Great Lakes Dredge & Dock Corporation (“Great Lakes” or the
“Company”) (Nasdaq: GLDD), the largest provider of dredging
services in the United States, today reported financial results for
the quarter ended June 30, 2022.
Second Quarter 2022 Highlights
- Revenue was $149.4 million in the second quarter
- Total operating loss was $0.3
million in the second quarter
- Net loss was $4.0 million in the
second quarter
- Adjusted EBITDA was $10.2 million
in the second quarter
Management Commentary
Lasse Petterson, President and Chief Executive
Officer commented, “Our second quarter results did not meet
expectations as we continue to face and navigate a challenging
environment driven by external factors including supply chain
delays, inflationary pressures, adverse weather conditions combined
with some atypical dredging project challenges.
During the quarter, three of our larger projects
encountered differing and unanticipated site conditions which
negatively impacted production. We are working to resolve the cost
impact through contractual discussions with our customers, however
revenue and profit recognition is delayed until these discussions
are finalized.
Supply chain delays impacted both the Liberty
Island’s and Carolina’s drydockings, which caused both dredges to
be delayed several weeks mobilizing to their projects. In addition,
rapidly increasing inflation impacted the cost of labor, operating
supplies, and drydockings in the quarter, which we are now
accounting for in bids
We also had several projects impacted by
unseasonably rough sea conditions along the east coast that caused
several vessels to stop operating and seek shelter, which extended
completion timelines and delayed commencement of subsequent
projects.
Finally, bids for new dredge projects did not
materialize as early as in previous years, resulting in idle time
for two dredges for part of the quarter. However, we expect bidding
to increase substantially for the remainder of the year and July is
already off to a strong start, in which Great Lakes was low bidder
on 74% of the $250 million of work that bid in the month.
As we enter the third quarter, we expect results
for the second half of 2022 to be stronger than the first, however
due to the issues encountered in the first half of the year, we do
not anticipate meeting full year expectations.
In spite of the current short-term challenges,
the outlook for Great Lakes remains strong. We continue to see
increased market demand backed by strong government support and
development of new LNG export facilities that we expect will
benefit Great Lakes and our market position in the upcoming years.
Our new build program is on schedule with the new hopper dredge,
the Galveston Island, expected to be ready for operations in the
first half of 2023 and her sister ship expected to be ready for
operations in 2025.
Our recently announced offshore wind award by
Equinor and BP solidifies Great Lakes’ entry into the U.S. offshore
wind market with a major project award for our subsea rock
installation vessel currently being built for expected delivery in
late 2024. Our goal is to contribute to building the U.S. offshore
wind industry, which we anticipate will provide an avenue for
diversification and growth for our Company.”
Quarterly Results
- Revenue was $149.4 million, a
decrease of $20.5 million from the second quarter of 2021. The
lower revenue in the second quarter of 2022 was due primarily to
lower maintenance dredging revenue, offset partially by higher
domestic capital project revenue.
- Gross margin percentage declined to
7.0% in the second quarter of 2022 from 13.5% in the second quarter
of 2021. As noted above, the delayed drydockings of the Liberty
Island and the Carolina negatively impacted gross margin. The New
York went into her regulatory drydocking in June and is expected to
remain in drydock for most of the third quarter. Gross margin was
also impacted by supply chain delays, inflationary pressures,
weather and atypical dredging project challenges.
- Operating loss was $0.3 million,
which is a $9.1 million decrease from the prior year quarter. The
decrease is a result of $12.4 million lower gross margin, offset
partially by lower general and administrative expenses compared to
the prior year second quarter.
- Net loss for the quarter was $4.0
million compared to net income of $2.1 million in the prior year
quarter. The decrease is a direct result of lower operating income,
offset partially by lower interest expense and an income tax
benefit.
- At June 30, 2022, the Company had
$75.4 million in cash and total long-term debt of $321.2
million.
