Good morning, ladies and gentlemen, and welcome to the Arcosa, Inc. Third Quarter 2024 Earnings Conference Call. My name is Jim and I will be your conference operator today. As a reminder, today's conference is being recorded. And now I would like to turn the call over to your host, Erin Drabek, Director of Investor Relations for Arcosa. Ms. Drabek, you may begin.

Good morning, everyone, and thank you for joining Arcosa's third quarter 2024 earnings call. With me today are Antonio Carrillo, President and CEO; and Gail Peck, CFO. A question-and-answer session will follow their prepared remarks. A copy of the press release issued yesterday and the slide presentation for this morning's call are posted on our Investor Relations website, ir.arcosa.com. A replay of today's call will be available for the next two weeks. Instructions for accessing the replay number are included in the press release. A replay of the webcast will be available for one year on our website under the News and Events tab. Today's comments and presentation slides contain financial measures that have not been prepared in accordance with GAAP. Reconciliations of non-GAAP financial measures to the closest GAAP measure are included in the appendix of the slide presentation. In addition, today's conference call includes forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company's SEC filings for more information on these risks and uncertainties, including the press release we filed yesterday and our Form 10-Q expected to be filed later today. I would now like to turn the call over to Antonio.

Thank you, Erin. Good morning, everyone, and thank you for joining us today. There are three key takeaways I want to highlight as we look at our third quarter progress, which you can see on Slide 4. First, our third quarter performance and profitability were strong, a result of our success in growing the business with meaningful margin expansion. During the third quarter, adjusted EBITDA grew significantly faster than our top line growth. We also generated free cash flow of $107 million as we prioritized working capital management. Next, we made significant progress on our strategic transformation. During the quarter, we completed the divestiture of our steel components business. And on October 1, we closed the acquisition of Stavola, the largest purchase in Arcosa's history. Stavola expands our aggregates footprint into the nation's largest MSA with increased exposure to lower volatility infrastructure markets. In our press release yesterday, we increased our adjusted EBITDA guidance for 2024, reflecting these portfolio actions. The midpoint of our revised adjusted EBITDA guidance reflects a 34% increase year-over-year when normalizing for the steel components divestiture and a large land sale gain in 2023. Finally, we completed these initiatives while implementing financial flexibility that enables us to use our cash flow to reduce our net leverage towards our target of 2x to 2.5x over the next 18 months while supporting our capital allocation priorities and growth initiatives. Slide 7 shows the positive results of our strategic transformation. Once we spun off from Trinity in 2018, our Construction Products business represented one-third of adjusted EBITDA. Today, our business is much larger than it was in 2018, and the Construction segment represents two-thirds of our EBITDA. We have come a long way as we have worked to build a simpler, more focused, and less cyclical company. This strategy continues to drive our operations and decisions every day and was a key driver of the transactions we completed throughout this year. Now let me briefly discuss third quarter results on Slide 9. From a profitability perspective, we delivered strong results relative to prior year as the third quarter benefited from recent acquisitions and divestiture progress, along with solid organic growth and more efficient operations. Third quarter consolidated revenues increased 14%, and adjusted EBITDA increased 39%, with margins expanding 330 basis points to 18.4% after normalizing for the divestiture of steel components. This was driven by organic improvement led by construction products and engineered structures and supported by accretive acquisitions completed earlier in the year, including Ameron. Within Construction Products, we were very pleased with the strong unit profitability growth and adjusted EBITDA margin expansion. Our operations performed well overcoming weather challenges, and recent bolt-ons are contributing nicely. Construction activity was stable during the quarter despite overall volumes coming in lower than expected. A portion of the volume weakness reflects our commercial strategy as we continue to prioritize price over volume. However, we do believe an element is also related to uncertainty regarding both the future path for interest rates and the outcome of U.S. elections. Turning to Engineered Structures, Ameron continues to perform well with strong execution. With respect to Wind Towers, our new facility in Berlin, New Mexico continues to ramp up production and has contributed positively to adjusted EBITDA. Market fundamentals for utility structures remain very healthy. Transportation Products results were distorted by the impact of steel components divestiture during the quarter. Our barge business continues to perform in line with expectations, and we were pleased with the 0.9x book-to-bill in the quarter. As you know, during the third quarter, several regions where we have operations were affected by severe weather events. Our focus during the quarter was to support our employees and local communities. Our people and our plants were not significantly affected by these weather events, and the Arcosa team showed incredible resilience in getting our plants back operating as soon as conditions were safe. Overall, our third quarter financial performance reflects strong operational performance and the continued positive impact from the strategic initiatives we began implementing six years ago. Since that time, we have seen improved revenue trends and meaningful acceleration in our margins. I will turn over the call to Gail to discuss our third quarter results in more detail. Gail?

