Q1 2024 Northwest Pipe Company Earnings Call

Operator: Hello, and welcome to the Northwest Pipe Company first quarter 2024 earnings call. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question 2 at any time by pressing star 1 on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Scott Montross, CEO of Northwest Pipe Company. Please go ahead, sir.

Hello, and welcome to the northwest Pipe company first quarter 'twenty 'twenty four earnings call. If anyone should require operator assistance. Please press star zero on your telephone keypad.

And answer session will follow the formal presentation.

You may be placed in the question queue at any time by pressing star one on your telephone keypad.

As a reminder, this conference is being recorded.

Scott J. Montross: My pleasure to turn the call over to Scott Mantra CEO of Northwest Pipe Company. Please go ahead, Sir good morning, and welcome to northwest pipe Company's first quarter 2024 earnings Conference call. My name is Scott <unk> and I am President and CEO of the company I'm joined today by Aaron Wilkins, Our Chief Financial Officer by now.

Scott J. Montross: Good morning, and welcome to Northwest Pipe Company's first quarter 2024 earnings conference call. My name is Scott Montross, and I'm president and CEO of the company.

Scott J. Montross: I'm joined today by Aaron Wilkins, our chief financial officer. By now, all of you should have access to our earnings press release, which was issued yesterday, May 1st, 2024, at approximately 4 p.m. Eastern time. This call is being webcast, and it is available for replay.

Speaker Change: You should have access to our earnings press release, which was issued yesterday may one 2024 at approximately four P. M. Eastern time. This call is being webcast and is available for replay as we begin I would like to remind everyone that the statements made on this call regarding our expectations for the future.

Scott J. Montross: As we begin, I would like to remind everyone that the statements made on this call regarding our expectations for the future are forward-looking statements, and actual results could differ materially. Please refer to our most recent Form 10-K for the year ended December 31st, 2023, and in our other SEC filings for a discussion of such risk factors that could cause actual results to differ materially from our expectations. We undertake no obligation to update any forward-looking statements. Thank you all for joining us today.

Speaker Change: Our forward looking statements and actual results could differ materially. Please refer to our most recent Form 10-K for the year ended December 31, 2023, and in our other SEC filings for a discussion of such risk factors that could cause actual results to differ materially from our expectations. We undertake.

Speaker Change: No obligation to update any forward looking statements.

Scott J. Montross: I'll begin with a review of our first quarter performance and outlook for 2024. Aaron will then walk you through our financials in greater detail. Our first quarter results were mixed, with the steel pressure pipe business surpassing our expectations, while precast came in softer than anticipated. On the whole, our net sales of $113.2 million increased 14.2% year-over-year on solid profitability levels and represented the strongest revenue first quarter we have ever had. First quarter revenue from our SPP segment totaled $80 million, an increase of 25.9% year-over-year, and the highest first quarter ever reported in company history for this segment.

Speaker Change: Thank you all for joining us today I'll begin with a review of our first quarter performance and outlook for 2020 for Aaron will then walk you through our financials in greater detail. Our first quarter results were mixed with steel pressure pipe business, surpassing our expectations, while free cash came in softer than anticipated on the whole.

Aaron: Our net sales of $113 2 million increased 14, 2% year over year on solid profitability levels and representing the strongest revenue first quarter, we've ever had.

Aaron Wilkins: First quarter revenue from our SPP segment totaled $80 million, an increase of 25, 9% year over year, the highest first quarter ever reported in company history for this segment our performance primarily reflected higher production levels due to changes in project timing related to strong pipeline of bidding opera.

Scott J. Montross: Our performance primarily reflected higher production levels due to changes in project timing related to a strong pipeline of bidding opportunities in the early to mid-first quarter and the improved bidding environment we've experienced to date following the relatively small bidding year we had in 2023. Our SPP team continues to do an excellent job executing on bids and projects.

Aaron Wilkins: <unk> in the early to mid first quarter and the improved bidding environment. We've experienced to date following the relatively small bidding year, we had in 2023.

Scott J. Montross: Our SPP team continues to do an excellent job executing on bids and projects.

Scott J. Montross: The very strong bidding activity and project wins in the first quarter led to our SPP backlog, including confirmed orders as of March 31st, totaling $337 million, an improvement from $319 million as of December 31st, 2023, and down from $370 million at March 31st, 2023. Our first quarter performance was partially offset by lower selling prices due to production mix and project timing. Steel prices continue to remain fairly high by historical standards and appear to be relatively stable, fluctuating between $10 to $20 per ton up or down on a weekly basis.

Aaron Wilkins: The very strong bidding activity and project wins in the first quarter led to our SPP backlog, including confirmed orders as of March 31, totaling 337 million an improvement from $319 million as of December 31, 2023, and down from the $370 million at March.

Aaron: <unk> 31 2023.

Aaron: Our first quarter performance was partially offset by lower selling prices due to production mix and project timing steel.

Scott J. Montross: Steel prices continue to remain fairly high by historical standards and appear to be relatively stable fluctuating, 10% to $20 per ton up or down on a weekly basis lead times remain fairly short at between three and six weeks.

Scott J. Montross: Lead times remain fairly short, at between three and six weeks. Now turning to our precast segment, precast revenue declined 6.6% year-over-year to $33.2 million, primarily due to very slow first-quarter shipments in the non-residential construction-related precast business at Park, resulting from fairly light bookings in the fourth quarter of 2023, due mainly to customer caution related to the current interest rate environment. As a result, we booked only $16 million in orders at PARC in the fourth quarter.

Aaron: Now turning to our pre cast segment free cash revenue declined six 6% year over year to $33 2 million, primarily due to very slow first quarter shipments in the nonresidential construction related pre cash business at park, resulting from fairly light bookings in the fourth quarter of 2023.

Scott J. Montross: Due mainly to customer caution related to the current interest rate environment.

Scott J. Montross: As a result, we booked only $16 million of orders at park in the fourth quarter. However, our first quarter bookings at park rebounded to a strong level coming in at over $22 million.

Scott J. Montross: However, our first quarter bookings at PARC rebounded to a strong level, coming in at over $22 million. The residential business at Geneva continued to be strong with strengthening order books, as well as robust production and shipment levels, especially for a first quarter, which is typically the seasonally slower time of the year. Both residential and non-residential precast business came under modest pricing pressure during the first quarter. That, along with some of the mixed changes that we experienced, drove a lower average selling price for precast, which was partially offset by higher shipping volumes from the residential precast business at Geneva.

Scott J. Montross: The residential business that Geneva continued to be strong with strengthening order books as well as a robust production and shipment levels, especially for our first quarter, which is typically the seasonally slower time of the year, both residential and nonresidential free cash business came under modest pricing pressure during the first quarter that along.

Scott J. Montross: With some of the mix changes that we experienced drove a lower average selling price for free cash, which was partially offset by higher shipping volumes from the residential free cash business at Geneva as of March 31, Our order book totaled $52 million up from $46 million as of December 31, 2023 and down from the 58.

Scott J. Montross: As of March 31st, our order book totaled $52 million, up from $46 million as of December 31st, 2023 and down from $58 million as of March 31st, 2023. First quarter consolidated gross profit increased 21.5% year over year to 20.1 million, resulting in a gross margin of 17.8%, up from 16.7% in the first quarter of 2023. Our SPP gross margin of 17.8% was strong, increasing by approximately 560 basis points over the prior year period and 280 basis points over the prior quarter, primarily due to higher production volume, given customer-driven timing changes, and by significant strength in the first quarter bidding activity, coupled with our persistent focus on high-margin business.

Aaron: As of March 31, 2023.

Scott J. Montross: First quarter consolidated gross profit increased 21, 5% year over year to $20 1 million, resulting in a gross margin of 17, 8% up from 16, 7% in the first quarter of 2023.

Aaron: Our SPP gross margin of 17, 8% with strong increasing by approximately 560 basis points over the prior year period, and 280 basis points over the prior quarter, primarily due to higher production volume given customer driven timing changes and by significant strength in the first quarter bidding activity.

Scott J. Montross: Coupled with our persistent focus on higher margin business.

Scott J. Montross: Our precast gross margin of 17.7% was down compared to 24.7% in the first quarter of 2023, as depressed shipments on the non-residential construction side resulted in reduced first quarter revenue at the park facilities and the associated lower overhead absorption.

Our free cash gross margin of 17, 7% was down compared to 24, 7% in the first quarter of 2023 as depressed shipments on the nonresidential construction side resulted in reduced first quarter revenue at the park facilities and the associated lower overhead absorption. However, as we expected the margins.

Scott J. Montross: However, as we expected, the margins on the residential construction side at Geneva have also come under some modest pressure due to regional differences in market demand. Next, I would like to provide an update on our capital allocation priorities. Our top strategic priority for 2024 remains growth of the business through our organic product spread strategy and M&A opportunities. Beginning with product spread, we continue to execute level one of this strategy by building out capacity utilization at our Texas-based precast plants with a goal of maximizing overall efficiencies and production volume. During the first quarter, we bid on $11.8 million worth of projects outside of Texas and booked approximately $2.5 million worth of orders outside of Texas.

