L.B. Foster Company

Good day and thank you for standing by. Welcome to the Q2 2022 LB Foster Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stephanie Listwack, Investor Relations Manager. Please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to LB Foster's second quarter of 2022 earnings call. My name is Stephanie Listwack, the company's Investor Relations Manager. Our President and CEO, John Castle, and our Chief Financial Officer, Bill Tallman, are We'll be presenting our second quarter operating results, market outlook, and business developments this morning. We'll start the call with John providing his perspective on the company's two recent acquisitions and one divestiture, and also the second quarter performance, including market developments. Bill will then review the company's second quarter financial results. John will provide perspective on company outlook and his closing comments. We will then open the session up for questions. Today's slide presentation, along with our earnings release and financial disclosures, were posted on our website this morning and can be accessed on our investor relations page at lbfoster.com. Our comments this morning will follow the slides in the earnings presentation. Some statements we are making are forward-looking and represent our current view of our markets and business today, including comments related to COVID-19. These forward-looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise or publicly release the results of any revisions to these statements in light of new information, except as required by securities laws. For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and presentation. We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and reconciliation tables provided within today's earnings release and within our accompanying earnings presentation carefully as you consider these metrics. For the purpose of helping you understand the underlying performance of the company, we will be referring to adjusted EBITDA, net debt, and adjusted net leverage ratio during the presentation today. as reflected in the reconciliation tables included in the appendix to the earnings presentation. Additionally, in September of 2021, we announced the asset sale of our Piling Products division. Due to the nature of the sale, we have presented the Piling Products within the continuing operations in our financial statements, but we have adjusted certain metrics as annotated in our presentation slides to reflect the sale for purposes of an even comparison. So, with that, let me turn the call over to John.

Thanks, Stephanie, and hello, everyone. Thanks for joining us today for our second quarter earnings call. I'll begin today's call by covering the more significant takeaways from the quarter and recent activities, starting with our portfolio accomplishments. Last week, we announced the completion of two acquisitions in our technology services solutions business in the United Kingdom. The first thing, Scratch Enterprise is limited. I will refer to them as Scratch. The second being Intelligent Video Limited, and I'll refer to them as IV. Both Scratch and IV demonstrate our commitment to invest in technology-based solutions, providing access to resources and channels to accelerate our growth and serve in adjacent markets. Also last week, we announced there's a vesture of our rail products track components business in Canada. I'll cover these three portfolio moves in a bit more detail in a moment. Now on to the Q2 highlights. We continue to be encouraged by our strong order intake levels we are achieving across the business. Our backlog stood at $251 million at quarter end, which is a five-year high, and order intake levels were up 25% compared to last year. It should be noted that both of these metrics are excluding the pilot investor we completed last September. It should also be highlighted that our order achieved do not include any significant business from the infrastructure and jobs bill passed in November of last year. The second quarter revenues and profitability improved sequentially, and the year-over-year comparisons also improved versus the first quarter. While we made progress on improving our revenue and profitability metrics in Q2, we still have work to do, particularly in the precast concrete business. Bill will cover off these details in his financial review. Overall, we continue to build momentum by executing a strategic playbook while also proactively managing the business in this challenging operating condition. As a reminder, slide six reflects our strategic playbook workstreams with three of the initiatives highlighted representing our recent accomplishments. We previously communicated our goal to transform certain elements of the portfolio from slower growth commodity-like offerings to higher growth technology-focused solutions. The transactions on slide seven reflect our progress towards this transformation. On June 21st, 2022, we completed the acquisition of Scratch with a purchase price of approximately $7.8 million. With annual revenues just under $8 million, Scratch is a UK industry leader in digital system integration with expertise in advanced digital display technologies and capabilities currently serving retail markets. We have collaborated with Scratch on projects in the past and believe the joining of our two companies will unlock the broader market potential for our respective solutions in the visual communication space. We also announced the acquisition of IV, which was completed just after the end of the quarter on July 6, 2022, at a total purchase price of approximately $1 million. IV is a UK developer of high-quality surveillance, security, and safety solutions that align well with our growth initiatives focused on our remote condition monitoring and visual communication businesses. Both Scratch and IV highlighted strategic core growth actions to transform the LB Foster Company into a technology-focused, high-growth infrastructure solutions company, enabling access to a wider target market in the United Kingdom and Western Europe. On the divestiture side, we completed the strategic sale of our track components business in Canada for approximately $7.8 million, As you recall from prior discussions, this business was part of our rail products business unit within the returns portion of our portfolio. We are pleased with the results achieved and satisfied the business was acquired by Gredal, a well-respected industry participant. Proceeds from the sale were used to reduce borrowings outstanding on our revolving credit facility, which will help to fund anticipated investments in growth initiatives to come. In summary, these transactions demonstrate that we are making progress towards transforming LB Foster and increasing shareholder value for years to come. Bill, we'll be covering the detailed financials for Q2, and I'll come back at the end with some closing remarks on our overall market and business outlook.