Greetings. Welcome to Valmont Industries, Inc. First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. We ask that you please limit yourself to one question and one brief follow-up question and return to the queue. Please note this conference is being recorded. I will now turn the conference over to your host, Renee Campbell, Senior Vice President of Investor Relations and Treasurer. Ms. Campbell, you may begin.

Good morning, everyone, and thank you for joining us. With me today are Avner Applbaum, President and Chief Executive Officer; Tom Liguori, Executive Vice President and Chief Financial Officer; and Tim Francis, Chief Accounting Officer. Earlier this morning, we issued a press release announcing our first quarter 2025 results. That press release and the presentation for today's webcast are available on the Investors page of our website at valmont.com. A replay of the webcast will be available later this morning. We'll begin today's call with prepared remarks and then open it up for questions. Please note that this call is subject to our disclosure on forward-looking statements, which is outlined on slide two of the presentation, and will be read in full after Q&A. With that, I'd now like to turn the call over to Avner.

Thank you, Renee. Good morning, everyone, and thank you for joining us. I'd like to start with first quarter highlights summarized on slide four. Demand across most of our markets has remained resilient amid a dynamic macro environment. Secular megatrends such as the energy transition and infrastructure investment continue to create meaningful opportunities for our business. While pockets of the business are more exposed to economic pressures, overall order activity and volume growth remain healthy as reflected in our growing backlog of $1.5 billion. We're confident in our ability to manage through disruptions, while positioning the business to capture long-term growth. While consolidated net sales were down slightly, they increased modestly on a constant currency basis with both operating margins and earnings per share remaining stable. Our financial performance is a result of our disciplined execution against our strategic priorities. We streamlined the organization to operate more efficiently and our operational and commercial excellence initiative and are delivering tangible results. Driven by continuous improvement culture, or strengthening our position, to grow as certain markets recover. Importantly, our market leadership and commitment to deliver premier quality and service to our customers continues to set us apart in infrastructure and agriculture. We're also actively mitigating near-term tariffs. With twenty-four manufacturing, and eighteen coatings facilities across the United States, we're well positioned to meet domestic demand. A few years ago, we began implementing a local-for-local supply chain strategy to better serve our global customers and network is paying off helping to reduce our exposure today. We're also seeing success from other proactive efforts across the business. Tom will share more detail later in the call. Turning to slide five. I'd like to share an update on a few of our 2025 critical objectives that I introduced last quarter. We're executing our strategy to…

Thank you, Avner. Good morning, everyone. Our team operated well in a rapidly evolving environment during the first quarter, We continue to make progress with our capacity, and margin expansion initiatives. I want to thank our team for their actions to control costs in the first quarter and the work performed to mitigate tariffs. Their efforts are helping to secure solid financial results. For full year 2025. Turning to slide nine. First quarter net sales of $969.3 million decreased 0.9% year over year. Gross margin of 30% decreased 130 basis points from the prior year. The decrease was in our agriculture segment, primarily due to a higher mix of international projects that carry lower margins. The gross margin decline was largely offset by lower SG&A due to cost reduction activities. or 13.2% of sales. Below the line, interest expense decreased due to lower debt. We incurred $2.7 million of other expense. Primarily due to foreign exchange impacts. Our diluted earnings per share was $4.32. In line with prior year period. Our first quarter results include $3 million of costs for tariffs or $0.11 per share. Turning to the segments on slide ten. First quarter infrastructure sales decreased 2.4%. Growth in telecom and utility was largely offset by significantly lower sales in solar along with softer results in lighting and transportation. Utility sales increased 2.4% driven by higher volumes, and higher average selling prices. Sales of concrete distribution structures were impacted by a strategic shift by a key customer. Which reduced volumes at that facility. This was a project-specific decision with no impact on other concrete operations. Our utility backlog remains strong, and we're actively supporting our utility partners with their long-term grid hardening efforts. Excluding concrete, our steel utility business grew 8% year over year. Lower sales in lighting and…

At this time, the operator will open up the call for questions.

