Great Lakes Dredge & Dock (NASDAQ: GLDD) reported Q3 EPS of $0.14, $0.02 better than the analyst estimate of $0.12. Revenue for the quarter came in at $169.8 million versus the consensus estimate of $178.5 million.

Third Quarter 2019 Highlights

• Revenue was $169.8 million in the third quarter, bringing year-to-date revenue to $547.2 million, an increase of $99.6 million over year-to-date revenue for the same period in the prior year.
• Gross margin percentage decreased to 18.8% in the third quarter from 22.2% in the prior year quarter.
• Total operating income from continuing operations was $18.4 million, bringing year-to-date operating income to $75.9 million, an increase of $40 million over year-to-date operating income for the same period in the prior year.
• Net income from continuing operations was $8.8 million, bringing total year-to-date net income from continuing operations to $40.9 million, an increase of $34.8 million over year-to-date net income for the same period in the prior year.
• Adjusted EBITDA from continuing operations was $27.1 million, bringing total year-to-date adjusted EBITDA to $103.0 million, an increase of $30.9 million over the same period in the prior year.
• Ratio of net debt to adjusted EBITDA from continuing operations was 1.08x.

Quarterly Results

• Revenue was $169.8 million, a decrease of $8.9 million over the third quarter of 2018. In the third quarter of 2019 a decrease in domestic capital and coastal protection revenue was partially offset by increases in maintenance, rivers & lakes and foreign revenue. Increased dry dock days also contributed to revenue decrease in the third quarter.
• Gross margin percentage of 18.8% in the current quarter was down from 22.2% in the third quarter of 2018 due to the reduction in revenue and increase in plant expense related to the vessel dry dockings in the quarter.
• Operating income was $18.4 million which is a $5.3 million decrease over the prior year quarter. The decrease is a result of lower gross margin, slightly offset by a reduction in general and administrative expenses compared to the prior year quarter.
• Net income from continuing operations for the quarter was $8.8 million compared to net income from continuing operations of $11.9 million in the prior year quarter. The reduction in net income is a result of lower operating income, offset partially by a decrease in net interest expense of $1.7 million in the third quarter of 2019 compared to the prior year quarter on lower revolver usage and higher interest income.
• At September 30, 2019, the Company had $180.9 million in cash and total debt of $322.6 million, resulting in a ratio of net debt to adjusted EBITDA from continuing operations of 1.08x.
• At September 30, 2019 the Company had $653.7 million in backlog, a decrease of $53.4 million from December 31, 2018.
• Capital expenditures for the quarter were $6.9 million. This compares to $2.3 million in capital expenditures during the third quarter of 2018. The Company now expects total capital expenditures to be $45 million for 2019, which includes an increased investment of $5 million in the existing fleet as we expect the domestic market to be robust for the foreseeable future.

Management Commentary

Chief Executive Officer Lasse Petterson commented, “Bidding activity increased significantly, with over $1.0 billion in projects bid in the third quarter. The third quarter reflects solid project performance which produced results in line with our expectations. Operationally, the quarter had lower dredging activity, due to several vessel dry dockings. Most of these dry dockings are now complete and those vessels are actively engaged on projects in the fourth quarter. The impact was partially offset by improved performance on the San Jacinto flood prevention project in Houston, Texas and the Jacksonville port deepening project in Florida. Strong performance is also a result of safe project execution as we continue to focus on improving safety on our projects.

As stated previously, the third quarter had over $1 billion in projects bid. Great Lakes was awarded $270 million of those projects in the third quarter. In addition, an option for work in Jacksonville was awarded for $96.6 million, bringing the total amount of work added to backlog in the quarter to $366.6 million, ending the quarter with a backlog of $653.7 million.”

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