L. B. Foster Company Aktie

Good day, and thank you for standing by. Welcome to the Q1 2026 L.B. Foster Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Lisa Durante, Director of Financial Reporting and Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to L.B. Foster's First Quarter of 2026 Earnings Call. My name is Lisa Durante, the company's Director of Financial Reporting and Investor Relations. Our President and CEO, John Kasel; and our Chief Financial Officer, Bill Thalman, will be presenting our first quarter operating results, market outlook and business developments this morning.

We'll start the call with John providing his perspective on the company's first quarter performance. Bill will then review the company's first quarter financial results. John will provide perspective on market developments and company outlook in his closing comments. We will then open up the session for questions.

Today's slide presentation, along with our earnings release and financial disclosures were posted on our website this morning and can be accessed on our Investor Relations page at lbfoster.com. Our comments this morning will follow the slides in the earnings presentation.

Some statements we are making are forward-looking and represent our current view of our markets and business today. These forward-looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise or publicly release the results of any revisions to these statements in light of new information, except as required by securities laws. For more detailed risks, uncertainties and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and presentation. We will also discuss non-GAAP financial metrics and encourage you to carefully read our disclosures and reconciliation tables provided within today's earnings release and presentation as you consider these metrics.

So with that, let me turn the call over to John.

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

Thanks, John; and good morning, everyone. I'll begin my comments on Slide 7, covering the consolidated results for the first quarter. Reconciliations for non-GAAP information and other financial details are included in the appendix of the presentation.

Net sales for the quarter were $121.1 million, up 23.9% over last year, primarily due to the strong growth in the Rail segment. As a reminder, last year's sales in Rail were weaker than normal due to a pause in government funding programs that delayed customer project work. As John mentioned, the consolidated gross profit was up 27.5% in the quarter, with gross margins improving 60 basis points to 21.2%. Both segments realized double-digit increases in gross profit in the quarter, highlighting the broad improvement realized in our results. I'll provide more color on segment sales and margins later in the presentation.

SG&A expenses totaling $23 million were up $2.1 million or 9.9% compared to last year. The primary driver was higher employment costs, including a $1.2 million increase in incentive compensation expense with the improved results in Q1 compared to last year. This year's incentive expense also includes $0.7 million in accelerated stock compensation expense associated with annual incentive plan grants awarded to retirement-eligible employees.

Despite the higher expenses year-over-year, the SG&A percent of sales improved 240 basis points to 19%. EBITDA was $5.2 million, up 183% versus last year, driven by the sales growth and improved gross profit. First quarter cash flow improved over last year with operating cash flow favorable $15.7 million on improved profitability and lower working capital needs.

And lastly, consolidated orders and backlog were both lower compared to last year, 4.7% and 11.7%, respectively. I'll cover segment-specific drivers later in the presentation.

The financial profile of our results on Slide 8 highlights the seasonality in the business over the last 3 years. We're entering the construction season for our customers, which typically translates to higher sales and profitability during our second and third quarters. Last year, first quarter sales were unusually low due to a pause in government funding impacting rail demand early in the year. These delays were resolved throughout 2025, resulting in an unusually strong fourth quarter last year. So while 2025 looks relatively normal compared to the averages, the quarterly splits last year were far from normal. This year's first quarter results represent a typical level of demand, and we expect the phasing of business to follow a more normal pattern in 2026. I'll cover the segment specific performance on the next couple of slides, starting with Rail on Slide #9.

First quarter revenues were $74.8 million, up 38.4% compared to last year's soft start, primarily in Rail Products. The improvement was strongest for Rail Products with sales up 40.8% due to higher demand for rail distribution and transit products. Global Friction Management sales were up 39.5%, as this growth platform continues to perform well. Technology Services & Solutions sales were also up 29.1% due to short-term project work in our U.K. business. Rail margins of 21.6% were down 70 basis points, driven primarily by unfavorable sales mix with the higher Rail distribution volumes this year.

Turning to Rail orders and backlog. Q1 orders were down 3.2% due to lower orders for Friction Management after a very strong level attained last year. Rail Product and TS&S orders were relatively flat compared to last year. And the Rail backlog was up 11.3% due to a large multiyear order secured in our U.K. business late last year.

Turning to Infrastructure Solutions on Slide 10. Net sales increased $2.6 million or 5.9%. The improvement was realized in Precast Concrete with sales up 17.2%, highlighting the strong demand that continues in this growth platform. Steel Products sales declined $2.3 million, primarily due to lower bridge form volumes. Infrastructure gross profit increased $1.4 million with the margins up 200 basis points to 20.6%. The improvements were realized in Precast Concrete driven by higher sales volumes and favorable sales mix, coupled with improved manufacturing execution.

I'll mention here that one cost driver we're starting to see elevate is fuel charges within our freight costs. This was not a big impact in Q1, but something we're working on mitigating starting here in Q2. Infrastructure orders declined $4.4 million due to lower intake for Pipeline Coatings after a very strong level in last year's first quarter. Partially offsetting were Precast Concrete orders up $2.3 million or 5.5%. Infrastructure backlog totaling $107.4 million is down $38 million versus last year. About $30 million of the decline was in Steel Products with $19 million due to the Summit Pipeline Coating order cancellation in Q3 last year. Precast Concrete backlog was also lower $8 million with reduced open orders for CXT buildings. I'll provide some additional color on segment orders and backlog at the end of my review.

I'll next cover liquidity and leverage metrics on Slide 11. The chart reflects the ongoing improvement in our management of net debt and leverage. Net debt of $55.7 million was down $24.2 million compared to last year, with the gross leverage ratio cut in half to 1.2x, driven by improved profitability and lower working capital levels. Our capital-light business model has translated into significant cash generation over the last several years. As a reminder, we wrapped up the $8 million per year Union Pacific settlement payments at the end of 2024. Excluding these payments, we generated about $85 million in free cash flow over the last 3 years or approximately $28 million per year on average. We also have about $75 million in federal NOLs available, which should continue to minimize cash taxes for the next several years. We utilize a systematic disciplined approach to deploying capital across our priorities, which I'll now cover on Slide 12.

Managing our debt and leverage at reasonable levels remains our top capital allocation priority. At the end of the first quarter, the gross leverage ratio per our revolving credit agreement was just under 1.2x, well within our target range of 1x to 1.5x. Seasonal working capital needs are expected to increase debt further in the second quarter, but we should stay around our target leverage range and remain favorable compared to last year. Capital spending in the first quarter totaled $3 million or 2.4% of sales.

We have several targeted organic growth programs within our Precast Concrete business that we expect will increase the 2026 CapEx rate to 2.7% of sales approximately. We've also systematically repurchased our stock over the last 3 years with just over 1 million shares repurchased since early 2023, representing 9.3% of the outstanding shares. We did not make any open market repurchases in the first quarter after buying about 582,000 shares in 2025. We have $28.7 million authorized to spend on buybacks over the next 2 years, which represents approximately 9% of the shares stock value outstanding at today's valuation. As always, we will remain disciplined and conservative in our approach to this important capital allocation priority.

And finally, we continue to evaluate tuck-in acquisitions to add breadth to our growth platforms, primarily in the Precast Concrete market space. I'll wrap up my comments with some additional color on order rates and backlog on Slides 13 and 14. We've mentioned in the past that order rates tend to be choppy for our business given the project nature of the work we support for our customers. Generally, orders received are fulfilled within a year with only about 10% of the open backlog relating to projects expected to extend beyond a year. On a consolidated basis, the trailing 12-month book-to-bill ratio at the end of the quarter was 0.95:1, down from both last year's first quarter and the end of 2025.

The decline versus last year was driven by the lower ratio in Infrastructure at 0.84:1, driven primarily by the Summit order cancellation and softer Pipeline Coating order intake impacting Steel Products. Rail order rates overall remain positive with the trailing 12-month ratio at 1.03:1, although down from the end of 2025 after the strong finish last year.

And lastly, the consolidated backlog reflected on Slide 14 totaled $209.6 million, down $27.6 million from last year, with the decline realized in Infrastructure stemming primarily from lower Pipeline Coating open orders, including the impact of the Summit order cancellation. We're focused on building our backlog across the business during the second quarter to set up a strong second half of the year. John will cover some additional backlog details and developments in his closing remarks.

I'll wrap up here by saying we're very pleased with the start of 2026 and remain optimistic about the prospects for further progress this year. Thanks for the time this morning. I'll now hand it back to John for his closing remarks. Back to you, John.

Thanks, Bill. I'll begin my closing remarks on Slide 16, reviewing developments in our key end markets.

Starting with Rail, Bill highlighted that the significant growth realized in Q1 was due to a return to normal customer demand levels after last year's slow start. The federal government programs that fund our customers' repair and maintenance projects remain active with no significant disruptions evident as of today. This should provide a favorable demand tailwind in the U.S. for our Rail Products for the foreseeable future.

Friction Management had another phenomenal quarter with 39.5% sales growth to start the year. This is on top of 42% growth in the fourth quarter last year and 19% growth for all of 2025. We continue to invest our commercial and technology capabilities for this important growth platform, and we're targeting further domestic market penetration as well as geographic expansion into Western Europe. The total track monitoring product line was somewhat flat in the first quarter, but commercialization of our Rockfall monitoring product line is expected to provide lift in volumes as the year progresses. All in all, we expect a more normal year in demand for the Rail segment in 2026, which would be a significant improvement over last year.

Turning to Infrastructure. The end market developments remain favorable as well. Precast Concrete sales were up 17% in Q1 after 20% growth in 2025. As expected, the backlog at the end of the quarter was a bit lower for the CXT buildings product line, which had a record year in 2025. However, civil construction activity remains robust, which is bolstering demand for Precast Concrete products, helping to mitigate the lower building volumes. We're also seeing demand for our Envirokeeper water management solution continue to increase, and we're making capital investments to support further growth of this product line. So all in all, we're off to a great start for Precast and expect growth to continue as 2026 unfolds.

Turning to Steel Products. Market conditions continue to improve, driven primarily by the recovery of oil and gas investments and favorable impact on our Protective Coatings product lines. Steel Products sales declined slightly in the first quarter due to softer demand for our bridge forms, while Protective Coatings were essentially flat in Q1 after nearly 43% growth in 2025. Bill mentioned the Infrastructure backlog was down primarily to the Summit order cancellation that was communicated last year, coupled with lower bookings for Protective Coatings. But it's important to note that bidding activity remains robust, and we believe the market recovery for domestic energy and pipeline investments will translate into improving Protective Coatings backlog.

In summary, we believe we're well positioned for continuing growth across our key end markets and product lines with ongoing emphasis on our growth platforms, noting that the volatile geopolitical environment has not had a significant impact to date on our end markets or demand of our products. Of course, we'll continue to monitor conditions and adjust as necessary.

So in conclusion, we're off to a great start in 2026, which allows us to reaffirm our financial guidance, which I'll cover in my closing remarks now on Slide 17. I'll start by highlighting again the significant progress we made through 2025. I'm very proud with our team's accomplishments and the strong start to 2026 highlights the favorable momentum we've generated in the business. The year-over-year growth and profitability expansion achieved in our first quarter results was primarily driven by a recovery to normal demand conditions for our Rail business.