- At June 30, 2022, the Company had
$373.8 million in backlog, compared to $454.4 million in backlog at
June 30, 2021.
- Capital expenditures for the second
quarter of 2022 were $39.2 million, which includes $11.7 million
for our new scows and multicats, $10.5 million for upgrades to the
Liberty Island, the Carolina, and the booster Buster, $9.0 million
for the Galveston Island build, and $2.8 million for the subsea
rock installation vessel.
Market Update
At the end of 2021 the domestic dredging bid
market reached $1.8 billion in projects bid. We expect the 2022 bid
market to be as strong as 2021 as the market continues to be driven
by the large-scale port deepening projects along the east and gulf
coasts. In 2022, we expect to see the continuation of port
deepening bids in the ports of Freeport, Sabine, Houston, Corpus
Christi and additional phases of Norfolk, and Mobile. In addition,
our nation’s coasts are subject to climate change, increasing
severe weather events, like Hurricane Ida, and sea level rise,
which can cause an increase in beach erosion and other damage that
adds to the recurring nature of our business and the need for more
frequent coastal protection and port maintenance projects.
We continue to see strong support from the Biden
Administration and Congress for the dredging industry. In July,
2022 the Senate passed their version of the Water Resources
Development Act 2022, or WRDA, which includes legislation that
authorizes about $25 billion to help finance 20 new or modified
U.S. Army Corps of Engineers (the “Corps”) projects for flood and
hurricane protection, dredging, ecosystem restoration and other
construction projects. Since the House passed their version also
recently, the legislation is expected to be conferenced and signed
into law by President Biden in short order. This is the earliest
passage of this legislation in recent history.
As of July 28, 2022, both the Senate and House
passed their respective fiscal year 2023 Corps budget proposals.
The Senate’s proposal was $8.7 billion in funding and the House’s
proposal was $8.9 billion. Prior to sending to President Biden for
his signature, the House and Senate will meet to agree on a final
amount, which will likely be another record budget for the Corps.
This increased budget and the funding from the Biden
Administration’s Infrastructure Bill support our expectation of a
strong market entering 2023.
Included in our low bids pending are two
liquified natural gas (“LNG”) projects that have been awaiting
Notice to Proceed from our clients. Several North American LNG
export projects have been delayed in the past couple of years
during the pandemic as customers were unwilling to sign long-term
deals needed to finance the multibillion-dollar projects. These LNG
projects are currently gaining momentum as Europe is re-evaluating
their sourcing of energy after the Russian invasion of Ukraine
which may require imports of large quantities of LNG. There are
currently several companies, including the two clients who have
awarded us work, targeting to make final investment decisions in
2022 to build their plants in the United States, Canada and
Mexico.
In the past year and a half, we have seen strong
support for offshore wind from the Biden Administration and we
believe the United States’ commitments to offshore wind will create
thousands of jobs, and help the U.S. transition to a more diverse
energy future. In March 2021, the White House announced new
initiatives that will advance the Administration’s goals to expand
the nation’s offshore wind energy capacity in the coming decade by
opening new areas of development, improving environmental
permitting, and increasing public financing for projects. As part
of that initiative the Departments of the Interior, Energy and
Commerce committed to a shared goal of installing 30 gigawatts of
offshore wind power generation capacity in U.S. waters by 2030.
The Company will be holding a conference call
at 9:00 a.m. C.D.T. today, August 2, 2022, where we will
further discuss these results. Information on this conference call
can be found below.
Conference Call Information
The Company will conduct a quarterly conference
call, which will be held on Tuesday, August 2, 2022 at 9:00 a.m.
C.D.T (10:00 a.m. E.D.T.). Investors and analysts are encouraged to
pre-register for the conference call by using the link below.
Participants who pre-register will be given a unique PIN to gain
immediate access to the call. Pre-registration may be completed at
any time up to the call start time.
To pre-register, go to
https://register.vevent.com/register/BI67daaed29a0246fe90aa0530f60dae6a.
