NWPX - NASDAQ

Greetings, and welcome to the Northwest Pipe Company First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only-mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Scott Montross, Chief Executive Officer. Thank you. You may begin.

Good morning, and welcome to Northwest Pipe Company's first quarter 2025 earnings conference call. My name is Scott Montross, and I am President and CEO of the company. I'm joined today by Aaron Wilkins, our Chief Financial Officer. By now, all of you should have access to our earnings press release, which was issued yesterday, April 30, 2025, at approximately 4:00 p.m. Eastern Time. This call is being webcast, and it is available for replay. As we begin, I'd like to remind everyone that statements made on this call regarding our expectations for the future are forward-looking statements, and actual results could differ materially. Please refer to our most recent Form 10-K for the year ended December 31, 2024, and in our other SEC filings for a discussion of such risk factors that could cause actual results to differ materially from our expectations. We undertake no obligation to update any forward-looking statements. Thank you all for joining us today. I'll begin with a review of our first quarter performance and outlook for 2025. Aaron will then walk you through our financials in greater detail. We entered the year with solid momentum, delivering strong operational execution that supported our strategic priorities. Net sales of $116.1 million were up 2.6% over the prior year period despite being affected by a significant amount of downtime related to weather early in the first quarter and trade policies implemented by the new administration that temporarily affected SPP revenue and shipments, specifically in the March time frame. The new trade policies also had the temporary effect of restraining our momentum in the non-residential portion of our precast business, resulting in customer-driven shipment delays on heightened macroeconomic uncertainty. Regardless of the headwinds, we delivered solid profitability of $0.39 per diluted share. This performance, coupled with effective working capital management, enabled us to generate positive free cash flow, positioning us well for the remainder of 2025. To further break down our segment level results, revenue from our SPP segment was $78.4 million, down 2% year-over-year and in line with typical seasonality. Our performance reflected lower production levels related to the mix of projects we produced in the first quarter, the impact of nationwide weather events that led to unscheduled downtime at various SPP facilities and the temporary effect of new trade policies and the administration of those policies. Again, this led to various customer-related shipping delays, especially in the month of March. Our SPP team has continued to execute on bids, project scheduling and production even through a highly disruptive March with broader market uncertainty. As we projected, with the light project bidding in the first quarter, our SPP backlog, including confirmed orders, declined to $289 million as of March 31 from $310 million as of December 31, 2024, and $337 million as March 31, 2024. We have seen significant bidding volume improvement in the second quarter, leading to a substantial increase in our current intra-quarter backlog, which is well over $300 million. A large portion of the current backlog increase that we have experienced will be valuable as we progress through 2025, helping to mitigate some of the cost pressures at our facility most affected by trade policy-related issues. We continue to anticipate 2025 bidding levels to be in line with 2024. The decline in SPP net sales was partially offset by higher realized selling prices due primarily to change in product mix. Now turning to our precast segment. Precast revenue increased 13.4% year-over-year to $37.7 million. Our performance was driven by continued strong momentum on the residential side of our Geneva business, where robust demand supported higher production and shipment levels. While overall volumes remain healthy, this strength was partially offset by softer performance in the non-residential construction-related portion of our business, as broader macroeconomic uncertainty and elevated interest rates continue to weigh on commercial construction activity. The Dodge Momentum Index was down 7% in March from the previous month due to uncertainty around material pricing associated with trade policy, as well as interest rates associated with fiscal policy. However, the Dodge Momentum Index was 30% higher in March of 2025 versus last year, indicating improving strength in the non-residential construction market for midyear 2025 through 2026. The commercial sector was up 32% versus the prior year period, while the institutional sectors were up only modestly. On the pricing side, while the residential portion of our precast business benefited from multiple price increases throughout 2024 with strong demand at Geneva, these gains were more than offset by slower demand and continued pricing pressure in our non-residential precast business. As of March 31, our precast order book improved to $64 million, near record territory from $61 million as of December 31, 2024, and $52 million as of March 31, 2024. The order book on the residential side of our precast business at Geneva remained consistent at strong levels, whereas a fairly large portion of the increase in our order book was on non-residential side of our precast business, indicating strengthening momentum in 2025. Our