Bruce Young - Chief Executive Officer Iain Humphries - Chief Financial Officer Cody Slach - Director of Investor Relations

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Concrete Pumping Holdings' financial results for the Third Quarter ended July 31, 2021. 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.

Thanks, Laura. I'd like to remind everyone that in the course of 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 as a result 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 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'd like to turn the call over to the CEO of Concrete Pumping Holdings, Bruce Young. Bruce?

Thank you, Cody. Good afternoon, everyone, and thanks for joining today's teleconference. I pleased to report that after a challenging weather start to the third quarter, we had a strong finish that highlighted the relative resilience and flexibility of our business. At the beginning of the quarter, we experienced well above average rainfall in many of our markets, including Texas, Colorado and Arizona. Because of the higher levels of precipitation, many of our customers projects in the month of May were delayed, but I'm am delighted to report that our team performed exceptionally well catching up in June in July, and we ended the quarter with 5% year-over-year consolidated revenue growth. This was driven by strong demand within our residential and infrastructure markets and our team's ability to opportunistically improve our rates. We continue to grow market share and have maintained a strong financial profile with $40.5 million in year-to-date free cash flow that has driven significant improvement in our total available liquidity. Based on our solid results to-date, we remain in a strong position to execute our strategic growth priorities and financial outlook in 2021 and beyond. Within our individual reporting segments, our U.S. Pumping business was slightly lower due to the above average rainfall that I just discussed, as well as lingering COVID-19 headwinds in some of our commercial projects. Like last quarter, this volume headwind was mostly offset by strong results and market share expansion in our residential business and continued growth in infrastructure. In our U.K. segment revenue increased 37% due to continued strong recovery from the impacts of COVID-19. In Eco-Pan, revenues were up 8% due to organic growth and pricing improvements. Eco-Pan remains an important part of our long term growth strategy and during the quarter we made great strides and further building out…

Thanks, Bruce, and good afternoon everyone. Consolidated revenue increased by approximately 5% to $80.8 million compared to $77.1 million in the same year ago quarter. The revenue increase was mainly driven by organic growth in our U.K. operations, as the country's construction market continues to recover from the impacts of COVID related shutdowns. Additionally, our U.S. Concrete Waste Management business operating under the Eco-Pan brand reported a record $10.1 million in sales, reflecting an 8% increase compared to the same year ago period. Turning now to our individual segments, revenue in our U.S. Concrete Pumping Segment mostly operating under the Brundage-Bone brand was $58 million compared to $58.6 million in the same year ago quarter. The slight decline as mentioned earlier by Bruce is primarily a result of the lower construction volume in May due to excessive and above average rainfall in our south and central regions. However, the team did an excellent job recovering and caught up most of the delayed revenue and volume throughout the months of June and July. For our U.K. operations, operating largely under the Camfaud brand, revenue grew 37%, $12.7 million compared to $9.2 million in the same year ago quarter. This organic growth is primarily attributed to the fact that the prior year period was heavily impacted by COVID-19 shutdowns. U.K. is now running at near full capacity when compared with the pre-COVID-19 volume and revenue run rate. We remain optimistic about the rest of the year and beyond in the U.K., as regional markets continue to strengthen across the country. Revenue in our U.S. Concrete Waste Management Services segment increased almost 8% to $10.1 million in the third quarter of 2021 compared to $9.4 million in the same prior year quarter. The increase was due to solid organic growth, pricing improvements and…

Thanks Iain. In the third quarter of 2021, we were pleased with our ability to grow revenue despite weather disruptions and the continued impact of COVID-19. We are gradually returning to a normalized state in both the U.S. and U.K. and during the quarter we took steps to drive scale through continued organic growth, as well as strategic M&A. In our Eco-Pan business, we are also focused on growth as we build out our sales team in strategic locations to enhance the reach of our service and communicate the disruptive and economic value of our service offering to new customers. While we're excited to be speaking about the two complementary tuck in acquisitions on this call, we continue to have a robust pipeline of other acquisitions that our team is assessing and we remain very disciplined in our approach to consummate a deal. High-tech is a great example of us sticking to that disciplined capital allocation approach as we believe this acquisition clearly fits our criteria of what we look for a high returning capital investment that will enable revenue growth and improve operating efficiencies to drive margin expansion. Overall, we continue to balance our disciplined capital allocation priorities to responsibly grow our business, while maintaining a healthy balance sheet and financial flexibility. We remain focused on prudent organic capital investment, the consistent return of value to our shareholders and value enhancing acquisitions. We look forward to continuing to develop our leading market share position organically and through acquisitions. For the last quarter of the year, we expect that residential construction will continue to be an area of momentum and strength for us, for our U.S. business as demand remains high for these projects. In infrastructure, we are also seeing continued momentum, especially in areas like the U.K., where we have always been infrastructured heavy. For commercial, we continue to see heightened demand for heavy industrial warehouses and data centers given the current e-commerce and work-from-home trends. We expect our commercial business will continue to recover in the last quarter of this fiscal year as commercial construction investment continue, and as the economy recovers from the impacts of Covid-19. Lastly, we expect Eco-Pan to continue accelerating, especially as our sales team ramp-up and we are able to sell in person. With that, I'd like to now turn the call back over to the operator for Q&A. Laura.

Thank you, sir. Our first question comes from the line of Tim Mulrooney with William Blair. You may proceed with your question.

Good afternoon, Bruce. Good afternoon, Iain.

Hi Tim!

So last quarter you guys highlighted some potential project delays from a supply chain shortage of concrete. Did that impact your business in the third quarter as well, and if so, could you quantify it for us?

