Q3 2023 Orion Group Holdings Inc Earnings Call

Thank you for standing by and welcome to the Q3 2023 Orion Group Holdings, Inc Earnings Conference call.

I would now like to welcome Margaret Voice Investor Relations for Orion to begin the call Margaret over to you.

Thank you all for joining us today to discuss Orion Group Holdings third quarter 2023 financial results, we issued our earnings release aftermarket last night. It is available in the Investor Relations section of our website at Orion Group Holdings, Inc. Dotcom.

I'm here today with Travis Boone, Chief Executive Officer of Orion, and Scott <unk>, Chief Financial Officer.

On today's call management will provide prepared remarks, and then we'll open up the call for your questions before.

Before we begin I would like to remind you that today's comments will include forward looking statements under the federal Securities laws.

Looking statements are identified by words, such as will be intend believe expect anticipate or other comparable words and phrases statements that are not historical facts are forward looking statements.

Our actual financial condition and results of operations may vary materially from those contemplated by such forward looking statements discussion of the factors that could cause our results to differ materially from these forward looking statements are contained in our SEC filings, including our reports on Form 10-Q and 10-K.

I'd also like to let you know that Orion will be presenting at the noble capital markets Noble kind of 19 conference December 3rd through fifth in Boca Raton, Florida with that I'd now like to turn the call over to Travis Travis. Please go ahead.

Thank you Margaret and welcome everyone to our third quarter 2023 conference call.

But September 12, Scott and I celebrated our first anniversary with Orion.

Looking back it's been a very exciting and productive year.

Both Scott and I are proud of what our team has accomplished.

When we assumed our leadership roles, we knew that success would rely on our people embracing change and pulling together to transform our business performance.

They stepped up to the plate eager to move Orion into a new era of collaboration and opportunity.

We are now beginning to reap the benefits of the changes we put into place.

And we continue to feel bullish about what we can achieve in the future.

Last quarter, we told you that we expected continued improvement in profitability through the back half of the year and we are delivering on that promise.

Our third quarter revenue came in around $169 million.

And our adjusted net income per diluted share was <unk> <unk>.

Third quarter, adjusted EBITDA was $9 4 million versus $3 7 million in Q2.

While revenue was down somewhat year over year due to our exit from Central Texas.

The higher quality of our revenue is delivering improved profitability.

Since March our concrete business has been profitable and improving on an adjusted EBITDA basis.

And it is operating income positive on.

Consolidated basis in the third quarter.

We have recent wins totaling $58 million in concrete.

And they are the type of projects that require our expertise and will deliver strong margins.

Bid activity has remained steady in our core markets of Dallas and Houston.

As I mentioned last quarter, the cost of capital is still a restraining factor in converting bids to backlog but.

But demand is strong and we are staying focused and disciplined in pursuing projects aligned with our capabilities, where we are positioned to win.

Turning to our marine business, we've got a lot of momentum with projects one in potential future projects.

As we reported in October we were awarded a significant design build contract for Grand Bahama shipyard Drydock for $120 million.

This is an exciting project for several reasons.

The pursuit required multiple skill competencies in our marine and engineering teams demonstrated the power of collaboration and scoping out a very complex project.

Infrastructure construction dredging, creating new morry facilities, and providing enhancements to assure stability.

Our team is especially excited about being part of what will be a historic project in the Caribbean.

When completed the Grand Bahama projects will have the largest floating dry docks in the western hemisphere capable of lifting the largest cruise ships in the world.

These state of the art floating dry docks promise substantial efficiency and cost savings to the shipyards customers and this venture also reflects the Bahamian spirit of their countries motto.

Word upward onward together.

This project is set to commence immediately and will be completed in 2025.

The Bahamian project is just one example of the opportunities we see for marine.

For a quick recap.

This estimated a $50 billion will be spent for coastal restoration in Louisiana alone in the coming years, and we are focused on capturing network.

The Panama Canal expansion created the need for U S port expansion projects from Texas, All the way up to the east coast to.

To accommodate larger shifts in both public and private facilities.

The infrastructure Bill will fund important projects in our areas of operation and well within our core capabilities in marine construction.

For a quick update on Hawaii, our team was mobilized we have people and equipment on the ground and work is starting in earnest in the fourth quarter.

Pearl Harbor is clearly a game changer for Orion.

Naval defense spending in the Pacific and the coming years is projected to be tens of billions of dollars and it's an urgent priority for our government.

Our work with the Navy at Pearl Harbor strategically positions us to leverage this opportunity.

I think we'll look back on this project is the tipping point that accelerated the next phase of Orion's growth.

We get a lot of questions about Army Corps of engineers dredging contracts the.

The near term issue is that dribbling out. These projects has created intense competition amongst smaller players who need to get equipment utilized after a dry spell of activity.

