Posted on August 1, 2022
CEO projects new lower full year 2022 EBITDA guidance with margin enhancement initiatives underway
Orion Group Holdings, Inc. (NYSE:ORN) Q2 2022 Results Conference Call July 28, 2022 10:00 AM ET
Company Participants
Francis Okoniewski – Vice President, Investor Relations
Austin Shanfelter – Interim Chief Executive Officer
Craig Owen – Chief Financial Officer Advisor
Conference Call Participants
Julio Romero – Sidoti& Company
Joe Gomes – NOBLE Capital
Alex Rygiel – B. Riley
Marco Rodriguez – Stonegate Capital Markets
Poe Fratt – Alliance Global Partners
Operator
Good day and welcome to today’s Second Quarter 2022 Orion Group Holdings, Inc. Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. As a reminder, today’s call is being recorded.
I would now like to turn today’s call over to Fran Okoniewski, Vice President, Investor Relations. Please go ahead, sir.
Francis Okoniewski
Thank you, Lisa, and good morning, everyone, and welcome to Orion Group Holdings Second Quarter 2022 Earnings Conference Call and Webcast. Joining me today are Austin Shanfelter, Orion Group Holdings Interim CEO; and Craig Owen, currently serving in the capacity of Chief Financial Officer, Adviser.
Regarding the format of the call, we’ve allocated about 10 minutes for prepared remarks in which Austin and Craig will highlight our results and update our 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 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 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 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 reconciliations and definitions inclusive of the most comparable GAAP measures and reconciliation tables accompanying this earnings conference call within the press release issued last evening.
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 Austin Shanfelter, Interim CEO. Austin?
Austin Shanfelter
Good morning, and thank you, Fran. First, I’d like to thank the entire team for embracing the changes and the new expectations that have been set in the past 60 days. I appreciate the actions that are underway and that needed to be provide a clear successful path forward. As we work to conclude the onboarding of a new leadership team, the steps we are taking now will enhance and set up the foundation for the success of that new team.
These steps include company-wide focus on obtaining margins, margin improvement on all projects; ensuring the ability to capture all cost escalations; continuously downsizing unproductive markets; monetizing real estate; improving liquidity; increasing project wins from negotiation processes, not just low bid. And once again, key is onboarding a new management team.
Just one example of the efforts that we put forward. June, we will post our first profit — we posted our first profit in concrete for the year. Our backlog remains solid, and we continue to see clear opportunities in our end markets, which will be further enhanced as the full impact of the Infrastructure Act comes online.
In addition to improving our liquidity and — by our performance, we also are focused on our DSOs. Please note that just one day improvement adds over $2.5 million of liquidity. With regards to real estate, we have two pending transactions on our Port Lavaca properties. We believe these will close in the second half of this year. We are fully engaged with CBRE on developing a disposition strategy on the remaining properties. I’ll go into that more later in the Q&A.
All proceeds from the pending transactions will go to the reduction of our revolver, which will add to our liquidity. Last but definitely not least, we are on the way to selecting our next CEO. We expect this process to be — and the hiring to be completed in August. The CFO search is well underway and has been very positive as well. Our current schedule to have this selection made most likely towards the end of August. I look forward to our Q&A session.
I’d now like to turn the call over to Craig.
Craig Owen
Thank you, Austin, and thanks, everyone, for joining us. I’ll now discuss the financial results for the second quarter in more detail. Revenues for the quarter were $195 million, up as compared to $146 million in the second quarter of 2021 and $175 million in the first quarter. The increase was primarily due to higher volume in the Concrete business and the startup of large jobs that were awarded in the second half of ’21 in the Marine business.
Second quarter gross profit was $14.3 million compared to $12.3 million in the prior year period. The increase was primarily driven by efficiencies in equipment and labor utilization and a change in mix of work in the Marine segment in the current period, partially offset by unabsorbed indirect expenses in the Concrete segment. Second quarter gross profit was up 12% as compared to the first quarter gross profit of $12.8 million. And year-to-date gross profit of $27.2 million was up over 100% compared to the second half of ’21. As a percentage of revenues, gross profit margin was 7.4% in the second quarter, down from 8.4% in the prior year period and up slightly from the first quarter.
