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Edited Transcript of BBCP.OQ earnings conference call or presentation 16-Sep-19 9:00pm GMT

Q3 2019 Concrete Pumping Holdings Inc Earnings Call

Sep 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Concrete Pumping Holdings Inc earnings conference call or presentation Monday, September 16, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Bruce F. Young

Concrete Pumping Holdings, Inc. - President, CEO & Director

* Iain Humphries

Concrete Pumping Holdings, Inc. - CFO, Secretary & Director

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Conference Call Participants

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* Andrew John Wittmann

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Stanley Stoker Elliott

Stifel, Nicolaus & Company, Incorporated, Research Division - VP & Analyst

* Timothy Michael Mulrooney

William Blair & Company L.L.C., Research Division - Analyst

* Cody Slach

Gateway Investor Relations - MD & Director of Investor Relation

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Presentation

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Operator [1]

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Good afternoon, everyone, and thank you for participating in today's conference call to discuss Concrete Pumping Holdings' Financial Results for the Third Fiscal Quarter ended July 31, 2019.

Joining us today are Concrete Pumping Holdings' CEO, Bruce Young; CFO, Iain Humphries; and the company's External Director of Investor Relations, Cody Slach.

Before we go further, I would 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.

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Cody Slach, Gateway Investor Relations - MD & Director of Investor Relation [2]

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Thanks, Elmer. 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. 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 Holding Inc.'s 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 discuss adjusted EBITDA, which is a non-GAAP financial measure that adjusts reported figures for certain items. We believe the presentation of this non-GAAP financial measure is useful because it provides investors and industry analysts the same information that we use internally for purposes of assessing our core operating performance. For a reconciliation of this measure, please refer to the press release issued today or the investor presentation posted on the company's website.

Also please note that on December 6, 2018, we consummated the previously announced business combination, where we acquired the formerly private company, previously known as Concrete Pumping Holdings, Inc., and the former SPAC, called Industrea Acquisition Corp, which transactions we collectively refer to as the Business Combination. In connection with the closing of the Business Combination, the company changed its name to Concrete Pumping Holdings, Inc.

Finally, the financial results described today for dates and periods prior to the Business Combination relate to the operations of the formerly private company previously known as Concrete Pumping Holdings, Inc. For additional information, please see our Form 10-Q that we will file after this call, which includes the historical Concrete Pumping Holdings, Inc. financial statements that we are discussing on this call as well as pro forma financial information for the company that reflects the business combinations.

I'd like to remind everyone this call will be available for a 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 Concrete Pumping Holdings' website.

Now I'd like to turn the call over to the CEO of Concrete Pumping Holdings, Bruce Young. Bruce?

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Bruce F. Young, Concrete Pumping Holdings, Inc. - President, CEO & Director [3]

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Thank you, Cody, and good afternoon, everyone. First, I will briefly cover our third fiscal quarter results, then I'll discuss year-to-date trends we have seen in the business and then provide an update on our integration of our May acquisition of Texas-based Capital Pumping. Iain will then provide a more detailed review of our third quarter financial results as well as our updated financial outlook for the 2019 full fiscal year. I will finish the call by expanding upon our updated operational outlook for the year and our ongoing strategy for supporting growth, maintaining our fleet and deleveraging the business.

Turning to our financial results. We generated strong top line growth in the third quarter as revenue increased by 18% to $78.7 million, while adjusted EBITDA improved by 37% to $30.6 million. And EBITDA margin of approximately 39% compared to approximately 34% in the equivalent year ago quarter. The third quarter financial performance was largely driven by the contribution and successful integration of the Capital Pumping acquisition, broad end-market strength in the U.S. within -- with organic growth in most markets and growth in the Eco-Pan business.

Additionally, the business continues to focus on the strength of our supply chain to ensure we deliver consistently healthy margin performance. The improved third quarter financial performance was partially offset by the continuous strengthening of the U.S. dollar, which negatively impact the translation of our U.K. segment's reported results.

As we mentioned on our previous 2 earnings calls, the first half of the 2019 fiscal year was negatively impact by harsh weather conditions. This delayed our customers' projects across both the U.S. and the U.K. and also affected our Eco-Pan business.

