Orion Group Holdings Inc (ORN) 2021 Q1 法說會逐字稿

Greetings, and welcome to the Orion Group Holdings First Quarter 2021 Conference Call. (Operator Instructions) A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Francis Okoniewski, Vice President of Investor Relations.

Good morning, everyone, and welcome to Orion Group Holdings First Quarter 2021 Earnings Conference Call and Webcast. My name is Fran Okoniewski, Vice President, Investor Relations. And joining me today are Mark Stauffer, Orion Group Holdings' President and Chief Executive Officer; and Robert Tabb, our Executive Vice President and Chief Financial Officer.

Regarding the format of the call, we've allocated about 10 minutes for prepared remarks, in which Mark and Robert will highlight our results and update our market outlook. We will then open the call for questions.

Through the course of this conference call, we'll make projections and forward-looking statements regarding, among other things, our end markets, revenues, gross profits, gross margin, EBITDA, EBITDA margin, backlog, projects and negotiation and pending awards as well as our estimates and assumptions regarding our future growth, administrative expenses and capital expenditures. These statements are predictions that are subject to risks and uncertainties including those described in our 10-K 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 new projections or forward-looking statements whether as a result of new developments or otherwise.

Also, please note that adjusted net income, adjusted earnings per share, EBITDA and EBITDA margin are non-GAAP financial measures under the rules of the Securities and Exchange Commission, including Regulation G. Please refer to the reconciliations and definitions inclusive for the most comparable GAAP measures and reconciliation tables accompanying this earnings call within the press release issued yesterday.

The press release can be found at our website at www.oriongroupholdingsinc.com. Also, for additional discussion of risk factors that could cause actual results to differ materially from our current expectations, please refer to our quarterly and annual filings with the SEC, which are also available in the Investors section of our website.

And with that, I'd like to turn the call over to Mark Stauffer, President and Chief Executive Officer. Mark?

Thank you, and good morning, everyone. Thanks for joining us today. Today, we'll discuss our first quarter 2021 results, provide updates on the benefits we continue to reap from our ISG and other operational improvement initiatives and discuss our current outlook.

I'll begin with an overview of the first quarter. Robert will then discuss our financial performance in more detail. Then I'll come back to discuss our markets and provide an update on our ERP implementation before we turn to Q&A.

As always, I'd like to begin by thanking our team for their hard work and commitment to our success, not only with regard to operational and financial performance but, most importantly, with respect to safety. Our foremost priority is that all our employees go home to their families in the same way they came into work, healthy and injury free. We are deeply committed to our Target Zero program to support our vision of an incident-free workplace.

With respect to the first quarter of 2021, as anticipated, our results reflected the impact of the historic winter storm in Texas during February, which disrupted our progress on projects across our concrete and marine operations, including our dredging projects. This reduced revenue for the quarter by approximately $8.2 million and lowered earnings per share by approximately $0.03.

Despite the weather challenges, our concrete segment delivered year-over-year growth in both revenue and profitability, which was a result of our team's solid execution and of the labor and equipment efficiencies gained by our ISG program.

While our backlog was down at the end of the first quarter relative to the end of the fourth quarter and the first quarter of last year, we are very optimistic about the trends we are seeing with respect to project opportunities across our end markets.

Our current level of quoted work stands at nearly $2 billion, a record level, up almost 130% from this time last year and also up meaningfully on a sequential basis. We have a significant amount of bids submitted and under evaluation in both our marine and concrete segments. And as noted in our earnings release, we currently have $134 million of low bid or awarded work, the highest reported level in 5 quarters.

We anticipate new bidding opportunities to emerge as economic activity picks up with increasing vaccination levels and herd immunity with respect to COVID-19. These factors make us confident we will be able to maintain our project pipeline and increased backlog as 2021 progresses, positioning us well for 2021 and beyond.

This favorable outlook has been further enhanced by the possibility of a new federal infrastructure bill, which would be an additional catalyst for increased demand across our diverse operations. Also during the first quarter, we continued to improve our liquidity.

Now I'll turn the call over to Robert to discuss our financial results for Q1. Robert?

Thank you, Mark, and thanks, everyone, for joining us. Today, I will review the financial results for the first quarter of 2021 then provide updates on the company's liquidity position and the status of our real estate transactions.