Turning to the segments. In the second quarter, the Marine segment had revenues of $82.3 million and adjusted EBITDA of $8.7 million, equating to an adjusted EBITDA margin of 10.6%. This compares to $63.9 million of revenue, adjusted EBITDA of $7.8 million and an adjusted EBITDA margin of 12.2% in the prior year period. Marine results were down slightly on revenues and up on adjusted EBITDA and adjusted EBITDA margin compared to the first quarter of ’22 that had revenues of $84.5 million, adjusted EBITDA of $7.3 million and an adjusted EBITDA margin of 8.6%. The increase in adjusted EBITDA compared to the second quarter of ’21 was driven primarily by the start-up of large jobs awarded in the second half of ’21.
The Concrete segment had second quarter revenues of $112.3 million, adjusted EBITDA of a negative $3 million and adjusted EBITDA margin of negative 2.7%. This compares to $81.9 million of revenue, adjusted EBITDA of $400,000 and adjusted EBITDA margin of negative 0.5% in the second quarter of ’21. Concrete results were up compared to the first quarter of 2022 that had revenues of $90.5 million, adjusted EBITDA of negative $2.0 million and an adjusted EBITDA margin of a negative 2.3%. The Concrete segment’s second quarter results as compared to the second quarter of ’21 were impacted by decreased project performance due to inefficiencies in executing work, partially offset by higher volume.
SG&A expenses for the first quarter — excuse me, second quarter were $17.2 million or 8.9% of revenues compared to $13.7 million or 9.3% of revenues in the prior year period. The increase in SG&A compared to the prior year was primarily due to severance, consulting fees related to management transition, property tax true-ups in the current year period and as a result of the true-up, reducing bonus expense in the prior year period.
Net loss for the second quarter was $3.1 million or $0.10 diluted loss per share. Adjusted for nonrecurring items and the tax impact from valuation allowances, adjusted net loss was $0.9 million or $0.03 loss per share.
Second quarter adjusted EBITDA was $5.7 million, representing an adjusted EBITDA margin of 2.9%. This compares to adjusted EBITDA of $7.4 million and an adjusted EBITDA margin of 5.1% in the prior year period, and adjusted EBITDA of $5.2 million and adjusted EBITDA margin of 3% in the first quarter.
Turning to bidding metrics. In the second quarter, the Company bid on approximately $1.8 billion worth of opportunities and was successful on $194 million. This resulted in a win rate of 10.8% and a book-to-bill ratio of 1.0x for the quarter. As of June 30, ’22, backlog was $603 million, up from $394 million at the end of the prior year period. Of quarter end backlog, $281 million was in the Marine segment and $322 million was in the Concrete segment. Approximately 81% or $487 million of the quarter ending backlog will burn during the next 12 months, with the remainder associated with longer-term projects burning throughout ’23 and into 2024.
Additionally, the Company is the apparent successful bidder or has been awarded $153 million of new work subsequent to the end of the second quarter. Of this, approximately $149 million is related to the Marine segment, while $4 million is related to the Concrete segment. The Company ended the quarter with $33 million of outstanding debt, $31.9 million of which was related to the revolver. As of June 30, 2022, the Company had approximately $8.1 million of cash and $8.4 million of availability under its revolving credit facility. The Company is in compliance with its credit agreement covenants.
With that, I’ll turn the call back to Lisa for Q&A.
Question-and-Answer Session
Operator
[Operator Instructions] We’ll take our first question from Julio Romero with Sidoti& Company.
Julio Romero
So I wanted to start off on the Marine side. If you could just maybe speak on the successful bids of $149 million in Marine. It seems pretty sizable. And if you could just touch on maybe the margin profile and if those awards are public or private.
Austin Shanfelter
They are a little bit of a mix of both, the public and private. The margins on those, I think — I can tell you, it would range from 10% to about a 12.5% margin on the projects. There was a lot of detailed discussion. What is notable is much of that was negotiated work, not low bid.
Julio Romero
Got it. Understood. And I guess, if you could just talk about Concrete a little bit. Just talk about why profitability kind of trended down sequentially and maybe what you expect for profitability and concrete in the back half of the year?
Austin Shanfelter
Well, we were finishing — when I got in here, we went over and we changed a lot of — I talked a lot about changing our margin approach in that business. And we’ve instituted a lot of new minimum margins that we’ll do bids on and take on new work. We had to burn off existing work in the last quarter, and we’re seeing the impact of burning that work off. One of the big examples that I can give you is we’ve reduced the backlog in Central Texas by over $9 million in the second quarter. Going forward, we’ve reduced the jobs by 15 projects to the fact we only have 19 projects left in the market.
This is a market that’s given us a lot of challenges attempting to make margin at all. And we’ve had a lot of losses there. So this is the subject where I talk about downsizing unproductive markets. And that still came into our numbers in the second quarter, reducing this by $9 million and dropping the project numbers, we expect to see margin improvements in concrete throughout the third and fourth quarter.
