Arcosa, Inc.

Good morning, ladies and gentlemen, and welcome to the ARCOSA Incorporated Second Quarter 2022 Earnings Conference Call. My name is Bobby, 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, CFO for ARCOSA. Ms. Peck, you may begin.

Good morning, everyone, and thank you for joining ARCOSA's Second Quarter Earnings Call. I am joined today by Antonio Carrillo, President and CEO. I'll begin with a few reminders and turn it over to Antonio. A question and answer session will follow our prepared remarks. A copy of yesterday's press release and the slide presentation for this morning's call are posted on our investor relations website, ir.barcosa.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 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 Security 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 releases filed yesterday and our Form 10-Q, expected to be filed later today. I would now like to turn the call over to Antonio.

Thank you, Gail. Good morning, everyone, and thank you for joining today's call. Starting on slide four, I'll begin with our second quarter highlights. ARCOSA reported excellent second quarter results, reflecting strong infrastructure-related fundamentals, proactive pricing actions, and significant operational efficiencies. All segments contributed to this quarter's results, led by our growth businesses within construction products and engineer structures. With each of our segments generating double-digit increases in revenue and adjusted EBITDA, we delivered record second quarter adjusted EBITDA and record adjusted EBITDA margins of 16.5%. I am proud of the dedicated team who once again executed at a high level, successfully navigating the challenging environment, managing inflationary pressures, and driving lean manufacturing efficiencies. We continue to advance our strategic transformation with the acquisition of Ramco, a leading provider of recycled aggregates in the Southern California market, while optimizing our portfolio with the pending divestiture of our storage tank business. Ramco is a great addition and complement to our construction products business, and I'll provide more details on this acquisition in a moment. We also continue to make progress on several large organic projects that should start producing positive EBITDA in 2023. Based on our stronger than expected first half of performance and our increasing confidence in the outlook for the second half, we're raising our full year revenue and adjusted EBITDA guidance. Turn to slide eight. We continue to make progress on our strategic transformation that is focused on reducing the complexity and cyclicality of our business. Over the past 18 months, we have completed three key acquisitions in construction products, extending our capabilities and expanding our geographic footprint into high-growth markets, including Arizona, Southern California, and Tennessee. At the same time, we have rationalized our portfolio with the pending divestiture of our storage tank business for $275 million, providing a significant source of capital to reinvest in growth initiatives. In particular, we continue to execute on several organic growth projects, which include the expansion of our specialty materials plaster plant in Oklahoma, and the construction of a concrete pole manufacturing plant in Florida to support our utility structure business. In addition, we will open two new aggregate greenfield sites in 2023, which will accelerate the growth in that business. Turning to slide nine, in May, we acquired Ramco, a leading independent producer of recycled aggregates serving the greater Los Angeles metropolitan area. Consistent with our disciplined approach to strategic M&A, we acquired this business for $75 million, representing an attractive implied valuation of less than eight times EBITDA. Ramco is a relatively small yet compelling strategic addition to our construction products business, complementing our existing footprint and customer base in the California market. Ramco has a unique business model. It charges customers a fee to receive construction materials for recycling, then crushes those materials and sells them as recycled aggregates. This combination of being able to charge both to receive and sell recycled aggregates makes Ramco a very profitable business. We're excited by the opportunities it brings to our coast. With a mid-year close, we estimate approximately $5 million of incremental adjusted EBITDA from Ramco in the second half, 2022. Now I will turn the call over to Gail to review our second quarter financial performance in more detail. Gail?

