Q1 2021 Orion Group Holdings Inc Earnings Call

April 29, 2021

[music].

Greetings and welcome to the Orion Group Holdings first quarter 2021 conference call.

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Francis Okoniewski, Vice President of Investor Relations.

Good morning, everyone and welcome to Orion Group Holdings first quarter 2021 earnings conference call and webcast my.

My name is Fran Okoniewski, Vice President Investor Relations and joining me today are Mark Stauffer Orion Group Holdings, President and Chief Executive Officer, and Robert Tabb, Our executive Vice President and Chief Financial Officer.

Regarding the format of the call we've allocated about 10 minutes for prepared remarks in which Mark and Robert will highlight our results and update our market outlook.

We will then open the call for questions through.

Through 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 margin EBITDA EBITDA margin.

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 for the most comparable GAAP measures and reconciliation tables accompanying this earnings call within the press release issued yesterday.

The press release can be found at our website at Www Dot Orion Group Holdings, Inc.

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 website.

And with that I'd like to turn the call over to Mark Stauffer, President and Chief Executive Officer Mark.

Thank you and good morning, everyone. Thanks for joining us today.

Today, we'll discuss our first quarter 2021 results provide updates on the benefits we continue to read from our ISG and other operational improvement initiatives and discuss our current outlook.

I'll begin with an overview of the first quarter. Robert will then discuss our financial performance in more detail then I'll come back to discuss our markets and provide an update on our ERP implementation before we turn to Q&A.

As always I'd like to begin by thanking our team for their hard work and commitment to our success not only with regard to operational and financial performance, but most importantly with respect to safety.

Our foremost priority is that all our employees go home to their families in the same way they came into work healthy and injury free.

We are deeply committed to our target zero program to support our vision of an incident free workplace.

With respect to the first quarter of 2021 as anticipated our results reflected the impact of the historic Winter storm in Texas during February which disrupted our progress on projects across our concrete and marine operations, including our dredging projects.

This reduced revenue for the quarter by approximately $8 2 million and lowered earnings per share by approximately <unk> <unk>.

Despite the weather challenges our concrete segment delivered year over year growth in both revenue and profitability, which was a result of our team's solid execution and of the labor and equipment efficiencies gained by our ISG program.

While our backlog was down at the end of the first quarter relative to the end of the fourth quarter and the first quarter of last year. We are very optimistic about the trends we are seeing with respect to project opportunities across our end markets are.

Our current level of quoted work stands at nearly 2 billion.

A record level up almost 130% from this time last year and I'll also up meaningfully on a sequential basis.

We have a significant amount of bids submitted and under evaluation in both our marine and concrete segments and as noted in our earnings release, we currently have $134 million of low bid or awarded work the highest reported level in five quarters.

We anticipate new bidding opportunities to emerge as economic activity picks up with increasing vaccination levels and herd immunity with respect to COVID-19.

These factors make us confident we will be able to maintain our project pipeline and increased backlog as 2021 progresses positioning us well for 2021 and beyond.

This favorable outlook is further enhanced by the possibility of a new federal infrastructure, Bill, which would be an additional catalyst.

For increased demand across our diverse operations.

Also during the first quarter, we continued to improve our liquidity.

Now I'll turn the call over to Robert to discuss our financial results for Q1, Robert Thank you Mark and thanks, everyone for joining US today I'll review the financial results for the first quarter of 2021 day.

Updates on the company's liquidity position and the status of our real estate transactions.

Starting with the financials revenue for the first quarter of 2021, or $153 3 million compared to $166 6 million in the first quarter of 2020 or a decrease of seven 9% decrease in revenues were driven by a combination of the timing and mix of projects from period to period and the extreme winter weather in Texas.

The first quarter gross profit was $15 5 million compared to $19 8 million in the prior year period.

Gross profit was also impacted by winter weather in Texas, and the mix of projects, both resulting in a decrease in equipment and labor utilization.

Also note Q1, 2000, Twenty's gross profit benefited from execution related margin gains on several projects.

Turning to our segments in the first quarter of 2021, our Marine segment had revenue to $72 1 million and an adjusted EBITDA of $7 9 million. This equates to an adjusted EBITDA margin of $10, 9% in the prior year period, we generated revenues of $85 9 million and adjusted EBITDA of $11 2 million or 30.

Two 1% adjusted EBITDA margin.

Marines revenue and EBITDA declines were driven by shifts in timing and mix of projects in Q1 of 2020, we had several large jobs closeout and recognize execution related margin gains.

Our concrete segment had first quarter revenues of $81 1 million.

Per $287 million in the first quarter of 2020 adjusted EBITDA for the concrete segment was $1 6 million compared to 985000 in the prior year period.

Concrete segment's year over year results improved despite being impacted by the winter weather in Texas increased production volume rates and execution related margin gains were key drivers of the year over year improvements.

Adjusted SG&A expenses for the first quarter were $14 million or nine 2% of revenues.

Please note that the first quarter tends to be the most seasonally weak quarter from a top line perspective.

We remain focused on driving annualized SG&A, two or below eight 5%.

Net income from the first quarter of 2021 was 928000 or <unk> <unk> diluted earnings per share net income includes roughly 500000 of net expenses related to ERP, partially offset by the benefit of our tax valuation allowances.

Adjusted net income was $1 2 million or <unk> <unk> per share.

The first quarter adjusted EBITDA was $9 5 million, representing an adjusted EBITDA margin of six 2%. This compares to $12 2 million weighted for an adjusted EBITDA margin of seven 3% in the prior year period.

Now to the bidding metrics and win rates.

For the first quarter of 2021, we've bid on approximately $1 1 billion worth of opportunities and were successful on $79 million. This resulted in a book to bill ratio of <unk> five times and a win rate of seven 4% for the quarter the lower than average win rate is primarily the result of extended timing of several projects being awarded.

We currently have a significant about quoted for which the outcome was undetermined during the quarter.

As of March 31, 2021, our backlog was $365 million of which $155 million was associated with our marine segment and $210 million per the concrete segment.

Additionally, subsequent to the end of the first quarter. We are the apparent low bidder or have been awarded a $134 million worth of opportunities.

This 56 million is related to the marine segment, while $78 million related to the concrete segment.

To note. This is the highest low bidder and subsequent award awards in the past five quarters, we see this as a positive leading indicator for potential future awards.

Also as Mark mentioned, we have nearly 2 billion of work quoted which is a record level.

Onto the balance sheet.

As of March 31, 2021, we had approximately $4 6 million of cash and $68 3 million of availability under our revolving credit facility. We ended the quarter with $29 million of debt outstanding all of which was related to the term loan. This translates into a seven four times leverage ratio and it free.

Charge ratio of four one times, both well within the covenant requirements. Our current liquidity position provides us with the flexibility to execute on our strategy and pursue New awards now I'll provide an update on the status of our pending real estate transactions starting with Tampa.

The rezoning of the Tampa property, which is a prerequisite for our transaction to close is moving toward final approval. We believe this transaction will close in the second quarter of 2020.

Now onto the Port Lavaka property. The bar is finalizing its lenders requirements. It has requested the close in July we will continue to work with the bar and are optimistic that this will close in Q3 finally, the property on the ship channel continues to garner significant interest.

We believe as the impacts from COVID-19, abate, we receive offers on this property.

As we execute our real estate transactions, we will continue to evaluate all potential uses of capital, including reinvestment into core assets accretive imminent M&A and share buybacks.

In closing our first quarter 2020 was consistent with our expectations. We saw the concrete segment posted a year over year improvement in results. Despite the extreme winter weather challenges in Texas.

Lastly, we have a <unk>.

Significant amount of low bid and quote it works, we continue to make progress during the quarter, but we remain focused on continuing our improvements.

Now I will turn the call back over to Mark.

Thanks, Robert turning to our markets as I've stated previously many of our end markets have continued to function normally or at increased levels. During the pandemic, while others have seen project opportunities slide to the right.

Bidding and winning new awards and augmenting our backlog remains a top priority more specifically securing the most attractive jobs, where we have the best likelihood of executing at or above our targeted profitability levels.

We believe this will continue to drive increased shareholder value.

The diversity of our end markets and the flexibility to adjust between them is a great advantage to us in this regard.

In addition, we are targeting select larger longer duration projects that gave us greater operational visibility and we currently have some very good prospects of this nature that we look forward to providing you with updates on in the coming months.

In our Marine segment, we continue to pursue opportunities in the public sector at the federal state and local levels, including Port expansion projects D. O T work involving bridges over water Navy facilities, and environmental and flood control projects.

