Q2 2020 US Concrete Inc Earnings Call
Presentation, there will be a question and answer session to ask a question. During the recession you want me to press Star one on your telephone if you require any forget assistance. Please press star in CRM I'd like to turn the call to the John Cooper, Senior Vice President and Chief Financial Officer.
Thank you good morning, welcome to U.S. concrete second quarter 2020 earnings call. Joining me on the call today is running through our President and Chief Executive Officer, We will make.
Some prepared remarks, after which we will open the call to questions.
Detailed on page two of our company presentation to facilitate todays discussion today's call will include forward looking statements as defined by the U.S. Private Securities Litigation Reform Act of 1995, such forward looking statements are subject to risks uncertainties and other factors, which could cause actual results to differ much.
Clearly, except as legally required we undertake no obligation to update or conformed such statements to actual result would be changes in our expectation.
For a list of these factors please refer to legal disclaimers and risk factors contained in our filings with the FCC. Please note <unk> you can find the reconciliations and other information regarding the non-GAAP financial measures that we discussed on this call.
Form 8-K, which was filed earlier today a presentation to facilitate today's discussion is available on Investor Relations section of our website.
Before I turn the colder Ronnie to offer his comments I will review our financial performance in business is resolved.
Today, we were pleased to present our results for the second quarter that volume disruptions that began in March continued into April it, especially in the coastal markets. We serve these disruptions resulted in a significant reduction in revenue during the quarter.
As the quarter progressed, we experienced a steady rebounded demand, we achieved substantially higher margins and adjusted EBITDA in the quarter versus the second quarter 2019, primarily as a result of aggressive cost containment more efficient utilization or plant and equipment.
And the increased use of our proprietary technology the improvement in our plant and equipment utilization and overall efficiency was achieved through use of data analytics greater use of Where's my concrete technology and reductions in cycle times.
Our performance since the inception of the pandemic, including the strength of our second quarter result, because they directors old work teams rapid response to this challenging environment and a testament to the strength of our business model our focus on building defensible vertically integrated market positions with an increasing concentration in aggregate I'll just produced the robust second.
Quarter results and demonstrates the strength of our business model during difficult times when market conditions are significant investments in aggregate, most notably Polaris and corn led to record setting performance of our aggregates business in the second quarter during the quarter the impact of a pandemic the related shelter in place requirements and.
Actions, where most acutely felt in our coastal regions, even though we redeemed in a central business. Many of our customers projects were subject to disruptions and delays as severe shutdown orders were being rolled out and implemented these restrictions impacted demand during the quarter, resulting in revenue of $323 million a 12%.
Greece compared to prior year second quarter, despite the lower volume and revenue. Our total adjusted EBITDA was $47.6 million, a 13.3% increase compared to the $42.0 million in last year's second quarter, our adjusted EBITDA margin was 40.8% during the quarter.
Versus 11.4% in the second quarter of 2019.
This improvement was driven by both our aggregates and ready mix operations, our aggregate adjusted EBITDA margin was 39.6%, which was up 1500 basis points versus the prior year and are ready mix. Adjusted EBITDA margin was 14%, which was an increase of 190 basis points compared to the prior year.
To your margin was flat at 47.6% compared to the prior year quarter, as we were able to recover modest material price increases.
Our EBITDA adjustments for the quarter relate primarily to stock compensation contingent consideration realignment initiatives and purchase accounting adjustments for corn inventory.
For 2020, we expect our adjusted effective tax rate to be approximately 27% and our interest expense to be in a 44 to 47 million dollar range.
Moving onto cash flow in the balance sheet during the second quarter, we generated $40.1 million a cash provided by our operating activities more than double the $18.7 million in the prior year quarter, we generated $33.3 billion adjusted free cash flow during the second quarter compared to 14.1 million.
In dollars in the prior year quarter, our operating performance and cost containment efforts during the quarter contributed to this improvement our focus and effort with respect to working capital added $7.7 million to these results during the quarter, our solid cash flow allowed us to pay down debt and reduced our net debt by 22.
Million dollars as of June Thirtyth compared to the March 31st quarter end, resulting in $741.4 million of net debt at the end of the quarter. The increase in our trailing 12 months to EBITDA, along with lower net debt position reduced our leverage at 3.9 times for about a quarter of return compared to the.
March 31st leverage ratio as of June Thirtyth, we had total liquidity of $335 million, including $17.5 million, a cash and cash equivalents $137.3 million availability under revolver, plus $180 million of availability under our delayed draw term loan.
During the second quarter of 2020, we invested approximately $6.9 million and capital expenditures compared to approximately $10.9 million for the same period last year for the full year 2020.
Given the improving business environment, and the opportunity to allocate capital to both high return in high growth projects, we're planning for capital expenditures within a range of $30 million to $40 million or we could reduce this amount if circumstances change similar to 2019, we're targeting free cash flow for the full year once again be above 100.
Billion dollars, while we had our share challenges during the quarter. We're very pleased that our management team employees rose to the challenge by controlling cost and leveraging our technology data analytics and asset base, which led to our improved operating performance during the quarter with that I will turn the call over to Ronnie.