Thank you, Antonio. I'll start on slide 11 and touch briefly on our closest consolidated results. Second quarter revenues increased 17%, driven by double digit increases in all segments. Second quarter adjusted EBITDA improved 26%, outpacing the increase in revenues led by our growth businesses. Overall adjusted EBITDA margin increased 120 basis points to a record 16.5% in the second quarter, led by engineered structures and supported by consistent year-over-year margins in construction and transportation, despite inflationary pressure. Turning to construction products on slide 12, revenues in adjusted segment EBITDA each increased approximately 20%, primarily due to organic contributions, with acquisitions contributing roughly 5 percentage points to revenue growth. Demand trends remained favorable across the segment, and we maintained stable margins year-over-year due to proactive pricing actions. On a sequential basis, margins improved 260 basis points from the seasonally slower first quarter. We continue to face headwinds from inflationary pressures, particularly higher costs for energy and for cement, which is used in our stabilized sand product lines during the Houston market. Although higher energy and cement costs increased cost of sales by approximately $10 million during the quarter, We believe full year segment margins in 2022 have the potential to meet or exceed last year's levels. In natural aggregate, healthy demand fueled elevated price increases across our market, with average organic pricing up low double digits that help to maintain organic margins year over year. Total natural aggregate volumes increased significantly as we benefited from the addition of Southwest rock. On an organic basis, we generated mid single digit volume growth led by our Texas and Gulf Coast regions. While weather was generally better than that in the prior year quarter, we experienced some volume pressure due to the lack of cement availability, which impacted our stabilized sand operations in Houston, as well as our ready mix customers in the Texas West and Gulf Coast regions. Turning to recycled aggregates, volumes and pricing increased significantly in the second quarter, With the late May closing, Ramco contributed positively to our results, though recycled aggregate growth during the quarter was largely organic, reflecting favorable demand and improved weather in the Houston market. In specialty materials, average selling prices were up broadly, but volumes were down, leaving revenues about flat year over year and margins lower. Strong volume in price and growth in our plaster business was offset primarily by lower lightweight aggregate volumes. While market demand for lightweight aggregates remains favorable, volumes declined due to scheduled and unplanned maintenance, as well as labor availability in certain markets. Finally, our trench shoring business reported a 29% increase in revenues on higher steel prices and increased volume. Border activity was healthy during the quarter, providing solid production visibility. Moving to engineered structures on slide 13, second quarter adjusted EBITDA increased 30%, outpacing revenue growth and resulting in a 270 basis point increase in margin. Although each business contributed to the better than anticipated quarterly results, utility structures was the primary driver of the significant outperformance during the quarter and versus the prior year. This business benefited from robust market demand, strategic pricing measures, and increased operating leverage. Combined revenues and adjusted EBITDA in our traffic and telecom businesses were also up compared to last year. Results in our traffic structure business were helped by a $1.6 million gain on the sale of one of our two plants in Florida as we consolidated our footprint serving the region. In our storage tanks business, second quarter revenues increased 22%, reflecting strong pricing to counter steel price inflation. Overall volumes were lower year over year, due to reduced volumes in our products during the Mexico market. Turning to wind towers, we executed well during the second quarter on significantly lower year-over-year volumes. At the end of the quarter, the combined backlog for utility, wind, and related structures was approximately $410 million, up 18% year-over-year, led by utility and traffic structures growth. Turning to transportation products on slide 14, the segment executed well as the year-over-year volume of profitability improvements in our steel components business more than offset expected declines in our barge business. Segment adjusted EBITDA increased 29% with similar margins to last year. Second quarter revenues in our steel components business increased 80%, driven by significantly higher volumes compared to last year's trough levels. As a result, adjusted EBITDA margins increased notably on improved operating leverage. Our barge business exceeded our expectations despite challenging market conditions and lower volumes year over year. Revenues increased 10% due to higher steel prices, while adjusted EBITDA declined but benefited from better cost absorption as several barges scheduled for the second half moved into the quarter. At the end of the second quarter, our backlog stood at $132 million, with approximately 50% scheduled for delivery in 2023. Moving to slide 15, we ended the quarter with net debt to adjusted EBITDA of 1.9 times, down slightly from the first quarter, driven by higher free cash flow. Reflected in our improved leverage position is an additional $30 million of net revolver borrowings to fund the acquisition of Ramsdell. During the quarter, we generated $60 million of free cash flow, compared to a break-even level in the first quarter. Second quarter working capital management contributed $8 million to cash flow, representing a significant improvement from the first quarter, driven by increased payables and supported by flat inventory levels. Inflationary pressures continue to increase overall working capital investment, though we continue to expect working capital will be a source of cash for the full year in 2022. Capital expenditures were $27 million, For 2022, we continue to see full-year capex of $120 to $140 million, with the potential to reach the high end of the range based on the growth projects we have underway in construction and engineered structures. During the quarter, we repurchased shares totaling $15 million, leaving $26 million available under our current $50 million authorization. One final note before turning the call back to Antonio. As we anticipate the storage tank divestiture to close in the second half of the year, the business is now presented as held for sale on our balance sheet. There were no changes made to the P&L or cash flow presentation. In addition, similar with our prior guidance and to facilitate comparability, our newly revised guidance includes a full year of storage tank results. As we indicated in yesterday's release, the midpoint of our revised guidance includes full year revenues of $250 million and adjusted EBITDA of $53.5 million related to storage tax. Antonio?

