Great Lakes Dredge & Dock Corp (GLDD) 2020 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Q2 2020 Great Lakes Dredge & Dock Corp. Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host today, Tina Baginskis. Thank you. please go ahead.

Good morning, and welcome to our quarterly conference call. Joining me on the call this morning is our Chief Executive Officer and President, Lasse Petterson; and our Chief Financial Officer, Mark Marinko.

Lasse will provide an update on the events of the quarter, then Mark will continue with an update on our financial results of the quarter. Lasse will conclude with an update on the outlook for the business and market for the remainder of 2020. 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 2019 Form 10-K and subsequent filings.

During this call, we also refer to certain non-GAAP financial measures, including adjusted EBITDA from continuing operations, which are explained in the net income to adjusted EBITDA from continuing operations 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.

Thank you, Tina. At Great Lakes Dredge & Dock, we've been fortunate to be able to continue working as a federally designated critical infrastructure company. As such, during this unprecedented COVID-19 pandemic, we have remained focused on performing our projects effectively while ensuring the safety and continued protection of our employees.

The results of the second quarter of 2020 were less than previous year, with net income continuing operations of $9 million versus USD 11.5 million in second quarter of 2019. For the first half of the year, net income from continuing operation was $42.9 million, which was an increase of 34% prior year. And year-to-date, adjusted EBITDA from continuing operation was $89.5 million, a $13.6 million or 18% increase over 2019. In addition, our net debt decreased by [$46. million] (technical difficulty) from year-end 2019 to $89.8 million, resulting in a healthy net debt to adjusted EBITDA from continuing operations ratio of 0.6.

As we noted last earnings release, planned dry dockings of certain vessels had an expected impact on second quarter results, as we pushed dry dock base from the first quarter into the second quarter. During the quarter, we had the hopper dredges, Ellis Island and Dodge Island; and cutter dredge, Illinois; and the mechanical, Dredge 58 in dry dock. We expect the Ellis Island, Dodge and the Dredge 58 will all be returning to work in the third quarter and Illinois will follow in the fourth.

The effects of the dry docks were offset with better-than-anticipated productivity on ongoing projects, such as the west of Shinnecock Inlet project, the Jacksonville deepening project and additional work on the Delaware River Reach B deepening project.

During the second quarter of 2020, the domestic bid market was greater than the prior year with $428 million in total project bid, of which we won $92.5 million, comprised of capital, maintenance and coastal protection projects. And subsequent to the quarter end, we were awarded $63.4 million in project work and an additional $32 million in low bids pending award. Please remember that variability in contract wins from quarter-to-quarter or from year-to-year is not unusual, and the win rate is not indicative of the win rate the company is likely to achieve this year.

As said, Great Lakes Dredge & Dock continues to be financially well positioned for potential changes in the current economic environment, and we continue to actively update our safety and operational procedures and plans.

And with those updates, I'll turn the call over to Mark to discuss the results of the quarter for an update on backlog development.

Thank you, Lasse. I will start with the quarterly results and then discuss some specifics related to our dredging business. Please remember that all results from our E&I segment in 2019 were placed in the discontinued operations, and therefore, not included in the results that I will discuss.

For the second quarter of 2020, revenues were $167.9 million, income from continuing operations was $9 million, and adjusted EBITDA from continuing operations was $28.1 million. Total company revenues for the second quarter of 2020 represented a $16.9 million or 9.1% decrease compared to the second quarter of 2019. The decrease was caused by lower foreign coastal protection and rivers and lakes revenue, offset partially by higher maintenance and domestic capital revenue.

Gross profit from continuing operations was $33 million compared to $37.5 million in the second quarter of 2019. Gross profit margin was 19.7% compared to 20.3% in the prior year quarter. The slight drop in gross profit margin is due to a change in project mix in 2020 versus 2019 and strong performance on the Jacksonville deepening project last year.

During the first half of the year, the company did have some additional expenses related to the COVID-19 pandemic related to additional equipment and procedural changes to keep our employees safe, but it does not have a material impact on our first half results.

The total company operating income was $18.3 million, which is a decrease of $4.5 million over the prior year quarter. The decrease [is a result of] lower gross margin. Our G&A expenses remained flat between current year second quarter and prior year quarter. Income from continuing operations for the second quarter of 2020 was $9 million compared to $11.5 million in the prior year quarter. The current quarter income includes net interest expense of $6.8 million and an income tax expense of $3.1 million. Income for the second quarter of 2018 included $7.2 million in net interest expense and $4.2 million income tax expense.

