Astec Industries, Inc. on Tuesday announced its financial results for the first quarter ended March 31.
"We are pleased to report another strong quarter in line with our plans to deliver consistency, profitability and growth," said Jaco van der Merwe, chief executive officer. "Strong operational execution delivered increases in net sales, EBITDA, net income and earnings per share.
"I am also excited to announce the signing of a definitive agreement to acquire TerraSource. TerraSource is a manufacturer and distributor of similar equipment, serving adjacent markets in materials processing equipment and related aftermarket parts.
They have annual revenues in excess of $150 million, a strong portfolio of industry leading brands and a track record of high performance. TerraSource adds significant growth and value creation opportunities including new markets, aftermarket parts and accretive margins. We look forward to having the hard-working TerraSource employees join the Astec team."
Brian Harris, chief financial officer, said, "The pending acquisition of TerraSource is consistent with our disciplined growth strategy. It will add scale, improve our aftermarket parts mix, expand our margins and quality of earnings and is expected to be accretive from day one. Excluding the pending acquisition, we reiterate our adjusted EBITDA full year guidance range of $105 million to $125 million."
Segments Results
The company's two reportable segments are comprised of sites based upon the nature of the products or services produced, the type of customer for the products, the similarity of economic characteristics, the manner in which management reviews results and the nature of the production process, among other considerations.
Infrastructure Solutions - Road building equipment, asphalt and concrete plants, thermal storage solutions and related aftermarket parts.
Net sales of $236.0 million increased 16.7 percent as the infrastructure construction market for asphalt and concrete plants remains strong, with some softness in mobile paving and forestry.
Segment Operating Adjusted EBITDA of $42.9 million increased 67.6 percent and Segment Operating Adjusted EBITDA margin of 18.2 percent increased 550 basis points.
Materials Solutions - Processing equipment to crush, screen and convey aggregates and related aftermarket parts.
Net sales of $93.4 million decreased by 12.7 percent, primarily due to lower domestic equipment sales attributable to finance capacity constraints with contractors and dealers resulting in fewer product conversions. Dealer quoting remains active.
Segment Operating Adjusted EBITDA of $5.2 million decreased 1.9 percent and Segment Operating Adjusted EBITDA margin of 5.6 percent increased 60 basis points.
Liquidity and Cash Flow
The company's total liquidity was $238.9 million, consisting of $90.1 million of cash and cash equivalents available for operating purposes and $148.8 million available for additional borrowings under its revolving credit facility.
Operating Cash Flow in the quarter was $20.5 million and Free Cash Flow in the quarter was $16.6 million.
First Quarter Capital Allocation
Capital expenditures of $3.9 million.
Dividend payment of $0.13 per share.
Acquisition of TerraSource
Under the terms of the definitive agreement, Astec will acquire TerraSource for $245.0 million in cash, subject to a customary working capital adjustment. Based on 2024 financial information, the company anticipate an adjusted EBITDA multiple of 5.9x adjusted for expected tax benefits of approximately $15 million and annual run-rate synergies of approximately $10 million expected by the end of year two. Astec intends to finance the acquisition with existing cash on hand and new committed financing. The transaction is expected to close early in the third quarter of 2025, subject to requisite regulatory approvals and satisfaction of other customary closing conditions.
Strategic and Financial Benefits:
Increases aftermarket and recurring revenue growth profile. TerraSource has a large installed base with 2024 aftermarket revenues approximating 60 percent of total revenue and 80 percent of gross profit
Adds scale and expands global market presence in attractive end markets for further growth opportunities
Provides an enhanced financial profile with accretion expected in gross profit margins, adjusted EBITDA margins and earnings per share
Enables meaningful run-rate cost synergies of approximately $10 million primarily from procurement savings
Strong cultural fit focused on innovation, sustainability and customer-centric solutions