Good day, ladies and gentlemen, and welcome to the Astec Industries Third Quarter 2021 Earnings Call. At this time, all participants have been placed on a listen-only mode and the floor will be opened for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Steve Anderson. Sir, the floor is yours.

Thank you and welcome to the Astec Industries' third quarter earnings call. Joining me on today's call are Barry Ruffalo, Chief Executive Officer; and Becky Weyenberg, Chief Financial Officer. In just a moment, I will turn the call over to Barry to provide comments and then Becky will summarize our financial results. Before we begin, I'll remind you that our discussion this morning may contain forward-looking statements that relate to the future performance of the company and these statements are intended to qualify for the safe harbor liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions. Factors that could influence our results are highlighted in today's financial news release and others that are contained in our filings with the SEC. As usual, we ask that you familiarize yourself with those factors. In an effort to provide investors with additional information regarding the company's financial results, the company refers to various U.S. GAAP, which are Generally Accepted Accounting Principles and non-GAAP financial measures, which management believes provides useful information to investors. These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and therefore, are unlikely to be comparable to the calculation of similar measures for other companies. Management of the company does not intend these items to be considered in isolation or as a substitute for the related GAAP measures. Management of the company uses both GAAP and non-GAAP financial measures to establish internal budgets and targets and to evaluate the company's financial performance against such budgets and targets. You should also note, comments made during today's call, we'll refer to non-GAAP results and a reconciliation of GAAP to non-GAAP results are included in our news release and appendix of our slide deck. All related materials are posted on our website at www.astecindustries.com, including our presentation, which is under the Investor Relations and Presentations tabs. And now I will turn the call over to Barry.

