Q4 2023 Northwest Pipe Co Earnings Call
Participants
Scott Montross; CEO; Northwest Pipe Company
Aaron Wilkins; CFO; Northwest Pipe Company
Brent Thielman; Analyst; D.A. Davidson & Co.
Julio Romero; Analyst; Sidoti & Company LLC
David Wright; Director; Henry Investment Trust LP
Presentation
Operator
Greetings, and welcome to the Northwest Pipe Company Fourth Quarter and Full Year 2023 earnings call. (Operator Instructions) As a reminder, this conference is being recorded It is now my pleasure to introduce your host, Scott Montross, CEO. Thank you, sir. You may begin.
Scott Montross
Good morning, and welcome to Northwest Pipe Company's fourth quarter and full year 2023 earnings conference call. My name is Scott Montross, and I am the President and CEO of the Company, and 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, March fourth, 2024 at approximately 4 P.M. Eastern time. This call is being webcast and 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 31st, 2022, and in our other SEC filings for a 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. So I'd like to begin with a review of our 2023 performance and an outlook for 2024. And Aaron will then walk you through our financials in greater detail 2023 was a year that presented some fairly significant headwinds, including a very small bidding market for steel pressure pipe business as well as challenging interest rate environment that suppressed both the residential and nonresidential construction markets negatively impacting demand in our precast business despite the challenging market conditions, our annual net sales of $444.4 million declined only modestly from 2022 record levels and profitability levels remain fairly solid, demonstrating what we believe is a new level of through-cycle resilience driven by the growth strategy that we have deployed for the last several years that we will continue to deploy moving forward.
Annual revenue from our steel pressure pipe segment remained fairly strong $296.4 million, a decline of 3.6% from 2022, primarily due to lower tons produced resulting from changes in project timing and the relatively small bidding year we had in 2023. This was partially offset by higher selling prices due to sales mix after a highly volatile pricing year in 2023, prices of hot roll steel bands increased 50% from the end of the third quarter to the end of the fourth quarter. However, year to date in 2024, prices have declined by about 15% and lead times remain fairly short. Steel pressure pipe backlog, including confirmed orders, was $319 million at the end of December 31st, which modestly declined from $335 million at September 30th, 2023, and from $372 million as of December 31st, 2022 Our backlog remains elevated by historical standards, even when taking into account the relatively small bidding year we had in 2023, we anticipate a significantly stronger bidding year in 2020 for Now turning to our precast segment. Precast revenue modestly declined by 1.4% from 2020 to $248 million, primarily due to lower production and shipping volumes resulting from the current interest rate environment impacting the US construction market, which led to changes in our product mix and increased levels of under-absorption. That said, our teams in the field did a great job of keeping pricing levels high, helping to offset elevated raw material input costs, which mitigated the impact to our top line. Our precast related order book remained fairly strong, totaling $46 million as of December 31st, 2023, which was down from $52 million as of September 30th, 2023 and down from the record levels we saw last year at $64 million as of December 31st, 2022. Our 2023 consolidated gross profit decreased 9.6% year over year to $77.6 million, resulting in a gross profit margin of 17.5%, down from 18.8% in 2022. Our steel pressure pipe gross margin of 14.3% declined by approximately 20 basis points over 2022, primarily due to changes in production volume, pre-crash gross margin of 23.8% of free cash sales in 2023 decreased by approximately 380 basis points from the record year we experienced in 2022. The decline was predominantly due to the impact of rising interest rates on the commercial construction and residential housing markets, which moderately reduced cash production demand, reducing overhead absorption and resulting in changes to our product mix.
Next, I would like to provide an update on our capital allocation priorities are focused on growing the business remains our top strategic priority through our pre-cash product spread strategy and attractive M&A opportunities. Our Level one product spread effort has been ramping up to build out capacity utilization at our Texas-based precast plants to maximize efficiencies in production. To that end, we bid on 55.8 million worth of projects outside of the state of Texas in 2023, mainly in the western and southeastern regions of the United States. And of that, we booked approximately $9.1 million worth of orders outside of Texas in 2023. As previously discussed, our precast operations in Utah have been serving as the pilot location for level two product spread activity to produce primarily precast Park products out of our existing Northwest Pipe locations in 2023. We reproduced 17 projects in Utah and are currently in production on four precast project orders. With more scheduled to come. We plan to expand upon Level two product spread once the park precast products are more comfortably established at the Utah locations before we expand those products to additional geographic locations following organic growth, we remain highly focused on repaying the debt we incurred to finance the 2021 acquisition of Park USA in order to position ourselves for further acquisitions.
