Good morning, everyone. Thank you for participating in today's conference call to discuss Concrete Pumping Holdings' financial results for the first fiscal quarter ended January 31, 2019. Joining us today are Concrete Pumping Holdings CEO, Bruce Young; and CFO, Iain Humphries; and the company's external Director of Investor Relations, Cody Slach. .

Before we go further, I would like to turn the call over to Mr. Slach to read the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Cody, please go ahead. .

Thanks, Brenda. I'd like to remind everyone that in the course of this call, to give you a better understanding of our operations, we will be making certain forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from such statements.

For information concerning these risks and uncertainties, see Concrete Pumping Holdings, Inc.'s publicly available filings with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise..

On today's call, we will also discuss adjusted EBITDA, which is a non-GAAP financial measure that adjusts reported figures for nonrecurring items.

We believe the presentation of this non-GAAP financial measure is useful because it provides investors and industry analysts the same information that we internally -- excuse me, that we use internally for purposes of assessing our core operating performance. .

Also, please note that on December 6, 2018, we consummated the previously announced Business Combination, where we acquired the formerly private company previously known as Concrete Pumping Holdings, Inc. and the former SPAC called Industrea Acquisition Corp, which transactions we collectively refer to as the Business Combination.

In connection with the closing of the Business Combination, the company changed its name to Concrete Pumping Holdings, Inc. Finally, the financial results described today, for dates and periods prior to the Business Combination, relate to the operations of the formerly private company previously known as Concrete Pumping Holdings.

For additional information, please see our Form 10-Q that we will file later today, which includes historical Concrete Pumping Holdings, Inc. financial statements that we are discussing on this call as well as pro forma financial information for the company that reflects the business combinations.

Because of the accounting treatment for the Business Combination, the company's financial statements for the quarter ended January 31, 2019, reflect the separation of periods pre- and post-Business Combination, which are labeled Predecessor and Successor periods.

For ease of understanding our financial performance, however, we discuss the results of the first quarter on a combined basis without distinguishing between the Predecessor and Successor periods.

Please refer to our Form 10-Q for the quarter ended January 31, 2019, for further discussion of the impact of this accounting treatment on our financial statements. .

I'd like to remind everyone the call will be available for replay starting at 1 p.m. Eastern today. The webcast will also be available via the link provided in today's press release as well as on the company's website. .

Additionally, the investor presentation outlining the acquisition of Capital Pumping has been posted to Concrete Pumping Holdings' website. .

Now I would like to turn the call over to the CEO of Concrete Pumping Holdings, Bruce Young.

Bruce?.

Thank you, Cody, and good morning, everyone. It's a pleasure to be joining you. I'm excited to be here today. First, we will discuss our first fiscal quarter financial results, and then we will transition to a detailed overview of the transformative acquisition of Capital Pumping that we announced this morning..

Turning to our results. Overall results in the first quarter of 2019 came in as expected as we generated top line growth in almost all of our markets. This was partially offset by adverse weather conditions experienced by many in our industry in the West Coast region of the U.S.

However, we expect the majority of our customers' impacted projects to resume later in fiscal 2019. .

Revenues for the first quarter increased 11% to $58.4 million, and adjusted EBITDA was up 5% to $17.1 million. Results were driven by our U.S.

concrete pumping segment, Brundage-Bone, which experienced improved utilization rates across its asset base as well as increased operational volumes in Colorado and Arizona markets from the acquisition of Richard O’Brien Companies last year. .

The adverse weather in the West Coast region also affected results in Eco-Pan. But again, we anticipate the majority of the affected projects to resume throughout fiscal 2019.

I would like to note that the Eco-Pan business began to trend above expectations starting in January as the weather turned more in our favor after experiencing severe adverse weather in November and December. Looking ahead, our growth story for Eco-Pan remains unchanged.

We still see significant opportunity to increase penetration and expand our customer base through -- both through cross-selling to our Brundage-Bone and Camfaud customers, as well as through organic customer acquisition. .

