NWPX Infrastructure, Inc. (NWPX) Q2 2026 Earnings Report, Transcript and Summary

Greetings, and welcome to the NWPX Infrastructure Second Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Scott Montross, President and CEO. Please go ahead.

Good morning, and welcome to NWPX's Second Quarter 2026 Earnings Conference Call. My name is Scott Montross, and I'm 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, July 29, at approximately 4:00 p.m. Eastern Time. This call is being webcast, and it is available for replay. As we begin, I'd like to remind everyone that 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, 2025, 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. I'll begin with a review of our second quarter performance and our outlook for the third quarter of 2026, and then Aaron will walk you through our financials in more detail. Second quarter marked another outstanding quarter for NWPX Infrastructure as we delivered record financial results across revenue, gross profit and EPS. Net sales were up 19.7% year-over-year to $159.5 million, primarily driven by strength in our Water Transmission Systems business. Consolidated gross profit totaled $34.4 million, up 35.5% from last year, with our gross margin expanding 250 basis points year-over-year to 21.5%. That momentum translated into strong bottom line performance, underscoring the operating leverage in our model with earnings of $1.62 per diluted share and free cash flow of $9.9 million or approximately $1.01 per share. These results reflect the strength of our diversified business model and the disciplined execution of our long-term strategy. Turning to our WTS segment. Revenue reached a quarterly record of $113.2 million, up 33.8% year-over-year with strong margin improvement. Our performance reflected higher production volume with tons produced up 26%, supported by strong project execution and favorable project timing. Additionally, selling prices per ton were up 6% year-over-year, driven by changes in product mix. We had another exceptionally strong booking quarter with robust bidding activity, sustaining continued healthy backlog and reinforcing demand strength across our markets. After having produced approximately 15% of the large NDA project in the second quarter, the WTS backlog, including confirmed orders, ended the quarter at $423 million, down only slightly from the $430 million at March 31 and well above the $348 million level we reported this time last year. This is a good indication of how strong the bidding was in the second quarter and continues to be in the third quarter. We also have a substantial pipeline of projects totaling more than $125 million that we've already bid on. While awards are still pending, we expect to secure a meaningful portion of these opportunities. As the large unplanned NDA project winds down, the WTS backlog levels will normalize to recent historical ranges. WTS gross profit increased 60.9% year-over-year to a record $24.2 million, resulting in a gross margin of 21.4%, up 360 basis points from last year. This improvement reflects higher volumes supported by strong customer demand and disciplined project execution as well as the related efficiency gains and higher overhead absorption that come with that level of production. In addition, we benefited from favorable product mix and pricing. Now turning to our Precast segment. Precast revenue slightly decreased 4.8% year-over-year to $46.3 million. Our performance reflected an 11% decrease in volume shipped as we experienced unusually heavy rainfall in Texas and customer-driven project delays at our Utah facilities during the months of April and May. However, our selling prices were up 7% over last year, reflecting favorable changes in product mix. Business conditions improved significantly in June, which led us to close out the quarter with strong momentum, with a quarter end precast order book of $61 million, up from $55 million at March 31 and above the $56 million level at June 30 of last year, positioning the business well for the remainder of the year. At Park, production increased 24% year-over-year, supported by 29% growth in