Orion Group Holdings, Inc. Reports Fourth Quarter and Full Year 2020 Results

Rhea-AI Summary

Orion Group Holdings reported a net income of $3.7 million for Q4 2020, translating to $0.12 diluted EPS, compared to $0.2 million in Q4 2019. Operating income rose to $5.1 million from $2.7 million, driven by improved production efficiency. Adjusted EBITDA increased to $12.6 million, up 9.2% year-over-year. Backlog was $439.5 million, down from $558.5 million a year prior, with a book-to-bill ratio of 1.06x. Despite challenges from COVID-19, the company expressed confidence in future bidding opportunities and strong liquidity.

Positive

• Net income increased to $3.7 million from $0.2 million YoY.
• Operating income improved to $5.1 million from $2.7 million YoY.
• Adjusted EBITDA grew to $12.6 million, a 9.2% increase YoY.
• Gross profit margin rose to 12.8%, up 320 basis points YoY.
• Backlog remains strong at $439.5 million despite a decrease, indicating potential future revenues.

Negative

• Contract revenues decreased by 14.8% to $170.2 million from $199.8 million YoY.
• SG&A expenses increased to $17.4 million from $16.3 million, leading to a higher percentage of total revenues.
• Backlog decreased from $558.5 million at the end of 2019.

Orion Group Holdings, Inc. (NYSE:ORN) (the “Company”), a leading specialty construction company, today reported net income of $3.7 million ($0.12 diluted earnings per share) for the fourth quarter ended December 31, 2020. Fourth quarter highlights are discussed below. For full year results please refer to the financial statements starting on page 7.

Fourth Quarter 2020 Highlights

• Operating income was $5.1 million for the fourth quarter of 2020 compared to operating income of $2.7 million for the fourth quarter of 2019.
• Net income was $3.7 million ($0.12 diluted earnings per share) for the fourth quarter of 2020 compared to net income of $0.2 million ($0.01 diluted earnings per share) for the fourth quarter of 2019.
• The fourth quarter 2020 net income included $0.6 million ($0.02 earnings per diluted share) of non-recurring items and $0.7 million ($0.02 earnings per diluted share) of tax benefit associated with the movement of certain valuation allowances. Fourth quarter 2020 adjusted net income was $3.5 million ($0.12 diluted earnings per share). (Please see page 9 of this release for a reconciliation of adjusted net income).
• EBITDA, adjusted to exclude the impact of the aforementioned non-recurring items, was $12.6 million in the fourth quarter of 2020, which compares to adjusted EBITDA of $11.5 million for the fourth quarter of 2019. (Please see page 10 of this release for an explanation of EBITDA, adjusted EBITDA and a reconciliation to the nearest GAAP measure).
• Backlog at the end of the fourth quarter was $439.5 million on a fourth quarter book-to-bill of 1.06x.

“We delivered strong growth in profitability and cash flow for the full year 2020,” stated Mark Stauffer, Orion’s Chief Executive Officer. “Despite the headwinds to the U.S. economy and our business resulting from the COVID-19 pandemic, our adjusted EBITDA increased more than 35% over 2019 and we improved our adjusted EBITDA margin by 210 basis points. This was the direct result of the commitment and resolve of our employees, coupled with the benefits of our Invest, Scale and Grow program, which we initiated in 2019.”

“Fourth quarter results were in-line with our expectations. Gross profit improved year over year in both dollars and margin, with gross profit margin improving by 320 basis points. The improvement was driven by production efficiency gains at the project level in both segments. Consolidated adjusted EBITDA for the fourth quarter also increased by 9.2% year over year. Our team’s focus remains on continued performance efficiency despite any macroeconomic challenges. We view our ability to generate improved profitability in a difficult market as a testament to Orion’s processes, procedures, and focus on bottom line results. We believe that this profitability improvement will be sustainable and scalable moving forward as bidding opportunities begin to normalize.”