Scott J. Montross: On the residential construction side at Geneva have also come under some modest pressure due to regional difference in market demand.

Scott J. Montross: Next I would like to provide an update on our capital allocation priorities.

Scott J. Montross: Our top strategic priority for 2024 remains growth of the business through our organic product spread strategy and M&A opportunities beginning with product spread we continue to execute level. One of this strategy by building out capacity utilization at our Texas based free cash plants with a goal of maximizing or.

Scott J. Montross: <unk> efficiencies and production volume during the first quarter, we bid on $11 $8 million worth of projects outside of Texas and booked approximately $2 $5 million worth of orders outside of Texas in regard to level two of our strategy to produce free cash products out of our existing northwest pipe lower.

Scott J. Montross: In regard to level two of our strategy to produce precast products out of our existing Northwest Pipe locations, we were in production on 14 projects at the Geneva locations during the first quarter of 2024, and we are currently in production on 16 projects with more scheduled to come. Once the park precast products are more comfortably established at the Utah locations, we plan to expand our level two product spread to additional geographic locations over the next couple of years.

Scott J. Montross: Patients we were in production on 14 projects at the Geneva locations. During the first quarter of 2024, and we are currently in production on 16 projects with more scheduled to come once the park precast products are more comfortably established at the Utah locations, we plan to expand our level two products.

Scott J. Montross: Fred to additional geographic locations over the next couple of years.

Scott J. Montross: Following organic growth, we are committed to repaying the debt we incurred to finance the 2021 acquisition of Park USA to ensure we are well positioned to take advantage of future growth opportunities. As it pertains to our M&A strategy, we are actively evaluating pre-cash related opportunities. Our criteria include high-quality candidates that are accretive to our EPS and that possess strong organic growth and margin potential, solid asset efficiency, and a consistent positive cash flow profile.

Scott J. Montross: Following organic growth, we are committed to repaying the debt we incurred to finance. The 2021 acquisition of park USA to ensure we are well positioned to take advantage of future growth opportunities.

Scott J. Montross: As it pertains to our M&A strategy, we are actively evaluating pre cash related opportunities. Our criteria includes high quality candidates that are accretive to our EPS and that possess strong organic growth and margin potential solid asset efficiency and a consistent positive cash flow profile.

Scott J. Montross: Until we are ready to execute a meaningful acquisition, we may opt to be opportunistic in repurchasing shares of our common stock, subject to our liquidity, including availability of borrowings and covenant compliance under our amended credit facility and other capital needs of the business. During the first quarter, we repurchased approximately 127,000 shares for a total of $3.7 million.

Scott J. Montross: Until we are ready to execute a meaningful acquisition, we may opt to be opportunistic in repurchasing shares of our common stock subject to our liquidity, including availability of borrowings and covenant compliance under our amended credit facility and other capital needs of the business.

Scott J. Montross: During the first quarter, we repurchased approximately 127000 shares for a total of $3 $7 million.

Scott J. Montross: And since the initial authorization of our share repurchase in November 2023, we bought back a total of approximately $5 million worth of our shares as of April 30th. Before I conclude, I'd like to summarize our outlook for the second quarter of 2024. In our SPP business, we anticipate both our revenue and gross margin to be relatively in line with the first quarter of 2024. As we move throughout the balance of the year, we expect continued strength in our revenue and margins, similar to what we saw in 2022. We also expect backlog to remain high by historical standards, given the volume of expected SPP bidding in 2024.

Scott J. Montross: And since the initial authorization of our share repurchase in November 2023, we bought back a total of approximately $5 million worth of our shares as of April 30.

Scott J. Montross: Before I conclude I'd like to summarize our outlook for the second quarter of 2024, and our SPP business, we anticipate both our revenue and gross margin to be relatively in line with the first quarter of 2024 as we move throughout the balance of the year. We expect continued strength in our revenue and margins similar to what we.

Scott J. Montross: Saw in 2022, we also expect backlog to remain high by historical standards, given the volume of expected SPP bidding in 2024 I'd also like to add we remain encouraged by the amount of activity, we're seeing on our current and upcoming water transmission projects.

Aaron Wilkins: I'd also like to add that we remain encouraged by the amount of activity we're seeing on our current and upcoming water transmission projects. For a more complete view of these projects, please review our investor presentations, which can be found on the investor tab of our website within the events and presentation section. In our precast business, following a slow first quarter, which is generally the case in our precast segment, we were expecting significant improvement in both revenue and margins for the second quarter of 2024 and a strong remainder of the year.

Aaron Wilkins: A more complete view of these projects. Please review, our investor presentation, which can be found on the investor tab of our website within the events and presentations section.

Aaron Wilkins: And our free cash business following a slow first quarter, which is generally the case in our pre cast segment, we're expecting significant improvement in both revenue and margins for the second quarter of 2024, and a strong remainder of the year. We continue to believe in the strength of the free cash business in the mid to long term given the significant level of pent.

Aaron Wilkins: We continue to believe in the strength of the precast business in the mid to long term, given the significant level of pent-up demand specifically for residential housing, a growing need for infrastructure spending in the U.S., and our growing market position. In summary, the first quarter marked a solid start to the year in what we believe will be a significantly stronger bidding environment despite persistent macroeconomic challenges. The diversification strategy that we embarked on in 2020 is continuing to take shape, and we remain focused on positioning ourselves to take advantage of future growth opportunities that we anticipate arising in the precast space.

Aaron Wilkins: <unk> demand specifically for residential housing a growing need for infrastructure spending in the U S and our growing market position in summary, the first quarter marked a solid start to the year and what we believe will be a significantly stronger bidding environment. Despite persistent macroeconomic challenges the diversification.

Aaron Wilkins: <unk> that we embarked on in 2020 is continuing to take shape and we remain focused on positioning ourselves to take advantage of future growth opportunities that we anticipate a rising in the free cash space. We continue to believe in the prospects of the pre cash business longer term. Despite the current interest rate.

Aaron Wilkins: We continue to believe in the prospects of the precast business longer term, despite the current interest rate environment and the resultant impacts to our financial performance. We believe the less cyclical nature of the precast business helps balance out the business during periods of variability in the steel pressure pipe market, given the more transactional nature of the precast business and associated faster cash conversion cycle. Our goal remains for our precast-related business to grow to a similar size as our SPP business in the near term.

Aaron Wilkins: <unk> and the resultant impacts to our financial performance, we believe the less cyclical nature of the precast business helps balance out the business during periods of variability in steel pressure pipe market given the more transactional nature of the free cash business and associated faster cash conversion cycle. Our goal remains for our pre cash related business.

Aaron Wilkins: To grow to a similar size as our SPP business in the near term I would like to thank our teams in the field for the strong operational performance and for the continued emphasis on safety and fused at every level of our organization looking ahead, our priorities remain one maintaining a safe workplace.

Aaron Wilkins: I'd like to thank our teams in the field for their strong operational performance and for the continued emphasis on safety infused at every level of our organization. Looking ahead, our priorities remain, one, maintaining a safe workplace where our employees are proud to work, two, persistently focusing on margin over volume, three, continuing to implement cost reductions and efficiencies at all levels of the company, four, continuing to identify strategic opportunities to grow the company, and five, in the absence of M&A opportunities, returning value to our shareholders through opportunistic share repurchases. I will now turn the call over to Aaron, who will walk through our financial results in greater detail.

Aaron Wilkins: Where our employees are proud to work to persistently focusing on margin over volume.

Aaron Wilkins: Three continuing to implement cost reductions and efficiencies at all levels of the company.

Aaron Wilkins: For continuing to identify strategic opportunities to grow the company and five in the absence of M&A opportunities returning value to our shareholders through opportunistic share repurchases I will now turn the call over to Aaron who will walk through our financial results in greater detail.

Aaron Wilkins: Thank you, Scott, and good morning, everyone. I'll begin today with an overview of our first quarter profitability. Solidated net income for the first quarter was $5.2 million, or $0.52 per diluted share, compared to $2.4 million, or $0.23 per diluted share, in the first quarter of 2023. Consolidated net sales increased 14.2% to $113.2 million compared to $99.1 million in the year-ago quarter. Thiel pressure pipe segment sales increased 25.9% to $80 million, compared to $63.5 million in the first quarter of 2023.

Aaron Wilkins: Thank you Scott and good morning, everyone I'll.

Aaron Wilkins: I'll begin today with an overview of our first quarter profitability.

Aaron Wilkins: Consolidated net income for the first quarter was $5 2 million or <unk> 52 per diluted share compared to $2 4 million or <unk> 23 per diluted share in the first quarter of 2023.

Aaron Wilkins: Consolidated net sales increased 14, 2% to $113 2 million compared to $99 1 million in a year ago quarter.

