Q2 2024 Northwest Pipe Company Earnings Call

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Operator: Good morning and welcome to the Northwest Pipe Company 2nd quarter 2024 earnings call. All participants will be in a listen-only mode; should you need assistance, placing all comfort specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Ask a question you may press star and then one. Using attention to your phone, to withdraw your questions you may press star and two.

Operator: Good morning, and welcome to the Northwest Pipe Company's second quarter 2024 earnings call. All participants will be in a listen-only mode.

Speaker Change: Good morning and welcome to the Northwest Pipe Company second quarter 2024 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Operator: If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. For questions, you may press the star key and then 1 using a touch screen or telephone.

Operator: Also note today's event is being recorded.

Operator: At this time, I'd like to turn the floor over to Scott Montross, Chief Executive Officer. Please go ahead.

Operator: To withdraw your questions, you may press star and 2. You also know today's event is being recorded. At this time, I'd like to turn the floor over to Scott Montross, Chief Executive Officer. Please go ahead.

Scott Montross: Good morning and welcome to Northwest Pipe Company 2nd quarter, 2024 earnings conference call. My name is Scott Montross, and I am President and CEO of the company. I am 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, to July 31st, 2024, at approximately 4 p.m. Eastern time. This call is being webcast, and it is available for replay. As we begin, I'd like to remind everyone that statements made on this call regarding our expectations for the future are forward-looking statements, and actual results could differ materially.

Scott Montross: Good morning and welcome to Northwest Pipe Company's second quarter 2024 earnings conference call. My name is Scott Montross, and I'm president and CEO of the company. 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, July 31, 2024, at approximately 4 p.m. Eastern Time. This call is being webcast, and it is available for

Scott Montage: Good morning, and welcome to northwest pipe Company's second quarter 2024 earnings Conference call. My name is Scott montage and I am President and CEO of the company 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 July 31, 2024 at approximately four P. M. Eastern time. This call is being webcast and is available for replay as we begin I'd like to remind everyone that statements made on this call regarding our expectations for the future are forward looking statements and actual results could differ.

Scott Montross: As we begin, I'd like to remind everyone that 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 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 no obligation to update any forward-looking statements. Thank you all for joining us today.

Scott Montross: Please refer to our most recent Form 10-K for the year ended December 31st, 2023, 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.

Scott Montage: 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 no obligation to update any.

Scott Montage: Any forward looking statements.

Scott Montross: I'll begin with a review of our second quarter performance and outlook for 2024. Aaron will then walk you through our financials in greater detail. We delivered strong second-quarter results, led by growth in our steel pressure pipe business and the residential side of our precast business. Our consolidated net sales increased 11.3% year-over-year to reach $129.5 million, the strongest quarterly level we have seen since early 2013. Our profitability significantly improved, and when coupled with effective working capital management, it helped drive strong cash flow during the quarter.

Thank you all for joining us today I'll begin with a review of our second quarter performance and outlook for 2020 for Aaron will then walk you through our financials in greater detail.

Scott Montross: I'll begin with a review of our second quarter performance and outlook for 2024. Aaron will then walk you through our financials in greater detail. We delivered strong second quarter results led by growth in our steel pressure pipe business and the residential side of our precast business. Our consolidated net sales increased 11.3% year over year to 129.5 million. The strongest quarterly level we have seen since early 2013. Our profitability significantly improved, and when coupled with the effective working capital management, helped drive strong cash flow during the quarter. To further break down our segment level results, revenue from our SPP segment totaled 89.5 and increased a 15.9% year over year, in the highest quarterly revenue reported in our history.

Speaker Change: We delivered strong second quarter results led by growth in our steel pressure pipe business and the residential side of our free cash business. Our consolidated net sales increased 11, 3% year over year to $129 5 million the strongest quarterly level, we've seen since early two.

Aaron: And in 13.

Aaron: Our profitability significantly improved and when coupled with effective working capital management helped drive strong cash flow during the quarter.

Scott Montross: To further break down our segment level results, revenue from our SPP segment totaled $89.5 million, an increase of 15.9% year-over-year and the highest quarterly revenue reported in our history. Our performance primarily reflected higher production levels due to changes in project timing, which were reflective of the strong pipeline of bidding opportunities that we saw in the first half of the year. Our SDP team has continued to do an excellent job executing on bids and projects, securing a number of new project wins in the second quarter and improving our backlog, while at the same time generating record revenue and strong free cash flow.

Scott Montage: To further break down our segment level results revenue from our SPP segment totaled $89 5 million, an increase of 15, 9% year over year and the highest quarterly revenue reported in our history.

Scott Montross: Our performance primarily reflected higher production levels due to changes in project timing, which were reflective of the strong pipeline of bidding opportunities that we saw in the first half of the year. Our SPP team has continued to do an excellent job executing on bids and projects, securing a number of new project wins in the second quarter and improving our backlog while at the same time generating record revenue and strong free cash flow. Our SPP backlog, including confirmed orders as of June 30, was 348 million, an improvement from $337 million as of March 31, 2024, and up from $343 million at June 30, 2023.

Scott Montage: Our performance, primarily reflected higher production levels due to changes in project timing, which were reflective of the strong pipeline of bidding opportunities that we saw in the first half of the year.

Aaron: Our SPP team has continued to do an excellent job executing on bids and projects securing a number of new project wins in the second quarter and improving our backlog while at the same time generating record revenue and strong free cash flow.

Scott Montross: Our SPP backlog, including confirmed orders as of June 30th, was $348 million, an improvement from $337 million as of March 31st, 2024 and up from $343 million at June 30th, 2023. Our second quarter performance was partially offset by lower realized selling prices due to production mix in the quarter. Steel prices steadily declined throughout the course of the second quarter but appear to be reaching the bottom and are stabilizing in the $650 a ton range.

Aaron: Our SPP backlog, including confirmed orders as of June 30 was $348 million an improvement from 337 million as of March 31, 2024, and up from 343 million at June 32023.

Scott Montross: Our second quarter performance was partially offset by lower realized selling prices due to production mix in the quarter. Steele prices steadily declined throughout the course of the second quarter, but appear to be reaching the bottom and are stabilizing in the $650 ton range.

Aaron: Our second quarter performance was partially offset by lower realized selling prices due to production mix in the quarter.

Aaron: Steel prices steadily declined throughout the course of the second quarter, but appear to be reaching the bottom in our stabilizing in the $650 a ton range.

Scott Montross: We time stand at about three to four weeks, now turning to our pre-cast segment. Pre-cast revenue increased by 2.2 percent year over year to $40 million. Primarily due to continued strength on the residential side of our business at Geneva, which resulted in strong production and shipment levels, in further improvement to our order book. However, reduced shipments on the non-residential construction-related portion of our pre-cast business at Park offset much of this strength. Primarily due to various severe weather events we experienced in Texas throughout the quarter. These events led to significant disruptions in our production, shipping, and order intake at all three park facilities, which we estimate had an approximate $4.3 million negative impact on our pre-cast sales during the quarter.

Scott Montross: Lead times stand at about three to four weeks. Now, turning to our precast segment. Precast revenue increased by 2.2% year-over-year to $40 million, primarily due to continued strength on the residential side of our business at Geneva, which resulted in strong production and shipment levels and further improvement to our order book. However, reduced shipments on the non-residential construction-related portion of our precast business at Park offset much of this strength, primarily due to various severe weather events we experienced in Texas throughout the quarter.

Aaron: Lead times stand at about three to four weeks now turning to our pre cash segment.

Aaron: Free cash revenue increased by two 2% year over year to $40 million.

Aaron: Primarily due to continued strength on the residential side of our business at Geneva, which resulted in strong production and shipment levels and further improvement to our order book, However, reduced shipments on the nonresidential construction related portion of our free cash business at park offset much of this strength primarily due to very.

Aaron: Severe weather events, we experienced in Texas throughout the quarter. These events led to significant disruptions in our production shipping an order intake at all three park facilities, which we estimate had an approximate $4 $3 million negative impact on our pre cash sales during the quarter.

Scott Montross: These events led to significant disruptions in our production, shipping, and order intake at all three park facilities, which we estimate had an approximate $4.3 million negative impact on our precast sales during the quarter. In addition, the current interest rate environment continues to create persistent headwinds on the commercial, non-residential side of our business.

Scott Montross: In addition, the current interest rate environment continues to create persistent headwinds on the commercial non-residential side of our business. On the pricing side, both the residential and non-residential pre-cast businesses saw better pricing dynamics in the second quarter following the implementation of multiple price increases. As of June 30th, our order book improved to $62 million from $52 million as of March 31st, 2020-24, and $58 million as of June 30th, 2023. Our consolidated gross profit for the second quarter increased 14.8% year-over-year to $25.8 million, a new consolidated gross profit record for the company, resulting in gross margins of 19.9%, up from 19.3% in the second quarter of 2023.

Aaron: In addition, the current interest rate environment continues to create persistent headwinds on the commercial nonresidential side of our business.

Scott Montross: On the pricing side, both the residential and non-residential precast businesses saw better pricing dynamics in the second quarter following the implementation of multiple price increases. As of June 30th, our order book improved to $62 million from $52 million as of March 31st, 2024 and $58 million as of June 30th, 2023. Our consolidated gross profit for the second quarter increased 14.8% year-over-year to $25.8 million, a new consolidated gross profit record for the company, resulting in gross margins of 19.9%, up from 19.3% in the second quarter of 2023.

Aaron: On the pricing side, both the residential and nonresidential pre cash businesses saw better pricing dynamics in the second quarter. Following the implementation of multiple price increases.

Aaron: As of June 30, our order book improved to 62 million from 52 million as of March 31, 2024, and $58 million as of June 32023.

Aaron: Our consolidated gross profit for the second quarter increased 14, 8% year over year to $25 8 million a new consolidated gross profit record for the company, resulting in gross margins of 19, 9% up from 19, 3% in the second quarter of 2023.

Scott Montross: Our SPP gross margin of 19% was strong, increasing by approximately 270 basis points over the prior year period and 120 basis points over the prior quarter, primarily due to higher production volume, which improved our overhead absorption, as well as changes in product mix and significant strength that we saw on the second quarter bidding activity. Our pre-cast gross margin of 22.1% was down compared to the 25.3% in the second quarter of 2023, primarily as a result of the severe weather-related impacts on our production and shipping days, which reduced our second quarter revenue at the park facilities and resulted in reduced overhead absorption.

Scott Montross: Our SPP gross margin of 19% was strong, increasing by approximately 270 basis points over the prior year period and 120 basis points over the prior quarter. This was primarily due to higher production volume, which improved our overhead absorption, as well as changes in product mix and the significant strength that we saw in the second quarter bidding activity. Our precast gross margin of 22.1% was down compared to the 25.3% in the second quarter of 2023, primarily as a result of the severe weather-related impacts on our production and shipping days, which reduced our second-quarter revenue at the park facilities and resulted in reduced overhead absorption. However, the margins on the residential construction site at Geneva strengthened versus the year-ago period.

Aaron: Our SPP gross margin of 19% was strong increasing by approximately 270 basis points over the prior year period, and 120 basis points over the prior quarter, primarily due to higher production volume, which improved our overhead absorption as well as changes in <unk>.

Aaron: <unk> mix and significant strength that we saw in the second quarter bidding activity.

Aaron: Our free cash gross margin of 22, 1% was down compared to the 25, 3% in the second quarter of 2023, primarily as a result of the severe weather related impacts on our production and shipping days, which reduced our second quarter revenue at the park facilities and resulted in reduced overhead.

Scott Montross: However, the margins on the residential construction side at Geneva strengthened versus the year-to-year-to-year period.

Aaron: <unk> however, the margins on the residential construction side at Geneva strengthened versus the year ago period.

Scott Montross: Next, I would like to provide an update on our capital allocation priorities. Our primary strategic focus remains on growing the business through a combination of organic pre-cast product spread strategy and future M&A opportunities. Beginning with product spread, traction has continued on level one of this strategy by building out capacity utilization at our Texas base pre-cast plants to maximize overall efficiencies and production volume. Year-to-date, we have continued to make solid progress despite the weather-related headwinds at park. By bidding on $30 million worth of projects outside of Texas and booking approximately $5 million worth of orders outside of Texas.

