Arcosa Inc Aktie

Good day, and welcome to the CRH conference call. My name is Krista, and I will be your operator today. [Operator Instructions]

At this time, I'd like to turn the conference over to Jim Mintern, CRH Chief Executive Officer, to begin the conference. Please go ahead, sir.

Hello, everyone. Jim Mintern here, CEO of CRH, and you're all very welcome to our presentation and conference call following our announced agreement to acquire Arcosa this morning, a significant investment for CRH and an acceleration of our growth strategy.

Joining me on the call is Aylwyn Bryan, our CFO; Randy Lake, our COO; and Danilo Juvane, Head of Investor Relations.

Over the next 15 minutes or so, we will provide you with an overview of the proposed transaction. And afterwards, we will be available to take any questions that you may have.

Before we get started, I'll hand over to Danilo for some brief opening remarks.

Thanks, Jim, and hello, everyone. I'd like to draw your attention to Slide 2 shown here on the screen. During our presentation, we'll be making some forward-looking statements related to our future plans and expectations. These are subject to certain risks and uncertainties, and actual results and outcomes could differ materially due to factors outlined on this slide. For more details, please refer to our annual report and other SEC filings, which are available on our website. We will also present projected financial information, which is based on management's current estimates and assumptions and has been prepared for illustrative purposes.

I will now hand you back to Jim, Aylwyn and Randy.

Thanks, Danilo. First, on Slide 3, a high-level overview of the proposed acquisition, which represents a compelling growth and value creation opportunity for CRH and will reinforce our position as the #1 infrastructure player in North America.

Arcosa is a leading provider of building materials and critical infrastructure products in the United States. With 35 million tons of annual high-quality aggregates, it will strengthen our position as the leader in U.S. aggregates with over 265 million tons of combined annualized production. Under our ownership, it will enhance our connected customer offering in attractive markets aligned with growing infrastructure megatrends.

It is highly complementary and an excellent strategic fit with CRH advancing our aggregates-led connected portfolio strategy. Arcosa has high-quality assets and an experienced management team with a proven track record of execution and a strong cultural alignment with CRH. We expect the acquisition to deliver strong growth and compelling value to CRH shareholders. It is consistent with our disciplined approach to capital deployment, fully aligned with our strategic ambitions and reinforces our position as a leading compounder of capital.

I will now ask Aylwyn to take you through the transaction in further detail.

Thanks, Jim, and hello, everybody. Turning to Slide 4. Our proposed acquisition of Arcosa for a cash consideration of $150 per share reflects a total enterprise value of $8.5 billion. This represents an EV-to-EBITDA multiple of 11.5x based on the midpoint of Arcosa's 2026 adjusted EBITDA guidance and including currently expected run rate cost synergies of approximately $175 million.

We intend to fund the transaction with available cash and committed debt financing. It is expected to be accretive to earnings, margins and cash flow in the first 12 months post completion excluding one-off transaction costs. On a pro forma 2026 basis, the transaction is expected to result in a net debt to adjusted EBITDA ratio of approximately 2.4x. We expect this to normalize towards our long-term average of approximately 2x in the 12 months post-completion, and we remain committed to maintaining our strong investment-grade credit rating, which we've held for over 20 years. The transaction is subject to Arcosa's stockholder approval, regulatory approvals and customary closing conditions, and we expect it to close in the first quarter of 2027.

Thanks, Aylwyn. On Slide 5, you can see a high-level overview of Arcosa. At the midpoint of its 2026 guidance, it is expected to generate $2.65 billion of revenue and $565 million of adjusted EBITDA, representing a margin of over 21%. Arcosa comprises 2 infrastructure-related businesses. Construction Products representing approximately 60% of the adjusted EBITDA, and Engineered Structures representing the remaining 40%.

Construction Products is a high-quality connected aggregates-led materials business serving 13 of the 50 largest MSAs in the United States with leading positions in Texas, the Southeast and other high-growth regions.

Engineered Structures is a leading U.S. manufacturer of critical infrastructure products in the high-growth energy transmission market. The business is supported by robust long-term demand underpinned by grid modernization, electrification and data center construction.

I will now ask Randy to provide some further color on each of the businesses.

Thanks, Jim, and hello, everyone. First, to Construction Products on Slide 6, a scaled aggregates platform in high-growth markets. With approximately 1.3 billion tons of aggregate reserves, it's fully aligned with our core strategy of strengthening our aggregates and cementitious businesses, 2 of our key growth platforms, which we highlighted during our Investor Day last year.

As you can see on the map, it has an attractive footprint of aggregates, asphalt and specialty materials, concentrated in Texas, the Southeast and other high-growth markets in the United States. It will also provide us with increased aggregates exposure in some of the fastest-growing MSAs in the United States, including Dallas-Fort Worth and Phoenix.

Combined with our existing business, there are significant opportunities to self-supply and create value through our connected portfolio. It will also complement and expand our capabilities in engineered concrete. Additionally, it's a leading U.S. provider of recycled aggregates and stabilized sand, representing 2 attractive growth platforms for CRH. Overall, it will reinforce our position as the leading aggregates producer with over 265 million tons of annualized production in the United States and over 400 million tons globally.

Turning to Slide 7, and Engineered Structures, which will strengthen our capabilities in the fast-growing U.S. energy infrastructure market. It's highly complementary to our connected customer offering across our aggregates, cementitious and critical infrastructure businesses and increases our exposure to growing infrastructure megatrends, supported by essential nondiscretionary investment. For example, as a result of the structural deficit and power supply, U.S. utilities are expected to invest approximately $1.4 trillion in grid infrastructure through 2030.

It further extends and complements our existing participation in energy transmission, one of the fastest-growing and most in-demand segments of the utility value chain. It will also deepen relationships with our shared customer base through a combination of long-term alliances with utility customers in a high-quality backlog, approximating its 2026 forecasted revenue, the business benefits from long-term demand visibility.

And as you can see on the map, it has an extensive manufacturing footprint with 18 manufacturing facilities across the United States and Mexico and benefits from a top 3 market position with leading brands, including Meyer Utility Structures.

Turning to Slide 8, and the synergy and value creation opportunities we've identified so far. With over 1,200 acquisitions completed throughout our history, we have a proven ability to acquire and integrate businesses at scale. And for this acquisition, we're uniquely positioned to deliver significant value creation for shareholders, leveraging on our unmatched scale, connected portfolio and leading performance capabilities.

We currently expect approximately $175 million of run-rate cost synergies to be achieved by year 3. And here, we've outlined the expected phasing with $60 million anticipated in the first year of ownership. We've identified significant opportunities for operational improvements, leveraging our expertise and technical capabilities from across our business to optimize plant performance and improve production efficiencies. It will also be very beneficial from a logistics and network optimization perspective, enabling us to be more efficient in how we service our customers.

There are also opportunities across our global procurement network, leveraging our scale, purchasing power and supply arrangements for materials, equipment and services. And from an integration standpoint, there are opportunities to self-supply our existing road and critical infrastructure businesses as well as optimizing our administrative and support function.

So in summary, the transaction represents strong synergy and value creation potential, and we're excited about the opportunity.

Thanks, Randy. Turning to Slide 9. I'd like to take a moment to highlight how the proposed acquisition of Arcosa aligns with our growth algorithm, which we outlined during last year's Investor Day. As the leading infrastructure player in North America, we are uniquely positioned to capitalize on 3 large and growing megatrends, transportation, water and reindustrialization, which we believe will support significant growth and value creation for our business going forward. The acquisition of Arcosa will enhance our exposure and capabilities in each of these areas.

Next, the CRH Winning Way, the force multiplier that enables us to fully capitalize on these growing infrastructure megatrends. Through our winning way, we execute our superior strategy with discipline and focus, driving leading performance across 4,000 locations through a culture of continuous improvement. As responsible stewards of our shareholder capital, we leverage our proven growth capabilities to build leadership positions of scale in attractive high-growth markets. All of this is supported by 4 key enablers: customer centricity, empowered teams, unmatched scale and our connected portfolio of businesses.

In summary, the acquisition of Arcosa together with the benefits of our winning way will reinforce our position as the leading compounder of capital in our industry.

Turning now to Slide 10. And as we previously communicated, over the next 5 years, we expect to have at our disposal financial capacity of approximately $40 billion, reflecting our strong growth profile, the level of cash we are generating and the strength of our balance sheet. We expect to allocate approximately 70% of this to growth investments, and the acquisition of Arcosa accelerates our progress in this regard while also demonstrating our disciplined approach to capital allocation.

The acquisition of Arcosa is fully aligned with the delivery of our 2030 financial targets: annual revenue growth of between 7% and 9% and adjusted EBITDA margin of 22% to 24% by 2030 and average adjusted free cash flow conversion of over 100%.

Before I turn over to Q&A, I will leave you with a few key takeaways from our presentation this morning. Arcosa is a leading U.S. provider of building materials and critical infrastructure products. With 35 million tons of annual high-quality aggregates production, it will strengthen our position as the leading aggregates producer with over 265 million tons of annualized production in the United States. The proposed acquisition of Arcosa will enhance our connected customer offering in attractive high-growth markets aligned with growing infrastructure megatrends.

In summary, this represents a compelling growth and value creation opportunity for CRH. It is enabled by our unmatched scale and cash generation capabilities, which provides us with the opportunity to deploy capital at scale and to further strengthen our leading positions across 4 connected growth platforms. Overall, the acquisition is a strong endorsement of our superior strategy, connected portfolio and the optionality we have for capital deployment.

So that concludes our presentation today. I will now hand you back to the moderator to coordinate the Q&A session of our call.

[Operator Instructions] Your first question comes from Adrian Huerta with JPMorgan.

Congrats on the transaction, and thank you for all the details provided in the presentation. Just 2 questions -- 2 quick questions. The first one is within all this that you explained, what is it exactly that excites you the most from this transaction?

And the second question is, how do you see this strategic fit of the Engineered Structures business of Arcosa within CRH?

Yes, listen, what excites us, Arcosa is a high-quality business, Adrian. Firstly, it's got a really attractive growth profile, and it's highly complementary to our existing business. And it's reinforcing our position as the #1 infrastructure player in North America.

Now, when you look into it, this is one of the largest U.S. aggregates acquisitions in the last 20 years, and it's really further strengthening our position as the leading U.S. and indeed a global aggregates producer. It takes us to about 265 million tons in North America and over 400 million tons globally. And particularly on this transaction, what's kind of exciting is that it is bringing us from an ags perspective into kind of 2 new high-growth MSAs in the Dallas-Fort Worth and Phoenix. We already have existing footprints there, but now going in there with ags is really super complementary to our connected portfolio.

I think the deal is kind of fully aligned with our strategy we set out in last year's Investor Day, which is kind of the focus on markets and regions with strong growing infrastructure megatrends and acquiring leading regional positions in high-growth markets all in all the time kind of focusing on enhancing our connected portfolio.

The deal this morning is going to give us strong growth and value creation potential, but attractive synergy opportunities. And we expect the transaction will be earnings margin and cash flow accretive 12 months post-completion. When we look at it from a multiple perspective, post the year 3 synergy rate of about $175 million, it's about 11.5x our synergized multiple, which is pretty much in line with our current trading multiple.

Now, I think the second question was around the Engineered Structures maybe and how it fits. I might ask Randy maybe to come back in on the second part of this, just to talk about some of the underlying drivers in that particular business, but it's highly complementary to our connected customer offering across both our cementitious and our critical infrastructure businesses, and it's increasing our exposure to those growing infrastructure megatrends.

We've actually been deploying capital in this space for the last 2 to 3 years. What it actually does is increases our connected product offering to actually the same customer base, the large utility companies. If you think about it, our existing U.S. IPG infrastructure business, the energy and water business is already supplying into this customer base. And last year's biggest acquisition, Eco Material, is on all these utility sites also. So it's really pulling together our kind of connected product offering to that same customer base.

But maybe, Randy, you might just talk about some of the underlying drivers we see in this space.

Yes. I mean, when we step back and look at Arcosa, first of all, in this space, they're a top 3 player in what we called out as obviously a very fast and growing transmission market. I think as Jim highlighted, it really does complement the capabilities that we currently have in that space. And if you think about not just the grid modernizations, the electrification that's taken place, the data center construction, all 3 of those things are really supporting the underlying drive for long-term growth in that sector.

And I think I mentioned in the opening remarks, the U.S. is expected -- the utilities in the U.S. are expected to invest $1.4 trillion through 2030 in terms of the underlying modernization in transmission and distribution. And I think another interesting point is over 70% of the U.S. grid is greater than 25 years old. So it's not just the additional capacity expansion. It's also modernization of the existing network.

And I think Jim -- lastly, Jim called it out, which is very important in terms of that relationship that we currently already have with the utilities, the work that Arcosa has done in terms of long-term customer alliances. And if you look at their backlog, the high quality level of that backlog gives you a lot of confidence in the mid- to long-term in terms of the need and the underlying investment.

Your next question comes from the line of Anthony Pettinari with Citi.

Jim, given you have a bit of geographical overlap in Texas and maybe kind of New York, New Jersey. I'm just wondering how you'd compare CRH's existing business with Arcosa's in maybe those 2 regions? And do you anticipate there could be any kind of divestitures or any kind of changes to make the deal go through?

Anthony, yes, listen, Texas, as we would have said, is the biggest state in CRH, right? We have a tremendous connected footprint there already. As I said, what's particularly interesting on the Arcosa deal is that it's bringing us ags, which we didn't have into the DFW MSA, so that's -- and really connecting what is a very strong footprint there already for us. So that's particularly exciting about it. The transaction itself is going to be subject to kind of customer closing conditions, including, firstly, Arcosa's shareholder and then regulatory approvals. And we expected to close in Q1 2027, but we don't anticipate any issues.

Your next question comes from the line of Michael Feniger with Bank of America.

Gentlemen, just -- I know you touched on it. I realize with Engineered Structures, it's exposed to megatrends with utility and grid CapEx. Can you just explain to us -- I mean, there's -- I think there's wind in there as well at 10% of Arcosa, 10% to 12%. Is that something you intend to keep? Do you have to invest more in this business? Is it higher capital intensity than the material side? And is the synergies -- is it complementary just because of the customer base? Or is it also just certain products you can cross-sell? Just help us understand a little bit more how the overall portfolio of Engineered Structures kind of fits in with CRH today.

Sure, Michael. Maybe a couple of questions there. Firstly, maybe I'll take the first one in terms of the wind side of it. Yes, you're right, the wind is a little less than 10% of Arcosa's business today. I think we can all agree on the kind of the opportunity and the need to continue to invest in the power generation network across the U.S. And in fact, wind today is still the cheapest and the quickest and fastest form to deploy in terms of power generation from that perspective.

It also has -- if you're familiar with Arcosa, the plants themselves are incredibly flexible in terms of the options you give, right? And when we see the demand that we have on the power generation side, we have the optionality also to pivot into that to meet the -- what we have today, a very significant kind of market dislocation between the demand side and the supply side.

In terms of the synergy side of it, maybe I'll kick it off, maybe ask Randy to comment on some of the details side of it, but -- we have a long history of acquisitions in CRH, right? And I think we've a proven ability to acquire and to integrate businesses at scale, 38 acquisitions last year in 2025. We're continuously able to leverage our unmatched scale, the connected portfolio and our kind of performance capabilities. Clearly, Arcosa is a public company acquisition. But in addition, there's very strong kind of operational synergies also.

But maybe, Randy, do you want to give a bit more color on those?

Yes. I mean, just to build on that, obviously, there's a history there in terms of our ability to integrate at scale. And I look at this deal as really kind of right down the middle in terms of what we're very, very good at and what we deliver in terms of synergies. And you would expect it to be in the areas that Jim called out. So certainly, we see kind of underlying opportunities and performance and production efficiencies. I think that the maximizing the logistics network will be a critical element of that. We called out Texas. It's our largest state. It's kind of plug and play in terms of self-supply. A lot of opportunity in and around just making sure that we're optimizing the logistical components of the deal there.

Our scale is going to certainly bring advantages from a procurement standpoint, and so we would anticipate significant opportunity there. And I think we laid it out in such a way that makes sense, $60 million in terms of the first 12 months and then $175 million by the end of year 3. I think also what we've learned over time, and I think we've done very well, is kind of dedicating resources and teams working side by side with the operating folks to drive the implementation of some of these practices as well as making sure that we're tracking and delivering on what we've laid out today in terms of synergies.

Your next question comes from the line of Angel Castillo with Morgan Stanley.

You've already touched on a number of these points, but just wanted to maybe unpack the Engineered Structures, maybe the strategic significance a little bit more -- in a little bit more detail. Just maybe any way to kind of quantify the potential for revenue synergies here given some of the overlap and perhaps customers?

