Good day and thank you for standing by. Welcome to the Q4 2022 L.B. Foster Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stephanie Listwak. You may now begin.

Thank you, operator. Good morning, everyone, and welcome to L.B. Foster's fourth quarter of 2022 earnings call. My name is Stephanie Listwak, the company's Investor Relations Manager. Our President and CEO, John Kasel; and our Chief Financial Officer, Bill Thalman, will be presenting our fourth quarter operating results, market outlook and business developments this morning. We will start the call with John providing his perspective on the company's recent portfolio changes and fourth quarter performance, including market development. Bill will then review the company's fourth quarter financial results. John will provide perspective on the company outlook and his closing comments. We will then open the session up for questions. Today's slide presentation, along with our earnings release and financial disclosures, were posted on our website this morning and can be accessed on our Investor Relations page at lbfoster.com. Our comments this morning will follow the slides in the earnings presentation. Some statements we are making are forward-looking and represent our current view of our markets and business today. These forward-looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise or publicly release the results of any revisions to these statements in light of new information, except as required by securities laws. For more detailed risks, uncertainties and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and presentation. We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and reconciliation tables provided within today's earnings release and within our accompanying earnings presentation carefully as you consider these metrics. Additionally, during the years ended December 31, 2022 and 2021, the company completed three acquisitions and two divestiture transactions in line with its strategic transformation plan. Where meaningful, some of today's comments adjust for the impact of these strategic portfolio changes to highlight performance from ongoing operation. So, with that, let me turn the call over to John.

Thanks, Stephanie, and hello, everyone. Thanks for joining us today for our fourth quarter earnings call. If you're following the presentation materials, please turn to Slide #5. As you know, we began a strategic transformation that we fostered in late 2021. And I'm pleased to say that the work in the fourth quarter was another positive step in the transformation of the company. As a summary, since a refresh strategy was rolled out, we completed five transactions, which were comprised of three companies we acquired from our growth platforms, and two legacy noncore companies we divested. These transactions were completed. During the time we faced unprecedented operating challenges, particularly around raw material inflation, supply chain disruptions, and labor availability. What you'll hear on today's call is that we were able to overcome these challenges and deliver strong results in Q4 and in the second half of 2022, continuing to build on the momentum moving into 2023. Specifically, in the fourth quarter, we continued the trend of strong year-over-year improvements and results established in the third quarter with Q4 revenues up 21.4% versus last year. Our portfolio transformation and margin improvement initiatives delivered a strong 260 basis point improvement in gross margins, and a $7.5 million in adjusted EBITDA, which was 5.5% of the net sales and up nearly 133% over last year. Order rates were very robust at $137.8 million, up nearly 45% over the last year, and our backlog remained at near record levels of $272 million. With the outlook for our key end markets remaining promising and our strategic transformation on track and taking hold, we issued financial guidance for 2023 which reflects a continuation of strong year-over-year growth. And with the prospects for improving financial outlook, our Board of Directors authorized a three-year $15 million stock buyback program. I'll cover these points in detail towards the end of the presentation. For now, let's turn it over to Bill to cover the financial highlights of the quarter and full year. Over to you, Bill.

Thanks, John. And good morning, everyone. I'll begin my comments by covering the fourth quarter highlights on Slide 7. Note that the schedules in the appendix provide more detailed information on our financial results, including the non-GAAP measures Stephanie referenced. As a reminder, we divested the Piling business in 2021 and Track Components in 2022 These transactions were not treated as discontinued operations. Accordingly, the amounts presented today include the Piling business within the Steel Products and Measurement segments, with Track Components reflected in Rail, Technologies and Services. Fourth quarter sales were $137.2 million, an increase of $24.2 million over Q4 last year, driven by strong organic growth and the accretive strategic transformation actions taken in 2022. The improved business portfolio can be seen in our gross margin expansion, which was up 260 basis points, largely due to our acquisition and divestiture activity. Margins in the legacy business also contributed 70 basis points to the improvement. SG&A expense was up $5.2 million due to the additional expenses from acquired businesses, coupled with M&A transaction costs, and increased personnel expenses during the quarter. The reported net loss for the quarter was $43.9 million, and was due to two specific noncash items. $8 million was attributed to intangible asset impairment charges required in two of our returns businesses. $5 million in our precision measurement business and $3 million in fabricated bridge products. Both of these businesses have been experiencing increasingly difficult market conditions. As a result of our reassessment of their longer term outlooks, these charges were required in the quarter. In addition, we recorded a $37.9 million tax valuation allowance in the quarter, fully reserving our net deferred tax asset position at year-end. This valuation allowance was necessary based on an evaluation of cumulative historical evidence as required by the accounting…

