Great. Good afternoon, everyone, and thank you for joining the Sidoti & Company 2025, March 2025 Small Cap Conference. My name is Julio Romero. I cover building products, industrials, and engineering and construction at Sidoti & Company. Really pleased to be able to host L.B. Foster. Their ticker is FSTR. With us today, we have John Kasel, President and Chief Executive Officer; Will Thalman, EVP and Chief Financial Officer; and Daniel Swick, who works with Lisa Durante on the IR front. The format of this is going to be a presentation followed by some Q&A towards the very end. If you do have questions for L.B. Foster, feel free to type them into the Q&A section at the bottom of the screen. Happy to ask towards the very end if time allots. With that, John, Will, and Daniel, thanks so much for being here, and the floor is yours.
Thank you, Julio. Much appreciated. Thanks for joining us today. Dan, if you go to the first chart, please.
All right. A little bit about me. I started the company. I'm just over 20, 22 years with the company. It's basically I've run multiple facets of the company. In 2020, I was named CEO, and in 2021, I was named CEO. We're going to talk about the story in the last three, four years, as we're continuing to pivot the company moving forward. A little bit about our history. We've been around since 1902. It was started by four brothers, the Foster family. Much of what we do today is in North America. In fact, 90% of what we do is with just over 1,000 employees, serving the North America market, about 90% of us here in North America. We're doing that as specifically strategic to us is really managing what we do here in North America.
We're going to talk quite a bit about the business segments. We roll up under two segments: Rail Technology Services and Infrastructure Solutions. We'll get into more details about that. You can find us on NASDAQ. We're traded FSTR. You see on this page, and we're going to talk about the guidance that we're giving for 2025 as it relates to revenue, adjusted EBITDA, and trajectory we're seeing, not just on gross profit, but also on cash flow. The company's had a rich history of generating cash, and we have, we're back to doing that. We feel confident that that is here to stay as is generating for small micro cap company, a strong balance sheet, but also generating a lot of cash. Next.
I want to just start with this because I think it's important as, you know, talk about the 2021 versus 2024, and you see on the left-hand side and where we started, basically a strategic journey, a transformation. I know a lot of companies talk about transformation. Most of our heavy lifting is behind us now. It's about continued growth on a solid platform, profitability, as well as cash generation. On the far right is what Will and I published earlier this year as far as our financial guidance. You can see significant improvement from where we were just three years ago. We had to get smaller, to get larger. In the last three years, we've done a number of deals. We're going to share with you some of the highlights of those.
But more importantly, it was about getting this product line and portfolio in line with who we are, who L.B. Foster is and our core competence. That is really specifically in our growth markets that we are going to talk about today. Next. All right. Let us walk into the segments. We will move to the next page. This is where we are really focusing on how to, how do we continue to grow growth for the shareholders. Rail is the legacy segment. The business goes all the way back to 1902, and the infrastructure is something we added during the period of time. We feel very good about both. Rail is the largest of the two. It is about 60% of the sales of the portfolio. You see what we are working on here is gross margins.
22.2% gross profit margin across the company and split out equally between rail and both infrastructure. We're going to get into more of what Rail Technology Services mean, what it means to us, and more importantly, what it means to you and Infrastructure Solutions in the coming charts. Next. First of all, rail, a little bit all the way back, rail products, you know, that's where we built and made, manufactured, and we still do today a lot of rail products that the transit and freight authorities run on. We kind of got the recognized brand, if you will, of when you build track, you go to L.B. Foster. We liked that business, but it also was something that was, as much of that was commoditized over the years. We needed to pivot ourselves into more technology innovation company.
We started that back in 2010 with the acquisition of Portec. Instead of just selling our rail products, we wanted to be able to give some solutions and offerings to be able to maintain that offering related to rail products. That is where Global Friction Management came in. We did that for two reasons. One, we wanted to give the customer something that would give them better life. They would have better utilization. We also wanted to grow the company and get a larger footprint. That brought us throughout North America as well as Western Europe with the acquisition of Portec.
