NWPX Infrastructure, Inc. Q3 FY2024 Earnings Call

Good morning, and welcome to Northwest Pipe Company's Third Quarter 2024 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, October 30, 2024 at approximately 4:00 p.m. Eastern Time. This call is being webcast and it is available for replay. As we begin, I'd like to remind everyone that the statements made on this call regarding our expectations for the future are forward-looking statements and actual results could differ materially from expectations. Please refer to our most recent Form 10-K for the year ended December 31, 2023 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 for 2024. Aaron will then walk you through our financials in greater detail. Once again, we delivered strong third quarter results achieving new quarterly records in several key financial metrics. Our performance was driven by growth on the residential side of our precast business, as well as ongoing strength in our steel pressure pipe business. Our consolidated net sales increased 9.7% year-over-year to $130.2 million, outpacing our strong second quarter and reflecting the highest quarterly revenue ever reported by the company. The $27 million of gross profit generated in the third quarter was also a quarterly record. In addition, our focus on effective working capital management helped drive another quarter of strong cash flow generation. To further break down our segment level results. Revenue from our steel pressure pipe segment remained at near record levels totaling $85.9 million and increasing 6.7% year-over-year in line with our expectations. Our performance primarily reflected continued high production levels due to the ongoing strength in the bidding environment that has carried over into the second half of 2024, as well as changes in timing. Our SPP backlog including confirmed orders was $282 million as of September 30, down from $348 million as of June 30, 2024 and down from $335 million as of September 30, 2023. Although our backlog declined, our SPP team has done a tremendous job executing on bids and projects. We attribute the third quarter decline in backlog primarily to the timing of expected job awards, our mix in backlog, and to a lesser extent lower steel prices. Nevertheless, we believe our backlog remains healthy and the bidding environment remains strong with a significant number of tons expected to bid in the fourth quarter. As a result, we expect our backlog to improve through year-end. Our third quarter performance was partially offset by lower realized selling prices due primarily to lower raw material costs. While steel prices were fairly volatile throughout the course of the third quarter, they appear to be stabilizing in the $700 per ton range with lead times standing at about four to five weeks. Now turning to our precast segment. Precast revenue increased 15.8% year-over-year to a new quarterly record of $44.3 million, driven by strong operational execution by our teams in the field and a backdrop of continued robust demand on the residential side of our Geneva business, which resulted in strong production and shipment levels. However, reduced shipments on the nonresidential construction-related portion of our precast business at Park offset some of this strength, mainly due to the continued impact of the current interest rate environment on the commercial construction portion of the business. We expect this to reverse and become a tailwind as rates continue to come down. To a lesser extent, our production was also impacted by the severe weather events we experienced in Texas in July. Currently, in the nonresidential construction market for projects that are going into planning, which is generally about 12 months prior to breaking ground, the commercial and institutional segments are up 31% and 4%, respectively versus year's levels. As interest rates fall, the length of time between planning and breaking ground is expected to compress. As a result, we are expecting upcoming near-term strength in the non-residential market. On the pricing side, the residential part of our precast business has enacted multiple price increases throughout 2024, driven by strong demand that we've experienced at the Geneva locations. However, our non-residential precast business experienced some downward pricing pressure as a result of the elevated interest rate environment and the negative impact it has had on the commercial construction demand. With the initial Fed 50 basis point rate cut in September and the additional cuts that are expected before year-end, we expect the non-residential construction market to strengthen in the near term. As of September 30, our precast order book totaled $57 million, down modestly from $62 million as of June 30, 2024, reflecting the resilience of this segment as we enter the traditionally slower time of the year, and it was up from $52 million as of September 30, 2023. Our consolidated gross profit for the third quarter increased 40% year-over-year to $27 million, a new quarterly gross profit record for the company, which resulted in a strong gross margin of 20.8%, up from 16.3% in the third quarter of 2023. This is the strongest quarterly gross margin we've reported for the current SPP and precast configuration of the company. Our SPP gross margin of 19.4% was strong, increasing