Q3 2020 Orion Group Holdings Inc Earnings Call
[music].
Greetings, ladies and gentlemen, and welcome to the <unk> third quarter 2020, earning conference call. At this time, all participants will be in a listen only mode. A question and answer session will follow the full presentation should anyone require operator systems. During the conference. Please press star zero on your telephone keypad now my pleasure to introduce your host Mr. Fred.
Okay Nevsky. Thank you you may begin.
Good morning, everyone and welcome to a REIT Group Holdings third quarter 2020 earnings conference call and webcast.
My name is Fran Okoniewski, Vice President of Investor Relations and joining me today are Mark Stauffer or wine group holdings.
<unk>, Chief Executive Officer, and Robert Tab, our Vice President and Chief Financial Officer.
This is my first earnings call with your right group after spending 28 years on the buy side, so I'm pretty excited to be here.
Regarding the format of the call we've allocated about 10 minutes.
Her prepared remarks in which mark and Robert will highlight our results.
And update our market outlook.
We will then open the call for questions.
Well the course of this conference call, we will make projections and forward looking statements.
Regarding among other things.
Our end markets.
Revenues.
Gross profit gross.
Gross margin.
EBITDA.
EBITDA margin back.
Backlog.
Projects and negotiation and pending awards as well as our estimates and assumptions regarding our future growth.
Administrative expenses and capital expenditures.
These statements are predictions that are subject to risks and uncertainties.
Including those described in our 10-K that may cause actual results to differ materially from those statements.
Moreover, past performance is not necessarily an indicator of future results.
By providing this information we undertake no obligation to update or revise any new projections or forward looking statements.
Whether as a result of new developments or otherwise.
Also please note that adjusted net income.
Adjusted earnings per share.
EBITDA and EBITDA margin are non-GAAP financial measures.
Under the rules of the Securities and Exchange Commission, including Regulation G.
Please refer to the reconciliations and definitions inclusive.
To the most comparable GAAP measures and reconciliation tables accompanying this earnings call within the press release issued yesterday.
The press release can be found on our website at Www Orion group.
Holdings Inc. Dot com.
Also for additional discussion of risk factors that could cause actual results to differ materially from our current expectations.
Please refer to our quarterly and annual filings with the SEC, which are also available in the investors section of our web site.
And with that I'd like to turn the call over to Mark Stauffer.
President and Chief Executive Officer Mark.
Mark.
Thank you and good morning, everyone. Thank you for joining our call.
Today, we will discuss our third quarter 2020 results and provide you with an update on the current state of our business I'll begin with a few comments on the quarter, then turn the call over to Robert to review our financial results in more detail and then I'll make some concluding remarks before we turn to Q.
Before getting to our third quarter results I'd like to address the tragic accident that occurred during the quarter, taking lives of five of our colleagues and injuring several others some seriously.
On August 21st an explosion and fire sank our dredge layman Boyd and the port of Corpus Christi ship channel, while it was performing work narrow pipeline.
Right now our primary concern is the well being of the crew members involved in this incident and their families.
Safety is an essential part of our guiding beliefs and part of the fabric of our culture.
We remain deeply committed to our target zero program to support our vision of an incident free work place.
Our support thoughts and prayers remain with the crew of the women boys and their families.
Because of this incident remains under investigation led by the National Transportation Safety Board in collaboration with other governmental agencies.
We continue to fully cooperate with the NTSB investigation, and we are eager to understand the cause of this accident.
With respect to the COVID-19 pandemic, we continue to be able to work on our projects with only minor disruptions.
During this challenging environment, the health and safety of our team members is our top priority and to that end all discretionary measures. We've implemented in response to this public health crisis will remain in place for the foreseeable future.
I'm proud of our entire team on all our project sites vessels construction yards shops, and field support offices and their continued resilience and commitment to improve our performance. Despite challenges brought about by code at 19.
Turning to our financial results in the third quarter. We once again delivered solid bottom line improvements with a year over year expansion in gross margin and adjusted EBITDA margin along with improved operational performance in both segments.
We continue to see bid opportunities in both our segments and we expect that opportunities to accelerate when the headwinds from the COVID-19 pandemic abate.
We have diversity in our end markets, which continue to drive project bid opportunities.
We also believe in the resiliency of those end markets currently being impacted by the pandemic and we are confident in the long term strength of these markets to drive future bid opportunities.
To that end, we are seeing signs of recovery and some of the end markets impacted by the pandemic.
We will continue to focus on targeting the end markets and projects, we expect to provide the most profitable opportunities moving forward.
Additionally, our liquidity position remains strong and provides us with more than sufficient financial flexibility to continue to pursue new awards and execute existing backlog.
I'm confident in our team's ability to navigate through the pandemic with the health and safety of our employees always as our foremost priority.
Now I'll turn the call over to Robert to discuss our third quarter results in more detail Robert.
Thank you Mark and thanks, everyone for joining us.
Today I will review the financial results for the quarter provide an update on the company's liquidity position and the status of our ERP initiatives. Finally, I will close by discussing the company's fourth quarter 2020 outlook.