One way to look at the favorable momentum in our results is our trailing 12 months metrics with sales of $563.4 million and adjusted EBITDA of $42.4 million. Both metrics are already at or near the midpoints of our 2026 full year guidance. So as long as quotation activity remains strong and backlog builds in line with expectations, we should be well positioned to deliver a strong year of growth in 2026.

So in closing, we're reaffirming our full year financial guidance for now, and we'll revisit our outlook after the second quarter. Thank you for your time and continuing interest in L.B. Foster. I'll turn it back to the operator for the Q&A session.

[Operator Instructions] And our first question will be coming from Liam Burke of B. Riley Securities.

John, I mean in your prepared comments, you talked about Friction Management, which is a great driver of growth and margin. How difficult is it to take the North American model and move it over to European markets?

Well, that's -- well, first of all, thanks for joining us today, Liam. And we've been working on that actually for the last 5 years of getting that acceptance, not just here in North America, but getting the excitement of this product over specifically in Western Europe, and we're going through Germany to make that happen. So we started working directly with the largest German transit authority over there, getting acceptance and accreditation of the product, and we're looking for continued interest as well as actual orders and sales happening this year -- end of this year as well as going to next year.

So it is a slower adoption, if you will, because of the brand recognition is primarily North America, but they're picking up on the excitement, especially in the transit space over there because it's just adding so much value. They're seeing the value. And the world is -- as far as friction management is relatively small. And so we're pretty excited about what we have right now and the ability to continue to grow that.

Great. Bill, you had negative operating cash flow for the quarter, which is perfectly normal for seasonality purposes. But on a year-over-year basis, as you point out in your comments, it was significantly better. What contributed to that improvement?

Yes. A few things, Liam. The profitability of the business overall, first of all, was much better. And then working capital needs this quarter were also a bit lower. And then the incentive arrangements for the company were a bit higher last year than they were this year just in terms of the payouts. So we would expect, where our working capital is at the moment, we will start to build further through the second quarter as we start to get ready for the growth expectations we see through the balance of the year. But just timing of some of the [indiscernible] a lot of time thinking about and addressing our U.K. business and the working capital deployed over there. So the model actually requires less working capital, and that's part of the benefit that we saw in Q1.

So just a quick follow-up, and I'll turn it over. Do you see any change in your overall working capital metrics or is it just normal quarter-to-quarter seasonality?

I would say, overall, we are running at a lower working capital need overall on an average as a percentage of sales.

[Operator Instructions]. Our next question will be coming from Julio Romero of Sidoti & Company.

Bill, you mentioned that fuel costs within freight -- fuel charges within freight costs for Infrastructure Solutions are starting to creep up, not a big surprise there given the macro front. But can you highlight if higher fuel and freight costs are isolated to just the Infrastructure Solutions segment or is it the broader portfolio? And then also how you're navigating these costs? And are there other -- are there any other rising input costs that are worth highlighting?

Yes. So maybe just to start with the fuel costs. Certainly, that would be within our inbound and outbound freight cost structure. Obviously, with the current market conditions, that's been an escalating cost that we're seeing across the portfolio. It's the most significant for sure, within Infrastructure, just given the delivery costs associated with the Precast Products being a heavier overall tare weight. But we've had different programs that we're implementing in terms of pricing where we can to mitigate those costs.

Just like any other company, that's something that we're looking to pass on. It wasn't a significant driver in Q1, but certainly starting to see it here in Q2, and we're managing that cost with pricing actions where we can.

And then I guess to follow up on your other question, in terms of other escalating costs, nothing of significance at this point that we would point to.

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

Yes. So our actions are definitely taking hold. We made a number of structural changes over there as well as focus on what business that we have and more importantly, what we want to do over there, and so we're seeing the benefits of that.

And when Bill was mentioning the working capital as far as the amount of working capital as a percent of sales, that's a big part of our improvement year-over-year. So we're very pleased with where we're at right now, and we'll continue to make sure that we stay in front of what it is. But it's a big part of our company. It's a big part of Rail. When we talk about the year-over-year improvement and the improvement of profitability, that's where the technology innovation is.

And when earlier question by Liam, that's a big part of our continued growth that we're doing, specifically in Friction Management, and that's kind of our gateway to make that happen. So we're -- we've been taking quite a bit of action, and we're going to stay focused to make sure that it's where we want it to be. But we are pleased with the first quarter results and coming out of where we ended last year.

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

Well, first of all, we really focus on organic. I just want to make sure we really hammer that. We got a lot of really good exciting things going on, and that's where we're taking our capital. Bill mentioned we spent $3 million of capital in the quarter, 2.4% of sales. We talked about spending 2.7% as far as the year. That's where we're spending our money because we got great growth, organic growth programs going on right now, specifically in the Infrastructure business and namely in Concrete.

And of course, we have our filter related to other inorganic opportunities where it makes sense. We will -- we continue to look at bolt-on type operations and that we will be able to add additional product lines or geographic expansion for us. And they're out there, and we're working through options or opportunities right now. But first and foremost, we're executing on what we have in front of us, and that's some nice growth here organically in those specific businesses. So we're pleased with results to date.

And I would now like to turn the call back to John Kasel for closing remarks.

Well, thank you, operator. Thank you for joining us today. And I'd like to close with 2 points maybe that didn't come up today in the call or specifically as it relates to the quarter. And Bill mentioned that our order rates are choppy and the project work and that's true that you see in our sales, sometimes it [indiscernible] as we close the quarter, we had a very strong April for order intake about 15% was added to our backlog in the month of April across the entire company.

So we talked a lot about momentum in Q4. We had a strong finish to the year. And we're here telling you now that momentum is carried in Q1. [indiscernible] concerns are not with us today. We have plenty of work to be able to achieve what we want to get done this year, and we're seeing that uplift happening across the company [indiscernible] and of course, bidding activity is extremely strong as well.

The last point I'd like to leave with you is our ability to pull this off and do it well. And I'd just like to call out the Infrastructure Group, Precast and our Steel Products side, that performed the entire quarter with 0 injuries in our company. And I think that's just a great testament to not just the fact that we're here now 124 years, but we're here really curating a culture of safety and performance and really a commitment to our employees of doing it right. And the Infrastructure Group, led by Bob Ness, has done just a tremendous job of doing it right each and every day and keeping our employees safe and getting our products to our customer. So -- and we'll continue to work on that, and we'll continue to strive into a wonderful second quarter. So we're looking forward to catch up with you at the end of Q2, and I wish everybody a wonderful start to May. Take care. We'll talk to you next time.

And this concludes today's program. Thank you for participating. You may now disconnect.

[Audio Gap] $2.2 million, respectively. And finally, I'll mention here that the year-over-year decline in net income was driven primarily by last year's federal valuation allowance release, coupled with a relatively higher effective tax rate this year due to higher U.K. pretax losses not being tax effective.

We expect our effective tax rate to be substantially lower in 2026 with an improved outlook for the U.K., which John will touch on in his closing remarks.

I'll now cover our liquidity and leverage on Slide 13. We've successfully managed our leverage and debt levels in line with our business profitability and capital allocation priorities. And the chart on Slide 13 reflects a consistent pattern of steady improvement over time. In 2025, we generated $35.6 million in operating cash flow and $25.2 million in free cash flow. Over the last 3 years, our average free cash flow was approximately $28 million, excluding the Union Pacific settlement payments, which were completed at the end of 2024.

As a result, we've maintained significant financial flexibility while also executing our capital allocation priorities. Our capital-light business model, along with the modest cash tax requirements provided by our federal NOL further enhances our cash generation and financial flexibility to fund our capital allocation priorities which I'll now cover on Slide 14.

Managing our debt and leverage levels remains our top capital allocation priority, and we maintain a disciplined, prudent approach to capital allocation with leverage in mind. At the end of 2025, the gross leverage ratio for our revolving credit facility was just under 1x, a low point in recent years and at the low end of our target range of 1.0 to 1.5x. Seasonal working capital needs are expected to elevate our debt and leverage somewhat in early 2026, but we should stay around our target range and realize improvements in the second half of the year, in line with our normal cash cycles.

Capital spending in 2025 totaled $10.4 million or 1.9% of sales. We have several targeted organic growth programs within our precast concrete business that we expect will increase the CapEx rate of sales to 2.7% in 2026. General repurchases our important capital allocation priority for us and we have $28.7 million remaining to spend on our buybacks under the most recent authorization approved in February of 2025. We repurchased approximately 121,000 shares for $3.3 million in Q4, and we repurchased just over 1 million shares or approximately 9% of the shares outstanding at an average price of just under $23 per share since restarting the program back 3 years ago.

And finally, we also continue to evaluate tuck-in acquisitions to add breadth to our growth platforms, primarily in the precast concrete market space.

My closing comments will refer to Slides 15 and 16 covering orders, revenues and backlog trends by business. The trailing 12-month book-to-bill ratio at the end of Q4 was 1:1, improved from Q4 last year, but down from Q3 with the strong Q4 sales. Rail order rates have begun to recover with the TTM ratio at 1.11:1, and I'll highlight that friction management orders were up 58.4% in Q4.

Lower net orders and infrastructure drove the lower trailing 12-month ratio of 0.87 to 1. Summit order cancellation reported in Q3 was the primary driver of the decline. And lastly, the consolidated backlog reflected on Slide 16 totaled $189.3 million, up $3.4 million over last year, with substantial improvements across all rail businesses, partially offset by lower infrastructure backlog. The shifts in the backlog suggests a stronger start for our rail business in 2026 compared to last year, with infrastructure growth developing later in the year after the strong results achieved in 2025.

John will cover some additional backlog details and developments in his closing remarks. I'll wrap up by saying we're very pleased with our financial performance in 2025. And and excited about the prospects for further progress in 2026. Thanks for your time this morning. Back to you, John.

Thanks, Bill. I'll begin my closing remarks on Slide 18, reviewing developments in our key end markets. Starting with Rail segment, we're seeing favorable trends in bidding activity that give us optimism that we will return to growth in 2026. The federal government programs that fund our customers' repair and maintenance projects are active and flowing, and we expect that this will provide a tailwind for demand for rail products in the U.S. for the foreseeable future. .

Of course, we'll monitor developments in Washington to respond to any changes in funding should they occur. Turning to Rail Technologies. Friction management had a phenomenal year in 2025 with 19% sales growth. noting that this growth was all organic, and we continue to invest in our commercial technology capabilities for this important growth platform and expect continuing long-term growth aligned with our customers' focus on safety, fuel savings and operating performance.

The total tracking monitoring product line was somewhat flat in 2025, but we're expecting improved demand in 2026 with the commercialization of some new technologies that improved rail safety and operating ratios. The U.K. market environment remains extremely challenging. We've taken significant actions in the last 3 years to reposition this business and expect it will lead to improved results in 2026. We also see some market trends worth mentioning for our Infrastructure segment. Starting with civil construction activity remains robust, particularly in the southern part of the U.S., which is bolstering demand for precast concrete products.

