Executive Summary / Key Takeaways

• Strategic Transformation: Great Lakes Dredge & Dock (GLDD) is successfully transitioning from a heavy capital expenditure cycle to a cash-generative growth phase, driven by a modernized fleet and strategic expansion into the burgeoning Offshore Energy market.
• Robust Performance & Backlog: The company delivered strong Q2 2025 results, with revenues up 13.9% year-over-year to $193.8 million and gross profit margins expanding to 18.9%, supported by a substantial $1 billion dredging backlog and an additional $215.4 million in pending awards.
• Technological Edge & Diversification: The new Jones Act-compliant vessels, particularly the Amelia Island and the subsea rock installation (SRI) vessel Acadia, provide a significant competitive advantage, enabling higher-margin projects and opening new domestic and international markets in offshore wind, pipeline, and cable protection.
• Strong Financial Health & Outlook: GLDD anticipates full-year 2025 to be the highest in company history for both revenue and net income. With the newbuild program nearing completion, the company expects to generate significantly positive free cash flow starting in 2026, supporting deleveraging and opportunistic share repurchases.
• Favorable Market Tailwinds: Sustained record funding for the U.S. Army Corps of Engineers, a robust coastal protection market, and the long-term global demand for subsea infrastructure protection underpin GLDD's growth trajectory, despite some near-term U.S. offshore wind market uncertainties.

A Century of Dredging: Laying the Foundation for Future Growth

Great Lakes Dredge & Dock Corporation, a name synonymous with American marine infrastructure since its founding in 1890, has long been the preeminent provider of dredging services in the United States. Its core business, encompassing capital dredging, coastal protection, and maintenance dredging, has been foundational to the nation's waterways and shorelines. This deep-rooted history and market leadership now serve as the bedrock for a strategic transformation, positioning GLDD for a new era of growth driven by fleet modernization and diversification into the high-potential Offshore Energy sector.

The company's strategic evolution is evident in its recent financial maneuvers and operational investments. In May 2021, GLDD optimized its debt structure by refinancing its 8.00% Senior Notes with new 5.25% Senior Notes due 2029. This was followed by an enhanced revolving credit facility in July 2022, a $150 million second lien credit agreement in April 2024, and a further $30 million upsizing of its revolver in May 2025. These actions, coupled with an S&P credit rating upgrade to B- from CCC+, underscore a concerted effort to fortify its financial position and support an ambitious newbuild program.

Technological Prowess: The New Fleet's Competitive Edge

GLDD's competitive advantage is increasingly defined by its state-of-the-art, Jones Act-compliant fleet. The company's investment in new vessels represents a significant technological differentiation, enhancing operational efficiency and expanding service capabilities.

The recent delivery of the hopper dredge Amelia Island in August 2025, following its sister ship the Galveston Island in January 2024, exemplifies this commitment. These dredges are specifically designed for the shallow and narrow waterways along U.S. coastlines, making them highly efficient tools for critical coastal protection projects such as beach restorations, wetland improvements, and barrier island construction. Their specialized design allows for superior maneuverability and operational effectiveness in these challenging environments, translating into more efficient project execution and potentially higher margins.

The most significant technological differentiator, however, is the Acadia, the first U.S.-flagged, Jones Act-compliant subsea rock installation (SRI) vessel. Launched in July 2025 and expected to be operational in Q1 2026, the Acadia is engineered to precisely deposit rock for the protection of critical subsea infrastructure. This includes safeguarding offshore wind foundations and cables, as well as oil and gas pipelines, power transmission lines, and telecommunication cables against environmental forces and potential acts of sabotage. Management projects the Acadia is "definitely capable of getting well north of $100 million revenue for full year" in the U.S. The strategic intent behind the Acadia is further bolstered by a "global shortage of rock placement vessels," with the market for telecommunication and oil and gas scour protection alone estimated to require the capacity of "approximately ten rock placement vessels of Acadia's class." This technological leadership provides GLDD with a unique competitive moat, allowing it to capture high-value projects in an underserved market.

Competitive Landscape: Dominance in Dredging, Diversification for Growth

GLDD maintains a leading position in the U.S. dredging market, consistently securing a significant share of available projects. Over the three-year period ended December 31, 2024, the company achieved an average combined bid market share of 31% in the U.S. (28% in capital, 59% in coastal protection, and 19% in maintenance, excluding LNG projects). While its Q2 2025 bid win rate of 14% was below this average, management noted this was due to strategic selectivity, as the company's existing backlog ensured high utilization.

Directly, GLDD competes with other marine construction and dredging firms like Orion Group Holdings (ORN). While ORN offers a broader marine construction portfolio, GLDD's specialized fleet and deep expertise in dredging provide a distinct advantage in large, complex sediment management projects. This specialization often translates to superior operational efficiency and project margins in its core areas. For example, GLDD's Gross Profit Margin (TTM) of 23.03% significantly outpaces ORN's 11% (2024 annual).

Indirectly, GLDD's expansion into offshore energy brings it into proximity with companies like MYR Group Inc. (MYRG), which specializes in electrical infrastructure. While MYRG's focus on clean energy and EV charging positions it well for electrification trends, GLDD's Acadia offers a unique, specialized service for subsea infrastructure protection that few others can match, particularly under Jones Act requirements. The global market for subsea rock installation is vast and growing, driven by geopolitical concerns and the expansion of offshore energy. This diversification allows GLDD to tap into new revenue streams and mitigate risks associated with fluctuations in traditional dredging markets.

