Arcosa - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered revenue of $632.0M (+6% YoY; +12% YoY excluding prior divested steel components), Adjusted EBITDA of $109.9M (+19% YoY; +26% YoY ex-divestiture), and Adjusted EBITDA margin of 17.4% (+200 bps), driven by strong Engineered Structures and solid barge performance despite weather headwinds in Construction Products.
• Versus Wall Street consensus (S&P Global), Arcosa posted broad beats: revenue $632.0M vs $614.5M*, Primary EPS $0.49 vs $0.18*, and EBITDA $106.1M vs $98.6M*; EPS upside was aided by segment margin gains and the timing of wind AMP tax credit monetization (credits from Q1 were sold in April).
• Guidance reaffirmed: FY25 consolidated revenue $2.8–$3.0B and Adjusted EBITDA $545–$595M; tariffs included and expected to be immaterial, with CapEx guided at $145–$165M and deleveraging targeted to 2.0–2.5x over the next 12 months.
• Execution catalysts: Engineered Structures margin expansion to 18.2% on wind volume and Ameron accretion, barge orders ($142M; 1.7x book-to-bill) extending tank backlog into 2026, and strong early-season activity at Stavola as Northeast construction ramps.

What Went Well and What Went Wrong

What Went Well

• Engineered Structures revenue grew 23% to $284.8M; Adjusted Segment EBITDA nearly doubled (+90%) to $51.7M and margin expanded 650 bps to 18.2%, driven by wind tower volume, Ameron’s accretion, and utility structures efficiencies.
• Transportation Products showed barge strength: $142M of orders (1.7x book-to-bill), backlog up to $333.6M, with margin up to 18.4% on higher tank barge deliveries and improved operating efficiencies.
• Management reaffirmed FY25 revenue and EBITDA guidance and highlighted resilient end markets and a path to delever to 2.0–2.5x over the next 12 months: “We remain committed to our goal of reducing leverage to 2.0–2.5 times over the next twelve months.” — CEO Antonio Carrillo.

What Went Wrong

• Construction Products organic revenues fell 6% and Adjusted Segment EBITDA decreased 5% YoY; margin declined 220 bps to 21.7% due to weather and the seasonally slow Stavola contribution (–$2M EBITDA; –320 bps margin impact).
• Operating cash flow turned slightly negative (–$0.7M) and Free Cash Flow was –$29.7M, driven by an $80.7M working capital use, including a $77.6M increase in receivables (timing of deliveries and AMP tax credits sold in April).
• Interest expense rose to $28.3M (+$20.0M YoY) on higher debt from the $1.2B Stavola acquisition, pressuring GAAP EPS despite operating progress.

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and welcome to the Arcosa First Quarter 2025 Earnings Conference Call. My name is Nikki, 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.

Erin Drabek (VP of Investor Relations)

Good morning, everyone, and thank you for joining Arcosa's First 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 two weeks. Instructions for accessing the replay number are included in the press release. A replay of the webcast will be available for one year on our website under the News and Easphvents 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 10Q expected to be filed later today. I would now like to turn the call over to Antonio.

Antonio Carrillo (President and CEO)

Thank you, Erin. Good morning, everyone, and thank you for joining us today for a discussion of our first quarter results and our outlook for 2025. I am pleased with the financial results we delivered in the quarter, which places us on a strong footing for 2025. Let me start with a few key takeaways on slide four. Our first quarter results demonstrate solid execution of our strategic vision driven by the transformative actions undertaken over the past several years. Excluding the divested steel components business from the prior year, we delivered consolidated adjusted EBITDA growth of 26%, outpacing 12% revenue growth in the quarter, and expanded our margin by 190 basis points. The integration of the $1.2 billion Stavola acquisition completed in October 2024 continues to progress well, and operations are ramping up for the spring construction season in the Northeast.

As expected, Stavola contribution was diluted to our first quarter results in its seasonally slowest quarter. Delivering 26% adjusted EBITDA growth with significant margin expansion in the quarter shows the strength of Arcosa's legacy business. First quarter organic performance was led by engineered structures where we operated well in utility structures with strong demand conditions and successfully continued to ramp up our wind tower facility in Belén, New Mexico. In construction products, despite unseasonably cold and wet weather impacting January and February, we expanded unit profitability on strong pricing gains, and first quarter results finished in line with our expectations. Within transportation products, our barge business had a solid quarter both in terms of performing better than expected on strong execution and extending our backlog with new orders. We are pleased to maintain our leverage at 2.9 times net debt to adjusted EBITDA.

