Concrete Pumping Holdings Inc (BBCP) Q4 2020 Earnings Call Transcript

Concrete Pumping Holdings Inc (BBCP 0.46%)
Q4 2020 Earnings Call
Jan 12, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Concrete Pumping Holdings' financial results for the fourth quarter and fiscal year ended October 31, 2020. Joining us today are Concrete Pumping Holdings CEO, Bruce Young; CFO, Iain Humphries; and the company's external director of investor relations, Cody Slach. Before we go further, I would like to turn the call over to Mr. Slach to read the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements.

Cody, please go ahead.

Cody Slach -- External Director of Investor Relations

Thanks, Shamali. I'd like to remind everyone that in the course of this call, to give you a better understanding of our operations, we will be making certain forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from such statements. For information concerning these risks and uncertainties, see Concrete Pumping Holdings, Inc.'s publicly available filings with the SEC.

The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. On today's call, we will also discuss adjusted EBITDA, net debt, and free cash flows, which are non-GAAP financial measures. Adjusted EBITDA, adjusted reported EBITDA for certain items, we believe, the presentation of this non-GAAP financial measure is useful because it provides investors and industry analysts the same information that we use internally for purposes of assessing our core operating performance. Net debt reflects all principal amounts outstanding under debt agreements less cash.

Cash is subtracted from the GAAP measure because it could be used to reduce the company's debt obligations. We believe this non-GAAP measure provides useful information to management and investors in order to monitor the company's leverage and evaluate the company's consolidated balance sheet. Free cash flow is defined as adjusted EBITDA less net capex and cash paid for interest. This measure is not a substitute for cash flow from operations and does not represent the residual cash flow available for discretionary expenditures since certain nondiscretionary expenditures, such as debt servicing payments, are not deducted from the measure.

CPH believes this non-GAAP measure provides useful information to management and investors in order to monitor and evaluate the cash flow yield of the business. For a reconciliation of historical adjusted EBITDA and net debt to their most directly comparable GAAP financial measure, please refer to the press release issued today or the investor presentation posted on the company's website. However, the company has not reconciled the forward-looking adjusted EBITDA guidance range and free cash flow range discussed to the most directly comparable forward-looking GAAP measures because this cannot be done without unreasonable effort due to the lack of predictability regarding the various reconciling items such as provision for income taxes and depreciation and amortization. I'd like to remind everyone this call will be available for replay later this evening.

A webcast replay will also be available via the link provided in today's press release as well as on the company's website. Additionally, we have posted an updated investor presentation to the company's website. Now I'd like to turn the call over to the CEO of Concrete Pumping Holdings, Bruce Young. Bruce?

Bruce Young -- Chief Executive Officer

Thank you, Cody, and good afternoon, everyone. Our performance throughout the fourth quarter and the fiscal-year 2020 has been a testament to our continued operational resiliency and solid financial foundation. The hard work of our team has allowed us to maintain the quality and efficiency of our operations as we navigated and continue to navigate the lingering COVID-19 headwinds across our markets. Our team members have swiftly adapted to evolving health protocols throughout the regions in which we operate.

We are deeply grateful for their flexibility and resourcefulness and we continue to prioritize their safety as we monitor further changes in health guidelines. Despite the pandemic, we maintained our position of financial strength in the fourth quarter. We continue to benefit from our highly variable cost structure and maintained year-over-year adjusted EBITDA margin expansion. In addition, we generated double-digit revenue growth in our Concrete Waste Management Services business, sustained the strong momentum that we have delivered throughout the year.

For our full year, revenue increased approximately 8% to $304.3 million when compared to fiscal 2019, demonstrating the resiliency of our business model throughout the challenging market backdrop. Gross margin was up 80 basis points to 45.1%, and adjusted EBITDA increased 12% to $107.3 million. Further, as Iain will highlight shortly, we made significant progress strengthening our balance sheet. Net debt has been reduced by $42 million since we ended fiscal 2019, and we have reached our 2020 targeted year-end leverage ratio of 3.5 times.

In fact, we have executed on all the key priorities we established in May to respond to the pandemic. Along with meeting our pre-COVID 2020 leverage target, we invested approximately $36 million into our fleet of equipment. We have kept our workers safe, maintained strong operations, demonstrated our businesses agility and resilience which today's results support, and controlled costs due to our roughly 70% variable cost operating model. Our ability to execute on our year-long strategic objectives during this difficult period proves that our robust foundation will not only see us through these challenging times but also sustain our long-term growth throughout fiscal 2021 and beyond.

