L.B. Foster Company - Earnings Call - Q2 2025
August 11, 2025
Executive Summary
- Q2 2025 delivered a return to organic growth with net sales $143.6M (+2.0% YoY), Adjusted EBITDA $12.2M (+51.4% YoY), and strong operating leverage from SG&A at 15.6% of sales (-200 bps YoY).
- Mixed vs estimates: revenue was a slight miss ($143.6M vs $144.2M*), EPS missed ($0.27 diluted vs $0.515 Primary EPS* actual $0.322*), while EBITDA beat ($12.2M vs $11.7M*) as tax rate spiked to 54.8% on UK losses with no tax benefit. Values retrieved from S&P Global.
- Guidance was lowered: FY25 net sales to $535–$555M (from $540–$580M), Adjusted EBITDA to $40–$44M (from $42–$48M), and FCF to $15–$25M (from $20–$30M); capex ~2% unchanged.
- Backlog/Orders strengthened: backlog $269.9M (+8.1% YoY), new orders $175.8M (+2.8% YoY), and gross leverage fell to 2.2x (from 2.7x) — setting up H2 acceleration, particularly in Rail (Rail Products +28.4% backlog; Global Friction Management +22.1%).
- Catalysts: backlog-driven H2 growth, reduced leverage, extended/cheaper credit facility (borrowing capacity to $150M through 2030), and continued buybacks; watch UK restructuring progress and tax normalization trajectory.
What Went Well and What Went Wrong
What Went Well
- Strong Infrastructure execution: Precast Concrete sales +36.0% YoY; Infrastructure net sales +22.4%; segment operating income +86.8% with margin expansion (+40 bps to 23.3%). CEO: “organic sales up 22.4%, led by 36.0% higher Precast Concrete sales”.
- SG&A leverage and profitability: SG&A down $2.4M (-9.8%) with SG&A/sales at 15.6% (-200 bps YoY); Adjusted EBITDA +51.4% to $12.2M on modest sales growth, highlighting mix and cost discipline.
- Orders/backlog and balance sheet: Backlog +8.1% YoY to $269.9M; gross leverage improved to 2.2x; CFO highlighted credit facility amendment expanding capacity and flexibility for growth and buybacks.
What Went Wrong
- Rail softness: Rail net sales -11.2% YoY; segment operating income -31.9%; margin -100 bps to 19.9% driven by UK AMH exit costs ($1.1M) and softer UK demand.
- Gross margin decline: consolidated gross margin -20 bps to 21.5% due to prior-year property sale gain ($0.8M) and current year AMH exit costs ($1.1M).
- Elevated effective tax rate: 54.8% in Q2 vs 10.9% last year, reflecting UK losses with full valuation allowance; CFO expects blended FY effective rate 35–40%, with future quarters 30–35% and longer-term normalization toward upper 20s.
Transcript
Speaker 3
Good day and thank you for standing by. Welcome to the L.B. Foster Company Second Quarter 2025 earnings call. At this time, all participants are in a 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 *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised today's conference is being recorded. I would now like to turn the call over to your speaker today, Lisa Durante. Please go ahead.
Speaker 2
Thank you, Operator. Good morning, everyone, and welcome to L.B. Foster Company's Second Quarter of 2025 earnings call. My name is Lisa Durante, the company's Director of Financial Reporting and Investor Relations. Our President and CEO, John Kasel, and our Chief Financial Officer, William Thalman, will be presenting our second quarter operating results, market outlook, and business developments this morning. We'll start the call with John providing his perspective on the company's second quarter performance. William will then review the company's second 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 disclosures, 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.
Speaker 4
Thanks, Lisa, and Mahoor, everyone. Thanks for joining us today for our second quarter review. I'll begin with slide five covering the key drivers of our results for the quarter. We're very pleased with our performance for the quarter, with improvements delivered broadly across the business. First of all, we returned to sales growth in the second quarter with revenues up 2% over last year. The growth was achieved in the infrastructure segment, with sales up 22.4%, led by a 36% increase in our precast concrete business. Rail revenues, on the other hand, remained soft in the quarter, declining 11.2% from last year. However, the rail sales included a 17.2% increase in friction management sales over last year. In addition, demand rates for our rail offering increased significantly in the quarter, as evidenced by a 42.5% increase in our backlog from the start of the quarter.
