NYSE:SUM Summit Materials Q2 2023 Earnings Report $52.54 +0.09 (+0.17%) Closing price 02/10/2025Extended Trading$52.54 0.00 (0.00%) As of 02/10/2025 04:33 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Summit Materials EPS ResultsActual EPS$0.71Consensus EPS $0.60Beat/MissBeat by +$0.11One Year Ago EPS$0.59Summit Materials Revenue ResultsActual Revenue$680.40 millionExpected Revenue$642.59 millionBeat/MissBeat by +$37.81 millionYoY Revenue Growth+7.70%Summit Materials Announcement DetailsQuarterQ2 2023Date8/2/2023TimeAfter Market ClosesConference Call DateThursday, August 3, 2023Conference Call Time12:00PM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Summit Materials Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 3, 2023 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Good morning. My name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Summit Materials' 2Q 'twenty three Earnings Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. Operator00:00:16After the speakers' remarks, there will be a question and answer session. Thank you. Andy Larkin, Vice President of Investor Relations, you may begin your conference. Speaker 100:00:35Hello, and welcome to Speaker 200:00:36the Summit Materials' 2nd quarter 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 a supplemental workbook, highlighted key financial and operating data. All of these materials can be found on our Investor Relations website. 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. Speaker 200:01:03Although these forward looking statements are based on management's current expectations and beliefs, actual results may differ in a material way. For a discussion of some of the factors that could cause actual results to differ, take you to the Risk Factors section of Summit Materials' latest annual report on Form 10 ks, which is filed with the SEC. You can find reconciliations of the historical non GAAP financial measures discussed in today's call and our press release. Today, I'm pleased to be joined by Ann Noonan, Summit's CEO and Scott Anderson, our Chief Financial Officer. Ann will begin with Speaker 300:01:34the business update, Scott will Speaker 200:01:36then review our financial performance, and then we'll conclude our prepared remarks with our view on the path forward. After that, we will 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. I'll now turn the call over to Anne. Speaker 400:01:54Thank you, Andy, and a warm welcome to everyone joining today's call. At Summit Materials, the teams across our footprint have a lot to be proud of. Our remarkable second quarter results, which includes several safety, operational and financial records, clearly signaled that our strategic focus as well as our safety first approach to everything we do is culminating in tremendous success across all important measures of our business. For safety, we are halfway through the year and our recordable incident rate is trending ahead of target as we collectively emphasize the leading metrics and technologies that help prevent injuries, minimize lost time and keep our employees as well as our community safe. Safety at Summit is a perpetual work in progress, but it is an everyday value where we empower our people and aim for continuous improvement on our journey towards 0 harm. Speaker 400:02:44Financially, the Q2 extends momentum for earlier in the year and puts us on very solid footing to again raise our financial commitments for 2023. And importantly, we have taken strategic steps that continue to strengthen our capabilities and our portfolio in a way that ensures we are building a summit that can meet tomorrow's challenges, seize its opportunities and deliver attractive growth and profitability for our shareholders. On Slide 4, I'm pleased to review the financial highlights from the Q2, for which there are plenty to cover. Here you can see we delivered outstanding record setting performance across nearly all metrics. Sustained pricing momentum for each of our lines of business and in each of our local markets was the primary fuel for revenue growth and even stronger profitability growth. Speaker 400:03:33We realized mid teens pricing growth in every business driven by inflation justified pricing actions in combination with sharp execution of value pricing principles. Cash gross profit and adjusted EBITDA each increased roughly 17%, the strongest second quarter growth rate since 2017, as positive price net of cost more than offset lower, albeit resilient organic volumes in the quarter. Given these substantial performance tailwinds, a more constructive view on second half operating conditions and contributions from recently completed acquisitions that I'll discuss momentarily. We are confident in again raising our adjusted EBITDA expectations for 2023. I'll spend more time on the embedded components of the outlook later in our prepared remarks. Speaker 400:04:22But the bottom line is that we are capitalizing on market opportunities, raising the bar operationally and well positioned to deliver significant profitable growth in 2023 for the organization and our shareholders. Our progress is most evident in our Summit scorecard on Slide 5. We grade ourselves in a very transparent and consistent manner to reinforce our strategic and financial direction externally. And despite inflationary impediments, we're delighted by the strides we're making against 3 financial targets. Leverage at 2.3 times was flat sequentially and better versus the prior year. Speaker 400:04:59Maintaining our leverage while adding attractive assets to our portfolio is an especially positive story considering we remain well below target and therefore have the headroom available to aggressively pursue organic and inorganic growth opportunities. ROIC at 10.1% is a new Elevate Summit high and crosses over our target threshold. Having reached our goal minimum, We view this achievement not as a stopping point, but rather as a starting point we intend to build upon. Especially in a higher rate environment, we know it's critical to continuously scrutinize the returns of each of our assets. And fortunately, that discipline is now a reliable part of our organizational DNA. Speaker 400:05:40And finally, our last 12 month adjusted EBITDA margin set a high watermark at 23.5%, up 70 basis points sequentially and more than a full percentage point better than at this point last year. This advancement clearly embodies positive trends for price and cost, executing against our self help margin opportunities and reflecting a more advantaged portfolio where we're leading in the right markets and determine to achieve our 75% target for EBITDA generated from our upstream businesses. Obviously, we have more ground to cover to reach our 30% goal, and we know progress won't always be linear. But I could say without equivocation that we are motivated and committed to reaching the Elevate Summit margin target we set back in 2021. We have complemented our financial progress by strategically leveraging our fortified balance to strengthen the composition of our portfolio via value creating M and A. Speaker 400:06:37In the Q2, we completed 3 acquisitions that meet our criteria for portfolio optimization that we've previously outlined and can be seen on Slide 6. As we strive towards our Horizon 2 objective of at least 75% of adjusted EBITDA from aggregates or cement, We acquired 2 pure play aggregates businesses that enhance our reserve positions, extend our market leadership in Missouri as well as in the North Texas and Oklahoma markets and position those businesses to capitalize on local market opportunities. Additionally, with the purchase of Arizona Materials, Summit enters one of the fastest growing MSAs with a leading integrated construction materials asset. This acquisition achieves footprint expansion into targeted geographic white space and positions us to benefit immediately from favorable growth conditions in Phoenix. In 2022, for the 2nd consecutive year, Population growth in Maricopa County was the largest of any county in the U. Speaker 400:07:36S. This continues a secular trend for robust domestic migration into the Phoenix MSA and supports a deep and ongoing need for single family residential construction. Phoenix and the surrounding area also promises to be a prime market for meaningful and sustainable commercial construction. Arizona is a leading market for the on shoring and reshoring of heavy industrial manufacturing. They have led the nation in chip investments since 2020, establishing the Phoenix area as a destination for large scale semiconductor manufacturing like the ones already announced by Taiwan Semiconductor and Intel. Speaker 400:08:14But private commercial investment stretches beyond semiconductors with several electric vehicle, electric battery and clean energy projects announced for Phoenix and nearby markets. And then finally, the public end market, which will be roughly 20% of our Phoenix business, will benefit from a legislative capital budget for Arizona DOT of $3,100,000,000 in fiscal 2024, which is 53% higher than fiscal 2023 levels. The point is entry into this rapidly