Great Lakes Dredge & Dock Corporation

Good day and thank you for standing by. Welcome to the fourth quarter 2022 Great Lakes Dredge and Dock Earnings Conference 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 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded I would now like to hand the conference over to your speaker today, Tina Boginskas, Director of Investor Relations. Please go ahead.

Tina Boginskas Thank you. Good morning and welcome to our fourth quarter conference call. Joining me on the call this morning is our President and Chief Executive Officer Lassa Pedersen and our Chief Financial Officer Scott Kornblau. Lassa will provide an update on the events of the quarter and the year, then Scott will continue with an update on our financial results for the quarter and the year. LASA will conclude with an update on the outlook for the business and market. 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 2021 Form 10-K and subsequent filings. During this call, we also refer to certain non-GAAP financial measures, including adjusted EBITDA, which are explained in the Net Income to Adjusted EBITDA 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 Lhasa.

Thanks, Gina. As seen in our financial results, 2022 turned out to be challenging. We entered the year with a good backlog, a solid cash position, and a record US Army Corps of Engineers budget of $8.3 billion. We had high expectations to return to normal operations after overcoming the challenges from COVID-19 in 2020 and 2021. Unfortunately, as the year progressed, we saw significant delays in the overall dredging bid market, and specifically large capital and port keeping projects were delayed, with bid dates now moved into 2023. According to our bid records, the overall dredging bid markets in the first four and a half months of 2022 was less than 50% of previous year's averages, which severely impacted our fleet utilization second half of 2022, as a portion of our annual revenues rely on projects bid and executed within the year, which we call book and burn. And typically, the majority of these projects are beach re-nourishment projects and coastal restoration projects, which carry higher margins. And overall for 2022, the bid market for beach re-nourishment projects were about only at 73% of the 2021 levels, and coastal restoration projects were at 57% of 2021 levels. To some extent, the lack of capital work was replaced by an increase in maintenance work. However, maintenance projects typically earn lower margins due to the nature of the work and the competitive landscape. As bidding picked up in the second half of the year, we won 47% of the bid volumes and ended the year with $375.5 million of dredging backlog and $594.7 million in open options and projects pending award. The US Army Corps of Engineers is the largest client, and during the year, we held numerous and constructive discussions with the Corps leadership. on what was impacting the bid market and how to resolve the issues. And we have started to see positive developments for 2023. Other external issues also significantly impacted operations. High inflations impacted projects and dry docking costs, and supply chain issues delayed dry docking completions. We experienced unseasonal and extreme weather conditions on some of our projects on the East Coast. We experienced more than normal challenging soils and site conditions on projects. Claims related to these projects are still pending resolution, and revenue and profit recognitions are impacted until these discussions are completed. The fourth quarter was impacted by the same issues as we have experienced this year. Specifically, we had significant weather impacts from storms in the northeast. The earlier than planned upper dredge requirement of the Terrapin Island dredge and both the Ellis Island and Padua Island had lengthy stays in dry dock, which increased costs and delayed revenues into 2023. We have, through the year, been taking action to adjust to the current difficult market conditions, as well as preparing for future years. We have temporarily cold-stacked two dredges and related support equipment, which will reduce operating costs. The cold-stacked dredges can easily be reactivated when we see the bid market improve. In our fleet renewal and improvement program, and the 42-year-old Hopper Dredge Terrapa Island was scheduled for retirement following the delivery of the new Hopper Dredge Galveston Island mid-2023. But a mechanical issues or major mechanical issue combined with a delayed bid market led to a decision to retire her now in the fourth quarter of 2022. And correspondingly, we have during the year been reducing our general and administration and overhead cost structure to reflect the current market conditions. Earlier this month, we had an additional 10% reduction in G&A and overhead staff, and we target a further 5% reduction in 2023 through natural attrition. As we adjust to the current market situation, We remain optimistic in the long-term outlooks for both dredging and offshore wind markets. Our ambition is to continue to be the U.S. industry leader in our selected market segments, and an important part of our strategy is to keep our fleet renewal program moving forward as planned. After decommissioning several of our oldest dredges in 2017, We have invested in productivity upgrades to our best-performing vessels, and our new hopper dredge, the Galveston Island, is on budget and is expected to be operational in the middle of 2023. And her sister ship, the Amelia Island, is expected to be delivered in 2025. Our U.S.-flagged JOMSAT-compliant inclined four-pipe vessel for subsea rock installation It's on budget and expected to be ready for operations the first half of 2025 to start working on the Empire Wind 1 and 2 projects for Equinor and BP. And I will now turn the call over to Scott to further discuss the results of the quarter and the year, and then I will provide further commentary around the market and our business.