Thank you. At this time, we'll be conducting a question and answer session. You may press star two if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. To allow as many questions as possible, please limit yourself to one question and one follow-up. One moment while we pull for questions.

Yeah. Good morning. This is Adam Farley on for Nathan Jones. I wanted to start with pricing actions.

Have price actions been implemented to offset all of the tariff impacts to date? And is there any type of lag that we should expect from pricing?

Well, first of all, I think the team did a really good job on mitigating tariffs. And I want to reiterate, you know, for the total year, we'll be cost neutral, which we believe is very positive. And it'll be cost neutral for both segments. It'll make us have a strong second half. To your question on pricing, you know, we mentioned that we had $80 million of tariff exposure. About half of that is through pricing, and the other half is through really supply chain movements and activities to avoid tariffs. You know, I think as you look through the year, and you look at our guidance, we expect higher pricing possibly lower volumes that's included in our guidance but we feel very good about where we are. With respect to lags on pricing, yeah, things that are in backlog are generally not repriced. So you know, in utility, the bid market, that's pretty much, you know, immediate passed on. Backlog will we'll see the effect on that more in the second half as we have new orders being produced. Hope that helps.

Yeah. That's very helpful. Maybe shifting to telecom. I mean, a really strong quarter here. Thirty percent growth. In telecom. You know, how should we think about that business for the rest of the year? I mean, do we should we expect, you know, this normalization to continue? Or are there any early signs of maybe carriers' deferring spending?

Hey. Morning, Adam. So overall, we're very pleased with our Q1 growth of over 30% in telecom. So we've definitely seen stabilization after a couple of years where carriers reduce their spending. And now the carriers are continuing to spend, and focusing on the 5G upgrades, on modernization, expansion, etcetera. So our order rate rates continue to be strong. And I believe the carriers will continue to invest I mean, they're investing in the future, You know, if you look at and we're tied very closely with a lot of their investments and their programs. You know, I'll give you an example, AT&T. They're focused on the multiyear ramp transition, and we're well equipped to support them in their growth, and that's been a lot of our demand. In fact, if you see this morning, just Verizon came out with their earnings and they reaffirmed their CapEx then and their outlook for the year. So I'd say overall, we're gonna keep on monitoring the order intake pretty closely. But the carriers are continuing to spend and we believe they're focused on the long term and we will continue to support them and we're well equipped to do so.

Great. Thank you for taking my questions.

Our next question is from Chris Moore with CJS Securities. Please proceed.

Hey. Good morning. Thanks for taking a couple. Yeah. So on the steel side, it sounds like you're talking about pricing as of 4/21. Just theoretically, if steel does increase meaning from here, does that just you know, you can't reprice some of the backup. Does that just push out know, that some of the 2H earnings a little bit further?

Yep. This is what we're seeing. You know, prices for steel went up. They're starting to moderate. If you look at futures in the second half, they've actually come down. So that is affected in our guidance. But, you know, we visited a steel supplier in the last two weeks, the largest plate producer in the US. And they have capacity. They invested in their plant in Houston. Houston is close to our Brenham and Monterey facilities, so we're talking to them about know, how can we use their steel at a lower freight cost? They're also talking to us about more value-added operations that they can perform, like cutting the steel, doing some base plates, So, you know, whereas February, March steel was very volatile, I think we have a better line of sight and road map to where we'll be. Toward the end of the year. And net net, I'd say is positive to us.

Got it. Very helpful. The EPS guide stayed $17.20 to $18.80. It sounds like you have more confidence that you'll get above that midpoint. Is that a margin discussion? Are you more comfortable you get closer to the high end of the revenue guide? Just, you know, any thoughts there?

