Q1 2022 Concrete Pumping Holdings Inc Earnings Call
Of 1995 that provides important cautions regarding forward looking statements Cody. Please go ahead.
Thanks Maria.
I'd like to remind everyone that in the course of this call to give 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, Inc. 's annual report on Form 10-K 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.
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. We 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. 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.
On the company's website.
Now I'd 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 in 2022 is off to a strong start with over 21% revenue growth in all segments of the business as we continued to gain market share and benefit from recent accretive acquisitions on the first day of the quarter. We successfully completed the acquisition of pioneer country pumping.
Adding pioneer to our portfolio positions us well to benefit from favorable market conditions and accelerated construction activity in Texas, and Georgia two of our strongest growth areas in Q1.
Additionally, it also provides a complementary growth platform for eco Pan service expansion.
This acquisition along with the other assets, we acquired late last year have integrated seamlessly into our business. We have been able to capture expected margin improvements at this point of the integration as we identify and secure various cost synergies.
With our experience in acquiring over 60 different companies in our industry. We are the clear leader in terms of M&A and we will continue to pursue opportunistic deals that will be accretive to our earnings and have teams that align with our core values of people safe.
Safety and reliability.
Now turning to our individual reporting segments, our U S pumping business increased 21% for the first quarter driven by contributions from recent acquisitions and our continued market share gains in residential and infrastructure projects. We continue to experience high demand in residential, especially single family homes, we expect residential to ring.
A bright spot for our company into 2022, even as interest rates rise due to strong demand and limited supply of housing for infrastructure, we experienced sustained activity from increased state funding and public project investments such as bridges schools wastewater treatment plants and hospitals.
We'll continue to work to wind projects at the state and local level and we are encouraged by the passage of the infrastructure investment and jobs Act, while we do not assume any meaningful benefit from the infrastructure Act in our 2022 fiscal year, we are well positioned for 2023 and beyond.
In our commercial business, we experienced a modest improvement during the first quarter, particularly with additional light commercial projects emerging around new residential construction. Additionally, we experienced more demand for our higher margin specialty equipment.
While we continue to experienced pockets of softness across the country types. The dynamic commercial construction environment created by Covid. The trends we are experiencing experienced in the first quarter encouraging in our UK segment revenue increased 23% compared to the prior year quarter due to organic volume growth from the country's continued strong.
Recovery from the impacts of COVID-19.
Our team continues to secure energy road and rail projects. In addition to the work we previously announced with the concrete intensive high speed rail project Hs too, which is expected to last beyond 2030.
In eco Pan our country waste management business revenue increased 24% for the quarter due to an improved sales approach and our team's ability to execute more in person selling.
As a reminder, we enhanced our eco pan sales team in 2021 to strengthen our position for long term growth going forward. We continue to expect to maintain equal pay us double digit revenue growth.
Shifting to the cost side of our business continued inflationary pressures were the only major headwind we experienced in the quarter, particularly in diesel fuel the rapid and material price escalation made it challenging to fully offset our rates in the first quarter and our team has done an excellent job to ensure we are well positioned to offsite offset.
Inflationary headwinds in 2022.
As we close our first quarter, we are in a strong position to continue executing on our strategic growth priorities for the rest of 2022, whether it's organic or through opportunistic M&A now I would like to hand, the call over to Ian So he can provide a detailed overview on our first quarter 2022 financial results I will then reached.
Turn to provide some concluding remarks.
Thanks, Bruce and good afternoon, everyone moving right into our first quarter 2022 results. We are pleased to report that revenue increased 21% to $85 4 million compared to $70 4 million in the same year ago quarter.
A double digit improvement was driven by a combination of revenue volume growth from our recent acquisitions solid organic growth and improved pricing.
Revenue in our U S pumping segment, mostly operating under the Brundage bone brand increased 21% to $63 1 million compared to $52 3 million in the same quarter.
Excluding the acquisitions of high Tech and pioneer organic revenue grew for the quarter increased by approximately 8% to $56 4 million.
