Q4 2023 Summit Materials Inc Earnings Call

Operator: Thank you for standing by. My name is Christina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Summit Materials fourth quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise.

Thank you for spending by my name is Christina and I'll be your conference operator today.

Christina: At this time I would like to welcome everyone to the summit materials fourth quarter of 2023 earnings call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If he would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone. If you would like to withdraw your question, again, please press star 1. Thank you. I will now turn the call over to Andy Larkin, Vice President of Investor Relations. Andy, you may begin your conference. Hello and welcome to the Summit Materials fourth quarter and full year 2023 results conference call. Yesterday afternoon, we issued a press release detailing our financial and operating results. Today's call is accompanied by an investor presentation and supplemental workbook highlighting key financial and operating data. All of these materials can be found on our investor relations website.

Christina: If you would like to withdraw your question again, Please press star one.

Christina: Thank you I will now turn the call over to Andy Larkin, Vice President of Investor Relations. Andy You May begin your conference.

Andy Larkin: Hello, and welcome to the some immaterial fourth quarter and full year 2023 results conference call.

Andy Larkin: Yesterday afternoon, we issued a press release detailing our financial and operating results. Today's call is accompanied by an investor presentation, and supplemental workbook, highlighting key financial and operating data.

Andy Larkin: All of these materials can be found on our Investor Relations website.

Andy Larkin: Management's commentary and responses to questions on today's call may include forward-looking statements, which by their nature are uncertain and outside of Summit Materials' control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For discussion of some of the factors that could cause actual results to differ, please see the risk factors section of Summit Materials' latest annual report on Form 10-K and quarterly report on Form 10-Q, as updated from time to time in our subsequent filings with the SEC.

Andy Larkin: Our commentary and responses to questions on today's call May include forward looking statements, which by their nature are uncertain and outside of summit Materials' control.

Andy Larkin: Although these forward looking statements are based on management's current expectations or beliefs actual results may differ immaterial way.

Andy Larkin: For a discussion of some of the factors that could cause actual results to differ please see the risk factors section of the materials latest annual report on Form 10-K, and quarterly report on Form 10-Q as updated from time to time.

Andy Larkin: Squint filings with the SEC you.

Andy Larkin: You can find reconciliations of historical non-GAAP financial measures discussed in today's call in our press release. Today, Ann Noonan, Summit CEO, will begin with high-level commentary. Scott Anderson, our Chief Financial Officer, will then review our financial performance, and we're preparing to close our prepared remarks with a more detailed discussion of our outlook for 2020. After that, we open the line for questions. Out of respect for other analysts and the time we have allotted, please limit yourself to one question and then return to the queue so we can accommodate as many analysts as possible in the time we have available. With that, let me turn the call over to...

Andy Larkin: You can find reconciliations of the historical non-GAAP financial measures discussed in today's call in our press release.

Andy Larkin: Today and Union <unk> CEO will begin with a high level commentary Scott Anderson, our Chief Financial Officer will then review our financial performance.

Andy Larkin: And we're trying to close our prepared remarks with a more detailed discussion on our outlook for 2024 after that we'll open the line for questions and respect for other analysts in the time, we have allotted please limit yourself to one question and then return to the queue. So we can accommodate as many analysts as possible anytime you have available with that let me turn the call over to Ann Thanks, Andy and welcome to everyone joining.

Ann Noonan: Thanks, Andy, and welcome to everyone joining the call today. Summit stands at a very exciting and pivotal point in our company's history. Our team achieved record financial performance in 2023, accelerated our Elevate Summit strategy across all dimensions, and is embarking on integrating the Argos USA assets into the Summit family. Scott and I will take you through the specifics here shortly, but we have a lot to be proud of, not the least of which is our emphasis on safety.

Andy Larkin: Our call today summit stands at a very exciting and pivotal point in our company's history. Our team achieved record financial performance in 2023 accelerated our elevate summit strategy across all dimensions and is embarking on integrating the Argos USA assets into the summit family.

Ann: Scott and I will take you through specifics here shortly but we have a lot to be proud of not the least of which is our emphasis on safety. The combined enterprise has a shared commitment to being an industry leader in safety, we are investing in people processes and tools and as a result, we are putting the health and wellbeing of our employees and our communities at the forefront of everything we do.

Ann Noonan: The combined enterprise has a shared commitment to being an industry leader in safety. We are investing in people, processes, and tools, and as a result, we are putting the health and well-being of our employees and our communities at the forefront of everything we do. I want to turn to slide four to highlight three areas of tremendous progress, starting first with how we've effectively undertaken a materials-led portfolio transformation. Since the beginning of 2023, we've entered the high-growth Phoenix market, and completed bolt-on aggregates acquisitions in targeted geographies. We continued to optimize the portfolio via non-core divestitures and completed the transformational Argos USA combination. As a result, our business is now materials-dominated, with roughly 8 out of every 10 EBITDA dollars coming from either aggregates or cement. And if you recall, only 63% of our adjusted EBITDA came from material lines of business when we initially launched Elevate Summit.

Scott Anderson: I want to turn to slide four to highlight three areas of tremendous progress starting first with how we've effectively undertaken a materials led portfolio transformation since the beginning of 2023, we've entered into the high growth Phoenix market completed bolt on aggregate acquisitions in targeted geographies continue to.

Scott Anderson: To optimize the portfolio will be a noncore divestitures are completed the transformational Argos USA combination as a result, our business its not materials dominant with roughly eight out of every 10 EBITDA dollars coming from either aggregates cement and if you recall only 63% of our adjusted EBITDA.

Scott Anderson: Came from material lines of business when we initially launched elevate summit.

Ann Noonan: This intentional shift towards high-margin upstream business has given us significant scale in our industry. As the fourth-largest cement and the sixth-largest aggregates producer in the U.S., we can leverage our collective spend to achieve scale synergies, tap into deeper talent pools, and, amongst other things, deploy best practice knowledge sharing across the whole of our enterprise. Second, thanks to excellent and widespread commercial execution, solid contributions from every reporting segment, and a growing focus on operational excellence, we were able to grow Summit's adjusted EBITDA margins by 160 basis points in 2023. Our team has adeptly navigated inflationary pressures and dynamic demand conditions to improve the quality of our earnings and put us on solid footing to deliver continued margin expansion in the year ahead. And lastly, with an organizational focus on portfolio optimization and a well-equipped balance sheet, we can continue our aggressive pursuits of aggregates-oriented M&A. We have a robust and promising deal pipeline as we endeavor to build an even more materials-led higher growth business. This isn't just talk.

Scott Anderson: This intentional shift towards high margin upstream businesses has given us significant scale in our industry as the fourth largest cement and the sixth largest aggregates producer in the U S. We can leverage our collective spend to achieve scale synergies tap into deeper talent pools and amongst other things deploy best practice knowledge sharing.

Scott Anderson: Across the whole of our enterprise.

Scott Anderson: Second thanks to excellent and widespread commercial execution solid contributions from every reporting segment and a growing focus on operational excellence, we were able to grow summit's adjusted EBITDA margins by 160 basis points in 2023, our team has a definitely navigated inflationary pressures and.

Scott Anderson: Demand conditions to improve the quality of our earnings and put us on solid footing to deliver continued margin expansion in the year ahead, and lastly, with an organizational focus on portfolio optimization and are well equipped balance sheet. We can continue our aggressive pursuit of aggregates oriented M&A, we have a robust and promising deal pipeline.

Scott Anderson: As we endeavor to build an even more materials led higher growth business. This isn't just talk a week ago, we completed a strategically attractive bolt on acquisition and I'll do the Phoenix platform, our proprietary aggregates centric deal that builds our reserve base extends our presence along a major growth corridor of we'd expect will become immediately.

Ann Noonan: A week ago, we completed a strategically attractive, bolt-on acquisition on our new Phoenix platform. A proprietary, aggregate-centered deal that builds our reserve base, extends our presence along a major growth corridor, and we expect will become immediately accretive to our margin profile. It's a deal that checks all the boxes and provides a template for our future M&A ambitions. Furthermore, in Q4, we completed two divestitures of sub-scale, mostly downstream assets in non-strategic markets.

Scott Anderson: Creative to our margin profile, it's a deal that checks all the boxes and provides a template for our future M&A ambitions.

Scott Anderson: Anymore in Q4, we completed two divestitures of subscale, mostly downstream assets in non strategic markets. These transactions executed at attractive multiples generated $75 million in proceeds fortifying an already strong balance sheet and providing additional dry powder for future eggs opportunities are over.

Ann Noonan: These transactions, executed at attractive multiples, generated $75 million in proceeds, fortifying an already strong balance sheet and providing additional dry powder for future ag opportunities. Our overall progress is more evident when considering our Elevate Summit scorecard on slide 5. For Summit Standalone, a 2.1 times net debt to EBITDA, we've effectively employed a disciplined and growth-oriented approach to capital allocation. And critically, on a pro forma basis, our net leverage remains well below the three times target, which gives our balance sheet ample flexibility for further portfolio enhancing acquisitions and to fully fund organic growth opportunities. For Rohit, at 10.4%, we established a new high water mark.

Scott Anderson: Progress is more evident when considering our elevate somewhat scorecard on slide five.

Scott Anderson: For somewhat stand alone of two one times net debt to EBITDA, we have effectively employed a disciplined growth oriented approach to capital allocation I critically on a pro forma basis, our net leverage remains well below the three times target, which gives our balance sheet ample flexibility for further portfolio enhancing acquisitions and to fully.

Scott Anderson: Fund organic growth opportunities.

Scott Anderson: For ROIC of 10, 4%, we established a new high watermark, adding 10 basis points sequentially and 130 basis points in 2023 by taking a total portfolio approach one that scrutinizes every asset against our return our margin criteria and if there isn't actually earned achievable path to reach.

Ann Noonan: Adding 10 basis points sequentially and 130 basis points in 2023 by taking a total portfolio approach, one that scrutinizes every asset against our return and margin criteria. And if there isn't a clear and achievable path to reaching elevated financial hurdles, then we've demonstrated a proficiency at finding better owners for these assets. The adjusted EBITDA margin for 2023 was 23.7%, an all-time high record, and 160 basis points higher than the year-ago period.

Scott Anderson: [noise] elevate financial hurdles, then we've demonstrated proficiency that finding better owners for these assets.

Scott Anderson: Adjusted EBITDA margin for 2023 was 23, 7%, an all time summit record and 160 basis points higher than the year ago period Scarborough.

Scott Anderson: Scott will walk you through the mechanics, but in short, we have strong profitability performance across the portfolio, despite challenging cost dynamics and a slowdown in residential demand. All the credit goes to the teams across our footprint who stayed focused, executed with incredible agility, and delivered admirably on each one of our 2023 financial and strategic commitments. Before I hand it to Scott, I do want to extend our gratitude to our shareholders who voted earlier this year to overwhelmingly approve the Argos transaction. While we believe the merits of the deal stand on their own, having a resounding endorsement from our shareholders is a vote of confidence as we begin our integration. We do not take your support for granted, and we continuously aim to earn your trust each and every day. With that, I'll turn it over to Scott to walk you through the financials, and then I'll come back to discuss our 2024 outlook. Thanks, Anne.

Scott Anderson: Scott will walk you through the mechanics, but in short we have strong profitability performance across the portfolio, despite challenging cost dynamics and a slowdown in residential demand all the critical to the teams across our footprint, who stayed focused and executed with incredible agility and deliberate admirably on each one of our 2023.

Scott Anderson: Financial and strategic commitments.

Before I hand, it to Scott I do want to extend our gratitude to our shareholders who posted earlier this year to overwhelmingly approved the Argos transaction why we believe the merits of the deal stand on their own having a resounding endorsement from our shareholders is a vote of confidence as we begin our integration we do not take your support for granted and we continuously.

Scott Anderson: Aim to earn your trust, each and everyday with that I'll turn it over to Scott to walk you through the financials and then I'll come back to discuss our 2024 outlook Scott.

