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 March 31, 2023.
First Quarter 2023 Highlights
- Revenue was $158.0 million for the first quarter
- Total operating loss was $0.9 million for the first
quarter
- Net loss was $3.2 million for the first quarter
- Adjusted EBITDA was $10.2 million for the first quarter
Management Commentary
Lasse Petterson, President and Chief Executive
Officer commented, “We reported improved results in the first
quarter of 2023, showing improvements in gross profit margins and
adjusted EBITDA from the prior three quarters. Despite facing
continued challenges related to weather delays in the Northeast and
a lower-than-normal amount of capital work, we ended the quarter
with revenues of $158.0 million and adjusted EBITDA of $10.2
million. The Company’s improved first quarter performance is
primarily due to more project work for our vessels and adjustments
we have made to the business and operations to improve
profitability.
We have taken swift and proactive action on cost
reductions and fleet adjustments. Last year we retired the
42-year-old hopper dredge, the Terrapin Island, and we currently
have cold stacked two major dredges and support equipment as we
continue to watch the bid market. Correspondingly, we are adjusting
our general and administrative, overhead cost structures and
dredging fleet to reflect the changed market conditions, which have
already led to substantially reduced costs in 2023.
In the first quarter of 2023, Great Lakes’ total
bid market reached over $300 million, which is approximately $125
million greater than the first quarter of 2022. The port deepening
and widening projects that were delayed in 2022 are starting to
enter the market. The first quarter saw one capital project bid,
and April 2023 included one more capital project.
Great Lakes ended the quarter with $327.1 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 $516.9 million in
low bids and options pending award. The Company’s awarded work
during the quarter represents 31.7% of the first quarter bid
market. Not included in the first quarter backlog is the Freeport
Capital Port Deepening project, on which Great Lakes was low bidder
in April for approximately $160 million, which is the third largest
domestic capital project Great Lakes has won in its history. We are
also optimistic that one or two Liquified Natural Gas ("LNG")
projects on which we are low bidder could achieve final investment
decision in 2023 with dredging to potentially start in the second
half of the year and continuing into 2024. We expect that the
improved market conditions, combined with the fleet adjustment and
cost reduction initiatives we have in place, will provide improved
results in 2023 and beyond.
Although we have seen overall improvement in
results in the first quarter, and bidding has picked up, second
quarter utilization is expected to be lower than the first quarter.
Our fleet renewal program remains on budget with our mid-size
hopper dredge, the Galveston Island, expected to be operational
mid-year 2023 and her sistership, the Amelia Island, is expected to
be delivered in 2025.
We are executing on our strategy to enter the
fast-growing U.S. offshore wind market. Construction of our U.S.
flagged Jones Act-compliant inclined fallpipe vessel for subsea
rock installation, which will be named the Acadia, is on budget and
expected to be delivered and operational in the first half of 2025.
In 2022, Great Lakes was awarded rock installation contracts for
the Empire Wind I and II projects by Equinor and BP, with
installation windows in 2025 and 2026. We are currently bidding
several other offshore wind farm projects with rock installations
planned for 2025 and beyond."
Operational Update
- Revenue was $158.0 million, a decrease of $36.3 million from
the first quarter of 2022. The lower revenue in the first quarter
of 2022 was due primarily to lower domestic capital and coastal
protection project revenue, offset partially by an increase in
maintenance, and rivers and lakes project revenue.
- Gross profit was $12.1 million, a decrease of $21.0 million
compared to the gross profit from the first quarter of 2022. Gross
margin percentage declined to 7.7% in the first quarter of 2023
from 17.0% in the first quarter of 2022. As mentioned, although the
majority of vessels were working, the total mix of projects
included less higher margin capital work in comparison to the prior
year first quarter. In addition, significant weather delays
impacted several projects in the Northeast.
- Operating loss was $0.9 million, which is a $19.7 million
decrease compared with the operating income from the prior year
quarter. The decrease is a result of $21.0 million lower gross
margin, offset slightly by lower general and administrative
expenses compared to the prior year first quarter.
- Net loss for the quarter was $3.2 million, which is a $14.3
million decrease compared to net income of $11.1 million in the
prior year first quarter.
- At March 31, 2023, the Company had $32.5 million in cash and
cash equivalents and total debt of $371.7 million, and availability
under its revolving credit facility of $195.7 million with $50.0
million of draws outstanding at the end of the first quarter of
2023.
- At March 31, 2023, the Company had $327.1 million in dredging
backlog as compared to $377.1 million at December 31, 2022. Low
bids and options pending award totaled $516.9 million as of March
31, 2023.
