Great Lakes Dredge & Dock Corp (NASDAQ:GLDD) reported its Q3 2023 earnings, revealing a challenging quarter due to vessel dry docks and idle equipment. Despite these challenges, the company managed to build a solid backlog for Q4 and 2024. The company ended the quarter with a record dredging backlog of $1.03 billion, not including offshore wind contracts and low bids pending award. They also reported revenues of $117.2 million, a net loss of $6.2 million, and adjusted EBITDA of $5.3 million.
Key takeaways from the call include:
- The company added $519 million in capital projects and $235 million in maintenance and coastal protection projects to their backlog.
- Great Lakes Dredge & Dock Corp has been proactive in cost reductions and fleet adjustments, reducing their general and administrative and overhead headcount by over 50% during the year.
- They are set to begin subcontract work on the Rio Grande Brownsville LNG project later this year and major dredging efforts in Q2 2024.
- Progress is being made in entering the US offshore wind market, with the construction of the Acadia offshore wind rock installation vessel and the signing of the first-ever subcontract with Carver Sand & Gravel.
- The company expects updates on offshore wind power purchase agreements in Q1 2024.
- The quarter-over-quarter decrease in revenue was primarily due to lower utilization for the hydraulic fleet, but the company expects hydraulic utilization to improve in Q4.
- They ended the quarter with $14.1 million in cash and $55 million drawn on their $300 million revolver.
- Total capital expenditures of $46.6 million for the quarter were reported, including investments in new vessels.
- Looking forward, they expect utilization to increase in Q4 and a strong bid market for capital projects in 2024.
During the earnings call, CEO Lasse Petterson discussed the challenges faced by the hydraulic market in 2023, while CFO Scott Kornblau noted that the dry docking schedule for 2024 is expected to be relatively flat compared to this year. They also discussed changes in their bidding process to account for inflation and avoid losses. The company anticipates higher revenue and margin in the fourth quarter, especially with non-government contracts.
Despite short-term challenges, the long-term outlook for offshore wind in the US is optimistic. Great Lakes expects improved results due to a record backlog and cost reduction initiatives. Q4 revenues are expected to be strong, and the company is confident in revenue generation even if a continued resolution lasts longer. The call concluded with gratitude to stakeholders and an invitation to the next earnings discussion.
InvestingPro Insights
In light of the recent earnings call, it's essential to consider some key insights from InvestingPro. GLDD has been operating under a significant debt burden, which could potentially lead to difficulties in making interest payments. There has also been a declining trend in earnings per share, and the company has been quickly burning through cash. These are crucial InvestingPro Tips to keep in mind when analyzing the company's performance.
In terms of real-time data, GLDD currently has a market cap of 430.87M USD. The P/E ratio stands at -12.54, indicating the company is not profitable. The revenue for the last twelve months as of Q2 2023 was 595.72M USD, with a decline of 17.53% in revenue growth during the same period. Finally, the gross profit margin stood at 2.97%.
Remember, InvestingPro offers additional tips and data metrics that could further enhance your understanding of GLDD's financial performance.
Full transcript - GLDD Q3 2023:
Operator: Good day and thank you for standing by. Welcome to the Q3 2023 Great Lakes Dredge & Dock Corp Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. And I would now like to hand the conference over to your speaker today, Ms. Tina Baginskis, Director of Investor Relations. Please go ahead.
Tina Baginskis: Thank you. Good morning and welcome to our third quarter 2023 conference call. Joining me on the call this morning is our President and Chief Executive Officer, Lasse Petterson; and our Chief Financial Officer, Scott Kornblau. Lasse will provide an update on the events of the quarter, then Scott will continue with an update on our financial results for the quarter. Lasse will conclude with an update on the outlook for the business and the market. Following their comments, there will be an opportunity for questions. During this call, we will make certain forward-looking statements to help you understand our business. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations. Certain risk factors inherent in our business are set forth in our earnings release and in filings with the SEC, including our 2022 Form 10-K and subsequent filings. During this call, we also refer to certain non-GAAP financial measures, including adjusted EBITDA, which are explained in the net income to adjusted EBITDA reconciliation attached to our earnings release and posted on our Investor Relations website, along with certain other operating data. With that, I will turn the call over to Lasse.
