Great Lakes Dredge & Dock Corporation Q3 FY2024 earnings call

• Great Lakes had a strong Q3 with $543 million in new contracts, including beach renourishment and port deepening projects. A record backlog of $1.2 billion was achieved, along with $465 million in pending award low bids and options.
• Dredging operations started on LNG export facility projects (Port Arthur LNG Phase 1 and Brownsville Ship Channel) in Q3, progressing well despite Biden admin's LNG license pause not impacting awarded projects.
• New hopper dredge Galveston Island delivered in Jan 2024, performing well; sistership Amelia Island expected in H2 2025. Offshore wind backlog was $44.6 million with $12.7 million in options pending award.
• Philly Shipyard sale to Korean group expected to have positive impact on Acadia build, which is contracted for offshore wind projects.

In the third quarter of 2024, Great Lakes Dredge & Dock achieved revenues of $191.2 million, net income of $8.9 million, and adjusted EBITDA of $27 million. Capital and coastal protection projects accounted for 80% of total revenues. For the trailing 12 months, revenues were $741.6 million, net income was $59.1 million, and adjusted EBITDA was $136.5 million. Current quarter gross profit was $36.2 million with a gross profit margin of 19%, up from $9 million and 7.7% in Q3 2023.

• Fourth quarter expected utilization and revenues to increase from Q3, with margins likely to rise due to environmental windows opening. Full year CapEx guidance remains $130-150 million, likely lower end.
• 2025 Corps budget expected to be strong, with House and Senate appropriations supporting solid funding for the U.S. Army Corps of Engineers, leading to good bid market for 2025.

• Potential delays in Philly Shipyard sale regulatory approvals could impact Acadia build timeline.
• Biden administration's temporary pause on new LNG export licenses not affecting awarded projects but could impact future ones.
• Competitive environment changes, though bid market in 2024 has been strong, with some competitors retiring vessels.

Q: Joe Gomes asked about the award environment for Q4, pending low bids and options.

A: Scott Kornblau said $90 million of low bids pending at end of Q3 were awarded, with $140 million in options, some to be exercised in Q4. Lasse Petterson added Q4 and Q1 are lower bidding periods.

Q: Joe Gomes asked about Philly Shipyard sale impact on Acadia.

A: Lasse Petterson said new owner has ambitions, regulatory approvals expected in current quarter, transfer to new owner will be positive.

Q: Joe Gomes asked about competitive environment.

A: Lasse Petterson said bid market 2024 strong, fleet fully occupied, competitor retired two dredges, Galveston Island added, capacity not increased substantially.

Q: Julio Romero asked about Q3 gross margins and expedited dry docking impact.

A: Scott Kornblau said expedited dry docking cost $2-2.5 million, Q4 margins expected to increase from Q3.

Q: Julio Romero asked about Q4 top line and 2025 margin potential.

A: Scott Kornblau said Q4 revenue strong with all active vessels working, large capital projects to execute in 2025.

Q: Adam Thalhimer asked about Acadia reservations.

A: Lasse Petterson said reservations give foundation for vessel utilization from 2028 onwards.

Q: Adam Thalhimer asked about LNG awards.

A: Lasse Petterson said Tellurian sold to Australian developer, project has FERC approval, not affected by Biden ban.

Q: Adam Thalhimer asked about Q4 top line.

A: Scott Kornblau said Q4 revenue strong, upper teen percent of backlog to be earned.

Q: Jon Tanwanteng asked about NextDecade project and G&A comp.

A: Lasse Petterson said NextDecade continuing project, Scott Kornblau said Q4 G&A expected $18-19 million, reset for 2025.

Q: Jon Tanwanteng asked about Acadia utilization in late 2026 and 2027.

A: Lasse Petterson said new options being discussed for Empire Wind and Sunrise Wind projects, partial utilization expected.