growing MSA provides Summit with attractive near term opportunity, but also a runway to build out a more extensive materials oriented growth platform in that geography over time. If you consider each acquisition individually, each presents compelling value creation for Summit and our shareholders. And collectively, they underscore our intentions to play offense in Horizon 2 by aggressively, yet Advancing the portfolio in line with a disciplined framework that richens our portfolio mix and generates substantial value. Speaker 400:09:18With that, let me hand over to Scott to take you through the quarter in more detail. Speaker 100:09:23Thanks, Ann. And I'll begin on Slide 8 with a review of business segment results for the quarter. Let's start in our West segment, where we witnessed a very nice rebound following the Q1 hampered by wet and cold conditions in Salt Lake City. On a reported basis, net revenue was up nearly $50,000,000 with roughly half coming from organic growth and the other half coming from acquisitions. Aggregates pricing remains a very positive story with 2nd quarter and first half pricing up 18.5% and 21.6 percent respectively. Speaker 100:09:55While price growth is strong across the West segment, it is particularly robust in Texas, including our core markets of Houston and North Texas. Importantly, the demand environment has proven especially resilient as 2nd quarter volumes for aggregates and ready mix demonstrated substantial sequential recovery following challenging Q1 weather conditions that thankfully abated in Q2. For asphalt, pricing and volume growth of 16% and 8.3% respectively largely reflect a healthy infrastructure backdrop, especially in North Texas, our largest asphalt market. West segment adjusted EBITDA increased 23.5 segment due in part to contribution from M and A, but mostly reflecting positive price cost dynamic. For our E segment, net revenue decreased 9.3%, exclusively due to divestiture as organic revenue was actually up approximately $17,000,000 in the period. Speaker 100:10:53Aggregates pricing increased more than 10%, led by growth in Missouri and Kansas. Despite divestitures, ag volumes were positively fueled by solid growth in Virginia and Kansas. Notably, in the coming quarters as we lap our 2022 divestitures. What will emerge is an Ags dominated portfolio and you're beginning to see that reflected in our adjusted EBITDA margins. 2nd quarter margins increased more than 300 basis points and year to date EBITDA margin is up over 4.50 basis points relative to the comparable prior year periods. Speaker 100:11:26Thus, as designed, our divestitures moves in combination with Greater Greenfield contribution to create an e segment capable of delivering very attractive run rate profitability. Lastly, pricing for our Continental Cement business increased 16% year over year and accelerated sequentially as the team is executing on the pricing plan with a July 1 price increase currently in the marketplace. Adjusted EBITDA increased 22 0.3% in Q2 fueled by positive price momentum, reduced distribution costs and greater contribution from Green America Recycling, a key growth driver and margin enhancer for Cement Business. On Slide 9, we present the pricing profile by line of business and the clear takeaway is that each business line was able to sustain very healthy pricing momentum in the second quarter. We know that as we move into the back half of the comparisons, we'll get incrementally more challenging. Speaker 100:12:23But that doesn't change the fact that we are operating in a very constructive pricing environment. We have implemented fresh pricing across our footprint and across our businesses. For aggregates, they differ in terms of timing and by market, but generally fall within that mid single digit range. On cement, as we previously discussed, we have implemented a mid year price increase of $10 a ton that simultaneously reflects inflationary input cost, ongoing tightness in supply and demand conditions and the unique value we bring our customers. Especially along the river where distribution conditions can be challenging. Speaker 100:13:00We've invested behind our product and our distribution network to ensure security of supply and Top Tier customer service. Factoring in the pricing actions across the Ags and Cement, we have consequently upgraded our materials pricing forecast for the year. On aggregates, we're now expecting pricing to be in the low teens range. And for cement, we're refining our expectation to mid teens for 2023 versus double digits previously. For the downstream, we continue to pass along higher cement costs via ready mix price with both Houston and Salt Lake delivering low teen pricing gains relative to Q2 2022. Speaker 100:13:38On asphalt, price grew 17.9% in Q2. And for our 2 largest markets, which comprise roughly 80% of our total asphalt business, North Texas and the Intermountain West. The pricing backdrop is very healthy and underpinned by robust public backlogs. Shifting now to volumes on Slide 10. And overall, I'd characterize the demand environment as pacing with or better than our expectations. Speaker 100:14:04With expectation in regards to non res and public end markets and better than expectations in regards to residential demand. These trends are most visible in the sequential improvement in ready mix and aggregates organic volume growth rates. Growth trends improved 8 0.3 percentage points for ready mix and 1.4 percentage points for aggregates from Q1 to Q2. And had we not had a temporary pullback in our British Columbia volumes, we would have experienced positive organic aggregates growth in the period. Nevertheless, residential activity in Houston and to a lesser extent Salt Lake City has proven more resilient than our expectation and that's resulted in volumes holding up relatively well. Speaker 100:14:49For Cement. Flattish quarterly and year to date volumes largely reflect a capacity constrained environment and are relatively consistent with how we see things moving forward. And for asphalt, strong year to date organic growth is tracking slightly ahead of our mid single digit growth for Public End Market this year, but still serves as confirmation that we're seeing the positive benefit from the IIJA impacting our business. Moving to Slide 11 for a look at cash gross margins. And while cost headwinds certainly continued in the 2nd quarter, We are seeing early evidence of cost abatement across several cost buckets. Speaker 100:15:27This cost moderation together with the compounding impacts of pricing actions and a sharp focus on operational excellence clearly makes us confident that conditions are right for margin recovery and then expansion. The total company GAAP cash gross profit margin expanded 280 basis points in Q2 and is up 290 basis points year to date, driven primarily by Cement and the product lines of business. For Cement, as we mentioned earlier, price alongside unique self help margin opportunities like our Davenport storage dome, full production conversion to Portland limestone cement and expansion of our Green America Recycling is powering substantial and sustainable gross margin growth. With regards to products, Encouragingly, both asphalt and ready mix experienced cash gross margin expansion this quarter despite persistent cost headwinds. Our teams are passing through inflation justified price increases, executing on short load fees where and when appropriate and in the process adding points of margin. Speaker 100:16:30Embedded in this process is a selective and unapologetic approach to the downstream where we compete in the right markets with advantaged assets. Turning to aggregates, where cash gross margin was virtually flat in Q2 versus the prior year. This represents an improvement in year on year trends versus Q1 'twenty three, but still short of where we'd like to be due to two factors. First, the prior year period had favorable cost recognition that did not repeat this year. And second, we experienced product and geographic mix headwinds relative to the year ago quarter. Speaker 100:17:05Controlling for these impacts, unit profitability would have increased roughly 20% in the period. This underlying trend improvement feeds our overall view that gross margin improvement for Ags is on the horizon and should be imminent. Before wrapping up, I'd like to refresh, but also reiterate our perspective on cost trends for 2023. If you recall, we had previously discussed mid to high single digit cost inflation for 2023, and that still feels like a reliable and reasonable estimate. What we saw in the front half was in the high single low double range, so we expect second half inflation to approximate that mid single digit range. Speaker 100:17:43Clearly, cost pressures are uneven with diesel and logistic costs coming down, while other things like equipment, labor and maintenance costs remain quite sticky. Therefore, our leadership team will continuously stress controlling our controllables and more specifically, emphasize executing on our commercial and operational excellence plans. I'll wrap up on Slide 12, where adjusted EBITDA margin