Lasse Petterson: Thank you, Tina. The third quarter, as expected, was a challenging quarter due to vessel dry docks and idle equipment due to the market delays from 2022 and the first half of 2023. Despite the challenges, we were successful in building a solid backlog for the fourth quarter and for 2024 and onwards. We continue to see positive developments with both a larger number of capital projects and a better mix of projects coming to the market, which provides us with confidence that we are on a path to return to normal operations going into 2024. Great Lakes ended the quarter with a record dredging backlog of $1.03 billion, which does not include approximately $50 million in performance obligations related to offshore wind contracts and $225 million in low bids and options pending award. At the end of the third quarter, 71% of Great Lakes' backlog consisted of capital projects. In the third quarter, we added $519 million in capital projects, which includes two LNG projects, the Brownsville Ship Channel project for Next Decade Corporation's Rio Grande LNG project, and the Port Arthur LNG Phase 1 project. The Rio Grande Brownsville LNG project is the largest projects undertaken in Great Lakes history. Subcontract work on this project is anticipated to start later this year with a major dredging effort starting in Q2 of 2024 and lasting for proximately two and a half years. Our proven performance and safety culture allows us to win and execute these projects and support the growth of LNG exports in the US. In addition to these two capital projects, Great Lakes added $235 million in maintenance and coastal protection projects to our dredging backlog in the third quarter. As we have navigated the challenges from 2022 and have seen the ramp-up in bidding in 2023, we continue to be proactive on cost reductions and fleet adjustments, and we have reduced our general and administrative and overhead headcount by more than 50% during the year. As we have stated previously, were temporarily cold stacked vessels to reduce costs and these vessels can easily be reactivated as the market improved as we did for one of our recent new projects. Our newest hopper dredge, the Galveston Island is expected to be operational later in the fourth quarter, and our sister ship, the Amelia Island, is expected to be delivered in 2025. In the quarter, we took delivery of our two multi-cats, Cape Hatteras and the Cape Canaveral, which supports our pipeline operations with a stable work platform for making pipeline connections safely and quickly in most weather condition, in line with our strong safety culture. We are executing on our strategy to enter the US offshore wind market. In July 2023, we were honored to have President Biden attend the steel-cutting ceremony for Great Lakes' offshore wind rock installation vessel, the Acadia, which marks another step forward as construction begins with expected delivery in 2025. In addition, we signed the first ever subcontract for procurement of US -- with Carver Sand & Gravel, a US quarry in the state of New York. Both milestones solidify our entry into the offshore wind market, and we support Great Lakes awarded rock installation contracts for the Empire Wind I and II projects with estimated installation windows in 2025 and 2026. We continue to monitor our developments on related offshore wind power purchase agreements after the refusal by the New York State Energy Research and Development Authority to renegotiate the agreements for Equinor and BP (NYSE:BP)'s Empire Wind projects and Orsted (CSE:ORSTED)'s Sunrise projects. We expect updates from Equinor in the first quarter on potential impacts to the development plans for the Empire Wind projects. The US offshore wind market has seen other projects delayed or canceled due to higher interest rates and inflation. However, on October 24th this year, the third round of PPAs for the state of New York saw 4 gigawatts of new PPAs awarded to three operators, and we continue to bid on projects with scheduled offshore installation windows in 2026 and onwards. I will now turn the call over to Scott to further discuss the results for the quarter, and then I'll provide further commentary around the market and our business.
