Q1 2025 Great Lakes Dredge & Dock Corp Earnings Call
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Speaker Change: Good day, and thank you for standing by. Welcome to the Q1 2025 Great Lakes Dredge & Dock Corp earnings conference call. At this time, all participants are in listen only mode.
Speaker Change: 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 1-1 on your telephone. You will then hear an automated message as advising that your hand is raised.
Speaker Change: To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Eric Berge, Vice President of Investor Relations, The Floor's Yours.
Eric Burge: Thank you, Gerald. Good morning and welcome to Great Lakes Dredge & Dock's First Quarter 2025 Results Conference Club.
Speaker Change: Joining me on the call this morning is our President and Chief Executive Officer, Lasse Petterson.
Speaker Change: And Chief Financial Officer, Scott Kornblau. Lasse will provide an update of the events of the quarter, then Scott will continue with an update on our financial results for the quarter. Lasse will conclude with an update on the outlook for the business and market. Following their comments, there will be an opportunity for questions.
Speaker Change: Hearing this call, we will make certain forward-looking statements to help you understand our business. These statements involve a number of risks and uncertainties than other factors that could cause actual results to differ materially from our expectations.
Speaker Change: Certain risk factors and herring in our business are set forth in our filings with our Secretaries of Change Exchange Commission.
Speaker Change: During the call, we will refer to certain non-GAF measures, including Adjusted EBITDA, which are explained in the net income to Adjusted EBITDA reconciliation attached to our earnings release, and posted on the Investor Relations website.
Lasse Petterson: along with other certain operating data. With that, I will turn the call over to Lasse Petterson.
Thank you, Eric.
Lasse Petterson: Following strong financial results in 2024, Great Lakes started 2025 with a great first quarter driven by a high acid utilization and strong project performance. Executing complex poor deepening and coastal restoration projects, leveraging the capabilities of our extensive fleet.
Lasse Petterson: We ended the quarter with a revenues of $242.9 million and adjusted the bidar of $60.1 million.
Good results also come from safe operations.
Lasse Petterson: In the first quarter of the year, we had zero recordable injuries, a testament to the strong safety culture we have in Great Lakes.
Lasse Petterson: Safe work is a core value in our company and we firmly believe also good safety is also good business.
Lasse Petterson: Adredging backlog remains strong, at 1 billion, with capital and coastal protection projects accounting for 95% of the backlog, plus an additional 265 million in low-bids and options
Lasse Petterson: Our successful bid strategy from last year resulted in a number of large product wins.
Lasse Petterson: and a Quality Backlog which will support high acid utilization and a solid revenue year for the remainder of 2025, as well as providing a good base and revenue versibility for 2026.
Lasse Petterson: After the quarter ended, we received notice to proceed on the Woodside Louisiana LNG project.
Lasse Petterson: The award award will be added to our backlog in the second quarter along with two options that will be added to our options pending award.
Dredging Operation are expected to commence early 2026.
Lasse Petterson: This along with a two current LNG projects that started Dredging activities in the third quarter in 2024 are capital projects which fit well with a core strength to perform large and complex projects.
A strong 2024 and first quarter of 2025 results.
Lasse Petterson: Contributed to a Board of Directors approving in March a $50 million share of repurchase program. As we believed, our share price did not reflect the company's financial performance and long-term outlook.
Lasse Petterson: As of April 30, we are repurchased 1.2 million shares with a total spend of 10.4 million under this program.
Lasse Petterson: And post-quarter and we upsized our revolving credit facility to 330 million, which Scott will provide more details on later.
Lasse Petterson: Moving on to our new build program, our newest Hopper Dredge, the Amelia Island, is expected to be delivered in the third quarter of this year and will go straight to work on projects already in backlog.
Lasse Petterson: The Amelia Island and her sister ship, the Galveston Island, have been carefully designed.
Lasse Petterson: for shallow and narrow waters along the U.S. coastlines. And our efficient tools for us to work on coastal protection projects such as beach restoration, wetlands improvements and barrier island construction.
Lasse Petterson: The Arcadia, the first U.S. flight, Jones Sackam, compliance, subsea rock installation vessel, is also current the construction with a scheduled delivery in first quarter next year.
Lasse Petterson: The target markets for the Acadia include domestic and international offshore wind projects as well as projects protecting critical, subsea infrastructure such as oil and gas pipelines and power and telecommunication cables.
Lasse Petterson: I now turn the call over to Scott to further discuss the results of the quarter, and then I provide further commentary around the market and our business.
Thank you, Lasse. Good morning, everyone.