Demand for our environment [indiscernible] water management solution is increasing with some large project wins already in our backlog. These improvements are partially offsetting softer demand for [indiscernible] buildings in the short term. This product line had a record year in 2025, and [indiscernible] activity is starting to pick back up. The softer residential real estate market has impacted demand for our forcast wall system product line in our new Florida facility. We remain optimistic that a lower interest rate environment and favorable population trends will improve demand in the future.

Within steel, our productive coatings product line sales improved 42.7% in 2025 with the renewed interest in U.S. oil and gas production and we expect these favorable trends to continue into '26 as well. A quick comment on tariffs. As in the case for most domestic markets, the impact of rising tariffs is being absorbed and managed by our supply chain and commercial teams.

I can confidently say that tariffs have had a minor impact on our business. In summary, we expect to start to 2026 to be stronger than last year, and we believe we are well positioned to benefit from the infrastructure-based investment plans for years to come.

Turning to Slide 19, I'll wrap up today's call with an overview of our 2026 financial guidance. I'll start by highlighting the significant progress we have made since we launched our strategic transformation back [indiscernible]. While last year's sales were up only 5% since 2021. Adjusted EBITDA has more than doubled and free cash flow was up $30 million. The capital deployed in the business is also much lower, significantly improving financial results. Our 2026 guidance anticipates continuing sales growth, profitability expansion and strong cash generation while investing in our growth platforms.

Bill mentioned earlier that our backlog was approximately $189 million at year-end, up 1.8% versus last year. While the increase is modest, there are some important shifts in the bacon that should be highlighted in their support for our optimism in 2026. Starting with the rail backlog, which is up $34.5 million versus last year. The increase was driven in part by stronger North American demand for both rail prices and friction management. Rail price backlog is up $10.6 million, while friction management is up $7.6 million.

The balance of the increase was realized within our TS&S, with the U.K. business securing a $20 million multiple year order last So the higher executable backlog for rail should translate into a better start for 2026 versus last year's weaker first half when the pause in federal funding curtailed rail customer project work. While infrastructure backlog is down $31.1 million, the majority of the decline is due to the Simon order cancellation. In addition, the precast concrete backlog is down $5.4 million with slightly lower CSG billing backlog to start 2026, after a record year in 2025 for this product line.

As a reminder, our precast business grew 19.9% in 2025. This impressive growth was all organic. I'm pleased to report that project pipelines are robust and [indiscernible] activity is picking up in both segments. During the first 2 months of 2026, overall backlog is up about 15% from year-end with solid gains realized in both segments. Our 2026 guidance reflects 3.7% sales growth with 11.3% growth in adjusted EBITDA, both at the midpoint of the range.

Free cash flow is expected to remain robust at the midpoint of $20 million with a slightly higher CapEx rate of 2.7% of sales as we invest in organic programs, primarily in [indiscernible]. In summary, our 2026 guidance reflects our expectation of another solid year and improvement in financial performance while investing for future growth along the strategic priorities.

I'll close today's call by thanking our team for a fantastic 2025. It was a challenging year in many ways, but our team was resilient and we finished the year strong. In fact, 1 of the strong best quarters we've seen in recent years, and we're carrying that positive momentum into 2026. I I'm coming up on my fifth year anniversary as CEO in July. I could not be more proud of what our team has achieved over those 5 years. And I look forward to greater accomplishments of '26 and beyond. Thank you for your time and continuing interest in L.B. Foster.

I'll turn it back to the operator for the Q&A session.

[Operator Instructions] Our first question will come from the line of Liam Burke with B. Riley Securities.

John, your -- it looks like with the orders in both friction management rail products that that segment will look a little more normal than it did in 2025 based on the U.K. problems and [indiscernible] opening the year -- the only thing we're seeing is maybe track monitoring flat, but that's project-based. Is there anything else that would keep you from having a more normal year in rail products this year?

No. Well, thanks, Liam, for joining us today. I think you hit it on the head. We finished the year down about $189 million, and the reason being we delivered. So we -- all the executable backlog with our channel partners. We had -- our billings were fantastic. The bookings really picked up here, as I mentioned, up 15% since the end of the year. With equal weighting, I would say, throughout real products and the infrastructure precast business. So this is as you mentioned, we're back to normal. We feel -- in fact, we were closer back to normal in the fourth quarter last year, bidding activity and the need is there today. So our team feels very good about the start to the year and our ability to see that guidance, the increased revenue that we're looking for profitability. It's kind of refreshing to have that now compared to where we were just a year ago.

Great. And on concrete, you have the order cancellation. You have normal quarter-to-quarter variability anyway. You touched on order activity being pretty solid in the first quarter. Do you anticipate a better cadence for concrete as we get into the third and fourth quarter -- second and third quarter this year?

Yes. Same. We've started to pick up some nice backlog as well as on the entire infrastructure side in steel as well, which had a very strong back end of the year. We're starting to see the energy business or specific facilities down in Texas as well as Birmingham starting to build a backlog. And then precast is -- we were a little light coming into the year because of the building side, but we pretty much shored that up in the first 2 months already.

So again, our facilities are basically running at capacity right now to for at least the first half of the year, and we'll see definitely pick up to the second half year, especially in areas like Florida with our new facility to really come online. We'll be excited about that.

[Operator Instructions] And our next question comes from the line of Julio Romano with Sidoti & Company.

Bill, Lisa. Maybe to start -- maybe to start on the 2026 guidance ranges that imply sales growth of about flattish to 7% on the sales line and then EBITDA growth of 5% to 18%, I believe, you just talk about what the puts and takes are that you think can get you to the high and the low end of those ranges.

Yes. Well, I think Liam hit it right there, it's about work of backlog and less disruptions. And the need is we're an infrastructure company in the right market right now with the industrials. So our customers need our product. So we're feeling much different about the start of the year than we were last year. And so order book is strong and the bidding activity is as good as we've seen in recent years. So we feel good about bringing the revenue in. Now we've got to really shore up some things. We had some -- as we mentioned, some things in the U.K. that we're -- and we've done now 3 years of really rightsizing that business to protect the company and protect the margins.

But we feel good with what's going on specifically here on the rail side. our FM business, as I mentioned, I mean, if you look at our growth platforms here, you look at precast as well as rail both of them up, respectively, 20% in the fourth quarter. And all the activity we talked about was all organic. So it really bodes well for the capital that we're bringing into the company. And as I mentioned, we took up the capital as a percent of sales a little higher this year, 2.7% because we feel very, very good about the opportunities we have in front of us.

And the reality is we have to increase capital now to stay up with the need specifically on the rail side and the [indiscernible]. And then we're backfilling some of the work that we need to do on the coating side as well. So right now, we're really focus on producing the backlog and executing well coming into the first quarter and first half of the year in a much different position than we were just one year ago today.

Absolutely. I was just hoping to go a little bit deeper into the cadence of the quarter-to-quarter rail revenues expected in 2026. It's obviously difficult to foresee any dog like events kind of driving delays for your customers. But absent an event like that, you mentioned you feel better about rail right now than maybe this time one year ago, just speak about the confidence of the quarter-to-quarter cadence top line.

Well, remember, we're a construction seasonal company, too, right? So as far as rail, they really don't get in and do much as far as the refurbishments until the weather improves heading into in the second, third quarter, right? So right now, it's about bringing us orders and we're providing them the materials for them to get on track and do what they need to do is shore up things in the second, third quarter. So we're looking at more of a typical bell curve, if you will, this year with the highest revenues coming in Q2 and Q3 [indiscernible] -- so unlike what we had to do this year, we make it all up in the fourth quarter. We're going to see quite a bit more work in activity and sales happen in the first half of the year.

Specifically, in Q2 and then continuing in Q3 compared to what we had just last year. We're set up to do it. So when the customers come and the need is there, we pivot, and we do very well executing but I think it's going to be -- it looks like a much more normal year this year on the rail side, including on the precast side. We feel very good about the performance we're having coming out of our concrete group -- we've done a good job of stabilizing our acquisition that we made back in 2023, and we're starting to really move product to the East Coast. And then we had a record year in our Hillsbol facility. Plant manager there, Jason Buzz, we've just done an outstanding job with record revenue coming out of that facility.

So we feel very, very good about what we see specifically with our growth platforms and their ability to perform and do it more consistently this year than getting in the whole like we had last year and having to come out of it in the fourth quarter like we did, and we communicated to the market. I think the other thing that we're really focused on is our debt for us to be down to 1x to really manage the working capital that you see here today. as well as the cash generation. We're very pleased with really focus on bringing the cash back to the shareholders and getting our debt to something where we finished the year at 1.0x. So we're very proud of all those activities.

Absolutely. And fair point about the inherent seasonality of construction in your business. I guess I'm just asking because because you had such a funky, for lack of a better word, sales cadence in '25 on the revenue line, I'm thinking about the year-over-year growth rates for rail in '26. I mean is it fair to expect year-over-year sales growth in the first half of '26? And would you expect the year-over-year growth rates to be more weighted? Or I guess, just help us think about that given how fast the fact 2025 comps are so skewed.

Yes. So let me give you a little color, and then I'll let Bill give you a few specifics. But last year, remember dose, right? So this time last year, the POs were curtailed because basically, much of what we see, especially on the Rail Products side, 55% of what we have flows through the government. So there were just a number of projects that we're looking for that didn't happen. So we were basically in a waiting game. The need was still there, but the funds as well as the POs weren't flowing. So it really put us behind the 8 ball, if you will, for the first half of the year. and we were able to make it up for the most part in the second half year because we have very good supply chain partners and our ability to flex our workforce and get the product out to customer. .

The good news is that demand and requirement has continued down from the fourth quarter into the first quarter of this year. So that's where things are completely different. We're getting the POs and bidding activities there. And most importantly, the need is there. We're in the maintenance and refurbishment part on the rail side. So the needs to the market are there. And the good news is we're there to deliver. Maybe Bill can give a little more color on the phasing.

Yes. Julia, I guess the way I would look at it is if you just take what you would layer out as a run rate in terms of your outlook for rail. If you convert that to a normal seasonality that we would typically see you're probably going to find that there's going to be some growth in rail in Q1 and stronger growth in Q2 and Q3 just based on the normal seasonality. And then with extraordinarily strong Q4 the growth would potentially not be as strong there or potentially not covering the extraordinarily strong Q4 that we had.

And then on the infrastructure side, I'd say, as John mentioned, the backlog is improving, but we started the year with a little lighter backlog. So I would say that it's still going to be a solid year of growth but that's probably going to be more towards the second, third and fourth quarters of the year as opposed to getting off to a strong start like we did last year. I think John mentioned our backlog was elevated at the beginning of the year with a strong building backlog. We executed against that in last year's Q1. So infrastructure may be a little lighter, but strong sales growth to start the year for rail.