As Stavola starts to contribute in the second quarter, we're confident we will continue reducing our leverage. We remain committed to our goal of achieving a leverage target of 2-2.5 times over the next 12 months. With operations primarily in the U.S., we expect to benefit from continued investment in the nation's aging infrastructure and the new era of growth for the U.S. power market. While the macroeconomic and policy environments continue to evolve rapidly, Arcosa is in good position to navigate this environment because our teams are managing our businesses well. Most of our end markets continue to demonstrate resilience, and our backlogs provide solid visibility. In summary, our strong first quarter results show solid execution from our teams, the strategic portfolio moves we have made over the last several years, and the initial benefit of the organic investments of the last few years.

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

Gail Peck (CFO)

Thank you, Antonio. Good morning, everyone. I'll start with construction products on slide 10. Before I discuss first quarter performance, I'd like to highlight a new revenue disclosure as we begin 2025. We will now separately disclose revenues for aggregates, which includes natural and recycled aggregates. For the first quarter, our aggregates business represents 69% of our construction materials revenues, which also include our asphalt and specialty material businesses. We plan to expand our aggregates disclosures in coming quarters in line with our peers. Turning to the segment performance, first quarter revenues increased 5% driven by the contribution from Stavola. On an organic basis, segment revenues declined 6%, with about half of the decline driven by lower freight revenues and a divestiture of underperforming operations in the prior year. The balance of the change reflects higher pricing that was offset by lower volumes.

Adjusted segment EBITDA decreased 5%, in large part driven by the inorganic impact of Stavola. Located in the Northeast and more seasonally impacted by cold weather in the winter months than our legacy operations, Stavola reduced adjusted segment EBITDA by $2 million in line with our expectations and diluted adjusted segment EBITDA margin by 320 basis points. On an organic basis, adjusted segment EBITDA declined 2% as volumes were impacted by wet and abnormally cold weather across our footprint. On a positive note, organic adjusted segment EBITDA margin expanded 100 basis points due to higher pricing and improved unit profitability. In our aggregates business, average organic pricing was up 7% from the prior year. Total pricing was up 10% with the accretive impact of Stavola.

Organic volumes declined high single digits, largely due to wet and seasonally cold weather that impacted demand in January and February, as well as our continued focus on value over volume. Including Stavola, total volume was down 2% in the quarter. Organically, adjusted EBITDA for aggregates declined while margin was roughly flat. Overall, production volumes were impacted by weather, reducing fixed cost absorption in our seasonally slow first quarter. Variable costs continue to show moderating inflationary pressures on a year-over-year basis. Turning to our other construction materials businesses, revenues were roughly flat in specialty materials as higher pricing was offset by lower volumes. Adjusted EBITDA for the business increased slightly compared to the prior year quarter, resulting in margin expansion. As expected, our asphalt business, which is part of Stavola's vertically integrated operations, was diluted to the quarter's results and drove the $2 million EBITDA loss for Stavola.

As we begin the spring construction season, we are pleased with the level of quoting activity for this business. Finally, revenues for our trench shoring business were down 4% due to lower steel prices reducing average selling prices and a slight decrease in volumes. Adjusted EBITDA grew and margin expanded in the quarter. Moving to engineered structures on slide 11, revenues for our utility, wind, and related structures businesses increased 23%, largely due to higher wind tower volumes and the inorganic impact from Amaron, which was acquired in April 2024. As expected, first quarter revenues in our utility structures business declined slightly as a double-digit volume increase and improved product mix were offset by lower steel prices, reducing average selling prices. Adjusted segment EBITDA increased 90% and margin expanded 650 basis points, led by the ramp-up in our New Mexico wind towers facility and growth in our utility structures business.

As a reminder, our New Mexico wind tower facility was incurring startup costs in the prior year period as it delivered its first towers in the second quarter last year. Adjusted EBITDA and margin for our utility structures business expanded nicely due to improved product mix and operating efficiencies. Segment performance was enhanced by Amaron, which hit its one-year anniversary as part of Arcosa in April and continues to perform well. We ended the quarter with combined backlog for utility, wind, and related structures of $1.1 billion and expected to deliver 59% during 2025. Turning to transportation products on slide 12, revenues were up 6% and adjusted segment EBITDA increased 13%, excluding the divested steel components business from the prior year period. Higher tank barge volumes and the associated operating leverage resulted in 120 basis points of margin improvement year-over-year for the barge business.

