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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 3/07/24 Concrete Pumping Holdings, Inc. 10-Q 1/31/24 88:6.4M RDG Filings/FA |
Document/Exhibit Description Pages Size
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM i 10-Q
(Mark One)
| i ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended i January 31, 2024
OR
| i ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____ to ____
Commission File Number: i 001-38166
CONCRETE PUMPING HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
| i Delaware | i 83-1779605 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| i 500 E. 84th Avenue, Suite A-5 | i 80229 |
| i Thornton, i Colorado | |
| (Address of principal executive offices) | (Zip Code) |
( i 303) i 289-7497
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| i Common Stock, par value $0.0001 per share | i BBCP | The i Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. i Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). i Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | i Accelerated filer | ☒ |
| Non-accelerated filer | ☐ | Smaller reporting company | i ☒ |
| Emerging growth company | i ☐ |
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i ☐ No ☒
As of March 4, 2024, the registrant had i 53,872,380 shares of common stock, par value $0.0001 per share, issued and outstanding.
CONCRETE PUMPING HOLDINGS, INC.
QUARTERLY REPORT ON FORM 10-Q
fOR THE PERIOD ENDED January 31, 2024
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| Part I. Financial Information |
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| Item 1. |
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Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) |
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Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) |
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7 | ||
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Notes to Unaudited Condensed Consolidated Financial Statements |
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| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 4. |
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| Part II. Other Information |
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| Item 1. |
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| Item 1A. |
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| Item 2. |
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| Item 3. |
31 | ||
| Item 4. |
31 | ||
| Item 5. |
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| Item 6. |
32 | ||
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| Signatures | 33 | ||
PART I
Concrete Pumping Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| As of January 31, | As of October 31, | |||||||
| (in thousands, except per share amounts) | 2024 | 2023 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | i 14,688 | $ | i 15,861 | ||||
| Receivables, net of allowance for doubtful accounts of $1,045 and $978, respectively | i 49,466 | i 62,976 | ||||||
| Inventory | i 6,230 | i 6,732 | ||||||
| Prepaid expenses and other current assets | i 9,244 | i 8,701 | ||||||
| Total current assets | i 79,628 | i 94,270 | ||||||
| Property, plant and equipment, net | i 432,671 | i 427,648 | ||||||
| Intangible assets, net | i 116,779 | i 120,244 | ||||||
| Goodwill | i 222,744 | i 221,517 | ||||||
| Right-of-use operating lease assets | i 28,772 | i 24,815 | ||||||
| Other non-current assets | i 12,489 | i 14,250 | ||||||
| Deferred financing costs | i 1,684 | i 1,781 | ||||||
| Total assets | $ | i 894,767 | $ | i 904,525 | ||||
| Current liabilities: | ||||||||
| Revolving loan | $ | i 13,021 | $ | i 18,954 | ||||
| Operating lease obligations, current portion | i 4,903 | i 4,739 | ||||||
| Finance lease obligations, current portion | i 39 | i 125 | ||||||
| Accounts payable | i 5,344 | i 8,906 | ||||||
| Accrued payroll and payroll expenses | i 9,785 | i 14,524 | ||||||
| Accrued expenses and other current liabilities | i 36,663 | i 34,750 | ||||||
| Income taxes payable | i 2,604 | i 1,848 | ||||||
| Warrant liability, current portion | i - | i 130 | ||||||
| Total current liabilities | i 72,359 | i 83,976 | ||||||
| Long term debt, net of discount for deferred financing costs | i 372,216 | i 371,868 | ||||||
| Operating lease obligations, non-current | i 24,255 | i 20,458 | ||||||
| Finance lease obligations, non-current | i 15 | i 50 | ||||||
| Deferred income taxes | i 79,432 | i 80,791 | ||||||
| Other liabilities, non-current | i 13,550 | i 14,142 | ||||||
| Total liabilities | i 561,827 | i 571,285 | ||||||
| Commitments and contingencies (Note 13) | ||||||||
| Zero-dividend convertible perpetual preferred stock, $0.0001 par value, 2,450,980 shares issued and outstanding as of January 31, 2024 and October 31, 2023 | i 25,000 | i 25,000 | ||||||
| Stockholders' equity | ||||||||
| Common stock, $0.0001 par value, 500,000,000 shares authorized, 53,870,084 and 54,757,445 issued and outstanding as of January 31, 2024 and October 31, 2023, respectively | i 6 | i 6 | ||||||
| Additional paid-in capital | i 383,822 | i 383,286 | ||||||
| Treasury stock | ( i 16,212 | ) | ( i 15,114 | ) | ||||
| Accumulated other comprehensive loss | ( i 1,403 | ) | ( i 5,491 | ) | ||||
| Accumulated deficit | ( i 58,273 | ) | ( i 54,447 | ) | ||||
| Total stockholders' equity | i 307,940 | i 308,240 | ||||||
| Total liabilities and stockholders' equity | $ | i 894,767 | $ | i 904,525 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Concrete Pumping Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended January 31, | ||||||||
| (in thousands, except share and per share amounts) | 2024 | 2023 | ||||||
| Revenue | $ | i 97,711 | $ | i 93,575 | ||||
| Cost of operations | i 64,397 | i 57,121 | ||||||
| Gross profit | i 33,314 | i 36,454 | ||||||
| General and administrative expenses | i 31,858 | i 27,041 | ||||||
| Income from operations | i 1,456 | i 9,413 | ||||||
| Other income (expense): | ||||||||
| Interest expense and amortization of deferred financing costs | ( i 6,463 | ) | ( i 6,871 | ) | ||||
| Change in fair value of warrant liabilities | i 130 | i 4,556 | ||||||
| Other income (expense), net | i 40 | i 21 | ||||||
| Total other expense | ( i 6,293 | ) | ( i 2,294 | ) | ||||
| Income (loss) before income taxes | ( i 4,837 | ) | i 7,119 | |||||
| Income tax expense (benefit) | ( i 1,011 | ) | i 644 | |||||
| Net income (loss) | ( i 3,826 | ) | i 6,475 | |||||
| Less accretion of liquidation preference on preferred stock | ( i 440 | ) | ( i 441 | ) | ||||
| Income (loss) available to common shareholders | $ | ( i 4,266 | ) | $ | i 6,034 | |||
| Weighted average common shares outstanding | ||||||||
| Basic | i 53,314,654 | i 53,601,707 | ||||||
| Diluted | i 53,314,654 | i 54,457,125 | ||||||
| Net income (loss) per common share | ||||||||
| Basic | $ | ( i 0.08 | ) | $ | i 0.11 | |||
| Diluted | $ | ( i 0.08 | ) | $ | i 0.11 | |||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Concrete Pumping Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
| Three Months Ended January 31, | ||||||||
| (in thousands) | 2024 | 2023 | ||||||
| Net income (loss) | $ | ( i 3,826 | ) | $ | i 6,475 | |||
| Other comprehensive income | ||||||||
| Foreign currency translation adjustment | i 4,088 | i 5,052 | ||||||
| Total comprehensive income | $ | i 262 | $ | i 11,527 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Concrete Pumping Holdings, Inc.
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
| Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total | |||||||||||||||||||||||
| (in thousands, except share amounts) | Shares | Amount | ||||||||||||||||||||||||||
| Balance, October 31, 2022 | i 56,226,191 | $ | i 6 | $ | i 379,395 | $ | ( i 4,609 | ) | $ | ( i 9,228 | ) | $ | ( i 86,237 | ) | $ | i 279,327 | ||||||||||||
| Stock-based compensation expense | - | i - | i 1,140 | i - | i - | i - | i 1,140 | |||||||||||||||||||||
| Forfeiture/cancellation of restricted stock | ( i 1,312 | ) | i - | i - | i - | i - | i - | i - | ||||||||||||||||||||
| Shares issued under stock-based program | i 25,264 | - | - | - | - | - | - | |||||||||||||||||||||
| Treasury shares purchased for tax withholding | ( i 82,356 | ) | i - | i - | ( i 573 | ) | i - | i - | ( i 573 | ) | ||||||||||||||||||
| Treasury shares purchased under share repurchase program | ( i 760,457 | ) | i - | i - | ( i 4,923 | ) | i - | i - | ( i 4,923 | ) | ||||||||||||||||||
| Net Income (loss) | - | i - | i - | i - | i - | i 6,475 | i 6,475 | |||||||||||||||||||||
| Foreign currency translation adjustment | - | i - | i - | i - | i 5,052 | i - | i 5,052 | |||||||||||||||||||||
| Balance, January 31, 2023 | i 55,407,330 | $ | i 6 | $ | i 380,535 | $ | ( i 10,105 | ) | $ | ( i 4,176 | ) | $ | ( i 79,762 | ) | $ | i 286,498 | ||||||||||||
| Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income (Loss) |
Accumulated Deficit | Total | |||||||||||||||||||||||
| (in thousands, except share amounts) | Shares | Amount | ||||||||||||||||||||||||||
| Balance, October 31, 2023 | i 54,757,445 | $ | i 6 | $ | i 383,286 | $ | ( i 15,114 | ) | $ | ( i 5,491 | ) | $ | ( i 54,447 | ) | $ | i 308,240 | ||||||||||||
| Stock-based compensation expense | - | i - | i 536 | i - | i - | i - | i 536 | |||||||||||||||||||||
| Forfeiture/cancellation of restricted stock | ( i 750,585 | ) | i - | i - | i - | i - | i - | i - | ||||||||||||||||||||
| Shares issued under stock-based program | i 8,496 | - | - | - | - | - | - | |||||||||||||||||||||
| Treasury shares purchased for tax withholding | ( i 109,178 | ) | i - | i - | ( i 850 | ) | i - | i - | ( i 850 | ) | ||||||||||||||||||
| Treasury shares purchased under share repurchase program | ( i 36,094 | ) | i - | i - | ( i 248 | ) | i - | i - | ( i 248 | ) | ||||||||||||||||||
| Net Income (loss) | - | i - | i - | i - | i - | ( i 3,826 | ) | ( i 3,826 | ) | |||||||||||||||||||
| Foreign currency translation adjustment | - | i - | i - | i - | i 4,088 | i - | i 4,088 | |||||||||||||||||||||
| Balance, January 31, 2024 | i 53,870,084 | $ | i 6 | $ | i 383,822 | $ | ( i 16,212 | ) | $ | ( i 1,403 | ) | $ | ( i 58,273 | ) | $ | i 307,940 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Concrete Pumping Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the Three Months Ended January 31, | ||||||||
| (in thousands) | 2024 | 2023 | ||||||
| Net income (loss) | $ | ( i 3,826 | ) | $ | i 6,475 | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Non-cash operating lease expense | i 1,281 | i 1,113 | ||||||
| Foreign currency adjustments | ( i 736 | ) | ( i 816 | ) | ||||
| Depreciation | i 10,202 | i 9,654 | ||||||
| Deferred income taxes | ( i 1,825 | ) | i 129 | |||||
| Amortization of deferred financing costs | i 445 | i 479 | ||||||
| Amortization of intangible assets | i 3,895 | i 4,795 | ||||||
| Stock-based compensation expense | i 536 | i 1,140 | ||||||
| Change in fair value of warrant liabilities | ( i 130 | ) | ( i 4,556 | ) | ||||
| Net gain on the sale of property, plant and equipment | ( i 305 | ) | ( i 578 | ) | ||||
| Other operating activities | i 46 | ( i 67 | ) | |||||
| Net changes in operating assets and liabilities: | ||||||||
| Receivables | i 13,894 | i 10,482 | ||||||
| Inventory | i 616 | ( i 957 | ) | |||||
| Other operating assets | ( i 564 | ) | ( i 7,256 | ) | ||||
| Accounts payable | ( i 3,865 | ) | ( i 3,997 | ) | ||||
| Other operating liabilities | i 635 | i 1,876 | ||||||
| Net cash provided by operating activities | i 20,299 | i 17,916 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property, plant and equipment | ( i 17,766 | ) | ( i 17,120 | ) | ||||
| Proceeds from sale of property, plant and equipment | i 1,282 | i 2,333 | ||||||
| Net cash used in investing activities | ( i 16,484 | ) | ( i 14,787 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds on revolving loan | i 84,173 | i 83,812 | ||||||
| Payments on revolving loan | ( i 90,107 | ) | ( i 84,980 | ) | ||||
| Purchase of treasury stock | ( i 1,098 | ) | ( i 5,495 | ) | ||||
| Other financing activities | i 1,449 | ( i 26 | ) | |||||
| Net cash provided by (used in) financing activities | ( i 5,583 | ) | ( i 6,689 | ) | ||||
| Effect of foreign currency exchange rate changes on cash | i 595 | i 127 | ||||||
| Net decrease in cash and cash equivalents | ( i 1,173 | ) | ( i 3,433 | ) | ||||
| Cash and cash equivalents: | ||||||||
| Beginning of period | i 15,861 | i 7,482 | ||||||
| End of period | $ | i 14,688 | $ | i 4,049 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Concrete Pumping Holdings, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Note 1. Organization and Description of Business
Organization
Concrete Pumping Holdings, Inc. (the “Company”) is a Delaware corporation headquartered in Thornton, Colorado. The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries including Brundage-Bone Concrete Pumping, Inc. (“Brundage-Bone”), Capital Pumping (“Capital”), Camfaud Group Limited (“Camfaud”) and Eco-Pan, Inc. (“Eco-Pan”).
