Okay, good morning everybody, and thank you for joining the Sidoti Company's September 2025 Small Cap Conference. My name is Julio Romero, and I cover building products, industrials, and engineering and construction names at Sidoti Company. We're really pleased to be able to host L.B. Foster. Their ticker is FSTR. With us today is John Kasel, President and Chief Executive Officer, Bill Thalman, Executive Vice President and Chief Financial Officer, and Lisa Durante, Director of Financial Reporting and Investor Relations. Management is going to have a presentation for us. It'll be followed by some Q&A towards the very end. If you do have any questions for L.B. Foster's management team, feel free to type them into the Q&A section at the bottom of your screen, and I'm happy to ask towards the end on your behalf.
With that, John, Bill, Lisa, thanks so much for being here, and the floor is yours.
Thanks, Julio. Thank you, everybody, for joining Bill and Lisa today, and myself, John Kasel, President and CEO of the company. As you can see in this first chart, there are a number of products here that L.B. Foster provides to the marketplace. Bill and I are going to walk you through the things that we do, and most importantly, we make things, and we build the American and North American infrastructure. The company was founded 123 years ago. We're a corporate office in Pittsburgh, Pennsylvania. As I mentioned, most of what we do is in North America. In fact, about 90% of the sales is here in North America. We report out in two business segments, both Rail Technologies and Services and Infrastructure Solutions.
As you can see here, the revenue, and Bill and I will get into details about this as far as the 2025 guidance, where our stock price is today, and more importantly, the value of a shareholder return we're providing to the investor. We've been through quite a bit, and we're going to walk you through some of the exciting things. Our company's been around for 123 years. We've still got a lot of opportunities for growth, both top line and bottom line. Next. Here's a great example where we really got after things, where the company really transitioned itself and transformed. I won't really use the term transformation anymore. We did a lot of heavy lifting in the last three or four years to put the portfolio and the business focus where it needs to be today.
You can see just between 2021, when I became the President and CEO, and Bill Thalman had just recently joined the company as CFO, as Julio mentioned. We got after things with a really strong focus on what we could do and how we could get better. It wasn't really a top-line focus. It was really about restoring and simplifying the business and bringing margins to the forefront of what we want to do. You can see a 540 basis point improvement in margin over that period of time and really focusing on generating cash and EBITDA for the corporation. We'll walk through what we're looking at for the second half of this year, as well as the 2025 financial guidance later in this deck. Next. Our company legacy and history is very, very important to us. The name L.B. Foster goes back 123 years ago, started by four brothers.
For a large part of the time, it was a privately held company, and it was restored 40 years ago. The company became public, as Julio mentioned. We're on NASDAQ today, traded FSTR, and the company has made a number of strategic moves with acquisitions over the past, but the real emphasis of where we're at, more importantly, where we're going, you'll see on the right-hand side here. Really focused on strategic execution, simplifying the business, and continuing to make the infrastructure build here in North America as the monies flow through, and we'll share that with you today. Why we feel very good about where we're at, more importantly, where we're heading as a company. Next. Okay, I talked about two big business segments, where their infrastructure in the past was relatively small.
We've been purposely trying to build up the infrastructure side on the sales side, so we're not quite even today, but that's where a lot of our focus is, getting infrastructure aligned with the rail. The margins respectively below here have been a big lift for the company, which I shared with you a few minutes ago. If you can see, we're 22.2%, and it's a pretty even share between the two segments. Next, let me get into, on the next chart, what these big business segments look like. If you go back to 123 years ago, we started in the Rail Products business. We have Rail Products, Global Friction Management, and technology services and solutions. These all support each other, and they build upon each other. The Rail Products is very simply that.
It's products that go to build the rail system, both transit side as well as freight side. Global Friction Management sits in and works with that build product of providing better efficiency for our end customer, again, both on the freight and transit side. Technology services and solutions has been a recent opportunity for us, where we're really seeing an improved margin profile, as you see on the right-hand side of this chart. Now we're off track in providing information and opportunities for our customers to really understand how those products and how that Global Friction Management is performing, and opportunities for them to be more efficient in what they do and how they do it in the marketplace. This is where we're really seeing exciting growth opportunities, and all three of these business segments really support each other as we continue to grow. Next.