Turning back to the quarter. Our fourth-quarter revenue performance reflects COVID-19-driven softness in the U.K. as well as in several U.S. markets.

To dive into this a bit further, starting with our U.K. business, we continue to experience COVID-19-related softness within this market as we have since the onset of the pandemic. While the curtailment of our business operations is not as severe as it was during April and May, the market's pace of recovery remains slow, particularly across infrastructure work and new project starts. We continue to monitor changes in lockdown status across the U.K.

region, particularly closely, given the recent reinstated restrictions put in place last month. We expect any easing of these restrictions will be based on the ongoing monitoring of new COVID cases and the success of the vaccine rollout. The U.K. construction sector has been considered essential work, and therefore, we expect that the majority of job sites will remain open, where it's safe to do so.

In addition, the multiyear HS2 project continues to represent a strong opportunity for our business, and we continue our bidding activity for contracts on this job. Moving now to our U.S. Concrete Pumping business. We experienced modest organic growth within many of our U.S.

markets that we were more than -- that were more than offset by COVID-19 headwinds in other regional markets. These headwinds took the shape of modest project delays and work interruptions. On the other hand, we have continued to see growing demand within our U.S. residential market, and we believe that this strength will carry through into fiscal 2021.

The strong demand and utilization trends of our Eco-Pan business also continues. The 11% revenue growth in the fourth quarter reflects the operational improvements and increased penetration that we have achieved throughout the year as well as continued positive reception to the geographic expansion of our Eco-Pan roll-off service. As I mentioned last quarter, our roll-off service is intended to handle larger volume pickups than what our standard Eco-Pan service can accommodate as it comes with larger containers that can be moved around job sites with roll-off or hook lift trucks. Having the service available allows us to enhance the value of our concrete pumping service with an expanded waste removal offering.

In summary, we are entering fiscal 2021 from a position of both financial and operational strength, a roughly 70% variable cost structure, diversified geographic and segment revenue exposure, and strengthened balance sheet make us well-positioned to address evolving macroeconomic and industry conditions over the coming months as well as seek accretive investment opportunities that support the long-term growth of our company. Now I'd like to hand the call over to Iain, so he can provide a detailed overview on our fourth quarter and full-year 2020 financial results. I'll then return to provide some color on our market expectations as we enter fiscal-year 2021. Iain?

Iain Humphries -- Chief Financial Officer

Thanks, Bruce, and good afternoon, everyone. Moving right into our fourth-quarter 2020 results. We generated revenue of $79.2 million compared to $84 million in the same year-ago quarter. The slight decline was due to lingering volume impacts of COVID-19 across our U.K.

markets. In addition, while we generated organic growth in many of our U.S. markets, as Bruce mentioned, this growth was more than offset by COVID-19-related volume declines in certain markets. As such, revenue in the U.S.

Concrete Pumping segment, mostly operated under the Brundage-Bone brand, was $58.5 million compared to $62.1 million in the same year-ago quarter. Q4 revenue in our U.K. operations, operating largely under the Camfaud brand, was $10.9 million compared to $13 million in the same year-ago quarter. As we've experienced over the past few quarters, this decline was driven by construction-volume reductions due to a slow recovery from-COVID-19, particularly within infrastructure.

The U.K. is currently running at approximately 85% of our pre-COVID revenue run rate. As we continue to monitor the U.K. regional recovery trends and anticipate a tempered return to full revenue capacity, we continue to believe we have ample runway for long-term market share expansion, including the multiyear high-speed rail project, HS2.

Revenue in our U.S. Concrete Waste Management Services segment, operating under the Eco-Pan brand, increased 11% to $9.9 million in the fourth quarter compared to $9 million in the same year-ago quarter. This was driven by robust organic growth in the majority of our markets and higher utilization of our assets as well as the sustained benefit of pricing improvements and additional service volumes from our expanded roll-off offerings. We have continued to optimize our Eco-Pan operations through our investments in our roll-off services in several locations as this service allows us to accommodate larger volumes than our established small and large pan services.

