Good day, ladies and gentlemen. And welcome to the Fourth Quarter 2016 Orion Group Holdings Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time [Operator Instructions]. As a reminder this call maybe recorded. I would now like to introduce your host for today's conference Mr. David Griffith, Manager of Investor Relations. Please go ahead, sir.

Thank you, Christy. Good morning everyone and welcome to Orion Group Holdings fourth quarter and full year 2016 earnings conference call and webcast. Joining me today on the call are Mark Stauffer, Orion Group Holdings President and Chief Executive Officer; Dwayne Breaux, our Executive Vice President and Chief Operating Officer; and Chris DeAlmeida, our Vice President and Chief Financial Officer. Regarding the format of the call, we have allocated about 15 minutes for prepared remarks in which Mark and Chris will highlight our results and will update our market outlook. We will then open the call for sell-side analyst questions for the remainder of the time. During the course of this conference call, we will make projections and other 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 uncertainty, including those described in our 10-K for 2015 which 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 projections or forward-looking statements, whether as a result of new development or otherwise. Also, please note that adjusted net income, adjusted earnings per share, EBITDA and EBITDA margin are non-GAAP financial measures under rules of the Security and Exchange Commission including Regulation G. Please refer to the reconciliations and definitions inclusive to the most comparable GAAP measures in reconciliation tables accompanying this earnings call. Within the press release issued this morning, March 9, 2017. The press release can be found on our new website www.oriongroupholdingsinc.com. This website will be the principle platform for investor communication going forward. 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 the investor section of our website. And with that, I would like to turn the call over to Mark Stauffer, President and Chief Executive Officer. Mark?

Thank you David and welcome everyone to our call this morning. I'd like to begin by thanking our 2500 coworkers for their hard work and commitment to our company. As I look back over the last year I am proud to see the collective efforts come together making these significant improvements in 2016 possible. I’m looking forward to further achievements together on multiple fronts in 2017. I'm very pleased with the progress we have made during 2016 which includes the following highlights. We made significant structural changes throughout the company to provide a solid platform for future success. We reported a 68% increase in year-over-year gross margin. We reported an 86% increase in year-over-year EBITDA. During 2016 we bid out approximately $2.8 billion worth of projects winning approximately. 654 million for win rate of approximately 24%. Our commercial concrete segment continued to perform excellently seeing solid gains in both top and bottom line performance. Our Dallas Fort Worth operation contributed significantly to this segments overall performance, with a 58% year-over-year revenue growth. Lastly we prepared to further develop our targeted infrastructure, industrial, and building sectors. Turning to our results overall we executed well on our projects during the fourth quarter. However during our fourth quarter results, reported results were impacted by one time charges related to the accounting treatment of a contract issue involving significant, highly unusual differing site conditions on a large multi-year dredging service project. Our ability to execute the project as originally planned was hampered when we encountered a significantly greater quantity of trash, debris, and shipped traffic delays than was anticipated by the project owner or the company when the contract was signed. We have developed and are pursuing a large equitable contract adjustment which we believe is fully supported by the contract and actual work…

Thank you Mark and thanks for joining us this morning. For the full year 2016 we reported a net loss of 3.6 billion or a $0.13 loss per diluted share. These results compared with a net loss of 8.1 million or a $0.29 loss per diluted share in the prior year period. Excluding the one-time charges Mark mentioned earlier and certain one-time tax charges net income for the full year 2016 was a profit of 5.2 million or $0.19 earnings per diluted share. Contract revenues for the full year 2016 were approximately 578 million of which approximately 50% came from heavy civil marine construction segment and approximately 50% came from the commercial concrete segment. Full year 2016 revenue from the heavy civil marine construction segment were down compared to last year due to the retrenchment of Tampa operations in 2015 and the one-time charges related to the accounting treatment of a specific contract with significantly different site conditions. Full year 2016 revenues from the commercial concrete segment increased approximately 46% from a reported 2015 revenues primarily driven by the full year impact of TAS as well as increased volume of work in the Dallas market. Within heavy civil marine construction segment approximately 46% of our full year 2016 revenues was generated from federal, state, and local government agencies while 54% was generated from the private sector. This compares to 60% of full year 2015 revenues being generated from federal, state, and local government agencies and 40% from the private sector. On the commercial concrete side of the business more than 90% of full year 2015 and 2016 revenues was generated from the private sector. As we would move forward we expect to continue to see a higher mix of private sector revenues driven by the contracts we are pursuing and…

[Operator Instructions]. Our first question is from the line Min Cho of FBR & Company. Your line is open.

