Astec Industries, Inc.

Good morning. My name is Dennis and I will be your conference operator today. At this time, I would like to welcome everyone to the Aztec second quarter 2022 earnings 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, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Steve Anderson, Senior Vice President of Investor Relations. Please go ahead.

Thank you, and welcome to the Aztec Second Quarter 2022 Earnings Conference Call. Joining me on today's call are Barry Ruffalo, Chief Executive Officer, and Becky Weinberg, Chief Financial Officer. In just a moment, I'll turn the call over to Barry to provide his comments, and then Becky will summarize our financial results. Before we begin, I'll remind you that our discussion this morning may contain forward-looking statements that relate to the future performance of the company, and 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 could 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 U.S. GAAP, which are 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 U.S. 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 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. A reconciliation of GAAP to non-GAAP results are included in our news release and appendix of our slide deck. All related earnings materials are posted on our website at www.aztechindustries.com, including our presentations, which is under the Investor Relations Presentations tabs. And now, I'll turn the call over to Barry.

Thank you, Steve. Good morning, everyone, and thank you for joining us. I will begin with a brief overview of the quarter, followed by highlights of progress made on our continued strategic evolution and key messages from the quarter. I will then share what we are seeing in terms of demand and current market dynamics. Then Becky will share details on our financial results and capital employment, and we will then open the call for Q&A. We are a well-diversified industrial company, as shown on slide four. with two segments providing valued equipment, parts, and digital solutions to our customers in infrastructure and materials markets. As a leader in our space, we have significant coverage across the Rock the Road value chain, allowing us to provide a wide range of our customers' needs. I began with a brief overview of our business because I believe it is helpful backdrop to understand the strong demand we are seeing as described in our key messages on slide five. Second quarter, Revenue grew nearly 15% year-over-year with strong growth across both of our segments as robust and market demand of our products and services continued. Customer sentiment and economic drivers in the markets we serve generally remain positive. Strong market demand has resulted in record backlog positions. Despite strong sales, I'm disappointed we are not able to deliver better profitability. Second quarter financial results were negatively impacted by several factors that reduced our margins. Among them were continued inflation and manufacturing inefficiencies associated with industry-wide supply chain and logistics constraints and the temporary absorption of expenses in order to support customer needs. Based on our demand outlook for the rest of 2022 and into 2023, we believe the long-term benefit of taking care of our customers outweighs these short-term costs, and we are confident the investments we are making will generate a positive return. We continue to make progress in battling supply chain challenges, but the fight continues. At the point when macro headwinds normalize, our actions to align costs with revenue and employ our one asset operating model will ensure we are truly adding value to our shareholders. Despite financial results that were below our expectations, we maintained a strong balance sheet that remains able to support our growth initiatives and facilitate investments in operational excellence. In addition, our balance sheet can support our business in times of potential economic recession. Good end market demand, a strong balance sheet, and a company united around one Aztec operating model positions our business to pursue profitable growth and drive long-term stakeholder value, guided by our simplified focus growth strategy. This focus provides a stable framework to address the near-term macro-driven headwinds we continue to face. Turning to slide six, I would like to review current business dynamics and how Aztec is responding. In response to industry-wide strong demand, we are implementing strategic actions to expand capacity and increase throughput. One action is capital investment. This quarter, CapEx is $7 million, bringing our total year to date CapEx to $19 million. As a reminder, the full year 2021 capital spend was $20 million. The incremental spend in 2022 is driven by automation and additional cost-sufficient capacity. In addition to capital investments, we are successfully hiring and training employees to position our workforce for higher levels of production. Unfortunately, This is creating a near-term headwind as we work through supply chain challenges. We believe, however, these will pay off longer term as we deliver solutions to our customers. It's worth noting that today's strong demand environment is not fully impacted by the Federal Highway Bill, and we are not relying solely on this for our optimistic outlook. We do believe this will be an added benefit and currently expected to begin seeing demand from funded projects beginning in 2023. Disruptions in supply chain and logistics continue to be a source of focus for us as we were impacted during the second quarter. Our one Aztec operating model and focus on operational excellence are helping us mitigate these challenges. We expect cost inflation to impact commodity purchase and logistics expenses for the rest of 2022. Our focus on pricing is better positioning us to offset inflation. And we are successful in leveraging our pricing power to pass through higher costs and capture value we offer to customers. We expect unrealized price and inner backlog to be recognized in the second half of the year. I would also like to note we continue to execute our strategy to simplify, focus, and grow that was initiated in 2019. The company is transitioning from a decentralized business model to a one aspect approach where systems and processes are consistent across the company. This approach leverages the scale of the company, better meets the needs of our customers, and creates better career opportunities for our employees. The company has invested to build capabilities in product management, engineering and operations, and sales while maintaining resources in the business to ensure continued focus and support to serve our customers. You can see our growing and record backlog on slide 7. This is a true testament to the strength of our end markets and our customers' desire for our solutions. However, it is also challenging that we want to ensure our customers are satisfied, which means we are striving to convert these orders into deliveries. I've already spoken about a number of these initiatives, including CapEx investments for facility expansion and automation and additional headcount. We're also beefing up our manufacturing engineering group to allocate project management skills that help ensure we are effectively and efficiently solving the most pressing needs. In addition, cross-site manufacturing better utilizes our capacity. The one Aztec business model shown on slide eight is a guiding framework for our company and enables us to better address industry headwinds. This helps focus our efforts and unites us with our core values. Though challenges are present, I am confident the one asset business model is the key to moving forward and instilling a true performance culture. Building on the model, we follow our SFG's growth strategy on slide nine. Simplify the business, focus on excellence in everything that we do, and grow across the Rockford Road value chain. This is an ongoing process for us, and we are always striving to improve. I am proud of the progress we have made and am confident that the strategy is the right one for us. By staying focused on critical objectives and effectively managing these things within our control, I am confident we are heading in the right direction and I remain optimistic that 2022 will be a positive year for Aztec, our customers, and our shareholders. With that, I will now turn the call over to Becky to discuss her detailed financial results.