Okay, we're going to go get started. First off, thank you for everyone who's joined us here in person today. Really appreciate it. Those on the webcast, we also appreciate you joining. My name is Joe Noyons. I'm with Three Part Advisors. Up next, we have one of our investor relations clients, L.B. Foster Company. L.B. Foster is traded on the Nasdaq under the symbol FSTR. The company's a technology-enabled infrastructure solutions provider that's well-positioned to benefit from ongoing rail modernization trends here in the U.S., as well as strong infrastructure demand. Excuse me. Presenting on behalf of the company today is going to be the Chief Operating Officer, Bill Thalman, and its Chief Financial Officer, Sean Reilly. All right, go ahead and take it from there, Bill.
Yep. Thanks, Joe. Morning, everyone. As Joe indicated, my name's Bill Thalman. Recently announced as Chief Operating Officer with L.B. Foster. I've been with the company since 2021, so a little over five years. With me today is Sean Reilly, who's been on the job as Chief Financial Officer for about 10 days. Sean's been with the company for about four years. We're going to take you through our story. Just to get started on slide four in the materials. L.B. Foster's been around for just shy of 125 years. It's based in Western Pennsylvania. Our headquarters is in Pittsburgh. It's largely a North American business. We have a little bit of exposure in the U.K. and Western Europe, but just over 90% of the business is in North America. We have about 1,200 employees.
We are organized around two operating segments, Rail and Infrastructure, which you'll see here on the next slide. We'll cover a couple of the particulars for those two segments. In terms of revenue, you can see the Rail segment is larger, about $325 million in revenue. Infrastructure is about $235 million in revenue. Just over $560 million in revenue on a trailing 12-month basis. Margin profiles of both businesses, this is gross margin, are similar. A little bit better in Infrastructure on a trailing basis. We'll spend a little time on the components of the business, which drives the margin profile. The margins have been improving significantly, especially over the last five years as we've executed our strategy. We've seen improvements in both sides of the business in terms of margin profile improvement.
Spending a little more time on the Rail segment, we have three business units within Rail. The Rail Products business unit is just around $200 million in revenue. That is, as you would expect, it's Rail Products. A large portion of that business is distributed rail that we sell to the regional railroads, transit authorities. We're basically an extension of SDI, their commercial arm in that product line. We also have insulated rail joints, and transit direct fixation fasteners for the transit authorities. That's a product line, again, about $200 million. Pretty steady business for us. We also have Global Friction Management. The Friction Management product line is one of our growth platforms. It's been growing nicely over the last three to five years. Margin profiles of that business are a bit higher than Rail Products.
Capital deployed also is relatively reasonable, lower as a relative position within the portfolio. Again, it's a technology-based product line that's been growing nicely. It helps the railroads with their safety initiatives as well as fuel efficiency and operating cost performance. That's just right around $85 million in revenue. Then technology services and solutions, which is the smallest component of that business, just over $40 million. There's two primary elements. We have a contract services piece of the business that sits over in the U.K. That is exactly as you would expect. It's contract work that we're doing with the railroad entities over there to support their maintenance work. We have about a $15 million revenue component for track monitoring solutions that we produce here out of the U.S.
That helps with everything related to rockfall, for wheel impact load detection, a variety of different monitoring solutions that assist the railroads with, again, safety performance monitoring, uptime, reduced dwell time, and improvements in operating efficiencies. Pretty wide margin profile of the business within rail. Again, what we're seeing is the technology-oriented pieces of that business are improving at a faster pace, which has been helping our margin profile. The addressable market for both of those elements of the portfolio, Rail Products, again, it's going to be relatively low single-digit growth rates. It's basically driven by maintenance work that's required to be done by the different railroad customers that we sell to. It's pretty steady demand.
Last year was an unusual year where there was a bit of a pause in funding from government agencies that impacted the first quarter and to some degree, the second quarter revenue last year. We've returned to a more normal demand profile this year, so we're seeing an improvement there. We would expect our sales to grow at a reasonable pace, pretty close to the market. Then for the rail technology side, there we're really seeing a significant improvement in our growth rates. The biggest driver of that from a volume point of view is in Friction Management. We still have more room to grow there, we believe. We have a solid market position, but there is more room to grow. The other element of that growth expectation has to do with the amount of deployment that there is of these technologies over the rail network.
