Good day, and welcome to the Orion Acquisition Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Margaret Boyce, Investor Relations. Please go ahead.
Thank you, Danielle, and thank you all for joining us today to discuss Orion's acquisition of J.E. McAmis and JEM Marine Leasing. Our press release and presentation are available in the Investor Relations section of our website at oriongroupholdingsinc.com. I'm here today with Travis Boone, President and Chief Executive Officer of Orion, and Allison Vasquez, Chief Financial Officer. On today's call, management will provide prepared remarks, and then we'll open up the call for your questions. As outlined on slide two of the materials we published earlier today, 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.
The benefits of the transaction and 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 are contained in our SEC filings, including the 8-K disclosing the transaction and 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 thank you all for joining us this morning. I'm very excited to share the news of our acquisition of a specialized heavy civil contractor, J.E. McAmis. We are very pleased to welcome the McAmis team to Orion. Known for their outstanding safety record, on-time performance, and healthy margins, McAmis is an excellent addition to the Orion family. The combination of our two companies provides us with increased scale and capacity by adding a highly skilled workforce, strategic marine equipment and real estate, and new capabilities ahead of the significant marine opportunities in front of us. This is our first acquisition since 2017, and is a reflection of the disciplined execution of our strategy to be the premier marine construction contractor in attractive end markets, delivering long-term shareholder value. I'll start on slide 3 with an overview of the McAmis business.
With over five decades of experience, primarily delivering public and defense projects across the United States, McAmis offers a wide range of highly specialized marine solutions, spanning jetty and breakwater construction, dredging, environmental restoration and rehabilitation, and dam and spillway construction. Based in Vancouver, Washington, McAmis focuses on projects on the West Coast, primarily in Washington and Oregon, and has also completed projects in Alaska, California, Florida, and Hawaii. They primarily serve federal clients and have strong, long-standing relationships with the U.S. Department of Defense and U.S. Army Corps of Engineers. McAmis has a very robust opportunity pipeline, with incremental opportunities to Orion of over $1.4 billion. McAmis maintains a broad portfolio of marine equipment and real estate appraised at over $34 million. The fleet augments Orion's equipment fleet nicely with high-value Jones Act marine vessels, including ABS barges and specialty equipment.
McAmis also brings strategic real estate along the Columbia River in Washington state and has secured critical access to prime quarries in the Pacific Northwest. Financially, McAmis is very attractive in terms of top and bottom-line growth at strong accretive margins for our marine business. From 2022 to 2024, McAmis posted annual average revenues of $38 million, with average EBITDA margins consistently in the 20%+ range, growing both the top and bottom line in each of those years. We're excited that John McAmis Jr. and Scott Vandegrift, whose family founded and grew this business, have joined Orion's leadership team to continue to build on the McAmis legacy. Moving on to slide 4, I'll touch briefly on McAmis' operations that focus on complex marine construction and modernization projects.
John and Scott lead a specialized team that has earned a distinguished reputation for tackling complex marine projects, operating safely and delivering on time and on budget. Recognized as jetty construction experts with a proven track record in complex project delivery, they are a top-tier go-to provider of marine solutions in challenging conditions and harsh environments. This incredible team recently completed a $170 million project that involved rehabilitating the full length of the South Jetty on the Columbia River. The work included placement of over 450,000 tons of jetty stone, weighing up to 40 tons each. Complex projects like this require significant and detailed upfront planning, constant focus on safety and execution, commercial discipline throughout the project, and close coordination across a wide stakeholder group, client, quarry, seafarers, and the community.
This is just one of many impressive projects this talented team has executed. There are a handful of other interesting projects in the appendix to the presentation. Please take a look.... Moving on to slide five. For Orion, the acquisition thesis is simple. McAmis advances our long-term strategic growth plan and fortifies our competitive position ahead of significant marine opportunities on the horizon. Since I've joined, we have worked with discipline and focus to position the company to capitalize on rising demand. Increased federal investment in defense infrastructure, as well as continued port expansion and modernization, are clear catalysts to industry growth. McAmis fortifies our marine construction position, expands the suite of services that we can provide our customers, and strengthens our presence on the West Coast. One of the most important criteria we use in evaluating M&A opportunities is cultural alignment.
From our first meetings with John and Scott, we have been highly impressed by their focus on winning as a team, their strategic approach to positioning for projects, their track record of safe execution, their well-earned reputation for project excellence, and their culture of integrity. I'm excited to welcome John, Scott, and the entire McAmis team, whose culture, values, leadership, and track record of execution align strongly with our organization. Together, this combination creates a strong platform to drive sustainable growth and long-term value creation for Orion stakeholders. I'll now pass it over to Allison to cover the financial details. Allison?
