Orion Marine Group, Inc. (OMGI)
Q2 2008 Earnings Call
August 7, 2008 10:00 am ET
Michael Pearson – Chief Executive Officer, President
Mark Stauffer – Executive Vice President, Chief Financial Officer
J. Cabell Acree – Vice President, General Counsel
Christopher DeAlmeida – Director, Investor Relations
Fred Buonocore – CJS Securities
Jack Kasprzak – BB&T Capital Markets
Trey Grooms – Stephens, Inc.
Mario Barraza – Kevin Dann and Partners, LLC
Alex Rygiel – Freidman, Billings, Ramsey & Co.
David Yuschak – SMH Capital
Jay Brosnahan – Westpark
Previous Statements by ORN
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Welcome to the Orion Marine Group second quarter 2008 earnings conference call. Joining me today are Mike Pearson, Orion Marine Group’s President and Chief Executive Officer; Mark Stauffer, our Executive Vice President and Chief Financial Officer and Cabell Acree, our Vice President and General Counsel.
Regarding the format of this call we have allocated about 15 minutes for prepared remarks in which Mike will give an update on Orion Marine Group, followed by Mark who will give present our second quarter results in more detail. We will then open the call up to questions for the remainder of the time.
During the course of this conference call we may make projections and other forward-looking statements regarding, among other things, our end markets, revenues, gross profits, gross margin, EBITDA, backlog, projects and negotiation of pending awards as well as our estimates and assumptions regarding our future growth, EBITDA, gross margin, administrative expenses and capital expenditures. These statements or predictions are subject to risks and uncertainties that may cause actual results to differ materially.
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 the result of new developments or otherwise.
Please refer to our earnings release issued this morning, August 7, 2008 which is available on our website for additional discussion of risk factors that could cause actual results that could cause actual results to differ materially from our current expectations.
With that I’ll turn the call over to Mike Pearson, President and CEO.
Thank you Chris. Good morning and thanks for joining us. Despite some challenges in the second quarter we did achieve good overall results and we improved our EBITDA margins over 2007’s second quarter results. We are very pleased on our performance on projects that involve bridge construction, marine docks outfall pipelines and maintenance of marine facilities during the quarter.
Additionally we continue to be pleased with the addition of Subaqueous Services and its contribution to our results.
For the quarter we reported revenue of $67.1 million. This is an increase of 30.3% year-over-year while delivering good second quarter EBITDA margins of 13.8% which were up slightly year-over-year. As we previously announced, our second quarter EBITDA was impacted by cost overruns associated with production issues that we identified on two dredging projects on the western Gulf Coast which we did complete during the second quarter.
Still, our team worked hard to overcome these challenges and continued to deliver good EBITDA margins. Overall, I feel we had a good quarter and I’m proud of our team’s efforts and focus.
Before I turn the call over to Mark to discuss the quarter’s financial results in more detail I want to spend a minute updating you on what we are seeing in the current competitive environment and our outlook for the remainder of 2008. Also, I want to say a quick word regarding the weather here in Houston earlier this week. As you know, tropical storm Edouard made landfall east of Galveston, Texas on Tuesday morning and involved winds in excess of 60 mph and heavy rain. As with any storm, we activated our hurricane plan and secured all our job sites along the upper Gulf Coast and while this storm caused a short disruption of these jobs it did not cause any major damage to the job site or our equipment.
All of our jobs are now back up and running and we do not expect this will have a material impact on our third quarter results.
Now turning to our outlook. As we have said all along we have solid end markets that are well funded. We have good drivers for continued long-term growth. As we look over the next few years we expect our end markets will continue to see robust bidding activity as port expansion continues, U.S. infrastructure is updated and the cruise industry continues to expand.
Specifically for the remainder of 2008 we expect to see continued strength in our end markets that should provide adequate revenue opportunities to meet our full year 2008 top line revenue goals and the growth was 28-32%. However, while the U.S. Army Corps of Engineers has begun releasing projects in the third quarter we believe the pace of projects involving dredging services to be released and the resulting margin pressure in the western Gulf Coast market will limit our ability to fully recover the negative margin impacts from two dredging projects I mentioned.
As a result, we now expect our full year 2008 EBITDA to be in the range of 14-16% which is lower than our initial goal of 17-19%.
Looking beyond 2008 we believe dredging projects that are being deferred today will become bid opportunities in future periods for the ongoing maintenance of the Gulf Coast infrastructure. In addition, we expect our end market strength will continue and we remain comfortable with our goal of long-term annual top line revenue growth averaging 15% while achieving average annual EBITDA margins of about 18% over the long-term.