by approximately 580 basis points over the prior year period and 40 basis points over the prior quarter, primarily due to high production volume with strong overhead absorption as well as changes in product mix. This, in addition to the ongoing strength in the bidding activity we've been experiencing. Our precast gross margin of 23.5% improved by approximately 160 basis points over the prior year period and 140 basis points over the prior quarter, primarily resulting from the strength in the residential construction market, as well as changes in product mix. Margins on the residential construction side of the Geneva location strengthened versus the year-ago quarter. As indicated, non-residential commercial construction market demand has been adversely affected by the high interest rate environment, creating some margin compression. In addition, early third quarter severe weather-related impacts on our production and shipping days not only reduced early third quarter revenue at the Park facilities, but also reduced production levels, leading to lower overhead absorption further impacting non-residential margins. Next, I would like to provide an update on our precast product spread strategy to promote organic growth in the business. Year-to-date, we have bid on over $47 million worth of projects outside of the state of Texas and booked approximately $8 million worth of orders. As a result of our ongoing efforts to enhance capacity utilization at our Texas-based precast plants to maximize overall efficiency and production volume. Further, we gained additional traction on product spread at the Geneva plants in Utah by booking approximately $1.7 million of Park-related projects. Our goal is to look for excess of $2 million worth of park-related projects at Geneva in 2024. As previously noted, once the park precast products are established at the Utah locations, we plan to expand our product spread strategy to additional current Northwest Pipe geographic locations. This is in the planning stage and is scheduled to occur over the next couple of years. Further to expanding our capacity, we are pleased to report that our investment in the new reinforced concrete pipe and manhole mill at our Salt Lake City, Utah facility is near completion. This will unlock additional production capacity and capabilities, positioning the Geneva business for additional growth. In addition to our organic growth activities, we are continuing to actively evaluate M&A opportunities in the precast related space that would help accelerate progress in our precast strategy by increasing our manufacturing capabilities and production efficiencies and expanding our geographic reach and product portfolio. The ideal deal candidate would be accretive to our earnings, possess strong potential for organic growth, enhance our margins, and deliver consistent positive cash flow generation. In properly executing our growth strategy, repaying debt we've incurred to finance the 2021 acquisition of Park USA remains a top strategic focus of our capital allocation philosophy, and in the absence of accretive opportunities, we may opt to repurchase shares of our common stock. While we did not repurchase any shares during the third quarter, we remain opportunistic in our approach since the initial authorization of our share repurchase in November 2023; we bought back a total of 174,000 shares for $5.1 million as of September 30. Before I conclude, I'd like to summarize our outlook for the fourth quarter of 2024. In our SPP business, we anticipate a stronger fourth quarter than we've seen in recent years, despite it generally being the slowest quarter of the year due to two major holidays as well as expected weather-related events. Nevertheless, we expect revenue and gross margins to be relatively strong for the fourth quarter of the year, primarily related to a mix of projects that we booked and their overall impact on production volume. We also expect backlog to remain strong by historical standards, given the volume of expected steel pressure pipe bidding for the remainder of 2024. Further, we remain encouraged by the amount of activity we're seeing on our current and upcoming water transmission projects, which can be found detailed in our investor presentation on the Investor Relations portion of our website. We continue to expect a healthy bidding year in 2025, similar to 2024 levels. In the precast business, we are expecting our fourth quarter revenue to be down sequentially from the record third quarter we just reported, with relatively stable gross margins. We continue to believe in the strength of the precast business in the mid to long term, given the significant level of pent-up demand specifically for residential housing and a growing need for infrastructure spending in the US and our growing market position. In summary, I'm very pleased with the strong operational and financial performance we delivered in the third quarter. Thank you to all of our team members for your continued dedication to success and safety in the field, as we execute our growth strategy in pursuit of enhanced shareholder and stakeholder value. Our performance continues to be bolstered by a strong bidding environment in 2024 that is anticipated to remain elevated throughout the balance of the year and into 2025.

