NWPX Infrastructure, Inc. Q4 FY2025 Earnings Call

Greetings, and welcome to the NWPX Infrastructure Fourth Quarter 2025 Earnings Call. The operator provided instructions. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Scott Montross, Chief Executive Officer. Thank you, sir. You may begin.

Good morning, and welcome to NWPX's Fourth Quarter and Full Year 2025 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, February 25, 2026, 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. Please refer to our most recent Form 10-K for the year-ended December 31, 2024, and 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 2025 performance and our outlook for the first quarter of 2026. Aaron will then walk you through our financials in greater detail. 2025 was another outstanding year for NWPX, marked by record financial performance, disciplined execution, operational improvements across our facilities and sustained demand across our end markets. First and foremost, we achieved record safety performance in 2025 with a 1.06 recordable incident rate, reflecting our culture and our belief that operational excellence begins with protecting the well-being of our employees. Our annual net sales reached $526 million, up 6.8% from 2024 and the highest in our company's history. This performance was supported by continued strength in the WTS bidding environment with the fourth quarter marking our strongest bidding quarter of the year, signaling solid momentum ahead. We also benefited from a better-than-normal fourth quarter. In Precast, our revenue was strong and margins continue to improve. WTS posted solid revenue and a robust margin as well. Our strategy drove record consolidated gross profit dollars of $103.6 million, up 8.6% year-over-year, resulting in a gross margin of 19.7% compared to 19.4% in 2024. This translated into record profitability with earnings of $3.56 per share and free cash flow of $47.1 million or $4.74 per share, demonstrating the strength, consistency and quality of our earnings and the durability of our cash generation. Revenue from our WTS segment totaled a record $350.9 million in 2025, up 3.8% year-over-year with increased margins. Our performance reflected higher selling prices per ton, up 14% year-over-year, driven by an improved product mix and a broader market dynamic in addition to favorable project timing across several large Water Transmission jobs and another very strong year of bookings associated with good project bidding volume. These gains were partially offset by a 9% decline in the production volume associated with the content of various projects produced throughout the year as well as shifts in project timing. The fourth quarter was exceptionally strong with a 26% improvement in selling price per ton, a consistently healthy bidding environment and strong project execution, all reinforcing the momentum we are carrying into 2026. WTS gross profit reached a record $67.1 million, up 7.2% from 2024, resulting in a gross margin of 19.1%, up from 18.5% in 2024. This improvement was driven by higher selling prices and a more favorable product mix and supported by continued strong customer demand and solid operational execution. Our WTS team continued to execute at a high level on both bids and project management throughout the year. Robust fourth quarter bidding activity increased our WTS backlog, including confirmed orders, to $346 million at year-end, up from $301 million at September 30 and well above the $310 million level at year-end 2024. We expect the 2026 bidding environment to be relatively consistent with 2025. Precast revenue increased 13.3% year-over-year to a new annual record of $175.1 million. Our performance was driven by an 8% improvement in sales volume, reflecting continued growth in the non-residential portion of our Park business with shipments and production increasing double digits year-over-year. Despite only modest rate declines in 2025 that continue to limit commercial construction activity, this improvement reflects signs of stabilization and an improving trajectory heading into 2026. We also benefited from sustained growth in the residential portion of our business at Geneva in 2025. Leading indicators strengthened as we've moved through the year with the Dodge Momentum Index up 50% in December of 2025 versus December of 2024. The commercial sector was up 45% and the institutional was up 60%, indicating positive signals for 2026 and into 2027 for non-residential construction activity. On pricing, we benefited from a 4% year-over-year increase in realized selling prices driven by price increase implementations and changes in product mix. Stronger volumes and pricing contributed to an 11.3% year-over-year increase in Precast gross profit to $36.5 million, resulting in a gross margin of 20.8%, down modestly from 21.2% in 2024, primarily due to lower Park production volumes early in 2025 and product mix. Most important is that the Precast margins improved each sequential quarter in 2025, specifically the non-residential business at Park. These results demonstrate that the absorption rates are beginning to improve with higher volume. We expect margins to continue recovering as non-residential demand builds. Our Precast order book ended the year at $57 million, up slightly from $55 million at September 30, reflecting solid momentum heading into 2026 and modestly below the $61 million level at year-end 2024. As we continue to execute our long-term strategy, we are making targeted organic investments across our footprint to expand capacity, enhance efficiency and support the growth of our platform. These efforts are taking shape across several areas of the business. First, by expanding Precast capabilities across our network and evaluating opportunities to introduce Precast into other WTS facilities through our Product Spread strategy, which remains a core component of our long-term growth plan. In Product Spread, we bid on $66.1 million of projects and booked a total of $10.7 million in 2025, up from $9.1 million in 2024. This initiative has helped improve capacity utilization at our Precast plants and has continued to gain traction at our Geneva plants in Utah, where we booked approximately $2.1 million of Park-related projects in 2025. Currently, we are advancing efforts to expand Park and other Precast-related products to additional Water Transmission Systems