NWPX Infrastructure, Inc. Q3 FY2023 Earnings Call

Greetings, and welcome to the Northwest Pipe Company Third Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Scott Montross, President and CEO of Northwest Pipe Company. Thank you. You may begin.

Good morning, and welcome to Northwest Pipe Company’s third quarter 2023 earnings conference call. My name is Scott Montross, and I am President and CEO of the company. I’m joined today by Aaron Wilkins, our Chief Financial Officer. By now, all of you should have access to our earnings press release, which was issued yesterday, November 2, 2023, at approximately 4:00 p.m. Eastern Time. This call is being webcast, and it is available for replay. As we begin, I would like to remind everyone that statements made on this call regarding our expectations for the future are forward-looking statements, and actual results could differ materially. Please refer to our most recent Form 10-K for the year ended December 31, 2022, and in our other SEC filings for a discussion of such risk factors that could cause actual results to differ materially from our expectations. We undertake no obligation to update any forward-looking statements. Thank you all for joining us today. I’ll begin with a review of our third quarter performance and outlook. Aaron will then walk you through our financials in greater detail. Our third quarter revenue of $118.7 million improved 2% over the second quarter and declined by 3.5% compared to the prior year quarter. Revenue from our SPP segment remained fairly strong, but decreased 3.8% to $80.5 million compared to the prior year quarter. This came in below our expectations due to one-time anomalies that impacted both revenue and gross margins in the third quarter. First, we had some customer-driven contract changes as well as scope changes of certain projects that had previously been forecasted to benefit the third quarter. We also encountered some customer-related delays that impacted project delivery timing, pushing projects scheduled to be produced in the third quarter out into early 2024. This led to short-term production gaps at certain plants, causing higher levels of under-absorption, further impacting our revenue and margins for the quarter. In addition to these nonrecurring items, higher selling prices in our SPP business due to sales mix were partially offset by a decrease in tons produced, resulting primarily from changes in project timing. Prices of hot-rolled band steel declined approximately 27% from the second quarter to the third quarter but have increased rapidly by approximately 16% from September through year-to-date fourth quarter. SPP backlog, including confirmed orders, was $335 million at September 30, which modestly declined from $343 million at June 30, 2023, and from $347 million as of September 30, 2022. Our backlog remains elevated by historical standards even though 2023 has been a relatively small bidding year. Now turning to our Precast segment. Precast revenue decreased 2.8% from the prior year quarter to $38.2 million, primarily due to reduced demand resulting from the current interest rate environment impacting the U.S. construction market, which led to decreased absorption of overhead, changes in our product mix, and reduced selling prices given lower market demand, all while raw material input costs have remained fairly elevated. Nevertheless, as we progressed into a slower period in the fourth quarter, our Precast-related order book has remained fairly strong and totaled $52 million as of September 30, 2023, which was down from $58 million as of June 30, 2023, and down from $74 million as of September 30, 2022. Our third quarter consolidated gross profit decreased 23.2% year-over-year to $19.3 million, resulting in a gross margin of 16.3%, down from 20.4% in the third quarter of 2022. Our SPP gross margin of 13.6% declined by approximately 340 basis points over third quarter 2022, primarily due to the anomalies I just discussed, including customer-driven contract changes and project scope changes that reduced the gross profit we expected to realize in the third quarter and from customer-driven changes in project delivery timing, pushing projects that were to be produced in the third quarter out into early 2024 and created near-term production gaps at certain plants leading to higher levels of under-absorption. Absent these items, we estimate that our SPP gross margins would have been approximately 200 basis points higher. Also important to note is that we are starting to see the relatively small SPP bidding market we experienced in 2023 result in some pressure on project margins for projects that are currently bidding. Our Precast gross margin of 21.9% decreased by approximately 590 basis points from the near-record highs experienced in the third quarter of 2022. The decline was predominantly due to the impact of rising interest rates on the commercial construction and residential housing markets, which moderately reduced Precast product demand, reducing overhead absorption and resulting in changes in our product mix. This led to our margins normalizing compared to the record year we had in 2022. Next, I would like to provide an update on our capital allocation priorities. Our focus on organic growth of the business remains a top priority by means of our product spread strategy with our Precast operations. The acquisition of ParkUSA in October 2021 spawned this strategy given the Park business employs some of the same capabilities that we have in our other Northwest Pipe facilities, namely the production of Precast vaults and fabricated steel housings, which in the case of ParkUSA service containment units for the water control system products and the water-related environmental solutions systems. As such, our Level 1 product spread effort has been ramping to build out our capacity utilization in our Texas-based ParkUSA plants to maximize efficiency and production. To that end, the Park team has bid on approximately $32 million worth of projects outside of Texas year-to-date 2023, predominantly in the Western and Southeastern regions of the United States. And of that, year-to-date, the team has booked approximately $7.1 million worth of orders