Aaron Wilkins: Steel pressure pipe segment sales increased 25, 9% to $80 million compared to $63 5 million in the first quarter of 2023.

Aaron Wilkins: As Scott highlighted earlier, steel pressure pipe sales exceeded our expectations, driven by a 54% increase in tons produced, resulting primarily from changes in project timing, which was partially offset by an 18% decrease in selling price per ton, primarily due to product mix. Precast segment sales decreased 6.6% to $33.2 million, compared to $35.6 million in the first quarter of 2023, due to a 24% decrease in selling prices, primarily due to product mix, which was partially offset by a 23% increase in volume shipped. Our Geneva business benefited from high shipment volumes in the first quarter, while our park business saw contractors extend delivery timelines.

Aaron Wilkins: As Scott highlighted earlier steel pressure pipe sales exceeded our expectations driven by a 54% increase in tons produced resulting primarily from changes in project timing, which was partially offset by an 18% decrease in selling price per ton, primarily due to product mix.

Aaron Wilkins: Free cash segment sales decreased six 6% to $33 2 million compared to $35 6 million in the first quarter of 2023 due to a 24% decrease in selling prices, primarily due to product mix, which was partially offset by a 23% increase in volume shipped.

Aaron Wilkins: Our Geneva business benefited from higher shipment volumes in the first quarter, while our park business stock contractors extend delivery timelines.

Aaron Wilkins: Products we manufacture are unique, and therefore shipment volumes in the case of precast, production volumes in the case of steel pressure pipe, and the corresponding average sales prices for both segments do not always provide comparable metrics between periods as they are highly dependent on the composition of each segment's product mix. Solid A Gross profit increased 21.5%, 20.1 million, or 17.8% of sales, compared to 16.6 million, or 16.7% of sales, in the first quarter of 2023.

Aaron Wilkins: Products, we manufacture are unique therefore shipment volumes in the case of precast production volumes in the case of steel pressure pipe and the corresponding average sales prices for both segments do not always provide comparable metrics between periods as they are highly dependent on the composition of each segments product.

Aaron Wilkins: Mix.

Aaron Wilkins: <unk> gross profit increased 21, 5% $20 1 million or 17, 8% of sales compared to $16 6 million or 16, 7% of sales in the first quarter of 2023.

Aaron Wilkins: SPP gross profit increased 83%, 14.2 million or 17.8% of segment sales compared to gross profit of 7.8 million, 12.2% of segment sales in the first quarter of 2023, primarily due to higher volume and changes in product mix. Precast gross profit decreased 33%, to 5.9 million or 17.7% of precast sales, 8.8 million or 24.7% of segment sales in the first quarter of 2023, primarily due to changes in product mix. While demand has shown some recent signs of strength, particularly for residential products, the precast segment's average sewing prices have moderated due to recent market pressures, which coupled with the shipment delays at PARC resulted in first-quarter precast margins below our expectations.

Aaron Wilkins: SPP gross profit increased 83% $14 2 million or <unk>, 78% of segment sales compared.

Aaron Wilkins: <unk> to gross profit of $7 8 million 12, 2% of segment sales in the first quarter of 2023, primarily due to higher volume and changes in product mix.

Aaron Wilkins: Free cash gross profit decreased 33% to $5 9 million or 17, 7% of free cash sales $8 8 million or 24, 7% of segment sales in the first quarter of 2023, primarily due to changes in product mix.

Aaron Wilkins: While demand has shown some recent signs of strength, particularly for residential products.

Aaron Wilkins: Cas segments average selling prices have moderated through recent market pressures, which coupled with the shipment delays at park resulted in first quarter pre cast margins below our expectations.

Aaron Wilkins: Selling general and administrative expenses decreased 3.6% to $11.4 million, or 10.1% of sales, compared to $11.9 million in the first quarter of 2023, or 12% of sales. The decrease was primarily due to $0.5 million in lower incentive compensation expense. For the full year of 2024, we continue to expect our consolidated selling, general, and administrative expenses to be in the range of approximately $45 to $47 million. The depreciation and amortization expense in the first quarter of 2024 was $3.4 million compared to $2.8 million in the year-ago quarter.

Aaron Wilkins: Selling general and administrative expenses decreased three 6% to $11 4 million or 10, 1% of sales compared to $11 9 million in the first quarter of 2023 or 12% of sales.

Aaron Wilkins: The decrease was primarily due to zero point $5 million and lower incentive compensation expense.

Aaron Wilkins: For the full year of 2024, we continue to expect our consolidated selling general and administrative expenses to be in the range of approximately $45 million to $47 million.

Aaron Wilkins: Depreciation and amortization expense in the first quarter of 2024 was $3 4 million compared to $2 $8 million in the year ago quarter.

Aaron Wilkins: Given the larger bidding year expected for the steel pressure pipe business and the planned commissioning of our new reinforced concrete pipe plant, we currently expect appreciation and amortization to increase modestly in 2024. Our non-cash incentive compensation expenses were $1 million for both the first quarters of 2024 and 2023. Interest expense increased modestly to $1.5 million from $1.4 million in the first quarter of 2023 due to higher interest rates, which more than offset the decrease in average daily borrowing.

Aaron Wilkins: Given the larger bidding year expected for the steel pressure pipe business and the planned commissioning of our new reinforced concrete pipe plant.

Aaron Wilkins: Currently expect depreciation and amortization to increase modestly in 2024.

Aaron Wilkins: Our noncash incentive compensation expenses were $1 million for both the first quarters of 2024 and 2023.

Aaron Wilkins: Interest expense increased modestly to $1 5 million from $1 4 million in the first quarter of 2023 due to higher interest rates, which more than offset the decrease in average daily borrowings.

Aaron Wilkins: For the full year of 2024, we expect interest expense to range between $5 and $6 million. Our first quarter income tax expense was $2,000,000, resulting in an effective income tax rate of 27.5%, compared to $1,000,000 in the prior year quarter, or an effective income tax rate of 28.7%. Our tax rate for the first quarters of 2024 and 2023 was impacted by non-deductible permanent differences. We continue to expect our tax rate for the full year of 2024 to be within the range of 25 to 27 percent. Now I will transition to our financial conditions.

Aaron Wilkins: For the full year of 2024, we expect interest expense to range between five and $6 million.

Aaron Wilkins: Our first quarter income tax expense was $2 million, resulting in an effective income tax rate of 27, 5% compared to $1 million in the prior year quarter or an effective income tax rate of 28, 7%.

Aaron Wilkins: Our tax rate for the first quarters of 2024, and 2023 were impacted by non deductible permanent differences.

Aaron Wilkins: We continue to expect our tax rate for the full year of 2024 being within the range of 25% to 27%.

Aaron Wilkins: Now I will transition to our financial condition.

Aaron Wilkins: Net cash used in operating activities was $26.1 million in the first quarter of 2024, compared to net cash provided by operating activities of $26.3 million in the first quarter of 2023, primarily due to changes in working capital, which were partially offset by increased net income adjusted for non-cash items. Cash flow generation remains a key strategic focus of our business as it is critical to the execution of our growth and shareholder return strategies.

Aaron Wilkins: Net cash used in operating activities was $26 1 million in the first quarter of 2024 part of.

Aaron Wilkins: Net cash provided by operating activities of $26 3 million in the first quarter of 2023, primarily due to changes in working capital, which were partially offset by increased net income adjusted for noncash items.

Aaron Wilkins: Cash flow generation remains a key strategic focus of our business as it is critical to the execution of our growth and shareholder return strategies.

Aaron Wilkins: While we expected pressure on working capital needs for the steel pressure pipe business in the first half of the year, working capital at March 31st was higher than expected, due largely to higher production levels experienced in the quarter. This was coupled with traditional pressures we see on steel pipe segments working capital needs, usually attributed to lower billings associated with the seasonal slowing in shipments to job sites.

Aaron Wilkins: While we expected pressure on working capital needs for the steel pressure pipe business in the first half of the year working capital at March 31 was higher than expected due largely to higher production levels experienced in the quarter.

Aaron Wilkins: This was coupled with traditional pressures, we see on steel pressure pipe segments working capital needs, usually attributed to lower billings associated with the seasonal slowing in shipments to job sites.

Aaron Wilkins: In addition, we maintained higher inventory levels through the first quarter in order to support the growth and production levels expected in 2024. However, we continue to expect these timing differences will reverse through the balance of the year, and as a result, we continue to expect full-year 2024 free cash flow to range between $19 and $25 million. Our capital expenditures totaled $4.6 million in the first quarter of 2024 compared to $4.4 million in the prior year quarter.

Aaron Wilkins: In addition, we maintained higher inventory levels through the first quarter or the growth in production levels expected. In 2024. However, we continue to expect these timing differences will reverse through the balance of the year and as a result, we continue to expect full year 2020 for free cash flow to <unk>.

Aaron Wilkins: Range between 19 and $25 million.