And then also just on the backlog visibility, one of, I think, the notable aspects of -- for instance, some of the work that you do in data centers is how you can go kind of work with the customer a little bit earlier on than the traditional kind of aggregates model. So can you just talk about the connectivity of the portfolio? And how maybe having more backlog visibility maybe impact the rest of your business broadly?

Yes, sure, Angel. Good to hear from you. Yes. I think in terms of the Engineered Structures business, as we said today, it's kind of building on where we've been deploying capital recently in the last number of years and really tapping into that megatrend of infrastructure build-out, right, across the kind of faster-growing regions of the U.S. So we're already supplying into that customer base through our IPG energy infrastructure work, but also to the Eco Material, who is actually physically on all the utility company sites as well and providing services. So it's a very interesting connection from that perspective to increase, I guess, a kind of share of wallet with a high-quality, fast-growing customer base -- utility customer base.

And when you look at the demand projections that are out there, you're looking at kind of very high single-digit top line growth rates in terms of underlying volume demand over the next kind of 5 to 7 years in this particular space. So very good revenue kind of synergies abilities.

You are absolutely right in terms of data centers, we are now active, I think, at this stage, over nearly 150 data centers across the U.S., right? We really kind of punch above our weight in terms of our share because of that connected product solution. It's not just about providing kind of one particular product like aggregates or concrete, but you're absolutely right, we're often in the very first with this exact kind of energy and water infrastructure on the subterranean services that are going into these sites.

Then, particularly as well in terms of soil stabilization, a very interesting aspect of this Arcosa acquisition. They have a very nice kind of niche high-growth area in soil stabilization, which is going to be super complementary to the whole build-out of data centers. And then, you bring in the rest of the connected portfolio in terms aggregates, concrete, asphalt, paving, et cetera. So again, it is acquiring high-quality connected infrastructure assets in fast-growing states, right? And that's what's particularly attractive for us and why we're excited about the transaction this morning.

Thanks, Angel.

Your next question comes from the line of Trey Grooms with Stephens.

So you guys talked quite a bit about clearly the Engineered Structures and utility, et cetera. You touched for a second on wind. But you mentioned, Jim, plant optionality, and Arcosa is currently increasing capacity within their utility structures business, converting a wind facility to utility structures. This is -- and clearly, utility has been a high-growth area for Arcosa. And I think once this plant conversion takes place, wind contribution to EBITDA for Arcosa is pretty insignificant. So my question is with some of the changes on the horizon that we're seeing in wind, do you expect to kind of continue to deemphasize wind overall? Or do you think as we kind of get into -- through '27 and into '28, as maybe the landscape becomes a little more clear, that there would be more stability in that part of the business where you could see maybe putting a little bit of growth capital into that? Just how you're thinking about the wind business once some of this plant optionality is already taking place?

Yes, absolutely, Trey. Good to hear from you. Yes, you're right, right? I mean, post the conversion of the ongoing Tulsa facility in Oklahoma, wind is going to be a pretty small part of even the Arcosa footprint, right, from that perspective. As I said, kind of in the introduction question as well, it is an area that right now today is the fastest and the cheapest way to deploy power generation onshore from a U.S. perspective. So that will be interesting to see that how that plays out over the next number of years. What gives us comfort around it is that optionality and the speed at which you're able to convert those facilities. And obviously, the excellent in-house technical expertise within Arcosa, but they've done this time and time before as well. So it's kind of a very small piece of the Arcosa footprint as we go forward, but there's optionality around us.

Okay. That's good. And one other one. We've touched on the cost synergies and some of the other things, but specifically around the -- on the construction business for -- Construction Products business for Arcosa, you mentioned there is a little bit of overlap and some things like this. But do you see more as you think about revenue synergy opportunities? Do you think that would be more kind of on the Engineered Structures, utility side of the house? Or do you see some opportunity on construction as well?

Yes. It's a good question. I'd say, yes, on Engineered Structures for sure, but you actually see significant opportunities in the material space as well. If you look at just the commonality of customers who actually consume and use our product and the way that we go to market in terms of the connected portfolio, we see opportunities to increase share and growth in those particular customers. So we see as much, probably even more opportunity in that traditional material space as we do with the engineering products.

And we have time for one more question, and that question comes from Kathryn Thompson with Thompson Research Group.

And really kind of a 2-part question. First, this is the -- one of the largest deals in the industry in recent years, certainly transformative. The only prior thing that was as big as you switching your primary listing. So what does this say about the scale of the M&A opportunities in the market? And then just a follow-up on that, and we had a great opportunity last week to see your largest quarry in the system in -- just outside of Austin. And I do note that Arcosa's assets has a quarry on the other side, so it nicely complements that market. But could you break out true blue aggregates versus recycled and other materials? How much of your heavy materials is true hard rock versus your recycled? But first, focusing primarily on the M&A opportunities out there.

Kathryn, good to hear from you. Yes, listen, just the deal this morning, just to put it in context for us, it's a little over 10% of the market cap of CRH, right? But -- and we have a strong tradition in -- from an M&A perspective. In fact, we've done over 1,200 acquisitions in our history. I think when you look at the kind of structure of the business today in the United States, firstly, really due to the kind of fragmented nature of it, most of the deals we do are kind of primarily bolt-ons. If you look at the 38 deals last year, the majority of them, I think, over 30, came from kind of local bolt-ons across the businesses. But for us, it's not really about the size of any particular transaction. It's more about the scale and the value creation opportunity that we have.

Now, we called out in the Investor Day last year, given that scale, we have up to $40 billion of financial capacity out to 2030, but that leaves us uniquely positioned to capitalize on opportunities like Arcosa. We have a strong pipeline still in terms of M&A, right? And we've got good opportunities where to deploy capital at scale and really to build on our leading positions across our connected portfolios. We called it out in terms of the platforms of growth, whether its aggregates, cementitious, roads or kind of water infrastructure and energy infrastructure. We've got very good optionality in terms of where we deploy capital. And I kind of always said, what comes with optionality is discipline, right, isn't that, where you allocate that capital. And that's a very important point of it as well. I think it all comes together in terms of reinforcing our position as kind of the leading compounder of capital in this space in the U.S.

In terms of the second one, and I think if I understood it properly, Kathryn, just in terms of the Arcosa, over 90% of the aggregate number we gave this morning is coming from virgin aggregates and the remainder is coming from recycled ags.

Excellent. Best of luck.

Thank you very much, Kathryn.

Well, that's all we have time for today, and thank you all for your attention. And as always, if you have any follow-up questions, please feel free to contact our Investor Relations team. We look forward to updating you again in July when we will report our results for the second quarter of 2026.

Thank you. Have a good day and stay safe.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Good morning, ladies and gentlemen, and welcome to the Arcosa, Inc. First Quarter 2026 Earnings Conference Call. My name is Chloe, and I will be your conference call coordinator today. As a reminder, today's call is being recorded.

Now I would like to turn the call over to your host, Erin Drabek, Vice President of Investor Relations for Arcosa. Ms. Drabek, you may begin.

Good morning, everyone, and thank you for joining Arcosa's First Quarter 2026 Earnings Call. With me today are Antonio Carrillo, President and CEO; and Gail Peck, CFO. A question-and-answer session will follow their prepared remarks. A copy of the press release issued yesterday and a slide presentation for this morning's call are posted on our Investor Relations website, ir.arcosa.com. A replay of today's call will be available for the next 2 weeks. Instructions for accessing the replay number are included in the press release. A replay of the webcast will be available for 1 year on our website under the News and Events tab.

Today's comments and presentation slides contain financial measures that have not been prepared in accordance with GAAP. Reconciliations of non-GAAP financial measures to the closest GAAP measure are included in the appendix of the slide presentation. In addition, today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company's SEC filings for more information on these risks and uncertainties, including the press release we filed yesterday and our Form 10-Q expected to be filed later today.

I would now like to turn the call over to Antonio.

Thank you, Erin. Good morning, everyone, and thank you for joining us for a discussion of our first quarter results and 2026 outlook. I am very pleased with our performance. We kicked off the year with strong results, made meaningful progress on our strategic transformation, and increased our full year guidance for continuing operations.

In the first quarter, we delivered adjusted EBITDA growth of 10% from continuing operations, double our revenue growth, and expanded margin by 100 basis points. The strong performance was driven by robust double-digit top line growth and strong margin uplift in utility structures. Despite typical seasonality and winter weather impacts, Construction Products contributed solid results, and we were pleased to see performance improved as the quarter progressed. Importantly, we recently reached a key milestone in our transformation. On April 1, we announced the completion of the $450 million barge divestiture, a pivotal step in simplifying our portfolio. Now with 2 segments, we're fully focused on Construction Products and Engineered Structures, both well positioned to benefit from infrastructure investment and power market tailwinds in the U.S. We intend to use the net proceeds from the barge sale to reinvest in our growth platforms and manage our debt.

In March, we completed a $60 million acquisition of a natural aggregates operation located in Florida with accretive margins that enhance our platform in this attractive market. We continue to have an active bolt-on M&A pipeline complemented by a healthy set of high-return organic growth projects. Our balance sheet is in great shape. And at the end of the first quarter, pro forma for the barge divestiture, net debt-to-adjusted EBITDA decreased to 1.9x, slightly below our target range, providing for both flexibility and capacity to support continued growth.

Turning to the outlook. Our full year 2026 guidance now reflects continuing operations only. At the midpoint of our guidance range, we expect adjusted EBITDA of $565 million, up $22.5 million from our previous guidance range, representing 11% growth year-over-year. In Construction Products, our demand outlook remains broadly consistent with the start of the year with new uncertainty created by the conflict in the Middle East, which commenced the day after our February earnings call. While geopolitical volatility is elevated and oil prices have risen sharply, we have not seen that translate into weaker demand in our construction footprint.

Within Engineered Structures, our first quarter performance in utility structures exceeded expectations. Momentum has been building in the demand environment for some time, and this strength is aligned with the excellent commercial and operational execution by our team, driving record margin performance in the quarter. As a result, we have raised our expectations for the balance of the year.

Reflecting on our journey as a stand-alone public company, we have never been better positioned. Our objective at the time of the spin-off was to grow in attractive markets while simplifying the portfolio and reducing cyclicality. We have succeeded in doing this while strengthening our margin profile and enhancing the company's overall resilience. Across our simplified portfolio, we are aligned to capitalize on durable multiyear U.S. infrastructure-related tailwinds. We're confident that these advantages, combined with disciplined capital deployment and consistent execution, position us to deliver continued shareholder value creation.

I will now turn the call over to Gail to provide additional details on our first quarter segment results.

Thank you, Antonio. Good morning, everyone. My comments today will focus on continuing operations. First quarter results for the barge business are included in discontinued operations, and we have eliminated segment reporting for Transportation Products.

Starting with Construction Products. First quarter results finished largely in line with our expectations, overcoming a slow start to the quarter due to severe winter weather across our footprint in January. Segment revenues increased 5% and adjusted segment EBITDA decreased slightly. Adjusted EBITDA growth in aggregates and trench shoring was offset by pronounced seasonality in asphalt and lower cost absorption in Specialty Materials. For aggregates, freight-adjusted revenues increased roughly 6%, driven by 2% pricing growth and 4% volume. Adjusted cash gross profit margin increased 220 basis points and adjusted cash gross profit per ton increased 7%. Performance this quarter was led by our Texas region, which benefited from favorable weather in February and March that more than offset the harsh winter conditions throughout the quarter in our East region.

Turning to Specialty Materials and Asphalt. Revenues decreased 4%, primarily due to lower asphalt volumes. Revenues for Specialty Materials increased slightly, driven by higher lightweight aggregates volume. Costs were higher year-over-year due to planned maintenance downtime at one of our lightweight plants and a larger seasonal impact from asphalt. The result was lower adjusted EBITDA for the quarter. We expect to see earnings growth and margin improvement for both product lines for the remainder of the year. Finally, our trench shoring business completed another strong quarter of growth with both revenues and adjusted EBITDA up about 26%. Record order levels converted into higher volumes, and customer sentiment remains very positive.

Moving to Engineered Structures. Segment revenues increased 4%, led by mid-teen growth in our utility and related structures businesses, more than compensating for lower wind tower revenues, which were expected. Utility structures revenue accelerated north of 15%, supported by both volume and pricing. Significant margin expansion drove a 21% increase in adjusted segment EBITDA. Segment margin increased to a record 21.1%, up 300 basis points year-over-year due to strong utility structures performance. During the quarter, the team successfully executed strategic capacity expansion projects to drive volume and accelerate the delivery of more favorable product mix.

We ended the quarter with record backlog for utility and related structures of $558 million, up 28% from the start of the year. Order activity continued to be strong and included a couple of orders for long-term projects that extend into 2028. Customer reservations, which are not included in reported backlog, are also robust. For wind towers, we received orders of $43 million during the quarter for delivery in 2026 and 2027. We ended the quarter with backlog of $600 million and expect to recognize 36% in 2026 and 59% in 2027.

I'll now provide some comments on our cash flow performance and balance sheet position. During the quarter, we generated $58 million of operating cash flow from continuing operations, which compared favorably to last year's $21 million use of cash. The increase was driven by higher earnings and a $53 million reduction in the use of cash for working capital. CapEx for continuing operations for the first quarter was $44 million compared to $33 million in the prior year period, which reflects increased investment in our core growth platforms. Free cash flow from continuing operations was $21 million, up from negative $49 million in the prior period.

Additional cash activity in the quarter included the investment of $60 million for the bolt-on natural aggregates acquisition and $18 million of share repurchase to offset dilution. Our balance sheet and liquidity position were enhanced by the barge sale. Pro forma for the April 1 closing, net debt-to-adjusted EBITDA is 1.9x compared to 2.3x at quarter end. This reflects $370 million of estimated after-tax net proceeds, of which $83 million was used to prepay a portion of the outstanding term loan balance in April. Pro forma liquidity is estimated at $1.1 billion, including full availability under our $700 million revolver.

I'll wrap up with guidance updates on a few items to reflect continuing operations now that the barge divestiture has closed. We now expect full year CapEx of $215 million to $240 million, a slight reduction from the prior range. We anticipate a full year effective tax rate of 16% to 18%, down 1.5 points due to a lower expected state tax rate for continuing operations. The first quarter tax rate of 5.3% was favorably impacted by onetime discrete items. So our guidance implies a quarterly effective rate slightly above the top end of the range for the balance of the year. And finally, we anticipate the full year corporate cost impact to adjusted EBITDA to be approximately $60 million at the midpoint of our guidance range, roughly flat with 2025 as we offset barge stranded costs.

I will now turn the call back to Antonio for more discussion on our 2026 outlook.

Thank you, Gail. We have started the year on solid footing, completing the barge divestiture, delivering strong financial and operational results and raising guidance. As a result, Arcosa is well positioned to deliver another year of record financial results for our 2 remaining segments. Our outlook for the year has improved, driven by the strength in utility structures as well as solid execution in the first quarter. At the midpoint of our guidance range, we anticipate revenues of $2.65 billion, up 6% year-over-year and adjusted EBITDA of $565 million, up 11% year-over-year. We expect margin to expand to a record 21.3%.

In Construction Products, we anticipate another record year of revenues and adjusted segment EBITDA. In our guidance range, we continue to expect mid-single-digit adjusted EBITDA growth for the segment. For the aggregates business, we are incorporating low single-digit volume growth and mid-single-digit pricing improvement consistent with our February guidance. On the cost side, we're managing increases in oil-related inputs. We're actively deploying fuel surcharges and loading fees in the aggregates operations to combat higher diesel costs and the asphalt pricing is indexed to changes in liquid AC. We're maintaining strong pricing discipline to support solid unit profitability gains consistent with actions we took to address high inflation.

Our 2026 outlook is underpinned by infrastructure and heavy nonresidential demand. In Texas, our largest market, we delivered above-average volume and pricing gains in the quarter, driven by healthy demand and favorable weather conditions in much of February and March. While highway lettings have been trending off peak levels recently in Texas, the outlook for state spending growth over the next several years is very positive. In New Jersey, our second largest regional market, the demand outlook is also favorable, as both the Department of Transportation and the Transit Authority have approved budget increases for 2026. We're ramping up for the spring construction season after a very cold start to the year. We believe there is pent-up demand as customers are ready to start their projects and make repairs caused by the harsh winter weather.

There is also progress in advancing a multiyear surface transportation reauthorization with initial language expected to be released by the House Transportation and Infrastructure Committee later this month. Within heavy nonresidential, volumes continue to benefit from data center development, reshoring activities in certain areas, and overall demand for new power generation. Additionally, we see continued momentum related to LNG opportunities in the Gulf Coast.