Nature of business
Brundage-Bone and Capital are concrete pumping service providers in the United States ("U.S.") and Camfaud is a concrete pumping service provider in the United Kingdom (“U.K.”). Their core business is the provision of concrete pumping services to general contractors and concrete finishing companies in the commercial, infrastructure and residential sectors. Most often equipment returns to a “home base” nightly and these service providers do not contract to purchase, mix, or deliver concrete. Brundage-Bone and Capital collectively have approximately 100 branch locations across approximately i 21 states, with its corporate headquarters in Thornton, Colorado. Camfaud has approximately i 30 branch locations throughout the U.K., with its corporate headquarters in Epping (near London), England.
Eco-Pan provides industrial cleanup and containment services, primarily to customers in the construction industry. Eco-Pan uses containment pans specifically designed to hold waste products from concrete and other industrial cleanup operations. Eco-Pan has i 20 operating locations across the U.S. with its corporate headquarters in Thornton, Colorado. In addition, we have concrete waste management operations under our Eco-Pan brand name in the U.K. and currently operate from a shared Camfaud location.
Seasonality
The Company’s sales are historically seasonal, with lower revenue in the first quarter and higher revenue in the fourth quarter of each year. Such seasonality also causes the Company’s working capital cash flow requirements to vary from quarter to quarter and primarily depends on the variability of weather patterns with the Company generally having lower sales volume during the winter and spring months.
/Note 2. Summary of Significant Accounting Policies
We describe our significant accounting policies in Note 2 of the notes to consolidated financial statements in our annual report on Form 10-K for the year ended October 31, 2023 ("Annual Report"). During the three months ended January 31, 2024, there were no changes to those accounting policies.
i
Basis of presentation
Our condensed consolidated balance sheet as of October 31, 2023, which was derived from our audited consolidated financial statements and our unaudited interim consolidated financial statements provided herein have been prepared in accordance with the instructions for Form 10-Q. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. The enclosed statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present a fair statement of the interim periods. The consolidated results of operations and cash flows for the first three months of the year are not necessarily indicative of the consolidated results of operations and cash flows that might be expected for the entire year. These condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended October 31, 2023.
Certain prior period amounts have been reclassified in order to conform to the current year presentation.
During the first quarter of fiscal year 2024, certain assets and associated revenues and expenses previously part of the Company's Other activities has now been aggregated into its U.S. Concrete Pumping segment in order to better align its placement with the manner in which the Company now allocates resources and measures performance. As a result, segment results for prior periods have been reclassified to conform to current period presentation. For further discussion, see Note 18.
i
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
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Revenue recognition
The Company generates revenues primarily from (1) concrete pumping services in both the U.S. and U.K and (2) the Company’s concrete waste services business, both of which are discussed below. In addition, the Company generates an immaterial amount of revenue from the sales of replacement parts to customers. The Company’s delivery terms for replacement part sales are FOB shipping point. Revenue is disaggregated between two accounting standards: (1) ASC 606, Revenue Recognition ("ASC 606") and (2) ASC 842, Leases ("ASC 842").
Leases as Lessor
Our Eco-Pan business involves contracts with customers whereby we are a lessor for the rental component of the contract and therefore, such rental components of the contract are recorded as lease revenue. We account for such rental contracts as operating leases. We recognize revenue from pan rentals in the period earned, regardless of the timing of billing to customers. The lease component of the revenue is disaggregated by a base price that is based on the number of contractual days and a variable component that is based on days in excess of the number of contractual days.
The table below summarizes our revenues as presented in our unaudited consolidated statements of operations for the periods ended January 31, 2024 and 2023 by revenue type:
i
| Three Months Ended January 31, | ||||||||
| (in thousands) | 2024 | 2023 | ||||||
| Service revenue | $ | i 89,958 | $ | i 86,365 | ||||
| Lease fixed revenue | i 4,549 | i 4,054 | ||||||
| Lease variable revenue | i 3,204 | i 3,156 | ||||||
| Total revenue | $ | i 97,711 | $ | i 93,575 | ||||
/
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Receivables and contract assets and liabilities
Receivables are carried at the original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts. Generally, the Company does not require collateral for their accounts receivable; however, the Company may file statutory liens or take other appropriate legal action when necessary on construction projects in which collection problems arise. A receivable is typically considered to be past due if any portion of the receivable balance is outstanding for more than 30 days. The Company does not typically charge interest on past-due receivables.
Pursuant to CECL (defined below), Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts, Management’s understanding of the current economic circumstances within the Company’s industry, reasonable and supportable forecasts and Management’s judgment as to the likelihood of ultimate payment based upon available data. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded when received. Our estimate of doubtful accounts could change based on changing circumstances, including changes in the economy or in particular circumstances of individual customers. Accordingly, the Company may be required to increase or decrease the allowance for doubtful accounts.
The Company does not have contract liabilities associated with contracts with customers. The Company’s contract assets and impairment losses associated therewith are not significant. Contracts with customers do not result in amounts billed to customers in excess of recognizable revenue.
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Newly adopted accounting pronouncements
ASU 2016-13, Financial Instruments Credit Losses (Topic 326) (“ASU 2016-13”) - In June 2016, the FASB issued ASU No. 2016-13, which, along with subsequently issued related ASUs, requires financial assets (or groups of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected, among other provisions (known as the current expected credit loss (“CECL”) model). Under the new guidance, the Company recognizes an allowance for its estimate of expected credit losses over the entire contractual term of its receivables from the date of initial recognition of the financial instrument. Measurement of expected credit losses are based on relevant forecasts that affect collectability. The Company’s receivables are in scope for CECL. At the point that these receivables are recorded, they become subject to the CECL model and estimates of expected credit losses over their contractual life are recorded at inception based on historical information, current conditions, and reasonable and supportable forecasts. This ASU is effective for smaller reporting companies with fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted CECL as of November 1, 2023 for fiscal year ending October 31, 2024. The adoption of CECL did not have a material impact on the condensed consolidated financial statements and related disclosures or the existing internal controls because the Company’s accounts receivable are of short duration and there is not a material difference between incurred losses and expected losses.
Recently issued accounting pronouncements not yet effective
ASU 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”) - In November 2023, the FASB issued ASU No. 2023-07, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. This ASU is effective for public companies with annual periods beginning after December 15, 2023, and interim periods within annual period beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effects adoption of this guidance will have on its consolidated financial statements.
ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”) - In December 2023, the FASB issued ASU No. 2023-09, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. This ASU is effective for public companies with annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effects adoption of this guidance will have on its consolidated financial statements.
Note 3. Fair Value Measurement
The carrying amounts of the Company's cash and cash equivalents, accounts receivable, accounts payable and current accrued liabilities approximate their fair value as recorded due to the short-term maturity of these instruments, which approximates fair value. The Company’s outstanding obligations on its asset-backed loan ("ABL") credit facility are deemed to be at fair value as the interest rates on these debt obligations are variable and consistent with prevailing rates. There were no changes since October 31, 2023 in the Company's valuation techniques used to measure fair value.
Long-term debt instruments
The Company's long-term debt instruments are recorded at their carrying values in the consolidated balance sheet, which may differ from their respective fair values. The fair values of the long-term debt instruments are derived from Level 2 inputs. The fair value amount of the long-term debt instruments as of January 31, 2024 and October 31, 2023 is presented in the table below based on the prevailing interest rates and trading activity of the Senior Notes.
i
| As of January 31, | ||||||||||||||||
| 2023 | ||||||||||||||||
| (in thousands) | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||
| Senior Notes | $ | i 375,000 | $ | i 369,375 | $ | i 375,000 | $ | i 353,438 | ||||||||
Warrants
At October 31, 2023, there were i 13,017,677 public warrants and i no private warrants outstanding. The warrants expired on December 6, 2023 and there were i no amounts outstanding as of January 31, 2024.
All other non-financial assets
The Company's non-financial assets, which primarily consist of property and equipment, goodwill and other intangible assets, are not required to be carried at fair value on a recurring basis and are reported at carrying value. However, on a periodic basis or whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable (and at least annually for goodwill and indefinite lived intangibles), non-financial instruments are assessed for impairment and, if applicable, written down to and recorded at fair value.