Adjusted EBITDA from continuing operations for the second quarter of 2020 was $28.1 million compared to adjusted EBITDA from continuing operations of $32 million in the second quarter of 2019.

Next, we turn to our balance sheet where at June 30, 2020, we had $233.5 million in cash. During the quarter, we continued to maintain a 0 cash balance on our revolver. Our net debt at June 30, 2020, was $89.8 million.

Our total capital expenditures for the quarter were $12.1 million. This compares to $19.2 million capital expenditures during the second quarter of 2019. The company continues to expect total capital expenditures to be $40 million for 2020, excluding the capital spending for the new hopper dredge.

Contracted backlog at June 30, 2020, totaled $423.4 million compared to a backlog at June 30, 2019, of $498.1 million. This decrease was expected as the company achieved below its historical bid market share in the second half of 2019 and the company earned additional revenue during the first half of 2020.

With that, I will turn the call back over to Lasse for his remarks on the outlook moving forward.

Thank you, Mark. As the country is still facing the challenges of COVID-19, the dredging industry, being an essential service, continued to operate and work on critical and needed infrastructure projects. The U.S. Army Corps of Engineers overseas the majority of these infrastructure projects, and in this capacity, has continued to follow their bid schedule and prioritize all types of dredging, including port deepening, port maintenance and expansion and coastal protection and restoration projects that are necessary to avoid potential storm damage during the upcoming hurricane season.

Turning to the safety and our 2

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team response. Great Lakes Dredge & Dock remains committed to maintaining the health and safety of its team members through an incident and injury-free safety management program. This value-based approach has allowed us to respond quickly and effectively to COVID-19 pandemic and any challenges as a result of the pandemic.

Through the first 6 months of 2020, the COVID-19 pandemic has not had a material impact on our operations. Any future impact from the pandemic to our employees, clients, supply chain or shipyards with which we contract prolonged, may lead to delays or cancellations in projects. Experts are predicting a second -- a potential new COVID-19 wave in the fall of 2020, and we continue to be proactive in preparing and addressing and continuously planning should this occur.

Moving to the bid market. We expect the 2020 bid market to be similar to 2019. Similar to last year, we expect the remainder of the year's bid activity to be substantially more active than the first half of the year. Upcoming bids in the second half of the year include additional phases of Charleston, Jacksonville and Corpus Christi port deepening projects as well as new deepening projects for the ports in Mobile, in Boston and in Sabine-Neches.

We have seen support for the dredging industry in the CARES Act, which includes a provision that lifts caps in the Harbor Maintenance Fund and in the 2021 House Appropriation Bill introduced in July 2020, which showed an increase of $1.7 billion above the President’s budget for requests for the U.S. Army Corps of Engineers. In addition, Corps of Engineers recently signed the chief's report for the Houston Ship Channel widening project. This major expansion project will include -- will be included in the WRDA 2020 legislation, which, when passed, will allow the project to proceed to construction.

Port the domestic market demand, we continue to upgrade our existing domestic fleets with new equipment and technologies to increase productivity. Our upgraded and most powerful cutter dredge, the Ohio, has returned to the U.S. market and is progressively working on the Great Egg beach renourishment project. In addition, in June, we announced the execution of a contract with Conrad Shipyards in Louisiana to build a 6,500 cubic yard hopper dredge, with expected delivery in the first quarter of 2023. This highly automated new build vessel will increase the capabilities of our hopper fleet in the coastal protection and maintenance models as well as address specific needs in the growing offshore wind market.

As stated last quarter, several liquefaction, natural gas liquefaction, petroleum and petrochemical and crude oil export projects are being developed in the Gulf of Mexico, meeting the need for port developments and navigational channel deepening and widening, to accommodate the larger vessels involved in this trade. We passed last week the signing of our subcontract with Bechtel Oil, Gas, & Chemicals, Inc. for dredging of the third marine birth at the Sabine Pass liquefaction project. This work involves complex strategy and long-distant pumping, commencing in third quarter of 2020 and lasting for approximately 215 days.

