Orion Group Holdings Inc (ORN) 2016 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q3 2016 Orion Group Holdings Inc. earnings conference call.

(Operator Instructions)

I would now like to introduce your first speaker for today, Manager of Investor Relations, Mr. David Griffith. Please go ahead, sir.

Thank you, Andrew. Good morning, everyone, and welcome to Orion Group Holdings third quarter 2016 earnings conference call and webcast. Joining me today 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've 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 analysts for 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 negotiations and pending awards, as well as our estimates and assumptions regarding future growth, administrative expenses and capital expenditures. These statements are predictions that are subject to risk and uncertainty, including those described in our 10-K for 2015, that 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 EBITDA and EBITDA margin are non-GAAP financial measures under rules of the Securities and Exchange Commission, including Regulation D.

Please refer to the reconciliations and definitions inclusive up to the most comparable GAAP measures accompanying this earnings call within the press release issued this morning, November 3, 2016. The press release can be found on our website at www.oringroupholdingsinc.com. Also, please refer to our quarterly and annual filings with the SEC, which are available on our website for additional discussion of risk factors.

And with that, I'd 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 2,400 co-workers for all their hard work and dedication. It's through the combined efforts of our entire team that we are on the road to sustain success. We experienced strong operating performance during the third quarter as a result of improved operating conditions across both segments. As anticipated, our marine construction segments have much improved EBITDA and EBITDA margin in the third quarter both sequentially and from the same period a year ago.

With the troubled Tampa projects completed, this segment was able to achieve much improved operating results with the structural changes we've made in this business, I'm confident in our ability to execute well in this segment over the long run. Our commercial concrete segment also continued to perform very well with record top line gains during August and September. Despite some tightening, Houston continued to see steady opportunities and solid project execution during the quarter.

Additionally, our Dallas operations continued to experience record growth due to high demand for our services in this market. As a result, we expect full-year 2016 Dallas revenue will increase to over 40% as compared to full year 2015. Overall, we executed well in our ongoing projects during the quarter, and saw good opportunities for future growth.

As a result, we achieved a solid book-to-bill ratio and a solid win rate. Additionally, we have a record level of low bids outstanding, totaling $171 million. I'm very pleased with the progress we've made during the third quarter and during 2016. We have made significant structural changes to provide a solid platform for continued success.

As we look ahead, we will focus on returning to peak performance and executing on our vision of being a premier specialty construction company, focused on providing solutions for our customers across the infrastructure, industrial and building sectors. In order to accomplish this, we will continue to focus on achieving solid execution in our marine construction segment while looking for opportunities to expand our commercial concrete segment.

Additionally, we will continue to look for diversification opportunities to further expand our services in order to meet our customers' needs. And additionally, we will see vertical integration opportunities that provide value to our current and future operations.

The fundamentals of our business remain strong and we continue to see solid demand for our services. Our marine construction segment continues to see solid demand to help maintain and expand the infrastructure to facilitate movement of goods and people on and over waterways.

In the private sector, we continue to see opportunities from our down-stream energy customers, as well as recreational customers for the construction, repair, dredging and improvement of terminals, docks, marinas and mooring systems. In the near-term, we expect the majority of our revenue in this segment to come from the private sector as demand for our services continues with the upgrade and expansion of facilities.

In the public sector, we continue to see demand from Federal, state and local agencies. At the Federal level, the status quo remains with finding being provided from continuing resolutions rather than appropriations. That being said, we still expect to see Federal opportunities throughout 2017. As I've stated previously, we are focused on maintaining our equipment utilization, including our dredge fleet, by targeting the right projects from our available bid opportunities.

At the state level, we continue to see good opportunities for bridge construction, and additionally, projects are beginning to come online for work related to the Restore Act, which we'll continue for the foreseeable future. Also, we see -- continue to see strong demand for improvement and a deepening and widening of ports and harbors in the Gulf Coast and along the Eastern Seaboard as a result of the recently opened Panama Canal expansion. We are working on some of these projects today and continue to see opportunities related to this expansion. As we've said before, we expect to see opportunities related to the Panama Canal expansion for years as ports execute on their expansion strategies.