Thank you, Steve. Good morning everyone and thank you for joining us on the call this morning to discuss Astec's third quarter results. During my remarks today, I will begin by discussing key highlights from the quarter to provide an update on actions we are taking to drive operational and commercial excellence. I will also share more detail on what we're seeing in terms of demand and current market dynamics before I turn the call over to Becky for details on our financial results. Then, we will highlight progress made on our continued strategic evolution and open the call for Q&A. Turning to slide four. First, the adaptability and dedication of our team drove strong third quarter performance, with sales up 15.4% and adjusted EBITDA up 58.5% compared to the third quarter of 2020. I would like to highlight the resilience of our team and their impressive ability to execute in a dynamic environment marked by a combination of increased demand and ongoing industry-wide headwinds. We also saw a fourth consecutive quarter of record backlog, up 184% year-over-year, a testament to the strength of our customer relationships, as we continue to provide our customers exceptional value, superior service and innovative industry-leading technology solutions. Second, we are realizing benefits from several strategic initiatives to mitigate industry headwinds, including increasing pricing to offset inflation, onboarding new talent to proactively identify supply chain disruptions. I will describe these initiatives in more detail later in my remarks and the results we are seeing thus far. Third, the successful execution of our strategy has positioned our business well for future growth. I am confident in our team's ability to execute in all economic scenarios as a more focused organization with a strong balance sheet and ample liquidity. This confidence is evidenced by our decision to increase our quarterly dividend. Fourth, we are building on the three pillars of our strategic evolution and the actions we have taken to simplify and focus our business as we continue to shift our focus to growth. We have a multitude of organic growth initiatives underway, which I will provide further detail on later during our call. Lastly, we remain focused on driving commercial and operational excellence across our business, as we position ourselves for future profitable growth. I'm excited for the organization's future as I look at how far we have come in our strategic evolution and the long runway ahead of us. We have the right team in place to execute our strategy and drive long-term stakeholder value creation. Turning to slide five. I'd now like to provide an update on our operations and the actions we have taken to optimize revenue, meet elevated customer demand and proactively manage supply chain issues. We continue to drive operational excellence across the organization through our OneAstec business model. We are maintaining flexible operations including cross-site manufacturing and manufacturing capacity sharing. We are focused on leveraging capacity and bandwidth across our footprint to deliver our customers best-in-class products and solutions across the Rock to Road value chain. And lastly, we remain focused on optimizing revenue within our footprint. I'm glad to note this is the best third quarter revenue generation in the history of our company. Now onto slide six. I'll review some of the key industry dynamics that are impacting our business and some initiatives Astec has in place to capture opportunities and address industry headwinds. We continue to see strong demand for our products across our Infrastructure and Materials Solutions businesses. Conversations with customers indicate a positive outlook through the remainder of 2021 and into 2022. Our record backlog this quarter reflects continued strong demand. We have a number of initiatives in place to enable us to meet higher demand and I will provide more detail on that shortly. Despite the latest extension of the federal highway bill, customers continue to express optimism for increased U.S. infrastructure spending and view the bill as a long-term tailwind for our business. However, as I've mentioned in previous calls, we are not a company that is waiting around for a bill to be passed. We see significant near-term demand for our products and we have a strategy in place to drive organic and inorganic growth moving forward. You should also note that our international and parts sales continue to grow as well. Our international parts teams are doing an outstanding job of driving the business and leveraging the investments that we have made in people, processes and tools, which allows them to be easy to do business with and focused on growth, while delivering value to our global customers. Labor shortages continue to persist across the industry. However, we are seeing steady improvements as a result of hiring strategies, with headcount up 8.5% year-over-year. Regarding inflation, we continue to see higher commodity transportation and logistics costs. We are, however, seeing early signs of steel prices starting to plateau and slowly decline. The situation remains fluid, and we are prepared to adapt prices accordingly to any further increases in input costs. On slide seven, we provide more detail on our initiatives to address labor shortages. We have four key elements highlighted including targeted recruitment, engagement and retention practices, ensuring the benefits of working at Astec. As you can see we have a number of initiatives in place to remain an employer of choice. We continue to evaluate our programs to retain current employees and enhance our recruiting practices. Our team is core to who we are here at Astec, and we know the investments we make in our people will pay dividends to the organization and stakeholders in the future. On slide eight, we provide more detail on our historic backlog, posting record backlog at the end of the third quarter. In today's environment, we expect backlog to be converted to sales in approximately two to three quarters. We are acting quickly and diligently to convert our backlog in a timely manner through cross-site manufacturing, increased headcount and automated processes. Some customers have begun to schedule orders in advance of their need in order to mitigate any future supply chain disruptions. This, combined with strong market demand, has resulted in longer lead times. We are constantly working to optimize our operating schedules to deliver end products to our customers at the desired time. On slide nine, we highlight some key ESG accomplishments since our last earnings call, including the announcement of our strategic partnership with CarbonCure. CarbonCure enables us concrete producers to reduce the carbon footprint of concrete and reduce other input costs. This partnership is in line with our strategy to increase environmentally friendly products and services to customers as part of our sustainability commitment. CarbonCure's technology offers a solution to embody carbon at the early stages of concrete production where the opportunities are greatest. I'm excited to be able to offer this product to our customers and further broaden our sustainability-focused solutions. But we are still in the early innings of our ESG journey. I am excited and proud of the progress that we have made to date. To recap the third quarter, we saw improved performance with a healthy increase in sales and adjusted EBITDA, driven by our team's successful execution of our strategy and continued strong demand for Astec products and solutions. Further, during the quarter, we started to see greater benefits from initiatives we put in place to meet strong customer demand, combat inflation, supply chain tightness and labor constraints. While we expect some of these industry headwinds may persist into 2022, I am encouraged by the actions that our team is taking to reduce the impact of our ability to continue to execute our strategy and drive profitable growth. We remain well-positioned to capitalize on the positive customer sentiment that we are seeing well into 2022 and resilient demand for our products, as we serve our customers with innovative and differentiated solutions. With that, I will now turn the call over to Becky to discuss our detailed financial results.

