Q2 2023 Arcosa Inc Earnings Call

Speaker 1: If you need assistance during your conference today, please press star zero.

You need assistance during your conference today, Please press Star zero.

Speaker 1: Good morning, ladies and gentlemen, and welcome to the ARCOSA Inc. Second Quarter 2023 Earnings Conference call. My name is Shelby 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, Aaron Drabeck, Director of Investor Relations for ARCOSA. Mr. Drabeck, you may begin.

Good morning, ladies and gentlemen, and welcome to the Arcos, Inc. Second quarter 2023 earnings Conference call. My name is Shelby 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 Aaron Dray back director of Investor Relations for Arcos <unk> Mistry back you may begin.

Speaker 2: Good morning everyone and thank you for joining our COSA second quarter 2023 earnings call. With me today are Antonio Carrillo, President and CEO and Gail Peck, CFO . A question and answer session will follow their prepared remarks.

Good morning, everyone and thank you for joining Arco's second quarter 2023 earnings call with me today are Antonio Carrillo, President and CEO and Gail Peck CFO .

A question and answer session will follow their prepared remarks.

Speaker 2: 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. For more information, visit our website www.aclu.org.

A copy of yesterday's press release and the slide presentation for this morning's call are posted on our Investor Relations website, IR dot arcos that dot 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.

Speaker 2: 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 this slide presentation.

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.

Speaker 2: In addition, today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995.

And today. In addition, today's conference call contains forward looking statements as defined by the private Securities Litigation Reform Act of 1995.

Speaker 2: 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 10Q expected to be filed later today. I would now like to turn the call over to Antonia.

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.

Speaker 3: Thank you, Aaron. Good morning and thank you for joining us to discuss our second quarter results and our updated outlook for 2023. Please turn to slide 4.

Thank you Erin.

Morning, and thank you for joining us to discuss our second quarter results.

Our updated outlook updated outlook for 2023 please.

Please turn to slide four.

Speaker 3: I will start with a few key messages. Our second quarter financial performance was consistent with our expectations, driven by growth in construction products and transportation product segments.

I will start with a few key messages our second quarter financial performance was consistent with our expectations driven by growth in construction products and transportation segment.

Speaker 3: Construction products benefit from strong unit profitability improvement in natural and recycled aggregates, while transportation products' performance highlighted the significant operating leverage in this segment from higher production volume.

Construction products benefit from strong unit profitability improvement in natural and recycled aggregates, while transportation brokerage performance highlighted the significant operating leverage in this segment from higher production volumes.

Speaker 3: This solid result were partially offset by expected softness from engineer structures, reflecting a less favorable mix of utility structures projects booked in 2022.

These solid results were partially offset by expected softness for maintaining your structures reflect reflecting a less favorable mix of utility structures projects booked in 2022.

Speaker 3: I am pleased with our performance through the first half of the year. We have achieved double-digit growth in revenue and adjusted the beta normalizing for storage tanks and expanded margins approximately 100 basis points excluding the first quarter land.

I'm pleased with our performance through the first half of the year, we have achieved double digit growth in revenue and adjusted it beat that normalizing for storage tanks, and the expanded margins approximately 100 basis points, excluding the first quarter landfill.

Speaker 3: This strengthened profitability reflects productive pricing actions, effective cost management that improves operating leverage and transportation problems.

This strengthened profitability reflects broad pricing actions effective cost management and improved operating leverage and transportation problems.

Speaker 3: Through disciplined working capital management, second quarter cash conversion was strong, driving free cash flow up 11%. The strength in our free cash flow generation is especially notable given our expanded CAPEX program in 2023 that includes a broad set of organic growth initiatives.

Through disciplined working capital management second quarter cash conversion was strong driving free cash flow up 11%.

To strengthen our free cash flow generation, especially notable given our expanded Capex program in 2023 that includes a broad set of organic growth organic growth initiatives.

Speaker 3: As we look ahead, our cyclical businesses are poised for accelerated growth and profitability next year, driven by improved production volume. Our engineers' structural backlog has more than tripled over the last year, while our transportation products backlog has more than doubled. Additionally, ordering inquiries for dry cargo barges remain strong and hot oil steel prices have retreated from their recent highs.

As we look ahead, our cyclical businesses are poised for accelerated growth and profitability next year driven by improved production volume are engineered structures backlog has more than tripled over the last year, while our transportation Bronx backlog has more than doubled.

Additionally, order inquiries for dry cargo barges remains strong in hot rolled coil steel prices have retreated from their recent highs.

Speaker 3: In construction products, we remain committed to prioritizing value over volume, focusing on increasing unit profitability and expanding margins. The overall pricing environment remains supportive, aided by favorable demand conditions in our geographic markets, and we continue to work proactively to mitigate infectionary pressure.

In construction products, we remain committed to prioritizing value over volume focusing on increasing unit profitability and expanding margins. The overall pricing environment remains supportive aided by favorable demand conditions in our geographic markets and we continue to work proactively to mitigate inflationary pressures.

Speaker 3: Our solid first half financial performance and improved disability for our cyclical businesses has increased our confidence in the second half outlook. As a result, we're raising the low ends of both our revenue and adjusted the feedback guidance ranges for 2023. Yale will now provide details on our financial results for the second quarter and I will return to discuss our updated outlook.

Our solid solid first half financial performance had improved visibility for our cyclical businesses has increased our confidence in the second half outlook. As a result, we're raising the low end of our both our revenue and adjusted they beat that guidance ranges for 2023.

Dan will now provide detail on our financial results for the second quarter, and then will return to discuss our updated outlook.

Speaker 2: Thank you, Antonio. I'll begin on slide 11 to discuss our second quarter segment results.

Thank you Antonio I'll begin on slide 11 to discuss our second quarter segment results.

Speaker 2: Starting with construction products, revenue has increased 8% driven by higher volumes in price and growth in recycled aggregates, as well as organic growth and acquisition related contribution in Trent Shores.

Starting with construction products revenues increased 8% driven by higher volumes and pricing growth in recycled aggregates as well as organic growth and acquisition related contribution in trench shoring.

Speaker 2: revenues in natural aggregates and specialty materials were roughly flat, as higher pricing was offset primarily by lower volume.

Revenues of natural aggregates and specialty materials were roughly flat as higher pricing was offset primarily by lower volumes.

Speaker 2: Adjusted segment EBITDA increased 5% year over year. Strong pricing gains and reduced inflationary cost pressures drove higher unit profitability in our aggregate business.

Adjusted segment, EBITDA increased 5% year over year.

Wrong pricing gains and reduced inflationary cost pressures drove higher unit profitability in our aggregates businesses.

Speaker 2: Adjusted segment EBITDA margins declined 50 basis points as operating inefficiencies and specialty materials offset margin expansion and our other business.

Adjusted segment EBITDA margins declined 50 basis points as operating inefficiencies in specialty materials offset margin expansion in our other businesses.

Speaker 2: Turning to natural aggregates, we continued to experience broad pricing strengths across our markets with average organic pricing up mid-teens on a freight adjusted basis led by our west region.

Turning to natural aggregates, we continued to experience broad pricing strength across our across our markets with average organic pricing up mid teens on a freight adjusted basis led by our West region Natura.

Speaker 2: Natural aggregate volumes were down mid single digits, an improvement from the pace of decline of the last couple of quarters.

Natural aggregates volumes were down mid single digits, an improvement from the pace of decline over the last couple of quarters.

Speaker 2: Continued pricing momentum coupled with an easing in inflationary pressures, particularly lower diesel costs, resulted in higher unit profitability and solid year-over-year margin expanse...

