Posted on May 7, 2024
HOUSTON, May 07, 2024 (GLOBE NEWSWIRE) — Great Lakes Dredge & Dock Corporation (Nasdaq: GLDD), the largest provider of dredging services in the United States, today reported financial results for the first quarter ended March 31, 2024.
First Quarter 2024 Highlights
- Revenue was $198.7 million
- Total operating profit was $31.5 million
- Net income was $21.0 million
- Adjusted EBITDA was $42.9 million
Management Commentary
Lasse Petterson, President and Chief Executive Officer commented, “Great Lakes ended the first quarter with strong financial results, including net income of $21.0 million and adjusted EBITDA of $42.9 million, which is the best adjusted EBITDA quarter since the fourth quarter of 2021, supporting a return to normalcy. The majority of our dredges were actively engaged on projects and our new hopper dredge, the Galveston Island, was successfully placed into operation contributing to the first quarter’s strong project performance. Our dredging backlog at the end of the quarter was $879.4 million with 77% of our backlog in capital projects. Notably, in 2023, we secured four major awards, including the Freeport Deepening Project and the Sabine-Neches Waterway Channel Improvement Project, both of which are currently underway.
With a record 2024 U.S. Army Corps of Engineer’s budget of $8.7 billion, that was approved in the first quarter, the bid market is expected to be robust and remain strong, particularly in our capital and coastal protection target markets.
In 2023, Great Lakes was awarded two large Liquified Natural Gas (“LNG”) projects, the Port Arthur LNG Phase 1 project for Marine Dredging and Disposal and the Brownsville Ship Channel project for Next Decade Corporation’s Rio Grande LNG project, which is the largest project undertaken in Great Lakes’ history. Subcontractor work has begun on both projects with dredging expected to commence mid-year 2024. We continue to tender bids on several LNG projects to diversify and expand our client base.
We continue to make progress on our new build program, and as stated previously, we have taken delivery on our newest 6,500-cubic-yard-capacity hopper dredge, the Galveston Island, which is currently in operation. Her sistership, the Amelia Island, is expected to be delivered in 2025. These dredges will work on projects that redevelop and improve our shorelines, which are subject to continual damage due to storms, rising waters and the effects of climate change. In addition, the Acadia, the first and only U.S.-flagged Jones Act compliant, inclined fallpipe vessel for subsea rock installation, is under construction with expected delivery in 2025.
We remain resolute in our long-term growth strategy to enter the U.S. offshore wind market. In early 2024, New York state held their fourth bid round of additional Power Purchase Agreements (“PPAs”). Both of Great Lakes’ contracts, Equinor’s Empire Wind I and Ørsted’s Sunrise Wind, were awarded offtake agreements and are expected to make significant contributions to the state’s clean energy goals.
We continue to pursue and bid on a number of other offshore wind farm projects for the Acadia, both domestically and internationally, with rock installations planned for 2026 and beyond. We expect that offshore wind will play a crucial role in helping the U.S. meet its decarbonization and clean energy goals and we believe the offshore wind power generation market offers Great Lakes long-term diversification with a strong opportunity for growth.
To support the new build program and provide additional liquidity for Great Lakes, in April 2024 we entered into a $150 million second-lien credit agreement with Guggenheim Credit Services, LLC for an aggregate principal amount of $100 million and a delayed draw term loan facility in the aggregate amount of $50 million, which is available to the Company for a period of 12 months following the closing date of the agreement, which, if funded, will have the same terms as the initial loan. The financing provides Great Lakes with additional liquidity to help us complete our new build program and provide the financial flexibility to continue pursuing other financing alternatives including Title XI.
Our outlook remains positive and we expect the dredging bid market to continue to remain strong in 2024. With our substantial backlog, enhanced fleet, and strategic initiatives, we firmly believe that our company is well-prepared for the future.”
Operational Update
- Revenue was $198.7 million, an increase of $40.7 million from the first quarter of 2023. The higher revenue in the first quarter of 2024 was due primarily to higher capital and coastal protection project revenues, offset partially by a decrease in maintenance and rivers and lakes project revenue.
- Gross profit was $45.6 million, an improvement of $33.5 million compared to the gross profit from the first quarter of 2023. Gross margin percentage increased to 22.9% in the first quarter of 2024 from 7.7% in the first quarter of 2023 due to improved utilization and project performance and fewer drydockings in the current year quarter.
- Operating profit was $31.5 million, which is a $32.4 million improvement compared with the operating loss from the prior year quarter. The year over year increase is primarily due to $33.5 million higher gross margin, a $2.0 million gain on sale of assets, offset partially by higher general and administrative expenses.
- Net income for the quarter was $21.0 million, which is a $24.2 million improvement compared to net loss of $3.2 million in the prior year first quarter. The increase is a result of improved operating results, partially offset by an increase in net interest expense primarily due to a higher drawn balance on our revolving credit facility.
- At March 31, 2024, the Company had $22.8 million in cash and cash equivalents and total long term debt of $382.2 million, which includes $60.0 million of draws outstanding against our $300 million revolver.
