Earnings Call Transcript - ACA Q2 2022

Operator, Operator

Good morning, ladies and gentlemen, and welcome to Arcosa, Incorporated Second Quarter 2022 Earnings Conference Call. My name is Bobby and I will be your conference call coordinator today. As a reminder, today's call is being recorded. Now I would like to turn the call over to your host, Gail Peck, CFO for Arcosa. Ms. Peck, you may begin.

Gail Peck, CFO

Good morning everyone and thank you for joining Arcosa's Second Quarter Earnings Call. I'm joined today by Antonio Carrillo, President and CEO. I'll begin with a few reminders and turn it over to Antonio. A question and answer session will follow our prepared remarks. A copy of yesterday's press release 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 contains 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.

Antonio Carrillo, President and CEO

Thank you, Gail. Good morning everyone and thank you for joining today's call. Starting on Slide 4, I'll begin with our second quarter highlights. Arcosa reported excellent second quarter results, reflecting strong infrastructure-related fundamentals, proactive pricing actions, and significant operational efficiencies. All segments contributed to this quarter's results, led by our growth businesses within Construction Products and Engineered Structures, with each of our segments generating double-digit increases in revenue and adjusted EBITDA. We delivered record second quarter adjusted EBITDA and record adjusted EBITDA margins of 16.5%. I am proud of our dedicated team for once again executing at a high level, successfully navigating the challenging environment, managing inflationary pressures, and driving lean manufacturing efficiencies. We continue to advance our strategic transformation with the acquisition of RAMCO, a leading provider of recycled aggregates in the Southern California market while optimizing our portfolio with the pending divestiture of our storage tank business. RAMCO is a great addition and complement to our construction products business and I'll provide more details on this acquisition in a moment. We also continued to make progress on several large organic projects that should start producing positive EBITDA in 2023. Based on our stronger than expected first half performance and our increasing confidence in the outlook for the second half, we're raising our full-year revenue and adjusted EBITDA guidance. Turning to Slide 8, we continued to make progress on our strategic transformation that is focused on reducing the complexity and cyclicality of our business. Over the past 18 months, we have completed three key acquisitions in construction products, expanding our capabilities and geographic footprint into high growth markets including Arizona, Southern California, and Tennessee. At the same time, we have rationalized our portfolio with the pending divestiture of our storage tank business for $275 million, providing a significant source of capital to reinvest in growth initiatives. In particular, we continued to execute on several organic growth projects which include the expansion of our specialty materials plaster plant in Oklahoma and the construction of a concrete pole manufacturing plant in Florida to support our utility structure business. In addition, we will open two new aggregates greenfield sites in 2023 which will accelerate the growth in that business. Turning to Slide 9, in May, we acquired RAMCO, a leading independent producer of recycled aggregates serving the Greater Los Angeles Metropolitan area consistent with our disciplined approach to strategic M&A. We acquired this business for $75 million, representing an attractive implied valuation of less than eight times EBITDA. RAMCO is relatively small yet a compelling strategic addition to our Construction Products business, complementing our existing footprint and customer base in the California market. RAMCO has a unique business model; it charges customers a fee to receive Construction Materials for recycling, then crushes materials and sells them as recycled aggregates. This combination of being able to charge most to receive and sell recycled aggregates makes RAMCO a very profitable business. We're excited by the opportunities it brings to our cost. With the mid-year close, we estimate approximately $5 million of incremental adjusted EBITDA from RAMCO in the second half of 2022. Now I will turn the call over to Gail to review our second quarter financial performance in more detail, Gail.