Scott Kornblau: Thank you, Lasse, and good morning, everyone. For the third quarter of 2023, revenues were $117.2 million, net loss was $6.2 million, and adjusted EBITDA was $5.3 million. Revenue of $117.2 million in the third quarter of 2023 decreased $41.1 million from the prior year third quarter. The quarter-over-quarter decrease in revenue was primarily due to lower utilization for the hydraulic fleet as that segment of the market has remained soft. However, we do expect hydraulic utilization to improve during the fourth quarter. Despite the lower quarter-over-quarter revenue, including $36 million less capital revenue, current quarter gross profit and gross profit margin increased to $9 million and 7.7%, respectively, compared to $3.8 million and 2.4%, respectively, in the third quarter of 2022. The increase in gross margin is primarily due to improved project performance and lower operating costs due to our continued focus on cost reductions. Third quarter 2023 G&A of $14.2 million is $900,000 higher than the same quarter last year, primarily due to higher incentive pay, profit sharing and severance pay in the current year quarter partially offset by lower costs due to our continued cost-cutting initiatives. Current quarter's operating loss of $5.1 million improved $4.4 million from the prior year's quarter net loss of $9.5 million, driven by the improved gross profit. Net interest expense of $2.8 million for the third quarter 2023 was down from $3.6 million in the third quarter of 2022, primarily due to an increase in capitalized interest related to our new build program, partially offset by current quarter revolver interest expense. Third quarter 2023 net income tax benefit of $1.8 million compared to $3.3 million of net income tax benefit in the same quarter of 2022 due to the higher current quarter income. Rounding out the P&L, net loss for the third quarter 2023 was $6.2 million, an improvement from a $9.9 million net loss in the prior year quarter. Turning to our balance sheet. We ended the third quarter of 2023 with $14.1 million in cash and $55 million drawn on our $300 million revolver, which doesn't mature until the third quarter of 2027. Total capital expenditures for the third quarter of 2023 were $46.6 million, which includes $28.4 million for the construction of the subsea rock installation vessel, the Acadia, $10.1 million for the Galveston Island and $2.2 million for the recently delivered multicast. So, far in the fourth quarter, we have paid an additional $42 million for new build payments and currently have $85 million drawn on the revolver. Full year CapEx guidance of approximately $145 million is down $30 million from previous guidance due to the timing of milestone payments on the Acadia, which we expect to take delivery in the first half of 2025. As previously discussed, in January of this year, we applied with the Maritime Administration or MARAD, which is a unit of the Department of Transportation for Title XI financing on our new wind vessel, which typically comes with very attractive terms. The review is ongoing, and a few weeks ago, we hit a key milestone with the commencement of an independent financial assessment, which is the next step in the process. But in parallel, we continue to explore other sources of capital. Post quarter end, we closed on a sale leaseback of various support equipment, bringing in approximately $29 million of cash. Looking towards the fourth quarter, we expect utilization to greatly increase from the third quarter as most of the non-cold stacked vessels are scheduled to work and there are no planned dry dockings. We should also see a larger amount of revenue coming from capital and beach projects, which typically come with higher margin than maintenance projects. With that, I'll turn the call back over to Lasse for his remarks on the outlook moving forward.
