Q4 2020 US Concrete Inc Earnings Call
Okay.
And ladies and gentlemen, thank you for standing by and welcome to the U S concrete fourth quarter and full year 'twenty and 'twenty earnings Conference call I'd now like to hand, the call over to Sharon and Ellis Vice President of Investor Relations. Thank you. Please go ahead.
Okay.
Thank you operator, and good morning, and welcome to U S concrete fourth quarter earnings call.
Joining me on the call today are Ronnie Pruitt, our president and Chief Executive Officer, and John Kim Our senior Vice President and Chief Financial Officer.
Ronnie and John will make some prepared remarks, after which we will open the call to questions and.
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 and certainties 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 and our expectations.
For a list of these factors please refer to the legal disclaimers and risk factors contained in our filings with the FCC.
Note that you can find the reconciliations and other information regarding the non-GAAP financial measures that we will discuss on this call and 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 will turn the call over to Ronnie.
Thanks, Sharon good morning, everyone and welcome to our fourth quarter earnings Conference call.
I would like to start the call by extending my thanks to all of our employees for their dedication, which resulted in another strong quarter and.
And so our valued customers suppliers and financial stakeholders for their partnership with us.
And we'll begin the call with brief comments regarding our 'twenty and 'twenty accomplishments, John Koonce will then cover the quarter's financial information and greater detail.
And I will conclude our prepared remarks with our outlook for 2021, and how U S. Concrete is positioned to continue to succeed and both the current environment and beyond with our strategic growth initiatives as we focus on continued improvement and the near term as well as the progress we are making toward our horizon 2025 goals after which we will.
Open the call to questions.
We have many reasons to celebrate our performance during 2020.
So the dedication vigilance and discipline of the entire U S. Concrete team, we were able to successfully navigate through a very challenging year our.
Our success in 'twenty and 'twenty is not only a testament to our team's ability to adapt to the current dynamic environment, but also a reflection of the work we've done to transform our business.
The U S concrete team was able to successfully address a number of critical issues and 'twenty and 'twenty, which included <unk>.
Efficiencies and business processes we.
We improved our operating margins with successful execution of our cost control measures and operational efficiencies as well as our continued focus on our customers and stakeholders, while maintaining our long long term strategic focus on our goals and objectives.
We continued the successful rollout of Where's my concrete to our central region and added functionality focused on back office automation and integration with our other enterprise systems.
We are progressing on the implementation of WMC and our West region and expect it to go live and spring of this year.
Results and trends, we saw stable and improving asp's and both aggregates and ready mix throughout the year.
For the year, our aggregates operating segment revenue increased to almost 16% of total reportable segment revenue and.
And aggregates segment adjusted EBITDA increased to 42% of total company adjusted EBITDA with the addition of Quorum and the expansion of our Texas aggregate operations at MW Ranch and and Amarillo.
For the year, our aggregates segment adjusted EBITDA margin net of freight expanded to almost 48% an all time record for our company.
Even with ready mixed volume is down 10% and 2020, we reported improved operating margins with our ready mix segment adjusted EBITDA margin improving to 12, 9%, a 60 basis point improvement year over year.
We are particularly proud of our ability to manage operating leverage and context of pandemic impacted volumes.
Strategic development to drive value the successful acquisition and integration of course, our sand and gravel facilities supporting our Metropolitan New York operations resulted in a better than seven times synergistic multiple we announced last February.
Liquidity and cash flow.
We ended the year with over 420 million of liquidity and the form of cash and cash equivalents and borrowing capacity to different lines of credit, which provides us flexibility to pursue strategic opportunities.
We generated a record $158 6 million of adjusted free cash flow during 'twenty and 'twenty, a significant increase of almost 54 million over the prior year.
Even with spending 142 million on Quorum, which was our second largest acquisition ever and our leverage ratio remained almost unchanged year over year.
Even with the impact of the pandemic on our business.
S and G and our responsibilities as corporate citizens.
We continue to meet the demand for low carbon concrete and the bay area, including the construction of the new Linkedin Middlefield campus in Mountain view, which is highlighted on slide 11 of our earnings presentation. This.
And this project, which included carbon cure and recycled supplementary cementitious materials known and the industry is S. C. M's helped linked and meet their aggressive carbon goal for this green building project.
We continue to develop and utilize progressive processes for a return concrete including converting it into recycled aggregates.
We were an early adopter introducing C N G or compressed natural gas mixtures to our New York Fleet and now are operating 47 and C. N G powered trucks or 15% of our total New York Fleet.
With these accomplishments as a backdrop I would now like to turn the call over to John for his financial commentary.
Thanks, Ronny as Ronnie mentioned, we're very pleased to report another quarter of improved performance. Despite the ongoing challenges presented by the pandemic. Our consolidated revenue for the quarter was 334 million a nine 4% decline compared to the prior year fourth quarter, Despite lower revenue, our fourth quarter adjusted EBITDA and <unk>.
Proved to $47 2 million compared to $45 5 million in the prior year quarter, our aggregates business continued to show growth and revenue and profitability and our ready mix business showed improvement and adjusted EBITDA margins on lower volumes for the year. Our performance resulted in adjusted EBITDA growth of almost five.
5% generating $192 $9 million and total adjusted EBITDA.
The growth and adjusted EBITDA was driven by 160 basis point improvement and our adjusted EBITDA margins. Many of the initiatives that contributed to our improved margins are outlined on slide 10, and our presentation materials.
