L. B. Foster at East Coast IDEAS Conference: Strategic Growth Plans

On Thursday, 12 June 2025, L. B. Foster (NASDAQ:FSTR) participated in the 15th Annual East Coast IDEAS Conference, where CFO Bill Tallman outlined the company’s strategic initiatives in the absence of CEO John Castle. The company is focusing on sales growth, margin expansion, and cash generation, despite a softer-than-expected first quarter in 2025. L. B. Foster is leveraging government funding and technology-driven offerings to enhance its market position.

Key Takeaways

• L. B. Foster is prioritizing growth in global friction management, track monitoring, and precast concrete.
• Despite a slow start in 2025, the company reaffirms its guidance and expects improvements in the second quarter.
• The company’s disciplined capital allocation focuses on managing debt, share repurchases, and strategic acquisitions.

Financial Results

L. B. Foster reported a sales increase to $531 million in 2024, up from $514 million in 2021. The gross margin improved significantly to 22% in 2024 from 16.8% in 2021, and EBITDA grew to 6.3% of sales. The company generated $31 million in free cash flow in both 2023 and 2024, excluding an $8 million annual payment to Union Pacific. Since the start of its stock buyback program in 2023, 5.5% of shares outstanding have been repurchased. For 2025, L. B. Foster provides a free cash flow guidance of $20 million to $30 million, with $93 million worth of federal NOLs available to offset federal income taxes.

Operational Updates

L. B. Foster completed nine transactions, including divestitures and acquisitions, since 2021 to align with its strategic goals. Investments have been made in growth platforms such as global friction management, track monitoring, and precast concrete. The company has commissioned a new facility in Florida for producing concrete wall systems aimed at residential housing. The pipeline coating business is expected to improve due to increased energy investments in the U.S., supported by government funding programs.

Future Outlook

Despite a softer first quarter, L. B. Foster maintains its guidance for 2025, anticipating sales growth and profitability improvements in the second quarter. The company plans to continue investing in organic growth, particularly in precast concrete, while maintaining a disciplined approach to capital allocation. This includes managing debt leverage between one and two times EBITDA, continuing the stock buyback program, and pursuing tuck-in acquisitions in the precast concrete space. Long-term growth is expected to be supported by government infrastructure funding and increasing demand for technology-oriented offerings.

Q&A Highlights

During the Q&A session, Tallman discussed the precast concrete business, emphasizing the benefits of faster installation and robustness, while addressing challenges in gaining residential market acceptance. He also highlighted L. B. Foster’s involvement in high-speed rail projects and collaboration with SpaceX on pipeline coating. The session included discussions on termite-resistant options for concrete wall systems.

For the full transcript of the conference call, readers are encouraged to refer to the detailed document below.

Full transcript - The 15th Annual East Coast IDEAS Conference:

Joe Noyans, Three Part Advisers: Alright. Well, thank you all for joining us. You’re here in person today. We really appreciate it. Those of you on the webcast, do as well.

off, my name is Joe Noyans with three part advisers. Up next, we have one of our investor relations clients, L. B. Foster. L.

B. Foster is traded on the Nasdaq under the symbol FSTR. It’s a leading technology based solutions provider for the rail and infrastructure markets. And today, giving the presentation will be the company’s chief financial officer, Bill Tallman. Thank you.

Bill Tallman, CFO, L. B. Foster: Thanks, Joe. Good afternoon, everyone. As Joe indicated, my name is Bill Tallman. I’m the CFO of L. B.

Foster. Been with the company for a little over four years. Joined in 02/2021. Typically, John Castle, our CEO, would be with us today. And unfortunately, he had a family emergency, was not able to attend.

So I’m gonna be covering covering the presentation today. So we’ll jump right into it. So L. B. Foster is a company headquartered out of Pittsburgh, Pennsylvania.

We’ve been in business for a little over one hundred and twenty years. The company got its start as a recycled rail business in Western Pennsylvania and has grown to what it is today. It’s largely North America focused. We do have a presence overseas primarily in The UK region, but it is primarily North American business. I would describe us as an infrastructure solutions provider that is focused specifically on rail and civil construction.

And when you get into the business units, we go through that in some detail later on, you’ll understand why. We do have two segments, rail and infrastructure, and you can see the regional breakdowns there on the screen. We’ll cover those in a little more detail here in a minute. So I guess maybe rewind a few years. Back in 02/2021, the company had initiated a strategic reassessment of the business.

