Q1 2024 Gulf Island Fabrication Inc Earnings Call

May 7, 2024

[music].

Operator: Good afternoon, ladies and gentlemen, and welcome to the Gulf Islands conference call to discuss first quarter 2024 results. All participants will be in a listen-only mode for the duration of the call. This call is being recorded. At this time, I would like to turn the floor over to Ms. Cindi Cook for opening remarks and introduction. Cindi, please go ahead. Thank you, and good afternoon.

Good afternoon.

Afternoon, ladies and gentlemen, and welcome to Gulf Islands Conference call to discuss first quarter 2024 results all participants will be in a listen only mode for the duration of the call.

Operator: This call is being recorded at this time I would like to turn the floor over to MS. Cindi Cook for opening remarks and introductions Cindy. Please go ahead.

Cindi Cook: Thank you and good afternoon. I would like to welcome everyone to our first quarter 2024 teleconference. Our results were released this afternoon, and a copy of the press release is available on our website at gulfisland.com. A replay of today's call will be available on our website after 7 p.m. this evening.

Cindi Cook: Thank you and good afternoon, I would like to welcome everyone to our first quarter 2024 teleconference.

Cindi Cook: Our results were released this afternoon and a copy of the press release is available on our website at Gulf Island Dot Com.

Cindi Cook: A replay of today's call will be available on our website. After seven P. M. This evening.

Cindi Cook: Please keep in mind that the press release and certain comments on this call include forward-looking statements, and actual results may differ materially. We would like to refer everyone to the cautionary language included in our press release and to the risk factors described in our most recent Form 10-K and subsequent SEC filings. Please also note that management may reference EBITDA, adjusted EBITDA, adjusted revenue, new project awards, and backlog on this call, which are financial measures not recognized under U.S. GAAP. As required by FCC rules and regulations, to the extent used, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our press release.

Cindi Cook: Please keep in mind that the press release and certain comments on this call include forward looking statements and actual results may differ materially.

Cindi Cook: Would like to refer everyone to the cautionary language included in our press release and to the risk factors described in our most recent Form 10-K and subsequent SEC filings.

Cindi Cook: Please also note that management may reference EBITDA adjusted EBITDA and.

Cindi Cook: Adjusted revenue New project awards and backlog on this call, which are financial measures not recognized under U S. GAAP.

Cindi Cook: As required by SEC rules and regulations to the extent used these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our press release.

Cindi Cook: Today we have Mr. Richard Heo, President and CEO, and Mr. Wes Stockton, Executive Vice President and CFO. Mr. Heo? Thank you, Cindi.

Cindi Cook: Today, we have Mr. Richard Hall, President and CEO and Mr. Wes Stockton Executive Vice President and CFO Mr. Huh.

Richard W. Heo: Thank you Sandy.

Richard W. Heo: Good afternoon, everyone.

Richard W. Heo: and welcome to our first quarter results conference call. I'm happy to be here with you this afternoon, and I hope that each of you and your families are continuing to stay healthy and safe.

Richard W. Heo: And welcome to our first quarter results conference call I'm happy to be here with you. This afternoon and I hope that each of you and your families continue to stay healthy and safe.

Richard W. Heo: During today's call, I'll provide key takeaways from the quarter, a review of segment performance and in-market trends, an update on the progress we have made on our strategic initiatives. West will then discuss our first quarter results in greater detail and provide some commentary on our outlook for 2024. We'll then open up the call for questions and end with some closing remarks. The positive momentum we experienced during 2023 has carried into the new year as we posted another quarter of solid operating results and strong operational execution.

Richard W. Heo: During today's call I'll provide key takeaways from the quarter.

Richard W. Heo: I'll review, our segment performance and end market trends and update on the progress we have made on our strategic initiatives.

Richard W. Heo: West will then discuss our first quarter results in greater detail and provide some commentary on our outlook for 2024.

Richard W. Heo: We will then open up the call for questions and then with the closing remarks.

Richard W. Heo: The positive momentum we experienced during 2023 has carried into the new year as we posted another quarter of solid operating results and strong operational execution. We continue to make important progress on our strategic initiatives, putting us in a strong position to take advantage of the favorable end market trends.

Richard W. Heo: We continue to make important progress on our strategic initiatives, putting us in a strong position to take advantage of the favorable in-market trends in our core Gulf Coast region. Based on these positive trends combined with our expectation for continued execution against our key initiatives, we are optimistic regarding the business outlook and remain on track to achieve our full year 2024 financial target. Another important highlight from the first quarter was our strong financial position exiting the quarter. West will cover our balance sheet and liquidity in more detail, but we are very encouraged by our strong balance sheet, with quarter-end cash of over $61 million.

Richard W. Heo: And our core Gulf Coast region.

Richard W. Heo: Based on these positive trends combined with our expectation for continued execution against our key initiatives we are.

Richard W. Heo: Optimistic regarding the business outlook and remain on track to achieve our full year 2024 financial targets.

Richard W. Heo: Another important highlight from the first quarter was our strong financial position exiting the quarter.

Richard W. Heo: <unk> will cover our balance sheet and liquidity in more detail, but we are very encouraged by our strong balance sheet with quarter ending cash of over $61 million.

Richard W. Heo: This gives us ample financial flexibility to pursue both organic and inorganic growth objectives. Now, turning to our segment results. First, looking at our services division, our first quarter revenue increased 18% year over year driven by continued strength in our offshore services markets, including further momentum in our SPARC safety business. The demand environment for our key oil and gas customers remains favorable as our customers are generating strong profitability, leading to a healthy maintenance capital spending environment.

Richard W. Heo: This gives us ample financial flexibility to pursue both organic and inorganic growth objectives.

