Good day, and welcome to the Orion Group Holdings Second Quarter of 2024 Conference Call. [Operator Instructions] Please also note that this call is being recorded today. I would now like to turn the call over to Margaret Boyce of Investor Relations. Please go ahead.

Thank you, Joe, and thank you all for joining us today to discuss Orion Group Holdings' second quarter 2024 financial results. We issued our earnings release after market last night. It's available in the Investor Relations section of our website at oriongroupholdingsinc.com. I'm here today with Travis Boone, Chief Executive Officer of Orion; and Scott Thanisch, Chief Financial Officer. On today's call, management will provide prepared remarks and then we'll open up the call for your questions. 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, intend, believe, expect, anticipate or other comparable words and phrases. Statements that are not historical facts are forward-looking statements. Our actual financial condition and results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of the factors that could cause our results to differ materially from these forward-looking statements are contained in our SEC filings, including our reports on Form 10-Q and 10-K. With that, I'd now like to turn the call over to Travis. Travis, please go ahead.

Thank you, Margaret. And good morning, everyone, and thank you for joining our second quarter 2024 conference call. I'll start with an overview of our second quarter results, recent wins and a market update, and then I'll turn it over to Scott to cover our financial results. In the second quarter, we generated revenue of $192 million and adjusted EBITDA of $5.5 million. As we discussed over the past two quarters, we anticipated a slower ramp-up with two large projects over the first half of the year. We don't like surprises and recognize that we fell short of consensus. We have been transparent about what we were seeing ahead. There's nothing more important to me than doing what we say we will do. This is a short-term challenge. We have an incredibly talented team and a strong foundation with a huge market opportunity ahead. While we had some logistical setbacks late in the quarter, our Grand Bahama Shipyard Dry Dock project is now back on track, and our teams on the Pearl Harbor project are working double time to get back on schedule. In construction, work delays beyond our control are not uncommon and can sometimes cause our results to vary from quarter-to-quarter. While the total value of the contracts remain unchanged, revenue recognition will shift. While these delays are not expected to have any impact on the critical completion of these large projects, they will affect our full year 2024 financial results. For this reason, we are lowering our annual guidance to a revenue range of $850 million to $900 million and an adjusted EBITDA range of $40 million to $45 million. We are still on target to deliver a very strong second half on a comparable basis. More importantly, our long-term outlook remains very strong. We are no…

Thanks, Travis. In our second quarter, we generated revenue of $192.2 million, up 5% over last year. As Travis mentioned, projects that were delayed in the first half are back on track, and we expect revenue to ramp in the second half of the year. Similar to last quarter, the mix of revenue continued to shift. Marine revenue was up 30%, while Concrete revenue was down 25%. This change in mix reflects our focus on Marine segment growth opportunities as well as the disciplined bidding standards we adopted to win quality work at attractive margins in our Concrete segment. Second quarter gross profit margin increased to $18.3 million or 9.5% of revenue, up from 13.8% -- $13.8 million or 7.6% of revenue in the second quarter of 2023. Both segments increased both gross margin dollars and gross margin percentage over the prior year. The 190 basis point increase in consolidated gross margin was primarily driven by improved pricing of high-quality projects and improved execution in both segments. SG&A expenses were $21.1 million, up from $18.1 million in the second quarter of 2023. As a percentage of total contract revenues, SG&A expenses increased to 10.9% from 10%. The increase in SG&A dollars and percentage of revenue reflected an increase in compensation expense, business development spending and legal cost. Over the next few months, we will be rolling out new IT tools and processes for our operations and our back office. These tools will share information and provide insight to the progress of our projects, improving our ability to effectively manage these projects on the ground. We are also migrating our business segments to the same financial platform, delivering efficiencies and greatly improving our line of sight across the entire business. Turning to profitability, we reported an adjusted net loss of $5.2…

[Operator Instructions] And our first question here will come from Aaron Spychalla with Craig-Hallum. Please go ahead with your question.

Yes. Good morning. Travis and Scott, Thanks for taking the questions. Maybe first for me on the two large projects, can you just give a little bit more detail on the logistical setbacks at Grand Bahama and some of the issues in Hawaii that you're working to get back on schedule. Just confidence there. And it sounds like really not any changes to overall profitability on the projects per se, just more timing where you can still make that up?