consolidated gross profit in the first quarter was $19.4 million, down 3.8% year-over-year, resulting in a gross margin of 16.7% compared to 17.8% in the prior year. Our SPP gross margin of 15.5% declined by approximately 230 basis points over last year due to lower production volumes and the associated reduction in overhead absorption related to the mix of projects we produced, as well as shipment delays related to the administration of new trade policies. Our precast gross margin of 19.1% increased by approximately 135 basis points over last year, primarily due to changes in product mix. Margins in our residential construction business at Geneva improved year-over-year, reflecting strong demand and operational efficiency. However, persistent weakness in the non-residential commercial construction side of our business, driven in part by elevated interest rates resulted in some margin compression. Now turning to our organic growth product spread strategy. We bid on over $14 million worth of projects outside of Texas in the first quarter and booked over $2.5 million worth of orders in an effort to enhance capacity utilization and maximize efficiencies at our precast plants. Additionally, we booked approximately $0.5 million of Park-related projects at the Geneva plants in Utah. And finally, as part of the third component of our product spread strategy, we will be expanding Park and other precast-related products to additional Northwest Pipe legacy locations by midyear 2025. Our goal for 2025 remains to book over $12 million worth of Park-related projects outside of the state of Texas with further benefits to come in 2026 and beyond. Additionally, we're continuing to invest in our footprint and equipment to drive capacity expansion and greater efficiencies in our precast business, and we are especially focused on investing in efficiency improvements at our legacy SPP plants. Next, I'd like to provide an update on our M&A strategy. In 2025, we are placing an increased strategic focus on actively pursuing acquisitions within the precast-related space as we look to accelerate growth and enhance our competitive position. The ideal candidate would allow us to enhance our manufacturing capacity and operational efficiency and broaden our geographic footprint and product offerings. Next, I'd like to summarize our outlook for the second quarter of 2025. In our SPP business, we anticipate revenue similar to the first quarter of 2025 with a steady sequential improvement in margins. We entered 2025 with a strong SPP backlog. And despite the light bidding environment in the first quarter, we continue to expect strong bidding activity in the second and third quarters with full year bidding levels aligning closely with 2024. Accordingly, we continue to expect another strong year for SPP in 2025. In our precast business, we entered the year with a robust order book. The residential business remains strong, and we are now seeing a steady improving non-residential order book, indicating strength in 2025 and into 2026. Growing strength in our order book, coupled with the anticipated higher production levels and better absorption gives us confidence that the second quarter of 2025 will show stronger precast revenue and margins versus the second quarter of 2024. We remain confident in the long-term strength of our precast business, driven by several key factors, including significant pent-up demand, particularly in the residential housing, a growing need for infrastructure investment in the U.S. and our expanding market position. On a consolidated basis, we expect revenues for the second quarter of 2025 to be modestly down from the second quarter of 2024 due to lower SPP revenue related to slower first quarter bidding and associated reduced production levels. However, we are expecting a sequential improvement in SPP margins in the second quarter of 2025. On the precast business, we are anticipating higher revenues and margins in the second quarter. For the second half of the year, we expect revenues and margins for SPP to be similar to 2024 levels, with precast revenue also being similar to 2024 levels, but with improving margins. Before I conclude, I would like to highlight our upcoming corporate rebranding initiative to NWPX Infrastructure. We believe this refreshed brand more accurately encompasses both of our operating segments and aligns with our overall mission to manufacture durable infrastructure solutions, helping communities build safe, reliable and sustainable systems that support daily life and long-term growth. We plan to unveil the rebrand at our upcoming Annual Meeting of Stockholders in June and look forward to sharing further details at that time. In summary, I am pleased with our traction during the first quarter amid significant broader market disruptions. I'd like to thank our talented team at Northwest Pipe for their strong execution of our strategy and maintaining their commitment to safety. We look forward to benefiting from an improved bidding environment and precast order book throughout the remainder of 2025. Looking ahead, our priorities are to one, maintain a safe workplace where our employees are proud to work. Two, focus on margin over volume. Three, intensify our focus on strategic acquisition opportunities to grow the company. Four, to implement cost reductions and efficiencies at all levels of the company. And five, in the absence of M&A opportunities, return value to our shareholders through share repurchases. I will now turn the call over to Aaron, who will walk through our financials in greater detail.