Richard W. Heo: Now turning to our segment results.

Richard W. Heo: First looking at our services Division, our first quarter revenue increased 18% year over year, driven by continued strength in our offshore services markets, including further momentum and our spark safety business the demand environment for our key oil and gas customers remain favorable.

Richard W. Heo: Our customers are generating strong profitability, leading to a healthy maintenance capital spending environment.

Richard W. Heo: We are pleased with the continued traction for our SPARC safety services offering as we continue to expand the base of new customers. The biggest challenge in our services business remains the ability to attract and retain craft labor.

Richard W. Heo: We are pleased with the continued traction for our spark safety services offering as we continue to expand the base of new customers.

Richard W. Heo: The biggest challenge in our services business remains the ability to attract and retain craft labor.

Richard W. Heo: As a result, we remain focused on retaining our employees and finding creative ways to attract and develop new talent, including through M&A, similar to our acquisition of Dynamics. That said, we remain encouraged by the trends in our services business and continue to expect a strong year in 2024. Now moving on to fabrication, a reported revenue decline from last year, but this was entirely driven by the benefit of our large fabrication project and last year's results.

Richard W. Heo: As a result, we remain focused on retaining our employees and finding creative ways to attract and develop new talent, including through M&A similar to our acquisition of dynamic.

Richard W. Heo: We remain encouraged by the trends in our services business and continue to expect a strong year in 2024.

Richard W. Heo: Now moving on to fabrication a reported revenue decline from last year, but this was entirely driven by the benefit of our large fabrication project in last year's results. The strong momentum in our small fabrication business continued during the first quarter as we saw solid year over year growth and strong.

Richard W. Heo: The strong momentum in our small fabrication business continued during the first quarter as we saw solid year-over-year growth and strong execution in this business. The demand trends in our legacy fabrication markets remain positive, including the opportunities we have discussed previously in the subsea market. A key aspect of our strategic plan is to target and market outside of our traditional oil and gas markets. We have discussed the potential in adjacent markets such as LNG and petrochemicals, and we continue to see attractive opportunities in these markets.

Richard W. Heo: Execution in this business.

Richard W. Heo: The demand trends in our legacy fabrication markets remain positive, including the opportunities. We have discussed previously previously and the subsea market.

Richard W. Heo: A key aspect of our strategic plan is to target end markets outside of our traditional oil and gas markets. We have discussed the potential in adjacent markets, such as LNG and petrochemical and we continue to see attractive opportunities. In these markets. We also continue to pursue new end markets, where we can take advantage of our history.

Richard W. Heo: We also continue to pursue new end markets where we can take advantage of our history of strong execution and our strategic location. Our contract for the fabrication of structural components for NASA, which was a key contributor to our strong growth in small-scale fabrication during the first quarter, is an example of the opportunity to expand our in-market focus. We are seeing that these in-markets place a premium on quality and schedule certainty, areas where Gulf Island is more than capable of delivering.

Richard W. Heo: Free of strong execution and our strategic location.

Richard W. Heo: Our contract for the fabrication of structural components for NASA, which was a key contributor to our strong growth in small scale fabrication. During the first quarter as an example of the opportunity to expand our end market focus we are seeing that these end markets place a premium on quality and schedule certainty.

Richard W. Heo: <unk> were Gulf Island is more than capable of delivering.

Richard W. Heo: As a result, we believe we are in an attractive position to pursue these new end markets. We continue to pursue several attractive large fabrication projects, however, regulatory uncertainty and an uneven interest rate outlook are, in many cases, extending the decision cycles and timelines of many of the large projects we are pursuing. We remain bullish on the potential for large fabrication awards, but the ability to predict timing is becoming much more challenging.

Richard W. Heo: As a result, we believe we are in an attractive position to pursue these new end markets.

Richard W. Heo: We continued to pursue several attractive large fabrication projects. However, the regulatory uncertainty and uneven interest rate outlook is in many cases, extending the decision cycles and timelines of many of the large projects we're pursuing.

Richard W. Heo: We remain bullish on the potential for large fabrication awards, but the ability to predict timing is getting much more challenging however, given the meaningful growth in our small scale business. We are now much less dependent on large awards, the strong market trends and our existing markets.

Richard W. Heo: However, given the meaningful growth in our small-scale business, we are now much less dependent on large awards. The Strong Market Trends in Our Existing Markets, as well as our opportunities in new end markets, combined with the tight fabrication capacities, give us confidence we're well positioned for growth in fabrication. Finally, turning to our shipyard division, as we highlighted on our last call, we wrapped up our remaining operational shipyard obligations during the first quarter, with the warranty period for our ferry projects being the final remaining items associated with the winding down of the business.

Richard W. Heo: As well as our opportunities in new end markets combined with the tight fabrication capacities give us confidence we are well positioned for growth in fabrication.

Richard W. Heo: Finally, turning to our shipyard division as we highlighted on our last call we wrapped up our remaining operational shipyard obligations during the first quarter with the warranty period for our ferry projects being the final remaining items associated with the wind down of the business. We are pleased to have the wind down and the ship.

Richard W. Heo: We are pleased to have the wind down in the shipyard behind us and are excited to put all of our energy and focus on growing our services and fabrication business. To that end, we have increased our efforts to identify strategic partnerships and acquisition opportunities. With our more stable fabrication and services platform combined with our strong financial position, we are ideally situated to pursue strategic partnerships and acquisition opportunities that will enable us to grow our existing platform, expand our current capabilities, and further penetrate new growth markets.

Richard W. Heo: We are behind us.

Richard W. Heo: And are excited to put all of our energy and focus to growing our services and fabrication businesses.

