Q3 2020 US Concrete Inc Earnings Call
This time all participants are in listen only mode. After the speaker presentation. There will be a question and answer session to ask a question during the session when either Star then one on your telephone.
Today's conference maybe recorded your.
You require any further assistance. Please press star then zero.
I'd like to hand, the conference over to your speaker today to Duncan Senior Vice President and Chief Financial Officer. Thank you. Please go ahead.
[music].
Thank you good morning, and welcome to U.S. Concretes third quarter earnings call. Joining me on the call today is Ronnie Pruitt, our president and Chief Executive Officer.
We will make some prepared remarks, after which we will open the call to questions.
As detailed on page two of our accompanying presentation. 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 materially.
Except as legally required we undertake no obligation to update or conform such statements to actual results or to changes in our expectations.
For a list of these factors please refer to the legal disclaimers and risk factors contained in our filings with the FCC. Please note that you can find the reconciliations and other information regarding the non-GAAP financial measures. We will discuss on this call in the form 8-K, which was filed earlier today a presentation to facilitate today's discussion is available.
On the Investor Relations section of our website.
With that I'll turn the call over to Ronnie.
Thank you John good morning, everyone.
And thank you for joining our third quarter earnings call.
Hope that you and your families of containers say safe and healthy.
Today, I'm going to discuss our record setting results for the quarter and then share our perspective on how the year bobbing construction environment is shaping longer term demand for our products.
Building on our excellent second quarter results. We continued this momentum into the third quarter with record setting financial performance.
As we will de till today, we believe our business is well positioned to continue to deliver strong financial results both in the near and long term.
The transformation, we've undertaken over the past several years to reshape our portfolio.
Capabilities for growth and improved margins have proven critical in enabling us to respond to the changing dynamics in the current environment.
Our diverse portfolio.
<unk> commitment to innovate and agile culture has allowed us to respond to the construction demand in the markets that we serve and position us to deliver meaningful financial results into the future.
Our performance reflects the great work our team has accomplished during these challenging times.
In particular I want to commend the hardworking U.S. concrete team members within all of our operating regions there.
Their extraordinary efforts and keeping safe while simultaneously focusing on our operating performances have made it possible for us to continue to meet the demands of our communities.
Customers and projects and I could not be more proud of them.
Shifting to the business, we generated $374.2 million of revenue during the third quarter of 2020 as referenced on slide three in our earnings presentation.
On a consolidated basis, we saw geographical shift to more normal levels, where the east region, representing 34% of total revenues for the quarter.
The central region was 35%.
And 31% in the West region, where results were impacted by a constrained summit supply in northern California.
During the quarter, we recorded sequential increases over the second quarter in segment and total cells as well as increases in segment and total adjusted EBITDA.
Consolidated adjusted EBITDA margins were 17.1% for the third quarter as we continue to drive significant margin growth in each of our operating segments.
Our execution on the quarter enabled us to exceed our EBITDA expectations. This is in large part due to aggressive management of expenses.
Utilization and process reengineering of our existing platform as well as gains from our acquisition of Coram earlier this year.
We're pleased to announce the U.S. concrete aggregate operations had record setting quarterly revenue of $64 million, which is a 20% increase over last year's third quarter with almost 3.7 million tons sold.
Our adjusted EBITDA for aggregates operations was $27 million during the third quarter as we expanded our adjusted EBITDA margin net afraid to 54% as compared to 42% for last years third quarter.
Continuing the trend from our second quarter, our aggregate segment generated 37% of total reported segment adjusted EBITDA.
Revenue volume and EBITDA for aggregate operations were up in virtually every market year over year and quarter over quarter as we saw strong demand for our product and a significant increase in production.
We continue to increase the internal consumption of aggregates, which increased to 41% on an LTM basis through September.
Our financial performance for aggregates segments at historical records during the quarter for revenue.
Adjusted EBITDA and adjusted EBITDA margins strengthening our aggregate portfolio and our operations has been an area of focus for us and we're seeing the fruits of our labor.
Our ready mixed concrete segment delivered 2.2 million cubic yards of concrete during the quarter generating $313 million of revenue and $46 million of adjusted EBITDA by.
Benefiting from the markets in which we operate our consolidated ready mixed concrete ASP was up sequentially over the second quarter.
End up over the third quarter of 2019.
Even with the fluctuations in volume across many of our markets our ready mix operating teams delivered solid adjusted EBITDA margins of 14.7%, which is 20 basis points higher than last years third quarter and up from 14% for the second quarter of 2020.
Our robust performance has also helped us to de lever at a faster pace as John will outline later, our net leverage ratio decreased to 3.65 times at September Thirtyth due to adjusted free cash flow generated during the quarter.