Julio Romero
Okay. Very good. And maybe last one for me is just if you could broadly maybe speak on demand trends in your private markets, both Marine and Concrete. And are you currently seeing any signs of rates may be leading to any demand changes at all?
Austin Shanfelter
Well, what’s interesting, first of all, the rates. We’ve gone ahead and changed a lot of our margin profile on our bidding across both divisions, both Marine and Concrete. And in doing so, we’ve been successful in winning what I would call better work, better quality work with great customers at a higher level. So we’re not seeing margin compression at this point. As a matter of fact, I’m seeing a little bit of the opposite. We’re testing those markets a little bit more.
Secondly, we’re working really hard to make sure that we’re building in contingency language in all of our contracts to handle any unforeseen escalation type of costs that we’re experiencing through this time. And most of our customers, if not all, have been working with us very closely on that issue, and we haven’t had a lot of pushback. The fact we’re still seeing strong markets in both Houston and Dallas. We’re not seeing any integration in the opportunities that we have, but we’re being more picky. So we’re going to probably see a little bit of reduction in revenue positively — positive reduction in revenue in Concrete. But here again, with the eye on increasing margins and profitability.
The Marine market has remained fairly strong, and this is without the infrastructure bill coming to the play at this point yet. I think we’ll start seeing a lot more of that coming in maybe the fourth quarter and then start hitting us in the first part of next year.
Operator
We’ll take our next question from Joe Gomes with NOBLE Capital.
Joe Gomes
So just maybe you can talk a little bit on the utilization. One of your goals was to improve the utilization of the fleet and your equipment. You mentioned some better utilization in today’s call. How much more do you think you can have there on the upside? And what do you do to try to continuously improve that utilization?
Austin Shanfelter
We just put a couple of new marine assets on the market recently. That didn’t happen in the second quarter, but it did happen last week. That could generate anywhere from a low end of $3 million to a high end of maybe $4.5 million to us. It’s an equipment that we have not been using. We are bringing online a new dredge that will be coming out in October, will have significant impact to our — both our revenue and margins in the fourth quarter of this year and of course, on through next year. It will probably run at a much more efficient path of the productivity of that vessel should be really strong for us. And that’s coming on, like I said, in October. But we’ll continue to look at any asset that’s not being deployed at a high level.
Joe Gomes
Okay. And you mentioned on — briefly on the real estate sales, and you’re going to answer some more — talk about them some more in the Q&A. Kind of where do we stand on East-West and Port Lavaca? We were hopeful that those deals last quarter were going to be completed. Maybe just really give us in-depth update on where we stand. And I know especially on East-West, you had talked previously about that could be worth significantly more if you had taken a couple of actions, and where are you leaning towards now in terms of that property?
Austin Shanfelter
Yes. Well, I think what — I definitely got my hands around all these properties in this quarter, in the past quarter, and let me update you where we are. We have two pending transactions in Port Lavaca, combined value of around $17.5 million. I believe that those transactions will take place in the third quarter to fourth quarter, but they’ll be completed. But we will have deals in place, I believe, in the third quarter. I just don’t have the closing dates or closing times on those deals to particular time.
We are partnering now with CBRE, and we’ve developed a strategy and working on a strategy — multiple tiered strategy on East and West Jones and Baytown. We’re looking at a lease sale combination with some groups. We’re looking at a joint venture with some groups that then a joint venture would be get somebody that can help us remove the concept I was talking about before. Somebody to remove the fall and be a partner of ours in the process, thus raise the money and we’ve become partners in that.
We’re also looking at a joint marketing solution with local other landowners in the area with — if we combine the properties that the combination of them will drive value in moving the properties as well. These conversations are ongoing right now. They are multiple-tiered in a few ways. I would expect that we make a final decision on those in the next 30 to 40 days, depending on the input we get, the interest we get. But we’re working down three paths to try to work on a strategy to monetize those locations.
Joe Gomes
So is the previous agreement that you had on East-West, is that now gone, terminated, expired, however you want to term it?
Austin Shanfelter
We terminated it and they’ve asked to come back in, they’re just one of the other people that are looking at these solutions. We are fully free and clear to do any one of these three directions at this time.
Operator
Our next question comes from Alex Rygiel with B. Riley.
Alex Rygiel
Austin, you mentioned you posted a profit in the Concrete segment in June. Has that continued into July? Do you think we could see a profit for the entire quarter in the third quarter in that segment?
