Orion Group Holdings, Inc. Reports First Quarter 2022 Results

Orion Group Holdings, Inc. (NYSE: ORN) (the “Company”), a leading specialty construction company, today reported a net loss of $4.9 million ($0.16 diluted loss per share) for the first quarter ended March 31, 2022. Excluding non-recurring items, adjusted net loss was $3.2 million ($0.10 diluted loss per share).

First Quarter 2022 Highlights

• Operating loss was $2.9 million for the first quarter of 2022 compared to operating income of $2.1 million for the first quarter of 2021.

• Net loss was $4.9 million ($0.16 diluted loss per share) for the first quarter of 2022 compared to net income of $0.9 million ($0.03 diluted earnings per share) for the first quarter of 2021.

• The first quarter 2022 net loss included $2.1 million ($0.07 loss per diluted share) of non-recurring items and $0.5 million ($0.02 per diluted share) of tax impact from valuation allowances. First quarter 2022 adjusted net loss was $3.2 million ($0.10 diluted loss per share). (Please see page 7 of this release for a reconciliation of adjusted net income).

• EBITDA, adjusted to exclude the impact of the aforementioned non-recurring items, was $5.2 million in the first quarter of 2022, which compares to adjusted EBITDA of $9.5 million for the first quarter of 2021. (Please see page 8 of this release for an explanation of EBITDA, adjusted EBITDA and a reconciliation to the nearest GAAP measure).

• Backlog at the end of the first quarter was $604.1 million on a first quarter book-to-bill of 1.08x.

“Since stepping in as Orion Group Holdings’ interim CEO a few weeks ago, I have been working closely with leaders to ensure that we are well positioned to capitalize on industry tailwinds, improve the quality of our backlog, enhance margins and ultimately deliver for our shareholders and customers,” stated Austin Shanfelter, Orion’s Interim Chief Executive Officer. “We ended the first quarter with a solid foundation for the future, including improving markets and a backlog up 66 percent year-over-year. Since the end of the quarter, we have successfully bid for an additional $112 million in projects.”

Mr. Shanfelter continued, “I am committed to working with our teams to meet or exceed our goals and I would like to thank our team members, our business partners and our clients for their leadership and support.”

Consolidated Results for First Quarter 2022 Compared to First Quarter 2021

• Contract revenues were $174.9 million, an increase of $21.6 million or 14.1% as compared to $153.3 million. The increase was primarily driven by the beginning of large jobs awarded in the second half of 2021 in the marine segment and increased cubic yard production on light commercial projects in the concrete segment.

• Gross profit was $12.8 million, as compared to $15.5 million. Gross profit margin was 7.3%, as compared to 10.1%. The decrease in gross profit dollars and percentage was primarily driven by write-downs in the concrete segment as a result of project conditions, reduced dredging volume in the current quarter and a change in the mix of work in the current period.

• Selling, General, and Administrative expenses were $16.2 million, as compared to $14.6 million. As a percentage of total contract revenues, SG&A expenses decreased from 9.5% to 9.2%, primarily due to higher revenues in the current period. The increase in SG&A dollars was driven primarily by additional consulting fees related to the management transition and additional property taxes, partially offset by reduced bonus expense.

• Operating loss was $2.9 million as compared to operating income of $2.1 million in the prior year period.

• EBITDA was $3.5 million, representing a 2.0% EBITDA margin, as compared to EBITDA of $8.6 million, or a 5.6% EBITDA margin. When adjusted for non-recurring items, adjusted EBITDA for the first quarter of 2022 was $5.2 million, representing a 3.0% 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 March 31, 2022 was $604.1 million, which compares with backlog under contract as of March 31, 2021, of $364.8 million. The first quarter 2022 ending backlog was composed of $317.4 million in the marine segment, and $286.7 million in the concrete segment. At the end of the first quarter 2022, the Company had approximately $2.1 billion worth of bids outstanding, including successful bids on approximately $112 million in projects subsequent to the end of the first quarter of 2022, of which approximately $30 million pertains to the marine segment and approximately $82 million to the concrete segment.

