Orion Group Holdings, Inc. (ORN) Q2 2026 Earnings Report, Transcript and Summary

Good day and welcome to the Orion Group Holdings Second Quarter 26 Financial Results Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Margaret Boyce, Investor Relations for Orion. Please go ahead, ma'am.

Thank you, operator, and thank you all for joining us today to discuss Orion Group Holdings second quarter 26 financial results. We issued our earnings release after market last night. it is available in the Investor Relations section of our website at oriongroupholdings.com. I am here today with Travis Boone, chief executive Officer of Orion and Alison G. Vasquez, Chief Financial Officer. On today's call, management will provide prepared remarks and then we will open up the call for your questions. Before we begin, I would like to remind you that today's comments will include forward-looking statements under the federal securities laws. Forward looking statements are identified by words such as will, be, intend, believe, expect, anticipate, or other comparable words and phrases. Statements that are not historical facts are forward-looking statements. Our actual financial conditions and results of operations may vary materially from those contemplated by such forward looking Discussion of the factors that could cause our results to differ materially from these forward-looking statements are contained in our SEC filings, including our reports on Form 10 Q and 10 ks. With that, I will turn the call over to Travis.

Travis, please go ahead.

Thanks, Margaret. And thank you all for joining our call today. I want to start by acknowledging that our results for the quarter were not in line with your expectations or ours, due to some client delays in our marine business. It is a timing issue, not a performance or operational issue. These delays are now behind us. We often talk about construction being a lumpy business This quarter is a good example. Things are going well. Our people are engaged. And we are performing If not for these delays, results would have been right in line with our expectations. We will give more details on the quarter shortly. Bigger picture, our win rate continues to be high, our concrete business is operating at historic levels, we had a strong quarter of bookings, Our pipeline continues to grow and our story remains unchanged. We have a historically strong marine construction market is opening in front of us and we remain confident in our ability to grow over the coming years. With multiple new marine projects kicking off, we expect the back half of 26 to be strong. And we are optimistic about 2027 as well. Turning to the market outlook, Today, our business is benefiting from powerful long term themes that include significant long duration capital investments spanning defense infrastructure, port and transportation infrastructure, energy, data centers, health care, and commercial construction. For marine, we are well positioned on the doorstep of a marine infrastructure investment mega cycle that enables continued US economic competitiveness energy security, supply chain resilience and national defense. These priorities are driving increased investment in larger, more technically complex marine infrastructure projects that require specialized marine construction capabilities, a highly skilled workforce and fit for purpose equipment precisely the type of projects Orion is increasingly pursuing winning and executing. The president's $1.5 trillion defense budget proposal made its way to the House last week but has yet to clear legislative hurdles in the Senate before reconciliation can begin. While spending levels will be debated, investments across naval infrastructure modernization Indo Pacific Command strength and logistics and port resilience continue to be priorities with solid bipartisan support. We are closely monitoring the U.S. Defense budget as we look ahead to programs that will catalyze our long term growth. On to the concrete market outlook. Where momentum remains very strong. We are benefiting from the build out of physical infrastructure supporting the investment in AI cloud computing and domestic manufacturing. As our clients seek to streamline project coordination compressed schedules and increased execution certainty, many are directly engaging with our team earlier in the project lifecycle to advise on design and execution, Additionally, our expansion into site civil services is going very well. And we are seeing increased opportunities to pursue this scope on a broader set of projects Overall, confidence in the long term outlook across our business is robust and our pursuit pipeline has grown to approximately $27 billion, with almost $1.6 billion in projects quoted awaiting award. As you may recall, this number was sitting right around $1 billion at the beginning of the year, and reflects our nearest term award opportunities. Our win rate during the quarter was well above industry average, and we were pleased to record over $275 million in bookings in the quarter, representing a 1.25x book to bill bringing backlog at quarter end to $722 million. Bookings across our Marine and Concrete businesses reinforce our compelling competitive position in attractive end markets and include a large port terminal expansion project in Alabama, dredging project in the U.S. Virgin Islands, a couple of nice jetty wins from Pacific Rock and Dredge, a.k.a. McCamis, who we acquired in February, and additional phases on multiple data center projects With a growing opportunity pipeline, expanded capabilities and an outstanding team delivering projects that matter, our conviction in Orion's long term growth trajectory is well intact. On to some high level comments on the second quarter results. Our results reflect the growth of concrete, alongside the temporary softness in marine caused primarily by slower than expected project starts and elongated award cycles. Our Concrete business posted excellent results reporting over 30% top line and 45% adjusted EBITDA growth in the quarter, benefiting from expansion into site civil services favorable utilization and solid execution. Marine top line and profitability were down primarily due to the timing of project awards, startups and completions. And we have reset our full year 2026 guidance to reflect this timing shift. Today we have very good visibility into the remainder of the year with nearly 90% of our marine work under contract and continued concrete momentum to achieve our updated guidance. Before handing it over, I would like to take a moment to give a shout out to our Pacific Rock and Dredge team who are prominently featured in the new documentary movie, Taming the Mouth, We had the honor of attending the premiere this past weekend and it is definitely worth seeing. The documentary is a fascinating piece on the treacherous mouth of the Columbia River, where it meets the Pacific Ocean. An area commonly known as the graveyard of the Pacific. The movie highlights McCamus' recently completed reconstruction of the massive jetty and breakwater system to calm the turbulent seas. Starting August 4, you can stream it on Apple TV or Amazon Prime. I will now turn it over to Alison to discuss the details. Alison?

