Q2 2025 L.B. Foster Co Earnings Call
Speaker #2: Good day, and thank you for standing by. Welcome to L.B. Foster's second quarter 2025 earnings call. At this time, all participants are in a listen-only mode.
Speaker #2: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press *11 on your telephone.
Speaker #2: You will then hear an automated message advising that your hand is raised. To withdraw your question, please press *11 again. Please be advised, today's conference is being recorded.
Speaker #2: I would now like to turn the call over your speaker today, Lisa Duranti. Please go head.
Speaker #3: Thank you, operator. Good morning, everyone, and welcome to L.B. Foster's second quarter of 2025 earnings call. My name is Lisa Duranti, the company's Director of Financial Reporting and Investor Relations.
Speaker #3: Our president and CEO, John Kasel, and our chief financial officer, Bill Thalman, will be presenting our second quarter operating results, market outlook, and business developments this morning.
Speaker #3: We'll start the call with John providing his perspective on the company's second quarter performance. Bill will then review the company's second quarter financial results.
Speaker #3: John will provide perspective on market developments and company outlook in his closing comments. We will then open up the session for questions. Today's slide presentation, along with our earnings release and financial disclosures, were posted on our website this morning and can be accessed on our investor relations page at lbfoster.com.
Speaker #3: Our comments this morning will follow the slides in the earnings presentation. Some statements we are making are forward-looking and represent our current view of our markets and business today.
Speaker #3: These forward-looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise or publicly release the results of any revisions to these statements in light of new information, except as required by securities laws.
Speaker #3: For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and presentation. We will also discuss non-GAAP financial metrics and encourage you to carefully read our disclosures and reconciliation tables provided within today's earnings release and presentation as you consider these metrics.
Speaker #3: So, with that, let me turn the call over to John.
Speaker #4: Thanks, Lisa. And hello, everyone. Thanks for joining us today for our second quarter review. I'll begin with slide five, covering the key drivers of our results for the quarter.
Speaker #4: We're very pleased with our performance in the quarter, with improvements delivered broadly across the business. First of all, we returned to sales growth in the second quarter, with revenues up 2% over last year.
Speaker #4: The growth was achieved in the infrastructure segment, with sales up 22.4%, led by a 36% increase in our pre-cash concrete business. Rail revenues, on the other hand, remain soft in the quarter, declining 11.2% from last year.
Speaker #4: However, the rail sales, including a 17.2% increase in friction management sales over last year. In addition, demand rates for our rail offering increased significantly in the quarter, as evidenced by a 42.5% increase in our bag quality from the start of the quarter.
Speaker #4: This sets a solid foundation for our growth outlook in the back half of the year. Highlighting the benefits of our strategic execution, we delivered a 51.4% increase in adjusted EBITDA over last year, despite the modest sales growth in the quarter.
Speaker #4: The improvement was driven by favorable margins in the infrastructure segment and strong SG&A leverage across the enterprise. Our net debt decreased to $77.4 million a quarter end, with gross leverage improving to $2.2 times compared to $2.7 times last year.
Speaker #4: And finally, the order rates for the quarter drove a solid increase in our bag quality for both segments, with an improved business mix versus last year.
Speaker #4: I'll turn it over to Bill now to cover the financials for the quarter and I'll come back at the end with some color on our market outlook and financial guidance for the year.
Speaker #4: Over to you, Bill.
Speaker #5: Thanks, John, and good morning, everyone. I'll begin my comments on slide seven, covering the consolidated results for the second quarter. As always, the schedules in the appendix provide details on the financial results covered in today's call.
Speaker #5: Including reconciliations for non-GAAP information. As John Kasel mentioned in his opening remarks, we returned to organic sales growth in the quarter for the first time since Q1 of 2024.
Speaker #5: Net sales grew 2% year over year, driven by strong growth in precast concrete within infrastructure. Reported gross profit was up $0.4 million, with a gross margin down 20 basis points to 21.5%.