revenue per yard shipped. This performance came despite elevated interest rates. We are continuing to see signs of improvement in the nonresidential demand trajectory as we move through 2026, particularly in data center projects that continue to bolster commercial construction activity. At Geneva, production was down 5% year-over-year, primarily reflecting the ongoing softness we've been seeing in the residential construction market. Production was mostly offset by growth in the nonresidential business, demonstrating the resilience in the Geneva market platform. That said, leading indicators remain solid in mid-2026, with the Dodge Momentum Index up 22% in June of this year versus June of 2025. The commercial sector was up 22% and the institutional sector was up 22%, indicating broad-based strength for nonresidential construction activity through the end of this year and into 2027. In addition, we are continuing to advance our Precast product spread strategy across the network, broadening our capabilities, increasing our capacity utilization and evaluating opportunities to introduce Precast into additional WTS facilities. Precast gross profit of $10.2 million was down 1.7%, which was directly related to the slow shipping months of April and May. However, we saw a gross margin improvement of 70 basis points to 21.9% from 21.2% last year, highlighting stronger pricing levels and better cost absorption despite lower volumes. We expect margins to continue recovering as nonresidential demand builds. I'll now turn to our outlook for the third quarter of 2026. On a consolidated basis, we expect our third quarter performance to be comparable to or stronger than the second quarter of 2026. In our Water Transmission Systems segment, we expect revenue and margins to be similar to the prior quarter, driven by strong production volume and product mix as well as the emergence of the previously discussed significant unplanned NDA project that began production in June and will extend through the third quarter. We continue to maintain a robust WTS backlog, elevated bidding levels that have continued into July are providing great visibility to near-term financial performance. Based on what we are seeing today, we expect full year bidding levels to be stronger than what we saw in 2025. We remain encouraged by the level of activity across current and upcoming Water Transmission projects, which continue to come with improved economics and margins. For a more complete view of these projects, please refer to our investor presentation on our website. Turning to Precast. We grew our order book in the second quarter of 2026, and we expect a stronger year for the Precast business overall with our momentum from June carrying over into the back half of the year. Demand remains healthy in the nonresidential market, supporting continued momentum across our Park and Geneva platforms. For the third quarter, we expect Precast revenue to be higher than both the third quarter of last year and the prior quarter with stable margins driven by solid demand, higher production levels with improved absorption and the strengthening order book. In closing, we delivered an outstanding second quarter, setting new records in revenue, gross profit and earnings per share. Demand across our end market remains healthy. Bidding activity continues to be elevated, and our Precast business is carrying positive momentum into the second half of the year. These factors reinforce our confidence that 2026 is shaping up to be a historic year for NWPX Infrastructure. I want to thank our team across the organization for their continued execution, their commitment to our strategy and to maintaining a strong safety culture. As we look ahead, our near-term priorities remain: one, maintaining a safe and rewarding workplace; two, focusing on margin over volume; three, intensifying our pursuit of strategic acquisitions; four, implementing our cost efficiencies across the organization; and five, returning value to the shareholders when M&A opportunities are limited. I will now turn the call over to Aaron, who will walk through our financials in greater detail.

