Orion Group Holdings, Inc. (ORN) Q1 2019 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. Welcome to the First Quarter 2019 Orion Group Holding Earnings Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's call, Mr. Shane Martin, Investor Relations. Sir, you may begin.

Thank you, Dorenda. Good morning, everyone, and welcome to Orion Group Holdings First Quarter 2019 Earnings Conference Call and Webcast. Joining me today are Mark Stauffer, Orion Group Holdings President and Chief Executive Officer; and Robert Tabb, 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 Robert will highlight our results and update our market outlook. We will then open the call for questions. 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 in negotiation, impending 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 uncertainty 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 to the most comparable GAAP measures and reconciliation tables accompanying this earnings call within the press release issued this morning. The press release can be found on 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 would like to turn the call over to Mark Stauffer, President and Chief Executive Officer. Mark?

Thank you, Shane, and good morning, everyone. Thank you for joining our call. Today, we will discuss our 2019 first quarter results and provide you with an update on our current outlook for full year 2019. I'll begin with an overview of the first quarter and then Robert will discuss our financial performance and capitalization in more detail, then I'll return to discuss what we're seeing in our market sectors and share our thoughts around our expectations for our business. As always, I'd like to start out by thanking our nearly 2,500 co-workers for all their hard work, dedication and commitment to our company. It's through our combined efforts we strive every day to safely meet our customers' needs, while working towards our strategic objectives. Turning to our first quarter 2019 financial performance. We grew our revenues both sequentially and year-over-year as our Concrete segment resumed project activity at more normal levels, following several months of delays due to heavy rains and destructive weather patterns throughout our key Texas markets. The margins on these concrete revenues however were impacted by weather-related delays from the second half of 2018 and into the first quarter of 2019, that translated into increased labor costs that weighed on the profitability of the projects that progressed in the first quarter. We were pleased, however, with the $90 million of new projects booked in the segment during the quarter, that given the quick churn nature of our backlog should lead to improving margins for the segment as the year progresses. Marine revenues were up to sequentially, but down slightly relative to the first quarter of last year largely as a result of the timing of start-up on several projects. Marine margins were lower year-over-year due to the timing and mix of projects in the first quarter, which resulted in an increase in unabsorbed labor and equipment costs. While the first quarter is normally our seasonally weakest quarter, our results did not meet our expectations. However, given the project activity we're currently engaged in across both of our segments coupled with our backlog, which was approximately 16% higher at the end of the first quarter of 2019 than at the same point last year, and sizeable new project awards we've won since the end of the first quarter, we expect to generate year-over-year top line growth in 2019, and we anticipate improving results as 2019 progresses with improved EBITDA for full year 2019 relative to the prior year. We remain focused on executing our strategy of being a premier specialty construction company, focused on providing solutions for our customers across the infrastructure, industrial and building sectors, while maintaining a healthy financial position and maximizing stakeholder value. We also remain focused on the operational transformation underway throughout our company, which we believe will become increasingly evident as 2019 progresses. Now I'll turn the call over to Robert to discuss the financial results for Q1 '19.

