NWPX Infrastructure, Inc. (NWPX) Q4 2021 Earnings Report, Transcript and Summary

Greetings and welcome to Northwest Pipe Company Fourth Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Scott Montross, President and Chief Executive Officer. Thank you. You may begin.

Good morning and welcome to Northwest Pipe Company's fourth quarter and full year 2021 earnings conference call. My name is Scott Montross and I am President and CEO of the company. I'm joined today by Aaron Wilkins, our Chief Financial Officer. By now all of you should have access to our earnings press release, which was issued yesterday March 15, 2022 at approximately 4:00 PM Eastern Time. This call is being webcast and it is available for replay. As we begin, I'd like to remind everyone that the statements made on this call regarding our expectations for the future are forward-looking statements and actual results could differ materially. Please refer to our most recent Form 10-K for the year ended December 31, 2020 and in our other SEC filings for a discussion of such risk factors that could cause actual results to differ materially from our expectations. We undertake no obligation to update any forward-looking statements. Thank you all for joining us today. Before I begin, I'd like to note that effective in the fourth quarter of 2021, we revised our reporting structure to better align with changes made in our internal management structure and the financial information used to assess our performance and allocate our resources. As such, we will be reporting on two operating segments moving forward. Engineered Steel Pressure Pipe or SPP for short, and Precast Infrastructure and Engineered Systems or Precast for short. For those of you who may be newer to our story, our Engineered Steel Pressure Pipe segment involves the manufacture of large diameter, high-pressure steel pipeline systems for use in water infrastructure applications, which are primarily related to drinking water systems. These products are also used for hydroelectric power systems, wastewater systems and other applications. Our Precast Infrastructure and Engineered Systems segment involves the manufacture of high-quality precast and reinforced concrete products, including manholes, box culverts, vaults, catch basins, oil water separators, pump lift stations, biofiltration and other environmental and engineered solutions. I'll now turn toward a review of the year and our 2021 performance. Aaron, will then walk you through our fourth quarter and full year financials in greater detail. We generated annual revenue of $333.3 million, which included an $18 million contribution from our acquisition of ParkUSA. I'd also note that this represents less than three months of ParkUSA revenue as we completed the acquisition on October 5, 2021. Annual revenue from our SPP segment increased 7.5% year-over-year to $259.8 million. We attribute the increase primarily to record high steel pricing in 2021, which was partially offset by decreased production volumes as project bidding delays pushed jobs out into 2022 and in some cases beyond. And we experienced customer-driven production delays of jobs already in backlog. As of December 31st, our backlog including confirmed orders for the SPP segment was a record $290 million, compared to our previous record of $276 million as of June 30, 2019 and compared to $221 million as of December 31, 2020. The significant number of project bidding delays we experienced during 2021 resulted in one of the smallest tonnage water transmission steel pressure pipe bidding years we've seen in a very long time. However, we were successful in winning a high percentage of the projects that did bid late in 2021, which helped improve our backlog in a small market environment. Furthermore, we've been seeing bidding volume pick up substantially in the first quarter of 2022, partially related to projects that moved out of 2021. We expect our backlog will continue to grow in terms of size and quality, which should lead to enhanced margin levels as we progress through the first half of 2022. Annual revenue from our precast segment, increased 66.2% year-over-year to $73.5 million, driven by a 26% increase in sales at our Geneva operation, which we acquired in January of 2020. In addition, we benefited from the $18 million contribution from a partial fourth quarter of Park, which was acquired on October 5, 2021. The strength of our precast business was inherent in our margins, which remained strong throughout 2021, due to implementation of several price increases and higher production volumes throughout the year at our Geneva locations, as well as, the fourth quarter contribution from Park. Our Precast order book remains at all-time highs in total $51 million as of December 31, 2021 compared to $24 million as of September 30, 2021 and $11 million as of December 31, 2020. I'd also note that December 31, 2021, was the first period that included the order book for ParkUSA. Our consolidated gross profit decreased 12.4% year-over-year to $44.3 million, which resulted in a gross margin of 13.3% down 530 basis points from 2020, due to a very small water transmission steel pressure pipe market in 2021. The process of permitting, bidding and engineering SPP projects took much longer throughout the year given the highly complex and fluid challenges in the SPP market related in part to the pandemic, which resulted in reduced production volumes at our SPP facilities and led to higher levels of under-absorption. In combination with a small market, a volatile steel pricing environment was significant delivery disruptions in customer-driven production delays of orders already in backlog, and overall project bidding pressure due to such a small market resulted in downward pressure on our SPP margins for much of the year. Partially offsetting the decline in our