outside of Texas, up from $4.5 million in the second quarter. Over the last 12 months, we’ve successfully booked approximately $8 million in projects, and we were just getting started. Level 2 product spread comes into play because we also produce the concrete vaults and steel fabrication at the current Northwest Pipe plants. As such, we are in the early stages of bringing the production of ParkUSA’s products to our existing Northwest Pipe locations, which we believe will provide incremental organic growth potential to the company. As previously discussed, our Geneva Precast operations have been serving as the pilot locations for Level 2 product spread activity. Year-to-date in 2023, we have produced 10 projects at Geneva and are currently in production on three Park product orders with more scheduled to come. We plan to expand upon Level 2 product spread once Park products are more comfortably established at the Geneva locations before we expand the Park products to additional Northwest Pipe legacy plants. We remain confident in our organic growth strategy for the Precast to further diversify our business with the goal of improving our resiliency through economic cycles and driving long-term consistently profitable growth. Despite the short-term challenges affecting the Precast business, we believe in the long-term value proposition of this space and investments that we are making to drive sustainable growth. Following organic growth, we remain highly focused on repaying the debt incurred to finance the acquisition of ParkUSA in order to position ourselves for further acquisitions, but only after we are comfortable that ParkUSA has been fully integrated. I’ll next turn to our M&A strategy, in which we currently are continuing to seek accretive acquisition candidates in the Precast-related space. While the integration of Park remains paramount, including the finalization of the ERP system integration, which is expected to be completed by the end of this year, we are continuing to evaluate prospective high-quality opportunities that possess strong organic growth potential and margin characteristics, solid asset efficiency, and positive cash flow profiles. We recognize that finding the right opportunities take significant diligence and time. And as such, we are pleased that our Board has authorized a stock repurchase program in the amount of $30 million with no expiration date. This underscores their confidence in our long-term strategic growth plan in alignment with our goal to enhance shareholder value. In the absence of meaningful M&A activity, we may opt to return value to our stockholders via opportunistic share repurchases as we deem appropriate. Obviously, any repurchases would be subject to our liquidity, including availability of borrowings and covenant compliance under our amended credit facility and other capital needs of the business. Before I conclude, I’d like to summarize our outlook for the remainder of the year. Aside from some of the challenges we are continuing to work through, such as our ERP implementation, and the resultant impact the current interest rate environment has had on our business, our outlook for the balance of 2023 remains positive. In our SPP business, we anticipate a strong fourth quarter given various customer-driven anomalies that I just discussed that we faced during the third quarter that are not expected to recur, as well as continued strength in our backlog. We entered 2023 with a robust Steel Pressure Pipe backlog near record territory, which has remained elevated and should carry us through into 2024 and lead to a strong finish to 2023. Despite the relatively small level of bidding that we’ve seen this year. However, over the last few months, the small bidding environment has caused downward pressure on project bidding. As such, we expect fourth quarter SPP revenue to be in line with the fourth quarter of 2022, but with some downward pressure on gross margins. I’d also like to add that we remain encouraged by the amount of activity we’re seeing on our current and upcoming water transmission projects, as we are currently expecting a larger bidding year in 2024. For a more complete review of the projects, please review our investor presentation, which can be found on the Investor tab of our website within the Events and Presentations section. In our Precast business, we anticipate macroeconomic factors to continue to weigh on our volume. As a result, our Precast revenue in the fourth quarter is expected to be modestly down from the prior year period, with margins that are down from 2022 record highs, but similar to what we’ve seen in the second and third quarters of 2023. We continue to believe our Precast business is well positioned to benefit longer-term given the significant level of pent-up demand specifically for residential housing, a growing need for infrastructure spending in the United States and our strong market position. In summary, I’d like to thank our team for the continued solid execution against our strategic plan to drive enhanced shareholder value and long-term profitable growth. With our nationwide footprint, and as an industry leader in this space, we are well positioned to participate in the increasing amount of water infrastructure projects required to support the increasing U.S. population in the years to come. As a result, our goal remains for our Precast-related business to grow to a similar size as our SPP business. Looking ahead, we will remain focused on: one, finalizing the integration of ParkUSA as quickly and efficiently as possible; two, persistently focusing on margin over volume; three, continuing to implement cost reductions and efficiencies at all levels of the company; four, continuing to identify strategic growth opportunities for the company once we’ve completed the integration work with ParkUSA; and five in the absence of M&A opportunities, returning value to our stockholders through opportunistic share repurchases. Thank you to our dedicated team at Northwest Pipe for your continued persistence and execution against our growth strategy and for operating safely. I will now turn the call over to Aaron, who will walk through our financial results in greater detail.

