Orion Group Holdings, Inc.

Good morning, everyone, and welcome to Orion Group Holdings' fourth quarter 2020 earnings conference call and webcast. My name is Fran Okoneski. I'm Vice President of Investor Relations, and joining me today are Mark Stauffer, Orion Group Holdings President and Chief Executive Officer, and Robert Tabb, our 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 the course of this conference call, we'll make projections and forward-looking statements regarding, among other things, our end markets, revenues, gross profits, 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 that 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 on our website at www.OrionGroupHoldingsInc.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 SDC, which are also available in the investor 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 fourth quarter and full year 2020 results, provide updates on the benefits we continue to reap from our ISG and other operational improvement initiatives, and discuss our outlook for 2021. I'll begin with an overview of the fourth quarter. Robert will then discuss our financial performance and provide an update on expectations for 2021. Then I'll come back to discuss our markets and provide an update on our ERP implementation before we turn to Q&A. I'd like to start by noting that our operations in Texas resumed this week after being impacted last week by the winter storm. Many of our employees across Texas were affected by the winter storm, and we are working through our HR support programs to provide assistance to our team members most impacted. I'd like to thank our team for their strong performance and ability to overcome obstacles, hardships, and challenges this past year. I'm proud of our entire team on all our project sites, vessels, construction yards, shops, and field support offices, and their continued resilience and commitment to improve our performance. Along with our focus on operation and financial performance, our foremost priority is that all our employees go home to their families the same way they came into work, healthy and injury-free. As such, we remain deeply committed to our Target Zero program to support our vision of an incident-free workplace. Turning to our financial results, during 2020 we made significant progress in our financial performance with near record level adjusted EBITDA. This progress is directly attributable to the implementation of our ISG initiatives, especially around labor and equipment efficiencies. Overall, in-market demand remains positive as evidenced by our Q4 year-over-year bookings growth of 30% and the approximately $1.6 billion in bids outstanding at the end of 2020. We continue to see bid opportunities in both our segments, and we expect to see bid opportunities increase as the COVID-19 vaccine rollout intensifies and the headwinds from the pandemic abate. A new infrastructure bill would also add an additional catalyst for bid opportunities. These factors combined with the operational transformation we've implemented through ISG support our ability to continue to deliver improved results as we progress through 2021. Now I'll turn the call over to Robert to discuss our financial results for Q4. Robert?

Thank you, Mark, and thanks everyone for joining us. Today I reviewed the financial results for the fourth quarter 2020, provide an update on the company's liquidity position, and discuss the company's full year 2021 outlook. Starting with the financials, revenue for the fourth quarter 2020 were $170 million compared to $199.8 million in the fourth quarter of 2019. This decrease was due to the timing and mix of projects in both the marine and concrete segments in the current year period. Fourth quarter year-over-year gross profits rose 13.7% to 21.7 million. This increase was a result of continued project execution gains and better labor utilization across both segments. As a percentage of revenues, gross profit margins expanded 320 basis points to 12.8%. Turning to our segments, in the fourth quarter of 2020, our marine segment had revenues of $97.6 million and an adjusted EBITDA of $13.1 million. This equates to an adjusted EBITDA margin of 13.5%. In the prior year period, we had revenues of $111.2 million and an adjusted EBITDA of $12.1 million, resulting in an adjusted EBITDA margin of 10.9%. The year-over-year revenue decline was due to time and a mix of projects in the current period. Despite this, we were still able to improve our profitability in this segment as a result of better labor and equipment utilization. Our concrete segment had fourth quarter revenues of $72.5 million compared to $88.6 million in the fourth quarter of 2019. Adjusted EBITDA for the concrete segment was a loss of $580,000 compared to a loss of $577,000 in the current year period. Our concrete segment year-over-year revenue decline was driven by a decrease in production volumes resulting from the timing of startups on certain newly awarded projects. That being said, we were able to more than offset the year-over-year revenue decline with improved operating margins. Adjusted SG&A expenses for the fourth quarter were $16.6 million. or 9.7% of revenues. The year-over-year increase is due to an increased accrual in the current period for the annual incentive compensation plan. Net income for the fourth quarter of 2020 was $3.7 million, or 12 cents diluted earnings per share, which includes $150,000 of non-recurring costs and other charges predominantly related to ERP initiatives. Adjusted net income was 3.5 million or 12 cents per share. Fourth quarter adjusted EBITDA grew 9.5% to 12.6 million. This represents an adjusted EBITDA margin of 7.4% compared to 11.5 million for an adjusted EBITDA margin of 5.8% in the prior year period. Now to bidding metrics and win rates. For the fourth quarter 2020, we bid on approximately 954 million worth of opportunities and were successful on 181 million. This resulted in a book-to-bill ratio of 1.06 times and a win rate of 19% for the quarter. As of December 31st, 2020, our backlog was 440 million, of which 203 million was associated with our marine segment and 237 million for the concrete segment. Additionally, we were the apparent low bidder or have been awarded subsequent to the end of the fourth quarter 96 million worth of opportunities Of this, 46 million is related to the marine segment, while 50 million is related to the concrete segment. In total, currently, we have over 535 million of projects between backlog and low bid. Now turning to the balance sheet. As of December 31st, 2020, we had approximately 1.6 million in cash and 63 million of availability under our revolving credit facility. We ended the quarter with $35 million of outstanding debt, $5 million of which was related to the revolver and $30 million related to the term loan. This translated into a 0.89 times leverage ratio and a fixed charge ratio of 4.05 times, both well within the covenant requirements. Our current liquidity position provides us with flexibility to execute on our strategy, pursue new awards, and perform work in backlog. Regarding our outlook for 2021, while we expect the COVID-19 pandemic to continue to impact certain end markets, based on our current backlog and bid opportunities, we expect adjusted EBITDA to be in the mid to high 40 million range, which is comparable to 2020, normalizing gains on the sale of assets. As macroeconomic factors develop, such as increases in nationwide distribution of the COVID-19 vaccine, we will provide and EBITDA update as the year progresses. Overall, 2020 was a successful year. The company achieved record high revenues and gross profits, leading to a near-record annual adjusted EBITDA. We are pleased with the progress that was made last year, but we remain focused on execution and continued improvement in 2021. Now, I'll turn the call back to Mark.