Concrete Pumping Holdings, Inc.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Concrete Pumping Holdings financial results for the fourth quarter and fiscal year ended October 31, 2020. Joining us today are Concrete Pumping Holdings CEO, Bruce Young, CFO, Ian Humphries, and the company's external director of investor relations, Cody Slott. Before we go further, I would like to turn the call over to Mr. Slott to read the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995. that provides important cautions regarding forward-looking statements. Cody, please go ahead.

Thanks, Shamali. I'd like to remind everyone that in the course of this call, to give you a better understanding of our operations, we will be making certain forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from such statements. For information concerning these risks and uncertainties, see Concrete Pumping Holding Inc.' 's publicly available filings with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. On today's call, we will also discuss adjusted EBITDA, net debt, and free cash flows, which are non-GAAP financial measures. Adjusted EBITDA adjusts reported EBITDA for certain items. We believe the presentation of this non-GAAP financial measure is useful because it provides investors and industry analysts the same information that we use internally for purposes of assessing our core operating performance. Net debt reflects all principal amounts outstanding under debt agreements less cash. Cash is subtracted from the gap measure because it could be used to reduce the company's debt obligations. We believe this non-gap measure provides useful information to management and investors in order to monitor the company's leverage and evaluate the company's consolidated balance sheet. Free cash flow is defined as adjusted EBITDA less net capex and cash paid for interest. This measure is not a substitute for cash flow from operations and does not represent the residual cash flow available for discretionary expenditures since certain non-discretionary expenditures such as debt servicing payments are not deducted from the measure. CPH believes this non-GAAP measure provides useful information to management and investors in order to monitor and evaluate the cash flow yield of the business. For reconciliation of historical adjusted EBITDA and net debt to their most directly comparable gap financial measure, please refer to the press release issued today or the investor presentation posted on the company's website. However, the company has not reconciled the forward-looking adjusted EBITDA guidance range and free cash flow range discussed to the most directly comparable forward-looking gap measures because this cannot be done without unreasonable effort due to the lack of predictability regarding the various reconciling items such as provision for income taxes and depreciation and amortization. I'd like to remind everyone this call will be available for replay later this evening. A webcast replay will also be available via the link provided in today's press release, as well as on the company's website. Additionally, we have posted an updated investor presentation to the company's website. Now I'd like to turn the call over to the CEO of Concrete Pumping Holdings, Bruce Young. Bruce?