consolidated gross margin was our Precast related margins which remained strong throughout the here. As a reminder, the Precast operations serve as a stabilizer to both our top line and gross margins during slow periods for the water transmission business. We anticipate our first quarter water transmission margins will remain muted, as we work through older backlog that was subject to the 2021 bidding pressures related to a very small market. However, the project bidding in early 2022 has been very strong in part due to orders from 2021 moving and sticking in 2022. As such, we expect water transmission margins should begin to expand in the second quarter. Further, we believe that steel supply and delivery-related issues have largely abated for the time being. In addition, while steel prices have fallen from the highs we saw in late 2021, they remain elevated by historical standards and we are seeing some upward pressure on steel pricing more recently. Again, given the current events that we're seeing in the world. Next I'd like to turn to a discussion on our two-pronged growth strategy. First, we remain focused on our core objective of driving growth in the Precast related space while at the same time continuing to maximize our Steel Pressure Pipe Water Transmission business. As we previously announced, our acquisition of ParkUSA in October helped significantly increase our participation in the Precast-related space through the addition of three Texas manufacturing facilities. For those of you who aren't familiar with Park, it's a technology leader in water infrastructure market that develops manufactures and distributes engineered water and wastewater control products as well as other water-related environmental solution products. The Park product portfolio serves both the commercial and residential construction markets, which helps better balance our product portfolio and offset periods of variability in steel pressure pipe. In addition, Park's portfolio is heavily value-added, which is very beneficial to our margin profile. We are very excited about ParkUSA and what it means for our business moving forward, given the expansion potential for Park's products within our existing Northwest Pipe facilities. This is a process we refer to as product spread, which will be a key focus once the integration is complete. The integration process has been going very well and is expected to last throughout the balance of the year. We expect the business to be immediately accretive and create organic growth opportunities throughout the company. For additional details regarding the ParkUSA acquisition, please see press release and supplemental presentation we issued on October 5th as well as the conference call replay from October 6th, all of which are available on the Investor page of our company website. In regard to our Geneva operations, we've been focused on expanding our capacity to further our growth strategy. As part of this endeavor, we are committed to invest over $18 million in new capital improvement projects at the Geneva plants in the form of facility expansions, automation, equipment upgrades to meet the growing market demand for Reinforced Concrete Pipe and other concrete products. In addition to manufacturing RCP, utility, storm water, and sanitary sewer solutions, we also started manufacturing lined sanitary sewer products at the Geneva plants which protect concrete from microbial induced corrosion when exposed to municipal and industrial wastewater. We believe these products have significant organic growth potential especially as it pertains to our product spreading strategy to eventually produce and sell these types of products at our ParkUSA locations. The second prong of our growth strategy is to continue to maximize our core steel pressure pipe Water Transmission business to drive shareholder value. We've continued to make progress in our efforts to focus on margin over volume, lean manufacturing, and cost reductions to drive efficiencies at all levels of the company. Through our lean processes this past year we reduced the number of man hours per job by approximately 1.75% versus the prior year on like projects. Further, we expect to realize additional cost savings ranging between $200,000 and $300,000 annually by upgrading and reconfiguring hydro testing equipment allowing us to reduce cycle-time and change over time. In addition we have been using lean manufacturing tools to reduce our cost of energy by working with the Energy Trust of Oregon which resulted in an 11% reduction in kilowatt-hours used and annualized savings nearing $50,000. We're in the process of evaluating work that has been done by outside engineering resources to explore additional opportunities for realizing longer term cost reductions. In regard to our SPP products, we introduced InfraShield during the fourth quarter which is patent-pending Seismic Resilient Joint System for use in geohazard and earthquake zones at a substantially lower cost of lifetime ownership versus other offerings. InfraShield helps improve the resilience and longevity of our steel water transmission pipelines and represents a prime example of our R&D efforts to continually improve livability in communities in which we live and work particularly in active seismic zones. I will now turn to look at current and upcoming Water Transmission projects. Looking at general market updates. H.R. 3684 Infrastructure Investment and Jobs Act has signed into law adding $55 billion in federal funding for relevant water infrastructure projects over the next five years. In the Eastern markets, the ongoing multiyear multiagency Houston Surface Water program is expected to bid multiple segments in 2022, representing 39,000 tons of pipe for the West and North Harris County Regional Water Authorities. We anticipate both authorities having additional