Richard W. Heo: Does that in we have increased our efforts to identify strategic partnerships and acquisition opportunities.

Richard W. Heo: With our more stable fabrication and services platform combined with our strong financial position. We are ideally situated to pursue strategic partnerships and acquisition opportunities that will enable us to grow our existing platform expand our current capabilities and further penetrate new growth Mark.

Richard W. Heo: That's.

Richard W. Heo: As we have done throughout our strategic transformation process, we will remain disciplined in our pursuit of both organic and inorganic growth opportunities.

Richard W. Heo: As we have done throughout our strategic transformation process, we will remain disciplined in our pursuit of both organic and inorganic growth opportunities. In closing, we're very pleased by our strong start to the year, which was highlighted by the continued momentum in our services and small-scale fabrication businesses. These businesses combine to form a more stable and profitable base of business, which, together with our strong financial position, gives us an attractive platform to pursue our growth objectives.

Richard W. Heo: In closing, we're very pleased by our strong start to the year, which was highlighted by the continued momentum in our services and small scale fabrication businesses. These businesses combined to form a more stable and profitable base of business, which together with our strong financial position gives us an attractive platform to pursue.

Richard W. Heo: Our growth objectives.

Richard W. Heo: Our successful execution of our strategic objectives has put us in a strong competitive position, and we are excited by the opportunities we see in front of us. I will now turn the call over to Wes to discuss our quarterly results in greater detail.

Richard W. Heo: Our successful execution of our strategic objectives has put us in a strong competitive position and we are excited by the opportunities we see in front of us.

Richard W. Heo: I will now turn the call over to Wes to discuss our quarterly results in greater detail.

Westley S. Stockton: Thanks Richard and good afternoon everyone. I will discuss our consolidated results and then provide some additional details regarding our segment results, putting in context the factors mentioned by Richard and their impacts on the quarter. I will then conclude with the discussion of our liquidity and full year financial outlook. Now turning to our quarterly results, consolidated revenue for the first quarter of 2024 was $42.9 million, down from $62.2 million in the prior year period.

Wes: Thanks, Richard and good afternoon, everyone.

Westley S. Stockton: I will discuss our consolidated results and then provide some additional details regarding our segment results putting in context, the factors mentioned by Richard and their impacts on the quarter. I will then conclude with a discussion of our liquidity and full year financial outlook now.

Westley S. Stockton: The decrease was driven by the contribution of our large fabrication project in the prior year quarter, which was canceled in July 2023, partially offset by growth in both our services segment and small-scale fabrication business. Consolidated Adjusted EBITDA was $3.7 million for the first quarter of 2024, essentially flat from the prior year period. Consolidated Adjusted Evada reflects the removal of the operating results of our shipyard division for both periods. The current quarter also reflects the removal of a gain from the sale of excess property, and the prior quarter reflects the removal of insurance gains related to hurricane losses. Adjusted EBITDA for the current quarter compared to the prior year reflects higher results for both services and small-scale fabrication, all set by the prior year results benefiting from our canceled large fabrication project.

Westley S. Stockton: Now turning to our quarter results consolidated revenue for the first quarter of 2024 was $42 9 million down from $62 2 million in the prior year period.

Westley S. Stockton: Consolidated adjusted EBITDA was $3 7 million for the first quarter of 2024, essentially flat from the prior year period.

Westley S. Stockton: Consolidated adjusted EBITDA reflects the removal of the operating result of our shipyard division for both periods.

Westley S. Stockton: The current quarter also reflects the removal of a gain from the sale of excess property in the prior year quarter reflects the removal of insurance gains related to hurricane item.

Westley S. Stockton: Adjusted EBITDA for the current quarter compared to prior year reflects higher results for both services and small scale fabrication offset by the prior year results benefiting from our canceled large fabrication project.

Westley S. Stockton: Specifically for the services division, revenue for the first quarter of 2024 was $25.5 million, an increase of 18% compared to the prior year period, primarily due to higher offshore services work, including incremental revenue associated with the Spark Safety Business Line. Services EBITDA for the first quarter of 2024 was $3.3 million, up 20% from the prior year period, and EBITDA margin was 13.1% for the current quarter, compared to 12.9% for the prior year period.

Westley S. Stockton: Yes.

Westley S. Stockton: Specifically for the services Division revenue for the first quarter 2024 was $25 5 million, an increase of 18% compared to the prior year period, primarily due to higher offshore services work, including incremental revenue associated with the spark safety business line.

Westley S. Stockton: Services EBITDA for the first quarter 2024 was $3 3 million up 20% from the prior year period, and EBITDA margin was 13, 1% for the current quarter compared to 12, 9% for the prior year period.

Westley S. Stockton: For our fabrication division, revenue for the first quarter of 2024 was $17.1 million, a decrease of $22.5 million from the prior year period, primarily due to the prior year including the previously mentioned benefit of our large fabrication project. Fabrication adjusted EBITDA, which excludes a gain of $2.9 million from the previously mentioned property sale, was $2.5 million for the first quarter. Adjusted EBITDA was down only modestly from the prior year period despite the contribution of the Large Fabrication Project and last year's results, as our first quarter of 2024 benefited from growth in small-scale fabrication.

Westley S. Stockton: For our fabrication division revenue for the first quarter 2024 was $17 1 million a decrease of $22 5 million from the prior year period, primarily due to the prior year, including the previously mentioned benefit of our large fabrication project.

Westley S. Stockton: Fabrication, adjusted EBITDA, which excludes the gain of $2 9 million from the previously mentioned property sale was $2 5 million for the first quarter adjusted EBITDA was down only modestly from the prior year period. Despite the contribution of the large fabrication project in last year's results.