Thank you, Travis. In the second quarter, we generated revenue of $222 million an 8% increase from the second quarter of last year. As Travis discussed, Concrete delivered another strong quarter while the timing of marine awards and project startups weighed on our results. Gross profit was $23 million down $3 million from last year, due primarily to lower marine volume and equipment utilization. Specifically, we had several projects where our team's mobilization was delayed primarily due to client related issues, such as site readiness and timing of delivery of client provided materials. When marine productivity slows, we sometimes get a double whammy in the lost project profitability along with the correlated lower equipment utilization, and this definitely impacted this quarter's gross profit. These projects are now all in full swing and we expect good productivity through the second half of the year. The decline in marine gross profit was partially offset by nice volume and favorable project execution within our Concrete segment. GAAP loss for the quarter was $4.1 million compared to GAAP net income of $800 thousand in the second quarter of last year, which was caused primarily by reduced volume in our marine business, increased depreciation and amortization and an increase in GAAP taxes associated with VA adjustments. Second quarter adjusted EBITDA was $7.9 million and adjusted EPS was $0.02 and compared to $11 million or $0.07 per share in the prior year quarter. Our balance sheet is in good shape with net leverage of 2.3 times providing us with financial flexibility to support our strategic priorities. As Travis mentioned, we have reset our full year guidance to reflect the timing shifts in our Marine segment. Revised 2026 annual guidance is revenue in the range of $900 million to $950 million unchanged adjusted EBITDA in the range of $50 million to $54 million representing 15% growth over 2025 actual results at the midpoint, adjusted EPS in the range of $0.23 to $0.30 representing 6% growth over 2025 actual results at the midpoint and capital expenditures in the range of $25 million to $35 million which remains unchanged. With that, I will turn it back to Travis to wrap it up.

Thanks, Alison. Orion is embarking on a pivotal chapter. We have spent the last few years refining our capabilities, expanding our geographic footprint, recruiting and upscaling our people, and embedding a culture of teamwork, safety, delivery and integrity throughout the organization We made these investments intentionally to seize on the vast market opportunities taking shape in the market. While timing can affect individual quarters, our confidence in where this business is headed is stronger than ever. We are on track and pleased with our business and our strategic direction. With that, I will hand it back over to the operator to open it up for Q and A.

Thank you. We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then 2. In the interest of time, please limit yourself to 1 question and 1 follow-up. We will now pause momentarily to assemble the roster. The first question will come from Aaron Spychalla with Craig Hallum. Please go ahead.

Yes. Good morning, Travis and Allison. Thanks for taking the questions.

Good morning, Aaron.

First for us, can you just maybe talk about guidance implies a pickup in margins in the back half. And just can you speak to the confidence in achieving those? And just broadly some of the opportunities you see for margin expansion moving forward?

Sure, we have some of those projects that the delays in the second quarter are mobilized and kicking off we have 90% of our marine backlog for the back half of the year under contract. And 80% of our business overall is under contract for the back half of the year. And we feel really good about our ability to deliver, that it is a big jump up from where we were in the first half. But when we get the all the marine assets utilized and everybody operating, it is gonna be it is gonna make a big jump. So we are we are confident in the back half. Being a big step up.

Alright. Thanks for that. And then, you know, just good to see the orders starting to pick up Has that carried over into July and just again, maybe kind of talk about what you are seeing in the market as you go to bid, on the margin side of things as well?