We also communicated that we expected the bulk of the delayed projects to commence in the back half of 2019. And during the third quarter, we largely saw this begin to play out. We are currently seeing more normalized construction activity across the majority of our geographies and anticipate that these delayed projects will continue to kick off in the fourth quarter and into fiscal 2020. In fact, in the U.S., our current project outlook is stronger now than this time last year.

Next I'd like to cover recent trends we have seen in our business. Starting in the U.S., our utilization dipped in the second quarter to approximately 73%, largely due to challenging weather, however, recovered nicely in the third quarter to approximately 80%.

Pricing in the U.S. also remained strong as revenue per build hour was up 1% in the third quarter compared to the same year ago quarter, while total build hours increased 29% versus the prior year from a combination of Capital Pumping acquisition and the organic volume growth. Please note that our year-over-year pricing comparative is somewhat diluted because the Capital Pumping fleet has fewer large units with the commensurate higher rates and our year-over-year pricing comparative, excluding Capital, shows a 2.5% build hour rate increase.

In the U.K., average revenue per job in fiscal 2019 has steadily been increasing and was up approximately 4% when compared to the same year-to-date period. In our Eco-Pan business, price per pickup has been growing this year, both sequentially and year-over-year and increased approximately 3% in the third quarter of 2019 compared to the same year ago quarter. These are a few of the core operating metrics that we track closely as an organization, and I am encouraged by our year-to-date progress.

Switching gears to an update on our Capital Pumping acquisition. We closed the acquisition on May 15, and the integration process is going very well and is expected to be completed by the end of the calendar year 2019. Additionally, we are pleased that Capital's financial performance in the third quarter was in line with expectations as we saw continued strong demand in construction activities across the majority of our end markets in the Texas region.

We continue to believe that this business will be a very positive element of the overall CPH portfolio and expect Capital to be accretive in our combined company's financial results as evidenced by our third quarter adjusted EBITDA margin of approximately 39%.

Before turning the call over to Iain, I'd like to comment on how our organization has successfully navigated several transformative transactions over the last year. These activities include our recent warrant exchange, the secondary equity issuance and the acquisition of Capital, all of which we consider essential in transformational steps to facilitate our continued focus on driving shareholder value.

Throughout this time, the entire CPH team has not taken their foot off the gas pedal when it comes to executing on our long-term strategy. Despite some weather headwinds outside of our control in the first half of the year, we remain focused on the profitable organic and sustainable growth of our business.

Now I'd like to hand the call over to Iain so he can provide a more detailed overview of our third quarter financial results and our updated outlook for fiscal year 2019. Iain?

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Iain Humphries, Concrete Pumping Holdings, Inc. - CFO, Secretary & Director [4]

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Thanks, Bruce, and good afternoon, everyone. Before getting into the details, I'd like to remind everyone that we refer to adjusted EBITDA, which is a non-GAAP financial measure, and a reconciliation from net income to adjusted EBITDA can be found in the press release we issued earlier today.

Now moving into the third quarter financial results. As Bruce mentioned, revenue increased 18% to $78.7 million compared to $66.6 million in the same year ago quarter. The increase was largely driven by the contribution from the Capital acquisition and organic growth from Brundage-Bone and Eco-Pan. This growth is partially offset by the continued strengthening of the U.S. dollar, which has surpassed growth and are translated with the poor U.K. results.

On a pro forma basis, which includes the results of recent acquisitions both pre and post the transaction date, our revenue increased by approximately 3%. Adjusting pro forma revenue on a constant currency basis, revenue increased by 4%.

In the current fiscal quarter, revenue in our U.S. Concrete Pumping segment, mostly operated under the Brundage-Bone brand name, increased 29% to $58.4 million. The Capital acquisition, which added additional operational capacity to our Texas markets, drove the majority of the year-over-year increase.

Revenue in the U.K. segment, operating under the Camfaud brand name, was $12.5 million compared to $13.9 million in the year ago quarter. The decline was primarily due to the continued strengthening of the U.S. dollar, which impacted the translation of our reported results. On a constant currency basis, Camfaud's revenue in the third quarter was down only by approximately 4% year-over-year.

