Q4 2023 Astec Industries Inc Earnings Call

Operator: Hello, and welcome to the Astec Industries fourth quarter and full year 2023 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 good morning everyone.

Hello, and welcome to the <unk> industries fourth quarter and full year 2023 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 good morning, everyone. Joining me on today's call are Yaacov under Murphy Chief Executive Officer.

Stephen C. Anderson: Joining me on today's call are Jaco Thundermurvey, 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.

Becky Weyenberg Chief Financial Officer.

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.

Stephen C. Anderson: Any such statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions. Factors that can 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 U.S. GAAP, Generally Accepted Accounting Principles, and Non-GAAP Financial Measures, which management believes provide useful information to investors. These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and are therefore unlikely to be comparable to the calculation of similar measures for other companies.

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 U S. GAAP.

Generally accepted accounting principles and non-GAAP financial measures, which management believes provides useful information to investors.

These non-GAAP financial measures have no standardized meaning prescribed by U S. GAAP and therefore are unlikely to be comparable to the calculation of similar measures for other companies.

Stephen C. Anderson: 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 is included in our news release under the appendix of our slide. All related earnings materials are posted on our website at www.AstecIndustries.com, including our presentation, which is under the Investor Relations and Presentations tab. Now, I'll turn the call over to Jaco.

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 is included in our news release and the appendix of our slide deck.

All related earnings materials are posted on our website at www Dot Aztec industries Dot com, including our presentation, which is under the Investor relations and presentations tabs.

Now I'll turn the call over to Yaacov.

Jaco G. van der Merwe: Thank you, Steve. Good morning, everyone, and thank you for joining us. I will begin on slide 4 with a review of our full year highlights. 2023 was an important year for us as we advanced key strategic initiatives such as operational excellence, and growing our business. These efforts enabled us to achieve great results in 2020 and will help us deliver more consistent, profitable growth in the future. I am very proud of what the team has been able to accomplish this year.

Thank you Steve Good morning, everyone and thank you for joining us.

I will begin on slide four we've had a view about food highlights.

Yeah.

Do we need to make city was an important year for <unk> as we advanced key strategic initiatives, such as operational excellence growing our parts business, new product development and Oracle ERP execution.

These efforts enabled us to achieve great results in 2023 and will help us deliver more consistent.

<unk> got over in the future.

I am very proud of what the team has been able to accomplish this year.

Jaco G. van der Merwe: In 2023, we expect record full-year sales as end market demand remains solid in both. We were particularly encouraged by the steady momentum we saw across the business at the end of the year, with Q4 implied orders growing 27.6% sequentially. I met with many customers at the recent World of Concrete and National Asphalt Paving Association event, and was encouraged by their positive sense, and are using our equipment to complete their projects. Their optimism, combined with a positive turn in implied orders during Q4, increased funding from the Federal Highway Bill and new product introductions, to give us confidence in the long-term demand for others. Didn't queue for 2020?

In 2023, we had record full year sales as end market demand remains solid in both segments.

We were particularly in spite of steady momentum we saw across the business at the end of the year.

With Q4 implied orders.

87, 6% sequentially.

I met with many customers at the recent world of concrete and National asphalt paving association the veins and was encouraged by the positive sentiment.

You remain busy and how to using our equipment to complete that project.

They had optimism combined.

Combined with the positive.

Implied orders during Q4.

Increased funding from the Federal Highway Bill and new product introductions.

Give us confidence in the long term demand outlook for our business.

During Q4 2023, our team delivered improved profitability and expanded margins.

Jaco G. van der Merwe: Our team delivered improved profitability and expanded models. This is a testament to the team's ability to execute a free..., and Apply Operational Excellence Practice. We expanded gross margins by 400 basis points, and adjusted EPS more than doubled for the full year, a priority for us in 2020. Astec Industries Inc consistently delivers financial results.

This is it takes them to the team's ability to execute efficiently and apply operational excellence practices.

We expanded gross margins 400 basis points and adjusted EPS more than doubled for the full yet.

A priority for us in 2023, plus two bolt a performance culture at <unk>.

System delivers financial results.

Jaco G. van der Merwe: Our full year result demonstrated that we have made great progress towards this. These achievements have laid the foundation for an even higher level of profitability as our business continues to grow. Our Oracle ERP implementation continues to move forward, as indicated by the 2023 milestones we achieved.

Our full year results demonstrate that we have made great progress towards this objective.

These achievements have laid the foundation for an even higher level of profitability as our business continues to grow.

Our Oracle ERP implementation continues to move forward as indicated by the 2023 milestones we achieved.

Jaco G. van der Merwe: We will continue to harness the capabilities of the Enhance News System to drive efficient and effective operations. Lastly, we published our first corporate sustainability report in the. It was a tremendous team effort to get this project across the finish line, and I would like to acknowledge the hard work done by many individuals. Please complete this report, guided by our core values of safety and devotion.

We will continue to harness the capabilities of the homes, new systems to drive efficient and effective operations.

Lastly, we published our first corporate sustainability report in December.

It was a tremendous team effort to get this project across the finish line.

And I would like to acknowledge the hard work done by many individuals to complete this report.

Guided by our core values of safety devotion.

Jaco G. van der Merwe: Integrity, Respect, and Innovation. This report describes how... We strive to do what is right for our customers, employees, and the communities in which they operate. Our vision is to build industry-changing solutions and create life-changing opportunities. This inaugural report provides a foundation from which we can move forward with the goal of long-term sustainable growth. Turning to slide 5.

<unk> respect any innovation. This report describes how we strive to do what is right for our customers.

<unk> and the communities and we'd be up right.

Our vision is to both industry changing solutions that could be.

<unk> life changing opportunities.

This inaugural report provides the foundation from which we can move forward with the goal of long term sustainable growth.

Turning to slide five.

Jaco G. van der Merwe: As demonstrated over the past few years, we have taken steps to simplify our business by Eliminating Waste and Enhancing Processes to Improve Product Quality. We are focused on areas where we add the greatest value, bringing innovation to our customers and working with our dealers to develop best-in-class aftermarket practices. We plan to continue to grow organically and explore opportunities through a Disciplined Acquisition Routine. Moving to slide six.

As demonstrated over the past few years, we have taken steps to simplify our business by eliminating waste and enhancing processes to improve productivity.

We are focused on areas, where do we add the greatest value, bringing innovation to our customers and working with our dealers to develop best in class after market practices.

We plan to continue to grow organically and explore opportunities through a disciplined acquisition road map.

Moving to slide six.

Jaco G. van der Merwe: After taking on the CEO role last year, one of the key priorities I established was for us to create and embrace a performance culture built on consistent agriculture. Reflecting on the last 12 months. I am pleased to see that we have made progress on this journey, as evidenced by our 2023 results in the. At the same time, we have identified significant additional opportunities to strengthen our business further. And I've built those goals into a long-term target.

After taking on the CEO role last year, one of the key priorities established west for us to create and embrace a performance culture, both on consistent execution.

Reflecting on the last 12 months.

I'm pleased to see that we have made progress on this journey.

Evidenced by our 2023 results and achievements.

At the same time, we have identified significant additional opportunities to strengthen our business further.

And have built those into our long term target goals.

Jaco G. van der Merwe: I would like to take a few minutes to highlight some notable achievements from the past year. We expanded gross margins by 400 basis points in 2023. We continue to invest in improving processes and delivering innovation, creating positive models. We will continue these efforts in 2024.

I would like to take a few minutes to highlight some notable achievements from the past year.

We expanded gross margins by 400 basis points in 2023.