Maintaining reasonable leverage metrics across the cycle is a strategic goal of ours and we are proud of the growth of our company over the past decade.
Taking advantage of an attractive interest rate environment, we refinanced $400 million of our senior unsecured notes in September which reduced our annual interest expense by 1.25% or $5 million annually.
We're committed to long term growth, which requires strategically investing in our operations because we remain confident in the long term outlook of our business.
Even during these challenging times, we remain committed to delivering innovation to our customers and their projects.
Our growth is rooted in innovation with strategic acquisitions that complement our historical operating portfolio and we're driving transformation and efficiencies in our business as discussed in detail during our second quarter call. For example, we've applied the proven strategy to quorum the Santa Graham.
Well operation we acquired back in February of this year to players as we continue to pursue the Blackberry expansion.
To the back office consolidation efforts of our business as well as gaining efficiencies, we're dispatching of concrete with Where's my concrete our proprietary technology application.
Our National Research Laboratory was also highlighted this August in a New York Times article about industry innovation and the adoption of our technologies such as carbon cure for producing low emission concrete with a reduced carbon footprint.
I would now like to turn the call over to John for additional financial commentary.
Thanks Ronny.
As mentioned, we're very pleased with our record setting financial performance, our third quarter. Adjusted EBITDA was 63.9 million the highest we have ever reported for any quarter.
Paired to 62 million in the prior year quarter, our aggregates and ready mixed business continued to show the resiliency during the quarter as demonstrated by their outstanding results in light of the economic climate.
Our aggregate volumes were up 17.6% compared to the prior year third quarter, driven primarily by the addition of course with our base aggregates business up marginally readiness.
Ready mix volume was off 13.2% compared to the prior year third quarter with each of our regions experiencing some reduced levels of demand our consolidated revenue for the quarter was $374 million and 8.5% decline compared to the prior year third quarter.
Our cost containment efforts continue to result in adjusted EBITDA margin improvement for the for both businesses with aggregate adjusted EBITDA margins, improving to 42.1% led by warm and Polaris and ready mix adjusted EBITDA margins improving to 14.7%.
These improvements resulted in a consolidated EBITDA margin of 17.1% for the quarter. We were we were able to achieve higher margins through continued cost containment actions more efficient utilization of our plant and equipment and the increasing use of technology based data driven decision making.
Our material margin increased by 90 basis points to 48.4% compared to the prior year quarter.
Our EBITDA adjustments for the quarter relate primarily to stock compensation contingent consideration a pension liability settlement.
Realignment initiatives and purchase accounting adjustments for corn inventory.
Our SGN eight was 8.6% of revenue for the third quarter of 2020 compared to 7.8% in the prior year quarter adjusted EPS DNA, excluding stock compensation acquisition related cost and realignment initiatives was 7.3% of revenue in the third quarter compared to 6.3% in the prior year quarter, reflecting.
Our cost control efforts offset by higher incentive compensation expense and the impact of lower revenue.
Based on the company's strong performance in 2020 and is expected that incentive compensation will be earned at levels above the nominal amounts awarded in 2019, resulting in higher expense during the quarter.
We recognized 10.2 million of tax benefits in the quarter relating to the Finalization of the interest limitation provisions contained in the tax cut jobs Act and the net operating loss carry back provisions of the cares Act for 2020, we expect our adjusted effective tax rate to be approximately 27%.
Our interest expense to be in the $44 million to $46 million range. As a result of our September notes offering we expect to see a reduction in our quarterly interest expense of approximately $1.3 million or 5 million annually on a prospective run rate basis.
However in Q4, our expense will include one time costs of approximately $12.5 million of fees and unamortized debt issuance costs associated with the October redemption, which are not included in the previously mentioned full year range.
Moving onto our cash flow and balance sheet during the third quarter, we generated $61.3 million or cash provided by our operating activities 9.8 million more than in the prior year quarter, we generated $58.6 million of adjusted free cash flow during the third quarter compared to $41.5 million.
In the prior year quarter, our operating performance and cost containment efforts during the quarter contributed to this improvement.
Working capital management activities added $1.2 million to these results during the quarter for the nine month period, our free cash flow was 129 million exceeding our 12 month target of 100 million.
Our cash flow performance allowed us to reduce our net debt position by $44.1 million as of September thirtyth compared to the June quarter end, resulting in $697.3 million of net debt at the end of the quarter. The increase in our trailing 12 months adjusted EBITDA along with lower net.
Position reduced our leverage to 3.65 times or about a quarter turn compared to our June thirtyth leverage ratio. We're also very proud to report that we have reduced our leverage by half a turn in the six months since the completion of our acquisition of corn and are back at levels close to where we ended the year.
