NWPX (NWPX) Q2 FY26 earnings call: guidance and Q&A

The WTS segment's record revenue and margin expansion were primarily driven by a 26% increase in tons produced and a 6% improvement in selling prices per ton. This was supported by strong project execution, favorable project timing, and a beneficial product mix. Higher production volumes led to improved overhead absorption, significantly contributing to the 360 basis point gross margin expansion. Management expects these positive trends to continue through the remainder of the year, with demand remaining stable to upward trending.

The Precast segment experienced a 4.8% revenue decrease due to an 11% volume decline in April and May, attributed to unusually heavy rainfall in Texas and customer delays in Utah. However, conditions improved significantly in June, with the segment closing the quarter with strong momentum and an order book of $61 million. Management expects a stronger second half for Precast, with higher revenue and stable margins, driven by solid demand in non-residential markets, and anticipates another record revenue year for Precast in 2026.

Leading indicators for non-residential construction remain solid, with the Dodge Momentum Index up 22% year-over-year in June for both commercial and institutional sectors. This broad-based strength is expected to continue through the end of 2026 and into 2027, particularly bolstered by data center projects, which are a key demand driver for the Precast business. This strong non-residential demand is helping to offset ongoing softness in the residential construction market.

NWPX is focused on five key priorities: maintaining a safe workplace, prioritizing margin over volume, intensifying strategic acquisitions, implementing cost efficiencies, and returning value to shareholders when M&A opportunities are limited. The company is building cash on its balance sheet to support growth and shareholder returns. Management is actively evaluating M&A opportunities in precast and adjacent infrastructure businesses, considering greenfield sites and ancillary businesses if M&A activity remains slow in the precast sector.

Steel costs represent a significant portion (34-35%) of WTS cost of sales. While steel costs increased approximately 24% year-over-year in Q2, NWPX has successfully passed these costs through, resulting in higher project pricing and increased gross profit dollars. Management noted published steel prices are over $1,200 a ton and expects them to continue inching up, potentially reaching $1,400 a ton or more, driven by tariff-induced supply limitations and upcoming mill outages. The company remains comfortable with higher steel prices as long as supply is available.

The WTS backlog, including confirmed orders, stood at $423 million at quarter-end, slightly down from $430 million at March 31st but significantly up from $348 million last year. This figure includes a large, unplanned NDA project. As this project winds down through Q3 and early Q4, the WTS backlog is expected to normalize^📎 to historical ranges of $300 million to $350 million, reflecting the one-time^📎 nature of the large project and the underlying strength of the core business.