With respect to Friction Management, only 5% of the North American rail network is treated with Friction Management. So there's opportunities for that to continue to expand, which creates additional market opportunity, and we think we're in a strong position to capture that. Turning over to the Infrastructure side, there's two business units within infrastructure. First of all, the largest piece is Precast Concrete. It's about $170 million in sales. That's been growing very nicely with strong margins. That has been one of our growth platforms that we've got in the business. There's been a combination of organic and inorganic growth in Precast Concrete. We're continuing to invest in that product line to see further growth in the future. Within Steel Products, we've got a handful, about three or four different product lines within that business. The biggest component of that is pipeline coating.
We have two facilities where we do pipeline coating for the oil and gas industry. As you can imagine, that was on a bit of a back burner for a number of years. About a year and a half ago, we started to see a more significant improvement in demand and investment activity in pipelines. That's resulted in some recovery in that product line, which has helped the margin profile and the sales growth overall for steel products over the last couple of years. Looking at the addressable market, primarily for Precast Concrete, we focus the infrastructure growth opportunities specifically in Precast Concrete. We have two primary product lines within Precast Concrete. We're well known in the marketplace for our CXT buildings. These are concrete structures that are produced in our plant, and then set in our plants. We have multiple plants where we produce them.
They are set in place, ready to be hooked up to utilities, and operational within a handful of days of being delivered. With the labor shortages that there's been in the last several years, this is an opportunity for this product line to be a viable solution for continuing growth for those needs. You can see that we've been growing at a fairly fast pace, pretty much in line with where the market is. Again, we have a pretty significant share, and one of the things that we're doing is looking at ways to expand our own production capabilities to be able to produce more CXT buildings and capture more share where that's possible. On the precast side, this is precast forms, box culverts, water retention systems, manholes, pipe, so on and so forth. Those precast products are the other half of the Precast Concrete business.
You can see we only have about a 1% market share. This is a very fragmented market. It's largely regionally deployed. You have competitors in various regions. It can ship 150-200 mi around the operating facility and compete in that space effectively. We've been growing that part of the business. We had a large acquisition back in 2022 in Tennessee, that we are also investing capital to help us grow in that space as well. To the extent that we are going to see accelerated growth within infrastructure, it's largely going to be driven by our efforts to grow Precast Concrete, both organic and inorganic opportunities there. Next two slides I'm going to cover give you a different perspective of how we look at the portfolio. Obviously, we have our SEC reporting, which drives the segment performance and the segment reporting.
We're also looking at the portfolio from a returns and a growth platform point of view. When we launched our strategy back in 2021, we started making very purposeful decisions about where we were going to allocate capital. We were going to pull capital away from the returns platforms, which to the large degree, what remains is pretty steady, cash-generating businesses, and we'll be investing in our growth platforms. Within the Rail business, we have two growth platforms. We have the Global Friction Management product line and our Total Track Monitoring product line. Both of those product lines have been growing at a much faster pace. We've put investment dollars into those product lines to allow them to grow. We expect that there will be more opportunity there to grow as well. The other growth platform that we have is Precast Concrete.
As I mentioned earlier, that's an opportunity for us to grow from an M&A point of view, but it's also one where we're investing CapEx dollars at a faster pace to drive growth in the Precast Concrete product space. That strategy over the last three to five years has translated into extraordinary growth in the growth platform, about 115% growth over the last five years from a top-line point of view. The margin profile of those businesses that have been growing at that much faster pace has accelerated about a 400-basis point improvement in our gross margins.
You'll see in a few charts here, which Sean will review, that that's translated into a much greater financial return for the business, both in terms of a lower invested capital overall because of the pruning work we did in the return side of the portfolio, plus the improved profitability of the business driven by investing in our growth platforms. It's been a nice strategy. It's worked out really, really well. We're excited about our financial performance, and Sean's going to cover the financial slides over the next five to six slides to give you some history on how we've performed. I'll turn it over to Sean. Sean?
Thank you, Bill, and good morning, everyone. My name's Sean Reilly, I'm the CFO, newly promoted, but as we'll see, I'm walking into a really good start. Nice first quarter. When we take a look at our first quarter, we had 23.9% total top-line growth. Now, I do have to note, though, that prior year was impacted, as Bill articulated, to weaker than normal government spending that occurred. Now we're more aligned to what will be normal spending. That being said, our Rail segment increased 38% in the quarter. Our Infrastructure was up just under 6%. Our EBITDA expanded $3.3 million, or 183%, in the quarter. Net debt was down $24 million year-over-year. Our gross leverage ratio was 1.2 x, compared to 2.5x in the prior year.