Thank you, Barry, and good morning everyone. Moving to slide 11. Third quarter sales increased 15.4% to $267 million compared to the prior year quarter. Equipment sales increased 27.3%, while parts sales increased 6.6% compared to the prior year period. The sales increase was driven by increased demand across product lines and regions, with domestic sales up 11.4% and international sales up 29.6% year-over-year. As Barry mentioned, backlog increased an impressive 184% to over $620 million at quarter-end, driven by higher Materials and Infrastructure Solutions orders, which were up 300% and 129%, respectively. Higher orders were driven by continued pent-up customer demand after COVID-19 uncertainty in 2020 in addition to our strong commercial excellence initiatives. Our commercial teams continue to build momentum and work with our customers to create value-added services, products and solutions. Third quarter adjusted EBITDA increased 58.5% to $16.8 million compared to the prior year period. Adjusted EBITDA margin grew 170 basis points to 6.3% compared to the prior year period, driven by pricing, volume and manufacturing efficiencies, which were partially offset by inflation and centralization efforts. Adjusted SG&A expenses increased 6.9% on a dollar basis, primarily due to the increase in personnel costs, which includes commissions, and more normalized travel expenses. Adjusted earnings per share increased 163.2% in the quarter to $0.50 compared to $0.19 in the third quarter of 2020. Third quarter adjusted EPS included $2.1 million or $0.09 of transformation restructuring and other costs, including $2.4 million of costs associated with our ongoing Simplify, Focus and Grow transformation program. Our adjusted net effective tax rate for the quarter was negative 23.9%, driven by the timing of tax credits, which resulted in an $0.18 positive impact to earnings per share. The tax benefit was driven by a valuation allowance release in Brazil. Net R&D credits driven by increased investments in engineering and stock compensation benefits. Our expectation for the full year adjusted tax rate in 2021 is in the 12% to 15% range. However, the situation remains fluid. On slide 12, we highlight the key drivers of our year-over-year adjusted EBITDA margin expansion of 170 basis points. As I mentioned, adjusted EBITDA margin expansion was primarily driven by pricing, volume and manufacturing efficiencies, partially offset by inflation and higher SG&A. We have implemented multiple price adjustments throughout the year to help offset the increasing impact of inflation, and we are prepared to implement further price increases as they become necessary. Moving onto slide 13. Our Infrastructure Solutions sales increased by 16.7% to $176.3 million in the quarter, primarily driven by strong international and domestic sales, which grew 45.2% and 11.6%, respectively, compared to the prior year period. Adjusted gross profit increased 24.7% to $39.9 million, and adjusted gross margin increased 140 basis points to 22.6% driven by improved volumes, pricing and mix. Infrastructure Solutions backlog at the end of the quarter increased 129.4% to $341.4 million as we continue to see strong and increasing demand for highway and road building construction products across the country. Turning to slide 14. Our Materials Solutions sales increased 13% to $90.7 million compared to the same period a year ago, driven by increased demand across product lines and regions, with international sales up 16.7% and domestic sales up 11% versus the third quarter of 2020. Segment gross profit increased 8.7% to $22.4 million, and gross margin decreased by 100 basis points to 24.7% driven by inflation. Materials Solutions backlog at the end of the quarter increased 300.4% to $279.1 million driven by continued dealer restocking and strong market activity. And on slide 15, I won't go over the details, but here we highlight the year-to-date results and provide some color for your reference. Turning to slide 16. We continue to maintain a strong balance sheet with minimal debt and a net cash position of over $164 million. Overall, we have available liquidity of $309.3 million including nearly $165 million of cash on hand, with only 900,000 in total debt as of September 30, 2021. While our leverage today is virtually zero, as a reminder, on a long-term basis, we will strive to operate between 1.5 to 2.5 times debt to EBITDA. However, in the future there could be times where we will be leveraged over this range. But our goal would be to return to the 1.5 to 2.5 times range. As Barry highlighted earlier during our call, we remain focused on maintaining a strong and flexible balance sheet, with ample liquidity and believe that this will enable us to withstand a variety of economic situations. Slide 17 is a reminder on our capital deployment framework. When we consider the various avenues of capital deployment, we do so in a context of our long-term strategic objectives and related revenue, earnings and cash flows in order to maximize shareholder value. Regarding acquisitions, the pipeline remains strong and our strategic approach remains consistent. As a reminder, we remain focused on acquisitions that align with our strategic filters and financial criteria to support our growth pillar. Importantly, we remain committed to delivering returns to shareholders primarily through funding our dividend. Of special note, beginning next quarter, our dividend will increase from $0.11 per share to $0.12 per share. This is being done to reward our shareholders and as evidence of our confidence in the OneAstec business model. With that, I will now turn it back over to Barry for his closing comments.