Aaron Wilkins: Our capital expenditures totaled $4 6 million in the first quarter of 2024 compared to $4 4 million in the prior year quarter.

Aaron Wilkins: We continue to anticipate our total CapEx to be in the range of $19 to $22 million for full year 2024. As Scott highlighted, we completed 3.7 million in share-free purchases in the first quarter of 2024 at an average price of $29.39 per share, all of which were executed under a 10B51 trading plan. Since the inception of the program through April 30th, the total value of share repurchases is approximately $5 million. As of March 31st, 2024, we had 89.9 million of outstanding borrowings on our credit facility, leaving approximately 34 million in additional borrowing capacity on our credit line.

Aaron Wilkins: We continue to anticipate our total capex to be in the range of $19 million to $22 million for full year 2024.

Aaron Wilkins: As Scott highlighted we completed $3 7 million in share repurchases in the first quarter of 2024 at an average price of $29 39 per share all of which were executed under a <unk> one trading plan.

Aaron Wilkins: Since the inception of the program through April 30, the total value of share repurchases or approximately $5 million.

Aaron Wilkins: As of March 31, 2024, we had $89 $9 million of outstanding borrowings on our credit facility, leaving approximately $34 million in additional borrowing capacity on our credit line.

Aaron Wilkins: In summary, we are very pleased with the first quarter results, which represent the best first quarter profitability performance the company has achieved in over a decade. Now that we are through the seasonally slower first quarter, we are well positioned to capitalize on improving market conditions through the balance of the year. Thank you to all of our employees for the continued exemplary execution and commitment to safety, as well as to our shareholders for their continued support and confidence in Northwest Pipe Company. I will now turn it over to the operator to begin the question and answer session.

Aaron Wilkins: In summary, we are very pleased with our first quarter results, which represent the best first quarter profitability performance of the company has achieved in over a decade.

Aaron Wilkins: Now that we're through the seasonally slower first quarter, we are well positioned to capitalize on improving market conditions through the balance of the year.

Aaron Wilkins: Thank you to all of our employees for the continued exemplary execution and commitment to safety as well as to our shareholders for their continued support and confidence in northwest pipe company.

Aaron Wilkins: I'll now turn it over to the operator to begin the question and answer session.

Operator: Thank you, and I'll be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1. Our first question is coming from Brent Thielman from D.A. Davidson, your line is now live.

Speaker Change: Thank you, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad.

Brent Edward Thielman: From Asian tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to epic apprehensive Newport pressing star one.

Operator: First question is coming from Brent Thielman from D. A Davidson your line is now live.

Brent Edward Thielman: Hey, thanks. Good morning, guys. Good morning. I guess just first on precast, I mean, a little lower than we were thinking in terms of margins this quarter. Scott or Aaron, what's kind of a reasonable case for a rebound in the next few quarters, just considering these are some of the differences in regions and what sounds like a little bit of pricing or lower pricing being realized right now.

Brent Edward Thielman: Hi, Thanks, Good morning, guys.

Brent Edward Thielman: Good morning, Brian.

Brent Edward Thielman: Okay.

Brent Edward Thielman: I guess first on free.

Brent Edward Thielman: Free cash I mean, a little lower than we were thinking in terms of the margin this quarter Scott.

Brent Edward Thielman: Scott or Aaron whats kind of a reasonable pace.

Brent Edward Thielman: For a rebound in the next few quarters just considering.

Brent Edward Thielman: Yes, some of the differences in regions.

Brent Edward Thielman: I'd like a little bit of pricing lower pricing being realized right now.

Scott J. Montross: Yeah, I think when you're looking at the free cash flow, Brent, it's really the steel pressure pipe business that ended up being significantly stronger than we thought it was going to be in the first quarter. So, as you know, that ties up a lot of current assets initially, and then it starts to roll out of those current assets and come back to the balance sheet. So we expect steel pressure pipe revenues to be relatively stable throughout the year.

Scott: Yes, I think when Youre looking at the free cash flow Brendan it's really the steel pressure pipe business ended up being.

Scott J. Montross: Significantly stronger than we thought it was going to be in the first quarter. So so as you know that ties up a lot of current assets.

Scott J. Montross: And then it starts to run.

Scott J. Montross: Both of those current assets and come back to the balance sheet. So we expect the steel pressure pipe revenues to be relatively stable throughout the year. So now that we're up at a plateau I think that we're going to we're going to see that reverse as we come out of this thing the thing we're getting more all the time is more pre.

Scott J. Montross: So now that we're up at a plateau, I think that we're going to see that reverse as we come out of this thing. The other thing we're getting more of all the time is more prepayments for steel and actually MOH payments. In fact, we just won a big project not long ago where we're receiving well in excess of 10 million dollars in prepayment for the whole project. So I think that's going to contribute to the cash flow as we go forward too. Plus, everybody in the senior management program at this company now has a cash flow goal for the year or so tied to variable compensation. So that is being very, very closely watched.

Scott J. Montross: Payments for steel and actually Moh payments in fact, we we just want a big project not long ago, we were receiving well in excess of $10 million of prepayment for the whole project.

Scott J. Montross: So I think that's going to contribute to the cash flow as we go forward two plus everybody in the.

Scott J. Montross: The senior management program at this company now has a cash flow goal for the year or so.

Scott J. Montross: It tied to variable compensation, so that is being very very closely watched.

Brent Edward Thielman: Brent, just to clarify, I think you may have said pre-cash. We heard free cash in our set. Were you talking about the pre-cash margins? Well, that was one of my questions was about free cash. So you answered that. But yeah, no, I was referencing that.

Speaker Change: So Brian just to make I think you may have said free cash we heard free cash in Orissa reached a kind of free cash margins.

Speaker Change: That was one of my question with free cash so you answered that but yes, yes exactly.

Scott J. Montross: The pre-cash margins and that kind of rebound we ought to be thinking about. It sounds like you think it's going to get better from here. In addition, the precast was really on the non-res side at PARC. The bookings were really, really slow in the fourth quarter of 2023. We only booked like $16 million worth of business at PARC in the fourth quarter, which really led to a, and this is pretty transactional business on the precast side, right?

Brent Edward Thielman: Okay.

Scott J. Montross: Mark Morris.

Scott J. Montross: The rebound we ought to be thinking about.

Scott J. Montross: It sounds like you think it's going to get better from here.

Scott J. Montross: And with the pre cap was it was really on the non res side.

Scott J. Montross: Park, the bookings were really really slow in the fourth quarter of 2023, when we booked $16 million worth of business Park in the fourth quarter, which really led to and this is pretty transactional business on the precast side right. So it really led to very small shipping firm.

Scott J. Montross: So it really led to a very small shipping first quarter of 2024. Well, that's kind of rebounded now as we've gone through the first quarter. We booked in excess of $22 million at PARC in the first quarter, which should lead to a pretty strong second quarter at PARC and those margins coming back up. The other thing is with precast; we are still seeing substantial demand from the residential side. And ultimately, what we're seeing is a Geneva order book, since that's mostly residential, that's continuing to grow.

Scott J. Montross: First quarter of 2024, well that's kind of rebounded now as we've gone through the first quarter, we booked in excess of $22 million at park in the in the first quarter.

Scott J. Montross: Lee do a pretty strong second quarter in park and those margins.

Scott J. Montross: <unk> is coming back up the other thing is when free cash we're still seeing.

Scott J. Montross: Substantial demand from the residential side and ultimately what we're seeing is a Geneva order books, and so thats, mostly residential that's continuing to grow and we've just implemented a price increase there in March because the bookings are coming in so strong. So we're we're pretty confident we're going to see a pretty.

Scott J. Montross: And we've just implemented a price increase there in March because the bookings are coming in so strong. So we're pretty confident we're going to see a pretty good rebound in both revenue and margins as we get into the second quarter and through the rest of the year.

Scott J. Montross: Good rebound in both both revenue and margins as we get into the second quarter and through the rest of the year.

Brent Edward Thielman: Okay. And Scott, just coming back to SPP, I would have thought you would have seen some delays. I think you did see some delays just with respect to the poor weather in parts of the country, but it doesn't seem to have been a huge impact. Was there a pull forward this quarter? I'm just wondering why the outside performance, because I had expected some delays there.

Scott J. Montross: Okay.

Scott J. Montross: Just coming back to us.

Brent Edward Thielman: I would have thought you would have seen some delays I think you did see some delays with respect to the poor weather in parts of the country, but it does thank you.

Brent Edward Thielman: Theres been a huge impact was there whether there pull forward this quarter I'm just wondering why the outsized performance because it.

Brent Edward Thielman: I had expected some some delays there.

Scott J. Montross: We're starting to see changes in project timing. I wouldn't say anything, but it was a pull forward.

Brent Edward Thielman: But we're still using.

Scott: Using project timing I wouldn't see anything that was pull forward, but it's really we had we had so much work bid in the first quarter and one so much work in the first.