Barge orders totaled $142 million during the quarter, representing a book-to-bill of 1.7, with the mix more weighted to tank barges. We ended the quarter with a backlog of $334 million, up 19% from the start of the year. I'll now provide some comments on our leverage position and cash flow performance on slide 13. We maintained 2.9 times net debt to adjusted EBITDA at the end of the first quarter, consistent with the start of the year, which was a good outcome in our seasonally slowest quarter for construction materials. We expect to demonstrate further deleveraging in the second half of 2025 and remain on track to return to our 2-2.5 times leverage goal over the next 12 months. Our liquidity remains strong at $868 million, including full availability under our $700 million revolver, and we have no material near-term debt maturities.

First quarter operating cash flow was essentially break-even, driven by an $81 million increase in net working capital requirements and higher interest payments driven by the additional debt to finance the Stavola acquisition. The increase in working capital was primarily due to higher receivables in engineered structures and transportation products, largely due to timing. Receivables also increased due to advanced manufacturing production tax credits recognized for our wind towers business that were subsequently sold in April. CapEx for the first quarter was $34 million, down $20 million from the prior period as we focused primarily on maintenance CapEx in 2025. We reaffirm our CapEx guidance of $145-$165 million for the full year. Free cash flow for the quarter was -$30 million. We expect free cash flow to improve as we move into the second half of the year.

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

Antonio Carrillo (President and CEO)

Thank you, Gail. I will now turn to slide 15 to review our guidance. Arcosa is well-positioned to navigate the current environment, and we expect a strong 2025. We executed well in the first quarter, and accordingly, we reiterate the full-year 2025 guidance that we provided in February. At the midpoint of our range, we anticipate revenues of $2.9 billion, up 17%, and adjusted EBITDA of $570 million, up 30%, excluding the divested steel components business from 2024 results. The full-year impact of the acquisitions in 2025 will be supplemented with anticipated double-digit adjusted EBITDA growth from our legacy operations. Regarding tariffs, as currently outlined, we're in a good position and do not anticipate any material direct impacts to Arcosa. We primarily source our steel in the U.S., and our USMCA-compliant products that are made in Mexico are exempt from tariffs.

Please turn to slide 16 for a discussion of our business outlook by segment. We expect construction products to perform well as we move into the stronger second and third quarter construction season. We continue to expect significant adjusted segment EBITDA growth because of the Stavola acquisition and high single-digit organic growth. We are maintaining our aggregates pricing outlook of mid-single-digit appreciation and solid double-digit volume growth benefiting from Stavola. Overall, as we look across the regions, infrastructure investment continues to be a tailwind. We see projects moving forward on the public side. Private markets are showing strength in data centers, select industrials, and an early recovery in warehouses. Single-family residential remains challenged, but we operate in many attractive markets with an undersupply of housing. We will continue to monitor the economic data closely, stay engaged with our customers, and focus on execution.

Moving next to engineered structures, the themes remain very consistent in utility structures. Increased electrification, grid hardening and resiliency, and the renewable energy connection to the grid are driving strong demand. After many years of flat demand for power in the U.S., we are now experiencing strong growth in the next several years. To supply that growth in power demand, new sources of energy will have to be built and connected to an already stressed grid. Therefore, we see a long period of sustained demand growth for utility poles, and we're looking at ways to increase both efficiency and capacity, including potentially converting an idle wind tower facility to increase capacity in the U.S. With respect to the wind energy industry, we believe the increased generation needs in the U.S. require an all-of-the-above energy strategy.

It becomes clear that renewable energy must play an important role in meeting power demand over the next several years when you compare load growth forecasts with potential new sources of gas power. We continue to engage with our wind turbine customers for orders for 2026 while we await additional clarity on renewable energy policy discussions in Washington, D.C. Meanwhile, the ramp-up in our New Mexico wind tower facility is helping us drive both year-over-year volume and margin improvement. 2025 continues to be a year of execution against a solid backlog for our wind towers business. Amaron continues to perform well, and we are seeing solid demand for lighting poles and traffic signals, a slight rebound in telecom carrier spending is benefiting our telecommunications business as well. Last, for a discussion on transportation products.