We've recently book, several new dredging jobs, including with the U S. Army Corps of Engineers, we expect to see an increase in bidding opportunities for dredging work from the core as we move through the second and third quarters, which is the back half of the federal fiscal year, and we are well positioned to capitalize on these upcoming opportunities.

We're also continue to see bid opportunities materialize in the private sector with us with expected upcoming projects in the energy space and in the Caribbean market, which is a positive sign of economic activity picking up in the markets that were more impacted by the pandemic.

With the continued rollout of the COVID-19 vaccine and as we reach herd immunity, we expect overall economic activity to accelerate driving better bidding activity in these markets, including some potentially large projects.

In our concrete segment, we have been pursuing and successfully winning new work and attractive end markets such as the Tech e-commerce and large retail sectors.

We also continue to bid on larger structural projects involving high rise residential or mixed use towers.

Anyone who has been in Dallas Fort worth Austin or Houston in recent months will understand the significant that significant activity going on with these types of projects.

Additionally, we are seeing bid opportunities outside our traditional Texas markets markets and in particular, we are targeting large structural or large like commercial construction projects in the Florida market.

We have long standing presence in our marine segment.

We've talked about our ISG initiative for several quarters now and while implemented during 2019, the benefits to our profitability, resulting from enhanced labor management equipment management project execution and corporate processes.

Really began to accrue to our results in 2020.

We expect to continue to see benefits from the actions we've taken as we move through 2021 and beyond particularly as our revenues increase and we gain leverage on our improved efficiencies and cost control.

We continue to make progress with our new ERP system implementation, which we expect to enable us to garner even greater benefit from our ISG initiative.

Once completed our new companywide ERP platform will not only solidify our operational efficiencies, but I'll also allow us to scale. These efficiencies that efficiencies as we grow organically and through possible M&A in.

In the future.

ERP will enable us to achieve full system integration across the various businesses that we've acquired over the years and critical corporate functions, including CRM project management, HR payroll and finance, we're confident that this investment will increase our effectiveness and executing our strategic plan and enable us to.

More efficiently integrate any future acquisitions.

In the first quarter of 2021, we continue to strengthen our balance sheet and improve our liquidity position, providing us with flexibility to continue to execute on projects and backlog and pursue new awards, while at the same time, enabling us to execute on our strategic plan, including positioning ourselves for any potential accretive acquisition opportunities.

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Additionally, we are investing in the rebuilding and upgrading of one of our dredges previously converted to use as a booster, which will replace the dredge lost during last year's tragic accident.

Moving forward, we will also look to upgrade and extend the lives lives of several of our dredging assets.

We would expect our pending asset sales to contribute to additional improvement to our financial position in the coming quarters.

In the first quarter our team once again rose to the occasion and executed well in the face of adversity, just as they have been doing for the past year.

As we look ahead, we are confident that through our ISG initiative are E. F. ERP implementation the strengthening of our balance sheet, all combined with a favorable outlook for our diverse end markets positions us well to capitalize both on current and postponed pandemic economic activity.

With that I'll turn the call back to the operator for Q&A.

Thank you at this time, we'll be conducting a question and answer session.

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One moment, while we poll for questions.

Our first question today is from Julio Romero of Sidoti <unk> Company. Please proceed with your question.

Hey, good morning, everyone.

Good morning.

And so wanted to ask you know generally can you speak to the quotation level relative environment relative to one quarter ago. It sounds based on your prepared remarks like its certainly improving.

What are you seeing out there in terms of activity levels and do you find conditions to be supportive overall.

I think overall, we do.

Again, it's the highest level of quoted work we've had outstanding in our history.

We've got a number of projects.

That even in the government sector that we're bidding on that or not.

Determined at the time of bad they are under an evaluation period is kind of an RFP process. So they've got a number of those outstanding right now.

We've got several large projects that we've we price them, we're waiting word on those and again as we commented on in the remarks, we have a significant amount of Hello, better work at this point and again, that's the highest we've reported out in about five quarters. So.

We feel good.

Concrete business that are a lot.

Lot of opportunity, there and all of our markets.

And then also in markets outside of our traditional markets in Texas.

And then on the marine side.

Again seeing work in the government sectors that we mentioned, but also we're.

We're seeing things.

Moving forward in.

And those areas of the private sector. They were more impacted by COVID-19 that seems to be.

Stirring and stuff coming out and and.

Pricing going in so yeah, we're pretty confident then.

And the opportunities we see in front of us.

Got it.

On the concrete segment wanted to ask about potential geographic expansion. There I know you mentioned in your prepared remarks, you are targeting projects outside of Texas, such as I believe you cited Florida as an example, how.

How about opportunities in other regions I know you mentioned, Louisiana in the past can you just speak to maybe other opportunities outside of Texas and Florida.

Yeah, we've we've been working in Louisiana, we haven't won yet, but it's definitely we're competitive in a very good a very good effort by our team.

And we're starting to get you know.

Opportunities and invitations to look at work in other places besides Texas from our.

Some of our G C.

As we May have mentioned before you know sort of our <unk> work in markets outside of Texas have more national footprint and so are we.

They know that we're looking to step outside of Texas, we're getting some.

You know getting opportunities in coming from from other places now that.

What we can do they know the quality of work we do they know the quality teams, we have and so they are there.

Starting to paying us on on other places as they as they're pursuing work in other in other markets for them, but for sure. We're definitely you know, Florida is an area of great interest for US. It's a population is.

As income.

It's growing it's an incoming a destination for population growth just like Texas is so some of the same drivers.

To drive opportunities in that market or what we're seeing in Texas and you.

So we're very familiar with that market long standing presence it on marine side, and a great way for us to leverage.

Our existing footprint to pursue these opportunities though.

Really pleased with our progress on that.

Great and then just last one for me here is a.

Could you mentioned in your remarks that you expect backlog to expand sequentially as we progress throughout the year.

Well, what I said was as we referenced the $134 million, we referenced all the opportunity. The quoted work we have out there the pipeline. We see so we think we're positioned for that to happen. Obviously, we have to bid work we have to win work.

But certainly we feel good about the prospects of a building backlog as we go through the year.

Sounds good thanks for taking the questions.

Yes.

The next question is from Alex Rigel of B Riley FBR. Please proceed with your question.

Thank you and good morning, Mark you're a win rate and your win rate in the quarter was on the low end of historical levels can you help us to understand why.

Yeah, It really relates to timing of award and it goes back to what I was saying.

For the last question.

Around.

You know a lot of work that's quoted even in the government sector.

RFP type work the way we do our calculations are those all of those quoted work that we have outstanding all the stuff that we're waiting for determination on is not included in our in the calculation.

That we do so we view it as a timing thing and we would expect that to increase as we go through the second quarter. We've already got a lot of work that didn't love bidding a little better as we mentioned in our remarks.

Our historical level of quoted work outstanding so as we get the terminations on these things.

And we feel good about our chances on a lot of the work that we've quoted.

I would expect that to uptick as we get into the second and third quarter.

And then the SG&A target of eight 5% when might you get from this level.

Well, we think that is.

We progressed through the year, we have a good shot at it this year from adjusted standpoint from.

Moving out all of the ERP.

Also have from moving expenses.

We sell some of these properties, which will will add back.

But no it's a target for this year and we think we'll get there it's gonna be weighted right.

Be.

A little bit heavier on the percentage is in the early reported a year will go to abate as we get into the year.

And then lastly.

Sounds like Youre going to spend a little bit of Capex on some dredge rebuilds can you quantify that for 2021 and 2022.

Well for 'twenty one.

It will fit it into the levels that we talked about before so we are we've begun the process of.

Converting.

The dredge that we had been using as a booster. So we're gonna converted back, but not only that will rebuild and upgrade it.

That process is ongoing and that will fit within.

The capex targets that we've talked about previously for 'twenty one.

The mature to talk about 'twenty two at this point, but we will be talking about that.

As we as we go throughout the year, what that's gonna be a multi year program for us.

But so we will commented on that in terms of when we talk about 'twenty two capex and beyond so we will have more to say about that as we go through the year.

Thank you.

Yeah.

The next question is from Marco Rodriguez of Stonegate capital markets. Please proceed with your question.

Good morning, everyone. Thank you for taking my questions.

I was wondering if you could spend a little bit time here on.

The asset sales that are obviously recognized through your P&L.

I had a fairly high level gain in this quarter, a little bit higher than what your historical trends.

