L.B. Foster pany(FSTR) - 2024 Q1 - Quarterly Results

Q1 2024 Performance Overview Key Financial Highlights L.B. Foster reported strong Q1 2024 results with net sales up 7.6% to $124.3 million, net income of $4.4 million, and 32.4% adjusted EBITDA growth | Metric | Q1 2024 | YoY Change | | :--- | :--- | :--- | | Net Sales | $124.3M | +7.6% | | Organic Sales | - | +16.9% | | Gross Profit | $26.2M | +12.7% | | Gross Margin | 21.1% | +90 bps | | Net Income | $4.4M | +$6.6M | | Adjusted EBITDA | $5.9M | +32.4% | | New Orders | $132.4M | -5.1% | | Backlog | $222.3M | -14.5% | - Net debt decreased by $2.5 million year-over-year to $74.9 million, with the Gross Leverage Ratio improving to 2.2x, down 0.2x from the prior year's quarter[4] - The company reaffirmed its full-year 2024 guidance, expecting net sales between $525.0 million and $560.0 million, and adjusted EBITDA between $34.0 million and $39.0 million[4] CEO Commentary CEO John Kasel noted a strong start to 2024, driven by organic growth and profitability, with the Rail business rebounding and Infrastructure backlog growing - The Rail business rebounded in Q1, delivering 29.4% organic sales growth and a 22.5% gross margin, which was up 330 bps sequentially from a sluggish Q4 2023[3] - The Infrastructure business saw flat organic sales due to adverse weather impacting the Precast Concrete business, but its backlog grew 17.0% during the quarter, suggesting future volume increases[3] - Adjusted EBITDA of $5.9 million (up 32.4% YoY) excludes a $3.5 million gain from the sale of an industrial property, the proceeds of which were used to pay down debt[3] - Order rates showed recovery, with organic orders up 3.0% YoY. Sequentially, total orders increased 25.5%, led by a 39.4% increase in the Rail business[6] 2024 Full Year Financial Guidance The company reaffirmed its 2024 full-year guidance, projecting net sales between $525 million and $560 million and adjusted EBITDA from $34 million to $39 million | 2024 Full Year Financial Guidance | Low | High | | :--- | :--- | :--- | | Net sales | $525.0M | $560.0M | | Adjusted EBITDA | $34.0M | $39.0M | | Free cash flow | $12.0M | $18.0M | | Capital spending (% of sales) | 2.0% | 2.5% | Detailed Financial Results First Quarter Consolidated Results Q1 2024 consolidated net sales grew 7.6% to $124.3 million, with gross profit up 12.7% and net income reaching $4.4 million | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $124.3M | $115.5M | +7.6% | | Gross Profit | $26.2M | $23.3M | +12.7% | | Operating Profit | $2.3M | $0.5M | +353.9% | | Net Income | $4.4M | ($2.2M) | +$6.6M | | Adjusted EBITDA | $5.9M | $4.5M | +32.4% | - Organic sales growth of 16.9% was the primary driver of the top-line increase, while divestiture and product line exit activities created a 9.2% headwind[8] - Net income improvement was driven by higher operating profit and $3.5 million in 'Other income - net' from a property sale, compared to a $1.8 million 'Other expense - net' in the prior year which included a loss on the sale of Chemtec[10] - Cash used by operating activities was $21.9 million, a significant increase from the $6.9 million provided in the prior year quarter, attributed to organic growth initiatives and higher seasonal working capital needs[10] Segment Performance Q1 2024 segment performance diverged, with Rail, Technologies, and Services driving growth while Infrastructure Solutions declined due to divestitures Rail, Technologies, and Services Segment The Rail, Technologies, and Services segment achieved strong Q1 results with net sales up 28.3% to $82.6 million and operating profit surging 183.8% | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $82.6M | $64.4M | +28.3% | | Gross Profit | $18.6M | $14.3M | +30.0% | | Gross Profit Margin | 22.5% | 22.2% | +30 bps | | Segment Operating Profit | $6.8M | $2.4M | +183.8% | | New Orders | $83.7M | $73.7M | +13.6% | - Organic sales growth of 29.4% was driven by improvements in Rail Products and Technology Services and Solutions, partially offset by lower volumes in the Global Friction Management business[11] - New orders increased by $10.0 million, primarily from Rail Products and Global Friction Management. However, backlog decreased by $27.6 million YoY, mainly due to timing fluctuations in executing large Rail Products orders[13] Infrastructure Solutions Segment Infrastructure