Zach Marriott

The analyst asked about monthly daily sales trends for Q2 and July, potential drivers for margin changes in Q3, and whether there is any customer spending hesitation due to macroeconomic uncertainty.

Answer

The company provided specific daily sales figures for April, May, June, and an estimate for July. They stated that margins are expected to continue benefiting from accretive acquisitions with higher margin profiles. Management reported not seeing any customer hesitation, citing a record-high backlog and a bookings-to-billings ratio greater than one.

Zach Marriott of Stephens Inc. inquired about monthly daily sales trends for the second quarter and July, the potential for margin shifts in the third quarter, and whether management is observing any customer spending hesitation due to macroeconomic or tariff uncertainty.

Answer

SVP & CFO Kent Yee provided specific daily sales figures, noting $7.81M for April, $7.55M for May, $8.37M for June, and an estimated $7.25M for July. He also stated that margins should continue to benefit from accretive acquisitions. Chairman & CEO David Little added that the company is not seeing a slowdown in customer spending, highlighting a record-high backlog and a bookings-to-billings ratio greater than one.

Zach Marriott of Stephens Inc. inquired about recent daily sales trends, the outlook for Q3 margins, and any signs of customer spending hesitation due to macro or tariff uncertainty.

Answer

CFO Kent Yee provided specific daily sales figures for Q2 and a flash for July, noting a typical month-end push in June. He also explained that margins should continue to benefit from accretive, higher-margin acquisitions. CEO David Little added that the company is not seeing a slowdown, citing a record backlog and a bookings-to-billings ratio greater than one as evidence of continued customer demand.

Zachary Marriott of Stephens Inc. inquired about the quarter-over-quarter trend in gross margins and asked about any noteworthy factors that could impact that trajectory moving into the next quarter.

Answer

Executive Kent Yee attributed the significant Q3 to Q4 gross margin increase to a favorable business mix, particularly the higher-margin water and wastewater acquisitions contributing more significantly. CEO David Little added that after achieving 10% EBITDA margins, the company has set a new goal of 11%, with employee compensation aligned to this target to drive continued improvement.

Zachary Marriott of Gabelli Funds inquired about the quarter-over-quarter trend in margins and any noteworthy factors that might alter that trajectory moving forward.

Answer

Executive Kent Yee attributed the significant Q3 to Q4 gross margin increase to a favorable business mix, particularly from higher-margin water and wastewater acquisitions contributing more significantly. He noted that while they hope for this trend to continue, new sales initiatives could also impact the mix. CEO David Little added that after achieving the 10% EBITDA margin goal, the company has now set a new target of 11%, aligning employee compensation with this objective and expressing confidence in continued improvement.

Zach Marriott of KeyBanc Capital Markets inquired about the sequential trend in consolidated margins for Q1 versus Q4 and any significant factors in March that could alter that trend.

Answer

Executive Ronald Knutson stated that January's margin profile was consistent with Q4 and that he expects margins to lift as 2025 progresses, driven by synergies from 2024 acquisitions, with benefits from Source Atlantic being more second-half weighted. Executive John King added that while the first two months felt good, March is a critical month that will ultimately determine the quarter's final margin performance, noting that most end markets outside of military and C&I are trending positively.