Starting with the financials. Revenues for the first quarter of 2021 were $153.3 million compared to $166.6 million in the first quarter of 2020 or a decrease of 7.9%. The decrease in revenues were driven by a combination of the timing and mix of projects from period to period and the extreme winter weather in Texas.

The first quarter gross profit was $15.5 million compared to $19.8 million in the prior year period. The gross profit was also impacted by winter weather in Texas and the mix of projects, both resulting in a decrease in equipment and labor utilization. Also note, Q1 2020's gross profits benefited from execution-related margin gains on several projects.

Turning to our segments. In the first quarter of 2021, our marine segment had revenues of $72.1 million and an adjusted EBITDA of $7.9 million. This equated to an adjusted EBITDA margin of 10.9%. In the prior year period, we generated revenues of $85.9 million and adjusted EBITDA of $11.2 million or a 13.1% adjusted EBITDA margin. Marine's revenues and EBITDA decline were driven by shifts in timing and mix of projects. In Q1 of 2020, we had several large jobs close out and recognized execution-related margin gains.

Our concrete segment had first quarter revenues of $81.1 million compared to $80.7 million in the first quarter of 2020. Adjusted EBITDA for the concrete segment was $1.6 million compared to $985,000 in the prior year period. Our concrete segment's year-over-year results improved despite being impacted by the winter weather in Texas. Increased production volume rates and execution-related margin gains were key drivers of the year-over-year improvements.

Adjusted SG&A expenses for the first quarter were $14 million or 9.2% of revenues. Please note that the first quarter tends to be the most seasonally weak quarter from a top line perspective. However, we remain focused on driving annualized SG&A to or below 8.5%.

Net income for the first quarter of 2021 was $928,000 or $0.03 diluted earnings per share. Net income includes roughly $500,000 of net expenses related to ERP partially offset by the benefit of our tax valuation allowances. Adjusted net income was $1.2 million or $0.04 per share.

The first quarter adjusted EBITDA was $9.5 million, representing an adjusted EBITDA margin of 6.2%. This compares to $12.2 million for an adjusted EBITDA margin of 7.3% in the prior year period.

Now to the bidding metrics and win rates. For the first quarter of 2021, we bid on approximately $1.1 billion worth of opportunities and were successful on $79 million. This resulted in a book-to-bill ratio of 0.5x and a win rate of 7.4% for the quarter. The lower-than-average win rate is primarily the result of extended timing of several projects being awarded. We currently have a significant amount quoted, for which the outcome was undetermined during the quarter.

As of March 31, 2021, our backlog was $365 million, of which $155 million was associated with our marine segment and $210 million for the concrete segment. Additionally, subsequent to the end of the first quarter, we are the apparent low bidder or have been awarded $134 million worth of opportunities. Of this, $56 million is related to the marine segment, while $78 million is related to the concrete segment. I want to note, this is the highest low bidder in subsequent awards in the past 5 quarters. We see this as a positive leading indicator for potential future awards. Also, as Mark mentioned, we have nearly $2 billion in work quoted, which is a record level.

Now turning to the balance sheet. As of March 31, 2021, we had approximately $4.6 million of cash and $68.3 million of availability under our revolving credit facility. We ended the quarter with $29 million of debt outstanding, all of which was related to the term loan. This translates into a 0.74x leverage ratio and a fixed charge ratio of 4.1x, both well within the covenant requirements. Our current liquidity position provides us with the flexibility to execute on our strategy and to pursue new awards.

Now I'll provide an update on the status of our pending real estate transaction, starting with Tampa. The rezoning of the Tampa property, which is a prerequisite for our transaction to close, is moving toward final approval. We believe this transaction will close in the second quarter of 2020.

Now on to the Port Lavaca property. The buyer is finalizing its lender's requirements and has requested to close in July. We will continue to work with the buyer and are optimistic that this will close in Q3.

Finally, the property on the Ship Channel continues to draw significant interest. We believe as the impacts of COVID-19 abate, we will receive offers on this property.

As we execute our real estate transactions, we will continue to evaluate all potential uses of capital, including reinvestment into core assets, accretive M&A and share buybacks.

In closing, our first quarter 2020 was consistent with our expectations. We saw the concrete segment post a year-over-year improvement in results despite the extreme winter weather challenges in Texas. Lastly, we have a significant amount of low bid and quoted work. We continue to make progress during the quarter, but we remain focused on continuing our improvements.

Now I will turn the call back over to Mark.

