Earnings call transcript: Gulf Island Fabrication Q2 2025 misses expectations

Gulf Island Fabrication reported its second-quarter 2025 earnings, revealing a notable miss on both earnings per share (EPS) and revenue compared to forecasts. The company posted an EPS of -$0.04, falling short of the expected $0.05, resulting in a surprise of -180%. Revenue reached $37.5 million, slightly below the forecasted $38 million, with a surprise of -1.32%. Following the announcement, Gulf Island’s stock saw a decline of 0.88% in aftermarket trading, closing at $6.76. According to InvestingPro analysis, the company maintains a "GREAT" overall financial health score of 3.16 out of 5, despite the earnings miss. Based on InvestingPro’s Fair Value analysis, the stock appears fairly valued at current levels.

Key Takeaways

• Gulf Island’s Q2 2025 EPS fell significantly short of forecasts, with a negative surprise of 180%.
• Revenue also missed expectations, coming in at $37.5 million against a $38 million forecast.
• The company’s stock price dropped by 0.88% in aftermarket trading following the earnings release.
• Gulf Island completed its acquisition of ENGlobal’s businesses, aiming to diversify its offerings.
• The company anticipates Q3 results to be similar to Q2, with improvements expected in Q4.

Company Performance

Gulf Island Fabrication’s performance in Q2 2025 reflects ongoing challenges, with revenue decreasing from $41.3 million in the same quarter last year. The company is navigating macroeconomic headwinds, which have led to extended decision cycles for new project awards. Despite these challenges, Gulf Island is focusing on diversifying beyond its traditional oil and gas markets, aiming to leverage opportunities in LNG, chemical, marine, and civil sectors.

Financial Highlights

• Revenue: $37.5 million, down from $41.3 million in Q2 2024
• Earnings per share: -$0.04, compared to an expected $0.05
• Adjusted EBITDA: $1.9 million, down from $2.5 million in Q2 2024
• Cash and short-term investments: $62 million
• Debt obligation: $19 million

Earnings vs. Forecast

Gulf Island Fabrication’s Q2 2025 results missed both EPS and revenue forecasts. The EPS of -$0.04 was a significant deviation from the projected $0.05, marking a negative surprise of 180%. Revenue also fell short, with a surprise of -1.32%, indicating challenges in meeting market expectations.

Market Reaction

Following the earnings announcement, Gulf Island’s stock decreased by 0.88% in aftermarket trading, closing at $6.76. This movement places the stock closer to its 52-week low of $5.12, reflecting investor concerns over the earnings miss and the company’s near-term outlook. According to InvestingPro data, the stock has demonstrated low price volatility with a beta of 0.24, while delivering a solid 25.19% return over the past year. The company’s market capitalization stands at approximately $110 million, with an attractive EV/EBITDA ratio of 4.28x.

Outlook & Guidance

Looking ahead, Gulf Island expects Q3 results to be comparable to Q2, with significant improvements anticipated in Q4 and into 2026. The company is integrating its recent acquisition of ENGlobal’s businesses, with full integration expected within 6-12 months. Despite expected operating losses of $1.5-2 million for ENGlobal in the second half of 2025, Gulf Island is investing in growth and strategic acquisitions.

Executive Commentary

CEO Richard Hubs expressed confidence, stating, "We are fortunate to be operating from a position of strength," emphasizing the benefits of tariffs and "Buy America" policies. CFO Wes Stockton highlighted the company’s financial flexibility, noting, "Our cash balance and long-duration debt provides significant flexibility."

Risks and Challenges

• Macroeconomic headwinds could continue to impact project award cycles.
• The integration of ENGlobal’s businesses presents operational challenges.
• Potential operating losses from the new acquisition may affect short-term profitability.
• Dependence on oil and gas markets, despite diversification efforts, remains a concern.
• Competitive pressures in labor recruitment and retention could impact project execution.

Q&A

During the earnings call, analysts inquired about the company’s end markets and project dialogues, particularly in the LNG and petrochemical sectors. Management highlighted these areas as key opportunities, alongside the details of a significant structural steel project expected to commence fabrication in Q4.