You know, we think we have a good shot at being above the midpoint for both revenue and EPS. And we feel better today. We're in a better position today than we were during our earnings call because of the work on tariff mitigation. But just as importantly, you know, we've taken a fresh look at our cost structure, and the results are promising. That is not included in our guidance, and it could be upside later in the year. But let me just talk a little bit about the cost initiatives. We're looking at the productivity in our factories. Avner and I went to, Monterey earlier this quarter. We're really happy with the improvements being made there. Know, we're focused on making sure they have steel and material in their first operations all of their time, get a better flow through Monterey. We have a lower, you know, average, cost per pulse, so to speak. Went through our El Dorado facility, same story. We're investing in CapEx. For capacity, but it's also gonna improve flow and improve our cost. But it's not just in factories. You know, we're looking at our back office. We're looking at our organization. Know, we have an effort underway in corporate to take a look at Stew at Zero Based. What really should be done in corporate? What should be done in segment? What should the cost of that be? And, you know, just as important, we're working with our suppliers. I'm really happy with the progress they've procurement teams on both steel, which we just talked about, but with our indirect. And when we look at these know, cost initiatives, you know, altogether, they could be quite sizable, $15 to $20 million once they're implement So we're in the early stages of that work, but, you know, we feel that it's in a good place. And that's why we're pretty confident about our total year 2025 and beyond.

Perfect. I'll leave it there. Thanks, guys.

Our next question is from Brent Thielman with D. A. Davidson. Please proceed.

Hey, Greg. Thanks. Good morning. Had a question on the infrastructure segment. It sounds like you know, pretty solid demand across the board in the US But I was curious just on the international sales exposure that you have. Are there some areas that you're monitoring? You know, what's sort of handicapped in the guidance from a demand perspective for that business group in particular?

Hey. Good morning. So overall, you know, we do we're a global company, and we do operate in global markets. And, you know, what we noted in the call is we had a slow start to the year mostly in our Asia Pac, specifically in Australia. Coming into the year, we had a weak backlog mostly on the lighting side, and it's just took a while for that to pick up. And we are positively we're happy about what we're seeing now in that business. The order rate has been improving in that region. And on top of that, you're also seeing the Australian government spending more money in infrastructure that helps our business there as well. So, you know, we're just wanna monitoring all the markets that we participate in. Our results in Europe are actually pretty solid for the quarter. So it's mostly around Australia, The lighting is where I'd highlight, but we're pleasantly we're happy with where we're seeing that the order is trending today, and that is all factored into our guidance.

Okay. Appreciate that. And then maybe just on ag, you looked Brazil been a meaningful market for you and preceding years. It sounds like you're starting to see some green shoots there, Avner. I don't know if you can elaborate on maybe the order trends you're seeing in that market, if this is a true recovery or just some catch up I know you had a tough year last year there, but curious any comments you have around Brazil.

Yeah. So, you know, I mentioned we had the Brazil dealers here in Omaha last week. We actually had a great meeting and conversations with our dealers there. And, you know, we believe it kinda bottomed out in Brazil and, you know, after a tough year, we're seeing stabilization. We're seeing order activity increasing. Into Q1. Q2 should also be a strong quarter for us. But, yeah, it's still not has recovered. I mean, the margins are still under pressure there. The soy the EBITDA margins are not as high as they were in the past, but improving. They're still profitable. And we're investing with our dealers in our growth and the potential, and we know that that region will drive growth in the future. You know, in fact, I have an opportunity to speak with leading economist from Sao Paulo and a former executive from the Brazilian market And while they're cautious about the short term, very excited about the long term, you know. Even if there are more of these trade tensions, between US and China, you know, Brazil is gonna benefit from that. The overall global demand is not gonna decrease. And even if it stays the same and the US farmer could negatively impact it, the Brazilian farmer will benefit from that, and they're investing there in infrastructure and in investments to support the growth. So, you know, we'll continue watching it. There's not a strong back over there, but we're pleased with the order activity improving. And, you know, on top of that, we also have our Middle East Africa project pipeline. That is very strong. That is robust. We're having a strong year in that area, you know, around the food security and countries are continuing to invest there. So I'd say even with a weaker North America, environment where we should expect Brazil into and the rest of the world to the weakness. Overall, pretty positive signs, and we'll keep on monitoring that.

