Astec Industries (ASTE) 6 Nov 242024 Q3 Earnings call transcript

Hello and welcome to the Astec Industries Third Quarter 2024 Earnings Call.

As a reminder, this conference call is being recorded. It is my pleasure to introduce your host, Steve Anderson, Senior Vice President of Administration and Investor Relations. Mr. Anderson, you may begin.

Thank you and welcome to the Astec Third Quarter 2024 Earnings Conference Call.

Joining me on today's call are President and Chief Executive Officer, Jaco van der Merwe; our newly appointed Chief Financial Officer, Brian Harris; and Vice President of Finance for Infrastructure Solutions, Heinrich Jonker. I'll and call will then financial moment, to to summarize a results. comments provide Brian just turn over the Jaco our In and Heinrich

may that begin, risks, by future the and the liability such qualify and statements guarantees the statements are SEC. and Litigation release discussion are that in remind for subject the we these of statements influence you assumptions. Private and intended uncertainties performance Before this relate Securities I'll performance morning established filings are contained contain company our can highlighted certain Act. Any Factors Reform to in are the forward-looking of to others that harbor not our results are with to future earnings our safe today's

be our Investor at of deck. related are Relations All appendix tabs. the to U.S. a slide our GAAP with management in measures. A is ask included The useful prescribed are no Presentation including www.astecindustries.com, website generally As our other that factors. to earnings U.S. companies. company non-GAAP information to and GAAP presentation, to is yourself for and believes under of in measures investors. These which the intend meaning these reconciliation principles familiarize you be similar financial to on the to related and therefore, release our GAAP, those the non-GAAP various GAAP earnings have does not items we materials isolation which measures, as of calculation for comparable Management financial standardized provide accepted which posted or refers are, unlikely and considered company the by substitute U.S. non-GAAP results usual, measures of accounting U.S.

Jaco. turn will over call I Now to the

Thank you, for and us. Good you Steve. thank joining everyone, morning,

new would ago. like Harris, a Financial us know, you joined I who, as begin, weeks Brian welcome as Chief to Astec's Officer I Before few

journey. I Solutions Finance sales. Gross for year-over-year the third less stable consolidated equipment to focused quarter position highlights the that, company line with and mixed our our on basis, in strengthen key the margin against basis continue to forward delivered results. In generally Infrastructure to slightly of was million summarized X. due our foundation as segment. With reductions working Heinrich We President On to held turn year. parts having growth. significant to our in will $XXX.X the as will we Financial of of important words of several to to few Officer companies. He benefiting Officer forward on the XX his leadership Interim Most to brings Summit Brian public Financial financial it start over himself with spent in I the leading We would like and recently, at Chief at experience, a results an about Chief to say board. for take a Brian Heinrich have to the thrilled leadership needed Astec's asphalt and executing operational net look strategy Slide he opportunity on look was had we experience. I initiatives producer roles and in Materials, in stepping section. hand and we are him remain across third as from sales, which concrete a aggregates, with on quarter, providing also thank Vice time in we years and prior and a this

generate continued million to and projects. in influence in asphalt conversions. rates flow. In plant for cash construction segment, the generated slower continue from interest Dealer inventory Solutions The a concrete Material infrastructure the free and quarter, healthy product $XX.X benefited of which Solutions, runway Infrastructure deliveries. market to were construction strong long-term the supported resulting highway by levels is federal we market, for demand positive flow having Importantly, infrastructure cash we

September previously, stated Reserve's levels XX X news interest points do moderate reduction rate and to the in customers. our and we welcome of inventory Federal basis the will X over believe was quarters next to As dealers

to We million. at turning the $XXX quarter backlog. Finally, ended

we backlog bit Solutions gave in between Solutions of noted, segments, Slide divergence stable X, with moderating and Infrastructure map. a X saw I've road our relatively trend our on showing trends. On a evidencing As update an Material we a strategic

strategic and being core continuing As beyond. to introduced on recall, will year provide pillars: our laser-focused on fostering organization's customers; our X of innovations the road the remainder we as enabled map we for this combination and you XXXX new strategic focus engaged this employees; framework the align of and industry-changing is earlier empowered,