Lasse Petterson: Revenues of $242.9 million in the first quarter of 2025 increased $44.2 million from the prior year's first quarter as every active Dredge was working for the majority of the quarter.
Lasse Petterson: Despite having one Dredge in the shipyard for half the quarter performing her regulatory dry dock, and two others beginning the regulatory dry dock later in the first quarter, the first quarter of 2025 was the second highest revenue quarter in company history. Thank you very much.
Lasse Petterson: Current quarter growth profit and growth profit margin increased to $69.5 million and 28.6% respectively compared to $45.6 million and 22.9% respectively in the first quarter of 2024.
Lasse Petterson: The increase in gross margin is primarily due to improved utilization and project performance and a larger number of capital and coastal protection projects which typically yield higher margins.
Lasse Petterson: during the first quarter of 2025, over 87% of our revenue came from these types of projects.
Lasse Petterson: Current quarters operating income of $49.9 million increased over 58% compared to the prior year's quarters operating income of $31.5 million.
Lasse Petterson: The year-over-year increase is driven by higher gross profit, partially offset by higher general and administrative expenses, mostly due to increased incentive compensation, resulting from the strong current year-first quarter.
Lasse Petterson: Net interest expense of $4.5 million for the first quarter of 2025 was up from $3.9 million in the first quarter of 2024.
Lasse Petterson: Primarily due to interest on the second-ling credit agreement entered into during the second quarter of 2024 partially offset by decreased borrowings under our revolver.
First quarter, 2025.
Lasse Petterson: Net income tax expense of $11.7 million increased from $7 million in the same quarter of 2024 due to the improved results and net income for the first quarter 2025 was $33.4 million compared to $21 million in the prior year's quarter.
Lasse Petterson: Total capital expenditures for the first quarter were $11.4 million, made up of $2 million for the Hopper Dredge & Melia Island.
Lasse Petterson: $3.9 million for the Subsea Rock Installation Vessel of the Acadia, with the remaining $5.5 million coming from maintenance and growth. Our previous full-year capex guidance of between $140 and $160 million remains unchanged.
Lasse Petterson: Turning to the balance sheet, we ended the quarter with $11.3 million in cash and nothing's drawn on our revolver, which doesn't mature until the third quarter of 2027.
Lasse Petterson: And as Lasse mentioned earlier, on May 2nd, we executed an amendment to our credit facility, upsizing our revolver by $30 million to $330 million, further enhancing our liquidity which now stands above $300 million.
Lasse Petterson: Our balance sheet is in great shape with a trailing 12 month net leverage ratio of 2.7 times a weighted average interest rate on our total debt under 7 percent and no debt maturities until 2029.
Lasse Petterson: As our new bill program will be substantially complete at the end of this year, we expect to be cash flow positive starting in 2026.
Lasse Petterson: As I discussed on the year end earnings call, 2025 is a heavier than normal regulatory dry dock year for us and the second quarter will be most impacted as we will have four vessels at the dock at various times which will result in lower revenues than the first quarter.
Lasse Petterson: Utilization will remain strong on the other vessels and we should see another solid quarter.
Lasse Petterson: Our expectation is that full year 2025 results will exceed 2024, which was the second highest in company history. With that, I'll turn the call back to Lasse for his remarks on the outlook moving forward.
Thank you, Scott.
Lasse Petterson: The Trump Administration and Congress continue to demonstrate strong and consistent support for the Dredging Industry.
Lasse Petterson: The U.S. Army Corps of Engineers is operating in fiscal year 2025 under a continued resolution through September 30th, which sustains the record funding levels established in the prior fiscal year's budget.
Lasse Petterson: This support, along with our $1 billion backlog, which includes a robust mix of large and complex projects in the beach's reimbursement and poor deepening markets, enable us to continue to deliver on a very busy 2025.
Lasse Petterson: with sustained execution capacity and product visibility extending well into 2026.
Lasse Petterson: We expect the 2025 bid market to be a normalized volume of approximately 2 billion.
Lasse Petterson: More focused on coastal protection projects funded by the 2023 disaster relief supplemental appropriation act and regular maintenance dredging, coming off a very strong poor deepening bid market in 2023 and 2024.
Lasse Petterson: Turning to the offshore wind market. In April , we saw a temporary pause on the Crenors Empire Wind One project, which currently is included in our offshore energy backlog.
Lasse Petterson: while the duration and impact of the temporary pause for the project are not known at this time.
Lasse Petterson: We remain in regular contact with a client Equinoir, who is evaluating further steps.
Lasse Petterson: Last year, recognizing early signs of potential delays in the US offshore wind market.
We proactively adjusted our strategic outlook.