“During the first quarter, we converted approximately $189 million of the approximately $1.3 billion of work on which we bid,” continued Mr. Shanfelter. “This resulted in a 1.08 times book-to-bill ratio and a win rate of 14.0%. In the marine segment, we bid on approximately $419 million during the first quarter 2022 and were successful on approximately $25 million, representing a win rate of 6.0% and a book-to-bill ratio of 0.30 times. In the concrete segment we bid on approximately $927 million of work and were awarded approximately $164 million, representing a win rate of 17.7% and a book-to-bill ratio of 1.81 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 first quarter 2022 at 10:00 a.m. Eastern Time/9:00 a.m. Central Time on Thursday, April 28, 2022. 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 [phone] 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 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
Condensed Statements of Operations
(In Thousands, Except Share and Per Share Information)
(Unaudited)
		Three months ended
		March 31,
		2022				2021
Contract revenues			174,931				153,309
Costs of contract revenues			162,115				137,854
Gross profit			12,816				15,455
Selling, general and administrative expenses			16,170				14,630
Amortization of intangible assets			310				380
Gain on disposal of assets, net			(809	)			(1,610	)
Operating (loss) income			(2,855	)			2,055
Other (expense) income:
Other income			44				37
Interest income			19				26
Interest expense			(740	)			(1,040	)
Other expense, net			(677	)			(977	)
(Loss) income before income taxes			(3,532	)			1,078
Income tax expense			1,324				150
Net (loss) income		$	(4,856	)		$	928
Basic (loss) earnings per share		$	(0.16	)		$	0.03
Diluted (loss) earnings per share		$	(0.16	)		$	0.03
Shares used to compute (loss) income per share:
Basic			30,971,379				30,465,475
Diluted			30,971,379				30,499,978

Orion Group Holdings, Inc. and Subsidiaries
Selected Results of Operations
(In Thousands, Except Share and Per Share Information)
(Unaudited)
		Three months ended March 31,
		2022								2021
		Amount				Percent				Amount				Percent
		(dollar amounts in thousands)
Contract revenues
Marine segment
Public sector		$	57,308			67.8		%		$	41,669			57.8		%
Private sector			27,172			32.2		%			30,477			42.2		%
Marine segment total		$	84,480			100.0		%		$	72,146			100.0		%
Concrete segment
Public sector		$	5,493			6.1		%		$	4,779			5.9		%
Private sector			84,958			93.9		%			76,384			94.1		%
Concrete segment total		$	90,451			100.0		%		$	81,163			100.0		%
Total		$	174,931							$	153,309
Operating (loss) income
Marine segment		$	1,840			2.2		%		$	2,848			3.9		%
Concrete segment			(4,695	)		(5.2	)	%			(793	)		(1.0	)	%
Total		$	(2,855	)						$	2,055

Orion Group Holdings, Inc. and Subsidiaries
Reconciliation of Adjusted Net Income (Loss)
(In thousands except per share information)
(Unaudited)
		Three months ended
		March 31,
		2022				2021
Net (loss) income		$	(4,856	)		$	928
One-time charges and the tax effects:
ERP implementation			906				586
Professional fees related to management transition			414				—
Severance			73				—
Tax rate applied to one-time charges (1)			713				(164	)
Total one-time charges and the tax effects			2,106				422
Federal and state tax valuation allowances			(484	)			(151	)
Adjusted net income		$	(3,234	)		$	1,199
Adjusted EPS		$	(0.10	)		$	0.04