This sets a solid foundation for our growth outlook in the back half of the year. Highlighting the benefits of our strategic execution, we delivered a 51.4% increase in adjusted EBITDA over last year, despite the modest sales growth in the quarter. The improvement was driven by favorable margins in the infrastructure segment and strong SG&A leverage across the enterprise. Our net debt decreased to $77.4 million at quarter end, with gross leverage improving to 2.2 times compared to 2.7 times last year. Finally, the order rates for the quarter drove a solid increase in our backlog for both segments, with an improved business mix versus last year. I'll turn it over to Bill now to cover the financials for the quarter, and I'll come back at the end with some color on our market outlook and financial guidance for the year. Over to you, Bill.
Speaker 0
Thanks, John, and good morning, everyone. I'll begin my comments on slide seven covering the consolidated results for the second quarter. As always, the schedules in the appendix provide details on the financial results covered in today's call, including reconciliations for non-GAAP information. As John mentioned in his opening remarks, we returned to organic sales growth in the quarter for the first time since Q1 of 2024. Net sales grew 2% year over year, driven by strong growth in precast concrete within infrastructure. Reported gross profit was up $0.4 million, with the gross margin down 20 basis points to 21.5%. The reported Q2 gross profit includes a $1.1 million charge related to the exit of an automation and material handling product line in the UK. Also, last year's gross profit included a $0.8 million property sale gain.
Adjusting for these two items, gross margins were up 120 basis points versus last year on improved business mix, primarily within the infrastructure segment. SG&A costs decreased $2.4 million due to lower personnel, insurance, and professional services costs in the quarter. The current quarter includes a $0.3 million charge for the AMH exit. With the higher revenues and lower spending levels, the SG&A percentage of sales improved 200 basis points to 15.6%. Adjusted EBITDA was $12.2 million, up 51.4% versus last year, driven by improved margins in infrastructure and lower SG&A spending across the business. Cash provided by operating activities was $10.4 million, favorable $15.4 million versus last year due to improved profitability and lower working capital needs. I'll cover the favorable developments in orders and backlog later in the presentation. Slide eight provides a reminder of our typical business seasonality and the related financial profile.
Sales and EBITDA levels are normally higher in the second and third quarters, as they represent the primary construction season for our customers. As a result, our free cash flow normally follows a pattern of consumption in the first half of the year, with a reversal in the back half of the year as the construction season winds down. Since the first half of 2025 was weaker for our rail business, the working capital needs this year are somewhat deferred to the back half. This is supported by the higher order book exiting Q2, as well as the sales growth implied by our guidance in the back half of 2025. I'll highlight that the assumed free cash flow at the midpoint of our guidance is approximately $41 million for the second half of 2025.
Over the next couple of slides, I'll cover our segment performance in the quarter, starting with rail on slide nine. Second quarter rail revenues were $76 million, down 11.2% due to delayed order development primarily in rail distribution, coupled with reduced activities in the UK. Rail product sales were down 15.5% due to the softer rail distribution demand in the quarter, and technology services and solutions sales were also down 32.6%, including the decline in the UK business. I'll mention here that the UK automation and material handling product line we're exiting had $3.1 million in sales and $0.6 million of an operating loss for the trailing 12-month period. As John mentioned, global friction management sales were up 17.2% versus last year, as this growth platform continues to perform well. Rail margins of 19.9% were down 100 basis points, driven primarily by the $1.1 million AMH exit charge.
Excluding this impact, rail margins were up 40 basis points. Rail orders decreased 2.3% versus last year, but increased 37.3% sequentially, reflecting the strong order book development we expected for rail distribution. Backlog levels increased 42.5% during the quarter and 13.9% versus last year. The backlog improvement was realized in both rail products and global friction management, while TS&S backlog declined, driven primarily by the UK. Turning to infrastructure solutions on slide ten, net sales increased $12.4 million, or 22.4%, due to the strength in our precast concrete business, which increased 36% over last year. Steel product sales were up $0.2 million, with improved protective coatings and threaded volumes offsetting lower bridge volumes. Gross profit margins improved 40 basis points to 23.3% due to higher sales volumes in precast and improved margins in steel products due to our portfolio work.
Excluding the $0.8 million favorable impact from the Bedford property sale last year, infrastructure margins were up 190 basis points year over year. Infrastructure orders remained robust at $61.4 million, up 13.7% over the prior year, with solid gains in precast concrete. Backlog totaling $139.2 million is up $4.2 million over last year, including $7.9 million, or 36.8% from improved protective coating demand. I'll next cover some of the key takeaways from our year-to-date results on slide 11. Net sales in the first half of the year were down 9% due to weaker demand in the rail segment, primarily in rail distribution, coupled with reductions in the UK. Partially offsetting were sales gains in our growth platforms of precast concrete, up 35.1%, and friction management, up 14.4%. Year-to-date gross profit reflects the lower rail sales volumes, with margins of 21.2%, down 20 basis points.
