Astec Industries, Inc.

Hello and welcome to Aztec Industries First Quarters 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 good morning, everyone. Joining me on today's call are our President and Chief Executive Officer, Yaku Fundamurba, and our Interim Chief Financial Officer, Heinrich Janka. In just a moment, I'll turn the call over to Jaco to provide comments, and then Heinrich 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 earnings 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 company results, We refer to various 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 are therefore unlikely to be comparable to the calculation of similar measures for other companies. Management of a company does not intend these items to be considered in isolation or as a substitute for the related US GAAP measures. A reconciliation of U.S. GAAP to non-GAAP results is included in our earnings release in the appendix of our slide deck. All related earnings materials are posted on our website at www.aztechindustries.com, including our presentation, which is under the Investor Relations and Presentations tabs. So now, I'll turn the call over to Jaco. Thank you, Steve.

Before I start with our review of the quarter, I'd like to take a moment to welcome Heinrich as our interim CFO. Since joining Aztec in 2021, he has been an integral leader on our financial team, most recently serving as the VP of Finance for our infrastructure solutions segment. Heinrich has approximately 20 years of public company experience, deep financial acumen, and he knows our business well. All of this has helped make for a seamless transition to interim CFO. Although I am certainly underplaying the hard work and long hours he and the team have put in since he stepped into the role. Heinrich, thanks for your commitment to ASTEC and for joining me on today's call. With that, I would like to begin my remarks with our first quarter overview, summarized on slide four. As our results indicate, we experienced a more challenging first quarter than anticipated, mainly due to market headwinds in our material solution segment. These headwinds impacted our reported results, offsetting what was a relatively solid quarter for our infrastructure solution segment. We are taking action to overcome these headwinds through focused execution of our strategy, and targeted cost reduction initiatives in material solutions, which we will return to later in the call. We continue to see opportunities ahead as we collaborate with our customers, deliver innovative new products to the market, and develop best-in-class aftermarket practices in both infrastructure and material solutions. Driving sustainable, profitable growth and margin expansions remains our North Star, and we have the right tools and team on hand to deliver on those objectives. Moving to our first quarter overview, we delivered $309.2 million in net sales and gross margin of 24.9%, with consolidated implied orders up 2.4% sequentially. While we experienced a supply chain delay from a specific supplier in our infrastructure solutions group, underlying results were positive and implied orders were up 9.3% from the prior quarter. Material solutions results were impacted by lower convergence from rental to buy and finance capacity constraints stemming from the current interest rate environment. With this, we saw implied orders and material solutions decrease 11% sequentially. Heinrich will share more on the specifics in a few minutes. But we do anticipate these headwinds to lessen as we move through 2024. And we are encouraged to see continued strong demand for asphalt and concrete plants. Our backlog levels approach the historic range at 559.8 million. due to improved lead times on most of our product lines. This will allow us to continue to meet the demand for our products moving forward and increase our sales. Another highlight of the quarter, our time at the World of Asphalt AG1 show and conference was incredibly fruitful, with strong customer engagement and a 38% increase in visitors over the previous record in 2022. Our new products displayed were very well received. We left with multiple plant leads, which we believe attest to a positive long-term mindset among customers. Now turning to slide five. I want to take a moment to discuss our new strategic framework that will drive our commitment to deliver sustainable value creation. As you know, for the last several years, we have been working under a strategic framework that we called simplify, focus, and grow. Operating under this framework, we made significant strides to streamline our organizational structure and operations, improve operational excellence in areas such as quality performance, aftermarket excellence, inventory management, and position the company for profitable growth. While elements of this strategy remain evergreen, for example, our focus on operational excellence and profitable growth, we ended fiscal 2023 with our key initiatives under the simplified focus and growth framework largely completed. As such, we are moving forward in 2024 with a new strategic roadmap supported by three core pillars, empowered, enabled, and engaged employees, customer-focused, and industry-changing innovations. Let