Next, I'll turn to our M&A strategy in which we are continuing to seek accretive acquisition candidates in the free cash related space. We are continuing to evaluate prospective high-quality opportunities that possess strong organic growth potential and margin characteristics, solid asset efficiency and a positive cash flow profile. In the absence of meaningful M&A activity, we may return value to our stockholders via opportunistic share repurchases, subject to our liquidity, including availability of borrowings and covenant compliance under our amended credit facility and other capital needs of the business.
During the fourth quarter, our strong cash generation enabled us to repurchase approximately 29,000 shares for a total of 0.8 million. And as of February 29th, we have repurchased a total of approximately 149,000 shares at a total of approximately 4.4 million.
Before I conclude, I'd like to summarize our outlook for 2024, which is very positive in our SPP. business. We anticipate moderately stronger revenue and margins in the first quarter of 2023. However, when compared to the prior quarter, we anticipate revenue to have us a modest sequential decline and for margins to be in line with the fourth quarter of 2023 due to typical seasonally and severe weather conditions that have led to unscheduled downtime at our various SPP. facilities that said, we expect continued strength in our backlog despite the relatively small level of bidding that we saw in 2023.
I'd also like to add that we remain encouraged by the amount of activity we are seeing on our current and upcoming water transmission projects as we are currently expecting a larger bidding year in 2024 for a complete view of these projects, please review our investor presentations, which can be found on the Investor tab of our website within the Events and Presentations section in our precast business, we anticipate macroeconomic factors to continue to weigh on our volume. As a result, our free cash revenue in the first quarter is expected to be down modestly from the prior year period with margins that we expect will continue to be depressed due to lower production levels and associated underabsorption as well as product mix changes related to the slower market associated with the impact of interest rates on the construction market. However, we expect this to be only a near term issue as we are projecting a strong 2024 for precast. We continue to believe our precast business is well positioned to grow longer term, given the significant level of pent-up demand specifically for residential housing, a growing need for infrastructure spending in the US in our strong market position.
In summary, 2023 was a challenging year considering the significant volatility we saw with steel prices, the relatively small SPP. bidding year and the rising interest rate environment. Nevertheless, we finished the year strong with only modest declines to both our top line and gross profit margins, which is a testament to the resiliency we built into the business through maintaining our competitive edge in the SPP market as well as our investments in the free cash base to diversify the business and provide for strong organic growth potential and a shorter cash conversion cycle. Our goal remains for our precast related business to grow to a similar size as our SPP. business. In addition, I'm extremely pleased to report that in 2023, we achieved our best safety year ever. Collectively, our 13 plants were well below the national average for recordable incident rate at 1.5, achieving the lowest total recordable incident rate ever seen at Northwest Pipe. Our safety culture of accountability is at the core of our culture, which infused at every level of our organization. Our commitment and teamwork sets the foundation for stable manufacturing environment and ensures the well-being and performance of all of our employees.
Thank you to our team at Northwest Pipe for your continued strong performance execution against our growth strategy and for operating safely. Looking ahead, our priorities remain one, maintaining a safe workplace where employees are proud to work 2% and was persistently focused on margin over volume, three, continuing to implement cost reductions and efficiencies at all levels of the company for continuing to identify strategic opportunities to grow the Company. And finally, number five in the absence of M&A opportunities, returning value to our shareholders through opportunistic share repurchases.
I will now turn the call over to Aaron to walk through our financials in greater detail.
Aaron Wilkins
Thank you, Scott, and good morning, everyone. Before I begin today, I would like to echo Scott's sentiments around the company's record safety year. Congratulations to the entire company on this accomplishment. Now moving to an overview of our profitability. Consolidated net income for the fourth quarter was $5.4 million, $0.54 per diluted share compared to $8 million or $0.79 per diluted share in the fourth quarter of 2022. For the full year, consolidated net income was $21.1 million or $2.9 per diluted share compared to $31.1 million or $3.11 for diluted share in 2022.