Thanks, Robert. Turning to our markets. As I've stated previously, many of our end markets have continued to function normally or at increased levels during the pandemic while others have seen project opportunities slide to the right. Bidding and winning new awards and augmenting our backlog remains a top priority, more specifically, securing the most attractive jobs where we have the best likelihood of executing at or above our targeted profitability levels. We believe this will continue to drive increased shareholder value. The diversity of our end markets and the flexibility to adjust between them is a great advantage to us in this regard.

In addition, we are targeting select larger, longer-duration projects that give us greater operational visibility. And we currently have some very good prospects of this nature that we look forward to providing you with updates on in the coming months.

In our marine segment, we continue to pursue opportunities in the public sector at the federal state and local levels, including port expansion projects, DOT work involving bridges over water, Navy facilities and environmental and flood control projects. We've recently booked several new dredging jobs, including with the U.S. Army Corps of Engineers. We expect to see an increase in bidding opportunities for dredging work from the core as we move through the second and third quarters, which is the back half of the federal fiscal year. And we are well positioned to capitalize on these upcoming opportunities.

We also continue to see bid opportunities materialize in the private sector with expected upcoming projects in the energy space and in the Caribbean market, which is a positive sign of economic activity picking up in the markets that were more impacted by the pandemic. With the continued rollout of the vaccine and as we reach herd immunity, we expect overall economic activity to accelerate, driving bidding activity in these markets including some potentially large projects.

In our concrete segment, we have been pursuing and successfully winning new work in attractive end markets such as the tech, e-commerce and large retail sectors. We also continue to bid on larger structural projects involving high-rise residential or mixed-use towers. Anyone who has been in Dallas-Fort Worth, Austin or Houston in recent months will understand the significant activity going on with these types of projects.

Additionally, we are seeing bid opportunities outside our traditional Texas markets. And in particular, we are targeting large structural or large light commercial construction projects in the Florida market, where we have long-standing presence in our marine segment.

We've talked about our ISG initiative for several quarters now. And while implemented during 2019, the benefits to our profitability resulting from enhanced labor management, equipment management, project execution and corporate processes really began to accrue to our results in 2020. We expect to continue to see benefits from the actions we've taken as we move through 2021 and beyond particularly as our revenues increase and we gain leverage on our improved efficiencies and cost control.

We continue to make progress with our new ERP system implementation, which we expect to enable us to garner even greater benefit from our ISG initiative. Once completed, our new company-wide ERP platform would not only solidify our operational efficiencies but also allow us to scale these efficiencies as we grow organically and through possible M&A in the future. ERP will enable us to achieve full system integration across the various businesses that we've acquired over the years in critical corporate functions, including CRM, project management, HR, payroll and finance. We are confident that this investment will increase our effectiveness in executing our strategic plan and enable us to more efficiently integrate any future acquisitions.

In the first quarter of 2021, we continue to strengthen our balance sheet and improve our liquidity position, providing us with flexibility to continue to execute on projects and backlog and pursue new awards while, at the same time, enabling us to execute on our strategic plan, including positioning ourselves for any potential accretive acquisition opportunities.

Additionally, we are investing in the rebuilding and upgrading of one of our dredges previously converted to use as a booster, which will replace the dredge lost during last year's tragic accident. Moving forward, we will also look to upgrade and extend the lives of several of our dredging assets. We would expect our pending asset sales to contribute to additional improvement to our financial position in the coming quarters.

In the first quarter, our team once again rose to the occasion and executed well in the face of adversity, just as they have been doing for the past year. As we look ahead, we are confident that through our ISG initiative, our ERP implementation, the strengthening of our balance sheet, all combined with the favorable outlook for our diverse end markets, positions us well to capitalize both on current and post-pandemic economic activity.

With that, I'll turn the call back to the operator for Q&A.

(Operator Instructions) Our first question today is from Julio Romero of Sidoti & Company.

So I wanted to ask, generally, can you speak to the quotation level relative -- environment relative to 1 quarter ago? It sounds based on your prepared remarks like it's certainly improving. What are you seeing out there in terms of activity levels? And do you find conditions to be supportive overall?

Yes. I think overall, we do. Again, it's the highest level of quoted work we've had outstanding in our history. We've got a number of projects that -- even in the government sector that we're bidding on, that are not determined at the time of bid. They're under an evaluation period. It's kind of an RFP process. So we've got a number of those outstanding right now. We've got several large projects that we've priced, and we're waiting a word on those.