____________________________
(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.

Orion Group Holdings, Inc. and Subsidiaries
Adjusted EBITDA and Adjusted EBITDA Margin Reconciliations
(In Thousands, Except Margin Data)
(Unaudited)
		Three months ended
		March 31,
		2022				2021
Net (loss) income		$	(4,856	)		$	928
Income tax expense			1,324				150
Interest expense, net			721				1,014
Depreciation and amortization			6,263				6,485
EBITDA (1)			3,452				8,577
Stock-based compensation			370				383
ERP implementation			906				586
Professional fees related to management transition			414				—
Severance			73				—
Adjusted EBITDA(2)		$	5,215			$	9,546
Operating income margin			(1.5	)	%		1.4	%
Impact of depreciation and amortization			3.6		%		4.2	%
Impact of stock-based compensation			0.2		%		0.2	%
Impact of ERP implementation			0.5		%		0.4	%
Impact of professional fees related to management transition			0.2		%		—	%
Impact of severance			—		%		—	%
Adjusted EBITDA margin(2)			3.0		%		6.2	%

____________________________
(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.

Orion Group Holdings, Inc. and Subsidiaries
Adjusted EBITDA and Adjusted EBITDA Margin Reconciliations by Segment
(In Thousands, Except Margin Data)
(Unaudited)
		Marine								Concrete
		Three months ended								Three months ended
		March 31,								March 31,
		2022				2021				2022				2021
Operating (loss) income (1)			1,840				2,848				(4,695	)			(793	)
Other income (expense), net			44				37				—				—
Depreciation and amortization			4,323				4,358				1,940				2,127
EBITDA (2)			6,207				7,243				(2,755	)			1,334
Stock-based compensation			343				351				27				32
ERP implementation			438				276				468				310
Professional fees related to management transition			200				—				214				—
Severance			73				—				—				—
Adjusted EBITDA(3)		$	7,261			$	7,870			$	(2,046	)		$	1,676
Operating income margin			2.2	%			3.9	%			(5.1	)	%		(0.9	)	%
Impact of other income (expense), net			0.1	%			0.1	%			—		%		—		%
Impact of depreciation and amortization			5.1	%			6.0	%			2.1		%		2.6		%
Impact of stock-based compensation			0.4	%			0.5	%			—		%		—		%
Impact of ERP implementation			0.5	%			0.4	%			0.5		%		0.4		%
Impact of professional fees related to management transition			0.2	%			—	%			0.2		%		—		%
Impact of severance			0.1	%			—	%			—		%		—		%
Adjusted EBITDA margin (3)			8.6	%			10.9	%			(2.3	)	%		2.1		%

____________________________
(1)		In connection with the preparation of the financial statements for the quarter ended June 30, 2021, the Company has identified and corrected certain immaterial errors in segment reporting for all periods presented. Specifically, certain corporate overhead costs previously recorded to the marine segment as part of operating income (loss) and allocated from the marine segment to the concrete segment below operating income in the other income (expense) line have been allocated from the marine segment to the concrete segment as part of the determination of operating income for each segment.
(2)		EBITDA is a non-GAAP measure that represents earnings before interest, taxes, depreciation and amortization.
(3)		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.

Orion Group Holdings, Inc. and Subsidiaries
Condensed Statements of Cash Flows Summarized
(In Thousands)
(Unaudited)
		Three months ended
		March 31,
		2022				2021
Net (loss) income		$	(4,856	)		$	928
Adjustments to remove non-cash and non-operating items			7,051				6,895
Cash flow from net income after adjusting for non-cash and non-operating items			2,195				7,823
Change in operating assets and liabilities (working capital)			7,865				1,295
Cash flows provided by operating activities		$	10,060			$	9,118
Cash flows (used in) provided by investing activities		$	(2,810	)		$	772
Cash flows used in financing activities		$	(12,817	)		$	(6,837	)
Capital expenditures (included in investing activities above)		$	(3,523	)		$	(1,618	)

