Greetings. Welcome to Valmont Industries, Inc. Second 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. Please note this conference is being recorded. I will now turn this conference over to your host, Renee Campbell, Senior Vice President, 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 second quarter 2025 results. Both the 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. To stay updated with Valmont Industries, Inc.'s latest news releases and information, please sign up for email alerts on our investor website. We'll begin today's call with prepared remarks, 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 second quarter highlights and key messages summarized on Slide four. We delivered solid operational results this quarter, reflecting the dedication and resilience of our global Valmont team. We want to thank our employees for living our core values and delivering for our customers every day. Sales grew modestly, driven by strength in utility, telecom, and international agriculture. Our teams executed well, driving volume growth in key markets while advancing our long-term strategy. We remain deeply confident in the end markets we serve, which are supported by powerful long-term growth drivers. Secular megatrends, including the energy transition, infrastructure investment, and global demand for food security, offer significant potential for our business. We have intentionally aligned our unique strengths with these trends. When I became CEO two years ago, we laid out a clear strategy to simplify the business, focus where we lead, flatten the organization, and direct our resources to the areas with the best long-term returns. That framework has not changed, and we've executed consistently against it. This quarter represents the final step in the realignment work we began in July 2023. We exited unprofitable parts of solar, took a hard look at access systems, and completed targeted changes across the company, removing layers, reassigning talent, and sharpening accountability. These actions resulted in $112 million of nonrecurring charges, but they were decisions that are fully aligned with the strategy we set from the start. Having now finished the realignment work, we have the right structure in place, and our teams are focused. We're in a stronger position to scale and execute more effectively and drive long-term value creation. With that foundation set, we're focused on what's next: accelerating growth, driving greater efficiency, and…

Thank you, Avner. Good morning, everyone. Turning to slide seven, I'd like to expand on the actions and associated one-time non-GAAP items recorded this quarter. Deliberate steps were taken to better align the organization and drive growth and profitability in the coming years. We reduced our headcount primarily in solar and North America agriculture to reflect near-term market conditions. We transitioned many of these team members to support growth in infrastructure and international agriculture. We reduced management layers across both segments and corporate to enable quicker decisions and greater agility. Manufacturing operations were integrated into the segments to drive accountability and improve collaboration between commercial and operations teams. In addition to the realignment, we further refined our portfolio. As you know, solar has been a growth headwind for some time, compounded by recent changes in government policy and regulation. Therefore, the leadership team decided to exit North America and significantly downsize our solar operations in Brazil for both our infrastructure and agriculture segments. The second portfolio action was within lighting and transportation. We reviewed the performance and outlook for the APAC Access Systems business, leading to a goodwill impairment tied to the revised financial outlook. All in, these actions resulted in the following nonrecurring financial impacts: non-cash long-lived asset impairment charges of $91.3 million, including $71.1 million for goodwill and intangibles related to the Solar and Access Systems businesses, and $20.2 million for other assets that will no longer be utilized. Cash realignment charges of $9.8 million, primarily severance, and other nonrecurring charges of $10.9 million, primarily costs to fulfill contractually required payments for system licenses no longer needed, and an estimated liability to exit a joint venture ag solar business. Described in the footnote on pages two and five of the press release, as a change in redemption value…

Thank you, Tom. 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys to allow for as many questions as possible. One moment while we pull up for questions. Our first question is from Nathan Jones with Stifel. Please proceed.

Yeah. Thank you. Good morning. This is Adam Farley on Nathan. Morning. I wanted to start on the solar business. Maybe you could talk about the decision to exit these pieces, what's left in the portfolio, and why being in solar at all is the right idea going forward.

Well, thank you for your question. You know, as I mentioned, we are done with all the portfolio actions that we've taken. We decided to exit the North American Solar market due to the environment. It really no longer supported the scale for the returns that we expect. Add to that the regulatory uncertainty was already a very competitive fragmented auto market, so we decided and we were not able to provide strong returns. So we exited the market. Now we have stayed in Italy. In Italy, it's a very different story. Our Italy solar business is profitable. It's supported by EU funding. It benefits from very strong brand equity, leadership position, we have strong engineering depth, and strong customer track. So it is also a market that we know very well and we continue to serve effectively. We've also decided to stay in Brazil. Now Brazil is more volatile. So what we've done there, we built a lean and scalable platform. And we do have a meaningful share there. So we're managing this business with discipline, we're monitoring the energy prices, the interest rates, and we're basically aligning our capacity and demand. So to sum it up, you know, both of these businesses are aligned with our infrastructure strategy, and we're running them with focus and return discipline.