Revenue in our U.K. concrete pumping segment, Camfaud, also came in as expected. Demand in the U.K. market remains robust, especially in larger infrastructure projects, and we have not seen a slowdown due to Brexit. However, as our consolidated financial statements are denominated in U.S.

dollars, there was a translation effect from the strengthening of the U.S. dollar..

Finally, just a reminder, the first fiscal quarter is typically a seasonally slower period for our business. But despite the adverse weather, our result sets were encouraging.

We remain on track with our long-term growth strategy, which is supported by the continued positive trends we are seeing across the business and in the end markets we serve, and we continue to see significant opportunities for continued share gains in the U.S. and the U.K. regions as well as continued rollout of the growth of our Eco-Pan business. .

I will now pass the call over to Iain to walk through a more detailed financial overview.

Iain?.

Thanks, Bruce, and good morning, everyone. Before getting into the details, I'd like to remind everyone that we refer to adjusted EBITDA, which is a non-GAAP financial measure. A reconciliation from net income to adjusted EBITDA can be found in the press release we issued earlier today. .

Now moving into the first fiscal quarter of 2019 financial results. As Bruce mentioned, the first quarter revenue increased by 11% to $58.4 million. On a pro forma basis for acquisitions, revenue increased 4% to $58.4 million compared to $56.1 million in the year-ago quarter.

The year-over-year revenue increase was largely driven by improved utilization of assets in almost all of the company's markets as well as the impact of the acquisition of O'Brien, which added additional pumping capacity in our Colorado and Arizona markets.

This year-over-year revenue growth was partially offset by harsh winter weather conditions across our California and Oregon regions..

During the first quarter of fiscal 2019, the U.S. concrete pumping segment, or Brundage-Bone, increased reported revenue by 15% to $40.7 million.

The increase was largely due to higher billable hours and the additional pumping capacity in the Colorado and Arizona markets resulting from the O'Brien acquisition, as well as increased utilization of our asset base across the majority of our end markets.

As noted, this was partially offset by negative weather conditions which impacted operations across California and Oregon. .

Our U.K. segment, Camfaud, increased reporting revenue by 2% in the first quarter to $11 million. Results were driven by an improvement in the utilization rates, which were mostly offset by the currency translation effect of the strengthening U.S. dollar. .

Our concrete waste management service, Eco-Pan, experienced relatively flat reported revenue of $6.7 million in the first quarter. And as discussed, growth expectations for this business were impacted by the harsh winter weather conditions, mainly in our West Coast region.

We believe the softness in the Eco-Pan first quarter was exclusively due to weather, and we remain encouraged about the opportunity to grow Eco-Pan's share and drive additional penetration. .

Turning back to our consolidated results. Gross profit was $23.2 million compared to $22.8 million in the comparable year-ago quarter, and gross margin was 39.8% compared to 43.2% last year.

The gross margin decrease was primarily due to the step-up in depreciation related to the Business Combination and the O’Brien acquisition, as depreciation expense related to our concrete pumping equipment is included within our cost of operations. .

General and administrative expenses were $18.6 million in the first quarter compared to $13.7 million in the year-ago quarter.

As a percentage of revenue, general and admin expenses were 31.8% compared to 26% last year, and this G&A increase was largely due to higher amortization expense from the step-up in fair value of certain intangible assets related to the Business Combination. .

Net loss of $26.2 million compares to net income of $17.6 million in the year-ago first quarter. The decrease was primarily caused by increased depreciation and amortization, higher transaction costs related to the Business Combination and increased interest expense.

Additionally, the first quarter of fiscal 2018 included a substantial tax benefit due to the enactment of the Tax Cuts and Jobs Act. Due to the Business Combination, earnings per share information is not presented and is not deemed to be meaningful given the capital structure of the Predecessor and Successor entities that are not comparable. .

Finally, adjusted EBITDA increased 5% to $17.1 million in the first quarter from $16.4 million last year. .