Thank you, Gail. As Gail discussed, we continue to benefit from solid underlying fundamentals within our infrastructure-related businesses, and we're successfully managing cyclicality in our wind, barge, and rail components. We remain vigilant in monitoring inflationary pressures, proactively implementing price increases where appropriate, and drawing on the strength of our supplier relationships to secure more advantageous pricing on key raw materials, including steel. Many of our businesses benefit from long-term secular trends driven by both public and private investment in large-scale infrastructure projects, and we expect the infrastructure bill will add an uplift in 2023. We continue to monitor the macroeconomic environment in light of the increase in interest rates and the potential impact on housing demand and consumer confidence. Please turn to slide 17. At the midpoint of our revised guidance range, we now forecast EBITDA improvement of 27% for our growth businesses in 2022. We expect second half EBITDA in our growth businesses to exceed our strong first half performance with the addition of Ramco. The outlook for construction products remains positive, benefiting from our expanded portfolio of products, favorable aggregate pricing, and healthy construction activity in our major markets. At the same time, we continue to manage supply chain constraints currently affecting certain customers. As we look at 2023, we anticipate that the initial spending outlays from the $1 trillion infrastructure bill will provide a tailwind for our construction products business. Strategically, we have achieved significant progress in broadening our geographic presence and product portfolio through our focused approach to M&A. Today, our construction product segment is fundamentally stronger, more resilient, and more diversified, providing a solid foundation for long-term growth and margin expansion. While we continue to evaluate smaller bolt-on opportunities that would enhance our operations, We're pausing our larger M&A efforts for now as we focus on completing the organic growth projects we have underway. We continue to see strong outlook for growth businesses within our engineer structures segment. The key drivers are continued robust demand for utility and traffic structures and improving demand within the telecom market. Electric utilities continue to direct capex towards grid hardening, resiliency, and renewable energy projects. Miguel Contreras- You providing good visibility for utility structures through the remainder of 2022 In addition, we're seeing favorable volume in our traffic structures business. Miguel Contreras- Moving to slide 18 although we continue to face challenging environment in our cyclical businesses, we have seen early but promising signs of market recovery. Miguel Contreras- Most notably, our barge business secure 35 million in new orders in the second quarter, adding to 105 million in new orders received in the first quarter. Our ability to secure more favorable steel pricing was a key factor in getting these orders, which completed our production plans for this year and provide production visibility into 2023. In addition, we have seen barge order inquiries trend upwards, indicating pent-up demand for customers seeking to upgrade their aging fleets. In wind towers, the absence of a renewable tax credit continues to weigh on shorter demand. However, the long-term outlook for wind power generation remains very positive. We are encouraged by the recently announced Senate legislation that includes tax credits for renewable energy. If enacted into law, these credits should provide a significant boost to our wind power business. We anticipate our rail components business will continue to perform well over the remainder of 2022. benefiting from improvement in the North American rail market where deliveries are forecast to raise sharply compared to 2021. Turning now to our updated financial guidance on slide 19. For our cost overall, including storage tanks, our revised 2022 adjusted EBITDA guidance range is now $325 to $345 million, up from our prior guidance of $290 to $305 million. Using the midpoints of both ranges, our revised guidance represents an increase of 37.5 million from our prior guidance. The increase in our full-year EBITDA guidance range reflects our stronger-than-expected performance in the first half of the year, as well as our increased confidence in the second half outlook. For our cyclical business specifically, we estimate 2022 adjusted EBITDA of 32.5 to 35 million, up from 20 to 25 previously. driven by our expectation for slightly higher production volumes and greater operating efficiencies in both our barge and wind tower business. Second half expected EBITDA for the cyclical businesses trails our first half performance primarily because certain higher margin barges scheduled for delivery later in the year shifted into the first half. In summary, our guidance for the second half shows the same pattern, significant year-over-year expansion in our growth businesses compensating for weakness in our cyclical business. In closing, our strong financial performance and our solid outlook for the second half lead us to increase our full-year revenue and EBITDA guidance. I am pleased with the strategic progress we have made expanding and strengthening our growth businesses through acquisitions and organic initiatives, while selectively optimizing our portfolio to enhance our resiliency and reduce cyclicality. And I would like to open the call for questions.