Thank you, Travis, and thanks everyone on the call for joining this morning. I share Travis's enthusiasm for this acquisition, which represents a very natural extension to our strategy, and further strengthens our financial and operating platform. Purchase consideration of $60 million, subject to customary adjustments, includes $46 million of cash, net of cash acquired, a $12 million 5-year, 6% subordinated promissory note, and $2 million of Orion common equity. Additional $2 million of Orion common equity. Additional consideration is contingent on realizing at least $10 million of profit on projects and backlog, plus a 40% profit share on any additional backlog profit and selected near-term pursuits. As Travis mentioned, this acquisition accelerates our path to scale. With specialized technical expertise, McAmis has grown attractively while expanding margins and maintaining a very strong balance sheet.
With a $40 million historical revenue run rate and margins consistently above 20% and healthy backlog, McAmis is set up nicely to contribute to Orion's growth and profitability. We plan to provide full-year consolidated 2026 guidance for Orion, inclusive of McAmis, when we report our full year and fourth quarter 2025 results next month. McAmis fits nicely into our M&A framework and our disciplined approach to target high quality, culturally aligned businesses that add capabilities, people, equipment, or geographic reach. McAmis delivers in all of those categories. We funded cash at closing of $46 million with borrowings under our new credit facility. That includes a $40 million acquisition term loan and $6 million of borrowings under our revolver. All borrowings bear interest at a rate of SOFR + 2.75% and mature in 2030.
We expect our leverage ratios will be very much in line with our goal of maintaining responsible leverage that gives optionality to pursue our long-term growth strategy. I'm thrilled to welcome John, Scott, and the McAmis team to Orion, and look forward to building on our momentum together to pursue the exciting opportunities ahead. Back to you, Travis.
In closing, the acquisition of J.E. McAmis is an excellent strategic fit that strengthens our platform and supports our goal of driving increased profitable growth. We're enhancing our jetty and breakwater construction capabilities, adding exceptional talent, widening our West Coast presence, and bolstering our marine fleet. As we execute our strategy to be the leading specialty construction contractor on, over, and under the water, we see strong momentum across the business and are excited to work with our new team members. We will continue to consider future accretive acquisition opportunities and weigh those against other opportunities to deploy capital for organic growth or return to our shareholders. We thank our people for delivering predictable excellence every day and look forward to sharing our progress on our fourth quarter earnings call. I'd now like to open up the call for questions. Operator?
Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. 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 then two. The first question comes from Aaron Spychala from Craig-Hallum. Please go ahead.
Yeah, good morning, Travis and Allison. Thanks for taking the questions. You know, maybe first for us, on the $1.4 billion pipeline, can you just talk about how that's kind of grown here recently? You know, any breakdown on project sizes or types, geography, and then just, you know, the optimism on closing some of those opportunities as we move forward?
Sure. That—and just to be clear, that $1.4 billion pipeline is kind of the McAmis opportunity pipeline, and it doesn't—where it doesn't cross over with any Orion opportunities. So that's a sort of new piece of pipeline that we have now, right? Just to clarify that piece. As far as what it is, it's generally projects in the Pacific Northwest that are kind of jetty-focused or rockwork type focused. And it's similar to our pipeline, let's say, work over the next 2-3 years, roughly.
...Okay, good. Thanks for the clarification on that. Seems like, you know, nicely additive. And then just maybe last on the fleet. Can you just kind of talk about McAmis's fleet and just what it means, you know, what it adds to yours, number-wise, kind of capability-wise? That'd be great.
Definitely. They've got some good equipment that we didn't have before. That's kind of specialized equipment for doing rock work. So they have some equipment that's you know ABS barges and things like that that Orion needs across the business. And then there's other specialized pieces that are specifically related to doing jetty work and things like that. So kind of a variety of different pieces of equipment, cranes, dump scows, et cetera, that are very valuable to us as a company.
Yeah, and I'll add to that and say that as part of when, as we were looking at the McAmis business, in addition to just the normal valuations and appraisals and things that we did, we sent our own equipment team out to all the major pieces of equipment. They crawled all over all the equipment and came away very, very impressed with how McAmis has maintained its fleet, and just the nature of just their equipment and the fundamental equipment, how they maintain that for their ongoing operations. So really nice equipment that we're bringing over. The team is pretty excited about putting that to use across a broader portfolio. Pretty excited about the addition of the fleet specifically as well.