Thank you, Scott and good morning, everyone. Beginning with our third quarter profitability. Consolidated net income was $10.3 million or $1.02 per diluted share compared to $5.8 million or $0.58 per diluted share in the third quarter of 2023. Consolidated net sales increased 9.7% to $130.2 million compared to $118.7 million in the year ago quarter. Steel pressure pipe segment sales increased 6.7% to $85.9 million compared to $80.5 million in the third quarter of 2023. The improvement was driven by an 18% increase in tons produced, resulting primarily from improved market demand in a continued strong bidding environment, as well as changes in project timing. It was partially offset by a 9% decrease in selling price per ton due to lower raw material costs. Precast segment sales increased 15.8% to a new quarterly record of $44.3 million compared to $38.2 million in the third quarter of 2023. This was driven by a 35% increase in volume shift, which was partially offset by a 14% decrease in selling prices, resulting from changes in product mix. Our Geneva business continued its strong performance on resilient demand in Utah, while the headwinds for commercial construction demand in Texas continued encumbering our Park business that was also slowed by weather-related delays. As a reminder, the products we manufacture are unique and therefore shipment volumes in the case of precast, production volumes in the case of steel pressure pipe, and the corresponding average sales prices for both segments do not always provide comparable metrics between periods, as they are highly dependent on the composition of each segment's product mix. Consolidated gross profit was also a record increasing 40% to $27 million or 20.8% of sales compared to $19.3 million or 16.3% of sales in the third quarter of 2023. SPP gross profit increased 52.4% to $16.6 million or 19.4% of segment sales compared to gross profit of $10.9 million or 13.6% of segment sales in the third quarter of 2023, primarily due to higher production volume resulting from improved market conditions. Precast gross profit increased 24% to $10.4 million or 23.5% of precast sales from $8.4 million or 21.9% of segment sales in the third quarter of 2023, primarily due to increased shipment volume, particularly in Utah. Selling, general and administrative expenses increased 13.1% to $11.6 million or 8.9% of sales compared to $10.2 million in the third quarter of 2023 or 8.7% of sales. The increase was primarily due to higher incentive compensation expense. Our non-cash incentive compensation expense in the third quarter of 2024 was $1.2 million compared to $0.7 million in the year ago quarter. For the full year 2024, we now expect our consolidated selling, general and administrative expenses to be in the range of approximately $47 million to $48 million. Depreciation and amortization expense in the third quarter of 2024 was $5.2 million compared to $4 million in the year ago quarter. We expect depreciation and amortization expense to be approximately $19 million in the full year 2024. Interest expense increased to $1.5 million from $1.2 million in the third quarter of 2023, due primarily to higher interest rates and an increase in our average daily borrowings. For the full year 2024, we expect interest expense to be approximately $6 million. Our third quarter income tax expense was $3.7 million resulting in an effective income tax rate of 26.3% compared to $2 million in the prior year quarter or an effective income tax rate of 25.7%. Our tax rate for the third quarter of 2024 and 2023 were impacted by non-deductible permanent differences. We now expect our tax rate for the full year of 2024 to be within the range of 20% to 21%. The change in our expectation is due to the statute of limitations that have expired on uncertain tax positions during the fourth quarter. Now I will transition to our financial condition. Net cash provided by operating activities was $22.7 million in the third quarter of 2024 compared to $16.9 million in the third quarter of 2023, due to the company's improved profitability. Improving cash flows remains a key strategic focus of our business and is critical for the execution of both our growth and shareholder return priorities. While our third quarter free cash flows improved, the working capital needs of our steel pressure pipe business can be highly variable between quarters, and therefore, we concentrate on the annual performance of this key metric. We continue to anticipate free cash flows to range between $19 million and $25 million for the full year 2024. Our capital expenditures totaled $6 million in the third quarter of 2024 compared to $4.8 million in the prior year quarter. As a reminder, we anticipate completion of the new concrete pipe mill project in Salt Lake City by year-end, which after successful commissioning is expected to improve production yields and efficiencies on the reinforced concrete pipe and manhole we produce and sell out of that facility. We anticipate our total CapEx to be in the range of $20 million to $22 million for full year 2024, which includes approximately $8 million of investment in our new reinforced concrete pipe mill and associated building, and the remainder primarily for standard capital replacement. As of September 30, 2024, we had $60.7 million of outstanding borrowings on our credit facility, leaving approximately $63 million in additional borrowing capacity on our credit line. In summary, we were pleased to deliver another very strong quarter of financial performance and consecutive quarterly records for consolidated gross profit. Our steel pressure pipe business is well-positioned for the remainder of the year and into 2025, and our precast business returned a new quarterly revenue record for that segment. These achievements are made possible by our employees' exceptional execution. I would like to thank each of them for their commitment to safety as well as our shareholders for their continued support and trust in Northwest Pipe Company.

