NWPX Infrastructure, Inc.

Greetings. Welcome to the NWPX Infrastructure's third 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 during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Scott Montross, President and CEO. Thank you, Scott. You may begin.

Good morning and welcome to NWPX Infrastructure's third quarter 2026 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, October 28th, at approximately 4 p.m. Eastern time. This call is being webcast, and it is available for replay. As we begin, I would 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, 2025 and in our other SEC filings for discussion of such risk factors that could cause actual results to differ materially from 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 third quarter performance and our outlook for the fourth quarter of 2026, and then Aaron will walk you through our financials in more detail. Third quarter marked another outstanding quarter for NWPX Infrastructure as we delivered record financial performance across several key metrics. Net sales were up 18.7% year over year to a record $179.4 million, primarily driven by strength in our water transmission systems business. Consolidated gross profit totaled a record $38.2 million, up 18.8% from last year, with our gross margin at 21.3%, consistent with the prior year. Strong execution across the business drove significant year-over-year earnings growth, with net income increasing 35% to $18.2 million, or $1.86 per diluted share. We also generated $20.4 million of free cash flow during the quarter, further strengthening our financial position. These results reflect the strength and resilience of our business, disciplined execution across our operations, and our continued ability to capitalize on favorable market conditions. Turning to our WTS segment. Revenue reached a quarterly record of $131.9 million, up 27% year-over-year, with strong margin performance. Our performance reflected higher production volume with tons produced up 7%, supported by strong project execution in favorable project timing. Additionally, selling prices per ton were up 19% year-over-year, driven by changes in product mix. Steel lead times have remained extended during the quarter but have begun to moderate. Importantly, our long-standing relationships with domestic mills continue to support reliable access to steel and our ability to serve our customers. Additionally, the significant NDA project we have discussed throughout the year was a meaningful contributor during the third quarter, generating approximately $31 million of revenue. We expect the project to make additional contributions in the fourth quarter and possibly into 2027 as well. We had another exceptionally strong booking quarter with robust bidding activity, sustaining continued healthy backlog and reinforcing demand strength across our markets. The WTS backlog, including confirmed orders, ended the quarter at a record $435 million, up from $423 million at June 30th and well above the $301 million level we reported last year at this time. Importantly, backlog continued to grow as we worked through a meaningful portion of the NDA project, demonstrating the strength of the broader demand environment. This is a good indication of how strong the bidding was in the third quarter, and continues to be in the fourth quarter. Our record backlog provides excellent visibility into future production activity and reflects continued demand for critical water infrastructure. WTS gross profit increased 23.4% year over year to a record 27.3 million, resulting in a strong gross margin of 20.7% compared to 21.3% last year. This performance reflects higher volumes and strong execution, which continue to drive operating efficiencies across the business. Gross margin was modestly below the prior year, primarily related to project production mix. That said, year-to-date, WTS gross margin was approximately 180 basis points above prior year period, underscoring the continued strength of the business. Now turning to our precast segment. Precast revenue slightly increased 0.6% year-over-year to $47.5 million. Our performance reflected a 4% decrease in volume shipped. However, selling prices were up 3% over last year, primarily reflecting favorable changes in product mix. Precast gross margin improved 160 basis points versus the prior year period. Approximately $1 million of revenue increased came from Serpentex, reflecting only a partial final month of the third quarter contribution from the September acquisition. While residential construction remains muted, and we have seen some softening in portions of the non-residential market, our ability to serve a diverse range of applications continues to help us navigate these conditions. We are particularly encouraged by the continued growth of our data center business. Through the third quarter, we quoted 33.5 million of data center project, booked in excess of 11 million worth of data center orders, and we are currently working on turning several additional large data center projects into new orders. While still a relatively small part of our overall business, it represents a growing source of opportunity, and we continue to approach the vertical selectively while maintaining our focus on our traditional precast markets. Our quarter-end precast order book totaled $67 million, which includes $10 million related to Serpentix. The legacy precast order book of $57 million is down from $61 million at June 30th and above the $55 million level at September 30th of last year, positioning the business well as we close out the year. While demand in the order book remained solid, some customer delayed shipments during the quarter amid continued uncertainty around interest rates, fuel costs, and the broader economic environment. This contributed to pre-cash revenue coming in somewhat below our expectations, but did not meaningfully change our view of the longer-term demand environment. The resilience of the precast business was particularly evident in this quarter. Despite the softer residential activity and some pressure within