Earnings call transcript Q2 2023

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Operator

Good day, and welcome to the Northwest Pipe Company Second Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Scott Montross, President and CEO. ahead. go Please

Scott Montross

joined welcome earnings and and Pipe second company. Company's am Chief Wilkins, Good Officer. Financial call. to My XXXX I'm the of conference and Montross, by name quarter Aaron President our morning, CEO Northwest today is I Scott

replay. now, you is p.m. X:XX for access is Eastern This call should By webcast, to release, and press available approximately earnings all XXXX, issued was at of being it which yesterday, have our August X, Time.

As filings cause discussion to that regarding statements expectations We forward-looking I the any like risk statements. factors to made recent XX-K on could results for are our for actual undertake such update the begin, forward-looking year everyone that from December other a refer Form no results for I'd remind future XXXX, ended of materially. our actual this our could statements Please XX, most differ differ call and and to materially in to expectations. obligation SEC our the

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

XXXX backlog, quarter. year ended a We a slow us the strong with for well solid the despite first positioning

declining second and of by our in only $XXX.X the Our quarter compared year the relatively revenues quarter. quarter came X.X% with expectations, million over with results in line first improving prior XX.X% to

from product tons by year was prices, in due to selling segment slightly our to from produced decrease following offset resulting in slow prior a were quarter, rebounded SPP mix. million quarter partially which up Revenue a first from changes the $XX.X primarily which higher

near-record by XXXX. reflected $XXX as including remains $XXX of XX, confirmed though million June at standards. June XX, up saw the our XXXX, order, $XXX it a This SPP historical at March from backlog which million from was million in backlog, we The was XX, decline strong

in and recently lower we versus the XXXX the of have backlog. stabilize to currently awaiting could activity award bidding be potential bid are level, that last that While projected is near-term year's projects multiple

band of hot-rolled by fairly prices a of general, business. quarter were historic to second XXXX. the SPP quarter, positive remaining Prices for second steel down In moderated XX% standards, the are higher our high steel compared but in

Now costs. U.S. our due offset turning primarily to segment. decreased precast prior by quarter, rate revenue from interest raw construction from prices to resulting higher were which the to shipments the market, input partially given million, impacting higher Precast material the current reduced environment year $XX.X X.X% selling

our anticipated, which rising year more continued impacted be and a have for increased the to As last sales by interest has again environment just week. than rate persisted

of as order $XX XX, as Our from and book March with XX, as million our XXXX, consistent of remains precast-related was totaled down which order June strong book June and XXXX, of million $XX XXXX. XX,

quarter gross decreased profit in second in X.X% $XX.X XX.X%, second XXXX. year-over-year gross to resulting consolidated XX.X% from margin Our of the of down quarter million, a

the basis strong in led approximately margin which of bidding we quality of second higher half quarter improved primarily to that project over second to XXXX, XX.X% margin we projects gross SPP and Our of pricing the by XXX in environment due in project of have experienced improved resulted points XXXX backlog.

to of in margin. costs given the gross housing the and the points margin quarter the decreased from XXXX sales associated higher further higher due XXXX. gross material The our rising in rates decline commercial underabsorption production levels impact on The costs production approximately was predominantly second record quarter contributed precast by of interest Precast markets. residential to XX.X% construction of experienced effect of to and second related the lower of of the highs in lingering of decline the raw basis XXX precast

like would provide on I growth update to initiatives. our an Next,

While water at highly pipe market-leading become remain steel business focused precast-related growth share. maximizing as pressure to on the XX% our driving market our we our while remains transmission position retaining priority, space strategic efficient top in as possible

many very you consolidated aware, and years, market of over SPP has significantly acquisition opportunities limited. the the are As remain

As business as centered lean focusing value opportunities priorities plant as our volume. shareholder margin measures well incremental through driving on such, enhanced for identifying level SPP and the for the reduction cost over maximizing on are at manufacturing

seeing and transmission to our nationwide we water States United support the add participate positioned grid remain in transmission well increasing projects that infrastructure upcoming projects. in of and in also this by we're space, footprint as amount like current amount encouraged the are industry we I'd to the required population. increasing leader activity With water our an of to