Starting with the financials revenues for the third quarter, 2020, or 189.4 million compared to 199.5 million in the third quarter of 2019.
The decline in revenues was driven by tropical weather in Texas and on the corner impacted production and our concrete segment.
The third quarter 2020, and reported gross profit was 22.5 million or 11.9% as compared to 20.9 million or 10.5% in the third quarter of last year. The year over year increase in margin was driven by a 200 basis point improvement to project margins.
Now turning to the segments. The marine segment margins increased by 10 basis points year over year.
The improvement is driven by execution related margin gains on certain projects the concrete segments year over year margins improved by 130 basis points also driven by execution related margin James moving.
Moving to EPS DNA.
Third quarter 2020 S. <unk> expenses were 15.3 million up from 14.6 million in the third quarter of 2019.
The increase is driven primarily by the font ratable accrual of the annual incentive compensation plan during the current year period.
As a percentage of revenues third quarter 2020 yesterday was 8.1% up from 7.3% in the prior year quarter we.
We remain focused on SDN, a panel at or below 8.5% of revenues for the full year, recognizing that we may see quarterly fluctuations.
Third quarter 2020 operating income was 12 was 13.1 million compared to 6.1 million in third quarter of last year.
Now to the bottom line results for the third quarter 2020, we reported net income of 11.8 million or 39 cents per share. These results compared to net income of 4 million or 14 cents per share for the same period a year ago.
After adjusting for approximately 2.5 million of non recurrent items and 2.2 million of tax expense related to federal and state valuation allowances adjusted net income for the third quarter of 2020 was 7.1 million or 23 cents per share.
Third quarter 2020, adjusted EBITDA was 17 million, representing an adjusted EBITDA margin of 9% compared to adjusted EBITDA of $14.9 million for a margin of 7.4% in the third quarter of last year.
I'd like to point out over the past nine months arrived has generated approximately $42 million of adjusted EBITDA and our trailing 12 four corner adjusted EBITDA is $53 million. The company also has posted five straight quarters of positive earnings.
This is indicative of the operational turnaround and the hard work of our employees, especially during an extremely difficult parent.
In the third quarter of 2020, we bid on approximately 734 million worth of opportunities and were successful on 90 million. This resulted in a win rate of 12% and they booked about <unk> 0.47 times.
As of September Thirtyth, 2020 backlog was 429 million of which 242 million was associated with our marine segment and 187 million with the concrete segment. Currently the company has 1.1 billion worth of bids outstanding, including a 108 million of which it is the apparent low bidder or has been a warrant it.
Contract subsequent to the end of the third quarter 2020.
In total we currently have $537 million of projects between backlog and Logan.
Now to liquidity.
Our current liquidity position is solid and we have generated over 36 million of free cash flow in the first three quarters of 2020. We ended the third quarter was 2.7 million of cash on hand, and access to 58 million under the revolving lines of credit.
We ended the quarter with 42 million and total debt of which 10 million was related to the revolver and 32 million was related to the term loan. This translated in a onex leverage ratio and a fixed charge ratio four times, both well well within our covenant requirements.
I like our current liquidity such a situation provides us with the flexibility to execute our strategy for Serrano warrants and perform work in backlog. Additionally, we're continuing to present steps to further enhance our liquidity, including continuing the process of selling non core assets, particularly surplus real estate success.
In this regard would put us in an even better position to drive shareholder value.
Now to the ERP update.
As previously discussed we have launched our ERP initiative, which was delayed earlier this year due to COVID-19. This project will move the company onto Microsoft dynamics, 365, and provide Orion the foundation to scale and grow the business, we expect to complete the design phase during the fourth quarter of 2020.
And start the Bill phase early in 2021.
Overall I expect this project the last 18 to 24 months in cost $15 million.
Now moving to the Fourq you 2020 outlook.
We were extremely pleased with our financial performance during a difficult period for the company and the country as a whole.
Given the seasonality of the fourth quarter, we expect to generate between 10 and 12 million of adjusted EBITDA for the fourth quarter of 2020 as mentioned before we're pleased with our results, but we remain focused on execution and rebuilding backlog now I'll turn it back over to Mark.
Thanks Robert.
Turning to our markets as I stated earlier, while pandemic related uncertainty has pushed some bid opportunities in certain sectors to the right. We continue to pursue projects in both of our segments.
Our focus is on profitably bidding these opportunities as opposed to simply filling backlog at any cost and our ability to adjust between deferring end markets continues to serve us well in this regard.
Additionally, we continue to target select larger and longer duration projects to provide us with greater operational visibility.
We are in constant communication with our private sector customers regarding their projects and bid opportunities in our Marine segment, we continue to target government sector projects at the federal state and local level.
Specifically in our Marine segment, we continue to track bid opportunities driven by Hurricane Harvey relief funding.
Significant funding is in place for these projects and we expect bid packages related to this funding to materialize in the coming quarters.
We also continue to track any movement on a federal infrastructure bill either as a replacement for the fast act or as part of future stimulus spending plans in response to kill the 19.
Any action on infrastructure funding, but likely provide significant bid opportunities that we are well positioned to capitalize on.
