Participants

Tina Baginskis; Director - Investor Relations; Great Lakes Dredge & Dock Corp

Lasse Petterson; President, Chief Executive Officer, Director; Great Lakes Dredge & Dock Corp

Scott Kornblau; Chief Financial Officer, Senior Vice President, Treasurer; Great Lakes Dredge & Dock Corp

Joe Gomes; Analyst; Noble Financial Capital Markets

Jon Tanwanteng; Analyst; CJS Securities

Adam Thalhimer; Analyst; Thompson Davis & Co.

Presentation

Operator

Good day, and thank you for standing by, and welcome to the Q1 2020 for Great Lakes Dredge & Dock Corp. Earnings Call Conference Call. (Operator Instructions) Please be advised that today's conference call is being recorded.
I would now like to hand over the conference to our first speaker today, Peter beginning, his Director of Investor Relations for headcount.

Tina Baginskis

Thank you. Good morning and welcome to our first quarter 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 Coram. While Boston will provide an update on the events of the quarter, and Scott will continue with an update on our financial results for the quarter. Plus I will conclude with an update on the outlook for the business and markets. 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 earnings release and in filings with the SEC, including our 2023 form 10 K and subsequent filings.
During this call, we also reserve 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 Lotta.

Lasse Petterson

Thank you, Tina, and Great Lakes concluded the first quarter with good financial results, marking the best EBITDA quarter since the fourth quarter of 2021. During the quarter, the majority of our fleets were active on projects and performing well.
Additionally, our new hopper dredge, the Galveston Island, it was successfully commissioned and started operations contributing to the project performance in the first quarter after suffering the aftereffects of COVID and delays in bidding on major projects from the core Army Corps of Engineers the last two years, we are now back to more normal operations.
In 2023, we secured five major project awards, including the Freeport channel deepening project, the Sabine matches waterway channel improvement project, the Port Arthur LNG Phase one channel improvement project and the brand's full Ship Channel project for the next decades, Rio Grande LNG project subcontractor work to build and improve the containment areas has started on both LNG projects with main dredging operations expected to commence midyear of 2024 and 2023. We were also awarded a large reservoir dredge project in Puerto Rico.
We have mobilized our dredge and pipeline in the reservoir and dredging operation started during the second quarter. Our dredging backlog is strong at the end of the quarter, it was $879 million, with 77% of our backlog in capital products with a record 2020 for U.S. Army Corps of Engineers budgets of 8.7 billion that was approved in the first quarter.
The bid market is expected to be robust in the second and third quarters, providing us with good opportunity to maintain a solid backlog sorry, modernizing our fleet with our new build program is a key factor in continuing to be a competitive market leader for the long term, we have made significant progress on our newbuild program with the delivery of our newest midsized hopper dredge, the Galveston Island, which now is in operation and performing well, a sister ship the Amelia Island and this expected to be delivered in 2025.
In 2023, we were honored to have President Biden attend the steel cutting ceremony for Great Lakes of offshore wind rock installation vessel. The Arcadia Acadia is the first and only US Flag Jones Act compliant inclined full pipe vessel for subsea rock installation. This month, we achieved another significant milestone with a killing at the Philly Shipyard, marking the start of the assembly phase of the vessels construction.
Acadia's current schedule is to install rock foundations for Ecuador's Empire Wind one and 2025 and ROC protection for the subsea cables on the Sunrise project in 2026, in spite of the negative headlines on offshore wind in late 2023. We have this year seen new tendering rounds for power purchase agreements and offshore wind leases.
Our offshore wind initiative presents Great Lakes with a strong growth opportunity in a rapidly expanding expanding industry, which will diversify our business activities and broaden our client base to support the newbuild program and provide additional liquidity for Great Lakes.
In April, we entered into a $150 million second lien credit agreement with Guggenheim credit services. This also provides us with additional capacity to issue letter of credits for new tenders and contracts as letters of credits are the most commonly required in oil and gas and offshore wind industries. Unlike the government works for performance bonds or preferred instruments.
I now turn the call over to Scott to further discuss the results for the quarter and provide more details on our financing, and then I'll provide some commentary around the market and our business.

