Arcosa(US:ACA)2021-11-04 17:19Financial Data and Key Metrics Changes - Arcosa reported strong third quarter results with double-digit growth in revenue and adjusted EBITDA, driven by Construction Products and Engineered Structures segments, offsetting lower results in Transportation Products [7][12] - Adjusted EBITDA increased at a 21% compounded annual growth rate since becoming an independent public company, with a margin improvement of 240 basis points [9][10] - The company expects adjusted EBITDA for 2021 to be in the range of $272 million to $280 million, reflecting a 22% increase year-over-year in growth segments [26][27] Business Line Data and Key Metrics Changes - Construction Products segment revenues grew 55% and adjusted EBITDA increased 48%, with a segment EBITDA margin of 24% [12][13] - Engineered Structures revenue increased 12% and adjusted EBITDA rose 13%, maintaining flat margins year-over-year [15] - Transportation Products saw significant declines, with revenue and adjusted EBITDA down due to a 41% decrease in barge revenue [18] Market Data and Key Metrics Changes - The combined backlog for utility wind and related structures was approximately $466 million, up from $349 million, indicating strong order activity [17] - The company noted healthy market fundamentals in key regions such as Texas, Gulf Coast, Arizona, and Tennessee, with positive infrastructure spending trends [22][26] - High steel prices continue to impact order volumes in the barge business, while demand for propane tanks in the storage tank product line remains strong [15][23] Company Strategy and Development Direction - Arcosa is focusing on integrating recent acquisitions and simplifying its portfolio to reduce complexity, with a commitment to growing Construction Products and Engineered Structures segments [11][22] - The company is implementing a new ERP system to enhance operational efficiencies and reporting capabilities [63][71] - The long-term strategy includes capitalizing on infrastructure investments and the shift towards renewable energy sources [26][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand factors in utility, telecom, and traffic structures, despite short-term challenges in the wind tower business [32][23] - The company anticipates a recovery in the Transportation Products segment starting in 2022, with positive signs in the North American rail car market [25][27] - Management highlighted the importance of federal investment in infrastructure as a potential growth catalyst starting in late 2022 [26] Other Important Information - The company generated approximately $6 million of free cash flow during the quarter, below expectations due to higher working capital use [20] - Arcosa is committed to ESG initiatives and has welcomed a new board member with extensive experience to advance its long-term strategy [28] Q&A Session Summary Question: Will utility, telecom, and traffic offset the decline in wind business? - Management is encouraged by demand in other areas and believes they can sustain EBITDA margins despite the weaker wind business [32][33][34] Question: What is the current customer sentiment in the barge business? - Management noted strong market fundamentals and pent-up demand, but high steel prices are causing customers to delay orders [36][37][38] Question: How frequently can price increases be implemented in the aggregates business? - Price increases have been implemented mid-year, with expectations for further increases in 2022 [41][42][44] Question: What is the significance of the wind towers portion of the business? - Wind towers were previously about half of the segment sales, but utility structures have taken a larger share as the wind market has declined [49][50] Question: What are the expectations for Construction Products pricing in 2022? - Management expects to continue raising prices in line with competitors, driven by inflationary pressures [55][56] Question: How is the integration of recent acquisitions progressing? - Integration is going well, with a focus on implementing a new ERP system and leveraging synergies from the acquisitions [62][63] Question: What is the outlook for Construction Products EBITDA margins? - Management is optimistic about expanding margins, despite inflationary pressures, and expects a positive outlook for 2022 [80][82]