projects representing 3,400 tons through 2023. The next new reservoir to be built in Texas is the Lake Ralph Hall for the Upper Trinity Regional Water District. This is another major program currently in design that includes a new dam and pipeline to move water into the DFW Metroplex. The project represents 17,000 tons of pipe. Construction on the dam began in 2021 and the pipeline is expected to begin in early 2023. The Alliance Regional Water Authority program in Central Texas is another multiagency regional water program. This project includes a large pipeline pump stations and treatment facilities with a few parts already bid. Construction started in 2021 and appears to be holding to the forecasted timeline with 8,500 tons remaining to bid. In North Dakota, progress is being made on the 140-mile, 87,000-ton Red River Valley Water Supply Project. We completed a 1.5-mile demonstration project in November and secured an additional nine-mile segment in January for construction commencing this summer, significant drought has now involved the state in a special legislative session held in November made some funding available, including federal funds received under the American Rescue Plan Act. Acceleration of the Red River Valley Water project is still being considered, but no significant action is expected until next regular legislative session commences in January of 2023. In Colorado, we are tracking an expected record of decision by the U.S. Army Corps of Engineers for the Northern Integrated Supply Project. The record of decision is now expected in 2022 and has been delayed by administrative backlog. If favorable construction of up to 150 miles of pipeline is expected to start in 2024. The project is located 60 miles north of Denver in the Fort Collins area. In the Western markets, California's Prop 1 $7.5 billion bond for water infrastructure has created the much needed funding for projects within state. According to the California Natural Resources Agency, 97% of those funds have been appropriated for various projects as of 2021 fiscal year. We expect requirements for these projects to stretch out over the next several years. Water reuse programs have generated new opportunities in the California market in which we expect to see bidding activity continue for the next year. The City of San Diego anticipates bidding, the three major remaining phases of the Pure Water program in the next 12 months. These phases include 8,600 tons of steel pipe. MWD is heading a regional reuse pilot project in conjunction with LA Sanitation District. This reuse program will treat and recycle water from one of the largest reclamation facilities in Southern California. It involves 60-plus miles of large diameter pipe. The current demonstration facility has been operating for almost two years. MWD is currently soliciting preliminary design and permitting services and construction of full-scale treatment and conveyance facilities could begin as early as 2025. MWD secured a $224 million refill loan in October of 2021 in which funding -- which will be funding nearly 50% of the anticipated construction cost. The MWD PCCP rehabilitation program will result in about 5,000 tons annually over the next 10 to 15 years. We have seen a slowdown in this work this year, which appears to be COVID related. So the timing of these projects has shifted to later this year. The site's reservoir is a water storage project that has received funding from Prop 1. It will involve over 30 miles of 144-inch pipeline. The project is forecast to begin in 2024 or 2025. Southern Nevada Water Authority has begun moving forward in earnest with an expansion of the southern part of their water delivery system. This program which has recently started preliminary design activity will include 25 miles of 78-inch pipe with construction tentatively scheduled for 2024. In Utah, design and permitting continues on the 150-mile 69-inch Lake Powell pipeline. This pipeline will provide an alternative source of water for Southern Utah. Construction is proceeding in earnest in New Mexico on the U.S. Bureau of Reclamation's Navajo-Gallup Supply program. The final major phase of pipeline construction for this program is expected to bid mid-2022 and includes 4,700 tons of steel pipe. In summary, we are very pleased with the record level of strength we experienced in both our SPP backlog in our precast order book despite the seasonally slower time of the year, as well as the ongoing pandemic-related issues that occurred throughout 2021. We entered 2022 with a considerable amount of momentum and we expect SPP bidding will remain fairly strong for the balance of 2022, which should lead to SPP margin expansion beginning in the second quarter. And the precast order book strength that we saw in 2021 is expected to continue throughout 2022. The addition of Park positions us well for future growth. And as we have said within three years our goal is to have our precast related business grow to a similar size, as our SPP business supported by the increasing infrastructure needs in the United States. Looking ahead, we will remain focused on our top priority of taking every precaution to keep our employees safe through the ongoing pandemic, integrating ParkUSA as quickly and efficiently as possible, having a persistent focus on margin over volume, continuing to implement cost reductions and efficiencies at all levels of the company and continuing to identify strategic opportunities to grow the company once we have completed the integration work with ParkUSA. I'd like to thank all of our Northwest Pipe employees for their ongoing commitment to solid operational execution and maintaining a safe work environment for all. I look forward to a productive 2022. I will now turn the call over to Aaron who will walk through our financial results in greater detail.

