ORN - Earnings call transcript Q3 2017 | Orion Group Holdings, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Q3 2017 Orion Group Holdings, Inc. Earnings Conference Call. Currently at this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] Also, as a reminder, this conference call is being recorded. to Martin. call like host, to now Shane to would turn over the your I may you Sir, begin.

Shane Martin

Earnings Webcast. Dylan. welcome Group XXXX to you, the Call Thank Good Orion Holdings morning Third everyone and Conference and Quarter

and Joining me Stauffer, Financial Vice Officer, Mark today Officer. Executive Chris our and Chief Holdings' DeAlmeida, Orion and President Executive Group are President Chief

results our Mark allocated for prepared minutes outlook. the of and will Regarding Chris XX format update the about call, and highlight our in market we which will have remarks,

We for the will sell-side analysts' remainder of open the then call questions the for time.

cause conference During assumptions projects the are end course we are in regarding capital expenditures, negotiation, EBITDA, and to EBITDA as projections of regarding, statements predictions margin, that things, gross this and statements release the under other administrative on as November at our expenses, among margin, and GAAP profits, release rules other risks to our EBITDA for awards, estimates result comparable inclusive call, found any to Web-site. This the our forward-looking Securities future XX-K, pending and new Mark performance necessarily the of the communications. on win over Commission, Executive uncertainty, definitions, platform measures morning, including are future and our X, revise investor development cause that, can refer Regulation an backlog, Stauffer, President Web-site And no discussion note Moreover, non-GAAP this make www.oriongroupholdingsinc.com. we the within forward-looking book-to-bill, results refer I for obligation indicator Chief subject or Also well would materially These of materially gross factors revenues, of financial Investors growth. measures, markets, this filings The G. will call whether current our to and results. is statements, turn section please undertake those is our Web-site EBITDA like be differ press otherwise. reconciliations principal Mark? actual update quarterly to the margin past not are and risk XXXX. which information, of to or including Exchange our a Please statements. also actual differ may please that issued most available to from providing expectations, from to By projections that those as could with Officer. described Also, in or results additional of that of SEC, rates, with the

Mark R. Stauffer

I'd of dedication and our like Shane, their X,XXX to thanking charitable the as hard during and you, helped provided as to way our support has proud for to hurricanes, well collectively Thank responded and welcome outreach the to our schools this I morning. up the generous begin call neighbors, am organizations co-workers by work, forward. extremely to and they commitment co-workers, team family, our devastating these recent events. as and move Company clean

solid quarter, growth the impacts business during long-term. of Excluding we the all the for well performed one-time overall experienced and we operations drivers experienced

impacts from significant of unprecedented major XX% delays, and newly ongoing you the third over which As Maria, three and This project affected in start had operations. experienced secured on results. third our quarter Harvey, the aware, projects, hurricanes, during resulted we quarter a our delayed are Irma of impact

quarter. million approximately was $XX.X impact in during the EBITDA Specifically, the third

higher the events couple destruction the see to our over additional in we are experiencing caused marine years. for expect these storm the demand of because opportunities the next segment to and we services by of related However, hurricanes,

needs. are into for waterways, emergency ready on an levels and projects Today, customers' the Harvey driving callout working Texas and As multiple in significant rain need Texas increased processing our we siltation example, event brought services. and to Hurricane dredging due are to of meet ports

forward. margins this our and strong impacted job see opportunities. fundamentals backlog some increase and solid opportunities was bid the continue we levels, of healthy in going with at remain While our to significantly and great the by our storms, business Currently business underlying remains quarter high

look vision enhancing specialty of strategic building As market will infrastructure, ahead, needs the focused sectors, executing continue building on meeting our company, value. share we customers construction of we and our premier industrial across on the the our being and while shareholder

this strategic to expansion acquisition will organic execute We vision greenfield and opportunities. through continue growth, strategic

high deploy to our Specifically, as increasing cash focus offerings, our capital. will with on increase we high-return, businesses, free flow we service on capital return continue to a invested

