NWPX Infrastructure, Inc.

Greetings and welcome to the NWPX infrastructure first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Scott Montross, President and CEO. Please go ahead, sir.

Good morning, and welcome to NWPX's first quarter 2026 earnings conference call. My name is Scott Montross, and I'm 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 29th, 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 31st, 2025, and in our other SEC filings for 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 first quarter performance and our outlook for the second quarter of 2026. And then Aaron will walk you through our financials in more detail. We delivered a strong start to 2026. Net sales were up 19% year-over-year to $138.3 million, reflecting meaningful growth across both our water transmission systems and precast businesses. Our strategy delivered record first quarter consolidated gross profit of $26.7 million, up 38% from last year, with our gross margin expanding 260 basis points year over year to 19.3%. That strength carried through to the bottom line, highlighting the operating leverage in our model and continued execution across the organization. We generated record first quarter profitability with earnings of $1.08 per share and produced strong free cash flow of $25.7 million, or $2.62 per share, reinforcing the strength and consistency of our earnings profile and the resilience of our cash flows. Turning to our WTS segment. Revenue reached a first quarter record of $93.5 million, up 19% year over year, with strong margin improvement. Our performance reflected higher production volume, with tons produced up 18%, supported by strong project execution. This growth came despite adverse weather that caused unscheduled downtime across three WTS facilities early in the quarter. Selling prices were up 1% year-over-year, driven by changes in product mix, and we also benefited from favorable project timing across several large water transmission jobs. In addition, we saw one of our strongest booking quarters to date with robust bidding activity the emergence of a significant previously unplanned project that is under NDA which will contribute positively to our 2026 results all of which contributed to a substantial increase in our backlog reinforcing the strength of demand across our markets WTS backlog including confirmed orders ended the quarter at a record four hundred and thirty million up from $346 million at year end and well above the $289 million level we reported this time last year. Looking ahead, we expect the 2026 bidding environment to be moderately stronger than 2025. WTS gross profit increased 42% year-over-year to $17.3 million, resulting in a gross margin of 18.5% of 300 basis points from last year. This improvement reflects higher volume supported by strong customer demand and the related efficiency gains in higher overhead absorption that come with that level of production, favorable product mix, and the overall solid operational execution across the segment. Now turning to our precast segment. Pre-cast revenue increased 19% year-over-year to a new record first quarter level of $44.8 million. Our performance was driven by a 14% increase in selling prices from a favorable change in product mix and increased sales volume reflecting continued growth in the non-residential portion of our business. At PARC, production increased 30% year-over-year, with strong growth in revenue per yard shipped, despite borrowing costs that remain elevated as the Fed held interest rates steady in 2026. We are continuing to see signs of improvement in the non-residential demand trajectory as we progress through 2026, specifically related to data center projects that have been instrumental in buoying the commercial construction demand. At Geneva, production and shipments had a solid year-over-year gains of 7% and 8% respectively, despite seeing a moderate slowdown in the residential construction market, which has more than been offset by growth in Geneva's non-residential business. Leading indicators remained solid early in 2026, with the Dodge Momentum Index up 26% in March of this year versus March of 2025. The commercial sector was up 29%, and the institutional was up 20%, indicating positive signals for non-residential construction activity this year and into 2027. Our precast order book ended the quarter at $55 million, down modestly from the $57 million at year-end, and below the $64 million level at March 31st of last year. The precast order book has remained stable for the last several quarters and continues to keep pace with higher levels of production and customer shipments. Stronger volumes and pricing contributed to a 30% year-over-year increase in precast gross profit to $9.3 million, resulting in a gross margin of 20.9%, up from 19.1% last year. These results show that absorption rates are improving with higher throughput. We expect margins to continue recovering as non-residential demand builds. Now turning to our strategic growth initiatives. As previously discussed, we are making solid progress expanding precast capabilities across our network. We're also looking at where it makes sense to bring precast into additional WTS facilities through our product spread strategy, which remains an integral part of our long-term growth plan. As part of that endeavor, we are seeing better capacity utilization at our precast plants, strong momentum at our Geneva operations in Utah, and steady progress as we introduce PARC and other precast-related products into more WTS locations. At the same time, we continue to evaluate M&A opportunities in the precast related space that can accelerate our strategy, expand our manufacturing capabilities and efficiencies, and broaden our geographic reach and product portfolio. Consistent with this approach, we are looking at both single plant acquisitions and larger opportunities that can support long-term growth and help us advance our precast expansion As previously announced, we completed the acquisition of Belton Precast, a single-site producer in the high-growth Pueblo, Colorado market during the first quarter of 2026. The integration is off to a strong start, and we're encouraged by the long-term growth potential we see in the Colorado market. I'll now turn to our outlook for the second quarter of 2026. In our water transmission systems segment, we expect higher revenue and margins compared to both the second quarter of 2025 and the prior quarter, driven by more favorable volume and product mix, and the emergence of a significant, previously unplanned project. We entered 2026 with a robust WTS backlog and elevated bidding levels, and both strengthened further in the first quarter, providing even greater visibility into near-term demand. Based on what we are seeing today, we expect full-year bidding levels to be stronger than what we saw in 2025, and we expect backlog to stay elevated throughout 2026. We remain encouraged by the level of activity across current and upcoming water transmission projects, which continue to come with improved economics and margins. For more complete view of these projects, please refer to our investor presentation on our website. Turning to precast, we maintained a stable and healthy order book in the first quarter of 2026. and we expect a stronger year for the precast business overall. Demand remains healthy in the non-residential market, supporting continued momentum across our park and Geneva platforms. For the second quarter, we expect precast revenue to be higher than the second quarter of last year and the prior quarter, with stable margins driven by solid demand, higher production levels with improved absorption, and a strengthening order book. On a consolidated basis, we expect the second quarter to be stronger than we've seen in recent years. We believe 2026 is shaping up to be a historic year for NWPX. Continued momentum in our precast business combined with strong bidding activity in our WTS business is indicating the potential for another record year. In addition... The significant previously unplanned WTS project noted earlier is additive to what we already expected for a record year. In closing, I'm very pleased with our results, which set new first quarter records across nearly every metric. Our teams delivered exceptional execution throughout the quarter, and I want to thank everyone at NWPX for their commitment to our strategy and to maintaining a strong safety culture. With a WTS backlog that is stronger than ever, a healthy bidding environment, and solid momentum in our precast order book, we feel well-positioned to carry this performance forward and continue building on the progress we've made across both segments. As we look ahead, our near-term priorities remain. One, maintaining a safe and rewarding workplace. Two, focusing on margin over volume. Three, intensifying our pursuit of strategic acquisitions. Four, implementing cost efficiencies across the organization. And five, returning value to our shareholders when M&A opportunities are limited. I will now turn the call over to Aaron, who will walk through our financials in greater detail.