Our fourth quarter consolidated net sales increased 3.1% to $110.2 million compared to $106.8 million in the year-ago quarter. Both business segments surpassed our revenue expectations for the fourth quarter. Steel pressure pipe segment sales in the quarter increased 4.1% to $75.1 million compared to 72.1 million in the fourth quarter of 2022. This was driven by a 2% increase in tons produced resulting from changes in project timing as well as a 2% increase in selling price per ton, primarily due to product mix. Precast segment sales for the fourth quarter increased 1.1% to 35.1 million fell to 34.7 million in the fourth quarter of 2022. This was primarily due to a 25% increase in volume shipped due primarily to product mix, partially offset by a 19% decrease in selling prices, which was a result of changes in product mix in addition to lower demand. As a reminder, due to the unique nature of the products we manufacture shipment volumes in the case of precast and production volumes in the case of steel pressure pipe and the corresponding sales prices for both segments do not always provide comparable metrics between periods as they are highly dependent on the composition of the mix of our products.
For the fourth quarter, consolidated gross profit decreased 11.8% to $19.3 million or 17.5% of sales compared to $21.9 million or 20.5% of sales in the fourth quarter of 2022 field pressure pipe gross profit decreased 6.8% in the quarter to $11.2 million or 14.9% of segment sales compared to gross profit of $12 million or 16.6% of segment sales in the fourth quarter of 2022, primarily due to changes in product mix, precast gross profit decreased 17.8% in the quarter to $8.1 million or 23.2% of free cash sales, $9.9 million or 28.5% of segment sales in the fourth quarter of 2022 due to pricing pressures brought on by lower demand, which also resulted in lower cost absorption. The downward pressure we've seen has been concentrated in the commercial construction markets. Our residential precast markets have remained relatively strong despite ongoing macroeconomic headwinds with the current mortgage rate environment and the implications that poses on new housing starts.
Selling, general and administrative expenses for the quarter decreased 2% to $10.7 million or 9.7% of sales compared to $10.9 million in the fourth quarter of 2022 or 10.2% of sales. The decrease was primarily driven by 1 million of lower incentive compensation expense, partially offset by 0.4 million of higher professional services, including system implementation fees. For the full year, our selling, general and administrative expenses increased 6.7% to $43.8 million or 9.9% of consolidated net sales compared to $41 million or 9% of sales in 2022. The increase in SG&A expenses, largely due to higher professional fees and system implementation costs, coupled with broader inflationary pressures.
For the full year 2024, we estimate our consolidated selling, general and administrative expenses to be in the range of 45 47 million. Depreciation and amortization expense in the fourth quarter of 2023 was $4 million compared to $4.4 million in the year ago quarter. For the full year, company-wide, depreciation and amortization expense was $15.8 million compared to 17.1 million in 2022. Given the larger bidding year expected for the steel pressure pipe business and the planned commissioning of our new reinforced concrete pipe plant, I currently expect depreciation and amortization to increase modestly in 2024. Our non-cash incentive compensation expenses were $0.6 million of $1.2 million in the fourth quarters of 2023 and 2022 respectively. And for the full year, non-cash compensation related expense was $3.7 million, which was relatively flat with 2022. For the full year.
Interest expense increased to $4.9 million compared to $3.6 million in 2022 due to the increase in interest rates, which more than offset the decrease in average daily borrowings seen in 2023. We currently expect interest expense between five and $6 million for full year 2024. Our 2023 income tax expense was $8.2 million, resulting in an effective income tax rate of 28% compared to 10.2 million in 2022 or an effective income tax rate of 24.7%. Our effective income tax came in higher than anticipated due to accrued interest on uncertain income tax positions, state tax rates and nondeductible permanent differences. We expect our tax rate for 2024 should be within the range of 25% to 27%.
Now I will transition to our financial condition. We generated strong cash flows in 2023. For the quarter, net cash provided by operating activities was $9 million compared to net cash used in operating activities, $8 million in the fourth quarter of 2022. For the full year, we generated net cash provided by operating activities of $53.5 million compared to net cash provided by operating activities of 17.5 million in 2022, primarily due to favorable changes in working capital, which was partially offset by lower profitability.