As of September Thirtyth, we had total liquidity of $826 million, including $406 million, a cash and cash equivalents $240 million availability under our revolver plus $179.6 million of availability under our delayed draw term loan.
Our liquidity includes $413 million, which was used to pay principal and redemption premiums on our six centsthree snows in early October during.
During the third quarter, we invested approximately $3.3 million in capital expenditures compared to $10.5 million for the same period last year for the full year 2020, we are planning for capital expenditures around $30 million.
Well, we continue to manage through these challenging times, we are very pleased with our record results. These results would not be possible without the dedication and effort of our employees and management team to control costs and leverage our technology to improve the operating efficiency of the business leading to our outstanding performance in this challenging environment with that.
I will turn the call over to Ronnie.
Thanks, John.
Now I'd like to address our perspective on the evolving environment and what we see going forward.
Well, we hope the most acute in severe impact of COVID-19 is behind US. We believe that recent shifts in behavior, coupled with macroeconomic trends suggest that residential commercial and even the infrastructure markets will be evolving with the changing work and lifestyle trends.
During the third quarter, we observed a 6% shift from commercial work to residential work right.
Actively representing 55% and 27% of our total projects with infrastructure, capturing the balance of 18%.
We continue to monitor the efforts in Washington with respect to a federal infrastructure build and are also hopeful that one will be passed by Congress. We believe the U.S. concrete is uniquely positioned in the markets that we serve to benefit from any infrastructure Bill and from these work and lifestyle shifts, including the current shift to suburban Mark.
Cuts due to our geographical footprint, our portfolio by aggregates and ready mix assets, our experience our relationships and ability to support the technical standard of the sometimes complex projects.
While we are pleased with our recent performance we want to emphasize that our focus is on the future market conditions opportunities and strategies that are required to optimize performance and shareholder value.
Fortunately the markets, we serve provide some natural diversification and hedge on market specific issues naturally, Texas, and New York and New Jersey Metropolitan area, all have different market fundamentals, even San Francisco has different attributes when compared to San Jose like.
Like many other companies we're consistently analyzing all data feedback and information. So that we can best assess what is the new normal, especially in our urban markets. As you know opinions vary greatly and we also must be cognizant the prior to the pandemic the us economy.
Me was well into its near 10 year expansion.
At this point, we are cautiously optimistic regarding next year's conditions in each of our markets. Although we do not believe it is possible to offer specific quantifiable judgments for volume of activities.
What we are confident in however is that based on our success in the past two quarters of unprecedented uncertainty in our country. Our team will be able to manage the business effectively and profitably in a range of future scenarios.
Our team has proven its ability to adapt to a variety of scenarios in a rapidly changing environment. We continue to see long term demand for aggregates and concrete and we will continue to invest in our platform.
Our proprietary system Where's my concrete empowers us to make informed decisions using data interact with their customers and gain insight into and manage our pipeline with a CRM.
The major lesson for us for 2020 is the significant percentages of our expenses are variable or highly variable.
We built our company to take out costs during changes in an economic cycle.
Results and margins over the past two quarters support this thesis and we believe it is an important dynamic in evaluating our business model.
Based on the normal seasonality our industry experiences in the fourth quarter, we are projecting our fourth quarter adjusted EBITDA to be between 40, and 45 million with full year 2020, adjusted EBITDA between 186, and 191 million, which would put US ahead of the 184 million generated.
In 2019.
As discussed last quarter every employee U.S concrete is operating with a sense of purpose to deliver durable long term results for all of our stakeholders. We set many new financial records during the quarter, which include record aggregate revenue record aggregated adjusted EBITDA record total adjusted EBITDA of Al.
And record adjusted free cash flow generated.
We have communicated over the last several quarters that we are focused on managing our operating margins and the results. We have reported today highlight that promise and our performance.
We're also pleased to announce a virtual investor day with a presentation and conference call that are scheduled for Thursday morning November the 12.
We look forward to your participation during that call and hope to form allows for fresh insights into the company our financial performance, our management team and strategies with that operator, I would like to open the call up for questions.
Thank you as a reminder to ask your question you'll need to press Star then one on your touched on telephone.
A question from the queue. Please press the pound key.
And by when we come out of the queue in a roster.
Our first question comes from Kathryn Thompson with Thompson Research Group. Your line is now open.
Hi, my questions today, the first focusing on the aggregate segment what were the primary components for the margin upside in particular, how much was driven by lower energy cost versus other structural changes really what we're trying to get to is understanding quick perhaps more onetime ad.
What is more sustainable going forward.
Good morning, Catherine Thank you for your question.
You know I think corn was.
Additionally, a very big finish.
