ASTEC INDUSTRIES INC Q4 FY2024 earnings call

• Delivered quarterly records for net sales, adjusted net income, and adjusted EBITDA. Fourth quarter benefited from continuous process improvement initiatives.
• Employee engagement continues to grow, with ongoing plans in 2025. Customer-focused approach remains key, with new product launches and digital integrations planned for 2025.
• Industry state: Astec is a niche player in rock to road market segments. U.S. infrastructure needs significant repair and replacement, with funding from federal, state, and private sources.
• Implied orders up slightly year-over-year and sequentially, driven by Infrastructure Solutions with Material Solutions also showing a 12% increase from Q3. Backlog declined sequentially but remained healthy.
• Operational excellence initiatives: Invested in resources to leverage purchasing power and reduce supply risk, identifying secondary and tertiary supply sources globally.

Infrastructure Solutions Segment:

• Fourth quarter: Higher net sales due to strong domestic capital equipment performance and moderate aftermarket parts sales. Annual net sales increased $37 million or 4.6%. Segment operating adjusted EBITDA dollars and margins were positively affected by volume, pricing, and operational excellence initiatives. Q4 delivered a record EBITDA margin of 21.3%.

Material Solutions Segment:

• Fourth quarter and year: Adjusted EBITDA dollars and margins negatively impacted by lower capital equipment sales from high interest rates and dealer destocking. Aftermarket parts sales were relatively flat but at healthy levels. Cost control mitigated some of the negative impact.

• 2025 adjusted EBITDA expected in range of $105 million to $125 million (excluding potential tariff impact).
• Seasonality: Approximately 40%-45% of adjusted EBITDA in first half, 55%-60% in second half.
• Operating cash flow expected $110 million to $125 million before capital expenditures of $35 million to $45 million.
• Adjusted SG&A expected $55 million to $65 million per quarter, effective tax rate 24%-26%, depreciation and amortization $26 million to $30 million.

• Short-term tariff risk. - Impact of high interest rates on Material Solutions capital equipment sales. - Lingering concerns over pace of interest rate reductions.

Q: Could we talk about manufacturing inefficiencies and progress made?

A: Yes, EBITDA bridges show improvement. Q4 inefficiencies were low. Teams improved counting efficiencies, and inefficiencies have been lowering quarter-over-quarter.

Q: What's a normalized level for Infrastructure Solutions backlog and concerns?

A: Backlog for asphalt and concrete plant equipment remains good. Asphalt side has strong order intake in first six weeks of 2025. Not concerned about Infrastructure Solutions as plant business is still strong.

Q: How important is reinstitution of bonus depreciation at 100% and impact of interest rates?

A: Reinstating bonus depreciation is important, especially for smaller customers. Customers have been conservative with buying due to elevated rates, but conversions in December and January show they're starting to replace old equipment despite rates.