At the end of Q4 2020, pans in the field, which is a leading indicator for future pickups, were approximately 6% higher when compared to the same year-ago quarter. We've seen tremendous potential for further increasing our Eco-Pan penetration across the existing concrete pumping footprint. In fact, without entering new markets, we would still expect to generate double-digit full-year revenue growth in this segment. Turning back to our consolidated results.

Gross profit in the fourth quarter was $35.5 million compared to $38.8 million in the same year-ago quarter, and gross margin was 44.8% compared to 46.3%. The slight decrease was primarily driven by higher depreciation expenses. Across our organization, we have continued to prudently manage our available cost to support the health and resiliency of our business. General and admin expenses in Q4 were $31.1 million compared to $28.2 million in the same year-ago quarter, and the increase was largely due to the noncash effects of higher stock-based compensation expense, which was partially offset by lower amortization expense in the fourth quarter.

Excluding the noncash items of depreciation, amortization of intangibles and stock-based compensation, general and admin expenses decreased 5% to $15.3 million, which equates to approximately 19% of revenue. Net loss attributable to common shareholders in the fourth quarter was $2.8 million or $0.05 per diluted share compared to net income of $0.1 million or $0 per diluted share in the same year-ago period. Finally, adjusted EBITDA in the fourth quarter increased to $29.9 million compared to $29.6 million in the same year-ago quarter. Adjusted EBITDA margin increased 260 basis points to 37.8% compared to 35.2% in the same year-ago quarter.

In our U.S. Concrete Waste Management business, adjusted EBITDA improved 3% to $5 million on the back of 11% organic revenue growth. We continue to deliver strong results in this segment and year-over-year improvement in revenue and adjusted EBITDA. This is driven by both the strength of our asset utilization, which is growing faster than the overhead we have added to the business throughout 2020 to support our organic growth.

In our U.S. Concrete Pumping business, adjusted EBITDA was up 6% to $20.6 million against an approximate $4 million drop in revenue, reflecting the continued strength of our variable cost control. And in our U.K. business, adjusted EBITDA was marginally down about $600,000 to $3.7 million with an approximate $2 million decrease in revenue.

While COVID-19-related headwinds persisted in the U.K., we continue to be proud of our cost containment initiatives and our team's diligent and agile discipline within this lower volume environment. Turning to the balance sheet. We continue to prioritize liquidity and cash preservation as well as driving improvement in leverage. Compared to Q3 2020, net debt in the fourth fiscal quarter was reduced by approximately $19.1 million to a year-end net debt amount of $376.2 million.

This was comprised of $382.9 million in debt principal and $6.7 million in cash. We have no near-term debt maturities. As a reminder, our 5-year ABL revolver is in place until December 2023, and our 7-year term loan facility matures in December 2025. These debt instruments are covenant-light.

We have no financial covenants on the term loan, and we continue to believe we have significant headroom in our ABL, which is a springing 1:1 fixed charge ratio based on total excess availability. As of October 31, 2020, we have accumulated approximately $59.3 million of total available liquidity, which includes cash on the balance sheet and availability from the ABL revolver. This reflects both our long-term initiatives to strengthen our balance sheet and the swift actions we have taken to preserve cash since the onset of the coronavirus pandemic. Our business continues to generate healthy operating free cash flows as we invoice our customers daily for the work we perform, and we have minimal working capital requirements as we do not take ownership of the concrete we place.

Even in this current macroeconomic environment, our ability to generate strong operating free cash flows and strong margins have allowed us to expand our liquidity and delever in line with our strategic goals. With our cash and liquidity focus, we are very pleased that we've been able to reduce our net debt position by approximately $37 million over the past two quarters as well as reach our targeted year-end leverage ratio of 3.5 times. Our diversified geographic and segment revenue streams, highly variable cost structure and overall resiliency continue to place us in a strong position to both strategically invest in our equipment and pursue other accretive investment opportunities in support of our long-term growth. As we've mentioned over the past few quarters, we suspended uncommitted 2020 capex investment for a brief period during the height of the COVID-19 pandemic.

But the continued momentum in our Eco-Pan business has since supported strategic capex investments to fulfill demand. With our selective age improvements to some of our concrete pumping fleet, we have prudently stayed consistent with our replacement capex schedule. Our equipment capex investment reflect our unwavering belief in the strength of our business, and we are already delivering improved returns. As we enter this next fiscal year, we will continue to apply prudent capital allocation and remain opportunistic with other accretive capex investments.