That’s when I joined the company in February March of twenty twenty one. John Castle became CEO in June of twenty twenty one. And basically, the the company had lost its way for a period of time. And, you know, the board took a very proactive step to say, we’re gonna define what we’re gonna be going forward. We’re gonna reestablish our strategy and and figure out a way how to grow this business and return the the business to its former performance and and hopefully then some.

So we established goals back in 02/2021. You can see the goals in the middle of the page there. In 2024, we’ve made great progress in terms of sales growth and more importantly, margin expansion and profitability expansion. Cash generation has improved dramatically as well. And we expect more to come in 2025.

And I’ll spend a little bit of time on how we got to the results that you’re seeing here in a few slides. So as I mentioned earlier, we have two segments, rail technologies and services as well as infrastructure solutions. The rail technologies business is just under $300,000,000 on a trailing twelve month basis and just a little over $2.00 $6,000,000 for our infrastructure division, again, on a trailing twelve month basis. So just over $500,000,000 in revenue. Margin profiles of the business are very similar, right around 22%.

You can see on the previous slide that our goals were to be around 22% to 23 in 2025. So we’re in that range at the moment. We expect improvements to continue throughout the year. And the segments you’ll see here on the next couple slides are very much focused on infrastructure related support for both rail as well as civil construction. So the slide is the rail technologies and services overview.

You can see three business units within the segment. I always start off with our largest component, which is rail products. When you think about rail products, the largest component of that business is selling track to class two, so the regional railroads as well as the transit authorities in The US. And that’s a pretty steady piece of our business. It’s about $150,000,000 in revenue.

And we have some other value added product lines as well within rail products, insulated rail joints, direct fixation fasteners for the transit applications. That’s all within rail products. So next we have friction management, global friction management. That is exactly as it says. So our friction management business line provides support to the rail industry in terms of improving wear and tear as well as improving fuel efficiency for the railroads as they apply that friction management application across their networks.

I say across their networks pretty liberally. Only 5% of the North American rail network is treated with a friction management today. So there’s an opportunity for that to be a much greater component of the business going forward. And lastly, technology services and solutions. That’s where some of our more interesting product lines are in terms of the monitoring network monitoring applications that we have.

That’s a growing piece of the business, and I’ll speak about that here in a few minutes. Margin profiles are on the right. And as you can see, the technology services and solutions as well as friction management are areas of focus for growth given the margin profiles. So turning to infrastructure solutions, two primary business units, business precast concrete products, which is about $130,000,000 in revenue, dollars 140,000,000 on a trailing twelve month basis, and then we have $63,000,000 for steel products. So when you think about the growth platforms that we have as a company, precast concrete is one where we see significant opportunity for growth.

Attractive margin profiles, it’s a somewhat fragmented market. We feel like there’s an opportunity for us to grow both organically and inorganically in precast concrete, and we’ve been making investments in that space along the way. For steel products, that’s a variety of different applications that support civil construction, bridge forms that are used for bridge repair, pipeline coating that is used for oil and gas pipeline transmission. We have a threaded pipe product line that is within that’s used for water well drilling. And yeah.

So the the steel products portion of the business, the one thing I would emphasize there is within steel products, the coatings business has been a component. The pipeline coating business has been softer over the last several years largely due to a lack of investment in pipelines here in The US. That’s something that had been a pretty strong business for us in the not too distant past, and we’re actually expecting that to improve here given some of the current macro trends with energy investment here in The US. So opportunities for growth there, but the primary area of growth within infrastructure is going to be within Precast. So this is just a different slice of the business, but it it’s important to understand, how we’re, viewing the elements of the portfolio from a strategic point of view.

So back in 02/2021, we made very purposeful choices to establish growth platforms and returns platforms. We actually went through a series of divestitures and acquisitions that were aligned with the strategy. We’re taking cash that’s being generated from those return platform businesses, which is relatively steady and and and pretty consistent. And we’re applying that money into investments in our growth platforms. So global friction management, track monitoring, and precast concrete, those are the product lines that we expect to see above average growth, along with our strategy.

So and the reason that’s the case is the margin profiles of those businesses are much better. It’s a value added element of the offering that we feel like there is headroom for growth. And you can see on the slide on the left hand side of the slide, those growth platform businesses over the last three plus years have grown 79%. And the margin profiles on that growth was are much higher than what you see on the right hand side where we’ve divested certain elements of the business and the growth rates are negative in some cases and much lower in other cases. But again, the margin profiles are lower on the return side and that mix of growth aligned with our strategy is what’s translated to a significantly improved profitability profile for the business, which I’ll cover here on the next slide.