Benefit until window margins.
No when I think about what's sustainable and whats one time I think we have.
Lots of benefits around our operating procedures.
Especially in.
When we think about corum, it's a very simple process. It's a very easy mining operation very similar to Polaris in a way that sand and gravel is it's a low cost way that we would produce those products. So so I think those operating.
Probably things that we've put in is very sustainable.
Pricing has also been a lift on that and I think we're just at the front end of of what we think our pricing strategies could be both on the west and East coast.
And then a layer that in with the with the investments we've made in this in the central side with them to be ranch and EMD up your answer has been really our first full too.
Two quarters back to back of operating.
So we're still working out the bugs at that plant, but but but that's seen significant improvements in margin as well.
So like I said in my prepared remarks, I think all three regions Central East and West contributed to that and so it's not just one area that we said we just picked up in this one place. So so I think those things are very sustainable.
Thank you.
Understanding that California was disrupted by fire said.
There's the summit shortage in the state.
Well at one point in time to plants being down were unable to serve the market could.
Could you quantify the impact to the California fires to result in even if it's just high level looking at what the top line and how does that just the cost of operating and.
Is that the mattress push out and where are you today.
Yes, Great question I think the demand is pushed out.
The the fires were definitely an impact with rolling.
Power.
Interruptions, but the bigger interruption was the was the.
Lack of cement supply, which was really from one of the plants being shut down.
Permanently in the you know.
The reaction to that is going to be more imports and those imports take time I do think over the next quarter, we'll see.
A more consistent supply on the cement side.
Which which again I think will help us.
On the cost side I don't.
Other than the unpredictability of that and pushing out.
The demand side and so so we saw some daily interruptions in the cement supply.
I don't think it.
It was a big issue on the cost, but I do I do think on the demand side and when we said the.
More normalized.
Distribution of our revenue by region in the West Coast was still impacted by that so we said 31%.
I think more normally we would see.
A pretty even split of our revenue by region.
So I think there is some recovery that we have to do and.
And I do think those volumes will be.
Pushed into the fourth quarter and first quarter of next year.
Okay, Great and final question before I hop back in the queue. Thanks for answering my questions. Today is just high level when you look at the.
Year to date.
Having the impact.
Endemic on major markets, and you think about New York, Texas and California.
Where do you see that they are able to give specific forward guidance, but.
What's the Apache C to those three regions as you look over not just next year, but say over the next 12 to 24 months. Thank you.
Yes, great question we.
We look forward to giving some more insight into that in our investor day presentation, but but I would say 12 to 24 months out each region specifically.
I think infrastructure plays a big role in all three regions I think of all the regions that have lacked infrastructure. The northeast is one that's probably been the most dramatic over the last four to five years of lack of infrastructure spend.
Obviously in Texas were seeing a lot of.
Residential and a lot of shift a residential but we're also seeing infrastructure spend continue and so I think Texas has been more of a balanced market.
And then with the with the cement shortages in Northern California has been some impact, but we've also seen shifts there as well on the residential side and Thats, where when I talk about that natural hedge of all of our markets, having different drivers and our ability to pivot within those markets.
And even called out that even in one quarter, we saw a shift from commercial to residential about 6% difference and so again as I as I talked about on the second quarter and I want to reinforce.
We're a concrete supplier and an aggregate supplier entered into the day whatever the market demand is we're going to we're going to meet the market demand and whether that comes in residential or whether that comes in infrastructure, whether that's in commercial.
We're here to service the market were to service our customers and we're going to service whatever those demands are and so.
I think I like our footprint still like where we're at and were able to pivot to whatever that demand would be.
Great. Thank you again.
Thank you.
Thank you. Our next question comes from Paul Roger with Exane. Your line is now open.
Yeah. Good morning, everybody. Thank you for taking my question on.
Obviously next week is a peak week, but the election and its difficult to know how it's going to pan out.
Do you have a view on what the different outcomes could mean fall U.S. home creates an industry, whether its president Trump President Biden.
Irrespective of who wins next week on if we get a highway bill is that a risk anyway that you have this sort of AD hoc kicks in.
Twentytwenty, one before anything new kicks in at on demand is a little bit lackluster on the infrastructure side.
Yes, Paul Thanks for asking and happy birthday.
Thank you very much.
You know I mean, I'm not I don't want to get into predicting the outcome of the elections I think we're well positioned.
With either outcome that infrastructure is a big need and infrastructure the need for our country.
Throughout all of our regions.
So I I am.
Confident that infrastructure will be a critical.
Not only need for for the spend but also for job creation for economic stimulus. It plays multiple roles in that and so I think there's going.
Going to be lots of support for that under the outcome either way.