the non-residential construction, precast revenue remained above the prior year as we continued to pivot between residential, traditional non-residential, and emerging opportunities such as data centers. Looking ahead at the broader market, non-residential construction indicators remain mixed but continue to point toward areas of opportunities. The Dodge Momentum Index was up 3.7% year-over-year in September, with the commercial sector down 3% and the institutional sector up 17.2%. While near-term activity continues to be influenced by interest rates and broader macroeconomic uncertainty, the continued strength in institutional planning supports opportunities across portions of the non-residential construction market as we move into 2027. In addition, during the quarter we completed the acquisition of Serpentix, a manufacturer of engineered conveyor systems used primarily in municipal wastewater treatment plants and industrial manufacturing facilities. The acquisition expands our participation in the wastewater treatment market and adds specialized engineered conveyance capabilities that fit naturally alongside NWPX Parks' existing dewatering, separation, and mixing capabilities. Together, these businesses strengthen the wastewater platform we have been developing and broaden the solutions we can provide to municipal and industrial customers. Integration is progressing well, with the existing Serpentex management team remaining in place and helping lead the process. We see attractive long-term growth potential in the wastewater market and believe Serpentex provides us with an additional platform from which to pursue opportunities across essential water and wastewater platforms. With two acquisitions completed this year, our immediate priority is executing a successful integration and ensuring we fully capture the strategic benefits of both businesses. At the same time, we continue to evaluate attractive acquisition opportunities that can expand our geographic reach, enhance our manufacturing capabilities, and broaden our product offering. Further, we are continuing to advance our precast product spread strategy across the network, broadening our capabilities and increasing our capacity utilization. Through September of this year, we have quoted $58.3 million worth of projects and we have booked 9.7 million of product spread orders, exceeding total bookings for the full year of 2025. Precast gross profit of 10.9 million was up 8.6%. Gross margin improved approximately 160 basis points to 22.9% from 21.3% last year, primarily reflecting favorable changes in product mix. The margin improvement is especially encouraging, giving the lower volumes of customer-driven shipment delays as we experience during the quarter and reflects our continued focus on pricing, cost management, and operating efficiency. I'll now turn to our outlook for the fourth quarter. On a consolidated basis, we currently anticipate stronger performance than both the fourth quarter of 2025 and the first quarter of 2026. which is particularly notable given the typical fourth quarter seasonality associated with fewer shipping days, holiday shutdowns, and potential weather-related disruptions. The strength of our backlog and the opportunities across our businesses give us confidence in our outlook as we close out the year. In our water transmission systems segment, we expect WTS backlog to remain elevated through year end supported by continued demand for critical water infrastructure. Our record $435 million backlog, including confirmed orders, provides excellent visibility into future production activity. In addition, elevated bidding levels that have continued into October are providing great visibility into near-term financial performance. Based on what we are seeing today, we expect full year base bidding levels, not including the NDA project, to be stronger than what we saw in 2025. We also expect additional contribution from the previously discussed NDA project during the fourth quarter. More broadly, the strength of the underlying WTS business gives us confidence that 2026 would have been a record year even without the benefit of this unique project. Through the first nine months of 2026 without the contribution from the NDA project, WTS Revenue would have been approximately 10% higher than the same period of 2025. The pipeline of current and upcoming water transmission projects remains strong, with attractive economics and margins supporting our outlook. For a more complete view of these projects, please refer to our investor presentation on our website. Turning to precast. We expect our precast business to remain steady in the fourth quarter, supported by a solid order book and continued customer activity. We continue to expect 2026 to be a record year for precast revenue. While residential construction remains muted and we are seeing some softness in portions of the non-residential market, we continue to benefit from the diversity of our product portfolio and end market exposure. In particular, data centers continue to provide an attractive source of incremental opportunity, helping offset softness in other areas of the business. Looking beyond the fourth quarter, The addition of Serpentix further broadens our capabilities and provides another avenue for growth across wastewater infrastructure and engineered solutions. In closing, we delivered another outstanding third quarter, setting new records for revenue and gross profit while generating earnings of $1.86 per diluted share. WTS continues to perform at an exceptional level Thank you for joining us today. None of these results would be possible without our people. Our total recordable incident rate at the end of the third quarter stood at .8, reflecting the stability of our manufacturing environment and the continued commitment of our employees to execute our strategy safely. I want to thank our teams 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, four, implementing cost efficiencies across the organization, and five, returning value to 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 