Concrete Pumping Holdings, Inc. — Q2 FY2021 Form 10-Q
Reporting period: Quarter and six months ended April 30, 2021. The consolidated financial statements are unaudited. The company provides concrete pumping services in the U.S. and U.K., and concrete-waste management services primarily in the U.S.
Financial results and position
| Metric | Three months ended Apr. 30, 2021 | Six months ended Apr. 30, 2021 |
|---|---|---|
| Revenue | $76.9 million | $147.3 million |
| Gross profit / margin | $33.3 million / 43.3% | $63.2 million / 42.9% |
| Operating income | $6.8 million | $14.2 million |
| Net loss | $10.9 million | $23.1 million |
| Net loss per diluted share | $0.21 | $0.45 |
| Adjusted EBITDA (non-GAAP) | $25.0 million | $47.4 million |
Compared with the prior-year periods, quarterly revenue increased 3.8%, while six-month revenue declined 0.5%. Quarterly gross margin rose from 43.0% to 43.3%; the six-month margin eased from 43.3% to 42.9%. Adjusted EBITDA increased 6.5% for the quarter and was essentially unchanged for the six-month period. Net losses improved substantially from prior-year losses, which included a $57.9 million noncash goodwill and intangible impairment charge in 2020.
- Quarterly segment revenue: U.S. Concrete Pumping fell 2.2% to $56.2 million; U.K. Operations rose 41.1% to $11.9 million (27.3% excluding foreign-currency effects); U.S. Concrete Waste Management Services rose 8.5% to $9.0 million.
- Cash flow, six months: Operating activities provided $36.2 million, investing activities used $13.0 million, and financing activities used $15.8 million. Capital expenditures were $16.7 million; equipment-sale proceeds were $3.7 million.
- Liquidity at April 30: Cash and equivalents were $13.7 million. The company reported $121.2 million of available ABL borrowing capacity and total available liquidity of $134.9 million.
- Debt: Gross debt was $376.1 million, comprising $375.0 million of senior notes and $1.1 million drawn on the ABL facility; debt net of unamortized financing costs was $369.5 million. The notes carry a 6.0% coupon and mature February 2026. The ABL facility provides up to $125 million, subject to borrowing-base limits, and matures January 2026.
- Balance sheet: Total assets were $771.5 million; current liabilities were $40.9 million. The company also reported $25.0 million of zero-dividend convertible preferred stock and an $18.5 million warrant liability.
Material changes and unusual items
- In January 2021, the company issued $375 million of 6.0% second-lien senior secured notes, amended its ABL facility from $60 million to $125 million, and repaid its prior term loan. The refinancing generated a $15.5 million debt-extinguishment loss, primarily from writing off unamortized debt issuance costs. Quarterly net interest expense declined by $2.7 million year over year.
- Following SEC guidance on SPAC warrants, the company reclassified warrants from equity to liabilities and measures them at fair value through earnings. The resulting fair-value movement was an $11.5 million loss in both Q2 and the six-month period, versus gains in the comparable prior-year periods. The filing describes related prior-period restatements and revisions; a $0.5 million prior-period warrant-accounting impact was recorded as an immaterial out-of-period adjustment in Q2.
- Warrant remeasurement is noncash and materially affected reported earnings. The prior-year $57.9 million impairment was also noncash.
Outlook, commentary, and risks
- Management stated that revenue volumes had recovered to or above pre-pandemic levels in many markets and improved from those levels in Q2 FY2021, while COVID-19 continued to affect certain markets. U.S. pumping revenue faced pandemic-related weakness and severe Texas weather; U.K. growth reflected recovery from pandemic disruption. Waste-management growth was attributed to organic growth, pricing, and new offerings.
- The company said existing cash, operating cash flow, and ABL availability should be sufficient for working capital and capital expenditure needs for at least 12 months. No numerical earnings or revenue guidance was provided.
- Risks include uncertain COVID-19 effects on construction activity, customer demand and collections, project delays or shutdowns, and possible further impairment of goodwill or intangible assets. The business is seasonal, generally with lower sales in the first half of its fiscal year.
- Management concluded disclosure controls were not effective as of April 30, 2021 because of a material weakness involving accounting for IPO and private-placement warrants. Remediation was underway, but the company gave no assurance it would be successful. The company reported compliance with debt covenants and no litigation believed material.
Important facts for investors to verify
- Whether operating recovery and segment trends persist, particularly in U.S. pumping and U.K. operations, and how seasonality affects the second half.
- Cash generation, capital spending, and actual ABL availability under borrowing-base limits, including the impact of letters of credit.
- Debt service capacity and the terms, collateral priority, covenants, and refinancing implications of the notes and ABL facility.
- Warrant liability valuation, earnings volatility, the status of prior-period corrections, and progress remediating the material weakness in financial reporting controls.
- Any renewed impairment indicators or changes in COVID-19 conditions, customer payment behavior, or construction demand.