locations. Looking ahead to 2026, our goal is to book $11.7 million of Product Spread-related projects beyond the Product Spread. We are also investing directly in plant capabilities to support future growth, such as enhancing production capabilities at Geneva with the installation of a new catch basin machine at our Orem plant. In addition, we are advancing efficiency initiatives at Park by evaluating additional Precast infrastructure capabilities at our Ferris plant to broaden the product offering and improve absorption. And we are investing in new forms and equipment at our WTS plants to support Precast production and further advance our Product Spread strategy. In parallel with these organic investments, we continue to pursue disciplined M&A opportunities in the Precast-related space that would accelerate progress on our Precast strategy, expand our manufacturing capabilities and production efficiencies, and broaden our geographic reach and product portfolio. To that end, we are pleased to announce that we have completed the acquisition of Boughton Precast, a single-site Precast producer in the high-growth Pueblo, Colorado market. This acquisition is directly in line with our strategy to establish a beachhead in markets where we have strong interest in expanding. We believe the Colorado market has significant long-term growth potential. And while this facility is relatively small today, we see meaningful opportunity to grow its capabilities and footprint over time. Consistent with this approach, we are continuing to evaluate both single plant and larger acquisitions to accelerate Precast expansion and support long-term growth. Our other capital priorities include paying down debt and returning value to shareholders. In 2025, we repaid $27.4 million of debt, ending the year with significant liquidity. At the end of 2025, we had $276,000 drawn against our credit facility. We also repurchased approximately 425,000 shares at an average price of $43.33, totaling $18.4 million for the full year 2025. I will now turn to our outlook for the first quarter of 2026. In our WTS segment, we expect higher revenue compared to the first quarter of 2025, driven by a more favorable volume and product mix despite the adverse impact of normal weather-related seasonality, which has resulted in some unscheduled downtime across three WTS facilities earlier in this quarter. Even with these factors, we expect margins to be higher than the first quarter of 2025. We entered 2026 with a robust WTS backlog and elevated bidding levels, providing strong visibility into the near-term demand. As such, we anticipate full year bidding levels to be relatively consistent with the strong levels seen in 2025. We remain encouraged by the level of activity across current and upcoming Water Transmission projects, which are coming with improved economics and margins. For a more complete view of these projects, please refer to our investor presentation on our website. We entered 2026 with a stable and healthy order book, and we expect a stronger year for the Precast business. Both non-residential and residential demand remain healthy, supporting continued momentum across our Park and Geneva platforms. For the first quarter of 2026, we expect Precast revenue to be higher than the first quarter of 2025 with improving margins driven by solid demand, higher production levels with improved absorption and a strengthening order book. While weather can always affect the start of the year, we expect the first quarter on a consolidated basis to be stronger than in recent years and believe that we are well positioned to deliver a very strong year in 2026. Before I conclude, I'd like to highlight the recent strategic leadership promotions we announced to position NWPX for continued growth and operational excellence. Michael Wray has been promoted to Executive Vice President, assuming operating and commercial oversight for both the WTS and Precast segments. Mike has been instrumental in advancing our Precast strategy and supporting the acquisitions of NWPX Geneva and NWPX Park. Mike also has significant experience in operating multiple WTS facilities at NWPX. He has been with the company since 2007 and will succeed Miles Brittain, who will retire in April and is assisting with the transition priorities. We thank Miles for his many years of contributions and wish him well in his next chapter. Next, Eric Stokes has been promoted to Senior Vice President and WTS Group President. Since joining NWPX in 2008, Eric has played a critical role in strengthening performance across the WTS segment. Eric has been very instrumental in implementing many improvements that have propelled the WTS business to its current level of performance. Jesus Tanguis has also been promoted to Senior Vice President and General Manager of Precast after joining the company in January of 2024. He will oversee operating and commercial activities for both NWPX Geneva and NWPX Park. And finally, Justin Fraughton has been promoted to Vice President and General Manager of NWPX Geneva, providing commercial and operating oversight for our three Utah facilities. Justin began with NWPX Geneva in 1998 and has taken on roles of increasing responsibility, most recently serving as multisite operations manager. We are proud of our ability to promote from within and continue building a leadership team capable of scaling our operations and positioning NWPX for our next phase of growth. To close, I'm extremely proud of what we were able to achieve in 2025 across our financial, operational and safety metrics. Our teams delivered exceptional execution throughout the year, and I want to thank everyone at NWPX for their commitment to our strategy and to maintaining a strong safety culture. With a strong WTS backlog, constructive bidding environment and a healthy Precast order book, we believe the foundation we built positions NWPX to deliver another very strong year and enhanced shareholder value. As we look ahead, our near-term priorities remain: one, maintaining a safe and rewarding workplace; two, focusing on margin over volume; three, intensifying our pursuit of strategic acquisitions; four, implementing cost efficiencies across the organization; and five, returning value to shareholders when M&A opportunities are limited. I will now turn the call over to Aaron to walk through our financials in greater detail.