Very good. Thank you.

Our next question is from Jon Braatz with Kansas City Capital. Please proceed.

Good morning, everyone. Good morning. Avner or Tom, you know, relative maybe where what you were thinking early on in the year, is your expectation for the North American irrigation market a little weaker today than three months ago?

Short answer is yes. We're gonna expect a tough environment. You know, in this type of uncertainty, the US farmer as we all know, he's gonna wait on the sidelines, and we see that, and we didn't expect to have a good year, and it's gonna be a challenging year for us. Having said that, you know, we're not gonna sit on the sideline. We continue to invest. We're investing in technology. As I mentioned, we're very pleased with the early adoption of our Accent 365 with our Icon solution. Connecting more of our pivots, creating that ecosystem, providing the grower with value proposition, making sure their equipment is up and running when they need it, and irrigating optimally. So and focusing with our strategic accounts. So we can we're gonna continue to invest. So when the market recovers, we'll be ready to execute But we should expect a tough year in North America in the ag market.

Okay. Tom, just a point of clarification. You mentioned in the first quarter tariffs cost you $3 million And your expectation for the full year is for it to be cost neutral Are you suggesting that you're gonna recover those $3 million in cost in the last three quarters of the year?

Yes. Yes.

Okay. So tariffs are a positive then. For the rest of the year.

Yes. For the okay. Alright. Alright. Thank you very much.

Yeah. Amy, I'll just add a little bit more color on the tariffs because, you know, it's obviously top of mind. I do want to point out and use this opportunity that I'm very pleased with the work our teams have done to manage the impact of tariffs. You know, they operated with a sense of urgency, you know, tariffs not new We've been dealing with tariffs for as a global company for decades. And we just got on it and you know, Tom gave all the detail about mitigating it, you know, as you think about us as a company and you know, with our presence in North America, I mean, our engine needs structures, they're heavy. Right? So if you think about it, but by almost by definition, we're not gonna be importing things from around the world. So, you know, our footprint here is in North America to support North America. We took these actions to local for local. And overall, mitigating their role. So I do want to use that opportunity just to say a very nice job by the team mitigating it.

Okay. Thank you.

Our next question is from Brian Drab with William Blair. Please proceed.

Hi. Thanks for taking my question. I first wanted to see if you could just put a finer point on the expectation for volume growth in utility and L and T this year. And what is specifically, what does the highway market look like and in 2025 and should we stop asking about are we gonna see, you know, impact from the highway portion of the infrastructure bill? Or is this the year?

Yeah. You know, I'll set up with the high level. You know, for the growth for the year for Valmont, you know, we have high level of confidence in our forecast. I'll just give you the main factors is why we feel confident about our growth. You know, we're going into we have a we have a billion and a half of a backlog which has increased, over the quarter. Just reflecting the strong demand we have in the utility space, in our projects in Middle East, You know, on top of that, we continue to invest in capacity Our capacity investments, they're ramping up. They're gonna support our growth as well. Specifically on the lighting and transportation. Right? The lighting activity started off. We had a slow start to the year, but the order rate has been improving for us, so that is a positive sign. Although the lighting business will be impacted, over the long term from pressure around, you know, for recession is to have. Around the transportation, that's been solid. Solid demand for us over the last several years to your point. You know, how much of that is driven by the infrastructure app It's hard to see exactly, but that does support continued strength for us. In that business. And overall, you know, we mentioned the pricing, the actions that we took that support sort of our outlook. So overall, you know, it's a dynamic environment. So we'll keep on managing and monitoring, but a lot of our business, they just they have long-term drivers and long-term megatrends. And those are not changing. You know, the need for energy connectivity, hardening, food security, border scarcity, all those long-term drivers are there. And we're operating with discipline, and we're positioned to capitalize on them and continue to drive growth.