Westley S. Stockton: As our first quarter 2024 benefited from growth in small scale fabrication strong execution and a more favorable project margin mix.

Westley S. Stockton: Strong execution and a more favorable project margin mix. For our corporate division, EBITDA was a loss of $2.1 million for the first quarter, compared to a loss of $2 million in the prior year period. With respect to our liquidity, we ended the first quarter with a cash and investments balance of just over $61 million, up $13.4 million from December 31st, owing to our solid first quarter operating results and the proceeds from our property sale.

Westley S. Stockton: For our corporate Division EBITDA was a loss of $2 1 million for the first quarter compared to a loss of $2 million in the prior year period.

Westley S. Stockton: With respect to our liquidity we ended the first quarter with a cash and investments balance of just over $61 million up $13 4 million from December 31.

Westley S. Stockton: Owing to our solid first quarter operating results and the proceeds from our property sale.

Westley S. Stockton: As of March 31, our debt obligation associated with the resolution of our MPSV litigation remains at $20 million, with annual payments of approximately $1.7 million beginning on December 31, 2024. Our cash balance and the long duration of our debt put us in a strong liquidity position and provides us with ample flexibility to pursue our growth objectives.

Westley S. Stockton: At March 31, our debt obligations associated with the resolution of our <unk> litigation remains at $20 million with annual payments of approximately $1 7 million beginning on December 31 2020 for.

Westley S. Stockton: Our cash balance and the long duration of our debt puts us in a strong liquidity position and provides us ample flexibility to pursue our growth objectives.

Westley S. Stockton: Turning to our earnings outlook for 2024, we are reiterating our previously provided segment full-year guidance. For our services segment, we expect 2024 EBITDA of approximately $14 million, driven primarily by growth in our SPARC safety business line. For our fabrication segment, we expect 2024 adjusted EBITDA of approximately $8 million, which includes year-over-year growth and our small-scale fabrication business but excludes the potential benefit of any large project award. Additionally, our adjusted EBITDA forecast excludes the gain from the previously mentioned property sales.

Westley S. Stockton: Turning to our earnings outlook for 2024, we are reiterating our previously provided segment full year guidance.

Westley S. Stockton: For our services segment, we expect 2020 for EBITDA of approximately $14 million driven primarily by growth in our spark safety business line.

Westley S. Stockton: For our fabrication segment, we expect 2024, adjusted EBITDA of approximately $8 million, which includes year over year growth in our small scale fabrication business, but.

Westley S. Stockton: But excludes the potential benefit of any large project award.

Westley S. Stockton: Our adjusted EBITDA forecast excludes the gain from the previously mentioned property sale.

Westley S. Stockton: And for our corporate segment, we expect an EBITDA loss for 2024 of approximately $8 million. Our capital spending plans for 2024 are also consistent with our previous expectations, with full-year capital expenditures anticipated to be approximately $5 to $5.5 million, of which approximately $3.5 million relates to upgrades to our homeless facilities and investments in more technologically advanced equipment. And the remainder reflects our more typical maintenance CapEx requirements. Our capital expenditures for 2024 will be partially supplemented by insurance proceeds of $2 million received in January 2024 associated with damage previously caused by Hurricane Ida.

Westley S. Stockton: And for our corporate segment, we expect an EBITDA loss for 2024 of approximately $8 million.

Westley S. Stockton: Our capital spending plans for 2024 are also consistent with our previous expectations with full year capital expenditures anticipated to be approximately $5 to $5 5 million of which approximately $3 5 million relates to upgrades to our houma facilities and investments and more technologically advanced equipment and the remainder of.

Westley S. Stockton: Flex our more typical maintenance capex requirements.

Westley S. Stockton: Our capital expenditures for 2024 will be partially supplemented by insurance proceeds of $2 million received in January 2024 associated with damaged previously caused by hurricane items.

Westley S. Stockton: Lastly, during the first quarter, we repurchased approximately 61,000 shares of our common stock for approximately $300,000 under our share repurchase program which commenced in mid-December. And as of March 31st, we had remaining authorization to purchase $4.6 million of our common stock under the program.

Westley S. Stockton: Lastly, during the first quarter, we repurchased approximately 61000 shares of our common stock for approximately 300000 under our share repurchase program commenced in mid December.

Westley S. Stockton: And at March 31, we had remaining authorization to purchase $4 $6 million of our common stock under the program.

Operator: This concludes our prepared remarks. Operator, you may now open the line for questions. Thank you. We will now be conducting a question and answer session.

Speaker Change: This concludes our prepared remarks, operator, you may now open the line for questions.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for your questions. Our first questions come from the line of Tom Spiro with Spiro Capital. Please proceed with your questions.

Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Tom Spiro: A confirmation tone will indicate your line is in the question queue.

Operator: You May press star two to remove your question from the queue.

Operator: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Tom Spiro: Please while we poll for your questions.

Operator: Yes.

Operator: Our first questions come from the line of Tom Spiro with Spiro capital. Please proceed with your questions.

Tom Spiro: Tom Spiro, Spiro Capital. Good afternoon. Good afternoon, Tom.

Operator: Tom Spiro Spiro capital good afternoon, Hey.

Tom Spiro: Hey, good afternoon Tom.

Richard W. Heo: Richard, you often mention that, in your view, our location gives us a strategic advantage. But it wasn't clear to me whether you meant a strategic advantage just for large fab projects, or also for small-scale fab jobs, or even for service businesses. Where is the advantage?

Tom Spiro: You often mentioned that your view.

Richard W. Heo: Our location gives us a strategic advantage.

Richard W. Heo: And I wasn't clear to me, whether you mean, a strategic advantage for large pad projects, John Russell, a small small scale fab or even the service businesses.