Hey, good morning, couple of question for you. Hi, there. Mark could you provide an update just on Tampa, just kind of what the bid activity looks like there?

Bid activity looks real good. As Chris just said we have some of the issues with the permitting starts and stuff like that on some of the projects. But as far as bid activity, very robust, really nice backlog for that group, and fully confident that the team we have in place there is going to hit their goals and objectives for this year. And well on our way with what they have in backlog in low bid to really perform well this year.

Thanks, that's good to hear. In terms of your kind of guidance for 2017, I know you don't provide quarterly guidance but can you provide a little more direction in terms of 1Q versus kind of what we saw in the first quarter of 2016 and just any seasonality that might be different this year relative to last year?

Sure, absolutely and a good question. So, we're sitting on a record high backlog. We've also got solid bid opportunities where we're headed. Like we mentioned in the prepared remarks we have seen -- some of our customers have seen some permitting delays predominantly on marine construction project just related to some core of Engineers permitting delays. So that is moving the timing a little bit of some of the execution. So looking at it compared to 2016 I would expect that results for Q1 2017 would be either in line maybe slightly behind what we saw a year ago. And then we would continue to see outperformance as we move through the year. Keep in mind Q1 is always our weakest period, it builds into the third and fourth quarter, and of course it would be based on the timing and mix of project as far as Q3 outperforms or Q4 outperformed overall.

Okay, so you said that you expect 1Q to be a little behind last year but last year 1Q, I mean didn’t you have the Tampa project issues that were impacting margins, so are you talking only top line or you talking top line and EBITDA?

I'm actually speaking to both top line and EBITDA. Yes, we did have the Tampa stuff that impacted those in the first quarter. I think this one’s a little bit different so we're seeing some impact just from again the timing of job due to the customer permitting delays. The difference in that is those jobs don't go away, that's purely a timing impact. So we would see those, or we would start to see a couple of those permits start to come through. So as they start to come through we would then see that be of benefit to Q2 through Q4.

Okay Chris, my last question is really on the SG&A. You said that SG&A leverage -- you expect SG&A leverage going forward but just kind of flat now in 2017, so you are suggesting that as a percentage of revenue kind of 11% in 2017 and then improving after that?

Correct, yes I am. Where we'll get that leverage as you know we had to add a little bit more staff for a larger company to make sure we have the infrastructure in place going forward. Also you are probably well aware just from the accounting side of things has increased a little bit and healthcare cost have continued to increase throughout this past year. So we’re factoring all that into that 11% but as we go forward we think we have a staff in a great place from the overhead side. So we expect to start to see leverage of that as we move down the road.

Okay, great. Well congratulations on the strong backlog.

Thank you Min.

Thank you, our next question is from Jon Tanwanteng of CJS Securities. Your line is open.

Good morning gentlemen. Thanks for taking my questions. First off the adjustments you gave in Q4 for the project that had the different site conditions, have you actually received payment for the work performed and simply can't recognize it in Q4 was it is something still actually need to be hammered out with the customer and then you receive it, then you recognize it and do you expect that to reverse in Q1 or is there more of a timing delay for that?

Well, [indiscernible]. I think -- I don’t expect it in Q1, I think it will go beyond that. We have been paid for base contract amount as we performed the work and build and then paid as we’ve done along. Those items that we're talking about related different sites. We're still in the process of working that out. Once we get that resolved whether or not -- then it just would become a receivable. But once we get that resolved with our customer we will be able to book whatever that resolution is. And then you know bill and get payment as we normally would. So, we're focused on getting that resolved with them. You know as I said in my remarks and in the release we performed the job, they have a completed project. We did the work, we expect to be fairly compensated for that, and we're working to get that resolved as soon as possible.

Okay, great. And then second, can you just clarify the EBITDA outlook just on the 40% growth that you indicated in the press release and your comments before. Is that on the 38 million reported in the results or is there an adjusted number, just trying to figure out what you're actually talking about there?

So good point, that would be on the reported numbers so that would be on 38.3…

Okay, so if I do the math that's about 53 million. You know how do you reconcile that with the I guess the 70 million target that you have put out in the past, what's the difference there, is it name of the permitting that you've been talking about or is this something else that we should be thinking about?

