ASTEC INDUSTRIES INC (ASTE)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The financial condition, results of operations and cash flows discussed in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" are those of Astec Industries, Inc. and its consolidated subsidiaries, collectively, the "Company," "Astec," "we," "our" or "us." The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2025. The financial position, results of operations, cash flows and other information included herein are not necessarily indicative of the financial position, results of operations and cash flows that may be expected in future periods.

Forward-Looking Statements

This Quarterly Report on Form 10-Q, particularly the following discussion and analysis of our results of operations, financial condition and liquidity in this "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements within the meaning of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, income, earnings, cash flows, changes in operations, operating improvements, businesses in which we operate and the United States and global economies. Statements in this Quarterly Report on Form 10-Q that are not historical are hereby identified as "forward-looking statements" and may be indicated by words or phrases such as "anticipates," "supports," "plans," "projects," "expects," "believes," "should," "would," "could," "forecast," "management is of the opinion," or use of the future tense and similar words or phrases.

These forward-looking statements are based largely on management's expectations, which are subject to a number of known and unknown risks, uncertainties and other factors described under the caption Item 1A. Risk Factors in Part II of this Report, elsewhere herein and in other documents filed by the Company with the Securities and Exchange Commission, including Part I, Item 1A. Risk Factors of the Company's Annual Report on Form 10-K for the year ended December 31, 2025, which may cause actual results, financial or otherwise, to be materially different from those anticipated, expressed or implied by the forward-looking statements. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements to reflect future events or circumstances, except as required by law.

Executive Summary

Highlights of our financial results for the three months ended June 30, 2026 as compared to the same period of the prior year include the following:

•Net sales were $408.1 million, an increase of 23.6%

•Gross profit was $106.8 million, an increase of 21.0%

•Income from operations was $20.4 million, a decrease of 4.7%

•Net income attributable to Astec was $10.5 million, a decrease of 37.1%

•Diluted income per share was $0.45, a decrease of 37.5%

•Backlog was $601.1 million, an increase of 57.9%

Recent Developments and Business Conditions

CWMF Acquisition – On January 1, 2026, we completed our acquisition of CWMF, LLC ("CWMF"), a manufacturer of portable and stationary asphalt plant equipment and parts. The acquisition increases production capacity in our Infrastructure Solutions segment.

Strategic Transformation Program – Our strategic transformation program includes the ongoing multi-year phased implementation of a standardized ERP system, which is replacing much of our existing disparate core financial systems. To date, we have launched the human capital resources module worldwide and converted the operations of three manufacturing sites along with Corporate. We expect the project to conclude in 2028 or 2029 with total approximate implementation costs anticipated to range from $180 to $200 million. Through the second quarter of 2026, we have incurred total implementation costs of approximately $158 million.

See Note 11, Strategic Transformation, Restructuring Charges and Other Operating Gains, net of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional discussion of the costs related to these strategic initiatives.

Economic Conditions – We monitor macroeconomic and other factors that may affect our business such as steel and oil prices and geopolitical conflicts, among others.

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Steel is a major component of our equipment. Increased steel demand in certain markets and elevated freight and energy costs have driven increased steel prices in the first half of 2026. We anticipate that steel prices will remain elevated during the remainder of 2026.

Additionally, significant portions of our revenues from the Infrastructure Solutions segment relate to the sale of equipment involved in the production, handling, recycling or application of asphalt mix. Liquid asphalt is a by-product of oil refining, and changes in the price of oil impact the cost of asphalt, which is in turn likely to alter demand for asphalt and therefore affect demand for certain of our products. Oil prices have routinely fluctuated in recent years and have experienced a significant rise in the first half of 2026 due to the conflict in the Middle East. We anticipate that these high prices will persist in the short term.

New or ongoing geopolitical conflicts may cause a downturn in the construction industries in which we operate, cause an increase in oil prices, damage a significant portion of our inventory or materially impair our ability to distribute our products to customers. We monitor, adjust and potentially cease our operations in affected jurisdictions to ensure compliance with any governmental actions made in response to such conflicts.

Whenever possible, we attempt to cover increased costs of production by adjusting the prices of our products. The markets we serve are competitive in nature, and competition limits our ability to pass through cost increases in many cases.

