Great Lakes Dredge & Dock Corporation (GLDD) Earnings Call Transcript & Summary

Good morning, and welcome to the Great Lakes Dredge & Dock Corporation's 2021 Annual Meeting of Stockholders. I would now like to turn the conference over to Lawrence Dickerson, Chairman of the Board. Please go ahead.

Good morning, ladies and gentlemen. I'm Larry Dickerson, Chairman of the Board of Great Lake Great Lakes Dredge & Dock Corporation. Thank you for making the time to attend our annual meeting. We are hosting a hybrid virtual meeting today, which allows us to be more inclusive and reach a greater number of our stockholders who're attending via the web portal. And any stockholder wishing to attend in person has been invited to visit our headquarters. Today's meeting will consist of 2 parts: first, the formal governance procedures; and second, remarks by our CEO. I will chair the formal governance procedures. After that, I'd like to turn the meeting over to the company's CEO, Lasse Petterson. I'll conduct the meeting according to the agenda, which you see on the web portal. We'll conduct the business portion of the meeting further. [Operator Instructions] We will conduct the business portion of the meeting first and answer questions end of the meeting. Though we may not be able to answer every question, we will do our best to provide a response to as many as possible. Please confine your questions and remarks to the particular item of business under discussion. Please note this meeting is being recorded. However, no one attending this webcast is permitted to use any form of recording device. In keeping with the digital approach to this year's meeting, it is now shortly after 8:00 a.m. Central Standard Time, I'd like to formally call this meeting to order and welcome you to our Annual Meeting of GLDD's Stockholders. I'd like to introduce the members of the company's executive management team who are on the call; Lasse Petterson, our Chief Executive Officer and Director; Vivienne Schiffer, our Chief Legal Officer, Chief Compliance Officer and Corporate Secretary; Mark Marinko, our Chief Financial Officer; Dave Simonelli, our Chief Operating Officer; and James Tastard, our Chief Human Resources and Administrative Officer. Also on the call from our Board of Directors are: Dr. Elaine Dorward-King, Ryan Levenson, Kathleen Shanahan, Ron Steger and Mike Steuert. I'd like to recognize Mr. Arie S. Wilgenburg, partner at Deloitte & Touche LLP, our independent registered public accounting firm for the year ended December 31, 2021. In accordance with the provisions of Delaware law, the Board of Directors has appointed Natalie Hairston of American Election Services to serve as the inspector of election at this meeting. I'd like to ask Ms. Hairston to verify our attendance verbally. I will go on and let lead our Chief Legal Officer, verify that Ms. Hairston is indeed on the line.

Thank you, Mr. Dickerson.

As noted in the Notice of Annual Meeting and proxy statement previously furnished to you, the record date for voting at this meeting was close of business on March 9, 2021. Based upon the percentage of the total shares of the company held by shareholders of record now present at this meeting either in person or by proxy, we have a quorum, and this meeting is duly convened. Our order of business today will be to consider the items properly brought before this meeting and as set forth in the company's proxy statement, which was previously furnished to you. Please note we will be passing over the opportunity to comment on the proposals after all the proposals have been presented. They are: proposal 1, the election of 2 directors, each to serve on our Board of Directors for a 3-year term; proposal 2, the ratification of Deloitte & Touche LLP as the company's independent registered public accounting firm for the year ended December 31, 2021; proposal 3, to approve on an advisory basis the compensation of the company's named executive Officers; and proposal 4, to approve Great Lakes Dredge & Dock Corporation's 2021 long-term incentive plan. First proposal is for the election of 2 directors to serve on our Board of Directors for a 3-year term. The nominees are: Mr. Lasse J. Petterson and Ms. Kathleen M. Shanahan. The Board of Directors has duly nominated Mr. Lasse J. Petterson and Ms. Kathleen M. Shanahan for election to the Board. Information regarding these nominees is included in the proxy statement previously furnished to you. A motion calling for a vote on the election of directors will now be received.

I move that Lasse J. Petterson and Kathleen M. Shanahan each be elected to the company's Board of Directors.

I second that motion.

Proposal #2, ratification of Deloitte & Touche LLP as the company's independent registered public accounting firm for the year ended December 31, 2021, second, -- which is the second proposal. Information regarding this proposal is included in the proxy statement previously furnished to you. A motion calling for a vote on this proposal will now be received.

I move the ratification of Deloitte & Touche LLP as the company's independent auditor for the year ending December 31, 2021.

I second that motion.

The third proposal brought before this meeting is to approve, on a nonbinding advisory basis, the company's executive compensation. Information regarding this proposal is included in the proxy statement previously furnished to you. A motion calling for a vote on this proposal will now be received.

I move the adoption of the following resolution resolved that the stockholders of Great Lakes Dredge & Dock Corporation approve, on an advisory basis, the compensation of the company's named executive officers as described in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation and the accompanying narrative disclosure set forth in the company's 2021 annual meeting proxy statement.