Thank you, Cody, and good afternoon, everyone. Our performance throughout the fourth quarter and the fiscal year 2020 has been a testament to our continued operational resiliency and solid financial foundation. The hard work of our team has allowed us to maintain the quality and efficiency of our operations as we navigated and continue to navigate the lingering COVID-19 headwinds across our markets. Our team members have swiftly adapted to evolving health protocols throughout the regions in which we operate. We are deeply grateful for their flexibility and resourcefulness, and we continue to prioritize their safety as we monitor further changes in health guidelines. Despite the pandemic, we maintained our position of financial strength in the fourth quarter. We continue to benefit from our highly variable cost structure and maintained year-over-year adjusted EBITDA margin expansion. In addition, we generated double-digit revenue growth in our concrete waste management services business, sustained the strong momentum that we have delivered throughout the year. For our full year, revenue increased approximately 8% to $304.3 million when compared to fiscal 2019, demonstrating the resiliency of our business model throughout the challenging market backdrop. Gross margin was up 80 basis points to 45.1%, and adjusted EBITDA increased 12% to $107.3 million. Further, as Ian will highlight shortly, we made significant progress strengthening our balance sheet. Net debt has been reduced by $42 million since we ended fiscal 2019, and we have reached our 2020 targeted year-end leverage ratio of 3.5 times. In fact, we have executed on all the key priorities we established and made to respond to the pandemic. Along with meeting our pre-COVID 2020 leverage target, we invested approximately $36 million into our fleet of equipment. We have kept our workers safe, maintained strong operations, demonstrated our businesses' agility and resilience, which today's results support, and controlled costs due to our roughly 70% variable cost operating model. Our ability to execute on our year-long strategic objectives during this difficult period proves that our robust foundation will not only see us through these challenging times, but also sustain our long-term growth throughout fiscal 2021 and beyond. Turning back to the quarter, our fourth quarter revenue performance reflects COVID-19 driven softness in the UK, as well as in several US markets. To dive into this a bit further, starting with our UK business, we continue to experience COVID-19 related softness within this market as we have since the onset of the pandemic. While the curtailment of our business operations is not as severe as it was during April and May, the market's pace of recovery remains slow, particularly across infrastructure work and new project starts. We continue to monitor changes in lockdown status across the UK region, particularly closely given the recent reinstated restrictions put in place last month. We expect any easing of these restrictions will be based on the ongoing monitoring of new COVID cases and the success of the vaccine rollout. The UK construction sector has been considered essential work, and therefore we expect that the majority of job sites will remain open where it is safe to do so. In addition, the multi-year HS2 project continues to represent a strong opportunity for our business, and we continue our bidding activity for contracts on this job. Moving now to our U.S. concrete pumping business, we experienced modest organic growth within many of our U.S. markets that were more than offset by COVID-19 headwinds and other regional markets. These headwinds took the shape of modest project delays and work interruptions. On the other hand, we have continued to see growing demand within our U.S. residential market, and we believe that this strength will carry through into fiscal 2021. The strong demand and utilization trends of our Ecopan business also continues. The 11% revenue growth in the fourth quarter reflects the operational improvements and increased penetration that we have achieved throughout the year, as well as continued positive reception to the geographic expansion of our Ecopan roll-off service. As I mentioned last quarter, our roll-off service is intended to handle larger volume pickups than what our standard Ecopan service can accommodate as it comes with larger containers that can be moved around job sites with roll-off or hook-lift trucks. Having this service available allows us to enhance the value of our concrete pumping service with an expanded waste removal offering. In summary, we are entering fiscal 2021 from a position of both financial and operational strength. Our roughly 70% variable cost structure, diversified geographic and segment revenue exposure, and strengthened balance sheet make us well-positioned to address evolving macroeconomic and industry conditions over the coming months, as well as seek creative investment opportunities that support the long-term growth of our company. Now I'd like to hand the call over to Ian so he can provide a detailed overview on our fourth quarter and full year 2020 financial results. although in return to provide some color on our market expectations that we enter fiscal year 2021. Ian?