For these be please projects, our Events can a of Investor website view Presentation, more Presentations section. of review the Investors on within found tab complete and which our the

a our ParkUSA, resiliency to turn a consistently remains our long-term to of driving cycles discussion on progress to which We've acquisition tremendous the of goal improving made now profitable economic I'll through strides strategy our further with ongoing. business growth. integrate our in and precast diversify

of we product spread our continuing strategy. that been effort, growth part have organic As on to execute

worth maximize reminder, the product Level of the second XXXX, region utilization efficiency Texas, of worth X Texas, of the bid and on building our capacity predominantly spread the $X a team at our million of quarter. orders the $X.X the million ParkUSA effort $XX the toward million booked Western State has Of projects Texas-based As approximately plants quarter in production. up from first outside of over geared outside is out Park United to that, of in team of States. Through

we've million booked in XX over Over the $X successfully projects. last months,

remainder and the to continue our year us product aimed plants. of the Which Level beyond. Northwest growing at leads Our to and spread X legacy objective spread, shipping throughout X at product products remains Level Park the Pipe producing

well As as to as quite the precast produce progressing we product serving bid have which pilot previously discussed, has Level locations location X preexisting continue and Geneva been the been new projects. activity, spread for

several June produced we've of XXXX, projects XXXX, XX, Geneva. at in Year-to-date as

more strategy on the in We Park once at currently Park orders We scheduled Geneva the at are products legacy on Pipe point locations, additional Northwest to Geneva, Park products more produce product with which we'll at established production at comfortably this locations. to expand begin to are come. plan six

believe Despite short-term in plant. we business affecting reinvest million have and addition, in precast to locations Utah, of resources City, the Lake to dedicated we this at facility production growth. long-term making profitable our proposition investments the the of business, RCP improvements. In drive value example to our precast An $XX manhole Salt we capacity the this drive and is challenges increased our capabilities new are

I'd outlook the for the of our year. to Before like remainder summarize I conclude,

seeing Aside some territory, carry such the the positive. the for SPP with ERP believe backlog implementation, we as challenges near XXXX in the of from remains shorter-term are environment, record through to We XXXX. in pressure through, we're lower addition continued our outlook strong the rate project which will we interest bidding half in level second of a working our a robust and into XXXX, us to to of despite lead XXXX entered XXXX finish

strength compared second volume half of downward of SPP in last of similar year, by in even the the bidding expected continued XXXX. business resulting our levels moderation an revenue For anticipate quarter considering the quarter backlog, when to in in we the and our third XXXX, driven third backlog

with gross a level, SPP higher We to improved similar levels, remain to XXXX at margins. revenue expect but

precast quarter. factors to margins our in our our third associated In result some on on quarter, weigh anticipate volume pressure we business, revenue the in could macroeconomic continue downward in the and which to additional

only optimistic modestly cautiously consider remain the we challenges, solid record the in demand these be XXXX. what from from for many of remainder Aside XXXX will with to off a remain year year,

our level demand need term for infrastructure and housing, specifically to well are the we in Utah pent-up U.S. a for to top We and significant the which such in of benefit as spending continue our fastest United strong presence in are growing the five believe growing areas position Texas, longer market key among the markets residential States positioned and given

long-term to maintaining bullish with our been profitable for activity. our similar have very supported drive In business summary, in strides enhanced we've by are and SPP remain We the growth. the SPP our our our business, strategy we a on to grow we bidding shareholder size to pleased made strength to value precast-related execute goal as

integration margin four, levels ParkUSA. grow over on remain we one, as ParkUSA integration cost once on: to at volume; possible; company completed the the identify focused opportunities of ahead, Looking number with to the quickly strategic all reductions finalizing of three, implement we company; efficiencies and focused and to continuing persistently work continuing efficiently two, have as and the

against operational dedicated you Pipe Thank persistence safety. growth your and for Northwest our at execution continued to strategy and for our team