When we take a look at our backlog, our backlog was down, but that was primarily driven by a $19 million order that was canceled in Q3 of the prior year. Our CXT buildings also had decline in backlog, but that's on top of an outstanding 2025 year. As we take a look at the current quarter, our Q2, we continue to see the backlog building from Q1. Going on to the next one, Bill touched upon this, the transformation that we did in the business. If you take a look on the left-hand side, there's six divestitures, product line exits that occurred. What that transpired to was sales over that period are up 10%, gross margin expanded 440 basis points. That's the power of that transformation that occurred. I'm going to go on to the next one.
This is also leveraging off of the strategic transformation that occurred over that period of time. I want to draw your attention to the adjusted EBITDA. Same thing here. Over that period of time, sales up 10%, but the adjusted EBITDA, the dollars doubled, and from a basis point perspective, it's up 390 basis points. It shows you the impact that taking businesses that had lower profitability and were more commodity-based have had on our financial results. Then we'll talk net debt leverage and our cash flow. I first want to draw your attention to the bottom right, the two black bars. When you take a look at Q4, then you take a look at Q1, this is normal. This is the seasonality of the business. Our net debt will increase in Q1. Our gross leverage will also increase in Q1.
That will happen again in Q2 as well. This is all part of the seasonality of the business, where working capital demands in the first half of the year are high, and free cash flow really generates in the second half of the year. When we take a look at our gross leverage ratio for Q2. Last year, it was right around 2.2 x. We would expect to end this year below that amount. Then we talked, net debt down 30% year-over-year. The other items I want to point out are funding capacity. We got $94 million in available funding. When we talk about capital allocations and the opportunities for M&A, that positions us well. We also have a capital-light business model, the cash flow that's generated from this business is very impressive.
We have $28 million of annual free cash flow that this business generated over the last three years. We have $75 million in NOLs. What that means is our cash taxes paid in 2024 and 2025 were under $2 million. Utilizing that NOL saves us cash taxes paid. Finally, we have repurchased 9% of our outstanding shares since 2023. I'm going to start here and just leverage off the share repurchase discussion we just had. We still have $28.7 million of authorized and remaining share buyback under our program. The stock price has moved up, being a little more conservative with that buyback as it is today. Over the last couple months, the stock price has increased relatively significantly. We expect to maintain our gross leverage ratio at 1x- 1.5 x. However, depending on any tuck-in acquisitions, that can move. In our capital expenditures.
Capital expenditures are higher in 2026, expected to be higher in 2026, much of that is driven by growth opportunities or investment opportunities that we have in the business. Those are organic growth. Then once again, acquisitions. When we take a look at acquisitions, we're always looking for accretive acquisitions that we can add to the portfolio to enhance our product offerings. Then valuation. There's just two or three things I want to point out here as it relates to valuation. Our trading volumes are up almost 50% in 2026. As we all know, as investors, that adds liquidity to the stock. We're targeting a free cash flow yield of 4%-6%, even with elevated capital spend in 2026. Our enterprise value to adjusted EBITDA is at 10 x. That's up from 8.5x at year-end.
What we're focused on is to increase our EBITDA and grow into the valuation. With that being said, I'll turn it over to Bill for closing comments.
Thanks, Sean. Spending a couple of minutes on the market outlook that we have at the moment. As Sean mentioned, first quarter last year, and frankly, the first half of last year was very unusual. For those that recall, there was some disruption in government funding that occurred in early part of 2025. I think we all remember the DOGE impact on a variety of different government agencies that flowed through to the FRA, which impacted CRISI Grant availability. CRISI Grants are grant programs that provide funds that are used by our customers to do repair work. There's been significant funding that's occurred over the last several years from CRISI Grants. Last year in the first half, there was a pause in that funding that didn't release until the back half of 2025.
As a result of that, our year-over-year performance, last year in Q1 and to a certain degree Q2 was very poor in the Rail business. The inverse of that, of course, is that we're in a normal year at this point. As a result, we saw a much significant improved Rail business in the first quarter of this year. The Rail business, as Sean mentioned, was up 38% in the first quarter compared to last year. We would say that that was because we returned to a normal period of time and a normal period of demand for the Rail business. The other thing I want to highlight there is during 2025, that disruption in funding had zero impact on Friction Management demand. We were up 19% in total revenue in Friction Management.
That emphasizes the value proposition that that product line offers to our railroads, because even though their capital was constrained, they continued to invest money in that Friction Management program. Friction Management also had a very strong first quarter result this year. We feel really good about that. We expect that over time, there will be continuing adoption of these rail technologies to assist with rail safety, operating ratios, wear and tear on the rail network, and the track monitoring benefits that our solutions provide in terms of operating ratios. Overall, we think 2026 is more of a normal year for the Rail business, and that will be much better than what we experienced in 2025. Turning our sights to the precast market. The precast market was up strong, about 17% revenue growth in the first quarter this year.