Thank you, Antonio. Good morning, everyone. I'll begin on Slide 10. In the Construction Products segment, third quarter revenues were approximately flat compared to last year. Before discussing individual businesses, I want to highlight two factors that negatively impacted overall segment revenue growth this quarter. First, the decrease in freight revenues, which is pass-through, lowered segment revenues by around 3%; second, the sale of a small underperforming asphalt business completed in the second quarter resulted in a roughly 2.5% decline in segment revenues. Excluding these effects, segment revenues grew by 7% year-over-year, driven by both organic and inorganic contributions. Third quarter adjusted segment EBITDA rose by 21%, mainly due to the positive effects of recent bolt-on acquisitions, improved unit profitability in our aggregates business, and operational enhancements in our specialty materials and trench shoring businesses. The freight-adjusted segment EBITDA margin was 29%, up 380 basis points compared to the previous year and 120 basis points sequentially from the second quarter. In our aggregates business, which includes both natural and recycled aggregates, pricing momentum remains robust, with average organic pricing increasing in the low double digits year-over-year. Total volumes were roughly flat year-over-year, while organic volumes decreased in the high single digits in the third quarter. The positive contributions from recent acquisitions and solid organic growth driven by unit profitability improvements led to over 20% adjusted EBITDA growth. Our aggregates business accounted for approximately two-thirds of the year-over-year margin improvement for the segment. In the Specialty Materials segment, freight-adjusted revenues increased in the low double digits, supported by significant pricing gains across our product lines and higher plaster volumes. Operational improvements in this business led to higher adjusted EBITDA and margin expansion. Moving on to our trench shoring business, revenues fell due to slightly lower volumes and decreased steel prices, but operating efficiencies resulted in higher adjusted EBITDA and margin expansion. Now turning to Engineered Structures on Slide 11, revenues increased by 26% due to higher wind tower volumes and the inclusion of the recently acquired Ameron business. In Utility Structures, higher volumes and an improved product mix were mostly offset by lower steel prices. Adjusted segment EBITDA surged by 74%, outpacing the revenue growth and leading to a 450 basis point margin increase. Strong organic growth in our wind towers business, better product mix, and lower steel costs were further enhanced by the accretive contribution from Ameron. Order activity in utility structures remains strong with appealing margins. While we did not secure any new orders in wind towers this quarter, we are actively engaging with customers regarding future needs. We concluded the quarter with a backlog of $1.3 billion in utility wind and related structures, with expectations to fulfill 20% of this backlog within the remainder of the year and about half in 2025. Now, regarding Transportation Products on Slide 12, segment results were affected by the mid-quarter divestiture of the steel components business. During the quarter, we recorded revenues of $14 million and an adjusted EBITDA loss of $1 million for steel components, which was below our expectations due to delays in certain product shipments and business disruptions from the divestiture process. In relation to the sale, we recognized a pretax loss of $23 million, which has been excluded from adjusted segment EBITDA. Third quarter revenues for our barge business increased by 21%, mainly due to higher tank barge deliveries. Adjusted EBITDA rose by 8%, while margin decreased by 190 basis points, primarily due to a planned transition to tank barge production at one of our barge facilities. We anticipate that margins for the barge business will improve sequentially in the fourth quarter now that the transition is complete. We received approximately $75 million in barge orders during the quarter for both tank and hopper barges, resulting in a book-to-bill ratio of 0.9. Our total barge backlog at the end of the quarter was $245 million, with around 70% expected to be delivered in 2025, giving us strong production visibility for the upcoming year. Finally, I'll share some updates regarding our cash flow and balance sheet on Slide 13. We generated a strong operating cash flow of $135 million during the quarter, an increase of $91 million compared to the previous period, attributed to higher earnings and a $50 million reduction in working capital mainly from decreased accounts receivables. Year-to-date, working capital has been roughly neutral to cash flow. Capital expenditures totaled $34 million, down from the previous year and also sequentially, as we approach the completion of ongoing organic projects. This resulted in third quarter free cash flow of $107 million, of which $60 million was utilized to reduce borrowings on our revolving credit facility during the quarter. We are revising our full-year CapEx guidance to a range of $180 million to $195 million from the prior range of $190 million to $205 million. At the midpoint, this suggests about $50 million of CapEx for the fourth quarter, including CapEx for Stavola. We are focused on completing large growth CapEx projects, including those initiated at Stavola, alongside ongoing maintenance CapEx. We ended the quarter with a net debt to adjusted EBITDA ratio of 1.2x. Adjusted for Stavola, our net leverage stands at 3.4x, down from 3.7x at the time of the acquisition announcement, reflecting our commitment to prudent deleveraging. We financed Stavola with a mix of attractively priced fixed and variable rate long-term debt, which provides considerable prepayment flexibility, as we aim to return to our targeted long-term net leverage range of 2x to 2.5x within 18 months. To wrap up with a couple of notes for modeling, as Stavola has now closed, it's essential to consider the seasonality impacts it may have on our results due to its Northeast locations. Historically, Stavola's first quarter revenues typically account for less than 10% of its annual total, and first quarter EBITDA is roughly breakeven and weather-dependent. Like our existing construction materials business, the second and third quarters tend to be the strongest seasons. Additionally, we've included our updated expectations for full-year net interest expense and the related reconciliation tables in yesterday's press release. At the midpoint, this indicates a fourth quarter net interest expense of about $34 million, an increase of $22 million from the third quarter. About $5 million of the expected interest expense is nonrecurring and pertains to arrangement fees on the acquisition bridge commitment and will not be factored into the fourth quarter adjusted EBITDA. I will now hand it back to Antonio for an update on our outlook.

