ASTE - Earnings call transcript Q3 2019

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Operator

Greetings and welcome to Astec Industries Third Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded.

It is now my pleasure to introduce your host, Mr. of Director VP, Anderson, Investor Relations. Steve sir, you you may begin. Thank

Steve Anderson

XX, Good Thank third to September morning the Michelle. quarter Astec ended the welcome for and you, call Industries that XXXX. conference

is Steve Michelle are Ruffalo, our Chief our my Silvious, As Officer David Financial Anderson. Barry and mentioned, Executive Chief on today's Also call name Officer.

and may our accessed slide release a can tab. be deck presentation by X-K in presentation an have the the deck Investor in link with and filed then earnings our on this morning. under noticed you the alo includes As release conference morning, webcast using our call this is the also that Section that We’ve the website Relations

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familiarize those yourself factors. with As usual, we that you ask

the call over this Barry. turn to At point, I'll

Barry Ruffalo

near as I’ve look know several to on with pleased I’m of of you the I Astec Thank to future. my Industries. morning, to met you, everyone, CEO Good first getting that in call conference and speaking haven’t you President all forward and be Steve.

the and time My the visiting the confirm company I our customers Astec of the great teammates. day-out leaders site our distributors, for create of significant top to the Astec team, while and August of a our values every leading meeting joining business what talking pleasure Astec joining strong XXX of amount spent had year, team our knew in this and our I’ve when of to core a organization shareholders. already and have Deliver desire The and many day-in customers. interactions value win and is passionate and about company. Since

customers best the values proud exemplify members in spent to dedication culture and our The over who time and I as trust to I operate most team earns I’m many that the our market repeatedly that our heard of. equipment women the and Our own our be the that our was and and passion over and of customers. equipment. part is in validated service for demanding class talking support

our deck. the turn now slide to attention Let’s

slide less are that gland we’re. added you of with those a For Astec great who similar is representation of the where and

note convert they’re [indiscernible] they’re have and dealers but busy I busy, decisions. buying a been although have customers summary our international flat. the the in to know see our by offset discussions from results, softer held-off equipment recently have mode hand retail a quarter that third inventory also that A that financial can North slow market of growth I basis was more revenue was in sales. of Moving America capital sales. on to with on healthy our year-over-year you that to

that was caught the and down our flow factors up that product [Indiscernible] to capacities slower quarter. and size to hard less We’ve our factories. we’re drive working in right our fact inventory, Those third the into been

forward continue includes sites, close I’m to United that X% South tools. we Germany moving we’ve our two utilization confident West planning with this to With of States. to operating by taken our do of our in capacity sales and which better and said, actions workforce in will by reducing one so one optimize year-to-date our decision

Astec you have focus sharp let we to the on executing imitative. to know want continue procurement strategic I that

We of full will international basis pleased million of $XX realize $X savings help America. between intent realizing in sales with to I’m a year lower on in in million XXXX. XXXX $X that North sales savings million in our offset the

are to strategic of Global team the but strategy paying opportunities to strong a plan. global in be I’ve Our exciting growth in we all and have leadership We’ve investments to still confidence execute off, and way our our go. able ahead long our us

our return continue we it. move invested our of on key done the attention that free a like good capital sharpen forward sheet, balance just metrics and managing can to cash turning flow. we've That's be growing will and our and to you see Now of and DNA part a as job strength focus

Our we forward. balance to the sheet levers, flexibility strong increased to pull gives shareholder intend many us drive to use value moving which

over it to turn David. now I'll

David Silvious

Thanks Good you Barry. morning joining everyone. Thank for us.

and for flat domestic the with relative prior is able to down But as revenues make Barry quarter the relatively U.S. efforts noted, for year. our XXXX up international Our softness. the market QX of the are were to

of equipment. impacted service offset capital equipment in domestically quarter. evidence percent by are our softness customers There's that sales. six-tenths the and using especially our a for sales ForEx sales working also their and Increased parts

yet those retail in have conversions high rentals to Our the of that inventories retail occur including XXXX. year, dealers have but by many historically converted sales to have to in time rental this fleets

by the equipment gas Our equipment, the the building market. decline reflects primarily domestic XX% production oil and softness aggregate in and domestic equipment road and backlog decreased capital in entire decreased and Backlog equipment. was

