Great Lakes Dredge & Dock - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered a material beat versus consensus, with revenue $242.9M and diluted EPS $0.49, driven by high asset utilization and strong execution on capital and coastal protection projects; Adjusted EBITDA was $60.1M with a 24.7% margin.
• Backlog stood at ~$1.01B (including $44.9M Offshore Energy) with an additional ~$265.3M in low bids/options, providing visibility into 2026; mix skewed 95% to higher-margin capital/coastal protection work.
• Liquidity enhanced via upsized revolver to $330M (from $300M) post-quarter; $50M share repurchase program authorized in March with 1.2M shares bought for $10.4M through April 30, 2025—signaling confidence in outlook.
• Management flagged Q2 as the likely low point for revenue/margins due to four dry docks, but still expects full-year 2025 results to exceed 2024, with ~60% of backlog converting to revenue in FY25.
• Near-term stock catalysts: continued backlog conversion and LNG awards (Woodside Louisiana LNG notice-to-proceed; ongoing Port Arthur/Rio Grande projects), plus buyback deployment; watch offshore wind (Empire Wind I temporary pause) and Q2 dry dock headwinds for volatility cues.

What Went Well and What Went Wrong

What Went Well

• Exceptional operational execution with all active dredges working; revenue $242.9M, net income $33.4M, Adjusted EBITDA $60.1M; CEO: “strong project performance and high utilization”.
• Margin expansion: gross margin rose to 28.6% (from 22.9% YoY) on improved utilization and project mix; EBITDA margin reached 24.7%.
• Backlog quality and LNG momentum: backlog ~$1.01B with 95% capital/coastal; post-quarter Woodside Louisiana LNG received NTP, adding to visibility alongside Port Arthur and Rio Grande LNG projects; CFO: “our team is killing it on both projects”.

What Went Wrong

• Offshore wind uncertainty: BOEM issued a temporary pause on Equinor’s Empire Wind I; management highlighted contract termination protections and international diversification for Acadia to mitigate risk.
• Dry dock headwinds: 2025 is a heavier regulatory dry dock year; Q2 revenue and margins expected to be the lowest of the year; dry docks typically ~60 days and $3–6M each plus lost revenue.
• G&A higher due to incentive compensation aligned with stronger results, modestly offsetting operating leverage; Q1 operating income up to $49.9M from $31.5M despite higher G&A.

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to the Q1 2025 Great Lakes Dredge & Dock earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Eric Birge, Vice President of Investor Relations. The floor is yours.

Eric Birge (VP of Investor Relations)

Thank you, Gerald. Good morning and welcome to Great Lakes Dredge & Dock's first quarter 2025 results conference call. Joining me on the call this morning is our President and Chief Executive Officer, Lasse Petterson, and Chief Financial Officer, Scott Kornblau. Lasse will provide an update of the events of the quarter, then Scott will continue with an update on our financial results for the quarter. Lasse will conclude with an update on the outlook for the business and market. Following their comments, there will be an opportunity for questions. During this call, we will make certain forward-looking statements to help you understand our business. These statements involve a number of risks and uncertainties and other factors that could cause actual results to differ materially from our expectations. Certain risk factors inherent in our business are set forth in our filings with our Securities and Exchange Commission.

During the call, we will refer to certain non-GAAP measures, including adjusted EBITDA, which are explained in the net income to adjusted EBITDA reconciliation attached to our earnings release and posted on the Investor Relations website, along with other certain operating data. With that, I will turn the call over to Lasse.

Lasse Petterson (CEO)

Thank you, Eric. Following strong financial results in 2024, Great Lakes started 2025 with a great first quarter driven by high asset utilization and strong project performance, executing complex port deepening and coastal restoration projects, leveraging the capabilities of our extensive fleet. We ended the quarter with revenues of $242.9 million and adjusted EBITDA of $60.1 million. Good results also come from safe operations. In the first quarter of the year, we had zero recordable injuries, a testament to the strong safety culture we have in Great Lakes. Safe work is a core value in our company, and we firmly believe also good safety is also good business. Our dredging backlog remains strong at $1 billion, with capital and coastal protection projects accounting for 95% of the backlog, plus an additional $265 million in low bids and options pending award.