Continued pricing momentum coupled with an easing in inflationary pressures, particularly lower diesel costs resulted in higher unit profitability and solid year over year margin expansion.

Speaker 2: In recycled aggregates, we continue to see strong demand, particularly in our Houston and DFW markets, with organic volumes up about 20% and pricing upload double-digit.

And recycled aggregates, we continue to see strong demand, particularly in our Houston and DFW market with organic volumes up about 20% and pricing up low double digits. The.

Speaker 2: The combination of the two drivers resulted in significant margin expansion for recycled aggregates in the second quarter.

A combination of the two drivers resulted in significant margin expansion for recycled aggregates in the second quarter.

Speaker 2: Within specialty materials, overall demand remains healthy, particularly for our plaster and lightweight aggregates product line.

Within specialty materials overall demand remains healthy, particularly for our cluster and lightweight aggregates product line.

Speaker 2: However, second quarter profitability was impacted by several items resulting in lower business unit EBITDA and large.

Second quarter profitability was impacted by several items, resulting in lower business unit EBITDA and margins.

Speaker 2: Skilled labor availability at a few specific locations continued to be a challenge. We have taken steps to address and are seeing improved hiring and retention.

Skilled labor availability at a few specific locations continued to be a challenge we have taken steps to address and are seeing improved hiring and retention.

Speaker 2: Unplanned maintenance and downtime also limited production volumes, which was further impacted by long lead times on certain repair parts.

Unplanned maintenance and downtime also limited production volumes, which was further impacted by long lead times on certain repair parts.

Speaker 2: Our expansion at our plaster plant continues to be on budget and on time. As expected, operating inefficiencies occur early in the process as we ramp up production.

Our expansion at our plaster plant continues to be on budget and on time as expected operating inefficiencies that occur early in the process as we ramp up production.

Speaker 2: We are focused on improving business unit profitability in the quarters ahead.

We are focused on improving business unit profitability in the quarters ahead.

Speaker 2: Finally, revenues in our trendshoring business grew 27% on higher organic volumes, as well as contribution from the Houston acquisition that closed during the first quarter. Margins also expanded, more than offsetting acquisition integration costs. Overall, customer confidence is strong, and our backlog and inquiry levels remain supportive of growth in 2024.

Finally revenues in our trench shoring business grew 27% on higher organic volumes as well as contribution from the Houston acquisition that closed during the first quarter.

Margins also expanded more than offsetting acquisition integration costs overall customer confidence is strong and our backlog and inquiry levels remains supportive of growth in 2024.

Speaker 2: Moving to engineered structures, slide 12 shows the impact of the storage tanks business that was sold in October 2022 on the prior period results.

Moving to engineered structures slide 12 shows the impact of the storage tanks business that was sold in October 2022 on the prior period result.

Speaker 2: During the second quarter, revenues for utility wind and related structures were flat as higher volumes in utility structures were offset by lower volumes in wind tower.

During the second quarter revenues for utility wind and related structures were flat as higher volumes in utility structures were offset by lower volumes in wind towers.

Speaker 2: adjusted segment EBITDA and margin decreased year over year, primarily on less favorable product mix in utility structure.

Adjusted segment, EBITDA and margin decreased year over year, primarily on less favorable product mix and utility structures. We.

Speaker 2: We expect the margin in utility structures to normalize in the second half of this year.

We expect the margin in utility structures to normalize in the second half of this year.

Speaker 2: Segment margin was positively impacted by $5.9 million of net benefit from AMP tax credits provided for in the Inflation Reduction Act, which more than offset the impact from lower wind timer.

Margin was positively impacted by $5 $9 million of net benefit from A&P tax credits provided for in the inflation reduction act, which more than offset the impact from lower wind tower volumes.

Speaker 2: Order activity for utility and related structures continues to be healthy and order levels kept pace with ships.

Order activity for utility and related structures continues to be healthy and order levels kept pace with shipment.

Speaker 2: While no new wind tower orders were booked this quarter, customer inquiries indicate strong interest.

While no new wind tower orders were booked this quarter customer inquiries indicate strong interest we ended the quarter with combined backlog for utility wind and related structures of one 5 billion.

Speaker 2: We ended the quarter with combined backlog for utility wind and related structures of one and a half billion dollars unchanged from the first quarter. Turning to transportation products.

Unchanged from the first quarter.

Turning to transportation products on slide 13.

Speaker 2: Segment revenues were up 28% driven by solid volume growth and improved pricing in both our barge and steel components business.

Segment revenues were up 28% driven by solid volume growth and improved pricing in both our barge and steel components businesses adjust.

Speaker 2: Adjusted segment EBITDA more than doubled and margins expanded over 500 bases.

Adjusted segment EBITDA more than doubled and margins expanded over 500 basis points, reflecting the significant operating leverage inherent in these businesses.

Speaker 2: reflecting the significant operating leverage inherent in these business.

Speaker 2: We received barge orders of $81 million, predominantly for hopper barges, which kept backlog about flat and extended our visibility into mid 2024. We ended the quarter with total barge backlog of $287 million, which we expect to deliver approximately 55% during 2024.

We received barge orders of $81 million predominantly for hopper barges, which kept backlog about flat and extended our visibility into mid 2024.

We ended the quarter with total barge backlog of $287 million.

We expect to deliver approximately 55% during 2024.

Speaker 2: I'll conclude on slide 14 with some comments on our cash flow and balance sheet position.

I'll conclude on slide 14, with some comments on our cash flow and balance sheet position.

Speaker 2: We generated $76 million of free cash flow during the quarter, up 11%, driven by a nearly 50% increase in operating cash flow. Solid working capital management resulted in a $41 million source of cash for the quarter, helping to recover most of the first quarter's $55 million use.

We generated $76 million of free cash flow during the quarter up 11% driven by a nearly 50% increase in operating cash flow solid working capital management resulted in a $41 million source of cash for the quarter, helping to recover most of the first quarters $55 million use of cash.

Speaker 2: As our growth businesses continue to expand and our cyclical businesses recover, we expect working capital to be a slight use of cash for the year.

As our growth businesses continue to expand in our cyclical businesses recover we expect working capital to be a slight use of cash for the year.

Speaker 2: Our second quarter free cash flow generation is all the more impressive considering capital expenditures were $53 million, almost double the prior year level. We continue to make progress on the organic projects underway in construction products and engineered structure.

Our second quarter free cash flow generation is all the more impressive considering capital expenditures were $53 million almost double the prior year level, we continue to make progress on the.

Organic projects underway in construction products and engineered structures.

Speaker 2: As a reminder, our full year CAPEX guidance is $185 million to $210 million, which includes $85 million to $100 million of gross CAPEX in 2023.

As a reminder, our full year Capex guidance is 185 million to $210 million, which includes 85 million to $100 million of growth Capex in 2023.

Speaker 2: We ended the quarter with net debt to adjusted EBITDA one time and available liquidity of $673 million. Our healthy balance sheet and liquidity continue to provide ample flexibility to pursue disciplined capital allocation.

We ended the quarter with net debt to adjusted EBITDA of one times and available liquidity of $673 million, our healthy balance sheet and liquidity continue to provide ample flexibility to pursue disciplined capital allocation.

Speaker 2: I'll now turn the call back over to Antonio for an update on our outlook. Thank you, Cale. Please turn to the next speaker.

I'll now turn the call back over to Antonio for an update on our outlook.

Thank you Kayla, please turn to slide 16.

Speaker 3: We're pleased with our performance of the first half of 2023, as our growth businesses have performed well, and our cyclical businesses have outperformed relative to our expectations at the start of the year.

