Good morning, everyone, and welcome to Orion Group Holdings Second Quarter 2019 Earnings Conference Call and Webcast. 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 15 minutes for prepared remarks in which Mark and Robert will highlight our results and update our market outlook, we’ll then open the call for questions. For 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 to differ materially from those statements. Moreover, past performance is not necessarily an indicator of future results. By providing this information, we undertake no obligation to update or revise any new projections or forward-looking statements, whether as a result of new developments or otherwise. Also, please note that adjusted net income, adjusted earnings per share, EBITDA and EBITDA margin are non-GAAP financial measures under the rules of the Securities and Exchange Commission, including Regulation G. Please refer to the reconciliations and definitions inclusive to the most comparable GAAP measures and reconciliation tables accompanying these earnings call within the press release issued this morning. 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 SEC, which are also available in the Investors Section of our website. And with that, I'd like to turn the call over to Mark Stauffer, President and Chief Executive Officer. Mark?

Thank you, and good morning, everyone. Thanks for joining us today. Today, we'll discuss our 2019 second quarter results and provide you with an update and further details on our invest scale and grow initiative or ISG. The key takeaways from our remarks today will be our improving performance, our record backlog, our positive cash flow and liquidity and ISG details. I'll begin by giving an overview of the quarter, then Robert will discuss our financial performance and capitalization in more detail. And I'll come back to discuss our markets and the details about the key elements of our ISG initiatives, progress we've made in this regard, and our expectations for the anticipated benefits of this program in the quarters and years to come. As always, I'd like to start out by thanking our nearly 2,500 coworkers for their commitments to the company, which they show every day through their hard work and dedication. It's because of our dedicated team, we are able to meet the needs of our customers and achieve our strategic objectives. During the second quarter, we generated year-over-year and sequential improvement in revenues as our Marine business saw improved performance on strong year-over-year and sequential revenue growth. The improving Marine performance also led to a sequential increase in adjusted EBITDA due to the higher revenues as well as improving execution in this business. Our concrete segment results continue to reflect bit margin pressures and a runoff of weather impacted projects, but we expect the profitability of this business to improve as our ISG initiatives begin to yield positive results. We remain focused on executing our strategy of being a premier specialty construction company, focused on providing solutions for our customers across the infrastructure, industrial and building sectors, while maintaining a healthy financial position and maximizing stakeholder value. The demand from our end markets remains robust as evidenced by our record high backlog of $661 million as of the end of the second quarter of 2019, and our outlook for top line growth is favorable. This, combined with the operational transformation we have underway through our ISG initiative, supports our focus on delivering improved results as we progress through 2019 and into 2020. Now I'll turn the call over to Robert to discuss the financial results for Q2 '19.