Thanks, Becky. Continuing with slide 18, we highlight some key organic growth opportunities we see across our businesses. As a reminder, we expect to drive approximately 5% year-over-year organic growth over the long-term. First, organic growth opportunities will continue in our international business and third quarter results demonstrate the traction that we're gaining on that front with international sales up 30% year-over-year. Secondly, opportunities to drive growth will continue in our parts and services businesses. During the third quarter, parts sales grew 6% year-over-year, reflecting the momentum that we are gaining in this business. New product development continues to gain momentum. A few examples include our new SB-3000 Material Transfer Vehicle and Highly Portable Ventura Asphalt plants shown on the next slide, which I will speak to more in a moment. We will continue to drive organic growth through new product launches and fostering a culture of innovation here at Astec to provide our customers with the best solutions in the industry to meet their needs. We also continue to pursue organic growth opportunities related to dealer expansion, cross-selling and strategic accounts. As success continues in each of these areas, I am confident our related strategic initiatives will drive future profitable growth across our businesses. We are reinvesting in the business to drive innovation and technology enhancements to support organic growth opportunities to provide customers with industry-leading technology solutions in order to provide value support for Rock to Road initiatives. We are well-positioned to capitalize on global growth opportunities in 2022, as we continue to reinvigorate innovation and leverage technology to unlock internal synergies while also enhancing the customer experience. Slide 19 shows our Shuttle Buggy 3000, which has been reinvented based on customer input to improve safety, serviceability, usability and performance. You may recall we invented the Shuttle Buggy Material Transfer Vehicle in 1989 and it quickly became the benchmark in the paving industry. Our new ultra Portable Ventura Asphalt plant maximizes performance capabilities primarily for international markets. As you can see, some of the plant's key features can be transported as a single load, is a continuous process that could produce 140 tons of mix per hour, and it is very easy to maintain. I'll conclude on slide 20 with our key investment highlights. Our performance during the third quarter is a reflection of the commitment and tenacity of the Astec team as we continue to work diligently and efficiently to deliver results against the backdrop of continued global headwinds. I am proud of the team's ability to execute our strategy during the quarter, and we are seeing benefits from the strategic initiatives that we have in place. We are still in the early innings of our business evolution and our team remains laser-focused on positioning the organization for future growth. We continue to innovate and work with our customers to create value-added services, products and solutions and leverage strong and long-lasting relationships. Lastly, as a reminder, we remain committed to our 2023 targets of 10% to 12% EBITDA margin and greater than 14% return on invested capital as highlighted at our December 2020 Investor Day. I am optimistic about the future for Astec as we continue to execute our strategy. I am confident that the progress we have made to date will result in a stronger and more agile organization. Our strategic initiatives and focus on commercial and operational excellence will drive continuous improvement, future profitable growth and long-term shareholder value. With that, operator, we're now ready to open the call for any questions.

Thank you. Ladies and gentlemen, the floor is open for questions. Our first question today is from Mig Dobre at Baird. Your line is live, and you may begin.

Thank you and good morning everyone.

Good morning, Mig.

Very good order intake, as you already highlighted, and record backlog. I guess, I'm curious your perspective on your ability to convert this backlog to revenue. You talked about the backlog is going to be converted over the next two to three quarters, but maybe you can be a little more specific in terms of are you able to increase production sequentially in the fourth quarter relative to the third given all the comments that you provided on supply chain and labor challenges. And yeah, maybe let's start with that.

Okay. Mig. Hey, this is Barry. Thanks for the question and for participating in the call. We feel as though we've built traction throughout the course of 2021, both in our ability to hire labor to support our demand. As you may have noted in the call, we've increased our headcount roughly just under 9%. It's not as much as we would have liked, but we feel like we have the right pieces in place to continue to build that, that will support our ability to convert backlog into orders. We've said it all along that one of our biggest constraints is really labor, and so we feel good about that. We also see that set aside the supply chain disruptions that we're dealing with, the examples of starting a machine, getting it down the line, and parts not showing up as they were promised from the supplier, we have to pull the machine, those types of things aside. We're seeing that some of the efficiencies that we're getting relative to the throughput have improved at our sites, but obviously a big component of that is the disruptions that we have in the supply chain and having to replanning production, so on and so forth. So, without a great extent of continued supply chain or a worsening supply chain situation, we feel good that, yes, we will continue to be able to convert more of that backlog to sales as we move forward in time. Certainly in Q4 and into 2022, setting aside logistics and supply chain issues we are having. And let me give you some color on how we're doing that, Mig. One of the things that I feel really proud about is that as we've gone to the OneAstec business model, we now look at the capacity that we have across all of our sites. Today we have many sites that were not traditionally concrete plant manufacturing sites that are now building components for concrete plants. We're now leveraging our supply chain more effectively to ensure that we can get components in to support the needs of our customers in the time that they require it. Now, obviously our supply chain is dealing with some of the same issues we are around labor. But generally, we found that that outsourcing of certain components has generally helped us get more products through the facilities. And obviously, the operational excellence initiatives we have in place are allowing us to use value stream mapping and other types of lean tools to take the inherent waste out of our build processes. And so, we've seen some throughput and capacity improvements from those types of exercises as well. In addition to that, Mig, we're also looking at how we expand capacity through investments, brick-and-mortar potentially. And also, we believe that with the right type of M&A strategy, we can also see our capacity improvements there as well. I feel good about our M&A funnel and know that the targets we have in that funnel would allow us to do that.

