Executive Summary / Key Takeaways

• Great Lakes Dredge & Dock (GLDD) is poised for sustained growth, leveraging its modernized dredging fleet and strategic expansion into the burgeoning offshore energy market. The company anticipates 2025 to be its highest EBITDA year in history, with strong revenue visibility extending into 2026.
• GLDD's core dredging business, particularly in high-margin capital and coastal protection projects, is underpinned by a robust backlog of $934.5 million as of September 30, 2025, plus an additional $194 million in pending awards. This strong pipeline is supported by consistent government funding and critical infrastructure needs.
• The company's new build program is nearing completion, culminating in the delivery of the Amelia Island hopper dredge in Q3 2025 and the Acadia subsea rock installation vessel in Q1 2026. These technologically advanced vessels enhance GLDD's competitive edge and operational efficiency.
• Strategic diversification into offshore energy, driven by the Acadia, targets international offshore wind and critical subsea infrastructure protection (oil and gas pipelines, power/telecom cables), mitigating U.S. market uncertainties and tapping into a global shortage of specialized vessels.
• GLDD is transitioning to a significantly free cash flow positive phase starting in 2026, with a priority on delevering its balance sheet following recent refinancing activities that enhanced liquidity and reduced interest expenses.

A Deep Dive into America's Dredging Leader

Great Lakes Dredge & Dock Corporation, established in 1890, stands as the largest provider of dredging services in the United States. Its foundational business centers on enhancing waterway navigability and protecting vital shorelines through the precise removal and replenishment of marine materials. This critical work supports national infrastructure, commerce, and environmental resilience. GLDD’s strategic evolution has seen it not only solidify its leadership in traditional dredging but also boldly expand into the nascent yet rapidly growing offshore energy sector.

The company's strategy is built on a foundation of operational excellence, a commitment to safety, and continuous fleet modernization. GLDD prioritizes large, complex capital and coastal protection projects, which typically yield higher margins and leverage its specialized equipment and experienced personnel. This focus has been instrumental in shaping its robust backlog and financial performance.

Technological Edge and Fleet Modernization

GLDD's competitive advantage is significantly bolstered by its cutting-edge technology and a continuous investment in its fleet. The company has aggressively introduced new technologies, ranging from advanced bucket and cutter designs to sophisticated hydrographic survey and positioning systems. This technological leadership ensures efficient and precise execution of complex projects.

A cornerstone of GLDD's technological differentiation is its modernized dredging fleet. The recent new build program concluded with the delivery of the Amelia Island in the third quarter of 2025, completing the company's hopper dredge fleet modernization. This fleet, including the Amelia Island and its sister ship, the Galveston Island, is specifically designed for the shallow and narrow waters of U.S. coastlines, making them highly effective for coastal protection projects such as beach restoration and barrier island construction. GLDD operates four of the largest mechanical clamshell dredges in the United States, alongside a diverse fleet of over 200 specialized vessels, including hydraulic dredges and a state-of-the-art drillboat. This extensive and versatile fleet allows GLDD to select the most efficient equipment for specific jobs and undertake multiple projects concurrently, minimizing downtime and enhancing profitability.

Beyond traditional dredging, GLDD is making a significant technological leap with 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 the first quarter of 2026, the Acadia is engineered to precisely deposit rock for the protection of critical subsea infrastructure. This technology offers tangible benefits by safeguarding assets against environmental forces, fishing activities, and potential sabotage. The Acadia's specialized capability positions GLDD to capture opportunities in offshore wind, oil and gas pipeline protection, and power and telecommunication cable protection, both domestically and internationally. This vessel represents a strategic investment in providing highly productive, efficient, and capable equipment for emerging markets.

GLDD also fosters innovation through its endowment of the Coastal & Dredging Laboratory (CDL) at Texas A&M University, established in 2022. This laboratory supports research, industrial testing, and education in dredging engineering technology, ensuring a pipeline of advancements for the industry. This commitment to R&D, both internally and through partnerships, reinforces GLDD's long-term competitive moat.

