Earnings call transcript Q1 2023

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Operator

Good afternoon, ladies and gentlemen. Welcome to Gulf Island's conference call to discuss First Quarter 2023 Results [Operator Instructions].

At this time, I would like to turn the floor over to Ms. Cindi Cook for opening remarks and introductions. Cindi, please go ahead.

Cindi Cook

afternoon. good and you, Thank I would XXXX our quarter everyone to welcome teleconference. to first like

materially. may were and and Please certain at the call would everyone most Our call, the this X:XX recognized which the described and release We management be released results afternoon subsequent to and website like to our mind actual is of measures that reference call under financial press U.S. are our forward-looking differ after GAAP. on include note and that may cautionary refer available awards replay press on press our this backlog in a this available our EBITDA, SEC in on A comments release website evening. language also results project on not filings. gulfisland.com. recent in risk p.m. this included Form XX-K today's statements, will and Please to keep factors release of copy new the

As comparable SEC measures their these to used, are in reconciled to non-GAAP most regulations required the rules financial press release. financial measures our by GAAP extent and

Heo? Executive Today, Richard Mr. Stockton, and CFO. Heo, Vice Mr. President CEO; we Wes and and President Mr. have

Richard Heo

healthy of you, each results you Thank our I and you safe. with afternoon, families happy and welcome to here that first and your conference continuing to Good Cindi. everyone, quarter be I'm and stay to call. this hope are afternoon,

our on trends Wes on open of progress end an currently then closing with the today's strategic remarks. call questions performance During based update of transformation generating results for key provide focused greater phase the stable, market profitable on our from quarter first up second will business have a call, I'll and initiatives. growth. is detail. made our then which discuss We're we in We'll segment the quarter and takeaways and end the review on

our in steady business small-scale report Services very quarter. fabrication another pleased growth So period during to we the Division were of first and

are We encouraged region key XXXX. continue competitive be end markets fabrication to services by fiscal which that growth the positioning our should Coast continued favorable in together small-scale with during and strong demand benefiting our trends in result in the Gulf

late all last activities in related received notice project. to we fabrication As February, our large discussed we quarter, project suspend to

Unfortunately, we still we any and resolution the steps of continue to await project on update further have minimize we to take not of impact the on project. received the suspension the while an the status

large optimistic will encouraged is While second this fabrication we we large the market XXXX. half and bidding in the and have we're to this several to event news hopeful in replace we disappointing, is will are pursuing canceled. remain We're share be of activity fabrication opportunities, in ultimately the able it by project the project

relates shift Shipyard are contracts obligations we it As nearing complete to be ferry our to Texas expect the happy we wind completion Shipyard of the operating as down, Carolina our and North XXX% during to the remaining We years to of we look and of second being to our fabrication to two businesses. the forward focus shipyard and services ago, exiting business the our quarter. began process able just

Now turning segment to our results.

at looking Division. First, Services our

as grew last organic which acquisition Our all X%, lapped the quarter we fully DSS almost first was quarter. revenue

acquisition to was of opportunities. opportunity significant margin income up operating reallocate compared higher-margin as The following to our the by services to expansion XXX% return higher was the a importantly, shift last driven key resources More DSS. to to continue year, almost -- priority resources opportunities almost we

have a growth the business, quickly platform success of validation our provides Gulf excited and of services leading the on rationale by the Mexico. remain in of the we objective So built acquisition. for margin this further We steady our services

numbers of almost a the in business success that a function now XXX services craft employees. force is Our skilled labor

services favorable of proud oil very the demand ability market core competitive attractive, driven and head for gas to our market. market labor be by conditions. offshore remain of to what our The our trends a maintain are despite We in count continues Gulf services Mexico

forward. also reaction be in Safety new which create line commenced pleased first this carried Spark positive operations. the to to that contributor in very shut to We welding be expect work second a environment project Spark with have market the We out a without the our business and safe down the hot need been quarter our material for closures provides offering Safety to going product

to in trends, business the With we market generate growth success the favorable our income and expect XXXX. of services operating Safety Spark

Fabrication on moving our Now to Division.