We're continuing to see significant civil projects across North America, primarily in the U.S. where our product lines will go. A lot of that is centered around water retention, any highway construction, building construction, factory construction. Our product lines are going to be used any time that earth is being moved and water needs to be managed to allow there to be a site that can perform with the overall utilities that are needed for that site. We're centered in very hot spots. We're in Texas, Hillsboro, Boise, Idaho, which is a booming area of the country. We're also in Tennessee, just outside of Nashville and Knoxville. Our facilities are positioned well to see that growth or capture that growth and participate in that growth. As I mentioned earlier, we're investing a larger portion of our capital spending.
Sean mentioned 2.7 x, which is about $15 million. About half of that would be maintenance, and the other half would be investment capital, both sales growth and cost out. The majority of that $8 million of investment capital is going to be around Precast Concrete growth initiatives that we think will pay off this year and into years to come. Turning to the pipeline story, as I mentioned earlier, that's a product line that we do coatings services in two facilities, one in Birmingham, Alabama, the other one outside of Houston. The Birmingham facility is an in-line coater for ACIPCO, long-term partner with ACIPCO. As you can imagine, there was a period of time prior to COVID where that business was booming in terms of pipeline investment. After COVID, it took a break for about four years, and then starting in 2025 has begun to recover.
We're seeing that recovery continue now, and we're pleased with what we're seeing there in terms of market demand and outlook for coatings services with ACIPCO. Lastly, the facility in Willis, Texas, which again is north of Houston. We've made some investments in that facility, modest investments, which has increased the growth potential and the volume that can be serviced out of that facility. It's more of a quick turn facility where products will show up, need a quick solution to be able to solve a particular need. We're seeing actually that product line being utilized for water transmission. One of the things we like to say is that we're seeing some work being done in the SpaceX space with the launch pads. Those product lines are helping with that particular initiative.
We're seeing some nice growth there, and we expect that to continue here in the years to come. The investment thesis for L.B. Foster really hasn't changed. We've done a lot of work over the last five years to transform the portfolio to a much more profitable product line and set of products and services that we think are in high demand from our customers. The strategy of having returns platforms which are generating cash that allows us to invest in our growth platforms has worked out very well, and we expect that to continue. The organic growth drivers are in place. I think we believe that there's going to be an infrastructure super cycle for years to come. We're participating in that in multiple different ways. The results show that thus far, and we think there's more runway ahead of us.
These businesses historically have been strong cash generators. I think Sean mentioned that we generated $28 million in an adjusted free cash flow over the last three years. We expect that to continue to grow. Our outlook for 2026 is a midpoint of $20 million of free cash flow. That's a little less than the historical average because we're investing a bit more capital because we think there's opportunities to grow, particularly in the precast space. Lastly, we have a very disciplined approach on capital allocation. Sean mentioned what those are. We're going to target 1.00x- 1.50x on leverage. We're going to be opportunistic on stock buybacks. We have been very successful with our stock buyback program over the last three years. We have some M&A targets that we're looking at, particularly in the precast space. Finally, the CapEx rate.
Normal maintenance would be about $8 million, but we're going to look at additional incremental capital where it's appropriate to be able to drive returns and profitable growth, primarily in the precast space. Last slide is just a little bit of a journey and some closing comments regarding what we've accomplished over the last few years. I mentioned earlier that in 2021, John Kasel was named as CEO of the company. We refreshed the board. I joined the company in March of 2021. We set off on executing a strategy. We've been, I'd say, pretty successful in getting that strategy executed, and we're seeing the financial returns as a result of that. What I can tell you is that that strategy is still intact as it exists today, but there's going to be a variety of different emphasis. We're going to look at less portfolio pruning.
There's always going to be some opportunities to look at minor elements of the portfolio that can generate capital to allow us to invest further in our growth platforms. We are going to be focusing on continuing the organic growth investments, primarily in Precast Concrete, but we see opportunities also in Friction Management. We're looking at growing further in Western Europe, with some partnerships over there. With the TTM part of the business, the track monitoring component, those adoption rates continue to improve. We have new product offerings that are coming forward, so we feel like there's the opportunity to continue to see some nice growth there as well. Our outlook for the year, we'd say, is pretty reasonable at just under $44 million as a midpoint for 2026. You can see what the growth rates translate into, 5.60%, compared to 5.40% last year.
