# Concrete Pumping Holdings, Inc. (BBCP) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Concrete Pumping Holdings, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1703956/000143774925000800/bbpp20241031_10k.htm
Accession: 0001437749-25-000800
Filing date: 2025-01-10
Report date: 2024-10-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/BBCP/
All MD&A years: /company/BBCP/mda/
Previous year: /company/BBCP/mda/fy2023/ (FY 2023)
Next year: /company/BBCP/mda/fy2025/ (FY 2025)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and related notes in Item 8 of this Annual Report. In addition to historical information, the following discussion contains forward-looking statements, such as statements regarding the Company’s expectation for future performance, liquidity and capital resources that involve risks, uncertainties and assumptions that could cause actual results to differ materially from the Company's expectations. The Company's actual results may differ materially from those contained in or implied by any forward-looking statements. Factors that could cause such differences include those identified below and those described in "Cautionary Statement Concerning Forward-Looking Statements and Risk Factors Summary" and in Item 1A "Risk Factors" of this Annual Report on Form 10-K. The Company assumes no obligation to update any of these forward-looking statements.

Business Overview

The Company is a Delaware corporation headquartered in Thornton, Colorado. The audited consolidated financial statements included herein include the accounts of Concrete Pumping Holdings, Inc. and its wholly owned subsidiaries including Brundage-Bone Concrete Pumping, Inc. ("Brundage-Bone"), Camfaud Group Limited ("Camfaud"), and Eco-Pan, Inc. ("Eco-Pan").

As part of the Company’s business growth strategy and capital allocation policy, strategic acquisitions are considered opportunities to enhance our value proposition through differentiation and competitiveness. Depending on the deal size and characteristics of the M&A opportunities available, we expect to allocate capital for opportunistic M&A utilizing cash on the balance sheet and the revolving line of credit.

U.S. Concrete Pumping

All branches operating within our U.S Concrete Pumping segment are concrete pumping service providers in the United States ("U.S."). Their core business is the provision of concrete pumping services to general contractors and concrete finishing companies in the commercial, infrastructure and residential sectors. Equipment generally returns to a "home base" nightly and these branches do not contract to purchase, mix, or deliver concrete. This segment collectively has approximately 90 branch locations across 22 states with their corporate headquarters in Thornton, Colorado.

U.S. Concrete Waste Management Services

Our U.S. Concrete Waste Management Services segment consists of our U.S. based Eco-Pan business. Eco-Pan provides industrial cleanup and containment services, primarily to customers in the construction industry. Eco-Pan uses containment pans specifically designed to hold waste products from concrete and other industrial cleanup operations. Eco-Pan has 20 operating locations across the U.S. with its corporate headquarters in Thornton, Colorado.

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U.K. Operations

Our U.K. Operations segment consists of our Camfaud, Premier and U.K. based Eco-Pan businesses. Camfaud is a concrete pumping service provider in the U.K and its core business is primarily the provision of concrete pumping services to general contractors and concrete finishing companies in the commercial, infrastructure and residential sectors. Equipment generally returns to a "home base" nightly and does not contract to purchase, mix, or deliver concrete. Camfaud has approximately 35 branch locations throughout the U.K., with its corporate headquarters in Epping (near London), England. In addition, we have concrete waste management operations under our Eco-Pan brand name in the U.K. and currently operate from a shared Camfaud location.

Corporate ("Other")

Our Corporate activities, referred to as "Other" in our financial statements, primarily relate to the change in fair value remeasurement of warrant liabilities leading up to their expiration.

Expiration of Warrants

On December 6, 2023, all of the Company’s 13,017,677 warrants to acquire shares of its common stock expired in accordance with their terms, and there were no other warrants outstanding as of October 31, 2024.

2024 Upsize of Asset-Based Lending Credit Agreement

As of October 31, 2024, we had $335.0 million in availability under our ABL credit agreement (the "ABL Facility") and $375.0 million of indebtedness outstanding, consisting of (1) $375.0 million for our fixed 6.000% senior secured second lien notes due 2026 (the "Senior Notes") and (2) approximately $20,000 outstanding under our ABL Facility. In September, 2024, the Company amended and restated its existing ABL Facility to provide up to $350.0 million (previously $225.0 million) of commitments and extend the maturity of the ABL Facility to September 6, 2029. The September 6, 2024 amendments to the ABL Facility (1) increased the maximum revolver borrowings available to be drawn thereunder from $225.0 million to $350.0 million, (2) increased the letter of credit sublimit from $22.5 million to $32.5 million and (3) extended the maturity of the ABL Facility to the earlier of (a) September 6, 2029 or (b) the date that is 180 days prior to (i) the final stated maturity date of the Senior Notes or (ii) the date the Senior Notes become due and payable.