Competitive Landscape and Strategic Positioning

GLDD operates in a specialized segment of the broader construction and engineering industry, where its primary direct competitors include companies like Orion Group Holdings (ORN), Sterling Construction Company (STRL), and EMCOR Group (EME). While these competitors offer overlapping services in marine or heavy civil construction, GLDD distinguishes itself through its deep specialization in dredging and its extensive, purpose-built fleet.

GLDD's historical expertise and dedicated dredging capabilities provide a qualitative edge in large-scale projects like port expansions and coastal restoration, where precise marine excavation is critical. This often translates to superior project execution and potentially higher margins through efficient delivery. In contrast, competitors like Orion Group Holdings, while diversified in marine construction, may not possess the same depth of specialized dredging assets. Sterling Construction Company, with its broader heavy civil focus, also offers a wider range of services but lacks GLDD's concentrated expertise in underwater operations. EMCOR Group, primarily focused on mechanical and electrical construction, intersects with GLDD in infrastructure projects but does not directly compete in core dredging activities.

GLDD's strategic focus on government contracts, particularly with the U.S. Army Corps of Engineers, has historically provided a stable revenue base. In the first nine months of 2025, federal contracts accounted for approximately 50% of revenues, a shift from a three-year average of 65% ending 2024, reflecting increased engagement with private customers. This diversification of its client portfolio provides a good balance in its backlog. The company's average combined bid market share in the U.S. was 31% over the three-year period ended December 31, 2024, including 59% in coastal protection, demonstrating its strong position in key segments.

The Acadia vessel further sharpens GLDD's competitive edge, particularly in the emerging offshore energy market. While a recent court ruling on non-Jones Act vessels for certain rock installation aspects was rejected on a technicality, GLDD maintains its strong position, as the larger scope of work for subsea rock installation remains Jones Act protected. The global shortage of specialized rock placement vessels also supports GLDD's strategy to capture significant international opportunities, following the lead of European competitors in expanding into these markets.

Financial Performance and Operational Strength

GLDD has demonstrated robust financial performance, driven by its strategic focus and operational efficiency. For the nine months ended September 30, 2025, total revenue increased by 12.8% year-over-year to $631.8 million, with capital dredging revenue surging by 29.5% to $322.8 million and coastal protection revenue growing by 26.7% to $225.6 million. This growth was achieved despite six dredges undergoing regulatory drydockings during the period, highlighting strong project performance and high utilization.

Net income for the nine months ended September 30, 2025, was $60.8 million, a substantial increase from $37.5 million in the prior year. Diluted earnings per share followed suit, rising to $0.90 from $0.55. Adjusted EBITDA, a key metric for the company, increased by 33% to $127.4 million for the nine months ended September 30, 2025, driven by the strong gross profit performance.

The company's profitability has seen significant improvement. Consolidated gross profit for the nine months ended September 30, 2025, rose by 34% to $149.8 million, with the gross profit margin expanding to 23.7% from 19.9% in the prior year. This margin expansion is primarily attributed to increased revenues, improved utilization, and a favorable project mix skewed towards higher-margin capital and coastal protection work. Operating income for the same period increased by 51.7% to $95.2 million.

Liquidity and capital resources are in a strong position. As of September 30, 2025, cash and cash equivalents stood at $12.7 million. The company's net cash provided by operating activities for the nine months ended September 30, 2025, was $166.9 million, a significant increase from $83.6 million in the prior year, reflecting higher earnings and favorable working capital movements.

A significant financial maneuver occurred post-quarter end. On October 24, 2025, GLDD refinanced and upsized its revolving credit facility to $430 million, extending its maturity to October 2030 and securing lower borrowing rates. This increased capacity allowed the company to immediately repay its $100 million second-lien term loan, which is expected to reduce annual interest expense by approximately $6 million. With a trailing 12-month net leverage ratio of 2.5x and liquidity nearing $300 million, GLDD's balance sheet is robust, with no significant debt maturities until 2029.

