Astec Industries, Inc.

Hello, and welcome to the Aztec 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 Aztec Third Quarter 2024 Earnings Conference Call. Joining me on today's call are President and Chief Executive Officer, Yaku Fundimerva, our newly appointed Chief Financial Officer, Brian Harris, and Vice President of Finance for Infrastructure Solutions, Heinrich Yacoum. In just a moment, I'll turn the call over to Yaku to provide comments, and then Brian and 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 can 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. The company refers to various US 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 US GAAP and are therefore 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 U.S. 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 Presentation tabs. Now, I will turn the call over to Yaku. Thank you, Steve.

Good morning, everyone, and thank you for joining us. Before I begin, I would like to welcome Brian Harris, who, as you know, joined us as Aztec's new chief financial officer a few weeks ago. We are thrilled to have Brian on board. He brings with him significant experience, having held leadership roles across several public companies. Most recently, he spent 10 years as the Chief Financial Officer of Summit Materials, a leading producer of aggregates, concrete, and asphalt, and we look forward to benefiting from his experience. I will hand it over to Brian to say a few words about himself at the start of the financial results section. I would also like to take this opportunity to thank Heinrich for stepping in as Interim Chief Financial Officer. and providing the leadership needed at an important time in ASTEC's journey. I look forward to continue working with Heinrich as vice president of finance in our infrastructure solution segment. With that, we will turn to our third quarter highlights summarized on slide five. We remain focused on executing against our strategy and key operational initiatives to strengthen our foundation and positioned the company for growth. In the third quarter, we had mixed results. On a consolidated basis, we delivered 291.4 million in net sales, which was slightly less on a year-over-year basis due to reductions in equipment and parts sales. Gross margin was stable and generally in line with the prior year. Importantly, we were cash flow positive in the quarter. having generated $19.9 million of free cash flow. In infrastructure solutions, we benefited from the strong infrastructure construction market, which continued to generate healthy demand for asphalt and concrete plant deliveries. The infrastructure construction market is supported by a long-term runway for federal highway projects. Dealer inventory levels and interest rates continue to influence the material solution segment, resulting in slower product conversions. As stated previously, we do believe inventory levels will moderate over the next two to three quarters, and the Federal Reserve's interest rate reduction of 50 basis points in September was welcome news to our dealers and customers. Finally, turning to backlog, we ended the quarter at $476 million, As I have noted, we saw a bit of a divergence in backlog between our two segments, with infrastructure solutions evidencing a relatively stable trend and material solutions showing moderating trends. On slide 6, we gave an update on our strategic roadmap. As you will recall, we introduced this new strategic framework earlier this year as we align the organization's focus on three core pillars. The combination of fostering empowered, enabled, and engaged employees, being laser-focused on our customers, and continuing to provide industry-changing innovations is our strategic roadmap for the remainder of 2024 and beyond. We are pleased to see our 2024 Voice of One ASTEC employee survey results showed positive trends and alignment on our goals and objectives was evident. The positive changes made to our business over the past year and a half will enhance our ability to execute for our customers and drive value for our shareholders. Turning now to slide seven. Let me share some observations on our current business dynamics for our infrastructure solutions and material solutions segments. While the quarter experience various sector challenges, the overall outlook for domestic road building is encouraging. The Infrastructure Investment Jobs Act disbursements are expected to continue at a high level and states continue to invest. For example, Texas Governor Abbott announced a record 148 billion 10 year investment for state transportation infrastructure. In addition, The Federal Highway Administration recently released $134 million to repair roads in North Carolina, Tennessee, and South Carolina, damaged by Hurricane Eileen. We expect continued strong demand for asphalt road building and concrete production equipment moving forward. I should note that our paving and forestry products are also sold through a dealer distribution network that experiences the same interest rate pressures felt by our material solutions dealer. That said, we are encouraged by the record bookings for parts in our infrastructure solution segment during the month of October. Many of the factors in the infrastructure solution segment are also positive for our material solution segment. As I'm sure you know, aggregates are used as base materials for roads and are key ingredients for asphalt and concrete. Although dealer destocking continues to present a near-term headwind, lower interest rates promise to relieve debt servicing requirements for our dealers and end users. Our one Aztec business model has also helped, as we have been able to share facility capacity alongside, both of which are beneficial for absorption and workforce retention. As with the infrastructure solution segment, Parts bookings for the month of October were strong. Slide 8 shows our backlog levels, which continue to moderate. As I noted earlier, the backlog trends underscore the relative stability in infrastructure solutions, while material solutions has been challenged in the short term by excess inventory in the dealer channel and higher interest rates. On slide 9, our implied orders of $236 million were slightly higher than the prior year third quarter level of $229 million. Year-over-year growth of infrastructure solutions implied orders of $29 million was partially offset by a $21 million decline in material solutions. Despite an overall reduction sequentially, we are encouraged by solid dealer quoting for future material solutions bookings and sales. As previously shared, our strategic roadmap includes an industry-changing innovation pillar, and I am proud of our progress on new product development shown on slide 10. Through our 52-year history, Aztec has been recognized as a leader in innovation, which is a fundamental element of our company. A great example of this is our new Aztec Remix Cold Central Plant Recycle or CCPR system. The CCPR system is a cold recycling technology. It is a sustainable approach to road construction that minimizes the environmental impact. By using reclaimed asphalt pavement materials and mixing them at ambient temperatures, our system minimized cost by significantly reducing the need for both virgin aggregate and the energy needed for heating the mix. We have multiple prototypes running in the field with positive results. We are excited about providing this solution to our customers. Slide 11 also showcases the sustainability of our products, which is a critical important component of our offerings. We strive to be environmentally responsible pillars of the communities in which we work and live. We are also committed to decreasing the carbon footprint of our own operations while supporting our customers on their sustainability journeys. A good example of this is our 6750D wood grinder, which enables high-volume recycling of organic waste and supports the production of alternative biomass fuels. Another example is our RX405 coal planer. which utilizes a stage five engine to minimize emissions while facilitating the reclaiming and reuse of asphalt materials from existing roads. And finally, our double barrel XHR produces asphalt materials with up to 65% recycled content. These products and many others evidence our commitment to continually develop innovative products that drive progress towards a more sustainable environment. That concludes my remarks, so let me now turn it over to Brian to introduce himself. Brian.