In our commercial concrete segment, we continue to see solid demand for services. The Dallas market remains robust and strong demand for -- with strong demand for warehouse, distribution and office space. Several large companies have moved their headquarters into this market due to the low tax and favorable business environment. According to the Dallas Chamber of Commerce, 18 Fortune 500 companies, 12 of the Forbes Top Private Companies and nearly 40 among the Fortune 1000 called the Dallas region home.

Recently, eight major companies moved their headquarters to Dallas and two companies moved their main data centers to the area which has become the seventh largest high-tech job center in the U.S. The important thing for us and all of that is that all of this activity brings a massive amount of business and population growth, leading to the need for warehouses, distribution centers, office space, retail buildings, schools and medical facilities.

As a result, we are seeing tremendous growth in the Dallas market and expect to see continued strong growth in 2017. In Houston, we have seen some tightening in the commercial concrete construction market. Still, in 2015, nearly 3,000 people a week moved into the Greater Houston Area. This led to growth across the market resulting in the need for additional educational, retail and medical space. We continue to see good opportunities in Houston and we expect these opportunities will remain steady in 2017.

Additionally, we are seeking opportunities to grow into the Central Texas commercial concrete construction markets. While I don't have anything to announce yet, we are working on multiple strategies to expand the success of our commercial concrete construction business into other areas. Overall, we remain confident in the fundamental drivers of our business and our growth opportunities, both in our existing markets as well as expansion markets.

We are pleased with our recent project awards and believe we have ample opportunities for 2017. In closing, Orion has a long history of success. Though the past couple of years have been challenging, we have addressed those challenges head-on, made changes to improve and have set the company on the path for long-term success. With the amount of backlog and low bid work we have and the market opportunities we anticipate, I am confident we'll have solid bottom line performance in 2017.

Our underlying business fundamentals are sound and the continued opportunities at our various end markets remain robust. Our teams are focused on continuing operating improvement, selecting the right projects, executing well and achieving our goals, which will result in creating shareholder value. [Highlight 4] is a solid growth in 2017 and remain determined and focused on achieving our goal of $70 million of EBITDA for 2017.

With that, I'll turn the call over to Chris to discuss our financial results in more detail. Chris?

Thank you, Mark, and thanks for joining us. For the third quarter of 2016, we reported net income of approximately $4.7 million or 17 cents diluted earnings per share. These results compare with a net loss of $7.4 million, or a 27-cent loss per diluted share in the prior year period. Contract revenues for the third quarter was approximately $164 million, of which, $82 million came from our heavy civil marine construction segment and $82 million came from our commercial concrete segment.

Consolidated EBITDA for the third quarter of 2016 was $18.1 million, or an 11% EBITDA margin which was a significant improvement both sequentially and year-over-year. Within the heavy civil marine construction segment, 56% of revenue was generated from Federal, state and local government agencies, while 44% was generated from the private sector. This compares to 63% being generated from Federal, state and local government agencies and 37% from the private sector in the prior year period.

On the commercial concrete side of the business, nearly 90% of revenue was generated from the private sector. Consolidated third quarter 2016 gross profit was approximately $24 million or a gross profit margin of 14.7% which compares to gross profit of approximately $8 million or a gross profit margin of 6% in the prior year period.

During the quarter, we bid our $622 million worth of opportunities, and we were successful of $195 million which resulted in a 27.9% win rate for the quarter and a book-to-bill ratio of 1.13 times. As of September 30th, 2016, we have a total backlog of work under contract of $388 million, of which $202 million is related to heavy civil marine construction segment and $186 million is related to the commercial concrete segment.

Moreover, the company is the apparent low bidder, or has been awarded subsequent to the end of the third quarter, an additional $171 million worth of opportunities. Of that, $151 million is related to the marine construction segment, while approximately $20 million is related to the commercial concrete segment.

SG&A expense for the third 2016 was $15.3 million compared to $14.5 million in the prior year period. This increase is primarily a result of full quarter of SG&A expenses for the commercial concrete segment in 2016, and increases in group health expenses, partially offset by cost savings.