And at this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing the pound key. We do ask you to limit yourself to one question and one follow-up question. Once again, that is star one to ask a question. We'll pause for a moment to allow questions to queue.

We'll take our first question from Stephanos Christ with CGS Securities.

Good morning and congrats on the quarter. Thank you, Stephanos. You discussed pausing M&A for organic projects. Can you talk about, you know, some of those organic projects and, you know, how much capital you can employ in those?

Sure. I described it a little bit in my script, but I'll give you a little more color. So we have really four large projects going on. We have a new plan to expand our plaster capacity significantly in Oklahoma. We expect to expand that capacity to start that plant sometime early in 2023. We announced in the first quarter conference call, we announced a new concrete pole facility in Florida. That should start late in 2023 because we just started. And then we have two greenfield facilities for our natural aggregates business that should start somewhere also in 2023. And that's why the capex this year is so high because we are investing in those projects. And the reason for the pausing of the larger M&A has to do not only with that, we will do probably some bolt-ons like Ramco and some others. But, you know, if you think about the environment we're in where there's expectation for a slower economy, etc., Think about it as dry powder to find better opportunities as we see them. So it doesn't mean we won't do anything. I just think the environment will lend itself so that we can find those opportunities that have better prices or better opportunities in the near future.

Perfect. Thank you for the caller. I'm going to just follow up on the acquisition of Ramco. Can you just talk about your expectations for recycled aggregates going forward and what you see driving growth there?

Absolutely. So the fundamentals are the same as natural aggregates. The pricing for recycled aggregates is set by natural aggregates. That's the maximum price you can sell at. The demand factors are the same. The pricing demand is exactly the same. It has a couple of differences. I think one is, of course, you don't have reserves. So the return on invested capital is much higher because you don't have a lot of reserves. Margins, I would say, are in similar ranges as natural aggregates. So the fundamentals and the market is very similar. The difference is how you acquire your raw material, which in this case is rubble. I described a little bit in my script that in the case of California, we charge a fee to receive that material because you cannot dump it in landfills over there. And that's one of the beauties of this business in California is that the regulations support recycling a lot, but the business is less developed than here in Texas. So I think we're taking our experiences from Texas and applying it to California, where we already had a presence in our lightweight aggregates. So I think the future for recycled aggregates, it's a growing business. It's something that I think is here to stay. I think it's a trend. that we cannot stop this, all the recycling. And it's not a business that, it's a business that's a complement to natural agri. It's not something that, you know, it's a much more business than natural, but it's a very healthy business.

Perfect. Thanks so much, and congrats again. Thanks.

We'll take our next question from the line of Gary Schmois with Root Capital.

Oh, hi. Thanks for taking my question. Congratulations on the quarter. I just wanted to start with engineer structures, the margin improvement in the quarter. Just, you know, if you can maybe parse out the drivers around the margin expansion, not asking you to hold kind of a 18% to 19% margin moving forward, given how much stronger the quarter was relative to normal, but just kind of wondering, you know, maybe how sustainable, you know, this type of margin is in the near to midterm.

Good morning, Derek. This is Gail. Yeah, we were very, very pleased with the performance of the engineered structures segment. You know, first half margins above 16% for the segment. Very strong first half performance, as we said in our comments, and materials led by utility structures. Very robust demand, solid execution, really across all fronts. from material handling and, you know, even including safety as we look at our safety records year over year. So this team is really firing on all fronts. And you know, we benefited from, you know, a favorable mix during the quarter. So as we think about the back half, like I said, a 16% or so margin for the first half, it may be a challenge to meet that level for the second half. We do have some slots to fill later in the year. Often those come with big market orders so that there could be a potential those slots fill in with lower margins. But all in all, our expectations for this segment is to continue to have a very strong second half. It just may be hard to meet that really perfection level that we achieved in the first half.

David, let me add something which I think is important to remember. This segment includes wind towers. And if you remember from three years ago, our highest margin business in that segment was wind towers. And we are achieving these margins even though our wind tower business, it had a better performance than we expected. Simply, they were more efficient. But they're still bouncing down in the bottom. So I think we're very optimistic about the future of wind, especially if this legislative package goes through. But right now, wind towers are being carried by the rest of the businesses.