I second that motion.

The fourth proposal brought before this meeting is to approve Great Lakes Dredge & Dock Corporation's 2021 long-term incentive plan. Information regarding this proposal is included in the proxy statement. A motion calling for vote on this proposal will now be received.

I move the adoption of the following resolution resolved that the share -- stockholders of Great Lakes Dredge & Dock Corporation approve the Great Lakes Dredge & Dock Corporation's 2021 long-term incentive plan, as described in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation and the accompanying narrative disclosure set forth in the company's 2021 annual meeting proxy statement.

I second that motion.

Any stockholder who would like to make a comment regarding the proposals, please submit your comment through the web portal. We have received none, and so we will proceed. It is now 8:15 a.m. Central Standard Time -- actually, it's 8:08 Standard Time on May 5, 2021, and the polls are now open. Any stockholder who has not yet voted or wishes to change their vote may do so by clicking on the Voting button on the web portal and following the instructions there. Stockholders who voted on the Internet, by telephone or by mail need not make any further action with respect to the matters to be voted on today. If there is no further discussion, we will proceed with the voting. [Voting]

Has everyone had an opportunity to vote? Polls are hereby declared closed at 8:09 a.m. Central Standard Time today, May 5, 2021.

May I proceed, Mr. Chairman?

Yes.

This is Vivienne Schiffer. Mr. Chairman, prior to the meeting, the inspector of election informed me that pending the final tabulation of votes, it appears that with regard to proposal 1, Lasse J. Petterson and Kathleen M. Shanahan were elected to the company's Board of Directors. With regard to proposal 2, the appointment of Deloitte & Touche LLP as the company's independent registered public accounting firm for the year ending December 31, 2021, has been ratified. With respect to proposal 3, requesting the approval on a nonbinding advisory basis of the company's executive compensation has been approved. And with regard to Proposal 4, requesting the approval of the Great Lakes Dredge & Dock Corporation's long-term incentive program has been approved. We will publish the final vote tabulation within the next 4 days on a Form 8-K filed with the Securities and Exchange Commission.

Thank you, Vivienne. I hereby direct the results of the voting to be incorporated into the minutes of this meeting. That completes our official business agenda for today. Let me now close this portion of the meeting by entertaining a motion to adjourn.

I move the meeting be adjourned.

I second the motion.

The Annual Meeting of Stockholders is now adjourned. Now that our formal business has been concluded, I would like to ask Lasse Petterson, CEO of the company, to take a few minutes to discuss our performance [Technical Difficulty] at Great Lake Dredge & Dock Corporation. However, before proceeding with some final remarks and our general discussion, I will ask Vivienne Schiffer to first read a notice regarding forward-looking statements.

Thank you, Mr. Chairman. Please note the following: Certain statements that company representatives make at today's annual meeting may be deemed to be forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements consist of information of a nonhistorical nature and may be affected by risks and uncertainties, which are inherent in the company's business and beyond the ability of the company to control. Such risks and uncertainties could cause the actual results to differ materially from those anticipated or projected by the company in such statements. Additional information concerning factors that could cause the results to differ materially is contained in various written documents and filings made by the company with the Securities and Exchange Commission. Those documents and filings include the company's annual report on Form 10-K for the fiscal year ended December 31, 2020, and the company's quarterly report on Form 10-Q for the quarter ended March 31, 2021. Mr. Petterson?