Note 4. Prepaid Expenses and Other Current Assets
The significant components of prepaid expenses and other current assets as of January 31, 2024 and October 31, 2023 are comprised of the following:
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| As of January 31, |
As of October 31, |
|||||||
| (in thousands) |
2024 |
2023 |
||||||
| Expected recoveries related to self-insured commercial liabilities |
$ | i 3,646 | $ | i 3,802 | ||||
| Prepaid insurance |
i 1,151 | i 1,611 | ||||||
| Prepaid licenses and deposits |
i 1,312 | i 810 | ||||||
| Prepaid rent |
i 643 | i 629 | ||||||
| Other current assets and prepaids |
i 2,492 | i 1,849 | ||||||
| Total prepaid expenses and other current assets |
$ | i 9,244 | $ | i 8,701 | ||||
/
Note 5. Property, Plant and Equipment
The significant components of property, plant and equipment as of January 31, 2024 and October 31, 2023 are comprised of the following:
i
| As of January 31, |
As of October 31, |
|||||
| (in thousands) |
2024 |
2023 |
||||
| Land, building and improvements |
$ | i 32,521 | $ | i 29,338 | ||
| Finance leases—land and buildings |
i 229 | i 828 | ||||
| Machinery and equipment |
i 529,692 | i 517,514 | ||||
| Transportation equipment |
i 9,720 | i 9,306 | ||||
| Furniture and office equipment |
i 3,689 | i 3,817 | ||||
| Property, plant and equipment, gross |
i 575,851 | i 560,803 | ||||
| Less accumulated depreciation |
( i 143,180 | ) | ( i 133,155 | ) | ||
| Property, plant and equipment, net |
$ | i 432,671 | $ | i 427,648 | ||
For the three months ended January 31, 2024 and 2023 depreciation expense were as follows:
i
| Three Months Ended January 31, |
||||||||
| (in thousands) |
2024 |
2023 |
||||||
| Cost of operations |
$ | i 9,613 | $ | i 9,061 | ||||
| General and administrative expenses |
i 589 | i 593 | ||||||
| Total depreciation expense |
$ | i 10,202 | $ | i 9,654 | ||||
/
Note 6. Goodwill and Intangible Assets
The Company has recognized goodwill and certain intangible assets in connection with prior business combinations.
There were i no triggering events during the three months ended January 31, 2024. The Company will continue to evaluate its goodwill and intangible assets in future quarters.
The following table summarizes the composition of intangible assets as of January 31, 2024 and October 31, 2023:
i
| As of January 31, | ||||||||||||||||||||||||
| Weighted Average | Gross | Foreign Currency | Net | |||||||||||||||||||||
| Remaining Life | Carrying | Accumulated | Accumulated | Translation | Carrying | |||||||||||||||||||
| (in thousands) | (in Years) | Value | Impairment | Amortization | Adjustment | Amount | ||||||||||||||||||
| Intangibles subject to amortization: | ||||||||||||||||||||||||
| Customer relationship | i 9.8 | $ | i 195,126 | $ | - | $ | ( i 133,859 | ) | $ | i 1,135 | $ | i 62,402 | ||||||||||||
| Trade name | i 4.8 | i 5,097 | - | ( i 2,778 | ) | i 273 | i 2,592 | |||||||||||||||||
| Assembled workforce | i 1.2 | i 1,650 | - | ( i 1,110 | ) | - | i 540 | |||||||||||||||||
| Noncompete agreements | i 3.7 | i 1,200 | - | ( i 455 | ) | - | i 745 | |||||||||||||||||
| Indefinite-lived intangible assets: | ||||||||||||||||||||||||
| Trade names (indefinite life) | - | i 55,500 | ( i 5,000 | ) | - | - | i 50,500 | |||||||||||||||||
| Total intangibles | $ | i 258,573 | $ | ( i 5,000 | ) | $ | ( i 138,202 | ) | $ | i 1,408 | $ | i 116,779 | ||||||||||||
| As of October 31, | ||||||||||||||||||||||||
| Weighted Average | Gross | Foreign Currency | Net | |||||||||||||||||||||
| Remaining Life | Carrying | Accumulated | Accumulated | Translation | Carrying | |||||||||||||||||||
| (in thousands) | (in Years) | Value | Impairment | Amortization | Adjustment | Amount | ||||||||||||||||||
| Intangibles subject to amortization: | ||||||||||||||||||||||||
| Customer relationship | i 10.1 | $ | i 195,126 | $ | - | $ | ( i 130,295 | ) | $ | i 832 | $ | i 65,663 | ||||||||||||
| Trade name | i 5.1 | i 5,097 | - | ( i 2,645 | ) | i 146 | i 2,598 | |||||||||||||||||
| Assembled workforce | i 1.4 | i 1,650 | - | ( i 972 | ) | - | i 678 | |||||||||||||||||
| Noncompete agreements | i 3.9 | i 1,200 | - | ( i 395 | ) | - | i 805 | |||||||||||||||||
| Indefinite-lived intangible assets: | ||||||||||||||||||||||||
| Trade names (indefinite life) | - | i 55,500 | ( i 5,000 | ) | - | - | i 50,500 | |||||||||||||||||
| Total intangibles | $ | i 258,573 | $ | ( i 5,000 | ) | $ | ( i 134,307 | ) | $ | i 978 | $ | i 120,244 | ||||||||||||
Amortization expense for the three months ended January 31, 2024 and 2023 was $ i 3.9 million and $ i 4.8 million, respectively.
The changes in the carrying value of goodwill by reportable segment for the three months ended January 31, 2024 are as follows:
i
| (in thousands) | U.S. Concrete Pumping | U.K. Operations | U.S. Concrete Waste Management Services | Total | ||||||||||||
| Balance at October 31, 2023 | $ | i 147,482 | $ | i 24,902 | $ | i 49,133 | $ | i 221,517 | ||||||||
| Foreign currency translation | - | i 1,227 | - | i 1,227 | ||||||||||||
| Balance at January 31, 2024 | $ | i 147,482 | $ | i 26,129 | $ | i 49,133 | $ | i 222,744 | ||||||||
Note 7. Other Non-Current Assets
The significant components of other non-current assets as of January 31, 2024 and October 31, 2023 are comprised of the following:
i
| As of January 31, |
As of October 31, |
|||||||
| (in thousands) |
2024 |
2023 |
||||||
| Expected recoveries related to self-insured commercial liabilities |
$ | i 12,107 | $ | i 13,822 | ||||
| Other non-current assets |
i 382 | i 428 | ||||||
| Total other non-current assets |
$ | i 12,489 | $ | i 14,250 | ||||
/
Note 8. Long Term Debt and Revolving Lines of Credit
The table below is a summary of the composition of the Company’s debt balances as of January 31, 2024 and October 31, 2023:
i
| January 31, | October 31, | |||||||||||
| (in thousands) | Interest Rates | Maturities | 2024 | 2023 | ||||||||
| ABL Facility - short term | Varies | June 2028 | $ | i 13,021 | $ | i 18,954 | ||||||
| Senior notes - all long term | i 6.0000% | February 2026 | i 375,000 | i 375,000 | ||||||||
| Total debt, gross | i 388,021 | i 393,954 | ||||||||||
| Less: Unamortized deferred financing costs offsetting long term debt | ( i 2,784 | ) | ( i 3,132 | ) | ||||||||
| Less: Current Portion | ( i 13,021 | ) | ( i 18,954 | ) | ||||||||
| Long term debt, net of unamortized deferred financing costs | $ | i 372,216 | $ | i 371,868 | ||||||||
On January 28, 2021, Brundage-Bone Concrete Pumping Holdings Inc., a Delaware corporation (the “Issuer”) and a wholly-owned subsidiary of the Company (i) completed a private offering of $ i 375.0 million in aggregate principal amount of its i 6.000% senior secured second lien notes due 2026 (the “Senior Notes”) issued pursuant to an indenture, among the Issuer, the Company, the other Guarantors (as defined below), Deutsche Bank Trust Company Americas, as trustee and as collateral agent (the "Indenture") and (ii) entered into an amended and restated ABL Facility (as subsequently amended, the "ABL Facility") by and among the Company, certain subsidiaries of the Company, Wells Fargo Bank, National Association, as agent, sole lead arranger and sole bookrunner, the other lenders party thereto, which provided up to $ i 125.0 million of asset-based revolving loan commitments to the Company and the other borrowers under the ABL Facility. The Senior Notes are jointly and severally guaranteed on a senior secured basis by the Company, Concrete Pumping Intermediate Acquisition Corp. and each of the Issuer’s domestic, wholly-owned subsidiaries that is a borrower or a guarantor under the ABL Facility (collectively, the "Guarantors").
On June 1, 2023, the ABL Facility was amended to, among other changes, (1) increase the maximum revolver borrowings available to be drawn thereunder to $ i 225.0 million, (2) increase the letter of credit sublimit to $ i 22.5 million and (3) extend the maturity of the ABL Facility to the earlier of (a) June 1, 2028 or (b) the date that is 180 days prior to (i) the final stated maturity date of the Senior Notes or (ii) the date the Senior Notes become due and payable. The ABL Facility also provides for an uncommitted accordion feature under which the borrowers under the ABL Facility can, subject to specified conditions, increase the ABL Facility by up to an additional $ i 75.0 million. The amended ABL Facility was treated as a debt modification. The Company capitalized an additional $ i 0.5 million of debt issuance costs related to the June 1, 2023, ABL Facility amendment. The preexisting unamortized deferred costs of $ i 1.4 million and the additional costs of $ i 0.5 million will be amortized from June 1, 2023 through June 1, 2028.
The outstanding principal amount of the Senior Notes as of January 31, 2024 was $ i 375.0 million and as of that date, the Company was in compliance with all covenants under the Indenture.
The outstanding balance under the ABL Facility as of January 31, 2024 was $ i 13.0 million and as of that date, the Company was in compliance with all debt covenants. Borrowings are generally in the form of short-term fixed rate loans that can be extended to mature on the earlier of (a) June 1, 2028 or (b) the date that is 180 days prior to (i) the final stated maturity date of the Senior Notes or (ii) the date the Senior Notes become due and payable. Amounts borrowed may be repaid at any time, subject to the terms and conditions of the agreement.
The Company utilizes the ABL Facility to support its working capital arrangement.
In addition, as of January 31, 2024 the Company had $ i 1.1 million in credit line reserves and a letter of credit balance of $ i 8.5 million.
As of January 31, 2024 we had $ i 202.3 million of available borrowing capacity under the ABL Facility. Debt issuance costs related to revolving credit facilities are capitalized and reflected as an asset in deferred financing costs in the accompanying consolidated balance sheets. The Company had debt issuance costs related to the revolving credit facilities of $ i 1.7 million as of January 31, 2024.
As of January 31, 2024 and October 31, 2023, the weighted average interest rate for borrowings under the ABL Facility was i 7.1% and i 7.9% respectively.
