Arcosa(US:ACA)2023-11-02 17:55Financial Data and Key Metrics Changes - Arcosa reported double-digit growth in revenue and adjusted EBITDA, normalizing for the divestiture of the storage tank business [5][19] - Adjusted segment EBITDA for Construction Products increased by 9% year-over-year, reflecting strong pricing gains and reduced inflationary cost pressures [10] - Operating cash flow for the quarter was $44 million, down year-over-year due to a $29 million increase in working capital [16] Business Line Data and Key Metrics Changes - Construction Products revenue increased by 7%, driven by higher pricing and recovery in natural aggregates volumes [10] - Engineered Structures revenue grew at a solid double-digit pace, but adjusted segment EBITDA declined by 6% due to operational challenges and a shift in production mix [13][48] - Transportation Products segment revenues were up 30%, with adjusted segment EBITDA more than tripling, reaching a three-year high [15] Market Data and Key Metrics Changes - Natural aggregates volumes increased by high single digits, particularly in the Gulf Coast and Texas regions [11] - The backlog for utility wind and related structures was $1.5 billion, approximately in line with the second quarter [14] - Barge backlog at the end of the quarter was up 87% year-over-year, indicating strong demand [23] Company Strategy and Development Direction - The company is focused on expanding its growth business through M&A and organic projects, with three bolt-on acquisitions in Construction Products [6][9] - Arcosa is preparing for a multiyear up cycle in the wind industry, optimizing production capacity across its footprint [22] - The company aims to prioritize pricing over volume to maximize margins, especially in the Construction Products segment [38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving double-digit growth in both revenue and adjusted EBITDA for 2023, with a forecast of 11% revenue growth and 30% adjusted EBITDA growth [19] - The company noted that while higher interest rates impact housing demand, other segments like utilities and wind towers remain insulated [58] - Management acknowledged operational challenges in Engineered Structures but expects margin improvements in the fourth quarter and into 2024 [49] Other Important Information - The company amended its credit facility to increase its revolver from $500 million to $600 million and extended the maturity date to 2028 [17] - Arcosa celebrated its fifth anniversary as an independent public company, highlighting significant changes and growth over the years [25] Q&A Session Summary Question: Can you provide more detail on volume growth in Construction Products by end markets? - Management noted that volumes for natural aggregates were up high single digits, particularly in Texas and the Gulf region, driven by positive project work [27][29] Question: What is the outlook for pricing in the Construction Products segment? - Management indicated that they are implementing pricing increases and prioritizing margins over volume, with expectations for continued strong pricing [38] Question: Can you elaborate on the issues in the Engineered Structures segment? - Management explained that operational challenges and a shift in production mix impacted profitability, but they expect margins to improve as they ramp up facilities [48][49] Question: How is the demand climate for wind towers outside of the large order tied to the New Mexico investment? - Management expressed confidence in the growth outlook for the wind tower business, supported by a good backlog and preparations for increased production [51][52] Question: What impact do higher interest rates have on the business? - Management stated that while higher interest rates affect housing demand, other segments like utilities and wind towers are less impacted due to strong fundamentals [58] Question: How do you see orders trending in the Transportation Products segment for the fourth quarter? - Management indicated that while river levels affected orders in the third quarter, they expect demand to improve in the fourth quarter with a strong backlog [62]