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

Aaron Wilkins

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

was share, or quarter per net quarter sales year-ago million, Consolidated compared quarter. second income diluted of $XXX.X the in $X.XX million per $X.X million, to second share, decreased or the compared net $X.XX XXXX. to Consolidated $XXX.X to X.X% in million, the for $X.X diluted

due was $XX.X second decrease from sales to in which resulting resulting quarter in ton in mix, $XX.X almost the at relatively primarily selling of were X% SPP from produced primarily timing. product per in project flat segment to changes a offset compared million, by price entirely XXXX, a million increase tons X%

volume $XX.X input quarter primarily million due a Precast X.X% offset second segment decrease raw compared decreased prices lower increased in to an XXXX, to million, selling due shipped in due increase costs. to sales X% to XX% partially to demand, by $XX.X in of the material

in quarter of compared to Consolidated to gross million, X.X% sales, XX.X% decreased profit XX.X% second sales, or XXXX. the of million, $XX.X of $XX.X

second increased of $XX.X or This Steel quarter segment the segment pressure $XX.X product to mix. in million, profit compared sales, million, of of to profit in changes XX.X% pipe or XXXX, gross of sales. gross XX.X% due XX.X% primarily to

decreased sales, increased the XX.X% XX.X% XXXX, or from million, of or to primarily to of million, due of costs. sales, segment quarter gross Precast second $XX production profit precast XX.X% $X.X in

to of and million higher of to Selling, benefits expense million $XX sales. The to and salaries X.X% $XX.X expense. expenses sales, in XXXX, quarter due X.X% increase million, second administrative or $X.X the general compared in associated and was increased or X.X% million administrative of $X.X in higher primarily

compared are Further, a business, of you which as to aware, increase fees the to integrate ERP professional in year-ago many platform ParkUSA quarter. our improve our committed to project large we an to contributed to

travel aforementioned in smaller the million all compensation increases expense. partially some of for to lower addition were $X.X incentive and offset In by advertising,

million we the the expenses the administrative $X.X quarter quarter. general year-ago $XX of and was million, in Depreciation range of in second XXXX to and $X.X expect in For be selling, million full-year the XXXX, to expense $XX million. consolidated compared to amortization

and $XX million. to to of million we amortization XXXX, full-year the be expect $XX For depreciation range the in

Interest expense compensation the $X.X to in second Our quarter. in non-cash of compared million XXXX, $X.X and $X.X were respectively. million incentive increased of in quarter expenses to ago and $X.X XXXX, second quarters year XXXX the million the million

full expect expense million of for We interest year the approximately $X XXXX.

effective income income tax $X.X XX.X%. XX.X%, $X.X an the tax tax resulting second million income million, expense quarter Our in of compared prior was rate to year for quarter an in rate of expected

for rates XXXX second by were nondeductible the of tax differences. Our quarters XXXX permanent and impacted

our XX% continue to tax full between rate XXXX expect and We to income range XX%. for year

cash We million due I'll lower second the by of compared working net profitability. in Now generated changes primarily $X.X and XXXX, million capital in transition to in $X.X activities quarter XXXX, condition. operating second of to to our of financial the quarter provided

quarter. which the year expenditures capital the $X totaled XXXX, with quarter second of million was Our prior in flat

the anticipate range to to in $XX total be million continue $XX year CapEx We XXXX. of full to for million

June $XX.X providing facility partner, ratio on the loosened million an July facility credit our XXXX. leverage the credit leaving during can credit in had on We option Wells upsize up EBITDA. required to of Form XX, support EBITDA X.Xx ending our be Xx outstanding from from covenant million borrowing The amended XXXX, appreciate filed million read and line. quarter, $XXX were in facility, minor for provides borrowing Other additional our on We our their $XX modifications we Fargo. also to $XX relatively entirety a term X-K five-year to credit capacity the the million of As continued approximately financing terms the within and X. and in senior June

initially automation, system our evaluated we the the progress business in to deployed we have ongoing Before coupled weakness management at process our architecture which corresponding I are transacting with in conclude, planning third ERP addition on to to the expect be have changes change we table the for of to certain quarter the I'd day-to-day an at push implementation with projects. relation and involved training, the Park. like year. to requirements will These now the the robust set update materials remediation on activities, employees end committed and working former, In to that material into provide

to our material the Remediating be weakness Committee. a and of management continues Audit priority

institute of cost We revenue of monitoring robust that are surrounding sales. internal and Park controls more working at to currently the failed manual

complete We will more are the executing testing that to controls frequent internal as gain also additional designed. comfort

While year's historical important the reiterate deficiencies this this audit, to project financial or through results. not the that control impacted identified current our have of it will continue is internal accuracy

continued the I'm closing, In has for progress prioritization safety thank program their to XXXX. confidence in well continued employees to Northwest position for made all pleased their very our strong like and our I Pipe. year entire us our with our another to team for would also in stakeholders of

begin session. the will over I turn now to the operator question-and-answer it to

Operator

Thank you.