/Note 9. Accrued Payroll and Payroll Expenses
The following table summarizes accrued payroll and expenses as of January 31, 2024 and October 31, 2023:
i
| As of January 31, |
As of October 31, |
|||||||
| (in thousands) |
2024 |
2023 |
||||||
| Accrued vacation |
$ | i 2,711 | $ | i 2,982 | ||||
| Accrued payroll |
i 3,089 | i 3,960 | ||||||
| Accrued bonus |
i 2,116 | i 5,368 | ||||||
| Accrued employee-related taxes |
i 1,778 | i 1,892 | ||||||
| Other accrued |
i 91 | i 322 | ||||||
| Total accrued payroll and payroll expenses |
$ | i 9,785 | $ | i 14,524 | ||||
/
Note 10. Accrued Expenses and Other Current Liabilities
The following table summarizes accrued expenses and other current liabilities as of January 31, 2024 and October 31, 2023:
i
| As of January 31, |
As of October 31, |
|||||||
| (in thousands) |
2024 |
2023 |
||||||
| Accrued self-insured commercial liabilities |
$ | i 10,587 | $ | i 11,087 | ||||
| Accrued self-insured health liabilities |
i 2,466 | i 2,269 | ||||||
| Accrued interest |
i 11,364 | i 5,775 | ||||||
| Accrued equipment purchases |
i 4,454 | i 8,545 | ||||||
| Accrued property, sales and use tax |
i 2,906 | i 1,791 | ||||||
| Accrued professional fees |
i 1,010 | i 1,429 | ||||||
| Other |
i 3,876 | i 3,854 | ||||||
| Total accrued expenses and other liabilities |
$ | i 36,663 | $ | i 34,750 | ||||
/
Note 11. Other Liabilities, Non-Current
The following table summarizes other non-current liabilities as of January 31, 2024 and October 31, 2023:
i
| As of January 31, |
As of October 31, |
|||||||
| (in thousands) |
2024 |
2023 |
||||||
| Self-insured commercial liability |
$ | i 12,332 | $ | i 14,140 | ||||
| Other |
i 1,218 | i 2 | ||||||
| Total other non-current liabilities |
$ | i 13,550 | $ | i 14,142 | ||||
/
Note 12. Income Taxes
The following table summarizes income (loss) before income taxes and income tax expense (benefit) for the three months ended January 31, 2024 and 2023:
i
| Three Months Ended January 31, | ||||||||
| (in thousands) | 2024 | 2023 | ||||||
| Income (loss) before income taxes | $ | ( i 4,837 | ) | $ | i 7,119 | |||
| Income tax expense (benefit) | $ | ( i 1,011 | ) | $ | i 644 | |||
The effective tax rate for the three months ended January 31, 2024 and 2023 was primarily impacted by the change in fair value of warrant liabilities.
As of January 31, 2024 and October 31, 2023, the Company had deferred tax liabilities, net of deferred tax assets, of $ i 79.4 million and $ i 80.8 million, respectively. Included in deferred tax assets as of January 31, 2024 and October 31, 2023 were net operating loss carryforwards of $ i 15.7 million and $ i 18.6 million, respectively. The Company has a valuation allowance of $ i 0.2 million as of January 31, 2024 and October 31, 2023, related to foreign and U.S. state tax credit carryforwards where realization is more uncertain at this time due to the limited carryforward periods that exist and state net operating losses that are expected to expire before they can be utilized.
/Note 13. Commitments and Contingencies
Insurance
Commercial Self-Insured Losses
The Company retains a significant portion of the risk for workers' compensation, automobile, and general liability losses (“self-insured commercial liability”). Reserves have been recorded that reflect the undiscounted estimated liabilities including claims incurred but not reported. When a recognized liability is covered by third-party insurance, the Company records an insurance claim receivable to reflect the covered liability. Amounts estimated to be paid within one year have been included in Accrued expenses and other current liabilities, with the remainder included in Other liabilities, non-current on the Consolidated Balance Sheets. Insurance claims receivables that are expected to be received from third-party insurance within one year have been included in Prepaid expenses and other current assets, with the remainder included in Other non-current assets on the Consolidated Balance Sheets.
The following table summarizes as of January 31, 2024 and October 31, 2023 for (1) recorded liabilities, related to both asserted as well as unasserted insurance claims and (2) any related insurance claims receivables.
i
| As of January 31, 2024 | As of October 31, 2023 | ||||||||
| (in thousands) | Classification on the Condensed Consolidated Balance Sheets | ||||||||
| Self-insured commercial liability, current | Accrued expenses and other current liabilities | $ | i 10,587 | $ | i 11,087 | ||||
| Self-insured commercial liability, non-current | Other liabilities, non-current | i 12,332 | i 14,140 | ||||||
| Total self-insured commercial liabilities | $ | i 22,919 | $ | i 25,227 | |||||
| Expected recoveries related to self-insured commercial liabilities, current | Prepaid expenses and other current assets | $ | i 3,646 | $ | i 3,802 | ||||
| Expected recoveries related to self-insured commercial liabilities, non-current | Other non-current assets | i 12,107 | i 13,822 | ||||||
| Total expected recoveries related to self-insured commercial liabilities | $ | i 15,754 | $ | i 17,625 | |||||
| Total self-insured commercial liability, net of expected recoveries | $ | i 7,165 | $ | i 7,602 | |||||
Medical Self-Insured Losses
The Company offers employee health benefits via a partially self-insured medical benefit plan. Participant claims exceeding certain limits are covered by a stop-loss insurance policy. The Company contracts with a third-party administrator for tasks including, but not limited to, processing claims and remitting benefits. As of January 31, 2024 and October 31, 2023, the Company had accrued $ i 1.4 million and $ i 1.2 million, respectively, for estimated health claims incurred but not reported based on historical claims amounts and average lag time. These accruals are included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets. The Company contracts with a third-party administrator to process claims, remit benefits, etc. The third-party administrator required the Company to maintain a bank account to facilitate the administration of claims.
Litigation
The Company is currently involved in certain legal proceedings and other disputes with third parties that have arisen in the ordinary course of business. Management believes that the outcomes of these matters will not have a material impact on the Company’s financial statements and does not believe that any amounts need to be recorded for contingent liabilities in the Company’s consolidated balance sheet.
Washington Department of Revenue Sales Tax Issue
Historically, the Company has not charged sales tax to its state of Washington customers that provide a reseller certificate, treating this as a wholesale transaction rather than as a retail sale. Effective April 1, 2020, the state of Washington Department of Revenue (“DOR”) published a rule which amended Washington Administrative Code 458-20-211, otherwise known as Rule 211, by designating sales of stand-alone concrete pumping services as solely retail transactions. The Company believes the DOR improperly amended Rule 211 and is strongly defending this position. As such, for the period from April 1, 2020 through January 31, 2024, the Company did not charge sales tax where its customers provide a reseller certificate and petitioned for declaratory relief from the rule.
In February 2023, the Company received an adverse ruling from the Thurston County superior court regarding its position, which it has appealed. In February 2024, oral arguments were heard in the Court of Appeals in Tacoma and the Company received an unfavorable judgement during the same month. As of October 31, 2023, no liability had been recorded in connection with this contingency as a loss was not deemed probable at that time. However, as a result of the unfavorable judgment in February 2024, the Company has concluded the loss is now probable and therefore has recorded a loss of $ i 3.5 million in the quarter ended January 31, 2024. The loss is included in general and administrative expenses in the Company’s condensed consolidated financial statements. During the quarter ended January 31, 2024, the Company made a payment of $ i 1.8 million to the DOR. Beginning with the second quarter of fiscal year 2024, the Company started assessing sales tax related to its customers in the state of Washington.
Letters of credit
The ABL Facility provides for up to $ i 22.5 million of standby letters of credit. As of January 31, 2024, total outstanding letters of credit totaled $ i 8.5 million, the vast majority of which had been committed to the Company’s general liability insurance provider.
Note 14. Stockholders’ Equity
Share Repurchase Program
In March 2024, the board of directors of the Company approved a $ i 15.0 million increase to the Company’s share repurchase program. This authorization will expire on March 31, 2025 and is in addition to the repurchase authorization of up to $ i 10.0 million to expire March 31, 2025 that was previously approved in January 2023. In January 2023, the board of directors of the Company approved a $ i 10.0 million increase to the Company’s share repurchase program that was set to expire on March 31, 2024. On January 4, 2024, the board of directors approved an extension of this authorization through March 31, 2025. This is in addition to the repurchase authorization of up to $ i 10.0 million through June 15, 2023, that was previously approved in June 2022. The repurchase program permits shares to be repurchased in the open market, by block purchase, in privately negotiated transactions, in one or more transactions from time to time, or pursuant to any trading plan adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Open market purchases will be conducted in accordance with the limitations set forth in Rule 10b-18 of the Exchange Act and other applicable legal and regulatory requirements. The repurchase program may be suspended, terminated, extended or otherwise modified by the Board without notice at any time for any reason, including, without limitation, market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, capital and liquidity objectives, and other factors deemed appropriate by the Company's management.
The following table summarizes the shares repurchased, total cost of shares repurchased and average price per share for the three months ended:
i
| Three Months Ended January 31, | ||||||||
| (in thousands, except price per share) | 2024 | 2023 | ||||||
| Shares repurchased | i 36 | i 760 | ||||||
| Total cost of shares repurchased | $ | i 248 | $ | i 4,923 | ||||
| Average price per share | $ | i 6.88 | $ | i 6.48 | ||||
/
Note 15. Stock-Based Compensation
Pursuant to the Concrete Pumping Holdings, Inc. 2018 Omnibus Incentive Plan, the Company granted stock-based awards to certain employees in the U.S. and U.K.
The following table summarizes realized compensation expense related to stock options and restricted stock awards in the accompanying condensed consolidated statements of operations:
i
| Three Months Ended January 31, |
||||||||
| (in thousands) |
2024 |
2023 |
||||||
| Compensation expense – stock options |
$ | i 60 | $ | i 132 | ||||
| Compensation expense – restricted stock awards |
i 476 | i 1,008 | ||||||
| Total |
$ | i 536 | $ | i 1,140 | ||||
Note 16. Earnings Per Share
The table below shows our basic and diluted EPS calculations for the three months ended January 31, 2024 and 2023:
i
| Three Months Ended January 31, | ||||||||
| (in thousands, except share and per share amounts) | 2024 | 2023 | ||||||
| Net income (loss) (numerator): | ||||||||
| Net income (loss) attributable to Concrete Pumping Holdings, Inc. | $ | ( i 3,826 | ) | $ | i 6,475 | |||
| Less: Accretion of liquidation preference on preferred stock | ( i 440 | ) | ( i 441 | ) | ||||
| Less: Undistributed earnings allocated to participating securities | i - | ( i 235 | ) | |||||
| Net income (loss) attributable to common stockholders (numerator for basic earnings per share) | $ | ( i 4,266 | ) | $ | i 5,799 | |||
| Add back: Undistributed earning allocated to participating securities | i - | i 235 | ||||||
| Less: Undistributed earnings reallocated to participating securities | i - | ( i 232 | ) | |||||
| Numerator for diluted earnings (loss) per share | $ | ( i 4,266 | ) | $ | i 5,802 | |||
| Weighted average shares (denominator): | ||||||||
| Weighted average shares - basic | i 53,314,654 | i 53,601,707 | ||||||
| Weighted average shares - diluted | i 53,314,654 | i 54,457,125 | ||||||
| Basic earnings (loss) per share | $ | ( i 0.08 | ) | $ | i 0.11 | |||
| Diluted earnings (loss) per share | $ | ( i 0.08 | ) | $ | i 0.11 | |||
For the three months ended January 31, 2024, i 2.5 million shares of Series A Preferred Stock, i 0.5 million of unvested restricted stock awards, i 1.1 million of unexercised stock options and i 0.2 million outstanding unexercised non-qualified stock options were excluded from the computation of diluted EPS because their effect would have been anti-dilutive.