Hi. Good morning.

Good morning, Brent.

Good morning.

Hey, Scott or Aaron, just on the backlog for the quarter down 16% year-on-year. How much of that decline is just comparisons of lower steel prices versus just what you burned in the quarter in terms of volume?

I think it's a little bit of a decline, Brent. But right now it's waiting for some of these job awards that we've been notified to receive. They're a little bit slower coming in. That's a piece of it, and it's just how things are bidding. As we look at this, we expect the backlog, in fact, to start going up through year-end. Ultimately, we believe the backlog is strong. What I would say about the pricing level, the steel costs are probably down for us about 22% versus where they were year-over-year but the price is only down 9%. So the price is staying fairly strong. It's just a matter of job timing being awarded. We feel comfortable with the backlog that we're going to carry out at the end of this year and what we're going into with the bidding environment next year looks to be pretty similar. Our bidding levels are okay with the amount of tons that are bidding in the steel pressure pipe markets, but they're not huge years. With the IIJA funding that's out there, we think those numbers are going to jump up as we get out to 2026, 2027, and 2028 based on the amount of projects that are coming through. We have a long runway with strong backlog in front of us. The steel price is going to fluctuate but the most important thing right now, Brent, is the margin on the steel pressure pipe side is responding positively, getting up to 19.4% even in an environment when it's just an okay bidding level. A lot of that is due to the consolidation that's happened in the business. So we're pretty comfortable with what's going on. Steel prices are going to fluctuate and it seems like there's this invisible barrier that's around $700 a tonne where it doesn't get much lower than that. Historically, in our 25 years in the steel business, prices would sometimes drop suddenly. You don't see that anymore. So we seem to get down to around $700 a tonne and then it starts to bounce back up because we've seen steel price increase announcements which will ultimately affect the backlog too. So I apologize for the length of my response to a straightforward question but I felt I needed to provide context.

I appreciate it, Scott. Maybe just a follow-up on the backlog. If everything held constant with steel prices and I know they won't, how much of a revenue headwind do you have going into next year in SPP just from a pricing perspective? And I don't think that means any impact to your gross profit since it's essentially a pass-through, but trying to get a sense of what kind of headwind you'd still have next year just from a pricing perspective.

I think if it remains at its current level, we're currently in our annual planning process to create our annual plan. I don't anticipate much of a change. This is a significant year for steel pressure pipe, and by annualizing the numbers, we can project where they will be. I believe we are looking at figures increasing to over $300 million as long as steel prices remain unchanged. If steel prices increase again, that would naturally lead to higher revenue and more gross profit. Currently, I don't foresee a substantial challenge with this because we don't expect prices to drop down to $345 or $350 per ton. Prices appear to be stabilizing around $700. The pricing stability is due to the market consolidating to three major suppliers in steel pressure pipe—us, Thompson, and American Spiral Weld—which has created a more stable bidding environment.

Very good. Just last one. I mean it's a meaningful turnaround in revenue in precast this quarter. I guess, taking all your commentary it seems as though you think there's some sustainability in this trend going forward just given what you're seeing out there in the market, product spread, etc.?

Yes. I would say we're in a situation right now, Brent, where we're still not hitting on all cylinders because the residential side of the business is off a little bit right now due to interest rates. There was a little bit of a weather impact in the beginning of the third quarter, but the residential business has been off a little bit. The non-residential business has been off a little bit, and that's mainly at the Park facilities. But what we're seeing looking forward is significant strength on the residential side of the business at the Geneva facilities. We're looking at numbers where they're almost twice as much in revenue compared to what we had when we purchased them back in 2020. The residential side is really strong. Going forward, we continue to see that kind of strength because if you look at a lot of the indices out there, total construction starts are only up about 2% right now. Residential is up about 6%. Currently, non-residential is pretty flat again because of the interest rate impact. However, with a 50 basis point drop that the Fed implemented in September and the expectation of a 25 basis point drop at the next two meetings, this is creating more momentum in the Dodge Momentum Index. Now, versus September last year, the Momentum Index is about 21% higher than it was in September 2023, with most of that on the commercial side and slightly higher on the institutional side, which has held in quite well. Commercial construction demand such as data centers and hotels is starting to pick up, indicating a strong non-residential market is emerging. If we continue to have the strength that we're seeing in residential at the Geneva facilities and start hitting on all cylinders in the non-residential market as it comes back strength-wise, we expect that trend to continue to grow as we enter next year and beyond. So we see a lot of sustainability in that business right now, which includes growth plans alongside possible M&A activity.