The live call and replay can also be heard at
https://edge.media-server.com/mmc/p/7h9zxde8 and on the
Company’s website, www.gldd.com, under Events on the Investor
Relations page. A copy of this press release will be available on
the Company’s website.
Use of Non-GAAP measures
Adjusted EBITDA, as provided herein, represents
net income (loss) from continued operations, adjusted for net
interest expense, income taxes, depreciation and amortization
expense, debt extinguishment, accelerated maintenance expense for
new international deployments, goodwill or asset impairments and
gains on bargain purchase acquisitions. Adjusted EBITDA is not a
measure derived in accordance with GAAP. The Company presents
Adjusted EBITDA as an additional measure by which to evaluate the
Company's operating trends. The Company believes that Adjusted
EBITDA is a measure frequently used to evaluate performance of
companies with substantial leverage and that the Company's primary
stakeholders (i.e., its stockholders, bondholders and banks) use
Adjusted EBITDA to evaluate the Company's period to period
performance. Additionally, management believes that Adjusted EBITDA
provides a transparent measure of the Company’s recurring operating
performance and allows management and investors to readily view
operating trends, perform analytical comparisons and identify
strategies to improve operating performance. For this reason, the
Company uses a measure based upon Adjusted EBITDA to assess
performance for purposes of determining compensation under the
Company's incentive plan. Adjusted EBITDA should not be considered
an alternative to, or more meaningful than, amounts determined in
accordance with GAAP including: (a) operating income as an
indicator of operating performance; or (b) cash flows from
operations as a measure of liquidity. As such, the Company's use of
Adjusted EBITDA, instead of a GAAP measure, has limitations as an
analytical tool, including the inability to determine profitability
or liquidity due to the exclusion of accelerated maintenance
expense for new international deployments, goodwill or asset
impairments, gains on bargain purchase acquisitions, interest and
income tax expense and the associated significant cash requirements
and the exclusion of depreciation and amortization, which represent
significant and unavoidable operating costs given the level of
indebtedness and capital expenditures needed to maintain the
Company's business. For these reasons, the Company uses operating
income (loss) to measure the Company's operating performance and
uses Adjusted EBITDA only as a supplement. Adjusted EBITDA is
reconciled to net income (loss) attributable to common stockholders
of Great Lakes Dredge & Dock Corporation in the table of
financial results. For further explanation, please refer to the
Company's SEC filings.
The Company
Great Lakes Dredge & Dock Corporation is the
largest provider of dredging services in the United States. In
addition, Great Lakes is fully engaged in expanding its core
business into the rapidly developing offshore wind energy industry.
The Company has a long history of performing significant
international projects. The Company employs experienced civil,
ocean and mechanical engineering staff in its estimating,
production and project management functions. In its over 132-year
history, the Company has never failed to complete a marine project.
Great Lakes owns and operates the largest and most diverse fleet in
the U.S. dredging industry, comprised of approximately 200
specialized vessels. Great Lakes has a disciplined training program
for engineers that ensures experienced-based performance as they
advance through Company operations. The Company’s Incident-and
Injury-Free® (IIF®) safety management program is integrated into
all aspects of the Company’s culture. The Company’s commitment to
the IIF® culture promotes a work environment where employee safety
is paramount.
