Astec Industries, Inc. ($ASTE)

Good morning, and welcome to Astec's 2026 Investor Day. My name is Steve Anderson, and I'm the Senior Vice President of Investor Relations. We're happy you've joined us today. I've been with Astec for over 26 years, and I can tell you, I've never been more excited about the future of Astec than I am right now. You'll learn more about the reasons why over the next 90 minutes. Before we get started, I'd like to share some details about today's event. The event is being webcast and recorded for replay. Presentation materials are available under the Investor Relations tab of the Astec Industries website at www.astecindustries.com. We don't anticipate any interruptions during the presentation that we are broadcasting from our manufacturing facilities in Chattanooga, Tennessee. In the unlikely event you hear any noises from our production areas, please excuse us to know that any disruptions will be quickly resolved. Some statements we will make are forward-looking. For more details about the risks, uncertainties and assumptions relating to these statements, please see our safe harbor language in this presentation. We will also discuss GAAP and non-GAAP financial metrics. We encourage you to familiarize yourself with our disclosures and reconciliation tables as you consider these metrics. Before we go deeper, I'd like to introduce you to our executive leadership team, many of whom you'll hear from today. We are leaders with over 130 years of combined experience across infrastructure, materials, manufacturing, engineering, finance, innovation and human resources. For our agenda today, we will cover 5 primary topics: who we are, the next era of growth, the megatrends shaping our markets, how we operate the Astec Build to Connect way and ultimately why we feel Astec is a compelling long-term investment. Questions can be submitted via the chat box on the webcast page during the presentation and be answered during the brief question-and-answer session at the conclusion of the presentation. With that, let me turn the presentation over to Jaco van der Merwe, our President and Chief Executive Officer.

Thank you, Steve. And I appreciate your kind words about how you view Astec today. Welcome to Astec's 2026 Investor Day. I want to start by thanking my team and all our partners who made this day possible. Secondly, I want to thank each of our participants on the call today. I trust that you will find the next 90 minutes insightful and that you will walk away as excited about Astec's future as we are. Since 1972, Astec has provided innovative solutions and exceptional customer service to the Rock the Road industry. Over the past 3 years, we are focused relentlessly on building a solid foundation, improving consistency, strengthening our balance sheet and proving we can execute. Today marks an inflection point. This is the moment where we describe the future of Astec and how we will further improve consistency, how we will enhance profitability and lastly, how we will grow. Our purpose, reason, core values and 3 strategic pillars are ingrained in who we are, how we operate and how we win. Achieving Astec's full potential will take focus on multiple fronts. Growing our recurring revenue mix and bringing industry-changing solutions to the market will be key for us to reach the long-term goals we will share with you today. We like the industry we play in, as demand for infrastructure, natural resources and recycling will continue to grow. I am very proud of our team, our product portfolio, our strong brand and as we have and are still building with our customers. Before we get into details, we want to start with who we are. This short video brings aspect to life. Our people, our purpose and the work behind the results we deliver. [Presentation]

Quite a fantastic overview of Astec. At Astec, we are Build to Connect. Think about it this way. Everything you drive on, everything you land on, your house, hotel or the office you are in right now has probably needed the products Astec makes during construction process. We connect people, families and the industries to the future. What did you see in this video, products, manufacturing sites, customers sites, I saw so much more than that. I see a company and industry that is made up of hard working people. People who make things happen. Focusing on our employees and our customers are 2 of the 3 strategic pillars, the third being innovation. Having engaged enabled and empowered employees is the key to success of our business. Part of our reason is to provide life-changing opportunities for our 4,500 team members. When we do this well, the results will follow. I want to share one of many examples with you. Kim Graf is a General Manager at one of our manufacturing sites. Kim started with Astec in 1992 at our front desk. She slowly worked itself into HR team, when she later became the HR manager. Her ability to communicate well made a natural choice when the GM position became available a couple of years later. Today, she runs one of our best facilities. Today, we have over 4,500 employees and 26 manufacturing sites around the world. We generate 80% of our revenue in the U.S., of which approximately 34% is from parts and service. Over the last 3 years, this team has generated a total return for our shareholders of 74%. This is an example of what is possible if we work together and use our resources in the right way. Astec operates in 2 strong segments: Infrastructure Solutions and Materials Solutions. Both these segments have strong and growing parts and service businesses. The Astec brand is well known for quality and customer service in asphalt, aggregates, mineral processing, and concrete production industries. Our product brands provide customers with a connection to legacy brands and companies started or acquired by Astec over the last 50-plus years. I am very proud of how our 2 recent acquisitions have integrated into Astec and our branding structure. Our 2 operating segments have truly assembled an unrivaled product portfolio that reflects the products our customers need to be successful. Each segment has a strong new product development pipeline, combined with our spec digital solutions. We are uniquely positioned in the Rock to Road space like no other OEM in North America. As an example of our focus on new product development, we have showcased and launched over 25 new or upgraded products at the March 2026 CONEXPO trade show. Products are important by providing our customers with solutions and support is what differentiates us in the market. Our parts and service business now makes up approximately 34% of our total revenue, growing to 40% to 50% will ensure we provide our customers with the support they expect from us while improving our consistency and profitability. Launching our Astec signal platform with CONEXPO 2026 was an exciting for us, moving away from products with software to providing customers with intelligence from products is transforming how we do business. Although Astec generates 80% of our revenue in the U.S., we have significant market share growth opportunities. Parts and service, mining, aggregate production, recycling selected adjacencies like industrial heating are just a few examples. Internationally, our products and brands are recognized well beyond our size and install base. We have a blank canvas internationally, supported by various manufacturing and sales facilities in key markets around the world. We will continue to grow our international presence through organic and inorganic growth, finding local manufacturing closer to key markets is part of our acquisition focus. To bring this to life, we want to show you how Astec comes together from raw material to finished solutions and from plant to the job site. This is our Rock to Road story. [Presentation]

