L.B. Foster Company - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 was soft versus an exceptionally strong prior-year quarter: net sales $97.8M (-21.3% y/y), adjusted EBITDA $1.8M (-69.3% y/y), diluted EPS -$0.20; Infrastructure grew 5.0% while Rail declined on lower Rail Distribution volumes.
• Strong order intake drove backlog up $51.3M sequentially to $237.2M (+27.6% q/q; +$15.0M y/y), with mix shifting to more profitable lines; book-to-bill improved to 1.04 from 0.95 in Q4.
• Management maintained 2025 guidance (sales $540–$580M, adjusted EBITDA $42–$48M, FCF $20–$30M), citing expected improvement as early as Q2 and robust backlog in Rail Products, Friction Management, Precast and Protective Coatings.
• Versus Wall Street, Q1 missed consensus: revenue $97.8M vs $114.4M*, EPS -$0.20 vs $0.01*, EBITDA $1.8M vs $4.5M*; management attributes the miss to lumpy Rail Distribution demand due to funding timing, with sequential acceleration expected in Q2.
  *Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

• Backlog and orders inflected positively: backlog rose $51.3M in the quarter to $237.2M (+27.6% q/q; +6.7% y/y), led by more profitable lines; book-to-bill improved to 1.04. CEO: “backlog growing during the quarter 46.9% and 17.8% for Rail and Infrastructure… should translate into near-term sales growth and profitability expansion… as early as the second quarter”.
• Infrastructure execution: segment net sales +5.0% y/y to $43.8M, gross margin +40 bps to 18.6%, operating loss improved by $0.9M; Precast Concrete +33.7% y/y boosted volumes and margins.
• Capital allocation: $40M buyback authorization (March) and 168,911 shares repurchased in Q1 (~1.5% of shares), reinforcing confidence and potential support for EPS over time.

What Went Wrong

• Rail Distribution volume pullback: Rail segment sales -34.6% y/y to $54.0M; segment operating income fell to ~$0.1M (0.3% margin) due to lower distribution and TS&S volumes, including U.K. scale-back.
• Profitability compression: adjusted EBITDA down to $1.8M (-69.3% y/y) and gross margin down 50 bps to 20.6%, reflecting volume/mix pressure; operating loss of $1.9M versus prior-year operating income of $5.6M (prior included a $3.5M gain on asset sale).
• Seasonal cash consumption and leverage: operating cash flow used ($26.1M) and free cash flow used ($28.7M); gross leverage ratio rose to 2.5x, with management expecting a decline in 2H as seasonality reverses.

Transcript

Operator (participant)

Today, and thank you for standing by. Welcome to the L.B. Foster First Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To start your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Lisa Durante. Please go ahead.

Lisa Durante (Director of Financial Reporting)

Thank you, Operator. Good morning, everyone, and welcome to L.B. Foster's First Quarter of 2025 Earnings Call. My name is Lisa Durante, the company's Director of Financial Reporting. Our President and CEO, John Kasel, and our Chief Financial Officer, Bill Thalman, will be presenting our first-quarter operating results, market outlook, and business developments this morning.

We'll start the call with John providing his perspective on the company's first-quarter performance. Bill will then review the company's first-quarter financial results. John will provide perspective on market developments and company outlook in his closing comments. We will then open up the session for questions. Today's slide presentation, along with our earnings release and financial disclosure, were posted on our website this morning and can be accessed on our investor relations page at lbfoster.com. Our comments this morning will follow the slides in the earnings presentation.

Some statements we are making are forward-looking and represent our current view of our markets and business today. These forward-looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise or publicly release the results of any revisions to these statements in light of new information except as required by securities laws. For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and presentation. We will also discuss non-GAAP financial metrics and encourage you to carefully read our disclosures and reconciliation tables provided within today's earnings release and presentation as you consider these metrics. With that, let me turn the call over to John.

