L.B. Foster (NASDAQ:FSTR) released first-quarter financial results and hosted an earnings call on Monday. Read the complete transcript below.

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Summary

L.B. Foster reported robust Q1 2026 financial performance with a 23.9% increase in net sales, primarily driven by a 38.4% growth in the rail segment.

The company achieved a significant improvement in profitability, with EBITDA up 183% and gross margins improving by 60 basis points to 21.2%.

Strategic focus remains on organic growth within the precast concrete business, with capital investments targeted to support this area.

Despite a seasonal increase in total debt by $16.9 million, the company reduced its overall debt by $22.8 million compared to last year, improving its leverage ratio to 1.2 times.

Management reaffirmed its full-year financial guidance, expressing optimism for continued growth, supported by a strong order intake in April and a robust bidding environment.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to the Q1 2026 LB Foster Earnings Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer sess. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised to withdraw your question. Please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Lisa Durante, Director of Financial Reporting and Investor Relations. Please go ahead.

Lisa Durante (Director of Financial Reporting and Investor Relations)

Thank you operator. Good morning everyone and welcome to L.B. Foster's first quarter of 2026 earnings call. My name is Lisa Durante, the company's Director of Financial Reporting and Investor Relations. Our President and CEO Jon Castle and our Chief Financial Officer Bill Tallman will be presenting our first quarter operating results, market outlook and business developments this morning. We'll start the call with John providing his perspective on the company's first quarter performance. Bill will then review the company's first quarter financial results. John will provide perspective on market developments and company outlook in his closing comments. We will then open up the session for questions. Today's slide presentation along with our earnings release and financial disclosures were posted on our website this morning and can be accessed on our Investor Relations page at lbfoster.com our comments this morning will follow the slides in the earnings presentation. Some statements we are making are forward looking and represent our current view of our markets and business today. These forward looking statements reflect our opinions only as of the date of this presentation and we undertake no obligation to revise or publicly release the results of any revisions to these statements in light of new information, except as required by securities laws. For more detailed risks, uncertainties and assumptions relating to our forward looking statements, please see the disclosures in our earnings release and presentation. We will also discuss non-GAAP financial metrics and encourage you to carefully read our disclosures and reconciliation tables provided within today's earnings release and presentation as you consider these metrics. So with that, let me turn the call over to John.

Jon Castle (President and CEO)

Thanks Lisa and hello everybody. Thanks for joining us today for our first quarter earnings call. I'll begin with slide 5 covering the key drivers for our results of the quarter. As you can see from earnings release, we carry positive momentum generated at the end of last year into the first quarter, delivering strong results across the board. Robust sales growth in Q1 was as expected of 23.9% over last year. The growth was highest in the rail group which was up 38.4% over last year with all business units delivering significant improvements. Sales for infrastructure segment were also up 5.9% driven by continuing demand on our precast concrete business. The strong sales growth translated into significant improvement in profitability, with EBITDA up 183% over last year. Improved profitability was realized within our margins with gross profit up 27.5% and gross margins improving 60 basis points to 21.2%. We also continue to leverage our operating structure with SG&A as a percent of sales declining 240 basis points compared to last year. Our normal working capital cycle increased total debt $16.9 million during the quarter as we prepared to support our customers construction season. However, disciplined capital allocation approach reduced total debt $22.8 million compared to last year, coupled with significant improvement in profitability during the quarter. Our gross leverage was cut in half from 2.5 times last year to 1.2 times at quarter end. So in summary, we're really pleased with the strong start to the year and we remain optimistic about our prospects for continued progress in 2026. I'll cover the market outlook and our financial guidance for the year after Bill runs through the financial details for the quarter. Over to you Bill.

