Gulf Island Fabrication(GIFI) - 2025 Q2 - Quarterly Report

Glossary of Terms Provides definitions for key terms used throughout the financial report PART I. FINANCIAL INFORMATION Presents the company's comprehensive financial data, including statements and detailed notes, for the reported periods Item 1. Financial Statements This section presents the unaudited consolidated financial statements of Gulf Island Fabrication, Inc. for the quarter ended June 30, 2025, including the Balance Sheets, Statements of Operations, Statements of Changes in Shareholders' Equity, and Statements of Cash Flows, along with their accompanying notes. These statements provide a snapshot of the company's financial position, performance, and cash movements - Financial Statements Included: Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Changes in Shareholders' Equity, Consolidated Statements of Cash Flows[6] - Unaudited Nature: The financial statements are unaudited and prepared in accordance with GAAP for interim financial statements[28] Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and equity, at specific points in time Balance Sheet Summary (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Cash and cash equivalents | $46,825 | $27,284 | +$19,541 | | Short-term investments | $14,167 | $38,784 | -$24,617 | | Total current assets | $105,398 | $105,409 | -$11 | | Total assets | $134,348 | $133,216 | +$1,132 | | Total current liabilities | $22,775 | $21,376 | +$1,399 | | Total liabilities | $41,590 | $40,114 | +$1,476 | | Total shareholders' equity | $92,758 | $93,102 | -$344 | Consolidated Statements of Operations Details the company's revenues, expenses, and net income or loss over specific reporting periods Three Months Ended June 30 (2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Revenue | $37,538 | $41,262 | -$3,724 | | Gross profit | $3,561 | $4,158 | -$597 | | Operating income (loss) | $(1,079) | $1,283 | -$2,362 | | Net income (loss) | $(574) | $1,889 | -$2,463 | | Basic income (loss) per share | $(0.04) | $0.12 | -$0.16 | | Diluted income (loss) per share | $(0.04) | $0.11 | -$0.15 | Six Months Ended June 30 (2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Revenue | $77,811 | $84,143 | -$6,332 | | Gross profit | $10,176 | $10,282 | -$106 | | Operating income (loss) | $2,201 | $6,991 | -$4,790 | | Net income (loss) | $3,253 | $8,129 | -$4,876 | | Basic income (loss) per share | $0.20 | $0.50 | -$0.30 | | Diluted income (loss) per share | $0.20 | $0.48 | -$0.28 | Consolidated Statements of Changes in Shareholders' Equity Outlines changes in the company's equity components, such as common stock and retained earnings, over time Shareholders' Equity Changes (December 31, 2024 to June 30, 2025) | Metric | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Common Stock Amount | $11,669 | $11,309 | -$360 | | Additional Paid-In Capital | $108,065 | $104,828 | -$3,237 | | Accumulated Deficit | $(26,632) | $(23,379) | +$3,253 | | Total Shareholders' Equity | $93,102 | $92,758 | -$344 | - Key Activities Impacting Equity (Six Months Ended June 30, 2025): - Net income: $3,253 thousand[20][99] - Stock-based compensation expense: $343 thousand[20][99] - Repurchases of common stock: $(3,369) thousand[20][99] Consolidated Statements of Cash Flows Reports cash generated and used by the company across operating, investing, and financing activities Cash Flow Summary (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Net cash provided by operating activities | $4,758 | $10,297 | -$5,539 | | Net cash provided by (used in) investing activities | $19,012 | $(37,508) | +$56,520 | | Net cash used in financing activities | $(4,229) | $(1,456) | -$2,773 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $19,541 | $(28,667) | +$48,208 | | Cash, cash equivalents and restricted cash, end of period | $48,022 | $10,984 | +$37,038 | - Key Investing Activities (Six Months Ended June 30, 2025): - Maturities of short-term investments: $48,120 thousand[23] - Purchases of short-term investments: $(23,503) thousand[23] - Acquisition of business: $(3,500) thousand[23] - Purchase of loan: $(1,500) thousand[23] Notes to Consolidated Financial Statements Provides detailed explanations and additional information supporting the figures in the primary financial statements Note 1. Organization and Summary of Significant Accounting Policies This note outlines the company's nature of operations, its recent acquisition of Englobal's businesses, the basis of financial statement presentation, and key accounting policies