L.B. Foster Company

Good day and thank you for standing by. Welcome to L.B. Foster's fourth quarter 2023 earnings 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. You will hear a message advising your hand is raised. To withdraw your question, press star 1-1 again. Please note that today's conference is being recorded. I would now like to pass the call over to the Investor Relations Manager, Stephanie Schmidt.

Good morning, everyone, and welcome to LB Foster's fourth 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 Tallman, will be presenting our fourth quarter operating results market outlook, and business developments this morning. We'll start the call with John providing his perspective on the company's fourth quarter and full year 2023 performance. Bill will then review the company's fourth 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 follow the slides in the 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 and presentation. During 2023, the company completed a reorganization that resulted in a change in reporting segments from three to two segments. For purposes of today's call, we have restated segment information for the historical periods presented to conform with the current 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. Thank you for joining us today for our 2023 fourth quarter earnings call. As I look back and reflect on what the team accomplished over last year, I could not be more proud of our progress. In late 2021, we set out to transform what we fostered to a high growth, technology-oriented infrastructure solutions provider. Since then, we've accomplished, we completed eight portfolio transactions, significantly reducing our complexity and narrowing our focus on becoming a clear infrastructure peer play with a focus on technology and innovation. We also launched multiple growth and profitability initiatives that significantly improved the earnings and cash-generating potential of the business. Clearly, the impact of our efforts is evident and our 2023 results. Fourth quarter sales continue to show strong organic growth at 7.7%, with a reported decline of 1.7% due to the strategic divestitures of Chemtech and CSD ties. Portfolio work, organic growth, and pricing initiatives drove improved gross margins of 21.5%, up 200 basis points over the last year. While gross margins were up $2.3 million versus last year, adjusted EBITDA was down $1.4 million due primarily to a higher variable incentive compensation expense that will reset to target levels in 2024. The highlight for the quarter was our operating cash flow generation of $22.1 million in operating cash flow translating to $16 million reduction in net debt during the quarter. Net debt finished the year at $52.7 million, with gross leverage ratio for our credit agreement facility improving to 1.7 times a year end, down from 2.0 times at the start of the quarter. In line with our disciplined capital allocation priorities, operating cash flow was used to maintain reasonable leverage levels, fund growth-oriented capital spending projects, complete tuck-in acquisitions for our key growth platforms, and continued capital returns to shareholders through stock repurchases. And with that, I'm pleased to report that we have made solid progress on all these fronts in Q4. Turning to slide six, you can see how our strong finish contributed to substantial progress we made in 2023 as reflected in our full year results. In fact, both sales and adjusted EBITDA results exceeded the upper end of our guidance for the year. Sales of $543.7 million were up 9.3% over 2022, and gross margins of 20.7% were up 270 basis points. Adjusted EBITDA of $31.8 million was up $7.6 million over last year, or 31.4%. It should be noted these results were achieved despite an ongoing commercial weakness in the UK market, specifically in our contract services business. Similar to Q4, cash generating cash generation was a highlight for the full year. In fact, it was fantastic results with operating cash flow results of totaling $37.4 million for 2023. We also generated $8.2 million from investors and asset sales. These proceeds were used primarily to reduce our net debt by $36.3 million during the year, bringing our gross leverage ratio down to 1.7 times versus 2.8 times last year. We also made good progress funding our growth CapEx initiatives and stock repurchases throughout 2023. As indicated in our earnings announcement, we realigned our management and operating structure at the end of the year, with the business now reporting up to two highly qualified segment leaders, Greg Lippert for rail, Bob Ness for infrastructure. Congratulations to both Greg and Bob. As a result of these changes, we have updated the segment reporting to align with how we run into business. And finally, we established financial guidance for 2024, with sales expected to range between $525 million and $560 million. We estimate this sales range would represent organic growth of flat to 6% year-over-year. Our just-to-eat-but-doubt outlook for 2024 is in the range of $34 to $39 million, with the benefits of the portfolio work and profitability initiatives expected to deliver improved just-to-eat-but-doubt margins. With the improved profitability outlook and our disciplined approach to managing working capital, we are now expecting to generate free cash flow ranging from $12 million to $18 million in 2024, with capital spending representing 2% to 2.5% of sales. We continue to fund organic growth initiatives. And as a reminder, this will be the last year of our union-specific settlement funding, with payments totaling $8 million in 2024. This will give us a great boost to cash flow starting in 2025. In summary, we're pleased with the great progress we've made in 2023 and look forward to continuing our journey into 2024. Next, Bill will cover the detailed financials for Q4, and I'll come back at the end with some closing remarks on our outlook. Over to you, Bill.