Hello, and welcome to the Astec Industries Third Quarter 2025 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 Jaco van der Merwe, our Chief Executive Officer; and Brian Harris, Chief Financial Officer. In just a moment, I'll turn the call over to Jaco to provide his comments, and then Brian will summarize our financial results. For your convenience, a copy of our press release and presentation have been posted on our website under the Investor Relations tab at www.astecindustries.com. Turning to Slide 2. I'll remind you this morning that our discussion will 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. 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 U.S. Securities and Exchange Commission. 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 and non-GAAP financial measures, which management believes provide useful information to investors. These non-GAAP measures have no standardized meaning prescribed by U.S. GAAP and are therefore unlikely to be comparable to the calculation of similar measures of other companies. Management 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 are included in our news release and the appendix of our slide presentation. And now turning to Slide 3, I'll turn the call over to Jaco.

Thank you, Steve. Good morning, everyone, and thank you for joining us. We were pleased to post another solid quarter, evidencing our focus on delivering consistent profitability and growth. Before we start, I would like to thank our combined Astec team as we continue to execute. As a reminder, our results now include TerraSource, which we completed on July 1. On Slide 4, we present a summary of our third quarter performance. This quarter, we continued our positive momentum with increased net sales, increased adjusted EBITDA and adjusted earnings per share. Adjusted EBITDA was $27.1 million, up $9.7 million or 55.7% from the third quarter of 2024. Adjusted EBITDA margins increased to 7.7%, a gain of 170 basis points, while adjusted earnings per share reached $0.47 for a year-over-year increase of 30.6%. Our backlog at quarter end was $449.5 million, representing a sequential increase of $68.7 million, $64.1 million of which was due to the addition of TerraSource, while the backlog in our legacy Infrastructure Solutions and Materials Solutions segments both increased slightly. We continue to see customers order closer to their desired delivery dates due to a combination of our shorter lead times and finished goods inventory on hand. Within the Infrastructure Solutions segment, asphalt plants, concrete plants, heaters and burners delivered strong results and contributed to margin expansion, while forestry and mobile paving equipment faced headwinds due to challenging end market conditions. Parts sales for the Infrastructure Solutions segment were strong, posting a 14.8% quarter-over-quarter increase. The Material Solutions segment includes the successful integration of TerraSource. Backlog in this segment has been stable for the past 5 quarters. We have noticed improved customer sentiment due to the recent movement in interest rates, and our parts sales mix increased 670 basis points with the addition of TerraSource. Lastly, you…

Thank you, Jaco, and good morning, everyone. The next 3 slides provide both Q3 and trailing 12-month data, which we feel provide an excellent view of the underlying financial trends in our business. Turning to our consolidated financial results presented on Slide 13. Net sales increased by 20.1%, which was due to strong demand for asphalt and concrete plants and the inclusion of TerraSource. Demand for forestry and mobile paving equipment continues to be soft due to a relatively high interest rate environment and an extended global slowdown in end markets. Over the trailing 12-month period, net sales increased 6.7%. We are pleased to report an adjusted EBITDA of $27.1 million for the third quarter, up 55.7% from $17.4 million in the same period last year. Looking at the trailing 12 months, adjusted EBITDA margin grew 49%. Our third quarter adjusted EBITDA margin grew 170 basis points over the same period in 2024. And on a trailing 12-month basis, adjusted EBITDA margin grew 300 basis points to 10.5%. Adjusted earnings per share for the third quarter were $0.47, a 30.6% increase over the $0.36 reported in Q3 '24, while adjusted earnings per share grew by 48.7% on a trailing 12-month basis. Turning to the Infrastructure Solutions segment outlined on Slide 14. The third quarter came in strong with a 17.1% increase over the third quarter in 2024. Growth was generated in both equipment and parts sales for the quarter. Solid demand for asphalt and concrete plants helped drive increased domestic sales, while international sales were stable. However, forestry and paving remain somewhat depressed. Net sales for the trailing 12-month period grew 8.8%. Segment operating adjusted EBITDA and EBITDA margin grew quarter-over-quarter and on a trailing 12-month basis. Our adjusted operating margin for the Infrastructure Solutions segment grew to 12.4% when…

