Great Lakes Dredge & Dock Corporation

Good day and thank you for standing by. Welcome to the Q2 2025 Great Lakes Dredgen DOT Corp 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 first speaker today, Eric Burge, Vice President of Investor Relations. Please go ahead.

Good day and thank you everyone for joining us. Welcome to Great Lakes Dredgen DOT Corp's second quarter 2025 financial results conference call. Before we begin, please note that certain statements made during this call are forward-looking in nature and are subject to various risks, uncertainties, and assumptions. These factors may cause extra results to differ materially from those anticipated. For a detailed discussion of these risks, please refer to our filings with the Securities and Exchange Commission. We will also discuss certain non-GAAP financial measures including adjusted EBITDA. Reconciliation of these measures to the most direct comparable GAAP measure can be found on our earnings release and on our investor section of our website at .gldd.com along with other supplemental operating information. Joining me on today's call is Lassa Pedersen, our President and Chief Executive Officer, and Scott Kormlau, our Senior Vice President and Chief Financial Officer. Lassa will begin with a review of the quarter's key developments, followed by Scott, who will provide detailed overview of our financial performance. Lassa will then conclude the call with commentary on the business outlook and market trends. With that, I will now turn the call over to Lassa.

Thank you, Eric. Following strong financial results in the first quarter over this year, the momentum continued into the second quarter. The solid results driven by high equipment utilization and strong project performance, executing complex port deepening and coastal restoration projects, leveraging the capability of our extensive fleet. We ended the quarter with revenues of $193.8 million and adjusted EBITDA of $28 million. Our dredging backlog remains strong at $1 billion, with 93% coming from capital and coastal protection projects, plus an additional $215.4 million in awards and options pending. Our successful bid strategy from last year resulted in a large number of project wins and a quality backlog, which will support high asset utilization and a solid revenue generation for the remainder of 2025, as well as providing a good base and revenue visibility for 2026. During the quarter, we received notice to proceed on the Woodside Louisiana L&G project. The awarded work is included in our second quarter backlog, along with two options that are included in our options pending award. Dredging operations on the project are expected to commence early 2026. Our strong performance in Q1 and good outlook for the remainder of the year contributed to our decision to initiate a $50 million share repurchase program in March, as we believed our share price did not reflect the company's financial performance and long-term outlook. As of June 30, we have repurchased 1.3 million shares, with a total spend of $11.6 million under this program. During the quarter, we upsized our revolving credit facility to further enhance liquidity, which Scott will provide more details on. Moving to our new build program, which is nearing completion, our newest hopper dredge, the Amelia Island, is expected to be delivered in the next few weeks. We will go straight to work on projects already in backlog. The Amelia Island and our sister ship, the Galveston Island, have been specially designed for the shallow and narrow waters in our U.S. coastlines and are efficient tools for us to work on coastal protection projects, such as beach restorations, wetland improvements, and barrier island construction. The final vessel in our new build program, the Arcadia, the first U.S. flag Jonesat compliant subsea rock installation vessel, is also currently under construction and hit a key milestone with her launch from dry dock in July. Delivery is expected in the first quarter of 2026, at which time she will go straight to work on Equinox Empire Wind 1 project. The target markets for the Arcadia include domestic and international projects for protection of critical subsea infrastructure, such as oil and gas pipelines and power and telecommunication cables and offshore wind installations. I now turn the call over to Scott to further discuss the results of the quarter, and then I'll provide further commentary around the market and our business. Thank you, Lhasa, and good morning,

