Hello and welcome to the Astec Industries Third Quarter 2020 Earnings Conference 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. Thank you, Mr. Anderson. You may begin.

Thank you, and welcome to the Astec Industries third quarter 2020 earnings call. My name is Steve Anderson and joining me on today's call are Barry Ruffalo, our Chief Executive Officer and Becky Weinberg, our Chief Financial Officer. In just a moment, I'll turn the call over to Barry 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. 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 that 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 GAAP in to U.S. 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 therefore unlikely to be comparable to the calculation of similar measures for other companies. Management of the company does not intend these items to be considered in isolation or as a substitute for related GAAP measures. Comments made during today's call will refer to non-GAAP results and a reconciliation of GAAP to non-GAAP results are included in our news release and appendix of our slide deck. All related earnings materials are posted on our website at www.astecindustries.com. And before I turn the call over to Barry, I'd like to remind everyone of our upcoming Virtual 2020 Investor Day on December 10th. Now let me turn the call over to Barry.

Thank you, Steve. Good morning everyone, and thank you for joining us on the call this morning to discuss our third quarter 2020 results. I continue to be proud and impressed of the hard work and dedication of our team members throughout pandemic. As you can see from our results, our team is focused on operational excellence and execution to significantly contribute and ensure the success of our organization during this time. We continue to prioritize the health and safety of our employees, suppliers and customers as we navigate through this and never stop in terms of our focus on driving long-term profitable growth. I'll begin with few highlights from the quarter and then provide an update on our operations. I will also discuss what we're seeing in terms of demand in our supply chain before trying to call over to Becky for details on our financial results. We'll also highlight progress made on our strategic transformation plan and then open the call for Q&A. Starting on slide four. Here are today's messages. First, as a result of the actions that we've taken over the past year to transform our company and our increased focus on driving operational excellence, we were able to drive another quarter of strong performance and improved quality of earnings with a 13% increase in adjusted EBITDA and 170 basis point increase in EBITDA margin compared to the prior year, despite the challenging macro environment. Second, in the quarter customer demand remain resilient as their products are essential for building infrastructure and are used to facilitate the transportation of our communities. My recent conversation with some of our key customers confirmed that while they continue to deal with near-term uncertainties, they also continue to demand Astec solutions and will continue to support them to remain vigilant…

Thank you, Barry. And good morning, everyone. I'm pleased to join you on today's call. Beginning on slide nine, third quarter adjusted revenues decreased 9.5% to $231 million compared to the prior year quarter, excluding the impact of foreign currency revenue decreased around 8%. Equipment sales decreased 16%, while part sales as Barry highlighted increased slightly compared to the prior year period. Our backlog decreased 10% to $219 million at quarter end, driven by lower material solutions and infrastructure solutions orders, which were down around 9% and 11%, respectively. Lower orders were driven largely by continued COVID-19 uncertainties. On a positive note, we did see an increase in equipment orders from our North American dealer order ready program in September. The third quarter adjusted EBITDA increased 2% to $11 million, compared to $10.7 million in the prior year period, and adjusted EBITDA margin improved 60 basis points to 4.8% compared to the prior year period. The margin improvement was driven by favorable mix in our ongoing transformation initiatives. Adjusted SG&A expenses increased nearly 3% on $1 basis driven by acquisitions. In relation to the company's efforts to simplify the organization, during third quarter we incurred $3.9 million of pre tax restructuring and other costs or $0.13 cents per share net of taxes. These items were excluded from adjusted earnings per share, and the restructuring charges are related to asset impairment, inventory write-down, a reduction in labor force and the closing of our Mequon, Wisconsin facility. Of note we've reduced our headcount nearly 12% year-over-year. Adjusted earnings per share rose 18% in the quarter to $0.20, compared to $0.17 in the third quarter of 2019. Overall, we reported strong third quarter results despite the challenging macro environment. Moving on to slide 10. We highlight the key drivers of our year-over-year adjusted…

Thanks, Becky. Now moving on to slide 19. I'll provide a quick overview of the three pillars of our strategy for profitable growth. Simplify, Focus and Grow. First, Simplify. The third quarter mark another period of successful execution on our strategies to leverage our scale, reduce organizational complexity, and consolidate rationalize our footprint and product portfolio. I'm proud of the progress our team has made to simplify our business and drive efficiencies across the portfolio. Second, Focus. We continue to strengthen our consumer centric approach driving commercial excellence in streamlining processes and instilling a performance based culture. Finally Grow. We are reinvigorating innovation, leveraging technology to unlock internal synergies, while also enhancing the customer experience, exploring global growth opportunities and carefully allocating capital to maximize shareholder value. We have made great progress so far this year within these three pillars, especially given the current environment. I'm confident that our team will be able to continue to execute on our strategy regardless of the economic environment. Slide 20 outlines some of the major milestones we are executing against on our transformational journey and the progress we have made to date. Under Simplify, we have achieved two milestones during the quarter to consolidate our footprint and streamline our portfolio. First, we completed the closure of our Mequon Wisconsin facility with the last day of production occurring in August. And second, we completed the sale of the remaining GEFCO assets. Under Focus, as I mentioned in my earlier remarks, we were able to further streamline our portfolio during the quarter with the sale of the remaining GEFCO assets to align with our Rock to Road strategy. We continue to place a strong focus on driving operational excellence across the organization and we are gaining strong internal traction on our initiatives. Our product portfolio…