Super helpful. And I guess just last one before I turn it over, I just wanted to comment on -- you really did have a fairly extraordinarily strong free cash flow in the fourth quarter. If you could just speak to the drivers of that? And how much of a function of that is kind of the structural things you've done as an organization.

Well, if you look at the last couple of years, we do that pretty frequently now we manage the fourth quarter, right, because of our working cycle needs. We have a big lift in working cycle really to raw materials coming in Q2, Q3 because of the seasonality, and that's our largest sales. So we're bringing in materials. And then we do a good job of moving those materials out and then collecting on our bills in the fourth quarter. We got a really good team that makes those things come together and make those things happen. So we did the same thing last year, 1.2x.

We finished the year and we finished this year -- last year being the year of 2024. And then, of course, we finished this year at 1.0x. So we're good at it. Now we want to make sure that we keep that focus. But at the end of the day, it's also about making sure that we're delivering to our customer. And so behind all this is good quality systems, on-time deliveries and make sure that we don't have customers that have reasons not to pay us. So there's also a very good performing part of this to make sure that when we ship something, it doesn't come back, we have delighted customers.

Our next question comes from the line of Justin Bergner with Gamco and [indiscernible].

A lot has been covered. But I just want to delve into some areas that maybe would be great -- good to get some more clarity on. So the total track monitoring, could you provide some just discussion as to the puts and takes there in the fourth quarter and looking forward?

All right. So we mentioned it was somewhat flat last year related to the activity. That is true. So we've been doing quite a bit of work behind the scenes and continue to work on technology innovation, which I mentioned in today's call. So we have some things that are coming to the market to help shore up what that business is and keep bidding and bringing the next generation of product for condition monitoring to the marketplace.

So our team was very active, and we had a significant job that we're working on abroad last year, too. It took away a little bit of our time and attention to the North American market. But we feel very good about where we're at today. We've built up the team. We have spent our available SG&A to bring the technical resources here in the U.S., moving from the U.K. So we're really set up well to deliver our mark forward application. And then as we've been talking about this rockfall installation that we're seeing pretty significant excitement in the marketplace today.

So last year was really getting ourselves shored up to make this happen, to make sure we support it and make sure we had our operating centers ready to perform. So we're looking for big things out of that group in '26 and beyond.

Got it. And then secondly, the Protective Coatings business, I mean, should we expect double-digit type growth there in '26?

Yes, I think we're going to be right up to it. It's -- and I think what's going on right now in the world related to energy and the need for more energy here in U.S. is probably going to continue to put us in a better position as far as volume and activity for the balance of the year. So again, we spent some money in those facilities. We brought in some new equipment to make us more efficient to be able to produce more product. So those -- as those orders come in, we're going to be ready to deliver in a big way that we haven't done in the years past.

Okay. Great. And then lastly, the headwinds to EBITDA in the quarter, I mean, you mentioned the U.K. rail business. But I guess your adjusted EBITDA adds back a lot of the restructuring expenses. So in light of that [indiscernible]. Any clarity on sort of even after adding back those restructuring expenses, what caused the fourth quarter to be a little bit light versus your expectations?

Yes. So first of all, as far as the U.K., I mean -- this has been a 3-year plan now really getting ourselves aligned to the market needs over there because it's been changing. It's been dynamic. It was a big part of our growth initially and as that market has changed, we've been pivoting and adapting our business to those needs. So I think we've done a very good job of rightsizing the business and the materials handling part of that was the last step that we've done getting ourselves in position at end the year strong, much stronger over there than where we were just a year ago. .

Bill, maybe you could give a little additional color on what you would like as far as Q4, other puts and takes?

Yes. Yes. Justin, as John mentioned, it's been 3 years of a restructuring and downsizing effort there. What we're seeing coming through in the fourth quarter is basically what I would call us wrapping up those final steps of those downsizing efforts. So the margin impacts were as a result of the lower sales volume. There was definitely manufacturing deleveraging that occurred as a result of that, some higher costs that came through. And then we also had some longer-term legacy commercial contracts that we resolved within the quarter.

So that all it resulted in a headwind for margins in the U.K. in the fourth quarter. I guess what I'd like to highlight is we're seeing improvement on a run rate basis moving into 2026 already, and we expect that to continue to improve as we go into the year.

Got it. That's very helpful. if I could throw one last one. Just the infrastructure backlog. You mentioned it was up from the end of the year. Is it up modestly? Or is it up material? I mean, if obviously, you're only one month away from the end of the quarter. I mean should we expect to see a nice uptick in the backlog for infrastructure?

We are up 15% since the end of the year. .

And I'm showing no further questions, and I would like to hand the conference back over to John Castle for closing remarks.

Thank you, Michelle, and thank you for joining us today. So I'd like to leave you with one thing that we mentioned sometimes, but I think it's really, really important to the culture and fabric of our company. I mentioned that in July will be my fifth year as CEO of the company. One of the things that the leadership team here has really been focusing on is our culture. L.B. Foster is -- we're in our 124th year -- and that really says something about the company and a lot of people have worked here for their entire career.

And what really makes us tick is our value system. And first and foremost is our focus on the people and safety -- our safety results. So the last 2 years have been respectively the best years we have had in the 124 years as far as safety performance, which is not just the number, it's all the activity and the focus and the attention to our people, the process, putting money back in the facilities, the yards and letting people know that they're important. When you have all those things come together, you're a more profitable company. and you're really providing the value to shareholders, and I think that's something that's sustainable.

So I'd like to recognize Ben [indiscernible] -- so Ben started with the company just about 25 years ago. So in October, he'll hit 25 years. Ben is the Director of Environmental Health and Safety. He's basically been in that role since he joined the company. And let's just say, 25 years ago, this was not -- L.B. Foster was not what it is today. We had -- we were we did not have great safety performance. There's a lot of effort and a lot of activities to make that happen, but the realities it took time. It took dedication. It took focus. It brought in new skill sets. -- but then was always there. And he was always pulling the levers as well as keeping the pieces together.

So I'd just like to thank Ben for all your efforts, all your focus, all your drive and really putting L.B. Foster at the forefront of being world-class, world class and how we do things and be an extension of our -- not just the shareholders but our customers as well. So thank you for your time today, and I look forward to meeting or hooking up with you after we finish Q1 results. Take care.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

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" Sidoti & Company, LLC

" B. Riley Securities, Inc., Research Division

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Good day, and welcome to L.B. Foster's Third Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Ms. Lisa Durante, Director of Financial Reporting and Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to L.B. Foster's Third Quarter of 2025 Earnings Call. My name is Lisa Durante, the company's Director of Financial Reporting and Investor Relations. Our President and CEO, John Kasel; and our Chief Financial Officer, Will Thalman, will be presenting our third quarter operating results, market outlook and business developments this morning. We'll start the call with John providing his perspective on the company's third quarter performance. Will then review the company's third quarter financial results. John will provide perspective on market developments and company outlook in his closing comments. We will then open up the session for questions.

Today's slide presentation, along with our earnings release and financial disclosures were posted on our website this morning and can be accessed on our Investor Relations page at lbfoster.com. Our comments this morning will follow the slides in the earnings presentation. Some statements we are making are forward-looking and represent our current view of our markets and business today. These forward-looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise or publicly release the results of any revisions to these statements in light of new information, except as required by securities laws. For more detailed risks, uncertainties and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and presentation. We will also discuss non-GAAP financial metrics and encourage you to carefully read our disclosures and reconciliation tables provided within today's earnings release and presentation as you consider these metrics. So with that, let me turn the call over to John.

Thanks, Lisa, and hello, everyone. Thanks for joining us today for our third quarter earnings call. I'll begin with Slide 5, covering the key drivers of our results for the quarter. We continued a favorable trend in the third quarter, posting modest sales growth for the second consecutive quarter with sales up 0.6% over last year. Like the second quarter, the growth was achieved in the Infrastructure segment, with sales up 4.4%, led by 12.7% increase in steel products. Rail revenues, on the other hand, remained soft, declining 2.2% from last year due to continued planned downsizing of our U.K. business and timing of rail distribution sales. But it's important to note that these results included positive revenue gain in our rail growth areas, starting with a 9% increase in friction management and approximately 135% increase in total track monitoring.

Turning to profitability for the quarter. Adjusted EBITDA was down $1 million with lower margins in both rail and infrastructure, partially offset by lower SG&A expenses. Speaking of SG&A, we remain focused on our strategic execution to leverage our cost base with containment measures reducing the SG&A percentage of sales to 16% for the quarter. Net income also declined year-over-year to $4.4 million compared to $35.9 million last year. As a reminder, improving profitability allow us to release a $30 million tax valuation allowance in last year's third quarter.

The major highlight of the quarter was our exceptionally strong cash generation with cash provided by operations totaling $29.2 million. These funds were used primarily to lower our net debt to $55.3 million at quarter end, with gross leverage improving to 1.6x compared to 1.9x last year. In line with our capital allocation priorities, we also repurchased approximately 184,000 shares of our stock, representing about 1.7% of outstanding shares.

Finally, the increased level of orders and backlog in the quarter sets us up for a strong finish to the year in Q4. The trailing 12-month book-to-bill ratio remained positive 1.08:1, and the backlog at quarter end stood at $247.4 million, up $38.4 million or 18.4% over last year. The elevated backlog is expected to translate into Q4 sales growth of approximately 25%, with both segments expected to make gains. I'll revisit our financial guidance to cover the market outlook after Will runs through the financial details for the quarter. Over to you, Will.

Thanks, John, and good morning, everyone. I'll begin my comments on Slide 7, covering the consolidated results for the quarter. Reconciliations for non-GAAP information and other financial details are included in the appendix of the presentation. Net sales grew 0.6% year-over-year, driven by 4.4% growth in infrastructure, with steel products up 12.7%. Rail segment sales remained softer, down 2.2% versus last year. Gross profit was down $1.7 million with the decline due to the lower rail sales volumes, coupled with unfavorable sales mix and higher manufacturing costs within infrastructure. The gross margin was 22.5%, down 130 basis points compared to last year's high point in the third quarter. We remain focused on what we can control in the short term with containment measures reducing SG&A costs $2.2 million compared to last year.

The SG&A percentage of sales improved 170 basis points to 16%. Adjusted EBITDA was $11.4 million, down 7.9% versus last year, with the decline driven by lower margins, partially offset by lower SG&A, both adjusted for restructuring and legal costs incurred last year. Cash provided by operating activities in the quarter was $29.2 million, favorable $4.4 million versus last year due to lower working capital needs in the Rail segment. Third quarter orders were up 19.6% year-over-year, with a favorable trailing 12-month book-to-bill ratio of 1.08:1. The backlog improved 18.4% year-over-year with the increase realized in the Rail segment, which was up 58.2%. I'll cover segment-specific performance for the quarter and the favorable developments in orders and backlog later in the presentation.

