Orion Group Holdings Inc Q1 FY2026 Earnings Call

Good day, and welcome to the Orion Group Holdings First Quarter 2026 Financial Results Conference Call. Operator provided instructions. 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' First Quarter 2026 Financial Results. We issued our earnings release after market last night. It's available in the Investor Relations section of our website at oriongroupholdingsinc.com. I'm here today with Travis Boone, Chief Executive Officer of Orion; and Alison Vasquez, Chief Financial Officer. On today's call, management will provide prepared remarks, and then we'll open up the call for your questions. Before we begin, I'd 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 condition and results of operations may vary materially from those contemplated by such forward-looking statements. 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-K. With that, I'll turn the call over to Travis. Travis, please go ahead.

Thank you, Margaret, and good morning, everyone. Thank you for joining us today to discuss our first quarter 2026 results. We delivered a solid start to the year, supported by disciplined operational performance and a healthy $24 billion pipeline of opportunities. This translated into top and bottom line growth and good cash flow generation. Our teams continue to execute at a high level, positioning us well for the remainder of 2026. In our Marine segment, demand for mission-critical maritime infrastructure continues to build, particularly across defense and port modernization projects. With the Iran conflict and disruption of traffic through the Strait of Hormuz, American naval superiority in domestic energy and petrochemical security are front and center. These are meaningful drivers of public and private maritime build-outs that Orion is well positioned for. On another note related to the conflict in the Middle East, you may have heard that the administration paused the Jones Act related to the disruption in the Strait of Hormuz. This is a temporary pause specifically related to the transportation of bulk petroleum and fertilizer products. Previous administrations have made similar actions related to emergencies or disasters. While this limited pause of the Jones Act does not impact our business, we are strongly opposed to any and all Jones Act modifications. It does not align with the America First approach the administration has so publicly promoted, and this action has had little to no impact on reducing fuel prices in the United States. The President's 2027 budget proposal released earlier this month includes a $1.5 trillion defense budget, a historic increase to fund the expansion and modernization of U.S. shipyards, dry docks and waterfront infrastructure, alongside expanding investment in maritime security and uninterrupted global transportation lanes. This budget prioritizes investment in hard assets tied to U.S. national security, a central theme to Orion's long-range growth outlook. Our commercial clients are signaling a growing need for investments that increase energy security and supply diversification, particularly in North America. Buoyed by elevated product prices that support investment economics, we are seeing an acceleration of early work to support energy, chemical and petrochemical projects that include meaningful marine infrastructure to increase export capacity. With the addition of J.E. McAmis in February and continued investment in our people and fleet, our team is well positioned to deliver the maritime infrastructure projects critical to our national defense strategy and commercial resilience. Turning to Concrete. This team delivered a fantastic quarter across all key metrics with strong revenue and impressive adjusted EBITDA expansion. Registering a 1.1x book-to-bill in the quarter and executing with excellence, Concrete is firing on all cylinders. Data center development continues to be a primary pillar for this business. Investment by hyperscalers and greenlighting of projects continues to advance at a very brisk pace. In the quarter, data centers accounted for around 40% of Concrete revenues. And with the current composition of backlog and pipeline, we believe data centers will continue to be a central driver of profitable growth for our Concrete segment going forward. We also continue to see growing opportunities across our other sectors, including advanced manufacturing, transportation and cold storage. Investments in these areas are driven by reshoring of manufacturing around long-term domestic production strategies, increasing demand for expanded distribution and fulfillment networks and a favorable regulatory environment. With our recent expansion into site civil, earthwork and underground utilities, we are seeing the size and scale of concrete pursuits and awards increase while also enhancing execution certainty and control for our clients and our own delivery teams. All in all, an outstanding quarter of bookings, execution and teamwork for our Concrete team. Our backlog is growing and our pursuit pipeline remains healthy with broad-based opportunities across both segments as we move through the year. Our $24 billion pursuit pipeline is currently evenly distributed over time with roughly $8 billion in opportunities for 2026, $8 billion in 2027 and $8 billion in 2028 and beyond. At the end of the quarter, backlog stood at $668 million and included almost $220 million in new awards and change orders booked in the quarter. Representative awards included a couple of midsized port modernization and dredging projects, a bridge project for an Army base, a couple of good wins for the McAmis team and a nice mix of concrete projects. We've continued the bookings momentum into April and have been awarded well over $200 million in new work that is not yet under contract, so it is not in our backlog, including a $100 million port renovation project, a $40 million dredging project and a $24 million data center project. These new awards set us up nicely for a strong second quarter. With growing backlog and a robust pipeline, we are pleased to reaffirm our full year 2026 guidance. I'll now turn it over to Alison to discuss our financials. Alison?