Speaker #5: The reported Q2 gross profit includes a $1.1 million charge related to the exit of an automation and material handling product line in the UK.
Speaker #5: Also, last year's gross profit included a 0.8 million property sale gain. Adjusting for these two items, gross margins were up 120 basis points versus last year, on improved business mix, primarily within the infrastructure segment.
Speaker #5: SG&A costs decreased 2.4 million dollars due to lower personnel insurance and professional services costs in the quarter. The current quarter includes a 0.3 million dollar charge for the AMH exit.
Speaker #5: With a higher revenues and lower spending levels, the SG&A percentage of sales improved 200 basis points to 15.6%. Adjusted EBITDA was 12.2 million, up 51.4% versus last year, driven by improved margins in infrastructure, and lower SG&A spending across the business.
Speaker #5: Cash provided by operating activities was 10.4 million dollars, favorable 15.4 million dollars versus last year, due to improved profitability and lower working capital needs.
Speaker #5: I'll cover the favorable developments in orders and backlog later in the presentation. Slide eight provides a reminder of our typical business seasonality and the related financial profile.
Speaker #5: Sales and EBITDA levels are normally higher in the second and third quarters, as they represent the primary construction season for our customers. As a result, our free cash flow normally follows a pattern of consumption in the first half of the year, with a reversal in the back half of the year as the construction season winds down.
Speaker #5: Since the first half of 2025 was weaker for our rail business, the working capital needs this year are somewhat deferred to the back half.
Speaker #5: This is supported by the higher order book exiting Q2, as well as the sales growth implied by our guidance in the back half of 2025.
Speaker #5: I'll highlight that the assumed free cash flow at the midpoint of our guidance is approximately 41 million dollars for the second half of 2025.
Speaker #5: Over the next couple of slides, I'll our segment performance in the quarter, starting with rail on slide nine. The second quarter rail revenues were 76 million dollars, down 11.2% due to delayed order development primarily in rail distribution coupled with reduced activities in the UK.
Speaker #5: Rail product sales were down 15.5% due to the softer rail distribution demand in the quarter, and technology services and solutions sales were also down 32.6%, including the decline in UK business.
Speaker #5: I'll mention here that the UK automation and material handling product line is exiting, had $3.1 million in sales, and $0.6 million of an operating loss for the trailing 12-month period.
Speaker #5: As John mentioned, global friction management sales were up 17.2% versus last year, as this growth platform continues to perform well. Rail margins 19.9% were down 100 basis points, driven primarily by the 1.1 million dollar AMH exit charge.
Speaker #5: Excluding this impact, rail margins were up 40 basis points. Rail orders decreased 2.3% versus last year, but increased 37.3% sequentially reflecting the strong order book development we expected for rail distribution.
Speaker #5: Backlog levels increased 42.5% during the quarter and 13.9% versus last year. The backlog improvement was realized in both rail products and global friction management while TS and S backlog declined, driven primarily by the UK.
Speaker #5: Turning to infrastructure solutions on slide 10, net sales increased 12.4 million dollars or 22.4%, due to the strength in our pre-cash concrete business, which increased 36% over last year.
Speaker #5: Steel product sales were up $0.2 million, with improved protective coatings and threaded volumes offsetting lower bridge volumes. Gross profit margins improved by 40 basis points to 23.3%, due to higher sales volumes in precast and improved margins in steel products, thanks to our portfolio work.
Speaker #5: Excluding the $0.8 million favorable impact from the Bedford property sale last year, infrastructure margins were up 190 basis points year over year. Infrastructure orders remained robust at $61.4 million, up 13.7% over the prior year, with solid gains in precast concrete.
Speaker #5: Backlog totaling $139.2 million is up $4.2 million over last year, including $7.9 million or 36.8% from improved protective coating demand. I'll next cover some of the key takeaways from our year-to-date results on slide 11.
Speaker #5: Net sales in the first half of the year were down 9% due to weaker demand in the rail segment, primarily in rail distribution, coupled with reductions in the UK.