increased 220 basis points year on year to 28.2%, driven by cash gross margin expansion as G and A spend ticked up, but is in line with our revised expectations that Ann will cover shortly. Adjusted diluted net income and adjusted diluted earnings per share improvement reflect strong operating results, partially offset by higher interest expense. And for the purpose of calculating adjusted diluted earnings per share, please use a share count of 120,200,000, which includes 118,900,000 Class A Shares and 1,300,000 LP Units. Speaker 100:18:43With that, I'll now turn it back over to Anne to provide an update on our 2023 guide. Speaker 400:18:49Thank you, Scott. In yesterday's release, we again raised our 2023 adjusted EBITDA guidance, this time to $560,000,000 at the midpoint, up from $510,000,000 previously. And now we anticipate mid teens percentage growth in adjusted EBITDA for 2023. Given our recent portfolio moves as well as the vitality of the current operating environment. We thought it would be useful to bridge from our previous expectations to where we are today on Slide 14. Speaker 400:19:18Clearly, our record setting Q2 was well ahead of the expectations we characterized in May. If I were to quantify Roughly $7,000,000 was from in quarter acquisitions and $15,000,000 to $20,000,000 can be attributed to better than forecasted second quarter performance. Looking forward, you can layer on roughly $12,000,000 in adjusted EBITDA for the remainder of 2023 from recently completed acquisitions that weren't Incorporated. Turning next to our year to go updates for price, volume and costs. Having now implemented and executed pricing actions across the enterprise, We have better visibility to in market traction for each of our lines of business. Speaker 400:19:58And while not uniform, we have seen very solid price realization and can now incorporate what we expect to generate from these mid year price actions. To put a finer point on it, we were out with mid single digit price increases in our ags market and the $10 per tonne for cement went into effect July 1. Overall, market receptivity has been broadly positive. The one area we're watching closely and that's not unique to Summit is import influenced cement markets. What may emerge as freight rates have come down, the dollar strengthened and oil prices have fallen, is imports pressuring certain markets? Speaker 400:20:36The ramification may be that you and we have factored this assumption into today's revised outlook. Similar to price, we are also upgrading our volume expectation for the second half on the back of residential resiliency. If you recall, in May, we discussed residential declining 25% in 2023, while also leaving the door open for further revisions. Now we are revising that expectation to down 20% for the year. We feel comfortable recalibrating residential demand based on what we see on the ground in Houston, where activity continues to improve and economic conditions for further recovery and acceleration of single family construction. Speaker 400:21:24Meanwhile, in Salt Lake City, while activity is still slow relative to COVID era activity. Now that we're clear of weather related Q1 complications, we have a better view on conditions and think that the bear case scenario is unlikely to play out. We believe Q3 and Q4 will be sequentially stronger, and we are hopeful this key market will build NICE exit velocity heading into 2024. That said, we continue to reflect a longer, more protracted normalization profile for Salt Lake into our latest forecast. Regardless of the near term recovery trends, we have strong conviction in the long term growth and potential for each of our major residential markets. Speaker 400:22:05Each have sound economic engines that should power long run growth. In Houston, the energy sector, a vibrant port and a growing medical community is bringing jobs and solid economic growth to one of the largest housing markets in the country. And Salt Lake, an emerging tech hub alongside tourism is the backbone of their economy and should support wage and job growth for the foreseeable future. In both cases, supply levels are more than a month below what we would regard as healthy, and we believe strongly that we are playing in advantaged markets. Aside from residential, we are maintaining our demand outlook for non residential at flattish and public at up mid single digits for this year. Speaker 400:22:45If we were to add color to each, it would be that non residential growth will be project and timing dependent. If certain projects in our footprint commence in the second half, and growth will be positive, but that's still uncertain. And for public, we have strong conviction that will land well within our outlook and that's supported by robust backlogs in our largest public markets. Putting it all together, if before we were expecting volumes down mid single digit for this year, We are now low to mid single digit with aggregates and ready mix down, cement flattish and asphalt experiencing volume growth that proxies our public demand outlook. Lastly, on cost, we are reiterating our outlook for mid to high single digit variable cost inflation this year. Speaker 400:23:30Although as Scott said, we expect a moderation in the pace of inflation in the second half, consistent with easiest prior year cost comparisons. The main change to our previous cost outlook regards G and A, where we are now calling for between $205,000,000 $215,000,000 in G and A for 2023 or approximately $110,000,000 year to go spend largely to fully account for performance based compensation. Rounding out our outlook items, our midpoint assumptions for interest expense is approximately $110,000,000 to reflect a higher rate environment at CapEx of $250,000,000 which we increased to reflect capital spend for our recent acquisitions. Let me sum it up by coming back to one of our Elevate Summit metrics, adjusted EBITDA margin. For 2023, thanks to performance to date as well as upgraded expectations. Speaker 400:24:24We now feel confident raising our full year margin outlook to between 23.5% 24%, a sizable step up from 2022, and if achieved, would be an all time Summit record. No matter what way you look at it, we are pacing towards record year for our business. Operationally, strategically and financially, our Elevate plan is working. And when we stay true to and against the capabilities and priorities you see on Slide 15, we have a unique and sustainable model for meaningful growth. We want to thank our shareholders for their continued support and now Scott and I would be happy to answer your questions. Operator00:25:17We'll take our first question from Trey Grooms with Stephens. Your line is now open. Speaker 500:25:24Yes. Thanks and good morning, Anne, Scott and Andy. Nice work on the margins there in the quarter, particularly in the Cement business and I guess also the product side as well. Could you talk about the primary drivers there? I know you touched Some Speaker 200:25:42of them, but maybe you Speaker 500:25:44could dive into some specifically around cement and then maybe kind of discuss your thoughts on the sustainability of the margin improvements you're seeing there. Speaker 400:25:54Yes, Trey. So honestly speaking, our team have done a fantastic job on execution under David Looms leadership in Cement. And really, I will just add to the latter part of your question. I believe it is very sustainable. As you recall, we set our North and the team's been on a multiyear plan to achieve that. Speaker 400:26:21And if you look at where we are, just trailing 12 months right now, the team has achieved 36.7%. And that's really through a number of levers. And this journey started back in 2020, where the team was hyper focused on customer segmentation to expand margins and on our supply chain optimization. So between 2020 2021, the team really focused there and started this margin accretion path. More recently, it's really been driven by 4 key areas. Speaker 400:26:50So pricing, value pricing, working with our customers to really get the value of our products and expand margins has been very strong on execution. The second area I'd highlight is around our investment in the Davenport Dome, which as you recall, brought down our costs, again, margin accretive and made it more safe for our employees, while also providing our customers with security of supply. We also invested in our grinding capacity. And then the 3rd area, PLC, we were the 1st in the U. S. Speaker 400:27:18To move with the conversion to Portland limestone cement, which as you know is adds capacity, is good for our carbon base and also expands our margins by having a lower cost. And then the final area, which is extremely margin accretive is our Green America Recycling, which we've invested to expand. And in 2023 alone, that's generating $14,000,000 EBITDA on a base revenue of $25,000,000 so very margin accretive. And the path continues because we just announced last quarter our Davenport investment in non haz waste to get the Flex Fuel technology in, and that will allow us to convert up to 50% of our fossil fuels, reducing our costs