Scott Kornblau

Thank you, Lisa, and good morning, everyone. I'll start by walking through the first quarter, which resulted in the second consecutive quarter that EBITDA exceeded 40 million in the first quarter. Revenues were 198.7 million, net income was 21 million and adjusted EBITDA and adjusted EBITDA margin were 42.9 million and 22%, respectively.
Revenues of 198.7 million in the first quarter of 2024 increased 40.7 million from the prior year's first quarter, primarily due to higher coastal protection revenue and higher capital revenue, which more than doubled from the prior year quarter, aided by the start-up of the Galveston Island, offset partially by a decrease in maintenance and rivers and lakes revenue.
Current quarter gross profit and gross profit margin increased to 45.6 million and 22.9% percent respectively, compared to 12.1 million and 7.7%, respectively in the first quarter of 2023. The increase in gross margin gross margin is primarily due to improved utilization and project performance a larger number of high margin capital projects and our continued focus on cost management. First Quarter 2024 G&A of $16.1 million is $3.1 million higher than the same quarter last year, primarily due to higher employee benefit and incentive costs.
Net interest expense of $3.9 million for the first quarter of 2024 was up from 3.4 million in the first quarter of 2023, primarily due to an increase in revolver borrowings during during the current year's quarter. First Quarter 2024 net income tax expense of 7 million compared to a 0.8 million of net tax income tax benefit in the same quarter of 2023 is driven by the higher current quarter income.
Rounding out the P&L, net income for the first quarter 2024 was 21 million, up from a $3.2 million net loss in the prior year quarter.
Turning to our balance sheet, we ended the first quarter with $22.8 million in cash and 60 million drawn on our 300 million revolver, which doesn't mature until the third quarter of 2027. And at last I mentioned in April, we closed on a five year 150 million second lien term loan, of which 100 million was funded at closing and 50 million is available on a delayed draw basis for the year with the term loan proceeds.
We fully paid off the revolver and are currently sitting with liquidity of over 325 million. With this financing, our weighted average interest rate on our total debt is 7% with no maturities until 2029. We are now well positioned to complete our newbuild program with plenty of additional liquidity while maintaining the flexibility of pursuing alternative sources of financing, including Title 11.
Total capital expenditures for the first quarter of 2024 were 13.5 million, made up of 7 million for the construction of the subsea rock installation vessel, the Acadia 3.3 million for the completion of the Galveston Island, 700,000 for the Amelia Island and the remaining 2.5 million for maintenance and growth.
Full year CapEx guidance remains unchanged at between 170 to 195 million, but can change depending on timing of upcoming milestone payments looking forward to the second quarter, we expect utilization and revenues to decrease from the first quarter as two dredges will be undergoing regulatory regulatory drydockings prior to commencing the LNG projects in the middle of the year.
This quarter, we will also began a regulatory drydocking on a previously cold-stacked dredge in anticipation of work slated to commence towards the end of this year, and we will have another dredge down for about a month for planned maintenance.
The second quarter expected decrease in revenues and increase in costs compared to the first quarter is mostly related to the timing of drydocks and risk and repairs. All of this was known and anticipated and doesn't change our view that 2024 will be a strong year and a return to normalcy anchored by a solid second half.
With that, I will turn the call back over to Lasa for his remarks on the outlook moving forward.

Lasse Petterson

We continue to see strong support from the Biden administration and Congress for the dredging industry. In March, President Biden signed the energy and water appropriation bill into law, which provides a record 8.7 billion in total funding for the U.S. Army Corps of Engineers for fiscal year 2024. The funding includes 5.6 billion for the core operations and maintenance of work and 2.8 billion for the Harbor Maintenance Trust Fund to maintain and modernize our nation's waterways.
In addition, EUR2.2 billion in Florida and storm damage reduction were approved. In addition, the disaster relief Supplemental Appropriations Act for Fiscal Year 2023 was approved, which includes one point $48 billion for the core to make necessary repairs to infrastructure impacted by hurricanes and other natural disasters and to initiate beach nourishment projects that will increase coastal resiliency.
We expect this increased budget and additional funding to support a very strong bid market for 2024. And as I said before, we expect bidding to significantly increase in the second and third quarters and include the port deepening projects for Sabine and will build and a number of coastal protection and beach projects on the East Coast.
US offshore wind market reached major milestones in the first quarter of 2024 with two commercial scale offshore wind farms becoming operational and supplying power to the grid in New York and Massachusetts.
In February, the Wynyard bend wind project of Martha's Wynyard completed installation of five turbines and supplying power to the New England grid while continuing to install additional jobs. In March, we saw the completion of the landmark South Fork wind project with all 12 offshore wind turbines constructed and the wind farm successfully delivered power power to the Long Island.
And Rocco is in an accelerated board bidding round in February of 2020 for an additional three gigawatts of power awarded by New York, Empire Wind one and Sunrise Wind for both awarded new power offtake agreements as part of the latest New York solicitation around notably Great Lakes has awarded rock installation.
Con has been awarded rock installation contracts for both projects, and we'll be using Arcadia to protect and stabilize foundations and cables for those projects with a combined capacity of 1.7 gigawatts. New York, New Jersey awarded 3.7 gigawatts of PPAs in January of 24 with a fourth round of solicitation for up to four gigawatts on April 30th and the results of the earlier announced Tri-State solicitation of six gigawatts of offshore wind as expected to be awarded in third quarter of 2024.
And then finally, New York State recently announced further plans for active solicitation round for offshore wind as of scrapping, the fourth round after disputes related to the turbine supply Great Lakes has established a unique business position in the U.S. offshore wind market, and we continue to pursue and bid a number of other offshore wind farm projects, both domestically and internationally, Iraq installations planned for 2026 and on.
So in conclusion, we entered the new year with a rock record backlog, providing us with a strong project pipeline. The outlook for the bid market remains promising, and we have streamlined our cost structure. Our newbuild program is progressing and supported by solid liquidity. The first quarter results were very strong. So we are well positioned to deliver improved year over year results.
And with that, I'll turn the call call over for questions.