Scott J. Montross: But it's really, we had so much work bid in the first quarter and won so much work in the first quarter that we're starting to get pretty loaded up at some of the facilities. So we're having to jockey the production schedules around a little bit so that we can produce these things on time. And it really wasn't a pull forward, but we produced $80 million worth of revenue in the first quarter, and the backlog still went up by like $18 or $19 million; I can't remember what exactly it was. So you can kind of do the math on how much we won work in the first quarter. So we're pretty loaded up at some of the facilities.

Scott J. Montross: First quarter that were starting to get pretty loaded up at some of the facilities. So as we're having the jockey the production schedules around a little bit. So that we can produce these things on time and it really wasn't a pull forward, but I mean, we produced $80 million worth of revenue in the first quarter.

Scott J. Montross: In the backlog still went up by like 18% or $19 million I can't remember what exactly it was so you can kind of do the math on how much we won work in the first quarter. So we're pretty loaded up at some of the facilities.

Brent Edward Thielman: And just the last question to that, Scott, with all the work that you're picking up, maybe the pricing attached to that, is it more attractive, I guess, in the big climate? more appealing to you from a competitive standpoint. Yeah, I think so.

Scott J. Montross: And just the last question to that Scott with all the work.

Scott: We're picking up.

Scott: The pricing.

Scott: Is it more attractive.

Brent Edward Thielman: Climate.

Brent Edward Thielman: More appealing to you from a competitive standpoint.

Scott J. Montross: Yeah, I think when you're dealing with pricing, it's a function of what steel prices are. And one of the things is that steel prices are remaining pretty high by historical standards. They're pretty stable right now, fluctuating around 825 or 835 for a hot roll band.

Speaker Change: Yes, I think when you when you are dealing about the pricing.

Scott J. Montross: It's a it's a function of what steel prices are when one of the things is that steel prices are remaining pretty high by historical standards, they're pretty stable right now fluctuating around <unk> 25, or <unk> 35 for for hot rolled band, but there is two things that drive.

Scott J. Montross: But there are two things that drive margins for the steel pressure pipe thing. One is obviously demand, and demand builds backlog industry-wide. And when backlogs build like that industry-wide, what happens is not everybody can do a job at the same time, so you have less bidding pressure on these jobs. And you tend to see the margins start to move their way up a bit, too. So we're pretty happy about the direction that all this is going right now, and these margins are moving in the right direction at this point.

Scott J. Montross: Margins for the steel pressure pipe thing one is obviously demand and demand builds backlog industry wide and when backlogs build like that industry wide. What happens is is not everybody can do a job at the same time. So you have less bidding pressure on these jobs and you tend to see the margins.

Scott J. Montross: To move its way up a bit too. So we're we're pretty we're pretty.

Scott J. Montross: Happy about the direction that all of that is going right now in these margins are moving in the right direction at this point.

Brent Edward Thielman: Excellent. Thank you. I'll pass it on.

Speaker Change: Excellent. Thank you I'll pass it on.

Operator: Thank you. The next question is coming from Julio Romero from Sidonian Company. Your line is now live.

Brent Edward Thielman: Absolutely.

Brent Edward Thielman: Thank you next question is coming from Julio Romero from Sidoti and company. Your line is now live.

Operator: Yeah.

Julio Alberto Romero: Hey, good morning, Scott and Aaron. Maybe we can stay on that point on SPP, just trying to maybe understand the strong margins a little bit, because they were really impressive. And as you just said in response to Brent's question, it was customer-driven project timing. You said you had to move around production levels a bit. But it wasn't pulling forward. Are you saying maybe you took on some quick turn work at, you know, favorable? Is that what it is? OK, yeah, we got the first one.

Julio Alberto Romero: Hey, good morning Darren.

Julio Alberto Romero: Maybe staying on that point on STP.

Julio Alberto Romero: Just trying to maybe understand.

Julio Alberto Romero: Strong margins, a little better because they were really impressive.

Julio Alberto Romero: As he just said in a response to <unk> question.

Julio Alberto Romero: It was customer driven project timing and you said you had to move around production and level is a bit.

Julio Alberto Romero: But it wasn't pull forwards are you, saying maybe you took on some some quick turn work I'd like yes, we are favorable.

Scott J. Montross: Yeah, we got the first quarter was a little short fuse on it, and ultimately, we got a little bit higher production levels on it. But we're seeing, you know, we're seeing really, really strong bidding through the first quarter. And you know, we expect the year to be a pretty good strong bidding year. And we have not even gotten to the IJA-funded part of this market for us on steel pressure pipe. That is a thing that's probably out in late 25, 26, 27, 28.

Speaker Change: We got the first.

Julio Alberto Romero: There was a blip.

Scott J. Montross: In short fuse on it.

Scott J. Montross: And ultimately, we got a little bit higher production levels on it but we're seeing we're seeing really really strong bidding through the first quarter and we expect the year to be a pretty good strong bidding year, and we have not even gotten to the <unk>.

Scott J. Montross: Hey, a funded part of this market for us on steel pressure pipe that is a.

Scott J. Montross: Thing, it's probably out in 'twenty late 'twenty five 'twenty six 'twenty 728, so the.

Scott J. Montross: So the expectation is we have a pretty strong steel pressure pipe market coming at us for multiple years in a row. And when you get multiple strong steel pressure pipe markets in a row, you tend to get a situation where the margins start to push up toward something that begins with a two at that point. So I think that we're kind of heading in that direction right now because of the demand that we're seeing coming forward.

Scott J. Montross: The expectation is as we have a pretty strong steel pressure pipe market coming at us for multiple years in a row and when you get multiple strong markets for steel pressure pipe in a row you tend to get a situation where the the margin start to push up towards something that begins with the two.

Scott J. Montross: At that point, so so I think that we're kind of heading in that direction right now because of the demand that we're seeing coming forward.

Scott J. Montross: And the other thing with margins is higher production levels, and you're spreading your fixed costs out over more tons, right? So it's a better situation that way. So we've got a pretty decent tailwind behind us. So we believe on the steel pressure pipe side, both on revenue and in margin right now, as we go through the near term and, quite frankly, the longer term because of the IJA.

Scott J. Montross: The other thing with the margins as higher production levels and you're spreading your fixed cost.

Scott J. Montross: Out over more tons right. So it's it's.

Scott J. Montross: A better situation that way. So we've we've got a pretty decent tailwind behind it we believe on the steel pressure pipe side both on revenue.

Scott J. Montross: And margin right now is as we go through the near term and quite frankly longer term because of the Iga.

Scott J. Montross: Got it. That's that's a good color. And thanks for adding that. So I guess, are you guys saying that you kind of exited March at a strong production level, and that kind of carried into April, and that gives you the confidence that revenue and margins, and 2Q for SPP should should look like something that you posted in 1Q? Yeah, it's

Speaker Change: Got it that's good color and thanks for.

Scott J. Montross: Thanks for adding that so I guess.

Scott J. Montross: Are you guys, saying that you kind of exited March at it at a strong production level in that kind of carry into April and Thats. What gives you the confidence that revenue and margins in <unk> for SPP.

Scott J. Montross: Should it look like something that you.

Scott J. Montross: Posted on <unk>.

Scott J. Montross: Yeah, it's really what we have in backlog already. I mean, we carried, like I said when Brent was asking questions, we produced $80 million worth of revenue on steel pressure pipe in the first quarter, and the backlog still went up by $18 million. So, you can do the math on how much we won in the first quarter with work, and it's starting to build up at these things.

Speaker Change: Yes, it's really what we have in backlog already I mean, we carried like I said one.

Scott J. Montross: When Brent was asking questions. I mean, we produced we produced $80 million worth of revenue on steel pressure pipe in the first quarter.

Scott J. Montross: The backlog still went up by $18 million. So you can do the math on how much kind of we won in the first quarter with work and its starting to buildup at these things. So we expect the rest of the year on steel pressure pipe to be strong and when you look at some of the construction trends.

Scott J. Montross: So, we expect the rest of the year on steel pressure pipe to be strong. And when you look at some of the construction trends, the non-residential stuff is really non-residential, and the non-building part of non-residential stuff has been pretty solid, and that's the thing that affects where we are on steel pressure pipes. So, we expect that to be pretty solid as we go forward through the rest of the year.

Scott J. Montross: The nonresidential stuff is really.

Scott J. Montross: The nonresidential.

Scott J. Montross: The non building part of nonresidential stuff is has been pretty solid and that's the.

Scott J. Montross: The thing that effect, where we are on steel pressure pipe. So we expect that to be.

Scott J. Montross: <unk> pretty solid as well as we're going forward through the rest of the year.

Speaker Change: What do you guys think.

Speaker Change: Do you think.

Scott J. Montross: Why do you think volume and bidding inflected.

Scott J. Montross: So quickly and strongly in <unk> was there anything that you can call out there that drove that.

