Arcosa, Inc.

Good morning, ladies and gentlemen, and welcome to the Arcoza Incorporated Third Quarter 2020 Earnings Conference Call. My name is Nikki, and I will 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, Finance and Treasurer for Arcoza. Ms. Peck, you may begin.

Good morning, everyone. Thank you for joining our third quarter 2020 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 investor relations website, www.ir.arcosa.com. 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 under the News and Events tab. 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 for more information on these risks and uncertainties, including our Form 10-K, the earnings press release we filed yesterday, and in our Form 10-Q for the third quarter expected to be filed later today. I would now like to turn the call over to Antonio.

Thank you, Gail. Good morning, and thank you for joining today's call to discuss our causes, third quarter results, and our business outlook. Beginning with the key messages on slide four. First, our highest priority has been the safety of our employees as we continue to operate in the COVID-19 environment. Our businesses remain fully operational as essential services, and we continually update our protocols to meet or exceed CDC guidelines and ensure the safety of every one of our employees. We're grateful to our employees and our communities for their dedication during this challenging time. Next, our cost and result continue to highlight the resilience of our business model and the repositioning of our company around infrastructure products. Double-digit growth in revenues and EBITDA was led by strong performance of our construction product segment. We executed well in the third quarter despite a record hurricane season causing some revenue and profit headwinds and ongoing challenges associated with the pandemic. New order activity was mostly positive. Construction activity remained healthy and would have been stronger had weather events not been so prevalent. Additionally, we booked 154 million in wind tower orders, and we have seen increased project-based wind tower inquiries. For utility structures, demand remains robust, and our primary constraint remains production capacity. Demand for traffic structures in our new Florida business has exceeded our expectations. Our Mexico business received good orders for infrastructure projects. In the liquid barge market, utilization rates continue to be low for our customers. but conditions in the dry cargo market have improved, with higher grain volumes and freight rates at very attractive steel prices. Even though we only received $18 million in new orders during the quarter, in the last few weeks we have seen significant improvement in inquiries and have closed $32 million of additional barge orders for 2021. We're building a strong cash culture at Arcosa. The impressive $93 million of free cash flow in the third quarter brings our year-to-date total to $170 million. as we focus on reducing our working capital and operating more efficiently. This cash culture is helping us deploy growth capital into attractive markets while maintaining low leverage. We still have opportunities to improve, especially in the inventory and accounts payable management, but I'm excited with the progress made to date. Finally, we're pleased with the strategic investments we have made to grow our business, centered around construction products and engineered structures. A key accomplishment was the $87 million acquisition of Strata Materials, a leading producer of recycled and natural aggregates in the Dallas-Fort Worth market that we closed in October. This transaction adds to the two smaller acquisitions we closed during the quarter. First, the telecom structure company we had previously disclosed, and the natural aggregate small-town in Texas. We paid around $53 million for these two acquisitions at very attractive multiples. Slide 8 is an overview of our third quarter performance. Construction posts, followed by energy equipment, were the key drivers of our 10% year-on-year revenue growth. EBITDA growth and margin expansion were driven by cherry acquisition as well as strong operating performances in our aggregates and barge businesses. Scott will review the performance of our different segments, and then I will come back to discuss our business outlook.