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Results of Operations

Management's discussion and analysis for our results of operations on a consolidated and segment basis include a quantification of factors that had a material impact. Other factors that did not have a material impact, but that are significant to understand the results, are qualitatively described. The tables included in the period-to-period comparisons below provide summaries of our revenues, gross profits and net income for our business segments for the years ended October 31, 2024 and 2023.

Twelve Months Ended October 31, 2024 and 2023

Revenue

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[[/GREPCENT_TABLE]]

*Change is not meaningful

Total revenue. Total revenues were $425.9 million for the twelve months ended October 31, 2024, compared to $442.2 million for the twelve months ended October 31, 2023. Revenue by segment is further discussed below.

U.S. Concrete Pumping. Revenue for our U.S. Concrete Pumping segment decreased by 8.4%, or $26.9 million, from $317.9 million in the twelve months ended October 31, 2023 to $291.0 million for fiscal 2024. The change is attributable to (1) a general slowdown in commercial construction volume, mostly due to restrictive monetary policy in the U.S. and the associated impact from persistently higher interest rates, (2) increased commercial building vacancy rates coupled with an oversaturation of concrete pumps in certain markets, and (3) significant weather events across many of the Company's markets throughout the year ended October 31, 2024, which included but is not limited to the record-breaking cold temperatures and heavy rainfall in much of the contiguous U.S. during the first three quarters of 2024 and the devastating amounts of precipitation dropped by Hurricane Helene on the Company's southeastern markets.

U.K. Operations. Revenue for our U.K. Operations segment increased by 2.2%, or $1.4 million, from $62.6 million in the twelve months ended October 31, 2023 to $64.0 million for fiscal 2024. Excluding the impact from foreign currency translation, revenue was down 1% year-over-year. The decrease was primarily attributable to volume declines as a result of continued delays on project start dates that slightly offset pricing improvements.

U.S. Concrete Waste Management Services. Revenue for the U.S. Concrete Waste Management Services segment increased by 14.8%, or $9.1 million, from $61.8 million in the twelve months ended October 31, 2023 to $70.9 million for fiscal 2024. The increase in revenue was driven by robust organic volume growth and pricing improvements despite the U.S. weather headwinds discussed above.

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Gross Profit and Gross Margin

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[[/GREPCENT_TABLE]]

Gross margin. Our gross margin for the year ended October 31, 2024 was 38.9% compared to 40.3% for the year ended October 31, 2023. The slight decrease in our gross margin was primarily related to decreased labor efficiencies caused by the reduced revenue in our U.S. Concrete Pumping segment and inflationary increases in commercial insurance premium costs. These amounts were partially offset by improved fuel expense and lower repair and maintenance costs.

General and administrative expenses

General and administrative expenses ("G&A"). G&A expenses for the twelve months ended October 31, 2024 were $116.5 million, a decrease of $0.4 million from $116.9 million in the twelve months ended October 31, 2023. G&A expenses as a percentage of revenue were 27.4% for fiscal 2024 compared to 26.4% for the same period a year ago. The slight decrease in G&A expenses was due primarily to non-cash (1) decreases in amortization expense of $3.8 million and stock-based compensation expense of $1.5 million, (2) increases in currency gains of $0.6 million due to exchange rate movements and (3) a cash decrease of $0.7 million in other G&A expense amounts. These decreases were almost completely offset by (1) a non-recurring charge of $3.5 million in the first quarter of 2024 as a result of a recent adverse court ruling related to sales tax in Washington State, as further described in Note 15 in Part I, Item 1 of this report, and (2) higher labor and health insurance premiums of approximately $2.9 million as a result of wage inflation.

For the twelve months ended October 31, 2024, excluding amortization of intangible assets of $15.1 million, depreciation expense of $2.3 million, stock-based compensation expense of $2.4 million and non-recurring charges of $4.1 million which include $3.5 million related to the Washington State sales tax court ruling, G&A expenses were $92.6 million (21.7% of revenue). For the twelve months ended October 31, 2023, excluding amortization of intangible assets of $18.9 million, depreciation expense of $2.4 million and stock-based compensation expense of $3.8 million, G&A expenses were $91.7 million (20.7% of revenue). The increase was primarily due to higher labor and health insurance costs as discussed above.

Total other income (expense)

Interest expense and amortization of deferred financing costs, net of interest income. Interest expense and amortization of deferred financing costs, net of interest income for the year ended October 31, 2024 was $25.6 million, down $2.5 million from $28.1 million for the year ended October 31, 2023. The decrease was primarily attributable to an approximately $46.1 million reduction in debt through repayment of our ABL revolver and cash accumulation during the twelve months ended October 31, 2024 as compared to the same period a year ago.