Full transcript - Gulf Island Fabrication Inc (GIFI) Q2 2025:

Conference Operator: Afternoon, ladies and gentlemen, and welcome to Gulf Islands Conference Call to discuss Second Quarter twenty twenty five Results. All participants will be in a listen only mode for the duration of the call. This call is being recorded. At this time, I would like to turn the floor over to miss Cindy Cook for opening remarks and introductions. Cindy, please go ahead.

Cindy Cook, Investor Relations/Corporate Communications, Gulf Islands: Thank you, and good afternoon. I would like to welcome everyone to our second quarter twenty twenty five teleconference. Our results were released this afternoon, and a copy of the press release is available on our website at gulfisland dot com. A replay of today’s call will be available on our website after seven p. M.

This evening. Please keep in mind that the press release and certain comments on this call include forward looking statements, and actual results may differ materially. We would like to refer everyone to the cautionary language included in our press release and to the risk factors described in our most recent Form 10 ks and subsequent SEC filings. Please also note that management may reference EBITDA, adjusted EBITDA, adjusted revenue, new project awards, and backlog on this call, which are financial measures not recognized under US GAAP. As required by SEC rules and regulations to the extent used, these non GAAP financial measures are reconciled to their most comparable GAAP financial measures in our press release.

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

Richard Hubs, President and CEO, Gulf Islands: Thank you, Cindy. Good afternoon, everyone, and welcome to our second quarter results conference call. I’m happy to be here with you this afternoon and hope that each of you and your families are continuing to stay healthy and safe. During today’s call, I’ll provide key takeaways from the quarter, a review of end market trends and an update on the progress we have made on our strategic initiatives, including the progress we have made on our recent and global acquisition. Wes will then discuss our second quarter results in greater detail and provide an update on our outlook for 2025.

We’ll then open up the call for questions and end with some closing remarks. Over the last several years, we have taken important strategic actions to develop a business that is more stable and durable across market cycles. We focused on reducing risk, growing our services and small scale fabrication businesses, and further strengthening our project execution. The benefits of these actions were evident during the second quarter, as we were able to generate revenues of $37,500,000 and adjusted EBITDA of $1,900,000 despite the ongoing macroeconomic headwinds stemming from the uncertain trade environment and slower maintenance and capital spending by our offshore services customers. While we were not pleased by the results, our more stable core business allowed us to generate solid operating results, which combined with our strong financial position enabled us to continue to invest in our organic growth initiatives, return capital to our shareholders through our share repurchase program and complete the ENGlobal acquisition.

Before getting into our segment results, I’d like to provide an update on our ENGlobal acquisition. During the quarter, we acquired certain assets of ENGlobal’s automation, engineering and government services businesses. The automation business provides engineering, design, fabrication and integration of industrial automation systems to the oil and gas, renewable energy, and traditional power industries. The engineering business provides various engineering solutions to the oil and gas and renewable energy industries, while the government services business provides engineering and automation solutions to federal, state, and local governments and educational institutions, generally in the form of technical field services. The integration is progressing as expected, and we see the opportunity for meaningful strategic benefits from the transaction.

First, the ENGlobal acquisition is expected to broaden our product and services offerings with the addition of automation and engineering solutions. Second, the acquired assets will allow us to expand our customer base and diversify into new end markets, including onshore oil and gas, data centers, and government. And third, the acquired businesses will help increase the overall value of our existing offerings by including the ability to strengthen our fabrication offerings with supplemental engineering capabilities systems integration for turnkey module offerings. We are extremely excited by the opportunities presented by the transaction, and while it is still early, our initial view of the transaction is extremely favorable. The early reception from customers and potential strategic partners has been very positive.

