Hello and welcome to the Astec Industries Second Quarter Earnings Call. As a reminder, this conference call is being recorded. It is my pleasure to introduce your host, Steve Anderson, Senior Vice President of Administration and Investor Relations. Mr. Anderson, you may begin. Thank you, and welcome to the Astec second quarter 2023 earnings conference call. Joining me on today's call are Jaco van der Merwe, Chief Executive Officer; and Becky Weyenberg, Chief Financial Officer. In just a moment, I'll turn the call over to Jaco 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 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 results, the company refers to various US 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 US GAAP and are therefore unlikely to be comparable to the calculation of similar measures of 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. A reconciliation of GAAP to non-GAAP results are included in our news release and appendix of our slide deck. All related earnings materials are posted on our website at www.astecindustries.com, including our presentation which is under the investor relations and presentation tabs. And now I will turn the call over to Jaco.

Thank you, Steve. Good morning, everyone, and thank you for joining us. I would like to begin my comments with the key messages summarized on slide four. We achieved record sales during the second quarter on strong end market demand and improved outputs of our products. We are building on a solid start to the year as the Astec team delivered unique solutions and outstanding service to our customers. Positive customer outlook continues to be driven by demand for asphalt, concrete, aggregates and machinery to support the Rock to Road value chain. Our exciting new products have been well received by our customers for their expanding projects. Due to the team's tireless efforts, we delivered adjusted EBITDA margin expansion of 510 basis points. Our improvements in operational excellence have helped drive throughput and further realization of previously implemented price increases contributed to revenue and profitability. I am proud of the contribution from everyone across our organization and optimistic about the momentum we have built going into the second half of 2023. Internally, we are elevating our performance to achieve objectives and we are united by our OneASTEC operating model. As I mentioned in our Q1 earnings call in May, we went live with the successful launch of the Oracle Cloud ERP at one of our major manufacturing sites. Additional incremental improvements are expected as we continue to complete the integration of the ERP solutions throughout our organization. As expected, our team managed the ERP implementation well, causing minimal production disruptions from the launch. The Astec team is excited as preparation continues to launch additional sites in 2024 and 2025. This crucial implementation will allow us to improve upon our performance excellence and continue to simplify, focus and grow across our entire organization. Becky will provide an update on our progress against our strategy later in the call. Our priorities for 2023 are shown on slide five. I would like to remind you of these and update you on the progress we are making. First is creating value through our simplified focus and growth strategy. As our second quarter results demonstrated, our renewed focus on execution is beginning to show results as we start to build a track record of stability and profitability. Value creation is dependent on consistent results and we are creating a performance culture that reliably delivers against strategic objectives. There is still work to be done, but I'm proud of the progress we are making. The second priority is dedication to employees, customers and shareholders. During the quarter, we further expanded our distribution network in North America by entering into an agreement with a dealer for the distribution of our forestry and environmental recycling equipment in California and Arizona. This agreement will enable us to provide additional customer service in the region and enhance the customer experience. Driving sustainable shareholder value creation requires leadership. With that in mind, I am pleased to take a moment to announce an addition to our executive leadership team. In July, we welcomed Ben Snyman as Group President within our Infrastructure Solutions Group. With over 25 years of executive experience in the mining capital equipment industry, including time with Joy Global and then Komatsu, Ben brings knowledge that will greatly support our drive for performance and help our customers succeed. We are thrilled to have Ben on board. Third, we are driving continuous improvement through the promotion of our OneASTEC operating model. I mentioned the ERP implementation earlier as an important step for us as an organization. In addition, we are using operational excellence to improve parts fill rates and to help convert backlog into sales. Finally, our commitment to core values will always be a priority for us. You will see many examples of the core values in action, including our commitment to safety in our inaugural Corporate Sustainability