Posted on March 21, 2025
On Wednesday, 19 March 2025, Great Lakes Dredge & Dock (NASDAQ: GLDD) presented at the Sidoti Small-Cap Virtual Conference, showcasing a robust financial year in 2024 while addressing future challenges and opportunities. CFO Scott Kornblau highlighted the company’s second-highest EBITDA in history and a substantial backlog, while also addressing concerns over shipbuilding incentives and market headwinds.
Key Takeaways
- Great Lakes reported over $760 million in revenue and $136 million in EBITDA for 2024.
- The company holds a $1.2 billion backlog, primarily in high-margin projects.
- A $50 million share repurchase program is authorized through 2026.
- New build program nearing completion, with significant free cash flow expected.
- Diversified market opportunities in offshore wind, telecommunications, and oil & gas.
Financial Results
- 2024 Revenue: Over $760 million
- EBITDA: $136 million, with margins in the high teens
- Liquidity: Over $280 million available
- Debt Maturities: None until 2029; revolver of $300 million maturing in Q3 2027
- Free Cash Flow: Expected to be positive next year, with an estimated $80 million based on 2024 results
Operational Updates
- Backlog: $1.2 billion, 94% in capital and coastal protection projects
- New Build Program: Over $500 million invested, nearing completion with two hopper dredges and the Acadia vessel
- Drydock Schedule: Seven vessels in 2025, including four hopper dredges
Future Outlook
- Market Opportunities: Pursuing offshore wind projects in the US and Europe, telecommunications, and oil & gas
- WERDA: New York Harbor deepening could be a $6 billion program over the next decade
- Guidance: Free cash flow positive next year, strong outlook for 2025 despite a heavy drydock schedule
Q&A Highlights
- White House Shipbuilding Incentives: Seen as positive for the industry, supporting US jobs
- Federal Funding: No impact on project funding or bid releases
- Capital Allocation: Balancing share repurchases with new build completion and deleveraging
Readers interested in more details can refer to the full transcript below.
Full transcript – Sidoti Small-Cap Virtual Conference:
Julio Romero, Analyst, Sidoti and Company: Okay. Morning, everybody, and thank you for joining the Sidoti and Company March twenty twenty five Small Cap Conference. My name is Julio Romero, and I cover building products, industrials, engineering and construction at Sidoti. We’re really pleased to be able to host Great Lakes Dredgen Dock Corporation. Their ticker is GLDD.
Company is here fresh off of announcing a $50,000,000 share repurchase authorization, so very timely presentation, which we appreciate. With us today, we have Scott Kornblau, senior vice president and chief financial officer. If you have any questions for Great Lakes, please type them into the q and a section at the bottom. Happy to ask on your behalf. With that, Scott, thanks so much for being here, and the floor is yours.
Scott Kornblau, Senior Vice President and Chief Financial Officer, Great Lakes Dredge & Dock Corporation: Great. Thanks, Julio. Appreciate, you having us, and thanks for everybody for joining. So I do have a a handful of slides I wanna run through. And then as Julio said, we’ll do q and a, at the end.
Some high level highlights, and I’m going to dive into all of this more throughout the presentation. But 2024, extremely successful year for us, and we ended up with the second highest EBITDA in company’s history. We’ve also set ourselves up now for the strong results to continue. We entered this year with $1,200,000,000 of backlog. We also continue to make progress on our entry into the offshore energy space.
We’re building a new vessel, the Acadia. And again, I’ll get into more details on all of this during the presentation. So just a little about us. We are the largest dredger in The United States, and we’ve been doing this for a very long time. Company was established in 1890.
The kind of work we do is critical to The U. S. We do port deepening, we protect coast with barrier islands, rebuild beaches after storm damage. We mostly work on the dredging side for the Army Corps of Engineers, but we also work for state local governments and private clients, including LNG producers. Some of the numbers on the bottom right, I’m going to dive into a little further into the presentation.
There’s really three kind of dredging projects that we execute. The first is called capital. This is our bread and butter. These are large complex projects. It’s port deepening and expansion.
There’s been a number of deepening cycles in The U. S. For ports as the ships get larger and bigger, the ports need to get deeper. The LNG facilities, same thing. We’re working on a couple of large LNG.
