管理層發言
Greetings, and welcome to the NWPX Infrastructure Second Quarter 2026 Earnings Call. The operator provided instructions. As a reminder, this conference is being recorded. It is now my pleasure to introduce Scott Montross, President and CEO. Please go ahead.
Good morning, and welcome to NWPX's Second Quarter 2026 Earnings Conference Call. My name is Scott Montross, and I'm President and CEO of the company. I'm joined today by Aaron Wilkins, our Chief Financial Officer. By now, all of you should have access to our earnings press release, which was issued yesterday, July 29, at approximately 4:00 p.m. Eastern Time. This call is being webcast, and it is available for replay. As we begin, I'd like to remind everyone that statements made on this call regarding our expectations for the future are forward-looking statements, and actual results could differ materially. Please refer to our most recent Form 10-K for the year ended December 31, 2025, and in our other SEC filings for a discussion of such risk factors that could cause actual results to differ materially from our expectations. We undertake no obligation to update any forward-looking statements.
Thank you all for joining us today. I'll begin with a review of our second quarter performance and our outlook for the third quarter of 2026, and then Aaron will walk you through our financials in more detail. Second quarter marked another outstanding quarter for NWPX Infrastructure as we delivered record financial results across revenue, gross profit and EPS. Net sales were up 19.7% year-over-year to $159.5 million, primarily driven by strength in our Water Transmission Systems business. Consolidated gross profit totaled $34.4 million, up 35.5% from last year, with our gross margin expanding 250 basis points year-over-year to 21.5%. That momentum translated into strong bottom line performance, underscoring the operating leverage in our model with earnings of $1.62 per diluted share and free cash flow of $9.9 million or approximately $1.01 per share. These results reflect the strength of our diversified business model and the disciplined execution of our long-term strategy.
Turning to our WTS segment. Revenue reached a quarterly record of $113.2 million, up 33.8% year-over-year with strong margin improvement. Our performance reflected higher production volume with tons produced up 26%, supported by strong project execution and favorable project timing. Additionally, selling prices per ton were up 6% year-over-year, driven by changes in product mix. We had another exceptionally strong booking quarter with robust bidding activity, sustaining continued healthy backlog and reinforcing demand strength across our markets. After having produced approximately 15% of the large NDA project in the second quarter, the WTS backlog, including confirmed orders, ended the quarter at $423 million, down only slightly from the $430 million at March 31 and well above the $348 million level we reported this time last year. This is a good indication of how strong the bidding was in the second quarter and continues to be in the third quarter.
We also have a substantial pipeline of projects totaling more than $125 million that we've already bid on. While awards are still pending, we expect to secure a meaningful portion of these opportunities. As the large unplanned NDA project winds down, the WTS backlog levels will normalize to recent historical ranges. WTS gross profit increased 60.9% year-over-year to a record $24.2 million, resulting in a gross margin of 21.4%, up 360 basis points from last year. This improvement reflects higher volumes supported by strong customer demand and disciplined project execution as well as the related efficiency gains and higher overhead absorption that come with that level of production. In addition, we benefited from favorable product mix and pricing. Now turning to our Precast segment. Precast revenue slightly decreased 4.8% year-over-year to $46.3 million. Our performance reflected an 11% decrease in volume shipped as we experienced unusually heavy rainfall in Texas and customer-driven project delays at our Utah facilities during the months of April and May.
However, our selling prices were up 7% over last year, reflecting favorable changes in product mix. Business conditions improved significantly in June, which led us to close out the quarter with strong momentum, with a quarter end precast order book of $61 million, up from $55 million at March 31 and above the $56 million level at June 30 of last year, positioning the business well for the remainder of the year. At Park, production increased 24% year-over-year, supported by 29% growth in revenue per yard shipped. This performance came despite elevated interest rates. We are continuing to see signs of improvement in the nonresidential demand trajectory as we move through 2026, particularly in data center projects that continue to bolster commercial construction activity. At Geneva, production was down 5% year-over-year, primarily reflecting the ongoing softness we've been seeing in the residential construction market.
Production was mostly offset by growth in the nonresidential business, demonstrating the resilience in the Geneva market platform. That said, leading indicators remain solid in mid-2026, with the Dodge Momentum Index up 22% in June of this year versus June of 2025. The commercial sector was up 22% and the institutional sector was up 22%, indicating broad-based strength for nonresidential construction activity through the end of this year and into 2027. In addition, we are continuing to advance our Precast product spread strategy across the network, broadening our capabilities, increasing our capacity utilization and evaluating opportunities to introduce Precast into additional WTS facilities. Precast gross profit of $10.2 million was down 1.7%, which was directly related to the slow shipping months of April and May. However, we saw a gross margin improvement of 70 basis points to 21.9% from 21.2% last year, highlighting stronger pricing levels and better cost absorption despite lower volumes.
