Q4 2023 Great Lakes Dredge & Dock Corp Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the Q4 2023 Great Lakes Dredge & Dock Corp earnings conference call. At this time, all participants are in a listen-only mode.

Good day, and thank you for standing by and welcome to the Q4 2023, Great Lakes Dredge and Dock Corp Earnings Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your <unk>.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised.

Allophone you will then hear an automated message if I can use your hand, just raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to introduce your host for today's conference Tina I can't guess.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to introduce your host for today's conference, Tina Baginskis, Director of Investor Relations.

Correct drove Investor Relations. Please go ahead.

Tina Baginskis: Thank you. Good morning, and welcome to our fourth quarter 2023 conference call. Joining me on the call this morning is our President and Chief Executive Officer, Lasse Petterson, and our Chief Financial Officer, Scott Kornblau. Lasse will provide an update on the events of the quarter and the year, then Scott will continue with an update on our financial results for the quarter and the year. Lasse will conclude with an update on the outlook for the business and market. Following their comments, there will be an opportunity for questions. During this call, we will make certain forward-looking statements to help you understand our business. These statements involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from our expectations.

Thank you.

Morning, and welcome to our fourth quarter 2023 conference call. Joining me on the call. This morning is our president and Chief Executive Officer lots of Patterson, and our Chief Financial Officer, Scott Kornblau.

Lastly, we'll provide an update on the events of the quarter and the year and Scott will continue with an update on our financial results for the quarter in the ear Lassa will conclude with an update on the outlook for the business in market.

Following their comments there would be an opportunity for questions. During this call. We will make certain forward looking statements to help you understand our business. These statements involve a number of risks uncertainties and other factors that could cause actual results to differ materially from our expectations certain risk factors.

Tina Baginskis: Certain risk factors inherent in our business are set forth in our earnings release and in filings with the SEC, including our 2022 Form 10-K and subsequent filings. During this call, we also refer to certain non-GAAP financial measures, including adjusted EBITDA, which are explained in the Net Income to Adjusted EBITDA Reconciliation attached to our earnings release and posted on our Investor Relations website, along with certain other operating data. With that, I will turn the call over to Lasse. Thank you, Tina.

Inherent in our business are set forth in our earnings release and in filings with the SEC, including our 2022 Form 10-K and subsequent filings.

During this call. We also refer to certain non-GAAP financial measures, including adjusted EBITDA, which are explained in the net income to adjusted EBITDA reconciliation attached to our earnings release and posted on our Investor Relations website, along with certain other operating data with that I will turn the call.

To laughter.

Thank you Dana.

Lasse J. Petterson: As expected, 2023 was a year of positive transition from the difficult 2022, and we ended the year strong with improved performance, stronger financial results, and a record backlog of $1.04 billion, which does not include approximately $179 million of low bids and options pending award and approximately $44 million of performance obligations related to offshore wind contracts. The bid market gained momentum throughout the course of the year in the preferred port deepening and coastal protection market. We ended the year with 71% of our backlog in capital projects, with four major awards, including the Freeport Deepening Projects, the Shepp V. Natchez Waterway Channel Improvement Project, and two large port deepening projects related to liquefied natural gas (LNG) projects. The Port Arthur LNG Phase 1 and the Next Decade Corporation Rio Grande LNG Project. The latter is the largest project ever undertaken by Great Lakes.

As expected 2023 was a year of positive transition from the difficult 2022.

We ended the year strong with improved performance stronger financial results and our record backlog of 1.04 billion, which does not include approximately 179 million of low bids and options pending award.

Approximately $44 million, our performance obligations related to offshore wind contracts.

The bid market gained momentum throughout the course of the year and our preferred port deepening on coastal protection market.

We ended the year with 71% of our backlog and capital projects with four major awards, including the Freeport deepening projects.

Not just waterway channel improvement project and two large port deepening projects related to liquidate liquefied natural gas LNG projects.

The Port Arthur LNG Phase, one and the next decade Corporation Rio Grande LNG projects. The latter is the largest project ever undertaken by Great Lakes.

Lasse J. Petterson: These two projects are not impacted by the recent White House announcements regarding a pause on new LNG export project permits. As we have navigated the challenging market conditions in 2022 and 2023, we have remained focused on staying a competitive market leader for the long term. We have implemented cost-reduction initiatives, including strong reductions in G&A and overhead cost structures. And we are modernizing our fleet with our ongoing Newville program and retirement of older, less productive dredges, such as the Terrapin Nylon N22 and the Dredge 53 N23. We have now taken delivery of our newest 6,500 cubic yard capacity hopper dredge, the Galveston Island, and we did that in December last year. The sister ship, the Amelia Island, is expected to be delivered in 2025.

These two projects are not impacted by the recent white house announcements regarding a pause on new LNG export projects permitting.

Yeah.

As we have navigated the challenging market conditions in 'twenty, two and 'twenty. Three we have remained focused on staying a competitive market leader for the long term.

We have implemented cost reduction initiatives, including strong reductions in G&A and overhead cost structures.

And we are modernizing our fleet with our ongoing Newbuild program and retirement of older less productive dredges, such as the Terrapin Island in 'twenty, two and the dredged 53 in 'twenty three.

We have now taken delivery on our newest 6500 cubic yard capacity Hopper dredge the Galveston Island, and we did that in December last year.

Assist to ship their Amelia Island is expected to be delivered in 2025.