SG&A costs decreased $4.4 million from the prior year, with lower personnel and professional service costs as the primary drivers. Adjusted EBITDA was $14.1 million, essentially flat with the prior year, despite the 9% decline in sales. I'll mention here that the higher effective tax rate for both the quarter and year-to-date period was due to our not recognizing a tax benefit on UK pre-tax losses. I'll emphasize that the higher rate is not reflective of our cash tax requirements, which remain extremely low at approximately $2 million per annum. We expect a lesser impact on our effective tax rate in future quarters, given our improvement efforts in the UK, as well as our overall improving profitability outlook. Operating cash flow was a $15.7 million use, favorable $10.7 million compared to last year on lower working capital needs, and orders were up 7.1% due to strong infrastructure demand.
I'll now cover liquidity and leverage on slide 12. Net debt levels of $77.4 million decreased $6.6 million compared to last year, with the gross leverage ratio improving to 2.2 times at quarter end. As mentioned earlier, we expect approximately $41 million in free cash flow in the back half of 2025. We expect to deploy these funds to lower debt levels while also improving leverage both sequentially and year over year. We also plan to continue our stock buyback program, with $36.7 million remaining authorized and approximately 6.5% of outstanding shares repurchased over the last two and a half years. A highlight of the quarter was the successful negotiation of an amendment to our revolving credit facility. We increased the borrowing capacity and extended the facility tenure to June of 2030, while also reducing borrowing costs and relaxing restrictions.
This achievement highlights the confidence our banking partners have in our strategic execution and prospects for the future, and we thank them for their continuing support. I'll briefly touch on our capital allocation priorities outlined on slide 13. Maintaining our financial flexibility with reasonable debt and leverage levels remains a top priority. We also continue to invest CapEx in our growth platforms and return capital to our shareholders through our share repurchase program. In summary, we have multiple levers available to drive shareholder value, and we remain prudent in our approach. My closing comments will refer to slides 14 and 15, covering orders, revenues, and backlog by segment. The book-to-bill ratio for the trailing 12 months was a favorable 1.04 to 1, with positive developments realized in both segments. The rail segment ratio improved to 1.06 to 1, with increasing order rates realized for three straight quarters.
The infrastructure ratio also remained positive at 1.02 to 1, with solid year-over-year growth in both orders and revenue in the second quarter. Finally, on slide 15, it's clear that the greatest improvement in our backlog was achieved in our rail segment, with a 13.9% increase year over year. I'll again highlight that the gains were realized in Rail Products, up 28.4%, and friction management, up 22.1%. Partially offsetting was the lower backlog for TS&S, due primarily to the UK. This should improve our overall profitability mix for rail in the coming quarters. The infrastructure backlog remains healthy at $139.2 million, with increased Protective Coatings demand driving the improved business mix. Thanks for your time this morning. I'll now hand it back to John for his closing remarks. Back to you, John.
Speaker 4
Thanks, Bill. I'll begin my closing remarks covering the recent market developments and outlook on slide 17. Starting with rail, the federal project funding that was previously curtailed at the start of the year began to release in the second quarter, which helped drive the backlog increase. We're cautiously optimistic that rail customer demand will remain steady through the balance of 2025, with expectations that federal funding will continue as is. We built a solid backlog in our friction management solutions, and we're also making further advances in our Total Track Monitoring product lines. Our customers see the value in these solutions, supporting the most challenging and operating safety requirements. Lastly, the UK market demand remains challenging, as we are taking the steps necessary to right-size this business to a smaller technology-based offering with improved demand and economic return profiles.
Turning to the infrastructure segment, our precast backlog remains solid at nearly $95 million. Precast has also benefited from the government funding programs, particularly the Great American Outdoors Act, and highway and civil construction projects that are also driving our demand levels. We previously mentioned the commissioning of our purpose-built precast facility in Central Florida. We're pleased to report that we have successfully manufactured and installed our first NevarroCast insulated wall system during the second quarter. As expected, interest in our solution is growing, with labor shortages prevalent in the local market. Overall, we remain bullish for a robust demand to continue for our precast concrete growth platform. Turning to steel products, second quarter results were flat overall, and the business mix improved substantially with the recovery of our pipeline coatings business, which was up 47% year over year.
