Q1 2025 Gulf Island Fabrication Inc Earnings Call
Speaker Change: Good afternoon ladies and gentlemen. I welcome to Gulf Island's conference call to discuss first quarter 2025 results. All participants will be in a listen only mode for the duration of the call.
Speaker Change: This call is being recorded. At the sign, I would like to turn the floor over to Miss Cindi Cook for opening remarks. Cindi, please go ahead.
Speaker Change: A replay of today's call will be available on our website after 7 p.m. this evening.
Speaker Change: Please keep in mind that the press release and certain comments on this call include forward-looking statements, and actual results may differ materially.
Speaker Change: 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 kin take and subsequent SEC filings.
Speaker Change: 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. gap.
Speaker Change: 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: Today, we have Mr. Richard Heo, President and CEO , and Mr. West Stockton, Executive Vice President and CFO . Mr. Heo. Thank you, Sandy.
Cindi Cook: Good afternoon everyone 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 in your families are continuing to stay healthy and safe.
Speaker Change: During today's call, I'll provide key takeaways from the quarter, a review of in-market trends and an update on the progress we've made on our strategic initiatives, including our recent agreement with In-Global Corporation.
Cindi Cook: West will then discuss our first quarter results in greater detail and provide an update on our outlook for 2025. We'll then open up the call for questions and in with closing remarks.
Cindi Cook: Our fiscal 2025 got off to a strong start, as the strategic actions we have undertaken in recent years enabled us to deliver solid first quarter results despite the growing macroeconomic uncertainty.
Cindi Cook: We generate a revenue of $40 million and adjust a $4.5 million, driven by small scale fabrication activity.
Cindi Cook: While our small scale fabrication and services business provide a more stable base of revenue, we're not completely immune to macro headwinds.
Cindi Cook: During the first quarter, reductions in capital spending by our offshore services customers negatively impacted our services business, and we're seeing an impact on the bookings of our short term, small scale fabrication.
Cindi Cook: Importantly, we remain committed to our strategic framework and made important progress against these key priorities during the first quarter that will position us for continued success as we move past the near-term macro uncertainty caused by trade headwinds.
Cindi Cook: As a reminder, our strategic priorities are focused on pursuing profitable growth, maintaining strong execution and operating efficiency, and strategically deploying capital with a focus on driving shareholder value.
Cindi Cook: Some of our accomplishments during the first quarter were as follows.
Cindi Cook: First, we continue in our pursuit to grow and diversify our services business through further investments in our cleaning and environmental services business.
Cindi Cook: Remain Optimistic regarding the opportunities in the market and believe we are well positioned to succeed as decommissioning activities in the Gulf pick-up.
Cindi Cook: 2nd, we remain disciplined in our financial management and took the opportunity to return capital through our share repurchase program.
Cindi Cook: And lastly, we made the strategic decision to enter it into a financing arrangement and ultimately enter into an agreement to purchase assets from angle global corporation.
Cindi Cook: I'd like to take some time now to provide board detail on our transaction within global and provide an overview of the strategic benefits we expect to realize from the deal.
as we have discussed.
Cindi Cook: In early March, we entered into a debtor and possession credit agreement as a lender with Anglo-Ber Corporation.
Cindi Cook: The agreement provided for advances of $2.5 million to englobals during their bankruptcy process. R&10 was to use the dip financing as an opportunity to evaluate the potential acquisition of certain assets from englobals.
Cindi Cook: We have been familiar with Inglable business for many years and have always felt these assets could be a strategic fit for Gulf Island.
Cindi Cook: During the first quarter, we made advances of approximately 1.2 million to Inglable and in April we funded the remaining amount of our commitment.
Cindi Cook: In April , we also assumed a loan of 2.4 million from a creditor of Inglobal in exchange for a 1.5 million cash payment, bringing our total capital commitment to $4 million.
Cindi Cook: On April 25th, our stock stocking horse bid and the amount of our dip financing was announced as the winning bid for certain assets of Inglable, including its automation, engineering and government businesses, and we expect to close on the acquisition in the second quarter.
Cindi Cook: In Global's Automation Business, represents the most significant operation of the businesses we are acquiring and generate a revenues of approximately 10 million for 2024.
Cindi Cook: This business provides engineering, design, fabrication, and an integration of industrial automation systems to the oil and gas, renewable energy, and power industries, which coupled with our fabrication business can provide capacity, growth, opportunities.
Cindi Cook: The engineering business provides various engineering solutions to the oil and gas and renewable energy industries and helps to complement our Fabricating Services business by providing additional know-how and expertise.
Cindi Cook: And finally, the government services business provides in global engineering and automation solutions to federal, state and local governments and education institutions generally in the form of technical field services and will open up new and markets for Gulf Island existing business.
Cindi Cook: We believe the acquisition will provide several strategic benefits, including further diversifying our business into new end markets.
Cindi Cook: Increasing the overall value of our existing offerings and adding a strong bench of both craft and professional workforce to our company.
Cindi Cook: While the transition will take time, and the acquisition is not expected to contribute positively to our operating results during 2025, we are excited by the potential overall value creation for the combination of the businesses.