Lasse Petterson: Thank you, Scott. For the nine months ending September 30, the bid market, not including LNG and offshore wind projects was $1.8 billion, of which Great Lakes 131%. The increase in the mid-market was driven by a strong market for capital projects, which has already seen seven bids for port improvement projects, including ports such as Freeport, San Juan and Norfolk. The total capital bid market for port improvement projects through the third quarter totaled $459 million, of which 39% of the market year-to-date was won by Great Lakes. We expect the budgeted appropriations to support the funding of several previously delayed capital report improvement projects that are still expected to bid before the end of the year, including Sabine, Houston, and Mobile. We continue to see strong support from the Biden Administration and Congress for the dredging industry. In March this year, President Biden released the President's fiscal year 2024 executive budget. The proposed amount for the Corps targets, $7.4 billion, which is a record amount for President's budget. In June this year, the House proposed an increased 2024 budget of $9.6 billion for the quarter, which is $910 million above the fiscal year 2023, and includes $2.8 billion of the Harbor Maintain Trust Fund and the $1.5 billion for flood and storm damage reduction. In July, the Senate Committee for Appropriations passed the budget, which targets $8.9 billion for the Corps. This will move to the Senate floor for further deliberations and considerations. This proposed budget is expected to provide a strong 2024 bid market, if passed by Congress over the next few months. Currently, the government is operating under a continued resolution until the budget is approved. Offshore wind has been recognized around the world as a reliable source of renewable energy. Globally, installed offshore wind power generation capacity is targeted to reach about 260 gigawatt by 2030, up from 40 gigawatts in place in 2020. In 2021, the Biden administration announced the ambitious goal of 30 gigawatts in the United States offshore wind by 2030 and provided $3 billion in federal loan guarantees for offshore wind projects. The administration support for offshore wind culminated in the Inflation Reduction Act, the largest Climate Mitigation Act ever passed by Congress. As stated previously, Great Lakes was awarded the Rock installation contract for Equinor and BP's Empire Wind I and II projects with estimated installation windows in 2025 and 2026. The developer requested adjustments to the power purchase agreements for these two projects, which New York rejected in October, and we are awaiting updates in the fourth quarter for potential impacts on the project schedules. New York continues to take a step forward in meeting their renewable energy goals with an announcement in October 24th, 2023, of three new projects awarded with a capacity of approximately 4 gigawatts of offshore wind energy and a new accelerated fourth bid round for additional PPAs that was announced for early 2024. Although the market is facing some short-term challenges, the long-term outlook for offshore wind in the US is optimistic based on strong fundamentals and commitments by the US to meet its energy independence and decarbonization targets. Great Lakes has established a unique business position in the United States offshore wind market, and we continue to tender bids on multiple offshore wind projects for the Acadia our, subsea rock installation vessel currently being constructed. In conclusion, our main focus for the year has been to keep managing through the various challenges that the 2022 delayed market presented us with, with a goal of delivering improved year-over-year results. As expected, so far this year, we have seen strong overall bid market, including a number of large capital projects that finally got bid, leading us to a record backlog of over $1 billion. This, combined with the fleet adjustments and the cost reductions and production initiatives we have in place will continue to provide improved results in the coming years. And with that, I'll turn the call over for questions.
Operator: Thank you. [Operator Instructions] Our first question will come from Joe Gomes of NOBLE Capital Markets. Your line is open.
Joe Gomes: Good morning. Thanks for taking my questions.
Lasse Petterson: Hey good morning Joe.
Scott Kornblau: Good morning.
Joe Gomes: So, I wanted to start off on the revenues. I mean, look back at the second quarter, your commentary there, and you talked about the delayed bid market was coming to an end, that the number of dredges were completely booked and very, very few had availability for the rest of the year. But then you came in at a revenue number, which is the lowest quarterly revenue number in at least five years and just trying to square that comment with the number that actually was generated in the quarter. I wondered if you could give us a little more color on that.
Scott Kornblau: Yes, Joe, what I had said -- and we said that at the beginning of the year and the commentary did not change throughout was that even though we were continuing to see an improving bid market, and we were winning our fair share of those, really didn't expect to see that turn into revenue until the fourth quarter and then going into next year. We'd always said the first three quarters would be somewhat muted. In addition, I'd also talked about last quarter, we had three dry docks scheduled for the third quarter as well. And we had talked about all year that the hydraulics market was still somewhat challenged, and we're starting to see that recover now with the LNG. So, I think I laid all the pieces out that we thought revenue would be down in Q3. Utilization would be down in Q3. And yet, you're right, this is the lowest revenue we've had in a very, very long time and still outperformed prior year quarter with $40 million more revenue. So, I think this is proving out the things that we can control on the cost reduction is on production we are. The revenue is about to come forward with supported by $1 billion worth of backlog.