the marine to segment of across public we fundamentals infrastructure, lead U.S. margin bid industrial on to services, to our expect facilities marine sector, remain high-quality sectors. drivers Throughout market which to pockets continue maintain and building waterways. expansion. infrastructure opportunities provide operating and continues and private We areas, are and opportunities The seeing expand to demand our today positive both

weather As I for additional catalyst to utilization. in increased previously provide mentioned, should third bid the quarter events. related This anticipate we increased the opportunities an asset near-term

sector projects in destinations bid customers from expand lines being opportunities refining continues promising are refurbishment facilities and and to remodeled, expanded existing recreational storage. of sector with opportunities their Also, as local private Additionally, remain the from they related related marinas downstream bid destinations and demand we as to continue private cruise associated energy or Caribbean. new waterside track customers as

anticipated the to idle because the in cost has mentioned increased much labor and we marine necessary and volatility. to been will the volatility take greater than address of this As and equipment before, we have steps have continue segment

However, of the this solid solid remain sound underlying demand opportunities bid business fundamentals drivers, backlog. a with and

segment facilities, discussed long-term received. the work their multifamily tightening some and is but as markets delayed sector, Houston, medical retail and are expansions, housing commenced Population to the population. in continues areas expect serve to and market planned business permits quarter, to concrete third maintain In throughout we centers, has educational This solid progressing building market, prior share. at drivers leading markets The which as growth distribution services, we new we facilities, continue today units, well. our our to The continue the positions were call experiencing during retain office growth as to drive to have for we facilities. our currently well. project Additionally, continues related demand

We market including Dallas-Fort are in focused market, share Worth structural the adding on expanding our opportunities.

foundation segment the our opportunities. to work along addressable from see resources continue to the to market to we in expand we Finally, continue The the continue the fundamentally marine the growth industrial significant Central expect to Gulf Texas and solid to combining long-term market will with by as inside In drivers. continue petrochemical-driven potential pursue end expansion sector, strong we talent massive provide project segment our environment. industrial Coast concrete and opportunities greenfield expand

This has the than for gas fundamental is to to production outpaced closing, net half manufacturing by the In in U.S. as petrochemical exporter will of lead shale gas. become pace business the a remain our fact, a an natural more construction in of to revolution, spending sector. domestic which should on which drivers of the XXXX increased growth led the of account industry, natural In result solid.

plan to by services volatility returns. working high are We focusing strategic reduce business with the and in executing complementary on our our

overhead and continuing a for opportunities We the meeting returns. were to the While third on reduce business costs. have severity unexpected, solid with while these believe shareholder fleet focus will and of create events right-size opportunities impacts we long-term we our drivers strong marine weather quarter the good

the the to results to turn like Now Chris? more in financial over detail. call to review Chris I'd

Christopher J. DeAlmeida

for you, Thank Mark, and us. joining thanks

$X.X million third or net period. compare results share the prior a a XXXX, For reported loss $X with a the of year million loss net quarter diluted of income $X.XX we per of earnings an or diluted $X.XX per share. These in

segment. the of from storms earnings XXXX third came income for from XX% share. were the which would third $X.X the have quarter diluted revenues for Contract segment the or been $XXX.X million, $X.XX quarter from came XX% marine impacts mentioned, Excluding and XXXX the Mark the million of per concrete

XX% quarter year. XXXX to segment last revenues by Mark driven marine that from Third mentioned decreased was primarily decrease weather the earlier. events This compared

sector. concrete in X.X%, the impact profit sector of in federal, Central period. state consolidated federal, government were XX% state primarily local is Third million, from Hurricane million and our being the the from were quarter year to markets. to $XX.X of This XX% while Consolidated from margin year year from XX.X%. hurricanes, a of by gross consolidated compares and prior particularly and Harvey, XXXX local prior segment generated the margin from private generated period. private XX% revenues XX% XX% prior the XXXX of Texas or quarter agencies, gross third or This government which of compares total, revenues was quarter Houston of the the gross third agencies a $XX.X profit from and decrease gross decreased In also generated driven revenues

EBITDA and consolidated saw During to the quarter weather margin, XXXX, third the events. decreases in we EBITDA due