Scott Anderson: I'll pick up on slide seven, where you see a record-breaking financial performance for both the fourth quarter and the full year. In Q4, net revenue increased 19.8%, driven by a combination of ongoing pricing momentum across each line of business, acquisition benefits, and accommodating weather in parts of our footprint. Fourth Quarter Adjusted Cash Gross Profit and Adjusted EBITDA increased 15.9% and 14.5%, respectively.

Scott Anderson: Thanks, Ann I'll pick up on slide seven where you see a record breaking financial performance for both the fourth quarter and the full year and.

Scott Anderson: In Q4 net revenue increased 19, 8% driven by a combination of ongoing pricing momentum across each line of business acquisition benefits and accommodating weather in parts of our footprint fourth quarter adjusted cash gross profit and adjusted EBITDA increased 15, 9% and 14 point.

Scott Anderson: And 5%, respectively, primarily reflecting the compounding impact of year to date pricing volume growth in most lines of business and less severe cost inflation.

Scott Anderson: Primarily reflecting the compounding impact of year-to-date pricing, volume growth in most lines of business, and less severe costs. For the full year, Summit set all-time records up and down the P&L, as inflation-justified pricing, together with commercial excellence execution, were the primary thrusts for net revenue growth of 9.9% and adjusted EBITDA growth of 17.6%. Additionally, we witnessed our Operational Excellence Program start to bear fruit, although we believe there is significant runway on this organizational imperative. Unpacking fourth-quarter line of business volumes on slide 8 would show improving year-on-year trends relative to Q3 in each line of business. While we do see demand conditions beginning to improve, mild and dry weather in key markets extended our construction season and was partially responsible for the sequential improvement in volume. Specifically, Utah and Texas, areas of particular portfolio strength, had exceptionally dry weather that allowed for more activity into December.

Scott Anderson: For the full year summit set all time records up and down the P&L as inflation justified pricing together with commercial excellence execution were the primary thrust for net revenue growth of nine 9% and adjusted EBITDA growth of 17, 6%. Additionally, we witnessed our op.

Scott Anderson: Operational excellence program start to bear fruit, although we believe there is significant runway on this organizational imperative.

Scott Anderson: Unpacking fourth quarter line of business volumes on slide eight which show improving year on year trends relative to Q3 in each line of business, while we do see demand conditions, beginning to improve mild and dry weather in key markets extended our construction season and was partially responsible for the sequential improvement in volumes.

Typically, Utah and Texas areas of particular portfolio strength had exceptionally dry weather that allowed for more activity into December also of note Q4 was a particularly difficult comparison for us in that business. If you recall in Q4 of 'twenty two we imported roughly 23% of our volumes this year.

Scott Anderson: Also of note, Q4 was a particularly difficult comparison for our cement business. If you recall, in Q4 of 22, we imported roughly 23% of our volumes. This year, we reduced our Q4 imports by more than 40%, which had a negative impact on volumes, but as you'll see, it has favorable mix benefits for cement's margin profile. For the full year, organic volumes by line of business tracked with our in-market expectations. Namely, the residential air park and sluggish demand and light non-res impacted our ready mix most acutely, followed by cement and ash.

Scott Anderson: We reduced our Q4 imports by more than 40%, which has a negative impact on volumes, but as you'll see it has favorable mixed benefits for cement margin profile.

Scott Anderson: On the full year organic volumes by line of business tracked with our end market expectations.

Scott Anderson: Mainly the residential air pocket and sluggish demand in light nonresidential that our ready mix, most acutely followed by cement and aggregates asphalt on the other hand increased 10, 1% organically as our primary asphalt markets in North, Texas, and the inner mountain west experienced double digit volume growth on a full year basis.

Scott Anderson: Asphalt, on the other hand, increased 10.1% organically, as our primary asphalt markets in North Texas and the Intermountain West experienced double-digit volume growth on a full-year basis and benefited from robust, ongoing public infrastructure investment. Turning to pricing trends, on slide nine, there are two things I'd like to highlight. One, and this should be obvious, we are operating in a constructive and enduring commercial environment. Local demand, cost factors, and go-to-market execution have combined to drive exceptional pricing performance across our lines of business and across our market. And second, despite a more challenging prior-year comparison, our price realization remained resilient. Aggregate pricing increased nearly 15% in 2023, with above-average growth in Houston as well as the Missouri markets, followed closely by gains in North Texas and the Intermountain West. Cement achieved 13.2% growth in 2023, reflecting favorable supply-demand conditions and better price realization in our northern and the cement market. The slight sequential moderation in cement average sales price between Q3 and Q4 does reflect customer mix impact. Absent that impact, pricing would have been sequentially up by over $1 in Q4.

Scott Anderson: And benefited from robust ongoing public infrastructure investments.

Scott Anderson: Turning to pricing trends on slide nine there are two things I'd like to highlight one and what should be obvious we are operating in a constructive and enduring commercial environment.

Scott Anderson: Local demand cost factors and go to market execution has combined to drive exceptional pricing performance across our lines of business and across our markets and second despite a more challenging prior year comparison, our price realization remained resilient.

Scott Anderson: Aggregates pricing increased nearly 15% in 2023 with above average growth in Houston as well as Missouri markets, followed closely by gains in North, Texas, and the inner mountain West cement achieved 13, 2% growth in 2023, reflecting favorable supply demand conditions and better price realization in our north.

Scott Anderson: And in the cement markets.

Scott Anderson: Slight sequential moderation in cement average sales price between Q3, and Q4 does reflect customer mix impacts absent that impact pricing would have been sequentially up by over one dollar in Q4 downstream pass through pricing supported ready mixed pricing growth in 2023 with both salt.

Scott Anderson: Downstream pass-through pricing supported ReadyMix pricing growth in 2023, with both Salt Lake City and Houston, our two primary ReadyMix markets, achieving solid pricing gains throughout the year. Crucially, ReadyMix pricing was up 11.2% in 2023, despite volume headwinds demonstrating our market leadership in attractive and advantage ReadyMix. Asphalt pricing increased 7.9% in the quarter and 15.6% in 2023, reflecting higher input costs, improved job selection, and strong demand pull-through. Slide 10 is a snapshot.

Scott Anderson: Lake City, and Houston are two primary ready mix markets, achieving solid pricing gains throughout the year crucially.

Scott Anderson: Mix pricing was up 11, 2% in 2023, despite volume headwinds demonstrating our market leadership in attractive and advantage ready mixed markets.

Scott Anderson: Asphalt pricing increased seven 9% in the quarter and 15, 6% in 2023, reflecting higher input costs improved job selection and strong demand pull through slide 10 is a snapshot adjusted cash gross profit margins.

Scott Anderson: Adjusted cash gross profit. Here we were able to achieve margin expansion throughout the portfolio and effectively contend with elevated and persistent costs. On a full-year basis and collectively, our variable cost basket increased approximately 9.5 percent, with stiff cost headwinds from several cost categories, including cement for our ReadyMix operation, kiln fuels, other energy components, and supply chain-related costs.

Scott Anderson: Here, we were able to achieve margin expansion throughout the portfolio and effectively contend with elevated and persistent cost inflation.

Scott Anderson: On a full year basis, and collectively our variable cost basket increased approximately nine 5% with stiff cost headwinds from several cost categories, including cement for our ready mix operation kiln fuels other energy components and supply chain related cost buckets.

Scott Anderson: That said, we did see the pace of cost inflation moderate in the fourth quarter, signaling a continued, even if prolonged, normalization of our costs. Specific to aggregates, we added roughly 90 basis points year-on-year in Q4 and 140 basis points in 2023, but it is important to flag that we are still in the margin recovery phase as profitability levels for ags are below 2021 levels. That is to say, through Predictivity Games, ongoing commercial excellence implementation, and a greater contribution from higher-margin greenfields, we have the opportunity to add percentage points, not basis points, to our aggregates margin profile in 2024. On cement, in the fourth quarter, rain in November provided some relief along the Mississippi River, and that, combined with reduced imports and pricing, helped to boost margins 100 basis points year on year.

Scott Anderson: That said, we did see the pace of cost inflation moderate in the fourth quarter signaling a continued even if prolonged normalization of our cost curve.

Scott Anderson: Specific to aggregates, we added roughly 90 basis points year on year in Q4, and 140 basis points in 2023, but it is important to flag that we are still in the margin recovery phase as profitability levels for eggs are below 2021 levels that.

Scott Anderson: That is to say through productivity games ongoing commercial excellence implementation and a greater contribution from higher margin Greenfields, we have the opportunity to add percentage points not basis points to our aggregates margin profile in 2024.

Scott Anderson: On cement in the fourth quarter rain in November provided some relief along the Mississippi River and that combined with reduced imports and pricing helped to boost margin 100 basis points year on year stepping.

Scott Anderson: Stepping back, our legacy Summit Cement business continues to operate at a very high level with strong operational and commercial execution, leading to a 380 basis point improvement in cash gross profit margin in 2023. Our performance provides confidence and momentum as we look to apply our expertise and this proven Elevate playbook to generate cement synergies in the coming years. Downstream, Q4 ready mix margins effectively maintained prior year levels, while asphalt margins moderated year over year as energy-related costs, including liquid asphalt, escalated. Despite this, and on a full year basis, Product margins grew by 110 basis points. Closing out on slide 11 with an initial comment on adjusted diluted earnings per share, which increased 31 cents or 24% in 2023, as gross margin expansion more than offset increased G&A expenses and interest expense for the year.

Scott Anderson: Stepping back our legacy summit cement business continues to operate at a very high level with strong operational and commercial execution, leading to a 380 basis point improvement in cash gross profit margins in 2023.

Scott Anderson: Our performance provides confidence and momentum as we look to apply our expertise and this proven elevate playbook to generate some synergies in the coming years.

Scott Anderson: Downstream Q4, ready mix margins effectively sustaining prior year levels, while asphalt margins moderated year over year as energy related cost, including liquid asphalt escalator.

Scott Anderson: Spite this and on a full year basis.

Scott Anderson: Margins grew 110 basis points.

Scott Anderson: Closing out on slide 11, with an initial comment on adjusted diluted earnings per share, which increased 31 cents or 24% in 2023 as gross margin expansion more than offset increased G&A expenses and interest expense for the year.

Scott Anderson: In terms of free cash flow, it took a sizable step up in Q4, and by extension, in 2023, as operating cash flow powered the step up. Enhancing our free cash flow generation is a core component of the Argos transaction. This, alongside a manageable leverage profile, prompted the recent upgrade to Double B Plus from S&P Global, a move we felt was warranted but nonetheless appreciated. And finally, after further efforts to retire our up-sea structure and in combination with shares issued in relation to the Argos transaction, for the time being, please use a share count of $175 million moving forward. This includes 174.3 million Class A shares and 763,000 LP units.

Scott Anderson: In terms of free cash flow it took a sizable step up in Q4 and by extension in 2023 as operating cash flow powered the step up.

Scott Anderson: Enhancing our free cash flow generation as a core component of the Argos transaction.

Scott Anderson: This alongside a manageable leverage profile prompted the recent upgrade to double B plus from S&P global.

Scott Anderson: A move we felt was warranted, but nonetheless appreciate it and.

Scott Anderson: And finally after further efforts to retire up sea structure and in combination with shares issued in relation to the Argos transaction for the time being please use a share count of 175 million moving forward. This includes $174 3 million class a shares and 763000 L. P.

Scott Anderson: Units.

Ann Noonan: With that, I'll turn it back to Anne for a discussion of our combined enterprise and a look ahead to 2024. Thanks, Scott. Let's start by clearly and quickly setting out what our new business looks like. On January 12th, we completed the Argos USA transaction and have since been diligently working towards bringing our teams together. From IT and operations to procurement and sales, we've hit the ground running and accomplished a lot in just over a month. And while we'd be in a position to share more details on our integration at next month's Investor Day, we want to provide what the 2023 Proforma portfolio looks like on slide 13. As you can see, we remain well diversified, with a relatively even split between public, residential, and non-residential.

With that I'll turn it back to Ann for a discussion of our combined enterprise and I look ahead to 2024.

Ann: Scott, let's start by clearly and quickly resetting what our new business looks like on January 12, we completed the Argos USA transaction and have since been diligently working towards bringing our teams together from an operations to procurement and sales we've hit the ground running and accomplished a lot in just over a month and what would be in a position to share.