Gail Peck, CFO

Thank you, Antonio. I'll start on Slide 11 and touch briefly on our first consolidated results. Second quarter revenues increased 17% driven by double-digit increases in all segments. Second quarter adjusted EBITDA improved 26%, outpacing the increase in revenue, led by our growth businesses. Overall adjusted EBITDA margin increased 120 basis points to a record 16.5% in the second quarter, led by Engineered Structures and supported by consistent year-over-year margins in construction and transportation despite inflationary pressures. Turning to Construction Products on Slide 12, revenues and adjusted segment EBITDA each increased approximately 20% primarily due to organic contributions with acquisitions contributing roughly 5 percentage points to revenue growth. Demand trends remain favorable across the segment and we maintain stable margins year-over-year due to proactive pricing actions. On a sequential basis, margins improved 260 basis points from the seasonally slower first quarter. We continued to face headwinds from inflationary pressure particularly higher costs for energy and for cement, which is used in our stabilized sand product lines serving the Houston market, although higher energy and cement costs increased cost of sales by approximately $10 million during the quarter. We believe full year segment margins in 2022 have the potential to meet or exceed last year's level. In natural aggregates, healthy demand field elevated price increases across our market with average organic pricing up low double-digits that helped to maintain organic margins year-over-year. Total natural aggregates volumes increased significantly as we benefited from the addition of Southwest Rock. On an organic basis, we generated mid-single-digit volume growth led by our Texas and Gulf Coast regions. While weather was generally better than that in the prior year quarter, we experienced some volume pressure due to the lack of cement availability, which impacted our stabilized sand operations in Houston, as well as our ready-mix customers in the Texas, West and Gulf Coast region. Turning to recycled aggregates, volumes and pricing increased significantly in the second quarter with a late May closing, RAMCO contributed positively to our results. The second recycled aggregates growth during the quarter was largely organic reflecting favorable demand and improved weather in the Houston market. In Specialty materials, average selling prices were up broadly but volumes were down, leaving revenues about flat year-over-year and margins lower. Strong volume and pricing growth in our plaster business was offset primarily by lower lightweight aggregates volume. While market demand for lightweight aggregates remains favorable, volumes declined due to scheduled and unplanned maintenance as well as labor availability in certain markets. Finally, our trench shoring business reported a 29% increase in revenues on higher steel prices and increased volume. Order activity was healthy during the quarter, providing solid production visibility. Moving to Engineered Structures, on Slide 13, second quarter adjusted EBITDA increased 30% outpacing revenue growth and resulting in a 270 basis point increase in margin, although each business contributed to the better-than-anticipated quarterly results, utility structures were the primary driver of the significant outperformance during the quarter versus the prior year. This business benefited from robust market demands, strategic pricing measures, and increased operating leverage. Combined revenues and adjusted EBITDA in our traffic and telecom businesses were also up compared to last year. We built in our traffic structures business were helped by a $1.6 million gain on the sale of one of our two plants in Florida as we consolidated our footprint serving the region. In our storage tank business, second quarter revenues increased 22% reflecting strong pricing to counter steel price inflation. Overall volumes were lower year-over-year due to reduced volumes in our products serving the Mexico market. Turning to wind towers, we executed well during the second quarter, despite significantly lower year-over-year volume. At the end of the quarter, the combined backlog for utility wind and related structures was approximately $410 million, up 18% year-over-year, led by utility and traffic structures. Turning to Transportation Products on Slide 14, the segment executed well as the year-over-year volume and profitability improvements in our steel components business more than offset expected declines in our barge business. Segment adjusted EBITDA increased 29% with similar margins to last year. Second quarter revenues in our steel components business increased 18% driven by significantly higher volumes compared to last year's trough level. As a result, adjusted EBITDA margins increased notably and improved operating leverage. Our barge business exceeded our expectations despite challenging market conditions and lower volumes year-over-year. Revenues increased 10% due to higher steel prices, while adjusted EBITDA declined but benefited from better cost absorption as several barges scheduled for the second half moved into this quarter. At the end of the second quarter, our backlog stood at $132 million with approximately 50% scheduled for delivery in 2023. Moving to Slide 15, we ended the quarter with net debt to adjusted EBITDA of 1.9 times, down slightly in the first quarter driven by higher free cash flow, reflected in our crude leverage position is an additional $30 million of net revolver borrowings to fund the acquisition of RAMCO. During the quarter, we generated $60 million in free cash flow compared to a breakeven level in the first quarter. Second quarter working capital management contributed $8 million cash flow representing a significant improvement from the first quarter, driven by increased payables and supported by flat inventory levels. Inflationary pressures continue to increase overall working capital investment. So we continue to expect working capital will be a source of cash the full year in 2022. Capital expenditures were $27 million for 2022, we continue to see full year CapEx of $120 million to $140 million with the potential to reach the high end of the range based on the growth projects we have underway in construction and Engineered Structures. During the quarter, we repurchased shares totaling $15 million, leaving $26 million available under our current $50 million authorization. One final note before turning the call back to Antonio as we anticipate the storage tank divestiture to close in the second half of the year, the business is now presented as held for sale on our balance sheet. There were no changes made to the P&L or cash flow presentation. In addition, similar with our prior guidance and to facilitate comparability, our newly revised guidance includes the full year of storage tank results. As we indicated in yesterday's release, the midpoint of our revised guidance includes full year revenues of $250 million and adjusted EBITDA of $53.5 million related to storage tanks.