Got it. That's encouraging. I wanted to follow up just on the cyclical business. I think you mentioned, first off, there's some barge shipments that were pulled forward into the first half of the year. I was wondering if you could quantify that.

uh and you know just more broadly you know you're starting to see some life here uh at the bottom but you know with the market worried about a recession just kind of curious if you're high level thoughts on how the cyclical businesses could perform in a recession so i'll give you talk a little bit about that so the the bars pull forward it's it's uh i think it's i'll let gave you the numbers but it's it's maybe a couple of million dollars that move forward and And I mentioned in my script that the second half, that's why we expect the second half to be a little lower in the cyclical businesses, which will be overcompensated by the growth businesses, including now the new acquisitions. So I'll give you a little color on the three cyclical businesses, starting with barge. As we've discussed before, this is a business driven specifically, it has several drivers. Of course, energy markets are one of the biggest ones. Second, all the grain exports, believe it or not, now the coal market is showing signs of life. But those are the three big drivers and petrochemicals. We are seeing very healthy inquiries for barges, especially for dry cargo, hopper barges, which are mainly grain, coal, and those kinds of commodities, and some petrochemicals. And so the reason I think the demand continues to be slow is Steel is a very large component of the cost of a barge. Barges are made with plate generally, and plate, even though steel has come down quite a bit in coil, the plate market has not behaved exactly the same way, so there's a wide difference right now in pricing between plate and coil. But every forecast shows that plate is coming down. We have been able to get some plate at relatively good prices, and that's why we've been able to sell these barges in the first quarter and second quarter. But everything indicates from the conversations with our customers to the inquiries we're getting that the demand is there, and also that the price of steel should be coming down. And we don't expect it to come down to levels of 2019, but it should be very good news for our bar business, at least to show the trends of steel coming down. On wind towers, normally we have our negotiations with our customers at this time of the year. so even though we didn't have orders in the second quarter it didn't surprise us it's a timing issue but we the market is very slow and unless we get this production tax credit approved we we expect slow slow wind tower market in the near future and even if we get this legislation approved there's already a gap created between the time you start a project and at the time wind towers are delivered so we will have a period of slowness in wind towers we our goal right now is to stay keep our manufacturing flexibility as healthy as possible so that we can take advantage of the demand when it comes back, because we believe it's going to be extremely robust when it comes back. And then finally, rail components, we saw significant growth in EBITDA and revenue in the quarter, and we see a very good ending of the year. The rail market has a forecast of significant growth in 2022. For 2023, there's a range of growth And let's see where that falls, but 2023 seems to be also a good year for rail components. So all in all, I think if you add them all, I think positive news, let's wait on the legislative package to see if it gets approved. That would be really good news for us. Great. That's very thorough. I appreciate the help and best of luck.

We'll take our next question from the line of Julio Romero with Sadati and Company.

Hey, good morning, everyone. Wanted to stay on the engineered structure side, specifically on the utility structures business. You talk about robust demand, materials handling mix. What surprised you the most in the quarter relative to your expectations three months ago?

Julio, this is Antonio. You know, I think... You know, things align very well in terms of the size of poles we were making. I think the allocation we did to our plants, as you know, in 2021, we started our – ramped up our plant in Mexico. Our production in Mexico has been going very, very well, and the efficiency is ramping up probably faster than we expected. We are seeing – more availability of labor. We have been seeing for probably a year, it was very difficult in the U.S. to get labor for our plants. Over the last three months, at least, we've seen positive trends. It doesn't mean we have a line of people waiting, but we are getting the people that we are needing. But I think in that business specifically, our team is doing just an incredible job. We've brought a tremendous amount of talent to the team. And they're just performing like clockwork. They're doing a very, very good work. So I think it's a combination of all things. And as Gail mentioned, it shows in everything from safety to quality to efficiencies. It's just the implementation of our lean process over there is going very well. So I think the team is just doing a fantastic job.

Okay, that's very helpful. And then... I believe you guys touched on it earlier, the Inflation Reduction Act, the Senate legislation. Any way to think about the impact to your wind tower business? And are folks in the value chain getting cautiously optimistic about that potentially being enacted?