Lasse J. Petterson: Also in 2023, we took delivery of our two multicasts, the Cap Hatteras and the Cape Canaveral, which will now be efficient tools for mobilizing and demobilizing pipelines, as well as general operations support, and we took delivery of three new scouts replacing older equipment last year. Towards the end of 2023, the offshore wind markets started to see growing pains. We saw several cancellations by developers of Power Purchase Agreements, or PPAs, that they entered into in 2018 and 2019 before COVID, inflation, and interest rate increases were a reality. The East Coast states also continue to invite new bids for new PPAs, which include the opportunity to increase the base rates to the new realities and to include inflation adjustments going forward. A client, the Equinor BP Joint Venture, decided to reset the plan for Empire Wind 2, the wind farm, and to cancel our rock installation contract scheduled for 2020. Equinor is continuing the Empire 1 development, as previously planned, and we will have the opportunity to re-tender the Empire Wind 2 contract when Equinor re-bids their PPA for this development.

Also in 'twenty three we took delivery of about two multi cast the cap hatteras and the Cape Canaveral.

Which will now be efficient tools for mobilizing and demobilizing, our pi pipelines as well as general operation support and we took delivery of three new scope scouse, replacing older equipment last year.

Towards the end of 2023.

Offshore wind market started to see growing pains.

We saw several cancellations by developers of power purchase agreements or Ppas that were entered into in 2018 in 2019 before COVID-19 inflation and interest rates increases were a reality.

The East Coast States also continue to invite new bids for new Ppas, which included the opportunity to increase the base rates to the new realities and to include inflation adjustments going forward.

Our clients equity BP joint venture decided to reset their plan for Empire wind to wind farm in to cancel a rock installation contracts scheduled for 2026.

Ecuador is continuing the Empire one development as previously planned and we will have the opportunity to re tender the empire wind to contract when accurate or rebates that PPA for this development.

Scott Kornblau: In December of 2023, we were awarded a new rock installation contract to perform rock protection over subsea power cables, a new utilization for this vessel, on an offshore wind project off the east coast of the United States. Going forward, we continue to pursue and bid on a number of other offshore wind farm projects, both domestically and internationally, with rock installations planned for 2026 and beyond. We believe the offshore wind market, the power generation market, offers Great Lakes a strong opportunity for growth in a rapidly growing market, which also provides us with an opportunity to diversify our business and our client. And I now turn the call over to Scott to further discuss the results for the quarter, and I'll provide further commentary on the market. Thank you, Lasse, and good morning, everyone.

In December of 'twenty, three we were awarded a new rock installation contract to perform a rock protection over subsea power cables and new utilization for this vessel on an offshore wind project off the east coast of the United States.

Going forward, we continue to pursue and bid a number of other offshore wind farm projects, both domestically and internationally.

Installations planned for 2026 and beyond.

We believe the offshore wind market power generation market offers great lakes, a strong opportunity for growth in a rapidly growing market, which also provides us with an opportunity to diversify our business and our client base.

Now ill turn the call over to Scott to further discuss our results for the quarter and I'll provide further commentary around the market and our business.

Thank you LASA and good morning, everyone I'll start by walking through the fourth quarter, which resulted in the strongest EBITDA quarter. We've had since the end of 2021 for the fourth quarter of 2023 revenues were $181 $7 million net income was $21 $6 million.

Scott Kornblau: I'll start by walking through the fourth quarter, which resulted in the strongest EBITDA quarter we've had since the end of 2021. For the fourth quarter of 2023, revenues were $181.7 million, net income was $21.6 million, and adjusted EBITDA was $40.8 million. Revenues of $181.7 million in the fourth quarter of 2023 increased $35.1 million from the prior year fourth quarter primarily due to higher utilization and higher coastal protection, maintenance, and offshore wind revenues, offset partially by a decrease in Rivers and Lakes project revenue. Current quarter gross profit and gross profit margin increased to $38.7 million and 21.3%, respectively, compared to negative $16.2 million and negative 11%, respectively, in the fourth quarter of 2022 The increase in gross margin is primarily due to improved project performance and utilization and approximately $20 million of lower operating costs due to our continued focus on cost reductions and efficiencies.

And adjusted EBITDA was $48 million.

Revenues of $181 $7 million in the fourth quarter of 2023 increased $35 $1 million from the prior year fourth quarter, primarily due to higher utilization and higher coastal protection maintenance and offshore wind revenues offset partially by a decrease.

And rivers and Lakes project revenue.

Current quarter gross profit and gross profit margin increased to $38 $7 million, and 21, 3%, respectively compared to negative $16 $2 million and negative 11%, respectively. In the fourth quarter of 2022 the increase in gross margin is primarily.

Due to improved project performance utilization and approximately $20 million of lower operating costs due to our continued focus on cost reductions and efficiencies.

Scott Kornblau: Fourth quarter 2023 G&A of $15.4 million is $3 million higher than the same quarter last year, primarily due to higher incentive and severance pay in the current year quarter, partially offset by our continued cost-cutting initiatives. Current quarter's operating income of $30.5 million is $67.2 million from the prior year's quarter operating loss of $36.7 million, driven by the improved gross profit, a $7.4 million gain related to the recently terminated offshore wind contract, and the non-repeating fourth quarter 2022 write-down of the Hopper Dredge-Terrapin Island after she was retired, partially offset by the previously discussed increase in G&A. Net interest expense of $2.8 million for the fourth quarter of 2023 was down from $3.1 million in the fourth quarter of 2022, primarily due to an increase in capitalized interest related to our new build program, partially offset by current quarter revolver interest expense. Fourth quarter 2023, a net income tax expense of $6.2 million compared to an $8.4 million net income tax benefit in the same quarter of 2022 is driven by higher current quarter income. Rounding out the P&L, net income for the fourth quarter of 2023 was $21.6 million, up from a $31.2 million net loss in the prior year quarter.

Fourth quarter, 2023, G&A, a $15 $4 million is $3 million higher than the same quarter last year, primarily due to higher incentive and severance pay in the current year quarter, partially offset by our continued cost cutting initiatives.

