Great Lakes Dredge & Dock (GLDD) Q3 2025: Backlog Climbs to $935M, Securing 2026 Revenue Visibility
GLDD’s Q3 performance reinforced the company’s operational momentum, with a $935 million backlog anchoring near-term revenue and margin visibility. Strong project execution and the completion of the new build program are positioning the business for a step change in free cash flow from 2026. Management’s proactive capital structure moves and strategic diversification into offshore energy and private sector clients are reducing risk and expanding addressable markets as the U.S. dredging cycle normalizes.
Summary
- Backlog Secures Multi-Year Revenue: $935 million in projects extends visibility through 2026, supported by robust coastal and LNG work.
- Fleet Modernization Complete: Delivery of Amelia Island concludes hopper dredge buildout, with Acadia set to expand offshore capabilities in 2026.
- Capital Flexibility Enhanced: Upsized revolver and early debt repayment lower interest expense and boost free cash flow outlook.
Performance Analysis
GLDD’s Q3 delivered solid financial execution, with revenue of $195.2 million and a notable lift in gross profit margin to 22.4% from 19% a year ago. The margin expansion reflects improved fleet utilization and a favorable project mix, as over 85% of revenue was driven by higher-margin capital and coastal protection projects. Despite three dredges undergoing regulatory dry docking, the company’s active fleet maintained high productivity, aided by the immediate deployment of the new Amelia Island hopper dredge.
Operating income rose sharply, up $11.4 million year-over-year, driven by both higher project profitability and disciplined G&A control. Net income nearly doubled versus the prior year, and the business generated $52 million in free cash flow year-to-date, even as it completed the bulk of its multi-year fleet renewal program. Capital expenditures remain elevated at $32.8 million for the quarter, but are set to decline with the new build cycle winding down.
- Margin Expansion Fueled by Project Mix: Capital and coastal protection jobs, typically higher-margin, dominated Q3 revenue contribution.
- Free Cash Flow Inflection Imminent: New build program wrap-up positions GLDD for materially higher free cash flow in 2026.
- Debt Structure Optimized: Refinancing and early repayment of second lien notes reduce annual interest by $6 million, lowering net leverage to 2.5x.
Management expects Q4 to be another high point, despite planned dry dockings, with full-year EBITDA on pace to set a new company record.
Executive Commentary
"A successful bid strategy from last year resulted in a large number of projects wins, which resulted in a high quality backlog, which will support full utilization and revenues for the remainder of 2025, as well as providing a good base and revenue visibility for 2026."
Lhasa Patterson, President and Chief Executive Officer
"With the increased capacity, we elected to immediately repay our $100 million second lien notes in full, reducing interest expense by almost $6 million per year. Our balance sheet is in great shape with a trailing 12-month net leverage ratio of 2.5 times, liquidity of nearly $300 million, no debt maturities until 2029, and a weighted average interest rate on our total debt now under 6%."
Scott Kornblau, Senior Vice President and Chief Financial Officer
Strategic Positioning
1. Backlog Composition and Visibility
GLDD’s $935 million backlog is heavily weighted toward capital and coastal protection projects, providing strong revenue and utilization coverage through 2026. Notably, three major LNG port deepening projects are included, with options pending that could further boost high-margin work. Management highlighted that 84% of backlog is in capital and coastal protection, supporting both near-term execution and longer-term visibility.
2. Fleet Modernization and Offshore Diversification
The completion of the Amelia Island hopper dredge marks the end of GLDD’s multi-year fleet renewal, establishing the company as the operator of the largest and most advanced hopper dredge fleet in the U.S. The upcoming delivery of the Acadia, a Jones Act-compliant subsea rock installation vessel, will unlock new opportunities in offshore energy—spanning wind, oil and gas, and cable protection—both domestically and internationally.
3. Capital Structure and Cash Flow Priorities
GLDD’s refinancing and revolver upsizing to $430 million, combined with early repayment of higher-cost debt, reduces interest burden and enhances balance sheet flexibility. Management signaled that deleveraging will be the top priority as the company transitions to a free cash flow generative phase post-new build program, with no major maturities until 2029 and a fixed coupon on remaining notes.