And again, as we commented on in the remarks, we have a significant amount of a low bidder work at this point. And again, that's the highest we've reported out in about 5 quarters. So we feel good in our concrete business that a lot of opportunity there in all of our markets and then also in markets outside of our traditional markets in Texas.

And on the marine side, again, seeing work in the government sectors that we mentioned. But also we're seeing things move forward in those areas in the private sector that were more impacted by COVID. That seems to be stirring and stuff coming out and pricing going in. So we're pretty confident in the opportunities we see in front of us.

Got it. And on the concrete segment, I wanted to ask about potential geographic expansion there. I know you mentioned in your prepared remarks you're targeting projects outside of Texas such as -- I believe you cited Florida as an example. How about opportunities in other regions? I know you mentioned Louisiana in the past. Can you just speak to maybe other opportunities outside of Texas and Florida?

Absolutely. Yes, we've been working in Louisiana. We haven't won yet, but it's -- definitely, we're competitive and very good effort by our team. And we're starting to get opportunities and invitations to look at work in other places besides Texas from some of our GCs. As we may have mentioned before, some of our GCs work in markets outside of Texas and have more national footprint. And so we -- they know that we're looking to step outside of Texas.

So we're getting some -- getting opportunities incoming from other places now that -- they know what we can do. They know the quality of work we do. They know the quality teams we have. And so they're starting to ping us on other places as they're pursuing work in other markets for them.

But for sure, we're definitely -- Florida is an area of great interest for us. Its population is growing. It's an incoming destination for population growth just like Texas is. So some of the same drivers that drive opportunities in that market are what we're seeing in Texas. And we're very familiar with that market, long-standing presence in our marine side and a great way for us to leverage our existing footprint to pursue these opportunities. So really pleased with our progress on that.

Great. And then just last one for me here is, did you mention in your remarks that you expect backlog to expand sequentially as we progress throughout the year?

Well, what I said was is we've referenced the $134 million. We referenced all the opportunities, the quoted work we have out there, the pipeline we see. So we think we're positioned for that to happen. Obviously, we have to bid work, we have to win work. But certainly, we feel good about the prospects of building backlog as we go through the year.

The next question is from Alex Rygiel of B. Riley FBR.

Mark, your win rate in the quarter was on the low end of historical levels. Can you help us to understand why?

Yes. It really relates to the timing of awards. And it goes back to what I was saying for the last question around a lot of work that's quoted, even in the government sector that's RFP-type work, the way we do our calculations. Those -- all this quoted work that we have outstanding, all the stuff that we're waiting for determination on is not included in the calculation that we do.

So we view it as a timing thing, and we would expect that to increase as we go through the second quarter. We've already got a lot of work that's in low bidding, a low bidder, as we mentioned in our remarks, historical level of quoted work outstanding. So as we get determinations on these things and we feel good about our chances on a lot of the work that we've quoted, we would expect that to uptick as we get into the second and third quarter.

And then the SG&A target of 8.5%, when might you get to this level?

We think that as we progress through the year, we have a good shot at it this year from an adjusted standpoint. We're moving out all of the ERP. We'll also have some move-in expenses as we sell some of these properties, which will add back. But it's a target for this year, and we think we'll get there.

Now it's going to be weighted, right? It's going to be a little bit heavier on the percentages in the earlier part of the year but then abate as we get into the year.

And then lastly, it sounds like you're going to spend a little bit of CapEx on some dredge rebuilds. Can you quantify that for 2021 and 2022?

Well, for '21, we'll fit it into the levels that we talked about before. So we've begun the process of converting the dredge that we had been using as a booster. So we're going to convert it back. But not only that, we'll rebuild it and upgrade it. So that process is ongoing, and that will fit within the CapEx target that we've talked about previously for '21.

Premature to talk about '22 at this point, but we will be talking about that as we go throughout the year. That's going to be a multiyear program for us. But -- so we will comment on that in terms of when we talk about '22 CapEx and beyond. So we'll have more to say about that as we go through the year.

The next question is from Marco Rodriguez of Stonegate Capital Markets.

I was wondering if -- just spend a little bit of time here on the asset sales that are obviously recognized through your P&L, had a fairly high level gain in this quarter, a little bit higher than what your historical trends. Or I know this is kind of an ongoing thing, and it might be a difficult question to answer. But I believe in your prepared remarks, you are expecting additional gains on asset sales.