Cautionary Note Regarding
Forward-Looking Statements
Certain statements in this press release may
constitute “forward-looking” statements as defined in Section 21E
of the Securities Exchange Act of 1934 (the "Exchange Act"), the
Private Securities Litigation Reform Act of 1995 (the "PSLRA") or
in releases made by the Securities and Exchange Commission (the
"SEC"), all as may be amended from time to time. Such
forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the
actual results, performance or achievements of Great Lakes and its
subsidiaries, or industry results, to differ materially from any
future results, performance or achievements expressed or implied by
such forward-looking statements. Statements that are not historical
fact are forward-looking statements. Forward-looking statements can
be identified by, among other things, the use of forward-looking
language, such as the words “plan,” “believe,” “expect,”
“anticipate,” “intend,” “estimate,” “project,” “may,” “would,”
“could,” “should,” “seeks,” “are optimistic,” or “scheduled to,” or
other similar words, or the negative of these terms or other
variations of these terms or comparable language, or by discussion
of strategy or intentions. These cautionary statements are being
made pursuant to the Exchange Act and the PSLRA with the intention
of obtaining the benefits of the “safe harbor” provisions of such
laws. Great Lakes cautions investors that any forward-looking
statements made by Great Lakes are not guarantees or indicative of
future performance. Important assumptions and other important
factors that could cause actual results to differ materially from
those forward-looking statements with respect to Great Lakes
include, but are not limited to: the impact of the COVID-19
pandemic and related responsive measures, including productivity
impacts and increased expenditures; variances in project estimates;
our ability to obtain and retain federal government dredging and
other contracts, which is impacted by the amount of government
funding for dredging and other projects and the degree to which
government funding is directed to the Corps and certain other
customers, which in turn could be impacted by extended federal
government shutdowns or declarations of additional national
emergencies; our ability to qualify as an eligible bidder under
government contract criteria and to compete successfully against
other qualified bidders in order to obtain government dredging and
other contracts; cost over-runs, operating cost inflation and
potential claims for liquidated damages, particularly with respect
to our fixed cost contracts; the timing of our performance on
contracts and new contracts being awarded to us; significant
liabilities that could be imposed were we to fail to comply with
government contracting regulations; increasing costs to operate and
maintain aging vessels and comply with applicable regulations or
standards; increasing costs of fleet improvements to remain
competitive; equipment or mechanical failures; impacts to our
facilities and suppliers from pandemics, epidemics or outbreaks of
infectious disease affecting our markets; market or supply chain
disruptions as a result of war or insurrection; impacts to our
supply chain for procurement of new vessel build materials: our
international dredging operations; instability and declining
relationships amongst certain governments in the Middle East and
the impact this may have on infrastructure investment, asset value
of such operations, and local licensing, permitting and royalty
issues; capital and operational costs due to environmental
regulations or extreme weather events; market and regulatory
responses to climate change; contract penalties for any projects
that are completed late; force majeure events, including natural
disasters, pandemics and terrorists’ actions; changes in the amount
of our estimated backlog; significant negative changes to large,
single customer contracts; our ability to obtain potential
financing for the construction of new vessels, including our new
offshore wind vessel and two new dredges; potential inability to
secure contracts to utilize new offshore wind vessel; unforeseen