We continue to invest to improve processes and deliver innovation.

<unk> I think positive margin.

We will continue these efforts in 2024.

Jaco G. van der Merwe: Additional investments will help us better serve growing markets, and a slate of new products will enable us to provide solutions. This is the second area we prioritized in 2020, our dedication to our customers, dealers, and shareholders. Accomplishments here included the expansion of our distribution network and the launch of new products that enable dealers and customers to better serve our growing global market. We want to continue to do so. Prioritizing these elements in 2020

Additionally, investments will help us better serve growing markets and a slate of new products will enable us to provide solutions to customer needs.

The second area, we prioritized since we need 23, plus our dedication to our customers. The lessons here at Alder accomplishments year included the expansion of our distribution network and the launch of new products that enable dealers and customers to better serve our growing global market.

We want to continue.

I think these elements in 2024 through greater collaboration and increased availability of thoughts to better serve our customers.

Jaco G. van der Merwe: With greater collaboration and increased availability of parts, these actions to drive an enhanced product offering out to a broader customer audience will enable us to create consistent, profitable growth. Promoting the One Astec operating model drives continuous improvement. The implementation of the Oracle ERP system is a great example.

These actions to drive an enhanced product offering out to a broader customer audience will enable us to create consistent profitable growth.

Promoting the one <unk> operating model drives continuous improvement.

<unk> of the Oracle ERP system is a great example, as we have launched modules at corporate and one major manufacturing sites in 2023.

Jaco G. van der Merwe: We have launched modules at corporate and one major manufacturing site. We have implementation plans for additional sites in 2024 and 2021. Operationally, we have made improvements in areas such as parts full right. [inaudible] One constant in our business is our steadfast focus on our core value of safety. This is very important to me and our customers.

We have implementation plans for additional sites in 2024 and 2025.

Operationally, we have made improvements in areas such as box full rates, which improved 20% in the past two years.

We will make additional investments to further improve throughput velocity this year.

One constant in our business is our steadfast focus on our core value of safety.

This is very important to me and our team.

Jaco G. van der Merwe: I want our team to go home healthy and injury-free every day. Through continuous improvement, we have reduced our recordable injury rate to 1.27. The best in the company's recent history and very favorable when compared to the industry. Our goal is zero harm, and we will continue to work to eliminate injuries across our state. And finally, the Astec team will continue to unite around our long-term objective and New Vision Statement, which is to build industry-changing solutions that create life-changing opportunities. We will work together to make Astec an even greater organization. [inaudible] I would like to offer some observations on the current business dynamic, while the macroenvironment remains uncertain. There are an increasing number of indicators that point to a stable demand environment with opportunities for growth in our infrastructure solutions and more. Demand for asphalt road building and concrete production is strong.

I wanted to our team to go home healthy and injury free every day.

Through continuous improvement, we have reduced our recordable injury rate to 127.

Based on the company's recent history, and wavering favorable when compared to the industry average.

Our goal of zero harm and we will continue to work to eliminate injuries across our sites.

And finally in the aesthetic team will continue to unite around our long term objectives, and new vision statement, which is to both industry <unk> solutions.

It's life changing opportunities.

We will work together to make as they can even greater organization.

Turning to slide seven.

I'd like to offer some observations on the current business dynamics.

While the macro environment remains uncertain.

There are an increasing number of indicators that point to a stable demand environment with opportunities for growth.

In our infrastructure solutions end markets.

<unk> for asphalt road building and concrete production is strong.

Jaco G. van der Merwe: Dealers need additional inventory, and we are working closely with our dealers to support a growing aftermarket opportunity by further improving the delivery of parts and service for our mobile. For material solutions, we saw signals from our annual dealer order lighting event that heightened interest rates concerns may weigh on mobile crashing and screening equipment outlook in the near term. For the long term, however, demand trends look favorable due to domestic infrastructure spending and opportunities in international markets. In both groups, we are releasing new products to deliver innovation to our customer needs. Customers are busy.

Dealers need additional inventory and we are working closely with our dealers to support our growing off the market opportunity by further improving the delivery of parts and service for our mobile equipment.

Materials solutions, we saw signals from our annual dealer order of I think event that titled Interstates concerns may weigh on mobile crushing and screening equipment outlook in the near term.

For the long term now either demand trend looks favorable due to domestic infrastructure spending and opportunities in international markets.

In both groups, we are releasing new products to deliver innovation to our customer needs.

Customers are busy and they rely on us to help keep the projects moving forward efficiently.

Jaco G. van der Merwe: [inaudible] in addition to new product introductions. We are increasing our sales coverage by expanding our dealer network and deploying this to our direct sales force to further penetrate the market. Funding from the Federal Highway Bill continues to be deployed at a growing rate.

In addition to new product introductions, we are.

Our increasing our sales coverage by expanding our dealer network and deploying at least since through our direct sales force to further penetrate markets.

Funding from the Federal Highway bolt continues to be deployed at a growing rate comp.

Jaco G. van der Merwe: Contract awards increased 8.6% in 2023, which is a positive leading indicator for future construction. Funding from federal legislation provides stability for our customers, driving future product and off-the-market... Next, I would like to update you on two of our new products shown on slide 8. Both products will launch in 2023, and both have been met with positive reception from our customers. The Peterson 3710E Horizontal Grinder was launched in March.

Tract Awards increased eight 6% in 2023, which is a positive leading indicator for future construction.

Funding from federal legislation provides stability for our customers driving future product and after market demand.

Next I would like to update you on two of our new product so on slide eight.

Both products will launch in 2023, and both have been met with positive reception from our customers.

The <unk> 17 E horizontal grind that was launched in March.

Jaco G. van der Merwe: The number of units sold and incremental margins for this product are in line with expectations, and we are on track. (Inaudible) The Rotec RX405 cold planer was launched in October and is off to a great start.

The number of units sold in any meaningful margins for this product are in line with expectations and we are on track.

Our unit forecast in 2024.

David I would take Rx 45 coal plainer was launched in October and is off to a great start.

Jaco G. van der Merwe: New product launches are complex and require teamwork and dedication. I am pleased with the success of these and look forward to presenting more new products at the World of Asphalt Trade Show in Nashville on March 25th through 27th. Slide nine shows that backlog continues to normalize from the peak levels experienced in 2022 that were primarily caused by customary actions. Supply Chain and Logistics, over the past year. Orders have since returned to more historic paths.

New product launches are complex and require teamwork and dedication.

I am pleased with the success of these and look forward to presenting more new products at the world of asphalt trade show in Nashville on March 22027.

Slide nine shows that backlog continues to normalize from the peak levels experienced in 2022 that were primarily caused by customary actions to supply chain and logistics constraints.

Over the past year.

Orders have returned to more historic patterns and we have made progress in converting backlog to sales through investments in throughput and operational excellence initiatives.

Jaco G. van der Merwe: And we have made progress in converting backlog to sales through investments in throughput and operational excellence. Implied orders shown on slide 10 increased 27.6% sequentially in Q4, after holding steady through the first three quarters of 2023, while one data point does not make it. We were encouraged with the increase in... Customer Sentiment for Infrastructure Solutions products is positive, while higher interest rates may temper demand for material solutions products in the near term. Industry data points to double-digit growth in federal and state road construction, which bodes well for our industry in 2020, combined with our new products and health feedback. I am becoming increasingly confident. 2024 will be a solid year for us. With that, I will now turn the call over to Becky to discuss our detailed fourth quarter and full year financial results. Thank you, Jaco, and good morning, everyone.