The third piece of that was if we want to continue to give the customer something more off track to really understand how they're operating their equipment and bring a reliability and a safety element to the business is where we bought the two business, which came from the U.K. back in 2015. Here, this is about surveillance. It's about understanding how trains are running on their particular assets. This is what's really changed our company and our thinking and where growth is going to continue to come, not just in global markets, but here in North America, bringing technology and services to the forefront to help our customers be able to run their assets and utilize their assets more effectively and efficiently. Next. Infrastructure was the other piece. We've, this has been a little choppy in specifically in 2024.
We feel very, very good about this business going forward. The choppiness was not on the precast side. We have had nice growth, tenure as far as what we have done in precast. We have grown that business from CXT back in 1999 with a recent acquisition of VanHoose Co in 2022, and now starting up an operation in Florida. The choppiness has been on the steel side, specifically on the energy side. In the last four years, you know, not much has happened with oil and gas. Now we are seeing that change significantly here in 2025, the start of 2025. We will talk a little bit about that in the coming charts. Next, we break up the business.
You know, we talk about how we report to the markets in two segments, but how we run the business is we look at it from a returns point of view and a growth point of view. First of all, from a returns point of view, this is the rail products that I was just mentioning, the U.K. services as well as the steel products. These are businesses, especially the rail products that generate a lot of cash. It gives us the opportunity to take that cash and reinvest it in the company. That is what we do on the left-hand side. The left-hand side is where we are spending our engineering, our R&D, and this is where we are spending our money and efforts. This is where the growth is coming.
Will and I will talk quite a bit about the growth that's coming in organic in nature in the next 2025 and beyond. We feel very excited about it. That all comes from how we run the return side. We feed and fund the Global Friction Management, the track, Total Track Monitoring, and what we just talked about, the precast concrete products. Next. This is one of our favorite charts because this is what, why we're doing what we're doing and why we're driving shareholder value and return. On the right side, we've had some contraction as it relates to growth, but that was, we did that intentionally, because we wanted to move away from the commodity type businesses, and really get into stuff that could grow in profitability of the company. That's what you see on the left-hand side.
74.6% growth since 2021 on the growth side. Some of that did come through acquisition, specifically with our Tennessee acquisition. In large part, a lot of that's coming from what we're doing with our organic programs. We're also at the same time focusing on our margin profiles. This is where it's exciting to us because we're really kind of defining some market, market spaces, as well as the opportunity to get paid for these. We're seeing a lot of pull from our customer on the rail side and infrastructure side of where they want our products, our services, our innovation that we're having offer. We're getting paid for it, as you see in respect of our gross margin profiles here on the left. Next. I'll flip it over to Will, and he'll give you a little more meat on the bone.
I'll come back to the closing remarks, how we're kind of seeing this year shape up. Will.
Thanks, John. Good afternoon, everyone. Thanks again for joining us. My name is Will Thalman. I'm the CFO of L.B. Foster. I've been with the company just over four years, and I joined at a very exciting time in the company's history, given the transformation work that was kicked off back in 2021. I'll spend a couple of minutes starting off with how we finished up 2024 and then get into the accomplishments we've seen over the last several years. We finished 2024 exactly how we expected, in a pretty strong way when it comes to cash generation as well as profitability expansion. Second half of the year was very strong, and that was something that we predicted and expected in our guidance that we provided. The net debt levels came down as expected.
We finished at the end of the year at 1.2x net debt, our leverage. The margins were higher on a year-over-year basis. EBITDA grew for the full year, up $1.8 million. As I mentioned, we generated a significant, significant amount of cash that allowed us to not only pay down our debt, but also execute a pretty robust stock buyback program in 2024. I'll remind everybody that we had a Union Pacific obligation that was settled and finalized at the end of 2024. That is behind us at this point. That represents a nice inflection point going forward in terms of free cash flow generation. The guidance we've put out for 2025, John mentioned, contemplates continued growth and strong profitability expansion. That's going to be driven by those growth platforms.
The free cash flow that we expect to generate will allow us to not only manage our debt levels in line with our aspirations to maintain that one to two times leverage, but then at the same time, execute a stock buyback program with the new one just authorized, just at the end of the last board meeting. It would have been announced in early March. A $40 million program. We feel very good about the outlook. Next slide, Dan. This is one of my favorite slides because it shows such a great journey that we've been on and the results that we achieved. We were able to complete nine transactions over a three and a half year period of time, five of which were divestitures, four acquisitions.