Thanks, Bill. Please turn to Slide 18. I'll start my closing remarks on the overall marketing and business outlook. The portfolio moves we have made demonstrate our commitment to executing the strategy, investing in our growth platforms. As Bill mentioned, our backlog is near record high levels and we remain optimistic in the longer-term outlook for our core end markets, namely in the rail and general infrastructure space. We continue to focus on ensuring a seamless integration of the businesses we acquired this past year, while assessing the new market opportunities these acquisitions open up. I'm pleased to say that the 2022 acquisitions have met our expectations and are accretive to the operating margins of the company. Building on these new acquisitions and moving into 2023, our attention will return to driving organic programs in both current and adjacent markets, made available through our strategic execution. We continue to have portfolio challenges to address, particularly in the Steel Products and Measurement segment. As Bill mentioned, non-cash asset impairment charges were taken in the Fabricated Bridge and Precision Measurement businesses, both of which faced weaker market demand and inflationary headwinds. As a note, we are focusing on stabilizing and establishing recovery programs for these return businesses in the short-term. On the favorable side, we continue to see improving outlook for our Coatings business with Q4 order rates up 30% year-over-year and some of the order booked in Q3 of last year is expected to begin delivery in 2023. And while recessionary risk persist in many of our industrial markets, we remain cautiously optimistic that the previously announced government infrastructure programs will provide some level of support for demand of our products and services. We continue to have line of sight to significant infrastructure projects across the portfolio that are well aligned…

[Operator Instructions] And our first question will come from Alex Rygiel of B. Riley Securities.

A couple of quick questions here. What do you think a good intermediate term target is for organic growth of the business right now?

Yes. You're talking about in sales primarily…?

Yes. Yes, I'd say total company sales organic growth target and kind of intermediate term meaning kind of next one to two years.

Yes, I'd say, well, first of all, we're going to be focusing on the Rail Technologies and Precast is where the organic capital will be spent for organic programs. So that'd be real clear line of sight where we expect to invest as well as get those returns. I think, Bill, you think we can add a little color. What we’ve…?

Yes. Yes, I would say, the guidance that we provided for 2023 has a range of 9%, 8.5%, up to 14.6%. Obviously, there's a little bit of carryover effect of the acquisitions that we've done in 2022 that will manifest itself in those growth rates into 2023. And then, I think organically we're looking at high single-digits would be where we're focused. I will highlight, we mentioned in the script that we've got some organic growth programs identified within the rail technology space and the precast space, both related to the acquisitions that we've done. So the CapEx will be a little heavier than what we've seen in the past. But we like what we see in terms of organic growth programs. And we feel like we have a good opportunity to leverage those platforms, given the work we've done.

And then from a high-level over that sort of one to two-year time period, can you sort of list the largest contributors to EBITDA margin improvement?

Well again you should go back to our aspirational goals which I finished the presentation with or at least in my closing comments, so we still -- aspirational would be $600 million by 2025. So let's pick that number. $50 million of EBITDA. This year was a big year for us 2022 Alex. So some of the portfolio moves we made, the two divestitures, as well as the three acquisitions has really put us in a position where we can have a clear line of sight to hit those aspirational goals. So a good part of what we're going to be seeing here in the next few years as far as growth in top and bottom line, as well as leveraging our SG&A, will come from the rail specific technology side, on the digital side, the information side as well as in the precast side. So we feel very good about our ability to make that happen, with or without the infrastructure spending that we're seeing today. We've feel pretty good about where we're at and more importantly, where we're heading.

Our next question comes from Chris Sakai of Singular Research.

Just a question on -- are you seeing an uptick in new orders in rail after the Ohio train derailment and all that going on?

We don't comment on anything related to that ongoing investigation. But I do want to make sure everybody understands that we have complete confidence in the NTSB as well as a higher level of respect for NS as a customer. Having said that, our activity -- and I mentioned in my remarks, the bidding activity right now in the rail space as well as across the company is very robust right now. So we don't necessarily point to anything related to what specific incident. Activity itself in general is very, very strong right now.

Okay. Thanks for that. And then your increase in guidance for 2023, how much of that would you say is related to the Infrastructure Bill?

