To all sites on hold, we appreciate your patience, and we ask that you please continue to stand by. Please standby. Your program is about to begin. Should you require operator assistance during today's program, please press star zero. Good morning, ladies and gentlemen, and welcome to the Arcosa, Inc. conference call. My name is Britney, and I will be your conference call coordinator today. As a reminder, today's call is being recorded. Now, I would like to turn the call over to your host, Erin Drabek, Vice President of Investor Relations for Arcosa, Inc. Erin Drabek, you may begin.

Good morning, everyone, and thank you for joining our Arcosa, Inc. fourth quarter and full year 2024 earnings call. With me today are Antonio Carrillo, President and CEO, and Gail Peck, CFO. A question and answer session will follow their prepared remarks. A copy of the press release issued yesterday and the slide presentation for this morning's call are posted on our Investor Relations website, ir.arcosa.com. A replay of today's call will be available for the next two weeks. Instructions for accessing the replay number are included in the press release. A replay of the webcast will be available for one year on our website under the news and events tab. Today's comments and presentation slides contain financial measures that have not been in accordance with GAAP. Reconciliations of non-GAAP financial measures to the closest GAAP measure are included in the appendix of the slide presentation. In addition, today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company's SEC filings for more information on these risks and uncertainties, including the press release we filed yesterday and our Form 10-K, expected to be filed later today. I would now like to turn the call over to Antonio Carrillo.

Thank you, Erin. Good morning, everyone, and thank you for joining us today for a discussion on our fourth quarter and full year 2024 results and our outlook for 2025. I am pleased with the strong financial results we delivered in both the fourth quarter and full year. Let me start with a few key highlights on page four. First, in 2024, it was about transformation. It was a pivotal year for Arcosa, Inc. as we successfully executed on our strategy of optimizing our portfolio by expanding our growth businesses while reducing our overall complexity and cyclicality. Next, we delivered double-digit organic growth, which underscores the strength of our infrastructure-led portfolio. Third, significant margin expansion was driven by a balanced contribution from higher-margin businesses we acquired and organic improvements, helped in part by the divestiture of non-core assets and other initiatives we have undertaken over the past few years. And finally, we generated robust free cash flow, which demonstrates our commitment to reducing leverage in 2025 and sets up Arcosa, Inc. for continued growth in 2026 and beyond. Please turn to slide seven. There were a number of important strategic initiatives that drove our performance. The acquisition of STAVOLA was game-changing for our construction materials business, expanding our aggregate footprint into the nation's largest MSA with increased exposure to less cyclical infrastructure-led markets. The acquisition of Ameren earlier in the year established our foothold in the attractive lighting poles and traffic signals markets, complementing our existing product offerings within engineered structures. Both STAVOLA and Ameren are contributing positively to margin expansion. We also progressed on several important organic initiatives, which include utility structures, the production ramp-up in our new concrete pole plant in Florida. Also, we produced our first towers from our new wind tower facility in New Mexico, which…

Thank you, Antonio, and good morning, everyone. I'll begin with construction products on slide eleven. Fourth-quarter segment revenues increased 31% while adjusted segment EBITDA grew 52%, resulting in 370 basis points of margin expansion. The segment performance was largely attributable to the accretive impacts of STAVOLA, which contributed 25% of segment revenues, 34% of adjusted segment EBITDA, and 290 basis points of segment margin expansion in the quarter. The integration of STAVOLA is progressing well, and fourth-quarter financial results were in line with our overall expectations. On an organic basis, segment revenues declined 4%, primarily due to lower freight revenue, which is a pass-through, and the divestiture of underperforming operations earlier in the year. This decrease was partially offset by strong pricing gains across our aggregate and specialty materials businesses, although adjusted segment EBITDA on an organic basis declined roughly 3%, organic margin improved 20 basis points year over year. Turning to our aggregates business, which includes both natural and recycled aggregates, average organic pricing was up low double digits from the prior year. Total fourth-quarter volume was up mid-single digits due to the contribution of STAVOLA, while organic volume decreased due to our focused strategy on pricing, a higher number of heavy rainfall days, and the closure of our West Texas Aggregates operations earlier in the year. Strong organic pricing, lower fuel costs, and actions to optimize operations resulted in mid-teen organic unit profitability gains and drove 50 basis points of segment margin expansion during the quarter. For the full year, pricing grew approximately 10% and volumes decreased roughly 8% on an organic basis. Total volume, inclusive of acquisitions, was about flat for the year with pricing growth similar to the organic showing. Within specialty materials, revenues were roughly flat as strong pricing gains were mostly offset by lower…