With the renewed interest in energy investment in the U.S., as evidenced in the second quarter sales growth, a 37% higher backlog for coatings, we believe that we are in a favorable recovery trend for this product line. In summary, we believe that demand drivers supporting steady growth through the year-end and beyond remain intact, with increasing demand expected for our growth platforms of rail technologies and precast concrete. Switching topics, I'll provide a brief comment on tariffs. As previously mentioned, our supply chains are primarily sourced from within the U.S., with some minor exceptions for certain electronics and other components sourced outside the U.S. Thus far, tariffs have not had a significant impact on our product costs or ability to secure the materials needed to serve our customers. I'll wrap up today's call covering our updated 2025 financial guidance on slide 18.
Second quarter results were largely in line with our expectations, delivering strong improvements both sequentially and year over year. We're entering the back half of the year with a solid order book, favorable business mix, and lower operating cost structure, which supports our expectations for a strong second half of 2025. Our revised full-year guidance is slightly lower due primarily to the rail segment H1 performance. While strong orders were secured in Q2, the rail sales outlook was deferred to the back half of the year, reducing our full-year outlook for the rail segment. Having said that, our revised guidance midpoint still assumes a 25.1% increase in adjusted EBITDA on relatively modest sales growth of 2.7% for 2025. The midpoints assume a 42.8% increase in adjusted EBITDA year over year on a 14.3% sales growth for the second half of 2025.
Finally, the free cash flow outlook for the full year was also reduced slightly, primarily due to the timing of working capital needs for rail at the end of 2025. I'll note that our revised free cash flow midpoint outlook is still in a track of yield at approximately 8%. As you can see, we're well positioned to deliver solid sales growth, strong profitability expansion, and robust cash generation as we strive to maintain momentum through the balance of 2025 and beyond. In summary, we're very pleased with our team's performance and the favorable track we are on. Thank you for your time and continuing interest in L.B. Foster. I'll turn it back to the operator for the Q&A session.
Speaker 3
Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press *11 on your telephone. If your question has been answered and you wish to move yourself from the queue, please press *11 again. We'll pause for a moment while we compile our Q&A roster. One moment for our first question. Our first question comes from Liam Dalton Burke with B. Riley Securities. Your line is open.
Speaker 0
Thank you. Good morning, John. Good morning, Bill.
Speaker 4
Hi, Liam.
Speaker 0
On the capital allocation front, are you seeing high return opportunities in acquisitions or possibly reinvesting in growth projects, or would you be leaning more towards repurchases and debt reduction?
Speaker 4
Thanks, Liam, for the question. First of all, we're getting, you know, we have the first organic growth we've seen now in five quarters, so we're very pleased about that. We've been plowing our available capital into our organic programs, and we're starting to see the benefit of that. As I mentioned, the Central Florida new operation is up and running. We feel very good about that, and we're continuing to put more money in our precast operations because that growth has really, really taken off, as I mentioned, through the Great American Outdoors Act. We're also seeing a lot of highway and civil type work with that. As you know, we are buying, and we have approval to buy shares in the company, a $40 million repurchase program over a three-year period.
We've been very active in that, and we're very bullish about where we're at today, and we'll continue to make that capital towards that. As far as acquisitions, we've got quite a bit going on organically right now. We're very happy with what's going on with the most recent acquisition of Anjusko, really making strides in that area as well. We're also being mindful of trying to find some tuck-in and other type acquisitions to support our strategy for the years to come. Our pipeline is active. We've been actively looking at opportunities out there, but we're also making sure that we're executing on what's in front of us right now. That's where we're feeling very strong about the second half of the year, supported by that significant backlog growth that we've seen sequentially and in solid year-over-year performance.
Speaker 0
Great. My next question is, if I look at the backlog composition on both the infrastructure and rail products and services, are you seeing follow-through on the infrastructure side, on precast concrete, and on rail on the friction management side in the backlog for the rest of the year?
Speaker 4
Yeah, absolutely. You know, friction management, now thanks for mentioning that, it's been absolutely a tremendous year that we put together Q2. We had the best month we've ever had, part of the Q2 related to friction management. That growth just keeps coming. We feel very good about that. Our TTM work, which was a little soft in the beginning of the year, a lot of that is a flow-through from the larger class ones, or it also comes from the, you know, the government types of funding and spending. We've seen those appropriations change and the need for that activity in the second half of the year. We feel very good about that. It's coming into backlog. As I mentioned, we were concerned in the first half of the year whether or not we're going to have the backlog support, you know, our guidance, and we do.
