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Concrete Pumping Holdings Inc (BBCP -1.51%)
Q2 2022 Earnings Name
Jun 07, 2022, 5:00 p.m. ET
Contents:
- Ready Remarks
- Questions and Solutions
- Name Members
Ready Remarks:
Operator
Good afternoon. Thanks for collaborating in at present’s convention name to debate Concrete Pumping Holdings monetary outcomes for the second quarter ended April 30, 2020. Becoming a member of us at present are Concrete Pumping Holdings CEO Bruce Younger, CFO Iain Humphries and the corporate’s exterior director of investor relations Cody Slach. Earlier than we go additional, I want to flip the decision over to Mr.
Slach to learn the corporate’s secure harbor assertion inside the which means of the Personal Securities Litigation Reform Act of 1995 that gives necessary warning concerning forward-looking statements. Cody, please go forward.
Cody Slach — Exterior Director of Investor Relations
Thanks, Shamali. I might wish to remind everybody that in the middle of this name, to present you a greater understanding of our operations, we might be ensuring forward-looking statements concerning our enterprise and outlook. These statements are topic to quite a few dangers and uncertainties that would trigger precise outcomes to vary materially from such statements. For data regarding these dangers and uncertainties, see Concrete Pumping Holdings annual report on Kind 10-Ok, quarterly report on Kind 10-Q and different publicly accessible filings with the SEC.
The corporate disclaims any intention or obligation to replace or revise any forward-looking statements, whether or not because of new data, future occasions or in any other case. On at present’s name, we may even reference sure non-GAAP monetary measures, together with adjusted EBITDA, web debt and free money circulate, which we consider present helpful data for traders. We offer additional details about these non-GAAP monetary measures and reconciliations to the comparable GAAP measures in our press launch issued at present or the investor presentation posted on the corporate’s web site. I might wish to remind everybody this name might be accessible for replay later this night.
A webcast replay may even be accessible by way of the hyperlink supplied in at present’s press launch, in addition to on the corporate’s web site. Moreover, we’ve posted an up to date investor presentation on the corporate’s web site. Now, I might like to show the decision over to the CEO of Concrete Pumping Holdings, Bruce Younger. Bruce?
Bruce Younger — Chief Government Officer
Thanks, Cody, and good afternoon, everybody. The income momentum accelerated from our first quarter of 2022 into Q2 with double-digit progress throughout all segments reflecting continued market share acquire and contributions from current accretive acquisitions. We’re more than happy by our 26% consolidated income enchancment, and that is one other indication that our enterprise mannequin is resilient and additional positioned to take market share. By reporting section, our U.S.
Pumping enterprise elevated 28% within the second quarter, pushed by current acquisitions and our continued market share acquire in all finish markets. We proceed to develop our residential enterprise, particularly with single-family houses and count on us to stay a vivid spot for the rest of the fiscal 12 months. In infrastructure, we skilled a sustained enchancment from elevated state funding in public undertaking investments comparable to bridges, colleges, wastewater therapy vegetation and hospitals. We are going to proceed to work to win initiatives on the state and native degree and stay inspired for future progress prospects as a result of passage of the Infrastructure Funding and Jobs Act.
Whereas we don’t assume any significant advantages from the Infrastructure Act in our 2022 fiscal 12 months forecast, we’re nicely positioned to capitalize on the elevated funding in 2023 and past, though, as of now, the magnitude is tough to estimate. Consequently, the infrastructure verticals ought to turn into a bigger share of our general income combine over time. In our business enterprise, the development developments we skilled final quarter continued into Q2 as initiatives restarted or broke floor as a result of lifting of pandemic restrictions. Except hospitality initiatives, we noticed a continued demand in all business segments and the 2 quarters of enlargement creates an encouraging early development.