For the three months ended January 31, 2023, i 13.0 million warrants to purchase shares of common stock at an exercise price of $ i 11.50, i 2.5 million shares of Series A Preferred Stock, and i 2.0 million of unvested restricted stock awards were excluded from the computation of diluted EPS because their effect would have been anti-dilutive.
/
Note 17. Supplemental Cash Flow Information
The table below shows supplemental cash flow information for the three months ended January 31, 2024 and 2023:
i
| Three Months Ended January 31, |
||||||||
| (in thousands) |
2024 |
2023 |
||||||
| Supplemental cash flow information: |
||||||||
| Cash payments related to operating lease liabilities |
$ | i 1,292 | $ | i 1,404 | ||||
| Cash paid for interest |
$ | i 489 | $ | i 779 | ||||
| Cash paid (refunded) for income taxes |
$ | i - | $ | ( i 306 | ) | |||
| Non-cash investing and financing activities: |
||||||||
| Operating lease assets obtained in exchange for new operating lease liabilities |
$ | i 5,324 | $ | i 1,070 | ||||
The table below shows property, plant and equipment acquired but nor yet paid for as of January 31, 2024 and 2023:
| As of January 31, |
||||||||
| (in thousands) |
2024 |
2023 |
||||||
| Beginning of period: |
||||||||
| PP&E acquired but not yet paid |
$ | i 9,484 | $ | i 8,882 | ||||
| End of period: |
||||||||
| PP&E acquired but not yet paid |
$ | i 4,597 | $ | i 3,762 | ||||
The Company’s revenues are derived from i three reportable segments: U.S. Concrete Pumping, U.K. Operations and U.S. Concrete Waste Management Services. Any differences between segment reporting and consolidated results are reflected in Intersegment or Other below. All Other non-segmented assets primarily include cash and cash equivalents and intercompany eliminations. The Company evaluates the performance of each segment based on revenue, and measures segment performance based upon EBITDA (earnings before interest, taxes, depreciation and amortization).
During the first quarter of fiscal year 2024, the Company moved certain assets and associated revenues and expenses previously part of the Company's Other activities into the U.S. Concrete Pumping segment based on the way our chief operating decision maker ("CODM") allocates resources and measures performance. As a result, segment results for prior periods have been reclassified to conform to the current period presentation.
The table below shows changes from the recast of segment results for the three months ended January 31, 2023:
i
| Three Months Ended January 31, 2023 | ||||||||
| (in thousands) | U.S. Concrete Pumping | Other | ||||||
| As Previously Reported | ||||||||
| Depreciation and amortization | $ | i 10,374 | $ | i 213 | ||||
| Segment EBITDA | $ | i 15,063 | $ | i 5,181 | ||||
| Recast Adjustment | ||||||||
| Depreciation and amortization | $ | i 213 | $ | ( i 213 | ) | |||
| Segment EBITDA | $ | i 625 | $ | ( i 625 | ) | |||
| Current Report As Adjusted | ||||||||
| Depreciation and amortization | $ | i 10,587 | $ | i - | ||||
| Segment EBITDA | $ | i 15,688 | $ | i 4,556 | ||||
The U.S. and U.K. regions each individually accounted for more than 10% of the Company's revenue for the periods presented.
The following provides operating information about the Company's reportable segments and geographic locations for the periods presented:
i
| Three Months Ended January 31, | ||||||||
| (in thousands) | 2024 | 2023 | ||||||
| Revenue | ||||||||
| U.S. Concrete Pumping | $ | i 66,683 | $ | i 67,187 | ||||
| U.K. Operations | i 15,408 | i 12,708 | ||||||
| U.S. Concrete Waste Management Services - Third parties | i 15,620 | i 13,680 | ||||||
| U.S. Concrete Waste Management Services - Intersegment | i 100 | i 92 | ||||||
| Intersegment eliminations | ( i 100 | ) | ( i 92 | ) | ||||
| Reportable segment revenue | $ | i 97,711 | $ | i 93,575 | ||||
| EBITDA | ||||||||
| U.S. Concrete Pumping | $ | i 7,036 | $ | i 15,688 | ||||
| U.K. Operations | i 3,176 | i 2,380 | ||||||
| U.S. Concrete Waste Management Services | i 5,380 | i 5,815 | ||||||
| Reportable segment EBITDA | i 15,592 | i 23,883 | ||||||
| Interest expense and amortization of deferred financing costs | ( i 6,463 | ) | ( i 6,871 | ) | ||||
| Reportable depreciation and amortization | ( i 14,097 | ) | ( i 14,449 | ) | ||||
| Other | i 131 | i 4,556 | ||||||
| Total income (loss) before income taxes | $ | ( i 4,837 | ) | $ | i 7,119 | |||
| Depreciation and amortization | ||||||||
| U.S. Concrete Pumping | $ | i 10,230 | $ | i 10,587 | ||||
| U.K. Operations | i 1,808 | i 1,827 | ||||||
| U.S. Concrete Waste Management Services | i 2,059 | i 2,035 | ||||||
| Total depreciation and amortization | $ | i 14,097 | $ | i 14,449 | ||||
| Interest expense and amortization of deferred financing costs | ||||||||
| U.S. Concrete Pumping | $ | i 5,754 | $ | i 6,178 | ||||
| U.K. Operations | i 709 | i 693 | ||||||
| Total interest expense and amortization of deferred financing costs | $ | i 6,463 | $ | i 6,871 | ||||
| Revenue by geography | ||||||||
| U.S. | $ | i 82,303 | $ | i 80,867 | ||||
| U.K. | i 15,408 | i 12,708 | ||||||
| Total revenue | $ | i 97,711 | $ | i 93,575 | ||||
| Total capital expenditures | ||||||||
| U.S. Concrete Pumping | $ | i 7,932 | $ | i 6,641 | ||||
| U.K. Operations | i 4,227 | i 7,169 | ||||||
| U.S. Concrete Waste Management Services | i 3,047 | i 3,291 | ||||||
| Reportable segment capital expenditures | i 15,206 | i 17,101 | ||||||
| Other | i 2,560 | i 19 | ||||||
| Total capital expenditures | $ | i 17,766 | $ | i 17,120 | ||||
The Company does not disclose total assets by segment as such information is not provided to the CODM. The total assets by geographic location is provided to the CODM and is presented below. Total assets and property, plant and equipment, net by geographic location for the periods presented are as follows:
| As of | As of | |||||||
| January 31, | October 31, | |||||||
| (in thousands) | 2024 | 2023 | ||||||
| Total Assets | ||||||||
| U.S. | $ | i 768,777 | $ | i 785,402 | ||||
| U.K. | i 125,990 | i 119,123 | ||||||
| Total Assets | $ | i 894,767 | $ | i 904,525 | ||||
| Property, plant and equipment, net | ||||||||
| U.S. | $ | i 371,425 | $ | i 371,689 | ||||
| U.K. | i 61,246 | i 55,959 | ||||||
| Property, plant and equipment, net | $ | i 432,671 | $ | i 427,648 | ||||
/
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following management’s discussion and analysis together with Concrete Pumping Holdings, Inc.’s (the “Company”, “we”, “us” or “our”) condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report. All references to "Notes" in this Item 2 of Part I refer to the notes to condensed consolidated financial statements included in Item 1 of Part I of this report. All references to “Annual Report” refers to our Form 10-K for the year ended October 31, 2023 filed with the SEC on January 16, 2024.
Cautionary Statement Concerning Forward-Looking Statements and Risk Factors Summary
Certain statements in this Quarterly Report on Form 10-Q ("Report") constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects, and the potential impact of the COVID-19 pandemic on our business. These forward-looking statements may be identified by terminology such as “likely,” “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or "views" or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this Report are reasonable, we cannot guarantee future results.
The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects. These statements involve known and unknown risks, uncertainties (some of which are beyond our control) and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the items in the following:
|
|
● |
the adverse impact of recent inflationary pressures, including significant increases in fuel costs, global economic conditions and events related to these conditions |
| ● | general economic and business conditions, which may affect demand for commercial, infrastructure, and residential construction and adverse effects of major endemics or pandemics on our business; | |
| ● | our ability to successfully implement our operating strategy; | |
| ● | our ability to successfully identify, manage and integrate acquisitions; | |
| ● | our ability to maintain effective internal controls necessary to provide reliable financial reports; | |
| ● | governmental requirements and initiatives, including those related to mortgage lending, financing or deductions, funding for public or infrastructure construction, land usage, and environmental, health, and safety matters; | |
| ● | seasonal and inclement weather conditions, which impede the installation of ready-mixed concrete; | |
| ● | the cyclical nature of, and changes in, the real estate and construction markets, including pricing changes by our competitors; | |
| ● | our ability to maintain favorable relationships with third parties who supply us with equipment and essential supplies; | |
| ● | our ability to retain key personnel and maintain satisfactory labor relations; | |
| ● | disruptions, uncertainties or volatility in the credit markets that may limit our, our suppliers’ and our customers’ access to capital; | |
| ● | personal injury, property damage, results of litigation and other claims and insurance coverage issues; | |
| ● | our substantial indebtedness and the restrictions imposed on us by the terms of our indebtedness; | |
| ● | the effects of currency fluctuations on our results of operations and financial condition; and | |
| ● | other factors as described in the section entitled “Risk Factors” in our Annual Report. |
Our forward-looking statements speak only as of the date of this report or as of the date they are made, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports on Forms 10-K, 10-Q and 8-K should be considered.
Business Overview
The Company is a Delaware corporation headquartered in Thornton, Colorado. The unaudited condensed consolidated financial statements included herein include the accounts of Concrete Pumping Holdings, Inc. and its wholly owned subsidiaries including Brundage-Bone Concrete Pumping, Inc. (“Brundage-Bone”), Camfaud Group Limited (“Camfaud”) and Eco-Pan, Inc. (“Eco-Pan”).
As part of the Company’s business growth and capital allocation strategy, the Company views strategic acquisitions as opportunities to enhance our value proposition through differentiation and competitiveness. Depending on the deal size and characteristics of the M&A opportunities available, we expect to allocate capital for opportunistic M&A utilizing cash on the balance sheet and the Company's revolving line of credit. In recent years, we have successfully executed on this strategy.
