This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk01: Good afternoon, everyone, and thank you for participating in today's conference call to discuss Concrete Pumping Holdings financial results for the first quarter ending January 31st, 2022. Joining us today are Concrete Pumping Holdings CEO Bruce Young, CFO Ian Humphreys, and the company's external director of investor relations, Cody Slaw. Before we go further, I would like to turn the call over to Mr. Slaw 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.
spk07: Thanks, Maria. 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 regarding our business and outlook. 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 Holdings Inc.' 's annual report on Form 10-K, quarterly report on Form 10-Q, and other 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 reference certain non-GAAP financial measures, including adjusted EBITDA, net debt, and free cash flow, which we believe provide useful information for investors. We provide further information about these non-GAAP financial measures and reconciliations to the comparable GAAP measures in our press release issued today or the investor presentation posted on the company's website. 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 on the company's website. Now I'd like to turn the call over to the CEO of Concrete Pumping Holdings, Bruce Young. Bruce?
spk02: Thank you, Cody, and good afternoon, everyone. Our first quarter in 2022 is off to a strong start with over 21% revenue growth in all segments of the business as we continue to gain market share and benefit from recent accretive acquisitions. On the first day of the quarter, we successfully completed the acquisition of Pioneer Concrete Pumping, adding Pioneer to our portfolio positions as well to benefit from favorable market conditions and accelerated construction activity in Texas and Georgia, two of our strongest growth areas in Q1. Additionally, it also provides a complementary growth platform for our Ecopan service expansion. This acquisition, along with the other assets we acquired late last year, have integrated seamlessly into our business. We have been able to capture expected margin improvements at this point of the integration as we identify and secure various cost synergies. With our experience in acquiring over 60 different companies in our industry, We are the clear leader in terms of M&A and will continue to pursue opportunistic deals that will be accretive to our earnings and have teams that align with our core values of people, safety, and reliability. Now turning to our individual reporting segments, our US pumping business increased 21% for the first quarter, driven by contribution from recent acquisitions and our continued market share gains in residential and infrastructure projects. We continue to experience high demand in residential, especially single-family homes. We expect residential to remain a bright spot for our company into 2022, even as interest rates rise due to strong demand and limited supply of housing. For infrastructure, we experience sustained activity from increased state funding in public project investments such as bridges, schools, wastewater treatment plants, and hospitals. We will continue to work to win projects at the state and local level and we are encouraged by the passage of the Infrastructure Investment and Jobs Act. While we do not assume any meaningful benefit from the Infrastructure Act in our 2022 fiscal year, we are well positioned for 2023 and beyond. In our commercial business, we experienced a modest improvement during the first quarter, particularly with additional light commercial projects emerging around new residential construction. Additionally, we experienced more demand for our higher margin specialty equipment. While we continue to experience pockets of softness across the country tied to the dynamic commercial construction environment created by COVID, the trends we are experiencing experienced in the first quarter are encouraging. In our UK segment, revenue increased 23% compared to the prior year quarter due to organic volume growth from the country's continued strong recovery from the impacts of COVID-19. Our team continues to secure energy road and rail projects in addition to the work we previously announced with the concrete intensive high-speed rail project HS2, which is expected to last beyond 2030. In Ecopan, our concrete waste management business, revenue increased 24% for the quarter due to an improved sales approach and our team's ability to execute more in-person selling. As a reminder, we enhanced our Ecopan sales team in 2021 to strengthen our position for long-term growth. Going forward, we continue to expect to maintain Ecopan's double-digit revenue growth. Shifting to the cost side of our business, continued inflationary pressures were the only major headwind we experienced in the quarter, particularly in diesel fuel. The rapid and material price escalation made it challenging to fully offset our rates in the first quarter, and our team has done an excellent job to ensure we are well-positioned to offset the inflationary headwinds in 2022. As we close our first quarter, we are in a strong position to continue executing on our strategic growth priorities for the rest of 2022, whether it's organic or through opportunistic M&A. Now I would like to hand the call over to Ian so he can provide a detailed overview on our first quarter 2022 financial results. I will then return to provide some concluding remarks. Ian?