In the past that I think the financial markets. The interest rate I think our country is.
Wanting to see stability, our I think our country is wanting to see.
Okay and on the growth and I think both parties.
Realized and so.
I think we'll have to just take the wait and see approach and see what happens, but we're we're well prepared.
For any scenarios that are that come our way.
And this is quite interesting because obviously I missed it by then.
So how do we think quite to convene agenda I think actually within his proposal 1.3 trillion of infrastructure spending there is a big emphasis on on most sustainable products. So I think I think I'd like to set us concrete does have a tier two.
Products in California, do you see a situation where the penetration of this type of products.
May actually increase if that means more focus on the green agenda on what could stop doing that to margins and pricing if anything.
Yes.
So.
Every region is different and it really comes down to the local specifiers and duties and the push for for those.
Greener initiatives carbon capture is a great product and we're definitely an early adopter of that.
And we're going to be rolling that out into other regions.
Flash is a great ROI.
Recycled product as well, there's there's also flyer shortages with as you think about ticking down coal fire power plants. There's there's more issues. There slag is another product that we use.
Throughout all of our regions. It's also.
A green products. So so we have lots of initiatives for recycling, we're using more recycled aggregates and all of our operations.
Continue that focus but at the end of the day the the Specifiers the local deal team the local architects and engineers are responsible for specifying those products and the.
And all of them have different levels of of potential margin improvement.
And I think we'll again, we're here to meet whatever the market demand is.
We've put the technology in place, we're adapting quickly to add to that greener.
Wave, that's coming and I think we'll be able to meet that demand no matter what it is.
Great. Thank you very much.
Thank you Paul.
Okay.
Thank you and our next question comes from Trey Grooms with Stephens. Your line is now open.
Hey, good morning morning.
I want to trade.
Not nice results in great job navigating this tough environment.
Especially on the margins.
But.
I guess on the for Q Guide.
I think I heard was it 40 to 45 million if I heard that right.
Are you seeing or or.
Assuming any change in the in the demand picture baked into that range there.
Or is it more kind of the same on the demand front.
I think we've we've baked in a lot of different scenario.
Narrows into that number normal seasonality is what we referred to it first and so as you know.
Seasonality affects our business and.
And in our markets obviously, the northeast can have a a wide variety of winter weather and in Texas can be dryer wet.
Then with California, we're trying to bake in a more normal supply side and thats been our biggest issues there and so I think it's a combination of what we see in our pipeline and what we believe.
Normal weather pattern would would contribute to that and so we've always seen.
A drop off in the fourth quarter because of those normal weather patterns and so I think as of visibility today.
We like what we see and and we believe that those results would be delivering a very good year for us on group.
Good deal.
Thanks for that.
John during your prepared comments I think you mentioned that.
Each region has seen some declines in demand so north Texas has been relatively strong and did you guys was there any change in that market there or any other color you could give around that.
Yes ill take that trade because I mean, if you look.
At the end, we continue to see sequential improvements as the restrictions were lifted and we talked about that in the second quarter.
And I would say in North Texas market.
And really our Texas footprint, because west Texas would be included in auto.
I think we had a good quarter and I'm very pleased with our results and I don't want to use weather as an excuse but in September we had nine weather days in last year's September we had zero literally zero weather in Texas last year in 2019, and we did weather in September and so I'm not using that as an excuse but it does impact.
And the volume will shift.
And we will see those shifts continue.
But it was it is something that definitely impacts our.
Day, Annandale volume when we have that kind of dramatic difference.
Year over year in one month.
Understood, but but no no change in kind of the underlying demand that that's.
Been seeing there and that well in Texas I guess overall.
West, Texas is probably seeing some some.
Some slowing but I guess from a six on a sequential basis from Twoq.
Outside of weather sounds like things are still kind of.
As they work.
Again, I think we'll continue to see shifts and what those segments are and I think as we continue to see more residential.
It'll lead and the good thing for us in these suburban markets that we do serve.
Including not just west, Texas, I mean, we serve a lot of rural areas in our ready mix footprint as well as we stretch out from the DFW metroplex.
I think we will see the continued underlying demands there, it's just going to be formed in different ways and so as as residential now takes the lead on that.
Obviously as you see these residential pockets that are in these outlying areas, we'll see like commercial and other support of whether those are schools or churches or other things but.
But I think overall, we continue to see.
Very consistent demand cycles okay.
Got it thanks for that and.
John This some kind of goes back to you just as a house keep or I.
I think you mentioned.
Excuse me incentive costs the increase in Fourq.
Is there any more color you could give us around that.
Yes, I mean last year, you know the incentive compensation numbers that we paid our route relatively nominal for the year. Our expectation is that we will have a payout this year associated with them. So we had to accrue and.