Sure. Thanks, Aaron. Yes. So I'll start with Grand Bahama shipyard project. That one, we did have a delay with one of our subcontractors getting on site. Fortunately, it was a critical path work. They did get on site in the -- late in the second quarter and got their work finished in early July. So we were able to catch up there without impacting the overall projects, just a bit of a delay in some of the revenue. And then on the Hawaii project, we talked about a few of these before, but we had some issues early in the year with the Panama Canal and delays getting material deliveries through there from -- with our piles that are coming from Houston and going to Hawaii. And then we've had some other hiccups, if you will, related to some work that needed to be done before we did our work, that wasn't completed on time. And so we were in a bit of a waiting scenario, waiting to be able to get our work done. So in both cases, it was issues out of our control. And we've done everything we can to catch up on the Hawaii project, and we'll continue to push forward on that one and feel good about where we're going to be able to finish for the rest of the year.

All right. Thanks for that. And then maybe second, just on the Navy opportunity, saw the $15 billion RFP that came out. Can you just talk about the process and time line there? And then just broadly, the overall opportunity with the Navy in the coming years? Is there still opportunities additional that are outside of that RFP for you as well?

Definitely, that was the -- that RFP that came out was the PDI MACC, which stands for Multiple Award Construction Contracts. It's a $15 billion contract, they'll select three contractors for the work there. Timing is, we'll be working on the proposal here for several months. I think they're anticipating selection late this year or early next year. And basically, that's one of multiple MACC contracts and other contracting mechanisms the Navy is using for the billions of dollars that they're going to be spending in the Pacific. So that's just one of multiple different contracts that are -- that we've either already pursued or will be pursuing in the coming months. So there's quite a few of those out there like that.

All right. And then just maybe last one. You mentioned a $20 million dredging project for the Army Corps, are you starting to see that market come back a little bit? And then just maybe talk about how you're managing your equipment fleet there given market dynamics?

Yes. We're still seeing that market disrupted. It's not -- still not returning to what was the norm a couple of years ago still been fairly slow with new projects coming to bid. So it's continued to be a challenge for us. Fortunately, we've been able to keep our dredges busy on doing some private work and a few other contracts that we won earlier in the year and last year with the core. So we'll obviously continue to pursue those projects when they do come out. And at some point, it will get back to normal because it's maintenance dredging that has to happen. And so there's -- that work never ends. It's an ongoing process to maintain the shipping channels and the intercoastal waterways.

Thanks for taking the questions. I'll hop back in queue.

Thanks, Aaron.

And our next question will come from Julio Romero with Sidoti & Company. Please go ahead with your question.

Thanks. Hi, good morning. Maybe to start on the guidance range, still implies even at the low end of the sales range, very strong year-over-year growth in the third and fourth quarters. Can you maybe speak to the confidence in hitting the lower end of your guidance -- of your sales guidance? And then secondly, the kind of the -- if you could help us out with the cadence of sales expected for the third and fourth quarters?

Sure. So we do feel really good about the second half of the year. There's a large amount of work happening in our Atlantic division in Florida in the Caribbean, that's really cranked up in the last half of the year. And then obviously, we've got the Hawaii project that's gaining momentum, and we expect strong performance there for the rest of the year. Additionally, we got multiple opportunities that we're continuing to pursue throughout our operating areas in both concrete and marine. So we're feeling good about the second half of the year and...

Yes. And when it comes to how it kind of develops out, the second quarter, you'll see a pretty substantial increase over the -- I'm sorry, the third quarter, you'll see a pretty substantial increase over the second quarter, and then it will kind of hang at that pace in the fourth quarter. So we expect it to develop -- it will increase a little bit as we go through the year, but the big jump is in the third quarter.

Okay. Thanks. That's very helpful there. And then how does the guidance change on the sales and EBITDA lines translate to the EPS guidance on both GAAP and adjusted?

How does the guidance change on the EBITDA line? In terms of dropping it $5 million, recognizing a little bit that there's the impact of what we've seen in the second quarter, we think that we can offset a lot of that as we continue to improve the performance of those delayed projects. So as we think about the full year EBITDA range, we feel pretty confident about where you've cited at the new level.

Got you. Sorry, just to clarify, I mean, how does that translate to the EPS guidance that you had from GAAP earnings per share and adjusted earnings per share?

Sorry, I misunderstood you. Yes, I believe there's a reconciliation in the press release that gives you kind of the walk down from the various lines down to EPS. So that should give you the components.

And that's -- I'm sorry, that's for the guidance.

Yes. There's a reconciliation of the guidance range in the press release.

Okay. I'll take another look, I guess afterwards for that. And just last one for me would be, you talked about the opportunity pipeline now standing at $14 billion and then how that sets you up for 2025. Can you maybe expand on that a little bit? And how does that opportunity pipeline kind of sets you up for order growth over the next two quarters? And then how would you have us think about the sales growth in '25? I know it's early stage, but any thoughts there?