Thank you, Scott, and good morning, everyone. As Scott highlighted, we have revised our historical segment reporting practices to now reflect two reportable segments: Engineered Steel Pressure Pipe and Precast Infrastructure and Engineered Systems. The historical period financial information discussed today has been restated to reflect our current segmentation. I'll start with our fourth quarter financial results. Consolidated net income was $2.3 million, or $0.23 per diluted share compared to $5.2 million or $0.53 per diluted share in the fourth quarter of 2020. Our consolidated net income in the fourth quarter of 2021 included $2.6 million of acquisition-related transaction costs, $2.3 million of acquisition-related inventory charges and $0.9 million of amortization of acquired intangible assets specific to ParkUSA, which were partially offset by $1.4 million related to the tax expense associated with the aforementioned items. For comparability purposes we also reported adjusted net income, which excludes these unique and unusual items. Our fourth quarter adjusted net income was $6.6 million or $0.67 per diluted share, compared to $5.4 million or $0.54 per diluted share in the fourth quarter of 2020. Please refer to the reconciliation of non-GAAP financial measures in our earnings release for a comprehensive schedule, detailing the adjustments for each period. Consolidated net sales increased 47.8% to $102.5 million compared to $69.4 million in the fourth quarter of 2020. SPP segment sales increased 23.2% to $71.6 million, compared to $58.1 million in 2020, due to 45% increase in selling price per ton, primarily due to increased steel costs along with changes in product mix, which were partially offset by a 15% decrease in tons produced, resulting from changes in project timing. Precast segment sales increased 174.2% to $31 million compared to $11.3 million in 2020, primarily due to the $18 million contribution from ParkUSA's operations, which Scott discussed earlier. This is in addition to a 15% increase in sales at our Geneva operations resulting from a 6% increase in shipments and 8% increase in selling prices. Consolidated gross profit increased 9.8% to $13.6 million, or 13.2% of sales, compared to $12.4 million or 17.8% of sales in the fourth quarter of 2020. SPP gross profit decreased 20.5% to $8.7 million or 12.1% of segment sales from $10.9 million or 18.8% of sales in 2020, primarily due to lower production volumes and pressure on input pricing, partially offset by increased selling prices. Precast gross profit increased 237.5% to $4.9 million or 15.9% of Precast sales from $1.5 million or 12.9% of sales in 2020, primarily due to the contribution from ParkUSA, as well as higher prices and shipment volumes at our Geneva operations. Included in Precast gross profit for the quarter was $2.4 million in acquisition-related charges. Excluding this item, the Precast segment's gross margin would have been 23.8% for the fourth quarter of 2021. Looking forward, we do not expect significant impact from ParkUSA acquisition-related charges on our gross margins. Selling, general and administrative expenses increased 81.9% to $10.5 million, compared to $5.8 million in the fourth quarter of 2020. The increase was almost entirely due to the addition of ParkUSA, which included $2.6 million of period specific transaction costs and $0.8 million in new amortization associated with the acquired intangible assets. In addition to the aforementioned non-cash amortization expense, the addition of ParkUSA has added approximately $1.5 million to our quarterly SG&A run rate for costs that are primarily personnel, related in nature. Now turning to our full year results, consolidated adjusted net income was $16.5 million or $1.66 per diluted share compared to $19.6 million or $1.99 per diluted share in 2020. Our 2021 adjusted net income excludes $5 million in unique and one-time items associated with the acquisition of ParkUSA net of respective taxes. This compared to our 2020 adjusted net income which excluded $0.6 million again net of taxes which consisted of $2.4 million of acquisition-related expenses associated with our 2020 acquisition of Geneva, partially offset by $1.8 million of Saginaw fire insurance recoveries. Consolidated net sales increased 16.6% to $333.3 million in 2021, compared to $285.9 million in 2020. SPP segment sales increased 7.5% to $259.8 million compared to $241.7 million in 2020, driven by a 15% increase in the selling price per ton due to increased material cost as well as changes in product mix, partially offset by a 6% decrease in tons produced which resulted from changes in project timing. Precast segment sales increased 66.2% to $73.5 million in 2021, compared to $44.2 million in 2020, largely due to the addition of ParkUSA in October 2021 as well as a 26% increase in sales at Geneva due to an 18% increase in