Thank you, Scott, and good morning, everyone. I’ll begin today with an overview of our third quarter profitability. Consolidated net income for the third quarter was $5.8 million or $0.58 per diluted share compared to $10 million or $0.99 per diluted share in the third quarter of 2022. Consolidated net sales decreased 3.5% to $118.7 million compared to $123 million in the year-ago quarter. Steel Pressure Pipe segment sales decreased 3.8% to $80.5 million compared to $83.7 million in the third quarter of 2022. The decrease, which Scott discussed earlier, was driven largely by customer-driven contract changes as well as other anomalies that impacted production timing. This resulted in a 13% decrease in tons produced, which was partially offset by an 11% increase in selling price per ton, primarily due to product mix. Precast segment sales decreased 2.8% to $38.2 million compared to $39.3 million in the third quarter of 2022, primarily due to an 8% decrease in selling prices due to reduced demand, which was partially offset by a 6% increase in volume shipped due to changes in product mix. Due to the unique nature of the products we manufacture, shipment volumes in the case of Precast and production volumes in the case of SPP and the corresponding sales prices for both segments do not always provide comparable metrics between periods as they are highly dependent on the composition of the mix of our products. Consolidated gross profit decreased 23.2% to $19.3 million or 16.3% of sales compared to $25.1 million or 20.4% of sales in the third quarter of 2022. Steel Pressure Pipe gross profit decreased 23.1% to $10.9 million or 13.6% of segment sales. This compared to gross profit of $14.2 million or 17% of segment sales in the third quarter of 2022, primarily due to contract changes and project timing delays. It’s important to note that while timing delays are typical for the Steel Pressure Pipe business, the magnitude of these changes reduced revenue and production efficiencies at certain plants resulting in a significant variance from our expectations for the third quarter. Precast gross profit decreased 23.2% to $8.4 million or 21.9% of Precast sales from $10.9 million or 27.8% of segment sales in the third quarter of 2022, primarily due to changes in product mix. We have seen our commercial construction Precast markets decrease, however, our residential Precast markets have held up better against the current pressures from the broader economy. Selling, general and administrative expenses decreased 3.9% to $10.2 million or 8.7% of sales compared to $10.7 million in the third quarter of 2022 or 8.6% of sales. The decrease was primarily due to $2 million in lower incentive and compensation expense, partially offset by $0.9 million in higher professional services, including ERP implementation fees, and $0.7 million in higher base compensation and benefits expense. For the full year of 2023, we expect our consolidated selling, general and administrative expenses to be approximately $44 million. Depreciation and amortization expense in the third quarter of 2023 was $4 million compared to $4.3 million in the year-ago quarter, and I currently expect the quarterly run rate to continue at a similar pace. Our noncash incentive compensation expenses were $0.7 million and $1.2 million in the third quarter of 2023 and 2022, respectively. Interest expense increased to $1.2 million compared to $1 million in the third quarter of 2022. We continue to hedge approximately half of our exposure to variable interest rates using interest rate swaps. Due to the dramatic increase in the risk-free interest rates compared to the year-ago quarter, our interest costs increased even though our average debt balance decreased from the third quarter of 2022. We expect interest expense of approximately $5 million for the full year 2023. Our third quarter income tax expense was $2 million, resulting in an effective income tax rate of 25.7% compared to $3.6 million in the prior year quarter or an effective income tax rate of 26.3%. Our tax rates for the third quarter of 2023 and 2022 were impacted by nondeductible permanent differences. We continue to expect our tax rate for the full year 2023 to range between 25% and 26%. Now, I will transition to our financial condition. We generated net cash provided by operating activities of $16.9 million in the third quarter of 2023 compared to $15.3 million in the third quarter of 2022 due to changes in working capital partially offset by lower net income adjusted for noncash items. Our capital expenditures totaled $4.9 million in the third quarter of 2023 compared to $3.3 million in the third quarter of 2022. We anticipate our total CapEx to be in the range of $18 million to $21 million for full year 2023. As of September 30, 2023, we had $58.1 million of outstanding borrowings on our credit facility, leaving approximately $66 million in additional borrowing capacity on our credit line. Before I conclude, I’d like to provide an update on the progress we’ve made with the ongoing ERP implementation and material weakness remediation projects. With respect to the ERP implementation, we continue to meet project milestones and remain on schedule. We are working through user testing and broader training of the workforce in advance of our initial deployment of materials resource planning or MRP automation by the end of the year. I’m proud of the team’s incremental gains in data management and business process improvement. Physical inventories are detecting fewer variances, which will reduce our dependency on these labor-intensive events. As for the material weakness remediation, this remains a top priority for management and our Audit Committee. We have instituted more robust internal monitoring of our manual controls that failed at Park while related to revenue and cost of sales while we continue to focus on addressing specific concerns that arose from system development life cycle control failures noted in last year’s audit. Importantly, the internal control deficiencies identified have not impacted the accuracy of our current or historical financial results. In closing, even though we encountered some anomalies that impacted our third quarter financial results, I’m very pleased with the progress our team has made that positions us well for a solid finish to 2023 and the year ahead. We remain steadfast in our commitment to drive long-term growth and enhance shareholder value. I would also like to thank our employees for their continued prioritization of our safety program and express gratitude to all our stakeholders for their continued confidence in Northwest Pipe. I will now turn it over to the operator to begin the question-and-answer session.