John Kasel (President and CEO)

Thank you, Lisa, and hello, everyone. Thank you for joining us today. I'll begin my remarks on slide five covering the key drivers of our first-quarter results. As mentioned in our year-end earnings report in March, we started 2025 softer than last year, with first-quarter sales down 21.3% compared to a typically strong prior-year comparison. The decline was realized entirely within our rail segment with infrastructure sales growing 5% over the last year, driven primarily by strong demand in our Precast Concrete business.

It's important to note that our rail business had an exceptionally strong first quarter last year and also entered 2025 with a lower backlog, primarily due to order timing and Rail Distribution. Rail Distribution demand is lumpy at times, and we have experienced quarterly swings in volume in the past, depending on timing of the large project work.

This quarter was also impacted by an apparent slowdown in the release of government funding, impacting project activity levels with our customers. I feel pleased to report that we're starting to see project funding and bidding levels improve, as evidenced by our 46.9% rail backlog increase during the quarter. Getting back to the results, the lower Q1 sales volume in the rail segment drove a 69.3% decrease in adjusted EBITDA versus last year.

As expected, our net debt increased to $79.9 million during the quarter, reflecting the increased working capital funding needed to support sales growth, along with annual incentive and insurance premium payments. Net debt was up $4.9 million versus last year, and the gross leverage ratio came in at 2.5x compared to 2.2x last year. Quarter rates began to recover in the first quarter, increasing 39.1% sequentially and 12.6% over last year.

This translated into an improved backlog at quarter end of $237.2 million, up $51.3 million during the quarter, and up $15 million over last year. The backlog growth was higher in our more profitable growth product lines, which should translate into near-term sales growth and profitability expansion year-over-year as early as the second quarter. As Bill covers the financial details for the quarter, I'll come back to him with some closing remarks on our backlog trends, the market outlook, and our financial guidance for the year. Over to you, Bill.

Bill Thalman (CFO)

Thanks, John. I'll begin my comments on slide seven, covering the consolidated results of the first quarter. As a reminder, the schedules in the appendix provide details on the financial results covered in today's call, including non-GAAP information. As John mentioned in his opening remarks, first-quarter results were lower than last year, driven entirely by lower sales volume in the rail segment.

Net sales for the quarter were down 21.3%, with rail segment sales down 34.6%, driven primarily by weak Rail Distribution demand within the Rail Products business unit. Partially offsetting the decline was an increase in infrastructure sales, which were up 5% over last year due to a 33.7% increase in Precast Concrete sales. Gross profit was down $6 million, with the gross margin down 50 basis points to 20.6%. The decline was driven by lower rail sales as well as slightly unfavorable mix within the rail segment.

SG&A costs decreased $1.9 million from the prior year due to lower personnel and professional service costs. First quarter adjusted EBITDA was $1.8 million, down $4.1 million versus last year due to the lower margins from the rail sales decline. Operating cash flow, which was the use of $26.1 million, followed normal seasonal patterns due to increased working capital needs, coupled with funding for prior-year incentives and annual insurance premiums. We saw favorable trends in orders and backlogs across the business, which I'll cover by segment later in the presentation. Slide eight provides a reminder of the typical seasonality of our business. Sales and EBITDA levels are normally stronger in the second and third quarters, as they represent the primary construction season period for our customers.

The growth in our backlog during the first quarter gives us confidence that we will see an improvement in sales volumes across the business in the second quarter. Free cash flow trends follow a pattern of consumption in the first half of the year, funding sales growth leading up to the construction season. This trend reverses in the back half of the year as construction season winds down. I'll highlight that despite these large swings, average free cash flow for 2023 and 2024 was approximately $31 million, excluding the $8 million Union Pacific payments, which are now behind us. That's a yield of approximately 15% at our current equity valuation. In summary, the softer first quarter is normal for our business, and we expect results for the balance of the year to follow our typical seasonal patterns.