How should we be thinking about these sales through this fiscal year? What sort of levels might be implied inside of your guidance? And then I'm assuming a lot of these higher-level sales are basically being driven by the ISG review and the effort to increase utilization rates. Any color would be helpful.

Yes. Well, I think there's kind of 2 separate things. There's one, it's kind of a normal ordinary course of business that we've talked about through ISG and just the -- making sure that we -- if we have any equipment or tools that we use in the operations that are -- don't have the utilization or the return metrics that we want to see, then we look to dispose of those or otherwise figure out a way to just gain efficiencies in our use of equipment.

Specifically, what Robert was talking about and in my comments are related around the real estate, which Robert covered in detail in his remarks. That -- those were more of what we were speaking about to, our remarks than the kind of the first category, which is just sort of ordinary course and a continuation of making sure that we've got the right equipment for our work.

And that as -- and some of that may mean we're selling equipment, not replacing it. Some of it may just be the ordinary course of something has reached the end of its life. We're selling that, and we're replacing it with something new. So it's a churn in the assets. And we've got CapEx on the other -- that may offset some of those sales.

Got it. Understood. And so just to also clarify the nonoperational asset sales. Those are not included in any sort of guidance, correct?

No. No, they're not.

Got it. Understood. And I don't know if I missed this on the call, but did you quantify the impact that the winter weather had on Q1 results? And if I remember correctly, we were talking about this on the last call that there was an expectation that this would probably be made up in Q2, Q3. Just kind of wondering if that's still the game plan, if you will. And wondering also if there might be any sort of compression to margins just because of the delay.

Well, so yes, we did -- in the remarks, we referred to the impact of Q1 was -- it was about $8.2 million top line impact because of the winter storm in Texas and about $0.03 per share. We were about $0.03 lower on our EPS as a result of the winter storm.

Keep in mind, I mean the work will still get done. It slides to the right. But as far as like being additive to future periods, it doesn't really work that way. It's -- again, the work didn't go away, but we'll still execute on all that work that was delayed during that period. But again, it's not additive to future periods. It just gets executed in future periods.

Got it. Understood. And then in terms of the concrete segment, just looking at the operating margins. Maybe if you can talk a little bit more about that and framing it in regard to the ISG review process? Obviously, the operating margins are not at the level that you're aiming for just quite yet. And you've made some improvements in terms of the types of bidding on work that is supposed to help kind of drive that. Maybe if you can kind of update us on your thinking there on the ISG review process and how those margins might move a little bit here in the next, I don't know, 12 months or so?

Well, I think again, the ISG initiatives have been implemented at this point. So it's just part of our daily DNA as we execute our work. As you point out, we've still got work to do to get to where our targeted levels are.

That being said though, we've made tremendous progress. We continue to make progress. We saw that again in Q1 even with the challenging weather. For those that don't know, I mean it's the worst winter storm in Texas since 1890. All 254 counties in Texas were under a winter storm warning. I mean that's historical by any measure. And despite all of that, our team had made improvements in our concrete business.

So we're moving in the right direction. We're -- we still have work to do. Our team is out there. We've got the right people and the right team and the right attitude and all of that to keep moving. And we're -- we factor that into where we expect to be for 2021. And we're keeping the move ahead on this effort and are very confident that we'll get to where our targeted margins are expected. But we've made a lot of progress. We continue to do so, and we continued it in Q1 despite the challenges.

The next question is from Poe Fratt of NOBLE Capital Markets.

I just had a couple -- first of all, a couple 40,000-foot level questions. Just when you look at sort of the way the company is structured right now when you're talking about potentially making accretive acquisitions, can you talk about where potentially you're devoting most of your time and energy and identifying those acquisitions?

Well, we're not going to get into a whole bunch of detail. I mean it's early days on this. But I mean we're looking for things that -- we're not being restrictive. And we could potentially look for things that are within our existing businesses or complementary services, complementary geographic regions. Obviously, we'll factor in capital needs, CapEx needs, are they heavy or light, and again looking for those things that can enhance and have higher-margin type businesses in -- or higher-margin type services.

So anything that is in our existing lanes or maybe even adjacent lanes that can provide that for us is things that we're looking at. We're out there looking at things, talking to investment bankers and think that, yes, we've got some good opportunities to generate -- some opportunities for us to look at and potentially let the transaction happen.