Yes, we have talked about the cement shortage and how that affected ready mix concrete in the last earnings call. It turned out in Q3 it wasn't as impactful as Q2 was and really it wasn't a meaningful impact for the quarter. Now, we have had other supply chain issues with steel and other supplies on projects that have had some impact on us, but to this point, they haven't been meaningful.

Okay, that's good to hear. And you anticipated my next question Bruce, because you did talk about supply chain constraints in your press release this afternoon. Those are not related to concrete – to cement, excuse me. It's related to other things like steel. Would you say that those constraints relative to last quarter have gotten better or worse or are about the same?

I would say that they are about the same as what they were in the last quarter and we see them steadily improving.

Okay, so not getting, not actively getting worse. And then as it relates to the uncooperative weather in Texas and Colorado and Arizona, I apologize if I missed this in your prepared remarks, but any estimate how much that impacted your fiscal third quarter, pushing revenue out in the future quarters?

Yeah Tim, this is Ian. It never – we called it – I mean in our prepared remarks, we largely called from that weather element. It was probably about $2 million of revenue that was impacted in May, but I mean the catch up was almost all recovered through June and July. It was maybe about $500,000 of revenue that was left behind. So not a substantial amount will get through, so our team did a remarkable job catching up in that volume in June and July.

Okay, that’s good to hear Iain. One more from me and I'll pass that along. You know on this Hi-Tech acquisition, I guess two parts here. Number one, Was this acquisition multiple for the business; was it in the normal range of what you typically expect to pay for a company of the size or have acquisition multiples increase in recent years? And secondarily, I think investors like to see opportunistic bolt on acquisitions like this. Can you provide us with a sense for how many of these types of bolt on opportunities there are in the U.S.?

Sure. So with the Hi-Tech business, as you know we look at business as we look at 4x EBITDA or 1.25x the value of their concrete pumping assets or the average of those two and the Hi-Tech acquisition threaded the needle on that, so it was right in line with where we expected it to be. And as far as for future opportunities, we have several very similar, some larger, some smaller in the pipeline right now that we're currently looking at.

That's great. Thanks for taking my questions guys.

Thanks Tim.

Our next question comes from the line of Stanley Elliott with Stifel. You may proceed with your question.

Hey everybody! Thank you guys for taking the call. Bruce, can you talk a little bit about the rate? You mentioned being opportunistic and pushing that higher. How much should we think the rate increased over the course of the quarter?

Yeah, so our rate increase over the quarter was a little over 1% for the quarter. Now we really started getting hit with the fuel cost early on in the quarter. And as you know, about 50% of our work is work that we've pre-bid, and so we already have agreements and we don't have the ability to get the rate up on that. And so as those jobs wind down and new jobs start, we basically put our cost tools to work and determine what the rate should be on future bidding on projects. And so while it's improving you know, as those projects run out and if fuel stays at the level it’s at and other issues, we’ll certainly factor that in over the next couple of quarters.

And when you think about kind of the CapEx as a percent of sales, should we think about that – I don't want to get too far ahead, but thinking about that in similar terms next year. The reason I'm bringing it up – I‘ve brought it up is you mentioned U.K. running near capacity. You talked about a lot of the infrastructure projects they have; they have such a long duration. Are we looking at a situation where we'll need to move the CapEx higher to meet demand in some of these markets?

Our utilization rates are still in the high 70’s where we target about 85%. So we have quite a bit of capacity to go before we have to start adding organic units. So I think for the near term I think the percentages we've given you in the past, you know 10% to 12% of revenue for CapEx are going to be pretty consistent.

Perfect! And then lastly for me, single family continues to be quite strong. Any concerns about some of your builders being able to find land to put down the pads, put down the roads, etc.

Certainly! In certain markets that's becoming tighter and tighter, but the pricing on houses has gotten to the point where they can afford to move into some of those properties that were unaffordable prior, and so I see that still moving on.

Great guys! Thank you very much and best of luck.

Thank you.

Our next question comes from the line of Justin Hawk with Robert Baird. You may proceed with your question.

Good evening! I appreciate the time here. I wanted to ask, I don't think you quantified it on the diesel specifically. I think you gave the amount of diesel increase, but not the dollar cost and just maybe how that weighed on the gross margin, if you can quantify that just for the quarter?

Yes, hi Justin! This is Iain. So on the fuel price, imagine it went up almost $1 from $2.40 a gallon to about $3.40 a gallon year-over-year. So there was about a 40% increase in fuel price year-over-year in that quarter. The dollar effect on the quarter was about $1.5 million.

$1.5 million, okay. Thanks, that's helpful. And I guess my second question – I’m sorry were you saying something.

No, go ahead Justin.

Okay. So the second question, just I wanted to clarify on the acquisition, I guess it's an acquisition. The H-T Construction that you called out that was in the quarter, is that a business or did you literally just acquire equipment there, and so it's more of a CapEx purchase?

This came through, there is a fairly large general contractor in Southern California that started buying equipment in 2014 and with the idea that they would go after the infrastructure play. And after six or seven years of running that business, he's decided that it wasn't for him. And so he offered that portion of his business up for sale, and largely just negotiated a deal with us to buy his assets for asset value.

Okay, alright, that makes sense. And I guess just maybe the last question I have here is on Eco-Pan, given the stat in the past about the growth of the number of Pan’s in the field just as kind of a leading indicator, what was that increase in the quarter, just so we can kind of think about the trajectory there?

Yeah, the increase in the quarter was largely around the revenue increase. So, the Pan’s in the field continuing to improve and align with our organic growth and revenue.

Got it. Okay, that's all I’ve got here. Thank you very much.

Thanks, Justin.

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, Laura. We'd like to thank everyone for listening to today's call and we look forward to speaking with you when we report our fourth quarter and full fiscal year 2021 results in January. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and enjoy the rest of your day.