Austin Shanfelter
That’s my expectation. What we’ve done there is — the big thing of Concrete, as I said in the last call, is that we were doing 70% of our projects profitably on margin as per our bill — our estimations. And what I’ve done with the team over there is we’ve started removing locations that we’ve not been successful, clients we’ve not been successful with and situations that we just couldn’t overcome. And this is the whole downsizing of the markets that we’re just not being productive in.
And by taking that out, we’re — you’re going to see a reduction in revenues put more like a little bit in the division. You’re going to see a reduction in cost division, and we should see an increased margin in the business and a consistency of those margins in the business. So my expectation is they have less write-downs in problematic projects and push the profitability back to where it should be. It won’t all happen in the third quarter, but trajectory-wise, I’m looking for improvement month over month over month.
Alex Rygiel
Just kind of a follow-up on that answer. You mentioned that you’re expecting sort of commercial revenue to, I don’t know, tail down a little bit. But yet segment backlog in Commercial Concrete is incredibly strong at $322 million, that’s up from $287 million in the first quarter, and that’s up from $224 million last year. So how soon do you see that sort of tailing lower?
Austin Shanfelter
Well, here again, I don’t mind getting good revenue. You’re going to see our Central Texas area continue to reduce in size and in backlog. And we’re not refilling that at the base unless we get super margins an opportunity. So it’ll be very cautious what we’ve been and how we’ve been there. But the markets in Dallas and Houston remain strong. And those are markets that we have a history of producing margins and producing positive results. So I think there’s a combination of drawdown in some locations. In other locations, we’re going to take positive opportunities where we can perform correctly.
Alex Rygiel
That’s very helpful. Within your Heavy Civil segment, the backlog of $281 million, what portion of that is associated with dredging?
Austin Shanfelter
I don’t have that percentage to tell you. I would imagine it’s around 30% to 35%. It could be a little higher. That goes — depending on how many pieces of equipment we’ve got working, that changes pretty rapidly. You’re going to see it grow to over, I would think, 45% to 50% in the second half of the year as we online the new dredges.
Alex Rygiel
And that brings me back to CapEx. Understanding you’ve got kind of a big CapEx spend here because of that dredge. What is your full year view on what the CapEx spend could be in total for 2022? And how do you see that trending in 2023?
Austin Shanfelter
Well, I see it going up in 2023 when the new management team gets here and creates their strategy and where they’re going. We’re looking at a couple of other adjacent markets at this particular point that would be conducive for us to look at and go into. But right now, it’s $16 million this year, I would believe that we’re going to be looking at some more expand in the following year, probably another $2 million to $3 million at this point. And a lot of it would also depend on exactly what we’re going to do with ERP next year. And those decisions will be made probably in the next 30 to 45 days.
Operator
[Operator Instructions] We’ll take our next question from Marco Rodriguez with Stonegate Capital Markets.
Marco Rodriguez
I was wondering — a little bit of a follow-up question in regard to the concrete market in Central Texas. Just obviously confirming that Central Texas, you guys are defining as Austin and San Antonio. And if you can maybe help us understand a little bit there. Obviously, you’re going to be reducing the exposure to that particular area in Texas. Can you give us a sense as far as the mix is concerned between your revenue mix, rather, between South, North and Central Texas?
Austin Shanfelter
Well, at the end of the day, Central Texas is probably our smallest region of — well, it is our smallest region and concrete by a substantial amount. So it probably would represent — it represented probably about 20% of our total work in concrete. The problem is that 20% was really struggled to make any profit margins at all for us over the last two years. And we’ve done a lot of things to change it, tried to change management, trying to change bidding processes, estimating processes. We just have not built a better mousetrap down there over the last few years.
And so we’ve just taken a realistic view at the market, and we just need to downsize very strongly down there and only take jobs down there that we can truly predict our margins to come through. And so it’s going to really cut that market down substantially over the next probably three, four months.
Marco Rodriguez
Got it. And can you maybe discuss some of the dynamics you’re seeing that make Central Texas much more difficult for you guys when it comes to bidding. I mean, Austin is obviously also still seeing quite a bit of growth compared to Dallas and Houston. Just kind of help us understand some of those dynamics.
Austin Shanfelter
Well, let me put it this way. Let me look at why Houston and why Dallas is doing much better. We have people in both those markets that have been around the Company for many, many years. These are folks that know the market, understand all the difficulties, understand how concrete the suppliers work with us. We have most favorite nation status with a lot of our vendors. And we have a very good relationship, healthy relationship with a lot of our clients that we’ve had for many, many years. All those things take out risk. And all those things add to predictability. So we’re just well established in the Houston and the Dallas market, and I think that adds to our ability to be profitable and be predictable and have results.
