Astec Industries, Inc.

Good morning. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Aztec fourth quarter and full year 2021 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star 1. Thank you. Steve Anderson, Senior Vice President of Administration and Investor Relations. You may begin your conference.

Thank you, and welcome to the Aztec Fourth Quarter 2021 Earnings Conference Call. Joining me on today's call are Barry Ruffalo, Chief Executive Officer, and Becky Weinberg, Chief Financial Officer. Before we begin, I'd like to let you know that our news release and presentation slides are posted for your convenience on our website at www.aztechindustries.com under the Investor Relations tab. In just a moment, I'll turn the call over to Barry to provide his commentary, and then Becky will summarize our financial results. At this point, I would like to remind you that our discussion this morning may contain forward-looking statements that relate to the future performance of the company. Our news release and slide two of our presentation provide additional details. Please also note we will be referring to both GAAP and non-GAAP information, which we believe will be useful in assessing the company's financial results. And now, I will turn the call over to Barry.

Thank you, Steve. Good morning, everyone, and thank you for joining us. I will begin by discussing key highlights from the quarter and provide an update on actions we are taking to drive operational and commercial excellence. I will also share more detail on what we are 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 continued strategic evolution and open the call for Q&A. Turning to slide four, the ad tech team continued to see top-line growth during the quarter driven by strong market demand as customer sentiment remains positive. Fourth quarter sales increased 12.1% compared to last year and we grew backlog to record levels for the fifth consecutive quarter, up more than double from the end of 2020. I continue to be encouraged by conversations with customers as they are seeing robust demand and are eager to receive our industry-leading solutions. Second, As we announced in the release of preliminary results on February 7th, bottom line performance in the fourth quarter was negatively impacted by industry-wide supply chain and logistics constraints and pandemic-related labor restrictions. While I'm disappointed in the overall bottom line result during the quarter, I'm proud of our team's continued discipline around operational excellence and adaptability as we executed our initiatives to combat these headwinds. That being said, These challenges have continued into the early part of the first quarter of 2022. We do continue, however, to realize benefits from several strategic initiatives to mitigate these industry headwinds. We have been increasing prices to offset inflation, proactively addressing supply chain disruptions, and onboarding new talent. Third, we remain laser-focused on operational and commercial excellence to provide our customers with exceptional value, superior service, and innovative industry-leading solutions. The positive trajectory we have achieved since implementation of our transformation strategy has positioned our business well for future growth as we continue to build on our strong foundation. I am confident in our team's ability to execute over the long term despite near-term challenges that we may face. Fourth, we remain positioned to execute and grow with a strong balance sheet and continue to focus on operational excellence. enabling us to continue to operate in a challenging macro environment, invest in growth, and return cash to shareholders with consistent practice of paying dividends. Lastly, our business is well-positioned for future profitable growth and to drive long-term stakeholder value guided by the execution of our simplified focus growth strategy. This focus provides us with a stable framework to address the near-term macro headwinds we are facing. Turning to slide five. Our one Aztec business model continues to serve as our North Star. This framework gives our team the tools to navigate industry headwinds while continuing to enable us to win across the rock-the-road value chain. We are taking actions to improve operations and meet elevated customer demand, such as hiring and training new employees and leveraging our footprint to reduce lead times, optimize revenue and managing costs. We continue driving operational excellence initiatives focused on identifying and validating multiple supply sources to mitigate supply and logistics disruptions. As we saw during the fourth quarter, macro challenges across our industry did not abate, but our discipline and initiatives lessened their impact, and we expect our actions will help mitigate challenges going forward. I am confident our continued focus on the one asset model will serve us well in the coming year and beyond. Now in slide six. I will review some of the key industry dynamics impacting our business and initiatives we have in place to capture opportunities and address industry trends. As I mentioned in my opening remarks, we continue to see strong demand for our products across both our infrastructure solutions and materials solutions businesses. Recent conversations with customers support a positive sales outlook well into 2022, with orders now being placed in 2023. Our record backlog reflects continued strong demand for our solutions, and we have initiatives in place to expand capacity. In addition to the current high levels of demand, our customers continue to express optimism that future funding from U.S. infrastructure spending will drive additional growth, and we continue to view the Federal Highway Bill as a long-term tailwind for our business. We see significant near-term demand for our products. and we have a strategy in place to augment those market tailwinds with incremental organic and inorganic growth initiatives moving forward. Labor shortages continue to challenge industry, and the impact of COVID-19 and the Omicron variant negatively impacted efficiencies. We believe pandemic-related challenges could persist in the near term, but are encouraged by improving trends being experienced now versus in early January. Our efforts to hire and retain key talent have been successful in growing the Aztec team, with height count up 14.2% year-over-year, which I will discuss further in a moment. Supply chain and logistics disruptions were an increasing concern throughout 2021, and the intensity we observed in the fourth quarter was beyond levels we'd seen earlier in the year. We continue to deploy operational excellence initiatives and leverage our one Aztec business model to increase throughput and mitigate the impact of these challenges. We are investing capital for equipment to deliver products more effectively and exploring the expansion of our footprint into low-cost territories. In addition, as we evaluate attractive acquisitions, we would expect these to provide additional capability as well as capacity, improving our ability to serve elevated demand. Finally, we anticipate higher commodity, transportation, and logistics costs to continue across the industry through the first half of 2022. We are a price leader in the markets we serve and will implement further price increases as needed to offset higher inflationary costs. On slide seven, we provide an overview of the actions we have taken to address labor shortages. We have four key elements to hire and retain talent. They include targeted recruitment, improved engagement and retention practices, improved attraction, and the use of both internal and external recruiting resources. As a result of these actions, we increased headcount more than 14% in 2021. We will remain committed to these plans into 2022 as we continue to need more talent to serve our large and growing backlog. Our people are the key to our success, and our ability to maintain our talented, dedicated workforce is vital to enable us to serve our customers and meet their growing demand. On slide 8, we provide more detail on our historical backlog as we achieved our fifth consecutive quarter record backlog, more than doubling the levels seen at the end of 2020. We have confidence in the sustainability of our backlog, as experience tells us that orders in backlog are rarely canceled. Our current expectations are that many of these orders will be converted to sales within approximately three quarters. We are implementing several initiatives to increase capacity to meet higher demand, such as increasing headcount in manufacturing facilities, adding manufacturing engineers to increase project management capability, investing in capital to expand facility output, leveraging cross-site manufacturing where possible, and continue our journey of further automation. We believe these actions will accelerate the conversion of our backlog to sales and better enable us to deliver end products to our customers at the desired time. Supply chain and logistics challenges may impact our near-term potential. However, the actions we are taking will pay dividends for years to come. Next on slide nine, I would like to update you on our ESG journey by highlighting areas of focus in 2022. During the next year, we will invest in resources to accelerate sustainability initiatives. We're establishing KPI tracking and assessments for greenhouse gas emissions, utility consumption, and other material factors. Lifecycle assessments on major product categories will further highlight the positive contributions and economic benefits of our product offering. We're also working on our ESG digital footprint and a sustainable operations guideline playbook for all Aztec sites. Along with these investments and resources, we will continue to advance social initiatives with a focus on employee safety and welfare in addition to diversity, equity, and inclusion, both internally and in our communities. Lastly, we will maintain sound governance practices through board oversight, cybersecurity protection, and audit discipline. As our ESG journey continues to mature and evolve, I remain proud of the progress we have made and excited about the strong foundation we are establishing for our company's future. With that, I will now turn the call over to Becky to discuss our detailed financial results.