Astec Industries, Inc. (NASDAQ:ASTE) Q4 2024 Earnings Conference Call February 26, 2025 8:30 AM ET Company Participants Steve Anderson - Senior Vice President of Administration, Investor Relations Jaco van der Merwe - President & Chief Executive Officer Brian Harris - Chief Financial Officer Conference Call Participants Brian Sponheimer - Gabelli Asset Management Operator Hello and welcome to the Astec Industries Fourth Quarter and Full Year 2024 Earnings Call. As a reminder, this conference call is being r ...

Fourth Quarter and Full Year Earnings February 26, 2025 B U I L T T O C O N N E C T Safe Harbor Certain statements contained in this presentation contain forward-looking statements within the meaning of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, income, earnings, cash flows, changes in operations, operating improvements, businesses in which we operate and the ...

Financial Performance - Record net sales of $359.0 million, an increase of 6.5% compared to $337.2 million in Q4 2023[4] - Strong net income of $21.1 million, up 41.6% from $14.9 million in Q4 2023; adjusted net income of $27.2 million, a 32.0% increase[4] - EBITDA of $40.0 million, a 57.5% increase from $25.4 million in Q4 2023; record adjusted EBITDA of $47.9 million, up 46.9%[4] - Diluted EPS of $0.92, a 41.5% increase from $0.65 in Q4 2023; record adjusted EPS of $1.19, up 32.2%[4] - Gross profit for Q4 2024 was $102.9 million, compared to $89.1 million in Q4 2023, reflecting a significant improvement in profitability[22] - Income from operations for Q4 2024 was $34.8 million, compared to $18.9 million in Q4 2023, with adjusted income from operations rising to $42.8 million from $26.3 million[43] - Adjusted operating margin improved to 11.9% in Q4 2024 from 7.8% in Q4 2023, reflecting operational efficiency gains[43] Segment Performance - Infrastructure Solutions segment net sales of $248.8 million increased by 11.9% due to strong demand for asphalt and concrete plants[13] - Materials Solutions segment net sales of $110.2 million decreased by 4.1% primarily due to lower domestic equipment sales[13] - Infrastructure Solutions segment net sales increased by 11.9% to $248.8 million, while Materials Solutions segment sales decreased by 4.1% to $110.2 million[26] - The Infrastructure Solutions segment's operating adjusted EBITDA margin improved to 14.5% in 2024 from 12.8% in 2023[30] Cash Flow and Liquidity - Operating cash flow of $36.6 million and free cash flow of $32.1 million in Q4 2024[4] - Total liquidity of $228.1 million, consisting of $88.3 million in cash and cash equivalents and $139.8 million available for additional borrowings[13] - Cash, cash equivalents, and restricted cash increased to $90.8 million as of December 31, 2024, compared to $63.2 million at the end of 2023[32] - The company reported a net cash provided by operating activities of $23.0 million for the year ended December 31, 2024, down from $27.8 million in 2023[36] - Free cash flow for Q4 2024 was $32.1 million, down from $37.5 million in Q4 2023, while net cash provided by operating activities decreased to $36.6 million from $46.6 million[52] Debt and Backlog - Long-term debt rose to $105.0 million in 2024 from $72.0 million in 2023, indicating increased leverage[32] - Backlog decreased by 26.4% to $419.6 million compared to $569.8 million in Q4 2023[4] Future Outlook - For full year 2025, the company expects adjusted EBITDA in the range of $105 million to $125 million[4] Transformation and Restructuring - Transformation program costs for 2024 totaled $33.5 million, up from $29.7 million in 2023, indicating ongoing investment in strategic initiatives[43] - The company is focused on restructuring efforts, with related charges of $9.5 million in 2024, compared to $7.7 million in 2023, aimed at simplifying operations[43] - Goodwill impairment charges of $20.2 million were recorded in 2024, reflecting challenges in the Materials Solutions reporting unit[43] Yearly Performance - For the year ended December 31, 2024, net sales were $1,305.1 million, a decline of 2.5% from $1,338.2 million in 2023[30] - Net sales for Q4 2024 were $359.0 million, an increase from $337.2 million in Q4 2023, while total net sales for the year decreased to $1,305.1 million from $1,338.2 million[43] - Total operating expenses decreased to $68.1 million in Q4 2024 from $70.2 million in Q4 2023, contributing to improved operating income[22]