Slide 8 provides a reminder of our typical business seasonality and the related financial profile by quarter. Normally, sales and profitability are strongest in the second and third quarters. However, 2025 phasing is skewed a bit due primarily to timing of rail distribution orders with deliveries deferred to the fourth quarter. As a result, combined Q2 and Q3 sales and profitability as a percentage of the full year are lower than we would typically see with the expected sales shift through the fourth quarter. We're in the cash generation period of our year and as evidenced by the exceptional operating cash flow in Q3. We expect this favorable trend to continue in Q4.

Over the next couple of slides, I'll cover our segment-specific performance in the quarter, starting with Rail on Slide 9. Third quarter revenues were $77.8 million, down 2.2% due to order delivery timing, primarily in Rail distribution, coupled with lower demand and revenues in the U.K. Rail product sales were down 5.9% due to softer rail distribution and transit product demand in the quarter. Technology Services & Solutions sales were also down 5.3%, including the decline in the U.K. business. Within TS&S, our total track monitoring sales were up 135.1%. Also, global Friction Management sales were up 9% as this growth platform continues to perform well. Rail margins of 22.8% were down 40 basis points, driven primarily by softer sales volumes as well as the weakness in the U.K. Rail orders increased 63.9% versus last year with all business units improving. Most notably, rail products orders were up $9.6 million, while TS&S orders were up $25 million with a large multiyear order awarded in our U.K. business. Rail backlog levels increased $51.6 million versus last year, led by Rail Products up $34.5 million or 59.9%, which supports our growth expectations for Rail in Q4.

Turning to Infrastructure Solutions on Slide 10. Net sales increased $2.5 million or 4.4%. The improvement was realized in steel products with sales up $1.9 million on improved protective coating and threaded volumes. Precast sales were also up 1.4% over last year. Despite the sales growth, gross profit declined $1 million with margins down 260 basis points to 22% -- the decline was due to unfavorable sales mix and higher production costs in the precast business, including $0.6 million of higher start-up costs at our new Florida facility. Infrastructure net orders declined $14.9 million due primarily to the cancellation of the $19 million Summit Protective coating order in Steel products. Solid gains in Precast Concrete partially offset the impact. Infrastructure backlog totaling $107.2 million is down $13.2 million from last year due to order cancellations. Shippable backlog for infrastructure is up approximately $6 million over last year's comparable level adjusting for the order cancellation.

Next, I'll cover some of the key takeaways from our year-to-date results on Slide 11. Net sales for the year-to-date period were down 5.7% due to lower sales volumes in rail, which were down 16.1% driven by timing of demand for rail products, coupled with the reductions in the U.K. Infrastructure sales were up 11% on stronger precast concrete volumes. Year-to-date gross profit reflects the impact of lower rail sales volumes with the results down $7.3 million and margins of 21.6%, down 60 basis points. Selling, general and administrative costs decreased $6.6 million from the prior year with lower personnel, professional service and legal costs as the primary drivers. Adjusted EBITDA was $25.4 million for the year-to-date period, down $0.9 million or 3.5% from the prior year despite the more pronounced decline in sales.

I'll mention here that the effective tax rate continues to be elevated due to our not recognizing a tax benefit on U.K. pretax losses. We made some progress reducing this impact in the quarter, and we expect a lesser impact in future quarters with an improved outlook for the U.K., coupled with overall improving profitability. Of course, the higher rate is not reflective of our cash tax requirements, which remain low at approximately $2 million for 2025 due to available NOLs. Cash flow provided by operations was $13.4 million, favorable $15.1 million compared to last year on lower working capital needs within rail with the growth deferred to the fourth quarter. And orders were up 10.1% with both segments realizing increases on improving demand.

I'll next cover liquidity and leverage metrics on Slide 12. The chart reflects net debt levels of $55.3 million, down $10.1 million compared to last year and down $22.9 million during the quarter. The gross leverage ratio improved to 1.6x at quarter end. We've demonstrated our ability to manage our leverage levels through choppy conditions and remain prudent in our overall capital allocation approach. Our capital-light business model translates into significant cash generation, and we continue to deploy these funds along our priorities, which I'll now cover on Slide 13.

Maintaining our financial flexibility with reasonable debt and leverage levels remains our top priority. Depending on working capital cycles, leverage typically cycles up to a high point around 2.5x before declining toward our longer-term goal of 1.0 to 1.5x. We manage our leverage while also returning capital to shareholders through our stock buyback program, which is also a high priority. We've repurchased approximately 461,000 shares thus far this year, representing approximately 4.3% of outstanding shares. We have $32 million remaining on our authorization through February of 2028. Since the inception of our repurchase program back in early 2023, we've repurchased approximately 896,000 shares, representing just over 8% of the outstanding shares.

We also continue to invest CapEx at a rate of approximately 2% of sales to maintain our facilities, drive operating efficiency and bolster our growth platforms. And lastly, as part of our continuous strategic planning and portfolio management process, we routinely evaluate potential tuck-in acquisitions that would complement our current portfolio, primarily in the precast concrete space. In summary, we have multiple levers available to drive shareholder value, and we remain prudent in our approach.

My closing comments will refer to Slides 14 and 15 covering orders, revenues and backlog trends by segment. The consolidated book-to-bill ratio for the trailing 12 months improved sequentially to a favorable 1.08:1, led by growth in orders in Rail. The Rail segment ratio improved to 1.18:1 compared to 1.06:1 at the end of the second quarter, driven by the increase in order rates over the last year. The infrastructure ratio declined to 0.94:1 due primarily to the Summit order cancellation in Steel products in Q3. And finally, on Slide 15, it's clear that the greatest improvement in our backlog was achieved in our Rail segment with a 58.2% increase year-over-year.

I'll again highlight that the gains were realized across the segment with Rail Products up 59.9%, friction management up 28.7% and TS&S up 77.7%, including the multiyear order secured in the U.K. business. And while the infrastructure backlog was down 10.9% due to the longer-term order cancellations, current demand levels remain improved for both precast products and steel products business units. This positions us well for a strong finish to 2025. Thanks for the time this morning. I'll now hand it back to John for his closing remarks. John?

Thanks, Will. I'll begin my closing remarks covering current market developments on Slide 17. First, I'll address a couple of macro headline topics, tariffs and the federal government shutdown.

As previously mentioned, our supply chains are primarily sourced from within the United States with some minor exceptions from certain electronics and other components sourced outside the U.S. As a result, tariffs have not had a significant impact on product costs or our ability to secure the materials needed to serve our customers. With respect to the recent U.S. federal government shutdown, at the moment, we're not seeing significant adverse impacts on business activity. Of course, federal funding programs support several of our business lines. we're monitoring project and delivery time lines for potential delays, which could have an adverse impact on Q4.

As Will mentioned during his review of orders and backlog, we've seen improved demand levels broadly across the rail business. The federal funding support began to release back in the second quarter, translating into improved rail order rates and backlog levels. The timing of orders and deliveries primarily in the rail products pushed the expected growth in rail to Q4, but we have the backlog in place to deliver the expected growth. More to come on this topic in a minute. Rail friction management sales are up 12.3% year-to-date, and backlog is up 28.7%, reflecting the increased demand for these solutions that improve safety and operating ratios for our customers. And outside North America, the multiyear order secured for our U.K. business is a positive sign that prospects for improvement in our demand in this market are trending in a favorable direction, albeit at depressed levels currently. Turning to the Infrastructure segment.

Our precast backlog remains solid at nearly $86 million, up 4.9% over last year. Precast has also benefited from government funding programs and highway and civil construction projects are supporting demand levels in our key regional markets. We previously mentioned the commissioning of our precast facility in Central Florida. While demand levels is soft in this market now, we remain bullish in the long-term prospects for Birocast wall system solution.

Turning to Steel Products. Third quarter sales were up 13% overall, but the overall business mix improved substantially with the recovery of our pipeline coatings business, which was up 77% over last year. With the renewed interest in energy investment in the U.S., we believe we are a favorable recovery trend for this product line, and we expect growth rates to expand further in the fourth quarter. In summary, drivers of improving demand in our key end markets remain intact as evidenced by our backlog, which we expect to deliver a strong finish to 2025, which I'll now cover starting on Slide 18.

Our updated guidance for 2025 anticipates extraordinary fourth quarter of growth and profitability expansion. At the midpoint, fourth quarter adjusted EBITDA is expected to be up 115% on 25% sales growth. We have 2 major areas that support this position. First, in the third quarter, sales only grew modestly despite a $20 million higher backlog at the start of the quarter. This was due primarily to order delivery timing for the rail distribution product line. Second, the backlog at the start of Q4 is up $38 million versus last year compared to $32 million sales increase expected at our midpoint of our guidance. Simply said, we have the backlog available and manufacturing capacity to deliver the expected sales growth contemplated in our guidance.

Of course, adverse weather conditions and unforeseen customer delays can always impact deliveries and the federal government shutdown and turmoil in Washington raises the risk of unforeseen disruptions, including those caused by funding delays. But we remain optimistic about a strong fourth quarter for both segments. The 2025 financial guidance reflected on Slide 19 represents a solid sales growth with substantial profitability and cash flow expansion compared to where we were in 2021 when we kicked off our strategic reset. While we're falling short of the 2025 sales goals we set for ourselves, we are striking distance of the EBITDA margins despite the weak rail demand at the start of 2025. In fact, the revised guidance implies that adjusted EBITDA margin would be well above the 8% target for the last 3 quarters of 2025. And while the free cash flow outlook is slightly lower than our previous guidance due to the deferral of rail deliveries to the fourth quarter, the $17.5 million midpoint represents a 6% yield at today's stock price.

So in conclusion, I'm very proud of the L.B. Foster team and what we have accomplished in a short period of time. Let me assure you, we are all focused on delivering a strong finish to 2025 and carrying positive momentum into next year. Thank you for your time and continuing interest in L.B. Foster. I'll turn it back to the operator for the Q&A session.

[Operator Instructions] And our first question will come from the line of Julio Romero with Sidoti.

Wanted to start on the guidance. Can you maybe talk about your guidance and hitting the implied fourth quarter sales and EBITDA guide? And does that embed any assumptions with regards to the ongoing government shutdown ending by a certain time or any other assumptions about funding impacts to your customers?

Thanks, Julio. Thanks for the question. As I mentioned in the script in the presentation, the actual government shutdown, which is going on today, it's going on now for, I guess, over 30 days. We are not seeing any immediate impact, significant impacts from that at all. Much of the funding that is out there is ready to roll. The good news is it's flowing. Now if this continues into end of the fourth quarter into next year, it's a different story. But the good news for us is we've got plenty of work. If you look at our book-to-bill ratio of 1.8:1, where we're standing, the orders that we picked up moving into Q4 we're very, very -- we're in really good shape related to having activity. More importantly, we have our supply chain that's locked in with us. Our partners, CIPCO, SDI to name a few, are also ready to drive what needs to happen and get this product out in the marketplace moving into Q4.

So it's going to be a big quarter, Julio. In fact, it will be the largest quarter we've seen since pre-COVID. But we're excited about it. And we feel that we're blessed to be in a position like that today. So we would like to have seen more things happen in Q3, but that's not the way the role -- the year has rolled together. As I have shared with you in the market, it was really about H1 versus H2. And the second half of the year was going to be strong for us, and it will be strong before the year is over. So we're sitting in good shape here first week of November to hit these guidance as we laid out in the presentation today.

