Concrete Pumping Holdings, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended October 31, 2021. This is an annual report, not a standalone fourth-quarter report; quarterly results are not clearly provided in the supplied filing text. Amounts are in U.S. dollars unless otherwise stated.
Business context
Concrete Pumping Holdings provides concrete pumping and concrete waste-management services in the U.S. and U.K. Its reportable segments are U.S. Concrete Pumping, U.S. Concrete Waste Management Services, U.K. Operations and Corporate. The U.S. pumping segment generated 73% of FY2021 revenue; U.S. waste management 12%; and U.K. Operations 15%. The company reported about 1,300 equipment units, 1,300 employees and 140 locations at year-end.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Revenue | $315.8 million | $304.3 million | Up 3.8% |
| Gross profit / margin | $137.7 million / 43.6% | $137.3 million / 45.1% | Margin down 1.5 percentage points, attributed mainly to labor and fuel inflation |
| Operating income (loss) | $38.0 million | $(31.7) million | FY2020 included $57.9 million of goodwill and intangible-asset impairment |
| Net loss / loss per share | $(15.1) million / $(0.31) | $(61.3) million / $(1.20) | Loss narrowed year over year |
| Adjusted EBITDA | $104.3 million | $107.3 million | Down 2.8%; non-GAAP measure |
| Cash from operations | $75.8 million | $79.0 million | Down $3.1 million |
| Capital expenditures | $62.8 million | $39.3 million | Investing cash outflow was $56.6 million after equipment-sale proceeds |
Segment trends: U.S. Concrete Pumping revenue was nearly flat at $229.5 million, with Adjusted EBITDA down 9.1% to $68.1 million. U.K. Operations revenue rose 22.9% to $48.1 million (up 14.0% excluding currency translation), and Adjusted EBITDA increased 25.4% to $15.3 million, reflecting recovery from COVID-19 disruption. U.S. Concrete Waste Management revenue rose 7.5% to $38.6 million; Adjusted EBITDA increased 4.1% to $18.4 million.
Debt and liquidity: At October 31, 2021, cash was $9.3 million and available ABL borrowing capacity was $120.6 million, for reported total available liquidity of $129.9 million. Gross debt was approximately $376.0 million: $375.0 million of 6.0% senior secured second-lien notes due February 2026 and about $1.0 million drawn on the ABL Facility. The notes are secured, subject to covenants; the company reported compliance with debt covenants. Management believed cash, operating cash flow and ABL availability would meet working-capital and capital-expenditure needs for at least 12 months.
Material changes and unusual items
- In January 2021, the company issued $375.0 million of 6.0% senior notes, expanded ABL commitments from $60.0 million to $125.0 million, and repaid its prior term loan. The refinancing reduced net interest expense by $9.2 million, but generated a $15.5 million debt-extinguishment charge.
- Warrants were reclassified from equity to liabilities following SEC guidance on SPAC warrants. FY2021 included a $9.9 million non-cash expense from fair-value remeasurement; warrant liabilities were $16.9 million at year-end. The FY2020 financial statements were revised, and earlier periods were restated as described in the filing. The accounting changes did not affect revenue, operating income, liquidity, cash balances or cash flows.
- COVID-19-related impairments of $57.9 million were recorded in FY2020; no impairment was identified through FY2021 year-end. Remaining goodwill was $224.7 million. Management cautioned that future impairments remain possible.
- The company completed three asset acquisitions in FY2021. The September Hi-Tech acquisition had $12.3 million of consideration. After year-end, it acquired Pioneer for $20.1 million in cash; the purchase-price allocation was not complete when the report was issued.
- U.K. tax-rate changes contributed approximately $2.1 million of FY2021 tax expense. The company recorded a $2.6 million tax expense despite a pretax loss.
Outlook, risks and contingencies
The filing provides no numeric revenue, earnings or margin guidance. Management said FY2021 volumes had largely returned to pre-pandemic levels in most U.S. markets and were near pre-pandemic levels in the U.K., while noting continuing COVID-19 effects in some markets. The business is seasonal, weather-sensitive and exposed to construction-market cycles, labor and fuel inflation, equipment costs, customer credit risk, foreign-exchange movements and acquisition integration risks.
Other significant risks include substantial indebtedness and restrictive covenants, variable-rate ABL exposure and the transition from LIBOR benchmarks, potential labor shortages or multiemployer pension withdrawal liabilities, equipment and workplace safety claims, environmental compliance and remediation exposure, and Brexit-related uncertainty. The company reported no litigation it believed material and no known material environmental non-compliance. It was in compliance with debt covenants at year-end.
The independent auditor issued an unqualified opinion on the consolidated financial statements. Management concluded disclosure controls and internal control over financial reporting were effective at October 31, 2021 and said a previously identified material weakness concerning warrant accounting had been remediated. The auditor did not attest to internal-control effectiveness because the company qualified as an emerging growth company.
Important facts for investors to verify
- Whether revenue recovery and pricing can offset continued labor, fuel and other cost inflation, particularly given the decline in gross margin and U.S. pumping Adjusted EBITDA.
- Debt-service capacity and refinancing risk, including the $375.0 million note maturity in 2026, ABL availability and applicable covenants and interest-rate benchmarks.
- Whether operating cash flow can sustain fleet investment and growth after FY2021 capital expenditures of $62.8 million.
- The assumptions supporting goodwill and intangible-asset carrying values, and any future impairment indicators related to COVID-19 or market conditions.
- The dilution and potential share overhang from 13.0 million public warrants, outstanding equity awards and convertible preferred stock; verify current balances and terms.
- Integration and returns from the Hi-Tech and Pioneer acquisitions, and the effects of the preferred stock’s potential redemption terms and accrued preference.