Implied orders shown on slide 10 increased 27, 6% sequentially in Q4.

After holding steady through the first three quarters of 2023.

While one data point does not make a trend we were.

Letting projects with the increase in orders.

Customer sentiment for infrastructure solutions products is positive while higher interest rates might tamper demand will material solutions products in the near term.

Industry data points to double digit growth in federal and state road, construction, which bodes well for our industry in 2024.

Combined with our new products and healthy backlog I am becoming increasingly confident that 2020 forward will be a solid year for us stick with that I will now turn the call over to Becky to discuss our detailed fourth quarter and full year financial results.

Thank you Yakov and good morning, everyone.

Rebecca A. Weyenberg: I'll begin with the review of our fourth quarter 2023 results on slide 12, failures for $337.2 million, down 3.6% as a slight increase in infrastructure solutions was more than offset by material solutions decline. By region, domestic sales growth of $4.1 million was more than offset by softer international sales, which were down $16.8 million, with particular weakness this quarter in Europe, Australia, and Canada. Part sales grew 2%, which was offset by a decline of 6.9% in equipment sales.

I'll begin with a review of our fourth quarter 2023 results on slide 12 sales.

Sales were $337 million down three 6%.

Increase in infrastructure solutions more than offset by <unk> decline.

By region domestic sales Scarlet.

$1 million, which more than offset by softer international sales, which were down $68 million with particular weakness this quarter in Europe, Australia and Canada.

Part sales grew 2%, which was offset by a decline of six 9% and equipment sales.

Rebecca A. Weyenberg: Adjusted EBITDA increased 46.8%, increasing adjusted EBITDA margins by 340 basis points. The biggest driver was pricing realization and tailwinds for manufacturing efficiency. We expanded gross margins by 610 basis points to 26.4%. Full year gross margins were 24.7%. The increased SG&A costs were driven by higher planned personnel-related costs and increased consulting and project costs. Overall, we are pleased with the progress and improvements we're making on margins. Adjusted earnings per share increased to $0.90 from $0.34 the prior year, an increase of 164.7%. This figure excludes the transformation program and other costs. The adjusted net effective tax rate for the quarter was 17.3%, a significant decrease from last year.

Adjusted EBITDA increased 46, 8% increase in adjusted EBITDA margins by 340 basis points, the biggest driver with pricing realization in tailwind from manufacturing efficiencies.

We expanded gross margins by 610 basis points to 26, 4%.

Full year gross margins were 24, 7%.

Increased SG&A costs were driven by higher plant personnel related costs and increased consulting and project cost.

Overall, we are pleased with the progress on your principles for making on margins.

Adjusted earnings per share increased to 90 cents from clarity for since the prior year, an increase of 164, 7%.

Take care excludes the transformation program and other cost.

The adjusted effective tax rate for the quarter with seven 3%.

And if I can't decrease from last year, the lower effective tax rate for the current period included an income tax benefit from the utilization of existing net operating losses.

Rebecca A. Weyenberg: The lower effective tax rate for the current period included an income tax benefit from the utilization of existing net operating losses and corresponding release evaluation allowances in Brazil and India. Our normalized net effective tax rate for the full year was 22.1%, which was slightly below the 23 to 24% range we had estimated on slide 13. Fourth quarter adjusted EBITDA increased 46.8% to $32.6 million, with margin expansion of 340 basis points to 9.7%. The positive contribution from volume, pricing, and mix plus manufacturing efficiencies more than offset the impact of inflation and higher SG&A expenses. Moving on to slide 14, infrastructure solutions net sales increased slightly to 240 million dollars with domestic growth of five percent offset by soft international demand. Parts sales were strong this quarter, up 7.2% as we were able to fulfill parts orders for aftermarket demand.

<unk> R&D and release of valuation allowances in Brazil and India.

Our normalized net effective tax rate for the full year was 22, 1%, which was slightly below the 23% to 24% range we had estimated.

On slide 13.

Fourth quarter, adjusted EBITDA increased 46, 8% to $32.6 million with margin expansion of 340 basis points to nine 7%.

Contribution from volume pricing and mix plus manufacturing efficiencies more than offset the impact from inflation and higher SG&A expenses.

Moving on to slide 14.

Infrastructure solutions net sales increased slightly to $240 million with domestic growth of 5% offset by softer international demand.

Parts sales were strong this quarter up seven 2% as we are able to fulfill parts orders for aftermarket demand.

Rebecca A. Weyenberg: Adjusted EBITDA margin for infrastructure solutions increased 500 basis points to 14.7%, saleable net volume price and mix outpaced inflation driving higher gross margins, net positive manufacturing efficiencies were partially offset by higher SG&A personnel costs. Turning to slide 15, material solutions net sales decreased 13.1% to $95.4 million as there were decreases in both international and domestic demand. International sales decreased 28.7%, and domestic sales declined 7%.

Adjusted EBITDA margin for infrastructure solutions increased 500 basis points to 14, 7%.

All of that volume price and mix outpaced inflation driving higher gross margins.

Net positive manufacturing efficiencies were partially offset by higher SG&A personnel costs.

Yeah.

Turning to slide 15 material solutions net sales decreased 13, 1% to 95 $4 million as there were decreases in both international and domestic demand.

Our national sales decreased 28, 7% and domestic sales declined 7%.

Rebecca A. Weyenberg: Equipment sales declined 15.7%, and parts were down 7.8%. However, adjusted EBITDA margins for material solutions increased 50 basis points to 9.3 percent. This was largely due to the positive impact from pricing and manufacturing efficiencies, partially offset by lower volume and mix and an increase in SG&A personnel costs. On slide 16, I'll review our full year results. Sales were $1,338.2 million, up 5%, with increases in both infrastructure and material solutions due to price-cost alignment and stable demand. By region, domestic sales growth of 6.8% was slightly offset by softer international sales, which were down 2.1%.

Equipment sales declined 15, 7% and parts were down seven 8%.

Adjusted EBITDA margins for material solutions increased 50 basis points to nine 3%. This was largely due to the positive impact from pricing and manufacturing efficiencies, partially offset by lower <unk> and an increase in SG&A personnel costs.

On slide six I'll review, our full year results.

Sales were 1 billion $338.2 million up 5% with increases in both infrastructure and material solutions due to price cost alignment and stable demand.

By region domestic sales growth of six 8% was slightly offset by softer international sales, which were down two 1%.

Rebecca A. Weyenberg: Adjusted EBITDA grew 55.4%, and adjusted EBITDA margins increased 260 basis points due to our ability to drive gross margin expansion through pricing initiatives. Adjusted earnings per share also had strong growth at 117.1%, even when factoring in the litigation loss reserve we incurred in the second half of the year. Moving to slide 17, we highlight the key drivers of our year-over-year adjusted EBITDA bridge. As previously mentioned, adjusted EBITDA increased 55.4% to $110 million, with an EBITDA expansion of 260 basis points to 8.2%. As seen in the chart, the positive impact of net volume, pricing, and mix more than offset headwinds from inflation and higher SG&A costs. We are proud of the strong expanded margin as our factory investments and pricing realization have come to fruition, and we expect to drive increased EBITDA to deliver long-term shareholder value. Turning to slide 18, our cash and cash equivalents stood at $59.8 million.

Adjusted EBITDA grew 35, 4% and adjusted EBITDA margins increased 260 basis points.

Our ability to drive gross margin expansion through pricing initiatives.

Adjusted earnings per share also had strong growth at 117, 1%, even when factoring in the litigation loss reserve, we incurred in the second half of the year.