“While bidding opportunities have been affected in some of our end markets, we still see bidding activity in both of our segments, largely driven by end markets that are continuing operations through the COVID-19 pandemic. As we have said previously, our efforts are focused on targeting the end markets in which we expect to have the best opportunities and on projects that we expect to be the most profitable projects. One of the key strengths of our Company is the wide array of potential users of our broad range of services, enabling us to pursue the most attractive bid opportunities in the end markets that are providing opportunities at any given point in time. This strategy has served us well and we believe it will continue to do so.”

“We continue to be confident in our ability to profitably execute our projects in backlog, and in our ability to maintain and grow our backlog level by targeting and winning new bid opportunities. We believe chances for a new infrastructure bill have improved, and if enacted, will be a further catalyst for continued strength in our end-market opportunities. We continue to focus on our liquidity position, which remains strong and provides us with more than sufficient financial flexibility to continue to pursue new awards and execute on existing projects in backlog. Our diverse end markets, broad range of construction capabilities and assets, and our highly experienced and professional personnel make us confident in our ability to deliver increasing levels of profitability and free cash flow, particularly in a post-pandemic environment.”

Consolidated Results for Fourth Quarter 2020 Compared to Fourth Quarter 2019

• Contract revenues were $170.2 million, down 14.8% as compared to $199.8 million. The decrease was primarily driven by the timing of projects for the marine and concrete segments.
• Gross profit was $21.7 million, as compared to $19.1 million. Gross profit margin was 12.8%, as compared to 9.6%. The increase in gross profit dollars and percentage was primarily driven by production efficiency gains in both segments.
• Selling, General, and Administrative expenses were $17.4 million, as compared to $16.3 million. As a percentage of total contract revenues, SG&A expenses increased to 10.2% from 8.2%. The increase in SG&A dollars was primarily attributable to the increased accrual of the annual incentive compensation plan during the current year period as compared to the prior year period.
• Operating income was $5.1 million as compared to $2.7 million. The operating income in the fourth quarter of 2020 reflects the aforementioned factors that improved gross profit.
• EBITDA was $11.7 million, representing a 6.9% EBITDA margin, as compared to EBITDA of $10.0 million, or a 5.0% EBITDA margin. When adjusted for non-recurring items, adjusted EBITDA for the fourth quarter of 2020 was $12.6 million, representing a 7.4% EBITDA margin. (Please see page 10 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 December 31, 2020 was $439.5 million, which compares with backlog under contract at December 31, 2019 of $558.5 million. The fourth quarter 2020 ending backlog was comprised of $202.6 million for the marine segment, and $236.9 million for the concrete segment. At the end of 2020, the Company had approximately $1.6 billion worth of bids outstanding, including approximately $96 million on which it is the apparent low bidder or has been awarded contracts subsequent to the end of the fourth quarter of 2020, of which approximately $46 million pertains to the marine segment and approximately $50 million to the concrete segment.

“During the fourth quarter, we bid on approximately $954 million of work and were successful on approximately $181 million of these bids,” stated Robert Tabb, Orion Group Holding's Vice President and Chief Financial Officer. “This resulted in a 1.06 times book-to-bill ratio and a win rate of 19.0%. In the marine segment, we bid on approximately $254 million during the fourth quarter 2020 and were successful on approximately $59 million, representing a win rate of 23.1% and a book-to-bill ratio of 0.60 times. In the concrete segment we bid on approximately $700 million of work and were awarded approximately $122 million, representing a win rate of 17.5% and a book-to-bill ratio of 1.69 times."

Backlog consists of projects under contract that have either (a) not been started, or (b) are in progress and 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 fourth quarter 2020 at 10:00 a.m. Eastern Time/9:00 a.m. Central Time on Thursday, February 25, 2021. To listen to a live webcast of the conference call, or access the replay, visit the Calendar of Events page of the Investor Relations section of the website at www.oriongroupholdingsinc.com. To participate in the call, please dial (201) 493-6739 and ask for the Orion Group Holdings Conference Call.