Okay. Thank you. I'm just trying to gauge, you know, which of your businesses are what your it's actually expectation is for volume growth or decline in the businesses in 2025 just because, you know, you're forecasting sales to be flat for the year. Really, at the midpoint. And I know there's strength. You were talking about strength in some segments. And it's soft in domestic irrigation. So I'm like, for example, I guess domestic irrigation is gonna be down volume, but international irrigation is gonna be up. With strong international project activity and Brazil recovering. I just don't know on the how you know, can you can you make any more precise comments on what your expected expectation is for volume growth or decline? Are we expecting a because we just started off the year down for L and T. You know, significantly Is that a business that we think by the end of the year can actually see volume growth? Or is it gonna have a challenged year? And I'm just wondering that for all the subsegments.

Yeah. You know, I'll just give you the high level. You know, when you look at the infrastructure, we should expect mid-single digit, volume growth for the infrastructure With expecting you know, with the exception of solar, we should see growth in each one of those businesses on the volume side and overall very close to our long-term targets of mid-single digit plus. And that is after accounting from some of the deselections we've done this last year, the strategic deselections to improve our business performance, with FX headwinds. So overall, you know, we should have a good volume growth and sales growth in infrastructure. So hopefully that answers your question.

Okay. And then the last question I have is how has your if you could give us any insight into how your impression of your tariff situation, your USMCA compliance, has changed given, you know, that you did highlight you know, how you have the significant shipments from Mexico into the US and at first, you thought they wouldn't be tariffed if it was US steel, then maybe it was gonna be tariffed if it's US steel. Now, you know, how has what has changed in the clarity you've been given in terms of USMCA compliance, I guess? And I don't know. Just any insight into how that is played out and, you know, your impression of those rules that you have to play by.

Brian, our Mexico operations are USMCA compliant. We feel very good about that. And, you know, I would just add, you know, we're all concerned about the economy. We're all concerned about tariffs. And every day we come into work, and we manage the tariffs, and we manage our cost. And if events change going forward, well, we manage the tariffs going forward. But while we come in every day to look at tariffs and costs, focused on the long term. And I think that's something that you know, we really want to get across in the call. Think about everything that we've talked about just on the call so far. We talked about cost work that could be $20 million or above. We talked about expanding capacity to meet able to meet this volume growth in utility and every time we spend $100 million, we'll get a dollar EPS going forward. We're actively repurchasing our shares Our share repurchase authorization is $700 million, that's over 10% of our market cap especially today. We know we have some upside in international ag. And that's both on our tech products and more. So, you know, we feel that we're managing through the near term. We're concerned about the economy. But think we're putting in actions that are very accretive to EPS. Over the next two to three years. And we don't need a great economy to be accretive to EPS. We need a decent economy, and that's why we feel pretty good about this.

Got it. Thank you very much.

We have reached the end of our question and answer session. I will now turn the call over to Renee Campbell for closing remarks.

Thank you for joining us today. A replay of this call will be available for playback on our website and by phone for the next seven days. We look forward to speaking with you again next quarter. This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on assumptions made by management considering its experience in the industry where Valmont operates, perceptions of historical trends, current conditions, expected future developments and other relevant factors. It is important to note that these statements are not guarantees of future performance or results. They involve risks, uncertainties, some of which are beyond Valmont's control, and assumptions. While management believes these forward-looking statements are based on reasonable assumptions, Numerous factors could cause actual results to differ materially from those anticipated. These factors include, among other things, risks described in Valmont's reports to the Securities and Exchange Commission SEC, company's actual cash flows and net income, future economic and market circumstances, industry conditions, company performance and financial results, operational efficiencies, availability and price of raw materials, availability and market acceptance of new products, product pricing, domestic and international competitive environments, geopolitical risks and actions, and policy changes by domestic and foreign governments. The company cautions that any forward-looking statements in this release are made as of its publication date and does not undertake to update these statements except as required by law.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.