Richard W. Heo: Where is the advantage.

Richard W. Heo: Well, I think it's all of the items that you outlined, it's both small-scale fabrication, obviously our services business benefits from the close proximity of where we fabricate and ship our fabricated materials, but what we're alluding to is mostly larger fabrication projects, especially around water access and close proximity to some of these large capital projects that we've talked about in Louisiana and Texas.

Richard W. Heo: Well I think it's all of.

Richard W. Heo: The outlines that are the items that you outlined spoke small scale fabrication, obviously, our services business has been.

Richard W. Heo: <unk> benefited from the close proximity of where we fabricate and ship our ship our fabricated materials, but what we're alluding to is mostly on the larger fabrication projects, especially around the water access.

Richard W. Heo: In close proximity to some of these large capital projects that we've talked about in Louisiana, and Texas sure.

Tom Spiro: That's helpful, thanks. And on the services side, we seem to be doing quite well offshore with our traditional customers, and that's great. No complaints here. But are we making any progress in expanding into onshore opportunities?

Speaker Change: Thanks, and on the services side, we seem to be doing quite well offshore with our traditional customers. That's great. No complaints here are we making any progress in expanding into the onshore opportunities.

Richard W. Heo: We are, but we're being strategic and concerted in that effort, Tom, because of the challenges with getting labor. So what we're looking for are opportunities where we can get a substantial amount of scale and consistency of work, rather than project-specific work where we're buoyed by the volatility of cycles of projects going up and down. So we are being more concerted in our expansion efforts onshore.

Speaker Change: We are but we're being strategic and concerted in that effort.

Richard W. Heo: Because of the.

Richard W. Heo: The challenges with getting labor so what we're looking for opportunities, where we can get substantial amount of scale and consistency of work.

Richard W. Heo: Rather than project specific work were buoyed by the volatility of site.

Richard W. Heo: Cycles of projects going up and down and so we are being more concerted and our expansion efforts on onshore.

Tom Spiro: Is labor as difficult an issue today as it was, say, a year ago?

Richard W. Heo: As labor is difficult to issue today as it was say a year ago.

Richard W. Heo: Absolutely, I think the labor today is probably as difficult or maybe even worse than it was a year ago.

Speaker Change: Absolutely I think I think the labor today is probably as difficult or maybe even worse than it was a year ago Wow Wow.

Tom Spiro: Wow, wow, huh. And just a couple of housekeeping items on ships, just to be sure I understand. We've now received final acceptance of all the vessels. They've all been final accepted, is that right? That's correct. That's great. And the warranty claims, have any been filed, or are we aware of any warranty claims that are pending?

Tom Spiro: And just a couple of housekeeping items on ships just to be sure I understand we've now received final acceptance of all the vessels.

Tom Spiro: They've all been finally accepted is that right.

Tom Spiro: That's correct that's great and then the warranty claims have any been filed or are we aware of any warranty claims that are pending.

Richard W. Heo: Nothing material, Tom. Okay. Okay.

Tom Spiro: Nothing material Tom.

Speaker Change: Okay. Okay. This is most helpful. Thanks a lot.

Speaker Change: Thank you.

Richard W. Heo: Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Richard W. Heo: I'm showing no further questions in the queue I'd like to hand, the call back over to Richard for any closing comments.

Speaker Change: In closing I want to thank our customers and shareholders for their continued support as well as recognize our employees who continue to demonstrate our commitment to Gulf Island success for those on the call. Thanks again for your interest in Gulf Island. During the second quarter, we will be attending the Sidoti Microcap.

Richard W. Heo: Conference on May 9th in the North North Northland Investor Conference on June 25th.

Speaker Change: If we're not able to connect at either of these events I look forward to speaking with you on our next conference call and updating you on our progress.

Speaker Change: Safe and take care.

Richard W. Heo: Sure.

Speaker Change: Thank you. This does conclude the Gulf Island Conference call.

Speaker Change: And goodbye.

Richard W. Heo: Okay.

Richard W. Heo: [music].

Richard W. Heo: Yes.

Richard W. Heo: Great.

Richard W. Heo: [music].

Richard W. Heo: Okay.

Richard W. Heo: [music].

Richard W. Heo: Sure.

Richard W. Heo: Okay.

Richard W. Heo: [music].

Tom Spiro: Okay, this is most helpful. Thanks a lot.

Speaker Change: Good afternoon, ladies and gentlemen, and welcome to Gulf Islands Conference call to discuss first quarter 2024 results.

Speaker Change: Participants will be in a listen only mode for the duration of the call.

Operator: Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. I'm showing no further questions in the queue. I'd like to hand the call back over to Richard for any closing comments.

Tom Spiro: This call is being recorded at this time I would like to turn the floor over to MS. Cindi Cook for opening remarks and introductions Cindy. Please go ahead.

Operator: Thank you. This does conclude the Gulf Island conference call. Thank you, and goodbye.

Richard W. Heo: In closing, I want to thank our customers and shareholders for their continued support, as well as recognize our employees who continue to demonstrate a commitment to Gulf Island success. For those on the call, thanks again for your interest in Gulf Island. During the second quarter, we'll be attending the Sudoti Micro-Cap Conference on May 9th and the Northland Investor Conference on June 25th. If we are not able to connect at either of these events, I look forward to speaking with you on our next conference call and updating you on our progress. Be safe and take care. Thank you. This does conclude the Gulf Island Conference Call.

Richard: Thank you and good afternoon, I would like to welcome everyone to our first quarter 2024 teleconference. Our results were released this afternoon and a copy of the press release is available on our website at Gulf Island Dot Com.

Richard W. Heo: A replay of today's call will be available on our website. After seven P. M. This evening.