Speaker #5: Partially offsetting were sales gains in our growth platforms of pre-cast concrete, which were up 35.1%, and friction management, which was up 14.4%. Year-to-date gross profit reflects the lower rail sales volumes, with margins of 21.2%, down 20 basis points.
Speaker #5: SG&A costs decreased $4.4 million from the prior year, with lower personnel and professional service costs as the primary drivers. Adjusted EBITDA was $14.1 million, essentially flat with the prior year, despite the 9% decline in sales.
Speaker #5: I'll ion here that the higher effective tax rate for both the quarter and year-to-date period was due to our not recognizing a tax benefit on UK pre-tax losses.
Speaker #5: I'll phasize that the higher rate not reflective of our cash tax requirements, which remain extremely low at approximately 2 million dollars per annum. We expect a lesser impact on our effective tax rate in future quarters, given our improvement efforts in the UK, as well as our overall improving profitability outlook.
Speaker #5: Operating cash flow was a $15.7 million use, favorable by $10.7 million compared to last year, due to lower working capital needs. Orders were up 7.1% due to strong infrastructure demand.
Speaker #5: I'll now cover liquidity and leverage on slide 12. Net debt levels of $77.4 million decreased $6.6 million compared to last year, with the gross leverage ratio improving to 2.2 times at quarter end.
Speaker #5: As mentioned earlier, we expect approximately $41 million in free cash flow in the back half of 2025. We expect to deploy these funds to lower debt levels while also improving leverage both sequentially and year over year.
Speaker #5: We also plan to continue our stock buyback program, with $36.7 million remaining authorized and approximately 6.5% of outstanding shares repurchased over the last two and a half years.
Speaker #5: A highlight of the quarter was the successful negotiation of an amendment to our revolving credit facility. We increased the borrowing capacity and extended the facility tenure to June 2030, while also reducing borrowing costs and relaxing restrictions.
Speaker #5: This achievement highlights the confidence our banking partners have in our strategic execution and prospects for the future, and we thank them for their continuing support.
Speaker #5: I'll briefly touch on our capital allocation priorities outlined on slide 13. Maintaining our financial flexibility with reasonable debt and leverage levels remains a top priority.
Speaker #5: We also continue to invest in CapEx for our growth platforms and return capital to our shareholders through our share repurchase program. In summary, we have multiple levers available to drive shareholder value, and we remain prudent in our approach.
Speaker #5: My closing comments will refer to slides 14 and 15, covering orders, revenues, and backlog by segment. The book-to-bill ratio for the trailing 12 months was a favorable 1.04 to 1, with positive developments realized in both segments.
Speaker #5: The rail segment ratio improved to 1.06 to 1, with increasing order rates realized for three straight quarters. The infrastructure ratio also remained positive at 1.02 to 1, with solid year-over-year growth in both orders and revenue in the second quarter.
Speaker #5: And finally, on slide 15, it's clear that the greatest improvement in our backlog was achieved in our rail segment, with a 13.9% increase year over year.
Speaker #5: I'll again highlight that the gains were realized in rail products, up 28.4%, and friction management, up 22.1%. Partially offsetting this was the lower backlog for TS and S, due primarily to the UK.
Speaker #5: This should improve our overall profitability mix for rail in the coming quarters. And the infrastructure backlog remains healthy at 139.2 million dollars, with increased protective coatings demand driving the improved business mix.
Speaker #5: Thanks for your time this morning. I'll now hand it back to John for his closing remarks. Back to you, John.
Speaker #4: Thanks, Bill. I'll begin my closing remarks, covering the recent market developments and outlook on Slide 17. Starting with rail, the federal project funding that was previously curtailed at the start of the year began to release in the second quarter.
Speaker #4: Push helped drive the backlog increase. We're cautiously optimistic that rail customer demand will remain steady through the balance of 2025, with expectations that federal funding will continue as is.
Speaker #4: We built a solid backlog in our friction management solutions, and we're also making further advances in our total track monitoring product lines. Our customers see the value in these solutions, supporting the most challenging operating safety requirements.