Joe Gomes: So, on that, I understand the backlog, and it's a great -- you guys have done a great job in the backlog, but we do have that continuing resolution there, how comfortable are you in the revenue actually coming into the fourth quarter, if that continuing resolution goes on further than I think it's supposed to be next Monday or Tuesday -- but next week.
Lasse Petterson: Yes, I think you're asking how that will impact our revenues going forward. The good news is that the -- it will not impact the revenue from the LNG projects that starts up in Q2 with the dredging. And also the capital project that has already been awarded that is in our backlog will continue to perform. So, the short-term impact of continued resolution that lasts for a long time as it did in 2022 is not really there. It will impact the ability for the Corps to issue new contracts on new projects, and that will have an impact towards the end of 2024 and not the first half. But we will just have to monitor what goes on in Congress and be optimistic about getting the continued resolution being short. As it normally is, it lasts two, three, four months, and that's normal. But in 2022, we had eight months of continued resolution that created a problem.
Joe Gomes: Thank you for that Lasse. And on the wind segment, unfortunate that there seems to be these delays going on. What would be the plan -- the Acadia if Empire I and II were not to go move forward anymore? I mean do you have some comfort level in some of the bids with some of the other projects out there that you'd be able to move the Acadia over to those projects?
Lasse Petterson: Yes, the short answer is yes. We have seen some uncertainty in the market, particularly with Orsted, who canceled their Ocean Wind I and II for New Jersey. The article was citing cost and inflation and also shortage of installation vessel capacity for the project, which tells me that once Acadia is out there, there will be a good demand for it. And also the new rounds for the PPA bidding that -- happened in October, sets up the installation windows in 2028 and onwards. And some of the projects that was slated for 2024, 2025 installation is slipping into 2025-2026. It's a bit of a fluid situation at this point in time. But I'm optimistic that we have a backlog to execute on when Acadia comes out of construction. There is also an international market that we can address. And as you have seen, the European market is very strong for offshore wind installations going towards 2030, and it far outpaces what we do here in the US.
Joe Gomes: Okay. One more, if I may. Scott, you get this question every quarter. So, last year, we had the site [ph] condition. You had talked about -- you thought one of the issues would be resolved in the third quarter, one in the fourth quarter. Just maybe give us an update on where those stand today?
Scott Kornblau: Yes. So, I actually get to give you a different answer than I have for the last four quarters. We have settled two of those during the quarter. And it was -- if you remember, we had kind of a small and medium and large and it was the medium to large that got settled. The smaller of the two that we settled did get fully booked in the quarter, and it is now resolved. The larger one now fully resolved and settled just the way the accounting works. About half of that has been booked and the other half will mostly be Q4 and maybe a little stub piece into Q1. So, for this quarter, we were able to book about mid-single-digit millions of revenue and the total settlement came in as we've kind of previously guided to the low double digits.
Joe Gomes: Okay, great. Thanks. I'll get back in queue.
Operator: Thank you. Our next question will come from Adam Thalhimer of Thompson, Davis. Your line is open.
Adam Thalhimer: Hey, good morning guys. Congrats on the record backlog.
Lasse Petterson: Thank you.
Adam Thalhimer: Scott, can you comment on kind of how we should be thinking about Q4 sales? I'm just curious if you see the potential for growth year-over-year.
Scott Kornblau: Yes, Q4 is now we're going to start seeing the fruits of some of the backlog that we had won earlier this year. I mentioned in my prepared remarks that most of the non-cold stacked vessels are fully utilized for the quarter and expect the hydraulics, which I mentioned were definitely stressed in the Q3. Those are not completely booked, but a lot more full than they were in the third quarter and the rest of the fleet is -- should be pretty busy during the quarter. And we will now start, I think, seeing the shift of having more capital projects in revenue than we had for the first nine months of the year. So, yes, I'm expecting very similar to how we laid out at the beginning of the year, we'll start seeing the fruits of this fantastic bid market starting to come to bear.