Our successful bid strategy from last year resulted in a number of large project wins and a quality backlog, which will support high asset utilization and a solid revenue year for the remainder of 2025, as well as providing a good base and revenue visibility for 2026. After the quarter ended, we received notice to proceed on the Woodside Louisiana LNG project. The awarded work will be added to our backlog in the second quarter, along with two options that will be added to our options pending award. Dredging operations are expected to commence early 2026. This, along with our two current LNG projects that started dredging activities in the third quarter in 2024, are capital projects which fit well with our core strength to perform large and complex projects.

Our strong 2024 and first quarter 2025 results contributed to our board of directors approving in March a $50 million share repurchase program, as we believed our share price did not reflect the company's financial performance and long-term outlook. As of April 30, we have repurchased 1.2 million shares with a total spend of $10.4 million under this program. Post-quarter end, we upsized our revolving credit facility to $330 million, which Scott will provide more details on later. Moving on to our new build program, our newest hopper dredge, the Amelia Island, is expected to be delivered in the third quarter of this year and will go straight to work on projects already in backlog. The Amelia Island and our sister ship, the Galveston Island, have been carefully designed for shallow and narrow waters along the U.S.

Coastlines and are efficient tools for us to work on coastal protection projects such as beach restoration, wetlands improvements, and barrier island construction. The Acadia, the first U.S.-flagged Jones Act compliant subsea rock installation vessel, is also currently under construction with a scheduled delivery in the first quarter of next year. The target markets for the Acadia include domestic and international offshore wind projects, as well as projects protecting critical subsea infrastructure such as oil and gas pipelines and power and telecommunication cables. I will now turn the call over to Scott to further discuss the results of the quarter, and then I will provide further commentary around the market and our business.

Scott Kornblau (SVP and CFO)

Thank you, Lasse. Good morning, everyone. I'll start by walking through the first quarter, which resulted in revenues of $242.9 million, net income of $33.4 million, and adjusted EBITDA and adjusted EBITDA margin of $60.1 million and 24.7%, respectively. Revenues of $242.9 million in the first quarter of 2025 increased $44.2 million from the prior year's first quarter as every active dredge was working for the majority of the quarter. Despite having one dredge in the shipyard for half the quarter performing her regulatory dry dock and two others beginning the regulatory dry dock later in the first quarter, the first quarter of 2025 was the second highest revenue quarter in company history. Current quarter gross profit and gross profit margin increased to $69.5 million and 28.6%, respectively, compared to $45.6 million and 22.9%, respectively, in the first quarter of 2024.

The increase in gross margin is primarily due to improved utilization and project performance and a larger number of capital and coastal protection projects, which typically yield higher margins. During the first quarter of 2025, over 87% of our revenue came from these types of projects. Current quarter's operating income of $49.9 million increased over 58% compared to the prior year's quarter's operating income of $31.5 million. The year-over-year increase is driven by higher gross profit, partially offset by higher general and administrative expenses, mostly due to increased incentive compensation resulting from the strong current year first quarter. Net interest expense of $4.5 million for the first quarter of 2025 was up from $3.9 million in the first quarter of 2024, primarily due to interest on the second-lien credit agreement entered into during the second quarter of 2024, partially offset by decreased borrowings under our revolver.

First quarter 2025 net income tax expense of $11.7 million increased from $7 million in the same quarter of 2024 due to the improved results, and net income for the first quarter 2025 was $33.4 million compared to $21 million in the prior year's quarter. Total capital expenditures for the first quarter were $11.4 million, made up of $2 million for the hopper dredge Amelia Island, $3.9 million for the subsea rock installation vessel the Acadia, with the remaining $5.5 million coming from maintenance and growth. Our previous full-year CapEx guidance of between $140-$160 million remains unchanged. Turning to the balance sheet, we ended the quarter with $11.3 million in cash and nothing drawn on our revolver, which does not mature until the third quarter of 2027.