Speaker #4: And lastly, the UK market demand remains challenging, as we are taking the steps necessary to right-size this business to a smaller technology-based offering, with improved demand economic return profiles.
Speaker #4: Turning to the infrastructure segment, our pre-cast backlog remains solid at nearly $95 million. Pre-cast has also benefited from the government funding programs, particularly the Great American Outdoors Act, and the Highway and Civil Construction projects are also driving our demand levels.
Speaker #4: We previously mentioned the commissioning of our purpose-built pre-cast facility in Central Florida. We're pleased to report that we have successfully manufactured and installed our first EnviroCast insulated wall system during the second quarter.
Speaker #4: And as expected, interest in our solution is growing, with labor shortages prevalent in the local market. Overall, we remain bullish for a robust demand to continue for our pre-cast concrete growth platform.
Speaker #4: Turning to steel products, the second quarter results were flat overall, and the business mix improved substantially with the recovery of our pipeline coating business, which was up 47% year-over-year.
Speaker #4: With the renewed interest in energy investment in the US, as evidenced in the second quarter sales growth of 37% higher backlog for coatings, we believe that we are in a favorable recovery trend for this product line.
Speaker #4: In summary, we believe that the demand drivers supporting steady growth through the year-end and beyond remain intact, with increasing demand expected for our growth platforms of rail technologies and precast concrete.
Speaker #4: Switching topics, I'll provide a brief comment on tariffs. As previously mentioned, our supply chains are permanently sourced from within the U.S., with some minor exceptions for certain electronics and other cold-sourced items outside the U.S.
Speaker #4: Thus far, tariffs have not had a significant impact on our product costs or our ability to secure the materials needed to serve our customers. I'll wrap up today's call, covering our updated 2025 financial guidance on slide 18.
Speaker #4: Second quarter results were largely in line with our expectations, delivering strong improvements both sequentially and year over year. We're entering the back half of the year with a solid order book, favorable business mix, and a lower operating cost structure, which supports our expectations for a strong second half of 2025.
Speaker #4: Our reliable year guidance is slightly lower due primarily to rail segment H1 performance. While strong orders were secured in Q2, the rail sales outlet was deferred to the back half of the year, reducing our full-year outlook for the rail segment.
Speaker #4: Having said that, a revised guidance midpoint is still assumed a 25.1% increase in adjusted EBITDA on relatively modest sales growth of 2.7% for 2025. The midpoint is assumed a 42.8% increase in adjusted EBITDA year over year, on a 14.3% sales growth for the second half of 2025.
Speaker #4: And finally, the free cash flow outlook for the full year was also reduced slightly due to primarily to the timing of working capital use for rail at the end of 2025.
Speaker #4: I'll note a revised free cash flow midpoint outlook is still in attractive yield at approximately 8%. So as you can see, we are well positioned to deliver solid sales growth, strong profitability expansion, and robust cash generation as we strive to maintain momentum through the balance of 2025.
Speaker #4: And beyond. In summary, we're very pleased with our team's performance and a favorable track we are on. So with that, thank you for your time and continuing interest in the LB Foster.
Speaker #4: I'll turn it back to the operator for the Q&A session.
Speaker #2: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered or you wish to move yourself the queue, please press star 11 again.
Speaker #2: We'll pause for a moment while we compile our Q&A roster. A moment for our first question. Our first question comes from Liam Burke with B Riley Securities.
Speaker #2: Your line is open.
Speaker #4: Thank you. Good morning, John. Good morning, Bill.
Speaker #5: Hi, Liam.
Speaker #2: Liam.
Speaker #4: On the capital allocation front, are you seeing high return opportunities in acquisitions? Or possibly reinvesting in growth projects? Or would you be leaning more towards repurchases and debt reduction?
Speaker #5: Thanks, Liam, for your question. You ow, first of all, we're getting, you know, have first organic growth we've seen now, and in five quarters.
Speaker #5: So, we're very pleased about that. We've been plowing our available capital into our organic programs, and we're beginning to see the benefit of that.