If you look at the Austin market and San Antonio market, those are markets that we try to grow and expand into. And we just have never gotten a good footing down there in those markets. We’ve tried to change our people. We tried to change our personnel in the sense of out in the field. We have clients that are new to us that we haven’t had a long-term relationship with. And it’s different down there in that area when it comes to rules, regulations, process, procedures that have impacted some of our projects as well. So it’s — I believe it’s more about the unknown and the risk profile that’s down in Austin and San Antonio for us. And at the end of the day, we got to admit when you can build a good team and when you can pull it together when you can. And that’s the thing we’ve dealt with very clearly now, and we’re moving on.
Marco Rodriguez
Got it. Very helpful. Also, I was just kind of curious here on the low bidder numbers, they kind of stood out to me with Marine at $149 million and Concrete at $4 million. Kind of looking at the fact that those numbers are at the high end and the low end of your historical ranges, if you will. Is there something that we should kind of read into that — those numbers?
Austin Shanfelter
It was probably the answer I should have given, Alex. When you see a low number and low bid in Concrete, that’s exactly my point. We’re being very careful what we’re bidding right now that we’re going to have profit in the work. So indirectly, that’s living proof that we’re not chasing revenues in Concrete at this moment in time. And we’re going to be very disciplined in our approach. So that should have been my — it’s a good answer for you, but it should have been my answer for Alex when he asked the question.
So we are focused totally on our capacity that we have in Marine looking for great opportunities that are timed well for us. And that’s what happened in this last quarter, we were able to negotiate some things in Marine that give us that look, not only in ’22, but go out in ’23 as well. Now these are more long-term projects that we were trying to finalize. One of the reasons they’re still a low bid and that the contract form is still working out the details of the contracts.
Marco Rodriguez
Got it. Very helpful. And then just last quick kind of a follow-up on the East-West Jones sale, very helpful color that you provided. I don’t know if I caught, but do you have any sort of a timing or a time frame when you think that might come to fruition?
Austin Shanfelter
Well, if you knew the pressure that I was putting on people to get an answer, my time line is I want to have this done before the end of August. I don’t know if that’s realistic with everything that’s going on in the markets today, the cost of money and capital. But we are definitely all hands on deck with our partners, CBRE. And I think that they’re a great team down here. They’re very knowledgeable in the end markets in Houston. They know how important this is to us.
I know we remind them a lot about trying to get to a solution. We’ll continue to press. I mean I can’t predict how the markets are going to work. But I can tell you the effort, the focus and the determination is all intact and all in a place. If we got solid offers, we’re not going to grind out a few extra bucks. We want these properties gone, and we want to make sure that we move on and do what we’re supposed to be doing, let’s run a business that run in real estate.
Operator
[Operator Instructions] We’ll take our next question from Poe Fratt with Alliance Global Partners.
Poe Fratt
If you could just highlight on Port Lavaca. It’s a little surprising that there’s another $12.5 million of potential proceeds there. Can you just talk about the old deal of $5 million and whether the new deal is $12.5 million or sort of have the parameters changed on the two different bids that you have right now?
Austin Shanfelter
They are changing a little bit. We have a brand-new offer that’s come in on the one property. It’s increased from the $5 million for a lot of positive reasons. And so we’re working on those details right now and trying to close that deal. The other one is — the other property is going to be a sales leaseback and we’re finalizing the terms of that deal, hopefully in the next two to three weeks.
Poe Fratt
Great. And then previously, we had talked about a working estimate under the old deal for East-West Jones of sort of, as I recall, the mid-30s. Can you give us an idea of sort of your targeted proceeds there? I know there’s a couple of different possible avenues you go forward as far as the joint venture or other things, but sort of what’s the working estimate on the value of that property?
Austin Shanfelter
Well, if you think about the three different opportunities we have, we do a lease and sale, where we would lease part of it out and sell part of it. I think the numbers still hold. I think you’re still looking at approximately a $30 million to $35 million number of value if the property as is with a lot of fill on it. But sales leaseback, it depends on how we break that out. If we do the joint marketing, that number would hold, but it would have a better chance of selling because the other locations we’re talking to don’t have to fill on it, and it’s something that people can work out over time and not have to have the access to the property immediately. So that’s an opportunity.