shipments as well as a 6% increase in selling prices. Recall that, 2021 includes an additional month of Geneva shipments compared to 2020, due to the timing of the acquisition within the year. Consolidated gross profit decreased 12.4% to $44.3 million or 13.3% of net sales in 2021, compared to $50.5 million or 17.7% of net sales in 2020. Steel Pressure Pipe gross profit decreased 29.4% to $31.3 million or 12% of segment sales in 2021, compared to $44.3 million or 18.3% of sales in 2020 due to the combination of changes in product mix and pressure on project pricing. Additionally, as a result of the fire, at our Saginaw facility in April 2019, $1.4 million of business interruption insurance recovery was recorded in 2020, net of incremental production costs, resulting in an adjusted segment gross margin of 17.7%. Precast gross profit increased 108.4% to $13 million or 17.7% of precast sales in 2021, compared to $6.2 million or 14.1% of sales in 2020, due to the fourth quarter's contribution from ParkUSA as well as higher prices and production volume at the Geneva operations. Precast gross profit in 2021 included $2.2 million of increased acquisition-related inventory charges. After considering the separate acquisition-related charges in 2021 and 2020, the adjusted gross margins for this segment were 21% and 14.7%, respectively. Selling, general, and administrative expense increased 13.1% to $28.2 million or 8.5% of consolidated net sales in 2021, compared to $25 million or 8.7% of sales in 2020. The increase in SG&A expense was largely due to the addition of ParkUSA and primarily consisted of $1.8 million and higher compensation-related expenses $0.6 million in higher acquisition-related transaction costs and $0.7 million in higher amortization expense associated with recently acquired intangible assets. For the full year of 2022, we estimate our consolidated selling, general, and administrative expenses to be in the range of $36 million to $38 million. Company-wide depreciation and amortization expense was $13.6 million in 2021, compared to $14.6 million in 2020. We expect depreciation and amortization to be in the range of $16 million to $18 million for 2022. Interest expense increased to $1.2 million in 2021, compared to $0.9 million in 2020. As we move through 2022, I expect our interest cost to vary with the working capital needs of our SPP business and with tightening to the current rate environment. Our 2021 income tax expense was $3.6 million resulting in an effective income tax rate of 24%, compared to $6.6 million in 2020 for an effective tax rate of 25.7%. Effective income tax rate in 2021 was primarily impacted by estimated changes in our valuation allowance. While the income tax rate for 2020 was primarily impacted by costs associated with the acquisition of Geneva that were nondeductible for tax purposes. Now transitioning to our financial condition, we used $5.8 million in net cash from operating activities in 2021 this compared to $56.1 million of net cash provided by operating activities in 2020. Net income adjusted for non-cash items generated $28.7 million of operating cash flow in 2021, compared to $40.3 million of operating cash flow in 2020. As of December 31, 2021, we had $86.8 million of outstanding borrowings on our credit facility and $37 million in additional borrowing capacity. We are continuing to diligently manage our working capital and believe our available borrowing capacity is sufficient to meet our near-term liquidity needs. Our capital expenditures for the year totaled $13.3 million. Ongoing labor and supply chain constraints resulted in a slower capital spend than desired in 2021. However, we were able to make a $1.8 million down payment on our reinforced concrete pipe mill ordered late in the fourth quarter as part of our expansion efforts as Scott highlighted earlier. We are currently projecting between $26 million and $30 million in CapEx for 2022 including approximately $13 million in additional investment for the new pipe mill with the remainder to be used primarily for standard capital replacement projects. I expect the timing of our 2022 CapEx spending will continue to depend on broader economic forces. In summary, we are pleased with the progress made in 2021 to advance our two-pronged growth strategy. I'd like to take a moment to acknowledge those team members involved in the continued integration efforts, which are a critical component to making our recent acquisitions of success. Your extra efforts are truly appreciated. I'd also like to echo Scott's sentiment in thanking all of our employees for their efforts in 2021 and encourage continued engagement and focus on our safety programs. Finally, I'd like to thank our stockholders, customers and suppliers for their ongoing support of Northwest Pipe Company. I will now turn it over to the operator to begin the question-and-answer session.

