Orion Marine Group Reports Fourth Quarter and Full Year 2015 Results

Orion Marine Group, Inc. (NYSE:ORN) (the “Company”), a leading specialty construction company, today reported net income for the three months ended December 31, 2015, of $1.4 million ($0.05 diluted earnings per share). These results compare to net income of $5.3 million ($0.19 diluted earnings per share) for the same period a year ago. For the full year 2015, Orion Marine Group reported a net loss of $8.1 million ($0.30 diluted loss per share), which compares to the prior full year 2014 net income of $6.9 million ($0.25 diluted earnings per share).

“2015 was a year filled with accomplishments, as well as challenges,” said Mark Stauffer, Orion Marine Group’s President and Chief Executive Officer. “I am very pleased with the acquisition of TAS and the growth opportunities it provides our Company. In our heavy civil marine construction segment, weather and project delays, along with the project execution issues during 2015 were disappointing developments in a year I initially had such high hopes for. However, the markets in both our segments remain strong and I have taken steps to correct the operational issues impacting our heavy civil marine construction segment. I remain excited about 2016 and the opportunities ahead for the Company.”

Financial highlights of the Company’s fourth quarter and full year 2015 include:

Fourth Quarter 2015

Consolidated Results

• Fourth quarter 2015 contract revenue was $161.9 million, an increase of 50.9%, as compared with fourth quarter 2014 revenue of $107.3 million, primarily as a result of the addition of TAS.
• Gross profit for the quarter was $17.4 million, a decrease of approximately $745 thousand as compared with the fourth quarter of 2014. Gross profit margin for the fourth quarter of 2015 was 10.8%, which was lower than the prior year period of 16.9%.
• Selling, General, and Administrative expense for the fourth quarter 2015 was $15.7 million as compared to $10.7 million in the prior year period. The increase is primarily attributable to the addition of TAS.
• The Company’s fourth quarter 2015 EBITDA was $12.8 million, representing a 7.9% EBITDA margin, which compares to fourth quarter 2014 EBITDA of $13.4 million, or a 12.5% EBITDA margin.

Heavy Civil Marine Construction Segment

• Fourth quarter 2015 contract revenue was $89.5 million, a decrease of approximately 16.6%. The decrease is primarily related to the timing and mix of projects compared to the prior year period.
• Fourth quarter 2015 operating loss was $2.0 million, a decrease of approximately $9.4 million. The decrease is primarily attributable to five previously discussed projects managed out of the Tampa office earning no margin during the quarter, as well as the timing and mix of projects.
• Fourth quarter 2015 EBITDA was $6.9 million, representing a 7.7% EBITDA margin, a decrease of approximately $6.6 million from the prior year period.

Commercial Concrete Construction Segment

• Fourth quarter 2015 contract revenue was $72.4 million, an increase of approximately 10.2% over the same period last year, on a pro-forma basis. The increase is attributable to a larger volume of work being executed in both the Houston and Dallas markets.
• Fourth quarter 2015 operating income was $3.8 million, a decrease of $3.1 million over the same period last year, on a pro-forma basis. The decrease is primarily driven by the amortization of intangible assets related to the acquisition and the corporate allocation of SG&A cost to the Commercial Concrete Construction segment.
• Fourth quarter 2015 EBITDA was $6.1 million, representing an 8.4% EBITDA margin

Full Year 2015

Consolidated Results

• Full year 2015 contract revenue was $466.5 million, an increase of 21% as compared with full year 2014 revenues of $385.8 million. The increase is attributable to the addition of TAS.
• Gross profit for the year was $40.2 million, which represents a decrease of $4.4 million as compared with the full year 2014. Gross profit margin for the full year 2015 was 8.6%, as compared to 11.6% for the full year 2014.
• Selling, General, and Administrative expense for the full year 2015 was $47.7 million as compared with $34.7 million in the prior year period. The increase is primarily attributable to the addition of TAS.
• The Company’s full year 2015 EBITDA was $20.6 million, representing a 4.4% EBITDA margin, which compares to full year 2014 EBITDA of $34.2 million, or an 8.9% EBITDA margin.

Heavy Civil Marine Segment

• Full year 2015 contract revenue was $347.1 million, a decrease of 10.0% as compared with full year 2014 revenues of $385.8 million. The decrease is primarily attributable to weather and project delays in the first half of 2015, as well as the timing and mix of projects.
• Full year 2015 operating loss was $13.6 million, a decrease of $23.6 million. The decrease is primarily related to the project execution issues experienced on five projects managed out of the Tampaoffice.
• Full year 2015 EBITDA was $10.7 million, representing a 3.1% EBITDA margin, which compares to full year 2014 EBITDA of $34.2 million, or an 8.9% EBITDA margin.