Thank you, Scott, and good morning to everyone joining the call today. Before we begin, I'd like to mention that unless otherwise stated, all financial measures in my remarks refer to the second quarter of 2026, and all comparisons will be year-over-year comparisons versus the second quarter of 2025. I'll begin with our profitability. We delivered record consolidated net income of $15.8 million in the second quarter or $1.62 per diluted share, up from $9.1 million or $0.91 per diluted share, reflecting improved operating leverage on higher revenues and the continued strength in execution across the business. This is the highest earnings per share posted in the company's history. Recall, the company excludes the third quarter of 2018, which was elevated by a onetime $21 million noncash gain on bargain purchase associated with our acquisition of Ameron Water Group. As we measure it, the previous record reflective of our operational performance was achieved in the third quarter of 2025. On the top line, consolidated net sales grew 19.7% to $159.5 million compared to $133.2 million last year. Our Water Transmission Systems segment posted record revenue in the second quarter, with sales rising 33.8% to $113.2 million versus $84.6 million. This growth was driven by a 26% increase in tons produced due largely to project timing and a 6% improvement in selling price per ton due to improved pricing and product mix. Precast sales were down 4.8% to $46.3 million compared to $48.6 million. The results reflected an 11% decrease in volume shipped due to adverse weather events and ongoing softness in the residential construction market, partially offset by a 7% increase in selling prices due to product mix. As a reminder, the products we manufacture are unique and the average sales prices for both of our operating segments as well as the Precast shipment volumes and WTS production volumes cannot be relied upon as comparable metrics due to variations in product mix between periods. We also achieved record consolidated gross profit, supported by higher volume and favorable pricing. Gross profit was $34.4 million, up 35.5%, representing 21.5% of sales, a 250 basis point improvement from $25.4 million or 19% of sales. In Water Transmission Systems, gross profit increased 60.9% to $24.2 million or 21.4% of segment sales, a 360 basis point improvement from $15.1 million or 17.8% of sales. The increase reflects higher production volume and the associated operational efficiency gains and higher pricing resulting from sustained strength in market demand and changes in product mix. Precast gross profit was down 1.7%, $10.1 million or 21.9% of segment sales compared to $10.3 million, representing a 70 basis point improvement from 21.2% of segment sales. Gross profit dollars were primarily impacted by lower shipment volumes. Selling, general and administrative expenses were $13.2 million, up 5% and represented 8.3% of net sales, an 80 basis point improvement from 9.1% of net sales a year ago, even with modest increases in incentive compensation expense. For the full year 2026, we now expect consolidated SG&A to range between $54 million and $56 million. Depreciation and amortization expense was $5.3 million compared to $4.9 million, and we now expect full year expense to be between $21 million and $23 million. Interest expense declined to $0.3 million from $0.8 million, reflecting lower average daily borrowings. Income tax expense was $5.6 million, resulting in an effective income tax rate of 26.3% compared to $3.4 million or a rate of 27.5% last year. The effective rates for both quarters were primarily impacted by nondeductible permanent differences. For the full year, we continue to expect an effective tax rate of approximately 24% to 26%. I'll now turn to our financial condition. At June 30, 2026, cash and cash equivalents improved to $19.3 million from $14.3 million at March 31. Our debt balance totaled $10 million, resulting in a net cash position of $9.3 million. At June 30, there were no outstanding borrowings under our credit facility, and we had approximately $124 million of additional borrowing capacity under the existing credit agreement. We continue to build cash on the balance sheet to support our growth and stockholder return priorities. Our improved profitability, coupled with favorable changes in working capital drove strong net cash provided by operating activities of $14.1 million, reflecting a 159% increase from $5.4 million last year. Capital expenditures were $4.2 million compared to $3.5 million last year. For the full year 2026, we continue to expect CapEx in the $20 million to $24 million range, including approximately $6 million for investment projects to support our Precast product spread strategy and broader Precast growth initiatives. As a result, we generated $9.9 million of positive free cash flow in the quarter compared to $1.9 million last year. For 2026, we are raising our full year free cash flow outlook to $56 million to $65 million, up from the prior range of $50 million to $56 million, reflecting stronger earnings and a more favorable billing schedules expected on Water Transmission System orders received. To close, the second quarter marked another period of exceptional performance, highlighted by record revenue, record gross profit and record profitability. We continue to generate strong free cash flow and further strengthened our balance sheet through disciplined capital deployment. Continued strength in demand for our products, combined with our focus on pricing and consistent operational execution positions us well to deliver strong financial results in the second half of this year. Thank you to our employees for their continued commitment to safety and excellence and to our shareholders for their continued support. I will now turn it over to the operator to begin the question-and-answer session.