Thank you. Ladies and gentlemen at this time, we will conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Brent Thielman with D.A. Davidson. Please proceed with your question.

Hey, thank you. Good morning.

Good morning.

Good morning.

I guess first question, Scott at the end -- it sounds like at the end of the first quarter presumably you could be over $300 million in backlog potentially just based on your commentary. How much of that do you think you can convert to revenue here in 2022?

What I would say is as you can see the backlog has continued to grow, right, finishing the year at $290 million. I think the biggest part of this Brent is we have 51,000 tons of projects that are bidding in the first quarter, okay? So this first quarter is one of the larger first quarters we've seen in a long time. And a lot of this stuff is relatively near-term. So the backlog that we have now generally spreads out over a relatively long period of time. But I think that you're going to see some pretty strong revenue numbers. If everything proceeds the way that we think it's going to proceed this year, very strong first quarter bidding on the steel pressure pipe side. The work that we have bid and that we're getting to in the backlog that is I guess better quality margin work, starting to run in the first and the second quarter. And all of those things are going to build into a pretty strong steel pressure pipe year if everything remains the way it is right now.

Okay. Great. And then maybe your thoughts on the current Precast margins. Aaron, I think you said closer to 20% stripping out some of the onetime items this quarter. But is there sort of a catch-up opportunity there as well, just because you've been implementing price increases and absorbing higher costs there. I guess just your thoughts around those gross margins as we progress through the year?

Yeah. The gross margins on precast are really -- the way we've always tried to characterize them Brent is the utility piece which is more of the Geneva type applications are probably, it gets to the very high side of what Water Transmission can get to. So when you're looking at those kind of margins, I think that potentials there are the low-20s as you go forward. We've had probably five or six price increases in the Precast side this year and actually we just got another one going in because the raw material prices continue to move on us, not only the cement, but the aggregates and things like that. So we're keeping up with the raw material prices, but that margin looks like it has the potential to continue to build. When you look at the Park margins in that part of our Precast business with Precast and the Precast equipment, they're generally a little bit higher, maybe moving more toward the mid-20s is the way it looks right now. So I think that's probably as we sit right now and as we through this Precast business, it's probably a relatively good bellwether. And I think we said in the script that Precast order book is really strong at the end of the year at $51 million. That also continues to gain strength in the first quarter, similar to what's happening in the steel pressure pipe side. So I think we've got a good bit of momentum behind us as we stand right now.

Yeah. That's good to hear. Yeah, I guess and to that point Scott, I mean it looks like Geneva is still growing at a very healthy sort of double-digit clip here. I mean any reason why that should moderate this year?

The Geneva is a pretty regional set up, right? We're in Utah. And I think what we're seeing in Utah is a really strong economy, unemployment rate below 2% in Utah, the housing rate and the number of put in place residential housing units they're putting in continues to grow. We -- there's continued net migration into Utah. So I think what we see in front of us at least for the near term looks to continue to be really strong in Utah. Obviously, the Fed with the interest rates can eventually affect this. But right now, what we're seeing is continued strength. And like I said, a order book on the Precast that continues to grow. So it looks to be strong on the Precast side, whether it's Park or the Geneva side all the way through this year as we sit right now.

Okay. Great. I’ll pass it on. Thanks guys.

Brent. Thanks.

[Operator Instructions] Our next question comes from the line of Gus Richard with Northland. Please proceed with your question.

Yes. Thanks for taking the question. Nice quarter guys.

Hey, Gus.

Hey. Real quick on the Precast business. How much of that is tied to housing starts? And how much of it is tied to other activities?

I would say that when you look at the utility side which is more of kind of the Precast side of what Park or what Geneva does, A big piece of that is tied to the residential side. When you look at the Precast piece of the business that Park does, it's relatively small to the residential side, maybe 15% or less of that. A lot of the Park stuff ends up in more relatively large industrial commercial applications, whether they're pump stations or water meter vaults or gigantic backflow preventers or things like that that's significantly more commercial driven and away from the residential piece.

Okay. So when I think about it blended, it sounds like roughly 50-50 when you blend Geneva with Park?

Yes, that's probably relatively close.

Okay. And then given the low bidding activity last year, I think, you have some lower margin stuff on the books you got to work through. Can you sort of talk about the profile of working through that backlog?