As discussed on prior earnings call, offshore wind power generation is coming to the U.S. with more than now 30 gigawatts of power generation capacity planned for installation over the next 10 years. As the time line for these projects are being developed, we are continuing to engage with developers and partners on these projects to use U.S.-built and U.S.-operated equipment, enhancing local value creation and content, both in the construction and during the operation spaces.

Related to our strengthened financial position, our fleet enhancements and the strong market outlook, we announced this morning that the Board authorized a share repurchase program, by which the company may repurchase up to $25 million of its common stock. This repurchase program demonstrates the Board's confidence in our future and our commitment to delivering value to all shareholders.

In conclusion, through this pandemic, we have maintained a sharp focus on employee safety and project performance, while continuing to advance our long-term strategy of investing in our fleet and strengthening our balance sheet.

And with that, I'll turn the call over for questions.

(Operator Instructions)

Your first question comes from Poe Fratt with NOBLE Capital Markets.

I was hoping to look at just the overall -- your awards subsequent to the end of the quarter, it's $63 million that you had announced and then $32 million of pending. Can you highlight whether the Sabine Pass LNG was included in the awards in the quarter?

Yes. Paul, you broke up a little bit, but...

Yes, I apologize.

No, that's okay. So yes, the Sabine LNG project is actually in the quarter. It was awarded in the quarter. So it's in our backlog in the quarter.

Okay, great. And then the $32 million of pending, a little bit of pending, was that the award that was announced by the DoD last -- late last week, the Great Egg to Brigantine in New Jersey?

No. So yes, the announcement was $30 million. $24 million of that is awarded, and $6 million of that is in low bid because there's a $6 million option there.

Okay. But was that the one that you referenced in your press release as far as low bids pending award?

No, we haven't announced that yet.

So that's incremental?

Correct.

Okay. Great. And then when we look at the wind market, Lasse, you've highlighted that you want to participate in the installation market. There was an interesting announcement after we closed yesterday where a dry bulk company is going to build installation vessels to the tune of, what, $270 million or so. Is that the segment of the market that you intend to compete in? Or is there another segment that you intend to compete in?

Well, when it comes to the offshore wind market, we are looking at which parts of that market that we can expand into from our capabilities and our existing equipment, and it is particularly the work that is going on underwater. We are not targeting the heavy-lift installation kit. The investments needed to participate in that market is very, very high, and it is also allowed for currently international installation vessels to come into the U.S. and do that lifting operation. So we are not targeting that part of the market.

That's good news because that's a fairly undisciplined and inexperienced competitor too that's entering that market. So watch out there, right? When we look at -- Mark, if we can just hone in on some of the -- mainly your SG&A, the run rate in the second quarter looked a little high relative to what it was in the first quarter. Could you give us an idea of whether there are any unusual expenses in G&A and then an outlook for the second half of the year?

Yes. Sure. Yes, when we get to the second quarter, we reforecast for the year where we are. We adjust from there where G&A is related to incentive pay, things like that. So we kind of true-up for the year. So the -- as we look forward for the rest of the year, that would be the only change really from first quarter, would be additional incentive pay. So as we look out through the rest of the year, I expect G&A to be close to that number that we had in the second quarter.

Okay, flat in the second half. And then one last one, and then I'll come back if I need to. But on the buyback, a positive announcement shows your confidence in the outlook, especially in the context of the new build program. Do you have any timing on when do you expect to execute that $75 million or is it open-ended?

We -- yes, we're going to put that in place very shortly. We just received Board authorization. We'll do that. It will probably be -- it's not finalized yet, but I expect it to be within a 12-month period.

Your next question comes from DeForest Hinman with Walthausen & Co.

So I think the share repurchase authorization is a positive announcement. Just so everyone understands, you said expectation to use that in 12 months. That's under the 10b5-1. So you can, in theory, buy during blackout periods. Is that correct?

Correct.

Okay. That's very helpful. Can you give everybody an update on where we stand in terms of the refinancing outlook on our debt and give us an update in terms of where you think the rate on the borrowings could fall?

Yes. Sure. So we can -- it's actually kind of similar to where we were last quarter, maybe a touch better. So the -- we continue to monitor it every day, essentially. And the -- it's an 8% senior -- just to refresh everybody's memory, it's an 8% notes right now. We can call them today but at a $104 million premium. Next May of 2021, I can call it at par. And right now, the rates are in -- if we were to refinance them today, they are in the middle 6s, so I'd say, in the 6.5% range. That was a little bit better than last quarter, maybe 25 basis points better. The market is obviously better than it was in the middle of COVID but still not as good as pre-COVID. So at the $104 million premium versus that savings and the lower interest rate, it does at this point make sense to wait. But we are continuing to monitor that, looking at risk going forward. But at this point, the math would tell you to wait.