ENGlobal has great people and very strong product offerings, which was evident in their ability to win work on the market despite their financial challenges. The market seems excited that a well capitalized, complementary company is now in control of these assets, and we see meaningful opportunities ahead. For example, we have already received requests for quotation for projects as a result of the combined company’s capabilities. We have received inquiries for process skids and packaged equipment where the client is requesting a turnkey solution of the fabrication, inclusive of systems control installed, and we’re seeing opportunities for larger systems integration projects that ENGlobal was not capable of executing on their own. While we will have to work through the integration, which we expect will take six to twelve months, and the challenges associated with bringing a business back from bankruptcy, I see strong signs that the acquisition will help us open more doors and give the combined company opportunities to provide more value to our customers.

Now turning back to our legacy business. As we look at our fabrication business, we continue to see extended decision cycles for new project awards in certain end markets due to market uncertainty, even for our small scale fabrication. However, we’ve been pleased more recently to see a pickup in dialogue with customers with large projects who paused their activity in the early part of 2025, and we are happy to share that subsequent to quarter end, we received a limited notice to proceed contract of approximately $20,000,000 This initial award is for the procurement of materials for a structural steel project, and we expect the full contract to be awarded during the third quarter, with a total contract value of approximately $35,000,000 inclusive of the limited notice to proceed value. If the award timing goes as planned, we would expect to commence fabrication activities in the fourth quarter. With the limited notice to proceed award, we remain optimistic that the longer term favorable structural drivers for the fabrication market remain in place, and we are confident we are well positioned to win as more projects move forward.

We continue to see LNG, chemical, and marine and civil as potential areas of opportunity for Gulf Island, and with the acquisition of ENGlobal, we will penetrate into new end markets. We are also encouraged by new opportunities driven by a push for more domestic supply. I feel that we are positioned to take advantage of this buildup and believe we will see additional positive results before the end of the year. Looking at our services business, while oil prices are off the lows, our customers are still targeting lower overall capital spending levels in the Gulf Of America in 2025. This, coupled with the trade uncertainty, has many of our customers holding back spending.

Despite the near term weakness, we will continue to invest in expanding and diversifying our services offering. While slower than anticipated, we remain optimistic regarding the potential for our Cleaning Environmental Services business, and Spark Safety has started to pick back up. Finally, as it relates to capital deployment, we remain committed to our balanced capital allocation framework regardless of the recent market softness. We’ll continue to prioritize investing in the business to drive growth in our existing services and penetrate new end markets, balanced with the pursuit of acquisition opportunities such as ENGlobal and capital return opportunities. In fact, we see the potential that our transaction with ENGlobal could open up additional opportunities for strategic acquisitions and partnerships in our core markets.

We’re fortunate to be operating from a position of strength and remain committed to our strategic framework with an ongoing focus on driving value for our shareholders. I will now turn the call over to Wes to discuss our quarterly results in greater detail.

Wes Stockton, Executive Vice President and CFO, Gulf Islands: Thanks, Richard, and good afternoon, everyone. I will discuss our consolidated results and then provide some additional details regarding our segment performance, putting in context the factors mentioned by Richard and their impacts on the quarter. I will then conclude with a discussion of our liquidity and full year financial outlook. Please note that as it relates to the ENGlobal acquisition, the post acquisition operating results for the Automation business are reflected within our Fabrication division, and post acquisition operating results for the Engineering and Government businesses are reflected within our Services division. Now turning to our quarter results.

Consolidated revenue for the second quarter twenty twenty five was $37,500,000 compared to $41,300,000 for the second quarter of last year. The year over year decline was driven by lower small scale fabrication revenue and weaker services activity. Adjusted consolidated EBITDA was $1,900,000 for the second quarter twenty twenty five, down from $2,500,000 for the second quarter twenty twenty four. Adjusted EBITDA for the second quarter twenty twenty five excludes $1,800,000 of transaction and related costs associated with the ENGlobal acquisition, but includes post acquisition operating losses of approximately $500,000 associated with the ENGlobal business. Specifically for our Services division, revenue for the second quarter twenty twenty five was $22,000,000 a decrease of 3.5 compared to the second quarter of last year, primarily due to lower offshore maintenance activity.

