NWPX Infrastructure, Inc.

Greetings and welcome to the NWPX Infrastructure second quarter 2026 earnings 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.

Good morning and welcome to NWPX's second 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. For now, all of you should have access to our earnings press release, which was issued yesterday, July 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 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, 2025, and in our other SEC filings for a discussion of such risk factors that could cause actual results to differ materially from our expectations. Thank you all for joining us today. I'll begin with a review of our second quarter performance and our outlook for the third quarter of 2026, and then Aaron will walk you through our financials in more detail. Second quarter marked another outstanding quarter for NWPX Infrastructure as we delivered record financial results across revenue, gross profit, and EPS. Net sales were up 19.7% year-over-year to $159.5 million, primarily driven by strength in our water transmission systems business. Consolidated gross profit totaled $34.4 million, up 35.5% from last year, with our gross margin expanding 250 basis points year-over-year to 21.5%. That momentum translated into strong bottom-line performance, underscoring the operating leverage in our model, with earnings of $1.62 per diluted share, and Free Cash Flow of $9.9 million or approximately $1.01 per share. These results reflect the strength of our diversified business model and the disciplined execution of our long-term strategy. Turning to our WTS segment, revenue reached a quarterly record of $113.2 million, up 33.8% year over year with strong margin improvement. Our performance reflected higher production volume with tons produced up 26%, supported by strong project execution and favorable project timing. Additionally, selling prices per ton were up 6% year over year, driven by changes in product mix. We had another exceptionally strong booking quarter with robust bidding activity, sustaining continued healthy backlog and reinforcing demand strength across our markets. After having produced approximately 15% of the large NDA project in the second quarter, the WTS backlog, including confirmed orders, ended the quarter at $423 million, down only slightly from the $430 million at March 31st, and well above the $348 million level we reported this time last year. This is a good indication of how strong the bidding was in the second quarter and continues to be in the third quarter. We also have a substantial pipeline of projects totaling more than $125 million that we've already bid on. While awards are still pending, we expect to secure a meaningful portion of these opportunities. As the large unplanned NDA project winds down, the WTS backlog levels will normalize to recent historical ranges. WTS gross profit increased 60.9% year over year to a record $24.2 million, resulting in a gross margin of 21.4% of 360 basis points from last year. This improvement reflects higher volumes supported by strong customer demand and disciplined project execution, as well as the related efficiency gains and higher overhead absorption that come with that level of production. In addition, we benefited from favorable product mix and pricing. Now turning to our precast segment. Precast revenue slightly decreased 4.8% year-over-year to $46.3 million. Our performance reflected an 11% decrease in volume shipped as we experienced unusually heavy rainfall in Texas in customer-driven project delays at our Utah facilities during the months of April and May. However, our selling prices were up 7% over last year, reflecting favorable changes in product mix. Business conditions improved significantly in June, which led us to close out the quarter with strong momentum, with a quarter-end precast order book of $61 million, up from $55 million at March 31st and above the $56 million level at June 30th of last year, positioning the business well for the remainder of the year. At part, production increased 24% year-over-year, supported by 29% growth in revenue per yard shipped. This performance came despite elevated interest rates. We are continuing to see signs of improvement in the non-residential demand trajectory as we move through 2026, particularly in data center projects that continue to bolster commercial construction activity. At Geneva, production was down 5% year-over-year, primarily reflecting the ongoing softness we've been seeing in the residential construction market. Production was mostly offset by growth in the non-residential business, demonstrating the resilience in the Geneva market platform. That said, leading indicators remained solid in mid-2026, with the Dodge Momentum Index up 22% in June of this year versus June of 2025. The commercial sector was up 22% and the institutional sector was up 22%, indicating broad-based strengths for non-residential construction activity through the end of this year and into 2027. In addition, we are continuing to advance our precast product spread strategy across the network, broadening our capabilities, increasing our capacity utilization, and evaluating opportunities to introduce precast into additional WTS facilities. Precast gross profit of $10.2 million was down 1.7%. which was directly related to the slow shipping months of April and May. However, we saw a gross margin improvement of 70 basis points to 21.9% from 21.2% last year, highlighting stronger pricing levels and better cost absorption despite lower volumes. We expect margins to continue recovering as non-residential demand builds. I'll now turn to our outlook for the third quarter of 2026. On a consolidated basis, we expect our third quarter performance to be comparable to or stronger than the second quarter of 2026. In our water transmission system segment, we expect revenue and margins to be similar to the prior quarter, driven by strong production volume and product mix, as well as the emergence of the previously discussed significant unplanned NDA project that began production in June and will extend through the third quarter. We continue to maintain a robust WTS backlog. Elevated bidding levels that have continued into July are providing great visibility to near-term financial performance. Based on what we are seeing today, we expect full-year bidding levels to be stronger than what we saw in 2025. 