FOSTER L B CO Q4 FY2025 earnings call

John mentioned 2025 Q4 had exceptional sales growth, robust profitability expansion, and strong cash generation, with net sales up 25.1% to $160.4 million, the highest fourth quarter sales since 2018. Bill noted Q4 net sales increased 25.1%, gross profit grew 10.6% but gross margins declined 260 basis points to 19.7% due to weaker UK results and unfavorable sales mix. SG&A expenses down 5.2% to $1.3 million, adjusted EBITDA up 89% to $13.7 million. For full-year 2025, sales were $540 million, up 1.7%, with infrastructure sales up 14.9% and rail down 6.5% due to DOGE impact. Adjusted EBITDA was $39.1 million, up $5.5 million. Mentioned UK rail business restructured in Q4 with a $2.2 million charge. Rail segment had growth in friction management and rail products, while infrastructure segment saw growth in steel products and precast concrete. 2026 guidance anticipates 3.7% sales growth, 11.3% adjusted EBITDA growth, with capital expenditure rate of sales expected to increase to 2.7% for organic programs, primarily in precast concrete.

Fourth quarter net sales were $160.4 million, up 25.1% year-over-year. Rail segment: Q4 revenues totaled $98 million, up 23.7% y-o-y. Driven by higher volumes in friction management (up 41.6%) and rail products (up 31.1%), but partially offset by lower TS&S sales (-24.7%) due to UK downsizing and softer demand. Rail margins were 17.8%, down 440 basis points. Infrastructure solutions segment: Revenue increased $13.4 million or 27.3%, with steel product sales up 58.2% (led by 206.5% improvement in protective coatings) and precast concrete sales up 18.7% in Q4 and 19.9% for the year. Infrastructure gross margins were 22.8%, up 20 basis points. Full-year 2025: Sales of $540 million were up 1.7%. Infrastructure sales up 14.9%, while rail sales down 6.5% due to DOGE-related U.S. government funding impact. Rail product sales in Q4 were the highest on record, and friction management had 19% sales growth for 2025.

2026 guidance reflects expected sales growth of 3.7% and adjusted EBITDA growth of 11.3% at midpoints. Pre-cash flow expected to remain robust at midpoint of $20 million. Capital expenditure rate of sales to be 2.7% of sales as investing in organic programs, primarily in precast concrete. Backlog at year end was $189.3 million, up 1.8% y-o-y. Rail backlog up 34.5 million, driven by stronger North American demand, while infrastructure backlog down 31.1 million due to Summit order cancellation. Order book up about 15% from year end in first two months of 2026 with solid gains in both segments.

UK market environment remains extremely challenging; need to monitor developments in Washington regarding rail funding; softer demand for CXT buildings in infrastructure segment and Wirecast Wall System product line due to residential real estate market; impact of tariffs being absorbed but need to continue monitoring.

Q: It looks like with the orders in both friction management and rail products that that segment will look a little more normal than it did in 2025 based on the UK problems and DOGE opening the year. The only thing we're seeing is maybe track monitoring flat, but that's project-based. Is there anything else that would keep you from having a more normal year in rail products this year?

A: We finished the year down about $189 million, bookings picked up, backlog up 15% since year end, with equal weighting throughout rail products and infrastructure precast business. Team feels good about start to year and ability to meet guidance.

Q: On the 2026 guidance ranges that imply sales growth of about flattish to 7% on the sales line and then EBITDA growth of 5% to 18%, just talk about what the puts and takes are that you think can get you to the high and the low end of those ranges?

A: It's about work, backlog, and less disruptions. Order book strong, bidding activity good, right-sized UK business, and focus on growth platforms like FM and precast.

Q: The total track monitoring, could you provide some discussion as to the puts and takes there in the fourth quarter and looking forward?

A: Somewhat flat last year related to activity, but team was active, working on technology innovation, built up team, spent SG&A to bring technical resources, looking for big things in 2026 and beyond.

Q: The protective coatings business. I mean, should we expect double-digit type growth there in 2026?

A: Yes, expect double-digit growth as energy needs continue and facilities upgraded to produce more product.

Q: The headwinds to EBITDA on the quarter, you mentioned the UK rail business, but I guess your adjusted EBITDA adds back a lot of the restructuring expenses. So in light of that, any clarity on even after adding back those restructuring expenses, what caused the fourth quarter to be a little bit light versus your expectations?

A: UK has been in restructuring for three years, margin impacts from lower sales volume, manufacturing deleveraging, higher costs, and resolving legacy commercial contracts. Improvement on run rate basis moving into 2026.

Q: The infrastructure backlog, you mentioned it was up from the end of the year. Is it up modestly or is it up materially?

A: Up 15% since the end of the year.