XXXX are evident. and see was business goals The our survey and for drive to past X.X will to made positive years alignment ability customers shareholders. the our trends positive showed We over results our our to our and changes enhance value objectives employee pleased execute Voice OneASTEC of for our on

to X. now Turning Slide

our Let current our and Solutions Infrastructure me segments. Solutions share Materials observations for some business dynamics on

high challenges, states the outlook domestic and building invest. is Act various Investment to The to expected experienced sector at quarter overall continue continue the While a level encouraging. are for Jobs Infrastructure road disbursements

record for state For infrastructure. example, billion Texas XX-year Governor transportation investment Abbott $XXX announced a

by Federal In repair Carolina, Hurricane Helene. South Tennessee Administration million released and addition, in Carolina the Highway to recently roads $XXX North damaged

Solutions our for dealer. we the segment. during month Solutions also segment record are the dealer the products parts should concrete road Material through that are moving paving bookings Material factors and by encouraged are in We equipment the by note interest same of That network October. Many sold experiences asphalt building of strong production forestry expect continued for rate our I our forward. a said, Infrastructure the distribution positive felt Solutions also pressures that Infrastructure demand for Solutions and segment our in

as you base materials for are ingredients for I'm used and sure know, and key As roads are aggregates concrete. asphalt

headwind, our debt destocking relieve users. for and interest dealer requirements a to Although lower end promised rates continues near-term servicing present dealers to

both of capacity which helped site, we Our are model among to OneASTEC workforce and business as absorption has able share beneficial been for also retention. have facility

bookings Solutions backlog for As our were strong. Slide with the of October shows X which month parts the levels, moderate. to continue Infrastructure segment,

the year noted the has channel Solutions been X, Slide I rates. On stability higher earlier, challenged orders trends while by and underscore interest dealer Solutions, our was Material the million solid $XX inventory sales. prior higher slightly Infrastructure an of in short than future the sequentially, As quarter encouraged excess implied the term in million. backlog reduction of $XXX Material level relative of was in Material $XXX Solutions. Despite orders third decline Year-over-year implied Solutions quoting offset million growth a bookings $XX in are for overall of we by dealer Solutions by and Infrastructure partially million

pillar system heating pavement on Recycle Central technology. significantly energy is new product minimize using The the them CCPR is map cold both system. proud shown for of and as materials that ReMix at is to A progress strategic our CCPR and XX-year virgin new the shared, industry-changing a approach leader and on our previously environmental need element Cold our am ambient It As reclaimed has road includes I fundamental Astec Plant XX. Through of mix. great a in Astec our impact. By sustainable the reducing which by of for cost aggregate a or temperatures, construction system our needed mixing development the company. recognized Slide example this a innovation, been asphalt recycling innovation minimizes an is road history, our

the with in positive running prototypes multiple field have We results.

of products, of our work to is important critical offerings. responsible about live. this excited customers. Slide our solution pillars the providing to also and XX are which showcases We in a be our of we the We strive communities environmentally sustainability component which

example production footprint biomass of the carbon are XXXXB organic committed the and on also this waste enables of customers recycling alternative wood our supporting our which journeys. A decreasing good to fuels. sustainability grinder, supports We high-volume operations our while of is own of their

our planner, from to RX-XXX double-barrel to asphalt minimize cold our Stage sustainable These that products while which is asphalt and content. emissions a concludes the a roads. And engine remarks. commitment to my of reclaiming environment. That XHR example more produces existing XX% materials many materials and utilizes up evidence Another facilitating reuse our innovative products continually others progress towards X with develop drive recycled finally,

it me now Brian over himself. to let introduce to turn So Brian?

encouraged Astec pivotal strong a for a Astec years, long the Jaco. the navigated join this confident industry innovative high-quality, through foundation It's for particularly I've have you, and here very the is excited and of caliber I'm pleasure in have thus everything more a at and Astec and the be admired Having and to opportunity seen its There value by have respected XX stage. Jaco in and over products to of creation its ahead. do, and I team the I'm the growth challenging but team. built part business. high for work Thank am last I be to to far the time been people.