Thank you, Mark, and thanks, everyone, for joining us. Revenues for the second quarter 2019 were $166 million compared to $159.8 million in the second quarter of 2018. The 3.9% increase is driven by increased demand for Marine services, slightly offset by a timing mix of concrete projects. The second quarter 2019 reported gross profit was $15 million as compared to $19.5 million in the prior year second quarter. The year-over-year decrease was primarily driven by a large Marine project that closed out and realized significant cost savings in the second quarter of 2018. With respect to our concrete business, margins continue to be impacted by a competitive bidding environment as well as the run-off of weather-impacted projects. SG&A for the second quarter of 2019 was $15.1 million or 9.1% of revenues, which compares to the second quarter 2018 SG&A expense of $14.7 million or 9.2% of revenues. The increase in SG&A in dollars reflects approximately $1.7 million of non-reoccurring professional and other fees related to our ISG initiative. For the second quarter of 2019, we reported a net loss of $1.6 million or $0.06 diluted loss per share. These results compared to a net income of $2.2 million or $0.08 diluted earnings per share for the same period a year ago. The second quarter 2019 net loss included $1.9 million or $0.07 per share of nonrecurring costs and other charges. Adjusted net income was $0.3 million or $0.01 diluted earnings per share. Second quarter 2019 adjusted EBITDA was $9 million, representing an adjusted EBITDA margin of 5.4% compared to adjusted EBITDA of $12.5 million for a margin of 7.8% in the second quarter of last year. Looking at our results with respect to our two segments. In the second quarter of 2019, our Marine segment had revenues of $89 million and adjusted EBITDA of $9.4 million with an adjusted EBITDA margin of 10.6%. This compares to revenues of $80.7 million and adjusted EBITDA of $12.2 million within a margin of 15.1% for our Marine segment in the second quarter of 2018. Our Concrete segment had second quarter 2019 revenues of $77 million as compared to $79.1 million in the second quarter of 2018. Adjusted EBITDA for the Concrete segment was approximately at $400,000 loss, representing a negative 0.5% adjusted EBITDA margin in the second quarter of 2019 as compared to the $300,000 profit or adjusted EBITDA margin of 44% in the second quarter 2018. In terms of breakout by customer type, Marine segment second quarter 2019 revenues comprised of 66% from government agencies, while 32% was generated from the private sector. This compares to 38% and 62% from government and private sector customers respectively in the second quarter of 2018. The concrete segment second quarter 2019 revenue is comprised of 82% from the private sector versus 79% in the second quarter of 2018. For the second quarter of 2019, we've been at $1.1 billion worth of opportunities and were successful on $416 million. This resulted in a book-to-bill ratio of 2.5 times and a win rate of 38.6% for the quarter. As of June 30, 2019, we had a backlog of work on a contract of $661 million of which approximately $477 million was associated with our Marine segment and $184 million with the Concrete segment. Additionally, we were the apparent low bidder or have been awarded subsequent to the end of the second quarter $69.3 million worth of opportunities. Of this, $14.4 million is related to Marine segment, while $54.9 million is related to the Concrete segment. In total, currently, we have over $730 million of projects between backlog and low bid, an increase of nearly $133 million from the end of 2018. This positions us well for growth. Return to the balance sheet. As of June 30, 2019, we had over $23 million of cash in revolver availability. We ended the quarter with approximately $83 million in total debt outstanding, of which $26 million was related to the revolver and $57 million was related to the term loan. This translated into a 3.95 times leverage ratio and a fixed storage ratio of 1.43 times, which was well within their covenant requirements. Further, we finished the second quarter 2019 in a net overbill position. Between the availability on our revolver, and our expectations for free cash flow generation, we have more than ample liquidity to support our growth strategy, including our ISG initiative. Additionally, our bonding program remains solid and is more than adequate to support our bidding activities. Now I'll turn the call back over to Mark.