I know this is kind of an ongoing thing and it might be difficult question to answer but I.

I believe in your prepared remarks, you are expecting additional gains on asset sales.

How should we be thinking about these sales through this fiscal year.

What sort of levels might be implied inside of your guidance and then I'm assuming a lot of these higher level of sales or are basically being driven by the ISG reviewing and the effort to increase utilization rates.

Any color would be helpful.

Yeah, well I think there you know theres kind of two separate things as one.

Normal ordinary course of business that we've talked about through I S. G and just.

Making sure that yeah that we.

If we have any equipment or or tools that we used in the operations that are.

I don't have the utilization or the.

The return.

Metrics that that we want to see.

When we look to dispose of those or otherwise figure out a way to.

Just gain efficiencies in our use of equipment, specifically, what Robert was talking about in my comments are related around the real estate, which Rob Robert covered in detail in his remarks.

Those were more of what we were speaking about through our remarks, then they the kind of the first category, which is just sort of ordinary course, and a continuation of of.

Making sure that we've got the right equipment for four.

Our work and that is and some of that May mean, we're selling equipment and not replacing it some of it may just be the ordinary course of <unk> reached the end of its life, we're selling that and we're replacing it with something new so it's the churn the churn.

Churn in the assets and you know we've got Capex on the other.

That may offset some of those sales.

Got it understood and so just to also clarify the.

The non operational asset sales those are not included in any sort of guidance correct.

No no no no.

I understand.

Don't know if I missed this on the call but did.

Did you quantify the impact that the winter weather had on our Q1 results and.

If I remember correctly when you were talking about this on the last call that there was an expectation that this would probably be made up in Q2 Q3.

Just kind of wondering if that's still the game plan. If you will and wondering also if there might be any sort of.

Pressuring the margin just because of a delay.

Well so yeah, we did it in the remarks, we refer to the impact of Q1 was about it was about $8 $8 $2 million top line impact.

Because of the winter storm in Texas.

And about three cents.

Per share.

We were about 3% lower.

Our on our EPS as a result of the winter storm keeping them out I mean, the work will still get done at slide to the right but.

As far as like a you know being additive to future period that it doesn't really work that way.

It is.

It's again the work doesn't go away but.

Yeah, we'll still execute on all of that work that was delayed during that period, but again it oh.

It's not it's not additive to future periods. It just gets executed in future periods.

I didn't understand and.

And then in terms of the concrete segment, just looking at the operating margin.

Maybe if you can talk a little bit more about that in framing. It in regard to the ISG review process. Obviously, the operating margins are not at the level that you're aiming for just quite yet and you've made some improvements in terms of the types of bidding on work there as opposed to help kind of drive that.

Maybe if you kind of update us on your thinking there on.

On the IC review process and how those margins might.

Move a little bit here in the next I don't know 12 months or so.

Well I think the again the ISG initiatives have been implemented at this point so.

It's just as part of our daily DNA.

We execute our work.

As you point out you know, we still got work to do to.

To get to where our targeted levels are that being said, though we've made tremendous progress. We continue to make progress you. We saw that again in Q1, even with the.

The challenging weather for those that don't know I mean, this is the worst winter storm in Texas since 18 90.

All 254 counties in Texas, we're under a winter storm warning historical by any measure.

And despite all of that.

Our team had it.

It made improvements in the concrete business. So yeah, we're moving in the right direction.

Where we still have work to do our team is out there we've got the right people and the right team and the right attitude and at all of that to keep moving in.

We factored that into.

Where we expect a day for 2021, and we're keeping a or keeping to move ahead on that on this effort.

Effort and are very confident that will we will get to where our targeted margins are expected but.

We've made a lot of progress week, we continue to decelerate and we continued in Q1, despite the challenges.

Yeah understood. Thank.

Thank you very much from them for your time I really appreciate it.

Yeah.

The next question is from Poe <unk> of Noble capital markets. Please proceed with your question.

Yeah. Good morning, Mark Good morning, Robert Good morning, Fran.

I just had a couple first of all a couple of you know.

40000 foot level questions I'm, just when you look at sort of the way the company structure right now when you're talking about potentially making accretive acquisitions can you talk about where potentially you're devoting most of your time and energy in identifying those acquisitions.

Well you know, we're not going to get it its a whole bunch of day till I mean, it's early days on this but I mean, we're looking for things that are you.

We're not being restricted on what we could potentially look for things that are within our existing businesses or complimentary services complementary geographic region.

Obviously, we'll factor in.

You know capital.

Capital needs Capex needs are the heavier light and again looking.

For for those things that can enhance and then.

<unk>.

Hi, Mark higher margin type businesses.

And or higher margin type services.

So anything that.

Is in is in our.

In our existing lanes or maybe even adjacent lanes that can they can provide that force us things that we're looking at we're out there.

Looking at things talking to investment bankers and.

I think that that's it.

Yeah, we've got some good opportunities to.

Generate.

From some opportunities for us to look at them separately.

The transaction happened.

Great and then Mark I was little surprised that you were optimistic where it seemed like you were more optimistic favorable on the cruise industry.

And I'm not sure how recent news, but it seemed like the Royal Caribbean.

<unk> CEO made some comments about just said the Georgetown crew.

Cruise Port was uncertain and remained uncertain and I was just trying to factor in you know sort of what you're looking at it as far as the cruise industry over next 12 to 18 months, Yeah, well I would tell I would separate Georgetown in Cayman Islands from from any any color on the remarks that the cruise business and the crews.

Since the in general Georgetown the Georgetown per has always been.

Kind of an elusive goal for the cruise industry I can tell you.

Well you know we did work.

Down in Georgetown.

Back in 2005, and they were talking about the crews per back then.

As you know last year there was a.

Free COVID-19 there was a lot of talk about that.

But that's kind of started.

Sort of the local populations are opposition to that crews per was was being felt even before COVID-19 happened. So I do think the cruise lines are reassessing that one but.

Cayman doesn't it doesn't.

Speak for what we're seeing in other areas.

We've been tracking and we're tracking pre COVID-19 projects in other areas.

We've been tracking a cruise.

Per activity our crews driven.

Infrastructure projects in the states as well and we're starting to see moving out of some of those things, we're starting to see moving on on.

Activity that we think will move forward in other places besides came in so.

<unk>.

Quite frankly wouldn't I don't place a lot of stock in the Cayman project are moving forward at this at this stage I'll believe it when I say, it's kind of a thing but that that means that doesn't mean, there's not going to be a lot of other activity elsewhere. I think bookings for 2022 cruises are up new ships are being built.

New ships are being built with.

You know to run off LNG. So that's that's pretty interesting for us on a couple of different levels. So we think there's going to be a lot of opportunities driving force.

Out of that business out of that.

The cruise industry.

Okay, Great and then when you look at.

Concrete and potentially you know bidding into Florida can you give interest and appreciation for whether any of the low bids pending award or any of the quotes or associated with work in Florida, where he said that you bid into Louisiana, but I was wondering if Florida is it is it active from a standpoint.

Might see something you know, but the second half's or the rest of the year or is it still more on the horizon.

Yeah.

Two parts to that one to answer your first part of your question no nothing in our low bid.

Our quoted at this stage is a active in Florida, but the second part of your question. Yeah. We are targeting getting work in Florida. This year. So we've got prospects that.

We're chasing in pursuing and our focus is on gaining work in Florida. This year.

Okay, Great and then Robert from the standpoint of a previous questioner had asked her referred to guidance and I'm not sure maybe I just wasn't listening that carefully but did you give guidance for 2021, whether it's from a revenue or EBITDA perspective or would you be.

Willing to.

Yeah on the last call we said.

Mid to high Forty's $40 million range from an EBITDA.

Good point.

Okay.

Mark was asking about the asset sales the real estate sales are not factored.

And to that guidance.

Any you know.

Equipment sales and things like that that piece this factor, but the real estate gains.

James we're not considered a net number.

Great. So the guidance is unchanged from that mid to high 40 million.

Million range.

And then again exclusive of ERP.

Costs.

Yes, sorry.

ERP and any moving costs associated with asset sales.

Okay.

And then it looked like Robert in the first quarter of the ERP costs were a little bit lower than what I thought they might be for the run rate per the year.

Is that accurate and then also could you give us an idea of sort of how the ERP expenses will look for the rest of the year.

I expect that to start ramping up.

We got through the design phase through the first part of year, but this is the piece where.

This is a time, where we'll start moving.

More and more dollars per youll see that that ramp up.

No change in net overall price that we think that will go live sometime in the middle of next year.

