NWPX Infrastructure, Inc. Q2 FY2026 earnings call

• Overall Financial Performance: The company delivered all-time record results for revenue, gross profit, and diluted EPS ($1.62 per share) in Q2 2026. Consolidated gross margin expanded 250 basis points YoY to 21.5%, and free cash flow reached $9.9 million, up from $1.9 million in Q2 2025. The company holds a net cash position of $9.3 million as of quarter-end, with $124 million of available borrowing capacity under its credit facility.

• Operational Updates: WTS production grew 26% YoY driven by strong project execution and the early phase of the large unplanned NDA project, with robust bidding activity supporting continued healthy backlog. For Precast, business conditions improved significantly in June after the April-May headwinds, with record monthly revenue at the Geneva facility. Non-residential construction demand, particularly from data center projects, is growing, offsetting ongoing softness in the residential construction market. The Dodge Momentum Index rose 22% YoY in June 2026, indicating broad strength in non-residential activity through the end of 2026 and into 2027.

• Strategic Priorities: Management's core near-term priorities are: 1) Maintaining a safe and rewarding workplace; 2) Prioritizing margin expansion over raw volume growth; 3) Actively pursuing strategic acquisitions to grow the business, especially the Precast segment; 4) Implementing ongoing cost efficiency initiatives across the organization; 5) Returning value to shareholders when attractive M&A opportunities are limited.

NWPX Infrastructure reported consolidated Q2 2026 net sales of $159.5 million, up 19.7% year-over-year. There are two operating segments:

1. Water Transmission Systems (WTS): Revenue hit a quarterly record of $113.2 million, up 33.8% year-over-year, representing 71% of consolidated net sales. Gross profit increased 60.9% YoY to a record $24.2 million, with gross margin expanding 360 basis points to 21.4%. The improvement was driven by a 26% increase in production volume, a 6% rise in selling price per ton from favorable product mix, and better overhead absorption from higher output. Segment backlog (including confirmed orders) ended the quarter at $423 million, down slightly from $430 million at the end of Q1 but well above the year-ago level of $348 million.
2. Precast: Revenue was $46.3 million, down 4.8% year-over-year, representing 29% of consolidated net sales. Gross profit decreased 1.7% YoY to $10.2 million, but gross margin improved 70 basis points to 21.9% due to stronger pricing and better cost control despite lower volumes. The revenue decline stemmed from an 11% drop in shipment volume caused by heavy rainfall in Texas and project delays in Utah during April and May, partially offset by a 7% increase in selling prices from favorable product mix. Segment order book ended the quarter at $61 million, up from $55 million at the end of Q1 and $56 million year-over-year.

• Consolidated Full-Year 2026: SG&A is expected to range between $54 million and $56 million. Depreciation and amortization is guided to $21 million to $23 million. Capital expenditures are expected to remain in the prior range of $20 million to $24 million, with ~$6 million allocated to Precast expansion initiatives. The effective tax rate is expected to be between 24% and 26%. Full-year free cash flow guidance was raised upward to $56 million to $65 million from the prior range of $50 million to $56 million, driven by stronger-than-expected earnings and more favorable billing schedules for WTS orders.
• Q3 2026: Management expects consolidated performance to be comparable to or stronger than Q2 2026. WTS revenue and margins are projected to be similar to Q2 levels, with strong core business growth partially offset by the winding down of the unplanned NDA project. Precast revenue is expected to be higher than both Q3 2025 and Q2 2026, with stable margins supported by higher production volumes, improved overhead absorption, and a growing order book.
• Full-Year 2026 Bidding: Annual bidding levels for WTS are expected to be stronger than 2025 levels, with projects coming in with improved economics and margins. Precast is expected to deliver another record revenue year in 2026, exiting the year with strong momentum.

• Adverse and unpredictable weather patterns (specifically extreme rainfall in Texas) can disrupt production and shipment schedules, negatively impacting near-term segment revenue and profitability.
• Elevated steel prices and potential supply constraints for steel, driven by U.S. import tariffs and planned mill outages that reduce domestic supply, could increase input costs if pricing is not fully passed through to customers.
• Ongoing elevated interest rates continue to pressure the residential construction market, which negatively impacts the Precast segment's residential-focused operations.
• There is continued uncertainty around future phases of the large unplanned NDA project, with no definitive visibility on additional awards at this time.
• Attractive acquisition targets for the Precast segment remain relatively scarce, which could slow the segment's planned growth relative to expectations.

Q: The WTS segment grew strongly YoY in Q2, with ~15% of revenue coming from the unplanned NDA project. Management guided Q3 WTS revenue to be similar to Q2—does that mean core WTS sales will decline sequentially? / A: Management clarified that core WTS revenue will actually be slightly stronger in Q3 than it was in Q2, even before adding the remaining NDA project volume. They noted Q3 has historically been NWPX's largest quarter of the year, and they expect 2026 to follow this trend, with both WTS and Precast revenue and profitability higher than Q2 if extreme weather does not cause disruptions. Backlog will normalize to the historical range of $300 million to $350 million after the NDA project is completed in early Q4, as strong current bidding activity offsets work drawn down from backlog.

Q: What drove the large WTS margin improvement in Q2, and how sustainable are these gains? How is Precast progressing toward its goal of reaching size parity with WTS? / A: Margin gains came from three key sources: better project pricing, favorable product mix, and improved overhead absorption driven by 26% higher production volume. Management expects these margin trends to continue through the second half of 2026 as demand remains stable to rising. To grow Precast, management targets acquisitions of businesses with comparable or better margins than existing operations, located near existing facilities with strong existing management teams. If acquisitions remain scarce, they will consider greenfield expansion or adjacencies to current infrastructure product lines.

Q: How have rising steel prices impacted Q2 pricing and margins, and what is the outlook for steel costs going forward? / A: Steel makes up ~34% to 35% of NWPX's cost of sales, and steel costs rose 24% YoY in Q2. WTS revenue per ton rose 6% YoY, which translated to a higher dollar value of price increase than the added steel cost. Higher volume also drove margin gains from better overhead absorption, and the company can be more selective in bidding, leading to a better mix of higher-margin projects. Management expects steel prices will continue to rise due to tariffs limiting import supply and mill outages reducing domestic supply, with prices potentially reaching $1,400 per ton or more. The company passes higher steel costs through to customers, so it does not view rising prices as a problem as long as steel supply remains available.

Q: What is current plant utilization for WTS, and are capacity constraints limiting growth? What drove higher-than-expected SG&A in Q2? / A: Current WTS plant utilization across the network is ~65%, and all plants currently run only one shift. Management noted there is substantial room to add volume by shifting production between plants to meet regional demand, or adding shifts, so capacity is not close to being constrained at this time. Higher SG&A in Q2 was driven by increased incentive compensation and associated employee benefits, with a small increase in professional fees. SG&A is expected to remain relatively consistent with Q2 levels through the second half of 2026.