EBITDA compares X.X% to EBITDA EBITDA million EBITDA $XX.X was $X or quarter third XXXX This quarter XX% margin. of Third or margin. million

acquired third impacts million from was the is prior as or been the Central EBITDA $XX.X the $XX company. This prior recently concrete million to up the in have the the XXXX million, increase a $XX.X EBITDA compared inclusion third SG&A year for year Texas SG&A margin. the period. X% in revenues, Excluding of quarter XX% expenses quarter. of primarily from XX% by events, driven weather would were quarter

reduce expenses we continue our of outpaces and costs. SG&A revenue revenue SG&A would percent forward, expect decline we as a to as Going growth overhead to as

$XXX was consolidated on worth of a a quarter of approximately year-to-date For and rate resulted the XX% win $XXX the XXXX, XX% X.XXx. book-to-bill X.XXx. for third with a bid of were win opportunities on million rate This successful a in book-to-bill we ratio quarter our we On basis, million. and

September is compares related million year $XXX to backlog, we as at of which XX, to XXXX to Of work backlog to related September segment. our the As the prior concrete million compared XX, flat the contract or of $XXX XXXX, marine while $XXX million $XXX period. is segment, relatively under have million,

million In where optimism related been headed segment, we low million the an Additionally, and while $XX of to bidder the of over the concrete $XXX opportunities. quarter low we backlog This Of bids. subsequent XXXX. means have apparent $XXX of gives or remainder total, end in additional million the XXXX segment. about level to have us million for to projects and this that, awarded marine are is the third of of worth activity is $XXX the currently we related are

business of general approximately in to of to end of and credit the making facility, on $XX requirements our on cash approximately credit. into credit, balance the Subsequent our XX, capital approximately of for million fund Year-to-date, of of to under the outstanding hand paid approximately sheet, line debt $X.X on entering needs. the debt. million the liquidity credit produced quarter and of that believe million after quarter, XXXX. our and revolving to is million our we turning million line line revolving outstanding. had of with quarter We reduced of flow $XX position $XX have total we from ongoing million We we payments total down $XX drew debt has our September Now forward. going Company revolving approximately the access $XX during cash our operations ended $XX by as working for combined $XX servicing adequate million debt total Since our million

go we free down will excess on cash debt continue to we As paying forward, with focus flows.

the including result a with third provide requirement agreement an as quarter, third to as the events during well of some we experienced the credit of changes, ratio our XXXX. to regard our quarter add-back leverage events amended during As the other room more weather-related minor weather

going ratio cushion provide within our exceed EBITDA cannot we leverage basis. XX-month making X.Xx on covenants Regarding adjusted a forward going trailing amendment, this leverage adequate our ratio, By forward.

support our continued relationship to forward look and are We our the from with long with continuing lenders group. a pleased bank

solid our and our bonding activities. than program to more adequate Finally, remains bid support is

demand our our for to business. across to outlook, we Turning strong see services continue our

Mark mentioned, the caused catalyst future. increased events short-term demand weather the a disruptions will have third while drivers during for they provide the quarter, As in

see demand services to additional in and for have certain now this We the expect increase seen future. demand in

marine optimistic are have plus $XXX backlog near of at the million opportunities Currently of we we are $XXX total level elevated related $XXX million to related are bids bidding Our segment. the the million which see. record we sustained given worth continue bids to outstanding, to remains concrete segment, low and

the the recognize our to XXXX the at timing third guidance, year look marine in quarter the year. changes we the for therefore As plus led segment during has costs, volatility and in this year we has experienced weather events led goals set we've of changes the full

execution. with and We fourth utilization and expect profitability see higher asset to will solid levels normal increased project the quarter activity return

is are the goal in and returns strong results. this growing Orion in will our The earnings to on to Company are we business we reduce and profitable always line. to and proactively changes adapting Our to our be focused market shareholders. is a and deliver adapting future our has volatility profitable

This at XXXX. expand As more delivering improvement we demand improvement we adjust in we significantly line remain about will XXXX for for Demand beyond. XXXX, provide to to events business in forward. some long we committed the weather and and will bottom in term profitable reduce move growth from volatility. line ongoing optimistic should remain as to our a markets look strong we our Overall, catalyst our continue bottom end improved the results prospects plus

necessary deliver I'll the where expand and to to Q&A to Additionally, adjust the our we infrastructure, value. to forward call. that, With sectors building portion the of we operator as call business shareholder back over begin improved turn industrial the look to the continuing

Operator

Our from Instructions] CJS Securities. comes question first Tanwanteng of Jon [Operator

Your question please?