Thank you, Scott, and good morning, everyone. I'll begin with our first quarter profitability. Consolidated net income for the quarter was $4 million or $0.39 per diluted share compared to $5.2 million or $0.52 per diluted share in the first quarter of 2024. Our first quarter consolidated net sales increased 2.6% to $116.1 million compared to $113.2 million in the year ago quarter. Steel pressure pipe segment sales in the quarter decreased 2% to $78.4 million compared to $80 million in the first quarter of 2024. The decline was driven by an 18% reduction in tons produced, resulting from changes in project timing, partially offset by a 20% increase in selling price per ton due to changes in product mix. Precast segment sales in the first quarter increased 13.4% to $37.7 million compared to $33.2 million a year ago. Our performance was driven by a 21% increase in volume shipped as demand at our Geneva operations in Utah remains strong. Additionally, our precast sales were negatively impacted by a 6% decrease in selling prices resulting from changes in product mix. As a reminder, the products we manufacture are unique. Shipment volumes in the case of precast, production volumes in the case of steel pressure pipe and the corresponding average sales prices for both segments do not always provide comparable metrics between periods, which are highly dependent on the composition of each segment's product mix. First quarter consolidated gross profit decreased 3.8% to $19.4 million or 16.7% of sales compared to $20.1 million or 17.8% of sales in the first quarter of 2024. SPP gross profit decreased 14.5% to $12.2 million or 15.5% of segment sales compared to gross profit of $14.2 million or 17.8% of segment sales in the first quarter of 2024, primarily due to decreased production volume, as well as changes in product mix. Precast gross profit increased 22% to $7.2 million or 19.1% of precast sales from $5.9 million or 17.7% of segment sales in the first quarter of 2024, primarily due to changes in product mix. Selling, general and administrative expenses increased 20.6% to $13.8 million or 11.9% of sales compared to $11.4 million in the first quarter of 2024 or 10.1% of sales. The increase was primarily due to a $1.6 million increase in incentive compensation, as well as increases in wages and employee benefits. For the full year 2025, we continue to estimate our consolidated selling, general and administrative expenses to be in the range of $47 million to $50 million. Depreciation and amortization expense in the first quarter of 2025 was $4.4 million, consistent with the year ago quarter. For the full year, we continue to expect depreciation and amortization expense to be approximately $18 million to $20 million. Interest expense decreased to $0.6 million from $1.5 million in the first quarter of 2024 due primarily to a decrease in average daily borrowings. For the full year 2025, we continue to expect interest expense of approximately $3 million. Our first quarter income tax expense was $1 million, resulting in an effective income tax rate of 19.8%, primarily for tax windfalls recognized upon the vesting of equity awards, providing the discrete adjustment in the quarter from statutory rates. This compares to $2 million of tax expense in the prior year or an effective income tax rate of 27.5%, which was impacted by non-deductible permanent differences. We continue to expect our tax rate for full year 2025 within the range of 24% to 26%. Next, I will transition to our financial condition. For the first quarter, our net cash provided by operating activities was $4.8 million. This compared to net cash used in operating activities of $26.1 million in the first quarter of 2024 due to a significant amount of cash to fund working capital requirements in the year ago quarter. Our capital expenditures for the first quarter were $3.7 million compared to $4.5 million in the first quarter of 2024. For the full year of 2025, we continue to expect CapEx in the range of $19 million to $22 million, including about $5 million for various investment projects, most notably to support the precast product spread, as well as initiatives to grow both our Park and our Geneva businesses to $100 million top line in the near term. Accordingly, we produced positive first quarter free cash flow of $1.1 million compared to negative $30.7 million in the year ago quarter. For the full year 2025, we continue to anticipate free cash flow to range between $23 million and $30 million. As we've previously emphasized, enhanced cash generation remains a key focus for our leadership team as we continue to grow the company. As of March 31, 2025, we had $25.5 million of outstanding borrowings on our credit facility, leaving approximately $98 million in additional borrowing capacity on our credit line. Our balance sheet remains healthy with ample liquidity. Consistent with our capital allocation strategy and continued focus on enhancing shareholder returns, we repurchased approximately 122,000 shares or $5 million worth of our common stock in the month of April under a Rule 10b5-1 trading plan. Considering the condition of our balance sheet, we believe it is appropriate to continue to take advantage of market opportunities for future share repurchases while continuing to invest in organic and inorganic growth as opportunities present themselves. In summary, we're incredibly pleased with our first quarter operating performance achieved in a highly dynamic and uncertain macroeconomic backdrop, as well as prospects for the full year of 2025 and beyond. We extend our thanks to our dedicated employees who continued prioritization on safety and hard work has made our recent achievements possible and to our shareholders for their continued confidence and support. I will now turn it over to the operator to begin the question-and-answer session.