We're pleased with our performance through the first half of 2023 as our growth businesses have performed well and our cyclical businesses have outperformed relative to our expectation of the start of the year.

Speaker 3: As a result, we're raising the low end of our 2023 revenue guidance range to 2.25 billion from 2.2 billion previous.

As a result, we're raising the low end of our 2023 revenue guidance range to $2 25 billion from $2 2 billion previously.

Speaker 3: At the midpoint of our revised range, we now forecast 11% revenue growth as compared to 2020.

The midpoint of our revised range, we now forecast, 11% revenue growth as compared to 2022.

Speaker 3: We're also raising the low end of our adjusted beta guidance range by 10 million to 300...

We're also raising the low end of our adjusted EBITDA guidance range by $10 million to $355 million.

Speaker 3: I'm maintaining the high end of the range at 307.

They need the high end of the range of $370 million.

Speaker 3: This represents a 30% year over year adjusted the BTEC growth of the midpoint of our revised range.

This represents a 30% year over year adjusted EBITDA growth at the midpoint of our revised range.

Speaker 3: Consistent with our prior guidance, our 2023 adjusted EBITDA forecast assumes wind-related tax credits of approximately $20 million as we await final clarification from the IRS.

Consistent with our prior guidance, our 2023 adjusted EBITDA forecast.

Rooms wind related tax credits of approximately $20 million as we await final clarification from the IRS.

Speaker 3: Mel, please turn to slide 17 to review the outlook for our growth.

Now please turn to slide 17 to review the outlook for our growth businesses.

Speaker 3: Increased infrastructure spending at both the federal and local levels support continued positive outlook for construction products.

Increased infrastructure spending at both the federal and local level support.

Positive outlook for construction products.

Speaker 3: While we have seen some pressure on volume in the single-family residential market, this has been more than offset by robust organic pricing and solid demand from the non-residential, multi-family and public infrastructure end mark.

Well, we have seen some pressure on volume in the single family residential market. This has been more than offset by robust organic pricing and solid demand from the non residential multifamily and public infrastructure end markets.

Speaker 3: We're encouraged by the recent pickup in single family permits and starts, and are beginning to see that translate into stabilization of volume.

We are encouraged by the recent pickup in single family permits and starts and are beginning to see that translate into stabilization of volumes.

Speaker 3: Penning from the Infrastructure Bill and Inpatient Reduction Act, as well as Healthy State Budgets, are providing a tailwind for our construction products business that we expect to continue to benefit our performance.

Spendings from the infrastructure, Bill and inflation reduction act as well as healthy state budgets are providing a tailwind for our construction products business that we expect to continue to benefit our performance.

Speaker 3: We continue to actively pursue potential acquisitions. Our current demand aid pipeline includes several attractive alternate opportunities that would complement and expand our geographical footprint.

We continue to actively pursue potential acquisition.

Tim on the pipeline includes several attractive bolt on opportunities that would complement and expand our geographic footprint.

Speaker 3: In engineered structures, the strength of our utility structures backlog reaffirms our view that customer demand and pricing remain solid. Utilities continue to invest heavily to strengthen the resilience of the electrical grid as well as to expand their infrastructure to connect new renewable energy sources to their network.

And then engineered structures the strength of our utility structures backlog reaffirms, our view that customer demand and pricing remains solid.

Utilities continue to invest heavily to strengthen the resilience of the electrical grid as well as to expand their infrastructure to connect new renewable energy sources to their network.

Speaker 3: The step down in second quarter profitability was not indicative of current market conditions, but instead was related to specific orders booked in 2022.

The step down in the second quarter profitability was not indicative of current market conditions, but instead was related to specific orders booked in 2022.

Speaker 3: Looking at the second half of the year, we expect utility margins to reflect and improve project...

Looking at the second half of the year, we expect utility margins to reflect an improved project mix.

Speaker 3: We're seeing continued demand for telecom towers to support the ongoing build-out of 5G networks, and traffic structures is benefiting from increased surface transportation investments.

We're seeing continued demand for telecom towers to support the ongoing build out of <unk> networks and traffic structures is benefiting from increased surface transportation investment.

Speaker 3: Shifting now to the outlook for cyclical businesses on slide 18.

Shifting now to the outlook for cyclical businesses on slide 18.

Speaker 3: This is an exciting time for our co-sign. As our cyclical businesses enter into what we believe will be a sustained multi-year obstacle. We're already seeing a glimpse of the financial impact these businesses can deliver as production volume scales and drives improving leverage.

This is an exciting time for our culture as a cyclical business center into what we believe will be a sustained multiyear up cycle.

We're already seeing a glimpse of the financial impact these businesses can deliver us production volume scales and drives improve operating leverage.

Speaker 3: As we expect our production rates to increase further in 2024, our Seaglicaut businesses are poised to generate strong growth in revenue margins and cash flow, leading to improved returns on invested capital.

As we expect our production rates to increase further in 2024, our cyclical businesses are poised to generate strong growth in revenue margins and cash flow leading to improved returns on invested capital.

Speaker 3: In wind towers, our current capacity utilization remains relatively low, consistent with the positive demand that we anticipated for this year. However, through our continued focus on driving operating efficiencies, we now expect wind towers business to perform above break-even in 2023, before considering the net benefits of backscandy.

And when.

Capacity utilization remains relatively low consistent with the Boston demand that we anticipated for this year.

However, through our continued focus on driving operating efficiencies, we now expect wind towers business to perform above breakeven in 2023 before considering the net benefits of tax credits.

Speaker 3: As you know, we're currently investing approximately $60 million in our new Mexico facility, which should start delivering windtowers in mid-2024. As production ramps dropped in New Mexico and other facilities, we should see steady improving profitability.

As you know, we're currently investing approximately $60 million in our new Mexico facility, which should start delivering wind towers in mid 2020 for.

As production ramps up in new Mexico, and other facilities, we should see steady improving profitability.

Speaker 3: Even as our wind backlog has grown substantially over the past year, customer interest remains strong and the market is very active, reinforcing a view that wind exploits for sustained periods of expenses.

Even as our wind backlog has grown substantially over the past year customer interest remains strong and the market is very active reinforcing our view that wind is poised for sustained periods of expansion or therefore filaments. In this market is complex taking time to negotiate therefore, we do not expect to announce the orders every quarter, but we do.

Speaker 3: We expect to continue to operate with relatively low capacity utilization in 2023. We have the flexibility to increase our throughput to meet improving market demand with

Expect order levels to trend higher although we expect to continue to operate with relatively low cap capacity utilization in 2023, we have the flexibility to increase our throughput to meet improving market demand with minimal operational capex.

Please turn to slide 19.

Speaker 3: With our barge backlog having reached nearly 300 million, we are increasingly confident in the near to midterm outlook for this business. Our production visibility now extends well into 2024, allowing us to be more selective with respect to the profitability of orders we pursue. We're focused on driving margin improvement through efficient cost management, generating operating leverage at volume scale.

With our barge backlog, having reached nearly $300 million, we're increasingly confident in the near to mid term outlook for this business. Our production visibility now extends well into 2024, allowing us to be more selective with respect to the profitability profitability with the profitability of orders we pursue.

We're focused on driving margin improvement through efficient cost management generating operating leverage as volume scales.

Speaker 3: Over the last couple of months, hot-roles oil steel prices have declined, while plate steel prices remain elevated. This difference in prices is starting to create attractive market conditions for barges made with oil. Given tight capacity and the aging fleet, we expect cost of our interest to remain high for this product.

Over the last couple of months Hot roll coil steel prices have declined while plate steel prices remain elevated this difference in prices, you're starting to create attractive market conditions for barges made with coil.