me briefly touch on each pillar. First, it is our goal to develop high-performing talent. We do this through competitive compensation, the ongoing development of leadership and technical skills, and a culture based on values that align to our employees. Being an employer of choice provides employees with the tools needed to succeed at ASTEC and offers life-changing professional opportunities. Next, we believe a strong customer focus across the organization is key to our success. This means driving commercial and operational excellence and simplifying our product offerings and production processes as a few examples. Finally, innovation has long been a cornerstone of our legacy. We want to build on our history of industry changing innovation by rolling out a new product development approach It increases our market competitiveness and better leverages our technology and digital connectivity. Innovation is very much at the core of who ASTIC is and what we do. The success of our operational improvements over the past few quarters gives us confidence in our ability to deliver on our strategic goals. Our focus on these three strategic pillars will help us build on our momentum and support our efforts to drive value for our employees, customers, and shareholders. Now turning to slide six, I would like to provide an update on our current business dynamics. For infrastructure solutions, we are focused on strengthening our sales channels, including growing our strategic accounts, driving efficiencies, and ensuring strong inventory control and supply chain cost reduction. we saw net sales of 202.2 million, which decreased 6.2%. As I mentioned earlier, this decline was mainly due to a select supply chain issue, but this was partially offset by increased part sales. We also saw segment operating adjusted EBITDA margin of 12.7%, which decreased 50 basis points due to the supply chain delay and volume-related manufacturing inefficiencies. On the material solution side, we reported net sales of 107 million, a decrease of 19.1%. This reflects a combination of factors, including slower product conversions and lower equipment sales, the latter of which are due to finance capacity constraints with contractors and dealers. Separately, our segment operating adjusted EBITDA margin of 5% decreased 600 basis points. These results were impacted by lower sales volume, manufacturing inefficiencies, and select inventory-related costs. We also wanted to provide an update on the federal highway bill as it relates to our business. Federal highway and pavement contract awards increased 11% year-over-year. with state budgets up 12% year-over-year, according to the American Road and Transportation Builders Association. Given these numbers, we expect continued strong demand for asphalt road building and concrete production equipment moving forward. On slide 7, we further highlight implied orders. As I said, implied orders is up 2.4% sequentially at $299 million. in comparison to 292 million last quarter. Additionally, infrastructure solutions increased 9.3% this quarter from 192 million last quarter to 210 million this quarter, a strong indicator of the positive momentum we expect. Separately, material solutions saw implied orders decrease 11% from 100 million last quarter to $89 million this quarter. A change, as I said earlier, due to lower conversions from rental to buy and finance capacity constraints stemming from the current interest rate environment. As a reminder, infrastructure solution makes up two-thirds of our total business. On slide eight, we show our backlog trends. Backlog of $559.8 million as of March 31st 2024 is returning to our historical range. Backlog for infrastructure solutions was 372.7 million, a 2.1% increase sequentially. And our backlog for material solutions was 187.1 million, a decrease of 8.9% sequentially. As I noted earlier, consolidated implied orders were up 2.4% sequentially. and we believe we are well positioned to meet the demand of our products and convert this backlog into sales. Moving to slide nine, I noted earlier how important innovation and new product development is to our overall growth strategy. Let me highlight some of the new products we exhibited at the World of Asphalt AG1 trade show in March. Our Remix CCPR system efficiently utilizes reclaimed asphalt pavement, or RAP, minimizing waste and promoting sustainable road construction practices. Our very frequency screen technology will revolutionize the industry with its ability to eliminate screen cloth binding, increase performance, and reduce operating costs. The ASTEC Intellipec moisture system provides visibility into virgin aggregate moisture levels, with advanced features that empower operators with real-time data and insights. And our IntelliFlex burner controls provide intuitive control over burner performance and safety operations for asphalt mixing plants. We receive strong feedback on these innovative products at World of Asphalt Ag One, and our teams are hard at work to get them into customers' hands. Various of these new products will enable us to apply artificial intelligence-enabled technologies in the future. With that, I will now turn the call to Heinrich to discuss our detailed financial results.