Great. And then Mark, I was a little surprised that you were optimistic or it seemed like you're more optimistic, favorable on the cruise industry. And I'm not sure how recent it is, but it seemed like the Royal Caribbean CEO made some comments about just the George Town cruise port was uncertain and remained uncertain. And I was just trying to factor in sort of what you're looking at as far as the cruise industry over the next 12 to 18 months.

Yes. Well, I would separate George Town and Cayman Islands from any color on the remarks about the cruise business and the cruise industry in general. George Town -- the George Town pier has always been kind of an elusive goal for the cruise industry. I can tell you, we did work down in George Town back in 2005. And they were talking about the cruise pier back then. As you know, last year, there was -- or pre-COVID, there was a lot of talk about that. But that kind of started sort of the local population's opposition to -- that cruise pier was being felt even before COVID happened.

So I do think the cruise lines are reassessing that one. But Cayman doesn't, I think, speak for what we're seeing in other areas. We've been tracking and we're tracking pre-COVID projects in other areas. We've been tracking cruise pier activity or cruise-driven infrastructure projects in the States as well. And we're starting to see movement on some of those things. We're starting to see movement on activities that we think will move forward in other places besides Cayman.

So I, quite frankly, wouldn't -- I don't place a lot of stock in the Cayman project moving forward at this stage. I'll believe it when I see it kind of thing. But that means -- that doesn't mean there's not going to be a lot of other activity elsewhere.

I think bookings for 2022 cruises are up. New ships are being built. New ships are being built with -- to run off LNG. So that's pretty interesting for us on a couple of different levels. So we think there's going to be a lot of opportunities driven for us out of that -- out of the cruise industry.

Okay. Great. And then when you look at concrete and potentially bidding into Florida, can you give us an appreciation for whether any of the low bids pending award or any of the quotes are associated with work in Florida? You already said that you bid into Louisiana. But I was wondering if Florida, is it active from the standpoint we might see something over the second half the rest of the year? Or is it still more on the horizon?

Well, I would -- 2 parts to that. One, to answer your first part of your question, no, nothing in our low bid or quoted at this stage is active in Florida. But the second part of your question, yes, we are targeting getting work in Florida this year. So we've got prospects that we're chasing and pursuing. And our focus is on gaining work in Florida this year.

Okay. Great. And then Robert, from a standpoint of -- a previous questioner had asked referred to guidance. And I'm not sure, maybe I just wasn't listening to that carefully. But did you give guidance for 2021, whether it's from a revenue or EBITDA perspective? Or would you be willing to?

Yes. On the last call, we said the mid- to high $40 million range from an EBITDA standpoint. And I think Marco was asking about the asset sales. The real estate sales are not factored into that guidance. Any equipment sales and things like that, that piece is factored. But the real estate gains are not considered in that number.

Great. So the guidance is unchanged from that mid- to high $40 million range?

Yes.

Unchanged, yes.

And again, exclusive of ERP costs?

Yes. Sorry, it excludes ERP and any move-in cost associated with our asset sales.

And then it looked like, Robert, in the first quarter, the ERP costs were a little bit lower than what I thought they might be for the run rate for the year. Is that accurate? And then also, could you give us an idea of sort of how the ERP expenses will look for the rest of the year?

I expect it to start ramping up. We got through the design phase through the first part of the year. But this is the piece where -- this is a time where we'll start spending more dollars. So you'll see that ramp up.

No change in that overall price tag. We think that will go live sometime in the middle of next year. But what I would expect is to see a nice ramp over the next couple of quarters.

Sort of in the $1.5 million to $2 million range per quarter? Or sort of can you give us an appreciation for just how much of a ramp?

Yes. It really just depends on the consulting. A lot of this is the consulting dollars and the consulting hours. As that breaks out, we'll have a better feel of the timing. But yes, I could see it jumping up in that $1 million range.

Great. And then just to confirm that your working estimate for CapEx for 2021 remains $20 million?

Yes. We said $22 million to $20 million in our guidance.

The next question is from Gerry Heffernan of Walthausen.

To start off with, I have a rather elementary question here, and it goes back to the person that asked about the win rate. And Mark, you commented on timing of awards comes into that as far as why is it so low, which to me beg the question, what exactly is the win rate? Because it sounded like if you bid on 10 projects, won 1, lost 1 and the other 8 are still outstanding as not decided, is that a 10% win rate?

