our ability to be paid. We’re working with our clients to get to that process as quickly as we can. We have a significant amount of our receivables owed to us in Libya on the order of about $50 million right now out of about a total of $170 million. John, is that accurate?

John Fanelli

Yes.

David Richter

So that’s a big percentage from one region of the world. It’s our number one priority inside the company to get that money paid to us as quickly as possible. And we believe it’s going to happen in the fourth quarter.

Tim McHugh – William Blair & Company

Okay. All right. Thank you very much.

David Richter

Thanks, Tim.

Operator

Your next call is from David Gold with Sidoti.

David Gold – Sidoti

Hey, good morning.

David Richter

Good morning.

David Gold – Sidoti

Just a couple of follow-ups for you. First off, David, you commented a little bit about what you're seeing in the transportation infrastructure area. From a bidding activity perspective, is that also where you're seeing the most strength right now or most potential?

David Richter

Certainly within the US, we do most of our transportation work in the United States. Right now, it’s the strongest market for us here. It’s 10% across the entire company, but significantly more than that in our home country. The biggest projects out there are transportation and infrastructure. On the building side, we are seeing some strength right now in hospitals and health care. I think it’s primarily as a result of the Boyken acquisition last year. We have a lot more resources and experience and relationships in that area. We’ve had some success in our western region mainly of winning hospital work.

We are seeing some – probably surprisingly, we’re seeing some opportunities in the hotel market right now. And government buildings continue to be pretty strong both in the federal, state and local level. Education market is relatively quiet. Other than that, certainly the private sector – commercial, retail, residential are very, very depressed, but that’s historically not been a big area for us at all. In fact, it’s probably – probably combined with the US, that’s probably 1% or 2% of our business. That’s had no impact on us at all. All the other markets, I talked about all doing very, very well.

David Gold – Sidoti

Got you. Perfect. And can you talk for a second – I know it's not huge, but about the $50 million contract cancellation sometimes for – sort of what brought that on and maybe what sector it was in?

David Richter

It was a resort in the Caribbean that was cancelled. And we had a pretty large role in it. It was a pretty major project, and it was cancelled and obviously our role was cancelled as well.

David Gold – Sidoti

Okay. And then one other – given the success from the acquisitions of late, so have eyes opened there and are there particular areas that you'd like to fill out?

David Richter

Yes, very much so. We can discuss those right now. Very active on the acquisition front. We’re looking at acquisitions, both in the US and internationally. Everything that we are looking at is on the Project Management side of our house, and we hope to have one or potentially more deals done before the end of this year.

David Gold – Sidoti

Perfect. Thanks a lot.

Operator

Your next question is from Joseph Foresi with Janney Montgomery Scott.

Jeff Rossetti – Janney Montgomery Scott

Hi, this is Jeff Rossetti calling on behalf of Joe Foresi. Just a quick question. Is there any particular area where you see the headwind from your work trailing off in Iraq coming from?

David Richter

I’m sorry. Are you talking about why do we work in Iraq?

Jeff Rossetti – Janney Montgomery Scott

Yes. I'm sorry, just any particular area where you would see like a growth offsetting the headwind that you have from work trailing off in Iraq. Is there – I know you were discussing the particular end markets, but any particular – is government public buildings probably the – and within transportation, also the strongest areas that you are seeing?

David Richter

Yes. The strongest areas in the world that we are looking at right now continue to be the United States. As I said, partly transportation. We’re seeing – Latin America is an extremely small part of our business, but we think it’s going to grow quickly. The North America market, despite the payment issues I just talked about, continues to be an area of tremendous opportunity for us and limited competition. And the Middle East, despite being down for the quarter, we continue to see some very big opportunities there. They are no longer like they were two years ago in Dubai. But we continue to see opportunities in Abu Dhabi, Saudi Arabia, Qatar and elsewhere.

Jeff Rossetti – Janney Montgomery Scott

Okay. Thanks. That's all I had. Thank you.

David Richter

Thank you, Jeff.