Current quarter's operating income of $35 million improved $67 $2 million from the prior year's quarter operating loss of $36 $7 million driven by the improved gross profit a $7.4 million gain related to the recently terminated offshore.

Our wind contract and the non repeating fourth quarter 2022 write down of the Hopper dredge Terrapin Island. After she was retired partially offset by the previously discussed increase in G&A.

Net interest expense of $2 $8 million for the fourth quarter 2023 was down from $3 $1 million in the fourth quarter of 2022, primarily due to an increase in capitalized interest related to our Newbuild program, partially offset by current quarter revolver interest expense.

Fourth quarter 2023, net income tax expense of $6 $2 million compared to an $8 $4 million net income tax benefit in the same quarter of 2022 is driven by the higher current quarter income rounding out the P&L net income for the fourth quarter 2023 was $21 six.

<unk> million dollars up from a $31 $2 million net loss in the prior year quarter.

Scott Kornblau: Turning now to our full-year results, revenue for 2023 was $589.6 million, net income was $13.9 million, and adjusted EBITDA was $73 million. Despite a $59.2 million decrease in year-over-year revenue, gross profit increased from 4.8% to 13.2%, net income increased $48 million, and adjusted EBITDA increased $56 million, driven by stronger project performance and improved efficiencies. Turning to our balance sheet, we ended 2023 with $22.8 million in cash and $90 million drawn on our $300 million revolver, which doesn't mature until the third quarter of 2027. So far this year, we have paid down $15 million and currently have $75 million drawn against the revolver. During the fourth quarter, we closed on a sale lease back of various support equipment, bringing in approximately $29 million of cash.

Turning now to our full year results revenue for 2023 was $589 $6 million net income was $13 9 million and adjusted EBITDA was $73 million, despite a $59 $2 million decrease in year over year revenue.

Gross profit margin increased from four 8% to 13, 2% net income increased $48 million and adjusted EBITDA increased $56 million driven by stronger project performance and improved efficiencies.

Turning to our balance sheet, we ended 2023 with $22 $8 million in cash and $90 million drawn on our $300 million revolver, which doesn't mature until the third quarter of 2027. So far this year, we have paid down $15 million and currently have 75.

Drawn against our revolver during the fourth quarter, we closed on a sale leaseback of various support equipment, bringing in approximately $29 million of cash.

Scott Kornblau: Total capital expenditures for 2023 were $144.8 million, which includes $64.5 million for the construction of the Subsea Rock Installation Vessel, the Acadia, $36.3 million for the Amelia Island, $24.8 million for the Galveston Island, $9.2 million for our recently delivered Multicats, and $10 million for maintenance CAPEX. As previously discussed, a little over a year ago, we applied with the Maritime Administration, or MARAD, The recent offshore wind headlines, including the cancelled PPAs Lasse discussed earlier, have slowed down the progress of our Title XI application. While we continue our conversations with MARAD, we have shifted our focus and are actively pursuing other financing that can either be a bridge to a Title XI loan or the primary funding source to support and complete our new build program.

Total capital expenditures for 2023 were $144 $8 million, which includes $64 $5 million for the construction of the subsea rocked installation vessel, the Acadia $36 $3 million for the Amelia Island, $24 8 million for the Galveston Island.

$9 $2 million for our recently delivered multi cat and $10 million for maintenance Capex.

As previously discussed a little over a year ago, we applied with the Maritime administration or myriad for title 11 financing on our new vessel. The Acadia. The recent offshore wind headlines, including the cancelled Ppas lots of discussed earlier has slowed down the progress of our title 11 apt.

Location, while we continue our conversations with myriad we have shifted our focus and are actively pursuing other financing that can either be a bridge to a title 11 loan or the primary funding source to support and complete our Newbuild program.

These discussions are progressing quickly and I am confident we are on a good path to secure additional financing soon I will provide updates in the future as appropriate.

Looking forward to 2024, we expect approximately 60% of our $1 billion backlog to be converted into revenue during the year. This can fluctuate higher or lower as vessel schedules adjust throughout the year.

We currently have three regulatory dry dockings planned for 2024 with two starting in the first quarter and a third plan for the second half of the year, but as always the number and timing of dry dockings is subject to change.

Scott Kornblau: These discussions are progressing quickly, and I am confident we are on a good path to secure additional financing soon. I will provide updates in the future as appropriate. Looking forward to 2024, we expect approximately 60% of our $1 billion backlog to be converted into revenue during the year. This can fluctuate higher or lower as vessel schedules adjust throughout the year.

We expect full year 2020 for capital expenditures to be between 170, and $195 million, which includes approximately $20 million of maintenance Capex. The timing of these payments is dependent on when certain milestones are reached on the new builds but we expect the heaviest spend.

To occur in the middle of the year.

Scott Kornblau: We currently have three regulatory dry docking plans for 2024, starting in the first quarter and a third plan for the second half of the year, but as always, the number and timing of dry docking is subject to change. We expect full-year 2024 capital expenditures to be between $170 and $195 million, which includes approximately $20 million of maintenance capex. The timing of these payments is dependent on when certain milestones are reached on the new bills, but we expect the heaviest spend to occur in the middle of the year. Looking ahead, we have two dredges beginning regulatory dry docking that will continue into the second quarter. Partially offsetting those down days is the addition of Galveston Island, which began operations earlier this month.

Looking towards the first quarter, we had two dredges beginning the regulatory Drydocking that will continue into the second quarter, partially offsetting those down days is the addition of the Galveston Island, which began operations earlier this month.

With that I'll turn the call back philosophy for his remarks on the outlet moving forward. Thank.

Thank you Scott.