this During revenue strategic revenue track and being the fabrication our the owing location year-over-year our customer prior attributable fabrication its business. to fabrication projects. strong first combined in strength quarter, revenue is Houma, our on-time of strength growth Absent demand business The in relationships, to continued contribution, in suspension. by quality XXX% record generated and our completion almost driven to of core small-scale approximately markets, was in of $XX small-scale the we continued large our project our trends with of favorable million

our vary for from expect While small-scale quarter-to-quarter, still in fab year full the business year-over-year we fab may XXXX. comparisons growth small in

large decision disappointing, in the optimistic project environment remains final capacity While bidding we fabrication ongoing existing LNG, suspension our a in energy activity timing remains large petrochemical Industry on fabrication the as regarding project of our remain uncertain. such large project of robust. market. The and and transition is markets is limited project the

contract we that in have the pursuing a chase just and is challenges and that are times inflationary the past, our in objectives, consistent are actively remaining committed in award disciplined we as especially reminder, the a not the that replace of financial and as will today. are we to risk backlog many with backlog replacement However, event this is any stated, half XXXX. contract we and ensure face And awarded second given large contract to we labor opportunities to be the we that canceled, could new hopeful ultimately

turning Division. our Finally, Shipyard to

delivery an shipyard end Texas the phase we finished must progress make wind-down our safe the operations. of towards complete delay and with month. awaiting determined ferry completed been We're have quarter. that the construction we continuing Guard the minimize DOT, the our vessels ferry inspection to Department delivery efficient the consoles, Modifications as replaced final second and as TxDOT by to or for schedule customer were respect in Guard contractually consoles. and make for U.S. And with be to commissioning is and to ferry discussed, are shipyard previously obligations last final XX-vehicle approval to second from substantially we of Transportation, the the in of this teams order of continue as our work With project we XX-vehicle Coast the North impact which Carolina to continue detailed respect the X to expect towards to work by We progress. projects our Coast the the metal customer of financial our wood of the U.S. quarter, ferry the and specified modified With the remaining quarter.

of and delivered vessel. One of was quarter, the acceptance the we the received conditional ferries during first

and repair quarter. the completed is we last equipment delays outfitting as acceptance. installed. be on design efficiencies the of associated are targeting encountered discussed mentioned stage, design Court the second ongoing. end our and State to the However, are the delivery replacement Carolina resulting lawsuit previous is completion resulting issue and this we Separately, for The the in seeking from by final as and vessels in work The awaiting month we should an damages previously equipment delivered towards our call, be the with ferry North and flaws final the

Turning Hornbeck. MPSV with to lawsuit the

As judgment dismissal court's discussed contracts. Gulf the that Hornbeck that terminated court was the for seeking call, X, of vessel our claim the had reversed by summary March decision Hornbeck's Shipyards construction on granted the partial motions previous Island on that appellate wrongfully trial

wrongful shipyards a the result was reinstated. of As termination claim successful appeal,

ruling, the to to our court's recent discretion a like very Shipyards pursue scheduled of Supreme filed whether key decision. writ On I'm for is its take March transformation, would end up opposition business the us quick XX, A previously application our Hornbeck to a I in and continued our which proud the to the applications. X relating is begin update on with the by strength will financial April the And comments with writ to filed decision. pending the of strategic on appellate court on X, concerning positioned my initiatives. execution wrap markets results has exercise trends favorable review against court was the advantage growth. our Court Supreme rescheduled appellate Gulf profitable XX, appellate our March progress of the Louisiana XXXX. it our Island evident and to on from XXXX, decision Court X, XXXX, Following October Louisiana April trial

of of on our execution as growth our services the As are well strategy markets growing key project and the end a phase markets, strengthening labor reminder, in business, traditional our aspects based expanding our and offshore force. diversifying pursuing skilled further new second as opportunities

continue pursuit from markets fab initiatives traditional generate new First, on we expect offshore continue. opportunities business our our to these growth project to recent growth include progress small-scale following: we momentum strong this markets, of terms of the markets our of Some in and traditional end our as as in and well

trends record end our well the for of for take recently announced pursuing favorable program. believe is on-time NASA's end high-quality, wide components to we in confident the advantage we range a projects have Houma execution that In markets of positioned to projects Artemis and complex addition, track our ancillary location strategic and in transferable new we're are of markets. We're on several and award markets, an in structural

head services to competitive our pleased progress to count the skilled to Second, craft and been to continue make maintain and our retain very continue headcount. we market look our expand that for We're we ways have business. given labor expanding able on

first has rapid of near-term services new notable been success We our quarter most customers business. remain began growth features due the second project the Spark the our system. our interest additional in of high safety Safety Our from during to and the

