L.B. Foster Company

Good day and welcome to LB Foster's third quarter of 2023 earnings call. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, this call is being recorded. I would like to turn the call over to Stephanie Schmidt, the company's investor relations manager. You may begin.

Thank you, operator. Good morning, everyone, and welcome to LB Foster's third quarter of 2023 earnings call. My name is Stephanie Schmidt. the company's investor relations manager. Our president and CEO, John Castle, and our chief financial officer, Bill Tolman, will be presenting our third quarter operating results, market outlook, and business developments this morning. We'll start the call with John providing his perspective on the company's third quarter performance. Bill will then review the company's third quarter financial results. John will provide perspective on market developments and company outlook in 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. 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 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. So with that, let me turn the call over to John.

Thanks, Stephanie. And hello, everyone. Thanks for joining us today for a third quarter earnings call. As you can see on slide five of our presentation materials, the improved growth and profitability profile of our business, driven by strategic transformation, continued to gain momentum during the third quarter. You'll recall that we previously announced the exit of the bridge grid deck product line, which is included within our steel products and measurements segment. The costs associated with the product line exit in the quarter were $4.1 million, which included an update in the expected value of certain commercial projects being completed as we wind down the product line. In addition, we recorded a $900,000 provision for bad debt expense associated with a customer in the UK who filed for administrative protection. Adjusting for these non-routine items, we reported a 12.6 organic sales growth and adjusted EBITDA of $10.6 million, which was up 14.2% year over year. Gross margins continue to expand in the quarter, with adjusted gross margins at 21.2%, improving 40 basis points year over year. On a year-to-date basis, adjusted gross margins are up 250 basis points versus last year, highlighting the significant progress we have made improving the profitability profile of our business. I am pleased to report that cash flow for generation was particularly strong in the third quarter, with cash flow from operations of $18.6 million, representing the highest level achieved since the third quarter of 2019. The cash generated was used to reduce borrowings on the revolving credit facility, with net debt being reduced by $16.9 million. As a result of our lower borrowings, we finished the quarter with the gross leverage ratio per credit facility at two times. This is down from the 2.5 times we reported in last quarter, and more significantly down from the 3.3 times we reported at the end of last year's third quarter. After a very strong order intake in the second quarter, order rates for third quarter were somewhat soft. Third quarter orders totaled $100.3 million, with the book-to-bill ratio standing at approximately 0.7 to 1. However, it's important to note that the trailing 12 months book-to-bill ratio was 1.03 to 1, indicating a continuing order book expansion. Backlog remains healthy at approximately $243 million, with the 29.6 million decline year-over-year due entirely to the strategic divestiture and exit activities we completed over the past year. With that, we are confident in the growth prospects for our key domestic and end markets, but somewhat more cautious in the outlook for our business in the UK, given the current conditions in that region. As a result, we maintain the midpoint of our guidance for sales and adjusted EBITDA for 2023, while narrowing the range for both metrics. I'm very pleased with the progress we have made thus far in 2023 and look forward to a continued strong finish to the year and further progress in 2024 and beyond. Next, Bill will cover the detailed financials for Q3, and I'll come back at the end with some closing remarks on our outlook. Over to you, Bill.