even further by reducing coal and pet coke in our kiln. So overall, the Team has done a great job on this path to 40%, and we're very confident that we can get that sustainable trailing 12 month margins. Speaker 400:28:11But there's a number of levers, Trey, as you see from that list I just gave you. Speaker 100:28:16Yes. Thanks, Ann. That was Operator00:28:26Okay. Next, we'll go to Keith Hughes with Truist. Speaker 300:28:31Thank you. Questions on the volumes in ready mix. Had a problem for a couple of quarters. Has the weather and the other issues cleared? What do you think that's going to look like in volumes in the second half of the year? Speaker 400:28:44Well, really the ready mix volumes are being driven primarily by our residential and our non residential segments. Clearly, we started the year out when we gave our first guide, saying residential will be down 30%. We upgraded that last quarter and we're upgrading it again to 20%. And last quarter, if you recall, Keith, it was very much about Houston being better than we thought. And really there, you've got those larger builders that are able to leaned into the rates, basically abate some of the concerns around affordability and spurred new market growth on homes. Speaker 400:29:20Salt Lake City started the year very with no with very bad weather, so really lost 50 days. Right at the beginning, we were very pleased to see it come back on here in Q2, but it's had a short season and it's coming from very high highs. There we're starting to see a pickup and you should Guide to Guide, the one that we've increased versus our last guide, and we remain confident in it. Now that being said, It's still down versus COVID era levels, but we think the fundamentals for residential are very strong. Demand is still being driven by household formation, by high income, by consumer confidence, supply has been driven, very low inventory. Speaker 400:30:11Those two markets, one has 2.6 months in Houston of inventory in Houston and Salt Lake City only has 2 months. You've got there also the resale market is very challenged and also you got builder confidence. So overall, we'll see ready mix improve, but we're not leaning into it very heavily at this point. Speaker 300:30:30Okay. Thank you. Operator00:30:34Thanks. Next, we'll go to Derek Shmois with Loop Capital. Your line is open. Speaker 300:30:39Hi, thanks. Congrats on the quarter and the outlook. I'm wondering if you could speak on M and A. You've made several acquisitions here recently. Thanks for the detail there. Speaker 300:30:50But your balance sheet now is below 3 times leverage, which is your goal. And I'm hoping you could talk a little bit about your desire perhaps to use your balance sheet to make additional acquisitions from here. Speaker 400:31:03Yes. So we were really pleased. If you recall the last few quarters, I've been talking about this rich pipeline, Garrick, that we were working on. And obviously, 3 of those acquisitions came to fruition, all with the ability to advance our materials led position and nothing changes. We're at 2.3x at the end of the quarter. Speaker 400:31:20We have a lot of headroom to grow. The pipeline is very strong. Our team is very active. They're disciplined, though, as we've said we would be. We've stated our Elevate goals. Speaker 400:31:31And the Arizona acquisition is a great example of we set about with key targets and key geographies that had strategic high growth and That's exactly what you can continue to see from us. You'll see materials led, going into strategic high growth markets just like Arizona, and the discipline that we've had before. So we have a lot of room. We feel this is the best value for our shareholders by reinvesting in the business in the form of M and A and also our Greenfields and organic growth. Operator00:32:07All right. We'll next go to Mike Dahl with RBC Capital Markets. Your line is now open. Speaker 100:32:14Thanks for taking my questions. Just a follow-up on the acquisitions. And can you just you outlined kind of the contribution the quarter and remainder of the year. So from a full year standpoint, on a pro form a basis, just help us fully quantify what these add in terms of EBITDA and maybe revenues as well. And then can you talk to get 2 of the acquisitions were existing markets, one was News in the existing markets, maybe talk to some Speaker 300:32:42of the synergy opportunities as well. Speaker 400:32:46Yes. I'll answer the latter part of that question, then let Scott give you the specifics on the actual contribution. So 2 of the aggregates acquisitions, one was in North Texas and is really one quarry. It helps us build out an market that we're in, improve our vertical integration, so good aggregates pull through, great example of extending our reserves. The other one was in Northwest Missouri and it's 3 quarries and that's a great example of being margin accretive, extending our materials led position in Missouri and it's right site our existing footprint. Speaker 400:33:17So we should be able to as we go into these, generally, we'll look to take 1 to 2 turns post synergies of and it's really back office, our pricing and our operational excellence that we put into these ags acquisitions. And as you know, it's in the DNA of the company, Mike, that we just do this very well and the team is already executing extremely well against that. Scott, maybe you'll talk to this specific contribution for Mike. Speaker 100:33:40Yes, Mike, just on the second quarter performance, you can use $7,000,000 EBITDA from the acquisitions. And then on the go forward outlook. You'll see it there in our slides that we've got $12,000,000 attributed to the M Speaker 300:34:00and A. Okay. Thank you. Speaker 400:34:02Does that answer your question, Mike? Speaker 100:34:05Yes, I guess the 1Q performance 1Q is usually a small quarter for you. So if I'm taking like the $19,000,000 that you're outlining, Should we just kind of round up to being a $20,000,000 a year type of contribution? Yes, that's fine. Speaker 300:34:23Okay. Speaker 400:34:26Thanks. Thanks, Mike. Operator00:34:28Next, we'll go to Anthony Pettinari with Citi. Your line is now open. Good morning. Speaker 400:34:37In Speaker 300:34:39cement, you talked about maybe some increased competitive intensity import exposed markets. And I'm just wondering, I mean, if that's a comment on pricing, is that something that you are seeing currently or that maybe you anticipate seeing in the second half or going forward or just wondering if you could give any more color on that comment. Speaker 400:35:05Yes. I think what's as I said in my prepared comments, first of all, our river markets are largely insulated from import exposure. The one area we have is Louisiana, which is about 10% of our volume, just to put in perspective. There you see Freight rates going down, you see high demand. And so there, I would say imports are pressuring a little bit more in Louisiana, and we saw that as we went for our mid year price increase. Speaker 400:35:31That being said, we had extremely strong execution along our river markets that are not import imposed. And so we're watching it. I don't think it's a huge factor to worry about moving forward. It just everyone had this very big price increase at the beginning of the year. We went for the mid year price increase. Speaker 400:35:48The team had excellent execution in all of our other markets. So, something to watch. Imports are always something we watch very carefully, but we're not overly exposed to it as a company. Speaker 300:36:00Okay. That's helpful. I'll turn it over. Speaker 400:36:03Thanks, Anthony. Operator00:36:04Next, we'll go to Phil Ng with Jefferies. Your line is now open. Okay, go ahead, Phil. Your line is now open. Speaker 600:36:26Sorry about that. Can you hear me now? Speaker 300:36:28Go ahead. Speaker 600:36:31Yes. Sorry about that. Congrats on another strong quarter. My question is for Scott. Aggregates, just from a demand and pricing has been really strong. Speaker 600:36:39Margin has been a little less robust. You talked about confidence in driving margin expansion. Should we expect that to come through by the back half? And you guys have talked about a North Star for Cement from a margin profile. How should we think about the path for margins in the aggregates business when we kind of look out in the back half going to 2024, that ability to kind of drive that expansion going forward. Speaker 100:37:04Yes, Phil, actually, I'm glad you asked the question about margin expansion in AgX. As you can see from our results here in Q2, we did improve over Q1 and it's something we're definitely intently focused on in getting that expansion. And as we look into Q3 and Q4, the back half of the year, really it comes down to 2 things. We've got a good read on price. So it really comes down to volumes and cost and volumes appear to be holding up relatively well. Speaker 100:37:35So really it's on the cost side and we are seeing the cost start to moderate, the inflation is starting to moderate and our operational excellence improvements that we are working towards are really starting to deliver