We accrued at a higher number a couple million dollars in expense more this year than what we ultimately recognized last year.
I really can't tell you what a full year number is because that kind of depend on our performance in Q4, we.
Yes indeed.
Warm in Q4 to be able to earn a bonus.
Earn our incentive compensation, but.
But that that situation may persist as we go into Q4.
Because again last year it would it would be a much lower number than what would otherwise be anticipated this year.
Got it okay that makes that makes sense.
And last one for me.
Yes, I mean, you guys did a great job on free cash flow exceeded your your targets there.
How are you thinking about free cash flow generation going forward, maybe fourq, you and and maybe beyond that.
Sure the color on Q4, Ronnie Senate, our EBITDA ranges that $40 million to $45 million. So you can sort of work back our capex guidance is around 30 million. So there's that delta between year to date and that guidance.
As one and then what you you shouldn't overlook is well is we do pay the premium on the notes redemption. So.
So thats, an incremental $12 million. So we'll have the normal interest expense than 12 million of incremental expense.
For the fees associated with the redemption. So you can do the math around that yet.
So to get to your cash flow number Okay, Hey, that's a that's all helpful. That's all I have thank you very much for taking my questions. Thanks structure.
Thank you and our next question comes from Stanley Elliott with Stifel. Your line is now open.
Nice work in a very tough environment.
Could you talk a little bit about some of the things you're learning from the Where's my concrete.
Some of the best practices metrics, whether it's how long you're on location or any sort of these internal improvements that you're you're gaining insight to that I think can be transferred across all the regions.
Yep.
Good morning, and great Great question.
You know certainly as we look at the full integration of of not just the Where's my congrats but the but the CRM piece of that along with our driver up along.
Along with our customer up we're measuring you know like you say on on job times, we're measuring and plant times, we're measuring.
Time for the drivers to check in we punch in in the hub.
So were measuring.
So many different things today that a year ago two years ago five years ago were unheard of no.
The more critical thing to me is we're capturing that in a way that as we as we load that information into our CRM and then ourselves our sales force is out there looking at how we quote jobs in the future.
We're no longer in a position that we're just putting something on material margin and then we have a rough estimate of delivery cost and then we think that hurt the margin that can be now we know down to the customer level, how does that customer order what's their behavior, how do they placed concrete how do they hold or trucks, how do they use our equipment.
And we're feeding all that into a system that now we're literally specifically going down to the customer level and being able to quote jobs based on what we have.
I would say much higher confidence level in what margins, we will be able to generate with no longer just the oil price and a material margin and so as we as we take all of this data.
It goes into our scheduling it goes into the way we dispatch it goes into the way. We we we anticipate labor both drivers plant labor raw materials and it just it just flows through our whole system that again I talked about it than last quarter. We're a very very very good company at reacting we react.
Extremely well, what we're trying to be as a better company at predicting and if we can get to a company that is really good at predicting what will happen instead of reacting to what will happen.
Obviously, we can be way better at driving margin improvement, when we anticipate and predict and not react.
Perfect and then switching gears a little bit on the pricing on the ready mix side I apologize. If you you mentioned the conversations.
But within the California being down.
Texas being good in New York.
I guess good too.
How much of that improvement was regional mix and then I guess the other question is is with residential looking like thats going to be probably the strongest market for most of the materials space. In 2021 does that have a negative impact in terms of kind of your reported price or margin as we're looking forward.
There there could be some definite mix in that and there's obviously differences and strength in residential versus the year higher complex commercial and infrastructure projects I think the most exciting thing for me was that we were able to move pricing in all of our markets and we talked about that was.
Achieved in all markets and so even with the drop off of of of volume in one of our higher priced markets and more of a shift into Texas, we still were able to show.
Pricing improvement in all of our markets.
I think that gets back into your previous question about technology, how we use that how we are smarter at the way we price.
And then as John mentioned, the material margin across our footprint was up as well and so we're able to to see where raw materials are going to influence us we're waiting to see where logistics influences and then were able to.
Obviously.
No target those margins and so I would continue to tell you Stanley that that that EBITDA margin.
Material margin those things were measuring will be a much better indicator of how we're running the business, we're going to continue to push pricing everywhere and we'll push pricing as hard as we can.
But at the end of the day, there is going to be fluctuations in end use markets and strengthen mixes and all that stuff will be noise, but.
But if you focus down to our material margin you focused on to our overall EBITDA margin I think thats, where you will see.
How this technology and our ability to be smarter in what we do we will continue to pay off.
Perfect. Thanks, so much for the time thinking about it.
Thank you. Our next question comes from Rohit, Seth maturing Securities. Your line is now open.