The second part of the business, which we really like, is it supports the rail side, is the infrastructure side. We just make, very simply, we make products that go to build north here in the United States, in both steel and in concrete. On the Precast Concrete side, this goes back about 30 years with the company of businesses that we really like. Concrete is really becoming a favor in the areas that we serve, which is specifically the east and southeast parts of the United States. Steel products have been a legacy product for us, where we get a nice low business and provide nice cash for the company. This is an area that we're seeing lots of growth and lots of opportunity flowing through the government funding, as well as local municipal projects in regional areas.
How Bill and I and the management team run the business, and this is how we really simplify it, is it's all about growth. It starts with returns. The return sides are the legacy products that I mentioned that generate cash. These are businesses that are, for the most part, very stable. They're predictable. They don't take a lot of management time, but they do generate quite a bit of income or cash for the company. We plow it into the left-hand side. This is where we spend our money on R&D. This is where we're spending money on SG&A. This is an opportunity where we are really defining some markets and growing, expanding our opportunities and the markets we serve, both today as well as adjacent spaces in the future. This is one of our favorite charts. This keeps us on track.
If you look at how we're running the business on the right-hand side, again, the return side, that's about the portfolio moves that we have made to really simplify the business, to take out some of the noise, take out some of the commodity-type products. It's not about sales on this particular side. It's about where we can stabilize the business and make money and then stabilize the margin profiles on the right-hand side. The left-hand side is where we're seeing nice growth, both in this year as well as in the years to come. Global Friction Management, for example, 42%. Total Track Monitoring, 273%. Precast, 119%. These are significant growth opportunities for us, and we're in the margins where we're really protecting and supporting. These are opportunities where we get paid, and we get paid for the services and the products we provide.
I'll turn it over to Bill, and I'll come back with some closing remarks. Bill.
Thanks, John. Morning, everybody. Pleased to join the call this morning and give you an update on the progress that we've made at L.B. Foster Company. As John indicated, I joined the company back in March of 2021, just when the strategy reassessment was being developed and kicked off. As John indicated, we've been very busy over the last four years or so, evolving the business that we have and really placing bets, I guess, is the best way to say it, and making sure that we had a clear line of sight of where we were going to place our investment to be able to drive profitable growth with a focus on generating economic profit and positive economic returns. We've been pretty successful. The most recent quarter that we completed, we did report an increase in our sales year over year, about 2%.
That was the first time that we increased sales on an organic basis in five quarters. We were pleased at that. A lot of that previous trend was due to some portfolio churning that was going on when we were scaling back certain portions of the business that were not going to be part of the long-term solutions for our offering. We've made significant progress in shaping that portfolio. You can see it in the margins. The reported margins were up on a year-over-year basis. SG&A is being leveraged. We're down 200 basis points versus last year. Importantly, our EBITDA was up 51% year over year in the second quarter. You can see the lift in profitability that's been generated there in the second quarter. Cash flow continues to be an area of focus, and we perform generally very well with our cash flow, capital-light business model.
We manage our debt and our cash needs very prudently. You can see the leverage has improved on a year-over-year basis, down a half a turn to 2.2. I'll talk a bit more about our targets, our longer-term targets later on. We're active with our stock buyback program that's been in place, refreshed here. It's been in place for several years, and it was just refreshed here back in February. We're active there. Our order book is growing. We saw a nice increase year over year in the second quarter with some strength in our rail business. We feel good about the progress we've made through the second quarter and more to come in the balance of the year. Next slide.
I'm not going to go through this slide too much because John mentioned some of the key takeaways, but at the end of the day, we've been very active in evolving our portfolio to drive improved sales and improved margins. Now, the margin profile, you can see the improvement, 540 basis points back from 2021. The sales are down a bit compared to what they were in 2021. However, we would say that the first part of the year was very slow related to the rail business. We're seeing strength in the Precast Concrete business. It was up 36% in the second quarter, and we're expecting solid growth in the back half of the year, which should lift that sales number well above the $514 million and then with that solid margin profile. We feel good about the work that we've got completed at this point. Next slide.
