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Good day, and thank you for standing by. Welcome to the fourth quarter 2024 Great Lakes Dredge & Dock Corporation Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' 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 phone. You will then hear an automated message advising 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, Tina Baginskis, Director of Investor Relations. Please go ahead.

Good morning, and welcome to our fourth quarter and full year 2024 conference call. Joining me on the call this morning is our President and Chief Executive Officer, Lasse Petterson, and our Chief Financial Officer, Scott Kornblau. We will provide an update on the events of the quarter. Then Scott will continue with an update on our financial results for the quarter and year. 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, 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 the Securities and Exchange Commission. During this call, we also refer to certain non-GAAP financial measures including adjusted EBITDA, which are explained in the net income to adjusted EBITDA reconciliation attached to our earnings release and posted on our Investor Relations website along with certain other operating data. With that, I will turn the call over to Lasse.

Thank you, Tina. Hi. Good morning. Great Lakes had a strong 2024 with fourth quarter revenues of $202.8 million and EBITDA of $40.2 million. The full year financial results were revenues of $762.7 million and adjusted EBITDA of $136 million, securing the second highest results in Great Lakes' 135-year history. The strong performance throughout the year was driven by executing complex port deepening and coastal restoration projects, leveraging our capabilities of our extensive fleet. In addition, our projects were efficiently executed with strong margin performance, and our new Hopper dredge, the Galveston Island, worked the majority of the year contributing to our 2024 results. The bid markets hit a historic level of $2.9 billion, which included a significant number of port deepening and coastal protection projects. Great Lakes won 33% of the overall bid market, which resulted in a substantial dredging backlog at year-end of $1.2 billion with an additional $282.1 million in low bids and options pending award. We focus our bidding on large and complex port deepening and coastal protection projects which now account for 94% of our backlog. These projects are where our fleet and experienced people excel, creating opportunities to achieve higher project margins. The largest capital project bid in the year was Sabine Neches' contract six deepening project, which we won with an awarded base and open options totaling $235 million. A successful bid strategy in 2024 resulted in a large number of project wins and quality backlog at year-end, which will support high utilization and a solid revenue year in 2025, as well as providing a good base and revenue visibility to 2026. As mentioned, we took delivery of our new hopper dredge, the Galveston Island, early last year. She went through commissioning and sea trials in record time and has been contributing strongly to our improved results in 2024. Our sister ship, the Amelia Island, is expected to be delivered in the second half of this year and will go straight to work on projects already in backlog. These two dredges have been specially designed for shallow and narrow waterways in the United States and are efficient tools for us to work on coastal protection projects such as beach restoration, wetlands improvements, and barrier island construction. Shortly after his inauguration, President Trump signed an executive order pausing the issuance of new offshore wind leases and permits, and ordered a review of the US wind generation permitting and leasing process. The executive order has not directly impacted fully permitted and ongoing construction projects such as Equinor's Empire Wind 1 and Ørsted Sunrise Wind projects, for which we have secured contracts for placing rock on the seabed to protect foundations and cables with our rock and subsea rock installation vessel, the Arcadia, which is currently under construction. The Arcadia is also well-suited for work outside of the US offshore wind, where it will be capable of accurately depositing rock for protection of subsea infrastructure from waves and currents, damage from fishing activities, and sabotage from hostile nations. In anticipation of a slowdown in the US market in 2027 and 2028, we have over the last two years been broadening our target market for the Arcadia to include international offshore wind projects, as well as protecting critical subsea infrastructure such as oil and gas pipelines and telecommunication and power cables. We have already tendered bids on several projects in these international markets, starting rock installation in the second half of 2026 and beyond. With the addition of these new target markets for Arcadia, we have decided to rename our offshore wind initiative to offshore energy, which better describes the new business. During 2024, we enhanced our financial position by generating a strong operational cash flow and we entered into a $150 million second lien credit agreement providing additional liquidity to support our new build program. In the second quarter, S&P Global Ratings upgraded Great Lakes' credit rating to B minus, which demonstrates the improvements that we have made this year to our balance sheet, cash flows, and overall performance. I now turn the call over to Scott to further discuss the results for the quarter and our full year results. Then I will provide further commentary around the market and business.