Thank you. At this time we will be conducting a question-and-answer session. [Operator Instructions] The first question comes from Brent Thielman with D.A. Davidson. Please proceed.

Hey, great. Thanks. Good morning, Scott, Aaron, like the new name.

Good morning, Brent.

Yeah. I guess, Scott, I wanted to dive into maybe understanding more of the specifics of the issues associated with tariffs and why you sort of think you're beyond it at this point or hopefully beyond it at this point as we move into the second quarter?

Yeah. I think that there's a couple of pieces to this thing, Brent. The first quarter, as we move through the first quarter, obviously, we always have weather events, right? In the first quarter, we've talked about that for years. I think this first quarter may have been a little bit heavier with weather events in the quarter because we had 13 days down collectively at our steel pressure pipe plants, mainly in Texas and West Virginia. And then we had about 14 days down in the precast side of the business. So that was a little bit heavier. And then we got into the March time frame with the additional cost and new trade policies associated with the new administration. So really, the - what we got into is a situation where we have orders on the books at the facility that's most affected by the trade policies. And ultimately, what we had to do is figure out how to work with our customers to unburden ourselves with the cost of those trade policies, especially on the SPP business. And ultimately, what that did is when you add the additional cost to some of those jobs that we were doing at that facility with percent complete accounting, you're actually less complete than you thought you were in that quarter. And what it did is remove several hundred thousand dollars of both revenue and a like amount of margin out of the quarter for SPP. So as we go forward, and I got to be a little careful of how I talk about this because, obviously, we have competitors listening. We're working with people to figure out if we can get an exclusion on those issues with the new trade policies at that facility, and that's moving along. The other piece of it is that a couple of weeks ago, we got about $60 million worth of SPP orders in 1 week. And ultimately, a big chunk of that is something that can go to the facility most affected by those trade policies and alleviates a whole bunch of the potential impact of the cost on that facility. And that's going to put us in a pretty good position at the facility in Mexico as we go forward through the second half of the year. Anything that we think is going to be subject to those additional costs associated with trade policies on orders that we plan to put at that facility, we are moving those orders going forward to the Tracy facility. So I think after the dust clears in the quarter, we're pretty much back on track on SPP because ultimately, we've got it set up. So we've got orders on that facility that are, I guess, conducive to us being back to relative normalcy at the facility in Mexico, and we're loading the other facilities up even more for steel pressure pipe. The one thing I'll say too, Brent, about the quarter was we've had a building backlog on the precast business, too, right? The backlog has grown to I think $64 million is probably near record territory. And what I would say about that is the precast business on the residential side has remained strong and relatively steady. And a lot of the growth that we saw on the order book in precast was related to the non-residential side of the business. And we got into the March time frame. And ultimately, you had a whole bunch of customers going, and they delayed taking shipments because they were trying to figure out what was going on. So ultimately, we missed about $1 million worth of revenue in our non-residential side of our business in the quarter two, which has now reversed course in the April time frame and the non-residential side is definitely picking up. So we think we're pretty well positioned right now going forward to deal with any of the tariff stuff that we see out there.

Yeah, Scott. And maybe just as a follow-up on the precast front. It sounds like you are seeing pretty good momentum on the non-resi side, notwithstanding some of the uncertainty out there. And I think I just wanted to get a better sense of why kind of the flattish outlook for revenue in the second half for precast. Is that just you want to be conservative? Is it - there are some other elements maybe we need to understand?