Scott J. Montross: I think part of it is that we had some stuff that was originally intended for 23 that ended up in the first part of 2024, so probably the years would have been a little bit more level had it not been for that. But I think it's that and some of the stuff that's coming forward. We're just now starting to see some of the IIJA funding come into place, and it's slow getting started because there's like 46 million or 46 billion that's set aside for water-type projects, like the things that we do.

Scott J. Montross: No.

Scott J. Montross: Part of it.

Scott J. Montross: That we had some some stuff that was originally intended for 'twenty three that ended up in the first part of 2024, so it probably the years would've been.

Scott J. Montross: A little bit more level had it not been for that but I think it's that and some of the stuff. That's coming forward. We're just now starting seeing some of the funding.

Scott J. Montross: Come into place and it's slow getting started because there is like $46 million or <unk> $46 billion is set aside for water type projects like the things that we do and so far through the end of the year in 2023, only about $1 8 billion of its been actually.

Scott J. Montross: And so far, through the end of the year in 2023, only about 1.8 billion of it's been actually put out and paid out. So there's a lot to be, there's a lot to be done. And I think those projects are really going to help buoy these things as we go forward.

Scott J. Montross: Put out paid out so there's a lot to be theres, a lot to be done and I think those projects are really going to help buoy the stuff as we go forward.

Speaker Change: And I'm not sure if I answered your question the way you want it what was the other part of that.

Julio Alberto Romero: Just trying to get a feel for what, like how you ended up with, you know, strong volumes and backlog, and, you know, anything one-time in nature that caused this inflection in bidding and volumes in the first quarter. But I think you answered it. Yeah.

Scott J. Montross: Just trying to get a feel for what.

Julio Alberto Romero: Like how you ended up with strong volumes and backlog up in anything onetime in nature that caused this inflection in bidding in volumes in the first quarter, but I think yes.

Scott J. Montross: One thing too is that business has been so heavy in the first quarter that everybody's starting to fill up a little bit. And remember, there are only three major competitors in steel pressure pipe after the consolidation that happened with us acquiring Amaron in 2018. So the tendency is those backlogs start to shift a little bit, and we're the ones that have a nationwide footprint, right? So we can take on much more work than anybody else can, and we're benefiting from that at this point.

Julio Alberto Romero: Yes.

Speaker Change: Do us.

Scott J. Montross: So in the first order.

Scott J. Montross: What are you starting to fill up a little bit and remember there's only three major competitors in steel pressure pipe after the consolidation.

Scott J. Montross: What happened with us.

Scott J. Montross: With us.

Scott J. Montross: Acquiring <unk> in 2018, so the tendency is as those backlogs start to shift a little bit.

Scott J. Montross: And the more the ones that have a nationwide footprint right. So we can take on much more work than anybody else can and it's we're benefiting from that at this point.

Scott J. Montross: Gotcha. Last one for me is, can you just speak to how active you are in the M&A pipeline right now on the precast side? Beep.

Speaker Change: Got you last one for me is can you just speak to how active you are in the M&A pipeline right now on the precast side.

Scott J. Montross: We're starting to get more active all the time. We're starting to see things that we're actually interested in and looking at. I think as we go through a period of time, it's going to continue to improve. The multiples are still a little frothy on the acquisition side because, obviously, we're coming off a period where there have been some pretty high business levels. I don't know if, especially on the general precast side, everybody is seeing the kind of strength that we're seeing in Utah.

Speaker Change: Turning to get more active all the time, we're starting to see things that we're actually interested in and looking at.

Scott J. Montross: And I think as we go through a period of time, it's going to it's going to continue to improve the multiples there are still a little frothy on the acquisition side because.

Scott J. Montross: Obviously, we're coming off a period, where there has been some pretty high business levels and I don't know that especially on the general pre cash side that everybody has seen the kind of strength that we're seeing in Utah. So we're starting to see those multiples adjust a little bit and I think as we get out through the rest of this year, it's going to get more interesting with.

Scott J. Montross: We're starting to see those multiples adjust a little bit. I think as we get out through the rest of this year, it's going to get more interesting with what we're seeing because we've got a couple that we're interested in looking at right now. Ultimately, we're going to be going down that road. It's part of our growth strategy now, right? If we can't do anything and there's nothing practical or accessible on the M&A side, we're gonna look at continuing to buy some shares back because we have to do something to make it better for our shareholders, and that's how we're looking at this thing. So ultimately, we will come up with something on the M&A, and until we do, we're gonna continue down the path that we are because we're very active at this point.

Julio Alberto Romero: Very good. Thanks again.

Julio Alberto Romero: What we're seeing because we've got a we've got a couple that we're interested in and looking at right now and ultimately where we're going to be going down that road I think.

Julio Alberto Romero: The way we look at it <unk> is that the share buyback thing as part of our growth strategy now right. If we can't do anything and there's nothing practical or accessible on an M&A side, we're going to look at.

Julio Alberto Romero: Buying continuing to buy some shares back because we have to do something to make it.

Julio Alberto Romero: To make it better for our shareholders.

Julio Alberto Romero: And that's how we're looking at this thing so so ultimately we will come up with something on the M&A.

Julio Alberto Romero: And until we do we're going to continue down the path that we are because we're very active at this point.

Julio Alberto Romero: Yeah.

Julio Alberto Romero: Very good thanks again.

Julio Alberto Romero: Absolutely.

Operator: Thank you. The next question is coming from Ted Jackson from Northland Securities. Your line is open.

Julio Alberto Romero: Thank you next question is coming from Ted Jackson from Northland Securities. Your line is ally.

Edward Randolph Jackson: Hey guys, congrats on a super quarter. My questions have all pretty much been answered, but just a couple of things. With regard to the outlook and your view with regard to steel pricing, am I right to infer that you expect steel prices for 2024 to be relatively stable on a go-forward basis and that it's underpinning your, you know, kind of $80 million quarterly run rate view?

Edward Randolph Jackson: Hey, guys congrats on a super quarter.

Speaker Change: Hey, Ted.

Edward Randolph Jackson: My questions have all pretty much been answered, but just a couple of things with regards to the outlook.

Edward Randolph Jackson: Your view with regards to steel pricing.

Edward Randolph Jackson: Right to infer that you expect steel prices for 2024 to be relatively stable on a go forward basis and that incentive pending here.

Edward Randolph Jackson: 80 million quarterly run rate view.

Scott J. Montross: You know, I'll tell you that I haven't seen, and you know, my background is in steel, and I haven't seen stable steel prices for many years, right? So I think you go back to before 2004, before things were really stable for long periods of time.

Speaker Change: I will tell you that I haven't seen in my background is in steel and I Havent seen stable steel pricing for for many years right. So I think you'd go back from before 2004 before things were for really stable for long periods of time, but right now it appears that we're in a little bit of a period of stability I would think.

Scott J. Montross: But right now, it appears that we're in a little bit of a period of stability. I would think, you know, a lot of the publications are saying that they expect it to kind of drift down as we go through the rest of this year. But I think the steel producers at this point are doing a pretty good job of, you know, managing their markets, and you see those guys will pull production capacity off relatively quickly if things start to drop too far.

Scott J. Montross: There are a lot of it a lot of the the publications are saying that they expect it to kind of drift down as we go through the rest of this year, but I think the the.

Scott J. Montross: Steel producers at this point or are doing a pretty good job at.

Scott J. Montross: On managing their markets.

Scott J. Montross: And you see those guys will pull production capacity off relatively quickly if things things start to drop too far and I think it's either going to be a little bit stable or maybe even potentially moving up at some point, but I just don't see it dropping as we go through the year. So I think in higher steel prices are good.

Scott J. Montross: And I think it's either going to be a little bit stable or maybe even potentially moving up at some point. But I just don't see it dropping as we go through the year. So I think higher steel prices are good for us on the steel pressure pipe side. It may tie up a little more cash in the short term, but ultimately, that rolls off and goes to the balance sheet. But I think it's probably relatively stable than maybe inching up as we go out through this period of time because the minute that starts dropping a bit, those guys will pull production capacity back and stabilize things.

Scott J. Montross: For us on the steel pressure pipe side. It may tie a little more cash up short term, but ultimately that rolls off and goes to the balance sheet, but I think it's probably relatively stable then maybe inching up as we go out through this period of time, because the minute that starts dropping a bit those guys will production capacity off in <unk>.

Scott J. Montross: Stabilize things.

Edward Randolph Jackson: What do you guys, in terms of your kind of forward modeling, what are you kind of penciling in for, you know, kind of a per ton price for steel? And when I look at the first quarter on the Midwest contract, it looks like the average was just under a thousand bucks a ton, but obviously, it's been, you know, lately, closer to 800. I mean, you know, kind of what do you think about the remainder of 24? What are you penciling in as you, you know, you know, model for your own business?

Speaker Change: What are you what are you guys in terms of here.

Edward Randolph Jackson: Kind of for modeling what are you kind of penciling in for per.

Edward Randolph Jackson: Per ton pricing for steel and when I look at first quarter on the mid west contract. It looks like the average was just under one <unk>.