In our U.Ok. section, income elevated 14% in comparison with the prior 12 months quarter as a consequence of natural quantity progress from the nation’s continued sturdy restoration from the impacts of COVID-19. Our staff continues to safe vitality street and rail initiatives, along with the work that we’ve beforehand introduced with the concrete-intensive high-speed railway undertaking, HS2, which is predicted to final past 2030. In our Eco-Pan enterprise, our Concrete Waste Administration enterprise income elevated 25% for the quarter as a result of improved gross sales method of our groups — and our staff’s potential to execute extra in-person promoting.
As a reminder, we enhanced our Eco-Pan gross sales staff in 2022 to strengthen our place for long-term progress. Going ahead, we proceed to count on to take care of Eco-Pan’s double-digit natural income progress. Through the quarter, we continued to execute upon our tuck-in M&A technique, buying two belongings within the Southern U.S. and one in the UK.
The primary asset is a enterprise known as Superior Pumping, and it operates primarily out of Corpus Christi, Texas. This strategic addition will add scale to our South Texas operations and is complementary tuck-in with our current presence on this space. We additionally acquired UK Screed & Grout to increase our footprint and repair providing within the U.Ok. Situated simply exterior of Manchester, this addition enhances our presence in Northern England and Midland areas and serves as a platform for invaluable geographic progress.
Our third acquisition was Landmark Pumping, which supplied enlargement into new markets in Southern Alabama and the Florida Panhandle. This acquisition positions us nicely to profit from favorable market dynamics and gives a brand new progress platform for our continued geographic enlargement. All three acquisitions clearly match our disciplined standards of offering alternatives for sturdy return on funding that place us to increase income develop market share and enhance margins over time. In addition they present added alternatives to introduce our Eco-Pan service to a wider buyer base.
Shifting to the price aspect of the enterprise, speedy inflation, significantly in diesel gasoline, proceed to affect year-over-year gross margin comparisons and our staff continues to work diligently to recalibrate our charges. To place this headwind into perspective, we skilled a roughly $2 million year-over-year enhance in diesel gasoline price in our second quarter or practically $4 million within the first half of the 12 months. Our staff has completed a superb job to offset diesel value and different provide chain inflation with charge will increase. Regardless of the continued velocity in price inflation, we’re happy to be realizing the anticipated return for a similar quantity of labor carried out.
Given our efficiency and near-term undertaking visibility, we’re in a powerful place to proceed executing on our strategic progress priorities for the remainder of 2022, whether or not it is natural or by means of opportunistic M&A. Now, I want to hand the decision over to Iain, so he can present an in depth overview of our second quarter 2022 monetary outcomes. I’ll then return to offer some concluding remarks. Iain?
Iain Humphries — Chief Monetary Officer
Thanks, Bruce, and good afternoon, everybody. Transferring proper into our second quarter 2022 outcomes. We’re happy to report that income elevated by 26% to $96.5 million in comparison with $76.9 million in the identical 12 months in the past quarter. The double-digit income enchancment was pushed by a mixture of quantity progress from our current acquisitions, strong natural progress and improved pricing.
Income in our U.S. Concrete Pumping section, largely working below the Brundage-Bone model elevated 28% to $71.8 million in comparison with $56.2 million in the identical 12 months in the past quarter. Excluding the acquisitions of Hello-Tech and Pioneer, natural income progress for the quarter elevated by roughly 15% to $64.9 million. This enhance was pushed by enchancment in a lot of our U.S.
markets, as a consequence of greater development volumes and pricing enhancements. For our U.Ok. Operations, working largely below the Camfaud model, income elevated 14% to $13.5 million in comparison with $11.9 million in the identical 12 months in the past quarter. The rise was primarily as a consequence of natural quantity progress from the area’s continued restoration from the affect of COVID-19 and pricing enhancements.
Income in our U.S. Concrete Waste Administration Companies section, working below the Eco-Pan model, elevated 25% to $11.3 million within the second quarter of 2022 in comparison with $9 million in the identical 12 months in the past quarter. The rise was pushed by natural progress, pricing enhancements and the continued restoration from the impacts of the pandemic. Returning to our consolidated outcomes.