Speaker #5: As I mentioned, the Florida new operations up and running, we feel very good about that, and we're continuing to put more money in our pre-cast operations.
Speaker #5: Because that growth is really, really taking off, as I mentioned, through the Great American Outdoors Act, but we're also seeing a lot of highway and civil type work with that.
Speaker #5: As you know, we are buying, and we have approval to buy shares in the company: a $40 million repurchase program over a three-year period.
Speaker #5: So we've been very active in that, and we're very bullish about where we're at today. We’re continuing to make that capital towards that.
Speaker #5: As far as acquisitions, you know, we got quite a bit going on organically right . We're very happy with what's going on with the recent, ou know, the most recent acquisition of Vanhusco to really make its strides in that area as well.
Speaker #5: But we're also being mindful of trying to find some tuck-in and other types of acquisitions this quarter. Our strategy for the years to come, so.
Speaker #5: You know, our pipeline is active. We've been actively looking at opportunities out there, but we're also making sure that we're executing on what's in front of us right now.
Speaker #5: And that's where we're feeling very strong about the second half of the year, supported by that significant backlog growth that we've seen sequentially and solid year-over-year performance.
Speaker #2: Great. And my next question is, if I look at the backlog composition, both the infrastructure and rail products and services, are you seeing follow-through on the infrastructure side, on pre-cast concrete, and on rail, on the friction management side, in backlog for the rest of the year?
Speaker #5: Yeah, absolutely. You know, friction management now, thanks for mentioning that. It's been absolutely tremendous year that we've put together Q2. And we had the best month we've ever had probably in Q2 related to friction management, and that growth just keeps coming.
Speaker #5: We feel very good about that. And our TTM work, which was a little soft at the beginning of the year, a lot of that is a flow-through from the larger Class Ones or it also comes from the, you know, the government types of funding and spending.
Speaker #5: And we've seen that those appropriations change and the need for that activity in the second half the year. So we feel very od about that.
Speaker #5: It's coming into backlog. We, you know, as I mentioned, we were concerned in the first half of the year whether or not we're going to have the log support, you know, our guidance.
Speaker #5: And we do. And it came through the rail side in a way. And then precast has just been humming along very, very well. And of course, we mentioned in a broadcast about what's going on with coatings.
Speaker #5: You know, that's been a good year-over-year improvement as well. So all in all, we feel very good about where we're at right now related to the work we have in hand.
Speaker #5: We just need to perform in the second half of the year.
Speaker #2: Great. Thank you, John.
Speaker #5: Yeah. Thanks, Liam.
Speaker #2: One moment for our next question. Our next question comes from Julio Romero with Sedonia and Company. The line is open.
Speaker #4: Thanks. Hey, good morning, John and Bill. Thanks for taking questions.
Speaker #5: Hey, Maria. Good morning, Julio.
Speaker #4: Hey, I wanted to start off with a clarification question. With the AMH exit of the UK business, do you have any remaining UK exposure within rail and then what's remaining within TS and S would be purely the US portion?
Speaker #5: Yeah, so thanks for your question. The UK, as we mentioned, has headwinds. We've been working on right-sizing that business for a period of time.
Speaker #5: We didn't just take action in Q2. We're just announcing that action. So AMH was a significant piece of that. And then related to our telecommunications work, we're just getting it in line with the activity and the type of work that we like to produce.
Speaker #5: In the market. So there'll be ongoing focus area. For us, for the balance of the year, but we got the right team working on it right now.
Speaker #5: In the UK, and with the oversight here in the US, we feel good. We're going to be in a good, you know, pretty good position here by the year's end.
Speaker #5: As far as the greater TS and S, is that your question? Related to back in North America?
Speaker #4: I was I was king if the remaining business within TS and S would be purely US, but it sounds like 's a little bit left of of UK in there.
Speaker #5: Yeah. A little bit UK, but, you know, the greater work in the US has been very, very strong. Very buoyant.