Well, the way we calculate it, and this is the method that we consistently do, we've consistently done, is that until we have the determination of the outcome of the bid, we don't factor it into the stats -- the calculation of the stats. And that's consistent with how we've done it over time. So there's no change in how we've done it for this quarter versus the previous something quarters. So if we have work that we've quoted but there's no determination on it, it does not factor into the win rate calculation.

Okay. All right. I just wanted to make sure I understood that clearly.

In regards to this $2 billion of bids outstanding, how does that break out between marine and cement, if you can just give me -- just roughly?

Roughly, probably about 75% of that is on the concrete side, and 25% roughly is on the marine side, which is consistent with what we see. Just historically, we bid a higher volume of work in our concrete business as a subcontractor. And we have different competitive dynamics. Our targeted win rate is a little bit lower in that business than it is in the marine business. So we -- that's consistent with what we kind of see.

Okay. Very good. And so of the 25% that's marine or, call it, $500 million -- and I understand I'm just talking round numbers here. I don't want to get too specific with it. How does that number stand up historically in regards to marine bids outstanding and marine activity out there?

It's a fairly -- it's towards the upper end of what we would see historically. So it's higher than average, I would say, based off our historical last few years.

Okay. And is there any geographic focus to that? Is it well diversified? Is there any one area that's really juicing that bid activity?

No, it's kind of across the board. I mean I was -- again, I think as we talked about before and mentioned again today, the energy space in the Caribbean market has been somewhat muted for the last year, based off COVID. We're starting to see stirrings on that. But in terms of geographic, that kind of -- the quoted work outstanding, low bids, it's kind of -- it's spread across the geographic footprint.

Okay. And as you said, $500 million would be above average, but we're not talking peak levels here.

Yes.

Okay. What is the capability of assets in the marine construction business in total or industry-wide to handle a $500 million bidding activity? At what point does the industry become taxed on having assets available to meet a demand?

That's a tough question, but I think -- because, again, it depends on the type of service that's involved in a project. If you're talking about dredging services, that's kind of one thing. And I think the industry has capacity to service an uptick, if you will, in infrastructure spend from the Corps of Engineers, as an example.

With respect to other stuff -- because it just depends again on the type of project, what sort of assets are needed to be used for that project. And then it depends on, again, on what equipment you might be using because there's a certain amount of flex capacity that you have access to.

As an example, a crane can work on land or can work on water. So that's not a limiting factor at all if you needed more lifting capacity. Now floating equipment, that's a different story, but we certainly have capacity within our fleet. But there's also third-party rental capacity that's out there, so that can be flexed.

So that is one of the -- I can't give you a number about what the overall size of the market is because we pull from so many different places, and our kind of work is always a subset of a broader picture, if that makes sense for you.

But I think if I understand your question, I think there's capacity in the system. There's capacity to flex that, we believe, and can take a higher volume of work as the economy picks up and we potentially see infrastructure -- an infrastructure bill.

Okay. I appreciate that. I was just trying to get a feel if we're anywhere near a point where bidding margins start to push up because of asset availability, but it sounds like that's not the case.

No, I think that's -- again, I think other dynamics go into that in terms of the volume of work coming out. If we see GDP numbers continue to come out, which -- today, the first quarter came out. That was at a pretty healthy clip. If we keep seeing that, there will be opportunities to pull -- press margins up as utilization increases. I would say it that way.

Okay. Well, that's certainly very good to hear. In early 2020, one of the first stimulus bills that came out, I forget if it was #1 or #2. In fact, I don't even know what number we're on now, there was a carve-out for harbor efforts, I think, of $15-something million or whatever. Did you guys actually see that flow into business activity?

And it's -- a lot of people are talking about an infrastructure bill. And everybody thinks it's a good idea and will be good for them. But I'm wondering how much of this hit from our government level has been lip service versus you guys actually seeing it, where you go, "Wow, that would not have happened if it was not from the stimulus effort"?

Well, I -- we are seeing a lot of spend in -- from port authorities as they execute their plan. Again, I think that's kind of come from either their own ability to generate capital investment funds, coupled with whatever they've been getting from the federal government on that. There is talk in the stimulus bills that we've seen running around. And obviously, we'll have to wait and see what ultimately gets done and what that looks like. But I do know water infrastructure, in particular, ports are what we've seen being discussed in some of the bills that are getting kicked around.