spk09: Thanks, Bruce, and good afternoon, everyone. Moving right into our first quarter 2022 results, we are pleased to report that revenue increased 21% to $85.4 million compared to $70.4 million in the same year-ago quarter. The double-digit improvement was driven by a combination of revenue volume growth from our recent acquisitions, solid organic growth and improved pricing. Revenue in our U.S. pumping segment mostly operating under the Brundage Bone brand, increased 21% to 63.1 million compared to 52.3 million in the same year-over-year quarter. Excluding the acquisitions of Hitech and Pioneer, organic revenue growth for the quarter increased by approximately 8% to 56.4 million. This organic growth was driven by improvement in many of our U.S. markets due to higher construction volumes and pricing improvements. For our UK operations, operating largely under the Camford brand, revenue increased 23% to $12 million compared to $9.8 million in the same year-ago quarter. This increase was primarily due to our organic volume growth from the region's continued recovery from the impact of COVID-19 and pricing improvements. Revenue in our US concrete waste management services segment, operating under the Ecopan brand, increased 24%. 10.5 million in the first quarter of 2022, compared to 8.4 million in the same year-ago quarter. The increase was driven by organic volume growth and growth in pan pickups, and also including some pricing improvements. While Q1 is typically a seasonally slower growth quarter for us, we're extremely pleased by our team's dedicated efforts and execution to successfully sell our EcoPan service offerings. Returning to our consolidated results, gross profit in the first quarter increased to $34.1 million compared to $29.9 million in the same year-ago quarter, while gross margin was 39.9% compared to 42.4%. The decrease in margin is directly related to inflationary pressures, particularly in the elevated diesel fuel prices that Bruce discussed earlier. To provide an order of magnitude of the impact of these inflationary pressures versus Q1 of last year, we estimate our gross margin was impacted by approximately 220 basis points due to the higher diesel fuel costs. General and administrative expenses in Q1 were $26.7 million compared to $22.4 million in the same year-ago quarter. The higher expense was primarily driven by increased labour expense due to the additional headcount following our recent acquisitions and some moderate wage inflation. Net income available to common shareholders in the first quarter increased to 0.7 million or one cent per diluted share compared to a net loss of 12.8 million or 24 cents per diluted share in the same year-ago quarter. Finally, adjusted EBITDA in the first quarter increased to 24 million compared to 22.4 million in the same year-ago quarter. Adjusted EBITDA margin was 28.1% compared to 31.7% in the same year-ago quarter. It is worth noting that Adjusted EBITDA in our first quarter included the disruption from the Teamsters Union strike in the Seattle, Washington area. Our business is not signatory to the Teamsters Union. However, the strike in Seattle does affect the delivery of concrete to construction sites. Due to our team's responsiveness and effective fleet management, we were able to minimize our exposure through this interruption, and despite construction volumes being impacted by approximately 40% in that market, our branch performance delivered positive EBITDA and positive cash flow. In our U.S. concrete pumping business, adjusted EBITDA was $15.2 million compared to $15.3 million in the same year-ago quarter, primarily due to inflationary pressures such as higher fuel and labor costs. In our UK business, adjusted EBITDA improved 20% to 3.3 million compared to 2.7 million in the same year-ago quarter. This reflects the continued construction volume recovery of the UK market from the impacts of the pandemic. For our US concrete waste management business, adjusted EBITDA increased 33% to 4.9 million compared to 3.7 million in the same year-ago quarter. Turning to liquidity, On January 31st, 2022, we had total debt outstanding of 391 million or net debt of 388 million. The slight uptick in debt on a sequential basis from our 2021 fourth quarter is due to the investment made in the acquisition of Pioneer. We had approximately 108 million in liquidity at January 31, 2022, which includes cash on the balance sheet and availability from our ABL facility. We have a strong liquidity position, greatly enhancing our ability to pursue accretive investment opportunities like M&A or the investment in organic growth equipment to support our overall long-term growth strategy. As a reminder, our business continues to generate healthy operating free cash flows. We invoice our customers daily for the work we perform and have minimal working capital requirements since we do not take ownership of the concrete we place. Our ability to generate strong operating free cash flows and strong margins allows us to expand our liquidity position and deliver in line with our strategic goals, regardless of the macroeconomic environment. Our fiscal year 2022 financial outlook remains unchanged. As a reminder of our 2022 previously stated guidance, we continue to expect full year revenue to range between $360 and $370 million, adjusted EBITDA to range between $115 and $120 million, and free cash flow, which we define as adjusted EBITDA, less net replacement capex, less cash interest, to range between $55 to $60 million. Operationally and financially, we have a solid foundation, and we are actively working to execute on our growth strategy. With that, I will now turn the call back over to Bruce.