We've won a few dredging bids, but we will be careful not to fall into the trap of winning work at margins that are too low.

Pent up demand that we think will be a tailwind for us well into 2024 and 'twenty five.

A key health indicator of the business is backlog and we've doubled since last year.

At quarter end, our backlog was $878 million altogether, our backlog and contracts awarded subsequent to September 30 totaled $920 million.

Overall, there are three significant areas to drive the business forward.

Good margins will be a key driver of our success that includes winning more work with attractive pricing on better projects and then delivery network with predictable excellence.

Second investment in business development to build customer relationships and identify opportunities further in advance.

Lastly, investing in our people and equipment to maximize our ability to capture the abundant opportunities in our markets.

Our framework is in place and some of the changes will take time to fully implement.

Culture doesn't change overnight, but we've made great progress.

Upgrading our it systems is ongoing and full implementation will not be complete until next year.

Before I turn the call over to Scott I want to share a moment of personal pride in our team.

Last month Orion was recognized for outstanding safety leadership by the council of dredging in Marine construction safety and.

And we were nominated for this award by our industry peers.

I was honored to accept the award on behalf of our Orion team, who worked collaboratively everyday to meet the exacting standards, while safely delivering world class Marine construction and dredging services to our customers.

Our safety through leadership success is born out of a strong advocacy for accident prevention innovative training and a commitment to exceeding regulatory compliance.

Being responsible and accountable as a priority for every team member with a special emphasis on performing every task safely every time.

Thank you and I'll turn the call over to Scott.

Thanks Travis.

I'll cover some highlights and then review the third quarter results.

As <unk> pointed out there's a lot of opportunity ahead for Orion and maintaining a strong balance sheet and liquidity is a top priority and executing our growth strategy.

Financial strength is extremely important in winning large contracts that can span over multiple years.

As I reported last quarter, we increased our access to capital with our lenders and succeeded in monetizing $25 million in sale leaseback transactions, including the $12 million sale of our Portland market South yard.

We remained focused on monetizing our real estate assets, such as our East West Jones property <unk>.

East West Jones is a unique development opportunity with 345 acres on the Houston ship channel and has generated interest from multiple parties.

We have previously announced a signed contract on this land, but that buyer ran into financing issues.

We are now negotiating with another buyer and we are confident that we will complete a transaction that will provide additional capital to invest and grow our business in 2024.

As a result of our performance and Ryan's improved financial position.

We've also been able to significantly increase our bonding capacity.

This gives us a greater ability to bid and win larger projects and grow our business above where we are today.

To wrap up on the balance sheet as of September 30, we had $3 9 million of cash and total debt outstanding of $53 million.

Our debt is higher than the end of the second quarter due to a temporary investment in working capital with the mobilization underway in Hawaii.

Moving onto our financial results Orion produced $168 $5 million of revenue in the third quarter down.

Down, 8% sequentially and 8% from the prior year.

The revenue decline was largely driven due to our exit from the central Texas construction market.

Partially offset by increased revenue in our marine segment from the Hawaii dry dock project.

Third quarter gross profit was $19 1 million or 11, 3% of revenue compared to $13 4 million or seven 4% of revenue last year.

The gross margin increase of 390 basis points, primarily reflected the actions we've taken to improve concrete segment margins, partially offset by lower equipment and labor utilization in our dressing business.

SG&A expenses for the third quarter were $17 1 million or 10, 2% of revenues compared to $15 4 million or eight 5% of revenues in the prior year period.

SG&A grew due to increased business development costs as well as higher legal expenses related to customer claims.

Adjusted net income for the quarter was $800000 or an adjusted net income of <unk> <unk> per diluted share, which was the same as what we achieved in the prior year period.

This result excludes $1 5 million or <unk> <unk> diluted earnings per share of nonrecurring items.

Our GAAP net loss for the third quarter, 2023 was 700000 or <unk> <unk> loss per diluted share.

EBIT for the third quarter was eight.

$7 million and adjusted EBITDA was $9 4 million.

Adjusted EBIT margin was five 6% up from four 8% in the prior year period.

Turning to bidding metrics in the third quarter, we bid on approximately $1 $1 billion worth of opportunities and one $227 million of this.

This resulted in a contract value weighted win rate of 21% and a book to bill ratio of one.

1.35 times for the quarter.

As of September 30, our backlog was $877 5 million.

A 60% increase over the $548 $6 million backlog on September 30 of 2022.

Breaking out our third quarter backlog 700 million. This was related to our marine segment and $178 million was related to our concrete segment.

Furthermore, we've been awarded over $43 million for New project work not included in our backlog at the end of the third quarter.

Of this approximately $22 million is related to marine while $21 million is related to the concrete segment.