You need to make those facilities deeper so the carriers can come in. Complex, long projects, and we typically do very, very well on these kind of projects. The next type of project is coastal protection. That is the creating and then rebuilding of beaches. You know, they get damaged from natural erosion and then also from storms.
And then the last category is maintenance. This industry is the gift that keeps on giving. There is natural sediment that occurs on beaches and in ports, and you need to go in and able to maintain that debt. I have these listed in order of complexity and therefore typically in order of margins and returns that you get on it. I have foreign listed here.
We have historically worked internationally. The U. S. Dredging market is so strong right now. We have all of our vessels here and I think we’ll be like that for the foreseeable future, but we always do have the option to deploy vessels overseas if it makes sense.
There are three kind of dredges and we have a number in all three categories. And it really is what gives us an advantage because we can put multiple dredges and different kind of dredges on projects, so we always have the best equipment doing the right job. The first one is hoppers. These are ships. So these these do move.
We have five of these, and we are building a six one that we’ll take delivery of later this year. We also have the largest hopper dredge in The US that we built about seven years ago. These are very mobile assets. They can operate in rough water and very, very good tool. We have the youngest hopper fleet by far.
Next is mechanical. We have four of these. These are really clamshells on a barge. Again, they’re very fit for purpose. And again, we’ll move them in and out of projects as needed.
And the last one is called hydraulics. They’re also referred to as cutters. They’re really good for digging up hard rock. They have teeth on the bottom that can dig up rock, and then you can pump it on or offshore depending on what you need to do the material. So it gives us a huge advantage when we’re bidding projects because we can deploy multiple assets on that project.
We are, as I mentioned, the largest dredger. We typically have a market share in the 30% range. We’re a little over that right now. Our market share is more than our next two competitors combined. And we also have the largest dredging fleet in The United States.
As I mentioned, our biggest customer is the U. S. Army Corps of Engineers. So we do rely on federal funding. Fortunately for us, we had seven consecutive years of record budgets for the Army Corps of Engineers.
Twenty twenty four had an $8,700,000,000 budget, which led to nearly a $3,000,000,000 US dredging bid market, and that’s a record. There’s never been a US bid market dredging bid market, that large, and that is part of what led to the extremely strong 2024. Just last week, president Trump signed a continuing resolution that will fund the federal government for the rest of the fiscal year. So that’s through September. During a continuing resolution, the government, and in our case, the US Army Corps of Engineers, they get access to prior year’s funding, and that’s a good news for us because I mentioned, this is a, was a record budget.
While I’m talking about government, I do wanna, you know, talk about Doge. We’ve been hearing a lot in the news around Doge. We don’t expect to see any impact of the dredging industry, based on Doge. The work we do is essential and critical to protecting and maintaining our coastlines. We have had conversations with Doge in DC.
They invited us to their offices and everything they’re saying, they understand how important this is, and we believe the dredging market will be business as usual. And that’s exactly what we have seen so far this year. In addition to the normal budget, which has been a record, at the end of twenty twenty three, there was an additional 1,500,000,000 approved as a disaster relief, and that was for the storms that decimated the East Coast. Those funds started going out in ’24 and they continue. So there’s additional funding to do a lot of the beach work and we think that’s what’s gonna be the focus this year is there’ll be a lot of activity in the bid market.
We made up a lot of these beach jobs. I wanna quickly mention WERDA. It’s the Water Resource Development Act. Every two years, Congress passes WERDA, and it basically allocates funding to start studying the next big projects that are along the line. But one of note 2022, that’s when the studying of the next deepening of the New York shipping channel, the New York Harbor having it’s estimated to be a $6,000,000,000 dredging program.
It’ll be 10 plus years. That looks like it’s going to be moving forward. We expect dredging will start in the next handful of years and it’s just going to be really, really good for the industry. Last thing I want to mention, we do work for private clients as well. There were two very large LNG projects that were awarded in 2023.
Great Lakes won both of them, and they’re both being executed right now. Rio Grande LNG is the largest project ever done in our history. And with the recent change of administration, we think there’s going to be many more opportunities for LNG work. As I mentioned, we entered this year with $1,200,000,000 of backlog. I also mentioned capital projects and coastal protection are the highest margin projects.
That makes up 94% of our current backlog. As I said, last year, we won about a third, again, which is typically what we do. And of the major projects that were awarded last year, we won three of the top four. The ones in red are the Great Lakes Wind and six of the top nine projects. Again, really setting ourselves up for the next couple of years.