Yes. So if you look at the, I would say the tone in the market or the, I would say almost the environment or the conversations, the The mood in the market from a month ago to today is completely different. It's changed dramatically. And if you look at the legislation or the proposals, it's different from the previous ones in terms of it will have a significant impact on our business because it has provisions for things to be made in the country. We are basically making them all in the country. We use everything sourced in the U.S., basically. We think we comply with a lot of the things that are in the package. So I think it would be a perfect package for us. But there's also the provisions that provide incentives for manufacturing and other things which are in addition to the previous package. So all in all, I think it would be a fantastic boost to our business. And it would provide a longer term view and perspective to the business, which is something that's needed. If you see the history of the wind tower business, Every time there's clarity and there's certainty for investors, the business behaves very, very well. Of course, the risks of passage, you know, I don't want to comment on what percentage or what are the risks or the chances. I would say it's my hope that it happens.

Yeah, knock on wood. Sounds very encouraging. Thanks very much for taking the questions.

We'll take our next question from the line of John Ramirez with DA Davidson.

Good morning. This is John Ramirez for Brent Thielman. How are you? Good. Thank you. Is there a way for us to understand what the impact of higher diesel and other costs is doing to aggregate margins? On the surface, it looks like they are stable, but you have some acquisitions that distort year-to-year comparison. I'm just wondering what kind of pressure you're seeing since the industry peers are seeing pressures?

Yeah, I'll take that. That's a great question. We did try to provide some color on that in an aggregate bucket of costs. So if I look at fuel, inclusive of diesel, natural gas, our specialty materials business is a consumer of natural gas and coal, along with cement, which is used in our and input in our stabilized sand product in Houston, we saw about a $10 million increase year over year in cost. I would say when you look at those costs and the pieces that I have drove at, the largest driver was diesel by far, was the biggest component of that $10 million increase year over year.

One thing to clarify, which I think is important, We have a very, very, very small downstream business. So we are mainly aggregates and recycled aggregates. We don't ship our product. So that's an important difference with some of our peers where they have ready mix and other things and they use a lot more diesel than we do. We basically use our diesel inside our facilities to move our loaders and things like that. So we are a little less exposed because we don't have that delivery system that some of our

peers do and just to clarify that 10 million year-over-year cost is that overall or is that what specifically for cement uh and that that was for the categories of energy and cement the price impact of um taking volume aside really what did price do for those inputs to our cost of sales year over year

Got it. And if I could do another question. What do the inquires and quotations look like for wind and the shoring business in the second half of this year based on, in March, sorry, in March, for the second half of this year based on the commentary you provided today?

Sure. For wind, we are basically sold out at the current capacity for 2022. So we have good visibility of our production for 2022. For 2023, we are in the process of negotiating with our customers their program for 2023. So as I mentioned in my comments before, we do expect slowdown in wind, like a slow market, simply because even if the package gets approved, The time between approval and then projects being ready to be rolled out and us delivering towers takes time. We expect 2023 will be a slow wind tower year. I think that's the general mood of the industry. In terms of barge, as I mentioned before, very healthy inquiries for coal, grain, and petrochemicals. You know, even at this current steel prices, as they fall down, I think we're going to be able to sell some. Let's hope prices fall fast so that the expectations of the customers align with the current market.

And then maybe just on barge, you'll, like we mentioned it in our prepared remarks, you'll see it in our materials. Our backlog is about $130 million right now. Half of that is for the back half, and then we have the other half that's scheduled for 2023. So that gives you a sense of the cadence with what we have at BACOF today.

Thank you. I appreciate the extra commentary.

I'll hop back into you.

And we'll take our next question from the line of Trey Grooms with Stevens.

Good morning. This is Noah Murkowski on for Trey, and congrats on the strong results.

Thank you.

So first, I think you'd mentioned in your prepared remarks that aggregates pricing was up low double digits in the quarter. Pretty impressive. How should we be thinking about that for the back half? Would that accelerate given the expectation for more price increases in the back half? Maybe see mid-double digit growth, mid-teens growth?

Good morning, this is Gail. Yeah, we did have nice pricing in the quarter below double digit. You look at the first quarter was mid single digits. You know, we have annual guidance out there for prices mid single. I think the strong performance in the second quarter gives us confidence we're going to be at the high end of that range for the year. Yeah, the pace of pricing continues to be and everyday discussion for us. We're obviously seeing a lot of value for our product and raising price to combat inflation where we can. I'm not sure I'm in a position to say we can match the low double digits for the back half, but we're certainly watching pricing very, very, very, very carefully.

