Concrete Pumping Holdings, Inc. Price & Performance (BBCP)

Thanks, Jamali. I'd like to remind everyone that in the course of this call to you a better understanding of our operations, we will be making certain forward looking statements regarding our business and outlook These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from such statements.

For information concerning these risks and uncertainties, see Concrete Pumping Holdings annual report on Form 10 ks, quarterly report on Form 10 Q and other publicly available filings. With the SEC. The company disclaims any intention or obligation to update or revise any forward looking statements [indiscernible] [indiscernible] whether as a result of new information, future events or otherwise. On today's call, we will also reference certain non GAAP financial measures including adjusted EBITDA, net debt, and free cash flow, which we believe provide useful information for investors. [indiscernible] provide further information about these non GAAP financial measures and reconciliations to the comparable GAAP measures in our press release issued today or the investor presentation posted on the company's website. I'd like to remind everyone that this call will be available for replay later this evening. A webcast replay will also be available via the link provided in today's press release as well as on the company's website. Additionally, we have posted an updated investor presentation to the company's website.

Now, I would like to turn the call over to the CEO of Concrete Pumping Holdings, Bruce Young. Bruce? Thank you, Cody, and good afternoon, everyone. Our first quarter was again impacted by volume driven declines in our U. S. Concrete pump Pumping segment offsetting continued growth in our Concrete Waste Management business. Specifically lingering higher interest rates from higher than expected monetary policy during our first fiscal quarter affected the timing of commercial projects. Additionally, extreme weather can in our Central Mountain, Southeastern and South regions, particularly in Texas, further impacted our revenue. In fact, we estimate some of the historic freezing temperatures and wet weather reduced our revenue by approximately $5,000,000 in the quarter. In The UK, the impacts of sustained higher interest rates on commercial project volume largely followed similar trends we experienced domestically. Our infrastructure projects and improved pricing held up well because Despite the challenges in our pumping markets, our disciplined fleet management and cost control strategies enable us to increase gross margins sustain our adjusted EBITDA margin in the first quarter. This flexible capital investment strategy combined with our strong unit economics expanding liquidity and improving balance sheet strength positions us well for a market recovery in fiscal twenty twenty five and beyond.

Turning to specific comments by end market, Within our commercial end market, we continue to experience construction softness across a variety of commercial work especially in light commercial, warehouse, manufacturing and office buildings. Which tend to be more interest rate sensitive. Larger commercial projects remain mostly durable, but continue to move at slower pace given the economic backdrop. Our residential end market remained resilient, especially considering the interest rate environment fact, our mix of our U. S. Concrete pumping work in the residential end market was resilient at 33% of total revenue on a trailing twelve month basis. We continue to see residential construction investments within our Mountain Region and in Texas which represents undersupplied regions where single family construction is prominent. We still expect the structural supply demand imbalance in housing will continue to support homebuilding activities, especially as homebuilders entice customers with creative solutions that include rate buy downs and we believe the Federal Reserves path to interest rate reductions should continue to support this end markets growth. Offsetting some of our commercial market softness, revenue share in our infrastructure markets grew slightly year over year in the first quarter. We In The U. K, infrastructure growth has continued and our U. S. National footprint has allowed us to win more publicly funded projects.

We expect our infrastructure business to grow in fiscal twenty twenty five due to the funding environment in The U. K. As well as opportunities domestically from the conversion of allocated budget funding into project starts within our infrastructure Investment and Jobs Act. I will now let Ian address our financial results in more detail before I return to provide some concluding remarks.

Ian?

Moving right into our results for the first quarter.

Revenue was $86,400,000 dollars compared to $97,700,000 in the same year ago quarter. The decrease was mostly due to a decline in our U. S. Concrete Pumping segment due to the slowdown in commercial construction volume and severe winter weather in our Central Mountain South and Southeastern markets. Revenue in our U. S. Concrete Pumping segment, most was $56,900,000 compared to $66,700,000 the prior year quarter As Bruce mentioned, we estimate the severe weather impacted our first quarter revenue by approximately $5,000,000 For our UK operations, operating largely under the Camford brand, revenue was $12,800,000 compared to $15,400,000 in the same year ago quarter due to lower volumes caused by a general slowdown in commercial construction work was mostly due to the impact from higher interest rates. Foreign exchange translation had a minimal on revenue during the first quarter. Revenue in our U. S. Concrete Waste Management Services segment operating under the Eco Pan brand continues to perform well against a challenging market backdrop and increased 7% to $16,700,000 compared to $15,600,000 in the prior year quarter. [indiscernible] organic increase was driven by increased volumes and sustained improvement in pricing. Now returning to our consolidated results, gross margin in the first quarter increased 200 basis points to 36.1% compared to 34.1% in the same year ago quarter.