We expect margins to continue recovering as nonresidential demand builds. I'll now turn to our outlook for the third quarter of 2026. On a consolidated basis, we expect our third quarter performance to be comparable to or stronger than the second quarter of 2026. In our Water Transmission Systems segment, we expect revenue and margins to be similar to the prior quarter, driven by strong production volume and product mix as well as the emergence of the previously discussed significant unplanned NDA project that began production in June and will extend through the third quarter. We continue to maintain a robust WTS backlog, elevated bidding levels that have continued into July are providing great visibility to near-term financial performance. Based on what we are seeing today, we expect full year bidding levels to be stronger than what we saw in 2025. We remain encouraged by the level of activity across current and upcoming Water Transmission projects, which continue to come with improved economics and margins.
For a more complete view of these projects, please refer to our investor presentation on our website. Turning to Precast. We grew our order book in the second quarter of 2026, and we expect a stronger year for the Precast business overall with our momentum from June carrying over into the back half of the year. Demand remains healthy in the nonresidential market, supporting continued momentum across our Park and Geneva platforms. For the third quarter, we expect Precast revenue to be higher than both the third quarter of last year and the prior quarter with stable margins driven by solid demand, higher production levels with improved absorption and the strengthening order book. In closing, we delivered an outstanding second quarter, setting new records in revenue, gross profit and earnings per share. Demand across our end market remains healthy. Bidding activity continues to be elevated, and our Precast business is carrying positive momentum into the second half of the year.
These factors reinforce our confidence that 2026 is shaping up to be a historic year for NWPX Infrastructure. I want to thank our team across the organization for their continued execution, their commitment to our strategy and to maintaining a strong safety culture. As we look ahead, our near-term priorities remain: one, maintaining a safe and rewarding workplace; two, focusing on margin over volume; three, intensifying our pursuit of strategic acquisitions; four, implementing our cost efficiencies across the organization; and five, returning value to the shareholders when M&A opportunities are limited. I will now turn the call over to Aaron, who will walk through our financials in greater detail.
Thank you, Scott, and good morning to everyone joining the call today. Before we begin, I'd like to mention that unless otherwise stated, all financial measures in my remarks refer to the second quarter of 2026, and all comparisons will be year-over-year comparisons versus the second quarter of 2025. I'll begin with our profitability. We delivered record consolidated net income of $15.8 million in the second quarter or $1.62 per diluted share, up from $9.1 million or $0.91 per diluted share, reflecting improved operating leverage on higher revenues and the continued strength in execution across the business. This is the highest earnings per share posted in the company's history. Recall, the company excludes the third quarter of 2018, which was elevated by a one-time $21 million noncash gain on bargain purchase associated with our acquisition of Ameron Water Group. As we measure it, the previous record reflective of our operational performance was achieved in the third quarter of 2025.
On the top line, consolidated net sales grew 19.7% to $159.5 million compared to $133.2 million last year. Our Water Transmission Systems segment posted record revenue in the second quarter, with sales rising 33.8% to $113.2 million versus $84.6 million. This growth was driven by a 26% increase in tons produced due largely to project timing and a 6% improvement in selling price per ton due to improved pricing and product mix. Precast sales were down 4.8% to $46.3 million compared to $48.6 million. The results reflected an 11% decrease in volume shipped due to adverse weather events and ongoing softness in the residential construction market, partially offset by a 7% increase in selling prices due to product mix. As a reminder, the products we manufacture are unique and the average sales prices for both of our operating segments as well as the Precast shipment volumes and WTS production volumes cannot be relied upon as comparable metrics due to variations in product mix between periods.
We also achieved record consolidated gross profit, supported by higher volume and favorable pricing. Gross profit was $34.4 million, up 35.5%, representing 21.5% of sales, a 250 basis point improvement from $25.4 million or 19% of sales. In Water Transmission Systems, gross profit increased 60.9% to $24.2 million or 21.4% of segment sales, a 360 basis point improvement from $15.1 million or 17.8% of sales. The increase reflects higher production volume and the associated operational efficiency gains and higher pricing resulting from sustained strength in market demand and changes in product mix. Precast gross profit was down 1.7%, $10.1 million or 21.9% of segment sales compared to $10.3 million, representing a 70 basis point improvement from 21.2% of segment sales. Gross profit dollars were primarily impacted by lower shipment volumes. Selling, general and administrative expenses were $13.2 million, up 5% and represented 8.3% of net sales, an 80 basis point improvement from 9.1% of net sales a year ago, even with modest increases in incentive compensation expense.