Residential remains challenged by affordability, and the recent rise in oil prices has weakened consumer confidence. With a soft start to the spring selling season, we see residential volume recovery pushing out to 2027, and anticipate flat to slightly down residential volume in aggregates this year. We service attractive markets and expect our footprint to benefit when the housing market recovers. In summary, our construction outlook continues to be supported by infrastructure and heavy nonresidential activity in 2026. With the winter season behind us, we're optimistic about a solid construction activity in the quarters ahead, led by healthy demand fundamentals in our largest markets.

Moving next to Engineered Structures. We had an excellent start to the year, exceeding expectations for the segment, with outperformance driven by utility structures, our largest business in the segment. Regarding the market outlook, conditions remain very healthy. As we have discussed before, the expansion of data centers and the rise in electricity consumption across the U.S. continues to drive a significant and sustained increase in power demand. Our utility customers have made large multiyear capital commitments to power investments along with ongoing efforts to modernize the grid. As a result, our backlog continues to increase and we are optimizing pricing.

We're successfully addressing the recently implemented steel tariffs. Previously, we were exempt from Section 232, as we source our steel from the U.S. for the manufacture of utility structures in Mexico to be sold in the U.S. Effective April 6, these imported structures are subject to a new 10% steel tariff on the full value of the finished products. We have contractual protection in place to effectively pass through the impact. We're optimistic that the joint review of the USMCA later this year will create certainty in the commercial relationships between U.S. and Mexico and avoid tariffs on products made in Mexico that comply with USMCA and are made of U.S. steel.

We're advancing several high-return investments in utility structures to align capacity with strong demand, while at the same time, focusing on efficiencies and throughput enhancements within our footprint. We're ahead of schedule with the conversion of the Illinois wind tower plant, which had been idle for several years to a utility pole plant. With critical equipment being installed and commercial success filling our backlog, we now expect to produce large utility poles from this facility by the end of the second quarter. Our new galvanizing facility in Mexico completed its first dip in April, and we should be commercially operational in the second quarter as well. Our expectations are that the expected cost savings from the galvanizing facility will help offset start-up costs in Illinois.

Additionally, planning continues for the transition of a second wind tower facility in Oklahoma to produce utility poles. In that plant, current wind tower backlog extends through 2027. We can run both product lines in parallel, and we expect to be moving our people to produce utility poles as wind tower orders are fulfilled. Within wind towers, which represent roughly 10% of full year total company revenues, the team performed well while transitioning to lower volumes. We now have 3 customers in our backlog with the orders received in the quarter, and we're planning for a volume recovery back to 2025 levels next year based on the backlog already in place.

With power demand rising and wind energy remaining competitive source of generation, we're optimistic that there will be demand for wind towers after the tax credits expire. With 2 of our 4 wind tower plants under active conversion to produce utility structures, Arcosa will be well positioned to deliver strong returns on the capital invested in the wind business while retaining a great optionality to further expand capacity for utility poles if demand continues to strengthen. Our first quarter beat and guidance raise highlights the significant strength in utility structures that serve as a backbone of the grid modernization.

Electricity demand is expanding at a pace not seen in a generation. We now anticipate segment adjusted EBITDA growth of approximately 10% at the midpoint of our guidance range with utility structures more than compensating for a transition year in wind towers. As it relates to our capital allocation priorities, we have an active pipeline of additional bolt-on opportunities, both in natural and recycled aggregates, and expect to deploy capital towards the highest value opportunities. While not reflected in our midpoint of our guidance, we are confident that we can execute on several bolt-ons this year.

In closing, we're entering the second quarter with strong momentum and improved balance sheet and additional confidence underpinned by increasing our guidance. The divestiture of our barge business is a significant milestone in our company's evolution and will sharpen our focus on our key growth businesses. We remain proactive in our value creation strategy and are always seeking for ways to deliver more value for our stakeholders. I'm extremely proud of our team's excellent start to the year. We're now ready for your questions.

[Operator Instructions] And we'll take our first question from Julio Romero with Sidoti & Company.

So on utility structures and maybe the Engineered Structures segment overall, the segment margins are very strong here in the first quarter, at a record level, I believe. Can you just help us understand what's driving the margin strength, particularly how much of that is driven by utility structures? And just help us think about how sustainable that margin performance is for the balance of '26?

So let me give you some color. I think we mentioned in our scripts, but the 2 businesses, let's say, it's a K-shape segment. Utility structures are going up pretty significantly. And as we've mentioned before, we expect the wind to come down given that we see 2026 as a transition year. So utility structures has been overcompensating for the reduction in wind. As Gail mentioned, our revenues went up over 15% in the quarter. And margins were extremely strong. Our team performed incredibly well. As volumes come up and we've been able to tweak our capacity across our footprint, the margin has continued to go up. So it was mainly driven by utility structures.

On the wind side, I also mentioned we expect this to be a transition year. In the second half of the year, we're going to start ramping up, because we already have the backlog in 2027 to go back to 2026 (sic) [ 2025 ] levels. So ideally, as the year goes by, we should continue to see utility structures continue to perform and accelerate, and wind should, at the end of the year, start accelerating to be able to fulfill our strong 2027 backlog.

And Julio, I think you asked for some guidance as we look forward in the sustainability of the margin. As you pointed out, the segment did report record margins in the quarter. So fantastic performance. Really, all the businesses were in line with our expectations and the outperformance was utility driven. So as we look through the balance of the year, we have raised our margin expectations for the year versus where we were here in February. You can see that in the guide with the EBITDA. The incremental margin on that EBITDA raise is pretty strong.

So we do have some -- we are ramping up our Clinton, as we mentioned, that will be operational at the end of the second quarter. But we do still have some start-up costs that we'll incur in Q2, along with some continuing start-up costs on the galvanizer. Those will probably hit their peak level in Q2 before they start abating in the back half of the year. So a long-winded way of saying our margin expectation for this segment has increased, and we would see an annual margin in the 20% range sustainable for the year.

Excellent. Really helpful there. And then second question is, you mentioned that customer reservations for utility structures, which aren't included in the backlog, are also robust. Can you maybe expand on that commentary and how those have been trending relative to historical?

And then kind of related to that, you also mentioned in the script about advancing several high-return investments related to capacity and utility structures. Does that go beyond the current conversions of Illinois and Tulsa? Yes, that's my 2-part question there.

Let me start with the first one. As we've always said, we have long-term contracts with our customers. And as our customers' utilities determine exactly what they need, the designs on the poles, et cetera, that's when we include them in our backlog. So as our backlog grows, normally, the reservations also grow. Normally, the reservation piece is about the same size as our backlog. This time, it's probably a little smaller, because we have some additional orders that were outside of our normal contracts. But they normally grow in parallel, both the backlog and the reservations. And we continue to see very strong demand and very strong customer sentiment on what's coming. So very excited about what we're seeing on utility structures.

On the 2 main projects that we have, which are the conversion of the 2 plants and the galvanizing -- 3 projects, 2 conversions and the galvanizing, those are the main projects in utility structures. We do have a lot of smaller projects that Gail mentioned in her script that we are trying to maximize our throughput in our plants; for 2 things, one is to maximize the margin profile of the products we are producing in a very tight market; and second, to try to increase our throughput. So lots of small projects in addition to the large projects.

We'll move next to Trey Grooms with Stephens.

This is Ethan on for Trey. Great job on the quarter. I wanted to touch on maybe your cost outlook. Any more detail on how to think about the energy exposure across your Construction Products business, how you're navigating that? And any expectations on timing impacts on the margin as we progress through the year, and perhaps in the Engineered Structures business as well, any other inflationary inputs that you're looking at would be great.

Sure. I'll give you conceptually and let Gail give you some numbers. So we use between 10 million and 11 million gallons of diesel in the footprint. And what we've been doing since this conflict started is passing through fuel surcharges and loading fees. So I think we have taken all the actions that we need to take to mitigate all these impacts. And I think we're in good shape. That's on the construction side. On the utility structures and wind, the impact is negligible. We don't have a lot of exposure to diesel. Our main exposure is natural gas. And as you've seen, natural gas, it went up a little bit, but it hasn't had a huge impact. So we don't expect a significant amount of impact there. And I'll let Gail give you some more color.

Yes. And Antonio mentioned the consumption that we have in aggregates, which is obviously clearly our most intensive diesel user. And so we've seen -- as you've heard from others, we didn't see much impact in Q1 as prices started to spike in March. But we're seeing diesel prices up about $1.50 a gallon in our footprint. So if these prices remained at this elevated level, we'd estimate about a 4% to 5% headwind to cash unit profitability for 2026, and that's unabated. So as Antonio just discussed, we have actively implemented surcharges and steps to mitigate that impact. So happy to provide any more color.

A couple of additional comments. I mentioned in my script, but we only have one large operation for asphalt in the Northeast, and our prices are indexed to liquid AC costs. So that's something that we're covered. So overall, I think we are in good shape. One more thing that differentiates Arcosa from many of the peers. We don't have ready-mix. We don't distribute our products. We don't deliver them. For the most part, the diesel is consumed inside our facilities. We don't have a large footprint in trucks delivering asphalt or aggregates or ready-mix or cement or anything like that. So we are, I think, a lot more insulated.

Got it. That's all very helpful color. So I appreciate that. And maybe shifting gears a little bit back to utility structures. At a higher level, how long of a tail do you think that this level of utility power demand has? I mean you mentioned in the prepared remarks that some of these contracts extend into 2028. So how long of a tail do you think this has? And of course, what are you seeing here that gives you confidence in raising the guide here in the earlier part of the year?

Yes. Let me start with your second question. We're raising the guide for 2 reasons. Performance has been very good. But we have the backlog already in place to support our guidance. So we have a lot of confidence in what our team is doing, and we have the orders to support our guidance. So that's on the guidance piece.

On what gives us confidence? So when you look at -- let's go back 7 years, 6 years, there's always this forecast of investment by utilities in the grid. And the forecast has been strong. And that's why we, 8 years ago, almost when we spun off, we decided this was going to be one of our growth businesses, because we saw significant investment in utility infrastructure that was coming and it was coming fast. But what has happened is that every year since then, things have gotten, let's say, more optimistic about the amount of investment going into the grid. And then AI came and that simply, let's say, supercharged the demand for transmission towers and the investment companies have to do to support growth in power demand.

So things have gotten -- they were already looking good and they have gotten better. We recently did market studies to support our expansions. We are not doing them blindly. We talk to our customers. We ask about their demand. We ask about their forecast for the next several years. And our forecast suggests that this has a very long tailwind of sustained demand for many years to come. So I think we're in a really strong position.

We'll move next to Min Cho with Texas Capital Securities.

First, on the utility structures, Gail, can you break out kind of price versus volume in the quarter? And maybe talk to any change in mix in terms of larger structures or anything like that, that we should be aware of?

Sure. As we said, we had north of 15% revenue growth in the quarter within the utility structures product line. And really a combination of very favorable volume and price, I would say, with a tilt towards volume, but both are -- just based on the demand environment right now, we're getting a tailwind from both sides of the equation.

Product mix, we've done a good job, I would say, from the margin lift with the increase in efficiencies and throughput. We've really worked through, I guess I could say it was lower-priced product, but the market is pretty attractive right now to be able to pull forward some of the improved price in our backlog. So you saw that in the margin lift as well. Maybe I'd turn it to Antonio just to give you some color on the product type and what's driving demand right now, but we're certainly seeing a movement towards larger tower structures as the increased need for transmission expands.

Yes. So I'll give you color. I think what we've seen over the last several years is a trend toward larger poles. And I would say that's our sweet spot. As a company, we pride ourselves in our engineering capacity and capabilities. And I think that's what our customers value. When you go to smaller poles, they're simpler, they're easier to make, and margins in general are lower. We've seen a large move towards larger poles, and that's our sweet spot. And that's why I think Arcosa is in a very strong position, because we are transitioning from a -- we're in a transition year for wind towers. And those towers, as you know, wind towers are very large. So the plants are very nicely suited to transform them into larger utility pole plants, which is what the market needs. And that's what we're doing right now, transforming plants that we had already in place to utility poles.

As we move forward, we are very confident in our ability to ramp up Illinois. That's what we do for a living, and then transform Tulsa into another transmission tower plant. And by 2028, we'll only have 2 wind tower plants left, which gives us great optionality. If the utility pole market continues to accelerate, we'll have a lot of optionality to add capacity if the market continues to grow in that way.

Excellent. And I know there's been a push or there's been a lot of discussion about the 765 kV transmission lines, which typically require like larger lattice towers. And I believe Meyer has experience with those towers. But do you have the capability and capacity to be able to produce these types of towers for these extra high-voltage lines?

Yes. For the most part, those lines, as you said, have been lattice. As you know, most of the lattice towers are imported. There's a couple of people developing capacity here in the U.S., but for the most part, they are imported. We have the engineering capability to do it and are working on it, but we have not sold those towers in the past. But we are actively working with customers on designing and developing them. And the plants we have converted, the wind tower plants, have capabilities to build those poles if we get to that point. So I think that's one of the things that Meyer, which is our brand for utility poles, is extremely well suited for those changes that are coming, and we're actively pushing for it.

Excellent. Let's see. I know that you -- obviously, congratulations on the barge sale, strengthened your leverage here. How are you prioritizing your incremental cash? I know that you mentioned M&A and obviously, you're doing the conversions. But if you can just kind of talk about your prioritization there. And I also saw the share repurchases this quarter. So that would be helpful.

The share repurchases are normally just opportunistic. We normally try to compensate for the compensation dilution. It's not our main capital deployment. We have no plans to increase our dividend at the moment. We've kept it flat for a long time now. And the reason is we always say that we have more ideas than money, which is a sign of a healthy company. We have a robust pipeline of bolt-on opportunities, both on the aggregates and recycled aggregates, and that's always been our priority on the inorganic side. And on the utility structures, it's mainly an organic story.

We have a lot of opportunities to continue to deploy capital there. So those are our 2 priorities. How do we continue to increase our footprint on natural aggregates and recycled aggregates, in great locations, with accretive margins, like the acquisition we announced in the first quarter in Florida. And then on the second side is continue to accelerate our transmission tower expansion, so that we can keep up with the market. So I think we have opportunities to deploy the capital. You will see us pay. Gail mentioned, we paid, I think, $83 million in April for our debt. So we will continue to manage our leverage profile as we see fit.

And it does appear that there are no further questions at this time. Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to the Arcosa, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Chloe and I will be your conference call coordinator today. As a reminder, today's call is being recorded.

Now I would like to turn the call over to your host, Erin Drabek, Vice President of Investor Relations for Arcosa. Ms. Drabek, you may begin.

Good morning, everyone, and thank you for joining Arcosa's Fourth Quarter and Full Year 2025 Earnings Call. With me today are Antonio Carrillo, President and CEO; and Gail Peck, CFO. A question-and-answer session will follow their prepared remarks.

A copy of the press release issued yesterday and the slide presentation for this morning's call are posted on our Investor Relations website, ir.arcosa.com. A replay of today's call will be available for the next 2 weeks. Instructions for accessing the replay number are included in the press release. A replay of the webcast will be available for 1 year on our website under the News and Events tab.

Today's comments and presentation slides contain financial measures that have not been prepared in accordance with GAAP. Reconciliations of the non-GAAP financial measures to the closest GAAP measure are included in the appendix of the slide presentation. In addition, today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company's SEC filings for more information on these risks and uncertainties, including the press release we filed yesterday and our Form 10-K expected to be filed later today.

I would now like to turn the call over to Antonio.

Thank you, Erin. Good morning, everyone, and thank you for joining us for a discussion of our Fourth Quarter and Full Year 2025 Results and 2026 Outlook.

2025 was an outstanding year for Arcosa, demonstrated by our exceptional financial performance and significant advancement of our strategic transformation. Our key growth businesses, Construction Materials and Engineered Structures drove year-over-year growth supported by cyclical expansion in both barge and wind towers. For the full year, we achieved record revenues of $2.9 billion, up 12%, record adjusted EBITDA of $583 million, up 30% and record adjusted EBITDA margin of 20.2%, up 280 basis points. Importantly, we accomplished these results safely, recording the lowest annual safety incident rate in Arcosa's history.

Our expanded disclosures further highlight the momentum underpinning our key growth businesses. Within Construction Products, we began separately disclosing revenues and unit statistics for the aggregates business, representing approximately 60% of our construction materials revenues, aggregates achieved 10% growth in cash unit profitability in 2025, led by strong pricing gains and the accretive impact of Stavola. Within Engineered Structures, we separated our revenue and backlog disclosures for utility and related structures and wind towers. This better highlights the underlying strength within utility structures where backlog levels remained at or near record highs throughout the year, supported by robust end market demand. We exited 2025 with great momentum.

Fourth quarter adjusted EBITDA increased 13% and margin expanded 90 basis points, with all segments contributing. Our earnings strength and positive cash flow enhanced our balance sheet and we ended the year comfortably within our long-term leverage target. Overall, I'm extremely proud of the dedication and contribution of the entire team.