This organic growth was driven by improvement in many of our U S markets due to <unk> due to higher construction volumes and pricing improvements.
For our UK operations operating largely under the comfort brand revenue increased 23% to $12 million compared to $9 8 million and assumed <unk> quarter.
This increase was primarily due to organic volume growth from the region's continued recovery from the impact of COVID-19 and pricing improvements.
Revenue in our U S concrete waste management services segment operating under the Eco Pan brand increased 24% to $10 5 million in the first quarter of 2022 compared to $8 4 million in the same quarter.
The increase was driven by organic volume growth.
Growth in PON pickups, and also including some pricing improvements.
Q1 is typically a seasonally slower growth quarter for us we were extremely pleased by our team's dedicated efforts and execution to successfully sell our eco Pan service offering.
Returning to our consolidated results gross profit in the first quarter increased to $34 1 million compared to $29 9 million in the same year ago quarter, while gross margin was 39, 9% compared to 42, 4%.
The decrease in margin is directly related to inflationary pressures particular, particularly in the elevated diesel fuel prices that Bruce discussed earlier.
To provide an order of magnitude of the impact of these inflationary pressures versus Q1 of last year. We estimate our gross margin was impacted by approximately 220 basis points due to the higher diesel fuel costs.
General and administrative expenses in Q1 were $26 7 million compared to $22 4 million in the same year ago quarter.
The higher expense was primarily driven by increased labor expense due to the additional head count following our recent acquisitions and some moderate wage inflation.
Net income available to common shareholders in the first quarter increased to $1 7 million or <unk> <unk> per diluted share compared to a net loss of $12 8 million or <unk> 24 per diluted share in the same year ago quarter.
Finally, adjusted EBITDA in the first quarter increased to $24 million compared to $22 4 million in the same quarter.
Adjusted EBITDA margin was 28, 1% compared to 31, 7% in the same year ago quarter.
It is worth noting that adjusted EBITDA in our first quarter included the disruption from the Teamsters Union strike in the Seattle, Washington area are.
Our business is not a signatory to the team. So gene however, the strike in Seattle does affect the delivery of concrete to construction sites.
Due to our team's responsiveness and effective fleet management, we were able to minimize that exposure through this interruption and despite construction volumes being impacted by approximately 40% in that market. Our brands performed our brand's performance delivered positive EBITDA and positive cash flow.
And our U S concrete pumping business adjusted EBITDA was $15 2 million compared to $15 3 million in the same year ago quarter, primarily due to inflationary pressures such as higher fuel and labor cost in our UK business adjusted EBITDA improved 20% to $3 3 million compared to $2 7 million in.
The same year ago quarter.
This reflects the continued construction volume recovery of the UK market from the impacts of the pandemic.
For our U S concrete waste management business, adjusted EBITDA increased 33% to $4 9 million compared to $3 7 million in the same year ago quarter.
Turning to liquidity on January 31, 2022, we had total debt outstanding of $391 million or net debt of $388 million the slight uptick in that on a sequential basis from our 2021 fourth quarter is due to the investment made in the acquisition of pioneer.
We had approximately $108 million in liquidity at January 31, 2022, which includes cash on the balance sheet and availability from our ABL facility.
We have a strong liquidity position greatly enhancing our ability to pursue accretive investment opportunities like M&A or the investment in organic growth equipment to support our overall long term growth strategy.
As a reminder, our business continues to generate healthy operating free cash flows we invoice our customers daily for the work, we perform and have minimal working capital requirements. Since we do not take ownership of the concrete we place.
Our ability to generate strong operating free cash flows and strong margins.
US to expand our liquidity position and Delever in line with our strategic goals, regardless of the macroeconomic environment.
Our fiscal year 2022 financial outlook remains unchanged as a reminder of our 2020 to previously stated guidance. We continue to expect full year revenue to range between 360 and $370 million adjusted EBITDA to range between 115 and $120 million.