Change in fair value of warrant liabilities. During the years ended October 31, 2024 and 2023 the Company recognized a $0.1 million gain and a $6.9 million gain, respectively, on the fair value remeasurement of our liability-classified warrants. The decline in the fair value remeasurement of the public warrants is due to the Company's share price trading below the exercise price as the warrants were closer to expiring in December 2023. On December 6, 2023, all of the Company's 13,017,677 warrants expired. As such they were no longer recognized as a liability on the condensed consolidated balance sheet as of October 31, 2024.

Income tax expense

Income tax expense. For the years ended October 31, 2024 and 2023, the Company’s effective tax rate was 33.3% and 21.6%, respectively. The increase of the effective tax rate from fiscal years 2023 to 2024 was primarily driven by (1) higher excess tax deficiencies from share-based compensation exercise and vesting activity in the twelve months ended October 31, 2024, (2) the non-taxable unrealized gains on the warrants fair value increases in the twelve months ended October 31, 2023, (3) increases in the UK corporate income tax rate to 25% during fiscal 2024 and (4) the expiration of the capital allowances super deduction in the UK in fiscal 2024. The higher excess tax deficiencies from share-based compensation were primarily related to the cancellation of market-based awards that failed to meet their performance conditions in the financial year.

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Net Income and Adjusted EBITDA Results

During the first quarter of fiscal year 2024, the Company moved certain assets and associated revenues and expenses, which were previously categorized in the Company's Other activities, into the U.S. Concrete Pumping segment in order to appropriately align its placement with the manner in which the Company allocates its resources and measures performance. As a result, segment results for prior periods have been reclassified to conform to the current period presentation. For further discussion, see Note 21 in Part II, Item 8 of this report for more information. In addition, in order to distribute the use of corporate resources and appropriately align measures with segment performance, beginning in the first quarter of fiscal year 2024, the Company is no longer adding back intercompany allocations to segment Adjusted EBITDA. Refer to Non-GAAP Measures below for details on adjustments. The Company recast segment results for the twelve months ended October 31, 2023 are below:

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[[/GREPCENT_TABLE]]

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[[/GREPCENT_TABLE]]

U.S. Concrete Pumping. Net loss for our U.S. Concrete Pumping segment was $2.3 million for the twelve months ended October 31, 2024, versus net income of $6.4 million for the twelve months ended October 31, 2023. Adjusted EBITDA for our U.S. Concrete Pumping segment was $67.4 million for the twelve months ended October 31, 2024, down 18.0% from $82.1 million for the twelve months ended October 31, 2023. The decrease in net income was primarily attributable to lower revenue volumes, decreased labor efficiencies driven by the reduced revenue, inflationary increases in commercial and health insurance, a non-recurring charge of $3.5 million in the first quarter of 2024 as a result of a recent adverse court ruling related to sales tax in Washington State, as further described in Note 15 in Part I, Item 1 of this report and increased depreciation expense. Apart from the non-recurring charge of $3.5 million discussed above and the increase in depreciation expense, the change in adjusted EBITDA was impacted by the same items.

U.K. Operations. Net income for our U.K. Operations segment was $4.2 million for the twelve months ended October 31, 2024, compared to net income of $4.2 million for the twelve months ended October 31, 2023. Adjusted EBITDA for our U.K. Operations segment was $16.8 million for the twelve months ended October 31, 2024, up 8.9% from $15.4 million for the twelve months ended October 31, 2023. Excluding the impact from foreign currency translation, net income decreased slightly due to the decreased revenue discussed above and an increase in income tax expense which were partially offset by improvements in fuel and repair costs. Excluding the impact from foreign currency transaction, adjusted EBITDA increased slightly due to the items discussed above except for income tax expense, which is excluded from the adjusted EBITDA calculation.

U.S. Concrete Waste Management Services. Net income for our U.S. Concrete Waste Management Services segment was $14.2 million for the twelve months ended October 31, 2024, down slightly from net income of $14.3 million for the twelve months ended October 31, 2023. Adjusted EBITDA for our U.S. Concrete Waste Management Services segment was $28.0 million for the twelve months ended October 31, 2024, up 3.5% from $27.1 million for the twelve months ended October 31, 2023. The slight decrease in net income was primarily due to increased depreciation expense, almost entirely offset by the increased revenue as described above. Adjusted EBITDA increased due to the items discussed above except for depreciation expense, which is excluded from the adjusted EBITDA calculation.

Other. Net income for Other activities was $0.1 million for the twelve months ended October 31, 2024, compared to a net income of $6.9 million for the twelve months ended October 31, 2023. The change in net income is related to the change in warrant liability, as discussed above.