Scott Montross: Next, I would like to provide an update on our capital allocation priorities. Our primary strategic focus remains on growing the business through a combination of organic precast product spread strategy and future M&A opportunities. Beginning with product spread, Traction has continued on level one of this strategy by building out capacity utilization at our Texas-based precast plants to maximize overall efficiencies and production volume. Year-to-date, we have continued to make solid progress despite the weather-related headwinds at par by bidding on $30 million worth of projects outside of Texas and booking approximately $5 million worth of orders outside of Texas, in regard to level two of our strategy to produce park products at our existing Year-to-date at Geneva, we have completed production on 15 projects, and we are currently in production on 6 more projects, with an additional 10 projects pending.

Aaron: Next I would like to provide an update on our capital allocation priorities.

Aaron: Our primary strategic focus remains on growing the business through a combination of organic pre cash product spread strategy and future M&A opportunities.

Aaron: Beginning with product spread traction has continued on level one of this strategy by building out capacity utilization at our Texas based free cash plants to maximize overall efficiencies and production volume year.

Aaron: Year to date, we've continued to make solid progress despite the weather related headwinds at park.

Aaron: By bidding on $30 million worth of projects outside of Texas, and booking approximately $5 million worth of orders outside of Texas.

Scott Montross: In regard to level two of our strategy to produce park products at our existing Northwest Pike plants, year-to-date at Geneva, we have completed production on 15 projects, and we are currently in production on six more projects with an additional 10 projects pending. Once the park pre-cast products are more comfortably established at the Utah locations, we plan to expand our level two products spread to additional geographic locations over the next couple of years. Following organic growth, repaying the debt we incurred to finance the 2021 acquisition of Park USA, as well as financing the current growth of the SPP business in related working capital, remains very high on our list of priorities to ensure that we are well positioned to pursue further pre-cast related growth opportunities.

Aaron: In regard to level two of our strategy to produce park products at our existing northwest pipe plants year.

Geneva: Year to date at Geneva, We have completed production on 15 projects and we are currently in production on six more projects with an additional 10 projects pending.

Scott Montross: Once the park precast products are more comfortably established at the Utah locations, we plan to expand our Level 2 product spread to additional geographic locations over the next couple of years. Following organic growth, repaying the debt we incurred to finance the 2021 acquisition of Park USA, as well as financing the current growth of the SPP business through related working capital, remains very high on our list of priorities to ensure that we are well positioned to pursue further precast-related growth opportunities.

Aaron: Once the park free cash 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.

Aaron: Following organic growth repaying the debt, we incurred to finance the 2021 acquisition of park USA as well as financing the current growth of the SPP business and related working capital remains very high on our list of priorities to ensure that we are well positioned to pursue further pre.

Aaron: Cash related growth opportunities.

Scott Montross: In regard to our M&A strategy, we are actively evaluating various opportunities in the pre-cast related space that would help increase our manufacturing capabilities and product portfolio, maximize production efficiencies, and expand our geographic reach. The pre-cast space continues to be an attractive area of expansion for us despite the near-term headwinds we've encountered resulting from the current interest rate environment. As previously noted, we are looking for high-quality, well-run businesses that are accretive to our earnings and that possess a strong potential for organic growth, enhanced margins, and consistent positive cash flow generation.

Scott Montross: In regard to our M&A strategy, we are actively evaluating various opportunities in the pre-cash related space that would help increase our manufacturing capabilities and product portfolio, maximize production efficiencies, and expand our geographic reach. The precast space continues to be an attractive area of expansion for us despite the near-term headwinds we've encountered resulting from the current interest rate environment. As previously noted, we are looking for high quality, well-run businesses that are accretive to our earnings and that possess a strong potential for organic growth, enhanced margins, and consistent positive cash flow generation.

Aaron: In regard to our M&A strategy, we are actively evaluating various opportunities and the free cash related space that would help increase our manufacturing capabilities and product portfolio maximize production efficiencies and expand our geographic reach.

Speaker Change: The free cash space continues to be an attractive area of expansion for us. Despite the near term headwinds we have encountered resulting from the current interest rate environment.

Speaker Change: As previously noted we are looking for high quality well run businesses that are accretive to our earnings and that possess a strong potential for organic growth enhanced margins and consistent positive cash flow generation next.

Scott Montross: Next, we may opt to be opportunistic in repurchasing shares of our common stock while we continue to evaluate accretive M&A opportunities. During the second quarter, we repurchased approximately 18,000 shares of our common stock for a total of $0.6 million. Since the initial authorization of our share repurchase in November of 2023, we bought back a total of 174,000 shares for $5.1 million as of July 31st.

Scott Montross: Next, we may opt to be opportunistic in repurchasing shares of our common stock while we continue to evaluate accretive M&A opportunities. During the second quarter, we repurchased approximately 18,000 shares of our common stock for a total of $0.6 million.

Aaron: Next we may opt to be opportunistic in repurchasing shares of our common stock, while we continue to evaluate accretive M&A opportunities during.

Aaron: During the second quarter, we repurchased approximately 18000 shares of our common stock for a total of $6 million.

Scott Montross: And since the initial authorization of our share repurchase in November of 2023, we bought back a total of 174,000 shares for $5.1 million as of July 31st. Before I conclude, I'd like to summarize our outlook for the third quarter of 2024. In our steel pressure pipe business, we anticipate both our revenue and gross margins to be relatively in line to down modestly from the record second quarter we just delivered, primarily related to a mix of projects that we have booked and their overall impact on production volume. We also expect backlog to remain high by historical standards given the volume of expected SPP bidding in the second half of 2024 that is currently expected to be slightly larger than the first half.

Aaron: And since the initial authorization of our share repurchase in November of 2023, we bought back a total of 174000 shares for $5 1 million as of July 31.

Scott Montross: Before I conclude, I'd like to summarize our outlook for the third quarter of 2024. In our steel pressure pipe business, we anticipate both our revenue and gross margins to be relatively in line to down modestly from the record second quarter we just delivered, primarily related to a mix of projects that we have booked and their overall impact on production volume. We also expect backlog to remain high by historical standards, given the volume of expected SPP bidding in the second half of 2024 that is currently expected to be slightly larger than the first half. We remain encouraged by the amount of activity we are seeing on our current and upcoming water transmission projects, which can be found detailed in our investor presentation on the Investor Relations portion of our website.

Aaron: Before I conclude I'd like to summarize our outlook for the third quarter of 2024.

Aaron: In our steel pressure pipe business, we anticipate both our revenue and gross margins to be relatively in line to down modestly from the record second quarter. We just delivered primarily related to mix of projects that we have booked and their overall impact on production volume. We also expect backlog to remain high.

Speaker Change: By historical standards, given the volume of expected SPP bidding in the second half of 2024 that is currently expected to be slightly larger than the first half.

Scott Montross: We remain encouraged by the amount of activity we are seeing on our current and upcoming water transmission projects, which can be found detailed in our investor presentation on the investor relations portion of our website. In our precast business, following a slow first half of the year, we are expecting a stronger third quarter with improvements in both revenue and margins, positioning us for a strong second half of the year. We continue to believe in the strength of the precast business in the mid- to long-term, given the significant amount of pent-up demand specifically for residential housing, and the growing need for infrastructure spending in the U.S. and our growing market position.

Speaker Change: We remain encouraged by the amount of activity, we are seeing on our current and upcoming water transmission projects, which can be found detailed in our investor presentation on the Investor relations portion of our website.

Scott Montross: In our precast business, following the slow first half of the year, we are expecting a stronger third quarter with improvements in both revenue and margins, positioning us for a strong second half of the year. We continue to believe in the strength of the precast business in the mid to long term, given the significant amount of pent-up demand specifically for residential housing, a growing need for infrastructure spending in the US, and our growing market position. In summary, we are very pleased with our results, which reflect the attainment of two new quarterly records, despite the various challenges we encountered.

Speaker Change: And our free cash business following a slow first half of the year, we're expecting a stronger third quarter with improvements in both revenue and margins positioning us for a strong second half of the year.

Aaron: We continue to believe in the strength of the free cash business in the mid to long term given the significant amount of pent up demand specifically for residential housing.

Aaron: A growing need for infrastructure spending in the U S and our growing market position in summary, we are very pleased with our results, which reflect the attainment of two new quarterly records. Despite the various challenges we encountered our performance continues to be supported by a significantly stronger bidding environment in 2024.

Scott Montross: In summary, we are very pleased with our results, which reflect the attainment of two new quarterly records despite the various challenges we encountered. Our performance continues to be supported by a significantly stronger bidding environment in 2024 that is anticipated to remain elevated throughout the balance of the year. I would like to express my gratitude to our teams in the field for their continued strong execution and for prioritizing safety in everything that they do.

Scott Montross: Our performance continues to be supported by a significantly stronger bidding environment in 2024 that has anticipated to remain elevated throughout the balance of the year. I would like to express my gratitude to our teams in the field for a continued strong execution and for prioritizing safety in everything that they do. Additionally, our results continue to be bolstered by the diversification strategy we began deploying in 2020 with our entry into the precast space. In comparison to the SPP business, the precast businesses are more transactional in nature, which creates an overall faster cast conversion cycle and helps balance out our business, especially during periods of variability in the SPP market.

Aaron: That is anticipated to remain elevated throughout the balance of the year I would like to express my gratitude to our teams in the field for their continued strong execution and for prioritizing safety in everything that they do.

Scott Montross: Additionally, our results continue to be bolstered by the diversification strategy we began deploying in 2020 with our entry into the precast space. In comparison to the SPP business, the precast businesses are more transactional in nature, which creates an overall faster cash conversion cycle and helps balance out our business, especially during periods of variability in the SPP market. 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 values to our shareholders through opportunistic share repurchases. I will now turn the call over Thank you, Scott, and good morning, everyone.

Speaker Change: Additionally, our results continue to be bolstered by the diversification strategy, we began deploying in 2020 with our entry into the free cash space.

Speaker Change: In comparison to SPP business, the free cash businesses are more transactional in nature, which creates an overall faster cash conversion cycle and helps balance out our business, especially during periods of variability in the SPP market.

Scott Montross: Looking ahead, our priorities remain on: 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 values to our shareholders through opportunistic share repurchases.

Aaron: Looking ahead, our priorities remain on one maintaining a safe workplace, where our employees are proud to work to persistently focusing on margin over volume three continuing to implement cost reductions and efficiencies at all levels of the company for continuing to identify.

Speaker Change: <unk> strategic opportunities to grow the company and five in the absence of M&A opportunities returning values to our shareholders through opportunistic share repurchases.

Aaron Wilkins: I will now turn the call over to Aaron, who will walk through our financial results in greater detail.

Speaker Change: 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 with an overview of our second quarter profitability. Consolidated income for the second quarter was 8.6 million or 86 cents per diluted share compared to 7.4 million or 74 cents per diluted share in the second quarter of 2023. Consolidated net sales increased 11.3% to 129.5 million compared to 116.4 million in the year-ago quarter. Deal pressure pipe segment sales increased 15.9% to a record 89.5 million compared to 77.3 million in the second quarter of 2023. As Scott highlighted, SPP sales exceeded our expectations, driven by a 56% increase in tons produced, resulting primarily from improved market demand and changes in project timing, which was partially offset by a 26% decrease in selling price per ton.

Aaron: Thank you Scott and good morning, everyone I'll begin with an overview of our second quarter profitability.

Aaron Wilkins: I'll begin with an overview of our second quarter profitability. Consolidated net income for the second quarter was $8.6 million, or $0.86 per diluted share, compared to $7.4 million, or $0.74 per diluted share, in the second quarter of 2023. Consolidated net sales increased 11.3% to $129.5 million compared to $116.4 million in the year-ago quarter.