Earlier this week, we announced that we entered into a definitive agreement to sell our barge business for $450 million in cash. With a strong backlog that provides production visibility deep into 2026 and market fundamentals supporting a healthy replacement cycle, we believe this is the right time to transition the barge business to an owner aligned with its long-term growth plans. We expect the sale to close in the second quarter of 2026, subject to regulatory approval and other customary closing conditions.

I want to thank our talented leadership team, dedicated employees and long-standing customers for their significant contributions to Arcosa Marine. The barge transaction further reduces portfolio complexity and cyclicality, raises our overall margin profile and enhances the long-term resiliency of the company. Upon completion of the divestiture, Arcosa will be fully focused on construction materials and engineered structures well -- both well aligned to benefit from long-term infrastructure and power market tailwinds in the U.S.

Before Gail goes over our financials in more detail, I want to acknowledge Jesse Collins. Jesse, who has served as Group President of Arcosa since our spin-off will be retiring in a few weeks and his strategic insight and commitment have helped shape our success and strengthening our foundation for the future. We thank him for his outstanding service and congratulate him on his retirement.

I will now turn over the call to Gail to discuss our fourth quarter segment results in more detail.

Thank you, Antonio, and good morning. Starting with Construction Products, fourth quarter segment revenues decreased 2%, excluding freight, which is a pass-through in our construction materials business, revenues increased 4%, adjusted segment EBITDA grew 3% and margin expanded 140 basis points. On a freight-adjusted basis, adjusted segment EBITDA margin was roughly flat.

As a reminder, segment performance this quarter is all organic as Stavola hit its 1-year anniversary on October 1 at the start of the quarter. For aggregates, freight-adjusted revenues increased roughly 8% driven by 5% pricing growth and 2% volume improvement. Two consecutive quarters of volume growth give us optimism on continued volume recovery in 2026. Adjusted cash gross profit increased 6% and adjusted cash gross profit per ton increased 3%. Many of our regions had double-digit growth in unit profitability, particularly our natural aggregates and stabilized sand operations in Texas and our aggregates operation in the East region. This performance, however, was partially offset by lower unit profitability in our Gulf region which was impacted by less favorable product mix and the West region, which had lower cost absorption on declining production volumes as we align inventory levels to domain.

For the full year, volumes increased 6% due to the inorganic contribution from Stavola, and organic volume improvement in the back half of the year, partially compensating for first half weather challenges. Full year freight-adjusted sales price grew 8% and adjusted cash gross profit per ton increased 10%, led by the accretive impact from Stavola.

Turning to Specialty Materials and Asphalt. Revenues decreased 5%, primarily due to lower freight revenue for asphalt. Excluding freight, revenues were roughly flat, while adjusted EBITDA and margin declined slightly. Within Specialty Materials, strong profitability gains in lightweight aggregates were offset by volume-related decline in our specialty plaster business. In our asphalt business, revenues increased slightly as solid pricing gains offset lower volumes, resulting in modest unit profitability gains. Finally, revenues and adjusted EBITDA for our trench shoring business saw a double-digit increase year-over-year and had strong margin expansion driven by higher volumes and improved operating leverage.

Moving to Engineered Structures, segment revenues increased 15%, led by a 20% increase for our utility and related structures businesses, while wind tower revenue increased 3%. For utility structures, volumes increased double digits, while pricing was up high single digits. Steel pass-through was roughly flat year-over-year. Adjusted segment EBITDA increased 22% and margin expanded 100 basis points to 18.5%, driven by strong revenue growth and operating efficiencies in utility structures. This business executed well throughout the year, resulting in sequential margin improvement in each quarter of 2025.

For wind towers, adjusted EBITDA was roughly flat as we focused on rightsizing the business for lower production levels in 2026, resulting in a slight decline in margin year-over-year for the business. We ended the year with backlog for utility and related structures of $435 million, up 5% from the start of the year, providing solid visibility for 2026. Customer reservations for utility structures, which have not yet hit backlog remains strong, providing additional confidence in the demand outlook. For wind towers, we received orders of $190 million during the quarter, primarily for 2027 delivery. We ended the year with backlog of $628 million and expect to recognize 42% in 2026 and 53% in 2027.

Turning to Transportation Products. Revenues were up 19%, and adjusted segment EBITDA increased 24%, primarily due to higher tank barge volumes and a more favorable mix, resulting in 90 basis points of margin expansion building on the meaningful improvement delivered in the prior year.

I'll now provide some comments on our cash flow performance and improved balance sheet positions. During the quarter, we generated $120 million of operating cash flow. As expected, this is down from last year's fourth quarter, which benefited from significant customer deposits in our wind tower and barge businesses for shipments delivering in 2025. Excluding advanced billings, which can be uneven, net working capital days have improved sequentially each quarter in 2025 as we remain very focused on cash management.

CapEx for the fourth quarter was $64 million, resulting in full year CapEx of $166 million, which was above the high end of our guidance range. The increase was driven by deposits placed on some long lead time equipment and the timing of spend on the wind tower plant conversion within our utility structures business. Free cash flow for the quarter was roughly $60 million and was $202 million for the full year. Our strong free cash flow generation in the second half of the year allowed us to repay $164 million of the term loan debt during the year, which is prepayable at no cost. We ended the year with net debt to adjusted EBITDA of 2.3x comfortably within our target leverage range. This is down from 2.9x at the start of the year. Our liquidity remains strong at $915 million, including full availability under our $700 million revolver and we have no near-term debt maturities.

We are pleased to have achieved our leverage goal to quarters ahead of schedule and are focused on balanced capital allocation. For the full year 2026, we expect CapEx to be between $220 million and $250 million. Our guidance includes $70 million to $80 million of growth CapEx and $150 million to $170 million of maintenance CapEx, including approximately $25 million of plant moves and IT-related initiatives in Construction Materials.

Within the growth category, we have a good mix of projects within Construction Materials and Engineered Structures the largest of which is the conversion of our Illinois wind tower plant. We anticipate the cadence of spending to be more first half weighted based on the expected project time lines.

I'll wrap up with a few final comments for modeling purposes. For the full year, we expect depreciation, depletion and amortization expense to range from $230 million to $240 million, slightly ahead of the annualized fourth quarter run rate as we expect to complete and capitalize large projects. Net interest expense is expected to range from $88 million to $90 million down from $102 million last year, primarily reflecting debt reduction that occurred in 2025 and opportunistic debt paydown in 2026. For 2026, we expect an effective tax rate of 17.5% to 19.5%. We will update this guidance as needed following the anticipated close of the barge divestiture.

I will now turn the call back to Antonio for more discussion on our 2026 outlook.

Thank you, Gail. For 2026, we anticipate revenues to be in the range of $2.95 billion to $3.1 billion and adjusted EBITDA to be in the range of $590 million to $640 million, excluding any impact from the barge divestiture. As outlined in the earnings press release, our guidance for barge includes full year revenues of $410 million to $430 million and adjusted EBITDA of $70 million to $75 million. We will update our full year guidance once the divestiture closes.

Our 2026 guidance incorporates another record year for our growth businesses, Construction Materials and Engineered Structures. With combined double-digit adjusted EBITDA growth and margin uplift. At the same time, we expect a short-term step-down in wind towers before recovering in 2027.

In our outlook comments today, we will focus on the Construction Products and Engineered Structures segments. Beginning with our first quarter 2026 results, we expect to eliminate segment reporting for transportation products and report results for the barge business as discontinued operations.

In Construction Products, we anticipate another record year of revenues and adjusted EBITDA. In our guidance range, we anticipate mid- to high single-digit adjusted EBITDA growth. For the aggregates business, we anticipate low single-digit volume growth and mid-single-digit pricing improvement. With our cost expectations generally in line with inflation, we anticipate solid gains in aggregate unit profitability. Our outlook is supported by solid infrastructure demand, which drives roughly 45% of our segment revenues. [ IIA ] funding, combined with strong state fiscal health is expected to support volume growth in 2026. Roughly half of the [ IIA ] funding has not been spent and there is progress on advancing a multiyear surface transportation reauthorization.

Our Shoring Products business has record backlog, a positive indicator of the underlying infrastructure demand. In Texas, our largest natural average and lightweight market, public infrastructure demand remains fundamentally healthy while highway lettings have been trending of off peak levels. The outlook for state spending growth over the next several years is very positive and remains at historically elevated levels. In New Jersey, our second largest regional exposure, the demand outlook is also favorable as both the Department of Transportation and the Transit Authority have approved budget increases for 2026.

As a reminder, Stavola operations are highly skewed to infrastructure and replacements. Our Stavola operations performed very well in 2025, and we anticipate a solid year of growth in 2026. Stavola has had an additional seasonality to our results, particularly in the first quarter. We anticipate that impact to be slightly more pronounced this year as the Northeast has been affected by very cold temperatures and significant stone hold in the first quarter.

Turning to private nonresidential market, volumes continue to benefit from data center development, reshoring activity in certain areas and overall demand for new power generation. Additionally, we are optimistic about future LNG opportunities. Residential remains challenged by affordability and our outlook incorporates flat residential volume in aggregates. While we continue to experience positive activity in Texas, particularly in the Houston market, residential volumes remained weak overall, notably in the Phoenix and Florida markets.

In our Specialty Plaster business, which serves multifamily construction, we anticipate a stronger second half of the year based on customer backlog and sentiment. Given we're an attractive state for residential development, we expect our businesses to benefit when housing market recovers.

Moving next to Engineered Structures. Our businesses play a pivotal role in strengthening the American infrastructure from wind towers that support much-needed new power generation to utilities constructions that connect energy to the grid and lighting traffic and telecom structures that address basic infrastructure needs of our expanding nation. As I've said before, we believe our Engineered Structures platform is strategically positioned to capitalize on attractive long-term trends.

Turning to U.S. power industry. the expansion of data centers and the rising electricity consumption across the U.S. continues to drive a significant and sustained increase in power demand. Multiyear capital plans underscore our utility customers' commitment to significant power investments, along with ongoing efforts to modernize the grid. During 2025, we maintained at or near record backlog levels for our utility structures and the outlook remains very positive. Industry capacity is constrained, lead times are extended, and we're optimizing pricing and focusing on operational excellence. We're making solid progress on the conversion of our idled wind tower facility in Illinois to produce large utility pole and expect to be operational in the second half of 2026. Additionally, we have placed deposits on long lead equipment -- long lead time equipment to maximize output in our existing plants. Our new galvanizing facility in Mexico will complete its first dip this quarter, which will allow us to improve our cost structure and help offset start-up costs in Illinois for this year.

For 2026, we anticipate another year of strong double-digit adjusted EBITDA growth and higher margins. Meeting expanding [indiscernible] power needs will regard leveraging all available sources of power generation. Cost competitive wind energy can play a critical role in meeting future energy needs quickly and efficiently. We remain optimistic about the long-term demand for wind towers despite near-term policy uncertainty impacting our anticipated volume for 2026.

During the fourth quarter, we received wind tower orders for $190 million primarily for 2027 delivery coupled with orders we received in the third quarter of 2025 and the shift forward of 2028 backlog, we have solid production visibility in 2026, but have reduced volumes from 2025. At December 31, our wind tower backlog scheduled for 2026 was $260 million, indicating a decrease of roughly 25% in anticipated wind tower revenues. Importantly, we expect to return to growth in 2027 supported by our current backlog for that year of $330 million. There is still time remaining in the year to book additional 2026 orders where our customers are focused on '27 and beyond.

Factoring in competitor announcements and potential for additional moves, third-party research estimates a capacity shortfall existing in 2027 for utility structures. The flexible and strategically located network of facilities within our Engineered Structures platforms provides us with the ability to adapt and increase capacity quickly without significant capital investments. As a result, we're currently preparing for a transition of our Tulsa Oklahoma facility from wind towers to utility structures. At Tulsa, our window backlog stretches through 2027, and we have the ability in that facility to run both product lines in parallel, as when tower orders are being finished, we will be moving our people to produce utility poles, reducing our wind tower capacity to 2 facilities rightsized the business and redirect our resources to the higher multiple, higher-margin utility structures business with a sustained runway for growth.

As it relates to our capital allocation priorities, we're focused on investing in our growth businesses, both organically and through acquisitions. We have an active pipeline of additional bolt-on opportunities, both in natural and recycled aggregates and expect to deploy capital towards the highest value opportunities. We also anticipate reducing debt in the interim to lower interest expense or on [indiscernible] $700 million revolver provides ample additional liquidity.

In closing, we entered 2026 as a more resilient company. The divestiture of our barge business, a significant milestone in our company's evolution and will sharpen our focus on our key growth businesses, construction materials and engineered structures. We will be -- we will now move from our transformation phase to being completely focused on growth as we look to create additional value for our shareholders.

We're now ready for your questions.

[Operator Instructions] We'll move first to Ian Zaffino with Oppenheimer.

Congratulations on the barge sale. Now as far as the proceeds, how are you thinking about redeploying those? What areas and maybe geographies or any other kind of color you could give us on that and kind of the multiples you're seeing out there, do you intend to use that...

So let me give you color on that. As Gail mentioned in her script, first, I think we have -- once we close this transaction, and we expect it to be in the second quarter. I think there might be some debt reduction in the short term. And then after that, we have a very active pipeline of opportunities for M&A. Right now, we're looking at mostly within our current footprint, but we do have some opportunities that take us some new MSAs that we are not present. And again, M&A, as mentioned in the past, has no timing because these things are sometimes take time and mostly our family on businesses. So it takes time to get there.

But we have a really active pipeline in both our current MSAs and a few new ones. And that would be our primary focus to try to accelerate our M&A pipeline, mainly bolt-on acquisitions. These are not enormous things. And I think that's -- I've mentioned before, I think the bolt-on is where we really get excited about the margin expansion.

We also have significant organic CapEx going on. We have Gail mentioned a few plant movements within our aggregates business, more reserves. We have finishing the Illinois facility, the galvanizing facility. I just announced that the -- that we're transitioning our Tulsa facility from wind towers to transmission over time as we finish our wind tower orders, but that facility is very large and has the ability to do both product lines.

So I think the big message here is now that we're a simpler company, we will focus our full attention into deploying the capital to generate additional value for our shareholders through both inorganic and organic opportunities.

Okay. Thanks...

We're losing you Ian.

What should we expect there? Because I know we're pretty close to being almost exclusively not cyclical at this point. But any other kind of moves that you intend to do or not do and what should we expect going forward?

The business we've talked in the past about is that the cyclical business that we are left with is the wind power business. As you know, current policy uncertainty makes it -- we need to get through the noise. I mentioned in my remarks that we're very optimistic about the future of the wind industry because it's -- as I've told investors many times for the first time since we've been building wind towers, we actually need them. The power demand increase is real. And so I think I'm optimistic about wind.

I mentioned in my remarks, we expect a slower '26, will return to higher volumes in '27. As we enter '28, that's where we need to start focusing on '28 and beyond. But at the same time, we recognize the policy uncertainty. And at the same time, we have another business that is growing fast, which is the utility structures, and that's why the transition from Arcosa facility to more utilities because I think there's some uncertainty.

I will tell you, as we get into '27, let's see, I'm very optimistic about '28 and beyond for wind. But rightsizing the business to 2 facilities really reduces our exposure and if the wind industry recovers fast, we'll see what we do. But for the moment, we'll be very, very focused on growing in utility structures. Long answer to your short question.

We'll move next to Trey Grooms with Stephens.

This is Ethan on for Trey. Starting off with utility structures, clearly expected to be a pretty large growth driver in 2026. Revenue was up 20% in the fourth quarter, so the magnitude of growth here is pretty impressive. And guide seems to imply pretty solid double-digit EBITDA growth. So just curious if this may help offset what is expected to be lower volume and profit in wind in 2026? And perhaps any more color on the growth or demand expectations for utility structures in 2026?

Yes. This is Gail. I'll kind of take the first part of that question as it relates to -- I think you're correctly identifying a lot of underlying strength within the utility structures. And as we look to 2026 and think about our guidance for the Engineered Structures segment, we do see a path to that strong utility compensating for the step down in wind. We gave rough estimate for where we are right now for wind backlog, which translates to revenues for 2026. So you do see roughly 25% step-down in wind revenues. But given where we are with utility and the strength of the double-digit volume increases and pricing increases that we've had, and as I said in my script, we saw margin expansion for utility in every quarter year-over-year throughout 2025. And so we have strong expectations for the business next year. And we see a path to flat to maybe slight growth within the segment for next year.