- Total capital expenditures for first quarter of 2023 were $28.7
million compared to $25.6 million in 2022. The 2023 capital
expenditures included $10.4 million for the Amelia Island, $9.7
million for the Galveston Island, and $4.3 million for the build of
the subsea rock installation vessel, the Acadia.
Market Update
We continue to see strong support from the Biden
Administration and Congress for the dredging industry. On December
29, 2022, the Omnibus Appropriations Bill for fiscal year 2023 was
signed into law which included another record budget of $8.66
billion for the U.S. Army Corps of Engineers (the "Corps") civil
works program of which $2.32 billion is provided for the Harbor
Maintenance Trust Fund to maintain and modernize our nation’s
waterways. In addition, the Disaster Relief Supplemental
Appropriations Act for fiscal year 2023 was approved which included
$1.48 billion for the Corps to make necessary repairs to
infrastructure impacted by hurricanes and other natural disasters
and to initiate beach renourishment projects that will increase
coastal resiliency. This increased budget and additional funding
support our expectation for a stronger bid market in 2023.
We expect these budgeted appropriations to support
the funding of several delayed capital port improvement projects
including Sabine, Houston, Corpus Christi, San Juan and additional
phases of Norfolk. Although the Corps was delayed in bidding
capital port deepening projects in 2022, the first four months of
2023 have already seen bids for the port improvement projects for
Norfolk and Freeport.
In March 2023, President Biden released the
President’s Fiscal Year 2024 executive budget. This is the starting
point for negotiations in Congress over what will eventually become
the actual Federal spending figures. The proposed amount for the
Corps targets $7.4 billion, which is a record amount for a
President's budget, and we are hopeful that based on recent
history, Congress will further increase the Corps' budget for
fiscal year 2024 when it is passed.
At the end of 2022, the Water Resources
Development Act of 2022, or WRDA 2022, was approved by Congress and
signed into law by the President. WRDA 2022 is on a two-year
renewal cycle and includes legislation that authorizes the
financing of Corps’ projects for flood and hurricane protection,
dredging, ecosystem restoration and other construction projects.
WRDA 2022 featured among many other things authorization for New
York and New Jersey shipping channels to be deepened to 55 feet,
estimated at $6 billion, as well as the Coastal Texas Protection
and Restoration Program, estimated at $34.4 billion which includes
dune and marsh restoration to safeguard the Texas Gulf Coast from
hurricane surges. In addition, this legislation includes policy
changes that will allow future port, waterways, and coastal
projects to be more readily approved and funded.
Included in our low bids pending are two LNG
projects that have been awaiting Notice to Proceed from our
clients. Several North American LNG export projects have been
delayed in the past few years during the pandemic but with the
increase in LNG prices, some of these LNG projects are currently
gaining momentum and are targeting final investment decisions in
2023.
In 2021, the Biden 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 Great Lakes 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. Great Lakes
continues to tender bids on multiple offshore wind projects for our
subsea rock installation vessel and additional contract awards are
anticipated in 2023.
The Company will be holding a conference call at
9:00 a.m. C.D.T. today, May 2, 2023, 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, May 2, 2023, 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/BI99134295d0664915b483bdaa546e6f12.
The live call and replay can also be heard at
https://edge.media-server.com/mmc/p/rse8awvj 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, which is complemented with a long history of
performing significant international projects. In addition, Great
Lakes is fully engaged in expanding its core business into the
rapidly developing offshore wind energy industry. The Company
employs experienced civil, ocean and mechanical engineering staff
in its estimating, production and project management functions. In
its over 133-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 are being made pursuant to the Exchange Act and the
PSLRA with the intention of obtaining of these terms or comparable
language, or by discussion of strategy or intentions. These
cautionary statements 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: project delays related
to the increasingly negative impacts of climate change or other
unusual, non-historical weather patterns; rising costs related to
inflation, particularly with the cost of materials needed for
general maintenance of our dredges and increasing costs to operate
and maintain aging vessels and comply with applicable regulations
or standards; the inability of our largest customer, the Corps, to
bring projects to market; impacts to our supply chain for
procurement of new vessel build materials or maintenance on our
existing vessels; the timing of our performance on contracts and
new contracts being awarded to us; equipment or mechanical
failures: 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; impairments of our goodwill or other intangible
assets; 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; significant liabilities that could be
imposed were we to fail to comply with government contracting
regulations, including proposed regulations which may be
promulgated capital and operational costs due to environmental
regulations; market and regulatory responses to climate change
including proposed regulations concerning emissions reporting and
future emissions reduction goals; 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
financing for the construction of new vessels, including our new
offshore wind vessel; potential inability to secure contracts to
utilize new offshore wind vessel; unforeseen delays and cost
overruns related to maintenance of our existing vessels and the
construction of new vessels, including potential mechanical and
engineering issues, supply chain 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; adverse rulings by Customs and Border
Protection concerning the Jones Act or other matters impacting our
business; 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 the impact of
COVID-19 or new worldwide infections and related responsive
measures, including negative supply chain impacts. 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, 2022.