Ann: More details on our integration at next month's Investor day, and we want to provide what the 2023 pro forma portfolio looks like on slide 13, as you can see we remain well diversified with a relatively even split between public residential and nonresidential, our geographic mix is enhanced and tilted towards higher growth stay.

Ann Noonan: Our geographic mix is enhanced and tilted towards higher-growth states that are benefiting from substantial public and private investments, as well as positive migration trends. By significantly increasing our presence in year-round Southeast markets, we reduce our seasonality and, by extension, reduce the quarter-to-quarter fluctuation in earnings. And, as you would expect, our profit mix is geared towards materials, with cement making up approximately 43% of our cash gross profit, followed by aggregates at 27%, and downstream at approximately 25%. As you move down to Adjusted EBITDA, that materials mix approaches 80% of the overall business. The bottom line is that with this new portfolio, we've accelerated our materials-led strategy, are operating in growing and advantaged markets, and have end market diversification that helps provide proof cycle economic durability and resilience. The Argos assets closed the year with very strong performance.

Ann: <unk> that are benefiting from substantial public and private investments as well as positive migration trends by significantly increasing our presence in year round southeast markets, we reduce our seasonality and by extension reduced quarter to quarter fluctuation in earnings and as you would expect our profit mix is geared towards materials with some.

Ann: Making up approximately 43% of our cash gross profit followed by aggregates, a 27% and downstream at approximately 25% as you move down to adjusted EBITA that materials mix approaching 80% of the overall business.

Ann: Bottom line is that with this new portfolio, we've accelerated our materials led strategy, our operating and growing in advantaged markets and have end market diversification that helps provide through cycle economic durability and resiliency.

Ann: The Argos assets closed the year with very strong performance aided by favorable weather. They outperformed our original expectations and achieved adjusted EBITDA of $343 million and then overall EBITDA margin of 21% relative to the purchase price of $3 2 billion. The headline multiple is very attractive.

Ann Noonan: Aided by favorable weather, they outperformed our original expectations and achieved adjusted EBITDA of $343 million and an overall EBITDA margin of 20.1%. Relative to a purchase price of $3.2 billion, the headline multiple is very attractive at just over nine times. We clearly have a strong platform for growth and even greater confidence that our post-synergy multiple will be nearly seven times after we complete our integration plan. Of the $343 million, approximately 85% was generated from cement, and the remaining 15% came from ReadyMix.

Ann: Just over nine times, we clearly have a strong platform for growth and even greater confidence that our post synergy multiple will be nearly seven times. After we complete our integration plan of the $343 million approximately 85% was generated from cement and the remaining 15% coming from ready mix together, our pro forma <unk>.

Ann Noonan: Together, our pro forma 2023 EBITDA was $921 million, and the combined adjusted EBITDA margin in 2023 was 22.2%. Given the shift in seasonality, the quarterly cadence for the new enterprise will be more balanced. Using round numbers, roughly 10% of EBITDA should be generated in Q1, 30 to 35% in Q2 and Q3, and roughly 25% in Q4. I will say these are very likely to be imprecise, but nevertheless, our aim is to give you an idea of how to think about the composition of the upcoming year. Now, having reset in broad strokes our 2023 baseline, let's look ahead. Our official 2024 EBITDA guide is $950 million at the low end to $1,010,000,000 at the high end. Inclusive in this range are five core drivers.

Ann: 23, EBITDA was $921 million and the combined adjusted EBITDA margin in 2023 was 22, 2%.

Ann: The shift in seasonality or the quarterly cadence for the new enterprise will be more balanced using round numbers roughly 10% of EBITDA should be generated in Q1, 30% to 35% in Q2, and Q3 and roughly 25% in Q4 I will say these are very likely to be imprecise, but nevertheless, our aim.

Ann: To inform how to think about the composition of the upcoming year no having reset in broad strokes are 2023 baseline, let's look ahead.

Ann: Our official 2024, EBITDA guide is $950 million at the low end to $1 $10 million at the high end inclusive in this range. Our five core drivers first we expect to generate at least $30 million in operational synergies. We will go into more detail at Investor day on where our synergies are coming from and the overall glide.

Ann Noonan: First, we expect to generate at least $30 million in operational synergies. We will go into more detail at Investor Day on where our synergies are coming from and the overall glide path. But for now, our current perspective nearly mirrors what was uncovered during Dillon.

Ann: Path, but for now our current perspective nearly mirrors what was uncovered during diligence, we anticipate the synergies from ready mixed and procurements come relatively quickly as well as cement synergies in the form of plc optimization.

Ann Noonan: We anticipate the synergies from ReadyMix and Procurement to come relatively quickly, as well as cement synergies in the form of PLC optimization. Furthermore, these 2024 expectations align closely with our commitment to deliver at least 50% or 50 million of our total synergy target within the first 24 months. The second core driver is the persistence of pricing momentum across the portfolio. As you know, on January 1st, we implemented price increases across the Summit footprint and in every line of business. Overall, we are seeing very good traction in our market. Our value pricing approach contemplates market-specific factors and demand conditions at the local level.

Ann: Furthermore, these 'twenty 'twenty four expectations align closely with our commitment to deliver at least 50% or $50 million of our total synergy target within the first 24 months.

Ann: The second core driver is the persistence of pricing momentum across the portfolio as you know on January one we implemented price increases across the summit footprint and in every line of business. Overall, we are seeing very good traction in our markets our value pricing approach contemplates market specific factors and demand conditions at the local level as such.

Ann Noonan: As such, our aggregate price increases are designed to be margin accretive and did range from mid-single-digit to double-digit in some areas to start the year. Importantly, today's guide only incorporates what we have done to date, and we certainly think there is a high probability that additional pricing actions are on the horizon, although it's too early for us to provide those specifics. On cement, our starting points vary between our river markets and the legacy Argos footprint.

Ann: Our aggregates price increases are designed to be margin accretive and did range from mid single digit to double digits in some areas to start the year Importantly, today's guide only incorporates what we have action today and we certainly think there is a high probability that additional pricing actions are on the horizon, Although it's too early for us to provide those specifics.

Ann: On cement are starting points vary between a river markets and the legacy Argo's footprint. If you recall January 1st pricing along the river was $15 per ton and that execution is proceeding reasonably well with northern markets experiencing better traction than our southern markets. As you would expect in the southeast and mid Atlantic we are likely to encounter.

Ann Noonan: If you recall, January 1st pricing along the river was $15 per ton, and that execution is proceeding reasonably well with northern markets experiencing better traction than our southern markets, as you would expect. In the Southeast and Mid-Atlantic, we are likely to encounter some near-term noise as we fully wrap our arms around existing customer contracts and better understand the upside opportunity from applying our value pricing and customer segmentation disciplines. What this means is, to varying degrees, we anticipate pricing growth in these markets to trail the rest of the portfolio, at least to start. That said, we have demonstrated sharp commercial execution along our river markets with consecutive years of double-digit pricing gains. We will move swiftly to apply the same standard of value pricing to the new cement markets within our portfolio. We will take the first opportunity to work with our Southeast and Mid-Atlantic customers to appropriately execute pricing adjustments to fully reflect the unique value we bring to the marketplace. The third component for Outlook is cost.

Ann: There's some near term noise as we fully wrap our arms around existing customer contracts and better understand the upside opportunity from applying our value pricing and customer segmentation discipline. What this means is to varying degrees, we anticipate pricing growth in these markets to trail the rest of the portfolio at least to start the year that.

Ann: Third we have demonstrated sharp commercial execution, along a river markets with consecutive years of double digit pricing gains.

Ann: We will move swiftly to apply the same standard of value pricing to the new cement markets within our portfolio.

Ann: We will take the first opportunity to work with our southeast and mid Atlantic customers to appropriately execute pricing adjustments to fully reflect the unique value we bring to the marketplace.

Ann: The third component for I would love is on cost trends, we anticipate cost inflation to moderate across most of our cost categories and the year ahead, and while we're confident the pace of inflation will slow the downward pitch of that cost curve is difficult to project. So we'll provide more color as we move through the year fourth we anticipate our operational excellence initiative.

Ann Noonan: We anticipate cost inflation to moderate across most of our cost categories in the year ahead. And while we're confident the pace of inflation will slow, the downward pitch of that cost curve is difficult to project, so we'll provide more color as we move through the year. Fourth, we anticipate our Operational Excellence Initiatives to really take hold in 2024. We spent 2023 getting our feet under us, building talent and capabilities so that we can drop serious savings to the bottom line this year. These productivity gains, together with a positive price-cost relationship, are expected to drive strong aggregate margin expansion in 2024. And finally, we believe, on the whole, underlying demand will improve as we move through the year. In this dynamic environment, however, demand trends can and will vary by end market and by geography.

Ann: To really take hold in 2024, we spent 2023 getting our feet under us building talent and capabilities. So that we can drop serious savings to the bottom line. This year. These productivity gains together with a positive price cost relationship is expected to drive strong aggregates margin expansion in 2024.

Ann: And finally, we believe on the whole underlying demand will improve as we move through the year in this dynamic environment. However, demand trends can and will vary by end market and by geographic market with that in mind, we have characterized our view on the three end markets beginning on slide 15, with our residential outlook, our long run view Hasnt changed.

Ann Noonan: With that in mind, we have characterized our view on the 3N markets, beginning on slide 15, with our Residential Outlook. Our long-run view hasn't changed, and like others, we believe there is a compelling case to support persistent and substantial investment in U.S. housing. Since the 1980s, the U.S. has consistently reduced the supply of housing relative to household formation.

Ann: <unk>. Unlike others. We believe there is a compelling case to support persistent and substantial investment in U S housing.

Ann: Since the 19 eighties. The U S has consistently reduced the supply of housing relative to household formation from 1960 to 1980 on average and as a nation. We produced more than 20 housing starts per 1000 households that figure stepped down to 15 starts between 1980 in 2000 and over the last 23 years, we have.

Ann Noonan: From 1960 to 1980, on average, and as a nation, we produced more than 20 housing starts per 1,000 households. That figure stepped down to 15 starts between 1980 and 2000, and over the last 23 years, we have produced roughly 11 housing starts per 1,000 U.S. houses. Our supply is clearly constrained, our existing inventory is certainly aging, and demand does not appear to be letting us. Taken together, these factors point to a severe shortfall in U.S. housing supply.

Ann: Reduced roughly 11 housing starts per 1000 U S households are supply is clearly constrained our existing inventory is certainly aging and demand does not appear to be letting up take.

Ann: Taken together these factors point to a severe shortfall of U S housing supply experts can debate if that shortage is 3 million or 7 million units, but at the end of the day in order to address that gap, we need a renewed commitment to rebuild our housing system in the U S.

Ann Noonan: Experts can debate if that shortage is 3 million or 7 million units. But at the end of the day, in order to address that gap, we need a renewed commitment to rebuild our housing system in the U.S. If the long-term residential trajectory is up and to the right, the short-term picture is more clouded. On the one hand, months of supply are well below a healthy equilibrium of five to six months. Consumer and home builder sentiments have sequentially improved, permitting declines are moderating, and construction costs are coming down. On the other hand, affordability remains historically poor and remains a significant overhang nationwide and in most of our major residential MSAs.

Ann: If the long term residential trajectory is up into the right. The short term picture is more cloud on one hand months of supply is well below a healthy equilibrium of five to six months consumer and homebuilder sentiment has sequentially improved permitting declines are moderating and construction costs are coming down on.

Ann: On the other hand affordability remains historically poor and remains a significant overhang nationwide and in most of our major residential msas.

Ann Noonan: On balance, indicators are signaling reduced uncertainty, and we appear to be on a path to recovery and then growth. But that path may look different from market to market. For example, Houston's unique economic factors, favorable zoning rules, and a higher proportion of large-scale builders create the conditions for a more swift recovery.

Ann: On balance indicators are signaling reduced uncertainty and we appear to be on a path to recovery and then growth, but that path may look different from market to market. For example, Houston unique economic factors favorable zoning rules and a higher proportion of large scale builders create the conditions for more swift recovery salt.