Thank you John Good morning, everyone and thank you for joining the call.
I know this continues to be a challenging time for many people. So first and foremost I hope, you're all staying healthy and safe.
With the onset of Cobot 19, we immediately committed ourselves to the following guidance of global healthcare leaders with a priority of taking care of our people and continuing to serve our customers.
We continue to monitor government related mandates and commit to maintaining our focus on these important priorities.
The second quarter of 2020 was a very dynamic environment due to the number of cobot cases across the country and government imposed restrictions put in place that affected our business.
We adjusted our operations on a daily basis to serve our customers and their projects that were deemed a central.
We witnessed a direct correlation between the number of cobot cases enter markets and the impact and timing of construction projects in those markets, most notably in New York in California.
We witnessed a geographical shift in our revenue due to the operating restrictions in our markets with the west and east regions, representing 30% of revenue during the quarter and the central region, comprising the balance of 40%.
Turning to our performance, we generated $322.7 million of revenue during the second quarter of 2020.
With revenue increasing from 29% earned in April.
32% earned in May to 39% earned in June.
Each month during the quarter, we saw sequential growth in construction activity across our markets as the definition of a central services evolved in each market and restrictions were modified.
We're pleased to announce the U.S concrete aggregate operations had record setting quarterly revenue of $55 million with almost 3.2 million tons sold.
Our adjusted EBITDA for aggregates operations was $22 million during the second quarter with an adjusted EBITDA margin net afraid of 51%.
Revenue production and EBITDA for our Texas Laggard operations were up year over year and quarter over quarter, and we saw a significant increase in volume led by our Greenfield investment at MWC Ranch and the modernization of our plant mobile equipment at our Amarillo sand and gravel operation.
Both of these strategic investments supported robust construction activity in the regions during the quarter.
Our aggregates segment performance was further enhanced by the first full quarter of core materials, our sand and gravel operation on long island there'll be acquired in February.
We're very pleased with the integration of core him to pull through of volume to support our operations and the external sales to third party customers in the New York area.
In addition to our internal consumption in or New York ready mix operation Coram shipped 217000 tons through external customers during the quarter.
As previously discussed corn was on target to achieve a post sooner just multiple of seven times.
Our ready mixed concrete segment delivered nearly 2 million cubic yards or concrete during the quarter generating over $272 million of revenue and $38 million of adjusted EBITDA.
A ready mixed concrete ASP was up in each of our markets during the quarter, but on a consolidated basis was down slightly due to geographical and product mix.
The employees are U.S concrete were diligently and officially to manage the business and implemented cost cutting measures all while actively reengineering the business. So that we could respond to the changes in each of our operating environments.
Proprietary technology platform Where's my concrete and its CRM provided valuable real time data and analytics to respond to the changes in our business.
During the second quarter, we generated an adjusted EBITDA margin of 14.8% as compared to 11.4% in the second quarter of 2019.
The key to delivering the improvement to our operating margins is twofold.
The variable nature of our cost structure for example in the form of materials delivery labor and fuel and the agility of our manager showed in each market by re sizing and scaling their assets to mirror the market conditions.
Our team continues to be focused on the following initiatives.
Labour management.
Improve processes.
Use of internally sourced aggregates.
Mix optimization for concrete.
Back office consolidation.
Higher asset utilization.
Management of plant cost.
Converting what were traditionally fixed expenses to some of variable.
And deliver efficiencies with a focused on enhanced customer service and yard for driver our with our technology platform Where's my concrete.
We also benefited from lower fuel costs and lower traffic volumes during the quarter.
All of these measures are driving improvements to our cost structure and profitability.
Our focus continues to be on operating margins and operating efficiencies.
As restrictions are lifted during the quarter. Our operating performance also improved as evidenced by our results as june's performance was substantially better than aprils.
In the future where people live how they commute to work and what a traditional work environment will be either remotely or in an office setting or all still unknown.
These trends will impact the residential commercial and infrastructure markets that we serve.
We're fully prepared to pivot within our markets to address changing demand patterns as exhibited by our second quarter performance.
While further volatility in restrictions are clearly possible and the pandemics economic impact is still difficult to quantify.
Hi, I'm certain that all companies are evaluating their business and the changing landscape to assess future demand.
Based on what we know today, our view as a business and construction restrictions will be limited, which should result in healthy activity levels in our markets, resulting in adjusted EBITDA anchored in the fifties for the third quarter.
Looking forward into 2021.
A detailed MSC analysis of construction next U.S. construction spend for the markets, we serve predicts a 17.5% increase and put in place commercial construction spending over 2020.
Please refer to slide eight in our supplemental presentation provided.
As a market leader, we participate in all sectors of the industry and have expertise with materials and mix designs and have the relationships the plant locations and the assets to support any type of construction project.
We continue to support the very large complex projects that we have consistently discussed.
It's also important to recognize that we have thousands of customers with thousands of diverse projects across our operating platform.
