Concrete Pumping Holdings, Inc. (NASDAQ:BBCP) Q2 2023 Earnings Call Transcript
Concrete Pumping Holdings, Inc. (NASDAQ:BBCP) Q2 2023 Earnings Call Transcript June 8, 2023
Concrete Pumping Holdings, Inc. reports earnings inline with expectations. Reported EPS is $0.09 EPS, expectations were $0.09.
Operator: Good afternoon, everyone and thank you for participating in today's conference call to discuss Concrete Pumping Holdings’ Financial Results for the Second Quarter ended April 30, 2023. Joining us today are Concrete Pumping Holdings' CEO, Bruce Young; CFO, Iain Humphries and Company's External Director of Investor Relations, Cody Slach. Before we go further, I'd like to turn the call over to Mr. Slach to read the company's Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995. That provides important cautions regarding forward-looking statements. Cody, please go ahead.
Cody Slach: Thanks Camilla. I'd like to remind everyone that in the course of this call to give you a better understanding of our operations, we will be making certain forward-looking statements regarding our business and outlook. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from such statements. For information concerning these risks and uncertainties, see Concrete Pumping Holdings’ annual report on Form 10-K, quarterly report on Form 10-Q and other publicly available filings with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
On today's call, we will also reference certain non-GAAP financial measures, including adjusted EBITDA, net debt and free cash flow, which we believe provide useful information for investors. We provide further information about these non-GAAP financial measures and reconciliations to the comparable GAAP measures in our press release issued today or the investor presentation posted on the company's website. I would like to remind everyone that this call will be available for replay later this evening. A webcast replay will also be available via the link provided in today's press release, as well as on the company's website. Additionally, we have posted an updated investor presentation to the company's website. Now, I would like to turn the call over to the CEO of Concrete Pumping Holdings, Bruce Young?
Bruce?
Bruce Young: Thank you, Cody, and good afternoon, everyone. I am pleased to report that in our second quarter we experienced 12% revenue growth, making our seventh consecutive quarter of double-digit revenue gains. This consisted of growth across all segments and was driven by continued market share gains in recent accretive acquisitions and organic growth. These strong results would have exceeded our expectations had we not experienced above average rainfall in most of our markets, west of the Rocky Mountains, as well as in our home state of Colorado. From an end market perspective, we have seen encouraging growth primarily in large commercial projects like distribution centers, warehouses, semiconductor fabrication plants, and EV and battery manufacturing plants.
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We expect this demand to continue given US reshoring trends as companies look to build out their domestic manufacturing footprint. While demand for large commercial projects is strong, Concrete Pumping demand from light commercial projects has been comparatively weaker due to higher interest rates and some impact from reduced availability of financing from smaller regional banks. Despite this, our expectation for the commercial market for in fiscal year 2023 remained strong. Opportunities with large manufacturing, particularly as we head into peak summer construction seasons. Turning to infrastructure. Our expanding US national footprint continue to drive strong results as it allowed us to capture more revenue from public project investments.
We will continue to work to win state and local projects and look forward to renewed investment in the US with the infrastructure investment in JOBS Acts, where we have recently seen an improved visibility of funds flowing to numerous projects, many of which are located in existing markets that we operate in. We plan to aggressively pursue these project opportunities and believe it has the potential to be a five-year-plus tailwind for our business. During the second quarter, our Residential segment remained relatively stable due to the ongoing structural supply demand imbalance in housing. The moderate declines we experienced in Q2 were absorbed by commercial work, highlighting the value of our diverse offering and agility in our fleet management.
For example, since the end of fiscal 2022 as a percentage of our total revenue, our residential work volumes have traded 400 basis points with growth in our commercial market. For the remainder of fiscal 2023, we expect residential revenue to main remain relatively consistent with the 29% of revenue we are experiencing today, which is in line with historical trends. Shifting to the cost side of our business, small improvements in input costs, particularly in stabilization of diesel fuel were mostly offset by a deleveraging effect we experienced in our labor due to above average rainfall that as I discussed earlier that impacted our equipment utilization. Our team continues to recalibrate our rates successfully across all business segments and realize the expected equipment return on investment for the same volume of work performed.
In summary, we had another great quarter that continues to show the strength of our business with 12% top line growth and 7% growth in adjusted EBITDA. I will let Iain walk through more details on our financial results before I return to provide some concluding remarks. Iain?
Iain Humphries: Thanks Bruce, and good afternoon, everyone. Five segment, Q2 revenue in our US pumping business increased 9%, mostly due to contributions from a recent acquisition of Coastal Carolina, but also from strong regional organic growth. In our UK segment, operating largely under the Camfaud brand, despite foreign exchange headwinds, US dollar revenues increased 13% compared to the prior year quarter. Excluding the FX translation impact, revenue grew by 22%. Our team continues to secure energy, road and rail projects in addition to the work we have previously announced with the concrete intensive high speed rail project HS2, which is expected to last beyond 2030. In our US Concrete Waste Management Services segment, operating under the Eco-Pan brand, we continue to deliver exceptional results, including increasing the revenue on an organic basis by 26% compared to the same year ago quarter.