Moving to slide 17, we highlight the key drivers of our year over year adjusted EBITDA Bridge.

Previously little chunk adjusted EBITDA increased 55, 4% to $110 million with an EBITDA expansion of 260 basis points to eight 2%.

As seen in the chart the positive impact of volume pricing and mix more than offset headwinds from inflation and higher SG&A costs.

We are proud of the strong expanded margin as our factory investments and pricing realization has come to fruition and we expect to drive increased EBITDA to deliver long term shareholder value.

Turning to slide eight.

Our cash and cash equivalents stood at $59 $8 million, we generated operating cash flow of $27 $8 million compared with a use of cash of $73 $9 million.

Rebecca A. Weyenberg: We generated operating cash flow of $27.8 million compared with the use of $73.9 million in the prior year, a difference of $101.7 million. This turnaround was due to improved earnings and steps we took to improve our working capital. Our liquidity is up slightly from the end of 2022, positioning us to continue investing in profitable growth initiatives while still maintaining a strong balance sheet. Turning to slide 19.

In the prior year, a difference of $101.7 million.

This turnaround was due to improved earnings and steps, we check to improve our working capital.

Our liquidity is up slightly from the end of 2022 positioning us to continue investing in profitable growth initiatives, while still maintaining a strong balance sheet.

Turning to slide 19.

Rebecca A. Weyenberg: We maintain a disciplined capital deployment framework, balancing investments in growth with returning cash to shareholders. We spent $9.1 million on CapEx in the fourth quarter, bringing our full-year CapEx to $34.1 million. This is within the range previously communicated. We were pleased to return $11.8 million to shareholders in the form of dividends during 2023 as we continue to direct capital to create the best return. With that, I will now turn it back over to Jaco. Thank you, Becky.

We maintain a disciplined capital deployment framework balancing investments in growth with returning cash to shareholders.

We spent $9 1 million on Capex in the fourth quarter, bringing our full year capex to $34 $1 million. This is within the range previously communicated.

We were pleased to return $11.8 million to shareholders in the form of dividends. During 2023, as we continue to direct capital to create the best returns.

With that I will now turn it back over to Yakov.

Thank you Becky.

Jaco G. van der Merwe: [inaudible] We close 2023 by delivering strong results in the fourth quarter. I am confident our teams can deliver even better results during 2020. We have work yet to do, but we are well on our way to delivering enhanced performance for our customers and shareholders. 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. If you would like to ask a question, simply press the star, then the number 1 on your telephone's back.

In closing on slide <unk> we.

Close <unk> III by delivering strong results in the fourth quarter.

I am confident our teams can deliver even better results during 2024.

We have work yet to do.

But we are well on the all the way to delivering enhanced performance for our customers and shareholders.

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.

Steve I'd like to ask a question simply press Star then the number one on your telephone.

Operator: Once again, if you would like to ask a question, please press star, then the number 1. Your first question is from the line of Steve Ferrazani, with Sydney. Please go ahead. Hi, good morning. This is Alex Han for Steve.

Once again, if you would like to ask a question. Please press Star then the number.

Your first question is from the line of Steve <unk> with Sig.

Please go ahead.

Hi, Good morning. This is Alex on for Steve. Thank you for taking questions.

Alex Han: Thank you for taking questions. Can we start by providing a little bit of color around what's led to the higher margins? Is it higher margin sales or pricing or other factors? Yeah, morning, Alan. This is Jaco here.

When we start by providing a little bit of color around what's led to the higher margins that higher margin sales or pricing or other factors.

Yes, good morning, Alan this is <unk>.

Sure.

Luckily like we mentioned in previous earnings calls Q4 is typically.

Jaco G. van der Merwe: You know, like we've mentioned in previous NX Calls, Q4 is typically a strong quarter for us with regard to a favorable parts mix. We've definitely seen that during the quarter. You know, we also had a strong performance from our infrastructure solutions team. And, you know, It's difficult to pinpoint to one thing, but our teams have obviously done a lot of work on our part performance. We've done a lot of work around operational excellence and investing in our facilities. And then, you know, we have a positive effect on pricing versus inflation. And as you've seen by the bridges, that effect is getting narrower every quarter. So definitely, you know, for the coming year, we expect it to move much closer to each other as well. Thank you for the context.

A strong quarter for us with regards to.

Favorable <unk> mix.

<unk> seen that.

During the quarter.

We also had a strong performance from our infrastructure solutions.

And.

It's difficult to pinpoint to one thing, but our teams have obviously done a lot of work on.

Paul its performance we've done.

A lot of work around operational excellence and investing in our facilities.

And then we have a positive effect on pricing versus inflation.

And as you've seen by the breaches.

Debt.

Do you think does getting that every quarter.

So definitely for the coming year, we expect that to.

To move much closer to each other as well.

Thank you for the context.

Jaco G. van der Merwe: And a follow-up question, could you talk a little bit about order rate trends and, you know, if you're seeing movement towards a positive turn or particular areas of improvement within the backlog? Yeah, when it comes to ordering and backlog, there's a couple of factors that we are looking at. You know, as mentioned in the prepared remarks, I've had the opportunity to speak to many customers already this year at the World of Concrete, our National Asphalt Paving Association.

And then follow up for me could.

Could you talk a little bit about order rate trends.

And so youre seeing movement towards a positive turn are particular areas of improvement within the backlog.

Yes, when it comes to ordering.

Backlog I know Theres a couple of factors that we are looking at.

As mentioned in the prepared remarks, I've had the opportunity to speak to many customers already.

Already this year that will accompany that.

I'll ask one paving association.

Jaco G. van der Merwe: You know, our customers are busy, sentiment is positive, we are seeing improved flow from federal funding, and we obviously mentioned the release of new products that are busy hitting the market right now. You know, on the opposite side of that, obviously interest rates are affecting mostly our mobile crossing and screening equipment, and then this year, you know, obviously being an election year, we always expect a little bit of up and down from an order point of view.

Our customers are busy sentiment is positive.

We are seeing see improved flow from from.

Favorable funding.

And.

We obviously mentioned that a lease of new products.

That is that as busy eating the market right now.

On the opposite side of that obviously interest rates or 15.

Mostly our mobile cutting and screening equipment and then this year, obviously being an election year.

We always expect a little bit of up and down from an order point of view, but.

Jaco G. van der Merwe: But, you know, overall, we believe that this year is going to be a stable year for us. The implied orders that jumped here in Q4 were a positive signal. So, you know, we are expecting flat to single-digit growth for 2024. Great, thank you.

Overall, we believe that this year is going to be stable year for us.

The implied orders that jumped yeah in Q4 was a positive signal.

So we are we are expecting.

That to single digits.

For what we think is meaningful.

Great. Thank you and last question for me.

Jaco G. van der Merwe: And last question from me. Could you talk a little bit more about the plant efficiency and ERP, but I'm curious about some of the timing of margin improvements we might see from those as the implementations develop. Thank you for watching, and I'll see you in the next video.

Can you talk a little bit more you've mentioned the plant efficiency and ERP.

But I'm curious about some of the timing of margin improvements we might see from those as the implementation has developed.