The improved margin was primarily due to continued improvement in our cost control initiatives that included improved fuel and repair and maintenance efficiencies. General and administrative expenses in the first quarter declined 13% to $27,800,000 compared to $31,900,000 in the prior year quarter primarily due to the non recurring $3,500,000 sales tax charge that occurred in the first quarter of twenty twenty four. As a percentage of revenue, G and A costs improved to 32.2% in the first quarter, compared to 32.7% in the prior year quarter. Net loss available to common shareholders in the first quarter was $3,100,000 or $0.06 per diluted share compared to a net loss of $4,300,000 or $0.08 per diluted share in the prior year quarter. Consolidated adjusted EBITDA in the first quarter was $17,000,000 compared to $19,300,000 in the same year ago quarter. However, our adjusted EBITDA margin was unchanged at 19.7%. As discussed previously, the improvement in margin on lower revenue driven by well controlled variable cost and a disciplined approach to managing our fleet. In our U. S. Concrete Pumping business, adjusted EBITDA declined to $9,200,000 compared to $11,600,000 in the same year ago quarter. [indiscernible] In our UK business, adjusted EBITDA was $2,800,000 compared to $3,200,000 in the same year ago quarter.

And for our U. S. Concrete Waste Management Services business, adjusted EBITDA increased to $5,000,000 compared to 4.5 in the same year ago quarter. Now turning to liquidity. At 01/31/2025, we had total debt outstanding of $425,000,000 and net debt of $340,000,000 which is a decrease of $33,000,000 over the course of the year which is a testament to our consistently strong free cash flow generation. [indiscernible] equates to a net debt to EBITDA leverage ratio of 3.1 times. [indiscernible] are approximately $410,000,000 of liquidity as of 01/31/2025, which includes cash on the balance sheet availability from our ABL facility. On 01/31/2025, we successfully closed private offering of $425,000,000 in aggregate principal amount of senior secured second lien notes that mature in 02/1932. [indiscernible] The proceeds were used to pay the redemption price for our outstanding 6% senior secured second lien notes were June 2026. In addition, the remainder of the net proceeds together with cash on hand, used to pay a special dividend of $1 per share on February 3. [indiscernible] Over the years, we have executed a range of capital allocation priorities including debt reduction, share buybacks and the investment in organic and M and A growth. The recent senior notes refinanced represents a significant milestone in our evolution and underscores our consistent operating performance and healthy free cash flow generation.

Returning excess capital to our shareholders in the form of a special dividend augments our capital allocation strategy and highlights our commitment to driving superior shareholder value all while maintaining prudent leverage balance sheet discipline and ample liquidity to invest in our long term growth strategy. Now moving into our share buyback plan. During the first quarter, we repurchased approximately 296,000 shares for $1,900,000 or an average share price of $6.53 Since the buyback was initiated in 2022, we have repurchased approximately $20,000,000 of our stock and we have an additional $15,000,000 authorized through December of twenty twenty We believe our share buyback plan demonstrates both our commitment to do delivering enhanced value to shareholders and our confidence in our strategic growth plan. Moving now on to our 2025 full year guidance. [indiscernible] While we had expected some recovery and an improved project funding landscape in the second half of fiscal year twenty twenty five, broader market uncertainty and higher foot interest rates has weakened the near term demand environment, particularly in our commercial end market As we navigate lower commercial project volumes, we are adjusting our financial outlook for fiscal year twenty twenty five. We now expect fiscal year revenue to range between $400,000,000 and $420,000,000 and adjusted EBITDA to range between $105,000,000 and $115,000,000 expect free cash flow, which we define as adjusted EBITDA, less net replacement CapEx less cash paid for interest to be approximately $60,000,000 which is in line with our previous 2025 guidance adjusted for our new capital structure.