Iron becomes smart, I love that expression. I mentioned earlier that providing customers with intelligence from equipment will be a key differentiator for Astec through our signal platform helping customers manage and utilize their equipment in a safe and more efficient way will become a necessity in an environment of inflation and customer consolidation. Launching Astec's Signal platform at CONEXPO 2026 was a huge milestone for us. This platform will enable us to further grow our parts and service mix and our customers to run equipment safer and more efficiently across the Rock to Road portfolio. Imagine an environment where you have 100% visibility of where your fleet is located, how well it's running and how you operate in the most efficient way. In an environment where you use signal to drive intelligence and operational improvement. An environment where you minimize equipment downtime through smart services, telematics, all from your smartphone or tablet, environment where you run equipment remotely or autonomously in a safe and productive manner. An environment where customers use our smart services to fix or prevent problems before they happen. These are all elements becoming a reality as we speak. Focusing on customer service has been an important part of our legacy since Astec was founded over 5 decades ago. When our customers are successful, we are also. Our customers rely on us for support, training, efficiency improvements and to bring industry-changing innovation to them. Our customer base is very diverse. From a new entrant to the market who chooses us because of our support expertise to the large industry consolidators who need visibility and performance across their off-the-road portfolio. We engaged all of them at all levels in their respective organization. Our teams are available 24/7. We are, however, taking this to the next level. During 2025, we launched our Astec customer-focused principles. The A representing acting with urgency and empathy. We want to respond quickly and with care. The S represents simplify every experience, remove friction and make it easy for the customer. The T stands for take ownership, only engagement from start to finish and follow through. E represents engaging as one aspect, work together across roles and apartments to deliver a complete solution. And lastly, the C stands for communicate effectively, keep the customer informed throughout the engagement. We are very proud of the business that Dr. Brock and his founding partner started. Since our inception in 1972, Astec has grown through various cycles. Some were very successful and some were full of valuable lessons. As you all know, we grew through acquisitions. Our company started as a pure play asphalt loan producer. Entering the crushing and screening market was a natural adjacency when Astec bought Telsmith, JCI and KPI. The addition of Petersen, BTI and PowerPlay complemented the asphalt, crushing and screening businesses. In early 2017, Astec took a deliberate decision to enter the concrete plant market through the acquisition of RexCon. Since then, we have added CON-E-CO and BMH to become the leading suppliers of concrete plant equipment in North America. The acquisition of Mines gave us the opportunity build a digital platform that can support our businesses. Launching of our signal platform position Astec to meet the digital and AI needs of our customers. The acquisition of TerraSource Global added opportunities in washing, recycling and soft rock mining. Our most recent acquisition of CWMF was a great tuck-in business, which provides reasonable support to customers in the northern part of the U.S. As mentioned before, we are at the inflection point. Over the last 3 years, we have worked very hard to create consistency, improve our profitability, and we made the biggest acquisition in the history continue to grow. But we are not done yet. In fact, we see many additional opportunities to enhance all 3 elements: consistency, profitability and growth as we're into the next phase of our company's journey. We are excited about the opportunities for Grove, the markets we operate in and the Astec Build to Connect way we have been operating under for the last 3 years. We see various industry megatrends that will have a positive effect on our future growth. Recycling, reindustrialization, digital solutions and mining are just a few examples. As these megatrends connect with our build to connect business model, we will generate greater results. Our focus remains on growing our top and bottom line in a consistent, disciplined, yet aggressive manner. I will now hand it over to Brian Harris, our Chief Financial Officer, who will walk you through our long-term growth targets and financial capacity.

Okay. Thanks, Jaco. In this section of the presentation, we outlined our financial and operational targets for the next 5 years. These are the targets that management will hold themselves accountable for, and it's our intention to provide regular updates on our progress towards these targets in the coming quarters years ahead. While we do not expect improvements in performance to be upwards in a straight line, we fully expect to achieve these targets by 2030. And then in doing so, we will deliver significant shareholder value. Management has selected 4 performance metrics, which we believe to be the most relevant to investors, those that reflect best-in-class peer performance and those which are consistent with management's long-term incentive plans underlying closely with shareholder value creation. With that said, I would like to add a little color to each metric. Revenue growth CAGR of greater than 6% compared to our previous 3-year average of 3%. So you may ask why the acceleration in top line organic growth. Astec is at an inflection point where the coming together of innovative new products with our superior digital offering provides the opportunity to capitalize on the tailwinds from growth megatrends and favorable end markets. Our global footprint and brand recognition is a launch pad for growth in a number of key markets, and recent acquisitions have created increased scale and expanded the global installed base. Adjusted EBITDA margin is perhaps the most important metric by which the quality of our earnings is compared to our industry peers. From a relatively low starting .3 years ago, we have achieved a 440 basis points improvement, and we expect to build consistently at the pace of 75 to 150 basis points each year. This margin improvement is underpinned by a number of initiatives. Most importantly, growing the higher-margin parts and service revenue in our mix. Continuous improvement in our manufacturing efficiency and a relatively fixed SG&A base that can support a substantially larger business providing a leveraged P&L account. Return on invested capital is another critical performance metric for investors and management alike and foremost, we must ensure that our return on invested capital is exceeding our weighted average cost of capital, which currently sits at 8.5% compared to our reported 2025 adjusted ROIC of 11.5%. I will discuss our capital allocation priorities in a moment. But first, I want to emphasize that our goal is not to strive for a bigger and bigger ROIC percentage. But rather to grow the capital employed base upon which we generate a return, which exceeds the cost of capital. By doing so, we will generate significant economic profit. Consider an extreme example, most investors will prefer to earn a 20% return on $1 million of capital rather than a 50% return on $1,000 of capital, even though the rate of return on the smaller capital is higher. The last of our 4 metrics is operating cash flow, which is also a management incentive metric and one which will be driven by improved and growing EBITDA, a focus on working capital management and stable consistent maintenance capital expenditure. We are often asked about our capital allocation strategy. And we believe this question lends itself less to a specific answer and more to a set of decision rules. Starting from a balance sheet with almost 0 debt 3 years ago, Astec has been able to allocate capital in a prudent but value-creating way. The left-hand chart shows the $380 million of capital deployed over the past 3 years. During which time, capital expenditure has averaged 2.4% of revenue. Cash has been returned to shareholders through a long-standing dividend policy, and we invested $250 million for the TerraSource acquisition in 2025. This left the company with a net debt to adjusted EBITDA leverage ratio of 2x, well within our stated range of 1.5 to 2.5x. The right-hand column provides a forward look at the capital to be deployed in the 5 years from 2026 to 2030. Assuming a continuation of the current dividend policy, no share buybacks, capital expenditure at 2.5% of revenue and including the acquisition of CW MF in January 2026. Our capital deployed would be $409 million. However, this is just half the story because it would leave the company with a leverage ratio well below 1x. If we were to operate with a leverage ratio range between 1.5x and 2.5x, we have the capacity to deploy a further $400 million to $600 million of capital. Astec has developed a robust capital deployment decision-making strategy that will result in a positive NPV investment and optimal capital structure and excess cash flow return to shareholders in a value-maximizing way. Clearly, as a growth-oriented company, it's essential that we take a disciplined approach to inorganic growth. And to this end, we have developed a comprehensive playbook that defines the businesses that will be of interest and most importantly, those that will not be a good fit. Our 2 most recent acquisitions of TerraSource and CW MF are great examples of businesses that met all our acquisition criteria. Both transactions were compelling for different reasons that had the common feature of being EPS accretive in the first full year. The graphic on the left summarizes the critical elements of our acquisition playbook. Delving into these a little deeper. Recurring aftermarket parts and service revenue is important to increase our mix of higher-margin products and get closer to our peers that are often in the 40% to 50% range, enhancing the overall scale of the business will allow us to unlock synergies in procurement and the back office as well as leveraging our relatively fixed SG&A cost base. As we grow our digital service offerings, companies that can support our technology and innovation aspirations will be of great interest achieving leadership in our chosen markets, which are aligned with the macro trends will allow us to grow faster than the underlying markets being closely tied to our large-scale customers can further enhance our market position in an industry that is consolidating at breakneck speed. And often overlooked that something that Astec management is very focused on is how well the 2 cultures will fit together. History is littered with examples of acquisitions that look good on paper but failed due to cultural differences. As I said earlier, capital deployment revolves around a decision-making strategy with shareholder value creation at the center. Here are some of the big themes that will drive growth in the construction industry and inform our thinking around acquisition opportunities. The reindustrialization of America, whether this being basic manufacturing or the construction of large-scale data centers, consumes large quantities of aggregates and concrete. The growth in mining, particularly as it relates to rare earth metals will be another source of incremental revenue. The digital revolution that is upon us will drive automation along with innovative new technology that put data in the hands of operators in a more meaningful way than ever before. Companies that incorporate this technology into their equipment will derive new sources of revenue and access to a larger customer base. Lastly, the need to continuously reduce costs and improve efficiency will drive the need for equipment that can be more energy efficient, allow for increased use of recycled materials and reduced Astec. Astec has the breadth of product and global reach to service all these industry trends and importantly, has the capital available to do so while prudently managing debt levels. And now back to Jaco for a more in-depth view of the megatrends and why Astec is well positioned to take advantage of them.