Orion Group Holdings, Inc. and Subsidiaries
Condensed Statements of Cash Flows
(In Thousands)
(Unaudited)
		Three months ended March 31,
		2022				2021
Cash flows from operating activities
Net (loss) income		$	(4,856	)		$	928
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization			5,503				5,704
Amortization of ROU operating leases			1,176				1,348
Amortization of ROU finance leases			760				781
Amortization of deferred debt issuance costs			32				239
Deferred income taxes			19				50
Stock-based compensation			370				383
Gain on disposal of assets, net			(809	)			(1,610	)
Change in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable			(13,907	)			3,837
Inventory			(189	)			74
Prepaid expenses and other			2,504				60
Contract assets			4,055				10,474
Accounts payable			12,689				(9,735	)
Accrued liabilities			(3,075	)			(2,371	)
Operating lease liabilities			(1,183	)			(1,196	)
Income tax payable			1,376				137
Contract liabilities			5,595				15
Net cash provided by operating activities			10,060				9,118
Cash flows from investing activities:
Proceeds from sale of property and equipment			713				1,950
Purchase of property and equipment			(3,523	)			(1,618	)
Insurance claim proceeds related to property and equipment			—				440
Net cash (used in) provided by investing activities			(2,810	)			772
Cash flows from financing activities:
Borrowings from Credit Facility			—				5,000
Payments made on borrowings from Credit Facility			(11,671	)			(11,155	)
Loan costs from Credit Facility			(494	)			—
Payments of finance lease liabilities			(637	)			(732	)
Purchase of vested stock-based awards			(15	)			(36	)
Exercise of stock options			—				86
Net cash used in financing activities			(12,817	)			(6,837	)
Net change in cash, cash equivalents and restricted cash			(5,567	)			3,053
Cash, cash equivalents and restricted cash at beginning of period			12,293				1,589
Cash, cash equivalents and restricted cash at end of period		$	6,726			$	4,642

Orion Group Holdings, Inc. and Subsidiaries
Condensed Balance Sheets
(In Thousands, Except Share and Per Share Information)
		March 31,				December 31,
		2022				2021
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	6,726				12,293
Accounts receivable:
Trade, net of allowance for credit losses of $323 and $323, respectively			99,780				88,173
Retainage			43,467				41,379
Income taxes receivable			405				405
Other current			3,713				17,585
Inventory			1,467				1,428
Contract assets			24,474				28,529
Prepaid expenses and other			6,008				8,142
Total current assets			186,040				197,934
Property and equipment, net of depreciation			104,974				106,654
Operating lease right-of-use assets, net of amortization			15,006				14,686
Financing lease right-of-use assets, net of amortization			17,472				14,561
Inventory, non-current			5,568				5,418
Intangible assets, net of amortization			8,246				8,556
Deferred income tax asset			40				41
Other non-current			3,530				3,900
Total assets		$	340,876			$	351,750
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current debt, net of issuance costs		$	27,210			$	39,141
Accounts payable:
Trade			60,537				48,217
Retainage			1,186				923
Accrued liabilities			21,141				38,594
Income taxes payable			1,977				601
Contract liabilities			32,593				26,998
Current portion of operating lease liabilities			4,005				3,857
Current portion of financing lease liabilities			4,670				3,406
Total current liabilities			153,319				161,737
Long-term debt, net of debt issuance costs			929				259
Operating lease liabilities			11,709				11,637
Financing lease liabilities			12,605				10,908
Other long-term liabilities			18,530				18,942
Deferred income tax liability			187				169
Interest rate swap liability			—				—
Total liabilities			197,279				203,652
Stockholders’ equity:
Preferred stock -- $0.01 par value, 10,000,000 authorized, none issued			—				—
Common stock -- $0.01 par value, 50,000,000 authorized, 31,676,725 and 31,712,457 issued; 30,965,494 and 31,001,226 outstanding at March 31, 2022 and December 31, 2021, respectively			317				317
Treasury stock, 711,231 shares, at cost, as of March 31, 2022 and December 31, 2021, respectively			(6,540	)			(6,540	)
Accumulated other comprehensive loss			—				—
Additional paid-in capital			186,236				185,881
Retained loss			(36,416	)			(31,560	)
Total stockholders’ equity			143,597				148,098
Total liabilities and stockholders’ equity		$	340,876			$	351,750

 

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