Our ability to drive this robust free cash flow on expected lower volume stems from our ability to optimize equipment utilization and flex CapEx investments based upon demand. This flexibility is also supported by previous investments we have made over the last three years including from acquisitions to maintain sufficient capacity in our fleet utilization. With that, I will now turn the call back over to Bruce. Thanks, Ian. Looking ahead to the remainder of the fiscal year, we are well positioned for commercial market recovery. Addition to preserving margins, we have successfully reduced debt debt and nearly doubled our liquidity year over year. This strategic positioning enhances our flexibility for future shareholder value initiatives including the special dividend paid in February, organic investments and future M and A investments. Remain focused on the long term strategic aspects of our business that we can meaningfully influence including the consistent and disciplined execution of our strategic growth plan Resolute adherence to our leading commercial strategy and prudent cost control through ongoing operational excellence. Equally, we are hopeful that a return to a more seasonal weather pattern coupled with an expected improvement in The U. S. Commercial construction volumes will stimulate demand.

In The U. K, our team continues to secure nationally critical energy road and rail projects in addition to the well documented HS2 project as the new UK government seeks to drive broader economic productivity growth. The fundamental strength and underlying drivers of our resilient business model, proven strategic plans, strong balance sheet with significant opportunities for growth and long history of success in our ability to continue delivering robust financial and operational performance. With that, I would now like to turn the call back over to the operator for Q and A. Shamali?

Thank you, sir. We will now be conducting a question and answer session. And our first question comes from the line of Tim Mulrooney with William Blair. Please proceed with your question.

Bruce, Ian, good afternoon. So first on the guide, it looks like you reduced your annual revenue guide by about $25,000,000 at the midpoint. Just curious how much of that's due to the shortfall in the first quarter relative to your expectations and how much of that is really more related to the remainder of the fiscal year?

Yes. I mean, we're really taking a measured guide for the entire year, Tim. I mean, obviously, some of it was the shortfall that we mentioned between weather and market demand in Q1, but it's really a measure to look at the entire year. And where we think that cadence of the remaining quarters to to perform for the remainder of the year.

Okay. And do you still expect that split first half, second half split kind of 40 five-fifty five or should we be looking for a little bit different cadence?

Yes. So I mean we are expecting that the second quarter will be slightly softer. We've seen some weather in February, but it aligns with that with the lower volume and the bring down in that $25,000,000 It's still centers around 45, 55.

That's helpful. And just on that weather disruption, I am if you don't mind me just to keep going here for a sec, that $5,000,000 weather related disruption in the first quarter, I noticed that you called out a $7,000,000 weather headwind in the first quarter of last year. So So to me, all else equal, that implies you had a $7,000,000 easier comp in the first quarter of this year. So I guess does that mean that weather related disruptions were really closer to $12,000,000 in the first quarter of this year relative to your expectations? Yes, that's right. And you can actually see that in the year over year performance. A lot it translates and we got some like heavy rainfall in November. And January was like severe low temperatures all across the country. So a lot of that came in January. But yes, you're right, it was more severe weather on top of quite extreme weather in the prior year.

Okay.

Which really led to the volume. And that's what led to the volume is really a volume change based on that weather impact Yes, that makes sense. Two more quick ones on capital allocation. Just to clarify that net debt of $340,000,000 in the press release it said it includes the $53,000,000 in cash used to pay the special dividend. Does that mean that you've already incorporated the payment into that calculation or we should add $53,000,000 to that $340,000,000 number to correctly adjust for the dividend?

You should add it to the $340,000,000 dollars Okay. So that gets me to my last question. I just want ask a little bit more about your capital allocation priorities. Given the special dividend that was announced it looks like your leverage ratio is going to go back up a little bit here. So how should we think about your philosophy or I guess the Board's capital allocation philosophy around special dividends and the target leverage ratio and just more broadly where investors should expect you to apply free cash flow over the coming years? Thank you.

Yes. So maybe I'll start with free cash flow. I mean, maybe I'll just revert back to our prepared remarks, Tim, on the guide. It's $60,000,000 of free cash flow. We believe that that's a really consistently high and healthy free cash flow number that we start from. And as you mentioned, we have a range of capital allocation priorities some that we've invested over the period of being a public company. We mentioned in our remarks well as between debt reduction, share buybacks, organic anemone growth the special dividend augments that. We'll continue to consider what we think drives the most optimal value.