Gross margin within the second quarter was 40.4% in comparison with 43.3% in the identical 12 months in the past quarter. The lower in gross margin is instantly mirrored to inflationary pressures, significantly pushed by the continued diesel gasoline value escalation that Bruce mentioned earlier. To present an order of magnitude of the fabric affect of those inflationary pressures versus Q2 of final 12 months, we estimate our gross margin within the second quarter was impacted by roughly 210 foundation factors as a consequence of greater diesel gasoline prices. Common and administrative bills in Q2 had been $28.5 million in comparison with $26.5 million in the identical 12 months in the past quarter.
The greenback price enhance was primarily as a consequence of extra prices following our current acquisitions and it’s notable that as a share of income, G&A prices within the second quarter improved from 34.4% to 29.6%. Web revenue accessible to frequent shareholders within the second quarter elevated to $5.6 million or $0.10 per diluted share, and this compares to a web lack of $11.4 million or $0.21 per diluted share in the identical 12 months in the past quarter. The development was primarily as a result of contribution from elevated income, in addition to a $2.5 million acquire from the change in honest worth of warrant liabilities this quarter versus Q2 final 12 months the place we recorded an $11.5 million expense. Consolidated adjusted EBITDA within the second quarter elevated to $27.7 million in comparison with $25 million in the identical year-ago quarter.
Adjusted EBITDA margin was 28.7% in comparison with 32.6% in the identical 12 months in the past quarter. In our U.S. Concrete Pumping enterprise, adjusted EBITDA improved to $18.6 million in comparison with $16.3 million in the identical 12 months in the past quarter, pushed by our sturdy income progress. In our U.Ok.
enterprise, adjusted EBITDA was $3.8 million in comparison with $4.1 million in the identical 12 months in the past quarter as sturdy income progress was partially offset by important inflationary pressures, primarily gasoline. For our U.S. Concrete Waste Administration enterprise, adjusted EBITDA elevated 16% to $4.6 million in comparison with $4 million in the identical 12 months in the past quarter. Turning to liquidity.
At April 30, 2022, we had complete debt excellent of $405 million or web debt of $402 million. We had roughly $96 million in liquidity as of April 30, 2022, which incorporates money on the steadiness sheet and availability from our ABL facility. We stay in a powerful liquidity place, which gives additional optionality to pursue value-added funding alternatives like accretive M&A or the discount of our fleet age to help our general long-term progress technique. As a reminder, our enterprise continues to generate wholesome working free money flows.
We bill our clients every day for the work we carry out and have minimal working capital necessities since we don’t take possession of the concrete we place. Our potential to generate sturdy working free money flows and robust margins permit us to increase our liquidity place and delever in step with our strategic objectives, whatever the macroeconomic surroundings. Our fiscal 12 months 2022 monetary outlook stays unchanged. As a reminder, our 2022 beforehand said steerage, we count on full 12 months income to vary between $360 million and $370 million, adjusted EBITDA to vary between $115 million and $120 million.
And free money circulate, which we outline as adjusted EBITDA much less web alternative capex much less money curiosity to vary between $55 million to $60 million. Whereas steerage stays unchanged with the speed changes made throughout the enterprise, we count on income efficiency to development across the high finish of the vary. Operationally and financially, we’ve a strong basis, and we’re actively working to execute on our progress technique. With that, I’ll now flip the decision again over to Bruce.
Bruce Younger — Chief Government Officer
Thanks, Iain. General, we’re more than happy with our Q2 outcomes and a powerful first half of the 12 months efficiency. It actually provides us confidence within the trajectory of our enterprise for the rest of 2022. We anticipate continued energy in all three finish markets of business, residential and infrastructure.
Given the speedy inflation we skilled in diesel gasoline, we’re happy with our staff’s efficiency in offsetting these prices with restricted disruption. As we take into consideration the place our enterprise is positioned for fiscal 2023, we’ve conviction that business and infrastructure will proceed to have a powerful demand as a consequence of elements we’re experiencing at present. We stay centered on driving our scale by means of natural progress and strategic M&A. Final quarter, we shared that we’ve earmarked roughly $20 million to $25 million towards natural progress capex and particularly new gear.