Thanks, Travis. We're pleased to report first quarter revenue of $216 million, GAAP net income of $4.7 million, adjusted EBITDA of $8.7 million and adjusted EPS of $0.05 per share. As compared to the first quarter of 2025, these results represent a 15% growth in revenue, 7% growth in adjusted EBITDA attributable to strong momentum and expansion of services in our Concrete segment and solid, consistent, predictable project execution across the company. Before turning to segment performance, I want to briefly highlight a change to our segment reporting this quarter. We have revised our presentation to begin reporting three segments: Marine, Concrete and Corporate. We believe this disaggregation of Corporate out of the results of Marine and Concrete will provide greater transparency into the underlying financial performance of each segment and is much more consistent with how we manage the business. Prior results have been recast to conform to the current presentation, and we've included a full recast of FY 2025 in our investor presentation posted on our website. Our Marine segment reported revenue of $110 million and adjusted EBITDA of $12 million, representing an 11% margin compared to $127 million in revenue and adjusted EBITDA of $17 million in the first quarter of 2025. These decreases were primarily due to the ramp down of several large projects and early starts on new projects kicking off. Our Concrete business had a standout first quarter, as Travis talked about, reporting revenue of $106 million and adjusted EBITDA of $8.6 million, representing an 8% margin as compared to revenue of $61.5 million and adjusted EBITDA of $2.8 million in the prior year quarter. These results represent a high watermark for both revenue and adjusted EBITDA and are the direct result of outstanding productivity, execution and momentum. We also benefited from the expansion of services that Travis mentioned earlier. From a balance sheet perspective, we ended the quarter with just over $70 million of debt that included $53 million of outstanding borrowings under the UMB credit facility, which we used to fund the McAmis acquisition in the quarter. Our net leverage remains at a healthy level, providing meaningful balance sheet flexibility as we look ahead. All in all, we are pleased to reiterate our full year 2026 guidance initiated last month. That's it for me. Back to you, Travis.

Thanks, Alison. As we move through the year, our focus remains on executing our work safely, maintaining discipline across the organization and delivering consistent results. I want to thank our shareholders for their continued support and recognize our teams across the business whose work every day drives our performance. Before I open the call for Q&A, I'd like to encourage our stockholders to cast your votes and participate in our virtual annual meeting coming up on May 19. You can find the details in our proxy materials and on our website. Finally, I'd also like to take this opportunity to recognize and thank Tom Amonett and Peggy Foran for their service on our Board. Each of them will be retiring from our Board at the annual meeting, at which time the size of our Board will decrease from eight directors to six directors. With that, I'd like to open it up for questions. Operator?

Operator provided instructions. The first question will come from Tomo Sano with JPMorgan.

So I'd like to ask about the guidance. Given the solid start of the first quarter and the positive project updates in April, there was no upward revision to your full year guidance. Is this due to conservative assumptions in your outlook? Or does it reflect some lag in the Marine segment despite the strong performance in Concrete? Could you elaborate on the key factors behind maintaining the current guidance, please?

Sure. I'll start and Travis can fill in. We just initiated the guidance last month, and we had a pretty good view when we set it. Given what Travis talked about on the call with regards to bookings post end of the quarter — the $200 million plus, especially more heavily weighted toward Marine — we're feeling more confident about the outlook as things come into focus. But I would say from a first quarter perspective, the results came in pretty much right in line with what we expected from a profitability perspective. So we felt it was prudent to hold where we are. And then as the year plays out, we'll see as those cards get dealt.

Yes, Tomo, generally we want to underpromise and overdeliver. We're going to take a conservative approach to things like this and hold the line for now and see how things progress over the next quarter or two.

And if you could talk about adjusted EBITDA margins contracting year-over-year in the first quarter. Could you elaborate on your concrete plans for margin recovery after the second quarter, please?