But what I would expect us to see a nice ramp over the next couple of quarters.

I'm sort of in the one and a half to 2 million range or per quarter or sort of can you give us an appreciation for just how much of a ramp.

It really just depends on the consulting that was a lot of this is the consulting dollars into consulting hours at that breaks out.

We'll have a better feel of the company, but I can see I can see it jumping up $11 billion range.

Great and then just to confirm there you're working estimate for Capex for 2021 remains 20 million.

Yes, we said, 22% to $20 million in there.

Again.

Great. Thank you.

Yeah.

The next question is from Gerry Heffernan from Walt Hulse.

Please proceed with your question.

Yeah.

Hello, guys. Thanks for taking the call.

Hey, just start off with I have a rather elementary question here and it goes back to the.

The person that asked about the win rate.

And Mark you commented on the timing of awards comes comes into that as far as why is it so low which to me beg. The question what exactly is the win rate because it's.

It sounded like if you bid on 10 projects one one last one and the other eight are still outstanding is not decided that a 10% win rate.

Well the way we calculate it and this is the method that we consistently do we've consistently done it is.

That until we have the determination of the.

Outcome of the bid we don't factor it into the start of the calculation of the stat and that's consistent with how we've done it.

Over the over time, so there's no change in how we've done it for this quarter versus the previous umpteen quarters.

So if we have work that we've quoted but theres no determination on it it does not factor into the win rate calculation.

Okay, Alright, I just wanted to make sure I understood that clearly.

In regards to this 2 billion.

Outstanding.

How does that break out between marine and.

So net if you can just give me a just just roughly.

Roughly probably about 75% of that is on the concrete side and 25 per cent roughly is on the marine side, which is consistent with what we see.

Historically.

Yeah, we bid.

We did a higher volume of work in our concrete business as a subcontractor and we.

And we have different competitive dynamics that are targeted win rates a little bit lower there in that business than it is in the marine business that we that's consistent with what we kind of see.

Okay.

Very good and so of the 25% is marine.

Our.

Call It 500, and I understand I'm, just talking round numbers here Matt.

I don't want to get too specific with it how does that number.

Standup historically.

In regards to marine bids outstanding.

Marine activity out there.

It is.

<unk>.

Early it's towards the upper end of what we would see historically.

So.

This higher than average I would say based off our historical last few years.

Okay.

And is there any geographic focus to that is it is it well diversified is there any.

One area.

That's that's really chasing.

Juicing that.

If activity.

It's kind of across the book.

Again, I think as we talked about before.

Mentioned again today, you know the energy space in the Caribbean market has been Uh huh.

Somewhat muted for the last year based off COVID-19, we're starting to see stirrings on that but in terms of geographic.

That kind of.

The quoted work outstanding low bids.

It's kind of spread across the geographic footprint.

Okay and.

As you said, it's 500 would be above average, but we're not talking peak levels here.

Yeah.

Okay.

What is the.

Capability of assets in the marine construction business.

In total the industry wide.

To handle a 500 million bidding activity yet.

At what point does the industry become taxed on having assets available to meet demand.

You know thats a tough.

Tough question, but I think you know because again it depends on the type of service that's involved in a project.

You know if youre talking about dredging services.

Yeah, that's kind of one thing and I think I think the industry has capacity to.

<unk> service.

<unk>.

An uptick if you will and in our infrastructure stand from the Corps of Engineers as an example, with respect to other stuff because it just depends again on the type of project what sort of assets are needed to be used for that project and then it depends on you know again.

Hum.

What equipment, you might be using because theres, a certain amount of flex capacity that that you have access to as an example.

Wayne can have Frank and work on land or can work on water. So theres there.

It's not eliminating factor at all if you needed more lifting capacity now floating equipment.

Is a different story, but.

We certainly have capacity within our.

Within our fleet, but Theres also.

Third party rental capacity that's out there so that.

That can be flexed so.

Is that that is one of the.

I can't give you a number about what the overall size of the market is because we pull from so many different places and.

Uh huh.

Our our kind of work is always a subset of a broader picture if that makes sense for you, but I think if I understand your question I think there is capacity in the system. There is capacity to flex that we believe and can take a higher volume of work.

As the economy picks up and we potentially see a infrastructures and infrastructure Bill.

Okay.

I appreciate that I was just trying to get a feel for you know anywhere near a point where.

Bidding margin start to push up because of the asset avail.

Availability, but it sounds like that's not the case.

Well I think.

I think that's I think again I think.

Other dynamics go into that in terms of the volume of work coming out if we see you know GDP numbers continue to come out with that.

First quarter came out that was done at a pretty pretty healthy clip, if we keep saying that.

There will be opportunities to Oh.

Oh pulp price.

<unk> margins up is as utilization increases I would say it that way.

Okay.

That's certainly very good to hear.

In.

Early 2021 of the first stimulus bills that came out I forget if it was number one or number two in fact, I don't even know what number one down there.

There was a a carve out for harbor efforts I think of.

15, something.

Million whatever.

It did.

Did you actually see that.

Hello into business activity and.

It's a lot of people are talking about an infrastructure bill and everybody thinks it's a good idea and it will be good for them, but I'm wondering how much of.

That's it from our government level has been lip service versus.

You guys actually seeing it where you go wow that that would not have happened if it was not from the stimulus efforts.

Well I you know we are seeing a lot of spend in and from port authorities as they execute their plan.

Again.

I think that's kind of come from.

Either their own.

The ability to generate.

Capital investment funds, coupled with whatever they have been getting from the federal government on that there is talk in the in the stimulus bills that we have seen running around and obviously, you'll have to wait and see what ultimately gets done and what that looks like.

But do you know.

Our water infrastructure in particular ports are what we've seen are being discussed.

And some of the bills that are getting kicked around and I.

I think I've mentioned this on a call before but we go back 10 years to kind of the previous.

Kind of stimulus Bill back in you bought early Obama first Obama administration.

There was it was a it was not a large amount, but it was a huge amount for the corps of engineers I mean, it was only only a five or $10 billion, but it was a massive amount compared to what their normal budget is.

So that's effectively a doubling of their budget for a couple of years there from from stimulus. So yeah, a little bit can go a long way relative to the overall size of what's being kicked around here first for like the corps of engineers, but we also would expect if if if.

Uh huh.

Infrastructure Bill gets done for D O Ts the benefit from that from the state Dot's.

Which would drive bridge work for us and for our Port authorities, that's being talked about a lot.

And things that we've seen two which would continue to help drive the expansion plans that a lot of these port authority has already have on the books.

Okay.

Last area of.

Discussion if you would've I'd appreciate if you could talk a little bit about capital allocation.

Yeah to the extent that you're able to.

Work towards your annual forecast here of <unk>.

Hi, forties of EBITDA that will be back to back years I believe last year, then the tally was about 47 million.

EBITDA.

Even with the ERP effort, there still should be a pretty good free cash flow to further reduce.

Debt on the balance sheet.

Can you talk to us about and then and you know what I I missed the comment on the state of the Tampa Real estate sales if you will.

Remind me on that for free.

Being delinquent I'm missing that.

But.

What do you do with the current.

Cash structure and you have what do you do with you.

A clean balance sheet understanding that you already talked about M&A earlier.

And.

And at this share price and this valuate.

Primarily its valuation given strong EBITDA and free cash flow.

Boy, how do you find an acquisition net and better than just buying in shares of your own company.

Well as you know is as Robert said in his remarks, and I did modeling you know.

We get to a point and we'll evaluate all uses of capital, including including share buybacks. So.

You know the way we look at it as the fortunate thing is it gives us a lot of flexibility.

Obviously as you mentioned, we have ERP, but you've kind of commented on that.

We have ERP, where we're reinvesting in the dredge fleet as we talked about and you know where we are.

We're.

Able to.

You know really take advantage of.

Be opportunistic on the M&A front, and if something makes sense obviously were.

It has what happened like sales force, but yes.

We will evaluate all uses of capital, including including share buybacks. So everything's on the table and the good thing is we have the flexibility.

To look at all of the options.

Okay can you talk to your current debt structure, because I don't think you have great flexibility in that.

And we certainly know from other information that the banks are desperate to have lending facilities.

Would seem to me that post the Tampa sell you would.

Things often enjoy a lot of free lunches from bankers trying to get your business.

Yes.

If we get the samples so complete we'll definitely have the flexibility.

<unk>.

Change the structure.

And look at alternative options I think Youre correct.

Our strong banking market right now.

