Concrete Pumping Holdings, Inc. ($BBCP)

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Concrete Pumping Holdings financial results for the first quarter ended January 31, 2026. Joining us today are Concrete Pumping Holdings CEO, Bruce Young; CFO, Iain Humphries; and the company's External Director of Investor Relations, Cody Slach. Before we go further, I would like to turn the call over to Mr. Slach to read the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Cody, please go ahead.

Thank you. I'd like to remind everyone that during this call to give you a better understanding of our operations, we will be making certain forward-looking statements regarding our business and outlook. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from such statements. For information concerning these risks and uncertainties, see Concrete Pumping Holdings annual report on Form 10-K, quarterly report on Form 10-Q and other publicly available filings with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether because of new information, future events or otherwise. On today's call, we will also reference certain non-GAAP financial measures, including adjusted EBITDA, net debt and free cash flow, which we believe provide useful information for investors. We provide further information about these non-GAAP financial measures and reconciliations to the comparable GAAP measures in our press release issued today or the investor presentation posted on the company's website. I'd like to remind everyone that this call will be available for replay later this evening. A webcast replay will also be available via the link provided in today's press release as well as on the company's website. Additionally, we have posted an updated investor presentation to the company's website. Now I would like to turn the call over to the CEO of Concrete Pumping Holdings, Bruce Young. Bruce?

Thank you, Cody, and good afternoon, everyone. We were pleased with our first quarter results, which represented a promising start to the year. Revenue increased 5% year-over-year with adjusted EBITDA up 6%, driven by a return to growth in our U.S. Concrete Pumping operations, solid execution across the organization and continued discipline around pricing and cost management. The quarter was led by renewed growth in our commercial end market where activity improved year-over-year. In particular, demand from large-scale data center projects has remained strong across several of our core geographies and continues to be a meaningful driver of growth for the business. These projects benefit from our scale, fleet depth and ability to reliably service complex high-volume pours, and we believe we are well positioned to continue supporting this activity. We also benefited from more favorable weather patterns during the quarter compared to the prior year quarter. Combined with strength in pricing, these factors contributed to improved performance and a solid quarter of free cash flow generation. Outside of data centers, the broader commercial end market continues to reflect the trends we have seen in recent quarters. Heavy commercial activity remains relatively resilient, while more interest rate-sensitive segments such as office construction continue to experience softness as developers remain cautious in the current rate environment. Turning to residential. Conditions were largely unchanged from prior quarters. Elevated interest rates and affordability constraints continue to weigh on homebuilding activity and volumes in this end market remained soft. While we continue to believe in the long-term fundamentals of housing given structural supply-demand imbalances, near-term conditions remain challenging. Infrastructure activity was also generally consistent with recent trends. We continue to closely monitor public infrastructure spending, particularly as the current federal funding bill approaches its expiration in September. That said, it is important to remember that the infrastructure funding is not an on and off switch. Historically, when a new funding bill is not immediately in place, extensions of existing programs are often implemented, typically adjusted for inflation. As a result, bidding activity and project starts tend to continue. Given this dynamic, our national footprint, we remain optimistic on the overall infrastructure backdrop. Our Eco-Pan Waste Management Services business again delivered a strong quarter, continuing to demonstrate the ability and diversification benefits it brings to the platform. Demand remains healthy, supported by both volume and pricing, and Eco-Pan continues to perform excellently even as the broader construction markets remain mixed. Moving to our U.K. operations. The impacts of interest rates and economic uncertainty continue to weigh heavily on commercial project volumes. However, infrastructure remains resilient in the U.K., particularly with energy projects and the continued demand in HS2 construction and the long construction runway remaining to the project completion. Finally, we remain on track with our capital investment plans we discussed last quarter. Our focus on fleet management, efficiency and disciplined capital allocation remains unchanged, and we believe these investments will continue to enhance our competitive positioning, support margins and drive long-term shareholder value. Overall, we are encouraged by the start of the year and believe the first quarter reinforces the strength of our operating model, the benefits of our scale and our ability to perform across a range of market conditions. I will now turn the call over to Iain to walk through financial results in more detail. Iain?