Over the next couple of slides, I'll cover our segment performance, starting with the rail segment on slide nine. First quarter rail segment sales totaling $54 million were down 34.6% due to an exceptionally strong first quarter last year, coupled with the lower order book entering 2025. The sales decline was primarily in the Rail Products business unit, which was down 44.7% due to the decline in Rail Distribution volume. Technology Services and Solutions sales were also down 41.3%, in part due to lower U.K. sales volumes as we continue to scale back initiatives in this market. On a positive note, global Friction Management sales were up 11% versus last year, as this growth platform continues to perform well. Rail margins of 22.3% were down approximately 20 basis points, driven by the sales volume decline and unfavorable business mix.

Rail orders declined 0.6% versus last year, but increased 51.4% sequentially as we enter the stronger demand period for the business. Backlog levels increased 46.9% during the quarter and 6.6% versus last year. The backlog improvement was realized in both Rail Products and global Friction Management, while Technology Services and Solutions backlog declined, driven primarily by the U.K.

Turning to infrastructure solutions on slide 10, net sales increased $2.1 million, or 5%, due to the strength in our Precast Concrete business, which increased 33.7% over the prior year. Steel product sales were down $5 million, or 24.4%, due primarily to lower Protective Coatings sales. Gross profit margins were up 40 basis points to 18.6% due to higher volumes within precast and improved margins in steel products due to our portfolio work. Infrastructure orders were very strong at $65.8 million, up $17.2 million, or 35.3% over the prior year quarter.

Backlog totaling $145.5 million is up $9.3 million over last year, including a $12.1 million increase, or 51.6%, from improving protective coating demand. I'll now cover liquidity and leverage metrics on slide 11. Net debt levels increased $4.9 million over the last year to $79.9 million, and the gross leverage ratio increased 0.3x to 2.5x at quarter end. These movements were largely in line with our expectations. We're in the heavy working capital investment period of the year, which will continue in the second quarter as we fund expected sales growth. Net debt levels should increase modestly during the second quarter, but we expect gross leverage will remain around 2.5x before declining in the back half of the year.

We remain confident in our ability to manage the choppy working capital needs of the business and believe the key drivers of strong, sustainable free cash flow remain intact. Our capital allocation priorities are outlined on slide 12. On March 3 of 2025, our board authorized a new three-year $40 million stock buyback program that will expire at the end of February 2028.

During the first quarter, we repurchased approximately 169,000 shares, representing approximately 1.5% of the shares that are outstanding. This compares to approximately 303,000 shares repurchased in all of 2024. Share repurchases are an important capital allocation priority for us, especially with the improving prospects for cash generation and the attractive equity valuation. We expect to invest capital in our facilities at a rate of approximately 2% of sales, with a focus on organic growth initiatives in our growth platforms.

We also continue to evaluate tuck-in acquisitions to add product line breadth and geographic coverage to our growth platforms. Finally, we will remain prudent with our leverage and net debt levels, with the goal of maintaining leverage between 1x and 2x over the longer term. My closing comments will refer to slides 13 and 14, covering orders, revenues, and backlog by business. The book-to-bill ratio for the trailing 12 months was a favorable 1.04-1, with favorable developments realized in both segments. First quarter order rates improved 12.6% over the prior year, driven by a 35.3% increase in infrastructure orders. Order rates improved 39.1% sequentially, with increases realized in both segments, highlighting the improved trend in demand levels across the business.

Lastly, the consolidated backlog on slide 14 reflects an improving trend for both segments, with backlog growing during the quarter of 46.9% and 17.8% for rail and infrastructure, respectively. Rail backlog included a $22.8 million increase, or 63.4%, for Rail Products, driven primarily by improved demand within Rail Distribution. Compared to last year, consolidated backlog is up $15 million, or 6.7%, with gains realized in our more profitable product lines.

Within rail, Rail Products and Friction Management backlog are up 21.2% and 71.4%, respectively, while the U.K. backlog within TS&S is down 52.7%. For infrastructure, precast backlog is up 3.8%, and as I mentioned earlier, protective coating backlog is up $12 million, or 51.6%. We believe these favorable trends will translate into improved results in the second quarter, both in terms of sales volume and margin expansion. Thanks for the time this morning.