Aggregate volumes were up eight 2% compared to the prior year fourth quarter with corn, and our Texas operations, leading the improvement for the year average volumes were up 10, 8%, while ready mix volumes were off 10, 2% our continued focus and executing our strategy of vertical integration through aggregates and our cause.
And containment efforts during the year resulted in an improved adjusted EBITDA margins for both business segments for the fourth quarter aggregate adjusted EBITDA margins improved to 38, 8%.
Volume was off 11, 5% compared to the prior year fourth quarter, which with each of our three regions experiencing lower levels of demand.
Our material margins increased by 30 basis points to 47, 5% compared to the prior year quarter, Despite lower volumes, our ready mix.
<unk> adjusted EBITDA was flat year over year at 34 million with 150 basis points improvement and this segment's adjusted EBITDA margin to 12% for the quarter.
The improved margins and our aggregates and ready mix segments resulted in consolidated EBITDA margins of 14, 1% 180 basis point improvement versus the prior year quarter.
Our EBITDA adjustments for the quarter relate to a loss on extinguishment of debt stock compensation contingent consideration and acquisition related cost realignment initiatives and purchase accounting adjustments. Our SG&A was eight 8% of revenue for the fourth quarter of 2020 compared to seven 2% in.
Prior year quarter, adjusted SG&A, excluding stock compensation and acquisition related costs and realignment initiatives with seven 5% of revenue and the fourth quarter of 2020 compared to six 5% and a prior year quarter, reflecting the impact of lower revenue and our cost control efforts offset by higher incentive compensation.
<unk> expense due to our strong financial performance, especially in light of the pandemic.
As a result of our September notes offering and the related redemption of our six and three eights notes in October we recognized a loss on the extinguishment of debt of approximately $12 $4 million during the quarter with a lower coupon on our new notes, we expect our full year 2021 interest expense to be and a 39% to $43 million.
<unk> and we expect our adjusted effective tax rate to be approximately 27%.
Moving onto our cash flow and balance sheet during the fourth quarter, we generated $36 million of cash provided by our operating activities and $30 million of adjusted free cash flow, our operating performance and cost containment efforts during the quarter contributed to these results for the full year, our cash flow performance was record setting as we generated.
$181 million of cash from operations and $158 $6 million of free cash flow.
After borrowing under our revolver to pay for a quorum acquisition and to fund premiums on our notes redemption. We ended the year with just over 6 million drawn on our revolving credit facility, resulting and availability of $230 million.
That coupled with $179 million of availability under our delayed draw term loan and cash on hand resulted in 420 million of liquidity at year and our leverage ended the year at three six times.
During the fourth quarter, we spent $7 million on cash capital expenditures related to our plant property and equipment compared to $14 million for the same period last year.
Forward to 'twenty 'twenty, one we anticipate managing our cash capital expenditures and the range of $40 million to $50 million.
And reflecting on the performance of the company. This past year, we were able to achieve many of our strategic objectives. Despite the economic impacts of the pandemic.
We completed our second largest strategic aggregates acquisition with corn and reduced our cost structure improved our margins strengthen our balance sheet with increased liquidity and continued our investment and Where's my concrete, which allows us to utilize the data from improved decision, making just to name a few.
With these achievements and the continued execution of our strategy. We believe the future continues to remain bright for U S concrete.
With that I'll turn the call over to Ronnie.
Thanks, John as.
As we turn to 'twenty 'twenty, one and the lingering effects of the pandemic MC the outlook difficult to forecast.
However, we are anticipating that the second half of the year will be stronger than the first half led by robust residential activity across all of our markets complemented by heavy industrial and commercial projects, including warehouses data centers and other commercial work that supports the development of new neighborhoods are key markets.
All expect strong and resilient activity for infrastructure, including free ways roads, and streets, either with or without a federal infrastructure Bill.
We are encouraged by the strength and resiliency of the markets that we serve and the fundamentals of our business as.
As we think about providing guidance, obviously, we faced shipping challenges and the first quarter, but we remain cautiously optimistic about our expected performance.
For the full year 'twenty 'twenty, one we expect.
An improvement over last year with and adjusted EBITDA around $200 million, which represents a 2% to 5% increase over 'twenty and 'twenty.
Regardless of volumes, we expect favorable pricing and we will continue to focus on operating margins and both of our business segments.
Over the long term U S concrete is well positioned to support the construction activity and the markets that we serve.
As we turn to the future outlined on slide 13, our continued focus on near term results and performance to benefit all of our stakeholders. This complemented by our horizon 'twenty and 'twenty five goals, which we shared during our recent investor day.
I announced a five year horizon target of 300 million of EBITDA and an effort to increasingly align our messaging to our financial stakeholders with the strategic planning, which governs much of our decision, making on capital spending M&A and strategy.
While we report earnings on a quarterly basis, our strategy is governed by much longer perspective.
I believe that it is healthy and will ultimately create the most value for our stakeholders.
The path to our horizon 'twenty twenty-five is twofold.
First we plan to accomplish this through organizational efficiencies.
Operational improvements organic growth technology, advancements and automation and with our Where's my concrete platform <unk>.
Expansion of our aggregates platform uplift from our current markets as well as other measures. In addition, we're making great progress on our strategic initiatives to strengthen and reinforce our existing markets and operating footprint.