Thank you, Vivienne. Today, I'm reminded of all the changes, challenges and unknown posed by the COVID-19 pandemic that we have faced throughout 2020 and that we continue to face today. I'm also reminded of the accomplishments and achievements that Great Lakes made in 2020 that will allow us to continued success in 2021 and into the future. During this unprecedented crisis, Great Lakes was fortunate to be able to continue working as a federally designated critical infrastructure. As our staff transitioned to a remote working environment and our project operation staff and vessel crew members adjusted to new shift schedules, we continue to work and we stayed on track. At Great Lakes, safety is a value that governs our work in all we do. Our incident- and injury-free safety management program enabled us to respond quickly to COVID-19 challenges and allowed us to effectively respond to the crisis and continue to deliver strong project performance. Our activities do result in change to the environment in which we work. Our ambition is to leave the areas that we touch in an approved state as a result of the work that we performed to support our ESG philosophy. We continue to build relationships with all stakeholders, including nongovernment organizations and conservation groups, to focus on the protection of our marine environment. I highly recommend to further review our efforts in our recently issued 2020 ESG Report. Despite the challenges we faced, we completed 2020 with a record net income from continuing operations of $66.1 million, adjusted EBITDA of $151.1 million and a net debt balance of only $107.2 million. Our strong cash flow and balance sheet and substantial liquidity allowed us to not only withstand the economic storm as a result of the pandemic, but positioned us well to invest in our future. In 2020, we contracted for a new midsize hopper dredge, we upgraded several large cutter dredges. We contracted to build several large cats and 2 Multicats for pipeline construction. We decided to establish regional offices in New York, Jacksonville and Houston. And eventually, we'll move our headquarters to Houston to be closer to our markets, clients and operations. We also invested in our shareholders by instigating a $75 million share repurchase program. The domestic dredging market remained strong in 2020, despite the pandemic. we expect this trend to continue over the coming years as the market conditions continues to be driven by projects for the U.S. Army Corps of Engineers, which include the large-scale port deepening projects along the East and Gulf Coast as well as coastal protection projects, including the renourishment of coastal beaches that have been damaged after the major hurricane events in the past. In September, Great Lakes was awarded a $105 million contract on the Jacksonville Harbor construction Dredging Project as a continuation of the successful work that we've done there over the last 2 years. We expect that 2021 will see bids for multiple project phases for port deepenings in Corpus Christi, Norfolk and the Houston ship channel that will continue for the next several years. We are continuing to see diversification in our markets and client base, which was manifested by the signing of the largest contract in Great Lake's history for dredging and channel improvements needed for the Brownsville LNG project developed by Next Decade Energy. We're also increasing our focus in the rapidly growing offshore wind market now coming to the U.S. As said, in 2020 we announced the relocation of our corporate offices to Houston, Texas, and we opened regional offices in Jacksonville, Florida, Staten Island, New York, and Houston, Texas, which has been the key location for dredging project activity over the years and is close to major U.S. Army Corps district locations. It also positions us close to our current private oil and gas clients and future offshore wind energy clients. In addition to basing us closer to most of our public and private business opportunities, the move is important to have a better access to and strengthen our efforts to attract and retain a specialized workforce to facilitate growth and thereby position us for the future markets. A number of large energy companies such as Equinor, Erste, Dominion, BP, Shell and others had bid for and won licenses to develop offshore wind farms in the -- on the U.S. East Coast. The Biden administration has given strong support and voiced an ambition to accelerate wind energy developments in the U.S. and has set targets to install 30 gigawatts of offshore wind energy by 2030, an increase of 200% from earlier targets. What we have over the last 2 years matured our strategy to participate in this fast-growing market, and the strong support from the Biden administration confirm plans and our determination to participate in the offshore wind market. In November 2020, we announced the design and development of the first U.S. flagged Jones Act compliant, inclined fall-pipe vessel for subsea rock installation for the wind turbine foundations. And in January of 2021, we hired Eleni Beyko as SVP to lead our efforts in this market. In March of 2021, we awarded the integration engineering and detailed design packets to Ulstein, a world-leading offshore vessel design company. This vessel will be signed to the strictest emission criteria and will represent a significant critical advancement in building the U.S. logistic infrastructure to support the future of the new U.S. offshore wind industry. Delivery is expected in late 2023, in good time for the 2024 offshore construction to pay. As we finished the first quarter of 2021, we have started to see significant additional direct costs and operational interruptions as a result of the continued spread of COVID-19 throughout the U.S. population. Several of our vessel crews were infected, despite our extensive testing and isolation protocols. Vessels were required to go to shore for crew changes, and the vessels had to be disinfected before returning to work. Crew changes and taking the vessels off-line for this infection impacted the vessel scheduling and availability, which impacted productivity on several projects, and led to delays, which pushed revenue from the first quarter into remaining quarters of 2021. Today, the projects and vessels that were impacted are back in operation, and we expect the majority of the revenue to be recovered throughout the remainder of 2021. We are very fortunate here in the U.S. for having COVID vaccines now available to all age groups, and we are making all efforts to make the vaccines easily available to all our employees. As of today, approximately 20% of all our staff and crew are either fully vaccinated or partially vaccinated. Our ambition is to have the majority of all staff and crew vaccinated in the second quarter of 2021, which will greatly reduce or potentially eliminate further impacts on our operations. Although we entered a year -- a new year, with still being challenged by the pandemic, we are confident that the decisions we made in 2020 position Great Lakes well going into 2021 and beyond. We continue to focus on meeting our 2021 expectations while ensuring the safety of all our vessels' crew and staff. Great Lakes Dredge & Dock Corporation is the United States' premier dredging company, and we will strengthen this position by continuously improving and assuring that we are creating shareholder value while executing our projects safely and efficiently. On behalf of the executive leadership and our Board of Directors, we are thankful to you, our shareholders. Your commitment is valued and appreciated. We will now allow time to address questions that are being entered today on the web portal. Please note, we'll answer as many questions as time allows, but only questions that are in germane to the meeting will be addressed. There being no further questions, thank you for joining us today. Our meeting is now concluded.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.