Taking my question.
Just wanted to talk a little bit about this.
The shift from urban to suburban.
Spent for the for the past cycle is a lot of focus on European footprint and a lot of your production capacity is in the New York and San Francisco region.
And so how.
How do you think about your positioning and maybe what's your strategy too.
We run the business in his upcoming cycle, where there might be a secular trend going the opposite direction and given the capacity you already have.
And maybe outside the various city cores is that enough production capacity.
Sustain sort of the earnings level that you're doing right now.
Yeah. That's a great question you know as we.
As we look at at those footprints specifically in those regions that you highlighted.
And I was I was able to travel a couple of weeks ago up to two New Jersey, and New York and as I look at what's happening in those markets. We've talked about this in the past I mean, a lot of our production capacity as our rolling stock and so when you think about.
Some of the rule areas that we service and the New Jersey market and even around our New York footprint.
That production is really shifted by our ability to move trucks and so we can move those trucks.
Pretty easy like literally in a day.
And you know in the boroughs, we're seeing a lot of activity around affordable housing. We're still we're still seeing a lot of activity in our pipeline.
We're still pouring concrete in Manhattan, and even though everyone thinks Manhattan is completely shut down we're still we did we did project clear yesterday. So we are still pouring concrete in those areas.
You know I think the San Francisco San Jose market is it's an interesting one for us as we look at how we project normal data data around permits and data around other economic things in the tech money. There's just one that is really hard to predict I think there's still a lot of money in that.
Area, we're still doing a lot of projects there, but we're also able to to pivot in that area to further out around the San Jose markets due to those residential as well and again I mean, we have capacity on wheels, and so we move those wells and we we we can meet that capacity, we have plenty of plant capacity. So it's really our ability to shift.
The drivers on the trucks, where we need them and and I think thats the flexibility we have.
And so but I mean, you still have to have your own.
Plant network, because the the trucks can only move so far.
Keith that concrete in the mixer within spectrum right. So there is a transportation limitation as they are not.
Yes, I mean, I think there's a transportation limitation, but when you think about where a lot of our plants are we were we were travelling 15 to 20 to 30 miles into metropolitan areas.
You flip that around and you're going 50% to 20 to 30 miles outside of metropolitan areas. That's a pretty big region. So when you think about these big urban areas and you say, Okay, where you could go to 30 miles into 30 miles obviously got a 60 mile circle. There that that's a that's a pretty good rigs that we can still hit I mean, we've got trucks in west Texas will draw.
Over an hour.
One way to get the job. So we have we have the expertise we have chemicals, we can do things with concrete today that you know that we couldn't do two years ago that we can do three years ago, we have technology on our trucks to control slump, we can add mix on the flight chemicals, while the trucks going down the road, we can be adding chemicals to it.
Two again anticipate what the concrete needs for the customer to to control the slumps to control the set times to control all kinds of opportunities. There that were just doing so many things different than what the ready mix business has historically been an up and I think we're going to go into way more detail on that in our investor presentation on November the two.
Well I'm going to break it down and really show people the differences of concrete today and I think it's just a misnomer that Oh, you only got an hour and that's all you can do and if you don't get it done in our menu are in trouble. That's just not the case today, we partner with a lot of our chemical companies to put this technology in place we're cost.
Currently.
Hum maximizing and optimizing our mixes and so.
So I think we have a lot of versatility around pivoting to those.
Urban areas or or rural areas, which are whichever direction, we want to go.
Understood and in getting those developments you can effectively compete with some of the smaller guys.
All right and then on players can you just provide an update on your expansion plans of black beer, Corey and a 2021.
Could be a significant year in that regard so.
So just remind us what the plan is how much capital is required in the expected ramp.
Yes, I appreciate that I would I would tell you that on on our on our Investor Day in November 12 them to break down that that entire project on what the meaning could be and so we'd like to save that for them, but but we've continued down the path of the opportunities we've talked about and Blackberry is one of the bigger opportunity that we have and ill be giving a lot more color of that.
On November 12.
All right can't wait everybody. Thank you. Thank you.
Thank you. Our next question comes from well gelatin from da Davidson. Your line is now open.
Well I'm working with Brent Thielman today.
Question for you about your coram aggregates business I'm wondering how your expectations for that company has changed since you acquired the company in February.
I don't think our expectations have changed at all I think when we when we acquired that company. Although it was right at the beginning of a.
The anticipated pandemic we.
We had done business with that company for a long time.
The the operation has been critical to New York for a long time.
And our expectations were.
Absolutely.
That it was a very strategic purchase force and.
And I don't think nothing through this has changed other than the fact that.
It's probably been even more strategic through this interruption.