We continue to believe we are well-positioned to navigate the evolving impacts of the COVID-19 environment and believe that the encouraging demand trends in residential and infrastructure construction and our Eco-Pan segment will continue to hold. As such, we are reinstating our full-year guidance outlook. In fiscal 2021, we expect revenue to range between $300 million and $310 million, adjusted EBITDA to range between $105 million and $110 million. And free cash flow, which we define as adjusted EBITDA less net capex, less cash interest, to range between $47.5 million to $52.5 million.

It is notable that our resilient execution in 2020 and the introduction of our 2021 outlook is against the current market capitalization of approximately $250 million. Our operational and financial strength heading into the new fiscal year provides a strong foundation for our performance as we execute on our strategy and continue to monitor the pace of economic and COVID-19 recovery across our markets. With that, I will now turn the call back over to Bruce to provide some additional color on our strategic priorities for 2021.

Bruce Young -- Chief Executive Officer

Thanks, Iain. We are now in our 2021 fiscal year and remain focused on applying our momentum and strong financial foundation to continue capitalizing on our highly diversified business in areas where we have an experienced market share gains. While some of our customers' projects are still delayed due to COVID-19 impacts and restrictions, we have not seen any new major changes or delays to our project schedule, our overall bidding environment. We continue to closely monitor the pace of recovery within regions that were more heavily impacted by the pandemic.

As we stated last quarter, we expect the U.K.'s recovery to continue into 2021 given its slower pace relative to the U.S. However, our diligent focus on managing cash flow and proactively in reinforcing our variable cost structure makes us well-positioned for the U.K.'s market's eventual stabilization. In the U.S., we continue to view residential construction as an area of strength for our business, and we expect residential demand to remain robust going into 2021. Additionally, we expect that other sectors, including wastewater treatment plants, data centers, warehouses, distribution centers, and healthcare projects will continue to experience positive trends.

In Eco-Pan, we remain focused on increasing our penetration among our existing concrete pumping footprint and developing opportunities to introduce the service to new markets. As Iain mentioned, increasing penetration alone will allow us to sustain double-digit revenue growth for the segment even without new market entry. We are proud of the progress that we have made in the business during 2020, and we greatly look forward to accelerating our momentum further in the coming year. We have a solid financial and operational framework in place for the year ahead.

The fact that we have improved our liquidity, have covenant-light debt facilities and no near-term debt maturities, and are now operating at our near-term target leverage ratio of 3.5 times provides greater flexibility for us to pursue growth-enhancing investment opportunities. As we pursue opportunities to increase our penetration across our existing geographic footprint and even enter into new markets, our strong balance sheet and highly variable cost structure will allow us to develop capital allocation strategy in ways that maximize returns and shareholder value. Throughout our organization, we are taking a cautious but optimistic approach to these and other growth opportunities given this dynamic macroeconomic environment. We are grateful for the support of our team members and our shareholders throughout these unprecedented times and look forward to executing on our strategic plan in fiscal 2021.

With that, I'd like to now turn the call back over to Shamali for Q&A.

Questions & Answers:

Operator

[Operator instructions] Our first question is from Tim Mulrooney with William Blair. Please proceed with your question.

Tim Mulrooney -- William Blair -- Analyst

Good afternoon, Bruce and Iain.

Bruce Young -- Chief Executive Officer

Hi, Tim. How are you?

Tim Mulrooney -- William Blair -- Analyst

Doing well. Thanks. A couple of questions this afternoon. So the first -- I wanted to ask about the market outlook.

If I look at the last recession, it took a few years, I think, for commercial construction to come back. But I know every cycle is different. So how do you think about your markets as we move into 2021? I appreciate the color you've given so far. But is there typically a lag for commercial construction following a downturn? And then on the residential construction side, do you expect that to hold steady and remain strong? Or do you think it will slow down at some point? Or accelerate? Any thoughts here would be helpful.

Bruce Young -- Chief Executive Officer

Yes. So I'll take it in the U.K. first. And the U.K.

was off quite a lot in 2020, as you saw from the results. While it's been slowly coming back, the latest shutdown has affected us slightly, but not significantly. It had continued to grow through December as we had expected. We believe that once we get through the vaccination and get more confidence in that market that the infrastructure portion of that will come back very quickly.