As Lasse mentioned earlier, on May 2nd, we executed an amendment to our credit facility, upsizing our revolver by $30 million to $330 million, further enhancing our liquidity, which now stands above $300 million. Our balance sheet is in great shape, with a trailing 12-month net leverage ratio of 2.7 times, a weighted average interest rate on our total debt under 7%, and no debt maturities until 2029. As our new build program will be substantially complete at the end of this year, we expect to be cash flow positive starting in 2026. As I discussed on the year-end earnings call, 2025 is a heavier-than-normal regulatory dry dock year for us, and the second quarter will be most impacted as we will have four vessels at the dock at various times, which will result in lower revenues than the first quarter.

Utilization will remain strong on the other vessels, and we should see another solid quarter. Our expectation is that full-year 2025 results will exceed 2024, which was the second highest in company history. With that, I'll turn the call back to Lasse for his remarks on the outlook moving forward.

Lasse Petterson (CEO)

Thank you, Scott. The Trump administration and Congress continue to demonstrate strong and consistent support for the dredging industry. The U.S. Army Corps of Engineers is operating in fiscal year 2025 under a continued resolution through September 30, which sustains the record funding levels established in the prior fiscal year's budget. This support, along with our $1 billion backlog, which includes a robust mix of large and complex projects in the beach reinforcement and port deepening markets, enables us to continue to deliver on our very busy 2025, with sustained execution capacity and project visibility extending well into 2026. We expect the 2025 bid market to be a normalized volume of approximately $2 billion, more focused on coastal protection projects funded by the 2023 Disaster Relief Supplemental Appropriation Act and regular maintenance dredging, coming off a very strong port deepening bid market in 2023 and 2024.

Turning to the offshore wind market, in April, we saw a temporary pause on Equinor's Empire Wind 1 project, which currently is included in our offshore energy backlog. While the duration and impact of the temporary pause for the project are not known at this time, we remain in regular contact with our client Equinor, who is evaluating further steps. Last year, recognizing early signs of potential delays in the U.S. offshore wind market, we proactively adjusted our strategic outlook for the Acadia to include international markets in the U.K., in the EU, and in Asia for offshore wind projects, as well as for rock protection for critical subsea infrastructure such as oil and gas pipelines and power and telecommunication cables, paving the way for the expansion of our offshore wind business into the broader range of service offerings that we now refer to as offshore energy.

In conclusion, building our strong performance in 2024, the company entered 2025 with significant momentum, achieving outstanding results in the first quarter. This success is a result of excellent, safe project execution, the strength of our modernized fleet, and a robust backlog. With our strong first quarter, solid liquidity to support the remainder of our new build program and ongoing strategic initiatives, we are well positioned for the future. With that, I'll turn the call over for questions.

Operator (participant)

Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from Joe Gomes of Noble Capital. The floor is yours.

Joe Gomes (Senior Generalist Equity Analyst)

Good morning. Congrats on the quarter.

Scott Kornblau (SVP and CFO)

Hey, thank you, Joe. Good morning.

Joe Gomes (Senior Generalist Equity Analyst)

I just wanted to touch base on the Equinor project, Empire 1. Kind of just spitballing worst-case scenario here, the project falls by the wayside. Just wondering, when did Equinor have contracted out time for the Acadia, and how quickly can you refill that time that would have gone to Equinor again in a worst-case scenario type of situation?

Lasse Petterson (CEO)

First of all, Equinor is in contact with the Trump administration to clarify the situation on the project. The project was fully funded, fully permitted, and just starting the offshore construction activities with the vessels being on its way, with the monopiles also on its way, and also with the rock installation already started. The stop on the project, or the temporary stop on the project, was a very large surprise for everybody. Equinor has now reached out to the Trump administration to try to see what is the issue and get that clarified. That is what we know at this point in time.

Joe Gomes (Senior Generalist Equity Analyst)

Right. I guess I'm more kind of, again, if it was a worst-case scenario and the project got canceled for whatever reason, not anticipating that, but if it did, how quickly do you think you can repurpose that time slot that the Acadia is currently under contract to work for Equinor?