So over that time period, as I mentioned, we did nine transactions since 2021. The sales back in 2021 were $514,000,000 and our margin profile was 16.8% at that time. As a result of the work that we did with the portfolio as well as other profitability initiatives, our sales have grown 2024. I’ll focus on that that data point to $531,000,000 in sales, but 22% gross margin. So a significant improvement in the gross margin profile.

We were a bit weaker in the first quarter, largely related to our distribution business. I will highlight the fact that the margin percent did stay the same despite the fact that the sales were softer. And, you know, we we believe that that will come back as the balance of the year progresses here with some of the trends going on in Washington around government funding and that starting to improve the outlook for the year. So this is just another view of of those same metrics, but obviously driven through all the way through to EBITDA. You can see where we stand in terms of the EBITDA performance.

So we grew EBITDA up to 6.3% of sales. Very capital light business model, so that EBITDA performance is relatively attractive when you evaluate that against free cash flow, which I’ll cover here in a minute. So a lot of work to change the profitability profile of the company. And despite the soft quarter, first quarter, we feel like we’re on a good track to improve on that in 2025. You’ve probably seen this slide already if you follow the company at all, but this is a slide that came out of our first quarter investor deck, earnings call deck.

And I think the key message here is that we tried to tease out the fact that our our distribution business for rail had a very soft quarter. Relatively speaking, in the first quarter against a very strong first quarter in 2024. You know, we tried to highlight the fact that the order book was up, the order rates were up, the book to bill ratios were improved in both portions of the business, and we reaffirmed our guidance for 2025 despite the soft start to the year. So the strong order book should translate to sales growth and profitability expansion as early as the second quarter, which ends at the June. And we certainly will provide an update in early August once we have those results in hand.

One of the other things to consider about our business is it’s somewhat cyclical from a seasonality point of view. We are a construction related business, so we provide a lot of work and support to businesses that are doing construction work outside, whether it’s repair, maintenance, installation of precast buildings, or installation of precast forms in a civil construction site. So we tend to be a little working capital heavy in the early part of the fiscal year, and then that working capital tends to unwind over the balance of the year. So things are a little bit choppy in that regard. And generally speaking, our revenues and profitability will be strongest in the second and third quarter compared to the first and fourth quarter.

But we want to highlight that for people that are new to the story just because of the potential choppiness that you would see with our financial performance. But over time, I guess the key message is is that we do a very good job of managing our leverage over time. You can see, we’re generating really nice cash and generating strong EBITDA relative to our debt and are able to get to the point where we are consistently running between two one times and two times on EBITDA as a percentage or as a index against our debt. The the the 2.5 that we typically are sitting at at the end of the second quarter is first quarter, second quarter is generally working capital related. But again, that will unwind through the balance of the year, and we feel good about where we expect to be by the end of the year given the normal seasonality of the business.

I will highlight that we generated $31,000,000 worth of free cash flow in 2023 and 2024. That’s excluding an $8,000,000 per year payment that we had been making to Union Pacific that is now behind us. So, you know, that’s a baseline that’s in place right now, and we hope to be able to improve on that as the as the year progresses. I will also mention that we had $93,000,000 worth of federal NOLs that are available to mitigate federal taxes, income taxes. So, you know, the the working cap or the capital needs for the business in terms of CapEx and interest are really the only significant deductions against EBITDA to get to free cash flow.

And we are very active with our stock buyback program. As you can see, we’ve repurchased 5.5% of the shares outstanding since the program was initiated in 2023, and we just re upped the new program that expires in February of twenty twenty eight. I won’t cover this in too much detail, but this is just suffice to say that we saw a nice improvement in our book to bill ratios across all elements of the business. And when you flip that over to the backlog, the backlog improved significantly on a sequential basis and is up year over year about 6% to 7%. But the thing that’s important to glean from that is that the backlog has improved in terms of the profitability profile of what we have in our backlog compared to last year.

So that should translate to a nice improvement in margin expansion on a year over year basis as early as the second quarter, and that’s very much in line with our strategy that we’re trying to accomplish. Couple valuation type comments around where the stock price is today relative to cash flow and EBITDA multiples. So the midpoint our cash guidance, free cash free cash flow guidance for the year is $20,000,000 to $30,000,000 At today’s stock price, that’s a 10% to 15% yield, which we think is pretty attractive. And as I mentioned earlier, the average free cash flow for the last two years was $31,000,000 So we feel like those are our numbers that are in the cards in terms of our outlook. And then looking at valuations at where we are at the moment, you know, we we took the excess cash, paid down some debt in our projections, and came up with what we felt was a fair way to evaluate the the enterprise value against the EBITDA s that are out there.