Thank you, Scott, and good morning, everyone. I'd like to echo Scott's remarks as we recognize another consecutive year of record-setting safety performance. Safety remains central to our values and is believed to have a direct relationship to the record financial results I'll review today. Thank you to everyone for keeping safety a priority again this year. I'll now turn to our profitability. Consolidated net income for the fourth quarter was $8.9 million or $0.91 per diluted share compared to $10.1 million or $1.00 per diluted share in the fourth quarter of 2024. The year-over-year decline in reported results is driven primarily by nonrecurring items, most notably a $1.8 million pension termination settlement loss recorded in 2025, which was unique to the year. Both periods also reflect benefits recorded in the tax provision from the lapse of statutes of limitations related to previously uncertain tax positions, although the 2025 benefit was less than half of what was recognized in 2024. Excluding these items from both quarters, adjusted net income for the quarter increased to $9.1 million or $0.93 per diluted share compared to $7.8 million or $0.77 per diluted share in the fourth quarter of 2024, reflecting a year-over-year increase of 16.6%. I encourage you to refer to the corresponding reconciliation of these adjustments in our earnings release. For the full year 2025, consolidated net income was a record $35.4 million or $3.56 per diluted share and included the unique items previously referenced for the fourth quarter. This compared to $34.2 million or $3.40 per diluted share in 2024. Excluding those items from both years, the 2025 adjusted net income increased to $35.6 million or $3.59 per diluted share compared to $31.9 million or $3.17 per diluted share in 2024, a year-over-year increase of 11.7%. Our fourth quarter consolidated net sales increased 5% to $125.6 million compared to $119.6 million in the year-ago quarter. Water Transmission Systems segment sales in the quarter increased 1.8% to $84 million compared to $82.5 million in the fourth quarter of 2024. This growth was driven by a 26% increase in selling price per ton due to changes in product mix, which was partially offset by a 19% decrease in tons produced, resulting from changes in project timing. Precast segment sales in the fourth quarter increased 12.2% to $41.7 million compared to $37.1 million a year ago. Our performance was driven by an 8% increase in selling prices due to changes in product mix and a 4% increase in volume shipped. The products we manufacture are unique and the average sales prices for both of our operating segments as well as the Precast shipment volumes and the Water Transmission Systems production volumes cannot be relied upon as comparable metrics between periods due to variations in product mix. Our fourth quarter consolidated gross profit increased 19.2% to $26.8 million or 21.3% of sales compared to $22.4 million or 18.8% of sales in the fourth quarter of 2024. Water Transmission Systems gross profit increased 20.6% to $17.8 million or 21.2% of segment sales compared to gross profit of $14.8 million or 17.9% of segment sales in the fourth quarter of 2024, primarily driven by higher pricing. Precast gross profit increased 16.6% to $9 million or 21.5% of segment sales from $7.7 million or 20.7% of segment sales in the fourth quarter of 2024, primarily due to changes in product mix. Selling, general and administrative expenses for the quarter increased 15% to $13.7 million compared to $11.9 million in the fourth quarter of 2024 due to higher incentive compensation and wage expense. For the full year, SG&A expenses increased 11.9% to $52.8 million or 10% of consolidated net sales compared to $47.2 million or 9.6% of sales in 2024 due to higher performance-based incentive compensation, wages and benefits. For the full year 2026, we estimate our consolidated selling, general and administrative expenses to be in the range of $52 million to $54 million. Depreciation and amortization expense