Our capital expenditures for the fourth quarter were 5 million compared to $11 million in the year ago quarter. For full year, our capital expenditures totaled $18.3 million compared to 22.8 million in 2022. We anticipate our total CapEx for the full year of 2024 to be in the range of 19 to $22 million as a result, our full year free cash flow totaled $35.2 million and posted negative free cash flow of 5.3 million in 2022.
Looking forward, we anticipate full year 2024 free cash flow to range between 19 and 25 million. While we expect some pressure on working capital needs for the steel pressure pipe business in the first half of the year. We believe that will reverse in the second half of 2024.
Consistent cash flow generation remains a key strategic focus of our business as evidenced by the addition of our new goal within our 2024 incentive compensation plan and applicable to every member of our management team. Collectively, we view free cash flow as critical to the execution of our growth and shareholder return strategies. As Scott highlighted, through February 2024, we completed 4.4 million in share repurchases, all of which were executed under a 10b5-1 trading plan and of which 0.8 million of the repurchases occurring in 2023. The average repurchase price paid to date was $29.32 per share. As of December 31st, 2023, we had 54.5 million of outstanding borrowings on our credit facility, down from $83.7 million as of year end 2022, leaving approximately $69 million in additional borrowing capacity on our credit line.
In summary, I'd like to echo Scott's sentiment, and I am proud of our 2023 financial performance achieved in a challenging operating environment, positioning us well for the year ahead. We are very pleased to have the material weakness, remediation project behind us. And I would like to thank the employees that made it possible to accomplish that important that important objective.
The MRP. pilot implementation project was another important 2023 accomplishment, and we will continue to seek opportunities to automate our precast business segment systems and thereby optimize our operating performance and market share.
Moving forward I'd also like to take this opportunity to express my sincere gratitude to our employees for their achievement and workplace safety in 2023 and encourage their continued commitment into 2024. Finally, I would like to thank our shareholders for their continued support and confidence in Northwest Pipe. I will now turn it over to the operator to begin the question and answer session.
Question and Answer Session
Operator
(Operator Instructions) Brent Thielman, D.A. Davidson.
Brent Thielman
Good morning. Scott parent, Monogram brand. Hey, yes, just the first question, Scott, maybe is there any more context than the uptick in bidding or bidding times in 24 versus 23, as you see it today and that kind of more front half or back half loaded just as we think about this backlog potentially expand?
Scott Montross
Yes, on would it be like we said, Brent 2023, which was pretty orbiting year. And we're seeing this year that in 2020 fours, somewhere between 40% and 45% higher than the amount of tons that we expect to bid during the year. And a pretty significant portion of that is in the upfront part of the year, which obviously is good for the back part of the year for production levels. So I mean, we're pretty happy about how this is starting to shape up bidding ways this year.
Brent Thielman
Okay, great. And then you mentioned that precast margins could remain depressed just given some of the crosscurrents in the market there. I guess, Scott, is the 20% plus gross margins that you've been generating still sustainable for the business with the conditions you see right now. And then can you just talk about where do you think precast margin margins should be under sort of better market conditions?
Scott Montross
Yes, I think that the first quarter of the year, which is kind of what we're talking about, we've obviously there's been some pretty significant weather events like almost every other year in the first quarter of the year. And just to give a little bit of example, which is why we're giving a little bit of the trending guidance about things being down a little bit. We've had we've had about eight days down and in our steel pressure pipe business and about the same in our precast business. So when you're looking at the precast business and we're talking about margins being a little bit compressed. It's really more of a near term thing. We're believing in the first quarter and those margins start to expand a little bit as we get past the first quarter of the year, especially since you know, was the construction market. What we're seeing is that there's no obviously, it's relatively flat right now. Writers, the activity's a little bit muted, but it looks like there's a lot of projects that are in the queue. You've been planning for like you know, if you listen to the Dodge Momentum Index, there's a lot of stuff in the queue and the expectation with interest rates as we get into the back half of the year as they start to ease. And the belief is that those those projects are going to go from the planning stage into the breaking ground stage as we get into the back half of the year and the construction markets really going to start to pick up. I think when you're looking at overall margins, Brent, for the precast business, probably in a relatively normal year, you're looking at margins that are probably between probably 20% and 24% depending on your product mix. If there are years like what we saw in 2022 with with a tremendous amount of demand, which may be what we're seeing going forward. I think you could see margins that are 26, 27, 28% on an ongoing basis. So it just kind of depends on how everything hits and what the product mix looks like. But we're pretty we're pretty happy with the way the margin performance is coming out on the precast side. And what I would say, Brent is interestingly enough, the margin on the Geneva side, residential, which you would expect to be being hit the most is actually holding up really, really well. And the Geneva market is holding up really, really well for the impact of the interest rates we're seeing Park being off a little bit more on the non-residential side, specifically on the commercial piece. But again, with what we see in backlog and backlog. But in the planning stages on the construction market, we think all that's going to start to come back up by middle of the year anyway. So I think it looks pretty good going forward.