Antonio Carrillo, President and CEO

Thank you, Gail. As Gail discussed, we continue to benefit from solid underlying fundamentals within our infrastructure-related businesses and we're successfully managing cyclicality in our wind, barge, and rail components. We remain vigilant in monitoring inflationary pressures, proactively implementing price increases where appropriate, and drawing on the strength of our supplier relationships to secure more advantageous pricing on key raw materials, including steel. Many of our businesses benefit from long-term secular trends driven by both public and private investment in large-scale infrastructure projects, and we expect the infrastructure bill will add an uplift in 2023. We continue to monitor the macroeconomic environment in light of the increase in interest rates and the potential impact on housing demand and consumer confidence. Please turn to Slide 17. At the midpoint of our revised guidance range, we now forecast EBITDA improvement of 27% for our growth businesses in 2022. We expect second half EBITDA in our growth businesses to exceed our strong first half performance with the addition of RAMCO. The outlook for construction products remains positive, benefiting from our expanded portfolio of products, favorable aggregates pricing, and healthy construction activity in our major markets. At the same time, we continue to manage supply chain constraints currently affecting certain customers. As we look at 2023, we anticipate that the initial spending outlays from the $1 trillion infrastructure bill will provide a tailwind for our Construction Products business. Strategically, we have achieved significant progress in broadening our geographic presence and product portfolio through our focused approach to M&A. Today, our Construction Products segment is fundamentally stronger, more resilient, and more diversified, providing a solid foundation for long-term growth and margin expansion. While we continue to evaluate smaller bolt-on opportunities that would enhance our operations, we're passing on larger M&A efforts for now as we focus on completing the organic growth projects we have underway. We continue to see strong outlook for growth businesses within our Engineered Structures segment. The key drivers are continued robust demand for utility and traffic structures and improving demand within the telecom market. Electric utilities continue to direct CapEx towards rate hardening, resiliency, and renewable energy projects, providing good visibility for our utility structures through the remainder of 2022. In addition, we are seeing favorable volume in our traffic structures business. Moving to Slide 18, although we continue to face a challenging environment in our cyclical businesses, we have seen early but promising signs of market recovery, most notably, our barge business secured $35 million in new orders in the second quarter, adding to the $105 million in new orders received in the first quarter. Our ability to secure more favorable steel pricing was a key factor in getting these orders which completed our production plans for this year and provided production visibility into 2023. In addition, we have seen barge order inquiries trend upwards indicating pent-up demand for customers seeking to upgrade their aging fleets. In wind towers, the absence of our renewable tax credit continues to weigh on short-term demand. However, the long-term outlook for wind power generation remains very positive. We are encouraged by the recently announced Senate legislation that includes tax incentives for renewable energy. If enacted into law, these credits should provide a significant boost to our wind tower business. We anticipate the rail components business will continue to perform well over the remainder of 2022, benefiting from improvement in the North American market where deliveries are forecast to rise sharply compared to 2021. Turning now to our updated financial guidance on Slide 19. For our cost overall including storage tanks, our revised 2022 adjusted EBITDA guidance range is now $325 million to $345 million, up from our prior guidance of $290 million to $305 million. Using the midpoint of both ranges, our revised guidance represents an increase of $37.5 million from our prior guidance. The increase in our full-year EBITDA guidance range reflects our stronger than expected performance in the first half of the year as well as our increased confidence in the second half outlook. For our cyclical business, specifically, we estimate 2022 adjusted EBITDA of $32.5 million to $35 million, up from $20 million to $25 million previously, driven by our expectation for slightly higher production volumes and greater operating efficiencies in both our barge and wind tower businesses. Second half expected EBITDA for the cyclical businesses trails our first half performance primarily because certain higher margin barges scheduled for delivery later in the year shifted into the first half. In summary, our guidance for the second half shows the same pattern: significant year-over-year expansion in our growth businesses compensating for weakness in our cyclical business. In closing, our strong financial performance and our solid outlook for the second half lead us to increase our full-year revenue and EBITDA guidance. I am pleased with the strategic progress we have made expanding and strengthening our growth businesses through acquisitions and organic initiatives while selectively optimizing our portfolio to enhance our resiliency and reduce cyclicality. And I would like to open the call for questions.

Operator, Operator

We'll take our first question from Stefanos Crist with CJS Securities.

Stefanos Crist, Analyst

Good morning and congrats on the quarter.