Okay. Thank you for that color. Does exiting the solar business add to EPS assuming it was lower or loss-making?

Yes. It does. It was operating at a slight loss, and it will be profitable in Q3 and Q4.

Okay. Thank you. And then maybe shifting gears to recent impact from steel prices. How does the impact of the increased tariff on steel impact your outlook? Are there any further price increases that are necessary at the current price level?

You know, when we look at pricing, the way we look at pricing is it's the value that we provide to our customers. Right? And there's strong value, especially in this dynamic environment due to our strong innovative solutions, our engineering expertise, we have strong manufacturing footprint and capabilities, and a strong dealer network. So overall, we have a strong value proposition. Now, of course, pricing is part of the equation, and we do look at our cost as well. But the other important is our products provide strong ROI to our customers if it's our engineering structures, if it's our pivots, they provide strong ROI and they'll support their long-term strategy. So from that point of view, we continue to take pricing leadership. And we haven't seen any impact on the demand. Tom, you want to just maybe add a little bit of flavor on the actions that we're taking?

Sure, Avner. Thank you. You know, steel, the pricing is stable, which is very encouraging for us. And you may be referring to the increases in tariffs on steel. We are using primarily US poured and melted steel and therefore, we feel in a good position. In tariffs in general, I would add, you know, keep the term profit neutral. And that's what we see right now. That's primarily because we have 24 plants in the US serving our US customers. I also wanted to say, you know, our team managed it very, very well. In addition to pricing that Avner talked about, it was about changing our supply chain, changing sourcing, making more things in the US. So steel, we feel very good about where it is today.

Great. Thank you.

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

Hey. Good morning, guys. Thanks for taking a couple. Yeah, maybe pick up on where Tom left off on the roadmap adding, you know, $500 to $700 million revenue, $7 to $12 EPS. Obviously, lots can change over the next three to four years. But sitting here today, is it likely, you know, is that back half loaded, or is it reasonably smooth to get there?

No. It's smooth, and it is definitely not back-end loaded. We expect to start seeing some of these improvements in revenue and EPS in Q4. We expect to step up in 2026. So we feel very confident about it, Chris.

Yeah. And, you know, Chris, let me add, a lot of these initiatives that we're taking to drive the $7 to $12 EPS are really grounded in some of these strong megatrends that we're seeing in our market. If we start with the catch the infrastructure wave, we're seeing strong market demand driven by really undeniable powerful megatrends. Think energy transition, electrification, load growth. I mentioned that Jefferies report earlier this morning, which is another data point. So we're seeing very strong demand in the utility space. And we've already taken actions to Tom's point around investing in our capacity and capability, anything from capital to automation, AI, and talent. So we're well on the way in our investments. We've managed that very tightly. We have KPIs aligned with that. And we're very confident in our ability to drive the utility space as well as agriculture. We're focusing on areas like aftermarket and ag tech that provide a very strong value proposition to the grower ultimately. Having the grower in mind, how do we help them achieve their goals, their profitability levels, and we have initiatives in place mentioned earlier around our e-commerce platform, our Accents 365, Icon, etc. So even in a tough ag market, we're able to scale and provide those benefits to the growers. So overall, we are confident in our ability to execute on these plans and ultimately provide strong shareholder value.

Got it. Really helpful. Maybe my follow-up is you were just talking a little bit about Ag. And I know you don't break out the margin separately between international and North America, but can you maybe talk a little bit about on a relative basis where the margins in international are now versus maybe a year or two ago and where they could be in a couple of years, you know, given some of the ag tech, etc. Just trying to understand the drivers.

That's a good question. So the margins in international are improved from where they were a year or two ago. You know, the international teams both in Brazil and in EMEA have spent a lot of time on their factories. We were just down in Brazil this quarter, and it's very clean. It's got a great flow. These are things that help contribute to better margins. You know, in our EMEA business, they're very focused on large projects, and we need to be very profitable on these large projects. And there's been a lot of actions taken that give us great confidence going forward. Chris, I hope that answers your question.

Yeah. It does. I guess just on a relative basis, a couple of years out, international versus North America, you see them at parity. You see one of them still being, you know, meaningfully above?

