Astec Industries(US:ASTE)2022-11-05 05:55Financial Data and Key Metrics Changes - Sales in Q3 2022 reached $315.2 million, an increase of 18.1% compared to the previous year, marking the highest third-quarter sales in the company's history [6][15] - Adjusted EBITDA increased by 1.2% to $16.6 million, while the adjusted EBITDA margin decreased by 80 basis points to 5.3% due to higher manufacturing costs and increased SG&A expenses [16][19] - Adjusted earnings per share was $0.28, impacted by inflationary pressures in material and labor [17] Business Line Data and Key Metrics Changes - Infrastructure Solutions sales increased by 15.7% to $201.9 million, with domestic sales up 16% and international sales up 14.4% [12][18] - Materials Solutions sales grew by 21% to $111.8 million, driven by a 31.8% increase in equipment sales, while parts sales increased by 4.3% [12][18] Market Data and Key Metrics Changes - Domestic sales increased by 23.6%, while international sales remained constant [15] - Backlog increased by 56.2%, with Material Solutions growing by 31.2% and Infrastructure Solutions surging by 75.8% [15] Company Strategy and Development Direction - The company is focused on a strategic transformation through a global technology platform to enhance automation and process efficiency [9] - The "Simplify, Focus and Grow" strategy aims to drive profitable growth and improve the business and earnings profile [9][14] - The company is committed to sustainability, supporting initiatives like the National Asphalt Paving Association's program for zero carbon emission asphalt pavements by 2050 [14] Management's Comments on Operating Environment and Future Outlook - Management noted robust market demand across segments despite softening macroeconomic indicators, with customer sentiment remaining positive [6][11] - The company expects improvements in margins and revenue as supply chain challenges normalize and inflationary pressures stabilize [12][33] - Management expressed confidence in future growth driven by federal funding from the Federal Highway Bill and ongoing infrastructure investments [11][49] Other Important Information - The company announced an 8.3% increase in its quarterly dividend to $0.13 per share and repurchased $6.1 million worth of shares [8][21] - The Oracle transformation project is expected to enhance operational efficiency and is set to be implemented across all global sites by 2025 [22] Q&A Session Summary Question: Can you provide details on the ERP implementation and its financial implications? - Management indicated that the ERP implementation will primarily be expensed, with a total program cost in the $150 million range, including some capital expenses for facility transformation [28][30] Question: How do you view inflation figures moving forward? - Management noted that pricing has begun to outpace inflation, with expectations for continued pricing realization through Q4 and into 2023 [32][33] Question: What is the outlook for gross margins into 2023? - Management stated that gross margins will be influenced by supply chain improvements, with expectations to recover margins as supply chain issues are resolved [39][40] Question: What is driving the strong order intake in Materials Solutions? - Management highlighted that the current ordering period and customer confidence in infrastructure spending are contributing to strong order intake [41][44] Question: How are component shortages affecting operations? - Management acknowledged ongoing challenges with specific components but noted improvements in supply chain conditions overall [46][47] Question: What are the expectations for federal highway spending? - Management confirmed that customers are beginning to see funds flow from federal programs, with expectations for significant project activity in 2023 and 2024 [49][57] Question: What are the updated CapEx expectations for this year and next? - Management revised the CapEx expectation for this year to $35 million to $45 million, with a similar range anticipated for 2023, focusing on automation projects [53][55]