Implied high and QX up QX an easy in leading XXXX, XXXX to due implied equipment off. of equipment, and oil of comp While equipment road in QX when orders building backlogs backlogs fell fell as backlog aggregate to historically as are down in well equipment. in that in are orders gas

some combination during down SGA&E was and due a from the and margin decline was the pricing being EBITDA mix. to margin benefits unabsorbed product decline payroll and XXXX quarter in gross detractor million the fees, in a the consulting of of million. $X.X professional increase primary of in $X.X remainder Adjusted reductions overhead at gross QX An by impacted also pressure with primarily of fees. related over was

Our long-term SGA&E will rate steps. to is a some but necessary this take have the run take goal time the to reduce begun expenses Obviously, low-teens. we to in

share Adjusted the $X.XX end German complete which of costs as plan as finalize $XXX,XXX by pellet group earnings quarter of to to post we disposal plant a costs excludes sizing per our infrastructure operations, the to year. of for right well the of to this business the level restructuring reflect related

the parts slightly in Our primarily in the infrastructure during International decreased and group. equipment quarter that quarter during domestic grew parts. revenues equipment group of

in road equipment. equipment in decreasing Sales production asphalt while increase building

million of additional under during by in compared to most Asphalt $X.X have reducing retail through QX were impacted of experiencing fewer direct within and We full also pressure equipment is convert gross term that and was production are soft that Infrastructure additional road the overhead hours equipment resulted that sold inventories and sold markets of production on XXXX. to on quarter sales. is margin dealers discussed our absorbed rentals have put also pricing. to all previously through as and longer inventory majority yet dealers focused building factories

quarter. the restructuring in mentioned. to to the gross cost Adjusted in a benefit Reductions were EBITDA in SGA&E due previously margin infrastructure EBITDA and $XXX,XXX decrease the excludes compression of group

margin. dealer equipment contributor through mining increase agg the was mining in This sales. hours The offset down are overhead group decline inventories our a resulting an which sales in year quarter. and are reduction the retail led production capital in decline domestic in to as again dealer in largest in $X.X slight by mentioned, high sales group rental international factories to conversions Most this capital go increase demand. reduction international relative sales Our reduced group experienced The sales. the of domestic equipment, driving distribution to the softer aggregate part in in previously million group decline and was volume in an unabsorbed of during in our through last and gross

margin. the in was group primarily of $X reductions fees. quarter related down along was decrease during in the the and decline due in and SGA&E headcount professional consulting gross a to EBITDA million A with in EBITDA to

parts the the quarter and relative in group increase to as the the energy margin by reduced reduction margin but the they increase total XXXX. as slight from million higher gas were XXXX. and to increased of Our concrete QX equipment group production with consistent in energy energy equipment during in Sales of flat margin. well unabsorbed group overhead sales to sales slightly of reduced offset of The An modestly of gross down, contributed of fees. to SGA&E as $X.X headcount gross sales its sales group QX equipment. were increased due were consulting a a carry relative increased margin heating EBITDA increase oil and remained as

us strong a continue debt. sheet We our with minimal a platform provides launch to strategic longer-term to balance maintain initiatives. This

and We've that improved execute cash. ample to We year our on over progress our have and a liquidity net cash returns unlocking plans. last additional also inventory capital well has working the initiatives as as made position

in long-term continue our earnings the capital. the capital our we in go shareholder so and of strategic disciplined deploying will consider deployment we And we revenues to context flows order do As to value. forward, a maximize related and have to when our objectives we various approach of cash avenues

to additional it I'll comments. over turn now back Barry for

Barry Ruffalo

David. Thanks

had market team the with lead foundational and customers with strengths. following that to observations to time spending a to team a of large share. privilege part after I set and the earlier her and had mentioned As of channel, the excited I'm the has be deep distribution Astec in

half look been moving build taking excited have a them of by company. how are months we at on I All over the my also a fresh two first organized. forward for and validated am them to

to flattened leverage on backfill Vice retirement. his of R&D engineering choosing new Chief organization we to our execution role us sharpening product will spend We Officer by along August allow with President added Since focus and recent the of role Innovation, not with which and Senior Operating resources development. have our the