Thanks, Robert. Turning to review of our market sectors. In the infrastructure sector, which we service through our Marine segment, we continue to have extensive opportunities with both public and private sector customers to deploy our capabilities in the maintenance and expansion of marine facilities and Waterway. We continue to see bid opportunities from port authorities and downstream energy customers as evidenced by the $160 million award we announced in late May to the Terminal 5 improvements project in the Port of Seattle, and the $52 million contract we recently announced for dredging services for the South Texas Gateway Terminal as well as the design of this Marine terminal. Additionally, we are tracking a number of recreational-driven bid opportunities from the cruise industry. We continue to track and pursue bid opportunities in the industrial sector to execute foundation and other work inside the industrial and other land-based environments. We expect the massive long-term petrochemical-driven opportunities along the Gulf Coast to continue providing significant potential to expand our addressable project opportunity, and we have been actively bidding work in this sector in order to build profitable backlog. Within the building sector, where our concrete business operates, we continue to expect solid long-term demand driven by population growth throughout our markets. We continue to see demand for structural work, which provides us with improved competitive dynamics in addition to providing us with the opportunity to secure larger and longer duration projects in this business. We are excited about the bid opportunities we have and that we see ahead. Our backlog sits at a record high, and we are optimistic about our prospects for additional awards given the healthy bid opportunities we are seeing. Currently, we have nearly $1.3 billion worth of total bids outstanding, of which $745 million is related to the Marine segment and $527 million is related to the Concrete segment. Overall, we are tracking over $9 billion of current or future bid opportunities. The combination of our current backlog or low bid, the $9 billion of bid opportunities we are tracking and the possibility that the funding picture may improve even further over the next several years, if a new federal infrastructure bill is passed, provides us with significant growth potential for our business. We currently are confident in our ability to win work and to execute on that work, which we expect to drive an increasing top line for Orion. Along with this, what we are acutely focused on is enhancing our profitability on this work and maintaining consistent profitability across projects. As I mentioned earlier in the call, the focus of our ISG initiative is translating our substantial project opportunity into profitable growth for Orion. As a reminder, at the beginning of 2019, we began an intensive review of our operation, processes, procedures, capital assets and human resources. The output of this exercise was our invest, scale and grow initiative or ISG, which has identified opportunities to unlock meaningful improvement in our performance that is scalable as we grow. The end goal of our ISG initiative is to provide the pathway to performance that meets our expectations for business segments on a consistent basis and then aligns with our strategic plan. A main element of our ISG initiative has been a recommitment of our expectations to our teams and a reinforcement of the accountability of our teams. As stated on our last call, the areas of focus of our ISG initiative are labor management, equipment management, project execution and corporate processes, following steps we are taking or have taken or are taking in each of these areas. In the area of labor management, we've improved the functionality of reporting to management for labor productivity and unassigned labor. This is providing better visibility for labor efficiency on projects and better control of indirect labor cost by minimizing unabsorbed labor, both of which will lead to improving consistency in margins. In the area of equipment management, we've improved and are improved -- continuing to improve the functionality of our management reporting to provide better information for decision-makers on equipment scheduling, repair and maintenance expenditures, capital expenditures and disposition of underutilized equipment, all of which is focused on reducing our net equipment expense and provide an improving consistency in job and operating margins. In the area of project execution, we're enhancing our management training to better equip our senior managers with the tool to improve consistency of results. We're improving our data analytics for our project selection process to better target opportunities that support our business plan. We're enhancing our productivity reporting tools and addressing standardization between our locations in each of our business segments. We're improving our oversight process to provide improved speed of data and reporting to identify any issues on projects earlier, so necessary corrective actions can be taken earlier. All of these steps are being taken to reinforce expectation and accountability to bring our projects in with margins at or above the as-bid margins. In the area of corporate processes, we utilized outside resources to review our workflow processes and to identify areas for streamlining and realignment of path. We've enhanced or upgraded our personnel in key positions and streamline processes, resulting in a net headcount reduction. We have and are continuing to review non-labor SG&A items to reduce or eliminate expenditures. We're laying the groundwork to implement a shared services platform across our divisions to eliminate duplication of effort and cost. To date, our efforts in this area has identified annualized savings of SG&A of $1.2 million. These and other steps we're taking will drive oversight and accountability for SG&A expenditures, which, when fully implemented, will drive total SG&A expense to at or below our goal of 8.5% of revenues. In addition to these areas of focus under our ISG initiative, recent awards of larger projects in our Marine segment are enhancing our capabilities to pursue and execute these larger anchor projects, which, in turn, improves our visibility and predictability. Similarly, in our Concrete segment, as we expand our market share in structural projects, we are positioning ourselves to add larger and longer duration projects into backlog with the same improvement in visibility and predictability. What I've just outlined for you are the key elements of an extensive program. We have numerous components of this program underway and -- which we will continue to implement through 2019. We remain acutely focused on delivering improved results as we progress through 2019 and into 2020. As I stated earlier, the goal of all these actions is to provide the pathway to performance that meets our expectations for our business segments on a consistent basis and that aligns with our strategic plan. With that, I'll turn the call back to the operator, so we can begin the Q&A portion of our call.

Thank you. [Operator Instructions] Our first question today is coming from Alex Rygiel from B. Riley FBR. Your line is now live.

Thanks. Good morning, Mark and Rob. How are you doing?

Pretty good Alex.

Not too bad. A couple of quick questions here. First, it looks like you might have been selected on the George Town Harbor project. Can you give us an update there? Is it in backlog? When might it go into backlog, possible size of that project? So on and so forth.