Yeah. We have we have seen general continued wins in July. Nothing specifically to write home about or we would have talked about it, but it is been good group of wins in the first the first month of the third quarter. As far as, you know, pricing and then, you know, it is generally been stayed relatively steady. Nothing heading in the wrong direction, so that is a good thing. And we are confident about things. Our win rate, just to reiterate, our win rate has stepped up a bit. So that is been good. And that was in the it is up in the second quarter from the first quarter. Just slightly in the marine business. So that is that is good and hopefully we expect that to continue.

Brent. Thanks for taking the questions. I will turn it over.

The next question will come from Brent Thielman with Oppenheimer. Please go ahead.

Hey, thanks. Good morning, Travis and Allison. I guess just on the concrete business, it seems like the backlog there is a little misleading relative to what you are seeing within the end markets. it is under pressure here for a few quarters now. Could you just sort of level set us on your expectations for growth for the segment into the second half?

And you said concrete, correct?

Yes, on the concrete segment.

Yeah, the concrete, it is tough to tell from pipeline or backlog with concrete what is happening because things happen so fast. In marine, you see it coming for a long time, and then, you know, there is there is tends to be quite a few delays, etcetera. there is there is a longer kind of lead up to actually getting to work with concrete. Oftentimes, we hear about-- an opportunity we are working on it 2 weeks later, 3 weeks later. it is a really quick turnaround. And so not seeing it in the backlog is not an indication of our expectations of what it is going to be just because it comes in comes in quick and burns fast. We have got over $1 billion in our concrete business outstanding, bids outstanding. So quite a quite a bit of work we are waiting to hear on and feel really good about our concrete business. I mean, I was on a bitter view this morning for a large project. there is a lot of things happening.

Okay. Excellent. And then, Travis, you did express confidence in the growth opportunities into 2027. Obviously, a lot going on in both business groups. Maybe you just kind of highlight some of the factors in particular that you are seeing. I know there is some larger naval related programs out there you are pursuing. Should we expect to see kind of build in the book of the business through the second half as we go into 2027?

that is what we expect albeit there has been a lot of slides and delays and opportunities that we think they are going to happen and they slide. So I do want to caveat it with our expectations versus reality. Sometimes it is a little different just based on clients pushing procurements and awards and things like that. But our pipeline is very strong for the rest of this year as well as the first half of next year. So we are feeling really good about our ability to continue to grow the business and build on where we have been talking about for a long time.

Yeah. And I will just add to that you mentioned the naval side, Brent, but the pipeline and the opportunities that we are pursuing are quite balanced across the Department of Defense, where Department of War as a piece of it. But, I mean, just in this quarter alone, from a second quarter perspective, the largest project that we won was a large port modernization project in Alabama. So we are seeing a nice balance between defense, between port modernization, between commercial and energy, oil and gas, chemical clients, really looking to make investments in a more regulatory light environment while they can press forward. And so we are seeing good momentum really across a number of different fronts. So I would not pigeonhole it back into just naval opportunities.

Not that you would, but The next question will come from Min Cho with Texas Capital Securities. Please go ahead.

Hi. Good morning. Thanks for taking my questions.

Good morning.

First question has to do with the concrete margins. They were obviously below 1Q. I know that was a high watermark for you, especially given the weather. But is 2Q or the margins a good run rate for the rest of the year? Or what could lead to some expansion there?

So the 2Q margins came in right in line with what we expected, right? They are just between 5.5% to 6%, and that is generally what we pencil out for them for the year. Do they have opportunities to bump that up to the extent that they can have additional capacity flow through that? They do. I would say from a second quarter perspective, we did see a downtick from the first quarter really associated with just some weather and starts and stops and things that happened with that. But from a momentum perspective, we are seeing good momentum in that business overall, good pipeline, as Travis mentioned earlier, of opportunities that we are waiting on. And really strong backlog as we enter into the third quarter. So the concrete team is busy and out and executing. And I do not see any issues with that team really. Hitting close to that 6% margin from a full year perspective, which is what we are really targeting for that business.

Great. Thank you. And then can you just tell us what percentage of Concrete revenue and Concrete backlog is currently from data centers?

it is roughly 50% quarter for data centers on concrete. The revenue this year or this quarter.

Yeah. And I would say the pipeline probably is in line with that, maybe a little bit slightly higher. Potentially, yeah. And, just as a reminder, was 40% in the first quarter. Brent, thank you.

And then if I can just slip 1 quick 1 in here. Your pipeline of opportunities has increased to $27 billion now up from the last quarter. Can you talk about any notable trends that you are seeing? What was kind of added? Yeah. Just any additional information about the growth in the pipeline.