Well, it is a couple different things. It's a little bit of change in strategy as well. What we have liked to do is to be a little conservative here and talk about the minimum that we would expect and then talk about the things that are going to help us outperform that. We've laid out five or six things that we believe will help us outperform. So the goal here is to say hey, we still believe that 70 million, we still believe that is achievable but if we look at the permitting delays, we look at the loss that we are seeing right now we're very comfortable that a minimum growth level would be the 40%. Then if the permitting delays actually pick -- stop and we start seeing the jobs come out, that's going to help us overachieve that particularly growth in the Dallas and Central Texas markets that we're targeting particularly on the concrete side. That's going to help us over accelerate. Again our Tampa operations are coming back up with full swing. We're bidding a full amount of work to the extent that outperforms. Again that would give us some outperformance to that number. And then finally just looking at the U.S. infrastructure invest method, we've all heard about. We've heard the government talking about it. So the extent that we see, we’re really not factoring much of that in today to the extent we see that. That again could help us outperform. So we want to spend a minimum level and talk about the things that help us outperform and get to potentially that $70 million.

Okay, great, that's really helpful. And then just with the I guess the hit to the EBITDA, do you anticipate any covenant issues going forward especially if the payment doesn't come in Q1 or Q2?

No, as we look at it today we think we've got all the costs associated with that job in particular done. It is in the results that we've seen that did impact Q4 and keep an eye from an accounting standpoint, the way the accounting rules work it will limit how much of that claim you would recognize before it is finalized and settled with the customer. So to that extent we don't think that's going to have any impact in the covenant going forward. We feel good about where we stand with the covenants. We do have a couple more steps down here in Q1 and Q2 of 2017 but we feel comfortable with those in the market we see in front of us.

Okay, great. Thanks a lot guys.

Thank you. Our next question is from Matt Duncan of Stephens. Your line is open.

Hey, good morning guys. So first question just on the job where you had the overrun, it sounds like with the site condition changing on you how big of a claim are we talking about here? And then Mark any help you can give us on maybe what the timing might look like, because it is probably not first quarter but it also sounds like you think it does happen this year, just give us a little more detail about that if you can how big would it be, I'm assuming it would flow through is revenue and then pure profit assuming it happens and how much would it add therefore to the EBITDA for the year that you could do I am assuming it's not in the 54 million number?

Mark, I will get this question. What we've said publicly is just with what we've said in the release and in the remarks today, we provided the impact that it had on Q4. We have not disclosed how large it is publicly. I think it’s prudent for us not to do so. We want to work this out with our customer and obviously we think we're entitled to fair compensation for the work we've performed so it is -- this is not necessarily unusual from the standpoint of having a differing site conditions. It's pretty commonplace in our business. It is unusual that we had sort of the size and the scope that we did on this project and particularly towards the tail end of the project that impacted Q4. But we haven't said publicly how large that is. It is significant. We are working diligently to try to resolve this with our customer we're hopeful that that will happen in the next couple of quarters but of course there's no guarantee on that. We are hoping to get this resolved and move on down the road. We've enjoyed an excellent relationship with the customer in question. Have done multiple jobs for him. So we're very hopeful to get this resolved quickly, as quickly as possible. But we're shooting for that over the -- would expect that if we can get this resolved the way we think it should be, be over the next couple of quarters or so, maybe before that or within that but, we'll have to see how it plays out.

And Matt as far as the 2017 impact, we factor already and factored into our result the portion of that claims to the extent that it exceeds us with that which we believe is relatively small. Then it would have a positive impact, there are no more costs associated with the jobs, you’re absolutely right that would be a revenue item and then it be pure gross profit.

Well, let me maybe do the algebra for you then, the net income impact that you put in the press release was 6.954 million. I'm assuming you have fully taxed that so we're talking about $11.5 million. Am I doing my algebra correctly, is that about the right number?

Well again your math is your math, we're not going to comment publicly on how large our request is. For just obvious reasons we think but I'm not going to challenge your math.

And Chris you said you have included a portion of that in the guide?

Well we've included a portion of that in our financial results for 2016.