And free cash flow, which we define as adjusted EBITDA less net replacement capex less cash interest to range between $55 million to $60 million.
Operationally and financially we have a solid foundation and we are actively working to execute on our growth strategy with that I will now turn the call back over to Bruce.
Thanks, Ian overall, we are pleased with our first quarter of 2022 and the path. It has set us on for the rest of the fiscal year, we remain focused on driving our scale through organic growth strategic M&A. Looking ahead, we anticipate that 2022 is a year in which we see a return to a more normalized state is underlying demand.
Fundamentals reset in U S and U K economies gained further momentum.
In the first quarter of 2022, we were pleased to report over 21% revenue growth across all segments and we continue to gain scale through organic growth as well as strategic M&A last quarter. We shared that we have earmarked approximately $20 million to $25 million towards organic growth Capex and specifically new equipment. The equipment is.
To begin arriving in the second half of 2022, delivering revenue and earnings benefit for 2023 and beyond on.
On the M&A front, we continue to have a robust pipeline of acquisitions that our management team is evaluating we remained very disciplined in our approach to M&A and plan to pursue accretive opportunities and increase our penetration across our existing geographic footprint and allow us to enter new markets looking beyond 2022, we re.
<unk> well positioned to capitalize on attractive market fundamentals and secular demand trends across our geographic footprint, we fully expect expanded federal and state level infrastructure investment continuing to single family housing strength in the commercial market recovery to support growing construction activity for years to come with these trends we.
Confidence in our hard working team to continue winning work across our country pumping in eco Pan business with.
With that I'd now like to turn the call back over to Maria for Q&A.
Thank you Sir at this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press <unk>.
One on your telephone keypad.
Information tone will indicate your line is in the question queue.
You May press star two if he would like to remove your question from the queue for.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the starkey.
One moment please poll for questions.
Our first question is from Andy with.
Baird. Please proceed with your question.
Hi, Thanks, good afternoon guys.
I thought I'd start we're probably anybody would start would just be about the inflationary characteristics that youre seeing in the business, particularly around diesel fuel.
Obviously, it didn't prevent you from kind of making your numbers in the quarter, but your margins.
Penalized by this obviously.
Second quarter here, the fuel prices are moving even faster than that.
Obviously to a higher level yet you guys said in your comments that I think that you'll be able to offset this for the year. So I guess the question is what are you doing right now to give you confidence that comment that you'll be able to offset these things have you hedged.
Change the terms of the way you write the contract anything you can do to get us comfortable with the fact and your ability to manage through this incredible moves that we've seen particularly in diesel prices.
Thanks, Andy that's a great question. It is something that we're very focused on and we will continue to be focused on.
Things that have changed since we had our last earnings call. We've shortened the length of our agreements, especially in the residential market, where we may have had annual agreements. Prior we're trying to get closer to three months agreements and being able to.
The offsets more real time than what we had in the past and then on our commercial and infrastructure projects, we're putting.
Surcharges for fuel for instance, as fuel price goes up 25.
There is an additional charge that goes to our hourly charge on our on our on our ticket. So those are the two things that we've largely done within our business to try to get out in front of the inflationary areas. We think we've done a fairly good job of really mitigating all of the other areas that we're dealing with inflation.
Got it can you just just to follow up on that what percentage of your contracts that that youre going to be executing I guess for the rest of this fiscal year are covered by these new terms, whether theyre shorter or they've got the surcharges is this substantially everything or.
Or is it pockets of I just want to understand how broad based is.
Wade.
Finally in terms are being rolled out.
Our operations management feel like we're about 70% of our agreements that have that in place now and we're looking to improve on that.
Okay great.
Great and then.
Maybe one more here.
Sure.
I guess, the pace and the trend lines that you're feeling in the commercial side of your business has obviously been an important piece of the business you've replaced it really well during this this pocket of softness from Covid, but it sounds like there's some green shoots that you didn't say that word but there also seems like there's some areas that arent really coming back as you sit here today.