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 a more complete view of these projects, please refer to our investor presentation on our website. Turning to precast, we grew our order book in the second quarter of 2026, and we expect a stronger year for the precast business overall, with our momentum from June carrying over into the back half of the year. Demand remains healthy in the non-residential market, supporting continued momentum across our park and Geneva platforms. For the third quarter, we expect precast revenue to be higher than both the third 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. In closing, We delivered an outstanding second quarter, setting new records in revenue, gross profit, and earnings per share. Demand across our end market remains healthy. Bidding activity continues to be elevated, and our precast business is carrying positive momentum into the second half of the year. These factors reinforce our confidence that 2026 is shaping up to be a historic year for NWPX Infrastructure. I want to thank our team across the organization for their continued execution, their commitment to our strategy, and to maintaining a strong safety culture. 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. for implementing our cost efficiencies across the organization, and five, returning value to the 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 we begin, I'd like to mention that unless otherwise stated, all financial measures in my remarks refer to the second quarter of 2026, and all comparisons will be year-over-year comparisons versus the second quarter of 2025. I'll begin with our profitability. We delivered record consolidated net income of $15.8 million in the second quarter, or $1.62 per diluted share. up from $9.1 million, or $0.91 per diluted share, reflecting improved operating leverage on higher revenues and the continued strength and execution across the business. This is the highest earnings per share posted in the company's history. Recall, the company excludes the third quarter of 2018, which was elevated by a one-time $21 million non-cash gain-on-bargain purchase associated with our acquisition of Amron Water Group. As we measure it, the previous record reflective of our operational performance was achieved in the third quarter of 2025. On the top line, consolidated net sales grew 19.7% to $159.5 million compared to $133.2 million last year. Our water transmission system segment posted record revenue in the second quarter. with sales rising 33.8% to $113.2 million versus $84.6 million. This growth was driven by a 26% increase in tons produced due largely to project timing and a 6% improvement in selling price per ton due to improved pricing and product mix. Precast sales were down 4.8% to $46.3 million compared to $48.6 million. The results reflected an 11% decrease in volume shipped due to adverse weather events and ongoing softness in the residential construction market, partially offset by a 7% increase in selling prices due to product mix. As a reminder, the products we manufacture are unique and the average sales prices for both of our operating segments, as well as the precast shipment volumes and WTS production volumes, cannot be relied upon as comparable metrics due to variations in product mix between periods. We also achieved record consolidated gross profit, supported by higher volume and favorable pricing. Gross profit was $34.4 million, up 35.5%, representing 21.5% of sales, a 250 basis point improvement from $25.4 million, or 19% of sales. In water transmission systems, gross profit increased 60.9% to $24.2 million, or 21.4% of segment sales. a 360 basis point improvement from $15.1 million, 17.8% of sales. The increase reflects higher production volume and the associated operational efficiency gains and higher pricing resulting from sustained strength in market demand and changes in product mix. Precast growth profit was down 1.7%, 10.1 million or 21.9% of segment sales. compared to $10.3 million, representing a 70 basis point improvement from 21.2% of segment sales. Gross profit dollars were primarily impacted by lower shipment volumes. Selling general and administrative expenses were $13.2 million, up 5% and represented 8.3% of net sales, an 80 basis point improvement from 9.1% of net sales a year ago. Even with modest increases in incentive compensation expense. For the full year 2026, we now expect consolidated SG&A to range between $54 and $56 million. Depreciation and amortization expense was $5.3 million compared to $4.9 million, and we now expect full year expense to be between $21 and $23 million. Interest expense declined to $0.3 million from $0.8 million, reflecting lower average daily borrowings. Income tax expense was $5.6 million, resulting in an effective income tax rate of 26.3% compared to $3.4 million, or a rate of 27.5% last year. The effective rates for both quarters were primarily impacted by non-deductible permanent differences. For the full year, we continue to expect an effective tax rate of approximately 24% to 26%. I'll now turn to our financial condition. At June 30, 2026, cash and cash equivalents improved to $19.3 million from $14.3 million at March 31. Our debt balance totaled $10 million, resulting in a net cash position of $9.3 million. At June 30th, there were no outstanding borrowings under our credit facility, and we had approximately $124 million of additional borrowing capacity under the existing credit agreement. We continue to build cash on the balance sheet to support our growth and stockholder return priorities. Our improved profitability coupled with favorable changes in working capital drove strong net cash provided by operating activities of $14.1 million, reflecting a 159% increase from $5.4 million last year. Capital expenditures were $4.2 million compared to $3.5 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 $9.9 million of positive free cash flow in the quarter compared to $1.9 million last year. For 2026, we are raising our full-year free cash flow outlook to $56 to $65 million, up from the prior range of $50 to $56 million, collecting stronger earnings and more favorable billing schedules expected on water transmission system orders received. To close, the second quarter marked another period of exceptional performance, highlighted by record revenue, record gross profit, and record profitability. We continue to generate strong free cash flow and further strengthen our balance sheet through disciplined capital deployment. Continued strength in demand for our products, combined with our focus on pricing and consistent operational execution, positions us well to deliver strong financial results in the second half of this year. Thank you to our employees for their continued commitment to safety and excellence and to our shareholders for their continued support. I will now turn it over to the operator to begin the question and answer session.