Q2 2023 Concrete Pumping Holdings Inc. Earnings Call
Speaker 1: Good afternoon everyone and thank you for participating in today's conference call to discuss concrete pumping holdings financial results for the 2nd quarter ended April 30th, 2023.
Speaker 1: Joining us today are concrete pumping holding CEO Bruce Young, CFO Anne Humphries, and the company's external director of investor relations, Cody Slaude.
Speaker 1: Before we go further, I would like to turn the call over to Mr. Slaw to read the company's Safe Harbor Statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important caution regarding forward-looking statements.
Speaker 1: Cody, please go ahead.
Speaker 2: Thanks, Camilla. 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.
Speaker 2: For information concerning these risks and uncertainties, see Concrete Pumping Holdings 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 that vaccinate employees and reduce any mask-packing sidemanks at the Old East Los Angelesvan.
Speaker 2: 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.
Speaker 2: 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.
Speaker 2: 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.
Speaker 2: Additionally, we have posted an updated investor presentation to the company's website.
Speaker 2: Now I'd like to turn the call over to the CEO of Concrete Pumping Holdings, Bruce Young. Bruce? Bruce?
Speaker 3: Thank you Cody and good afternoon everyone. I'm pleased to report that in our second quarter we experienced 12% revenue growth making our seventh consecutive quarter of double digit revenue gains. This consisted of growth across all segments and was driven by continued market share gains in recent and creative acquisitions and organic growth.
Speaker 3: These strong results would have exceeded our expectations had we not experienced above-average rainfall in most of our markets west of the Rocky Mountains, as well as in our home state of Colorado. From an end market perspective, we have seen encouraging growth primarily in large commercial projects like distribution centers, warehouses, semiconductor fabrication plants, and other
Speaker 3: has been comparatively weaker due to higher interest rates and some impact from reduced availability of financing from smaller regional banks. Despite this, our expectation for the commercial market in fiscal year 2023 remains strong. Opportunities with large manufacturing, particularly as we head into...
Speaker 3: to renewed investment in the US with the infrastructure investment in job acts where we have recently seen an improved visibility of funds flowing to numerous projects many of which are located in existing markets that we operate in. We plan to aggressively pursue these project opportunities and believe it has the potential to be a five-year plus.
Speaker 3: of our diverse offering and agility in our fleet management. For example, since the end of fiscal 2022, as a percentage of our total revenue, our residential work volumes have traded 400 basis points with growth in our commercial market. For the remainder of fiscal 2023, we expect residential revenue to remain relatively consistent with the 29% of revenue we are experiencing today.
Speaker 3: Our team continues to recalibrate our rates successfully across all business segments and realize the expected equipment return on investment for the same volume of work performed. In summary, we had another great quarter that continues to show the strength of our business with 12% top line growth and 7% growth in adjusted EBITDA.
Speaker 3: I will let Ian walk through more details on our financial results before I return to provide some concluding remarks. Ian?
Speaker 4: Thanks Bruce and good afternoon everyone. By segment Q2 revenue in our US pumping business increased 9% mostly due to contributions from our recent acquisition of Coastal Carolina but also from strong regional organic growth.
Speaker 4: In our UK segment, operating largely under the Canford brand, despite foreign exchange headwinds, US dollar revenues increased 13% compared to the prior year quarter.
Speaker 4: Exploding the FX translation impact, revenue grew by 22%. Our team continues to secure energy, road and rail projects in addition to the work we have previously announced with the concrete intensive high speed rail project HS2, which is expected to last beyond 2030.
Speaker 4: In our U.S. Concrete Waste Management Services segment, operating under the EcoPam brand, we continue to deliver exceptional results, including increasing the revenue on an organic basis by 26% compared to the same year ago quarter.
Speaker 4: This continues to be driven by investments we made in our sales team and the value of our enhanced service offering.
Speaker 4: Going forward we expect to maintain EcoPounds double digit organic revenue growth given our continued investment in our team and equipment, its penetration in the market and the continued evolution of the methods used in concrete construction projects to contain concrete waste.
Speaker 4: Returning to our consolidated results, gross margin in the second quarter was 40.3% compared to 40.4% in the same year ago quarter.
Speaker 4: As Bruce noted earlier, small improvements in input costs, particularly in diesel fuel, were mostly offset by higher labour costs due to lower equipment utilisation.
Speaker 4: improvements in input costs, particularly in diesel fuel, were mostly offset by higher labour costs due to lower equipment utilisation.