With that context, we're highly confident and our ability to continue to source strategic growth opportunities.
At attractive multiples there were bolster our organic initiatives to enhance our horizon targets.
As we began 2021, we want to share some of our strategic projects.
Terminal facilities.
We are actively expanding our terminal network for several of the markets that we serve.
Principally through rail, but also water.
So that we can better manage our supply chain and access to raw materials.
We have an agreement to acquire some and tissue distribution terminal.
And the Bay area give us, giving us access to rail and a bulk cement storage facility.
With the changing dynamics of cement supply and northern California, and the last year. This terminal gives us more flexibility and the ability to better manage our supply of some tissue material.
And this turned Jackson is scheduled to close this spring.
Blackberry <unk>.
Black bear allows us to expand our presence adjacent to the Orca quarry of players to provide additional coarse aggregates to the west coast markets.
While leveraging our existing ship loading facility, which has the annual permitted capacity of 8.7 million metric tons. We're currently and the environmental permitting process working with our first nation partners and are simultaneously developing our mine plan.
It is anticipated that we will maximize this permanent capacity with upgrades to our production facilities and conveyor system with approximately 400 million tons of both measured and indicated incremental and inferred Blackberry reserves.
<unk> course aggregates are a natural complement to orcas sandridge reserves, we're targeting the Blackberry will be operational later in 2023 with revenue generated early in 2024.
Aggregates are and limited supply and to the California market and the supply of workers high quality sand and course materials when enhanced with the addition of Blackberry coarse aggregate reserves will not only benefit U S concrete operations, but will provide much needed resources to aggregate customer consumers, including hot mix producers as well as other.
Construction materials markets outside of the normal concrete producing customers.
Additionally, we are meeting the demand of aggregates and the northern and southern California markets by water.
Which is an environmentally friendly method of transportation and provides EP DS and LEED certification compliance with these materials.
Greenfield and market developments, and and expanding Dallas Fort worth market.
According to Dodge data, the Dallas Fort worth market saw a remarkable 24 billion and construction starts for the residential and commercial projects in 'twenty and 'twenty, even with the pandemic.
And over 150 companies have announced that they will be moving their headquarters to this area.
We're in the process of optimizing our operational footprint to be able to service this ever expanding market.
While growth can certainly take the form of M&A. There are significant advantages to leveraging our key markets to efficiently deploy further capital investment as bolt ons to drive expansion.
Shut Meyer aggregate reserves, we added strategic aggregate reserves to our Atlantic region. During the fourth quarter through the acquisition of land adjacent to our wanted facility with an estimated 10 million tons of reserves.
And while we can't specifically address the capital investment of these projects. They average a six times multiple and provide operating synergies and incredible value to our existing operating footprint.
In addition to the strategic projects, we shared with you. This morning, our team is actively reviewing and analyzing many other initiatives to enhance and strengthen our company focusing on continuous improvement across our platform with an emphasis on operational efficiencies back office consolidation and rolling out Where's my concrete.
And cost management opportunities.
While 2020 was a year of overcoming obstacles or outlook for 'twenty 'twenty. One is promising and we expect continued strengthen our business segments, our team our markets and our operating margin profile to deliver excellent results to all of our stakeholders.
Operator, I would now like turn the call over for questions.
Thank you to ask a question you will need to press star one on your telephone towards trying a question. Please press the pound key please standby, while we compile the Q&A roster.
Our first question comes from Kathryn Thompson with Thompson Research Group. Your line is open.
Hi, Thank you for taking my questions today.
A couple clarification on guidance.
And you did provide some color in the prepared commentary and thank you.
How should we think about the cadence of 2021, taking into account three main buckets.
<unk> cash.
Cadence acquisitions, and then there are one offs that impacted the quarter, including Q3 with net availability and California. Thank you.
Good morning Catherine.
I would say only.
First topic.
I think.
And the Covid impact is still there.
Obviously, we've we following the science as well as anyone else and so I think as the year progresses.
The sequential improvements will continue.
But that's but that impact is still there, especially around the.
Hotel and that that type of industry I think is still going to struggle.
With the part two of that.
I think was M&A, there was no M&A assumptions and and our guidance. So we're not assuming any M&A at all and that guidance and if we do M&A during the year.
It would be on top of that guidance.
And the part three.
On the cement shortages.
And I would tell you. If you if you think about the cement shortages and the impact of the head on and on our business. Obviously when they initially happened we saw some some restrictions and actual supply.
We overcame Matt, but I think the biggest impact was really on our material margin, we were having a truck cement further and do things to get cement to the market.
That has subsided and and we see a more normal material margin today any impact that we saw on on volumes I think it was just delayed and pushed into a into Q1 now.
And so we've seen a more normal cadence on us on the supply side.
Which is also as we talk about the.
The agreement that we've put in place to to buy a facility there and the Bay area, where we're trying to address that longer term that we're going to be and better control of our <unk>.
Yes helpful.
Just in the near term and.
Hopefully you guys have thawed out a bit from last weeks.
And then the garden and Texas.
And it's our understanding that from that plant chemical plants.
We're shut down and which by virtue means that everything came to grant a halt how.
How realistic is it to ramp up operations.
You may be ready to go but how about your suppliers and how should we just think about that from a realistic standpoint as we're modeling for this this quarter.
Thank you.