Thank you. At this time, we'll be conducting the question and answer session. [Operator Instructions] Our first question will be coming from the line of Mig Dobre with Robert W. Baird. Please proceed with your questions.

Thanks. Good morning, guys.

Hey, Mig. Good morning. How you're doing?

You know, I'm doing okay. It's an interesting day today. Let's just say that. And I'm actually not going to ask you an election related question to kind of start us off here. But rather, I'm wondering if you can give us a little more detail on the backlog in infrastructure solutions. Has there been any contribution to the backlog from your recent acquisitions? And if so, can you can you quantify? I don't know if I missed that in your slides somewhere if you disclose that already.

Yes. The backlog, as far as the contribution from the acquisitions, I would say, yes, we had some. We've had the concrete plant space has been one that's been pretty active for us. We did not identify how much of the backlog was contributed to that product line. But we feel good about the -- again, the activity in the marketplace since we've actually finished the transaction. So they are contributing to our backlog. And Mig, I also want to say, we're looking forward to participating in next week's Baird Industrial Conference as well.

Well, thank you for that. We're looking forward to having you there. And I'm sorry to pressing on this. But I'm looking at -- we're trying to do the math here on your orders, your implied orders and infrastructure, and they're up. And I'm trying to understand how much of that is sort of the core business relative to things that you might have acquired? Can you at least talk about that? I mean, is your base business excluding the recent acquisitions growing in terms of order intake in the quarter and going into the core [ph]?

Yes. No, the growth in the backlog and infrastructure solutions is primarily driven by the asphalt plant product line. So we -- the last couple of months have been very active there. We've been very pleased with that order flow. So that's what I can give you there. It's basically our core business, legacy business.

I see. And then, sticking with this theme, can you help us understand the impact from these acquisitions on your gross margins in a segment? Or accretion or however you really sort of -- how do you want to frame this?

I would say in the quarter the impact is positive, but it's not material, Mig. So we're not going to comment specifically on that. We can give you some more detail as we get into the Investor Day, which we have scheduled in early December. By that time, we'll have a little bit more time with these acquisitions. So we can give you a little bit clearer picture in regards to what their contribution really is.

But you're unable to comment on gross margin and where these businesses are about to the segment today?

Mig, it's about 3% on the full year. We don't have the specific right in front of us on the quarter, but it's the impact in our outlook for the full year is about 3%.

Right. I mean, I wasn't talking about the quarter. I'm just wondering about the gross margin for these businesses, just so that we layer them in properly in our estimates, Becky, that's what I'm getting at?

Yes. On a gross profit basis, the improvement to our full-year will be 3%.

Okay. And then, I guess my follow up here is trying to understand how you're thinking about the business sequentially into the fourth quarter relative to the third. Your performance here in the third quarter has been frankly better than I expect it from a top line perspective. And I'm wondering if you view that as sustainable, where there are some factors related to seasonality or the way your backlog is set for delivery that we need to be aware of here in the near term? Thanks.

No. I think there's many pieces of the margin improvement that we continue to realize that we'll see move forward into Q4. Certainly, these are all were still in a very fluid situation relative to impact of COVID. And that obviously has an impact on our customers and their willingness to take orders in time. So it's hard for us to give you a lot of confirmation. But I can tell you that, again, the margin improvement that we've actually seen in Q3 is, we would expect it that would be -- we've realized that same type of improvement in Q4.

And the top line? I think about the top line?

Yes. No. I think we're entering into Q4, obviously with a pretty decent backlog. And we feel that should help us in Q4. But again, we don't have control over customers regards to permitting and taking of orders. So I'd hate that to give you too much confidence in regards to what that's going to look like even for the rest of this year. Albeit, just a couple of months now. So -- the margin side, we're more comfortable to comment that we should be able to see some stickiness in regards to our performance there.

Okay. Thank you.

Thanks, Mig.

The next question comes from the line of Stanley Elliott with Stifel. Please proceed with your questions.

