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 September 30, 2022.
Third Quarter 2022
Highlights
- Revenue was $158.3 million in the third quarter
- Total operating loss was $9.5 million in the third quarter
- Net loss was $9.9 million in the third quarter
- Adjusted EBITDA was $1.3 million in the third quarter
Management Commentary
Lasse Petterson, President and Chief Executive
Officer commented, “We continue to see the effects from a
significantly delayed bid market the last three quarters, which has
impacted vessel utilization for 2022. In addition, the quarter was
impacted by increased inflationary pressure, follow-on impact from
second quarter site condition claims and some dredging project
challenges. Great Lakes has delivered strong performance over the
past years, we have demonstrated our ability to manage through a
challenging environment and we believe the current challenging
conditions will improve over the next quarters.
The bid market did start to gain momentum in the
third quarter and Great Lakes was awarded $338.9 million in
dredging projects and open options, ending the quarter with $452.6
million of dredging backlog, which does not include approximately
$50.0 million dollars of performance obligations related to
offshore wind contracts. In addition, we ended the quarter with
$625.7 million in open options pending award. This indicates that
the bid market is in the process of recovery from the bidding
difficulties that we have seen in 2022. The Company’s awarded work
represents 50.1% of the third quarter bid market.
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 is
expected to be ready for operations in the first half of 2025. The
delivery of the Galveston Island will provide us with added
capacity and the opportunity to potentially retire some of our
older dredges which is expected to have a positive impact to our
overall margins in the coming years. In addition, the liquified
natural gas export projects that are bid but not yet awarded are
getting closer to final investment decisions.
Our recently announced offshore wind award by
Equinor and BP, with expected commencement in 2025, solidifies
Great Lakes’ goal of participating in the U.S. offshore wind
market. We presently have five additional bids tendered for other
offshore wind projects, which we anticipate will add to our
offshore wind backlog during 2023.
As we enter the fourth quarter, we expect results
to improve as our fleet is expected to be busy this quarter and in
the first quarter of 2023. We believe the fundamentals are in place
for a return to a normal dredging market in 2023 and that the
ongoing demand for dredging, combined with our strategy for overall
improvement is a solid path to long term growth."
Quarterly Results
- Revenue was $158.3 million, a decrease of $10.3 million from
the third quarter of 2021. The lower revenue in the third quarter
of 2022 was due primarily to lower domestic capital project
dredging and maintenance dredging revenue, offset partially by
higher coastal protection project revenue.
- Gross margin percentage declined to 2.4% in the third quarter
of 2022 from 21.5% in the third quarter of 2021. As mentioned
previously, the third quarter of 2022 continued to be impacted by
the delayed bid market, inflationary pressures, prior quarter’s
site condition claims and atypical dredging project challenges.
Moreover, we had multiple dredges in regulatory drydocking or not
working during the quarter. With delayed project work, we have
taken the opportunity to move up maintenance on some of our dredges
in preparation for upcoming work, which drives up our plant expense
accordingly. During this quarter, the New York finished her
drydocking and the Ellis Island and Padre Island entered their
drydocks in September. The Ellis Island and Padre Island are
expected to return to work in the later part of the fourth quarter
2022.
- Operating loss was $9.5 million, which is a $30.9 million
decrease in operating income from the prior year quarter. The
decrease is a result of $32.5 million lower gross margin, offset
slightly by lower general and administrative expenses compared to
the prior year third quarter.
- Net loss for the quarter was $9.9 million compared to net
income of $13.8 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 September 30, 2022, the Company had $38.8 million in cash,
total long-term debt of $321.4 million, and our $300 million
revolving credit facility remains undrawn.
- At September 30, 2022, the Company had $452.6 million in
dredging backlog, compared to $598.5 million in dredging backlog at
September 30, 2021.
- Capital expenditures for the third quarter of 2022 were $33.7
million, which includes $11.1 million for our new scows and
multicats, $8.5 million for the Galveston Island build, $8.2
million for other maintenance capital expense, $5.1 million for the
second new hopper, and $0.8 million for the subsea rock
installation vessel.
Market Update
In 2023, 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 the impacts caused by
climate change, more frequent severe weather events, like Hurricane
Ian, 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. Since the House passed their version
recently as well, the legislation is expected to be conferenced and
signed into law before the end of 2022.
As of July 28, 2022, both the Senate and House
passed their respective fiscal year 2023 U.S. Army Corps of
Engineers' (the "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. This will be under continuing resolution until
mid-December 2022.
Early last year, the administration announced
the ambitious goal of 30 GW of Offshore Wind by 2030 and provided
$3.0 billion in federal loan guarantees for offshore wind projects.
Equinor and BP have already awarded us the rock installation
contracts for the Empire Wind I and II projects, with installation
windows in 2025 and 2026, which is expected to power more than 1
million homes in the State of New York.