Thank you, Mark, and thanks, everyone, for joining us. Revenue for the first quarter 2019 were $143.1 million compared to $136.8 million for the first quarter 2018. Revenues increased as we resume work on a number of concrete projects that had been delayed due to weather in the third and fourth quarters of 2018. First quarter 2019 reported gross profit was $10.2 million as compared to $15.8 million in the prior year first quarter. The year-over-year decrease was the result of an unfavorable mix shift for our Marine business, coupled with the impact of unabsorbed labor costs incurred on a number of our concrete projects during the previous-mentioned weather delays. SG&A for the first quarter 2019 were $16.8 million or 11.7% of revenues, which compares to first quarter 2018 SG&A expense of $15 million or 11% of revenues. The increase in SG&A in dollars and as a percentage of sales reflects approximately $1.5 million of nonreoccurring professional and other fees related to the development of our ISG initiatives. Over the course of 2019, we expect to gain leverage on our SG&A expense as a percentage of revenue. For the first quarter 2019, we reported a net loss of $7.9 million or $0.27 diluted loss per share. These results compared to a net income of $4.1 million or 14% diluted earnings per share for the same period a year ago. Adjusted for approximately $1.5 million of pretax nonrecurring costs related to professional and other fees associated with our ISG process along with approximately $0.7 million for tax valuation allowances. Our first quarter 2019 adjusted net loss was $6 million or $0.21 loss per diluted share. On an adjusted basis for first quarter 2018, net loss was approximately $100,000 or roughly breakeven on a per diluted share basis. Our adjusted net income for the first quarter of 2018 backed out the net favorable impacts of legal settlement. First quarter 2019 adjusted EBITDA was $2.4 million, representing an adjusted EBITDA margin of 1.7% compared to EBITDA of $8.4 million or a margin of 6.1% in the first quarter of last year. Looking at our results with respect to our 2 segments. In the first quarter of 2019, our Marine segment had revenues of $61.5 million and adjusted EBITDA of $2.2 million with an adjusted EBITDA margin of 3.6%. This compares to revenues of $62.8 million and adjusted EBITDA margin of $7.9 million with a margin of 12.5% for the Marine segment in the first quarter of 2018. Our Concrete segment had first quarter 2019 revenues of $81.6 million as compared to $74.1 million in the first quarter 2018. Adjusted EBITDA for the Concrete segment was $238,000 representing 0.3% adjusted EBITDA margin in the first quarter 2019 as compared to $522,000 and 0.7% adjusted EBITDA margin in the first quarter of 2018. In terms of breakout by customer type, the Marine segment's first quarter 2019 revenues were comprised of 75% from federal, state and local government agencies, while 25% was generated from the private sector. This compares to 47% and 53% from government and private sector customers, respectively, in the first quarter 2018. The Concrete segment's first quarter 2019 revenues were comprised of 84% from the private sector versus 80% in the first quarter 2018. For the first quarter 2019, we bid on $1.1 billion worth of opportunities and were successful on $114 million. This resulted in a book-to-bill ratio of 0.8x and a win rate of 10.6% for the quarter. As of March 31, 2019, we had a backlog of work under contract of $411 million, of which approximately $219 million was associated with our Marine segment and $192 million for the Concrete segment. Additionally, we are the apparent low bidder or have been awarded subsequent to the end of the first quarter $86 million worth of opportunities. Of this, $74 million is related to the Marine segment and $12 million is related to the Concrete segment. In total, currently, we have over $497 million of projects between backlog and low bid, positioning us well for growth in 2019. Now turning to balance sheet. As of March 31, 2019, we had nearly $30 million of cash on hand and availability under our revolving line of credit. We ended the quarter with approximately $79 million in total debt outstanding, of which $23 million was related to the revolver and $56 million was related to the term loan. Between the availability on our revolver and our expectations for free cash flow generation in 2019, we have more than ample liquidity to support our growth strategy including our ISG initiatives. As mentioned in our press release, the company executed an amendment to its credit facility on May 7, 2019. The amendment will increase the leverage ratio requirements in 2019 to 9.5x in the second quarter, 6.25x in the third quarter and 4x in the fourth quarter. Also, the fixed charge coverage ratio will be waived for the second and third quarters of 2019. The leverage ratio will revert back to 3x in the first quarter 2020 and the fixed charge coverage ratio will revert back to 1.25x in the fourth quarter of 2019. The company is pleased with the continued robust support from its lenders and looks forward to maintain an excellent relationship with its bank group. Additionally, our funding program remains solid and it's more than adequate to support our bidding activity. Now I'll turn the call back over Mark to wrap up.