Okay. I guess my other question has to do with the strong orders that you have, which is great. But I'm kind of curious as to your ability to properly price these orders and properly price your backlog given the various cost drags and inflation that you're experiencing. Can you comment on that at all?

Thank you for the question. Our customers are making informed decisions as they navigate inflation within their operations. The value we provide has enabled us to implement price increases effectively. We anticipate that our cost-price ratio will improve as we progress through the fourth quarter and into 2022, though we recognize that challenges may still lie ahead. We're actively assessing our costs and pricing strategies. I am proud of our team for successfully collaborating with customers throughout 2021 to minimize price impacts. The EBITDA waterfall chart indicates we have benefited from operational efficiencies in some acquisitions, which have helped mitigate cost-price gaps. We believe we can sustain our pricing efforts, especially for inventory and backlog that does not have specific customer commitments. However, for orders tied to specific customers, we are more cautious due to prior commitments made by our dealers. Overall, we have been successful in passing on price increases for our inventory and backlog without designated customers.

Yeah. I mean, to this very point, I'm looking at the fact that your infrastructure orders were $300 million. And as far as my model goes, I yet to see a quarter where order intake has been quite this strong, leaving the wood pellet plan story aside from back in a day. But anyway, my understanding is that a lot of these orders actually do have a customer name associated with it, which is why I'm sort of wondering given the strength of this order intake, are you able to properly price these when you think about the pace of delivery and the cost that you're going to have going forward? Sorry to be stressing this point. I just want to make sure that we're clear on that.

No problem. On the infrastructure side, many of the orders are related to asphalt plant sales, and our customers plan in advance based on their capital expense strategies. We have managed to work with them effectively. Our product, service, and value are premium, which allows us to pass on the price effectively. Additionally, we continue to manage our material margins by adjusting how we buy materials and negotiate. In this environment, there isn't a single strategy that works for procurement due to inflation; flexibility is essential. The efforts from our procurement and operations teams at Astec are helping us offset and mitigate these challenges. Lastly, I'm proud of the organization; instead of simply accepting the circumstances, we are determined not to be victims of them. Everyone is committed to ensuring we take care of our customers and continue delivering value as we have for years.

I see. My last question if I may, has to do deal with this bridge on slide 12 that you've mentioned. You call out here inflation of 705 basis points in terms of it being the drag. Looking at last quarter, a very similar number, it was 697 basis points last quarter. So sequentially, it seems like things are tough, but they haven't gotten materially worse. I'm curious, first, is my understanding of this correct? Secondly, as you think about the next couple of quarters, do you expect these drags from inflation to escalate from this, call it, 700 basis points run rate? Because I'm presuming as we move into the second quarter of next year and beyond just base effect will have this drag be quite a bit lower than what we're experiencing currently. Thank you for that.

Good question, Mig. Generally, I would respond this way. I'll start, and if Becky has anything to add, she certainly can. I think your assessment is correct. We've observed a stabilization of inflationary pressures. As you can see from the comparison between Q2 and Q3, and we believe this trend will continue into Q4. This gives us confidence in our price-cost ratio, suggesting we should be able to recover some of that as we progress. While we can't predict exactly what will happen with inflation in 2022, I believe we are in a significantly better position now to manage it compared to the beginning of this year. When inflation spikes, like we've seen with steel over the past several months, it's challenging for any organization to keep up, including us. However, when steel prices fluctuate at a slower rate, we can manage those changes more effectively and use our strategies to offset them. I don't anticipate experiencing the same trajectory of inflation that we faced in the last 12 months. Consequently, we should be in a much stronger position to handle any future inflation challenges.

All right. I appreciate the comments. Good luck.

Thank you.

Thank you. Our next question today is coming from Steve Ferazani at Sidoti. Your line is live. You may begin.

Morning, Barry. Morning, Becky. I do want to follow-up on the series of previous questions. Just to ask, as we've gone through this earnings season, we're hearing from companies saying that the supply chain issues are actually getting worse, certainly not getting better and that the duration could be longer, maybe that's just lack of visibility. You've been going through a couple of quarters. Given your sense on turning backlog into revenue, do you think it isn't getting worse, or do you think you're finding more work around?