Ann: They can Phoenix by contrast are facing stiffer affordability headwinds so while we're cautiously optimistic we are factoring in a slower recovery.

Ann Noonan: Salt Lake and Phoenix, by contrast, are facing stiffer affordability headwinds, so while we're cautiously optimistic, we are factoring in a slower recovery. In summary, until we see mortgage rate relief, we are maintaining a modest outlook regarding residential real estate in 2024. Judging by recent history and the fact that nearly 90% of homeowners are locked in at interest rates under 6%, we think if rates trend towards 5%, that should unlock demand and spur greater activity overall.

Ann: In summary, until we see mortgage rate relief, we are maintaining a modest outlook regarding residential in 2020 for judging by recent history and the fact that nearly 90% of homeowners are locked in at interest rates under 6%.

Ann: We think if rates trend towards 5% that should unlock demand has far greater activity overall, but.

Ann: Until we get there our planning stance is for flattish residential performance this year.

Ann: For nonresidential on slide 16, the headline message is that trends we experienced in 2023 should carry into 2024 that means heavy growth moderated by and may be more than offset by sluggish like non res activity. This is where our specific footprint and project pipeline really matters for US we are playing in markets that are.

Ann Noonan: But until we get there, our planning stance is for flattish residential performance this year. For non-residential, on slide 16, the headline message is that the trends we experienced in 2023 should carry into 2024. That means heavy growth moderated by, and maybe more than offset, by sluggish, light non-residential activity.

Ann: Benefiting from chips and I, our investment in fact, nearly 60% of the announced investment is occurring at top summit states timely investments in Arizona to build out that new platform should really pay dividends in the years ahead as semiconductor investment is concentrated in the Sun belt and we are also seeing datacenters commit to phone.

Ann Noonan: This is where our specific footprint and project pipeline really matters. And for us, we are playing in markets that are benefiting from CHIPS and IRA investment. In fact, nearly 60% of the announced investment is occurring in top summit states.

Ann: And Phoenix and Kansas are Green Energy project pipeline remains robust with five energy projects currently in the pipeline. Similarly in the Carolinas and Georgia ongoing investments in alternative energy infrastructure is benefiting our footprint in the southeast elsewhere. A lot has been made of overbuilt warehousing in the country.

Ann Noonan: Timely investments in Arizona to build out that new platform should really pay dividends in the years ahead, as semiconductor investment is concentrated in the Sun Belt. And we are also seeing data centers come into focus in Phoenix. In Kansas, our green energy project pipeline remains robust, with five energy projects currently in the pipeline.

Ann: But for US it's not a major component of any of our platforms. It may however have an indirect impact whereby it may increase competition for other end uses and lastly, the outlook for like non res is for it to remain dormant in 2024 between tighter credit standards and recent residential trends it would be premature to expect activity.

Ann Noonan: Similarly, in the Carolinas and Georgia, ongoing investments in alternative energy infrastructure are benefiting our footprint in the Southeast. Elsewhere, a lot has been made of overbuilt warehousing in the country, but for us, it's not a major component of any of our platforms. It may, however, have an indirect impact, whereby it may increase competition for other end uses. And lastly, the outlook for light non-res is for it to remain dormant in 2024. Between tighter credit standards and recent residential trends, it would be premature to expect activity to recover in verticals like retail, office, and lodging.

Ann: To recover in verticals like retail office and lodging.

Ann: So as to not undersell its impact like non res has historically made up roughly half of our commercial business. So this represents a not insignificant headwind, particularly in our ready mix and cement markets. So overall the demand outlook is mixed for non res with flat organic volumes likely representing the high end of our current expectations and.

Ann: Then for the public end markets, we have consistently come back to our three leading indicators to provide a comprehensive view on infrastructure activity slide 17 profiles, our top eight state dot budgets, which youll varying degrees of strength butter up collectively 16%, which is above the national average importantly, our public exposure it's not.

Ann Noonan: So as not to undersell its impact, Light Non-Res has historically made up roughly half of our commercial business, and so this represents a not insignificant headwind, particularly in our ready-mix and cement markets. So overall, the demand outlook is mixed for Non-Res, with flat organic volumes likely representing the high end of our current export. And then for the public end market, we'll consistently come back to our three leading indicators to provide a comprehensive view of infrastructure activity. Slide 17 profiles our top 8 state DOT budgets, which show varying degrees of strength but are up collectively 16%, which is above the national average. Importantly, our public exposure is not even amongst our states and is disproportionately weighted towards areas with heavier asphalt operations.

Ann: Even amongst our states and it's disproportionately weighted towards areas with heavier asphalt operations.

Ann: This notably includes Texas, which comprised more than 40% of our asphalt volume in 2023 and is witnessing a strong step up in D. O T funding in 2024.

Ann: The second indicator is highway paving awards for our top states as of December on a trailing 12 month basis Highway paving awards have increased 14% versus the comparable year ago period more than twice the rate of growth for all other states and then we look at backlogs as these are the truest indicator of upcoming activity in our back.

Ann: <unk> activity is either maintaining very healthy levels like in asphalt or is up substantially like in aggregates and ready mix. So with indicators all flashing green, we think it's fair to expect mid single digits or better growth in public volumes for 2024.

Summing it up I think we start this year with a guarded optimism around demand conditions with much depending on fed moves and the path of interest rates and rather than prognosticating, our future rates, we are comfortable taking a measured stance and setting organic volume expectation around flat for 'twenty 'twenty, four which fully incorporates a slow year to date weather impacted.

Ann Noonan: This notably includes Texas, which comprised more than 40% of our asphalt volume in 2023 and is witnessing a strong step up in DOT funding in 2024. The second indicator is highway and paving awards for our top states. As of December, on a training 12-month basis, highway and paving awards have increased 14% versus the comparable year-ago period, more than twice the rate of growth for all other states. And then we look at backlogs, as these are the truest indicator of upcoming activity. And our backlog activity is either maintaining very healthy levels, like in asphalt, or is up substantially, like in aggregates and readiness. So with indicators all flashing green, we think it's fair to expect mid-single digits or better growth in public volumes for 2024.

Ann: Start to our year.

Ann: At the end of the day, we feel very positive about the year ahead controlling what we can achieving a comfortable gap between price and cost and delivering strong EBITDA growth for 2024.

Ann: Turning now to capital allocation on Slide 18, you will see in our guide we've called for between $430 million to $470 million in Capex. This aligns with our commitment to keep capex as a percentage of that revenue at approximately 10% in the near term before stepping the proportion down over time much of the Capex investment.

Ann: It's designed to assist in the winter turnarounds at our cement plants as a carryforward, our ready mixed fleet modernization initiative.

Ann: These specific investments are targeted to either improve profitability or avoid unplanned downtime in both cases. It is high return spend that is necessary to more profitably run the legacy Argos assets, you'll see that a 10% of net revenue, we were actually reducing capital intensity.

Ann Noonan: Summing it up, I think we start this year with a guarded optimism around demand conditions, with much depending on Fed moves and the path of interest rates. And rather than prognosticating on future rates, we are comfortable taking a measured stance and setting organic volume expectations around flat for 2024, which fully incorporates a slow year-to-date weather impact at the start of our year.

Ann: Together with improved enterprise profitability. This should help drive a 15% or more increase to free cash flow per share in 2024. This is central to our overall value creation thesis as greater cash flow conversion in generation will increase our optionality to reinvest in growth capex and aggressively pursue accretive.

Ann: <unk> ag's oriented M&A, all while effectively managing our leverage.

Ann Noonan: At the end of the day, we feel very positive about the year ahead, controlling what we can, achieving a comfortable gap between price and cost, and delivering strong EBITDA growth for 2024. Turning now to capital allocation on slide 18, you'll see in our guide we've called for between $430 million and $470 million in CapEx. This aligns with our commitment to keep CapEx as a percentage of net revenue at approximately 10% in the near term before stepping the proportion down over time. Much of the CapEx investment is designed to assist in the winter turnarounds at our cement plants and to carry forward our Ready, Mix, Fleet modernization initiative. These specific investments are targeted to either improve profitability or avoid unplanned downtime. In both cases, it is high-return spend that is necessary to more profitably run the legacy Argos assets.

Ann: Is a growth company with a compelling set of opportunities in front of us and our capital allocation priorities underscore that growth objective.

Ann: I'll close by reiterating our near term priorities on slide 19 in the midst of a large scale integration it can be easy to lose sight of what the goals are but we as an organization are committed to safely integrating our two companies accelerating aggregates growth delivering on our synergy commitments and using our enhanced III.

Ann: Cash flow profile to further optimize the portfolio and strengthen an already fortified balance sheet. These priorities guide our actions and decisions and only field for elevate summit priorities of market leadership asset light sustainability and innovation as we collectively execute and create a stronger summit. We are confident we can.

Ann: Deliver industry, leading value for our employees, our stakeholders and Soma shareholders with that I'll ask the operator to open the line for questions.

Speaker Change: Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad and we'll pause for just a moment to compile the Q&A roster.

Ann Noonan: You'll see that at 10% of net revenue, we are actually reducing capital intensity. Together with improved enterprise profitability, this should help drive a 15% or more increase in free cash flow per share in 2024. This is central to our overall value creation thesis, as greater cash flow conversion and generation will increase our optionality to reinvest in growth capex and aggressively pursue accretive, ags-oriented M&A, all while effectively managing our leverage. Summit is a growth company with a compelling set of opportunities in front of us, and our capital allocation priorities underscore that growth objective.

Speaker Change: Thank you. Your first question comes from the line of Stanley Elliott from Stifel. Your line is open.

Stanley Stoker Elliott: Good morning, everyone. Thank you for the question and congratulations on the deal very exciting.

Stanley Stoker Elliott: Hum.

Stanley Stoker Elliott: Scott you mentioned, adding points to the margin profile potential.

Stanley Stoker Elliott: Potentially on the aggregate side.

Stanley Stoker Elliott: Could you help us with kind of the puts and takes as to how we might get to the high end of it.

Stanley Stoker Elliott: You know versus kind of.

Stanley Stoker Elliott: What you mentioned.

Possibly on the on the more of a basis point sort of a buildup.

Speaker Change: Yes, so from our point of view of where we started here as you saw we had progress in the last two quarters on aggregates margin expansion and that has been driven largely by pricing and some opex once wins as we've gone through.

Ann Noonan: I'll close by reiterating our near-term priorities on slide 19. In the midst of a large-scale integration, it can be easy to lose sight of what the goals are. But we, as an organization, are committed to safely integrating our two companies, accelerating aggregate growth, delivering on our synergy commitments, and using our enhanced free cash flow profile to further optimize the portfolio and strengthen an already fortified balance. These priorities guide our actions and decisions and only fuel the four Elevate Summit priorities of market leadership, asset life, sustainability, and innovation. As we collectively execute and create a stronger Summit, we are confident we can deliver industry-leading value for our employees, our stakeholders, and Summit shareholders. With that, I'll ask the operator to open the line for questions.

Speaker Change: We ended the year on a trailing 12 month cash adjusted gross profit margin of about 49, the bumping that 50% we've set a target there of 60%.

Speaker Change: Been playing a bit of catch up and I ask with cost inflation et cetera, but the two key drivers our pricing has been very strong as we've seen right through 2023, and we will continue that value pricing mentality as we go into 'twenty 'twenty four and we think it's a very constructive environment for aggregates moving forward and that's driven by as you know standing a core tenant.

Operator: Thank you. At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad, and we'll pause for just a moment to compile the Q&A. Thank you. Your first question comes from the line of Stanley Elliott from Stiefel. Your line is open. Good morning, everyone.

Speaker Change: Our elevate strategy is to be market leadership number one or number two in all of our local markets supply demand dynamics are very strong there's persisting cost inflation and our January price increases are out there very strong and once you have in the guide right. Now is only one price increase it doesn't have the mid years, but the other part that I point, you to which is a difference.

Scott Anderson: Thank you for the question and congratulations on the deal. Very exciting. Scott, you mentioned adding points to the margin profile, you know, potentially on the aggregate side. Could you help us with kind of the puts and takes as to how we might get to the high end of it, you know, versus kind of what you mentioned possibly on the more of a basis point sort of a buildup?

