Valmont Industries, Inc.

Greetings. Welcome to Valmont Industries' third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. We ask that you please limit yourself to one question and one brief follow-up question and return to the queue. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Renee Campbell, Senior Vice President, Investor Relations and Treasurer. Ms. Campbell, you may begin.

Thank you and good morning. Welcome to Valmont Industries' third quarter 2023 earnings call. With me today are Avner Appelbaum, President and Chief Executive Officer, Tim Francis, Interim Chief Financial Officer, and Jean Padgett, Senior Vice President and Chief Accounting Officer. This morning, Avner will provide a brief summary of our third quarter results, commenting on our markets and long-term business strategy. Following that, Tim will review our financial performance and provide our current outlook and indications for 2023 with closing remarks from Avner. This will be followed by Q&A. A live webcast of the presentation will accompany today's call and is available for download from the webcast or on the investor's site at valmont.com. A replay will be available on our website later this morning. Please note that this call is subject to our disclosure on forward-looking statements, which applies to today's discussion, is outlined on slide two of the presentation, and will be read in full at the end of today's call. Finally, if you would like to be notified when Valmont publishes news releases and other information, please sign up for email alerts through our investor site. We also encourage investors and others interested in our company to follow Valmont and our brands on the social media channels listed on our website. With that, I would now like to turn the call over to our President and Chief Executive Officer, Avner Appelbaum.