Antonio Carrillo, President and CEO

Thank you, Stefanos.

Stefanos Crist, Analyst

You discussed pausing M&A for organic projects. Can you talk about some of those organic projects and how much capital you can employ in those?

Antonio Carrillo, President and CEO

Sure. I'm just trying a little bit in my script, but I'll give you a little more color. So we have really four large projects going on. We have a new plant to expand our plaster capacity significantly in Oklahoma. We expect to expand our capacity to start that plant sometime early in 2023. We announced in the first quarter conference call a new concrete pole facility in Florida that should start late in 2023, and we have two greenfield facilities for our natural aggregates business that should start sometime in 2023. So those are the reasons why the CapEx this year is so high because we are investing in those projects. The reason for pausing on larger M&A has to do with the expectation for a slower economy, allowing for better opportunities as we see them. So it doesn't mean we won't do anything; I just think the environment will lend itself to finding better prices or opportunities in the near future.

Stefanos Crist, Analyst

Perfect, thank you for the color. If I just follow up on the acquisition of RAMCO. Can you just talk about your expectations for recycled aggregates going forward and what you see driving growth there?

Antonio Carrillo, President and CEO

Absolutely. We're putting them into the same category as natural aggregates, but pricing for recycled aggregates is set by natural aggregates, that's the maximum price you can sell, and the demand factors are the same. The pricing demand is exactly the same. It has a couple of differences. One is that you don't have reserves, so the return on invested capital is much higher because you don't have a lot of reserves. Margins are in similar ranges as natural aggregates. So the fundamentals of the market are very similar. The difference is in how you acquire your raw material; it's, in this case, rubble. I described it a little bit in my statement that in the case of California, we charge a fee to receive that material because you cannot dump it in landfills there, and that's one of the advantages of this business in California, where regulations support recycling a lot, but the business is less developed than here in Texas. So I think we're taking our experiences from Texas and applying them to California where we already had a presence in our lightweight aggregates. The future for recycled aggregates is a growing business and something that I think is here to stay; it's a trend that we cannot stop in regards to recycling. It's not a business that completely replaces natural aggregates, but it's a very healthy and complementary business.

Operator, Operator

We will take our next question from the line of Garik Shmois with Loop Capital.

Garik Shmois, Analyst

Hi, thanks for taking my question and congratulations on the quarter. I just wanted to start with Engineered Structures to margin improvement in the quarter. Just wanted to parse out the drivers around the margin expansion; not asking you to hold to kind of 18% to 19% margin moving forward, given how much stronger the quarter was relative to normal, but just kind of wondering maybe how sustainable this type of margin is in the near to mid-term.

Gail Peck, CFO

Good morning. Garik, this is Gail. Yes, we're very pleased with the performance of the Engineered Structures segment, with first half margins above 16% for the segment. A very strong first half performance, as we said in our comments and materials, was led by utility structures and very robust demand and solid execution really across all fronts from material handling, and even including safety as we look at our safety records year-over-year. So this team is really firing on all fronts and we benefited from a favorable mix during the quarter. As we think about the back half, like I said, a 16% or so margin for the first half may be a challenge to meet that level for the second half; we do have some slots to fill later in the year and often those come with big market orders, so there could be a potential for those slots to sell with lower margins, but all in all, our expectations for the segment is to continue to have a very strong second half; it just may be hard to meet that perfection level that we achieved in the first half.

Antonio Carrillo, President and CEO

Garik, let me add something which I think is important to remember. This segment includes wind towers and if you remember three years ago, our highest margin business in that segment was wind towers, and we are achieving these margins even though our wind tower business had a better performance than we expected. It seems like we are becoming more efficient; however, there is still some balance found in the bottom. So I think we are very optimistic about the future of wind, especially if the legislative package goes through, but right now wind towers are being carried by the rest of the businesses.

Garik Shmois, Analyst

Got it. That's encouraging. Wanted to follow up just on the cyclical business. I think you mentioned there are some barge shipments that were pulled forward into the first half of the year; was wondering if you could quantify that and just more broadly, your high-level thoughts on how the cyclical businesses could perform in a recession.