Thanks, Bruce, and good afternoon, everyone. Moving right into our fourth quarter 2020 results, we generated revenue of $79.2 million compared to $84 million in the same year-ago quarter. The slight decline was due to lingering volume impacts of COVID-19 across our UK markets. In addition, while we generated organic growth in many of our U.S. markets, as Bruce mentioned, this growth was more than offset by COVID-19-related volume declines in certain markets. As such, revenue in the U.S. concrete pumping segment, mostly operated under the Brundage Bone brand, was $58.5 million compared to $62.1 million in the same year-ago quarter. Q4 revenue in our U.K. operations operating largely under the Canfor brand, was $10.9 million compared to $13 million in the same year-ago quarter. As we've experienced over the past few quarters, this decline was driven by construction volume reductions due to a slow recovery from COVID-19, particularly within infrastructure. The UK is currently running at approximately 85% of our pre-COVID revenue run rate. As we continue to monitor the UK regional recovery trends, and anticipate a tempered return to full revenue capacity, we continue to believe we have ample runway for long-term market share expansion, including the multi-year high-speed rail project HS2. Revenue in our U.S. concrete waste management services segment, operating under the EcoPound brand, increased 11% to $9.9 million in the fourth quarter, compared to $9 million in the same year-ago quarter. This was driven by robust organic growth in the majority of our markets and higher utilization of our assets, as well as the sustained benefit of pricing improvements and additional service volumes from our expanded roll-off offerings. We have continued to optimize our Ecopan operations through our investments in our roll-off services in several locations, as this service allows us to accommodate larger volumes than our established small and large pan services. At the end of Q4 2020, pans in the field, which is a leading indicator for future pickups, were approximately 6% higher when compared to the same year-ago quarter. We see tremendous potential for further increasing our eco-pan penetration across the existing concrete pumping footprint. In fact, without entering new markets, we would still expect to generate double-digit full-year revenue growth in this segment. Turning back to our consolidated results, Gross profit in the fourth quarter was $35.5 million compared to $38.8 million in the same year-over-quarter, and gross margin was 44.8 compared to 46.3%. The slight decrease was primarily driven by higher depreciation expenses. Across our organization, we have continued to prudently manage our variable costs to support the health and resiliency of our business. General and admin expenses in Q4 or $31.1 million compared to $28.2 million in the same year-ago quarter, and the increase was largely due to the non-cash effects of higher stock-based compensation expense, which was partially offset by lower amortization expense in the fourth quarter. Excluding the non-cash items of depreciation, amortization of intangibles, and stock-based compensation, general and admin expenses decreased 5% to $15.3 million equates to approximately 19% of revenue. Net loss attributable to common shareholders in the fourth quarter was 2.8 million, or five cents per diluted share, compared to net income of $0.1 million, or nil dollars per diluted share in the same year-ago period. Finally, adjusted EBITDA in the fourth quarter increased to $29.9 million, compared to $29.6 million in the same year-ago quarter. Adjusted EBITDA margin increased 260 basis points to 37.8% compared to 35.2% in the same year-ago quarter. In our U.S. concrete waste management business, adjusted EBITDA improved 3% to $5 million on the back of 11% organic revenue growth. We continue to deliver strong results in this segment and year-over-year improvement in revenue in adjusted EBITDA. This is driven by both the strength of our asset utilization, which is growing faster than the overhead we have added to the business throughout 2020 to support our organic growth. In our U.S. concrete pumping business, adjusted EBITDA was up 6% to $20.6 million against an approximate $4 million drop in revenue, reflecting the continued strength of our variable cost control. And in our UK business, adjusted EBITDA was marginally down about $600,000 to $3.7 million, with an approximate $2 million decrease in revenue. While COVID-19-related headwinds persisted in the UK, we continue to be proud of our cost containment initiatives and our team's diligent and agile discipline within this slower-volume environment. Turning to the balance sheet, we continue to prioritise liquidity and cash preservation, as well as driving improvement in leverage. Compared to Q3 2020, net debt in the fourth fiscal quarter was reduced by approximately $19.1 million to a year-end net debt amount of $376.2 million. This was comprised of $382.9 million in debt principal and $6.7 million in cash. We have no near-term debt maturities, As a reminder, our five-year ABL revolver is in place until December 2023, and our seven-year term loan facility matures in December 2025. These debt instruments are covenant-like. We have no financial covenants on the term loan, and we continue to believe we have significant headroom in our ABL, which is a springing one-to-one fixed charge ratio based on total excess availability. As of October 31, 2020, we have accumulated approximately $59.3 million of total available liquidity, which includes cash on the balance sheet and availability from the AVL Revolver. This reflects both our long-term initiatives to strengthen our balance sheet and the swift actions we have taken to preserve cash since the onset of the coronavirus pandemic. Our business continues to generate healthy operating free cash flows as we invoice our customers daily for the work we perform. And we have minimal working capital requirements as we do not take ownership of the concrete we place. Even in this current macroeconomic environment, our ability to generate strong operating free cash flows and strong margins has allowed us to expand our liquidity and deliver in line with our strategic goals. With our cash and liquidity focus, we are very pleased that we've been able to reduce our net debt position by approximately $37 million over the past two quarters, as well as reach our targeted year-end leverage ratio of 3.5 times. Our diversified geographic and segment revenue streams, highly variable cost structure, and overall resiliency continue to place us in a strong position to both strategically invest in our equipment and pursue other accretive investment opportunities in support of our long-term growth. As we've mentioned over the past two quarters, we suspended uncommitted 2020 CAPEX investment for a brief period during the height of the COVID-19 pandemic. But the continued momentum in our Ecopalm business has since supported strategic CAPEX investments to fulfill demand. With our selective age improvements to some of our concrete pumping fleet, we have prudently stayed consistent with our replacement CAPEX schedule. Our equipment capex investment reflect our unwavering belief in the strength of our business and we are already delivering improved returns. As we enter this next fiscal year, we will continue to apply prudent capital allocation and remain opportunistic with other accretive capex investments. We continue to believe we are well positioned to navigate the evolving impacts of the COVID-19 environment and believe that the encouraging demand trends in residential and infrastructure construction and our ecopower segment will continue to hold. As such, we are reinstating our full year guidance outlook. In fiscal 2021, we expect revenue to range between 300 and 310 million, adjusted EBITDA to range between 105 and 110 million. and free cash flow, which we define as adjusted EBITDA, less net capex, less cash interest, to range between $47.5 million to $52.5 million. It is notable that our resilient execution in 2020 and the introduction of our 2021 outlook is against a current market capitalization of approximately $250 million. Our operational and financial strength heading into the new fiscal year provides a strong foundation for our performance as we execute on our strategy and continue to monitor the pace of economic and COVID-19 recovery across our markets. With that, I will now turn the call back over to Bruce to provide some additional color on our strategic priorities for 2021.