Thank you, Renée. Good morning, everyone, and thank you for joining us. I want to first say how proud I am of our global Valmont team as they navigate a dynamic demand environment and demonstrate their unwavering support to our mission and core values. It is the team's customer-centric culture, driving innovation and delivering results, that ultimately gives me confidence of our success now and into the future. During my first quarter as CEO, I made it a priority to hear directly from our employees, customers, dealers, and shareholders. These conversations were valuable and insightful and I am appreciative of all the people I have had the opportunity to meet. Before moving forward with our quarterly review, I would like to briefly comment on the recent tragic events in Israel. The safety and well-being of our Valmont colleagues in Israel is our primary concern. I'm thankful to report all of our employees and their families there are safe, including my own. as both my wife and I have family in our home country. The loss of innocent lives during this escalating violence has been staggering, and our hearts go out to all those affected by this senseless tragedy. Now let me return to our third quarter results and key messages shown on slide four. Our Valmont team continued to perform extremely well across both segments, delivering solid third quarter results. Adjusted operating margins and adjusted diluted earnings per share improved significantly year over year while navigating a dynamic market demand environment that is pressuring top-line growth. We also generated strong operating cash flow as we managed working capital, allowing us to support our balanced capital deployment strategy and return cash to shareholders. Infrastructure demand remains robust globally, as nearly all of our end markets are experiencing multi-year secular growth drivers and global agriculture market fundamentals remain relatively strong. I will say more about our end markets in a few moments. The strong performance of our global operations team and pricing strategies in both segments have ensured we are driving margin expansion amid lower sales and ongoing inflation while capturing the value we add to our customers. And finally, we have announced necessary actions to position Valmont for long-term success, including an organizational realignment program and executive leadership changes. These actions improve our ability to support our business, streamline decision-making, and improve efficiency. Turning to slide five for an update on our markets. within infrastructure, utility demand remains robust as utilities continue to increase CAPEX spending to support a safe, secure, and reliable grid system. North America's power grid is benefiting from several demand drivers, including the need to increase grid resiliency and reliability, support power load growth, and capitalize on favorable government policies designed to accelerate the energy transition. The IRA is expected to provide tailwinds to our solar business as the industry obtains clarity on manufacturing tax credit details. Meanwhile, global solar demand remains strong due to the extension of the 10-year investment tax credit in the U.S. and favorable international renewable energy policies. Road construction investment continues to support transportation demand globally. The release of IIJA funding has been slower than anticipated, as inflation, higher interest rates, and labor constraints are delaying some projects. Although we're not yet seeing orders from this program, our transportation products are typically purchased 9 to 12 months following funding appropriation. Commercial lighting markets are experiencing some near-term softness from the impacts of higher interest rates, inflation, and declining single-family housing starts. Telecom remains muted as carrier reduced capex spending following record levels of investment. While some of our markets are faced with near-term macroeconomic challenges, broad-brace infrastructure demand remains strong with several long-term drivers. Our flexible manufacturing footprint and strong commercial partnership uniquely positions us to deliver value to our customers and drive profitable growth well into the future. Turning to agriculture, in North American markets, the latest USDA projection reaffirmed that 2023 net farm income levels are expected to be at historically high levels. While farmer economics remain healthy, Sentiment remains somewhat muted coming off the substantial profit margins that were recognized in 2021 and 2022. We are seeing signs of positive trends this quarter as order levels for irrigation systems are tracking ahead of last year. International agriculture fundamentals remain robust. Brazil has been strong this year, and we achieved another record quarter of sales as the market continues to experience increasing level of production and expansion of irrigated acres. Brazil is expected to be the fastest-growing ag market in the world, and it remains a key part of our long-term growth strategy. In other regions, our leadership position and project pipeline support ongoing demand, and shipments of the Large Egypt project are expected to continue through 2024. In summary, global agriculture markets are still in a position of relative strength. Our value proposition and the long-term demand trend set us up for continued profitable growth. Turning to slide six, today we are announcing specific actions to better align our organization to our strategy and improve our cost structure. After evaluating the administrative support within each business segment and corporate, We have taken actions to create synergies and optimize our structure. We are simplifying reporting lines, improving our visibility across the organization, and driving accountability to achieve results. These are net positives that help us scale the organization to efficiently focus on our priorities and drive strategy to improve profitability. We don't take these actions lightly, but they are necessary to set us up for long-term success. Next, while Tim will provide more detail later in the call, I'd like to briefly address the impairment charges to Goodwill and Intangible Assets in the Agriculture Technology Reporting Unit. These charges reflect a much lower adoption rate of Prospera's agronomy technology solutions compared to original assumptions. Going forward, our go-to-market approach is to ensure innovation is introduced with the purpose of meeting the immediate needs of our irrigation customers. As the market leader in advanced irrigation technology solutions, we're excited about the growth and partnership opportunities our investment creates for us to deliver additional crop and water management solutions to our growers. We're committed to harnessing the power of evolving AI and machine learning technologies and will continue investing in R&D. Moving to slide seven, I now would like to share an update on our executive leadership team, our strategic priorities, and forward expectations. Aaron Schaffer has been named Group President to Agriculture and our Chief Strategy Officer, which is a new role for the organization. Aaron previously had numerous leadership roles within our irrigation business and most recently served as Group President, Infrastructure. As Chief Strategy Officer, Aaron will develop opportunities to leverage commercial and technology strategies and create a strategic roadmap for growth across the company. Tim Danayou has backfilled Aaron's role as Group President, Infrastructure. In this role, he will lead commercial growth strategies and foster collaboration across all infrastructure's product lines to deliver value-add solution to our customers that drive profitability and ROIC improvements. Tim was most recently EVP corporate business development and previously was the president of the former ESS segment. Diane Larrikin remains our EVP of global operations, leading strategy to support capacity growth, including meaningful productivity enhancement across our businesses through operational excellence. Our entire executive team will lead their respective areas with a sharp focus on data-backed decision-making and tight processes around investment decisions. I am confident this is the right team to help us achieve our strategic objectives. A few weeks ago, the leadership team and I met to discuss our strategy for in light of my transition into the CEO role. The most important outcome from those meetings that I wanted us to achieve was to affirm that our core strategic priorities remain intact. At the same time, as is common when there are changes in leadership, as CEO, I started prioritizing certain aspects of our strategy differently than my predecessor. On our investor day, we highlighted initiatives that deliver profitable growth based on leveraging our competitive advantages. The last few years, we experienced tremendous growth, which drove the ability to explore several investment opportunities. While we continue prioritizing growth initiatives, looking ahead, we will invest with discipline and proactively make decisions in conjunction with market cycles. we remain focused on new products and solutions that solve our customers' most pressing challenges while specifically strengthening our core businesses and prioritizing high-value revenue. Through this lens, the pace of some of our initiatives may change. For example, the bottom-line impact from our agriculture growth initiatives will be more measured than our previous commentary may have indicated. and we'll be more realistic about anticipated rate of change to our business. We still hold an unshakable belief that we can and should bring advanced solutions to our customers. Our innovation funnel includes a mix of projects with longer payback horizons and others with more immediate impacts, such as our robust solar business and our newly launched eco-friendly concrete utility poles. In summary, Our management team and organization are united around our strategic priorities with a focus on initiatives that deliver compelling value proposition to our customers. I'm excited about Belmont's journey as a company that maximizes financial performance through the cycles made possible by an unwavering discipline on capital allocation and ROIC. Now I'll turn it over to Tim for a third quarter financial review and update it out.