Now, turning to the balance sheet. As of September 30th, 2016, we have $3.1 million of cash on hand and access to approximately $33 million under our revolving line of credit. We ended the quarter with $115 million in total debt outstanding, of which $16 million was related to the revolver, and $99 million was related to the term loan. Subsequent to the end of the quarter, we do have approximately $8 million on a revolving line of credit to fund working capital needs. As we go forward, we will continue to focus on paying down debt with excess free cash flows. We believe our liquidity position is adequate for general business requirements and for servicing our debt going forward.

Additionally, we are in compliance with our financial covenant, including being comfortably below the 3.25 leverage ratio required at the end of the quarter. Also, our bonding program remains solid and does more than adequately support our debt activities. As we look ahead, we believe at that the level of opportunities we have and we are optimistic given the level of bid opportunities we see for 2017. Currently, we have approximately $837 million worth of total bids outstanding, of which $254 million are related to the heavy civil marine construction segment, a record $583 million are related to the commercial concrete segment.

However, in the beginning of October, Hurricane Matthew impacted our East Coast operations. This resulted in delayed projects as we took appropriate precautions to maintain the safety of our employees to prevent that any significant damage to ongoing projects and prevent damage to our equipment. We were successful in our approach, but our East Coast operations saw delays in projects as a result of the storm,

Additionally, some of our customers have experienced permitting delays causing the anticipated start date to start jobs to push into 2017. Due to this, we believe fourth quarter consolidated revenue will be below third quarter 2016, causing fourth quarter bottom line results [to go below] our initial expectation. As a result, full-year 2016 EPS will be below our previously stated EPS range of 30 to 40 cents. However, these delays in activity will benefit 2017. Given this, the backlog we have today, the record amount of low bids outstanding, and the amount of work to bid on in the coming quarters, we are poised to achieve our full-year 2017 EBITDA goal of $70 million.

Overall, we are pleased with the progress we have made this year and look forward to an exciting 2017. With that, I'll turn the call back to the operator to begin the Q&A portion of the call.

(Operator Instructions)

And our first question or comments comes from the line of Matt Duncan with Stephens. Your line is now open.

Hey, good morning, guys. This is Will on the call for Matt.

Hey, Will.

Hey, good morning. I wanted to start with, if you can quantify the impact of Hurricane Matthew and those project push-outs you were talking about relative to your previous 2016 guidance ranges separately. And how much of that lost project revenue has shifted from the fourth quarter into 2017 and what does end up -- make in your 4Q sales and earnings outlook shape-up now?

Well, a few different things in there. One, 100% of the -- this is all a timing impact. So, 100% of the revenue that was -- that will sit out into 2017. So, we -- these aren't lost opportunities, but just timing of when those are executed. As far as the way -- to think about it from an overall perspective, we could see revenue in the fourth quarter closer to kind of second quarter 2016 levels, but with approved margins overall at the same time.

As far as what that does to our sales and our backlog going forward, we don't necessarily make projections or statements regarding what exactly we expect ourselves to be on our backlog. But clearly, posting those out, we still have great opportunities that we're going after here. We feel comfortable with our 2017 guidance and we think there's a lot of opportunities. I mean, were sitting on a healthy backlog, we've got a record amount of low bid, we have solid opportunities as we go into 2017.

So, while there's a little bit of noise here in the fourth quarter, we think that will be a positive impact as we go forward.

Okay. And moving over to the pricing environment, can you talk about your bid margins now and the overall impression environment? Are you still seeing an uptick in pricing your balanced markets? And there's some commentary in Houston tightening a bit. Are you seeing price pressures there from that?

Yes. Well, I think, overall, I think the overall comment is we're seeing -- we continue to see incremental improvement in bid pricing, that's kind of a general comment. Specifically, there's variations of that -- on the commercial concrete side, we are seeing a tightening in Houston. I think we still expect to see opportunities. We still have very good market share in Houston. We've added structural projects this year in Houston.

And so, we're pleased with where we are, we did see a little bit of tightening in bid margins there just -- in this market. Contrast that with Dallas where we are seeing actual improvement in bid margin, there's a lot of stuff going on there as I commented on in the remarks.