Given the tight capacity and the aging fleet, we expect cost of our interest to remain high for this product.

Speaker 3: For still components business continues to perform well despite operating at a relatively low level of capacity. While we do not anticipate a meaningful strengthening in the market demand for the remainder of this year, the forecast for the next several years are promising.

Our steel components business continues to perform well despite operating at a relatively low level of capacity, while we do not anticipate a meaningful strengthening in the market demand for the remainder of this year the forecast for the next several years are promising.

Speaker 3: One of the main products of our steel components business are rail car couplers. Our cost of profitability in this market has been pressured from rail car couplers produced in China and Mexico.

One of the main products of our steel components business, our railcar coffers.

Profitability in this market has been pressured from railcar koppers produced in China and Mexico.

Speaker 3: Great remedy investigations by the federal government led to the recent establishment of duties of more than 400 percent on imported copies from China.

Great remedy investigations by the federal government government led to the recent establishment of duties of more than 400% on imported from China in.

Speaker 3: In the second half of this year, the government is also expected to make final determinations on potential duties for imported couplers from Mexico.

In the second half of this year. The government itself is expected to make final determinations on potential duties for imported couplers for Mexico for Mexico.

Speaker 3: These trade remedies help level the playing field and should enable our steel components business to generate higher volumes of driving proven fish.

This trade remedies help level, the playing field and should enable our silicon bonus business to generate higher volumes and driving program efficiencies.

Speaker 3: In closing, our first half of 2023 results are a testament to the quality of our talented team as we effectively navigate challenging market conditions.

In closing our first half of 2023 results are a testament to the quality of our talented team as we effectively navigated challenging market conditions. Looking ahead, we're optimistic about the outlook for both our growth and cyclical businesses.

Speaker 3: Looking ahead, we're optimistic about the outlook for both our growth and cyclical business.

Speaker 3: Our COSA remains well positioned, given our broad exposure to infrastructure markets that we believe will benefit from multi-year tailwinds.

<unk> remains well positioned given our broad exposure to infrastructure market that we believe will benefit for multiyear tailwind or.

Speaker 3: Our strong balance sheet provides sample flexibility as we continue to pursue attractive organic and inorganic opportunities. We remain committed to expanding margin, generating strong cash flow and allocating capital to build long-term shareholder value. I would like to open the call for questions.

Our strong balance sheet provides ample flexibility as we continue to pursue.

<unk> organic and inorganic opportunities, we remain committed to expanding margins generating strong cash flow and allocating capital to build long term shareholder value and I would like to open the call for questions.

Speaker 1: At this time, if you would like to ask a question, please press the star in one on your touchstone phone.

Thank you.

At this time, if you would like to ask a question. Please press the star and one on your Touchtone phone.

Speaker 1: You may remove yourself from the queue at any time by pressing star-

You may remove yourself from the queue at any time by pressing star Q.

Speaker 1: Once again, that is star in one to ask a question. We will pause for a moment to allow questions to cue.

Once again that is star one to ask a question, we will pause for a moment to allow questions to queue.

Speaker 1: And we'll take our first question from Noah Murkowski with Stevens. Your line is open.

And we'll take our first question from nowhere Makowski with Stephens. Your line is open.

Good morning, and thanks for taking my questions.

Good morning.

First I wanted to talk about the construction product segment, and how youre thinking about that in the back half of the year.

Speaker 4: about that in the back half of the year. You know, it sounds like pricing needs to be very strong and, you know.

It sounds like pricing continues to be very strong.

And granted there's some some volume headwinds there, but I think the expectation also for the back half for some of the costs to ease so.

Speaker 4: is some of the cost to E. So ultimately I'm just trying to figure out how you're thinking about margins of the back half. And if we should see, you're on E.

Ultimately I'm just trying to figure out how you're thinking about margins in the back half and if we should see.

Year on year expansion.

Speaker 3: Sure, let me give you some color. I think

Sure Let me, let me give you a.

Some color I think.

Speaker 3: Since the beginning of the year, even from last year, we expected the second half of the year to start seeing some volume pick up as housing is expected to start recovering.

<unk>.

Since the beginning of the year, even from last year, we expected the second half of the year to start seeing some volume pick up as housing is expected to start recovering.

Speaker 3: So we're optimistic about the housing recovery starting sometime in the second half.

So we are optimistic about the housing recovery starting sometime in the second half.

Speaker 3: We continue to see strong pricing momentum in our business. And ideally as volume recovers and pricing keeps its strength.

We continue to see strong pricing momentum in our business.

Ideally as volume recovers and pricing keeps it keeps.

Speaker 3: we should continue to see some margin expansion in natural aggregates and recycled aggregates.

Strength, we should continue to see some margin expansion in the natural aggregates and recycled aggregates.

Speaker 3: And our goal for the second half of the year is to improve our margins, especially especially the materials with heat of the second quarter. So I think we're optimistic, I think the fundamental aspects of them of the market are strong. So we do expect to say a strong second half of the year. Of course, we're going through a summer that's been extremely hot that creates...

For the second half of the used to improve our margins and especially specialty materials with Tito's hard in the second quarter. So I think we're optimistic I think the fundamental aspects of them off the market are strong. So we do expect to say a strong second half of the year or as we're going through the summer that's extremely hard to create.

Speaker 3: creates issues like some projects are shutting down early to make sure people are stay healthy, etc. But those are temporary things. I think overall the pricing environment and the volume recovery should help us in the second quarter.

It creates issues like some projects are shutting down early too to make sure people are state stay healthy et cetera, but those are.

Temporary thing so I think overall, the pricing environment and the volume recovery should help us in the second quarter.

Speaker 5: Special vestor 3000 phosphate.

Got it that makes sense to take over that for a second half yes.

Speaker 4: And then for my follow up, you know, in switching gears.

And then for my follow up.

In.

Switching gears to the wind towers business.

Speaker 4: In prior cycles when there was much more wind tower demand, what did the EBIT for EBIT downmarge?

In prior cycles, when there was much more wind tower demand what did the EBIT or EBITDA margins for for wind towers look like.

Speaker 4: wind towers look like? Or maybe just put another way, how should we think about margins for that segment once we've done that?

Or maybe just put another way how should we be thinking about margins for that segment once.

Once you start delivering on these <unk>.

And orders.

Speaker 2: Good morning, this is Gail, I'll take that. You know, as we think about the wind business, we're certainly in a ramp up. We've taken, as you're aware, the, you know, more than a billion dollars of orders since the passage of the Inflation Reduction Act almost a year ago. So our backlog is strong. We have a billion and a half dollars of backlog for wind.

Good morning, this is Gil I'll take that.

As we think about the wind business.

Certainly in a ramp up we've taken as Youre aware the more than $1 billion of orders since the passage of the inflation reduction act almost a year ago. So our backlog is strong we have a 1 billion and a half dollars of backlog for wind utility most of that being for our wind businesses, we don't.

Speaker 2: utility, most of that being for our wind businesses, we don't

Speaker 2: book long term backlog for utility so we're in a strong position as I look to to 2024 You know about 25% of that backlog is coming out in 24 our Plant space in the backlog we have today certainly aren't at full utilization So we would expect from a margin perspective to see improvements in our Windmargin next year in our in as Antonio mentioned in his script We are anticipation is with the

Book long term backlog for utilities. So we're in a strong position as I look to 2024.

You know about 25% of that backlog is coming out in 'twenty for our plants based on the backlog that we have today are certainly arent at full utilization. So we would expect from a margin perspective to see improvements in our win margin next year.

And as Antonio mentioned in his script, our anticipation is with the inflation reduction Act is to have additional you know potentially larger orders over the over the course of this.