Adam Thalhimer: Okay, great. And then Lasse, I'm trying to -- let's see, you talked about some of the larger projects that are currently in backlog, significant dredging begins in Q2 of 2024. Was that just for Rio Grande or is that really a comment on the capital backlog in general?
Lasse Petterson: No, it was really a comment on the two LNG projects. As Scott has been saying, the cutter market or the hydraulic market has been challenged over -- all of 2023. And we are, with the Port Arthur and with the Brownsville project, we are putting those assets back in full operation, which is really generating some good revenues once they are active.
Adam Thalhimer: Okay. And then, Scott, do you have any sense for like dry docking schedule in 2024?
Scott Kornblau: Yes, a little early. I'll give more color on the next call. But I'll tell you, it's probably going to be relatively flat to this year. I think it's going to be in that 3 to 4 range. I will say though, Adam, that the way we have it scheduled out now, and again, I'll give more color on the year-end call, it is much more weighted to the beginning of the year than the end, especially on some of the hydraulics as we get ready to execute this LNG, will go ahead and pull those dry docks to the left, so we can get those done and out of the way. So, once we get on payroll, we don't have to stop.
Adam Thalhimer: Got it. And then high level, for next year, we still have some vessels in dry dock. And then I'm curious what the revenue -- like what is your annual revenue potential at this point, given all the moving pieces with the boats, now that we have a full backlog, I'm just curious.
Scott Kornblau: Yes, I mean I'm not going to give the full potential because, as you know, a lot of it depends on mix and when the jobs are starting. I will say, though, of our roughly $1 billion of backlog with some of these large capital projects, they're going well into 2025 and one of the LNG projects is going into 2026. So, we will earn rough numbers of the backlog, probably about half of it next year in 2024. So, there is still some white space for us to fill next year, but we also have a lot more backlog already into 2025 into 2026 and we typically have a couple of years out.
Adam Thalhimer: Great. Okay. Thanks guys.
Operator: Thank you. Our next question will come from Jon Tanwanteng of CJS Securities. Your line is open.
Jon Tanwanteng: Hi, good morning. Thank you for taking my question. My first one, just on the wind, I guess, end market is, do you expect the Equinor project to be pushed out or canceled or somehow renegotiated on your end? And if so, what are your options for the Acadia and the timing of delivery of the financing construction if that happens?
Lasse Petterson: Yes. We -- the only thing that we know is that we have been informed by Equinor that they are reevaluating the new situation as New York were reluctant to or did not renegotiate those PPAs. So, we are expecting information from them in the fourth quarter. There are a number of other projects that are going forward and we have biddings in most of these projects that have the installation windows from 2026 and onwards. It's a bit of a fluid situation, as you can see in the press with the headlines. But the outlook for Orsted Wind towards the end of this decade is very good.
Jon Tanwanteng: Okay. Are those projects that are still -- you're still in bidding on, are they under better contract agreements with the states that they're supplying power to? We have not been updated to reflect the cost and the interest rates that have been coming up.
Lasse Petterson: Yes. Most of the projects that has now been canceled or delayed was -- had power purchase agreements from 2018 and 2019 before COVID and before the inflationary pressures that we've seen has kicked in since then. That includes Empire, that includes Ocean Wind, that includes the revolution win for Orsted. So, now that we see the new PPAs coming through, there are projects that has been awarded since then, which have -- that has adjustments for inflation going forward, and those projects are continuing. And the new PPAs that has just been bid for New York had inflation adjustments included RWE, CIP, TotalEnergies (EPA:TTEF) were successful in winning those projects. And we are currently in discussions to tender those projects for them.