Aaron: Holiday net income for the second quarter was $8 6 million or <unk> 86 per diluted share compared to $7 4 million or <unk> 74 per diluted share in the second quarter of 2023.

Speaker Change: Consolidated net sales increased 11, 3% to $129 5 million compared to $116 4 million in the year ago quarter.

Aaron Wilkins: Thiel pressure pipe segment sales increased 15.9% to a record $89.5 million, compared to $77.3 million in the second quarter of 2023. As Scott highlighted, SPP sales exceeded our expectations, driven by a 56% increase in tons produced, resulting primarily from improved market demand and changes in project timing, which was partially offset by a 26% decrease in selling price per ton, primarily due to lower raw material costs coupled with changes in product mix.

Aaron: Pressure pipe segment sales increased 15, 9% to a record $89 5 million compared to $77 3 million in the second quarter of 2023.

Speaker Change: As Scott highlighted SPP sales exceeded our expectations driven by a 56% increase in tons produced resulting primarily from improved market demand and changes in project timing, which was partially offset by 26% decrease in selling price per ton, primarily due to lower raw material costs, coupled with changes in product.

Aaron Wilkins: Primarily due to lower raw material costs coupled with changes in product mix. Precast segment sales increased 2.2% to 40 million compared to 39.1 million in the second quarter of 2023 due to a 30% increase in volume shift, partially offset by a 22% decrease in selling prices stemming from changes in product met. Our Geneva business continued to benefit from higher shipping volumes in the second quarter on strong demand, while our park business was slower due to headwinds in the commercial construction market in Texas as a result of the interest rate environment, as well as weather delays.

Speaker Change: Mix.

Aaron Wilkins: Precast segment sales increased 2.2% to $40 million compared to $39.1 million in the second quarter of 2023 due to a 30% increase in volume shipped, partially offset by a 22% decrease in selling prices stemming from changes in product mix. Our Geneva business continued to benefit from higher shipment volumes in the second quarter due to strong demand, while our park business was slower due to headwinds in the commercial construction market in Texas as a result of the interest rate environment, as well as weather delays.

Speaker Change: <unk> segment sales increased two 2% to $40 million compared to $39 1 million in the second quarter of 2023 due to a 30% increase in volume shipped partially offset by a 22% decrease in selling prices stemming from changes in product mix.

Speaker Change: Our Geneva business continued to benefit from higher shipment volumes in the second quarter on strong demand, while our park business was slower due to headwinds in the commercial construction market in Texas as a result of the interest rate environment as well as weather delays.

Aaron Wilkins: As a reminder, the 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. Consolidated gross profit increased 14.8% to $25.8 million, or 19.9% of sales, compared to $22.5 million, or 19.3% of sales, in the second quarter of 2023.

Speaker Change: As a reminder, the 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 mix.

Aaron Wilkins: The comparable metrics between periods as they are highly dependent on the composition of each segment's product mix. Consolidated gross profit increased of 14.8% to 25.8 million, or 19.9% of sales, compared to 22.5 million, or 19.3% of sales in the second quarter of 2023. Our second quarter represented a record consolidated gross profit for the company. Steel pressure-price gross profit increased 35.1% to 17 million or 19% of segment sales compared to gross profit of 12.6 million or 16.3% of segment sales in the second quarter of 2023, primarily due to higher volume and changes in product mix. Precast gross profit decreased 10.9% to 8.8 million, or 22.1% of precast sales, from 9.9 million, or 25.3% of segment sales in the second quarter of 2023, primarily due to changes in product mix.

Aaron: Consolidated gross profit increased 14, 8% to $25 8 million or 19, 9% of sales compared to $22 5 million or 19, 3% of sales in the second quarter of 2023.

Aaron Wilkins: Our second quarter represented a record consolidated gross profit for the company. Steel Pressure Pipe Gross Profit increased 35.1% to $17 million, or 19% of segment sales, compared to gross profit of $12.6 million, or 16.3% of segment sales, in the second quarter of 2023, primarily due to higher volume and changes in product mix. Precast gross profit decreased 10.9% to $8.8 million, or 22.1% of precast sales from $9.9 million, or 25.3% of segment sales in the second quarter of 2023, primarily due to changes in product mix.

Speaker Change: Our second quarter represented a record consolidated gross profit for the company.

Aaron: Steel pressure pipe gross profit increased 35, 1% to $17 million or 19% of segment sales compared to gross profit of $12 6 million or 16, 3% of segment sales in the second quarter of 2023, primarily due to higher volume and changes in product mix.

Aaron: Free cash gross profit decreased 10, 9% to $8 8 million or 22, 1% of free cash sales from $9 9 million or 25, 3% of segment sales in the second quarter of 2023, primarily due to changes in product mix.

Aaron Wilkins: Despite strengthening residential infrastructure demand, particularly in Utah, we saw continued margin compression for the precast segment during the second quarter due to continued headwinds in the commercial infrastructure markets. Coupled with shipment delays at park. Selling, general and administrative expenses increased 10.7% to 12.2 million, or 9.4% of sales, compared to 11 million in the second quarter of 2023, or 9.5% of sales. The increase was primarily due to higher incentive compensation expense. Our non-cash incentive compensation expense in the second quarter of 2024 was 1.6 million compared to 1.3 million in the year-ago quarter. For the full year of 2024, we now expect our consolidated selling, general, and administrative expenses to be in the range of approximately 46 to 48 million.

Aaron Wilkins: Despite strengthening residential infrastructure demand, particularly in Utah, we saw continued margin compression for the precast segment during the second quarter due to continued headwinds in the commercial infrastructure market, coupled with shipment delays at par. Selling, general, and administrative expenses increased 10.7% to 12.2 million, or 9.4% of sales, compared to 11 million in the second quarter of 2023, or 9.5% of sales. The increase was primarily due to higher incentive compensation expense. Our non-cash incentive compensation expense in the second quarter of 2024 was $1.6 million compared to $1.3 million in the year-ago quarter.

Speaker Change: Despite strengthening residential infrastructure demand, particularly in Utah, we saw continued margin compression for the pre cash segment during the second quarter due to continued headwinds in the commercial infrastructure markets.

Speaker Change: With shipment delays at park.

Speaker Change: Selling general and administrative expenses increased 10, 7% to $12 2 million or nine 4% of sales compared to $11 million in the second quarter of 2023 or nine 5% of sales.

Speaker Change: The increase was primarily due to higher incentive compensation expense.

Speaker Change: Our noncash incentive compensation expense in the second quarter of 2024 was $1 6 million compared to $1 3 million in the year ago quarter.

Aaron Wilkins: For the full year of 2024, we now expect our consolidated selling general administrative expenses to be in the range of approximately $46 to $48 million. Appreciation and amortization expense in the second quarter of 2024 was $4.7 million compared to $3.9 million in the year-ago quarter. We expect depreciation and amortization expense to be between $19 and $20 million for the full year 2024. Interest expense increased to $1.8 million from $1.2 million in the second quarter of 2023, due primarily to the increase in average daily borrowings and, to a lesser extent, a higher average interest rate.

Speaker Change: For the full year of 2024, we now expect our consolidated selling general and administrative expenses to be in the range of approximately $46 million to $48 million.

Aaron Wilkins: Appreciation and amortization expense in the second quarter of 2024 was 4.7 million compared to 3.9 million in the year-ago quarter. We expect appreciation and amortization expense to be between 19 and 20 million for the full year of 2024. Interest expense increased to 1.8 million from 1.2 million in the second quarter of 2023 due primarily to the increase in average daily borrowings and, to a lesser extent, a higher average interest rate. For the full year of 2024, we expect interest expense to be approximately $6 million. Our second quarter income tax expense was 2.9 million, resulted in an effective income tax rate of 25.5%, compared to 2.7 million in the prior year quarter or an effective income tax rate of 26.5.

Speaker Change: Depreciation and amortization expense in the second quarter of 2024 was $4 7 million compared to $3 $9 million in a year ago quarter. We.

Speaker Change: We expect depreciation and amortization expense to be between 19% and $20 million for the full year of 2024.

Speaker Change: Interest expense increased to $1 8 million from $1 2 million in the second quarter of 2023, due primarily to the increase in average daily borrowings and to a lesser extent.

Speaker Change: Higher average interest rates.

Aaron Wilkins: For the full year of 2024, we expect interest expense to be approximately $6 million. Our second quarter income tax expense was $2.9 million, resulting in an effective income tax rate of 25.5%, compared to $2.7 million in the prior year quarter, or an effective income tax rate of 26.5%.

Speaker Change: For the full year of 2024, we expect interest expense to be approximately $6 million.

Speaker Change: Our second quarter income tax expense was $2 9 million, resulting in an effective income tax rate of 25, 5% compared to $2 7 million in the prior year quarter or an effective income tax rate of 26, 5% or.

Aaron Wilkins: Our tax rates for the second quarter of 2024 and 2023 were impacted by a non-deductible permanent difference. We continue to expect our tax rate for the full year of 2024 to be within the range of 25 to 27%.

Aaron Wilkins: Our tax rates for the second quarters of 2024 and 2023 were 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%. Now I will transition to our financial condition. Net cash provided by Operant Activities was $22.3 million in the second quarter of 2024, compared to $1.2 million in the second quarter of 2023, primarily due to changes in working capital and higher profitability.

Speaker Change: Our tax rate for the second quarters of 2024, and 2023 were impacted by nondeductible permanent differences.

Speaker Change: We continue to expect our tax rate for the full year of 2024 to be within the range of 25% to 27%.

Aaron Wilkins: Now it will transition to our financial condition. Net cash provided by offer and activities was 22.3 million in the second quarter of 2024, per to 1.2 million in the second quarter of 2023, primarily due to changes in working capital and higher profitability. Enhanced cash flow generation remains a key focus of our business as it is critical to the execution of our growth strategy and delivering greater value to our shareholders. While we had anticipated working capital pressures for the real pressure pipe business in the first half of the year, the actual working capital position at June 30 was less than expected, attributable to our in-increase and contract liabilities, stemming from our ability to build early for certain large projects.

Speaker Change: Now I will transition to our financial condition.

Speaker Change: Net cash provided by operating activities was $22 3 million in the second quarter of 2024 compared to $1 2 million in the second quarter of 2023, primarily due to changes in working capital and higher profitability.

Aaron Wilkins: Enhanced cash flow generation remains a key focus of our business as it is critical to the execution of our growth strategy and delivering greater value to our shareholders. While we had anticipated working capital pressures for the steel pressure pipe business in the first half of the year, the actual working capital position at June 30th was less than expected, attributable to an increase in contract liabilities stemming from our ability to bill early for certain large projects.

Speaker Change: Enhanced cash flow generation remains a key focus of our business as it is critical to the execution of our growth strategy and delivering greater value to our shareholders.

Speaker Change: While we had anticipated working capital pressures for the steel pressure pipe business in the first half of the year. The actual working capital position at June 30 was less than expected attributable to an increase in contract liabilities stemming from our ability to bill early for certain large projects.

Aaron Wilkins: This more than offset the higher than anticipated SPP production levels achieved during the quarter. We continue to expect our cash flows to improve in the second half of the year, with free cash flow anticipated to range between 19 and 25 million for the full year of 2024. Our capital expenditures totaled 6.1 million in the second quarter of 2024, compared to 4 million in the prior year quarter. We anticipate completion of the new concrete pipe project in Salt Lake City in the next three months, which, after successful commissioning, is expected to improve production yields and efficiencies on the reinforced concrete pipe and manholes we produce and sell out of that facility.

Aaron Wilkins: This more than offset the higher than anticipated SPP production levels achieved during the quarter. We continue to expect our cash flows to improve in the second half of the year, with free cash flow anticipated to range between $19 and $25 million for the full year 2024. Our capital expenditures totaled $6.1 million in the second quarter of 2024, compared to $4 million in the prior year quarter.

Speaker Change: This more than offset the higher than anticipated SPP production levels achieved during the quarter.