From the industry perspective, I think the numbers reflect what we're seeing in the industry. We're seeing very solid demand -- we're seeing very long lead times. We're seeing a move towards larger utility poles. And that is why we're moving our wind power facilities to utility poles. So the big picture for us is we're very excited about the industry. We have a very flexible footprint in our plants that allow us to move capacity towards the places where demand is stronger than at this time. Utility is really the strongest place, and we expect it to be -- the good news is we expect this to be a very long run for utilities. So this is not only '26. I think we're seeing a path towards a longer-term solid demand for utility structures for quite a while.

Got it. And on that topic of transitioning the idle wind tower facility to expand capacity in utility structures perhaps, how should we be thinking about layering in that incremental capacity relative to the market growth? And I know you touched on specific CapEx cadence for that transitioning. But any thoughts on maybe P&L implications of initial start-up costs would be great.

Yes. So I mentioned the first facility work transition, which is Clinton will start coming online in the second half of this year. And I mentioned also in my remarks that given our galvanizing facility in Mexico starting this quarter, we expect the savings from one facility to generally offset start-up costs of the other one. So we don't see a huge impact this year in our Illinois facility. And -- but it will start -- that facility already has orders and customers assigned to it. So we're going to be ramping up with relative certainty around 2027 being a year where the facility starts contributing to the bottom line.

The other facility, it's a longer-term process. I mentioned we have orders until 2027. So this is a 2028 and beyond impact. And the ramp-up in that facility will be a lot smoother because if you think about the first facility was idle. So we have -- we are hiring people, we're training people and everything. The other facility is a much easier transition because we always have people, which is the hardest thing to get and the most important resource for anyone of our facilities. So moving people that are already know how to weld and produce wind towers to transmission structures is a lot easier than hiring new people.

We'll move next to Garik Shmois with Loop Capital.

Just on the first quarter, I was wondering if you could maybe follow up a little bit more just on the observations around weather in the Northeast impacting Stavola, any additional perspective on Q1 and what the impact there is, whether it's from a production standpoint or if we should think about maybe the percentage of EBITDA in the first quarter relative to the full year, how that's looking to share versus historicals?

Sure. Good morning Garik, and thanks for the question, yes. It's been a cold and snowy quarter up in the Northeast, which has -- will likely impact the cadence of our Q1 as a percent of the total. I think if you look at last year, in Q1, Q1 EBITDA for the segment within construction was about 16% or so of the year. So it certainly is a smaller contributor to EBITDA for the year.

I would say, with the weather and the snow here recently, we'll see that percentage share drop just a little bit. So you won't see the same contribution as a percent of the whole, as you saw last year.

Okay. Makes sense. And then maybe just on gross profit per ton expectations in aggregates for 2026, certainly, Q4 had some headwinds due to fixed cost absorption in some of the Western markets, it sounds like. How should we think about gross profit per combo for the segment overall for this year?

Sure. As I said in my comments, with mid-single-digit price in the low single-digit volume and where we sit here today with expectations that, that costs are generally in line with inflation. We do see solid unit profitability gains on -- for 2026. The cadence of that is always a little bit uneven with the seasonality. Q1 will likely have a tough comp and unit profitability year-over-year. But for the full year, we expect solid gains in GP per ton.

We'll move next to Julio Romero with Sidoti & Company.

Congratulation to Jesse on his retirement. I wanted to ask about the slope of the accelerating demand in utility structures. You're allocating resources there. Illinois in 2026, Tulson in 2027. So could you dive a bit deeper into whether the acceleration in demand is being driven by a particular product line or geography? And then from an end-use perspective, Antonio, you said you're seeing demand skew towards larger utility pulls. Should we infer that to mean that demand is being driven primarily by new transmission work versus substation?

Yes. So let me -- I think the slope of -- we've seen over the last couple of years, slope, let's say, become more pronounced. And as we look at the backlogs and as we look at order intake and as we look at the -- the non-reported backlog, let's say, the reservations that our customers have, we see the need to accelerate our capacity expansion because our customers need it. And in this industry, like in every other one. If we don't do it, someone else is going to do it. So we need to be there for our customers.

If you remember, we are a company that has a significant share of our revenues tied to longer-term contracts. We have had very long-term relation with our customers. So they have the let's say, we have the obligation to respond to their needs. And that's really exciting to us. I will tell you, it's not a regional thing. I would say that what we've seen is all over the place. We see it all over the country. That's why one plant in Illinois, one plant in Tulsa give us further coverage.

So I would tell you the overall sentiment is very positive. Again, we didn't do this with just hopes to have a good demand. We had a market study by a third-party, analyzed utility investment over the next 5 to 10 years. And we see this slow continuing to accelerate at least from here to 2030. So that's something that we have to acknowledge and we have to plan for, and we have to be, of course, we have to review it frequently and make sure that every step we take has the basis to make the right choices and the right capital allocation. And we don't do it just based on our gut feeling. We have solid data behind our thinking, no.

Absolutely. Very helpful there. And on those customer reservations, I assume that some of your customers and utility structures that are seeing increased load requests, when those -- but a large load customer, like a hyperscaler commits to incremental capacity. Just talk about the timing from the load request to the utility planning to win maybe Arcosa see the revenue flow through on the P&L?

Yes. So first of all, our customers are mostly utilities. We have a few customers that are EPC and -- but for the most part, we don't sell -- we've not sold to a hyperscaler. So our customers are the people who supply to the power, to developers and hyperscalers and that kind of thing.

So I will tell you, it might take years. If right now, someone is trying to be the data center here in Dallas or in any of the locations around where our footprint is it might take 2, 3 years for us to start seeing any even noise around it. But it is important to your first question that I did not respond I think the move to higher larger poles that we've seen over the last couple of years has to do with that increase in loads in certain areas. I think has to do with permitting and it has to do with rights of way. It's easy to put a big pull rather than a lot of small poles, takes less space. And you see it also in the conversation of the 765 lines, a very large line.

So I think -- and also bigger lines with higher voltage have more resiliency -- add resiliency to the power to the grid. So I think it's -- the whole country is just reconfiguring to people who have higher loads, have higher demands and everyone is trying to adapt to that and we are part of the mix of that. But it might take us years to see from the [indiscernible] develops data center to the time we see the order.

We'll move next to Brent Thielman with D.A. Davidson.

Yes, on Engineered Structures, you've been in a pretty tight range of margins throughout 2025, and want to get a sense of whether you sorts of levels are sustainable into 2026. It sounds like you could have a bit of a different mix within the segment. Does that have a material impact through the year? Maybe just help us understand that piece.

Sure. Brent, I'll take that. Yes, it's a great question, kind of 2 different stories going on within Engineered Structures for 2026. Feel very comfortable with the visibility we have in wind. But with that revenue step down and some lost absorption, we will see a margin impact on the wind side. Does utility fully compensate for that margin impact? I think there's a chance there. I think we do see utility with good year-over-year progression in margin so I think the way I would say it right now is wind is going to have an impact for sure, and I think a path to flat margins for the segment looks achievable. But we'll have to see how the year progresses.

And just to add some color because I think it's -- I think there's a path. Again, it's a big client to get -- to compensate for that big of a drop in wind. But there's a path to get there. But let me give you the qualitative side of that. We're changing -- if we get close to it, the quality of our EBITDA in 2026 is going to be a lot better than 2025 because we're changing tax credit EBITDA for utility structures, EBITDA. So it's -- the quality of our EBITDA is going to be it better, I think, in 2026 and beyond as utility structures grows.

Okay. I guess as a follow-up, Antonio, you've been a patient seller with respect to the barge assets? I know it's been something that's been discussed for a long time and congrats on kind of getting something to the finish line here. Could we presume that you built up an M&A pipeline that you really want to act on. And now it's just the right time to get this done? Or I'm just trying to think around what finally got this to the finish line.

Yes. Well, I've mentioned it in the past, and it's a really good question. I mentioned M&A has its own timing. And we needed to get the barge to a point I've been -- I'm convinced that the buyer [ Wind Church Capital ] is going to do very well with this asset because it's the right spot to sell it. The backlog is there. The trends in the industry are really good and the replacement cycle is coming. I think they're going to have a really, really good business to run and I'm very excited for our team and for them to buy this business.

So the timing is right to sell it. It's hard to -- I mean, could it be better 6 months ago or a year from now, I can't tell you. I think right now, it's as good as we've seen it and that's why we waited to do it at the right time. There's a long runway for it. At the same time, we have been building our pipeline. And we are excited about some of the opportunities we have going on. I will tell you I'm excited about all these opportunities we have, at the same time, you've seen us act in the past. We're not going to do -- the money is not going to burn a hole in our pocket. We're not going to deploy capital to things that we don't think are the best that generate value for our investors. We're not going to pay incredibly high multiples that we cannot afford. We're going to be very disciplined in our capital allocation. And the goal is to build a pipeline that we can act on while at the same time, staying disciplined with our capital allocation. So we're going to be a disciplined capital allocator going forward, focused on growth.

Okay. One more, if I could, just with some of the investments you've made or making on the utility structure side, including the conversion of the wind facility, could you maybe level set us on how much revenue capacity comes on in 2026 or into 2027. Just trying to think about what you're doing internally and what that adds for you in terms of thinking about growth rates for utility structures.

Sure, Brent. I'll try to address that for you. I think in terms of 2026 as we've said on the conversion for the wind tower facility, that's the second half of the year where that's going to start contributing. And from a steel structure perspective or steel plant perspective, that would be our seventh steel utility pole plant. So that kind of gives you a sense of what type of capacity it is adding. But we would see that more of an impact certainly from a full year perspective in 2027.

The other investments we're making, as Antonio said, we've invested in a new galvanizing line down in Mexico, not a top line impact for that. That is a cost-saving initiative as we're bringing galvanizing in-house down in Mexico. So from a P&L perspective, as we ramp the Clinton facility in the U.S., the benefits from that galv cost savings should offset that ramp impact in 2026. So half year benefit from the top line perspective for that Clinton plant, and then you get the full year impact in 2027.

This does conclude the Q&A portion of today's event. And this also brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to the Arcosa Third Quarter 2025 Earnings Conference Call. My name is Boe, and I will be your conference call coordinator today. As a reminder, today's call is being recorded.

Now I would like to turn the call over to your host, Ms. Erin Drabek, Vice President of Investor Relations for Arcosa. Please go ahead, Ms. Drabek.

Good morning, and thank you for joining Arcosa's Third Quarter 2025 Earnings Call. With me today are Antonio Carrillo, President and CEO; and Gail Peck, CFO. A question-and-answer session will follow their prepared remarks.

A copy of the press release issued yesterday and the slide presentation for this morning's call are posted on our Investor Relations website, ir.arcosa.com. A replay of today's call will be available for the next 2 weeks. Instructions for accessing the replay number are included in the press release. A replay of the webcast will be available for 1 year on our website under the News and Events tab.

Today's comments and presentation slides contain financial measures that have not been prepared in accordance with GAAP. Reconciliations of non-GAAP measures to the closest GAAP measure are included in the appendix of the slide presentation. In addition, today's conference call includes forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company's SEC filings for more information on these risks and uncertainties, including the press release we filed yesterday and our Form 10-Q expected to be filed later today.

I would now like to turn the call over to Antonio.

Thank you, Erin. Good morning, everyone, and thank you for joining us today for a discussion of our third quarter results and the outlook for the rest of the year.

Let me start with a few key takeaways on Slide 4. Q3 was a record quarter for Arcosa. We delivered double-digit revenue and adjusted EBITDA growth with all 3 segments contributing to our strong results. Revenue increased 27% and adjusted EBITDA grew 51%, both excluding the impact of the divested steel components business. Likewise, our record adjusted EBITDA margin of 21.8% was a 340 basis points improvement over the same period last year. We believe our third quarter performance is a testament to the strength of the portfolio optimization strategy we have undertaken over the past few years, highlighted by the accretive contribution of the $1.2 billion Stavola acquisition, which we closed a year ago.

The strength of our business model is underscored by the free cash flow generation and debt reduction we delivered during the third quarter. The team did a great job with particular focus on disciplined cash management. As a result, we ended the quarter with a leverage ratio of 2.4x, putting us 2 quarters ahead of our stated plan to return to our 2 to 2.5x leverage target within 18 months of the Stavola acquisition. We are extremely proud of this progress. Now that we are back within our target range, we will continue to take a balanced approach on capital allocation, investing in the business to drive growth while maintaining a healthy balance sheet.

Moving next to an update on our business units. Within Construction Products, third quarter adjusted segment EBITDA was a record $150 million and margin expanded 300 basis points. Stavola led our significant third quarter growth and was highly accretive to segment margin. The acquisition performed well in this first year, delivering $105 million in adjusted EBITDA, a 35.2% margin for the 12 months ending in September 30. Overall, we saw higher ASPs and higher volume in the aggregates business, leading to double-digit unit profitability gains.

Engineered Structures continues to deliver strong organic performance, benefiting from increased demand in our utility structures business and higher volumes in our wind tower business. In the third quarter, we increased adjusted EBITDA by 29%, expanding margins by 240 basis points. with significant tailwinds in the U.S. power market remains robust and our backlog in utility and related structures is at record levels. Additionally, we received new wind tower orders, improving our near-term production visibility while we wait for an anticipated uplift to demand in 2027 and beyond. The barge business executed well, generating double-digit revenue and adjusted EBITDA growth with margin increasing 190 basis points. Our barge backlog is up 16% year-to-date, and we have production visibility for both hopper and tank barges extending well into the second half of 2026.

Our outlook for the remainder of the year remains very positive. Overall, demand trends are favorable, and we believe our U.S.-focused operations are well aligned with long-term infrastructure and secular power market drivers. We have increased the midpoint of our 2025 adjusted EBITDA guidance range and anticipated 32% year-over-year growth, reflecting strong accretion from Stavola as well as double-digit organic expansion. To wrap up, the third quarter performance reflects steady progress in executing our strategic priorities. And with a stronger balance sheet, we're once again in a position to look at potential M&A opportunities as well as organic investments as we seek to further enhance long-term shareholder value.

I will now turn over the call to Gail to discuss our third quarter results in more detail. Gail?

Thank you, Antonio. Good morning, everyone. I'll start with Construction Products segment on Slide 10. Third quarter revenues increased 46% and adjusted segment EBITDA increased 62%, which reflects record quarterly performance for the segment. Margin expanded by 300 basis points to 29.7%. The growth was led by the accretive contribution from Stavola, which has now completed a full year with Arcosa.

For our aggregates business, freight-adjusted revenues increased 28% and adjusted cash gross profit increased 38% during the quarter, expanding margin by 330 basis points. Total volumes increased 18%, largely due to the addition of Stavola. We were pleased to see organic volume growth for the first time in several quarters as weather was generally favorable throughout the quarter. Monthly volume was relatively stable throughout the quarter, indicating steady market demand.

On a unit basis, freight-adjusted average sales price per ton increased 9% and adjusted cash gross profit per ton increased 17%. Organically, aggregates pricing was up mid-single digits. However, unit profitability declined compared to last year. The decrease was primarily due to production downtime at a few natural aggregates locations negatively impacting cost absorption during the quarter. The root causes largely related to unplanned equipment repairs have been addressed, positioning us for improved performance in the fourth quarter. Normalizing for the unabsorbed costs, organic adjusted EBITDA for aggregates would have been up mid-single digits for the quarter.

Turning to specialty materials and asphalt. Revenues more than doubled, primarily reflecting Stavola's asphalt business, which performed well during the quarter. In specialty materials, revenues increased high single digits as strong growth in lightweight aggregates was partially offset by a slight revenue decline in specialty plaster, which was comping against a strong volume quarter in the prior year period. Adjusted EBITDA and margin expanded year-over-year, both in total and on an organic basis. Finally, revenues and adjusted EBITDA increased in our trench shoring business, while margin declined slightly due to mix.

Moving to Engineered Structures on Slide 11. In the third quarter, segment revenues increased 11% with the contribution split between utility and related structures and wind towers. Within utility and related structures, which represented 69% of segment revenues, third quarter revenues increased 8% due to double-digit volume growth and mid-single-digit pricing expansion in utility structures, partially offset by lower steel price pass-through. Within wind towers, revenues increased 20% due to higher volumes from our New Mexico plant, which was ramping up production in the third quarter of last year.

Adjusted segment EBITDA increased 29% and margin expanded 240 basis points to 18.3%. The earnings growth and margin expansion were primarily driven by higher revenues and operating improvements in our utility structures business. We ended the quarter with a record backlog for utility and related structures of $462 million, up 11% year-to-date as we continue to see strong order activity. Our production visibility for this business is supported by our reported backlog as well as customer reservations for future capacity. For wind towers, we received orders of $57 million during the quarter, which improves our production visibility in 2026. We ended the quarter with backlog of $526 million, which also reflects the revaluation impact of adjusting backlog into 2026 from 2028.