I'll now hand it back to John for his closing remarks. Back to you, John.

John Kasel (President and CEO)

Thanks, Bill. Please turn to slide 16, where I'll begin my closing remarks, covering recent market developments and near-term outlook. While first quarter results were down versus last year, the decline was largely isolated to weakness in Rail Distribution demand within the Rail Products business unit. This product line benefits from the well-publicized government infrastructure programs, which we believe slowed earlier in the year due to uncertainty in the amounts and continuation of federal funding resulting from Washington's cost-cutting initiatives of the like. As Bill mentioned in his comments, it's important to note that demand levels for Rail Products began to improve throughout Q1, with orders up sequentially 77.8% and backlog up both sequentially and year-over-year at the end of the quarter.

We also are seeing increasing quotation rates from some of our largest customers in Q2, providing us confidence that demand drivers for Rail Products are getting back on track. Demand for Friction Management solutions remains robust, and ongoing focus on rail safety in North America continues to drive demand for our Total Track Monitoring solutions. Within the infrastructure segment, demand for our Precast Concrete Products continues to grow, with increased orders and backlog year-over-year on top of strong sales growth delivered in the first quarter. We continue to see favorable demand building for our Enviro-Cast precast wall system now being manufactured in Florida, as well as our Protective Coatings business, with combined backlogs up $12.1 million, or 51.6%, year-over-year.

The increased backlog, coupled with improved profitability mix within the backlog, should translate into near-term sales growth and profitability expansion year-over-year, as early as the second quarter. We are closely monitoring the status of the government funding programs, but remain optimistic that they will move forward as announced, given the greater infrastructure need. As mentioned during our last update, our markets are absorbing the threat of tariffs, which primarily is centered around steel. We continue to take steps in this area to protect our supply chains and build in flexibility where possible, recognizing the volatile operating environment. In summary, we expect our key end markets will improve in the second quarter as we enter the heavier construction season for our customers.

As you would expect, we will monitor demand drivers as the balance of the year unfolds and focus on what we can control, maximizing opportunity in front of us. A reminder of our investment thesis can be found on slide 17. In summary, the four key pillars of value creation remain unchanged. We have repositioned our business portfolio, which allows us to focus on investment in our highly profitable growth platforms of Rail Technologies and Precast Concrete.

Our capital-light business model drives free cash flow and economic profit generation, with longer-term demand both expected from domestic and infrastructure investment. We continue to employ a disciplined approach to capital allocation to maintain flexibility while driving shareholder returns. Lastly, we remain confident in our strategic execution and believe we are well positioned to deliver improved shareholder returns now and into the future.

I'll wrap up today's call by covering our 2025 financial guidance on slide 19. First quarter results were down from last year's exceptionally strong start, but the first quarter is normally slow, and we entered the second quarter with a strong backlog, improved profitability mix, and favorable demand drivers in our key end markets. The second quarter results are expected to be substantially better than the first quarter, and we expect to realize near-term sales growth and profitability expansion year-over-year as early as the second quarter. As a result, despite the volatile and uncertain macro environment, we are maintaining our 2025 financial guidance as we continue to remain confident in our ability to deliver results within our guidance for the year.

As I mentioned earlier, we remain optimistic that previously announced government funding programs for infrastructure investment will remain largely intact, and our 2025 guidance includes this assumption, knowing that we will revisit our guidance as appropriate as these market demand drivers and broader operating conditions become more clear for the balance of the year. Thank you for your time and continuing interest in L.B. Foster. I'll turn it back to the operator now for the Q&A session.

Operator (participant)

Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephones. You'll then hear an automated message advising your hand is raised. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we take the first question. Our first question today is coming from the line of Julio Romero of Sidoti. Your line is open.

Julio Romero (Equity Research Analyst)

Great. Thanks. Hey, good morning, John and Bill. Thanks for taking questions.

John Kasel (President and CEO)

Hi, how are you?