Lasse Petterson (CEO)

Yeah. The vessel will come out of the yard in Q1 next year. The plan was then to go straight to work on the Empire Wind 1 project. It will be difficult to fill that time slot with other projects, but there are also plans during 2026 to work on the projects for Ørsted. There are cancellation arrangements in the contract. The worst scenario, if the project gets canceled, we will let Scott do the details, but we have cancellation fees in that contract that will take care of some of the costs that we incur on the project.

Scott Kornblau (SVP and CFO)

Yeah. Joe, I'm not going to get into the details of the termination. Obviously, we can't with this contract. I will remind you when the other contract we had last year was terminated, we did get roughly $9-$10 million out of that. Termination provisions within these contracts are not unusual.

Joe Gomes (Senior Generalist Equity Analyst)

Okay. Again, I'm just spitballing worst-case scenario. Hopefully, Equinor is able to figure out whatever the Trump administration is doing and get forward and put the project back on pace. That would be the best outcome. Yeah.

Scott Kornblau (SVP and CFO)

Joe, sorry, I'll also add yesterday, the Attorney General of New York, along with a number of other states, have also put in a formal challenge to the current interpretation that these fully permitted projects should continue as planned. We'll see how it all plays out.

Joe Gomes (Senior Generalist Equity Analyst)

Thanks for that. Appreciate it.

Lasse, you talked about a $2 billion market, you think, for this year. I am just wondering, given that we had that continuing resolution for a while, and I guess we are kind of operating under a full-year continuing resolution, just wondering what the pace of awards that you have seen so far here, year to date.

Lasse Petterson (CEO)

Yeah. The year has been slow when it comes to new port deepening projects. Fortunately for us, we had in our low bids and not yet awarded the Woodside LNG project, which is coming through, which is great news for us. The bid market, as I said, the visibility of large projects due to the fact that we are in a continuing resolution is not that good. There is a number of coastal restoration projects that we have visibility to because they were funded back in 2023. So those projects, which are large and complex, will come out to bid now in Q2 and Q3. We expect the maintenance market to be strong this year. As you know, we prefer to do the port deepening projects and the coastal restoration projects because that's where we excel.

We also do a number of maintenance projects when those are coming out to bid.

Scott Kornblau (SVP and CFO)

Joe, the first quarter, as Lasse said, yeah, was a slower bid market, but that's not unusual. As you know, it's the middle two quarters that have the most activity. We did not see an impact from the continuing resolution. Everything that we expected to come out in the first quarter did. Our expectation is Q2 and Q3 will also play out like that.

Joe Gomes (Senior Generalist Equity Analyst)

Okay. Great. And then just one more for me. The competitive environment, given where we are, are you seeing any increase in the competitive environment? Has it kind of stayed similar to what historically has been?

Lasse Petterson (CEO)

No, it's similar to what it has historically been. We have seen some dredges that have been taken out of operation, and then we have new builds that have come to the market from other competitors. As I said on the call, we are getting the Amelia out now this year, but she goes straight to work. We are in good shape. I could also say that given the fact that we are fully booked here this year, we are selective with the bid opportunities that we are targeting.

Joe Gomes (Senior Generalist Equity Analyst)

Great. Congrats again on the quarter. Thanks. I'll get back in queue. Thanks.

Operator (participant)

Thank you for your question. One moment, please. Our next question comes from Adam Thalhimer from Thompson Davis. The floor is yours.

Adam Thalhimer (Director of Research)

Hey, good morning, guys. Great quarter. I did not even know $243 million of revenue was possible, so congratulations.

Scott Kornblau (SVP and CFO)

There you go.

Adam Thalhimer (Director of Research)

Quick question on the Woodside job. Are the options already in low bid pending or just the base work?

Scott Kornblau (SVP and CFO)

Yeah. The base was in low bid pending. That will now go into backlog in Q2. The options were not in low bid pending, so that will get added in in the second quarter.