Yeah. I think that's a little bit of conservatism built in because obviously, when you're looking out that far, a lot of different things can happen. So the - I think the big thing for us in the near term that's close in is the way that the second quarter looks for precast. We're looking at a second quarter right now that's a pretty big quarter for the precast side of the business with improving margins. So we're kind of saying the second half of the year is going to be like last year, which was pretty strong, but there's likely some upside to that.

Fair enough. Last one, and this might be more for Aaron. I apologize if you discussed it, but probably the bigger deviation for us was SG&A this quarter. And I wanted to just get a sense what that was and then how quickly does that come back in, in the next few quarters if it does?

Yeah. The SG&A was higher in the quarter just due to seasonality in large part. We typically accrue bonus expense through the duration or through the point that they're actually paid, meaning that our first quarters are always hindered with, I guess, what I would call double expense. That would sound like something that would be comparable as you compare it to the year ago quarter. However, the performance for 2024 was considerably better than the 2023 performance, meaning that we had a higher rate of expense, that is what kind of snagged the first quarter with that higher level - higher expense level. So that will come off as we come through the year. I do think that, that will be the highest expense level for SG&A that we see in 2025. So I still think that our range of 47 million to 50 is pretty good for the balance of this year.

Great. Thanks, guys. I'll pass it on.

Thanks, Brent.

Thanks, Brent.

The next question comes from Julio Romero with Sidoti. Please proceed.

Thanks. Hey, good morning, Scott and Aaron. Hope all is well. I wanted to follow up a little bit on what you said about on the precast side, the trade, the customer-driven shipment delays you experienced in March. Scott, I think you said that, that reversed course in April, but wanted to see if you could expand on what level of a rebound you saw in April and what you're hearing from your customers about what level of uncertainty is still out there and how much more shipments do you think are delayed, could be delayed and where that stands today?

Yeah. Like I said, Julio, I think that's reversed course in April. We're seeing a relatively large second quarter. And obviously, some of it's based on the residential side of the business, which continues to gain strength. But all the growth that we're seeing in our order book as of late is related to the non-residential business. So I think that we're seeing customers now on the non-residential side in the April time frame, taking their orders. We're going to be substantially higher on revenue on the non-residential side than we were in the March time frame. And that looks like it's just starting to build because when you look at the Dodge Construction Index, the construction starts were relatively flat for the latest period. And again, it's uncertainty. So it kind of fits with what we're talking about here, but the momentum index that receded a little bit in the March time frame from February in 2025, we've seen pretty substantial growth in that since 2024. It's actually up 30% versus where it was in March of last year. And about 32% of it is related to the commercial side of the business. So I think we're seeing a lot of the customers, contractors, subcontractors just getting used to a more normalized situation as the dust clears with the trade cases. And we're expecting a big year on the precast side. So we're seeing the business rebound in the second quarter, and we expect that to continue into the third and fourth quarters. Shipments are starting to go out. And it was something that we got a little bit concerned about in the March time frame because the order book was building and shipments weren't going out. Now we're seeing the order book still building and shipments going out. So a very good sign on the non-residential side for us.

Got it. That is helpful. A little bit about the retroactive tariffs that you experienced in the fourth quarter. If you could give us a finer point on how much was the negative impact from those retroactive tariffs in the first quarter? How much is expected in the second quarter? And then maybe a separate question about any quantification of the newer tariff impact in the second quarter?

Yeah. I think the right way to think about it, we had about 800,000 from the retroactive tariffs that are impacting our first couple of quarters at least of this year. I would say, Julio, that probably about 400,000 of that was something that impacted the first quarter, leaving another 400,000 for the balance of the year. The harder thing for us to navigate, obviously, because of the more surprising element of it was the new tariffs. Those tariffs had about a little under 600,000 of impact in - the go forward on that, and maybe Scott want to talk about this a little bit more, too, is just the elements of the tariff and the customer acceptance of it will certainly be influential on how much expense we incur in the future. Obviously, we're in a position where shipping into those markets from that plant certainly coming at a higher cost. We're trying to manage that cost and our profitability accordingly. So it's kind of hard to predict. But I think what I would say is that the impact of those are certainly included in the projections or guidance that we're - not guidance, but the foreshadowing that we're doing for the second quarter results. So anything you want to?