We are in the late innings of the largest newbuild program we’ve ever done, just over $500,000,000 That was investing in two new hopper dredges. I mentioned the Galveston Island. We took delivery of last year. She’s doing great. We’re building a sister to the Galveston Island named the Amelia Island.
We’ll take delivery of her in the second half of this year, and she’s already contracted out through ’26. So we’ll go straight from the yard to work. Also invested, in multiple support equipment. We did some emission upgrades as well, and then we are building the first and only subsea rock installation vessel named the Acadia. So late innings, we should wrap up the new build program about a year from now, and there’s about $120,000,000 or so left on it.
So again, most of the heavy lifting is done. We’ll get it substantially wrapped up this year and completely wrapped up next year. So I do want to talk about the Acadia. It’s being built right now in the Philly Shipyard, and I said probably nine to twelve months away from taking delivery. The Acadia is a subsea rock installation vessel.
It will lay rock over anything that needs rock, and it’s the only one being built in The U. S. That is Jones Act compliant and has all the latest emission requirements on there. So let me talk about the markets that it can service. One of them is offshore wind, not only here in The United States, but also globally.
The bottom left is the outlook for offshore wind globally. The orange line is the quantity of vessels in the market right now, including the Acadia that can do this kind of work. There is an undersupply of these vessels, in order to keep up with the demand of offshore wind internationally. When we talk about The US market, there was an executive order put in that stops the permitting of new offshore wind permits. However, existing permits, are allowed and will move forward.
Fortunately for us, we do have two contracts already, one with Empire for Empire Wind with Equinor and one for Sunrise Wind, which is Orsted. Those are permitted projects. So those are moving forward. And as we take delivery of the vessel, we will go and execute both of these projects and that should keep us busy for 2026. We also recently signed a vessel reservation agreement with a third wind developer for work in The U.
S. This is for work in ’twenty eight and ’twenty nine, but it is also a permitted project. So the vessel reservation agreements puts us in exclusive negotiations to execute a contract and that is progressing. So a very robust offshore wind market. The US will happen.
In our opinion, it’s not if, it’s when. So we’ll execute these two projects, and, there’s a pipeline of a number of projects, towards the end of the decade that we’re excited about. But in the meantime, there’s a plenty of work in Europe and Asia, and we’ll start going after that. We were planning eighteen months ago for, you know, wanted to make sure we expanded and weren’t being fully reliant on The US market. So we did open up an office in Europe about eighteen months ago and are participating in a number of tenders for offshore wind projects for the period 2728, and ’29.
And the prospects looked really, really good. We just don’t expect contracting on those to happen until the beginning of next year because it’s such a robust market, an established market. They typically don’t sign vessel contracts until about twelve months prior to, to needing them. So we’ll continue to tender on projects and, you know, we’re very optimistic that we’ll have full utilization, in ’twenty seven and beyond, maybe going back and forth between The U. S.
And international. As I mentioned though, this vessel is not reliant just on the wind market. It’s a scour protection vessel and anything that needs rock over it, the Acadia can do. There’s two other markets that are very interesting to us that we are looking at participating in tenders as well. One is rock over telecommunication cables.
There’s been a number of instances recently of sabotage of vessels dragging anchors over telecommunications lines trying to disrupt communication. Putting rock over that would stop it. The other market is oil and gas pipelines. Putting rock over a pipeline also protects it from rupturing. We estimate that there’s probably another eight to 10 vessels needed for both of these markets in Europe and Asia.
We also just recently put boots on the ground in Asia to be exploring that market. So plenty of opportunities, for the Acadia, and I say we’re really excited about the prospects of it. So moving forward to the numbers, as I mentioned, 2024, a great year on all accounts, dollars $760,000,000 plus of revenue, EBITDA second highest ever at $136,000,000 and EBITDA margins in in the high teens. So very, very successful year for us. Going back historically, I’ve talked in the past about, you know, the the hiccup that happened in ’22 that was, you know, mostly macro related.
We were very adamant that we would see the return to normal. The work that we do, as I mentioned, it’s critical. It doesn’t go anywhere. It needs to be done and this is played out exactly as we predicted the return to normalcy. And as I mentioned with the backlog we have, this will continue, for for quite some time.
