Press Release

HOUSTON, Oct. 26, 2022 (GLOBE NEWSWIRE) -- Orion Group Holdings, Inc. (NYSE: ORN) (the “Company”), a leading specialty construction company, today reported net income of $0.2 million ($0.01 diluted earnings per share) for the third quarter ended September 30, 2022. Excluding non-recurring items, adjusted net income was $0.8 million ($0.02 diluted earnings per share).

Third Quarter 2022 Highlights

• The Company has enhanced the capabilities of its management team with the addition of two experienced and operationally-focused executives, Chief Executive Officer Travis Boone and Chief Financial Officer Scott Thanisch.
  
  
• Continued efforts focusing on more attractive markets and targeting higher bid margins is yielding improved project margins on new contract awards of $128 million in the quarter.
  
  
• The Company has signed an agreement for the $10.5 million sale-leaseback of its Port Lavaca property expected to close in December and continues to explore options to monetize additional real estate assets.
  
  
• Operating income was $1.1 million for the third quarter of 2022 compared to an operating loss of $8.7 million for the third quarter of 2021.
  
  
• Net income was $0.2 million ($0.01 diluted earnings per share) for the third quarter of 2022 compared to a net loss of $10.2 million ($0.33 diluted loss per share) for the third quarter of 2021.
  
  
• The third quarter 2022 net income included $0.5 million ($0.01 diluted earnings per share) of non-recurring items. Third quarter 2022 adjusted net income was $0.8 million ($0.02 diluted earnings per share). (Please see page 7 of this release for an explanation of adjusted net income, adjusted earnings per share and a reconciliation to the nearest GAAP measure). 
  

“We are excited to see bid margins of recent wins increasing in the third quarter due to more disciplined bidding practices established over the past few months,” stated Travis Boone, Orion’s Chief Executive Officer. “These higher margin projects will establish a solid base of work for 2023. We will continue to focus on disciplined bidding, along with strong project delivery, as we pursue profitable growth.”

Consolidated Results for Third Quarter 2022 Compared to Third Quarter 2021

• Contract revenues were $182.6 million, an increase of $42.7 million or 30.5% as compared to $139.9 million. The increase was primarily driven by the start of large jobs awarded in the fourth quarter of 2021 in the marine segment, higher volume in the concrete segment and the impact from claims and unapproved change orders recognized related to work primarily incurred in previous periods.
  
  
• Gross profit was $13.4 million, as compared to $6.6 million. Gross profit margin was 7.4%, as compared to 4.7%. The increase in gross profit dollars and margin was primarily driven by the impact from claims and unapproved change orders recognized related to work primarily incurred in previous periods, the release of discretionary project bonuses and increased dredging activity as compared to the prior year period.
  
  
• Selling, General, and Administrative (“SG&A”) expenses were $15.4 million, as compared to $15.7 million. As a percentage of total contract revenues, SG&A expenses decreased from 11.2% to 8.5%, primarily due to higher revenues in the current period. The decrease in SG&A dollars was driven primarily by a decrease in Enterprise Resource Planning implementation expense as compared to the prior year period, partially offset by consulting fees related to the management transition.
  
  
• EBITDA was $7.2 million, representing a 4.0% EBITDA margin, as compared to EBITDA of $(2.5) million, or an (1.8)% EBITDA margin. When adjusted for non-recurring items, adjusted EBITDA for the third quarter of 2022 was $8.8 million, representing a 4.8% adjusted EBITDA margin, as compared to adjusted EBITDA for the third quarter of 2021 of $(0.5) million, representing a (0.3)% adjusted EBITDA margin. (Please see page 8 of this release for an explanation of EBITDA, Adjusted EBITDA and a reconciliation to the nearest GAAP measure).
  

Backlog

Backlog of work under contract as of September 30, 2022 was $548.6 million, which compares with backlog of work under contract as of September 30, 2021 of $572.8 million. The third quarter 2022 ending backlog was composed of $280.2 million in the marine segment, and $268.4 million in the concrete segment. At the end of the third quarter 2022, the Company had approximately $1.8 billion worth of bids outstanding, including successful bids on approximately $39 million of projects, subsequent to the end of the third quarter of 2022, of which approximately $36 million pertains to the marine segment and approximately $3 million to the concrete segment. 

