10-K: Great Lakes Dredge & Dock Corporation Announces Executive Employment Agreement and Files Annual Report

Great Lakes Dredge & Dock Corporation details an employment agreement for a Senior Vice President and releases its annual 10-K filing, outlining business performance and future outlook.

Summary

• Great Lakes Dredge & Dock Corporation (GLDD) has formalized an employment agreement with Eleni Beyko as Senior Vice President of Offshore Wind, starting January 25, 2021, with a base salary of $300,000.
• The agreement includes eligibility for annual performance bonuses, long-term incentives, and participation in employee benefit plans.
• The company's 10-K filing for the fiscal year ended December 31, 2023, highlights a 9.1% decrease in total revenue to $589.6 million, primarily due to a decrease in domestic capital project revenues.
• Despite the revenue decrease, gross profit increased by 149.2% to $77.7 million, with a gross profit margin of 13.2%, driven by lower operating costs and improved project performance.
• The company's backlog increased by 175.5% to $1.04 billion, with 71% attributed to domestic capital projects.
• GLDD is strategically entering the U.S. offshore wind market, having secured contracts for rock installation and is building a Jones Act compliant vessel for this purpose.
• The company's average combined bid market share in the U.S. was 33% over the three-year period ended December 31, 2023.
• The company's net income for 2023 was $13.9 million, a significant improvement from a net loss of $34.1 million in 2022.
• Adjusted EBITDA for 2023 was $73.0 million, compared to $17.0 million in 2022.

Sentiment

Score: 7

Explanation: The document presents a mixed picture with strong positives in profitability and backlog growth, but also highlights challenges in revenue and potential risks. The strategic move into offshore wind is a positive long-term indicator.

Positives

• The company secured a new rock installation contract for subsea cable protection in the offshore wind market.
• The company's gross profit margin improved significantly due to cost reductions and better project performance.
• The company's backlog has increased substantially, indicating strong future revenue potential.
• The company's net income has improved significantly year over year.
• The company is strategically positioned in the growing U.S. offshore wind market.

Negatives

• Total revenue decreased by 9.1% year-over-year.
• The company experienced a decrease in domestic capital project revenues.
• The company saw several cancellations of Power Purchase Agreements (PPAs) that were entered into in 2018 and 2019, as inflation and interest rate hikes eroded the profitability of these PPAs.

Risks

• The company is subject to risks associated with cost over-runs, operating cost inflation and potential claims for liquidated damages, particularly with respect to fixed cost contracts.
• Project delays related to the increasingly negative impacts of climate change or other unusual, non-historical weather patterns could impact the company's ability to perform projects on time and on budget.
• The company faces risks related to equipment or mechanical failures.
• The company is subject to risks related to a pandemic, epidemic or outbreak of an infectious disease.
• The company faces risks related to disruptions to its supply chain for procurement of new vessel build materials or maintenance on existing vessels.
• The company is subject to capital and operational costs due to environmental regulations.
• The company is subject to market and regulatory responses to climate change, including proposed regulations concerning emissions reporting and future emissions reduction goals.
• The company faces risks related to contract penalties for any projects that are completed late.
• The company is subject to force majeure events, including natural disasters, war and terrorists actions.
• The company faces risks related to changes in the amount of its estimated backlog.
• The company is subject to significant negative changes attributable to large, single customer contracts.
• The company faces risks related to its ability to obtain financing for the construction of new vessels, including its new offshore wind vessel.
• The company faces risks related to its ability to secure contracts to utilize its new offshore wind vessel.
• The company is subject to unforeseen delays and cost overruns related to the construction of its new vessels.
• The company faces risks related to any failure to comply with the Jones Act provisions on coastwise trade, or if those provisions were modified or repealed.
• The company is subject to fluctuations in fuel prices, particularly given its dependence on petroleum-based products.
• The company faces impacts of nationwide inflation on procurement of new build and vessel maintenance materials.
• The company is subject to risks related to its ability to obtain bonding or letters of credit and risks associated with draws by the surety on outstanding bonds or calls by the beneficiary on outstanding letters of credit.
• The company faces risks related to acquisition integration and consolidation, including transaction expenses, unexpected liabilities and operational challenges and risks.
• The company is subject to risks related to divestitures and discontinued operations, including retained liabilities from businesses that it sells or discontinues.
• The company faces potential penalties and reputational damage as a result of legal and regulatory proceedings.
• The company is subject to any liabilities imposed on it for the obligations of joint ventures, partners and subcontractors.
• The company faces increased costs of certain material used in its operations due to newly imposed tariffs.
• The company is subject to unionized labor force work stoppages.
• The company faces any liabilities for job-related claims under federal law, which does not provide for the liability limitations typically present under state law.
• The company is subject to operational hazards, including any liabilities or losses relating to personal or property damage resulting from its operations.
• The company faces risks related to its ability to identify and contract with qualified MBE or DBE contractors to perform as subcontractors.
• The company has a substantial amount of indebtedness, which makes it more vulnerable to adverse economic and competitive conditions.
• The company is subject to restrictions on the operation of its business imposed by financing terms and covenants.
• The company faces impacts of adverse capital and credit market conditions on its ability to meet liquidity needs and access capital.
• The company is subject to limitations on its hedging strategy imposed by statutory and regulatory requirements for derivative transactions.
• The company faces foreign exchange risks, in particular, as it relates to the new offshore wind vessel build.
• The company is subject to losses attributable to its investments in privately financed projects.
• The company is subject to restrictions on foreign ownership of its common stock.
• The company is subject to restrictions imposed by Delaware law and its charter on takeover transactions that stockholders may consider to be favorable.
• The company is subject to restrictions on its ability to declare dividends imposed by its financing agreements or Delaware law.
• The company faces significant fluctuations in the market price of its common stock, which may make it difficult for holders to resell its common stock when they want or at prices that they find attractive.
• The company faces changes in previously recorded net revenue and profit as a result of the significant estimates made in connection with its methods of accounting for recognized revenue.
• The company faces risks related to maintaining an adequate level of insurance coverage.
• The company faces risks related to its ability to find, attract and retain key personnel and skilled labor.
• The company is subject to disruptions, failures, data corruptions, cyber-based attacks or security breaches of the information technology systems on which it relies to conduct its business.
• The company faces impairments of its goodwill or other intangible assets.

