Orion Group Holdings, Inc. (ORN) Earnings Call Transcript & Summary

Good morning, and welcome to the 2020 Annual Meeting of Stockholders of Orion Group Holdings, Inc. I'm Richard Daerr, Chairman of the Board of Directors, and I will be presiding over this meeting. At this time, I call the meeting to order. If you have not yet viewed copies of the agenda or the rules of conduct, please refer to the documents attached to the virtual stockholder meeting. Present today, thanks to the advantages of virtual technology, are the 6 other directors: Thomas Amonett; Michael Caliel; Margaret Foran; Austin Shanfelter; Mary Sullivan; and Mark Stauffer, who is also the company's President and Chief Executive Officer. Also present today are Robert Tabb, the company's Vice President, Chief Financial Officer and Treasurer; and Pete Buchler, the company's Executive Vice President, General Counsel, Chief Administrative Officer and Secretary. Mr. Buchler will act as secretary and timekeeper of the meeting. The Board of Directors has appointed Beth VanDerbeck of Broadridge to act as inspector of elections. Beth VanDerbeck has previously taken the oath as the inspector of elections. Also in attendance is Jason Rash, Partner; and Jay Calimag, Senior Manager, both of whom are representing KPMG LLP, the company's registered independent outside auditors. During the question-and-answer period at the end of the meeting, Mr. Rash and Mr. Calimag will be available to answer questions concerning the company's financial conditions. Ms. VanDerbeck and Mr. Rash and Calimag are also participating via virtual technology. You all have available to you a copy of the rules of conduct for this meeting. And in order to conduct an orderly meeting, we ask that participants follow these rules. As stated in the rules of conduct, stockholders will not be able to address the meeting until they're recognized. Should you desire to ask a question or speak during the meeting, please do so by posting your question using your online screen. After being recognized, please identify yourself and your status as a stockholder or a proxyholder and ask your question. Please limit remarks as stated in the rules of conduct. As noted in the notice and proxy statement given to you, the record date for voting at this meeting was the close of business on March 27, 2020. A list of registered stockholders on the record date can be made available for your review. The secretary has delivered an affidavit of mailing, showing the notice of this meeting was given and a copy of both the notice and the affidavit will be incorporated into the minutes. The secretary will now report on the presence of a quorum at this meeting.

The stockholder list shows that holders of 29,283,569 shares of common stock of the company are entitled to vote at this meeting. We are informed by the inspector of elections that there are, represented online and in -- online in-person or by proxy, 24,108,238 shares of common stock or approximately 82.3% of the shares entitled to vote at this meeting.

Based upon the percentage of the total shares of the company held by holders of record now present online at the meeting, either in person or by proxy, a quorum is present. This meeting is now duly convened for the purpose of transacting business properly before it. The next order of business is a description of matters properly brought before this meeting. There have been no stockholder proposals, timely or otherwise, received for consideration at this meeting. Properly submitted proposals are listed on the agenda and in the proxy materials previously distributed to you. The first item of business today is the election of 3 Class I directors, each to serve a 3-year term expiring at the 2023 Annual Meeting. The directors elected today will hold office until the applicable date of the Annual Meeting of Stockholders and until a successor is duly elected and qualified. The nominees are listed in your proxy materials and on the agenda. The Board of Directors of the company recommends the election of Mr. Amonett, Ms. Foran and Mr. Stauffer, each for election as a Class I director. There are no other nominees recommended by the Board of Directors of the company. Accordingly, all nominations are closed. Are there any questions concerning this proposal?

There are no questions at this time.

Since there's no questions, I make a motion to elect Thomas Amonett, Margaret Foran and Mark Stauffer as Class I directors to serve until the 2023 Annual Meeting or until the individual's earlier death, resignation or removal. Is there a second?

Yes. I second the motion.

Voting will commence after all proposals have been presented, and we'll move on to Proposal #2. The second item of business today is the approval of the compensation of our Chief Executive Officer and the 2 other named executive officers as disclosed in this year's proxy statement. This proposal, known as the say-on-pay proposal, is required under Section 14A of the Securities Exchange Act of 1934 as amended and gives the company's stockholders the opportunity on an advisory basis to approve or not approve the compensation of named executive officers through the resolution found in your proxy materials. The Board of Directors of the company recommends that you vote for the approval of the executive compensation proposal. Are there any questions?

There are no questions at this time.

There being no questions, I make a motion to approve the compensation of our Chief Executive Officer and the 2 other named executive officers. Do I have a second?

I second the motion.

Voting will commence after all proposals have been presented. And we'll now move on to Proposal #3. And this third item of business today is to approve the appointment of KPMG LLP, an independent registered public accounting firm, as the company's outside independent auditors for 2020. And the Board of Directors recommends that you vote for this proposal. Does anyone have any questions regarding this proposal?

There are no questions at this time.

Since there are no further questions, I make a motion to approve the appointment of KPMG LLP as the company's independent registered public accounting firm for 2020. Is there a second?

I second the motion.