Operator

(Operator instructions) The next question is from Arnold Ursaner with CJS Securities.

Arnold Ursaner – CJS Securities

Hi, good morning. A couple of – first, some bookkeeping questions for John. John, what was your end-of-quarter share count, please?

John Fanelli

The fully diluted that you asked every quarter is $78.7 million.

Arnold Ursaner – CJS Securities

Okay. And within your gross margin – I'm sorry. Within the SG&A in the quarter, you mentioned you had some legal and amortization expenses. Can you quantify those so we can get a better feel for more of the core SG&A expense as a percent of revenue?

David Richter

I’ll give you that. I just happen to be on that page in the draft 10-Q. The increased amortization expense for the quarter was $520,000. And that was due to all four of the acquisitions we closed since last year’s third quarter.

Arnold Ursaner – CJS Securities

And the legal expenses?

David Richter

It was about $400,000.

Arnold Ursaner – CJS Securities

Okay. So if we adjust for those two, you are doing a much better job controlling your SG&A despite the growth you've had from the acquisitions.

David Richter

By the way, the number I just gave you, $400,000, was for an increase in all of our professional fees, which included the ones related to the acquisitions, but not just those.

Arnold Ursaner – CJS Securities

Got it. David, could you comment on the margin trends on your backlog, what are you seeing there? And can you also comment on the pattern of activity both during the quarter as well as some general observation about what you're seeing in October?

David Richter

The pattern of activity of new business development?

Arnold Ursaner – CJS Securities

In the backlog, yes. The incremental work you're getting in backlog, what sort of margin is it at and was it a pretty steady pattern through the entire quarter?

David Richter

If you look at the company as a whole, the gross margin backlog really does not change very much. And we haven’t seen any kind of a major change at all. Certainly, there is a big difference between the Project Management gross margin, which generally comes to around 30% to 40%, and the Claims margin, which is typically 55% to 60%. What affected us for the quarter was McLachlan Lister, which was a high end and high margin consulting practice in Australia, came in and was probably more than 10% or close to 12% of addition to the Claims Group. And that shifted the number higher a little bit for the company as a whole because of the size of the acquisition. And the DCK acquisition was higher margin than our typical project management work within the company. That had a positive effect as well.

Arnold Ursaner – CJS Securities

Okay. One more question. You focus obviously on sequential trend change. So I wanted to try to highlight a little bit of the sequential opportunity between Q3 and Q4. In Q3, there are typically a lot of vacations. A lot of utilization tends to go down. Q4, you have a lot of holiday periods. Can you help us get a better feel for how we should expect the trend change in Q4 versus Q3 given some of the seasonality issues?

David Richter

Typically, as you just mentioned, the third quarter and fourth quarter generally have a higher amount of holiday time, vacation time, which as a consulting fact is once revenue that comes right off the bottom line for us. Despite that, the third and fourth quarters are typically our two best quarters of the year. And we expect that to be so this year as well.

Arnold Ursaner – CJS Securities

So would it be fair to say – I know you don't give formal guidance. Is there any reason to think that Q4 trends like we saw in Q3 wouldn't be continuing, if not even improving?

David Richter

That’s what we expect to see.

Arnold Ursaner – CJS Securities

Okay. My final question is a little more strategic, David. I know you had been developing a lot of real estate activities and it is something I know you've incurred the expenses related to that and yet haven't talked very much about the opportunity. Is this a good time for you to try to do that or is it more a year-end item?

David Richter

No, it’s actually a good time to about that. I appreciate you asking the question. We have a – I think in the very near term there is going to be a third operating segment in the company, to be named Real Estate Development Group. And really at this point, it consists of four small startup businesses essentially. They are each involved in providing some level of real estate development services to clients, not that we are going to invest our funds and our capital in speculative real estate projects, but where we’re providing services to other parties or where the initiator of a project and we raise outside equity from other parties.