Yes, that's a good question and we've talked to a lot of our suppliers and you've been premiere.
With us from an industry for a long time and.
The.
The weather was extreme no question and we faced a lot of challenges both personally and our and our business, but at the same time.
It's February.
A typical.
Slower quarter anyway, a lot of outages at these plants were planned and the winter.
But I would I would tell you that from my experience, especially plants that are that are in Texas.
They're built for whether to go down and do the Twenty's and Thirty's for times, but not in the zero degrees or negative degrees for long period of time. So so I think there is going to be some challenges to get those plants back up but the good thing to me is that.
A lot of the plants.
You have clinker inventory and so you know when you think about the payroll system versus the grinding nah I think they'll have the clinker inventory.
But from our experience and.
And you've seen this for a longtime us well Kathryn.
Cement shortages can be a good thing if they're managed properly and so if if cement does get short I think it's an opportunity for us to even focus more on on margin improvement and our AR and our ready mix business.
Okay, and then final question for the day.
Going into 'twenty, and 'twenty inflation, and then theme for us just really across the construction value chain.
And it's definitely has picked up and a wide variety of categories.
How are you managing inflation and.
What are the bigger areas that you're managing it.
Thanks very much.
Sure.
Inflation for US is really on our on the variable side, which would.
And we could see some headwinds on and fuel costs and the good thing is we've talked about and and many years past when fuel we have fuel surcharges and place those fuel surcharges are have always been in place and they kick in at certain levels when when fuel hit certain price we have those triggers in place. So so we protect ourselves naturally on the on the fuel.
Tied with those surcharges.
I think youre going to continue to see increases and all of our markets and increases from.
From a pricing standpoint.
That's got to cover the basis for this because a lot of people froze.
Allergies and they froze different other compensation methods during the during the pandemic and and those things are going to be put back in place and so naturally we have a we're going to focus on our margins I think the technology piece of our business with WMC. The visibility we have our CRM all of those things.
Obviously, we're using.
To the greatest extent to not only control, but also improve margins.
And I think we're just going to have to maximize on the visibility we have and the business.
Okay, great. Thank you so much thanks Catherine.
Our next question comes from Larry Solow with CJS Securities. Your line is open.
Good morning missile Stefanos Crist, calling in for Larry.
It's simple.
Yes.
First and we talk about ready mix volumes.
Volumes were down can you maybe break that out by region and possible where it was most impacted and then where we'll see the most opportunity for growth and 2021.
Yeah.
If you think about what we saw and in Q4.
It was it followed similar patterns with what we had seen for the.
For the majority of the year, obviously, the New York markets were continued to be.
Trading off further than than the rest of our markets and that was normal with the with the impact of the pandemic. So nothing surprised US there was no changes and anything dramatically and AR in Q4 with the trends that we had seen.
I think what gives us what gives me confidence and in my prepared comments I said, the second half of the year being more stronger than the first as is and we not only have and our pipeline current projects that are continuing to go but we've also added quite a few new projects even between the fourth quarter of 2020, and even presently now and the first quarter.
And both of those.
List or in the pipeline or are in our New York markets and they're in our San Francisco markets and they're they're midrise their high rise their data centers and so my confidence is that all of these markets that we participate in and are still solid fundamentals and as the pandemic.
Continues to to drift to a place of a cure being in place and people getting confidence of their own personal safety.
I think the markets that were and are still going to have very good fundamentals for population growth as well as our commercial infrastructure and and residential spend.
Got it thank you and just one more and I'll jump back in the queue you.
And you briefly talked about M&A.
And we talk about what the M&A pipeline looks like.
And any opportunities that you're seeing and the market and yes.
Overall, what are you seeing right now.
Yes, I mean, we can we continue to be a very.
Discipline and and our M&A look I mean, we look at a lot of things.
Again, what we've said is we've got to continue to be.
A company, that's very strategic from a standpoint of multiples that we can afford to pay and so we said and our prepared remarks.
The things we're looking at will be.
Sub seven times opportunities and.
And those things just don't fall and your lab, because there's less competition out there for everything.
So I would say the I think the activity in 'twenty, one will pick up.
But but what you will see Ottawa US is continued discipline around.
Multiples that we can afford to pay if we choose to I think our organic opportunities that I laid out.
And are much more enticing for us because strategically we've got footprints and place so those bolt on opportunities on the ready mix side as well as Brazil.
The reserves that we already have on the aggregate side is us.
And where our focus is and if there happens to be external opportunities that are that come up with good multiples.
And then we definitely have the liquidity to do that but we're going to be very disciplined.
Perfect. Thank you.
Thank you. Our next question comes from Paul Roger with Exane Bnb Paribas. Your line is open.
Yeah. Good afternoon gents good morning, why you off.
Good afternoon to you.
And maybe we'll just start just a bit of a follow up on the demand outlook.
Thoughts about what had been known as all of us shipping quite small data centers and the likes.
Are you seeing any signs of life and the MSR.
Light and not sort of commercial and of the market.
And how difficult is that is that right now.
And then also on demand.
Clearly, there's a lot of talk about people moving out of us to chase back into the suburbs.
Have a meaningful and box as well.
Yeah Bob.
And so on the commercial side and.
And yes, your comments were spot on and we're continuing to see very strong demand on residential and all of our markets residential has continued to be very strong and the commercial side we are seeing.
A lot of visibility and our pipeline with a lot of projects being.
