L.B. Foster Q2 Earnings Call Highlights

Key Points

• Cash generation and leverage improved significantly: L.B. Foster generated $17.9 million in second-quarter cash, reduced net debt by $13.5 million, and lowered gross leverage to 1.0x from 2.2x a year earlier. The company reaffirmed its full-year guidance, including projected free cash flow of $15 million to $25 million.
• Quarterly results were mixed: Revenue fell 3.5% to $138.6 million and adjusted EBITDA declined 4.7% to $11.7 million, primarily because Rail Products orders shifted into the first quarter and employment costs rose. First-half sales increased 7.6% and adjusted EBITDA grew 19.6%.
• Backlog and outlook remain supportive despite pockets of weakness: Consolidated backlog rose 17.4% sequentially to $246.1 million, with at least 80% expected to be completed by the end of 2026. Rail backlog increased year over year, while Infrastructure backlog declined due partly to a canceled pipeline coating order, though it improved in July.

L.B. Foster NASDAQ: FSTR reported second-quarter 2026 results marked by strong cash generation, lower debt and improved first-half profitability, while quarterly revenue and adjusted EBITDA declined modestly as sales timing shifted and personnel costs rose.

President and CEO John Kasel said the company generated $17.9 million in cash during the quarter, its highest second-quarter cash generation since 2017. Net debt declined by $13.5 million during the quarter and by $35.2 million from the prior year, while gross leverage fell to 1.0x from 2.2x a year earlier.

“We’re pleased with the second quarter and first half of the year,” Kasel said, pointing to the company’s backlog and confidence in its second-half outlook. L.B. Foster reaffirmed its full-year financial guidance during the call.

Quarterly sales decline reflected order timing

Second-quarter net sales totaled $138.6 million, down 3.5% from the prior-year period. Chief Financial Officer Sean Reilly said the decline was primarily tied to the timing of customer orders in the Rail Products business, after sales were pulled forward into the first quarter. First-quarter sales had increased 23.9%, and first-half sales rose 7.6% to $259.7 million.

Consolidated gross margin improved 80 basis points to 22.3%, aided by favorable business mix. However, gross profit included a $2.1 million charge related to L.B. Foster’s exit from certain non-core product lines at its Tew Engineering business in the United Kingdom. SG&A expenses increased $1.7 million, or 7.7%, to $24.1 million, primarily due to higher employment costs, including $1.1 million in variable incentive-based compensation tied to the company’s year-to-date performance.

Adjusted EBITDA was $11.7 million, down 4.7% from a year earlier. For the first six months, adjusted EBITDA increased 19.6% to $16.8 million, supported by higher sales volume and improved gross profit.

Operating cash flow for the first half was $7.4 million, an improvement of $23.2 million from the prior-year period, reflecting higher profitability and lower working-capital needs. Reilly said the company continues to project full-year free cash flow of $15 million to $25 million, with most of that cash generation expected in the second half. Capital spending is expected to be about 2.7% of 2026 sales.

Rail and Infrastructure trends

Rail segment sales were $72 million in the second quarter, down 5.2% from the prior year because of order timing in Rail Products. The decline was partly offset by an 18.1% sales increase in Global Friction Management and a 66.9% increase in Technology Services and Solutions, which benefited from short-term project work in the United Kingdom.

Rail segment margins rose 70 basis points to 20.6%, primarily due to favorable sales mix. Rail backlog increased 8.2% from the prior year, helped by a large U.K. order received late last year. During the question-and-answer session, Reilly said that order was valued at about £15 million and is expected to extend over a couple of years.

Infrastructure Solutions sales declined 1.5%, or $1 million, from the prior year. Steel Products revenue fell by $2 million, largely due to lower threaded water well volumes, while Precast Concrete revenue increased $0.9 million amid continued demand. Infrastructure gross margin increased 80 basis points to 24.1%, aided by sales mix and manufacturing efficiency.

Infrastructure backlog ended the quarter at $104.7 million, down $34.5 million year over year. Reilly said $19 million of the decline related to the cancellation last year of a Summit pipeline coating order, while Precast Concrete backlog was lower because of reduced activity in shorter-turn projects. Still, the company said Infrastructure backlog increased about 10% in July from June, with improvement in both Steel Products and Precast Concrete.

Backlog, capital allocation and market outlook

Consolidated backlog totaled $246.1 million at quarter-end, down $23.8 million from a year earlier but up 17.4% sequentially. Kasel told analysts that at least 80% of the current backlog is expected to be executed before the end of 2026.

The company’s trailing 12-month consolidated book-to-bill ratio was 0.96:1 at the end of the quarter. Rail’s ratio was 1.03:1, while Infrastructure Solutions’ ratio was 0.85:1, reflecting the Summit cancellation and softer Precast Concrete orders.

L.B. Foster said debt reduction remains its top capital-allocation priority, though it also plans to invest in organic growth initiatives, particularly in Precast Concrete. The company has repurchased more than 1 million shares since early 2023, representing 9.3% of shares outstanding, and has $28.7 million remaining under its repurchase authorization over the next two years. It also said it will continue evaluating acquisitions, with a primary focus on the Precast Concrete market.

Kasel said rail funding programs supporting repair and maintenance projects remain active, with no significant disruptions observed. He also cited favorable conditions in domestic energy markets for Protective Coatings and robust civil construction activity supporting Precast Concrete demand. The company said it has not experienced a material impact on demand from broader geopolitical or macroeconomic conditions.

Separately, L.B. Foster announced that Greg Lippard plans to retire at the end of the year. The company promoted Sean Reilly to CFO and Bill Thalman to chief operating officer, both effective June 1, and appointed Jason Bowlin to succeed Lippard as senior vice president of rail.

About L.B. Foster (NASDAQ:FSTR)

L.B. Foster Company is a diversified infrastructure solutions provider offering products and services to the transportation, energy, and construction markets. Founded in 1902 and headquartered in Pittsburgh, Pennsylvania, the company has built a reputation for delivering specialty materials and engineering solutions that support critical infrastructure projects across various industries.

The company's operations are organized into three primary segments: Rail Products & Services, Construction Products, and Tubular & Energy Products.

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