role strategy to and Operational leverage our We role the will Senior efforts and chain performance. manufacturing also This our global President Vice lead of of added Excellence. supply

days these are transformation as initiatives will our we more for We our in shareholders. accelerate our value lean of and position customers continue this drive early to the and

that we focus our company. the Finally, ERP I define a improve am strategy centralized will drive the Information our Officer. perfect platforms. build position IT are confident the and of well as position our and analytics to three transformation data and elements simplify, Chief grow pillars added This as as of

long-term build We shareholder create also need and highlight value. it enhance complexity and are strategies parts the non-strategic Conversely, makes that in will them if business for to resources. it We and discontinue them business the will value simplifying that and leverage on focus that we of growth. non-core platform and invest a find as business difficult complex the to businesses doesn't

the Moving forward stop and quarterly we temporarily annual will guidance. of practice giving

plans. identified also industry instead targets to that through stand long-term of the metrics and will tied shareholder are tied have our are incentive We These to value our creation. cycles

We on updated overtime consistency on ourselves ability against to targets targets report will a obtaining evaluated will measure be continue and them. our shareholders, and to These regular basis. our these you, progress and based our

I highlights. leaving presentation will a the investment by key with Astec's conclude you

a questions. of strong forward ahead lies excited and your transformation progress of and strategy to have foundation We I'm about further welcome look us. the take communications. future that opportunity in to We our details now new sharing I our opportunity the

Operator

Thank you.

question. Baird.. a Please We of Our session. comes [Operator will line conducting from the Mig W. your Instructions] first now question with Dobre proceed with be Robert question-and-answer

Unidentified Analyst

Hey good morning Mig It's I'm this Joe guys. Grabowski. for morning.

Barry Ruffalo

morning Good Joe.

David Silvious

Joe. Hey,

Unidentified Analyst

and morning, look at good Barry in our forward next Mig to meeting person welcome I you week. Hey aboard. and conference

past compare As maybe facilities the How over thoughts your specifically you of decentralized Astec weeks, dealt the thoughts? your did to several facilities are on with And all structure? then initial during Astec's the your once what career? you've more visited

Barry Ruffalo

that that starting and in the visits of very every with Yes. could that I sites was company. time happy single I tell get the that one relatively after the of a actually I you to I period had, short

they represent. they really me, foremost, in foundational they to people And passion and for and for really what and what the build to to the first of. really companies us block the did, represents had think pride the me struck that is a off I great regards

I there some -- and saw transformation. as different that room you best-in-class is there put array some have lean would tell would of where we progress lots think to the facilities, through improvement. an relative of for were I I walk I I

into get a we to that and of the we not huge as sites that, look able level. top to so, all for And down that opportunity to us raise build our on be and at of off try

and utilization there to of of allow assets, do on more us that focus think also performance, senior work some excellence only transformation, not there's So president but new I things. those footprints vice bringing to types our lean on will our of operational

model as go where to perspective, we're find value over so stones think, less and profitably, value, I is comments destroying think doing no decentralized and that really we my I it's we I there's investments where from a so turn back areas not to decentralized it around actually about to that to going stop try and centralized, can grow the that. potentially, we and where are make should probably therefore about

us customers. forward to we that as able want moving to I is be our close think the well to key for stay

to that do and we than real want Astec's that's to think, we that make competition, strength been a our billion I maintain as of to number way that but the and of leverage a parts years, sure we different across company of well better that, over able a has global company. be find we're to dollar want leverage points our of a that lot also

more And addition going the us engineering leverage to think I lead allow position resources energy appropriately. to back lead of or offices, position that's innovation with engineering the

many looking that our at and get can to company ways where find and think we're trying I lenses we whole for different So value the shareholders. from

Unidentified Analyst

Excellent. lot QX to gross are talked into about that. Great. David, color a drilling results, maybe seems year-over-year, surprising for margin but when you it's the And down reason it Thanks me being the for sales and flattish, about just XXX dynamics and and flattish absorption again basis year-over-year. there, sales, infrastructure variances come where down margin the points, aggregate and talk gross see sales Maybe under points mining. when from those are to basis on relatively XXX

