Company Overview
Great Lakes Dredge & Dock Corporation (GLDD) is the largest provider of dredging services in the United States, with a rich history that spans over 135 years. The company has solidified its position as a critical player in maintaining and enhancing the nation's coastal regions and waterways, playing a pivotal role in ensuring the resilience and prosperity of coastal communities.
Historical Background
Established in 1889 in Chicago, Illinois, Great Lakes Dredge & Dock has evolved from a small dredging company operating on the Great Lakes into an industry powerhouse. The company's expertise encompasses a wide range of services, including capital dredging for port expansions, coastal protection through beach nourishment, maintenance dredging to keep waterways navigable, and environmental restoration projects. Over the decades, Great Lakes expanded its geographic reach and diversified its service offerings, becoming a leading provider of dredging and marine construction services across the United States.
A significant milestone in the company's history was its public listing on the NASDAQ stock exchange in 1997, which provided Great Lakes with access to capital to fund its growth strategies, including strategic acquisitions and investments in its fleet of specialized dredging equipment. Despite facing challenges during the 2008 financial crisis, which impacted both public and private construction spending, Great Lakes remained focused on operational excellence and maintaining a strong balance sheet, allowing it to weather the storm.
In the 2010s, Great Lakes began diversifying its business beyond traditional dredging, entering the offshore wind market through the construction of its specialized rock installation vessel, the Arcadia. This represented a significant strategic move for the company as it sought to capitalize on the emerging renewable energy industry. Great Lakes also continued to strengthen its core dredging operations, winning major contracts for port deepening and coastal protection projects around the country.
Current Operations
Today, Great Lakes Dredge & Dock Corporation operates a fleet of over 30 specialized vessels and employs a team of experienced personnel. The company has a strong track record of executing complex, high-profile projects for both government and private clients, and is known for its commitment to safety, innovation, and environmental stewardship. Despite the challenges it has faced over the years, Great Lakes has demonstrated its resilience and ability to adapt to changing market conditions.
One of the key factors contributing to Great Lakes' success is its strategic focus on tackling complex, large-scale projects. The company has demonstrated its ability to execute challenging port deepening and coastal protection initiatives, which now account for 94% of its backlog. This specialization has enabled Great Lakes to achieve higher project margins and maintain a strong competitive position in the market.
Project Backlog
As of September 30, 2024, Great Lakes reported a dredging backlog of $1.21 billion, with an additional $465 million in domestic low bids pending formal award and options. This substantial backlog not only provides the company with a solid foundation for revenue and profitability in the coming years but also reflects the robust demand for its services. Furthermore, the company's backlog includes several high-profile projects, such as the Brownsville Ship Channel project for Next Decade Corporation's Rio Grande LNG project, which is the largest project undertaken in Great Lakes' history.
Financial Performance
Great Lakes' financial performance has been impressive, with the company reporting revenues of $762.7 million and adjusted EBITDA of $136 million for the full year 2024, which was the second highest in the company's 135-year history. Net income for 2024 was $57.3 million, operating cash flow was $83.58 million, and free cash flow was -$36.13 million. This represents a significant improvement compared to the previous year, driven by the successful execution of complex port deepening and coastal protection projects, as well as the contribution of the company's newest hopper dredge, the Galveston Island.
For the fourth quarter of 2024, Great Lakes reported revenue of $202.8 million, an 11.6% increase from Q4 2023, primarily due to higher capital and coastal protection revenue. Net income for Q4 2024 was $19.7 million, operating cash flow was -$13.52 million, and free cash flow was -$36.13 million. The gross profit margin increased from 21.3% in Q4 2023 to 24.1% in Q4 2024, driven by improved utilization, project performance, and a larger proportion of higher-margin capital and coastal protection projects.
Liquidity and Balance Sheet
The company's balance sheet reflects a strong financial position, with $10.2 million in cash and $35 million drawn on its $300 million revolving credit facility as of the end of 2024. The revolver was fully paid off after year-end. Additionally, Great Lakes secured a $150 million second lien credit agreement in the second quarter of 2024, providing additional liquidity to support its new build program and capital expenditures.
Great Lakes' debt-to-equity ratio stands at 1.22, while its current ratio and quick ratio are both 1.21. These metrics indicate a solid financial foundation and the ability to meet short-term obligations.
Growth Initiatives
One of the key growth initiatives for Great Lakes is its expansion into the offshore energy market, where the company is leveraging its expertise in subsea rock installation to protect offshore wind turbine foundations, cables, and other critical infrastructure. The company's specialized vessel, the Arcadia, is currently under construction and is expected to be delivered and operational in the second half of 2025. This strategic move not only diversifies Great Lakes' revenue streams but also positions the company to capitalize on the rapidly growing global offshore wind market.
Resilience and Adaptability
Despite the challenges posed by the COVID-19 pandemic and ongoing geopolitical tensions, Great Lakes has demonstrated its resilience and adaptability. The company has continued to navigate these turbulent waters by focusing on its core strengths, maintaining a strong backlog, and investing in strategic initiatives to drive future growth.
Market and Industry Trends
Great Lakes primarily operates in the United States dredging market, which has experienced a 3-year compound annual growth rate (CAGR) of approximately 7% from 2021 to 2024. This growth has been driven by increased federal funding for navigation, flood control, and coastal restoration projects. The company's strong position in this growing market has contributed to its solid financial performance and robust backlog.
Segment Performance
Great Lakes' dredging segment, which accounts for the majority of the company's revenue, consists of four main types of work: capital, coastal protection, maintenance, and rivers & lakes. In the third quarter of 2024, the dredging segment saw significant growth, with revenue increasing 63% year-over-year to $191.17 million. This growth was primarily driven by strong performance in capital and coastal protection projects.
Capital dredging revenue in Q3 2024 was $108.68 million, a 99% increase from the prior year, driven by higher revenue earned on capital projects in Texas. Coastal protection revenue grew 86% to $43.91 million, primarily due to higher revenue on projects in Florida. Maintenance dredging revenue increased 12% to $37.87 million, while rivers & lakes revenue declined 86% to $0.71 million.
The company's gross profit margin for the dredging segment improved significantly, rising to 19.0% in Q3 2024 from 7.7% in the prior year period, reflecting improved project performance and utilization.
Offshore Wind Segment
In addition to its core dredging business, Great Lakes is expanding into the offshore wind market. The company's offshore wind backlog totaled $57.60 million as of September 30, 2024, representing performance obligations and options related to offshore wind projects that Great Lakes is pursuing both domestically and internationally using the Arcadia vessel.
Future Outlook and Guidance
Looking ahead to 2025, Great Lakes expects approximately 60% of its $1.2 billion backlog to be converted into revenue, with most of it coming from capital and coastal protection projects. The company has planned seven regulatory drydockings during 2025, including four hopper dredges, primarily in the second and third quarters.
Great Lakes anticipates 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. For the first quarter of 2025, the company expects utilization to remain strong as the majority of its dredges are working, with one regulatory drydocking planned during the quarter and two others scheduled to begin towards the end of the quarter.
The company expects 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 compared to the very strong 2024 bid market.
Conclusion
In conclusion, Great Lakes Dredge & Dock Corporation is a well-established industry leader with a proven track record of delivering high-quality services and generating strong financial results. The company's focus on complex, large-scale projects, its diversification into the offshore energy market, and its robust financial position position it well to capitalize on the growing demand for coastal resilience and infrastructure maintenance in the years to come. With a solid backlog, improving margins, and strategic investments in new capabilities, Great Lakes is poised for continued success in the evolving dredging and offshore energy markets.