Great Lakes Dredge & Dock CORP

Great Lakes Dredge & Dock Corporation (GLDD) is the largest provider of dredging services in the United States, with a long history of international projects, and is actively expanding into the offshore energy industry. The company was founded in 1890 and operates primarily on the East and Gulf coastlines and in inland U.S. waterways, focusing on building and maintaining navigation systems, protecting shorelines, restoring habitats, and creating aquatic infrastructure. The U.S. dredging market is segmented into capital, coastal protection, and maintenance work, with GLDD holding an average combined bid market share of 29% over the three-year period ended December 31, 2025, including 36% in domestic capital, 46% in coastal protection, and 15% in maintenance sectors, excluding LNG projects ¹.

The company's core business model revolves around providing marine construction services, primarily dredging, and expanding into offshore energy. Revenue is generated through competitively bid contracts with federal, state, local, and foreign governments, as well as domestic and foreign private customers. Most contracts are fixed-price, with revenue recognized over time using the cost-to-cost method based on estimated fulfillment costs. In 2025, approximately 48% of GLDD's total revenues were derived from 29 different contracts with federal agencies or third parties operating under federal contracts ².

GLDD operates in one reportable segment: dredging. Within this segment, the company performs three primary types of work. Capital dredging, which accounted for 51% of 2025 dredging revenues ³, involves port expansion, channel deepening, land reclamation, trench digging for pipelines, and other marine structure construction. Coastal protection, representing 33% of 2025 dredging revenues ⁴, focuses on moving sand to shorelines to combat erosion and protect assets, typically occurring in fall and winter. Maintenance dredging, comprising 16% of 2025 dredging revenues ⁵, involves re-dredging waterways and harbors to remove accumulated sediments, a recurring and often non-deferrable need.

The company is also strategically expanding into offshore energy, which contributed 3% of 2025 revenue ⁶. This segment services the offshore wind, oil and gas, and power and telecommunication industries, both domestically and internationally. A key asset in this expansion is the "Acadia," the first and only Jones Act subsea rock installation (SRI) vessel being built in the U.S., which was launched in July 2025 and is expected to be operational in the first half of 2026 ⁷. The Acadia has already secured offshore wind rock placement contracts for Equinor's Empire Wind 1 and Ørsted's Sunrise Wind projects in the U.S., ensuring full utilization for 2026 ⁸.

For the fiscal year ended December 31, 2025, Great Lakes Dredge & Dock Corporation reported total contract revenues of $888.277 million ⁹. Gross profit was $203.485 million ¹⁰, resulting in a gross profit margin of 22.9% ¹¹. Operating income stood at $127.788 million ¹², with an operating margin of 14.4% ¹³. Net income for the year was $73.469 million ¹⁴, and diluted earnings per share (EPS) was $1.08 ¹⁵. The company's Adjusted EBITDA was $171.315 million ¹⁶, representing an Adjusted EBITDA margin of 19.3% ¹⁷. As of December 31, 2025, cash and cash equivalents totaled $13.361 million ¹⁸, and total long-term debt was $378.169 million ¹⁹.

Comparing 2025 to 2024, total revenue increased by $125.584 million, or 16%, from $762.693 million ²⁰ to $888.277 million ⁹. This growth was primarily driven by a $93.0 million, or 27%, increase in domestic capital dredging revenues to $441.056 million ²¹, and an $28.238 million, or 11%, increase in coastal protection revenues to $281.598 million ²². Offshore energy revenues also saw a significant increase, reaching $30.229 million in 2025 from no revenue in 2024 ²³. Conversely, maintenance dredging revenues decreased by $25.854 million, or 16%, to $135.394 million ²⁴. Consolidated gross profit increased by $42.909 million, or 27%, to $203.485 million ¹⁰, and the gross profit margin improved from 21.1% in 2024 ²⁵ to 22.9% in 2025 ¹¹. General and administrative expenses rose to $77.970 million in 2025 from $70.769 million in 2024 ²⁶, mainly due to higher incentive compensation, employee benefits, and Transaction-related expenses. Net interest expense decreased from $17.880 million in 2024 ²⁷ to $16.751 million in 2025 ²⁸, primarily due to the repayment of the Second Lien Credit Agreement.