Barriers to entry in the dredging industry are high, primarily due to the substantial capital investment required for specialized fleets and the complex regulatory approvals, especially for government contracts. GLDD's long-standing relationships with entities like the U.S. Army Corps of Engineers and its extensive fleet of Jones Act-compliant vessels reinforce its competitive position.

Financial Strength and Operational Excellence

GLDD's financial performance in the first half of 2025 reflects its operational effectiveness and strategic focus on higher-margin projects. For the three months ended June 30, 2025, the company reported revenues of $193.8 million, a 13.9% increase from $170.1 million in the prior-year period. Net income for the quarter rose to $9.7 million from $7.7 million, and Adjusted EBITDA reached $28.0 million. The gross profit margin expanded significantly to 18.9% in Q2 2025 from 17.5% in Q2 2024, driven by improved utilization and strong project performance, particularly from capital and coastal protection projects which constituted over 88% of the quarter's revenue.

For the six months ended June 30, 2025, revenues climbed 18.4% to $436.6 million, with net income reaching $43.1 million, up from $28.7 million in the same period of 2024. Gross profit for the six-month period was $106.1 million, yielding a robust 24.3% margin, a notable increase from 20.5% in the prior year. This strong performance occurred despite a "heavier-than-normal" regulatory dry dock schedule in 2025, which saw four dredges undergoing inspections at various times in Q2.

The company's liquidity position is robust. As of June 30, 2025, GLDD had $2.9 million in cash and $5 million drawn on its $330 million revolving credit facility, resulting in total liquidity of $272 million. The weighted average interest rate on its total debt (after interest rate swaps) was 6.80%, with no debt maturities until 2029. This financial flexibility is crucial as the company completes its newbuild program.

Outlook and Strategic Trajectory

Management's outlook for GLDD is highly optimistic. The company expects full-year 2025 results to be the "highest in company history for both revenue and net income," building on 2024's performance which was the second highest in its 135-year history. This confidence is underpinned by a substantial dredging backlog of $960.4 million as of June 30, 2025, with an additional $215.4 million in domestic low bids and options pending award. Approximately 40% of this backlog is slated for completion in the remainder of 2025, with the balance extending into 2026, providing strong revenue visibility.

The U.S. dredging market continues to benefit from strong government support. The U.S. Army Corps of Engineers is operating under a continuing resolution for fiscal year 2025, sustaining record funding levels. The 2025 Corps' budget is anticipated to be another record appropriation, nearing $10 billion, with significant allocations for operations, maintenance, and the Harbor Maintenance Trust Fund. This robust funding environment is expected to translate into a "normalized volume of approximately $2 billion" for the 2025 dredging bid market, primarily focused on coastal protection projects. Looking further ahead, the Water Resources Development Act (WRDA) is expected to authorize the financing of major port deepening projects in New York, New Jersey, Tampa, New Haven, and Baltimore, with dredging work likely to commence in 2027.

The Offshore Energy segment is poised for significant growth. The Acadia is fully booked for U.S. offshore wind projects (Equinor (EQNR)'s Empire Wind 1 and Ørsted's Sunrise Wind) in 2026. Recognizing potential delays in the U.S. offshore wind market, partly due to the One Big Beautiful Bill Act (OBBBA) signed in July 2025, GLDD proactively diversified Acadia's target markets to include international offshore wind, oil and gas pipeline protection, and power/telecommunications cable protection. The company is actively bidding for work in Europe and Asia for 2027 and beyond, with Europe being a primary international focus due to its mature market and shorter lead times. Reservation agreements for U.S. projects through 2029 further solidify the vessel's long-term utilization.

Capital expenditures for 2025 are projected to be between $140 million and $160 million, inclusive of capitalized interest, primarily for the newbuild program and maintenance. Critically, as the newbuild program substantially completes by the end of 2025, GLDD expects to become "cash flow positive starting in 2026," with free cash flow generation anticipated to "significantly grow." This shift will enable the company to prioritize deleveraging, although an opportunistic $50 million share repurchase program was initiated in March 2025, with $11.6 million already executed, signaling management's belief in the stock's intrinsic value.

Risks and Considerations

Despite the strong outlook, investors should consider several risks. The U.S. offshore wind market, while promising, faces potential delays or reduced investment due to policy changes like the OBBBA. While GLDD has proactively diversified the Acadia's target markets, any significant or prolonged slowdown could impact the vessel's revenue generation beyond its secured 2026 utilization. The U.S. Army Corps of Engineers operating under a continuing resolution means new projects cannot be bid, potentially affecting future backlog generation, though existing projects continue. Furthermore, the dredging industry remains project-based, subject to environmental windows, weather events, and the inherent complexities of large-scale marine construction.

Conclusion

Great Lakes Dredge & Dock stands at a pivotal juncture, successfully executing a strategic transformation that promises to unlock significant shareholder value. The company's deep-rooted expertise in U.S. dredging, combined with a modernized, technologically advanced fleet, positions it as a leader in both traditional and emerging marine infrastructure markets. The Amelia Island enhances its core coastal protection capabilities, while the Acadia establishes a unique competitive moat in the high-growth subsea rock installation sector, globally.

With a record backlog, strong financial performance, and a clear path to substantial free cash flow generation in 2026, GLDD is poised for sustained profitability. The company's proactive diversification into international offshore energy and critical subsea infrastructure protection demonstrates strategic foresight, mitigating domestic market uncertainties. For discerning investors, GLDD represents a compelling opportunity to participate in the long-term growth of essential marine infrastructure and the burgeoning offshore energy transition, driven by a resilient business model and technological leadership.