Thank you, Gail. The actions we took in 2024 position us well as we enter 2025. Arcosa, Inc. is a company focused on growing in the US market, which is supported by attractive long-term infrastructure-led investment. Of the over 140 locations Arcosa, Inc. operates, only one mine is in Canada, and two manufacturing plants are in Mexico. Everything else is in the US. Almost every steel product we make, even in Mexico, is melted and rolled steel. So we believe the company is well prepared against the current trade and tariff uncertainties. However, there are many unknowns surrounding the trade policies that are being discussed and the risk of potential retaliatory impacts, including by Mexico. So we will be watching developments closely and making the adjustments needed as the details come out. We're also optimistic about the potential impact of reduced regulation in many of our markets. Like with trade, it's too early to estimate any future benefit, but in many of our markets, heavy regulatory burdens are bottlenecks for infrastructure growth. The 2025 guidance that I'll review in a moment does not incorporate any impacts from potential regulatory changes, either positive or negative. Turning to our outlook on slide seventeen. We expect growth to come from four different sources in 2025. First, our growth businesses, construction materials, and utility and related structures, entered the year with solid underlying demand fundamentals. Second, the backlogs in our cyclical businesses, barge and wind towers, support solid growth for 2025. Third, several organic projects we finished in 2024 should contribute positively to our results in 2025. And finally, the important acquisitions we did last year should bring solid growth for the company this year. For 2025, we anticipate revenues to be in the range of $2.8 billion to $3 billion and adjusted EBITDA…

Hi. Great. Thank you very much, and thanks for all the color. Appreciate that. Morning, Antonio. Question beyond steel components. You know, how much did the decline in steel prices impact revenues? And then maybe help us understand the volume decline, what drove that? Thanks.

Good morning, Ian. This is Gail. And I'm assuming you're referring to the steel-related impacts on our engineered structures as it relates to revenue? Yes.

Yeah. Yeah. Someone steal in and shoot yes. Sorry about that.

Sure. Sure. I would say, you know, yes. We did for the full year, and really that came in the fourth quarter, we did miss our revenue guidance at the we're about $25 million below the midpoint. And I would attribute that mostly to the engineered structures, and I would attribute that mostly to steel. We did see a little bit of revenue missing construction, maybe to the $2 to $5 million or so, as you know, volumes were impacted a little bit by weather. But predominantly, the revenue miss was on the steel price side. I would say, you know, not quite a 10% decline year over year for transmission revenues, but I would certainly say high single-digit impact for steel prices. And, you know, we had a little bit of slowness around the border at year-end. No surprise there that impacted revenue, but I would attribute it to the steel price.

And, yeah, and I'll just give a little more color. The structures we build, they range from very small, you know, distribution poles to very, very large transmission towers. And when you measure volume, it's hard to compare a small tower to a big tower. So sometimes you would see this volatility in volumes. As the production mix changes, you see this. And then there's also not only size but the complexity of each one. So it's normal to have some volatility on the volume side.

Okay. And just to be clear, that decline in steel prices is pretty much a hundred percent pass-through. So there's really no profit impact. And then I guess if I was just to add another question, I'm just on general steel. Are you seeing any type of, like, prebuy activity, you know, maybe concern that steel prices might go up and then maybe they could lock in now or build something now at a lower steel price? Thanks.