This portfolio diversity highlights the capabilities and our versatility to handle dynamic market conditions, and a wide variety of commercial infrastructure projects and large markets with underlying favorable conditions.
We have the knowledge ability and agility to support the projects and end markets for whatever drives aggregates and concrete demand whether in residential commercial or infrastructure.
With attractive and desirable locations our markets represent over 20% of the U.S. population and are seeing increased population growth with higher with rates higher than the national average.
Due to the proximity of infrastructure projects through our markets U.S. concrete has been and we'll be well position to support these projects.
We are even better position now to support infrastructure with our aggregates and distribution terminals located near many major markets.
Just confirmed our strategic alignment of aggregates in concrete in attractive markets that are coordinated with our proprietary technology platforms.
All of which will be a formal foundation for any contemplated infrastructure built.
We continue to be laser focused on our strategy, we have diverse operating assets across major metropolitan regions in the United States and further diversified with our robust aggregates portfolio to provide vertical integration for our ready mixed assets.
Our focus is on maximizing our margins through cost management and operational efficiencies and has exhibited by our second quarter financial results, we have a variable cost structure.
Every employee U.S concrete is operating with a sense of purpose to deliver a durable long term results for all of our stakeholders.
We crossed an important operating milestone in U.S. concretes evolution as a company with our second quarter results.
We have successfully proven that we can maintain and even improve or operating margins during times of pressure.
We have significantly grown the impact of our aggregates business, which represented 36% of total reported segment adjusted EBITDA generated during the quarter.
We have improved liquidity with the generation of free cash flow.
We reduced our leverage to 3.9 times, and we recognize stable and even improving pricing of our products during difficult market conditions over the quarter.
We're a company focused on delivering aggregates, we are a company focused on delivering concrete and we're a company focused on delivering results. If you noticed I emphasize the word. We this is a team effort and I want to thank all of our employees for their leadership and dedication.
You asked concrete financial results, our tangible evidence of their hard work and efforts.
Operator, I would now like to open the call for questions.
Thank you, ladies and gentlemen, as a reminder to ask the question you would need to press star one on your telephone to withdraw your question pressed uptown or ski please standby, while we compile documenting roster.
Our first question is from Paul Roger with Exane BNP Paribas. Please go ahead.
Yes, good afternoon linen guys. Congratulations on the result, as always thanks for taking my questions.
I will just stuff with two that plays obviously, they the big stalled. It today I guess is about the extra margin performance now clearly demand will be what equities in the second half, but what we think about those margins do you think this sustainable and that say relisting level that you'll get to get in the second half.
My second question, it's all the ready mix slice it looks like they fell I think you'll say about 5% sequentially in the call.
Now you have mentioned mix. So is it possible to tell us what that was on a mix adjusted basis on how concerned should would be about that obviously the industry. It typically pricing historically has been quite volatile.
Yeah. Thanks, Paul Good afternoon on your side of the Youre the pond.
So I'll I'll take the first question on margin. So I'll give you a couple of data points as just think about.
And I really want to talk about sequential quarter over quarter. So if you look at our Q1 volumes were right at around 2 million yards.
Our volumes in Q2 were very similar right at about 2 million yard. So if I if I look at those comparable on a on the quarter over quarter, and then I'd take what I'm going to talk about is our total plant cost, which is really our labor and our repair and maintenance at are ready mix operating facilities as well as our total delivery cost and when I look at those.
Total dollar amount quarter over quarter, our total plant costs was down a little over $4 million.
On a percentage basis, if I look at our labor cost at our plants they were down about 16%.
Repair and maintenance cost was down an additional 16%.
On the delivery side, we were down about $11 million in total in the two over to sequentially.
If I take that and I really look at fuel we had we had a tailwind on fuel.
Obviously, everyone has talked about the tailwind on fuel, but fueling made up about $2 million of that and so when I think about the other things that go into our delivery cost our delivery labor was down about 14% our delivery our NIM cost was down 23%. So those are things that we control those are decisions, we made and.
I just want to emphasize the jet fuel has been a tailwind.
No traffic congestion content continues to be a tailwind, but we're also really driving with the help of our technology and planning and every bit manager out there watching the labor side to me is where we have the most control over that and we will continue to focus on that.
I'll, let John give you a little insight on the pricing so I.
A couple with respect to our a espeed. The short answer here question is on a mix adjusted basis RSP is actually up 1.3% have you think about that just conceptually obviously the Atlantic region with the hardest hit they had one of the higher ASP. So as that volume drops that's going to have obviously pulled down the.
Hey, SP, but when you look across the regions our regions. They just do them individually, we're really a crop up in every region, we really didn't see a decrease in the quarter for the region, but 1.3% is what we saw on a on a mix adjusted basis.
Okay. That's good just because about to London is onset today the first question.
Linking it to you is by called creates.
What lines does use my concrete really help you addressed it is they can definitely to logistics all it later on what proportion of the on network is actually used in this till now.
Thank you referred to Where's my concrete.
Where's my concrete oncology.
Okay.
We spent a lot of money getting a name right there Paul.