“During the third quarter, we converted to backlog $128 million of the $1.2 billion of work on which we bid,” stated Scott Thanisch, Orion’s Chief Financial Officer. “This resulted in a 0.70 times book-to-bill ratio and a win rate of 10.5%. In the marine segment, we bid on $377 million during the third quarter 2022 and were successful on $75 million, representing a win rate of 20.0% and a book-to-bill ratio of 0.99 times. In the concrete segment we bid on $849 million of work and were awarded $53 million, representing a win rate of 6.2% and a book-to-bill ratio of 0.50 times.”

Backlog consists of projects under contract that have either (a) not been started, or (b) are in progress but are not yet complete. The Company cannot guarantee that the revenue implied by its backlog will be realized, or, if realized, will result in earnings. Backlog can fluctuate from period to period due to the timing and execution of contracts. Given the typical duration of the Company's projects, which generally range from three to nine months, the Company's backlog at any point in time usually represents only a portion of the revenue it expects to realize during a twelve-month period.

Conference Call Details

Orion Group Holdings will host a conference call to discuss results for the third quarter 2022 at 10:00 a.m. Eastern Time/9:00 a.m. Central Time on Thursday, October 27, 2022. To listen to the call live, dial 800-715-9871 in the US and Canada or 646-307-1963 in the US and ask for the Orion Group Holdings Conference Call. To listen to the call via the Internet, please visit https://edge.media-server.com/mmc/p/a7xmvgsg. Please go to the website 15 minutes early to download and install any necessary audio software. If you are unable to listen live, a replay of the conference call may be accessed for approximately 30 days after the call at Orion Group Holdings' website.

About Orion Group Holdings

Orion Group Holdings, Inc., a leading specialty construction company serving the infrastructure, industrial and building sectors, provides services both on and off the water in the continental United States, Alaska, Canada and the Caribbean Basin through its marine segment and its concrete segment. The Company’s marine segment provides construction and dredging services relating to marine transportation facility construction, marine pipeline construction, marine environmental structures, dredging of waterways, channels and ports, environmental dredging, design, and specialty services. Its concrete segment provides turnkey concrete construction services including pour and finish, dirt work, layout, forming, rebar, and mesh across the light commercial, structural and other associated business areas. The Company is headquartered in Houston, Texas with regional offices throughout its operating areas.

Non-GAAP Financial Measures

This press release includes the financial measures “adjusted net income/loss,” “adjusted earnings/loss per share,” “EBITDA,” "Adjusted EBITDA" and “Adjusted EBITDA margin." These measurements are “non-GAAP financial measures” under rules of the Securities and Exchange Commission, including Regulation G. The non-GAAP financial information may be determined or calculated differently by other companies. By reporting such non-GAAP financial information, the Company does not intend to give such information greater prominence than comparable GAAP financial information. Investors are urged to consider these non-GAAP measures in addition to and not in substitute for measures prepared in accordance with GAAP.

Adjusted net income/loss and adjusted earnings/loss per share are not an alternative to net income/loss or earnings/loss per share. Adjusted net income/loss and adjusted earnings/loss per share exclude certain items that management believes impairs a meaningful comparison of operating results. The Company believes these adjusted financial measures are a useful adjunct to earnings/loss calculated in accordance with GAAP because management uses adjusted net income/loss available to common stockholders to evaluate the Company's operational trends and performance relative to other companies. Generally, items excluded, are one-time items or items whose timing or amount cannot be reasonably estimated. Accordingly, any guidance provided by the Company generally excludes information regarding these types of items.