Services EBITDA for the second quarter twenty twenty five was $2,000,000 or 9.1% of revenue compared to $2,700,000 or 11.7% of revenue for the prior year period, with the decrease primarily due to lower revenue, a less favorable project margin mix, and post acquisition operating losses of approximately $200,000 associated with the ENGlobal engineering and government businesses. For our Fabrication division, revenue for the second quarter twenty twenty five was $15,800,000 a decrease of approximately 15% compared to the second quarter of last year, primarily due to lower small scale fabrication of activity as we completed several projects during the quarter and experienced delays in the awards of new project opportunities. Fabrication EBITDA for the second quarter twenty twenty five was $1,100,000 compared to $1,800,000 for the prior year period. The decrease was primarily due to lower revenue, lower utilization of facilities and resources due to reduced work hours and post acquisition losses of approximately 300,000 associated with the ENGlobal Automation business. These negative impacts were partially offset by a more favorable project margin mix for the current period.

And for our Corporate Division, adjusted EBITDA was a loss of $1,200,000 for the second quarter twenty twenty five compared to a loss of $2,000,000 for the prior year period. Adjusted EBITDA for the second quarter twenty twenty five excludes $1,800,000 of transaction and related costs associated with the ENGlobal acquisition. The improvement in adjusted results is primarily due to lower incentive plan cost and an insurance gain realized during the current quarter. With respect to our liquidity, we ended the second quarter with a cash and short term investments balance of approximately $62,000,000 as the benefit of our adjusted operating results for the quarter were offset by the capital required to fund the N Global acquisition, which I will cover in more detail shortly, capital expenditures and the repurchase of approximately $2,800,000 of our common stock under our share repurchase program. As of June 30, we had remaining authorization to purchase approximately $5,300,000 of our common stock under the program, which expires in December 2026.

As it relates to N Global, as of June 30, the total capital commitment related to the acquisition was $5,500,000 which consists of $3,500,000 of debtor and possession financing, of which $1,200,000 was advanced to ENGlobal in the first quarter and $2,300,000 was advanced in the second quarter. A $1,500,000 payment made in the second quarter in exchange for the assumption of a loan from a creditor of ENGlobal and transaction cost of approximately $500,000 of which $200,000 was incurred in the first quarter and $300,000 was incurred in the second quarter. Of these amounts, the $3,500,000 debtor and possession advances were forgiven by us in connection with the transaction and represents our acquisition purchase price. And the $1,500,000 payment for the assumed loan and the transaction costs were expensed during the first and second quarters as incurred. At June 30, our debt obligation totaled $19,000,000 and our annual payments of principal and interest of approximately $1,700,000 will be made in December of each year over the remaining fourteen year term of the obligation.

Our cash balance and the long duration of our debt puts us in a strong liquidity position and provides significant flexibility to pursue our growth objectives and evaluate further opportunities to return capital to our shareholders. And finally, turning to our outlook for the remainder of 2025. As Richard discussed, the ongoing trade and macroeconomic uncertainty has pushed out certain project award decisions for our fabrication business, and lower capital spending by our customers in The Gulf continues to pressure results for our Services segment. As a result, excluding the impact of the acquired and global business, we expect our consolidated third quarter results to be comparable to the second quarter. However, we anticipate our consolidated results will improve significantly in the fourth quarter and as we move into 2026, particularly for our fabrication division.

Further, as it relates to the acquired nGlobal business, we expect operating losses over the back half of the year of approximately 1,500,000.0 to $2,000,000 as we transition the business out of bankruptcy and work to integrate it into our existing operations. These losses are consistent with our expectations for the ENGlobal business at the time of the acquisition. While these near term challenges are frustrating, we remain confident in our long term competitive positioning, and our strong financial position provides us the flexibility to continue executing on our strategic plan. This concludes our prepared remarks. Operator, you may now open the line for questions.

Conference Operator: Thank First question comes from the line of Martin Malloy with Johnson Rice. Please go ahead.