The broader barge fleet continues to get older, and it's approaching an average age of 20 years. Barge orders received during the quarter extend our tank barge backlog deep into 2026. Customer inquiries continue to be healthy for tank barges despite higher steel prices as industry capacity is tight relative to future replacement needs. On the dry barge side, our backlog extends into the beginning of the fourth quarter. Dry hopper barge customers are more sensitive to steel prices and potential agricultural tariffs, so they're taking a more conservative approach to ordering. We're seeing signs of easing in the steel prices, which is encouraging. We did receive some hopper barges during the quarter, and we're confident we will be able to fill our open slots.

With the fleet aging quickly, replacement needs over the next five years for both barge types are expected to far exceed industry building capacity if customers continue to wait. In the meantime, our barge business is delivering outstanding margins at low production rates, and we're ready to ramp up production as demand picks up. Summing it all up, we have much to be excited about in 2025, and we anticipate another strong year of growth. The global macroeconomic and policy environment remains fluid, and we continue to monitor potential impacts on our company. Our teams are staying focused on what they can control and maintaining operational excellence. Arcosa is well-positioned in the markets we serve, and our portfolio of business is much more resilient today than in previous periods of uncertainty.

As we head into the second quarter, we should start to see the positive impact of the Stavola acquisition and continue to see strong organic growth from our legacy businesses. I want to thank our employees for their commitment and hard work. Your efforts are making a difference, and we're seeing that in many ways across our company, most notably in our safety culture of ARC 100. As you will see in our 2025 sustainability report, which was posted on our website earlier this week, we recorded our lowest number of recordable incidents, or TRIR, in Arcosa's history. Together, we're building a stronger company. We're now ready to take your questions.

Operator (participant)

Thank you. At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may withdraw your question at any time by pressing star two. Once again, to ask a question, please press the star and one on your telephone keypad. We'll take our first question from Julio Romero with Isidori & Company. Please go ahead. Your line is open.

Julio Romero (Analyst)

Great. Thanks. Good morning, Antonio and Gail. Thanks for taking questions.

Antonio Carrillo (President and CEO)

Hello. Good morning.

Julio Romero (Analyst)

Hey. Very nice performance in the engineered structures segment. I wanted to dig into the moving pieces there in the quarter. Understanding there is some noise on the margin percentage in the segment due to the steel prices on the utility side. Can you elaborate on what the wind tower contribution was to sales and profit dollars in the quarter?

Antonio Carrillo (President and CEO)

Let Gail give you a little more detail, but let me, I think the big message here, Julio, is for the last several quarters, when you have steel volatility, it creates noise. The reality is the volume growth in utility structures to me is the highlight here. We have double-digit growth in volumes in utility structures. Demand is really, really strong, and the plants are performing very, very well. Last year, we had some hiccups in a few of our operations. This year, the plants are operating extremely well, and we see a very long period of demand. Plants are doing well. On the wind side, the ramp-up of our facilities continues to do very, very well, and we're having really nice margins both from the operations itself and the tax credit. That's the big picture.

We see very strong demand on the utility side, and the operations are performing extremely, extremely well. The other thing to mention on utility structures, even though our products are USMCA compliant, etc., in the previous conference call I mentioned, we did have some steel in Mexico that was left over from our purchase last year, and we incurred some tariffs during the quarter that were completely absorbed by the efficiencies of the plant and cost-cutting and other things. The performance of the businesses were incredibly strong during the quarter. I'll let Gail give you some more details.

Gail Peck (CFO)

Yes. Good morning, Julio. As it relates to growth in the quarter, kind of parsing through the different businesses, we did have another quarter, our last quarter, of inorganic impact from Amaron. So Amaron's a $95-$100 million revenue business on an annual basis. You had that inorganic impact in Q1. As we talked about on our last call, we do expect strong revenue growth in wind this year based on our backlog visibility. As I said in my comments, utility structures revenue was about flat, maybe a little bit down year over year. That is really, as Antonio talked about, related to steel prices.

Your question on the profits, as you know, we don't disclose profit by business in our financials, but I can say from a margin perspective, wind and Amaron continued to be accretive to the segment margin, and we saw strong year-over-year improvement in margin for the utility structures business. Very happy with the performance for the quarter.