Revenue in our Concrete Waste Management Services segment or Eco-Pan increased 6% to $8 million in the third quarter. The increase was driven by modest improvements in the majority of our markets and higher utilization of our assets. We experienced strong growth in our next tier markets, recent start-up branches are gaining traction, and we progress the integration of Eco-Pan into our Concrete Pumping footprint.

Finally, pans in the field, which are our leader indicator for future pickups, are at record levels.

Turning back to our consolidated results. Gross profit in the third quarter increased 29% to approximately $39 million compared to the same year ago quarter and gross margin increased 430 basis points to 49.6% when compared to 45.3% last year. The increase in gross margin was primarily due to the acquisition of Capital and further improved by the strengthening of our supply chain purchasing power. This improvement was partially offset by the step-up in depreciation related to the Business Combination and the Capital acquisition as depreciation expense related to our Concrete Pumping equipment is included within our cost of operations.

General and administrative expenses were $28.2 million in the third quarter compared to $16.8 million in the same year ago quarter. As a percent of revenue, general and administrative expenses were 35.8% compared to 25.2% last year. The G&A increase was largely due to $8.6 million higher amortization expense from the step-up in fair value of certain intangible assets related to the Business Combination and Capital acquisition and a $1.5 million increase in stock-based compensation. The remainder of the expense is largely attributable to head count growth, increase in the head count from the Capital acquisition.

Net income attributable to common shareholders was $2.3 million or $0.05 per basic and diluted share. Please note that our share count increased in the current quarter as a result of the secondary equity offering related to Capital Pumping acquisition that was completed in May 2019.

Finally, adjusted EBITDA in the third quarter increased 37% to $30.6 million or approximately 39% of revenue when compared to $22.3 million in the same year ago quarter. Revenue growth, gross margin improvement and procurement savings in parts and fuel drove the strong EBITDA expansion.

Please note that our performance in the third quarter shows a seasonality we experienced in our business. Sequentially, revenue and adjusted EBITDA were up approximately 7% and 20%, respectively, on a pro forma for acquisition basis when compared to the second quarter of fiscal 2019. This is reflective of a more normalized weather pattern in the third quarter when compared with the unusually harsh weather experienced in the first half of the year and our normal seasonality is an important aspect of our business to understand.

To provide more information on seasonality, in the Q3 earnings release materials that we issued today, we included quarterly historical financial informations back to 2017 fiscal year to help current and potential investors better analyze our business trends, seasonality, profitability and the timing of capital expenditure requirements. As we mentioned before, our business is seasonal with approximately 45% of revenue generated in the first half of the fiscal year and 55% in the second half.

Additionally, our profitability is typically back-half weighted while capital expenditures are largely front-half weighted as we take delivery of new equipment in the earlier months of the fiscal year to ensure we maximize our fleet up-time in our busiest periods.

Turning to the balance sheet. At July 31, 2019, we had approximately $4.5 million of cash and approximately $439.1 million of total debt. Please note that the change in debt from Q2 2019 was largely the result of $60 million of incremental term loans utilized to finance a portion of the acquisition of Capital.

As a reminder, our business generates healthy free cash flow as we invoice our customers daily for the work we perform, and we have minimal working capital requirements as we do not take the ownership of the concrete that we place. This ability to generate strong free cash flow, along with our strong margins that have been enhanced with the accretive acquisition of the Capital business, provides us comfort in our current debt levels and our ability to strategically delever and strengthen our balance sheet over time.

Now let's turn to our updated fiscal year 2019 financial outlook. As we enter the fourth quarter and now that we have integrated the majority of the Capital Pumping business on to our platform, we have updated our outlook for fiscal year 2019. We expect construction activity in our end markets to largely remain robust over the coming months as we work through our backlog of delayed projects from the first half of the year and as new projects kick off. In fact, and as Bruce mentioned, our current project outlook in the U.S. is in a stronger position today when compared to this time last year.