everyone. I'll start by walking through the second quarter, which resulted in revenues of $193.8 million, net income of $9.7 million, and adjusted EBITDA and adjusted EBITDA margin of $28 million and 14.4%, respectively. Despite having four dredges performing the regulatory dry docking at various times during the second quarter of 2025, revenues of $193.8 million increased $23.7 million from the prior year's second quarter, as every active dredge was working for the majority of the quarter. Current quarter gross profit and gross profit margin increased to $36.6 million and 18.9%, respectively, compared to $29.8 million and 17.5%, respectively, in the second quarter of 2024. The increase in gross margin is primarily due to improved utilization and project performance and a large number of capital and coastal protection projects, which typically yield higher margins. These projects accounted for over 88% of our second quarter revenue. The -over-quarter gross profit increase was partially offset by higher dry docking costs. Current quarter's operating income of $17.1 million increased $2.5 million compared to the prior year's quarter operating income of $14.6 million. The -over-year increase is driven by higher gross profit, partially offset by higher general and administrative expenses, mostly due to increased incentive compensation resulting from strong first half of the year. Net interest expense of $4.2 million for the second quarter of 2025 was flat compared to the second quarter of 2024 and second quarter 2025 net income tax expense of $3.4 million increased from $2.8 million in the same quarter of 2024 due to the results. Rounding out the P&L, net income for the second quarter 2025 was $9.7 million, up from $7.7 million in the prior year quarter. Total capital expenditures, including capitalized interest for the second quarter, was $64.6 million, made up of $19.8 million for the Dredge Amelia Island, $28.7 million for the construction of the Acadia, $8.8 million related to the addition of support equipment with the remaining $7.3 million coming from maintenance and growth. Our previous full-year CAPEX guidance of between $140 and $160 million, including capitalized interest, remains unchanged. Turning to our balance sheet, we ended the quarter with $2.9 million in cash and $5 million drawn on our revolver, which doesn't mature until the third quarter of 2027. And as Lhasa mentioned earlier, in May, we executed an amendment to our credit facility, upsizing our revolver by $30 million to $330 million, further enhancing our liquidity, which stood at $272 million at quarter end. Our balance sheet is in great shape, with a trailing 12-month net leverage ratio of 2.7 times, a weighted average interest rate on our total debt under 7%, and no debt maturities until 2029. For the first half of 2025, we were $36 million free cash flow positive, and as our new bill program will be substantially complete at the end of the year, we expect this number to significantly grow starting in 2026. As I discussed on the Q1 earnings call, 2025 is a heavier than normal dry dock year for us, and during the third quarter, we will have three vessels at the dock at various times for regulatory surveys and repairs. Utilization will remain strong on the other vessels, and with the Amelia Islands scheduled to come online, we expect to see third quarter EBITDA higher than the second quarter. Despite the large number of dry docks, our expectation is that full year 2025 results will be the highest in company history for both revenue and net income. With that, I will turn the call back over to Lhasa for his remarks on the outlook moving forward.

Thank you, Scott. The administration continues to demonstrate strong and consistent support for the industry. The U.S. Army Corps of Engineers is operating in fiscal year 2025 under a continued resolution through September 30th, which sustains the record funding levels established in the prior fiscal year's budgets. This support, along with our $1 billion backlog, which includes a robust mix of large and complex projects in the beach, renourishment and port deepening markets enable us to continue to deliver on a very busy 2025 and provides clear revenue visibility extending well into 2026. We expect the 2025 dredging bid market to be at a normalized volume of approximately $2 billion, focused on coastal protection projects after very strong port deepening bid markets in 2023 and 2024. As we look further ahead, we are beginning to see meaningful progress on the next phase of deepening projects, including New York, New Jersey, Tampa, New Haven, and Baltimore, among others, the dredging work likely to commence in 2027. In response to early signs of potential delays in the U.S. offshore wind market, we proactively adjusted our strategic outlook for the Arcadia. Over the past couple of years, we have expanded our target markets for the Arcadia to include the safeguarding of critical subsea assets, including oil and gas pipelines, power transmission lines, telecommunication cables, and international offshore wind farms, increasing our opportunities into a broader range of services we now refer to as offshore energy. The Arcadia is engineered to precisely deposit rock for the protection of subsea infrastructure against environmental forces such as weather and potential acts of sabotage by hostile entities. We are actively pursuing engagement across these sectors, bidding work for 2027 and onwards. As we have between Empire Wind 1 and Earth's Sunrise Wind, Arcadia fully booked for work in the U.S. for 2026. In conclusion, we are confident our strong project execution and results for the remainder of the year. Our strong backlog gives us good revenue visibility for 2026. Our new bill program is coming to an end and we are looking at generating solid positive cash flows for 2026. With that, I'll turn the call over for questions.

Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by as we compile the Q&A roster. Our first question comes from Joe Gomez of Noble Capital. Your line is now open.

Good morning and congrats on the quarter. Thanks, Joe. I wanted to start off with just kind of take a look at the pace of awards. Is it running to expectations? Are you seeing anything being kind of pushed out to the right? Is there anything there that leads you to have any concern about the award level for this year?

Yeah, Joe. So, you know, as we talked about it at year end, one, we expected a more normalized bid market for this year. That's playing out. We also knew as the current deepening cycle was starting to come to an end, there would be very little capital projects. That also was playing out. As Lhasa said, we do see early signs of the next wave of deepening projects coming out in the next 18 months or so, which is a good sign. And then the third thing, with our utilization, with our backlog, we were not going to be able to participate in a lot of the bids that came out, just because we didn't have availability. For the first half of the year, we did not bid on well over 50% of the projects that came out. One, we just didn't have the availability. Or two, it just didn't fit into the profile of the limited availability we have. So, this market ebbing flows. Our win rate is going to ebb and flow. And we have the backlog like I have. It's just impossible for us keep winning at the rate that we were winning over the last couple

of years. Okay, thanks for

that. On the Acadia, obviously, you mentioned you've got it fully booked in 26 and you're exploring other markets in 27. Is there the possibility that you think that vessel could still be in the US in 27? Are most of your efforts looking overseas in the US? Or is it just international markets for 27?