Speaker Change: We continue to expect our cash flows to improve in the second half of the year with free cash flow anticipated to range between 19 and $25 million for the full year 2024.

Speaker Change: Our capital expenditures totaled $6 1 million in the second quarter of 2024 compared to $4 million in the prior year quarter.

Aaron Wilkins: We anticipate completion of the new concrete pipe project in Salt Lake City in the next three months, after successful commissioning is expected to improve production yields and efficiencies on the reinforced concrete pipe and manholes we produce and sell out of that facility. We continue to anticipate our total CapEx to be in the range of $19 to $22 million for the full year 2024. As of June 30, 2024, we had $75.9 million of outstanding borrowings on our credit facility, leaving approximately $47 million in additional borrowing capacity on our credit line.

Speaker Change: We anticipate completion of the new concrete pipe project in Salt Lake City in the next three months, which after successful commissioning is expected to improve production yields and efficiencies on the reinforced concrete pipe and man holds we produce and sell out of that facility.

Aaron Wilkins: We continue to anticipate our total cat facts to be in the range of 19 to 22 million for the full year of 2024. As of June 30, 2024, we had 75.9 million of outstanding borrowings on our credit facility, leaving approximately 47 million in additional borrowing capacity on our credit line.

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

Speaker Change: As of June 32024, we had $75 9 million of outstanding borrowings on our credit facility, leaving approximately $47 million in additional borrowing capacity on our credit line.

Aaron Wilkins: In summary, we are extremely pleased with our record quarterly gross profit and overall improved financial performance, including our cash flows, which are all a testament to our team's focus, dedication, and execution. Our ability to adapt to market conditions is evident in our financial achievements, and our strategic initiatives have positioned us well for future growth and continued success through the balance of this year and beyond. Thank you to all of our employees for the continued commitment to safety and exemplary execution, as well as to our shareholders for their continued support and confidence in Northwest Pipe Company.

Operator: In summary, we are extremely pleased with our record quarterly gross profit and overall improved financial performance, including our cash flows, which are all a testament to our team's focus, dedication, and execution. Our ability to adapt to market conditions is evident in our financial achievements, and our strategic initiatives have positioned us well for future growth and continued success through the balance of this year and beyond. Thank you to all of our employees for their continued commitment to safety and exemplary execution, as well as to our shareholders for their continued support and confidence in Northwest Pipe.

Speaker Change: In summary, we are extremely pleased with our record quarterly gross profit and overall improved financial performance, including our cash flows which are all a testament to our team's focus dedication and execution.

Speaker Change: Our ability to adapt to market conditions is evident in our financial achievements and our strategic initiatives have positioned us well for future growth and continued success through the balance of this year and beyond.

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

Operator: I will now turn it over to the operator to begin the question-and-answer session. Ladies and gentlemen, at this time, we'll begin the question-and-answer session. Once again, to ask a question, please press star, and then one using a touch-to-tone telephone. To withdraw your questions, you may press star and then two.

Operator: I will now turn it over to the operator to begin the question and answer session. Ladies and gentlemen, at this time, we'll begin our question and answer session. Once again, to ask a question, please press star and then one on a touch-tone telephone. To withdraw your question, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound.

Speaker Change: I will now turn it over to the operator to begin the question and answer session.

Speaker Change: Ladies and gentlemen at this time, we'll begin the question and answer session. Once again to ask a question. Please press star and then one using a touchtone telephone.

Operator: Once again, that is star and then one to join the question. We'll pause momentarily to assemble the roster. And our first question today comes from Julio Romero from Sidoti. Please go ahead with your question. Can we expect that to kind of sustain? Hey, Julio, you were kind of cut out at the beginning.

Speaker Change: For all your questions you May press star two.

Operator: If you are using a speaker phone, would you ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star, and then one to join the question to you.

Speaker Change: If you are using a speaker phone could you ask that you. Please pick up the handset prior to pressing the keys to ensure the best sound quality.

Speaker Change: Once again that is star and then one hey join the question queue.

Operator: We'll pause momentarily to assemble the roster.

Speaker Change: We will pause momentarily to assemble the roster.

Julio Romero: And our first question today comes from Julio Romero from Sedotti. Please go ahead with your question.

Scott Montross: I don't know if we missed the first part of your question. But as to the question about the second half, I mean, obviously, we've looked at these things, and we know what they are bidding on in the second half of this year, and it's slightly larger than what they are bidding on in the first half of this year. So, obviously, the steel pressure pipe market continues to be very strong, and we're just now starting to see the IIJA money start to trickle in a little bit and start to bolster some of these things.

Speaker Change: And our first question today comes from Julio Romero from Sidoti. Please go ahead with your question.

Julio Romero: For the second half, your pressure pipe is expected to be slightly better than the first half.

Julio Romero: Environment for the second half steel pressure pipe is expected to be slightly better than the first half can you maybe talk to your confidence that.

Julio Romero: Can you maybe talk to your confidence that that fuel pressure pipe segment strength can be sustained, and then secondly, how long can we expect that strength to kind of sustain itself?

Julio Romero: That.

Julio Romero: Steel pressure pipe segment strength can be sustained and then secondly, how long can we expect that sprint kind of sustained itself.

Scott Montross: Hey Julio, you were kind of cut out at the beginning. I don't know if we missed the first part of your question, but it's to the question on the second half. I mean, obviously we've looked at these things, and we know what's bidding in the second half of this year, and it's slightly larger than what's bid in the first half of this year. So obviously the steel pressure pipe market continues to be very strong, and we're just now starting to see the I-I-J-A money start to trickle in a little bit and start to bolster some of these things.

Speaker Change: Hey, Julio you were you were kind of cut out at the beginning I don't know if we missed the first part of your question.

Speaker Change: But is it.

Speaker Change: As to the question on the the second half I mean, obviously, we've we've looked at these things and we know what's bidding in the second half of this year and it's slightly larger than what's been in the first half of this year. So obviously the steel pressure pipe market continues to be very strong and we're just now starting to see the Iga a money start to trickle in.

Julio Romero: In a little bit and then start to bolster some of these things like theirs.

Scott Montross: Like, there's an Eastern New Mexico Rural Water District project that's got a bunch of the IIJA funding on it, and we don't really expect the mass of the IIJA funding to really hit until, like, late 2025 or 26. So, this is quite a period in front of us of strength that we're seeing on the steel pressure pipe side. So, I'm gonna let you, I'm gonna pause there for a second and let you ask another question because we missed the first part of what you said. Yeah, I'm sorry about that.

Scott Montross: Like there's an Eastern New Mexico, a raw water district project that's got a bunch of the I-I-J-A funding on it, and we don't really expect the mass of the I-I-J-A funding really to hit until like late 2025 or 26. So this is quite a period in front of us of strength that we're seeing on the steel pressure pipe site.

Julio Romero: Eastern New Mexico Rural Water District project, it's got a bunch of the Iga funding on it.

Julio Romero: And we don't really expect the the mass of the <unk>.

Julio Romero: Hey, a funding really to hit until like late 2025 or 26. So this is this is quite a period in front of us of strength that we're seeing in the steel pressure pipe side, So I'm going to let Hugh I'm going to pause there for a second and let you ask another question because we missed the first part of what you said.

Scott Montross: So I'm going to let you pause there for a second and let you ask another question because we missed the first part of what you said.

Julio Romero: Yeah, I'm sorry about that. I'm sorry if I'm cutting it in out. My question was just really focused, and you kind of hit on it. It sounds like, you know, second half, 24 for steel pressure is expected to be better, and it sounds like the long term I-I-J-A drivers are certainly in place.

Scott Montross: I'm sorry if I'm cutting in and out. My question was just really focused, and you kind of hit on it. It just sounds like, you know, second half 24 for steel pressure is expected to be better, and it sounds like the long-term IIJA drivers are certainly in place. I'm just trying to think about like the medium term, like 2025 sustainability of SPP because I know in the past it's been a volatile segment from a profit standpoint. Just help us think about like the medium term sustainability.

Hugh: Yeah, I'm, sorry about that I'm, sorry, if I'm cutting in and out. My question was just really focused and you kind of hit on it is just it sounds like.

Speaker Change: Second half 'twenty four for steel pressure is expected to be better.

Speaker Change: And it sounds like the long term IHA a drivers are certainly in place I'm just trying to think about like the medium term like 2025 sustainability of SPP, because I know in the past it's been a volatile segment from a from a profit standpoint, just help us think about like the medium term.

Scott Montross: I'm just trying to think about like the medium-turn, like 2025 sustainability of SPP because I know in the past, you know, it's been evolved to a segment from a profit standpoint. Just help us think about like the medium-turn sustainability of the other stories. Yeah, I think one of the things that's different about this business now that we've seen longer term is there was a significant amount of consolidation in the business, and even when you look at how 2023 turned out, 2023 was relatively, I guess, small-year bidding-wise and production-wise in the steel pressure pipe business, and even with that we were still able to, you know, generate halfway decent gross margin level and profitability level.

Speaker Change: Sustainability of Mr.

Scott Montross: One of the things that's different about this business now that we've seen it for longer is that there was a significant amount of consolidation in the business. And even when you look at how 2023 turned out, 2023 was a relatively, I guess, small year bidding wise and production wise in the steel pressure pipe business. And even with that, we were still able to generate a halfway decent gross margin level in profitability. Well, we're seeing a market that's over 40% larger in 2024, and you're starting to see what the results of a market that's that big have on steel pressure pipe one overhead absorption to the bidding pressure on every job. Because there's so much more, bidding is not as great.

Speaker Change: One of the things Thats different about this business now than what we've seen longer term is there was a significant amount of consolidation in the business and even when you look at how 2023 turned out 2023 was a relatively I guess small year bidding wise and production wise in the steel pressure.

Julio Romero: Pipe business and even with that we were still able to.

Julio Romero: Generate a halfway decent gross margin level in profitability level, well, we're seeing a market that's over 40% larger in 2024 and youre starting to see what the results of a market. That's that big has on steel pressure pipe one overhead absorption to the bidding pressure on every job because.

Scott Montross: Well, we're seeing a market that's over 40% larger in 2024, and you're starting to see what the results of a market that's that big has on steel pressure pipe: one overhead absorption to the bidding pressure on every job because there's so much more bidding is not as grace, so it also allows the pricing and margins to continue to elevate up. And we don't expect that to change in the midterm. We expect to go into 2025 with a strong backlog the way we have the last few years and kind of glide right into that time frame with the I-I-J-A funding really starts to push up the demand in the business, so we're not really concerned at this point of any violent fluctuations in steel pressure pipe. But even with that, with the consolidation that's happened in the business, even when we have small markets like we had in 2023, it's still not nearly as volatile as what we saw back in 2015, 2016 and 2017 when there were five major players in the market.

Scott Montross: So it also allows the pricing and margins to continue to escalate, and we don't expect that to change in the midterm. We expect to go into 2025 with a strong backlog the way we have the last few years and kind of glide right into that time frame with the IJA funding really starting to push up the demand in the business. So, we're not really concerned at this point about any violent fluctuations in steel pressure pipe, but even with that, with the consolidation that's happened in the business, even when we have small markets, like we had in 2023, it's still not nearly as volatile as what we saw back in 2015, 16 and 17, when there were five major players in the market.

Julio Romero: There is so much more bidding.

Julio Romero: Is is not as great as it would also allows the pricing and margins to continue to elevate up and we don't expect that to change in the midterm. We expect to go into 2025 with a strong backlog.

Julio Romero: The way we have the last few years.

Julio Romero: And kind of glide right into that timeframe with the Iga funding really starts to push up the demand in the business. So we're not really concerned at this point of <unk>.

Julio Romero: Any violent fluctuations in steel pressure pipe, but even with that with the consolidation that's happened in the business. Even when we have small markets like we had in 2023, it's still not nearly as volatile as what we saw back in 2015 16 and 17 when there were five major players in the market now there is.

Scott Montross: Now there's three major players in the market, and it's consolidated down to a decent level, so I think that's kind of changed the landscape for probably the longer-term, will you?