Given these dynamics, we now expect full year revenue in fiscal year 2019 to be approximately $284 million and adjusted EBITDA to be approximately $95 million. I'd like to note that this outlook includes the contribution from Capital starting May 15, 2019, the date the acquisition closed. On a pro forma basis, we expect revenue of approximately $311 million and adjusted EBITDA of approximately $108 million.

Looking into fiscal 2020, our focus remains on the balance sheet strength, profitable organic growth and the continued successful execution of our long-term plan. We expect broad end market strength in the U.S. Concrete Pumping to continue in 2020 with organic growth expected in most of our key regions.

The accretive addition of Capital business galvanized our presence in the important Texas marketplace, and we continue to look for ways to drive both revenue and expense synergies across the combined business. Within Eco-Pan, our strategy remains steadfast as we look to efficiently and profitably expand that business and leverage our interest -- our existing infrastructure across Brundage-Bone Capital and Camfaud's existing footprint.

In the U.K., as I mentioned, there is some uncertainty in the market, and we are facing some modest foreign exchange headwinds. As such, we expect Concrete Pumping in the U.K. region to be somewhat flat in 2020. However, our team in the U.K. continued to perform exceptionally well and while it's a very challenging market and have done an outstanding job maintaining a strong and resilient position in the U.K. market, and we expect this to continue.

To help frame our initial 2020 outlook, the investor presentation posted today leaves our directional commentary on each of our guidance metrics. We expect low- to mid-single-digit organic revenue and adjusted EBITDA growth in 2020 with flat to low-single-digit margin expansion. We also expect free cash flow to reduce our leverage ratio to below 3.5x.

With that, I will now turn the call back to Bruce.

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Bruce F. Young, Concrete Pumping Holdings, Inc. - President, CEO & Director [5]

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Thanks, Iain. First, I'd like to quickly provide a little more context on our updated fiscal 2019 outlook. I previously mentioned that certain core operating metrics across our 3 segments are strong, and we are seeing more normalized construction activity across the majority of our end markets after a harsh and prolonged winter conditions.

This momentum has continued so far into the fourth quarter as we continued to see a pickup in delayed projects during the first half of the year, and our project outlook is strong in the U.S. Also in the U.S., we have several large projects kicking off mid- to late fourth quarter of this year and in the first half of 2020. These range from microchip plants, office buildings, working garages, data centers, LNG plants, distribution centers, hotels, medical buildings and a variety of energy-related projects. These large projects are spread across the breadth of the country from Oregon and Washington to Texas and Atlanta.

Regarding Eco-Pan, as Iain mentioned, we are continuing our efforts to grow the business predominantly by leveraging our existing infrastructure, customers and branch locations. This will allow us to profitably grow the business while increasing awareness of our service offering. Additionally, and to support the continued growth and leadership of our Eco-Pan business, we recently appointed Casey Mendenhall as the General Manager. Casey joined CPH with an impressive track record in the concrete construction services business, and we are excited to have him join the team.

For the U.K., inherent in our outlook for the rest of the year is a much stronger U.S. dollar than we had originally expected going into 2019 fiscal year. Additionally, as we said previously, there are some continued uncertainty in the U.K. market due to the pending decisions regarding Brexit. Despite these potential headwinds and excluding the impact of currency fluctuations, we remain in a position to continue driving annual price increases due to our value-added service, strong relationships with our customers and broad geographic footprint.

Next, I'd like to outline our near-term priorities which we believe will drive optimal shareholder value. First is driving organic EBITDA growth and free cash flow generation. We will continue our integration of Capital and capture the remaining synergies and drive Eco-Pan further across the Concrete Pumping footprint. We'll remain highly disciplined in cost management.

Second is maintaining stable investment in our equipment in fiscal 2020. We have a younger fleet, which reduces repair and maintenance. Capital expenditures typically range between 9% and 11% of revenue and is largely first-half weighted as we typically take position of new equipment ahead of the peak construction season. We actively manage the purchase and sale of our equipment to minimize lumpiness in our capital requirements in any given year. And during the potential downturn, we are able to quickly ratchet down CapEx and even turn it negative as we increase sales of our used equipment.