Additionally, in the energy sector, we are seeing long range long range projects begin to move forward, which will provide bid opportunities in the near term.
In our concrete segment, we are seeing bid opportunities from end markets in the sectors of the economy that have continued to operate throughout the pandemic.
We're also seeing long range projects move forward for structural projects.
We continue to execute on our strategy of expanding our structural concrete business, where our competitive dynamics for this type of work has led to securing more of these projects such as the large multi use tower structure in Houston that we began work on during the third quarter.
Our performance on structural projects has greatly contributed to the improved operating performance of our concrete business.
Texas also remains one of the leading states for population and business growth in the United States, which will continue to provide opportunities for all types of concrete construction.
We continue the strong operational performance in the third quarter that we saw in the first half of 2020, and we enter the fourth quarter with combined backlog and low bid at strong levels. Despite the COVID-19 impacts on some of our end markets.
We also currently have over $1.1 billion of bids outstanding of which we are low bidder or have been awarded subsequent to the end of the quarter.
108 million.
We have performed incredibly well in a difficult and challenging environment and we continue to improve improve our liquidity and strengthen our balance sheet.
As a result, we're incredibly well positioned with options to execute our growth strategy as we move forward and look toward a post pandemic economy.
I'm confident our team's ability to perform in the current environment and the challenges that brings along with it.
We have shown that in spite of one of the most challenging macroeconomic periods in recent history, we were able to improve operational effectiveness and profitability by focusing on business development efficiently executing the work on our projects and controlling indirect costs in particular, unabsorbed labor and equipment.
We remain confident in the diversity sustainability and long term drivers of our markets and we believe we are well positioned to capitalize on both current demand and post pandemic demand across all of our end markets.
With that I'll turn the call back to the operator for questions.
Thank you, ladies and gentlemen, we will now be conducting question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad a confirmation total indicate your line. No question can you make that starts usually like to move your questions in the queue I.
Participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys, well known that seasonally poll for questions.
Our first question comes from the line of Joe Mondillo with Sidoti and company. Please proceed with your question.
Hi, guys good morning.
Can you hear me.
Hello, Hello can you hear me.
Yeah can you hear me, yes, I hear you.
All right I couldn't hear you at first so sorry about that so my first question just regarding the Marine segment. So backlog has declined sequentially for the last couple of quarters I'm. Just curious just overall, how you're thinking about that business over the next handful of quarters or.
Going into 2021.
Well you know obviously, we've been we've been burning work than we've had in backlog and you know we've we've had some timing of a new awards that have impacted the book to bill but.
Yeah, we've we've booked or low better on a 108 million.
Since the end of the third quarter roughly about half of that is a bit on the marine side. You know, we're starting to see or some of the end markets that have been impacted particularly in the energy sector of start move for moving forward with long range project. So we commented on that in the in our prepared remarks. So.
You know, we're seeing upcoming bid opportunities. There. So you know <unk> you know, it's a it's a weird environment right now, but we're confident that we're going to have the opportunities.
Where we're as I've said on prior calls we're you know we're targeting where the work is coming out and you know, we're trying to but perhaps profitable backlog. So Ah you know we're targeting or are they the areas that are generating the bid opportunities for us and we're seeing those so I think some of this is timing some of this.
It is.
You know certain projects moving to the right, but yeah, we're confident that we've got opportunities upcoming and yeah, we're going to create keep grinding away and and ER and replacing the backlog.
Okay. So that's what I was sort of thinking it seems like things are it's sort of a timing situation sounds like there's a lot of opportunity out there just things maybe being delayed or just not the trend you're not being polled immediately what do you think about you know the following factor.
There's the fast act expiring and then sort of being extended one year the election state budget constraints.
And I don't know what's going to have you know if if the fiscal stimulus effect to at all but you know <unk> are any of those factors do you think sort of delaying things from moving along well clearly you know some of our end markets have been impacted by the Cove It or you know the bulk of it and then.
I get it it's kind of one of those things out of if you think about the parts of the economy that has been moving forward are continuing to drive opportunities for us there are parts of the economy that have been impacted.
You know there's been a pause in some of those are in some of those opportunities or they've shifted rightward. A lot. You know we have a lot of things that we were targeting yes, when the when the pandemic hit a those projects haven't gone away, but they have been yeah, they've been delayed and pushed to the right clearly the election, you know from a macroeconomic.
I'll make standpoint is is kind of out there you know hopefully we'll get resolution on that and the next you know next week and Ah you know, we think once there's resolute resolution on that and you know people assess what that means then you know you know things well to the extent that that's impacting decisions is that a.
Ah decisions will be made and so things like that will move forth also you know parts of the economy like I said that have been impacted.
You know, we're starting to see things that are you know from a more long range standpoint move forward you know 'cause it yeah that people are thinking about a two or three year long.
Yeah, you know outlook for their their particular project yeah, we're starting to see stuff like that you know move ahead. So you know again, we're confident in the ability to pursue the work that is coming out right now and we're confident in the end markets that have been impacted that like I said, we're starting to see.
