NWPX Infrastructure, Inc.

Greetings and welcome to the Northwest Pipe Company first quarter 2025 earnings call. At this time, our participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this concert is being recorded. It is now my pleasure to introduce Scott Montrose, Chief Executive Officer. Thank you. You may begin.

Good morning and welcome to Northwest Pipe Company's first quarter 2025 earnings conference call. My name is Scott Montross and I am president and CEO of the company. I'm joined today by Aaron Wilkins, our chief financial officer. By now, all of you should have access to our earnings press release, which was issued yesterday, April 30th, 2025, at approximately 4 p.m. Eastern time. This call is being webcast and it is available for replay. As we begin, I'd like to remind everyone that statements made on this call regarding our expectations for the future are forward-looking statements, and actual results could differ materially. Please refer to our most recent Form 10-K for the year ended December 31, 2024, and in our other SEC filings for a discussion of such risk factors that could cause actual results to differ materially from our expectations. who undertake no obligation to update any forward-looking statements. Thank you all for joining us today. I'll begin with a review of our first quarter performance and outlook for 2025. Erin will then walk you through our financials in greater detail. We entered the year with solid momentum, delivering strong operational execution that supported our strategic priorities. Net sales of $116.1 million were up 2.6% over the prior year period, despite being affected by a significant amount of downtime related to weather early in the first quarter, and trade policies implemented by the new administration that temporarily affected SPP revenue and shipments, specifically in the March timeframe. The new trade policies also had the temporary effect of restraining our momentum in the non-residential portion of our precast business, resulting in customer-driven shipment delays on heightened macroeconomic uncertainty. Regardless of the headwinds, we delivered solid profitability of $0.39 per diluted share. This performance, coupled with effective working capital management, enabled us to generate positive free cash flow, positioning us well for the remainder of 2025. To further break down our segment level results, Revenue from our SPP segment was 78.4 million, down 2% year over year, and in line with typical seasonality. Our performance reflected lower production levels related to the mix of projects we produced in the first quarter, the impact of nationwide weather events that led to unscheduled downtime at various SPP facilities, and the temporary effect of new trade policies and the administration of those policies. Again, This led to various customer-related shipping delays, especially in the month of March. Our SPP team has continued to execute on bids, project scheduling, and production, even through a highly disruptive March with broader market uncertainty. As we projected with the light project bidding in the first quarter, our SPP backlog, including confirmed orders, declined to $289 million as of March 31st. From $310 million as of December 31st, 2024, and $337 million as March 31, 2024. We have seen significant bidding volume improvement in the second quarter, leading to a substantial increase in our current intra-quarter backlog, which is well over $300 million. A large portion of the current backlog increase that we have experienced will be valuable as we progress through 2025. helping to mitigate some of the cost pressures at our facility most affected by trade policy related issues. We continue to anticipate 2025 bidding levels to be in line with 2024. The decline in SPP net sales was partially offset by higher realized selling prices due primarily to change in product mix. Now turning to our precast segment. Precast revenue increased 13.4% year over year to 37.7 million. Our performance was driven by continued strong momentum on the residential side of our Geneva business, where robust demand supported higher production and shipment levels. While overall volumes remained healthy, this strength was partially offset by softer performance in the non-residential construction-related portion of our business, as broader macroeconomic uncertainty and elevated interest rates continued to weigh on commercial construction activity. The Dodge Momentum Index was down 7% in March from the previous month due to uncertainty around material pricing associated with trade policy, as well as interest rates associated with fiscal policy. However, the Dodge Momentum Index was 30% higher in March of 2025 versus last year, indicating improving strength in the non-residential construction market for mid-year 2025 through 2026. The commercial sector was up 32% versus the prior year period, while the institutional sectors were up only modestly. On the pricing side, while the residential portion of our precast business benefited from multiple price increases throughout 2024, with strong demand at Geneva, these gains were more than offset by slower demand and continued pricing pressure in our non-residential precast business. As of March 31st, our precast order book improved to $64 million. near record territory, from $61 million as of December 31, 2024, and $52 million as of March 31, 2024. The order book on the residential side of our precast business at Geneva remained consistent at strong levels, whereas a fairly large portion of the increase in our order book was on non-residential side of our precast business, indicating