Overall, we are pleased with the progress our team is making to improve our margins by winning quality work and attractive pricing.

We think low double digit adjusted EBIT margins are achievable from Murray.

<unk> segment is performing well and in the third quarter adjusted EBIT margin was 9%.

We are experiencing some near term impact due to lower mix and margin from our dredging business.

Our concrete segment produced adjusted EBITDA margins of two 4% in the quarter compared to negative margins in the prior year.

We continue to believe that our concrete business can achieve high single digit adjusted EBITDA margins.

We expect continued expansion of these margins toward our goals over the coming quarters.

As we look ahead to the fourth quarter and beyond we are very optimistic we've won several attractive and prestigious projects. We're executing well we have sufficient capacity to grow and we are optimizing our people and assets to take advantage of the significant opportunities in our markets.

Unknown Executive: Thank you for standing by and welcome to the Q3 2023 Orion Group Holdings Inc earnings conference call.

Margaret Boyce: I would now like to welcome Margaret Boyce, investor relations for Orion to begin the call. Margaret, over to you. Thank you all for joining us today to discuss Orion Group Holdings third quarter 2023 financial results. We issued our earnings release after market last night. It is available in the investor relations section of our website at Orion Group Holdings Inc.com.

As with any project based business, there will be variability in quarter to quarter results, depending on when projects start and roll off but the general upward trend in our top and bottom lines, we will continue.

Our backlog is growing and so as our reputation for being a significant player in our targeted markets.

Going forward, we will see operating leverage as we continue to grow the top line.

Margaret Boyce: I'm here today with Travis Boone, Chief Executive Officer of Orion and Scott Thanisch, Chief Financial Officer. On today's call, management will provide prepared remarks and then we'll open up the call for your questions. Before we begin, I would like to remind you that today's comments will include forward looking statements under the federal securities laws. Forward looking statements are identified by words such as will, be intent, believe, expect, anticipate, or other comparable words and phrases.

Margin execution improvement will continue to bear fruit.

Theres been a lot of positive momentum in our business and that should flow through quarter, four and into Q1 of 2024.

Margaret Boyce: Statements that are not historical facts are forward looking statements. Our actual financial condition and results of operations may vary materially from those contemplated by such forward looking statements. Discussion of the factors that caused our results to differ materially from these forward looking statements are contained in our SEC filing, including a report on form 10Q and 10K.

With that we'll open the call to your questions.

Operator.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we ask that you limit yourself to one question and one follow up question. Please and if needed you may re queue.

We'll pause for just a moment to compile any questions.

Again, if you'd like to ask a question. Please press star one on your telephone keypad now.

Margaret Boyce: I'd also like to let you know that Orion will be presenting at the noble capital market, noble con 19 conference, December 3rd through 5th in Volkowartan, Florida.

Our first question comes from the line of Joe Gomes from Noble capital. Please go ahead.

Good morning, Thanks for taking my questions.

Margaret Boyce: With that, I'd now like to turn the call over to Travis. Travis, please go ahead.

Good morning, Joe Good morning, Joe.

So I wanted to start.

Travis Boone: Thank you, Margaret, and welcome everyone to our third quarter 2023 conference call. On September 12th, Scott and I celebrated our first anniversary with Orion and looking back, it's been a very exciting and productive year. Both Scott and I are proud of what our team has accomplished. When we assumed our leadership roles, we knew that success would rely on our people embracing change and pulling together to transform our business performance. They stepped up to the plate, eager to move Orion into a new era of collaboration and opportunity.

Just on the on the top line on the revenue.

Came in a little bit lighter than we were expecting I think consensus was expecting.

Was wondering.

The top line revenue in line with your guys' thoughts.

Prior to the quarter was a little softer than what you were thinking.

How does that look just mentioned Scott the general trend upward trend should continue but I think consensus for the fourth quarter is more around that $200 million level are we all being a little too optimistic there for the fourth quarter, even with some of these new contracts coming online.

Travis Boone: We are now beginning to reap the benefits of the changes we put into place, and we continue to feel bullish about what we can achieve in the future. Last quarter, we told you that we expected continued improvement and profitability through the back half of the year, and we are delivering on that promise. Our third quarter revenue came in around $169 million, and our adjusted net income per deluded share was two cents.

No I don't think the fourth quarter is optimistic.

From the perspective of what I have seen out there.

Those expectations, but.

We're pleased with where the quarter ended up we have.

Our growing backlog and so although the revenue timing may vary a bit from quarter to quarter.

Travis Boone: Third quarter adjusted EBITDA was $9.4 million versus $3.7 million in due two. While revenue was down some what year over year, due to our exit from Central Texas, the higher quality of our revenue was delivering improved profitability. Since March, our concrete business has been profitable and improving on an adjusted EBITDA basis, and it is operating in-term positive on an unconsolidated basis in the third quarter. We have recent wins totaling $50.8 million in concrete, and they are the type of projects that require our expertise and will deliver strong margins.