Hey thanks, good morning, Scott, Aaron.

Hey Brent.

Good morning, Brent.

Hey, on SPP, perhaps could you just talk about the nature of the delays you’re experiencing? It doesn’t sound like isolated cases, but maybe it is. And then I guess, Scott, kind of what gives you the confidence that the schedules into the first quarter are firm?

Brent, I mean it was a little bit of a messy quarter on Steel Pressure Pipe, and I think the way to describe it is these are customer-driven changes in contracts and contract scope. We have some projects that are design-build projects, which means that you’re getting the project generally from the contractor or owner before it’s fully designed. So normally, they are probably 90% or 95% designed. In this case, it was probably 80% to 85% designed. As a result, you’re going forward with the value that you think you have with the customer going forward, but scope can change as you go through a project. Normally, these will go for like a year or year and a half, sometimes even longer with these design-build projects – but this was a relatively large project that was design-build that actually got altered within five months to six months. The changes were happening quickly and ultimately, the project scope changed and reduced what the project was. That was one piece. The other piece was another build project that had design issues that was supposed to be done in the third quarter, that ended up getting pushed into the first quarter of 2024. We see these delays from time to time, but these are two relatively large projects that really had an impact. Yes, we don’t see these things reappearing on a smaller scale. Generally, the design-build projects don’t move as quickly as some of the things happening now. I think there’s a little bit of a change in the business, Brent, because obviously, we’re trying to promote change and get progress payments on things and get advances for steel and other materials. Some of these projects are starting to come out and move quicker now, which we obviously have to pay more attention to. But that really is what caused the issue in the third quarter.

No. I think you’ve answered that Scott, it was really just the confidence that the schedules for these are firm as we get into the early next year.

Yes, I think we’re looking pretty firm right now. Obviously, this has been a small bidding year. If you think back to when we had bidding years like this in the past, especially with Steel Pressure Pipe back to 2015, 2016, and 2017, I don’t probably have to remind you too much of what the margins looked like in those years. One of the exciting things is while the quarter was disappointing, these smaller markets have decent margins, which really indicates a bit of change in market resiliency based on the current configuration in the market and ultimately, due to the consolidation in the market, which we were a big part of. This bodes well for the Steel Pressure Pipe business as we get into larger markets, which we expect to engage in 2024. We expect that market in 2024 to be quite a bit bigger than it was in 2023. So, I think we’re in pretty good shape with that.

Okay. Yes. And on that front, Scott, do these delays impede your ability to add new business in SPP just given that even though the production is sort of allocated, you can still fill it in?

No. Yes. I mean we have more than enough production capacity to probably handle most of what’s coming out in the market. Some of the timing gets a little bit tricky on projects, and you can’t handle them based on things being pushed out. But in any given quarter, we might be producing on somewhere between 50 and 100 different projects. So across all of our plants, we have the ability to move stuff around because we’ve got a nationwide footprint and deploy different assets unlike a lot of our competitors.