We have a company in the – a lot of this has been announced already, Arnie. We have a company in the East Coast called Hill International Real Estate Partners, or HIREP, that’s all been pursuing both a developed project in Philadelphia as well as stepping to raise an equity fund to invest in distant projects, primarily in the New York to DC market. We have a West Coast development company called Hill International Development, or HID. That’s primarily focused on serving clients in the hotel hospitality market, and they have several projects that we think potentially are going to be moving forward in the near term. We just started a small company that’s going to focus on development in the Caribbean called Trident.

And then finally, the press release we issued a few weeks ago announcing the hiring of several executives for a company called HillStone International, which is a little different than the first three, it is looking to basically be a distributor, reseller, middleman, whatever you want to call it, for a modular housing system that we think there is a lot of demand for in the third world. And we think it could be a tremendous opportunity for us, both at the revenue line and at the bottom line. It not only includes selling the system, it includes potentially managing the installation of them, the construction of them and overseeing that work on a very, very large scale for countries in primarily – that we’re talking to now in Africa, in Latin America, and in Asia.

Arnold Ursaner – CJS Securities

Thanks very much.

Operator

Your next question is from the line of Mark Swaha [ph].

Mark Swaha

Good morning. Relative to your last comment about establishing the new subsidiary companies, how soon do you think that these companies will be operational and bringing revenue dollars to your bottom line? And a follow-up to that question would be, what are the plans do you have in the short or medium term for enhancing stockholder value?

David Richter

Thank you, Mark. The – and you raised a good point, which is – those four businesses have been nothing but cost to us. I don’t mean that in a negative way, but they don’t generate revenue to date. We expect that each of them will be generating revenue in 2011. We expect one of them will be generating revenue in the fourth quarter of this year. And we’ve been able to increase our profitability substantially in the third quarter. At the same time, we’ve been paying the expenses of these businesses, which have not been offset by revenue or profit. So, as they generate revenue, that’s going to have, I think, a significant positive impact on our bottom line. And I think the opportunities among all four of them are strong.

I think among HillStone, it’s beyond strong. If the company is successful, it’s going to be very, very successful. And like the other three, if it’s not successful, we’ll know that in a relatively short period of time and the expense can be ended. They are all along the lines of the kind of investments we like to make, which are low cost, low risk, very high reward. And we have very high expectations for each of the four companies. Obviously, we wouldn’t be talking about setting up a third group to manage them. What we are doing to trying to improve shareholder value, obviously today had a big impact, is continuing to make more money, continue to grow the business, start with more projects and do more work with more clients. That should have a very strong impact on our bottom line, as we get back into a growth mode, as we climb out of this recession.

At the same time, we are looking at acquisitions. We’ve done four over the last nine months. We’ve done a lot more than that since we’ve gone public. We continue to look at acquisitions that we can bring into the company, acquisitions that are in our two service lines, which are Project Management and Construction Claims. The primary focus for acquisitions is project management. We think it’s the most value-added acquisition, the safest, and we see it as the best way for us to not only build critical mass in the areas where we are, which should drive profitability significantly, but also to get access to new markets, new geographic markets where we’re not.

Mark Swaha

Thank you very much. I appreciate your comments.

David Richter

My pleasure, Mark. Thank you.

Operator

There are no further questions. I would now turn the call back to management.

David Richter

Thank you very much. We’ve been very pleased with our performance in the strong third quarter for our company and for each of our two operating groups. As 2010 has progressed, our management team has grown increasingly confident that the worst of the recession’s effects are behind us. And our future looks significantly better for the markets we’re pursuing for our new business development efforts and opportunities in those markets and for our company’s financial performance as a whole in the final quarter of 2010 and heading into 2011. I want to invite any investors on the phone to join us at one of our upcoming presentations. We’ll be presenting both at the Sidoti Investment Conference on November 16 and the KeyBanc Engineering and Construction Conference on November 17. Thank you all for your participation in today’s call. I look forward to speaking with you all at the end of next quarter.

Operator

Ladies and gentlemen, this concludes our conference for today. Thank you all for participating, and have a nice day. All parties may disconnect.

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