Q3 2024 Orion Group Holdings Inc Earnings Call

Speaker Change: That morning and welcome to the Orion Group Holdings 3rd quarter of 2024 financial results conference call. All participants will be in listen only mode. She can need assistance, please send them a conference specialist, back to us in the start key, followed by zero.

Speaker Change: After today's presentation, we'll be an opportunity to ask questions. To ask a question you may have asked other one yet telephone keypad. To a prior question, please first start with me too.

Speaker Change: King, what this event is being recorded. I'm now like to turn the cops over to Margaret Boyce, Invest your relations. Please go ahead.

Margaret Boyce: Thank you to the operator and thank you all for joining us today to discuss a Ryan through Poling's third quarter, 2024 financial results.

Margaret Boyce: We issued our earnings release after Market Last Night. It's available on the Investor Relations section of our website at OrionGrewPoldingsink.com. I'm here today with Travis Boone, Chief Executive Officer in Scott-Bandish, Chief Financial Officer.

Margaret Boyce: and today's call, Management will provide prepared remarks and then we'll open up the call for your questions.

Margaret Boyce: Before we begin, I'd 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, beliefs, respect, and anticipate for other kinds of bold words and phrases.

Margaret Boyce: St. Monson are not historical facts are forward-looking statements.

Margaret Boyce: Our Actional Financial Condition and Results of Operations may vary materially from those contemplated by such forward-looking statements.

Speaker Change: Discussion of the factors that could cause our results indifferent materially from those forward-looking statements are contained in our SEC filing, including our reports on Form 10 Q and 10K. With that, I'll now like to turn off Call Over to Travis. Travis, please go ahead.

Travis Boone: Thank you, Margaret. Good morning, everyone. And thank you for joining our third quarter of 2024 Conference Call.

Travis Boone: I'll start with an overview of our third quarter results in market update and then I'll turn it over to Scott to cover a financial results.

Travis Boone: For the last few quarters, we said that we expected momentum to pick up strongly in the back half of this year, and that did play out in the third quarter.

Travis Boone: Total revenue came in at $226.7 million and adjusted the speed of $15.2 million. A 62% improvement year over the year.

Travis Boone: The $15.2 million in a just leave it off. It's higher than the $9.6 million we reported in an entire first half of this year. In fact, 59% higher.

Travis Boone: i

Travis Boone: Our top-line growth was largely driven by the ramp up of our Pearl Harbor and Grand Baha'o Projects. Now that the project delays have been resolved.

Travis Boone: Also, a number of projects that began during the summer contributed to this strong quarter.

Travis Boone: Our third quarter results demonstrates the level of profitability our business can generate as we scale and grow.

Travis Boone: For the full year, we're on target to deliver a adjusted E-Bid off and the range of $40 to $45 million for $20-24, which would greatly exceed the $24 million reported in 2023.

Travis Boone: We want $116 million in new contract to wars in October that will start in the fourth quarter. Here's a few examples of our recent wins.

Travis Boone: First Marine was awarded a $3.6 million dollar subcontract as cans could USA to construct its rate threshold for the Ford's Bay Bridge Project for the Washington State Department of Transportation.

Travis Boone: This work is expected to begin in the fourth quarter of 2024 with a construction duration of approximately six months for the first phase.

Travis Boone: We were also awarded an $8.5 million contract for the Port of Houston's turning-based in Northward of 16 bulkhead repairs.

Travis Boone: The start is slated for the fourth quarter of 2024 and will run through the middle of 2025.

Travis Boone: In our concrete business, we won an $18.2 million dollar subcontract to Harvey Bellers for the rich Carlton Revinences and the Woodland Texas.

Travis Boone: The project is expected to begin on the fourth quarter of 2024 and will extend approximately two years.

Travis Boone: Our concrete business continues to win into liver data center projects. We now completed our working on 29 separate data center projects. We have placed over 300,000 cubic yards of concrete for a total of $176 million in revenue on these projects.

Travis Boone: We're currently working 14 active pursuits. Our strong relationships with key general contractors, our strong performance, and our industry-leading safety record are all contributing factors to our success on data center projects.