Okay. And then on Precast, I mean the sales line was sort of right as we’d anticipated, and I think you’ve been articulating maybe the margins were a little lighter than what we were thinking about. Maybe if you could just kind of level set us on where you expect the margins for the business to be considering, I mean we understand there’s some slack in some of these markets, but just be helpful.

Yes. I think probably everybody compares things going on to what 2022 was. In 2022, that was a boom year for Precast. There were a lot of records set in that business. Going through this year, we’re modestly off of the revenues we saw in 2022. Obviously, demand dropped. You have the higher interest rates affecting both the residential and nonresidential parts of the market. So you have reduced production levels, which leads to lower levels of overhead absorption and then less demand resulting in some price pressure. We’re experiencing some changes in product mix in the Precast business versus what we witnessed in 2022, including some products that may have a lower margin profile. However, overall, I think our margins are expected to align with about 22% for this quarter, which is a drop from around 25% in the second quarter. As we head into next year, there are predictions that the Fed might start loosening interest rates around mid-next year, and that could yield a positive response across housing and the commercial construction markets, which are a little slower right now than we’re seeing in the residential side. We’re coming through a period with significant headwinds in both the Steel Pressure Pipe and Precast segments, yet despite the quarter's disappointing outcomes, we are navigating through it in decent shape.

Yes. Just my last question, it might be for Aaron. I mean the cash conversion here this year has been pretty fantastic. I guess I’m wondering if there’s anything that’s an anomaly in there and how we ought to think about that into 2024. Is this unusual? Or can you keep up this pace because you’re going to have a balance sheet plus within cash and very little debt here pretty soon.

Yes. I think what I would say, Brent, is that one, yes, we’re performing better. I think we have changed the focus. So, I kind of mentioned it a little bit here and there because it’s a thing we’re continuing to work on, and we’re not where we want to be yet, but the progress we’re making, especially in getting customer prepayments, especially for steel, really puts us in a different working capital position on our jobs and moderates the working capital needs of that Steel Pressure Pipe business. That has been kind of a pain point for the company in its history. We acknowledge that and we acknowledge that that’s something we should strive to improve, and we’re trying to do that. Now I’m not saying that we haven’t had a couple of good blips this year that helped, especially in the first quarter, where I believe we saw around $21 million of free cash flow. So we’ve had a couple of positive bounces. But overall, we are seeing a shift in some customer relationships that’s paying dividends for the business and its cash flows.

Yes, I think just to add a little bit to that, Brent, the progress payments, as I noted at the beginning, are starting to change. We’ve been driving them because of the cash that gets tied up in current assets, especially with the Steel Pressure Pipe business. We are focused on securing progress payments, especially for steel in long projects where we have to buy steel upfront to guard against price fluctuations.

Very good. I’ll pass it on. Thank you.

Thank you, Brent.

Thank you. Our next question comes from the line of Julio Romero with Sidoti & Company. Please proceed with your question.

Hey, good morning, Scott and Aaron.

Good morning, Julio.

Hey, morning. You guys mentioned earlier on the Precast side that commercial construction has decreased, but residential has held up pretty well. Should we infer that to mean that you’re seeing the ParkUSA product demand kind of temper a little bit and Geneva hold up pretty well? And is that where some of the product mix challenges you mentioned earlier are stemming from?

I think that’s right, Julio. The interesting piece of this is, obviously, we’re in two robust markets on the Precast side of the business. The State of Texas is always building and spending cash generated from the energy sector, and Utah has seen solid net migration. We’ve been pleasantly surprised by how well the Precast infrastructure side of the business at Geneva has held up due to pent-up housing demand in the Utah market. Thus, while these segments have decreased modestly, the impact is more pronounced on the Park side. However, if you look at the Dodge Momentum Index and what’s coming forward, it reflects nonresidential projects moving into planning, generally leading spending in the nonresidential market by about 12 months. The index was up about 3% in September, while the commercial sector was flat. The institutional segment has increased substantially, which involves public projects like education and hospitals. Right now, the prediction is if the interest rates stabilize, we could expect a robust commercial construction market next year, along with a continued strong performance in the Precast infrastructure segment.

Great. No, that’s really good color there. I appreciate it. And then – maybe if you can speak to ERP a little bit. Did you call out how many days downtime you might have taken in the quarter and maybe how many you expect for next quarter?