Scott Montross: Now, there are three major players in the market, and it's consolidated down to a decent level. So, I think that's kind of changed the landscape for, probably, the longer term, Julio. I appreciate you guys providing the context there. Last one, if I could.

Julio Romero: Three major players in the market and its consolidated down to a decent level. So I think that's kind of changed the landscape for for probably the longer term Julio.

Julio Romero: I appreciate you guys providing the context there. Last one, if I could, you know, you called out that 4.3 million negative impact from sales on the precast side through the weather impact, I believe. Does that get realized in 3QD? Is that incremental? Just how should we think about that? I think you're going to see the pickup in Q3 with precast.

Julio Romero: Understood I appreciate you guys, providing the context there.

Julio Romero: Last one if I could.

Scott Montross: You called out that 4.3 million negative impact from sales on the precast side due to the weather impact, I believe. Does that get realized in 3Q? Is that incremental? How should we think about that? I think you're going to see the pickup in Q3 with precast, although what I will say about Q3 is, if you remember, Hurricane Burl hit the Houston area, which has our largest Park USA plant, and in the beginning of July, that park plant was down for about a week because there was no power in Houston; 2.5 million people were out of power.

Speaker Change: You called out that $4 3 million negative impact from sales.

Speaker Change: On the free cash side.

Speaker Change: Due to the weather impact I believe does that get realized in <unk> is that incremental just how should we think about that.

Speaker Change: I think youre going to see the pick up in Q3 with with pre cast although what I will say about Q3, if you remember the hurricane barrel hit.

Scott Montross: Although what I will say about Q3, if you remember, the Hurricane Burrell hit the Houston area, which has our largest park USA plant, in the beginning of July, and that park plant was down for about a week because there was no power in Houston. 2.5 million people were out of power. But I think that you'll see the third quarter coming in stronger. The weather is still iffy down there; they're doing so much rain. But the order book is starting to grow. I think the confidence in the non-residential business is starting to come back, especially when you look at the Dodge Momentum Index, which is something that we follow.

Julio Romero: <unk>.

Julio Romero: The Houston area, which are which has our largest park USA plant.

Julio Romero: In the beginning of July in that Park plant was down for about a week because there was no power in Houston $2 5 million people were out of power, but but I think that youll see the third quarter coming in stronger the weather's still iffy down there. They are getting so much rain, but the order book is starting to grow I think the confidence in the.

Scott Montross: But I think that you'll see the third quarter coming in stronger. The weather is still iffy down there, they're getting so much rain, but the order book is starting to grow. I think the confidence in the non-residential business is starting to come back, especially when you look at the Dodge Momentum Index, which is something that we follow. If you look at that, the index is up 7% higher in June of 24 than it was in 2023, and the commercial piece is up about 25% from year-ago levels.

Julio Romero: <unk>.

Julio Romero: The non residential business is starting to come back, especially when you look at the the Dodge momentum index, which is something that we follow if you look at that I mean, the index is up at.

Scott Montross: If you look at that, I mean the index is up at 7% higher in June of 24 than it was in 2023. And the commercial piece is up about 25% from year-ago levels. The institutional is off a little bit. That's mainly schools, hospitals, and things like that. Forward-facing or public-facing things which we don't see a significant amount of impact on that with our public-facing stuff which is the pressure pipe side because of the IJA funding. So I think there's a lot of good things going on, and I think that the pre-cast business, after what we would consider to be a slow start in the first half of the year, kind of picks up steam as we get into the second part of the year.

Julio Romero: At 7% higher than June of 'twenty four than it was in 2023 and the commercial piece is up about 25% from year ago levels. The institutional is off a little bit that's mainly schools hospitals and things like that forward facing or public facing things.

Scott Montross: The institutional side is off a little bit; that's mainly schools, hospitals, and things like that, forward-facing or public-facing things, which we don't see a significant amount of impact on that with our public-facing stuff, which is the steel pressure pipe site, because of the IIJA funding.

Julio Romero: Which we don't we don't see a significant amount of impact on that with our public facing stuff, which is the steel pressure pipe side because of the Iga a funding. So I think theres a theres a lot of good things going on and I think that the precast business. After what we would consider to be a slow start in the first half of the year.

Scott Montross: I think there are a lot of good things going on, and I think that the precast business, after what we would consider to be a slow start in the first half of the year, kind of picks up steam as we get into the second part of the year. What I would say about our precast business is that the business that's the residential piece, which was what everyone was worried about, right, because of the interest rate environment and those things, is really booming. The business in Geneva, the Geneva locations, is very, very strong.

Julio Romero: Picks up steam as we get into the second part of the year and what I would say is about our precast business is that.

Scott Montross: And what I would say is about our pre-cast business is that the business is the residential piece, which was what everyone was worried about, right? Because of the interest rate environment and those things, is really booming. The business to Geneva, the Geneva locations is very, very strong. The order book is very, very strong, similar to what we saw in 2002 on the pre-cast side, but with higher revenues. So I think we're expecting a really big year on the pre-cast side in a much better second half of the year than we saw in the first because, along with the residential piece that's still booming, especially in the Utah market, we're seeing the commercial side starting to come back.

Speaker Change: The business as the residential piece, which was what everyone was worried about right because of the interest rate environment and those things is is really booming.

Speaker Change: Businesses Geneva, the Geneva locations is very very strong.

Scott Montross: The order book is very, very strong, similar to what we saw in 2022 on the precast side, but with higher revenues. So I think we're expecting a really big year on the precast side and a much better second half of the year than we saw in the first, because along with the residential piece that's still booming, especially in the Utah market, we're seeing the commercial side starting to come back. We've just had some bumps in the roads because of the weather issues in Texas. Not very helpful. I'll pass it along.

Julio Romero: The order book is very very strong similar to what we saw and in.

Julio Romero: In 2022 on the free cash side, but with with higher revenues.

Julio Romero: So.

Julio Romero: I think we're expecting a really big year on the free cash side in a much better second half of the year than we saw in the first because along with the residential piece that still booming, especially in the Utah market. We're seeing the commercial side starting to come back. We just had some bumps in the road because of the weather issues in Texas.

Scott Montross: We've just had some bumps in the road because of the weather issues in Texas.

Julio Romero: Yeah.

Julio Romero: Very helpful.

Julio Romero: I'll pass it along. Thanks very much. Thank you, Leo.

Speaker Change: Very helpful. I'll pass it along thanks very much.

Julia: Thanks Julia.

Brent Thielman: Our next question comes from Brent, the Omen from DA Davidson. Please go ahead with your question.

Speaker Change: Our next question comes from Brent Thielman from D. A Davidson. Please go ahead with your question.

Brent Thielman: Thanks, morning. Good morning. It sounds like pre-cast visibility much improved into the second half of the year, and it sounds like you think margins could improve from here.

Brent Thielman: Hi, Thanks, Good morning, Scott Eric Good morning.

Scott Montage: Hey, Scott.

Speaker Change: It sounds like.

Speaker Change: Free cash visibility much improved into the second half of the year.

Speaker Change: It sounds like you think margin.

Speaker Change: It improved from here is that is that principally just because of increased.

Scott Montross: Is that principally just because of increased contributions from park, and can you help us recall what the differential in margins is? I think it will be, to some extent, from increased contribution from park, but we've had, we've already had several price increases on the Geneva side of the business with the pre-cast infrastructure stuff, and the amount of order book continues to go up. The Geneva margins are improving, and the park margins are improving, so it's on both sides of it. And then when you get to the park piece, that's going to be a bigger piece of the picture as we go, as we start moving forward when they get back on level ground from the weather stuff and from some of the earlier interest rate impact on the environment. I think that's what pushes them up, but it's both of it; it's increases in both of their margins and the park side becoming a bigger piece of it. And ultimately, when you look at the pre-cast for earlier in the year, the first part of the year, you see that the selling price was down, but that's because you're looking at Geneva being a much larger piece of the business and you're looking at products that are shipping into the market that have good margins but aren't as high as the cost or revenue as what the park products are.

Speaker Change: <unk> from park and if that is can you help us.

Speaker Change: Recall, what the differential in margins is it at par.

Scott Montross: Thanks very much. Yeah, I think it will be to some extent from increased contribution from park, but we've already had several price increases on the Geneva side of the business with precast infrastructure stuff. And the amount of the order book continues to go up. The Geneva margins are improving, and the park margins are improving. So, it's, it's on both sides of it. And then, when you get to the park piece, that's gonna be a bigger piece of the picture as we go, as we start moving forward, when they get back on level ground from the weather stuff. And from some of the earlier interest rate impact on the environment, I think that's what pushes them up, but it's both of them.

Speaker Change: Linda.

Speaker Change: Yes, I think the.

Speaker Change: It will be to some extent.

Speaker Change: From increased contribution from park, but we've had we've already had several price increases on the Geneva side of the business with a pre cast infrastructure stuff and the amount of order book continues to go up.

Speaker Change: Geneva margins, there are improving and the park margins are improving so it's.

Speaker Change: It's on both sides of it and then when you get to the park piece, that's going to be a bigger piece of the picture as we go as we start moving forward when they get back on.

Speaker Change: On level ground from the weather stuff in from some of the earlier interest rate impact on the environment I think that's what pushes them up but it's both of it it's it's.

Speaker Change: <unk> in both of their margins and the in the park side, becoming a bigger piece of it.

Scott Montross: It's, it's, it's increases in both of their margins, and the in the park side is becoming a bigger piece of it. And ultimately, when you look at the precast for earlier in the year, the first part of the year, you see that the selling price was down, but that's because you're looking at Geneva being a much larger piece of the business, and you're looking at products that are shipping into the market that have good margins but aren't as high in cost or revenue as what the park products are.

Speaker Change: And ultimately when you look at the <unk>.

Speaker Change: The free cash for earlier in the year or the first part of the year you see that.

Speaker Change: Selling price was down, but thats, because youre looking at Geneva, being a much larger piece of the business and Youre looking at products that are shipping into the market that have good margins, but arent as high as call.

Speaker Change: Cost of revenue as with the pork products are so all of that mixed together, Brent I think youre going to see a strong second half half of the year and free cash.

Scott Montross: So, all that mixed together, Brent, I think you're gonna see a strong second half of the year and precast. Okay, and then, um, Scott, the RCP plant in Geneva, I think is close to the finish line.

Scott Montross: So all that mixed together, Brenn, I think you're going to see a strong second half of the year in pre-cast.

Brent Thielman: Okay, and then Scott the RCT plant at Geneva I think is close to the finish line.

Brent Thielman: Okay and then.

Speaker Change: Scott.

Speaker Change: Plant.

Scott: I'll take it.

Scott Montross: Well, is that a structural change potentially to their margins, or is that more of a capacity? You know, with this environment that you're characterizing, Scott, it sounds pretty healthy here for at least the next couple of years, since you sort of think of the margins on an annual trajectory. Very good. Thanks, Scott. Thanks, Aaron. Absolutely. Our next question comes from Ted Jackson from Northland Securities. Please go ahead with your question.

Scott Plant: <unk> line.

Scott Montross: Is that a structural change potentially to their margins, or is that more of a capacity ad play? It's both. I think the biggest thing about the exact 2500 that we're putting in in Salt Lake City is versus the current facility that we have there, which takes about 12 or 13 people to run it. The exact 2500 is going to take about five or six people to run it. So you're going to have a better conversion cost profile on that and should very well lead to higher margins on that and higher level of production capability. So that's the double-edged sword.

Speaker Change: Is that it.

Speaker Change: Got it.

Speaker Change: Our crude oil change potentially to their margins or is that more of a capacity add play.

Speaker Change: It's both I think the the biggest thing about the exact 2500, we're putting it in Salt Lake City is versus the current facility that we have there.

Speaker Change: Which takes about 12 or 13 people to run it. The exact 2500 is going to take about five or six people to run it. So youre going to have a better conversion cost profile on that and should very well lead to higher margins on that and how.

Speaker Change: A higher level of production capability so.