It is not in backlog. It is in the number that we quoted just a minute ago for the work that we have quoted and outstanding quotes. We are pleased to be part of the team that's pursuing that. We still have work to be done on that to get that project in the backlog. We think -- obviously, we're going to continue to work diligently with our team to secure that project, and we're hopeful to land that project timing-wise. There is a number of steps that need to be undertaken in order for that to -- for us to complete the process. So we're hopeful that maybe early next year or early 2020, that will be completed, and we can move that to backlog. I won't give the exact size of that. It is a sizable project. But I don't want to give an exact number at this point just because there's still some moving pieces on that. So I don't want to say anything about that publicly, but it is a large project.

No problem. And I believe you've got a number of real estate assets up for sale. Any way you could address that topic, maybe quantify that? And maybe give us any color on success to date?

Well, as -- yes, we are looking at, as always, or just the -- all of our assets and what are things we should and shouldn't know. We talked about that in the remarks around the equipment side of things. We -- as you said, yes, we are looking at real estate as well as to how we should be positioned there. We have a number of things in motion, no news to report today on anything that is imminent, but we think we may have some activity at least on some of these by the end of the year, in which course we would note in future calls.

And then on the sort of ongoing ISG expenses that are coming through the P&L, have we reached the peak of those expenses? How long could they continue to come through the P&L? I'm just trying to think from a modeling standpoint, when do I start to see the benefits of those expenses being removed from the models coupled with some of the benefits?

Sure. I think we have reached the peak. I think in Q1 and Q2, we definitely -- we've reached the peak. We do anticipate that we will have some additional costs in Q3 and Q4 as we continue to implement. Probably at that point, I think, largely that we would expect the expenditures to be reduced or if not eliminated entirely by the end of the year. We have some longer-term things that we -- around ERP and stuff like that, that may be in future periods, but we would talk about that separately. And just kind of in the normal course of CapEx expenditures, but I think we would expect the Q3 and Q4 numbers to be significantly reduced from what we've seen in Q2. And then we would expect to be complete at that time.

And I don't want to get ahead of you here, but can you maybe help us to think about third quarter a little bit, maybe both segment revenue as compared to 2Q and segment margin as compared to 2Q? I don't want to get ahead of my skis here. Your backlog has moved a lot, but I suspect some of those projects may not necessarily be starting immediately. So can you kind of help us think about third quarter versus second quarter?

Yes. As far as modeling, you're right, we have booked a lot of big legal projects, and a lot of those projects should be really ramping up in the third quarter. And as you know, kind of seasonality-wise Q3 tends to be our best quarter from a revenue generation standpoint. It's the summer time, longer days, more time to burn cost. The same kind of things that we've talked about before. On the concrete side, we don't expect to see the continued issues from the margin erosion from these projects that were weather impacted. We got past all of that. On the Marine side, the bigger projects that we've recently won. We expect those to start ramping up, so we have a good expectations around increased utilization quarter-over-quarter. And then year-over-year, we have a softer comp due to the weather that we had last year.

I should just follow-up on that. Having said that, I mean, to your point, we don't want to get ahead -- in front of our skis either. As we kind of talked about, and this kind of goes back to your prior question as well about ISG and when we expect to see that. So just kind of going back to the remarks I made, the whole objective here is to set us on the path to consistently meet our expectations for the business. And we've talked about this previously, just to put that in perspective is that we believe that Marine business should be operating at kind of a 10% to 12% EBITDA margin basis consistently. Concrete for the 8% to 11% EBITDA margin consistently. And obviously, we think there may be periods of our performance, but our focus is around those ranges on a consistent basis. So we do have some ramp-up going on in Q3, as Robert said. We do expect year-over-year comps, obviously, to be improved, and we expect to be improved from Q2, but we don't want to get ahead of ourselves in terms of -- we are seeing improvement. Is it going to be historical from a few years ago? At this point, we're not prepared to say that. We will reiterate that we think that full year EBITDA will be in the range on an adjusted basis of how we completed 2017 in that kind of range. So we're seeing improvement. But we're sort of still saying that -- sticking with the comments we made previously about the full year 2019. And obviously, we're working diligently to realize the improvement as quickly as possible. So we'd love to be in a position of our performance, but again, we don't want to get ahead of our ski.