U.S. Concrete Pumping
All branches operating within our U.S. Concrete Pumping segment are concrete pumping service providers in the United States ("U.S."). Our U.S. Concrete Pumping core business is the provision of concrete pumping services to general contractors and concrete finishing companies in the commercial, infrastructure and residential sectors. Equipment generally returns to a “home base” nightly and these branches do not contract to purchase, mix, or deliver concrete. This segment collectively has approximately 100 branch locations across approximately 21 states with their corporate headquarters in Thornton, Colorado.
U.S. Concrete Waste Management Services
Our U.S. Concrete Waste Management Services segment consists of our U.S. based Eco-Pan business. Eco-Pan provides industrial cleanup and containment services, primarily to customers in the construction industry. Eco-Pan uses containment pans specifically designed to hold waste products from concrete and other industrial cleanup operations. Eco-Pan has 20 operating locations across the U.S. with its corporate headquarters in Thornton, Colorado.
U.K. Operations
Our U.K. Operations segment consists of our Camfaud, Premier and U.K. based Eco-Pan businesses. Camfaud is a concrete pumping service provider in the U.K. Our U.K. core business is primarily the provision of concrete pumping services to general contractors and concrete finishing companies in the commercial, infrastructure and residential sectors. Equipment generally returns to a “home base” nightly and does not contract to purchase, mix, or deliver concrete. Camfaud has approximately 30 branch locations throughout the U.K., with its corporate headquarters in Epping (near London), England. In addition, we have concrete waste management operations under our Eco-Pan brand name in the U.K. and currently operate from a shared Camfaud location.
Results of Operations
During the first quarter of fiscal 2024, the Company’s operations in the U.S. were negatively impacted by severe winter weather, including heavy rainfall, snow and freezing temperatures in the month of January that stalled many customer projects and resulted in a revenue decline in the U.S. Concrete Pumping segment. This was coupled with an increase in expenses during the first quarter primarily due to (1) a non-recurring charge of $3.5 million as a result of a recent adverse court ruling related to sales tax, and (2) higher labor, health insurance and rent costs. These factors are reflected in the description of our results of operations below.
Three Months Ended January 31, 2024 Compared to the Three Months Ended January 31, 2023
The tables included in the period-to-period comparisons below provide summaries of our revenue, gross profit and net income for our business segments for the three months ended January 31, 2024 and 2023.
Revenue
| Three Months Ended January 31, |
Change |
|||||||||||||||
| (in thousands) |
2024 |
2023 |
$ |
% |
||||||||||||
| Revenue |
||||||||||||||||
| U.S. Concrete Pumping |
$ | 66,683 | $ | 67,187 | $ | (504 | ) | -0.8 | % | |||||||
| U.K. Operations |
15,408 | 12,708 | 2,700 | 21.2 | % | |||||||||||
| U.S. Concrete Waste Management Services - Third parties |
15,620 | 13,680 | 1,940 | 14.2 | % | |||||||||||
| U.S. Concrete Waste Management Services - Intersegment |
100 | 92 | 8 | 8.7 | % | |||||||||||
| Intersegment eliminations |
(100 | ) | (92 | ) | (8 | ) | 8.7 | % | ||||||||
| Reportable segment revenue |
$ | 97,711 | $ | 93,575 | $ | 4,136 | 4.4 | % | ||||||||
Total revenue. Total revenues were $97.7 million for the three months ended January 31, 2024 compared to $93.6 million for the three months ended January 31, 2023. Revenue by segment is further discussed below.
U.S. Concrete Pumping. Revenue for our U.S. Concrete Pumping segment decreased by 0.8%, or $0.5 million, from $67.2 million in the first quarter of fiscal 2023 to $66.7 million for the first quarter of fiscal 2024 primarily attributable to a decrease in volume driven by severe winter weather in the 2024 first quarter, specifically heavy rainfall and freezing temperatures in the month of January.
U.K. Operations. Revenue for our U.K. Operations segment increased by 21.2%, or $2.7 million, from $12.7 million in the first quarter of fiscal 2023 to $15.4 million for the first quarter of fiscal 2024. Excluding the impact from foreign currency translation, revenue was up 16% year-over-year. The increase in revenue was primarily attributable to pricing improvements.
U.S. Concrete Waste Management Services. Third party revenue for the U.S. Concrete Waste Management Services segment improved by 14.2%, or $1.9 million, from $13.7 million in the first quarter of fiscal 2023 to $15.6 million for the first quarter of fiscal 2024. The increase in revenue was driven by robust organic growth and pricing improvements against a backdrop of adverse winter weather.
Gross Profit and Gross Margin
| Three Months Ended January 31, |
Change |
|||||||||||||||
| (in thousands, unless otherwise stated) |
2024 |
2023 |
$ |
% | ||||||||||||
| Gross Profit and Gross Margin |
||||||||||||||||
| Gross Profit |
$ | 33,314 | $ | 36,454 | $ | (3,140 | ) | -8.6 | % | |||||||
| Gross Margin |
34.1 | % | 39.0 | % | ||||||||||||
Gross margin. Our gross margin for the first quarter of fiscal 2024 was 34.1% compared to 39.0% in the first quarter of fiscal 2023. The decrease in our gross margin was primarily related to lower revenue volumes and labor utilization driven by the adverse impact severe of winter weather conditions, coupled with inflationary increases in insurance costs.
General and administrative expenses
General and administrative expenses ("G&A"). G&A expenses for the first quarter of fiscal 2024 were $31.9 million, an increase of $4.9 million from $27.0 million in the first quarter of fiscal 2023. G&A expenses as a percent of revenue were 32.7% for the first quarter of fiscal 2024 compared to 28.9% for the same period a year ago. The dollar increase in G&A expenses was largely due to (1) a non-recurring charge of $3.5 million related to sales tax litigation, as further described in Note 13 in Part I, Item 1 of this report for more information, (2) higher labor and health insurance costs of approximately $2.5 million as a result of additional headcount in our U.S. Concrete Waste Management Services segment to support growth initiatives and wage inflation, and (3) higher rent of $0.5 million. These increases were partially offset by non-cash decreases in amortization expense of $0.9 million and $0.6 million in lower stock-based compensation expense.
Excluding amortization of intangible assets of $3.9 million, depreciation expense of $0.6 million, stock-based compensation expense of $0.5 million and the non-recurring $3.5 million sales tax litigation-related charge, G&A expenses were $23.4 million for the first quarter of fiscal 2024 (23.9% of revenue), up $6.4 million from $20.5 million for the first quarter of fiscal 2023 (21.9% of revenue). The increase was primarily due to the Washington charge and higher labor as discussed above.
Total other income (expense)
Interest expense and amortization of deferred financing costs. Interest expense and amortization of deferred financing costs for the first quarter of fiscal 2024 was $6.5 million, down $0.4 million from $6.9 million in the first quarter of fiscal 2023. The decrease was primarily attributable to a lower average ABL revolver draw during the fiscal 2024 first quarter as compared to the same quarter a year ago.
Change in fair value of warrant liabilities. During the first quarter of fiscal 2024 the Company recognized a $0.1 million gain on the fair value remeasurement of our liability-classified warrants. During the first quarter of fiscal 2023 the Company recognized a $4.6 million gain on the fair value measurement of our liability-classified warrants. The decline in the fair value remeasurement of the public warrants for the first quarter of fiscal 2023 is due to the Company's share price trading below the exercise price as the warrants were closer to expiring in December 2023. On December 6, 2023, we announced the expiration of the Company's 13,017,677 warrants to acquire shares of its common stock, as such they are no longer recognized as a liability on the balance sheet as of January 31, 2024.
Income tax expense
Income tax expense (benefit). For the first fiscal quarter ended January 31, 2024 the Company recorded income tax benefit of $1.0 million on pretax loss of $4.8 million. For the same quarter a year ago, the Company recorded an income tax expense of $0.6 million on a pretax income of $7.1 million. The comparability of effective tax rates between both periods was primarily impacted by the warrants fair value activity in the three months ended January 31, 2023, as it is not recognized for tax purposes.
Adjusted EBITDA and Net Income/(Loss)
During the first quarter of fiscal year 2024, the Company moved certain assets and associated revenues and expenses, which was previously categorized in the Company's Other activities, into the U.S. Concrete Pumping segment in order to better align its placement with the manner in which the Company now allocates resources and measures performance. As a result, segment results for prior periods have been reclassified to conform to the current period presentation. For further discussion, see Note 18 in Part I, Item 1 of this report for more information. In addition, in order to appropriately distribute the use of corporate resources and better align measures with segment performance, beginning in the first quarter of fiscal year 2024, the Company is no longer adding back intercompany allocations to segment Adjusted EBITDA. The Company recast segment results for the quarter ended January 31, 2023 are below:
| Three Months Ended January 31, 2023 |
||||||||||||||||
| (in thousands) |
U.S. Concrete Pumping |
U.K. Operations |
U.S. Concrete Waste Management Services |
Other |
||||||||||||
| As Previously Reported |
||||||||||||||||
| Net income (loss) |
$ | (1,100 | ) | $ | (100 | ) | $ | 2,812 | $ | 4,862 | ||||||
| Income tax expense (benefit) |
(390 | ) | (40 | ) | 968 | 105 | ||||||||||
| Depreciation and amortization |
10,374 | 1,827 | 2,035 | 213 | ||||||||||||
| EBITDA |
15,063 | 2,380 | 5,815 | 5,180 | ||||||||||||
| Other Adjustments |
(1,505 | ) | 812 | 737 | - | |||||||||||
| Adjusted EBITDA |
14,688 | 3,186 | 6,547 | 625 | ||||||||||||
| Recast Adjustment |
||||||||||||||||
| Net income (loss) |
$ | 307 | $ | - | $ | - | $ | (307 | ) | |||||||
| Income tax expense (benefit) |
105 | - | - | (105 | ) | |||||||||||
| Depreciation and amortization |
213 | - | - | (213 | ) | |||||||||||
| EBITDA |
625 | - | - | (625 | ) | |||||||||||
| Other Adjustments |
1,511 | (774 | ) | (737 | ) | - | ||||||||||
| Adjusted EBITDA |
2,136 | (774 | ) | (737 | ) | (625 | ) | |||||||||
| Current Report As Adjusted |
||||||||||||||||
| Net income (loss) |
$ | (793 | ) | $ | (100 | ) | $ | 2,812 | $ | 4,556 | ||||||
| Income tax expense (benefit) |
(284 | ) | (40 | ) | 968 | |||||||||||
| Depreciation and amortization |
10,587 | 1,827 | 2,035 | |||||||||||||
| EBITDA |
15,688 | 2,380 | 5,815 | 4,556 | ||||||||||||
| Other Adjustments |
6 | 38 | - | |||||||||||||
| Adjusted EBITDA |
16,824 | 2,412 | 5,810 | - | ||||||||||||
| Net Income (Loss) |
Adjusted EBITDA |
|||||||||||||||||||||||
| Three Months Ended January 31, |
Three Months Ended January 31, |
Change |
||||||||||||||||||||||
| (in thousands, except percentages) |
2024 |
2023 |
2024 |
2023 |
$ |
% |
||||||||||||||||||
| U.S. Concrete Pumping |
$ | (6,845 | ) | $ | (793 | ) | $ | 10,706 | $ | 16,824 | $ | (6,118 | ) | -36.4 | % | |||||||||
| U.K. Operations |
484 | (100 | ) | 3,202 | 2,412 | 790 | 32.8 | % | ||||||||||||||||
| U.S. Concrete Waste Management Services |
2,405 | 2,812 | 5,373 | 5,810 | (437 | ) | -7.5 | % | ||||||||||||||||
| Other |
130 | 4,556 | - | - | - | 0.0 | % | |||||||||||||||||
| Total |
$ | (3,826 | ) | $ | 6,475 | $ | 19,281 | $ | 25,046 | $ | (5,765 | ) | -23.0 | % | ||||||||||
U.S. Concrete Pumping. Net loss for our U.S. Concrete Pumping segment was $6.8 million for the first quarter of fiscal 2024, versus a net loss of $0.8 million for the first quarter of fiscal 2023. Adjusted EBITDA for our U.S. Concrete Pumping segment was $10.7 million for the first quarter of fiscal 2024, down 36.4% from $16.8 million for the same period in fiscal 2023. The decreases in net income and Adjusted EBITDA were primarily attributable to lower revenue volume and labor utilization due to the adverse impact from severe winter weather in the first quarter, coupled with increased costs related to insurance.