Yeah. I think that, obviously, we're working with our customers on those, Julio, to pass those along, and we're seeing some success in that. And ultimately, that's what we intend to work on doing from the facility most affected by those tariffs, which is our facility in Mexico. But like I said, in the big order week that we had a few weeks ago, there was a huge chunk of that $60 million worth of orders that's actually going to go to that Mexico facility, and it will not be burdened by those additional costs associated with the trade policies. So that really starts to take place in the second half of the year. So anything that we would have planned on doing at the Mexico facility that would be subject to the new trade policies, we'll be doing at the Tracy facilities going forward because we have a pretty good backlog load going into Mexico that helps alleviate that situation for us. So I think we're in pretty good shape with that.

Got it. That's good color. Last one, if I could, is just wanted to ask a little bit about your precast growth plans and your new product capabilities at the Orem [ph] facility. If you could talk to that a little bit and how much benefit is it built into your 2025 outlook from that new product capability?

Yeah. Well, the new product capability at the Orem plant, there is really not much built into it for this year because that product won't be in play really until next year. But what I would say is the growth plans, I think Aaron talked about in the script, we plan on being at a $100 million rate at both the residential side of it, which is Geneva and the Park side by the end of 2026. And what I would say on the residential side of the business is it's growing pretty quickly right now. So I think we may be a little bit ahead of schedule there. We could be getting closer to that this year. I don't think we make it all the way to $100 million, but we're driving in that direction on the residential side of the business. The non-residential side is just starting to pick up, like we said, with the order book. So that's going to lag a little bit. But the plan is, is that we have both of them at $100 million by the time we get on to the end of 2026. And I think we can get there because we're pretty well positioned, especially with the growth that we're seeing in the order book on the non-residential side. And like we said, $64 million near record level of order book. And that increase isn't really related to the Geneva business. It's really related to the Park business, which is a really positive sign. So we are expecting a year this year that is going to be a bit bigger than we had last year on the precast side with improving margins.

Perfect. Really helpful. Thanks very much.

No problem.

[Operator Instructions] The next question comes from Ted Jackson with Northland Securities. Please proceed.

Thanks very much. Hi, guys.

Hi, Ted.

Just almost everything I had on my list got asked. So just a couple of little ones. Aaron, what was the percentage of steel in your COGS in the quarter?

Percentage of steel is about 30%. Let me just double check the number. Yeah, it's about 30%, Ted. A little under in this particular quarter, like 20%, 28-ish percent.

Okays. I appreciate that. And then the cost of steel is just popped with the new Trump administration and everything happening with tariffs and whatnot. And I know that for you, just kind of how things go through your financials and everything else, it's not necessarily something that just takes down your margins or your gross profit would be a better term. But nonetheless, it takes up the cost of your product. And so I guess the question is we had a similar experience the last time had Trump in office and the things that he did. And generally speaking, just basic economics is if things cost more, it impacts demand. And so when you look back at the last time we had a big run-up in steel prices, how did that play out for you all in terms of like a demand for tonnage? Because I mean, I know that a lot of the stuff you do is government funded and stuff, but you have cost overruns, you see everything with this. I mean at some level, it has to have some kind of impact at a tonnage level and I just completely off pace with that. So that's my first question is kind of given we just went through something like this similarly, call it, 4 years ago, like how did that play out? And how would you see that playing out for this one? And then I have a follow-up.

Well, the way I'd answer that, Ted, is when this happened some time ago with the first Trump administration, we saw steel prices run up significantly higher than we see them now. And my recollection there is getting $1,800 a ton where it was. And now we're seeing steel prices that are more in the $950 a ton range. And it's kind of stalled out a little bit. It jumped up, I guess, probably from 800 or high 700s towards the end of the year to about 50 now. But it's kind of stalled out right now at about $950 a ton because I think capacity utilization in the industry is at about 74.5%. So it's still relatively calm. But I would expect that you're going to see that continue to bump up as we go out into the future because when there's that new trade policy and the cost of bringing steel in from foreign countries and in any given year, you're looking at between 20 million and 30 million tons of steel that comes in as imports to support the demand from the market in this country that once you start grinding that down, which is starting to happen right now, that the steel prices are going to increase. But we just haven't seen a lot of that yet. I think it's probably going to be a little bit more muted than what we saw during the previous administration. But for us, higher steel prices mean higher project prices mean higher gross profit dollars, especially on the steel pressure pipe business. So it's not really a bad thing for us. And right now, it doesn't appear that it's running up so much that it's going to affect any of the jobs being done that are being planned out into the future. And because we're seeing all those going forward. We're really seeing a demand level this year that, quite frankly, is maybe going to be a little bit higher than it was last year because I think we ended the year last year at just below 140,000 tons of demand. And right now, we're projecting about 145,000 tons of demand on steel pressure pipe. But I don't see the steel price running up to where it was in the - during the first time, which we were going through COVID and things like that, and that caused a lot of different issues. I think it will go up a little bit more, and it's just going to benefit us on our project pricing and our gross profit dollars for steel pressure pipe.