Romero, Our go first Sidoti today will Julio now We from Instructions] question question-and-answer Company. & begin [Operator Please come will of session. the ahead.

Julio Romero

good Hey, Thanks. everbody. morning, Great.

Scott Montross

morning. Good

Aaron Wilkins

Good morning.

Julio Romero

start SPP, projects et and the during remarks for second you maybe bid margins, the saw can Can steel you sense at projects in on that you of type that any bidding the the pipe prepared volume of pressure expand bid potential segment of on recently maybe award multiple quarter? mentioned and you you you And the cetera? the the bid

Scott Montross

that Well, there's because year quarter quarter. of a bidding the relatively major was bid couple the projects of second large in second this

million other little Portland here give $XX One for just And somewhere of gets probably of projects the I'm couple we're margins kind that Bull major you now on right And ones that that bit seeing tell a in to too are the pretty those. between range, million Run Julio, there's that $XX that, the and otherwise margins was it Reservoir specific, job. the a products a going that quite on consistent I that of to those large, going business. what's bid not happen SPP that with waiting in are would for the we're And area.

in maybe line. but better, little much pretty line, So a in

Julio Romero

Okay. That's trend you the of in if may think it pressure very impact the that prices have can the how but pipe might at on helpful. you touched business, about all? And prepared remarks, steel then steel I talk and

Scott Montross

part We've and this steel between of We're of have prices year. $XXX a down bit come middle year, in that seen, a the obviously, seeing through bands the now $XXX are hot-rolled the prices somewhere into ton. probably

year. you quarter, are push the year, back what steel as to rest in places, the that the impact start various things coming obviously at this outages a to we One and online as marketplace. to through see half up. that have supply capacity in is the of the couple tendency tighten adds the you bit up fourth little are which at a especially There's going go the of a to this to of supply generally, the get mills prices But

what So happens. we're have going to see to

while going kind for to the years But a through I the several the coming price think I steel past and never is the in or stable. think is going stable down. looks views, now it is It's either up really right a stay like in lot it's of it seen we've year. be what of of people's where end

I year. the is Julio, biggest the to forces But the thing play we now. do different right Because how it seen. could in So part do. a extra get lead work be on outages lot coming There's view of think, times the online back that have it the ultimately, as of some pressure this through is upward and the my what remains at capacity do against

Julio Romero

and of the sewer flooding just I recent be and could for then systems, the highlighted that question. a big-picture greater of that. U.S. need infrastructure produces And a for kind broader Understood. drainage for part products solution Northwest kind of have in Okay. Northeastern The

for the if and about talk at are kind of all. pipeline Just water needed unlock floods recent the infrastructure help could headlines focused drainage spend on spend the

Scott Montross

talking look at stuff. way in you localized you're a at potable systems if that to and looking flooding, part can just it's part I Where we over with you States that It's When of probably you're water. small when the Well, a business, said, of stuff, precast relatively that look the drainage in environmental all country. the you business. both with water address think type dirty the big more or about play Eastern the those at the United being that In make we sewage business of solutions of type our a business. mostly at product is could systems, we which SPP ParkUSA things ship

So Eastern would you that plants talking point. situation, this ones out at the I precast with miles about ship about best products at kind the Park are the United probably infrastructure XXX States, when plants, far our around you're think in and talk least there as XXX, that products Julio, play precast as mean, Utah. of products, all the generally are maybe Because I radius that the

be to and products into But water out and So it projects there. would get United the the I the think taking Northeastern hydrocarbons play solutions cleaning probably could out environmental States. in in those difficult Park

probably on So for we would really focus there. what that's

Julio Romero

Understood. you the queue. appreciate And back the Well, taking into question. hop I’ll