delays and cost overruns related to the construction of new
vessels, including potential mechanical and engineering issues and
unforeseen changes in environmental regulations; any failure to
comply with Section 27 of the Jones Act provisions on coastwise
trade, or if those provisions were modified or repealed;
fluctuations in fuel prices, particularly given our dependence on
petroleum-based products; impacts of nationwide inflation on
procurement of new build materials; our ability to obtain bonding
or letters of credit and risks associated with draws by the surety
on outstanding bonds or calls by the beneficiary on outstanding
letters of credit; acquisition integration and consolidation,
including transaction expenses, unexpected liabilities and
operational challenges and risks; divestitures and discontinued
operations, including retained liabilities from businesses that we
sell or discontinue; potential penalties and reputational damage as
a result of legal and regulatory proceedings; any liabilities
imposed on us for the obligations of joint ventures, partners and
subcontractors; increased costs of certain material used in our
operations due to newly imposed tariffs; unionized labor force work
stoppages; any liabilities for job-related claims under federal
law, which does not provide for the liability limitations typically
present under state law; operational hazards, including any
liabilities or losses relating to personal or property damage
resulting from our operations; our ability to identify and contract
with qualified MBE or DBE contractors to perform as subcontractors;
our substantial amount of indebtedness, which makes us more
vulnerable to adverse economic and competitive conditions;
restrictions on the operation of our business imposed by financing
covenants; impacts of adverse capital and credit market conditions
on our ability to meet liquidity needs and access capital; our
ability to maintain or expand our credit capacity; limitations on
our hedging strategy imposed by statutory and regulatory
requirements for derivative transactions; foreign exchange risks,
in particular, as it relates to the new offshore wind vessel build;
losses attributable to our investments in privately financed
projects; restrictions on foreign ownership of our common stock;
restrictions imposed by Delaware law and our charter on takeover
transactions that stockholders may consider to be favorable;
restrictions on our ability to declare dividends imposed by our
financing agreements and Delaware law; significant fluctuations in
the market price of our common stock, which may make it difficult
for holders to resell our common stock when they want or at prices
that they find attractive; changes in previous recorded net revenue
and profit as a result of the significant estimates made in
connection with our methods of accounting for recognized revenue;
maintaining an adequate level of insurance coverage; our ability to
find, attract and retain key personnel and skilled labor;
disruptions, failures, data corruptions, cyber-based attacks or
security breaches of the information technology systems on which we
rely to conduct our business; and impairments of our goodwill or
other intangible assets. For additional information on these and
other risks and uncertainties, please see Item 1A. “Risk Factors”
of Great Lakes' Annual Report on Form 10-K for the year ended
December 31, 2021.
Although Great Lakes believes that its plans,
intentions and expectations reflected in or suggested by such
forward-looking statements are reasonable, actual results could
differ materially from a projection or assumption in any
forward-looking statements. Great Lakes' future financial condition
and results of operations, as well as any forward-looking
statements, are subject to change and inherent risks and
uncertainties. The forward-looking statements contained in this
press release are made only as of the date hereof and Great Lakes
does not have or undertake any obligation to update or revise any
forward-looking statements whether as a result of new information,
subsequent events or otherwise, unless otherwise required by
law.
For further information