Julio Romero (Analyst)

Okay. Great. Thanks for all the color there. I guess that's helpful. I guess just maybe I'm just trying to get a sense of the wind profit jump because the year-over-year profit jump in the quarter was really significant, I mean, on a dollar basis. I guess maybe asking another way, would you say that the volume improvement in utility structures was a bigger maybe surprise to you in the quarter than the wind jump on a profit dollar side?

Gail Peck (CFO)

No. No, I would not say so, Julio. Maybe one thing I might point out, we did expect to have a little bit of profit degradation in wind in the quarter for the sale of tax credits. That sale was executed in April, so we did not have that deduct from wind in Q1 that we will have in Q2. Other than that, I would say our performance was very much in line with what we expected. We expect strong growth in wind in 2025 based on the backlog visibility that we have. Belén, as Antonio said, has ramped up, and we saw Belén very accretive to the segment margin in the quarter.

Antonio Carrillo (President and CEO)

To your question, I think, Julio, both businesses performed very, very well. I think from the margin perspective, I was very pleased with both, but utility structures was especially important to me because, as I said, last year, we had some hiccups, and it shows that the plants are performing really well, and the management team is doing a fantastic job. I think I'm excited for what I'm seeing in both businesses.

Julio Romero (Analyst)

Really helpful there. Last one for me would be just maybe staying on that a little bit longer, just a quick refresher on what the economics of the wind tower business are at, just given the years of continuous improvement, I think maybe even decades that you guys have done in wind tower manufacturing. If you could just kind of contrast the economics of that business now, even if any incentives, whatever, go away, maybe compared to last cycle.

Antonio Carrillo (President and CEO)

Yes. That's a great question. I think that's a good way to phrase it. Let me give you a first big picture. Last cycle versus this cycle, the biggest difference to me, forgetting about the production, is the demand factor. In the previous cycles, wind towers, I would say renewable energy in general, but wind specifically, were nice to have. We were living in a period of flat power demand in the U.S., so you could substitute retiring coal plants with wind or solar, and that's okay. You can do a transition. That changed over the last few years where now power demand is growing. If you look at the numbers of turbines that can be built in the U.S. and the expansion happening, gas turbines, gas turbines will not be able to supply the power that this country needs for the next five to seven years.

Nuclear plants are far away. You can delay a little bit of the coal plant retirements, but that does not solve the problem. The only thing that is really shovel-ready and can get really production real fast is renewables. It has all the problems that we all know about, intermittency and all those things, but it is the only tool we have for the short term. To me, that is the biggest difference, is we actually now, for the first time in my 20-some years building wind towers, we actually need them. With that in mind, before the tax credits, we had a very viable business. The developers were getting tax credits, and what we wanted to do is produce towers, and that is what we did. Today, we have an additional tax rate that we get, and we love the tax rate, and it is so great.

I don't think there's a scenario where it goes away. We haven't heard anything that tells us that it will go away. There might be tweaks, adjustments here and there, and we will adjust our business model with our customers according to the cards we're dealt. If the wind tower tax rates get reshuffled one way or another, we'll have a conversation with our customers for future orders, and there might be different economics within them. We expect good economics for Arcosa because we had those economics in the previous cycles without any tax credit. Very long answer to your short question, but I think the big picture is there's strong demand that's needed for towers, for wind. Second, even without a tax rate or with some disruptions in tax rates, we still have a very viable and profitable business. One more thing.

If the tax credits get, let's say the timing gets reduced or something changes, what we've seen in the past is that people get anxious about it, and they order a lot so that they can take advantage of the tax credit. There is a scenario where reducing the time can be good for demand in the short term. That is a very long answer to your short question.

Julio Romero (Analyst)

Great. Thanks for the color. I'll pass it on.

Operator (participant)

Thank you. Our next question comes from Brent Thielman with DA Davidson. Please go ahead. Your line is open.

Brent Thielman (Analyst)

Hey, thanks. Good morning. One more on engineered structures, if I could, maybe to approach it a different way. Is there any reason you should not continue to be producing at sort of 18%+ EBITDA margins absent the fact that I know you are selling these tax credits? And then, Gail, is there any way to kind of handicap what that tax credit sale will do to margins? Is it less than 100 basis points? Just wanted to kind of level set there.