This is a similar view, but just summarizing each of the individual years and bringing it all the way to EBITDA. You can see we're at 3.6% of sales back in 2021, just over $19 million at that point in time. Our trailing 12 months was $34 million, 6.1% of sales, so significant improvement there. Midpoint of our guidance for the year is $42 million. You can see we're making significant progress to improve the profitability. Importantly, the invested capital of the company is declining in that same period of time. We're doing a really good job of driving economic returns and profitability through that smart deployment of capital. Next slide. Just a quick comment on seasonality. We do have a very seasonal business. Generally speaking, the second and third quarter are typically our strongest quarters just because of the construction season.
From a working capital point of view, what generally ends up happening is working capital in the first half of the year is consumed as we build up assets and working capital to support sales during the construction season, and then it unwinds in the back half of the year. That's the typical trend we would see. We would also expect that this year as well. I will say that some of the working capital need was deferred to the back half of the year just because of the sales shift in our rail business from the first and second quarters back to the back end of the year due to some of the delays in the rail space. Normal typical seasonality expected. Next slide. Cash flow, as I mentioned before, has been very favorable.
You can see the sequential decline on leverage as well as the year-over-year improvement on the right-hand side. We target leverage to be one to one and a half times on debt/EBITDA. Right now, we're at 2.2. At the end of the second quarter, we would expect that to continue to decline. We have a very capital-light business model that generates a significant amount of cash. We have a favorable NOL position, which will shield taxes for the foreseeable future. I should mention we just completed the renewal of our credit facility and increased up to $150 million back in June and significantly favorable terms in that facility. We feel good about the capital available to us to execute our strategy. Next slide. Last comment on the revenues and the book-to-bill ratios.
As I mentioned, we saw a strong second quarter in terms of order intake, particularly in the rail business. You can see that in the elevated book-to-bill ratio on the lower left-hand side of that chart. Infrastructure continues to expand as well. On an overall basis, we're seeing an improving order book as reflected in those ratios. Next slide. That's reflected in the backlog trend. You can see the build on the lower left-hand side in the rail business, which was substantial. We're still pretty strong already on the infrastructure side as well. One thing that's important to recognize is the overall profitability mix within the backlog is improving as well, particularly on the infrastructure side, where steel products are seeing some improvements in our coatings business, which is helping with the overall profitability improvement outlook for the balance of the year. Next slide. This is my last slide.
Just a couple of comments on some of the metrics that we look at from a cash flow and a yield point of view. On the right-hand side, you can see the valuations where we are. We're currently trading at about eight times EBITDA on a forward basis. We still feel like we have an attractive valuation. We're buying stock, as I mentioned before. The cash flow yield that we currently are trading at is right around 7% at the midpoint. Our midpoint is $20 million of free cash flow for the year. Again, we are optimistic that we continue to see that strong cash outlook coming as our season winds down and finish the year strong from a sales and profitability. With that, I'll turn it back over to John for his closing remarks. John.
Thanks, Bill. Bill had mentioned quite a bit about capital. The questions we get are where we spend and what our priorities are related to capital allocation. As Bill mentioned, every debt itself is important to us, so one and one and a half times. We really focus on somewhere in that range. Share repurchase, we got a very active program that goes for the next couple of years, $40 million authorized. We got an active 10B51, and we're out buying stock today. Growth capital is about 2% of sales. We feel that we're pretty light as far as capital side, but we definitely want to support that as about 50% maintenance and 50% on the growth side. Where it makes sense, we will do tuck-in acquisitions, specifically in our infrastructure Precast Concrete business, where we want to grow a product line extension or in a regional area.
As we all know, it's been pretty choppy coming to government and everything that's going on. Going back to the IIJA, about 30% of the IIJA money has actually been spent. We started this year with DOJ and all the other things related to the government. Focus this year on government spending. The good news, we are definitely seeing our order book pick up. Our bidding activity is exciting. The monies are starting to really flow through the government that we're seeing here in the second half of this year. We expect that to continue across the business segments that you see listed here. There's definitely a renewed focus in restoring energy here in North America. We're seeing that. On the coatings side with backlog up 36.8%. As Bill mentioned, we had a big Precast Concrete second quarter of the year.