Thank you, Brian. Our core business is within the infrastructure market. It is an attractive market segment that will need investments for decades to come. According to the American Society of Civil Engineers, if the United States wants to improve from a C report card grade to a B, we will need over $9 trillion of investment. As a reminder, the Infrastructure Investment and Jobs Act provided $1.2 trillion of investment with $379 billion for highways, $65 billion for Energy & Power and $69 billion for water and environment. We expect the next highway bill to be very focused on roads and bridges, and this portion could be as high as $600 billion. We have a lot of work to do as a country with about 4.1 million miles of roads and 623,000 bridges in tour or mediocre condition. Our customers operate in this space. The need for investment is clear, and it has bipartisan support. Our funding mechanisms need to reform and our company and industry are very involved with regulators to get this done. Astec is well positioned to respond and take advantage of the funding needed to keep our infrastructure intact. Both Brian and I talked about megatrends earlier that we believe will have a positive effect on aspect. This slide provides more detail on what sits below these megatrends. Movement in the macro environment cannot be controlled by the company, but many of the examples listed here will have a positive effect on aspect. Recent developments around data center growth is a great example. We know our markets and our customers use our equipment to take advantage of these megatrends. The release of our signal platform positions us well to benefit when our customers shift towards the use of digital platforms. Our Build to Connect way has been in place and refined over the last 3 years. We have a strong and clear purpose of Build to Connect. Our vision of building industry-changing solutions that create life-changing opportunities, both honors our legacy, but also explains what will make us successful in the future, innovation and employees. The 3 strategic pillars provide the foundation of our purpose and vision, engage employees, customer focus and innovative solutions. Our engaged employees will look after our customers, who will then reward us with business to fund innovation. Next, members of our executive leadership team will present on the 3 strategic pillars. Aletheia Silcott will start by talking about our team members. And then Michael Norris will talk about being customer-focused and developing innovative solutions.

Thank you, Jaco. Hello. I'm Aletheia Silcott, and I have the pleasure of serving our employees as the HR leader at Astec. I would like to share with you how our people approach directly supports our strategy, sustainable growth and operational performance. Before I get into the details though, I'd like to start with our people, the men and women who help us to be the success that we are today. This short video brings to life what it means to be an Astec employee and how being engaged, enabled and empowered directly supports our strategy and performance. [Presentation]