Excellent. And good news to hear that some of that funding is flowing already. I guess maybe just asking another way, worst-case scenario, it does go on through '26. I mean, do you still confident in hitting the sales and EBITDA guide even in that scenario with respect to the impact to your customers?

Yes. As far as '26, I really can't talk about that. I don't know. I do know that we're sitting in really good shape right now, and the bidding activity is as strong as we've seen it for the entire year. So I really can't comment on 2026. I will tell you, I think the momentum that we have right now will continue into Q1 though.

Got you. Okay. It will take into Q1. Perfect. And then I wanted to turn to total track monitoring. It was really impressive to see the sales growth of 135% year-over-year, implies a pretty nice number there. Can you help us unpack the drivers of that sales growth and help us think about the sustainability of total track monitoring sales going forward?

Yes. Well, it's all 3 of our strategic growth platforms, right? So you mentioned TTM, which is condition monitoring, the impact that we're having through moving our Wild product in the marketplace, the conversions between Mark II as well as the adoption of what we're doing related to the wilds and the acceptance by the customers has been fantastic. FM has had a fantastic quarter as well. In fact, they're pulling together they'll have the best year that we've seen. So another huge strategic growth initiative for us where the customer is really looking for that product. And then precast, our third leg of our growth and strategic focus, really had a strong quarter, building up backlog, and we're going to have a fantastic finish to the year. Our buildings part of that is going to have an exception year, probably the best year we've seen since we've owned that business line. So all three of them are performing very well. This is really the tale of rail products and movement from Q1 to really Q4 as it relates to the deferral and starting the year with Doge and moving the projects, the government-type projects and the funding type of transit authorities and the other freight lines into Q4. So the good news is it's here and it's happening this year, and we feel very good about where we're sitting right now. We're very blessed, as I mentioned earlier. Yes, absolutely. It's been a dynamic year for sure.

Absolutely. And last one for me would just be on the free cash flow guidance. Does the push out in the rail side imply you may see a more heavily weighted first half '26 free cash flow than usually do from a seasonal perspective?

Yes, for sure. And well, first of all, thanks for mentioning because we're pretty pleased with the cash generation in the quarter. The $29.2 million is really indicative of what L.B. Foster has done. If you look at the past few years, this is what we do, and we generate cash. So I know the shareholders are excited about that. More importantly, we're excited about it. This is something we really focus on. But with the rail deferrals and rail distribution specifically moving to the fourth quarter, we will see some movements in working capital and payables moving to next year. So we'll have some impact on that.

And that will come from the line of Liam Burke with B. Riley.

Good morning John Will, you saw nice growth in total track management and friction management. You talked about that on the earlier discussion. Your margins got hit by unprofitable product mix with contribution from U.K. and volume, which is what it is. But how much offset in profit margin did you get from total track management and friction management? Is it measurable?

So yes, I think it was. But I mean, there's -- but not measurable. I mean, there's a piece of it that I think Bill can bring you into the details with. But I mean, overall, Will, do you want to add a little color on...

Liam, yes, the overall profitability in the quarter for the Rail segment, the margins in Rail Products, even though the sales were down, margins were up a tick in Rail Products because of the sales mix and some of the overall pricing initiatives and things that we have within Rail Products. Friction Management volume was up, but the profitability was flat year-over-year at a margin level. That's due to sales mix again. We feel really good about the progress that was made, especially in the first half for friction management. But for this particular quarter, it was flat on a year-over-year basis. And then on a combined basis, TS&S, there was a deterioration in the margins because of the U.K., but we did get a bit of an offset within the total track monitoring portion because we had solid sales growth in total track monitoring. That's a product line that contributes on the overall favorable mix for margins within rail. So we got some lift there. So I would say that overall, it was a bit of an offset, but not a significant offset. As we mentioned, the big impact was the decline that we realized within the U.K. business because of their challenges over there.

Great. Thank you, Will. And your acquisition emphasis is on precast concrete. How has that potential or opportunity pipeline looked on precast -- potential precast acquisitions?

We have a process. We have an actual group of people that are looking at those things. We're specifically looking at precast, as you mentioned. We're specifically looking in the south part of the U.S., but we're also very focused on getting our Tennessee wrapped up to the volumes we want to see in our Florida, as I mentioned in the script. We're done commissioning. We're building product, and we're starting to see a nice flow of production orders rolling through there now. So -- but we are keeping in mind what's going on related to precast, maybe opportunities for us into '26 and beyond related to maybe some acquisitive growth. But our organic opportunities, Liam, as I mentioned to you in the past, are something that we're feeling very good about for a period of time here, and we want to make sure we perform on those as well.

[Operator Instructions] And our next question will come from the line of Justin Bergner with GAMCO.

So a lot of moving pieces this quarter. I guess maybe to start, I understand the pushback, particularly in Rail Products from the second and third quarter to the fourth quarter. But given that your sales guide and corresponding EBITDA guide is kind of tweaked to the lower end of the prior range, is that because some of the rail products is pushing beyond '25 into '26? Or are there certain parts of the business that are tracking a little bit lower for the full year '25 than you expected? Quarter?

I think it's more about what we have or capacity, and we're just being realistic to what we feel we will get out in the marketplace and in terms of revenue for us by the end of the year. Our activity -- if you look across the board, Justin, sorry, we are -- we've got plenty of work. I mean all of our operating centers are at capacity right now. So I think we're just trying to be realistic to what we can do and hit the expectations.

Okay. Got you. So if you can't get back to your initial sales guide level at the midpoint because you're kind of trying to get product out the door capacity, what will sort of come through in the early part of '26 that might not have come through in '25?

Well, first of all, on the revenue side, keep in mind, we're really getting after SG&A, too, right? So we may not necessarily get to the guidance that we had originally on the revenue side, but we're managing our cost and managing our costs very effectively because with more rail distribution, that will have some pressure on margins. So we're being very mindful of what we have right now, and we feel we're going to have some very nice leverage with that additional sales that we're seeing going into Q4 with the 25% sales growth. And as far as what's going to happen in '26, I'm looking for a much better start to next year than what we saw this year with all the turmoil that we had in Washington. So like I said earlier, Julio, we're busy quoting. There's a lot of projects that are on the radar right now. And even though we have a government shutdown, everybody is pretty excited about, I think, the opportunities that's in front of us.

Okay. Maybe just a couple of questions on the order book. So the multiyear order in the U.K., how does that contrast with the business that you're deemphasizing? A little more color there.

Good question. So first of all, U.K., we keep talking about that. We've got a good group that's really focused on simplifying the business, being able to perform in the market conditions that are presented to us today, which are very challenging. But we're continuing to just right size the business. They're really focused on what it is that we do and how we can add value and make sure that we get paid. So we have a good, very good operating team that's really focused on that today. So we're very selective in the orders that we're accepting, and we're going after. And this is one of the orders that has been a good business for us in the past. It's been where we're treated a little different.

We're looking at a little different. We're higher in the pecking order, if you will, as far as performing and getting paid. And it's a 6-year deal. So it brings some stability to our business over there. Because at the end of the day, that business is very important to us. It's our technology for our rail side. With the acquisition of 2 and 2 plus that we made back in 2015, that is where we bring our condition monitoring and a big piece of our TTM is through that business over there as well as our expansion plans that we have in Western Europe. It's very exciting for us, taking friction management and other products that we have into that part of the geography. So order like this just helps give us some stability not just next year, but for many years to come for us to be able to continue to perform and also take that technology innovation and keep bringing that into North America.

Okay. Last question. The cancellation, how longer term was that? Kind of what were the circumstances around that?

You're talking about the Summit order?

Yes, the Summit order.

Yes. So we didn't cancel it. Our customer canceled it. So we're an in-line coater of AIPCO, right? So I was just out there meeting with the people that run that operation. It's pretty exciting what's going on there right now. In fact, our entire coating business, when you look at what's going on there as well as our operation in Texas. So that's been on the books for multiple years. It's been on the backlog for SICO as well for multiple years. And it came to a point in time where that thing probably has to be completely rebid because it's been sitting on their books. So AICO basically has gone back to the people at the Summit and said they're taking off their books and they notified us. And then when they notified us, we took it off at the quarter. So it still may be out there. It may be resurrected. It may come back to AIPCO. Keep in mind, we're not the sales arm, right? We get the orders AsIos the arm orders, and we're a tolling in-line quarter for them. So as they move the orders in and out, we have to move accordingly, and that's what happened with that order.

Okay. But prior to it being canceled, how far back were you kind of budgeting it to be?

Back or Forward. When was it going to be delivered?

Yes.

Well, we were hopeful it would continue at some point this year or into next year, but we have plenty of work and plenty of work for the SICO. So we just keep it out there in front of us.

I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. John Kasel for any closing remarks.

Thank you, Sheri. Thank you, everybody, for joining us today. Thanks for your I think the balance of the year is really something that we're looking at as an opportunity as well as excitement here as our company. And hopefully, you have appreciation of that. A lot of times when we head into Q4, it's about winding down the year and you kind of -- the year ends basically in November, you don't have a lot going on. This is different. It's exciting for us. It's one of the things that we're really trying to transform the company is moving from just a construction materials company to innovation technology company. And we believe by continuing to drive that strategy, our quarters will start filling up and look different and the seasonality will continue to change. And we're hopeful that Q4 is representative of that. So it's something that will continue into next year, and we won't have those big tailoffs at the end of the year. So I find this to be encouraging what we're doing, what our strategy is working. We're going to have pulled together, if you look at our guidance, a very good year year-over-year. And more importantly, our team here at L.B. Foster, all the way up to our Board of Directors is laser-focused on making this happen, and we're doing it safely. Give you an example, the rail business had no recordable injuries in quarter 3. And I think that's just tremendous that we're really focused on getting work out, but we're doing it the right way and really driving the right culture that's sustainable for all shareholders because it's not about just profits today, it's about the journey to profitability to the future. And I think we do that extremely well. So thanks again for your time today, and we look forward to catching up with you next year. Happy holiday season to you and your families. Take care. Be safe.

This concludes today's program. Thank you all for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the L.B. Foster Second Quarter 2025 Earnings Call. [Operator Instructions] Please be advised today's conference being recorded.

I would now like to turn the call over to your speaker today, Lisa Durante. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to L.B. Foster's Second Quarter of 2025 Earnings Call. My name is Lisa Durante, the company's Director of Financial Reporting and Investor Relations. Our President and CEO, John Kasel; and our Chief Financial Officer, Bill Thalman, will be presenting our second quarter operating results, market outlook and business development this morning.

We'll start the call with John providing his perspective on the company's second quarter performance. Bill will then review the company's second quarter financial results. John will provide perspective on market developments and company outlook in his closing comments. We will then open up the session for questions.