Because no further business is on the agenda to come before this meeting, we'll now move on to voting. If you've already provided your proxy card, your shares will be voted accordingly. If you'll be voting today, the online polls will be opened momentarily. Voting will proceed after I declare that the polls are open. You will be given time to complete and submit your online ballots to the inspector of elections. The time now is 10:09 a.m. Central Daylight Time, and I declare the polls now open for each matter to be voted on today, May 21, 2020. [Voting]

And while you're completing your votes, I will ask Mark Stauffer, President and CEO of the company, to make a brief report to you about the company. But please reserve your questions and comments for the question-and-answer period following the results of voting.

Thank you, Richard, and thanks for joining us this morning. I'll now go through the presentation being shown on your screen. I'll move to Slide 3. Our core values, which are quality, safety and production, all on the foundation of integrity, remain consistent with our strategy. These values are even more crucial in today's environment. Moving to Slide 4. We are a specialty construction company servicing the infrastructure, industrial and building sectors through our Marine and Concrete segments. At the end of Q1 2020, 54% of our trailing 12-month revenue came from the Marine segment and 46% came from the Concrete segment. Our backlog as of the end of Q1 2020 was 59% in the Marine segment and 41% in the Concrete segment. We have diversed end markets with favorable long-term trends. Over the last year, we have been focused on process improvements through our invest, scale and grow, or ISG, initiative to drive sustainable, profitable performance. Both our segments have favorable long-term demand drivers. Slide 7 highlights the wide array of our capabilities in our Marine segment to service our customers' needs. Additionally, on Slide 8, we have a fleet of Marine and specialized equipment to meet the service requirements of our customers. Our Concrete business is one of the largest Texas-based commercial concrete construction company. Demand in this business is driven by population growth, and the outlook for Texas population growth remains positive. We service our customers' needs across the light commercial, structural and industrial markets. Our Marine segment's customer base covers government agencies at all levels as well as the private sectors. Our Concrete segment services general contractors in the private sector and the educational space. In 2019, our backlog grew 30% from the prior year-end. At the end of Q1 2020, our backlog was up 6% over year-end 2019. The industrial space represents an opportunity for Orion to expand its addressable market, utilizing the skill sets and customer base of our Marine and Concrete businesses. As I mentioned earlier, over the last year, we utilized our ISG initiative to strengthen our processes across labor management, equipment management, project execution and corporate processes. Our 2019 revenue was up 36% over 2018, and our adjusted EBITDA improved by 53%, significant progress for our company. Our recently reported Q1 2020 results showed continued improvement in our operating income and adjusted EBITDA. At the end of Q1 2020, we have solid -- had a solid liquidity position and bonding capacity to support our operations and our project pursuit. This concludes our presentation. And again, we want to thank you for joining us this morning.

Thank you, Mark. If you have not already done so, please submit your ballot online to the inspector of elections. I declare the polls now closed at 10:14 a.m. Central Daylight Time today, May 21, 2020, and ask the inspector of election to collect and tabulate the ballots. Has the inspector of elections collected the ballots?

Yes.

Will the secretary of the meeting, please report the results of voting.

The inspector of elections has informed us that the ballots have been collected. I will now announce the preliminary results of the voting with the official results to be reported in the company's quarterly report on Form 10-Q for the fiscal quarter ending June 30, 2020. With regard to Proposal 1, the preliminary voting shows that 16,205,605 shares of common stock or approximately 88.2% were voted in favor of Thomas N. Amonett being elected to serve on the Board of Directors for a 3-year term or until his earlier death, resignation or removal; and 17,725,556 shares of common stock or approximately 96.5% were voted in favor of Margaret M. Foran being elected to serve on the Board of Directors for a 3-year term or until her earlier death, resignation or removal; and 16,432,516 shares of common stock or approximately 94.6% were voted in favor of Mark R. Stauffer being elected to serve on the Board of Directors for a 3-year term or until his earlier death, resignation or removal. With regard to Proposal #2, the preliminary voting shows that 17,820,686 shares of common stock or approximately 97% were voted in favor of the approval of compensation for the 3 named executive officers. With regard to Proposal 3, the preliminary voting shows that 23,918,053 shares of common stock or approximately 99.8% were voted in favor of the appointment of KPMG LLP as the company's independent auditors for 2020.

Thank you, Pete. In view of the report of the inspector of elections, I declare that Thomas Amonett, Margaret Foran and Mark Stauffer have been elected to serve on the Board of Directors, each for a 3-year term and -- or until the individual's earlier death, resignation or removal. And I declare that compensation for the 3 named executive officers has been approved. And I also declare that the ratification of KPMG LLP's appointment as the company's independent auditors for 2020 has been approved. If there's no further official business come before this meeting, I make a motion for adjournment. Is there a second?

I second.

You've heard the motion to adjourn the meeting. All those in favor, say aye. [Voting]

Any opposed? No. [Voting]

The motion is carried. I declare the meeting to be officially adjourned at 10:23 a.m. Central Daylight Time today, May 21, 2020. We'll now proceed with any post-meeting -- with a post-meeting question-and-answer session. I'll now open the floor to questions. Please remember to follow the rules of conduct, especially regarding the time limit. If you'd like to be recognized, please post your questions or statements using your online screen.

There are no questions at this time.

Our program for the day has concluded. Thank you all for attending today's meeting and for your continued support of the company. We look forward to seeing you again next year. Thank you all.