So were my concrete our entire Atlantic regions on it in a in the first half of the year, we rolled out all of our DFW ready mix on it and currently were.
Installing it in west, Texas, It or Ingram ready mix. The next phase of it will be rolled out into our California footprint and so if you think about it on we're a little over probably three quarters of away done as far as the number of yard we're running through the system.
The thing that the system allows us to do it it's our scheduling it scheduling of our customers ordered scheduling of our labor scheduling of all of our delivery and so when we think about the efficiencies we try to drive and using analytics to do that it's getting out ahead of us in estimating the impacts of what it would historically taken eetrex too.
Serbia job now takes Ford trucks, the server job what would historically take in.
10 hours to serve a job now taking six hours of service jobs. So the system's ability to predict that and be real time learning is critical to us because if we were going back in old way of doing business, we would have.
In estimating that on her own and maybe it would have taken several weeks to estimate that and we didn't know traffic patterns and we didn't know.
The things that really driver efficiencies and so that's what the technology allows us to do.
Real time basis, it's making adjustments to predict demand and predict traffic can predict labor needs and so thats, what we use it for do it also schedules all of our inbound materials. It has a lot of functions to it but from a from the most part it's really a.
Predictability model that we're trying to be more predictable or with our needs and managing those labor and assets.
Yes, that's been instead, thanks a lot.
Thank you. Our next question comes from Kathryn Thompson with Thompson Research. Please go ahead.
Hi, Thank you for taking my question today.
The look more on the concrete business sure margin on a go forward basis.
Much of the efficient how much at the margin improvement quarter.
It's really driven by efficiency drive times.
Traffic, but also the tools that you have internally versus having other variable costs and.
Yes alone that the other costs that labor that could you get more clarity in terms of changes you may have done on the labor front and including.
Cutting back on guaranteed times, and what does that mean, but the teacher.
Yeah. Good morning, Catherine Thank you.
Going through some of the numbers I just talked about in breaking those down even further and.
Hi level, yes, we did reduce guaranteed hours in our in our non union footprint here in the Texas market.
We implemented that early on in April.
And I would tell you we've talked in the past about how that guaranteed hours was more in line with our ability to attract.
Consistent labor and we've talked about those pressures in the first quarter call also in the fourth quarter called last year.
One of the things we have seen as those pressures on the labor side lifted dramatically. During this time or driver turnover is really a lot better during this time.
But from a cost perspective, when we talk about our delivery labor costs being down 14% sequentially.
Again, I think theres a lot of that that has to do with.
Our predictability are managing or those driver labor hours.
No. This this traffic help that it does and I would say the most impacted markets on the congestion is definitely in New York in San Francisco.
But at the same time I've had about comments that well you know those markets are never going to do this are never going to do that.
But you're not going to be able to sustain.
Those kind of efficiencies.
I guess my only argument would be you can argue that both ways.
If they are never going to build another office building in New York than there is not going to be traffic back. If they are going to build those office buildings and there will be traffic back one way or the other I can either sustaining for a long time in the market may shift in like I've said, we've had we have the ability to pivot the whether thats infrastructure, whether that's commercial whether that's residential whatever concrete demand is.
We don't we don't make the demand, but we will need to the man.
And the that I think the most.
Positive thing I've taken from these results is our ability of our managers to adapt to.
Predicting what that labor needs are going to be and really managing down to the daily.
Needs of our labor and so.
In a variable cost model.
No we took cost all or some of those costs going to come back.
It just depends there's a lot of factors out there that influence.
But I'm extremely pleased and where we're at and I'm extremely pleased and our ability to continue to drive the margins that we delivered.
It's fair to say that the.
Perhaps not all but there is a decent portion at the margin upside that could be classified as it more structural.
Change.
Outside of kind of labor.
Oh, yes.
Okay, Yes.
Do you look at I mean in you've you've pointed that out in the past as you look the growth of U.S. concrete and the acquisitions that we've done over the last.
Eight plus years I.
I mean, what the did give us the ability to do as manage assets and so if we think about our ability to serve these major metropolitan areas, we have multiple assets.
And these big markets that ultimately we just we can take a planned down I mean, when we take a plant down our labor cost at that plant goes to zero and we can serve the market I mean, if there's less needs I don't have to operate all my plan. So when I picked up plant down I don't have any labor costs there.
And really that's what we saw especially coming out of April into May and then as we open those plants backup in June obviously, the labor cost is going to come back, but we're doing that in a way we're predicting the demand on that plant and so we are looking at this from an asset management standpoint, as well not just as a delivery company, but also as a production company.
There were when do we operate these plants in many locations.
Okay, that's helpful shifting to California.
Could you give an update just between northern and southern California understanding that.
Southern California got back a little bit faster than we are you now just in terms of.
Shelter in place.
Right.
Inquiry in terms of not just fine SAP. It kind of what are you seeing bid activity change and that's it that's markets.
Yes, so southern California, obviously, we're just bear with our long Beach terminal and we supply that from players I would tell you that are.
Our business during the quarter was was pretty steady in southern California.
With less or.