He does things live some of those things move forward now and we're confident that you know once we sort of get to a little more certainty on on the cobot pandemic and you know therapies and treatments in vaccines and stuff like that that we think are the end markets. All of our end markets will provide us that opportunity.
All right and then in your prepared remarks, you mentioned the Harvey Hurricane Fund.
And some opportunities there. So this year, we saw a record amount of Hurricanes just yesterday, we saw you know category to hit the golf.
How much opportunity do you see related to the storms that we've seen this year.
Well generally speaking the storms drive opportunities for us in the long term. So as an example, Harvey hit Texas or two years ago three years ago now and we're starting we're just now starting to see a lot of that long term funding or generate project opportunities. So yeah, we typically will see anywhere from a one.
Under five year tail on on project opportunities driven by by a hurricane activity. So you know, we'll see what comes out of this obviously, a Louisiana was very hard hard hit this year I think that was probably about the fourth or fifth storm that hit that state a this year yesterday so.
We'll see what happens you know there's there's work that we've been chasing over there related to you know prior storms and just yeah flood control and a reclamation projects and things like that so now we'll see what happens, but again that can be a good long term driver for us just like we've seen with Harvey three years ago.
Okay. I appreciate that so I guess I got a few more questions, but I'll jump back in queue and let someone else have a shot at this thing. Thanks.
Thank you. Our next question comes from the line of how fraught with noble capital markets. Please proceed with your question.
Good morning, I have a couple follow up questions. If you wouldn't mind can't Mark can you talk about you alluded to it a little bit you know you have flexibility in the concrete business to bid or you would transition to where you think end markets are stronger and you know Boyd weaker markets can you highlight some of the stronger end.
Markets and maybe also some of the weaker end markets that you're seeing out there on the concrete side.
Well that comments really in reference to both a boat segments, but specifically on the concrete side I mean again, if you think about things that have been impacted by the the pandemic you know as an example, Bakken in the first part of the year, we had several projects on our like for commercial side related around.
You know Jim facilities or movie theaters or things like that clearly those businesses have been impacted.
By the pandemic and so we're not seeing a lot of those opportunities right now and ones that we were working on you have been suspended or or ship it to the right.
So that's an example of kind of what's been impacted but on the same token we're seeing a other areas you know for distribution centers and things like that.
Related to you know that that again, you know a lot of ecommerce type stuff has been has been going on in building as a matter of fact, and so we're seeing a you know opportunities driven driven by by that business. Likewise as I said, just a minute ago, a long range projects.
Yeah, we're seeing people make decisions and move forward, but things are structural work again tends to be longer term duration and so you know, even though our where our work on a structural project. Maybe you know 12 to 18 months. The overall project for that Investor is probably you know a two to three year long.
Yeah project for them. So you know there are a lot of people are you know they are taking a long term view and they're confident that you know two three years out yeah, we're going to be in a post pandemic environment and so they're making decisions to move things forward. So you know and likewise ER.
Even with the you know some of the states being impacted a again a lot of our exposure is in.
States that have been you know.
Back moving an opening their economy its early on and so we're seeing 'em, yeah, we're continuing to see a bid opportunities driven and again a lot of the lot of the opportunities that we see in the government sector are driven by federal dollars and so Oh, yeah, we're still seeing opportunities driven by that and we would.
We expect that to continue particularly if there is any kind of Ah you know additional stimulus, but yeah. There's been a lot of stimulus that's come in already that you know is potentially going to help drive those opportunities for us.
Great and then if we could talk about that.
The weather impact in the third quarter.
[laughter] you know typically when you see weather impact.
Historically, you've seen an impact on the profitability EBITDA profitability held up even though the revenues were down Robert can you maybe quantify the impact that you saw on revenues in the quarter and then also help US understand how you know profitability did hold up in the third quarter.
Yeah, well I think the revenue impact was EUR $8 million to $10 million or on the on the concrete side. If you go I think what you're alluding to when you go back to a few years ago when Hurricane Harbor get it was it was a weather pattern issue in that year. So we had a lot of unabsorbed labor that pull back on margin I don't expire.
I like to see that going going forward. This was a an event that this should do well some floors that were going to happen at the end of the quarter well into the fourth quarter. So we don't expect to see a a margin impact on that just really a timing thing yeah. The last I'd add to that too is that I mean this is again, we mentioned this on the remarks.
I believe that you know its indicative of the highest g. initiatives that to that are you know we went through and implemented last year and just you know our teams are just really performing well.
Despite despite challenges and as Robert said. This was this was very Devry. This was like quick hit kind of stuff that impacted a shorter period of time. This wasn't like a without bad weather pattern like we saw a few years ago.
Okay, Great and then thanks for putting guidance out there for EBITDA for the fourth quarter.
HM two questions on that guidance first of all do you have a mix Robert on the 10 to 12 million free EBITDA for the fourth quarter and then when you look out into next year. You know if you do hit the low end of your guidance, you're looking at 52 million for the year adjusted EPS.
The guy.
And when you look at how 2021 is shaping up well you know clearly there's some uncertainty but do you think that you can at least on me or you know stay in that same 50 million dollar range in 2021% adjusted EBITDA standpoint, or can you give us.