Backlog growing the revenue will come in so the margin is the margin performance was pretty significant.

This quarter and we're happy to see that continue so I think that.

For the full year were kind of in line with what we were originally thinking.

It would look like in.

Going into next year, we expect to have some good momentum.

Okay. Thanks for that and then you talked a little bit about the bidding environment.

And just maybe get your guys' thoughts Avi.

So what's happening in Washington, the continuing resolution.

Travis Boone: Big activity has remained steady in our court markets of Dallas and Houston. As I mentioned last quarter, the cost of capital is still a restraining factor in converting biz to backlog, but demand is strong, and we are staying focused and disciplined for continuing projects aligned with our capabilities where we are positioned to win.

Are you seeing any impact on the bidding environment from that.

Or do you think that.

Given some of the past bills that have been passed for spending.

Travis Boone: Turning to our marine business, we've got a lot of momentum with project one and potential future projects. As we reported in October, we were awarded a significant design build contract for Grand Bahama Shiffyard, Tridoc, for $120 million. This is an exciting project for several reasons. The pursuit required multiple skill competencies, and our marine and engineering teams demonstrated the power of collaboration in scoping out a very complex project that includes infrastructure construction, dredging, creating new mooring facilities, and providing enhancements to short stability.

In the area, especially on the marine side that the continuing resolution shouldnt have much of an impact on you guys, assuming it doesn't just drag out forever.

Yes, we're not seen any impacts yet Joe.

It's been it's been fairly.

Kind of consistent in <unk>.

We haven't we haven't seen the bid opportunities slowing down because of because of the continuing resolution.

Yet to be seen what happens.

Next year in case, if something does shift there, but I think I think we're on.

Travis Boone: Our team is especially excited about being part of what will be a historic project in the Caribbean. When completed, the Grand Bahama projects will have the largest floating dried rocks in the Western Hemisphere, capable of lifting the largest cruise ships in the world. These state-of-the-art floating dried rocks promise substantial efficiency and cost savings to the shipyard's customers, and this venture also reflects the Bahamian spirit of their country's motto, forward, upward, onward together. This project is set to commence immediately, and will be completed in 2025.

Things are things are continuing to move and I think that theres generally good support on both sides of the aisle for the projects that we would benefit from.

Washington has its issues, but I think everyone agrees that the country needs investment and infrastructure, particularly in the marine space.

Great. Thanks for taking the questions I get back in queue.

Our next question.

Our next question comes from the line of Julio Romero from Sidoti. Please go ahead.

Travis Boone: The Bahamian project is just one example of the opportunities we see for marine. For a quick recap, the estimated $50 billion will be spent for coastal restoration in Louisiana alone in the coming years, and we are focused on capturing that work. The Panama Canal expansion created the need for U.S. Port expansion projects from Texas all the way up to the east coast to accommodate larger ships in both public and private facilities. The infrastructure bill will fund important projects in our areas of operation, and well within our core capabilities in marine construction.

Thanks, Hey, good morning, Travis Scott.

Mine area.

Hey, So I appreciate the color you gave about the current bidding environment for dredging.

What's your sense about when the competitive environment might abate.

Maybe you can point to historical.

Instances when something like this has happened in.

When do you think the environment will allow you to bid for projects with more proper.

Margins that you're targeting.

We think it's going to be sometime probably late next year.

<unk>.

Travis Boone: For a quick update on Hawaii, our team is mobilized. We have people and equipment on the ground, and work is starting in earnest in the fourth quarter.

It's probably going to continue somewhat like this first for some period of time.

Obviously, we'd like for it to be sooner, but it's it seems like it's just going to continue this way for four.

Travis Boone: Pearl Harbor is clearly a game changer for Orion. Naval defense spending in the Pacific in the coming years has projected to be tens of billions of dollars, and it's an urgent priority for our government. Our work with the Navy at Pearl Harbor strategically positions us to leverage this opportunity.

For a little while longer yes. So we're just making ourselves look at our schedule to be mindful of our maintenance cycles.

Being disciplined in the bidding processes that we're.

Travis Boone: I think we'll look back on this project as the tipping point that accelerated the next phase of Orion's growth. We get a lot of questions about Army Corps of Engineers' Dredging Contracts. The near-term issue is that dribbling out these projects has created intense competition among smaller players who need to get equipment utilized after a dry spell of activity. We've won a few Dredging Bids, but we will be careful not to fall into the trap of winning work at margins that are too low.

Engaged in.

Making sure that we value our our contributions appropriately and with pricing ourselves right, we're not going to lock our equipment up on low margin work for long periods of time, but we'll price ourselves according to market dynamics.