Speaker 2: Inflation Reduction Act is to have additional, you know, potentially larger orders over the course of this Inflation Reduction Act will certainly help

Reduction actual will certainly help too.

Speaker 2: increase our volumes and push our margins up regardless of the tax credit. When we think about normalized margins that we've seen for

Increase our volumes and push our margins up regardless of the tax credit when we think about normalized margins that we've seen for the wind business in the past.

Speaker 2: They're in that healthy kind of 10% plus range. The tax credit certainly would be additive on top of that. So as our volume builds, as our efficiencies improve, we would expect to see our wind margins continue to improve. To give you a sense more or less, I think the highest EDIT number we reported on wind is somewhere around $90 million when we were at the peak of the previous cycle or around that number.

Yeah the.

Yeah.

They're in that healthy kind of 10% plus range.

The the tax credit certainly it would be would be additive on top of that so and as our volume build as our efficiencies improve we would expect expect to see our wind margins continue to improve.

To give you a sense more or less I think its highest EBITDA number we reported and when you're somewhere around $90 million. When we were at the peak of the previous cycle or around that number.

Speaker 3: So, and with probably a little higher margins. So it's a very, it's a business that's very sensitive to volume, so that's why we're excited about volume in this business.

So probably a little higher margins. So it's a very it's a business that's very sensitive to volume. So that's why we're excited about volume in this business.

Speaker 4: Got it. That's really helpful, Color. I appreciate it. Thanks for the time, and I'll leave it there.

Got it that's really helpful color I appreciate it thanks for your time and I'll leave it there.

Yeah.

Thank you.

Take our next question from Ian Zaffino with Oppenheimer. Your line is open.

Speaker 1: Your line is open.

Speaker 6: Hi, great. I actually just wanted to kind of follow up on that question. You know, we're deeper into discussions on the wind side.

Alright, great.

You wanted to kind of follow up on that question.

We're deeper into discussions on the on the wind side.

Speaker 6: how you're thinking about the tax credits and maybe the sharing mechanism of those tax credits. And then also, you know, the discussions that you're talking about on wind, what's typically the lead time, so when will we see it hit the backlog? Thanks.

How are you thinking about the tax credits and maybe that the sharing mechanism of those tax credits and then also the discussions that you're talking about wind what's typically the lead time, so when will we see it hit the backlog. Thanks.

Speaker 3: Yes, so let me start with the tax credits. You know, the tax credits we mentioned before in the current backlog we have.

Yeah. So let me start with the tax credits the tax credits, we mentioned before in the current backlog. We have we did give a portion of that's more of a portion of the tax credits to our customers.

Speaker 3: We did give a portion of a smaller portion of the tax credits to our customers. It's part of the negotiations. Ideally going forward, that number becomes smaller, but we are keeping the majority of the tax credits. It's not so...

It's part of the negotiations.

I mean ideally going forward.

Number become smaller, but we are keeping the majority of the tax credits not so.

Speaker 3: The tax credits, the way I see it, it should be an enhancement to our mark.

The tax rates the way the way I see it is it should be an enhancement to our markets. So if you look at the previous cycles. When you add the tax rates or margins. This time should be much better and you'll see it in the results even start looking at this quarter.

Speaker 3: So if you look at the previous cycles, when you add the tax rates or margins, this time should be much better. And you see it in the results, even start looking at this quarter. To your second question, when you get orders...

To your second question.

The when you get orders.

Speaker 3: If you look at the order we got in the first quarter, these are larger orders. So that's why I mentioned in my preparing marks that they take time to negotiate. You're not negotiating for it. We're not accompanied. It historically has built 10 hours of this and 5 hours of that. And we normally like, we're very good at repetitive manufacturing. But we like it longer term orders.

If you look at the order we got in the first quarter.

These are larger orders. So that's why I mentioned in my prepared remarks that they take time to negotiate you you're not negotiating for it we're not a company that historically has.

You'll think towers of these five hours of that than we normally like we're very good at repetitive manufacturing. So what we like is longer term orders.

Speaker 3: So if you look at how long it would take if we get backlog this quarter, let's say, my guess is it would be for production to start sometime in mid next year or first quarter of next year, sometime around that. So it takes at least six months from the time you receive an order to really start delivering on that order. And remember, we already have a backlog. So any order that we receive would imply we have to hire people, train people, et cetera, et cetera. And we have to ramp up to get us.

So if you look at how long it would take if we gave the backlog this quarter, let's say my guess is it would be for production to start sometime next year or first quarter first quarter of next year sometime around that so it takes at least six months, but from the time you receive in order to really start delivering on that.

And remember we already have a backlog so any order that we received would imply we have to hire people train people et cetera et cetera. So it takes a ramp up together.

Speaker 6: Okay, thank you. So I guess just to clarify, roughly speaking, we could probably take historical margins and let's just say an incremental $85,000 per tower.

Okay. Thank you so I guess just to clarify.

Roughly speaking you can probably take historical margins.

Let's just say an incremental 85.

Dollars.

Our tower it seems like.

Speaker 6: Okay, and then also, you know, it seems like most of the businesses now are really recovering and doing, you know, very well. How do you now thinking about portfolio optimization in this now environment that you're seeing significantly improved fund dynamics?

And then also it seems like most of the businesses now are really recovering.

And doing you know very well how are you thinking about portfolio optimization.

This now environment that youre seeing significant improved fundamentals.

Speaker 3: Absolutely. So just to answer your first comment on the 85,000, remember that's relative to the size of the tower. So depending on the size of the tower, that 85,000 can be less or more. It's based on the power of the terminal on top of the tower. So that'll vary. And I think there's a range, but 85 should be more or less in range.

So just to answer your first comment on the 85000.

The tax rate is relative to the size of the tower.

Depending on the size of the tower that 85000 could be less or more its based on the.

The power of the therapy on top of the towers, so that that'll vary.

There is a range, but you know 85 should be more or less in range.

Speaker 3: To your second question, you know, I think it's a, it's, that is, that is a really good question because

To your second question.

I think it's a it's that is that is a really good question because.

Speaker 3: The reality is our strategy has not changed. This company, we're going to continue to allocate to most of our capital to engineer structures and construction products, because that's where we believe that the growth potential is.

The reality is our strategy has not changed this company, we're going to continue to allocate most of our capital to engineered structures and construction products, because that's where we believe that the growth potential lease.

Speaker 3: As we, this business improve, I think what happens is they just become more valuable for us and they, so, so, this strategy has not changed. We continue to believe that this company is moving towards engineers, structures and construction projects. We are intentionally moving that way.

And.

As we this business improve I think what happens is they just become more valuable for us.

So so the strategy has not changed we continue to believe that these companies moving towards engineered structures in construction products, we are intentionally moving that way.

Speaker 3: And as our business improve, we might or might not decide to optimize the portfolio in the shorter term. My goal would be to continue to simplify the story and focus so that we can even make your lives easier as an analyst. No, we are a complex story and for our size, we're too complex.

And.

As our business improve.

We might or might not decided to do to optimize the portfolio.

In the shorter term my goal would be to continue to simplify the story and focus so that we can.

Even make your lives easier and analysts know we're a complex story in.

For our size were too complex.

Okay. Thank you very much.

Speaker 1: And we'll take our next question from Garrett Schmoyce with Luke Capital Market.

And we'll take our next question from Garik <unk> with loop capital markets.

Your line is open.

Speaker 7: Oh, hi, thanks for casing my question. So hoping you can quantify the impact of the edification.

Oh, hi, Thanks for taking my question I was hoping you can quantify the impact of the inefficiencies.