And I think I've mentioned this on a call before, but we go back 10 years to kind of the previous kind of stimulus bill back in the early Obama -- first Obama administration. There was -- it was not a large amount, but it was a huge amount for the Corps of Engineers. I mean it was only $5 billion or $10 billion, but it was a massive amount compared to what their normal budget is. So they effectively almost had a doubling of their budget for a couple of years there from the stimulus.

So a little bit can go a long way relative to the overall size that's being kicked around here for like the Corps of Engineers. But we also would expect if an infrastructure bill gets done for DOTs, the benefit from that from the state DOTs, which would drive bridge work for us and for port authorities. That's been talked about a lot in things that we've seen too, which would continue to help drive the expansion plans that a lot of these port authorities already have on the books.

Okay. Last area of discussion, if you would. I'd appreciate if we could talk a little bit about capital allocation. You're -- to the extent that you're able to work towards your annual forecast here of mid-, high 40s of EBITDA, that will be back-to-back years. I believe last year, the tally was around $47 million of EBITDA. Even with the ERP effort, there still should be a pretty good free cash flow to further reduce debt on the balance sheet.

Can you talk to us about -- and then -- and you know what, I missed the comment on where the state of the Tampa real estate sales. If you would remind me on that for being delinquent and missing that?

But what do you do with the current debt structure you have? What do you do with a clean balance sheet, understanding that you already talked about M&A earlier? And at this share price and this -- primarily this valuation, given strong EBITDA and free cash flow, boy, how do you find an acquisition that is better than just buying in shares of your own company?

Well, as Robert said in his remarks and I did in mine, I mean we get to a point, and we'll evaluate all uses of capital including share buybacks. So the way we look at it is, the fortunate thing is it gives us a lot of flexibility.

Obviously, as you mentioned, we have ERP. But you've kind of commented on that. We have ERP. We're reinvesting in the dredge fleet, as we talked about. And we're able to really take advantage of -- be opportunistic on the M&A front if something makes sense, obviously, where -- it would have to make sense for us.

But we'll evaluate all uses of capital, including share buybacks. So everything is on the table. And the good thing is we have the flexibility to look at all of the options.

Can you talk to your current debt structure? Because I don't think you have great flexibility in that. And we certainly know from other information that the banks are desperate to have lending facilities. It would seem to me that post the Tampa sale, you would pay things off and enjoy a lot of free lunches from bankers just trying to get your business.

Yes. We -- as we get the Tampa sale complete, we'll definitely have a flexibility to change the structure and look at alternative options. I think you're correct, it is a strong banking market right now.

I think, Gerry, the best thing is -- and we tried to allude to this on the last call and on this call, is as we get closer to those closing dates, we're going to make sure that we have maximum flexibility. We've talked to the banks. We had internal conversations. We're going to do what's best and what creates the most value.

Our next question is from Christopher Sansone of Sansone Advisors.

One quick question for me regarding the $135 million award. How does the profitability on that award compare to your 2021 operating budget?

It's in line with the work that we've been executing on and fits in line with what our guidance is for 2021.

The next question is a follow-up from Poe Fratt of NOBLE Capital Markets.

Yes. Gerry pretty much hit all the points I wanted to on cash flow and balance sheet. And maybe just to follow up a couple of things just so that we can sort of get an idea of how quickly this could develop. The second reading for the Tampa City Council is May 6. When -- how quickly can you close after that?

And then secondly, of the availability of $68 million, Robert, how much is the credit facility that expires in June? And could you move to cancel that early because you have such a strong balance sheet and you're generating free cash?

Well, on the first one, I'll refer you back to my comments. We believe that property will -- the Tampa property will wrap up sometime in Q2.

As far as the debt you talked about, the 364-day credit facility wraps up at the end of next month. We'll have some flexibility there with our banking group to fund our strategic plan. Whether it's accretive M&A or something else, we definitely will -- we definitely have been communicating with our banks. And I think we're all in lockstep.

Great. Really well positioned.

Thank you, Poe.

There are no additional questions at this time. I would like to turn the call back over to Francis Okoniewski for closing remarks.

Okay. Thank you, Brock, and thank you, everyone, for joining our Q1 earnings conference call. We look forward to talking with you again in late July for our Q2 earnings results. Thank you, and have a great day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.