Richard W. Heo: Please keep in mind that the press release and certain comments on this call include forward looking statements and actual results may differ materially.

Richard W. Heo: We would like to refer everyone to the cautionary language included in our press release and to the risk factors described in our most recent Form 10-K and subsequent SEC filings.

Richard W. Heo: Please also note that management may reference EBITDA adjusted EBITDA.

Richard W. Heo: Adjusted revenue New project awards and backlog on this call, which are financial measures not recognized under U S. GAAP.

Richard W. Heo: As required by SEC rules and regulations to the extent used these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our press release.

Richard W. Heo: Today, we have Mr. Richard <unk>.

Richard W. Heo: President and CEO and Mr. Wes Stockton Executive Vice President and CFO Mr hub.

Sandy: Thank you Sandy.

Operator: ?? ?? ?? ?? ?? ?? Copyright © 2021 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ??

Speaker Change: Afternoon, everyone.

Speaker Change: And welcome to our first quarter results conference call I'm happy to be here with you. This afternoon and I hope that each of you and your families are continuing to stay healthy and safe.

Operator: Good afternoon, ladies and gentlemen, and welcome to Gulf Island's conference call to discuss first quarter 2024 results. All participants will be in a listen-only mode for the duration of the call. This call is being recorded. At this time, I would like to turn the floor over to Ms. Cindi Cook for opening remarks and introduction. Cindi, please go ahead. Thank you, and good afternoon.

Cindi Cook: Please keep in mind that the press release and certain comments on this call include forward-looking statements, and actual results may differ materially. We would like to refer everyone to the cautionary language included in our press release and to the risk factors described in our most recent Form 10-K and subsequent SEC filings. Please also note that management may reference EBITDA, adjusted EBITDA, adjusted revenue, new project awards, and backlog on this call, which are financial measures not recognized under U.S. GAAP. As required by SEC rules and regulations, to the extent used, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our press release.

Cindi Cook: Today we have Mr. Richard Heo, President and CEO, and Mr. Wes Stockton, Executive Vice President and CFO. Mr. Heo? Thank you, Cindi.

Speaker Change: On today's call I'll provide key takeaways from the quarter.

Richard W. Heo: Review, our segment performance and end market trends and update on the progress we have made on our strategic initiatives.

Westley S. Stockton: Wes will then discuss our first quarter results in greater detail and provide some commentary on our outlook for 2024.

Richard W. Heo: We will then open up the call for questions and then with the closing remarks.

Cindi Cook: The positive momentum we experienced during 2023 has carried into the new year as we posted another quarter of solid operating results and strong operational execution we.

Richard W. Heo: We continue to make important progress on our strategic initiatives, putting us in a strong position to take advantage of the favorable end market trends in our core Gulf Coast region.

Westley S. Stockton: Based on these positive trends combined with our expectation for continued execution against our key initiatives were up.

Richard W. Heo: Domestic regarding the business outlook and remain on track to achieve our full year 2024 financial targets and.

Richard W. Heo: Another important highlight from the first quarter was our strong financial position exiting the quarter.

Westley S. Stockton: <unk> will cover our balance sheet and liquidity in more detail, but we are very encouraged by our strong balance sheet with quarter ending cash of over $61 million.

Westley S. Stockton: This gives us ample financial flexibility to pursue both organic and inorganic growth objectives.

Richard W. Heo: During today's call, I'll provide key takeaways from the quarter, a review of segment performance and in-market trends, an update on the progress we have made on our strategic initiatives. West will then discuss our first quarter results in greater detail and provide some commentary on our outlook for 2024. We'll then open up the call for questions and end with closing remarks. The positive momentum we experienced during 2023 has carried into the new year as we posted another quarter of solid operating results and strong operational execution.

Speaker Change: Now turning to our segment results.

West: First looking at our services Division, our first quarter revenue increased 15% year over year, driven by continued strength in our offshore services markets, including further momentum and our spark safety business the demand environment for our key oil and gas customers remained favorable as our.

Richard W. Heo: <unk> are generating strong profitability, leading to a healthy maintenance capital spending environment.

Richard W. Heo: We are pleased with the continued traction for our spark safety services offerings as we continue to expand the base of new customers.

Richard W. Heo: The biggest challenge in our services business remains the ability to attract and retain craft labor.

Richard W. Heo: As a result, we remain focused on retaining our employees and finding creative ways to attract and develop new talent, including through M&A similar to our acquisition of dynamic.

Richard W. Heo: We remain encouraged by the trends in our service business and continue to expect a strong year in 2024.

Richard W. Heo: Execution in this business.

Richard W. Heo: The demand trends in our legacy fabrication markets remain positive, including the opportunities. We have discussed previously previously and the subsea market.

Richard W. Heo: A key aspect of our strategic plan is to target end market outside of our traditional oil and gas markets. We have discussed the potential in adjacent markets, such as LNG and petrochemical and we continue to see attractive opportunities. In these markets. We also continued to pursue new end markets, where we can take advantage of our here.

Richard W. Heo: We also continue to pursue new end markets where we can take advantage of our history of strong execution and our strategic location. Our contract for the fabrication of structural components for NASA, which was a key contributor to our strong growth in small-scale fabrication during the first quarter, is an example of the opportunity to expand our in-market focus. We are seeing that these end markets place a premium on quality and schedule certainty, areas where Gulf Island is more than capable of delivering.

Richard W. Heo: Tree of strong execution and our strategic location.

Richard W. Heo: Our contract for the fabrication of structural components for NASA, which was a key contributor to our strong growth in small scale fabrication during the first quarter as an example of the opportunity to expand our end market focus.