At Astec, our employees are guided by a clear purpose Build to Connect. That purpose shows up not just in what we build for our customers but in how we develop, enable and engage our workforce. And we believe that a high-performance culture with fully engaged employees is a competitive advantage, especially in a complex manufacturing-driven environment. So men and women at Astec are what makes us truly successful. They are the heart of our organization and the craftsman of our products. When we create a positive employee experience for our team members, they in turn, create innovative solutions and go above and beyond for our customers. Let me briefly walk you through how this comes to life and what we've been focused on over the last 3 years. First, living our vision of life-changing opportunities. In 2025 alone, more than 300 of our team members were promoted or to new challenges internally. This is not incidental, that's intentional. We focus on clearly defined career journeys and leadership development programs at all levels of the organization that allows us to grow talent from within. Why does this matter to investors? Because internal mobility protects institutional knowledge and lowers long-term talent costs. It also create stronger leaders who understand our products, our customers and our operating model. Second, establishing a high-performance culture. We drive consistency and accountability through our One Astec operating model, supported by a well-defined high-performance framework. This creates alignment across all of our functions and geographies and ensures that we execute with quality and discipline even as we scale. Our high-performance culture is not just about expectations, it's about clarity. Our teams know what success looks like, how performance is measured and how they contribute to our collective results. That clarity translates directly into execution of reliability and improved operating outcomes. Third, operational excellence driven by each and every one of our team members. A great example of this is our Win program, where employees submit improvement ideas directly from the frontline. To date, over 3,000 projects have been submitted, demonstrating a culture where grassroot ideas are grown and owned locally and benefit the entire organization. At the same time, we are investing heavily in lean capability. We currently have 93 manufacturing certification grade with 145 additional graduates scheduled for this year. This builds internal problem-solving capability and drive continuous improvement in productivity, quality, safety, all critical to margin performance. Finally, training and development and employee incentives, we offer more than 580 training courses spanning technical skills, leadership development and compliance. We also conduct a biannual Voice of One Astec employee engagement survey. This survey provides critical insights into the needs of our team members. We strive to be a best place to work. And the voice of the employee is paramount as we carry competitive benefits, wages and opportunities. We also take pride in recognizing our talented employees who make a lasting impact our organization. Programs like our BRAVO awards and peer recognition reinforce our winning behaviors and reward employees who deliver results aligned with our strategy. In summary, we foster a culture and a workforce that is empowered to act, enabled with the right tools and engaged in continuous improvement. For our investors, this means stronger execution, lower operational risk, better scalability and a culture that supports long-term value creation. Our people stand is not separate from our business strategy. It's a core driver of it. And now over to our Group President of Materials Solutions, Michael Norris, who's going to touch on our other 2 strategic pillars. -

Thank you, Aletheia. At Astec, everything we do starts and ends with our customers. We are a reliable provider of the world's renowned brands and top-tier solutions, and that reputation has been earned over decades of listening to what our customers need and delivering their expectations. This slide captures the foundation of how we put customers at the center of our business. First, we developed customer-focused solutions. We offer custom solutions spanning the full Rock to Road value chain. Our engineering teams work directly alongside customers to develop innovative answers to their most pressing challenges. This is not off-the-shelf equipment. It's the purpose-built technology designed for real-world job site conditions. And second, we focus on overall customer experience mentioned previously, our state customer-focused principles got every interaction with our customers. A great example of the impact, we have enabled our customers to improve their restocked proportion of their asphalt content by up to 20%, helping them operate more efficiently and sustainably. Third, customer training and support. We run dedicated customer schools designed to help operators get the maximum value from their tailored solutions. Annually, we train over 2,000 customers. Training is available in the classroom, in the field and through virtual sessions, meeting our customers wherever they are. This investment in education directly translates into better uptime and productivity for their operations. And fourth, we deliver an enhanced aftermarket experience. We have a global service team supporting all business segments, along with inspection services, specifically designed to prevent costly downtime. And back in all this up is over 1 million square feet of parts on the shale, ensuring timely delivery so that customers are never waiting on us. The bottom line is this, our customer-first mindset, it's not just a philosophy. It's invaded in how we design build, train and service. It drives loyalty, repeat business and ultimately, long-term value for our shareholders. Now we're turning to a short video that shows what happens when more than 50 years of innovation pushes [indiscernible] further. [Presentation]

Our customers told us something loud and clear. We don't just need machines. We need smarter machines, and that's exactly what we build. Take our signal connectivity suite and managing running a job site with real-time visibility into performance health and productivity, all unified across your entire Rock to Road fleet through one asset management dashboard. That's not a future promise. That's today. Think about parts and service. We built the tech portal. So your team can find the exact part they need in just 3 clicks, no catalogs, no hold times, 3 clicks in your ordering. At CONEXPO 2026, we launched our upgraded 25 new products. Each one backed by our disciplined phase-gate new product development process that ensures everything we release is ready for the real world, not just the showroom. Now here's where it gets exciting. Our advanced technology group is developing AI power simulation that are transforming the industry as we know it. Silobot uses artificial intelligence for more efficient inspection, assessment and reporting. Drop Zone uses AI detection for safe truck loading, and we're using extended reality as both and a service tool, which will allow our customers to walk through an entire asphalt plant or a crushing plant virtually before it's even built. This is what built to connect really means. It's not just connecting Rock the Road, it's connecting data, people and the future of the industry to the technology that will define it. Innovation is in the department of Astec, it's who we are.

Thank you, Aletheia and Michael. To add what Michael just talked about. Our focus on innovation and developing sustainable solutions provide several benefits for our customers, including operating within federal and state legal environments and obtaining permits for new facilities, driving cost reductions through energy and operational efficiency. Customers depend on us to keep doing product development and to ensure they can operate in a changing environment. This is an area where we effectively combine product and digital innovation to make the complete system more efficient. Astec is uniquely positioned in the Rock to Road space to deliver for our customers. Earlier in the presentation, Brian outlined the key performance metrics that we will hold ourselves accountable for and which we believe are of great interest to investors. However, we know that investors have a choice. And when they choose to invest in Astec, they do so knowing that our performance compares favorably with the peer group and best-in-class companies. Our recent share price performance and the total shareholder returns compare very well with our peer group, which demonstrates that a turnaround has begun at Astec, giving us the confidence to deliver even greater shareholder value in the future. Our 2030 targets also compare favorably with both peers and best-in-class companies, providing a compelling basis for investment in Astec. During full year 2025, we delivered 10% EBITDA for the first time since we started reporting adjusted EBITDA in 2016. We are committed to delivering our 2030 targets as we elevate Astec to new levels, 14% to 17% adjusted EBITDA, 13% to 15% ROIC and 25% plus operating cash flow growth are achievable targets. Our focus on growing our parts and service business, introducing new products and continuing our operational excellence journey are anchored by strong balance sheet. Executing our plans will position us well to deliver the 2030 targets to reinforce the investment thesis in Astec. I'd like to remind you of the growth drivers and industry tailwinds. We have a large number of new products launching over the next 12 to 18 months, which target specific segments of the market. Our growing parts and service business will expand margins. Public funding is stable and growing, and the public end markets are noncyclical. The industry megatrends promised multiple years of growth in the demand for construction materials and our positive cash flow and strong balance sheet provide excellent options for capital allocation. The flywheel multiplier effect of these growth drivers with the aspect Build to Connect way will supercharge the impact on shareholder value creation, reinforcing the case to invest in Astec. Thank you for spending your morning with us today. We really appreciate your time and interest in Astec. Putting investor money to work successfully as a big responsibility. The Astec leadership team says in that responsibility as we are. We know what we need to do to deliver our long-term results. We know what good looks like. We are dedicated to strengthen our parts and service business continuous improvement and bringing our industry-changing solutions to the market. Over the last 3 years, we delivered 74% of total shareholder returns. We focused on creating consistency. Now we are shifting our focus to further improve profitability and to accelerate our growth. Thank you. I will now turn the presentation back over to Steve.