Just a little bit of a preview when 2021, if you wouldn't mind.
Yeah, I think you know 2021 is going to depend on or you know the next couple of months and how things shake out I think mark alluded to in his comments that there are a lot of great opportunities out there obviously the timing of when when these things take free and in a people press go on projects well will really determine how much we actually get the.
Burn and 2021, but you know we like like like Mark said, we feel really comfortable with where the bid environment is and the opportunities that are in front of US is good it's really going to boil down to you know the time to go when those projects. So you know free you up and actually let out.
Yeah. The then I'd add so I think we've talked about this on prior calls you know our focus is on on you know aggressively going after work in backlog and again, we want to do it profitably we don't want to as I said in my remarks, we don't want to just fill up on cheap work. Just the you know have worked a we want to we want to make sure that were.
Targeting the right thing.
You know our message has been cast a wide net we're gonna go. After you know all of you know all the opportunities we see out there we're going to we're going to you know we expect to generate.
Generate you know greater throughput with our estimating staff. We've added are estimating capability and flex exit estimated capability. So that you know we can we can make sure that were.
You know targeting Ah opportunities and we're bidding everything we should be bidding and and even if we if we're bidding more opportunities or just to make sure that you know we're finding the right work on a lot of backlog. So that we can continue to.
To perform well as we go into 2021.
Yeah, Robert mix on fourth quarter, EBITDA any right you know s. immense water marine versus can concrete and fourth quarter. Yeah. I think it's gonna look a lot like Q2 is probably the best case from a revenue and a a a mix from the group.
<unk> segment as a you know you did this quarter are you you have Tom should this weekend, so you're going to have a shorter days, let's say like Oh. So it gives you a little bit like Q2 from our internal modeling.
Great. So you know still profitable in concrete, maybe a little bit of a slowdown or not slow down, but little you know where from the standpoint of marine just because those days, yes, <unk>, yes seasonality now he's an alley effect, but yeah. That's a good way to think about it.
HM importantly, concrete looks like you potentially you hit a new level or at least have a.
<unk> created a more sustainable profit fairway there.
Yeah, I think again, we're working with we're not where we want to be yet, but we've made tremendous progress are really proud of the team. There that is you know the get the guys, leaving the division there are doing a fantastic job.
You know, there's just a there's a great energy in that division and there's Ah Ah you know just a yeah just to just they've just done a great job and they they continue to do that they are executing on our strategy and you know weve continued to make improvements as we've gone through this year you know building off of what we did last.
Here are with I.S.G. and are.
Just a really really proud of the effort everybody has done and what they're doing and again I think we've got more room to improve there and does that we're you know we're going to keep branded on that.
Great. If I can just talk about you know capital or Capex and in the context of Boston's surplus real estate.
You in the press release, you talked about that you're gonna have proceeds from the insurance recovery to bring in Baskin looking at reinvesting that into the grants, we market and replacing it with the women Boyd can you put some color on what level Capex. There and then also can.
Can you talk about the timing of they you know surplus real estate sales I think in the last quarter you talked about any preliminary sales agreement on Tampa and I was just wondering where that and what the status of the campus sandwiches.
Yeah, So I well you know we as we said in our remarks you know we're currently working on a you know what makes sense for us in terms of Ah you know capacity replacement and with our dredge fleet.
Yeah, there's there's a lot of different opportunities and and things like that that we're looking at to determine what's the best.
Passport forced on that so we'll have more to say about that as we go forward for now or you know Capex is I I would kinda.
You know think about that in the same way that we've talked about that the last couple of years in the ranges that we've talked about it as we determine which way we're going to go up on a capacity for dredging, we'll have more to say about that and whether or not that alters.
Or increases our overall Capex picture there I'll, let Robert touch on the the real Omega. So the update on the Tempur real estate is a you know the than what it's been for that property moving forward is the rezoning with the city or the hearing has been moved to its everywhere. So once good hearing happens we.
We hope to close shortly after that but in this current environment, a I don't want to lock in on a on a timeframe. It is just really going to depend on the city of example in their administrator profit before we can move on their property.
Okay, and then sorry.
I was going to say it I do think you know again, assuming that that we expect that their car. We don't think theres any issues there, but we could see you know a in the next couple of quarters or a summit. Some movement on a you know at least to the to the real estate properties we have.
I'm sorry, Mark two other ones are no gets you to the ones that we were talking about Tampa and one of the other ones in Texas, we could see movement on that or in the next couple of quarters.
He's got east West Jones.
So this is the property of surplus property into a port Lavaca, we have a feel for it right now Oh, Pete a fan placement now for 5.5 million hopefully you know we are.
Some things break right, maybe it's a a Q4 item, but you know we're getting close on a deal as well.
Great. Thanks, and just lastly, if you could talk about the ERP launch you know you're really design phase by the end of year end you can start in the first quarter 2021.
We're going to spend it.
You know a total of 15 million well can you talk about the timing of that spending and then also more importantly, you know what the payoff is what do you can you give us a couple of examples of.
How big your P., it's going to improve our your operating <unk> operations.