Less interruptions because of the type of work that we are on there we were more.
Project specific deemed to central.
So we saw very little interruption in southern California, but you have obviously a much smaller presents for us.
And in a lot less.
Opportunity to disrupt because we don't have a a wide variety of different projects like we are in northern California.
Northern California, I think it was very similar to New York as far as the the immediate impacts of early on with the with the restrictions that were put in place and then.
As the market open back up in those restrictions were lifted we saw the volumes recover pretty quick.
And pretty steady.
I would tell you we're from a bidding perspective in pipeline and all the different analysis that we do as far as how we look forward.
And our demand side.
We haven't seen a tremendous amount of ship Residentials men.
Steady, we obviously have a lot of technology spend out there that I think that's the thing in that market that is.
It's tough to predict on a financial model because there's a lot of liquidity out there.
So there's I mean, we did have a mad poor in downtown San Francisco Honenone office mixed use tower two weeks ago, and so it's not like Wow, you're just not seeing nothing ever things come to an end, we're still seeing very good activity, we're still having a lot of interaction with our customers and and I think there's still a lot of.
A lot of Blurriness and a crystal ball to say how far ahead of it are you willing to get I.
I think Thats why we said we're confident in what we say for third quarter, and we'll reevaluate as far as guidance looks up for that.
Okay very helpful. Its final point and once again looking at key geographic markets Weve for taxes.
Your thought that.
Markets, you're a little bit more.
And private side Betsy.
And non rise to some extent.
What are you seeing in terms of trends in that market and what your thoughts specifically on the resi and mark in terms of bid activity. Thank you very much.
Yes. Thank you.
As far as Texas goes we've seen.
The resi side pretty much just they really consistent I would I would say the most impact was early on and some of that impact was mixed with.
Both cobot end, whether and so we had some early on weather and so it was really hard to distinguish on the resi side because a lot of the customers we have.
Told us that older houses that were under construction, we're going to continue and they are initially we're not going to start any new and then and then that got flipped pretty quick so we've seen very consistent results on the resi side.
Mama Nonresi side I think we continue to see the same trends, we have not really seen.
Anything as far as the word major cancellations, we've seen words like delay what words like pushed out.
But we're also seeing jobs that are bidding on a daily and weekly basis, and so I think that's going to be the the piece to me that were in the right markets and so where the people are matters.
When you look at per capita consumption that equation is based on where population is and so I would much rather be where I'm at today than in the middle nowhere, hoping that they're going to build something and in my Bill my ability to pivot again, whether that's infrastructure, whether that's commercial or whether that resin is residential is.
Streamline easy for me extremely easy I mean, the assets are in the right place. We've got the expertise so whatever the demand is we're in a position to me.
Thank you very much.
Thank you. Our next question comes from trade grounds with Stephens. Please go ahead.
Hey, good morning.
That's right.
And congrats on a quarter Nash nice work, especially on the margins.
And I know that's been touched on quite a bit.
But the on the aggregate side it seems like a lot of that things are talking about was on the ready mixed side.
But on aggregates massive increase there and the gross margin.
Can you talk a little bit more about that specifically on the aggregate side and how much of that is due to core im coming on.
And how much of that is more just kind of structural changes that you've made there would be my first question.
Yes, sorry, I'll take a.
Definitely a benefit from quorum I'm definitely continued benefit from from colors and also.
As I called out MW ranch, our Greenfield investment that.
It was really fully online at the first of the year, but really maximizing that through the quarter was also.
A very big tailwind for us on the margin side I guess the way I would look at a tree and when we talk about net afraid 51% margins on our own a aggregate side I think the the lack of credit we get his people look at sand and gravel as kind of of stepchild too hard rock hardware.
Look as good hard rock as necessary, we have hardrock quarries in New Jersey.
But if you look at reorder concrete Theres also find aggregates needed in every single yard define aggregates needed and when you look at the operations I have today with core them within MW ranch with Rainbow with Red River with chat filled with Polaris not go on down the list of.
Center gravel plants that I have my cost structure. There just so much different I don't have drilling blasting.
Very very little Cory cost, it's extremely efficient and how we mine the sand and if you look at the is fees for our aggregates I mean, there just really study and so as we continue to to put those improvements in our operations, we continue to invest in.
And mobile equipment. It also has a really good payback for efficiencies.
Just think we're in a really good good position with our aggregate strategy and what we've done and we talked about from a location matters and so everything we've done has been coordinated around our pull through strategy and so what we did a players is the exact same thing we talked about a quorum and quorum is another example that we we buyer.
We integrated and we can pull through and control. It we did the hard work on the downstream assets. Once you have the downstream assets. The rest of the work has a lot lot easier and and that's the store. We continue to try to tell and I think thats. The story that we continue to not get credit for so hopefully you know these results we can continue.
Due to deliver.
You know people will give us credit for what we've done an aggregate its a.
It's a tough business, but I believe we're in the right place, where the right locations and definitely have the right operating teams and I'm very proud of what our teams did.
Seeing no aggregates now.
36% of EBITDA on the quarter is definitely.