Speaker #4: Okay, that's very helpful. And you know, on the guidance, I think the updated sales range implies second half sales growth of 10% to 18% at the low and high ends of the guidance.
Speaker #4: Can you maybe discuss how you envision that growth across the two segments? And then also, from a cadence perspective, with regards to the third and the fourth quarter.
Speaker #5: Yeah. Well, third and fourth quarter, first of all, from a seasonality point of view, you know, it's very, very strong. Q3 is typically the best quarter that we see in the year.
Speaker #5: We expect that to continue. This year, and in Q4, we just have so much work to do that Q4 should be in good order.
Speaker #5: And good standing for that. You know, what we are really happy about is our gross profit. You know, we ended the quarter at 30.9% gross profit.
Speaker #5: In dollars, and a 21.5% profit margin. That's going to continue. We expect that to continue to grow through the balance of the year.
Speaker #5: And our work that we did a year ago on SG&A is really positioning ourselves well to leverage up, you know, the cost side of the business in the second half of the year.
Speaker #5: Backlog is supportive of what we need to get done in the second half of the year. So the numbers that we put out there, the 535,000 to 555,000 sales, is an area that we feel strongly that we will finish.
Speaker #5: And then, of course, the adjusted EBITDA numbers will flow accordingly.
Speaker #4: Yeah. Very fair. And that's even, you know, the gross profit dollars you're hitting is without even, the rail business really working on all cylinders.
Speaker #4: So,
Speaker #5: That's exactly right. You know, we really performed very, very well in the first half of the year in Q2, with what we had to work on.
Speaker #5: We feel very good about how we have the work really performing.
Speaker #4: Very odd. Last one, if I may, is just on the EnviroCast business. You know, congratulations on manufacturing and installing your first EnviroCast pre-cast wall system.
Speaker #4: Can you just talk about, you know, the progress in that business and how much contribution, if any, is expected in the second half?
Speaker #5: Yeah, we're, this is about getting it right. So we're entering a new market, a new space, with the product line that we know and we've performed in other parts of the, you know, the U.S.
Speaker #5: So, we're starting slow, but it's meeting our expectations. We're working very closely with contractors and home builders on our first job, as well as bringing in the best workforce we can. We are focusing on our quality, focusing on productivity, and most of all, focusing on safety.
Speaker #5: So, we're very pleased with where we're at to date. I'll be down there next month to see it firsthand again as we start moving product out to the sites and talking directly with customers.
Speaker #5: But as far as the balance of the AR, we're not expecting that much. This is really a growth, organic growth opportunity that we're putting in place for years to come.
Speaker #5: and we're focused on just making re we're doing the right this year.
Speaker #4: Very helpful. Thanks very ch.
Speaker #5: Thanks, Julio.
Speaker #2: Again, ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on our telephone. One moment for our next estion.
Speaker #2: Our next question comes from John Bear with Ascend Wealth Advisors. Your line is open.
Speaker #6: Hey, good morning, John and Bill.
Speaker #5: Hi, John. Hi, John.
Speaker #6: A couple of questions. How much of the UK business is sort of been cleaned up? You took a pretty significant hit there with the tax situation.
Speaker #6: Can we expect that to be lesser impact going forward?
Speaker #5: Yeah, definitely. We take a large hit. We're expecting to do, and we'll talk about the tax, and of course, there's the cash part of the tax.
Speaker #5: You know, it's probably the most important. But maybe Bill could add a little color on some of those details that we can share.
Speaker #4: Yeah. Morning, John. Hi. Yeah. So in the quarter, you know, we reported a 55% effective rate. And it's basically a mathematical impact because we didn't have a tax benefit that we would record on the loss that we incurred in the UK on a pre-tax basis because of the cumulative losses that we had there.
Speaker #4: As well as the restructuring charge that we took in the quarter. What we would expect going forward is the profitability will improve. In the UK, and our overall profitability will also improve.
Speaker #4: So, the impact of that situation in the UK will become lesser as the year progresses. We're expecting an effective rate for the quarters between 30% to 35%.