Jaco G. van der Merwe: Yeah, so just on, you know, on margins as a whole, it comes from various, various places, you know, we are continuously working on delivering operational excellence. And, and as you can see, with our CapEx last year, we invested quite a bit in our facilities, those are continuously now, you know, having an effect. And obviously, we saw that in the, in the last couple of quarters. You know we mentioned already the pricing inflation parity and you know our one Astec procurement team they are they are really coming together now nicely and we are definitely taking advantage of the size of Astec now across the organization so so those are all contributing you know on the ERP side specifically we went live on one site last year we have various sites that will go live here during 2024 and we will have specifically two sites that will go in in in Q2 so we expect to see you know positive effect of those in future quarters but you know for for the shorter term there's a lot of good work that the teams have already done that that should help with with margins I think one thing to consider also you know from a margin point of view you know the the level of work that we have in our factories are always a big item to consider when it comes to you know having good absorption and I think our teams are doing a really good job now with improved sales and operations planning processes to to plan for resources based on on level so you know the teams are well positioned that you know if if the market continues to be strong that we can take advantage of that you know on certain products if the market burns down you know we we have good visibility now to take the appropriate action. Yeah, I might like to add a reminder as well.

Yes, so just on on margins as a whole it comes from various radius.

Places.

We're continuously working on putting operational excellence and as you can see without Capex last year, we invested quite a bit.

In our facility is those are.

Continuously now having an effect and obviously we saw that in the.

In the last couple of quarters.

We mentioned already the pricing inflation.

Yeah.

And.

Our one aspect procurement team. They are they are really coming together nicely and we are definitely taking advantage of the size of our stake now across the organization. So so those are all contributing.

Besides specifically.

We went live with one side last year, we have various sites that will go lives.

During 2024, and we will have specific the two sites that will go.

In Q2, so we expect to see a positive effect of those in future quarters.

For the short term.

There is a lot of good work that the teams have already done that that should help.

With with margins.

I think one thing to consider there also.

From a margin point of view.

The level of work that we have in our factories are always a big.

Item two conservative when it comes to having good absorption and I think our teams are doing a really good job now with improved sales and operations planning.

<unk> two two planned for resources based on.

On label so.

The teams are well positioned.

If the market continues to be strong that we can take advantage of that.

On certain products.

<unk> is down.

We have good visibility now to take the appropriate there.

Yeah, Glenn I would like to add a reminder, as well we had a significant transformation program best.

Rebecca A. Weyenberg: We had a significant transformation program that's been in place for the last two years with one of our sites in Chattanooga, and that is coming to a close. We are putting the final, [inaudible] which is launching in Q1 here. And then that's the end of that program as far as the investment is concerned.

The last two years with one of our sites in Chattanooga and that is coming to a close we are putting.

Vinyl.

Okay.

Which is launching in Q1 here and then that's the end of that program as far as the investments and then throughout the remainder of the year. They will continue to perfect. The stabilized and so we do expect.

Rebecca A. Weyenberg: And then throughout the remainder of the year, they'll continue to improve and stabilize. And so we do expect continued margin improvement from that investment to impact us in the back half of the year, and then going forward, it'll just continue to grow. The other major investment we're making is in our OMA facility in Northern Ireland. We had a capital expansion to their facility, which is still in progress, but we'll also finish it in 2024. And that is specifically what we're calling our gateway to Europe.

Margin improvement from that investment to impact us in the back half of the year and then going forward. It will just continue to grow.

Other major investment, we're making is in our <unk> facility in Northern Ireland, We had a capital expansion to their facility, which is still in progress, but we'll also finished in 2024 and that specifically.

What we're calling our gateway to Europe that we will be launching several new products in that facility once they have the room and.

Rebecca A. Weyenberg: So we will be launching several new products in that facility once they have the room, and that will be in the back half of the year and into 2025. So we do see opportunity from our investments to increase our margin, our gross margin, and EBITDA margin portfolio. Thank you, Jaco and Becky. I really appreciate all the colors.

That will be in the back half of the year and into 2025 say, we do see opportunity from our investments to increase our margin our gross margin and EBIT margin portfolio.

Thank you yeah going back to I really appreciate all the color.

Alex Han: Your next question comes from the line of Meg Dobre with R. W. Baird. Please go ahead. Hey, good morning guys. It's Joe Grabowski on for MIG this morning.

Your next question comes from the line of Mig <unk> with RW Baird. Please go ahead.

Hey, Good morning, guys, Tom Joe Grabowski on for Mig This morning.

Joseph Michael Grabowski: I also wanted to ask about EBITDA margin, but maybe kind of split it out between segments. You know, the infrastructure EBITDA margin was the highest quarter it's been in the past several years, but the material solutions margin was the softest it's been in 2023. Maybe kind of, you know, talk about margins by segment. And I know Becky, you were just kind of touching upon it, but what is kind of working in infrastructure that maybe is not flowing through in material solutions?

I also wanted to ask about EBIT margin, but maybe.

Maybe kind of split it out between segments.

The infrastructure EBIDTA margin.

What was the highest quarter, Japan in the past several years very material solutions margin was.

Got it.

In 2023, so maybe kind of talk about margins by segment and are now back to you with just kind of touching upon APAC.

What is kind of working in an infrastructure that may be snack flowing through and material solutions.

Yes.

Jaco G. van der Merwe: Yeah, I can take a first stab at that. You're absolutely right, Infrastructure Solutions had a really strong performance. If you look at that group specifically, Q4 is a very strong parts quarter, you know, as will be Q1 this year. So parts obviously have a positive influence.

Yes, I can.

I can take a first stab at that.

You're absolutely.

Connected solutions that are really.

Strong performance.

If you look at.

Specifically Q4 is a very strong bullets Goldberg.

As will be Q1 this year so.

So, possibly say that was a positive influence.

Jaco G. van der Merwe: We've also, you know, the teams have done really well in driving efficiencies around our plants and, you know, the asphalt and concrete plants that we're selling. You guys have heard us talk in the past about modularization and the work we're doing on that. So we're starting to see the outcomes of that.

We are also.

Teams have done really well.

The IV efficiencies around our plants and.

The asphalt and concrete plans that we Sally.

You guys have heard us talk in the past around Modularized nation and the work we're doing on that so we are starting to see.

The outcomes of that.

Jaco G. van der Merwe: So, you know, but on the Infrastructure Solutions side, I will also say that, you know, over the last three, four years, we've created a very strong rational team. And that team has obviously had enough time now to execute, and now that we have a new leader on the material solutions side, we will duplicate what we did on that side. We have definitely seen interest rates having a more significant effect on the material solution side of the business, specifically with customers not converting rental units to, you know, procured units.

So but.

On the infrastructure solutions side I will also say that over the last three four years, we've created a very strong relational.

And that team.

Obviously.

<unk> had enough time now to execute.

And now that we.

We have a new leader on the material solutions side, we will duplicate what we've done on that side.

We have definitely seen.

Interest rates, having a more significant effect on the material solutions side.

After business specifically with.

With customers not converting in waynesville units too.

It's the brickyard units so our dealers are carrying a bigger bigger rental fleet versus.

Jaco G. van der Merwe: So our dealers are carrying a bigger rental fleet versus, you know, converting those at the end of leases. The good thing is that, you know, our customers are running the equipment. So it's not that we have equipment standing. They are running.

Converting those at the end of leases.

The good thing is that.

Our customers are running the equipment. So it's not that we not.

But we have equipment spending.

Ronnie so as soon as they are starting to converge those that haynesville to purchase agreements.

Jaco G. van der Merwe: So as soon as they are starting to convert those rental to purchase agreements, you know, our dealers will have to replenish their inventory. And, you know, we are obviously having discussions with our dealer network on a daily basis around that. Got it. Okay. Thanks for that color.

Our dealers will have to replace these data inventory.

And we obviously are having discussions with our dealer network on a daily basis around that.

Got it okay. Thanks, thanks for that color.