Report planned for distribution later this year. Turning to slide six. I would like to spend a few minutes discussing our simplified focus and growth strategy and update you on the progress we made. The three pillars of our strategy are designed to create the performance culture and provide the organization with a common framework to fully unlock the value we can deliver. We continue to make progress on our simplified pillar as we optimize our organizational structure and operations. As you know, we have made footprint and product rationalizations, and earlier this year we streamlined our executive leadership team and some other areas of our business. We are now realizing the benefits of these actions and we'll continue to do so going forward. The operational excellence improvement I mentioned earlier are an example of the focus pillar, being able to satisfy demand for OEM products and aftermarket requirements by increasing manufacturing throughput of parts. Finally, as we achieve the initiatives listed on the slide, we grow profitably, demonstrating that we are growing the right way and being recognized by our customers for the value we provide. Overall, our simplified focus and growth framework is driving the right behavior. I'm convinced that this will enable us to create sustainable value for employees, customers, partners and shareholders. Turning to slide seven. I would like to provide an update on current business dynamics and how we are responding. Demand from the infrastructure market we serve remains strong. In conversations with our customers, they continue to share that a positive business environment is driving demand for the equipment, parts and solutions we provide. This is not a short-term observation, but a view based on the long-range outlook for their businesses. We are selectively investing in capacity and completing projects to increase throughput to these customer needs. In addition to strong market demand, funding for the Federal Highway Bill is being deployed. Project activity supported by these funds is ramping. As reported by the American Road & Transportation Builders Association, Federal contract awards reflect a 30% year-over-year increase for June 2023 and year-to-date totals are higher as well. We view the Federal funding mechanism as providing long-term stability for our customers and in turn Astec. Reviewing external challenges we have faced over the last few years, the overall environment has improved. Tight labor markets have stabilized and wage inflation is normalizing, although at elevated levels. Supply chain and logistic constraints are easing. However, long lead times on certain purchase components continue to be a challenge. Finally, inflationary pressures are stabilizing and our efforts to mitigate rising costs are proving effective, restoring profit margins. The bottom line is, we are performing better and improving profitability, while near-term headwinds ease. Our initiatives are proving effective in driving the desired outcomes. We show our historical backlog on slide eight. Backlog levels, while below last year's historically elevated peak remain above our three-year average and are supportive of our positive outlook. We were encouraged to see implied orders improve sequentially in the second quarter. Also, we continue to successfully execute against our operational excellence initiatives, which has led to improved output. Additionally, dealer inventory remains below optimal levels, which creates additional demand. Further stability is provided by the Federal Highway program, which has been in place for several decades. We are comfortable with our current backlog levels as we continue to see strong customer demand in both of our segments. As I speak to our customers, they continue to see very strong demand and a robust pipeline for projects. Turning to slide nine. Sustainability is built into our business model with a focus on our product and operations. We are committed to our environmental, social and governance initiatives as we continue to create value for our employees, customers and shareholders. Though early in the journey, we are making progress. Due to the devotion of numerous employees through Astec, we will be proud to share the company's first Corporate Responsibility Report later this year. We introduced our Astec Digital suite of solutions, highlighted on slide 10 to the CONEXPO attendees last quarter with very positive reaction. This is an exciting initiative for us as it greatly enhances the customer experience. Astec Digital provides us with data that can be used to improve product performance and drive standardization across the Rock to Road value chain for our customers. We continue the process of upgrading and integrating our software through telematics, connectivity, controls and equipment to create actionable intelligence. We are creating a core competency of data analytics and plan to introduce this disruptive technology across our platform to drive transformation. I look forward to what we are achieving as we create value and a competitive advantage for both our customers and Astec. With that I will now turn the call over to Becky to discuss our detailed financial results.