On Slide 17, we provide a glimpse of our recently released 2025 Corporate Sustainability Report. As you will see in the report, we are committed to innovate our products and technologies to help our customers achieve their efficiency and cost reduction goals through sustainability investments, respect our natural resources, ensure the safety and well-being of our employees and uphold employee satisfaction by demonstrating our devotion to our core values. Slide 18 provides an overview of the key investment highlights for Astec. We take pride in Astec's ongoing reputation as a reliable provider of world-renowned brands and top-tier solutions for our customers. We continue to maintain a high level of engagement with our customers. While they remain somewhat cautious, their outlook is positive and customers are optimistic about the ongoing activity in the construction markets. We are also proud that our focus on operational excellence is yielding results with many benefits still ahead. Efforts in manufacturing and procurement are enhancing efficiency, and we are seeing favorable trends in adjusted EBITDA. Our business is driven by several exciting growth opportunities, including expanding our reoccurring aftermarket parts business, which remains a key focus for the Astec team, advancing our strong pipeline of new products. Please mark your calendars to visit the Astec booth at the 2026 ConExpo-Con/AGG trade show in Las Vegas from March 3 through March 7, 2026, where we will showcase various new products. The reliability offered by multiyear federal and state funding for interstate and highway projects in our primary market, the United States, multiple opportunity for expansion in both existing and emerging international markets, strategic inorganic growth prospects that align with our financial objectives. As Brian mentioned, our solid balance sheet gives us flexibility to support growth initiatives and effectively manage our leverage. With that, operator, we are ready for questions.

[Operator Instructions] Your first question comes from Steve Ferazani with Sidoti.

Appreciate the detail on the call this morning. First one, general question -- first general question in terms of your raising the low end of guidance. Was there any worries you saw that sort of dissipated in 3Q? Or are you seeing something particularly better in 4Q that gave you the confidence to raise that low end?

Yes. No, Steve, good question. As a reminder, when we did the Q2 earnings call, we spoke about the fact that we still had quite a bit of gaps in our capacity to fill at the end of -- or when we had the Q2 call. Fortunately, for us, that filled in very nicely. And with our short lead times, our teams have the ability to deliver those in Q4. So we have the capital orders to deliver Q4 sales that we need to deliver that new range.

When I look at your book-to-bill and order rates in 3Q, at least even the last 2 years, there was a change this quarter versus the last 2 years in terms of orders and even in IS. Did something change this year? Because typically, this has been seasonally weaker for the last 2 years?

Yes. So I don't think we've noticed anything specific. We definitely saw a later or a different booking process from our customers. As I said, if we look at where we were in Q2, we still had substantial gaps in our capacity to fill. And obviously, that came through during the third quarter. Steve, I think the other thing is we are getting to the tail end of what I want to say, the uncertainty around tariffs. And I think customers are just getting to a point where they know they need to make a decision. And obviously, we were the beneficiaries of that.

That's helpful. The one to me was a negative surprise that even if I back out the litigation expense from the year ago MS, margins still would have been somewhat flat. Our expectation was TerraSource would have -- would be accretive to margins. Can you tell us if they were in 3Q and your expectation on the timing of synergy realization now that you're working through the integration?

Yes. No, absolutely. So first of all, I want to say we could not be happier with what we're seeing of the TerraSource team now that they're part of our organization. We are excited about the work that our legacy team is doing. Obviously, last year, we had that one release that gave the benefit to that. Quarter-over-quarter, obviously, you will always have some swing, Steve. We are pretty excited about the underlying trends that we're seeing. And I think you will see the margins come. Remember, this was the first quarter that TerraSource was on our side. The legacy MSE sales was a little bit lower compared to last year. So obviously, that has an effect. But it's early days. We're excited about the work the team is doing. The TerraSource margins were accretive. So there's nothing that we have seen that raises our eyebrows now that we own them for the last 3 months. So yes, I think in the next coming quarters, the full effect of TerraSource will show up.

And your expectation, any changes in what you expect can be realized synergies and the timing of realizing them?

No. No, we have good visibility of the synergies that we communicated during the deal announcements. Some of the synergies are realized already. So we've seen some benefit. Obviously, they will flow through over a 12-month period. And we expect to see quite a bit of the synergies next year already.

Okay. You may not have this number, but any -- the breakdown of how much parts as a percentage of revenue per segment now? I'm assuming it's much -- it will now be at least higher on the MS side.

Yes. So we -- I think we mentioned that in the release that MS have jumped about 670 basis points. So as a company now, I think we bounced to 32% or so. So I think that number is going to consistently pick up as it reflects in our rolling numbers. So it's definitely having the effect that we were hoping for, Steve.

Great. And if I could get one more in, in terms of tariff uncertainty on your end, given the addition of the Section 232 tariffs. Is that getting a little bit harder to offset or no changes?

Yes. I mean it's complicated. I can tell you that. But we feel that we have a very good understanding of it. Our raised lower end of the range takes into consideration how we think we can deal with the tariff, Steve. So one thing I will say is that the flow-through is real. And the actions that our teams have taken on pricing and taken on looking for alternative supplies have really positioned us well to mitigate the tariff increases. And I think we're pretty well positioned for next year.

[Operator Instructions] your next question comes from Steven Ramsey with Thompson Research Group.