Thank you, Gail. Overall, our third quarter performance was consistent with our expectations, and we remain optimistic about the opportunities ahead of us. Now turning to our 2024 financial outlook on Slide 15. As I mentioned, we are increasing our guidance to reflect our performance year-to-date, the contribution from Stavola, as well as the divestiture of the steel components business. We're now estimating 2024 revenues of $2.56 billion to $2.63 billion and adjusted EBITDA to be in the range of $435 million to $450 million. We have been aggressively investing in our growth business over the past two years and are starting to see the benefits of these investments. In 2025, those investments will continue to ramp up and contribute to our growth while we prioritize debt reduction and maintenance projects versus new growth investments. Our approach to capital allocation remains consistent and deliberate. We will continue to successfully balance efficient growth with long-term investments while deleveraging the balance sheet and creating value for shareholders. To reiterate what Gail said before, we're firmly committed to quickly returning to our long-term net leverage target. Now please turn to Slide 16 for a discussion on our business outlook. The outlook for construction products is enhanced by recent portfolio actions, both acquisitions and divestitures and supported by favorable multiyear market fundamentals, including increased infrastructure spending and overall shortage of housing availability. These fundamentals and the strategic actions we have taken are reflected in our higher revenue and increased margin expectations for 2024. Currently, our Construction Materials business is experiencing lower volumes on an organic basis, which is partly weather-driven, but also resulting from some delays in infrastructure spending ahead of the U.S. election and single and multifamily construction that has been slow to recover. As a result, for the full-year, we now expect volumes for the aggregates business to be down mid-single digits on an organic basis. Pricing growth continues to be strong across our product lines. In aggregates, low double-digit organic price increases so far this year set us up for continued momentum next year. During the fourth quarter, construction products will benefit from Stavola, a transformative acquisition for us, which will contribute to both growth and margin expansion. Moving next to Engineered Structures. Order activity for utility and traffic structures remains healthy given the grid hardening initiatives and road infrastructure spending. Other positive long-term demand drivers include 5G telecom, street lighting upgrades, such as LED, and connecting renewable energy to the grid. The integration of Ameron is progressing well and is accretive to margins for the business. For wind towers, we continue to ramp up production in the Belen facility, and discussions with our customers indicate increased demand for new wind tower deliveries in 2026 and beyond. The current backlog coupled with ongoing negotiations for new business bodes well for increased production volumes and improved profitability as we move forward. Shifting to Transportation Products. We are cautiously optimistic about this business as there has been significant underinvestment in the aging inland barge fleet over the past few years. Our current backlog, along with orders received since the quarter end, position us well for 2025, with our planned tank barge capacity already fully booked for next year and about half of our hopper barge capacity similarly filled. With the current backlog, we have the flexibility to continue to ramp up production in preparation for what we expect will be a multiyear strong cycle given the state and age of the barge fleet. Summing up, 2024 has been an important, exciting, and transformational year for Arcosa. Our results demonstrate success in executing our strategy of investing in our growth businesses while simplifying our portfolio to become a company focused on expanding in attractive markets with fantastic growth opportunities. Our improved positioning will serve us well as we enter 2025, and we continue to see additional opportunities to enhance our growth and profitability over time. I want to recognize and thank all of our Arcosa employees for their dedication and contribution throughout the year and welcome the Stavola team to Arcosa. This ends my prepared remarks. We're now ready to take your questions.