The acquisitions were squarely in our growth platforms and really helped us to transform the profitability profile of the company that you see here. On a reported basis, our growth over that top, top, that time frame was about 3%, just over 3%. When you look at the organic elements of it, we grew organically about 17% over that three-year period of time. Importantly, we were also able to drive strong margin expansion because of that portfolio work that we accomplished along with the organic growth, as well as the profitability initiatives that we've had in the business. You know, we went from 16.8% all the way up to 22.2%.
We would expect that gross margin to continue to expand moving into 2025, given our goals in terms of growth within the growth platforms and continuing to leverage the strong platform we have in the returns. Next slide. This chart gives a similar picture in terms of the annual improvement in adjusted sales and EBITDA and gross profit. It is also important to highlight the improvement we saw in EBITDA from $19 million in 2021 all the way up to $34 million in 2024. That represents a 79% increase over that time frame. Again, more room to grow here, based on the guidance we have put out in 2025. Next slide. We are really proud of our ability to manage cash and leverage, cash generation and our operating leverage. We believe this is a core competency and capability of the company.
Our cash flow can be very lumpy given the working capital needs of the business, and the seasonality of the business that we have. Typically, the second and third quarter are our strongest two quarters. First quarter is typically our weakest, and the fourth quarter is somewhere in between those two data points. You know, working capital cycle typically results in us having a higher leverage level in the first and the second quarter. You can see we had that in the last couple of years per this chart. We also have the cycle come down on the back half of the year, which allows us to pay down the debt and get to a reasonable debt level. We'll be targeting one to two times, closer to that one, at the end of each fiscal year.
We think we have the cash outlook, that the cash needs of the business will help us to be able to get to that level of leverage also with the improvement in profitability that we expect to see coming in 2025. I already mentioned you real quickly, just one more comment back here, Dan. Thanks. I already mentioned the Union Pacific obligation that's behind us. I did also want to mention, you know, we have $93 million in net OLs. From a cash taxes point of view, we have a very low federal tax bill for the foreseeable future, and that will also be part of our cash generation story here for the foreseeable future. Thanks, Dan. Next slide. John mentioned earlier about the backlog and how we were seeing the business cycle given some of the decisions that we've made.
For the last several quarters, we've operated below one when it comes to the book-to-bill ratio. That's in both of the businesses. You'll notice that rail is a bit lower than that, on the lower side. Infrastructure are a bit higher. Both have been improving in terms of book-to-bill ratio, but it's been below one largely because, or, in part due to the decisions that we've made strategically to get out of certain product lines and certain parts of the business that were not performing from an economic profit point of view. If you flip to the next page, I can unpack that a little bit more. This is the backlog on a consolidated basis, and then for both infrastructure and rail. On a consolidated basis, backlog is down year over year $28 million. That's about 13%.
You can see on the left-hand side, rail represents about $22 million of that, and then infrastructure about $6 million. Infrastructure is largely due to the timing of some of the orders that we've had in the coatings business. That backlog is down on a year-over-year basis, but we see it improving. As John mentioned, that's an area of the business that we expect will continue to improve under the new administration and the focus on energy production here in the U.S. On the left-hand side, over half of the decline in the rail technologies business backlog is related to the U.K. business, where we've made a very strategic decision to scale back initiatives there because of the profitability profile of some of the business that we had previously. It's a very tough market.
they're having their challenges in the U.K., and we're purposely scaling back that business, because we think it's the right thing to do. We have better uses for that capital. We're going to deploy it to other parts of the business that have better prospects for the future. Next slide. I'll wrap up my comments with this slide. you know, we, we think we have a very compelling, message here today, particularly where the stock price is trading today. you know, we're, we're guiding free cash flow for 2025 at $20million-$30 million, midpoint being $25 million. We generated $25 million of free cash flow in 2024 on an apples-to-apples basis, if you consider the, the one-time cash needs of the business related to what we would call non-recurring items in 2024, as well as the UP payment.