[Operator Instructions] First question, Julio Romero with Sidoti & Company.

I wanted to start on the Water Transmission Systems segment. You had very impressive year-over-year sales in the segment. And then, Scott, based on your comments of completing about 15% of the previously unplanned project, I think that implies the core business did significantly well in the quarter, up about 25% year-over-year, if my math is right. I guess maybe to start just reconciling that performance with the third quarter Water Transmission Systems segment outlook of similar revenue quarter-over-quarter. Are you implying that the -- for the third quarter that the core WTS segment sales are going to step down sequentially? Just kind of help us square those 2 pieces here.

No, I don't think that's it at all. I think when you look at -- looking back to the third quarter of last year, we were about $103 million of revenue in the water transmission side, Julio. This year, you're $113 million. So if you pull the piece out that's related to the NDA project, we were up to probably about $105 million of core business, okay? So when we get to the third quarter of the year, obviously, when you look at the third quarter over the last few years, the third quarter has been the biggest quarter of the year. And ultimately, we expect that quarter to be the biggest quarter of this year, too. We're a little bit cautious, and that's why when we gave our guidance in the earnings call, we said comparable to or stronger in the third quarter than the previous quarter, the second quarter. And the reason we're doing that is we've seen some pretty crazy weather patterns in Texas over the last several months. But sans those weather patterns, which we've kind of gotten our way through pretty well without having a problem, we expect the third quarter to be larger on water transmission, on Precast and with better profitability than we saw in the second quarter. And I think what you'll see as far as the base business, Julio, that the base business will be a little bit stronger than it was in the second quarter before you add the NDA piece on top of it.

Okay. Perfect. That's really, really helpful. And then I guess my follow-up is just thinking about current bidding levels for WTS, kind of future phase visibility you have both for the previously unplanned project and your core business. Just how do you see -- and then your comments about the segment backlog normalizing at recent historical levels as you work down the unplanned project. Just help us think about what you see the backlog shaping up in the back half of the year and how you see yourself entering '27?

Yes. I mean the bidding levels are really, really strong in the third quarter. They're -- what I would say is they're at least as strong as they were in the second quarter with the amount of work that we're seeing out there bidding, and we still have a lot of what we refer to pending unknowns to be awarded that are out there at this point. So I think what I would characterize is the bidding level this year is what I would -- is a little bit stronger than what we saw in 2025. And 2025, I think we ended up somewhere in the area of about 138,000 tons of bidding. And if you pull the NDA project out of the water transmission bidding this year, we're looking at having 150-some thousand bidding this year. So we're seeing a bit stronger bidding year than we did last year. And ultimately, it's coming with improving, like we said in the script, economics and margins as we move forward. And what was the second piece of that, Julio?

Just trying to think overall how you see the backlog ending 2026 heading into '27 and what that speaks to what -- how your '27 is shaping up relative to '26?

Yes. I think when you start looking at the backlog, when we reported before we started the NDA project, we reported a backlog of $430 million, ended this quarter with $423 million after running some of that, which gives you an indication if we're running somewhere in the area of $8 million or so of that project, it gives you an indication of how strong the bidding was in the quarter. But once we run through all that, and we will be run through most of that as we get through the third quarter and the beginning of the fourth quarter, then what you're going to see is a backlog that's pretty normal for the Water Transmission Systems business, probably somewhere between the low 300s to the mid-300s range is where you see that backlog just like we have for the last few years. It just returns to a normal range after that really the onetime project works its way through our system.

Got it. And then last question is just on the onetime project. Any increased visibility as to future phases of that project as it is now relative to 3 months ago?

No. We're seeing maybe a little bit more activity and discussion around it, but I wouldn't say anything that's definitive at this point, Julio.

Next question, Tomo Sano with JPMorgan.

On the WTS margin improvement, could you talk about what is actually driving by execution and efficiency? And if you could talk about how sustainable do you believe those -- the gains are in the back of house and so on, please?

Yes. So Tomo, what I would say, the story on the WTS side, the water transmission side is that during the second quarter, we had tons where tons produced were up 26% versus what we saw like last year in the second quarter, where, obviously, we had a margin that was significantly lower last year in the second quarter. But the selling prices were up about 6% and that kind of followed along with the steel cost, but the selling prices were actually up a bit higher than what the steel cost was. So as a result, we had a margin level that went to 21.4% or a growth of 360 basis points. Really what it was is a little bit more project pricing and better project pricing in the marketplace, a favorable project mix with the kind of projects that run well on our facilities. But the high production levels gave us better overhead absorption and absorbing the overhead also contributed to the margins. So that's really the story of the Water Transmission Systems business. And we think we see the same thing moving through the rest of this year. And what I would say is we've kind of gotten ourselves into a channel, Tomo, where the demand has gotten relatively stable to upward trending. And the longer that it stays that way, I think the higher that you continue to see the margins inch up over the period of time. So we believe it looks like that going into and through the third quarter. And the fourth quarter is a little bit different because it's normally the slowest quarter of the year. And this year, we'll have to see if it's going to be slower because it may not be that much slower. But we expect to see those upward trends on margin in those metrics as we go forward.

