Astec Industries(ASTE) - 2024 Q2 - Quarterly Results

Astec Q2 2024 Financial Results Q2 2024 Key Financial Highlights Astec's Q2 2024 net sales slightly decreased, with diluted EPS heavily impacted by a $20.2 million goodwill impairment Q2 2024 Financial Performance Summary (in millions, except per share data) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $345.5M | $350.0M | (1.3)% | | Diluted EPS | $(0.61) | $0.58 | (205.2)% | | Adjusted EPS | $0.61 | $0.87 | (29.9)% | | Backlog | $531.1M | $688.8M | (22.9)% | | International Sales | $73.4M | $63.6M | 15.4% | | (Loss) Income from Operations | $(10.7)M | $17.3M | (161.8)% | - A pre-tax non-cash goodwill impairment charge of $20.2 million was recognized for the Materials Solutions reporting unit, significantly contributing to the quarterly operating loss. This impairment had an $0.89 per share impact on Diluted EPS[2][7] - Implied orders showed positive momentum, increasing 5.9% sequentially from Q1 2024, driven by high demand in the Infrastructure Solutions segment[2][4] - Management noted that federal highway bill spending is still in its early stages, with only about 20% of funds disbursed, suggesting future potential for the domestic road building market[2] Segment Performance Segment performance was mixed, with Infrastructure Solutions growing and Materials Solutions declining due to financing constraints Infrastructure Solutions Q2 2024 Performance (in millions) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $221.4M | $199.4M | +11.0% | | Segment Operating Adjusted EBITDA | $27.2M | $25.7M | +5.8% | | Segment Operating Adjusted EBITDA Margin | 12.3% | 12.9% | -60 bps | - The Infrastructure Solutions segment's sales growth was fueled by a strong infrastructure construction market, with healthy demand for asphalt and concrete plant deliveries expected through early 2025[9] Materials Solutions Q2 2024 Performance (in millions) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $124.1M | $150.8M | -17.7% | | Segment Operating Adjusted EBITDA | $10.2M | $18.3M | -44.3% | | Segment Operating Adjusted EBITDA Margin | 8.2% | 12.1% | -390 bps | - The decline in the Materials Solutions segment was primarily due to lower equipment sales resulting from finance capacity constraints among contractors and dealers, which led to fewer product conversions[10] Financial Position and Cash Flow Astec maintained total liquidity of $175.8 million, with net cash used in operating activities at $36.1 million - Total liquidity stood at $175.8 million, comprising $60.6 million in cash and cash equivalents and $115.2 million available under the revolving credit facility[11] - Net cash used in operating activities for the six months ended June 30, 2024, was $36.1 million[11] - Capital expenditures for efficiency improvements were $7.6 million in Q2 2024, and the company paid a dividend of $0.13 per share[12] Strategic Initiatives and Outlook Astec continues its multi-year ERP system implementation, expected to complete in 2027, while driving cost efficiencies - Management anticipates market dynamics to improve in the latter half of the year and expects benefits from transformation programs in future operating results[4] - The company is implementing a standardized ERP system. The pace of deployment is being adjusted to improve efficiencies, with the project now expected to conclude in 2027[13] - Total anticipated implementation costs for the ERP project range from $180 to $200 million, with approximately $119 million incurred through Q2 2024. Annual costs are expected to peak in 2024[14] Detailed Financial Statements This section presents the unaudited condensed consolidated financial statements for Q2 and H1 2024 and 2023 Condensed Consolidated Statements of Operations Statements of Operations (in millions, except per share data) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | 2024 | 2023 | 2024 | 2023 | | Net sales | $345.5 | $350.0 | $654.7 | $697.9 | | Gross profit | $81.3 | $82.9 | $158.2 | $172.1 | | (Loss) income from operations | $(10.7) | $17.3 | $(4.4) | $34.9 | | Net (loss) income | $(14.0) | $13.2 | $(10.7) | $25.3 | | Diluted EPS | $(0.61) | $0.58 | $(0.47) | $1.11 | Condensed Consolidated Balance Sheets Balance Sheet Highlights (in millions) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash, cash equivalents and restricted cash | $63.2 | $63.2 | | Inventories, net | $455.3 | $455.6 | | Total current assets | $778.8 | $719.5 | | Total assets | $1,107.0 | $1,059.3 | | Total current liabilities | $311.2 | $299.0 | | Long-term debt | $125.0 | $72.0 | | Total equity | $633.3 | $653.7 | Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Six Months Ended June 30 (in millions) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(36.1) | $(2.5) | | Net cash (used in) provided by investing activities | $(12.6) | $2.6 | | Net cash provided by (used in) financing activities | $49.5 | $(22.0) | | Change in cash, cash equivalents and restricted cash | $0.0 | $(21.5) | Reconciliation of GAAP to Non-GAAP Measures This section reconciles U.S. GAAP to non-GAAP financial measures, adjusting for non-core items to reflect core performance - The company excludes costs it does not believe are indicative of core business operations, including transformation program costs, restructuring charges, and goodwill impairment[31][32][33] Adjusted Income from Operations Reconciliation Reconciliation of (Loss) Income from Operations to Adjusted (in millions) | | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | (Loss) income from operations (GAAP) | $(10.7) | $17.3 | | Transformation program | $11.2 | $7.8 | | Restructuring and other related charges | $0.9 | $0.4 | | Goodwill impairment | $20.2 | - | | Adjusted income from operations (Non-GAAP) | $21.4 | $26.2 | | Adjusted operating margin | 6.2% | 7.5% | Adjusted EPS Reconciliation Reconciliation of Diluted EPS to Adjusted EPS | | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Diluted EPS (GAAP) | $(0.61) | $0.58 | | Transformation program | $0.49 | $0.34 | | Restructuring and other related charges | $0.03 | $0.01 | | Goodwill impairment | $0.89 | - | | Income tax impact of adjustments | $(0.18) | $(0.09) | | Adjusted EPS (Non-GAAP) | $0.61 | $0.87 | EBITDA and Adjusted EBITDA Reconciliation Reconciliation of Net (Loss) Income to Adjusted EBITDA (in millions) | | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net (loss) income (GAAP) | $(14.0) | $13.1 | | Interest, Taxes, D&A | $9.6 | $10.4 | | EBITDA | $(4.4) | $23.5 | | Transformation program | $11.1 | $7.6 | | Goodwill impairment | $20.2 | - | | Other adjustments | $0.7 | $1.1 | | Adjusted EBITDA (Non-GAAP) | $27.6 | $32.2 | | Adjusted EBITDA margin | 8.0% | 9.2% |