Great Lakes Reports Record First Quarter

First quarter net income from continuing operations of $34.0 million First quarter adjusted EBITDA from continuing operations of $61.4 million Cash position of $207.5 million at March 31, 2020

OAK BROOK, Ill., May 05, 2020 (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 quarter ended March 31, 2020.

First Quarter 2020 Highlights

• Revenue was $217.7 million in the first quarter, a $25.1 million or 13.0% increase over the prior year quarter.
• Gross margin percentage increased to 31.5% in the first quarter from 25.9% in the prior year quarter.
• Total operating income from continuing operations was $53.0 million, an $18.2 million increase over the prior year quarter.
• Net income from continuing operations was $34.0 million, a $13.5 million increase over the prior year quarter.
• Adjusted EBITDA from continuing operations was $61.4 million as compared to $43.9 million in the prior year quarter.
• Net debt to adjusted EBITDA from continuing operations was 0.75x.

Management Commentary

Lasse Petterson, Chief Executive Officer and President commented, “First and foremost, we recognize that the COVID-19 pandemic has impacted every facet of life in this country and around the world. At GLDD we have been fortunate to be able to continue working as a federally-designated “Critical Infrastructure” company. We have taken steps to ensure the continuing safety of all of our team members, with no confirmed COVID-19 cases to date that we are aware of, and at the same time projects have progressed as planned.

The first quarter of 2020 was an exceptional quarter driven by strong project performance, resulting in net income from continuing operations of $34.0 million and adjusted EBITDA from continuing operations of $61.4 million. During the quarter, we saw better than expected productivity on the Hunting Island Beach and Delray & Ocean Ridge beach renourishment projects. We also performed additional work on the Delaware River Reach B deepening project and completed Phase 1 of the deepening of the Corpus Christi entrance channel. During the quarter all of our dredges were in continued operation with no planned dry dockings. Starting in April, we will have planned dry dockings of certain vessels which will have an impact on results in the second quarter and continuing into the third quarter.

The Company ended the first quarter with a strong net cash position, balance sheet and substantial liquidity which has positioned the Company well for the current economic environment. Our project work is largely uninterrupted by the pandemic at this point in time, and the Army Corps of Engineers is continuing to advertise new projects. However, we are actively investigating safety and operational contingency plans to be able to respond to potential changes to the evolving pandemic and economic environment.”

Quarterly Results

• Revenue was $217.7 million, an increase of $25.1 million over the first quarter of 2019. The first quarter of 2020 was characterized by strong production and project performance, with an increase in coastal protection and maintenance dredging revenue that was partially offset by the decrease in domestic capital, rivers and lakes and foreign dredging revenue.
• Gross margin percentage improved to 31.5% in the first quarter of 2020 from 25.9% in the first quarter of 2019 on strong project performance. In the first quarter of 2020, most of our dredges have worked a busier than usual schedule, which contributed to the higher gross margin. We expect our gross margin percentage to level off from the first quarter for future quarters, particularly in light of planned dry dockings beginning in the second quarter of 2020.
• Operating income was $53.0 million, which is an $18.2 million increase over the prior year quarter. The increase is a result of higher gross margin slightly offset by increased general and administrative expenses primarily due to higher incentive compensation.
• Net income from continuing operations for the quarter was $34.0 million compared to $20.5 million in the prior year quarter. In addition to the increase in operating income, net interest expense in the first quarter of 2020 also decreased compared to the prior year quarter by $0.9 million on lower amortized financing fees and additional interest income.
• At March 31, 2020, the Company had $207.5 million in cash and total debt of $323.1 million, resulting in a net debt to adjusted EBITDA from continuing operations of 0.75x.
• At March 31, 2020, the Company had $474.9 million in backlog, a decrease of $114.5 million from December 31, 2019. This decrease was expected as the Company earned significant revenue during the first quarter of 2020 and bidding activity was lower than the prior year’s first quarter.
• Capital expenditures for the first quarter of 2020 were $7.1 million. This compares to $7.7 million in capital expenditures during the first quarter of 2019. The Company continues to expect total capital expenditures to be $40 million for 2020.

COVID- 19 and Market Update

During this unprecedented crisis that now faces our country, the dredging industry continues to operate and work on critical and essential infrastructure projects. These projects include continued port deepening projects, as well as coastal protection and restoration projects. Dredging has been specifically listed in the U.S. Department of Homeland Security’s “Advisory Memorandum on Identification of Essential Critical Infrastructure Workers During COVID-19 Response”, dated March 28, 2020. The U.S. Army Corps of Engineers oversees the majority of these infrastructure projects and in this capacity has continued to tender bids and prioritize all types of dredging including port maintenance and expansion and coastal protection projects that are necessary to avoid potential storm damage during the upcoming hurricane season.