Scott Montross

Absolutely. you. Thank

Operator

is next Davidson. from ahead. D.A. go Ramirez Jean question of Please Our

Jean Ramirez

are is This Brent Thielman. How for Hi. you? Jean,

Scott Montross

How you? Good. are

Jean Ramirez

third With would help of to expect quarter precast the quarter, see do sort Good. half? the or over we pressure in orders second that offset revenue down And XX% second on in precast that? the what

Scott Montross

XXXX, much first it look quarter what right? of market. of you second all-time book you it quarter look the record at the have pretty compare of If you quarter second to when the it we that really order XXXX, if an flat, now, that precast it at think I XXXX to pretty from at was right was ended it

at up significantly So the point. that was order book

normalized on weighs a to even, on housing that and I Because environment. residential interest nonresidential order seeing just puts some think And everything thing pressure I precast-related; the think the that, housing. rate rate you're right the now book. what obviously, is more environment interest is obviously, about extent,

I of would upward is little I obviously housing. book, call interesting to right maybe think precast what movement starting one is the mostly see residential in Geneva we're a things infrastructure, bit of is related to now which order which the

scenario interesting that's So go forward. an as we

they been business of The shortage and interest a see precast for pent-up where years, are of houses the still that demand many, we still the and many think see though going they've housing. inventory the also in side the that thing in I other where buying affects is you Even the people they're available. highest rates marketplace

don't like that's when we're precast looking I has So like modestly why residential, sides doesn't Because both the this market year, look falloff either it still it, has last and nonresidential, at said strength. only – of side it of looking versus certainly, off year. through significant and we a some it at it looks

XX% a bit which pieces second not of than you I see saw margins. of obviously is the astronomical range year, XX%, I'd What the demand what we I you less in in we're call margins XX-or-so of saw the probably little were a normalized is mean, probably would that hit you probably in quarter question I'm normal all more more sure see asked. do the that now, if precast. margins XXXX margins. record seeing are percent What And bringing all-time what we to

there's away. of that, another fire if So piece

Jean Ramirez

No.

third you mind you pretty for SPP, it. quarter. repeating third you're on to looking think Do quarter that's much how think SPP? I at how an margins us about gave the for And idea

Scott Montross

saw that as get revenue-wise we've last But gone a of think, XXXX. we think in margins. pretty as was margin-wise, going basis to SPP trajectory better in were we've a that through saw it last there with to I about what going like calls, the where which on the quarter, were obviously XX.X% I over And the margin, was year. talked XXX business points we couple second we similar be

continues. kind I think that trend of

be overhead upward year margin the volumes the a probably in through a and in probably may bit it's absorption, XX%-ish. but you to XX% going we we between production see and think little bit that normalized go little better have movement more in as range and higher SPP I

Jean Ramirez

I’ll you. you. Thank Thank into back Great. the hop queue.

Scott Montross

problem. No Sure.

Operator

At conference Montross this like time, we will turn session. for over the conclude Scott back would to our remarks. any closing to I question-and-answer

Scott Montross

with a today. environment in riding through you. And script, we close year lower record record thanks, bit really joining a wave SPP, and of in we're Thank a we're or year. backlog bidding the call as backlog everybody, started to seeing Again, that backlog we've a throughout for pretty the little the even said strong the with XXXX,

pipe So well on do in to XXXX. pressure pretty side steel well positioned the we're

side, commercial strong. both where this still on And the elevated and segment off we at to only rates with modestly At just least last point, we're even the the and be the seeing on precast interest residential, were impact things year. look versus

said So years, a remains the I focused get and business the our pressure And doing. precast on long-term we're focus to really unchanged. the that's in our times, similar next business what think pipe few size business many many, we've as the view precast and as goal on to is steel

So everybody their and again today, forward I'd and we'll thank to like speaking to look time November. to in attention you for

you. thank So

Operator

has now attending concluded. presentation. The We you thank today's for conference

now disconnect. may You

Northwest Pipe (NWPX) 3 Aug 232023 Q2 Earnings call transcript