Now if we get into the joint venture where we have an individual that comes in and works with us to remove fill over a period of time, that would probably — that will definitely raise the value of the property. But then we’re sharing in that upside with another joint venture partner.
Poe Fratt
Great. And leaning into the second bullet of ensuring the ability to capture all cost escalators. Can you talk about potentially where you’re seeing cost pressures, both on the Concrete side and then also on the Marine side? And then Austin, you offered a targeted margin for the awards that you had in Marine of 10% to 12.5% gross margins. Could you do the same thing on Concrete?
Austin Shanfelter
The margins I offered to you on Marine, just to make sure it’s clear, is on some of the new work that we’ve just obtained. Some of our work now in the past has been a little bit lower. Right now, we’re just — we’re very focused on making sure that we improve our margins on everything we bid. So going forward, those are new goals and objectives for us. The same thing does lie in Concrete. We are basically looking at a 10% or better margin target in Concrete and everything we bid right now. I don’t want to give anything more away or more details away than that. But at the end of the day, we’re definitely increased what our minimum requirements to bid are internally.
Poe Fratt
And then just to clarify, when you talk about target margins, is it gross margin, EBITDA margin? What — can you just clarify that definition?
Austin Shanfelter
It’ll be gross margins.
Poe Fratt
Okay. And then can you talk about cost pressures, please?
Austin Shanfelter
Yes. It’s across the board. I mean, concrete — first of all, availability of concrete is a challenge. It goes up and it goes down in the Houston market and the Texas market itself. But the cost is up without a doubt, and we need to build those escalations in. I mean I look at the roofing industry, you can’t sign a roofing contract now without an escalation clause. We’re doing that a lot more in our contacts and our agreements now going forward. And we’re actually going back and talking to our existing clients about these issues.
And for the most part, they’ve been incredibly cooperative and very understanding that it’s just a fact. It’s not something that we’re trying to leverage them on, but it’s a real fact. So we’re being very proactive on those fronts. But you’re seeing in the fuel prices. We’re seeing it in concrete in the actual costs that we’re seeing is steel, we’re seeing it in any kind of metal or steel — the metal market. We’re seeing in wood and framing and things like that, that we have to purchase and lever. So we just — bottom line is we’re working closely with our clients in all of our new beds to make sure those things are included, and our bids are time-sensitive and we’re also going back with our own clients.
Operator
We have a follow-up question from Joe Gomes with NOBLE Capital.
Joe Gomes
Yes. Just one quick follow-up. You guys have previously been guiding into the mid-30s in the adjusted EBITDA range. I’m wondering if you’re still sticking with that? Or are you making any changes with that guidance?
Austin Shanfelter
Well, right now, to be candid with you, with new leadership coming on board, just giving them some — a little bit of leeway as they work through the process. I’m internally looking at $25 million to $30 million at this point. I think that it’s — I feel we have the ability to get to $30 million. But I mean, I think that we just have to be sensitive about — we’ve got — we’ve had the change of me coming in. We’ve got a change of another group coming in, and it’s going to take them a little longer to get up to speed than it did me to get going there.
But I feel confident that the team is in a place where we’re very focused on margins, very focused on doing better and performing better over the second half of this year. I think situations are good for us to have a better second half than we did in the first half. But I think I’m looking at $25 million to $30 million at this time.
Joe Gomes
That’s a pretty substantial drop in the low end there from the mid-30s previously, especially when you’re looking at — you’re saying things are improving. I’m not quite sure I’m following on why it would be going down that much.
Austin Shanfelter
Well, the first half of this year was pretty low. I mean we’re at about $8 million, $8.7 million right now. So if you look at it from what we got done in the first half and then you start looking at $30 million to $30 million plus in the second half of the year, those are some really good-sized numbers. I’m not saying that we can’t get there. I’m just saying that we are going to have another change in leadership. We are going to have some cost here going forward to make some of those changes. And we just got to be — I’m just trying to be realistic with everybody and not have a number that’s maybe not attainable. But we’re working towards the $30 million. We have our plans to get to the $30 million. I’m just being cautious.
Operator
And that does conclude the question-and-answer session. I would like to turn the call back over to Fran Okoniewski for any additional or closing remarks.
Francis Okoniewski
Thanks, Lisa, and thanks, everyone, for your interest in joining our second quarter results conference call. We look forward to speaking with you again in October to discuss our third quarterly results. Thank you, and have a great day.
Operator
Thank you. And that does conclude today’s presentation. Thank you for your participation, and you may now disconnect.