Speaker 7: in the specialty aggregates business, how much of a margin drag was it specifically?

In the specialty aggregates business.

How much of a margin drag was it specifically in the quarter.

Speaker 2: I'll take that one. Good morning, Garak. As you know, we didn't put a number in the press release or our comments on that. I will comment that margins were down in the segment, 50 basis points year over year, despite the number of cases that were reported in the previous slide. So, I think that's a good point.

I'll take that one good morning Derek.

As you know we didn't put a put a number in the in the in the press release or our comment on that well.

Comment that margins were down in the segment, you know 50 basis points year over year.

Despite.

Speaker 2: you know, some meaningful margin expansion within our aggregate natural over-cycle, as well as our shoring business. So, you know, we spent some time talking through some of the challenges there, because they had a meaningful impact on the performance of the segment overall for the quarter.

Some meaningful margin expansion within our aggregate natural recycled as well as our showing business. So you.

We spent some time talking through some of the challenges there because they had a meaningful impact on on the performance of the segment.

We're all for the quarter.

Speaker 2: So, you know, an exact number, you know, the specialty materials business, it's about, you know, a third of our revenue in and around that ballpark. So, you know, we were not happy with the margin performance year over year and it had a 50 base, resulted in a 50 basis point decline for the segment.

So you know an exact number you know that the specialty materials business.

About a third of our revenue in and around that that that ballpark. So.

Yeah, we were not happy with with the margin performance year over year and it had a 50 basis resulted in a 50 basis point decline for the segment.

Speaker 7: Okay, looking to the second half of the year and the steps that you're taking to remedy some of the inefficiencies in the second quarter, would you anticipate that margins in the segment will...

Okay.

Looking to the second half of the year and the steps that you're taking to.

Remedy some of the inefficiencies in the second quarter.

Would you anticipate that margins in this segment.

Speaker 7: I still challenge in the second half of the year to anticipate margin expansion in the back half, just given some of the pricing and hopefully improving volumes and lower costs that you're seeing on the broader part of the contract.

I'll be still challenged in the second half of the year do you anticipate margin expansion.

In the back half just given some of them would be pricing.

Pricing and hopefully putting volumes will go or costs that you're seeing or.

On the broader part of the construction.

Speaker 2: Well, I guess I maybe quickly summarize some of the comments Antonio already made with regard to construction performance in the second half. We're very optimistic about our potential in the second half. The market dynamics are favorable. We certainly have pricing strengths. We've talked about some challenges with some tough comps in the back half. I think we're probably high teens pricing that we're comping against for the second half.

Well I guess I, maybe quickly summarize some of the comments Antonio already made with regard to construction performance in the second half where I'm very optimistic.

Stick about our potential in the second half the market dynamics are favorable we certainly have pricing strength, we've talked about some challenges with some tough comps in the back half I think we're probably high teens pricing that we're comping against for the second half, but you know we.

Speaker 2: You know, we've had select July price increases.

Select July price increases.

Speaker 2: Some August ones and out, so I think we feel pretty good from a pricing perspective. We're continuing to manage costs well and with regard to specialty, as we said, we're

August ones and out so I think we feel pretty good from a pricing perspective, we're continuing to manage cost well and.

Now with regard to specialty as we said, we're taking steps to address we have taken a number of steps and our expectation is we'll see profitability improve in the quarters ahead. So we're very optimistic about the back half in construction.

Okay great.

Speaker 7: My follow-up question is related to engineered structures. Just want a little bit more clarity on the margin outlook there as well. I think you mentioned

My follow up question is related to engineered structures, just want a little bit more clarity on the margin outlook there as well. Thank you mentioned.

Speaker 7: that you expect to return to normalized margins in the second half of the year. Is that related to wind specifically, or is that also related to the block?

That you expect to return to normalized margins in the second half of the year is that related to wind suppliers are also correlated to the broader sector.

Speaker 8: This is an advantage just to the second quarter profitability in this segment was not reflective of current market conditions in the utility structures.

This is Antonio just too.

The second quarter profitability in this segment was not reflective of current market conditions in the utility structures.

Speaker 3: Last year when we some of our customers have the holes in their

Last year, when we some of our customers have the.

Holds in there in their needs and we have to fill the backlog with a what's called the bid market. So lower lower margin approach and that's what we produced during the second quarter as we entered the third quarter. Those orders are gone and we returned to our.

Speaker 3: And we have to fill the backlog with what's called a big market. So lower margin products and that's what we produced during the second quarter. As we enter the third quarter, those orders are gone and we return to our, let's say more profitable backlog with our traditional customers.

Let's say more profitable backlog with our traditional customers.

Speaker 3: And so we expect in proof profitability in our utility structures business.

And.

So we expect improved profitability in our utility structures business.

Speaker 3: And the winter production continues to improve and accelerate. As we mentioned, we now expect that business to be above rate even for the year. And that's proving as they improve their efficiencies, that should help engineer structures. And if you add a tax rate, we should see improved margins for the second half of the year. Oh, thank you. Thanks for taking my questions, you know, Pasadam.

The wind tower production continues to improve and accelerate as we mentioned.

We now expect that business to be above breakeven for the for the year and thats proving as they improve their efficiencies that should help engineered structures and if you add the tax rate, we should see improved margins for the second half of the year.

Understood. Thanks for taking my questions and I'll pass it on.

And we'll take our next question from Julio Romero with Sidoti Your line is open.

Speaker 9: Hi, good morning, Antonio and Gell. This is Alex Hamman on Prophelia. Morning.

Hi, Good morning, Antonio and Gail This is Alex Hammond on for Julio.

Good morning, or.

Good morning, Mike.

Speaker 9: My first question is around transportation products. Could you talk about the inquiries that you're seeing in the barge business, with steel prices trending lower? What's your sense of whether that helps inquiries on the fence, you know, convert into orders in the near future?

My first question is around transportation products could you talk about the inquiries that youre seeing in the barge business.

With steel prices trending lower what's your sense of whether that helps inquiries on the fence convert into orders in the near future.

Speaker 3: So yes, the wires are high.

Sure.

So yes, they are high.

Speaker 3: especially on the dry cargo side. As you know, there's two different markets, the dry cargo and liquid. Liquid has been more quiet, most of the orders we have right now are for dry cargo. But we are seeing inquiries for both liquid and dry, mostly dry but some liquid also. And there's different dynamics going on.

Especially on the dry cargo side as you know there is two different markets right when liquid liquid has been more quiet most of the orders we have right now are for dry cargo.

But we are seeing inquiries for both liquid and dry mostly dry, but some liquid and there's different dynamics going on on.

Speaker 3: On both markets, the utilization rate for barge is extremely, extremely high.

On the on both markets the utilization rate for barges is extremely extremely high.

Speaker 3: And as you know, we've had several years of very, very low production, well below replacement, the replacement needed just to keep the fleet where it needs to be. So the demand we perceive it, it's out there and we've seen it in inquiry.

As you know we've had several years of very very low production well below replacement.

<unk> been needed just to keep the fleet, where it needs to be so the demand we perceive it it's out there I mean, we've seen inquiries.

Speaker 3: As still prices come down and I mentioned in my prepare remarks that coil prices have come down quite a bit over the last few months and plate prices continue high. This is starting to create that to wider gap between those two prices that allows us to start producing and bidding barges with coil rise and plate and that that should help us on the on the converting inquiries into toward StrikingWowks heheok

As steel prices come down and I mentioned in my prepared remarks that coil prices have come down quite a bit over the last few months and plate prices continue high.

This is starting to create that wider gap between those two prices that allows us to.