Scott. On Precast side, forecast improvement in June, you talked about. And how should we think about exit rates for volumes and activity as you move into third quarter? And if you could talk about the demand outlook as well as the more normalized after some headwinds from the weather conditions, please?

Yes. I think we've been fortunate, Tomo, getting through the weather without a whole bunch of issues down there because at one point a couple of weeks ago, Central Texas was getting somewhere between 25 and 30 inches of rain. So we've been pretty fortunate. So obviously, when you look at the second quarter, it affected our production in April and May. But June came storming back. And what I would say is that we had a record month of revenue at Geneva in the month of June and a strong Park business and the margin improved by about 60 basis points. But I think the bigger thing is the order book grew pretty significantly from where it had been. So our order book grew up to about $61 million. And ultimately, what we're doing is we're coming out of the second quarter and moving into a third quarter that we expect to be stronger revenue-wise than what we saw last year's third quarter with improving margins because of the volume that we're doing. One of the other things that we're seeing, Tomo, is I think it's pretty obvious out there with interest rates being where they are, that the residential real estate residential construction piece is down a little bit. But we have really seen continued improvement over where we were last year in the nonresidential piece of the business. And if you look at the momentum index, they're both up 22% at this point in the year. So that bodes well probably for the next year. Our Geneva business has been more geared toward doing residential business in the past. But as that has slowed down, the Geneva business has gone way more toward the nonresidential side and filling up, and we're seeing that with those revenue numbers as we come out into the third quarter. And I think when we look at the Precast business, we're looking at the precast business with another record revenue year in 2026 and we're going to exit the year strong. And it appears that the nonresidential piece is going to continue with that strength and not be as affected by the residential as the interest rates.

If I may squeeze one more last thing. You've discussed the ambitions for Precast to become comparable in size to WTS. Could you talk about what milestones, investments and M&A criteria should we track to gauge that progress, please?

Yes. I think what we're seeing is we're looking for more of on the Precast side, stuff that's similar to the Geneva business that we have with margin levels that are similar to better with good asset efficiency as we look at these things. And generally, we would like to find things that are relatively close to the existing plants, like when we acquired Boughton's Precast, they're in Colorado, and they folded right into the Geneva business. So really, Geneva has 4 plants now. That's the kind of thing we're looking for. But signs that and there's been a little bit of a shortage of opportunities on the Precast side. We're willing to look farther afield as long as the precast businesses have the metrics comparable to what we have with our businesses or better, and they have strong management groups. So that's going to be important for growing the Precast piece of it. I think that the other thing, Tomo, that we have to look at right now, along with growing the precast, are there other adjacencies to the precast that could also provide us opportunities for growth as we move forward, while the Precast business is a little bit -- the M&A we're seeing in the Precast is a little bit slower right now. So those are the things that we're kind of focused on at this point. It's really -- we'll add one plant at a time if we have to. We'll look at doing potentially greenfield sites in Precast if it makes sense. We'll look at something that may be an ancillary type business to infrastructure to precast to the WTS business. Those are all things that we have going forward in the process and looking for something else in the way of how we're going to grow. So that is a big -- probably a big priority, one of the biggest priorities we have right now to be able to continue to grow the company and provide higher levels of revenue and better levels of profitability. So hopefully, that answers the question. That was kind of a long-winded answer, but...

Yes, that's really helpful. Congrats on the quarter.

We have a follow-up from Ted Jackson with Northland Securities.

Most of my questions have been answered, but I got a couple. And before I say, congrats on the quarter and the execution. And every quarter, we get on these calls and you just impress and then you actually just raised the bar. So congratulations. I wanted to ask an obvious one for me because I ask it all the time is I want to move around with steel and just kind of at a basic level, can you tell me like as a percentage of revenue, what steel was for the quarter?