Thanks, Robert. Turning to a review of our market sectors. In the infrastructure sector, which we service through our Marine segment, we continue to have expensive -- extensive opportunities with both public and private customers to deploy our capabilities in the maintenance and the expansion of Marine facilities on U.S. waterways. Throughout our operating areas, fundamentals remain positive as evidenced by the $35 million of awards we recently announced for dredging of ship docks and berths for private customers in several major waterways along the Texas, Gulf Coast. We continue to see a substantial amount of additional bid opportunities in the infrastructure space particularly from downstream energy customers as they expand their waterside facilities associated with refining, stores and exporting. Other important areas for bid opportunities for our Marine segment are the recreational and port authority markets. These markets enhance our overall project diversity as they provide access to both private and public customers and give us exposure to multiple macro trends. Recreational-driven bid opportunities from cruise lines remain promising as we tracked several projects related to new destinations as well as for the refurbishment of existing infrastructure both domestically and in the Caribbean. We also continue to see demand from port authorities, which are generating opportunities as they execute their expansion plans to handle larger vessels and increased traffic flow. The example of this is our $97 million expansion project at Port Everglades in Florida, which continues to progress well and we are pursuing similar projects across our markets. The industrial sector represents a broad range of opportunities for our company. By leveraging our skill sets and customer base, we are expanding our addressable markets to provide high-quality services to meet more of our customers' needs. We are continuing our greenfield expansion by combining talent and resources from the Marine and Concrete segments to continue to pursue and execute foundation and other work inside the industrial environment and other land-based environments. We expect the massive long-term petrochemical-driven opportunities along the Gulf Coast to provide significant potential to expand our addressable project opportunities. We have been actively bidding work in the sector and we are focused on building profitable backlog in this business. Within the building sector, where our Concrete business operates, we continue to have solid long-term demand drivers. The market -- the markets we currently serve in Texas continue to be leading centers for population growth and business expansion. Population growth throughout our markets continues to drive demand for new distribution centers, office expansions, retail and grocery facilities, multifamily housing units, educational facilities and medical facilities. While in recent quarters the market has been experiencing irrational competitive behavior on the bidding side. We are hopeful that as project activity continues to ramp up as we move through 2019, markets will adjust accordingly to these positive bid activities -- to the positive bid activity we currently see. Looking across our business sectors, we see substantial bid opportunities and believe we have strong long-term drivers. Our backlog combined with low bid remains at elevated levels and we are optimistic about our prospects for adding new awards given the healthy bid opportunities we are seeing. Currently, we have nearly $1.1 billion worth of bids outstanding, of which $342 million is related to the Marine segment and $789 million is related to the Concrete segment. Overall, we are tracking over $11 billion of current and future bid opportunities. Looking beyond this already large set of prospects. Last week, key congressional leaders met with the President and agreed to pursue a $2 trillion infrastructure package to repair and upgrade our nation's roads, bridges and waterways. Obviously, quite a bit has to happen to make this kind of legislation a reality, not the least of which is how it will be funded. But we believe it is a very good indication of the federal government's recognition of the need to take some meaningful action as it relates to infrastructure. We will continue to monitor development on infrastructure legislation, which if enacted would add an additional -- would add additional meaning drivers to our markets. Between our current backlog in low bid, our $11 billion of bid opportunities and solid macro drivers, we see no lack of growth potential for our business. However, we are acutely focused on enhancing our ability to expand our profitability on this work and do so on a consistent basis. As I mentioned earlier in the call, during the first quarter, we undertook an intensive review of our operations, processes, procedures, capital assets and human resources. We refer to this as our invest, scale and growth initiatives or ISG. Over the course of this in-depth analysis, we've identified several areas of our business where we believe opportunities lie to unlock meaningful, incremental, profitable -- profitability through cost reductions and efficiency enhancements. We have multiple initiatives underway across our business with the areas of focus around labor management, equipment management, project execution and corporate processes. Over the past several years, we've taken various actions to improve our practices in all these areas and what we're engaged in now builds upon that foundation by directing numerous specific initiatives within each category, which are assigned specific targets and schedules with respect to margin or profits improvement. With specific accountabilities for executive and business unit management responsible for driving these changes. We look forward to providing you with more updates on these actions we are taking and the results they are yielding in the coming months. With that, I'll turn the call back over to the operator to begin the Q&A portion of the call.

[Operator Instructions]. Our first question comes from Jonathan Tanwanteng from CJS Securities.

Can you tell me how much is your current backlog in low bids outstanding that you would expect to liquidate in 2019?

Yes. We expect a good portion of that to liquidate this year. As we talked about before, our projects run from 6 to 9 months on average, so a good portion of that should burn off this year.

Anyway to ballpark it above 50, 60%, 70%?

Yes. I think that 60% -- 60%, 70% range is a good number to use.

Okay. Great. And then how's the weather been going to Q2? Has there been any other delays that we should be aware of? I know there's a fire in your facilities recently in Houston, just any picture on how Q2 is progressed.

Yes. Well, yes, we did have improving weather in -- for our Concrete business in Texas during the quarter, it started off a little rough in the first part of the quarter in Q1. However, yes, we saw improvements as the quarter progressed. As we've gotten into the second quarter, again, I think we -- it's been a little bit of a mixed bag, but I think we've had some good patterns. We're in a little bit of a funky week this week, but hopeful that we'll get through pass this and get into some better weather patterns as the quarter progresses.

And any other delays that we should be aware of?

We had -- sorry, you mentioned the fire on the Ship Channel here in Houston, that had a little bit of a delay for us, but not much. We basically -- we're not working in the area that was impacted by that. We did have the Ship Channel close down for short period of time that impacted our mobilization that we had underway, but that was resolved fairly quickly. So no long-term impacts at this point that we're seeing.