Start producing them bidding barges with with.

With call rights and play them that that should help us on.

On the on the converting inquiries into orders at the same time as I mentioned, we have backlog until mid 2024.

Speaker 3: At the same time, as I mentioned, we have backlogged until mid-2024.

Speaker 3: And we are focused on margin. We don't want to give the barges away. We believe that there is a strong demand coming. So we are being very disciplined about the pricing we use and the timing for delivery.

Where we're focused on margin, we don't want to give the bar just away. We believe that there is a strong demand coming so we're very being very disciplined about the pricing we use the timing for those.

For delivery.

Speaker 3: and we're planning a ramp up in our facilities.

We're planning a ramp up in our facilities.

Speaker 3: in a way that we can improve efficiency. So I think we're in a really good position to be able to capitalize on the market conditions, our current backlog, and the steel pricing that's becoming more beneficial to convert inquiries into order.

In a way that we can improve efficiency. So I think we're in a really good position to be able to capitalize on the market conditions. Our current backlog on the steel pricing that's becoming more.

More than.

Beneficial to convert inquiries into waters.

Speaker 9: Noted. Thank you, Antonio. And quick follow-up on transportation. Is the strong margin performance that you're seeing in the segment solely a function of operating leverage, or are there other tailwinds or efficiencies that you're seeing with the segment margin?

Thank you Antonio and quick follow up on transportation.

Is the strong margin performance that Youre seeing in this segment.

Solely a function of operating leverage or are there other tailwind or efficiencies that youre seeing with the segment margins.

Speaker 3: I think it has mostly to do with operating leverage. It's not only in barge. If you look at our margins in our steel components, even though, as I mentioned, they're operating at a relatively low capacity, their margins are relatively high, and they are relatively low going forward credit.

Yeah, I think it has mostly to do with operating leverage.

It's not only embark its if you look at our margins. He knows there's still components, even though as I mentioned they are operating at a relatively low capacity.

The margins have been very nice.

Speaker 3: And as we run pop and I mentioned the trade case against China right now, that should help us improve our volumes over the next several quarters.

And.

As we ramp up and I mentioned, the trade case against China right now.

That should help us improve our volumes over the next several quarters. This was volume trend up there is significant operating leverage in this business and suddenly it's it's not a it's not a.

Speaker 3: So as volumes trend up, there's significant operating leverage in these businesses. It doesn't take much to...

It doesn't take much to move the margins. The other thing that happens with these businesses you increase margins, but they also are they they don't require a lot of capex. So their cash flow profile is very very good so.

Speaker 3: The other thing that happens with these businesses, you increase margins, they also are, they don't require a lot of topics. So their cash flow profile is very, very good. So return on capital should be held by the recovery in these businesses by a significant amount.

Return on capital should be helped by the recovery in these businesses by a significant amount.

Speaker 9: Got it. Thank you. And looking at another segment, engineered structures, can you talk about the project mix in utility structures? How does the component of big customers in the third quarter compare to what you realize in the second quarter?

Got it thank you.

And looking at another segment engineered structures can you talk about the project mix and utility structures. How does the component are big customers in the third quarter compared to what you realized in the second quarter.

Speaker 3: We don't give specific guidance on the type of customers, but historically the majority of our orders go to a group of customers that are what we call a reliance.

Yeah, we don't give specific guidance on the type of customers, but.

Historically, the majority of our orders go to a group of customers that are.

What we call our alliance customers.

Speaker 3: And the way that works is you have an agreement with these customers for a certain amount of battle for a certain period of time.

The way that works is you have an agreement with this customer for a certain amount of backlog for a certain period of time, but.

Speaker 3: But it's not defined. So you don't have a definition of what type of towers you're building. That backlog is pretty large. But we don't consider it backlog until it converts into an actual design and natural poll we're going to deliver. And that's the major...

But it's not defined so you don't have a definition of what type of towers are you building that backlog is pretty large, but we don't consider it backlog on deal it converts into a natural design a natural pull we're going to deliberate and that's the majority of our backlog.

Speaker 3: That's what we report once we have clarity in the type of poll that we will be delivering.

That's what we report once we have clarity on the type of phone that we will be delivering.

Speaker 3: And we also, every quarter, we produce a certain number, a smaller portion to the bid mark.

And we also every quarter, we produce a certain number smaller portion to the bid market.

Speaker 3: In the second quarter specifically, the portion of the bit margues much larger than normal.

In the second quarter, specifically the portion of the bid Mark was much larger than normal.

Speaker 3: So, starting the third quarter, as I mentioned, that should normalize, and we expect the second quarter to be stronger than the second quarter.

So.

Starting in the third quarter as I mentioned that should normalize and we expect the second half that should be much stronger than the second quarter margins, let's see.

Speaker 9: Thank you. You did a very helpful context around Alliance First Bid. My last question is around a balance sheet. Notice that you're holding around 200 million of cash, which is somewhat higher than what you typically carry. How should we think about capital allocation over the next few quarters? Yeah, that's a-

Thank you that's very helpful context around alliance versus debt.

And my last question is around the balance sheet I noticed that you're holding.

Around $200 million of cash, which is somewhat higher than what you typically carry.

Should we think about capital allocation over the next few quarters.

Yeah, that's a great question, where.

Speaker 2: Certainly, please, with the strength of our balance sheet, the strength of our liquidity position. And...

We are pleased with the strength of our balance sheet, the strength of our liquidity position.

Speaker 2: You know, I think we've been, as you've seen in our track records, since then, very active allocators of capital. Most of our capital has been allocated towards acquisition and organic investment, so that's...

I think we've been as you've seen in our track record since then very active allocators of capital.

Most of our capital has been allocated towards acquisition and organic investments. So that's that's where.

Speaker 2: where we see the focus. At the same time, we continue to maintain a $50 million share of purchase, so we'll be opportunistic there. But the liquidity is something we view as an asset, and we'll continue to allocate our capital towards...

Where we see the focus at the same time, we continue to maintain a.

$50 million share repurchase it will be opportunistic there but.

You know the liquidity is it is something we view as an asset and will continue to allocate our capital towards acquisitions or inorganic growth. We've got a number of large projects that you know we have underway on the organic side in construction and engineered structures and as Antonio mentioned, we have an active pipeline of.

Speaker 2: acquisitions in organic growth. We've got a number of large projects that you know we have underway on the organic side in construction and engineering structures. And as Antonio mentioned, we have an active pipeline of both on acquisition opportunities that we're considered.

Bolt on acquisition opportunities that we're considering.

Speaker 9: Thank you, Gail, very helpful. And thank you, Antonio, for your context. That's all for me.

Thank you gave a very helpful and thank you Antonio Great context, that's all for me. Thank.

Thank you Greg.

Speaker 1: And we'll take our last question from John Ramirez with DA Davidson. Your line is open. Hi, this is John .

And we'll take our last question from John Ramirez with D. A Davidson your line is open.

Yeah.

Hi, This is Joe from Brent Thielman. Thank you for taking my question.

Good morning.

Speaker 10: I'll start with a two-part question. So, looking at aggregates this quarter, to what degree was growth constrained by weather in Texas versus other factors like housing, and when do you expect to see an inflation?

Good morning, all.

So with the two part question so looking at aggregate this quarter she want to agree with growth constrained by weather in Texas versus other factors like housing.

And when do you expect to see an inflection in volume.

Speaker 11: Yeah, that's a good question in Texas specifically. We were pleased with how we saw our volumes for the quarter. You know, overall for aggregates we were down mid single digits. I'd say Texas we were probably a little closer to flat. So, encouraged with what we're seeing in Texas. From a weather perspective.