Thank you, Scott, and good morning to everyone joining the call today. Before I begin, I'd like to mention that unless otherwise stated, all financial measures in my remarks refer to the first quarter of 2026, and all comparisons will be year-over-year comparisons versus the first quarter of 2025. I'll begin with our profitability. We delivered record first quarter consolidated net income of $10.5 million, or $1.08 per diluted share, up from $4 million, or $0.39 per diluted share, reflecting the improving operating leverage on higher revenues and the continued strength and execution across the business. On the top line, consolidated net sales grew 19.1% to $138.3 million compared to $116.1 million last year. Our water transmission system segment also posted a record first quarter, with sales rising 19.1% to $93.5 million versus $78.4 million. This growth was driven by an 18% increase in tons produced due largely to project timing and a 1% improvement in the selling price per ton due to product mix. Precast delivered a record first quarter as well, with sales up 18.9% to $44.8 million compared to $37.7 million. The results benefited from a 14% increase in selling prices due to product mix and a 4% increase in volume shipped. As a reminder, the products we manufacture are unique in the average sales prices for both of our operating segments, as well as the pre-cast shipment volumes and WTS production volumes, cannot always be relied upon as comparable metrics due to variations in the mix between periods. We also achieved record first quarter consolidated gross profit supported by higher volume and favorable pricing and mix. Gross profit was $26.7 million, up 37.7%, representing 19.3% of sales, a 260 basis point improvement from 19.4 million, or 16.7% of sales. In water transmission systems, gross profit increased 42.3% to 17.3 million, or 18.5% of segment sales, a 300 basis point improvement from 12.2 million, or 15.5% of sales. The increase reflects higher production volume and the associated operational efficiency gains, as well as favorable changes in product mix. Precast gross profit also reached a record first quarter, rising 30% to $9.3 million, or 20.9% of segment sales, compared to $7.2 million, or 19.1% of sales. The 180 basis point improvement in gross margin was largely driven by higher selling prices tied to product mix. Selling general administrative expenses were $14 million, up 1.5% and represented 10.1% of net sales. 180 basis point improvement from 11.9% of net sales a year ago, even with modest increases in incentive compensation expense. For the full year of 2026, we now expect consolidated SG&A to range between $53 and $55 million. Depreciation and amortization expense was $4.8 million compared to $4.4 million, and we continue to expect a full year expense of approximately $20 to $22 million. Interest expense declined to $0.3 million from $0.6 million, reflecting lower average daily borrowings. Income tax expense was $2 million, resulting in an effective income tax rate of 16% compared to $1 million, or a rate of 19.8% last year. The effective rates for both quarters were primarily impacted by tax windfalls recognized upon the vesting of equity awards. Our tax rate can vary based on the level of total permanent differences relative to pre-tax income. For the full year, we currently expect an effective tax rate of approximately 24% to 26%. I'll now turn to our financial condition. At March 31, 2026, cash and cash equivalents improved to $14.3 million from $2.3 million at year end. Our debt balance totaled $10.7 million, and there were no outstanding borrowings on our credit facility at March 31. This resulted in a net cash position of $3.5 million as we continued to drive cash to the balance sheet to support our growth and shareholder return priorities. our improved profitability coupled with favorable changes in working capital drove strong net cash provided by operating activities of 29.2 million, reflecting a more than 500% increase from 4.8 million last year. Capital expenditures were 3.5 million compared to 3.7 million last year. For the full year 2026, we continue to expect CapEx in the 20 to 24 million range, including approximately 6 million for investment projects to support our precast product spread strategy and broader precast growth initiatives. As a result, we generated 25.7 million of free cash flow in the quarter compared to 1.2 million last year. For 2026, we are raising our full year free cash flow outlook to 50 to 56 million, up from a prior range of 40 to 46 million. In terms of capital deployment for the quarter, we spent 8.9 million to complete the purchase of Bouton Precast, repurchased approximately 33,000 shares of our common stock at an average price of $67.17 for a total of 2.2 million, and repaid 1 million in debt. These activities highlight our ability to continue to grow the company while concurrently returning value to our shareholders. To close, we delivered a strong start to the year, with first quarter records for revenue under the current configuration, gross profit, and earnings. We also generated very strong free cash flow, further strengthened our balance sheet, and remained disciplined in our capital deployment. Our record water transmission systems backlog and our solid precast order book coupled with the commercial team's focus on pricing and our track record of superb operational execution, position us to achieve new heights in financial performance as we move through the remainder of 2026. Thank you to our employees for their continued concentration on workplace safety and to our shareholders for their continued support. I'll now turn it over to the operator to begin the question and answer session.