Great. Thank you, Lasse. Good morning, everyone. I'll start by walking through the fourth quarter, which resulted in revenues of $202.8 million, net income of $19.7 million, and adjusted EBITDA and adjusted EBITDA margin of $40.2 million and 20% respectively. Revenues of $202.8 million in the fourth quarter of 2024 increased $21.1 million from the prior year's fourth quarter, primarily due to the addition of the Galveston Island and higher capital and coastal protection revenue, offset partially by a decrease in maintenance and rivers and lakes revenue. Current quarter gross profit and gross profit margin increased to $48.9 million and 24.1% respectively, compared to $38.7 million and 21.3% respectively in the fourth quarter of 2023. 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 fourth quarter of 2024, over 85% of our revenue came from these types of projects. Fourth quarter 2024 G&A of $18.7 million is $3.3 million higher than the same quarter last year, primarily due to higher incentive pay from our improved results. Current quarter's operating income of $30 million remained relatively flat compared to the prior year quarter operating income of $30.5 million. The fourth quarter of 2023 had a one-time gain of $7.4 million from a terminated offshore energy contract, which was mostly offset by the improved operational performance in the fourth quarter of 2024. Net interest expense of $4.9 million for the fourth quarter of 2024 was up from $2.8 million in the fourth quarter of 2023, primarily due to interest on the second lien credit agreement entered into earlier in 2024, partially offset by decreased borrowings on our revolver during the current year's quarter. Fourth quarter 2024 net income tax of $5.1 million was down slightly compared to income tax expense of $6.2 million in the same quarter of 2023. Net income for the fourth quarter of 2024 was $19.7 million compared to $21.6 million from the prior year's quarter. Turning now to our full year 2024 results, revenues increased $173.1 million to $762.7 million, driven mostly by significant increases in capital and coastal protection revenue. We saw gross profits more than double from the prior year to $160.6 million, and net income increased over four times to $57.3 million. Finally, adjusted EBITDA increased $63 million year over year to $136 million. By all metrics, 2024 was a very successful year. Turning to our balance sheet, we ended the year with $10.2 million in cash and $35 million drawn on our $300 million revolver, which does not mature until the third quarter of 2027. After year-end, we fully paid off the revolver and it is currently undrawn. As Lasse mentioned, in the second quarter, we closed on a five-year $150 million second lien term loan that has very favorable call provisions. With liquidity currently over $300 million, a weighted average interest rate on our total debt under 7%, and no maturities until 2029, we are well-positioned to complete our new build program with plenty of additional liquidity. Total capital expenditures for 2024 were $135.7 million, made up of $72.7 million for the subsea rock installation vessel, the Arcadia, $41 million for the Amelia Island, $5.4 million for the completion of the Galveston Island, with the remaining $16.6 million coming from maintenance and growth. Looking forward to 2025, we expect approximately 60% of our $1.2 billion backlog to be converted into revenue during the year, with most of it coming from capital and coastal protection projects. We currently have seven regulatory drydockings planned during 2025, including four hopper dredges. The majority of the drydockings are planned for the second and third quarters, but as always, the number and timing of drydockings are subject to change. We expect full-year 2025 capital expenditures to be between $140 million and $160 million, including capitalized interest for the Amelia Island, Arcadia, and maintenance and growth CapEx. We are also currently evaluating moderate upgrades to certain dredges and support equipment over the next three years and will update current CapEx guidance accordingly as these decisions are made. Looking towards the first quarter of 2025, we expect utilization to remain strong as the majority of our dredges are working. We will start and complete one of the scheduled regulatory drydockings during the quarter and are scheduled to begin two others towards the end of the first quarter. With that, I will turn the call back over to Lasse for his remarks on the outlook moving forward.