Julio Romero (Equity Research Analyst)

Hey. I wanted to start on the rail technology and services segment. I appreciate the commentary you gave about the lower year-over-year volume and the impact that had on the first quarter and how the Rail Products business unit was down year-over-year against the strong prior year quarter and the first quarter. It would seem that the second and third quarter would also be tough comparables, so I was hoping you could talk about how you would have us think about Rail Products volumes sequentially here in the second quarter, and should we expect Rail Products volumes to also be down in the second quarter on a year-over-year basis?

John Kasel (President and CEO)

Yeah. Thanks, Julio. Thanks for your question today. We're a seasonal construction company, so we're looking for actually a very big Q2 and Q3. This is where we really feel good about maintaining our guidance for the year because we really picked up some nice orders entering Q2. The mill and our supply channel partners are ready to perform. Contrary to maybe your thoughts, we're looking at a big Q2, and last year was not the best Q2 for us. We're looking to put a number on the board here and show some good activity here in profitability as well in Q2. Rail products will be a big piece of that.

Julio Romero (Equity Research Analyst)

Great. Very encouraging there. It was good to see that backlog growth in rail here in the quarter. Can you speak to the mix of that backlog growth?

John Kasel (President and CEO)

Yeah. I mentioned it to Bill as well. I can have Bill give the exact numbers again. Even though we were down on the rail product side, to be clear, it was just the distribution side. A reminder to investors and viewers that a big part of that Rail Distribution business flows through the government, about 82% of it. That is where we saw a little bit of a pause in the first quarter. We are seeing that break free now because the nice thing about the rail space is they need to replace the rail, right? These things cannot just sit there and not be replaced. That work is beginning to come. Our TTM business, our condition monitoring business, is really, really doing well, including the FM business.

That is where we are seeing even the larger profit margins as well and the opportunity to really get some nice growth, not just on the quarter, but a year-over-year comparison. Bill, maybe you could highlight what those numbers were again?

Bill Thalman (CFO)

Yeah. For the rail segment, just looking at the year-over-year growth and backlog, we saw about 22% growth in Rail Products. Friction management was up about 71% on a year-over-year basis. That, again, speaks to the improving mix within the backlog. Importantly, we saw a pretty large decline in the U.K. portion of the backlog, which was down about 53% on a year-over-year basis. As you know, that market's been challenged for quite a while, and we've been scaling back our initiatives there. All of those moves give us confidence that we're going to see improving profitability mix on the rail portfolio. As long as we expect those government programs remain intact, the volume should be there that would follow that mix improvement as well.

Julio Romero (Equity Research Analyst)

Very helpful there. That dovetails into the last question for me, which is just on the Friction Management piece, the growth in the backlog and the upsales in the quarter here. Just speak to what's working well on that Friction Management piece and if you're seeing any share gains.

John Kasel (President and CEO)

Yeah. We're picking up new work and new customers and new geographies. Our service team is performing extremely well. We feel very good about our installed base as it relates to lubricators. The amount of consumables that's now entering North America as well as outside of North America is something we have never seen before. We're feeling very good about that business. Our guy leading the business, Jason Bowlin, is doing just a fantastic job. He's also done a great job of—we're also in Canada. He's done a great job of managing the relationships in the business. We talk about tariffs, and this guy in that group is working very well managing what's in front of us related to the ongoing tariff threats. I'm very proud of what that group is doing.

Our customers are getting the benefit of a very good product and service.

Julio Romero (Equity Research Analyst)

Very good. I'll pass it on, and best of luck in the second quarter.

John Kasel (President and CEO)

Thanks, Julio.

Operator (participant)

Thank you. One moment for the next question. The next question will be coming from the line of Liam Burke.

John Kasel (President and CEO)

Morning, Liam.

Liam Burke (Managing Director)

Good morning, John. Good morning, Bill. John, typically when there's a potential economic or national economic slowdown, the rails tend to see lower traffic volumes, but that's when they take advantage of slower volumes and step up CapEx. Are you getting any kind of feel for increased capital expenditures on rail projects?

