Concrete Pumping Holdings, Inc. — Q2 FY2022 10-Q
Reporting period: Three and six months ended April 30, 2022. Figures are in U.S. dollars; financial statement amounts are in millions unless noted. The filing is unaudited.
Business context
The company provides concrete pumping services in the U.S. and U.K., and concrete waste-management services primarily in the U.S. Its business is seasonal, with revenue generally lower in winter and spring and higher in the fourth quarter. The quarter included the effects of the November 2021 Pioneer asset acquisition, which expanded U.S. operations in Georgia and Texas.
Financial performance and liquidity
| Metric | Three months ended Apr. 30, 2022 | Prior-year quarter | Six months ended Apr. 30, 2022 | Prior-year period |
|---|---|---|---|---|
| Revenue | $96.5 | $76.9 | $181.9 | $147.3 |
| Gross profit / margin | $38.9 / 40.4% | $33.3 / 43.3% | $73.1 / 40.2% | $63.2 / 42.9% |
| Operating income | $10.4 | $6.8 | $17.8 | $14.2 |
| Net income (loss) | $6.0 | $(10.9) | $7.2 | $(23.1) |
| Diluted earnings (loss) per share | $0.10 | $(0.21) | $0.11 | $(0.45) |
| Adjusted EBITDA (non-GAAP) | $27.7 | $25.0 | $51.6 | $47.4 |
Quarterly revenue grew 25.5%; six-month revenue grew 23.5%. Revenue increases reflected acquisitions and organic growth, including higher volumes and pricing in U.S. pumping, U.K. recovery and pricing, and U.S. waste-management growth. Despite higher sales, gross margin declined year over year as labor and fuel inflation outpaced pricing gains. Quarterly G&A rose to $28.5 million from $26.5 million, though it fell as a share of revenue to 29.6% from 34.4%.
- Cash flow: Six-month operating cash flow was $21.4 million, down from $36.2 million. Investing used $57.1 million, including $60.3 million of property and equipment purchases; financing provided $28.2 million, principally net ABL borrowings. Cash fell to $2.7 million from $9.3 million at October 31, 2021. Operating cash flow less property-and-equipment purchases was negative $38.9 million.
- Debt and liquidity: At April 30, gross debt was $404.9 million: $375.0 million of 6% senior notes due 2026 and $29.9 million drawn on the revolving ABL facility. The filing reports $93.7 million of undrawn ABL capacity and $96.4 million of total available liquidity including cash. The company reported compliance with debt covenants.
- Balance sheet: Total assets were $818.6 million and stockholders’ equity was $265.2 million. Current liabilities were $74.0 million against current assets of $73.6 million.
Material changes, outlook and risks
- Net income improved from the prior-year loss, aided by revenue growth and a $2.5 million gain from warrant remeasurement, versus an $11.5 million loss in the prior-year quarter. For the six-month comparison, the prior year also included a $15.5 million debt-extinguishment loss. These items make reported earnings comparisons less reflective of operating trends.
- Management cited rising fuel and labor costs, inflation, supply-chain disruption, tight labor markets, foreign-exchange movements and lingering COVID-19 effects. It said it has sought rate increases where possible; fuel costs materially affected results. The U.K. segment’s Adjusted EBITDA was broadly flat despite revenue growth, with inflation offsetting gains.
- Management stated existing cash, operating cash flow and ABL availability should be sufficient for working capital and capital expenditures for at least the next 12 months. The filing provides no specific revenue or earnings guidance.
- The company had $25.0 million of zero-dividend convertible preferred stock; an additional cumulative amount of $6.1 million would be relevant if redemption becomes probable. The company may elect redemption after December 6, 2022 under the stated terms.
- No goodwill or long-lived-asset impairment indicators were identified through April 30, 2022. Management will continue evaluating these assets. Ordinary-course legal matters were not expected by management to have a material financial impact; no material risk-factor changes were reported.
Important facts for investors to verify
- Whether pricing and volume gains can offset continued fuel, labor and other cost inflation, and whether gross margins recover.
- Capital spending needs and cash conversion: six-month property-and-equipment purchases substantially exceeded operating cash flow.
- ABL borrowing-base availability, covenant headroom, interest-rate exposure and the company’s ability to manage its debt burden.
- Acquisition contribution and integration, including the Pioneer assets, versus underlying organic growth.
- Potential dilution or cash obligations related to preferred stock, warrants and equity awards, and future impairment assessments.