And kind of ride out the storm were larger than some of these small players that have to act more desperately.

Got it that's very helpful and then.

Travis Boone: There's pinstub demand that we think will be a tailwind for us well in the 2024 and 25. A key health indicator of the business is backlog and we've doubled it since last year. At quarter ends, our backlog was $878 million. Altogether, our backlog and contracts awarded subsequent to September 30 totals $920 million.

Maybe piggybacking on Joe's question, a little bit about the top line.

Maybe specifically on the marine side.

Because the marine sales.

Sequentially contracted a bit do you is it.

Is it fair that they're expected to.

Inflect back upward next quarter towards maybe second quarter's top line figure or is that not.

Not in the ballpark.

Travis Boone: Overall, there are three significant areas to drive the business forward. First, good margins will be a key driver of our success. That includes winning more work with attractive pricing on better projects and then delivering that work with predictable excellence. Second, investment in business development to build customer relationships and identify opportunities further in advance.

Okay.

Yes, we should see it.

Continuing growth in the Marine revenue line as we have.

More and more production coming out of Hawaii, and that will really start to produce in the fourth quarter.

Just early start on that.

The Grand shipyard in the Bahamas, and Grand Bahamas.

That's also going to start contributing so.

Travis Boone: Lastly, investing in our people and equipment to maximize our ability to capture the abundant opportunities in our markets. Our framework is in place and some of the changes will take time to fully implement. Culture doesn't change overnight but we've made great progress. Upgrading IT systems is ongoing and full implementation will not be complete until next year.

The top line in the marine is going to come up pretty significantly starting in the next quarter and then really in earnest starting into the first and second quarter of next year.

Really appreciate the color there I'll hop back into queue. Thanks very much.

Thanks Luke.

Our next question comes from the line of Dave storms from Stonegate capital markets. Please go ahead.

Travis Boone: Before I turn the call over to Scott, I want to share a moment of personal pride in our team. Last month, Orion was recognized for outstanding safety leadership by the Council of Dredging and Marine Construction Safety and we were nominated for this award by our industry peers. I was honored to accept the award on behalf of our Orion team who worked collaboratively every day to meet the exacting standards while safely delivering world-class marine construction and Dredging services to our customers.

Good morning.

Good morning, Dave.

I appreciate you taking my call just wanted to start with the east with Jones property.

If I remember correctly that had a price tag of about $36 million.

Will that or has that been repriced and is there an expected close date.

With the new potential buyer.

Yes, so we're still marketing in that same neighborhood.

Travis Boone: Our safety through leadership success is born out of a strong advocacy for accident prevention, innovative training and a commitment to exceeding regulatory compliance. Being responsible and accountable is a priority for every team member with a special emphasis on performing every task safely every time.

<unk>.

We anticipate that.

Conversations that we're engaged in right now.

To the extent that those.

Continue and conclude successfully the timing of the transaction would be early next year.

Very helpful. Thank you and then just one more for me with.

Scott Thanisch: Thank you and I'll turn the call over to Scott. Thanks, Travis. I'll cover some highlights and then review the third quarter results.

It's a great contract win in the Grand Bahamas are there any logistical challenges are resource constraints that you're foreseeing, considering you're going to have two very large projects on either side of the continent.

Scott Thanisch: As Travis pointed out, there's a lot of opportunity ahead for Orion. And maintaining a strong balance sheet and liquidity is a top priority in executing our growth strategy. Financial strength is extremely important in winning large contracts that can span over multiple years. As our reported last quarter, we increase our access to capital with our lenders and succeeded in monetizing $25 million in sale leaseback transactions, including the $12 million sale of our Port La Vaca south yard.

No that's not really not really an issue for us we've got multiple crews in multiple teams.

It's different different resources, both with our equipment and people that will be delivering these projects. So no no concerns as far as resource constraints internally.

There's the.

It's a different countries. So there's there's challenges with with different things didn't didn't go in.

In a different country, but were.

Scott Thanisch: We remain focused on monetizing our real estate assets, such as our East West Jones property. East West Jones is a unique development opportunity with 345 acres on the Houston Shipping Channel and has generated interest from multiple parties. We have previously announced a signed contract on this land, but that buyer ran into financing issues.

It's moving quickly.

We're mobilizing and getting started.

On the Bahama project.

That's very helpful. Thank you.

Our next question comes from the line of Alex Rygiel from B Riley. Please go ahead.

Thank you gentlemen, coming back to the Grand Bahama project, what's the margin profile of that project relative to some others and any notable working capital needs in the short term.

Scott Thanisch: We're now negotiating with another buyer and we're confident that we will complete a transaction that will provide additional capital to invest and grow our business in 2024. As a result of our performance and Orion's improved financial position, we've also been able to significantly increase our bond needs. Capacity. This gives us a greater ability to bid and win larger projects and grow our business above where we are today.