Yeah. So we think that's been is a a good chunk. It was going to happen next year on into 2022, you know over the life of the 18 to 24 month period.
Oh speaking of the benefits. So we think that this is going to be very beneficial to our high return or just generally the sense of being able to consolidate and standardize kind of our back office processes and how we execute ER projects are in doing anymore.
Sure.
Man or we have better data across the well the business. So when we when we launch I see last year, we talked about labor management equipment management overhead management or is this just reinforces all of those things and this is the foundation to manage those resources better well go to bid a good he's going to give us is going to give us.
But really the two to scale and grow the business as we think about capital allocation and what what are the next steps or a four ryan or whether it's M&A or other opportunities like that well this would give us the platform to be able to scale up and and it really grow the business.
Great. Thank you so much thanks.
Thanks, though.
Thank you. Our next question comes from the line of Greg Weiss with Boston Partners. Please proceed with your question.
Hey, guys how are you doing.
Right.
Just to follow up a little bit on the you know some of the asset sales or the real estate sales questions. You know you when you look at the.
The various properties and door assets, you know you look to to pop and monetize here to.
To me I was just trying to get the portfolio more efficient and drives value can you give any you know pull.
Holistic kind of ranges in terms of kind of proceeds we think we can generate.
Oh, so the separate property or we think we can generate somewhere around 20 million books for that one in the port Lavaca property or somewhere around 5 million users Jones is a a little early in the process No. No farm offers on that but I can say that it's a listed in the $40 million to $45 million right.
And from from that do applaud. Some you know some simple or discounts on that for closing costs well I think you can calculate what what do you think the proceeds could be.
Yeah, so and.
Wouldn't do any of these sales.
A result in any degradation in EBITDA I became the reason right running expenses, but not really operation yet you're not selling businesses that that produce.
You know revenues or profit as part of it no no. They these properties are company owned properties in a.
You know in sample, where we're moving to a we're releasing it well, but that then expenses shown up into for you know for the last three quarters. So all of the I guess, the additional operating costs or it's already factored into the business, but these these are games to the business yeah.
This is this is a surplus so close to that.
Right and just so bad. This is you know today your market cap is 90 billion. Bob you said you have $36 million is that you know I think you just highlighted I mean, you highlighted over $60 million of sales, but let's just say 60, I don't know what the tax goes on that so basically post that.
You know what you say your day EPS by valued at 125 million and it would be.
$75 million and I think you just said you know the low end of EBITDA range for next year's 50 million was that I mean are.
Are those real numbers.
In theory.
Hi, there yeah.
Alright.
It doesn't seem very effective.
The company, but we'll see.
The guy that it's nice to see another good quarter and great job on the balance sheet.
Thanks, Greg.
Yeah.
Thank you. Our next question comes from the line of a follow up question from Joe Mondello like Saudi and company. Please proceed with your question.
Hi, guys. Thanks for taking the follow ups just on a concrete segment, you've made tremendous amount of progress over the last three you know over the last couple of years actually when you go back to 2018 actually in the last three quarters of this year Youve sequentially made improvement.
Still a ways to go to that 8% to 11% a goal, but you've made a lot of progress what mole what have you accomplished thus far and what more do you have to do to get to that 8% to 11% EBITDA margin goal at concrete.
Well I'll wait we've we've greatly improved project execution and you're seeing that in our results. There's Ah yeah. We had some challenges in in or some of the markets, particularly central Texas that way.
ER was Ah you know impacting us even after we came out of the the poor weather pattern. Because you know a couple of years ago that was one of the biggest drivers of performance was just a really bad weather pattern in the state of Texas and all of our market, but we've always as part of the of the process last year you know we we.
We're able to kind of get back to some some basic blocking and tackling you know generating a you know ER.
And enhancing reports and stuff like that and this is you know stuff we've already talked about in the past that.
You know to just be able to get a good information in the managers hands. So they can make good decisions. We have Ah you know again, we've we've changed out some personnel last year and this year and so you know we're seeing a really good improvements on project execution.
And I think you know we we will continue on that also will have Ah Ah you know just focusing in on a you know Ah Ah controlling indirects and Ah you know that's a that's an area where of course, we've been focused on that we know will continue to focus on and then just you know targeting the type of work.
With that Ah, where the most successful on and and provides us the best opportunities that we think to be successful and successful in executing work profitably. So you know it's kind of like all the all the stuff. We've been doing we're just going to keep doing it and you know keep drilling down on that and we think that that.
We'll continue to pay off for us than drive us to to continued improvements in that business.
Okay. So I guess for the third quarter can you tell me how much structural made up up the concrete segment and looking at your bookings and the low bid Awards and awards that you won you know post the quarter end or how does that sort.
A mix look like what are your bookings are looking like relative to structural and light.
Most of the work and I'm trying to remember it I would say most of the working cap rate that we've looked at it. They included in that books and little bit number since the end of the quarter is a light commercial.
There there might be a small structural in there, but I think it's mostly like commercial at this point, we do have some upcoming work that we're bidding on and structural so you know well, we're hoping to add to that backlog as weak as we go forward and as far as as far as the mix from a structural year over.