Thank you very much.

Yes.

Our next question is coming from Poe Fratt from NOBLE Capital Markets. Your line is now live.

Good morning. Just a follow-up on that last question about sort of EBITDA relative to 2017 level - levels. If you look at adjusted EBITDA, so far, it's a little bit over $11 million over the first half, so that implies the second half, even quarters is roughly adjusted EBITDA of $10 million per quarter. Is that consistent with your thoughts just to make sure that we're sort of all in the same page?

Yes. That's consistent with our thoughts. Again, as I said, obviously, we'll be working diligently to improve upon that. But at this point as we continue to implement ISG in the back half of the year, ramp up on the projects that we're on the same page with what you just said.

Yes. And just so that we -- we exclude the ISG costs or add them back into adjusted EBITDA, too. So -- and then when you look at -- Robert, I think you said, there was $1.7 million or roughly in an SG&A number. So if you -- of nonrecurring costs. If you take that out, the run rate for SG&A for the quarter works out to roughly 8.3% of revenues. That's below your goal of 8.5%. Is that a reasonable run rate when you exclude the ISG cost? Or is -- was there something that might have depressed the SG&A in the second quarter that's not going to be as positive in third and fourth quarters?

Yes. So the goal we laid out is when we think about this thing on an annual run rate, there's going to be periods of time where that number floats above the 8.5% target on a run rate in a steady basis. We'd like to see that number at or below. And then as we continue to implement the ISG initiative, we hope to drive that down. A couple things to know for modeling purposes, and we will have a pretty good disclosure on this in the queue that gets posted up no later than tomorrow. We did make a couple re-class adjustments from SG&A. You'll see it on the face of the financials where we've removed the amortization expense from SG&A and called it out as a separate line item. That's related to the TAS acquisition from 2015. Then we also made some changes around wood [ph] stuff, we're calling project cost. We've removed roughly $1.3 million of project management cost on the concrete side into cost of goods sold. So there's a little bit of a presentation difference, which is helping 8 [ph] that number down in the quarter. I believe that, long term, 8.5% to below 8.5% is a good target, I mean as we implement more stuff, and we get more streamlined processes, but we hope to continue to drive that down.

Great. And I would just add one thing to what Robert said, too, is that part of the rationale is that we made those changes ours just to make a more clearer presentation of our information, but also with a lot of things that we've been doing internally, and that we talked about in the remarks is getting the visibility and transparency on where our costs are, so that we've got the management team that's closest to that particular cost has got the visibility to better manage that cost. So that's part of that equation as well.

Great. And then if I can ask a couple of questions about the concrete business. Are you seeing any competition abatement? Any lessening of the competitive pressures that you saw over the last, call it, 9 months? And then low bids was actually encouraged -- was up to what you have about $55 million of low bids. And can you comment on sort of the quality or relative to big backlog that was booked over those 9 months? Is it -- have we seen better contracting so that the margins on new projects will flow through? Or are we still going to see some burn off of lower margin projects?

Yes. No, good question. So let me kind of walk through that. So I think it's that kind of the last thing first is, is that I think we are still seeing elements of margin pressure out there for certain types of projects. We do expect that -- we do think the backlog that we have been booking by the fact that the prior backlog that we've been burning off in the front half of the year was really weather impacted. So it was -- those weather impacts were depressing margins that already booked work. So just by nature of seeing better weather patterns, we would expect to see and we are seeing better margins in the backlog that's replacing the burn-off. With respect to what we're seeing out there in the marketplace, a couple comments I want to make there. It kind of goes back to what I said in the remarks about ISG. So one of the key things is there's things out there we've talked about before that we don't control. We don't control the weather pattern. The -- our competitors are going to bid irrationally. We don't control that. What we can control, though, is, what are we targeting in terms of the types of projects. So I mentioned in the remarks about improving our data analytics around our project targeting. The reason why we're doing that, and we've done that as part of our ISG is just for that reason. So that if we're seeing an uneven level of competition in certain types of work, then we can use our data to help drive us towards better project selection for either whether it's just better competitive dynamics at the bid stage or whether it's -- we perform better on certain types of projects and things like that. So that's one of the things that we've been focused on, and again, where we're implementing and would expect over time to see results there. We're also, as I mentioned in the remarks too, is we expand our targeting of structural market and our market share of structural projects in the Concrete business. By definition, those are larger projects, longer duration, it improves our competitive dynamics because it's a different set. You drop off a lot of the smaller mom-and-pop type customer competitors that we may see on some of the light commercial work. We're going to tend to not see those same people. And on the structural work, it gives us better visibility in terms of the length and duration size of those projects. So as we pivot a little bit towards using our data analytics to help drive our decision-making on project selection, project bidding, and we increased the expansion of our structural targeting of structural work, both those things are going to help impact that. And look, this has been a business that has performed consistently over the years. We think that by taking these and other steps that it will get back to that performance. And we talked about what our expectations are for that business. But if we go back historically, the Concrete business has been a good performer for us, and we think that we can get there again with the steps that we've talked about.