Jon Tanwanteng: Okay. So, it's fair to say that the projects that are scheduled for 2026 and on pretty much have the risk priced in and don't have as much potential for cancellation to push out as we've seen in the ones that have made the news recently?
Lasse Petterson: I think we have seen the bad headlines, both from Orsted, from BP, from Equinor. And the others are proceeding forward. So, particularly for the PPAs that had the inflation adjustments in them, they are continuing as planned.
Jon Tanwanteng: Got it. Okay. Scott, a question for you just on the utilization. You mentioned the hydraulics wouldn't be -- Q2, I think. So, what's your expected utilization for Q4 and Q1 just on the number of vessels you expect to have out there?
Scott Kornblau: Yes. And we mentioned Q2 because that's when the LNG works, and that's going to keep a number of the hydraulics busy for a period of time. We still have utilization and work for those in Q4 and the first half of Q1 right now continue to bid more. So, Q4 utilization just on the Hydraulics will be more than double what we saw in Q3. So again, they are starting to get busy. As I mentioned, Q1 is starting to shape up. Then Q2 and beyond, we have a number of those that will be tied up on the two LNG projects.
Jon Tanwanteng: Understood. Thank you. And then just quickly, is there an update on the competitive environment and how people are bidding now that there's more projects and work out there?
Lasse Petterson: Well, the competitive environment -- the dredging industry in the United States is very competitive, and there is a number of new vessels that have been added to the fleet over the last couple of years, both in the Hopper segment and in the cutter segment. So, we have seen some aggressive bidding on projects, and you can see that from the US -- engineers records that there is quite some competitive bidding on some of the projects that has been awarded recently. But the market is also very good. Strong capital projects announcements from the Corps. So, I'm optimistic about the market, but just with our current backlog and also with the number of projects that are now coming to bid as we estimate over the next six months.
Jon Tanwanteng: Okay, great. Thank you.
Operator: Thank you. Our next question will come from William Hong of Reorg Research. Your line is open.
William Hong: Hi good morning. Thanks for taking my question. Perhaps to Scott, you can tackle this one. When do you guys expect to receive notice of approval for your Title XI application? Is the company currently seeking any additional sources of financing to fund your CapEx initiatives?
Scott Kornblau: Yes. So, as I mentioned in the prepared remarks, we did hit a key milestone a few weeks ago, which was the next step we've been waiting on. Now that MARAD has done their due diligence, they're statutory acquired to get a third-party review. That is what's ongoing right now. And that process is still ongoing. My guess, and again, each one of these projects are different and not to have a specific time line. If I had to guess, I think this is kind of a late Q1, early Q2, just kind of based on the cadence and the pace that this is going. And then the second part of your question, yes, I'm not going to get into all the nitty-gritty of what we're looking at. But yes, we're having conversations in parallel with MARAD with many others to get through this new build program. We still -- we'll take delivery of the Galveston later this year, but we still have not only the Acadia, but another hopper, the Amelia Island. So, we still have a lot of CapEx to go. So ,we're going to continue to look at initiatives. I mentioned that we did bring in about $30 million in the last week or so on a sale leaseback, and I'll continue a lot of the conversations that I'm having in parallel with MARAD.
William Hong: All right. Thanks for the color. Very helpful.
Lasse Petterson: Thanks for the call.
Operator: Thank you. Our next question will come from Jacob Christensen of Axebrook Capital. Your line is open.
Jacob Christensen: Hey guys. Thank you very much. Could we talk about the CapEx investment cycle and sort of how much CapEx you expect for the rest of the year and give us a way to think about what to expect for 2024?
Scott Kornblau: Yes. So, as I mentioned, we'll have full year CapEx of about $145 million for this year, and we've spent another $40 million already in the fourth quarter. So, there's very little left to spend for this year, we'll be at the $145 million. And right now, we're in the $135-ish million range or so. We just have the final payment to make on the Galveston Island and just some maintenance CapEx. As I look forward to next year, and I'll give more specific guidance on the next call, but right now, it's laying out to probably be in the upper 100 -- so call it $175 million to $195 million, but I'll dial that in a little more on the year-end call.