David Silvious

Yes. It's a great question.

infrastructure paving specifically, inventory. selling out the were with in address We equipment. of mobile group So we can that

efforts, typically that on and As had of company, to the AG conversions that and and drives but -- in the reduction lot you were through a over and the low the of group rest past built during and you the shop you as on to QX, hours during know mining due inventory QX couple the strong we've and very reduced and fulfilled orders lack had be the hours the reduce put pricing, the the of a effort of which QX other had demand rental and and those also well. pressure a especially year inventory years in lot In inventory had there, shop. to quarter both

to we And demand respond have been in reduction slow Barry to that our in mentioned, so, as shops.

several in program thing, building through but Our the year-to-date the where of us we're much, right number too SNOP hours we're that not wrong that is, is we're place buying and has is producing the demand through also shops. not iterations gone understand our helping and

it is and size a got man-hours with and we as the the capacity on in out so, fill build continue the to again number used of and get equipment. right of capacity, factories, this the to we've right journey hours the place And right lean the right got sure these we've that make number

journey that's during overhead of unabsorbed huge contributor where the this SNOP process, the quarter. I was but think a

Unidentified Analyst

it. Got

that. for me. for more Thanks Okay. Couple questions

I So that top I you at you're on ask can how any understand here, give just all the I to but quarter on QX any thoughts of has discontinuing kind any or guess started QX? perhaps level guidance, have color

Barry Ruffalo

you're say Yes. I that, right. would

discontinue guidance. We going to temporarily are giving

from much pullback giving around probably we'll color QX. said, being that with think I So you too

Unidentified Analyst

Yes. enough. Fair Okay.

Barry Ruffalo

information get point bit short-term we look we about Joe, to the like little give be have the moving We guys confidence forward. hope a can that that you what to we able in the to here more

point. processes to work until our come out but we to it behooves -- back to think before us continue then, that I

Unidentified Analyst

guess And for enough. question last me. Fair I Yes.

worried D.C. your guys construction things We an and are do We're highway election, kind Washington in U.S., think next FAST of you the you you from And the dysfunctional right approaching year How playing busy. spending are all with but is a Bill here the street and pretty you in that? see customers your it As plays it mentioned over the year? up and the customers obviously out about do data digits expiring election that? about out? expiring monthly still less the Highway Are days. than now are see worried before double year. away these How Act are we

Barry Ruffalo

Yes.

that's I I to even and of asked. to the think part that that question that would -- you is today space that we and market and I in mean pieces important and of a strong cycle the be today. the the operate we're can an to profitable you a focused a on obviously lot moving just be and within we're tell the lot drivers in is the of of operate. There's puts answers that that more business as in in we we takes trying

of take uplift we're favorable So position our can competition that the drivers earning that -- if advantage add quickly of that and possible and within and those as customers relative as market our value to the on types the market advantage in to position side. a

Joe Grabowski

Yes. Make you seeing in Chicago next sense. forward taking my week. for to questions. Thanks Look guys

Barry Ruffalo

same Yes, Thank here. you.

Operator

Thank you.

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

Unidentified Analyst

Hi Brophy This good Stanley. Brian is for on morning.

could question a on we year-on-year give what's expenses, looks and bit it little I below around driving us a like a little were the of what was was Just had lower expecting. that? bit SGA&E hoping it color you

David Silvious

hi this that that of Strategic was and the ASP Astec is last consulting XXXX. -- what was program year drivers full quarter had in the QX Brian, call We David. primary program The Purchasing this in we swing fees. began we

program June/July year longer That are this of quarter. a no fees So SGA&E. were in complete the consulting and we fees so were lot timeframe those in is of that paying there that as

some addition headcount. In we've reduced

back the reduction is in headcount the office. shop in Now and both that

do again ongoing reductions year the had those SGA&E. higher professional some fees well. last So impact we as And

all run to now. So the make target we to should shareholder want baked reductions this we run should. to and those maximize so there, rate to into the are that be have lower got it value and we We we've the get think there SGA&E The teens. company way

were were on of a items those in there. items. $X give was the those or It So take million that about each

Unidentified Analyst

get the Help of there? today. move that expenses Got it. decently percentage bridge That's are as helpful. us these you How growth? sales a a of large low-teens you Is it sales, Is further? that's kind it do gap? cutting obviously from where And guys