Okay. That's a good update. You made mention of the House Appropriations Bill, interesting there. Can you just help us think about that number? It's a pretty sizable number to increase versus the request. Do you have any thoughts around how that might trickle into the markets that you serve, just generally?

Well, the request from the executive branch tends to be lower than what has been traditionally appropriated for the Corps of Engineers. So what we see here is that the appropriation from the House Committee is supporting the U.S. on the Corps of Engineers at the same or higher level than what we had last year, which then translates into the

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and funding of projects so that the Corps is then contracting with us for. So it gives us very strong confidence in the bid market for the remainder of this year and into next year.

Okay. That's helpful. And then can you just help us think about the cadence of the dry dockings in the third quarter, either months or days, and how those would compare to the second quarter and how they would compare to the third quarter of last year?

Yes. Mark, can you take that?

Sure. Sure. So we had 4 vessels in dry dock in Q2. We have 2 vessels in dry dock in Q3, the Illinois and the Padre. As we move into Q4, we'll have those same 2 vessels in dry dock for about half of Q4. And when we look at -- yes, I'm trying to remember how many we had in Q2 last -- or Q3 last year. I believe it was 2, but I would have to -- I'd have to doublecheck that.

Okay. I can circle back on that. I think that's it on the questions.

(Operator Instructions)

Your next question comes from Poe Fratt with NOBLE Capital Markets.

I had a couple of follow-ups, if you don't mind. Would -- on the Sabine Pass LNG, I noticed you didn't quantify the award on that. Can you help us frame sort of what the potential is there?

Mark, can you do that?

Sure. So yes, per the agreement, I can't give you the pricing and dollar value, but that's why we kind of -- or we use these 215 days of work. So that's a fairly large amount of work. It will be done in -- there's some windows where we won't be working on it. We finish that project, I believe, in about the first quarter of 2021. So it's a very nice-sized project for us. But that's the extent of what I can give to you at this point in time.

And Mark, is that an L-assignment type of job? Or is it another piece?

No, it's actually the Alaska. We'll be working on that, cutter dredge Alaska.

Okay. And then when going back to drydocking activity, it sounds like Ohio wasn't in the fleet at all in the second quarter and maybe is partially in the fleet in the third quarter.

That -- it was worked a little bit in the end of the second quarter. So yes, and then it's really full in the third quarter. That's correct.

Okay. And then looking at the cash flow statement, you generated a lot of cash in the quarter. Net income, depreciation were pretty much in line with expectations. It seems like the big variance might have been on noncash items or working capital. Can you give us a flavor on what happened to both of those items in the quarter and sort of an outlook for the second half, if you wouldn't mind?

Yes. So yes. The way -- we had -- we talked about this similar in this last year a little bit is the way some of our projects work, depending upon how the project is structured in terms of timing. We do have some movements on billings in excess of revenues; or the other way around, depending upon the timing of the project. So we don't expect the positives for the rest of the year like we did see in the first half year. So some of that will reverse in the neighborhood of $10 million to $20 million. It just depends on the timing of the projects, but, yes, we wouldn't expect that same level of working capital increase for the back half of the year.

Yes, okay. Do you happen to have an operating cash flow number before working capital changes or total operating cash flow number? It looks like either one of those items -- or when do you expect to file the Q?

We're going to actually file the Q tonight.

Okay. Great. And then can you -- you highlighted the changes that you see as far as just higher potentially appropriations, also the Harbor Maintenance Trust Fund, and the bid market over the second half of the year looks, if I do the math correctly, to be over $1 billion, maybe more like $1.1 billion. Can you maybe quantify the different opportunities from a revenue potential as far as whether it's Charleston, Jacksonville or Corpus and some of the other deepenings that you talked about in Mobile? And then also, isn't there -- the Spanish ridge seems like a pretty big opportunity for you, and that's more of a state opportunity. So is that included in that? Or is that exclusive of sort of when you look at the bid market?