Speaker 4: General and administrative expenses in Q2 were 30.3 million, up 1.7 million from 28.6 million in the same year of the quarter, primarily as a result of the headcount additions and higher labour costs related to recent acquisitions.
Speaker 4: As a percentage of revenue, G&A costs for 28.1% in the second quarter compared to 29.6% in the same yearbook quarter.
This is illustrative of the operating efficiencies we typically achieve as we scale both organically and through M&A.
The 2.8 million year over year improvement in income for operations was realized
We've realised by more than offset by higher interest and income tax expense.
As a result, net income available to common shareholders in the second quarter slightly declined to 5.2 million or 9 cents per diluted share compared to 5.6 million or 10 cents per diluted share in the same year-to-go quarter. To solidify and adjust the deal with that in the second quarter increased 7% to 28.8 million compared to 27.1 million in the same year-to-go quarter.
Adjustity by that margin declined slightly to 26.7% compared to 28% in the same Eurogo quarter.
Moving on to our results by segment, in our US concrete pumping business, adjusted even though I declined 5%, 17.1 million compared to 18 million in the same year old quarter, given the weather impacts west of the Rockies and Colorado on our operating leverage.
In our UK business, the adjusted EBITDA increased 22% to 4.6 million compared to 3.8 million in the same year to go quarter.
For our US Concrete Waste Management Services business, adjusted EBITDA improved 39% to 6.5 million compared to 4.6 million in the same year ago quarter.
Turning to liquidity, as at April 30th of 2023 we had totaled the outstanding of $436 million or net debt of $429 million.
We are approximately 100 million in liquidity as of April 30th, 2023, which includes cash on the balance sheet and availability from our EBL facility.
Furthermore, last week we upsized our asset-based lending facility from $160 million to $225 million while also extending its rigidity to June 28.
We are delighted to welcome the team from PNC Bank into our ABL relationship and appreciate the continued support from the teams at Wells Fargo and JPMorgan Chase. We believe this development further enhances our ability to pursue accretive investment opportunities and support our overall long term growth strategy.
As a reminder, we have no near-term debt matures with our senior notes maturing in 2026.
and our asset-based landing facility now maturing in 2028.
We remain in a strong free cash flow and liquidity position which provides further optionality to pursue value added investment opportunities like a creative M&A, continued investment in Ecopath and our concrete pumping fleet.
In the second quarter, the company repurchased approximately 339,000 shares for $2.3 million.
As at April 30th, 2023, we are approximately 10.1 million remaining under the existing share repurchase authorization. We are encouraged by what we are seeing in our business and the momentum that we are carrying into the coming quarters. As a result, our fiscal year 2023 financial outlook remains unchanged.
As a reminder of our 2023 previously stated guidance, we continue to expect fiscal year revenue to range between 420 and 445 million, adjusted EBITDA to range between 125 and 135 million and free cash flow which we define as adjusted EBITDA less than a year ago.
net replacement capex and less cash paid for interest to range between $65 and $75 million.
operationally and financially we have a solid foundation and we have confidence in executing on our growth strategy. With that I will now turn the call back over to Bruce. Thanks Ian. In summary we are very pleased with another record quarter driven by double digit top line growth and expansion in every segment.
We continue to prove the compelling business proposition of our high-value service and the necessity of our mission-critical service offering in a construction industry which positions us well for 2023 and beyond. We anticipate ongoing growth in our infrastructure and commercial end markets given the industry trends we discussed and our ability to capitalize on our business.
continue to focus on maximizing shareholder value by leveraging our unique operational capabilities, high value service offering, and executing non-opportunistic accretive M&A while strategically balancing our leverage. With that, I would like to turn the call back over to the operator for Q&A. Camilla?
We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue.
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One moment please while we poll for questions.
poll for questions. Thank you.
And our first question will come from Tim Mulroney with William Blair. Please proceed with your question. Bruce Ian, good afternoon.
Our first question will come from Tim Mulroney with William Blair. Please proceed with your question. Bruce Yeehan, good afternoon. Hi Tim. Hi Kim. Hi. Hi. Hi. Hi. Hi. Hi. Hi. Hi. Hi. Hi. Hi. Hi. Hi. Hi. Hi. Hi. Hi. Hi. Hi. Hi.
A couple questions here. So you know if I exclude the contribution from Carolina Coastal, it looks like organic revenue growth in your U.S.
concrete business was up, you know, maybe low single digit in the second quarter. Is that the type of momentum you'd expect as you head into the second half of the fiscal year?