I wanted to start with the parts results within the Infrastructure segment. Good results there. Can you maybe parse out a bit the volume and price contribution to that 15% growth and maybe kind of the push-pull dynamics there of better internal execution and reaching customers versus just natural demand that comes from the plants?

Yes. Yes. No, good question, Steven. One thing I will say is we've been working on driving our parts business for quite a while now. And those efforts are starting to pay off. So obviously, that's a big piece of that growth. I mean, Brian, pricing-wise, I don't think we have broken that out specifically. But I will say, if I look at it, we've basically adjusted for inflation over the last year or so. And then obviously, Steven, where we have seen tariff increases coming through, that have been reflected. And overall, I will say probably 4% to 5% cost of goods sold effect that show up partially in that number. But I will say the majority of that is due to the work the teams are doing to grow that parts business.

Okay. That's excellent. That's helpful. And you called out asphalt and concrete plant strength in the quarter. On a percentage basis, was one a bigger driver than another?

No, I won't say that. We're very fortunate that both those segments are very strong. So no, I will not say that. Obviously, asphalt plant sales, when you sell an asphalt plant, depending on the size, it can be $8 million, $10 million. So we just have one additional one, and it makes a big swing in the quarter. So -- but no, I don't think there's a trend more to the one versus the other.

Understood. Understood. Flipping to the Materials segment, you've talked about the dealer inventory dynamic. Can you maybe share the incremental changes that you're seeing there? And is this something that you expect to be washed out in the fourth quarter? Or is this more of a 2026 dynamic? And then maybe one more that would be good to get insight on is TerraSource within the dealer channel, are they experiencing the same dynamics?

Yes. Yes. So let's talk legacy first. We've now said for the last 2 quarters, we've actually, I think, reached a period where our dealer inventory for MS is pretty healthy. The type of inventory that our dealers have are the right level. We've actually started to see some dealer stocking again. So I think we're in a pretty good position, Steven, when it comes to dealer inventory. Obviously, there's always some movements that takes place dealer to dealer. But we're in pretty good shape. And the other thing that I'm excited about in the MS side is, historically, we were very strong in our system sales. So a system is where you put a significant amount of equipment together and provide a customer a whole solution. And there was a period in time where Astec lost the focus on that. We brought that focus back here in the last 2, 3 years. And that is starting to show up as well. And obviously, that is something that doesn't necessarily get consumed out of inventory. So you have more of a flow-through effect from us to the dealer. So as that business starts to flow through, I think the dependency we have on dealer inventory for the pure mobile units should become less and less. On the second question, TSG. So TSG has a channel that uses, I want to say, all the channels possible. They sell direct in some areas. They do go through dealers in some areas. We have some agents in some areas. So we're busy working through that. There's a possibility that some of their sales in the future will go through our dealer channel. But the product is a little bit different. It's more project related. So I don't expect besides spare parts that our dealers will stock a lot of TerraSource equipment going forward.

Okay. Okay. That's helpful. I wanted to get some more details on the fill rates with TerraSource that you talked about synergies coming in, in 2026 for that business and their parts fill rates, clearly a lot of upside for them to reach core Astec levels. Can you talk about the timing on how you expect TerraSource fill rates to improve over the coming quarters and years?

Yes, absolutely. I mean that's an effort that started day 1. As you know, I'm personally very passionate about that and fortunately, the TerraSource team as well. They know having parts on the shelf makes a big difference. There's a big gap between what they have as performance versus what we are having today. And if I look back for Astec, it took us 18 to 24 months to get to where we are today. I think this is going to be a lot faster than that. So I will say within the next 12 months, we're going to get them very close to our fill rates. And obviously, we believe that, that will have a good effect on their performance going forward. So -- the team is engaged. The work has started. We've identified where to go, and I will continue to keep the market updated on the performance there.

Excellent. That's good. Last one for me. You called out rare earth mining as a potential demand catalyst. Have you seen any of this to date or in conversations? And are there internal moves you're making within product development or within channels to take advantage of this?

Yes. Yes, we actually received our first orders. One of the companies has been in the news a lot lately because the government took a stake in that. We got a nice order from them just here recently. So it's real, Steven, it's coming. Investments are happening. And the good thing for us is our equipment can do the work today. So there's not a need for a major redevelopment that needs to take place. So our dealer network are very entrepreneurial. So they are very aware of all the opportunities that's coming up in their markets, and they're taking advantage of that. And we are seeing it. So it's not just talk, it's actually orders.

That concludes our Q&A session. I'll now turn the conference back over to Mr. Anderson for closing remarks.

Thank you, Carla. We do appreciate your participation in our conference call this morning, and thank you for your interest in Astec. As today's news release states, this conference call has been recorded. A replay of the conference call will be available through November 19, 2025, 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 5 business days. This concludes our call. I'm happy to connect later if you have additional questions. Thank you all. Have a good day.

This concludes today's conference call. You may now disconnect.