Yes. And I can comment on -- the market in general, when you look, the Corps of Engineers announced bid market ranges. The -- just to look at the major projects for the second half of the year, we are looking at somewhere between $1 billion and $1.5 billion of bids, and that is the rein that the Corps is giving for their -- on their list. In addition, there are several other smaller projects that are kind of running in the list not included in this. And as I said, there are some interesting opportunities coming up. Please remember that for

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Corps strength is when the projects are getting not necessarily large but are getting complex. And as we've seen on Jacksonville, on Charleston, that's where we excel. That's where the -- you're working offshore, you're working in -- or in difficult soil conditions and that is our sweet spot. So the projects coming up is further phases of Charleston, which are mostly inland. It is the Jacksonville project. There is a Mobile start of the deepening and widening Phase 1 and continued work on Corpus Christi and so forth. So it is a very active season for us here in the next quarter or 2 quarters.

Great, Lasse. It sounds like Charleston may be more less complex, but are all the other ones more complex and the more are in your sweet spot?

Well, as a general comment, when the soil conditions get difficult, complex or we're working offshore, where you have impacts from the environment or the weather when you go to very large complex pumping distances and so forth, that's when we excel due to the flexibility in our fleet and our ability to use specialized equipment for the special soil conditions that are -- or the varying soil conditions. So general rule, difficult projects is where we excel, and that's projects that we target. And there are clearly also large project where you have to use a lot of equipment, but that may vary. As we've seen for the last 2 years, there has been some larger projects that has been awarded to smaller local dredging contractors. But typically, that has been fairly easy projects to execute, hence, easier for them to target.

Okay. Great. That's helpful. And Mark, on the CapEx number, $12.1 million for the quarter, did that include any new build CapEx?

Yes. $2 million, yes.

So $2 million. So when we compare the $40 million exclusive of CapEx, we should back out that $2 million in the second quarter. And then what do you think CapEx will be for the new build for the year?

Yes. We have another $9 million at the end of the year, so around $11 million, $12 million for the year.

Okay. So that's on top of the $40 million roughly that you expect to spend on your normal maintenance CapEx?.

Correct. Correct.

Your next question comes from Rich Glass with Glass Capital.

Nice boring quarter in a "boring is good in this industry" kind of way.

Thanks.

Lasse, can you maybe help us define how we should think about the LNG and wind opportunities longer term? I mean, are these niche opportunities that while sizable will be in passing? Or these are potentially more legs on the stool for buffeting tougher times in other markets and maybe lending some more stability over time? Where should we set with these?

Yes. Turning first to the LNG opportunities and the developments in the Gulf. What we have seen on the LNG front is that when there is additional train being added to an existing facility or LNG facility, those projects are highly profitable for the operators and are very -- highly likely to go ahead as we saw Sabine.

When it comes to greenfield developments, the picture is a little bit more difficult because you then need both permissions and financing for the facility. And with the oil price war that started out with Saudi and Russia earlier this year and temporarily depressed LNG pricing in the international market, I anticipate that we will see about a year delay in the greenfield LNG market. But I do think that this is something that will be rectified getting into 2021. And those projects are substantial when it comes to dredging and very interesting opportunities for us. But it is our traditional business with very high focus from the oil and gas environment and contract

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and owners on our safety procedures, our track record, our professionalism when it comes to executing these projects. So they are very good target for us to get engaged in.

When it comes to the offshore wind markets, timing is somewhat, I would say, uncertain. We've seen delays happening for those developments. But now it looks that market is taking off. And if you take the view that is it's a 10-year market that's being developed, the installation is 30 gigawatts, then you can just pick a nice number, 10 megawatts per turbine. You can see that, that is a very large construction market, and it's a large maintenance market coming up. And to participate in that market, we can modify our existing equipment or we build new equipment to target niches of that market. And that's how I look upon it. So there is clearly an interest from the international contractors to come into the U.S. and do most of the work. And the international contractors have spent 20 years in the North Sea or renewable energy prices to develop their techniques and their equipment. So they are very efficient and experienced. So it's a market which we have to approach in that

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where we have confidence and where we can define our niche and where we can generate some good margins for our shareholders.

Your next question comes from Neil McCabe with Beutel Goodman.

Quick one. What are your -- I guess, you said the Q is coming out tonight. I was just curious what your letters of credit outstanding number was. And then if you can comment on the overall expected cost of the new hopper dredge?

Yes. Sure. So our outstanding letters of credit, I'm going to give a round number, it's in about, I think, $36 million, $38 million. And then our -- the cost of the new hopper dredge was out in our 8-K, it's $97 million.