Results of Operations

Net Sales

Net sales for the second quarter of 2026 were $408.1 million compared to $330.3 million for the second quarter of 2025, an increase of $77.8 million, or 23.6%. The increase in net sales was primarily driven by net favorable volume and mix coupled with favorable pricing that generated increases in equipment sales of $42.6 million and parts and service revenues of $35.0 million. Included in the net increase is $48.6 million of incremental net sales from acquired businesses. Sales reported by our foreign subsidiaries in U.S. dollars for the second quarter of 2026 would have been $4.0 million lower had second quarter 2026 foreign exchange rates been the same as second quarter 2025 rates.

Net sales for the first six months of 2026 were $804.4 million compared to $659.7 million for the first six months of 2025, an increase of $144.7 million, or 21.9%. The increase in net sales was primarily driven by net favorable volume and mix coupled with favorable pricing that generated increases in equipment sales of $85.9 million and parts and service revenues of $59.0 million. Included in the net increase is $98.1 million of incremental net sales from acquired businesses. Sales reported by our foreign subsidiaries in U.S. dollars for the first six months of 2026 would have been $8.5 million lower had the first six months of 2026 foreign exchange rates been the same as the first six months of 2025 rates.

Domestic sales for the second quarter of 2026 were $332.6 million, or 81.5% of consolidated net sales, compared to $262.0 million, or 79.3% of consolidated net sales, for the second quarter of 2025, an increase of $70.6 million, or 26.9%. Domestic sales increased primarily due to higher equipment sales of $44.3 million and parts and service revenues of $26.1 million. Included in the net increase is $37.0 million of incremental net sales from acquired businesses.

Domestic sales for the first six months of 2026 were $651.6 million, or 81.0% of consolidated net sales, compared to $535.8 million, or 81.2% of consolidated net sales, for the first six months of 2025, an increase of $115.8 million, or 21.6%. Domestic sales increased primarily due to higher equipment sales of $69.5 million and parts and service revenues of $46.7 million. Included in the net increase is $79.0 million of incremental net sales from acquired businesses.

International sales for the second quarter of 2026 were $75.5 million, or 18.5% of consolidated net sales, compared to $68.3 million, or 20.7% of consolidated net sales, for the second quarter of 2025, an increase of $7.2 million, or 10.5%. International sales increased primarily due to higher parts and service revenues of $8.9 million partially offset by lower equipment sales of $1.7 million. Included in the net increase is $11.6 million of incremental net sales from acquired businesses.

International sales for the first six months of 2026 were $152.8 million, or 19.0% of consolidated net sales, compared to $123.9 million, or 18.8% of consolidated net sales, for the first six months of 2025, an increase of $28.9 million, or 23.3%. International sales increased primarily due to higher equipment sales of $16.4 million and parts and service revenues of $12.3 million. Included in the net increase is $19.1 million of incremental net sales from acquired businesses.

Gross Profit

Gross profit for the second quarter of 2026 was $106.8 million, or 26.2% of net sales, as compared to $88.3 million, or 26.7% of net sales, for the second quarter of 2025, an increase of $18.5 million, or 21.0%. The increase in gross profit was primarily driven by the impact of net favorable volume and mix coupled with favorable pricing of $41.0 million and lower warranty program costs of $1.0 million. This increase was partially offset by (i) manufacturing inefficiencies, inclusive of freight, duties and tariffs, of $8.6 million, (ii) the impact of inflation on materials, labor and overhead of $8.4 million and (iii) net unfavorable inventory adjustments of $6.4 million.

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Gross profit for the first six months of 2026 was $205.9 million, or 25.6% of net sales, as compared to $180.7 million, or 27.4% of net sales, for the first six months of 2025, an increase of $25.2 million, or 13.9%. The increase in gross profit was primarily driven by the impact of net favorable volume and mix coupled with favorable pricing of $66.4 million and lower warranty program costs of $4.2 million. This increase was partially offset by (i) manufacturing inefficiencies, inclusive of freight, duties and tariffs, of $24.8 million, (ii) the impact of inflation on materials, labor and overhead of $14.6 million and (iii) net unfavorable inventory adjustments of $4.8 million.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $85.5 million or 21.0% of net sales, for the second quarter of 2026, compared to $67.0 million, or 20.3% of net sales, for the second quarter of 2025, an increase of $18.5 million, or 27.6%, primarily due to (i) increased intangible asset amortization expense of $7.2 million, (ii) increased personnel-related costs of $5.3 million, (iii) increased technology support costs of $1.8 million, (iv) increased costs related to our strategic transformation program of $1.2 million, (v) increased professional service costs of $1.1 million and (vi) increased dealer commissions of $0.9 million.

