Gulf Island Fabrication, Inc.

Good afternoon, ladies and gentlemen, and welcome to Gulf Islands Conference Call to discuss first quarter 2022 results. All participants will be in a listen-only mode for the duration of the call. This call is being recorded. At this time, I would like to turn the floor over to Ms. Cindy Cook for opening remarks and introductions. Cindy, please go ahead.

Thank you and good afternoon. I would like to welcome everyone to our first quarter 2022 teleconference. Our results were released this afternoon and a copy of the press release is available on our website at gulfisland.com. A replay of today's call will be available on our website after 7 p.m. this evening. Please keep in mind that the press release and certain comments on this call include forward-looking statements. and actual results may differ materially. We would like to refer everyone to the cautionary language included in our press release and to the risk factors described in our 2021 Farm 10-K and subsequent SEC filing. Please also note that management may reference EBITDA, new project awards, and backlog on this call, which are financial measures not recognized under U.S. GAAP. As required by SEC rules and regulations to the extent used, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our press release. Today we have Mr. Richard Huff, President and CEO, and Mr. Wes Stockton, Executive Vice President and CFO. Mr. Huff?

Thank you, Cindy. Good afternoon, everyone, and welcome to our first quarter results conference call. I'm happy to be here with you this afternoon, and I hope that each of you and your families are continuing to stay healthy and safe. During today's call, I'll provide key takeaways from the quarter, an update on segment performance and in-market trends, and an update on the progress we've made on our strategic priorities. Wes will then discuss our first quarter results in greater detail. We'll then open up the call for questions and conclude with some closing remarks. the first quarter results were consistent with our expectations as strong revenue and profit growth in our newly formed services segment and another quarter of strong project execution were offset by continued low volume levels associated with large project fabrication work. While fabrication backlog remains at low levels, we're encouraged by the recent tightening in market conditions we're witnessing for large project fabrication. Additionally, We made good progress on the safe wind down of our shipyard business and made continued advancements on our strategic initiatives. Specifically for our services division, we have quickly built a strategic platform that is well positioned to take advantage of favorable in-market trends while also bringing stability to our overall business. Our first quarter services revenue more than doubled, while EBITDA more than tripled, as we generated strong organic growth in our legacy services business driven by the strength of our end markets and benefited from solid results in our first quarter of contribution from the DSS acquisition. I'm very pleased with the integration of the DSS business as we are seeing strong utilization of our expanded craft workforce and opportunities for pull and fabrication work from our expanded customer base. We have made organizational changes to combine all of our services business to bring stronger collaboration and accountability. I'm happy with the progress we've made in a very short timeframe and excited about the possibilities for future revenue synergy opportunities. As in-market trends in our services business continue to strengthen with rising energy prices, our customers are moving forward with projects that have been delayed and pushed out in recent years. With an expanded portfolio of services offerings, a broader customer base, and a workforce of skilled craft labor that doubled in size following the acquisition, we are now seeing the strength of this combination. We're also leveraging the strong foundation for pull-through fabrication work for our fabrication division. For example, we are seeing more awards for fabricated materials for our services customers including subsea fabricated structures that help operators optimize oil and gas production. These subsea structures range from simple pipe connectors to entire subsea process systems. We were recently awarded subsea jumpers, which are short pipe connectors that are used to transport production fluid between two subsea components. I'm very excited about the in-market trends and our ability to capture our market share with support from our services business. Moving on to our fabrication division, we have another solid quarter of execution, with most projects performing better than their as-sold estimates. Volumes remain challenged overall, but we continue to see good activity in our small-scale fabrication business, supported by pull-through fabrication work from our services customers, as previously mentioned. Given the favorable in-market trends in energy, our deep customer relationships and strategic location as well as our ability to benefit from pull-through fabrication work from our services customers, we expect continued momentum and demand for small-scale fabrication. With respect to larger fabrication work, we highlighted on our last call our commitment to taking a measured and disciplined approach when bidding on large projects, given the risks inherent in these long-term fixed-price contracts, and that has not changed. Activity in the large fabrication market continues to improve with early decisions being made on a number of large LNG projects, but through the end of the first quarter, we were still seeing excess capacity in the market, resulting in unattractive pricing dynamics. However, with announcements of FID for key LNG projects in the Gulf Coast and rising energy prices, we are beginning to see a noticeable tightening in fabrication capacity. The industry is quickly coming to grips with this dynamic and we are having much more constructive conversations with our potential customers. We are encouraged by the evolving trends in the large project fabrication market and believe our solid base of skilled craft workforce, strategic location, and strong history of execution positions us to take advantage of these improving industry dynamics. While we have yet to sign any large fabrication orders, I believe our patients may soon be rewarded. For our shipyard division, we continue to focus on efficient and safe bind down of our shipyard operations. Our 70 vehicle ferry project for the Texas Department of Transportation was 86% complete at the end of the first quarter and remains on track to be completed in the third quarter of 2022. The ferry is substantially finished with the construction phase and it is in the water. We are pre-testing the piping system and moving into the outfitting phase, which will be followed by sea trials and commissioning. We continue to work collaboratively with Texas Department of Transportation to ensure that we maintain our budget and schedule. With respect to our 240 vehicle ferry projects, our teams continue to make good progress. notwithstanding the many challenges associated with previously discussed vessel design deficiencies. At March 31, the second vessel was approximately 96% complete and is forecast to be completed in the second quarter 2022, and the first vessel was approximately 77% complete and is forecast to be completed in the third quarter of 2022. As we previously disclosed, In January, during sea trials for the second vessel, one of the propulsion systems unexpectedly shut down, causing the vessel to veer off course and run aground, causing damage to the hull. We recorded a charge of $100,000 associated with our deductible for our insurance coverage for the incident. We believe the system shutdown was due to the design deficiencies and are currently working through a change order with the customer to make modifications to the vessel to fix the problems that resulted in the propulsion system shutdown. We remain focused on safely and efficiently completing our remaining shipyard obligations, and we believe we are on track to successfully complete the wind down of the shipyard business by the end of the third quarter. Once complete, we look forward to redeploying these resources and focusing 100% of our time and energy on profitably growing our remaining businesses. I'm happy with the progress we're making on our strategic transformation strategy, as we have made important advancements on a number of key initiatives during the quarter. Our new growth in markets are seeing robustness that gives me confidence that we will end the year with some large fabrication awards. Looking further out, we continue to see increased inquiries and bidding activity with customers focused on energy transition and renewable energy. While larger opportunities in U.S. wind would likely not materially impact our backlog until the back half of 2023, we are also seeing momentum in this end market as well. Lastly, as the labor supply market continues to be a challenge, we are seeing more opportunities outside of the oil and gas sector where customers are looking to reduce risk with a modular concept by moving fabrication into a more controlled environment like our yard in Houma, Louisiana. We'll continue to evaluate these opportunities and pursue those where the risks and benefits align with our company objectives. In closing, I'm encouraged by our first quarter progress. We're continuing to see solid trends in our services and small-scale fabrication businesses, and we're encouraged by the recent trends in the large project fabrication market. There is still work to be done, but I'm very encouraged by our in-market trends and believe we are well-positioned to succeed in each of our businesses. I will now turn the call over to Wes to discuss our quarterly results in greater detail.