Okay. Great. And then regarding the ongoing review that you have going on, what are the costs associated with that? Number one. And number two, do you expect that to tail off once it's over or are there investments that you need to make? Just a little better picture on what expenses are going to be associated with this.

Yes. So a couple things on that. One is in the first quarter, as Robert talked about, about $1.5 million of the impact that he called out in his remarks in Q1. For Q2, we would expect that to drop dramatically probably in half at least and we'll have there -- it is called our invest, scale and grow initiative, so we'll have more to say on that as we go forward for the year, so that we can talk about benefits that we will call out netted against any expenditures we see there. But again, very pleased with the progress we've made. I think we've got a lot of good initiatives underway that we think will yield the long-term benefits for us. And again, we'll call more of that out as we go forward through this process and net against any expenditures as a result of these initiatives.

Okay. And at the risk of trying to get a sneak preview, I mean, you mentioned in your prepared remarks that you're acutely aware of, I guess, the issues in past quarters related to external risk, whether it's weather delays or anything like that. But is there anything you're doing to address the, I guess, the sharing of risk with your client in these projects that you're doing, to either better distribute it, protect ourselves, improve returns efficiency, is there anything specific that you can share with us now to help improve those things?

Yes. Well on that front, I would say, we're always looking for ways to do that. We always look for ways to share that. As an example, if we get into the hurricane season as we're getting into it that starts in about 3 weeks here. We will try to look at the risk profile there and see how we can share that, how we can build cost into -- contingency cost into our bid. We always have to focus on what the market will bear, but to your point, we are focused on being innovative in this regard. We are focused on enhancing our weather data that our management has at their hands, so that they can factor that into their contingency build up as they look at this. Again, we have to balance that against being competitive to gain work, but we are focused on doing the things that you're talking about whether it's contractual based, where we can share some things, as I said, around the tropical weather or if it's just looking at it from a contingency standpoint and if we can get the better forecasting data about what we're seeing and so we can factor that into our cost structure as we bid work. So again we're focused on execution and improvement across the board.

Got it. And then finally, just you had a couple issues with either collections or change orders in the last quarter, any update on those and if those have been resolved or getting close to a resolution?

Well, we'll take those separately on the one -- a couple projects in particular that we took charges on. One of those projects is -- which should finish in the second quarter. We do have some change orders pending there that we are progressing that we will think will be beneficial. On the larger project that had the impact, we are progressing along the REA process. No news to report on that front, we are continuing to execute on the project, we're gearing up for the seasonal work on that project. As we said last time, we're confident in our position, on our entitlement to a recovery there. Of course, we can't make any guarantees on that but we are progressing the -- through the process and have taken the steps along that way and that continues and will continue on and we'll update that as we see movement on that. With respect to the receivable reserves that we took last quarter, again, as we said last time, that's very unusual for us to have any kind of issues with receivable. In fact, I can't -- I think, I said this last time, I can't remember the last time we had any kind of issues on receivable, these were sort of a couple of unique circumstances. And as we said last time, very clear, these were reserves that we thought were prudent to be conservative in our accounting. We still continue to believe and we are entitled to the full amount of those receivables and are continuing to progress our recovery on those, no news to report on that recovery at this time. But we're continuing our efforts on recovery and no additional changes in the reserves for receivable nor quite frankly, do we think we'll have any of that on a go-forward basis, I think we just had a couple of unique things that happened and that happens occasionally, but it's very infrequent for us, and so no additional charges were taken on anything.

Okay. Great. And one more, if I may. Do you expect to be drawing down the revolver in the coming quarter?

I expect the debt to remain flat, slightly up quarter-over-quarter. That's going to be really driven just about the time of project start-ups in the normal AR process. But at this point, I'm projecting it to be flat to slightly up quarter-over-quarter.

Yes. And I think, just to add to that, I think you'll see like you saw in Q1, we may make draws, but we pay down during the quarter. So as Rob -- that ties in to what Robert just said. So depending on timing of things, there's always draws and pay downs on the revolver in a given quarter.

Our next question comes from Marco Rodriguez from Stonegate Capital Markets.

I was wondering if you could talk a little bit more about the impacts you saw on the quarter on the concrete side with the additional labor costs. Can you kind of quantify what sort of impact that was in the quarter from a dollar perspective or a margin perspective?