We're going to continue to see that throughout the year. On the rail side, the work needs to be done to shore up the infrastructure related to hardening the rail. We're seeing that work and the opportunities flow through. Things are really starting to come together nice as far as being this investment supercycle that we're looking to see. Why invest in L.B. Foster Company? First of all, I think it's the leadership. The leadership team that's been with the company has been through some tougher times, but more importantly, really focused on a strategy and where we can add value and growth. That's where this profitability improvement is really coming from. Really building off the strategy, focusing on where the money is being spent here in North America. Understand where the organic drivers are.
Make sure we support the return side of the business, but really get after the organic opportunities we see. Generate cash. We're all about generating cash. Bill talked about that, but that's the key focus of our company, and we get incentivized on it as well. That's very important. We don't spend money until we absolutely need to spend money. That could be an acquisition or it could be specifically maintenance or growth capital in the company. We're very disciplined on how we spend our cash. Next. We talked about this a little bit, but this is what's exciting. I mentioned to you and Bill mentioned to you the backlog growth. We're looking at growth expected at 43% in H2 of this year and 14% organic. Bill mentioned we saw organic growth for the first time in Q2. That's continuing through the second half of the year.
The fantastic cash generation as well, as you're seeing here. As we mentioned, we are a seasonal business. We are a construction company, but we are seeing the cash generation coming through the second half of the year. The valuation. I mean, it's a good time that our stock price has been increasing. I think it's getting more in line with what reality is with our company and more importantly, with our guidance and where we're expected to go. It's still a good time to get into the company and be a part of something that I think is going to continue to grow and show favorable returns for years to come. Next. With that, I'd like to thank you. There's the pictures again that we started off with, but we make stuff. We build stuff. We service stuff.
We take care of the customers here in North America, but the main focus here in the U.S. Thank you. Julio?
Excellent. Thanks, John. Thanks, Bill and Lisa, for the rundown. If you have any questions for L.B. Foster, feel free to type them to the bottom of the screen, and I'm happy to ask on your behalf if time permits. I'll kick it off here with a couple of questions on my own. You know, a high-level question for you guys that we've been getting lately about the industry. In late July, two of the large class one railroads announced some plans to potentially merge and create a transcontinental railroad. Presumably, one or both of these class ones are customers of yours. Can you maybe speak to any potential impact to L.B. Foster where these railroads get together? Also, if you could provide some historical context as to how L.B. Foster has worked through industry consolidation of railroads in prior periods.
Sure. Yeah, we've seen a lot of the consolidation, you know, most recently with the Canadian railroad. The railroads you're referring to are Union Pacific and Norfolk Southern. They are both customers. They're both very good customers. It really makes sense from a market point of view and industry point of view of connecting the East Coast to the West Coast. Primarily, Union Pacific is on the West and Norfolk Southern is on the East. The railroads, what they need to continue to reinvent themselves, is to be more efficient in moving products and commodities across the country and take things off the roads, off trucks, and put it on the rail systems. Opportunities like that are great for us. If you look at our Rail Products, first of all, companies like this need the Rail Products.
When they want to be more efficient and be able to run more trains and keep the trains on the track and get better fuel efficiency, that's where our Friction Management comes into play. Union Pacific today is one of the leaders using that technology and those products and services that we provide today. In the end, when these opportunities do come and these railroads do come together, it really, really is a good thing for L.B. Foster Company.
That's a great call, John. Thanks so much. You'd mentioned Friction Management is one area where your product lines stand to benefit from some potential industry consolidation. Any other, and I think you said rail distribution as well as a second?
Yeah, and TSNS obviously is now off the track because they want to really understand if their track is good to travel on, meaning if it's fault or not. Our condition monitoring equipment that provides rockfall protection as well as our wheel impact load detection, which really educates and provides the information for our customer how those trains are operating on top of their track, becomes very important when they're running long distances in remote areas like Union Pacific North, Norfolk Southern will do and will do in the future.