Your structurals up almost 60% year over year, but we'll we'll file our Q tomorrow and you can see the dis aggregation knows a different services in it but if there was a oh a mix shift in the concrete business or structural was off like commercial was was down year over year.
And is that was that for the third quarter, but you're referring to yes third quarter 2020 versus putting <unk> third quarter 2019.
Okay and then just another question on concrete it looks like the non raz construction market is going to turn over at least in a handful of sectors I'm going into next year, you know looking at office buildings hotels, maybe retail.
How are you thinking that it was going to affect the concrete business. As you go into 2021, how are you thinking about that.
Well kind of kind of what I've, just said earlier as the you know the parts of the economy that have been moving forward are driving opportunities and so oh.
You know, that's where we're seeing more opportunities today and that's what we kind of expect to see in the near term you know some of the buildings that you know this on the structural side that we're doing are you know kinda.
Residential type type bell or mixed use type structures and again to the those that are moving forward people are thinking that they're taking a long term view on those type of deals because that's a you know by the time they bring those online as you know were in the 2022 2023, so they're taking a longer term view on that and we you know we.
I think there's a lot of opportunities in that infrastructure work or that we're targeting also the other thing too is is that you know where it were at a a state that is Ah you know continue to see population inflow, we're seeing a lot of businesses relocate the Texas and again obviously.
You know office buildings and some of the retail things Yeah, we're gonna have to see how that shakes out, but Ah you know residential towers mixed use towers were seeing those types of projects move forward and we're seeing you know again, a lot of Ah Ah like commercial work and a larger like commercial work <unk> that relate.
It to the other parts of the economy that have been have really never slowed down and in some cases have expanded in this kind of economy drive opportunities for so that's where we're looking to see.
See those opportunities in addition to even with the impact in education.
Again, you know, we kind of have a mix of a lot of.
You know districts in Texas are going to school and go on remote and a lot of lot of districts are doing both at the same time.
And so you know we still yeah. There was a lot of bond money that was already passed a that we think can drive Ah you know education are opportunities for us as we go forward.
Okay, and then just going back to the sort of EBITDA margin goals that you have at that segment is there a mix.
Percentage, a that you have to get to take it to hit those goals at all.
Do you actually got structural no no there's not really I mean again, what we wanted to do is target those opportunities that Joe just to give us the continuity that we perform well on yeah. We perform our our guys that our team our guys and gals performed well in both Sally We you know we do.
Do excellent work in both light commercial and structural work and we worked well with.
Yeah. The general contractors that are performing that kind of work in both those areas. So we have the opportunity to achieve our objectives, regardless of the mix up but you know as part of our strategy. We are targeting a more structural work, we like our competitive dynamics in that it's larger work load.
Longer duration, it gives us a better operational visibility so we like that and so Ah yeah. That's that's a key part of our strategy, but you know we do excellent work on the life commercial side, as well and and Oh perform well in that type of work as well. So we think we can get there regardless of what the math.
Next is going to be.
Okay and just one last question on the Corpus Christi explosion I just wanted to verify I think youve sort of said, but I just wanted to verify you don't anticipate any liabilities related to the unfortunate incident.
Well, we have insurance coverage and so we have what I would say is as we have we believe we have adequate insurance coverage.
For this accident and all the claims associated with it.
Okay, and then lastly, also just to confirm and you sort of already set up but I just want to verify what kind of risks there is I'm, losing that dredge you you don't think that effects much of your business at all.
Well as we've said I mean, obviously it was it's a tragedy that first and foremost and and Ah you know, we we reiterate that our sports thoughts and prayers are with the crew members.
ER and their families that were impacted by that.
Having you know isn't just to repeat what we kind of said in the earnings release and in my remarks, I think ER. We believe we've got Oh, Yeah, we're able to work at all to all the backlog than we have in hand and.
Our we've communicated that out to our customers that are you know we will meet all of our commitment and we're in the process of determining what's the best way for us to Ah Ah replace that capacity and what form what form that takes so we're still going through that we'll have more sales that later, but.
We're confident in our ability to execute the work we have a backlog.
Okay, well great. Thanks for taking my follow up questions appreciate that have a great day.
Thank you.
Thank you. Our next question comes from the line of Chris cancel like sampling of Madness [laughter].
Question.
Hi, guys. Good morning, good morning.
With respect to the the the low bids.
Is the margin profile on those opportunities.
Similar to where the segments are are currently or are they you know greater or less.
I can't really say can I say that you know there are kind of the same I mean I'm you know obviously on some of the smaller sized contracts.
You know, there's we've seen a little bit of a.
Tightening of <unk>, a competitive bid margins and you know from some of the smaller players.
You know were toward trying to target larger sized work to offset that but I would say as a general comment you know we're we're we're pleased with where the Oh yeah. The bid margins are in the work we have in backlog.
Okay.
And then with respect to.
ER approximately the $60 million worth of opportunities you know to to monetize properties, well where are those where do those properties being carried on your books.
So on the balance sheet or if it's fixed assets.
No yeah, but what's the value that it had.