Yeah, currently, we are bidding a lot of work in Europe and we're also looking at Asia for the remainder of this decade. The market in Europe continues to be strong and it is probable, most probable, that the vessel will be in Europe when

we get entered 2027. Okay.

And then, one last one for me, kind of more 10,000 foot level ASA. You guys have mentioned the new build program should be coming to an end here. All the positives for that. Is there anything out there, maybe far out on the horizon right now that would make you reconsider and say, maybe we need to build more vessels? Or is this, hey, we are definitely done here for whatever the next phase of years is?

Well, clearly, we've been looking at our fleet. It's my opinion. We have invested heavily into our hopper fleet. So, we have now four very young, modern hoppers in the market. Plus, we have two older ones, smaller ones. So, we have a fleet that is updated and very competitive. Our cutter fleet is also large. We are continuously updating the equipment on board our cutters. So, we, at this point in time, we don't see any need for building any new dredges. But that may change over time. But I would say for the coming couple of years, it's not on the agenda. Scott, do you have any comments?

No, I think that's right. Joe, we've said we may look to do some strategic upgrades on some of the non-hopper fleet. But we're comfortable with the number of dredges that we have right now. We strategically invested over the last few years. And I think we're already starting to see the dividends paying off and continue to expect the

same sort of results. Okay, great. Thanks for that. I'll get back

in queue. Thank you. Thank

you. Our next question comes from the line of Julio Romero of Cydotian Company. Your line is now open.

Great. Thanks. Morning, Vasa, Scott, and Eric. Maybe staying on the Acadia for a bit. You know, what's your confidence level in Acadia delivery to you in the first quarter of 26 versus potentially later in the year? And then what would be your best guess as to Acadia revenue dollars in 26, if we assume it does get delivered on time and goes straight to work on Empire 1?

Yeah, we have high confidence in getting the vessel delivered in Q1. That is the date that the yard is giving us. The acquisition of the yard by the Koreans, Anwa, has resulted in additional resources coming to the yard. And the progress is good. As I said, we are out of the dry dock and it's now at the outfitting key at Philly Shipyard. And they are looking at trying to improve the delivery dates to an earlier delivery in Q1. But as we are speaking today, that is what the yard is telling us. Revenue and expectation? Yeah,

and so we are, there are some options that, you know, we'll get exercised. We're still, you know, finalizing pricing on that. So, I'm going to keep numbers a little closer there. But, you know, with the end of Q1 delivery and, you know, call it another month, month and a half of commissioning, you know, we should see, you know, a little more than six months, give or take of revenue. You know, I think we have said that in the U.S., you know, this vessel will, you know, is definitely capable of getting, you know, well of a hundred million dollars revenue for full year. And, you know, again, call it, you know, seven months, give or take with this year, you know, just normal ebb and flows and mobs between jobs. I think you can get directionally correct on how we're thinking about it.

Yep, fair enough. And, you know, any update on potential wins for the offshore energy awards for the Acadia and a quick refresher on what the lead time is between bidding an award for offshore energy in Europe and in Asia?

Yeah, and the lead time is much shorter in those markets, mature markets. Here in the U.S., we were fortunate to be able to book projects very early for the Acadia due to the newness and the novelty in the market and lack of vessels or U.S. flag vessels in the international markets. It's more looking at maybe a year, maybe less in lead time between award and you actually execute the project.

Yeah, Julio, there has not been one project in Europe or Asia that we have bid on for 27 or beyond that's been awarded to anybody yet.

Okay, I appreciate the finer point on the lead time there and, you know, a year or less. That's very helpful. Just maybe on the base business, you know, are you, I think you touched on it earlier, but are you seeing any change in customer hesitation at all or any delays in decision making on the base dredging business?

Well, as you know, we are in a continued resolution, which is good and bad news. The Corps cannot bid new projects in this situation, but they have the revenue for, or the guaranteed, guarantee for the revenues similar to prior years. So that means that there's a lot of projects which are being executed in this situation. We have to wait until the government or the Congress get together and make a new budget for next year. And then there's a number of new projects that should be included in that new budget. That is the, let's say, clarity that we have around it. There's a number of beach renourishment and reconstruction projects that are being bid at this point in time, and that market is very strong. And as you know, we perform extremely well on those projects on the East Coast.

And I guess for LNG, I guess is also what I was getting at. If, in the order cadence of LNG, any change from decision, from customer decision making on that front?