It came through the rail side in a big way. Precast has just been humming along very, very well. Of course, we mentioned in the broadcast about what's going on with coatings. That's been a good year-over-year improvement as well. All in all, we feel very good where we're at right now related to the work we have in hand. We just need to perform in the second half of the year.
Speaker 0
Great, thank you, John.
Speaker 4
Yeah, thanks, Liam.
Speaker 3
One moment for our next question. Our next question comes from Julio Romero with Sidoti. Your line is open.
Speaker 1
Thanks. Hey, good morning, John and Bill. Thanks for taking questions.
Speaker 4
Hey, Julio. Good morning, Julio.
Speaker 1
Hey, I wanted to start off with a clarification question. With the AMH exit of the UK business, do you have any remaining UK exposure within rail? What's remaining within TS&S would be purely the U.S. portion?
Speaker 4
Yeah, thanks for your question. The UK, as we mentioned, the headwinds are there. We've been working on right-sizing that business for a period of time. We didn't just take action in Q2. We're just announcing that action. AMH was a significant piece of that. Then related to our telecommunications work, we're just getting it in line with the activity and the type of work that we like to produce in the market. It'll be an ongoing focus area for us for the balance of the year. We got the right team working on it right now in the UK and with the oversight here in the U.S. We feel good we're going to be in a pretty good position here by the year's end. As far as the greater TS&S, is that your question related to back in North America?
Speaker 1
I was asking if the remaining business within TS&S would be purely U.S., but it sounds like there's a little bit left of UK in there.
Speaker 4
Yeah, a little bit of UK, but you know the greater work in the U.S. has been very, very strong, very buoyant.
Speaker 1
Okay, that's very helpful. On the guidance, I think the updated sales range implies second half sales growth of 10% to 18% at the low and high ends of the guidance. Can you maybe discuss how you envision that growth across the two segments, and also from a cadence perspective with regards to the third and the fourth quarter?
Speaker 4
Yeah, third and fourth quarter, first of all, from a seasonality point of view, you know, it's very, very strong. Q3 is typically the best quarter that we see in the year. We expect that to continue this year. In Q4, we just got so much work to do that Q4 should be in good order and good standing for that. You know, what we really are happy about is our gross profit. You know, we ended the quarter at 30.9% gross profit in dollars and 21.5% in profit margin. That's going to continue. We expect that to continue to grow through the balance of the year. Our work that we did a year ago on SG&A has really positioned ourselves well to lever up, you know, the cost side of the business in the second half of the year.
Backlog is supportive of what we need to get done in the second half of the year. The numbers that we put out there, the $535 million to $555 million sales, is an area that we feel strongly that we will finish. Of course, the adjusted EBITDA numbers will flow accordingly.
Speaker 1
Yeah, very fair. That's even, you know, the gross profit dollars you're hitting is without even the rail business really working on all cylinders.
Speaker 4
That's exactly right. We really performed very, very well in the first half of the year in Q2 with what we had to work on. We feel very good about now we have the work really performing.
Speaker 1
Very good. The last one, if I may, is just on the EnviroCast business. Congratulations on manufacturing and installing your first EnviroCast precast wall system. Can you just talk about progress in that business and how much contribution, if any, is expected in the second half?
Speaker 4
Yeah, we're not, this is about getting it right. We're entering a new market, new space with a product line that we know and we performed in other parts of the U.S. We're starting slow, but it's meeting our expectations. We're working very closely with contractors and home builders and our first job, as well as bringing in the best workforce we can, focusing on our quality, focusing on productivity, and most of all, focusing on safety. We're very pleased, you know, to date where we're at. I'll be down there next month to see it firsthand again as we start moving product out to the sites and talking directly with customers. As far as the balance of the year, we're not expecting that much. This is really a growth, organic growth opportunity that we're putting in place for years to come.
We're focused on just making sure we're doing it right this year.
Speaker 1
Very helpful. Thanks very much.
Speaker 4
Thanks, Julio.
Speaker 3
Again, ladies and gentlemen, if you have a question or a comment at this time, please press *11 on your telephone. One moment for our next question. Our next question comes from John Bair with Ascend Wealth Advisors. Your line is open.
Speaker 0
Hey, good morning, John and Bill.
Speaker 4
Hi, John.
Speaker 0
Hi, John. A couple of questions. How much of the UK business has sort of been cleaned up? You took a pretty significant hit there with the tax situation. Can we expect that to be lesser impact going forward?