And brought to market and discussed and that's what gives us confidence and the comments we made about.
The second half of the year being <unk>.
Probably.
Fueling stronger than the first.
And I would say those are variety I mean, when we talk about.
Data centers and the support of that.
We're seeing data centers and and northern California.
And that really over the last two to three years that market outside of the San Jose area has become a really strong data center area. Obviously, we see lots of distribution type warehouses, and the Texas area, we're seeing net and our D C markets as well with both data centers and Virginia as well as distribution centers there and.
And New York, we continue to see a shift of mid rise affordability and the New Jersey market continues to have a lot of strong pipeline opportunities on the infrastructure side, even though we haven't got an infrastructure bill yet.
With the outlook of SB, one and in California, and we still have really good funding there txdot is extremely healthy and well.
And we are expecting a very good year out of textile here in Texas and also Governor Cuomo's has released a very good spending opportunity and and New York and I think all of those markets are again is it liquid infrastructure.
Fundamentally the demand has it has to be done I mean, the roads the bridges the tunnels.
It has to be addressed and so whether that's in the form of.
The big large federal one or the states having to take more control of that I think that's what gives us confidence and all three legs of our market the residential and commercial and the infrastructure.
And I'd also just sold and they saw next slide a structural trend of people people moving out to fix it.
And in the lab is all sub adds and solve anything like that is that.
Something that youll seen and impart Tau and <unk>.
Meaningful cutoff date.
Yes, Paul I mean, we're seeing the same trends that everybody else sees but at the end of the day I think the.
Fundamentally the markets are going to.
And at some point people are going to come back to work and I think the day virtual office is a was a good stopgap I still think collaboration personal interaction.
And those things are going to be valued and the future and.
And so when we look at the suburbs, we reached the suburbs and we are even though we have plants that can reach the cities. We also reached the suburbs. So when we look at these what we define as mega regions.
And if you're talking about 30% to 40 miles is considered suburbs and in both directions.
We reached that and so we see that and our residential demand and we're participating in that every day and so.
I think strategically with our distribution system and the plant locations.
And we can we can capture value on either side of that.
Yeah.
And my second question was on C O two.
And obviously present and and some of us talking about maybe two taxes.
You mentioned Danielle prepared remarks, two things you all day and I'm not funds.
It's interesting because if I, if I reflect back to when this happened and yellow pages and <unk>.
<unk> thousand five it was perceived as a bit of a disadvantage for independents concrete provide us.
Because obviously it is harder to work on some product solutions light.
And that makes us all on novel clean because of things like that.
How well positioned do you think you obviously see it really does get into.
And to see eye to taxes.
So.
Paul we've been and early adopter of what we've talked about with carbon cure and we were one of the first.
Companies to adopt <unk>.
Process, and California, we're rolling that out to all of our regions.
We've been and early adopter of a lot of the CMS. We fly ash has been one slag mixes has been another ground glass, we're using ground glass and mixes.
And I think with with with our National Research lab, and and have to give them a lot of credit we have a national research lab that is.
And that is located in California, So it's right in the middle of the.
Of the most forward thinking market that we participate in and when it comes to us.
Really looking at environmentally friendly solutions to an industry that has not been considered as an environmentally friendly industry.
And that lab that we have operated by our folks there.
US constantly testing many different forms of not just recycled.
But also looking at.
How do you reduce the amount of us.
Cement and the mixes that ultimately can net net reduce the carbon and so on.
We embrace this we think it's a great opportunity, we're seeing more and more.
Of the developers the owners.
And especially on the technology side, but also.
Just normal developers that are now putting in specifications for this that.
And that we feel like we can have a.
<unk> over to Dana zone, because we've we were and early adopter and we're going to continue to focus on it.
And that's great.
Thanks, Paul. Thank you. Our next question comes from Adam Thalheimer with Thompson Davis Your line is open.
Hey, good morning, guys. Congrats on a solid Q4.
Thank you Adam.
Wanted to dig into the 'twenty, one outlook a little bit.
Is the.
Yeah, he talked about ready mix volumes last year.
Down double digits aggregates up double digits is that trend going to continue but and are less.
Dramatic way I guess, you would say maybe low single digits versus teams.
And it's hard it's hard to put a number on that right now, Adam and especially coming through the last two weeks.
I would tell you today.
With our WMC I haven't.
I have and Apple my phone that I can click on and look at all of our volumes across all of our footprint and what today is February 24th.
And I clicked on the up this morning, and I'd do it every morning and.
If I would have not known it was February the 24th I would've thought it was a mayor of June type of volume today now a lot of that is recovery from the last two weeks of experiences we've had and all of our markets with not only.
Wet weather in California, and Cold and Texas, and Cold and New York, but but all three of those markets I see the bounce back that we normally see in normal markets. When we have weather effects, we call it pent up demand and the bounce back and the next couple of days I am seeing that now and it's very.
It's very exciting to me to see that and win when we do have these weather events, which isn't going to be Norman and I want to make it clear. These are these are even though Texas was.
And 100 year event winter is going to happen and we're prepared for that.
And so at the end of the day.
I'm, just very optimistic that we will continue to see sequential sequential recovery.
And as I really start thinking about.
And to do comps versus 2020 than I've got to put myself back and what was happening back then and what was happening in March when the pandemic hit what what's shut down and so I still see the opportunity there that I think.