Okay, got you. So there's still some of that, I am with you, okay. That helps. In the commercial concrete business you guys had a very strong quarter I would say unseasonably so because typically you do get weather impacts in a fourth quarter that I would think would generally make fourth quarter revenue below third quarter, that's not what we experienced this time. Can you talk a little bit about what drove the sequential growth there when normally you wouldn't see that, was there some weather benefit that was just one particular large project or what's going on in that business?

Well, as we talked about and Chris has touched on this across just from a global perspective. It varies sometimes what you see in weather or just performance in Q3 and Q4. Sometimes Q3 is the outperformed quarter, sometimes Q4. We just -- we had some good windows. The guys did an excellent job executing on work. We've seen obviously -- we touched on a couple of different times in the remarks and the release about increasing our market presence and share in the Dallas, Fort Worth market. So that played into that as well but some of it just kind of hitting good weather windows and taking advantage of that and executing very well on the work. And so I'm very pleased with that but I think some of that is just as we sometimes refer to it of timing and mix. And I think that's what you can talk and update. Overall I'm very pleased with their performance and I think it's just again good windows that we had in the quarter and excellent execution by the team to TAS.

Alright that helps and two last questions from me just on 2017. First of all free cash flow expectation Chris, if you could give us that and then it sounds like that EBITDA guide is kind of a minimum. It's an at least guide. What would the revenue amount be that you would have, is that roughly 54 million in EBITDA, what kind of revenue are we contemplating there, is kind of an at least revenue number?

Yeah, I mean overall Matt we have provided what we think is going to be that minimum EBITDA guidance and it would grow from there. At this time we really don't want to put a stake in the ground either on the free cash flow side or the revenue side. So I'll let you work the numbers from that perspective. Like we said we anticipate the fee growth as we go into this next year on a free cash flow basis clearly from what we're talking about, we’d expect to see a nice positive free cash flow.

Alright, I appreciate it, thanks.

You bet Matt.

Thank you. [Operator Instructions]. Our next question is from the line of Bobby Burleson of Canaccord. Your line is open.

Hey, good morning. So it sounds like that 70 million EBITDA is still in the cards potentially for 2017?

It is potentially in the cards. I think we've got to have a lot of things going right, so that's why we wanted to kind of readjust and say here's a minimum level and here's all the things that could potentially get us there.

Okay and then in terms of what you're seeing on the commercial concrete side, the DFW area was up quite a bit. Do you expect growth rates kind of back off from levels that you saw on 2016 in that market?

Well, we think again as a reminder that was a smaller market for us when we acquired TAS. We have had a much larger presence in Houston, so we always expected that, that would be a growth area for us. We expect growth up there, I don't know if it'll be as much as it was this past year, but keep in mind we were starting from a lower number in 2015 so that's we saw significant growth there. We certainly are excited about that market and are working to kind of take advantage of that market. Obviously we want to be smart about how we do that, we don't want growth for growth sake. We want profitable growth. So very possible we will see, our expectation is to see growth there. Not necessarily at the same level we saw this year but we'll see how that plays out.

Okay and kind of how our bid margins evolving in the Houston area. I know that's a year we're looking for maybe things to improve there. Is there just a lag kind of for that idiosyncratic reasons, a lag for that region versus Dallas, Fort Worth and is it -- or is there some sort of permanent kind of structural thing happening to depress margins there?

I'm assuming you're talking commercial concrete in Houston. Yeah, we are and I think it's just Houston. I think it is, I don't think there's anything structural or just in the paradigm shift or anything like that. I think it's just kind of as we were we were in last year with some of the energy exposures that Houston has, did have an impact. I mean Houston is much more diversified economically than in times past but it still does have some exposure on the energy side. So there were some impact there. I think some of it is just in my view a little bit of a shift in some way and what some of the work opportunities are out there. A little bit of that sort of market nervousness about what was coming and sort of a little bit of uncertainty driven about some of the energy impact. But I think by and large we still expect opportunities, we're still seeing opportunities. It's a little bit tighter or it has tightened as I said in terms of bid margins for Houston. But we think that is temporary. I think that, that we expect long-term, Houston is very bullish on the Texas economy, Houston, Dallas, Fort Worth in particular. This is going to be a significant, we're going to see a significant population increases which drives this market. So whatever tightening we're seeing at some point that will loosen up. I mean I don't know when that will be but I think there's certainly things out there on the horizon that could loosen that up from a macro level. And again we remain very excited about that segment and our prospects going forward.