Turning to the balance sheet and as at January 31, 2019, we had approximately $4.8 million in cash and $374.3 million of total debt compared to $8.6 million in cash and approximately $238.8 million of total debt as at October 31, 2018.

The change in debt levels is attributed to the effect of the Business Combination, and the company remains committed to strengthening the balance sheet.

As a reminder, our business generates healthy and significant free cash flows as we invoice our customers daily for the work that's performed, and we have minimal working capital requirements as we do not take ownership of the concrete that we place.

This ability to generate strong free cash flows gives us comfort with our current debt levels and will allow us to delever the balance sheet over time..

Looking ahead and despite some winter headwinds due to the weather in the first quarter, we remain confident in the strength of our business and see significant opportunities across our business. Additionally, we continue to experience positive underlying secular and market trends, predominantly in the commercial and infrastructure sectors. .

With that, I will now turn the call back to Bruce to close out the Q1 prepared remarks and expand upon the acquisition deal announced this morning. .

Thanks, Iain. Just to reiterate, first quarter results came in as expected, and our growth strategy that we outlined in our last call remains intact. As a quick reminder, this includes growing the Eco-Pan brand; accretive M&A, which we're excited to discuss with you more; and share gains. .

Now, I'd like to discuss the acquisition of Capital Pumping. During this discussion, we will be referencing the slides in the investor presentation that we've posted to our Investor Relations website this morning. Iain and I will be taking turns presenting slides, and I will start on Slide 3, which provides a brief introduction of myself and Iain.

I have been the CEO of CPH since 2008. I have also been the CEO of Eco-Pan since we started the business in 1999. I led the national concrete pumping operations for Brundage-Bone from 2002 to 2008. I've been with the company since 1985 and have been in the concrete pumping business since 1980.

Also, just a reminder, our management team has a significant investment in the company, owning approximately 13%. .

Thanks, Bruce. As many of you will know, I joined the CPH team as CFO nearly 2.5 years ago in November of 2016. Prior to this, I worked for 11 years with a company called Wood Group PLC, who are a U.K. FTSE 250 global oil and gas service company.

Wood Group's market cap is around $4 billion, and my last role with them was as 4 years as the CFO of the Americas Production Services business. And during this time, we doubled the size of the Americas region through organic and multiple M&A transactions. .

Turning to Slide 4. CPH has a proven M&A platform. Successful M&A transactions at attractive multiples have been the cornerstone of our historic growth and continue to play a significant part of our future growth strategy. In the U.S.

and U.K., we have strong long-term relationships with most concrete pumping services providers, who are nearly all family owned. In many cases, when the owner is ready to sell, we are their first call.

We have completed over 45 acquisitions in our history, and we believe the integration of Capital will be easier than many because of the sophistication of Capital's business, the talent of Capital's team, common equipment and systems between the 2 companies in a geographic region that we are familiar with.

Additionally, our acquisitions are typically structured to allow 100% cost expensing for tax purposes. Finally, we have approximately $100 million of additional adjusted EBITDA in our M&A pipeline. .

Turning to Slide 5. The acquisition of Capital Pumping is a transformational transaction that aligns well with our proven acquisition strategy. The business delivered 2018 revenue of $49 million and adjusted EBITDA of $23 million.

While most acquisitions come through a direct negotiation with the seller, the Capital opportunity came through a formal process where it became clear that we are the acquirer of choice.

The transaction is consistent with our acquisition strategy in that it increases efficiency in the fragmented Texas region, expands our presence in a high-growth area, gives us a larger customer base to roll out our Eco-Pan business, has a well-maintained fleet that is the youngest of any scaled player in the industry and has compelling adjusted EBITDA, tax, CapEx and real estate synergies.

This transaction also leverages our ability to integrate acquisitions with a company that currently shares our core values of safety, people and reliability. .

The purchase price is $129.2 million, which is 5.7x Capital's 2018 adjusted EBITDA, and we expect to lower this multiple to 3.6x with benefits of post-transaction synergies.