I'll give you. Yes. So depending on the business, we have two types of business on steel. One where we have a full pass-through with some delay. So the transmission industry is one of them, where we have pricing agreements, and if the price remains in a relatively, let's say, close band, there's no adjustment. But once the price moves, you pass it through down or up. So what you saw when the price goes down, you will see our margin increase because it's basically a pass-through. And that's what you saw in the fourth quarter. There's other businesses like Barge and Wind where we have specific pricing agreements with the steel mills for specific products, and then there is no volatility on steel prices. That's both barge and wind. It works like that. On the pre-buy, we have seen additional, let's say, demand specifically for barges. I mentioned in my comments that we sold some additional barges, tank barges, and now our delivery time is deep into 2026. And that comes from some people saying, well, steel might go up. Let me take my orders right now. But it's not something that we expect to continue because it's not easy to get fixed prices right now with all the expectations of steel going up. No?

Okay. Thank you very much for the call.

Thank you. We'll take our next question from Trey Grooms with Stephens. Your line is now open.

Hey. Good morning, everyone. This is Ethan on for Trey. Thanks for taking the question. I just wanted to elaborate quickly on the wind outlook. What are you hearing from customers? Curious on how the current administration has impacted customer sentiment. And we know previously you pointed to 2026 as being the year where wind kind of really picks up. I'm just curious if that's still the case.

What we're hearing from customers is that the demand for renewables, specifically for wind, is still there. I would say that the sentiment continues to be very optimistic. And the reason behind it is the load growth in the US, the demand for energy in the US is growing. And the debate can be whether data centers will contribute 2% or 10% in five years or in ten years. That's a little irrelevant. What's important is any growth will significantly increase the need for power. And if you order a gas turbine right now, you're in 2030 receiving it if you're not in the queue already. So the need for wind is there. I think we just need some additional clarity. And if you think about what's happening, if you look at the total wind installations in 2025, 2026, I think what we are seeing from customers is that they expect a relatively flat year in 2026. And what we've mentioned is, you know, when the growth comes, we should receive orders for additional growth probably we expected it initially at the end of this year. Let's see where the regulatory environment ends. But I think we have the backlog to support our production this year. We have backlog in another facility that supports it for several years. So I think we're in good shape to wait and see where the regulatory environment ends up. What's important is the demand is there for wind, and we have the backlog to stay focused this year and generate strong growth.

Okay. Awesome. Yeah. That's really encouraging. And then secondly, just switching gears to construction products. Just curious on your outlook. You gave some good, you know, end market commentary. And the mid-single digits on pricing was really helpful. Just curious on how you're thinking about unit profitability in 2025 and how that might compare to 2024. And similarly, within the guidance you mentioned, you know, a certain portion being tied to the implied EBITDA increase within the 2025 guidance, a certain portion of that to be tied to organic growth. So just wondering which segments you're thinking about that might be most heavily concentrated towards. Thanks.

Good morning. This is Gail. I'll take that. Yeah. As we think about 2025, and we said in our comments, you know, overall, we're looking at 30% EBITDA growth at the midpoint, outpacing the teens revenue growth. So strong margin growth expected for 2025 in total. And we did say that that growth was split 40% organic and 60% inorganic. And that inorganic piece is primarily STAVOLA. We do benefit from another quarter of Ameren that we didn't have last year, but that's primarily STAVOLA. And so to your question on the 40% organic side, we see about 15% of that growth coming from the construction products segment. So as Antonio said in his script, you know, about high single-digit organic growth for the construction segment. We said mid-single digit on price, so we're expecting to price ahead of inflation, and so we expect unit profitability gains on an organic basis within construction products. The other big slice of that organic growth is going to come from the engineered structures segment. I'd say about 20% of the overall growth is coming from engineered structures. Again, I think we gave some pretty good commentary in the script. We expect double-digit adjusted EBITDA growth in utility structures and significant growth within Wind Tower, you know, when you heard Antonio just saying based on the strong visibility that we have in that business for 2025. And then, you know, the last piece of the organic growth will come from the barge business. That's our remaining business within the transportation product segment, and that's about 5% of the overall growth for the company.

Got it. That's super helpful. Thank you so much for the color. I'll pass it on.

Thank you. We'll take our next question from Garik Shmois with Loop Capital Markets. Your line is now open.

Oh, hi. Hi. Thank you. Just wanted to follow-up on construction products since hoping you could provide some more color on what you're expecting for volumes, you know, recognizing, you know, you're coming off of a softer year in 2024. You've had some, you know, weather delays, both in the fourth quarter and, you know, when we started this year. You know, just wondering how you're thinking more on an organic basis how you expect construction products and specifically aggregates demand to progress this year.