Adam Thalhimer (Director of Research)

Got it. Okay. Scott, can you just give a quick update on the two LNG jobs that are ongoing, how those are going, and an update on when they're projected to wrap up?

Scott Kornblau (SVP and CFO)

Yeah. I mean, we've been saying all along this is the kind of work we like to do, these very large, complex projects. They have high margins, and we have historically outperformed even how we anticipated doing. These two projects are no exception. Our team is killing it on both projects. One of them should wrap up right at the end of the year. The larger one, Rio Grande, that goes well into next year.

Adam Thalhimer (Director of Research)

Got it. Lastly for me, maybe just an update on the international conversations you're having for the Acadia vessel, how those are going.

Lasse Petterson (CEO)

Yeah. We have very good. We are very well received by the developers in Europe. As I said, last year, we saw a slowing down in the U.S. potentially coming in 2027, 2028. We started our business development activity in Europe and in Asia early. We are having a number of bids outstanding in that market. The market is more mature than what we have here in the U.S. The lead time between bidding and also the awards is shorter. We are now bidding for work in 2027 and 2028 in Europe. I am very optimistic with that coming to a positive conclusion, but probably not project awards until the latter half of this year.

Adam Thalhimer (Director of Research)

Got it. Okay. Thank you both. Talk to you soon.

Lasse Petterson (CEO)

Thanks, Adam.

Operator (participant)

Thank you for your question. One moment, please. Our next question comes from the line of Julio Romero from Sidoti & Company. The floor is yours.

Julio Romero (Equity Research Analyst)

Great. Thanks. Hey, good morning, Lasse, Scott, and Eric. Thanks very much. Really strong performance this quarter across the board. Can you quantify the dry dock effect, if any, in the first quarter? Before dry docks that are expected in the second quarter, how many are hopper dredges? Was the first quarter dry dock also a hopper dredge?

Scott Kornblau (SVP and CFO)

Yeah. The one that was in and out during the quarter, so was down for a little more than half the quarter, that was a hopper. Moving forward to the second quarter, there is one hopper that will be down for most of the quarter performing her dry dock. The three others in the second quarter, they're not hoppers. I'm not going to give an exact dollar impact of the dry docks. Q1 was somewhat of a normal dry docking, having one down for most of the quarter and then another two starting. The difference this year is we are pulling vessels off of jobs because of all the backlog we have. It's not hypothetical revenue that's lost. It is real revenue. The cost of the dry dockings, a typical dry dock is somewhere in that 60-day period.

The cost of the dry dock itself, again, depending on what you have to do, could be in the $3 million-$5 million, $6 million. You take the revenue off. Yeah, it is impactful. That is why I pointed out Q2 will be the most impacted. Hopefully the second half looks lighter on the dry docking schedule.

Julio Romero (Equity Research Analyst)

Really helpful. I appreciate that there. I'm just trying to think about the second quarter because we're coming off such a strong first quarter base, right? And I'm just looking at how do we think about the gross margin? Should that be the low point of the year for 2025?

Scott Kornblau (SVP and CFO)

Yeah. Second quarter should be the lowest on revenue and on margins. It will look a lot more normalized in the second half of the year.

Julio Romero (Equity Research Analyst)

Okay. Great. I was hoping you could just talk a little bit high level about your tariff exposure. While you have a large percentage of your revenues come from publicly funded contracts, we've heard some other companies talk about index pricing in publicly funded contracts that sometimes can help. I was wondering if you have any index pricing within your contracts.

Scott Kornblau (SVP and CFO)

Yeah. Let me hit the tariff question first, and I'll probably answer the second. Yeah, as a U.S. Jones Act company, we purchase most of our supplies and equipment here in the U.S. Very little is purchased overseas. The impact so far in this first quarter was immaterial. We do not expect it to change moving forward. That being said, we have identified some of the larger items that we do procure internationally, and we are actively looking to see if we can source it here in the U.S. or from countries that have lower tariffs, but really do not anticipate a material impact to us at all. On our new builds, the vast majority of the equipment that was coming from overseas is already sitting here in the U.S. and paid for. Very little exposure there as well.