Yes. Julio, what’s happening is we’re starting to see better transactional integrity throughout the business, primarily due to reinforcing processes and better data management compared to last year. We’re receiving assistance from consultants to help us navigate this, and we’re getting closer to MRP automation as we advance. Regarding downtime, I would estimate we've spent about three days on inventory-related downtime this quarter. The year-ago quarter was probably a little more because we had to conduct an extra inventory at the ParkUSA launch.

Got it. Thank you for that. And it sounds like you’re making progress there, for sure. And then just thinking about the share repurchase authorization, how should we kind of think about the cadence of you guys deploying that when you balance that with maybe debt reduction and some other cash uses?

Well, I think, Julio, the way we’re looking at it is, the Board approved the $30 million, and we’re new at this. We’ll probably start deploying maybe $10 million of that at a time just to start getting our feet wet. We’re going to continue to work down our debt as we go. As you heard Brent ask about cash flow, we’re focused on cash flow so that we can reduce debt and ultimately drive shareholder value. The repurchase program is a component of our growth strategy now because M&A acquisitions may not always be readily available or at practical valuations. The market is still competitive in terms of multiples, and we’re aware of our trading position to ensure we make accretive decisions for shareholders. In the absence of suitable acquisitions, we will consider share repurchases, but we won't do anything that disrupts our credit facility or puts us in a position where we miss acquisition opportunities when they arise.

Great to hear. Thanks very much for taking the questions.

Absolutely.

Thank you. Our next question comes from the line of Ted Jackson with Northland Securities. Please proceed with your question.

Thanks. Good morning, Scott. Aaron.

Good morning.

Good morning, Ted.

Yes. TGIF.

TGIF, yes.

The main question I want to ask is going back into your commentary, Scott, you had first of all, if there’s actually a presentation for the quarter, I’m not sure it’s on your website. When I go on your website, I see an August presentation. I think it hasn’t been updated, but perhaps I’m wrong.

Yes, I think it will be updated soon. Sorry about that.

Okay. In terms of questions, Scott, you had talked about a pickup in bidding activity for 2024. But because of the decreased bidding activity in 2023, there’s more margin pressure. I wanted to kind of unpack that a little bit on two fronts. First, you’ve had some nice margin business booked in your backlog that we’re seeing the benefit of. Could you elaborate on what this implies for your margin structure? On a positive note, the bidding activity for 2024 looks to be relatively strong. How does that impact your backlog as you progress through the year? Are there specific drivers behind the expected bidding activity?

To take the last question first, the IIJA funding and government funding are starting to gain traction as we head into next year. However, the larger projects we’re tracking typically take a couple of years to mature. Our strategic planning process is underway, and we’re looking at everything coming through our project tracking system to evaluate likely bids. We have identified significantly more projects planned for 2024 than we experienced in 2023. This is encouraging; however, the IIJA funding may not fully materialize until later (2025). Smaller projects typically don't yield much margin pressure; larger ones are what attract more competition. We've seen this trend in years past, where bidding slows down leading to a reduction in added backlog.

So, just to clarify, you're saying that while there are opportunities out there beneficial to backlog, the margin environment is tight due to fewer substantial project bids? I assume there’s competition for available projects?

Yes. That’s correct. And given the nature of this market cycle, increased competition makes it more focused on smaller projects, reducing margins overall.

Thanks for the clarity, Scott. I also want to commend your cash flow performance this year. It’s encouraging to see solid cash conversion rates, and it seems like your year-to-date level is close to 2020 figures. Looking forward to your continued growth in cash flow. I’ll now let someone else ask questions. Thank you.

Thanks, Ted.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I’ll turn the floor back to Mr. Montross for any final comments.

Yes. I’d just like to say thank you all for joining us today. We entered 2023 with a high backlog and have maintained that status in recent quarters. We feel confident as we move into 2024, managing significant opportunities in the water transmission Steel Pressure Pipe space. Although the Precast sector hasn't reached its record highs from 2022, it still remains strong. Our optimistic long-term perspective remains unchanged. We are committed to growing this sector to match the size of our Steel Pressure Pipe operation. We've faced many headwinds this year, especially in Steel Pressure Pipe, yet even with disappointing outcomes, our margins are significantly more favorable than in past years with similar market sizes. This indicates greater market resilience due to consolidation we've undergone and has us excited for future opportunities. The same applies for Precast. While facing challenges from interest rates, our business remains steady, which gives us both set of opportunities in the future. Thank you for your time today. We look forward to speaking again in March.

Thank you. This concludes today’s conference call. You may disconnect your lines at this time. Thank you for your participation.