Arcosa, Inc.

Good morning, ladies and gentlemen, and welcome to ARCOSA's first quarter 2019 earnings conference call. My name is Ashley, and I'll be your conference call coordinator today. As a reminder, today's call is being recorded. Now I would like to turn the call over to your host, Gail Peck, Senior Vice President of Finance and Treasurer for ARCOSA. Ms. Peck, you may begin.

Thank you, Ashley. Good morning, everyone. Thank you for joining our first quarter 2019 earnings call. With me today are Antonio Carrillo, President and CEO, and Scott Beasley, CFO. A question and answer session will follow their prepared remarks. A copy of yesterday's press release and the slide presentation for this morning's call are posted at our website, www.arcosa.com. You can access the presentation by going to the Events tab under the Investors section of the website. A replay of today's call will be available for the next two weeks. Instructions for accessing the replay number are included in the press release. A replay of the webcast will be available for one year on our website. Today's comments and presentation slides contain financial measures that have not been prepared in accordance with generally accepted accounting principles. Reconciliations of non-GAAP financial measures to the closest GAAP measure are included in the appendix of the slide presentation. Let me also remind you that today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company's SEC filings, including its Form 10-K, for more information on these risks and uncertainties. I would now like to turn the call over to Antonio.

Thank you, Gail. Good morning, everyone. Thank you for participating in today's call to review ARCOSA's first quarter results and discuss our business outlook. We are pleased with the way the quarter evolved and see this as a strong start to a year of strong growth for ARCOSA. As you know, our business model has been developed around three primary operating segments. each comprised of several product lines serving different end markets within the infrastructure sector. This gives us multiple platforms for growth as well as significant resilience to quarter-specific events such as weather, shipment timing, maintenance slowdowns, et cetera, that can impact any of our business lines. Our first quarter performance benefit from having this broad exposure to infrastructure and markets as well as from successful organic projects and the addition of ACG materials which we acquired in December last year. Please move to slide four where we list what we consider to be the key strategic highlights for the first quarter. First, our results exceeded our original expectations specifically on the energy equipment segment and provide a strong start to the year. Next, the ACG acquisition is performing to plan, integrating very well into our construction product segment and has brought with it potential bolt-on acquisitions that we're currently working on. Also, the application of lean manufacturing process in the utility structures unit of our energy equipment segment that began late last year is starting to pay off. We saw increased throughput and other operating efficiencies that contributed to first quarter EBITDA growth. And in transportation products, we continue to see good demand for liquid barges, and while we did see some orders for hopper barges, the demand remains soft. At the same time, the previously announced production ramp-up at our facilities is going as planned and positioned as well to meet customer demand. To sum up this slide, each of these first quarter strategic highlights is aligned with the near-term priorities that we have outlined and have continued to talk about since our investor day last October. There is still a lot of runway in each of our business units, but we are pleased with the progress so far and are looking forward to continued improvements in the periods ahead. The actions taken so far, together with positive momentum in our markets, allowed us to deliver a strong financial quarter, which you can see on slide five. Our adjusted EBITDA and margin expansion outpaced our revenue growth. Now I will provide additional operating color on each of our business segments, starting with construction products group on slide six, where our priority has been to drive revenue growth at attractive margins. As we look at this segment's results, it's important to remember that the ACG acquisition has margins that are higher than our cost's overall margin, but lower than the historical construction product segment's margins, contributing to an expected drop in segment margin after the acquisition. In the first quarter, our legacy aggregates business saw very strong margin performance. On the demand side, activity continues to be healthy and customers remain positive on their outlook. Healthy demand in the Dallas-Fort Worth area is helping absorb the additional supply that came into the market. In addition, despite the increased supply and high number of bad weather days in the DFW market, our margins have remained at attractive levels. This was also the first full quarter of contribution from our ACG materials acquisition. We scaled up our construction segment revenues by approximately 50% on an annualized basis, and added important geographic and end-market diversification to the