At this time, management team is available to take questions. As a reminder, questions can be submitted in the chat box on the webcast page, and we will get to as many of those as we can. [Operator Instructions] But before we get started, I want to ask Jaco to introduce a key recent addition to the Astec team. Jaco?

Thank you, Steve, and to welcome Chad hardly this morning. Chad is our new Group President for the Infrastructure Solutions Group. Chad, you joined us on Monday. So I assume everything has already figured out by now.

Absolutely.

So we're very fortunate. Chad brings many years of experience in sales, manufacturing, running global operations to our team. So Chad, why Astec? I mean, what picked your interest in the business? And what are the opportunities that you see right now?

Yes. Thanks, Jaco. And great to be here with Astec. When you take a look at this business, extremely strong foundation, a lot of good things going on within the business, driving more consistency in the results. And then truly, it's just an inflection point that you talk about on the journey. So I think it's just an absolutely great time to be a part of the company. What I see is great people within the organization and truly from the shop floor all the way up leadership, the passion, the engagements that I've seen has been really, really good. And I think right now, it's just really about time to accelerate, right? So the consistency, that is starting to happen. So that's great. A couple of other things I would just say, the innovation, the digital piece of things, that ecosystem and how this business has a portfolio to really drive a broader industry is great. And so all in all, I just think it's a great time to be a part of this company and just I see the passion, and I see the opportunity within Astec.

Yes, absolutely. And we definitely welcome you to the team and look forward to seeing what you brings to the table for us.

Yes. Thank you.

Thank you, Chad. And now for a question-and-answer session. Our first question goes to Jaco. Can you elaborate on the most important drivers for margin growth over the next 5 years?

Yes. As part of our presentation today, we talk about growing our EBITDA margin from 14% to 17%. And we know that really aggressive target. But there's 3 significant focus areas for us. Number one is growing our parts and service business. It gives us a huge opportunity to connect with our customers on a daily basis and to make sure our customers' equipment are running as they want them to run. Secondly, we see a big opportunity still in improving our own internal operations, manufacturing, sales and operations planning, improving quality, the state of our inventory so many opportunities from an operational excellence point of view. Lastly, we're very excited about our new product development pipeline. And just recently at CONEXPO, we launched over 25 new or significantly upgraded equipment. So that pipeline is healthy. Between those 3 focus areas, we feel margin can be driven into this range that we quoted. But we also see some efficiencies from an SG&A point of view. Right now, we know that we have some room for improvement compared to our peer companies.

All right. Thank you, Jaco. Next question, I'll direct to Brian. Brian, how much of your anticipated revenue and margin growth will be organic versus inorganic?

Yes. The vast majority of the revenue growth that we have in the next 5 years is organic and for the reasons that Jaco just mentioned. But there are a couple of other areas. One, of course, is the inorganic growth that we've got from CWMS first year, we thought that'd be on January 1, 2026, so we have a full year in year 1 of that 5-year plan. And then also, we have the second 6 months of the TSG acquisition, which we closed in July of last year. So both of those would be incremental. But everything else that we have in the plan 5 years is organic growth.

Thank you, Brian. Next question, I'll direct to Michael Norris, Group President of our Materials Solutions segment. The Materials Solutions segment went through a down cycle that has shown recent improvement. How do you see the cycle playing out over the next 5 years?

Yes. Thanks for the question, Steve. And Material Solutions is definitely on the upswing. If we take a look at the cycle a little bit and think about the last 2 years, it was really impacted by high interest rates and how that impacted our business was that our big producers that use our equipment, they limit their investment in capital. The high interest expense really impacted our channel partners' ability to reinvest in their inventory. We had high inventory levels across our own peer group. But I think if you think about it now, that's changed our customers, they're used to working in this high interest rate environment today. And we have increased demand from infrastructure spending, data centers are driving a lot of interest in our business today. We also have TerraSource that joined us that gives us a lot of new markets that we can go into. I think if you think about energy, you think about fertilizers, special minerals like lithium and those types of things. And those markets, they have a different cycle than what the traditional get market has. So I think we have opportunity and durability in that cycle. And also, I would say that TerraSource brings thousands of assets for us to harvest the aftermarket as well, and it just gets us closer to our 40% to 50% target of aftermarket. So I think we're in a good place. Our portfolio is strong. And I think we're at the right time in the cycle to be able to grow this business over the next several years.

All right. Thank you, Michael. And for Chad, Chad, can you tell us about your operational, commercial and manufacturing experience and how they relate to Astec?

Yes. Absolutely, Steve. I think the experience I've got centers around a lot of the themes that Astec is really on disciplined execution, building strong teams thinking about the innovation pipelines, everything. It's all been things that have been experienced in my career. Transformation is another thing. Again, this inflection point that we talk about, been through a lot of journeys of transforming parts of the business, bringing different parts of the business together. And I think there's a lot of that opportunity here within Astec. And then customer focus perspective, really bringing innovation, industry solutions, digital, all those things together as you have an acquisitive company, there's just broader aspects that you can bring solutions to. So I think those are all things that I have a lot of passion for and have a lot of background in. So I just feel like the fit of these things that with everything that's been talked about today and the experiences I've had, sticking to disciplined execution, building strong teams, all those things really come together.

Thank you, Chad. I'll direct this next question to Jaco. With Signal, how much of the rollout is from retrofitting installed Astec equipment versus a possible accelerator in equipment replacement demand?