We our contributor of be growth expect going business a the the of Division to success forward. Services key this new to

to maintaining committed awards. remain bidding as large we we in pursue new business discipline our fabrication Lastly,

not our does by the on While our pressures I'm challenges is we terminated, with we and end that availability by remain the risk market skilled will encouraged tolerances return first asset. not In into as meet investment continue fabrication to the are and labor, quarter we an eager to assess replace and agreement large fabrication of favorable ongoing results return project our our given inflationary the in objectives pleased of enter closing, overall trends. the event

to Division in We Wes fabrication to market. and encouraged detail. quarterly in profitable over I'll are greater generate small-scale turn large by the active expect our we bidding growth to project in and discuss our the continued environment results Services business, now call the

Wes Stockton

and of and quarter the the growth over net first conclude liquidity. first in $XX.X putting consolidated million. Thanks, first mentioned line. increase discuss of details additional large good to was new segment XXXX, revenue small-scale the fabrication Consolidated and quarter regarding fabrication provide Consolidated suspension in impacts will continued the million, the from some business by our XXX% for for will of then Safety afternoon, $XXX,XXX factors an for everyone. I by EBITDA Division context Richard Richard, attributable revenue its their our income driven I our then $X.X results XXXX our of results, Services and discussion and to on quarter project to quarter. growth a was with our prior Spark related was our

shipyard from advisory results and legal Offset consolidated positive by the fees our attributable associated our reflect Our remaining Division operations. Corporate Divisions. to Fabrication Services with and our and contributions costs

Revenue our business the Safety driven million, for in Specifically last contribution Division, first we line, compared of same the to $XX.X of increase The for year. by XXXX launched increase quarter which Services an the the third the was X.X% XXXX. period quarter of was Spark

last allocating tight services core by our to our modestly revenue labor to take opportunities. labor the down was higher-margin skilled of project excluding Spark continue from year, While workforce market advantage Safety, we

business quarter the for revenue prior of a of was line from for or a favorable quarter and million X.X% revenue, or our from result, XX.X% $X.X the benefited mix. million As more period. Operating $X.X project for EBITDA Safety services up Spark margin results year the

line. division strong based Spark our for markets, in end We continue results the business contribution and growth XXXX position organic and of competitive strength favorable the expect to of on Safety our operating

fabrication and million, our our project $X.X first prior of For revenue for significantly quarter $XX.X fabrication XXXX Fabrication Division, to large the related strong to growth suspension. revenue up from million. was increase revenue first small-scale was quarter to The attributable in of XXXX its

a revenue period. project for noted to for and Richard, quarter quarter Fabrication project. approximately loss overhead the $X.X the costs prior was the related and million EBITDA with million first decrease gross recoveries activities, a limited procurement which large facilities margins. XXXX $XX generated large As of was a fabrication portion and versus improved associated million which of by was for total the The significant our the of was improved in associated revenue in year result under-recovery resources to higher due profitability our and utilization of with of our $X.X

on mitigate As a of working in project remainder the the suspension to suspension, the challenged quarter XXXX. result to first large results impacts and are be to of we our the second quarter the relative expect of the

are ferry entirely as Richard, was our XX-vehicle our Shipyard completion. Revenue projects, for and related XX-vehicle to which For Division, ferry by first two nearing discussed quarter XXXX the

the legal and costs partial costs under-recovery of vessel fees the with due loss operations. down and our was we to MPSV related Our primarily associated resources shipyard litigation and for as holding wind of underutilization advisory the quarter to the overhead our