The bottom left is illustrative of the new build program that I that I spoke of. And again, winding down, we’ll have one final large piece this year in ’twenty five and then it will be substantially complete the first part of twenty twenty six. Our balance sheet is in really great shape. We ended the year with liquidity of over $280,000,000 We have no debt maturities until 2029. We have a weighted average interest rate of under 7%, have a $300,000,000 revolver that doesn’t mature until the third quarter of ’twenty seven.
And as Julio mentioned, we did just last week announce a $50,000,000 repurchase program. We’re going to be opportunistic on buying stock, but with the large disconnect from where our price, our stock is trading right now and the results that we keep printing, we think this is a prudent use of capital. Last thing I want to say too on the new build program, once we complete this, we are done for the foreseeable future. We have no plans of building, any any other dredges. So we’ll turn to return to a more normal CapEx, moving forward on the tail end of this new build program.
So wanted to kind of demonstrate on the other side of this new build program, you know, what what cash flow could look like. We do expect to be free free cash flow positive starting next year as the new build program winds down. So, I took twenty twenty four results adjusted EBITDA and you can use that as a proxy for operating cash flow. Our typical maintenance CapEx is somewhere in the $25,000,000 range. Currently, we have cash interest of $30,000,000 So using the 2024 results as a proxy, we have free cash flow of $80,000,000 This doesn’t account for the upside from the Acadia, from the Amelia Island, which is the new Hopper dredge that we’ll be adding later this year.
So we will have a lot of options, on the other side of this with the cash that can include paying down debt, that can include, you know, continuing with the repurchase, program that we just put in place last week. So really excited about the prospects of this business on the other side of the newbuilds program. The presentation will be posted on our website. I’ve got a few things in the appendix that I will not go through now, but it’s there for reference. And, Julio, that’s all I’ve got.
I’ll turn it back over to you.
Julio Romero, Analyst, Sidoti and Company: Excellent. A new White House office of shipbuilding that offers special tax incentives. Just if you could talk about how how does that affect Great Lakes, if it affects it at all, and then more broadly, the industry?
Scott Kornblau, Senior Vice President and Chief Financial Officer, Great Lakes Dredge & Dock Corporation: Yeah. So, our as in our vessels are substantially built right now, and we’re still parsing through that. That that appears that may be more beneficial for the shipbuilders themselves, but it is fantastic for the industry. It’s what we’ve been looking for. It’s keeping US jobs.
It’s promoting US industries. And, again, all the work that we do fits right into that as well. So now we think it’s a very favorable thing to keep all the stuff that we’re doing in America.
Julio Romero, Analyst, Sidoti and Company: Perfect. And then, you know, part of his comments also talked about, you know, the Panama Canal, reclaiming the Panama Canal, etcetera. And and he highlighted that BlackRock, you know, was part of a group that bought a 90% stake in the Panama Ports company. You know, does this translate to to any increased dredging activity, you know, around that area for for Great Lakes or the industry?
Scott Kornblau, Senior Vice President and Chief Financial Officer, Great Lakes Dredge & Dock Corporation: Yeah. There there’ll definitely be, you know, projects. As I said, right now, we are full here in The US, and, you know, have a lot of work here. But I said, we always have our pulse on other markets. We’ve deployed assets outside of The US before.
And, you know, if the returns are right, we absolutely are happy to do it again. You know, the fact that we continue to have more access and larger ships that can continue going through Bannevale. That also leads to other opportunities here in The U. S. As being the Porsche just need to continue getting wider and deeper.
Julio Romero, Analyst, Sidoti and Company: Absolutely. Just wanted to touch on your base dredging business. If you could give a State of the Union of sorts in terms of what you’re seeing on the federal funding side, does the continuing resolution impact the Army Corps pace and amount of projects, and just what you’re seeing there?
Scott Kornblau, Senior Vice President and Chief Financial Officer, Great Lakes Dredge & Dock Corporation: Yes. So as I mentioned now, the continuing resolution gives us certainty to access to prior year’s budget, which was been $8,700,000,000 and led to the largest bid market that we have seen. So, yes, the funding side is strong as it has been for the last seven years, truly a bipartisan industry. The work we do is critical. It is supported by everybody.