Gail Peck (CFO)

Good morning, Brent. Thanks for the question. On the monetization of the tax credits, there continues to be a good market for the sale of tax credits. As I said in my script, we subsequently sold our Q1 tax credits in April. We did not accrue the loss. In terms of the loss in the sale, we had about a $2.5 million loss in Q4 of last year, maybe a little bit on the higher end because we sold some credits that were in addition to those that were generated in the quarter. You could think about that kind of $2 million-ish as a range for what we would see as we continue to monetize these credits on a quarterly basis.

Antonio Carrillo (President and CEO)

If you remember, Brent, what we've said is for utility structures, our goal is to we're targeting staying at around 15%. We've been coming up from lower margins, and our goal is to get to about 15% margins on utility structures. Amaron, when we bought it, was a little above 20%, so that would be accretive. Then you have wind, which is also accretive. Ideally, we should get close to that 18% that you referred when you combined the businesses.

Gail Peck (CFO)

I think one last point, Brent, would be on Belén. We ramped in Q1, so you're going to see that level out as we move through the year. That continues to perform very well, but that year-over-year benefit is going to start to neutralize as we're at full ramp in our Belén, New Mexico facility now.

Brent Thielman (Analyst)

Okay. Okay. I guess a question just on the construction products business, maybe to just speak to, I guess, the things that's dying out in the Northeast, how Stavola is ramping up, and maybe just a level set on the cadence of contributions you're expecting through the course of the rest of the year that could be helpful.

Antonio Carrillo (President and CEO)

Sure. Absolutely. I'll give you some color. First, I think the biggest thing here is there's no surprises here. We have not had no surprises with the business. We're very pleased with the management team, the plants, the operations. Nothing that happened in Stavola surprised us at all. We expected something like this. When you see the quarter, if you go deeper into the quarter, January was a disaster because it basically shut down. February a little better, and March was quite a bit better.

I think the important thing here is we are seeing very good demand and very good orders for April and going forward. Stavola operates a little different than our other businesses. They have larger contracts and a lot more infrastructure-oriented. We are seeing really good bidding and really good orders for the business. We are excited about what we are seeing in Stavola. There are a lot of things that we are doing as a team, some improvements in our operations. We are investing. There were a lot of CapEx. A lot of the CapEx you are seeing in Arcosa is coming from Stavola, things, projects that were being already developed. I think the asphalt specifically Gail mentioned was the biggest hit in the quarter. I mean, you can sell some rocks when it is snowing, but you cannot lay asphalt. Asphalt is a little more volatile.

We're seeing very good demand for April. No surprises. Things are moving along, and we expect a pretty significant improvement in the second quarter and going forward.

Brent Thielman (Analyst)

Okay. That's great, Antonio. Maybe just the last one. I mean, nice order activity in the barge business this quarter. I understand your comments, a lot's happened, I guess, towards the end of the quarter and after the quarter. Your sense on how customers are responding to all that kind of noise in the market post-liberation day, and it does seem like steel prices have at least flattened out. What's sort of your expectation for orders in the short term as we kind of work through the rest of the year just based on customer dialogue you're having?

Antonio Carrillo (President and CEO)

Sure. Let me start with steel.

I think when you see steel prices, of course, tariffs came on steel, and immediately prices jump. The reality is that the demand for steel in the U.S. is not there. I mean, steels are still operating at a very low capacity. If you look at steel operations, they're lower this year than for the last couple of years, and the demand is not there. Pricing is artificially high due to tariffs. The way I would phrase it is we are seeing steel mills willing to negotiate prices, which is normally not the case when demand is high. I think we are in a period where this thing will stabilize, and the steel prices, as we see them, cannot stay here for a long time with this demand. Steel is not a huge worry for me.

On the demand for barges, there are two sides. One, tank barges, I think demand is a little more consistent. The type of customers and the products that are moved are a lot more sensitive to the age of the barge and the quality of the barge. We see very good inquiries. Plus, steel is a smaller component of the cost of the barge because there is a lot of equipment on those tank barges. We see very good things happening on the tank side. Our backlog extends now deep into 2026, even though we are still running at low capacity. When you look at the demand that the replacement needs over the next five years, we really need to get going if we want to, if the customers want to replace those barges. Otherwise, we will not have the capacity.

On the dry cargo side, I would say steel is a big thing where people are more concerned about steel. I think the biggest thing there is really the trade situation with China on the commodities, specifically soybean and corn and some other commodities. I think trade talks that, based on this morning, they have announced that there's trade talks with China are important and getting some certainty on our customers that the U.S. will continue to be a huge exporter of agricultural products is very important. I think once that noise, let's say, goes away at some point in the next few months, I think steel will be less of a factor. We are excited about, again, the position.