Liquidity and Capital Resources

Overview

Our capital structure is primarily a combination of (1) permanent financing, represented by stockholders’ equity; (2) zero-dividend convertible perpetual preferred stock; (3) long-term financing represented by our Senior Notes and (4) short-term financing under our ABL Facility. Our primary sources of liquidity are cash generated from operations, available cash and cash equivalents and access to our revolving credit facility under our ABL Facility, which provides for aggregate borrowings of up to $350.0 million, subject to a borrowing base limitation. We use our liquidity and capital resources to: (1) finance working capital requirements; (2) service our indebtedness; (3) purchase property, plant and equipment; and (4) finance strategic acquisitions. As of October 31, 2024, we had $43.0 million of cash and cash equivalents and $335.0 million of available borrowing capacity under the ABL Facility, providing total available liquidity of $378.0 million.

We have paid down borrowings on the outstanding balance of our ABL Facility using cash on hand, during the twelve months ended October 31, 2024. Such repayments, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

We believe our existing cash and cash equivalent balances, cash flow from operations and borrowing capacity under our ABL Facility will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, potential acquisitions and overall economic conditions. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity could result in dilution to our stockholders while the incurrence of additional debt could restrict our operations.

Material Cash Requirements

Our principal uses of cash historically have been to fund operating activities and working capital, purchases of property and equipment, strategic acquisitions, fund payments due under facility operating and finance leases, share repurchases and to meet debt service requirements.

Our working capital surplus as of October 31, 2024 was $56.0 million. We are in compliance with our debt covenants and believe that we have sufficient working capital to meet our material cash requirements for the foreseeable future.

The amount of our future capital expenditures will depend on a number of factors including general economic conditions and growth prospects. In response to changing economic conditions, we believe we have the flexibility to modify our capital expenditures by adjusting them (either up or down) to match our actual performance and business needs. Our gross capital expenditures for the years ended October 31, 2024 and 2023 were approximately $43.8 million and $54.5 million, respectively. See "Cash Flow" discussion below for more information.

To service our debt, we require a significant amount of cash. Our ability to pay interest and principal on our indebtedness will depend upon our future operating performance and the availability of borrowings under the ABL Facility and/or other debt and equity financing alternatives available to us, which will be affected by prevailing economic conditions and conditions in the global credit and capital markets, as well as financial, business and other factors, some of which are beyond our control. Based on our current level of operations and given the current state of the capital markets, we believe our cash flow from operations, available cash and available borrowings under the ABL Facility will be adequate to service our debt and meet our future liquidity needs for the foreseeable future. See "Senior Notes and ABL Facility" discussion below for more information.

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Future Contractual Obligations

Our contractual obligations and commercial commitments principally include obligations associated with our outstanding indebtedness, interest payments, lease agreements and capital expenditures. We have no off-balance sheet arrangements except for our committed capital as discussed below. Our estimated future obligations as of October 31, 2024 include both current and long term obligations. We have a long-term obligation of $375.0 million related to our Senior Notes due February 2026 (excluding discount for deferred financing costs). Under our operating leases, we have short-term obligations for payments of $6.5 million and long-term obligations for payments of $28.1 million. As of October 31, 2024, we have a current obligation for our ABL Facility of approximately $20,000. Additionally, the Company was contractually committed for $11.0 million of capital expenditures for purchases of property and equipment and these are expected to be paid in the next twelve months.

Senior Notes and ABL Facility

The table below is a summary of the composition of the Company's debt balances as of October 31, 2024 and 2023:

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[[/GREPCENT_TABLE]]

Amendment to ABL Facility

On September 6, 2024, the ABL Facility was amended to, among other changes, (1) increase the maximum revolver borrowings available to be drawn thereunder from $225.0 million to $350.0 million, (2) increase the letter of credit sublimit from $22.5 million to $32.5 million and (3) extend the maturity of the ABL Facility to the earlier of (a) September 6, 2029 or (b) the date that is 180 days prior to (i) the final stated maturity date of the Senior Notes or (ii) the date the Senior Notes become due and payable. The ABL Facility also provides for an uncommitted accordion feature under which the borrowers under the ABL Facility can, subject to specified conditions, increase the ABL Facility by up to an additional $25.0 million. Of the $125.0 million in incremental commitments, $75.0 million was provided by Bank of America, N.A. and $50.0 million was provided by PNC Bank, N.A. The amended ABL Facility was treated as a debt modification. The Company capitalized an additional $1.2 million of debt issuance costs related to the September 6, 2024, ABL Facility amendment. The preexisting unamortized deferred costs of $1.4 million and the additional costs of $1.2 million will be amortized from September 6, 2024 through September 6, 2029.