Question and Answer Session

Operator

(Operator Instructions) Joe Gomes, NOBLE Capital.

Joe Gomes

Go ahead, Joe. Good morning. Thanks for taking the questions. Really nice quarter. Morning, Joe. So first question, I wanted to ask on the Galveston Island, how much and utilization that you get out of that in the first quarter?

Lasse Petterson

Yes, she started operations in January. We were working her at the same time as we were doing commissioning and then she progressed to do a beach project on the East Coast on the exact utilization number, I do not have so as she was partially operational during the first quarter and our utilization is solid for the rest of the year.

Joe Gomes

Great. And then you talked about the LNG project subcontractor work is undergoing. Did you see any revenue in the first quarter from the LNGs? Are you is all that really kind of midyear and on?

Scott Kornblau

Yes, Joe, we do book revenue when the subcontractor work starts, but the progression of subcontractor work is on the lower side of when we actually start dredging So our expectation when those projects start in the middle of the year, that we'll see a tick-up in revenue related to those projects.

Joe Gomes

Okay. And then you talked about the dry docking it originally, John, you're talking about the two vessels to be in drydocking beginning in Q one. Now it sounds like they're been pushed out into 2Q to suggest there was there anything behind that? Or just is that your typical just timing of when they could get in for drydock?

Scott Kornblau

Yes, that's exactly it. One of them did start in the first quarter and continued into the second quarter. I just completed that one in the last week or so. The other one that we had anticipated to start in the first quarter had some additional work we were able to do in the quarter. So that got delayed to start in the second quarter and will run its duration for most of this second quarter. And then we'll be able to get ready for the LNG work, which should shortly start after that.

Joe Gomes

Okay, great. And one more for me, if I may. I'll get back in queue. You talked a lot about the the core budget and you think there should be some solid bidding going on and awarding in the second and third quarter. You do see those contracts tending towards the bid and the book-and-burn type? Or do you still see some key capital? Our project awards are coming this year?

Lasse Petterson

Yes, the bid market is improving and the deepening projects that are going on in the Gulf is now continuing?
Well, there is several phases of mobile one that has been awarded that we see a second phase of it will be also happening here in the second quarter and on the East Coast, there's a lot of coastal protection work. I think if you go back a couple of earnings calls, we were talking about that to that beach market being delayed and those contracts are now coming out.
So there's good bid opportunities on the East Coast and the Gulf here in the next two quarters, we should be able to maintain a book-and-burn type of bidding. But you know, that is difficult to say in the exact numbers. But in general, the bid market looks strong for the next two quarters.

Joe Gomes

Great. Again, congrats on the quarter and thanks for taking my questions.

Operator

Jon Tanwanteng, CJS Securities.

Jon Tanwanteng

Good morning and nice quarter and thank you for taking my questions. My first one is, could we possibly expect Q3 or Q4 two on have performance similar to the one you just had? Or is there more white spaces on the schedule or maybe more drydocking as you go through the year. Just any thoughts on how the second half might evolve?