now. So You can see we built up we narrowed that gap in Q2 and I think you'll see expansion in Q3. So that's where we're headed. We do have a North Star target. It's 60% for our ag's gross profit margins. Speaker 100:38:05And We are intently on focusing and continuing getting that expansion as we head towards that 60%. Speaker 400:38:11I'd just add, Phil, that as you look at the runway towards that, we have, As Scott pointed out, you got your operational, your commercial excellence. You also had the impact of our greenfields, which are extremely margin accretive. And then you've got like the acquisitions we did this quarter, accretive ags acquisitions will expand that margin as well. So you've got the 4 levers. And as we've talked before to operational excellence, that's one of the things that gives us some upside as a company because of our maturity and getting those Ags margins there. Speaker 400:38:38We remain very confident and glad to see the progress start this quarter. Speaker 600:38:43Okay. Appreciate all the great color. Operator00:38:47Next, we'll go to Adam Thalhimer with Thompson Davis. Your line is now open. Speaker 200:38:54Hey there, great quarter. Operator00:38:57Was that 60% on an annual basis or Speaker 600:38:59you're just saying there might be a quarter out there where you could hit 60% ags margin? Speaker 400:39:04It's on an LTM basis over time. It's a North Star objective. It's not within the year. So we've set a very lofty objective for our team. But as I said in my comments, you can get there through all the levers that we have. Speaker 400:39:18And I just kind of listed those out. But I think the operational excellence one is the one we talked about last quarter. We're just starting to get momentum on that and starting to drop dollars to the bottom line, and that's where we really feel we can make progress over time and get to 60% target. Thanks. Speaker 200:39:35Okay. Thanks, Ed. Great quarter. Speaker 400:39:37Thank you. Operator00:39:39Next, we'll go to Brent Thielman with D. A. Davidson. Your line is open. Speaker 300:39:45Hey, great quarter as well. Thanks. Just I mean, not an insignificant amount of capital here put to work towards deals through the first half and clearly focused on and a platform expansion. I'm hoping you could just comment on what's sort of different about the M and A strategy couldn't work today versus what we that came to know about the legacy strategy at Summit. What about these transactions or the characteristics and composition of the deals or sort of different from the old strategy. Speaker 400:40:18Yes. Great question. Thanks, Brent. If we if you go back to when we launched Elevate, we said we're going to be very materials led, and we'd be very selective in the down and the big difference is, we have been very clear that we will only be in downstream markets where we can be leading positions. And the Arizona Materials acquisition is a great example of that, where we're entering a high growth market with a leading position in ready mix. Speaker 400:40:47We're really good at the downstream and we're unapologetic about being in it, but we're very selective. And so you saw the margins come out of that downstream. Our portfolio is so much better today with the divestitures that we did in some of the underperforming downstream businesses where we didn't have leading positions. So what we look for is this vertical integration model. And if you look at Phoenix, we look at it as an opportunity to maybe replicate Salt Lake City, which is the market where Vertically integrated, you compete along every point of the value chain with the same competitors, which allows you then to get these high profit, high return businesses. Speaker 400:41:23And we see that we have a pathway through this acquisition to actually replicate our Salt Lake City Downstream market in Phoenix. So we're very excited about this platform as we move forward. And that's a key difference. We will not go into positions where we're like sub positions in a market where you're number 4 or 5. It has to be a leading position and it has to lead to a path of being materials led just like the Phoenix acquisition where you have a strong ag space and ability to bolt on in a largely fragmented market. Speaker 300:41:57Okay, very good. Thank you, Anne. Speaker 400:41:59Thanks, Brent. Thanks, Brent. Operator00:42:05Star then the number one on your telephone keypad. Next, we'll go to a David MacGregor with Longbow Research. Your line is open. Speaker 300:42:14Yes. Good morning and nice quarter. Just to clarify on that last M and A question, are there other sort of new geographic regions that you're contemplating within your current M and A funnel. Obviously, you're not going to get into a lot of detail around that, but I'm just wondering if we're going to see you entering other new geos. And then I wanted to for my principal question, I wanted to ask about the aggregates cash gross margins, go back to that because in your prepared remarks, You cited a couple of drivers the prior year favorable cost recognition, there were some regional differences. Speaker 300:42:47I'm just trying to get a sense of the improvement you're expecting and those margins in the second half of this year. How much of it is just these year ago factors resolving and how much of it is operational improvement that you're achieving right now on a sequential basis. Speaker 400:43:01Yes. So let me ask the first part of your answer the first part of your question and then Scott will address your question on the market specific margin question. So David, as you recall, we announced 1, an acquisition in Ocala, Florida. That was a great example of a strategic growth market that we had identified and we're in the process of very active building that out right now. Phoenix is now our next one and we do have others. Speaker 400:43:25For competitive reasons, I obviously won't go into specifics on those. But we do have those. If you think about our M and A, it's a mix of that going into new platforms, strategic high growth platforms and it's building out from making the circle bigger from where we belong today. And The 2 ags acquisitions were a great example of that bolt on strategy as well. So expect more of the same is how I would to finance. Speaker 400:43:49Scott, maybe you want to address some of those margin questions? Speaker 100:43:52Yes. So David, you called out the favorable cost adjustment from a timing issue in the prior year. And really all that amounts to is, last year with the rapid pace of inflation, we had to pull forward the standard costing end of June. Usually, we do that in Q3. So it's a timing. Speaker 100:44:14It will smooth out in Q3. It really won't affect the annual performance at all. As far as the margin expansion though, when I think about the if I isolate the back half, I think about the cost coming down from that high single digit really to a mid single digit. And then on the pricing side, as we've talked about, Really the back half of the comp gets a little harder, so we're probably only going to be at the double digit. But I think that's where we're going to get our expansion that cost is going to be coming off in the back. Speaker 100:44:43And then as we've already talked about the operational improvement initiatives, we've got $20,000,000 identified in operational improvement initiatives. Now that won't all hit this year, but definitely we're going to see some material impact from Speaker 200:44:59that in the Speaker 100:45:00business. Does that answer your question, David? Speaker 300:45:03It does, Scott. Thanks very much. Thanks, Andy. Speaker 400:45:07Yes. Thanks, David. Operator00:45:08Okay. Next, we'll go to Jerry Revich with Goldman Sachs. Your line is open. Speaker 700:45:14Yes. Hi. Good morning, good afternoon, everyone. I'm wondering if I could just ask regarding the margin progression Q3 versus Q2. So with the mid year price increases flowing through in Ags and Cement. Speaker 700:45:28It sounds like we should see margins proving more than the two points we would see under normal seasonality, 3Q versus 2Q, but I just want to make sure there's No other pieces to think about in that progression versus normal seasonality this quarter. Speaker 400:45:46Yes. I think all the factors that we've talked about and Scott just went through will continue to be margin progression. I don't think you should see any difference in our seasonality moving through because Q3 is our biggest quarter, you know that, Jerry. And so we would expect a compound see additional tailwinds on pricing in Q3. And as Scott referenced, the cost should start to moderate and come off and we have our self help initiatives, so you should expect to see margin expansion over time. Speaker 400:46:14And that's why we were confident putting the overall expansion of margins in our guide for the full year at 23.5% to 24%. Speaker 700:46:23Yes, absolutely. Just trying to gauge whether there's upside to that end. And then in terms of the pricing outlook. Obviously, super early for 2024, but conceptually, given the outsized inflation we're seeing this year. Are you folks