Thank you, Jaco, and good morning, everyone. I'll begin my review of second quarter results on slide 12. Sales were $350 million, up 10% with growth in both segments, especially in Materials Solutions, which increased 21.2% year-over-year. By region, strong domestic sales growth of 15.3% more than offset softened international sales. Both equipment and parts sales grew 5.8% and 7.1%, respectively. Backlog decreased at the end of the second quarter, down 17.7% year-over-year and 13.9% sequentially, while off from peak levels, backlog remains elevated and above our three-year average. Domestic backlog was down 16.6% and international down 24%. As Jaco mentioned earlier, with fewer supply chain disruptions, customer order patterns are normalizing, and we continue to make investments in operations to increase output. We anticipate converting more backlog to sales as these initiatives are implemented and the supply chain constraints continue to ease. Though extended lead times on certain purchase components continue to exist. Overall, they have started to come down, and this has led to moderation in our backlog. We posted a strong bottom line as adjusted EBITDA increased 143.9% to $32.2 million, expanding adjusted EBITDA margin 510 basis points to 9.2%. We expanded gross margins by 390 basis points to 23.7% as we achieved further price realization and higher volumes with favorable mix. This is the fourth consecutive quarter gross margins have exceeded 20% and year-to-date gross margins are 24.7%. Adjusted SG&A increased slightly due to higher personnel costs as we invested in our business and increased consulting and project costs. Adjusted SG&A expenses declined as a percentage of sales. We are pleased with the progress on adjusted EBITDA margins and look to continue driving improvements. Adjusted earnings per share increased to $0.87 from $0.19 the prior year. The improvement was driven by our improved operating margin. The adjusted net effective tax rate for the quarter was 19.4%, lower due to the changes in the relative weighting of jurisdictional income and loss. We expect our normalized net effective tax rate to continue to be in the 23% to 24% range for the remainder of the year. Moving onto slide 13. Infrastructure Solutions net sales increased 4.1% to $218.1 million on strong domestic performance, which was up 10.7%. Part sales were up 8.8% as we were able to fulfill parts orders for aftermarket demand. Segment backlog decreased 16.9%, primarily due to the normalization of customer order patterns and fewer supply chain disruptions as noted by Jaco. Adjusted EBITDA margin for the segment expanded 460 basis points to 12.2% due to favorable gross margin, partially offset by higher operating expense. Turning to Slide 14. Our Materials Solutions sales increased 21.2% to $130.2 million driven by strong domestic demand and strong increase in equipment sales. Favorable pricing and mix also contributed to the increase in segment sales. Equipment sales grew 29.6% and parts were up 4.5%. Domestic sales grew 24.9% and international sales increased 11.6%. Segment backlog was down 19.7%. As a reminder, our annual dealer event takes place in the fall, early indications show order activity in line with the prior two years. Adjusted EBITDA margins for the segment increased 530 basis points to 14.1%. This was largely due to net positive volume, mix and pricing, partially offset by higher inflation on materials, labor and overhead costs as well as manufacturing inefficiencies. On slide 15, we highlight the key drivers of our year-over-year adjusted EBITDA bridge. Adjusted EBITDA improved 143.9% to $32.2 million, an expansion of 510 basis points to 9.2%. The positive contribution from volume, pricing and mix more than offset the impact of inflation. Manufacturing efficiency headwinds due to supply chain disruptions are still having a lingering effect. SG&A expenses were slightly higher due to higher personnel costs. Looking ahead, we continue to expect further benefit from the implementation of our transformation strategy to drive increased EBITDA to deliver our long-term targets. Turning to slide 16. Our cash and cash equivalents stood at $41.4 million. With ample liquidity and low debt, our balance sheet remains solid, and we expect our cash position to grow with continued profitability and the normalization of inventory levels. We have the financial strength to withstand a variety of economic situations as well as support investment plans and return cash to shareholders. Our current net leverage ratio is low, which we think is prudent given rising interest rates. Our target leverage range over cycles is between 1.5 times to 2.5 times. Turning to slide 17. We maintain a disciplined capital deployment framework, balancing investments and growth with returning cash to shareholders. We spent $9.1 million on CapEx in the second quarter to maintain and improve operationally. The target range for our full year capital expenditures is $25 million to $35 million. As Jaco mentioned earlier, we went live with Oracle Cloud ERP at one of our major manufacturing sites this quarter as part of our Oracle implementation shown on slide 18. We are currently in the process of fine-tuning these activated systems as we move closer to an organization-wide implementation. Our corporate systems also went live on May 1st after a successful launch of our human capital management system on January 1st. I'm very pleased with the launch thus far and the progress we've made since our journey began in early 2021 with diligent planning and data mapping. We expect to see progressive benefits from the implementation, and I'm proud of our Astec team as we were able to minimize the anticipated production disruption this quarter. We will leverage our rollout successes to date as we continue implementation throughout the entire organization. I will now turn it back over to Jaco for his closing comments.