David Silvious

Obviously, two the address sales growth are There things impact from certainly number I think. will help to But to got in you business. spending create we efficiencies more and the one standpoint it. need that a

As and the can We're will. business that it customer in It anything go as we creates to mass advantages. forward we're take that's also mentioned we back-office; decentralized to and processes Joe some standardized the advantage cost where be and we and to able inefficiencies. -- inefficiencies our close need anything earlier, creates some has but of take out we

cutting thing. processes. -- that's that efficiencies is it's and heads of and not creating necessarily It about So kind

Unidentified Analyst

I switching release a guys commentary it. from gears remember really the little in That's pricing I guess or little a Got more hear quarters about helpful. didn't talked that couple you your any in peers. bit, prepared remarks. of I bit if correctly pressure past of

Just pressures, what's guys if are something has If seeing like? competitive changed still environment wondering the some there? you

Barry Ruffalo

I is that this Hey Barry you tell would Brian, not changed. and Yes. has Ruffalo, that

today we're amount conditions market that I same marketplace. there's in think of the the competitiveness pressure with and pricing in the

at do we the the David margin, looked decrease. I to, that – as think alluded when I think,

up from coming made as and of an that of part influence there also under-absorption from was other big the mix the part it. pricing which well With

Unidentified Analyst

the for product share And guys these one such what wondering and between last cetera? as I'm me it equipment from on. market competitive if you you're differences I'm are curious One et occurring? pass helpful. there's mobile pressures road that feeling given asphalt like building standpoint? a How then I'll plants seeing That's versus are any type

Barry Ruffalo

we'll and feel or I Certainly, Yes. there's share but the nothing like we're to there, see we from line from quarter-to-quarter product line comment product don't market in in movement general here been today. that board. shift really specific would a on sense going and say across comment to any can

Unidentified Analyst

you. Thank I will on. Okay. pass

Operator

comes Our Instructions] line Please of question proceed [Operator question. your you. Mondillo next from the Sidoti. Thank with with Joe

Unidentified Analyst

is This for everybody. morning morning. this Brian good Hey Lau Joe

Barry Ruffalo

morning. Good Brian. Hey,

Unidentified Analyst

just look of obviously on that kind qualitative of Maybe suspending the retroactively weaker temporarily, And results through to expected. visibility understand last what like? but quarter? based about this then kind talk quarter I guidance maybe generally What's of guidance, than changed the a we're little your

Barry Ruffalo

Yes.

to I more mouth, have well us little generally a think it's we the cases very mix. In line. tell the hand QX. again different a being bit that would so not at look backlog that gave a it's we line-by-product you history into product is a visibility guidance stellar. just meet Others to I that actually our are when some back little takes you able of

in. And have therefore make we're so good we more I the that that of my initiative think sure on operating it's to pause to grasp a just markets maybe real

The then a trends then process. and sales planning sure we to far our make of and that into can project the enough have forward look customers that forecast. sound And can operating

made we've the come lot that would course started these to little of of of in -- got team introduce a last for a a able lot guidance to of give to to making you months. as again. use progress you we've to order the of bit Really we so back I get of credit over the give some and progress tools, over confidence go couple the to the give ways but of be the year And

Unidentified Analyst

the Alright. me. for Appreciate That's Thanks. color. it

Barry Ruffalo

Thanks Brian.

Operator

to Anderson any over remarks. time. to Thank the closing call at Mr. for you. further like no There are questions this turn I'd back

Steve Anderson

Astec. Again, on and participation call interest your quarter your you, thank this appreciate Thank conference third for we Michelle. in you

webcast transcript release the available will available of the XX of available website conference under within As replay next Investor be Astec been industries call A Relations call an archived recorded. the days. today's section indicates will days. has A will our seven be news conference through for November be the and XXth

the earlier is information contained release was that All that sent of in today. news out

all. our week. good call. this you Have So a concludes Thank

Operator

Thank you. This concludes today's teleconference.

you your this You for may participation Thank day your lines a time. have and disconnect wonderful at

Astec Industries (ASTE) 29 Oct 192019 Q3 Earnings call transcript