Yes, that's -- Steve, that's a really good question. Signal is obviously a platform that consists of various pieces and included in there is controls, obviously, in the future, telematics, management capabilities. So today, every piece of equipment that goes out is signal ready. But there is a significant opportunity for us to go in the retrofit. And that cycle has already started. We are very fortunate that various of the big players in the market that have chosen our solution as the platform for the future. And we think this business can grow significantly over the long term. And it's going to be a mix between new installations, but also retrofits.

All right. And as a follow-up and related question, Jaco, can you discuss how you plan to monetize the new Signal digital platform and how the digital megatrend plays into your 2030 targets?

Yes. So obviously, Signal and monetizing a product like Signal is something new for Astec. Our teams, our product management teams have done a lot of work around that. And we see various channels on how to monetize this. First of all, obviously, sell the technology as part of the new product that we sell, selling controls for plant upgrades or retrofits. But long term, I think there's an element of license fees as you go, and it becomes more a way for the customer to run their business versus just the product. I will say Signal, obviously, as a product, we want to monetize that. But long term, our goal is to use signal to drive smart services and with that then sell more parts to our customers. I can see a future where we use signal to provide services to our customers to provide spare parts for them without even them interacting in the process. They will trust us to make sure they keep their machines running and their equipment running in the most efficient way.

Thank you, Jaco. Brian, I'll direct the next question to you. How much revenue can you support with the existing level of SG&A? And will SG&A need to grow as you expand internationally?

Yes. So to look today, our SG&A percentage of revenue is about 19%. We know that's high relative to our industry peers and higher than we would like it to be. But we've talked about having this leverage P&L account. So the G&A portion of that corporate back office expenses and the infrastructure that we need to support being a public company is relatively fixed. So as our top line grows, then we'd expect that percentage to come down. Now obviously, as we grow our sales organically, we may need to flex our sales teams and our sales expenses appropriately. But the SG&A will not grow at the same kind of pace that we see our top line growing at. So we will bring that percentage down. And ultimately, that will improve our EBITDA margins as well as we go over the next 5 years here.

Thank you, Brian. And Jaco, I'll direct the next one to you. Can you talk about the role of acquisitions in getting to the 40% to 50% part mix goal?

Yes. Acquisitions play an important role in our strategic road map. And I think the recent acquisition of TerraSource is a great example where we found a business that has a very high parts and service mix in that product. So obviously, that will help us. That will probably over the next year as it gains momentum, help us to add another 2, 3 percentage points to our mix. Today, we are at 34%. Brian also presented earlier today, our strategic filters around acquisitions. And you can clearly see aftermarket is a key consideration when we do acquisitions. I will say we've also noticed through our scouting of the market of acquisition opportunities that a lot of companies that is available have not focused that much on parts and service business. And that just means that there is a great opportunity for us that if we do buy a business that we can use the way we think about equipment and servicing our customers that we can grow that mix within an acquired business. So absolutely part of our focus, we are constantly looking for that pure play part players. But if we have to buy a company with a lower percentage and we see the opportunity, we will definitely take advantage of that.

I might add to that just a little bit. If I think about our own population and the assets that we have in place, I think we have a lot of opportunity to capture more of our own share as well. So there's an inorganic path to get there. But I think organically, we have a good path to get there as well.

All right, Michael, I'll direct the next question to you. On the mining and rare earth minerals opportunity, can you talk about how you're seeing the demand in the recent 1 to 2 years and where you see the opportunity going?

Yes, I would say it's a great question. I think today, I think about just North America and we talk about the rare earth minerals and you think about the Department of the Defense and that they're making in rare earth minerals here. I mean that Mountain Pass project, we're in on that. Our dealer channel network is in on those projects. That's going to get to be more and more of a higher demand for us, and we're well positioned with our product portfolio and the products that we have to be able to capitalize on that. So it's an important part of the future for us, and we're seeing that demand.

Yes. And if I can add a little bit there. We talked about different megatrends that is of interest to us and mining is a space that is definitely an opportunity for us. In certain markets around the world, South Africa, Brazil, where we have factories that is predominantly focused on mining. And here in North America, we are playing way on the outside of mining. So great opportunity for us. Obviously, with rare minerals, great opportunity now that we have the TerraSource product portfolio and getting into soft-rock mining. So that space is something that's very interesting to us.

All right. Brian, I'll send the next one to you. On the greater than 6% organic revenue CAGR target, how much of that growth is expected to come from Infrastructure Solutions versus Material Solutions?

Yes. The mix is probably pretty even right now. We've got a lot of activity on the MS side. You've seen our backlog has grown substantially over the last 2 or 3 quarters. So we do expect that to be a good source of the growth. But probably, over the 5 years, it will be pretty well balanced, maybe a little more acceleration in MS in the near term. But over the 5-year horizon that we've been looking at, I think, pretty well balanced between both IS and MS.

And maybe, Michael, you can add a little bit of color around the new products that we launched at CONEXPO. And what is that pipeline look like for MACI over the next year?

Yes, I would just -- thanks, Jaco. Just to add to that. I mean I think if I look at our innovation pipeline that we have on the MS side, I mean, over the next 18 months, we're going to have over a dozen new products that are going to hit the market -- and those are focused on domestic market, North America. That's our big market, but also on the international side. So you can imagine on our mobile equipment, we primarily manufacture in North America, for North America historically and the waste and dimensions and over-the-road access and those types of things are different globally. So a lot of our innovation pipeline gives us opportunities to expand our North American business, but also grow internationally as well. A lot of good stuff coming.

All right. And Jaco, if you could address this. Can you talk about how your Concrete segment fits into the long-term framework of Astec? What are you trying to achieve in this business from a parts and service standpoint? And from a high level, can you compare and contrast the margin profile of concrete versus asphalt?

Yes, absolutely. We bought Rexcon in 2017 and I've had the great fortune to watch this concrete portfolio grow. And I will say it gives us a great diversification. If you look at our customers today, they do crushing and screening, they do asphalt production, they do concrete production, obviously lay down. So it really fits well with that Rock to Road portfolio we're building. From a margin profile point of view, it's -- I will say it's comparable with asphalt, typically on a concrete plant, the mix of parts is a lot lower compared to what you see on an asphalt plant just because of their complexity in asphalt production. But overall, it's it still has a really nice margin profile. And we are really starting now the new product development in that space. Over the next couple of years, we're very excited about how we will bring change to that market and obviously have a solution for our Signal platform that connects to the concrete side as well.