All right. Appreciate the color. Thanks for taking the questions. I'll turn it over.
Thanks, Aaron.
Thanks, Aaron.
The next question comes from Tomo Sano from J.P. Morgan. Please go ahead.
Hi. Good morning, everyone.
Morning.
Morning, Tomo.
Thank you for taking my questions. My first question is, how would you assess the quality and profitabilities of McAmis' existing backlog, $24 million, and, and a pipeline, $1.4 billion as well, please?
One moment while we reconnect the speaker line. Okay, I've reconnected the speaker line. Please go ahead.
Thank you, Danielle, and apologies that we dropped there for a moment. Wonders of live calls. Okay. So Tomo, we heard the first part of your question with regard to backlog. If there was more to your question, we can... Would you like to complete the question, or would you like us to address the backlog quality piece first?
Yeah. Could you talk about the backlog qualities as you talk about accretive for EBITDA margins compared to Orion for these acquisitions, but wondering the quality of and the profitability of the backlog and upcoming pipeline please first?
Sure. Absolutely. One of the things that is very attractive about this business is their level of profitability across their projects. As we said in the call, we have a high level of confidence that the McAmis business will be very accretive to our business. It is accretive to our marine business, and the composition of the backlog is no different than that. We expect that, as we continue through the year, we'll start the year. We closed, or McAmis closed, twelfth of December of 2025, with about $24 million in backlog. And we think that's a good, healthy place for them to be, just based on the pipeline, what we see ahead.
But I would say that the qualities of the backlog include profitable projects, some of which are, you know, at various stages of completion, that will take the company probably through about, I would say, consistent with Orion, about 60%, 60%-65% of their year, with other projects that we have on the horizon that we expect, we will be booking and completing as we get through the year. But very healthy backlog, I would say. Travis, any other comments on that?
No, I agree. It's a good backlog, good, healthy business, and it's, as we said, accretive to our business and will be good for us going forward.
Thank you. And just to follow up on the after these acquisitions, would you say, like, will this acquisition change Orion's overall growth strategies or M&A policies going forward? If you could talk about that, please.
Sure. I don't think it'll change our growth strategy. We have, we've been evaluating acquisitions for several years. In fact, we've evaluated a large number of potential acquisitions, and we haven't found one that we liked until now. So we're, we'll continue to look for the right acquisition that fits our company culture, fits our strategy, and fits how we wanna grow. So this one, this is one that we're very excited about. As we said, we've kind of evaluated a lot, and to get this one is, we feel really good about so.
Thank you, Travis. That's all from me.
Thanks, Tomo.
The next question comes from Min Cho, from Texas Capital Securities. Please go ahead.
Great, thank you. Congratulations on this acquisition. First-
Thanks, Min.
It sounds like they, yeah, it sounds like McAmis does a lot of work for the DoD and the U.S. Army Corps. Can you break out what percentage of their revenue comes from federal? And if these projects are they low bid, like the dredging work, or, you know, is the more complex work kind of negotiated with a higher margin opportunities?
Good questions. Definitely, most of it is low bid, and the vast majority is Army Corps of Engineers work. I don't have the exact percentage in front of me, but I would say more than 80% is Army Corps of Engineers work. There's some private sector work and some public sector work outside of kind of DoD, but most of it is Army Corps of Engineers projects, primarily in the Columbia River.
Perfect. Okay. And then, can you just talk about kind of what your key integration opportunities are in the first kind of 6-12 months here? It sounds like they're fairly separate businesses, doing similar work, but just any. Yeah, just any details about integration that's required.
Sure. They're a very lean and mean fighting machine. So they don't have a lot of overhead and things like that, so there aren't a lot of cost synergies between the businesses, but there are great opportunities to work together with our marine construction business and give us kind of expand the capabilities of what McAmis has been doing to other parts of our geography. So take the talent and expertise and use it in other parts of the country, for example. And I think it'll give us kind of a new market that we haven't pursued, mostly because we didn't have the expertise that McAmis brings.
Got it. That makes sense. And then just one final question from me. Does this acquisition change your capital allocation strategy? Sounds like you're still going to continue to look for some smaller acquisitions, but does debt reduction or maybe investment in additional assets, with the integration?