Lasse Petterson: for the Arcadia to include international markets in the UK, in EU and in Asia.
Lasse Petterson: For a show-in project, as well as for rock protection for critical subsea infrastructure such as oil and gas pipelines and power and telecommunication cables.
Lasse Petterson: Caving the way for the expansion of our offshore wind business into the broader range of service of brains that we now refer to as offshore energy.
Lasse Petterson: In conclusion, building our strong performance in 2024, the company entered 2025 with a significant momentum, achieving our standing results in the first quarter.
This success is a result of excellence, safe project execution.
Lasse Petterson: the strength of our modernized fleet and a robust backlog. And with our strong first quarter, solid liquidity to support the remainder of our new bill program on going strategic initiatives, be a well-precision for the future. And with that also on the call over for questions.
Thank you.
Speaker Change: At this time, we will conduct the question and answer session.
Speaker Change: As a reminder to ask a question, you will need to press Star 1-1 on your telephone and wait for your name to be announced. To draw your question, please press Star 1-1 again. Please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from Joe Gomes, of Noble Capital, the floor is yours.
Good morning, congrats on the quarter.
Okay, thank you Joe. Good morning.
Speaker Change: So I just wanted to touch base the Equinor Project, Empire One.
Speaker Change: Kind of just spit-balling, worst-case scenario here, the project falls by the wayside.
Speaker Change: Just wondering when did Equinor have contracted out time for the Acadia and how quickly can you
Speaker Change: You know, refill though that time that would have gone to Equinor again in a worst-case scenario type of situation.
Speaker Change: Well, first of all, the Equinoir is in contact with the Trump Administration and to verify the situation on the project.
that just starting the offshore construction activities with the...
Speaker Change: with this monopiles also on its way and also with rock installation already started.
Speaker Change: So the stop on the project or the temporary stop on the project was a very large surprise for everybody. So Equinor is now reached out to the Trump administration to try to see what is the issue and get that clarified.
Speaker Change: and that is what we know at this point in time.
Speaker Change: Right. I guess I'm more kind of, again, you know, if it was a worst case scenario on the project got cancelled for whatever reason, not anticipating that. But if it did, you know, how quickly do you think you can repurpose?
Speaker Change: that time slots that the Acadia is currently under contract to work for Equinor.
Speaker Change: Yeah, the best will come out of the yard in 2-1 next year and the plan was then to go straight to work on the Empire win one project.
Speaker Change: It will be difficult to fill that time slot with other projects, but there is also a plan during 26 to work on the the projects for Ersted.
Speaker Change: There are cancellation arrangements in the contract, so the worst scenario if the project gets cancelled, we will let Scott do the details but we have a cancellation piece in that contract that will.
Speaker Change: That will take care of some of the costs that we incur on the problem.
Speaker Change: Yeah, and Joe, I'm not going to get into the details of the termination, but obviously we can't with this contract. I will remind you, when the other contract we had last year was terminated, we did.
Speaker Change: get roughly $9 to $10 million out of that, so termination provisions within these contracts are not unusual.
Speaker Change: Okay. Again, I'm just spitball and worst case scenario. Hopefully, you know, we're able to, Equinoe is able to figure out whatever the Trump administration is.
You The Best Outcome
Speaker Change: Yeah, and Joe, sorry, I'll also add, yesterday the Attorney General of New York, along with a number of other states, have also put in a formal challenge to the current interpretation that these fully permitted projects should continue as planned, so we'll see how it all plays out.
Thank you.
Speaker Change: And Lasse, you talked about about a two billion market you'd think for this year to just wanderings.
Speaker Change: You know, given that we had that continuing resolution for a while and I guess we're kind of operating under a full year continuing resolution, you know, just wondering what the pace of awards that you've seen so far here year to date.
Speaker Change: Yeah, the year has been slow when it comes to a new poor deepening projects. Fortunately for us we had in our...
Speaker Change: in our low beds and not yet awarded the Woodside LNG project which is coming through, which is great news for us.
Speaker Change: Restoration Projects that we have a visibility to because they were funded back in 2023.
Speaker Change: So those projects which are large and complex will come out a bit now in Q2 and Q3.
Speaker Change: And then we expect the maintenance market to be strong this year as you know we prefer to do the poor deepening projects and the coastal restoration projects because that's where we excel.
Speaker Change: but we also do a number of maintenance projects when we...
when those are coming out a bit.