So, yes, we don’t think and we have not seen any impact whatsoever or change of pace in the bids that were supposed to come out so far this year. They’ve come out as expected. As I mentioned earlier, we do think this year, not anything based on the budget, but just how we saw this year playing out, will be heavier on the coastal protection. The last couple of years, there was a large number of capital projects. We think this year, those are going to be replaced by a large number of coastal protection.
The margin on coastal protection work is very comparable to capital work. So it’s also complex work that we do and do very well. So, yeah, we’re we’re excited that we’ll just continue to be able to add on to our backlog. With the backlog we have right now, we’re really trying to fill out the second half of twenty six and ’27 right now. We have very, very little white space, you know, through the until we get to the second half of twenty six.
Julio Romero, Analyst, Sidoti and Company: Very helpful. You know, any exposure to tariffs on your end and and, you know, dealing with the federal government and contracts with them, are you able to kind of put any any mitigation, clauses at all in the contracts?
Scott Kornblau, Senior Vice President and Chief Financial Officer, Great Lakes Dredge & Dock Corporation: Being a US company, we get almost nothing from overseas. So we’re we’re already procuring, the vast majority of our stuff here. And our new build program, The vessels I mean, the the equipment that came from overseas is also substantially here already, so the exposure for us is just about new.
Julio Romero, Analyst, Sidoti and Company: Gotcha. Wanted to spend some time talking about your recently rebranded offshore energy division, building the Acadia, as you said, expect to take delivery either later this year or early twenty twenty six. Just kind of a refresher of sorts, how much on the Acadia has been spent to date? And then, you mentioned $120,000,000 left on the new build. How much of that, if you could parse out, is related to Acadia?
Scott Kornblau, Senior Vice President and Chief Financial Officer, Great Lakes Dredge & Dock Corporation: Yeah. So the total build on the Acadia is $245,000,000 to $250,000,000 There’s $95,000,000 left on that. So that what makes up the bulk of the $1.25, the rest is just finishing up the Amelia Island.
Julio Romero, Analyst, Sidoti and Company: Perfect. And then when you take, you know, ownership of that, how long does a vessel like that operate, from a year’s perspective?
Scott Kornblau, Senior Vice President and Chief Financial Officer, Great Lakes Dredge & Dock Corporation: Yeah. I mean, that’s gonna be, thirty years plus, for a vessel like that. Again, these are, ships, very, very long life on these. The equipment on there, just long as you maintain them and the thrusters. I mean, this ship will be well over thirty year life.
Julio Romero, Analyst, Sidoti and Company: For sure. And I really enjoyed slide 19 you put in the deck here talking about the illustration of free cash flow post new build because I think that’s a lot of the focus on the investor front these days. And so if I think about CapEx pre newbuild period averaging at around 9% of sales, is that also a fair way to think about normalized CapEx and then we can layer on what we think net income and cash flow from operations is after that?
Scott Kornblau, Senior Vice President and Chief Financial Officer, Great Lakes Dredge & Dock Corporation: Yeah. With the new build program we did, one of the reasons we did that too is that that should reduce maintenance CapEx going forward. We do have a newer fleet. So there will be ebbs and flows year to year depending on drydock scheduling, but I think $25,000,000 to $30,000,000 is normal. This last year, we were under $20,000,000 So it does ebb and flow, but I don’t envision maintenance CapEx really being over $30,000,000 So I don’t tie it as much as a percentage of sales.
It’s just what needs to be done on these vessels. But the reason you get new vessels is so it doesn’t need as much work on the CapEx side.
Julio Romero, Analyst, Sidoti and Company: For sure. And then maybe thinking about the CapEx side, you did mention some some slight, you know, growth CapEx for, I think, doing support vessels or things of that nature in 2728. Is that correct?
Scott Kornblau, Senior Vice President and Chief Financial Officer, Great Lakes Dredge & Dock Corporation: So we’re considering that right now. I said we are we are done building, for the foreseeable future. We will not be building new new dredges anytime soon. There are some moderate upgrades that we made due to, some support equipment and to two or three dredges. We’re in the evaluation stage right now.
If we decide to pull the trigger on all of that, it’s likely an $80,000,000 program spread out over a three year period. So, you know, call it another potentially $25,000,000 or so of CapEx that would easily be done within cash flow. Again, we’re still working through all the analysis on that now.