Core Points - Astec Industries, Inc. will hold a conference call to discuss its fourth quarter and full year 2024 financial results on February 26, 2025 [1] - The call will be hosted by key executives including the President and CEO, CFO, and Senior VP of Administration and Investor Relations [2] - A replay of the call will be available until March 12, 2025, and a transcript will be provided within 5 business days after the call [3] Company Overview - Astec is a manufacturer specializing in equipment for asphalt road building, aggregate processing, and concrete production [4] - The company's operations are divided into two main segments: Infrastructure Solutions and Materials Solutions [4]

Financial Performance - Net sales for Q3 2024 were $291.4 million, a decrease of 3.9% compared to $303.1 million in Q3 2023[94]. - Gross profit for Q3 2024 was $66.8 million, representing 22.9% of net sales, down from $69.6 million or 23.0% in Q3 2023, a decrease of 4.0%[113]. - Loss from operations for Q3 2024 was $7.2 million, an increase of 38.5% compared to the prior year[94]. - Domestic sales for Q3 2024 were $211.2 million, or 72.5% of consolidated net sales, down 8.0% from $229.6 million in Q3 2023[109]. - International sales for Q3 2024 increased to $80.2 million, or 27.5% of consolidated net sales, up 9.1% from $73.5 million in Q3 2023[111]. Backlog and Orders - Backlog as of Q3 2024 was $475.9 million, a decrease of 22.6% from the previous year[94]. - The backlog of orders decreased by $138.9 million, or 22.6%, to $475.8 million as of September 30, 2024, compared to $614.7 million as of September 30, 2023[122]. Expenses - Selling, general and administrative expenses decreased by $8.7 million, or 11.7%, to $65.6 million in Q3 2024[115]. - Selling, general and administrative expenses increased by $1.4 million, or 0.7%, to $208.1 million for the first nine months of 2024, compared to $206.7 million for the same period in 2023[116]. - The total restructuring-related charges for the three months ended September 30, 2024, were $8.4 million, compared to $0.5 million for the same period in 2023[118]. Segment Performance - Infrastructure Solutions segment sales increased by $1.8 million, or 1.1%, to $165.0 million for the third quarter of 2024, while Materials Solutions segment sales decreased by $13.5 million, or 9.6%, to $126.4 million[124][128]. - Segment Operating Adjusted EBITDA for Infrastructure Solutions was $15.6 million for the third quarter of 2024, an increase of $2.3 million, or 17.3%, compared to the same period in 2023[138][139]. - Materials Solutions segment Operating Adjusted EBITDA was $14.5 million for Q3 2024, up $5.0 million or 52.6% from $9.5 million in Q3 2023, primarily due to litigation-related adjustments and favorable inventory changes[140]. - For the first nine months of 2024, Infrastructure Solutions segment Operating Adjusted EBITDA was $68.4 million, an increase of $0.9 million or 1.3% from $67.5 million in the same period of 2023, driven by favorable pricing and reduced costs[142]. - Materials Solutions segment Operating Adjusted EBITDA decreased to $30.0 million for the first nine months of 2024, down $12.4 million or 29.2% from $42.4 million in 2023, mainly due to manufacturing inefficiencies and unfavorable sales volume[143]. Cash Flow and Liquidity - Net cash used in operating activities for the nine months ended September 30, 2024, was $(13.6) million, an improvement of $5.2 million compared to $(18.8) million in the same period of 2023[154]. - Net cash used in investing activities was $14.0 million for the nine months ended September 30, 2024, compared to $3.9 million in the same period of 2023, primarily due to the absence of prior year asset sales[156]. - Total liquidity as of September 30, 2024, was $195.1 million, consisting of $52.7 million in cash and cash equivalents and $142.4 million available for additional borrowings[146]. - As of September 30, 2024, the company had $99.0 million in outstanding borrowings under its Credit Facilities, with $142.4 million available for future borrowings[149]. Impairments and Charges - A goodwill impairment charge of $20.2 million was recognized for the Materials Solutions reporting unit due to macroeconomic conditions[98]. - A pretax non-cash goodwill impairment charge of $20.2 million was recognized for the Materials Solutions reporting unit during the second quarter of 2024[117]. Market Outlook - The company expects total implementation costs for the ERP system to range from $180 to $200 million, with $127 million incurred to date[95]. - The company anticipates that steel prices will remain stable and oil prices will remain high throughout 2024 and into 2025[102][103]. Taxation - The effective income tax rate for the third quarter of 2024 was 27.1%, compared to 8.5% for the third quarter of 2023, driven by higher pretax book loss[120]. Dividends - The company paid quarterly dividends of $0.13 per common share in both Q3 2024 and Q3 2023[158].