Yeah. So Brazil and North America at parity and EMEA probably slightly below, but they've much closer closing the gap versus a couple of years ago.

Perfect. I will leave it there. Thanks, guys.

Thanks, Chris.

Our next question is from Jean Velez with D. A. Davidson. Please proceed.

Hi. Good morning. Thank you for the time. Morning.

Morning.

In telecom, can you talk about the visibility you have for the rest of the year? And expanding on that, would you provide just a look at whether there's further potential strength in 2026?

Well, thank you for the question. I'll start off with, you know, telecom is not a platform business. But having said that, telecom came in very strong this quarter, you know, over 40% year over year. And that was really driven by, you know, increased carrier and tower activity, you know, specifically around carrier technology upgrades, additional spectrum deployment, so particularly tied to 5G densification and fixed wireless access. And these are all components of the broader digital infrastructure expansion. But, you know, beyond what's really important here is that beyond the market momentum, the growth reflects our competitive position. You know, we provide engineering support, we have fast and reliable turnaround, we have integrated solutions that really, if you think about the customer, it makes their execution much easier. We're expecting another strong quarter in Q3. Some of that is we do have some easier comps there. And Q4 is going to be more normalized growth, but still very strong, close to double-digit growth in that business. So overall, the carriers are going to continue to spend. We are aligned very well, and we should take that momentum into 2026. So telecom is a smaller part of our portfolio, but it is very margin accretive. And it's strategically aligned with the long-term trends in broadband and connectivity.

Thank you. Could you perhaps just expand a little bit on what these product alignments with the key carrier programs are?

Yeah. So, you know, when we talk about, you know, I'll give you an example, you know, fixed wireless access is a good example. But overall, right, as they work on the whole spectrum of deployment in the mid cell, small cell, you know, we have a very strong product offering to support both the carriers and the tower providers, to make sure they have all the engineered solutions they need to support them in any part of their deployment. So as I mentioned, you know, we're aligned with their programs with a broad product offering. Anything from macro towers, concealment solutions, components that go on towers, if it's antenna mounts, etc. So we're very broad in this space and provide them a strong set of solutions.

That makes sense. Thank you so much. And if I could just sneak one last one. For T&D, I just wanted to perhaps get a sense of whether you expect greater second half versus 2024 second half. And just perhaps a few more comments on what aspects of that business segment are driving this growth? Is it distributions or substations? Yeah, that would be great.

Okay. Sure. So overall, I just mentioned, right, it is supported by very strong megatrends, and it's really across the board. Right? Transmission is the largest part of our business, but the spend is in transmission, it's in distribution, it's in substation. We're seeing strength in all of these three areas, and we expect that to continue for the foreseeable future. We'll continue to invest in our capacity, and all that will support a very strong second half. We're going to grow in excess of double digits in the second half of the year. So we're very pleased with how this is shaping out. In fact, last week, we had the strongest production week ever for Valmont. So it is very encouraging to see, and the future looks bright in this area.

Alright. I appreciate the color there. Hop back in the line. Thank you so much.

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

Good morning, everyone. Tom, could you go over the SG&A cost increase in the quarter? Can you give us a little bit more details of why it was so high?

A lot of movements, Jon. So first, I would say Q3 and Q4 should be back to the mid-$170 million range. You know, we did have a year-over-year, we had higher variable selling costs, and some higher spending in IT. I would say that is a one-time type item. You know, we're putting a focus on better systems and using AI technology for a lot of our scheduling and back-office functions. There were also some, you know, accounting-type things. We have a deferred compensation plan. And you know, the accounting is a little tricky in that the gains in that fund show up as an accounting SG&A expense. That's offset below the line that you'll see. There's just a lot of stuff going on, but you know, we feel we have a good handle. We feel with the initiatives we have going on that there would be steadily decreasing as a percent of revenue going into 2026, and please expect $170 million for Q3 and Q4.

Let me just add on the SG&A. Tom made very good points there, but as we move forward, we have a lot of initiatives to improve our efficiency in that space, which really allows us to keep on investing around tools such as AI, which we discussed, innovation, etc. So we're really managing that to both reduce our cost as well as provide room to invest in our customers.

Okay. And Tom, I think you mentioned that there's some, as you look ahead, maybe some realignment costs associated with North American irrigation. Are we talking headcount reduction or anything like that?