Now turning back to our crime business.
Cindi Cook: As we look at the remainder of 2025, the market outlook has become more difficult to forecast due to the macroeconomic uncertainty, including trade policies.
Cindi Cook: As we look at our Fabrication business, we remain well positioned strategically and continue to be optimistic regarding the long-term outlook in our markets.
Cindi Cook: However, we are experiencing extended decision cycles for new project awards due to market uncertainty, even for our small scale fabrication.
Cindi Cook: While we had been encouraged by the pickup and dialogue with customers in the fourth quarter of 2024 and into the early parts of 2025, particularly in the LNG market, the trade-related macro uncertainty is delaying decisions for all types of fabrication projects.
Cindi Cook: That said, longer term, we remain optimistic as the favorable structural drivers for the fabrication market remain in place, and we remain well positioned to when as projects eventually move forward, especially in an environment where there is a push for more domestic supply.
Cindi Cook: Looking at our services business, while the project delays impacting our service's activity are subsiding, our customers are targeting lower overall capital spending levels in the Gulf of America in 2025 as a result of lower demand for crude and the resulting lower margins for customers.
Cindi Cook: This coupled with the trade uncertainty has many of our customers holding back spending.
Cindi Cook: While we expect lower activity near-term, we'll continue to invest in expanding and diversifying our services offering. Our cleaning and environmental services business is being to see increased volume as decommissioning activity gains momentum and spark safety has started to pick back up.
Cindi Cook: Despite our solid first quarter results, we expect the remainder of 2025 to be challenged based on the previously mentioned economic headwinds and expected losses from Inglobal, as the business transitions out of bankruptcy and is integrated into our existing operations.
while we are disappointed by the near-term outlook.
Our Disciplined Financial Management and Impses on Preserving Financial Flexibility
Cindi Cook: has enabled us to maintain a strong financial position and puts us in the inviable position of being able to continue investing in our growth strategy.
and potentially take advantage of market opportunities.
caused by the uncertainty.
Cindi Cook: Our capital allocation framework will continue to prioritize investing in the business as we have done in the past by adding service lines organically, including hiring key personnel to help us drive growth in our existing services and penetrate UN markets.
Cindi Cook: Balance with the pursuit of acquisition opportunities such as Inglable and other capital return opportunities.
Cindi Cook: We're fortunate to be operating from a position of strength, heading into a period of economic uncertainty and remain committed to our strategic framework and driving value for our shareholders.
Cindi Cook: I will now turn the call over to us to discuss our quarterly results in greater detail.
Wes Stockton: Thanks Richard, good afternoon everyone. I will discuss our consolidated results and then provide some additional details regarding our segment performance.
Wes Stockton: Putting in context, the factors mentioned by Richard and their impacts on the Quarer. I will then conclude with the discussion of our liquidity and full your financial outlook.
Wes Stockton: Now turning to our quarter results, consolidated revenue for the first quarter 2025 was 40.3 million compared to 42.9 million for the first quarter of last year.
Wes Stockton: The year over year decline was driven by lower services activity, partially offset by growth and fabrication.
Wes Stockton: I just have to consolidate the EBITDA with 4.5 million for the first quarter 2025, up from 3.7 million for the first quarter 2024.
Wes Stockton: Adjusted EBITDA for the first quarter, 2024 excludes a gain of 2.9 million for the Fabrication Division related to the sale of excess property and income of approximately 300,000 for our Farmers Shipyard Division.
Wes Stockton: Specifically for our services division, Revenue for the first quarter 2025 was 19.99, a decrease of 22% compared to the first quarter of last year.
Wes Stockton: Services EBITDA for the first quarter of 2025 was 2.1 million or 10.4% of revenue compared to 3.3 million or 13.1% of revenue for the prior year period. With the decrease primarily due to lower revenue, a less favorable project margin mix.
Wes Stockton: and ongoing investments associated with the startup of the division's cleaning and environmental services offering.
Wes Stockton: For our Fabrication Division, Revenue for the first quarter of 2025 was 20.7 million an increase of 21 percent compared to the first quarter of last year, with the increase primarily due to higher small-scale fabrication activity.
Wes Stockton: Fabrication Adjusted EBITDA for the first quarter 2025 to 4.5 million compared to 2.5 million for the prior year period.
Wes Stockton: Justin Ibidot for the first quarter of 2024 excludes the previously mentioned gain related to the sale of excess property
Wes Stockton: The increase in adjusted operating results for 2025 compared to 2024 is primarily due to higher revenue, a more favorable project margin mix, and improved utilization of facilities and resources associated with the increased small scale fabrication activity.
Wes Stockton: and for a corporate division, EBITDA was a loss of $2 million for the first quarter 2025 compared to a loss of $2.1 million for the prior year period.
Thank you.
Wes Stockton: With respect to our liquidity, we ended the first quarter with a cash and short-term investments balance of over 67 million consistent with our balance at your end as the benefit of our operating results for the current quarter were partially offset by working capital increases.