Thanks, Bruce, and good afternoon, everyone. Moving directly into our first quarter results. Revenue increased 5% to $90.6 million compared to $86.4 million in the prior year quarter. The increase was driven by higher U.S. commercial and infrastructure volumes, particularly in data center-related projects, favorable weather patterns and continued strength in pricing within our U.S. Concrete Pumping and Eco-Pan segments. Revenue in our U.S. Concrete Pumping segment, which operates primarily under the Brundage-Bone brand, increased 5% to $59.9 million compared to $56.9 million in the prior year quarter. By end market, commercial and infrastructure activity benefited from higher volumes led by data center projects, along with strength in chip plants, education and bridge work. These gains were partially offset by continued softness in light commercial construction and subdued residential demand, largely driven by affordability challenges from elevated interest rates. Revenue in our Concrete Waste Management Services segment, operating under the Eco-Pan brand increased 8% to $18.1 million compared to $16.7 million in the prior year quarter. This growth was driven by organic volume increases and pricing improvements, underscoring the scalability of this business through the cycle due to long-term market demand. Turning to our U.K. operations, which operates under the Camfaud brand, revenue was $12.5 million compared to $12.8 million in the prior year quarter. The decline was due to a mix of disruptive winter weather and volume-driven weakness in commercial construction activity amid elevated interest rates and economic uncertainty. Foreign exchange translation provided an approximately 570 basis point benefit to revenue during the quarter. At the consolidated level, first quarter gross margin declined 80 basis points to 35.3% compared to 36.1% a year ago. The decrease was primarily attributable to higher commercial insurance costs and an increase in repair and maintenance expenses. General and administrative expenses declined to $27.5 million in the first quarter compared to $27.8 million in the prior year quarter. As a percentage of revenue, G&A was 30.4% in the first quarter compared to 32.2% in the prior year quarter, reflecting our continued cost discipline. Net loss attributable to common shareholders in the first quarter was $2.9 million or $0.06 per diluted share compared to a net loss of $3.1 million or $0.06 per diluted share in the prior year quarter. Consolidated adjusted EBITDA increased 6% to $18 million compared to $17 million in the year ago quarter, with adjusted EBITDA margin remaining consistent at 20%. Within our U.S. Concrete Pumping business, adjusted EBITDA increased 6% to $9.7 million compared to $9.2 million in the prior year quarter. In our U.S. Concrete Waste Management Services business, adjusted EBITDA increased 20% to $6 million compared to $5 million in the prior year quarter, driven by strong operating leverage on higher volumes and pricing. And in the U.K. operations, adjusted EBITDA was $2.3 million compared to $2.8 million in the prior year quarter. Turning now to liquidity. As of January 31, 2026, total debt outstanding was $425 million with net debt of $372 million, representing a net leverage ratio of approximately 3.8x to adjusted EBITDA. We ended the quarter with approximately $350 million of available liquidity, which includes cash on hand and availability under our ABL facility, providing substantial financial flexibility. Regarding capital allocation, during the first quarter, we repurchased approximately 651,000 shares for $4 million at an average price of $6.21 per share. Since initiating this program in 2022, we have repurchased approximately 5.6 million shares for $35.5 million with $14.5 million remaining under the current authorization through December of 2026. We believe our share buyback plan demonstrates both our commitment to delivering enhanced shareholder value and our confidence in our long-term strategic growth plan. Turning to our outlook for fiscal 2026, which remains unchanged. We continue to expect revenue in the range of $390 million to $410 million and adjusted EBITDA between $90 million and $100 million. Our guidance assumes no meaningful recovery in the construction markets during fiscal 2026. We expect free cash flow, which is defined as adjusted EBITDA less net replacement CapEx and net cash interest to be at least $40 million. This outlook assumes approximately $23 million of net replacement CapEx and $32 million of net cash paid for interest. This excludes the accelerated CapEx pulled forward from fiscal 2027 that was discussed on our prior earnings call. As a reminder, we are incorporating accelerated fleet investment into our fiscal 2026 planning. We expect to invest approximately $22 million in fiscal 2026 that has been accelerated from 2027, and this pull-forward investment relates to the upcoming 2027 stricter NOx emission standards. Beginning in fiscal 2027, we expect net replacement CapEx to be in the low single-digit percentage of revenue. Our balance sheet and liquidity position comfortably supports this investment strategy. We remain committed to disciplined capital deployment, maintaining leverage within our target range and prioritizing returns on invested capital. We believe we are well positioned to strengthen our service offering in anticipation of a market recovery. With that, I will now turn the call back over to Bruce.