So on a tons basis, you really don't see this as having any kind of material impact to your for SP...

No, not at this point. No.

And then shifting over more on the precast side. I mean I love the outlook that you've given. But I mean, most - are you - you don't view there is any risk with regards to a recession with regards to a more cautious view in the second half of '25. I mean almost every call I've been on in the last couple of weeks that's been kind of part and parcel with the guidance. So when I listen to you, I don't hear it. And I'm just kind of curious as to like why, so I'll be happy [indiscernible] stands out.

Yeah. I think for us, I mean, obviously, we're - especially in our residential construction side of the business. I mean, we're in a part of the country that's happened to benefit from a significant net migration into the state. And ultimately, there's a relatively significant shortage of housing. So we don't really see that slowing down at this point. And I think that the non-residential side is kind of getting comfortable with the idea of, okay, well, we've got a Fed funds rate that's 4.3% or 4.4% at this percent, at this juncture. And it's starting to kind of settle in that maybe housing rates are - interest rates for mortgages are going to be 6.8% to 7%. And when you think about it, that's not really that far out of the realm of where we've been in quite a long time. So I mean - so before you look back years ago, during the '70s and early '80s, those mortgage rates were significantly higher than those. So I think that there's a settling in thought process here that maybe this should be more the norm. And when you look at the recession, the possibility of recession, I mean, anything could happen. But it's certainly not appearing on our business or our forecast at this point. And it's not appearing in the construction indexes, what we follow, but you sure do hear a lot of discussion on it on the news. So for us, we're expecting another really strong year, Ted. I mean we just don't see that slowdown at this point.

Okay. And then my last, which is just more maybe a little color is with regards to the Mexican plant, I know and that [indiscernible] and you mentioned it, so it's where kind of your exposure is in some of the markets you serve in the U.S. Can you provide some more color with the business that you got that allows you to keep that plant running and handle the absorption costs and then be able to serve areas that it might have served but had to deal with tariffs from other plants. I mean what is the business? I mean, is that like - is it like - I mean, it - I assume it's not a U.S. order. Is it Canadian? Is it Mexican? Maybe just kind of a little color in terms of how that fell into your lap and what it is. That will be my last question.

Well, there's two pieces to this, right, Ted. First, our drive is to work with our customers to pass whatever the associated cost with the new trade policies are. The answer to the second part of your question is, yes, it's not a U.S. order.

Okay. Okay. I'm going to leave here with that. So thank you very much for the time.

Thank you, Ted.

Thanks, Ted.

Thank you. At this time, I would like to turn the floor back to Scott Montross for closing remarks.

Well, thanks, everybody, for joining the call today. And I think despite a little bit rougher than normal first quarter with weather challenges and the administration's new trade policies and the headwinds created by both in the first quarter, we exited the first quarter pretty strong. The SPP bidding really took off. And like I said, a couple of weeks ago, we booked $60 million of work in really 1 week. And as Ted pointed out, a large portion of that will help alleviate the extra costs associated with the new trade policies in our plant that's most affected by those. And I think even more encouraging is that our inter-quarter backlog has now jumped well up above $300 million again. And our precast order book has grown to near record levels, most of which growth in the precast order book has been non-residential, indicating a growing strength as we move through the second quarter. And the residential side of our business remains very strong and continues to grow. And what I would say is this year could very well be the first time during this configuration of the company that we are hitting on all cylinders across our business segments. So obviously, we're expecting another very strong year for both segments, and we thank you for joining our call, and we'll talk again in August. Thank you.