We'll consume some working capital moving into 2025, relatively speaking, because of the sales growth, but we feel great about the $25 million midpoint that we've got established. You can see the yield, the free cash flow yield against today's stock price at the high and the low end of the range that are reflected there. From a valuation point of view, as of year-end, we were at about 10x EBITDA based on 2024 EBITDA enterprise value to EBITDA. When you look at where the stock price is trading today and consider the debt level as well as the cash generation that we expect in 2025, we're a very, very attractive valuation. As I mentioned earlier, we have our stock buyback program. We're active with that program, and we think it's an attractive time to be looking at L.B. Foster.
Foster. With that, I'll turn it back over to John for his closing remarks. John.
Thanks, Will. Go ahead. Let's go to the next chart, Dan. I'm sure I'll wrap up here in five minutes with a little Q&A session. A lot of this is just a repeat of what we talked about, but I think support, we get a lot of questions about our capital priorities. You know, we take capital very seriously, and we're very structured about how we go about things, especially spending money. We're, you know, we finished 1.2, as Will mentioned, at the end of the year. You know, one is a target of ours as far as leverage ratio. We're very excited about the largest, the largest program we have as far as repurchasing of shares, which is $40 million over three years, which we're active in today. Growth is not a big number for our company.
It used to be in the past when we were building all these plants and facilities. Since we've really been pivoting the company with technology innovation, it only represents 2% of the sales as it relates to CapEx for our company. We're very mindful where we spend that money. We always have a filter open as far as acquisitions, but we're not looking for the big game-changing. We don't need it. We have plenty to do organically, but where it makes sense to do tuck-in acquisitions, where we can add a specific product line or move to a geographic location, we will definitely take those under consideration. You know, unrelated to what's going on right now, coming out of D.C., there's a lot of pent-up demand.
There's a lot of monies that are maybe a little bit of a flickering green right now because of what's going on in D.C. We feel very confident and comfortable that the monies are going to be flowing into the balance half of this year as well as into next year. One of the things we're really excited about is renewing domestic energy here in oil and gas specifically. The last four years, we haven't done much in that business, but we're seeing quite a bit of work. I mentioned it there in our earnings release. We just hired 55 people, which really fills out our facility as far as our ability to co-pipe for the oil and gas distribution business. We just commissioned a facility in Florida to produce our EnviroCast modular wall system.
We have lots of growth opportunities, and we see a lot of funding and support behind to make these happen. I'm going to walk through a few more before we close the session. Next. Here's one that we really keep a close eye on, and these are CRISI grants. This is monies that have been appropriated for Consolidated Rail Infrastructure and Safety Improvements for the Missouri Federal Government. We've seen a five-fold improvement in funding. What happens is these things get kind of a backlog, because they have to find specifically where they want to look at safety and efficiency. There's a lot of focus on safety and efficiency in the rail space today, both on the freight side and transit side.
The monies that you see on this chart specifically in the FY 2022, 2023, and 2024, these bar charts, those are billions of dollars, and it is five-fold what we have seen in the past. The bulk of this money, in fact, 2023 and 2024, has not been spent at all. A good proportion of, perhaps we believe, up to 70% of the 2022 money has not been spent. This is all pent-up demand that is going to be flowing through. You know, at the end, you know, this is good for L.B. Foster and our shareholders. Next. Here is a chart, a lot going on on this chart, but, you know, we are seeing improvements in what is going on related to just the year-over-year improvements as well as traffic, all the other things we are looking at to really drive our company.
The things that's going on in the pipeline, we talk about the Great American Outdoors Act, the IIJA, which is from 2021. We believe that only 30% of that money has been spent. We're just looking at a lot of pent-up demand, that's going to be flowing through. The good news is L.B. Foster, 90% of what we do is here in North America. A large percent of that is right here in the United States. Our suppliers, by and large, are all domestic. We feel we're very well positioned for this infrastructure supercycle that we see for years to come. Next. As a reminder, our thesis, our structural improvement, to drive profitability is in place. The heavy lifting is behind us. We feel very good about our organic opportunities for growth. This is in the steel side.
We're seeing a piece of that, but more on infrastructure precast and, of course, on the rail technology side is a big place for us growth. Favorable free cash flow is imminent now, with the closure of the UP settlements that we did last year. Will talked about that. You know, we will be generating cash as we laid out in our guidance. And then very disciplined how we spend those monies. We believe in protecting the assets of the company and impacting our, protecting our shareholders as well. That's a very, very important part of how we manage our cash and manage, more importantly, our strategy, taking that cash and really driving our core confidence, what made L.B. Foster brand what it is today and then driving it to the future. Next. In closing, strategic execution behind us.