Brent Thielman
Excellent. And maybe just last one could could you talk about some of the things that you've done or may be looking to do that accelerate the M&A strategy? Because I mean, at the pre-cast strategy is paying dividends here.
Scott Montross
It's pretty clear in the financials, but I'm just wondering if the company is in a position to potentially accelerate if we look at it really really comes down to brand in looking at the M&A market? And is it accessible? Is it practical right for accessibility for the M&A market or other things that are out there? And I think one of the things that you run into in a year like this, it's a little bit of a challenging year compared to what we've seen in 2022. So maybe maybe people that own the businesses or whoever owns the businesses that we're looking at are in such a big hurry because maybe their EBITDA generation isn't isn't what it was. So they're they're waiting to get back to a higher level, higher level period. And the other piece is is what is the practice the practicality of it, right? If for us, I mean we're pretty we're pretty cognizant of insensitive to what we're trading at. So if we're seeing things that are out there that are trading at multiples at nine, 10, 11 times, that's a little bit of a deterrent. So we are we constantly are looking at things right now, and we're actually seeing more things all the time at this point. So I think people are starting to get back into the market. It is, you know, just looking in finding the right one that fits the profile that we're looking for.
Good, good cash flow profile, strong margin performance, all those things. And that's just going to be additive and accretive to the business. We constantly look for those things at any one time. We're probably looking at two or three different ones. So we're accelerating it just as fast as we can. So sometimes it takes a while.
Brent Thielman
Yes, no, I get that, Scott. I think my question is more around internally. Are you sort of building, you know, as a base folks there, you see the integration of the deals going forward? I mean, obviously, depending on what's out there and what people are asking?
Scott Montross
Yeah you kind of hit the nail on the head for what we've been talking about internally because what we've ended up with is in these past acquisitions, the same people that are doing the day-to-day running of the Company are involved in the due diligence and everything on the acquisitions and the integration. So it starts to be kind of a burnout factor a little bit with people internally. So what we've done is we've started to add almost like a PC to a little bit of a SWAT team, we'll call it that we can have in here working on normal things when the business is just ongoing. But then when we have an acquisition, we'll be able to deploy those people to the acquisition and not be taking up the time of the people that are running the Company day-to-day. And we're actually just starting now with one of the first pieces in the next couple of weeks that we're bringing in. So we're bringing in a little bit of a we're calling a little bit of a SWAT team to be able to handle these things right now, Brett.
Brent Thielman
Excellent. Really interesting. I'll get back in queue. Thanks, guys.
Scott Montross
Okay, great. Thanks, Brent.
Operator
Julio Romero with Sidoti.
Julio Romero
Thanks. Hey, good morning, Conor and earlier. Hey, Aaron, did I hear you correctly that you said the material weakness remediation is behind the company?
Aaron Wilkins
That is correct. We were able to obviously a lot of work involved, a lot of a lot of functional teams involved. It was a priority project for the year to obviously get that material weakness behind us that was associated with those. A lot of a lot of great work was done to complement the team enough also to point out seek the team members that are external to us. We have an externally of steered the internal audit function as well as direct. Our AutoZoners are across all of our various portfolio, a very broad set of processes Excellent.
Julio Romero
Congrats to you guys. I know that was a big undertaking for you and do you expect to get that reflected on the 10 K in terms of a clean audit?