Today's slide presentation, along with our earnings release and financial disclosures, were posted on our website this morning and can be accessed on our Investor Relations page at lbfoster.com. Our comments this morning will follow the slides and earnings presentation.

Some statements we are making are forward-looking and represent our current view of our markets and business today. These forward-looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise or publicly release the results of any revisions to these statements in light of new information, except as required by securities laws. For more detailed risks, uncertainties and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and presentation.

We will also discuss non-GAAP financial metrics and encourage you to carefully read our disclosures and reconciliation tables provided within today's earnings release and presentation as you consider these metrics.

So with that, let me turn the call over to John.

Thanks, Lisa, and hello, everyone. Thanks for joining us today for our second quarter review. I'll begin with Slide 5, covering the key drivers of our results for the quarter. We're very pleased with our performance in the quarter with improvements delivered broadly across the business.

First of all, we returned to sales growth in the second quarter with revenues up 2% over last year. The growth was achieved in the Infrastructure segment, with sales up 22.4% led by a 36% increase in our Precast Concrete business. Rail revenues, on the other hand, remained soft in the quarter, declining 11.2% from last year. However, the Rail sales included a 17.2% increase in Friction Management sales over last year. In addition, demand rates for our Rail offering increased significantly in the quarter as evidenced by a 42.5% increase in our backlog from the start of the quarter.

This sets a solid foundation for our growth outlook in the back half of the year. Highlighting the benefits of our strategic execution, we delivered a 51.4% increase in adjusted EBITDA over last year despite the modest sales growth in the quarter. The improvement was driven by favorable margins in the Infrastructure segment and strong SG&A leverage capacity enterprise. Our net debt decreased to $77.4 million at quarter end, with gross leverage improving to 2.2x, compared to 2.7x last year. And finally, the order rates for the quarter drove a solid increase in our backlog for both segments with an improved business mix versus last year.

I'll turn it over to Bill now to cover the financials for the quarter, and I'll come back at the end with some color on our market outlook and financial guidance for the year. Over to you, Bill.

Thanks, John, and good morning, everyone. I'll begin my comments on Slide 7, covering the consolidated results for the second quarter. As always, the schedules in the appendix provide details on the financial results covered in today's call, including reconciliations for non-GAAP information.

As John mentioned in his opening remarks, we returned to organic sales growth in the quarter for the first time since Q1 of 2024. Net sales grew 2% year-over-year, driven by strong growth in Precast Concrete within Infrastructure. Reported gross profit was up $0.4 million with the gross margin down 20 basis points to 21.5%. The reported Q2 gross profit includes a $1.1 million charge related to the exit of an Automation and Material Handling product line in the U.K. Also, last year's gross profit included a $0.8 million property sale gain. Adjusting for these 2 items, gross margins were up 120 basis points versus last year, on improved business mix, primarily within the Infrastructure segment.

SG&A costs decreased $2.4 million due to lower personnel, insurance and professional services costs in the quarter. The current quarter includes a $0.3 million charge for the AMH exit. With the higher revenues and lower spending levels, the SG&A percentage of sales improved 200 basis points to 15.6%.

Adjusted EBITDA was $12.2 million, up 51.4% versus last year driven by improved margins in Infrastructure and lower SG&A spending across the business. Cash provided by operating activities was $10.4 million, favorable $15.4 million versus last year due to improved profitability and lower working capital needs. I'll cover the favorable developments in orders and backlog later in the presentation.

Slide 8 provides a reminder of our typical business seasonality and the related financial profile. Sales and EBITDA levels are normally higher in the second and third quarters as they represent the primary construction season for our customers. As a result, our free cash flow normally follows the pattern of consumption in the first half of the year with a reversal in the back half of the year as the construction season winds down.

Since the first half of 2025 was weaker for our Rail business, the working capital needs this year are somewhat deferred to the back half. This is supported by the higher order book exiting Q2 as well as the sales growth implied by our guidance in the back half of 2025. I'll highlight that the assumed free cash flow at the midpoint of our guidance is approximately $41 million for the second half of 2025.

Over the next couple of slides, I'll cover our segment performance in the quarter, starting with Rail on Slide 9. Second quarter Rail revenues were $76 million, down 11.2% due to delayed order development, primarily in Rail Distribution, coupled with reduced activities in the U.K. Rail Products sales were down 15.5% due to the softer Rail Distribution demand in the quarter. And Technology Services and Solutions sales were also down 32.6% and including the decline in the U.K. business.

I'll mention here that the U.K. Automation and Material Handling product line were exiting had $3.1 million in sales and $0.6 million of an operating loss for the trailing 12-month period. As John mentioned, Global Friction Management sales were up 17.2% versus last year as this growth platform continues to perform well. Rail margins of 19.9% were down 100 basis points, driven primarily by the $1.1 million AMH exit charge. Excluding this impact, Rail margins were up 40 basis points.

Rail orders decreased 2.3% versus last year but increased 37.3% sequentially, reflecting the strong order book development we expected for Rail distribution. Backlog levels increased 42.5% during the quarter and 13.9% versus last year. The backlog improvement was realized in both Rail Products and Global Friction Management, while TS&S backlog declined driven primarily by the U.K.

Turning to Infrastructure Solutions on Slide 10. Net sales increased $12.4 million or 22.4% due to the strength in our Precast Concrete business, which increased 36% over last year. Steel Products sales were up $0.2 million, with improved Protective Coatings and threaded volumes offsetting lower bridge volumes. Gross profit margins improved 40 basis points to 23.3% due to higher sales volumes in Precast and improved margins in Steel Products due to our portfolio work. Excluding the $0.8 million favorable impact from the Bedford property sale last year, Infrastructure margins were up 190 basis points year-over-year.

Infrastructure orders remained robust at $61.4 million, up 13.7% over the prior year with solid gains in Precast Concrete. Backlog totaling $139.2 million is up $4.2 million over last year, including $7.9 million or 36.8% from improved Protective Coating demand.

I'll next cover some of the key takeaways from our year-to-date results on Slide 11. Net sales in the first half of the year were down 9% due to weaker demand in the Rail segment, primarily in Rail Distribution, coupled with reductions in the U.K. Partially offsetting were sales gains in our growth platforms of Precast Concrete up 35.1% and Friction Management up 14.4%. Year-to-date gross profit reflects the lower Rail sales volumes with margins of 21.2%, down 20 basis points.

SG&A costs decreased $4.4 million from the prior year with lower personnel and professional service costs as the primary drivers. Adjusted EBITDA was $14.1 million, essentially flat with the prior year despite the 9% decline in sales.

I'll mention here that the higher effective tax rate for both the quarter and year-to-date period was due to our not recognizing a tax benefit on U.K. pretax losses. I'll emphasize that the higher rate is not reflective of our cash tax requirements, which remain extremely low at approximately $2 million per annum. We expect a lesser impact on our effective tax rate in future quarters, given our improvement efforts in the U.K. as well as our overall improving profitability outlook.

Operating cash flow was a $15.7 million use, favorable $10.7 million compared to last year on lower working capital needs. And orders were up 7.1% due to strong Infrastructure demand.

I'll now cover liquidity and leverage on Slide 12. Net debt levels of $77.4 million decreased $6.6 million compared to last year, with the gross leverage ratio improving to 2.2x at quarter end. As mentioned earlier, we expect approximately $41 million in free cash flow in the back half of 2025. We expect to deploy these funds to lower debt levels while also improving leverage both sequentially and year-over-year. We also plan to continue our stock buyback program, with $36.7 million remaining authorized and approximately 6.5% of outstanding shares repurchased over the last 2.5 years.

A highlight of the quarter was the successful negotiation of an amendment to our revolving credit facility. We increased the borrowing capacity and extended the facility tenure to June of 2030, while also reducing borrowing costs and relaxing restrictions.

This achievement highlights the confidence our banking partners have in our strategic execution and prospects for the future, and we thank them for their continuing support.

I'll briefly touch on our capital allocation priorities outlined on Slide 13. Maintaining our financial flexibility with reasonable debt and leverage levels remains a top priority. We also continue to invest CapEx in our growth platforms and return capital to our shareholders through our share repurchase program.

In summary, we have multiple levers available to drive shareholder value, and we remain prudent in our approach.

My closing comments will refer to Slides 14 and 15, covering orders, revenues and backlog by segment. The book-to-bill ratio for the trailing 12 months was a favorable 1.04:1, with positive developments realized in both segments. The Rail segment ratio improved to 1.06:1, with increasing order rates realized for 3 straight quarters. The Infrastructure ratio also remained positive at 1.02:1 with solid year-over-year growth in both orders and revenue in the second quarter.

And finally, on Slide 15, it's clear that the greatest improvement in our backlog was achieved in our Rail segment with a 13.9% increase year-over-year. I'll again highlight that the gains were realized in Rail Products, up 28.4% and Friction Management, up 22.1%. Partially offsetting was the lower backlog for TS&S due primarily to the U.K. This should improve our overall profitability mix for Rail in the coming quarters. And the Infrastructure backlog remains healthy at $139.2 million, with increased Protective Coatings demand driving the improved business mix.

Thanks for your time this morning. I'll now hand it back to John for his closing remarks. Back to you, John.

Thanks, Bill. I'll begin my closing remarks, covering the recent market developments and outlook on Slide 17.

Starting with Rail, the federal project funding that was previously curtailed at the start of the year began to release in the second quarter, which helped drive the backlog increase. We're cautiously optimistic that real customer demand will remain steady through the balance of 2025 with expectations that federal funding will continue as it is. We built a solid backlog in our Friction Management solutions, and we're also making further advances in our total track monitoring product lines. Our customers see the value in these solutions supporting the most challenging and operating safety requirements.

And lastly, the U.K. market demand remains challenged as we are taking the steps necessary to rightsize this business to a smaller technology-based offering with improved demand economic return profiles.

Turning to the Infrastructure segment. Our Precast backlog remains solid at nearly $95 million. Precast has also benefited from the government funding programs, particularly the Great American Outdoors Act and highway and civil construction projects are also driving our demand levels. We've previously mentioned the commissioning of our purpose-built Precast facility in Central Florida. We're pleased to report that we have successfully manufactured and installed our first Envirocast insulated wall system during the second quarter. And as expected, interest in our solution is growing with labor shortages prevalent in the local market. Overall, we remain bullish for a robust demand to continue for our Precast Concrete growth platform.

Turning to Steel Products. Second quarter results were flat overall and the business mix improved substantially with the recovery of our pipeline Coatings business, which was up 47% year-over-year. With the renewed interest in energy investment in the U.S. as evidenced in the second quarter sales growth of 37% higher backlog for Coatings, we believe that we are in a favorable recovery trend for this product line.

In summary, we believe that demand drivers supporting steady growth through the year-end and beyond remain intact with increasing demand expected for our growth platforms on Rail Technologies and Precast Concrete.

Switching topics. I'll provide a brief comment on tariffs. As previously mentioned, our supply chains are primarily sourced from within the U.S. with some minor exceptions for certain electronics and other sourced outside the U.S. Thus far, tariffs have not had a significant impact to our product cost or ability to secure the materials needed to serve our customers.