If you look at the demand for hopper barges over the next five years, we need to get started also on replacing them because they're aging really, really fast.

Brent Thielman (Analyst)

Okay. Very good. Thank you.

Operator (participant)

Thank you. Our next question comes from Garik Shmois with Loop Capital Markets. Please go ahead. Your line is open.

Garik Shmois (Analyst)

Thanks, Garik. Good morning. Congrats on the results. Two questions on construction products. I guess first on aggregates pricing. I think I heard you correct. Pricing was up 7% organic in the quarter, but it was up more overall due to Stavola. I think it was up 10%. So just wondering how to think about that moving forward is maybe that 300 basis point difference between organic and kind of all-in with Stavola a good way to think about your aggregates pricing through the rest of the year?

Gail Peck (CFO)

Yeah. Good morning, Garik. Yes, you're correct on the pricing for the quarter. So good pricing growth. And as Antonio mentioned in his script on the outlook, we maintain the mid-single-digit price growth on a full-year basis. And it's early in the year. Our January 1 price increases went through as expected. We'll have conversations about mid-years, but it's a very market-by-market conversation and an assessment on local market conditions. So we're maintaining our full year of mid-single digit for 2025.

Antonio Carrillo (President and CEO)

As you see, if you think about Stavola, it's a hard rock business. The average price is higher. The business is a lot more seasonal than the other businesses, the other regions we have. As that region picks up with more rock than sand that we have in other areas, also that will, let's say, create some positive momentum on our pricing.

Garik Shmois (Analyst)

No, that makes sense. Thank you. I guess the follow-up question is just on the segment margins, a number of moving parts. You just spoke to pricing. It looks like oil-based costs are starting to come down, which could be positive for aggregates operations and maybe potentially for asphalt inputs, at least in the near term. I was wondering if your thinking on the segment margins have changed since we last heard from you and maybe a little bit more hand-holding on what we should expect for margin progression the rest of the year.

Gail Peck (CFO)

I'll take that one, Garik. I don't think our outlook has changed as it relates to the segment performance for margin. We expect margin on an organic basis to be up in 2025 relative to 2024. As I said in the quarter, even with the lower volumes, somewhat weather-driven in our seasonally slow first quarter and less fixed cost absorption, we saw organic margin improvement of 100 basis points year over year. We do see pricing outpacing cost pressures on the variable side. Very positive outlook as it relates to margins. Maybe one other point on organic for construction. As we see the year, and we reiterated in Antonio's script that we do see high single-digit EBITDA growth on an organic basis for construction.

Garik Shmois (Analyst)

Okay. Great. Thank you very much.

Operator (participant)

Thank you. Our next question comes from Ian Zaffino with Oppenheimer. Please go ahead. Your line is open.

Ian Zaffino (Analyst)

Hi, Gray. Thank you very much. Just building on the pricing on the aggregate side or material side, how are you thinking about pushing price versus any type of volume declines that you might see or that you have seen? Thanks.

Antonio Carrillo (President and CEO)

Yes. Yeah. I'll take that. It's a fine equation that you have to make in terms of absorbing your fixed cost versus just focusing on the pure margin per ton. As we've said, we have been focusing on margin rather than volume. It's a very local decision-making, very local specific situation for each one of the quarries. That's where our team started spending most of the time on balancing that cost absorption versus price increases. That's why you will see the average price increase. We gave you guidance on that.

The average price tells you there's going to be a wide variety of price increase across the company. In some areas, we'll probably have a lot more. In some areas, we'll have a lot less. Try to balance that pricing momentum at the same time cost absorption based on volume. That is the way to manage the business. Those are the discussions that our team is having on a very local basis. I think they're very good at it. I'm excited about what we're seeing in terms of process of how they come up with solutions.

Ian Zaffino (Analyst)

Okay. Thanks. I guess we're almost in kind of mid-May here. What do you need to see potentially to put through another letter on the material side, a mid-year increase? What would you need to see?

Can you maybe just comment on kind of what geographies you're seeing the most strength in and where you're maybe seeing some softness? Thanks.

