L.B. Foster pany(US:FSTR)2023-05-14 09:33Financial Data and Key Metrics Changes - First quarter sales were $115.5 million, up $16.7 million or 16.9% year-over-year, with organic growth at 11.5% [36][47] - Adjusted EBITDA improved $2.8 million year-over-year to $4.5 million, with the EBITDA margin more than doubling to 3.9% [83] - Gross margins expanded 360 basis points to 20.2%, the highest Q1 result since 2019 [29][60] Segment Performance Changes - Rail segment revenues were up slightly year-over-year at $64.4 million, with 5.8% organic growth [2] - Precast Concrete segment revenue increased $9.3 million or 61.8% year-over-year [62] - Steel Products & Measurement segment revenues increased by 33.6%, driven largely by coatings and measurement [85] Market Data and Key Metrics Changes - Consolidated book-to-bill ratio was strong at 1.21:1, with all segments increasing their order books [30] - Orders in backlog were down 19.3% and 7.6% respectively, primarily due to the track components divestiture [62] - Precast backlog increased by 21% over last year, attributed to the VanHooseCo acquisition [66] Company Strategy and Development Direction - The company is focusing on organic growth and core competencies, especially following the divestiture of Chemtech [7][48] - There is a heightened focus on rail safety in the U.S., representing an opportunity for improving demand for Rail Technologies [67] - The company plans to cautiously evaluate opportunities to return cash to shareholders through a $15 million stock repurchase program [54] Management's Comments on Operating Environment and Future Outlook - Management remains cautiously optimistic about key end markets due to government-funded infrastructure programs [38] - The company expects strong revenue growth and improved gross margins to continue through 2023 [84] - Management highlighted that pricing dollars are currently exceeding inflationary dollars, indicating effective pricing strategies [31] Other Important Information - The company reduced net debt by $11.5 million to $77.5 million at quarter end, with $6.2 million in free cash flow [37] - The Chemtech divestiture provided $5.3 million in proceeds, which were used to further deleverage [48] - The company received approximately $3 million in federal income tax refunds, aiding in cash flow [86] Q&A Session Summary Question: Is the strong gross margin in the precast segment sustainable? - Management indicated that the 20.2% margin is a clear signal of being on the right path and emphasized a focus on organic growth [7] Question: Are there plans for more divestitures? - Management stated they will evaluate businesses if growth does not meet expectations but will focus on digesting recent acquisitions for now [10] Question: What is the target gross leverage ratio for the rest of the year? - Management expects to see the gross leverage ratio return closer to 2 by the end of the year, following strong cash generation [100]