Day parcel of the way through the second quarter. Bruce are you are you confident that this summer is going to look more like a normal summer or do you still think it's going to the commercial business is going to be in recovery through this construction season.
I think it'll be in recovery. However, it is recovering now in Q1, we saw movement of 1% of our total revenue moved towards commercial we are bidding more work more and more of our specially equipment that we've talked about in the past as is being bid out and actually we're winning work for this summer to use up more of that equipment than what we had used.
In 2021, so we feel confident that we'll be improving through this year.
But I don't think it will get back to where we were in 2020 or earlier until really 2023.
Got it and then just one final question for me.
The lack of any commentary on weather.
Just to me that the weather was probably pretty good.
Was that the case overall the weather was was actually on mute.
Would you say that the weather was unusually good this quarter.
Absolutely.
I would say the weather was average for this quarter as we've talked in the past with our geographic footprint, we're going to deal with some weather somewhere every quarter.
And so it was no different in this last quarter and so really we think our geographic footprint kind of helps us through that.
Thank you have a good evening.
Thanks, Andy.
Our next question is from Steven Fisher with UBS. Please proceed with your question.
Thanks. Good afternoon, I was wondering if you could give us some updated thoughts on expected organic growth for this year.
You've got the total revenue guidance out there, but Q1 coming in at 11% seemed.
A bit faster than you expected, so I'm wondering kind of what.
What you are expecting for the next few quarters here and then if there is any sort of upside potential that you think could come out of what youre seeing now.
Yes, Hi, Steve Good question.
I mean, the pace of the organic growth in the first quarter I mean thinking back to what we had said in January we felt.
The organic growth of maybe five or 6% clearly we've outpaced that in the first quarter.
So that's really taking the benefit of the.
Good weather.
Bruce mentioned just earlier, so I mean from a from a volume perspective.
Previously we had said that part of the organic growth is maybe two or 3%, it's probably closer to five or 7% now so that's really where the pickups coming through the pricing power over the organic growth I would say is largely the same but maybe towards the top end of.
The 4% to 7% price case that we gave so.
The organic pace of the business right now is a little in front of where we expect so it's nice to see the momentum really outpaced what we had originally thought a couple of months ago.
Okay. That's helpful and then I guess.
Within the U S concrete pumping business, how broadly are you seeing acceleration across your geographies and customer base.
Are there to what extent are there still any kind of pockets.
Of slower activity that youre, seeing and where might those be.
Nothing specific I mean outside of the volume change that we mentioned in our remarks are in Washington.
Rest of the pace of volume in our business is largely around those expectations that just meant mentioned on volume and also on pricing so outside of Seattle, Washington area, not really but I would say our team has done a great job through the fleet management and the nimbleness of making sure that we can place our equipment the right areas to manage through.
Even though unexpected volume changes.
Got it thanks very much.
Thanks Steven.
Our next question is with Zain Caribbean D. A Davidson. Please proceed with your question.
Hey, good afternoon, and thank you for taking my questions.
So first off here thinking about replacement parts in the dynamics. There are there any supply disruptions impacting your ability to get equipment replacement parts are new equipment altogether do you think this is more of an issue for your competitors with less scale.
Hi.
Yes.
Maybe move from e-commerce would be it in the past.
We buy our parks for many different suppliers and Oems.
So we're not relying on any one provider for those parks now reduced stock.
I needed amount of parts and our invitation so that we can keep on cycling through.
And the parts that we have our local locations so that we're not dependent on rocket.
Rocket or overnight shipments. So we look to maintain really a modest level of inventory to service our needs.
So no real meaningful disruption in that part of our supply chain.
Because we are usually quite well out in front of that and really bolt buying at good pricing and making sure again to the timing.
Those items the needed locations when we need it.
What I would add to that Ian is with the new equipment.
They are delayed slightly but nothing has been delayed to the point, where we can service our customers the way they expect.
Okay, Okay, good to hear there.