spk02: Thanks, Ian. Overall, we are pleased with our first quarter of 2022 and the path it has set us on for the rest of the fiscal year. We remain focused on driving our scale through organic growth through strategic M&A. Looking ahead, we anticipate that 2022 is a year in which we see a return to a more normalized state as underlying demand fundamentals reset and U.S. and U.K. economies gain further momentum. In the first quarter of 2022, we were pleased to report over 21 percent revenue growth across all segments, and we continue to gain scale through organic growth as well as strategic M&A. Last quarter, we shared that we have earmarked approximately $20 to $25 million towards organic growth CapEx and specifically new equipment. The equipment is expected to begin arriving in the second half of 2022, delivering revenue and earnings benefit for 2023 and beyond. On the M&A front, we continue to have a robust pipeline of acquisitions that our management team is evaluating. We remain very disciplined in our approach to M&A and plan to pursue accretive opportunities and increase our penetration across our existing geographic footprint and allow us to enter new markets. Looking beyond 2022, we remain well positioned to capitalize on attractive market fundamentals and secular demand trends across our geographic footprint. We fully expect expanded federal and state-level infrastructure investment continued single-family housing strength, and the commercial market recovery to support growing construction activity for years to come. With these trends, we have confidence in our hardworking team to continue winning work across our country pumping and ecopan business. With that, I'd now like to turn the call back over to Maria for Q&A.
spk01: Thank you, sir. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would 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 Andy Whitman, Please proceed with your question.
spk04: Hi, thanks. Good afternoon, guys. I thought I'd start where probably anybody would start would just be about the inflationary characteristics that you're seeing in the business, particularly around diesel fuel. Obviously, it didn't prevent you from kind of making your numbers in the quarter, but your margins did get penalized by this, obviously. In the second quarter here, the fuel prices are moving even faster. and obviously to a higher level. Yet you guys said in your comments that you think that you'll be able to offset this for the year. So I guess the question is, what are you doing right now to give you confidence in that comment that you'll be able to offset these things? Have you hedged? Have you changed the terms of the way you write the contract? Anything you can do to get us comfortable with the fact and your ability to manage through this incredible move that we've seen, particularly in diesel prices?
spk02: Thanks, Andy. That's a great question. It is something that we're very focused on and will continue to be focused on. Things that have changed since we had our last earnings call, we've shortened the length of our agreements, especially in the residential market where we may have had annual agreements prior. We're trying to get closer to three-month agreements and being able to make the offsets more real-time than what we have had in the past. And then on our commercial and infrastructure projects, We're putting surcharges for fuel. For instance, if fuel price goes up 25 cents, there's an additional charge that goes to our hourly charge on our ticket. So those are the two things that we've largely done within our business to try to get out in front of the inflationary areas. We think we've done a fairly good job of really mitigating all the other areas that we're dealing with inflation in.
spk04: Got it. Just to follow up on that, what percentage of your contracts that you're going to be executing, I guess, for the rest of this fiscal year are covered by these new terms, whether they're shorter or they've got the surcharges? Is this substantially everything, or is it pockets of it, just to want to understand how broad-based these new ways of finding your terms are being rolled out?
spk02: Our operations management feel like we're about 70% of our agreements that have that in place now, and we're looking to improve on that.