Selling

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes included in Item 8 of this Annual Report on Form 10-K for the year ended December 31, 2025. The results of operations and other information included herein are not necessarily indicative of the financial condition, results of operations and cash flows that may be expected in future periods. This Annual Report on Form 10-K, including matters discussed in this Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements relating to our plans, estimates and beliefs that involve important risks and uncertainties. See "Safe Harbor Statements Under the Private Securities Litigation Reform Act" and Part I, Item 1A. Risk Factors

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for a discussion of uncertainties and assumptions that may cause actual results to differ materially from those expressed or implied in the forward-looking statements.

This section of this Annual Report on Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. A similar discussion of 2023 items and year-to-year comparisons between 2024 and 2023 can be found in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2024.

The financial condition and results of operations discussed in this Management's Discussion and Analysis of Financial Condition and Results of Operations are those of Astec Industries, Inc. and its consolidated subsidiaries, collectively, the "Company," "Astec," "we," "our" or "us."

Business Overview

We design, engineer, manufacture, market and service equipment and components used primarily in asphalt and concrete road building and related construction activities, as well as certain other products. Our products are used in each phase of road building, from quarrying and crushing the aggregate to application of the road surface. We also offer industrial automation controls and telematics platforms as well as manufacture certain equipment and components unrelated to road construction, including equipment for the mining, quarrying, construction, demolition, land clearing and recycling industries and port and rail yard operators; industrial heat transfer equipment; commercial whole-tree pulpwood chippers; horizontal grinders; blower trucks; commercial and industrial burners; and combustion control systems.

Our products are marketed both domestically and internationally primarily to asphalt and concrete producers; highway and heavy equipment contractors; utility contractors; sand and gravel producers; construction, demolition, recycling and crushing contractors; forestry and environmental recycling contractors; mine and quarry operators; port and inland terminal authorities; power stations and domestic and foreign government agencies. In addition to equipment sales, we manufacture and sell replacement parts for equipment in each of our product lines and replacement parts for some competitors' equipment. The distribution and sale of replacement parts is an integral part of our business.

Executive Summary

Highlights of our financial results as of and for the year ended December 31, 2025 as compared to the prior year include the following:

•Net sales were $1,410.4 million, an increase of 8.1%

•Gross profit was $374.2 million, an increase of 14.1%

•Income from operations was $65.9 million, an increase of 184.1%

•Net income attributable to Astec was $38.8 million, an increase of 802.3%

•Diluted income per share was $1.68, an increase of 784.2%

•Backlog was $514.1 million, an increase of 22.5%

Significant Items Impacting Financial Results in 2025

TerraSource Acquisition

On July 1, 2025, we completed our acquisition of TerraSource Holdings, LLC ("TerraSource"), a market-leading manufacturer of material processing equipment and related aftermarket parts serving complementary crushing, screening and separation applications. This acquisition provides us with access to adjacent markets in materials processing equipment and related aftermarket parts and significant growth and value creation opportunities.

New Credit Facility

On July 1, 2025 and simultaneously with the consummation of the acquisition of TerraSource, we entered into a new credit agreement (the "2025 Credit Agreement") with Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto from time to time that provides for (i) a revolving credit facility, a term loan facility, a swingline facility and a letter of credit facility, in an initial aggregate amount of up to $600.0 million and (ii) an incremental facilities limit in an aggregate amount not to exceed $150.0 million (collectively, the "2025 Credit Facilities").

Strategic Transformation Program

Our strategic transformation program includes the ongoing multi-year phased implementation of a standardized enterprise resource planning ("ERP") system, which is replacing much of our existing disparate core financial systems. To date, we have launched the human capital resources module in our U.S. and Canadian locations and converted the operations of three manufacturing sites along with Corporate. We expect the project to conclude in 2028 or 2029 with total approximate

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implementation costs anticipated to range from $180 to $200 million. Through the year ended December 31, 2025, we have incurred total implementation costs of approximately $151 million.

See Note 21, Strategic Transformation and Restructuring, Impairment and Other Asset (Gains) Charges, net of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional discussion of the costs related to these strategic initiatives.

Industry and Business Condition

Our financial performance is affected by a number of factors, including the cyclical nature and varying conditions of the markets we serve. Demand in these markets fluctuates in response to overall economic conditions and is particularly sensitive to the amount of public sector spending on infrastructure development, privately funded infrastructure development and changes in the prices of liquid asphalt, oil, natural gas and steel. In addition, many of our markets are highly competitive, and our products compete worldwide with similar products produced and sold by a number of other manufacturers and dealers.