Future Outlook

The company expects to continue to build its offshore wind capabilities, win rock installation projects, and position for growth in the accelerating U.S. offshore wind market. The company anticipates that remaining new build program payments will be made with cash on hand, future cash flows generated from operations, revolver availability, and possible future financing transactions. The company expects to spend between approximately $170 million and $195 million on capital expenditures in 2024 which is comprised of vessels in our new build program and maintenance capital expenditures.

Management Comments

• The company is strategically entering the nascent U.S. offshore wind market.
• The company has already established a first mover advantage in scour protection installation for offshore wind foundations, cables, and offshore substations.
• The company expects to continue targeting foreign capital projects in the future.
• The company is committed to a reliability-assured maintenance program.

Industry Context

The announcement reflects a strategic shift towards the growing offshore wind market, aligning with broader industry trends in renewable energy. The company's focus on U.S. based projects and Jones Act compliance positions it well within the domestic market.

Comparison to Industry Standards

• The company's average combined bid market share of 33% over the three-year period ended December 31, 2023, indicates a strong competitive position within the U.S. dredging market.
• The company's focus on capital, coastal protection, and maintenance dredging aligns with the core activities of major dredging companies globally.
• The company's entry into the offshore wind market mirrors the strategic moves of European dredging companies, indicating a global trend in the industry.
• The company's investment in a Jones Act compliant vessel for offshore wind positions it uniquely in the U.S. market, where foreign competition is restricted.
• The company's financial performance, with a significant increase in gross profit and a return to profitability, suggests a positive trend compared to industry averages, which have been impacted by supply chain issues and inflation.

Management Changes

Legal Proceedings

• The company is currently a defendant in a number of litigation matters, including those described in Item 3. Legal Proceedings of this Annual Report on Form 10-K.
• The company was involved in litigation relating to the sale of its historical demolition business, which was settled on April 24, 2023.

Stakeholder Impact

• Shareholders will benefit from the company's improved profitability and strategic positioning in the offshore wind market.
• Employees will benefit from the company's growth and potential for increased compensation and benefits.
• Customers will benefit from the company's expanded capabilities and expertise in dredging and offshore wind projects.
• Suppliers will benefit from the company's increased activity and demand for materials and services.
• Creditors will benefit from the company's improved financial performance and ability to meet its obligations.

Next Steps

• The company plans to continue to build its offshore wind capabilities and win rock installation projects.
• The company will continue to pursue and tender bids, both domestically and internationally, on multiple offshore wind projects for the Acadia.
• The company will continue to monitor for changes in facts or circumstances that may impact its estimates.
• The company will perform its next scheduled annual test of goodwill in the third quarter of 2024 should no triggering events occur which would require a test prior to the next annual test.

Key Dates

Keywords

dredging, offshore wind, marine construction, capital projects, coastal protection, maintenance dredging, Jones Act, backlog, financial results, revenue, EBITDA, contracts, vessels, infrastructure