Arcosa, Inc. Announces Third Quarter 2024 Results

• Robust Third Quarter Earnings Growth and Margin Expansion Led by Construction Products and Engineered Structures
• Strong Operating Cash Flow of $135 Million Driven by Increased Earnings and Improved Working Capital Management
• October 1 Closing of $1.2 Billion Stavola Acquisition and Third Quarter Completion of Steel Components Divestiture Enhance Portfolio Transformation
• Raised Full Year 2024 Adjusted EBITDA Guidance Reflecting Strategic Actions

Arcosa, Inc. (NYSE:ACA) ("Arcosa," the "Company," "We," or "Our"), a provider of infrastructure-related products and solutions, today announced results for the third quarter ended September 30, 2024.

Antonio Carrillo, President and Chief Executive Officer, noted, "We continue to successfully execute on our portfolio optimization strategy and are strengthening the foundation of our business by reducing the complexity and cyclicality while improving our margin profile. During the third quarter, we completed the divestiture of our steel components business and on October 1st we closed on the $1.2 billion acquisition of the aggregates-led construction materials business of Stavola, our largest transaction to date.

"Our progress is reflected in our third quarter financial results with 39% Adjusted EBITDA growth outpacing revenue growth resulting in 330 basis points of margin expansion, normalizing for the divestiture of steel components, with strong organic and inorganic growth in both Construction Products and Engineered Structures.

"Order levels during the quarter remained healthy for our utility structures business while conversations with our customers for additional wind tower orders are focused on delivery in 2026 and beyond. For barge, we received orders for both tank and hopper barges representing a book-to-bill of 0.9 and providing increased production visibility for 2025.

"Severe weather has been a recurring event, with two hurricanes in the quarter and a third in early October, impacting areas where we have operations. We are thankful our people are safe and our plants were not significantly impacted, although we did experience some production interruptions as a result."

Carrillo continued, "We generated $107 million of free cash flow in the third quarter, benefiting from strong working capital management and a reduction in capital expenditures. Our pro forma Net Debt to Adjusted EBITDA of 3.4x was improved compared to the 3.7x we projected at the time of the Stavola acquisition announcement. We remain confident in our goal to return to our target leverage ratio of 2.0x - 2.5x within 18 months. Overall, we are pleased with how our business is performing and the underlying trends remain positive. We are well-positioned to build further on the success that we have achieved."

2024 Outlook and Guidance

The Company made the following adjustments to its full year 2024 guidance to reflect the strategic portfolio actions:

• Adjusted its consolidated revenues range to $2.56 billion to $2.63 billion, compared to the prior guidance range of $2.60 billion to $2.72 billion.
• Increased its consolidated Adjusted EBITDA range to $435 million to $450 million, compared to the prior guidance range of $420 million to $440 million.

Commenting on the outlook, Carrillo noted, "Adjusting for the steel components divestiture, our third quarter results tracked well to our expectations, delivering in-line Adjusted EBITDA and outperforming on margin. Our outlook for the remainder of the year remains very positive. We are pleased to increase our Adjusted EBITDA guidance to reflect the strategic actions we have taken to optimize our portfolio, specifically, the acquisition of Stavola completed at the beginning of October, with some offset from the divestiture of steel components in August."

Third Quarter 2024 Results and Commentary

Construction Products

• Revenues increased 1% to $265.9 million primarily due to recent acquisitions. Organic revenues in our aggregates and specialty materials businesses were down slightly as lower volumes, a decrease in freight revenue, and a reduction in revenue from recently divested operations were partially offset by higher pricing. Revenues for our trench shoring business decreased 6% primarily due to lower steel prices and reduced volumes.
• Adjusted Segment EBITDA increased 21% to $71.0 million primarily due to the accretive impact of recent acquisitions, increased unit profitability in our legacy aggregates business and operating improvements in our specialty materials and shoring businesses.
• Adjusted Segment EBITDA Margin increased 430 basis points to 26.7% from 22.4% in the prior year period and Freight-Adjusted Segment EBITDA Margin was 29.2% compared to 25.4% in the prior year period.

Engineered Structures

• Revenues for utility, wind, and related structures increased 26% to $279.4 million primarily due to higher volumes in our wind towers business and the contribution from the Ameron Pole Products ("Ameron") business that was acquired in April 2024. Revenues for utility structures increased slightly as higher volumes and improved product mix were mostly offset by lower steel prices.
• Adjusted Segment EBITDA increased 74% to $44.3 million, and margin expanded 450 basis points to 15.9%, resulting from higher wind tower volumes, the accretive impact of the acquired Ameron business, and operating improvements in our utility structures business.
• Order activity for utility and related structures remains healthy and conversations with our customers for additional wind tower orders continue.
• At the end of the third quarter, the combined backlog for utility, wind, and related structures was $1,264.6 million compared to $1,450.8 million at the end of the third quarter of 2023. We expect to deliver approximately 20% of our current backlog in 2024.

Transportation Products

• Results for the segment were impacted by the divestiture of the steel components business. Third quarter revenues and Adjusted EBITDA for the steel components business were $13.6 million and $(1.3) million, respectively, compared to $39.8 million and $6.3 million, respectively, in the prior year period.
• In addition, the Company recognized a pretax loss on the sale of $23.0 million ($17.7 million after tax), which has been excluded from Adjusted Segment EBITDA.
• Revenues for our barge business increased 21% primarily due to higher tank barge deliveries.
• Excluding the impact of the divested steel components business from both periods, Adjusted Segment EBITDA increased 8%, to $12.9 million, driven by higher tank barge deliveries.
• Adjusted Segment EBITDA Margin was 15.8% compared to 17.7% in the prior period, excluding the steel components business. The decrease was largely due to planned operating inefficiencies resulting from the changeover from hopper to tank barge production in one of our facilities.
• During the quarter, we received barge orders totaling approximately $75 million for both tank and hopper barges representing a book-to-bill of 0.9.
• Backlog for inland barges at the end of the quarter was $244.7 million compared to $240.4 at the end of the third quarter of 2023. We expect to deliver approximately 32% of our current backlog in 2024.