Speaker Change: That's a double edged sword right, you've got a higher margins because you've got a better cost and then you got better overhead absorption because you have more production capabilities. There. So so I think it's both of those things it's going to create an upward movement in those margins as long as the market stays like it is and certainly we're not seeing real.

Scott Montross: You've got higher margins because you've got a better cost, and then you've got better overhead absorption because you have more production capabilities there. So I think it's both of those things; it's going to create an upward movement in those margins as long as the market stays like it is, and certainly we're not seeing really any change that we're expecting in the near future or in the pre-cast market.

Speaker Change: Any change that we're expecting in the near future and the free cash market.

Brent Thielman: Okay, and an understanding on SPP you're going to have quarter-to-quarter variability in margins or mix or whatever, but you know with this environment you're characterizing, Scott, I mean it sounds pretty healthy here from the least the next couple of years. Do you sort of think of the margins from an annual trajectory. You think there's obviously some opportunity to continue to improve on them in the forthcoming years. I'm not asking for quarter to quarter, but you know this market tightens; presumably, there's a trajectory higher over the next few years. Is that fair?

Speaker Change: Okay.

Speaker Change: And understanding on ASP.

Speaker Change: Youre going to have quarter to quarter variability in margin for next year or whatever but.

Speaker Change: Yes.

Speaker Change: You characterize.

Speaker Change: I mean, it sounds pretty healthy year from at least the next couple of years.

Speaker Change: I think the margin from an annual trajectory.

Speaker Change: Yes.

Speaker Change: And then some opportunity to continue to improve on that in the forthcoming years I'm not asking for a quarter to quarter, but this market tightens up presumably those that trajectory higher over the next few years is that fair.

Scott Montross: Absolutely. I mean, Brent, as we've talked about in the past, I think one of the keys in the steel pressure pipe business is backlog, which we've had historically high backlog now for the last few years, and multiple strong years of bidding in a row. And I would characterize 2024 as a pretty decent size bidding year, but I think what we see going forward with IIA funding is even bigger years. So ultimately, when you start getting to those things multiple years in a row, you start seeing gross margin levels that start with a two on the steel pressure pipe side versus, you know, 16, 17, 18.

Speaker Change: <unk>.

Speaker Change: Brennan as we've talked about in the past I think one of the keys the heat in the steel pressure pipe business has backlog, which you know we've had a historically high backlog now for the last few years and multiple strong years of bidding in a row.

Speaker Change: I would characterize 2024 as a.

Speaker Change: Pretty decent sized bidding year, but I think what we see going forward with Iga, a funding as ive or even bigger years. So ultimately when you start getting to those things multiple years in a row you start seeing gross margin levels that start with it too on the steel pressure pipe side versus you know 16, 17 18 and.

Scott Montross: And, you know, where we are now is 19% in the second quarter. So we're starting to kind of get into that territory at this point.

Speaker Change: Where we are now is 19% in the second quarter. So we're starting to kind of get into that territory. At this point, but then like you said you have fluctuations within quarters in.

Scott Montross: But then, like you said, you have fluctuations within quarters, and one of the things about the third quarter is, you know, it's hard for me to sit here and predict two record quarters in a row. But we do expect the third quarter to be a pretty strong quarter for steel pressure pipe. So I think we've got a strong backlog, and we've got upward momentum on the gross margins as we move forward just because of the strength of the market over the next few years.

Speaker Change: One of the things about the third quarter is.

Speaker Change: I know, it's hard for me to sit here and predict two record quarters in a row, but we do expect the third quarter to be a pretty strong quarter for steel pressure pipe. So I think we've got a a strong backlog and we've got upward momentum on the gross margins as we move forward just because of the strength of the market.

Speaker Change: The next few years.

Brent Thielman: Okay, very good.

Speaker Change: Okay, Alright, good thanks, Scott Thanks, Eric.

Brent Thielman: Thanks, Scott. Thanks, Aaron.

Scott Montross: Absolutely.

Speaker Change: Absolutely.

Ted Jackson: Our next question comes from Ted Jackson from Northland Securities.

Speaker Change: Our next question comes from Ted Jackson from Northland Securities. Please go ahead with your question.

Ted Jackson: Please go ahead with your question. Thank you very much. And I want to begin with not just congratulating you on the quarter, which was fabulous. But also, you know, the execution in terms of, you know, the work on, you know, controlling working capital on cash flow, it's something you set forth as a strategy for the management team, and you can see it in the results, and, you know, it's great to see. So congrats on that too.

Scott Montross: Thank you very much. And I want to begin by not just congratulating you on the quarter, which was fabulous, but also, you know, the execution in terms of, you know, the work on, you know, controlling working capital and cash flow. It's something you set forth as a strategy for the management team, and you can see it in the results. And, you know, it's great to see. So congratulations on that too.

Ted Jackson: Thank you very much and I want to begin with not just congratulating you on the quarter, which was fabulous but also.

Speaker Change: The execution in terms of that.

Ted Jackson: Work on.

Speaker Change: Controlling working capital and cash flow at something you set forth business strategy for the management team and you can see it in the results.

Speaker Change: It's great to see so congrats on that too.

Ted Jackson: Jed.

Ted Jackson: In terms of my questions, a lot of them have been hit, but I'm going to circle around to a few. And one is just regarding the precast and Park USA. If I'm understanding what you're saying, is the business that did not happen during the second quarter because of whether we should see in the third quarter. And so we should see a good up pick in your precast sales in third quarter. Is that a little bit of, you know, because it's kind of a timing issue, kind of a pig in the python when we should see a, say, not that fourth quarter is weak, but a stronger third quarter than fourth quarter because you're picking up volume.

Speaker Change: In terms of my question is a lot of them had been hit.

Speaker Change: But I'm going to circle around a few and one is <unk>.

Ted Jackson: Regarding.

Speaker Change: Precast and park USA, if im understanding what youre, saying is the business that did not happen during the second quarter because of weather, we should see in the third quarter until we should see a good up tick.

Speaker Change: In your pre cast sales in third quarter is that a little bit.

Speaker Change: Because it's kind of a timing issue kind of a pig in the Python and we should see yet.

Speaker Change: Not that fourth quarter is weak, but a stronger third quarter and fourth quarter. Because you are picking up volume that really should have happened in the second quarter.

Scott Montross: That really should have happened in the second quarter. Yeah, I would say, Ted, that we are expecting a stronger third quarter. And like I said, the Geneva business is really, really strong. But the park business is just starting to begin to pick up. I mean, we lost. Like, for example, in Houston, nine production days in the second quarter in Ferris. We lost four production days, and we lost one in San Antonio, but we also lost shipping days. You know, we lost probably half of the shipping days in the month that Houston and Ferris because of how bad the weather was.

Speaker Change: I would I would say Ted that we are expecting a stronger <unk>.

Speaker Change: Third quarter and like I said, the Geneva business is really really strong, but the park business just starting to begin to pick up I mean, the we lost we lost like for example in Houston nine production days in the second quarter and ferrous we lost four production days and we lost one in San Antonio, but we also lost shipping.

Speaker Change: Days.

Speaker Change: We lost probably half of the shipping days in the month that Houston and fairest because of how bad the weather wise, but it also it also affected order placement because people people couldnt get into work because of the flooding and people.

Scott Montross: But it also affected order placement because people, people couldn't get into work because of the flooding, and people, you know, the power was out. So it may be a little bit more back end loaded this year, like you said, just because the orders are now starting to get placed and filling up the order books. And you can kind of see some of that in our order book for the end of the second quarter because we were at over 60 million in orders for the order book in precast again. And that's both sides of the business starting to pick up.

Speaker Change: The power was out so it may be a little bit more backend loaded. This year like you said just because the orders or are now starting to get placed and filling up the order books and you can kind of see some of that in in our order book for the for the end of the second quarter, because we were at over $60 million in orders for the <unk>.

Speaker Change: Your book and free cash again, and that's that's both sides of the business starting to pick up but it's really park is just now starting to pick back up again.

Scott Montross: But it's really park is just now starting to pick back up again. So some of these weather issues, you might not clear it all in the third quarter, and we could see another kind of trail into the fourth quarter as well. Yeah, maybe not. If I were to guess at this point, Ted, I would say that the fourth quarter as far as light Geneva, because all of a sudden it starts to get cold in Utah and starts to snow. So it slows down the contractors getting in the field and doing the installs and things like that.

Speaker Change: So some of this.

Speaker Change: These weather issues.

Speaker Change: Not clear at all in the third quarter, and we could see no trail.

Speaker Change: Trail into the fourth quarter, well, yes, maybe not if I were to guess at this point, Ted I would say that the fourth quarter as far as like Geneva, because all of a sudden it starts to get cold in Utah and starts to snow show, which slows down the contractors getting in the field and doing the installs and things like that but in Texas, I think youre going to have the issue.

Scott Montross: But in Texas, I think you're going to have the issue from this weather stuff. You're going to have a little bit of pent-up demand on orders that didn't get placed. So we may end up saying a fourth quarter that's a little bit larger than we normally do. Okay.

Speaker Change: From this weather stuff youre going to have a little bit of pent up demand on orders that didn't get placed so we may end up seeing a fourth quarter, that's a little bit larger than we normally do.

Speaker Change: Okay.

Ted Jackson: Shifting over to the SPP business, you know, and you did bring it up. I mean, you know, steel pricing has, you know, come down quite a bit and, you know, you're just the fact that you're putting up the revenue numbers that you're putting up, you know, says how strong your businesses. And the fact that you're looking for third quarter, it's called second half of the year to remain strong and, you know, given how your business works. My sense would be that, you know, the average price of steel for you in the second half of 24 would be lower than the first half of 24. Again, it gets to the strength.

Speaker Change: Shifting over to the SPP business and you did bring it up.

Speaker Change: Steel pricing has come down quite a bit.

Speaker Change: And just the fact that you're putting up the revenue numbers that youre, putting up sales how strong your businesses.

Speaker Change: The fact that Youre looking for third quarter Thats call. It second half of the year to remain strong and given how your business works my sense would be that the.

Speaker Change: Average price of steel for you in the second half of <unk>.

Speaker Change: Four would be lower than the first half of 'twenty four again, it gets to the strength when I when I.

Ted Jackson: When I think about steel pressure, steel pricing, you know, where do you think this is going to, it's going to play out as we roll through 25. Do you think we're going to stay in that kind of six to $700 per ton range. And, you know, I'm saying, I mean, because it's not really about the bottom line, it's really just kind of about the top line with you guys, because, you know, it's kind of a pass through for you anyway. But, you know, I mean, like, you know, like, when I think about my model and such, you know, kind of what is, what's in your kind of pricing deck for that, as you guys manage your business?

Speaker Change: Think about steel pressure.

Speaker Change: Steel pricing.

Speaker Change: No.

Speaker Change: Where where do you think this is going to it's been a play out as we roll through 25 do you think we're going to stay in that kind of 6% to $700 per ton range.

Speaker Change: I'm, saying that I mean, because it's not really about the bottom line. It's really just kind of about the topline with you guys.

Speaker Change: Kind of a pass through for you anyway.

Speaker Change: <unk>.

Speaker Change: <unk>.

Speaker Change: When I think about my model and such kind of what is what's been your kind of pricing deck.

Speaker Change: As you guys manage your business well.

Scott Montross: Well, we've seen over the last, I'd say, you know, three or four years, the steel price fluctuate a lot, and we've continued to be on an upward trajectory on revenue for steel pressure pipe. So, you know, we've seen it back in 2020, down into the below $500 a ton, and back in, you know, in 2022, it was, it was $1,200 a ton and then dropped to $690 a ton by the end of the year. And, so it's the same thing. It's just kind of fluctuating around the one thing I would say our expectations are, as we go forward, that it's going to probably revolve around a mean that's probably between $808 and $150 a ton as we go forward.

Scott Montross: Well, over the last, let's say, you know, three or four years, the steel price has fluctuated a lot, and we've continued to be on an upward trajectory on revenue for steel pressure pipe. So, you know, we saw it back in 2020, down below $500 a ton. And back in 2022, it was 1200 bucks a ton and then dropped to $690 a ton by the end of the year. And so it's the same thing.

