L.B. Foster Co (FSTR) Q2 2025 Earnings Call Highlights: Strategic Execution Drives EBITDA ...
Precast Concrete Sales: Increased by 36% over last year.
Rail Revenue: Declined by 11.2% from last year.
Friction Management Sales: Increased by 17.2% year-over-year.
Adjusted EBITDA: Increased by 51.4% over last year, reaching $12.2 million.
Gross Margin: Reported at 21.5%, down 20 basis points, but up 120 basis points when adjusted for specific charges.
SG&A Costs: Decreased by $2.4 million, improving SG&A percentage of sales by 200 basis points to 15.6%.
Net Debt: Decreased to $77.4 million, with gross leverage improving to 2.2 times.
Cash Flow from Operations: $10.4 million, favorable by $15.4 million compared to last year.
Rail Backlog: Increased by 42.5% during the quarter.
Infrastructure Orders: Increased by 13.7% over the prior year.
Free Cash Flow Guidance: Approximately $41 million expected for the second half of 2025.
Warning! GuruFocus has detected 5 Warning Signs with FSTR.
Release Date: August 11, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
L.B. Foster Co (NASDAQ:FSTR) returned to sales growth in the second quarter with a 2% increase year-over-year, driven by a 22.4% rise in the Infrastructure segment.
The company achieved a 51.4% increase in adjusted EBITDA despite modest sales growth, highlighting strong strategic execution.
Net debt decreased to $77.4 million, with gross leverage improving to 2.2 times from 2.7 times last year.
The backlog for both segments increased significantly, with a 42.5% rise in the Rail segment, setting a solid foundation for future growth.
Successful negotiation of an amendment to the revolving credit facility increased borrowing capacity and extended tenure, reflecting confidence from banking partners.
Negative Points
Rail revenues declined by 11.2% due to delayed order development and reduced activities in the UK.
The UK market remains challenging, necessitating rightsizing efforts and impacting profitability.
The exit of an automation and material handling product line in the UK resulted in a $1.1 million charge.
The effective tax rate was high at 55% due to not recognizing a tax benefit on UK pretax losses.
The full-year guidance was slightly lowered due to the Rail segment's weaker performance in the first half of the year.
Q & A Highlights
Q: On the capital allocation front, are you seeing high return opportunities in acquisitions or possibly reinvesting in growth projects? Or would you be leaning more towards repurchases and debt reduction? A: John Kasel, President and CEO, explained that the company is focusing on organic growth, particularly in their precast operations, which have shown significant growth. They are also active in their share repurchase program and are exploring tuck-in acquisitions to support their strategy. The company is optimistic about the second half of the year due to significant backlog growth.
Q: Are you seeing follow-through on the Infrastructure side on Precast Concrete and on Rail on the Friction Management side and the backlog for the rest of the year? A: John Kasel confirmed strong performance in Friction Management, noting it was the best quarter ever for this segment. The backlog is supportive of their guidance, with significant contributions from both Precast Concrete and Coatings.
Q: With the AMH exit of the UK business, do you have any remaining UK exposure within Rail? And what's remaining within TS&S? A: John Kasel stated that while there is still some UK exposure, they are rightsizing the business to align with desired activities. The focus is on improving the UK business, with most of the TS&S work being strong in the US.
Q: Can you discuss how you envision sales growth across the two segments in the second half of the year, and the expected cadence for the third and fourth quarters? A: John Kasel highlighted that Q3 is typically the strongest quarter due to seasonality, and they expect this trend to continue. The company is confident in achieving their sales guidance of $535 million to $555 million, supported by a strong backlog and improved gross profit margins.
Q: Regarding the Envirocast business, can you talk about progress and expected contribution in the second half? A: John Kasel mentioned that the focus is on getting the product right as they enter a new market. While they are not expecting significant contributions this year, they see it as an organic growth opportunity for the future, with a focus on quality and safety.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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