Forterra, Inc. (NASDAQ:FRTA) Q3 2019 Earnings Conference Call Transcript

Nov 05, 2019 • 10:00 am ET

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Forterra, Inc. (NASDAQ:FRTA) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning, and welcome to Forterra's Third Quarter 2019 Earnings Conference Call. Today's call is hosted by Karl Watson, Jr., the Company's Chief Executive Officer and Charlie Brown, the Company's Chief Financial Officer.

With that I will now turn the call over to Mr. Brown.

Executive
Charlie Brown

Thank you and good morning to everyone. Welcome to Forterra's Third Quarter 2019 Earnings Conference Call. I'd like to point out that Forterra intends to take advantage of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995 as noted in the earnings release we filed last night.

In addition, we have posted an investor presentation on our website under Investor Relations that includes price and volume information for both of our segments. Please remember that our comments today may include forward-looking statements, which are subject to risks and uncertainties and actual results may differ materially from those indicated or implied by such statements.

Some of these risks are described in detail in the company's SEC filings, including our Annual Report on Form 10-K. The Company does not undertake any duty to update such forward-looking statements. Additionally, we will refer to certain non-GAAP financial measures during the call including EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin.

You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure and other related information including a discussion of why we consider these measures useful to investors in our earnings release.

Now, Karl will give an update on our business.

Executive
Karl H. Watson, Jr.

Good morning, everyone. We appreciate you being on the call with us today. Our third quarter results reflect the continued improvement in the operating performance of our Company. The solid quarter saw a year-over-year increase in revenue of 7% and gross profit of 32% primarily driven by; one, higher volume associated with favorable weather conditions pending our drainage operations; two, higher average selling prices in both of our businesses; three, lower raw material costs in the Water business; and fourth, the beginnings of productivity improvements across both businesses. As a result, adjusted EBITDA was 30% higher than the same quarter last year.

I'd like to spend a few moments to summarize our current quarter performance in terms of volume, price and cost. Finished shipment volume increased 9% year-over-year. The growth in volume reflects fewer rainy days in many of our key markets, especially Texas.

Our backlogs for Pipe & Precast products at the end of the third quarter were up year-over-year, giving us confidence in our near-term volume outlook. Water shipment volume decreased by 9% over the same quarter in the prior year. Our customers indicated that they built inventory in the third quarter of last year, an action they did not repeat this year.

Regarding future demand, while our backlog at the end of the third quarter was less than at the same time last year, we have seen an increase in recent booking volumes. We anticipate volumes in Water business to return to our historic averages. In