So we have -- Bill and I, we have been saying now for -- well, since it came out in what 14 months ago, we said that we weren't expecting much in 2022, but we were expecting billings to start flowing through in 2023. We have seen only a small piece of that actually hitting our order book and coming through in billings. So we expect some of that still yet to come. But a lot of this pays to where we are at right now with our near record backlog of $272 million. Chris, that's really put us in a strong position right now. So anything that's going to be coming from the Infrastructure Bill, I think, will be -- give us opportunity to maybe even -- maybe hopefully be towards the top end of that range, but we will see how things come together here. Bill, anything you'd like to add there?

Yes. No. I would say that -- yes, the Infrastructure Bill, activity has been increasing in terms of quotations, and we would expect to start to see some higher volumes coming through, maybe towards the back half of the year, and a continued run rate increase. The only other thing I would highlight is that there are some recessionary risks out there that create disruption. Obviously, there is interest rate headwinds and what have you. So we think these projects are going to get done and might be a bit more delayed than what we would have otherwise seen in past periods of time. But we feel confident that we will start to realize some more of those benefits towards the end of the year.

Okay. And last one for me. Your -- the backlog and new orders increase in Coatings and Measurement, can you shed some light there? How do you see that playing out in 2023?

Yes. Thanks for the question. We did -- we brought up in last quarter as said, we booked the Summit order, right, which was $19 million and was a big order for us to finish the year. As far as Summit itself, we are -- ourselves as well as our partner, our in line partner ACIPCO, have scaled up produce that work. They're running both of their steel mills today. And we have added about -- we doubled our workforce in the recent two to three months, giving us opportunities to produce that, as well as we have seen a number of other pipeline coating jobs that have come through, that really make us feel that we are going to have a nice year in that business in 2023 and beyond, including starting to ship up to the Summit order.

And our next question comes from Brett Kearney of Gabelli.

Excellent. Probably just two quick ones. The recent announcement of the FUCHS partnership, can you just talk about the evolution of that, and I guess what it unlocks for both of the organizations?

We're kind of the brand leader, if you will, in the friction management business. And it's about standing that cutting edge. So we've been looking for a channel partner to help us on the R&D side, the chemistry side, as well as take some of our products across the globe, specifically in Western Europe, and the FUCHS is a perfect partner, channel partner as well as R&D partner to make that happen. So there’s a lot of collaboration that’s going on for the last, I'd say 1 year, 18 months. We signed a deal with them not that long ago. I'm going to be heading over there shortly to meet with the CEO of FUCHS. And we're very excited about the opportunities it's going to do to make our -- I guess, our footprint, if you will, and our opportunity to bring more of the innovation technology to the rail space specifically in Western Europe. We are very excited about that. So that's about all I care to say about that today. But look for more things coming out of that collaboration cooperate-ship over the years to come.

Perfect. And then maybe on the precast platform, you’re seeing solid growth, it sounds like the legacy business as well as VanHooseCo. And your legacy business, I think coming off of The Great American Outdoors Act strength. Can you just talk about some of the -- I guess some of the areas or markets, applications where you're seeing to continue momentum on both parts of that?

Yes, so -- yes, thanks for the question. The legacy side has been very strong related to The Great Outdoors American Act, and we expect to that end -- we're still seeing some activity coming through that. So a lot of that's still going in the state, Federal national parks. That's been good business for us. Very, very, very steady, very solid business. But we're getting excited, though, we're seeing with the acquisition of VanHooseCo, it gives us the opportunity to hit adjacent spaces that we were not serving with our legacy business, that getting into the moving or securing order, if you will. Some of the other industrial type products that go under building cities or building communities, building residential areas, we now have that opportunity to bring that into our existing facilities, as well as taking that geographic expansion that we're now seeing going down in the Southeast, specifically in the Tennessee region between our two locations. I said earlier that the acquisition has met our expectations. And I sure mean that from many fronts, not just from the P&L point of view, but from the cultural side of the two businesses coming together, and really coming together as one company. We've done a great job and our team -- respectively, our teams in the facilities have done a great job of really driving the strategies, as well as driving the synergies of bringing that product in the marketplace. So we're looking for a lot of the good aspirational stuff that we've been talking about relative to our growth. A good part of it's going to be coming out of the Precast for years to come. We're very pleased with that acquisition.

[Operator Instructions] And I'm showing no further questions. I would like to turn the call back to John for closing remarks.

Thank you, Tanya. Thanks, everybody, for joining us today. We're glad to put a book end to 2022. There's been a lot of heavy lifting that’s done by the folks here in L.B. Foster Company, and I appreciate your support in us and patience, if you will. But this is just the beginning of what we see to be a transition year heading into some real growth and prosperity for our shareholders out there. So thanks for your support. And thanks to all the employees at L.B. Foster making this happen. Take care and have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.