The outstanding balance under the ABL Facility as of October 31, 2024 was approximately $20,000 and as of that date, the Company was in compliance with all debt covenants. In addition, as of October 31, 2024, the Company had $1.1 million in credit line reserves and a letter of credit balance of $13.9 million. As of October 31, 2024, we had $335.0 million of available borrowing capacity under the ABL Facility. Debt issuance costs related to revolving credit facilities are capitalized and reflected as an asset in deferred financing costs in the accompanying consolidated balance sheets. The Company had debt issuance costs related to the revolving credit facilities of $2.5 million as of October 31, 2024. See Note 10 in Item 8 Financial Statements and Supplementary Data for more information on the Senior Notes and ABL Facility.

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Cash Flows

Cash generated from operating activities typically reflects net income, as adjusted for non-cash expense items such as depreciation, amortization and stock-based compensation, and changes in our operating assets and liabilities. Generally, we believe our business requires a relatively low level of working capital investment due to low inventory requirements and timely customer payments due to daily billings for most of our services.

Cash flow provided by operating activities. Net cash provided by operating activities generally reflects the cash effects of transactions and other events used in the determination of net income or loss.

Net cash provided by operating activities during the twelve months ended October 31, 2024 was $86.9 million. The Company had net income of $16.2 million, which included net non-cash expense items of $67.9 million. In addition, we had cash inflows related to a decrease in our working capital of $2.8 million. Cash inflows related to working capital activity include a decrease in receivables of $7.2 million, a decrease in other operating assets of $0.6 million and a decrease in inventory of $0.6 million. These were offset by a decrease of $4.0 million in other operating liabilities and a decrease in accounts payable of $1.7 million. The decrease in receivables is due to decreases in sales volumes during the twelve months ended October 31, 2024. The decrease in accounts payable is driven by a slow down in business activity as discussed above and the general timing of invoices.

Net cash provided by operating activities during the twelve months ended October 31, 2023 was $96.9 million. The Company had net income of $31.8 million, which included non-cash expense items of $66.3 million. In addition, we had cash net outflows related to an increase in our working capital of $1.2 million. Working capital changes primarily include a decrease in accrued payroll, accrued expenses and other current liabilities of $3.5 million, an increase in inventory of $1.1 million and a decrease in accounts payable of $0.5 million, mostly offset by an increase in net income taxes payable of $2.2 million and a decrease in prepaid expenses and other assets of $1.3 million. The decrease in accrued payroll, accrued expenses and other liabilities is primarily related to payments for operating lease liabilities of $5.3 million, mostly offset by an increase to accrued payroll related to the timing of payroll payments. The increase in net income taxes payable is primarily related to the timing of payments remitted.

Cash flow provided by (used in) investing activities.  Net cash provided by (used in) investing activities generally reflects the cash outflows for property, plant and equipment.

We used $32.1 million to fund investing activities during the twelve months ended October 31, 2024. The Company used $43.8 million for the purchase of property, plant and equipment. These amounts were partially offset by $11.7 million in proceeds from the sale of property, plant and equipment.

We used $44.2 million to fund investing activities during the twelve months ended October 31, 2023. The Company used $54.5 million for the purchase of property, plant and equipment and $0.8 million for the purchase of intangible assets. These amounts were partially offset by $11.1 million in proceeds from the sale of property, plant and equipment.

Cash flow provided by (used in) financing activities. Net cash provided by (used in) financing activities generally reflects the cash changes related to our Senior Notes and ABL Facility.

Net cash used in financing activities was $28.8 million for the twelve months ended October 31, 2024. Cash used in financing activities included $18.9 million in net payments under the Company's ABL Facility and $10.2 million in purchase of treasury stock, which included $6.5 million purchased under the share repurchase program and $3.7 million in outflows from the purchase of shares into treasury stock in order to fund the employee tax obligations for certain stock award vesting and stock option exercise activities.

Net cash used in financing activities was $44.3 million for the twelve months ended October 31, 2023. Cash used in financing activities included $33.2 million in net payments under the Company's ABL Facility and $10.5 million in purchase of treasury stock, which included $8.9 million purchased under the share repurchase program and $1.6 million in outflows from the purchase of shares into treasury stock in order to fund the employee tax obligations for certain vested stock awards.

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Accounting and Other Reporting Matters

Non-GAAP Financial Measures (EBITDA and Adjusted EBITDA)

We calculate EBITDA by taking GAAP net income and adding back interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is calculated by taking EBITDA and adding back loss on debt extinguishment, stock-based compensation, changes in the fair value of warrant liabilities, other income, net, goodwill and intangibles impairment and other adjustments. Other adjustments include non-recurring expenses, non-cash currency gains/losses, transaction expenses and other items not necessarily indicative of our underlying operating performance. Transaction expenses represent expenses for legal, accounting, and other professionals that were engaged in the completion of acquisitions. Transaction expenses can be volatile as they are primarily driven by the size of a specific acquisition. As such, we exclude these amounts from Adjusted EBITDA for comparability across periods.