Yeah. So that's been completed. And the cost to do that is in our Q2 financials. So you should have some pretty clean financials going forward, with improving revenues and improving margins.

Okay. Alright. Thank you very much.

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

Hi. Thanks for taking my question. I just want to start with a high-level question. We talked a lot today about the wave of demand coming in infrastructure. I was just wondering if you could, you know, talk a little bit more about what signs you're seeing, what conversations you're having, what projects you're seeing develop that give you the confidence to add, you know, it sounds like you're adding about 30% to your capacity in transmission and distribution. I know it's more than, you know, just a report from an investment bank and other things, but it just like, if you could give us some more tangible signs that this wave is really coming in the next year or two for you, that would be great.

Yeah. Of course. Well, thank you for the question. And so, of course, there's a lot of indicators and reports around, you know, the strength in that market and energy transition. But, of course, that's not how we make decisions. We are very close to the customer. We're the leader in that space. We have discussions with our customers on a daily basis to align with their long strategic goals. So we are linked with them as they move forward and put their capital plans and they work on their strategy, they come to us to help them provide strong solutions, innovative solutions around how to support them with our very large footprint, our large capabilities and capacities around transmission, substation, around our steel, concrete, composites. So we're there. We hear the voice of the customer, which gives us a high level of confidence. Now one last point on that is, of course, we watch the entire market to assess the capacity. The whole industry is under capacity, so very mindful of that. So we're adding flexibility. Capital is one area. But the other area that we're doing is we're focusing on having the right talent, automation, and we're piloting AI, which I believe will be another strong driver for us to drive additional capacity and capability. So this is pretty tangible, and we have a $1.5 billion backlog, which is another indicator that goes into next year. And we feel pretty good about it.

Great. Yeah. Thanks, Avner. Can you also just talk about the outlook for the lighting and transportation business? You know, that it was down about 10%, I think, in the quarter. Is there something, you know, that you're seeing that could turn that around? Or is it still, you know, a lot of uncertainty with commercial construction, etc.? And is there any hope at this point that, you know, the infrastructure bill that's now, like, five years old is going to ultimately be a tailwind at all in that business? Thanks.

So I'll start off by saying, you know, L&T, it is a very profitable business. But, you know, this quarter results did come in below our expectations. We did see some softer market conditions in Australia, and we did have some execution challenges in both access and the US. But, you know, we took action. We simplified the structure. We aligned our operations and our commercial teams. And we strengthened some of our leadership. So these changes are in motion, and we should expect to see improved performance. Now as it relates to tailwinds that we're seeing in that market, the DOT spend remains strong even, you know, even with or without the IIGA bill. I mean, it keeps to be steady. There's a lot of need to rebuild infrastructure. So the DOT business remains strong. L&T today is weak, mostly due to single-family housing starts. But when you look into the horizon, there's a shortage of housing. So we do know that it will come back, and we scale and position this business to execute. So we will see steady performance over the next quarters and into 2026, driven by our execution efforts specifically.

Okay. And then one more quick one just for, I guess, you or Tom or anyone. But, you know, when you look at the longer-term guidelines that you gave us for the financial model today, I'm getting, you know, I think low double-digit earnings growth over that forecast period, that three to four years, maybe, like, 12%. Is that, I just want to make sure that I'm aligned with how you're thinking about it.

Yes, Brian. You are aligned. Good seeing you at your conference.

Alright. Thank you, everyone. Have a good day.

Thank you. We have reached the end of the 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, and we look forward to speaking with you again next quarter.

These slides and the accompanying oral discussion contain 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 industries where Valmont Industries, Inc. 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, including tariffs. The company cautions that any forward-looking statements in this release are made as of the publication date and does not undertake to update these statements except as required by law. The company's guidance includes certain non-GAAP financial measures, adjusted diluted earnings per share, and adjusted effective tax rate, presented on a forward-looking basis. These measures are typically calculated by excluding the impact of items such as foreign exchange, acquisitions, divestitures, realignment or restructuring expenses, goodwill or intangible asset impairment, controlling interest, changes in tax laws or rates, change in redemption value of redeemable non-controlling interest, and other nonrecurring items. Reconciliations to the most directly comparable GAAP financial measures are not provided as the company cannot do so without unreasonable effort due to the inherent uncertainty and difficulty in predicting the timing and financial impact of such items. For the same reasons, the company cannot assess the likely significance of unavailable information, which could be material to future results.

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