Julio Romero, Analyst, Sidoti and Company: Really helpful. And I appreciate you putting a finer point on that. And that helps kind of think about free cash flow normalized post newbuild because the newbuild really is different. It’s a different period these few years than your history. Fair?
Scott Kornblau, Senior Vice President and Chief Financial Officer, Great Lakes Dredge & Dock Corporation: Absolutely. Again, we’re building for the future, especially on the hopper side. Those are the highest money earners. Prior to the newbuild program, we had the best hopper fleet in The U. S.
And now adding to Galveston and Amelia, we have set ourselves up for a very long period of time.
Julio Romero, Analyst, Sidoti and Company: Really helpful there. And and, you know, given the 50,000,000 share repo announced this week through ’26 and then just given where the stock is, you know, how are you weighing being more opportunistic with regards to share repurchases versus other uses of cash?
Scott Kornblau, Senior Vice President and Chief Financial Officer, Great Lakes Dredge & Dock Corporation: Yeah. Honestly, a month ago, a share repurchase wasn’t on the radar for this year because we had other priorities. In our opinion, now there’s just a huge disconnect. And if the market is going to give us a softball like this, we’re going to take it. So we’ll be opportunistic.
We still have longer term priorities. We got to complete the new build program. Eventually, we will start delevering. But if there’s going to be this large of a disconnect, we’ll just continue to we think it’s a really good return for shareholders and a good source of capital if we think there’s this large of a disconnect between what our results have shown and what we believe they’ll be and where the market has its price right now.
Julio Romero, Analyst, Sidoti and Company: Squeeze two more in here with the two minutes we have left. Number one is just a refresher on the schedule of dry docks, by quarter for ’25. As you mentioned, we have a great backlog. This year is a little bit constrained because of the abnormal amount of drydock. So any refresher there on the drydocks by quarter?
Scott Kornblau, Senior Vice President and Chief Financial Officer, Great Lakes Dredge & Dock Corporation: Yeah. So these vessels are required every five years to go into what we call a major drydocking and every two to three years to do an intermediate. The way the calendar falls, this is a heavy drydock period for us, a heavy year. We do have seven vessels going into drydock. Four of those are hopper dredges.
And as I mentioned, those are the earners. These are not we are taking vessels off of jobs to do it. We have to do that. Q1, I mentioned on the call, we had one in and out and two starting right now, so right at the end of the quarter. I’ll I’ll give quarter by quarter guidance as as we get to it on kind of the the cadence of the rest of them.
I will say though, despite having seven normal for us is a kind of three dry docks a year, It doesn’t change the fact this year is going to be extremely strong. Again, the backlog we have and more importantly, the kind of projects that we have in the backlog, we’re still extremely excited about this year. And the good news is when you have a heavy drydock year, it means the following year is likely gonna be a light drydocking year.
Julio Romero, Analyst, Sidoti and Company: Excellent. Any aspects, you think that are overlooked in your view and as well as any other kind of key messages you wanna have folks take away from today?
Scott Kornblau, Senior Vice President and Chief Financial Officer, Great Lakes Dredge & Dock Corporation: Yeah. I mean, I think we’re unfairly getting lumped in with government contractors right now. I think that has been, some of the the pain that we have have seen on our stock. I said the the work that we do is different. It’s critical to infrastructure.
This doesn’t go anywhere. So and again, we haven’t seen any impact. And now with continued resolution, we know we have access to budget. And I sleep at night too knowing I also have $1,200,000,000 of backlog sitting behind us. So give clear visibility to revenue for quite some time for us.
And then the last thing I would say is absolutely some headwinds on offshore wind in The US. But as I mentioned, we there are many markets and we’ve been planning for this for eighteen months. It’s not a knee jerk reaction for us to go exploring the European market. I’ve talked about it for the last year and a half. There are many opportunities there.
We’re pursuing them. The very large ocean, the Acadia will work and for a while it may be going back and forth. Eventually, we do think there will be more utilization in The U. S. But in the meantime, we’ll work the vessel wherever we need to.
Julio Romero, Analyst, Sidoti and Company: I’ll leave it there. Thanks, Scott.
Scott Kornblau, Senior Vice President and Chief Financial Officer, Great Lakes Dredge & Dock Corporation: Alright. Thank you, Julio. Thanks, everyone, for joining.