Travis Boone: We have recently received several industries safety awards, including the Florida Transportation Bole's Association Safety Excellence Award for the NASA College Way Grace Projects.

Travis Boone: Three awards from the American Society of Concrete Contractors.

Travis Boone: The Liberty Mutual Insurance Company Gold Safety Award for us standing in safety performance.

Travis Boone: and two awards from the Associated General Contractors of Houston.

Travis Boone: These awards exemplify our commitment to safety across our business.

Travis Boone: Our team sub-computed over 92-hundred-side observations so far this year to provide leading indicators and prevent incidents from occurring.

Travis Boone: Currently, our total, recordable incident rate or TRIR is around 0.70 throughout October.

Travis Boone: The average TRIR in the construction industry is 2.40.

Travis Boone: We are proud of our performance on safety and we are committed to our people going on safely at the end of every day.

Travis Boone: i

Travis Boone: We're actively pursuing several significant projects in our extended out-the-off opportunities that with our pipeline quadrupling from $3 billion last year. We're confident that our diverse markets will accelerate revenue growth.

Travis Boone: We see this project flow, beginning to ramp up in 2025, but we expect 2020 steps will be the year when we see transformational growth.

Travis Boone: and preparation for the growth we see coming. We're focused on making investments in people and equipment that will help us capture and deliver the large volume of projects and apply plenty of opportunities.

Speaker Change: The recent hurricanes that hit the southeast have been devastating to large numbers of people in businesses.

Speaker Change: Archendolences to all those impacted by these storms.

Speaker Change: For Fortune into the battle, there's very minor impacts to our people and equipment and projects.

Speaker Change: We were able to resume work on our projects quickly and we have picked up several emergency repair projects in Florida.

Speaker Change: In closing, we are very wealthy across our business. We are delivering at higher margins. We have dramatically improved our cash and liquidity position. We are profitable and we have strong roads trajectory in really coming years.

Speaker Change: are short and narrowly talented people are all united in their excitement and commitment to continue to build our company and capture in the market opportunities ahead.

Speaker Change: Now, turn it over to Scott for a review of our financials. Scott.

Scott Bandish: Thanks, Travis, and good morning everyone.

Scott Bandish: Our third quarter generated strong results with revenue increasing 35% over last year to 226.7 million dollars and a just to give it an increasing 62% to 15.2 million dollars.

Scott Bandish: As we indicated earlier this year, the Crow Harboring Grand Bahamun Projects ramped up in the third quarter and we also had the start of one project that was slated for the fourth quarter, accelerated in the Q3.

Scott Bandish: This combined to deliver results above our expectations for Chiefs Rain.

Scott Bandish: Like last order.

Scott Bandish: Our revenue mix continued to shift with Marine Revenue up 73% and concrete revenue decreasing 1%.

Scott Bandish: As we said,

Scott Bandish: The Marine Opportunity is meant and we're intensely focused on winning that work. Our concrete segment was relatively flat on the top line.

Scott Bandish: but with winning our fair share of quality projects that need our discipline-biting standards of attractive margins.

Scott Bandish: and so in the latest third quarter growth profit margin, increased to $27.1 million or $11.9% of revenue. Up from $19.1 million or $11.3% of revenue in the same period last year.

Scott Bandish: The 60 basis point increase in consolidated gross margins was primarily due to improved pricing and execution in both segments.

Scott Bandish: so

Scott Bandish: As she and A expenses, we're $20.8 million up from $17.1 million in the comparable period.

Scott Bandish: As a percentage of total contract revenues, SGA expenses decreased to 9.2% from 10.2%.

Scott Bandish: SG&A dollars increased due compensation, business development and legal expense. In addition to some one-time costs of process improvement initiatives.

Scott Bandish: Turning the Prophet's ability, adjusted net income was $5.6 million or 16 cents per the limited share in the sort of quarter. Compared to adjusted net income of $1 million or 3 cents per the limited share prior to your period.