Okay, great. And then just switching gears a little bit heavy civil marine. Your commentary on the outlook from the public side sounded a little bit more optimistic in terms of better funding from some of these federal items like Fast Act, the Restore Act, etc. And now it sounds kind of like you're monitoring it. So I heard one person say the Fast Act is now become the Slow Act. Kind of what are you guys thinking in terms of the federal contribution is a better outlook for funding and then also what are you factoring in terms of maybe a better outlook from a funding perspective from state and local on that business?

Sure, good question. I think from our perspective keep in mind we draw from a number of different funding sources at the government level, at all levels of government. So what we look to and when we look for opportunities is we'd like to see a lot of opportunities from the different funding sources and different government agencies whether there's different federal agencies or whatever. So when we look at our target universe of projects and stuff what we're saying is we are seeing better opportunities that are being driven by the Fast Act. We do expect to continue to see federal agencies led projects but we are starting to see the Restore Act work that we talked about for a long time. Those projects are coming into the bid hopper but, what we are saying now is naturally there's a change in administrations. I think that's just the sort of a natural what's going to happen here type thing in terms of funding. You know we haven’t as we've commented on many times in our previous calls. You know we haven't seen normal budgeting process for a number of years and we've operated under continuous illusions. So we don't really we're kind of monitoring that as we said to see what's going to happen with the funding and budgeting process and with the new administration and the new Congress. Obviously they've got a lot on their plate with some things so we'll see how that goes forward and if we're going to have continued dysfunction like we've had in the past or we're going to have some breaking of the logjams, I think that we are kind of watching that to see what happens. At the end of the day we do expect to see -- continue to see there is still a need for these agencies to let work at the federal state and local level. They're all driven by different funding mechanisms at the state level, effectively the Fast Act is in place but obviously there's some funding processes that have to go on there. At the local level a lot of that is done with local financing but does have some federal piece in it. So, we're monitoring that. At the end of the day we are seeing projects from all these various sources. I think what we comment on is -- commented on is more around permitting stuff which really has to do with the regulatory bureaucracy rather than funding stuff but we're going to continue to monitor that. Obviously we've in the last couple of years with our diversification in commercial concrete we've lessened our reliance on -- from a consolidated perspective on the government sector. But we still have exposure to that on the marine side in particular and so we'll continue to monitor this and see how it impacts us but we are expecting work to come out. We're bidding on work as we speak in these areas

And then overall is it still fair to say that with the material closure to the Tampa projects that you’ve eliminated a lot of that lingering execution risk. And this latest event was more kind of normal course of business type permitting delays?

Very, very, very good way to put it. Yes, this -- the issues we talked about on the contract for Q4 is completely unrelated. It's simply a different site condition, a pretty big one but it's a different site condition where we're trying to work out with our customer fair compensation for it. It was a bonded project so we were obligated to continue on with the work even though we're going to have to resolve what our fair compensation on that is. But it was a bonded project that we completed and that was the best course of action for us to do. But, back to your other point yeah, the Tampa project is behind us. When I spoke about the structural changes and we refer that to there is a lot of things that we've done. One of the most visible ones is the changes that we made in management in that office and you gain full confidence. We've got the right team there. We are expecting much improved performance out of that group, significant improvement in top line and of course bottom line to where we are executing profitable work out of that group.

Okay and are there any capacity constraints on the commercial contract segment. I mean I know you talked about kind of going through a low base in Dallas, Fort Worth but given the growth rates you're seeing, when do you kind of run into a ceiling there?

Well, again we want to be smart about how we do it and we don't want to growth for growth sake, we want to do it profitably. But in that business again it's really isn’t in all of our -- in both of our segments. It really comes down to the people. The people are key, they are key in both segments. The people you know are the key to our success in the commercial concrete business, so we want to make sure that we have the right folks executing the work and want to make sure that we're smart about that. And so we're -- we expect to take advantage of the growth opportunities there but we're going to be making sure that we do that smartly and having the right people. On our team executing our work is kind of the key to that.

Okay, great. Thank you.

Thank you and that concludes our Q&A session for today. I’d like to turn the call back over to Mr. Mark Stauffer for any further remarks.

Thank you. Thanks for joining us today on the call; we look forward to talking to you soon on our next earnings call.