Jaco G. van der Merwe: My next question would be, I guess, international sales, $51 million in the quarter, down 25% year over year. Can you talk about what you're seeing on the international side of the business? Yeah, and I will say a big piece of that was more timing. So, you know, obviously, Europe is soft. I think you've heard that from multiple other people in the industry.

My next question would be I guess international sales.

$51 million in the quarter.

Down 25% year over year can you talk about what youre seeing on the international side of the business.

Yes, I will say a big piece of that was more timing.

So obviously Europe is soft I think you've heard that from multiple other people in the industry. So Europe itself, although Europe is not a big part of our business.

Jaco G. van der Merwe: Although, you know, Europe is not a big part of our business, but actually, if you look at our pipeline from an international point of view, we have a very strong pipeline in our quoting funnel, and we have various pieces of equipment that were in transit to international customers, and those should flow through here in Q1. So, you know, actually, I think our investment in our international organization has shown improvements over the last few years, and with the strong pipeline that we have, we believe that 2024 will be stronger on the international side. I got it.

But actually if you if you look at our pipeline from an international point of view.

We have a very strong pipeline in our quoting funnel.

And we have various pieces of equipment that was in process to international customers.

Those those should flow through.

In Q1 so.

Actually I think our investment in our international organization.

Showed improvements over the last few years.

And with the strong pipeline that we have.

We believe that the 2024 will be stronger on the international side.

Rebecca A. Weyenberg: Okay. And final question for me, Becky, you touched upon the transformation program. I think you had $26 million in charges in 2022, $29 million in 2023. Maybe just kind of talk about what everything is in the transformation program charges and what you expect those charges will be in 2024 and beyond. Sir, absolutely.

Got it okay.

Our final question from me back to Brian.

Our transformation program.

Thank you at $26 million of charges in 2000 $20 million to $29 million in 2023, maybe just kind of talk about.

What all is in the <unk>.

The information program charges.

And what do you expect those charges will be in 2024 and beyond.

Yes.

Sure absolutely.

Rebecca A. Weyenberg: So we do expect the same kind of range of spending as 24 and 25 are the rollouts to all the sites. And we do expect to conclude the majority of that program in 2025 with all of our largest sites that manufacture products. And then we'll continue with international sales entities and such, but those would be a lighter lift as we go forward.

So we do expect the same kind of range of spending is 'twenty four 'twenty five or the rollout to all the sites and we do expect to conclude the majority of that program in 2025 with all of our largest sites that manufactured products and then continuing.

Continuing with international.

Sales entities and such but those would be a lighter lift as we go forward.

Rebecca A. Weyenberg: The transformation program, there were two programs, as I mentioned, the transformation at our facility here in Chattanooga is ending this year. And so that one is that it is finished at the end of Q1 for all intents and purposes, so that we won't have those charges going forward. The remainder of the transformation is tied to our Oracle rollout. And I'll just remind everyone, it's more than an ERP. So it is, we really had disparate systems everywhere in the company. Every site had a different flavor, but we were missing some fundamental basics.

The.

The transformation program. There was two programs as I mentioned the transformation at our facility here in Chattanooga is concluding that share and so that one is that is finished at the end of Q1 for all intents and purposes. So that we won't have those charges claimed part.

The remainder of the transformation is tied to our Oracle rollout.

And I'll, just remind everyone. It's more than an ERP. So it is we really had disparate systems everywhere in the company every site had a different flavor, but we were missing some fundamental basics.

Rebecca A. Weyenberg: So we rolled out a human capital management system. We also rolled out a customer relationship management tool. And we rolled out a corporate consolidation tool, our ERP, and we're doing a transformation management system program. So quite a few heavy lists there, but it will conclude at the end of 2025, and we're pretty excited about it because we are already seeing that we have more effective and efficient operations because we went live in the manufacturing facility and corporate. And then we went through all of US human capital management. So the information we're getting, the quickness of the information, the accuracy of the data, I mean, that's really setting us up for future profitability and efficiency. I got it.

We rolled out our human capital management system, we rolled out a customer relationship management tool and we rolled out a corporate consolidation tool or ERP and are arguing that transformation management system program. So quite a few heavy.

Less there, but it will conclude at the end of 2008, and we're pretty excited about it because we are already seeing that we have.

More effective and efficient operations.

We went live in manufacturing facility and corporate and then we went all of the U S on human capital management. So the information we're getting a quick note that the information on the accuracy of the data I mean, thats really studying us up for future profitability and efficiency.

Got it okay. Thanks for taking my questions. Good luck.

Joseph Michael Grabowski: Okay. Thanks for taking my questions. Good luck. Thanks, Joe. Your next question is from the line of Larry DeMaria with William Blair. Please go ahead. Thanks. Good morning, everybody.

Thanks, Joe.

Your next question is from the line of Larry de Maria with William Blair. Please go ahead.

Hi, Thanks, good morning, everybody.

Lawrence Tighe De Maria: Hey, I wanted to talk about material solutions. It's obviously kind of a little bit weak in your term, but can you relate to that? Hey, can you break out backlog by segment, and then secondly, how did, you know, material solutions, orders, diversity, expectations, considering the dealer event? I think we were looking for $70 to $75 million there. Did we hit that number? Is that not relevant?

Hey, I wanted to ask.

Hey, good morning.

Materials solutions, it's I'll take that as a little bit weak near term.

But can you is that a can you break out backlog by segment and then secondly, how did you mean, our materials solutions orders diversity expectations, considering the dealer event I think we were looking for 775 millionaire they'd be hit that number that got relevant or if you can just talk about the order versus expectations and maybe split out backlog of orders by segment.

Jaco G. van der Merwe: Or can you just talk about, you know, the orders, diversity, expectations, and maybe split out the backlog orders? Bye. Yeah, I'll take a stab at the, you know, at the General Solutions event. We, the, you know, the full value came in quite a bit lighter than we expected. Larry, we had about $40 million. Now, I will say that we had two or three of our biggest dealers that did not participate in that program this year due to, you know, what we explained earlier. You know, equipment not converting from rental to procurement.

Yeah.

Yes, I'll take a stab at it.

It'll solutions event.

We.

The full value came in quite a bit lighter than what we expected.

I'm, Larry we had about $40 million now I will say that we had two or three of our biggest dealers that did not participate in that program. This year due to what we explained earlier.

Equipment not converting from rental.

Due to procurement, we are having discussions with those dealers right now cuss.

Jaco G. van der Merwe: We are having discussions with those dealers right now. You know, customers are using equipment, so we might, you know, we're actually expecting some of that writing to take place here in the next couple of months. So, yes, it came out quite a bit lighter, but, you know, customers are still using equipment.

Most of our using equipment, so we might.

We actually expect to seeing some of that but I think to take place yet in the next couple of months.

So yes, it came up quite a bit lighter but.

Customers are still using equipment.

Jaco G. van der Merwe: And if you look at, you know, the reports of companies in the material crushing space, all of those companies are expecting a pretty strong 2024. So, we feel comfortable that this is more of a timing issue. And we're continuously working with our dealers on getting what they need to support their customers. On the backlog by segment, I don't think we typically break that out by segment, you know, but obviously, material solutions saw the biggest reduction year over year from a percentage point of view. You know, sequentially here in the last quarter, both were more or less the same percentage reduction compared to previous years. But we fully expect that bookings here in Q1 will be in line with what we expect and potentially be above what they were last year in Q1. Once again, I'm Lawrence Maria. Once again, if you would like to ask a question, simply press star, then the number 1 on the telephone keypad.

And if you look at.

The reports of companies in the materials processing space.