in the fourth quarter of 2025 was $4.9 million compared to $4.8 million in the year-ago quarter. For the full year, depreciation and amortization expense was $19.4 million compared to $19 million in 2024, and we expect depreciation and amortization expense to be approximately $20 million to $22 million for the full year 2026. Interest expense decreased to $0.4 million from $0.9 million in the fourth quarter of 2024 due primarily to a decrease in average daily borrowings. For the full year, interest expense decreased to $2.6 million compared to $5.7 million in 2024. And for the full year of 2026, we expect interest expense to be approximately $1 million to $2 million. Income tax expense for the full year 2025 was $11.1 million, resulting in an effective income tax rate of 23.8% compared to $8.2 million in the prior year or an effective income tax rate of 19.3%. Our effective tax rate for 2025 and 2024 was primarily impacted by the realization of uncertain income tax positions due to the lapse in statutes of limitations from the year the tax attribute originated. We do not expect to realize similar attributes in 2026 and therefore, expect our tax rate for the full year to be within the range of 26% to 27%. Next, I will transition to our financial condition. As of December 31, 2025, we had $0.3 million of outstanding borrowings on our credit facility, leaving essentially the full borrowing capacity on our credit line. For the quarter, net cash provided by operating activities was $36 million and remained relatively consistent with the fourth quarter of 2024. For the full year 2025, we generated net cash provided by operating activities of $67.3 million, a 22.2% increase from the $55.1 million in 2024, primarily due to a $13.4 million increase in cash provided by net income adjusted for noncash items. Our capital expenditures for the fourth quarter were $5.2 million compared to $4.2 million in the fourth quarter of 2024. For the full year, our CapEx totaled $20.2 million compared to $20.8 million in 2024. For the full year 2026, we anticipate our total CapEx to be in the range of $20 million to $24 million, including approximately $6 million in various investment projects, most notably to support Precast Product Spread as well as other initiatives to grow our Precast segment businesses. Accordingly, we generated positive fourth quarter free cash flow of $30.8 million compared to $31.9 million in the year-ago quarter. For the full year, free cash flow totaled $47.1 million, which exceeded our expectations and compared to $34.3 million in 2024. For the full year 2026, we anticipate free cash flow to range between $40 million and $46 million. As we've emphasized, consistent strong cash generation remains a top priority for our leadership team, supporting our ability to drive growth both organically and through disciplined M&A as appropriately valued opportunities arise. We remain committed to enhancing shareholder returns through our capital allocation strategy, which includes continued investment in growth-related CapEx projects, M&A including our recent acquisition of Boughton Precast that Scott highlighted, and repurchasing shares under our 10b5-1 trading plan. To close, we are extremely pleased with our fourth quarter performance, which capped another record year for the company. We entered 2026 with real momentum, supported by a strong WTS backlog, a stable bidding environment and improving trends across the Precast markets. With a strong balance sheet, ample liquidity and continued improvement in cash generation, we remain focused on driving sustainable long-term growth through disciplined capital allocation. On behalf of the entire management team, I again want to thank our employees for their commitment to safety as well as their unwavering dedication to operational excellence, both of which were central to our record results in 2025. I'd also like to thank our shareholders for their ongoing support. I will now turn it over to the operator to begin the question-and-answer session.