Federal funding provides a significant portion of all highway, street, roadway and parking construction in the United States. As federal highway funding programs have consistently been in place for several decades, we believe that these funding programs provide stability in the purchasing decisions of our customers by allowing them to plan and execute longer-term projects with federal legislation in place over a multi-year period. The U.S. government enacted the Infrastructure Investment and Jobs Act ("IIJA") in November 2021 as a replacement for the prior program. The IIJA allocates $548 billion in government spending to new infrastructure over the five-year period concluding in 2026, with certain amounts specifically allocated to fund highway and bridge projects. We believe that multi-year highway programs (such as the IIJA) have a positive impact on the domestic road construction industry.

Significant portions of our revenues from the Infrastructure Solutions segment relate to the sale of equipment involved in the production, handling, recycling or application of asphalt mix and, to a lesser extent, concrete as surface choices for roads and highways. Liquid asphalt is a by-product of oil refining, and changes in the price of oil impact the cost of asphalt, which is in turn likely to alter demand for asphalt and therefore affect demand for certain of our products. While increasing oil prices may have a negative financial impact on many of our customers, our equipment can use a significant amount of reclaimed asphalt pavement, thereby partially mitigating the effect of increased oil prices on the final cost of asphalt for the customer. We continue to develop products and initiatives to reduce the amount of oil and related products required to produce asphalt. Price volatility continues to make it difficult to predict the costs of oil-based products used in road construction such as liquid asphalt and gasoline. Oil prices have routinely fluctuated in recent years, and based on the current macroeconomic environment, we anticipate that oil prices will experience moderate fluctuation throughout 2026.

Steel is a major component of our equipment. In reaction to import tariffs and market uncertainty, steel prices increased in the first half of 2025, before experiencing a gradual decline in the second half of the year, resulting in a relatively stable average price for the year overall. Despite rising prices at the end of 2025, we anticipate minimal price changes in 2026 as domestic mills manage output and maintain pricing advantages over imports. We continue to employ flexible strategies to ensure supply and minimize the impact of price volatility. Potential ongoing constraints in the supply of certain steel products may continue pressuring the availability of other components used in our manufacturing process. Furthermore, given the volatility of steel prices and the nature of our customers' orders, we may not be able to pass through all increases in steel costs to our customers, which may negatively impact our gross profit and margins.

New or ongoing geopolitical conflicts may cause a downturn in the construction industries in which we operate, cause an increase in oil prices, damage a significant portion of our inventory or materially impair our ability to distribute our products to customers. We monitor, adjust and potentially cease our operations in affected jurisdictions to ensure compliance with any governmental actions made in response to such conflicts.

Whenever possible, we attempt to cover increased costs of production by adjusting the prices of our products. The markets we serve are competitive in nature, and competition limits our ability to pass through cost increases in many cases.

Results of Operations: 2025 vs. 2024

Net Sales

Net sales increased $105.3 million, or 8.1%, to $1,410.4 million in 2025 from $1,305.1 million in 2024. The increase in net sales was primarily driven by net favorable volume and mix coupled with favorable pricing that generated increases in (i) equipment sales of $44.6 million, (ii) parts and component sales of $44.5 million, (iii) service and equipment installation revenue of $12.8 million and (iv) freight revenue of $4.0 million. Included in these net increases is $84.7 million of incremental net sales from the acquired TerraSource business. Sales reported by our foreign subsidiaries in U.S. dollars for 2025 would have been $2.5 million lower had foreign exchange rates been the same as the 2024 rates.

Domestic sales for 2025 were $1,130.2 million, or 80.1% of net sales, compared to $1,015.4 million, or 77.8% of net sales, for 2024, an increase of $114.8 million, or 11.3%. Domestic sales increased primarily due to higher (i) equipment sales of $58.9

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million, (ii) parts and component sales of $42.1 million, (iii) service and equipment installation revenue of $11.2 million and (iv) freight revenue of $3.4 million. Included in the net increase is $58.4 million of incremental domestic revenue from the acquired TerraSource business.

International sales for 2025 were $280.2 million, or 19.9% of net sales, compared to $289.7 million, or 22.2% of net sales, for 2024, a decrease of $9.5 million, or 3.3

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