We're seeing -- generally speaking, improved margins on the marine construction side, particularly in the fact that we're targeting the right projects, we believe, that are going to help us to achieve our objectives. We've got a -- as we talked about the troubled Tampa projects us, we are replacing that with work that has been bid with our new team in place over there.

And again we've gone after the -- what we think are the right types of projects that we should be targeting. So, I think as a general comment, we're moving in the right direction, but there's a couple of areas we've seen some tightening.

Okay. Then just moving on back to guidance a little bit in the next year, on the $70 million of EBITDA and as we look at the current backlog levels and the bids outstanding, the pricing environment and how everything is shaping out, can you walk us through your assumptions, your updated revenue expectations and kind of the trend how we -- how we should think about you bridging the gap to that $70 million of EBITDA next year? Any color there would be great. And --

Yes.

-- through each segment, too, please. That would be great.

Sure, absolutely. Generally speaking, we're not providing revenue guidance for 2017, but what I would highlight to you is keep in mind, the first half of 2016, revenue was impacted by finishing out from those troubled Tampa jobs, because when we make cost adjustments, it can actually impact the revenues, but you have a natural pickup in revenue, and you kind of see that in the first quarter here, where we did achieve a solid kind of revenue level going forward.

So, we think two things as we look into 2017. One, we don't have the troubled Tampa job. Those are behind us, we're done with that. We expect similar operating margins to the environment we're in today, as we look at 2017.

So, we search the unnatural entries in revenue because of that.

The other thing I would throw on to that, when we look back at third quarter a year ago, we started to pull back in the amount of bids that we were going after in the Tampa office until we could get a hold of where we were at that market. That impacted 2017 from a revenue standpoint -- 2016 from a revenue standpoint. But we are fully bidding and as we look into next year, we won't have that hangover into 2017. So that's an increase of -- on the revenue side as well.

And then when you really look at the margin impact, of course, there are -- again, first half year of 2016, we have a margin impact but we won't have that next year. So, from an overall perspective, we do expect to see growth, we expect to see a natural pickup, kind of in our thought process of that $70 million of EBITDA for 2017, about 2/3 of that would be coming from the marine construction business and about 1/3 of that would be coming from the commercial concrete segment.

Great. Thank you, guys.

You bet.

And our next question or comment comes from Min Cho with FBR Capital Markets. Your line is now open.

Great. Good morning.

Good morning, Min.

A quick question about the permitting delays. Can you talk about how much of your backlog -what percentage of your backlog includes projects for which you don't have permits yet?

Well, it's not our permit. It's the customer permit. There were several projects that had some permit delays. The other thing we -- in the private sector, the other thing that we deal with, too, is a little more of a drawn-out process on the contractual side sometimes. I mean, it's not like the government sector where it's pretty regimented. You have bid date and you're going to quickly get Notice of Award and Notice to Proceed.

In the private sector, as we're negotiating some of these contracts sometimes, for a variety of reasons, it can kind of stretch out a little bit longer. So, again, it's kind of one of those timing things as we're coming into this quarter. Some of the things that we thought would start either in the fourth quarter or the beginning of the fourth quarter are being pushed rightward a little bit, which is obviously affecting the burn. We have full confidence in getting these started just a little bit later than what we typically -- or than what we had initially planned for as we were coming into the quarter.

Some of the part -- there's no issues, we just think, again, it's been a little bit not unlike a lot of industries where the permitting process at the Federal level has gotten a little more complicated. But, we are -- we are seeing those received, we are going to execute on the work, it's just shifted it rightward.

Okay. So, you're not concerned about continued delays on those projects, maybe past 2017 at this point you feel pretty comfortable.

No, and in fact, one of them we're imminently signing a contract for something now that we thought we would have signed a little bit ago, but we're in the process of getting that signed. So, we don't have any concerns about the work coming into the fold and/or getting starting, because some of the stuff we've already got award, we're just waiting on the permits to start. So, we're not concerned about any of that, no.