Thank you. And I'll pass it on. Thanks, guys.

No problem.

Hey good morning, Scott and Aaron.

Hey, Julio.

Good morning, Julio.

Hey, good morning. What do you guys attribute to the resilience of the residential portion precast?

I think it's the same thing that's been going on. It's net migration into the State of Utah and in and around Utah. The housing market is very, very strong. We've seen concerns about it falling off with the increase in the interest rates, but we just have not seen it. In fact, it's continued to strengthen. There is some pent-up demand in the housing market because when interest rates were high, there wasn't enough inventory on the market. Houses are still being built, particularly in Utah and Idaho, which are desirable locations. The management team at the Geneva facilities has been excellent in executing growth in the market and ensuring we are pricing appropriately. It’s simply a robust market, and we’re focusing on doing the right things to sustain growth.

Got it. That's helpful. You mentioned that you expect the non-residential portion of free cash to strengthen in the near-term due to falling interest rates. Could you clarify the timing of that strengthening? Will it occur in the first half of 2025, the second half of 2025, or possibly even in 2026? Additionally, how much of this near-term strengthening of non-residential cash flow should we attribute to the decrease in interest rates versus an increase in public spending?

Okay. So the first part was what piece again? What was the first part?

Just trying to clarify the timing of when non-res gets better, like a first half event or ...

Normally, when examining the momentum index, projects typically enter the planning phase about 12 months before they actually begin construction. However, with interest rates decreasing, this timeline is shortening, as many have been holding off until rates fell. We are starting to witness early signs of improvement, with some of the yards or concrete production at our Park facilities increasing quarter-over-quarter compared to last year. This upward trend is becoming evident now. We anticipate that by mid-2025, or slightly thereafter, the situation will begin to strengthen significantly. I expect this strengthening to occur gradually at first and then accelerate as we move towards mid-to-late 2025. We foresee both the residential and non-residential sectors performing well as we move forward. What was the next part of that question?

Yeah. That's well, you answered the question. I had even after that which was...

Okay.

… the residential should stay resilient as the non-res gets better, and then you are kind of hitting on all cylinders going out. And the second part of my question was really just how much of that near-term strengthening of non-res should be from interest rates falling, but also from an increase in public spending IIJA funds flowing through, etc.?

Yeah. So for the non-res and residential segments, we’re primarily focused on the precast piece, right? The interest rates are really going to drive that and are more commercial. Non-building residential is really more oriented towards the IIJA infrastructure spending, which impacts our steel pressure pipe business. We haven't seen that yet. I think all that is ahead of us based on what we can observe. Therefore, interest rates are essentially igniting the demand. The more they come down, the stronger the business will become. We are also preparing for the launch of our new facility, which will increase our efficiency and capacity in the residential market. So we see growth into 2025 in the precast side, and likely acceleration in the non-residential market as we move into late 2025. The prospects appear very strong.

Great context there. And then maybe just last one for me would be talking about free cash flow a little bit. You had another strong quarter here even as steel pressure pipe continues to do well. Aaron, I think you mentioned the working capital needs of SPP can be variable on a quarter-to-quarter basis. We saw the days sales tick up a little bit sequentially. Does that days sales figure kind of continue to trend upward as steel pressure pipe continues to do well?

Yeah. It does tend to go in that direction, especially in the two larger quarters of the year, which are typically the second and the third. It's not atypical for the fourth quarter's days to fall off a little bit and to see a little bit more working capital efficiency come through in your fourth quarter free cash flow. Our business levels aren't something right now that we're expecting to see as much of a fourth quarter fall-off as we've seen in other years. We're actually expecting them to stay relatively elevated. I think we'll get a little bit of an uptick in free cash inflow for the next fourth quarter relative to what we had last year and the second quarter leading up to the third quarter. But the main driver of our cash flows this year is really our profitability.

