Arcosa, Inc.

Good morning and welcome to the Acosta Inc. second quarter 2021 earnings conference call. My name is Gretchen and I will be your conference call coordinator today. A copy of yesterday's press release and the slide presentation for this morning's call are posted on the company's investor relations website, www.ir.arcosa.com. All participants are now in a listen-only mode. A question and answer session will be followed the company's prepared remarks As a reminder, today's call is being recorded. Instructions for accessing the replay number are included in the press release. A replay of the website will be available for one year on the company's website. Now I would like to turn the call over to your host, Gail Peck, CFO for Arcosa. Ms. Peck, you may begin.

Good morning, everyone, and thank you for joining Arcosa's second quarter 2021 earnings call. With me today is Antonio Carrillo, President and CEO. Let me begin with some important reminders. Today's comments and presentation slides contain financial measures that have not been prepared in accordance with GAAP. Reconciliations of non-GAAP financial measures to the closest GAAP measure are included in the appendix of the slide presentation. In addition, 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 the press release we filed yesterday and our Form 10-Q, expected to be filed later today. Antonio will begin today's call with a discussion of our overall second quarter performance and the acquisition of Southwest Rock products that we were pleased to announce in yesterday's release. I would now like to turn the call over to Antonio.

Thank you, Gail. Good morning and thank you for joining today's call. Starting on slide four, ARCOSA executed well in the second quarter, generating 3% revenue growth over the prior year and reporting adjusted EBITDA in line with last year's record. Despite the headwinds we faced in the quarter, our solid financial performance underscores the resilience of our business and the benefit of strategic investments we have made to expand our business into attractive new markets. Let me discuss a few key takeaways from the quarter. The construction products business, which now represents more than 50% of our adjusted EBITDA, continues to benefit from strong activity and the outlook remains positive. The segment generated 17% growth in the second quarter adjusted EBITDA, even after the impact of excessive rainfall. We're managing our continued steel price inflation through proactive price increases across our operations. However, in our barge business and, to a lesser extent, wind towers, high steel prices are limiting the conversion of inquiries into new orders, weighing on our near-term expectations for this business. Engineering Structures continues to experience a healthy level of order activity, driven by three key trends. Increased utility spending to improve the reliability of the electric grid. the connection of renewable energy sources to the power grid, and continued federal and state investments in road infrastructure. Finally, I'm excited to announce today our acquisition of Southwest Rock Products. The transaction, which follows our purchase of Stone Point materials this past April, exemplifies how we are successfully executing on our long-term strategy by evolving our portfolio towards higher margins, faster growth, and less cyclical products. Turning to slide 7, let's look at our consolidated results for the second quarter. Revenue increased 3% from the prior year, reflecting strength in our construction products and engineer structural segments, partially offset by continued softness in the transportation product segment. Adjusted EBITDA was approximately even compared to the record level in last year's second quarter. benefiting in part from the contribution from recent acquisitions in construction products and favorable product mix in engineered structures. Second quarter adjusted net income declined 18%, primarily due to the increase in non-cash expenses, specifically depreciation and amortization from recent acquisitions. Please turn to slide eight. We're excited about the acquisition of Southwest Rock, a leading pure play aggregates producer serving the greater metropolitan Phoenix market. Aggregates business of Southwest Rock's scale and quality are scarce, and we couldn't be more pleased that their experienced team is joining our cause. With five active sand and gravel locations and one hard rock quarry location, Southwest Rock produces approximately 5 million tons of aggregates annually and is backed by an attractive reserve profile. Southwest Rock expands our footprint into one of the fastest growing construction markets in the U.S. and strengthens our position as a leading aggregate supplier. The acquisition should take our cost of production to over 35 million tons of aggregates and specialty materials, plus between 3 and 4 million tons of recycled aggregates. From a financial perspective, Southwest Roth generated trailing 12 months revenue of approximately $36 million and adjusted EBITDA of approximately $14 million as of May 31, 2021. Given this high level of profitability, Southwest adjusted EBITDA margins are accretive to our construction product segment and to our cost overall. Importantly, the acquisition was sourced from StonePoint's pipeline of deals, highlighting the advantages of our increased scale and the follow-on benefits this acquisition strategy can provide. Turning to slide 9, we're particularly enthusiastic about the significant growth opportunity that Southwest Rock adds to our construction materials platform. As I mentioned earlier, the Finnish metropolitan market is one of the fastest-growing construction markets in the nation, underpinned by robust, large-scale investment needs to support population growth. In fact, Arizona is ranked number one in infrastructure spending on highway contracts over the past five years, underscoring the compelling growth opportunity for Arcosa as we enter this market at scale. Since becoming an independent public company almost three years ago, we have invested approximately $1.3 billion in strategic construction materials acquisitions that reposition ARCOSA to our higher growth and higher margin infrastructure opportunities. Having announced two sizable acquisitions, Stone Point and Southwest Rock, already this year, we intend to focus our efforts over the next few quarters on integration, organic growth opportunities, and simplifying ARCOSA's overall portfolio. I will now turn over the call to Gail to discuss our segment performance, and then I will return to update you on our outlook for our business.