Sure. You may remember on our last call, we talked about our pipeline being around $11 billion -- just over $11 billion. It's increased $3 billion since our last quarterly call. So it's definitely -- and it's increased multiple millions over the past year, which indicates more and more opportunities out there for us to pursue. And again, it's a constrained market in the marine space. And so we feel really good about the number of opportunities that are out there. And that pipeline is primarily marine business just because our concrete work is a shorter visibility to that. So the majority of that pipeline is concrete project -- or is marine projects, sorry.

Okay. Great. I'll pass it along. Thanks so much.

Thanks Julio.

And our next question will come from Alex Rygiel with B. Riley Securities. Please go ahead.

Hi. Good morning. Travis and Scott, this is Min for Alex. Just couple of questions. So you did talk about the opportunity pipeline growing. Can you talk a little bit about what the kind of bulk of that increase is from? Is it for more federal funding, just kind of new geographies? Just any details there.

It's not really new geographies, and we've stayed pretty consistent with the geographies that we work in. And so it's not necessarily increasing geographies, it's more increasing opportunities with clients. Yes, a lot of it is federally funded or federal projects, whether it's for ports or DOTs or for DoD clients like the Navy and Army Corps of Engineers. There's quite a few opportunities that are showing up on a regular basis for us.

Okay, excellent. You mentioned that you've won a couple of data center projects, and they seem a little smaller in size in general. Just want to talk about margin relative to your segment margin targets. Are they at the lower end or higher end or just pretty much right within that target range?

We have minimum bid margins that we hold steady on and then different projects, there's different margins. Generally speaking, our data center projects provide good margins at the end of the job, and we've been able to perform them very well.

Okay. And then finally, you mentioned the new -- the concrete award in Florida for Costco. You also mentioned that this is just Phase I. So can you talk about what the opportunities are there with Costco and just maybe in Florida in general?

Yes, there'll be a large Phase 2 on that project as well that we're pursuing, obviously, and hope to bring in the door. But there's opportunities with quite a few different companies, Costco and others, that we did actually just win another Costco project in Texas yesterday. So we're continuing to add into the mix there, whether it's Costco or other clients that we work with on a regular basis that continue to add to our backlog.

Okay. Thank you.

Thanks Min.

[Operator Instructions] Our next question will come from David Storms of Stonegate Capital. Please go ahead.

Morning. Thank you for taking my questions.

Morning David.

Just wanted to try to get a sense of how we should think about margins going forward. I know you mentioned a couple of times that revenues are expected to ramp through the balance of 2024 and into 2025. Should we expect there to be maybe a bit of delay in margin expansion due to the catch-up that's going to need to take place in Hawaii and the Grand Bahama?

Well, we do expect margins to continue to improve. They're not going to just immediately spring up to those target ranges that we've kind of talked about. But we do expect as the activity levels on those delayed projects come up and they're absorbing more of the cost, the indirect cost, we'll see gross margin improvements there. So we'll -- I would say that as you look forward into the projections, steady kind of progress on margins as opposed to just kind of seeing the immediate realization of the single-digit and the double-digit goals.

Understood. That's very helpful. And then just on the SG&A expenses, it sounded like a couple, a little bit of increase year-over-year, maybe onetime in nature. But Scott, I know you mentioned there's going to be maybe a little more IT spending and a little more expenses coming from business transitions. Should we expect that, call it, 11% low double-digit run rate -- low double-digit SG&A expenses as relative to revenues via fair run rate?

I think that you'll see the percentage come down as the revenue ramps more quickly. But I think that in absolute terms, you kind of consistent with what you saw in the second quarter would be a good assumption.

Sounds great. Thank you. And then just one more, due to some of the interruptions at your larger projects, do you expect any impact on, call it, the Port Everglades project or the Port of Tampa project? Is there going to be any impact to those newer projects from those interruptions do you think?

No, we don't foresee anything, Dave. Those projects are starting off well and seem to be on track. I don't anticipate anything on -- coming up on those that cause any issues. I guess I'll add to that and say it is construction. There are a lot of variables in the field and -- but we don't anticipate anything.

Understood. Thank you very much and good luck in the next quarter.

Thanks, Dave.

And this concludes our question-and-answer session. I'd like to turn the conference back over to Travis Boone for any closing remarks.

Before Travis says that, I realized that in our press release, the EPS is not listed there, just the EBITDA. So the EPS range that we're expecting is adjusted EPS of $0.07 to $0.20 for 2024. Sorry, go ahead, Travis.

Thanks, Scott. Thank you, everyone, for joining today. We appreciate your time. In closing, I just want to thank you -- thank all of our employees who are working really hard in our business every day to work safely and to work profitably and bring the best they can to work every day. Also, I want to thank our shareholders for their continued confidence in us, and I look forward to our continued growth in the second half of the year and going forward. Thanks, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.