Astec Industries(US:ASTE)2021-08-08 01:02Financial Data and Key Metrics Changes - Second quarter revenues increased 4.8% to $278 million compared to the prior year quarter [16] - Adjusted EBITDA decreased 14.2% to $21.7 million, with an adjusted EBITDA margin decline of 170 basis points to 7.8% [17] - Adjusted earnings per share decreased 26.9% to $0.49 compared to $0.67 in the second quarter of 2020 [17] Business Line Data and Key Metrics Changes - Infrastructure Solutions business revenue decreased slightly to $180.2 million, while Materials Solutions business revenues increased 17.3% to $97.8 million [19][20] - Parts sales increased 18.9%, driven by higher demand across product lines and regions [16] - Backlog increased 140% year-over-year to over $436 million, with Materials Solutions orders up 200% and Infrastructure Solutions orders up 99% [16][19] Market Data and Key Metrics Changes - Strong residential real estate demand is expected to lead to increased non-residential construction, creating opportunities for the company [12] - Customer sentiment remains positive, with expectations for increased U.S. infrastructure spending due to bipartisan support for a multi-year infrastructure bill [12][13] - International sales increased by 51%, indicating strong demand in global markets [20] Company Strategy and Development Direction - The company is focused on a strategic transformation program aimed at simplifying operations, improving productivity, and embedding continuous improvement [10] - A rebranding initiative was launched to unify the organization and enhance customer interactions [11] - The company aims for long-term organic growth of approximately 5% year-over-year, with a focus on international business and parts and services [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ongoing challenges from inflation and labor shortages but remains optimistic about customer demand and backlog conversion [15][30] - The company is actively managing supply chain constraints and has implemented price increases to offset rising costs [14][31] - Management expects continued strong demand for products, driven by favorable industry dynamics and pent-up demand from the pandemic [12][15] Other Important Information - The company maintains a strong balance sheet with minimal debt and a net cash position of over $174 million [21] - The company is committed to funding dividends and maintaining a flexible balance sheet to withstand various economic situations [22] Q&A Session Summary Question: How do you see the inflationary environment developing going forward? - Management indicated that Q2 was more challenging than Q1, and while future conditions are uncertain, they are confident in their procurement strategies and ability to manage supply chain issues [29][30] Question: What is the biggest constraint on converting backlog to revenue? - Labor availability is the primary constraint, with improvements noted but still a significant challenge [33][34] Question: Can you quantify lost revenue due to labor shortages? - Management stated that quantifying lost revenue is difficult, but they are focused on converting backlog efficiently [39] Question: How are you managing pricing in light of inflation? - The company has implemented five price increases year-to-date and is actively managing pricing strategies across different segments [38] Question: What is the status of the Mequon facility? - The Mequon facility has been sold, and production has been moved to other locations, improving performance in the Materials Solutions business [48] Question: How exposed is the backlog to fluctuating prices? - There is some exposure to fluctuating prices, but the company is using various mechanisms to manage costs and pricing effectively [48] Question: What is the outlook for international sales and margins? - International sales are growing, and management is optimistic about maintaining margins as they expand in new markets [66] Question: How do you prioritize backlog? - The company prioritizes backlog based on expected delivery dates as per purchase agreements, with some flexibility for urgent needs [68]