All right. Thank you, Jaco. Michael, I'll direct the next one to you. Can you talk about the opportunity to develop system sales and is the installed base a source of advantage? Can you leverage existing brands? How do you develop dealer support for MS systems? How should we think about the benefit?

Yes. That's a great question, Steve. I think maybe first, I'll find what the system is maybe for some of the listeners who don't understand that. So on the MS side of the business, we have 2 mainly tracks of portfolio that we offer. One is we call a system, which is a complete fixed plant installation. You can imagine this, the larger producers are doing a lot of tons per hour. And so that's what that system business is. And we're trying to grow that business because it's a larger system. Obviously, it's a bigger order, but it's also a bigger consumer of parts, and we talk about trying how we're going to grow our parts business. And the other path that we have is around the mobile track stuff. And so that typically goes through a dealer channel. And so if we think about the mix of those, the system business is better for parts, better for aggregate production on big volumes. And then the mobile stuff is more for the contractor market. It's more of a little bit smaller, parts consumption is not quite as high as it is on the other units. So the systems business is a big portion of us, an important part of what we do. And it's also one of the largest profitability opportunities that we have.

And Michael, maybe to add to that, I will say, since Michael is in his role, we, for a while, there Astec lost its focus on the system business. And I will say we've done a great job bringing that back to life. And Michael, maybe just talk about the pipeline a little bit.

Yes, I would say, I mean, our pipeline and project opportunities is in the hundreds at the moment. And when we talked earlier about the high interest rates kind of pausing that capital investment by the large producers, well, that's all coming online today. And we've seen that pick up significantly in the later half of Q4 and Q1 has been strong, and it continues into Q2 as well. I mean, the pipeline is really growing there.

And typically, when you have a system like that, I mean you -- that will be in place for 15, 20-plus years and it just -- it produced [indiscernible] every day of the week.

And that's a great point. I mean, for us, we try not to lose any deals when it comes to the systems projects that we have. If you're out, you can be out for 10 years or more, and you lose that annuity for the parts business along with that. So we really focused on that. And for us, it's a competitive advantage. I mean our engineering teams, how we ETO, we can do that with some of the digital tools that we have today. We can do the augmented reality, lay out your plant in your quarry before you even place the PO, we can walk you through what that would look like to help you identify traffic patterns and where you want to stockpile and just kind of get your logistics and your quarry in place. So we have a lot of tools to kind of help promote that, and it's a big focus for us at the moment.

All right. Thank you. Brian, I'll direct the next question to you. Do you include any larger CapEx investments in your 2.55 of revenue target? Or is this primarily maintenance CapEx? And is it reasonable to think you can reach 100% cash conversion within your target period?

Yes. We haven't really included any major significant capital expenditure projects in the 2.5%. That's pretty much the run rate. We've been at 2.4% for the past 3 years. So we've included 2.5 in the model that we've got going forward for the next 5 years. And a lot of that is maintenance and replacement. We are investing in the manufacturing facilities to upgrade them, improve our efficiencies, reduce costs. So the 2.5% is really the major part of that.

We have a few parts related questions, so I'll summarize those. Does reaching 40% to 50% of revenue from parts and service by 2030 require additional M&A? Or do you have a current plan to attain that mark organically? And what efforts are underway?

Yes. Getting to that target, obviously, is going to take both acquisitions and growing organically. I mentioned earlier, TerraSource was a great opportunity for us to buy a very strong parts and service business. And even with that mix, we think there's a lot more to go after. Michael talked about the thousands of installations that they have and getting to touch every one of those is something that we're busy putting the resources in place. There is not that many pure-play parts businesses that makes 100% sense, but there is quite a few, and we are exploring those. But from an organic point of view, we see obviously significant opportunity, both in the local market internationally. And we're very excited about how we're going to use our Signal platform to help us to enable that. And I think if we do that well, our customers will see the benefit with improved run time or uptimes in their operations. And that will just generate in a new cycle of capital spend with us.

All right. Another question related to parts. Do you have sufficient infrastructure in place to achieve the 40% parts mix targets? Or will that require additional investment?

Yes. I will say, in general, we have. We have great capability in shipping and receiving. We have the warehouse capacity. Obviously, if you look at parts, there's a mix between procured parts that we buy and sell and then there's manufactured parts. And in certain of our facilities, we will need investment in capacity. And Michael, maybe you can say something about that just in MS from a machining point of view, what you've seen and what your team is working on.

Yes. I'll maybe go back to the previous question that asked really about what we're doing today, right? So today, right now, there's people out there that are going and calling on these customers where our assets are located and doing machine audits and things like that to go and try to drive that business today. So we have those asset populations mapped out. We know where they are. We have people in place going out to call on those things. So that's what we're doing today. If we think about our capacity to fulfill parts, I mean, fill rate for us is one of the major focuses. We look at that on a monthly basis for all of our sites and all of our product portfolios to make sure that we have the parts on the shelf and available at the time the customer needs it. And we find if you do that, you win a lot. And so we're really focused on that.

Yes. And I will also note that in most product lines, from a market share point of view, we have an opportunity to grow our share as in general, it's lower than what we see in some of our capital equipment product lines. So big opportunity and opportunity with existing customers running our equipment. The last thing on parts is, it takes time to develop that. It's not something that you're just going to get a big order and all of a sudden, you jump to 40%. It is something that you have to work on, on a daily basis. A tool like MyAstec that we have now rolled out on our asphalt plants. soon, it will be on our concrete plants are all ways that we want to make it easy for our customers to do business with us. And if we do that, we feel comfortable that we can grow that to 40% to 50%.

All right. Thank you, Jaco. Next I'll direct to Brian. How do you envision deploying capital towards acquisitions going forward, larger deals, smaller bolt-on acquisitions, other?