Turning to Transportation Products on Slide 12. Inland barge revenues were up 22% and adjusted segment EBITDA increased 36%, excluding the divested steel components business from the prior year period. The growth was driven by higher tank barge volumes, while hopper barge volumes were roughly flat. Margin for the business improved by 190 basis points, primarily driven by improved mix and operating leverage in our tank barge operations. During the third quarter, barge orders totaled $148 million for both hopper and tank barges, reflecting a book-to-bill of 1.5. Our barge backlog at the end of the quarter totaled $326 million, an increase of 16% year-to-date, and our current production visibility extends well into the second half of 2026.

I'll now provide some comments on our cash flow performance and leverage position on Slide 13. Third quarter operating cash flow was $161 million, an increase of 19% year-over-year and up more than 150% sequentially as we planned for higher cash flow in the back half of the year. Working capital was a $23 million source of cash in the quarter even as revenues increased 25%. CapEx for the third quarter was $40 million, bringing year-to-date CapEx to $101 million, down $35 million year-over-year. For the full year, we continue to expect CapEx of $145 million to $155 million, which implies a slightly higher rate in the fourth quarter as we are investing in our plant conversion and placing deposits for long lead time equipment items within utility structures.

Free cash flow for the quarter was $134 million, an increase of 25% year-over-year. We allocated $100 million to reduce the outstanding balance on the Stavola acquisition term loan, which is prepayable with no penalty. As Antonio mentioned, we are pleased to achieve our stated leverage goal at an accelerated pace. We ended the quarter at 2.4x net debt to adjusted EBITDA. And looking ahead, we expect to remain within our target range. Our liquidity remains strong at $920 million, including full availability under our $700 million revolver, and we have no material near-term debt maturities.

I will now turn the call over to Antonio for an update on our outlook.

Thank you, Gail. I will now turn to Slide 15 to review our guidance. As evidenced by our third quarter and year-to-date results, the strategy we have executed for the last 7 years of allocating capital to our growth businesses, improving our cyclical businesses and simplifying the portfolio has created a resilient platform with significant long-term growth potential. Our portfolio is now strategically aligned around businesses with durable demand fundamentals and compelling end market positions. Our key growth businesses continue to demonstrate strong performance, while our cyclical businesses benefit from solid backlog visibility and a strong foundation for continued growth. Given our year-to-date performance and confidence in our outlook for the rest of the year, we have adjusted our full year 2025 guidance ranges, tightening forecasted revenues to a range of $2.86 billion to $2.91 billion and adjusted EBITDA to a range of $575 million to $585 million. At the increased midpoint, this implies 32% adjusted EBITDA growth in 2025, normalizing for the divestiture of steel components business.

Turning to Slide 16 for a discussion on our outlook for the business segments. Beginning with Construction Products, we're optimistic about the future, supported by attractive long-term demand fundamentals. Stavola continues to perform in line with expectations and the seasonally stronger second and third quarters demonstrated its premium financial attributes. Infrastructure demand drivers underpin the stability of Stavola's results, and we remain confident in the pipeline of work for both aggregates and asphalt in the New York, New Jersey market, now our second largest market.

In Texas, our largest aggregates market, public infrastructure demand remains fundamentally healthy. While highway lettings are trending off peak levels, the outlook for state spending growth over the next several years is very positive and remains at historically elevated levels. More broadly, we believe infrastructure is on solid footing, and we expect it to be a catalyst for 2026 volumes. In our shoring business, which serves early phase public and private infrastructure works, third quarter order activity was above last year's level and our customers remain confident. On the private side, we're encouraged by the secular nonresidential trends, including U.S. energy infrastructure build-out, onshoring activities and the data center investments.

Additionally, warehouse activity continues to positively inflect. Our construction materials platform is well located in favorable geographies with attractive population dynamics and long-term growth drivers that will benefit from a recovery in single-family housing. At the start of the year, we were hopeful to see an uptick in residential volumes in the back half of the year, but this has not materialized. With the recent Fed action and the potential for additional rate cuts, we now see a prospect of a single-family housing recovery in 2026. For full year 2025, we remain on track for high single-digit pricing growth in aggregates.

Turning to volumes. Year-to-date volumes were up 7%, benefiting from Stavola and offsetting mid-single-digit organic volume decline. Looking at the full year, we now expect high single-digit volume growth, a slight step down from our prior guidance. On the third quarter, we were encouraged by the reversal in declining organic volume trends and ended the quarter with strong volume growth in September. We expect modest fourth quarter volume growth, assuming normal weather and no adverse impacts from the government shutdown.

Moving next to Engineered Structures. I'll begin with a few comments on the U.S. power industry, which is the driver of our utility structures and wind tower businesses. The expansion of data centers and the rise in electricity consumption across the U.S. are driving significant and sustained increase in power demand. Meeting this growing need will require leveraging all available sources of power generation and significant investments in the transmission and distribution infrastructure. As I've said before, this is an exciting time to be serving the U.S. power industry, and we believe our Engineered Structures platform is strategically positioned to benefit in this new era of power growth.

Turning first to wind towers. Wind energy is now cost competitive with other major power sources, even in the absence of tax credits and can play a critical role in meeting future energy needs quickly and efficiently. We have received orders from 2 customers totaling approximately $117 million, of which $60 million were received after the quarter end. At the same time, we shifted a portion of our 2028 backlog into 2026. This improves our production visibility as we now have backlogs for all 3 facilities for '26 and '27. We're still early and continue to work with our customers on additional orders. What is important is that we have good visibility across our platform, and we have time to continue to work with our customers on production schedules that allows them to prepare for growth in 2027 and beyond.

Moving to utility structures. We continue to see accelerating demand underscored by our record backlog as utility customers continue to increase their investments in transmission and distribution infrastructure. During the third quarter, we made good progress in the conversion of our wind tower facility in Illinois to produce large utility poles. Production in this facility is scheduled to begin in the second half of 2026. We expect our new galvanizing facility in Mexico to complete its first dip in the first quarter of 2026, which will improve our cost structure and enhance margin. We remain confident in the durability of demand supported by long-term power trends, increased utility CapEx and the strategic network of alliance customers. As the utility market grows, the flexible and strategically located network of facilities within our Engineered Structures platform provides us with the ability to adapt and increase capacity without significant capital investments.

Turning to Transportation. The aging U.S. barge fleet creates a favorable replacement cycle, which is expected to extend over the next several years. Strong order activity in the third quarter has significantly improved our production visibility for 2026, extending beyond the typical outlook we have at this point of the year. This improved line of sight for both hopper and tank barges reinforces our confidence in sustained demand through the cycle. In closing, as we enter the fourth quarter and turn our attention to fiscal year '26, we remain confident in the strength and future potential of our core markets. With an optimized portfolio and favorable macro dynamics, we are positioned -- we have positioned Arcosa for sustained long-term growth and value creation while focusing on operational excellence and disciplined capital allocation.

We are now ready to take your questions.

[Operator Instructions] We'll go first this morning to Trey Grooms of Stephens.

Congrats on the great quarter. I guess, first off, you gave us some pretty good color, but I didn't know if maybe you could dive in a little bit more around the puts and takes around the full year revenue and EBITDA guidance adjustments or kind of just tightening those ranges a bit. Any more color you could give us on those puts and takes, please?

Sure. Trey, this is Gail. I'll take that. As you saw in our release and in our comments this morning, we made some adjustments to the full year guide with just 1 quarter left. It reflects the strong year-to-date performance that we've had through the first 9 months, and we expect a good quarter in Q4. So we tightened the revenue guidance just a little bit. I think that reflects a very small slight step down. That would be coming from construction as volumes -- on the organic side for the year have not been as strong as we would have thought at the start of the year. All that being said, slight adjustment to revenue, we're looking at strong double-digit revenue growth year-over-year.

On the EBITDA side, we did raise the midpoint about $10 million. We now see $580 million of EBITDA for the year. As Antonio said, that's 32% growth year-over-year. As we think about the fourth quarter, this will be our first quarter with 100% organic as Stavola has anniversaried in the third quarter. And we're seeing strong double-digit growth in the fourth quarter. It is a seasonal quarter for Construction. So you do see Q4 step down. We do have Stavola in the New York, New Jersey MSA, which is very weather-dependent in the fourth quarter. So you see some seasonality, a normal step down in Q4.

And we're really excited to close the year strong. We have excellent production visibility with our backlog on the manufacturing side. You do have 2 holidays in the fourth quarter, and sometimes that has an impact. But we're really excited to end the year strong, pleased to raise the midpoint of our guidance and conclude a very strong record year for Arcosa.

That's super helpful. Just kind of following up on that. On the Construction business, you mentioned some inefficiencies with some of your legacy aggregates businesses with some production downtime at a few locations. Is that going to continue into the fourth quarter? Is that playing a role at all? Or is that largely behind you?

Trey, it's Antonio. I think that's largely behind us. As you increase the number of facilities, and we're still -- we've grown a lot, but we're not the size of some of our larger peers. So 1 or 2 facilities that have a problem still reflects in our -- creates a little volatility for us. And that's what you saw. I think we're largely over that. And every day, we get better as a company, and that's what we try to do, become better every day.

If I could switch just to Engineered Structures, just real quick. The margins there, very impressive margin improvement. You mentioned pricing and some operating improvements in utility. So if you could maybe talk about some of those drivers and how you're thinking about the margin outlook and kind of sustainability of those margins as we look forward.

I'll take that, Trey. So when you look at what happened in the third quarter and what's been happening this year, both businesses, the wind tower business and the utility structures are performing very, very well. On utility structures -- I'm sorry, on wind, we started the year. We've been ramping the Belen facility in New Mexico last year. So when you compare -- last year, we had excess cost compared to this year. But overall, the team has done a fantastic job ramping up facilities. And we are very good at building wind towers when we have a continued -- a very, very steady production cycle, which is what we have right now. And that's why we're excited about the visibility we get with the new orders for 2026 and '27. It gives us very good line of sight.

On the utility structures, demand continues to be strong. We've been increasing our capacity. As Gail said, volume grew double digit, and we've been growing volume double digit for the last 7 years. So this is a very, very good run that we're getting in increasing capacity, and we've become good at it. Our plants run very well. As always, when you have a larger business, you have things that are always working well and sometimes they're not. We still have things that we need to improve in our business. We're not done. And so we have some plants that are doing better than others. But I'm very excited about where we are.

Our team is doing a very good job. And Gail mentioned, we have placed orders for additional equipment because we need to continue to expand our capacity. We will see going forward, the Illinois facility as we start hiring people will start going through its ramp-up. But it's part of the growing pains, and we're just excited with where we are.

And I might add, Trey, on to that, just coming back to the start of your question. And when you really look at the year-over-year growth, as Antonio said, wind was ramping, we finished that ramp earlier in the year. So the year-over-year growth is really coming from the strength in utility and related structures. So very pleased to see that. At nearly 70% of segment revenue, that's an important driver of our performance.

We go next now to Julio Romero at Sidoti & Company.

I wanted to start on Construction Products. Antonio, you mentioned for full year '25, you remain on track for high single-digit pricing growth in aggregates. Can you just talk about the pricing outlook within aggregates as we head into '26? And I'm not asking for guidance, but just kind of high-level thoughts there.

Sure. I think, as you know, this business is a very local business. And every one of our locations has different dynamics. But I think overall, we're positive about where we're seeing demand, especially on the infrastructure side. So I think as long as we continue having this -- and we mentioned that we had -- Gail mentioned in her script that we had consistent volumes during the quarter, which was a very good sign and recovering volume growth is a very important price of the pricing dynamic -- very important part of the pricing dynamic. We've been able to raise price throughout several quarters with volume declining.

Now that volume seems to be recovering, I think pricing should be something that we can continue to pass through to our customers. We are in really good locations, great geographies, and that also helps. And I think if we're able to get some recovery in '26, late '26, sometime on housing, that will help even more. So we're optimistic about where we are on pricing. We're optimistic about where we're seeing the volume based on what we saw in the third quarter. And I think we're in a really good position. And very important, I think Stavola really changed the dynamics of our business.

I might add, just, Julio, as you think about the cadence of pricing, we have full year pricing guide of high single digit for Arcosa in 2025. That's total pricing. We did indicate that organic pricing was up mid-single digit in the quarter. Stavola does anniversary. So fourth quarter will be all organic. So we do expect a slight step down to that year-over-year rate in the Q4 with somewhere near more of that organic rate that we achieved in Q3. So as we look to 2026, as Antonio said, we still see pricing trending on the high side of historical averages.

Okay. Very helpful there. And congratulations on reaching your target leverage 2 quarters ahead of schedule. You weren't kidding when you said you'd have cash flow accelerate in the second half here. Can you just talk about capital allocation going forward? How are you thinking about perhaps more debt reduction versus further growth initiatives?

Sure. So first of all, I think what you said is exactly how we thought about it. When we went through Stavola, it was a large acquisition for us, but we had a really good visibility on our cyclical businesses backlog and on the growth businesses performance. And that's what gave us the confidence to go for a larger acquisition. And that's why when we talk about our backlogs, the visibility is so important.

On capital allocation, we mentioned we want to keep our balance sheet. We want to continue to improve. Even though we are within our range, I personally would like to be lower in that range to have more flexibility as we move forward. So my goal would be to try to get lower in the range of 2 to 2.5x leverage. On the other hand, we are -- we've been working for the last several months on filling our pipeline of bolt-on acquisitions, and we are -- we have opportunities out there, and these things happen sometimes when you want them, sometimes when they just happen. So we now have the flexibility of taking advantage of those opportunities and continue to focus on bolt-on acquisitions, which have been very, very accretive to Arcosa numbers. So I want to continue doing that, both on the aggregates and the recycled aggregates.

On the organic growth side, we have opportunities. We're investing in the facility in Illinois to convert it from wind to transmission. I mentioned we are finally finishing out our galvanizing facility in Mexico. And we have opportunities based on depending on the strength of the transmission tower business. We always have opportunities to continue to invest. We are ordering additional equipment to continue to grow the business as we see demand strength accelerating. So I think you will see a combination of both organic and inorganic capital allocation in terms of M&A and organic growth going forward and hopefully continue to reduce our debt to the lower end of our range.

We'll go next now to Ian Zaffino of Oppenheimer.

Congrats on all the wind tower orders. I guess I just wanted to ask also, what is the outlook, I guess, for incremental orders there? And what was the decision to accelerate the backlog? Walk me through kind of those dynamics, was this all on because of you're trying to figure out your production schedules? Was this driven by the customers' decision? Maybe just some color around there as well.

Sure. Thank you, Ian. So let me give you a big picture. As I mentioned in my remarks, the wind industry is competitive now with other sources of power to -- but it's been attached to tax credits for a long, long time. And it seems that after '27, the industry is going to go to a market-driven economy like it probably should be, and we're happy it goes there because we are now competitive. But we have 2 years to get there. And you've seen all the policy changes during this year that have created uncertainty.

So the way to bridge these 2 years, which -- our base case scenario is that these 2 years will accelerate as we get closer to end of 2027. Historically, developers and the whole industry accelerates to try to capture as much tax credits as possible before they go away. We needed to bring that backlog to try to capture as much as possible for our customers that need these towers. And 2028 is going to be a different environment. 2028 is going to be an environment that I'm very optimistic about because the U.S. needs the power. Prices of power are going up and the industry is competitive. So we will have a very good industry in 2028 and beyond.

But for the moment, we had the backlog. We agreed with our customers to move forward part of the backlog. And at the same time, we got new orders. So I think we're in a really good position. We're not full for '26 and '27. We're still working with customers to try to accommodate additional orders and to figure out the needs of many of our customers as they go through this period of tax incentives still being present. So I'm optimistic we're going to get additional orders, but we're still early. We're just at the end of October, early November, and we have time for this to materialize over the next several months.

Okay. And then as a follow-up, I guess your 2 nongrowth segments are doing very well. And we've kind of -- you've been very patient here waiting for them to ramp and really to hit either mid-cycle or above. And kudos to you guys, you've done a very good job in doing that. Given where they are at this point and given that you want to shift your business more into growth, is there anything kind of on the horizon that you're now thinking of as far as capital allocation and moving more aggressively into growth businesses and away from those nongrowth businesses that are kind of now actually performing very well?

That's a good question, and that's a question that we are always debating. And I would tell you that Stavola changed the dynamics of Arcosa. We now have a business that's a lot larger than we were a year ago. And that has helped, let's say, put us on a better footing to be able to continue to move our portfolio. It's always -- we just have to decide when we want to continue to simplify the company. I will tell you one important step that we took this quarter was achieving our leverage ratio.

Those cyclical businesses provide a lot of cash. So we needed those businesses to be able to help us delever as we bought Stavola. Now that we are continuing to move ahead and we are reducing our leverage ratio to our target, I think we'll be in a good position to continue to move forward with the simplification of the company, but those things take time, and there's never a perfect time to do it. We'll just have to continue to evaluate it.