Thank you. We'll hear first today from Trey Grooms at Stephens.

Hi, good morning everyone. And nice work in the quarter.

Thank you.

Yes, and thanks for all the details on everything. Antonio, do you have any early thoughts maybe on kind of how the 2025 demand outlook could be across your Construction Products markets, even if it's just high level. Just any color you could give us on your thoughts there would be great.

I'm going to provide some insights. We are very optimistic about 2025. Our businesses are experiencing strong support across the board. However, one thing I noted briefly in my earlier comments is the uncertainty surrounding elections seems to have a significant impact that’s challenging to quantify. People appear hesitant to commit to large projects. It's not about who will win; it’s more about wanting to move past this uncertainty and focus on business as usual. In addition, interest rates aren't decreasing as quickly as desired, and the housing sector remains very sluggish, with multi-housing also facing challenges. On a positive note, manufacturing is performing well, data center construction is strong, and we expect housing recovery to gain momentum in 2025. The pricing strategies we've developed throughout 2024 will also position us well for 2025. Overall, I'm feeling positive about 2025 for our construction segment and the company as a whole.

Got it. Okay. Thank you. And maybe this one is for Gail. But the free cash flow, very good in the quarter, working capital management, just all around great showing. How should we be thinking about free cash flow from a flow-through standpoint or however we should be thinking about it kind of going forward, especially with the portfolio changes you've made with Stavola?

Sure. And thank you, Trey. Good morning. We're very pleased with our cash flow generation in the third quarter. Really, year-to-date, about $130 million of free cash flow. That's up about 30% year-over-year. A lot of that came in the third quarter, and we'll continue to focus on cash generation for the balance of the year. The working capital, we are focused on levers that we can pull and control. So you saw a strong working capital in the quarter. A lot of that came from liquidation of receivables, very healthy. Timing can always impact that. So maybe we had a little of that fourth quarter effect coming into the third quarter, but very pleased with that. You saw that we did tweak down slightly our CapEx guidance for the year. So again, it's levers that we can really control on the cash side. I'd point out as it relates to the fourth quarter, the focus will absolutely be there. But you do see a step-up in interest expense. I mentioned in my comments, we see about a $22 million increase in interest expense in Q4 now that we've closed the Stavola acquisition. We'll have a little bit of follow-on on transaction and advisory fees that you'll see in our EBITDA tables as well. So those will impact Q4 cash flow, but we're absolutely focused on controlling what we can control. Antonio talked about the outlook for 2025, we are very optimistic and cash is at the very forefront of our minds.