We can see us.
Single digit improvement and volumes on ready mix for the year and I'm still confident and up.
Okay.
And then I think I don't know the way, it's working out from my model.
Feel like Youre guiding to about flat segment level margins is what I'm kind of coming up with which possibly makes sense and ready mix I'm not sure about that.
But then and aggregates you guys had 100 basis points of EBITDA margin improvement and 'twenty, how do you see that shaken out and 21.
Well, if you think about the way we are the comp I mean, we layered in and we talked about corn and corn was a big impact to us on the ISP side, because we layered that in and February of last year.
Higher asps, because we talked about it being so close to the market that serves that there was not a lot of freedom bulb. There. So so we saw that lift last year, which was a very good.
Comp force last year. This year will be a full year of of quorum and and as we start comping that too.
10, or 11 months 10 months, our comp last year, it will be more normalized.
I would say, there's still opportunities I think.
When you talk about a flat margin on concrete.
I still say at the end of the day, we got a we got a lot of things we've put back in place that we took out.
Whether that's <unk>.
Our employees and the structure of their.
Salaries and other benefits that we froze that we're going to put back in and so we have some initial headwinds on that.
But I still think there's opportunities there that we'll be able to capture the value of that.
Material margin and I think it's an opportunity as well we talked about some it could be a challenge if cement is a challenge I think that'll be an opportunity to do a to increase our asps on the ready mix side. So I'm excited about the margins we had in 2020.
I'm excited about the visibility we have with our technology.
And I think we're going to continue to capture.
You know very very strong margins when it comes to the comps you are you accomplished against and our space.
Okay. Good detail. Thank you Ronny thanks, Adam. Thank you. Our next question comes from Trey Grooms with Stephens, Inc. Your line is open.
Hey, good morning.
Hey, Troy.
So.
Really a few from me here, just well first I want to touch on maybe again kind of on the guide.
Would that kind of ballpark of 200 million and EBITDA.
John I mean, as we're looking at the free cash flow or the cash flow from operations at least.
And you guys had great flow through.
Last year, and then you gave us a fever and the moving pieces. There you know tax and net interest expense is is there any reason why we shouldnt see us similar if not as good.
And the flow through there.
Now to cash flow.
Yes, so when you look at our results and in 2020 article we benefited from a few things.
Ported that cash flow.
And was tax obviously, we were not a cash taxpayer in 2020, I do expect to be a cash taxpayer in 2021.
And some working capital tailwind, we took out working capital and that provided a benefit for us as well and then Capex you know our Capex came in at about $24 million. Our guide is higher it and a 40% to $50 million range.
With that said youre going to see a little bit of a pullback from that 158 number in light of those factors.
Yes, and it was.
Thank you for bringing me up.
<unk>.
Cash tax difference, that's that's important and it's something I was and accounting for it.
Okay and then.
Shifting gears a little bit.
And the quarter and it might be tough to parse this out right now but.
Given that it and the integration and everything but is there any way for us to think about you know what what core contributed to the quarter as far as volume.
As far as volume goes, yes, and just how much of that 8% Inc.
Increase in aggregate volume was corum us what umbrella and trying to get at.
I would I would say that it and and <unk> in the quarter, obviously as.
As great as operation as a us calm has been a strategic as it has been for US. It's still located in a market that is because it's affected by winter months and so the and the quarter I would say there was a more of an impact on our Texas operations, we had really solid weather quarter, and Texas and we also had really solid demand in Texas and so.
So I think that's the balance we have and the good thing about it is is that with the investment we did with MW ranch, and and and our Texas aggregates and Amarillo.
Along with our existing aggregate operations I would say, Texas had a greater influence on that but <unk> still obviously with any shipment that was better on a comp basis. So I think it was there's probably an equal split between something with what <unk> did versus our Texas aggregates actually being up as well.
Alright, that's that's helpful. Thanks Ronny.
Sure.
And then I guess last one for me.
And here again, a little bit of housekeeping on the SG&A.
You had a little bit higher SG&A as a percentage of sales last year with some of the moving pieces and.
As far as looking out into 'twenty, one John is there a good run rate, we should be thinking about there.
Sure I mean, the biggest differential between 'twenty and 'twenty and 2019, because if you recall.
Incentive compensation in 2019 was much lower than what it is expected to be in 2020, what is sort of baked into our Q4 number is.
Something where that's more around a normal type level of incentive comp of what I would expect on a run rate going forward. So why would I think that Q4 number is probably a good number for <unk>.
Right and as far as.
Sure.
SG&A going forward.
And I look at it in light of our overall volume declines of revenue, that's what's sort of driving it up as a percentage of revenue. Our revenue is down meaningfully we did take out cost as Ronnie mentioned, we took us meaningful cost, but it was somewhat offset by that.
That's good color. Thanks, guys. Good luck.
Sure.
Thank you and our next question comes from Stanley Elliott with Stifel. Your line is open.
Hey, good morning, guys. Thank you all for taking the question and nice a nice finish to a challenging year for sure.
Hey.
Would you want to talk about it sounds like the M&A pipeline is very full and you know and you've got leverage is very manageable free cash flow is accelerating and three six is certainly doable for you guys.
And you are thinking about leverage targets and near term this year, maybe even into next year.
Just given the number of opportunities you see on the horizon.
Yeah good.
Good question and as we've said throughout the year.