Orion Group Holdings defines EBITDA as net income/loss before net interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is calculated by adjusting EBITDA for certain items that management believes impairs a meaningful comparison of operating results. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA for the period by contract revenues for the period. The GAAP financial measure that is most directly comparable to EBITDA and Adjusted EBITDA is net income, while the GAAP financial measure that is most directly comparable to Adjusted EBITDA margin is operating margin, which represents operating income divided by contract revenues. EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are used internally to evaluate current operating expense, operating efficiency, and operating profitability on a variable cost basis, by excluding the depreciation and amortization expenses, primarily related to capital expenditures and acquisitions, and net interest and tax expenses. Additionally, EBITDA, Adjusted EBITDA and Adjusted EBITDA margin provide useful information regarding the Company's ability to meet future debt service and working capital requirements while providing an overall evaluation of the Company's financial condition. In addition, EBITDA is used internally for incentive compensation purposes. The Company includes EBITDA, Adjusted EBITDA and Adjusted EBITDA margin to provide transparency to investors as they are commonly used by investors and others in assessing performance. EBITDA, Adjusted EBITDA and Adjusted EBITDA margin have certain limitations as analytical tools and should not be used as a substitute for operating margin, net income, cash flows, or other data prepared in accordance with GAAP, or as a measure of the Company's profitability or liquidity.

The matters discussed in this press release may constitute or include projections or other forward-looking statements within the meaning of the “safe harbor” provisions of Section 27A of the Securities Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, of which provisions the Company is availing itself. Certain forward-looking statements can be identified by the use of forward-looking terminology, such as 'believes', 'expects', 'may', 'will', 'could', 'should', 'seeks', 'approximately', 'intends', 'plans', 'estimates', or 'anticipates', or the negative thereof or other comparable terminology, or by discussions of strategy, plans, objectives, intentions, estimates, forecasts, outlook, assumptions, or goals. In particular, statements regarding future operations or results, including those set forth in this press release, and any other statement, express or implied, concerning future operating results or the future generation of or ability to generate revenues, income, net income, gross profit, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, or cash flow, including to service debt, and including any estimates, forecasts or assumptions regarding future revenues or revenue growth, are forward-looking statements. Forward looking statements also include estimated project start date, anticipated revenues, and contract options which may or may not be awarded in the future. Forward looking statements involve risks, including those associated with the Company's fixed price contracts that impacts profits, unforeseen productivity delays that may alter the final profitability of the contract, cancellation of the contract by the customer for unforeseen reasons, delays or decreases in funding by the customer, levels and predictability of government funding or other governmental budgetary constraints, the effects of the ongoing COVID-19 pandemic, and any potential contract options which may or may not be awarded in the future, and are at the sole discretion of award by the customer. Past performance is not necessarily an indicator of future results. In light of these and other uncertainties, the inclusion of forward-looking statements in this press release should not be regarded as a representation by the Company that the Company's plans, estimates, forecasts, goals, intentions, or objectives will be achieved or realized. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company assumes no obligation to update information contained in this press release whether as a result of new developments or otherwise, except as required by law.

Please refer to the Company's Annual Report on Form 10-K, filed on March 7, 2022, which is available on its website at www.oriongroupholdingsinc.com or at the SEC's website at www.sec.gov, for additional and more detailed discussion of risk factors that could cause actual results to differ materially from our current expectations, estimates or forecasts.

Orion Group Holdings, Inc. and Subsidiaries
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(1) Items are taxed discretely using the Company's effective tax rate which differs from the Company’s statutory federal rate primarily due to state income taxes and the non-deductibility of other permanent items.

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(1) EBITDA is a non-GAAP measure that represents earnings before interest, taxes, depreciation and amortization.

(2) Adjusted EBITDA is a non-GAAP measure that represents EBITDA adjusted for stock-based compensation, ERP implementation, professional fees related to management transition and severance. Adjusted EBITDA margin is a non-GAAP measure calculated by dividing Adjusted EBITDA by contract revenues.

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(1) EBITDA is a non-GAAP measure that represents earnings before interest, taxes, depreciation and amortization.

(2) Adjusted EBITDA is a non-GAAP measure that represents EBITDA adjusted for stock-based compensation, ERP implementation, professional fees related to management transition and severance. Adjusted EBITDA margin is a non-GAAP measure calculated by dividing Adjusted EBITDA by contract revenues.

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Source: Orion Group Holdings, Inc.