Antonio Carrillo, President and CEO

So I'll give you some numbers. The barge pull forward, I think let's give you the numbers, but it's maybe a couple of million dollars moved forward, and I mentioned in my comments that the second half is expected to be a little lower in the cyclical businesses, which will be over-compensated by the growth businesses including now the new acquisition. The barge business is driven primarily by energy markets and grain exports, coal markets are showing signs of life, as well as those driven by petrochemicals. We are seeing very healthy inquiries for barges, especially for dry cargo hopper barges which are mainly for grain, coal, and those kinds of commodities and some petrochemicals. The demand continues to be slow due to high costs associated with barges as barges are made with plate generally, and while steel prices have come down in coil, the plate market has not behaved the same. However, every forecast shows that plate is coming down, and we have been able to get some barges at relatively good prices, which is why we've been able to sell these barges in the first and second quarters. Everything indicates from customer conversations to inquiries we're receiving that demand is there and the price of steel should be coming down, and we expect that to also positively influence our barge business in the coming months. For wind towers, we have negotiations with our customers at this time of the year. Even though we didn't see orders in the second quarter, it didn't surprise us; it is a timing issue. The wind market remains slow, and unless we get the production tax credit approved, we expect slower wind tower market conditions in the near future. But we believe that when demand resumes, it will be extremely robust;

Operator, Operator

We will take our next question from the line of Julio Romero with Sidoti and Company.

Julio Romero, Analyst

Good morning, everyone. Wanted to stay on the Engineered Structures side, specifically on the utility structures business. You talked about robust demand and materials handling mix. What surprised you the most in the quarter relative to your expectations three months ago?

Antonio Carrillo, President and CEO

Hi Julio, it's Antonio. You know, I think things aligned very well in terms of the size of the poles we were making. I think the allocation we did to our plants, as you know, in 2021, we started ramping up our plant in Mexico. Our production in Mexico has been going very, very well, and the efficiencies ramped up probably faster than we expected. We are seeing more availability of labor. For probably a year, it was very difficult in the U.S. to find labor for our plants, over the last few months, at least we've seen a positive trend. It doesn't mean we have a line of people waiting, but we are meeting the right talent. The team is performing incredibly well; they're doing a fantastic job, and this is reflected in everything from safety to quality to efficiencies; the implementation of our lean processes is going very well.

Julio Romero, Analyst

Okay, that's very helpful. I believe you guys touched on it earlier regarding the Inflation Reduction Act, the Senate legislation. Any way to think about the impact on your wind tower business and if folks in the value chain are getting cautiously optimistic about that potentially being enacted?

Antonio Carrillo, President and CEO

Yes, so if you look at the tone in the market or the environment from a month ago to today, it has changed dramatically. The legislation will have a significant impact on our business because it contains provisions that incentivize manufacturing and other things, which we believe will be beneficial for us. The history of the wind tower business shows that every time there is clarity and certainty for investors, the business performs very well. While there are risks, I remain hopeful that it gets enacted.

Julio Romero, Analyst

Yes and knock on wood, it sounds very encouraging. Thanks very much for taking the questions.

Operator, Operator

We'll take our next question from the line of John Ramirez with DA Davidson.

John Ramirez, Analyst

Good morning. This is John Ramirez for Brent Thielman. Is there a way for us to understand what the impact of higher diesel and other costs is due to aggregate margins? On the surface, it looks like they are stable. But you have some acquisitions that this year-to-year comparison. I'm just wondering what kind of pressure you're seeing since industry peers are seeing pressures.

Gail Peck, CFO

Yes, that's a great question and we did try to provide some color on that in an aggregate bucket of costs. We saw about a $10 million increase year-over-year in costs associated with fuel, including diesel and natural gas, and cement which is used in our stabilized sand product in Houston. The largest driver of that increase was diesel costs.

Antonio Carrillo, President and CEO

One thing to clarify which I think is important: We have a very small downstream business. So we are mainly aggregates and recycled aggregates. We don't ship our product, so we're a little less exposed than some of our peers who have ready-mix operations and use more diesel for delivery. We primarily use diesel inside our facilities to move our loaders and similar equipment.

John Ramirez, Analyst

And just to clarify, that $10 million year-over-year cost increase is that overall, or was that specifically for cement?

Gail Peck, CFO

That was for the categories of energy and cement, with the price impact related to those inputs to our cost of sales year-over-year.

John Ramirez, Analyst

Got it. And if I could do another question. What do the inquiries and quotations look like for the wind and barge business in the second half based on your commentary today?

Antonio Carrillo, President and CEO

Sure. For wind, we are sold out at the current capacity for 2022. We have good visibility of our production for 2022. For 2023, we are in the process of negotiating with our customers about their program for next year. So, while we expect a slow wind tower market, we want to maintain our manufacturing flexibility. For barges, as I mentioned, there are strong inquiries for coal, grain, and petrochemicals, and we hope that falling steel prices will align with customer expectations.