And we're going to continue to be disciplined and and and the way we look at it.
You know I am not.
I'm not I'm not afraid of leveraging up if we see a quick path I mean, it's just like what we saw with quorum.
Financing that through ABL and literally ending the year with the same leverage I mean, if those opportunities are there we're going to take advantage of that and.
Again, I think when it comes to the.
Our focus on aggregates, it's and you know this market and you know it's hard to find those kind of opportunities.
And that's why we're focused on the.
Things that we can control internally, whether that be black bear we talked about shut Meyer and we were able to successfully.
Approvals at Hamburg, we added.
Reserves at our other New Jersey Corrugate, Hamburg, So we're spending we're investing.
Money and those type of operations for for the long term and.
I say long term because at the end of the day without without buying these reserves and without.
Adding the long term permitting processes that we go through.
And <unk>.
Just want to make sure that the investment community understands that we're looking at this as long term sustained values.
And I think those values are going to be more.
The credit we will get for that is way more.
Credible on on the aggregate side and so we're going to continue to focus on that on the ready mix side.
I would just I would just tell you we're going to be extremely disciplined and and if things make sense like sugar City, we did sugar city and the fourth quarter. It was a great strategic opportunity for US. It was a it was a very attractive multiple.
And it filled in.
A large GAAP of our service area and that Northern California market.
Those opportunities will continue to look at.
But I wouldn't anticipate us levering up for a.
For a heavily.
Sure.
Concrete contributing business and less strategically we had a lot of pull through with aggregates or some other benefit there.
And.
What do you think about the past energy markets had always been a big competitor for drivers and <unk>.
Commodity prices are starting to tick back up we'll see what happens with activity levels, but.
Is that a concern that that some of the energy firms and try to poach some of your drivers to chip in and.
And you guys have been supporting for all of this period I'm, just curious how you're thinking about the labor component.
Yes, it's a great question and we've talked about labor and the past.
And.
It's interesting to me because one of the markets, obviously, our west Texas market is probably are our direct impact of energy is west, Texas ramps up and down and and overall West, Texas has our lowest turnover rate and.
And I think a lot of that is is that our drivers. There are long term drivers like the consistency our drivers like being home every night and so.
So.
I think overall, we have to take care of our employees. The way we've taken care of and we're going to continue to focus on taking care of them and as long as we do that I think our our.
Our problems take care of themselves Theres.
And theres going to be ebbs and flows and it so the positive side of that as and when energy is good demand and usually goes up and then we might have to fight some labor issues.
But I'm willing to do that for us all trade that for the for the demand that energy.
Lifts our markets as well.
Fair enough. Thanks, guys I appreciate it best of luck. Thank you.
Thank you and our next question comes from Julio Romero with Sidoti and company. Your line is open.
Good morning, Ronnie and John Hey, Good morning.
Could you break out the ready mix volume by end market for the quarter with respect to resi University infrastructure and C&I.
Yes, so for the quarter when you look at the breakdown that we have I think we were around 58%.
For our commercial what we call our commercial and industrial.
Around 25% for residential and the remainder was.
Net infrastructure bucket.
Okay, so about more or less in line with the full year breakout.
Yes.
Strength coming in the commercial sector and the fourth quarter, but yes, that's correct okay.
Okay, and I guess if.
It sounds like based on your commentary you do have a good outlook for residential and infrastructure and if that comprises a greater portion of the overall ready mix pie and 2021 can you just.
And maybe speak to the impact on the margin in any way and regards to the recipe or a mixture of the product or to the complexity of those projects and what you'd be shipping product.
Yes Julio.
Definitely the some of the green projects some of the complicated projects do drive a higher <unk>.
Material margin. We also we've talked about in the past and which will continue us as we see ebbs and flows and our markets.
Obviously, higher asps and mature margins and.
On our coast, both east and West coast compared.
To Texas, and so as we continue to see.
The demand and Texas really really strong.
You'll see some mix there.
But I do think whether it's infrastructure or commercial and even resident and some of the residential projects that we do.
Even though they're lower Psa targets.
Theres some theres some really interesting things, we're doing with both our technology as well as.
Some of the chemical makeup that we do.
For more exposed so a lot of lot of a lot of homes here.
They have exposed concrete they want they want and concrete floors. So what are they don't they don't want cracks and so when we put crack resistance and these chemicals.
We get a lot of value for that and so even the residential side continues to have a lot of really good.
Momentum on the margin side and the material margin and the way we value add so on the chemical side of our business.
Okay and.
I wanted to ask about the infrastructure outlook for Texas. It sounds like funding for Txdot is solid and healthy and funds for current projects are tagged for many years out.
And the tax revenues could very well be down in 'twenty, one and I got to imagine that that has an impact eventually so.
Could you help us understand and maybe how and when.
Potentially lower tax revenues could flow through to net funding of projects and more specifically give us concrete.
Yeah.
I guess as John broke out I mean and infrastructure has not been.
A big piece of our focus here.
<unk> market, which is really when we talk about Texas. It's it's really heavily focused on the DFW West, Texas is even not us.
Huge infrastructure market force and when those infrastructure projects come to those smaller areas.
<unk>.
And we participate very heavily and that.
I think the interesting thing here is as you look at the metroplex the growth.
And there's so many different funding ways and so historically again, we've talked about textile at the rainy day fund and rainy day funds still sitting at above $10 billion and so we've got a lot of.