Worth noting.
And.
I guess to follow up still just kind of sticking with aggregates just for a second.
You know coram you closed on that and then you know right out of the gate you had.
Covert hit so I don't clearly I don't think we've seen which its full potential so.
How are you thinking about.
That aggregate mix as a portion of your total EBITDA as we go forward.
Yes, I think that 36% is.
No as we see the interruptions encoded interrupted both sides. So did interrupt the concrete side too. So as Weve continued to see the markets month over month sequentially improve we've continued to see both sides of it improve I.
I would tell you on a on a on a margin side and an EBITDA side. Obviously, the aggregates is going to have a much greater influence.
On a revenue side to the quorum is a lot of Fob sales and so it's it's really really.
Clean operation that has just a lot of fob customers.
The other side of that.
That one of the benefits of being vertically integrated in that market is just the visibility it gives us into the entire market. It's just a really good fit for us with a pure pull through into that New York markets. So the only not only supports our own internal operations, but we have a lot a really good third party customers.
There that are also diversified in other markets, there and so it really diversifies us and in all those other markets in residential in smaller.
Commercial stuff than in infrastructure as well so I think it gives us.
A better cushion around any volatility in the New York market as well.
Got it and then.
Switching gears to the you had a little bit.
Commentary around Threeq you.
Just to make sure I heard you right.
It sounded like adjusted EBITDA in the in the Fiftys range of map.
I was having some technical difficulties and it was breaking up around that time want to make sure I heard that right first off and secondly.
If you can.
Maybe give a little bit more color about kind of what's your what's you're seeing that drives you to that number in.
John what's what's baked into that I guess.
Yeah sure you did you did hear I wish that anchored in the Fiftyth.
And so we're we're trying to get a little range there.
And I would tell you what we see and what gives us confidence in that is one on the margin side. The variability side of things I've talked about the the things we put in place to manage this business.
Through the pressures that we see Ana and to the the continued sequential.
Month over month over month.
Improvements and so I think we're far enough into Q3 that we can have that visibility.
I think we're going to be really patient around getting too far out ahead of that.
I can tell you that we're confident in our ability to manage the business.
We're not trying to get out and predict the demand side, but we will.
Absolutely maximize our assets an absolutely be in a position.
The whatever drives concrete demand in aggregate demand that we can we can meet that demand.
Understood. Thanks for the color.
Hi, Mike.
Thank you our next question.
Yes.
Finally, Elliott with Stifel.
Hi, good morning, everybody congratulations on a nice quarter.
I apologize if you Mitch mentioned this had been gentlemen, a bunch of call. Just 40 do you guys can provide any commentary on on trends in July I heard the 50 50 million plus.
For EBITDA, but I was just curious kind of if you had said anything about July.
No we did not monthly Stanley what what we have said is we just continue to see.
Sequential improvements in our business so as markets have stabilized open back up we continue to see the same trends that we did as I gave you. The example of.
The difference in April the difference in maybe the difference in June we've continued to see just just a small steady increase in how the markets look more stable as weve as we've gotten into law.
Perfect and provide any contribution from from acquisitions in the quarter in terms of that nice ramp.
On the aggregates piece.
No I mean, we called out kind of the what they external influence on core and was when we called out where.
We believe quorum is exactly in line with where we had originally said even through co would even through the timing of announcing that at the end of February and all the difficulties that everybody said, we were going to have we are absolutely on page is still in a post synergy of seven times multiple net acquisition. So you can model. Let however, you would like but I think.
That.
Absolutely we're confident in.
And lastly, you did such a nice job on the call aside and delivery cost.
Is it pretty well split between kind of your union and non Union markets.
Just curious kind of how those costs trended and if there were any different between those two.
Yes, I would I would tell you using from from a modeling perspective, what we said was there were the there was a shift regionally from 30% of our revenues came in the east 30% Weston.
And 40% in our central So I would say from a volume perspective cost perspective, those kind of things that's a pretty good model to use obviously, there's some higher labor cost on our union contracts and things like that but I think if you use that kind of model in the quarter most of that award show.
Perfect guys. Thanks for the time appreciate it that's what you Stanley.
Our next question is from Adam Thalhimer Thompson Davis. Please go ahead.
Hey, good morning, guys congrats.
Yeah, Hey, I'm, just curious like on the visibility front I know a couple of months ago.
It's hard to have faith and kind of your concrete schedules just with clients kind of moving things around during the pandemic has that improved at all just your visibility in general.
I think our visibility from a standpoint of.
We have a CRM system that we use the we've just part of our Where's my concrete technology that we developed in the CRM, we've actually rolled that out everywhere.
We put the CRM in place ahead of the dispatching technology and with the CRM does is it allows us to to be way more specific down to the customer level. So we track a lot of things on customer trends because it into the day our customers are the ones that we see the biggest impact as far as inflows and outflows.
Subs and so when we should really start predicting year over year customer trends I mean, I think we have a real pretty good visibility into where their AD and if theres shifts in the market because we have customers segmented in residential customers segmented in commercial and customer segmented in infrastructure. So.