Outlook and Growth Catalysts

GLDD's management expresses strong confidence in its forward trajectory. The company expects 2025 to be its highest EBITDA year in history by a large margin, with outstanding results continuing into 2026. This outlook is supported by a robust dredging backlog of $934.5 million as of September 30, 2025, with an additional $193.5 million in domestic low bids and options pending formal award. The majority of this backlog, along with all offshore energy backlog, is expected to convert to revenue by the end of 2026.

The 2025 dredging bid market is anticipated to normalize to approximately $1.8 billion, with a greater focus on coastal protection and maintenance projects, following the strong port-deepening bid markets of 2023 and 2024. Looking further ahead, GLDD foresees the next phase of major port deepening projects in key locations like New York, New Jersey, Tampa, New Haven, and Baltimore, with work likely to commence in 2027. These projects, along with ongoing coastal restoration efforts driven by disaster relief funding and storm impacts, provide a recurring and substantial demand for GLDD's services.

The Acadia is a significant growth catalyst for the offshore energy segment. It has secured full utilization for 2026 with contracts for Equinor (EQNR)'s Empire Wind 1 and Ørsted (DNNGY)'s Sunrise Wind projects. In response to potential delays in the U.S. offshore wind market, GLDD proactively diversified Acadia's target markets to include international offshore wind, oil and gas pipeline protection, and power and telecommunication cable protection in Europe and Asia. This strategy is supported by a global shortage of rock placement vessels and market estimates suggesting a demand for approximately ten Acadia-class vessels for subsea protection projects globally.

Capital expenditures for 2025 are projected to be between $140 million and $150 million, inclusive of capitalized interest, primarily for the new build program and maintenance. With the new build program largely concluding by year-end, GLDD expects to be significantly free cash flow positive starting in 2026. The primary use of this cash flow will be delevering the balance sheet, with management prioritizing the repayment of the revolving credit facility.

Risks and Considerations

While GLDD's outlook is strong, investors should consider several factors. The dredging industry remains susceptible to government funding cycles and regulatory changes. Although GLDD has demonstrated resilience during government shutdowns, prolonged political impasses could introduce uncertainty into future bid markets. The "One Big Beautiful Bill Act" (OBBBA) in July 2025, which accelerated the phaseout of certain energy tax credits, could also lead to delayed or reduced investment in the U.S. offshore wind industry, impacting future domestic opportunities for the Acadia.

Operational risks include the inherent complexities of large-scale marine projects, which can be subject to weather delays, equipment downtime, and cost overruns. GLDD's schedule for seven regulatory drydockings in 2025, including four hopper dredges, will impact revenue and margins, particularly in the second and third quarters. While the company has contractual protections for project cancellations, as demonstrated by previous termination fees, significant unexpected project disruptions could still affect financial performance.

Competition, while managed through specialization, remains a factor. While GLDD leads in specialized dredging, competitors like Orion Group Holdings and Sterling Construction Company demonstrate strong revenue growth in diversified infrastructure segments. GLDD's ability to maintain its competitive edge will depend on continued technological innovation and efficient project execution.

Conclusion

Great Lakes Dredge & Dock is at a pivotal juncture, successfully transforming its business through strategic fleet modernization and diversification into the high-growth offshore energy market. The company's robust backlog, strong operational performance in core dredging, and the imminent full deployment of its advanced vessels like the Amelia Island and Acadia, underpin a compelling investment thesis. GLDD's proactive expansion into international offshore energy markets further de-risks its growth trajectory, leveraging its technological leadership to address a global demand for specialized subsea rock installation.

With a clear path to significant free cash flow generation starting in 2026 and a disciplined capital allocation strategy focused on delevering, GLDD is well-positioned for sustained profitability. While regulatory and operational risks are inherent to the industry, the company's established market leadership, technological differentiation, and strategic agility in adapting to evolving market dynamics suggest a strong outlook. Investors seeking exposure to critical infrastructure development and the burgeoning offshore energy transition, backed by a company with a proven track record and a modernized fleet, should find GLDD a compelling consideration.