Hey, good morning, everyone. Thank you all for taking my question. In the call -- earlier in the call, you mentioned stronger margins in the asphalt plant. Curious, is that pricing? Is it -- well, how is pricing in the industry doing? Is that more part sales? You mentioned that? Just curious to get a little more color around what's happening with the plants business?

Yes. So I would say generally in the marketplace family, thanks for the question. The pricing is in pretty good shape. Obviously, we do see a little bit of pressure, but we haven't seen anything that's erratic. And so, I would say, we continue to look at our discounting and manage that pretty effectively. So I think ultimately, even with the market as it is we're trying to get as much price as we can on the products that we're selling. Yes, there is a little bit of impact on parts. We saw the parts business in general, tick up to about 32% of our sales in the third quarter, which is a little bit of an increase from the prior sequential quarter. So I think generally, and I also believe that we're getting those OpEx, with the procurement activities we have going on, and the lien that we're driving through our facilities, that's contributing to our cost and lowering that and helping us as well.

Great. And looking back over the periods when we've had either an infrastructure build or new highway build, when do you start to realize that in your order book. Just curious on the timing? And then, I guess -- then the second part of that would be with kind of a new procurement system in place and a lot of changes on the inventory sourcing side, you'll kind of speak to the confidence that this new structure will be able to meet that elevated demand when it hopefully comes?

Yes. So, we're pleased that the government through the reauthorization of the FAST Act has given us another -- given our market another 12 months of visibility, I think that helps. I've had the opportunity recently to spend a lot of time with different congressional offices, both Republican and Democrat to understand where things stand. And I was pleased with the fact that on both sides, where there's a House, Senate, a Republican or Democrats that they're all -- they all see the longer term infrastructure bill is a high priority pass this election. So that's good news. So ultimately, I think that as far as when we would realize impact from a longer term infrastructure bill, I think we enter into this. We're in a time frame as you talk to our customers that they have a backlog that takes them into 2021. And so they're relatively in good shape there. The FAST Act helps, but a reauthorization or a new infrastructure bill is one that we would typically take maybe a year to start to see some of those projects actually, maybe a little bit longer hit the market. But I think ultimately, we're going into it with a pretty good position. So hopefully that gives our customers some confidence and their customers confidence to go ahead and pull the trigger on projects.

Great. And then lastly, for us. For the product class is that hold inventory, you at the dealership level, how is that on a relative basis? And maybe any commentary about some of the customers that are renting equipment, if they're opting for the ownership opportunity, would just love to get a flavor for what's happening in underground?

Yes. I've been very pleased with our team's tenacity on inventory of finished goods and working with our distribution partners to continue to drive that down to a very low level. I think today we're at a level that is, puts us right on top of the market. And Becky alluded in her piece that there's been a little bit of a uptick in flow of orders. And that's because of that lower inventory that we've had over the last many months, Stanley, relative to our dealers. So they are very low on inventory. And they look forward. We've seen some order flows increase as we enter -- as we exited 2000 -- as we exited Q3. And, again, that's because they're very tight with the market relative to their inventories. Relative to the leasing, that continues to be a big part of our customers operation model. And obviously through this timeframe as we exited 2019 and entered in 2020, we've seen some of those leases continue on longer timeframes than what we would have expected, which obviously means they're not going to be converted over to retail orders as quickly as we would have maybe thought they would. And I think that's a little bit due to the uncertainty relative to COVID and what's going on in the marketplace. But that is -- that's something we stay very close to and makes sure that we understand how that's trending. So when we start to build our SNOP process, we can make sure that we have those volumes, predicted as closely as possible. To ensure that your point that we have the inventory, that we have the workforce, that we have the capacity and ability to react to them quickly. So I feel good from a business perspective that our team at Astec is very much on top of what's going on in the marketplace. And that allows us then to flow those demands in whatever direction through our systems in order to make sure that they're ready to take care of our customers.

Perfect. Becky, Steve, thank you guys for the time.

Thanks, Stanley.

Thank you. [Operator Instructions] Thank you. At this time, I'll turn the call back to Steve Anderson for closing remarks.

Thank you, Rob. Again, we appreciate your participation on this conference call. And thank you for your interest in Astec. Yesterday's news release indicates today's conference call has been recorded. A replay of this conference call will be available through November 18, 2020. And an archived webcast will be available for another 90 days. The transcript will be available under the Investor Relations section of the Astec's Industries website within the next seven days. All of that information is contained in the news release that was sent out earlier today. This concludes our call. So thank you all and happy to connect later on with any additional questions. Thank you.

Thank you. Ladies and gentlemen, this concludes today's teleconference. Thank you for your participation. You may now disconnect your lines at this time and have a wonderful day.