Astec Industries, Inc. Q3 FY2025 earnings call

• Continued positive momentum in Q3 with increased net sales, adjusted EBITDA, and adjusted earnings per share. Adjusted EBITDA was $27.1 million, up 55.7% Y/Y. - Included TerraSource since July 1, with TerraSource contributing $64.1 million to consolidated backlog. - Proactive in managing tariffs, implementing strategies like dual sourcing and reshoring. - Progress in TerraSource integration, including payroll and benefit system transition, and harvesting synergies. - Backlog stability in Infrastructure Solutions and legacy Materials Solutions, with TerraSource driving Material Solutions growth. - Committed to sustainability through product and technology innovation.

Infrastructure Solutions segment: Third quarter net sales increased 17.1% from the third quarter of 2024, with growth in equipment and parts sales. Asphalt and concrete plants drove domestic sales, but mobile paving and forestry equipment faced headwinds. Trailing 12-month net sales grew 8.8%, and segment operating adjusted EBITDA margin improved. Materials Solutions segment (including TerraSource): Net sales for the quarter increased $30.5 million or 24.1%. Adjusted EBITDA increased 6.2%, but adjusted EBITDA margin declined 170 basis points due to prior year litigation reserve release. Trailing 12-month net sales, segment operating adjusted EBITDA, and margin increased.

• Raised the lower end of full-year adjusted EBITDA guidance from $123 million to $132 million, maintaining the upper range at $142 million. - Guidance is based on current operating environment, including tariff impact. - Full year ranges: adjusted EBITDA $132M-$142M, effective tax rate 24%-27%, capital expenditures $25M-$35M. Q4 ranges: adjusted SG&A $65M-$73M, depreciation and amortization $37M-$42M.

• Fluctuations in tariffs and related uncertainty pose risks to margins. The tariff environment is fluid, creating uncertainty for future periods.

Q: Was there any worries that dissipated in 3Q that gave confidence to raise the low end of guidance?

A: When doing Q2 earnings call, there were gaps in capacity to fill, which filled nicely, and with short lead times, teams can deliver Q4 sales to support the new range.

Q: When looking at book-to-bill and order rates, did something change this year?

A: Customers had a different booking process, and uncertainty around tariffs lessened, leading to better orders in 3Q.

Q: TerraSource's margin in 3Q and timing of synergy realization?

A: TerraSource margins were accretive, and synergies are expected to show up in 2026, with some already realized.

Q: Breakdown of parts as percentage of revenue per segment?

A: MS parts sales mix jumped 670 basis points, and the percentage is expected to continue increasing.

Q: Tariff uncertainty with Section 232 tariffs?

A: Complicated, but teams have taken actions on pricing and alternative supplies to mitigate tariff increases.

Q: Parsing parts results in Infrastructure segment volume and price contribution?

A: Majority of parts growth is due to efforts to grow the parts business, with some cost of goods sold effect from tariffs.

Q: Asphalt vs concrete plant strength in percentage terms?

A: Both asphalt and concrete plant segments are strong, with no clear bigger driver as each can have significant impact depending on size.

Q: Materials segment dealer inventory and TerraSource in dealer channel?

A: Legacy MS dealer inventory is healthy, and TerraSource has a different channel with some potential to go through dealer channel but less likely for equipment stocking.

Q: TerraSource parts fill rates improvement timing?

A: Efforts started day 1, and expect to get them very close to Astec's fill rates within the next 12 months.

Q: Rare earth mining demand catalyst and internal moves?

A: Received first orders from rare earth mining companies, and equipment can be used today, with dealer network taking advantage of opportunities.