We have identified approximately $4.9 million of EBITDA synergies, $18.6 million NPV of tax benefits, $9 million NPV of CapEx synergies and $1.2 million NPV of real estate synergies.

We expect that through this transaction, pro forma net leverage will be less than 3.5x by the end of fiscal year 2019, and we expect to close the transaction during calendar Q2 of 2019.

Prior to the closing of the acquisition, we intend to execute a warrant exchange concurrent with or prior to the completion of the acquisition, which, if completed, will simplify our capital structure and reduce the potential dilutive impact of the warrants. .

Now to Slide 6. Capital Pumping is a leading provider of concrete pumping services in Texas, and their service offering is very much the same as ours. They have the youngest fleet of any scaled player in the industry with an average fleet age of only about 3 years. The business was founded in 1971 and is currently family owned.

The map on the bottom left shows our Texas footprint with operations in all of the high-growth regions. The graph in the center demonstrates their ability to maintain high margins while consistently growing revenue. It's worth noting here that January 2019 revenue for Capital was up 25% year-over-year.

The graph in the lower right shows a very young fleet that is well balanced to meet customer demands. .

Slide 7 highlights the attractive economics of the transaction. The deal was a transformational opportunity at an attractive multiple that is consistent with our acquisition strategy.

The illustration in the bottom left shows how the purchase price is positively impacted by the anticipated cash flow synergies we expect to generate through the combination. We expect these synergies will be achieved in tax and bonus depreciation, CapEx redeployment and reducing real estate overlap.

The illustration in the bottom right shows how we expect adjusted EBITDA will be positively impacted by the efficiencies gained across procurement, corporate overhead and operational efficiencies that are expected to contribute approximately $4.9 million of adjusted EBITDA improvement.

Taking these synergies into account, the transaction multiple drops from 5.7x to 3.6x fiscal year 2018 adjusted EBITDA. .

Thank you, Bruce. Moving to Slide 8. This lays out the main sources and uses of the proposed transaction. Uses will include estimated transaction fees associated with the proposed deal.

We intend to finance the transaction with a combination of approximately $95 million from the issuance of equity securities, which may be in the form of public or private offering, and approximately $40 million of incremental term loan debt. .

Moving into Slide 9. This is an illustration of the company's continued commitment to focus on the strength of the balance sheet and to execute on opportunities to delever. At the close of the Industrea and CPH merger transaction on December 6, 2018, the company had a leverage ratio of around 4.4x.

Pro forma for the Capital acquisition, we expect to achieve net leverage of less than 3.5x by the end of fiscal year 2019. In addition, we believe our strong free cash flow generation and the compelling synergies that the proposed transaction are expected to generate should provide additional cash flow that will allow further deleveraging.

The cash and reinvestment strategy for CPH remains consistent, whereby we will invest in equipment, M&A at attractive multiples or delever the balance sheet. .

Through to Slide 10. CPH currently has approximately 10% of the $1.75 billion U.S. concrete pumping spend. With the acquisition of Capital, our share will grow to approximately 13%. Nearly all concrete pumping companies in the U.S.

are family owned with an average fleet size of 5 to 10 units, and there are a few regional companies that serve more than 2 states.

The acquisition of Capital is consistent with our consolidation strategy, which is centered around attracting and retaining talent to complete the most complex concrete placements using our highly scalable corporate center for a smooth integration and optimizing utilization and ROI through asset management. .

Slide 11 highlights how our scale and national footprint gives us advantages. First, purchasing. Our size gives us the opportunity to purchase equipment, parts, fuel, instruments and other operational supplies at meaningful discounts. Second, breadth of service. Our broad mix of equipment gives us the ability to service all sizes and types of projects.

Third, fleet availability. Our large fleet gives us the flexibility to meet our customer demand throughout the U.S. and the ability to redeploy assets where they are needed most. And lastly, trained operators. Safety and reliability are the key to our success. Both CPH's and Capital's programs are industry leading. .