The operator provided instructions for the question-and-answer session. Our first question comes from the line of Brent Thielman with D.A. Davidson.

Scott, good margin expansion in both segments here in the fourth quarter and it sounds like that will continue into the first quarter. I don't know if you could offer any more color just in terms of where the bar is for margins as we think about the full year 2026 for either business group, but it doesn't really seem to me that they should be going backwards.

No, I don't think so. I think you'll see a relatively steady climb. It's obviously a slow climb over a period of time for both the Water Transmission and the Precast businesses. Looking at Water Transmission, we're starting to see a year in 2026 that probably appears a little bit bigger than we thought it was going to be. We originally thought the 140-some thousand ton range. It looks like it's going to be in the 150 or so range. At this point, we're seeing heavy bidding in the first quarter and that is translating into what we're projecting to be a relatively strong backlog. In fact, I would say strong backlog as we carry our way through 2026 on the WTS side. On the Precast side, I think the margins are certainly recovering in the non-residential business. We're seeing the momentum index going up, and we're seeing the business, specifically at Park, follow that. Margins are starting to creep back toward where they were before the falloff in the non-residential market a couple of years ago. Overall, for both sides of the business, not only the Water Transmission piece but the Precast piece, we're seeing what we consider to be a very strong 2026.

Okay. Scott, just to follow up, or Aaron, with the acquisition, is there going to be some additional capital that gets plugged into that maybe to scale it? I don't know if you can offer any color there, more to come on that front.

The Boughton operation does a lot of the same things that Geneva does — manholes, risers, RCP, vaults and similar products. There probably will be a bit of capital as we go. We're dealing with a business that's probably $8 million or so of revenue as it sits today. They have good bones, their own batch plant, and there are a couple of batch plants that are currently unused, which is beneficial. With relatively limited capital, doubling the size of the business in the next two to three years is a reasonable expectation. Our plan is to roll this under the Geneva umbrella and make it a fourth Geneva plant because of the similarity to the rest of the Geneva business. The site is about eight to nine acres, and it is actually the first property that we own on the Precast side of the business, which is an asset we value for future expansion.

Our next question comes from the line of Julio Romero with Sidoti & Company.

This is Justin on for Julio. Congrats on the Boughton acquisition. Can you talk a bit about your interest in the Colorado area? And are there any roll-up opportunities in that market?

The Colorado area is interesting because we're seeing expansion across the state. Traditionally much of the expansion was toward Denver, but we're now seeing growth in El Paso County, which is just north adjacent to where the facility we bought is located. El Paso County appears to be the largest construction market in the state over the next few years. We see a lot of organic growth opportunity given the amount of activity there. Regarding roll-up opportunities, there are potential assets out there, but the challenge is finding sellers who are willing to transact at practical terms. Our strategy is to create a beachhead through a single plant in markets where we want to be and grow organically from there. While availability of Precast assets in the market is somewhat limited, we will continue to pursue sensible opportunities to grow our business.

Great. Shifting to WTS. Can you talk about any incremental demand you may be seeing from the private sector? There's been talk about data centers and other private sector jobs driving demand for water infrastructure. So just curious if NWPX can play any role in the private sector there.

When the data center boom began, we saw some activity affecting WTS, but it's hard to generalize for WTS because water needs vary by project. We have seen significantly more activity related to data centers on the Precast side of our business. We currently have roughly 12 projects that we either produced and shipped, are producing, or are awaiting purchase orders that are data center-related. Many of these projects are covered by NDAs, so details are limited. Data centers have water management needs: pump lift stations, water distribution meter vaults, wastewater diversion and treatment solutions, and diverter valves. Park USA is handling much of the Precast work for data centers and has a product development group focused on these needs. Pricing for these projects has generally not been an issue; speed of delivery is often the critical factor. A lot of product development is happening to meet the varying needs of different data centers, particularly those in Texas. We are seeing good pricing and material opportunities in this area.

