Great Lakes Dredge & Dock CORP Q3 FY2023 earnings call

• Ended Q3 with a record dredging backlog of $1.03 billion, including $50 million in offshore wind performance obligations and $225 million in low bids/options. 71% of the backlog was capital projects.
• Added $519 million in capital projects, including LNG projects like the Brownsville Ship Channel for Next Decade Corporation's Rio Grande LNG project and the Port Arthur LNG Phase 1 project.
• Acquired multi-cats Cape Hatteras and Cape Canaveral, and the Galveston Island hopper dredge will be operational in Q4; the Amelia Island is due in 2025.
• Entered the offshore wind market with the steel-cutting ceremony for the Acadia and a subcontract with Carver Sand & Gravel. Awarded rock installation contracts for Empire Wind I and II projects with installation windows in 2025-2026.
• Monitored offshore wind PPA developments, expecting updates from Equinor on Empire Wind projects in Q1 2024. The bid market for capital projects was strong, with Great Lakes winning 39% of the $459 million capital bid market for port improvement projects year-to-date.

In the third quarter of 2023, revenues were $117.2 million, a decrease of $41.1 million from the prior year's third quarter. Gross profit increased to $9 million with a margin of 7.7% compared to $3.8 million and 2.4% in the third quarter of 2022. The hydraulic fleet had lower utilization in Q3, but Q4 is expected to see improved utilization. Capital and beach projects, which typically have higher margins, are anticipated to contribute more revenue in Q4.

• Full year CapEx guidance reduced to approximately $145 million due to timing of Acadia milestone payments.
• Expect Q4 utilization to greatly increase with no planned dry dockings and more revenue from capital and beach projects.
• Backlog of over $1 billion provides confidence in improved results in the coming years.
• Anticipate updates from Equinor on Empire Wind projects in Q1 2024.

• Uncertainty from continuing resolution affecting the Corps' ability to issue new contracts, though impact on existing backlog projects is minimal.
• Offshore wind projects face challenges due to PPA renegotiation issues, project delays/cancellations from higher interest rates and inflation.
• Inflation and interest rate impacts on offshore wind project costs and feasibility.

Q: Discussion on Q3 revenue vs prior commentary A: Explained lower Q3 revenue due to dry docks, hydraulic fleet challenges, but backlog supports future revenue.

Q: Impact of continuing resolution on Q4 revenue A: Existing backlog projects not impacted, continued resolution impact on new contracts delayed to end of 2024.

Q: Acadia plans if Empire I/II not proceed A: Acadia can be used for other projects, international market available.

Q: Site condition settlements A: Two settlements resolved, half booked in Q3, rest in Q4 and Q1.

Q: Q4 and Q1 utilization A: Q4 hydraulics utilization more than double Q3, Q1 shaping up with LNG work.

Q: Title XI application approval and financing A: MARAD review ongoing, parallel financing discussions, sale leaseback of equipment raised $29M.

Q: CapEx for 2024 A: 2024 CapEx expected to be $175M-$195M, with maintenance CapEx around $25M.

Q: Contract margins and inflation A: Government contracts have fixed prices with inflation assumptions, non-government contracts more favorable.