Scott Bandish: The third quarter net income included $1.4 million or about 4% per diluted share of adjusted items.

Scott Bandish: and GapNet income for the third quarter of 2024 was $4.3 million or 12 cents per delivered chair.

Scott Bandish: Even that for the third quarter was 13 and a half million dollars and adjusted the even though was 15.2 million dollars.

Scott Bandish: Our adjusted EBITDA margin was 6.7% up from 5.6% last year.

Scott Bandish: During the third quarter, adjusted the margin in the marine segment was 8.2% compared to 9 last year, and adjusted the margin in our concrete segment was 4.3% up from 2.4% in the third quarter last year.

Scott Bandish: As a reminder, our goal is to generate adjusted even in margins in the low double digits for our Marinelessness and the high single digits for a concrete segment.

Scott Bandish: We've been pleased with the progress of our concrete segments since they returned to Egypt a prophodilly last year.

Scott Bandish: Everything starts with winning the right jobs with good marches.

Scott Bandish: With a better starting point, our project teams have implemented new field practices focused on delivering projects to the customer more efficiently and better than the margins.

Scott Bandish: Our Revisagnet Executed Well in the Quarters Well, with significant increases in activity on our largest projects.

Scott Bandish: Moving on to bidding metrics, in the third quarter we've been on approximately $1.2 billion worth of opportunities of which we won $159 million in the quarter.

Scott Bandish: This resulted in a contract value weighted wind rate, 13.4% and a book to build ratio of 0.7 times for the corporate.

Scott Bandish: As of September 30th, our backlog was $690.5 million, compared to $758.4 million at June 30, 2024, and $877.5 million at September 30 of 2023.

Scott Bandish: Breaking out our third quarterback vlog.

Scott Bandish: 537 million was in our Marine segments and 153.5 million was in our concrete segment.

Scott Bandish: Turning to cash flow, the business generated $35.2 million of cash flow from operations during the third quarter compared to negative cash flow from operations of $15.1 million in 2023.

Scott Bandish: This huge delta was mainly due to the reversal of working capital on the Hawaii Project.

Scott Bandish: We required a cash investment at the start of the project and is now generating cash.

Scott Bandish: We saw most of this reversal in Q3 and Hawaii will continue producing cash going forward.

Scott Bandish: During the quarter, we took steps to strengthen our balance sheet by raising 26.5 million dollars in a secondary offering.

Scott Bandish: We are now better cat-lines and we'll use the proceeds for general corporate purposes, working capital, and the continued repayment of his deadness under our credit agreement.

Scott Bandish: We will also be making investments and equipment going forward, needed to optimize the demand opportunity ahead.

Scott Bandish: We ended the third quarter with 28.3 million dollars in cash.

Scott Bandish: Told that outstanding was $28.0 million, and we had no outstanding borrowing under our revolving credits facility at the end of the quarter.

Scott Bandish: Our sale of the East West Jones property did not close and set timber as anticipated due to delay in the fires due to emissions.

Scott Bandish: We remain engaged with this fire and other interested parties.

Scott Bandish: With the Client Interest Race, we believe we can turn this valuable asset into cash for growing our business.

Scott Bandish: and our stronger balance sheet and liquidity gives us more flexibility and time to strike the right deal.

Scott Bandish: For the full year 2024, we are on target to deliver revenue in the range of $850 million to $900 million, and expected adjusted EBITDA in the range of 40 to 45 million hours.

Scott Bandish: With the additional shares from our secondary offering, this translates to a range of negative distance to positive force in the gap of BPS.

Scott Bandish: and 11 cents to 22 cents for a JSTVPS.

Scott Bandish: As we prepare for 2025, we've already executed some important initiatives that will enhance our company's efficiency and productivity.

Scott Bandish: During the third quarter, we hired a leader for our newly created Certificate Group.

Scott Bandish: This individual will serve the whole company by achieving economies of scale through more efficient and coordinated procurement of materials and resources.

Scott Bandish: Over the last few quarters, we've been implementing new IT tools and processes for our operations and our back office.