Our capital allocation strategy will remain pretty consistent, just focused on, you know, first and foremost, good organic growth, maintaining a healthy balance sheet, highly strategic M&A opportunities as we see them. We'll take some time to digest this one. As Travis said, this is the first one we've done, well, that we've done as a team, and also that the company's done since 2017. So we'll take some time to get this acquisition digested, to do it right, to make sure that we, you know, keep all of the value across both organizations and then the value together. So our capital allocation strategy will stay the same.
I'll say that, in addition, so as you'll all recall, we, and we'll talk about this in much more detail when we talk about our full year results for 2025, but at the end of the third quarter, we, and following the East West Jones land sale, we essentially were close to zero at net debt. So the borrowing that we made on this acquisition just puts us right around one turn of leverage, which is a really healthy place for us to be. It still gives us some dry powder for other opportunities, whether that be investment in equipment or, you know, other opportunities that may arise over the year.
So I would say that in short, that we still have a good amount of flexibility. We still have a very strong balance sheet, and we're really happy with the acquisition and also just where the balance sheet is following.
Great. Thank you.
The next question comes from Liam Burke, from B. Riley Securities. Please go ahead.
Thank you. Good morning, Travis. Good morning, Allison.
Good morning.
Good morning, Liam.
Travis, on the stock component of the acquisition, is that creating the opportunity for the management of McAmis to participate in the joint enterprise now?
Definitely. Definitely, obviously, the ownership and is one of several ways we use to kind of make sure that they were engaged, you know, fully focused on integrating and continuing to operate profitably. So they're super engaged and very excited to be part of Orion and help us grow.
Great. And, just-
Yeah.
Touching back. I'm sorry. Go ahead, Allison.
Oh, I was just gonna say, I think the other thing that really helps tie us together are the elements of the contingent consideration. I mean, there's $10 million of deferred consideration on this transaction that is really centered around the McAmis team delivering the backlog and growing. So we'll share profits as we go forward, and specifically on the execution of the backlog and also on near-term pursuits. So that essentially will, you know, help keep our teams, you know, very much connected, very much aligned over the near term as we think through, you know, integration, what integration looks like, and how to become, you know, really kind of one Orion team. So, very much focused.
I think, you know, one of the things that is really exciting about this acquisition for us is the excitement of John and Scott to stay a part of Orion. I think they were very enthusiastic. They're very enthusiastic about being part of the team and about helping us grow together. So I think we're in a really good spot with, with John, with Scott, with the rest of the team. We met with the McAmis, the broader part of the McAmis team last night, and come away very, very impressed with, from a leadership perspective, and also just, you know, through the entire team, just the quality of the people.
Great. Thank you. And, just quickly touching back on synergies, are there cross-platform at opportunities for you on the application side, or do you see opportunities for Orion to move into McAmis' existing geographies?
We're already kind of, let's say, a little overlap on geography. They operate a lot in the Pacific Northwest and have historically operated in Florida and some in California. But I think the opportunities for us are more to expand our capabilities from just being in the Northwest to other parts of the country.
Great. Thank you, Travis. Thank you, Alison.
Sure. Thanks, Liam.
The next question comes from Brent Thielman from D.A. Davidson. Please go ahead.
Hey, thanks. Good morning. Apologize, I did join a bit late, so if you've said this again, apologize. But Travis, does sort of the fleet, the assets they have, does any of this strengthen your ability to participate in some of the future federal deterrence opportunities that could be coming, or is this really separate of that?
Yes, it does give us opportunities. In fact, McAmis is currently working on a project in the Pacific with some of their fleet, and so definitely it gives us an opportunity to do some additional types of work in kind of the PDI and other types of work in the Pacific.
Okay. And then the $1.4 billion pipeline, I mean, I guess in your mind, does this sort of combination immediately change that for them? Just sort of thinking about future revenue synergy opportunities, you know, how do you, how do you think about how that pipeline evolves with the combination of the two companies?
Definitely, I think it will grow once we start looking at other opportunities outside of kind of their focus areas that made up the $1.5 billion or $1.4 billion. I think once we start kind of looking at the opportunities that are available in, let's just say, Florida or Texas or the Gulf, other places in the country where we can bring the expertise that they've, I think it'll definitely add to our pipeline opportunities across the company, as well as the Pacific.
Yeah. And maybe last one, I mean, given the contingent consideration, some of the stock, obviously, keeping management around, is that over a period of a number of years? And maybe you can just talk about the different layers of management internally and what you're doing to keep them on.