Thank you, Becky. Turning to slide 19. I would like to summarize our key investment highlights. We have built leading positions within our attractive niche markets. Our markets are benefiting from long-term secular trends, including population growth and aging infrastructure. Government spending on US infrastructure has also been in place for decades when the National Interstate and Defense Highways Act was put into place in 1956. Federal funding continues to provide a core level of work for our domestic customers. Through our leading positions in Materials and Infrastructure Solutions, we are delivering best-in-class products and services. We have built a reputation for innovation, which is carrying forward with our Astec Digital solutions. The combination of these factors has helped us grow our installed base. We will continue to drive our aftermarket parts initiative to serve our customers and grow this recurring revenue stream. As our top and bottom line grow, we further strengthen our balance sheet to provide the liquidity needed to fund our growth initiatives, including a return to shareholders. Our simplified focus and growth strategy is driving sustainable profitable growth as we progress towards our long-term goals shown on slide 20. We have a good start to 2023 and are optimistic about the second half of this year. I am grateful to our employees for their dedication and hard work and to our customers for their loyalty and support. With that, operator, we are now ready to open the call for questions.

Your first question will come from Stanley Elliott with Stifel. Your line is now open.

Hi. Good morning. This is Brian Brophy on for Stanley. Just wanted to ask one on backlog. Can you give us a sense on how you're thinking backlog is going to trend from here and where we might expect things to bottom out? What kind of level do you guys feel is normal?

Hey, good morning, Brian. This is Jaco here. As I mentioned in the call so far, we still feel positive about the market. Our customers have a very strong pipeline. During last year, we had the order writing for our Materials Solutions Group during August. And this year, we are expecting that to happen in Q4. So we see that still reflecting in the backlog for Q3. If you look at historically we always were running 1.5 to 2 quarters of backlog. And we'll feel comfortable if we can stabilize around those levels going forward. We are still continuing to drive down parts backlog, ensuring that we can provide our customers with the service they need from us. So that's a very specific effort that we have in place.

Okay. That's helpful. And then I wanted to ask one on capital allocation. Obviously, you guys are getting close to a net cash position below your leverage targets. Share repurchases have taken a little bit of a pause here. I guess, how are you guys thinking about capital allocation? What is the M&A pipeline looking at? What are some of the priorities on M&A? Any thoughts there would be helpful.

Yes. Our focus so far this year was to create good stability in our results and have a good transition from the year before. So I think we are well positioned now to start to shift our focus to the growth side. And obviously that will include potential acquisitions, Brian. We are always looking, although we were not active here in the last six months or so. And we believe that there's various opportunities for us to fill pipeline or to fill gaps in our product portfolio. Things like share repurchases and dividends are obviously something that the Board reviews every time. And if the time is right, we will also look at those.

Okay. Thank you. And then one other one. You guys introduced a handful of new products at CONEXPO, some categories you guys hadn't been competing in, to my understanding in the past. I guess I'm curious as to what initial customer reception has been on some of those new products you introduced?

Yes. So you're specifically referring to the products that we have on our mobile equipment side. We will actually release those products for sale year in September and October. The customers who've been testing the prototypes have been very complimentary of the new designs. So we are really excited about taking those to market. And we expect to see those orders to come through in the fourth quarter for those products.

Great. Thank you. I'll pause it on.

Thank you.

Your next question comes from Mig Dobre with Baird. Your line is now open.

Hey, good morning, everyone. It's Joe Grabowski on for Mig this morning.

Good morning, Joe.

Good morning. So I was surprised to see that infrastructure equipment sales were down 7%. Backlogs are still elevated, it sounds like throughput levels are improving. Was this just driven by lumpy shipments or anything else going on there?

Yes. So if I look at the data, it looks like our numbers reflect a little bit higher sales for Infrastructure Solutions year-over-year. We obviously did go live, Joe, in one of the biggest sites in our Infrastructure Solutions Group. And we planned for lower output during May and June. I'm glad to say that our teams did better than what we had in our internal plans. So you will see that output in the sales and obviously, that comes from that going back to normal levels here in the next couple of months. So that was the biggest driver. And we most probably had a few machines that didn't ship at the end of the quarter. And specifically, we had some parts that were still left at the docks. So the team is all on board there. We've done a much better job here in the last months to work through some of the small tweaks we had in the system. So that's the biggest driver for that.