Alison's point about a kind of a good balance of Department of War type, whether it is Corps of Engineers or Army pursuits, as well as, you know, private industry energy type work as well as state and local agencies, be it ports or DOTs it is pretty well balanced. We are seeing continued shifts to larger projects. As well as shifts toward more alternative delivery, meaning not a kind of traditional design bid build, but more of the, you know, whole variety of different types of alternative delivery be it design builds or progressive design build or all the different other nomenclatures that are used for different delivery models but so we have seen an uptick in those as well. So and that is typically with the larger more complex projects they typically have some sort of alternative delivery component and that is what we are seeing more and more of those.

Got it, great. Thank you so much.

Thank you. The next question will come from Tomohiko Sano with JPMorgan. Please go ahead.

Hi, good morning everyone.

Good morning, Tomohiko.

Good morning. Thanks for taking my questions. You have said Marine phasing and high visibility into the back half. are understood. And where is the equipment utilization today? What utilization levels are you targeting in the second half? And could you quantify margin sensitivity to utilization please?

We do not talk specifically about what the utilization percentages are. But I would say that they were below expectation in the second quarter As we think about what we see in the third quarter and into the fourth quarter, as some of those projects ramp and have ramped and are ramping in as we kick off new work. The equipment plans are quite high in terms of the equipment utilization as well as the labor utilization. And so I would say that we have good line of sight into not only just the expansion of the revenue and the growth into the back half, but a lot of that profitability and that revenue growth will have opportunities to bring that all the way to the bottom line because the equipment cost is the equipment cost, whether you are using it or you are not using it. As we grow revenue and we are using our own fleet, you have more of those dollars fall to the bottom line, which gives us opportunities to expand margins, in a more meaningful way in our marine business.

Thank you. And, 1 more follow-up. On McAmis, how should we expect McKamy's integration to contribute in the back half to utilization wins and profitability? And are there any areas integration is behind upon or costing more than expected?

We feel really good about the integration that is happened so far. The team has continued to win projects. And their work window just kind of opened up this month. So they are off to the races, so to speak, with quite a few projects underway currently, and we will be busy for the rest of the year. So I would say they would, you know, contribute much more heavily in the back half of the year, which that is kind of going to be the norm, if you will. For that business back half of the year weighted for them just because of the work windows in their area. But they will be they will be highly utilized and very busy for the back half of the year.

Yeah. And I will pick up on the integration question just with regard to how the integration is going. The integration is going very well. We are, you know, they are fully transitioned over to our project controls, financial and IT systems. That is going well. And they contributed positively both from a top line perspective and then also from an EBITDA perspective and were accretive to EBITDA margins. During the quarter. So we feel good about that. But as Travis said, their work window really is, late June or early July through February. So our expectation is that through the back half of the year that will ramp up quite significantly.

Thank you, Travis, Allison. that is all.

Thanks, Tomohiko.

Thanks.

The next question will come from Gerry Sweeney with ROTH Capital. Please go ahead.

Good morning, Travis and Alison, thanks for the lot of questions already answered, but just maybe another question on McAmis. Obviously, brings a unique skill set to Orion. I am just wondering if the opportunity is to sort of expand that skill set around jetties, etcetera. Maybe to other operating areas within your footprint? Opportunity there longer term?

Yeah. Definitely, Gerry. We have been tapping into their expertise to look at projects elsewhere across the business. Into other geographies and bringing their expertise onto existing projects as well to provide kind of value and efficiencies to projects we already had underway. They provided a lot of value already and we expect that to continue as we expand their capability set across the geography.

Got it. And then 1 question on concrete. Obviously, you mentioned that you get brought into these projects very close to there is not a whole lot of lead time between you getting involved and work starting. So but with these concrete or even data center projects, these projects, you know, they are permitted site selection you know, ground has already been cleared. So these projects are front and center They are not gonna be canceled or anything like that. Do you have a clear sight as to the opportunity right in front of you in terms of there is that is that is right, Gerry.

But by the time by the time they hit our desk, they are they are full go mode and which is why it is typically pretty short time between when we find out until we are we are working. I mean mentioned a bid review I was on this morning. We heard about that job early last week and it will final numbers go in today and we will be working within a month. And it is a it is a large project. Right? So it is it is a really quick turnaround on these things and they are very much full go mode by the time we get them. So there is highly unlikely that they get cancelled. At that point.