Turning to Slide 12, which illustrates how combining CPH and Capital will create a stronger overall company. The acquisition will add 6 new locations on a net basis and will allow us to consolidate 6 locations, extending our footprint while adding efficiency. The transaction also increases the size of our fleet to 1,089 pieces of equipment.

The Capital fleet and our existing fleet have been managed under similar fleet mix philosophies and fit naturally together. Finally, the combination brings our overall fleet age down from 9.1 years to 8.3 years, improving our CapEx and maintenance cost profile going forward. .

Thank you, Bruce. Moving into Slide 13. This provides more detail on expected transaction synergies. EBITDA synergies are expected to be achieved by applying CPH's purchasing power in procurement, driving the efficiencies in corporate functions and collaborating across operational activities.

Additionally, this transaction will provide a valuable opportunity to enhance the reach of our Eco-Pan and concrete washout solutions by cross selling across Capital Pumping's Texas locations.

The cash flow benefits of this transaction are expected to be realized in reducing the overlap of our real estate locations and optimizing fleet deployment to maximize our investment returns. It's worth noting that there's also a meaningful tax shelter to be gained, and the NPV of tax savings are currently estimated at around $18.6 million.

Currently, we do not pay any federal tax in the U.S. because of our existing NOL position, and this acquisition would further deepen that NOL position and defer tax payments into the future. .

Slide 14 summarizes the combined financial profile of the enlarged CPH group pro forma for the synergies to be realized from the proposed transaction. As a reminder, CPH has a fiscal year-end of October 31.

And on the successful completion of the transaction during calendar Q2 of 2019, the company will recognize a partial year benefit within its fiscal 2019 results.

On a pro forma basis, based on 2018 fiscal results, we expect the combined revenue of $307 million and adjusted EBITDA of $111 million, including synergies that we expect to realize within 24 months. We expect our adjusted EBITDA margin will increase from approximately 33% today to 36% with the benefit of the proposed combination.

It's worth highlighting that the underlying cost structure of our business is approximately 70% variable, and this allows the business to remain agile through the changes in the macro environment and deliver stable and attractive markets in the local markets we operate.

Lastly, we expect adjusted EBITDA, less CapEx, as a percentage of revenue to be enhanced by the proposed transaction at a very strong 27% of revenue. .

Slide 15 shows how the combined businesses provide significant scale and diversity. Pro forma for the transaction, 83% of our business is in the U.S. and 17% will be in the U.K. While this acquisition strengthens our position in the South, the region still only represents 37% of our U.S. concrete pumping revenue.

This translates to approximately 20% of our total revenue. We maintain a solid business mix, with high margin commercial work representing 55% of our concrete pumping revenue in the U.S.

Finally, 10% of our revenue is related to our Eco-Pan business, which remains an area of focus for the management team and is expected to benefit from the addition of Capital's locations and diverse customer base. .

Slide 16 shows that with this acquisition of Capital, we position ourselves to have a stronger presence in key Texas regions around Austin, San Antonio, Dallas, Houston and Lubbock. Eco-Pan is currently in only 3 of the 22 concrete pumping branches in Texas.

This acquisition positions us for additional growth in Eco-Pan as we cross-sell the service across a new set of customers. .

Turning to Slide 17. Texas remains an area of focus for us because of its strong economy and growth in commercial and residential construction, which is supported by positive demographic trends. The graph on the left show, while most of CPH's U.S.

locations are positioned for commercial construction growth, Texas is one of the strongest, expecting a mid- to high single-digit growth rate. The graph in the center shows that construction in Texas remains strong, especially in metropolitan areas.

The right side of the slide shows substantial population growth and employment gains in Texas that we expect will continue to drive broader construction growth in the state.

Finally, with population growth, an aging infrastructure system and a state government well positioned to match federal funding, we expect infrastructure spending in Texas to increase as well. .