The U S dredging bid market for 2023 was at a record $2 8 billion of which great lakes won 46%.

This include the over $500 million of capital Port deepening projects for LNG developments that great Lakes was awarded.

We continue to see strong support from the administration and Congress for infrastructure developments, including new maritime and port deepening widening and maintenance projects requiring dredging.

In March of 'twenty, three precedent Biden released the President's fiscal year 2024 executive budgets.

Lasse J. Petterson: With that, I'll turn the call back to Lasse for his remarks on the Outlook moving forward. Thank you, Scott. The U.S. dredging bid market for 2023 was at a record $2.8 billion, of which Great Lakes won 46%. This includes the over $500 million of capital port deepening projects for LNG developments that Great Lakes was the voice for. We continue to see strong support from the Administration and Congress for infrastructure developments, including new maritime and port deepening, widening, and maintenance projects requiring dredging. The proposed amount for the U.S. Army Corps of Engineers was $7.4 billion, which is a record amount for a President's budget.

Post amounts for the U S. Army Corps of Engineers was $7 4 billion, which is a record amount for a president's budget.

And in June of 'twenty three the house proposed an increased 2020 full budget of nine 6 billion for the quarter.

$910 million above the fiscal year 2023.

And then June July of 'twenty, three the Senate Committee for Appropriations passed the budget, which includes $8 9 billion for the quarter.

This proposed budget is expected to provide for a strong 2020 for U S. Army Corps of engineers bid market and we expect budgeted appropriations to support the funding of several previously delayed basis, a catheter abroad port improvement projects, including for the port of <unk>.

Lasse J. Petterson: In June of 2023, the House proposed an increased 2024 budget of $9.6 billion for the Corps, which is $910 million above the fiscal year 2023. And in July of 2023, the Senate Committee for Appropriations passed the budget, which included $8.9 billion for the Corps. This proposed budget is expected to provide for a strong 2024 U.S. Army Corps of Engineers bid market, and we expect budgeted appropriations to support the funding of several previously delayed phases of capital port improvement projects, including for the ports of Sabine, Houston, and Mobile, which are expected to bid in the first half of 2024. Currently, the government is operating under a continuing resolution until the budget is approved, which we hope is done in March As stated earlier, towards the end of 2023, the offshore wind market started to see growth. However, the long-term outlook for the offshore wind market continues to be strong in the U.S. and internationally, with globally installed offshore wind power generation capacity targeted to reach 260 gigawatts by 2030, up from 40 gigawatts in operation in 2020.

Been Houston, and mobile, which is expected to bid in the first half of 2024.

Currently the government is continuing.

Operating under a continuing resolution until the budget is approved which we hope is done in March of this year.

As stated earlier towards the end of 2023, the offshore wind market started to see growing base.

However, the long term outlook for the offshore wind market continues to be strong in the U S and international with global installed offshore wind power generation capacity targeted to reach 260, Gigawatts by 2030 upfront 40 Gigawatts in operation in 2020.

The U S that targets Alpha <unk> 50, Gigawatts by 2035.

These are ambitious targets and it was a challenge the existing supply chains at the same time as it provides strong growth opportunity for the industry.

Although new York rejected the developers requests for adjustments to their existing Ppas. The state continues to take step forward in meeting the renewable energy goals with the announcement in October.

Last year of three new projects awarded for approximately four gigawatts of offshore wind power.

Lasse J. Petterson: And in the U.S., the targets are for 50 gigawatts by 2035. These are ambitious targets, and they will challenge the existing supply chains, at the same time as they provide strong growth opportunities for the industry. Although New York rejected the developer's request for adjustments to their existing PPA, the State continues to take steps forward in meeting the Renewable Energy Goals with the announcement in October last year of three new projects awarded for approximately 4 gigawatts of offshore wind power generation, and a new accelerated fourth bid round for additional PPAs was announced for early 2024. Wynyard Wind, the first commercial-scale offshore wind farm on the East Coast, recently completed the installation of its first offshore wind turbine, which on January 2nd of this year began delivering power to the New England grid.

Power generation and a new accelerated fourth bid round for additional Ppas was announced for early 2024.

When the other win the first commercial scale offshore wind farm on the East Coast recently completed the installation of the first offshore wind turbine, which on January the second of this year began delivering power to the new England grid. In addition, south Fork win which will be the first offshore wind farm to supply power to the state of New York.

<unk> has completed the installation of two of his 12 client turbines on which one currently is operational now in January.

And recently also in January the New Jersey Board of public utilities selected two projects to deliver three seven gigawatts of offshore wind power generation for the state.

With these awards New Jersey has now five two gigawatts contracted auto its goal of 11 Gigawatts by 2040.

Operator: In addition, South Fork Wind, which will be the first offshore wind farm to supply power to the state of New York, has completed the installation of two of its 12 planned turbines, of which one is currently operational now. And recently, also in January, the New Jersey Board of Public Utilities selected two projects to deliver 3.7 gigawatts of offshore wind power generation for the state. With these awards, New Jersey has now 5.2 gigawatts contracted out of its goal of 11 gigawatts by 2040. Great Lakes has established a unique niche business position in the U.S. offshore wind industry, and we continue to pursue and tender bids both domestically and internationally on multiple offshore wind projects for the Arcadia, the first and only Jones Act-compliant subsea rock installation vessel.

Great Lakes has established a unique niche pitchers business position in the in the U S offshore wind market, we continue to pursue internal debates both domestically and international internationally on multiple offshore wind projects for the Acadia, The first and only Jones Act compliant subsea rock cans.

Relation vessel.

We are also actively seeking for partners that share our ambition for growth in offshore wind and that will co invest in assets to address this rapidly growing market.