During the first quarter of fiscal year 2024, the Company moved certain assets and associated revenues and expenses that were previously categorized in the Company's Other activities, into the U.S. Concrete Pumping segment in order to appropriately align its placement with the manner in which the Company allocates its resources and measures performance. As a result, segment results for prior periods have been reclassified to conform to the current period presentation. For further discussion, see Note 21 in Part II, Item 8 of this report for more information. In addition, in order to distribute the use of corporate resources and appropriately align measures with segment performance, beginning in the first quarter of fiscal year 2024, the Company is no longer adding back intercompany allocations to segment Adjusted EBITDA. As a result, segment results for prior periods have been reclassified to conform to our current period presentation. See the section "Adjusted EBITDA and Net Income/(Loss)" above for more information.

We believe these non-GAAP measures of financial results provide useful supplemental information to management and investors regarding certain financial and business trends related to our financial condition and results of operations, and as a supplemental tool for investors to use in evaluating our ongoing operating results and trends and in comparing our financial measures with competitors who also present similar non-GAAP financial measures. In addition, these measures (1) are used in quarterly and annual financial reports and presentations prepared for management, our board of directors and investors, and (2) help management to determine incentive compensation. EBITDA and Adjusted EBITDA have limitations and should not be considered in isolation or as a substitute for performance measures calculated under GAAP. These non-GAAP measures exclude certain cash expenses that we are obligated to make. In addition, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently or may not calculate it at all, which limits the usefulness of EBITDA and Adjusted EBITDA as comparative measures.

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[[GREPCENT_TABLE]]
[["","","Year Ended October 31,"],["(in thousands)","","2024","","","2023"],["Consolidated"],["Net income","","$","16,207","","","$","31,790"],["Interest expense and amortization of deferred financing costs, net of interest income","","","25,572","","","","28,119"],["Income tax expense","","","8,104","","","","8,772"],["Depreciation and amortization","","","57,110","","","","58,666"],["EBITDA","","","106,993","","","","127,347"],["Stock-based compensation","","","2,394","","","","3,847"],["Change in fair value of warrant liabilities","","","(130",")","","","(6,899",")"],["Other expense (income), net","","","(406",")","","","(330",")"],["Other adjustments(1)","","","3,295","","","","635"],["Adjusted EBITDA","","$","112,146","","","$","124,600"],["U.S. Concrete Pumping"],["Net income (loss)","","$","(2,315",")","","$","6,384"],["Interest expense and amortization of deferred financing costs, net of interest income","","","22,823","","","","25,294"],["Income tax expense (benefit)","","","1,758","","","","3,680"],["Depreciation and amortization","","","40,092","","","","42,730"],["EBITDA","","","62,358","","","","78,088"],["Stock-based compensation","","","2,394","","","","3,847"],["Other expense (income), net","","","(300",")","","","(284",")"],["Other adjustments(1)","","","2,912","","","","477"],["Adjusted EBITDA","","$","67,364","","","$","82,128"],["U.K. Operations"],["Net income","","$","4,154","","","$","4,160"],["Interest expense and amortization of deferred financing costs, net of interest income","","","2,749","","","","2,825"],["Income tax expense","","","1,893","","","","752"],["Depreciation and amortization","","","7,669","","","","7,535"],["EBITDA","","","16,465","","","","15,272"],["Other expense (income), net","","","(86",")","","","(40",")"],["Other adjustments","","","383","","","","158"],["Adjusted EBITDA","","$","16,762","","","$","15,390"],["U.S. Concrete Waste Management Services"],["Net income","","$","14,241","","","$","14,348"],["Income tax expense","","","4,450","","","","4,339"],["Depreciation and amortization","","","9,349","","","","8,401"],["EBITDA","","","28,040","","","","27,088"],["Other expense (income), net","","","(20",")","","","(6",")"],["Adjusted EBITDA","","$","28,020","","","$","27,082"],["Other"],["Net income","","$","127","","","$","6,898"],["Income tax expense","","","3","","","","1"],["EBITDA","","","130","","","","6,899"],["Change in fair value of warrant liabilities","","","(130",")","","","(6,899",")"],["Adjusted EBITDA","","$","-","","","$","-"]]
[[/GREPCENT_TABLE]]

1 Other adjustments include the adjustment for non-recurring expenses, non-cash currency gains/losses, and transaction expenses. For the twelve months ended October 31, 2024, other adjustments include a $3.5 million non-recurring charge related to sales tax litigation amongst other adjustments. See Note 15 in Part II, Item 8 of this report for more information.