Speaker Change: Well over the last let's say three or four years, the steel price fluctuate a lot and we've continued to be on an upward trajectory on.

Speaker Change: On revenue for steel pressure pipe. So we've seen it back in 2020 down into the.

Speaker Change: Below $500, a ton and back in 2022. It was it was 200 Bucks a ton and then dropped to $690 a ton by the end of the year and so it's the same thing it just kind of it's fluctuating around the one thing I would say our expectations are as we go forward that its going to probably have a revolver.

Scott Montross: It's just kind of fluctuating around. The one thing I would say, our expectations are, as we go forward, that it's probably going to revolve around a mean of, it's probably between 800 and $850 a ton as we go forward. But you're going to see highs and lows. And, like, for example, now, you know, we've seen the steel price go down for the last several weeks, and it seems to have bottomed out at about $650 a ton this week in the market. The price has started to move back up a little bit again. So it's kind of an interesting way that this thing cycles now because once the steel guys start getting below about $700 a ton, they start having a little bit more difficulty making money.

Speaker Change: I mean, thats, probably be between 800 $850 a ton as we go forward, but youre going to see highs and lows.

Scott Montross: But, you're going to see highs and lows and, like, for example, now, you know, we've seen the steel price go down for the last several weeks, and it seems to have bottomed out at about $650 a ton. In this week in the market, the price had started to move back up a little bit again. So, it's kind of an interesting way that this thing cycles now. Because once the steel guys start getting below about $700 a ton, they start having a little bit more difficult time making money, and ultimately they start taking off production capacity and so on and so forth.

Speaker Change: And like for example, now we've seen the steel price go down for the last several weeks and it seems to have bottomed out at about $650 a ton in this weekend.

Speaker Change: In the market the prices started to move back up a little bit again so.

Scott Montross: And ultimately, they start taking off production capacity and so on and so forth. So I think you're going to still see it revolving around that 800, $850 a ton number, Ted, as we go forward into the future. And then just kind of, you know, keeping over on this side of the world, and you did actually say it, you know, the better bidding environment means better margins.

Scott Montross: It's kind of an interesting way that this thing cycles now because once the steel guys start getting below about $700 a ton they start having a little bit more difficult time, making money and ultimately they start taking our production capacity and so on and so forth. So I think youre going to still see it revolving around that 800 to 850.

Ted Jackson: So, I think you're going to still see it revolving around that $850 a ton as we go forward into the future. Okay. And then sticking on steel, you know, I mean, I know you're not going to give me the exact, but can you give me a sense what percentage of your COGS was, you know, steel for the quarter? I think we're right now, we're probably around 30% ish.

Ted Jackson: Our ton number Ted as we go forward into the future.

Speaker Change: Okay.

Speaker Change: And then sticking on steel I mean I know.

Ted Jackson: Yes, I can give me the exact but can you give me a sense.

Speaker Change: What percentage of your Cogs was.

Speaker Change: Steel.

Speaker Change: For the quarter.

Speaker Change: I think we're right now, we're probably around 30% ish.

Ted Jackson: Okay. And then just kind of, you know, keeping over on the side of the thing of the world. And you did actually sit, you know, you're having, you know, a better bidding environment; better bidding environment means better margin.

Speaker Change: And then just.

Speaker Change: Kind of keeping over on this side of the of the World and you did actually said.

Speaker Change: You are having a better bidding environment better bidding environment means better margins.

Scott Montross: So, you know, it's fair to assume that implicit within the guidance that you're bringing for the second half of the year, we should expect to see the margin structure for SPP to be similar to what we just saw in the second quarter. Well, I think it's going to, yeah, I didn't line up like similar to that, Ted. The one thing is, is you have differences in production on the number of jobs that you've taken. We've gotten; I mean, the steel pressure pipe guys have done a great job of getting a lot of work in, and these jobs fluctuate.

Speaker Change: It's fair to assume that implicit within the guidance that you are bringing for the second half of the year, we should expect to see the margin structure for SPP to be similar to what we just saw in the second quarter.

Speaker Change: Well I think youre going to.

Speaker Change: Yes, I think the lineup like similar to that Ted. The one thing is as you have differences in production on the number of jobs that you have taken we've gotten.

Speaker Change: The steel pressure pipe guys have done a great job of getting a lot of work in and these jobs fluctuate and ultimately a little bit of it now comes it comes to what are the jobs and and based on the jobs that you're running in a specific timeframe. What is your overall production level and how does that fit into your overhead absorption profile.

Scott Montross: And ultimately, a little bit of it now comes to what are the jobs, and based on the jobs that you're running in a specific time frame, what is your overall production level, and how does that fit into your overhead absorption profile. And that's what'll probably cause things to fluctuate a little bit in the quarters.

Speaker Change: And that's what will probably cause things to fluctuate a little bit in the quarter. So I do think though that we're going to remain on a upward trajectory.

Scott Montross: So, I do think, though, that we're going to remain on an upward trajectory as we go through this year. But remember, the fourth quarter is always a little bit rough on the steel pressure pipe side, too, simply because you have, you start having weather issues where we have our steel pressure pipe plants, and then you have the quarters that have the two major holidays of the year in them. So, ultimately, it'll fluctuate around, but I think when you look at it on a longer term basis, from where we've come from, you know, I think that you see a year last year where you had a steel pressure pipe margin that was 14, 15% for the average. In 2023, you're going to see a year this year that's probably averages out, probably a couple hundred to a few hundred basis points higher than that.

Speaker Change: As we go.

Speaker Change: Through this year, but remember the fourth quarter is always a little bit rough on the steel pressure pipe side to simply because you have you started having weather issues.

Speaker Change: Where are we ever steel pressure pipe plants, and then you have the quarters. It had two major holidays of the year in them. So so ultimately it will fluctuate around but I think when you look at it on a longer term basis from where we've come from you know I think that you see a year last year and we had a steel pressure pipe margin that was 14, 15%.

Speaker Change: The average in 2023, youre going to see a year. This year, that's probably averages out probably.

Speaker Change: Couple of hundred to a few hundred basis points higher than that and if the demand continues to move like we think it's going to continue to move in the future as you get out into 'twenty five and the <unk>.

Scott Montross: And if the demand continues to move, like we think it's going to continue to move in the future, as you get out into 25, and the IJA funding really starts to kick in. I think you're going to see higher production levels and ultimately margins that start with a two in steel pressure pipe.

Speaker Change: J a funding really starts to kick in I think youre going to see higher production levels and ultimately margins to start with a two.

Scott Montross: And steel pressure pipe.

Ted Jackson: It's exciting.

Speaker Change: Hi, this is exciting.

Ted Jackson: I've got two more questions, and then I'm done with you. Aminate pipeline, no one's really kind of brought this up yet. I know it's an important thing. I know you guys are, you know, shaking the bushes, looking at opportunity. Can you give me a sense in terms of, you know, kind of what's the activity there? You know, is there anything that you think is, you know, I'm saying like, is there anything that's kind of, you know, we could, is there something that we expect some action here before the end? It's not the end of this year; maybe the end of next year is probably a better way to think about it, you know.

Ted: Got two more questions and then.

Ted: I'm done with it.

Speaker Change: M&A pipeline no one's really kind of brought this up yet I know, it's an important thing I know you guys are.

Speaker Change: Shaking the bushes looking at opportunity can you give me a sense in terms of.

Ted: What's the activity there is there anything that you think is.

Scott Montross: So it's, you know, it's fair to assume that implicit within the guidance that you're bringing for the second half of the year, we should expect to see the margin structure for SPP to be similar to what we just saw in the second quarter. You know what I'm saying, like, is there anything that's kind of, you know, we could, is there something, can we expect some action here before the end of this year, maybe the end of next year is probably a better way to think about it, you know. Okay. Actually, do you know what?

Ted: What I'm, saying.

Is there anything thats kind of just.

Scott Montross: Is that what can we expect some action here before the end of if not the end of this year maybe into next year is probably a better way to think about it.

Scott Montross: We're looking; I mean, we've got a couple of things that we're interested in right now that we're doing a deeper dive into. So we are, you know, it's hard to get them done real quickly, right? So especially when you're dealing with companies that aren't public companies and you could be dealing with family businesses and things like that. So those have a tendency to drag on a little bit longer.

Speaker Change: We're always looking I mean, we've got a we've got a couple in a couple of things that we're interested in right now that we're doing a deeper dive into.

Speaker Change: So we are.

Speaker Change: It's hard to get them done.

Speaker Change: Real quickly right, so, especially when you're dealing with with companies that are arent public companies and you could be dealing with family businesses and things like that so those have a tendency to drag on a little bit longer. So I would say that it is it is a pretty good chance that youll see some action from us by 2025.

Scott Montross: So I would say that it is a pretty good chance that you'll see some action from us by 2025, because it's, you know, we're going on three years since we did the last acquisition. And there's been a lot of, you know, integration going on and getting Park up to speed and cultural stuff. And we're getting to the point now; we're getting ready to do that. And you can tell that just by the focus on cash flow and getting the credit facility paid down, where we dropped it from about 90 million down to about 75 million in the end of the second quarter.

Speaker Change: We're going on three years since we did the last acquisition and Theres been a lot of integration going on in getting park up to speed and cultural stuff and we're getting to the point now where we're.

Speaker Change: We're getting ready to do that and you can you can you can tell that just by the focus on cash flow and getting the credit facility pay down where we dropped it from about $90 million down to about $75 million and the end of the second quarter. So we expect that trend to continue through the end of this year and position us well to.

Scott Montross: So we expect that trend to continue through the end of this year and position us well to get this next thing done. But we, I would say that there are things that are out there, and I expect something to be imminent by 2025.

Speaker Change: To get this next thing done, but we I would say that there are things that are out there and I expect something to be imminent by 2025.

Scott Montross: Yeah.

Scott Montross: My last question is kind of not even worth asking. Again, congrats on the quarter. Super, super job. I hope you're proud of me, too.

Ted Jackson: Okay, actually, you know what, my last question is kind of not even worth asking. Again, scratching the corner. Super, super job. Very, very, you know, I hope you're proud of me to, thanks. Thank you. Good.

Scott Montross: Okay.

Speaker Change: My last question is kind of not even worth asking.

Scott Montross: Thanks. Bye, and the EPA Pipe Charge. And would you consider it larger a few years down the road than $450 to $600 million, years ahead? Oh, yeah.

Speaker Change: And congrats in the quarter.

Barry: Super job Barry.

Speaker Change: I hope your partnership.

Speaker Change: Thank you.

Operator: Once again, if you would like to ask a question, please press star and one.

Scott Montross: Yes.

Speaker Change: Once again, if you would like to ask a question. Please press star and one.

David Wright: Our next question comes from David Wright from Henry Investment Trust.

Speaker Change: Our next question comes from David Wright from Henry Investment Trust. Please go ahead with your question.

David Wright: Please go ahead with your question. Good morning. A great report and glad to see SPP firing on all cylinders. A lot of great questions from the analyst here, previously in the call.

Speaker Change: Got here and good morning.

Speaker Change: Good morning, good morning.

Scott Montross: Hey.

Speaker Change: Great report and I'm glad to see SPP firing.

Speaker Change: On all cylinders.

Speaker Change: A lot of great questions from the analysts here previously in the call.

David Wright: I want to ask a little larger question, looking at your slide deck, where you have this chart of EPA pie chart. And would you consider water transmission pipe to fall in the category of source or distribution transmission? It would be more distribution transmission. Yeah, okay. So that's two-thirds of the pie. And they've got the 20-year need; they've got the 20-year need, excuse me, at $420 billion. And then I'm looking at the funnel that you have for appropriations. And, you know, not very much of it is actually made it out into the market. And you said in the call, you know, kind of a couple of years out, okay, that you'll start to see it more in your business.

Scott Montross:

Speaker Change: I wanted to ask a little larger question looking at your slide deck.