In conclusion, our main focus this year was to keep managing through the various channels that the 2022 delayed bid market presented us and we successfully delivered improved year over year results.

And as we and as we enter the new year with a record backlog improved fleet and slimmer cost structure.

Operator: We are also actively seeking partners that share our ambition for growth in offshore wind and that will co-invest in assets to address this rapidly growing market. In conclusion, our main focus this year was to keep managing through the various challenges that the 2022 delayed bid market presented us, and we successfully delivered improved year-over-year results. And as we enter the new year with a record backlog, an improved fleet, and a slimmer cost structure, we believe the company is positioned to deliver improved year-over-year results this year as well. And with that, I'll turn the call over to questions. Thank you. As a reminder, if you would like to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

We believe the company is positioned to deliver improved year over year results this year as well.

And with that I'll turn the call over for questions.

Thanks.

Wonder if you would like to ask a question at this time. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again please.

Please standby, while we compile our Q&A roster.

Okay.

And our first question is going to come from the line of Adam <unk> with <unk>.

Davis Your line is open. Please go ahead.

Hey, guys. Congrats on the strong Q4, it was great to see.

Thank you.

Actually I wanted to start with what what is the.

Why did the mirror timing shift I was kind of curious about that from.

From a couple of Ppas that kind of surprised me that that would matter that much.

Operator: Please stand by while we compile our Q&A roster. And our first question is going to come from the line of Adam Thalhimer with Thompson Davis. Your line is open. Please go ahead.

So let's start there how about that.

Yes, good morning, Adam.

So as you know we've been talking to Marriott now for over a year and our application has progressed and as you saw a few months ago, we did kind of get to the final stage. However, as they were continuing their diligence during <unk>.

Adam Robert Thalhimer: Hey guys, congrats on the strong Q4, that was great to see. Thank you. Um, I actually wanted to start with, why does the Marad timing shift?

Some of these negative headlines.

Scott Kornblau: I'm kind of curious about that from... Just from a couple of PPAs, it kind of surprised me that that would matter that much. Well, let's start there. How about that? Yeah, good morning, Adam.

It did change how they just look at the market in general today.

There there is a path for us to get something done now it is not at terms that work for us. So I've been very transparent all along we were not going to put all of our eggs in the myriad basket and we're working a number of things in parallel we will know action. Those we will continue our dialogue with Marriott I do think there is a path to.

Scott Kornblau: So, as you know, we've been talking to MIRAD now for over a year, and our application has progressed. And, as you saw a few months ago, we did kind of get to the final stage. However, as they were continuing their diligence during some of these negative headlines, it did change how they just look at the market in general today. There is a path for us to get something done now. It is not on terms that work for us, so I've been very transparent all along.

Ultimately get there, but in the meantime, we'll secure the liquidity and.

Hopefully be able to take it out at some point with myriad if not.

Very comfortable that we're going to be in a very good liquidity position soon.

Got it.

Okay. That's fine just a little surprising on their from their perspective.

The.

Scott how would you characterize.

Scott Kornblau: We were not going to put all of our eggs in the MIRAD basket, and we're working a number of things in parallel. We will now action those. We will continue our dialogue with MIRAD. I do think there is a path to ultimately get there.

Margins are margins or gross margin, 21% in Q4 that was completely unaffected by.

The cancellation payments. So that's a real number how do you think that trends going forward.

Yes, So we started executing on the capital and coastal protection work during the fourth quarter. We also were benefited by not having any dry docks during the quarter, we got them all out during the first three quarters. So we had a pretty clean cost structure.

Scott Kornblau: But in the meantime, we'll secure the liquidity and hopefully be able to take it out at some point with MIRAD. If not, we're very comfortable that we're going to be in a very good liquidity position soon.

Adam Robert Thalhimer: Okay, that's fine, just a little surprising from their perspective. Scott, how would you characterize... Margins, the margins are real, gross margin 21% in Q4, that was completely unaffected by the uh... cancellation payment. Such a real number. How do you think that trend is going? Yeah, so, you know, we started executing on the Capital and Coastal Protection work during the fourth quarter. We also, though, were benefited by not having any dry docks during the quarter. We got them all out during the first three quarters, so we had a pretty clean cost structure. As I mentioned, we do have two dry dockings beginning this quarter and will go into the second quarter. So, as you know, that's kind of the double whammy, no revenue during that time and then the cost to do that.

Sure.

As I mentioned, we do have two dry dockings, beginning this quarter and will go into.

Into the second quarter. So as you know that's kind of a double whammy.

No no revenue during that time, and then the cost to do that but this has been our expectation all along when you have that proper mix of projects and the vessels are working and we execute in addition to the.

Cost reset that we have done on the fleet.

We've been saying for the last year, we thought that we were on this path to normalcy in 2024, and that's exactly how it's playing out.

That's good to see and then did you I guess that'll be in the 10-K, but did you guys give a figure for percentage of backlog that will burn in 'twenty four.

Yes, I said, roughly 60%, but again as you know that can move left to right as we adjust schedules throughout the year, but it's roughly 60%.

Okay.

Adam Robert Thalhimer: But this has been our expectation all along, when you have that proper mix of projects and the vessels are working, and we execute in addition to the cost reset that we have done on the fleet. You know, we've been saying for the last year that we thought that we were on this path to normalcy in 2024, and that's exactly how it's playing out. Now, it's good to see.

Alright, I'll turn it over to Greg to say thanks, guys.

Thank you and one moment as we move on to our next question.

Okay.

And our next question is going to come from the line of Joe Gomes with Noble capital. Your line is open. Please go ahead.

Good morning, Thanks for taking my questions.

Hey, good morning, Jeff.