Okay. And you continued to talk about steadily improving pricing as we're going forward. So, is that, is it safe to say that the margins within backlog are a little bit better than what we have -- what you're reporting at this point?

Yes, I think so. I mean, generally keeping in mind what Chris just said on the Troubled Tampa projects have been weighing down on that we also had just kind of the whole retrenchment, if you will of staff operations where we were really restricting the bidding over there. So, we've changed that, we're targeting the right projects not only there but across the board. So, yes, we're seeing improvement in the margins in the backlog for all of those reasons.

Okay. And then also, your guidance for EPS for the full year 2016, consensus is already below the 30-cent, the low end of your guidance. So I just wanted to make clear, for your fourth quarter, are you suggesting -- I mean, could -- I mean Eps isn't going to be negative. And I mean, especially given the margin improvements that you're saying, I would hope not. And it -- any more kind of general guidance for 4Q --

Yes --

-- besides revenue?

Absolutely. Definitely we'll give that. I do not expect to have negative EPS. What I would say from kind of looking at it specifically for the fourth quarter, we expect to probably see a slight improvement year-over-year on the bottom line.

Slight. Okay. And also, you mentioned on your kind of State and local work that you're seeing some increased bidding opportunities due to the Restore Act. Are you seeing any positive impact from the FAST Act yet? For bridges, for bridge construction in either segment?

Well, in terms of opportunities, yes, we are seeing that. I think it's a little premature for us to say that that has impacted positively the bid pricing for that work. So, we remain sort of selective in what we're looking at in terms of those bridge opportunities. But we continue to remain hopeful because it's the first time in forever that we've had a long-term highway bill.

So, we're still -- we're hopeful that that will put upward pressure on pricing. But our focus is just to kind of be selective about what we go after there and in general, we were hopeful that it has a positive impact on pricing because that just has a positive effect on the overall market in terms of -- as I've said many times before, we believe and I believe bid pricing should be stronger than it is. We think there's a lot of opportunities out there, you've seen it in terms of our numbers of bids outstanding and how much work we've bid, our win rates and stuff like that.

We think that bid pricing should be even better than it is now. I mean, again, we've seen incremental improvement. But we still continue to believe that with the work we see out there, all of the drivers driving the businesses, that it should be -- it should be better than it is today, so that's kind of what we're pushing for.

Okay, great. Well, that's it for me. Good luck in 2017.

Thanks, Min.

And our next question or comment comes from the line of [John Penlington] with CGS. Your line is now open.

Good morning, guys. It's [Pete Lucas] for John. Just a question on --

Hi, [Pete].

Just a question on SG&A. It was down nicely on a sequential basis, so why was that and we expect the run rate to continue going forward?

Part of that is some timing impacts for the different quarter. What I would say is we still expect full-year SG&A to be about 10% of revenue, maybe slightly higher than that.

Great, thanks. And any update on the sale of the dredging assets?

We're still actively pursuing that. Keep in mind, we wanted or we have a desire to fill those into the foreign market, so -- from a competitive standpoint going forward. So, with that, we are still moving but we do expect us to take a little bit longer with respect to that when we made that decision, but we are progressing in trying to get those filled.

And then, last one for me. How much of a provision for whether another unexpected incidences do you include in that $70 million EBITDA target for next year?

Well, normally, we factored that into our you know, kind of on a job-by-job basis. It's been fairly inactive seasons the last several years. So, we just -- on a job-by-job basis, in other words, the work that we have in backlog going end of the year and the work that we'll bid on going forward, we'll sort of factor that into the work that's going to be in in the areas that could be impacted during hurricane season and we'll put the appropriate contingencies and have put the appropriate contingencies in there.

One of the things I wanted to comment on this, and just follow on Chris' comments earlier that Matthew is pretty unique. I've lived in Hurricane Country my entire life and this was pretty unusual. The path of the storm, -- I don't -- I certainly don't remember in my lifetime where it just kind of scooted the entire length of the Florida and Carolina Coast and effectively impacted our entire East coast operations. Our yard facilities were shut down, our offices were shut down, multiple jobs impacted. Thankfully, all of our people were safe and came through Okay. We took the precautions on our job sites and equipment and all of that went well.