I would say that the margin impacts were attributable to the phasing of where we are on projects, specifically in Marine. I assume you're referring to Marine, which had margin pressure in the quarter. But really, it was attributable to just the timing and phasing of projects. As we wrapped up many projects toward the end of last year, a lot of the upside will generally come into the numbers as new projects ramp. When we kick off new projects, we generally are a bit more conservative in initial margin assumptions. So I would characterize this as more of a timing item. We aren't seeing any signals that there will be consistent or persistent margin degradation over time. If anything, we're seeing the opposite with the pipeline and the number of opportunities on the horizon. Concrete had a very strong step-up in their EBITDA contribution for the quarter. We benefited in our Concrete business from good weather. Often we talk about bad weather, but this is a quarter where we benefited from consistent momentum and strong utilization that was not interrupted by weather. As concrete projects get larger, we have opportunities to keep teams on programs and maintain consistent utilization and execution over time, which ultimately serves to lift margins by reducing starts and stops. So I wouldn't attribute Concrete's performance to any fluke other than outstanding execution, strong momentum and uninterrupted work — and yes, favorable weather helped as well.

Operator provided instructions. The next question will come from Aaron Spychalla with Craig-Hallum.

First for me, good to hear the order activity continuing to pick up into April. You noted seeing acceleration for early work on the energy and petrochemical side. Just can you talk a little bit about the timeline from that early work and when those could maybe turn into project awards? And any thoughts on what those could look like size-wise, content-wise?

I think we're seeing a fair amount of activity and increased urgency to get projects breaking ground and moving forward. The disruption in the global energy environment has woken some things up and added urgency to getting projects underway. There's more conversation and more early-stage activity than we saw previously.

Yes. Generally, as we start seeing early signals of projects, it is mostly on the Marine side where our larger commercial clients begin indicating they may greenlight projects. There may be a period of three months, six months, or a year between early work and full awards. Some projects will move forward very quickly, especially those that are more advanced on permitting. Others will take more time to get permits and satisfy regulatory requirements. But we do see a number of clients and programs where momentum is picking up. For the more advanced projects from a permitting perspective, we would expect them to move forward more quickly.

And then maybe second, you kind of highlighted an uptick in activity with the Coast Guard and other agencies. Can you just talk a little bit about what some of those opportunities look like and how you're thinking about timing on those as well?

The uptick relates to the President's budget, which includes a meaningful uplift for military and maritime priorities. Of course, the President's budget is a proposal and represents the administration's priorities; it still needs to be enacted by Congress. But directionally it's a positive sign and indicator of what the administration would like to see and suggests increased funding for naval infrastructure and related projects if Congress follows through. We'll see how it plays out, but it's a constructive directional sign for the sector.

Yes. Even putting a proposal out there for $1.5 trillion is meaningful when current defense spending is approximately $900 billion now. Even if the final number increases to around $1 trillion, that's still a very large increase. We would expect to benefit from that, especially given the emphasis on naval superiority, maritime infrastructure resilience and related themes that are central to our work, and which are very much accentuated by current geopolitical dynamics in the Middle East.

Understood. And then maybe one last for me. Just with higher fuel prices, and some tariff developments like potential Section 232 expansions, any margin or backlog sensitivity, or actions you might be taking on the business side of things?

Fuel is something we're watching. We build contingencies into our bids for fuel spikes and, in parts of our business where we consume a lot of fuel, we buy in advance. Right now, we're generally okay, but if high fuel prices persist over the long term, we could see some minor impacts. For now, we're in a watch-and-see mode and taking steps to protect ourselves where possible.

And then anything on steel or anything coming out of potential Section 232 expansions?

We discussed tariffs extensively about a year ago. We're generally in pretty good shape with how we bid — we either include contingencies or we lock in prices. So we're generally comfortable on the tariff side of things at the moment.

Operator provided instructions. The next question will come from Min Cho with Texas Capital.

Congratulations on your standout quarter for Concrete. And I understand that weather helped you guys a little bit here. But given the level of backlog that you have, do you feel like this level of revenue and margins are sustainable in the intermediate term, assuming we take weather out of it?

Yes. Between the backlog, the activity we're seeing and the outreach we're getting from owners and our general contractor partners, it seems like this activity will continue. We don't see a cliff or slowdown at the moment. There's a lot of activity we expect to see coming in throughout the year.