Our third priority is maintaining a strong balance sheet and driving down leverage. We continue to be comfortable with our current amount of debt, and as Iain mentioned, we expect our leverage ratio to decline by less than 3.5x by the end of fiscal 2020. The main driver of the sequential decline in our leverage ratio is that we typically generate the bulk of our free cash flow in the back half of the year due to seasonality as a higher proportion of revenue and adjusted EBITDA, along with lower CapEx, comes from our third and fourth quarters. Our long-term leverage target remains at 2.5x.

Lastly, we will pursue opportunistic acquisitions only after Capital is fully integrated. While our M&A pipeline still sits at about $100 million of incremental adjusted EBITDA, we expect near-term M&A would be tuck-ins rather than transformational, like Capital. To put this in perspective, Capital generated approximately $24 million of trailing 12-month adjusted EBITDA as of March 31, while the companies in our pipeline have an average adjusted EBITDA of about $5 million to $10 million. Integration of all M&A opportunities is a key consideration for us when reviewing acquisition prospects, and in this regard, the successful completion of the Capital Pumping integration is a key success factor to be completed and remains an immediate priority. And for avoidance of doubt, we do not anticipate issuing any more equity for the foreseeable future. Capital was a unique situation, given its size and strategic importance.

Before turning the call over to the operator for Q&A, I'd like to say that I'm encouraged by our results in the third quarter as they show the levels of profitability our organization can produce. The first 9 months of fiscal 2019 saw industry-wide headwinds due to harsh weather along with successful completion of several transformative transactions. Looking ahead, and with a strong third quarter under our belt, we believe we are well positioned to drive strong organic growth in fiscal 2020.

With that, I'd now like to turn the call back over to Elmer for questions and answers. Elmer?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from Andrew Wittmann, Robert W. Baird & Company.

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Andrew John Wittmann, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [2]

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I just wanted to clarify a couple of things, if I could here. Specifically, Bruce, in your commentary, I guess, you mentioned that some of the work in the U.S. is normalizing. You mentioned that in the first half of the year, obviously, you had some weather and that pushed things out. Usually, I would expect that to be a week or 2 delay, but you kind of talked about some of the projects that were delayed from the first half just now happening here in the fourth quarter and expect it to happen into 2020.

So I wanted to understand that a little bit better. Are you waiting for your customers to give you, like, a notice to proceed? Have they not broken ground on these things and they're waiting for something to pass that's totally out of your control? Or is it just that construction schedules were truly delayed by months instead of weeks? I just want to understand that dynamic a little bit better.

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Bruce F. Young, Concrete Pumping Holdings, Inc. - President, CEO & Director [3]

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Yes. So Andrew, a couple of things. So one, we never get a notice proceed. We're truly a service business, and we come out as the contractors start the projects and provide the contract pumping service or Eco-Pan service when they need it. The second part is, typically with weather, if -- especially wet weather, it affects the ground conditions. So until the ground conditions come to a position where they can actually excavate and do the dirt work, it pushes things out, maybe more than just the time it rained. And the third thing that we see is typically because of the labor shortage, that even when these jobs do start, they don't have accelerated schedules because they have the challenges with getting the labor to accelerate their schedules. So even though the weather stopped, the work doesn't start immediately and then ramping up sometimes takes a little bit of time. However, we're in a position now where most of those projects are now starting, and we see ourselves in a very good position going into 2020.

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Andrew John Wittmann, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [4]

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Okay. That's helpful. And then you guys talked about the guidance a couple of times, some of it was kind of fast. So I just kind of want to recap it and maybe talk with a little bit more detail on that specifically. Obviously, I think the revenue increase is in line with the contribution that we would expect from Capital. I heard things on the EBITDA side, I heard uncertainty from Brexit, and U.S. dollar strength is a couple of things. Can you just talk about some of the other things that affected the U.S. markets, in particular, for -- on the EBITDA, why we didn't see more of an increase on the EBITDA side?