There has been quite a lot of activity on the commercial market in the U.K., and we expect that to be not too far behind us. So we've very optimistic about the U.K. for 2021. In the U.S., with our Eco-Pan business, it's really telling the story and growing penetration through education, and we expect that to continue regardless of market conditions.

And with our U.S. Concrete Pumping business, our residential market remains strong in several areas within the U.S., and it is offset, it's more than offset what we have lost in commercial or infrastructure during 2020, and we expect that to continue on. In the commercial markets, we are starting to bid more work than what we had in the past. There are several projects that were put on hold that we expect it will be started later in the year.

And so we expect second half of 2020 to look quite good for us with the commercial market or the nonres market. And then in the infrastructure market, we have several projects that have been put on hold based on funding challenges. We're hopeful, and the things that we're hearing about an infrastructure bill being rapidly run through the administration is -- will hopefully get those things back online. And we believe the infrastructure will start ticking up in the second half of the year as well.

Tim Mulrooney -- William Blair -- Analyst

That's good color, and it's a good segue to my other question. We're kind of unexpectedly maybe entering a period with the unified government once again and the conversation around infrastructure spending is definitely heating up. I'm wondering if you could provide investors, provide us with a few examples of how you might benefit from an infrastructure package. I know, for example, that concrete pumping isn't typically used for building roads and highways, but I have to think there will be some major opportunities for you and was hoping you could help walk us through what that might look like.

Bruce Young -- Chief Executive Officer

Yes. So infrastructure, I know there's a lot of focus on roads and highways, but there's also bridge structures on those as well, and those bridge structures will use concrete pumping. We have in our investor presentation, you'll see an illustration of where the -- basically how our infrastructure is created across the different states of the country, and it's created very poorly. And that comes from wastewater, from water, from bridge structures.

And largely, anything that goes through an infrastructure bill is really highly affected by -- for us, there's a lot of concrete in all those projects. And so we're actually quite excited about that. And with Eco-Pan, I think there'll be an opportunity there with new environmental enforcement that may come along with that, that may help Eco-Pan along the way as well.

Tim Mulrooney -- William Blair -- Analyst

Understood. Thank you for taking my questions.

Bruce Young -- Chief Executive Officer

Thanks, Tim.

Operator

And our next question is from Andrew Wittmann with Robert W. Baird. Please proceed with your questions

Andrew Wittmann -- Baird -- Analyst

Great. Thanks. Good afternoon, guys. I would just take a little time here and ask some questions around the guidance.

If you look at it, it's basically saying flat revenues and kind of margins for '21. But inside of this, you talked already about some of the puts and takes by segment. It sounds like secular growth in Eco-Pan to continue. I heard you say double digit for the year as kind of your view.

U.K.'s soft. You said it's running down about 85% -- you said it's running 85% of volumes or maybe down about 15%. Kind of suggesting maybe that the U.S. is, I don't know, I guess, up slightly.

Is that the way to think about the top line guys inside of that? Maybe, Iain, for you?

Iain Humphries -- Chief Financial Officer

Yes. That's exactly how we think about it.

Andrew Wittmann -- Baird -- Analyst

OK. And then I guess just as it relates to the margin side of that equation, you guys talked a lot in your prepared remarks about having the variable cost structure and how that's allowed you to deliver good EBITDA, kind of making EBITDA numbers here, even if the top line was a little bit soft. I guess as you address the cost structures, sometimes the second wave or third wave, whatever wave it is, in terms of adjusting cost, it's harder to come by. So as you move into '21 and think about the guidance, if the revenues do come in kind of soft like they did in '20 because of COVID, if they continue to remain soft, do you feel like there's still enough knobs to deliver the EBITDA guidance kind of irrespective of the top-line environment as long as the world doesn't drastically change? Bruce, maybe you could comment on that.

Bruce Young -- Chief Executive Officer

Yes. I would say that the amount of discipline within our country pumping operations that we created over the last year will -- with our variable costs, we'll be able to continue that into 2021 and into the future. And with our Eco-Pan business, as we create more route density, our -- as you see, our margins increase with that. So I do believe we'll be able to maintain our margins into 2021.