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 |
|
|
March 31, |
|
|
|
2023 |
|
|
|
2022 |
|
Contract
revenues |
$ |
158,044 |
|
|
$ |
194,349 |
|
Gross profit |
|
12,135 |
|
|
|
33,055 |
|
General and
administrative expenses |
|
13,017 |
|
|
|
14,604 |
|
Gain on sale
of assets—net |
|
(18 |
) |
|
|
(321 |
) |
Operating income (loss) |
|
(864 |
) |
|
|
18,772 |
|
Interest
expense—net |
|
(3,385 |
) |
|
|
(4,025 |
) |
Other income
(expense) |
|
227 |
|
|
|
(405 |
) |
Income (loss) before income taxes |
|
(4,022 |
) |
|
|
14,342 |
|
Income tax
benefit (provision) |
|
791 |
|
|
|
(3,285 |
) |
Net income (loss) |
$ |
(3,231 |
) |
|
$ |
11,057 |
|
|
|
|
|
|
|
Basic
earnings (loss) per share |
$ |
(0.05 |
) |
|
$ |
0.17 |
|
Basic weighted average shares |
|
66,264 |
|
|
|
65,847 |
|
|
|
|
|
|
|
Diluted
earnings (loss) per share |
$ |
(0.05 |
) |
|
$ |
0.17 |
|
Diluted weighted average shares |
|
66,264 |
|
|
|
66,436 |
|
Great Lakes
Dredge & Dock Corporation |
|
Reconciliation of Net Income (Loss) to Adjusted
EBITDA |
|
(Unaudited
and in thousands) |
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
|
2023 |
|
|
|
2022 |
|
Net income
(loss) |
$ |
(3,231 |
) |
|
$ |
11,057 |
|
Adjusted
for: |
|
|
|
|
|
Interest expense—net |
|
3,385 |
|
|
|
4,025 |
|
Income tax provision (benefit) |
|
(791 |
) |
|
|
3,285 |
|
Depreciation and amortization |
|
10,850 |
|
|
|
11,316 |
|
Adjusted
EBITDA |
$ |
10,213 |
|
|
$ |
29,683 |
|
Great Lakes
Dredge & Dock Corporation |
|
Selected
Balance Sheet Information |
|
(Unaudited
and in thousands) |
|
|
|
|
|
|
|
|
Period Ended |
|
|
March 31, |
|
|
December 31, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
Cash and
cash equivalents |
$ |
32,519 |
|
|
$ |
6,546 |
|
Total
current assets |
|
208,590 |
|
|
|
182,841 |
|
Total
assets |
|
1,024,995 |
|
|
|
981,780 |
|
Total
current liabilities |
|
163,154 |
|
|
|
160,333 |
|
Total
long-term debt |
|
371,658 |
|
|
|
321,521 |
|
Total
equity |
|
364,022 |
|
|
|
368,220 |
|
Great Lakes
Dredge & Dock Corporation |
Revenue and
Backlog Data |
(Unaudited
and in thousands) |
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
Revenues |
|
2023 |
|
|
|
2022 |
|
|
Dredging: |
|
|
|
|
|
|
Capital -
U.S. |
$ |
32,475 |
|
|
$ |
101,010 |
|
|
Coastal
protection |
|
51,305 |
|
|
|
71,917 |
|
|
Maintenance |
|
71,928 |
|
|
|
19,812 |
|
|
Rivers &
lakes |
|
2,336 |
|
|
|
1,610 |
|
|
Total revenues |
$ |
158,044 |
|
|
$ |
194,349 |
|
|
|
As of |
|
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
Backlog |
|
2023 |
|
|
|
2022 |
|
|
|
2022 |
|
Dredging: |
|
|
|
|
|
|
|
|
Capital -
U.S. |
$ |
118,895 |
|
|
$ |
148,429 |
|
|
$ |
320,352 |
|
Coastal
protection |
|
62,051 |
|
|
|
97,819 |
|
|
$ |
120,457 |
|
Maintenance |
|
143,131 |
|
|
|
125,671 |
|
|
$ |
31,451 |
|
Rivers &
lakes |
|
3,070 |
|
|
|
5,221 |
|
|
$ |
1,211 |
|
Total backlog |
$ |
327,147 |
|
|
$ |
377,140 |
|
|
$ |
473,471 |
|
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