All of those companies are expecting a pretty strong 2024 or so.

We feel comfortable that this is more of a timing.

Timing issue.

And we are continuously working with our dealers on on getting what they need.

<unk> customers.

On the backlog by and by segment.

I don't think we typically break that out by segment.

<unk>.

But obviously material solutions saw the biggest.

Yes.

But from a percentage point of view.

Sequentially in the last quarter, both with lower rates the same the same needs.

Adoption compared to previous years.

But we fully expect that that.

Bookings here in Q1.

Well, we will be in line with what <unk>, what we expect in <unk>.

And potentially be above what it was last year in Q1.

Once again delighted with.

And once again, you would like to ask a question simply press Star then the number one under telephone keypad.

Brian C. Sponheimer: Your next question is from the line of Brian Sponheimer with Gabelli Funds. Please go ahead. Hi, good morning everyone.

Your next question is from the line of Brian spot Hammer with Gabelli funds. Please go ahead.

Hi, Good morning, everyone I appreciate all the color on the call just a question about backlog if we're looking at the 500.

Brian C. Sponheimer: I appreciate all the color on the call. Just a question about backlog, you know, if we're looking at the 500, or almost $600 million in backlog here, 570, and that compares that to $913 million a year ago. Talk about maybe imputed margins and imputed pricing and what is in that backlog, maybe relative to a year ago or what you've seen there and your ability to really defend pricing in that backlog as it normally is. Brian, I will say we are very confident in the pricing that we have in our backlog. I think our teams did an exceptional job after that first year being caught off guard by the inflationary pressures that jumped up so quickly.

Our almost $600 million of backlog of $5 70, and compares that to $913 million a year ago.

About maybe imputed margins, an imputed pricing and what is in that backlog, maybe relative to a year ago or what's what you're seeing there and your ability to to really.

<unk> pricing in that backlog is as normalized.

Yeah, Brian I will say, we are very confident in the pricing that we have in our backlog I think our teams data exceptionals.

That's first.

Being caught off guard with the inflation.

But I just jumped up so quickly.

Rebecca A. Weyenberg: So we feel confident about that. We've also already implemented pricing to offset any inflationary expectations for 2024. So within that backlog, are there any potential mechanisms in case the inflation outlook changes for you to adjust prices on what is there? We typically do not have an inflationary adjustment in our contracts post the signing of a deal. And that was the reason why, what was it, two years ago, pricing lagged inflation so much. So I think the teams have been much more proactive in predicting inflation and building that into pricing for future delivery. Decent quarters to start the year; obviously, the third quarter was a challenge.

So we feel good.

Confident about that we've also.

<unk> implemented pricing to offset any inflationary expectations for 2024.

So are there any within that backlog are there any potential mechanisms of case inflation.

The inflation outlook changes for you adjust pricing.

What is there.

We typically do not have an inflationary adjustment in our contracts.

Post the signing of a deal.

And that was the reason why what was it two years ago.

Pricing lagged inflation so much.

I think the teams have been much more.

To anticipate inflation on building into pricing for you.

Pizza deliveries.

Alright, I appreciate that maybe you can help here.

I'm thinking about how 2023 wet with some.

Rebecca A. Weyenberg: If we're thinking about the ability to drive profitability in 2024, maybe in a year where infrastructure is up and materials are down, talk about where your starting point is from a profitability perspective relative to a year or two. Oh, certainly. Certainly we have seen some softness in MS. But we don't expect that to continue. We are seeing signs that that will come back.

Some decent quarters to start the year, obviously third quarter was a challenge.

If we're thinking about.

The ability to drive profitability in 2024, maybe in a year, where infrastructure is up and materials is down.

Yes.

Talk about where your starting point is from a profitability perspective relative to a year ago.

I'll certainly certainly we had.

We've seen some softness in and asked that we don't expect that to continue we are seeing signs that that will come back and part of that comes from the fact that on our infrastructure solution side of the house. We are largely direct sales say, we don't have the same pressures from.

Rebecca A. Weyenberg: And part of that comes from the fact that on our infrastructure solution side of the house, we are largely direct sales. So we don't have the same pressures from interest rates, certainly our customers do, but we have some pretty large customers, you know, that can weather these storms a little bit more than we can at our size. But on the dealer sales channel, that's where we're seeing the most pressure. And if interest rates come down, I think everybody can read what's out there the same way I can, but we expect maybe one or two cuts to come next year. If that happens, we're not banking on it, but if that happens, then that'll give some confidence to our dealer network, and they'll be able to carry some more inventory. Right now, they're kind of waiting to see.

We don't internally have the same pressures from interest rates certainly our customers do but we have some pretty large customers that can weather. These storms a little bit more than we can on our side, but on the dealer sales channel, that's where we're seeing the most pressure and if interest rates come down.

I think everybody can read what's out there is the same as I can we expect maybe one or two cuts to come next year. If that happens we're not we're not banking on it but if that happens then that will give some confidence to our dealer network and they will be able to carry similar inventory.

Right now theyre kind of wait and see they want to see that these rentals convert but certainly we were pretty pretty pleased every single quarter. This year, we had about 23% gross margin.

Rebecca A. Weyenberg: They want to see that these rental conversions happen, but certainly, we were pretty pleased. Every single quarter this year, we had above 23% gross margin, and we know that we can do better than that, as we saw in Q4. So if we can get the sales, you know, we feel pretty strong that we have runway to expand both gross margins as well as EBITDA and profit margins going forward. We're also very confident in our programs that we're rolling out. They return on our invested capital grew quite a bit this year, finishing the year at 9.9%. So we know that we're tracking very well with our programs that we're spending money on.

And we know that we can do better than that as we saw in Q4. So if we can get the sales leads.

Feel pretty strong that we have.

Runway to expand gross margins as well as EBITDA and profit margins.

Going forward. We're also very confident in our programs that we're rolling out the return on our invested capital.

Through quite a bit of share, finishing the year at nine 9%. So we know that we're tracking very well with our programs that we're spending money on and we make sure that they get our metrics for our approval.

Rebecca A. Weyenberg: And we make sure that they hit our metrics for approval. So we do see quite a bit of opportunity. Jaco mentioned this as well.

We do see quite a bit of opportunity and Yakov mentioned this as well the other point that gives us confidence is our ability to increase our fill rates. We should never have parts in backlog. So that is part of our drop in backlog we are turning positive.

Rebecca A. Weyenberg: The other point that gives us confidence is our ability to increase our parts fill rates. We should never have parts in backlog. So that is part of our drop-in backlog. We are turning parts orders at a regular rate. You know, we want to satisfy the customer in 24 hours when possible. A little bit longer if we have to manufacture something that's, you know, an older piece of equipment.

Cars at our regular routine we want to satisfy the customer in 24 hours when when possible.

A little bit longer we estimated facts or something that's an older equipment.

Rebecca A. Weyenberg: But we've seen very good progress there, but we're not where we want to be. So we'll continue to focus on that. And that should also give us some room for expansion. Hi Brian.

We've seen very good progress there and we're not where we want to be so we'll continue to focus on that and that should also give us some room for expansion.

Hi, Brian I don't know you, Jeff maybe just.

Jaco G. van der Merwe: I don't know if it's up here. Maybe just, you know, additional comment on that. You know, this year for us, I will say, if we get the sales, we feel that operationally, we have a lot of stability now in the way we manufacture, you know, and price. So if the sales are there, we feel that there's an upside, you know, to profit development. So, you know, we're spending a lot of time and effort with our sales teams to drive that, to fill the pipeline, and, you know, because of all the work that we've done to create more consistency in our business, that should show up positively in the future, you know, if we materialize the sale. I appreciate that. I guess one last one, if you'll allow me, with the idea that you've kind of set a baseline for where profitability is going to go. The balance sheet is in great shape. How do you think about using cash here? Buy back if you're looking for acquisitions. Yeah, no, a good question.