Well, we are currently engaged in three projects in the LNG space. There is a couple of other projects where it's either being done by other dredgers. There's probably two LNG projects, other than the three that we are working on that is going forward, and where our competition will be fully engaged. So beyond that, it's probably more a discussion on the general LNG market. Is there room for more capacity to be built in the U.S.? And how can the export markets really absorb these volumes of LNG

going forward? Okay. Helpful. I'll pass it on. Thanks.

Thank you. Our next question comes from the line of Kevin Ganey of Thompson Davis & Co. Your line is now open.

Good morning, Laszlo Scott and Eric. Nice quarter on a heavy dry job. Thanks, Kevin. I was hoping that maybe we could kind of touch on the Acadia conversations that you guys are having. And maybe at this point, what is more likely to happen? Is it going to be more international wind work or asset protection jobs and kind of how those conversations are unfolding?

Yeah, it's a very interesting market for us. I think I've been saying on these calls that we business would be both U.S. and international work. The fact that we now have a slowdown in the U.S. as we are seeing means that the international work had to be addressed earlier. We started that almost two years ago to talk to clients that we have here in the U.S. about their European operations. And we have been bidding very actively for that work starting in 27 and onwards. It's offshore wind farms. There's large volumes of rock needed for the offshore wind farms. But also the power cable or transmission cables that are being installed in Europe requires a lot of rock protection. It's a large market and we are actively engaged in bidding for that work. There's also been discussions around the communication cables, the sabotage that's been happening in the Baltics and the, let's say, unprotected infrastructure that you see in the U.S. and the U.S. and the U.S. are also very interested in the potential impact those from sabotage. So there is several markets here which are interesting for Acadia.

Thank you, I appreciate that color. As far as I think you mentioned Scott, the KVDX and Q3 are going to be three. Is there any set up for Q4 as well currently?

Yeah, right now and again the caveat is that these can still ebb and flow left or right. We have two planned at various times, not necessarily full quarter during Q4. And then I'll answer the next question you didn't ask. Because it was such a heavy dry dock year this year, we expect to see a lower than average dry docking schedule for 2026.

And just

to clear up on cash flow, what was operating cash flow Q2 and do you have any thoughts about second half cash flow?

Yeah, Q2 operating cash flow was right around 30, I'm sorry about 60-ish for operating cash flow and as I mentioned on the call, free cash flow for the first half of the year, well above 30. We expect to see, I'm not going to say the numbers will be the same, but this year is going to look like a normal year. The quarters Q1 and Q4 will be the strongest and then the middle ones something less. So we saw that the first half of the year. My expectation is we'll see that in the second half of the year. I think we do still have to finish up the payments on the Amelia Island. We obviously have some more to do on the Acadia for this year. So we still have some capex this year. My guess is you just kind of look at total cash flow second half of the year will be probably flat-ish give or take. And then as we talked about next year as the new bill program winds down at the beginning of the year, that's when we really start generating cash.

Great, sounds good.

Thank you. As a reminder to ask a question, please press star 1-1 on your telephone. Our next question comes from the line of John Tanwon-Teng of CJS Security. Your line is now open.

Good morning, it's Jeremy on for John. Thanks for taking the time to take questions. How should we think about capital allocation beyond capex given the stronger performance? Has your preference shifted more towards repurchases versus debt pay down?

No, I think with where we're at now, I think we kind of go back to the priorities we had been stating all along. Let's get through the new bill program and then let's start delivering the new program. We had a reaction to the softball that the market gave us where we just saw this huge depression in the stock price. So put the program in place, we were able to take some swings at it at a very depressed price. Now we'll, as long as we see the price where it's at or higher, not that we think it's properly valued now, but we'll just go back to the other priorities. The program's still in place. If we see another huge disconnect, we can always start nibbling again. But right now, as I see it, let's get through the new bill program and then let's start delivering.

Makes sense, thank you. And then can you just discuss the expansion of the credit facility and kind of the rationale behind doing so?

Yeah, a couple of things drove that. We did have on our second lean paper the ability to upsize it by $50 million that expired during the second quarter. We weren't going to take it, but we did have the opportunity to upsize Revolver at much more favorable pricing. To the tune of 30, we did it. Also, with the LNG work that we have and the progress we're making on the offshore energy, those projects typically require letter of credit as opposed to the base dredging business, which are usually surety bonds. So the Revolver for us is not just a mechanism to borrow cash. It's also the facility that we use to issue letter of credit. You'll see we're going to issue our 10Q later today. We have roughly $60 million of letter of credit outstanding right now to support the LNG and offshore energy backlog.

Awesome, thank you.

Thank you. I'm showing no further questions at this time, so I would now like to turn it back to Eric Burge for closing remarks.

Thank you. We appreciate the support of our shareholders, employees, and business partners, and we thank you for joining us for our discussion today about the important developments and initiatives in our business. We look forward to speaking to you during next quarter's earnings. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.