Yes. When you look at where we are the steel as a percentage of cost of sales, it's at about 34% or 35% right now. It is high. Obviously, that's a pass-through for us. So it's -- for us, Ted, as we've said in the past, that's something that creates higher project pricing, which doesn't necessarily improve project margin, but it improves the total gross profit dollars in those things. So we're not afraid of higher steel prices as long as we can get steel.

Yes, that's the most important part. And I mean, honestly, the fact that you can -- that your margins are doing what they're doing with what's going on in steel just tells you -- tell everyone how strong your business is. With regards to steel prices, I mean, it's not a fair metric. But I mean, like last quarter, I think you guys commented that pricing in steel was up 18%. And when I kind of look at different kind of metrics. I mean, I would suggest that pricing is up another 18%, 20% year-to-year. So maybe kind of square the circle as to how you were able to -- when I think about your volume being up so high, your pricing -- I mean not that it wasn't up a lot, but I think you said 6%. How does steel factor into that? It would seem to me that pricing would have been a bigger driver in the quarter than it was given the steel backdrop. And so what am I missing there?

Well, I don't think so -- when you look at pricing in the quarter, I mean, our -- on the WTS side, our revenue per ton was up about 6%. So if you look at that 6% is a higher number than if we're looking at steel costs and what we actually consumed when we got in, steel cost was up about 24%. But that 6% in steel actually was a higher dollar value than that 24% -- or the 6% on price was a higher dollar value than what that 24% on steel was in the cost, okay? So that's a piece of the puzzle. The other piece of the puzzle is the tons we were running -- the tons were up 26% quarter over last year's quarter. So the overhead absorption you're getting is pretty significant, too, and contributing to the margin. So steel is helping, but the overhead absorption is helping probably more than anything at this point.

But what it's also telling me is that your -- I know that there's a variable of kind of the value of the product you're delivering and how that has -- can have a lot of sway on margin. Your revenue the last few quarters has clearly been skewed towards better margin, better margin projects. And you're essentially guiding that you're going to continue to see that mix?

We've seen a very favorable product mix with the jobs that have been coming through. I mean it's -- when you look at it in the market and the bidding market, the number of jobs coming through are pretty large at this point. So you can sit back a lot of times because the backlog is in the shape it is and kind of pick the ones that fit you with your best cost position and do some product mix improvement on the backlog. And we've seen a bunch of that. And as a result, the margin that we see in backlog is looking pretty good when you look at maybe where we've been in the past. So I think that's a little bit of what you're seeing, too. We've seen some pretty favorable project mix.

You got to be more selective. That's interesting. That's a nuance I wouldn't have thought of, but I mean...

You can be when there's enough projects that are coming out.

What do you guys think in terms of like when you look forward for the remainder of this year, kind of next year in your deck for cost of steel, kind of what are you viewing it as on a per-ton basis?

I think the cost for steel, we're starting to see steel that obviously, published prices are over $1,200 a ton now, right? So I think the -- and I think that continues to inch its way up because you probably find those public prices are a little bit in arrears of what actual pricing is in the steel market. And I think you're going to continue to see that move up. One of the reasons is with the tariff situation that's been applied a lot to a lot of the foreign steel coming in, you've basically -- you've limited supply or supply has been limited in the United States to the capacity that's existing into the United States. And as a result, the price continues to move up in the marketplace. And again, for us, I mean, we saw it during COVID reached or almost reached $2,000 a ton. I won't be bold enough to predict that. But I think we're going to continue to see that inch up. And I think maybe $1,400 a ton is maybe a number that could happen and maybe more. I think it's going to continue to inch up, Ted, because I'm not sure what stops it from inching up until it gets high enough where it offsets the value of the tariffs on steel coming in where steel is just going to kind of pour in because the domestic steel has gotten high enough. So where that tipping point is at this point, I'm not sure because the tariffs are applied to the foreign steel being shipped into the country are pretty convoluted, and it's hard to kind of get a dead reckoning on those, if you know what I mean.