Edward Randolph Jackson: Bucks a ton, but obviously, it's been lately, it's been closer to 800, I mean kind of what do you. When you think about the remainder of 2000 and for what is your Pennsylvania.

Edward Randolph Jackson: No.

Edward Randolph Jackson: Model for your own business.

Scott J. Montross: Well, steel prices that we realized in the first quarter, now remember, some of these are bought previously, so they're previous pricing, and we're seeing steel, incoming steel costs that are in the low to, yeah, probably the lower 900s because those include freight costs and extras for whatever kind of greatest deal that you're buying, right? So, you know, from what we've talked about, we probably have something in the area of about 900 penciled in, maybe a little bit less than that for the year, and don't really expect that to change too much, to tell you the truth.

Speaker Change: We feel.

Scott J. Montross: We realized in the first quarter now remember some of these or are bought previous so their previous pricing Dan.

Scott J. Montross: Steel incoming steel costs that are in the low to yes, probably lower nine hundreds because those include freight cost than.

Scott J. Montross: Extras for whatever whatever kind of greatest deal that youre buying right. So so if you from what we've talked about we've probably got something in the area of about 900 penciled in maybe a little bit less than that for the year and don't really expect that to change too much to tell you the truth.

Edward Randolph Jackson: And then when you look forward, and you know, we talked about it, you know, within it came up in the last one of the last questions with regard to the second quarter view for margins in the SPP product to be similar to the first quarter. Is it fair? What I'm hearing from you and everyone else is that there's a more robust market in terms of opportunity, so it's lessening competition for individual bids.

Scott J. Montross: And then when when you look forward and we talked about within came up in the last.

Edward Randolph Jackson: And then the last question is with regards to the second quarter view for margins in the SPP product to be similar to the first quarter is it fair what I'm hearing from you and everything else is that there is more robust.

Edward Randolph Jackson: Market in terms of opportunity so it's lessening competition for individual bids.

Edward Randolph Jackson: Are we going to see the margins that you had in the first quarter continue, or as this market kind of goes along, is there an opportunity for margins, you know, actually to improve, you know, all else being equal because you have the greatest capacity and hence you have more, you know what I'm saying, you have the appetite to take on more bids than other people can?

Edward Randolph Jackson: Is it are we going to see the margins that you had in the first quarter.

Edward Randolph Jackson: Continue or is this market kind of goes along or is there an opportunity for margins.

Edward Randolph Jackson: To improve all else being equal because you have you have greatest capacity and hence you have the more what.

Speaker Change: I'm, saying, yes.

Edward Randolph Jackson: Appetite to take on more business than other people.

Scott J. Montross: That's a fair question. I think that with the backlog that we have and the projects that we've won and stuff, that it's at least something that we view to be stable going forward, but with the potential of having some upward movement, if that makes sense.

Edward Randolph Jackson: Yes.

Speaker Change: That's a fair question I think that was the backlog that we have in the projects that we've won.

Scott J. Montross: Tough that that it's it's at least something that we view to be stable.

Scott J. Montross: Going forward, but with the potential of having some upward movement if that makes sense.

Speaker Change: That makes sense.

Edward Randolph Jackson: And then going into free cash flow, and thanks very much for all the color with regard to 24 guidance. Very helpful. But, you know, I mean, obviously, I was a little surprised, and I understand why the free cash flow number for the first quarter went the way it did.

Scott J. Montross: And then.

Scott J. Montross: Going into free cash flow and thanks very much for all the color with regards to that.

Edward Randolph Jackson: 24 guidance very helpful.

Edward Randolph Jackson: Obviously, it's a little surprised and I understand why the free cash flow number for the first quarter.

Edward Randolph Jackson: It did I mean, it's actually a pretty decent problem to have because the business is growing your committed capital, but if youre going to keep your run rate at $80 million in was to say that the runway for you given kind of the length.

Edward Randolph Jackson: I mean, it's actually a pretty decent problem to have, you know, because business is growing, you're, you know, committing capital. But if you're going to keep your, you know, run rate at $80 million, and was to say that the runway for you, given, you know, kind of the length and opportunity with, you know, you know, a lot of the water projects that you mentioned rolling, not really until the end of 24, but really 25 and 26, you know, is it, you know, fair to assume that if you maintain kind of a revenue run rate, you know, going forward for the next year or two at that $80 million, Your working capital levels would run, you know, kind of flat.

Edward Randolph Jackson: Opportunity with.

Edward Randolph Jackson: A lot of the water projects that you mentioned rolling that really until the end of 'twenty, four but really 'twenty five 'twenty six.

Edward Randolph Jackson: Is it.

Edward Randolph Jackson: Fair to assume that if you maintain kind of a revenue run rate going forward for the next year or two at that $80 million that we would continue to see this more and more improvement in free cash flow because here.

Edward Randolph Jackson: Working capital levels would run.

Edward Randolph Jackson: Do you understand what I'm saying, where I'm going with this? Like if you're going to run at an $80 million run rate, you know, and you're running there now and you've just put this big increase in, you know, this big drain, you know, in terms of your cash flow from, you know, working capital changes, would we, would it be fair to say that, you know, your working capital levels would run relatively stable and that we could feel an extended period of, you know, very solid free cash flow generation?

Speaker Change: Tim just wanted to say Hey, we're going with this like it if youre going to run it at $80 million run rate.

Edward Randolph Jackson: You're running there now and you just put this big increase in.

Edward Randolph Jackson: That's a big drain in terms of your cash flow from working capital changes, we would it be fair to say that your working capital levels would run relatively stable and that we could see an extended period of very.

Edward Randolph Jackson: Very solid free cash flow generation.

Aaron Wilkins: Yeah, Ted, that would essentially be the way it works. We got caught in a little bit of a perfect storm this quarter. You know, obviously had the production levels go up for steel pressure pipe. Had to kind of load the gun for the production levels that we had. Coil in our inventories, right?

Speaker Change: Yes, Ted that that would essentially be the way. It works, we got caught in a little bit of a perfect storm this quarter.

Aaron Wilkins: You know obviously had to predict.

Aaron Wilkins: Up for steel pressure pipe.

Aaron Wilkins: Kind of load the gun for the production level that we.

Aaron Wilkins: Coil.

Aaron Wilkins: And our and our inventories right, so and really.

Edward Randolph Jackson: So, and really, we just didn't kind of get some of the good bounces that we got a year ago. And those good bounces are going to come, like Scott said. We're doing a good job of getting out and working on MOH payments with our customers, and working on steel prepayments with our customers. So, some of those good timing things that we've seen in the past are just kind of still in front of us for 2024.

Edward Randolph Jackson: We just didnt kind of get some other good bounces that we got a year ago. Then those good balances are going to come like Scott said, we're doing a good job of getting out and working on moh payments with our customers working on steel prepayments with our customers. So some of those good timing things.

Edward Randolph Jackson: That we've seen in the past there are just kind of still in front of us for 2024.

Edward Randolph Jackson: I think the other thing, though, as you kind of go back to just kind of that normalization of revenue levels, that will really kind of steady the ship. The only thing that would really kind of steer it, I think, off that path would be just a really weird blip in steel prices. That has some potential. If it were to end, and like we said, we don't foresee that happening or anything like that, but that would be the thing that could really kind of derail at that kind of 80 million run rate for SPP.

Edward Randolph Jackson: I think the other thing that was you kind of go back to just to kind of that normalization of the of the revenue levels that will really kind of steady the ship and the only thing that would really kind of.

Edward Randolph Jackson: Steroid I think off that path would be just a really weird blip in steel prices that has that has some potential.

Edward Randolph Jackson: If it were to and like we said, we don't we don't foresee that happening or anything like that but that would be the thing that could really kind of derail and that kind of near 80 million run rate for SPP.

Edward Randolph Jackson: Well, that's why I preface it with Thiel, you know, with all else being equal, because I understand what Thiel does with regard to the business itself. But all in all, I mean, that's super encouraging.

Edward Randolph Jackson: Well, that's why I said, let's deal with all else being equal because I understand whats deal does with regard to the business itself.

Edward Randolph Jackson: But all in all that's all super encouraging than my last.

Edward Randolph Jackson: Then my last kind of question is, when you talk about a fairly strong market for precast in the second quarter and beyond, I mean, are we talking, you know, like, you know, can you, you know, can you, what are we talking about here? I mean, like, you know, I mean, it's not, it's not the biggest part of your business, obviously. But I mean, can you see that business, you know, popping north of 40 million in the second quarter?

Edward Randolph Jackson: Question is when you talk about.

Edward Randolph Jackson: <unk>.

Edward Randolph Jackson: Fairly strong.

Edward Randolph Jackson: Market for precast.

Edward Randolph Jackson: Second quarter and beyond I mean are we talking like.

Edward Randolph Jackson: Can you can you.

Edward Randolph Jackson: What are we talking about here.

Edward Randolph Jackson: Scott.