And you can see the range of 5.3 to six times based on where we’re trading at the moment. So attractive, inexpensive valuation at the moment, and we feel good about that opportunity that we have to buy stock in this time frame given where we are with those valuations. So in terms of closing remarks, just a couple comments with capital allocation that we focus on. I mentioned earlier that company had gone through a significant challenge, 02/2015 through 02/2020, and, you know, with the revised strategy that we’ve put in place. We’re very much focused on being disciplined approach disciplined with our approach to capital allocation.

We are gonna manage our our debt leverage levels. We’ll be closer to one. We will range between one and two, but we will make sure that whenever we’re up against a time period where the needs might be a little heavier than others, we’re going to be cautious with what we can control to make sure we maintain that leverage level. CapEx is a relatively light capital need for the business. It’s about 2% of sales, so running about 10 to $12,000,000 worth of CapEx.

And we are investing in organic growth platforms that will allow us to grow, should allow us to grow, and our guidance certainly suggests that we will be growing here in 2025. The share repurchase program, I already mentioned, that was re upped for another $40,000,000 program that started in February and runs through 2028, and we continue to be active there. And tuck in acquisitions, I would say that’s primarily focused in the space of precast concrete. We think there’s an opportunity there with a pretty much fragmented market, and an opportunity to pick up businesses at reasonable valuations, in that space. Just a couple items I want to highlight here.

On the left hand side, we talked about the government funding programs that are supporting business investment for our customers’ projects to harden up their rail networks and the infrastructure that they operate in. And we expect that to continue for the foreseeable future. On the right hand side, there’s two pieces of our infrastructure business. So we just commissioned a new facility in Florida that is producing concrete wall systems for residential housing in that market. That’s just starting now, and we believe that that has an opportunity for growth moving in here starting this quarter and then moving forward.

And then lastly, I mentioned earlier the pipeline business. That’s an element that we feel like has an opportunity to get back on track similar to what it was in the past. And the backlog for that portion of the business is up nearly 52 versus last year at the end of the first quarter. So that’s a strong indication of where that business is headed. This is always an important slide for investors to take a look at as a leading indicator of volume improvements for the rail industry.

So Congress has a program. It’s called a CRISI grant. That stands for consolidated rail infrastructure and safety improvement. Those grants are annual. They’re administered by the FRA, the Federal Railroad Administration, and it’s funding that supports the rail and transit network in The United States, in terms of, repairs and maintenance and upgrades to their networks.

And, you can see the level of funding that’s been approved over the last three years that compared to the previous five years, it’s it’s a five x increase. And suffice to say that some of the the activities in Washington has slowed down the funding flows of those particular programs, so a large portion of that funding has yet to come. We don’t think it’s being eliminated. It’s just been slowed down, and we think that’s an area for improvement, improving demand for the rail business here into the future. And then lastly, in terms of growth drivers, we’ve got construction starts that are all on a positive trend.

There’s been a large number of infrastructure related programs, whether it’s the IIJA or the Great American Outdoors Act, as I mentioned earlier. There’s been a lot of government programs in place to support infrastructure spending, and we expect that is going to be a long term tailwind for the business going into the future. I guess to wrap up on some of the key things to think about when you’re considering L. B. Foster as a potential investment.

So we’ve done a lot of heavy lifting over the last four years to position the business to benefit from a very focused level of growth potential that’s driven by not only government funding, but also demand from our customers for what we would call a more technology oriented offering. So we’ve taken steps to dramatically change the profitability profile of the business. And you can see that it’s coming through in the results that we’ve demonstrated thus far. We feel like there’s more to come. The places that we’re investing are areas where we believe organic growth can be robust, between five to 10% for an industrial company, which is very good.

But importantly, the growth rates of the more profitable elements of our portfolio, we expect will be at a higher rate than that average, which will lift the margin profiles and overall profitability and cash generation generating elements of the portfolio. I mentioned earlier that we have a very capital light business model. We’re only spending $10,000,000 to $12,000,000 worth of money funds per year for CapEx. Some of that is for maintenance, but also partially that is for growth CapEx as well. We have our stock buyback program, which we think is an appropriate use of our cash given where especially where we are with the terms of evaluation today.

And we also will be very prudent with deploying that cash to to potential acquisitions that are out there. From a overall capital allocation point of view, we feel like that disciplined approach will serve us well, and we feel confident that there’s shareholder value to be gained by that disciplined approach. So I’m not going to read the key takeaways. We have I think eight minutes or so for Q and A session. But suffice to say that we’ve done a lot of heavy lifting and we feel good about the work we’ve completed thus far.