Financial Data and Key Metrics Changes - Consolidated net sales for Q3 2024 were $291.4 million, a decrease of 3.9% year-over-year due to reductions in equipment and parts sales [9][28] - Adjusted EBITDA increased by 74%, with an adjusted EBITDA margin improvement of 270 basis points [29] - Adjusted earnings per share was $0.31 compared to a loss of $0.01 in the prior year [30] Business Line Data and Key Metrics Changes - Infrastructure Solutions segment net sales increased by 1.1% to $165 million, driven by an $8.4 million increase in equipment sales [31] - Material Solutions segment net sales decreased by 9.6% to $126.4 million, primarily due to lower domestic equipment sales [32] - Segment operating adjusted EBITDA for Infrastructure Solutions increased by 17.3% to $15.6 million, while Material Solutions saw a 52.6% increase to $14.5 million [31][32] Market Data and Key Metrics Changes - Domestic sales accounted for approximately 72% of consolidated net sales, with a year-over-year decrease of 8%, while international sales increased by 9.1% [29] - The backlog at the end of the quarter was $476 million, with Infrastructure Solutions showing stability and Material Solutions experiencing moderating trends [12][19] Company Strategy and Development Direction - The company is focused on three core pillars: empowering employees, customer focus, and industry-changing innovations [13] - The strategic roadmap aims to enhance operational efficiency and drive sustainable growth [38] - The company is exploring inorganic growth opportunities that align with its financial criteria [40] Management's Comments on Operating Environment and Future Outlook - Management noted a challenging market environment but emphasized strong demand for asphalt and concrete plant deliveries [36] - There is cautious optimism for future orders based on strong quoting activity and customer feedback [49][57] - The company expects full-year sales to be broadly flat compared to the prior year, with gross margin anticipated at the lower end of the previously provided range [41] Other Important Information - The company generated $19.9 million of free cash flow in the quarter and ended with total available liquidity of $195.1 million [34] - The company is committed to sustainability and has introduced innovative products that minimize environmental impact [22][24] Q&A Session Summary Question: What attracted you to the opportunity at Astec? - The new CFO highlighted the strong foundation built by the management team and the potential for value creation through growth drivers [45] Question: Was there a favorable impact to EBITDA from a legal settlement in this third quarter? - Management clarified that there was a $2 million release related to a legal case, contrasting with a $6.4 million charge in the prior year [46] Question: How much has dealer destocking been impacting sales and orders? - Management noted a 4% to 5% reduction in dealer inventory and expressed optimism based on positive dealer feedback [47][48] Question: Do you expect the positive quoting activity to translate to orders in the fourth quarter? - Management indicated historical trends suggest a positive conversion of rental agreements in Q4, with a focus on larger systems [49] Question: Can you talk about ongoing manufacturing efficiencies? - Management expressed satisfaction with cross-site production efforts and emphasized the need to balance cost reductions with expected output [51] Question: What is the outlook for cash flow generation in Q4? - Management expects positive cash flow in Q4, despite some additional cash outflows related to legal settlements [54] Question: Will CapEx remain at maintenance levels next year? - Management indicated that CapEx will likely remain strong, with ongoing investments in operations and potential manufacturing capacity in India [56]