Jacob Christensen: Got it. Thank you very much. And could you maybe try to parse that 2024 ballpark into maintenance projects?
Scott Kornblau: Yes. So, our maintenance CapEx has decreased over the last couple of years as you bring on new vessels. That's the expectation is that your maintenance CapEx comes down. So, we run about $25 million a year in maintenance CapEx, and then the rest will be for the wind vessel, the Acadia and the new hopper dredge, the Amelia Island.
Jacob Christensen: Excellent. Thank you very much.
Operator: Thank you. Our next question will come from Gregory Bennett of [Indiscernible]. Your line is open.
Unidentified Analyst: Hey good morning. Thanks for the information. How much of your current backlog that I think you said half of it you expect to monetize over the next 12 months. Half of that is fixed at costs that are going up in this inflationary environment. Do you expect you have adjustments in these contracts for fuel or personnel? Or could we be stuck with low-margin contracts that were delayed over the last several months? Thank you.
Scott Kornblau: Yes. So, for the majority of our government contracts, those are fixed-price contracts. However, based on what happened last year, we have changed the way that we bid costs and -- inflation into those. So, we -- and we're not going to get burned again like we did last year. So we've taken some very aggressive assumptions on what inflation will be. That was built into our bid when we priced it out. Now, that we're also starting to win a lot of nongovernment jobs, those contracts, our RFPs and you can negotiate those. And I can't get into the specifics of all of those contracts, but they are a lot more favorable than the off-the-shelf government contracts.
Unidentified Analyst: So, you're expecting when we hear your next -- with your fourth quarter earnings announcement that the expectation is you should be profitable and have significant cash flow. Is that what you're telling us?
Scott Kornblau: Telling you that we're expecting a much higher revenue and much higher margin in the fourth quarter than we have seen in the first three quarters of this year. One other comment, too, on the cost and the inflation. Two of the larger costs that we have, one is labor. We do have a lot of union labor. Those agreements are fixed, and we just recently signed a three-year labor agreement. So, we know what that is. Another large component is fuel, and we hedge our fuel as we win a contract, but we mitigate the impact of that as well.
Unidentified Analyst: On the new vessel that you're building for offshore wind, my take is a lot of the contracts aren't going to happen. Why not wait until you have your financing in place, stop construction, wait until you have your contract, your financing -- your favorable financing in place and wait until you have contracts -- definitive contracts, take-or-pay contracts for that vessel and not put us at risk?
Lasse Petterson: Well, the contract for the vessel in the United States, it takes three to three and a half years to build a vessel. So we entered into this contract, what is now year and a half ago. And we have a delivery in 2025 to go to work on the Equinor's Empire I contract. That is a firm contract, the firm backlog, which fills up most of our 2025. And then we have Empire II, which comes in 2026, where we also have our performance obligation. As you heard earlier on the call, Equinor will come back to us in the second quarter -- in fourth quarter with their firm plans for those two projects, and that will be a time to reconsider whatever we have planned. But currently, the construction program is going as scheduled, and we are bidding a number of projects for 2026 and onwards that will require the vessels to be ready and operational.
Unidentified Analyst: What happens if they don't happen?
Lasse Petterson: Well, then we have to reconsider and we will come back to that in the fourth quarter. Otherwise, it's just speculations.
Unidentified Analyst: Okay. Thank you.
Operator: Thank you. And I'm seeing no further questions in the queue. I would now like to turn the conference back to Tina Baginskis for closing remarks.
Tina Baginskis: Thank you. We appreciate the support of our shareholders, employees, and business partners, and we thank you for joining us in this discussion about the important developments and initiatives in our business. We look forward to speaking with you during our next earnings discussion. Thank you.
Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.