Tim, one thing, and obviously we talked about the weather impact in the second quarter as well which is not typical. I'd maybe add to what you said, there was about 3 or 4 million dollars of weather affected growth that we would have normally seen in the second quarter. I mean obviously that plays into our utilization as well. On the organic side you're right but I would add to what you said.
The weather certainly played more of a part in this quarter than we've seen in a comparable year last year. But now, obviously moving into Qs 3 and 4, with the weather breaking we would expect improved volume from improved utilization and the same in Q4.
Okay, all right, so it sounds like maybe, you know, we're talking really normalized mid to high single digit organic growth is how that business is trending. If you, you know, split that up between pricing and volume on a normalized basis, how are you thinking about the business? The Chemicals on the
Yeah, a good way to think about that. So looking at the second quarter, so there's 12% yield over year growth, 5% like you said was on the M&E side and then 7% on organic. Of that 7% organic, it's about 2% volume, 5% price.
Got it. So still a strong pricing environment. Just one more for me if you don't mind.
Got it. So still a strong pricing environment. Just one more for me if you don't mind.
EBITDA margins, they were, I think, down a little bit in US concrete pumping. Just curious if you're able to quantify the impact from excess rainfall, what you think the primary risk impact will be and what the historical meaning of the tall surface area
EBITDA margin would have been without that impact trying to get an idea how to think about margin expansion or contraction as we had in this exactly year. Yeah, good question. The EBITDA margin impact from weather is about half the other half. There's still some lagging effects on inflation, mostly around labor.
and that would make up the other half. One thing on inflation that has stabilized in the second quarter was on the fuel side. So still a little bit of a hangover on the inflation piece in that margin.
Thanks so much for taking my questions. Thanks, Tim.
Thanks so much for taking my questions. Thanks, Tim. Thank you. Thank you.
As a reminder, if you would like to ask a question, it is star 1 on your telephone keypad.
Our next question will come from Brent Thilman with DA Davidson. Please proceed with your question.
Thanks. Good afternoon, guys. Hey, Ian, just following up on that last comment about – Okay.
Some of the margin compression related to inflation as you mentioned looks like fuel costs. It's sort of abated to some degree. What other factors that we thought we'd be thinking about here in the second half just in terms of inflationary impacts on the business. I think with fuel abating, you'd have some runway from margins here.
Yes, certainly going into Quarters 3 and 4, most of that comes from improved utilization as I mentioned earlier. It's hard through the second quarter when you've got this weather affected utilization piece so yes, on the margin improvement we expect a lot of that comes from the pull through and utilization. There is a slight element of...
inflation in there, mostly around the labour cost. Obviously we're looking forward to Q3 and 4 where we have more utilisation of the equipment which feeds nicely into the utilisation of our employees which then in turn generates that typical improved margin you see in Q3 and 4.
Okay, and you guys experienced some pretty significant pressures just associated with tough weather, I guess particularly in the west.
Yeah, I felt some of that in the first quarter, too.
How do you think about the snapback? You can see here in the second half of the year, there's a lot of work you can make up for. Obviously, there's still constraints out there in terms of how much you can actually get done. I'm just curious how you think about this volume snapback in the second half, given tough first half weather. I'm curious how you think about the snapback in the second half of the year.
Yeah, thanks for that question, Brent. The markets are responding really nicely. The commercial market has been really strong. We've started into Q3 now and we feel really good about the revenues in commercial. Bidding activity is really good in commercial right now and the project starts are becoming stronger.
And Bruce, maybe just one more. How much of the commercial business...
has sort of evolved or trended toward these larger projects, data centers, manufacturing, warehouses. I guess I'm just wondering, are you still seeing a fair number of opportunities within the lighter commercial vertical? Maybe if you could parse that out, that'd be helpful.
We don't separate that out as a percentage, but I would say the volume of the larger projects has become a significantly greater part of our commercial market than what we've seen.
don't separate that out as a percentage but I would say the volume of the larger projects have become a significantly greater part of our commercial market than what we've seen.
Thanks, Brian .
At this time, this concludes our question and answer session. I would now like to send a call back over to Mr. Yon for taking remarks.
Thank you, Camilla. We'd like to thank everyone for listening to today's call and look forward to speaking with you when we report our third quarter fiscal 2023's results in September . Thank you.
Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
That is.