Yeah. I'll take that. Good morning, Garik. We, you know, as we said in the script, we see strong double-digit growth on a total basis for volumes within construction. I'd say from an organic basis, not too dissimilar from some of our larger peers. Kind of flattish to maybe slightly up on an organic basis from a volume perspective. And, you know, as it relates to the quarter, for the fourth quarter where we exited the year, we did have some, you know, some heavy rainfall days. I wouldn't say the weather was a complete deterrent for the quarter by any means, but we did have some, you know, in the Dallas area, along the coast, in the Tennessee area. We had some heavy rainfall days, not only the number of days but the quantity of rain we had. So that did impact volumes in the fourth quarter. So on an organic basis, we did see volumes exiting the year down on a year-over-year basis.

Okay. That's I I I it's not to not maybe just to add one more point that shouldn't be lost, cause I know you've listened to a lot of materials calls by now. January and February, we're a little weak from just purely cold and wet weather. So we're not it's not unusual in the first quarter, but a little bit of a slower start with some of the weather here in January and February.

But that's basically the flattish to slightly up organic volume outlook for the year.

Yep. And that message has certainly been conveyed by others. I wanted to follow-up just on CapEx. It looks like it's taking a step down this year. Just wanted to confirm that. To $145 to $165 million. And then also, you know, I think in the prepared remarks, you talked about, you know, some projects that you wrapped up in 2024. You expect them to contribute in 2025. You know, just wondering if you could go into a little bit more detail around those projects and, you know, the level of earnings contribution or accretion you expect this year from the capital projects that were completed last year.

I'll take that in. So let me start with the CapEx. Yes. We're stepping down. As we mentioned, since we bought STAVOLA, we were focusing on delevering. So what we're cutting is not maintenance CapEx. It's the growth CapEx. We do have some growth CapEx, but it's really to finish projects that we have underway. On a few small things. And when we bought STAVOLA, we said we felt very good about increasing our leverage at that time because we were finishing all these organic projects that were going to help us in 2026. And in my remarks, I mentioned we expect growth from four different areas, which growth from our growth businesses, engineered structures, and construction, growth from our cyclical businesses, because of the backlog wind and barge, we expect the growth from these organic projects that we built last few years and they should start contributing and finally the acquisitions. The organic projects, I also mentioned in my prepared remarks, you know, the concrete poles factory we built in Florida. And that product has margins similar to the rest of the portfolio. So the margin probably will be relatively flat to the business, but it will increase the EBITDA for the segment. The wind power plant that's ramping up, as mentioned, Gail, in her remark, is being accretive to the segment. So as we ramp up the plant in New Mexico, that should help us increase the margin in Engineered Structures. We mentioned a few other small projects we've ramped up a small plant in aggregate that has similar margins than the rest of the business and a few small the plaster plant that's going to be now fully operational and it's doing very well in Oklahoma. The margins on that one are a little lower than the segment margin, but it's very, very accretive to specialty materials. And finally, the small recycled aggregates plants that we started last year are also accretive to margins. So I think it's a good mix of a lot of projects that we invested over the last couple of years. And now it's time to prove that they were good and start getting the returns while we deliver.

Sounds good. I appreciate all the color. Nice quarter and best of luck.

Thank you.

Thank you. We'll take our next question from Julio Romero with Sidoti and Company. Your line is now open.

Good morning. This is Justin on for Julio. Thank you for taking questions.

Morning.

So on STAVOLA, you mentioned the seasonality impact on STAVOLA performance expected. So I guess, do you expect the organic recycled aggregate facilities to help offset the seasonality? And how might these facilities contribute to overall performance in the first half of 2025?

Well, the recycle facilities we have are, you know, if the recycle facilities are in the northeast, they will have similar seasonality as natural aggregates. No. It's what happens is that the weather really shuts down construction, and that's where the seasonality comes from. So, no, I don't expect our recycled facilities to offset. They would have similar seasonality in the region.