Yeah. And the other thing that I would say that gives us confidence in the longer term outlook for the data centers, 2 things. The first is as we look at across the ecosystem and the landscape, we see the long lead time items in the backlog of those companies that those long lead time items, whether it be the servers or the racks or the electricians. And we see that the backlog for those types of companies is multi year. So our expectation because we are not long lead time, we are we are critical path, but we have a much shorter window It gives us a greater window of visibility into what our own path looks like. So a lot of times permitting is not front and center. We do not know because a lot of those things are very secretive. For the data centers, which is why we hear about them a week or a month before we really are starting to bid in seriousness. But as we look across the ecosystem, we see that others who are who do have those long lead time items have a multi year visibility into that, which gives us confidence that also our concrete business, our site civil services, which are taking off that those businesses also will continue to be vibrant for the foreseeable future. The other thing I would point out is because of the our credentials in this space, we are a known commodity. Like, we are a known player. We are known for We are known for getting things done on time and on schedule. And for working collaboratively across in this critical path item. And it gives us the opportunity to really focus on those more premier clients and not the speculative developers and things. That also really prioritizes where we sit in the stack and the of opportunities that we see over the longer term even if we do not see those with 6 or 12 or 8 month visibility in our pipeline, we do have those relationships and the capabilities and credentials to give us confidence that this is a work stream that will continue for us for the foreseeable future.

that is helpful. I mean, essentially, it is also fair to say you are working on projects or data center projects that were planned 2 years ago. So that is on projects that were just planned at the start and the beginning front end of the AI of investment cycle.

And that is right. That would be the point.

Okay. Yeah. Alright. If I could slip 1 more in, I probably last at the end of the line, anyhow. Just a little bit of detail on site civil services. You know, it is something you brought up in expanding and maybe just what is going on there and what is the opportunity for you?

Yeah. that is something that we started, Gerry, late last year as you recall, and that is been we have seen that going really well. The general contractors we work with and to some extent the owners that we work with are they appreciate that we are doing, you know, site civil and the concrete and that is a good value proposition for them. And it is been you know, we are only, you know, 2.5 quarters or so in, but what we have seen is really good performance by the team. And a really strong embrace of what we are doing by our teaming partners. So it is it is going very well. Got it. And lots of lots of lots of action and opportunities that we are were actively pursuing currently.

And it absolutely simplifies execution for us and more maybe more importantly for our clients. Because they have 1 place to go to, and we can resolve our issues, whatever issues we may encounter. We can resolve internally. So it is a it really derisks execution. So it is something that is quite attractive.

Got it. I appreciate it. Thanks for the thanks for your time this morning.

Thanks. The next question will come from Laura Meyer with B. Riley Securities. Please go ahead.

Hi. Good morning, Travis and Alison, thanks for taking the question.

Good morning, Laura.

Good morning. My first question is on concrete. So the book to bill was roughly 0.93x this quarter. Given the 6 to 12 month project duration, how should we think about the bookings cadence?

Think the bookings were the this was the first quarter, in quite a while where the bookings have been, or the book to bill has been less than 1x. So but I see that more as an episodic item in timing item. I do not see any issue with the bookings environment in concrete at all. I think it is purely a timing issue in terms of, win awards. I mean, we just got a big award in July that, could have come in June, but just timing perspective. Fluctuated that. So I do not see any issues in that area at all.

Okay. Thanks. And then my second question, are you seeing the same contract term improvements that the broader heavy civil market is seeing specifically upfront mobilization payments and owner funded escalation provisions? And if so, is that showing up in marine or concrete or both?

Good question. So we always are working on trying to get upfront mobilization on our projects, be it concrete or marine. And it depends on the client and things like the contract terms for example for the federal government there is little to no negotiation on a contract terms with the federal government. Having said that, you know, on the concrete business, we are not working for the federal government and so we are able to negotiate terms often As far as escalation goes, for certain items we were able to get escalation for things like which maybe this is where you are headed but fuel obviously is a concern on all of our business for the cost of diesel having a lot of variability in the last few months and kind of continued concern over long term prices for diesel. We do often either hedge that lock it in, or we build a large or we build a contingency pool into our bid to cover higher diesel prices.

Thanks, Travis. Thanks, Alison.

Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mr. Travis Boone, CEO, for any closing remarks.

Thank you. Just quick, kind of recap of our key messages through the call. I would say we started with this is a timing issue, not a demand issue. This is all about timing of getting started on contracts. Our end markets are very strong we are winning at or above historical rates and definitely above industry average. And our confidence in the long term strategy is very high. And our as I mentioned earlier, our marine business, we have 90% of the work for the back half of the year under contract. And 80% overall for the company, so we are feeling good about things despite how the numbers came in, in the second quarter. But we are feeling good about where we are and what we are doing. We appreciate all of our employees who are working so hard every day to deliver the business and things to our shareholders for believing in our story. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.