Thank you, Scott. As stated previously, the year ended with a record bid market of $2.9 billion, which included a robust market for large and complex projects in the beach renourishment and port deepening markets. The bid market was supported by a record $8.7 billion in budgeted appropriations in 2024 for the US Army Corps of Engineers. Additionally, the 2023 Disaster Relief Supplemental Appropriation Act allocated $1.5 billion for infrastructure repairs and beach renourishment projects. The Army Corps budget for 2025 is expected to be yet another record appropriation, nearing $10 billion. The bill includes $5.7 billion for operations and maintenance projects, of which $3.1 billion is from the Harbor Maintenance Trust Fund. Currently, the federal government is operating on a continuing resolution through March 14 of this year, after which Congress and the administration can pass the funding bill. We expect the 2025 dredging bid market to be similar in volume to 2023, with strong activity in the coastal protection segment and less activity in the port deepening segment after a very strong 2024 bid market. With our record backlog, we are well-positioned for 2025 and 2026, even if the bid market is somewhat delayed due to the extended continuing resolution. We continue to be confident in our growth and diversification plan via the subsea rock installation initiative. As stated previously, we are broadening our targeted SRI market to include oil and gas pipelines and telecommunication cable protection and international offshore wind. The latest Bloomberg offshore wind market outlook shows global offshore wind expected to grow substantially towards 2040, with a forecast exceeding 700 gigawatts of installed power. Due to the global political uncertainty, this may be a high case. However, it does point to a strong growth opportunity in offshore wind later this decade and beyond. In addition, market expectations for telecommunication and oil and gas scour protection projects globally are estimated to require the capacity of approximately ten rock placement vessels of Arcadia's class. The Arcadia was built to operate in US waters for the majority of her time, but she is also equally well-suited for work outside of the US, including the UK, EU, Middle East, and Asia, where the growth in rock placement services is expected to grow strongly over the next decades. In conclusion, 2024 was a very successful year for Great Lakes, with strong revenue and project performance, resulting in the second highest EBITDA in the company's history. We entered 2025 with $1.2 billion of backlog, providing us with a deep project pipeline for 2025 and revenue visibility well into 2026, positioning us well for the future. And with that, we turn the call over for questions.

Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you'll 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. Our first question comes from the line of Joe Gomes of Noble Capital. Your line is now open.

Good morning. Congrats on the quarter.

Thank you, Joe.

So I wanted to start off, you know, obviously, 2024 was a really strong year bid market year. I know you guys just mentioned you expect 2025 to be more like 2023 as opposed to 2024, but, you know, there's all these DoD efforts. And I'm wondering, you know, how it might possibly impact the Corps and work awards. You know, one of the things in the recent past that had been a challenge was so many other people still working from home. And just if you guys, I know it's early days, you know, kind of what your thought process is on how that might impact the market. If you think it's gonna impact the market at all.

Yeah. The situation with DoD, I don't know who knows where that goes. But as we understand, they are starting to look at the defense spending this week. We have this strong backlog, which is a water project. It is funded projects. So the dredging backlog will be executed during 2025. That is we're very certain on that. And also into 2026. So if there are some efforts to delay the bid market that is now coming out, typically in Q2 and Q3 of 2025, the impact on us will be minimal, if any, for 2025. It may impact backlog generation for 2026, but it remains to be seen. With the backlog we have, we are very confident in our outlook for the next two years.

Okay. And, lastly, if I can just add, you know, Lasse mentioned coastal protection projects. When we saw a slowdown in the market because of the work from home, it was the inability to get the large capital projects out. We think that these coastal protection projects will move forward. I mean, this is important work that needs to get done to rebuild these beaches. So we don't have a ton of white space to fill for this year, but those projects that come out, you know, will really start filling in the second half of 2026 for us.

Okay. And then I saw recently here there was an adverse court ruling on non-Jones Act vessels being able to do rock installation in the US. I was wondering if you might be able to talk a little bit about that and how that may or may not impact Arcadia. I know you already mentioned you're looking at other markets for that vessel, but I just wanted to give us a little color on that court ruling.

Yeah. Can you take that, Lasse?

Yeah. Sure. So the punchline, Joe, is we are in no different position today than we were two weeks ago when the ruling came out. This was a lawsuit that we put out there challenging the interpretation of a certain aspect of the work related to the Jones Act. So some wind farms have two layers of rock that's around the monopiles. A first layer is laid down. Then the monopile is driven in, and then the second layer of rock is laid down. The current interpretation of the Jones Act is that the first layer only is not Jones Act protected. We were challenging that interpretation, saying that both of them should be. It was rejected on a technicality. It does not change our position. That second layer, which is typically the larger scope of work, is absolutely Jones Act protected. There's also a large number of wind farms that don't even do a first layer of rock. A monopile is laid. Once the monopile is put in, that does set a US seaport point, and then all the rock that gets laid is Jones Act protected. So we were trying to enhance our already strong position. Again, a technicality, we are still evaluating, you know, what our next legal step may be. But again, just want to make it clear, we are in no different position than we were prior to this ruling.

Okay. Thank you for that. Then one more for me and I'll get back in queue. Any update on Title XI funding?