Scott Kornblau

Yes. So we will be executing a lot of the backlog that we have right now for the rest of this year. Again, with the caveat on the second quarter drydocks and repairs that I mentioned, we still have some white space to fill in the second half of the year but with the backlog we have, that number is fairly low. So again, we still have work to win, but those those two quarters are setting up to be a return to normalcy, what we've been preaching for the last year.

Jon Tanwanteng

Got it. And could you talk a little bit more about the domestic and international opportunities for the Acadia in 26? Specifically And if you're making progress towards them, it's filling the schedule for that year.

Lasse Petterson

Yes, we have worked Good. The backlog is secured for 2025 when she comes out of 26. So we see additional scopes coming out on the existing contracts. So that is developing for 2026 and then 2026 and seven and eight, there is opportunities internationally, which we are looking at at this point in time.
At the same time, as you have seen, the the bidding rounds and the PPA awards is quite fluid in the US and some of the work that has been delayed is now being delayed into 26 and 27, and we just need to see how that pans out.
Clearly Arcadia is very competitive in the US market, but we are also competitive on on the international market due to our unique attributes. So we are working on those those years. If you go beyond the US. 28 and onwards, the market outlook is extremely solid. So good opportunities here. So that's the that's kind of the details we have at this point in time.

Operator

Adam Thalhimer, Thompson Davis.

Adam Thalhimer

Scott, can you help out a little bit on that sequential? What did you say on the sequential from Q1 to Q2?

Scott Kornblau

I said that we have two vessels in drydock, one that we'll be completing a drydock that started in Q. one one that will be in drydock for most of the second quarter and then a new drydock that wasn't contemplated at the end of the year.
A previously cold-stacked vessel will begin a reactivation for work that's expected to start towards the towards the end of the year. And then we had some planned maintenance on a vessel that we knew about that we will bring in for four weeks or so during the second quarter to get to get that out of the way.

Adam Thalhimer

But I guess my question is the current consensus around the hoop or is that going to come down? And then we'll just put some because it sounds like the back half is going to be really strong.

Scott Kornblau

Yes. I mean, this is I mean, none of this is new to us. This is how we saw it playing out again, I don't recall, Adam, where everybody has consensus right now, a portion a small portion of Q. one is timing from that one drydock that slipped a month or so into the second quarter. So you might make a small adjustment for that.
And again, we have this additional drydocking, which obviously is accretive at this previous cold-stacked vessel that will have utilization. But again, when I think about the year, again, nothing has changed. We've been saying for quite some time, this is going to be a solid year, a return to normalcy and exactly how it's still shaping up? I'd expect backlog to trend.
Yes. I mean, we when you have $1 billion of backlog coming into the year, it means you don't have that much availability as you normally do. So I think we've been pretty consistent to think that we would just maintain a $1 billion in perpetuity is likely not going to happen because we are going to be rolling off a lot.
But as losses in this market is extremely strong. There are a lot of opportunities coming up and we do have availability in 2025. We also have some flexibility on some of the backlog that we plan on executing in 2024 that we can push to the right if we find opportunities.
So we'll be consistent in bidding jobs at the margins that we need for our vessels. But there are a lot of opportunities getting ready to come up over the next few months because more of the beach nourishment are Capital. And then you mentioned LNG, there are a lot of opportunities, yes, there are.
And then any update on Title 11. And as not, not a lot of we continue to have dialogue with them. But as we mentioned last quarter, we're not going to wait anymore and that's why we went ahead and did this financing. But this financing maintains a lot of flexibility with very favorable call provisions.
And this delayed draw feature where we'll continue to work that if we're able to do it, we can swap this out a fair fairly reasonably. So dialogue continues, but I'm just done making predictions as to when we think that will finally go forward.

Adam Thalhimer

Look at the last time I'll ask. And then just back half margins, you've done low 20s gross and adjusted EBITDA margins for a couple of quarters in a row now sounds like it's not going to be that way in Q2, but you get back to that in the back half?

Scott Kornblau

I mean, the backlog is still mostly comprised of capital over three-fourths of it is and a lot of that will get executed during the remainder of the year. As I mentioned, we have a little white space to fill But assuming that gets filled again, there's no reason to think the second half of the year is not going to look what I would call normal when you have this much capital backlog in hand. I think the last couple of quarters demonstrates what we can do when we have the proper mix of backlog.

Operator

Thank you. This concludes our question-and-answer session. I would now like to turn it back to Tina for closing remarks.

Tina Baginskis

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.

Operator

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