ASTEC INDUSTRIES INC Q1 FY2025 earnings call

• Q1 results were strong with net sales, adjusted EBITDA and adjusted earnings per share all showing positive trends. - Signed a definitive agreement to purchase TerraSource, a market-leading manufacturer of materials processing equipment and related aftermarket parts. - In Infrastructure Solutions, strong net sales from capital equipment and aftermarket parts; in Materials Solutions, capital equipment sales challenged by high interest rates and dealer destocking but aftermarket parts stable. - Proactive actions taken to mitigate tariff risks, including OneAstec procurement team efforts, negotiating purchases, dual sourcing, resourcing, managing supply chain and considering reshoring. - Participated in the World of Asphalt AGG1 show and will attend 2026 CONEXPO trade show.

Infrastructure Solutions segment: Net sales for the quarter were driven by strong domestic capital equipment performance. For the trailing 12 months, net sales increased 10.7%. Segment operating adjusted EBITDA dollars and adjusted EBITDA margins were positively affected by volume, pricing, operational excellence initiatives and expense management, both posting solid increases on a quarter-over-quarter and trailing 12 months basis. Materials Solutions segment: Net sales for the quarter and trailing 12 months were negatively impacted by lower capital equipment sales due to high interest rates and dealer destocking. Aftermarket parts sales declined slightly but remained at healthy levels. Despite lower sales revenue, costs were controlled and adjusted EBITDA margins were improved.

• Maintained expectations for adjusted EBITDA in the range of $105 million to $125 million for full year 2025, excluding tariff impact. - Announced acquisition of TerraSource with purchase price $245 million in cash on a cash-free, debt-free basis, net purchase price after tax benefits expected to be $230 million. - Expected adjusted EBITDA to be accretive from day 1 with $10 million annual integration synergies recognized by end of year 2, and TerraSource expected to provide EBITDA margin expansion and improved free cash flow. - Anticipated closing of TerraSource acquisition in early part of Q3 2025.

• Uncertainty around tariff environment, which could impact costs and sales. For example, potential 4% to 10% impact on COGS depending on product, with parts being a focus for passing through cost increases. - Customers sitting on the sideline to see tariff outcome, causing some uncertainty in sales momentum.

Q: Obviously, second straight really strong quarter. Why not raise guidance given some commentary on implied orders and MS expecting better orders by second half?

A: No, didn't pull anything forward. The guidance range still gives upside from the midpoint of $115 million. Uncertainty around tariffs is a factor, including cost impact and customers waiting to see tariff outcome. Our team is proactive on tariffs but there's still some uncertainty on how it will play out.

Q: How are you positioned given current tariffs? If passing through, will there be a lag where margins may trend lower and then come back up as equipment costs are caught up?

A: As mentioned, team has learned from COVID and has internal models. We were proactive with price adjustments early on. For parts, flow-through to customers will be almost immediate. Sourcing all steel in US, implemented price increases early and did forward buying on steel. There's some risk but team has reacted quickly and feels well positioned as US manufacturer compared to competitors importing units.