Speaker Change: And Joe, you know, the first quarter of Lasse said, yeah, it was a, you know, slower big market, but that's not unusual, you know, as you know, it's the middle two quarters that have the most activity. So we did not see an impact from the continued resolution, you know, everything that we expected to come out in the first quarter did and our expectation is, you know, Q2 and Q3 will also play out like that. [inaudible]
Speaker Change: Okay, great. And then just one more for me. You know, the competitive environment given where we are. Are you seeing any increase in the competitive environment? It's kind of stayed similar to, you know, when it has to work. He's gone.
Speaker Change: It's similar to what it has historically been. We have seen some dredges that has been taken out of operation and then we have new bills that have come to the market.
Speaker Change: from other competitors and as I said on the call we are getting the Amelia out now this year but she was so straight to work so we are in good shape and
Speaker Change: I could also say that given the fact that we are fully booked here this year, we are selected with a bit of opportunities that we are targeting.
Speaker Change: Great, congrats again on the quarter. Thanks, I'll get back in queue.
Thanks. Thank you for your question.
One moment, please.
[inaudible]
Speaker Change: Our next question comes from Adam Thalhimer from Thompson Davis, The Floor's Yours.
Adam Thalimer: Hey, good morning guys, great court. I didn't even know 243 million of revenue was possible, so congratulations.
You ready to go?
Speaker Change: Quick question on the woodside job. Are the options already in low bid pending or just a base work?
Speaker Change: Yeah, so the the base was in low bid pending that will now go into backlogging Q2. The options were not in low bid pending so that will get added in in the second quarter.
Speaker Change: Got it, okay. And then Scott, can you just give a quick update on the two LNG jobs that are on going how those are going and an update on when they're projected to wrap up?
Speaker Change: Yeah, I mean, you know, we've been saying all along, this is the kind of work we like to do, these very large complex projects.
Speaker Change: They have high margins and we have historically outperformed even how we anticipated doing and these two projects are no exception. Our team is killing it on both projects.
Speaker Change: One of them should wrap up right at the end of the year, the larger one Rio Grande, that goes well into next year.
Speaker Change: Got it and then lastly for me maybe just an update on the international conversations you're having for the rock fall vessel, how those are going.
Speaker Change: Yeah, we have very good, we are very well received by the developer in Europe and as I said last year we saw a slowing down in the US potentially coming in 27-28 and so we started our business development activity.
Speaker Change: in Europe and in Asia, early, and we are having a number of bids outstanding in that market.
Speaker Change: The market is more mature than what we have here in the U.S., so the lead time between bidding and also the awards is shorter.
Speaker Change: So we are now bidding for work in 27 and 28 in Europe and I'm very optimistic with that coming to a positive conclusion, but probably not prior to awards until the latter half of this year.
Got it. Okay. Thank you both. Talk to you soon.
Thank you, Adam. Thank you for your question.
One more please.
Julio Romero: Our next question comes from the line of Julio Romero from Sedotti & Company. The floor is yours.
Julio Romero: Great, thanks. Morning, Lasse Scott and Eric. Thanks very much. You know, really strong performance this quarter across the board.
Julio Romero: Can you quantify the dry dock effect if any in the first quarter and then before dry docks that are expected in the second quarter? How many are hopper Dredges and was the first quarter dry dock also hopper? Dredge
Julio Romero: Yeah, so the one that was in and out during the quarter, so it was down for a little more than half the quarter, that was a hopper.
Julio Romero: Moving forward to the second quarter there is one hopper that will be down for most of the quarter performing her dry dock and then the three others in the second quarter they're not hoppers. I'm not going to give an exact dollar impact of the dry dock and Q1 was somewhat of a normal dry docking, you know, having one down for most of the quarter and then another two starting but, you know, the difference this year.
Speaker Change: We are pulling vessels off of jobs because of all the backlog we have so it's not hypothetical revenue that's lost. It is real revenue and then the cost of the dry dockings.
Speaker Change: You know a typical dry dock is somewhere in that 60 day period and the cost of the dry dock itself again depending on what you have to do you know it could be in the you know three five six million dollars and then you take the revenue off the added it is impactful that's why I pointed out you to will be the most impacted and then you know hopefully that the second half looks lighter on the dry dock schedule [inaudible]
Speaker Change: Really helpful. I appreciate that there. I'm just trying to think about the second quarter because we're coming off such a strong.
First quarter base, right? And I'm I'm just looking at
You know, how do we think about the gross margin?
Should that be the low point of the year, for...
Twenty-five.
Speaker Change: Yes, second quarter should be the lowest on revenue and on margins and then it'll look a lot more normalizing, second half of the year.
Speaker Change: Okay, great. And, you know, I was hoping you could just talk a little bit, you know, high level about your tariff exposure and, you know, while you have a large percentage of your revenues come from publicly funded contracts, you know. You know, we've heard some other companies talk about, you know, but...