Aaron Wilkins
Yes, you'll see that reflected in the K that we filed today this afternoon. The opinion, do I to be reflective of no material weakness, no material center to the centers.
Julio Romero
It's excellent. That's great news. Some great to hear. I guess turning to to precast on, we've heard some industry peers talk about contractor delays impacting the value chain and particularly on the commercial side, which is where I think you guys also mentioned bomb some pressure as well. Can you just comment on if you've seen the same in terms of contractor delays and any way to quantify the impact to your precast segment in the fourth quarter?
Scott Montross
You know, what would the early was still a little bit more on the commercial side and for us, the commercial side is mostly on the park side. So we are seeing the park business being more impacted by that in the fourth quarter and maybe just a little bit early into the first quarter just because of the amount of production is down because of the interest rate impact. And as a result, overhead absorption is not as good and it's impacting the margins. So I think the biggest impact that we're seeing right now with some of the commercial delays based on interest rates and owners and builders waiting to see what happens is really slowing the business down at Park and the production levels at Park and impacting the margins there. That's the biggest impact that we're seeing. We're not we're seeing that as much on the residential side for Geneva. Geneva has been surprisingly strong as we've gone through this thing. And quite frankly, they were the ones that we were that we were expecting to see the biggest impact from and we just haven't seen that impact at this point. It's mostly been the commercial side, mostly Park, mostly under absorption for lower production levels. It's what it is.
Julio Romero
Got you. That's helpful. And then maybe if you could speak to customer sentiment across the precast segment, particularly as it relates to expecting interest rates to maybe come down later in the year. And I know you talked about you kind of expect 1Q to be down, whether contractor delays, but but expecting a strong overall year for the second?
Scott Montross
Yes, I think the sentiment is a little bit like there's just a lot of people waiting to see what's happening. And ultimately, obviously, that's going to have a lot to do with the order with how the order book looks. And to me, it's get we get a pretty good look at it because those precast customers vote with their order book right. And in what I would say is we're seeing that the order books start to grow again, not only on the Geneva side, but the park side is starting to grow again. So I think the expectations from the customers across the board or by the time we get into the back half of this year, like I said, in a little bit earlier. A lot of these projects that are right now in the planning stages, whether they're commercial or or institutional or the residential stuff are going to go from the planning stages into the breaking ground stages and then the market starts to really pick up. And that's what we're expect expecting as we get into the second half of the year. And if you listened to the lot a lot of the stuff that Dodge talks about specifically on the on the Momentum Index and the construction starts they're sitting there. They're really starting to think that we're setting up for a really strong 2025 on the construction side. So I think its back half strength in 24 going into a very strong 2025 is what we're looking at.
Julio Romero
Great. Great context, and I'll pass it on. Thanks very much.
Operator
(Operator Instructions) David Wright, Henry Investment Trust.
David Wright
Hey, Scott, here in Des Moines it morning tomorrow.
Scott Montross
Hey, David.
David Wright
Hey, Tom, congratulations on the good safety results and and also on the new deck that you posted yesterday. It's a sum it's pretty good. So congratulations for that. Thank you.
Tom, at the end of the deck or where you've started, including the projects?
Scott, I wanted to ask in years past project lists, they generally had a whole lot of stuff in Texas, and you've just listed them Houston surface water program as the only kind of Texas job on new market update. Is this just sort of a condensed list of larger opportunities that's in the data.
Scott Montross
Yes, we just don't. We're calling out ones that are relatively major programs, David, so that people get an idea of the big stuff that's coming through but the vast majority of projects that we bid on our in-house projects that can be anywhere from a couple of hundred tons to 800 to 1,000 tons and the ones that we show you guys on this list are really the ones that are that could be anywhere from 10 to 25 to 50,000 tons depending on the project like the Red River Valley Water Supply Project. It's always there. And when you guys when you guys hear us talk about these projects, you hear us talking about them in segments two, right where we got this segment and this segment, well, each segment can be about 5,000 tons of pipe and fittings and things like that. But there could be 12 segments, you know what I'm saying. So we just rolled out the big ones. The the vast majority are much smaller projects that we're bidding on. So we do a we do a bid log meeting really every Tuesday morning and go over the projects and probably 10 to one smaller projects versus decent sized projects. So there's a lot of those out there there's a lot of vetting that goes on on really small projects.