group. ACG materials also brought additional specialty materials expertise that we believe we'll be able to leverage over time to produce more products with elevated barriers to entry. In the first quarter, we continue to invest in organic opportunities to expand the production capacity and geographic reach of several ACG product lines, serving the West Coast and Central U.S. markets. This is indicative of the type of support that acquisition candidates can expect from ARCOSA for projects that provide high returns on investment. As we have mentioned before, ACG has developed a robust pipeline of acquisition opportunities prior to the acquisition by ARCOSA, complementing the existing pipeline in our legacy business. We expect to complete two or three very small bolt-on acquisitions from our pipeline shortly. Given the size, we believe we can execute those transactions at reasonable multiples. Our construction site support operations continue to perform well in the first quarter. Commercial construction activity is a key driver here, as well as increasing regulations and the focus on worker safety. To sum up construction, we are pleased with our first quarter performance and expect to see volume and margin improvement as we move into the seasonally stronger second and third quarters. I remain very optimistic about the segment's long-term fundamentals and ability to serve as a platform for growth. There are many encouraging drivers that support our positive outlook. On the public side, state and federal funding for infrastructure projects in our markets, particularly highways, is robust. And demographic trends will continue to require both public and private infrastructure investment. Our positive market outlook is why growing construction segments is a priority for our COSA. On slide seven is a business review of our energy equipment group, where our near-term priority has been margin expansion. This group was a very strong performer in the first quarter for a number of reasons, but operationally we're starting to see some positive signs related to the rollout of our lean manufacturing process in our utility structure business. Throughput has started to increase, as well as our on-time delivery. As we continue to improve on our operations at the plants, we will have greater confidence and ability to increase our order intake in a market that's showing healthy demand. Overall, we are happy with the signs of improvement seen to date in our utility structure business and are looking forward to future progress. Our wind tower business continues to maintain attractive margins, and our backlog remains solid, providing good visibility into 2020. While we did not book any new wind tower orders during the first quarter, we are currently quoting orders for 2020. Of course, the plan faced out of the production tax trade has caused uncertainty in the market. As market leaders, we are preparing to operate within an evolving business environment, but we still believe that the industry's long-term fundamentals are sound, given that wind is a competitive energy source on its own. Lastly, our storage tank backlog continued to increase in the first quarter driven by demand from residential, commercial, and agricultural customers. Additionally, we are pleased with the progress on the turnaround of our Mexico business. Finishing up on our energy equipment group, we were pleased to see two actions in April supporting fair trade practices. In the U.S., the International Trade Commission upheld the anti-dumping and countervailing duties on imports of utility-scale wind towers from China and Vietnam. And separately, in Mexico, a new investigation against fair trade practices was initiated against China. As a company, we will continue to vigorously support fair trade practices that discourage the illegal dumping of products into the North American markets. Slide 8 provides additional insights on the development of our transportation products group, where our near-term priority has been to expand capacity to capture the emerging ongoing recovery in barges and to build our customer base for railcar components. Scott will touch on some specifics. However, more broadly, we see positive trends in the business, which are creating solid demand factors for tank barges. In the first quarter, our backlog increased substantially by over 65%. This was an exceptionally high quarter for orders with a book to build of four to one that reflected solid demand and the finalization of several large orders that had been in the pipeline for months. The majority of these orders were for liquid barges, but this strong performance included some orders for dry barges as well. The orders received in the first quarter come from a wide variety of customers and a diverse set of commodities, which are signs of a healthy market. On the dry side, we are still seeing demand below replacement volumes, and we still see high steel prices as being one of the limiting factors in this market. The orders received have filled our production schedule for 2019, and we are starting to build our production schedule for 2020. And in railcar components, we continue to get orders and build a relationship with new customers. At this point, I would like to turn over to our CFO, Scott Beasley, who will provide first quarter financial review.