Thanks, Ian. We are now in our 2021 fiscal year and remain focused on applying our momentum and strong financial foundation to continue capitalizing on our highly diversified business in areas where we have experienced market share gains. While some of our customers' projects are still delayed due to COVID-19 impacts and restrictions, we have not seen any new major changes or delays to our project schedule or overall bidding environment. We continue to closely monitor the pace of recovery within regions that were more heavily impacted by the pandemic. As we stated last quarter, we expect the UK's recovery to continue into 2021, given its slower pace relative to the U.S. However, our diligent focus on managing cash flow and proactively reinforcing our variable cost structure makes us well-positioned for the UK's market's eventual stabilization. In the U.S., we continue to view residential construction as an area of strength for our business, and we expect residential demand to remain robust going into 2021. Additionally, we expect that other sectors, including wastewater treatment plants, data centers, warehouses, distribution centers, and healthcare projects will continue to experience positive trends. In Ecopan, we remain focused on increasing our penetration among our existing concrete pumping footprint and developing opportunities to introduce the service to new markets. As Ian mentioned, increasing penetration alone will allow us to sustain double-digit revenue growth for the segment even without new market entry. We are proud of the progress that we have made in the business during 2020, and we greatly look forward to accelerating our momentum further in the coming year. We have a solid financial and operational framework in place for the year ahead. The fact that we have improved our liquidity, have covenant-like debt facilities, and no near-term debt maturities, and are now operating at our near-term target leverage ratio of 3.5 times provides greater flexibility for us to pursue growth-enhancing investment opportunities. As we pursue opportunities to increase our penetration across our existing geographic footprint and even enter into new markets, our strong balance sheet and highly variable cost structure will allow us to develop capital allocation strategy in ways that maximize returns and shareholder value. Throughout our organization, we are taking a cautious but optimistic approach to these and other growth opportunities given this dynamic macroeconomic environment. We are grateful for the support of our team members and our shareholders throughout these unprecedented times and look forward to executing on our strategic plan in fiscal 2021. With that, I'd like to now turn the call back over to Shamali for Q&A.

At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Tim Maruni with William Blair. Please proceed with your question.

Good afternoon, Bruce and Ian.

Hi, Tim. How are you?

Doing well, thanks. A couple of questions this afternoon. So the first I wanted to ask about the market outlook. If I look at the last recession, it took a few years I think for commercial construction to come back, but I know every cycle is different. So how do you think about your markets as we move into 2021? I appreciate the color you've given so far, but is there typically a lag? for commercial construction following a downturn? And then on the residential construction side, you know, do you expect that to hold steady and remain strong? Or do you think it'll slow down at some point or accelerate? You know, any thoughts here would be helpful.

Yeah, so I'll take it in the UK first. And, you know, the UK was off quite a lot in 2020, as you saw from the results. While it's been slowly coming back, the latest – shutdown has affected us slightly, but not significantly. It had continued to grow through December as we had expected. We believe that once we get through the vaccination and get more confidence in that market, that the infrastructure portion of that will come back very quickly. There has been quite a lot of activity on the commercial market in the U.K., and we expect that to be not too far behind us. We're very optimistic about the U.K. for 2021. In the U.S., with our Ecopan business, it's really telling the story and growing penetration through education, and we expect that to continue regardless of market conditions. And with our U.S. concrete pumping business, our residential market remains strong in several areas within the U.S., and it is offset, it's more than offset what we have lost in commercial, our infrastructure. during 2020, and we expect that to continue on. In the commercial markets, we are starting to bid more work than what we had in the past. There are several projects that were put on hold that we expect will be started later in the year, and so we expect the second half of 2020 to look quite good for us with the commercial market or the non-res market. And in the infrastructure market, we have several projects that have been put on hold based on funding challenges. We're hopeful, and the things that we're hearing about an infrastructure bill being rapidly run through the administration will hopefully get those things back online, and we believe the infrastructure work will start picking up in the second half of the year as well.