Yes. I think it's -- when we started talking about the fall off, I think, it's when it originally started, it was really the second half of 2020 that was -- we're starting to fall off. And then the first half was rough of 2021. We expected the second half to be really strong with the bidding in the second half like well over 100,000 tons of work bidding and that started to deteriorate. A lot of it was COVID related getting jobs pushed around. Actually a lot of that is being sent out into 2022. So with that, it's a really small market, you get a lot of market bidding pressure, right, during that period of time. So what we're seeing right now really fourth quarter, what we expect to see in the first quarter is being subjected to a lot of that bidding pressure that we saw during that period of time. As we got later in 2021, the bidding very late in the year started to pick up. And what I would say is the quality of the work that was going into the backlog as far as margin concern started to really improve. And what we've seen in the early part of 2022 continues to improve margin-wise. So certainly we expect, like we said to see some expansion in that margin. But I think, it's going to be into the second quarter until we really get there. And we've got some pretty good quality work in backlog coming forward. And quite frankly, the amount of that work as we progress through the first quarter that's in backlog continues to grow based on what's bidding. So it's pretty substantial.

And then do you think you can get back to historic -- the high end of your gross margin range exiting the year?

It really depends on how stable the marketplace is, Gus. If we get a market that has good extended demand that we see right now and we see industry-wide backlogs with competitors that are solid and in good shape, can you get a stable bidding environment? You can start getting up to the higher end of that range again. The issue we always see is, there's always some period of disruption that happens that once we get to that period, we'll have a bit of disruption in the market and it falls off for a period of time and then we have to climb all the way back up there. So that's -- I would say that we are heading in that direction right now.

Okay. And then last one from me. You mentioned that steel delivery has gotten a little bit better and that pricing has eased a bit, but seems to be stabilized except for recent events. And I was just wondering if you could talk about what has happened particularly with delivery and project delays going forward?

Well, we really saw most of the delivery and project delay issues probably starting, as we got toward the beginning of the second quarter in 2021, and still got really tight, and we had all the restrictions with the 232s are bringing imported steel into the country, and you couldn't -- there really wasn't enough supply to fit the demand profile that we had in the company -- or excuse me, the country, which caused the tightness throughout the industry. That caused prices to go up to almost $2,000 a ton on hot bands during that period of time. It also caused lead times to go out to eight, 10, 12 weeks to get a hot-rolled band delivered if you could get into somebody's order book at that point in time. Well, that kind of continued really into the third quarter and it started to abate as we got out a little bit later into 2021. We're not seeing that now. It started to really kind of crest and fall off as we got really late in 2021. We saw steel prices start to fall pretty significantly to where they fell down to probably $1,050 to $1,100 a ton all the way down from almost $2,000 a ton. Lead times started to come back in. And that's kind of what we're seeing rate up to this point. But what we've seen in the last couple of weeks, Gus is that based on recent world events, we've actually seen steel prices start to move back up again. They're kind of to the $1,100 $1,200 range. We're still able to get steel, but what is the effect on the conflict in the Ukraine and other issues going to have on steel, how do the transportation costs affect that as we go forward. So, those are things that we're going to have to pay close attention to and make sure that we're passing that on through the system. But right now things look to be pretty stable and lead times in -- the general probably four, five-week range for hot-rolled band, which is pretty manageable. But we're keeping our eye on it with what's going on in the world now and see what happens. But I think that there's a little bit of upward pressure on steel again, and we'll see what happens. It could move up quite a bit again I think. And we're not opposed to high steel prices. We're just opposed to the volatility in prices, where it causes us problems with deliveries and things like that. And we are definitely in favor of high steel prices, just not volatility.

Got it. Very helpful. Thanks so much.

Absolutely.

There are no further questions in the queue. I'd like to hand the call back over to Scott Montross for closing remarks.

Okay. Thank you, and thanks again for everybody joining our call today. And before we close out of the call, I just wanted to leave you with a couple key takeaways. Record backlog achieved in 2021 bodes pretty well for both our SPP business and our Precast business as we move into 2022, both on the revenue and margin side. So, we are very pleased with the way that the Park acquisition is progressing and the integration of Park and all the things that we're doing there. And the business that it's getting us into we're very excited about the idea of product spread, which we've talked about, we'll be talking way more about as we go into the future and the kind of organic growth that it can provide for the company. So pretty excited about all that stuff and I think we've got some really good solid momentum going into 2022. I'd like to thank everybody for your time and attention today, and we look forward to speaking with you again very soon on the first quarter call in May. So, thank you.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.