Orion Group Holdings Inc (ORN) Q3 2024 Earnings Call Highlights: Strong Revenue Growth and Improved Cash Flow

Orion Group Holdings Inc (ORN) reports a 35% revenue increase and significant cash flow improvement, despite challenges in backlog and marine segment margins.

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Nov 01, 2024
Summary
  • Total Revenue: $226.7 million, a 35% increase year over year.
  • Adjusted EBITDA: $15.2 million, a 62% improvement year over year.
  • Gross Profit Margin: $27.1 million or 11.9% of revenue, up from 11.3% last year.
  • SG&A Expenses: $20.8 million, decreased to 9.2% of total contract revenues from 10.2%.
  • Adjusted Net Income: $5.6 million or $0.16 per diluted share.
  • GAAP Net Income: $4.3 million or $0.12 per diluted share.
  • Adjusted EBITDA Margin: 6.7%, up from 5.6% last year.
  • Marine Segment Adjusted EBITDA Margin: 8.2%, compared to 9% last year.
  • Concrete Segment Adjusted EBITDA Margin: 4.3%, up from 2.4% last year.
  • Backlog: $690.5 million as of September 30, 2024.
  • Cash Flow from Operations: $35.2 million, compared to negative $15.1 million in 2023.
  • Cash Position: $28.3 million at the end of the third quarter.
  • Total Debt Outstanding: $28.0 million.
  • Full Year Revenue Guidance: $850 million to $900 million.
  • Full Year Adjusted EBITDA Guidance: $40 million to $45 million.
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Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Orion Group Holdings Inc (ORN, Financial) reported a significant 62% year-over-year increase in adjusted EBITDA, reaching $15.2 million for the third quarter.
  • The company achieved a 35% increase in revenue compared to the previous year, totaling $226.7 million.
  • Orion Group Holdings Inc (ORN) secured $116 million in new contract awards in October, indicating strong future business prospects.
  • The company has a robust pipeline of opportunities, with the potential for transformational growth expected in 2026.
  • Orion Group Holdings Inc (ORN) has improved its cash and liquidity position, ending the third quarter with $28.3 million in cash and no outstanding borrowings under its revolving credit facility.

Negative Points

  • The backlog decreased to $690.5 million as of September 30, 2024, down from $758.4 million at the end of June 2024.
  • The marine segment's adjusted EBITDA margin decreased to 8.2% from 9% in the previous year.
  • SG&A expenses increased to $20.8 million, up from $17.1 million in the comparable period, due to compensation, business development, and legal expenses.
  • The company experienced a delay in the sale of the East West Jones property, which did not close as anticipated in September.
  • Orion Group Holdings Inc (ORN) faces challenges in maintaining a steady backlog, with a book-to-bill ratio of 0.7x for the quarter.

Q & A Highlights

Q: Can you provide more detail on the current bidding environment and the outlook for backlog?
A: Travis Boone, CEO, stated that the bidding environment is strong and steady. The company has maintained a fairly consistent backlog throughout the year and anticipates several significant pursuits in the first quarter of the next year, with more lined up for 2025.

Q: What is the outlook for Navy opportunities, particularly in the Pacific?
A: Travis Boone, CEO, expressed optimism about Navy opportunities in the Pacific, noting that while some big pursuits expected in 2025 may be delayed due to congressional funding, the long-term outlook remains positive with significant opportunities anticipated over the next five years.

Q: How is Orion Group Holdings planning to manage capital expenditures (CapEx) for growth?
A: Gordon Thanisch, CFO, mentioned that the company is looking to acquire equipment to drive future growth. With a strong balance sheet and good liquidity, they anticipate increasing CapEx spending next year to prepare for growth opportunities.

Q: Can you elaborate on the impact of recent hurricanes on your business?
A: Travis Boone, CEO, reported minimal impact from recent hurricanes, with only minor damage that did not meet insurance deductible levels. The company was able to resume work quickly and has taken on some emergency repair projects in Florida.

Q: What are the expectations for SG&A expenses in the near term?
A: Gordon Thanisch, CFO, indicated that SG&A expenses in the fourth quarter are expected to be similar to the third quarter as the company completes investments in systems and process changes. Further guidance for 2025 will be provided later.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.