The expansion gear will largely arrive within the second half of 2022, delivering income progress and earnings profit for 2023 and past. Moreover, as introduced with at present’s incomes launch, the Board of Administrators has accepted a share repurchase program that licensed the repurchase of as much as $10 million of the corporate’s frequent inventory by means of June 15, 2023. We’re dedicated to strategically deploy capital to drive long-term worth for our shareholders. We consider that the present macro surroundings, mixed with the energy of our steadiness sheet, presents a horny shopping for alternative for our inventory.
This new share repurchase plan is a mirrored image of the arrogance our Board has in our market alternative and our technique to take a position for long-term progress. With that, I might now like to show the decision again over to the operator for Q&A. Shamali?
Questions & Solutions:
Operator
[Operator instructions] And our first query comes from the road of Brent Thielman with D.A. Davidson. Please proceed along with your query.
Brent Thielman — D.A. Davidson — Analyst
Hey. Thanks. Good afternoon, Bruce, Iain. I suppose, first query, simply round diesel gasoline with the actions you guys have taken on the pricing aspect, when would possibly we sort of take into consideration your potential to neutralize that impact on the margins that a few quarters out? Any ideas round that.
Iain Humphries — Chief Monetary Officer
Sure. So, I imply, as you realize, Brent, we’re working laborious to maintain that going. Clearly, since Q1 to Q2, the gasoline inflation has continued. I might say our staff has completed a pleasant job to guarantee that we will offset that by means of the present quarter.
So our pricing continues to develop and really outpaces a number of the unique steerage that we have. So it is one thing we proceed to work on as we’re diesel costs come by means of to ensure we will make amends for that inflationary price.
Brent Thielman — D.A. Davidson — Analyst
OK. After which perhaps on the Eco-Pan enterprise, I think about the identical impact is form of occurring there on the margins. I imply, simply perhaps your medium-term, long-term confidence and sort of getting the margins again as much as that top 40s, 50% degree as we get by means of a few of these inflationary pressures. Or has there been some everlasting modifications in that enterprise?
Bruce Younger — Chief Government Officer
Sure. So Brent, there’s a few issues there. We’re actually coping with inflation with Eco-Pan as nicely, however we have invested into a variety of new markets now, and so we’ve start-up prices in these markets. And as we create that route density in these new markets, that ought to proceed to enhance our margins.
Brent Thielman — D.A. Davidson — Analyst
Received it. OK. After which the acquisitions, the Hello-Tech and Pioneer offers, I imply, are these contributing margins under the section common?
Iain Humphries — Chief Monetary Officer
The margins are largely in step with the remainder of the efficiency of the enterprise. Clearly, they’re nonetheless coping with the identical inflationary pressures. However the margins are, I imply, the companies are actually absolutely built-in into our heritage enterprise, and the margins are again in step with the place we might count on them to be.
Brent Thielman — D.A. Davidson — Analyst
Received it. OK. Thanks, guys. I am going to flip it over.
Iain Humphries — Chief Monetary Officer
Thanks, Brent.
Operator
Our subsequent query comes from the road of Tim Mulrooney with William Blair. Please proceed along with your query.
Samuel Kusswurm — William Blair — Analyst
Hey, that is Sam filling in for Tim. Bruce, Iain hope you each are doing nicely. I suppose, I am going to begin with some margin questions right here. Adjusted EBITDA margins, they contracted near, name it, 400 foundation factors.
I believe you supplied the affect from greater gasoline costs — however might you assist spherical out the 400 foundation factors for us, perhaps share how a lot greater labor prices impacted you or different massive price buckets?
Iain Humphries — Chief Monetary Officer
Sure. The largest piece is, as we talked about on our ready remarks round gasoline, the place it is round on a year-to-date foundation, in all probability 250 foundation factors. The labor element is round perhaps 110, 120 foundation factors. So between gasoline and labor, that is a giant portion of it that we see one thing coming by means of.