including revenue recognition, goodwill impairment, and fair value measurements. It also discusses the impact of oil and gas price volatility and macroeconomic conditions on estimates - Nature of Operations: Gulf Island Fabrication, Inc. is a leading fabricator of complex steel structures, modules, and automation systems, and a provider of specialty services to industrial, energy, and government sectors[26] - Reportable Segments: The company operates through two operating divisions (Services and Fabrication) and one non-operating division (Corporate)[26] - Englobal Acquisition: During Q2 2025, the company acquired Englobal's Automation Business (reflected in Fabrication Division) and Engineering and Government Businesses (reflected in Services Division)[27] - Significant Estimates and Judgments: Key estimates include revenue recognition for long-term contracts (POC method), fair value determination for acquired assets, impairment assessments for long-lived assets and goodwill, deferred income taxes, and reserves for bad debts[31][37] - Impact of Oil and Gas Price Volatility and Macroeconomic Conditions: These factors continue to create uncertainty, potentially leading to reduced bidding, project suspensions, customer financial deterioration, and unanticipated project costs[32][33] - New Accounting Standards: The company adopted ASU 2023-07 "Segment Reporting" in Q4 2024 and is evaluating ASU 2023-09 "Income Taxes" (effective Q4 2025) and ASU 2024-03 "Income Statement Reporting" (effective Q4 2027)[59][60][61] Note 2. Revenue, Contract Assets and Liabilities and Other Contract Matters This note details the company's revenue recognition practices under Topic 606, disaggregating revenue by segment, contract type, and duration. It also provides information on future performance obligations, contract assets and liabilities, allowance for doubtful accounts, and changes in project estimates Revenue Disaggregation (Three Months Ended June 30, 2025) | Segment | Fixed-price and unit-rate (in thousands) | T&M and cost-reimbursable (in thousands) | Other (in thousands) | Total (in thousands) | | :-------- | :--------------------------------------- | :--------------------------------------- | :------------------- | :------------------- | | Services | $141 | $20,906 | $931 | $21,978 | | Fabrication | $7,764 | $8,081 | $0 | $15,845 | | Total | $7,896 | $28,987 | $655 | $37,538 | Revenue Disaggregation (Six Months Ended June 30, 2025) | Segment | Fixed-price and unit-rate (in thousands) | T&M and cost-reimbursable (in thousands) | Other (in thousands) | Total (in thousands) | | :-------- | :--------------------------------------- | :--------------------------------------- | :------------------- | :------------------- | | Services | $359 | $39,095 | $2,379 | $41,833 | | Fabrication | $18,799 | $17,740 | $0 | $36,539 | | Total | $19,080 | $56,835 | $1,896 | $77,811 | - Future Performance Obligations (June 30, 2025): - Total remaining performance obligations: $6.8 million[66] - Expected to be recognized as revenue during 2025[66] - Includes approximately $2.1 million related to the Englobal Business[67] Contract Assets and Liabilities (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------------- | :----------------------------- | :----------------------------- | | Contract assets | $7,727 | $8,611 | | Contract liabilities | $(2,078) | $(1,278) | | Contracts in progress, net | $5,649 | $7,333 | - Allowance for Doubtful Accounts and Credit Losses: Provision for bad debts and credit losses was $1.5 million for Q2 and YTD June 30, 2025, related to a reserve for the Alliance Payment in connection with the Englobal Acquisition[70] Note 3. Acquisition This note details the acquisition of Englobal Business, including the DIP Loan and Alliance Loan, the preliminary purchase price allocation, and supplemental pro forma financial information. The acquisition involved a "credit bid" of the DIP Loan as the purchase price, while the Alliance Loan resulted in a $1.5 million reserve due to unlikelihood of recovery - Englobal Acquisition Details: - Acquired Automation Business (effective May 12, 2025) and Engineering & Government Businesses (effective June 16, 2025)[77] - Consideration: Assumption of certain liabilities and a "credit bid" of the $3.5 million DIP Loan[77] - Alliance Loan: Assumed $2.4 million senior secured loan from Englobal for a $1.5 million cash payment (Alliance Payment). A $1.5 million reserve was recorded as recovery is not probable[78] - Transaction costs: $0.3 million (Q2 2025) and $0.5 million (YTD June 30, 2025)[77][78] Preliminary Purchase Price Allocation (in thousands) | Category | Allocation | | :-------------------------------- | :--------- | | Net tangible assets and liabilities | $1,711 | | Intangible assets - trade name | $400 | | Goodwill | $1,389 | | Purchase Price | $3,500 | Pro Forma Revenue (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | | :---------------- | :----------------------------- | :----------------------------- | | Pro forma revenue | $83,214 | $93,340 | Pro Forma Net Income (Loss) (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | | :---------------------- | :----------------------------- | :----------------------------- | | Pro forma net income (loss) | $1,907 | $6,032 | Note 4. Credit Facilities and Debt This note details the company's credit facilities and debt obligations, including the LC Facility, surety bonds, and the Note Agreement with Zurich, which is secured by a Mortgage Agreement on the Houma Facility - LC Facility: $10.0 million letter of credit facility with Whitney Bank, maturing June 30, 2026. $1.2 million outstanding at June 30, 2025, secured by restricted cash[86] - Surety Bonds: $15.6 million outstanding at June 30, 2025, used to support projects and insurance, with indemnification obligations[87] - Note Agreement: Promissory note with Zurich for $20.0 million, bearing 3.0% interest per annum, payable in 15 equal annual installments. First payment made December 30, 2024, final payment due December 31, 2038[88] Note Agreement Principal Maturities (in thousands) | Year | Principal Maturities | | :--- | :------------------- | | 2025 | $1,108 | | 2026 | $1,141 | | 2027 | $1,175 | | 2028 | $1,210 | | 2029 | $1,247 | | Thereafter | $13,044 | | Total maturities | $18,925 | - Mortgage Agreement: Secures the Note Agreement with Zurich, encumbering the Houma Facility real estate[89] Note 5. Commitments and Contingencies This note discusses various commitments and contingencies, including routine legal proceedings, a lawsuit related to the forty-vehicle ferry projects, insurance coverage limitations, and environmental matters - Routine Legal Proceedings: Subject to various routine legal proceedings, primarily commercial disputes, workers' compensation, and personal injury claims, not expected to have a material adverse effect[90] - Forty-Vehicle Ferry Projects Lawsuit: Lawsuit filed against customer for cost and schedule impacts due to design deficiencies; customer denied claim and asserted counterclaim for defective workmanship. Mediation was unsuccessful, trial set for February 2, 2026[91] - Insurance Coverage: Generally uninsured for future damage to property and equipment due to coverage limitations and high premiums/deductibles. Maintains insurance for other aspects but exposed to losses due to deductibles and retentions[93][94] - Letters of Credit and Surety Bonds: Contingent obligations for performance guarantees, with cash securitization for LCs and indemnification for surety bonds[95] - Environmental Matters: Believes to be in material compliance with environmental laws and regulations; no material adverse effect expected[96] Note 6. Income (Loss) Per Share and Shareholders' Equity This note provides the computation of basic and diluted income (loss) per share and details the company's share repurchase program Basic and Diluted EPS (Three Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Basic income (loss) per share | $(0.04) | $0.12 | | Diluted income (loss) per share | $(0.04) | $0.11 | Basic and Diluted EPS (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Basic income (loss) per share | $0.20 | $0.50 | | Diluted income (loss) per share | $0.20 | $0.48 | - Share Repurchase Program: - Authorized up to $10.0 million of common stock repurchases, expiring December 15, 2026[99] - Repurchased 523,593 shares for $3.4 million during the six months ended June 30, 2025[99] - Remaining authorization: $5.3 million at June 30, 2025[99][201] Note 7. Reportable Segments This note details the company's reportable segments: Services, Fabrication, and Corporate. It explains the reclassification of the former Shipyard Division, the integration of the Englobal Acquisition results into the Services and Fabrication divisions, and provides summarized financial information for each segment - Segment Structure: Two operating divisions (Services, Fabrication) and one non-operating division (Corporate)[101] - Shipyard Division: No longer a reportable segment effective January 1, 2025, following the substantial completion