project for of period, with first we to XXXX For and timing of million Division, activities. liquidity, at $XX.X million majority to was quarter March year-end. procurement to large our increase With of end, Corporate largely compared with million. we of Subsequent year payments first quarter relate for the $X.X balance approximately receivables investments and which administrative prior with respect for $X of the to our the due cash total had received our quarter $X.X $XX suspended XX, fabrication our At a million the balance we ended expense million general certain consistent costs. to the

any that until temporary second remaining not to indicated to has we the the cash during delays. to related third balance payment our quarter usage XXXX. be meaningful received may due customer working our expect payments quarter However, anticipated capital decline Accordingly, the

are a the substantial quarter flow of we cash guarantee second with for have We our mitigate remaining of as working the payment a our receivable customer received and vendors payments impacts from to bond security portion balance. delayed the

our concludes now may you for open prepared questions. This remarks. line the Operator,

Operator

question from Tom Capital. from [Operator Spiro Instructions] The first Spiro comes

Tom Spiro

Spiro, Tom Capital. Spiro

with -- how now timing you kind questions. of there do or couple a that's One of suspension. cost a you is terminate Just Can large your What the it on fab to some job ability it? terminate? under Is associated can it freely? issue easily

Wes Stockton

of and asking a It's this we in for function pursue is go having of impacting impacted point, it's the with conversations on other might being small still to of -- think terminate by the and context need scopes our work thinking doing point. with you're not I ability it us customer to customer And we're At things. other this some our work reason. other the at not not suspension

know you crystally. let are we get me more that if a something and just little So try there's that more wanting can to answer at, bit to

Tom Spiro

with discussing job, got can process of out the in other that of hey, you're you someone another you what and get answer? suspended if But now your fellow the else says, large what's project

Wes Stockton

don't with a We have we'll that think problem ultimately.

Tom Spiro

you in to release What markets hear capture, particular, you In one the I'm all about about expert for as hear energy lot the I storage. of the that transition of the that. -- an refers feel opportunities the carbon markets I opportunity But energy hydrogen. for company. a hear I transition press about company? in hardly energy in represents

Richard Heo

of particular a pursuing side capabilities interest our we're client. to the where project of Yes, modular on the actively right hydrogen a business, essentially, now are

ammonia, markets opportunities. similar there chasing actively. And then types other are we're obviously, Hydrogen so in like of And is one

Tom Spiro

they I are fairly a those from sometimes they're a I -- opportunities. have like you from now, not. energy years transition sound it's now, like like hydrogen four about things have quarters and It's when near-term of read it's three, and And sounds sense ammonia that two, something. might couple it

Richard Heo

Yes, that's Tom. correct,

Operator

John from from next Deysher [Operator comes question Instructions] Pinnacle. The

John Deysher

What those question. receivables subsequent please? quick one have customer? -- the from major could over guess, the collected again, just go I quarter you numbers the I what something end. you quarter, were Solid to And balance in Wes, the

Wes Stockton

or managing We on perception acknowledging customer subsequent not $XX.X priorities flow the quarter. approximately all with is With receive -- then actually will security do our its then And of the because to to its portion did be One delays us a to we the We amount. impact letter of the working receivables normal the commitment the due. point capital time quarter, is for have million bond the capital what cash subsequent amounts the substantial about its said, expect from the provides the customer quarter out I do its a payment normal thing the that that second in a capital we a end of we of would $X and projects. working through our customer. want back guarantee to temporary have We're million third customer we that just to the do be collected by at a quarter. the We've position. dispute and get various in believe back that received suspension

John Deysher

expect the collect them? in quarter anything second you Do from to

Wes Stockton

wouldn't But haven't I anything other expect than mentioned. million more that We point, at we the told this $X won't. meaningful been we

Operator

Heo would the the to question-and-answer conference back to remarks. like concludes session. for I Richard This turn closing over

Richard Heo

well In Gulf employees their commitment for our customers success. want continued who recognize to closing, a thank continue I as support to our demonstrate shareholders as and to Island

you. Thank speaking and updating results take you our second again and the progress. on on I to and Be thanks interest on call, our safe quarter care. for you call your For conference those look with forward

Operator

goodbye. Gulf This concludes you, Island Thank the conference and call.

Gulf Island Fabrication (GIFI) 9 May 232023 Q1 Earnings call transcript