Orion Group Holdings, Inc.

Q1 2023 Earnings Conference Call

5/9/2023

spk03: And what are your expectations on the length and depth of the J curve as that segment improves?
spk02: We're definitely seeing improvements in just about every aspect of our operations on the concrete business. Lower issues on projects, fewer write downs, better execution. And in terms of our bidding practices, We've seen through latest market bids opportunities with existing customers, repeat customers who we've done highly complex and successful projects with. And we're seeing opportunities to get the kind of margins that we think that our business is entitled to based on our capabilities and our ability to deliver for our customers. So I see a lot of really good positive trends. Ardell is done a great job really kind of shaking things up and doing things differently and is getting a great deal of support from the team in the concrete segment. I think that the entire business is excited about where it's headed, and we think that there's a lot of room for improvement still.
spk03: Awesome. Really appreciate it. Thanks, John. You bet.
spk01: Okay, and our final question comes from the line of POFRAP from AGP. Your line is open.
spk00: Yeah, good morning, Travis. Good morning, Scott. It's Alliance Global Partners. But can we talk about, nobody's asked about the credit facility, and can you, since the terms have been, you know, it sounds like finalized, just subject to documentation, can you give us a little better idea of some of the terms, you know, how long is the term loan period? you know, the availability under the revolver, you know, is there a set, you know, tenor to that too? And then also, if you could sort of give us an idea of sort of where your interest rate margin is going to come in on it and whether there might be any equity sweeteners on the arrangement with the private lender.
spk02: Sure, I'll answer what I can. Obviously, those are, you know, discussions that we're wrapping up right now. So we expect to come back to you guys with more information on that when it's all finalized. But it's a three-year tenor on the term loan and the revolver. In terms of the rates, we have on the revolver rates fairly consistent with our previous debt. On the term loan, rates that are pretty consistent with what you're seeing for ABL loans of this type in the market right now. As you know, we went to market and ran a competitive process, so we feel good that what we're achieving with this debt is going to be consistent with other market positions right now.
spk03: Which, by the way, the market is not great for getting a loan, but it is what it is.
spk02: But, you know, a lot of flexibility in our operations with capacity in the revolver. You know, we're expecting to – it's like a typical ABL revolver with a borrowing base that undergirds your borrowing capacity. So over time, the amount of capacity we have changes, and we expect that to grow as the business grows.
spk00: Great. Thank you. And then if you look at your awards subsequent to the end of the quarter, I think in the press release you talked about $624 million. You know, the Navy contract is, what, $450 roughly of that. What are the other components of that sort of delta of $175 million?
spk03: There's both marine and concrete winds of varying sizes kind of throughout the business that make up that delta there. I wouldn't say there's one mega project in there. It's a variety of projects throughout the business.
spk00: And then I think I heard Scott say that a quarter of that 624 would be realized or burned off in 2023. Was that correct? And if so, can you talk about the burn rate for the remainder? It sounds like it would be maybe 50% in 24 and then 25% in 25. Is that fairly... Is that a fair estimate?
spk02: I'd say that's a reasonable expectation. Yeah. Oh, and, Poe, I didn't answer one part of your question earlier. There's no equity component to the debt.
spk00: Okay, great. And then along those lines, you highlighted, you know, long-term margins target for marine of low double digit, I think. Just to clarify, is that on a gross margin basis or EBITDA basis? And then if you could talk about whether the Navy contract meets that long-term goal?
spk02: That's on the EBITDA front. So those are kind of quoted margins on the bottom of the P&L. The Navy contract is you know, a massive contract. And I would say that we definitely achieved our margin goals with that contract. You know, given its size, as you might expect, it's not going to be the highest contract, the highest margin contract that we have. But we're very pleased with where it was bid when we think that when executed, we'll be able to deliver a really nice result for ourselves and for shareholders.
spk00: Great. Congratulations. You guys have been really busy, so covered a lot of ground. Thanks. Yes, we have. Thanks, Bob. Thanks, Bob.
spk01: Again, as a reminder, the floor is now open for your questions. To ask a question at this time, please press star 1 on your telephone keypad. I would now like to turn the call over to Travis Boone for closing remarks.
spk03: Thank you, and thank you all for joining the call today. We enjoyed our time with you and looking forward to continuing to have good news for you in the coming quarters.
spk01: Thank you, ladies and gentlemen. This does conclude today's call. Thank you for your participation. You may now disconnect.
Disclaimer

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