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Iain Humphries, Concrete Pumping Holdings, Inc. - CFO, Secretary & Director [5]

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Yes. I mean the EBITDA performance in the U.S., I mean, it's largely in line with where we'd expect to be across most of our regions, although we have seen a little bit of softness in Colorado. But otherwise, on the pumping side, the U.S. business has performed where we expected it to. So I mean that's largely what we're seeing on the U.S. side from the Concrete Pumping side.

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Andrew John Wittmann, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [6]

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Okay. But -- so Capital, I think, you guys were -- came into the quarter saying that EBITDA for the year would be around $95 million, now you added Capital and it's still $95 million. I guess I'm trying to reconcile what the offsets were beside.

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Iain Humphries, Concrete Pumping Holdings, Inc. - CFO, Secretary & Director [7]

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Yes. So I mean, added to that -- I mean, so the impact of the FX translation is probably about $700,000. I mean, so what we've seen with the decrease of FX, where we expected it to be, and that would be the impact on the U.K. side. And from an Eco-Pan perspective, I mean that we had really some harsh weather, as we mentioned before, in some of our mature markets, which has really affected the growth that we expected on that business through the year.

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Andrew John Wittmann, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [8]

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Okay. So the Eco-Pan, that was...

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Iain Humphries, Concrete Pumping Holdings, Inc. - CFO, Secretary & Director [9]

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That totally -- yes, that would be the full complement. Really what we've seen move, everything else in the U.S. and the U.K. has largely been in line with where we expected it to be.

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Andrew John Wittmann, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [10]

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Okay. So yes, just on Eco-Pan. I mean, obviously, the organic growth rates have been improving here. This is the business that you guys have talked about having even better growth rates than what you put up in the quarter. You kind of talked about your outlook into 2020, but can you just talk -- I mean, frame the marketplace and the growth profile in Eco-Pan just to kind of set our expectations there maybe a little bit more? I mean, should we be thinking about double-digit growth there at all? Or is this rate that you saw in the quarter probably more realistic for the time being?

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Bruce F. Young, Concrete Pumping Holdings, Inc. - President, CEO & Director [11]

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Yes. So actually, we feel like it will be stronger than what you've seen right now into 2020. Many of these locations that we have started now, and we're starting to get our feet underneath ourselves and putting ourselves in a position where we're getting good integration with our Brundage-Bone team and our Capital teams to -- and our U.K. team, actually, to move those forward. So we expect our growth within Eco-Pan in 2020 to be somewhat better than what we are seeing this year.

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Operator [12]

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Our next question is from Stanley Elliott, Stifel.

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Stanley Stoker Elliott, Stifel, Nicolaus & Company, Incorporated, Research Division - VP & Analyst [13]

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Quick question. I think you may have kind of touched on it a minute ago. So when you're thinking about the low- to mid-single-digit organic growth into '20, help me reconcile that with the slide on page, I think it's like, 15 in the slide deck where you're looking at a 7% plus compounded rate. Is that kind of factoring in slower than the U.K. and so that the U.S. business is going to be north of that or at least in line with that? Or how do we conceptualize all that together?

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Iain Humphries, Concrete Pumping Holdings, Inc. - CFO, Secretary & Director [14]

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Yes, Stanley, so what we typically see, I mean, from a -- as you know, breaking down the growth within our business other than the U.K., which we are expecting to be flat year-over-year, the growth in the business is largely split between our price increase we expect to get on the Eco-Pan side and also on the Brundage side. So we usually see 2% or 3% pricing on the U.S. side on the pumping side and then closer to maybe 4% or 5% on the Eco-Pan side. We will be processing through the readjustments in the U.K., but largely the volume and pricing change in our business is almost 50-50.

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Stanley Stoker Elliott, Stifel, Nicolaus & Company, Incorporated, Research Division - VP & Analyst [15]

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Okay. And when -- on the cash flow piece, kind of looking out into next year, you've given us kind of numbers to use as benchmarks. But if we were looking at kind of CapEx being, I think, you said 9% to 11% of sales or let's call it 10% of sales off of -- that math is kind of 100 and -- well, it basically spits out something closer to $80 million of free cash flow into 2020. Is that math way off? Kind of where is the nuances? And I say that kind of relation to kind of where we are from a market cap standpoint. I'd be curious to kind of get your thoughts there.