Speaker Change: And then acceleration from 'twenty, 'twenty, four which will push us our 'twenty to 'twenty, three which will push us to the high end is the opex. Once so as you know we made progress last year, we actually dropped $15 million to the bottom line from our continuous improvements events in eggs and this year, we expect to double our amount of continuous improvement events, we brought at Marshall.

Scott Anderson: So, from a point of view of where we started here, as you saw, we've had progress in the last two quarters on aggregates margin expansion, and that has been driven largely by pricing and some operational excellence wins. We ended the year on a trading 12-month cash-adjusted gross profit margin of about 49 to bump that 50%. We've set a target there of 60%. We've been playing a bit of catch-up in ags with cost inflation, etc., but the two key drivers are pricing's been very strong, as we've seen right throughout 2023, and we'll continue that value pricing mentality as we go into 2024. And we think it's a very constructive environment for aggregates moving forward, and that's driven by, as Supply-demand dynamics are very strong.

Speaker Change: As our Chief operations Officer, and will add more resources and so that's what will push us to the higher end of that eggs profiles. So we expect to increase our AG expansion in 2024.

Speaker Change: Great. Thanks, so much.

Speaker Change: Your next question comes from the line of Garik <unk> from Loop Capital Research. Your line is open.

Garik: Oh, great. Thank you.

Garik: Wondering if you could speak to the operational synergies you called out $30 million how much of that has been secured here. Shortly after closing the <unk> deal and maybe if you could provide some color on how you expect that pacing too.

Speaker Change: Occur throughout the balance of the year.

Speaker Change: Okay.

Speaker Change: Let me start just at a high level. So the $30 million, we're very confident in our ability to deliver that if you recall in our proxy we had actually $20 million for the first year in the proxy. So we've got nothing but validation of our operational synergies. We've had our teams together I'm working very closely on workshops and so if you.

Scott Anderson: There's persistent cost inflation, and our January price increases are out there very strong, and what you have in the guide right now is only one price increase. It doesn't have the mid-years, but the other part that I point you to, which is a difference and an acceleration from 2024, which will push us, or 2023, which will push us to the high end, is the operational excellence. So, as you know, we made progress last year. We actually dropped $15 million from the bottom line from our continuous improvement events in ags, and this year, we expect to double our amount of continuous improvement events. We've brought on Marshall Moore as our chief operations officer, and we'll add more resources, and so that's what will push us to the higher end of that ags profile. So, we expect to increase our ags expansion in 2024. Great, thanks so much.

Speaker Change: Think about the actual amount of synergies will come in first from a pacing perspective is really the scale synergies, which will be from SG&A and procurement. The next synergies you can expect to roll in our ready mix. We're very encouraged by a lot of the opportunity we have in ready mix. We have the ongoing fleet modernization program that Argo said.

<unk> and will complete and that'll improve margin expansion on ready mix and then where the teams are actively putting together enhancements to delivery improving the footprint, bringing in technology like load and go that's all moving very quickly in ready mix and we can move quickly in ready mix.

Ann Noonan: Your next question comes from the line of Garrick Schmoyes from Loop Capital Research. Your line is open. Oh, great. Thank you. I'm wondering if you could speak to the operational center, call it out, $30 million. How much of that has been secured here, you know, shortly after closing the Argos deal? And maybe if you could provide some color on how you expect that pacing to occur throughout the balance.

Speaker Change: Our key focus for 'twenty 'twenty four and we're very confident that this is the ability to improve the operational equipment efficiency and that'll reduce costs increase our productivity and most importantly allow us to have more domestically produced cement from the legacy arkose assets versus relying on imports, which will expand our margins.

Speaker Change: So all in we're very confident around that $30 million.

Ann Noonan: Okay. So, let me start this at a high level. So, the $30 million, we're very confident in our ability to deliver that. If you recall, in our proxy, we actually had $20 million for the first year in the proxy. So, we've gotten nothing but validation of our operational synergies. We've had our teams together, working very closely at workshops. And so, if you think about the actual amount of synergies, what will come in first from a pacing perspective is really the scale synergies, which will be from SG&A and procurement. The next synergies you can expect to roll in are ReadyMix.

Speaker Change: Maybe you want to talk to pacing of how that might occur throughout the year. Yeah. So Gary when you think of pacing or phasing throughout the year.

Gary: We don't necessarily provide quarterly guidance on that but what I would say, it's going to really mirror the operational activities here and obviously, we need a little time to ramp up here in the beginning but as Anne mentioned the teams are very engaged right now and we're seeing we're seeing progress so but I see it kind of.

Gary: Aligning with the EBITDA performance of the business throughout the year there. The other thing I would add just you know you asked specific Eric to operational synergies, but one of the things that I've been extremely encouraged by his mediately. After close we had workshops with all of our commercial folks and they have really been digging into the details I'm coming up with value pricing.

Ann Noonan: We're very encouraged by a lot of the opportunity we have in ReadyMix. We have the ongoing fleet modernization program that Argos started and will complete, and that'll improve margin expansion in ReadyMix. And then the teams are actively putting together enhancements to delivery, improving the footprint, and bringing in technology like Load&Go. That's all moving very quickly in ReadyMix, and we can move quickly in ReadyMix.

Gary: <unk> procurement opportunities, but additionally, you know some angst pull through opportunities will represent additional upside we'll update you more on that in our Investor day, but I would say all in all of that $30 million is pretty secure and we're very confident that having some upside as we move through the integration period.

Ann Noonan: Cement, our key focus for 2024, and we're very confident in this, is the ability to improve operational equipment efficiency, and that'll reduce costs, increase our productivity, and most importantly, allow us to have more domestically produced cement from the legacy Argos assets versus relying on imports, which will expand our margins. So, all in, we're very confident around that $30 million. Scott, maybe you want to talk about pacing on how that might occur throughout the year? Yeah.

Speaker Change: So does that complete your question.

Speaker Change: Yes. It does thank you.

Thank you. Your next question comes from Phil Ang from Jefferies. Your line is open.

Phil Ang: Hey, guys congrats on the solid quarter free cash flow certainly very impressive.

Phil Ang: I guess my first question was really around the magnitude and timing of the cement price increase you anticipate to see kind of in the southeast Atlantic mid Atlantic region in terms of the magnitude of what's been announced.

Scott Anderson: So, Garrick, when you think of pacing or phasing throughout the year, we don't necessarily provide quarterly guidance on that, but what I would say, it's going to really mirror the operational activities of the year. And obviously, we need a little time to ramp up here in the beginning, but as Ann mentioned, the teams are very engaged right now, and we're seeing progress. So, but I see it kind of aligning with the EBITDA performance of the business throughout the year. The other thing I would add, just, you asked specific questions about operational synergies, but one of the things that I've been extremely encouraged by is that immediately after close, we had workshops with all of our commercial folks, and they have really been digging into the details and coming up with value pricing opportunities, procurement opportunities, but additionally, you know, some Ag We'll update you more on that at our investor day, but I would say, all in all, that $30 million is pretty secure, and we're very confident of having some upside as we move through the integration period. And with that, sir, does that complete your question? Yes, it does.

Phil Ang: How long do you kind of think it will take to kind of work through some of these contracts and brought your value pricing and any more color.

Phil Ang: Well imports I know the Red Sea in Panama Canal has that been a good guy in terms of.

Phil Ang: Tightening up the market as well.

Speaker Change: Yeah, let me kind of step back on on cement pricing. So as we said in our prepared comments Phil.

Speaker Change: You know if I just take legacy summit business, we went out of the $15 a ton relatively strong price execution that the team has done the last two years demonstrated double digit price increase and we won't hold out for demand and customers allowed we will have is a midyear price increase as we've done the last two years, so were really solid and secure and all.

Speaker Change: Value pricing principles, and then our customer segmentation on legacy summit.

Speaker Change: As I said in my prepared comments, a little bit of a different game when it comes to legacy Argos there we have longer term contracts, which will some of those will be rolling off as we go through 'twenty four and the teams are working through that and we're working with our customers to expect value pricing principles to come in and that we also have a larger customers than you would happen if you remember.

Operator: Your next question comes from Phil Eng from Jefferies. Your line is open. Hey guys.

Speaker Change: If you go back to the how summit started this journey a customer segmentation basically becoming less reliant on power of buyers. You can expect that same kind of discipline as we look through and worked with our customers customer by customer to optimize our customer mix. So that's going to take a little bit of time. There is some immediate impact the January price increases.

Ann Noonan: Congratulations on the solid quarter. Free cash flow is certainly very impressive. I guess my first question is really around the magnitude and timing of the cement price increase you anticipate to see in the Southeast Atlantic and Mid-Atlantic region in terms of the magnitude of what's been announced. How long do you think it'll take to kind of work through some of these contracts and determine your value pricing? And any more color around imports?

Speaker Change: Is on the legacy Argo side, where it's as robust as on the summit side now remember summit had a lot of heavy high barge costs. So that really supported a very high price increases we went and we've had strong secure that but we do believe there is upside on pricing and the legacy Argos just base business. There is some catch up pricing to be done.

Ann Noonan: I know Red Sea and Panama have been a good guys in terms of tightening up the market as well. Yeah, let me kind of step back on cement pricing. So, as we said, in our prepared comments, Phil, you know, if I just take legacy summit business, we went out at $15 a ton, relatively strong price execution as the team has done the last two years, demonstrated double-digit price increases. And we won't hold out, for as long as demand and customers allow, we will have a mid-year price increase as we've done the last two years. So we're really solid and secure in our value pricing principles and in our customer segmentation on legacy Summit. As I said, my prepared comments are a little bit of a different game when it comes to legacy Argos. There we have longer-term contracts, some of those will be rolling off as we go through 24. And the teams are working through that.

Speaker Change: So think about it in terms of Patriot large contracts rolling off customer segmentation segmentation on catch up pricing on the January at the end of the day do I think we'd be double digit every year like we were in 22 and 23, but high single digits is probably a good estimate for our cement business.

Speaker Change: Any color on an important dynamic.

Speaker Change: Yeah, so imports.

Speaker Change: One of the nice things that exist as you know the existing summit business legacy summit business reading only has 5% to 10% in Louisiana, which is where imports come in the Argos business. Similarly, if you look at the mid Atlantic and Southeast. If you look at total imports into the U S only 5% to 10% actually come into those markets. So we're not heavy.

Ann Noonan: And we're working with our customers to expect value pricing principles to come in and that we also have a larger customer segmentation than you would have. And if you remember, if you go back to how Summit started this journey on customer segmentation, basically becoming less reliant on power buyers, you can expect that same kind of discipline as we look through and work with our customers, customer by customer, to optimize our customer mix. So that's going to take a little bit of time. There is some immediate impact because January price increases on the legacy Argo side weren't as robust as on the Summit side. Now remember, Summit had a lot of heavy, high budget costs.

Speaker Change: The import exposed overall, so I would say we're much more focused on margin expansion.

Speaker Change: On the Argos business on profitability expansion and that's around the pricing. We just discussed but also with landing the operational synergies in our cement and we're very confident of strong EBITDA growth in our cement business in 'twenty 'twenty four for those two reasons.

Ann Noonan: So that really supported a very high price increase as we went in. We've had strong evidence of that. But we do believe there is upside on pricing in the legacy Argo's just base business. There is some catch-up pricing to be done. So think about it in terms of large contracts rolling off, customer segmentation, and catch-up pricing in January. At the end of the day, do I think we'd be double-digit growth every year like we were in 22 and 23? But high single digits is probably a good estimate for our cement business. Any color on the imported titanium?

Speaker Change: Super. Thank you yeah, we really really appreciate it.

Speaker Change: Thanks Bill.

Speaker Change: Your next question comes from the line of Adam Cal Hammer from Thompson Davis Your line is open.

Speaker Change: Hey, good morning, guys, Hey, and at a high level can you talk about the relationship with Argos and how you expect that to trend over the next few years.

Speaker Change: And then is Argos under a standstill provision or could they actually buy some shares in the open market.

Speaker Change: Yeah. So on the latter part Argos is that has a two year standstill.

Ann Noonan: Yeah, so imports, you know, one of the nice things that exists, as you know, the existing Summit business, the legacy Summit business, really only has 5 to 10% in Louisiana, which is where imports come in. The Argos business, similarly, if you look at the Mid-Atlantic and Southeast, if you look at total imports into the U.S., only 5 to 10% actually come into those markets. So we're not heavy import exposed overall. So I would say we're much more focused on margin expansion on the Argos business, on profitability expansion, and that's around the pricing we just discussed, but also achieving the operational synergies in our cement. And we are very confident of strong EBITDA growth in our cement business in 2024 for those two reasons. Thank you, Anne. I really, really appreciate it.

Speaker Change: The relationship is we have three new board members, 131% or 31% shareholders of our company.

But most importantly, the relationship is very strong we're very United on the strategy of the company. This deal wouldn't have come together frankly without that.

Speaker Change: This is something which you know as we've integrated the two teams have been extremely encouraged to see I've been personally out to every one of the cement plants at this point, they're still left to get out to all the ready makes it a little more of a challenge, but our teams are all out there. The teams are integrating extremely well and.

Speaker Change: On the people side I would say the enthusiasm engagement and creativity thats coming out of those teams is very encouraging on the business side, you know validation of the synergies has been we've got no surprised there's only upside from the commercial side. So I expect this to be a very long term and sustainable relationship and you know Ark.

Ann Noonan: Thanks, Bill. Your next question comes from the line of Adam Thalhimer from Thompson Davis. Your line is open. Hey, good morning, guys.

Ann Noonan: Hey, and at a high level, can you talk about the relationship with Argos and how you expect that to trend over the next few years? And then, is Argos under a standstill provision, or could they actually buy Summit Shares in the open? Yes, so on the latter part, Argos has a two-year standstill. And the relationship is we have three new board members who own 31%; they're 31% shareholders of our company. But most importantly, the relationship is very strong.

Speaker Change: So Scott in here, because they want to participate in the U S and the growth. So this is a long term partnership that you can expect that.

Scott Anderson: Great. Thank you Dan.

Speaker Change: Your next.

Speaker Change: Question comes from the line of Anthony Pettinari from Citigroup. Your line is open.

Anthony Pettinari: Hi, good morning.

Anthony Pettinari: Good morning.

Anthony Pettinari: If I look at the 2023 performance versus what you had forecast in the proxy it seems like Argos did much better in 2023, and you expected and I was wondering why that was and then maybe a related question. The 24 guide at the midpoint maybe.

Ann Noonan: We're very united on the strategy of the company. This deal wouldn't have come together, frankly, without that. This is something which, you know, as we've integrated the two teams, I've been personally out to every one of the cement plants at this point. I still have to get out to all the ready-mix plants, which is a little more of a challenge.

Anthony Pettinari: Maybe looks just a touch below what was discussed or maybe implied in the proxy and I'm wondering if there was anything.

Anthony Pettinari: Anything driving that.

Speaker Change: Okay I'll take the latter part of that the 'twenty 'twenty four guide and then I'll have Scott actually maybe address the 'twenty to 'twenty three will that be OK sure alright, So the 'twenty 'twenty four guide, let's we had in the proxy.

Ann Noonan: But our teams are all out there, and the teams are integrating extremely well. And, you know, on the people side, I would say the enthusiasm, engagement, and creativity that's coming out of those teams is very encouraging. On the business side, you know, validation of the synergies has been, we've gotten no surprises, only upside from the commercial side. So I expect this to be a very long-term and sustainable relationship. And, you know, Argos got in here because they want to participate in the U.S. and its growth.

Scott Anderson: 10, 18, and I would ask as basically and you got to remember that's a point in time and that was mid like 'twenty. Two 'twenty three we put that in place I would say the things that have brought the guidance slightly I still think it's in the ballpark overall as we've done two divestitures on the summit side, which were about 8 billion and EBITDA. We've also been able to guess now since January.

Ann Noonan: So this is a long-term partnership that you can expect. Great. Thank you, Anne.

Scott Anderson: 12, and I'm really fine tuned dis synergies and so that number has been refined and then the third factor I encourage you to look at Anthony is more around you know we've done now a bottoms up volume and price total analysis of the legacy Oracle business and so that's what got us to the overall number you know I would say our guide over.

Ann Noonan: Your next question comes from the line of Anthony Pettinari from Citigroup. Your line is open. Good morning.

Ann Noonan: Morning. If I look at the 2023 performance versus, you know, what you had forecast in the proxy, it seems like Argos did much better in 2023 than you expected. And I was wondering, you know, why that was, and then maybe a related question, the 24 guide at the midpoint maybe looks just a touch below what was discussed. The Bulletproof Executive 2013, Okay, I'll talk about the latter part of that, the 2024 guide, and then I'll have Scott actually maybe address the 2023. Would that be okay with you?

Speaker Change: Raul is we're very confident in that guide that we've put out there in the mid point and if anything we would skew to upside on that guide Scott you want to talk about 'twenty two 'twenty three yeah for Argo's 2023, Anthony you're right back in September we thought you know the low three hundreds.

Speaker Change: Does the kind of the expectation and are.

Speaker Change: Similar to US Argos finished really strong to come in at that $3 43.

Speaker Change: Number.

Speaker Change: And I don't want to speculate because we didn't own it until January but I know, they're pricing, we're starting to really take traction.

Ann Noonan: Sure. All right, so the 2024 guide we had in the 1018, and I would, as basically, and you've got to remember, that's a point in time, and that was mid-2023 when we put that in place. I would say the things that have brought the guide down slightly, but I still think it's in the ballpark overall, is we've done two divestitures on the summit side, which were about $8 billion in EBITDA. We've also been able to guess now since January 12th with a really fine-tuned disc synergies, and so that number's been refined.

Speaker Change: And just some of that fleet modernization their opex journey. They got started on that we're going to carry through.

Speaker Change: But really really excited to see the momentum they have as well as our momentum coming into 'twenty four yeah. I mean, the other thing I'd point you to Anthony as you know the total margin of the combined entity was 22, 2% on a pro forma basis, and we're very confident in bringing that number in 'twenty 'twenty four to a range of 23 to 24.

Speaker Change: <unk> EBITDA and that'll be driven by price cost across the entire portfolio Ag's op excellence and delivering that $30 million of cost synergies that we've talked about them. So we see a pretty clear path and then portfolio optimization will only provide upside so the starting point that we're talking about for 2020 three it gives us a nice jumping off point.

Ann Noonan: And then the third factor I'd encourage you to look at, Anthony, is more around, you know, we've done a bottoms-up volume and price total analysis of the legacy Argos business, and so that's what got us to the overall number. You know, I would say our guide overall is, we're very confident in that guide that we've put out there at the midpoint, and if anything, we would skew to the upside on that guide. Scott, you wanted to talk about 2023? Yeah, for Argos 2023, Anthony, you're right.

Speaker Change: So really leverage down on the three key elements that we talked about growing the business.

Okay. That's very helpful I'll turn it over.

Speaker Change: Yes.

Speaker Change: Your next question comes from the line of Brent Thielman from D. A Davidson your line is open.

Scott Anderson: Back in September, we thought, you know, the low 300s was kind of the expectation, and similar to us, Argos finished really strong to come in at that 343 number. And I don't want to speculate because we didn't own it until January, but I know their pricing was starting to really gain traction, and just some of that fleet modernization and their op-ex journey they got started on that we're going to carry through. But really, really excited to see the momentum they have as well as ours coming in 24. Yeah, I mean, the other thing I'd point you to, Anthony, is that the total margin of the combined entity was 22.2% on a pro forma basis. And we're very confident in bringing that number in 2024 to a range of 23 to 24%.

Hey, Thanks, Good morning, I think one for Scott wasn't quite clear to me, but the step up in Capex. This year could you just talk about the cadence that you've mentioned targeting some winter turnarounds.

Brent Thielman: It wasn't clear to me.

Brent Thielman: We're front end loaded on the capex or the more spread out.

Scott Anderson: You bet, Brett so when we think of Capex you know, we've talked about the 10% threshold kind of being our goal here of maintaining that net revenue, but when you think about the phasing of it.

Speaker Change: We don't really provide phasing, but I can tell you just like you called out it will be weighted towards the front I would say kind of a 60 40. If you looked at the first half of the year to the back half of the year.

That 60% upfront really theres two reasons to drive that really first is that's when the plant shut down the plant shutdowns are occurring so we're really putting that capital into those plants. The raise that OE and that operating performance early in the year and then just the second part.

Scott Anderson: That'll be driven by price cost across the entire portfolio, AgSop excellence, and delivering that $30 million of cost synergies that we've talked about. So we see a pretty clear path. And then portfolio optimization will only provide upside. So this starting point that we're talking about for 2023 gives us a nice jumping off point to really leverage down on the three key elements that we talked about growing the business. Okay, that's very helpful. I'll turn it over. Your next question comes from the line of Brent Thielman from D.A. Davidson.

Speaker Change: It's really just the deployment, we want to get that money to work for us as early as we can in the year. So we can get the returns on those growth and profitability capex projects. So.

Speaker Change: Really that's that's where you're looking at we will want to push early in the year.

Speaker Change: As we can and get the use of that capital.

Speaker Change: Okay very good thank you.

Speaker Change: Your next question comes from the line of Keith Hughes from Trust. Your line is open.

Scott Anderson: Your line is open. Hey, thanks. Good morning.

Scott Anderson: I think one for Scott wasn't quite clear to me, but the step up in CapEx this year, could you just talk about the cadence of that? You mentioned targeting some winter turnaround, but it wasn't clear to me, front-end loaded on the Cat-Back. You bet, Brent. So, when we think of CapEx, you know, we've talked about the 10% threshold kind of being our goal here of maintaining that net revenue, but when you think about the phasing of it, we don't really provide phasing, but I can tell you, just like you called out, it will be weighted towards the front, I would say, kind of a 60-40 split if you looked at The first is that it's when the plants shut down.

Keith Brian Hughes: Thank you when you were going over year end market view I think he came up with kind of a flat scenario for 24 did I hear that right and is there is there are differences amongst the different products and what you think unit unit change will look like in 'twenty four.

Speaker Change: Yeah. So let me kind of give you the high level of across end markets just at a high level and then I'll go into line of business to address your question Kate So youre correct, we kind of came across as flattish overall.

Speaker Change: So that really is made up of residential being flattish.

Speaker Change: Nonresidential heavy being stronger light being dormant and weak so we kind of stay flat to down on the nonresidential and then public mid single digit or higher so how that plays out in our actual lines of business I would think of it in terms of aggregates and ready mix being flat.

Scott Anderson: The plant shutdowns are occurring, so we're really putting that capital into those plants to raise that OE and that operating performance early in the year, and then just the second part is really just the deployment. We want to get that money to work for us as early as we can in the year so we can get the returns on those growth and profitability CapEx projects. So, really, that's what you're looking at.

Speaker Change: You know, we talk about cement flat to down and that's because it's heavy nonresidential and then you know we talk about asphalt volume is gonna be high mid single digits overall.

Speaker Change: So we're going to have less imports as well on cement. So we'd have more domestically produced so lesser imports more reliance on higher margin cement business is how I would look at it now that being said I will say, we are taking but I would call a guarded approach to volumes because really there is on one side.

Scott Anderson: We will want to push early in the year as we can and get the use of that capital. Very good. Thank you. Your next question comes from the line of Keith Hughes from Truist. Your line is open. Thank you. When you were going over your in-marshal... Did I hear that right, and are there differences amongst the different products?

Speaker Change: Say, if there's pent up demand on residential.

Ann Noonan: Yeah, so let me kind of give you the high level across end markets just at a high level, and then I'll go into the line of business to address your question, Keith. So you're correct, we kind of came across as flattish overall. And so that really is made up of residential being flattish, you know, non-residential, heavy being stronger, light being dormant, and weak.

Speaker Change: And that could pop if interest rates getting as I said in my prepared comments to 5%. So there is definitely an opportunity for that to swing up to the right side, that's kind of tempered against a January that was had a lot of weather now our teams are really good at picking up from weather, but we did start in a bit of a hole here and we also have pretty much a dorm at nonresidential, which is.