Value that you know at approximately where you plan on on selling this property Oh, sorry, I didn't I think because of course, yeah, we expect to get a decent size gains going on all of them.
[noise] so.
You know the the true economic tangible book value of the company is greater than you know where it's currently being stated you know he's a d. gap.
Correct, Yeah, Yeah, I think we proved that out every quarter, what do you see that the gains on sale of assets a quarter in quarter out yeah.
So do you have the ability or within your covenants to buy back stock or is that something that you're discussing.
Do we have to wait for proceeds from those sales to happen. If that's part of the plan or or can you do it now because it would just seem like a given where the stock is trading.
This would be a great opportunity for the company and for shareholders to see you guys buy back some stock yeah, yeah. According to our existing credit agreements in place today that restriction would go went through <unk> room, well into the beginning of June well before that restriction comes off well, but whereas we stated.
Sure you know this is the option that's on the table when it's something that we consider all the time.
Okay. So you can't do anything until June unless there is maybe some some proceeds from sales of.
And at that point, it will be something you guys hope to consider.
Well it will it will require us or you know striking to deal with the with the bank group to to remove that restriction.
Okay, I mean, I would I would hope given where EBITDA is that.
You should be able is that something that you're trying to do.
Well, we we I I would answer it this way, we always look at all options, including share buybacks or for a use of capital and we continue to do that so that you know your point's well taken and a that is something that we continue to look at as always as with all other options as well.
Great. Thanks, guys. Good color you bet. Thank you.
Thank you. Our next question comes from the line of how fraught with noble capital markets. Please proceed with your question.
Yeah, Thanks for allowing a couple of follow ups. If you wouldn't mind something that hit the radar screen and you know September was the emergency work that you were awarded.
In Seattle and then the subsequent disruption of that work Robert was any of that work recognized in the third quarter will be a fourth quarter event and can you frame potentially how the work might the work potentially might have expanded because it collapses appear.
Yeah, I want to make sure I understand your question of course are you, saying the good additional emergency work that that gets booked in Q3.
Did you book any of the emergency work I think the original contract was 4 million Bucks from the city of Seattle.
And was that booked in the third quarter and then you know looking it.
You know, how they're going to have to recover it. That's the you know the fountain and other other things are you know other structural structures that fell into the water can you just given maybe a potential scope how much of that work is expanded from ASCO perspective.
Yeah. So this is mark I'll I'll answer that I'm. So the so to the first part I believe that that contract was booked in the third quarter or if that's different it it did and so we looked at in the third quarter. It is too soon to tell or what.
If you know what type of Oh, so I'm not going to quantify any potential additional contract value. At this time, we're working through that and just to be clear. The part that collapse was weak. So this was the demolition of appear that the city identified.
As a as failing and so this was done as an emergency work. A this is a payer that they had planned to demolish in her place a couple of years from now, but they're they're inspections determined that oh. It was unsafe. So they close this pair down and and put out this contract, which which we did book in.
In the quarter, so they'll work or the failure that happened was work that was already going to be demoed. So weve submitted a plan to the city or they're looking at that we are working back on side have been and are working on other areas.
Demolition of the other areas of the pair not the part that failed and so we will be working with the city to and are working with the city to determine the best way to.
Recover as the you know the parts that up that failed and fell into the water. So too soon to tell what that might mean in terms of overall contract value, but it is possible that can go up I just can't quantify it at this point.
Okay, and then do you have a number for dredging revenues for the quarter and then can you talk about your you generated free cash flow, even though working capital was negative by about 8 million Bucks and can you give a forward looking you know do you want how working capital might change in the fourth quarter.
Yeah, and again, though because every year some revenue revenue, who will post oak tomorrow as a part of the Q, but but we saw roughly about a $5 million decline on a year over year well in dredging revenues.
And you know.
Mark talk a lot about the earlier I'm almost a mixture of things, but we saw an increase in marine construction, well, which drove the overall number went went off book or for marine well move into kind of your working capital of course, and you know I expect it to be more in line with Q3, Oh you know this problem of years when we took.
We build up a we had some really good selections towards the end of the quarter and it kept close to cash flow positive about you know we put in place.
You know you know some some heightened controls and well you know, we really try to squeeze a lot of cash out of working capital we will keep those protocols in place and we'll we'll continue to work at that but you know we expect you know we don't expect to see a a big buildup in working.
Capital over the fourth quarter.
Okay, Great and then can we just clarifying the insurance you. It sounds like you define the you know asset side of the liability there or on the asset side of you know what potentially recovery, you're going to get from insurance.
And the you know the liability is little open have you recognized stole the deductibles you were likely to incur from the Corpus Christi accident.
Oh those yes those were recorded in the a as we said in the earnings release, a that's a net number that you see there. So those have been recorded in the third quarter.
Great. Thank you.
Huh.
Thank you ladies and gentlemen at this time there are no further questions I'd like to turn the floor back management for closing comments.
Okay. Thank you everyone for attending todays call and we look forward to speaking to you on our.
Next quarterly conference call in early twenties, 21 have a great day.
Thank you ladies and gentlemen. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
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