of wind-down operations in Q4 2023 and expiration of warranty in Q1 2025. Remaining results are in Corporate Division's other (income) expense, net[101] - Englobal Acquisition Integration: - Automation Business results integrated into Fabrication Division[102] - Engineering Business and Government Business results integrated into Services Division[102] - Services Division Activities: Provides maintenance, repair, construction, scaffolding, coatings, welding enclosures, cleaning, environmental, engineering, design, project management, commissioning, and technical field services[103] - Fabrication Division Activities: Fabricates modules, skids, piping systems, foundations, steel components, support structures, industrial automation systems, and offshore production platforms[104] Segment Operating Income (Loss) (Three Months Ended June 30, 2025, in thousands) | Segment | Operating Income (Loss) | | :---------- | :---------------------- | | Services | $1,569 | | Fabrication | $407 | | Corporate | $(3,055) | Segment Operating Income (Loss) (Six Months Ended June 30, 2025, in thousands) | Segment | Operating Income (Loss) | | :---------- | :---------------------- | | Services | $3,152 | | Fabrication | $4,202 | | Corporate | $(5,153) | Note 8. Subsequent Events This note discloses the enactment of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, and the company's ongoing evaluation of its potential effects on financial statements and disclosures - OBBBA Enactment: The One Big Beautiful Bill Act was enacted on July 4, 2025, including tax reform provisions[109] - Evaluation of Impact: The company is evaluating the potential effect of OBBBA on its financial statements and disclosures[109] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a narrative discussion and analysis of Gulf Island Fabrication, Inc.'s financial condition and results of operations for the periods presented, offering insights into performance drivers, strategic initiatives, and future outlook. It includes forward-looking statements and discusses key factors impacting the business Cautionary Statement on Forward-Looking Information Highlights inherent uncertainties and risks associated with forward-looking statements in the report - Forward-Looking Statements: Statements about future performance, operations, projects, diversification, Englobal integration, industry outlook, cash flows, capital expenditures, tax rates, share repurchase program, liquidity, and strategic initiatives[112] - Risk Factors: Actual results may differ due to factors like Englobal integration, oil and gas industry cyclicality, competitive pricing, reliance on major customers, supply chain disruptions, changes in contract estimates, operating dangers, and ability to secure new projects[113] - No Obligation to Update: The company undertakes no obligation to publicly update or revise any forward-looking statements[114] Overview Provides a high-level summary of the company's core business, customer base, and operational structure - Core Business: Leading fabricator of complex steel structures, modules, and automation systems, and provider of specialty services[115] - Customer Base: U.S. and international energy producers, refining, petrochemical, LNG, industrial and power operators, EPC companies, and government entities[115] - Reportable Segments: Services, Fabrication, and Corporate divisions[115] Former Shipyard Division Details the wind-down and reclassification of the former Shipyard Division's operations and financial results - Wind-down Completion: Shipyard Division operations substantially completed in Q4 2023, with final completion (warranty expiration) in Q1 2025[116] - Segment Reclassification: No longer a reportable segment effective January 1, 2025; remaining results included in Corporate Division[116] Acquisition Summarizes the recent Englobal acquisition and its integration into the company's operating divisions - Englobal Acquisition: Acquired Automation Business (May 12, 2025) and Engineering & Government Businesses (June 16, 2025)[117] - Integration: Automation Business results in Fabrication Division; Engineering & Government Business results in Services Division[117] Impacts of Oil and Gas Price Volatility and Macroeconomic Conditions on Operations Discusses how fluctuating oil and gas prices and broader economic factors influence company operations - Ongoing Volatility: Oil and gas prices remain volatile, influenced by geopolitical turmoil[118] - Macroeconomic Factors: Global economic factors like labor constraints, trade