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Financial Performance - Net sales for Q3 2024 were $291.4 million, a decrease of 3.9% compared to Q3 2023[1]. - The net loss was $6.2 million, which included an $8.4 million charge related to a legacy litigation settlement; adjusted net income was $7.0 million[1][2]. - Adjusted EBITDA increased by 74.0% to $17.4 million, while EBITDA declined to $0.6 million, a decrease of 66.7%[1][3]. - The company reported a loss from operations of $7.2 million for Q3 2024, compared to a loss of $5.2 million in Q3 2023[28]. - Adjusted income from operations for Q3 2024 was $9.9 million, up from $3.1 million in Q3 2023, resulting in an adjusted operating margin of 3.4%[28]. - The net loss attributable to controlling interest for Q3 2024 was $6.2 million, slightly improved from a loss of $6.6 million in Q3 2023[29]. - The company reported an adjusted EPS of $0.31 for Q3 2024, compared to a loss of $0.01 in Q3 2023[29]. - EBITDA margin for Q3 2024 was 0.2%, down from 0.6% in Q3 2023[30]. Sales Performance - Domestic sales decreased by 8.0% to $211.2 million, while international sales increased by 9.1% to $80.2 million[3]. - Infrastructure Solutions segment net sales increased slightly to $165.0 million, with operating adjusted EBITDA rising 17.3% to $15.6 million[6]. - Materials Solutions segment net sales decreased by 9.6% to $126.4 million, but operating adjusted EBITDA increased by 52.6% to $14.5 million[7]. - Infrastructure Solutions revenue increased to $165.0 million, up 1.1% from $163.2 million in 2023[18]. - Materials Solutions revenue decreased to $126.4 million, down 9.6% from $139.9 million in 2023[18]. - Net sales totaled $291.4 million, a decline of 3.9% compared to $303.1 million in 2023[18]. Cash Flow and Liquidity - Total liquidity was $195.1 million, consisting of $52.7 million in cash and $142.4 million available for additional borrowings[8]. - Free cash flow for the quarter was $19.9 million after capital expenditures of $2.6 million[8]. - Free cash flow for Q3 2024 was $19.9 million, a significant improvement from a negative $24.2 million in Q3 2023[31]. - Net cash used in operating activities was $(13.6) million for the nine months ended September 30, 2024, compared to $(18.8) million in 2023[21]. - Cash, cash equivalents, and restricted cash decreased to $55.3 million from $63.2 million at the end of 2023[20]. Backlog and Assets - The backlog decreased by 22.6% to $475.8 million, with domestic backlog down 26.0% to $377.6 million[3][6]. - Total assets as of September 30, 2024, were $1,067.1 million, compared to $1,059.3 million at the end of 2023[20]. - Current liabilities remained stable at $299.2 million, slightly up from $299.0 million in 2023[20]. Charges and Impairments - The company incurred restructuring and related charges of $8.4 million in Q3 2024, compared to only $0.1 million in Q3 2023[28]. - Goodwill impairment charges of $20.2 million were recorded in the nine months ended September 30, 2024, with no charges in the same period of 2023[29]. - The transformation program costs are included in "Cost of sales" and "Selling, general and administrative expenses" and are part of ongoing strategic initiatives[23].

Core Insights - Astec Industries, Inc. reported a net sales decrease of 3.9% to $291.4 million in Q3 2024 compared to Q3 2023, with a net loss of $6.2 million, which included an $8.4 million charge related to a litigation settlement [1][2][3] - Adjusted net income for the quarter was $7.0 million, with adjusted EBITDA increasing by 74.0% to $17.4 million [1][3][32] - The company experienced mixed results across its segments, with Infrastructure Solutions showing sales and margin growth, while Materials Solutions faced challenging market conditions [2][6][7] Financial Performance - Net sales: $291.4 million in Q3 2024 vs. $303.1 million in Q3 2023, a decrease of 3.9% [1][17] - Domestic sales decreased by 8.0% to $211.2 million, while international sales increased by 9.1% to $80.2 million [3][17] - Backlog decreased by 22.6% to $475.8 million, with domestic backlog down 26.0% and international backlog down 5.7% [3][17] Segment Results - Infrastructure Solutions segment net sales increased slightly to $165.0 million, with an operating adjusted EBITDA of $15.6 million, up 17.3% [6][17] - Materials Solutions segment net sales decreased by 9.6% to $126.4 million, but operating adjusted EBITDA increased by 52.6% to $14.5 million [7][17] Cash Flow and Liquidity - Operating cash flow for the quarter was $22.5 million, with free cash flow of $19.9 million after capital expenditures of $2.6 million [1][8] - Total liquidity stood at $195.1 million, comprising $52.7 million in cash and cash equivalents and $142.4 million available for additional borrowings [8][20] Balance Sheet Highlights - Total assets increased to $1,067.1 million as of September 30, 2024, compared to $1,059.3 million at the end of 2023 [20] - Total equity decreased to $631.4 million from $653.7 million [20] Strategic Focus - The company is concentrating on commercial and operational excellence, aiming to drive sustainable value creation for shareholders [2][3] - Ongoing transformation initiatives include a phased implementation of a standardized enterprise resource planning system and lean manufacturing efforts [24][25]

Group 1 - The article discusses the perspective of a value-oriented analyst focused on the oil and gas sector, emphasizing the importance of analyzing cash flows and assessing company value [1] - The analyst employs Benjamin Graham's investment philosophy combined with a contrarian approach to identify businesses trading at significant discounts to their intrinsic value [1] Group 2 - The analyst runs a newsletter called Crude Value Insights, which aims to provide insights into the valuation of companies within the oil and gas industry [1]