Bill Tallman (Chief Financial Officer)

Thanks John and good morning everyone. I'll begin my comments on Slide 7 covering the consolidated results for the first quarter. Reconciliations for non GAAP information and other financial details are included in the appendix of the presentation. Net sales for the quarter were $121.1 million, up 23.9% over last year, primarily due to the strong growth in the rail segment. As a reminder, last year sales in rail were weaker than normal due to a pause in government funding programs that delayed customer project work. As John mentioned, the consolidated gross profit was up 27.5% in the quarter, with gross margins improving 60 basis points to 21.2%. Both segments realized double digit increases in gross profit in the quarter, highlighting the broad improvement realized in our results. I'll provide more color on segment sales and margins later in the presentation. SG&A expenses totaling $23 million were up $2.1 million or 9.9% compared to last year. The primary driver was higher employment costs, including a $1.2 million increase in incentive compensation expense with the improved results in Q1 compared to last year. This year's incentive expense also includes $0.7 million in accelerated stock compensation expense associated with annual incentive plan grants awarded to retirement eligible employees. Despite the higher expenses year over year, The SG&A percent of sales improved 240 basis points to 19%. EBITDA was $5.2 million, up 183% versus last year driven by the sales growth and improved gross profit. First quarter cash flow improved over last year with operating cash flow favorable 15.7 million million on improved profitability and lower working capital needs. And lastly, consolidated orders and backlog were both lower compared to last year, 4.7% and 11.7% respectively. I'll cover segment specific drivers later in the presentation. The financial profile of Our results on slide 8 highlights the seasonality in the business over the last three years. We're entering the construction season for our customers, which typically translates to higher sales and profitability. During our second quarter third quarters last year, First quarter sales were unusually low due to a pause in government funding impacting rail demand early in the year. These delays were resolved throughout 2025 resulting in an unusually strong fourth quarter last year. So while 2025 looks relatively normal compared to the averages, the quarterly splits last year were far from normal. This year's first quarter results represent a typical level of demand and we expect the phasing of business to follow a more normal pattern in 2026. I'll cover the segment specific performance on the next couple of slides starting with rail on slide 9, first quarter revenues were 74.8 million, up 38.4% compared to last year's soft start primarily in rail products. The improvement was strongest for Rail products with sales up 40.8% due to higher demand for rail distribution and transit products. Global Friction Management sales were up 39.5% as this growth platform continues to perform well. Technology, services and solutions sales were also up 29.1% due to short term project work. In our UK business, rail margins of 21.6% were down 70 basis points driven primarily by unfavorable sales mix with the higher rail distribution volumes this year. Turning to rail orders and backlog, Q1 orders were down 3.2% due to lower orders for Friction Management after a very strong level attained last year. Rail product and TS and S orders were relatively flat compared to last year and the rail backlog was up 11.3% due to a large multi year order secured in our UK business late last year. Turning to Infrastructure Solutions On Slide 10, net sales increased $2.6 million or 5.9%. The improvement was realized in precast concrete with sales up 17.2% highlighting the strong demand that continues in this growth platform steel product sales declined $2.3 million primarily due to lower bridge form volumes. Infrastructure gross profit increased $1.4 million with the margins up 200 basis points to 20.6%. The improvements were realized in precast concrete driven by higher sales volumes and favorable sales mix coupled with improved manufacturing execution. I'll mention here that one cost driver we're starting to see elevate is fuel charges within our freight costs. This was not a big impact in Q1, but something we're working on mitigating starting here. In Q2, infrastructure orders declined $4.4 million due to lower intake for pipeline coatings after a very strong level in last year's first quarter. Partially offsetting were precast concrete orders up $2.3 million or 5.5%. Infrastructure backlog totaling $107.4 million is down $38 million versus last year. About 30 million of the decline was in steel products with 19 million due to the Summit pipeline coating order cancellation in Q3 last year. Precast concrete backlog was also lower $8 million with reduced open orders for CXT buildings. I'll provide some additional color on segment orders and backlog at the end of my review. I'll next cover liquidity and leverage Metrics on slide 11. The chart reflects the ongoing improvement in our management of net debt and leverage. Net debt of $55.7 million was down $24.2 million compared to last year, with the gross leverage ratio cut in half to 1.2 times. Driven by improved profitability and lower working capital levels. Our capital life business model has translated into significant cash generation over the last several years. As a reminder, we wrapped up the $8 million per year union Pacific settlement payments at the end of 2024. Excluding these payments, we generated about $85 million in free cash flow over the last three years, or approximately $28 million per year on average. We also have about $75 million in federal NOLs available, which should continue to minimize cash taxes for the next several years. We utilize a systematic, disciplined approach to deploying capital across our priorities, which I'll now cover on slide 12. Managing our debt and leverage at reasonable levels remains our top capital allocation priority at the end of the first quarter. The gross leverage ratio per our revolving credit agreement was just under 1.2x, well within our target range of 1 to 1.5 times. Seasonal working capital needs are expected to increase debt further in the second quarter,