Speaker #4: And then a blended effective rate for the full year between 35% and 40%. But those are, in just P&L drivers for the effective tax rate in S.
Speaker #4: The important thing for us, first of all, is obviously turning the UK business around. We think we're getting to that pivot point there.
Speaker #4: But then also on a consolidated basis, we're paying somewhere around $2 million per year in global cash taxes, and that will be the case for the foreseeable future.
Speaker #6: Okay. And then, going forward, in, say, '26, will those tax rates in the 30% to 35% range come down?
Speaker #5: Yes.
Speaker #6: Okay.
Speaker #5: Yeah. We would expect that to be more normalized and migrating closer to the upper 20s, which is what we've expected it to be from a overall jurisdictional mix of taxes point of view.
Speaker #6: Okay. Okay. And then switching over to precast. With the EnviroCast, what is the emphasis on residential versus commercial? What do you see as the more positive uptake of that?
Speaker #6: Or is there? Is it too early in the game yet?
Speaker #5: Well, I don't think it's too early. The initial thinking was residential. We could do light commercial, light industrial type work as well. But the real market there, we're serving, and the area we went to is very heavy focused on residential.
Speaker #5: And so that's the contractors and the home builders that we're working with directly today.
Speaker #6: Is there any legislation or anything like that would drive potential sales and adoption of this technology?
Speaker #5: Yes. The hurricanes and the effects of the weather have a dramatic impact on home builders, on regulatory requirements, and we are seeing, of course, the ability to pay—be able to afford to pay for insurance.
Speaker #5: So you ow, in the event that you cannot afford insurance or it's very expensive, you know, there is a big significant draw towards building a home on a concrete today.
Speaker #5: The thing that we really did not anticipate going into this was that we knew we had an impact related to labor. But with everything else going on across the country right now related to, you know, building construction and the labor market, that's where we're really seeing an uptick in the need for our product. The availability of labor is just shrinking.
Speaker #5: In that part of the country, what our product is able to do is build in the factory. So, labor is in the factory environment.
Speaker #5: And the erection of a home is, you know, literally in days versus weeks or potentially months. So that's been a real significant draw: being able to manage, you know, expectations with our customer because of the inability for them to bring labor and secure labor in the market down there.
Speaker #6: Okay. Well, that raises another interesting question then. How are you focused—or not focused—but how are you? What is your situation with your own labor force at, say, who’s going elsewhere?
Speaker #5: Yeah. Very good. We've working on that. First of all, you know, the beauty of LB Foster is our is our people. That's really what drives our company and the profits come from our people.
Speaker #5: So we spend a lot of time supporting and nurturing our culture. So we've ome the place to work in the markets we serve. And we've been working on that talent pool and that workforce of Florida long before we made any product.
Speaker #5: Bringing them on board, bringing them into the culture, understanding how we do things. And for them to really have that ownership related to building a factory and now building a product.
Speaker #5: That's a significant part of how we do things. So we have a very, very good workforce. And we feel very fortunate but also we work on it.
Speaker #5: Each and every day to make it the way is today.
Speaker #6: Yep. Very good. Thanks for taking my estions.
Speaker #5: Thanks, John. You take care.
Speaker #6: Yep. Yeah. We'll see you soon. Bye.
Speaker #5: Yep.
Speaker #2: And I'm not showing any further questions at this time. 'd like to turn the call back to John for any further remarks.
Speaker #5: Thank you, everybody. Thanks for joining us today. And we've, again, you know, wrap up. We feel very good about the quarter. Where we're at, the build of the backlog, supporting our margin, the SG&A that we're now, you know, dealing with.
Speaker #5: We're now able to really leverage that in the second half of the year. It's really tariffs, I mentioned in the call, really have little to no impact.
Speaker #5: And the freeing up of government funding, the specifically in the rail side, is really giving us opportunity to el very excited about what's going to what's in front of us for the second half of the ar.
Speaker #5: So thanks for your ongoing support of the company. And that we look forward to talking to you after we post the next quarter results.
Speaker #5: Take care.