Concrete Pumping Holdings, Inc. — Q2 FY2024 Form 10-Q
Reporting period: Three and six months ended April 30, 2024. Unless stated otherwise, figures are in U.S. dollars; financial statement amounts are in millions. The company provides concrete pumping services in the U.S. and U.K. and concrete waste management services in the U.S.
Financial performance
| Metric | Q2 FY2024 | Q2 FY2023 | Six months FY2024 | Six months FY2023 |
|---|---|---|---|---|
| Revenue | $107.1 | $107.8 | $204.8 | $201.4 |
| Gross profit | $41.8 | $43.5 | $75.1 | $79.9 |
| Gross margin | 39.0% | 40.3% | 36.7% | 39.7% |
| Income from operations | $12.1 | $13.2 | $13.5 | $22.6 |
| Net income (loss) | $3.0 | $5.6 | ($0.8) | $12.1 |
| Net income (loss) per diluted share | $0.05 | $0.09 | ($0.03) | $0.20 |
| Adjusted EBITDA | $27.5 | $28.8 | $46.8 | $53.9 |
Q2 revenue was down 0.7% year over year; first-half revenue rose 1.7%. Lower U.S. Concrete Pumping revenue and weaker margins weighed on results. First-half net income declined to a loss, reflecting lower operating income and a much smaller warrant fair-value gain than in 2023; the prior-year six-month period included a $5.7 million warrant gain, versus a $0.1 million gain in 2024.
Segments and material changes
- U.S. Concrete Pumping: Q2 revenue fell 4.8% to $74.6 million; first-half revenue fell 2.9% to $141.3 million. Adjusted EBITDA declined 10.7% in Q2 to $17.2 million and 22.6% for the half to $27.9 million. Management cited slower commercial construction, pump oversupply in some markets, heavy precipitation, and lower labor utilization.
- U.K. Operations: Q2 revenue increased 2.0% to $15.5 million, but was down 1% excluding currency translation. First-half revenue increased 10.8% to $31.0 million, or 6.6% excluding currency translation, with pricing improvements cited. First-half Adjusted EBITDA rose 17.7% to $7.3 million.
- U.S. Concrete Waste Management Services: Q2 third-party revenue rose 19.3% to $16.9 million; first-half revenue rose 16.8% to $32.5 million, driven by organic growth and pricing. First-half Adjusted EBITDA was essentially flat at $11.6 million.
- Consolidated gross margin declined 1.3 percentage points in Q2 and 3.0 points for the first half. Management attributed the decrease mainly to lower U.S. pumping volume and labor utilization, and higher commercial insurance costs; lower fuel and repair costs partly offset the first-half decline.
- First-half G&A increased $4.3 million to $61.6 million, including a $3.5 million non-recurring Washington sales-tax litigation charge and higher labor and health insurance costs. The charge was recorded in Q1.
Cash flow, debt and liquidity
- Six-month operating cash flow was $29.4 million, compared with $31.1 million a year earlier. Capital expenditures were $28.8 million, down from $34.7 million; proceeds from equipment sales were $5.2 million.
- Cash and cash equivalents were $18.0 million at April 30, 2024, versus $15.9 million at October 31, 2023. Working capital was $19.5 million.
- Gross debt was $391.4 million: $375.0 million of 6.0% senior notes due February 2026 and $16.4 million drawn on the ABL revolving facility. The ABL weighted-average borrowing rate was 8.9%. The company reported $198.9 million of available ABL capacity and total available liquidity of $216.9 million, including cash.
- Management reported compliance with debt covenants and believes existing cash, operating cash flow and ABL capacity will meet working capital and capital expenditure needs for at least the next 12 months.
- The company repurchased $1.5 million of shares under its program during the six-month period. The board increased the authorization by $15 million in March 2024; the program authorizations expire March 31, 2025.
Outlook, risks and unusual items
- The filing provides no specific revenue, earnings or EBITDA guidance. Management notes that results are seasonal, with lower activity generally in winter and spring and higher revenue in the fourth quarter; weather affects volumes and working-capital needs.
- Key disclosed risks include construction-market weakness and cyclicality, interest rates, inflation and fuel costs, adverse weather, labor and supplier availability, insurance claims and litigation, currency movements, and substantial indebtedness and related restrictions. No material changes to previously disclosed risk factors were reported.
- Washington State sales-tax dispute: after an unfavorable February 2024 appellate judgment, the company recorded a $3.5 million loss in Q1 and paid $1.8 million to the state. It began assessing sales tax on Washington customers in Q2. Management considers the loss probable; no additional quantified exposure is stated here.
- Ordinary-course legal proceedings are disclosed; management does not expect them to materially affect the financial statements and says no contingent liability accrual is required. The company retains significant risk for workers’ compensation, automobile and general liability claims; net recorded self-insured commercial liabilities were $7.7 million after expected recoveries.
- The company’s 13.0 million public warrants expired on December 6, 2023. Disclosure controls were assessed as effective, with no material quarter-over-quarter change in internal control over financial reporting.
Important facts for investors to verify
- Whether U.S. pumping demand, volumes and labor utilization stabilize, particularly in markets affected by weather and equipment oversupply.
- Whether waste-management growth and U.K. performance can offset U.S. pumping weakness, and whether gross margins recover amid insurance and labor cost pressure.
- The company’s ability to refinance or repay the $375 million senior notes due February 2026, and the effect of variable-rate ABL borrowings on interest expense and liquidity.
- Developments in the Washington sales-tax matter, including any remaining payments or further appeal-related exposure.
- Cash conversion relative to capital spending, self-insurance claims and share repurchases; the filing reports substantial liquidity but also significant debt.
- Adjusted EBITDA is a non-GAAP measure; review the filing’s reconciliation and its stated limitations alongside GAAP results.