Wes Stockton: Dip Advances related to the Anglobal Transaction, Capital Expenditures, and the repurchase of approximately 600,000 of our common stock and our share repurchase program.
Wes Stockton: In April , we purchased an additional 1.1 million of our common stock, and as of April 30, we had remaining authorization to purchase approximately $2 million of our common stock under our share repurchase program, which expires in December 2025.
Wes Stockton: At March 31st, our debt obligation totaled 19 million and our annual payments of principal and interest of approximately 1.7 million will be made in December of each year over the remaining 14-year term of the obligation.
Wes Stockton: Our cast balance and the long duration of our debt puts us in a strong liquidity position and provides significant flexibility to pursue our growth objectives and evaluate opportunities to return capital to our shareholders.
And finally, turning to our Outlook for 2025.
Wes Stockton: As Richard discussed, while we generated strong first quarter results, the ongoing trade and macro uncertainty is pushing out project award decisions across our fabrication business.
Wes Stockton: While lower capital spending by our customers in the Gulf is continuing to put pressure on our results for our services segment
Wes Stockton: As a result, while we expect to remain profitable, we anticipate a significant decline in our second quarter results compared to the first quarter.
Wes Stockton: are pretty results for the back half of the year are difficult to predict [inaudible]
Wes Stockton: Due to the previously mentioned factors which may impact the timing of potential fabrication project awards, so at this point we are not assuming any rebound from the expected second quarter trend.
Wes Stockton: Further, we believe we may incur operating losses of approximately 1 to 2 million during the 6 to 12 month period after the acquisition of the Anglobal business as it transitions out of bankruptcy and we integrate it into our existing operations.
Wes Stockton: While the challenges created by the trade uncertainty are frustrating, our strong financial position provides us the flexibility to continue executing on our strategic plan.
Wes Stockton: We remain encouraged by the long-term outlook for Gulf Island, including the opportunities as we integrate the inglobal business.
Wes Stockton: This concludes our prepare remarks. Operator, you may now open the line for questions.
Thank you.
Speaker Change: Ladies and gentlemen, if you would like to ask a question, please put press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press start too if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before
Speaker Change: And a first question comes from the line of Martin Malloy with Johnson Race, please proceed.
Martin Molloy: Good afternoon. Thank you for taking my question. First question on the in global business union acquisitions. Could you maybe talk a little bit more about the customer base? I remember
Yeah, that's a good question, Marty.
Marty: Surprisingly, there is a lot of duplicity in the customers that we serve and in the global serves, but the important kind of disc-
Marty: Distinction is that in global serves a lot of the customers on the onshore types of projects whereas you know our customer base is offshore so you know I think that gives us some broader reach with these key large operators.
Marty: Power, Plant, type operators, and also data center construction companies for the automation and
Marty: Integration of System, Hardware and so forth. So, you know, it does give us now additional reach into different and markets that has been one of the strategic kind of pushes that we've been making for in the past, you know, four or five years. And then finally, the government.
Marty: Technical Services Business opens up that brand new end market as well for us.
Okay.
Marty: And just on the tariff situation, are you seeing, and you talked about, you know, some seeing some delays and products game pushed out the decisions on them?
Are you seeing any customers?
Marty: or potential customers inquire about the fabrication capabilities of Gulf Island that maybe they were thinking previously about going.
Marty: to countries abroad for their fabrication, and now they're maybe looking at switching to a domestic provider to...
Take away some of the uncertainty.
Marty: L&H Projects, for example, had material supply from Mexico and China.
Marty: as you can imagine with the uncertainty around terrorists and freight and all of the other factors that impact that overall cost.
Marty: and potentially scheduled, you know, certainty. Now, Gulf Island and the domestic supply starts to look more favorable, right? And so we are having those conversations.
Marty: Unfortunately, the fact of the matter is, everything's just conversations right now and everything's on pause because of just the trade uncertainties.
Marty: I'm hoping that it's a short-term impact and as we settle in on whatever that tariff is going to be and have some certainty these projects will get released and hopefully Gulf Island can start executing on some of these projects going forward.
Okay, and the delays in the LNG projects
Speaker Change: Is it related to having difficulty getting a handle on the cost or is it taking in your estimation of taking longer to get the off-take agreement signed or anything else?
Particularly driving it.
Speaker Change: and they're in the process of execution and so it's the projects that, again, have broken ground and they're in material kind of purchase type situations that we're talking about. The projects where it's still off-take agreements being discussed, obviously you're seeing delays there as well, but we're not impacted by that because of just the timing.
Okay, great. Thank you. I'll get back in cue.
Thank you.
Speaker Change: Ladies and gentlemen, there are no further questions at this time. I'd like to turn the call back to Mr. Richard Heo for closing remarks.
Speaker Change: In closing, I want to thank our customers and shareholders for their continued support, as well as recognize their employees who continue to demonstrate a commitment to Gulf Island's success.
Richard Heo: for those on the call. Thanks again for your interesting Gulf Island. If you're not able to connect during the quarter, I look forward to speaking with you on our next conference call and updating you on our progress. Be safe and take care.
Richard Heo: This concludes the Gulf Island conference call. Thank you and goodbye.