Edward Randolph Jackson: It's not the biggest part of your business, obviously, but I mean can you see that business pop in north of $40 million in the second quarter. I mean is it that kind of pop or is it something a little more modest than that.

Edward Randolph Jackson: I mean, is it that kind of pop, or is it something a little more modest? Oh, and by the way, congratulations on the improvement in bookings in that business. That was, you know, you've had a lot of decline in that for a mini-period, so it was really nice to see that, by the way.

Edward Randolph Jackson: No.

Edward Randolph Jackson: Congratulations on the improvement in bookings in that business that was.

Edward Randolph Jackson: <unk> had a lot of decline in that for many periods. So it was really nice to see that by the way.

Scott J. Montross: Yeah, I think the second quarter is kind of where you're saying. If you look at last year where we were in the second quarter, second and third quarters for precast are the big times of the year, while the first quarter is generally always slow. Okay, and you know, obviously for us, one of the businesses that produce the precast infrastructure in Geneva is in Utah, and they tend to get a lot of snow in the winter, and the contractors aren't out doing as much work during the winter.

Edward Randolph Jackson: Yes, I think the second quarter's kind of.

Scott J. Montross: Where you are saying if you look at last year, where we were in the second quarter second and third quarters for free cash or the big the big time of the year first quarters generally always slow, okay, and obviously for us.

Scott J. Montross: One of the one of the business and the free cash and infrastructure in Geneva is in Utah, and they tend to get a lot of snow in the winter and the contractors are not doing as much work during the winter. So we believe that it is going to rebound like similar to what we did last year in the second quarter and probably the year before in the second quarter also so I think it's kind of on a similar path.

Scott J. Montross: So, we believe that it's going to rebound, similar to what we did last year in the second quarter and probably the year before in the second quarter also. So, I think it's kind of on a similar path, and we expect again, you know, after a pretty slow first quarter for precast, we expect the rest of the year to be pretty good.

Scott J. Montross: And we expect again after a pretty slow first quarter for free cash we expect the rest of the year to be pretty good.

Edward Randolph Jackson: Well, I mean, it was a great quarter, and it looks like you're really teed up for, you know, an extended period of, you know, financial performance, and market performance. Congratulations and everything, and I'll talk to you later. Thanks, Dad.

Scott J. Montross: Okay.

Speaker Change: Great quarter, and it looks like Youre really teed up for an extended period of.

Speaker Change: Financial performance market performance congratulations on everything.

Edward Randolph Jackson: Populated.

Speaker Change: Thanks, Ed.

Operator: Thank you. As a reminder, that's star number one to be placed in the question queue. Our next question is coming from David Wright from Henry Investment Trust. Your line is now live.

Edward Randolph Jackson: Thank you as a reminder, that star one to be placed in quick question queue. Our next question is coming from David Wright from Henry Investment Trust. Your line is now live.

David W. Wright: Hey, guys good morning.

David W. Wright: Hey, David Good morning, David.

David W. Wright: Hey, congratulations. Great job on the stock buyback during the quarter. I think down here that's a great thing to use your capital for, and that's a really great average price.

David W. Wright: Hey, congratulations great job on the stock buyback during the quarter.

David W. Wright: I think down here.

David W. Wright: And to use your capital for <unk> and.

David W. Wright: And that's a really great average price.

Scott J. Montross: Scott, you were talking about, um.., kind of, you know, having a lot of SPP business and getting loaded, highlighted a 54% increase in tons produced in Q1. How do you, do you have to flex the labor force at all? I know in quarters in years past, you've been kind of at lower capacity utilization. How does a ramp up work from a staff?

David W. Wright: Scott you were talking about.

Scott J. Montross: Kind of having a lot of SPP business and getting loaded.

Scott J. Montross: Our level of 54% increase in tons produced in Q1.

Scott J. Montross: How do you do you have to flex the labor force at all I know in quarters and years past kind of lower capacity utilization, how does how does that ramp up work from a staffing point of view.

Scott J. Montross: Sometimes we have to do that, but generally, when we're adding people back, it's not like a whole shift or a whole crew. We may be adding here four, five, or seven or something like that. When the production levels on steel pressure pipe get low, we will probably shed something similar. We can shed 10 or 12 at a time at certain plants.

Scott: Sometimes we have to do that but generally when we're adding people back it's not it's not like a whole a whole shift or a whole crew, we may be adding here for five or seven or something like that when the production levels on steel pressure pipe get low we will shed and probably something similar we can shed 10 or 12 minutes.

Scott J. Montross: It's certain ones of the plants, but we flex up and down pretty regularly with the changes in the market situation, but I think that right now we're kind of in a position where we are staffed and the guys.

David W. Wright: But we flex up and down pretty regularly with the changes in the market situation. But I think that right now we're kind of in a position where we're staffed. And the guys, I guess, had a little bit of a foreshadowing that this was going to potentially be coming because the way the bidding was, we've kind of staffed up for that already. And we're ready to kind of take on the rest of the year.

David W. Wright: I guess, we had a little bit of a foreshadowing that this was going to potentially be coming because the way the bidding wars that we've kind of staffed up for that already and we're ready to kind of take it on the rest of the year shouldnt be much of an issue for the steel pressure pipe side at all so we regularly do that not a big deal.

David W. Wright: Shouldn't be much of an issue for the steel pressure pipe side at all. So we regularly do that. Not a big deal. Any sense of kind of what capacity the facilities operated at in the aggregate in the first quarter?

David W. Wright: And any sense of kind of port capacity in the aggregate the facilities operated at in the first quarter.

Scott J. Montross: In the aggregate, what I would say is a practical capacity for steel pressure pipes.

David W. Wright: In the aggregate what I would say.

Scott J. Montross: As a practical capacity for steel pressure pipe it was about 64, 65%.

David W. Wright: So you should have some in oh, yeah, that's good.

Scott J. Montross: Okay. So you still have some room.

David W. Wright: Yeah.

Speaker Change: Thats My only question great quarter.

Speaker Change: Thanks very much.

David W. Wright: Okay.

Operator: Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to Scott for any further closing comments.

David W. Wright: Thank you we reached end of our question and answer session I would like to turn the floor back over to Scott for any further or closing comments.

Scott J. Montross: Again, thank everybody for joining us today and I just wanted to end the call with a few comments. Obviously, we've seen significantly improved bidding in 2024 on the steel pressure pipe side. And we expect that this kind of environment is going to continue near term, which is really a 2024 thing. But I think the most important thing is we expect this environment to really continue for the next three or four or so years, which should create a pretty interesting situation for steel pressure pipe.

Operator: Yes.

Scott: Again, thank everybody for joining us today, and just wanted to leave the call with a few a few comments.

Scott J. Montross: Obviously, we've seen significantly improved bidding in 2024 on the on the steel pressure pipe side, and we expect that this kind of environment is going to continue near term, which is really a 2024 thing, but I think the most important thing is as we expect this environment to really continue.

Scott J. Montross: <unk> for the next.

Scott J. Montross: Three or four or so years, which should create a pretty interesting situation in steel pressure pipe.

Scott J. Montross: And I think longer term, we're well positioned to continue to absorb those business increases and produce them. And on the precast side, you know, for 2024, we anticipate we're going to have a stronger 24 than we did in 23, even with the macroeconomic pressures that we're seeing from the elevated interest rates. So I think we're in a situation as we said on this last call with the consolidation that has happened in the steel pressure pipe business and the entry into the precast business and what that has done and where it's taken us.

Scott J. Montross: And I think longer term, we are well positioned to continue to absorb those business increases and produce them in on the free cash side.

Scott J. Montross: The 2024.

Scott J. Montross: We anticipate we're going to have a stronger 24 than we did 23, even with the macroeconomic pressures that we're seeing in the <unk> from the elevated interest rates. So I think we're in we're in a situation where we said this last call with the consolidation.

Scott J. Montross: As happened in the steel pressure pipe business and the entry into the.

Scott J. Montross: Pre cash business and what that's done and where it's taken US too it's created a different level of resiliency for this company and ultimately we're seeing that now we had a we had a relatively soft quarter in free cash in the quarter still came in at one of the biggest first quarters, we've ever seen or the biggest first quarter, we've ever seen in the company.

Scott J. Montross: It's created a different level of resiliency for this company. And ultimately, we're seeing that now. You know, we had a relatively soft quarter in precast, and the quarter still came in at one of the biggest first quarters we've ever seen or the biggest first quarter we've ever seen in the company. So, you know, if this had been several years ago, it wouldn't have been that way.

Scott J. Montross: So if this would have been several years ago wouldn't have been that way. So I think that's an important thing to remember.

Operator: So I think that's an important thing to remember. And again, thank everybody for their time and attention today. We look forward to speaking with you again in August on our second quarter call. So, thank you very much.

Operator: And again, thank everybody for your time and attention today, we look forward to speaking with you again in August on our second quarter call. So thank you very much. Thank.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.