NWPX Infrastructure, Inc.

Greetings and welcome to the NWPX Infrastructure Second Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A brief 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 conference is being recorded. It is now my pleasure to introduce your host, Scott Montross, CEO. Thank you, sir. You may begin.

Good morning and welcome to Northwest Pipe Company's second 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, August 7th, 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 the 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. We undertake no obligation to update any forward-looking statements. Thank you all for joining us today. I'll begin with a review of our second quarter performance and outlook for 2025. Erin will then walk you through our financials in greater detail. We are pleased to report on the continued strong momentum in the second quarter in which we achieved record-setting performance. These results reaffirmed the strength of our strategic plan and disciplined execution. Before diving into the financials, I want to highlight a pivotal shift that reflects our strategic direction, our recent rebranding to NWPX infrastructure. This new corporate identity reflects our growth in the water infrastructure sector, removing geographic and product constraints while positioning us as a national solutions-driven infrastructure provider. With an expanded portfolio that now goes beyond steel pressure pipe, we've defined our segment naming convention with Water Transmission Systems, or WTS, replacing engineered steel pressure pipe, SPP, while retaining the Northwest Pipe branding for our suite of engineered water transmission system products to preserve our strong market recognition. Our precast infrastructure and engineered systems segment name remains unchanged. We are confident in our trajectory and our ability to scale our success under the NWPX infrastructure banner. Now turning to our second quarter results. Net sales of $133.2 million reached a new quarterly high under our current configuration of the company, increasing 2.8% over the prior year and demonstrating strong operational execution in demand across both of our business segments. Our performance was driven by continued momentum in our water transmission business, and record performance from our precast segment. That translated into healthy margins, driving profitability of 91 cents per diluted share for the quarter. Through the disciplined work in capital management, we delivered positive free cash flow of 3.1 million in the first half of 2025 versus negative 14.4 million in the first half of 2024, a positive swing of 17.6 million. reinforcing our financial strength and positioning us for continued momentum through the remainder of the year. To further break down our segment level results, revenue from our W2S segment totaled $84.6 million, down 5.5% year over year, primarily due to lower production volumes resulting from the mix of projects produced in the second quarter. The decline in WTS net sales was partially offset by higher realized selling prices, also largely due to changes in product mix. Encouragingly, the impact of new trade policies that led to various customer-related shipping delays in the first quarter has largely subsided. Through this period of market uncertainty, our team has remained highly effective, actively engaging with our customers executing disciplined pricing strategies in securing increased volume of bids. Our WTS backlog, including confirmed orders, significantly improved by over 20% to $348 million as of June 30th, from $289 million as of March 31st, and was consistent with levels as of June 30th last year. We expect third quarter to be the largest bidding quarter of the year. And we continue to anticipate full year 2025 bidding levels to be in line with or modestly higher than 2024. Now turning to our precast segment. Precast revenue grew 21.5% year over year to a new quarterly record of 48.6 million. This growth was fueled by sustained momentum on the residential side of our Geneva business, where strong demand drove higher production and shipment levels. While overall volume remained solid, gains were partially tempered by the slower to improve results in the non-residential construction related portion of our precast business. As broader macroeconomic headwinds, including effects from the new trade policies, and persistently high interest rates continued to impact commercial construction activity. However, we are continuing to see some signs of improvement at a modest rate. The Dodge Momentum Index grew 6.8% in June due to steadily improving non-residential construction activity, but expected weaker consumer spending and travel demand, as well as funding uncertainty, may still be muting projects going into the planning queue. However, the Dodge Momentum Index was 20% higher in June of 2025 versus last year, signaling year-over-year growth in non-residential construction planning. The commercial sector was up 11% versus the prior year, while the institutional sector was up 46%, albeit compared to a weak June in 2024. On the pricing front, The residential portion of our precast business saw positive momentum related to continued strong demand at Geneva. However, these pricing gains were partially offset by the slower to improve demand and pricing in our non-residential business, reflecting the more cautious environment. As of June 30th, our precast order