Speaker Change: A significant part of our portfolio, but I would think about volumes overall, we started from a stance of guarded and cautious because that allows our team to react in a very appropriate way, that's why focusing on price focusing on the highest margin expansion op excellence focusing on our synergies and portfolio optimization controlling what we can control and then as Paul.

Ann Noonan: So we kind of say flat to down on the non-residential and then public mid-single digit or higher. So how that plays out in our actual lines of business, I would think of it in terms of aggregates and ready mix being flat. You know, we talk about cement being flat to down, and that's because it's heavy residential.

Ann Noonan: And then, you know, we talk about asphalt volumes going to be high mid-single digit overall. So, we're going to have less imports as well on cement, so we have more domestically produced. So, less imports, more reliant on higher margin cement business, is how I would look at it. Now, that being said, I will say we are taking what I would call a guarded approach to volumes because, really, there is, on the one side, I would say there's pent up demand for residential and that could pop if interest rates get, as I said in my prepared comments, to 5%. So, there is definitely an opportunity for that to swing up to the right side. That's kind of tempered against January, which had a lot of weather.

Speaker Change: Would kick in at the end that we you should see that as upside and the potential for to have a compounding effect of strong pricing actions.

Speaker Change: Okay. Thank you.

Speaker Change: Thanks Keith.

Speaker Change: Your next question comes from the line of David Macgregor from Longbow Research. Your line is open.

Hey, Good morning. This is Joe Nolan on for David.

Joe Nolan: I was just wondering first quarters seen a little bit of weather and you talked about the 10% EBITDA in the first quarter.

Joe Nolan: I was wondering whether that was more of a long term view or whether that was 2024 specific and we might see that skewed a bit lower just due to the weather this year.

Speaker Change: Yes, Joe I'll take that one.

Speaker Change: Youre right January it was rough.

Ann Noonan: Now, our team's really good at picking up on weather, but, you know, we did start in a bit of a hole here. And we also have pretty much a dormant non-residential, which is a significant part of our portfolio. But I would think about volumes overall. We started from a stance of guarded and cautious because that allows our team to react in a very appropriate way.

Speaker Change: And I think everybody felt the weather impacts for January.

Joe Nolan: We're still going to hold to that 10%.

Speaker Change: We feel like that are you know February things, we still got enough time.

Speaker Change: To build that back.

Speaker Change: So it wouldn't necessarily change our outlook and you look to the history summit legacy was kind of a 5% to 7% and that Q1 and now with the addition of Argos.

Ann Noonan: That's by focusing on price, focusing on agriculture, margin expansion, operational excellence, focusing on our synergies and portfolio optimization, controlling what we can control and then as volume would kick in at the end, we should see that as upside and the potential for it to have a compounding effect of strong pricing. Thank you. Thanks, Keith. Your next question comes from the line of David MacGregor from Long Bough Research. Your line is open. Hey, good morning. This is Joe Nolan on behalf of David.

Speaker Change: It's more complementary and the seasonality. So now we're pushing that up to 10, but I think we still hold to that fan and plan on getting it back at this point Joe.

Joe Nolan: Got it. Thank you that's helpful I'll pass it on.

Joe Nolan: Your next question comes from the line of Noah Cuzco from Stephens. Your line is open.

Noah Cuzco: Oh good morning, Thanks for taking my questions and congrats on the strong results.

Noah Cuzco: Thanks Noah for.

Noah Cuzco: Yeah, just just one quick one here you know the asphalt volumes were really strong in the quarter up 27, 5% I guess is that a one time big project or is it something like that.

Scott Anderson: I was just wondering, um, the first quarter saw a little bit of weather, and you talked about the 10% EBITDA in the first quarter. I was wondering whether that was more of a long-term view or whether that was 2024 specific, and we might see that skewed a bit lower just due to the weather this year. Yeah, Joe, I'll take that one. You're right. January, it was rough.

Noah Cuzco: Really strong growth rates something we can see continue as we look through 'twenty four I'd imagine infrastructure plays a big role in and driving volumes there.

Scott Anderson: And I think everybody felt the weather impacts for January. We think we're still going to hold to that 10%. We feel like that, you know, February things, we still have enough time to build that back. So it wouldn't necessarily change our outlook.

Speaker Change: Yeah, I mean Q4, you're absolutely right now what it was high but it was really weather, we had very favorable weather. So our guys. Every crew we have we're out in the road. That's all I can tell you I weighed a ton of backlogs, which we still do an asphalt so on a full year basis on an organic growth you'll see that our asphalt was up like 10%, but very heavy in Q4, just because we got.

Scott Anderson: And you look at the history, Summit legacy was kind of a five to 7% in Q1. And now with the addition of Argos, you know, it's more complementary in the seasonality. So now we're pushing that up to 10. But I think we still hold to that 10 and plan on getting it back at this point, Joe. Thank you. That's helpful. I'll pass it on.

Speaker Change: Particularly favorable weather.

Speaker Change: Once in a while we got a call out the good weather.

Speaker Change: Sure.

Speaker Change: Got it and I think correct me, if I'm wrong, but the answer to Keith's question kind of thinking about asphalt volumes up in the mid to high single digit range.

Ann Noonan: Your next question comes from the line of Noah Mercusco from Stevens. Your line is open. Good morning.

Speaker Change: Yeah, you can look at it that now we have a very tough comp on the first half I would say of asphalt because it had a very significant increase where we saw a big slug of pipeline in 2023 command from you know, we always said, we would be the beneficiary of repair and rebuild of being the first of the infrastructure dollars to go in and we started to see that in 'twenty three and so.

Ann Noonan: Thanks for taking my questions and congrats on the strong results. Thanks, Noah. So for, yeah, just one quick one here. You know, the asphalt volumes are really strong in the quarter, up 27.5%. I guess, is that a one-time big project? Or is something like that some really strong growth rate, something we can see continue as we look through 24? I'd imagine infrastructure plays a big role in driving volumes there. Yeah, I mean, Q4, you're absolutely right, Noah, it was high, but it was really weather.

Speaker Change: What you can expect Noah is as we go into 'twenty four really healthy asphalt backlogs, but we also have really healthy aggregates backlogs that are all tied to that public funding.

Noah Cuzco: Got it that all makes sense. Thanks for the time and good luck with the rest of the year.

Speaker Change: Thanks Noah.

Speaker Change: Your next question comes from the line of Kathryn Thompson from Thompson Research Group. Your line is open.

Ann Noonan: We had very favorable weather, so our guys, every crew we had, were out on the road. That's all I can tell you. And we had a ton of backlogs, which we still do in asphalt. So on a full-year basis, on organic growth, you'll see that our asphalt was up like 10%, but very heavy in Q4 just because we got particularly favorable weather. Once in a while, we've got to call out the good weather, even though January has turned.

Kathryn Ingram Thompson: Hi, Thank you for taking my questions today.

It's not that the heavy lifting is behind you with getting Argos if that finish line, but that's over the finish line and you're focused on integration.

Kathryn Ingram Thompson: With Argos for then stomach.

Speaker Change: But touching on commentary about just that continuous pruning of noncore assets too.

Ann Noonan: Got it. And I think that, correct me if I'm wrong, but the answer to Keith's question, kind of thinking about asphalt volumes up in the mid to high single-digit range. Yeah, you can look at it that way. Now, we have a very tough comp on the first half, I would say, of asphalt because it had a very significant increase where we saw a big slug of pipeline in 2023 come in from, you know, we always said we would be the beneficiary of repair and rebuild being the first of the infrastructure dollars to come in, and we started to see that in 23. And so what you can expect, Noah, is as we go into 24, really healthy asphalt backlogs. We also have really healthy aggregate backlogs that are all tied to that public fund. Got it. That all makes sense. Thanks for your time, and good luck with the rest of the year.

Speaker Change: Two parts on that.

One what are your what are your priorities.

Speaker Change: And then two kind of a long tied with that how has that changed with ARCUS and as is the piece in the type or geographic mix.

Speaker Change: Since the relatively greater drivers for pruning your portfolio. Thank you.

Speaker Change: Thanks for the question Catherine So yes, we are as you know we've always talked about portfolio optimization as a process not a project for summit and we will continue to be that way and every priority. We have is driven around reaching our elevate summit's financial metrics that we've said so we've said we want ROIC above 10%.

Speaker Change: And we're pushing the portfolio to over 30% EBITDA margins. So every asset is scrutinized at summit and that includes legacy or our gross assets and if we don't see a clear path to those kind of metrics, we will find a better owner and we've demonstrated that yet again here in the fourth quarter I will say it doesn't change our own.

Ann Noonan: Thanks, Noah. Your next question comes from the line of Kathryn Thompson from Thompson Research Group. Your line is open. Hi, thank you for taking my questions today. Not that the heavy lifting is behind you with getting Argos over the finish line, but that's over the finish line, and you're focused on integration with Argos within Summit. But touching on commentary about just that continuous pruning of non-core assets, there are two parts to that. One, what are your priorities?

Speaker Change: For all strategy, our overall strategy to become more material sled, obviously, the Argos acquisition allowed us to increase that to over 80%. So we've really got that materials part moving for us at a good time.

Ann Noonan: And then, too, kind of tied to that, how has that changed with Argos, and is the pace and the type or geographic mix some of the relatively greater drivers for pruning your portfolio? Thanks for the question, Kathryn. So, yes, we are, as you know, we've always talked about portfolio optimization as a process, not a project for Summit, and we will continue to be that way. And every priority we have is driven around reaching our Elevate Summit financial metrics that we've set. So we've said we want ROIC above 10%, and we're pushing the portfolio to over 30% EBITDA margin. So every asset is scrutinized at Summit, and that includes legacy Argos assets.

Speaker Change: And growth for all of our end markets or geographies have been further fortified by this combination and that's getting you know less seasonality into our business and having that exposure to high growth Msas in the South East and you know our pruning also was around you know we have said, we're gonna grow new platforms. So think about the acquisition we.

Speaker Change: Did this quarter was very important it was adding 30 year reserve in Arizona, and a high growth corridor, where we said we were going to build out that ax platform and you know some of the pruning where in geographies frankly, where we're not focused on their non strategic and non core. So we still keep this ongoing list of tier one two and three that are on our divestiture.

Ann Noonan: And if we don't see a clear path to those kind of metrics, we will find a better owner, and we've demonstrated that yet again here in the fourth quarter. But I will say it doesn't change our overall strategy. Our overall strategy was to become more materials-led.

List that have to meet the financial targets and they also aligned very strategically with our materials led strategy.

Speaker Change: And then just to follow up on that.

Ann Noonan: Obviously, the Argos acquisition allowed us to increase that to over 80%. We've really got that materials part moving for us at a good time of growth for all of our end markets. Our geographies have been further fortified by this combination, and that's getting less seasonality into our business and having that exposure to high-growth MSAs in the Southeast. And our pruning also is around; we have said we're going to grow new platforms. So think about the acquisition we did this quarter was very important. It was adding 30-year reserves in Arizona and a high-growth corridor where we said we were going to build out that Ags platform. And some of the pruning was in geographies where we're not focused, and they're non-strategic and non-core.

Speaker Change: Yeah.

Speaker Change: Since you're you're able to share.

Speaker Change: What are the.

Speaker Change: Those top three criteria.

Speaker Change: Can you just referenced the top grade tens of street Criterias materials led.

Speaker Change: Okay. Okay just.

Doesn't that theres something else along with that great. Thank you so much and again congrats on the quarter and best of luck.

Speaker Change: Okay. Thank you Kat.

Speaker Change: Okay.

Speaker Change: Your next question comes from the line of Jerry Revich from Goldman Sachs. Your line is open.

Jerry Revich: Yes, hi, good morning, everyone.

Jerry Revich: Hi, Jerry.

Jerry Revich: Hey, Ann.

Speaker Change: Wonder if you could just talk about the.

Jerry Revich: Potential for cost per ton.

Jerry Revich: Both exits mat to come down.

Ann Noonan: So we still keep this ongoing list of tier one, two, and three that are on our divestiture list that have to meet the financial targets, and they also align very strategically with our materials-led strategy. And just to follow up on that, if Spencer, you're able to share what are the top three criteria, just referenced. The top three criteria are materials, lead, Okay.