Scott Bandish: These tools will share information and provide insight into the progress of our projects.

Scott Bandish: and Pre-Ming our ability to effectively manage these projects on the ground.

Scott Bandish: We've also been migrating our business segments to the same financial platform, which will greatly improve our line of sight across the entire business.

Scott Bandish: This implementation is largely complete and now in the testing phase with a handful of projects.

Scott Bandish: We plan to go live in January so that we can start the new year on our new systems.

Scott Bandish: We are prepared and excited for 2025 and plans to provide our outlook for the year when we report our year-in results in March.

Speaker Change: The Nat will open up to call questions.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask the question you have asked the other one you have told the phone keeper.

Speaker Change: It's using a speaker phone, please check up your hands up to your friend's mate. To a prior question, please press star then too. At this time, we'll pause momentarily to assemble our roster.

Speaker Change: The

Speaker Change: The

Speaker Change: i

Speaker Change: Our first question will come from Aaron Spahala with Craig Hallum.

Speaker Change: You may now go ahead.

Aaron Spahala: Yeah, good morning Travis and Scott, thanks for taking the questions. Maybe first.

Aaron Spahala: For me, can you give a little bit more detail on the bidding environment? Backlog was down a little quarter of a quarter. I know you've talked about exiting the year with higher backlog. Sounds like you're starting to see the bidding activity pick up here, funding start to hit the market, but it was just hoping you could elaborate a little bit on that.

Good morning here. Yeah, so the bidding environment has been strong. I wouldn't say it's...

Aaron Spahala: This is...

Aaron Spahala: Hot, but it's strong, been holding the steady and you can tell from our back on we've been keeping a fairly bad call on fairly steady back on throughout the year.

Aaron Spahala: It's we've got several big pursuits that look like they're lying up for the first quarter for awards.

is looking like a fairly steady year and then, you know, like I said, quite as you line up for 2025. So...

didn't really get it and getting stronger.

Speaker Change: Alright, thanks for that. And then maybe on the Navy in particular, can you give us an update there on just how you're thinking about that opportunity progressing what that can look like for you here in the coming years.

Speaker Change: Sure, still very bullish about Navy Opportunities with Pacific, lots of big opportunities out there that we're playing at for.

You know a year ago we thought there would be a couple of big pursuits with the Navy in 2025. Looks like the way congressional funding rolled out. Some of those will be probably later in 2025.

as far as being maybe opportunities, I think they're brothers.

We're like a said, still very bullish about the opportunity over the next five years or more. The big opportunities that we're looking at will likely be late in 25 for pursuits.

Alright, understood, and then just maybe last for me on CapX, you kind of talk about the outlook there, as you look to kind of bring in more equipment to capitalize on this opportunity, how are thinking about it for this year and as we look towards 2025 as well.

We've been looking at ways which we could acquire some of the equipment that we think will.

Speaker Change: Drive our growth in the future.

and have our eyes on a few items. I think if we can find ways to complete those transactions in the very near turn, we're going to be looking for ways to do that.

A strong balance sheet and good liquidity right now to make those investments. So we anticipate that we're going to be increasing our capX spending going into next year as a result of that try to kind of work every breath.

Alright, I understood thanks for the color, I'll turn it over.

Thanks for watching

Speaker Change: Our next question will come from Julio Romero with Sadodi and Go. You may not go ahead.

Great, thanks, Hagan Boyce for Travis Scott.

Julio Romero: and we're going to start on the concrete side, specifically data centers. You mentioned you completed or are working on 29 separate data center projects. Maybe if you could help us frame that figure a bit, is that 29 projects kind of...

Post-Clull with today, you're today and, and, and.

Maybe any frame of reference of the part of that kind of like a player prior periods.

Yeah, that's a total number that we've worked on over the last

Speaker Change: Probably five years or so, a large number of been, though, have been in the last couple of years.

and this year we've been video working on more than ever.

Julio Romero: So it's been a pretty rapid increase starting kind of last year. I don't know the exact number honestly for this year, but it's...