It was the best thing is.

We tried to allude to this from the last call.

Paul is as we get closer to those those closing date, we're going to make sure that we have maximum flexibility we've talked to the banks.

We have internal conversations we're going to do.

And what creates the most value.

Operator can we.

We have two folks in the queue and we only have a few more minutes left can we move to the next caller. Please yes, Sir our next question is from Christopher Samsung Samsung Advisors. Please proceed with your question.

Hi, Good morning, one quick question from me regarding the $135 million Award.

The profitability on that award compare to your 2021 operating budget. Thank you.

It's in line with the work.

Work that we've been executing.

Moving on and fits in line with what our guidance is for 2021.

Thank you.

The next question is a follow up from Poe <unk> of Noble capital markets. Please proceed with your question.

Yeah. Thank you.

Jerry pretty much hit all the points I wanted to you know cash flow and balance sheet and just.

Maybe just to follow up a couple of things just so that we can sort of get an idea of how quickly this could do.

Develop b the second reading per the Tampa City Council's may 6th.

When and how quickly can you close after that and then secondly.

The availability of 68 million Robert how much is the credit facility that expires in June and could you move to Europe.

Cancel back early because you have such a strong balance sheet and you're generating free cash.

On the first one I'll refer you back from my comments, we believe that property will the type of property will wrap up sometime in Q2.

As far as the <unk>.

You talked about the 364 day credit facility ramps up.

At the end of next month.

We will have some flexibility there.

With our banking group.

So photo strategic plan, whether it's accretive M&A or something else.

We definitely will well, we definitely have been communicating with our banks.

I think growth in lock step.

Great really well position. Thank you Robert.

Thank you Bob.

There are no additional questions at this time I would like to turn the call back over to Francis Okoniewski for closing remarks.

Okay. Thank you, Brian and thank you everyone for joining our Q1 earnings conference call. We look forward to talking with you again in late July four Q2 earnings results.

Thank you and have a great day.

This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

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Greetings and welcome to the Orion Group Holdings first quarter 2021 conference call.

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Francis Okoniewski, Vice President of Investor Relations.

Good morning, everyone and welcome to Orion Group Holdings first quarter 2021 earnings conference call and webcast.

Regarding the format of the call we've allocated about 10 minutes for prepared remarks in which Mark and Robert will highlight our results and update our market outlook.

We will then open the call for questions through.

Backlog projects and negotiation and pending awards as well as our estimates and assumptions regarding our future growth administrative expenses and capital expenditures.

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.

Justin earnings per share EBITDA, and EBITDA margin are non-GAAP financial measures under the rules of the Securities and Exchange Commission, including regulation G.

The press release can be found at our website at Www Dot Orion Group Holdings, Inc.

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 website.

And with that I'd like to turn the call over to Mark Stauffer, President and Chief Executive Officer Mark.

Thank you and good morning, everyone. Thanks for joining us today.

Today, we'll discuss our first quarter 2021 results provide updates on the benefits we continue to read from our ISG and other operational improvement initiatives and discuss our current outlook.

Our foremost priority is that all our employees go home to their families in the same way they came into work healthy and injury free.

We are deeply committed to our target zero program to support our vision of an incident free workplace.

With respect to the first quarter of 2021 and as anticipated our results reflected the impact of the historic Winter storm in Texas during February which disrupted our progress on projects across our concrete and marine operations, including our dredging projects.

This reduced revenue for the quarter by approximately $8 2 million and lowered earnings per share by approximately <unk>.

Our current level of quoted work stands at nearly 2 billion a.

A record level up almost a 130 per cent from this time last year and I'll also up meaningfully on a sequential basis.

We anticipate new bidding opportunities to emerge as economic activity picks up with increasing vaccination levels and herd immunity with respect to COVID-19.

These factors make us confident we'll be able to maintain our project pipeline and increased backlog is 2021 progresses positioning us well for 2021 and beyond.

This favorable outlook is further enhanced by the possibility of a new federal infrastructure, Bill, which would be an additional catalyst.

For increased demand across our diverse operations.

Also during the first quarter, we continued to improve our liquidity.

Updates on the company's liquidity position and the status of our real estate transactions.

Starting with the financials revenues from the first quarter of 2021, or $153 3 million compared to $166 6 million in the first quarter of 2020 or a decrease of seven 9% decrease in revenues were driven by a combination of the timing and mix of projects from period to period and the extreme winter weather in Texas.

First quarter gross profit was $15 5 million compared to $19 8 million in the prior year period.

Gross profit was also impacted by winter weather in Texas, and the mix of projects, both resulting from a decrease in equipment and labor utilization.

Also note Q1, 2000, Twenty's gross profit benefited from execution related margin gains on several projects.

Turning to our segments in the first quarter 2021, our Marine segment had revenue to $72 1 billion and an adjusted EBITDA of seven point not only.

This equated to an adjusted EBITDA margin of 10.9% in the prior year period, we generated revenues of $85 9 million and adjusted EBITDA of $11 2 million or 13, 1% adjusted EBITDA margin.

Marines revenue and EBITDA declines were driven by shifts in timing and mix of projects in Q1 of 2020, we had several large jobs closeout and recognize execution related margin gains.

Our concrete segment had first quarter revenues of 81.1 day.

Compared to $80 7 million in the first quarter of 2020 adjusted EBITDA for the concrete segment was $1 6 million.

Two 995000 in the prior year period.

Our concrete segment's year over year results improved despite being impacted by the winter weather in Texas increased production volume rates and execution related margin gains were key drivers of the year over year improvements.

Adjusted SG&A expenses for the first quarter were 14 million or nine 2% of revenues.

Please note that the first quarter tends to be the most seasonally weak quarter from a top line perspective. However, we remain focused on driving annualized SG&A two or below eight five per cent.

Adjusted net income was $1 2 million or four cents per share.

The first quarter adjusted EBITDA was $9 $5 million, representing an adjusted EBITDA margin of six 2%. This compares to $12 2 million weighted for an adjusted EBITDA margin of seven 3% in the prior year period.

Now to the bidding metrics and win rates.

For the first quarter of 2021, we've bid on approximately $1 1 billion worth of opportunities and were successful on $79 million. This resulted in net book to Bill ratio of <unk>, five times and a win rate of $7 four per cent for the quarter.

The lower than average win rate is primarily the result of extended timing of several projects being awarded.

We currently have a significant about quoted from <unk>.

Which the outcome was undetermined during the corner.

As of March 31st 2021, our backlog was $365 million of which $155 million was associated with our marine segment and 210 million from the concrete segment.

Additionally, subsequent to the end of the first quarter. We are the apparent low bidder or have been awarded a $134 million worth of opportunities.

This 56 million is related to the marine segment, while 78 million is related to the concrete segment.

To note. This is the highest low bidder and subsequent award awards in the past five quarters, we see this as a positive leading indicator for potential future awards.

Also as Mark mentioned, we have nearly 2 billion of work quota, which is a record level.

Onto the balance sheet.

Exchange ratio of four one times, both well within the covenant requirements. Our current liquidity position provides us with the flexibility to execute on our strategy and pursue New awards now I'll provide an update on the status of our pending real estate transactions starting with Tampa.

The rezoning of the Tampa property, which is a prerequisite for our transaction to close is moving toward final approval. We believe this transaction will close in the second quarter of 2020.

Now on to the Port Lavaka property, the bar has fallen logging in cylinders requirements. It has requested the close in July we will continue to work with the bar and are optimistic that this will close in Q3 finally, the property on the ship channel continues to grow on a significant interest.

We believe as the impacts from COVID-19, but we will receive offers on this property.

As we execute our real estate transactions, we will continue to evaluate all potential uses of capital, including reinvestment into core assets accretive M&A and share buybacks.

Lastly, we haven't.

Significant amount of low bid and quote it works.

We continue to make progress during the quarter, we remain focused on continuing our improvements now I will turn the call back over to Mark.

We believe this will continue to drive increased shareholder value.

The diversity of our end markets and the flexibility to adjust between them is a great advantage to us in this regard.

In addition, we are targeting select larger longer duration projects that give us greater operational visibility and we currently have some very good prospects of this nature that we look forward to providing you with updates on in the coming months.

Okay.

In our concrete segment, we have been pursuing and successfully winning new work and attractive end markets such as the Tech e-commerce and large retail sectors.

We also continue to bid on larger structural projects involving high rise residential or mixed use towers.

Anyone who has been in Dallas Fort worth Austin or Houston in recent months will understand the significant significant activity going on with these types of projects.

