Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- First quarter organic sales improved by 16.9% over the prior year, driven by a strong performance in the Rail segment which saw a 29.4% increase.
- Adjusted EBITDA increased by 32.4% year over year, supported by a 90 basis point gross margin improvement, ending at 21.1%.
- Net debt decreased by $2.5 million compared to last year, and the gross leverage ratio improved from 2.2 times to 2 times year over year.
- Order rates recovered in the first quarter, increasing by 25.5% sequentially and 3% over the last year on an organic basis.
- The company reaffirmed its 2024 financial guidance, indicating confidence in achieving its 2025 financial goals.
Negative Points
- Infrastructure results were softer in the quarter, with organic sales remaining flat year-over-year, impacted by challenging weather conditions.
- Backlog decreased by $37.6 million versus last year, primarily due to strategic divestitures and improved order fulfillment lead times in the Rail distribution business.
- Cash used for operating activities in the quarter was $21.9 million, driven by seasonal working capital needs and funding for prior incentives and annual insurance premiums.
- Selling, general, and administrative costs increased over the prior year due to personnel and professional services costs.
- The Infrastructure Solutions segment revenue decreased by 18.4%, with a significant part of the decline due to divestiture and product line exit activities.
Q & A Highlights
Q: Did you see any pull forward in orders, or are you just staying conservative with your guidance despite a strong first quarter?
A: (John Kasel - President, CEO, Director) We did see some activity that we expected in Q2 move into Q1, but overall, we are maintaining a conservative guidance due to various market headwinds, despite the strong start.
Q: Can you provide more detail on the impact of shorter lead times mentioned?
A: (John Kasel - President, CEO, Director) Shorter lead times have returned to pre-COVID levels, particularly in our Rail distribution, which affects our backlog visibility. This normalization is positive as it eases past supply chain stresses.
Q: How do you plan to use the free cash flow, particularly regarding M&A activities?
A: (John Kasel - President, CEO, Director) Our capital allocation remains disciplined. We focus on enhancing core competencies and profitability before considering further M&A. Any potential M&A will be strategic and align with our long-term goals.
Q: What are the main drivers behind the strong revenue growth in the Rail segment?
A: (John Kasel - President, CEO, Director) The Rail segment's growth was driven by robust performance in both the Rail Products and Technology Services & Solutions, particularly from the domestic rail safety business and recovery in the UK market.
Q: Can you discuss the backlog trends and expectations for the year?
A: (John Kasel - President, CEO, Director) While we don't provide specific guidance on backlog levels, the strong bidding activity across the company supports our confidence in meeting our annual guidance.
Q: What was the impact of adverse weather on the Infrastructure segment's performance?
A: (William Thalman - CFO, Senior VP) The Precast business unit saw a revenue decline of about 13% year-over-year, largely due to weather impacts, which we expect to recover as conditions improve.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