Yeah. I would say yes and yes, Steve and good morning. We went to experience. I've never seen a quarter like Q3 that we've experienced here in the industry and certainly at Astec relative to those types of disruptions and struggles around supply chain and logistics and labor. But I'm proud of the fact that our organization has found ways to minimize that impact as best as possible. I do agree that there is a likelihood it could get worse. As a matter of fact, we see lead times continue to slip out on major components, and the supply performance even on minor components is a little erratic. I don't necessarily think it's going to get better. The best we can hope for is that it's plateaued in regard to the amount of severity that is causing to the business, but we're prepared for it to get worse. When we are working on the supply chain today, of course, we're working on the firefighting that we have on a daily basis and we're also in the background with our procurement team working on the strategies and supply chains that allow us to get out of potential looming situation. But one thing that the backlog does give us is great visibility. We know when we're going to be running production and that gives us the ability to look out in the future to say, where do we think we have constraints or concerns and then to put a plan in place to be able to mitigate that. I think, we've talked a lot about recently this ERP transformation. You can imagine, Steve, as we go forward and start to get some of our sites on the Oracle platform, the more sites we get on, the better visibility we have. Today we're working across many ERPs. I know that's not necessarily going to have been completely in 2022, but we're excited about the investment we're making and the teams we're putting resources behind it to put that system in place so we can be a lot more effective in regards to how we plan and have visibility to future production.

I would like to address labor. It seems that you have made some progress here. Becky mentioned that headcount increased by 8.5%. Do you believe you are now sufficiently staffed to meet the growing production demands if supply chain issues improve? Additionally, how should we consider the effects of wage inflation? Have you been able to manage that?

Yeah. I would say that today we have not caught up generally across the company relative to our labor needs. If we could hire more people today, we would. Part of the issue that we're dealing with is the traction part of it, but then also the retention part of it. The slide that we put in the deck today was to demonstrate to you guys and our shareholders what we're doing in order to try and mitigate and get ahead of this. I'm pleased with the team's efforts to continue to find ways to improve that situation. The reality is we are still short. I think when I look at the backlog, I'd rather have that backlog smaller and have those products into our customers' hands. Labor is going to be something that's going to determine our ability to do that effectively. Some of our labor issues are site-by-site specific. In some plants, we're much better in regards to being able to pull in labor than we are in others, but the strategy and the tools we're using are really tools we're using across the company. So, long answer to basically say we're still constrained by labor and we're doing everything we can to try to attract and retain folks. From a labor inflation perspective, yes, we're going to see a little bit of that hit us in Q4, because we've had to do some things to adjust rightly so, our workforce in regards to compensation. We've had to do that for employees that we have within the company today and to attract employees moving forward. So, we’ll see that hit us a little bit in Q4 and be more of a mainstay as we get into 2022.

Great. Thanks Barry. Appreciate the time.

Thanks, Steve.

Thank you. Our next question today is coming from Stanley Elliott at Stifel. Your line is live. You may begin.

Hey, good morning everyone. Thank you all for taking the question. A quick question guys. Starting off on the CarbonCure, our state DoTs adopting these sorts of technologies and allowing for various specs of ready mix in any sort of the projects, or is it still kind of in more of an earlier phase?

Hey. Good morning, Stanley. Thanks for the question. We are really super excited about the relationship that we have with CarbonCure today. Quite honestly, we see it as just the beginning step into what we want to develop moving forward across many more of our products and solutions, everything from crushing and screening to asphalt to where we're at today now with concrete. To answer your question specifically today, our CarbonCure partnered process is really more on the ready mix side, Stanley, and not necessarily from a transportation perspective. As you probably know and heard from others, changing specifications of Departments of Transportation can be a tough process and can take time. We feel confident that we're going to get there with the partnership that we have for the CarbonCure team. But today, most of the CarbonCure solutions that we are partnering on are really around types of concrete installations, other than roadways and other DoT work which is plentiful. That's a big part of our concrete plant customer base as well. We like the CarbonCure relationship because obviously we've made a commitment. Two years ago when I started with this company, I could meet with customers and no one would talk about sustainability. Today, if I talk to 10 customers, eight of them are bringing up the topic on their own and asking what we can do to provide sustainable solutions. This is one huge step that we put in place with this relationship to really add value to our customers regarding their own initiatives around driving sustainability. We will continue to find more ways with our product development through partnerships and acquisitions to do more of this moving forward in time.