And another part of that, Julio, is the focus we've had on ensuring that we're maximizing cash flow from the steel pressure pipe business. A significant aspect of this is ensuring prompt payments for progress in steel and anything we can get paid upfront for, which has been beneficial for our cash flow. We've placed a lot of emphasis on managing cash efficiently now. This is a top priority, as that and profitability matters significantly for our goals. The team is responding well and taking actions that boost cash flow, which will continue to be a core focus.

Really helpful. Thanks for taking the question.

Sure, Julio.

Thanks. Congratulations on another excellent quarter.

Congratulations on another excellent quarter. First of all, I want to let you know that I have a couple of friends that have recently moved from California to Utah. So they're helping out on the housing demand.

I'll trust you, man. Like the houses took a lot of concrete to build it big.

The more people we attract, the better off we will be.

I'll trust you. Like the houses took a lot of concrete to build it big. On the SPP and the backlog, you've put up a couple of quarters of really, really excellent margins. And if you look or when you look into backlog that you have, what's the margin profile for that? I mean, were we able to maintain that call it at 19-ish% margin in SPP in fourth quarter? And then how would we think about that for 2025?

Yeah. The fourth quarter is typically influenced by weather events, right? Are we going to have winter storms and ice? Additionally, there are two major holidays during the fourth quarter. So generally, I don't know that fourth quarter is indicative of what we're going to see going forward. We believe margins will remain strong like they've been this year, but we don’t think that we will see the same levels observed in 2025. Our production levels and business levels are expected to be similar to 2024. A significant factor is the overhead absorption rate, which we have been managing properly. Currently, we are operating about 65% capacity utilization at our facilities, which is strong. If we stay at those levels, we can expect margins to remain high and perhaps even improve as we build on strong demand trends. 2025 looks to be a decent bidding year as well, but perhaps not as strong as what we anticipate for 2026, 2027, and 2028 with IIJA funding ahead of us. We expect to see margins be very strong during those years. We don’t announce monthly results, but we've recorded months recently with margins exceeding 20% in steel pressure pipe. So that's encouraging, and it's a good sign for the future, especially considering the bidding activity we expect.

If I were to summarize what you've just shared, excluding the utilization aspect, it appears that over the next few quarters, there will always be factors beyond your control. However, the backlog and the positive outlook for the next few years suggest that, assuming all else remains equal, the margin environment should improve. If this projection holds true, it may lead to historical record margins. If you start achieving regular margins above 20%, that would indeed be an exceptional outcome for your company, wouldn't it?

I think we've seen margins in the past and quarterly margins; Aaron, you may have to correct me if I'm wrong, but I think we've seen them as high as 25% in a quarter when we had a lot of work going on. What you're saying is right, Ted. I think when you start getting over 20%, 21%, 22%, that's about as high as we've seen. What we haven’t experienced is a scenario like this with IIJA funded jobs coming in. And you never know. We could see those margins push into the mid-20s if the anticipated projects materialize and demand continues to grow.

Let's talk about capital expenditures. In 2024, you had significant spending, including the Geneva plant and the $8 million for the Salt Lake City expansion. For 2025, will there be similar projects that will help maintain your capital spending, or should we expect it to decline from around $20 million? I'm curious if there's a chance we'll return to levels like 2021, where spending was about $13 million to $14 million, or if there are additional projects that will keep expenditure around $20 million.

No, I don't think it comes down to like a $12 or $13 million. Looking forward as we evaluate our upcoming projects, I think we’ll be in the range of $16 million, $17 million, $18 million, which would be reasonable unless we have a large project like we did with the exact 2,500s in Salt Lake City. That project was over a number of years in excess of $20 million. If you analyze our maintenance CapEx, it's likely to trend between $16 million to $18 million unless we lock in another large project.

Okay. And then just circling over to the M&A. I know you guys have been looking hard and knocking around trying to find stuff. You described your ideal acquisition, and I hope you find it because it sounds perfect. Is there something like that? Are you currently in the process of discussions? Given that most of the integration work you've done with Geneva and Park is now complete, what's the timeline? Can we expect something in 2025? Is this active, or just exploratory?

