NWPX Infrastructure, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Third Quarter Performance: Consolidated net sales were $130.2 million, up 9.7% year-over-year, and gross profit was $27 million, a quarterly record. Strong cash flow generation from effective working capital management.
• SPP Segment: High production levels due to a strong bidding environment, though backlog declined. Steel prices stabilized around $700 per ton.
• Precast Segment: Strong residential demand in Geneva, offset by non-residential headwinds in Texas. Weather events impacted production. Product spread strategy for organic growth, with a new mill near completion in Utah.
• M&A and Growth: Actively evaluating Precast-related M&A, focus on repaying debt and opportunistic share repurchases if accretive.

Segment Performance

• Steel Pressure Pipe (SPP): Revenue was $85.9 million, increasing 6.7% year-over-year. Backlog as of September 30 was $282 million, down from prior periods. Gross margin was 19.4%, up approximately 580 basis points year-over-year.
• Precast: Revenue reached $44.3 million, a new quarterly record, up 15.8% year-over-year. Order book totaled $57 million as of September 30. Gross margin was 23.5%, up approximately 160 basis points year-over-year.

Guidance

• Fourth Quarter SPP: Anticipates stronger revenue and margins despite a slower quarter, with backlog expected to improve by year-end.
• Fourth Quarter Precast: Revenue expected to decline sequentially from Q3 but retains long-term strength in residential and infrastructure.
• 2025 Outlook: SPP bidding expected similar to 2024 levels, and Precast to continue growth with product spread initiatives.

Risks

• Steel Price Volatility: Fluctuations in steel prices can impact SPP pricing and margins.
• Weather and Construction Delays: Affected Precast production and shipments in Texas.
• Interest Rate Impact: Continued headwinds for non-residential Precast construction due to high interest rates.

Question and Answer

Q: Brent Thielman asked about the 16% year-on-year backlog decline and its relation to steel prices and volume.

A: Scott Montross responded that backlog decline is due to slower job awards and bidding timing, but backlog is expected to improve by year-end. Steel prices are down, but pricing remains relatively stable.

Q: Julio Romero asked about the resilience of residential precast and timing of non-residential improvement.

A: Scott Montross said residential precast resilience is due to net migration to Utah and strong housing market. Non-residential improvement is expected to start mid-2025, driven by interest rate drops and public spending.

Q: Ted Jackson inquired about M&A timeline and CapEx outlook.

A: Scott Montross stated they are actively seeking accretive Precast-related acquisitions aiming for 2025 completion. CapEx expected to be in the $16-18 million range with ongoing projects contributing.

Q: David Wright asked about Precast product mix and Texas vs Utah performance.

A: Scott Montross explained Geneva's Precast products have a higher mix of infrastructure products with lower prices, and Utah's Geneva facilities have higher margins than Texas' park facilities due to stronger demand.