I'll wrap up today's call covering our updated 2025 financial guidance on Slide 18. Second quarter results were largely in line with our expectations delivering strong improvement both sequentially and year-over-year. We're entering the back half of the year with a solid order book, favorable business mix, and lower operating cost structure, which supports our expectations for a strong second half of 2025.

Our realized full year guidance is slightly lower due primarily to the Rail segment H1 performance. While strong orders were secured in Q2, the Rail sales uplift was deferred to the back half of the year, reducing our full year outlook for the Rail segment. Having said that, our revised guidance midpoint still assume a 25.1% increase in adjusted EBITDA on relatively modest sales growth of 2.7% for 2025. And the midpoint assume a 42.8% increase in adjusted EBITDA year-over-year on a 14.3% sales growth for the second half of 2025.

And finally, the free cash flow outlook for the full year was also reduced slightly due primarily to the timing of working capital needs for Rail at the end of 2025. I'll note that our revised free cash flow midpoint outlook is still an attractive yield at approximately 8%. So as you can see, we are well positioned to deliver solid sales growth, strong profitability expansion and robust cash generation as we strive to maintain momentum through the balance of 2025 and beyond.

In summary, we're very pleased with our team's performance and the favorable track we are on.

So with that, thank you for your time and continuing interest in the L.B. Foster. I'll turn it back to the operator for the Q&A session.

[Operator Instructions] Our first question comes from Liam Burke with B. Riley Securities.

On the capital allocation front, are you seeing return -- high return opportunities in acquisitions or possibly reinvesting in growth projects? Or would you be leaning more towards repurchases and debt reduction?

Thanks, Liam, for the questions. First of all, we have first organic growth we've seen now in 5 quarters. So we're very pleased about that. So we've been plowing our available capital into our organic programs, and we're starting to see the benefit of that. As I mentioned, the Florida new operations up and running. We feel very good about that, and we're continuing to put more money in our Precast operations, because that growth has really, really taken off. As I mentioned through the Great American Outdoors Act, but we're also seeing a lot of highway and civil type work with that.

As you know, we are buying, and we have approval to buy shares in the company, $40 million repurchase program over a 3-year period. So we've been very active in that, and we're very bullish about where we're at today, and we'll continue to make those -- that capital towards that.

As far as acquisitions, we've got quite a bit going on organically right now. We're very happy with what's going on with the recent -- most recent acquisition of VanHouseCo. We're really make strides in that area as well. But we're also being mindful of trying to find some tuck-in and other type of acquisitions to support our strategy for the years to come.

So our pipeline is active. We've been actively looking at opportunities out there, but we'll also make sure that we're executing on what's in front of us right now. And that's where we're feeling very strong about the second half of the year, supported by that significant backlog growth that we've seen sequentially, and solid year-over-year performance.

Great. And my next question is, if I look at the backlog composition, both Infrastructure and Rail Products and Services, are you seeing follow-through on -- in the Infrastructure side on Precast Concrete and on Rail on the Friction Management side and the backlog for the rest of the year?

Yes, absolutely. Friction Management, thanks for mentioning, it has been absolutely tremendous year that we put together in Q2. And we had the best month we've ever had in Q2 related to Friction Management. And that growth just keeps going. We feel very good about that.

And our TTM work, which was a little soft in the beginning of the year, a lot of that is a flow-through from the larger Class 1s or also comes from the government type funding and spending. And we've seen that those appropriations change and the need for that activity in the second half of the year. So we feel very good about that. It's coming into backlog.

As I mentioned, we were concerned in the first half of the year, whether or not we're going to have the backlog support our guidance and we do. It came through the Rail side in a big way. And then Precast has just been humming along very, very well. And of course, we mentioned in the broadcast about what's going on with Coatings. That's been a good year-over-year improvement as well.

So all in all, we feel very good where we're at right now related to the work we have in hand. We just need to perform in the second half of the year.

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

I wanted to start off with a clarification question. With the AMH exit of the U.K. business, do you have any remaining U.K. exposure within Rail? And then what's remaining within TS&S would be purely the U.S. portion?

Yes. So thanks for your question. The U.K. as we mentioned, is the headwinds are there. We've been working on rightsizing that business for a period of time. We didn't just take action in Q2. We're just announcing that action. So AMH was a significant piece of that. And then related to our telecommunications work, we're just getting it in line with the activity and the type of work that we would like to produce in the market. So that will be an ongoing focus area for us for the balance of the year, but we've got the right team working on it right now in the U.K., and with the oversight here in the U.S. So we feel good we're going to be in a good -- pretty good position here by year's end.

As far as a greater TS&S, is that your question related to back in North America?

I was asking if the remaining business within TS&S would be purely U.S., but it sounds like there's a little bit left of U.K. in there.

Yes, a little bit U.K., but the greater work in the U.S. has been very, very strong, very buoyant.

Okay. That's very helpful. And on the guidance, I think the updated sales range implies second half sales growth of 10% to 18% at the low and high ends of the guidance. Can you maybe discuss how you envision that growth across the two segments. And then also from a cadence perspective with regards to the third and the fourth quarter.

Yes. Well, third and fourth quarter, first of all, from a seasonality point of view, it's very, very strong, Q3 is typically the best quarter that we see in the year. We expect that to continue this year. And in Q4, we just got so much work to do that Q4 should be in good order and good standing for that. What we really are happy about is our gross profit. We ended the quarter at 30.9% gross profit in dollars and 21.5% in profit margin. That's going to continue. We expect that to continue to grow through the balance of the year.

And our work that we did a year ago on SG&A has really positioned ourselves well to lever up the cost side of the business in the second half of the year. Backlog is supportive of what we need to get done in the second half of the year. So the numbers that we put out there, the $535 million to $555 million of sales is an area that we feel strongly that we will finish. And then, of course, the adjusted EBITDA numbers will flow accordingly.

Yes. Very fair. And that's even -- the gross profit dollars you're hitting is without even the Rail business really working on all cylinders. So...

That's exactly right. We really performed very, very well in the first half of the year and Q2 with what we had to work on. We feel very good about how we have the work really performing.

Very good. Last one, if I may, is just on the Envirocast business. Congratulations on manufacturing and installing your first Envirocast precast wall system. Can you just talk about progress in that business and how much contribution if any, is expected in the second half?

Yes, we're not -- this is about getting it right. So we're entering a new market, new space with the product line that we know and we performed in other parts of the U.S. So we're starting slow, but it's meeting our expectations. We're working very closely with contractors and homebuilders, and our first job as well as bringing the best workforce we can focus on our quality, focus on our productivity and most of all focus on safety. So we're very pleased we're to date where we're at. I'll be down in the next month to see it firsthand, again, as we start moving product out to sites and talking directly with customers.

But as far as the balance of the year, we're not expecting that much this is really a growth -- organic growth opportunity that we're putting in place for years to come. And we're focused on just making sure we're doing right this year.

[Operator Instructions] Our next question comes from John Bair with Ascend Wealth Advisors.

A couple of questions. How much of the U.K. business has sort of been cleaned up. You took a pretty significant hit there with the tax situation. Can we expect that to be lesser impact going forward?

Yes. Definitely. We've taken a large hit that we were expecting to do, and we'll talk about the tax. And of course, there's a cash part of the tax that is probably the most important. But maybe Bill can add a little color on some of those details that we can share.

Yes. So in the quarter, we reported a 55% effective rate. And it's basically a mathematical impact because we didn't have a tax benefit that we would record on the loss that we incurred in the U.K. on a pretax basis because of the cumulative losses that we had there as well as the restructuring charge that we took in the quarter.

What we would expect going forward is the profitability will improve in the U.K. and our overall profitability will also improve. So the impact of that situation in the U.K. will become lesser as the year progresses, and we're expecting an effective rate for the quarters between 30% to 35%. And then a blended effective rate for the full year between 35% and 40%. But those are, again, just P&L drivers for the effective tax rate and EPS.

The important thing for us, first of all, was obviously turning the U.K. business around, and we think we're getting to that pivot point there. But then also on a consolidated basis, we're paying somewhere around $2 million per year in global cash taxes, and that will be the case for the foreseeable future.

Okay. And then -- so then going forward in, say, '26, were those tax rates in the 30%, 35% range come down? So...

Yes. And we would expect that to be within the [indiscernible] rate closer to the upper 20s, which is what we've expected it to be from an overall jurisdiction and mix of taxes point of view.

Okay. Okay. And then switching over to Precast, with the Envirocast. What is the emphasis on residential versus commercial? What do you see as the more positive uptake of that? Or is it too early in the game yet?

Well, I don't think it's too early. The initial thinking was residential, and we could do light commercial or light industrial type work as well. But the real market that we're serving and the area we went to is very heavy focused on residential. And so that's the contractors and the homebuilders that we're working directly with today.

Is there any legislation or anything like that, that would drive potential sales and adoption of this technology?

Yes. The hurricanes and the effect of the weather had a dramatic impact on homebuilders, on regulatory requirements. And so we are seeing -- and of course, the ability to pay -- be able to afford to pay for insurance. So in the event that you cannot afford insurance or it's very expensive, there is a big significant draw towards building a home out of concrete today.

The thing that we really did not anticipate going into this, we knew that we had an impact related to labor. But with everything else going on across the country right now related to building, construction and labor market, that's where we're really seeing an uptick in the need for our product. The availability of labor is just shrinking in that part of the country.

And what our product is able to do is we build in a factory. So the labor is in the factory environment and the erection of a home is literally in days versus weeks or potentially months. So that's been a real significant draw is being able to manage expectations with our customer because of the inability for them to bring labor and secure labor in the market down there.

Okay. Well, that raises another interesting question then, how are you focused or not focused, but how are you -- what is your situation with your own labor force at, say, VanHouseCo and elsewhere?

Elsewhere? Yes, very good. We've been working on that. First of all, the beauty of L.B. Foster fosters is our people. That's really what drives our company and the profits come from our people. So we spend a lot of time supporting and nurturing our culture. So we've become the place to work in the markets we serve.

And we've been working on that talent pool and that workforce of Florida long before we made any product, bringing them on board, bringing them into the culture, understanding how we do things. And for them to really have that ownership related to building a factory and now building a product. That's a significant part of how we do things.

So we have a very, very good workforce. And we feel very fortunate, but also we work on it each and every day to make it the way it is today.

And I'm not showing any further questions at this time. I'd like to turn the call back to John for any further remarks.

Thank you, everybody. Thanks for joining us today. And we've, again, wrap up, we feel very good about the quarter, where we're at, the build of the backlog, supporting our margin, the SG&A that we're now dealing with, where now we're able to really leverage that in the second half of the year. It's really the tariffs I mentioned in the call, really have little to no impact, and the freeing up of government funding, specifically on the Rail side is really giving us opportunity to feel very excited about what's in front of us for the second half of the year.

So thanks for your ongoing support of the company. And we look forward to talking to you after we post next quarter results. Take care.

Thank you. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.