Yeah. We put post the change administration, I mean, all government loan programs were put on pause, and that includes Title XI. So we're just gonna have to see how it shakes out. And then even once the pause is lifted, I'm not sure if vessels like the Arcadia will get the same sort of priority that they were, you know, getting under the prior administration. But, you know, as you know, last year, we planned for this. We did see other financing. Obviously, we've seen a much different cash flow profile from operations. So now, MARAD, I'd like it, but it really becomes a nice to have at this point and definitely not a need to have.

Great. Thank you very much.

Thank you. One moment for our next question. Our next question comes from the line of Jon Tanwanteng of CJS Securities. Your line is now open.

Hi. Good morning, guys. Thank you for taking my question. My first one is, could you give an update just on the Arcadia construction and when you expect to take delivery of that vessel?

Yeah. I can take that, Scott. Yeah. We are progressing well at the Philly Shipyard. As you know, there has been an ownership change at the shipyard. So now the Korean Hanwha company is an owner of the shipyard, and in this period, there have been some delays at the yard for the vessel. So we are looking at delivery towards the end of this year, maybe early in Q1 of 2025. And then just in terms of the project that you already have in backlog and your contract signed for, I know you said that, you know, those permits are still existing, but there has been chatter that, you know, existing permits might be reviewed. What are the options for the Arcadia if those contracts do get canceled, the permits get pulled? Do you have protection still from the contracts, number one, and two, is there any way to fill that utilization of the vessel, you know, if those things fall through?

Yeah. There are protections in the contracts. If those projects are being canceled, which we haven't seen any indications of yet, then the alternative is to take the Arcadia and work internationally. And the market internationally for rock placement activities is strong.

Okay. And there's enough lead time as, you know, for the next, I guess, period that you're able to utilize that after you take delivery of those contracts account?

Yeah. Clearly, it takes time for these contracts to be negotiated and awarded. So depending on when these potential negative news should come out, there could be lead time to do that. If it comes out very close to the execution time for the projects, it's more difficult. But this is just pure speculation at this point in time.

Okay. Got it. A quick one for you just what is your expected liquidation of backlog in Q1 just given the trade-off schedule? I think you mentioned you had one in maybe starting two others, but I didn't know if those were the big dredges. You know, what projects you're working on? Should we think of Q1 as probably maybe the biggest one of the year for you just given your schedule going forward?

Yeah. I think that's fair. I think we will see the highest revenue quarter in the first quarter. I mentioned we do have four hopper dredges scheduled for this year. One of those, the one that goes in and out in Q1, is a hopper, but it's one of the smaller ones. The larger hoppers are more in the middle and towards the end of the year. So, yeah, utilization and revenue for Q1 is going to be strong.

Okay. Great. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Adam Thalhimer of Thompson Davis. Your line is now open.

Hey. Good morning, guys. Nice quarter. Not sure why the stock's down, but nice quarter.

Yeah. Thank you.

Thanks, Scott. When you say 60% backlog conversion into revenue this year, should we read that as guidance on revenue, or is there additional book and burn that comes in?

There's additional book and burn. That's what I would call the floor. We have a little white space built to fill. And that will top out, you know, what the revenue for 2025 is. But, you know, you do the math, that's $720 million already on the books right now with very little left to wind to fill out the year. And then what are your thoughts high level on margins? Obviously, the number of dry docks is up. But so is your percentage of revenue from capital. Just curious how that shakes out if you can have revenue growth this year. With even with the seven dry docks, my expectation is we will see revenue higher in 2025 than we did in 2024. If this would be a normal dry dock year, it would all be off the charts. But even with it, my expectation is that we see a growth in revenue in 2025 over the revenue number.

And then I was curious how that shakes out on the margin line, Scott.

Yeah. I mean, so, you know, it's obviously of that amount that we're gonna be burning off, you know, it's well over 90% of that is going to be on these higher margin projects. But then, of course, I've got seven dredges that will be for a period of time. Not only having a zero on the top line, there'll be costs incurred, you know, on there. So it will bring down, you know, where margins could be because of the cost. But that being said, expectations are big because of the makeup of the revenue we would still have very, very strong margins. Again, I bring up again if this was a normal year, you know, I think we'd be talking about historic levels on a lot of fronts for 2025. That being said, it's still going to be an extremely strong year.

Understood. And then last one for me. You talked about critical subsea protection outside of on the international front, not just in offshore wind, but also pipelines and telecom. Just curious on the pipelines and telecom piece, what you're seeing there and how big that opportunity could be?