Pete Lukas

filling for It's Jon this here Pete Lukas morning. in

mentioned had changes your in You goals.

an You million filed detailing $XX recently potential. million annual X-K EBITDA to in $XX

a and has what wondered to and if happen there? what's there change Just that to the you realizing to get in timing that for is

Christopher J. DeAlmeida

that So all. at no change there to is

when into weather and talked changed we the reduce to about time about those we delays walked goals. events, over we goals, had those have Through we goals. talked higher had Specifically, we as and project XXXX,

what the to I specifically goals. that's talking So, was about

believe of at in it, the Company and long-term. sectors, the this we that up million building look $XXX do reach infrastructure in to we business are the X-K in we EBITDA As and could of that and taking where particularly we industrial, future

a put not have that. We specified on timeframe

volatility, marine side are the on look the making into particularly we As XXXX, still we adjustments some of the reduce business. to

want growth that So a necessarily goal we're assist we're and to execute us well. expect potential any a where looking from of but as year, of necessarily growth We're long-term. at what five-year some on expansion as that particularly we that of where type – opportunities, to industrial expect and building do timeframe to we achieve and be some over get we more looking at depend don't on at that will to as perspective, and acquisitions the and far depending in sectors, could as this

Pete Lukas

you But you to had for mentioned forward? have think terms past of a plagued permits helpful, problem talked several very you you And permitting Okay, thanks. last about that last quarter. we did that guys the we're the receive now face do those are in going that or delays going still quarters, you issues is that that

Mark R. Stauffer

we what be past we're had, think it's were an as I the delayed seeing. additional first logjam going of beyond process of think don't year roadblocks to us. but think I for as I issue that still half the little up quite the some it's we've bad kind when been had that thrown permitting the we that

think versus be ago living we're a saw an year, that in I I process but increase So, what earlier it's going years few from we still example. with we saw as improved an the what in think to

trying we're trying we to lead customers to adjust of can get a much to again, times very focused their our and into that So, that with new so we're rhythm. on do work sort

it sort I reality of with us, think things, get working to rhythm again, to I that customers events the again, behind the overall that but think earlier adjust of takes into our this duration these year of a happened some we and process. the are that, new are new on

Pete Lukas

from last of and terms before impacts, but for you from you another anything to of some of benefits? the lingering of expect or the you start me, one that and thanks. there, in and Great, or emergency And on tailwinds reconstruction we and mentioned opportunities to can so, touch work quarter soon for kind Irma, do Harvey then last some see how

Mark R. Stauffer

the think running as to was safely back do back are and release so, we soon running the we get today in I up as as all talked and we and to in safe worked up areas. to back about are we and earnings operations it

this out like saw, And survey events we we've inspection kind work, which of where we work seeing. sort expect. think, of hurricane been unprecedented term this amount impact certainly but playing would we very before a that unusual they create opportunities. see is I again, we've of Short was and seen

the see starting work are as caused, they were with of work opportunities an on the the particularly additional as result of the generated dredging additional result that take catalyst, additional been but we're couple will We see the of particularly the a will dredging of some over some now, this. next Caribbean. to we'll in of years, damages starting dredging, some be opportunities. Those that have a Longer-term, time, opportunities

into those expect quarter we opportunities. of So then year and of and coming first as online, that we that certainly some the next will be quarter construction projects fourth go into longer-term the

Pete Lukas

the Thank you back much. helpful. Very jump very queue. I'll in

Operator

Our next Bobby question Burleson from of Canaccord. please? Question comes

Bobby Burleson

kind that's of more where of potential of opportunity, next works what's So think in you and business, can we utilization of your duration up over kind quarters, you now your coming? this are happening a now. with have where little guys levels where and about just on the dredging go sounds is, bit that Can that that the several scope work the like the talk following capacity