And maybe just to add on to that, we did say in the prepared remarks that we do expect a 200 basis point headwind from STAVOLA in the first quarter as they are essentially a breakeven operation, you know, contributing some revenue, but a breakeven operation in the first quarter.

Great. Thanks for the color there. And then on guidance, we saw the updated depreciation, depletion, and amortization expense guide of $230 to $235 million. It's meaningfully higher than our expectations. So how much of this increase is directly attributable to STAVOLA? And how should we consider this as the normal run rate when modeling for 2026 and beyond?

Yeah. And that's a good question. That's why we wanted to be very clear on our expectations because there is a change there. And I would attribute that really predominantly to the step-up related to STAVOLA. And you saw that in the fourth quarter as well of 2024 with a 50% increase in that expense line item. And that really is the write-up in the fixed assets, you know, most notably, their reserves, and that's what drives our depletion expense. So I would consider that a fairly normalized run rate on a go-forward basis.

Great. Thank you. That's all for me.

Thank you. We'll take our next question from John Belize with DA Davidson. Your line is now open.

Hi. Thank you so much for the time. Regarding barge, could you talk about what kind of feedback you're receiving from customers when you let them know about the possibility of steel prices and therefore the barge prices to go up?

You know, I would say very different circumstances in tank and in hopper barges. Let me start with Hopper. I think Hopper is more sensitive to price, and I think people are still thinking that prices are coming down, so they, you know, they're a little more, let's see, concerned about steel price increases. On the tank barge side, when you look at the customer mix, for two things. On the tank barge, there's a lot more regulation involved on the certification by the Coast Guard, etcetera. So they have less flexibility on how much they can let the barges age and the quality of the barges and the state of the barge that they are operating. So they have fewer options. Of course, there's always a concern about steel prices, but I think a lot of customers, what they're watching now, especially on the tank barge side, when you look at the amount of barges that need to be replaced over the next five years, both hoppers and tanks. And you look at the production capacity that the industry players, the barge manufacturers have right now, so if they don't start ordering a lot of barges right now, there's going to be a problem getting them. And when I talk to customers, I sense concern about whether there's going to be capacity to supply all these barges that need to be replaced. So I think that's what you're seeing in our barge backlog, that some people are trying to, I think the Hopper people have not taken that step, but at some point, when you look at the amount of barges that need to be replaced, there's a limit to how much you can wait. So as I mentioned in my remarks, waiting to see if steel prices come down, especially with the tariff threat right now, it's not a very wise option, but, of course, I don't buy barges.

Thank you. And pivoting to the construction products, could you provide a little more color for the sort of growth you see in specialty materials relative to your natural and recycled aggregates operations?

Yeah. So in specialty materials, I would say that the demand is a little more weighted towards infrastructure on the lightweight aggregates. It's a lot more infrastructure-driven than our natural aggregates. We have a higher mix of infrastructure projects. On the specialty material side, I mentioned we started, we finished our plaster plant, which is mainly geared toward multifamily housing, and it's doing very, very well. I think we have the plant is basically at full capacity, running very well with very good margins. Meeting the expectations we had when we invested the money to expand it. So overall, we expect solid growth in our specialty materials coming from that expansion and then not the other products they have. And specialty materials, you know, I think, as I said, it's more focused on our infrastructure. So like, you know, we're very bullish on infrastructure spending in the US, so it should do very well.

Alright. And if I could squeeze one more within engineering structures, and I apologize if you already went over this. Could you talk about why utility and related structure volumes were lower in the fourth quarter?

Yeah. I mentioned a couple of things. And Gail mentioned on the sales side or on the revenue side was mostly steel. There were some issues at the end of the year on the border, which slowed our production a little bit. But I also mentioned that the production mix, the product mix that we go to, we make very small poles and very large poles, very simple and very complex. And it's not abnormal to see volatility in the volume because of the size and the complexity of the poles. So there was nothing special that happened. It's just, I think it's normal volatility based on product mix.

I appreciate you coming. Thank you so much for the time.

Thank you. We have no further questions in the queue. I'll turn the program back over to Erin Drabek for closing remarks.

Thank you for joining Arcosa, Inc. this morning for our fourth quarter and full year update, and we look forward to providing you another update in our first quarter call.

Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful day.