Posted on November 2, 2021
Third quarter net income of $13.8 million
Third quarter adjusted EBITDA of $32.2 million
Backlog of $598.5 million at September 30, 2021
HOUSTON, Nov. 02, 2021 (GLOBE NEWSWIRE) — Great Lakes Dredge & Dock Corporation (“Great Lakes”) (Nasdaq:GLDD), the largest provider of dredging services in the United States, today reported financial results for the quarter ended September 30, 2021.
Third Quarter 2021 Highlights
- Revenue was $168.6 million in the third quarter.
- Operating income was $21.4 million in the third quarter.
- Net income was $13.8 million in the third quarter.
- Adjusted EBITDA was $32.2 million in the third quarter.
- Backlog at September 30, 2021 was $598.5 million.
Management Commentary
Lasse Petterson, President and Chief Executive Officer commented, “We ended the third quarter with improved results and a solid backlog. In the first half of 2021, our operations saw substantial negative impacts from the COVID-19 pandemic. Our priority has been and always will be to ensure the safety and health of all our people, and we believe that in this current situation vaccination is an important tool in achieving this goal. As vaccines became widely available in the second quarter, we set a target to have all parts of our organization vaccinated and we are now close to reaching this target.
Although our stringent safety protocols and increasing vaccination efforts were successful, we did experience some lingering COVID-19 related costs in the third quarter. The direct COVID-19 costs were $2.1 million in the third quarter, for a total of $9.4 million year to date. Indirect COVID-19 cost impacts are not easily quantified, however we have seen a decrease in our realized project margins which we attribute in part due to inefficiencies caused by COVID-19. Today our safety protocols and our vaccination efforts have resulted in improved project performance and we are confident that our continued efforts will ensure reduced COVID-19 related impacts to our operations going forward.
In addition to the COVID-19 impacts on our third quarter results, we experienced project delays due to Hurricane Ida. Several of our projects were impacted and experienced delays returning to work due to the damage and debris in the ports. One of our vessels, the Terrapin Island, was damaged in the storm and resulted in a 6 week unplanned drydock. All vessels are back at work in this fourth quarter.
We ended the quarter with net income of $13.8 million and Adjusted EBITDA of $32.2 million compared to the third quarter of 2020 that ended with $12.5 million of net income and $32.2 million in Adjusted EBITDA. Given project activity in which we are currently engaged, coupled with our backlog, new project awards, and fewer vessel drydocks for the remainder of the year, we expect improved results in the fourth quarter of 2021. Unfortunately, even with improving results we do not expect to achieve our original expectations for 2021.
We continue to be confident in the domestic bid market and 2021 is shaping up to be as strong as 2020. During the third quarter, Great Lakes was awarded $300.5 million in work resulting in a year to date 37.1% bid market share bringing our third quarter backlog to $598.5 million. In addition, we ended the quarter with $533.9 million in low bids and options pending award. Post quarter end, Great Lakes was awarded the Oak Island beach renourishment project for $17.1 million, the South Atlantic Regional Harbor Dredging project for $25.8 million, and we have added an additional $106.9 million to low bids pending award, which includes the Houston Project 11 Deepening that was announced by the Port of Houston.
The offshore wind power generation market will provide GLDD with a good opportunity for growth. The Biden administration’s 30-gigawatt target of offshore wind energy by 2030 confirms our plans to enter this new market by building the first U.S. flagged Jones Act compliant, inclined fall-pipe vessel for subsea rock installation for wind turbine foundations. This vessel would represent a significant critical advancement in building the U.S. logistics infrastructure to support the future of the new U.S. offshore wind industry. We anticipate making an investment decision in the fourth quarter of 2021 with expected delivery of the vessel in the second half of 2024.”
Quarterly Results
- Revenue was $168.6 million, a decrease of $7.2 million over the third quarter of 2020. The decrease was caused by lower coastal protection and foreign revenue, offset partially by higher domestic capital, maintenance, and rivers and lakes revenue.