Okay. I have one last question. We have seen strong margin expansion in Construction Products and other areas. However, I would like to focus on this specific topic due to time constraints. You mentioned improved unit profitability. As you think about price costs across the different product lines within construction products, how do you see unit profitability and margins evolving as we approach 2025 for Construction Products? This includes both organic factors and the impact of the Stavola acquisition.

Let me give you a high-level overview, and then I'll allow Gail to share some specific data. As you've heard in our previous calls, part of the decline in volumes is due to our pricing strategy. This year, we've emphasized focusing on margins and prioritizing pricing over volume. This approach is consistent throughout the company, and we have linked margin performance to our compensation, which is one of our key objectives. We believe that margins reflect the quality of our business, and that's an important aspect of what you see happening behind the scenes. Additionally, the small acquisitions we've made this year are beneficial for our margins, and we plan to continue making those strategic bolt-on acquisitions, which are crucial from both a valuation and margin perspective. Over the past six years, as we've made numerous acquisitions, we've encountered some challenges, especially with companies that have extensive operations. This year, our focus has been on streamlining our portfolio by closing or selling underperforming operations where we lack a strong market presence. This is a new initiative for us, and you can see the results, such as the sale of the asphalt plant and the closure of certain operations in the West. While this reduces our revenue, these operations were less profitable than others, contributing to the margin increase you're witnessing. Finally, we are concentrating on increasing prices. All these factors together have led to the margin expansion you're observing. That's the overall perspective, and I’ll let Gail provide more details if needed.

Sure. I would like to highlight a couple of points, particularly distinguishing between organic and inorganic growth. As we mentioned during the announcement of the Stavola acquisition, we expect it to significantly impact our margins next year. Stavola is anticipated to operate at a 35% EBITDA margin. Additionally, I mentioned earlier that we will experience some seasonality effects on margins in the first quarter. However, we are optimistic about seeing margin improvements next year. On the organic side, Antonio mentioned that we are targeting low double-digit price increases through the end of 2024, which should provide us with strong momentum as we move into 2025 with a more favorable inflation outlook. We believe these factors will positively influence our organic growth as well.

Great. Thanks for the color. I'll turn it over. Thank you very much.

Our next question will come from Garik Shmois at Loop Capital.

Good morning. I'm filling in for Garik today. To start, it's early, but could you provide any additional insights or comments on Stavola, particularly regarding its operations or potential cost synergies and commercial aspects?

Yes, I'll take that. We are very excited about Stavola. We took over just a few weeks ago, and everything is going very well. The integration is progressing smoothly, and we are pleased to welcome the Stavola team. We have acquired an incredible company and, more importantly, a talented team that knows what they are doing. As a company, we have been focused on learning from each acquisition over the last six years. We do not implement changes overnight but rather understand what we have acquired as part of our culture. Early indications suggest that we can contribute positively to their operations, and they may bring some improvements to ours as well. Overall, we are pleased with what we are seeing. The integration process is not very complex, involving only five quarries and 12 asphalt plants, which makes it easier because it is quite concentrated. In summary, we are excited and happy with our progress there.

Okay. Great. Yes, that makes sense. Thanks for that. And then quickly, just on the weather for the quarter. Was there any substantial impact within Construction Products? Or how do you guys bucket that?

We have operations in various regions. Many of the hurricanes and large storms affected our operations across the board. I mentioned in my remarks that the most important thing is that our people and our plants were not severely impacted. Of course, there are disruptions in business. I think our team did an incredible job in bringing back the plants. Many times, what happens is in the quarries, you get flooded, and you have to clean them and lose power. We lost power in several of our plants, etc. So there's always a disruption. I cannot quantify it for you, but of course, we did have an impact. I wouldn't say it was a material impact in the quarter, but there was an impact.

Just I appreciate it. Thanks.

Our next question today will come from Ian Zaffino with Oppenheimer.

Hi, great. Thank you very much. Although I'm just trying to think about some of the delays that happened in this quarter as kind of following up on the last question is with the election delays and I guess the weather delays, will you be able to make that up in the fourth quarter? Or how should we think about maybe that total impact of all of that? I know it's kind of hard to kind of get, but if you could maybe steer us directionally and what the impact or maybe what the recovery might be in the fourth quarter? Thanks.