Thanks, Bruce. That's good color and is a good segue to my other question. You know, we're kind of unexpectedly maybe entering a period with a unified government once again, and the conversation around infrastructure spending is definitely heating up. I'm wondering if you could provide investors, you know, provide us with a few examples of how you might benefit from an infrastructure package. I know, for example, that concrete pumping isn't typically used for building roads and highways, but I have to think there will be some major opportunities for you and was hoping you could help walk us through what that might look like.

Yeah, so infrastructure, I know there's a lot of focus on roads and highways, but there's also bridge structures on those as well, and those bridge structures will use concrete pumping. We have in our investor presentation, you'll see an illustration of basically how our infrastructure is graded across the different states of the country, and it's graded very poorly. and that comes from wastewater, from water, from bridge structures. And largely, you know, anything that goes through an infrastructure bill is really highly affected by our – for us, there's a lot of concrete in all those projects. And so we're actually quite excited about that. And with Ecopan, I think there will be an opportunity there with new environmental enforcement that may come along with that that may help Ecopan along the way as well.

Understood. Thank you for taking my question.

Thanks, Tim.

And our next question is from Andrew Whitman with Robert W. Barrett. Please proceed with your question.

Great. Thanks. Good afternoon, guys. I thought I would just take a little time here and ask some questions around the guidance. You know, as you look at it, it's basically saying flat revenues and kind of margins for 21, but Inside of this, you talked already about some of the puts and takes by segment. It sounds like, you know, secular growth and Ecopan to continue. Heard you say double-digit for the year is kind of your view. UK soft, you said it's running down about 85. You said it's running 85% of volumes, maybe down about 15%. Kind of suggesting maybe that the U.S. is, I don't know, I guess, up slightly. Is that the way to think about the top line, guys, inside of that? Maybe, Ian, for you?

Yeah, that's exactly the way to think about it.

Okay. And then I guess just as it relates to the margin side of that equation, you know, you guys talked a lot in your prepared remarks about having the variable cost structure and how that's allowed you to deliver good EBITDA, kind of making EBITDA numbers here, even if the top line is a little bit soft. I guess, you know, as you address the cost structures, sometimes the second wave or third wave, whatever wave it is in terms of adjusting costs, is harder to come by. So as you move into 21 and think about the guidance, if the revenues do come in kind of soft like they did in 20 because of COVID, if they're continue to remain soft, do you feel like there's still enough knobs to deliver the EBITDA guidance, kind of irrespective of the top-line environment, as long as the world doesn't drastically change? Bruce, maybe you could comment on that.

Yeah, I would say that the amount of discipline within our concrete pumping operations that we created over the last year, with our variable costs, we'll be able to continue that into 2021 and into the future. And with our Ecopan business, as we create more route density, as you see, our margins increase with that. So I do believe we'll be able to maintain our margins into 2021. Got it.

Okay. And then I guess just quickly on Ecopan here, you were talking about double-digit growth. Pan's in the field up 6% right now. I guess pans in the field, I guess the compares get tougher. Is there anything else in there as to why the top line in the eco-pan segment can be double-digit with pans, not up double-digit?

Yeah, one thing I'd mention to that, just the volume growth on the pan side. I mean, as you've heard us talk about the geographically expansion of our roll-off service, there's higher pricing on that piece as well. So there's volume from the traditional pans in the field count, but you're also, we're getting a bit more velocity from that higher price increase on the roll-off service. Got it.

Okay, I'll leave it there. Maybe I'll chime back in later if something else comes up. Thanks, guys. Thanks, Andy.

Our next question is from Stephen Fisher with UBS. Please proceed with your questions.