Very helpful. Great context there. Do any of your product lines within rail carry a value prop of, you know, you talked about the safety and efficiency, but, you know, we think about increased service as the railroads kind of have to compete with trucking. Any of your product lines stand to benefit from potentially increasing service?
Yeah, for sure. You know, one thing that we set off to do a number of years back in 2012, we started a service organization in our rail space. Before, we just sell products and we provide engineering or solutions, but we were not on track. In 2012, we started a rail service business that went out and serviced the products that we sold. At that time, it was Friction Management. Today it's really almost everything that we provide and sell. We're on track today. As the track expands, as the trains move, as there's more commodity carloads and intermodal type activities, that's a really good thing for us. It gives us more service opportunities to get closer to the customer. Closer to the customer is another corporate office to us that's on track. That's where we really, they see the benefit of us as well.
Very helpful there. I wanted to ask about where we are with regards to CRISI Grant monies. Funding for those CRISI Grants is up significantly over the past few years, but that money takes time before it's spent on products such as the rail safety offerings that L.B. Foster Company provides. Can you just kind of share some perspective on the visibility you have around whether the 2023 CRISI Grant funds are actively being deployed yet? Also, how would you characterize the magnitude of the pent-up demand tied to those funds?
Yes, great question. I wanted to turn this over to Bill because this is his favorite subject to talk about. Bill, maybe a little highlight on CRISI Grant program, what it is, how it's a flow-through for our company.
Yeah, sure. Thanks. Great question. It's an area that we monitor very closely, and there's public data out there, so people can go get the public data on what the grants have been. We use our connections to try to get a feel for where do we stand in terms of that money actually having been spent. CRISI Grant stands for Consolidated Rail Infrastructure and Safety Improvements Grant, so CRISI being the acronym. Historically, it's been in place since 2017 under its current form. It's a government-funded program. It gets administered by the FRA, and it's been running up until 2021 in the range of about $200 million to $300 million per year. In 2022, it spiked up to $1.4 billion in 2022, and it's been authorized at just below that level.
The authorizations expected through 2026 are basically, if you look at the averages, four and a half times what they were in the previous five years. The last five years are four and a half times as great as what they were in the previous five years. There has been a step change improvement increase in the funding that's been set aside for projects to support the rail industry in North America. Those CRISI Grants go through an approval process where they get proposed and then they get approved, but then there's a final vetting by the FRA to make sure the entire project is funded, they know where it's going to go, it makes sense, and it is in line with the objectives of the program. Ultimately, what ends up happening is once all that vetting process occurs, the FRA will authorize the spend.
Generally, that process takes about two years. I would say that with some of the disruptions that occurred early in 2025 in terms of the administration turnover in Washington, that's probably extended out even a bit further than the two-year period that we would typically see in the past. I don't have a precise number, but suffice to say, we expect CRISI Grant funding to continue to be a significant tailwind to support the programs that need to be implemented, projects need to be implemented to improve the rail network in North America, or specifically in the U.S. in this case. We're excited about working with our customers to ensure that our products and services can help them with those efforts.
Very helpful there. Wanted to squeeze one more in with about 30 seconds left here, is just on the Infrastructure Solutions segment. Precast has been growing significantly. You talked about up 36% in the second quarter. Just talk about the growth drivers there, and then also speak to, you know, what do you see as the growth drivers as you look out to the next two years, say 2026 and 2027?
Thank you. First of all, steel, obviously, the renewed focus and growth in energy here in North America. We're in line quarter for oil and gas industry. We're seeing a nice pickup in that that we're going to see for years to come. Concrete, we're following the people. We're following demographics of people as they're moving to the east and south to the southern part of the United States. That's where we're spending our money, our time. That's where we have our great organic drivers. As people move there, infrastructure needs to be built, and we're there to make that happen.
Excellent. I'll leave it there. Thanks very much, guys.
Thanks, Julio.
Thanks for your time today.
Thanks for joining us today.
Take care.
Take care.
Thanks.