Andrew Wittmann -- Baird -- Analyst

Got it. OK. And then I guess just quickly on Eco-Pan here. You were talking about double-digit growth.

Pans in the field, up 6% right now. I guess, pans in the field, I guess the compares get tougher. Is there anything else in there as to why the top line in the Eco-Pan segment can be double digit with pans, not up double digits?

Iain Humphries -- Chief Financial Officer

Yes. One thing I'd mention to that, just the volume growth on the pan side. I mean, as you've heard us talk about the geographical expansion of our roll-off service, there is higher pricing on that piece as well. So there's volume from the traditional pans in the field count, but you're also -- we're getting a bit more velocity from the higher price increase on the roll-off service.

Andrew Wittmann -- Baird -- Analyst

Got it. OK. I'll leave it there. Maybe I'll turn back in later, something else comes up.

Thanks, guys.

Bruce Young -- Chief Executive Officer

Thanks.

Iain Humphries -- Chief Financial Officer

Thanks, Andy.

Operator

Our next question is from Steven Fisher with UBS. Please proceed with your question.

Steven Fisher -- UBS -- Analyst

Thanks. Good afternoon, guys. I wonder if you could just talk a little bit more about the cadence of the slight growth that you assume in the U.S. business over the course of 2021? And including that, what trends have you seen in the first quarter already? Should we anticipate something similar on a year-over-year decline for the first couple of quarters, and then an offsetting growth rate in the second half of the year? How should we think about that? And so kind of what have you seen in the first quarter as well?

Iain Humphries -- Chief Financial Officer

Yes. I think that's fair. This is Iain. I think that's fair where if you look at the mix of H1, H2, I mean, typically, we've guided to sort of 45%, 55%.

It was the way the pace of our business trends. I mean we do expect to see a slight shift in that in 2021, where there's likely to see a higher pickup in the back half of the year, so as opposed to the 45%, 55%, we might see the 43%, 44% again and 57%, 56%. So a change. So we do expect to see, as you mentioned, a higher pickup in the back half of the year as there is some stabilization in those construction markets.

And outside of that, the assumption we would make is that our organic pace and our business would continue.

Steven Fisher -- UBS -- Analyst

OK. And I know you talked about the potential for infrastructure stimulus. How much visibility and how would you describe the visibility that you have to the revenue growth at this point for the year?

Bruce Young -- Chief Executive Officer

Yes. As far as infrastructure, we haven't tied too much infrastructure growth into our projections because we expect that, that will happen later in the year and maybe after our fiscal year ends.

Steven Fisher -- UBS -- Analyst

OK. I mean do you have -- and can you just remind me backlog? Or how -- how many months of visibility do you have in, let's say, your U.S. business at this point?

Iain Humphries -- Chief Financial Officer

Yes. So typically, it's 50% of a year. So as you know, we are a quick-term business, but we typically see and we continue to see about 50% of that annual revenue through the backlog commitments that we've got.

Steven Fisher -- UBS -- Analyst

OK. That's helpful. And could you just talk a little bit about how your rates, your pricing overall, and again, it's focusing on the U.S. business, Brundage-Bone concrete pump.

How were your rates year over year in the quarter? What was your utilization like? And what would you embed for assumptions there in 2021?

Bruce Young -- Chief Executive Officer

Yes. So our rates stayed really strong through 2020. Our industry, in general, was fairly healthy, and so there's -- wasn't a lot of pressure on rates. Utilization.

We didn't get the bump in billed hours that we would have expected in a typical second half of the year in 2020 that we would normally have gotten so that we have more capacity than what we were able to get utilization for, which just puts us in a better position for growth into 2021.

Steven Fisher -- UBS -- Analyst

And sorry, what was the rate expectation for '21? Flat? Up? Down?

Iain Humphries -- Chief Financial Officer

The rate would probably go up 2% to 3%?

Steven Fisher -- UBS -- Analyst

Up 2% to 3%.

Iain Humphries -- Chief Financial Officer

Yes. Obviously, I mean that will depend on any sort of end market change with obviously the strength on the residential side. So we'll have to see how that plays out. But across the business, that would be the organic pace we would expect to see.

Steven Fisher -- UBS -- Analyst

Got it. And last question, I'm not sure if I missed this, but did you give a capex, gross capex expectation for '21 compared to the $39 million in 2020?