We're just trying to get so far away from the typical backlog that people talk about because backlog to US was stone age and people that still want to talk about backlog.
Theres a lot more data out there that we can use and we think we can be smarter around planning our assets planning our labor.
Planning, our investment planning, our Capex planning those things around more visibility into what forward looking things are going to look like and so I would tell you again I mean, we what we are going to be disciplined ends our pricing side, we do not we do not create demand on our product with pricing. It never has an ever will.
So whatever demand is going to look like we're prepared to to supply that.
But I would say you know when the in the can the Constructconnect information we gave you.
Even if you think about the way a lot of whether its constructconnect, whether its Dod lot of these guys are are reporting we're always going to be a lag because a lot of those projects get reported right upfront and then we may be putting on the job three four or five more months.
But were also a lag on the front end. So you know what kind of balances out, but I would tell you.
I think from our perspective, we feel good on continuing you'll see the sequential.
Improvements that we've seen really starting from mid may when a lot of the.
Restrictions are lifted yes, okay. That's my key point like as the restrictions were lifted how would you characterize kind of customer.
Hey, there any as we sit here in July are you seeing customers, saying and you alluded to this in San Francisco that saying, Hey rates are low I got to move on this stuff.
Yes, I think it's been a combination of both I think some of them more and more impacted by restrictions depending on what type of work. They were so some of them immediately started back to work on jobs that they already had and they hit the ground running I mean, it was full speed ahead. The whole was already Doug whatever dirt work was done and then we.
I've seen a certain amount of customers that said, we don't know what's going to happen in in two weeks later.
You know jobs came back that they thought we're going to be delayed for a long time and so there's market by market segment by segment residential has been very consistent and I wouldn't say I don't want to use the words of of records or Baba, but but it's been very consistent I think that's the ability for us to continue to push.
The efficiencies that we've built in and controlling our cost is it's a consistent model that we can get ahead of and really manage that labor.
As well as though our NIM in the things like that that we said we control during the quarter.
Okay, and then just from a sense is like you.
Your guys on the ground.
At the activity there seeing the bids they're seeing that maybe the easiest thing to do it just be kind of rank. Your your big geography is New York, San Fran Dallas kind of.
Where you feel the most confident the next kind of six to 12 months and maybe where you could at least.
Yes, I would say from a competent standpoint.
We've talked about in the past, Texas is very diverse Texas has a lot of growth, Texas has a lot of.
Land and affordability is obviously, a big piece of that and so I think.
No, Texas is one that probably can pivot the most to whatever demand to there is and whatever.
Economic factors influence is it.
I would say from a standpoint of both New York, and San Francisco, and New Jersey, NBC and Philadelphia that I mean, the the positive thing is there's so much infrastructure demand and is not infrastructure from a standpoint of how we're going to pave or what's it going on Bubba Theres a lot.
Out of that political stuff, that's going to still happen from a demand perspective, those markets have been starved for infrastructure dollars.
And when you think about our footprint I mean, its its worthy infrastructure dollars are needed.
And I don't care, we talk about well, there's going to be a transition out of the suburbs.
From the city, we can reach the suburbs were in Westchester were in New Jersey, we can reach those markets and it's not like Oh, well everything leaves that city and you're done there are no. We can pivot and go to the suburbs two and we've got really good assets to fit that and so I'm confident in all of our markets. All of them will look different all them are going to have diminished.
Different demand drivers and again, I think location matters, and where people are matters and I, just feel very confident and weve picking pick the right locations because population and per capita is a very big driver of what concrete and aggregate demand is.
Okay, great. Thank you right.
But.
Thank you. Our next question is Larry Solow CJS Securities.
Good morning. This is a brendan on for Larry just want to ask about looking at the aggregates margins year over year, how how much could you speak to how much coram attributed to that so that benefit.
And we didn't we don't breakout call them I would.
I would tell you the corms aggregate results.
Our similar to our other sand and gravel results I mean, I think they were all very good from a production side. There were all very good from a.
Sales price being consistent and movement on that and so.
Looking at Corum, it's it's a it's just another really really good aggregate play for us that has really really good pull through and obviously as we put more volume through it those margins are going to just improve.
Okay and then.
Just looking at your your pipeline I talked about some that.
Seen it.
The study fairly quickly.
Looking beyond I ask you know price you're working on now I mean, how how our customers approaching.
Feature large projects.
Are you having similar amounts of conversations with customers you know about stuff. That's you know I guess not necessarily backlog would potentially looking more out at like potential backlog or people, it's kind of sitting and waiting or you still having as those projects got conversations.
No were evident lots of project conversations and.
The same amount of planning that goes into these complex projects are still haven't changed even though those may be.
Virtual planning meetings now instead of in person the the planning still goes into that.
I would tell you that I think our customers are taking the same approach. We are there a their pleasantly surprised by the amount of work has come back and they are being cautiously optimistic about what's to come.
They have their relationships just like we have I relationships.
With developers with owners with key projects and and I think so depending on which segment you're in which market driven.