Corporate and Other Financial Notes

• Excluding acquisition and divestiture-related costs, which have been excluded from Adjusted EBITDA, corporate expenses decreased to $13.4 million in the third quarter from $14.2 million in the prior year.
• Acquisition and divestiture-related costs were $11.6 million in the third quarter compared to $0.5 million in the prior year.
• The effective tax rate in the second quarter was 13.1% compared to 17.4% in the prior year. The decrease in the tax rate was primarily due to increased Advanced Manufacturing Production tax credits and foreign currency impacts.

Cash Flow and Liquidity

• Operating cash flow was $135.0 million during the third quarter, an increase of $91.1 million compared to the prior year driven by a reduction in working capital.
• Working capital was a $50.0 million net source of cash for the quarter compared to the prior year's $29.4 million net use of cash. The increase in cash provided by working capital was driven by a decrease in receivables and an increase in accrued liabilities.
• Capital expenditures in the third quarter were $34.4 million, compared to $47.9 million in the prior year, as we near completion on organic projects underway in Construction Products and Engineered Structures.
• Free Cash Flow for the quarter was $107.2 million, up significantly from $1.7 million in the prior year.
• During the quarter, we invested $34.7 million, net of cash acquired, for the acquisition of a Phoenix, Arizona based natural aggregates business.
• The Company received net cash proceeds of $53.1 million from the divestiture of the steel components business, which was used to fund repayments on the Company's revolving credit facility totaling $60 million during the quarter.
• On August 26, 2024, we issued $600.0 million of 6.875% unsecured senior notes, temporarily increasing cash, net of issuance costs, for the quarter, to partially fund the $1.2 billion acquisition of Stavola. The balance of the purchase price was funded with a $700.0 million variable-rate senior secured Term Loan B Facility that closed concurrently with the acquisition on October 1, 2024.
• We ended the quarter with total liquidity of $516.1 million, including $156.8 million of cash and cash equivalents, excluding the net proceeds from the senior note issuance.
• Net Debt to Adjusted EBITDA was 1.2x for the trailing twelve months. Pro forma Net Debt to Adjusted EBITDA for the acquisition of Stavola is 3.4x.

Non-GAAP Financial Information

This earnings release contains financial measures that have not been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). Reconciliations of non-GAAP financial measures to the closest GAAP measure are included in the accompanying tables to this earnings release.

Conference Call Information

A conference call is scheduled for 8:30 a.m. Eastern Time on October 31, 2024 to discuss third quarter 2024 results. To listen to the conference call webcast, please visit the Investor Relations section of Arcosa's website at https://ir.arcosa.com. A slide presentation for this conference call will be posted on the Company's website in advance of the call at https://ir.arcosa.com. The audio conference call number is 800-343-1703 for domestic callers and 785-424-1116 for international callers. The conference ID is ARCOSA and the passcode is 15081. An audio playback will be available through 11:59 p.m. Eastern Time on November 14, 2024, by dialing 800-934-4577 for domestic callers and 402-220-1177 for international callers. A replay of the webcast will be available for one year on Arcosa's website at https://ir.arcosa.com/news-events/events-presentations.

About Arcosa

Arcosa, Inc. (NYSE:ACA), headquartered in Dallas, Texas, is a provider of infrastructure-related products and solutions with leading positions in construction, engineered structures, and transportation markets. Arcosa reports its financial results in three principal business segments: Construction Products, Engineered Structures, and Transportation Products. For more information, visit www.arcosa.com.

Some statements in this release, which are not historical facts, are "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Arcosa's estimates, expectations, beliefs, intentions or strategies for the future. Arcosa uses the words "anticipates," "assumes," "believes," "estimates," "expects," "intends," "forecasts," "may," "will," "should," "guidance," "outlook," "strategy," "plans," "goal," and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date of this release, and Arcosa expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, except as required by federal securities laws. Forward-looking statements are based on management's current views and assumptions and involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations, including but not limited to assumptions, risks and uncertainties regarding the failure to successfully complete or integrate acquisitions, including Ameron and Stavola, or divest any business, or failure to achieve the expected benefits of acquisitions or divestitures; market conditions and customer demand for Arcosa's business products and services; the cyclical nature of, and seasonal or weather impact on, the industries in which Arcosa competes; competition and other competitive factors; governmental and regulatory factors; changing technologies; availability of growth opportunities; market recovery; ability to improve margins; the impact of inflation and costs of materials; assumptions regarding achievements of the expected benefits from the Inflation Reduction Act; the delivery or satisfaction of any backlog or firm orders; the impact of pandemics on Arcosa's business; and Arcosa's ability to execute its long-term strategy, and such forward-looking statements are not guarantees of future performance. For further discussion of such risks and uncertainties, see "Risk Factors" and the "Forward-Looking Statements" section of "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Arcosa's Form 10-K for the year ended December 31, 2023 and as may be revised and updated by Arcosa's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

TABLES TO FOLLOW

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