Richard W. Heo: We are seeing that these end markets place a premium on quality and schedule certainty areas, where Gulf island is more than capable of delivering.

Richard W. Heo: As a result, we believe we are in an attractive position to pursue these new end markets.

Richard W. Heo: We continue to pursue several attractive large fabrication projects. However, the regulatory uncertainty and uneven interest rate outlook is in many cases, extending the decision cycles and timelines of many of the large projects we are pursuing.

Richard W. Heo: As well as our opportunities in new end markets combined with the tight fabrication capacities give us confidence we are well positioned for growth and fabrication.

Richard W. Heo: Finally, turning to our shipyard division as we highlighted on our last call we wrapped up our remaining operational shipyard obligations during the first quarter.

Richard W. Heo: But the warranty period for our ferry projects being the final remaining items associated with the wind down of the business we.

Richard W. Heo: We are pleased to have the wind down and the shipyard behind US and are excited to put all of our energy and focus to growing our services and fabrication businesses.

Richard W. Heo: To that end, we've increased our efforts to identify strategic partnerships and acquisition opportunities with our more stable fabrication and services platform combined with our strong financial position. We are ideally situated to pursue strategic partnerships and acquisition opportunities that will enable.

Richard W. Heo: To grow our existing platform expand our current capabilities and further penetrate new growth markets.

Richard W. Heo: As we have done throughout our strategic transformation process, we will remain disciplined in our pursuit of both organic and inorganic growth opportunities.

Richard W. Heo: Our growth objectives.

Richard W. Heo: Our successful execution of our strategic objectives has put us in a strong competitive position and we are excited by the opportunities we see in front of us.

Richard W. Heo: I will now turn the call over to Wes to discuss our quarterly results in greater detail.

Wes: Thanks, Richard and good afternoon, everyone.

Westley S. Stockton: The decrease was driven by the contribution of our large fabrication project in the prior year quarter, which was canceled in July 2023, partially offset by growth in both our services segment and small-scale fabrication business. Consolidated adjusted EBITDA was 3.7 million for the first quarter of 2024, essentially flat from the prior year period. Consolidated adjusted EBIDA reflects the removal of the operating results of our shipyard division for both periods. The current quarter also reflects the removal of a gain from the sale of excess property. And the prior year quarter reflects the removal of insurance gains related to hurricane-related items.

Westley S. Stockton: Now turning to our quarter results consolidated revenue for the first quarter 2024 was $42 9 million down from $62 2 million in the prior year period.

Westley S. Stockton: Consolidated adjusted EBITDA was $3 7 million for the first quarter of 2024, essentially flat from the prior year period.

Westley S. Stockton: Consolidated adjusted EBITDA reflects the removal of the operating result of our shipyard division for both periods.

Westley S. Stockton: Adjusted EBITDA for the current quarter compared to the prior year reflects higher results for both services and small-scale fabrication, all set by the prior year results benefiting from our cancelled large fabrication project. Specifically for the services division, revenue for the first quarter of 2024 was $25.5 million, an increase of 18% compared to the prior year period, primarily due to higher offshore services work, including incremental revenue associated with the Spark Safety Business Line. Services EBITDA for the first quarter of 2024 was $3.3 million, up 20% from the prior year period, and EBITDA margin was 13.1% for the current quarter, compared to 12.9% for the prior year period

Westley S. Stockton: Yes.

Westley S. Stockton: Specifically for the services Division revenue for the first quarter of 2024 was $25 5 million, an increase of 18% compared to the prior year period, primarily due to higher offshore services work, including incremental revenue associated with the spark safety business line.

Westley S. Stockton: For our fabrication division, revenue for the first quarter of 2024 was $17.1 million, a decrease of $22.5 million from the prior year period, primarily due to the prior year including the previously mentioned benefit of our large fabrication project. Fabrication adjusted EBITDA, which excludes the gain of $2.9 million from the previously mentioned property sale, was $2.5 million for the first quarter. Adjusted EBITDA was down only modestly from the prior year period, despite the contribution of the large fabrication project and last year's results.

Westley S. Stockton: As our first quarter of 2024 benefited from growth in small-scale fabrication, Strong Execution, and a more favorable project margin mix, for our corporate division, EBITDA was a loss of $2.1 million for the first quarter, compared to a loss of $2 million in the prior year period.

Westley S. Stockton: As our first quarter 2024 benefited from growth in small scale fabrication strong execution and a more favorable project margin mix.

Westley S. Stockton: For our corporate Division EBITDA was a loss of $2 1 million for the first quarter compared to a loss of $2 million in the prior year period.

Westley S. Stockton: With respect to our liquidity, we ended the first quarter with a cash and investments balance of just over $61 million, up $13.4 million from December 31st, owing to our solid first quarter operating results and the proceeds from our property sale. As of March 31st, our debt obligation associated with the resolution of our NPSV litigation remains at $20 million, with annual payments of approximately $1.7 million beginning on December 31st, 2024. Our cash balance and the long duration of our debt put us in a strong liquidity position and provide us with ample flexibility to pursue our growth objectives.

Westley S. Stockton: With respect to our liquidity we ended the first quarter with a cash and investments balance of just over $61 million up $13 4 million from December 31.

Westley S. Stockton: Owing to our solid first quarter operating results and the proceeds from our property sale.

Westley S. Stockton: Our cash balance and the long duration of our debt puts us in a strong liquidity position and provides us ample flexibility to pursue our growth objectives.

Westley S. Stockton: Turning to our earnings outlook for 2024, we are reiterating our previously provided segment full-year guidance. For our services segment, we expect 2024 EBITDA of approximately $14 million, driven primarily by growth in our SPARC safety business line. For our fabrication segment, we expect 2024 adjusted EBITDA of approximately 8 million, which includes year-over-year growth and our small-scale fabrication business but excludes the potential benefit of any large project award. Additionally, our adjusted EBITDA forecast excludes the gain from the previously mentioned property sale.

