Orion (ORN) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues for Q3 2020 were $189.4 million, down from $199.5 million in Q3 2019, primarily due to tropical weather impacting production in the concrete segment [16] - Gross profit for Q3 2020 was $22.5 million (11.9% margin), compared to $28.9 million (10.5% margin) in the same period last year, with a year-over-year margin increase driven by a 200 basis point improvement in project margins [16][20] - Adjusted net income for Q3 2020 was $7.1 million ($0.23 per share), compared to $4 million ($0.14 per share) in Q3 2019 [20] - Adjusted EBITDA for Q3 2020 was $17 million, representing a margin of 9%, compared to $14.9 million (7% margin) in Q3 2019 [20] Business Segment Data and Key Metrics Changes - Marine segment margins increased by 10 basis points year-over-year due to execution-related margin gains [17] - Concrete segment margins improved by 130 basis points year-over-year, also driven by execution-related margin gains [17] - The company bid on approximately $734 million worth of opportunities in Q3 2020, with a win rate of 12% and a book-to-bill ratio of 0.47 times [21] Market Data and Key Metrics Changes - As of September 30, 2020, backlog was $429 million, with $242 million in the marine segment and $187 million in the concrete segment [22] - The company has $1.1 billion worth of bids outstanding, including $108 million where it is the apparent low bidder or has been awarded contracts post-Q3 2020 [22] Company Strategy and Development Direction - The company is focusing on targeting end markets and projects that provide the most profitable opportunities moving forward, with a strong liquidity position to pursue new awards and execute existing backlog [15][24] - The ERP initiative is expected to enhance operational efficiency and scalability, with a total cost of $15 million over 18 to 24 months [25][73] - The company is targeting larger and longer-duration projects for better operational visibility and is in constant communication with private sector customers regarding projects and bid opportunities [28][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate through the pandemic, emphasizing the health and safety of employees as a top priority [13][16] - There are signs of recovery in some end markets impacted by the pandemic, and the company remains optimistic about long-term market strength [14][15] - The company expects to generate between $10 million and $12 million of adjusted EBITDA for Q4 2020, reflecting seasonality [26] Other Important Information - The company has generated over $36 million of free cash flow in the first three quarters of 2020 and ended Q3 with $2.7 million in cash and access to $58 million under revolving lines of credit [23] - The company is working on selling non-core assets, particularly surplus real estate, to enhance liquidity and drive shareholder value [24] Q&A Session Summary Question: Outlook for the marine segment and backlog decline - Management acknowledged the sequential decline in backlog but noted recent bookings and upcoming bid opportunities, particularly in the energy sector [40][42] Question: Impact of external factors on project timing - Management indicated that COVID-19 has caused delays in some projects but remains confident in future opportunities once there is more certainty regarding the pandemic [44][46] Question: Opportunities from hurricane-related work - Management stated that storms typically drive long-term project opportunities, with ongoing work related to past hurricanes expected to materialize [47] Question: Flexibility in concrete business and market conditions - Management highlighted stronger opportunities in distribution centers and structural projects, while acknowledging weaker markets impacted by the pandemic [49][50] Question: Weather impact on Q3 performance - Management quantified an $18 million revenue impact from weather on the concrete side but noted that profitability held up due to effective project execution [53][55] Question: Guidance for 2021 and EBITDA expectations - Management expressed optimism about meeting or exceeding the $50 million adjusted EBITDA range in 2021, depending on project timing and execution [57][58] Question: Update on surplus real estate sales - Management provided updates on the Tampa property and other surplus assets, indicating potential proceeds and the importance of rezoning for future sales [67][70] Question: ERP initiative benefits - Management discussed the expected benefits of the ERP initiative, including improved operational efficiency and the ability to scale the business [72][73]