Release Date: July 25, 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 revenue increase of 5% year-over-year, reaching $192 million in Q2 2024.
- The company secured significant new contracts, including an $80 million project with Port Everglades and a $20 million project with Port Tampa Bay.
- Orion Group Holdings Inc (ORN) has a strong backlog of $876 million, indicating robust future business.
- The company has a pipeline of opportunities worth more than $14 billion, positioning it well for future growth.
- The concrete segment showed improvement, with adjusted EBITDA margins increasing to 6.6% from 0.3% in the previous year.
Negative Points
- Orion Group Holdings Inc (ORN) fell short of consensus expectations for Q2 2024, leading to a lowered annual guidance.
- The company experienced logistical setbacks on two large projects, causing delays and impacting revenue recognition.
- SG&A expenses increased to $21.1 million, up from $18.1 million in the same quarter last year, affecting profitability.
- The company reported an adjusted net loss of $5.2 million for Q2 2024, compared to a loss of $4.5 million in the prior year period.
- Margins in the marine segment retreated due to unabsorbed costs related to delayed projects and lower margins in the maintenance dredging business.
Q & A Highlights
Q: Can you provide more details on the logistical setbacks at Grand Bahama and Hawaii projects? Are there any changes to the overall profitability of these projects?
A: Travis Boone, CEO: The Grand Bahama project faced delays due to a subcontractor issue, but it has been resolved without impacting the overall project. In Hawaii, delays were caused by material delivery issues through the Panama Canal and other preparatory work not being completed on time. Both projects are now back on track, and we are confident in our ability to finish them as planned.
Q: Can you discuss the Navy opportunity and the $15 billion RFP? What is the process and timeline?
A: Travis Boone, CEO: The $15 billion RFP is for the PDIMAC contract, which will select three contractors. We are working on the proposal, with selections expected late this year or early next year. This is one of several contracts we are pursuing with the Navy, indicating significant opportunities in the Pacific.
Q: Are you seeing the dredging market come back, and how are you managing your equipment fleet given market dynamics?
A: Travis Boone, CEO: The dredging market remains disrupted and has not returned to previous norms. However, we have kept our dredges busy with private work and earlier contracts. We continue to pursue new projects and expect the market to normalize eventually, as maintenance dredging is an ongoing necessity.
Q: Can you speak to the confidence in hitting the lower end of your sales guidance for the third and fourth quarters?
A: Travis Boone, CEO: We feel good about the second half of the year, with significant work in our Atlantic division and the Caribbean. The Hawaii project is gaining momentum, and we have multiple opportunities in both concrete and marine segments. Scott Banta, CFO: We expect a substantial increase in Q3 over Q2, with a steady pace in Q4.
Q: How does the guidance change on sales and EBITDA translate to EPS guidance?
A: Scott Banta, CFO: The adjusted EPS range for 2024 is expected to be $0.07 to $0.20. The reconciliation from EBITDA to EPS is provided in the press release.
Q: Can you expand on the $14 billion opportunity pipeline and how it sets you up for 2025?
A: Travis Boone, CEO: Our pipeline has increased by $3 billion since the last quarter, indicating more opportunities, primarily in the marine business. This positions us well for substantial order growth and sales growth in 2025.
Q: What is driving the increase in your opportunity pipeline?
A: Travis Boone, CEO: The increase is driven by more opportunities with federal projects, including ports, DOTs, and DOD clients like the Navy and Army Corps of Engineers. We are not expanding into new geographies but focusing on existing ones.
Q: Can you discuss the margins on your data center projects?
A: Travis Boone, CEO: Our data center projects generally provide good margins and we have been able to perform them very well. Different projects have different margins, but overall, they align with our margin targets.
Q: Can you talk about the opportunities with Costco and the concrete award in Florida?
A: Travis Boone, CEO: There will be a large Phase 2 for the Florida project, and we are pursuing it. We recently won another Costco project in Texas, and we continue to add to our backlog with various clients.
Q: Should we expect any impact on the Port Everglades and Port Tampa projects due to interruptions at your larger projects?
A: Travis Boone, CEO: We do not foresee any impact on these newer projects. They are starting off well and seem to be on track.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