policies, supply chain disruptions, inflation, and economic slowdowns continue to impact operations[118] - Potential Impacts: Reduced bidding activity, project suspensions/terminations, customer financial deterioration, and unanticipated project costs/delays[119] Recent Regulatory Changes Addresses the enactment of new legislation and its potential implications for the company's financial reporting - OBBBA Enactment: The One Big Beautiful Bill Act was enacted on July 4, 2025, with tax reform provisions[120] - Evaluation Underway: Company is evaluating the potential effect on financial statements and disclosures[120] Strategic Transformation Outlines the company's ongoing strategic initiatives aimed at achieving stable, profitable growth and diversification - Current Strategic Focus: Generating stable, profitable growth[121] - Key Initiatives: - Expand skilled workforce[121] - Improve resource utilization[122] - Strengthen project execution and maintain bidding discipline[123] - Diversify offshore services customer base and expand services onshore[124] - Continue pursuing traditional offshore fabrication markets[126] - Reduce reliance on offshore oil and gas, pursue new growth end markets, and increase T&M vs. fixed price revenue mix[127][128] Operating Outlook Presents the company's forward-looking perspective on operational priorities, success factors, and potential challenges - Primary Focus: Securing profitable new project awards and backlog, generating operating income and cash flows, and workforce safety[129] - Success Factors: Ability to hire/retain skilled labor, oil and gas prices/volatility, fabrication opportunities in traditional and new markets, securing new project awards, facility utilization, project execution, Englobal integration, and strategic growth opportunities[131] - Potential Adverse Effects: Losses from Englobal Business, costs for temporary under-utilized personnel, investments in personnel/process improvements, strategic pursuit costs, and organic growth investment costs[129] Critical Accounting Policies Confirms the consistency of critical accounting policies and estimates since the last reporting period - No Changes: No changes to critical accounting policies and estimates since December 31, 2024[130] New Project Awards and Backlog Provides an overview of new project awards and the current backlog, indicating future revenue recognition New Project Awards (Three Months Ended June 30, 2025 vs. 2024) | Segment | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :---------- | :----------------------------- | :----------------------------- | :-------------------- | | Services | $21,858 | $22,392 | $(534) | | Fabrication | $10,558 | $17,610 | $(7,052) | | Total | $32,131 | $39,810 | $(7,679) | New Project Awards (Six Months Ended June 30, 2025 vs. 2024) | Segment | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :---------- | :----------------------------- | :----------------------------- | :-------------------- | | Services | $41,729 | $47,860 | $(6,131) | | Fabrication | $24,943 | $35,882 | $(10,939) | | Total | $66,111 | $83,628 | $(17,517) | Backlog (June 30, 2025 vs. December 31, 2024) | Segment | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :---------- | :----------------------------- | :----------------------------- | :-------------------- | | Services | $470 | $52 | +$418 | | Fabrication | $6,330 | $15,499 | -$9,169 | | Total | $6,800 | $15,551 | -$8,751 | - Backlog Recognition: All backlog at June 30, 2025, is expected to be recognized as revenue during 2025[133] Results of Operations Analyzes the company's financial performance, detailing revenue, gross profit, and net income trends across periods Comparison of the Three Months Ended June 30, 2025 and 2024 (Consolidated) For the three months ended June 30, 2025, consolidated revenue decreased by $3.7 million, leading to a decline in gross profit and a shift from operating income to an operating loss, and net income to a net loss, compared to the same period in 2024. This was primarily due to lower revenue in both Services and Fabrication divisions, a lower margin project mix in Services, and significant other expenses related to the Englobal Acquisition Consolidated Financial Performance (Three Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | New project awards | $32,131 | $39,810 | $(7,679) | | Revenue | $37,538 | $41,262 | $(3,724) | | Gross profit | $3,561 | $4,158 | $(597) | | Gross profit percentage | 9.5% | 10.1% | -0.6% | | Operating income (loss) | $(1,079) | $1,283 | $(2,362) | | Net income (loss) | $(574) | $1,889 | $(2,463) | - Key Drivers of Change: - Revenue decrease primarily due to lower offshore services work and small-scale fabrication activity[136] - Gross profit decrease due to lower revenue, lower margin project mix in Services, and lower utilization in Fabrication (including Automation Business)[138] - Other (income) expense, net: $1.4 million expense in 2025 (vs. $0.5 million income in 2024) due to $1.5 million Alliance Payment reserve and $0.3 million Englobal Acquisition transaction costs[141] Segments (Three Months Ended June 30, 2025 and 2024) For the three months ended June 30, 2025, the Services Division saw decreased revenue and gross profit due to lower offshore services work and a lower margin project mix, while the Fabrication Division also experienced lower revenue and gross profit from reduced small-scale fabrication activity and underutilization of resources, despite a higher margin project mix. The Corporate Division's operating loss increased significantly due to acquisition-related charges Services Division (Three Months Ended June 30, 2025 and 2024) Analyzes the Services Division's financial performance, highlighting revenue, gross profit, and operating income trends Financial Performance (Three Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | New project awards | $21,858 | $22,392 | $(534) | | Revenue | $21,978 | $22,767 | $(789) | | Gross profit | $2,398 | $2,888 | $(490) | | Gross profit percentage | 10.9% | 12.7% | -1.8% | | Operating income | $1,569 | $2,189 | $(620) | - Key Drivers: Lower offshore services work, lower margin project mix, and underutilization of resources for acquired Engineering and Government Businesses[144] Fabrication Division (Three Months Ended June 30, 2025 and 2024) Examines the Fabrication Division's financial performance, focusing on revenue, gross profit, and operating income changes Financial Performance (Three Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | New project awards | $10,558 | $17,610 | $(7,052) | | Revenue | $15,845 | $18,727 | $(2,882) | | Gross profit | $1,163 | $1,239 | $(76) | | Gross profit percentage | 7.3% | 6.6% | +0.7% | | Operating income | $407 | $1,129 | $(722) | - Key Drivers: Lower small-scale fabrication activity, lower utilization of facilities and resources (including Automation Business), offset by a higher margin project mix[147] Former Shipyard Division (Three Months Ended June 30, 2025 and 2024) Confirms the absence of financial activity for the former Shipyard Division during the reported period - No Activity in 2025: No new project awards, revenue, or gross profit for Q2 2025[150] - Completion: Ferry Projects completed in 2024, last warranty expired Q1 2025[150] Corporate Division (Three Months Ended June 30, 2025 and 2024) Reviews the Corporate Division's operating loss and the key factors influencing its financial results Financial Performance (Three Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Operating loss | $(3,055) | $(2,044) | $(1,011) | - Key Drivers: - Other (income) expense, net: $1.4 million expense in 2025 (vs. $0.1 million income in 2024) due to $1.5 million Alliance Payment charge and $0.3 million Englobal Acquisition transaction costs[152] - General and administrative expense decreased by 23.2% due to lower incentive plan costs and timing of certain costs[153] Comparison of the Six Months Ended June 30, 2025 and 2024 (Consolidated) For the six months ended June 30, 2025, consolidated revenue decreased by $6.3 million, and operating income significantly declined by $4.8 million, leading to a substantial decrease in net income compared to the same period in 2024. This was primarily driven by lower revenue in the Services and former Shipyard divisions, and a significant increase in other expenses related to the Englobal Acquisition Consolidated Financial Performance (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | New project awards | $66,111 | $83,628 | $(17,517) | | Revenue | $77,811 | $84,143 | $(6,332) | | Gross profit | $10,176 | $10,282 | $(106) | | Gross profit percentage | 13.1% | 12.2% | +0.9% | | Operating income | $2,201 | $6,991 | $(4,790) | | Net income | $3,253 | $8,129 | $(4,876) | - Key Drivers of Change: - Revenue decrease primarily due to lower offshore services work and no revenue from the Shipyard Division[155] - Gross profit slightly decreased due to lower revenue and lower margin project mix in Services, offset by higher margin project mix in Fabrication[157] - Other (income) expense, net: $1.5 million expense in 2025 (vs. $3.5 million income in 2024) due to $1.5 million Alliance Payment charge and $0.5 million Englobal Acquisition transaction costs, contrasting with significant gains from asset sales in 2024[160] Segments (Six Months Ended June 30, 2025 and 2024) For the six months ended June 30, 2025, the Services Division experienced decreased revenue and operating income due to lower offshore services work and a lower margin project mix. The Fabrication Division saw increased revenue and gross profit due to higher small-scale fabrication activity and a higher margin project mix, despite a decline in new project awards. The Corporate Division's operating loss increased significantly due to acquisition-related charges Services Division (Six Months Ended June 30, 2025 and 2024) Analyzes the Services Division's year-to-date financial performance, including revenue and operating income trends Financial Performance (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | New project awards | $41,729 | $47,860 | $(6,131) | | Revenue | $41,833 | $48,301 | $(6,468) | | Gross profit | $4,681 | $6,501 | $(1,820) | | Gross profit percentage | 11.2% | 13.5% | -2.3% | | Operating income | $3,152 | $5,056 | $(1,904) | - Key Drivers: Lower offshore services work, lower margin project mix, costs for new cleaning and environmental service line, and underutilization of acquired Engineering and Government Businesses[162][165] Fabrication Division (Six Months Ended June 30, 2025 and 2024) Examines the Fabrication Division's year-to-date financial performance, focusing on revenue and gross profit changes Financial Performance (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | New project awards | $24,943 | $35,882 | $(10,939) | | Revenue | $36,539 | $35,865 | $674 | | Gross profit | $5,495 | $3,431 | $2,064 | | Gross profit percentage | 15.0% | 9.6% | +5.4% | | Operating income | $4,202 | $5,850 | $(1,648) | - Key Drivers: Higher small-scale fabrication activity and a higher margin project mix drove revenue and gross profit increases. Operating income decreased due to higher G&A (business development, Automation Business acquisition) and significantly lower other income (2024 included $2.9M gain from real property sale and $1.1M from equipment sales)[167][168][169] Former Shipyard Division (Six Months Ended June 30, 2025 and 2024) Confirms the absence of financial activity for the former Shipyard Division for the year-to-date period - No Activity in 2025: No new project awards, revenue, gross profit, or operating income for YTD June 30, 2025[171] - Completion: Ferry Projects completed in 2024, last warranty expired Q1 2025[171] Corporate Division (Six Months Ended June 30, 2025 and 2024) Reviews the Corporate Division's year-to-date operating loss and the key factors influencing its financial results Financial Performance (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Operating loss | $(5,153) | $(4,266) | $(887) | - Key Drivers: - Other (income) expense, net: $1.6 million expense in 2025 (vs. $0.2 million income in 2024) due to $1.5 million Alliance Payment charge and $0.5 million Englobal Acquisition transaction costs[173] - General and administrative expense decreased by 18.7% due to lower incentive plan costs and timing of certain costs[174] Liquidity and Capital Resources Assesses the company's cash position, working capital, and cash flow activities, along with future liquidity needs Available Liquidity (June 30, 2025, in thousands) | Metric | Amount | | :---------------------------------------------------- | :------- | | Cash and cash equivalents | $46,825 | | Short-term investments | $14,167 | | Restricted cash | $1,197 | | Total cash, cash equivalents, short-term investments and restricted cash | $62,189 | - Working Capital (June 30, 2025, in thousands): $82.6 million. Excluding cash, cash equivalents, short-term investments, restricted cash, and current debt, working capital was $21.6 million[177] Cash Flow Activity (Six Months Ended June 30, 2025, in thousands) | Metric | Amount | | :---------------------------------------- | :------- | | Net cash provided by operating activities | $4,758 | | Net cash provided by investing activities | $19,012 | | Net cash used in financing activities | $(4,229) | - Primary Uses of Liquidity (Remainder of 2025 and foreseeable future): - Costs for under-utilization of facilities (including Englobal Business losses)[188] - Englobal Business integration costs[188] - Capital expenditures (estimated $1.5M-$2.0M for remainder of 