Commercial Concrete Segment

• The acquisition of TAS Commercial Concrete was completed on August 5, 2015. The annual results for this segment represent results from August 5, 2015 to December 31, 2015.
• Revenue attributable to Orion Marine Group, Inc. during 2015 was $119.4 million. On a pro-forma basis, assuming that the acquisition of TAS Commercial Concrete had been completed as of January 1, 2015, total 2015 revenue would have been $255.4 million which represents an increase of 8.1% over 2014, on a pro-forma basis. The increase is attributable to a larger volume of work being executed in both the Houston and Dallas markets.
• Operating income attributable to Orion Marine Group, Inc. during 2015 was $6.1 million. On a pro-forma basis, assuming that the acquisition of TAS Commercial Concrete had been completed as ofJanuary 1, 2015, total 2015 operating income would have been $17.0 million which represents a decrease of 18.5% over 2014, on a pro-forma basis. The decrease is primarily related to the amortization of intangible assets related to the acquisition and the corporate allocation of SG&A cost to the Commercial Concrete Construction segment.
• EBITDA attributable to Orion Marine Group, Inc. during 2015 was $10.0 million. On a pro-forma basis, assuming that the acquisition of TAS Commercial Concrete had been completed as of January 1, 2015, total 2015 EBITDA would have been $27.2 million, an increase of 11.7% over 2014, on a pro-forma basis.

Backlog of work under contract as of December 31, 2015 was $357.6 million, which compares with backlog under contract at December 31, 2014 of $215.3 million. Of the 2015 ending backlog, $194.3 million was attributable to the heavy civil marine construction segment, while $163.3 million was attributable to the commercial concrete segment. Additionally, the Company is currently the apparent low bidder on approximately $61 million of work.

The Company reminds investors that 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. 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.

Outlook

“We continue to see solid demand for our services that should support improved results in 2016,” said Mr. Stauffer. “With the remaining three Tampa projects that experienced issues in the third quarter nearing completion, we are excited to capitalize on improving markets in the Heavy Civil Marine Construction segment. Additionally, the market in our Commercial Concrete Construction segment remains solid, with ample opportunities for growth in 2016.

“With an improved federal and state funding outlook, along with continued private sector demand, we remain optimistic for improved results in the Heavy Civil Marine Construction segment in 2016. The passage of the OMNIBUS funding bill last year is an encouraging development. Additionally, under the recently approved two year budget deal, appropriations for the fiscal year beginning October 1, 2016 should occur under regular order, which should allow the U. S. Army Corps of Engineers to let maintenance dredging projects at a more consistent and predictable pace. We were also pleased to see the passage of a 5 year,$305 billion transportation bill, called the FAST Act, in December. Among other transportation items, the FAST Act will fund bridge construction projects through various state departments of transportation. This long term bill will not only provide an increase in bid opportunities for bridge construction projects, but may also lead to improved bid pricing given the visibility provided to the market. We also continue to monitor developments in the private sector related to our midstream and downstream energy clients. As I have said over the past several quarters, despite the prolonged downturn in energy prices, we continue to see bid opportunities in this sector, driven by expansion of liquid terminals and petrochemical facilities.

“In the Commercial Concrete Construction segment, demand for services also remains solid. While we are seeing somewhat of a softening in the Houston market for multifamily and office construction, this type of work does not make up a large portion of our targeted work and is being offset by increasing demand for distribution, retail and warehouse space. Vacancy rates in retail spaces in Houston remain at historically low levels along with low vacancy rates for distribution and warehouse facilities near the Port of Houston. The Dallas market continues to be a source of growth. Vacancy rates in Dallas are also trending lower, which should continue to drive demand for our services in the area. In fact, the Commercial Concrete Construction segment ended the year with its highest level of backlog for Dallas projects in its history.”

“We were pleased with our bid activity and success rate in 2015 across both our segments,” said Chris DeAlmeida, Orion Marine Group’s Vice President and Chief Financial Officer. “In the Heavy Civil Marine segment, we bid on approximately $1.4 billion in 2015 and were successful on $324 million. This resulted in a 0.94 times book to bill for the year and an annual win rate of 23%. The Commercial Concrete Construction segment also had a healthy bid levels for the year, bidding on approximately $1.2 billion in work while being awarded approximately $264 million. This resulted in a 1.07 times book to bill for the year, on a pro-forma basis, and an annual win rate of 22%. Overall, we have over $568 million worth of bids outstanding, including approximately $82 million on which we are apparent low bidder or have been awarded subsequent to the end of the quarter.

Given our improving end markets across both our segments and robust bidding activity, we believe results for 2016 should be within the previously stated range.”

About Orion Marine Group

Orion Marine Group, Inc., a leading construction company, provides services both on and off the water in the continental United States, Alaska, Canada and the Caribbean Basin through its heavy civil marine construction segment and its commercial concrete segment. The Company’s heavy civil marine construction segment services includes marine transportation facility construction, marine pipeline construction, marine environmental structures, dredging of waterways, channels and ports, environmental dredging, design, and specialty services. Its commercial 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 offices throughout its operating areas.