Adam Robert Thalhimer: And then did you, I guess it'll be in the 10K, but did you guys give a figure for the percentage of backlog that will burn in... Yeah, I said roughly 60%, but again, as you know, that can move left or right as we adjust schedules throughout the year, but it's roughly 60%. All right, I'll turn it over to you. Great to see you.

So I just wanted to kind of get on your expectations for the quarter I mean, it was really good but on the revenue side. It seemed a little light in the Q. You mentioned you should have burned about 19%.

The dredging backlog in the fourth quarter, which would've been about 190 plus million was there. Some weather issues. There are some projects that may have been delayed and kind of.

Operator: Thanks, guys. Thank you and one moment as we move on to our next question. And our next question is going to come from the line of Joe Gomez with Noble Capital. Your line is open. Please go ahead. Good morning. Thanks for taking my question. Good morning, Joe.

At the same time.

On the capital projects revenue was up about 7 million sequentially. It was kind of flat year over year was thinking maybe we would've been looking for a little bit higher run rate on the capital projects is there anything particular there that.

Scott Kornblau: So I just wanted to kind of get on your expectations for the quarter. I mean, it was really good, but on the revenue side, it seemed a little light, you know, in the queue you mentioned you should have burned about $19 of the dredging backlog in the fourth quarter, which would have been about 190 plus million. There are some weather issues there, some projects that may have been delayed, and kind of at the same time, on the capital projects, revenue was up about $7 million sequentially, but it's kind of flat year over year. I was thinking maybe we would have been looking for a little bit higher run rate on the capital projects to reduce the revenue growth on that segment. No, the big driver of, you know, the revenue you were expecting compared to what came in is really driven by some subcontractor work on the LNG project. It is now underway. We had thought it would start earlier in the fourth quarter. It started later.

Might have.

Reduce the revenue growth on that segment.

No.

The big driver of the revenue you were expecting.

To what came in.

It's really driven by sub sub contractor work on the LNG project is now underway.

We had thought it would start earlier in the fourth quarter. It started later, that's really what's what's driving it and Youre right. The capital revenue was relatively flat, but the coastal protection was way up and those also have very solid margins and of the so the capital work now.

Start getting executed.

Just over $1 billion backlog, 71% of that backlog is made up of capital projects.

Okay. Thanks for that.

On the termination of the Iraq contract, obviously, you've got I think it was $7 $4 billion is there anything more there or is that all that you will get for that.

So you may have noticed Joe in the press release, when we broke out revenue there was an additional roughly $2 $5 million of revenue.

That is related to engineering and project management services that had already been performed on Empire to prior to the data termination. So once it was terminated we went ahead.

Scott Kornblau: That's really what's driving it. And you're right, the capital revenue was relatively flat, but the coastal protection was way up, and those also have, you know, very solid margins. And of the, you know, so the capital work will now start getting executed on the just over billion dollar backlog. 71% of that backlog is made up of capital projects. Okay, thanks for that. On the termination of the ROC contract, obviously, you got, I think it was $7.4 million. Is there anything more there, or is that all that you will get?

And book that so all in all for Empire to between the termination and the services previously before.

It's roughly $10 million and we do have similar construct on our other two contract related there are some services that do occur before we lay rock.

Okay.

And one last one for me if I may I'll get back in queue.

And again, some some additional asset sales in the quarter that you said you raised $29 million of cash do you see more of those here.

Here in 'twenty, four and you kind of through with the asset sales.

Scott Kornblau: So you may have noticed, Joe, in the press release when we broke out revenue that there was an additional roughly $2.5 million of revenue. That is related to engineering and project management services that had already been performed on Empire 2 prior to the date of termination. So once it was terminated, we went ahead and booked that. So all in all for Empire 2, between the termination and the services previously performed, it's roughly $10 million. And we do have similar constructs on our other two contracts. There are some services that do occur before we lay rocks. And one last one for me, if I may, I'll get back.

Yes.

It's a lever we can pull Joe but.

I don't foresee us doing that as I mentioned were.

Progressing rather quickly.

Some longer term financing for the Newbuild program. So I do not see us doing anything more like that in 2024.

Okay.

Great. Thanks for taking the questions.

Thanks, Joe.

And one moment for our next question.

And our next question comes from the line of John Penguin Penguin.

CJS Securities. Your line is open. Please go ahead.

Hi, good morning, Thanks for taking my questions and great quarter.

Lastly, I was wondering if you could tell us if you guys internally have line of sight to full utilization on the Acadia.

Scott Kornblau: You mentioned, again, some additional asset sales in the quarter. You said you raised $29 million in cash. Do you see more of those here in 2024? You kind of threw away the asset sales. Yeah, it's a lever we can pull, Joe.

And the 2006 timeframe or if that's still to be determined.

And kind of how that squares the law Meredith.

Yes <unk>.

Relations of these ppas.

Scott Kornblau: But I don't foresee us doing that. You know, as I mentioned, we're progressing rather quickly with some longer-term financing for the new build program. So I do not see us doing anything more like that in 2024. Great, thanks for taking the question. Thank you. And please wait one moment for our next question. And our next question comes from the line of John Tanwanteng with NCJS Securities. Your line is open. Please go ahead. Hi, good morning.

Over the last let's say six months pushed some of that revenue to the right.

So what we are looking at us.

25, when the vessel comes out to the Empire wind, one theres going to be executed and then we have an additional contract for 2026.

Also the delays in on these other developments are pushing.

Project revenues of project opportunities from 24, and 25 into 'twenty six 'twenty seven but this remains to be seen.