During 2025, GLDD took delivery of the Amelia Island, a 6,500 cubic yard trailing suction hopper dredge, which commenced operations in the third quarter of 2025 ²⁹. The company also sold one smaller hydraulic dredge and one mechanical dredge as part of its ongoing fleet modernization program ³⁰. In July 2025, the Acadia, the subsea rock installation vessel, was launched and is anticipated to be operational in the first half of 2026 ⁷. A significant operational development was the full repayment and termination of the Second Lien Credit Agreement in the fourth quarter of 2025, resulting in a loss on extinguishment of debt of $10.822 million ³¹. The company also amended its revolving debt facility, upsizing it by $100 million to $430 million and extending its maturity to October 24, 2030 ³².

Management anticipates that the Transaction with Saltchuk Resources, Inc., where Merger Sub will commence a tender offer to purchase all outstanding shares at $17.00 per share ³³, is expected to close in the second quarter of 2026 ³⁴. This is subject to customary closing conditions, including the tender of one share more than a majority of outstanding common stock and receipt of required antitrust clearance ³⁴. Upon closing, the company's common stock will be delisted from the Nasdaq Stock Market and deregistered under the Securities Exchange Act of 1934 ³⁴.

A major growth area for GLDD is the offshore energy industry, particularly with its subsea rock installation (SRI) vessel, the Acadia. The Acadia, the first and only Jones Act SRI vessel being constructed in the United States, was launched in July 2025 and is expected to be delivered and operational in the first half of 2026 ⁷. This vessel has secured offshore wind rock placement contracts for Equinor's Empire Wind 1 and Ørsted's Sunrise Wind projects in the U.S., providing full utilization for 2026 ⁸. Despite headwinds in the U.S. domestic offshore wind market, GLDD has proactively expanded the Acadia's strategic target markets to include oil and gas pipeline protection, power and telecommunications cable protection, international offshore wind, and critical subsea infrastructure protection ³⁵. The company has secured its first two international offshore wind contracts in Europe, with work expected to commence early in 2027, providing the Acadia close to full utilization for that year ³⁶.

Another significant growth driver is the continued demand for dredging services, particularly deep port capital projects. The U.S. Army Corps of Engineers' (Corps) 2026 budget was signed into law at a record $10.4 billion on January 23, 2026 ³⁷, with additional details pending the Corps' work plan release. The Water Resources Development Act (WRDA) of 2024, signed on January 4, 2025, includes several capital projects aimed at enhancing flood protection, improving coastal resilience, and supporting ecosystem restoration ³⁸. The annual bid market for domestic capital dredging, excluding LNG projects, averaged $586 million over the three-year period ended December 31, 2025 ³⁹. The company expects approximately 89% of its domestic capital dredging backlog at December 31, 2025, to be performed in 2026, with the remainder in 2027 ⁴⁰.

The substantial need for coastal protection also presents a growth opportunity. Beach erosion is a recurring problem, intensified by coastal development and severe storm activity. The 2023 Disaster Relief Supplemental Appropriations Act allocated $1.5 billion for infrastructure repairs and beach renourishment projects ⁴¹, which supported a strong bid market in 2025, with additional projects expected in 2026 ⁴¹. The annual bid market for domestic coastal protection averaged $605 million over the three-year period ended December 31, 2025 ⁴². GLDD expects 100% of its coastal protection dredging backlog at December 31, 2025, to be performed in 2026 ⁴³.

Required maintenance of U.S. ports is a recurring and non-deferrable source of work. The lifting of caps on the Harbor Maintenance Trust Fund (HMTF) by the CARES Act on March 27, 2020, allows full access to future annual revenues, and Congress is utilizing the historically high level of the HMTF to support major maintenance dredging initiatives ⁴⁴. The annual domestic bid market for maintenance dredging averaged $1,086 million over the three-year period ended December 31, 2025 ⁴⁵. GLDD expects 100% of its maintenance dredging backlog at December 31, 2025, to be performed in 2026 ⁴⁶.

The company expects to spend between approximately $65 million and $75 million on capital expenditures in 2026 ⁴⁷, inclusive of capitalized interest, which includes investments in its new build program and maintenance capital expenditures. Remaining new build program payments are anticipated to be funded by cash on hand, future cash flows from operations, revolver availability, and potential new financing transactions ⁴⁸.