It's been quite few of them. Some of them have been very large, some of them down the smaller side. You know, we're good.

I think 14 active pursuits right now. Most of those are in North Texas, but there's also several in other states outside of Texas, where we're going with a key.

Keep Partners, who have asked us to follow them into other states. The environment on the data center side of things is pretty odd. You may remember I think three months ago I said, we were at 24. So there's been five of those added in the last few months.

So it's been quite, quite, active on the down center side. Again, the side range is very, pretty significant. We're somewhere small and some are very large.

Speaker Change: got it. That's very helpful there. And then, you know, I wanted to ask about the really impressive cash flow you did in third quarter. Scott, I think you mentioned much of that was through Hawaii generating cash and that Hawaii cash generation should continue in four-q. So just given that expectation, how do you kind of, how should we be thinking about cash flow for Orion overall to shake out in the fourth quarter?

Yes, we did have a great cast-level reporter and it kind of wind up the timing on some of that's a wide revenue as well.

So I think that we're going to continue to see cash thrown off of the wide project.

We won't see a fourth quarter cash generation at the same level in the third quarter, but still generating a nice cash flow on the operating line as we finish out the year.

Julio Romero: i

Okay, excellent, and then just last one for me would be kind of staying on cash for cash a little bit.

Speaker Change: You have a bolster balance sheet, you generated really strong cash and you talked about earlier about some cat-text deployment for your growth plans.

can give us a quick kind of refresher on how you're thinking about capital allocation overall, you know, kind of growth versus debt repayment versus other in the near term and kind of just sized enough for us there.

Yeah, so obviously with the stronger balance sheet that we have after the secondary offering and the strong cash flow that we've achieved in the third quarter.

We're thinking about the ways that we ought to be structuring our capital going forward.

Julio Romero: You know, our net deck right now is...

Julio Romero: Zero.

So we have options that we think about the ways that we move forward.

We do think that with our improved predosition and...

Stronger Balm Shooter

We've got a pretty good hand to play as we talk to our existing lender.

Julio Romero: of about how we modified the agreement to move forward to make it better suited to give us the flexibility we need for growth. We see a lot of opportunity to potentially put.

Money into equipment in the near future and I think that's going to be able to drive the top one and earnings faster. So, we want to generate internally the cash flow that we need to drive those investments and that's our primary focus.

Excellent, we'll thank you for all the color and I'll pass it along.

Our next question will come from Mimcho with B-Rythe Securities. You may not go ahead.

and I get morning Travis and Scott.

Speaker Change: Gordon As.

and there I'm so specific.

Question on potential impact from the hurricane. Can you talk about any positive or negative impacts on your business? I know you talked about some emergency work and forward up post the hurricane from assuming that's more under 4Q. Wondering if there's any negative impact to your concrete margins specifically.

We don't just say, we were the last hurricane kind of was T-UP on Tampa and then made a slight turn to the South, which was...

for two of us for our business. So we were spared major impacts to our yards, our equipment, and our people quite frankly, and our projects. So that was a few days of kind of...

shut down while in preparation for the storm and then after the storm was over, we were able to get right back to work and pretty minimal impact. We had a...

So, a little bit of root damage in our yard, and I mean it's very minor type of damage that we had. Then even we are cancerous to duct voltage, I mean pretty pretty minor stuff.

Speaker Change: So we were very fortunate to escape two major storms pretty well and again, you know, people people able to give it right back to work and so it was good for us and then there were some some days too.

Speaker Change: So, in the Lord Customers...

and the Pacific Lake. So it is in the Pacific Lake and Tampa Bay area that we've been helping them with and kind of jumping into help them, our, you know, few is major projects, but able to help our customers in time with leaders is important to us.

Okay, let's get to here. Just wondering, I mean, it sounds like you're kind of reiterating your pipeline of opportunities around 13 billion. But you just want to make sure that was still the case. And if you're seeing kind of any increased opportunities, especially on the data center work.

The Duckling Day Center Work is...