Yes. I think we have a solid fourth quarter in front of us. I think the business is starting to perform well. Many times, I would say that the weather pushes things out. It's never easy to recover over the next few weeks. But the projects are there. What's important for us is that the demand is there and the projects are there, and we see demand for products out there. So that's the essential piece. On the rest of the businesses, I would say, the majority are operating well, and we have solid backlogs moving forward. In the utility structures business, one of the things that's happening is that you see projects being moved around. The positive aspect here is that, for the most part, when a project gets moved, we have another product that comes in to fill the space, and we've seen that throughout this year. This is a newer trend in the industry. I think the demand is very strong, and therefore, we have the capability of shifting projects around. There's always some moves in margins and things like that overall. I think we're in good shape for the fourth quarter. Our businesses are operating well. Our plants have not sustained any major damages from the storms, and so we feel confident heading into fourth quarter.

Ian, I might add, this is Gail. Good morning. Just on the topic of storms. As I think about our Utility Structures business, we do have some plants in the Southeast. You might see some timing issues where it could be difficult for our customers to take their deliveries on time. So we're watching that for the fourth quarter, certainly not a demand issue, but due to that area being hard hit, we have seen some impact there.

Okay. Thanks. And then encouraged by the constructive comments you made on the wind tower side, is there a sense of maybe the timing of another order or maybe like the size of another order? And how do we actually think about that? And do you think it will be from the same customers or are there new customers coming in? Like any type of color you could give us there, that would be great? Thanks.

Let me start with the customers. As you know, it’s a very concentrated market. There aren’t many players, but the two large companies that have a significant market share are both our customers. Currently, we are building for both. We have inquiries and discussions happening with both of them. So that positions us well for market access. I would say the larger point here is that the impact of the Inflation Reduction Act that was approved in August of 2022 is something we are excited about. Demand for renewable energy is high, especially as the U.S. is facing increasing load growth stemming from electrification and the rise of data centers driven by AI. This shift indicates considerable opportunities for us. I think it's about 2026 where we will see considerable installations. Therefore, these orders should happen at some point in 2025. The change in the fundamentals of demand over the last two years has been very promising, and as our facilities ramp up production, we believe we are setting ourselves up for a strong demand period in the near future. So I'm excited about the overall business.

Okay. Thank you very much.

Brent Thielman at D.A. Davidson, your line is open for our next question.

Thanks. Regarding the Engineered Structures results this quarter, it seems that wind delivery increased during the period. How should we anticipate the fourth quarter? Can we expect another rise in deliveries? Also, could you provide some guidance on the growth anticipated in wind for 2025, considering the strong visibility you have into next year's deliveries?

I'll let Gail provide guidance on the growth for '25. Let me provide some color first. What's important is that the factors impacting wind demand apply equally to utility structures because both industries are essential for increasing electricity production in the U.S. As we move into the fourth quarter, we're preparing for a solid performance ahead. Specifically, I think one observation is that steel prices have dropped significantly over the last two years and this impacts our business positively. With our customer agreements allowing for shifts in steel pricing, we can maintain strong margins despite revenue variations stemming from fluctuating steel prices. Overall, we expect to see steady growth for both utility structures and wind towers as we proceed into the fourth quarter and then into 2025. I'll let Gail provide further specifics on the growth outlook.

Sure. Good morning, Brent. On wind, we have really solid visibility for next year. As we discussed, in the second quarter, we began delivering at Belen, and we’ll benefit from that ramp-up next year. Our other two plants are expected to deliver consistent results compared to this year. We anticipate solid revenue growth out of the wind business for 2025 based on the backlog we have. To give you a rough idea, at the start of this year, we had about $400 million of backlog for 2025, with most of that being in wind. So about 80% is within the wind segment. This gives you a sense of the revenue potential next year. We are optimistic on the order front, but we see that showing up more significantly in 2026 and beyond.