Those customers level of confidence are going to vary.
But I would say overall the tones pretty positive.
Okay, great. Thank you.
Right.
Thank you. Our next question comes from same Terry.
Da.
And your line is open.
Hey, good morning, guys, congrats on a quarter and help everyone is staying healthy in the well.
Excellent.
So first off I think was off of Catherine's question earlier, but to what degree have you guys enable that end point back to job sites in New York City in the Bay area and how much of a recovery should we assume its history Q.
So as far as jobs sites and restrictions, we have no restrictions as far as government imposed or local restrictions on job sites in the in New York or in San Francisco. So the restrictions have been.
Lifted I mean, we have a lot of safety things, we're doing with our own and internal employees and then we have safety things that are also being done by our customers on job sites. So there's a lot of.
You know things that we're doing from a safety perspective, but as far as restrictions as part of being on jobs. We will have any of those right now on either market. So I would say that from a natural progression of the jobs recovering.
It's just all about now the the customers on the job in and what our ability is to to actually start those jobs back. So it's nothing that is from a governance perspective being restricted.
Thank you then.
How much longer can sustain capex at these levels I think is below DNA and can you remind us of that true maintenance capex run rate.
Yes so.
Our capex.
That 30 to 40 million range isn't too far below our our depreciation as.
As you referred to it there is.
Depletion and amortization in there as well.
So the appreciation I wished by six in the mid 60 so.
Forecasted a little bit lower than that we think that we can sustain and obviously for the remainder of the year then as we go into next year, we'll evaluate how we how we think about it but we do want to allocate capital.
The high growth high return projects.
Going forward. So it's something that's certainly can be managed.
Okay. Thank you guys very much.
Thank you.
Thank you ladies and gentlemen, another reminder to ask a question you want me to press Star one on your telephone Keybanc.
Our next question please.
I don't with Sidoti and company.
Hey, Good morning Hope you all are well.
Thanks Julio.
Yes. My first question is on ready mix pricing John I appreciate you, calling out the mix adjusted pricing up 1.3% in the quarter.
Can you just talked about pricing trends, you're maybe seeing today in our your geographic markets still holding price on a standalone year over year basis.
Yes, I would.
I would tell you what we're seeing today is.
Very little pressure on pricing very little pressure on what a normal.
Economic downturn would look like in Reno, and I think as you as you think about that Julio the markets have changed I mean, we did a lot of consolidation there's been other consolidation help.
And there's been a focus.
Over the past.
10 years ever since.
Bill started the strategy of rolling up a lot of these assets that.
The investment community the.
All sides of it hammered on us about how the importance of pricing was and so when you look at.
The PPI and you can go back over the last five years and you can look at it currently.
Ready mix pricing is holding really well really strong and there is a very very strong correlation between ready mixed pricing in aggregate pricing in cement pricing and I've told you in the past ill reiterate it I'm in a position that I'm not trying to beat up suppliers everyday I've told you that I'm not going to give up mature.
Our genes and I'm not willing to you up material margins, but I'm going to support those increases I'm in the aggregate business I don't do any good trying to.
To find one source of beating someone up and then it all gets given away and so our our.
Role as a leader in our markets has continued to do the things, we do and pricing being stable is one of the things. We've said in the past that was our focus and it's going to continue to be a focus and I'm not saying there will be ups and downs, but.
But strategically with the systems, we have the analytics were using with our CRM tool with our WMC tool.
We're going to make the right decisions from a profitability standpoint with pricing and if we have to walk away, we walk away, but we're just not again, we're not going to create concrete demand with the price of concrete.
Thank you I appreciate the color and I guess that dovetails into just my follow up question is.
You do have some healthy share the northeast in California, and you've got some defensible positions in those markets.
Have you do you think you maybe have gained any share or seen any broader change in the competitive landscape just given the volatility in the quarter in those markets. Thank you.
Yes, I don't think.
In the quarter and I think because of the restrictions because of the type of work because of the.
The Choppiness and how those jobs open back up and were down that there was really really hard to get visibility into.
What market share was because it just really dependent on what job you had going into it and how that job was affected so I.
I think it's too early to say you're going to go out and really think that someone gave up or or took market share.
As the market stabilizes, we continued to see consistency in the markets.
We evaluate that normally it's not something we overreact to because it can ebb and flow with large projects and if you lose a large project for whatever reason or you get a large project for whatever region.
You know your market share can really make a big jump, it's not something that I measure from a standpoint of a being aggressive or being more on the pricing side, because it's just too many moving parts.
Understood. Thanks for taking the questions appreciate it.
Thank you.
Thank you ladies and gentlemen, this concludes our Q on a session, but today I will like to turn that all Giovanni Pruitt for final remarks.
Thank you can run from all of us at the U.S concrete. Thank you for joining our second quarter call.
We will continue to navigate these challenging times and deliver excellent operating margins to drive shareholder value. We look forward to sharing our third quarter financial results in a few months until then stay safe and be will.
Okay.
Thank you ladies and gentlemen, thank you say baby in today's conference you may now disconnect.
[music].