However like I discussed on the sooner piece on pricing, the pricing tempo that we have is outpacing the place we might count on it to be, and that may assist proceed to handle the margin piece.
Samuel Kusswurm — William Blair — Analyst
Received you. Perhaps tipping into pricing. I consider within the prior quarter, you talked about 70% of your contracts had a few of these new phrases added to guard pricing, be it shorter contracts or gasoline surcharges. I am questioning for those who might replace us on that determine because it stands at present.
And perhaps simply hear your ideas usually round how efficient these modifications have been to sort of offset a few of this inflation.
Bruce Younger — Chief Government Officer
Sure. So we have completed a extremely good job of offsetting a variety of inflationary gadgets. Clearly, gasoline continues to go up, and we attempt to chase that up. We do have value escalators, gasoline surcharges that we proceed so as to add as gasoline value goes up.
However largely, we’re in about the identical place, about 50% to 60% of our work is extra backlog work that we’re locked into. We’re locking in residential to shorter intervals of time making an attempt to know the place inflation goes to take us. However I believe, basically, our staff has completed a extremely good job of getting charges up with inflation.
Samuel Kusswurm — William Blair — Analyst
OK. That is useful. And perhaps final query for me right here, associated extra to your business enterprise. You highlighted the resurgence of business in your ready remarks.
I hoped you could possibly present extra element on a number of the undertaking varieties and even clients which can be driving this resurgence. And perhaps on the shopper entrance, might you share if that is extra a product of recent clients you are profitable over or current clients which can be simply accelerating a few of their very own exercise?
Bruce Younger — Chief Government Officer
Sure. So it is sort of the entire above. You in all probability know, we’re on 1,000 completely different jobs every single day with our completely different gear. And so, it is varies from completely different finish markets to completely different segments within the business market.
So there’s not anybody that basically drives that, however we’re seeing continued progress in information facilities. The workplace buildings are coming again. Largely, we’re seeing that the massive manufacturing, every little thing aside from hospitality appears to be bettering slightly by little.
Samuel Kusswurm — William Blair — Analyst
Good. Nice to listen to. I am going to depart it there. Thanks.
Iain Humphries — Chief Monetary Officer
Thanks, Sam.
Operator
[Operator instructions] The subsequent query we’ve is from the road of Robert Schultz with Baird. Please proceed along with your query.
Robert Schultz — Baird — Analyst
Hey there. Thanks for taking the query. I simply wished to make clear on the three acquisitions. Are these companies? Or did you actually simply purchase the gear, and so it is extra of a capex buy? After which, how a lot incremental income are you anticipating out of these acquisitions for ’22?
Iain Humphries — Chief Monetary Officer
Sure. So there have been asset purchases, which is de facto in step with the best way that we have completed typical offers prior to now. So it is actually including gear into our fleet. I imply, give it some thought like natural progress and from the again half of the 12 months.
So simply given we have not too long ago accomplished these offers within the again half of the 12 months, they might generate perhaps $3.5 million of income or one thing in that magnitude.
Robert Schultz — Baird — Analyst
Received it. Thanks. That is all for me.
Bruce Younger — Chief Government Officer
Thanks, Robert.
Operator
And we’ve reached the tip of the question-and-answer session. And I am going to now flip the decision again over to Mr. Younger for closing remarks.
Bruce Younger — Chief Government Officer
Thanks, Shamali. We might wish to thank everybody for listening to at present’s name, and we sit up for talking with you after we report our third quarter fiscal 2022 ends in September. Thanks.
Operator
[Operator signoff]
Length: 23 minutes
Name contributors:
Cody Slach — Exterior Director of Investor Relations
Bruce Younger — Chief Government Officer
Iain Humphries — Chief Monetary Officer
Brent Thielman — D.A. Davidson — Analyst
Samuel Kusswurm — William Blair — Analyst
Robert Schultz — Baird — Analyst
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