Additional comment on that.

This this year for us I will say.

If we get this sales.

We feel that operationally, we have a lot of stability now.

The way we manufacture pricing.

So the silos of data we feel that there is an upside.

Two two proper development so.

We are spending a lot of time and effort with our sales teams to drive that.

To fill the pipeline up and.

Because of all the work that we've done.

It is more consistency in our business.

That's that should show up.

Positively in the future.

If we if we want to utilize the sales.

Alright, I appreciate that I guess, one last one.

If you'll allow with the idea that you've kind of set a baseline for where profitability is going to go balance sheet is in great shape.

How do you think about using cash here.

Sure.

Is it buyback you're looking for acquisitions is it just fixing what's.

Continuing effects.

Jaco G. van der Merwe: Good question, Brian. So from a capital allocation point of view, there are a couple of things that we have on the table. Obviously, CapEx, we still want to invest in our facilities. So, you know, we think CapEx is going to be in that $30-$35 million range. And then, you know, we'll continue with the dividends. I think in the past year, it was about $12 million.

Good question.

Good question, Brian So from a capital allocation point of view, there's a couple of things.

That we have on the table, obviously capex, we we still want to invest in our facilities.

So we think capex is going to be in that 30 $35 million range.

And then.

We will continue with the dividends I think this past year, there was about $12 million.

Jaco G. van der Merwe: From a buyback point of view, you know, we do have an open program. But under the current program design, even if we do start buyback, it will not give us significant volume, you know, just because of the way the plan is designed. But we want to make sure we drive down our inventory to obviously fund and pay down the debt that we have on our revolver today. And we are definitely looking at future acquisition opportunities. The teams are all working on filling that pipeline.

From a buyback point of view, we do have an open program.

Under the current program design, even if we do start buyback.

It will not give us significant volume.

Just because the way the plan is designed.

But we wanted to make sure we drive down our inventory to obviously fund.

And pay down the date that we have on our revolver today and we are definitely.

Looking at our.

Future acquisition.

Opportunities. The teams are all working on filling that pipeline.

Jaco G. van der Merwe: And if we find the right company, we'll definitely consider that. I will also just mention that, you know, our teams have done a really good job this last year on things other than just inventory. You know, if you look at our accounts receivable, and accounts payable work that the teams have done there, I would say it's in the best shape it's been in a long time.

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If we.

If we find the right company, we will definitely consider that.

I will also just mention that our teams have done a really good job this last year.

On things other than just inventory if you look at our accounts.

Receivable accounts payable work that the teams have done the <unk>.

I will say, it's in the best shape, it's been in a long time.

Jaco G. van der Merwe: So a lot of work around using our capital in a good way and driving that ROIC in the right direction is a big focus for us. Great, much appreciated, and congratulations on a good turnaround from Q3. Thank you. Your next question is a follow-up from the line of Barry DeMaria with William Blair. Please go ahead.

A lot of work around using our capital in a good way and.

Driving that.

Otherwise see in the <unk> zone is a big focus for us.

Alright, great much appreciated and congrats on a good turnaround from Q3 here.

Yes.

Thank you.

Your next question is a follow up from the line of Larry de Maria with William Blair. Please go ahead.

Lawrence Tighe De Maria: Thanks, I got disconnected before. Jaco, you noted the obviously big increase in gross margins for the year, I think 24.7 and obviously above 26 in full queue. Now, we look at 25, 27, 24, flat sales, transformation program benefits, growth in parts, so shouldn't that imply 25 to 26% growth margins in 24? Is that fair? Or if not, why not?

Sorry about that I got disconnected before.

Yes, you noted.

Obviously, the big increase in gross margin for the year.

I think $24 seven out was about 26 for Q.

Look at 25 2024.

Flat flat to up sales.

Basic program benefits growth in parks, so should that not imply 25% to 26% gross margin in 'twenty four is that fair or if not why.

Yeah, No. That's that's a good question.

Jaco G. van der Merwe: That's a good question. We definitely have various items that we are working on. Larry, I talked about further driving the parts business, the new products that we're releasing, and the work we're doing on procurement. I will say the item that we are watching very closely is making sure that we have good control in our factories around absorption. All the goods that we're working on, we are expecting margins to continuously improve. It's just the timing thing on exactly when it will hit, but there's definitely a lot of positive news. [inaudible] Okay, thanks. So, here I am.

You know we definitely have various.

Items that we we are working on I'm, Larry I talked about further driving the parts business.

New products that we're releasing.

The work we're doing on procurement.

I will say that.

I've done that that we are watching very closely is making sure that we have.

Good control in our factory under absorption.

So.

All the goods that we are working on we are expecting margins due to continues to improve.

It's just it's just the timing timing thing on exactly when it will hit but.

There's definitely a lot of positive momentum around margin development.

Okay. Thanks, so very additive to what I was looking for.

Rebecca A. Weyenberg: Yeah, Larry, I might add, you know, we're positive about our margin expansion. But just, you know, we're cautious at this point because we do have several factories that are going to go live with Oracle. We're really confident in where we're positioned. The teams are all on board, and there is great leadership at our sites that are going live, that are really driving it from the top down. So, if everything goes as planned, we should expect our margin to improve. But we are certainly expecting an uptick here with a range that could be anywhere from twenty-four to twenty-five and a half percent.

Yes, Larry.

We're positive on our margin expansion.

But just you know we're cautionary them at this point because we do have several factors factories that are kind of go live with Oracle.

We're really confident and where we're positioned there. The teams are all on board and great leadership at our sites that are growing in lines that are really driving it from the top down.

So if everything goes as planned we should expect our margin to improve but we're certainly expecting an uptick here.

With a range that could be anywhere from 24 to 25, 5%.

Lawrence Tighe De Maria: Okay, that's fair enough. Thank you very much for the call. There are no further questions in queue. I'd like to hand the call back to Steve Anderson for closing remarks. All right. Thank you, Dennis. Thank you, everyone, for being on the call. I'd like to remind you that Astec will be displaying products at the World of Asphalt trade show in Nashville, Tennessee, on March 25th through March 27th. So, if you attend that show, please stop by our booth and say hello.

Okay. That's fair enough. Thank you very much for the color.

Okay.

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

Alright, Thank you Dennis.

Thank you everyone for being on the call I'd like to remind you that as that will be displayed products that the world of asphalt trade show in Nashville, Tennessee on March 25th through March 27.

You attend that show please stop by Bruce and say Hello, we.

Stephen C. Anderson: We appreciate your participation on this call and thank you for your interest in Astec. As today's news release indicates, this conference call has been recorded. A replay of the conference call will be available through March 13th, 2024, 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 that information is contained in the news release that went out earlier this morning.

We appreciate your participation on this call and thank you for your interest in <unk> <unk>.

Today's news release indicates this conference call has been recorded a replay of the conference call will be available through March 13, 2024, and an archived webcast will be available for 90 days. The transcript will be available under the Investor Relations section of the <unk> industries website within the next seven days all of that information is contained in the.

A news release that went out earlier. This morning. This concludes our call, but as always I'm happy to connect with calls later all thank you all.

Operator: This concludes our call, but, as always, I'm happy to connect with calls later on. 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. Thanks for watching!

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

Okay.

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