third quarter of 2026, and all comparisons will be year-over-year comparisons versus the third quarter of 2025. I'll begin with our profitability. We delivered consolidated net income of $18.2 million in the third quarter, or $1.86 per diluted share, up 35% from $13.5 million, or $1.38 per alluded share, reflecting the benefits of higher operating leverage on record revenue and disciplined execution across the business. This is the highest quarterly earnings per share posted in the company's history, excluding the third quarter of 2018, which included a one-time $21 million non-cash bargain purchase gain associated with the Ameron Water Group acquisition. The result demonstrates the earnings power of the business as record revenue translated into a 27.7% increase in operating income. On the top line, consolidated net sales grew 18.7% to a record $179.4 million compared to $151.1 million in the third quarter of 2025. Our water transmission system segment also delivered record net sales of $131.9 million increase of 27% from $103.9 million. This growth was driven by a 19% increase in selling price per ton due to changes in product mix and a 7% increase in tons produced resulting from project timing. Precast net sales increased 0.6% to $47.5 million from $47.2 million. The results reflected a 3% increase in selling prices primarily due to product mix which was partially offset by a 4% decrease in volume shipped. Third quarter results also included $2.1 million contribution from the recently acquired businesses, Bouton and Serpentix, which were not included in the year-ago quarter. As a reminder, the products we manufacture are unique, and the average sales prices for both of our operating segments, as well as the pre-cash 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 of $38.2 million, up 18.8%. Consolidated gross margin remained consistent year over year at 21.3%. In water transmission systems, gross profit increased 23.4% to a record $27.3 million, or 20.7% of segment sales, compared with 22.1 million or 21.3% of segment sales. WTS gross margin declined 60 basis points year-over-year, reflecting a change in production mix between periods. Precast gross profit increased 8.6% to 10.9 million or 22.9% of segment sales compared with 10 million or 21.3% of segment sales. The 160 basis point margin improvement primarily reflected stronger margin performance within the non-residential portion of the business. Third quarter segment sales also included $0.4 million of gross profit from recently acquired businesses, with no comparable contribution in the year-ago quarter. Selling general administrative expenses were $13.9 million, up 5.8% from $13.1 million, and represented 7.7% of net sales. for the full year 2026, we now expect consolidated SG&A to range between $55 and $56 million. Depreciation and amortization expense was $6.3 million compared to $5.2 million, and we now expect full year depreciation expense to be between $22 and $23 million, which includes the amortization of acquired intangible assets obtained in the acquisition of Serpentix. Interest expense declined to $0.4 million from $0.8 million, reflecting lower average daily borrowings. Income tax expense was $5.7 million, resulting in an effective income tax rate of 23.9% compared to $4.7 million or 26% last year. The effective rate in the quarter was primarily impacted by non-deductible permanent differences, partially offset by return to provision adjustments. For the full year, we now expect an effective tax rate of approximately 23% to 24%. I'll now turn to our financial condition. At September 30, 2026, cash and cash equivalents were $6.1 million, up from $2.3 million in December 31, 2025. Total debt was $27.7 million, including $18.5 million outstanding under the revolving line of credit. At quarter end, we had approximately $105 million of additional borrowing capacity under our credit facility. Following the completion of the Suprentix acquisition in September, our balance sheet remains well positioned to support organic growth, disciplined M&A, and capital returns to shareholders. Strong profitability and effective working capital management drove net cash provided by operating activities of $27.4 million during the quarter, compared to $21 million last year, bringing year-to-date operating cash flow to $71.1 million. The year-over-year increase in quarter primarily reflected a $5.6 million increase in net income adjusted for non-cash items. In addition, changes in working capital contributed $0.9 million to the increase, demonstrating strong working capital efficiency when considered with the 18.7% year-over-year increase in quarterly revenues. During the quarter, we deployed capital across several key priorities, including 49.7 million to complete the acquisition of Serpentix, 7 million in capital expenditures, and 1.2 million in share repurchases. These investments demonstrate our ability to fund growth while continuing to return capital to shareholders. For the full year 2026, we now expect capital expenditures in the 21 to 23 million range, including approximately 6 million for investment in projects to support our precast product spread strategy and broader growth initiatives. Finally, we generated $20.4 million of free cash flow during the quarter compared to $13.2 million last year, bringing free cash flow for the first nine months of 2026 to $56 million. We now expect free cash flow for the full year 2026 in the range of $62 to $72 million. To close, the third quarter marked another period of strong execution highlighted by multiple company records including Consolidated Revenue and Gross Profit, WTS Revenue and Gross Profit, and Earnings Per Share. Our record water transmission systems backlog, including confirmed orders, provides strong visibility where our solid cash generation and ample borrowing capacity preserve flexibility to invest in growth and return capital to shareholders. Thank you to our employees for continuing to prioritize safety and commercial and operational 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.