Posted on October 28, 2021
HOUSTON–(BUSINESS WIRE)–Oct. 27, 2021– Orion Group Holdings, Inc. (NYSE: ORN) (the “Company”), a leading specialty construction company, today reported a net loss of $10.2 million ($0.33 diluted loss per share) for the third quarter ended September 30, 2021.
Third Quarter 2021 Highlights
- Operating loss was $8.7 million for the third quarter of 2021 compared to operating income of $13.1 million for the third quarter of 2020.
- Net loss was $10.2 million ($0.33 diluted loss per share) for the third quarter of 2021 compared to net income of $11.8 million ($0.39 diluted earnings per share) for the third quarter of 2020.
- The third quarter 2021 net loss included $1.1 million ($0.04 loss per diluted share) of non-recurring items and $0.7 million ($0.02 loss per diluted share) of tax expense associated with the movement of certain valuation allowances. Third quarter 2021 adjusted net loss was $8.4 million ($0.27 diluted loss 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 $(0.5) million in the third quarter of 2021, which compares to adjusted EBITDA of $17.0 million for the third quarter of 2020. (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 third quarter was $572.8 million on a third quarter book-to-bill of 2.28x.
“Our third quarter results were impacted by lower than anticipated revenue due to the phasing of project work, project win rates and timing, tropical weather, and COVID-19 related items,” stated Mark Stauffer, Orion’s Chief Executive Officer. “This also resulted in an increase in unabsorbed labor and equipment, which further pressured margins.”
“When we reported our second quarter results three months ago, we noted our optimism regarding the activity level in our end markets and amount of active project bids. We also noted our intention to remain disciplined in our approach to bidding. That discipline has paid off as we closed the third quarter with several project award announcements, resulting in period-ending backlog of $572.8 million, up 45% from the end of the second quarter. Our bidding activity remains healthy, with approximately $2 billion currently outstanding. We continue to see demand for our services in for both of our segments, and we will remain disciplined in our approach to bidding on these opportunities.”
“Despite weather and COVID-19-related impacts, our concrete segment was able to grow revenues 11.3% compared with the prior year period as production volumes increased. Larger, light-commercial jobs were the primary component of our work in the quarter as volumes improved 19% from the prior year period. Conversely, our marine segment experienced a 51.5% revenue decline due primarily to project timing and scheduling as a number of larger projects were underway in the prior-year quarter while the third quarter 2021 reflected a gap in prior projects completing and new projects starting up. Looking ahead for the remainder of the year and heading into 2022, we expect to see improved absorption of labor and equipment as our current scheduling ramps up on new projects.”
“We are continuing to track progress on the Federal infrastructure bill. While passage of a large bill would provide a significant catalyst for our end markets and drive absorption of industry capacity, we also believe the clarity resulting from a failed bill would also be a modest positive as many state and local entities are currently in a “wait and see” mode regarding possible funding. As they gain certainty regarding their funding outlook, we expect project award activity to gain momentum.”
Consolidated Results for Third Quarter 2021 Compared to Third Quarter 2020
- Contract revenues were $139.9 million, down 26.1% as compared to $189.4 million. The decrease was primarily driven by the timing and mix of several large marine projects that had driven activity in the prior year, which were not replicated or replaced in the current year quarter. This decrease was partially offset by increased production volumes in our concrete segment due to an increase in activity during 2021, including on several larger jobs in the current year period as compared to the prior year period.
- Gross profit was $6.6 million, as compared to $22.5 million. Gross profit margin was 4.7%, as compared to 11.9%. The decrease in gross profit dollars and percentage was primarily driven by the decreased activity and volumes in the marine segment which negatively impacted revenue and contributed to an under recovery of indirect costs primarily related to decreased labor and equipment utilization. Decreased project performance in the concrete segment was driven by inefficiencies in executing work from COVID-19 and weather-related impacts, along with cost overruns in the current period on the completion of one project.
- Selling, General, and Administrative expenses were $15.7 million, as compared to $15.3 million. As a percentage of total contract revenues, SG&A expenses increased from 8.1% to 11.2%, primarily due to lower revenue in the current period. The increase in SG&A dollars was driven primarily by an increase in ERP implementation expense, partially offset by a decrease in bonus expense as compared to the prior year period.
- Operating loss was $8.7 million as compared to operating income of $13.1 million. Excluding the net gain on insurance recoveries and the recovery of a disputed receivable operating income was $9.3 million in the prior year period.
- EBITDA was $(2.5) million, representing a (1.8)% EBITDA margin, as compared to EBITDA of $20.0 million, or a 10.5% EBITDA margin. When adjusted for non-recurring items, adjusted EBITDA for the third quarter of 2021 was $(0.5) million, representing a (0.3)% 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 September 30, 2021, was $572.8 million, which compares with backlog under contract as of September 30, 2020, of $428.8 million. The third quarter 2021 ending backlog was comprised of $379.9 million for the marine segment, and $192.9 million for the concrete segment. At the end of the third quarter 2021, the Company had approximately $2.0 billion worth of bids outstanding, including approximately $103 million on which it is the apparent low bidder or has been awarded contracts subsequent to the end of the third quarter of 2021, of which approximately $47 million pertains to the marine segment and approximately $56 million to the concrete segment.
“During the third quarter, we bid on approximately $1.3 billion of work and were successful on approximately $318 million of these bids,” continued Mr. Stauffer. “This resulted in a 2.28 times book-to-bill ratio and a win rate of 24.3%. In the marine segment, we bid on approximately $495 million during the third quarter 2021 and were successful on approximately $264 million, representing a win rate of 53.4% and a book-to-bill ratio of 4.83 times. In the concrete segment we bid on approximately $815 million of work and were awarded approximately $54 million, representing a win rate of 6.6% and a book-to-bill ratio of 0.63 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 2021 at 10:00 a.m. Eastern Time/9:00 a.m. Central Time on Thursday, October 28, 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20211027006121/en/
Orion Group Holdings Inc.
Francis Okoniewski, VP Investor Relations
(346) 616-4138
www.oriongroupholdingsinc.com
INVESTOR RELATIONS COUNSEL:
The Equity Group Inc.
Jeremy Hellman, CFA (804) 595-2083
Source: Orion Group Holdings, Inc.