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Iain Humphries, Concrete Pumping Holdings, Inc. - CFO, Secretary & Director [16]

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Yes. So I mean the cash flow and the CapEx is about right, which is very standard and consistent with our spend historically. And the only other piece coming off of the cash flow, as you know, would be the interest element. And then from a tax perspective, we're still in an NOL position that was deepened with the addition of the Capital business. But the CapEx number that you've got is right in line with where we've been tracking historically.

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Stanley Stoker Elliott, Stifel, Nicolaus & Company, Incorporated, Research Division - VP & Analyst [17]

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But if the -- finally, assuming kind of an EBITDA less CapEx as a proxy for free cash flow, then my math is fairly much in the ballpark?

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Iain Humphries, Concrete Pumping Holdings, Inc. - CFO, Secretary & Director [18]

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Yes, that's right.

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Operator [19]

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(Operator Instructions) Our next question is from Tim Mulrooney, William Blair.

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Timothy Michael Mulrooney, William Blair & Company L.L.C., Research Division - Analyst [20]

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Based on your guidance for the full year in 2019, guys, by our calculation, that kind of implies a pickup in organic growth sequentially from the third quarter to the fourth quarter. Is that fair? Or is there something wrong with our math?

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Iain Humphries, Concrete Pumping Holdings, Inc. - CFO, Secretary & Director [21]

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Yes. That means the organic growth as we projected for pro forma, it's about 3% in the business right now.

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Timothy Michael Mulrooney, William Blair & Company L.L.C., Research Division - Analyst [22]

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Yes.

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Iain Humphries, Concrete Pumping Holdings, Inc. - CFO, Secretary & Director [23]

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So -- yes. That's what you are. I mean that's consistent with what we're seeing from the organic quarter-over-quarter guidance. And as you'll see from what we published then historically, Q3 and Q4 are quite comparable quarters year-over-year.

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Timothy Michael Mulrooney, William Blair & Company L.L.C., Research Division - Analyst [24]

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Okay. Okay. So more like 3% to 4% pro forma organic growth in the fourth quarter, similar to what you saw in the third quarter?

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Iain Humphries, Concrete Pumping Holdings, Inc. - CFO, Secretary & Director [25]

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Yes.

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Timothy Michael Mulrooney, William Blair & Company L.L.C., Research Division - Analyst [26]

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All right. And then setting aside pricing for a second, kind of just look at volumes and specifically in the U.S. concrete business, did volumes pick up in the second half of the year as you expected, taking into account project delays and everything else? Were they above or below your internal expectations through the summer?

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Bruce F. Young, Concrete Pumping Holdings, Inc. - President, CEO & Director [27]

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They have really picked up about what we expected, maybe just a touch better. Now going into 2020, we actually feel like we're in a little better position as all of our specialty equipment and our long booms, more of our high-margin equipment is being booked up into next year. So we feel quite good about the way next year will start.

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Timothy Michael Mulrooney, William Blair & Company L.L.C., Research Division - Analyst [28]

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Okay. That makes sense. And utilization rates picking up here, that's also probably giving you some confidence. Is this -- the utilization rates that you've seen now pick up from the first half to the second half, this is kind of what you expect going forward, Bruce?

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Bruce F. Young, Concrete Pumping Holdings, Inc. - President, CEO & Director [29]

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It is. And we've ran about 80% utilization in the third quarter in the U.S. And as we complete the integration of Capital and get the equipment into the right locations, we think we can actually do a little better than that. Our target is really to get somewhere up near 85%.

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Operator [30]

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We have reached the end of the question-and-answer session, and I would like to turn the call back over to Mr. Young for closing remarks.

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Bruce F. Young, Concrete Pumping Holdings, Inc. - President, CEO & Director [31]

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Thanks, Elmer, and thanks everyone on the call. We appreciate you joining us. We look forward to speaking to you again when we report our fourth quarter, full fiscal year 2019. Thank you.

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Operator [32]

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Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.