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Critical Accounting Policies and Estimates

For more information regarding the Company’s significant accounting policies, as well as recent accounting pronouncements, see Note 2 and Note 3 to the consolidated financial statements within Item 8 of this Annual Report.

In presenting our financial statements in conformity with U.S. GAAP, we are required to make estimates and assumptions that affect the amounts reported therein. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. However, events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. Significant unfavorable changes to current conditions, have and could result in a material impact to our consolidated and combined results of operations, financial position and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time. Presented below are those accounting policies that we believe require subjective and complex judgments that could potentially affect reported results. However, the majority of our business activities are in environments where we are paid a fee for a service performed, and therefore the results of the majority of our recurring operations are recorded in our financial statements using accounting policies that are not particularly subjective, nor complex.

Listed below are those estimates that we believe are critical and require the use of complex judgment in their application.

Goodwill and Intangible Assets

In accordance with Accounting Standards Codification ("ASC") Topic 350, Intangibles–Goodwill and Other ("ASC 350"), the Company evaluates goodwill for possible impairment annually, generally as of August 31st, or more frequently if events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company uses a two-step process to assess the realizability of goodwill. The first step (generally referred to as a "step 0" analysis) is a qualitative assessment that analyzes current economic indicators associated with a particular reporting unit. For example, the Company analyzes changes in economic, market and industry conditions, business strategy, cost factors, and financial performance, among others, to determine if there are indicators of a significant decline in the fair value of a particular reporting unit. If the qualitative assessment indicates a stable or improved fair value, no further testing is required. If a qualitative assessment indicates it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company will proceed to the quantitative second step (generally referred to as a "step 1" analysis) where the fair value of a reporting unit is calculated based on weighted income and market-based approaches. If the fair value of a reporting unit is lower than its carrying value, an impairment to goodwill is recorded, not to exceed the carrying amount of goodwill in the reporting unit.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. Estimating fair value of individual reporting units and indefinite-lived intangible assets requires us to make assumptions and estimates regarding our future plans, as well as industry and economic conditions. These assumptions and estimates include projected revenue, cash flow margins, capital expenditures, trade name royalty rates, discount rate, tax amortization benefit and other market factors outside of our control. The Company evaluates for triggering events quarterly throughout the fiscal year.

When we perform any goodwill impairment test, the estimated fair value of our reporting units are determined using an income approach that utilizes a discounted cash flow ("DCF") model and a market approach that utilizes the guideline public company method ("GPC"), both of which are weighted for each reporting unit and are discussed below in further detail. In accordance with ASC Topic 820, Fair Value Measurement ("ASC 820"), we evaluated the methods for reasonableness and reliability and assigned weightings accordingly. A mathematical weighting is not prescribed by ASC 820, rather it requires judgement. As such, each of the valuation methods were weighted by accounting for the relative merits of each method and considered, among other things, the reliability of the valuation methods and the inputs used in the methods. In addition, in order to assess the reasonableness of the fair value of our reporting units as calculated under both approaches, we also compare the Company’s total fair value to its market capitalization and calculate an implied control premium (the excess sum of the reporting unit’s fair value over its market capitalization). We evaluate the implied control premium by comparing it to control premiums of recent comparable market transactions, as applicable.

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Under the income approach, the DCF model is based on expected future after-tax operating cash flows of the reporting unit, discounted to a present value using a risk-adjusted discount rate. Estimates of future cash flows require management to make significant assumptions concerning (i) future operating performance, including future sales, long-term growth rates, operating margins, variations in the amount and timing of cash flows and the probability of achieving the estimated cash flows, (ii) the probability of regulatory approvals, and (iii) future economic conditions, all of which may differ from actual future cash flows. These assumptions are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. The discount rate, which is intended to reflect the risks inherent in future cash flow projections, used in the DCF model, is based on estimates of the weighted average cost of capital ("WACC") of market participants relative to our reporting unit. Financial and credit market volatility can directly impact certain inputs and assumptions used to develop the WACC. Any changes in these assumptions may affect our fair value estimate and the result of an impairment test. The discount rates and other inputs and assumptions are consistent with those that a market participant would use.

