L.B. Foster pany(US:FSTR)2022-08-14 03:13Financial Data and Key Metrics Changes - The company's second quarter sales were $131.5 million, down $23 million or 14.9% from Q2 last year, but adjusted for the Piling divestiture, sales declined only 0.7% year-over-year [21][22] - Gross profit margins improved by 80 basis points on a reported basis due to the favorable mix from the Piling divestiture, despite higher raw material and labor costs [22] - Adjusted EBITDA in Q2 declined $2.2 million to $6.1 million, with $1.1 million attributed to the Piling divestiture [25] Business Line Data and Key Metrics Changes - Rail segment revenue decreased $7 million year-over-year, primarily due to lower volumes and timing of orders, but gross margins increased 30 basis points due to higher volume in the Friction Management business unit [27] - Precast Concrete Products segment revenue increased $3.5 million or 17.6% year-over-year, but gross margins were down 530 basis points due to higher raw material and labor costs [28] - Steel Products and Measurement revenues increased $2.5 million or 10.7% year-over-year, with gross profit margins improving 140 basis points due to improved volumes and pricing [30] Market Data and Key Metrics Changes - The company's backlog stood at $251 million at quarter end, a five-year high, with order intake levels up 25% compared to last year [12][26] - Orders in the Precast Concrete products segment totaled $22.9 million, up over 39% versus last year [39] - The consolidated backlog reflects a 14% increase compared to the same time last year, excluding the Piling divestiture [40] Company Strategy and Development Direction - The company is focused on transforming its portfolio from slower growth, commodity-like offerings to higher-growth, technology-focused solutions, as evidenced by recent acquisitions [15][17] - The acquisition of Skratch and Intelligent Video is aimed at expanding into technology-based solutions and adjacent markets in the UK and Western Europe [16][17] - The divestiture of the Rail Products' track components business is part of a strategy to enhance shareholder value and focus on higher-margin businesses [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving demand over time, despite current operating conditions causing delays in project identification and commissioning [42][43] - The company does not expect significant revenue from the Infrastructure Investment and Jobs Act in 2022, with expectations for revenue to materialize in 2023 and beyond [44] - Management acknowledged challenges in improving operating margins but remains focused on executing the strategy and managing through headwinds [46][47] Other Important Information - The company generated approximately $11.9 million in cash after the end of the second quarter from the track components divestiture and a federal income tax refund, improving its leverage ratio [37] - The company is maintaining a conservative approach to debt levels and capital allocation as it transitions to funding growth initiatives [37] Q&A Session Summary Question: Long-term targets for gross margins by segment - Management acknowledged that margins are not where they want to be but emphasized efforts to improve pricing and manage costs, particularly in the Rail and Precast segments [52][54] Question: Project delivery timing and market conditions - Management noted that while project delivery has improved, delays are primarily due to site availability rather than production issues, with expectations for continued improvement [56][57] Question: Impact of acquisitions on gross margin - Management indicated that the acquisitions will allow for better control over the supply chain and pricing, potentially leading to margin expansion over time [66][69] Question: New orders and market activity in Q3 - Management reported a record backlog and high bidding activity, indicating a positive outlook for continued order intake despite recessionary concerns [70] Question: Use of coatings and measurement in other industries - Management highlighted ongoing efforts to explore adjacent markets for coatings and measurement applications, with some positive signs of activity in carbon sequestration and related fields [74]