L.B. Foster pany(US:FSTR)2023-08-11 22:05Financial Data and Key Metrics Changes - Q2 sales reached $148 million, up 12.6% year-over-year, with organic growth at 13.3% [21][32][46] - Adjusted EBITDA was $10.6 million, representing 7.2% of sales, up nearly 73% from last year, marking the highest level since Q2 2020 [26][48] - Gross margins improved by 410 basis points to 21.8% due to higher sales volumes and improved pricing [21][46] Business Line Data and Key Metrics Changes - Rail segment revenues increased by 12% year-over-year to $91.6 million, with 17% organic growth [51] - Precast Concrete segment revenue rose by 43.4% year-over-year, with organic growth of 12.8% [52] - Steel Products and Measurement segment revenues decreased by 13.6% due to the Chemtec divestiture [53] Market Data and Key Metrics Changes - Order rates totaled nearly $184 million for the quarter, with a book-to-bill ratio of 1.24:1, indicating strong demand [45][72] - Rail orders and backlog increased year-over-year, with new orders up 24.8% and backlog up over 6% [40] - The backlog in the Precast Concrete business increased by 28% year-over-year, attributed to the VanHooseCo acquisition [73] Company Strategy and Development Direction - The company is focusing on organic growth programs, particularly in Precast Concrete and Rail Technologies, as primary drivers for profitability [10][60] - Capital allocation priorities include deleveraging while investing in organic growth opportunities, with capital spending expected to be around 1.5% to 2% of sales [60][61] - The company aims to enhance shareholder value through strategic acquisitions and potential stock repurchase programs [61] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing infrastructure investment super cycle, which is expected to provide strong tailwinds for growth [79] - The company anticipates improvements in free cash flow and further reduction of leverage in the second half of the year [29][58] - Management highlighted the importance of government infrastructure funding as a significant driver for future orders [64] Other Important Information - The company completed 7 strategic portfolio transactions, including 3 acquisitions and 4 divestitures, in a challenging operating environment [20] - Net debt increased by $8.2 million to fund working capital needs, resulting in a gross leverage ratio of 2.5x [27][56] - The divestiture of the CXT Concrete Ties business provided $2.4 million in proceeds, which were used to pay down debt [26] Q&A Session Summary Question: Can you comment on backlog and the potential for price realization? - Management reported a backlog of $290 million, with a good balance between Rail and Precast segments, and noted strong bidding activity [92][93] Question: Can you expand on the rebound in pipeline projects? - Management indicated a much better year ahead compared to pre-COVID levels, with a focus on midstream markets [84] Question: What is driving the rebound in the Coatings section? - Management expressed surprise at the rebound in the Coatings business, anticipating continued growth based on bidding activity [115]