In different pandemic related things, but but long term, it's meeting or exceeding all of our expectations.
Okay, Great that helps thank you and then.
Im wondering are you are you cultivating a pipeline of potential acquisition candidates right now and have you observed any more willing sellers since your last earnings earnings call in August.
Yes.
I would say, we're going to give a lot more color into into our longer term strategy on our on our November 12 call with investors, but at the end of the day I don't I don't see it as cultivating because were not.
We're not out there cold calling people to see if they want to so I think it then the they were going to present, our investors with long term.
Strategic value and what we do and we're going to be very disciplined around what we do.
And we're going to let you know a lot of different factors around our capital structure or under leverage around.
You know, how we trade or under multiples and a balance between our aggregate in ready mix.
Acquisitions, and so I would say we have.
Lots of opportunity that will be going into a more in depth with phone or on the call in November.
All right well. Thank you I look forward to that call in a couple of weeks here. Thanks.
Thanks will.
Thank you and our next question comes from Larry Solow with CJS Securities.
Your line is now open great.
Great. Thanks, Good morning, Ronnie John.
Congrats on a good.
Quarter ability to certainly navigated through a tough environment.
Can you maybe just just parse out a little bit more on the on the pricing on the aggregate side to the near 13% increase.
Some of that was certainly mix and.
Maybe just help us bucket some of the drivers there is that Korlym is that I assume maybe the NW ranch is helping there as well can you maybe help us with that.
Yes, Larry.
Great question.
I would say, yes, obviously quorum helps form is a is a close and supply and so when you think about pricing in the way.
We look at the closer to the markets the higher the Fob prices. This quarter has definitely been a contributor of that I would also point out that we for the first time ever we exceeded over a million tons of shipments through our long Beach terminal from Polaris, which southern California that long Beach terminal is a very good price point as well so we're getting lift there.
And then yeah, I mean, the Texas market has been solid and so I think it's it's.
There's obviously on a on a like for like basis corn was a was a very big lift, but we've seen very momentum in all markets I'm pleased with where we're at and all of our markets.
And I think again as we look at the.
Our focus strategically around more.
Growth in our aggregate side I mean, this is what the expectations would be from from from our investors that aggregate is more disciplined aggregates is more reliable and aggregates is more sustainable through any.
Whether that dependent or any other economic.
Headwinds.
I think we're proving that out.
Right, Okay, Great and then on the on the similarly on the ready mix side.
I assume mix, probably may have actually impacted your pricing, but you still were able to.
2% year over year gain so.
Pricing actually up in all your markets are you.
Yes, yes, it was up across the board and again I would.
I think as you think through.
The headwinds that we faced through the pandemic and and what.
What normal reactions would be or could be during economic downturns in ready mix and I think again.
The industry is tagged with.
Being on disciplined and all these other things that happened in 2007 or eight or nine and now we're we're trying to overcome those things from from 10 to 15 years ago.
There's been a lot of consolidation and a lot of markets and not just the markets. We're in and there's been a lot of consolidations over the last 10 years and I think there's just more discipline out there and pricing and I think technology is a big piece of this and us still.
Theres, a big difference in the way concretes priced in a way cements priced in a way aggregates are priced and concrete is little reprised on a daily basis, we bid jobs every single day, and we have an opportunity and we have an opportunity that we can take it either way.
Voices to continue to be very disciplined around our pricing strategy and so I think a lot of those.
Processes and the way we look at things during this time is paying.
Dividends around the way we choose to price.
Okay, and then just could you maybe just anecdotally just discuss sort of any.
Any changes in sort of level of of your pipeline or sort of level of bidding activity as we sort of look out I don't want to give not ready to give any guidance but.
That remained fairly constant.
Material changes over the last few months.
Yes, it's interesting we track a lot of different data points and when.
Applying bidding activity tracking different met.
The metrics of of all kinds and obviously, we've seen lots of activity on the residential side and the residential piece of our markets are a lot more.
Shorter timeframe from quote to execution and so literally its oh, we're executing on those on a daily basis.
I would say, we're still seeing a lot of activity in our bidding.
Bidding activity and if anything we continue to see a slower pace from from actual bid to start it.
And I think those are the trends, we'll just have to overcome through the next several months of getting the election past us and and figuring out what's the next the what's the next opportunities there as the markets start to.
To rebound.
Got a great okay, great. Thanks, so much appreciate it thank you Sir.
Thank you and I'm showing no further questions in the queue at this time I'd like to turn the call back to running for President and Chief Executive Officer for any closing remarks.
Thank you Jimmy Thank you for joining our earnings call today, and we look forward to your participation in our Investor day on November the 12 until.
Until then stay safe and be well.
Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program and you may now disconnect.
[music].