Yes, very exciting. I believe you mentioned you had 12 projects. Were any of those projects included in the order book for the fourth quarter?

Yes. We've seen some of those in the fourth quarter order book, but due to NDAs they are fairly confidential, so we can't disclose much more.

Our next question comes from the line of Ted Jackson with Northland Securities.

Congratulations on another great quarter. I wanted to start with the acquisition and get a handle on how it will flow through the model. You spent about $9 million for it. I assume you'll use your credit line and we'll see the debt on the credit line pop up to $9 million, and then we'll see another $9 million in the financing section of the cash flow statement.

Yes. We'll book the purchase price through the line of credit and we hope to pay that down relatively quickly. From the cash flow statement perspective, Ted, the line financing will be in the financing section. The investment in Boughton will be shown in the investing section.

Bringing that on board and making it part of Geneva, can you talk a bit about the tasks you need to take to integrate the plant and the business into NWPX? Things like ERP systems, sales systems, synergies, CapEx, and other integration activities?

A lot of the initial focus is on culture and safety before systems integration. We have team members already traveling to start that process. Our plan is to integrate them into the existing Geneva reporting and operational systems fairly quickly because Geneva is familiar with the workflows and processes. We expect to have them integrated by about the middle of the second quarter, which provides a sensible pace to onboard employees without overwhelming them and to meet the reporting needs of a public company. That will be our primary focus.

You don't see much of a heavy lift to bring these guys in. It's not going to be like the build-out you had with Park, correct?

No, I don't think it will be that sort of exercise. Park required a build-out and systems development. Boughton does not have a developed ERP and inventory systems, so we'll train them on the systems we already use for Geneva. Our Geneva system is called Titan, and we have that infrastructure in place. The effort will be more training and integration rather than building out a new system.

Given your guidance for free cash flow and current debt position, there's a good chance you could exit 2026 debt free. What will you do with that cash? Accelerate organic expansion in Precast, buy back stock, accumulate cash, or something else?

Our primary focus will be organic growth initiatives, including expanding plants such as Tracy and Adelanto in California and other Precast investments. As we evaluate M&A opportunities, they remain limited, so absent transformational acquisitions we'll step up organic investments. We will continue to look for single plant opportunities to create beachheads in desired markets. We also expect to continue share repurchases to return value to shareholders when attractive. The overall plan is to keep debt low and maintain dry powder so we can act when a transformative opportunity arises.

Last modeling question: can you give me the percentage of steel as a portion of cost of goods for the fourth quarter?

For the year we were about 28% and it was a little less than that for the fourth quarter. For the quarter, it was about 25%.

I want to say one last thing: I regret that I stepped to the sidelines with regards to NWPX in the past. You guys are executing well with great momentum. I'm impressed and happy for you.

We have reached the end of our question-and-answer session. I'd like to turn the call back over to Mr. Montross for any closing remarks.

A couple of takeaways as we wrap up: 2025 was a record year for NWPX. Beyond the financial metrics and operational performance, we're most proud of the continued improvement in safety performance, which is a core part of our company culture. Looking at Water Transmission, bidding is very healthy right now. We see a strong bidding environment in the first quarter and possibly a bit larger demand in 2026 than we originally thought. Our Precast platform continues to grow, and the non-residential piece is performing well with margins moving up as anticipated. We're continuing progress on our long-term strategy, including the acquisition of Boughton Precast, which strengthens the Precast side and supports organic growth opportunities. Looking into 2026, we have strong order books in both segments. Despite some weather-related impacts earlier in the year that resulted in downtime at a few facilities, we expect the first quarter for both WTS and Precast to be stronger than 2024 and stronger than recent years. We have had some leadership transitions: Miles Brittain will retire in April after many years of service, and we congratulate him. The new leaders stepping into those roles are strong and will continue to drive the company forward. We are confident in the opportunities ahead and remain disciplined on execution, safety and delivering long-term value to shareholders. From our perspective, what we're seeing for 2026 looks to be a very strong year. Thank you, and we will see you again in late April.

Late April.

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