Lastly, moving into Slide 18. This illustrates that CPH currently trades at discounts to its peer group on an adjusted EBITDA and adjusted EBITDA-less-CapEx multiple basis while maintaining adjusted EBITDA margins above its peer averages.

On review of EV to 2018 adjusted EBITDA, CPH is currently positioned at a discount of around 30% to 41% when compared to this peer group. Additionally, on a review of EV to 2018 adjusted EBITDA less CapEx, which we consider as a free cash flow-like measure, there is a more significant discount of approximately 42% to 48%.

On the bottom of the page, you can see that CPH delivers healthy EBITDA margins when compared to this peer group, and that translates to a compelling financial profile for the business.

The margin and cash flow potential that this transaction has the ability to achieve, along with the relative undervaluation of the combined business to its peers, shows the long-term value this acquisition can drive. .

With that, I'd now like to turn the call back over to the operator for questions and answer.

Brenda?.

[Operator Instructions] Our first questions are from the line of Alex Rygiel with B. Riley. .

So quick question with regards to the -- one of the last statements you made with regards to guidance. So it sounded like you expect something on the order of $307 million of sales and $111 million of EBITDA in fiscal 2019.

How does that compare to your previous guidance of, call it, $270 million to $275 million and $95 million? Is that intact and the differential here is just this acquisition? Or was there a modest adjustment to your base business?.

The 2019 guidance, Alex, that we gave is still intact, and we look to make more adjustment for this acquisition. But the previous guidance on '19 is still intact as we sit today. .

Very helpful. You talked a little bit about some work getting pushed out from the fourth quarter in the first -- into the first quarter because of some difficult weather. Now in the first quarter, you had a little bit of difficult weather as well.

I don't think anybody is surprised of that, but just can you sort of comment on the status of those projects that got pushed to the right? Have any of them gotten canceled? Or is it really just a function of timing?.

Yes. So, Alex, we have not had any projects canceled. It's just a function of timing. And we have seen some accelerated schedules on many of these projects to give us additional revenue in future quarters. .

That's excellent. As it relates to your greenfield strategy, you've talked a little bit about the greenfield expansion strategy in Charlotte as well as in the U.K.

Can you give us an update on that?.

Yes. So our Charlotte greenfield is actually going quite well for us. We're consistently gaining market share. The U.K., as you know, we cover pretty much the entire island that contains England, Scotland and Wales. We're really more just attacking greater market share gain in the U.K. at this point in time.

And then with Eco-Pan, we've moved into 5 new locations during the last 3 months. .

Excellent. And one last question, if you don't mind. The profitability of Capital looks fantastic.

Can you just maybe comment or create a comparison of maybe why their margins were so strong and how you can take some of those best practices and transfer them over to your business?.

Yes. Alex, I mean, really, what we have in comparison is the benefit of a younger fleet, and there's a couple of things. As you'd expect, there's lower maintenance costs within a fleet that's younger, and we also have the benefit of more uptime.

So you get the benefit on both sides of that, and that's largely what we see coming over with the benefit of that younger fleet. But we -- I mean, we have some markets in our business that have equal performance, so that's largely the difference in the combined business. .

[Operator Instructions] Our next questions are from the line of [ Ted Lee ] with GeoCapital. .

I just had a quick question on the exchange offer that you're contemplating.

Did you envision the exchange offer being a means to generate proceeds for the acquisition like inducing conversion earlier? Or was it more just a pure equity-for-warrant exchange to simplify that cap structure?.

Yes. It's just an equity-for-warrant exchange to simplify the cap structure. .

Okay.

And do you have any idea when that might come or just sometime before closing?.

Yes, so we're expecting to address that over the next few weeks. .

At this time, this concludes our question-and-answer session. I would now like to turn the floor back over to Mr. Young for closing comments. .

Thank you, Brenda. Again, we'd like to thank everybody for listening in to today's call. Myself and the organization are very excited about the next stage in our company story and look forward to speaking with you when we report our second quarter results. Thank you. .

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation..