Financial Data and Key Metrics Changes - Consolidated net sales increased by 3.1% to $364.3 million, surpassing the previous year's strong results [20] - Gross profit decreased by 1.8% to $128 million, with a gross margin of 35.1%, down 180 basis points year over year [20] - Adjusted EBITDA reached a record $84.5 million, an increase of 2.8% compared to the prior year, with an adjusted EBITDA margin of 23.2% [23] - Adjusted net income per diluted share increased by 13.3% to $0.34, setting a new second quarter record [24] Business Line Data and Key Metrics Changes - Water Flow Solutions (WFS) net sales increased by 5.1% to $216.2 million, driven by higher volumes of iron gate and specialty valves [24] - Water Management Solutions (WMS) net sales increased by 0.3% to $148.1 million, primarily due to increased volumes of repair products [26] - Adjusted operating income for WFS increased by 6.3% to $55.9 million, while adjusted EBITDA decreased by 0.3% to $62.2 million [25] Market Data and Key Metrics Changes - Approximately 92% of net sales are in the U.S., with 60% to 65% of net sales used for the repair and replacement of municipal water infrastructure [11] - The company is experiencing resilient end market demand, particularly in the municipal market, while facing challenges in the residential construction market [52] Company Strategy and Development Direction - The company is focused on enhancing operational excellence, improving supply chain efficiencies, and developing advanced manufacturing capabilities [14] - Recent investments and experience with inflationary cycles position the company to strengthen its market presence [18] - The company aims to capture benefits from investments needed to address aging North American water infrastructure [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to adapt to external challenges, including recently enacted tariffs [9] - The company is increasing its annual guidance for 2025 net sales while maintaining adjusted EBITDA guidance due to higher costs from tariffs [29] - Management anticipates continued resilience in the municipal market, with some uncertainty in the residential construction market [52] Other Important Information - The company has a strong balance sheet with a net debt leverage ratio below one and no debt maturities until June 2029 [28] - Free cash flow for the first half of the year was $47.3 million, representing 51% of adjusted net income [28] Q&A Session Summary Question: Was there any pre-buy observed due to tariffs? - Management indicated that there was no significant pre-buy observed, but it is being analyzed closely [39][40] Question: Is the new foundry fully operational? - The new foundry is fully operational, and the impairment charge of $800,000 was related to the legacy foundry [42][43] Question: What is the outlook for capital expenditures now that the new foundry is operational? - Most capital for the new foundry has already been spent, and anticipated CapEx will remain at 3% to 4% of sales [48][49] Question: How is end market demand being affected by tariffs? - Management expects continued resiliency in the municipal market, but some uncertainty in the residential construction market [52] Question: How are pricing strategies being adjusted in light of tariffs? - Targeted price increases have been implemented for specialty valve and repair products, but they may not fully cover the expected tariff impacts [60][62] Question: What is the expected gross margin for the next quarter? - Management anticipates improvements in gross margin, expecting an implied range of about 37% for the back half of the year [74]

Q2 Fiscal Year 2025 Performance - Net sales reached $364.3 million, a 3.1% increase year-over-year[12] - Adjusted EBITDA was $84.5 million, up 2.8% compared to the previous year[12] - Adjusted net income per diluted share increased by 13.3% to $0.34[12] - Free cash flow was $5.1 million, an increase of $20.9 million year-over-year[12] - Gross margin was 35.1%, a decrease of 180 bps[12] Fiscal Year 2025 Outlook - The company expects net sales between $1.39 billion and $1.40 billion, representing a 5.7% to 6.5% increase year-over-year[42] - Adjusted EBITDA is projected to be between $310 million and $315 million, an 8.9% to 10.6% increase year-over-year[42] - Capital expenditures are estimated to be between $45 million and $50 million[42] - The company anticipates free cash flow to be greater than 80% of adjusted net income[42] Tariff Impact and Mitigation - The company is implementing targeted price actions and supply chain initiatives to mitigate the impact of newly enacted tariffs[14, 15]

Company Overview and Strategy - Northwest Pipe Company (NWPX) is positioned to meet North America's growing needs for water distribution, management, infrastructure, and sustainability [7] - The company's growth strategy involves organic growth through "Product Spread" and accretive acquisitions in the precast-related space [56, 57] - NWPX prioritizes organic growth, debt repayment, accretive acquisitions, and stock repurchases in its capital allocation strategy [59, 60, 61, 62, 63] Market and Financial Performance - The total addressable market for steel pressure pipe is estimated at $450 to $650 million, with NWPX holding approximately $338 million (~52%) market share [38, 39] - The total addressable market for concrete pipe & precast is estimated at $14 billion, with NWPX holding approximately $155 million (~1%) market share [40] - The company's backlog including confirmed orders for the Engineered Steel Pressure Pipe segment was $289 million in Q1 2025 [72] - The order book for the Precast Infrastructure and Engineered Systems segment was $64 million in Q1 2025 [72] Acquisitions and Innovation - NWPX acquired Geneva Pipe and Precast on January 31, 2020, for $49.4 million (~7.5x EBITDA) [50, 96] - NWPX acquired ParkUSA on October 5, 2021, for $90.2 million (~6.2x EBITDA) [50, 100] - The company is a leader of innovation in water infrastructure, with recently developed technologies like the Radial Bending Joint and InfraShield Joint System [52, 55] Demand Drivers and Market Dynamics - Key demand drivers include aging water and wastewater systems, rising demand on developed water sources, drought conditions, and increasingly stringent regulatory policies [29, 30, 31] - Utility level projects funded by the Infrastructure Investment and Jobs Act ("IIJA") total $3.3 billion through state revolving fund ("SRF") and non-SRF programs [35] - The EPA divides and allots US $23.2 B for DWSRF and US $19.5 B for other programs among states, territories, and tribes every fiscal year [44]