Bill Tallman (Chief Financial Officer)

but we should stay around our target leverage range and remain favorable compared to last year. Capital spending in the first quarter totaled $3 million, or 2.4% of sales. We have several targeted organic growth programs within our precast concrete business that we expect will increase the 2026 capex rate to 2.7% of sales approximately. We've also systematically repurchased our stock over the last three years, with just over a million shares repurchased since early 2023, representing 9.3% of the outstanding shares. We did not make any open market repurchases in the first quarter after buying about 582,000 shares in 2025. We have $28.7 million authorized to spend on buybacks over the next two years, which represents approximately 9% of the shares stock value outstanding at today's valuation. As always, we will remain disciplined and conservative in our approach to this important capital allocation priority. And finally, we continue to evaluate tuck in acquisitions to add breadth to our growth platforms, primarily in the precast concrete market space. I'll wrap up my comments with some additional color on order rates and backlog on slides 13 and 14. We've mentioned in the past that order rates tend to be choppy for our business given the project nature of the work we support for our customers. Generally, orders received are fulfilled within a year, with only about 10% of the open backlog relating to projects expected to extend beyond a year on a consolidated basis. The trailing twelve month book to bill ratio at the end of the quarter was 0.95 to 1, down from both last year's first quarter and the end of 2025. The decline versus last year was driven by the lower ratio in infrastructure at 0.84 to 1, driven primarily by the Summit order cancellation and softer pipeline coating order intake impacting steel products. Rail order rates overall remain positive with the trailing twelve month ratio at 1.03 to 1, although down from the end of 2025 after the strong finish last year. And lastly, the consolidated backlog reflected on slide 14 totaled $209.6 million, down 27.6 million from last year. With the decline realized in infrastructure stemming primarily from lower pipeline coding open orders including the impact of the Summit order cancellation, we're focused on building our backlog across the business during the second quarter to set up a strong second half of the year.

Don

Don will cover some additional backlog details and developments in his closing remarks.

Bill Tallman (Chief Financial Officer)

I'll wrap up here by saying we're very pleased with the start of 2026 and remain optimistic about the prospects for further progress this year. Thanks for the time this morning I'll

Jon Castle (President and CEO)

now hand it back to John for his closing remarks. Back to you, John. Thanks Bill. I'll begin my closing remarks on Slide 16. Reviewing developments in our key end markets, starting with rail, Bill highlighted that the significant growth realized Q1 was due to a return to normal customer demand levels after last year's slow start. The federal government programs have funded our customers. Repair and maintenance projects remain active with no significant disruptions evident as of today. This should provide a favorable demand tailwind in the US for our rail products for the foreseeable future. Richard Management had another phenomenal quarter with 39.5% sales growth to start the year. This is on top of 42% growth in the fourth quarter last year and 19% growth for all of 2025. We continue to invest our commercial and technology capabilities for this important growth platform and we're targeting further domestic market penetration as well as geographic expansion into Western Europe. The total track monitoring product line was somewhat flat in the first quarter, but commercialization of our rockfall monitoring product line is expected to provide lift and volumes as the year progresses. All in all, we expect a more normal year in demand for the rail segment 2026, which would be a significant improvement over last year. Turning to infrastructure, the end market developments remained favorable as well. Precast concrete sales were up 17% in Q1 after 20% growth in 2025. As expected, the backlog at the end of the quarter was a bit lower for the CXT buildings product line which had a record year in 2025. However, silver construction activity remains robust which is bolstering demand for precast concrete products, helping to mitigate the lower building volumes. We're also seeing demand for Envirotkeeper water management solution continue to increase and we're making capital investments to support further growth of this product line. So all in all we're off to a great start for precast and expect growth to continue as 2026 unfolds. Turning steel products market conditions continue to improve, driven primarily by the recovery of oil and gas investments and favorable impact on our protective coatings product lines. Field product sales declined slightly in the first quarter due to softer demand for our bridge forms, while protective coatings were essentially flat in Q1 after nearly 43% growth in 2025. Bill mentioned the infrastructure backlog was down primarily to the summit order cancellation that was communicated last year, coupled with lower bookings for protective coatings. But it's important to note that bidding activity remains robust and we believe the market recovery for domestic energy and pipeline investments will translate into improving Protective coatings Backlog in summary, we believe we're well positioned for continuing growth across our key end markets and product lines, with ongoing emphasis on our growth platforms, noting that the volatile geopolitical environment has not had a significant impact to date on our end markets or demand of our products. Of course, we'll continue to monitor conditions and adjust as necessary. So in conclusion, we're off to a great start in 2026 which allows us to reaffirm our financial guidance, which I'll cover in my closing remarks now on slide 17. I'll start by highlighting again the significant progress we made through 2025. I'm very proud with our team's accomplishments and the strong start to 2026 highlights the favorable momentum we've generated in the business. The year over year growth and profitability expansion achieved in our first quarter results was primarily driven by a recovery to normal demand conditions for our rail business. One way to look at the favorable momentum in our results is our trailing twelve months metrics with sales of 563.4 million and adjusted EBITDA of 42.4 million. Both metrics are already at or near the midpoints of our 2026 full year guidance. So as long as quotation activity remains strong and backlog builds in line with expectations, we should be well positioned to deliver a strong year of growth in 2026. So in closing, we are reaffirming our full year financial guidance for now and we'll revisit our outlook after the second quarter. Thank you for your time and continuing interest in LB Foster. I'll turn it back to the operator for the Q and A session.