spk04: Okay, great. And then maybe one more here. I guess the pace and the trend lines that you're feeling in the commercial side of your business, this has obviously been an important piece of the business. You've replaced it really well during this pocket of softness from COVID. But it sounds like there's some green shoots, you didn't say that word, but there also seems like there's some areas that aren't really coming back. As you sit here today, you know, parts of the way through the second quarter, Bruce, are you confident that this summer is going to look more like a normal summer, or do you still think the commercial business is going to be in recovery through this construction season?
spk02: I think it will be in recovery. However, it is recovering now. In Q1, we saw a movement of 1% of our total revenue move towards commercial. We're bidding more work, more of our specialty equipment that we've talked about in the past is – is being bid out and actually we're winning work for this summer to use up more of that equipment than what we had used in 2021. So we feel confident that it will be improving through this year, but I don't think it'll get back to where we were in 2020 or earlier until really 2023. Got it.
spk04: And then just one final question for me. The lack of any commentary on weather suggests to me that the weather was probably pretty good. Was that the case overall, that the weather was actually – would you say that the weather was unusually good this quarter, just out of curiosity?
spk02: I would say the weather was average for this quarter. As we've talked in the past with our geographic footprint, we're going to deal with some weather somewhere every quarter. And so it was no different in this last quarter. And so really we think our geographic footprint kind of helps us through that.
spk04: Thank you. Have a good evening. Thanks, Andy.
spk01: Our next question is from Steven Fisher with UBS. Please proceed with your question.
spk05: Thanks. Good afternoon. Wondering if you could give us some updated thoughts on expected organic growth for this year. I know you've got the total revenue guidance out there, but Q1 coming in at 11% seemed it was a bit faster than you expected. So I'm wondering kind of what what you're expecting for the next few quarters here, and if there's any sort of upside potential that you think could come out of this, what you're seeing now.
spk09: Yeah, hi Steve. Good question. You're right. I mean, the pace of the organic growth in the first quarter, I mean, thinking back to what we'd said in January, we thought around that organic growth of maybe 5% or 6%, clearly we've outpaced that in the first quarter. So that's really taking the benefit of the good weather that Bruce mentioned just earlier. So, I mean, from a volume perspective, previously we had said that part of that organic growth is maybe around 2 or 3%. It's probably closer to 5 or 7% now. So that's really where the pickup's coming through. The pricing part of the organic growth, I would say, is largely the same, but maybe towards the top end of the 4 to 7% price gauge that we gave. So, yeah, the organic pace of the business right now is a little in front of where we expect. So, It's nice to see the momentum really outpace what we had originally thought a couple of months ago.
spk05: Okay, that's helpful. And I guess within the U.S. concrete pumping business, how broadly are you seeing acceleration across your geographies and customer base? To what extent are there still any kind of pockets of slower activity that you're seeing, and where might those be?
spk09: Nothing specific. I mean, outside of the volume change that we mentioned in our remarks around Washington, the rest of the pace of volume in our business is largely around those expectations I just mentioned on volume and also on pricing. So outside of that Seattle, Washington area, not really. But I would say, I mean, our team have done a great job through the fleet management and the nimbleness of making sure that we can place our equipment in the right areas to manage through even unexpected volume changes.
spk05: Got it. Thanks very much. Thanks, Steven.
spk01: Our next question is with Zane Karame with DA Davidson. Please proceed with your question.
spk08: Good afternoon, and thank you for taking my questions. So, first off here, thinking about replacement parts and the dynamics there, are there any supply disruptions impacting your ability to get equipment replacement parts? for new equipment altogether. Do you think this is more of an issue for your competitors with less scale?
spk09: Hi. Yeah, I mean, as you maybe know from comments we've made in the past, we buy our parts from many different suppliers and OEMs. So we're not really relying on any one provider for those parts. Now, we do stock a needed amount of parts in our inventory so that we can keep on cycling through the parts that we have at our local locations so that we're not dependent on rapid or overnight shipments. So we look to maintain really a modest level of industry to service our needs. So no real meaningful disruption in that part of our supply chain because we're usually quite well out in front of that. Really buying at good pricing and making sure, again, that the timing gets those items to the needed location when we need it.