Well, I'll kind of talk generally and then Robert can jump in here. But I think what we saw is we talked about it in the last couple of calls what was going on in the back half of '18. I think what we saw in the first quarter was those impacts are just -- our cost around our -- in those prior periods around the inability to get work on the ground or having to do rework because of the weather and the weather impacts and things like that. So essentially, as we burned off and we're able to use resume as we said in the remarks more normal activity in the first quarter, normal production, we're basically we're working off the pressured margins because of the cost build up in those -- in that backlog of work that was impacted in the prior period. So as we've talked about before, the -- that business has been pressured with margin pressure in 2018, just the bid margin pressure, which I talked about, I made remarks today, in my remarks that I think that given the activity that we see out there in terms of the macro items and the actual work, I mean, we've bid on between the segments over $1 billion worth of work in the first quarter, and we see that continuing going forward with the opportunities in front of us. So in our view, that means there's just irrational bidding going out there. We think that the market conditions support higher bid margins. And again, we're hopeful that the market would recognize that as well and react accordingly. So with respect to an actual dollar figure, I don't know that we called out that specifically, but I think it's safe to say that our results in that segment would have been substantially improved had we not had that pressure in the cost side of things from -- that we had in embedded in the work that we burned off in the first quarter.

Got you. Maybe you can talk then about what's in the backlog right now for the Concrete, you mentioned that you had an additional $90 million in there that was relatively new, so not encumbered by those margin pressures. Is there additional work in the backlog that is still under this -- the margin pressure from the issues you had in the second half of '18 and maybe if I can try this way, maybe if you can quantify or give us a sense as far as the delta on the margins of the new business for $90 million versus what's -- what might be remaining that have some pressure?

Well, I'll answer that in couple different ways. One is that overall, in the Concrete business, again, the overall, bid margins have been pressured. So it's a little bit different margin profile than it was in 2017 out of the gate. So by point or 2 something like that. I think again as we talked about a lot of the work that we burned off in the first quarter is around this delayed work from the second half of '18 that again because of the cost impact of those delays that got embedded in that backlog or reduce the margins in those backlogs as we were going forward, a lot of that burns off in the first quarter, the $90 million that we put in there should be improving. And as we transition from burning off that impacted backlog, I'll call it that way, to kind of new backlog as I said, we should margin improvement as we go through -- progress through the year. Again, some of that's going to depend on the timing. I think just as a general statement, we're going to see that improvement there, but again it's timing and mix of work again, we would expect to have less of the prior backlog burn in Q2 and more of the new backlog burn in Q2 as a result of just the quick burn nature of our work. I mean we burn this work relatively quickly. So we did get a lot of that out in Q1, I think.

Okay. It's fair. Then maybe if you can talk about the bid pressures, I mean you've brought this up, obviously, for some time now. And If I'm not mistaken, I thought most of the pressure was down in the Houston area. Has that kind of bid pressure manifested itself up in the Dallas and central kind of Austin area as well?

Well, yes, a little bit just on the weather pattern. So again, it's a very fluid market. I think in the Houston market in particular, as you point out, it was Houston. We've had some margin pressures for kind of an extended time. I think a lot of that, as I called out in earlier remarks from previous quarters, was around some of the issues that were specific to Houston, Harvey and the post-Harvey impact around just the disruption that, that caused in the marketplace. And I think that's kind of exacerbated and extended out those bid pressures. In other markets, we see that -- we'll see kind of periodic where we see goofy some stuff what we would call irrational bidding and then it kind of bait somewhat. I think again right now, I would attribute some of the irrational stuff that we're seeing is around the kind of weather stuff. I mean a lot of people have been pent up not being able to execute work, not just us in Texas and again that gets people in our view, acting very goofy at the bid stage because again we see pent up demand, we see good long-term drivers in this business and so we kind of -- are kind of not under -- viewing it as people being irrational as their approach here. But going back to the positive here, as we saw -- we're seeing in Houston and we talked about this last year that our in -- our leading indicators were that we would see an uptick in activity, a bid activity I'm talking about, which is kind of step one of the allevment [ph] of the margin pressures as we see it. So we've started -- we've seen the uptick in bid opportunities. We're seeing that, so that's kind of the first step. So again, as I've said in the remarks today, we're hopeful that the market recognizes the level of activity and the few -- and the expected future level of activity and adjust accordingly. Just said another way, we don't understand why people are bidding as cheap as they are. But I think from the standpoint of what we can control, we're focused on executing the work at or above where we bid it. And again, from a long-term perspective, we see really good drivers in that business and think it's a matter of time and abatement of irrational behavior and we'll start seeing bid margins tick up.