Thanks. Good afternoon, guys. I wonder if you could just talk a little bit more about the cadence of the slight growth that you assume in the U.S. business over the course of 2021, including that. What trends have you seen in the first quarter already? Should we anticipate something similar on a year-over-year decline for the first couple of quarters and then an offsetting growth rate in the second half of the year. How should we think about that? And so kind of what have you seen in the first quarter as well?

Yeah, I think that's fair. This is Ian. I think that's fair where if you look at the mix of H1, H2, I mean, typically we've gone into sort of 45, 55 is the way the pace of our business trends. I mean, we do expect to see a slight shift in that in 2021 where there's likely to see a higher pickup in the back half of the year. So as opposed to the 45, 55, we might see 43, 44, again, and 57, 56. So a change. So we do expect to see, as you mentioned, a higher pickup in the back half of the year as there's some stabilization in those construction markets. And outside of that, the assumption we would make is that our organic pace in our business would continue.

Okay. And I know you talked about the potential for infrastructure stimulus. How much visibility and how would you describe the visibility that you have to the revenue growth at this point for the year?

Yeah, as far as infrastructure, we haven't tied too much infrastructure growth into our projections because we expect that that will happen. later in the year and maybe after our fiscal year ends.

Okay, I mean, do you have, and can you just remind me, you know, backlog or how much, how many months of visibility do you have in, let's say, your U.S. business at this point?

Yeah, so typically it's 50% of a year. So as you know, we are a quick-term business, but we typically see and we continue to see about 50% of that annual and revenue through the backlog commitments that we've got.

Okay, that's helpful. And can you just talk a little bit about how your rates, your pricing overall, and again, it's focusing on the U.S. business, Brunch's going, CompuPump. How were your rates year over year in the quarter? What was your utilization like? And what do you embed for assumptions there in 2021?

Yeah, so our rates stayed really strong through 2020. Our industry in general was fairly healthy, and so there wasn't a lot of pressure on rates. Utilization, we didn't get the bump in build hours that we would have expected in a typical, you know, second half of the year in 2020 that – that we would normally have gotten so that we have more capacity than what we were able to get utilization for, which just puts us in a better position for growth into 2021.

I'm sorry, what was the rate expectation for 21, flat, up, down?

The rate, we probably got about 2% or 3%. Up 2% to 3%?

Yeah, obviously, I mean, that will depend on any sort of end market change. Obviously, there's strength on the residential side, so we'll have to see how that plays out.

But across the business, that would be the organic pace we would expect to see.

Got it. And last question. I'm not sure if I missed this, but did you give a CapEx, gross CapEx expectation for 2021 compared to the $39 million in 2020?

No, we never. So we provided free cash flow guidance, and the net capex in 2020 was actually 36, not 39.

Yeah, I was saying gross. I think the gross was about 39. So I was curious if you were planning to keep that relatively steady. But I can follow up offline. Thank you.

Our next question is from Brent Dillman with Dingay Davidson. Please proceed with your question.

Hey, thank you. Good afternoon. Hey, Bruce, I was wondering if you could comment a little more on your ability to move resources and equipment around. I think it's one of the unique levers of the business to sort of take advantage of these markets in the U.S. that aren't as impacted where you'd be able to find some healthy pockets. I guess I'm just wondering if your ability to do that could manifest into some of the growth that you're talking about in the U.S. markets in the new year. How much of a lever is that for you?

Yeah, thanks for asking that question, Brent. That's a big lever for us. Every one of our units is truck mounted, and so they're very easily driven from one location. to another, you know, small units are about $3 a mile to drive them. Larger units are a little more than that. But, you know, we monitor utilization in each market every month. And every month we typically move a couple of machines just to where we can get better utilization out of it. We may see more of that into 2021. But currently we have enough capacity in most of our locations that we don't have to move a lot of equipment.

And out of curiosity, which markets in the U.S. have you seen more slowness delays versus the ones that are really strong right now?

Yeah, so we've seen a little softness in Colorado, in parts of Oklahoma and Kansas, a little bit in the southeast. The stronger markets for us have been more in the west, the mountain region and the west coast. Texas has been fairly strong for us as well.

Okay. And I guess, Bruce, the bidding competitive environment, has that sort of been conducive to the commentary you've offered about margins in the U.S. market into 2021 still staying pretty healthy?