But it's pretty unusual -- normally, when we think about storm considerations, you think about maybe a project being impacted. But in this case, we had the whole Southeast U.S. kind of impacted here which is highly -- I mean, as an example on Jacksonville, it's kind of unheard of for Jacksonville to have been impacted by a storm which may sound unusual, them being in Florida, but where they're located, they rarely have any kind of impact but it just scooted right up past them this time.

This was pretty unusual, and that's kind of one of the points that I think I want to emphasize. It's unfortunate, it's going to have the impact on Q4 along with some of the other delays, but the good news is, that's what it is. It's really just sort of a delay. It's not -- we still have the work, we still have the work to execute. And sort of the impact, the Q4 impact is going to benefit 2017 because we'll go in there with that much more work to execute on.

Great. Thanks, guys. That's it for me.

And our next question or comment comes from the line of Bobby Burleson with Canaccord. Your line is now open.

Yes, good morning.

Good morning.

Just curious on the heavy civil business. The mix there in terms of the amount of that that's Federal, state and local. This year versus last, is down. I'm wondering where you expect that mix to go next year based on what you can see in the bid pipeline and the backlog?

I think we expect in the near term, 2017, that probably a predominant amount of the business would come from the private based on what we have in low bid -- backlog in low bid and what we see in terms of the opportunities going forward. That's not to say that we don't have opportunities or backlog in Federal, state and local government sector. We are finishing up a pretty good-sized local project, local agency project.

We just announced a project for the U.S. Navy a couple of weeks ago, a couple of months or so ago. So, we still expect to see those opportunities as I said in my remarks, but partially, it's a matter of what we're going after and what we're successful in winning. And so, given what we're seeing in the private sector, what we've already won, what we have in low bidder and what we see ahead of us as far as opportunities, that's why we've made the comment that we would expect near-term that part of the revenues in this segment would come from the private sector.

But again, we are tracking a lot of stuff in the public sector. We have work to execute in the public sector. We'll continue to look at that kind of -- in terms of previous question about state work, we're selectively going after some of the DOT stuff. But again, at the end of the day, we're focused on targeting the right projects with -- it gets us the utilization, gets us the -- towards achieving our goals and we think we've got the markets out there to do that for 2017.

Could I get some clarification. All of the permitting delays that are part of that Q4 impacts were weather-related or is there anything additional there?

No, actually, only partial was weather -- it's kind of unrelated. There was one related to the weather impacts over there in Florida in the East Coast. The delays we've talked about over there, more just you have to -- you have to stand down and secure everything. Workers have to go home and secure their personal situation and then you got to -- you got to kind of crank everything back up after the event. So, we just -- we lost a lot of time there in executing our Hurricane preparedness plan.

We did have one project over there that we -- is a permit, it was just -- or excuse me, the NTP, the Notice to Proceed was delayed as a result of the storm. The other stuff was not necessarily in that area, but just one of those things where as you -- as I said earlier, sort of the regulatory state, it's kind of ground down a little bit on some of these -the processes for some of the permits taking a little bit longer than they did a couple of years ago or several years ago.

And as I said before, we fully expect that we'll -- our customers will have those in place, we'll move forward. It's just kind of getting through the bureaucracy to get them cranked out. We don't have any concerns about that not occurring, it's just a matter of getting those cranked out and we're already seeing some of those come online so that we can plan and move forward with getting down to the projects and executing on them.

Okay. And you touched on the FAST Act. I'm curious about any local ballot measures that you might be tracking here, that are meaningful in terms of creating some new work opportunities.

None in particular. Again, we kind of -- we expect to continue with the opportunities, local, state and Federal. But nothing in particular that we got any emphasis in answer to your question.

Okay, thanks.

You bet.

(Operator Instructions)

And our next question comes from the line of John Rogers with Davidson. Your line is now open.

hi, good morning.

Good morning, John.

Just a couple of follow-up things. First, from the concrete construction business, the margins for the quarter were substantially improved in, not only year-over-year what we have seen -- I'm just -- because I don't have as much experience watching that, but is that -- is that just a seasonal factor? Is that the -- is that the representative of the market pricing that we're seeing now? How should we think about the opportunities, the profit margin opportunities there?