Your next question comes from Jon Tanwanteng with CJS Securities.

My first question. I don't recall this being mentioned, but can you talk about the impact of storms in the quarter, first, I guess, Hanna in the Texas area and Isaias up on the Atlantic Coast right now?

Yes. Sure. I can take that, Lasse. So with this tropical storm going through, it impacted or will impact 4 of our projects: Jacksonville, Charleston, York Spit, Great Egg. Most of those projects are impacted by about 4 days. So we take -- before the storm comes in, we take it in, and then after the storm moves, we take it out. So for example, Jacksonville, expecting that to be back at work today, actually, so it's already been in and out. And these weather delays, we've obviously -- we put these contingencies in our estimates. So especially when we know we're working at this time of the year in that area during hurricane season, so we're covered from, in our estimates, on these weather-type delays.

Got it. And then just talk about your annual expectations from an EBITDA perspective now that you have outperformed for 2 quarters in a row, you have also landed the LNG project, which excluded from prior -- your prior flat to up outlook. Just how are you thinking about the year, either compared to last year or an absolute or a relative basis?

Yes. Just to give you a few data points. So not too different from what we talked about in the first quarter, but we expect revenues this year to be above 2019. We expect our gross profit margin. I think last quarter I said to be about the same as 2019, now I'm expecting it to be a little bit better. We expect G&A to be slightly higher than the prior year. And those are the data points I can give you at this point. So a little bit more positive than what we talked about in the first quarter.

Okay. Got it. And then just in terms of the win rate that you've been showing over the last few quarters, now it's been under your market share. Can you just give us an update on how we should think about the competitiveness of your project lettings, the competition is out there and the chances of you actually having a higher backlog by year-end as I know there's a lot of big project coming up in the next 2 quarters?

Yes. I can start with that. So yes, sure. Yes, we're really actually excited about the bid market that's coming up. As Lasse said, it's between -- just the large projects are between $1 billion and $1.5 billion if you look at the range. So that's going to put our bid market close to $2 billion this year is the way this is looking, so we're expecting it could be close to that.

And one other thing to add, that bid market does not include any of the LNG opportunities that Lasse was talking about. Those would really be 2021 type in that bid market. So a couple of these projects, these large deepening projects, whether you are talking about the Jacksonville project or Boston, those are, Boston, for example, complex, hard rock. Those are projects that we've done before that we are well equipped to do, and those are the larger ones in this bid market in the back half of the year. So the opportunities look good for us. And so that's why we are pretty excited about the back half of the year.

Your next question comes from Max Batzer with Wynnefield Capital.

Lasse, I heard you talking about the wind opportunity and foreign vessels, but it was my understanding that a substantial portion of the work is reserved for Jones Act vessels and foreign vessels can't compete for and you didn't mention it. I wondered if you could tell us a little bit about what portion is reserved for Jones Act and what portion isn't -- would be -- you have to be competed against foreign vessels.

Yes, Max. The -- there's some uncertainty around this. And as you know, there are several questions that are in the -- into the administration to the customs and borders to rule on some of these questions. What seems to be very clear is that the installation of the foundation or the monopile and the installation of the towers, blades and turbines with heavy-lift equipment is excluded from Jones Act. So there's no Jones Act protection. So the vessels can come in from the international market and do that work.

You have to remember that not just the U.S. market is active but the European and the Asian markets are also extremely active the next 10 years in offshore wind generation installations. So there will be competition from -- for these vessels, and there are several international and U.S. groups that are looking at that segment. The segment that we are looking at is what goes on underwater. So we are looking at rock installation, foundations installation. We're looking at paths of the trenching which to be done by our equipment for cable installation and so forth and our uncertainty around the Jones Act protection around this. They are clearly dredging that is required. Is the Jones Act protected? So that is something we will compete for. But we are looking at these other segments to see how we can compete, making sure that we can maximize the local content requirements that the states are requiring and help the operators in achieving those goals for local content.

Lasse, I guess my point was that I understood that any of the trenching that was coming back to the U.S. can bring the power cables back from these in U.S. waters would be Jones Act (inaudible) at this stage. Is that correct? Or is that still up in the air?

It is my understanding that, that is not clear.

Well, we hope it gets clear for you.

And at this time, you have no further questions.

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.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.