Yeah. So.

Yeah. That's a good question in Texas, specifically, we were we were pleased with how we saw our volumes for the quarter overall for aggregates were down mid single digits, I'd say, Texas, we were probably a little closer to flat. So encouraged with what we're seeing in Texas.

On a weather perspective.

Speaker 2: you know all we can think about right now is heat in texas but i you know we did have a little bit of wetness i guess at the beginning of the quarter but uh... i'd say we're encouraged by the pace of weddings on the infrastructure side we still continuing to see some good commercial health in texas and then you know overall as it relates to to housing uh... you know starting to see some stabilization so you know our comps unlike

All we can think about right now is heat in Texas, but we did have a little bit of wetness I guess at the beginning of the quarter, but I'd say, we're encouraged by the pace of Lettings on the infrastructure side, we're still continuing to see some good commercial health in Texas, and then you know overall as it relates to to to housing.

Starting to see some stabilization. So you know our comps unlike price on the volume side, they're a little bit in our favor on the second half so.

Speaker 2: on the volume side, they're a little bit in our favor on the second half. So, you know, we're optimistic.

You know what we're optimistic.

Speaker 2: And, you know, but I also say that we continue to focus on price and continue to focus on value over volume, but overall the Texas market performed well for us in the second quarter.

And yeah, but.

I I'd also say that we continue to focus on pricing continue to focus on value over volume, but.

But overall, the Texas market performed well for us in the second quarter.

Yeah.

So.

Speaker 10: Regarding then that volume, so is it more heavily weighted towards fourth quarter or is it just evenly throughout the second half where would you see a gradual growth?

Good morning, Ben.

That volume is it more heavily weighted towards fourth quarter or is it just evenly throughout the second half, where we should see a gradual growth.

Speaker 2: Yeah, well, I mean, just as you think about seasonality, fourth quarter can be a little seasonally slower just with weather, getting a little bit cooler and in the approaching the winter months. So generally, you see volumes are better in Q2 and Q3. But I would say at the same time, you've got some momentum going on that you didn't have earlier in the year as it relates to infrastructure lettings and some stabilization on the single family side.

Yeah, well I mean, just as you think about seasonality in fourth quarter can be a little seasonally slower just with weather I'm getting a little bit cooler and.

Approaching the winter months, so generally you'll see volumes or better in Q2, and Q3, but I would say at the same time, you've got some momentum going on.

That you didn't have earlier in the year as it relates to infrastructure Lettings and you know some some stabilization on the single family side.

Speaker 10: Got it. And I know there's been a lot of questions about wind, but I want to touch a little bit about your production. I know you don't mention how many wind towers you produce, but I just, you know, ballpark.

Got it.

And.

I know there's been a lot of the questions.

But I wanted to touch a little bit about your.

Production.

I know you don't mention how many wind towers you produce.

But.

Just ballpark.

Speaker 12: Do you expect to finish 2023 in levels of 2022 production? Based on what we think you produce in that year.

Do you think do you expect to finish 2023 in levels of 2022 production.

<unk>.

Based on what we think.

You produce into that year.

Speaker 2: I think, you know, the way we think about wind is with the orders that we've booked and the orders that we have in backlog right now, looking at 2024 from a volume perspective would be up relative to 2023. And as we've talked about, you know, similarly in our barge and our wind businesses, we expect to exit 2023 with a higher level of production capacity that we had at the beginning of the year as we're ramping up in those businesses.

I think you know and the way we think about wind is with.

With the orders that we've booked and the orders that we have in backlog right now looking at 2024 from a volume perspective would be up relative to 2023 and as we've talked about them.

Similarly in our barge and our wind businesses, we expect to exit 2023 with a higher level of production capacity that we had at the beginning of the year as well as we're ramping up in those businesses.

Okay.

Let me try it.

Speaker 10: Yeah, I just wanted to, you know, um, consider what the-

Yeah, I just wanted to.

And then at Westwood.

Speaker 12: You had, I guess, based on commentary in 2020, there was a notion that it was a good year for at least the wind towers. So I just wanted to see what is the end of 2023 and 2024 look like compared to that in terms of how many wind towers you produce.

You had a I guess based on commentary in 2020.

There was a notion that it was a duty airport at least the wind towers. So I just wanted to see what is the end of 2023, and 2024 look like compared to that in terms of wind.

Wind towers.

You produced.

Speaker 3: Let me give you some, some color comparing 22 and 23. So 2022 until July or 2020.

Let me give you something that some color comparing 'twenty two 'twenty three.

So 2022 until July of 2020.

Speaker 3: 20 or 22? Yeah, sorry, 20 versus 20, 23. That's what I wanted.

'twenty or 'twenty, two sorry, 'twenty 'twenty versus 2000 Twenty's to me, that's what I wanted to see.

Speaker 3: 2020 was still a so the Real business since we spawn in 2018 has been coming down

Okay great.

So so.

Our wind business seems respond in 2018 has been coming down.

Speaker 3: It's pretty drastic downward curve. When you look at, and there's a page in the presentation that shows our cyclical businesses when we spawn were close to 70% of our EBITDA. And this year they will be...

I'd say its pretty drastic that downward curve.

When you look at it and there's a page in the presentation that shows.

Cyclical businesses, when we spun were close to 70% of our EBITDA.

And this year, they will be less than 10%.

Speaker 3: So when this is considered within our cyclical businesses, so when March, rail components, March had a small spike in the middle, but overall, the growth in our cost has been really through our construction segment and engineer structure. So it's been a really a cliff dive for when since we spawn.

So wind is considered within our cyclical businesses. So when March rail components March had a small spike in the middle but overall.

The growth and of course has been really through our construction segment and engineered structures. So it.

It's been a it's been a really a cliff dive for wind since we spun.

Speaker 3: As we touch 2023 and the Inflation Reduction Act kicked in, you're going to see a pretty steep going back the other way as we get more orders. Right now, the backlog is not supported for a steep, let's say, hockey stick, but we are building the foundation for additional orders to come on top of it. So that's why we're excited about the business.

As we touch 2023, and the inflation reduction that kicked in.

We're going to see a pretty steep going back the other way as we get more orders right now the backlog is not supportive for a steep.

Let's say a hockey stick, but we are building the foundation for additional orders to come on top of it. So that's why we're excited about the business.

Got it.

And rigor.

Regarding.

Speaker 12: the engineer structures. Are the margins that we're seeing right now a sustainable floor or should MIX be more of a benefit for the rest of the year.

Okay.

Engineered structures.

Are the margins that we're seeing right now.

A sustainable tour or shouldn't mix being more of a benefit for the rest of the year.

Speaker 3: So, as I mentioned, the second quarter is not reflective of the current margins. The project makes for the second half is much healthier. So we should see some improved margins in the utility structures and with improved ramp up in wind towers, plus a pack spread, ideally you should see the second half of the year with stronger margins.

So the as I mentioned in the second quarter is not reflective of the current margins.

The project mix for the second half is much healthier. So we should see some improved margins in the utility structures and with the improved ramp up in the in our wind towers.

Close it back spirit ideally you should see the second half of the year with stronger margins.

Okay. Thank you so much I appreciate the time.

Thank you.

Speaker 1: That concludes today's teleconference. Thank you for your participation. You may now disconnect and have a wonderful day. Every Jewel.

Thank you that concludes today's teleconference. Thank you for your participation you may now disconnect and have a wonderful day.

Sure.

[music].

Mhm.

[music].

Speaker 1: You

Hum.

[music].

Uh-huh.

[music].

Mhm.

[music].

Hum.

[music].

Speaker 1: We for.

Hum.

Yeah.