David Wright
Thanks for that clarification pay for Aaron, on the the executing on the stock buyback, that's great. You know, but the stock is below stated, book value is $29 every day. Nobody seems to care. And it's good that the Company tiers and that you're putting the money into it so yes, I think that's great. On the in January and February, you bought a total of about 120,000 shares. So that would be 60,000 shares a month?
And is that kind of the cadence to look for over the balance of the year, absent any other, you know, kind of unexpected capital needs?
Aaron Wilkins
Yes, we have a 10b5-1 trading plan that takes us up to $10 million of total transactions, at which point we would we would have to reconsider our capital allocation with our Board of Directors and think about what for M&A. But I would say that it and and I think that's the rate that you seen in January.
David Wright
Okay. Thank you. You're going in and out there. I don't know if that's your microphone or my speaker. And then Adam, you mentioned I did. I get this right, that free cash flow is projected 19 to $25 million in 2024?
Aaron Wilkins
Yes, that's correct.
David Wright
And done that that has been added as one of the as a new incentive for the executive compensation plan for everyone.
Aaron Wilkins
Yes, that's also correct. Scott has worked with his senior team to devise a new short-term incentive plan goal that would be focused on cash flow and client cash flow generation. As this is not something that we have looked at. We look at it actually every single week, but he wants to get to a place where we all have a little bit more skin in the game and can drive better results for the Company and the right.
David Wright
And is equity generally on an increased component of the executive compensation plan over, say, prior years found it to be consistent with the emphasis on share repurchase.
Aaron Wilkins
I think if I understood your question correctly, David alluded to there's no change in total, I guess, offered to employees it's just that one piece of the cash bonus element to our senior team has been devoted to this. So as in years past, it would have been devoted to Department of functional goals divided by leadership. That's a that, Scott. If you kind of today for one of those three goals, one has to all be aligned and have a uniform objective.
Scott Montross
Yes, Dmitry, I mean the cash flow thing, these becomes very important to the valuation of the company, right? So should we tie up a lot of cash in our steel pressure pipe business with contract assets and receivables and things like that. And really the thought process is having the focus on mining as much of that cash as possible on an ongoing basis that comes in and everything from prepayments to steel for getting paid for material on hand from the steel pressure pipe business so that the flow of the business is better than what we've seen because what do you think it's doing is it's affecting the valuation of the business and the share price going forward because the cash flow component is low enough where it's not adding to anything. So if we can find a way to continue to mine more of those dollars out of the 3Q, the steel pressure pipe business, we're just going to generate better cash flows and I think help the valuation of the company.
David Wright
Carrier less less question kind of how how how deep into the employee-based equity participation, albeit?
Scott Montross
It goes down into past the senior management into the higher the higher level of of the general management structure. It doesn't go all the way down into the bid all the way down the business, generally senior management down to the next level, like director level and people like that.
David Wright
And so would that be stock options or would that be fair?
Scott Montross
No, what you're looking at when you're looking at the equities piece, it shares we have a we have restricted shares, which is a small piece and then performance shares, which is a larger piece, restricted shares make up 25% of the total and performance shares based on our EBITDA generation and percentage EBITDA generation makes up the rest.
David Wright
Hey, thanks. Great. That it goes down to that level and the best of luck for 2020.
Scott Montross
Thanks, David.
Operator
There are no further questions at this time. I would now like to turn the call back over to Scott for closing comments.
Scott Montross
So really appreciate everybody joining us today. And obviously, we're coming through a period here where we've had some headwinds, the small bidding environment and steel pressure pipe and the pressure with interest rates on the precast business and even with those headwinds. And like we said in the press release, we think we've kind of gotten to a different level of resiliency with this business through the goals and not is for ups and downs. And we think we're heading into a pretty good 2024 and beyond so obviously, we're looking forward to continuing to grow the business on the precast side and just continuing to add mortgage value for the for the shareholders. So we appreciate everything that you guys do and listen to with us in the future. This thing goes.
Operator
This concludes today's teleconference. You may disconnect your lines at this. Thank you for your participation.