Great. That's helpful. If I could squeeze in a couple more. Congratulations on the South Texas Gateway award. In the press release, you talked about design work. Can you talk about the potential for that project to expand from $52 million, if there's any way to quantify that? And then secondly, you mentioned the recreational opportunities. Can you give us an idea of the total addressable market in recreational?

Yes. Well, first, on the Texas Gateway project, we are working very hard. We appreciate the confidence that they put in us in awarding us the dredging piece of that and to contract with us to a system in the design phase of that. Clearly, we are working -- we'll work diligently to assist the customer with that design. And ultimately, we hope to book that the next phase of that, the actual construction of the dock. Again, I'll kind of have the same answer that I had earlier on the other -- other project is, I don't want to quantify that just in terms of -- that's still in negotiation and workout and design. So it'd be premature to try to quantify that. We do think, again, that would be a nice project, not as large as the other project that I talked about on the prior call -- question, excuse me. But significant for us and another example of the types of projects we're seeing in downstream energy sector based off of just all of the energy being produced domestically that's flown in the Gulf Coast. So we're very pleased with that opportunity, and we'll continue to pursue that. With -- long story short, we hope to be in a period in the future where again we can announce that next phase of that is in backlog. With respect to the recreational piece, there are a number of projects that are in planning or in some cases, further along in getting into the bidding stage. The project that was mentioned earlier in the call here, down the Grand Canyon is a -- associated with the recreational business, the cruise line industry specifically. There are a number of -- as we've talked about before, bigger ships coming online that are in that marketplace in the Caribbean market, which is driving opportunities for either upgrade of existing facilities or just creation of new facility. So we're excited. We think there is a lot of potential projects that will be coming online in the next few years as a result of that - those ships driving into that market. So we are thinking very positively about bid opportunities we'll be seeing with respect to that recreational sector in the coming years.

And in different size point?

On size point, there is a number of projects. These opportunities can go anywhere from -- from $10 million to $15 million to -- on up to north of $100 million. It just depends on what the scope is, whether it's a refurb, whether it's just an extension of something or whether it's a whole new facility. So they can run the gamut. And we expect to see opportunities all throughout that range from kind of north of $10 million to $15 million to north of $100 million.

Great. Thanks for your time Mark and Robert.

You bet.

Thank you. Our next question is a follow-up from Alex Rygiel from B. Riley FBR. Your line is now live.

Thank you. Just a follow-up. If you were to raise cash from asset sales, how much would have to go towards paying down debt before you could repurchase shares?

Well, currently, the way the current structure of our credit facility is that 100% of the asset sales would go through to the term loan. So as it's structured now. And so we're below 2 times leverage ratio.

So how much would you have to pay off to get to below 2 times?

Well, if you kind of back into the numbers that I laid out today, you're looking at the $25 million to $30 million range.

Perfect. Thank you.

Thank you. We've reached end of our question-and-answer session. I'd like to turn the floor back over to management for any further closing comments.

Thanks, everybody, for joining us today. We look forward to talking to you on the next call after the Q3 earnings release.

Thank you. This does concludes today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.