Management has flagged several structural headwinds and execution risks. The pending Transaction with Saltchuk is subject to various closing conditions, and failure to satisfy these or delays could adversely affect the business, results of operations, financial condition, and stock price ⁴⁹. The Merger Agreement contains provisions limiting GLDD's ability to pursue alternative transactions and imposes restrictions on the conduct of its business ⁵⁰. If the Merger Agreement is terminated under certain circumstances, GLDD may be required to pay Saltchuk a termination fee of approximately $37 million ⁵¹. Furthermore, the company's ability to secure contracts for the Acadia could be impacted by unforeseen market conditions or changing political climates, such as the January 20, 2025, Executive Order pausing new offshore wind leases and permits ⁵². Unforeseen delays and cost overruns in new vessel construction, like those experienced with the Acadia, could negatively impact the business strategy ⁵³.

Geographic, regulatory, and macro factors also pose constraints. A substantial portion of GLDD's revenue is derived from federal government contracts, making it vulnerable to reductions in government funding, contract cancellations, or delays in project awards ⁵⁴. The political environment and governmental fiscal and monetary policies, including potential shifts in federal spending and support for the dredging and offshore energy industries, could adversely affect business and operating results ⁵⁵. For example, the Executive Order pausing offshore wind leases could impact future contracted work ⁵². Compliance with the Jones Act and other federal laws restricting foreign competition is critical, and any modification, repeal, or different interpretation of these provisions could significantly increase competition and materially adversely affect the business ⁵⁶. Additionally, new tariffs, such as the 25% tariff on imported steel and aluminum imposed in February 2025, which was raised to 50% in June 2025 ⁵⁷, have increased costs, and the inability to pass these on to customers could adversely affect profits.

The company faces material risks including the potential failure to satisfy conditions for the pending Transaction with Saltchuk, which could lead to business disruption, adverse effects on customer and supplier relationships, difficulties in retaining key personnel, and a required termination fee of approximately $37 million ⁵¹. A substantial portion of revenue is derived from federal government contracts, making the company vulnerable to reductions in government funding, contract cancellations, or delays in project awards, as federal contracts can be canceled at any time without penalty to the government ⁵⁴. The unpredictable political environment and governmental fiscal and monetary policies, such as executive orders impacting offshore wind leases, could significantly reduce funding or support for the dredging and offshore energy industries ⁵⁵. The company's significant number of fixed-price contracts exposes it to risks of cost over-runs, operating cost inflation, and potential claims for liquidated damages if estimates are inaccurate or unforeseen conditions arise ⁵⁸. Project delays due to increasingly negative impacts of climate change or unusual weather patterns can affect timely performance and increase costs ⁵⁹. Equipment or mechanical failures, particularly given the average age of the marine fleet is 27 years ⁶⁰, could result in increased costs, project delays, and reduced revenues. Disruptions to the supply chain for new vessel build materials or maintenance on existing vessels could prohibit procurement and adversely impact the business ⁶¹. Environmental regulations can force the company to incur capital and operational costs, and non-compliance can result in fines, penalties, and third-party claims ⁶². The company has substantial indebtedness of $380.0 million as of December 31, 2025 ⁶³, which makes it more vulnerable to adverse economic and competitive conditions and limits financial flexibility ⁶⁴. The inability to obtain bonding or letters of credit, which are generally required for domestic and foreign projects, would severely limit the ability to obtain future contracts ⁶⁵. Cybersecurity threats, including malware, ransomware, and data breaches, affecting IT and OT systems, could materially adversely affect operations, project execution, regulatory standing, and financial condition ⁶⁶.

Management's message to shareholders emphasizes a steadfast commitment to executing a long-term strategy that maximizes growth opportunities, particularly through reinvestment in the core dredging business and expansion into the offshore energy industry. A key strategic priority is the successful delivery and operation of the Acadia, the subsea rock installation vessel, which was launched in July 2025 and is expected to be operational in the first half of 2026 ⁷. This vessel has secured contracts providing full utilization for 2026 and close to full utilization for 2027 ⁸, ³⁶, demonstrating a clear focus on leveraging this new asset for growth in both domestic and international offshore energy markets. Another strategic priority is capitalizing on the robust demand drivers in the domestic dredging market, including deep port capital projects, coastal protection, and required maintenance of U.S. ports, supported by record government funding, such as the Corps' 2026 budget of $10.4 billion ³⁷. Management also highlights the ongoing fleet modernization program, including the delivery of the Amelia Island hopper dredge in 2025 ²⁹ and the retirement of older dredges, to enhance capacity and efficiency. The company expects to spend between approximately $65 million and $75 million on capital expenditures in 2026 ⁴⁷, reflecting continued investment in its fleet and new build program.