I think some of it is seasonal. Keep in mind, we had a little -- we had a lot of rain in Q2, that delayed -- so it wasn't as much as we had in 2015, but it was still a lot that affected Q2. So, that pushed some work out into Q3 that was executed then. Again, Q3 was overall a pretty favorable operating environment from that [visit]. And we placed a lot of concrete. We had record levels placed in some of the markets in August and September. The guys just did a fantastic job in getting a lot of work placed and we're able to catch up, so to speak, some of that work that got pushed out in Q2. Generally speaking, there's a lot -- you're in the -- kind of no pun intended, the heat of the summer, which, I mean, again, speaks highly of our crews being able to get up there and place that much work.

But also, it's just -- it's a really productive time in terms of daylight hours and this year, pretty decent, favorable conditions weather-wise compared to what we had in Q2. So, this is a little bit of a -- I would say kind of outperformance kind of during the quarter in terms of getting stuff placed. But, we're still very pleased in that business as we kind of said before, we think that's kind of a 9% to 11% EBITDA margin-type business over the long term.

Yes. So, does that imply then that when you're talking about fourth quarter being -- terms slightly better than what we saw last year, will the marine construction business be possible in the fourth quarter or not?

Well, I think overall, yes, but again, keep in mind, for commercial concrete, we'll kind of normally kind of pull back. I mean, we kind of have the catch-up performance in the fourth quarter -- excuse me -- in third quarter. But we're still pleased with where we are but again, we did have these -- the predominant amount and good question, John, let me clarify our remarks earlier. The impacts that we're talking about in terms of Hurricane Matthew and sort of the permitting and customer delays, our commentary on there is focused on the marine construction site.

Right.

So, that's seeing that impact -- those same factors are not applying really at all on the commercial concrete side, so thank you for allowing me to clarify that. But I will -- we still feel good about where we are. It's just we've got some stuff shifting rightward in that segment. So, again, expect that to be a little bit down from where we previously thought.

Okay, but in the black, is that what you're saying?

Yes, we would expect both segments to still be in the black. So, particularly the marine construction, how far depends on where --

(Multiple Speakers)

Okay. Okay, thank you for that. And then, if you think about the concrete construction business, and I appreciate your comments earlier, Mark, about the expansion. What are you thinking about in terms of investment there to do that? To broaden your geographic coverage and other acquisition opportunities and does it -- does it stay in the private sector, or do you try to go after public works as well?

Well, yes. A couple of things is, one, we are looking at both -- there are acquisition opportunities, there are greenfield opportunities. We're going to weigh each of those very carefully. As a general comment, it is relatively -- especially, as compared to the marine construction business, it's a lower CapEx, a much lower CapEx-type business --

Right.

-- than marine business. The key part for -- not that it's not key on marine construction, but it's kind of magnified in commercial concrete is the people side of the business. So, that's factored into our thought process too in terms of acquisition versus greenfield.

So, we certainly think the opportunity is there for each, we are weighing our options, going either route, but we certainly think there is an opportunity for expansion and that fits with our strategy here. It has, from Day 1 when we made that acquisition is that we've recognized the opportunities, A, for growth in the Dallas Fort Worth market, but B, growth in other parts, particularly not only Texas, but potentially other areas as well.

But we think there's a lot of opportunity in Texas as well. It's still a very -- long term, we expect a lot of continued growth in this state, both at our existing markets and in potential other markets in this state. So, we think it's a good place to be and that's not to say that we won't consider other opportunities outside of Texas, but we certainly think we've got some opportunities near-term for expansion in this state.

Okay. Thank you for that.

You bet.

And at this time, I'm showing no further questions. So, that's it. I would like to turn the conference back over to Manager of Investor Relations, Mr. David Griffith for any closing remarks.

Sure. Thank you, Andrew, and I just want to say thanks to everyone that joined today. If you have any followups, feel free to reach out and we'll be happy to answer any further questions. We'll be around the rest of the day. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a wonderful day.