Yes, we don't talk about specific project margins, but that's a project that we're really happy with both in terms of fitting.

Fitting our strategic direction being a design build contract bring.

Bringing more of our services to bear for our customers.

And also.

In a different geographic space than than Hawaii, where we've also got some growth going on it's nice to kind of balance out that so.

Scott Thanisch: To wrap up on the balance sheet, as the September 30th, we had $3.9 million of cash and total debt outstanding of $50.3 million. Our debt is higher than the end of the second quarter due to a temporary investment in working capital with a mobilization underway in Hawaii. Moving on to our financial results, Orion produced $168.5 million of revenue in the third quarter, down 8% sequentially and 8% from the prior year. The revenue decline was largely driven due to our exit from the Central Texas construction market, partially offset by increased revenue in our marine segment from the Hawaii Drydog project.

Happy with the margin profile and expect to see continued improvement in the overall marine margins as we execute on that in the Hawaiian project going forward.

And then any working capital needs in short term on that.

There is there is a fairly good dynamic within that contract for mobilization payments. So the working capital investment is relatively small obviously working.

In some different currencies will drive a little bit extra need than what we might normally have but its relatively modest so not a significant build in working capital anticipated related to grant bombs.

Scott Thanisch: Third quarter gross profit was $19.1 million or $11.3 percent of revenue compared to $13.4 million or $7.4 percent of revenue last year. The gross margin increase of 390 basis points primarily reflected the actions we've taken to improve concrete segment margins, partially offset by lower equipment and labor utilization in our dredging business. SGNA expenses for the third quarter were $17.1 million or $10.2 percent of revenues compared to $15.4 million or $8.5 percent of revenues in the prior year period.

And then as it relates to fourth quarter Directionally, how should we think about SG&A expense I know last year trended down sequentially quite a bit.

But given the increase in.

Work here, how should we think about SG&A in the fourth quarter relative.

Relative to the third yes, I think it will.

We'll see kind of continued levels around where we are potentially a little growth in those legal expenses expenses that I mentioned and as we have some customer claims that were pursuing and thats probably going to be.

Higher need over the near term as we have a couple of fairly significant customer claims that will be it.

Scott Thanisch: SGNA grew due to increased business development and IT cost as well as higher legal expenses related to customer claims. Adjusted net income for the quarter was $800,000. Or an adjusted net income of 2 cents per deluded share, which was the thing that's what we achieved in the prior year period. This result excludes $1.5 million or $4.0 deluded earnings per share of non-recurring items. Our gap net loss for the third quarter 2023 was $700,000 or 2 cents loss per deluded share.

Investing legal expense and but.

I would think the third quarter would be a good.

Measuring stick for.

We expect it to be in the fourth quarter and beyond.

And was there any positive benefit from.

The.

When east West.

Broke apart.

Relatively minor I mean, there was some some earnest money that was forfeited but not a material amount.

Great. Thank you very much.

Scott Thanisch: Evident for the third quarter was $8.7 million and adjusted EBITDA was $9.4 million. Adjusted EBITDA margin was 5.6 percent up from 4.8 percent in the prior year period. Turning to bidding metrics, in the third quarter we bid on approximately $1.1 billion worth of opportunities and won $227 million of this. This resulted in a contract value weighted win rate of 21 percent and a book to bill ratio of 1.35 times for the quarter.

Thanks.

Again, we'd like to ask a question. Please press star one on your telephone keypad now.

There are no further questions at this time I would now like to turn the call over to Travis boom for closing remarks.

Thanks Monday.

We are proud of the progress we have made with transforming this business to be healthier profitable and set up for future success.

We have been doing what we said we would do and the results are starting to show.

Scott Thanisch: As of September 30, our backlog was $877.5 million, a 60 percent increase over the $548.6 million backlog on September 30, 2022. Breaking out our third quarter backlog, $700 million was related to our marine segment and $178 million was related to our concrete segment. Furthermore, we've been awarded over $43 million for new project work, not included in our backlog at the end of the third quarter, of this approximately $22 million is related to Marine, while 21 million is related to the concrete segment.

Our team has been working hard to make it all happen and we appreciate all of their efforts to make us a stronger company.

Finally, our thoughts and prayers are with those who are facing the adversity of war.

Being a U S domestic company may provide some insulation.

We can only keep praying for a peaceful resolution to these devastating conflicts.

Thank you for participating today and as always we welcome the opportunity to maintain an open line of communication with current and potential investors.

I would like to thank our speakers for today's presentation and thank you all for joining US. This now concludes today's call you may now disconnect.