Martin Malloy, Analyst, Johnson Rice: Good afternoon. Congratulations on the award.

Richard Hubs, President and CEO, Gulf Islands: Hey. Thanks, Marty. Good afternoon.

Martin Malloy, Analyst, Johnson Rice: I just wanted to try to figure out maybe if you could spend some time describing the industries, the end markets where you’re seeing the pickup in dialogue on the large projects. And then also if there’s any more information you can give us about the large project, structural steel’s pretty broad. Is this a first of a kind project for Gulf Island, or is this something of the type that Gulf Island has done before?

Richard Hubs, President and CEO, Gulf Islands: As it relates to the pickup in dialogue, it really is around the LNG and petrochemical markets that we’ve been chasing. As you can imagine, with some certainty around the tariff positions stabilizing and momentum being built up on FID of certain LNG projects, the frequency of the conversations and the quality of the conversation has improved. So we are seeing a lot more discussions with the customer with regard to LNG and large petrochemical projects. Your second question with regard to just more specificity around this large award It is a large award that we it’s an end market that we play in kind of tangentially, but it is outside oil and gas. And so Marty, one of the things that we talked about is continuing to diversify Gulf Island out of that cyclical oil and gas end markets.

And so we’re happy to share that all that hard work has paid off in terms of this potential award. The award is just structural steel. It is something that Gulf Island is very good at. It’s a time sensitive award, meaning that the customer really saw the value in our capabilities, our large fab yard, our rolling capacity and just our track record of doing time sensitive projects. And so we’re excited about this award.

It’s an award that will have some high visibility. Ultimately, we look forward to sharing more details of the award here in the next few weeks.

Martin Malloy, Analyst, Johnson Rice: Great. That was very helpful. And then just as a follow-up, in regards to some of the interest in Gulf Island and the dialogue related to these large projects, are these the type of projects that would have been very difficult for you to win in the past, but because of the tariff situation, the current environment that you’re maybe they’re coming to you for the certainty around tariffs and pricing and ability to deliver?

Richard Hubs, President and CEO, Gulf Islands: Yeah, that’s a great question. We are seeing more opportunities come to us because of the tariff. But also compounding that is this whole push for US manufacturing. So both of those policy positions are helping a company like Alf Island. So I think the combination of the tariffs and just still the uncertainty around the ultimate value of the tariffs, along with a push for Buy America, Made in America, I think both of those points are really helping Gulf Island.

Martin Malloy, Analyst, Johnson Rice: Okay. And then, sorry to do this, but can I sneak one more question in? Absolutely. I wanted to ask about the labor situation that you’re experiencing. There’s a lot of very large projects going on in the Gulf Coast right now.

And maybe could you speak a little bit about what you’re encountering?

Richard Hubs, President and CEO, Gulf Islands: Yeah. We haven’t seen a dramatic impact on the labor as of yet. But you’re absolutely right, there are large projects picking up in close proximity to our facility.

Conference Operator: But

Richard Hubs, President and CEO, Gulf Islands: I’ll tell you, we have a little bit of confidence in our ability to get labor is that we went through a pretty tough labor cycle on two large projects prior to this one. We were able to not only hire the high number of folks that we needed at the peak of those jobs, but also quality employees that wanted to continue to work at Gulf Island. And so we feel good about our position and location and that competitive environment around the labor availability, especially for these upcoming projects that we’re excited about.

Martin Malloy, Analyst, Johnson Rice: Great, thank you. I’ll turn it back.

Conference Operator: Thank you.

Martin Malloy, Analyst, Johnson Rice: You.

Richard Hubs, President and CEO, Gulf Islands: In closing, I want to thank our customers and shareholders for their continued support as well as recognize our employees who continue to demonstrate a commitment to Gulf success. For those on the call, thanks again for your interest in Gulf Island. If we’re not able to connect during the quarter, I look forward to speaking with you on our next conference call and updating you on our progress. Be safe. Take care.

Conference Operator: Thank you. This concludes the Gulf Island Conference Call. Thank you, and goodbye.

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