Sure. I'll start with one of the things that really excites me is they're excited to be part of Orion. As a company, they were kind of, I'll say, hungry to be able to do more with their really strong capabilities they had, and the best way for them was to be acquired and to join a company like ours. And they were- They're very excited to be part of our company. And so beyond their kind of, you know, good fit to be with us, they want to be a part of us, including the management, the ownership of McAmis.
They want to be part of our company, and so we're excited to have their kind of strategic thinking and approach to winning work that they have, that's made them so successful to bring them in and have them part of us. And then we have several kind of parts of the deal, so to speak, that help keep them motivated to be part of the company, including the stock, as well as some of the ways we've structured the deal. I don't know if you want to add to that.
Yeah, no, I think similar to what I said where I think another interesting thing. And Scott said it last night when we were visiting with the broader McAmis team. He said, "You know, McAmis is too small to be big, and it's too big to be small." And so for them to do the things that they want to do and to be able to grow into the markets that they want to grow into, they needed to be attached to a larger organization, and that's what Orion brings. We, we bring support, we bring help in, you know, front office, all the way through back office, through operations, in terms of just helping them get through doors that they, you know, were struggling to get through or that they couldn't get to because they had grown so nicely through their own tenure.
So that's really exciting, in that they view this as an opportunity for them to continue to grow and to advance the McAmis legacy. And just the alignment between our teams in terms of, you know, they get really, really jazzed about doing really tough projects, which is the same as Orion. Like, you know, they, you know, work on, you know, a severe environment in Alaska, or as Travis said, they're working in the Pacific. They, you know, do this jetty project that Travis talked about, in his prepared remarks. I mean, they do some of the hardest things, in some of the most complex areas. So I think there's really good opportunity for us to work together, as we bring them into the fold.
The pipeline is pretty exciting in terms of opportunities that we see ahead, but just the cultural alignment around wanting to grow, wanting to do cool stuff, wanting to take on, and tackle hard projects, I think is really, really exciting.
Okay, very good. Thank you.
Thanks, Brent.
Thanks, Brent.
As a reminder, if you have a question, please press star one. The next question comes from Gerry Sweeney from Roth Capital. Please go ahead.
Hi. Good morning, Travis and Allison. Thanks for taking my call.
Morning, Gerry.
Good morning, Gerry.
You had mentioned in the prepared remarks and in the presentation, you know, J.E. McAmis has heavy civil jetty breakwater, but also the environmental side. Is the environmental side a little bit newer of a sort of service that is additive to the Orion platform?
We've been doing environmental-type projects for quite some time, Jerry. I think it's maybe a little bit expands the capabilities within the environmental footprint more than anything. I think it's not entirely new for us. We've done quite a few projects in that realm. And so I wouldn't say it necessarily opens up a new door in the environmental side of things, but it gives us more opportunities there.
Got it. And just to carry on with that, climate adaptation is sort of moving up the climate agenda, and all this sort of fits around what, McAmis does, what Orion does. Does this sort of position you a little bit better for some opportunities for, you know, shoreline work, different, different areas along the, along that, thought process?
Absolutely. That's, that's exactly right. There's, there's a lot of, a lot of major projects, not only on the West Coast, but also around the country, that, that McAmis is a good fit to, to help us be able to perform or bring a, bring a strength that we didn't have to be able to perform kind of, you know, coastal rehabilitation, coastal restoration-type projects, coastal protection-type projects, that sort of thing. So, definitely helps, helps, align with, our positioning to win those projects.
Got it. And one last question. I know you talked about first M&A opportunity in a bunch of years. It may take some time to sort of digest it, but and you also mentioned, you know, you've remained, I think, active on that front. What is the M&A pipeline, and how active are you on that side? Does that continue to expand? Is this something we should continue to think about as we move forward?
Sure. As I mentioned on the call, we've evaluated quite a few opportunities over the last 2-3 years, and so there's definitely opportunities, but we're pretty picky about the opportunities that fit well with us. Talked about it before on other calls, but, you know, we're looking to fill gaps, whether it be geographic gaps, or gaps in capabilities, gaps where a company might bring talent and expertise we don't have, or equipment that we don't have. So, kind of a few different ways we're looking at them, but the long and short is the cultures have to align, and this one aligns really well on the culture side.
Got it. All right. That's it for me. I appreciate it. Thanks.
Awesome. Thanks, Gerry.
This concludes our question and answer session. I would like to turn the conference back over to Travis Boone for closing remarks.
We appreciate you joining us today. We look forward to speaking to you, with you next month for our fourth quarter 2025 earnings call. Thank you.
Thanks, everyone.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.