Astec Industries, Inc.

Hello and welcome to the Aztec Industries, Inc. Second Quarter 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 Aztec Second Quarter Earnings Conference Call. My name is Steve Anderson and joining me on today's call are Barry Ruffalo, our Chief Executive Officer, and Becky Weinberg, our Chief Financial Officer. In just a moment, I'll turn the call over to Barry to provide highlights and then Becky will summarize our financial results. Before we begin, I'll remind you that our discussions this morning may contain forward-looking statements that relate to the future performance of the company. These statements are intended to qualify for the safe harbor liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions. Factors that can influence our results are highlighted in today's financial news release and others are contained in our filings with the SEC. As usual, we ask that you familiarize yourself with those factors. In an effort to provide investors with additional information regarding the company's results, the company refers to various GAAP, which are United States Generally Accepted Accounting Principles and non-GAAP financial measures. which management believes provide useful information to investors. These non-GAAP financial measures have no standardized meaning prescribed by US GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies. Management of the company does not intend these items to be considered in isolation or as a substitute for the related GAAP measures. Management of the company uses both GAAP and non-GAAP financial measures to establish internal budgets and targets and to evaluate the company's financial performance against such budgets and targets. You should also note comments made during today's call will refer to non-GAAP results, and a reconciliation of GAAP to non-GAAP results are included in our news release. All related earnings materials are posted on our website at www.asstecindustries.com. including our presentation, which is under the investor relations and presentation tabs. And now, I'll turn the call over to Barry.

Thank you, Steve. Good morning, everyone, and thank you for joining us on the call this morning to discuss our second quarter earnings results. I'll begin by acknowledging our team for another quarter of strong execution against the backdrop of evolving market dynamics, including increasing customer demand, inflationary pressures, and a disruptive supply chain in a tight labor market. I continue to be impressed by their ability and dedication as we provide our customers with superior service and innovative industry-leading technology solutions. Today, I will start by discussing key highlights and drivers of our performance and then provide an update on our operations and supply chain. I will also discuss what we're seeing in terms of demand and current market dynamics before turning the call over to Becky for details on our financial results. Then, we will highlight progress made on our strategic transformation and open the call for Q&A. Turning to slide 4, we had solid second quarter performance with sales up nearly 5% and adjusted gross profit up approximately 9% compared to the second quarter of 2020. The second quarter also embarked another period of record backlog, which was up 140% year-over-year. We were able to achieve these results while addressing many headwinds. We remain focused on mitigating these headwinds through the pricing and talent submissions we have in place. We continue to provide our customers with industry-leading technology solutions to deliver value through our one-asset approach from rock to road. We are focused on delivering differentiated solutions to meet strong and increasing customer demand, and sentiment remains positive through 2021 and into 2022. Third, we are positioned for future growth with our streamlined organization structure and strong balance sheet. Our ability to execute through a variety of economic situations is a testament to the foundation we have built in our focus on driving operational and commercial excellence across the organization. Fourth, our strategic journey to simplify, focus, and grow continues with our transformation program, which now also includes digitizing the company. The primary goals of this program are to reduce complexity, improve productivity, and embed continuous improvement in processes across Aztec. Looking forward, we will leverage the strong foundation we have built under our simplified and focused pillars to further grow our business. A number of organic growth initiatives are underway, and I will share more details about these later in the call. Lastly, we remain focused on executing our strategy of driving a culture of operational excellence and sustainable, profitable growth. This, in turn, will create long-term stakeholder value. We are still in the early years of this transformational journey and have many opportunities ahead of us. Moving on to slide five. As many of you know, during the quarter we launched a rebranding initiative to unify our organization and make it easier for customers and dealers to do business with Aztec. Our rebrand is more than just a look. It enables us to build strength together under one common name and purpose of being Built to Connect. Our rebranding initiative is in line with a strategy to simplify, focus, and grow Aztec as we service our customers more effectively and provide them with value in a more sustainable way. Our Aztec rebranding initiative coincides with our One Aztec business model, which we show on slide 6. Our business model is a competitive advantage, enabling us to provide a strong value proposition, serving our customers from rock to road. We are optimizing revenues within our footprint, leveraging global capacity to reduce lead times, and maintain flexible operations to adapt to changes in demand. We actively manage our supply chain for constraints and volatility, and have ongoing conversations with our suppliers to manage long-term risks. Despite these efforts, we are not immune to disruptions caused by the recent surge in global demand, and we continue to identify multiple supply sources in anticipation of further tightness going forward. Moving on to slide seven, I will discuss some of the key industry dynamics we are seeing impacting our business and what we are hearing from our customers. As the strengthening economy indicates, we continue to be in an upcycle in North America. Thank you for joining us today. While an infrastructure bill will provide a tailwind to our business, as I've mentioned before, we are not a company that's waiting around for a bill to be passed. We see significant near-term demand for our products, and we have initiatives in place to drive organic and inorganic growth. As expected, labor shortages and inflationary pressures persisted during the second quarter. Though challenging, we have made progress on our labor front and have enacted numerous initiatives to retain and attract employees. Our team is core to who we are here at Aztec, and we know the investments we make in our people will pay dividends to our organization and our stakeholders. Regarding inflation, we continue to see higher commodity costs, particularly in steel and logistics. To mitigate the impact of steel inflation, we continue to drive our operational access programs and strategically pass on price increases when necessary. Turning to slide eight, here we highlight some of our key environmental, social, and governance initiatives. ESG continues to have prominence across ad tech, beginning at the top with continued support from our board of directors. While we are still in the early days of our journey, I'm excited and proud of the progress we've made to date. In summary, during the second quarter, we continue to see strong customer demand along with the headwinds of inflation and tight labor markets. We have taken actions to mitigate the headwinds, which we expect to persist through 2021. Thank you. Thank you. Thank you.