As we go forward. But we will you've seen us being committed to the balance sheet and discipline around leverage. And you can expect that same commitment going forward.

Tim, what I would add to that is that we are more focused M and A now than we were in the past years. While the market is a little messy right now, we think going to start improving maybe later this year and into next year. [indiscernible] that could be part of our capital allocation this year that you haven't seen in the last couple of years.

Got it. That's helpful color. Thank you, Bruce. Thanks, Aine.

Thank you. Our next question comes from the line of Brent Thielman with D. A. Davidson.

Hey, thanks guys. Good afternoon. Hey, Ian, just wanted to ask real quick on Eco Pan if there was a weather impact there as well. I didn't hear you call that out.

Yes. So I mean they're dealing with the same challenging weather. I mean you've always recall as opposed to just the pure service, Ecopan do get the benefit of one a wider market than the concrete pumping side from the amount of concrete production. So there's a market share element there. And obviously, they'll get rent on the pans that are out there as well. So they had the same challenges. In the markets that are in. Obviously, it's a bit more pronounced than the the core part of The U. S. Business.

Okay.

And I guess, Bruce, I mean, I guess as the industry goes right now, what markets or sectors you seeing sort of excess equipment capacity focus, maybe how that's impacting pricing dynamics in the market right now and how you're working around that? So there is still a surplus of equipment in the market. We expect with the softening market this year that will Concrete. But the only market that really is a affecting us would be residential, a little bit of light commercial, but those folks that are buying those units are mostly smaller units and they're not really affecting the infrastructure or the commercial market.

Okay.

I guess just the last one would be, you've held CapEx relatively low for a few quarters now including the first quarter. Ian, I mean, do we expect to see a ramp up here or catch up in cost and replacement or do you expect to hold it at these relatively lower levels?

Our CapEx, I mean, as you know, our CapEx investment and capital allocation has been consistent year over year. And again, we don't have any air pocket in the investment. We mentioned on the prepared remarks, we still have some excess capacity in our fleet. And that really feeds into that free cash flow number that we talked about. So there's not any significant investments that we're deferring and we have enough fleet capacity to run what we think the volumes are from here. So you want to don't expect to see a meaningful change our investment in that replacement fleet. As we go forward.

What I would add to that is, as we start looking into more M and A, as you know, as you'll remember that nearly every business we buy has way more assets, at least 20% more assets than they need for the work that they have. And so that will play into that capital policy going forward as well. Got it. Makes sense. Thanks guys.

Thanks.

Thank you.

Our next question comes from the line of Justin Hawke with Baird. Please proceed with your question. [indiscernible] Yes. Thanks. Good afternoon, everyone. I just wanted to ask about I guess, the puts and takes on the margins being flat year over year. You quantify maybe the positives on like the fuel cost side concrete side, labor side versus the declines on the volume side just to kind of understand the moving pieces that got that back to flat?

Yes, absolutely, Justin. I mean, as you know, a large percent, I mean, between 7580% of our cost of sales base is variable. So really what we've seen in the quarter was good control over labor, between operators on the mechanic side. And maybe a half a percentage point move on the fuel We've seen some abatement on that fuel in placement. Replacement. And then really on the repair and maintenance, I mean good control on that variable cost [indiscernible] there's less steps being put on the equipment, which is which allows us to control that repair maintenance component. So really between repair, maintenance and fuel and good operator efficiency is really what contributes to keeping that margin in line, which again is a good testament to that variable cost structure that we've got.

Okay, great. I guess my second question just given a lot of the [indiscernible] Concrete waste management services segment, the growth rate has come down a little bit from where it was in the past. It was up 7% quarter. I guess I was just curious to understand the volume versus pricing mix there and how that's changed maybe over the last year or two?

Yes. So the pricing has been low single digits improvement The volume issues are more with weather. If we wouldn't have had the weather in Q1 that we had, you would have seen the same type of growth with Eco Pan that you had experienced in the past. Okay, great.

Much. [indiscernible] At this time, this concludes our question and answer session. I would now like to turn the call back over to Mr. Young for closing remarks.

Thank you, Shamali. We'd like to thank everyone for listening to today's call and we look forward to speaking with you when we report our second quarter fiscal twenty twenty five results in June.

Thank you for your participation.