U.K. Operations. Net income for our U.K. Operations segment was $0.5 million for the first quarter of fiscal 2024, versus a net loss of $0.1 million for the first quarter of fiscal 2023. Adjusted EBITDA for our U.K. Operations segment was $3.2 million for the first quarter of fiscal 2024, up 32.8% from $2.4 million from the same period in fiscal 2023. The increases were primarily attributable to the year-over-year improvement in revenue and reductions in fuel, labor and repair costs.
U.S. Concrete Waste Management Services. Net income for our U.S. Concrete Waste Management Services segment was $2.4 million for the first quarter of fiscal 2024, versus net income of $2.8 million for the first quarter of fiscal 2023. Adjusted EBITDA for our U.S. Concrete Waste Management Services segment was $5.4 million for the first quarter of fiscal 2024, down 7.5% from $5.8 million from the same period in fiscal 2023. The decreases were primarily attributable to the adverse weather impact in the first quarter on revenue volumes and labor utilization, coupled with insurance cost inflation.
Other. Net income for Other activities was $0.1 million for the first quarter of fiscal 2024, compared to a net income of $4.6 million for the first quarter of fiscal 2023. The change in net income is primarily related to the change in warrant liability, as discussed above. There was no change in Adjusted EBITDA for our Other activities for the periods provided.
Liquidity and Capital Resources
Overview
Our capital structure is primarily a combination of (1) permanent financing, represented by stockholders’ equity; (2) zero-dividend convertible perpetual preferred stock; (3) long-term financing represented by our Senior Notes and (4) short-term financing under our ABL Facility. Our primary sources of liquidity are cash generated from operations, available cash and cash equivalents and access to our revolving credit facility under our ABL Facility, which provides for aggregate borrowings of up to $225.0 million, subject to a borrowing base limitation. We use our liquidity and capital resources to: (1) finance working capital requirements; (2) service our indebtedness; (3) purchase property, plant and equipment; and (4) finance strategic acquisitions. As of January 31, 2024, we had $14.7 million of cash and cash equivalents and $202.3 million of available borrowing capacity under the ABL Facility, providing total available liquidity of $217.0 million.
We may from time to time seek to retire or pay down borrowings on the outstanding balance of our ABL Facility or Senior Notes using cash on hand. Such repayments, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
We believe our existing cash and cash equivalent balances, cash flow from operations and borrowing capacity under our ABL Facility will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, potential acquisitions and overall economic conditions. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity could result in dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations.
Material Cash Requirements
Our principal uses of cash historically have been to fund operating activities and working capital, purchases of property and equipment, strategic acquisitions, fund payments due under facility operating and finance leases, share repurchases and to meet debt service requirements.
Our working capital surplus as of January 31, 2024 was $7.3 million. We believe we have adequate coverage of our debt covenants.
The amount of our future capital expenditures will depend on a number of factors including general economic conditions and growth prospects. In response to changing economic conditions, we believe we have the flexibility to modify our capital expenditures by adjusting them (either up or down) to match our actual performance. Our capital expenditures for the three months ended January 31, 2024 and 2023 were approximately $17.8 million and $17.1 million, respectively.
To service our debt, we require a significant amount of cash. Our ability to pay interest and principal on our indebtedness will depend upon our future operating performance and the availability of borrowings under the ABL Facility and/or other debt and equity financing alternatives available to us, which will be affected by prevailing economic conditions and conditions in the global credit and capital markets, as well as financial, business and other factors, some of which are beyond our control. Based on our current level of operations and given the current state of the capital markets, we believe our cash flow from operations, available cash and available borrowings under the ABL Facility will be adequate to service our debt and meet our future liquidity needs for the foreseeable future. See “Senior Notes and ABL Facility” discussion below for more information.
Future Contractual Obligations
For information regarding our future contractual obligations, see the MD&A discussion included in Item 7 of Part II of our Annual Report.
Senior Notes and ABL Facility
The table below is a summary of the composition of the Company’s debt balances as of January 31, 2024 and October 31, 2023:
| January 31, |
October 31, |
||||||||||||
| (in thousands) |
Interest Rates |
Maturities |
2024 |
2023 |
|||||||||
| ABL Facility - short term |
Varies |
June 2028 |
$ | 13,021 | $ | 18,954 | |||||||
| Senior notes - all long term |
6.0000% | February 2026 |
375,000 | 375,000 | |||||||||
| Total debt, gross |
388,021 | 393,954 | |||||||||||
| Less: Unamortized deferred financing costs offsetting long term debt |
(2,784 | ) | (3,132 | ) | |||||||||
| Less: Current Portion |
(13,021 | ) | (18,954 | ) | |||||||||
| Long term debt, net of unamortized deferred financing costs |
$ | 372,216 | $ | 371,868 | |||||||||
On June 1, 2023, the ABL Facility was amended to, among other changes, (1) increase the maximum revolver borrowings available to be drawn thereunder to $225.0 million, (2) increase the letter of credit sublimit to $22.5 million and (3) extend the maturity of the ABL Facility to the earlier of (a) June 1, 2028 or (b) the date that is 180 days prior to (i) the final stated maturity date of the Senior Notes or (ii) the date the Senior Notes become due and payable. The ABL Facility also provides for an uncommitted accordion feature under which the borrowers under the ABL Facility can, subject to specified conditions, increase the ABL Facility by up to an additional $75.0 million. The amended ABL Facility was treated as a debt modification. The Company capitalized an additional $0.5 million of debt issuance costs related to the June 1, 2023, ABL Facility amendment. The preexisting unamortized deferred costs of $1.4 million and the additional costs of $0.5 million will be amortized from June 1, 2023 through June 1, 2028.
The outstanding balance under the ABL Facility as of January 31, 2024 was $13.0 million and as of that date, the Company was in compliance with all debt covenants. In addition, as of January 31, 2024, the Company had $1.1 million in credit line reserves and a letter of credit balance of $8.5 million. As of January 31, 2024, we had $202.3 million of available borrowing capacity under the ABL Facility. Debt issuance costs related to revolving credit facilities are capitalized and reflected as an asset in deferred financing costs in the accompanying condensed balance sheets. The Company had debt issuance costs related to the revolving credit facilities of $1.7 million as of January 31, 2024. See Note 8 for more information on the Senior Notes and ABL Facility.
Cash Flows
Cash generated from operating activities typically reflects net income, as adjusted for non-cash expense items such as depreciation, amortization and stock-based compensation, and changes in our operating assets and liabilities. Generally, we believe our business requires a relatively low level of working capital investment due to low inventory requirements and timely customer payments due to daily billings for most of our services.
Cash flow provided by operating activities. Net cash provided by operating activities generally reflects the cash effects of transactions and other events used in the determination of net income or loss.
Net cash provided by operating activities during the three months ended January 31, 2024 was $20.3 million. The Company had a net loss of $3.8 million, which included non-cash expense items of $13.4 million. In addition, we had cash outflows related to an increase to our working capital of $10.7 million. Working capital changes primarily include a decrease in receivables of $13.9 million, a decrease in inventory of $0.6 million, a decrease of $3.9 million in accounts payable, an increase in other operating assets of $0.6 million and a decrease in other operating liabilities of $0.6 million. The decrease in receivables is due to seasonal collection of receivables during the first quarter of fiscal year 2024. The decrease in accounts payable is driven by the timing of vendor payments. The increase in other assets is primarily due to the increase in sales tax receivable.
Net cash provided by operating activities during the three months ended January 31, 2023 was $17.9 million. The Company had net income of $6.5 million, which included non-cash expense items of $11.4 million. In addition, we had cash outflows related to a decrease to our working capital of $0.1 million. Working capital changes primarily include an increase to other operating assets of $7.3 million and a decrease of $4.0 million to accounts payable, offset by a decrease in receivables of $10.4 million, an increase in other operating liabilities of $1.9 million, and an increase in inventory of $1.0 million. The increase to prepaid expenses and other current assets is primarily due to timing of prepaid insurance, which is generally prepaid during the first quarter of fiscal year 2023. The decrease in accounts payable is driven by timing. The decrease in receivables is due to seasonal collection of receivables during the first quarter of fiscal year 2023, while the increase in other operating liabilities is primarily related to an increase in accrued interest and partially offset by lease payments of $1.4 million. The Company makes semiannual interest payments in February and August each year.
Cash flow used in investing activities. Net cash used in operating activities generally reflects the cash outflows for property, plant and equipment.
We used $16.5 million to fund investing activities during the three months ended January 31, 2024. The Company used $17.8 million for the purchase of property, plant and equipment, which was partially offset by $1.3 million in proceeds from the sale of property, plant and equipment.
We used $14.8 million to fund investing activities during the three months ended January 31, 2023. The Company used $17.1 million for the purchase of property, plant and equipment, which was partially offset by $2.3 million in proceeds from the sale of property, plant and equipment.
Cash flow provided by (used in) financing activities.
Net cash used in financing activities was $5.6 million for the three months ended January 31, 2024. Cash used in financing activities included $5.9 million in net payments under the Company's ABL Facility and $1.1 million in purchase of treasury stock, which included $0.2 million purchased under the share repurchase program and $0.9 million in outflows from the purchase of shares into treasury stock in order to fund the employee tax obligations for certain vested stock awards.