Yeah. What we have seen in Europe has been sabotage or you call accidents to this input critical infrastructure. And there's a lot of discussion on how to protect the cables, connecting Europe both with power and for communication, and also going over to the US. And one way is to protect it with rock placement so that they are then insulated from that damage. And in Asia, we see large pipeline projects, gas pipelines, where it's being considered to cover pipelines completely with rock. So that market is already a large market, but it is growing. And growing on the back of the general geopolitical situation. And as I said in my script, when we investigate that market and get a full overview of it, it looks like there is a volume that is equal to ten vessels of Arcadia's size to cover that market. So that is a substantial growth that we see there.

Fantastic. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Julio Romero of Sidoti and Company. Your line is now open.

Thanks. Hey. Good morning, Lasse and Scott.

Good morning.

Hey. Good morning.

Wanted to stay on Adam's kind of question there a little bit. You know, thinking about these addressable markets for the targeted rock installation broadening, you know, can we maybe rank order these opportunities for Great Lakes? In terms of rock installation through, let's say, 2028, I know you talked about Europe, both power and communication rock protection, and then also Asia kind of the power protection. Just kind of give us a better sense of how you see the rank order of those opportunities over the next four years.

Yeah. I just wanna for you guys specifically. Yeah. The market, as I see it for Arcadia, is clearly the rock volumes are large in offshore wind, and offshore wind is continuing to be strong in Europe, in particular, and also in Asia. So we have been tendering for these offshore wind projects for a while. And we see that starting in 2026 and onwards. Then we have cable protection with rock. And it's interesting to see because when you do these cable installation projects, it's difficult to estimate how much of the cable you are able to trench easily or where you hit hard rock. And where you hit hard rock underneath, you need to protect the cable in that area. And that market is large. But difficult to estimate when you start out the project. For us, cable protection for power cables will be the second largest market and then also telecommunication thereafter. And our priorities will be Europe first, and then look at Asia as well.

Great. Would South America be an opportunity for you guys? I've heard a lot of chatter about, you know, offshore energy opportunities, particularly around Brazil.

Yeah. We haven't looked at that in detail. I think the realistic scenario is that we prefer to take Arcadia to Europe and address that market. That's where we see the growth. That's where it's a mature market. And we have good opportunities to perform there.

Gotcha. Very helpful there. And then I know we talked a lot about the impact of the new administration on kind of your legacy business and the offshore energy segment, but can we also talk about kind of the impact on the outlook for LNG projects? I know there's a recent executive order to lift the freeze on export permitting applications. Just talk about the outlook for LNG for you guys.

Yeah. I think that market will be strong going forward. The lifting of the permitting, I think that will happen fairly soon. And that opens up for the opportunity to continue to invest in LNG in the United States for exports. I think a factor that needs to be taken into consideration is what's happening in Europe around Ukraine and whether Europe will start buying Russian gas again and impact the demand for imported LNG into Europe. But that is for other people to decide on. But I think it's a positive outlook for LNG projects in the US in the short term.

Great. And then last one for me would just be, and I'm sorry if you said this in the prepared, but how much is left on the new build program and does it all end in 2025? And then just speak to your cash flow expectations for 2025.

Thank you. Yeah. Can you take that, Scott?

Yeah. So we have roughly about $110 to $120 million left between the Arcadia and the Amelia Island. You know, Lasse mentioned that delivery of the Arcadia, you know, if it's not the end of this year, it may creep into the first quarter of next year. So that'll just kind of depend on, you know, when that last payment is made. There is some delay after delivery when we actually make the last payment. So my expectation is that payment, the final payment, is probably made sometime in the first quarter of next year, but we'll be substantially done paying for it this year for the entire new build program. And then again, cash flow, you know, we still, as I mentioned with the, you know, CapEx guidance, you know, in that $140 to $160 million, I did mention that includes capitalized interest. That's about $20 million, so you can really kind of back that off when you're looking at cash outlay related to the new build program and then, you know, pencil in what you think our cash flow from ops is gonna be, but we should be, you know, I would say fairly give or take, you know, cash flow neutral for the year even with the big CapEx ticket remaining to spend this year.

Very helpful. Thanks very much.

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Tina Baginskis for closing remarks.

Thank you. We appreciate the support of our shareholders, employees, and business partners, and we thank you for joining us in this discussion about the important developments and initiatives in our business. We look forward to speaking with you during our next earnings discussion. Thank you.