Concrete Pumping Holdings, Inc. — Q1 FY2023 Form 10-Q
Reporting period: Three months ended January 31, 2023; comparisons are with the three months ended January 31, 2022 unless otherwise stated. The company provides concrete pumping and concrete waste-management services in the U.S. and U.K. Its business is seasonal, with historically lower sales in the first quarter and higher sales in the fourth quarter.
Financial and operating performance
| Metric | Q1 FY2023 | Q1 FY2022 | Change |
|---|---|---|---|
| Revenue | $93.6 million | $85.4 million | Up 9.5% |
| Gross profit / margin | $36.5 million / 39.0% | $34.1 million / 39.9% | Margin down 0.9 percentage points |
| Income from operations | $9.4 million | $7.4 million | Up $2.0 million |
| Net income | $6.5 million | $1.2 million | Up $5.3 million |
| Income available to common shareholders | $6.0 million; $0.11 per diluted share | $0.7 million; $0.01 per diluted share | Up $5.3 million |
| Net cash from operating activities | $17.9 million | $13.2 million | Up $4.7 million |
| Capital expenditures | $17.1 million | $35.4 million | Down $18.3 million |
| Adjusted EBITDA (non-GAAP) | $25.0 million | $23.3 million | Up 7.4% |
Revenue growth included U.S. Concrete Pumping of $67.2 million (+6.5%), U.K. Operations of $12.7 million (+5.7%; +17.9% excluding currency translation), and U.S. Concrete Waste Management Services of $13.8 million (+31.7%). Management attributed U.K. growth mainly to pricing and U.S. waste-management growth to organic volume and pricing.
Net income included a $4.6 million noncash gain from remeasuring warrant liabilities; that gain materially affects the year-over-year earnings comparison. Interest expense rose $0.6 million to $6.9 million. Management said higher fuel and other input costs pressured gross margin, with a lag before pricing increases took effect.
Balance sheet, debt, and liquidity
- At January 31, 2023, cash was $4.0 million, total assets were $882.1 million, and stockholders’ equity was $286.5 million.
- Gross debt was $425.2 million: $375.0 million of 6.0% Senior Notes due February 2026 and $50.2 million outstanding under the revolving ABL Facility, which matures January 2026. Debt net of deferred financing costs was $421.1 million.
- The company reported $106.2 million of available ABL borrowing capacity and total available liquidity of $110.2 million, including cash. It reported compliance with debt covenants and said it expected available cash, operating cash flow, and ABL capacity to cover working capital and capital needs for at least the next 12 months.
- Cash declined $3.4 million during the quarter. Investing activities used $14.8 million net; financing activities used $6.7 million, including $5.5 million of treasury-stock purchases.
- Current assets were $76.3 million and current liabilities were $102.9 million. The ABL balance was $50.2 million; outstanding letters of credit were $4.2 million.
Material changes, outlook, and notable items
- Gross margin fell despite revenue growth, which management attributed to inflation—particularly diesel fuel—and the timing of customer price increases. G&A was $27.0 million, slightly above the prior-year quarter; as a share of revenue it declined to 28.9% from 31.3%.
- No numerical full-year guidance is provided in the filing. Management cited seasonal demand, construction-market conditions, inflation and fuel costs, labor, weather, acquisition execution, currency movements, and substantial indebtedness as relevant uncertainties.
- Management described the company’s liquidity as sufficient for at least the next 12 months, while noting future needs could vary and additional financing might be required if existing sources prove insufficient.
- In February 2023, after quarter-end, the company acquired Cherokee’s assets for $6.3 million in cash; the purchase-price allocation was not complete when the filing was issued.
- The board authorized an additional $10.0 million for share repurchases in January 2023. During the quarter, the company repurchased 842,813 shares for $5.5 million total, including 760,457 shares under announced programs.
- The Series A preferred stock has a $25.0 million stated amount and a 7% cumulative redemption accretion after December 6, 2022; the filing says the accrued amount was $7.4 million and would be recognized when redemption becomes probable.
- Disclosure controls were deemed ineffective as of January 31, 2023 because of previously identified material weaknesses involving journal-entry review and IT access/segregation of duties. Management said it had implemented remediation measures, but they had not operated long enough to establish effectiveness.
- Management said ordinary-course legal proceedings were not expected to have a material financial-statement impact. The company was partially self-insured and accrued estimated insurance and health claims.
Important facts for investors to verify
- How much of earnings and reported EBITDA improvement reflects recurring operations versus the $4.6 million warrant remeasurement gain and other non-GAAP adjustments.
- Whether pricing continues to offset diesel, labor, insurance, and other cost inflation, and how margins perform as seasonal activity changes.
- ABL borrowing-base availability, variable-rate interest expense, covenant headroom, and the company’s ability to service debt due in 2026.
- Whether the newly implemented internal controls operate effectively long enough to remediate the disclosed material weaknesses.
- The final Cherokee purchase-price allocation and the acquisition’s contribution to results; also assess the cash demands of acquisitions and share repurchases.
- The potential dilution or cash implications of 13.0 million outstanding warrants, which had an $11.50 exercise price and a December 6, 2023 expiry, and of the preferred stock’s redemption/conversion provisions.