I will highlight that as of the end of the first quarter, our trailing 12-month results are basically at our 2026 guidance. That tells you that if you think we can hold serve for the balance of the year compared to last year, we should have a pretty good shot of hitting the guidance that's out there for 2026. Obviously, we'll see how things transpire here over the next couple quarters and see if there's an opportunity to make an adjustment there. We're really pleased with the results that we've achieved over the last several years. We think there's more room to go, and we're going to be very disciplined about our approach, with a focus on driving shareholder value. With that, I'll close up the presentation and see if there's any questions from the group on anything we've discussed or anything else. Yeah.
Could you remind me about the Friction Management? I always thought it was a nice little business. Glad to see that it's gained a little more traction. Remind me of [audio distortion] the value to the customer.
Yeah. The question was about Friction Management and how it's done well over the last several years, and it's the value to the customer. We sell our Friction Management solutions to all elements of the North American and frankly, Europe market. Friction Management is wayside units, so units that sit alongside the track, and it's also onboard solutions where we have stick Friction Management product lines that assist with the wheel-track interface. Where the wheel meets the track. It's funny, when a lot of people think about Friction Management, they're thinking about reducing friction, right? That's a lot of times what we're doing there. Friction, when you hear squealing in a transit authority, when you're in the middle of the city and you hear squealing, that's friction. That's deteriorating the wheels, and it's deteriorating the track.
We have Friction Management solutions that we deploy at that particular site on the track network. That eliminates that squeal, eliminates that wear and tear, and reduces wear and replacement cost for wheels, as well as the track itself. The other thing to consider is that not only does it reduce friction, at times, we have to add friction. There might be a particular element of the track network that needs friction added because of need to stop the train, a grade that is difficult, depends on the environment that you're in. We'll work with the customers to add a friction modifier that actually adds friction at that spot that will allow them to operate better in that particular location.
What it does for the customer is it saves 3%-5% fuel cost, which when they spend billions of dollars on diesel fuel, it's a significant cost savings. The wear and tear on the wheels as well as the track, obviously it also helps out with safety because you're not deteriorating the track, less opportunities for failure in the track and derailments that could occur as a result of that.
You mentioned that Friction Management, you said it was 5% deployed, or there's a lot of room for growth?
Yeah. We get that question all the time. How big do you think it can be?
Yeah.
Yeah. Okay. It is something where the 5% deployment is over the areas of the network that are the most challenged, that absolutely need it to perform properly in that area. Our value proposition and our selling point is that it can save fuel savings significantly. There's an opportunity for there to be increased deployments over the network, and over time, we just feel like that's something that will continue to grow, as you saw the growth rates for Friction Management spend.
Is there a recurring service revenue on that?
Sure.
Yeah.
Yeah. Well, Friction Management, the primary product line is a track side unit, and then the consumable. Razor, razor blade.
Yeah.
We sell the consumable, as well as the track side units. The higher margin profile comes from the consumables. That's a recurring revenue stream of ours. Yes. Yes, sir.
Can you give us a color on the promise of the residential housing in Precast Concrete?
Yeah. The question was promise around residential housing. About this time last year, we set up a facility in Florida to produce precast walls for the residential housing market, and that facility is up and running. We are generating revenue. Nowhere near what we expected to be generating. It's a facility where we feel like we have a nice value proposition when the housing market recovers. At the moment, we're obviously just running it very closely, tightly, to manage costs while the housing market has been a bit softer. We'll look at strategic options for that facility. There's other things we can do there if we need to in the short term, but the long-term thesis is still solid. It's just the housing market has been a bit of a challenge here over the last year, two years. We have time for maybe one more question.
Hey, Justin. Yeah.
How much of the TAM for friction monitoring is international, and how much business are you doing international?
Yeah. The question for the group is what is the TAM for international on the condition monitoring, the track monitoring solutions.
I'm sorry, the Friction Management.
Friction Management. Oh, okay.
I meant Friction Management.
Okay. Yeah. Friction Management specifically. I would say a large portion of the Friction Management market opportunity, I'm not going to know the number off the top of my head, but what I can tell you is that in Europe, they use very little Friction Management today, and we're working with Deutsche Bahn over in Germany, to get accreditation on their network. We're on the cusp of receiving that. That'll open up that market significantly. Pretty much untouched at this point.
The 5.70%, that includes the international opportunities?
Yes.
Okay.
Yeah. Okay, I think we're out of time. Thanks a lot. Appreciate it, and enjoy the conference.