Where we have long standing presence in our marine segment.

We've talked about our ISG initiative for several quarters, now and well implemented during 2019, the benefits to our profitability, resulting from enhanced labor management equipment management project execution and corporate processes.

Really began to accrue to our results in 2020.

We expect to continue to see benefits from the actions we've taken as we move through 2020, one and beyond particularly as our revenues increase in the gain leverage on our improved efficiencies and cost control.

We continue to make progress with our new ERP system implementation, which we expect to enable us to garner even greater benefit from our ISG initiative.

Once completed our new company wide ERP platform will not only solidify our operational efficiencies, but I'll also allow us to scale. These efficiencies that efficiencies as we grow organically and through possible M&A.

In the future.

ERP will enable us to achieve full system integration across the various businesses that we've acquired over the years and critical corporate functions, including CRM project management, HR payroll and finance we are confident that this investment will increase our effectiveness in executing our strategic plan and enable us to more.

More efficiently integrate any future acquisitions.

<unk>.

Additionally, we are investing in the rebuilding and upgrading of one of our dredges previously converted to use as a booster, which will replace the dredge loss during last year's tragic accident.

Moving forward, we will also look to upgrade and extend the lives lives of several of our dredging assets.

We would expect our pending asset sales to contribute to additional improvement to our financial position in the coming quarters.

In the first quarter our team once again rose to the occasion and executed well in the face of adversity, just as they have been doing for the past year as.

As we look ahead, we are confident that through our ISG initiative or ERP implementation, the strengthening of our balance sheet, all combined with a favorable outlook for our diverse end markets positions us well to capitalize both on current and postponed pandemic economic activity.

With that I'll turn the call back to the operator for Q&A.

Thank you at this time, we will be conducting a question and answer session.

If he would like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue.

You May press Star two if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, while we poll for questions.

Our first question today is from Julio Romero of Sidoti <unk> Company. Please proceed with your question.

Hey, good morning, everyone.

Good morning.

Hey, So wanted to ask you know generally can you speak to the quotation level relative.

Relative to one quarter ago. It sounds based on your prepared remarks like it's certainly improving what are you seeing out there in terms of activity levels and do you find conditions to be supportive overall.

I think overall, we do.

So again, it's the highest level of quoted work we've had outstanding in our history.

We've got a number of projects.

That even in the government sector that we're bidding on that or not.

Determined at the time of bad they're under an evaluation period is kind of an RFP process. So they've got a number of those outstanding right now we've.

We've got several large projects that we've we price and we're waiting word on those.

And again as we commented on in the remarks, we have a significant amount of Hello, better work at this point and again, that's the highest we've reported out in about five quarters. So.

We feel good in our you know in.

In our concrete business that are a lot of opportunity there and all of our markets.

And then also in markets outside of our traditional markets in Texas.

And then on the marine side.

<unk> seeing work in the government sectors that we mentioned, but also.

We're seeing things.

Now move forward in those areas in the private sector. They were more impacted by COVID-19 that seems to be a star.

Storing and stuff coming out and and.

Pricing going in so we're pretty confident then.

And the opportunities we see in front of us.

Got it.

And on the concrete segment wanted to ask about potential geographic expansion, there and I know you mentioned in your prepared remarks, you're targeting projects outside of Texas, such as I believe you cited Florida as an example, how.

How about opportunities in other regions I know you mentioned, Louisiana in the past can you just speak to maybe other opportunities outside of Texas and Florida.

Yeah, we've we've been working in Louisiana, we haven't won yet, but it's definitely we were competitive in a very good a very good effort by our team.

And we're starting to get you know.

Opportunities and invitations to look at work in other places besides Texas from our some of our G C.

As we May have mentioned before you know sort of our <unk> work in markets outside of Texas and have more national footprint and so are we.

They know that we're looking to step outside of Texas, we're getting some.

You know getting opportunities in coming from from other places now that.

They know what we can do they know the quality of work we do they know the quality teams, we have and so they're there they're starting to paying us on on other places as they as they are pursuing work in other in other markets for them, but for sure. We're definitely you know, Florida is an area of great interest for us it's a population.

As.

As income.

It's growing it's an incoming a destination for population growth just like Texas is so some of the same drivers.

To drive opportunities in that market or what we're seeing in Texas and you.

We're very familiar with that market long standing presence and on marine side, and a great way for us to leverage.

Our existing footprint to pursue these opportunities though.

Really pleased with our progress on that.

Great and then just last one for me here is.

You mentioned in your remarks that you expect backlog to expand sequentially as we progress throughout the year.

Well, what I said was as we.

The $134 million, we referenced all the opportunity of the quoted work we have out there the pipeline. We state. So we think we're positioned for that to happen. Obviously, we have to bid work we have to win work.

But certainly we feel good about the prospects of a building backlog as we go through the year.

Sounds good thanks for taking the questions.

The next question is from Alex Rigel of B Riley FBR. Please proceed with your question.

Thank you good morning, Mark your win rate and your win rate in the quarter was on the low end of historical levels can you help us to understand why.

Yeah, It really relates to timing of awards and that goes back to what I was saying.

For the last question.

Around.

A lot of work that's quoted even in the government sector. That's a RFP type work the way we do our calculations.

Those all of those quoted work that we have outstanding all the stuff that we're waiting for determination on is not included in our in the calculation.

That we do so we view it as a timing thing and we would expect that to increase as we go through the second quarter. We've already got a lot of work that's been low bidding a little better as we mentioned in our remarks.

Historical level of quoted work outstanding so as we get determinations on these things.

We feel good about our chances on a lot of the work that we've quoted we would expect that to uptick as we get into the second and third quarter.

And then the SG&A target of eight 5% when might you get to this level.

Well, we think that as.

We progressed through the year, we have a good shot at it this year from an adjusted standpoint.

We're moving out all of the ERP.

It will also have a.

Moving expenses as we.

We still have some of these properties, which will will add.

Add back, but it's a target for this year and we think we'll get there it's gonna be weighted right there's going to be.

A little bit heavier on the percentage is in the early reported a year ago.

Abate as we get into the year.

And then lastly.

Sounds like Youre going to spend a little bit of Capex on some dredge rebuilds can you quantify that for 2021 and 2022.

Well for 'twenty one.

<unk> will fit into the levels that we talked about before so we've begun the process of.

Converting.

The dredge that we had been using as a booster. So we're gonna converted back but not only that will rebuild and upgrade it so that process is ongoing and that will fit within.

The capex targets that we've talked about previously for 'twenty one.

Pretty mature to talk about 'twenty two at this point, but we will be talking about that.

As we as we go throughout the year, that's going to be a multi year program for us, but so we will commented on that in terms of when we talk about 'twenty two capex and beyond so we'll have more to say about that as we go through the year.

Thank you.

Yeah.

The next question is from Marco Rodriguez Stonegate capital markets. Please proceed with your question.

Good morning, everyone. Thank you for taking my questions.

I was wondering if you could spend a little bit of time here on.

The asset sales that are obviously recognized through your P&L.

Had a fairly high level gain in this quarter, a little bit higher than what your historical trends.

I know this is kind of an ongoing thing and it might be a difficult question to answer but I.

Believe in your prepared remarks, you're expecting additional gains on asset sales.

How should we be thinking about these sales through this fiscal year.

What sort of levels might be implied inside of your guidance and then I'm assuming a lot of these higher level sales are basically being driven by the ISG reviewing and the effort to increase utilization rates.

The color would be helpful.

Yeah, well I think there you know theres kind of two separate things is one is kind of a <unk>.

Normal ordinary course of business that we've talked about through ISG and just the you know the.

Making sure that yeah that we.

If we have any equipment or or tools that we used in the operations that are.

Don't have the utilization or the other.

The return.

Metrics that that we want to see that we look to dispose of those or otherwise figure out a way to.

Just gain efficiencies in our use of equipment, specifically, what Robert was talking about in my comments are related around the real estate, which Rob Robert covered in detail in his remarks.

Those were more of what we were speaking about through our remarks, then they the kind of the first category, which is just sort of ordinary course.

A continuation of of.

Making sure that we've got the right equipment for four.

Our work and that is in some of that May mean were selling equipment, not replacing and some of it may just be the ordinary course of <unk> reached the end of its life, we're selling that and we're replacing it with something new so it's the churn the.

Churn in the assets and you know we've got Capex on the other.

That may offset some of those sales.

Got it understood and so just to also clarify.

The non operational asset sales those are not included in any sort of guidance correct.