The GPC method provides an estimate of value using multiples derived from the stock prices of publicly traded companies. This method requires a selection of comparable publicly-traded companies on major exchanges and involves a certain degree of judgment, as no two companies are entirely alike. These companies should be engaged in the same or a similar line of business as the reporting units being evaluated. Once comparable companies are selected, the application of the GPC method includes (i) analysis of the guideline public companies' financial and operating performance, growth, intangible asset's value, size, leverage, and risk relative to the respective reporting unit, (ii) calculation of valuation multiples for the selected guideline companies, and (iii) application of the valuation multiples to each reporting unit's selected operating metrics to arrive at an indication of value. Market multiples for the selected guideline public companies are developed by dividing the business enterprise value of each guideline public company by a measure of its financial performance (e.g., earnings). The business enterprise value is calculated taking the market value of equity (share price times fully-diluted shares outstanding) plus total interest bearing debt net of cash, preferred stock and minority interest. The market value of equity is based upon the stock price of equity as of the valuation date, and the debt figures are taken from the most recently available financial statements as of the valuation date. In selecting appropriate multiples to apply to each reporting unit, we perform a comparative analysis between the reporting units and the guideline public companies. In making a selection, we consider the revenue growth, profitability and the size of the reporting unit compared to the guideline public companies, and the overall EBITDA multiples implied from the transaction price. In addition, we consider a control premium for purposes of estimating the fair value of our reporting units as we believe that a market participant buyer would be required to pay a premium for control of our business. The control premium utilized is based on control premiums observed in recent comparable market transactions.

For long lived intangible assets not subject to amortization, we test for impairment annually, or whenever events or changes in circumstances indicate that their carrying value may not be recoverable. In testing long-lived intangible assets for impairment, we compare the fair value with the carrying value.  The determination of fair value is based on the relief from royalty method, which models the cash flows from the intangibles assuming royalties were received under a licensing agreement. This discounted cash flow analysis uses inputs such as forecasted future revenues attributable to the reporting unit, assumed royalty rates and a discount rate. If we were to experience a decrease in forecasted future revenues attributable to the brands, this could indicate a potential impairment. If the carrying value exceeds the estimated fair value, the long-lived intangible asset is considered impaired, and an impairment loss will be recognized in an amount equal to the excess of the carrying value over the fair value of the intangible asset. 

The Company's annual impairment analysis is performed each year on August 31. The Company determined that it is more likely than not that the goodwill and long-lived intangible assets were not impaired during fiscal 2024 and 2023. If the planned business performance expectations are not met or if specific valuation factors out of our control, such as the discount rate, change significantly, then the estimated FVs of the reporting unit might decline and lead to a goodwill impairment in the future.

The Company elected to have a step one impairment analysis performed as of August 31, 2022 on the Company’s U.S. Concrete Pumping, U.S. Concrete Waste Management Services, and U.K. Operations reporting units. Management’s projections used to estimate the discounted cash flows included modest annual increases to revenue volumes and rates, cash flow margins that are consistent with recently achieved actual amounts, terminal growth rates of 3.0% and discount rates ranging from 10.0% to 11.3%.

As a result of the goodwill impairment analysis, the fair values of its U.S. Concrete Waste Management Services and U.K. Operations reporting units substantially exceeded their carrying values by 82% and 32%, respectively.

For the U.S. Concrete Pumping reporting unit, which had goodwill of $147.5 million, the fair value was approximately 7% greater than its carrying value. Changes in any of the significant assumptions used could materially affect the expected cash flows and such impacts could result in a potentially material non-cash impairment charge. The most sensitive assumption is the discount rate and a 50 basis point increase in the discount rate would not have resulted in any of the reporting units’ carrying values exceeding their fair values.

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Business combinations and asset acquisitions

The Company applies the principles provided in ASC 805, Business Combinations ("ASC 805"), to determine whether a transaction involves an asset or a business.

If it is determined an acquisition is a business combination, tangible and intangible assets acquired and liabilities assumed are recorded at fair value and goodwill is recognized to the extent the fair value of the consideration transferred exceeds the fair value of the net assets acquired. Transaction costs for business combinations are expensed as incurred in accordance with ASC 805.

If it is determined an acquisition is an asset acquisition, the purchase consideration (which will include certain transaction costs) is allocated first to indefinite lived intangible assets (if applicable) based on their fair values with the remaining balance of purchase consideration being allocated to the acquired assets and liabilities based on their relative fair values.

The application of acquisition accounting requires the Company to make fair value determinations as of the valuation date. In making these determinations, the Company is required to make estimates and assumptions that affect the recorded amounts, including, but not limited to, expected future cash flows, market comparable and discount rates, replacement costs of property and equipment and the amounts to be recovered in future periods from acquired deferred tax assets. To assist the Company in making these fair value determinations, the Company may engage third-party valuation specialists or internal specialists who generally assist the Company in the fair value determination of identifiable assets such as customer relationships, property and equipment and any other significant asset or liabilities. The Company’s estimates in this area impact, among other items, the amount of depreciation and amortization and income tax expense or benefit that we report. The Company’s estimates of fair value are based upon assumptions that the Company believes to be reasonable, but which are inherently uncertain.

Recently Issued Accounting Standards

For a detailed description of recently adopted and new accounting pronouncements refer to Note 3 to the Company’s audited financial statements included elsewhere in this Annual Report.