results over new let you this into QX speaking settle review Year. With the in about forward that, New to to fiscal Heinrich to and I continue I it turn to As results. XXXX QX role, with look me

Thank Diving to Brian morning, XX. and the decreased numbers million you, on good X.X% Slide $XXX.X the sales year-over-year. into quarter Net everyone. in

increased demand decrease sales As XX% approximately Material sales EBITDA Material and concrete EBITDA and XX%. X.X%. continue Overall, points. increased year-over-year, net equipment XXX Solutions consolidated Solutions down comprising remaining for domestic strong increased with of decreased net to were Jaco segment, sales X.X%. By increased while XX% international the while for X.X% sales region, sales international X% see By basis adjusted for asphalt we said net products. earlier, a plant Solutions year-over-year, Infrastructure domestic sales accounted margin Adjusted and

of positive $X.XX and the by As a costs, lower XXXX settlement and excludes SG&A quarter largely bad per $X.XX and costs in the and margins pricing, in the to third other favorable third in adjusted of from to EPS slide, Adjusted compared year's the net quarter, increased a last prior EBITDA due share $X.XX legal lower was mix manufacturing in earnings offset initially year. inefficiencies. Adjusted recorded seen on quarter XXXX. costs transformation volume, debt loss third $X.XX employee-related

a million timing Solutions mix rate EBITDA Slide believe tax Net $XXX offset a manufacturing by to part segment. customer sales. Based margin XXX inefficiencies. not the SG&A a result of adjusted million, a points sales the I'll million a and $X.X to operating Infrastructure increased increased operating mainly XX.X%. On volume, positive increase from basis downward of in on lower decline and XX.X% XX, and net segment offset X.X%, million equipment to costs, was adjusted discuss partly X.X% that in improved decline sales $X.X and is Our Segment to pricing we which feedback, effective was by partly adjusted $XX.X result due was EBITDA results trend.

X.X%. Segment to increased operating $XX.X to as equipment by product longer segment as XX. with EBITDA conversions. sales, Slide due increased increased the charge million, by XXX which $XXX.X decreased contractors XX.X%. legal $X to offset basis partly in capacity initial X.X% attributable as to decline finance adjusted million driven was XX.X% EBITDA This operating points from to to prior a million were third Materials well part net million $X.X quarter. the Moving constraints continued sales lower dealers year and Solutions benefit domestic sales, and stronger This which settlement margin primarily legal adjusted to compared was a

cost our adjusted EBITDA the sharing the capacity our help and within continued quarter which Infrastructure in Solutions as demand well. facility reduction to We meet segment, efforts to contributed

adjusted our XX. EBITDA Slide to bridge Turning on

of For available in we you and of inefficiencies experienced of see pricing the quarter other inflation, liquidity can and Slide costs. On million, total a equivalents and from delivered million. the we cash realized quarter, We ended $XXX.X volume, million with $X.X manufacturing credit EBITDA $XXX.X negative cash the XX, and available benefit million. impacts period of adjusted and $XX.X mix from increase

were quarter. for Our third $XX.X million the cash of activities a operating source

our and ample balance $XX.X quarter liquidity in capital Our was to the and inorganic the to I turn be our while will free continuing commercial priorities and will explore overview strong operational opportunities. That sheet. million growth over concludes Jaco. have we excellence and a to back flow cash to allocation call Driving continue continue financial

you, Thank Heinrich.

robust. our to made underlying noted XX, the and on Slide in of key the but the progress important continue As quarter, on business through a environment work fundamentals initiatives we third remain challenging market

remains our through beginning deliveries at concrete demand strong and Infrastructure look X we plant asphalt for segments, XXXX. As with Solutions healthy of the

rental We Solutions. are in seeing activity and strong quoting dealer Material

levels inventory However, carrying there ample costs. interest continue be to rate dealer near-term headwinds from and

and optimize have balance includes sites action select demand taken which We to to footprint, at manufacturing cross-site capacity. our

focused operational support We improvement. on making margin and action efficiencies, pricing are taking cost enhancements to driving