contact: Tina BaginskisDirector,
Investor Relations630-574-3024
Great Lakes Dredge & Dock Corporation |
|
Condensed Consolidated Statements of
Operations |
|
(Unaudited and in thousands, except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
June 30, |
|
|
June 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Contract revenues |
$ |
149,428 |
|
|
$ |
169,914 |
|
|
$ |
343,777 |
|
|
$ |
347,547 |
|
Gross profit |
|
10,481 |
|
|
|
22,922 |
|
|
|
43,536 |
|
|
|
55,998 |
|
General and administrative
expenses |
|
10,820 |
|
|
|
14,224 |
|
|
|
25,424 |
|
|
|
30,546 |
|
(Gain) loss on sale of
assets—net |
|
3 |
|
|
|
(138 |
) |
|
|
(318 |
) |
|
|
(32 |
) |
Operating income (loss) |
|
(342 |
) |
|
|
8,836 |
|
|
|
18,430 |
|
|
|
25,484 |
|
Interest expense—net |
|
(3,424 |
) |
|
|
(6,657 |
) |
|
|
(7,449 |
) |
|
|
(13,243 |
) |
Other income (expense) |
|
(1,120 |
) |
|
|
755 |
|
|
|
(1,525 |
) |
|
|
896 |
|
Income (loss) before income taxes |
|
(4,886 |
) |
|
|
2,934 |
|
|
|
9,456 |
|
|
|
13,137 |
|
Income tax (provision)
benefit |
|
853 |
|
|
|
(829 |
) |
|
|
(2,432 |
) |
|
|
(2,218 |
) |
Net income (loss) |
$ |
(4,033 |
) |
|
$ |
2,105 |
|
|
$ |
7,024 |
|
|
$ |
10,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per
share |
$ |
(0.06 |
) |
|
$ |
0.03 |
|
|
$ |
0.11 |
|
|
$ |
0.17 |
|
Basic weighted average shares |
|
66,071 |
|
|
|
65,646 |
|
|
|
65,959 |
|
|
|
65,458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per
share |
$ |
(0.06 |
) |
|
$ |
0.03 |
|
|
$ |
0.11 |
|
|
$ |
0.16 |
|
Diluted weighted average shares |
|
66,071 |
|
|
|
66,137 |
|
|
|
66,480 |
|
|
|
66,187 |
|
Great Lakes Dredge & Dock Corporation |
|
Reconciliation of Net Income (Loss) to Adjusted
EBITDA |
|
(Unaudited and in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
June 30, |
|
|
June 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Net Income (Loss) |
$ |
(4,033 |
) |
|
$ |
2,105 |
|
|
$ |
7,024 |
|
|
$ |
10,919 |
|
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense—net |
|
3,424 |
|
|
|
6,657 |
|
|
|
7,449 |
|
|
|
13,243 |
|
Income tax provision (benefit) |
|
(853 |
) |
|
|
829 |
|
|
|
2,432 |
|
|
|
2,218 |
|
Depreciation and amortization |
|
11,614 |
|
|
|
10,628 |
|
|
|
22,930 |
|
|
|
20,681 |
|
Adjusted EBITDA |
$ |
10,152 |
|
|
$ |
20,219 |
|
|
$ |
39,835 |
|
|
$ |
47,061 |
|
Great Lakes Dredge & Dock Corporation |
|
Selected Balance Sheet Information |
|
(Unaudited and in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Period Ended |
|
|
|
June 30, |
|
|
December 31, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
75,420 |
|
|
$ |
145,459 |
|
Total current assets |
|
|
283,120 |
|
|
|
327,432 |
|
Total assets |
|
|
1,015,150 |
|
|
|
997,670 |
|
Total current liabilities |
|
|
141,565 |
|
|
|
154,735 |
|
Long-term debt |
|
|
321,246 |
|
|
|
320,971 |
|
Total equity |
|
|
412,188 |
|
|
|
398,997 |
|
Great Lakes Dredge & Dock Corporation |
Revenue and Backlog Data |
(Unaudited and in thousands) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
Revenues |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
Dredging: |
|
|
|
|
|
|
|
|
|
|
|
Capital - U.S. |
$ |
89,693 |
|
$ |
79,399 |
|
$ |
190,704 |
|
$ |
157,005 |
Capital - foreign |
|
- |
|
|
1,613 |
|
|
- |
|
|
6,322 |
Coastal protection |
|
45,119 |
|
|
46,631 |
|
|
117,036 |
|
|
93,262 |
Maintenance |
|
12,648 |
|
|
37,278 |
|
|
32,460 |
|
|
82,579 |
Rivers & lakes |
|
1,968 |
|
|
4,993 |
|
|
3,577 |
|
|
8,379 |
Total revenues |
$ |
149,428 |
|
$ |
169,914 |
|
$ |
343,777 |
|
$ |
347,547 |
|
|
As of |
|
|
|
June 30, |
|
December 31, |
|
June 30, |
|
Backlog |
|
2022 |
|
2021 |
|
2021 |
|
Dredging: |
|
|
|
|
|
|
|
|
|
|
Capital - U.S. |
|
$ |
246,042 |
|
$ |
398,748 |
|
$ |
320,820 |
|
Capital - foreign |
|
|
- |
|
|
- |
|
|
269 |
|
Coastal protection |
|
|
76,978 |
|
|
99,048 |
|
|
51,204 |
|
Maintenance |
|
|
43,561 |
|
|
50,966 |
|
|
67,440 |
|
Rivers & lakes |
|
|
7,220 |
|
|
2,826 |
|
|
14,669 |
|
Total
backlog |
|
$ |
373,801 |
|
$ |
551,588 |
|
$ |
454,402 |
|
Great Lakes Dredge and D... (NASDAQ:GLDD)
Historical Stock Chart
From Jun 2024 to Jul 2024
Great Lakes Dredge and D... (NASDAQ:GLDD)
Historical Stock Chart
From Jul 2023 to Jul 2024