GLDD is committed to maintaining the health and safety of our team members and an Incident and Injury Free® (IIF®) safety management program across the Company and this value-based approach enabled us to respond quickly and effectively to the COVID-19 pandemic. As such, our Oak Brook office staff have effectively transitioned to a remote working environment to follow the recommended physical and social distancing guidelines. Further as it relates to our job sites and vessel crews, we have reviewed and strengthened our safety procedures and adhere to CDC guidelines while also remaining focused on the successful execution and completion of projects that are critical to maintaining and deepening the Nation’s maritime infrastructure and protecting our coastlines from the upcoming hurricane season.

As expected, during the first quarter of 2020, the domestic bid market was lower than the prior year with only $216 million in total project bids of which Great Lakes won $72 million during the quarter, comprised of capital dredging, coastal protection and maintenance projects. Despite the low first quarter bid market, we have seen support for the dredging industry in the CARES Act which includes a provision that lifts caps on the Harbor Maintenance Trust Fund, thereby allowing full access to future annual revenues to be used for their intended purpose of dredging our nation’s ports and harbors. Projects coming into the market pipeline include additional phases of Charleston, Jacksonville and Corpus Christi deepenings, as well new deepenings for ports in Mobile, Alabama and the Everglades in Florida.

The Company will be holding a conference call at 9:00 a.m. C.D.T. today where we will further discuss these results. Information on this conference call can be found below.

Conference Call Information

The Company will conduct a quarterly conference call, which will be held on Tuesday, May 5, 2020 at 9:00 a.m. C.D.T (10:00 a.m. E.D.T.). The call in number is (877) 377-7553 and Conference ID is 1274718. The conference call will be available by replay until Thursday, May 7, 2020 by calling (855) 859-2056 and providing Conference ID 1274718. The live call and replay can also be heard on the Company’s website, www.gldd.com, under Events & Presentations on the investor relations page. Information related to the conference call will also be available on the investor relations page of the Company’s website.

Classification of Environmental and Infrastructure Business
During the second quarter of 2019, the Company completed the sale of its historical environmental & infrastructure business. The historical environmental & infrastructure segment has been retrospectively presented as discontinued operations and assets and liabilities held for sale, and as such is no longer reflected in continuing operations.

Use of Non-GAAP measures

Adjusted EBITDA from continuing operations, as provided herein, represents net income (loss) from continuing operations, adjusted for net interest expense, income taxes, depreciation and amortization expense, debt extinguishment, accelerated maintenance expense for new international deployments, goodwill or asset impairments and gains on bargain purchase acquisitions. Adjusted EBITDA from continuing operations is not a measure derived in accordance with GAAP. The Company presents adjusted EBITDA from continuing operations as an additional measure by which to evaluate the Company’s operating trends. The Company believes that adjusted EBITDA from continuing operations is a measure frequently used to evaluate performance of companies with substantial leverage and that the Company’s primary stakeholders (i.e., its stockholders, bondholders and banks) use adjusted EBITDA from continuing operations to evaluate the Company’s period to period performance. Additionally, management believes that adjusted EBITDA from continuing operations provides a transparent measure of the Company’s recurring operating performance and allows management and investors to readily view operating trends, perform analytical comparisons and identify strategies to improve operating performance. For this reason, the Company uses a measure based upon adjusted EBITDA to assess performance for purposes of determining compensation under the Company’s incentive plan. Adjusted EBITDA from continuing operations should not be considered an alternative to, or more meaningful than, amounts determined in accordance with GAAP including: (a) operating income as an indicator of operating performance; or (b) cash flows from operations as a measure of liquidity. As such, the Company’s use of adjusted EBITDA from continuing operations, instead of a GAAP measure, has limitations as an analytical tool, including the inability to determine profitability or liquidity due to the exclusion of accelerated maintenance expense for new international deployments, goodwill or asset impairments, gains on bargain purchase acquisitions, interest and income tax expense and the associated significant cash requirements and the exclusion of depreciation and amortization, which represent significant and unavoidable operating costs given the level of indebtedness and capital expenditures needed to maintain the Company’s business. For these reasons, the Company uses operating income to measure the Company’s operating performance and uses adjusted EBITDA from continuing operations only as a supplement. Adjusted EBITDA from continuing operations is reconciled to net income attributable to common stockholders of Great Lakes Dredge & Dock Corporation in the table of financial results. For further explanation, please refer to the Company’s SEC filings.

The Company

Great Lakes Dredge & Dock Corporation (“Great Lakes” or the “Company”) is the largest provider of dredging services in the United States. In addition, the Company has a long history of performing significant international projects. The Company employs experienced civil, ocean and mechanical engineering staff in its estimating, production and project management functions. In its over 130-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 over 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.