Orion Marine Group Reports First Quarter 2016 Results; Sets 2017 EBITDA Goal

Orion Marine Group, Inc., a leading construction company, today reported a net loss for the three months ended March 31, 2016, of $1.2 million ($0.04 diluted loss per share). These results compare to a net loss of $0.3 million ($0.01 diluted earnings per share) for the same period a year ago.

Consolidated Results for the First Quarter of 2016

• First quarter 2016 contract revenue was $129.6 million an increase of 59.1%, as compared with first quarter 2015 revenue of $81.5 million, primarily as a result of the addition of TAS.
• Gross profit for the quarter was $14.7 million or a gross profit margin of 11.3%, an increase of approximately $6.3 million as compared with the first quarter of 2015. Gross profit margin for the first quarter of 2015 was 10.4%.
• Selling, General, and Administrative expenses for the first quarter 2016 were $15.5 million as compared to $8.7 million an increase of $6.8 million or 78.8% in the prior year period. The increase in SG&A is primarily attributable to the addition of TAS and SG&A labor costs.
• First quarter 2016 EBITDA was $8.1 million, representing a 6.3% EBITDA margin which compares to first quarter 2015 EBITDA of $13.1 million, or a 9.4% EBITDA margin.
• Backlog of work under contract as of March 31, 2016, was $384.8 million.

“The first quarter has historically been our slowest quarter of the year in our Heavy Civil Marine Construction segment, and this year was no different,” said Mark Stauffer, Orion Marine Group’s President and Chief Executive Officer. “We experienced slightly slower productivity during the quarter as a result of specific adverse weather on certain jobs, primarily on the East Coast. In addition to seeing some typical weather related seasonality, we also experienced several customer directed delays and changes related to the completion of the three remaining troubled Tampa projects previously discussed, all of which caused the timing and mix of jobs in our Heavy Civil Marine Construction segment to be slightly different than initially anticipated. That being said, excluding these items, the Heavy Civil Marine Construction segment had solid performance during the quarter, and overall results would have been in line with expectations.

“Additionally, I continue to be pleased with our commercial concrete segment’s performance. TAS performed very well during the first quarter with top line gains in Dallas and continued solid market drivers with good bid opportunities across our markets. Overall, both our segments are performing well, with slightly improved margins in our backlog and solid project execution. We believe we will see continued improvement in the second half of 2016 in our bottom line results.”

Heavy Civil Marine Construction Segment

• First quarter 2016 contract revenue was $62.4 million, a decrease of $19.0 million or 23.4% from the prior year period. The decrease is primarily attributable to specific adverse weather impacts on certain jobs, primarily on the East Coast, and several customer directed delays and other changes related to the completion of the three remaining troubled Tampa projects.
• First quarter 2016 operating loss was $1.1 million, a decrease of $2.9 million compared to the prior year period.
• First quarter 2016 EBITDA was $4.4 million, representing a 7.0% EBITDA margin which compares to first quarter 2015 EBITDA of $7.3 million, or 9.0%.
• Backlog of work under contract as of March 31, 2016, was $199.3 million, which compares with backlog under contract at March 31, 2015, of $208.5 million.

Commercial Concrete Construction Segment

• First quarter 2016 contract revenue was $67.2 million, an increase of $9.3 million or 16.1% from the prior year period.
• First quarter 2016 operating income was $0.2 million, a decrease of $3.0 million or 92.6% compared to the prior year period. This decrease is partially attributable to the internal allocation of corporate SG&A costs of $2.4 million to the segment. Without this allocation of costs, operating income would have been $2.7 million.
• First quarter 2016 EBITDA was $3.7 million, representing a 5.5% EBITDA margin as compared to first quarter 2015 EBITDA of $5.7 million, or 9.9%.
• Backlog of work under contract as of March 31, 2016, was $185.5 million, which is comparable with backlog under contract at March 31, 2015, of $157.5 million.

For both of our reporting segments, backlog consists of projects under contract that have either (a) not been started, or (b) are in progress and not yet complete, and the Company cannot guarantee that the revenue projected in 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.

Outlook

“As we look ahead, we expect first quarter impacts to continue well into the second quarter, however we anticipate significant improvement in our results in the second half of 2016,” continued Mr. Stauffer. “We continue to experience a high level of demand for all of our services across both operating segments, and our Commercial Concrete Construction segment has exceeded our expectations. In our Heavy Civil Marine Construction segment we are focused on completing the remaining troubled Tampa projects, pursuing our claims on these projects and resuming profitable operations in our Tampa office. Overall, we are targeting $70 million of EBITDA for 2017 and maintaining overall EBITDA margins in the 10 to 12% range,” said Mr. Stauffer.

“Our heavy civil marine construction segment continues to see solid demand to help maintain and expand the infrastructure that facilitates the movement of goods and people on and over waterways. Specifically, we continue to see bid opportunities from our private sector energy related customers as they expand their marine facilities related to the storage, transportation and refining of domestically produced energy. Over the long term, we expect further opportunities in this sector from petrochemical related customers, energy exporters, and LNG facilities.

“In the Commercial Concrete Construction segment, demand for services also remains solid. In the Houston market, we are seeing increasing demand for education, medical and retail space. The Dallas market continues to be a source of growth. In fact, the Commercial Concrete Construction segment continues to maintain its highest level of backlog for the Dallas market in its history. Recently, we poured the most cubic yards of concrete in a week in the Dallas market in the Company’s history. We believe solid demand for our Commercial Concrete Construction segment will continue in our current operating markets and support our expansion in the Dallas market,” concluded Mr. Stauffer.

“We were pleased with our bid activity and success rate during the first quarter 2016 across both our segments,” said Chris DeAlmeida, Orion Marine Group’s Vice President and Chief Financial Officer. “Overall, we bid on approximately $535 million during the first quarter 2016 and were successful on $157 million. This resulted in a 1.21x times book to bill for the quarter and a win rate of 29.3%.

In the Heavy Civil Marine segment, we bid on approximately $194 million during the first quarter 2016 and were successful on $68 million. This resulted in a 1.08x times book to bill for the quarter and a win rate of 34.9%.

The Commercial Concrete Construction segment also had a healthy bid levels for the quarter, bidding on approximately $340 million in work while being awarded approximately $89 million. This resulted in a 1.33x times book to bill for the quarter and a win rate of 26.2%.

Overall, we have over $613 million worth of bids outstanding, including approximately $37 million on which we are apparent low bidder or have been awarded subsequent to the end of the quarter.

“Additionally, we successfully amended certain financial covenants of our credit facility to provide flexibility as we close out the troubled Tampa jobs. The demand we see in our end markets across both our segments remains robust. While challenges remain through the first half of the year, we anticipate seeing significantly improved results in the second half of the year,” concluded Mr. DeAlmeida.

Source: Orion Marine Group