Operator: Thanks for taking my questions and a great quarter. Lasse, I was wondering if you could tell us if you guys internally have a line, www.fisheries.noaa.gov, and how that, of course, was... Yeah, cancellations of these PPAs over the last, let's say, six months have pushed some of that revenue to the right. So, what we are looking at is 25, when the vessel comes out, Empire Wind 1 is going to be executed, and then we have an additional contract for 2026. Also, the delays on these other developments are pushing project revenues or project opportunities from 2024 and 2025 into 2026 and 2027, but this remains to be seen. We are looking for and bidding on a number of projects starting in 2026 for rock installations, but there is no firm commitment at this point in time. In parallel, we are looking at international work.

We are looking for on bidding a number of projects starting in 2006.

For rock installation.

There is no firm commitments at this point in time.

Parallel we are looking at.

International work there is.

A good strong market in Europe that we are evaluating.

We may participate in this period.

Okay, great. Thank you.

And just relative to the 60% of the backlog that you.

We expect to book this year.

Can you remind me what your historical level of book and Bill during the years or book and burn kind of what you go and get it within a year in net revenue during the year.

Yeah and.

John I would say this year is going to just be a little atypical because of the large backlog that we have right. Now so we don't have as much white space entering a year that we typically would.

With over $600 million of 2024 revenue quote unquote in the bank right now so I wouldn't necessarily draw a parallel to.

Lasse J. Petterson: There is a good, strong market in Europe that we are evaluating and that we may participate in this period. And just relative to the 60% of the backlog that you expect to book this year, can you remind me what your historical level of book and bill during the year is, or book and burn, kind of what you go and get within the year and then revenue? Yeah, and John, I would say this year is going to just be a little atypical because of the large backlog that we have right now. So, we don't have as much white space entering a year that we typically would with over 600Million dollars of 2024 revenue, quote unquote, in the bank right now. So, I wouldn't necessarily draw a parallel to prior years. I would say, typically, when we enter a year, we roughly have 60% of coverage like we do now, but it's on a much lower backlog.

Prior.

<unk> I would say typically when we enter a year.

Roughly half, 60% like we do now of coverage, but it's on a much lower backlog. So again the amount of white space. We have in 2024 looks much different than it has historically.

Okay, Great. That's that's fair and are there any remaining claims to be settled on older projects.

No nothing material that we clear out the big ones that we had previously talked about it now it's just kind of the normal cadence that pops up but really nothing of note to call out.

Okay, Great last one for me and then I'll leave it at that.

The year over year impact of dry docks, what do you expect that to be in 'twenty three versus 24, I think you've disclosed the number but I don't know if you have a revenue or EBITDA comparison, comparator and kind of how that flows through.

Scott Kornblau: So, again, the amount of white space we have in 2024 looks much different than it has historically. Okay, great. That's fair. And are there any remaining claims to be settled on older projects? Nothing material.

No I mean, just my.

We're going to have three.

This year in 2024 that was comparable.

What we had last year.

So I would call it marginally a wash I don't I don't see any big swings when it comes to dry docking 23 versus <unk> 24.

Scott Kornblau: I said we cleared out the big ones, you know, that we had previously talked about, and now it's just kind of the normal cadence that pops up, but really nothing of note to call out. And last one for me, and then I'll leave it at that. Just the year-over-year impact of dry docks: what do you expect that to mean? I think you've disclosed a number, but I don't know if you have a revenue or EBITDA comparator. No, I mean, you know, just my own we're going to have three this year in 2024. That is comparable to what we had last year.

Okay, great. Thanks, guys.

Okay.

Thank you and one moment for our next question.

And our next question is going to come from the line of Brian Russo with Sidoti. Your line is open. Please go ahead.

Yes, hi, good morning.

Hey, good morning, Brian.

Hey, so just back on the fourth quarter. If you look at the EBITDA margin, excluding the gain was a little over 18%.

And when I look back at the fourth quarter.

For the years 2018 to 21.

It was about 16% to 21% so great.

Scott Kornblau: So I would call it, you know, marginally a wash. I don't I don't see any big swings when it comes to dry docking, 23 versus 24. Great. Thanks, guys. Thank you, and one moment for our next question. Yeah, hi. Good morning.

Great smack in the middle of that range, but that's despite the capital projects when we generating 34% of the total <unk> revenue.

Which is below the 40% to 50% of the revenue in prior fourth quarters.

Operator: Hey, so just back on the fourth quarter, you know, if you look at the EBITDA margin, excluding the game, it was a little over 18%. When I look back at the fourth quarter for the years 2018 to 21, it was about 16 to 21%, so right smack in the middle of that range. But that's despite the capital projects only generating 34% of the total 4Q revenue, which is below the 40 to 50% of the revenue in prior fourth quarters. So I'm just guessing, is this fourth quarter, in your opinion, considered normalized, or is it still below the optimal 50-50 mix that you guys target and will likely see in 2024, given the backlog? Yeah, you know, I'll reiterate what I said before. Q4 did not have any dry docks.

Just guessing.

Is this fourth quarter in your opinion considered normalized or.

Is it still.

Below it's below the optimal kind of 50 50 mix that you guys target and we will likely see in 2024, given the backlog profile.

Yes.

Alright, what I've said before Q4 did not have any dry dock and as you know that does impact margins.

Take a vessel out and have have the additional costs, but if I just look at not just look at for the whole year as opposed to quarter over quarter, we have that mix of backlog to get us to that what we always aim for the high teens operating margin in that mid teens EBITDA, we are absolutely now setting.

Scott Kornblau: And, you know, as you know, that that does impact margins; take a vessel out and have the additional cost. But if I just look, you know, not just, you know, look at for the whole year, as opposed to quarter over quarter, we have that mix of backlog to get us to that, you know, what we always aim for, the high teens operating margin and that mid teens EBITDA. We are absolutely now, you know, setting ourselves up to turn, you know, back to normal. And I would call that, you know, the normal margins that we strive to get.

