Great Lakes Dredge & Dock CORP Q1 FY2024 earnings call

• Great Lakes concluded Q1 with good financial results, marking the best EBITDA quarter since Q4 2021. The new hopper dredge Galveston Island was commissioned and started operations. - Secured five major project awards in 2023, including Freeport channel Deepening, Sabine-Neches Waterway Channel Improvement, etc. Subcontractor work on LNG projects started, with main dredging to commence mid-2024. - Dredging backlog was $879 million at quarter end, with 77% in capital projects. The 2024 U.S. Army Corps of Engineers budget was a record $8.7 billion, boosting bid market. - New build program progress: Galveston Island in operation, Amelia Island to be delivered in 2025. Offshore wind rock installation vessel Acadia had key laying at Philly Shipyard, scheduled for rock installation work in 2025 and 2026. - Entered into a $150 million second-lien credit agreement in April to support new build program and provide liquidity.

In Q1 2024, revenues were $198.7 million, an increase of $40.7 million from the prior year's first quarter. This was primarily due to higher coastal protection revenue and capital revenue, with capital revenue more than doubling from the prior year quarter, aided by the startup of the Galveston Island, offset partially by a decrease in maintenance and rivers & lakes revenue. Adjusted EBITDA was $42.9 million with an adjusted EBITDA margin of 22%. Current quarter gross profit was $45.6 million with a gross profit margin of 22.9%, compared to $12.1 million and 7.7% in the first quarter of 2023. The balance sheet ended the first quarter with $22.8 million in cash and $60 million drawn on a $300 million revolver, and in April, a $150 million second-lien credit agreement was entered into, fully paying off the revolver and providing over $325 million in liquidity.

• The 2024 U.S. Army Corps of Engineers budget of $8.7 billion is expected to lead to a robust bid market in Q2 and Q3, including port deepening and coastal protection projects. - The offshore wind market has new tendering rounds and leases, presenting growth opportunities. - Full year CapEx guidance remains between $170 million to $195 million, with the second half expected to be strong as backlog is executed. - Expect bidding to increase in Q2 and Q3 with various projects like Mobile port deepening and East Coast coastal protection.

• Uncertainties in the offshore wind industry despite new tendering rounds. - Timing of dry docks for dredges, with some dry docks pushed from Q1 to Q2, affecting short-term utilization. - Dependence on government contracts and bidding processes, which can be subject to delays or changes.

Q: How much utilization did the Galveston Island get in Q1?

A: She started operations in January, was partially operational during Q1, exact utilization number not available but utilization is solid for the rest of the year.

Q: Did the LNG project generate revenue in Q1?

A: Subcontractor work started, but revenue from LNG projects is expected to tick up midyear as main dredging commences.

Q: Why were dry docks pushed from Q1 to Q2?

A: One dry dock started in Q1 and continued into Q2, another had additional work in Q1 delaying it to Q2, with work to get ready for LNG work shortly after.

Q: Will Q3/Q4 performance be similar to Q1?

A: Backlog will be executed, with some dry docks and maintenance in Q2, but the second half is expected to be strong with return to normalcy as per prior expectations.

Q: Update on Title XI?

A: Continues to have dialogue, but no major updates, and the recent financing maintains flexibility to pursue alternative sources including Title XI.