4. Bid Market Normalization and Client Mix
The U.S. dredging bid market has normalized to an expected $1.8 billion in 2025, down from the port deepening surge of recent years. GLDD’s backlog mix and diversification—now 50% private and 50% federal—reduce exposure to federal budget cycles and position the company to weather fluctuations in government appropriations.
5. Offshore Energy Market Entry
GLDD is actively pursuing contracts in the offshore energy sector, with the Acadia already booked for Empire Wind 1 and Sunrise Wind in 2026. While U.S. wind project delays have led to a more proactive international bidding strategy, especially in Europe, management is targeting subsea infrastructure protection as a future growth vector, even as contract lead times remain shorter overseas.
Key Considerations
This quarter’s results underscore a multi-year transition for GLDD, as the company shifts from a capital-intensive fleet renewal to a focus on operational leverage, cash flow generation, and risk diversification.
Key Considerations:
- Backlog Quality and Funding: All current and upcoming projects are fully funded, with government shutdowns having no material impact on project execution or payments.
- Bid Market Dynamics: The reduction in new port deepening starts is offset by robust coastal protection and maintenance dredging, underpinned by supplemental disaster relief funding.
- Offshore Energy Upside: The Acadia’s full utilization in 2026 is secured, but 2027 bookings depend on success in both U.S. and European subsea infrastructure markets.
- Interest Expense Reduction: Debt refinancing and repayment will provide a tailwind to net income and free cash flow as capitalized interest phases out.
- Client Diversification: The shift to a 50-50 federal/private mix reduces reliance on U.S. Army Corps of Engineers appropriations and mitigates political risk.
Risks
GLDD faces ongoing exposure to U.S. federal budget cycles, especially if continuing resolutions persist and delay new project starts. Offshore wind market volatility, particularly in the U.S., could impact utilization of the Acadia beyond 2026 if international bidding does not convert. Capital allocation discipline will be critical as free cash flow ramps, and execution risk remains around complex, high-margin project delivery.
Forward Outlook
For Q4 2025, GLDD guided to:
- Strong revenue and margin performance, despite two hopper dredges in dry dock
- Full quarter of utilization for Amelia Island and increasing offshore energy revenue
For full-year 2025, management expects:
- Record adjusted EBITDA, with a similar project mix and backlog strength carrying into 2026
Management highlighted several factors that will shape results:
- Continued normalization of the U.S. dredging bid market, with steady coastal and maintenance work
- Full funding of backlog projects and timely payments, even during government shutdowns
- Focus on deleveraging and free cash flow maximization as capital spending declines
Takeaways
GLDD’s Q3 results validate the company’s strategic transition, with multi-year backlog, a modernized fleet, and a clear path to higher free cash flow and lower leverage.
- Backlog Anchors Revenue Base: $935 million in funded projects and option value provide rare visibility in a cyclical industry.
- Offshore Energy is the Next Test: Acadia’s utilization and margin profile in 2027 will hinge on international contract wins and U.S. wind market stabilization.
- Capital Discipline Will Be Scrutinized: As free cash flow ramps, investors will watch for prudent balance sheet management and capital deployment.
Conclusion
GLDD is entering a new phase, with its fleet renewal nearly complete, backlog at historic highs, and capital structure optimized for flexibility. The next chapters will be defined by cash flow execution, offshore energy expansion, and continued risk management as the U.S. dredging cycle normalizes.
Industry Read-Through
GLDD’s experience highlights the importance of backlog quality and funding certainty in government-exposed infrastructure businesses. The normalization of the dredging bid market signals a return to typical cyclicality, while the pivot to offshore energy and subsea infrastructure protection reflects a broader trend of contractors seeking growth beyond traditional public works. Capital structure optimization and client diversification are emerging as critical levers for resilience and value creation across the heavy civil and marine construction sector.