thinking about for Aggregates and Cement more substantial January 1 price increases than what we've seen over Long term history in this industry of 4% to 5%. Speaker 400:46:50Yes. Scott said costs have not abated. While energy and logistics may have come off a bit, we still see a lot in equipment, labor and repair and maintenance. So the Speaker 700:47:09Thank you. Speaker 400:47:11Okay. Operator00:47:12Next, we'll go to Kathryn Thompson with Thompson Research Group. Your line is open. Speaker 800:47:17Hey, good afternoon. This is actually Brian Biros on for Catherine. Thank you for taking my question. On asphalt, can you just touch more on the outlook here for the segment? With public spending Coming, it seems like asphalt side could really be a pretty big growth engine for you guys. Speaker 800:47:30I think you've alluded to that before. Is this how much more can volumes go either in the second half or 2020 for the strength of public activity coming down and are there any headwinds that would kind of limit the growth here Speaker 300:47:41for you guys? Thank you. Speaker 400:47:44Yes. I mean, to your point, it's been very robust. And I look at our if you just look at the IIJ dollars, they're definitely going in. And for the first time, You actually see that in the Texas state budget, and that's our biggest market for asphalt. If I look at our backlogs, just what's in the backlog today, we're up 40 year on year and we've another pipeline coming in very strongly after that. Speaker 400:48:07And with federal funding of the IIJA dollars, we expect that in the second half, It will be strong and continued strength. 2024 should be a very much outsized growth market year on year for public spending, and we're seeing it across our entire footprint. So if you look at year to date, we're up on our contract highway and paving awards in Texas by about 41%, Kansas 85%, Colorado 71%, and Missouri and Utah are up 20% to 25%. So we're very bullish on the public side and feel that our asphalt will grow. To your question about headwinds, Clearly, labor is something we're working on. Speaker 400:48:45We're increasing the size of our crews. We're planning to be able to meet all the demand that comes, but it is a challenge and it will continue to be from a labor perspective. But we've got a great team and great positions in our public markets and are very encouraged by the long term outlook for Public moving forward. Speaker 300:49:03Thank you. Operator00:49:06There are no further questions at this time. And Noonan, I'll turn the call back over to you for any additional or closing remarks. Speaker 400:49:15Summit's on pace for a record setting year with operational and market tailwinds that should push us towards unprecedented levels of growth and profitability. Our more positive outlook in Ray's guidance incorporates strong pricing execution, the operational opportunities that we are actively pursuing across our footprint and the accretive acquisitions we've already completed. We are winning in a dynamic marketplace, thanks to an improved portfolio, a clear strategic direction and a talent rich organization. We have a full plate of opportunities ahead of us, but our team is animated by pushing our progress further and is intently focused on delivering the financial commitments we expressed today. As always, we thank you for your continued support for Summit Materials and hope you have a great day. Operator00:49:59This concludes today's conference call. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallSummit Materials Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Summit Materials Earnings HeadlinesLarge M&A Fizzles Worldwide In FebruaryMarch 14, 2025 | seekingalpha.comNigeria to host Africa raw materials summitFebruary 25, 2025 | msn.comTrump wipes out trillions overnight…Is there anybody more powerful than Donald Trump right now? In a single tariff announcement, he wiped out nearly $5 trillion in wealth from the S&P 500 and $6.4 trillion from the Dow Jones… Not to mention the countless trillions of dollars lost in every market around the world… leaving the major political powers scrambling in fear of Trump’s next move.May 7, 2025 | Porter & Company (Ad)Summit Materials, Inc.: Summit Materials Announces Stockholder Approval of Quikrete TransactionFebruary 11, 2025 | finanznachrichten.deSummit Materials, Inc.: Summit Materials Completes Merger with QuikreteFebruary 11, 2025 | finanznachrichten.deSummit Materials (SUM) Receives a Hold from D.A. DavidsonFebruary 11, 2025 | markets.businessinsider.comSee More Summit Materials Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Summit Materials? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Summit Materials and other key companies, straight to your email. Email Address About Summit MaterialsSummit Materials (NYSE:SUM) is a vertically integrated construction materials company, which engages in manufacturing construction materials and related downstream products. It operates through the following segments: West, East, and Cement. The West segment includes operations in Texas, Utah, Arizona, Colorado, Idaho, Wyoming, Oklahoma, Arkansas and British Columbia, Canada. The East segments refers to its East and Central regions and serves markets extending across the Midwestern and Eastern United States. The Cement segment is involved in Hannibal, Missouri and Davenport, Iowa cement plants, and distribution terminals along the Mississippi River from Minnesota to Louisiana. The company was founded by Thomas W. 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There are 9 speakers on the call. Operator00:00:00Good morning. My name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Summit Materials' 2Q 'twenty three Earnings Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. Operator00:00:16After the speakers' remarks, there will be a question and answer session. Thank you. Andy Larkin, Vice President of Investor Relations, you may begin your conference. Speaker 100:00:35Hello, and welcome to Speaker 200:00:36the Summit Materials' 2nd quarter 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 a supplemental workbook, highlighted key financial and operating data. All of these materials can be found on our Investor Relations website. 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. Speaker 200:01:03Although these forward looking statements are based on management's current expectations and beliefs, actual results may differ in a material way. For a discussion of some of the factors that could cause actual results to differ, take you to the Risk Factors section of Summit Materials' latest annual report on Form 10 ks, which is filed with the SEC. You can find reconciliations of the historical non GAAP financial measures discussed in today's call and our press release. Today, I'm pleased to be joined by Ann Noonan, Summit's CEO and Scott Anderson, our Chief Financial Officer. Ann will begin with Speaker 300:01:34the business update, Scott will Speaker 200:01:36then review our financial performance, and then we'll conclude our prepared remarks with our view on the path forward. After that, we will 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. I'll now turn the call over to Anne. Speaker 400:01:54Thank you, Andy, and a warm welcome to everyone joining today's call. At Summit Materials, the teams across our footprint have a lot to be proud of. Our remarkable second quarter results, which includes several safety, operational and financial records, clearly signaled that our strategic focus as well as our safety first approach to everything we do is culminating in tremendous success across all important measures of our business. For safety, we are halfway through the year and our recordable incident rate is trending ahead of target as we collectively emphasize the leading metrics and technologies that help prevent injuries, minimize lost time and keep our employees as well as our community safe. Safety at Summit is a perpetual work in progress, but it is an everyday value where we empower our people and aim for continuous improvement on our journey towards 0 harm. Speaker 400:02:44Financially, the Q2 extends momentum for earlier in the year and puts us on very solid footing to again raise our financial commitments for 2023. And importantly, we have taken strategic steps that continue to strengthen our capabilities and our portfolio in a way that ensures we are building a summit that can meet tomorrow's challenges, seize its opportunities and deliver attractive growth and profitability for our shareholders. On Slide 4, I'm pleased to review the financial highlights from the Q2, for which there are plenty to cover. Here you can see we delivered outstanding record setting performance across nearly all metrics. Sustained pricing momentum for each of our lines of business and in each of our local markets was the primary fuel for revenue growth and even stronger profitability growth. Speaker 400:03:33We realized mid teens pricing growth in every business driven by inflation justified pricing actions in combination with sharp execution of value pricing principles. Cash gross profit and adjusted