Northwest Pipe Company: 2023 Annual Letter to Stakeholders

Dear Fellow Stakeholders:

As we reflect on 2023, I am pleased to share with you the strength demonstrated by Northwest Pipe Company in the face of a challenging operating environment. The small bidding market, coupled with the rising interest rate economy, added to the pressure on both our Steel Pressure Pipe (“SPP”) and Precast Infrastructure and Engineered Systems ("Precast") segments. Despite the headwinds, we generated 2023 net sales of $444.4 million and earnings per diluted share of $2.09, reflecting only a modest decline from the record levels achieved in 2022. We believe our performance demonstrates a new level of through-cycle resilience created by the growth strategy we have deployed over the last several years.

Record Safety Performance
The area of which we are most proud is achieving our best safety year ever in 2023. Collectively all 13 of our plants performed exceptionally well and were below the national average for Total Recordable Incident Rate (“TRIR”) at 1.51, achieving the lowest TRIR in our Company’s history. Our safety philosophy of accountability is at the core of our culture, which is infused at every level of our Company. Our commitment and teamwork sets the foundation for a stable manufacturing environment and ensures the well-being and performance of all our employees, as well as creates a safe and engaging workplace where employees feel valued and supported.

Commitment to Enhancing Shareholder Value
We remain fully committed to repaying the debt we incurred to finance the ParkUSA (“Park”) acquisition in 2021 and to fund the current growth of our SPP business, ensuring that we are well positioned to take advantage of future growth opportunities. We are actively evaluating high-quality, Precast-related M&A opportunities that possess strong organic growth and margin potential and are accretive to our earnings. The less cyclical nature of Precast helps balance out the business during periods of variability in the SPP market given the more transactional nature of Precast sales and the associated faster cash conversion cycle. We continue to believe in the strength of the Precast business in the mid- to long-term given the significant level of pent-up demand, specifically for residential housing, an increasing need for infrastructure spending in the U.S., and our growing market position.

In the absence of imminent M&A activity, we may opt to repurchase shares of our common stock opportunistically. Since our Board’s authorization of our share repurchase plan in November 2023, we have repurchased 171,000 shares for $5.1 million through April 30, 2024.

Organic Growth Focus
We made significant progress in 2023 by executing our Precast Product Spread organic growth strategy to maximize our overall efficiencies and production volume with a focus on Park products. Our endeavor to build out capacity utilization at our Texas-based Precast plants in the first quarter of 2024 has resulted in approximately $11.8 million in project bids and $2.5 million of orders booked outside of Texas as of March 31, 2024. Further, producing Park Precast products out of our existing Northwest Pipe locations resulted in 14 projects produced in our Utah-based facilities through the first quarter of 2024 with 16 more currently in the schedule. Once the Park Precast products are successfully established at the Utah locations, we plan to expand our Product Spread strategy to additional geographic locations.

Long-Range View
We expect enhanced performance in both the SPP and Precast businesses in 2024 supported by a significantly improved SPP bidding year and strong Precast order book. Beyond 2024, we remain well positioned to participate in the increasing amount of water infrastructure projects required to support the increasing U.S. population well into the future.

Additionally, we are very proud of the progress we have made with our sustainability initiatives, particularly in developing a strong, skilled and diverse team, which aligns with our corporate values and enhances our ability to build long-term value for all of our stakeholders. In 2023, over 51% of our U.S. workforce was comprised of racial and ethnic minorities, up 12% from 2021. We thank you for your continued support as we strive to build a more sustainable future.

Lastly, I have never been more optimistic about our growth prospects as a company throughout my 13 years at Northwest Pipe. While I have had the opportunity to work with many talented individuals, I can confidently say that the people I work with now are the best group I have ever had the privilege to lead in my 37-year career. Their dedication, innovation, and teamwork have not only driven our success but have also created a supportive and dynamic work environment. Their resilience and commitment, especially in the face of challenges, has been truly inspiring. Together, we are achieving remarkable things and setting the stage for a bright and prosperous future.

Thank you to our valued employees, stockholders, customers, and suppliers for your continued support and confidence in Northwest Pipe Company.

Scott Montross
President and Chief Executive Officer

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