Thanks, Iain. As we move through the year, we are encouraged by the momentum we are seeing in the business following a strong start to 2026. While some end markets remain challenged, particularly in residential construction, the return to growth in our commercial operations and continued strength in data center-related activity reinforces our confidence in the durability of our platform and our ability to perform across varying market conditions. Over the last several quarters, we have continued to generate solid free cash flow and maintain a strong balance sheet, preserving the financial flexibility that allows us to operate from a position of strength. This discipline provides the ability to invest through the cycle, remain selective and opportunistic and position the company to benefit as construction activity continues to normalize. Our focus remains squarely on the areas within our control, executing our disciplined growth strategy, maintaining commercial leadership in our core markets, driving efficiency through cost management and fleet optimization and investing strategically in our equipment base as a key source of competitive advantage. We believe these priorities, combined with the benefits of scale and pricing discipline will continue to support margin performance and long-term value creation. With our strong financial position, we retain the flexibility to pursue value-accretive acquisitions, invest in organic growth initiatives and return capital to shareholders when appropriate. We remain disciplined in our approach to M&A, prioritizing opportunities to strengthen our core platform and align with our strategic and financial objectives. The strength of our operating model, diversified end market exposure and proven ability to navigate cycles gives us confidence in our outlook. We believe we are well positioned to continue executing in the near term while creating meaningful long-term shareholder value as market conditions evolve. With that, I'd now like to turn the call back over to the operator for Q&A. Yun?

[Operator Instructions] And our first question is from Sam Kusswurm with William Blair.

I guess to start, I wanted to ask a bit more about the momentum you saw in your business this quarter. The midpoint of your guide calls for top line growth of 2% and no meaningful recovery in the construction market, but you have a pretty strong start to the year here. Can you talk more about the end markets, geographies or project types that is surprising you to the positive? And if it's really primarily the data center work, was there a significant step-up that you weren't expecting before? Just trying to understand the acceleration a bit more.

Yes. So there's 3 things, I think. One, we did have better weather this quarter than we had last year. And so that helped with some of the momentum that we're feeling. We have started this next quarter with fairly good weather as well. So that's helped our Q2 to begin with. The data center work certainly has been stronger for us than we had initially anticipated. And it does appear that there could be greater potential in that as the year plays out, and we're monitoring that very closely. And I guess the third thing is our infrastructure is continuing to do a little bit better as well with dollars that were set aside for those projects many years ago now coming into play, and we're starting to see that momentum. So with those offsetting some of the softness we're seeing in some of the other commercial segments and residential, we're still a little cautious going into the year, but we feel like we have a good start, and we're looking forward to the rest of the year.

Great. That's very helpful color. Maybe on the fluid side of this, I need to ask about your energy costs. I know it's really early right now in this whole dynamic and a lot seems to be changing every day. But if oil were to stay sticky at, say, $90 a barrel for a while, how should we think about the impact to your margins and your ability to stay within your guidance range for EBITDA, given I think your guide assumes or was assuming similar energy costs as last year?

Fuel prices are certainly front of mind for us. We do have fuel surcharges in a lot of our agreements that are left over from the last time we saw price escalation with fuel. And we're also starting to implement fuel surcharges in other areas as well. We do hope it's short-lived, no telling just how long we'll deal with that, but we'll do the best we can to recoup some of those additional costs.

Our next question comes from the line of Justin Hauke with Baird.

Great. I guess I was curious, I mean, just given that the guidance doesn't assume any volume growth, but you did talk about volume growth and pricing growth. Of the revenue growth, can you break out kind of the split between those 2 for the quarter? I'm just trying to, I guess, gauge how much the better weather helped on the volume side.

Yes, Justin, it was almost split about 2% on the volume side. And like Bruce said, that was some part due to like more consistent weather that we've seen that helped us with execution. And then the remaining piece of about 3% on price year-over-year.

Okay. I guess my second question before I turn it over, I just wanted to understand the language on the CapEx acceleration, which obviously is -- you talked about that last quarter when you gave the guidance, but there was some additional language where you haven't accelerated anything yet. And I didn't know if that meant that, that was still an option that you may decide not to do that $22 million of investment this year or if it just meant in the quarter, none of that had been spent.

Yes. It was just meant in the quarter. We do anticipate spending that this year. Now there may be some concerns with whether or not we can get those truck delivered before our fiscal year-end, which is in October. And largely, we'll have to have the trucks in place that might be delivered into next year that are 2026, but some of the changes that you're hearing or that we're all hearing about the regulation towards trucks, the truck manufacturers are still telling us they're moving forward with the change to the truck and the emissions, which we talked about on our last call being a concern for us because it won't give us the reliability and really the functionality with the stronger horsepower engines that we currently have that won't be available into the future. So we do anticipate getting out in front of that. Now that has some benefit with the data center growth that we're experiencing, getting those trucks in a little bit earlier to help us with some of that work has been helpful.

At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Young for closing remarks.

Thank you, Bonn. We'd like to thank everyone for listening to today's call, and we look forward to speaking with you when we report our second quarter results in June. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.