For the full year 2026, we now expect consolidated SG&A to range between $54 million and $56 million. Depreciation and amortization expense was $5.3 million compared to $4.9 million, and we now expect full year expense to be between $21 million and $23 million. Interest expense declined to $0.3 million from $0.8 million, reflecting lower average daily borrowings. Income tax expense was $5.6 million, resulting in an effective income tax rate of 26.3% compared to $3.4 million or a rate of 27.5% last year. The effective rates for both quarters were primarily impacted by nondeductible permanent differences. For the full year, we continue to expect an effective tax rate of approximately 24% to 26%. I'll now turn to our financial condition. At June 30, 2026, cash and cash equivalents improved to $19.3 million from $14.3 million at March 31. Our debt balance totaled $10 million, resulting in a net cash position of $9.3 million.
At June 30, there were no outstanding borrowings under our credit facility, and we had approximately $124 million of additional borrowing capacity under the existing credit agreement. We continue to build cash on the balance sheet to support our growth and stockholder return priorities. Our improved profitability, coupled with favorable changes in working capital drove strong net cash provided by operating activities of $14.1 million, reflecting a 159% increase from $5.4 million last year. Capital expenditures were $4.2 million compared to $3.5 million last year. For the full year 2026, we continue to expect CapEx in the $20 million to $24 million range, including approximately $6 million for investment projects to support our Precast product spread strategy and broader Precast growth initiatives. As a result, we generated $9.9 million of positive free cash flow in the quarter compared to $1.9 million last year.
For 2026, we are raising our full year free cash flow outlook to $56 million to $65 million, up from the prior range of $50 million to $56 million, reflecting stronger earnings and a more favorable billing schedules expected on Water Transmission System orders received. To close, the second quarter marked another period of exceptional performance, highlighted by record revenue, record gross profit and record profitability. We continue to generate strong free cash flow and further strengthened our balance sheet through disciplined capital deployment. Continued strength in demand for our products, combined with our focus on pricing and consistent operational execution positions us well to deliver strong financial results in the second half of this year. Thank you to our employees for their continued commitment to safety and excellence and to our shareholders for their continued support. I will now turn it over to the operator to begin the question-and-answer session.
分析師問答
The operator provided instructions. First question, Julio Romero with Sidoti & Company.
I wanted to start on the Water Transmission Systems segment. You had very impressive year-over-year sales in the segment. And then, Scott, based on your comments of completing about 15% of the previously unplanned project, I think that implies the core business did significantly well in the quarter, up about 25% year-over-year, if my math is right. I guess maybe to start just reconciling that performance with the third quarter Water Transmission Systems segment outlook of similar revenue quarter-over-quarter. Are you implying that for the third quarter that the core WTS segment sales are going to step down sequentially? Just kind of help us square those two pieces here.
No, I don't think that's it at all. I think when you look at looking back to the third quarter of last year, we were about $103 million of revenue in the water transmission side, Julio. This year, you're $113 million. So if you pull the piece out that's related to the NDA project, we were up to probably about $105 million of core business. So when we get to the third quarter of the year, obviously, when you look at the third quarter over the last few years, the third quarter has been the biggest quarter of the year. Ultimately, we expect that quarter to be the biggest quarter of this year, too. We're a little bit cautious, and that's why when we gave our guidance in the earnings call, we said comparable to or stronger in the third quarter than the previous quarter, the second quarter. The reason we're doing that is we've seen some pretty crazy weather patterns in Texas over the last several months. But absent those weather patterns, which we've largely worked through without having a problem, we expect the third quarter to be larger on Water Transmission, on Precast and with better profitability than we saw in the second quarter. And I think what you'll see as far as the base business, Julio, is that the base business will be a little bit stronger than it was in the second quarter before you add the NDA piece on top of it.
Okay. Perfect. That's really helpful. And then I guess my follow-up is just thinking about current bidding levels for WTS, kind of future phase visibility you have both for the previously unplanned project and your core business. How do you see the bidding levels and then your comments about the segment backlog normalizing at recent historical levels as you work down the unplanned project? Just help us think about what you see the backlog shaping up in the back half of the year and how you see yourself entering 2027?
