Arcosa, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Key Takeaways: Record quarter reflecting positive momentum from strategic initiatives. Stavola integration driving growth. Aggregates had strong pricing gains. Engineered Structures benefited from Wind Tower volumes. Solid cash generation and deleveraging progress.
• Construction Products: Stavola's contribution was accretive, but weather impacted organic volumes. Year-to-date organic adjusted EBITDA margin slightly up.
• Aggregates: Increased transparency with additional disclosures. Pricing up mid-single digits organically, weather was a headwind but normalized weather in July led to strong volume growth.
• Engineered Structures: Breakout of revenues into Utility and Related Structures and Wind Towers. Strong backlog for Utility and Related Structures and Wind Towers.
• Transportation: Barge orders and backlog details, with solid visibility into 2026.

Segment Performance

• Construction Products: Record revenues and adjusted segment EBITDA. Second quarter revenues increased 28%, adjusted segment EBITDA increased 44%, margin expanded 310 basis points to 28.3%. Stavola's contribution was accretive. Despite weather impacts on organic volumes, year-to-date organic adjusted EBITDA margin was slightly up.
• Aggregates: Freight-adjusted revenues increased 15%, adjusted cash gross profit increased 21%, margin expanded 250 basis points. Total volumes increased 6%, with Stavola offsetting lower organic volumes. Freight-adjusted average sales price per ton $17.83, adjusted cash gross profit per ton $8.24. Weather was a headwind but normalized weather in July led to strong volume growth.
• Specialty Materials and Asphalt: Revenues effectively doubled due to Stavola. Asphalt performed well, but Specialty Materials had flat adjusted EBITDA. Trench shoring revenues down due to lower volumes and steel prices.
• Engineered Structures: Segment revenue increased 7% due to Wind Tower volumes. Utility and Related Structures revenues down 2%, adjusted segment EBITDA increased 31%, margin expanded 350 basis points. Backlog for Utility and Related Structures at $450 million, up 9% from start of year; Wind Towers backlog almost $600 million.
• Transportation Products: Revenues up 18%, adjusted segment EBITDA increased 10%, margin declined 110 basis points. Backlog $277 million, with $122 million in orders since quarter end for barges, providing backlog visibility into 2026.

Guidance

• Tightened guidance range for full year 2025 revenues and adjusted EBITDA while maintaining the midpoint. Midpoint implies 30% growth in EBITDA excluding divested steel components.
• Construction Products: Expected to perform well with accretive contributions from Stavola. Second half of year expected to have high single-digit organic growth.
• Aggregates: Pricing outlook raised to high single-digit appreciation, expecting double-digit volume growth. Second half volume growth supported by Stavola and organic growth.
• Engineered Structures: Benefiting from infrastructure investment and power market trends. Conversion of Illinois facility to utility structures planned for second half of 2026.
• Transportation: Barge backlog visibility into 2026, with inquiries for tank barges into 2027.

Question and Answer

• Q: Trey Grooms of Stephens on updated guide range and segment basis A: Gail Peck on tightened range, maintained midpoint, organic vs inorganic growth, with confidence in back half construction outlook due to improved weather impact.
• Q: Ian Zaffino of Oppenheimer on Wind Tower capacity A: Antonio Carrillo on plant capacity (3 plants at ~60% capacity), transition of Illinois facility to utility structures due to strong demand.
• Q: Garik Shmois of Loop Capital on Aggregates gross profit per ton A: Gail Peck on back half trends, continued gross profit per ton growth, focus on pricing and cost discipline.
• Q: Julio Romero of Sidoti & Company on wind policy and margins A: Antonio Carrillo on policy clarity providing industry momentum, Gail Peck on increased confidence due to clarity.
• Q: Brent Thielman of D.A. Davidson on backlog conversion and Utility Structures A: Antonio Carrillo and Gail Peck on backlog visibility, conversion of idle plant to utility structures due to strong utility trends and pole size shifts.