And also on M&A front, one of the strategies you've commented on earlier.
With regard to drivers for this year was M&A can you give us an update on the M&A funnel, while youre seeing and potentially any new competitors in the bidding process.
Our M&A pipeline remains full.
We are actively negotiating with several businesses currently.
It Hasnt really changed values, we place on the businesses are very similar to what we've seen in the past we've always had some minor competition.
On deals.
And that really hasnt changed for us much either.
Okay.
Thank you and last one for me.
On eco Pan, but maybe some of the disruptions you stock up in Seattle, but can you update us on the progress with your market penetration initiatives with the company.
Yes, so eco pan's has been a really good story for us. This year. If you remember back in 2020, we had 20% revenue growth near 20% revenue growth.
Last year it was difficult for us to have in person selling in fact in the second half of 2020, it was that way as well and so it was very difficult for us to increase our share as the market started opening up last summer, where our sales folks could get out and meet with folks in person and during that period of time, we expanded our sales force.
We've done a really good job of increasing that penetration in nearly every market that we're in.
Okay, great. Thank you very much.
Thank you.
Our next question is from Stanley Elliott with Stifel. Please proceed with your question.
Hi, Good afternoon. This is Brian broken ground for Stanley.
I'm, hoping you could talk a little bit about the labor side last quarter, you mentioned that was in <unk>.
Pretty.
Tightness for both you and your customers.
We will begin to ease their or what are you seeing seen in that regard.
It's still it's still a bit of a challenge for our customers and our business. It does seem to have gotten better here in the last couple of months and we're encouraged that it continue to improve throughout this year.
Got it. Thanks, and then you talked about 220 basis point diesel impact in the quarter to margins. What are you guys embedding for the full year.
Yeah.
I mean, right now and we're obviously looking at price inflation that we've never seen before so really what we're doing.
Owned.
The change in expected pricing going forward is really modifying the pricing that Bruce mentioned as we go along we have good momentum in our pricing initiatives right now.
But I mean, as we mentioned earlier, we're looking to make sure that we stay on top of how we adjust the price of our service to nearly <unk>.
<unk> data most of the change in fuel prices through the first quarter was the largest part of what we've seen in that margin change and we will continue to modify those initiatives as we see the that part of the supply chain cost move.
Got it thanks I'll pass it on thanks.
Yes.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next question is with Tim Mulrooney with William Blair. Please proceed with your question.
Bruce Ian good afternoon.
Hey, good afternoon, Hi, Tim.
Housing starts they slowed a little bit to start off the year can you talk a little bit about your outlook and some more detail on the residential side of the business, maybe you could frame. It in in terms of how that business grew in 2021 and what your expectations are for this year.
So.
Our first quarter. It stayed about where we would have expected it to be there have been a few pockets where.
The foundation portion of the projects that got out in front of some of the supplies of getting other things done, but that hasnt been too impactful to us.
The demand side is still quite strong.
And from everything that we're following in the customers. We're talking to we expect it should stay strong for us through the remainder of the year.
Yes.
Okay. That's helpful and just lastly from me on Eco Pan I noticed that EBITDA grew faster than revenue in the first quarter, which was a little surprising to me given the inflationary environment, particularly with diesel.
As most of us from pricing and leverage on higher volumes or other factors to take into account as well.
I think the.
Route density is really playing out really well for eco Pan as we do better at creating more density within our own markets that route density improves our margins, that's really always been a big part of our strategy.
That's helpful. Thanks Bruce.
Thanks, Tim.
Okay.
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 Maria we'd like to thank everyone for listening to today's call and we look forward to speaking with you. When we report our Q2 financial results in June . Thank you.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
[music].
Yes.
[music].
Okay.
[music].
Okay.
Okay.
[music].
Yes.
[music].
Yes.
[music].
Yes.
Yes.
Yes.
[music].
Okay.
Okay.
Sure.
[music].
Okay.
Yes.
Okay.
[music].
Okay.
[music].
Yes.
[music].