Speaker Change: Index Pricing in Publicly Funded Contracts that sometimes can help. I was wondering if you have any index pricing within your contracts.
Speaker Change: Yeah, well, and let me hit the tariff question first, and I'll probably answer the second. So yes, as a US Jones Act company, we purchased most of our supplies and equipment here in the US. The very little is purchased overseas.
Speaker Change: The impact so far in this first quarter was immaterial. We don't expect it to change moving forward.
Speaker Change: That being said, we have identified some of the larger items that we do procure.
Speaker Change: Internationally, and we're actively looking to see if we can source it here in the US or from...
Country that have lower tariffs, but really don't...
Speaker Change: and anticipate a, you know, a material impact to us at all, and on our new builds, the vast majority of the equipment that was coming from overseas has already sitting here in the US and paid for, so very little exposure there as well.
Okay, great. I'll pass it on. Thanks very much
Thanks.
Thank you for your question. Our last question
One more, please, I'm sorry.
Our last question comes from John .
Tanwanteng from C.J.S. The Floor's Yours
Speaker Change: Hi guys, thank you for taking my questions and congrats on a strong quarter. I was wondering Scott, if you could break down maybe.
Yeah, I mean the-
Speaker Change: The big number was driven by the project performance on the high capital job. We did have a couple of the two dry ducts that started at the end of the quarter. They may be winning about a week each later than we expected, but really the biggest driver here was just killing it on these big projects that we have in our backlog.
[inaudible]
Speaker Change: Okay, great. Thank you. And then what's actually scheduled to liquidate in Q2 with the four dry dockings you have?
Speaker Change: What do you mean? I don't understand. I don't know the backlog that scheduled to liquidate.
in Q2.
Speaker Change: So yeah, I mean, we don't give a quarter by quarter, you know, of how much is going to burn off each quarter. I will tell you when our queue comes out later today, we do say that 60% of our backlog right now will is estimated to be burned off for the remainder of the year.
Okay. Great. Thank you. And then...
Speaker Change: I was wondering if you could talk about, you've had this strong mix of capital and coastal work.
What do you think that makes start to normalize?
Speaker Change: Number 1 and number 2, just given the volume of trade declines today with the tariff impact. Do you think that port budgets may fall in the out years and quarters if there's continued disruption there for deepening specifically?
Speaker Change: Well, if I knew all that, that would be great. Just a comment on large projects. The reason why we are...
Speaker Change: targeting the larger project is because we have this extensive fleet and once we get into swing on a large project that is going over a year or a year and a half.
Speaker Change: We can then utilize the equipment that is specifically designed for the various phases of those projects and that gives and when we
Speaker Change: Get those products, we perform very well and that gives the rise to the higher margins that we are able to realize on those projects.
Speaker Change: was very slow, if you remember, back in 2022, beginning of 2023, particularly in Florida and that market came back now in 24 and 25 and we see that also continuing going forward.
Speaker Change: Really a rush from the extension of the Panela Canal, which then triggered the savanna to start first and then it just been continuing along the coast of four deepenings.
Speaker Change: That will continue probably with the New York starting up in 27 and to deepen the New York port. That is a mega project which would go on many years.
Speaker Change: and we are also looking at new large projects in Florida and also here in the Gulf.
Speaker Change: But the visibility for those projects will probably come as we go through the latter part of this year and beginning of next year.
Thank you. Thank you.
Speaker Change: The general funding for the Corp to do Dredging comes from the Haberment Trust Fund to a large extent and those fees that are collected goes to maintenance Dredging and make sure to maintain our waterways and our ports.
Speaker Change: And that funding has been very strong as you know, we are using 100% of the annual revenues that goes into that fund is then being used for dredging and we do see that continuing.
Speaker Change: There was a comment in the President's budget for reduction in the use of the Harbourman Maintenance Trust Fund, but if you read it carefully, it says that the Trump administration is very focused on prioritizing the Dredging portion.
Speaker Change: and the funds that were being reduced was for other uses of the Hall of Endurance Trust.
Speaker Change: So, as I see it, it will be a good budget for next year with the support that we both have from the Administration and also in Congress.
Okay. Thank you.
Thank you for your question.
Speaker Change: This concludes the question and answer session. I would now like to turn it back over to Eric Burge, Vice President of Investor Relations for closing remarks. The floor is yours.
Eric Burge: Thank you, everybody. We appreciate the support of our shareholders, employees and business partners and we thank you for joining us in the discussion about the important developments and initiatives of our business. We look forward to speaking during our next earnings call. If you have any questions, please feel free to reach out.