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,” “adjusted earnings 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 and adjusted earnings per share are not an alternative to net income or earnings per share. Adjusted net income and adjusted earnings 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 calculated in accordance with GAAP because management uses adjusted net income 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 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 generally accepted accounting principles in the United States, 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 Private Securities Litigation Reform Act of 1995, the provisions of which 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.

Please refer to the Company's Annual Report on Form 10-K, filed on February 28, 2020, 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
Condensed Statements of Operations
(In Thousands, Except Share and Per Share Information)
(Unaudited)
		Three months ended								Twelve months ended
		December 31,								December 31,
		2020				2019				2020				2019
Contract revenues			170,176				199,793				709,942				708,390
Costs of contract revenues			148,476				180,704				625,239				644,349
Gross profit			21,700				19,089				84,703				64,041
Selling, general and administrative expenses			17,440				16,335				65,091				61,012
Amortization of intangible assets			518				660				2,070				2,640
Gain on disposal of assets, net			(1,310	)			(607	)			(9,044	)			(1,804	)
Operating income			5,052				2,701				26,586				2,193
Other (expense) income:
Other income			96				197				347				771
Interest income			32				36				183				353
Interest expense			(1,198	)			(1,827	)			(4,920	)			(6,808	)
Other expense, net			(1,070	)			(1,594	)			(4,390	)			(5,684	)
Income (loss) before income taxes			3,982				1,107				22,196				(3,491	)
Income tax expense			316				948				1,976				1,868
Net income (loss)		$	3,666			$	159			$	20,220			$	(5,359	)
Basic earnings (loss) per share		$	0.12			$	0.01			$	0.67			$	(0.18	)
Diluted earnings (loss) per share		$	0.12			$	0.01			$	0.67			$	(0.18	)
Shares used to compute income (loss) per share:
Basic			30,426,454				29,562,635				30,122,362				29,322,054
Diluted			30,427,940				29,574,145				30,122,362				29,322,054

Orion Group Holdings, Inc. and Subsidiaries
Selected Results of Operations
(In Thousands, Except Share and Per Share Information)
(Unaudited)
		Three months ended December 31,
		2020						2019
		Amount			Percent			Amount			Percent
		(dollar amounts in thousands)
Contract revenues
Marine segment
Public sector		$	58,669		60.1	%		$	77,349		69.5	%
Private sector			38,955		39.9	%			33,875		30.5	%
Marine segment total		$	97,624		100.0	%		$	111,224		100.0	%
Concrete segment
Public sector		$	4,995		6.9	%		$	8,624		9.7	%
Private sector			67,557		93.1	%			79,945		90.3	%
Concrete segment total		$	72,552		100.0	%		$	88,569		100.0	%
Total		$	170,176					$	199,793
Operating income
Marine segment		$	4,492		4.6	%		$	2,641		2.4	%
Concrete segment			560		0.8	%			60		0.1	%
Total		$	5,052					$	2,701
		Twelve months ended December 31,
		2020						2019
		Amount

FAQ

What were Orion Group Holdings' Q4 2020 earnings?

Orion Group Holdings reported a net income of $3.7 million for Q4 2020.

How did Orion Group Holdings perform in terms of adjusted EBITDA for Q4 2020?

The adjusted EBITDA for Q4 2020 was $12.6 million, up 9.2% from the previous year.

What was the contract revenue for Orion Group Holdings in Q4 2020?

Contract revenues for Q4 2020 were $170.2 million, a decrease of 14.8% from $199.8 million in Q4 2019.

What is Orion Group Holdings' backlog as of Q4 2020?

As of Q4 2020, the backlog was $439.5 million, down from $558.5 million a year earlier.

What is the book-to-bill ratio for Orion Group Holdings in Q4 2020?

The book-to-bill ratio for Q4 2020 was 1.06x.