John Kasel (President and CEO)

They don't come out and actually say that, but that's exactly what we're seeing. That's where this backlog and new orders that we're seeing is coming from. This is maintenance and additional capital work that they may be putting out or done. They're not necessarily adding capacity, but they're showing up and hardening their track system. That's exactly right.

Liam Burke (Managing Director)

Great. Thank you. On pipe coating, orders were up. Were the sales numbers affected seasonally, or is that just project-based and just general lumpiness?

John Kasel (President and CEO)

Yeah. I kind of shared with the, I think, earlier in the year, we talked about with the new administration that we're probably going to see this thing break free, and we have. We are very pleased with the order intake. We've hired a lot of people, somewhere around 50 people for this business. We're running close to capacity right now. We will be at full capacity in the second quarter.

We are seeing a very strong year. In fact, I think we're looking at multiple years of restoring that profitability to that business. Now, remember, we have two businesses. We are Line Coater, and then we have special coating as well. Both businesses have very large opportunities in front of us, similar to what we've seen maybe six, seven years ago. We are feeling very, very good about the outlook of those businesses.

Bill, you want to add anything to that?

Bill Thalman (CFO)

Yeah. The only thing I'd highlight is the quarter itself in terms of reported results. The coatings business was down a tick. We had a pretty large order that we had received at the end of the previous fiscal year that burned out in Q1 of last year. The first quarter was a little soft in terms of volume, but as John mentioned, we ended up having a 51% increase in the backlog based on the order intake level that we saw in Q1, and we see that continuing on for the rest of the year.

Liam Burke (Managing Director)

Super. Thank you, John. Thank you, Bill.

John Kasel (President and CEO)

Thanks, Liam.

Operator (participant)

Thank you. One moment for the next question. The next question is coming from the line of Christopher Sakai of Singular Research. Your line is open.

John Kasel (President and CEO)

Morning, Chris.

Christopher Sakai (Director of Research)

New orders and infrastructure. What are you seeing there? What's leading to the improvement?

John Kasel (President and CEO)

Yeah. We mentioned that Q1 order rates of 35%. Precast is just doing extremely well. Our strategy was to continue to double up and double down on what we're doing in precast. With our expansion and growth and new product lines as well as our new acquisition, well, that's not so new anymore. It's approaching three years old, but the penetration we're seeing in the East Coast and down in the Carolinas. Now, with our new operations starting up in Florida, we're just really pleased with what's going on in our precast business. We're looking for that really to it really shored up what we had in the first quarter, honestly, with the distribution being down.

We're looking for them to have sequentially a couple of really nice quarters put together here. The nice thing about the business is the Great American Outdoors Act, which is really the funding for our original legacy business, the building side. We haven't seen any pullback in that as well. Our order rate coming in related to the legacy precast buildings is as good, if not better, than it was even last year. We're looking at a fantastic year in that business, in all of infrastructure, which is really being led by precast.

Christopher Sakai (Director of Research)

Okay. Great. Can you talk about potential acquisitions? What are you seeing out there? Is it more of a challenging market now with the talks of the tariffs?

John Kasel (President and CEO)

It is, but we really are mindful of our strategy. We got a bunch of organic opportunities and growth that we're trying to manage. We're busy hiring people. We're busy looking at adding shifts, and we're busy bringing in technical and salespeople to make things happen, including service operations and organizations. We're not really actively looking for acquisitions because we don't need them. What we have in front of us for the year and the guidance, that's within our ability to perform. We just need to execute. Now, if it makes sense to do some smaller tuck-in type things, we're, of course, always looking at those things, but it's really not front of center or front of mind for us right now, Chris.

Christopher Sakai (Director of Research)

Okay. Great. Thanks for the answers.

John Kasel (President and CEO)

Yes. Thank you.

Operator (participant)

Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. One moment for the next question. Our next question is coming from the line of Justin Bergner of Gabelli Funds. Your line is open.

John Kasel (President and CEO)

Morning, Justin.

Justin Bergner (Portfolio Manager)

Morning, Justin.