Sales up to return back to normal and I would call that.

The normal margins that we strive to get.

Okay great.

The $44 million of performance obligations that are excluded for the backlog for offshore wind is that just empire. One or is that also include the second.

Contract that I guess is pending.

It is not pending <unk> it is a.

It is a signed contract it is included in there.

Scott Kornblau: Okay, great. And the $44 million of performance obligations that are excluded for the backlog for offshore wind, is that just Empire I, or does that also include the second contract that I guess is pending FIB? It is not pending FID. It is a signed contract. It is included there.

Now.

We're under NDA to disclose who it is but that is that is a signed executed contract.

We will do that work right. After we finished empire one.

At the end of 'twenty five.

Okay, Great and just you know just curious on your thoughts we've seen a lot of.

Scott Kornblau: Right now, we're under an NDA to disclose who it's with, but no, that is a signed, executed contract. We'll do that work right after we finish Empire One at the end of 2025. Okay, great. And just, you know, just curious about your thoughts. We've seen a lot of, you know, consolidation in terms of project developer ownership of, you know, offshore wind projects. We also saw a utility sell their stake last night to a global infrastructure fund. And, you know, I'm just curious, is Great Lakes even better positioned now as a preferred vendor, you know, of the consolidated ownership of these projects? Just, you know, wondering what your thoughts are. What kind of general thoughts are there?

Consolidation in terms of.

Project developer ownership.

<unk>.

Offshore.

And projects.

We also saw utility so their stake last night.

Two.

Our global infrastructure fund.

I'm, just curious as great lakes, even better positioned now.

For preferred vendor.

The.

<unk> ownership of these projects just wondering what you are.

Kind of general thoughts are there.

Okay.

The general thought is that.

The work we are doing is to install the rock on the bottom and.

The ownership structure is.

It's really changing a lot over the last.

Lasse J. Petterson: The general thought is that what we are doing is to install the rock on the seabed, and the ownership structure is really changing a lot over the past couple of months. But what we've seen is that Equinor and BP have parted ways. And Equinor is continuing with Empire Wind 1, and they are re-evaluating Empire Wind 2. BP is looking at Beacon Wind 1 and 2, and we probably will see that come to the forefront by the end of the decade. It's good to see strong companies such as BlackRock getting behind some of these developments, huge capital outlays for them, developing the offshore wind field, so when stronger companies are coming into the market, we see that as possible. But in general, we know the developers; we have good contacts with all of them.

Last couple of months, but what we've seen is that Ecuador.

BP has parted ways.

<unk> is continuing with the Empire wind, one and they are reevaluating <unk> into <unk>.

BP is looking at the.

The beacon win one and two and.

We.

We'll see that come to the forefront to the water to the end of the decade.

It's good to see strong companies such as Blackrock getting behind some of these developments.

It's <unk>.

Huge capital outlays for them developing the offshore wind feels so when stronger companies are coming into the market, we see that as positive.

But in general we know the developers we have good contacts with all of them.

Lasse J. Petterson: And with the Arcadia being a Jones Act-compliant vessel, we're very optimistic about its utilization and her engagement throughout the coming years. And then just lastly, you know, when we look at 2024 and into 2025, just your CapEx profile, and as New Vessel CapEx winds down, you know, there seems to be an inflection point, right, as CapEx winds down, your operating cash flow, normalized, and is growing, you know, we should start to see that inflection point kind of accelerate towards the end of or the middle towards the end of 2025. I Yeah, that's right, Brian. You know, in 2025, we'll be finishing up Acadia and Amelia Island, but, you know, the CAPEX, as you said, will be winding down. One of the advantages of having new vessels is that it keeps your maintenance CAPEX, you know, down, you know, from where we were historically. So, yeah, you're thinking about that right.

And.

With the Acadia being.

The Jones Act compliant vessel, we are very optimistic about the utilization or engagement throughout the coming years.

Okay, Great and then just lastly, when we look at 2024 and into 2025, just your Capex profile.

And as the.

New vessel Capex winds down.

Seems to be an inflection point right is capex winds down your operating cash flow.

Is.

As normalized.

And is growing.

We should start to see that inflection point kind of.

Accelerate towards the end of the middle towards the end of 2025 is that.

Kind of a fair statement when we look over the next 18.

24 months.

Yes.

That's right Brian.

Five.

We will be finishing up the Acadia in Amelia Island, but.

Capex as you said will be winding down.

One of the advantages of having new vessels is that it keeps your maintenance capex down from where we historically were so yes, youre thinking about about that right. We've said all along we had this this.

The cash outflow as we build for the future that would wind down in 'twenty five and then we.

Scott Kornblau: You know, we've said all along that we have this big cash outflow as we build for the future that would wind down in 2025, and then we'd quickly start building up the coffers again. Great, thank you very much. Thank you, and I would like to hand the conference back over to Tina Baginskis for her closing remarks. Thank you. We appreciate the support of our shareholders, employees, and business partners, and we thank you for joining us in this discussion about the important developments and initiatives in our business. We look forward to speaking with you during our next earnings call. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Lasse Pettersson, Martin Luks, Tina Baginskis, Lasse Pettersson, Peter Lukas, John Tanwanteng, Poe Fratt, Great Lakes Dredge & Dock Corp. The Ultimate Parody Site!

Quickly start building up the coffers again.

Okay, great. Thank you very much.

Thank you and I would like to hand, the conference back over to <unk> for closing remarks.

Thank you.

We see this part of our shareholders employees and business partners and we thank you for joining us.

And about the important development initiatives in our book.

We look forward.

Thank you.

This concludes today's conference call. Thank you for participating you may now disconnect.

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