Will talked about the attractive valuation, free cash flow, and then strong profitability with our guidance that we, that we put out there for this year, 34% growth, and adjusted EBITDA, with 5.5% organic sales growth. And then free cash flow, you know, landing in there between $20 million and $30 million. We're seeing the benefits of a lot of heavy lifting, a lot of good work by all the employees at L.B. Foster in the last couple of years making this happen. This is the time for our company to grow both top and bottom line. With that, we thank you for your time, and, Julio, I'll turn it back to you for, we got maybe three or four minutes for some question or two.
Excellent. Thank you very, very much for the rundown. Again, if you have questions for L.B. Foster, type them into the Q&A section. We'll get to it if we have time. I'll kick it off here with just, you know, you mentioned, John, the strategic execution behind you, much of the heavy lifting with regards to the portfolio changes complete and continued growth and structurally improved cash flow ahead. I really wanted to hone in on the growth pieces of the business. Global Friction Management, Total Track Monitoring, and Precast Concrete. Can we just identify, you know, what can drive above market growth in each of these three?
Yeah. Precast, we're moving, we're following the people, the demographics of the population, the South Southeast. That's why we built a facility in Florida, and we have a new acquisition that we did in Tennessee. That's going to drive a lot of growth. A lot of the infrastructure that's being built today starts with concrete, and managing and moving water. Now we're getting into light industrial applications for buildings as well as residential homes. That's a big piece of that. On friction management, it's all about the ROI for our customer. It's about efficiency. It's about running their assets on rail and getting better fuel savings, better wear and tear, better life. Our customers clearly understand that. We're the number one market leader, the best brand in the market today.
More importantly, only about 5% of the market that we're serving today relative to the rail is being treated today. We see a lot of upside as they continue to move our products and solution throughout their rail structure, both freight and transit across North America. It's a big piece of that. You know, the railroads want to be able to run their assets and run their trains and run as many trains as they can and keep them closest together and be able to move freight or move passengers and do it safely and reliably.
With our Wild Mark IV and with our RockWall Solutions we have today, we can give them early warning what's going on and be able to manage those assets, be able to run more effectively and efficiently down the track, and be able to get the best velocity they can and reduce their dwell time when they're in your yards and locations. All those are good opportunities where the customer is really just pulling on L.B. Foster and taking our technology innovation. We're building off of what we were once just a rail products company into something that's really giving them an ability to be a better company and do what they do even better. I think it's a very exciting time. Will talked about it's a great time to get into the stock.
We feel good about where we're at today, and we only see things picking up here in the second half of this year.
Really helpful. To zoom in on the Global Friction Management piece, when you said you serve 5% of the market, the other 95% is just untouched, or are there other folks serving that market?
No, it's untouched. So the way that works today with the technology is, you know, they're just, they're in the areas with applicators and consumables where it makes sense, where it's the most demanding areas. And we're working on technology to be able to bring that product across the whole service lines, and be mobile in application.
Very good. You generated strong cash in the fourth quarter, ended 2024, solid balance sheet, and you announced your new three-year $40 million share repo program. Just speak to how you're weighing cash uses, share repos versus debt reduction and growth initiatives, both organic and inorganic.
Yeah. You know, we're mindful that we're a small micro-cap company, and I know a lot of folks are sensitive about that and balance sheets. And so we, when we look at capital, we take that very seriously. And we were, you know, we have a mindset, you know, we like to be around one times. But, you know, second of that, it's about buying back shares of the company right now. We really think that's the right thing to do. We look at the valuation of where it's at today. So we're going to take that. And where it makes sense, we'll look at smaller tuck-in type acquisitions with capital. But it's really about supporting. At the end of the day, I want the message I want to leave, it's about supporting the organic programs we have today. That's the real upshot to the company.
We do not need to go out and do a bunch of risky M&A type work and go off and try to be something that we are not. We have plenty of opportunities. We just, we are really focusing on doing it well.
Perfect. Well, John, Will, Daniel, thanks so much for taking the time, and I'll leave it there.
Thanks, Julio.
Thank you, everybody.
Have a great day.
Thank you very much.