Westley S. Stockton: Turning to our earnings outlook for 2024, we are reiterating our previously provided segment full year guidance.

Westley S. Stockton: For our services segment, we expect 2020 for EBITDA of approximately $14 million driven primarily by growth in our spark safety business line.

Westley S. Stockton: For our fabrication segment, we expect 2024, adjusted EBITDA of approximately $8 million, which includes year over year growth in our small scale fabrication business, but.

Westley S. Stockton: That excludes the potential benefit of any large project awards.

Westley S. Stockton: Our adjusted EBITDA forecast excludes the gain from the previously mentioned property sale.

Westley S. Stockton: And for our corporate segment, we expect an EBITDA loss for 2024 of approximately $8 million.

Westley S. Stockton: Our capital spending plans for 2024 are also consistent with our previous expectations with full year capital expenditures anticipated to be approximately $5 to $5 5 million.

Westley S. Stockton: Which approximately $3 5 million relates to upgrades to our homework facilities and investments and more technologically advanced equipment and the remainder reflects our more typical maintenance capex requirements.

Westley S. Stockton: And at March 31, we had remaining authorization to purchase $4 $6 million of our common stock under the program.

Operator: This concludes our prepared remarks. Operator, you may now open the line for questions. Thank you. We will now be conducting a question and answer session.

Speaker Change: This concludes our prepared remarks, operator, you may now open the line for questions.

Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Tom Spiro: A confirmation tone will indicate your line is in the question queue.

Operator: You May press star two to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys one.

Tom Spiro: One moment, please while we poll for your questions.

Operator: Our first questions come from the line of Tom Spiro with Spiro Capital. Please proceed with your questions Hey, Tom Spiro Spiro capital good afternoon.

Tom Spiro: Tom Spiro, Spiro Capital. Good afternoon. Good afternoon, Tom.

Tom Spiro: Hey, good afternoon Tom.

Tom Spiro: Richard you often mentioned that your view our location gives us a strategic advantage.

Richard W. Heo: And I wasn't clear to me, whether you mean strategic advantage just for large pad projects to Russia, small small scale fab or even the service businesses, where we originally advantage.

Richard W. Heo: Well, I think it's all of the items that you've outlined, it's both small-scale fabrication, obviously our services business benefits from the close proximity of where we fabricate and ship our fabricated materials, but what we're alluding to is mostly larger fabrication projects, especially around water access and close proximity to some of these large capital projects that we've talked about in Louisiana and Texas.

Richard W. Heo: I think it's all of the.

Richard W. Heo: The outlines that are the items that you outlined it's.

Richard W. Heo: Small scale fabrication, obviously, our services business has.

Richard W. Heo: We've talked about in Louisiana, and Texas sure.

Speaker Change: Well, thanks, and on the services side, we seem to be doing quite well offshore with our traditional customers and that's great. No complaints here are we making any progress in expanding into the onshore opportunities.

Tom Spiro: We are but we're being strategic and concerted in that effort.

Richard W. Heo: Because of the.

Richard W. Heo: The challenges with getting labor so what we're looking for opportunities, where we can get substantial amount of scale and consistency of work.

Richard W. Heo: Rather than project specific work were buoyed by the volatility of site.

Richard W. Heo: Cycles of projects going up and down and so we are being more concerted and.

Tom Spiro: Is labor as difficult an issue today as it was, say, a year ago?

Richard W. Heo: Expansion efforts on onshore.

Richard W. Heo: As labor is difficult to issue today as it was say a year ago.

Richard W. Heo: Absolutely, I think the labor today is probably as difficult or maybe even worse than it was a year ago.

Speaker Change: Absolutely I think I think the labor today is probably as difficult or maybe even worse than it was a year ago Wow Wow.

Tom Spiro: Wow, wow, and just a couple of housekeeping items on ships, just to be sure I understand. We've now received final acceptance of all the vessels. They've all been final accepted, is that right? That's correct. That's great. And the warranty claims, have any been filed, or are we aware of any warranty claims that are appending?

Tom Spiro: And just a couple of housekeeping items on ships just to be sure I understand we've now received final acceptance of all the vessels.

Tom Spiro: And finally accepted is that right.

Tom Spiro: That's correct that's great and then the warranty claims have any been file nor are we aware of any warranty claims that are pending.

Richard W. Heo: Nothing material, Tom. Okay, okay.

Tom Spiro: Okay. Okay. Okay. This is most helpful. Thank you.

Tom Spiro: Nothing material Tom Okay. Okay. Okay. This is most helpful. Thanks a lot.

Tom Spiro: Thank you.

Tom Spiro: Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Operator: I am showing no further questions in the queue I'd like to hand, the call back over to Richard for any closing comments.

Richard: In closing I want to thank our customers and shareholders for their continued support as well as recognize our employees who continue to demonstrate our commitment to Gulf Island success for those on the call. Thanks again for your interest in Gulf Island. During the second quarter, we will be attending the Sidoti micro.

Richard W. Heo: Cap conference on May 9th in the North North Northland Investor Conference on June 25th.

Richard W. Heo: If we're not able to connect at either of these events I look forward to speaking with you on our next conference call and updating you on our progress be safe and take care.

Operator: Thank you. This does conclude the Gulf Island conference call. Thank you, and goodbye.

Speaker Change: Thank you. This does conclude the Gulf Island Conference call. Thank you and goodbye.

Q1 2024 Gulf Island Fabrication Inc Earnings Call

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