Mark R. Stauffer

work Engineers of this. to take some I expected, had this the that after we the begun capacity care has utilization. and that our and some of we an have after that of inspection the with had that Corps online. where The several work where of contracts some weeks storm expect have right step bringing mean we of out. them kind I on the occurred do think assist survey events can this modifying definitely as Again, to We we that been in first see of uptick of

mass that the all just had Texas, of rain – in amount occurred in of siltation So, we as a state. amount result mass particularly a the a

expect some volatility business, of that we about in we that So, we've see increased I related talked to we're the expect permit about. still the capacity. marine and to that just the talked business, Obviously on the issue going

with We'll quarter. little dredging have increase utilization, with out, we do within had into into We quarter of been see go operations. that be otherwise to that expect the bit we've near-term as other nicely additional fourth long underutilized terms get to respect a our capacity to However, to and and the in will additive work that be opportunities on. how after takes clear that going would first certainly there, that the and

So in utilization. we a certainly expect near-term uptick

Bobby Burleson

lot your TAS Then in there you're won of works after I'm going the maybe a margins, terms you with jobs jobs, legacy on doing, business and of of kind the think do and versus recently gives goes terms margins better what you segment are industrial? in are sort more of Great. into of industrial I first your these higher backlog of projects the contrasting stability, longer-term and your it kind and industrial, of in the industrial comparing job concrete trade-offs you wondering the terms industrial in that kind it have where

Mark R. Stauffer

Yes, good question.

necessarily to greenfield are But point. I away concrete marine that stand at expect come their us greenfield, business anything mentioned to see would now the attributes skill that from meaning going and marine got from we in we is asset-intensive side pursuing this this again, we're again, segments. We're this that our not you pursuing our it's expanding segment utilizations business, business. leveraging Most right how be similar or from were that again, up an the in And equipment we concrete on as in opportunity sets we are in both think, it. particular job take we this our for segment. a we've not additive,

pursuing are if perspective, we a over cash focused it concrete And to good So, it on but for certainly from area to flow down we and come a from along. candidate standing unit M&A see again, at the up opportunity be be this a in not space, separate greenfield opportunity its we the certainly might greenfield this better than the as right point, that similar expect we own long-term. if perspective see road, the an

Bobby Burleson

some on and quick hurricanes? some have lot maybe are customers, of has last damage in the another storms that's all but you've opportunities come given And is of of the some willingness, some just a that Gulf really of know damage increased in industrial, those and one no I areas, existing maybe willingness number of to into market, changed that seen these provider the one, of the Coast these impact at is the the because the there from or plants, around that of happened coming

Mark R. Stauffer

existing I dredging think that's happened opportunities. kind of segment, operations with marine our standpoint of from our the the in particularly certainly

that of already – the Gulf the things winds storm today. those customers these I think I energy/shale question Most these the being haven't the by being on the we pursuing your the your is water's that's expansion on stuff, eventually to think are I really, impact produced had driving To of the our which like opportunities, other expansions. Coast, respect question, with about that really revolution, is, by already that. and of don't edge, it's That's point is that. off up of events we one industrial all domestically driven these think stuff what facilities, driven the which an

we we in our have existing referred that why as that leveraging set customer skill to in both leveraging that's have our but marine and marine relations So, businesses. our this we also concrete,

marine this space is industrial operating business Our essentially [indiscernible] in today.

are off and edge. used So within mostly facilities that those working to large It's already in. by that the we these already additional the just providing water's customers we're services customers plants that for have, are

Bobby Burleson

Great. Thank you.

Operator

show I DeAlmeida to back I call for this no to further time, turn in queue. like would the remarks. closing questions Chris Instructions] At the [Operator

Christopher J. DeAlmeida

please out. In to look the reach if you have on call today and thank joining questions, forward free us all for I to any you speaking We meantime, next you. you feel Thank quarter. the with

Operator

program. ladies conference. gentlemen today's attending the This and you, concludes Thank for

You may disconnect. all

Orion (ORN) 8 Nov 172017 Q3 Earnings call transcript