Concrete Pumping Holdings, Inc. — Q1 FY2020 Form 10-Q
Reporting period: Three months ended January 31, 2020. The company provides concrete pumping services in the U.S. and U.K., and concrete waste-management services, primarily in the U.S. Financial statements are unaudited. Unless stated otherwise, amounts below are in U.S. dollars.
Financial results
| Metric | Q1 FY2020 | Comparable period / change |
|---|---|---|
| Revenue | $73.9 million | $58.4 million combined prior-year period; up 26.7% |
| Gross profit / margin | $32.1 million / 43.5% | 39.8% margin; up 3.7 percentage points |
| Operating income | $5.5 million | Prior-year combined GAAP operating loss was $9.5 million, including transaction costs |
| Net loss / loss per share | $2.7 million / $0.06 | Prior-year combined net loss was $26.2 million; comparison is affected by transaction and debt-extinguishment costs |
| Adjusted EBITDA | $23.8 million | $17.1 million in the combined prior-year period; up 39.0% (non-GAAP) |
| Operating cash flow | $1.8 million provided | Prior-year statements are split between predecessor and successor periods and are not directly comparable |
| Capital expenditures | $17.4 million | Operating cash flow less purchases of property and equipment was approximately negative $15.6 million |
Interest expense, net, was $9.5 million. The company recorded a $1.1 million income-tax benefit on a $3.9 million pretax loss. Depreciation and amortization totaled $15.1 million.
Balance sheet and liquidity
- At January 31, 2020, cash was $2.6 million, versus $7.5 million at October 31, 2019. Current assets were $59.1 million and current liabilities were $88.9 million.
- Term-loan principal was $396.9 million and the revolving-credit balance was $38.7 million. The balance sheet reports total debt of $377.6 million net of deferred financing costs, plus the revolver. Cash and total available liquidity, including undrawn ABL capacity, were $33.8 million.
- The ABL facility has a $60.0 million maximum borrowing amount; available capacity was $31.2 million. The company reported compliance with debt covenants at quarter-end.
- Stockholders’ equity was $324.4 million; the company also had $25.0 million of zero-dividend convertible preferred stock. Common shares outstanding were 58.2 million.
Changes and management commentary
- Management attributed most of the revenue increase to the May 2019 Capital Pumping acquisition, which contributed approximately $12.0 million of incremental U.S. pumping revenue. U.S. concrete pumping revenue rose 35.3%; U.S. waste-management revenue rose 23.3%.
- U.K. Operations revenue declined 2.5% (3.8% excluding foreign-currency effects), which management attributed largely to unusually severe weather.
- Gross-margin improvement reflected Capital’s contribution, more favorable fuel pricing, and lower procurement costs. Higher G&A included increased intangible amortization, stock-based compensation, and staffing associated with Capital.
- Compared with the combined prior-year period, Q1 FY2020 had no transaction or debt-extinguishment costs; those prior-year costs were $14.2 million and $16.4 million, respectively. Management said their absence, along with revenue growth, contributed to the improved net result.
Outlook, risks and contingencies
- No specific financial guidance or forecast is provided. Management said cash, operating cash flow, and ABL availability should be sufficient for working-capital and capital-expenditure needs for at least 12 months; future requirements depend on growth, acquisitions, and economic conditions.
- Sales are seasonal, historically lower in the first quarter and higher in the fourth quarter, with weather affecting volume and working-capital needs.
- Debt bears floating-rate interest based on LIBOR plus margins. The company noted that additional financing, if needed, could dilute shareholders or impose debt-service and covenant constraints.
- Ordinary-course legal proceedings were not expected by management to have a material financial impact. The company reported partially self-insured liability and health claims, and $1.2 million of outstanding letters of credit. It relied on two significant vendors for concrete-pumping boom equipment, while noting alternatives were available.
- Management reported effective disclosure controls as of January 31, 2020, and no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Separate the acquisition-driven contribution from organic growth, particularly in U.S. pumping, and assess the persistence of the U.K. weather-related decline.
- Review the company’s Adjusted EBITDA definition and adjustments alongside GAAP results; the prior-year combined comparison is non-GAAP and the predecessor/successor statements use different accounting bases.
- Track cash generation against capital expenditures, working-capital movements, and the increase in ABL borrowings.
- Monitor debt balances, floating-rate interest expense, covenant headroom, and the company’s stated liquidity needs.
- Assess the terms and potential dilution or future redemption cost of the preferred stock, as well as outstanding warrants and equity awards.