Scott Thanisch: Overall, we are pleased with the progress our team is making to improve our margins by winning quality work at attractive pricing. We think low double digit adjusted EBITDA margins are achievable for Marine. Our Marine segment is performing well and in the third quarter adjusted EBITDA margin was 9%. We are experiencing some near term impact due to lower mix in margin from our judging business. Our concrete segment produced adjusted EBITDA margins of 2.4% in the quarter compared to negative margins in the prior year. We continue to believe that our concrete business can achieve high single digit adjusted EBITDA margins and we expect continued expansion of these margins toward our goals over the coming quarters.

[music].

Yes.

Yes.

[music].

Yes.

Yes.

Okay.

[music].

Okay.

Okay.

Scott Thanisch: As we look ahead to the fourth quarter and beyond, we are very optimistic. We've won several attractive and prestigious projects. We're executing well. We have sufficient capacity to grow and we are optimizing our people and assets to take advantage of the significant opportunities in our markets.

Okay.

[music].

Scott Thanisch: As with any project based business, there will be variability in quarter to quarter results depending on when projects start and roll off. But the general upward trend in our top and bottom lines will continue. Our backlog is growing and so is our reputation for being a significant player in our targeted markets. Going forward, we'll see operating leverage as we continue to grow the top line. Margin execution improvement will continue to bear fruit. There's been a lot of positive momentum in our business and that should flow through quarter for in into Q1 of 2024.

Okay.

Yes.

Yes.

Okay.

[music].

Sure.

Unknown Executive: With that, we'll open the call to your questions operator. At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We ask that you limit yourself to one question and one follow up question, please. And if needed, you may re-cute. We'll pause for just a moment to compile any questions. Again, if you'd like to ask a question, please press star one on your telephone keypad now.

Joe Gomes: Our first question comes from the line of Joe Gones from Noble Capital. Please go ahead. Good morning. Thanks for taking my questions. Morning, Joe. I wanted to start just on the top line on the revenue. Came a little bit lighter than we were expecting. I think consensus was expecting. It was wondering, you know, was the top line revenue in line with you guys thoughts prior to the quarter? It was a little softer than what you were thinking.

Joe Gomes: And, you know, how does that look? You just mentioned Scott, you know, the general trend upward trend to continue. But I think consensus for the fourth quarter is more around that 200 million level. Are we all being a little too optimistic there for the fourth quarter, even with some of these new contracts coming online? No, I don't think the fourth quarter is optimistic from the perspective of what I've seen out there and in those expectations.

Joe Gomes: But, you know, we're pleased with where the quarter ended up, you know, we have a growing backlog. And so, although the revenue timing may vary a bit from quarter to quarter with the backlog growing, the revenue will come. And so the margin is, the margin performance was pretty significant this this quarter and we're happy to see that continue. So, I think that for the full year, we're kind of in line with what we were originally thinking it would look like and going into the next year, we expect to have some good momentum.

Joe Gomes: Okay, thanks for that. And then you talked a little bit about the bidding environment, just maybe get your guys thoughts, you know, obviously what's happening in Washington, the continuing resolution. Are you seeing any impact on the bidding environment from that, or do you think that, you know, given some of the past bills that have been passed for spending in the area, especially on the marine side that the continuing resolution shouldn't have much of an impact on you guys, assuming it doesn't just drag out forever.

Joe Gomes: Yeah, we're not seeing any impacts, yeah, Joe, it's been, it's been fairly kind of consistent and, and we haven't, we haven't seen the bid opportunities slowing down because of, because of continuing resolution yet to be seen what happens, you know, next year in case if something does shift there, but I think, I think we're, we're on. Things are things are continuing to move, and I think that there's generally good support on both sides of the aisle for the projects that we would benefit from. So, you know, Washington has its issues, but I think everyone agrees that the country needs investment and infrastructure, particularly in the marine space.

Unknown Executive: Great, thanks for taking the question like a fact and cute.

Julio Romero: Our next question comes from a line of Julio Romero from Sudoti, please go ahead. Thanks, hey, good morning Travis and Scott. Where are you? Hey, so I appreciate the color you gave about the current bidding environment for for dredging.

Julio Romero: Maybe what's what's your sense about when the competitive environment might abate, maybe you can point to historical instances when something like this has happened and, you know, when do you think the environment will allow you to bid for projects with more proper bid margins that you're targeting. We think it's going to be sometime probably late next year. It's probably going to continue somewhat like this for some period of time. Obviously, we'd like for it to be sooner, but it seems like it's, it's going to continue this way for for, for a little while longer.

Julio Romero: Yeah, so we're just making ourselves, you know, look at our schedules, be mindful of our maintenance cycles, being disciplined in the bidding processes that were engaged in and, you know, making sure that we value our contributions appropriately and we're pricing ourselves right. We're not going to lock our equipment up on low margin work for long periods of time, but, you know, we'll price ourselves according to market dynamics and, and kind of ride out the storm work larger than some of these small players that have to act more desperately. Got it. That's very helpful.

