– Adjusted EBITDA Growth of 24%, Net of Divestiture, Led by Construction and Transportation Products

– Operating Leverage and Unit Profitability Gains Drove Margin Expansion of 170 Basis Points

– Completed Three Construction Products Acquisitions for $41 million at Attractive Valuations

Arcosa, Inc. (NYSE: ACA) (“Arcosa,” the “Company,” “We,” or “Our”), a provider of infrastructure-related products and solutions, today announced results for the third quarter ended September 30, 2023.

On October 3, 2022, the Company completed the divestiture of its storage tanks business. Financial results for the storage tanks business were historically included in the Engineered Structures segment as part of continuing operations until the date of sale. The table below includes additional financial information to facilitate the comparison to prior year's results.

Third Quarter Highlights

“Arcosa delivered double-digit revenue and Adjusted EBITDA growth in the third quarter, normalizing for the sale of the storage tanks business,” said Antonio Carrillo, President and Chief Executive Officer. "Strong results in Construction and Transportation Products more than compensated for a decline in Engineered Structures, underscoring the resiliency of our diversified portfolio.

“In Construction Products, pricing remained strong across our portfolio. Natural aggregates benefited from a recovery in overall volumes, particularly in our Texas and Gulf Coast regions. In specialty materials, margins increased significantly from the second quarter, reflecting solid execution on our operational improvement plan. We also advanced our strategic objectives, investing $41 million to complete three bolt-on acquisitions in September and October. While relatively small in size, these acquisitions expand our footprint within both existing and new geographies at attractive valuations.

“Within Engineered Structures, our wind towers business performed well despite a relatively low level of production volume. We continued to take steps to prepare our footprint for an anticipated multi-year up-cycle, and our backlog provides visibility for improved performance in 2024. During the quarter, we were pleased to receive a small qualification order from a new customer for delivery next year.”

Carrillo continued, “Our utility structures business underperformed relative to our expectations in the third quarter. Key factors affecting performance included product mix headwinds, partially attributable to some higher margin projects delaying to 2024, and operating challenges, including equipment downtime. Year-over-year results were also impacted by a stronger peso. We are addressing these challenges and anticipate improved performance going forward.

“Adjusted Segment EBITDA in Transportation Products reached a three-year high with margin nearly tripling year-over-year. This performance highlights the enhanced operating leverage inherent in these businesses as production volumes increase. Inland river water levels reached historic lows during the quarter impacting customer sentiment, which is reflected in our book-to-bill ratio of 0.3. Despite relatively low order activity in the third quarter, our backlog is up 87% year-over-year and extends into the second half of 2024 with improved pricing.”

Carrillo concluded, “Our balance sheet and liquidity position remain strong, providing ample flexibility for strategic capital allocation. We are making solid progress on our organic growth initiatives within Construction Products and Engineered Structures and look forward to the related contribution in 2024 and beyond.”

2023 Outlook and Guidance

The Company maintains its full year 2023 guidance:

• Consolidated revenue of $2.25 billion to $2.30 billion.
• Consolidated Adjusted EBITDA of $355 million to $370 million.

Commenting on the outlook, Carrillo concluded, “We are pleased with our strong year-to-date results and remain confident in our 2023 outlook. As we look ahead to next year, Arcosa is well-positioned for continued growth. Backlogs in our cyclical businesses provide visibility for stronger performance, and the fundamentals in our growth businesses are favorable. We remain focused on building long-term shareholder value through the consistent execution of our strategy.”

Third Quarter 2023 Results and Commentary

Construction Products

• Revenues increased 7% to $262.1 million driven by higher pricing across our aggregates and specialty materials businesses and volume growth in our natural aggregates business. Our trench shoring business benefited from both organic volume growth and acquisition-related contribution.
• Adjusted Segment EBITDA increased 9% to $58.7 million, reflecting strong pricing gains and reduced inflationary cost pressures.
• Adjusted Segment EBITDA Margin expanded to 22.4% compared to 22.1% in the prior year period. Freight-Adjusted Segment EBITDA Margin of 25.3% was flat with the prior year period.
• Margin in our specialty materials business increased sequentially reflecting progress on plans to address labor and maintenance challenges, but declined year-over-year.

Engineered Structures

• Comparability of segment results was impacted by the divestiture of our storage tanks business completed on October 3, 2022. Prior year third quarter results included revenues and Adjusted EBITDA for the storage tanks business of $65.8 million and $18.7 million, respectively.
• Revenues for utility, wind, and related structures increased due to higher volumes in our utility structures business, partially offset by lower pricing due to product mix and reduced volumes in our wind tower business.
• Excluding the impact of the storage tanks business, Adjusted Segment EBITDA decreased 6% to $25.4 million, and margins declined 140 basis points to 11.4%.
• Adjusted Segment EBITDA declined primarily due to lower margins in our utility structures business, partially offset by the recognition of $5.6 million in net benefit from Advanced Manufacturing Production (“AMP”) tax credits in our wind towers business.
• The margin decline in utility structures was the result of product mix headwinds, operating challenges, and negative foreign currency impacts.
• Order activity for utility and related structures was healthy, with orders received keeping pace with shipments. Conversations with our customers for additional wind tower orders continue. During the quarter, we received a qualification order from a new customer for two wind towers.
• At the end of the third quarter, the combined backlog for utility, wind, and related structures was $1,450.8 million compared to $370.4 million at the end of the third quarter of 2022.

