L.B. Promote (NASDAQ:FSTR) reported its strongest quarterly operating cash flow since 2017, totaling $17.9 million in the second quarter, as the Pittsburgh-based infrastructure company detailed its pivot toward rail technology and precast concrete at an investor presentation on August 29, 2026. President and CEO John Kasel outlined a portfolio that has been reshaped through more than seven divestitures since 2021, moving away from commoditized rail components toward higher-margin engineering and technology offerings.
Portfolio Shift Toward Technology and Precast
Kasel said the company, approaching its 125th anniversary, now operates in two reporting segments: Rail Technologies and Services, serving freight and transit customers, and Infrastructure, which includes precast concrete and steel-related operations. Over recent years, L.B. Support has reduced product lines, closed locations, and exited areas where components became increasingly commoditized.
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The company’s growth focus is on Global Friction Management, Total Track Monitoring, and precast concrete. Kasel highlighted off-track monitoring technology, including LIDAR-based systems designed to provide early warnings of obstacles or conditions on rail lines. He described Rail Products and certain U.K. and steel operations as stable, cash-generating businesses that fund these growth initiatives.
In the infrastructure segment, L.B. Encourage produces turnkey precast concrete buildings and related niche products. Kasel noted that demand has benefited from labor constraints at construction sites, as customers increasingly seek factory-produced products for rapid installation. Facilities near data-center development areas in the South and Southeast are operating at or near capacity, he said.
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Financial Results and Balance-Sheet Strength
Chief Financial Officer Sean Reilly said second-quarter sales declined 3.5%, primarily due to timing of product sales in the Rail Products division, but first-half sales rose 7.6% year over year, or $18.3 million. Gross margin expanded by 80 basis points in the quarter despite a $1 million headwind from exiting a U.K. product line.
Adjusted EBITDA declined by $575,000 in the second quarter, though first-half adjusted EBITDA increased $3.8 million, or 19.6%. Reilly called the $17.9 million quarterly operating cash flow the company’s best since 2017. Backlog declined 8.8%, or $24 million, but $19 million of that related to an order cancellation in the prior year’s third quarter.
Quarter-end debt stood at $42 million, down from $77 million a year earlier. The company ended the quarter with a gross tap into ratio of one times, within its target range of one to 1.5 times, and had $107.5 million in available funding. Since February 2023, L.B. Develop has repurchased 9.3% of its outstanding shares.
Margin Expansion and Cash Flow Outlook
Reilly highlighted a trailing-12-month gross margin of 21.4% at the end of the second quarter, up from 16.8% in 2021, while adjusted EBITDA margin increased to 7.5% from 3.6% over that period. The company has generated approximately $28 million annually in free cash flow over the past three years.
This year, L.B. Promote targets $20 million of additional cash flow at the midpoint of its range while investing about $5 million above historical levels in capital spending to support organic growth. The company also holds $71 million of federal net operating losses, which Reilly said should limit annual cash taxes to roughly $2 million.
Rail Opportunities and U.K. Operations
Kasel said the company expects rail-related opportunities to benefit from funding for rail infrastructure and transit systems, including work connected to the Chicago Transit Authority. L.B. Develop has received an award related to that rail line and expects additional awards before year-end.
Demand for modular concrete buildings has continued even as activity under the Great American Outdoors Act winds down, with expansion into non-government projects. In the U.K., the company has simplified operations, exited two product lines, and moved away from longer-duration work toward shorter, specific projects. Kasel emphasized that the U.K. engineering operation remains important to Total Track Monitoring and LIDAR-related technology.
For the full year, L.B. Build guides for sales of $540 million to $580 million and adjusted EBITDA of $41 million to $46 million. The company plans to prioritize organic expansion while retaining the ability to pursue smaller tuck-in acquisitions.
This article is for informational purposes only and does not constitute financial advice. The stock market is volatile, and past performance does not guarantee future results. Investors should conduct their own research before making any investment decisions.