Iain Humphries -- Chief Financial Officer

No, we never. So we provided free cash flow guidance. And the net capex in 2020, it was actually $36 million, not $39 million.

Steven Fisher -- UBS -- Analyst

Yes. Thank you. I was saying gross. So what the -- I think the gross was about $39 million.

So just curious if you were planning to keep that relatively steady. But I can follow up off-line.

Bruce Young -- Chief Executive Officer

Thank you.

Operator

Our next question is from Brent Thielman with D.A. Davidson. Please proceed with your question.

Brent Thielman -- D.A. Davidson -- Analyst

Hey. Thank you. Good afternoon.

Bruce Young -- Chief Executive Officer

Hey. Good afternoon, Brent.

Brent Thielman -- D.A. Davidson -- Analyst

Hey, Bruce. I was wondering if you could comment a little more on your ability to move resources and equipment around. I think it's one of the unique levers of the business to sort of take advantage of these markets in the U.S. that aren't as impacted where you'll be able to find some healthy pockets.

I guess I'm just wondering if your ability to do that could manifest into some of the growth that you're talking about in the U.S. markets in the new year? How much of a lever is that for you?

Bruce Young -- Chief Executive Officer

Yes. Thanks for asking that question, Brent. That's a big lever for us. Every one of our units is truck mounted, and so they're very easily driven from one location to another.

Small units are about $3 a mile to drive them. Larger units are a little more than that. But we monitor utilization in each market every month. And every month, we typically move a couple of machines just to where we can get better utilization out of it.

We may see more of that into 2021. But currently, we have enough capacity in most of our locations that we don't have to move a lot of equipment.

Brent Thielman -- D.A. Davidson -- Analyst

And out of curiosity, which -- I mean which markets in the U.S. have you seen a little more slowness, delays versus the ones that are really strong right now?

Bruce Young -- Chief Executive Officer

Yes. So we've seen a little softness in Colorado, in parts of Oklahoma and Kansas, a little bit in the Southeast. The stronger markets for us have been more in the West, the Mountain region, and the West Coast. Texas has been fairly strong for us as well.

Brent Thielman -- D.A. Davidson -- Analyst

Yes. OK. And I guess, Bruce, I mean the bidding competitive environment, is that sort of being conducive to the commentary you've offered about margins in the U.S. market into '21 still staying pretty healthy? [Inaudible] believe that?

Bruce Young -- Chief Executive Officer

Yes, I expect -- yes, it will -- I believe it will stay healthy into 2021 and beyond.

Brent Thielman -- D.A. Davidson -- Analyst

OK. And Iain, on SG&A, I guess, if we back out some of these items, stock comp, D&A, is this the run rate we should sort of expect into 2021?

Iain Humphries -- Chief Financial Officer

Yes. When you take out all the noncash items, the run rate is around 18%, 19%. So we keep that fairly consistent.

Brent Thielman -- D.A. Davidson -- Analyst

OK. So that's a good benchmark for the new year. OK. Great.

Thank you, guys.

Bruce Young -- Chief Executive Officer

Thank you.

Iain Humphries -- Chief Financial Officer

Thanks, Brent.

Operator

And our next question is from Stanley Elliott with Stifel. Please proceed with your question.

Stanley Elliott -- Stifel Financial Corp. -- Analyst

Hi, Bruce, Iain. Thank you guys for taking the call. Happy new year. Can you talk a little bit about the M&A environment? I mean it feels like we've -- you've been able to navigate all the disruption from COVID.

Chances are, we'll get some stimulus in some way, shape or form, vaccines, economy should start to pick up through the rest of the year. If you guys are going to generate, let's call it, $50 million of free cash flow, what are the thoughts right now about putting that to work maybe ahead of you seeing the full turn to try to capitalize on the upswing?

Bruce Young -- Chief Executive Officer

Yes. Thanks for the question. So M&A has been a big part of our business in the past. We did put M&A on hold during the pandemic just to strengthen our balance sheet and better position us.

We are in a much better position, as you know, going into 2021. And so we are more interested in some accretive M&A opportunities. We do want to get visibility on the markets that they're in, where we expect them to go, making sure that we get the right value on them, get the right synergies in place, that sort of thing. But those conversations are certainly things that we're starting to think through now, and we'll see how that plays out for 2021.