Solutions Q1 net sales decreased 18.4% to $41.7 million due to divestitures, with operating loss widening to $1.4 million | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $41.7M | $51.1M | -18.4% | | Gross Profit | $7.7M | $9.0M | -14.8% | | Gross Profit Margin | 18.4% | 17.6% | +80 bps | | Segment Operating Loss | ($1.4M) | ($0.4M) | -291.3% | | New Orders | $48.6M | $65.8M | -26.1% | - The 18.4% sales decline was driven by a 19.5% impact from divestitures. Organic sales grew 1.0%, with strong Steel Products sales offset by lower Precast Concrete volumes due to adverse weather[14] - Gross profit margins expanded by 80 basis points to 18.4%, primarily due to portfolio changes, despite a $1.3 million decrease in absolute gross profit[14] Financial Statements Condensed Consolidated Statements of Operations Q1 2024 income statement shows a turnaround with net income of $4.4 million ($0.40 diluted EPS) versus a prior year loss | (In thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total net sales | $124,320 | $115,488 | | Gross profit | $26,249 | $23,291 | | Operating profit | $2,283 | $503 | | Income (loss) before income taxes | $4,694 | ($2,712) | | Net income (loss) attributable to L.B. Foster | $4,436 | ($2,152) | | Diluted EPS | $0.40 | ($0.20) | Condensed Consolidated Balance Sheets As of March 31, 2024, total assets reached $326.4 million, driven by higher inventories and receivables, with total liabilities at $181.1 million | (In thousands) | Mar 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $3,148 | $2,560 | | Inventories - net | $85,761 | $73,496 | | Total current assets | $182,984 | $167,990 | | Total Assets | $326,401 | $313,206 | | Liabilities & Equity | | | | Total current liabilities | $84,181 | $95,306 | | Long-term debt | $77,926 | $55,171 | | Total L.B. Foster stockholders' equity | $144,601 | $142,111 | | Total Liabilities and Stockholders' Equity | $326,401 | $313,206 | Non-GAAP Financial Measures and Reconciliations Explanation of Non-GAAP Measures The company uses non-GAAP measures like adjusted EBITDA and organic sales growth to provide a clearer view of operational performance - Adjusted EBITDA excludes items the company believes are unusual, non-recurring, unpredictable, or non-cash. For Q1 2024, this included a gain on an asset sale. For Q1 2023, it included a loss on a divestiture[30][31] - Organic sales growth is a non-GAAP measure that excludes the effects of divestiture and product line exit activities to provide a clearer view of underlying business trends[33] - Net debt, defined as total debt less cash and cash equivalents, is used as a key metric to assess the company's operational and financial health[32] Reconciliation of Net Income to Adjusted EBITDA Q1 2024 net income of $4.4 million reconciled to an adjusted EBITDA of $5.9 million, a 32.4% increase year-over-year | Reconciliation (In thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income (loss), as reported | $4,405 | ($2,171) | | Interest, Taxes, D&A | +$4,805 | +$5,817 | | Total EBITDA | $9,410 | $2,546 | | Gain on asset sale | ($3,477) | — | | Loss on divestiture | — | $2,033 | | VanHooseCo contingent consideration | — | ($97) | | Adjusted EBITDA | $5,933 | $4,482 | Reconciliation of Sales and Orders (Organic vs. Reported) Q1 2024 reported net sales grew 7.6%, but organic sales increased 16.9%, while reported new orders decreased 5.1% Consolidated Sales Change (YoY) | (In thousands) | Amount | Percent Change | | :--- | :--- | :--- | | 2023 Net Sales | $115,488 | - | | Decrease due to divestitures | ($10,642) | -9.2% | | Change due to organic sales | $19,474 | +16.9% | | 2024 Net Sales | $124,320 | +7.6% | Consolidated New Orders Change (YoY) | (In thousands) | Amount | Percent Change | | :--- | :--- | :--- | | 2023 New Orders | $139,515 | - | | Decrease due to divestitures | ($11,267) | -8.1% | | Change due to organic new orders | $4,137 | +3.0% | | 2024 New Orders | $132,385 | -5.1% | Net Debt Reconciliation Net debt was $74.9 million as of March 31, 2024, a sequential increase of $22.2 million but a year-over-year decrease of $2.5 million | (In thousands) | Mar 31, 2024 | Dec 31, 2023 | Mar 31, 2023 | | :--- | :--- | :--- | :--- | | Total debt | $78,085 | $55,273 | $80,096 | | Less: cash and cash equivalents | ($3,148) | ($2,560) | ($2,639) | | Net debt | $74,937 | $52,713 | $77,457 |