OPERATOR

Certainly, as a reminder to ask a question, you will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile our Q and A roster and our first question will be coming from Liam Burke of B. Riley Securities. Liam, your line is open.

Liam Burke (Equity Analyst)

Thank you. Good morning, John Good morning, Bill. Morning Liam. John, how. I mean, in your prepared comments you talked about friction management, which is a great driver of growth and margin. How difficult is it to take the North American model and move it over to European markets?

Jon Castle (President and CEO)

Well, that's what well, first of all, thanks for joining us today, Liam. And we've been working on that actually for the last five years of getting that acceptance not just here in North America, but getting the excitement of this product over specifically in Western Europe. And we're going through Germany to make that happen. So we Started working directly with the largest German transit authority over there, getting acceptance and accreditation of the product. And we're looking for continued interest as well as actual orders and sales happening this part this year, end of this year, as well as going to next year. So it is a slower adoption, if you will, because of the brand recognition is probably North America, but they're picking up on the excitement, especially in the transit space over there because it's just adding so much value. They're seeing the value and the world is as far as stricture management is relatively small. And so we're pretty excited about what we have right now and the ability to continue to grow that.

Liam Burke (Equity Analyst)

Great. Thank you, John. Bill, you had negative operating cash flow for the quarter, which is perfectly normal for seasonality purposes, but on a year over year basis, as you point out in your comments, it was significantly better. What contributed to that improvement? Yeah, a few things, Liam. The profitability of the business overall first of all was much better and then working capital needs this quarter were also a bit lower and then the incentive arrangements for the company were a bit higher last year than they were this year just in terms of the payouts. So we would expect where our working capital is at the moment. We'll start to build further through the second quarter as we start to get ready for the growth expectations we see through the balance of the year. But just timing of some of the. Time, thinking about and addressing our UK business and the working capital deployed over there. The model actually requires less working capital and that's part of the benefit that we saw in Q1. So just a quick follow up and I'll turn it over. Do you see any change in your overall working capital metrics or is it just normal? Normal quarter to quarter seasonality? I would say overall we are running at a lower working capital need overall on an average at percentage of sales. Great. Thank you Bill.

OPERATOR

And as a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. Our next question will be coming from Julio Romero of Sidoti and company. Your line is open.

Julio Romero

Thanks. Hey, good morning, John, Bill and Lisa. Hi, good morning, Julio. Good morning. Hey Bill, you mentioned that fuel costs within freight, fuel charges within freight costs for infrastructure solutions are starting to creep up. Not a big surprise there given the macro front. But can you highlight if higher fuel and freight costs are isolated to just the infrastructure solutions segment or is it the broader portfolio and then also how you're navigating these costs and are there any other rising input costs that are worth highlighting.