Speaker Change: Where you have this chart of.

Speaker Change: The EPA Pie chart.

Scott Montross: And.

Speaker Change: Would you consider.

Speaker Change: Water transmission pipe.

Speaker Change: All in the category of source.

Speaker Change: Or distribution transmission.

Speaker Change: It would be it would be more distribution transmission.

Speaker Change: Yes, okay. So thats two thirds of the pie.

Speaker Change: And they've got the 20 year need they've got the 'twenty near 20 year 2020 year need excuse me at $420 billion.

Speaker Change: And then I'm looking at the funnel that you have.

Scott Montross: Yeah.

Scott Montross: Sure.

Scott Montross:

Scott Montross: Appropriations.

Speaker Change: Not very much of it is actually made it out into the market and you said in the call you know kind of a couple of years out okay that youll start to see it more in your business.

Scott Montross: And when you talk about Northwest Pipes market share in water transmission, you put that market at $450 to $600 million. And you put your share in, you know, around half. So, isn't it reasonable to think that, you know, particularly since you don't use all of your capacity and your two competitors, I don't know how much of their capacity they use. But isn't it reasonable to think that the overall market for seal pressure pipes should be larger, a few years down the road, than $450 to $600 million a year? Especially with the IJA funded stuff, David, for sure.

Speaker Change: And when you talk about northwest pipes market share and we're in.

Speaker Change: In water transmission.

Speaker Change: That market at $450 to $600 million and you put your share it.

Speaker Change: Around half.

Scott Montross:

Scott Montross: So.

Speaker Change: Isn't it reasonable to think that particularly since you don't use all of your capacity and your two competitors I don't know how much of their capacity their use.

Speaker Change: Isn't it reasonable to think that the overall market for steel pressure pipe should be.

Scott Montross: Larger a few years down the road that $450 to $600 million a year.

Scott Montross: Especially with the <unk> funded stuff David for sure.

Scott Montross: That's what our expectation is. Yeah, so ultimately, you know, we had a pretty good capacity utilization in the second quarter. I think we're about 74% of practical capacity at seal pressure pipes. So, we still have a lot more than we can do, right? So, ultimately, if that market's there and it's going to boom like we think it's going to boom, I think you'll see some pretty good results on the seal pressure pipe side. Right, right, right. So, I mean, you could talk about good bidding years and, you know, average bidding years. But it seems to me that the bidding years should just get better and better.

Speaker Change: That's what our expectation is yes. So so ultimately we had a pretty good capacity utilization.

Speaker Change: In the second quarter I think we were about 74% of practical capacity at steel pressure pipe. So we still have a lot more that we can do right. So so ultimately if that market is there and it's going to boom like we think it is going to boom.

Speaker Change: I think youll see youll see some pretty pretty good results on the steel pressure pipe side.

Speaker Change: Right right right, so I mean.

Speaker Change: Talk about good bidding years.

Speaker Change: Average bidding years, but it seems to me that the bidding years sure.

Speaker Change: Should just get better and better.

Scott Montross: Yeah, and larger, right. So, you know, even though, and you march into better, so even though you're pursuing pre-cast, if this growth in water transmission pipe, you know, happens.

Speaker Change: Yes, and larger right. So so.

Speaker Change: Even though and your margins are better so even though youre pursuing precast if this growth.

Speaker Change: In water transmission pipe.

Scott Montross: Happens.

Scott Montross: Coffin. It's still going to be a big part of the company in the years ahead. Oh, yeah. And so I think it's great. You've got the footprint; you've got the capacity. You've got the reputation in the market and just keep on doing a great job.

Speaker Change: It's still going to be a big part of the company in the years ahead.

Scott Montross: And so I think it's great. You've got the footprint; you've got the capacity. You've got a reputation in the market, and just keep on doing a great job. Just a few key takeaways before closing. One, I think the expectations for the bidding in 2024 are pretty much coming to pass, and the second half is still very strong. So we're expecting the steel pressure pipe business to have a very strong year this year.

Speaker Change: Oh, yes.

Scott Montross: I think it's great you got the footprint you've got the capacity.

Scott Montross: You've got the reputation in the market.

Scott Montross: Just keep on doing a great job.

Scott Montross: Next David, appreciate that David. We've got some big years in front of us. And, as you mentioned, and we have the funnel up on the screen, really not much of that IJA money has come to the market at this point. And we're just starting to see it. And in some of the jobs, I mean, there's some, the job in California, the site's reservoir job, which is, you know, the source will be source, but there's other big reservoir jobs that are going on. And we just saw a thing come out in about the state of Texas, where the SWIFT fund, the State Water Infrastructure Fund in Texas, it just allocated $3 billion to some additional projects.

Scott Montross: Thanks, David I appreciate that.

Speaker Change: We've got some big years in front of Us and as you mentioned and we have the.

Speaker Change: Funnel up on the screen really not much of that.

Speaker Change: Money has come to the to the market at this point.

Scott Montross:

Manny: And we're just starting to see it in some of the jobs I mean, there is some the job in California, the site's reservoir job, which is Manny.

Speaker Change: The sort of source will be sourced, but theres other big reservoir jobs that are going on and we just saw.

Speaker Change: I think come out in about.

Scott Montross: About the state of Texas, where the.

Scott Montross: The Swift funding.

Scott Montross: State water infrastructure fund in Texas.

Speaker Change: Allocated $3 billion to some additional projects in one of those projects was a brass port water supply project, which is a project alone is going to get about $750 million, but thats off channel reservoir project to basically triple the capacity of storage down there.

Scott Montross: And, and one of those projects was a brass port water supply project, which is a, that project alone is going to get about 750 million. But that off-channel reservoir project to basically triple the capacity of storage down there. And they're going to have to transmit that. Then there's another big project going on down there in Corpus Christi that's a seawater desalinization project plant that's going in for just over half a billion dollars. So there's all kinds of stuff out there on the horizon right now that, that really makes some of the pain that we've gone through in the past years like 15, 16, and 17.

Speaker Change: And theyre going to have to transmit that then there is another big project going on down there in Corpus Christi, that's a seawater desalination project plant that's going in for <unk>.

Speaker Change: Just over half a billion dollars. So there is all kinds of stuff out there on the horizon right now that that really makes.

Speaker Change: Some of the pain that we've gone through in the past years like 15, 16 and 17.

Scott Montross: You know, it starts to, it starts to relieve some of those memories a little bit. So, and I'd say really since 2019, Steel Pressure Pipe Business has been on a relatively decent pace, even with a slow year in 2023 and bidding and production. We still managed to put together a pretty good year based on, you know, us being one of the big consolidators in the market. So I think that's kind of changed the dynamics here. And big years are going to get really big. And, but you'll, you'll have periods of time that will slow down.

Speaker Change: It starts to starts to relieve some of those memory is a little bit so and I'd say really since 2019 steel pressure pipe business has been on a relatively decent pace, even with a slow year in 2023 and bidding and production, we still managed to put together a pretty good.

Speaker Change: <unk> based on us being one of the big Consolidators in the market. So I think that's kind of changed the dynamics here.

Speaker Change: And big years, Youre going to get really big and but you'll you'll have periods of time that'll slow down. It's just it's just how the projects are sequenced in bid and when they get produced but.

David Wright: It's just, it's just how the projects are sequenced and bid, and when they get produced. But we get pretty good upward trend over the next, really through about 2028 right now on projects in Steel Pressure Pipe because of this I, I, J, A funding. Well, you're pretty close to half a billion dollars in revenue. I mean, maybe you'll not quite make it this year, but, you know, I mean, that's really significant. So again, congratulations. Great, great work. Thanks, David. Appreciate it. Thanks, David.

Scott Montross: Pretty good upward trend over the next really through about 2028 right now on on projections steel pressure pipe because of this iga funding.

Scott Montross: Yeah.

Speaker Change: You're pretty close to half a billion dollars in revenue I mean, maybe not.

Speaker Change: Not quite make it this year, but.

Speaker Change: That's that's really significant so again congratulations.

Speaker Change: Great Great work.

Scott Montross: Thanks, David appreciate it David.

Scott Montross: And ladies and gentlemen, at this time, in showing no additional questions, I'd like to turn the floor back over to Scott Montrasse for any closing remarks. Yes, a few few key, key takeaways before closing. One, I think the expectations for the bidding in 2024 are pretty much coming to pass, and a second half still very strong. So we're expecting the Steel Pressure Pipe business to have a very strong year this year. Same thing with the precast. I mean, after a slow first quarter because of the, some of the headwinds with weather and, you know, some of the issues related to the interest rate environment, we're expecting a second half to be significantly stronger.

Speaker Change: And ladies and gentlemen at this time in showing no additional questions I'd like to turn the floor back over to Scott Montross for any closing remarks.

Scott Montross: A few.

Scott Montross: Key takeaways before closing one I think the expectations for the bidding in 2024 pretty much coming to pass in the second half still very strong. So we're expecting the steel pressure pipe business to Teva.

Scott Montross: Same thing with the precast. I mean, after a slow first quarter because of some of the headwinds with weather and some of the issues related to the interest rate environment, we're expecting the second half to be significantly stronger. And, you know, a couple of things to mention. You can do the numbers and see what it would have looked like without the weather impact and what it should look like going forward. So, ultimately, these things are working, and we really appreciate today your attention and the time you take to be on our call and look forward again to speaking with you in the November time frame. So, thank you.

Scott Montross: A very strong year this year.

Scott Montross: Same thing with the free cash I mean, after a slow first quarter because of the some of the headwinds with weather and some of the issues related to the interest rate environment, we're expecting the second half to be significantly stronger and the a couple of things to mention it.

Scott Montross: And, you know, the, the, a couple of things to mention, it's in our growth strategy; you know, part of that was centered around stabilizing our Steel Pressure Pipe business. And when you look at where we are now versus where we were in 2017, you know, our revenues have more than doubled. And when adding the precast side of the business to this, you know, the company is more than tripled over the last time frame. So ultimately, the things that we're doing on the growth of the company are working. And, you know, we continue to be on the track for acquisitions and organic growth on the precast side, not only from product spread, but potentially doing precast at some of our different plants.

Speaker Change: And our growth strategy.

Speaker Change: Part of that was centered around stabilizing our steel pressure pipe business and when you look at where we are now versus where we were in 2017, our revenues have more than doubled and was adding the free cash side of the business to this the company has more than tripled over the last timeframe. So ultimately the.

Scott Montross: The things that we're doing on the the growth of the company are working and we continue to be on track for acquisitions and organic growth on the free cash side, not only from product spread but but.

Scott Montross: Potentially doing pre cast at some of our different plants and I think longer term, we're in a great spot to be well positioned from these infrastructure projects that are increased due to the increasing population and we're in a great spot going well into the future I think the biggest takeaway is the business diversification strategy that we've implemented.

Scott Montross: And I think longer term, we're in a great spot to be well positioned from these infrastructure projects that are in create, do the increasing population. And we're in a great spot going well into the future. I think the biggest takeaway is the business diversification strategy that we've implemented. is working. Even with a big part of our business being severely impacted by weather in the second quarter, we were able to put together a fairly decent quarter from our perspective. And, you know, imagine you can do the numbers and see what it would have looked like without the weather impact and what it should look like going forward.

Scott Montross: <unk>.

Speaker Change: He is working even with a big part of our business being severely impacted by weather in the second quarter, we were able to put together a fairly decent quarter from our perspective and imagine.

Scott Montross: You can do the numbers and see what it would have looked like without the weather impact and what it should look like going forward. So so ultimately these things are working and we really appreciate today your attention and the time you take to to be on our call and look forward again to speaking with you in the November timeframe. So thank you.

Scott Montross: So ultimately these things are working, and we really appreciate today your attention and the time you take to be on our call and look forward again. And speaking with you in the November timeframe. So thank you.

Operator: And ladies and gentlemen, with that, we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your life.

Speaker Change: Ladies and gentlemen, with that we will be concluding today's conference call and presentation. We do thank you for joining you may now disconnect your lines.