I see. And was that implementation, was that international? Did that impact the international sales, which were, I guess, down 25% year-over-year?

Yes. So a big piece of our international sales come from mobile equipment that comes from the large sites we had here in the US. So, obviously, they didn't have all the machines that they have in backlog to invoice during the quarter.

I see. Okay. And then I guess on the flip side, you talked about in the Infrastructure segment, strong domestic service and installation revenue. Can you maybe expand upon that? And are those positive trends sustainable?

Yes. One of our key focus areas is to enhance the service and construction work we provide to our customers, and our team has made significant progress in expanding our capabilities over the last year or two. This growth is intentional, and we plan to continue it. As we install more equipment, that aspect of our business is expected to grow accordingly.

Got it. Okay. And then last question, sticking with the Infrastructure segment. It looks like implied orders were kind of stable Q1 versus Q2, obviously down somewhat from the past two years. But does it kind of feel like we've sort of stabilized there and the kind of the run rate we've been on the last couple of quarters is maybe the run rate will be on for a while here?

Yes. We've definitely seen it stabilizing. So you're correct there. Historically, if you look at especially the asphalt plant-related business, Q2 is a very busy season for our customers as is Q3. So it's typical for us to see lower orders during those two quarters. A lot of our customers are now going into their budgeting process as well. So we fully expect here in the latter part of Q3 and then the majority of the order writing for next year's delivery will be late Q3, early Q4.

I see. Okay. Great. Thanks for taking my questions. I appreciate it.

Thanks, Joe.

Your next question comes from Stephen Ferazani with Sidoti. Your line is now open.

Good morning, Jaco. Good morning, Becky. I did want to follow-up with some of the questions around backlog and orders. Obviously, you've had two really strong quarters, particularly top line as you've converted a lot of this elevated backlog. When we think about this cycle and the new spending plan, clearly, some of your orders should be front-end loaded around the asphalt plants. When we think about where your order trends are going and the fact that you've converted really strongly over the last two quarters. Are you thinking these two quarters are peak revenue in this cycle or can you grow top line from here?

Yes. We, obviously, had a very strong booking season the last 12 to 24 months. And our teams have done a really good job creating additional capacity. So theoretically, our factories have the capability to deliver higher numbers as even compared to what we've delivered here in H2. We still have strong backlog and we feel pretty confident that H2 will be more or less in line with what we had in H1.

Okay. That's fair. Thanks. Last quarter and I don't want to put words in your mouth, but you were targeting sort of a 24%, 25% gross margin for the year. It looks like you're still tracking there. You still feel good about that?

Yes, we do. Just a reminder that typically the third quarter is the lowest parts quarter of the year. So that will weigh a little bit on overall margins. But we feel that that range is definitely applicable right now.

We haven't discussed much about the margin improvements that can be achieved through the OneASTEC model, especially with reduced branding and fewer SKUs. These topics have taken a backseat. However, looking ahead to the next two to three years, you have a target of over 12% EBITDA margin. Despite facing inflationary pressures, as we consider 2024 and 2025, where parts should ideally constitute a larger share of sales and potentially yield higher margins, along with other initiatives that may resurface, do you think there is a significant opportunity for margin improvement from this point over the next two to three years?

Yes. I mean I do. I will say, first of all, I think we've built a really strong operational team. We've created some good structures in terms of manufacturing, engineering, quality engineering. We've really put good investments in place in our factories and those things are all starting to deliver results. So me personally will be disappointed if we don't see that expand over the next couple of years. But of course, the market is dynamic, and we're going to watch the market very closely in terms of movements around pricing and continuously to keep an eye on inflation. We're still seeing some vendors are raising prices. So we are definitely watching it closely at the moment.

All Right. Thanks, Jaco.

There are no further questions in the queue. I'd like to hand the call back to Steve Anderson for closing remarks.

All right. Thank you, Briana. Again, we appreciate your participation on this conference 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 will be available through August 16th, 2023, and an archived webcast will be available for 90 days. The transcript will be available under the Investor Relations section of the Astec Industries website within the next seven days. All of this information is contained in the news release distributed earlier this morning. This concludes our call and I'm happy to connect with any of you that have additional questions later. Thank you all. Have a good day.

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