But is it fair to assume, I mean, when I look at like that Midwest flat-rolled contract, I mean, it's up 23% year-over-year. When I think about the fact that typically, you kind of -- your pricing kind of works off of a lag that your steel costs now are pushing modestly north of $1,000 a ton and they continue to climb just because of -- as all this goes through. Is that kind of more or less kind of regurgitating your answer?

You can expect to see that as we move through this period of time. And remember, you're moving into the time of the year now where a lot of the big mills are doing their outages. So that's a further restriction on supply in the marketplace. And that just is more of a lever to cause price increases as we move forward. And again, we're good with the steel price increases. As long as we can get steel, it just means higher project pricing and more gross profit dollars.

Shifting and then just into productivity. I mean you're ramping up volume at pretty astronomical levels. What is your utilization rate at this point within your plants? Are you starting to get -- I'm saying to the point where your ability to handle more volume is you becoming constrained?

Well, what I would say is that because we have 6 WTS plants across the country and obviously, you have different demand levels in different regions, we're probably at about a 65% utilization rate right now. Remember, we run one shift on these plants, right? And there's nothing that says that you can't add another shift. The thing that we get to is you generally see it busy in specific areas, right? So then it gets a little bit harder to take some business in an area that's already relatively full in their marketplace. But as far as -- and then what we do, we'll move projects around a little bit so we can absorb it. But we're not even close to being filled to what capacity is, Ted.

Okay. And then my last question, and sorry for asking so many, but usually, when I'm at the end of the list, I don't get to ask so many, this is great. On the expenses, operating expenses, SG&A, and this is just against my model, it was actually higher than I would have expected. And I was kind of curious within that line item on the P&L, what was driving within -- I mean, is it more from like commission-oriented stuff? Is there anything in there? Or was that just kind of off base with regards to my forecast? I mean what does that mean for the remainder of the year?

I think we've kind of flatten out. Obviously, you always see the first quarter is kind of the high mark, generally speaking. The thing that's really kind of pushed things up for us in the SG&A is the incentive comp and associated employee benefits that go a little bit of pressure on some professional fees, but really those drivers. And so I think right now, we're getting to a point we're kind of topping out on the incentive comp. So I'm expecting relatively consistent performance on the SG&A line through the third and fourth quarter.

You broke up, you said that a blank performance for SG&A [indiscernible] quarter?

Relatively consistent with the second quarter.

Okay, that's it for me. Congrats again. Thanks again for taking all the questions and congrats on the quarter.

I would like to turn the floor over to Scott for closing remarks.

Yes. Just a few closing remarks. Obviously, quarter was a strong second quarter with a bunch of records in revenue, gross profit and EPS. I think the one thing we're seeing is more consistency in the results over a period of time, significantly improved free cash flow. And those things are starting to show up in the share price for us. Water Transmission, obviously, is going through pretty exceptional performance with record revenues and pretty much all of those things across the board and a lot of bidding activity. And even with the weather-related stuff in Precast, we came through the second quarter pretty well. And I think it bodes well for how we're looking at things. And we're continuing to advance our long-term strategy, broadening the Precast capabilities across the network and evaluating opportunities to produce products that produce Precast in additional WTS plants. And the other thing I would say is even without -- or if we never got the -- that significantly previously unplanned NDA project, even without that, I think we would be heading toward another record year supported by the strong demand and the bidding that we're seeing. And looking at the third quarter, obviously, when we did the press release, we're being a little bit cautious because of the weather issues that we've been seeing in Texas because those things can always affect the business, especially with how severe that weather has been but we expect a strong third quarter with both segments positioned for year-over-year growth and improving margins and sustained demand and really, really reinforcing our confidence that 2026 is shaping up to be a historic year for NWPX. So I thank everybody. We thank everybody for your attention on the call, and we will talk to you again in late October. So thank you very much.

This concludes today's teleconference. You may disconnect your lines at this time, and we thank you for your participation.