We would like to have something completed by 2025. We're always working on opportunities. M&A is an area we focus on, so we are definitely open to finding the right match.

So then my final question, I'll let you go, Scott, is just talking about backlog a bit. You always highlight the backlog number on a dollars basis, which is fine. Given the volatility, and you touched on this a bit within the context of today's call. But could you offer some color? I know you don't want to get into too much detail about kind of what's the volume of backlog that you have relative to say 12 months ago and last quarter and how you see it rebounding, because you are clearly expecting a rebound in the fourth quarter. But like this kind of something to kind of sort of apples-to-apples it for us?

The volume right now is a little bit lower than it has been. One factor in our backlog is when we have many tunnel work items. We call this long fuse work, meaning it can sit in backlog for up to two years before converting to orders. What we have in the backlog currently is actionable, and it is down from the areas previously mentioned. However, we are waiting for a number of expected tons to be awarded, which should gradually push us back up to where we have been on tonnage as we approach the end of this year and early next year. So we haven't experienced a significant decline. As I mentioned, steel prices are lower year-over-year for us, around 22%, while the consumer prices have only dropped about 9%. Our pricing remains relatively solid. Overall, the tons we expect will be similar as we close out this year compared to previous periods.

Okay. That’s a fair answer. Again, congrats on the quarter. That was impressive.

Good to talk to you.

Good morning.

Good morning, David.

Congratulations on achieving $10 million net and maintaining 20% margins. You've been working hard, and it must feel rewarding to see everything coming together. I appreciated the in-depth discussion about SPP margins that Ted brought up; it was very informative. I wanted to ask about your precast performance. It sounded like Utah was performing really well. How does that compare to Texas?

Well, Texas has been lighter volumes, David. So that's been down a little bit. The margins on the residential side are probably a few to several hundred basis points higher than the non-residential side because of higher volume absorption. We aren’t maximizing all potentials yet, since the non-res is relatively light, especially at the Park facilities. However, we expect that performance to return, ultimately with expected margins at Park to equal if not exceed those at the Geneva facilities when we strike the right amount of business. As for now, the Geneva facilities are a few hundred basis points above at this point.

Okay. And when you mentioned in the press release, you talked about an increase in volume and decrease in selling price due to changes in product mix and precast. What products are you selling a lot of?

Well, the Geneva part, the Geneva products are a larger share of the precast mix right now. These are more infrastructure products that usually have lower selling prices than those of the Park products. Additionally, we're observing a lot of work that deals with covert operations in Geneva, which, while it's not a high-price item per unit, consists of high concrete volumes and maintains good margins. That's mainly what I would attribute the changes to.

Okay. Well, that’s all I have, and again congratulations and thank you.

Thank you. I appreciate it.

Thank you. At this time, there are no further questions in queue. I'd like to turn the call back to Scott Montross for closing comments.

Yes. Just a few takeaways before we leave. Obviously, we expect to finish with a strong fourth quarter, achieving strong levels for a fourth quarter of the year. As we've discussed, we anticipate 2025 to be very similar to what we saw in '24 on the steel pressure pipe side. We expect to continue to gain strength on the Precast side. So, we are positioned well for the near and midterm on both SPP and Precast sides. Ultimately, we will see some tailwinds from the IIJA funded initiatives, which likely will heavily impact us as we progress through '25 into 2026. Once again, we expect to see the precast business strengthening during that time. We've talked about product spread, and it's moving along quite nicely. The Park product business at the Geneva facilities is continuously growing, and we aim to expand our Park products across our other Northwest locations as well. To recap, in the third quarter of 2024, we reached over $130 million in revenue and $27 million of gross profit. In comparison, the full year of 2017 was around $132 or $133 million of revenue and approximately $5 million of gross profit. The company's growth trajectory is evident. We're on a path that we will continue to follow, both organically through product spread and in the M&A space. We have a lot of runway ahead of us, and I want to thank everyone on the call and all our employees for their support and dedication to our business. We look forward to speaking to you again in March when we discuss our full-year results. Thank you very much.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.