Got it. Okay. And then last question, I'll jump back in queue. Just kind of coming back to the ISG initiatives that you mentioned on the call earlier, just wondering if you could maybe help frame or put some additional color on some targets whether that's dollars that you expect to take out of operating expenses or improvements to win rates, margins, any sort of targets you can possibly share with us, I think, would be kind of helpful so we could track that?

Well, I agree, Marco, as we talked about on the remarks that we'll be able to hang a little more color around that, but from the investment side obviously will be much, much smaller than what we expect to yield benefit-wise out of this. I think at this point, we're still going through the process of getting our process put in place, our initiatives put in place around what expectations are, what our timing of that is in terms of some things may be a quicker benefit, some things may be a longer-term benefit. So I think it's premature to kind of give you some specific dollar figures today because I -- we want to be very accurate about that. But we will give you that at the appropriate time and then we will speak to it as we go forward after we give that to you. I think what we would just reiterate today is that we think it is transformational, it is focused around controlling the things we can control. As we talked about earlier, there's some things we -- I can't control the weather. But we can control -- to the earlier question, we can control trying to get better data on that so that we can try to factor that into contingency or other ways that we can potentially try to mitigate weather risk. We can control the areas that we're talking about in improvements to our labor processes, our equipment processes, our project execution, our corporate services i.e., G&A and as Robert talked, about leveraging our G&A as a percent of revenue. So there are a lot of things in motion and we are very, very focused on it and we'll have more to talk about that in detail as we go through the next few months.

Our next question comes from Alex Rygiel from B.Riley FBR.

Mark, could you quantify or characterize the quantity of your backlog associated with dredging?

Alex, I'll tell you that don't lick because we don't break that out, but we have significant backlog in dredging. We recently -- this is public, we haven't announced it, but it's public. We just recently won a Corps of Engineers project. We have -- we expect higher utilization in our dredge fleet as we go through 2019 both in private sector work and public sector work that we -- so we don't have that broken out specifically, but it is -- I'll say it this way, that it's higher than it was a year ago and it does include a good mix of private and public work.

When you're thinking about the second half of the year, as it relates to revenue contribution from dredging, would you expect that to be up single digits, up double digits on a year-over-year basis?

Yes. We expect that to be up high-single digits and maybe even going up to double digits year-over-year. I mean, as Mark alluded to, we have won several dredging projects and the market looks well right now and there's a lot of a good bid opportunities still in front of us. So we expect the utilization up year-over-year.

Any chance your utilization could be near 100% by late this year?

It's possible. I mean, as you know, if you get to the 85% to 90% or you get around 90% that's effectively full utilization. So we think -- we expected to get -- to have high utilization as we go through the back half of the year. Some of that may be, as we've talked about previously, we do have some dredges or 1 or 2 at this point that we've used as boosters. So they're utilized, it does have a different cost structure. So we may be at that high run rate, it may be inclusive of using a dredge or 2 as a booster, but long story short, to your point, the back half of the year, we would -- right now what our expectations are is that our utilization of our dredge fleet will be up year-over-year.

As it relates the ISG process, are you considering the sale of any idle assets or the divestiture of any business unit?

Well, we were taking a look at broadly, I'll answer this and then specifically, so broadly we're -- we've been looking at everything as you can imagine. I mean we're looking at as we talked about in our remarks, used all facets of the business. So specific around assets that we are looking at that in terms of not only equipment, but facilities and property. Again, there's an I piece of this and a divestiture piece of this, too. There are some things that we may need to do in certain areas to enhance our efficiencies, but there's also surplus things that have been identified that we are in the process of addressing through those ISG units.

And just to confirm, you haven't taken any action yet per se on ISG conclusions yet, correct?

We have not reached the point where we, again, are going to hang color around that per the last questions. But we have been through -- we are -- we've been through our review process. We're in our kind of a staging process, set up process. There are certain things that, I mean, this is not -- this is a very fluid dynamic process as you can imagine. And so there are some things that are further progressed that are actually we are in the implementation phase. There's other things that we are getting ready to be in the implementation phase, there's numerous initiatives, a lot of moving parts as you can imagine, but there are things that we are implementing right now, there's other things that we will be implementing. And so again, we're still kind of "in the process", which as we talked about earlier, we'd have remarks around that as we kind of concluded that. And so we're still in the process of concluding that.

I'm showing no further questions at this time. I would now like to turn the call back over to Shane Martin for closing remarks.

Everyone, thank you for joining Orion Group Holdings first quarter 2019 earnings conference call. We look forward to seeing everyone on the next call. Thank you.

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