Great. That is very helpful. I was just curious if, with DoTs adopting the recycled asphalt piece fairly broadly, this was kind of next in line.

Yes. Question for you on the international business and certainly nice pick up here, you attractive new product coming out. And then also you kind of overlay that with the margin piece given the headwinds across the supply chain. Are we to think that several quarters ago when you had more opportunistic sale internationally that we should think of the international margins being kind of above or at least in line with what you're looking at from a longer-term perspective?

Hi, Stanley. This is Becky. Good morning. Regarding our international sales, we have seen a positive increase, as the groundwork we laid in Q1 has facilitated this, and growth is aligning with our expectations. Additionally, the margins are coming in as anticipated. There may be a slight lag compared to domestic sales since we are still manufacturing many products locally, coupled with ongoing transportation issues and cost inflation. However, the output in those regions is expected to meet our targets.

I think as we think about where we continue to invest Becky, we've said all along, Stanley, we know that to really grow a substantial profitable international business, we have to be closer to the customer. Today, I'm really proud of the work that we're doing in all the international sites, as you might remember we're producing in Belo Horizonte, Brazil, Johannesburg, South Africa and in Oman, Northern Ireland. We are partnering with people and supply chains in order to build non-proprietary components locally, which helps that margin profile and deliverability perspective. We're doing things in a very disciplined way. As we move forward in time, we also believe that we can use our capital to continue to build those capabilities both organically, but also we believe as you look at our filters around M&A that global growth and our ability to have the right specifications in the right global footprint is a targeted approach in regards to how we invest capital through mergers and acquisitions.

That's actually kind of a nice segue to the last piece. It sounds like the M&A market seems pretty full, at least the pipeline does. Do you have more of a bias toward the material side or the infrastructure side? Also, are you spending more of your time domestically or internationally on those assets?

First and foremost, I might just call your attention, Stanley, we feel good about changing our dividend. We are going from $0.11 to $0.12. We haven't changed our dividend for quite a while and hopefully that gives you the sense that we feel good about our cash generation on a long-term basis. Dividends are something we plan on paying and it's a big part of our capital allocation strategy along with investing back into our business primarily and M&A. I feel good about our funnel. It's really mixed. What I like about our team in our approach is we're not sitting here, waiting for the phone to ring for someone or a bank to tell us that there is an opportunity to look at a company. We know where we have gaps. We know where we want to invest the capital to grow this business, and it really is across both reporting segments. It really is global. We believe that we can accelerate our investments in technology to continue to build our technology platforms through M&A. We also believe we can grow globally through M&A. We’re looking at those as well. But as I've always said, we'd like to do business in our own backyard. So, the domestic piece is also attractive when those targets are ready to interact and potentially do transactions. But we are very focused and targeted in regards to where we want to drive the M&A strategy.

Perfect. Thanks so much for the time and best of luck.

Thanks, Stanley.

Thank you. Our next question today is coming from Larry De Maria at William Blair. Your line is live. You may begin.

Thanks. Good morning, everyone. Regarding the backlog, it seems that price-cost may not become positive until the second or possibly third quarter of next year. Is that the correct way to understand it? Additionally, do you anticipate margin expansion and positive price-cost in 2022 based on your current outlook? Thank you.

Good morning, Larry, and thank you for your question. I wouldn't say we are waiting until Q2 for improvements. We expect to see continued progress, having already witnessed an improvement from Q2 to Q3, and we anticipate more momentum in Q4 and Q1. As we move from quarter to quarter, we will see ongoing improvements. Some product lines are performing well, while others are not. I believe that as we enter Q1, we will start to see a balance. We expect this because, as you recall, when we implemented price changes throughout 2021, we had a significant backlog. We are waiting for those orders to process, which we expect to begin flowing through in Q4 and Q1. By Q2 of 2022, we should be in a strong position. Regarding margin growth, I believe that if we avoid further inflationary pressures, we should be well positioned to see margin improvement throughout 2022. While neither of us can predict the future, I do not foresee significant increases like in prior spikes, which should enable us to manage more effectively in 2022.

Okay. That's really good color. Thanks, Barry. Then you referenced price increases. Can you maybe break down for all of us on the call the timing and the cumulative effects, so we can kind of see there the carryover, and what to think about for the impact on top line given the price increases this year? Would that mean for next year? So, cumulatively, we have 20%. I don't know. Can you help us understand that?