Gail mentioned in her remarks, you know, our goal for the year is to to at least meet or exceed our margins from last year. So our goal is to try to match pricing increases to be able to focus on the margins for the business, though.

Okay. That's helpful. And then the volume side, I think you said mid-single-digit volume. Is that a good run rate for the rest of the year? Obviously, there's some headwinds coming from new residential – also been hearing of a lot more supply constraints. So maybe if you could just contextualize how you're thinking about volumes for aggregates.

Yeah, I'd stick to kind of our full-year guidance there. Volumes were much lower in the first quarter on a year-over-year basis. So we're seeing, you know, organic one to three. I think just like pricing, we have the opportunity to see volumes for the full year coming closer to that higher end of our organic range. To your point, we're watching residential very closely. Conditioned Still very favorable in the markets that we're at, you know, within Texas, within Tennessee, within Arizona, but we're watching residential very closely.

All right, perfect. Thanks for taking my questions, and good luck on the next quarter.

Thank you. And we'll take our next question from Ian Sassino with Oppenheimer.

Isaac Sazan on for Ian. Thanks for taking the question. Regarding the infrastructure bill, I know we've been talking about it for some time, but just wondering if is there any indication into the magnitude of the uplift for 2023 across the businesses, maybe as it applies to construction products or the utility structures business?

Yep, it is Antonio. It's hard to give you a number. But I will tell you, if you read the infrastructure bill, I think you can put a Narcosa name almost to everything that's included, probably except water. We don't have a lot of exposure to water infrastructure. We are seeing already in some of our businesses projects being deployed, especially, for example, in the barge business in the maintenance of the locks and some large projects for improving the infrastructure around the Mississippi River. There's a lot of talks of many, many projects out there. It's hard to see which projects comes from the infrastructure bill versus just a normal project. But what we said in our comments is we expect in 2023 we will see some tailwinds from that. It's hard to tell you how much, but I think the way I think about it is Many of our businesses are behaving very well and have drivers that are not necessarily tied to GDP growth. They have specific things like parts, the replacement of wind towers, things like that that have specific drivers. And the infrastructure bill just provides an additional boost to that. On the other hand, for some of the businesses that are more tied to the construction, housing, things like that, I think the infrastructure bill provides some sort of a safety net for them because when you get some headwinds on housing, you will get some tailwinds on the infrastructure side, which is a much bigger exposure. We're much more exposed to infrastructure than housing. So I think overall it should help us compensate some of the negatives of a slowdown.

Okay, great. That's helpful. And then briefly on M&A, I guess given the acquisition of Ramco, it seems like there's still plenty of strategic or bolt-on acquisitions out there. I know you mentioned larger M&A would be off the table for now, but generally what does the M&A landscape look like? I guess what kind of synergies, if any, can be realized on smaller acquisitions like Ramco?

Sure. As I said, larger M&As off the table It's really we're going to be taking a pause and being very disciplined around it because we think we're going to find good opportunities probably later. On the bolt-ons, we do have a pipeline. We always have a full pipeline. We analyze and we choose the best ones we want. And synergies are relatively easy to generate in smaller acquisitions where you have a presence. Once you have a presence, for example, now in Arizona, molten acquisitions are integrated relatively fast, and there's many, many synergies. In the case of Ramco, for example, I think recycled aggregates, it's really more developed here in Texas than in California in terms of the discipline, the pricing, the operations. So I think bringing our capabilities from our Houston and Dallas market to California is going to help us, and the idea is to increase the margins. So I think the synergies are more operational and, let's say, our systems than anything else, but they are very, very profitable when you do a bolt-on and try to generate the synergies really fast.

Okay, that's very helpful. Thanks for taking the questions, and congrats on the first half of the year.

Thank you. And that is all the time we have for questions. I'll now turn the call back over to CFO Gail Peck.

Thank you, Bobby, and thank you, everyone, for joining us today. We look forward to speaking with you again next quarter.

And thank you for joining the ARCOSA Incorporated second quarter conference. 2022 earnings conference call. This does conclude the program. You may now disconnect. Have a great day.