Julio Romero (Equity Research Analyst)

Okay. Great. I'll pass it on. Thanks very much.

Scott Kornblau (SVP and CFO)

Thanks.

Operator (participant)

Thank you for your question. Our last question. One moment, please. I'm sorry. Our last question comes from Jon Tanwanteng from CJS Securities. The floor is yours.

Jon Tanwanteng (Managing Director)

Hi guys. Thank you for taking my questions and congrats on a strong quarter. I was wondering, Scott, if you could break down maybe what part of the outperformance was overperformance on projects versus what you budgeted and if there are any pull-ins of projects or push-outs of expenses, if any.

Scott Kornblau (SVP and CFO)

Yeah. I mean, the big number was driven by the project performance on these high-capital jobs. We did have a couple of the two dry docks that started at the end of the quarter. They maybe went in about a week each later than we expected. Really, the biggest driver here was just killing it on these big projects that we have in our backlog.

Jon Tanwanteng (Managing Director)

Okay. Great. Thank you. What is actually scheduled to liquidate in Q2 with the four dry dockings you have?

Scott Kornblau (SVP and CFO)

What do you mean? I didn't understand the question.

Jon Tanwanteng (Managing Director)

What number of the backlog that's scheduled to liquidate in Q2?

Scott Kornblau (SVP and CFO)

Oh, yeah. I mean, we don't give a quarter-by-quarter of how much is going to burn off each quarter. I will tell you, when our queue comes out later today, we do say that 60% of our backlog right now is estimated to be burned off for the remainder of the year.

Jon Tanwanteng (Managing Director)

Okay. Great. Thank you. I was wondering if you could talk about you have had this strong mix of capital and coastal work. When do you think that mix starts to normalize, number one? Number two, just given the volume of trade declines today with tariff impacts, do you think that port budgets may fall in the out years and quarters if there is continued disruption there for deepening specifically?

Lasse Petterson (CEO)

If I knew all that, that would be great. Just a comment on large projects. The reason why we are targeting the larger project is because we have this extensive fleet. Once we get into swing on a large project that is going over a year or a year and a half, we can then utilize the equipment that is specifically assigned for the various phases of those projects.

That gives when we get those projects, we perform very well. That gives the rise to the higher margins that we are able to realize on those projects. The coastal protection market was very slow, if you remember, back in 2022 and beginning of 2023, particularly in Florida. That market came back now in 2024 and 2025. We see that also continuing going forward. Port deepenings was really a rush from the extension of the Panama Canal, which then triggered the Savannah to start first, and then it has just been continuing along the coast of port deepenings. That will continue probably with New York starting up in 2027. To deepen the New York port, that is a mega project which will go over many years. We are also looking at new large projects in Florida and also here in the Gulf.

The visibility for those projects will probably come as we go through the latter part of this year and beginning of next year. The general funding for the Corps to do dredging comes from the Harbor Maintenance Trust Fund to a large extent. Those fees that are collected go to maintenance dredging and make sure that we maintain our waterways and our ports. That funding has been very strong. As you know, we are using 100% of the annual revenues that goes into that fund is then being used for dredging, and we do see that continuing. There was a comment in the President's suggested budget for a reduction in the use of the Harbor Maintenance Trust Fund. If you read it carefully, it says that the Trump administration is very focused on prioritizing the dredging portions.

The funds that were being reduced were for other uses of the Harbor Maintenance Trust Fund. As I see it, it will be a good budget for next year with the support that we both have from the administration and also in Congress. Okay. Thank you.

Operator (participant)

Thank you for your question. This concludes the question and answer session. I would now like to turn it back over to Eric Birge, Vice President of Investor Relations, for closing remarks. The floor is yours.

Eric Birge (VP of Investor Relations)

Thank you, everybody. We appreciate the support of our shareholders, employees, and business partners, and we thank you for joining us in the discussion about the important developments and initiatives of our business. We look forward to speaking to you during our next earnings call. If you have any questions, please feel free to reach out.

Operator (participant)

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.