No no they're not.

Got it I understand and I don't know if I missed this on the call but did.

Did you quantify the impact that the winter weather had on our Q1 results and.

If I remember correctly, we were talking about this on the last call that there was an expectation that this would probably be made up in Q2 Q3.

Just kind of wondering if that's still the game plan. If you will and wondering also if there might be any sort of compression in the margin just because of a day light.

Well, so what we did in all of it in the remarks, we referred to the impact of Q1 was about it was about $8 $8 $2 million top line impact.

Because of the winter storm in Texas.

And about three cents.

Per share.

We're about 3% lower.

<unk> on our EPS as a result of the winter storm keeping them out I mean, the work will still get done at slides to the right but as.

As far as like a you know being additive to future period that it doesn't really work that way.

It's again the work doesn't go away but.

Yeah, well, we will still execute on all of that work that was delayed during that period, but again it oh.

It's not it's not additive to future periods. It just gets executed in future periods.

I didn't understand and then in terms of the concrete segment just looking at the operating margin maybe.

Maybe if you kind of update us on your thinking there on.

On the IC review process and how those <unk>.

Margins might move a little bit here in the next I don't know 12 months or so.

Well I think the again the ISG initiatives have been implemented at this point so now.

It's just as part of our daily DNA as we execute our work.

As you point out we've still got work to do to.

To get to where our targeted levels are that being said, though we've made tremendous progress. We continue to make progress you. We saw that again in Q1, even with a challenging weather for those that don't know I mean this is the worst winter storm in Texas since 18 90.

All 254 counties in Texas, we're under a winter storm warning I mean, that's historical by any measure.

And despite all of that.

Our team had it.

It made improvements in the concrete business. So yeah, we're moving in the right direction.

Where we still have work to do our team is out there we've got the right people and the right team and the right attitude and at all of that to keep moving in.

We factor that into where we expect a day for 2021 and.

We're keeping a or keeping to move ahead on that on this effort.

Effort and are very confident that we'll we'll get to where our targeted margins are expected but.

We've made a lot of progress week, we continue to decelerate and we continued in Q1, despite the challenges.

Yeah. Thank.

Thank you very much from them for your time I really appreciate it.

Yeah.

The next question is from Poe <unk> of Noble capital markets. Please proceed with your question.

Yeah. Good morning, Mark Good morning, Robert Good morning, Frank.

I just had a couple first of all a couple you know 40000 foot level questions I'm, just when you look at the sort of the way the company structure right now when you're talking about potentially making accretive acquisitions can you talk about where potentially you are devoting most of your <unk>.

I'm in energy and identifying those acquisitions.

Well you know.

We're not going to get it to a whole bunch of detail I mean, it's early days on this but I mean, we're looking for things that are.

We're not being restricted on that we could potentially look for things that are within our existing businesses or complimentary services complementary geographic region.

Obviously, we'll factor in.

Uh huh.

Capital needs Capex needs are the heavier light and you know again looking.

For for those things that can enhance it.

<unk>.

Hi, Mark higher margin type businesses.

And or higher margin type services.

So anything that.

Is in is in our.

In our existing lanes or maybe even adjacent lanes that can they can provide that force us things that we're looking at we're out there.

Looking at things talking to investment bankers and.

I think that that's it.

Yeah, we've got some good opportunities to.

Generate.

Some some opportunities for us to look at them separately.

They can transact could happen.

Great and then Mark I was little surprised that you were optimistic where it seemed like you were more optimistic stable on the cruise industry.

And I'm not sure how recent news, but it seemed like the Royal Caribbean.

CEO made some comments about just said the Georgetown crew.

Cruise Port was uncertain and remained uncertain and I was just trying to factor in you know sort of what youre looking at exploring the cruise industry over next 12 to 18 months, yeah, well I would tell I would separate Georgetown in Cayman Islands from from any any color on the remarks that the cruise business and the crews.

Since the in general Georgetown the Georgetown per has always been.

Kind of an elusive goal for the cruise industry I can tell you.

Well you know we did work.

<unk> down in Georgetown.

Back in 2005, and they were talking about the crews per back then.

As you know last year there was a.

Free COVID-19 there was a lot of talk about that.

But that kind of started.

Sort of the local populations are opposition to that cruise here was was being felt even before COVID-19 happened. So I do think the cruise lines are reassessing that one, but you know Cayman doesn't it doesn't I.

I think speak for what we're seeing in other areas.

We've been tracking and we're tracking pre COVID-19 projects in other areas.

We've been tracking a cruise.

Per activity our crews driven.

Infrastructure projects in the states as well and we're starting to see it moving on some of those things we're starting to see moving on on.

Activity that we think will move forward in other places besides came in so.

I I I quite frankly wouldn't I don't place a lot of stock and in the Cayman project are moving forward at this at this stage I'll believe it when I say it kind of a thing but that doesn't mean that doesn't mean, there's not going to be a lot of other activity elsewhere. I think bookings for 2022 cruises are up new ships are being built.

New ships are being built with.

You know its a run off LNG. So that's that's pretty interesting for us on a couple of different levels.

So we think there's going to be a lot of opportunities driving force.

Out of that out of that.

The cruise industry.

Okay, Great and then when you look at.

You know concrete and potentially bidding into Florida can you give interest and appreciation for whether any of the low bids pending award or any of the quotes or associated with work in Florida, where he said that you bid into Louisiana, but I was wondering if Florida is it is it active from the standard.

We might see something you know, but the second half's, where the rest of the year or is it still more on the horizon.

Well I would say.

Two parts to that one to answer your first part of your question no nothing in our low bid.

Our quoted at this stage is active in Florida, but.

But the second part of your question Yeah, we are targeting getting work in Florida. This year. So we've got prospects that are.

We're chasing in pursuing and our focus is on gaining work in Florida. This year.

Okay, Great and then Robert from a standpoint of a previous questioner asked or referred to guidance and I'm not sure maybe I just wasn't listening that carefully but did you give guidance for 2021, whether it's from a revenue or EBITDA.

Spector or would you be willing to.

Yeah on the last call we said.

Mid to high 40 $40 million range from here.

Point.

Okay.

Mark was asking about the asset sales the real estate sales are not factored into.

And to that guidance.

Any.

Equipment sales and things like that that piece of spectrum put their real estate.

James we're not considered a net number.

Great. So the guidance is unchanged from that mid to high 40 million.

Million range.

And then again exclusive of ERP.

Costs.

Yes, sorry.

<unk> ERP and any moving costs associated with asset sales.

No.

And then it looked like Robert in the first quarter. The ERP costs were a little bit lower than what I thought they might be for the run rate per the year.

Is that accurate and then also could you give us an idea of sort of how the ERP expenses will look for the rest of the year.

I expect that to start ramping up.

We got through the design phase through the first part of year, but this is the piece where.

This is a time, where we'll start moving more and more dollars per youll see that ramp up.

Change in net overall price tag.

We think that will go live sometime in the middle of next year.

But what I would expect us to see a nice ramp over the next couple of quarters.

I'm sort of in the one and a half to 2 million range or per quarter or sort of can you give us an appreciation for just how much of a ramp.

It really just depends on the consulting there's a lot of this is.

Insulting dollars into consulting hours it breaks out.

We'll have a better feel overcoming book, yes, I can see I can see it jumping up.

Range.

Great and then just to confirm there you're working estimate for Capex for 2021 remains 20 million.

Yes, we said 22% to $20 million.

Again.

Great. Thank you.

Net.

The next question is from Gerry Heffernan of a bolt on.

Please proceed with your question.

[laughter].

Hello, guys. Thanks for taking the call.

Hey, just start off with I have a rather elementary question here and it goes back to the.

The person that asked about the win rate.

And Mark you commented on the timing of awards comes comes into that as far as why is it so low which to me beg. The question what exactly is the win rate because it's.

It sounded like if you bid on 10 projects one one last one and the other eight are still outstanding is not decided that a 10% win rate.

Well the way we calculate it and this is the method that we consistently do we've consistently done it is.

That until we have the determination of the.

Outcome of the bid we don't factor it into the start of the calculation of the stat and that's consistent with how we've done it.

Over the over time, so there's no change in how we've done it for this quarter versus the previous umpteen quarters.

So if we have work that we've quoted but theres no determination on it it does not factor into the win rate calculation.

Okay, Alright, I just wanted to make sure I understood that clearly.

In regards to this 2 billion a day.

Outstanding.

How does that break out between marine and.

So net if you can just give me just just roughly.