We go next now to Jean Van Diest (sic) [ Jean Veliz ] of D.A. Davidson.

I want to start with the wind business. Are you anticipating additional wind orders beyond what you've discussed here today? And do you need to see additional orders for us to assume a sort of stable contribution from wind in 2026?

So we have -- as I mentioned before, we're still early. We're working with our customers. I hope we can get additional orders. And I'm optimistic about where I see '26 and '27. We now have good visibility for our 3 facilities, as I mentioned in my remarks. So -- but we have time. I think we don't provide guidance at this time of the year, but we have time, and we're optimistic about where we are with our customers. So we'll know more over the next few weeks and months.

Yes. And I guess I would just add as it relates to '26 and your question. We feel very, very comfortable where we are at this point of the year, and we have good coverage of our '25 revenue run rate. We're not there at 100% yet, but we have very good coverage at this point of the year.

Got it. And moving on to Engineered Structures. Can you provide an update on timing of capacity investments you're making in Engineered Structures? And when do you expect that to begin to ramp up and contribute to growth?

I mentioned that during the second half of the year, we'll start ramping up that production. And that starts -- hopefully, by the end of the year, it should be done. And we -- I think it's going to start contributing positively probably in '27.

And are you guys filling that capacity?

Yes. Yes, we're working with our customers to fill it up. And the reason we're expanding is because we have the demand from our customers. We're really seeing accelerating demand in utility structures, and that's why we're doing this expansion and why we're evaluating additional expansion based on conversations with our customers.

And we'll go next now to Garik Shmois of Loop Capital.

Just to start, a couple of questions on barge. Just given the improvement in orders...

Garik, I'm sorry to interrupt you. We're having a hard time hearing you.

Sorry, is this better?

Yes. Please go ahead.

Okay. Sorry about that. So a couple of questions on barge to start. Just given the improvement in orders, are you seeing an inflection in hopper orders as well as tank? I'm wondering what you're hearing from your customers just regarding the ramp in the replacement cycle being sustainable moving forward? And if you can speak maybe to the type of margins you're seeing on the new orders coming into backlog.

Yes. Absolutely. The big picture is barges need to be replaced, both tank and hopper. When you look at the replacement cycle, I'm convinced over the next several years, I think we're going to have a long cycle. I'm not sure if it starts today or tomorrow or a week from now, but we believe our capacity is very, very valuable because we will need all our capacity to be able to meet this replacement cycle. And we are pricing our barges like that. So we're not giving our capacity away if we wanted to fill the plants and I gave cheap prices to every one of our customers, we will have to fill them -- we could fill them up tomorrow for the next several years.

But we're not doing that. We're selling our barges at the price we think they deserve and with good margins. And I'm a big believer in the barge business for the next several years being on strong footing. We have received orders for both hopper and tank barges. And I won't tell you it's -- people are lining up for hundreds of barges, but we see solid demand. We see solid demand for barges going forward, and we have really good visibility in our backlog. We said we're deep into the second part of the year next year. And for this time of the year, that's not common for us. No, we normally don't have that visibility that we have today for 2026.

Okay. That's helpful. I wanted to ask on aggregates and organic volumes. I think you mentioned that you're starting to see modest growth here in the fourth quarter. Wondering if you can unpack where that is. Is that certain regions are starting to perform better? Or is it more of a function of end markets improving? I'd be thinking more nonresidential and infrastructure. But just any help on where you're seeing some of the inflections on organic aggregates demand?

Yes. I will tell you. So starting by markets, I think in Texas, and over the last year, I think with residential being slow, we've strategically targeted more infrastructure business, and that takes us time to continue to move into that market from a more residential oriented, especially in Texas and in the West. So I think infrastructure continues to be solid, and that's where we're seeing good volume demand -- good volume growth.

Residential, as I mentioned in my remarks, we expected the second half to see an uptick, and we didn't see that. So we continue to inflect into more infrastructure focus. We're really excited about some of this -- the reshoring, all the power built infrastructure, all the data centers, we are seeing good volume there. And we are still seeing relatively weakness in the Gulf market. But we see very, very good potential for '26 with LNG and some other projects that have been delayed.

So I think as we move into 2026, and we've shifted more into infrastructure that will give us a solid footing and more consistent. I think on the nonresidential side, we're optimistic of what we're seeing. And then hopefully, sometime in the '26, we get some uptick in residential. So overall, very positive. Stavola specifically, a lot more focused on infrastructure. So assuming there's no impact from the federal funding, I think we should be in really good shape.

Thank you. And ladies and gentlemen, that will conclude our question-and-answer session for this morning. So that will bring us to the conclusion of today's Arcosa Third Quarter 2025 Earnings Conference Call. Again, we'd like to thank you all so much for joining us this morning and wish you all a great day. Goodbye.

Good morning, ladies and gentlemen, and welcome to the Arcosa, Inc., Second Quarter 2025 Earnings Conference Call. My name is Leo, and I will be your conference call coordinator today. As a reminder, today's call is being recorded.

Now I would like to turn the call over to your host, Erin Drabek, Vice President of Investor Relations for Arcosa. Ms. Drabek, you may begin.

Good morning, everyone, and thank you for joining Arcosa's Second Quarter 2025 Earnings call. With me today are Antonio Carrillo, President and CEO; and Gail Peck, CFO.

A question-and-answer session will follow their prepared remarks. A copy of the press release issued yesterday and the slide presentation for this morning's call are posted on our Investor Relations website, ir.arcosa.com. A replay of today's call will be available for the next 2 weeks. Instructions for accessing the replay number are included in the press release. A replay of the webcast will be available for 1 year on our website under the News and Events tab.

Today's comments and presentation slides contain financial measures that have not been prepared in accordance with GAAP. Reconciliations of non-GAAP financial measures to the closest GAAP measure are included in the appendix of the slide presentation.

In addition, today's conference call includes forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company's SEC filings for more information on these risks and uncertainties, including the press release we filed yesterday and our Form 10-Q expected to be filed later today.

I would now like to turn the call over to Antonio.

Thank you, Erin. Good morning, everyone, and thank you for joining us today for a discussion of our second quarter results and the outlook for 2025.

Let me start with a few key takeaways on Slide 4. We are pleased to report a record quarter that reflects the positive momentum for our strategic initiatives. Over the past year, we have taken deliberate actions to strengthen our growth businesses, streamlining the portfolio, reduce the cyclicality and expand margins. And the impact is clear in this quarter's results. It also bodes well for our future performance.

As Arcosa continues to transform, we have expanded our disclosures around our key growth businesses, construction materials and utility-related structures, to help investors track our progress. Gail will provide more details in her remarks.

Arcosa's revenue increased 18% and adjusted EBITDA grew 42% year-over-year, excluding the divested steel components business. We reported a record adjusted EBITDA margin of 20.9%, up 360 basis points. The successful integration of Stavola, which we acquired in October of 2024, has proven to be a significant driver of our growth, increasing consolidated revenues by 14% and expanding adjusted EBITDA margin by 250 basis points. Contribution from Stavola more than compensated for weather-related challenges in our organic legacy Construction Products business, which experienced above-average rainfall throughout the quarter.

In the Aggregates business, we continued to realize strong pricing gains, which drove 15% increase in adjusted cash gross profit per ton. Additionally, our growth was augmented by a record quarter for Engineered Structures, fueled by strong execution in our utility and related structures business and raising demand tied to long-term grid expansion trends.

Our fully ramped wind tower facility in Belen, New Mexico, is performing well and is margin accretive. Our barge business performed in line with expectations and order activities positive with orders received in the third quarter. Our hopper barge backlog now extends into the second quarter of 2026. Tank barge backlog extends into the fourth quarter of next year.

We also delivered strong cash generation during the quarter, as we continue to prioritize deleveraging. Following the Stavola acquisition, we remain on track to reach our target leverage range of 2 to 2.5x within the next 3 quarters. Given healthy overall demand in our growth businesses, along with solid backlog visibility in our cyclical businesses, we're tightening our guidance range for full year 2025 revenues and adjusted EBITDA while maintaining the midpoint. As a reminder, the midpoint of our guidance implies a 30% growth in EBITDA for 2025, excluding the divested rail components business.

To wrap up, we are pleased with our solid first half performance and the momentum we have as we move into the second half of the year.

I will now turn the call over to Gail to discuss our second quarter segment results in more detail.

Thank you, Antonio. Good morning, everyone. I'll start with Construction Products segment on Slide 10, which reported record revenues and segment adjusted EBITDA.

Second quarter revenues increased 28%, and adjusted segment EBITDA increased 44%, driven by the accretive contribution from Stavola. Margin expanded 310 basis points to 28.3%. The acquisition integration is progressing very well, and Stavola's second quarter performance demonstrates its premium financial attributes, delivering a 39% adjusted EBITDA margin for the quarter, despite a significant increase in rainfall days in the New York, New Jersey MSA during the quarter compared to the prior year.

On an organic basis, higher overall pricing was offset by reduced volumes and cost absorption, as wet weather impacted many of our key markets. While weather has been a headwind in the first 6 months of the year, we are pleased to see year-to-date organic adjusted EBITDA margin for the segment up slightly year-over-year.

As Antonio mentioned, we are expanding our disclosures for our Aggregates business to better align with our construction materials peers. An additional table has been added to the earnings release that provides volumes, average selling price and unit profitability metrics for our largest construction materials business.

As a reminder, last quarter, we began breaking out revenue for Aggregates, and we are pleased to increase transparency to highlight the quality of our platform. For our Aggregates business, freight-adjusted revenues increased 15% and adjusted cash gross profit increased 21% during the quarter, expanding margin by 250 basis points.

Total volumes increased 6%, as the addition of Stavola more than offset lower organic volumes. On a unit basis, freight-adjusted average sales price per ton increased 8% to $17.83 and adjusted cash gross profit per ton increased 15% to $8.24. Organically, pricing was up mid-single digits, in line with expectations.

Above average rainfall was a factor throughout the quarter in most of our markets, reducing the number of available workdays. With lower production volumes, our teams focused on maintenance and repair activities during the quarter, which reduced cost absorption, but should improve margin in the second half of the year.

With more normalized weather patterns in July, we experienced strong double-digit volume growth in our Aggregates business supported by Stavola and solid organic growth, which underpins our confidence in the second half of the year.

Turning to Specialty Materials and Asphalt. Revenues effectively doubled, primarily reflecting the Stavola acquisition. Stavola's Asphalt business performed well during the quarter with margins slightly ahead of expectations. In Specialty Materials, higher pricing was offset by lower volumes, resulting in flat adjusted EBITDA year-over-year.

Finally, revenues for our trench shoring business were down due to lower volumes and a reduction in steel prices, which decreased average selling prices. Adjusted EBITDA declined in line with revenue, and margin was unchanged. Customer sentiment for our shoring business remains positive.

Moving to Engineered Structures on Slide 11. As previously mentioned, we have now broken out revenues into 2 line items: Utility and Related Structures and Wind Towers. We provide backlog information on a stand-alone basis as well.

In the second quarter, segment revenue increased 7% due to higher Wind Tower volumes from our New Mexico plant, which began delivering towers in the second quarter of last year and is now fully ramped to its planned production.

Revenues from utility and related structures decreased 2%, in line with expectations. Significant double-digit volume growth in our steel utility poles and improved product mix were offset by lower steel prices, which reduced average pricing.

Adjusted segment EBITDA increased 31%, and margin expanded 350 basis points to a record 18.7%. The earnings growth was about evenly split between Utility and Related Structures and Wind Towers. We ended the quarter with a record backlog for Utility and Related Structures of $450 million, up 9% from the start of the year, as we continue to see strong order activity.

Our production visibility for this business is supported by our reported backlog as well as customer reservations for future capacity. For Wind Towers, we ended the quarter with backlog of almost $600 million, down 23% from the start of the year, as we continue to deliver on our existing orders. As a reminder, our backlog extends into 2028 at our New Mexico facility.

Turning to Transportation Products on Slide 12. Revenues were up 18%, and adjusted segment EBITDA increased 10%, excluding steel components from the prior year period. The growth was driven by higher tank barge volumes, partially offset by lower hopper barge deliveries. Margin for the business declined 110 basis points, in line with expectations based on product mix. We expect to see sequential margin improvement in the second half.

During the second quarter, barge orders totaled $33 million, primarily for hopper barges for 2025 delivery. We ended the quarter with backlog of $277 million, in line with the start of the year. Order activity increased subsequent to quarter end, and we have solidified our production plans for 2025.

I'll now provide some comments on our cash flow performance and leverage position on Slide 13. Second quarter operating cash flow was $61 million, a sequential improvement from the first quarter's breakeven cash flow. Working capital was a $76 million use of cash, primarily driven by higher receivables due to the seasonal ramp in construction and increased inventory supporting our Utility Structures business.

Looking at working capital days, we are pleased with the significant reduction from the second quarter last year. CapEx for the second quarter was $28 million, down $20 million from the prior period, as we are primarily investing in maintenance CapEx this year. For the full year, we now see CapEx of $145 million to $155 million, which lowers the top end by $10 million, reflecting the expected timing of investment.

Free cash flow for the quarter was $39 million, we expect free cash flow to improve, as we move into the second half of the year. We continue to make progress deleveraging the balance sheet following the Stavola acquisition. Second quarter's 2.8x net debt to adjusted EBITDA is down over a 0.5 turn from when we closed the transaction last October due to strong earnings growth.

With higher anticipated cash flow, we expect to begin reducing debt during the second half of the year. Our liquidity remains strong at $890 million, including full availability under our $700 million revolver, and we have no material near-term debt maturities.

I will now turn the call over to Antonio for an update on our 2025 outlook.

Thank you, Gail. I will now turn to Slide 15 to review our guidance.

Looking ahead, our growth businesses are firmly positioned in attractive end markets with solid demand fundamentals. Additionally, our cyclical businesses have strong backlog visibility. The steps we have taken to strategically transform our portfolio have created a more focused and resilient platform, which is positioned for consistent long-term growth.

At the midpoint of our range, we anticipate revenues of $2.9 billion, up 17% year-to-year and adjusted EBITDA of $570 million, up 30%, excluding steel components from 2024 results. We expect the full year impact of acquisitions in 2025 to be supplemented by double-digit adjusted EBITDA growth from our legacy operations.

In terms of tariffs, we have navigated this period of uncertainty very well. And with the current available information, we do not see any future material impacts.

Please turn to Slide 16 for a discussion of our business outlook by segment. We expect Construction Products to perform well, driven by accretive contributions from Stavola.

In our Aggregates business, we are increasing our full year pricing outlook to high single-digit appreciation, and we expect double-digit volume growth. With volumes up 2% for the first half of the year, we anticipate solid volume growth in the second half coming from both Stavola and organic volume improvements.

When we look at the end market demand, infrastructure investment continues to serve as a growth catalyst. Public sector projects are progressing, while private markets show resilience in select industrial segments such as AI, data centers and warehouses. In contrast, single-family residential remains pressured, while demand for multifamily is improving.

On balance, we are confident in the strong long-term prospects for our construction business despite recent weather-related softness. As Gail mentioned, when weather is dry, volumes appear to be solid, which we saw in the second half of June as well as in the month of July. This supports the outlook for high single-digit organic growth in the second half of the year for the Construction Products segment.

Moving to Engineered Structures. We're benefiting from continued investment in the nation's aging infrastructure and the new era of growth for the U.S. power market due to increased electrification, data center growth and connecting renewable energy to the grid.

Given strong momentum and a pickup in demand for transmission structures, we have begun converting our idle Illinois facility from Wind Towers to Utility Structures. We expect to be operational in the second half of 2026. Our record backlog, long-term power trends, increased utility CapEx and strategic network of alliance customers gives us confidence in the durability of demand.

Ameron is also experiencing steady demand for lighting poles and traffic signals as road infrastructure spending continues to support our Traffic Structures business.

On the Telecom side, we are seeing a modest pickup in spending by carriers, which is giving us -- giving that part of the business the lift.

Turning to Wind. The recent passage of the One Big Beautiful Bill adds clarity and urgency to the near-term orders. Other inquiries with our wind turbine customers have increased, and we anticipate a period of solid demand as developers expedite activity to ensure they capture tax credits before they expire.

Long term, U.S. power demand is expected to accelerate, and all sources of power generation will be required to fulfill demand. Even without tax rate support, wind has become cost competitive with other sources of generation and should play an important role in meeting low growth demands.

This is an exciting time to be serving the U.S. power industry, and we believe our Engineered Structures platform is well positioned in this new environment of power growth. With relatively small capital investment, most of our plants are capable of producing large utility structures, providing us optionality if demand for transmission poles continues to accelerate.

Last, for a discussion on transportation, the barge fleet continues to age, and this means replacement demand over the next 5 to 10 years will likely outpace what the industry can build. The introduction of permanent bonus depreciation should be helpful for our barge customers.