This continues to be driven by investments we made in our sales team and the value of our enhanced service offering. Going forward, we expect to maintain Eco-Pan's double-digit organic revenue growth given our continued investment in our team and equipment, its penetration in the market and the continued evolution of the methods used in concrete construction projects to contain concrete waste. Returning to our consolidated results, gross margin in the second quarter was 40.3% compared to 40.4% in the same year ago quarter. As Bruce noted earlier, small improvements in input costs, particularly in diesel fuel, were mostly offset by higher labor costs due to lower equipment utilization. General and administrative expenses in Q2 were $30.3 million, up $1.7 million from $28.6 million in the same year ago quarter, primarily as a result of the headcount editions and higher labor costs related to recent acquisitions.
As a percentage of revenue, G&A costs were 28.1% in the second quarter compared to 29.6% in the same year ago quarter. This is illustrative of the operating efficiencies we typically achieve as we scale with organically and through M&A. The $2.8 million year-over-year improvement in income from operations was realized by more than offset by higher interest and income tax expense. As a result, net income available to common shareholders in the second quarter slightly declined to $5.2 million or $0.09 per diluted share compared to $5.6 million or $0.10 per dilute share in the same year ago quarter. Consolidate and adjusted EBITDA in the second quarter increased 7% to $28.8 million compared to $27.1 million in the same year ago quarter. Adjusted EBITDA margin declined slightly to 26.7% compared to 28% in the same year ago quarter.
Moving on to results by segment. In our US Concrete Pumping business, adjusted EBITDA declined 5% to $17.1 million compared to $18 million in the same year ago quarter, given the weather impacts west of the Rockies and Colorado on our operating leverage. In our UK business, adjusted EBITDA increased 22% to $4.6 million compared to $3.8 million in the same year ago quarter. For our US Concrete Waste Management Services business, adjusted EBITDA improved 39% to $6.5 million compared to $4.6 million in the same year ago quarter. Turning to liquidity. As at April 30th, 2023, we had total debt outstanding of $436 million or net debt of $429 million. We had approximately $100 million in liquidity as of April 30th, 2023, which includes cash on the balance sheet and availability from our ABL facility.
Furthermore, last week, we upsized our asset-based lending facility from $160 million to $225 million, while also extending its maturity to June, 2028. We are delighted to welcome the team from PNC Bank into our ABL relationship and appreciate the continued support from the teams at Wells Fargo and JP Morgan Chase. We believe this development further enhances our ability to pursue accretive investment opportunities and support our overall long-term growth strategy. As a reminder, we have no near term debt maturities with our senior notes maturing in 2026 and our asset-based lending facility now maturing in 2028. We remain in a strong free cash flow and liquidity position, which provides further optionality to pursue value added investment opportunities like accretive M&A, continued investment in Eco-Pan, and our Concrete Pumping fleet.
In the second quarter, the company repurchase approximately 339,000 shares for $2.3 million. As of April 30th, 2023, we had approximately $10.1 million remaining under the existing share repurchase authorization. We are encouraged by what we're seeing in our business and the momentum that we are carrying into the coming quarters. As a result, our fiscal year 2023 financial outlook remains unchanged. As a reminder of our 2023 previously stated guidance, we continue to expect fiscal year revenue to range between $420 million and $445 million; adjusted EBITDA to range between $125 million and $135 million; and free cash flow, which we define as adjusted EBITDA, less net replacement CapEx, and less cash paid for interest to range between $65 million and $75 million.
Operationally and financially, we have a solid foundation and we have confidence in executing on our growth strategy. With that, I will now turn the call back over to Bruce.
Bruce Young: Thanks Iain. In summary, we are very pleased with another record quarter driven by double-digit top line growth and expansion in every segment. We continue to prove the compelling business proposition of our high value service and the necessity of our mission-critical service offering in the construction industry, which positions us well for 2023 and beyond. We anticipate ongoing growth in our infrastructure and commercial end markets, given the industry trends we discussed and our ability to capitalize on them given our broad and growing footprint and momentum with heavy commercial projects. Our focus remains on optimizing end market mix to continue to deliver strong top and bottom line growth as we move into the peak summer construction season.
We'll also continue to focus on maximizing shareholder value by leveraging our unique operational capabilities, high value service offering and executing non-opportunistic accretive M&A while strategically balancing our leverage. With that, I would like to turn the call back over to the operator for Q&A. Camilla?
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