Visibility and confidence and this year's Txdot budgets, but but it's really to me more of the of.
The alternative ways of textiles, and looks at financing things, whether that's through toll roads, whether that's through <unk>.
235 project Theres, a lot of private money and that there is.
Other projects here that are.
And that are a combination of tools and and public private. So so again I think txdot has a very creative I give them a lot of kudos for.
Meeting.
The extraordinary population growth that we've experienced here and and all of these markets and.
And you know really when you look at a lot of the infrastructure type work that we do there's also a lot of that that's controlled by counties and cities and and local governments that they've.
They've grown so much that the AR.
And we talk about infrastructure us streets and roads, but you also talked about utilities and pipelines and more cell towers, and and all those things that come with that and at the end of the day all of those things need concrete as well and so.
And I look at this us multiple segment us not just the states and we need to focus on big Interstate or Big State highways. It's the cities the counties and the local governments also saying man and you know we got so many people move into the Frisco or Mckinney or Plano, where we've got a we got a lot of infrastructure locally that we have to do just to <unk>.
And the traffic demand and so it's multiple.
Ways of looking at it and I'm very confident that that the state will we will continue to find ways to fund the infrastructure.
Okay. Thanks for taking the questions and best of luck and 21. Thanks.
Thank you.
A reminder, ladies and gentlemen to ask your question. Please press star one.
Our next question comes from Dan <unk> with D. A Davidson your line is open.
Hey, good morning, gentlemen, this is zane on for Brent Thielman.
Hey, Dave.
So first off this question was asked a little earlier I just wanted a little more clarity.
Congrats and more than just ready mix, but how much of your business do you think has shifted towards more of these horizontal build outs.
Data centers warehouses, commercial and residential build out versus.
That's a vertically focused project base.
It's hard to say as we breakout what we look at us commercial and those things are bucket it into our commercial but but I would say at the end of the day I mean, when you look at the.
The concrete factor of the.
The intensity of these <unk>.
Large horizontal footprints, whether that'd be data centers or distribution centers or things of that like.
Theres, just a lot of concrete consumed and those type of projects and so when I look at.
A project that's.
What we did with Facebook and Fort worth for Us.
Data centers there.
Versus a high rise.
To probably duplicate seven high rises to equal one of these large.
Data centers and so we continue to see that and.
From a standpoint of us.
The growth and and that industry and when we look at the tech side.
And there.
There's going to be greater demand for data centers, and we love that business.
And it's very not only high volume demand, but it's also very high specification because they have to have moisture targets and they have to have all kinds of different specifications that go into those.
Those buildings. So we will we not only like the volume, but we love.
The margin potential as well.
And they're really now and every one of our markets I mean, it used to be they were subsets of.
Data centers, where places that were not.
Not us.
Up to weather events or or earthquakes or anything like that and now we're seeing data centers and every single one of our markets as is the data center play and so we are we like that trend and and we wanted to take advantage of that.
Okay. Thank you and switching gears, a little bit here, but as you guys bring on black bear and the next couple of years are you seeing us more critical to add additional west coast markets to the platform to support that additional available volume and.
And you need to find some other outlets and that volume beyond what you currently have.
Yes, Great question and you know at the end of the day I don't think we need to find other markets, we will and we've talked about our terminal network and we will need to add some terminal capacity.
But when we talk about between the northern and southern California market and really we're talking about black bear being a whole different product mix and so when you talk about black bear being really.
The opposite of Orca, where orca is 80 plus percent fine.
Blackberry is going to be 80 plus percent core so it's really meeting the demand.
Hi.
Holly needed coarse aggregate and two very large.
Aggregate consuming markets and I've talked about and my prepared comments.
Opening up the hot mix side of us.
And the markets for us that we don't currently participate in based products and other things that orca can't do because orca so focused on the concrete sand side, but it gives us more downstream opportunities to broaden the markets from a consumer side, but we talked about last year, we and expanded our long.
Each terminal and so we've got capacity there to serve the southern California market.
And then we'll continue to look at and we're strategically.
I'm looking at things and northern California as well.
But I think from a demand side and when we're talking about maximizing the ship load out, which we talked about with $8 7 million metric tons.
No. We don't have to go look at other markets to do that.
Okay. Thank you and last one from me real quick.
Comment on the backlog anything regarding ready next day.
Yes.
We stopped really talking about backlog, we do talk about our pipeline because with our with our WMC CRM. We're measuring so many more things than just backlog because we look at bidding activity with a future projects. We were really trying to get ahead of just our normal everyday backlog because we think thats a you just make so many mistakes when you are.
Measuring things off of backlog, but with our pipeline, we're seeing and like.
And I said, that's what gives us confidence and the second half if I was talking about backlog a day.
I would be saying, yes, first first quarter second quarter, but what we're seeing is we're preparing for us the visibility we have with the pipeline of opportunities coming.
That gives us a lot of confidence and the second half of 2020 and and.
And continue to meet.
The margin targets that we've set for the first half.
Okay. Thank you gentlemen.
Thank you thank.
Thank you and I'm currently showing no further questions I'd like to hand, the call back over to Mr. Ronnie Pruitt for closing remarks.
Thank you Norma. Thank you for your interest and our U S concrete today, and we look forward to updating you and and May time frame on our first quarter results.
Everybody stay safe and have a great day. Thank you.
And ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
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