The Company will be holding a conference call at
9:00 a.m. C.D.T. today, November 1, 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, November 1, 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/BIaf179cb81e584ab596ba33265b7db30d
The live call and replay can also be heard at
https://edge.media-server.com/mmc/p/ka3fjd5a 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: 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; the impact of the COVID-19 pandemic and related responsive
measures, including productivity impacts and increased
expenditures; 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 our 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.
|
|
Great Lakes Dredge & Dock Corporation |
|
Condensed Consolidated Statements of
Operations |
|
(Unaudited and in thousands, except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
September 30, |
|
|
September 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Contract revenues |
$ |
158,346 |
|
|
$ |
168,638 |
|
|
$ |
502,123 |
|
|
$ |
516,185 |
|
Gross profit |
|
3,799 |
|
|
|
36,281 |
|
|
|
47,335 |
|
|
|
92,279 |
|
General and administrative expenses |
|
13,292 |
|
|
|
15,167 |
|
|
|
38,716 |
|
|
|
45,713 |
|
Gain on sale of assets—net |
|
(40 |
) |
|
|
(291 |
) |
|
|
(358 |
) |
|
|
(323 |
) |
Operating income (loss) |
|
(9,453 |
) |
|
|
21,405 |
|
|
|
8,977 |
|
|
|
46,889 |
|
Interest expense—net |
|
(3,551 |
) |
|
|
(4,214 |
) |
|
|
(11,000 |
) |
|
|
(17,457 |
) |
Other income (expense) |
|
(253 |
) |
|
|
(204 |
) |
|
|
(1,778 |
) |
|
|
692 |
|
Income (loss) before income taxes |
|
(13,257 |
) |
|
|
16,987 |
|
|
|
(3,801 |
) |
|
|
30,124 |
|
Income tax (provision) benefit |
|
3,347 |
|
|
|
(3,181 |
) |
|
|
915 |
|
|
|
(5,399 |
) |
Net income (loss) |
$ |
(9,910 |
) |
|
$ |
13,806 |
|
|
$ |
(2,886 |
) |
|
$ |
24,725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
$ |
(0.15 |
) |
|
$ |
0.21 |
|
|
$ |
(0.04 |
) |
|
$ |
0.38 |
|
Basic weighted average shares |
|
66,111 |
|
|
|
65,691 |
|
|
|
66,010 |
|
|
|
65,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share |
$ |
(0.15 |
) |
|
$ |
0.21 |
|
|
$ |
(0.04 |
) |
|
$ |
0.37 |
|
Diluted weighted average shares |
|
66,111 |
|
|
|
66,311 |
|
|
|
66,010 |
|
|
|
66,246 |
|
|
|
Great Lakes Dredge & Dock Corporation |
|
Reconciliation of Net Income (Loss) to Adjusted
EBITDA |
|
(Unaudited and in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
September 30, |
|
|
September 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Net Income (Loss) |
$ |
(9,910 |
) |
|
$ |
13,806 |
|
|
$ |
(2,886 |
) |
|
$ |
24,725 |
|
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
Interest expense—net |
|
3,551 |
|
|
|
4,214 |
|
|
|
11,000 |
|
|
|
17,457 |
|
Income tax provision (benefit) |
|
(3,347 |
) |
|
|
3,181 |
|
|
|
(915 |
) |
|
|
5,399 |
|
Depreciation and amortization |
|
11,047 |
|
|
|
10,993 |
|
|
|
33,977 |
|
|
|
31,674 |
|
Adjusted EBITDA |
$ |
1,341 |
|
|
$ |
32,194 |
|
|
$ |
41,176 |
|
|
$ |
79,255 |
|
|
|
Great Lakes Dredge & Dock Corporation |
|
Selected Balance Sheet Information |
|
(Unaudited and in thousands) |
|
|
|
|
|
|
|
|
|
|
Period Ended |
|
|
|
September 30, |
|
|
December 31, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
38,833 |
|
|
$ |
145,459 |
|
Total current assets |
|
|
232,779 |
|
|
|
327,432 |
|
Total assets |
|
|
1,003,520 |
|
|
|
997,670 |
|
Total current liabilities |
|
|
147,034 |
|
|
|
154,735 |
|
Long-term debt |
|
|
321,383 |
|
|
|
320,971 |
|
Total equity |
|
|
396,906 |
|
|
|
398,997 |
|
|
Great Lakes Dredge & Dock Corporation |
Revenue and Dredging Backlog Data |
(Unaudited and in thousands) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
September 30, |
|
|
September 30, |
|
Revenues |
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Dredging: |
|
|
|
|
|
|
|
|
|
|
|
Capital - U.S. |
$ |
90,574 |
|
|
$ |
111,481 |
|
|
$ |
281,278 |
|
|
$ |
268,485 |
|
Capital - foreign |
|
- |
|
|
|
274 |
|
|
|
- |
|
|
|
6,596 |
|
Coastal protection |
|
36,934 |
|
|
|
15,945 |
|
|
|
153,970 |
|
|
|
109,208 |
|
Maintenance |
|
26,202 |
|
|
|
35,052 |
|
|
|
58,662 |
|
|
|
117,631 |
|
Rivers & lakes |
|
4,636 |
|
|
|
5,886 |
|
|
|
8,213 |
|
|
|
14,265 |
|
Total revenues |
$ |
158,346 |
|
|
$ |
168,638 |
|
|
$ |
502,123 |
|
|
$ |
516,185 |
|
|
As of |
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
Dredging Backlog |
|
2022 |
|
|
|
2021 |
|
|
|
2021 |
|
Capital - U.S. |
$ |
220,723 |
|
|
$ |
398,748 |
|
|
$ |
411,354 |
|
Coastal protection |
|
86,847 |
|
|
|
99,048 |
|
|
|
139,072 |
|
Maintenance |
|
132,479 |
|
|
|
50,966 |
|
|
|
39,155 |
|
Rivers & lakes |
|
12,538 |
|
|
|
2,826 |
|
|
|
8,900 |
|
Dredging backlog |
$ |
452,587 |
|
|
$ |
551,588 |
|
|
$ |
598,481 |
|
For further information contact: Tina
Baginskis Director, Investor Relations
630-574-3024
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