strengthening momentum in 2025. Our consolidated gross profit in the first quarter was $19.4 million, down 3.8% year over year, resulting in a gross margin of 16.7% compared to 17.8% the prior year. Our SPP gross margin of 15.5% declined by approximately 230 basis points over last year due to lower production volumes and the associated reduction in overhead absorption related to the mix of projects we produced, as well as shipment delays related to the administration of new trade policies. Our precast gross margin of 19.1% increased by approximately 135 basis points over last year, primarily due to changes in product mix. Margins in our residential construction business at Geneva improved year over year, reflecting strong demand and operational efficiency. However, persistent weakness in the non-residential commercial construction side of our business driven in part by elevated interest rates, resulted in some margin compression. Now turning to our organic growth product spread strategy. We bid on over $14 million worth of projects outside of Texas in the first quarter and booked over $2.5 million worth of orders. In an effort to enhance capacity utilization and maximize efficiencies, at our precast plants. Additionally, we booked approximately half a million of park-related projects at the Geneva plants in Utah. And finally, as part of the third component of our product spread strategy, we will be expanding park and other precast-related products to our additional Northwest Pike legacy locations by mid-year 2025. Our goal for 2025 remains to book over $12 million worth of park-related projects outside of the state of Texas with further benefits to come in 2026 and beyond. Additionally, we're continuing to invest in our footprint and equipment to drive capacity expansion and greater efficiencies in our precast business. And we are especially focused on investing in efficiency improvements at our legacy SPP plants. Next, I'd like to provide an update on our M&A strategy. In 2025, we are placing an increased strategic focus on actively pursuing acquisitions within the pre-cast related space as we look to accelerate growth and enhance our competitive position. The ideal candidate would allow us to enhance our manufacturing capacity and operational efficiency and broaden our geographic footprint and product offerings. Next, I'd like to summarize our outlook for the second quarter of 2025. In our SPP business, we anticipate revenue similar to the first quarter of 2025 with a steady sequential improvement in margins. We entered 2025 with a strong SPP backlog, and despite the light bidding environment in the first quarter, we continue to expect strong bidding activity in the second and third quarters with full-year bidding levels aligning closely with 2024. Accordingly, we continue to expect another strong year for SPP in 2025. In our precast business, we entered the year with a robust order book. The residential business remains strong and we are now seeing a steady improving non-residential order book indicating strength in 2025 and into 2026. Growing strength in our order book coupled with the anticipated higher production levels and better absorption gives us confidence that the second quarter of 2025 will show stronger precast revenue in margins versus the second quarter of 2024. We remain confident in the long-term strength of our precast business, driven by several key factors, including significant pent-up demand, particularly in the residential housing, a growing need for infrastructure investment in the U.S., and our expanding market position. On a consolidated basis, we expect revenues for the second quarter of 2025 to be modestly down from the second quarter of 2024 due to lower SPP revenue related to slower first quarter bidding and associated reduced production levels. However, we are expecting a sequential improvement in SPP margins in the second quarter of 2025. On the precast business, we are anticipating higher revenues and margins in the second quarter. For the second half of the year, we expect revenues and margins for SPP to be similar to 2024 levels, with pre-cast revenue also being similar to 2024 levels, but with improving margins. Before I conclude, I would like to highlight our upcoming corporate rebranding initiative to NWPX Infrastructure. We believe this refreshed brand more accurately encompasses both of our operating segments and aligns with our overall mission to manufacture durable infrastructure solutions, helping communities build safe, reliable, and sustainable systems that support daily life and long-term growth. We plan to unveil the rebrand at our upcoming annual meeting of stockholders in June and look forward to sharing further details at that time. In summary, I am pleased with our traction during the first quarter amid significant broader market disruptions. I'd like to thank our talented team at Northwest Pipe for their strong execution of our strategy in maintaining their commitment to safety. We look forward to benefiting from an improved bidding environment and precast order book throughout the remainder of 2025. Looking ahead, our priorities are to, one, maintain a safe workplace where our employees are proud to work, two, focus on margin over volume. Three, intensify our focus on strategic acquisition opportunities to grow the company. Four, to implement cost reductions and efficiencies at all levels of the company. And five, in the absence of M&A opportunities, return value to our shareholders through share repurchases. I will now turn the call over to Aaron, who will walk through our financials in greater detail.