Stanley Elliott -- Stifel Financial Corp. -- Analyst

And kind of back to the capex piece, it looks like there is some growth capex kind of coming off of a lower base. Are we to assume that all of that is going to the Eco-Pan business to try to build that out? Or are there some other entering into new markets or just high level? Would love to kind of hear where your head is at there.

Iain Humphries -- Chief Financial Officer

Yes. So I mean we do have growth in there for Eco-Pan, as you know. And as you've heard in our prepared remarks, we want to make sure that we also keep up with the pace of replenishing our fleet. So we would expect that to continue.

I mean, as you know, back in Q2 of this year, we paused briefly. But with the continued performance of our business, we quickly went back to investing in our fleet. So we would expect to see that continue into 2021.

Stanley Elliott -- Stifel Financial Corp. -- Analyst

And then lastly, if we do get an infrastructure bill or a highway bill whatever, how quickly does that start to flow through to your numbers?

Bruce Young -- Chief Executive Officer

Yes. So if it helps fund some of the states that have projects put on hold currently, that could go fairly quickly for us. If it's new construction, that typically is going to take six months to a year before actually, we put concrete in place.

Stanley Elliott -- Stifel Financial Corp. -- Analyst

Great, guys. Thanks for the time. Appreciate it. And best of luck.

Bruce Young -- Chief Executive Officer

Thanks, Stanley.

Operator

[Operator instructions] And our next question is from Alex Rygiel with B. Riley Securities. Please proceed with your questions.

Alex Rygiel -- B. Riley Securities -- Analyst

Thank you, and happy new year, gentlemen.

Bruce Young -- Chief Executive Officer

Hi, Alex. How are you?

Iain Humphries -- Chief Financial Officer

Hi, Alex.

Alex Rygiel -- B. Riley Securities -- Analyst

Pretty good. My question is around your residential exposure. So in your slide deck, you identify that 30% of your business is exposed to residential. Is that 30% of just your U.S.

pumping business? Or is that 30% of the total? Just for clarification. And then --

Bruce Young -- Chief Executive Officer

I'm sorry. Go ahead, Alex.

Alex Rygiel -- B. Riley Securities -- Analyst

And then can you talk a little bit about regional strengths and weaknesses in that business?

Bruce Young -- Chief Executive Officer

Sure. So it's 30% of U.S. pumping. Markets where we have a higher percentage of residential would be in the Mountain region and the Texas region and Colorado.

But that kind of ebbs and flows. But it is a market that we're -- it's not new to us. It's something that's always been very important to us.

Alex Rygiel -- B. Riley Securities -- Analyst

And could you sort of estimate sort of the growth rate of that business in 2020 and what you might think it will deliver in 2021?

Iain Humphries -- Chief Financial Officer

Yes. I mean the growth rate was probably 2% or 3%. I think we would expect -- yes, we would expect probably something [Inaudible] for 2021.

Bruce Young -- Chief Executive Officer

Yes. I think what I would add to that is, so as we look at end market in U.S. Concrete Pumping, the residential has taken up about 2% of total revenue over nonres in the last several months. That may increase slightly, but it's not going to be that significant of a shift.

Alex Rygiel -- B. Riley Securities -- Analyst

Thank you.

Bruce Young -- Chief Executive Officer

Thanks, Alex.

Operator

We have reached the end of our question-and-answer session. And I'll now turn it back forward to -- I apologize. I'll turn it back over to Mr. Young for closing remarks.

Bruce Young -- Chief Executive Officer

Thanks, Shamali. We'd like to thank everyone for listening to today's call, and we look forward to speaking with you when we report our first quarter fiscal 2021 results in March.

Operator

[Operator signoff]

Duration: 45 minutes

Call participants:

Cody Slach -- External Director of Investor Relations

Bruce Young -- Chief Executive Officer

Iain Humphries -- Chief Financial Officer

Tim Mulrooney -- William Blair -- Analyst

Andrew Wittmann -- Baird -- Analyst

Steven Fisher -- UBS -- Analyst

Brent Thielman -- D.A. Davidson -- Analyst

Stanley Elliott -- Stifel Financial Corp. -- Analyst

Alex Rygiel -- B. Riley Securities -- Analyst

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