Release Date: May 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Infrastructure sales grew by 5% year-over-year, driven by a 33.7% increase in precast concrete sales.
- Rail backlog increased by 46.9% during the quarter, indicating improved project funding and bidding levels.
- Order rates improved 39.1% sequentially and 12.6% year-over-year, translating into an improved backlog of $237.2 million.
- The company initiated a new $40 million stock buyback program, reflecting confidence in cash generation and attractive equity valuation.
- Friction Management sales were up 11% year-over-year, showing robust demand and strong performance in this growth platform.
Negative Points
- First quarter sales were down 21.3% compared to the previous year, primarily due to a 34.6% decline in the Rail segment.
- Adjusted EBITDA decreased by 69.3% year-over-year, driven by lower sales volume in the Rail segment.
- Net debt increased to $79.9 million, with a gross leverage ratio rising to 2.5x from 2.2x last year.
- Operating cash flow was a use of $26.1 million, following normal seasonal patterns but reflecting increased working capital needs.
- Rail Technology Services and Solutions sales declined by 41.3%, partly due to lower UK sales volumes as initiatives in this market are scaled back.
Q & A Highlights
Q: Can you discuss the outlook for Rail Products volumes in the second quarter, given the tough comparables from last year?
A: John Kasel, President and CEO, stated that despite the seasonal nature of their business, they expect a strong second quarter. They have picked up significant orders entering Q2, and their supply channel partners are ready to perform. They anticipate a big Q2, contrary to concerns, and expect Rail Products to be a significant contributor.
Q: What is the mix of the backlog growth in the Rail segment?
A: John Kasel explained that while Rail Products were down, it was primarily due to distribution. The Rail Distribution business, which heavily relies on government funding, saw a pause in Q1 but is now recovering. William Thalman, CFO, added that Rail Products backlog grew by 22% and Friction Management by 71% year-over-year, indicating an improving profitability mix.
Q: What is driving the growth in the Friction Management backlog and sales?
A: John Kasel highlighted that they are gaining new work, customers, and geographies. Their service team is performing well, and they are seeing unprecedented demand for consumables in North America and beyond. The business is well-managed, and customers are benefiting from their products and services.
Q: Are you seeing increased capital expenditures on rail projects due to potential economic slowdowns?
A: John Kasel noted that while rail companies don't explicitly state it, they are indeed seeing increased maintenance and capital work. This is reflected in their backlog and orders, as rail companies shore up and harden their track systems during slower traffic periods.
Q: Can you comment on the impact of higher steel prices on your Rail Products business?
A: John Kasel mentioned that they benefited from rising steel input costs during the previous tariff period and expect to do so again. They have become nimble and agile in driving market pricing, and they are prepared to pass on any cost increases due to tariffs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