to Astec are as right that We are highlights drive Slide position we the confident to taking markets on with investment growth sustainable steps XX. improve. Concluding

year. they Astec have customers brands trusted is of into a us for source Many solutions and considerable recognized our stretching globally high-quality next told backlog of have customers. our

excellence need operational provide continue the our position products will efforts need them. Our they customers to with they us when to

and few strategically pipeline, multiyear growth of drivers, margins total international and interstates opportunities be XX% parts of has QX, criteria. Based XX.X%. financial range at expect a flat XX% are previously our several year. product order parts our future that broadly opportunities our prior expansion to revenue sales revenue, XX% for we exciting currently compared expected new our funding recurring aligned growth are meet and business of activity sales current lower end result to year in and business to the on in to and markets and stable service of mix that to highways, which and are represents in state in gross QX full The Our equipment, the provided a increased federal inorganic current and growing

quarterly million to feel the SG&A the year $XX are CapEx be million. to to $XX for in be of will $XX the in million to range. range expected $XX continue full million We

consistency We potential working the questions. that, to full to the operator, happy are Astec are realize diligently excited future. With take are of and build to we about

Baird. of Instructions] from Mirc Dobre of [Operator the first your question And comes line

attracted It's Brian, any Astec. had. maybe you, morning. thoughts what again, this more with Joe welcome. starting on you a initial Grabowski talk bit maybe more a at Maybe for little opportunity Mirc little And to And you've the on about

have talked approach in an from for journey participation Yes. They've really said as journey shareholders. Jaco growth have I strategic It's this appreciate saw creation the there's and their Joe. the of today. drivers the professional Thanks, months. we about the remarks, a been opportunity the the for transformation my just some I to fantastic this XX business. value for as that question deep expertise for business map here, Astec. in road working products management of will infrastructure to a several built past lot opening opportunities. and funding new place, and team foundation. And revenue great got call be parts the Jaco next a there for already product and growth, the tremendous Thanks growth international pipeline. We've their years, knowledge, on in I everybody's team for been industry which on

Astec So and really delighted it's great time a team. be at just to I'm the of be part to

be last from comparison? just there working million a quarter, in there saying litigation question welcome. it a impact Again, you. to forward was Great. Look favorable clarification. with I know legal And $X.X Was a a next my quarter? EBITDA this settlement third favorable would Or a just to charge. third are we was

I can start maybe Joe. that, with

we additional million. we're quarter, focusing that interest anticipated that that that. last yes, outcome of first third I So driving to things in on. But $X.X since the booked a we've system consistency of and those want cases really make these out and all, we historic that here And one getting we are things of time, is accrued our year, for then legal is overall just like comment an expenses

released that case QX year when $X connected was case. this there was of So million about that to during settled, the

Got on Okay. moving to And then maybe Material Solutions. it.

about the next last that has dealer talking do remarks, much destocking playing and destocking the And sales you few been I out Maybe quarters. been kind of it know quarters? You've impacting how see dealer over you mentioned few for in your but destocking prepared orders? how

there. momentum some We've Yes. positive seen

saw dealer about reduction we in quarter-over-quarter, Just inventory. a X% X%,

speak to dealers So our they doing the continuously destocking. We frequently.

in strong weeks quite And multiple Just about a positive our ago, quoting they're activity. couple key next see had year. of We of we dealers place.

least goods a continue, inventory. destocking quarters, bit for momentum will in we've a of positive still finished their little it like at seen of have we couple efforts. We So said, but

to clear looking inventory. that. equipment. have through we They business, it's Quoting But our our their good. to running our work have work at So parts are is through very that customers activity

we're So based on dealers, from the feedback Joe. get next about cautiously optimistic we our year

last Great. And then a this. on just further question, maybe expansion

that into in -- that Solutions. orders Material way shift Or you it 'XX? of quoting half the Do the maybe to is first all does fourth it mentioned in activity positive think quarter? You translates the

Yes.