2025)[190] - Working capital requirements[188] - Interest and principal payments on Note Agreement[188] - Corporate administrative expenses[188] - Organic and inorganic growth opportunities[188] - Share repurchases under Share Repurchase Program[188] - Liquidity Outlook: Believes current liquidity is sufficient for remainder of 2025 and foreseeable future, but acknowledges uncertainties from financial forecasts, oil and gas volatility, macroeconomic conditions, and potential future losses[189] Off-Balance Sheet Arrangements Confirms the absence of material off-balance sheet arrangements impacting the company's financial condition - No Material Off-Balance Sheet Arrangements: The company has no off-balance sheet arrangements with a material current or future effect on financial condition, results of operations, or liquidity[191] Item 3. Quantitative and Qualitative Disclosures About Market Risk. This section states that there are no applicable quantitative and qualitative disclosures about market risk for the company - Not Applicable: No market risk disclosures are applicable[192] Item 4. Controls and Procedures Management, with the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, and concluded they were effective. There were no material changes in internal control over financial reporting during Q2 2025, and the Englobal Business was excluded from the scope of management's review of internal control over financial reporting - Disclosure Controls Effectiveness: Disclosure controls and procedures were effective as of June 30, 2025[193] - No Material Changes in Internal Control: No material changes in internal control over financial reporting during Q2 2025[194] - Englobal Business Exclusion: The Englobal Business was excluded from the scope of management's review of internal control over financial reporting[194] PART II. OTHER INFORMATION Presents additional non-financial information, including legal proceedings, risk factors, and equity security details Item 1. Legal Proceedings This section states that there are no legal proceedings to report under this item - None: No legal proceedings to report[197] Item 1A. Risk Factors This section highlights a new risk factor related to the Englobal Acquisition: the company may not successfully integrate the Englobal Business or realize anticipated benefits, potentially impacting operations and financial condition due to integration expenses, operating losses, and potential litigation - New Risk Factor: Inability to successfully integrate the Englobal Business or realize anticipated benefits[199] - Potential Impacts: Adverse effects on operations and financial condition due to integration expenses, operating losses, and potential litigation[199] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section summarizes the company's common stock repurchases under its Share Repurchase Program during the three months ended June 30, 2025. The Board increased the authorization to $10.0 million and extended the program to December 15, 2026 Common Stock Repurchases (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :------------------ | :----------------------------- | :--------------------------- | | April 1 to 30, 2025 | 167,106 | $6.38 | | May 1 to 31, 2025 | 199,153 | $6.32 | | June 1 to 30, 2025 | 70,970 | $6.72 | | Total | 437,229 | $6.41 | - Share Repurchase Program Update: Authorization increased from $5.0 million to $10.0 million and extended to December 15, 2026[201] - Remaining Authorization: $5.3 million available at June 30, 2025[99] Item 5. Other Information This section states that no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the second quarter of 2025 - Insider Trading Arrangements: No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements adopted or terminated by directors or officers in Q2 2025[202] Item 6. Exhibits This section lists the exhibits filed or furnished with the Form 10-Q, including organizational documents, restricted stock unit agreements, CEO/CFO certifications, and XBRL documents - Exhibits List: Includes Amended and Restated Articles of Incorporation, Bylaws, various Restricted Stock Unit Agreements, CEO/CFO Certifications, Section 906 Certification, and Inline XBRL documents[203] Signatures This section contains the required signatures for the Form 10-Q, confirming its submission by an authorized officer of Gulf Island Fabrication, Inc - Authorized Signature: Signed by Westley S. Stockton, Executive Vice President, Chief Financial Officer, Treasurer and Secretary[208] - Date: August 6, 2025[209]