Speaker 4
Yeah, definitely. We take a large hit that we were expecting to do, and we'll talk about the tax. Of course, there's the cash part of the tax that, you know, is probably the most important. Maybe Bill could add a little color on some of those details that we could share.
Speaker 1
Yeah, good morning, John.
Speaker 0
Hi.
Speaker 1
Yeah, so in the quarter, we reported a 55% effective rate. It's basically a mathematical impact because we didn't have a tax benefit that we would record on the loss that we incurred in the UK on a pre-tax basis because of the cumulative losses that we had there, as well as the restructuring charge that we took in the quarter. What we would expect going forward is the profitability will improve in the UK, and our overall profitability will also improve. The impact of that situation in the UK will become lesser as the year progresses. We're expecting an effective rate for the quarters between 30 to 35%, and then a blended effective rate for the full year between 35 and 40%. Those are, again, just P&L drivers for the effective tax rate and EPS.
The important thing for us, first of all, was obviously turning the UK business around, and we think we're getting to that pivot point there. Also, on a consolidated basis, we're paying somewhere around $2 million per year in global cash tax. That will be the case for the foreseeable future.
Speaker 0
Okay, going forward in, say, 2026, will those tax rates in the 30-35% range come down?
Speaker 1
Yes.
Speaker 0
Okay.
Speaker 1
Yeah, we would expect that.
Speaker 0
You'd be more normalized.
Speaker 1
To migrate closer to the upper 20s, which is what we've expected it to be from an overall jurisdictional mix of taxes point of view.
Speaker 0
Okay. Switching over to precast with the EnviroCast, what is the emphasis on residential versus commercial? What do you see as the more positive uptake of that, or is it too early in the game yet?
Speaker 4
I don't think it's too early. The initial thinking was residential, and we could do light commercial or light industrial type work as well. The real market that we're serving and the area we went to is very heavily focused on residential. That's the contractors and the home builders that we're working directly with today.
Speaker 0
Is there any legislation or anything like that that would drive potential sales and adoption of this technology?
Speaker 4
Yes, the hurricanes and the effects of the weather have a dramatic impact on home builders' regulatory requirements. We are seeing, of course, the ability to pay, be able to afford to pay for insurance. In the event that you cannot afford insurance or it's very expensive, there is a big significant draw towards building a home out of concrete today. The thing that we really did not anticipate going into this, we knew that we had an impact related to labor. With everything else going on across the country right now related to building, construction, and the labor market, that's where we're really seeing an uptick in the need for our product. The availability of labor is just shrinking in that part of the country. What our product is able to do is we build in the factory.
The labor is in the factory environment, and the erection of a home is literally in days versus weeks or potentially months. That's been a real significant draw, being able to manage expectations with our customer because of the inability for them to bring labor and secure labor in the market down there.
Speaker 0
Okay, that raises another interesting question. How are you focused, or not focused, but how are you, what is your situation with your own labor force at, say, Vancusco and elsewhere?
Speaker 4
Yeah, very good. We've been working on that. First of all, you know, the beauty of L.B. Foster Company is our people. That's really what drives our company, and the profits come from our people. We spend a lot of time supporting and nurturing our culture. We've become the place to work in the markets we serve. We've been working on that talent pool in that workforce of Florida long before we made any product, bringing them on board, bringing them into the culture, understanding how we do things, and for them to really have that ownership related to building a factory and now building a product. That's a significant part of how we do things. We have a very, very good workforce. We feel very fortunate, but also we work on it each and every day to make it the way it is today.
Speaker 0
Yep, very good. Thanks for taking my questions.
Speaker 4
Thanks, John. You take care.
Speaker 0
Yep, yeah, we'll see you soon. Bye.
Speaker 4
Yep.
Speaker 3
I'm not showing any further questions at this time. I'd like to turn the call back to John for any further remarks.
Speaker 4
Thank you, everybody. Thanks for joining us today. We feel very good about the quarter, where we're at, the build of the backlog, supporting our margin, the SG&A that we're now dealing with, that we're now able to really leverage that second half of the year. Tariffs I mentioned in the call really have little to no impact. The freeing up of government funding, specifically on the rail side, is really giving us an opportunity to feel very excited about what's in front of us for the second half of the year. Thanks for your ongoing support of the company, and we look forward to talking to you after we post the next quarter results. Take care.
Speaker 3
Thank you, ladies and gentlemen. This does conclude today's presentation. You may now disconnect and have a wonderful day.