their a agreements here of quite customers the in fourth rental bit quarter. historically, have So converted

if are we historical about fourth quarter. we're we what in seeing trends, at So positive the look

is and purely I selling systems think also really it we're the or dependent rental team little X last been on out over seeing mobile that one X of And refocusing momentum. the quarters, think conversions. not other the the that's equipment. that gaining I business things on we've larger will balance bit just And a

comes question line of Steve Ferazani from of And your next Sidoti. the

taking the from are reduce on some capacity. I Or how wanted cross-sector the going ]. to you further demand like talk a of want that pickup efforts about really standpoint? side efficiencies the to you that It manufacturing Can ask [ to about require to a use you that? MS is some about I ask -- sounds with ongoing eliminate

I work actually I'm Yes. with you, No, good Stephen. will with our done have question, teams company-wide. be very honest happy the

we remarks, between done moving X as efficiencies teams of X from sites production manufacturing between facilities the good are have or a well. Most job working really that. in and through the or under-absorption the and As mentioned prepared groups comes teams this

do because next point next for see of And expect an the we from expect year. level during get year. want that we We is output out is know positive balance once what We we about to the to that the how and very business. of reductions are output cost our the to view retain it people there to side challenge we sales be with we the us

That's Okay. helpful.

for guiding -- for numbers obviously, your was flow but half strong the Typically, cash provided outlook you the quarter. of this you're some a Given is, XXXX, second

Yes.

cash XQ. numbers to provided above think -- get you on or a you CapEx basis that can this higher close the breakeven a year? on you flow Do based quarter in

positive you are on full a quarter, expecting basis. we year for flow. Yes, Heinrich, cash can the maybe help

very Jaco. flow here on Yes, year on generation. we cash a focus I in full for basis, to us, QX mean, continue much

As quarter well. mentioned, a from Jaco typically for is perspective strong us, as a cash QX flow

receivable happen Now -- outflow will for during the But also as however, during hard about inventory that that some development out and will yes, well on cash do and additional down. settled. capital cash Q. We fourth push continue quarter the flow very legal the driving mentioned case have that will we we to working during focus us. we QX case on That

That Great. it will year. down be last your obviously, being said, well where was from CapEx

next budgeting at close start you you're stay long for still I'm levels. year, a you getting As CapEx maintenance level in How assuming and be to can of [indiscernible]? position this

Yes. No, good question, Steve.

believe So still good our that investing really a use is in of cash. own operations we

couple Over our comes opportunities the processes. to some operational last further us we've that manufacturing with And a of built for years, and team. really improve strong automate great

in So over another CapEx in to manufacturing strong next and year India we in there will communicated invest some capacity in We've year. future. the establishing has market the efforts been growing significantly. also probably our operations India. That And manufacturing be will

So year. this say I will equal next be range to year for will the probably

That's helpful. Okay.

and talked asphalt demand concrete You plant obviously, healthy about, has been very throughout.

into expecting couple after demand over years, strong into talked talk -- moderating last about demand pace about you of demand Are orders some it XXXX? you You such strong can now? orders see the XXXX. growth But to running would you expect early of such

things couple a of Yes. so Yes, here.

our they basis, we meet that the strong with to have activity. opportunity mentioned have order earlier, frequent We've quoting I customers seen backlogs. strong on a when I and As do

new a We products market. the have bit getting that's into of quite

next year the Steve. we expectations give our cautious early of I QX about when next a gives things a we're we'll idea year, for and there's better So year. market obviously, in us full the But process talk our lot early of for optimism that think

queue. closing in for questions further the to like call remarks. Steve back no are I'd to There hand the Anderson

All and in you, conference Kathleen. your your Thank We interest call appreciate for on right. Astec. you participation our thank

section will of call website and an X XX XX, The available be conference call will of XXXX, today's will transcript recorded. be has Investor Relations this A been replay indicates, days. conference the the under Astec available through Industries within archived be As release available next news the webcast the days. November for

of the news All in is that information we contained this release morning. distributed

with you later Happy said, we concludes our if call. as of So connect you on. to any have questions this

day. thank all. Have good So you a

that joining. Thank gentlemen, today's all for and concludes Ladies call. you

disconnect. now may You