Arcosa Inc (ACA) Q3 2025 Earnings Call Highlights: Record Revenue and EBITDA Growth Amid ...

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Revenue Increase: 27% increase, excluding divested steel components business. Adjusted EBITDA Growth: 51% growth, excluding divested steel components business. Adjusted EBITDA Margin: Record margin of 21.8%, a 340 basis points improvement year-over-year. Leverage Ratio: Ended the quarter with a leverage ratio of 2.4 times. Construction Products Segment EBITDA: Record $150 million, margin expanded 300 basis points. Aggregate Business Volume Increase: 18% increase, largely due to the addition of Stabola. Engineered Structures EBITDA Growth: 29% increase, margin expanded 240 basis points to 18.3%. Barge Business Revenue Growth: Double-digit revenue growth, margin increased 190 basis points. Operating Cash Flow: $161 million, a 19% year-over-year increase. Free Cash Flow: $134 million, a 25% year-over-year increase. Full Year Revenue Guidance: $2.86 billion to $2.91 billion. Full Year Adjusted EBITDA Guidance: $575 million to $585 million, implying 32% growth.

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Release Date: October 31, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Arcosa Inc (NYSE:ACA) reported a record quarter with a 27% increase in revenue and a 51% growth in adjusted EBITDA, excluding the impact of the divested steel components business. The company achieved a record adjusted EBITDA margin of 21.8%, a 340 basis points improvement over the previous year. Arcosa Inc (NYSE:ACA) successfully reduced its leverage ratio to 2.4 times, two quarters ahead of its plan, demonstrating strong cash flow generation and debt reduction. The construction products segment delivered a record adjusted segment EBITDA of $150 million, with a 300 basis points margin expansion. The engineered structures segment saw a 29% increase in adjusted EBITDA, with significant demand in the utility structures business and a record backlog in utility and related structures.

Negative Points

Organic volume growth in the construction segment has been weaker than expected, leading to a slight adjustment in revenue guidance. Production downtime at a few natural aggregate locations negatively impacted cost absorption, although these issues have been addressed. The company faces challenges in the residential market, with no uptick in residential volumes as initially expected for the second half of the year. There is uncertainty in the wind tower business due to policy changes and the transition to a market-driven economy post-2027. The barge business, while showing growth, is not experiencing a surge in demand, with orders being steady rather than overwhelming.

Story Continues

Q & A Highlights

Q: Can you provide more details on the adjustments to the full-year revenue and EBITDA guidance? A: Gail M. Peck, CFO, explained that the adjustments reflect strong year-to-date performance and expectations for a good fourth quarter. The revenue guidance was slightly tightened due to lower-than-expected organic volumes in construction. However, the EBITDA midpoint was raised by $10 million, reflecting 32% year-over-year growth, with strong double-digit growth expected in the fourth quarter.

Q: Are the production inefficiencies in the legacy aggregate business expected to continue into the fourth quarter? A: Antonio Carrillo, CEO, stated that the issues are largely behind them. The company has grown significantly, and while some volatility can occur, they are improving daily and expect better performance moving forward.

Q: Can you discuss the margin improvements in the engineered structures segment and their sustainability? A: Antonio Carrillo, CEO, noted that both the wind tower and utility structures businesses are performing well. The ramp-up of the Belen facility in New Mexico contributed to improved margins. The company is confident in sustaining these margins due to strong demand and ongoing capacity expansions.

Q: What is the pricing outlook for aggregates as we head into 2026? A: Antonio Carrillo, CEO, expressed optimism about pricing due to strong infrastructure demand and recovering volumes. The company expects to continue passing through price increases to customers, especially with potential recovery in housing in 2026.

Q: How is Arcosa approaching capital allocation with the recent achievement of its leverage target? A: Antonio Carrillo, CEO, stated that the company aims to maintain a healthy balance sheet and is focused on both organic and inorganic growth opportunities. They plan to continue reducing debt while pursuing bolt-on acquisitions and investing in growth initiatives.

Q: What is the outlook for additional wind tower orders and the decision to accelerate backlog? A: Antonio Carrillo, CEO, explained that the wind industry is competitive and expects an acceleration in orders as tax credits phase out by 2027. The company agreed with customers to move part of the backlog forward and received new orders, providing good visibility for 2026 and 2027.

Q: Are you anticipating additional wind orders beyond what has been discussed? A: Antonio Carrillo, CEO, expressed optimism about receiving additional orders. The company has good visibility for its facilities and is working with customers to accommodate further orders, expecting more clarity in the coming months.

Q: Can you provide an update on the timing of capacity investments in engineered structures? A: Antonio Carrillo, CEO, mentioned that the ramp-up of production is expected to begin in the second half of the year, with positive contributions anticipated in 2027. The company is expanding capacity due to accelerating demand from customers.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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