Great Lakes Dredge & Dock Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the Great Lakes Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's call is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Tina Baginskis. Please go ahead.

Thank you. Good morning, and welcome to our quarterly conference call. Joining me on the call this morning is our President and Chief Executive Officer, Lassa Pedersen, and our Chief Financial Officer, Mark Marinko. Lassa will provide an update on the events of the quarter, then Mark will continue with an update on our financial results of the quarter. Lassa will conclude with an update on the outlook for the business and markets. Following their comments, there will be an opportunity for questions. During this call, we will make certain forward-looking statements to help you understand our business. These statements involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from our expectations. Certain risk factors inherent in our business are set forth in our earnings release and in filings with the SEC, including our 2020 Form 10-K and subsequent filings. During this call, we also refer to certain non-GAAP financial measures, including adjusted EBITDA from continuing operations, which are explained in the net income to adjusted EBITDA from continuing operations reconciliation attached to our earnings release and posted on our investor relations website, along with certain other operating data. With that, I will turn the call over to Lasso.

Thank you, Gina. In the first half of 2021, our operations saw substantial impact as a result of the COVID-19 pandemic. As the third wave of the pandemic spread through our population, we started to see significant additional direct cost and operational interruptions in the first quarter of 2021. Several of our vessel crews were infected despite extensive testing and isolation protocols. In order to mitigate continued outbreaks, in the second quarter, we initiated an extensive vaccination effort of our crews and staff as vaccines became available and set an ambitious target to have a majority of our employees vaccinated by the end of the quarter. Thus far, we have been successful, and our company-wide vaccination currently stands at 71% of our staff being fully vaccinated or partially vaccinated. We are now implementing new protocols, including requiring all new projects to have 100% vaccination prior to startup, and all vessels coming back into operations from dry docks to have 100% vaccinated crews. Additionally, we require proof of vaccination to access any of our main offices. Unfortunately, vaccines were not readily available until later in Q2. Hence, we continue to incur COVID-related costs and experienced increased operational challenges on several projects during the second quarter of this year. The direct COVID cost of at-home and on-site testing, disinfecting our vessels, and the cost of quarantining infected crew and bringing replacement crews were $4.3 million in the first quarter, with an additional $3 million incurred in the second quarter. Direct costs can be easily tracked, but the impact on projects and operational performance related to COVID were not as easily quantified, but could be seen in lower than expected margins on several jobs. The majority of the projects worst affected have now been completed, which included an international project, two coastal beach projects in the southeast, one beach project in the northeast, and one capital project in the Gulf of Mexico. We expect to see positive effects of a vaccination initiative with reduced COVID impacts on our operation in the remainder of the year. We ended the quarter with adjusted EBITDA of $20.2 million. and net income of 2.1 million. Our first half of 2021 results did not meet expectations due to the COVID impacts and related project performance mentioned. Given project activity we are currently engaged in, coupled with backlog, new projects awards, and fewer vessel dry docks for the remainder of the year, we expect the third and fourth quarter of 2021 to be stronger outperforming the third and fourth quarter of 2020. However, we do not expect the stronger second half to fully allow us to achieve our original expectations for 2021. I will now turn the call over to Mark to further discuss the results of the quarter and for an update on backlog development.