Jerry Revich: You folks in terms of the pace of inflation that we're seeing another one.

Jerry Revich: Labor intensive industries is just improved productivity as turnover rates normalize and things generally normalize post COVID-19.

Jerry Revich: Delivery of equipment.

Jerry Revich: Efficiency gains as a result.

Jerry Revich: I'm wondering to what extent is it possible based on leading indicators that you track that we could see.

Ann Noonan: Yeah. Okay. Just that I didn't know if there was something.

Jerry Revich: Unit cost inflation slowed to low single digit range.

Ann Noonan: Great, thank you so much. Again, congrats on the quarter and best. Okay, thank you, Kev. Your next question comes from the line of Jerry Revich from Golden Saks. Your line is open. You're OK. Good morning, everyone.

A couple of quarters.

Jerry Revich: I'll, let Scott take the inflation in cost profile that we're looking at for 2024 you.

Scott Anderson: You bet Jerry so when we think of cost you are right.

Scott Anderson: We see opportunity here to expand the margin in eggs and bring down that cost we've got a pretty aggressive playbook around operational excellence, but let me just kind of on the inflation side of it you know when you look at labor.

Ann Noonan: Hi Jerry. Hey Anne, I wonder if you could just talk about the potential for cost per ton both in ags and cement to come down, www.larryweaver.com generally normalizing post-COVID and deliverable equipment, and the fish. Thank you. Thank you.

Scott Anderson: You know last year, we were bumping up against that double digits.

But we're definitely we've got that modeled to come off and now we're looking more in that 4% to 5% for this year, which we think that's going to provide some opportunity for us.

Scott Anderson: As you go through.

Operator: Thank you, www.summitmaterialsinc.com, Costs, and inflation slow to the low single-digit range in coming quarters. I'll let Scott take the inflation and cost profile that we're looking at for 2024. You bet, Jerry.

Scott Anderson: Some of the other areas on energy or diesel fuel.

Scott Anderson: You know our hedging program has put us in a really good place. So we got favorability on that for next year as a matter of fact, we've got 50% of our diesel fuel already hedged at $2 79, a gallon and if you compare that to an average of last year about $3 20, you can see we got some favorability there.

Scott Anderson: So when we think of cost, you're right. We see opportunity here to expand the margin in ags and bring down that cost. We've got a pretty aggressive playbook around operational excellence. But let me just tell you, kind of on the inflation side of it, you know, when you look at labor, last year we were bumping up against double digits. But we're definitely, we've got that model to come off.

Scott Anderson: It would be easy for me, we've used about 32 million gallons a year it would be easy to come up with $6 million to $8 million in savings right. There are a tailwind for us.

So we've got some overall, though when you think of cost we do say.

Scott Anderson: Coming from the high single digits last year really moderating down to that mid single digits. Overall is kind of where were were looking at and that's just some of the big pieces. There I guess the last one I would would mentioned is the supply chain costs. That's one we're really watching closely and as we get more into the Argos business will get a better visibility around.

Scott Anderson: And now we're looking more in that four to five percent range for this year, which we think is going to provide some opportunity for us. As you go through, you know, some of the other areas in energy, our diesel fuel, you know, our hedging program has put us in a really good place. So we got favorable favorability on that for next year. As a matter of fact, we've got 50 percent of our diesel fuel already hedged at 279 a gallon. And if you compare that to an average of last year, about 320, you can see we've got some favorability there. It would be easy for me, you know; we use about 32 million gallons a year.

Scott Anderson: That but right now you know last year that was double digits and when I say supply chain I'm talking the repair and maintenance I'm talking to equipment related parts.

Scott Anderson: Sub contracting and that one that went to 25% of our overall Cogs. So that's a big that's a big piece and were watching that one closely where last year. We were double digits, we're seeing that more in that mid <unk> mid to high single digits, maybe that 7% right now and an early view. So hopefully that gives you a little context here.

Scott Anderson: It'd be easy to come up with six to eight million in savings right there or a tailwind for us. So we've got some overall, though, when you think of cost, we do say, you know, coming from the high single digits last year, really moderating down to that mid single digits overall is kind of where we're looking at. And that's just some of the big pieces there. I guess the last one I would mention is the supply chain cost.

Scott Anderson: And where we're going but definitely AG margin expansion. The last two quarters, we've been focused on that and we're carrying that and we're going to be all over the cost coming into this year.

Speaker Change: Thanks Scott.

Speaker Change: And your next question comes from the line of Mike Dahl from RBC capital markets. Your line is open.

Scott Anderson: That's the one we're really watching closely. And as we get more into the Argos business, we'll get better visibility around that. But right now, you know, last year, that was double digits.

Michael Dahl: Hi, Thanks for taking my question and just back on the high level bridge to there.

Michael Dahl: To put a finer point around things can you specify what your assumed contribution is for Argos versus legacy Standalone Summit, and then maybe specifically call out what some of those dis synergy quantification. We're now because obviously you've got the $30 million in good guys.

Scott Anderson: And when I say supply chain, I'm talking repair and maintenance. I'm talking equipment-related parts, and subcontracting. And that one's 25% of our overall COGS. So that's a big piece.

Scott Anderson: And we're watching that one closely. Where last year, you know, we were double digits, we're seeing that more in that mid to high single digits, you know, maybe that 7% right now in an early view. So hopefully that gives you a little context, Jerry, on where we're going. But definitely, ags, margin expansion, you know, the last two quarters, we've been focused on that, and we're carrying that in. We're going to be all over the cost coming into this year.

Michael Dahl: From the synergies, but maybe just help us understand a little bit more detail that.

Speaker Change: Yeah, well, let me kind of give you. The guide overall so you know if we think about we've talked about the markets being essentially flat on volume. So a lot of our you know if you think about the synergies the operational synergies there about $30 million, they're not clearly not on the summit site right. So that side will be coming.

Scott Anderson: Thanks, Scott. And your next question comes from the line of Mike Dahl from RBC Capital Markets. Your line is open. Thanks for taking my question. And just back on the high-level bridge to the guide to put a fire point around things.

Speaker Change: From except maybe you know the SG&A and procurement would be more at the SFC level, but youre going to see it in cement and in ready mix and if you think about you know cement margins being in the low thirties, we've put a lot of confidence in growing those through the opera the OE improvement on putting Portland limestone cement and ready mix.

Ann Noonan: Can you specify what your assumed contribution is for Argos versus the legacy standalone summit and maybe specifically call out what some of those dis-synergy quantifications were? Because obviously, you've got the 30 million in good guys from the synergies, but maybe just help us understand in a little bit more detail that. Yeah, well, let me kind of give you the guide overall.

The ongoing fleet modernization completion gets to about 10% will have opportunity to grow there. So overall, if you just step back and look at the growth of our guide exclude out the.

Ann Noonan: So, you know, we've talked about the markets being essentially flat on volume. So, a lot of our, you know, if you think about the synergies, the operational synergies, they're about 30 million. They're not, clearly not on the summit side, right?

Speaker Change: Divestitures, you've got a 4% to 11% growth you've got 30 million in synergies a big chunk going in to the Agua side of the business and then some obviously shared between the two you should see you know the base business is growing.

Ann Noonan: So, that side will be coming from, except maybe, you know, the SG&A and procurement would be more at the SSE level. But you're going to see it in cement and in ReadyMix. And if you think about, you know, cement margins being in the low 30s, we have a lot of confidence in growing those through the OEE improvement and putting Portland limestone cement in. In ReadyMix, the ongoing fleet modernization completion rate gets to about 10%. We'll have an opportunity to grow there. So, overall, if you just step back and look at the growth of our guide, exclude the, you know, divestitures, you get a 4 to 11% growth. You got 30 million in synergies, a big chunk going into the Argo side of the business. And then some, obviously, shared between the two.

Speaker Change: And that's you know high single digit growth range in our guide. So there I would say you know we're very confident in the 23% to 24% margin at the end of the year coming off a 22%, which as you recall in our proxy we actually had dilution in the first year. So we're very encouraged by the ability to deliver the synergies have continued price flex.

Speaker Change: Ability grow our AG opex. So this is what's going to drive an improved contribution from Greenfields will drive our summit side of our business.

Speaker Change: So hopefully that gives you a little bit more color Mike.

Ann Noonan: You should see, you know, the base businesses growing in that, you know, high single-digit growth range in our guide. So, there, I would say, you know, we're very confident in the 23 to 24% margin. At the end of the year, coming off at 22%, which, as you recall, in our proxy, we actually had dilution in the first year.

Michael Dahl: It does can I can I sneak in a follow up.

Michael Dahl: Sure.

Speaker Change: I guess, if I plug in the high single digits on the RBC come that it gets me to about $610 million, which is kind of below where you expected. It in the proxy even though you just be on the.

Speaker Change: The quarter or so.

Speaker Change: Is that just your conservatism on volume because it sounded like you've got the pieces in place for the price.

Speaker Change: Margin initiatives.

Speaker Change: Yeah. So you know we are being conservative and guarded I'd say on volume there is some upside there, but also remember pricing. So we only have first half pricing and we do not have any mid year price again across the summit platform and as you know Mike we've been very strong I, putting midyear price again on aggregates our customers our customers are accustomed to it.

Ann Noonan: So, we're very encouraged by the ability to deliver the synergies, have continued price flexibility, and grow our ags business. Excellence is what's going to drive, and improved contribution from green fields will drive the summit side of our business. Hopefully, that gives you a little bit more color, Mike. It does.

Ann Noonan: Can I sneak in a follow-up here? I guess if I plug in the high single digits for the Legacy Summit, it gets me to about $610 million, which is kind of below where you expect it in the proxy, even though you'd just be on the quarter. So is that just your conservatism on volume?

Michael Dahl: And cement I believe demand will pick up in the second half and we'll have some opportunity to go. There also so think about it as a volume and price upside, particularly on the summit side.

Michael Dahl: Thanks, Ed.

Ed: Okay. Thank you Mike.

Ann Noonan: Because it sounds like you've got the pieces in place for the price. Margin. Yeah, so you know, we are being conservative and guarded. I'd say on volume, there is some upside there, but also remember pricing. So we only have first half pricing, and we do not have any mid-year pricing across the summit platform. And as you know, Mike, we've been very strong at putting mid-year pricing in on aggregates; our customers are accustomed to it. And cement, I believe demand will pick up in the second half, and we'll have some opportunity to go there also. So think about it as a volume and price upside, particularly on the summit.

Speaker Change: Thank you and with no further questions Anne Noonan I'll turn the call back over to you.

Anne Noonan: Thank you I'd like to thank everyone for joining our call today, our summit team couldn't be more excited about the opportunities that lay ahead of us our collective focus continues to be on high quality execution against our financial strategic and safety goals, we see demand scenarios, improving commercial conditions remaining robust and the unique opportunity.

Anne Noonan: Better our operational performance through productivity measures and integration efforts, we have every intention of meeting or beating our 'twenty 'twenty four commitments and delivering superior value creation. Our shareholders expect we hope you can join us for our Investor day on March 13th and as always we appreciate your ongoing support of summit materials. Thank you and have a.

Ann Noonan: Thanks, guys. Okay. Thank you, Mike. Thank you, and with no further questions, Anne Noonan, I'll turn the call back over to you. Thank you. I'd like to thank everyone for joining our call today. Our summit team couldn't be more excited about the opportunities that lay ahead of us. Our collective focus continues to be on high-quality execution against our financial, strategic, and safety goals. We see demand scenarios improving, commercial conditions remaining robust, and the unique opportunity to improve our operational performance through productivity measures and integration efforts.

Anne Noonan: A great day.

Speaker Change: Thank you. This does conclude today's conference call you may now disconnect.

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Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Ann Noonan: We have every intention of meeting or beating our 2024 commitments and delivering the superior value creation our shareholders expect. We hope you can join us for Investor Day on March 13th, and, as always, we appreciate your ongoing support of Summit Materials. Thank you and have a great day.

Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Yeah.

Speaker Change: [music].

Operator: Thank you. This does conclude today's conference call. You may now disconnect.

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