Roughly probably about 75% of that is on the concrete side and 25 per cent roughly is on the marine side, which is consistent with what we see.

Historically.

We bid.

We paid a higher volume of work in our concrete business as a subcontractor and yeah. We are.

And we have different competitive dynamics that are targeted win rates a little bit lower there in that business than it is in the marine business that we that's consistent with what we kind of see.

Okay.

Very good and so of the 25% is marine.

Our.

Call It 500, and I understand I'm, just talking round numbers here Matt.

And I don't want to get too specific with it how does that number.

Standup historically.

In regards to marine bids outstanding.

Marine activity out there.

It is yeah.

<unk>.

It's it's towards the upper end of what we would see historically.

So.

This higher than average I would say based off our historical last few years.

Okay.

And is there any geographic focus to that is it is a well diversified is there any.

One area.

That's that's really.

Juicing that.

The activity.

No it's kind of across the book.

Again, I think as we talked about before and mentioned again today the energy space in the Caribbean market has been.

Us somewhat.

Somewhat muted for the last year based off COVID-19, we're starting to see starring zone on that but in terms of geographic.

That kind of.

The quoted work outstanding low bids.

It's kind of it's spread across the geographic footprint.

Okay and.

As you said, it's 500 would be above average, but we're not talking peak levels here.

Yeah.

Okay.

What is the.

Capability of assets in the marine construction business in total industry wide.

To handle a 500 million you know bidding activity yet.

At what point does the industry become taxed on having assets available to meet our demand.

You know Thats, a tough question, but I think you know because again it depends on the type of service that's involved in a project.

You know if you are talking about dredging services.

Yeah, that's kind of one thing and I think I think the industry has capacity to our service.

Service.

No.

<unk>.

An uptick if you will and in our infrastructure spend from the Corps of Engineers as an example, with respect to other stuff because it just depends again on the type of project what sort of assets are needed to be used for that project and then it depends on you know again.

Hum.

What equipment, you might be using because theres, a certain amount of flex capacity that that you have access to as an example, a crane.

And can work on land or can work on water. So there's that's that.

Not a limiting factor at all if you needed more lifting capacity now floating equipment.

That's a different story, but we.

We certainly have capacity within our.

Within our fleet, but Theres also.

Third party rental capacity that's out there so that that.

That can be flexed so.

Is that that is one of the.

I can't give you a number about what the overall size of the market is because we pull from so many different places and.

Uh huh.

As the economy picks up and we potentially see a infrastructures and infrastructure Bill.

Okay.

I appreciate that I was just trying to get a feel for you know anywhere near a point where.

Bidding margin start to push up because of the asset avail.

Availability, but it sounds like that's not the case.

Well I think.

I think that's I think again I think the.

Other dynamics go into that in terms of the volume of work coming out if we see you know GDP numbers continue to come out with that.

First quarter came out there was it a pretty.

Pretty healthy clip, if we keep saying that.

There will be opportunities to.

Oh pulp price margins up is as our utilization increases I would say it that way.

Okay, well, that's that's certainly very good to hear.

Hey.

<unk>.

Early 2021 of the first stimulus bills that came out I forget if it was number one or number two in fact, I don't even know what number of hormone.

There was a a carve out for harbor efforts I think of.

15, something.

Million or whatever.

Did you actually see that.

Low into business activity and.

It's a lot of people are talking about an infrastructure bill and everybody thinks it's a good idea and it will be good for them, but I'm wondering how much of.

This is from our government level has been lip service versus.

You guys actually seeing it where you go wow that that would not have happened if it was not from the stimulus efforts.

Well I you know we are seeing a lot of spend in and from port authorities as they execute their plan.

Again.

I think that's kind of come from.

Either their own.

<unk> ability to generate.

Capital investment funds, coupled with whatever they've been getting from the federal government on that there is talk in the in the stimulus bills that we've seen running around and obviously, you'll have to wait and see what ultimately gets done and what that looks like.

But do you know.

Our water infrastructure in particular ports are what we've seen are being discussed.

And some of the bills that are getting kicked around and I think.

I've mentioned this on a call before but we go back 10 years to kind of the previous.

Kind of stimulus Bill back and they bought early Obama first Obama administration.

There was it was a it was not a large amount, but it was a huge amount for the corps of engineers I think it was the only only a five or $10 billion, but it was a massive amount compared to what their normal budget is.

So, let's say you're effectively almost a doubling of their budget for a couple of years there from from stimulus. So yeah, a little bit can go a long way relative to the overall size. That's been kicked around here first for like the corps of engineers, but we also would expect that if they are.

Infrastructure Bill gets done for D O T.

The benefit from that the state Dot's.

Which would drive bridge work for us and for Port authorities, that's being talked about a lot.

And things that we've seen two which would continue to help drive.

The expansion plans, there's a lot of these port authorities already have on the books.

Okay.

Last area of.

Discussion if you would.

If we could talk a little bit about capital allocation.

Yeah.

Stuff that you were able to.

Work towards your annual forecast here of mid high forties of EBITDA that will be back to back years. I believe last year, then the tower was about $47 million of EBITDA.

Even with the ERP effort, there still should be a pretty good free cash flow to further reduce.

Our debt on the balance sheet.

Can you talk to us about and then and you know what I mean.

Missed the comment on the state of the Tampa Real estate sales. If you would remind me on that book.

Being delinquent I'm missing that.

<unk>.

What do you do with the current.

Cash structure, you have what do you do with <unk>.

<unk> balance sheet understanding that you always talked about M&A earlier.

And.

And at this share price and this value weighted primarily its valuation given strong EBITDA and free cash flow.

Boy, how do you find an acquisition that is better than just buying in shares in your own company.

Well as you know is as Robert said in his remarks, and I did modeling you know.

We get to a point and we'll evaluate all uses of capital, including including share buybacks. So.

You know the way we look at it as the fortunate thing is it gives us a lot of flexibility.

Obviously as you mentioned, we have ERP, but you've kind of commented on that we have ERP, where we're reinvesting in the dredge fleet as we talked about.

And you know where we were.

Able to.

You know really take advantage of.

Be opportunistic on the M&A front, if something makes sense, obviously, where it.

It has what happened like sales force, but.

Yeah, we will evaluate all uses of capital, including including share buyback. So everything's on the table and the good thing is we have the flexibility.

To look at all of the options.

Okay can you talk to your current debt structure, because I don't think you have great flexibility in that.

And we certainly know from other information at the back.

So desperate to to have lending facilities. It would seem to me that posting the Tampa sales you would.

Things often enjoy a lot of free lunches from bankers trying to get your business.

Yes.

If we get the sample so complete we'll definitely have the flexibility.

To change your structure.

Look at alternative options I think Youre correct.

A strong banking market right now.

The best thing is.

We tried to allude to this from the last call and on this call is as we get closer to those those closing date, we're going to make sure that we have maximum flexibility when we've talked to the banks.

We've had internal conversations.

Do what's best and what creates the most value.

Operator can we.

Hi, Good morning, one quick question from me regarding the $135 million Award.

How does the profitability on that award compare to your 2021 operating budget. Thank you.

It's in line with the work.

Work that we've been executing.

Moving on and fits in line with what our guidance is for 2021.

Thank you.

The next question is a follow up from Poe <unk> of Noble capital markets. Please proceed with your question.

Yeah. Thank you.

Jerry pretty much hit all the points I wanted to you know cash flow and balance sheet and just.

Maybe just to follow up a couple of things just so that we can sort of get an idea of how quickly this could do.

Develop the the second reading per the Tampa City Council's may six.

When and how quickly can you close after that and then secondly.

The availability of 68 million Robert how much is the credit facility that expires in June and could you move to cancel back early because you have such a strong balance sheet and you're generating free cash.

Well on the first one I'll refer you back from my comments, we believe that property will the type of property will wrap up sometime in Q2.

As far as the.

You talked about the 364 day credit facility ramps up.

At the end of next month.

We'll have some flexibility there.

With our banking group.

Photo strategic plan, whether it's accretive M&A or something else.

We definitely will well, we definitely have been communicating with our banks.

I think we're all in lockstep.

Great really well position. Thank you Robert.

Thank you Bob.

There are no additional questions at this time I would like to turn the call back over to Francis Okoniewski for closing remarks.

Okay. Thank you, Brian and thank you everyone for joining our Q1 earnings conference call. We look forward to talking with you again in late July four Q2 earnings results.

Thank you and have a great day.

This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

Q1 2021 Orion Group Holdings Inc Earnings Call

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