Okay. And maybe another way to ask this, Gail. In 2025, proportionately, would you expect wind to be a larger percentage of sales? And I'm just thinking about this from the perspective that I think this should be pretty margin accretive to you?

Yes, we would expect from wind to shift to a slightly larger share of the overall segment. With the efficiencies we gain from Belen, we expect to see some margin benefits there. So we’re really optimistic as we look into 2025 for the segment.

Yes. Okay. I appreciate that. And then my other question is just on barge. Maybe if you could talk about your remaining capacity availability for 2025 relative to the, I guess the current visibility you have? Will you still be able to fulfill new orders next year as they come in? And I guess you have also talked about the election. I'm not sure if any of that was in reference to this business, but do you have any thoughts on whether that's impacting order trends or not there? I'd be curious.

Yes. I mentioned in my remarks, the backlog, and we have booked additional orders after quarter-end. It's important to highlight that we are fully booked for tank barges in 2025; if someone wants a barge, we're looking at January of '26. On hopper barges, we’re into the third quarter of that year. This gives us flexibility. And the importance lies in the fact that, given the positive demand trends, I believe our capacity is valuable. When you have backlog, you can focus on margins again. We want to sell those orders at a margin that is beneficial for all involved. The visibility of backlog offers us the opportunity to ramp up our plants. Currently, we are operating at relatively low capacity. So I think if demand rises, we always have the capability to increase production.

Excellent. Thank you.

And we will hear from Julio Romero at Sidoti & Company.

Good morning. This is Alex on for Julio. Thanks for taking questions.

Good morning.

Good morning.

Just to start, I wanted to follow up on an earlier question around Stavola synergies. Could you talk about the opportunity to cross-sell some of your legacy products such as recycled aggregates into Stavola's geographic footprint?

Sure. I want to begin by mentioning that Stavola already has a small presence in the recycled business with five plants. I'm excited about this, but we are still in the learning phase and I don't want to exaggerate. We're working to understand the full potential. The difference between recycled and natural aggregates mainly lies in the raw material, which is a significant bottleneck. The infrastructure in the Northeast around our location is aging, and that’s one reason we are interested in this business—it’s focused on repair, replacement, and maintenance. When maintenance work occurs on these projects, it generates a considerable amount of raw material for recycling. We're eager about this potential. We've had success with recycling in Texas and Arizona, where the infrastructure is newer. We have high expectations for the New Jersey area. Looking ahead, we are exploring other potential opportunities in construction materials products that they haven't stabilized yet. Overall, we will keep monitoring and reassessing as time goes on, allowing me to provide a clearer view of the opportunity size.

Great context. Thank you very much. And then one more, Antonio, you mentioned your commitment to quickly returning to net leverage targets. Can you help me think about the pacing? Should we expect it to be a little bit more linear? Or are you saying maybe there’s more weighting towards the near term or another part?

Well, we’ve said our goal would be to achieve that target sometime within 18 months after the acquisition closed. It’s essential there to look at our business dynamics. Our businesses are seasonal. The seasonality will create volatility in our working capital, which is one of the tools we need for deleveraging. If we look at the tools available, we have growth, working capital adjustments, and CapEx. The simplest one is CapEx, as we’ve discussed in detail. Our CapEx has decreased. Most of our growth CapEx will be completed soon, with only a few smaller projects extending into '25. However, we are committed to maintaining safety and effective operations, which means our maintenance CapEx will continue as necessary. As we progress through this, we’ll be able to convert cash flow from CapEx. Additionally, working capital will be managed, but it experiences more volatility. Finally, we expect growth in '25. These three dynamics should aid us in generating cash, supporting our efforts to reduce leverage. Once we reach below 3x net debt-to-adjusted EBITDA, we’ll gain a lot of flexibility to allocate capital effectively. We’ve stated our goal is within the 18-month period to achieve this target.

Very helpful. Thank you.

And that was our final question from our phone audience today. Ms. Drabek, I'm happy to turn the floor back to you for any additional or closing remarks.

Thanks again everyone for joining us today, and we look forward to providing our next update at the end of the year.

Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may now disconnect your lines.