Astec Industries(US:ASTE)2023-11-01 18:05Financial Data and Key Metrics Changes - Sales for Q3 2023 were $303.1 million, down 3.8% year-over-year, with slight declines in both segments [16] - Adjusted EBITDA decreased 39.8% to $10 million, with an adjusted EBITDA margin of 3.3%, a decrease of 200 basis points [17] - Gross margins improved by 220 basis points to 23%, marking the fifth consecutive quarter with gross margins exceeding 20% [17][19] - Adjusted earnings per share decreased to a loss of $0.01 from an income of $0.28 the prior year, primarily due to a litigation contingency [18] Business Line Data and Key Metrics Changes - Infrastructure Solutions net sales decreased 5.5% to $190.8 million, with international growth of 3.4% offset by softening domestic demand [19] - Material Solutions net sales decreased 1.2% to $110.5 million, with international sales increasing by 20.7% while domestic sales declined by 9% [20] - Part sales grew 2.4%, while equipment sales declined by 4.5% [16] Market Data and Key Metrics Changes - Strong international sales growth of 11.7% was noted, while domestic sales were down 7.9% [16] - Backlog decreased 36.6% from the peak in Q3 2022 and 10.8% sequentially, remaining within the historical range of 1.5 to 2 quarters [16] Company Strategy and Development Direction - The company is focused on operational excellence and has simplified its internal staffing and branding [13] - Investments are being made to optimize the manufacture of mobile construction and crushing equipment domestically and internationally [13] - The company is pursuing a growth strategy that includes introducing new products and expanding into new geographies [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about customer sentiment and backlog for concrete plants and related equipment, expecting strong demand in 2024 [10][12] - The company is monitoring high-volume dealer orders for potential modifications due to rising interest rates [10] - Management indicated that the Federal Highway Bill funding is providing long-term stability for markets and customers [10] Other Important Information - The company announced the addition of paid parental leave for both parents and an increase in the company 401(k) maximum effective January 1, 2024 [7] - A corporate sustainability report is set to be released in Q4, marking a significant step forward in the company's ESG journey [15] Q&A Session Summary Question: Can you discuss the margin front and the sequential decline? - Management noted that overall margins continue to improve year-over-year, but the mix of products in Q3 contributed to the margin profile [27] Question: Did the mix of international versus domestic revenues contribute to margin changes? - Management stated that they were pleased with international performance and that transfer pricing affects margins [29] Question: Are order rates expected to turn positive in Q4? - Management expects a strong order writing period in Q4, in line with previous years, due to low dealer inventory [32] Question: What does "normalization" of orders mean? - Management clarified that they expect order patterns to stabilize within a comfortable range of $400 million to $500 million [34] Question: Can you comment on infrastructure order delays? - Management indicated that delays were temporary and that shipments were expected to resume shortly [42] Question: What is driving the increase in SG&A costs? - Management explained that higher SG&A was due to litigation costs and specific project investments [44] Question: When will improvements from plant efficiency investments be seen? - Management anticipates seeing improvements in Q4 and significant benefits in the following year [49]