Yes. The bidding levels are really strong in the third quarter. They're at least as strong as they were in the second quarter with the amount of work that we're seeing out there bidding, and we still have a lot of what we refer to as pending unknowns to be awarded that are out there at this point. I would characterize the bidding level this year as a little bit stronger than what we saw in 2025. In 2025, we ended up somewhere in the area of about 138,000 tons of bidding. If you pull the NDA project out of the water transmission bidding this year, we're looking at having 150-some thousand tons bidding this year. So we're seeing a bit stronger bidding year than we did last year. Ultimately, it's coming with improving economics and margins as we move forward. When you start looking at the backlog, when we reported before we started the NDA project, we reported a backlog of $430 million, ended this quarter with $423 million after running some of that, which gives you an indication if we're running somewhere in the area of $8 million or so of that project, it gives you an indication of how strong the bidding was in the quarter.
But once we run through all that, and we will run through most of that as we get through the third quarter and the beginning of the fourth quarter, then you're going to see a backlog that's pretty normal for the Water Transmission Systems business, probably somewhere between the low 300s to the mid-300s range, which is where you see that backlog like we have for the last few years. It just returns to a normal range after that one-time project works its way through our system.
Got it. And then last question is just on the one-time project. Any increased visibility as to future phases of that project as it is now relative to three months ago?
No. We're seeing maybe a little bit more activity and discussion around it, but I wouldn't say anything that's definitive at this point, Julio.
Next question, Tomo Sano with JPMorgan.
On the WTS margin improvement, could you talk about what is actually driving it by execution and efficiency? And if you could talk about how sustainable you believe those gains are in the back of house and so on, please?
So Tomo, the story on the WTS side is that during the second quarter, tons produced were up 26% versus last year. Selling prices were up about 6% and that roughly tracked with steel cost, but selling prices were actually up a bit higher than steel cost. As a result, we had a margin level that went to 21.4% or a growth of 360 basis points. The improvement reflects better project pricing in the marketplace, a favorable project mix with projects that run well on our facilities, and the higher production levels gave us better overhead absorption. Absorbing overhead also contributed to the margins. We think we see the same dynamics moving through the rest of this year. The demand has become relatively stable to upward trending, and the longer that continues, the more we expect margins to inch up over time. We believe that trend looks favorable going into and through the third quarter. The fourth quarter is normally the slowest quarter of the year, and it may be a little different, but we expect to see those upward trends on margin in those metrics as we go forward.
On the Precast side, you mentioned forecast improvement in June. How should we think about exit rates for volumes and activity as you move into the third quarter? Please talk about the demand outlook as the business normalizes after some headwinds from the weather conditions.
We've been fortunate getting through the weather without a whole bunch of issues down there because at one point a couple of weeks ago, Central Texas was getting somewhere between 25 and 30 inches of rain. So when you look at the second quarter, it affected our production in April and May. But June came back strongly. We had a record month of revenue at Geneva in June and a strong Park business and the margin improved by about 60 basis points. The order book grew significantly to about $61 million. We're moving into a third quarter that we expect to be stronger revenue-wise than last year's third quarter with improving margins because of the volume we're doing. With interest rates where they are, residential construction is down a bit, but we have continued improvement in the nonresidential piece of the business. Momentum indicators are positive, and that bodes well for the next year. Geneva has been more residential-focused historically, but as that slowed, Geneva has shifted more to the nonresidential side and is filling up. Overall, we expect another record revenue year in Precast for 2026 and to exit the year strong. The nonresidential piece appears likely to continue its strength and be less affected by residential headwinds from interest rates.
You've discussed ambitions for Precast to become comparable in size to WTS. Could you talk about what milestones, investments and M&A criteria we should track to gauge that progress?
On the Precast side, we're looking for assets similar to our Geneva business with margin levels that are comparable or better and good asset efficiency. We prefer targets that are relatively close to existing plants so they can fold into our network, similar to when we acquired Boughton's Precast in Colorado and integrated it into Geneva. There has been a shortage of opportunities on the Precast side, but we're willing to look farther afield as long as the businesses have metrics comparable to ours and strong management teams. We're also evaluating adjacencies to Precast that provide growth opportunities. We'll consider adding one plant at a time, potential greenfield sites if they make sense, or ancillary infrastructure or precast-related businesses. Growing Precast and exploring these adjacencies is a key priority for continuing to grow the company and deliver higher revenue and profitability.
We have a follow-up from Ted Jackson with Northland Securities.
Most of my questions have been answered, but I have a couple. Before I say, congrats on the quarter and the execution. You consistently impress and then you actually raise the bar. I wanted to ask an obvious one I ask all the time about steel. At a basic level, can you tell me what steel was as a percentage of cost of sales for the quarter?
