So I think that we’re kind of heading in that direction right now because of the demand that we’re seeing coming forward. And the other thing with the margins is higher production levels and you’re spreading your fixed cost out over more tons, right? So it’s a better situation that way. So we’ve got a pretty decent tailwind behind us, we believe, on the Steel Pressure Pipe side, both on revenue and margin right now as we go through the near-term, and quite frankly, longer term because of the IIJA.
Julio Romero: Got it. That’s good color and thanks for adding that. So, I guess, are you guys saying that you kind of exited March at a strong production level and that kind of carried into April, and that’s what gives you the confidence that revenue and margins in 2Q for SPP should look like something that you posted in 1Q?
Scott Montross: Yeah. It’s really what we have in backlog already. I mean, we carried, like I said, when Brent was asking questions, I mean, we produced $80 million worth of revenue on Steel Pressure Pipe in the first quarter and the backlog still went up by $18 million. So you can do the math on how much kind of we won in the first quarter with work and it’s starting to build up at these things. So, we expect the rest of the year on Steel Pressure Pipe to be strong. And when you look at some of the construction trends, the non-residential stuff is really — non-residential and the non-building part of non-residential stuff has been pretty solid and that’s the thing that affects where we are on Steel Pressure Pipes. So we expect that to be pretty solid as we’re going forward through the rest of the year.
Julio Romero: What do you guys think — what do you think — why do you think volume and bidding inflected so quickly and strongly in 1Q? Was there anything that you can call out there that drove that?
Scott Montross: No. I think the part of it what is that we had some stuff that was originally intended for 2023 that ended up in the first part of 2024, so probably the years would have been a little bit more level had it not been for that. But I think it’s that and some of the stuff that’s coming forward. We’re just now starting seeing some of the IIJA funding come into place and it’s slow getting started because there’s like $46 million — $46 billion that’s set aside for water-type projects like the things that we do, and so far through the end of the year in 2023, only about $1.8 billion of it’s been actually put out — paid out. So there’s a lot to be done and I think those projects are really going to help buoy this stuff as we go forward. And I’m not sure if I answered your question the way you wanted. What was the other part of that, Julio?
Julio Romero: Just trying to get a feel for what, like how you ended up with strong volumes and backlog up and anything one-time in nature that caused this inflection in bidding and volumes in the first quarter. But I think you answered it.
Scott Montross: Yeah. And one — too is the bid is so heavy in the first quarter that everybody’s starting to fill up a little bit. And remember we — there’s only three major competitors in Steel Pressure Pipe after the consolidation that happened with us acquiring Ameron in 2018. So the tendency is those backlogs start to shift a little bit and the — we’re the ones that have a nationwide footprint, right? So we can take on much more work than anybody else can and we’re benefiting from that at this point.
Julio Romero: Gotcha. Last one for me is can you just speak to how active you are in the M&A pipeline right now on the Precast side?
Scott Montross: I think we’re starting to get more active all the time. We’re starting to see things that we’re actually interested in and looking at. And I think as we go through a period of time, it’s going to continue to improve. The multiples are still a little frothy on the acquisition side because, obviously, we’re coming off a period where there’s been some pretty high business levels. And I don’t know that, especially on the general Precast side, that everybody is seeing the kind of strength that we’re seeing in Utah. So we’re starting to see those multiples adjust a little bit. And I think as we get out through the rest of this year, it’s going to get more interesting with what we’re seeing, because we’ve got a couple that we’re interested in looking at right now, and ultimately, we’re going to be going down that road.
But I think, the way we look at it, Julio, is that, the share buyback thing is part of our growth strategy now, right? If we can’t do anything and there’s nothing practical or accessible on an M&A side, we’re going to look at buying — continuing to buy some shares back because we have to do something to make it better for our shareholders and that’s how we’re looking at this thing. So, ultimately, we will come up with something on the M&A side and until we do, we’re going to continue down the path that we are because we’re very active at this point.
Julio Romero: Very good. Thanks again.
Scott Montross: Absolutely.
Operator: Thank you. Next question is coming from Ted Jackson from Northern Securities. Your line is now live.
Ted Jackson: Hey, guys. Congrats on a super quarter.
Scott Montross: Hey, Ted. Thanks.
Ted Jackson: My questions have all pretty much been answered, but just a couple of things. With regards to the outlook and your view with regards to steel pricing, am I right to infer that you expect steel prices for 2024 to be relatively stable on a go-forward basis and that it’s underpinning your, kind of $80 million quarterly run rate view?
Scott Montross: I’ll tell you that, I haven’t seen and my background is in steel, and I haven’t seen stable steel pricing for many years, right? So I think you go back from before 2004, before things were really stable for long periods of time. But right now, it appears that we’re in a little bit of a period of stability. I would think, a lot of the publications are saying that they expect it to kind of drift down as we go through the rest of this year. But I think the steel producers at this point are doing a pretty good job at, on managing their markets and you see those guys will pull production capacity off relatively quickly if things start to drop too far and I think it’s either going to be a little bit stable or maybe even potentially moving up at some point.
But I just don’t see it dropping as we go through the year. So I think higher steel prices are good for us on the Steel Pressure Pipe side. It may tie a little more cash up short-term, but ultimately that rolls off and goes to the balance sheet. But I think it’s probably relatively stable to maybe inching up as we go out through this period of time, because the minute that starts dropping a bit, those guys will pull production capacity off and stabilize things.