Julio Romero: And then maybe piggybacking on Joe's question a little bit about the top line, maybe specifically on the marine side. Because the marine tails sequentially contracted a bit, do you, is it fair that they're expected to reflect back upward next quarter towards maybe second quarters top line figure, or is that not in the ballpark. Yeah, we should see a continuing growth in the marine revenue line as we, you know, have more and more production coming off of why that will really start to produce in the fourth quarter.

Julio Romero: You know, just early starts on that, the grand chipyard in the Bahamas, that's also going to start contributing. So the, the top line in the marine is going to come up pretty significantly starting in the next quarter and then really in earnest, starting into the first and second quarter next year. Really appreciate the color there. I'll hop back into queue. Thanks very much. Thanks, please.

Dave Storms: Our next question comes from the line of Dave storms from Stonegate capital markets. Please go ahead. Good morning. Morning, Dave. Appreciate you taking my call. Just wanted to start with the East West Jones property. If I remember correctly, that had a price tag of about 36 million. Well, that has that been reprised and is there an expected closed date with the new potential buyer? Yeah, so we're still marketing in that same neighborhood and, you know, we anticipate that the conversations that we're engaged in right now.

Dave Storms: To the extent that those continue and conclude successfully, the timing of a transaction would be early next year. Very helpful. Thank you. And then just one more for me with a, you know, the great contract when in the grand Bahamas. Are there any logistical challenges or resource constraints that you're foresee and considering you're going to have two very large projects on either side of the continent. No, it's not really not really an issue for us.

Dave Storms: We've got, you know, multiple crews and multiple teams and it's different, different resources both with our equipment and people that will be delivering each project. So no, no concerns as far as, you know, resource constraints internally. You know, there's the, it's a, it's a different country. So there's, there's challenges with, with different things getting, getting going in a, in a different country, but we're, you know, we're, it's moving quickly and we're mobilizing and getting started, on the Bahama Project.

Dave Storms: That's very helpful. Thank you.

Alex Rygiel: Our next question comes from the line of Alex Riegel, from B. Riley. Please go ahead. Thank you, gentlemen. Coming back to the Grand Bahama Project, what's the margin profile of that project relative to some others and any notable working capital needs in the short term? Yeah, we don't talk about specific project margins, but you know, that's a project that we're really happy with, both in terms of it, fitting our strategic direction, being a design build contract, you know, bringing more of our services to bear for our customers.

Alex Rygiel: And also just, you know, being in a different geographic space than then why we've also got some growth going on. It's nice to kind of balance out that. So happy with the margin profile and expect to see continued improvement in the overall marine margins as we execute on that and the wine project going forward. And then any working capital needs in short term on that? There's a fairly good dynamic within that contract for mobilization payments.

Alex Rygiel: So the working capital investment is relatively small. Obviously working in some different currencies will drive a little bit extra need than what we might normally have, but relatively modest, so not a significant build in working capital anticipated related to Grand Bahamas. And then as it relates to fourth quarter directionally, how should we think about SGNA expense? I know last year turned it down sequentially quite a bit, but given the increase in work here, how should we think about SGNA in the fourth quarter relative to the third?

Alex Rygiel: Yeah, I think that we'll see kind of continued levels around where we are potentially a little growth in those legal expensive expenses that I mentioned as we have some customer claims that we're pursuing. That's probably going to be a higher need over the near term as we have a couple of fairly significant customer claims that will be investing legal expense. But I would think the third core of the good measuring stick for where expected to be in the fourth quarter and beyond.

Alex Rygiel: And was there any positive benefit from the when East West, you know, broken part? It's relatively minor. I mean, there was some some earnest money that was forfeited, but not a material amount. Great. Thank you very much. Thanks. Again, if you'd like to ask a question, please press star one on your telephone keypad now. There are no further questions at this time.

Travis Boone: I would now like to turn the call over to Travis Boone for closing remarks. Thanks, Monday. We are proud of the progress we have made with transforming this business to be healthier, profitable, instead of for future success. We have been doing what we said we would do, and the results are starting to show. Our team has been working hard to make it all happen, and we appreciate all of their efforts to make us a stronger company.

Travis Boone: Finally, our thoughts and prayers are with those who are facing the adversities of war. While being a U.S, domestic company may provide some insulation, we can only keep praying for a peaceful resolution to these devastating conflicts. Thank you for participating today, and as always, we welcome the opportunity to maintain an open line of communication with current and potential investors.

Unknown Executive: I would like to thank our speakers for today's presentation, and thank you all for joining us. This now concludes today's call. You may now disconnect, joining us today,