Q2 2026 Orion Group Holdings, Inc. Earnings Conference Call

And the opportunities that we're pursuing are quite balanced across the Department of Defense or Department of War is 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're 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're seeing good momentum really across a number of different fronts. So I wouldn't pigeonhole it back into just naval opportunities. Not that you would, but. Okay.

I'll pass it on.

The next question will come from Min Cho with Texas Capital Securities. Please go ahead.

Great. Thanks for taking my questions. The 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 are the 2Q 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? I mean, they're just between 5.5% and 6%, and that's generally what we expected. 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 happen with that. But from a momentum perspective, we're seeing good momentum in that business overall, good pipeline, as Travis mentioned earlier, of opportunities that we're waiting on, and really strong backlog as we enter into third quarter. So the concrete team is busy and out and executing, and I don't see any issues with that team really hitting close to that 6% margin from a full-year perspective, which is what we're 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's roughly 50% this 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, it was 40% in the first quarter.

And if I can just slip one quick one in here. You know, your pipeline of opportunities has increased, you know, to 27 billion now up from the last quarter. Can you talk about any notable trends that you're seeing? What was kind of added? Yeah, just any additional information about the growth in the pipeline?

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

Got it. Great. Thank you so much. Thank you.

The next question will come from Tomo Sano with J.P. Morgan. Please go ahead. Hi. Good morning, everyone. Good morning, Tomo.

Thank you for taking my questions. You've 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 a second and a half? And could you quantify margin sensitivity to utilization, please?

We don't 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're using it or you're not using it. And as we grow revenue and we're 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 one more follow-up on McKamey's. How should we expect McKamey's integration to contribute in a back half to utilization wins and profitability?

And are there any areas integration is behind a plan or costing more than expected? uh we feel really good about the integration that's happened so far um the the team um has continued to win win projects and their you know their their work window just kind of opened up uh this month so they're off to the races so to speak um with quite a few projects underway uh currently and will be busy for the rest of the year um so i would say they would you know contribute uh much more heavily to the back half of the year which that's kind of going to be the norm, if you will, for that business. Back half of the year waited for them just because of the work windows in their area. But they'll be highly utilized and very busy for the back half of the year.

Yeah, and I'll pick up on the integration question just with regard to how the integration The integration is going very well. We are, you know, they're fully transitioned over to our project controls, financial, IT systems. So that is going well, and they contributed positively both from a top-line perspective and then also from an EBITDA perspective and were accreted 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 that will ramp up quite significantly.

Thank you, Travis, Allison. That's all.

The next question will come from Jerry Sweeney with Roth Capital. Please go ahead.

Good morning. I'm taking my call. But obviously it brings the opportunity to sort of expand that skill set around jetties, et cetera, maybe to other operating areas within your footprint.

Yeah, definitely, Jerry. We've 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. So 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 you mentioned that you get brought into these projects, right? There's not a whole lot of these projects front and center that you have a clear – Yeah, that's right, Jerry.

By the time they hit our desk, they're full go mode, which is why it's typically a pretty short time between when we find out until we're working. I mean, I mentioned a bid review I was on this morning. We heard about that job early last week, and final numbers go in today, and we'll be working within a month. And it's a large project, right? So it's a really quick turnaround on these things, and they are very much full go mode by the time we get them. So it's highly unlikely that they get canceled 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, two things. The first is, as we look across the ecosystem and the landscape, we see the long lead time items in the backlog of those companies that have 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 a 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 don't know because a lot of those things are very secretive for the data centers, which is why we hear about them, you know, 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 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'd point out is because of our credentials in this space, we are a known commodity. Like, we are a known player. We are known for delivery. 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. So that also really prioritizes where we sit in the stack and the types of opportunities that we see over the longer term, even if we don't see those, you know, with six or 12 or 18-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's helpful. I mean, essentially, it's also fair to say you're working on projects or data center projects that were planned.

That's right, exactly.

You're working on projects that were just at the start and the beginning front end of the AI.

That's right.

If I could flip one more in, I probably will at the end of the line anyhow. Just a little bit of detail on sites. It's, you know, it's something you brought up in expanding and maybe just what's going on there and what's the opportunity for you.

Yeah, that's something that we started, Jerry, late last year, as you recall. And that's been – we've 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're doing, you know, site civil and the concrete, and that's a good value proposition for them. And it's been, you know, we're only, you know, two and a half quarters or so in. But what we've seen is really good performance by the team and a really strong embrace of what we're doing by our teaming partners. So it's going very well. And lots of action and opportunity that we're actively pursuing currently.

And it absolutely simplifies execution for us and maybe more importantly for our clients because they have one place to go to and we can resolve our issues. Whatever issues we may encounter, we can resolve internally. So it really de-risks execution. So it's something that's quite attractive.

Got it. I appreciate it.

Thank you. The next question will come from Laura Maher with B. Riley Securities. Please go ahead.

Hi, good morning, Travis and Allison. Thanks for taking the question. My first question is on concrete. So the book-to-bill was roughly 9.3 times this quarter. Given the 6- to 12-month project duration, how should we think about the bookings, Caden?

I think the bookings were – this was the first quarter, actually, in quite a while, where the bookings have been – or the book to bill has been less than one time. But I see that more as an episodic item and a timing item. I don't see any issue with the bookings environment in concrete at all. I think it is purely a timing issue in terms of when 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 don't see any issues in that area at all.

Okay, thanks. And then my second question, are you seeing the same contract term improvements 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, you know, working on trying to get upfront mobilization on our projects, be it concrete or marine. And it depends on the client and things like, you know, the contract terms. For example, for the federal government, you know, there's little to no negotiation on a contract terms with the federal government. Having said that, you know, on the concrete business, we're not working for the federal government. And so we're 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're 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. So 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.

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 a 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're 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 um we're we're feeling good about things um despite how the numbers came in in the second quarter but we're we're feeling good about where we are and what we're doing uh we appreciate all of our employees who are working so hard every day to uh to deliver the business and and thanks to our shareholders for uh for believe in our story. Thank you.

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