EBITDA each increased roughly 17%, the strongest second quarter growth rate since 2017, as positive price net of cost more than offset lower, albeit resilient organic volumes in the quarter. Given these substantial performance tailwinds, a more constructive view on second half operating conditions and contributions from recently completed acquisitions that I'll discuss momentarily. We are confident in again raising our adjusted EBITDA expectations for 2023. I'll spend more time on the embedded components of the outlook later in our prepared remarks. Speaker 400:04:22But the bottom line is that we are capitalizing on market opportunities, raising the bar operationally and well positioned to deliver significant profitable growth in 2023 for the organization and our shareholders. Our progress is most evident in our Summit scorecard on Slide 5. We grade ourselves in a very transparent and consistent manner to reinforce our strategic and financial direction externally. And despite inflationary impediments, we're delighted by the strides we're making against 3 financial targets. Leverage at 2.3 times was flat sequentially and better versus the prior year. Speaker 400:04:59Maintaining our leverage while adding attractive assets to our portfolio is an especially positive story considering we remain well below target and therefore have the headroom available to aggressively pursue organic and inorganic growth opportunities. ROIC at 10.1% is a new Elevate Summit high and crosses over our target threshold. Having reached our goal minimum, We view this achievement not as a stopping point, but rather as a starting point we intend to build upon. Especially in a higher rate environment, we know it's critical to continuously scrutinize the returns of each of our assets. And fortunately, that discipline is now a reliable part of our organizational DNA. Speaker 400:05:40And finally, our last 12 month adjusted EBITDA margin set a high watermark at 23.5%, up 70 basis points sequentially and more than a full percentage point better than at this point last year. This advancement clearly embodies positive trends for price and cost, executing against our self help margin opportunities and reflecting a more advantaged portfolio where we're leading in the right markets and determine to achieve our 75% target for EBITDA generated from our upstream businesses. Obviously, we have more ground to cover to reach our 30% goal, and we know progress won't always be linear. But I could say without equivocation that we are motivated and committed to reaching the Elevate Summit margin target we set back in 2021. We have complemented our financial progress by strategically leveraging our fortified balance to strengthen the composition of our portfolio via value creating M and A. Speaker 400:06:37In the Q2, we completed 3 acquisitions that meet our criteria for portfolio optimization that we've previously outlined and can be seen on Slide 6. As we strive towards our Horizon 2 objective of at least 75% of adjusted EBITDA from aggregates or cement, We acquired 2 pure play aggregates businesses that enhance our reserve positions, extend our market leadership in Missouri as well as in the North Texas and Oklahoma markets and position those businesses to capitalize on local market opportunities. Additionally, with the purchase of Arizona Materials, Summit enters one of the fastest growing MSAs with a leading integrated construction materials asset. This acquisition achieves footprint expansion into targeted geographic white space and positions us to benefit immediately from favorable growth conditions in Phoenix. In 2022, for the 2nd consecutive year, Population growth in Maricopa County was the largest of any county in the U. Speaker 400:07:36S. This continues a secular trend for robust domestic migration into the Phoenix MSA and supports a deep and ongoing need for single family residential construction. Phoenix and the surrounding area also promises to be a prime market for meaningful and sustainable commercial construction. Arizona is a leading market for the on shoring and reshoring of heavy industrial manufacturing. They have led the nation in chip investments since 2020, establishing the Phoenix area as a destination for large scale semiconductor manufacturing like the ones already announced by Taiwan Semiconductor and Intel. Speaker 400:08:14But private commercial investment stretches beyond semiconductors with several electric vehicle, electric battery and clean energy projects announced for Phoenix and nearby markets. And then finally, the public end market, which will be roughly 20% of our Phoenix business, will benefit from a legislative capital budget for Arizona DOT of $3,100,000,000 in fiscal 2024, which is 53% higher than fiscal 2023 levels. The point is entry into this rapidly growing MSA provides Summit with attractive near term opportunity, but also a runway to build out a more extensive materials oriented growth platform in that geography over time. If you consider each acquisition individually, each presents compelling value creation for Summit and our shareholders. And collectively, they underscore our intentions to play offense in Horizon 2 by aggressively, yet Advancing the portfolio in line with a disciplined framework that richens our portfolio mix and generates substantial value. Speaker 400:09:18With that, let me hand over to Scott to take you through the quarter in more detail. Speaker 100:09:23Thanks, Ann. And I'll begin on Slide 8 with a review of business segment results for the quarter. Let's start in our West segment, where we witnessed a very nice rebound following the Q1 hampered by wet and cold conditions in Salt Lake City. On a reported basis, net revenue was up nearly $50,000,000 with roughly half coming from organic growth and the other half coming from acquisitions. Aggregates pricing remains a very positive story with 2nd quarter and first half pricing up 18.5% and 21.6 percent respectively. Speaker 100:09:55While price growth is strong across the West segment, it is particularly robust in Texas, including our core markets of Houston and North Texas. Importantly, the demand environment has proven especially resilient as 2nd quarter volumes for aggregates and ready mix demonstrated substantial sequential recovery following challenging Q1 weather conditions that thankfully abated in Q2. For asphalt, pricing and volume growth of 16% and 8.3% respectively largely reflect a healthy infrastructure backdrop, especially in North Texas, our largest asphalt market. West segment adjusted EBITDA increased 23.5 segment due in part to contribution from M and A, but mostly reflecting positive price cost dynamic. For our E segment, net revenue decreased 9.3%, exclusively due to divestiture as organic revenue was actually up approximately $17,000,000 in the period. Speaker 100:10:53Aggregates pricing increased more than 10%, led by growth in Missouri and Kansas. Despite divestitures, ag volumes were positively fueled by solid growth in Virginia and Kansas. Notably, in the coming quarters as we lap our 2022 divestitures. What will emerge is an Ags dominated portfolio and you're beginning to see that reflected in our adjusted EBITDA margins. 2nd quarter margins increased more than 300 basis points and year to date EBITDA margin is up over 4.50 basis points relative to the comparable prior year periods. Speaker 100:11:26Thus, as designed, our divestitures moves in combination with Greater Greenfield contribution to create an e segment capable of delivering very attractive run rate profitability. Lastly, pricing for our Continental Cement business increased 16% year over year and accelerated sequentially as the team is executing on the pricing plan with a July 1 price increase currently in the marketplace. Adjusted EBITDA increased 22 0.3% in Q2 fueled by positive price momentum, reduced distribution costs and greater contribution from Green America Recycling, a key growth driver and margin enhancer for Cement Business. On Slide 9, we present the pricing profile by line of business and the clear takeaway is that each business line was able to sustain very healthy pricing momentum in the second quarter. We know that as we move into the back half of the comparisons, we'll get incrementally more challenging. Speaker 100:12:23But that doesn't change the fact that we are operating in a very constructive pricing environment. We have implemented fresh pricing across our footprint and across our businesses. For aggregates, they differ in terms of timing and by market, but generally fall within that mid single digit range. On cement, as we previously discussed, we have implemented a mid year price increase of $10 a ton that simultaneously reflects inflationary input cost, ongoing tightness in supply and demand conditions and the unique value we bring our customers. Especially along the river where distribution conditions can be challenging. Speaker 100:13:00We've invested behind our product and our distribution network to ensure security of supply and Top Tier customer service. Factoring in the pricing actions across the Ags and Cement, we have consequently