That's excellent. Obviously, adjusted EBITDA of about $9 million suggests a back-half weighted outlook. Can you talk about what specific drivers — maybe volume, mix or margins — give you the most confidence in achieving this guidance and where you could see the greatest risk or upside?

I think it's a timing issue. Our Marine business was a little light this quarter because of project timing, while Concrete kicked hard. Between the backlog and the projects we've already won in the early part of the second quarter, activity has been strong and we're confident in the pipeline and backlog we can build this year. Historically, 2024 had a similar shape — a lighter first half and a heavier second half — and we're seeing a comparable pattern this year for different reasons.

Excellent. And then just finally, Alison, what was J.E. McAmis' contribution to adjusted EBITDA in the quarter?

It contributed positively. I would say their contribution was more about opportunity pursuit and building backlog for the future. They won some really nice awards that they'll continue to execute through 2026 and into 2027. Importantly, they have been integral in supporting other interesting opportunities we are pursuing. So while their direct profit and revenue contribution this quarter was nominal, their meaningful contribution has been scaling their expertise across current projects and supporting high-value pursuits.

Operator provided instructions. The next question will come from Gerry Sweeney with ROTH Capital.

I may do something blasphemous and just start with Concrete, if that's okay. I appreciate the courtesy. Listen, Concrete, really, really great quarter, obviously. And I know you're working on the Iowa projects. But I'm really curious as to what's your visibility on data center work. Some of our other clients are seeing tons of work coming down the pipe, especially as the build-out of these facilities starts to expand. I'm just curious how much visibility you have, what's the market opportunity this year into next year and even a little bit forward as we look at these projects?

As we've said before, visibility into data centers is generally limited until it is go time. These projects are often quite secretive until they are ready to move. So visibility will always be more limited compared to public sector projects in Marine. However, activity is heavy. We're having a lot of conversations about large projects with key partners and owners we work with regularly. It looks really good for data centers for us this year.

Separately, Iowa was one you highlighted previously. As you do that and other projects, does that elevate you in terms of reference projects and bring you more into the circle with owners?

Generally speaking, we've done over 50 data centers now. We've got a lot of experience under our belt, so we're one of the key providers in this space, especially in markets like Texas where a lot of these projects are underway and planned. We have a seat at the table in many early conversations with owners and partners.

One more question: as these projects come onto the drawing board and hit shovel-ready status, what's the derivative or knock-on effect on general capacity in the concrete market? Is it pulling talent and capacity into the data center market and potentially raising pricing or margins in other sectors as well?

Yes. We're seeing that in Texas and other areas: many trades and subcontractors on these projects struggle to find people, equipment and even housing and food in some remote areas for all the workers. There are definitely resource challenges across people, equipment and materials. But owners, general contractors and site teams are finding ways to make it happen. Owners are highly motivated to execute these projects and everyone collaborates to find solutions.

Got it. That's it for me. I'll save my Marine questions for a follow-up, if that's okay.

All right. Sounds good. Thanks.

Operator provided instructions. The next question will come from Liam Burke with B. Riley Securities.

Your operating cash flow year-over-year was very strong in what typically would be a slower cash flow quarter. As we look into the balance of the year, is there any priority to delevering even though the balance sheet is still in pretty good shape?

I think the balance sheet is in good shape. We ended the quarter right at about 1.5x net leverage, which is a healthy place for us to be. We might have opportunities to bring that down, but that's not our highest priority. Our capital deployment priorities tend to focus on opportunities to expand our positioning organically — investments in key equipment, people and other items needed to support the pipeline and convert the organic opportunity. Given the interest rates we negotiated earlier this year, we're comfortable around the 1.5x level on a steady-state basis. We will always factor leverage into our capital allocation strategy, but in a growing business that requires working capital, we expect to run around that level.

So with your organic opportunities and McAmis coming on nicely, both from addition and synergies you're gaining, is M&A off the table in terms of capital allocation?

I wouldn't say that. Travis, I'll let you comment.

Yes. I agree with Alison. We will be disciplined on M&A. If something comes along that makes strategic sense and is a reasonable size, we would consider it, but we will be careful and selective.

This concludes our question-and-answer session. I would like to turn the conference back over to Travis Boone for any closing remarks.

Thanks, everyone, for taking the time to join the call today. We look forward to speaking with you in the next quarter.

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