Gail Peck, CFO

And just to add on the barge discussions, as we mentioned in the remarks, our backlog is about $130 million right now, half of that is for the back half of this year, and the other half is slated for 2023. That gives you a sense of our cadence with what we have in backlog today.

Operator, Operator

We'll take our next question from the line of Trey Grooms with Stephens.

Noah Merkousko, Analyst

This is Noah Merkousko on for Trey. And congrats on the strong results. So first, I think you'd mentioned in your prepared remarks that aggregates pricing was up low double-digits in the quarter, which is pretty impressive. How should we be thinking about that for the back half? Would that accelerate given the expectation for more price increases in the back half, maybe see mid double-digit growth, mid-teens growth?

Gail Peck, CFO

Good morning. This is Gail. Yes, we did have nice pricing in the quarter; low double-digit increases. If you look at the first quarter, it was mid-single digits. We have annual guidance out there for prices mid-single digits. I think the strong performance in the second quarter gives us confidence we will be at the higher end of that range for the year. The pace of pricing remains an everyday discussion for us. We're seeing a lot of value for our products and raising prices to combat inflation where we can. I'm not sure I'm in a position to say we can match the low double-digit increases for the back half, but we're certainly watching pricing very carefully.

Antonio Carrillo, President and CEO

As Gail mentioned, our goal for the year is to at least meet or exceed our margins from last year. So our goal is to try to match pricing increases in order to maintain the margins for the business.

Noah Merkousko, Analyst

Okay, that's helpful. And then the volume side, I think you said mid-single digit volume. Is that a good run rate for the rest of the year? Obviously, there are some headwinds coming from new residential, also been hearing of a lot more supply constraints. So maybe if you could just contextualize how you're thinking about volumes for aggregates.

Gail Peck, CFO

Yes, I stick to kind of our full-year guidance there. Volumes were much lower in the first quarter on a year-over-year basis. So we're seeing organic one to three; I think just like pricing. We have the opportunity to get volumes for the full year coming closer to the higher end of our organic range, but we're watching residential conditions very closely as they remain favorable in the markets we're in, particularly Texas, Tennessee, and Arizona.

Operator, Operator

We'll take our next question from Ian Zaffino with Oppenheimer.

Alex, Analyst

Hi, good morning. This is Alex on for Ian. Thanks for taking the question. Regarding the infrastructure bill, I know we've been talking about it for some time, but just wondering if there are any indications into the magnitude of the uplift for 2023 across the businesses, maybe as applies to Construction Products or the utility structures business?

Antonio Carrillo, President and CEO

Yes, this is Antonio. It's hard to give you a specific number, but if you read the infrastructure bill, you could almost put Arcosa's name to everything that's included, probably except water; we don't have much exposure there. We are already seeing some projects being deployed, especially in the barge business with maintenance projects around the Mississippi River infrastructure. While it’s challenging to differentiate projects coming from the infrastructure bill versus normal projects, we expect in 2023 to see some tailwinds from that bill. While it's hard to quantify how much specifically, many of our businesses are performing well with drivers that are not solely tied to GDP growth; they have specific demand drivers. The infrastructure bill just provides an additional boost.

Alex, Analyst

Okay, great, that's helpful. And then briefly on M&A, it seems like the acquisition of RAMCO shows there are still plenty of strategic or bolt-on acquisitions out there. I know you mentioned larger M&A would be off the table for now, but generally, what does the M&A landscape look like? What kind of synergies, if any, can be realized on small acquisitions like RAMCO?

Antonio Carrillo, President and CEO

So, I stated that larger M&A is off the table. We're taking a disciplined approach to it because we think we can find good opportunities later on. We do have a pipeline for bolt-ons, and once we have a presence in a region, bolt-on acquisitions are integrated relatively quickly. In the case of RAMCO, for example, I think there's an opportunity for us to increase margins by bringing our capabilities from Texas to California. The synergies are mainly operational and through our systems, and they tend to be quite profitable.

Operator, Operator

And that is all the time we have for questions. I will now turn the call back over to CFO, Gail Peck.

Gail Peck, CFO

Thank you, Bobby. And thank you everyone for joining us today. We look forward to speaking with you again next quarter.

Operator, Operator

Thank you for joining the Arcosa, Incorporated second quarter 2022 earnings conference call. This does conclude the program. You may now disconnect. Have a great day.