Antonio Carrillo (President and CEO)

We have scheduled price increases in several regions of the company, each one a little different, but we have several prices that we will be doing mid-year. We did a price increase in January in several locations also, and it stuck well. I would say that we're seeing demand on the industrial, on the, let's say, start with the infrastructure piece. We're seeing good demand on the infrastructure side on projects, and things are moving along well. New Jersey, specifically, I think the demand continues to be relatively strong. We saw a lot of weakness in the Arizona market on the housing side over the last several quarters already. Texas has been also relatively slow on the housing side.

Probably that's more a temporary thing. I think the industrial piece is where we're seeing some positive momentum. I think Texas, the Gulf, Florida are areas where we're seeing very positive things. When you look at Arizona, I think we're starting to see some pickup back on the warehousing and some other things. The mix, I would say, is I'm encouraged by the industrial side, and I'm encouraged by the infrastructure piece of the equation. Housing continues to be where things are, let's say, still not very positive.

Ian Zaffino (Analyst)

Okay. Thank you very much.

Operator (participant)

Thank you. As a reminder, it is star and one if you would like to join the queue. We will move next with Trey Grooms with Stevens. Please go ahead. Your line is open.

Trey Grooms (Analyst)

Hey, good morning, everyone. Real quick, just following up, I guess, on maybe some of the comments kind of as we were heading through April. Antonio, you mentioned some of the or touched on some of the trends in Stavola, which sound like they're picking up seasonally, and you're happy with what you're seeing there. Any color on April demand trends in the rest of the legacy construction products business that you could share with us?

Antonio Carrillo (President and CEO)

Yes. I think when the weather cooperates, we're seeing good demand for the products. We're seeing solid demand. I will tell you that when you look at January and February with the weather, which was pretty heavy, it was not only the amount of bad weather. It was also normally it would fall on a Tuesday, Wednesday, which kills the whole week. I think when the weather cooperates, we're seeing good demand. I'll give you a couple of other things that we track closely. There are more leading indicators than lagging indicators. Our shoring business, which is a leading indicator in our view, because before you start construction, you normally make the hole for the foundation, and you use the shoring piece. Demand has been very strong. Our backlogs are growing. That's kind of a very positive thing. On our Amaron products, they sell lighting poles.

Normally, when you're developing a new industrial development or housing development, you start with the infrastructure and the lighting poles going first. The demand has been very, very strong. Our backlogs are the strongest we've seen since we bought the business. Some leading indicators lead us to believe that demand continues to be there and is holding strong.

Trey Grooms (Analyst)

Okay. Great. Thanks for that. You mentioned residential is slow. That's been the case for you guys for a while for most. I believe the guide had assumed kind of a back half single family or maybe back end of 2025 single family pickup. Is that still kind of the way you're thinking about it, or is that what's still kind of in the guide that's what you need to see, or how are you thinking about that as we kind of look further out into the year?

Antonio Carrillo (President and CEO)

Yes. When we say we expected a better second half than first half, we're not thinking about a booming housing market at all. It's just we expect it to stabilize and at least start recovering. Yes, that's in our expectations for the second half of the year.

Gail Peck (CFO)

Good morning, Trey. As it relates to housing, I mean, we're seeing pockets of more activity. Like in the Houston market, residential continues to be stable, which is helpful for our recycled and our stabilized sand business. As we talk about housing in general, we're coming off from some lows, but we have some areas where there's good activity.

Trey Grooms (Analyst)

Okay. Gail, you brought up stabilized sand. I know you guys buy a lot of cement in those markets, I think, specifically kind of Dallas, Fort Worth, Houston, maybe some others. Can you talk about what you're seeing on the input side there? It sounds like some of the increases from April got moved around, but it does seem kind of to vary market by market. Just any comment you could give us on that?

Gail Peck (CFO)

Yeah. I think we're seeing some relief on a year-over-year basis on input costs. So we're encouraged by that. The trend seems to be heading in the right direction for us from a raw material perspective.

Trey Grooms (Analyst)

Okay. Thanks a lot for answering my questions. Have a great day.

Antonio Carrillo (President and CEO)

Thank you.

Operator (participant)

Thank you. This does conclude our Q&A session. I will now turn the call over to Ms. Drabek for closing remarks.

Erin Drabek (VP of Investor Relations)

Thank you all for joining our first quarter update today. We appreciate your time and attention, and we hope you will join us again next quarter.

Operator (participant)

Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time.