spk02: You know, what I would add to that, Ian, is with the new equipment, They are delayed slightly, but nothing has been delayed to the point where we can't service our customers the way they expect.
spk08: Okay. Okay. Good to hear there. And also on the M&A front, one of the strategies you commented on earlier with regards to drivers for this year was M&A. Can you give us an update on the M&A funnel, what you're seeing, and potentially any new competitors in the bidding process?
spk02: You know, our M&A pipeline remains full. We are actively negotiating with several businesses currently. It hasn't really changed. Values we place on the businesses are very similar to what we've seen in the past. We've always had some minor competition on deals, and that really hasn't changed for us much either.
spk08: Thank you. And last one for me. on Ecopan and maybe some of the destructions you saw up in Seattle. But can you update us on the progress with your market penetration initiatives with Ecopan?
spk02: Yeah, so Ecopan has been a really good story for us this year. If you remember back in 2020, we had 20% revenue growth or near 20% revenue growth. Last year, it was difficult for us to have in-person selling. In fact, the second half of 2020, it was that way as well. And so we It was very difficult for us to increase our share. As the market started opening up last summer where our sales folks could get out and meet with folks in person, and during that period of time we expanded our sales force, we've done a really good job of increasing that penetration in nearly every market that we're in.
spk08: Great. Thank you very much.
spk02: Thank you. Thank you.
spk01: Our next question is from Stanley Elliott with Steeple. Please proceed with your question.
spk03: Hi, good afternoon. This is Brian Brofion for Stanley. I was hoping to talk a little bit about the labor side. Last quarter you mentioned that was an area of tightness for both you and your customers. Have things begun to ease there, or what are you seeing in that regard?
spk02: You know, it's still a bit of a challenge for our customers and our business. It does seem to have gotten better here in the last couple of months, and we're encouraged that it may continue to improve throughout this year.
spk03: You got it. Thanks. And then you talked about 220 basis point diesel impact in the quarter to margins. What are you guys embedding for the full year?
spk09: I mean, right now, we're obviously looking at price inflation that we've never seen before. So really what we're doing around the change in expected pricing going forward is really modifying the pricing that Bruce mentioned as we go along. We have good momentum in our pricing initiatives right now. But, I mean, as we mentioned earlier, we're looking to make sure that we stay on top of how we adjust the price of our services to really accommodate that. Obviously, the change in fuel prices through that first quarter was the largest part of what we've seen in that margin change, and we'll continue to modify those initiatives as we see that part of the supply chain costs move.
spk03: Got it. Thanks. I'll pass it on. Thanks.
spk01: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question is with Tim Mulrooney with William Blair. Please proceed with your question.
spk06: Bruce, Ian, good afternoon.
spk09: Hey, good afternoon.
spk06: Hi, Tim. How did it start? They slowed a little bit to start off the year. Can you talk a little bit about your outlook in some more detail on the residential side of the business? Maybe you could frame it in terms of how that business grew in 2021 and what your expectations are for this year.
spk02: So our first quarter, it stayed about where we would have expected it to be. There have been a few pockets where the foundation portion of the project got out in front of some of the supplies of getting other things done, but that hasn't been too impactful to us. The demand side is still quite strong, and from everything that we're following and the customers we're talking to, we expect it should stay strong for us for the remainder of the year.
spk06: Okay, that's helpful. And just lastly for me on Ecopan, I noticed that EBIT grew faster than revenue in the first quarter, which was a little surprising to me given the inflationary environment, particularly with diesel. Is most of this from pricing and leverage on higher volumes or other factors to take into account as well?
spk02: I think... The route density is really playing out really well for Ecopan as we do better at creating more density within our own markets. That route density improves our margins. That's really always been a big part of our strategy.
spk06: That's helpful. Thanks, Bruce.
spk02: Thanks, Tim.
spk01: At this time, this concludes our question and answer session. I would now like to turn the call back over to Mr. Young for closing remarks.
spk02: Thank you, Maria. We'd like to thank everyone for listening to today's call, and we look forward to speaking with you when we report our Q2 financial results in June. Thank you.
spk01: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Disclaimer