Yes. Look, I think it's going to be a combination of the above. We've talked in the presentation there about having $400 million to $600 million of capital available to allocate towards acquisitions if we maintain our leverage in that 1.5 to 2.5x range. We have a very active business development process within the company, and we have a pretty active pipeline of potential targets. We're constantly looking at them. We've talked about the filters and the discipline that we have. But it's a little hard to predict exactly when those deals will land, how big they'll be. There could be some smaller bolt-on tuck-in deals along the way that fit nicely with the existing portfolio that we have. And there could be larger transformational ones. But we're very disciplined about the approach that we take to our acquisition. And it will just -- it will take time for those to land. We're going to stay well within our leverage boundaries, and we'll acquire what we can and what's the best fit for the company going forward.

All right. Thank you, Brian. And I'll stick with you, Brian on this one. How are you thinking about the level and timing and investment necessary to achieve your international growth goals?

Well, again, the growth goals are both domestic and international. We have a very good international footprint. It represents about 20% of our revenue today. We operate in some very attractive end markets. We'd like to grow internationally. And it really depends on the art of the possible when it comes to acquisitions. We get inbound inquiries all the time with businesses that are for sale, and we look hard at those, but it's about managing risk. about being in the right markets where we see the growth potential. I wouldn't say there was a specific mix between international and growth. The 80-20 domestic international is quite a good mix just now. And that may not change significantly over time. But we will be looking at international targets to under own around the world, sometimes much bigger than what we are. But our opportunity to grow market share is significant internationally. And players, international players like our product. So if we can take our existing product and make it close to the customers, I think there is a significant opportunity for us. So we're excited about that. I think the really good thing is we have a lot of international experience. If I just look at all 4 of us, we've all lived in different countries and worked in different countries. So lots of international experience within our leadership team.

All right. Great. And we have time for just a couple more questions. I'll direct the next one to Michael. In Materials Solutions segment, where do you foresee your growth coming from geographically?

We just kind of as we discussed a little bit earlier, I think the North American market for us is still our primary market and it's the most stable market for us. But we have good foundations already set up in Latin America, and we're seeing good growth opportunities there. Brazil for us has been a growth area for us over the last few years. So Asia, I think with TerraSource, with the energy and the potash and the fertilizer and those types of markets are going to be a growth area for us in the Middle East. I think we have a lot of opportunity. And again, going back to this innovation, I imagine our products today were for North America. And so our new products that were coming out are going to give us more of an international appeal. And so we're excited about what the future looks like there. And like I said, all those are coming online over the next 18 months or so. So we're excited about what the growth opportunities are internationally.

Okay. Great. Jaco, I can maybe address this one, please. If you were able to build out the parts enterprise, are you able to leverage the investment by expanding the offering beyond Astec parts and carrying margin-attractive non-Astec parts?

Yes, absolutely. If you look at our customer base today, a lot of our customers, especially right now, are growing through industry consolidation. So a lot of acquisitions made by our customers. And that means that they have a mixed fleet of equipment. So customers want to deal with us. And if we provide them better service on Astec equipment with our support, they're looking to us for support on competitive parts as well. And in some of our business areas, we're already doing really well with that. And just here recently, both Michael and in our Infrastructure Solutions side, we've launched dedicated platforms that are specifically focused on competitive parts. And we see a significant opportunity there. And to be quite frank, I think we're doing a really good job. We're supporting our customers. We have great fill rate today. So if a customer needs something, we probably have it. And if we can create that same type of availability from a competitive point of view, we feel that we can attract quite a bit of business there.

All right. Thank you, Jaco. And then this question ties up parts and digital together, but can you talk about the customer acceptance rates on MyAstec? And is this accelerating for new users of MyAstec, what kind of acceleration in your parts are you seeing? And what are you seeing, once those customers are fully on board?

Yes. If I remember correctly, we probably now have 400 assets, 400 asphalt plants on MyAstec. So it's growing on a daily basis. We have a team now that just go from customer to customer. We create a digital twin of what the customer have so that we know exactly what that customer wants when they order parts from us. So anything technology related, there is a variance in adoption. Typically, the younger employees, and we see a lot of that in our industry now, they adapt to this technology really quickly. Somebody who's run an asphalt plant that's used to picking up the phone and say, send me that thing and everybody knows what that thing is, they want to do that. So we're catering for both. But we know long term, it's going to be a great opportunity for us. And obviously, that's a platform that we now started to take to concrete. And it's going to be on the Material Solutions side as well in the future. So yes, a great opportunity for us.

I might just add a little bit to that, Jaco, if you don't mind, on the Signal platform you talked about in the Telematics piece there. I mean, really, all of this ease of tools that we're trying to put together is really try to reduce friction. If we can be easy and have a good feel rate, we feel pretty confident that we can win in that market segment. So Telematics and Signal is going to be a good adder for us for sure.

All right. And Jaco, as we wrap up, are there -- is there a final message you'd like to leave with us?

Yes, absolutely, Steve. First of all, I want to thank everybody for joining us today. And I trust that you've learned a lot about Astec today. And I trust that you see how excited we are about the future of Astec. I think if you look at our long-term targets, taking this business to a 14% or 17% EBITDA business, it's elevating it to a place that we've never been before. And I think we, as a team, we really like the product portfolio that we have. We like the market that we play in. And I think we have a very clear path to get to our 2030 targets. And I want to remind you of those, obviously, growing our parts and service business, driving operational excellence and then bringing new products to the market that gives our customers the opportunities to stay competitive. And I got away from CONEXPO this year, so energized because it was so clear that we are leading the way around that. So the next thing is we are very fortunate that we have a strong balance sheet. And Brian talked about the financial capacity that we have to take advantage of inorganic opportunities. And we have a strong process. We have a strong team around that. And I think over the next few years, we're going to put that money to work in a good way. And then lastly, we've proven that we can execute. The last 3 years, we've grown and improved our shareholder returns to 74% over the last 3 years. So this team have demonstrated through our Build to Connect way that if we execute, the results will come. And from my side, where I'm sitting today, I hope you guys agree, this journey has just started. Today, we're not only announcing these targets to the market. We're making a commitment. We're making a commitment with our 4,500 employees that we're going to take this business and really put it in a place where it deserves to be. So thank you very much. We appreciate your time.

Thank you, Jaco, and thank you all for joining us today. As we've mentioned previously, our Investor Day materials can be found in the Investor Relations section of the Astec Industries website at www.astecindustries.com. So have a great day. We're adjourned.