- Gross margin was $36.3 million, which is relatively flat as compared with the prior year quarter. Gross margin percentage was 21.5% in the third quarter of 2021 as compared to 20.7% in the third quarter of 2020. Direct COVID-19 costs had an unfavorable impact of $2.1 million on gross profit during the third quarter. During the third quarter of 2021, we had the Dredge 53, the Alaska, and the Terrapin Island in drydock. The Alaska returned to work in the third quarter, the Terrapin Island returned to work earlier in the fourth quarter and the Dredge 53 is preparing to start operations in Mobile, Alabama.
- Operating income was $21.4 million, which is a $1.8 million decrease from the prior year quarter due in large part to a $1.7 million loss of use claim credit received last year.
- Net income for the quarter was $13.8 million compared to $12.5 million in the prior year third quarter as the decrease in operating income was more than offset by the decrease in interest expense and income tax expense.
- At September 30, 2021, the Company had $173.8 million in cash and total debt of $320.8 million.
- At September 30, 2021, the Company had $598.5 million in backlog as compared to $661.3 million at September 30, 2020.
- Capital expenditures for the third quarter of 2021 were $21.1 million, which includes $8.3 million for the construction of our new hopper dredge, $2.1 million for the construction of new multicats, and $0.6 million for the design of our rock installation vessel.
Market Update
In 2020, the domestic dredging bid market reached $1.8 billion in projects bid. We continue to be confident in the market for the remainder of the year and still anticipate it to be as strong as 2020. The market continues to be driven by the large-scale port deepening projects along the East and Gulf coasts. We expect in 2022 to see bids for multiple project phases for port deepenings in Norfolk, Freeport, Mobile, Sabine and the Houston ship channel. In addition, our nation’s coasts are subject to climate change, increasing severe weather events like Hurricane Ida, and sea level rise, which can cause an increase in beach erosion and other damage that adds to the recurring nature of our business and the need for more frequent coastal protection and port maintenance projects. We saw continued support for the dredging industry in the Corps’ 2022 budget that was approved by the House of Representatives and is slated to be $8.66 billion, an 11% increase over prior year levels. In this bill the Harbor Maintenance Fund (the “HMTF”) would receive $2.05 billion, which is $370 million over 2021 budget appropriations. In addition, the 2020 Water Resource Development Act included some additional reforms to HMTF that will allow Congress to drawdown from the $9.3 billion surplus in the HMTF. The U.S. government including the Corps are presently operating under a continuing resolution with budget approval anticipated before the end of the year. Included in the continuing resolution are significant dollars for emergency funding as a result of Hurricane Ida impacts. In addition, the US Senate passed the $1.2 trillion infrastructure bill where the Corp will be granted $11.6 billion in funding to improve the nations resilience to the effects of climate change, including flood control and waterway dredging.
We continue to see strong support for offshore wind from the Biden administration. In March 2021, the White House announced new initiatives that will advance the administration’s goals to expand the nation’s offshore wind energy capacity in the coming decade by opening new areas of development, improving environmental permitting, and increasing public financing for projects. As part of that initiative the Departments of the Interior, Energy and Commerce committed to a shared goal of installing 30 gigawatts of offshore wind power generation capacity in U.S. waters by 2030. In May, the administration approved the Vineyard Wind Project which is the nation’s first large-scale offshore wind project estimated to include up to 84 turbines. The administration also stated it would direct $230 million in federal transportation dollars to fund port infrastructure and earmark $3 billion in loan guarantees from the Department of Energy in support of offshore wind.
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, November 2, 2021 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 1187471. The conference call will be available by replay until Tuesday, November 4, 2021 by calling (855) 859-2056 and providing Conference ID 1187471. 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.
Use of Non-GAAP measures
Adjusted EBITDA, as provided herein, represents net income (loss) from continued 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 is not a measure derived in accordance with GAAP. The Company presents Adjusted EBITDA as an additional measure by which to evaluate the Company’s operating trends. The Company believes that Adjusted EBITDA 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 to evaluate the Company’s period to period performance. Additionally, management believes that Adjusted EBITDA 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 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, 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 only as a supplement. Adjusted EBITDA 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 131-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.
For further information contact:
Tina Baginskis
Director, Investor Relations
630-574-3024