While we only received $33 million in orders in the second quarter, we booked $122 million of additional orders since quarter end, filling our 2025 production plants for hopper barges and providing solid backlog visibility for both hopper and tank barges well into 2026.

Inquiries for tank barges are into 2027, but we are ready to increase production if demand continues to accelerate. We will continue to be disciplined and strategic with our deployment of capital as we prioritize deleveraging while also investing in the business to drive long-term growth, both organically and via potential M&A transactions.

Summing up, we're optimistic about 2025 and beyond. We have an incredible team who is executing well, and our results reflect that. Our growth businesses are operating in attractive markets with solid demand fundamentals, and we have a very strong market position.

Our cyclical businesses have solid backlogs, their products are needed and with recent policy clarity, demand is picking up. Our cost is more resilient than ever before, and our goal is to continue to take steps to optimize our portfolio to reduce complexity while enhancing long-term shareholder value.

With that, we're ready to take your questions.

[Operator Instructions] We'll take our first question from Trey Grooms of Stephens.

This is Ethan on for Trey. I wanted to talk first about the moving pieces of the updated guide range and looking ahead to the second half. You've called out the organic versus inorganic contribution for the year, but how should we think about the moving pieces of the guide on a segment basis versus the assumptions you had baked in at the beginning of the year?

This is Gail. I'll take that. Maybe just a few comments high level on the outlook. As Antonio says in his script, we remain on track for strong growth in 2025, and the guidance really reflects our increased confidence in the outlook.

We've maintained the midpoint, as you know, and tightened the range. And as I think about the organic versus inorganic split, we're looking at 30% EBITDA growth for the year, still expecting 12% of that or 12% year-over-year growth on an organic basis, that's really not changed from where we were at the start of the year. So strong 12% organic growth.

I'd say what has changed is now that we've finished the first 6 months of the year, and we know that our Construction business was challenged by weather that had some impact on construction for the first half of the year.

We have had outperformance by Utility Structures and a little bit by barge to help compensate for that. So that really leaves the full year guide intact. What we did say in our comments is we expect the second half of construction to be high single-digit organic growth, that is where we started the year. It was just interrupted by the weather we had in the first half.

As we mentioned in July, we were pleased with the strong double-digit volume growth and solid organic growth in the month of July. So what we're seeing when the weather is dryer, volumes are good. So that's underpinning our confidence in the back half construction outlook. So I think really, it's just a little bit of movement between outperformance in Engineered Structures and the softened first half of construction really due to weather.

Right, right. And that's encouraging to hear about the pickup in activity. And quickly on the drivers of the raised Aggregates' ASP guidance, where is the outperformance there coming from relative to what you had expected at the beginning of the year?

So on an ASP front, as you can see, we had 8% growth in the quarter, total ASP growth. That brings year-to-date growth to about a 10% increase year-over-year. So strong pricing in the first half of the year, which was above our expectations. So our raise from the mid-single digit to the high-single digit really reflects the start of the year, where we had select mid-year that we were targeting, we were able to achieve. So that improved.

As you remember, our initial guide didn't have any mid-years. We did have some select mid-years. Pricing gains were really broad-based in the quarter. Stavola continues to be accretive to ASP, and pricing trends in the New York, New Jersey MSA are favorable. So high confidence on the performance in the first half.

And then when you think about the back half, we'll continue to have very strong pricing momentum. I will point out first half did benefit from the strong low double-digit volume -- excuse me, price increases we had in the back half of last year. So we had some carryover impacts in the first half, but we're very positive about the pricing environment.

Our next question is from Ian Zaffino of Oppenheimer.

This is Isaac Sellhausen on for Ian. I just had one on the Wind Tower business. As you noted, Wind Tower's, obviously, inquiries seem to pick up a bit, as there's a bit more uncertainty on the policy side and some urgency as, I guess, tax credits phase out. I guess, the question is maybe could you remind us on the capacity available across the Wind Tower business to receive new orders? And how you think about potentially adding orders and utilizing that capacity?

Sure. Absolutely. This is Antonio. So we have 4 plants that could produce wind towers. One of them we announced that we are transitioning to a transmission tower since we're seeing tremendous demand there and the backlogs are extending and that delivery times are extending. So I think that's a really positive move for our Utility Structures business, which is really, really doing very well.

Our Wind Tower business is also performing very well in terms of operation and running. The 3 plants that are left for wind are operating, I would say, about 60% capacity, probably in New Mexico a little higher. So we do have capacity to increase production in the short term if our customers require it.

And as you mentioned, I think that the biggest news in this quarter versus last quarter, now with policy clarity, is that our customers are very excited about the next few years for wind. And so we are excited to support the industry over the next few years. And hopefully, over the next several quarters, we have some good news about additional orders and clarity for the whole industry.

Our next question is from Garik Shmois of Loop Capital.

Appreciate the increased Aggregates disclosures. I just wanted to ask on the Aggregates' gross profit per ton growth. And it is pretty impressive, but how should we think about the level of growth in the second half of the year? And then maybe just kind of big picture on gross profit per ton now that we're seeing it a little bit more clearly, is there a long-term target for that metric that you think the business can get to over time?

Thanks for the questions. Yes, we're very pleased to enhance our disclosures within Construction Materials having done over 20 acquisitions since our start. It's taken us a little bit of time, but we're really pleased to have the enhanced disclosures. We think it helps investors a lot to really understand what we think is a high-quality platform.

To your question about back half trends, we'll continue to see good gross profit per ton growth in the back half. We will benefit from another quarter that would be Q3 of inorganic contribution from Stavola, and that has been nicely accretive to our performance overall this quarter. I think it really shines. Q1 was their seasonal low, and we're really seeing the impact that the acquisition has and really validates our decision to move forward acquiring the business.

As we think about on a go-forward basis, we haven't set an absolute target. What's important to us is really maintaining that growth in GP per ton. And that's really going to be a combination of our continued focus on pricing discipline and cost discipline. And we're seeing signs. Certainly, it bumps around as a lot of things do these days, but we're seeing reduction in inflationary pressures, certainly on some of the inputs, which is helpful. But it's growing that gross profit per ton that we're very focused on.

Okay. That makes sense. I wanted to ask just on the balance sheet, with the leverage expected to get back down to the 2x to 2.5x range within the next 2 to 3 quarters, I was wondering if you could talk about the acquisition pipeline in particular. What you're seeing and what some of the opportunities could be as you work the leverage down post Stavola?

Sure. This is Antonio. And I think that's where we have continued to focus on having a full pipeline. So we never took the foot off the pedal. And we've -- as we've said before here, M&A has its own timing and sometimes things come that we don't expect, and sometimes when we want things, there's nothing available. So that's why we've kept an open mind, and we feel we have a very solid pipeline of bolt-on acquisitions, and we continue to work on them.

So as we get closer to our leverage ratio, I think we would feel more comfortable in deploying capital, both organically and inorganically. As I said before, we announced the transition of one of our Wind Power facilities to Transmission Structures, that's going to be about $20 million to $25 million in capital. Most of it will be spent next year. But we are feeling more comfortable now that our balance sheet is closer to our target.

And on M&A, as we get -- if we find something that really fits and we really like, we'll think about it as we get closer.

[Operator Instructions]. Our next question is from Julio Romero of Sidoti & Company.

Great. You spoke about policy uncertainty fading in the wind tower business post the tax reform bill and demand picking up as a result. Can you maybe speak to how the final provisions of the bill compared to what you expected? Any details that surprised you?

And then secondly, can you talk about the margin implications of those final provisions to your Wind Tower business relative to expectations?

Yes. So the policy thing was kind of a rollercoaster through the quarter because things -- different versions came out. I think things could always be better and things could always be worse. I think what's important here, Julio, is the clarity. I think the industry -- what the industry needs is clarity.

And I mentioned in my remarks, wind is a competitive source of energy. So just having clarity allows the industry to move. And that's what we're seeing right now, and let's say, the sentiment we're getting from our customers, okay, we'll move.

There is an important step that's happening in the next few weeks, which is clarity on what start of construction means for these wind projects, and that's going to be an important part in the next couple of weeks. Again, I think what we need is clarity.

If you look at the pipeline of projects that are out there, I think we have a solid couple of years coming. We just need a little more clarity around what that means. But to be honest, it was a relief to at least see what we're dealing with. And the industry is not going anywhere. I think the industry is going here to stay and is going to have a solid near-term future.

I would tell you there's also clarity in other areas. I mentioned, the bonus depreciation for barges. And that's, if you saw, we only sold $33 million in the second quarter. We sold -- we've already sold $122 million in the third quarter. Some of it has to do with tax -- that has tax benefits for our customers behind it. So I think the clarity -- and I think there's still things to come that we are still analyzing from the Big Beautiful Bill. So overall, clarity is important.

Julio, I was just going to add on to Antonio's clarity comment, and that really comes to the increased confidence comment that we had. And that's really what this -- we've executed really well in the second quarter, but we have a higher level of confidence relative to where we were at the start of the year. Most notably in our cyclical businesses as we filled production slots that we needed to fill in the fourth quarter.

And so when we come back to guidance and looking at the EBITDA midpoint range, seems very achievable. And we'd like to think that there is potential upside if weather cooperates, which our construction folks would surely appreciate, and we get additional tailwinds from incremental operating leverage within our manufacturing businesses. So the clarity is important, as we think about the balance of the year.

Great. And then, are you guys seeing any customer-driven delays as a result of federal, state or DoT funding across the portfolio? And is there any way to parse that out from the weather delays you called out that affected you guys and everybody else in the quarter?

Yes, I'll take that. We are not -- I don't think we -- any of the -- of our weakness in organic had to do with delays in projects. It was really weather. It was really bad weather quarter in several of our regions. But when you sit down with our teams, and you really dig into, asking questions, well, tell me about what you see in the market, what's happening with projects. I think the biggest word I hear is, all these projects are real. So there are a lot of projects that are waiting in the pipeline to get started.

And when you talk to our teams across the board in construction, but also in utility and also in wind and in barge, the word that we hear is all these projects that we're seeing are real. So I'm very excited about -- maybe they're taking a little longer to start or something, but I really perceive a very positive environment around projects -- large projects that are coming to fruition soon.

Great. One more, if I could. Just on the Aggregates business, you mentioned multifamily demand is improving. Can you maybe talk about which geographies are showing that multifamily improvement?

Yes. There are several regions where we're seeing that. I would say probably the weakest we're seeing is in the Gulf Coast. But here in Texas, we're seeing some improvements. And in New Jersey, things have gone very, very well. I think New Jersey is probably the highlight for us across the board in the Stavola platform. So -- and then I would say Texas and New Jersey were the highlights for the quarter in that sense.

I'd add on to that, Julio. We've seen third-party research on multifamily. The National Association of Homebuilders sees mid-single-digit growth for multifamily in 2026. So back half seems to be improving from a multifamily front. And our Specialty Materials customer sentiment seems to align with that.

Our next question is from Brent Thielman of D.A. Davidson.

We appreciate the added disclosures here as well. I guess, Antonio, I kind of look across all the different businesses you have, and it seems like you're carrying a lot of momentum here, potentially into 2026 with sort of when one of the variables still trying to figure out here.

And I was just doing kind of the math on the backlog conversion there. You're running about $90 million a quarter in revenue, just based upon that. I guess, my first part of the question is how much of that can carry over into 2026? And the -- I wanted to sort of delineate increase in inquiries versus when orders could ultimately come in, in any greater sense of when that could occur just to sort of shore up your next year's visibility there.

Sure. Let me start. As you know, construction has less visibility because for the most part, we don't have a huge backlog. We are a -- on the Aggregates side, we do have projects, especially, I would say, and contracts in the West, where we have on-premise people located that are taking Aggregates. But for the most part, we don't have a lot of long-term contracts.

That said, we are seeing, especially here in Texas and the Gulf Coast and New Jersey, larger projects that we're bidding, and we have in New Jersey very strong backlog, for example, for infrastructure projects.

So overall, Construction, which is less tied to large projects, we are seeing strong demand for large projects, which is -- it's a good thing. And as you said, I think we have good momentum there.

Talking about the other businesses, starting -- I would say the one that I'm the most excited about is the Utility and Related structures. As I mentioned in my remarks, I think it's a great time to be serving the Power industry. When you look at every trend there, and the customer sentiment is really, really positive. And that's why we took the chance to change the facility from wind to utility because we see not only us but our competitors extending delivery times. And that's why we want to open the facility to be able to serve the industry and allow ourselves to tie to this incredible trend that we're seeing and be able to grow faster once we open the facility in the second quarter next year.

It's going to take a ramp-up, but it's -- and I also mentioned we have additional capacity if we need more. On the -- so that's on the backlog. But we are very optimistic. Gail mentioned we have record backlog in Utility, but we also have customer reservations that are very strong, and that means they have not been converted from, let's say, a conceptual order to specific designs. And as that process continues, we expect our backlog to continue to perform well.

On the Wind Tower side, it's just timing. I think once our customers are needing the wind towers, we just have to -- these negotiations and contracts take time, so we're working on that. I will tell you, I'm very optimistic of where we're seeing the backlog -- where we expect the backlog to look like several months from now. So positive on that.

And finally, barge. I think you saw the orders in the third quarter already. Our barge line now is filled up until April of next year. The tank line is filled up until the fourth quarter of next year. We're quoting tank barges into 2027. And as I mentioned in my remarks, I think it might take a little longer. I don't know when it's going to pick, but the pent-up demand for barges is incredible. And at some point, we're going to have to increase capacity to be able to supply it.

So as you said, I think across the board, very positive momentum in the company, great visibility for the second quarter -- for the second half. It's all about execution and focusing on building the backlog so that 2026 continues to be -- continue the growth of Arcosa.

Okay. All right. I appreciate all that. I think, Antonio, what I was trying to get to just on the wind side is that, I know you had some carryover backlog into subsequent years and you have pretty good visibility here into the second half of the year for that business from a volume perspective. What I'm trying to figure out is how much of this sort of run rate of revenue in Wind through the second half of the year carries into 2026 before you need to get some more orders to sort of continue that through the year, if that makes sense?

Yes. So we have 3 plants operating. One is -- as Gail mentioned in her remarks, it has orders until 2028. The other 2 plants, we have orders until the end of '25, and we have -- right now, we're working with our customers to fill up that capacity for '26. As I mentioned, we're confident we're going to get there. I'm not worried about it.

I think the clarity was important, and the timing was very important. If you had asked me a few months ago before this, there was a lot more worry. But -- I will tell you one important piece, just like Wind Towers is very important for us, it's a good business for us, we're a very important supplier for our customers. So it's a -- we have a strategic relationship with our customers that we both need each other for -- to be able to supply this industry, and I think we'll get there in the near future.

Okay. One more if I could, just on Utility Structures. Obviously, there's been a push around some of your competitors in the industry to add capacity as well. And I just wanted to get a sense, especially with this latest announcement of the conversion of the wind plant to transmission. What is it that maybe has changed for you to make that decision in the market? What are you hearing from your customers that's just incrementally different, whether it's the last 6 months, last 12 months, specifically in the Utility Structures, Transmission Structures arena to decide to make that added push to add capacity there?

Yes. So it's a really good question. I think we've always been very bullish on this. When you look at forecast -- utility CapEx forecast for -- they've been just increasing and increasing, and the -- let's say, the trend continues not only to be very positive, but every day, it's more positive.

We're also seeing faster response time from our customers in terms of their getting permits to be able to build the lines. And I would tell you, the other thing that's changing that's very interesting is the poles are getting bigger. And as you get into bigger poles, that's our sweet spot. That's where our cost really, really shines and that's where the flexibility we have in our manufacturing really is unique because the wind towers are enormous, and they're very well set up for building utility poles -- large utility poles. So as utilities move towards large -- when you look at announcements, it's mainly very large pole lines. And that's what we really like to build, and our plants are really well set up for that. So I think the trends are in our favor.

And I think, Brent, just to add on, as it relates to the conversion we're doing, I mean, we're converting an idle plant that has a little bit of a drag on our P&L because it's idled. We're converting that into utility structures, which are seeing strong growth at a relatively small dollar ticket of $20 million to $25 million, as Antonio said. You compare that to the nice returns we're getting on the New Mexico wind tower facility, that was a $55 million investment. So we're able to deploy some capital and have that operational by the second half of '26 and fully ramped sometime not too far down in the future. So that -- I think that puts us in a very unique position.

And there are no further questions at this time. I'd be happy to return the conference to Erin Drabek for closing comments.

Thank you again for joining us today. We appreciate your questions and your interest in Arcosa. Please reach out if you have any follow-up questions.

This does conclude today's conference. You may now disconnect your lines, and everyone, have a great day.