It truly depends on the product line, our competitive position, our ability to deliver, and our capacity to pass on the premium due to the value we provide. When discussing this, the chart we have offers a summary of our current positioning. You can see that the column displaying pricing, volume, and mix highlights that we are utilizing various tools to mitigate pricing, but the largest factor contributing to that pricing is indeed pricing itself. We won't break it down by color or product, but overall, I'm optimistic about the steps we've taken. These actions have been implemented throughout 2021, sometimes more rapidly than we would have preferred, but it was necessary. Our customers are quite perceptive and have managed to understand and adapt. We're not finished with pricing adjustments either; it's now fundamentally part of our approach. We aim to remain leaders in pricing within the markets while ensuring we are acting in the best interest of both our customers and shareholders.

Okay. Thank you and good luck.

Thanks, Larry.

Hey. Thanks for taking the follow-ups. Just two very quick ones. I guess maybe you kind of answered this question, but to make sure that I get a straight. If I'm sort of looking at this volume pricing mix bar that you've got on slide 12, so this accelerated a couple of hundred basis points sequentially. I'm looking to make sure that I understand is this pricing that's accelerating sequentially, or are there are some other base effects here? Because when I'm looking at revenue, revenue was actually a little bit lower sequentially, the third quarter versus the second? That's why I'm asking the question, I guess.

Yeah. Mig, it's really a mix. I think that as we've talked about for a while now, we've invested in resources at our sites to try and find ways to become more effective and efficient. As you can imagine, we've been able to generate this revenue with less square footage. That's obviously part of the story and part of the numbers you’re seeing flow through, but pricing is a big part of it. I think that's a testament that the inflation hit us so fast that the margin we're seeing from the pricing actions we took has taken a little while for it to flow through. It's really a mix. We have to give credit to the teams again for the work they're doing in our facilities and our supply chain. It's really in some cases, a matter of making all hands on deck relative to what we're doing in order to try and get products delivered and manage our throughput. You'll see pricing continue to be in the price cost, as I mentioned, several times now improve, that ratio as we move forward in time. But there's quite a bit of work going on in our facilities to try and increase throughput. We're working hard to get that backlog converted into orders and we know that the faster we can do that, the better off we're going to be and a better offer our customers are going to be.

My final question has to do with steel. As you're looking at the fourth quarter of 2021, can you give me a sense what sort of steel prices are flowing through your P&L at this point? Maybe you can use hot rolled as a benchmark if you would, because we all understand that one. I'm curious as to how you're handling material purchases looking into 2022. Are you buying anything forward or really approaching, if you would, your purchases any differently than what you have done in the past? Thank you.

Thank you, Mig. We have regular monthly meetings in our steel council, which provides the executive team with insights into the current state of steel, including its capacities, pricing, and lead times. I am confident in our established processes. Over time, we have shifted from a service center purchasing strategy to a mill direct approach, which has proven beneficial in terms of supply and pricing. We plan to increase our steel purchases directly from mills. Having been in this industry long enough, I understand that a flexible approach to purchasing steel is essential; we must be prepared to buy on the spot, forward, secure inventory, and consider hedging. For instance, we've successfully locked in prices for future purchases and will maintain this strategy into 2022. As anticipated, steel prices appear to be stabilizing, so we may need to shorten our buying timelines to avoid being stuck with agreements that limit our profit margins if prices decline. Going forward, we will be more careful about how far ahead we commit, but I want to emphasize that when we quote an order and agree on a margin, we will aim to secure that margin. We face challenges with a long backlog and prefer not to risk our shareholders' money on uncertain outcomes. We approach this strategically, and I believe we will manage our prepurchase timing with the potential for price softening in mind, which could provide us with advantageous opportunities.

Understood. I appreciate the color.

Thanks, Mig.

Thank you. That concludes our Q&A. I will now turn the floor back over to Steve Anderson for any closing remarks.

All right. Thank you, Kate. We appreciate everyone's participation on this call, and thank you for your interest in Astec. As today’s news release indicates, today's conference call has been recorded. A replay of this conference call will be available through November 17, 2021, and an archived webcast will be available for 90 days. The transcript will be available under the Investor Relations section of the Astec website within the next seven days. All of this information is contained in the news release sent out earlier this morning. So, again, this concludes our call. Thank you all have a good day.

Thank you. Ladies and gentlemen, this does conclude today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.