Arcosa, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Arcosa provides infrastructure-related products and solutions across Construction Products, Engineered Structures, and Transportation Products. Financial amounts are in millions except per-share data.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|
| Revenue | $598.6 | $549.2 |
| Operating profit | $53.4 | $75.1 |
| Net income | $39.2 | $55.7 |
| Diluted EPS | $0.80 | $1.14 |
| Operating cash flow | $80.5 | $27.3 |
| Capital expenditures | $54.4 | $44.4 |
- Revenue increased 9.0%, while net income fell 29.6%. Operating margin was approximately 8.9%, versus 13.7% in the prior-year quarter; the comparison was affected by a $21.8 gain on depleted land in Q1 2023. Excluding that gain, management said operating profit was roughly flat year over year.
- Operating cash flow improved by $53.2, primarily because working-capital movements were a net source of cash in 2024 versus a substantial use in 2023. Cash flow less capital expenditures was $26.1, compared with negative $17.1 in Q1 2023.
- Cash and equivalents were $176.5 at March 31, up from $104.8 at December 31, 2023. Total debt, including finance leases and net of issuance costs, was $607.2, versus $568.7 at year-end. The company reported $378.0 of revolving-facility availability at quarter-end and compliance with its financial covenants.
- Interest expense was $8.3, up from $7.1. The effective tax rate declined to 17.1% from 20.3%, primarily reflecting AMP tax credits, equity-compensation tax benefits, and lower state income taxes, partly offset by higher foreign taxes.
Segments and material changes
| Segment | Revenue, Q1 2024 | Year-over-year change | Operating profit, Q1 2024 |
|---|
| Construction Products | $251.2 | +6.4% | $28.8 |
| Engineered Structures | $231.6 | +11.5% | $26.3 |
| Transportation Products | $115.8 | +9.9% | $14.6 |
- Construction Products revenue benefited from acquisitions and higher pricing. Operating profit fell from $49.5, largely because the prior period included the depleted-land gain; excluding that gain, management reported a 4.0% increase.
- Engineered Structures operating profit declined from $29.9 as utility-structure project mix and start-up costs at two new facilities weighed on margins, despite higher volumes.
- Transportation Products operating profit rose from $10.1, supported by higher hopper-barge volumes and improved margins. Inland-barge backlog was $294.4, up 16% from year-end.
- SG&A increased 10.6% to $69.1, reflecting headcount, acquired businesses, and higher acquisition- and divestiture-related costs. Depreciation, depletion, and amortization rose 10.3% to $42.8.
Outlook, liquidity, and risks
- Management expects 2024 capital expenditures of approximately $190–$205. It believes cash, available liquidity, and operating cash flow will fund planned capital expenditures and operating needs for the foreseeable future.
- Construction Products demand is described as healthy overall, supported by infrastructure spending and private non-residential activity; higher interest rates and housing affordability are pressuring single-family residential volumes. Management says it has addressed inflationary costs with price increases.
- Engineered Structures backlog was $1,366.7 at March 31; approximately 40% is expected to be delivered in 2024, 29% in 2025, with the remainder through 2028. Management cited healthy utility demand and more than $1.1 billion of wind-tower orders received since the Inflation Reduction Act. A New Mexico wind-tower facility was expected to begin deliveries in Q2 2024.
- Inland-barge backlog was $294.4, with approximately 73% expected to be delivered in 2024 and the balance in 2025. Management cited healthy customer inquiries, but noted the business remains in recovery from cyclical lows and steel sourcing can constrain order fulfillment.
- In April 2024, after quarter-end, Arcosa completed its $180.0 acquisition of Ameron Pole Products for its Engineered Structures segment. It used $160.0 of additional revolving-credit borrowings and cash on hand. At March 31, the revolver had $200.0 outstanding under a $600.0 facility; the subsequent borrowing changes the post-quarter-end debt and availability position.
- Key stated risks include cyclical and seasonal demand, weather, steel and other input costs and availability, interest rates, customer order timing and credit, acquisition integration, litigation and environmental matters, and uncertainty around realizing IRA tax-credit benefits. The company reported no material change in risk factors from its 2023 Form 10-K.
- Contingencies include approximately $1.2 of reasonably possible losses and $1.5 accrued for claims and lawsuits. Environmental liabilities of $0.3 are matched by a third-party indemnification asset; collection is not assured.
Important facts for investors to verify
- Whether operating performance improves as new facilities ramp up and how utility-project mix affects Engineered Structures margins.
- Actual delivery, cancellation, and conversion to revenue of the $1,366.7 Engineered Structures and $294.4 inland-barge backlogs.
- Ameron’s integration, contribution to earnings and cash flow, and the resulting debt, interest expense, and revolving-credit availability.
- Whether 2024 capital spending remains within the $190–$205 outlook and produces expected returns.
- Ongoing eligibility and realization of AMP tax credits, as well as any changes in litigation, environmental exposure, or indemnity recoveries.