Good morning, Bill.

A few questions here. You mentioned that weaker mix was a driver of slightly lower gross margins in your rail segment, but I guess I did not necessarily follow that given the pieces you broke out in the strength and the friction side versus the rail product side.

John Kasel (President and CEO)

Okay. Go ahead, Bill, please.

Bill Thalman (CFO)

Yeah. So the volume impact on Rail Products was a part of it, just given the cost structure within the overall business. But then we also had our TTM business, which is the Total Track Monitoring component of the business, had a pretty strong start to the year last year as well. So their volume decline was also a contributing factor. If you look across the entire rail segment, the largest impact overall was by far the Rail Distribution volume. The TTM piece, we're seeing nice bidding activity there. That was more of a temporary factor than anything.

Justin Bergner (Portfolio Manager)

Okay. That makes sense. Are you seeing any benefit or impact from higher steel prices in your Rail Products business as it relates to dollar or percentage margins?

John Kasel (President and CEO)

Yeah. Good question. Back in the first Trump administration, right, with the tariffs in 232 and steel, we benefited from that because as the steel input costs rose, we passed that out to the marketplace back then. We are going to see the same thing. We are seeing the same thing, actually, this year. As things continue to move forward and prices go, we will be able to pass those on. Coming out of COVID, we got really nimble and really agile where we are able to really start driving market pricing. I think we are set up very well as the tariffs continue to, if how real they are, we will be ready to make sure that we pass those out and get paid for.

Justin Bergner (Portfolio Manager)

Okay. That makes sense as well. In terms of the funding being released, is that comment mainly relevant to the Rail Products business as you look out to the rest of the year? Are there other businesses?

John Kasel (President and CEO)

Yeah. Specifically Rail Distribution. Behind Rail Distribution is the transit business. Behind the transit is government authorities. That is how it all flows. To put this in perspective for you, we would not be talking about a down quarter if we just shipped two or three more trains. That is how close it is, and that is how lumpy it is, and that is what kind of construction work we do.

Instead of those two or three trains being in Q1, this is, again, providing rail to the transit authorities, they will now go in Q2. We will see that pick up. It is all about the government programs. It is all about government funding, and it is about spinning a little slower at the start of the year with all the things going on in Washington. We are seeing that change here pretty quickly.

Justin Bergner (Portfolio Manager)

Okay. Thank you. Lastly, could you comment at all on what you're seeing in April in terms of sales and orders versus the first quarter qualitatively or quantitatively?

John Kasel (President and CEO)

Yeah. We always love questions like that because we do not typically talk about that, but I am not discouraged, let us put it that way, for where we are at sitting here in April. And when we talked and I closed up today's speech about giving confidence that we are going to hit our year-end guidance, that is mindful of what is going on in April.

Justin Bergner (Portfolio Manager)

Okay. You still think the upper half of the guidance is possible based on where we stand today?

John Kasel (President and CEO)

Yeah. Justin, we're lining up to our guidance. We'll see where all the chips fall. I will tell you, our operations are ready to perform. As the work continues and things get freed up here, we're ready to perform and ready to deliver.

Justin Bergner (Portfolio Manager)

Okay. Thanks so much.

John Kasel (President and CEO)

Thank you.

Operator (participant)

Thank you. This does conclude today's Q&A session. I would like to turn the call back over to John Kasel, CEO, for closing remarks. Please go ahead, sir.

John Kasel (President and CEO)

Thank you very much. Thank you for joining us today. It's one of these things that you get through the quarter and you get to the next quarter. That's how myself and the management team are looking. Put that behind us and really focus on what's in front of us right now because we have much to do to really be driving the volumes that we see in front of us and do it the right way to take care of our customers, to make sure that we run a safe and good quality organization and drive sure of the return. We're looking to continue that through Q2 and the balance of the year. Thanks for your time today, and we look forward to talking to you after the close of the second quarter. Take care.

Operator (participant)

Thank you for your participation in today's conference call. You may now disconnect.