On November 5 Orion Marine Group Inc. (NYSE: ORN) reported net income for the three months ended September 30 2009 of $5.4 million ($0.22 diluted earnings per share). These results compare to net income of $3.8 million ($0.17 diluted earnings per share) for the same period a year ago.
“We are pleased with our results for the quarter including better than expected revenue” said Mike Pearson Orion Marine Group’s president and Chief Executive Officer.
“During the quarter we continued to see a good pace of bid activity while continuing our solid project execution.”
Financial highlights of the company’s third quarter 2009 include:
• Third quarter 2009 contract revenues increased to $81.5 million up 29.5 percent as compared with the third quarter of 2008. Revenue growth for the quarter exceeded the company’s third quarter revenue growth goal of 16 percent to 21 percent as a result of favorable conditions including the acceleration of project schedules.
• Gross profit for the quarter was $16 million which represents an increase of $3.4 million or 27 percent compared with the third quarter of 2008. Gross profit margin for the quarter was 19.6 percent which was
essentially flat compared to the prior year period.
• Selling general and administrative expenses for the third quarter 2009 were $7.7 million a slight increase year-over-year.
• The company’s third quarter 2009 EBITDA was $13.2 million representing a 16.2 percent EBITDA margin which compares to third quarter 2008 EBITDA of $10.3 million or a 16.5 percent EBITDA margin. EBITDA margin for the quarter was within the company’s third quarter goal range of 15 percent to 17 percent.
• Orion self-performed approximately 83 percent of its work as measured by cost during the third quarter 2009 compared with 87 percent in the prior year period. Self performance for the third quarter 2009 was lower due to the timing and mix of projects.
Backlog of work under contract as of September 30 2009 was a record $224.3 million which compares with backlog under contract at September 30 2008 of $160.5 million. In addition the recently announced large project award involving dredging services adds approximately $10 million to backlog. The company reminds investors that backlog can fluctuate from period to period due to the timing and execution of contracts. Given the typical duration of the company’s projects which range from three to nine months the backlog at any point in time usually represents only a portion of the revenue it expects to realize during a twelve month period. Backlog consists of projects under contract that have either (a) not been started or (b) are in progress and not yet complete and the company cannot guarantee that the revenue projected in its backlog will be realized or if realized will result in earnings.
“Overall we are pleased with the results of the third quarter and are optimistic about the road ahead” said Mark Stauffer Orion Marine Group’s executive vice president and chief financial officer. “We will continue to execute our growth plan while working to maintain our industry leading EBITDA margins”.
The company remains comfortable with its previously stated full year 2009 year-over-year revenue growth goal of 12 percent to 16 percent and its full year 2009 EBITDA margin goal of 14 percent to 18 percent. Given the timing shifts of revenue during the second quarter and expected low material pricing which could reduce overall contract values the company believes its revenue growth for the full year 2009 will be at the lower end of the stated full year 2009 revenue growth goal range. However the company believes the favorable EBITDA margins experienced in the first half of the year will boost its full year EBITDA margin towards the middle to upper end of its full year 2009 EBITDA margin goal range.
The company expects the positive trends in port expansion U.S. infrastructure updates coastal and wetland restoration projects expansion in the cruise industry and projects involving dredging services to continue to provide good bid opportunities long term.
“2010 is shaping up to be another record year for Orion Marine Group with the highest level of booked work we have seen at this point headed into the next year” said Pearson. “Additionally we continue to see multiple end markets with good funding and drivers for continued growth for 2010 and beyond.”
Looking at 2010 in detail Orion is tracking $4.0 to $4.5 billion of bid opportunities of which it expects approximately $1.8 billion could liquidate in 2010. As a result of the backlog and expected bid opportunities the company’s initial full year 2010 revenue goal range is between $350 million and $360 million. The initial full year 2010 EBITDA margin goal is 14 percent to 18 percent.