Net cash provided by financing activities was $6.7 million for the three months ended January 31, 2023. Financing activities during this period primarily included $5.5 million in purchase of treasury stock, which included $4.9 million purchased under the share repurchase program and $0.6 million in outflows from the purchase of shares into treasury stock in order to fund the employee tax obligations for certain vested stock awards. In addition, cash used in financing activities included $1.2 million in net proceeds under the Company's ABL Facility
Accounting and Other Reporting Matters
Non-GAAP Measures (EBITDA and Adjusted EBITDA)
We calculate EBITDA by taking GAAP net income and adding back interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is calculated by taking EBITDA and adding back transaction expenses, loss on debt extinguishment, stock-based compensation, changes in the fair value of warrant liabilities, other income, net, goodwill and intangibles impairment and other adjustments. Transaction expenses represent expenses for legal, accounting, and other professionals that were engaged in the completion of various acquisitions. Transaction expenses can be volatile as they are primarily driven by the size of a specific acquisition. As such, we exclude these amounts from Adjusted EBITDA for comparability across periods. Other adjustments include non-recurring expenses and non-cash currency gains/losses.
During the first quarter of fiscal year 2024, the Company moved certain assets and associated revenues and expenses that was previously categorized in the Company's Other activities, into the U.S. Concrete Pumping segment in order to better align its placement with the manner in which the Company now allocates resources and measures performance. As a result, segment results for prior periods have been reclassified to conform to the current period presentation. For further discussion, see Note 18 in Part I, Item 1 of this report for more information. In addition, in order to appropriately distribute the use of corporate resources and better align measures with segment performance, beginning in the first quarter of fiscal year 2024, the Company is no longer adding back intercompany allocations to segment Adjusted EBITDA. As a result, segment results for prior periods have been reclassified to conform to our current period presentation. See the section “Adjusted EBITDA and Net Income/(Loss)” above for more information.
We believe these non-GAAP measures of financial results provide useful supplemental information to management and investors regarding certain financial and business trends related to our financial condition and results of operations, and as a supplemental tool for investors to use in evaluating our ongoing operating results and trends and in comparing our financial measures with competitors who also present similar non-GAAP financial measures. In addition, these measures (1) are used in quarterly and annual financial reports and presentations prepared for management, our board of directors and investors, and (2) help management to determine incentive compensation. EBITDA and Adjusted EBITDA have limitations and should not be considered in isolation or as a substitute for performance measures calculated under GAAP. These non-GAAP measures exclude certain cash expenses that we are obligated to make. In addition, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently or may not calculate it at all, which limits the usefulness of EBITDA and Adjusted EBITDA as comparative measures.
| Three Months Ended January 31, | ||||||||
| (in thousands) |
2024 |
2023 |
||||||
| Consolidated |
||||||||
| Net income (loss) |
$ | (3,826 | ) | $ | 6,475 | |||
| Interest expense and amortization of deferred financing costs |
6,463 | 6,871 | ||||||
| Income tax expense |
(1,011 | ) | 644 | |||||
| Depreciation and amortization |
14,097 | 14,449 | ||||||
| EBITDA |
15,723 | 28,439 | ||||||
| Stock-based compensation |
536 | 1,140 | ||||||
| Change in fair value of warrant liabilities |
(130 | ) | (4,556 | ) | ||||
| Other expense (income), net |
(39 | ) | (21 | ) | ||||
| Other adjustments1 |
3,191 | 44 | ||||||
| Adjusted EBITDA |
$ | 19,281 | $ | 25,046 | ||||
| U.S. Concrete Pumping |
||||||||
| Net income (loss) |
$ | (6,845 | ) | $ | (793 | ) | ||
| Interest expense and amortization of deferred financing costs |
5,754 | 6,178 | ||||||
| Income tax expense (benefit) |
(2,103 | ) | (284 | ) | ||||
| Depreciation and amortization |
10,230 | 10,587 | ||||||
| EBITDA |
7,036 | 15,688 | ||||||
| Stock-based compensation |
536 | 1,140 | ||||||
| Other expense (income), net |
(19 | ) | (10 | ) | ||||
| Other adjustments1 |
3,153 | 6 | ||||||
| Adjusted EBITDA |
$ | 10,706 | $ | 16,824 | ||||
| 1 Other adjustments include the adjustment for non-recurring expenses and non-cash currency gains/losses. For the three months ended January 31, 2024, other adjustments includes a $3.5 million non-recurring charge related to sales tax litigation. See Note 13 in Part I, Item 1 of this report for more information. | ||||||||
| U.K. Operations |
||||||||
| Net income (loss) |
$ | 484 | $ | (100 | ) | |||
| Interest expense and amortization of deferred financing costs |
709 | 693 | ||||||
| Income tax expense (benefit) |
176 | (40 | ) | |||||
| Depreciation and amortization |
1,808 | 1,827 | ||||||
| EBITDA |
3,177 | 2,380 | ||||||
| Other expense (income), net |
(13 | ) | (6 | ) | ||||
| Other adjustments |
38 | 38 | ||||||
| Adjusted EBITDA |
$ | 3,202 | $ | 2,412 | ||||
| U.S. Concrete Waste Management Services |
||||||||
| Net income |
$ | 2,405 | $ | 2,812 | ||||
| Income tax expense |
916 | 968 | ||||||
| Depreciation and amortization |
2,059 | 2,035 | ||||||
| EBITDA |
5,380 | 5,815 | ||||||
| Other expense (income), net |
(7 | ) | (5 | ) | ||||
| Adjusted EBITDA |
$ | 5,373 | $ | 5,810 | ||||
| Other |
||||||||
| Net income (loss) |
$ | 130 | $ | 4,556 | ||||
| EBITDA |
130 | 4,556 | ||||||
| Change in fair value of warrant liabilities |
(130 | ) | (4,556 | ) | ||||
| Adjusted EBITDA |
$ | - | $ | - | ||||
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are disclosed in the “Critical Accounting Policies and Estimates” section of our Annual Report. No modifications have been made during the three months ended January 31, 2024 to these policies or estimates except for those noted in Note 2 to the condensed consolidated financial statements included within Item 1 of this report.
New Accounting Pronouncements
For information regarding recent accounting pronouncements, see Note 2 to the condensed consolidated financial statements included within Item 1 of this report for more information.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of January 31, 2024 (as such term is defined in Rule 13a-15(e) under the Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Based upon this evaluation, our Chief Executive Office and Chief Financial Officer concluded that, as of January 31, 2024, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the quarter ended January 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II
The information required with respect to this item can be found under “Commitments and Contingencies—Litigation” in note 13 of the notes to the consolidated financial statements in this quarterly report and is incorporated by reference into this Item 1.
There have been no material changes to the Risk Factors previously disclosed in our Annual Report. For a detailed discussion of the risks that affect our business, please refer to the section entitled “Risk Factors” in the Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
During the first quarter of 2024, under our share repurchase program, we repurchased an aggregate of 36,094 shares of our common stock for a total of $0.2 million at an average price of $6.88 per share. The following table reflects issuer purchases of equity securities for the three months ended January 31, 2024:
ISSUER PURCHASES OF EQUITY SECURITIES
| Period |
Total Number of Shares Purchased (1)(2) |
Average Price Paid Per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs (3,4) |
||||||||||||
| 36,094 | $ | 6.88 | 36,094 | $ | 8,179,645 | |||||||||||
| 109,178 | 7.79 | - | 8,179,645 | |||||||||||||
| - | - | - | 8,179,645 | |||||||||||||
| Total |
145,272 | 2 |
$ | 7.56 | 36,094 | $ | 8,179,645 | |||||||||
| (1) | In June 2022, our board of directors approved a share repurchase program, which was announced June 7, 2022, authorizing us to repurchase up to $10.0 million of our common stock from time to time through June 15, 2023. In January 2023, the board of directors of the Company approved a $10.0 million increase to the Company’s share repurchase program, which was announced January 23, 2023. This authorization was set to expire on March 31, 2024, but on January 4, 2024, the board of directors approved an extension of the authorization so that it will expire on March 31, 2025. In March 2024, the board of directors of the Company approved a $15.0 million increase to the Company's share repurchase program, which was announced March 7, 2024. This authorization will expire on March 31, 2025. | |
| (2) | Of the 145,272 shares included in this column, 36,094 were purchased under the purchase program and the remaining 109,178 shares reflect shares of common stock purchased into treasury stock in order to satisfy employee tax withholding obligations for the vesting of stock awards. | |
| (3) | Includes commission cost. | |
| (4) | Dollar value of shares that may yet be purchased under the repurchase program is as of the end of the period. |
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not Applicable.
(a) None
(b) None
(c) The Company’s Chief Executive Officer, Bruce Young, currently has 736,810 stock options that will expire in February 2025. To ensure those options do not expire unexercised, Mr. Young adopted a trading arrangement for the sale of securities of the Company’s common stock (a “Rule 10b5-1 Trading Plan”) that is intended to satisfy the affirmative defense conditions of Securities Exchange Act Rule 10b5-1(c). Mr. Young’s Rule 10b5-1 Trading Plan was adopted on January 15, 2024, provides for the exercise and sale of i 736,810 shares of common stock pursuant to the terms of the plan, and expires on February 5, 2025 or upon the earlier exercise of all 736,810 stock options.
The documents set forth below are filed herewith or incorporated herein by reference to the location indicated.
| Exhibit No. |
Description |
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| 31.1 | Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule15d-14(a). |
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| 31.2 | Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule15d-14(a). |
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| 32.1 | |||
| 32.2 | |||
| 101.INS |
Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
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| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
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| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
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| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
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| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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CONCRETE PUMPING HOLDINGS, INC. |
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By: /s/ Iain Humphries |
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Name: Iain Humphries |
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Title: Chief Financial Officer and Secretary |
| (Authorized Signatory) |
Dated: March 7, 2024
| This ‘10-Q’ Filing | Date | Other Filings | ||
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| 6/1/28 | ||||
| 3/31/25 | ||||
| 2/5/25 | ||||
| 12/15/24 | ||||
| 10/31/24 | ||||
| 3/31/24 | ||||
| Filed on: | 3/7/24 | 8-K | ||
| 3/4/24 | ||||
| For Period end: | 1/31/24 | |||
| 1/16/24 | 10-K | |||
| 1/15/24 | ||||
| 1/4/24 | ||||
| 1/1/24 | ||||
| 12/31/23 | ||||
| 12/15/23 | ||||
| 12/6/23 | 4 | |||
| 12/1/23 | ||||
| 11/30/23 | ||||
| 11/1/23 | ||||
| 10/31/23 | 10-K | |||
| 6/15/23 | ||||
| 6/1/23 | 8-K | |||
| 1/31/23 | 10-K, 10-Q | |||
| 1/23/23 | 8-K | |||
| 12/15/22 | ||||
| 10/31/22 | 10-K, ARS, NT 10-K | |||
| 6/7/22 | 10-Q, 8-K | |||
| 1/28/21 | 8-K | |||
| 4/1/20 | ||||
| List all Filings | ||||