book was $56 million, down from the near record levels of $64 million as of March 31st, and $62 million as of June 30, 2024. On the residential side of our business, Geneva order activity remains strong, with bookings coming in at an elevated rate and volume being fulfilled more quickly, which helps explain why the current order book appears lighter versus the prior year. Additionally, a notable portion of the order book stem from the non-residential side of our precast business, signaling improving momentum and strengthening demand throughout the remainder of 2025. Our consolidated gross profit in the second quarter was $25.4 million, down 1.7% year-over-year, resulting in a gross margin of 19% compared to 19.9% in the prior year. Our WTS gross margin of 17.8% declined by approximately 120 basis points over last year due to lower production volumes and the associated decline in overhead absorption. This was largely driven by the mix of projects we produced during the quarter, though the impact was partially offset by improved selling prices. It is, however, important to note that our WTS margin is up 230 basis points sequentially over the first quarter of 2025 with positive momentum that is continuing to build. Our precast gross margin of 21.2% decreased by approximately 90 basis points over last year, primarily due to changes in product mix. Margins in our residential construction business at Geneva improved year over year, supported by strong demand and operational efficiency. This strength was offset by the slower to improve portion of our non-residential commercial construction side of our business. which has been more affected by the Fed's stance on monetary policy and the uncertainty around trade policy. However, our precast gross margin did improve 220 basis points sequentially over the previous quarter. The improvement was modest on the non-residential side, but more substantial on the residential portion. Next, I'd like to discuss progress on our product spread strategy. In the second quarter, We bid on $14.9 million worth of projects outside of Texas and successfully booked $2.5 million in new orders, supporting our efforts to enhance capacity utilization and maximize operational efficiencies at our precast plants. In addition, we booked approximately 632,000 of park-related projects at the Geneva plants in Utah. Our 2025 goal is to book $3 million of park-related products at Geneva. As part of our third component of our product spread strategy, we've also begun expanding park and other precast-related products to additional legacy locations, positioning us to broaden our market reach and long-term growth. Our goal for 2025 remains to book over $12 million of in park related and other precast projects outside of Texas, with further benefits to come in 2026 and beyond. With respect to our broader growth strategy, we remain focused on both organic growth and M&A, though we are currently prioritizing organic expansion due to lack of viable acquisition candidates. While our disciplined acquisition criteria remains unchanged, we would consider a single location precast facility if it strategically strengthens our presence in targeted geographies. That said, we remain well positioned to move quickly should a larger, more impactful acquisition opportunity arise. Ideally, any such opportunity would enhance our manufacturing capacity and operational efficiency while also broadening our geographic footprint and expanding our product offerings. Next, I'd like to summarize our outlook for the third quarter of 2025. In our WTS business, we anticipate revenue and margins to remain in line with or exceed those of the second quarter of 2025. Production levels are expected to increase modestly, which should contribute to improved overhead absorption. We entered 2025 with a solid backlog in place and continue to expect strong bidding activity in the second half of the year. Full year bidding levels are currently projected to be modestly higher than those of 2024, reinforcing our confidence in another strong year of performance for WTS. In our precast segment, our healthy and growing order book, coupled with anticipated higher production levels and better absorption, supports our expectations for pre-cast revenue to remain strong in the third quarter of 2025 with continued margin improvement versus the first two quarters of 2025. On a consolidated basis, we expect revenues for the third quarter of 2025 to modestly improve from the third quarter of 2024. For the second half of the year, we continue to expect WTS revenues and margins to be similar to 2024 levels with precast revenue also being similar at 2024 levels, but with improved margins. In closing, I want to thank our talented team at WPX Infrastructure for their strong execution of our strategy and unwavering commitment to safety. Looking ahead, we're optimistic about the improving bidding environment and the strengthening order book as we move through 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 efforts on strategic acquisition opportunities to grow the company. Four, implement continued cost reductions and efficiencies at all levels of the company. And number 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. Before I begin, I'd like to highlight our continued focus on enhancing shareholder returns, consistent with our capital allocation strategy. Through July 31st, the final trading day in our most recent Rule 10b-501 