When you look at steel as a percentage of cost of sales, it's about 34% or 35% right now. It's high. That's a pass-through for us. Higher steel prices create higher project pricing, which doesn't necessarily improve project margin percentage but does improve total gross profit dollars. We're not afraid of higher steel prices as long as we can get steel.
That's the most important part. Your margins are performing well despite what's going on in steel, which speaks to the strength of your business. Last quarter you commented that pricing in steel was up 18%. If I look at different metrics, pricing appears up another 18% to 20% year-over-year. You said revenue per ton was up 6% this quarter. How does steel factor into that? It seems pricing would have been a bigger driver in the quarter given the steel backdrop. What am I missing there?
On pricing in the quarter, our revenue per ton on the WTS side was up about 6%. Steel cost was up about 24% based on what we consumed. That 6% increase in selling price was a higher dollar value than the portion of cost represented by the 24% steel increase. Another big piece of the puzzle is tons produced were up 26% quarter-over-quarter versus last year, so overhead absorption was significant and contributed substantially to margin improvement. So steel matters, but overhead absorption is helping even more right now.
What this also tells me is that your revenue mix has skewed toward better-margin projects the last few quarters. You're essentially guiding that mix will continue?
We've seen a very favorable product mix with the jobs coming through. When there's enough projects coming out, you can be selective and pick the ones that fit your cost position best, which improves product mix. We've seen a lot of that and the margin profile in backlog looks pretty good relative to the past. So yes, that's part of what you're seeing.
What do you think about steel cost for the remainder of this year and into next year on a per-ton basis?
Published public prices are over $1,200 a ton now and I think actual pricing in the market is somewhat higher. I expect prices to continue to inch up due to constrained supply from tariffs and capacity limits in the U.S. We saw steel approach $2,000 a ton during COVID; I won't predict that, but it's reasonable to expect continued upward pressure. A number like $1,400 a ton could happen and possibly more. Prices may continue to climb until they reach a level where imported steel economics change and supply dynamics shift, but the tariffs and their effects make it hard to pinpoint a tipping point.
When I look at Midwest flat-rolled contract pricing up 23% year-over-year and your lagged pricing model, steel costs are now modestly north of $1,000 a ton and continue to climb. Is that a fair assumption?
Yes, you can expect to see that as we move through this period. Also, many mills are doing outages now, which restricts supply and adds upward pressure on prices. Again, we're comfortable with higher steel prices as long as we can obtain supply because it translates into higher project pricing and more gross profit dollars.
On productivity, you're ramping up volume significantly. What is your utilization rate at this point within your plants? Are you becoming capacity-constrained?
We have six WTS plants across the country with different regional demand levels, and overall utilization is probably around 65% right now. We currently run one shift at these plants, and adding a second shift is an option. Demand is busy in specific areas, which makes taking additional business in those areas harder, but we can move projects around to absorb volume. We're not close to maximum capacity.
My last question is about SG&A. It was higher than I modeled. Within that line, what was driving the increase? Is it commission-related or something else? What should we expect for the remainder of the year?
SG&A has generally flattened out. The drivers pushing it up are incentive compensation and associated employee benefits, plus modest pressure on professional fees. We're approaching a point where incentive compensation is topping out, so I expect relatively consistent performance on the SG&A line through the third and fourth quarters, relatively consistent with the second quarter.
You broke up earlier. Did you say relatively consistent performance for SG&A through the third and fourth quarter?
Yes. Relatively consistent with the second quarter.
Okay, that's it for me. Congrats again and thanks for taking the questions.
I would like to turn the floor over to Scott for closing remarks.
Just a few closing remarks. The quarter was a strong second quarter with records in revenue, gross profit and EPS. We're seeing more consistency in results over time and significantly improved free cash flow, and those things are starting to show up in the share price. Water Transmission is performing exceptionally with record revenues and a lot of bidding activity. Even with weather-related issues in Precast, we came through the second quarter well, which bodes well for the rest of the year. We're continuing to advance our long-term strategy, broadening Precast capabilities across the network and evaluating opportunities to produce Precast products in additional WTS plants. Even without the significant previously unplanned NDA project, we believe we would be heading toward another record year supported by strong demand and bidding. Regarding the third quarter, we're being a bit cautious because of Texas weather issues, which can affect the business, but we expect a strong third quarter with both segments positioned for year-over-year growth and improving margins. Demand is sustained, which reinforces our confidence that 2026 is shaping up to be a historic year for NWPX. Thank you for your attention on the call, and we will talk again in late October. Thank you very much.
This concludes today's teleconference. You may disconnect your lines at this time, and we thank you for your participation.