Feel like there’s more runway ahead of us. And also feel as though given the the the first quarter challenge with the year over year comparables being a bit softer and the stock price reaction to that, we feel like it’s an opportunity to take a close look at L. B. Foster. If you’re a long term believer in infrastructure spending here in The US, we’re an attractive option to consider to consider.

And with that, I will open it up to any questions. Yeah. Can you give us some more color on Precast? Yeah. Yeah.

The question was some more color on Precast. So it’s about a $130,000,000 business for us. The lion’s share of that business for us is precast buildings that we build in our factories and ship to sites already built, pre built. And they go in ready to be utilized right away with the utility hookups that are necessary. And it’s a nice alternative to a facility or some other property that would be built using concrete block, as an example.

You don’t need the labor, same labor cost to have that done, and it’s done much quicker. Now on the other hand, it’s little more expensive, but it’s also much more sturdy. It can hold up to some significant weather conditions and much more likely to be a robust solution than some of the other solutions that would be out there. So if you go to a national park and there’s a restroom facility I’m trying to think if there’s a picture here. Say again?

Yeah, we don’t have a picture in this deck of that. It’s bottom left, you can barely see it. It’s really small. But it’s precast building that is made out of concrete that doesn’t look like it’s made out of concrete. It can have stone structure.

It can have wood looking structure. It’s got ready to use restrooms, water fountains, showers in some cases. And it’s a turnkey solution for a need that would be out there for national parkers.

Unidentified speaker: Yeah.

Bill Tallman, CFO, L. B. Foster: So that’s actually one you can see pretty clearly here. So on the left hand side, you see those wall systems that are used right there? Is this a pointer? No, it’s not. On the left hand side, you can see those concrete walls.

So those are insulated walls that are built in our factory and shipped straight to the job site ready to be erected. So you’re not building a cinder block home. You are building a concrete wall home. And a lot of the applications in the Florida market are are are looking at solutions like this. And we just opened up our facility in Central Florida, just North of Orlando.

Right now it’s just started up. We think the turnover can be 25,000,000 eventually. And literally, we’re taking orders now and just starting up production.

Unidentified speaker: Sure,

Bill Tallman, CFO, L. B. Foster: sure. But it invoke, you can

Joe Noyans, Three Part Advisers: do both.

Bill Tallman, CFO, L. B. Foster: Of course, yeah. Thank you. Yeah. The question is what’s the largest hurdle that we have or most significant challenge that we have getting the residential market to buy into a precast wall system solution. And I would say that it starts with the homebuilder.

So the homebuilders, they have certain options similar to this that they’re already using. To to me, this is them getting comfortable with our solution, which is slightly different. It’s an insulated unit already, insulated wall. It’s it’s we’re new to the local market. They wanna see what a new home with our system looks like, see it in their market, and then as they get comfortable that we’re able to deliver and perform, then we feel like over time the the uptake of demand will occur.

It’s a strong market, and just in terms of construction that’s already there, they’re looking for solutions. We just have to show that we can perform with a quality product and be on time. I mean, yeah.

Unidentified speaker: So in that market, Bill, are there termite resistant options or are they primarily the wood the wood remade walls? Walls?

Bill Tallman, CFO, L. B. Foster: In that market, I would say today, anything that’s new is not wood. It is concrete block.

Unidentified speaker: Is But you said there were some competing to the system where essentially they could already buy a wall tile in the

Bill Tallman, CFO, L. B. Foster: Yeah, produced in a different way. In a different, yeah. Okay. Yeah. It’s a concrete wall produced in a different way.

So there this this is a we have a license for the technology that we’re using to produce this wall. So it’s slightly different than what’s already out there. Yeah. We have about a minute and a half left.

Unidentified speaker: Do you have any input on high speed rail?

Bill Tallman, CFO, L. B. Foster: Yeah, in some ways. So there’s some projects that have been done here in The United States. Brightline East is one that’s from Southern Florida up Orlando and a little bit further east. So that’s been in place for a while. There is Say again?

That I don’t know. I don’t know that off the top of my head. But we would do some work related to some of the high speed projects that are currently being discussed like Bright Line West, is a line that would go from Southern California to Las Vegas. So that’s one that we’re actively looking at. Do I?

No joke. I mean, you know, we

Unidentified speaker: know he’s going to Mars, but he also has been interested in rail.

Bill Tallman, CFO, L. B. Foster: Yeah. Don’t know. SpaceX, I know we do some work for SpaceX in Houston related to some of the pipeline coding work that we do out of our facility in Willis, Texas. But nothing related to rail with Elon that I’m aware of anyway. Anything else?

Great. Thanks for your time today.

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