- At March 31, 2024, the Company had $879.4 million in dredging backlog as compared to $1.04 billion at December 31, 2023. Dredging backlog does not include approximately $203.0 million of low bids and options pending award and approximately $57.3 million of performance obligations and options pending award related to offshore wind contracts.
- Total capital expenditures for the first quarter of 2024 were $13.5 million compared to $28.7 million for the first quarter of 2023. The 2024 capital expenditures included $7.0 million for the construction of the subsea rock installation vessel, the Acadia, $3.3 million for the Galveston Island, $0.7 million for the Amelia Island, and the remaining $2.5 million for maintenance and growth.
Market Update
We continue to see strong support from the Biden Administration and Congress for the dredging industry. On March 9, 2024, President Biden signed the Energy and Water Appropriations Bill into law which provides a record $8.7 billion in total funding to the U.S. Army Corps of Engineers (the “Corps”) for fiscal year 2024. This funding includes $5.6 billion for the Corps’ Operations and Maintenance work and $2.8 billion for the Harbor Maintenance Trust Fund to maintain and modernize our nation’s waterways. In addition, $2.2 billion for flood and storm damage reduction, and $18 million for Beneficial Use of Dredged Material was approved. In 2023, the Disaster Relief Supplemental Appropriations Act for fiscal year 2023 was approved which included $1.48 billion for the Corps to make necessary repairs to infrastructure impacted by hurricanes and other natural disasters, and to initiate beach renourishment projects that will increase coastal resiliency. We expect this increased budget and additional funding to support a strong bid market for 2024. We expect bidding to increase and budgeted appropriations to support the funding of several capital port improvement projects that are still expected to bid in the first half of 2024, including Sabine and Mobile.
At the end of 2022, the Water Resources Development Act of 2022, or WRDA 2022, was approved by Congress and signed into law by the President. WRDA 2022 is on a two-year renewal cycle and includes legislation that authorizes the financing of Corps’ projects for flood and hurricane protection, dredging, ecosystem restoration and other construction projects. Among many other things, WRDA 2022 featured authorization for New York and New Jersey shipping channels to be deepened to 55 feet, estimated at $6 billion, as well as the Coastal Texas Protection and Restoration Program, estimated at $34.4 billion. The Coastal Texas program includes dune and marsh restoration to safeguard the Texas Gulf Coast from hurricane surges. In addition, this legislation includes policy changes that will allow future port, waterways and coastal projects to be more readily approved and funded.
The U.S. offshore wind market reached historic milestones in the first quarter of 2024, with two commercial-scale offshore wind farms becoming operational and supplying power to the grid in New York and Massachusetts. In February 2024, Massachusetts Governor, Maura Healey, announced that “America’s offshore wind industry has gone from a dream to reality”, with the Vineyard Wind project, located about 14 miles off Martha’s Vineyard, completing installation of five turbines and supplying power to the New England grid, while continuing to install additional turbines. In March 2024, New York Governor Kathy Hochul, alongside the U.S. Secretary of the Interior Deb Haaland, announced the completion of the landmark South Fork Wind project, with all 12 offshore wind turbines constructed and the wind farm successfully delivering power to Long Island and the Rockaways. In October 2023, New York awarded 4 gigawatts (“GW”) of offshore wind power offtake agreements. In an accelerated fourth bidding round, in February 2024, an additional 3 GW of power were awarded by New York. Empire Wind and Sunrise Wind were both awarded new power offtake agreements, as part of the latest New York solicitation round. Notably, Great Lakes has been awarded rock installation contracts for both projects, and expects to be using the rock installation vessel, the Acadia, to protect and stabilize foundations and cables for these projects with a combined capacity of 1.7 GW. New Jersey also awarded 3.7 GW of PPAs in January 2024, and the results of the tri-state (Massachusetts, Rhode Island, and Connecticut) solicitation for 6 GW of offshore wind, are expected in the third quarter of 2024.
Great Lakes has established a unique business position in the U.S. offshore wind market, and we continue to pursue and tender bids, both domestically and internationally, on multiple offshore wind projects for the Acadia, which will be the first and only U.S. flagged Jones Act compliant subsea rock installation vessel in the United States.
The Company
Great Lakes Dredge & Dock Corporation is the largest provider of dredging services in the United States, which is complemented with a long history of performing significant international projects. In addition, Great Lakes is fully engaged in expanding its core business into the rapidly developing offshore wind energy industry. The Company employs experienced civil, ocean and mechanical engineering staff in its estimating, production and project management functions. In its over 134-year history, the Company has never failed to complete a marine project. Great Lakes owns and operates the largest and most diverse fleet in the U.S. dredging industry, comprised of approximately 200 specialized vessels. Great Lakes has a disciplined training program for engineers that ensures experienced-based performance as they advance through Company operations. The Company’s Incident-and Injury-Free® (IIF®) safety management program is integrated into all aspects of the Company’s culture. The Company’s commitment to the IIF® culture promotes a work environment where employee safety is paramount.