Thank you, Scott, and good morning, everyone. I'll begin with our first quarter profitability. Consolidated net income for the quarter was $4 million, or $0.39 per diluted share, compared to $5.2 million, or $0.52 per diluted share in the first quarter of 2024. Our first quarter consolidated net sales increased 2.6% to $116.1 million, compared to $113.2 million in the year-ago quarter. Steel pressure pipe segment sales in the quarter decreased 2%, 78.4 million compared to 80 million in the first quarter of 2024. The decline was driven by an 18% reduction in tons produced resulting from changes in project timing, partially offset by a 20% increase in selling price per ton due to changes in product mix. Precast segment sales in the first quarter increased 13.4% to 37.7 million compared to 33.2 million a year ago. Our performance was driven by a 21% increase in volume shipped, as demand at our Geneva operations in Utah remained strong. Additionally, our precast sales were negatively impacted by a 6% decrease in selling prices, resulting from changes in product mix. As a reminder, the products we manufacture are unique. Shipment volumes in the case of precast, production volumes in the case of steel pressure pipes, and the corresponding average sales prices for both segments do not always provide comparable metrics between periods, which are highly dependent on the composition of each segment's product mix. First quarter consolidated gross profit decreased 3.8% to $19.4 million, or 16.7% of sales, compared to $20.1 million, or 17.8% of sales in the first quarter of 2024. SPP gross profit decreased 14.5%, 12.2 million or 15.5% of segment sales compared to gross profit of 14.2 million or 17.8% of segment sales in the first quarter of 2024, primarily due to decreased production volume as well as changes in product mix. Precast gross profit increased 22% to 7.2 million or 19.1% of precast sales from 5.9 million or 17.7% of segment sales in the first quarter of 2024, primarily due to changes in product mix. Selling general and administrative expenses increased 20.6% to $13.8 million, or 11.9% of sales compared to $11.4 million in the first quarter of 2024, or 10.1% of sales. The increase was primarily due to a $1.6 million increase in incentive compensation, as well as increases in wages and employee benefits. For the full year of 2025, we continue to estimate our consolidated selling general and administrative expenses to be in the range of $47 to $50 million. Depreciation and amortization expense in the first quarter of 2025 was $4.4 million, consistent with the year-ago quarter. For the full year, we continue to expect depreciation and amortization expense to be approximately $18 to $20 million. Interest expense decreased to $0.6 million from $1.5 million in the first quarter of 2024, due primarily to a decrease in average daily borrowings. For the full year 2025, we continue to expect interest expense of approximately $3 million. Our first quarter income tax expense was $1 million, resulting in an effective income tax rate of 19.8%. Primarily for tax windfalls recognized upon the Vesting of Equity Awards, providing a discrete adjustment in the quarter from statutory rates. This compares to $2 million of tax expense in the prior year, or an effective income tax rate of 27.5%, which was impacted by non-deductible permanent differences. We continue to expect our tax rate for full year 2025 within the range of 24 to 26%. Next, I will transition to our financial condition. For the first quarter, our net cash provided by operating activities was $4.8 million. This compared to net cash used in operating activities of $26.1 million in the first quarter of 2024 due to a significant amount of cash to fund working capital requirements in the year-ago quarter. Our capital expenditures for the first quarter were $3.7 million compared to $4.5 million in the first quarter of 2024. For the full year of 2025, we continue to expect CapEx in the range of $19 to $22 million including about $5 million for various investment projects, most notably to support the precast product spread, as well as initiatives to grow both our park and our Geneva businesses to $100 million top line in the near term. Accordingly, we produced positive first quarter free cash flow of $1.1 million compared to negative $30.7 million in the year-ago quarter. For the full year 2025, we continue to anticipate free cash flow to range between $23 and $30 million. As we previously emphasized, enhanced cash generation remains a key focus for our leadership team as we continue to grow the company. As of March 31, 2025, we had $25.5 million of outstanding borrowings on our credit facility, leaving approximately $98 million in additional borrowing capacity on our credit line. Our balance sheet remains healthy with ample liquidity. Consistent with our capital allocation strategy and continued focus on enhancing shareholder returns, we repurchased approximately 122,000 shares or $5 million worth of our common stock in the month of April under a Rule 10b-5-1 trading plan. Considering the condition of our balance sheet, we believe it is appropriate to continue to take advantage of market opportunities for future share repurchases while continuing to invest in organic and inorganic growth as opportunities present themselves. Summary, we're incredibly pleased with our first quarter operating performance achieved in a highly dynamic and uncertain macroeconomic backdrop, as well as prospects for the full year of 2025 and beyond. We extend our thanks to our dedicated employees who continued prioritization on safety and hard work has made our recent achievements possible, and to our shareholders for their continued confidence and support. I will now turn it over to the operator to begin the question and answer session.