Gulf Island Fabrication, Inc.

Good afternoon, ladies and gentlemen, and welcome to Gulf Islands Conference Call to discuss the third 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 call 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 third 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 Form 10-K and subsequent SEC filings. 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. Welcome to our third 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, a review of segment performance and in-market trends, and an update on the progress we have made on our strategic priorities. Plus, we'll then discuss our third quarter results in greater detail. We'll then open up the call for questions and end with some closing remarks. During the quarter, we continued to successfully execute on our strategic transformation, highlighted by another quarter of solid results for our services division and small scale fabrication business. The award of a large offshore fabrication contract and the continued wind down of our shipyard business. We're very pleased by our quarterly performance and I'm certain that these solid results would not have been possible without the focused execution by our team on our strategic initiatives over the last two years. It is very encouraging to see our plan continue to successfully play out and I'm excited about the opportunities ahead. Now turning to our segment results. First, looking at our services division, it was another strong quarter and the outlook for the business remains encouraging given the favorable trend in the offshore market in the Gulf of Mexico and the continued tight labor availability. Our third quarter services revenue grew over 140% and EBITDA was up nearly 170% compared to the same period in 2021, driven by continued solid results from the acquisition and integration of DSS, strong activity in the offshore services market, which benefited our legacy services business, and a more favorable business mix. We're not coming up on the one year anniversary of the DSS acquisition, and I'm extremely pleased with the performance of the business during the first year under Gulf Island. The acquisition doubled our services workforce and was a key component that it enabled us to quickly build the expanded services platform that we are benefiting from today. The momentum from our services business continues to build. and we are seeing strong utilization for our expanded craft workforce, increasing cross-selling opportunities, and new strategic partnership opportunities to further grow the services business. I could not be more excited by the success we have experienced in the first year with DSS and look forward to continued expansion of our services platform. At the end of the day, the services business is all about our people, so I am very proud of our strong workforce, which is comprised of some of the most dedicated and skilled craft professionals in the industry. Their relentless focus on safety and quality is being recognized by our clients, providing us opportunities for growth. We continue to focus on retaining these important team members, as well as finding creative ways to further grow our headcount, given the favorable demand backdrop. We are working with local trade schools to ensure we are involved in the training and development of the next generation of craft professionals while exploring outside our traditional geographic regions and in markets for additional craft personnel. I'm happy to report that we have been awarded grants from the Incumbent Worker Training Program from Louisiana as well as the Skills Development Fund from Texas to help us train and continue to advance the skills of our craft professionals. Our focus will continue to be on the recruitment and retention of our employees to support our anticipated growth. As we have discussed on previous calls, a key part of our strategic transformation has been to expand and grow our services business, and we have looked to accomplish this by diversifying our offshore services customer base, increasing our offshore services offering, and expanding our services business to include higher value-added solutions. The DSS acquisition helped accelerate our progress, and we have made other important strides towards this objective as well. And I'd like to highlight a couple of these initiatives. First, we continue to pursue strategic partnerships to diversify our customer base, including potential opportunities to partner with original equipment manufacturers to provide critical services to our customers along the Gulf Coast, and partnerships with engineering companies to provide turnkey solutions for key end markets. Second, in an effort to add to our services offerings, in the third quarter of 2022, we launched a new business line called Spark Safety, which provides welding enclosures that create a safe environment for welding, cutting, and burning in live production locations. This is a value-added solution that our customers utilize to reduce safety risks associated with certain routine maintenance without the need to shut down operations. Importantly, we can use our existing infrastructure and craft professionals to provide this key service. I'm excited to share that in October, we received our first award from a strategic customer, which I fully expect to be the first of many. We're very excited by the opportunities for our services business and believe our expanded platform is very well positioned to take advantage of the favorable in-market trends. Now, moving on to our fabrication division. While we are excited by the growing momentum in our services business, the highlight of the quarter was clearly the signing of a large fabrication contract for an offshore project in the Gulf of Mexico. This was the key driver behind our strong growth in new project awards during the quarter. with third quarter fabrication bookings growing to $117 million, up from $12 million in the second quarter, 2022, and $6 million in the year-ago period. We are limited as to what we can discuss around the award at the request of our customer, but I can tell you that we believe the contract is consistent with our business strategy and financial objectives. Based on our key resources, strategic location, and expertise, and the fabrication of offshore structures, we are confident Gulf Island is uniquely positioned to successfully support our customer on this important project and potential future opportunities as well. We are excited by the new award and are pleased that our decision to remain patient and disciplined in the pursuit of large contracts has paid off. That said, we are not stopping here. and we remain encouraged by the project activity in the LNG market and Gulf Coast region more broadly. This large award provides us a stable base of backlog through 2023, which will provide us additional flexibility to be selective on new awards. In addition to our success in the large fabrication market, we continue to see robust activity in our small-scale fabrication business. which was the key driver behind our third quarter fabrication segment revenues nearly doubling from the year-ago period. The strong growth in the quarter was a function of the favorable in-market trend, including subsea structures and pull-through fabrication work from our services customers, and we expect continued growth in our small-scale fabrication business for the foreseeable future. Finally, continuing to our shipyard division, We continue to make progress toward an efficient and safe wind down of our shipyard operations. With respect to our 70 vehicle ferry project for the Texas Department of Transportation, the construction phase of the ferry is substantially finished and the ferry is in the water for the final outfitting stage. We expect to commence sea trials in November and consistent with our previous expectations are targeting delivery by the end of the year. I'm excited to see the ferry in service as the route in Galveston, Texas is one that our family has utilized in the past. I'm looking forward to being a passenger on this quality ferry. With respect to our 240 vehicle ferry projects for the North Carolina Department of Transportation, our teams continue to make progress. We had previously anticipated completion of the vessels in the third and fourth quarters of 2022. However, as discussed on our previous call, We encountered performance issues during our July sea trials for the first vessel and entered into a change order with the customer for modifications to the propulsion system to rectify the performance issues, which resulted in greater than anticipated construction delays for both vessels. We successfully completed the modifications for the first vessel in the third quarter and completed sea trials in October. The vessel is now en route in North Carolina and we anticipate final acceptance trials and delivery of the vessel to be completed in November. Further, we're targeting the completion and delivery of the final vessel in the first quarter of 2023. The lawsuit in North Carolina state court regarding the original design flaws for the vessels and the resulting delays is still pending. As a result of the completion delays for the final North Carolina ferry, we now anticipate the wind-down of our shipyard operations to be completed in the first quarter 2023. With respect to our MPSV dispute, discovery and trial preparation in connection with the lawsuit continues in anticipation of trial, which is scheduled for March 2023. In closing, I'm very pleased with our third quarter financial performance, and I'm even more excited about the future opportunities for our businesses. As mentioned previously, I believe the success we have seen in recent quarters and our strong positioning as we look into 2023 and beyond are a direct result of our team's buy-in and focus on executing on our strategic plan and all phases of our strategic transformation strategy. Momentum is building across each of our key businesses, and we are well positioned to take advantage of the attractive market dynamics. I'll now turn the call over to Wes to discuss our quarterly results in greater detail.