It's like everyday there's more coming in, but they just don't work as definitely

and I said earlier, pretty hot and continuing to pick up. As far as our pipeline goes, it's definitely holding the strong. I don't think it's the act number is, but it's in the 1314. 14 billion dollar range. Lots of lots of good opportunities lined up for the next couple of years.

Okay, perfect, and then this final question on kind of your SGA and Outlook, sometimes like you're definitely investing in equipment, through CapEx, and you mentioned investing in people as well. Any guidance in terms of what we should expect in 4K as a percentage of revenue, or in dollars, and looking on to 2025 as well.

We expect the dollar for year in the fourth quarter to be in the consumer to what it was in the third quarter as we complete our investments and systems and process changes should be at about that level and then go in the next year Then we'll give you a little more guys and then as to what's on the phone

Speaker Change: All right, thank you.

Thanks for watching.

Again, if you have a question, please press star then one.

Our next question, we'll come from Jason or Stainer with Bumchew Holdings.

Speaker Change: and Miracle Ed.

Speaker Change: Good morning. Thanks for taking my question.

It was a rough end of the World Theory last night, had James Earl Jones recently passed away in September and just got me thinking

about field of dreams in that famous speech, you know, like the growth will come, Travis. It's going to come to the gulf, specific reasons they can't even pass on, you know, turn up the or doorstep, give you the money.

but to be in Syria, you know, doesn't seem to be in film right? Well, it doesn't seem like there's any contention on the demand side longer term, which I think.

You know, it's pretty rare and desirable out to end this market, but so the real question, you know, kind of seems to be coming down to the execution and credibility and the ability to do the jobs, the people, the equipment.

Speaker Change: the Beating Expertise so...

Speaker Change: You know, assuming you can capture the market opportunities that are ahead for the next year, the next decade, you know, sounds like maybe even longer. I guess what's still given you the confidence sitting here today or what is your confidence level that that's going to translate.

into some of the profitability metrics and margin expectations that you previously laid out or maybe we'll be laying out particularly in the Marine segment.

Hello, my name is Frances.

Unchange if anything is higher than it was a year ago. So really confident about the market and our ability to capture it.

and our ability to capitalize and continue to improve our margins and performance as we scale our business and grow. So we're headed for some really great things.

Speaker Change: The one thing that is you know.

Speaker Change: and from the investor side.

Speaker Change: There's some, you know, concern when...

We have a year like this one where there's some things that didn't quite go our way, but everything quite out like we said it would. We've been saying from the beginning of the year it's going to be slow, a slow first half and a...

Really big second house and that's exactly how things are playing out.

and construction is a bit of a lumpy business. But we're going to take this as...

Take things as they come and capitalize on every opportunity we can and minimize the downside of every opportunity we can. So I think we're feeling really good about things going forward and looking forward to building this company into what it can be.

and Kevin Lowe's not potential.

Yeah, and this is a different company that I was two years ago. And the investments that we've made in improving the operational performance and improving our ability to go win work and drive business, I think it's really starting to pay off in bare fruit, which is just excited to see that continue.

Speaker Change: and just maybe remember what have you guys communicated in terms of potential margin expectation on the Marine segment at a certain scale. I'm trying to go back to some of the quarters what was the target level there.

Speaker Change: Yeah, the target level that we've talked about then.

Loved Double Digital, either the margins for the learning business. We see that as being at the scale where we expect to be over a billion dollars in the near future. Once you get to that level and size and get the operating leverage from spreading our fixed costs over more projects, then that's when we'll see those margins.

Awesome. Alright, well thanks for your much and congrats on the nice court.

Again, if you have a question, please press star then one.

Speaker Change: The End

In the peers are no further questions, this concludes our question and intersection of what's the turn to call tobacco to try to spoon for an equal gender marks.

Thanks. Thank you all for joining our calls today. I want to take this time to thank our employees for all their hard work.

and it's been working a lot of hours out in the elements and during and during a lot of a lot of different factors including weather and other things. So thanks to our employees for everything they do every day and thanks to all of our stockholders for...

Believe in us and have a confidence in what we can do. We look forward to speaking with all of you guys again next quarter.