trading plan, we repurchased approximately 363,000 shares or approximately $15 million worth of our common stock for an average price of $41.21 per share. This represents 3.6% of the ending shares outstanding on March 31st, 2025. Given the health of our balance sheet, we believe it is prudent to continue to take advantage of market opportunities for future share repurchases while also continuing to invest strategically to grow our business. Next, I'll turn to our second quarter profitability. Consolidated net income was $9.1 million, or $0.91 per diluted share, compared to $8.6 million, or $0.86 per diluted share, in the second quarter of 2024. Our second quarter consolidated net sales increased 2.8% to $133.2 million, compared to $129.5 million in the year-ago quarter. Sales for the water transmission system segment decreased 5.5% to $84.6 million compared to $89.5 million in the second quarter of 2024. Its decline was driven by a 10% reduction in tons produced resulting from changes in project timing, partially offset by a 4% increase in selling price per ton due to changes in product mix. Precast segment sales in the second quarter increased 21.5% to a record $48.6 million compared to $40 million a year ago. Performance was driven by a 13% increase in volume shipped, as demand under Geneva operations in Utah remained strong, and a 7% increase in selling prices due to changes in product mix. As a reminder, the products we manufacture are unique. Given volumes in the case of precast, production volumes in the case of WTS, 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. Our second quarter consolidated gross profit decreased 1.7% to 25.4 million, or 19% of sales, compared to 25.8 million, or 19.9% of sales in the second quarter of 2024. WTS gross profit decreased 11.3% to 15.1 million, or 17.8% of segment sales, compared to gross profit of $17 million or 19% of segment sales in the second quarter of 2024, primarily due to decreased production volume as well as changes in product mix. Precast gross profit increased 16.7% to $10.3 million or 21.2% of segment sales from $8.9 million or 22.1% of segment sales in the second quarter of 2024, primarily due to changes in product mix. Selling general and administrative expenses declined by less than a percent to $12.1 million compared to $12.2 million in the second quarter of 2024, as lower professional fees and incentive compensation expense was partially offset by higher base compensation. As a percent of sales, our SG&A improved 9.1% from 9.4% in the prior year. For the full year 2025, we now estimate our consolidated selling general and administrative expenses to be in the range of $50 to $51 million. Depreciation and amortization expense in the second quarter of 2025 is $4.9 million compared to $4.7 million in 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 $0.8 million from $1.8 million in the second quarter of 2024 due primarily to a decrease in average daily borrowings. For the full year of 2025, we continue to expect interest expense of approximately $3 million. Our second quarter income tax expense was $3.4 million, resulting in an effective income tax rate of 27.5%, which was primarily impacted by non-deductible permanent differences. This compares to $2.9 million in the year-ago quarter, or an effective income tax rate of 25.5%, which was also impacted by non-deductible permanent differences. We continue to expect our tax rate for the full year 2025 within the range of 24% to 26%. Next, I will transition to our financial condition. For the second quarter, net cash provided by operating activities was $5.4 million compared to $22.3 million in the second quarter of 2024. The $16.9 million decline was primarily due to changes in working capital. Our capital expenditures for the second quarter were $3.5 million compared to $6.1 million in the second quarter of 2024. For the full year 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 precast product spread, as well as initiatives to grow both our PARC and Geneva businesses to $100 million top line in the near term. Accordingly, we produced positive second quarter free cash flow of $1.9 million compared to $16.2 million in the year-ago quarter. For full year 2025, we continue to anticipate free cash flow to range between $23 and $30 million. Strengthening consistent cash generation remains a top priority for our leadership team, which is focused on driving growth both organically and through prospective M&A as appropriately valued opportunities arise. As of June 30, 2025, we had $30.6 million of outstanding borrowings on our credit facility. leaving approximately $93 million in additional borrowing capacity on our credit line. Our balance sheet remains healthy with ample liquidity to execute our capital allocation priorities. To close, we are very proud of our strong execution we delivered in the second quarter, resulting in record-setting results. Our performance highlights the strength and adaptability of our business model and reinforces our confidence in our ability to drive continued momentum through the remainder of 2025 and beyond. We thank our employees for their unwavering focus on safety and operational excellence, which has been instrumental in achieving these results. We also appreciate the continued confidence and support of our shareholders as we execute our long-term strategy. I will now turn it over to the operator to begin the question and answer session.