Transportation Products

• Revenues were $107.1 million, up 30%. Barge revenues increased 32% and steel components revenues increased 25%, both driven by higher volumes and pricing.
• Adjusted Segment EBITDA increased $13.3 million, or 271%, to $18.2 million, representing a 17.0% margin compared to 5.9% in the prior period. The increase was driven by enhanced operating leverage on higher volumes and improved pricing.
• During the quarter, we received orders of approximately $21 million in our barge business, representing a book-to-bill of 0.3. These orders extend our backlog into the second half of 2024.
• Barge backlog at the end of the quarter was $240.4 million compared to $128.9 million at the end of the third quarter of 2022. We expect to deliver approximately 26% of our current backlog in the fourth quarter of 2023 and the remainder in 2024.

Corporate and Other Financial Notes

• Excluding acquisition and divestiture-related costs, which have been excluded from Adjusted EBITDA, corporate expenses decreased to $14.2 million in the third quarter compared to $15.1 million in the prior year primarily driven by lower insurance-related costs.
• Acquisition and divestiture-related costs were $0.5 million in the third quarter compared to $1.6 million in the prior year.
• The effective tax rate for the third quarter was 17.4% compared to 21.2% in the prior year. The decrease in the tax rate was primarily due to AMP tax credits for our wind tower business, which are excluded from taxable income, and lower foreign taxes.

Cash Flow and Liquidity

• Operating cash flow was $43.9 million during the third quarter, a decrease of $27.5 million year-over-year primarily due to an increase in working capital requirements.
• Working capital resulted in a $29.4 million use of cash for the quarter compared to the prior year's $3.8 million use of cash. The increase in working capital was largely due to higher volumes and the timing of collection of our receivables.
• Capital expenditures in the third quarter were $47.9 million, up $14.9 million from the prior year, as progress continued on organic projects underway in Construction Products and Engineered Structures.
• Free Cash Flow for the quarter was $1.7 million, down from $40.7 million in the prior year.
• We ended the quarter with total liquidity of $633.3 million, including $155.3 million of cash and cash equivalents, and Net Debt to Adjusted EBITDA was 1.0X for the trailing twelve months.

Non-GAAP Financial Information

This earnings release contains financial measures that have not been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Reconciliations of non-GAAP financial measures to the closest GAAP measure are included in the accompanying tables to this earnings release.

Conference Call Information

A conference call is scheduled for 8:30 a.m. Eastern Time on November 2, 2023 to discuss third quarter 2023 results. To listen to the conference call webcast, please visit the Investor Relations section of Arcosa’s website at https://ir.arcosa.com. A slide presentation for this conference call will be posted on the Company’s website in advance of the call at https://ir.arcosa.com. The audio conference call number is 800-343-1703 for domestic callers and 785-424-1116 for international callers. The conference ID is ARCOSA and the passcode is 52019. An audio playback will be available through 11:59 p.m. Eastern Time on November 16, 2023, by dialing 888-225-1656 for domestic callers and 402-220-4975 for international callers. A replay of the webcast will be available for one year on Arcosa’s website at https://ir.arcosa.com/news-events/events-presentations.

About Arcosa

Arcosa, Inc. (NYSE:ACA), headquartered in Dallas, Texas, is a provider of infrastructure-related products and solutions with leading positions in construction, engineered structures, and transportation markets. Arcosa reports its financial results in three principal business segments: Construction Products, Engineered Structures, and Transportation Products. For more information, visit www.arcosa.com.

Some statements in this release, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Arcosa’s estimates, expectations, beliefs, intentions or strategies for the future. Arcosa uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “outlook,” “strategy,” “plans,” and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date of this release, and Arcosa expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, except as required by federal securities laws. Forward-looking statements are based on management’s current views and assumptions and involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations, including but not limited to assumptions, risks and uncertainties regarding the impact of the COVID-19 pandemic, or other similar outbreaks, on Arcosa’s business; assumptions, risks and uncertainties regarding achievement of the expected benefits of Arcosa’s spin-off from Trinity Industries, Inc.; tax treatment of the spin-off; failure to successfully integrate acquisitions or divest any business, or failure to achieve the expected benefits of acquisitions or divestitures; market conditions and customer demand for Arcosa’s business products and services; the cyclical nature of, and seasonal or weather impact on, the industries in which Arcosa competes; competition and other competitive factors; governmental and regulatory factors; changing technologies; availability of growth opportunities; market recovery; ability to improve margins; the impact of inflation and costs of materials; assumptions regarding achievements of the expected benefits from the Inflation Reduction Act; and Arcosa’s ability to execute its long-term strategy, and such forward-looking statements are not guarantees of future performance. For further discussion of such risks and uncertainties, see "Risk Factors" and the "Forward-Looking Statements" section of "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Arcosa's Form 10-K for the year ended December 31, 2022 and as may be revised and updated by Arcosa's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

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