Bill Tallman (Chief Financial Officer)

Yeah. So maybe just to start with the fuel costs, certainly that would be within our inbound and outbound freight cost structure. Obviously with the current market conditions, that's been an escalating cost that we're seeing across the portfolio. It's the most significant for sure within infrastructure, just given the delivery costs associated with the precast products being a heavier overall tar weight. But we've had different programs that we're implementing in terms of pricing where we can to mitigate those costs just like any other company. That's something that we're looking to pass on. It wasn't a significant driver in Q1, but certainly starting to see it here in Q2. And, and we're managing that cost with pricing actions where we can. And then I guess, yeah, to follow up on your other question, in terms of other escalating costs, nothing of significance at this point that we would point to.

Julio Romero

Okay, very helpful there. You highlighted you're seeing some early signs that the actions taken in the UK rail business are translating into improvements. Is that business becoming less of a drag? Was it less of a drag to your pre tax profit here in the first quarter than it was in the fourth quarter? And what kind of sequential improvement in that business is kind of embedded in the 2026 outlook?

Jon Castle (President and CEO)

Yeah, so our actions are definitely taking hold. You know we made a number of structural changes over there as well as focus on what business that we have and more importantly what we want to do over there. And so we're seeing the benefits of that. And when Bill was mentioning the working capital, as far as the amount of working capital as a percent of sales, that's a big part of our improvement year over year. So we're very pleased with where we're at right now and we'll continue to make sure that we stay in front of what it is. But it's a big part of our company, it's a big part of rail. When we talk about the year over year improvement and improvement of profitability, you know, that's where the technology innovation is. And when earlier questioned by Liam, that's a big part of our continued growth that we're doing specifically in friction management and that's kind of our gateway to make that happen. So we're, you know, we've been taking quite a bit of action then we're going to stay in focus to make sure that it's where we want it to be. But we are pleased with the first quarter results and coming out of the where we ended last year,

Julio Romero

excellent. And Then last one for me would just be if you could touch on the inorganic growth pipeline for Precast products and any other market penetration initiatives you currently have underway within Precast products.

Jon Castle (President and CEO)

Well, you know, first of all, you know, we really focus on organic. You know, I just want to make sure we really hammer that we got a lot of really good, exciting things going on and that's where we're taking our capital. Bill mentioned we spent $3 million of capital in the quarter, 2.4% of sales. We talked about spending 2.7% as far as the year. That's where we're spending our money because we got great growth, organic growth programs going on right now, specifically in the infrastructure business and namely in concrete. And of course we have our filter related to other inorganic opportunities where it makes sense. We continue to look at bolt on type operations and that will be able to add additional product lines for geographic expansion for us. And they're out there and we're working through options or opportunities right now. But first and foremost we're executing on what we have in front of us. And that's some nice growth here organically in those specific businesses. So we're pleased with results to date.

Julio Romero

Excellent. Thanks very much, guys.

OPERATOR

Thanks. Julio and I would now like to turn the call back to Jon Castle for closing remarks.

Jon Castle (President and CEO)

Well, thank you operator. Thank you for joining us today. And I'd like to close with two points. Maybe that didn't come up today in the call or specifically as it relates to the quarter. And Bill mentioned that our order rates are choppy in the project work. And that's true that you see in our sales sometimes as we closed the quarter, we had a very strong April for order intake. About 15% was added to our backlog in the month of April across the entire company. So you know, we talked a lot about momentum in Q4. We had a strong finish to the year and you know, we're here telling you now that momentum is carried in Q1. So the only thing that I was concerned about and we mentioned today was the ordering rate. And those concerns are not with us today. We have plenty of work to be able to achieve what we want to get done this year. And we're seeing that uplift happening across the company in the relative and of course betting activity is extremely strong as well. The last point I'd like to leave with you is our ability to pull this off and do it well. And I'd just like to call out the infrastructure group, Precast and our steel products side that performed the entire quarter with zero injuries in our company. And I think that's just a great testament to not just the fact that we're here now 124 years, but we're here really creating a culture of safety and performance and really a commitment to our employees of doing it right. And the infrastructure group, led by Bob Ness, has done just a tremendous job of doing it right each and every day and keeping our employees safe and getting a product to our customer. So we'll continue to work on that. We'll continue to strive into a wonderful second quarter. So we're looking forward to catch up with you at the end of the day. And I wish everybody a wonderful start to May. Take care. We'll talk to you next time.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.