Yeah. I believe it will stay healthy into 2021 and beyond. Okay. And, Ian, on...

On SG&A, I guess if we back out some of these, you know, items.com, DNA, is this the run rate we should sort of expect into 2021? Yeah.

I mean, as you know, when you take out all the non-cash items, the run rate is around 18%, 19%. So we keep that fairly consistent.

Okay. So that's a good benchmark for the new year. Okay. Great. Thank you, guys.

Thank you. Thanks, Brent.

And our next question is from Stanley Elliott. Steve, please proceed with your question.

Hey, Bruce, Ian. Thank you guys for taking the call. Happy New Year.

Hi, Stanley.

Can you talk a little bit about the M&A environment? I mean, it feels like, you know, you've been able to navigate, you know, all the disruption from COVID. Chances are we'll get some stimulus in some way, shape, or form, vaccines. Economies should start to pick up through the rest of the year. If you guys are going to generate, let's call it $50 million in free cash flow, what are the thoughts right now about putting that to work maybe ahead of you seeing the full turn to try to capitalize on the upswing?

Yeah, thanks for the question. So M&A has been a big part of our business in the past. We did put M&A on hold during the pandemic just to, you know, strengthen our balance sheet and better position us. We are in a much better position, as you know, going into 2021, and so we are more interested in some accretive M&A opportunities. We do want to get visibility on the markets that they're in, where we expect them to go, making sure that we get the right value on them, get the right synergies in place, that sort of thing. But those conversations are certainly things that we're starting to think through now, and we'll see how that plays out for 2021.

And kind of back to that CapEx piece, it looks like there is some growth CapEx kind of coming off of a lower base. Are we to assume that all of that is going to the Ecopan business to try to build that out, or are there some other entering into new markets, or just high level would love to kind of hear where your head is at there?

Yes, I mean, we do have growth in there for Ecopan, as you know, and as you've heard in our prepared remarks, we want to make sure that we also keep up with the pace of replenishing our fleet. So we would expect that to continue. I mean, as you know, back in Q2 of this year, we paused briefly, but with the continued performance of our business, we quickly went back to investing in our fleet. So we would expect to see that continue into 2021.

And then lastly, you know, if we do get an infrastructure bill or a highway bill, whatever, how quickly does that start to flow through to your numbers?

Yeah, so if it funds some of the states that have projects put on hold currently, that could go fairly quickly for us. If it's new construction, that typically is going to take, you know, six months to a year before actually put concrete in place.

Great, guys. Thanks for the time. I appreciate it, and best of luck.

Thanks, Stanley. And again, as a reminder, if anyone has any questions, you may press star 1 on your telephone keypad. Doing so will ensure that you're joined in question queue. And our next question is from Alex Ryu with VRI-SBR. Please proceed with your questions.

Thank you, and Happy New Year, gentlemen.

Hi, Alex. How are you? Hi, Alex.

Pretty good. My question is around your residential exposure. So in your slide deck, you identify that 30% of your business is exposed to residential. Is that 30% of just your U.S. pumping business, or is that 30% of the total, just for clarification?

I'm sorry. Go ahead, Alex.

And then can you talk a little bit about regional strengths and weaknesses in that business?

Sure. So it's 30% of U.S. pumping. Markets where we have a higher percentage of residential would be in the mountain region and the Texas region and Colorado. But that kind of ebbs and flows. But it is a market that we're, you know, it's not new to us. It's something that's always been very important to us.

And could you sort of guesstimate sort of the growth rate of that business in 2021? and what you might think it will deliver in 2021?

Yeah, I mean, the growth rate is probably 2 or 3%. Yeah, we would expect probably something similar for 2021.

Yeah, I think what I would add to that is, so as we look at end market in U.S. concrete pumping, the residential has taken up about 2% of total revenue over non-RES in the last several months. That may increase slightly, but it's not going to be that significant of a shift.

Thank you.

Thanks, Alex.

We have reached the end of our question and answer session. And I'll now turn it back over to Mr. Young for closing remarks.

Thanks, Jamali. We'd like to thank everyone for listening to today's call, and we look forward to speaking with you when we report our first quarter fiscal 2021 results in March.

Ladies and gentlemen, thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.