upgraded our materials pricing forecast for the year. On aggregates, we're now expecting pricing to be in the low teens range. And for cement, we're refining our expectation to mid teens for 2023 versus double digits previously. For the downstream, we continue to pass along higher cement costs via ready mix price with both Houston and Salt Lake delivering low teen pricing gains relative to Q2 2022. Speaker 100:13:38On asphalt, price grew 17.9% in Q2. And for our 2 largest markets, which comprise roughly 80% of our total asphalt business, North Texas and the Intermountain West. The pricing backdrop is very healthy and underpinned by robust public backlogs. Shifting now to volumes on Slide 10. And overall, I'd characterize the demand environment as pacing with or better than our expectations. Speaker 100:14:04With expectation in regards to non res and public end markets and better than expectations in regards to residential demand. These trends are most visible in the sequential improvement in ready mix and aggregates organic volume growth rates. Growth trends improved 8 0.3 percentage points for ready mix and 1.4 percentage points for aggregates from Q1 to Q2. And had we not had a temporary pullback in our British Columbia volumes, we would have experienced positive organic aggregates growth in the period. Nevertheless, residential activity in Houston and to a lesser extent Salt Lake City has proven more resilient than our expectation and that's resulted in volumes holding up relatively well. Speaker 100:14:49For Cement. Flattish quarterly and year to date volumes largely reflect a capacity constrained environment and are relatively consistent with how we see things moving forward. And for asphalt, strong year to date organic growth is tracking slightly ahead of our mid single digit growth for Public End Market this year, but still serves as confirmation that we're seeing the positive benefit from the IIJA impacting our business. Moving to Slide 11 for a look at cash gross margins. And while cost headwinds certainly continued in the 2nd quarter, We are seeing early evidence of cost abatement across several cost buckets. Speaker 100:15:27This cost moderation together with the compounding impacts of pricing actions and a sharp focus on operational excellence clearly makes us confident that conditions are right for margin recovery and then expansion. The total company GAAP cash gross profit margin expanded 280 basis points in Q2 and is up 290 basis points year to date, driven primarily by Cement and the product lines of business. For Cement, as we mentioned earlier, price alongside unique self help margin opportunities like our Davenport storage dome, full production conversion to Portland limestone cement and expansion of our Green America Recycling is powering substantial and sustainable gross margin growth. With regards to products, Encouragingly, both asphalt and ready mix experienced cash gross margin expansion this quarter despite persistent cost headwinds. Our teams are passing through inflation justified price increases, executing on short load fees where and when appropriate and in the process adding points of margin. Speaker 100:16:30Embedded in this process is a selective and unapologetic approach to the downstream where we compete in the right markets with advantaged assets. Turning to aggregates, where cash gross margin was virtually flat in Q2 versus the prior year. This represents an improvement in year on year trends versus Q1 'twenty three, but still short of where we'd like to be due to two factors. First, the prior year period had favorable cost recognition that did not repeat this year. And second, we experienced product and geographic mix headwinds relative to the year ago quarter. Speaker 100:17:05Controlling for these impacts, unit profitability would have increased roughly 20% in the period. This underlying trend improvement feeds our overall view that gross margin improvement for Ags is on the horizon and should be imminent. Before wrapping up, I'd like to refresh, but also reiterate our perspective on cost trends for 2023. If you recall, we had previously discussed mid to high single digit cost inflation for 2023, and that still feels like a reliable and reasonable estimate. What we saw in the front half was in the high single low double range, so we expect second half inflation to approximate that mid single digit range. Speaker 100:17:43Clearly, cost pressures are uneven with diesel and logistic costs coming down, while other things like equipment, labor and maintenance costs remain quite sticky. Therefore, our leadership team will continuously stress controlling our controllables and more specifically, emphasize executing on our commercial and operational excellence plans. I'll wrap up on Slide 12, where adjusted EBITDA margin increased 220 basis points year on year to 28.2%, driven by cash gross margin expansion as G and A spend ticked up, but is in line with our revised expectations that Ann will cover shortly. Adjusted diluted net income and adjusted diluted earnings per share improvement reflect strong operating results, partially offset by higher interest expense. And for the purpose of calculating adjusted diluted earnings per share, please use a share count of 120,200,000, which includes 118,900,000 Class A Shares and 1,300,000 LP Units. Speaker 100:18:43With that, I'll now turn it back over to Anne to provide an update on our 2023 guide. Speaker 400:18:49Thank you, Scott. In yesterday's release, we again raised our 2023 adjusted EBITDA guidance, this time to $560,000,000 at the midpoint, up from $510,000,000 previously. And now we anticipate mid teens percentage growth in adjusted EBITDA for 2023. Given our recent portfolio moves as well as the vitality of the current operating environment. We thought it would be useful to bridge from our previous expectations to where we are today on Slide 14. Speaker 400:19:18Clearly, our record setting Q2 was well ahead of the expectations we characterized in May. If I were to quantify Roughly $7,000,000 was from in quarter acquisitions and $15,000,000 to $20,000,000 can be attributed to better than forecasted second quarter performance. Looking forward, you can layer on roughly $12,000,000 in adjusted EBITDA for the remainder of 2023 from recently completed acquisitions that weren't Incorporated. Turning next to our year to go updates for price, volume and costs. Having now implemented and executed pricing actions across the enterprise, We have better visibility to in market traction for each of our lines of business. Speaker 400:19:58And while not uniform, we have seen very solid price realization and can now incorporate what we expect to generate from these mid year price actions. To put a finer point on it, we were out with mid single digit price increases in our ags market and the $10 per tonne for cement went into effect July 1. Overall, market receptivity has been broadly positive. The one area we're watching closely and that's not unique to Summit is import influenced cement markets. What may emerge as freight rates have come down, the dollar strengthened and oil prices have fallen, is imports pressuring certain markets? Speaker 400:20:36The ramification may be that you and we have factored this assumption into today's revised outlook. Similar to price, we are also upgrading our volume expectation for the second half on the back of residential resiliency. If you recall, in May, we discussed residential declining 25% in 2023, while also leaving the door open for further revisions. Now we are revising that expectation to down 20% for the year. We feel comfortable recalibrating residential demand based on what we see on the ground in Houston, where activity continues to improve and economic conditions for further recovery and acceleration of single family construction. Speaker 400:21:24Meanwhile, in Salt Lake City, while activity is still slow relative to COVID era activity. Now that we're clear of weather related Q1 complications, we have a better view on conditions and think that the bear case scenario is unlikely to play out. We believe Q3 and Q4 will be sequentially stronger, and we are hopeful this key market will build NICE exit velocity heading into 2024. That said, we continue to reflect a longer, more protracted normalization profile for Salt Lake into our latest forecast. Regardless of the near term recovery trends, we have strong conviction in the long term growth and potential for each of our major residential markets. Speaker 400:22:05Each have sound economic engines that should power long run growth. In Houston, the energy sector, a vibrant port and a growing medical community is bringing jobs and solid economic growth to one of the largest housing markets in the country. And Salt Lake, an emerging tech hub alongside tourism is the backbone of their economy and should support wage and job growth for the foreseeable future. In both cases, supply levels are more than a month below what we would regard as healthy, and we believe strongly that we are playing in advantaged markets. Aside from residential, we are maintaining our demand outlook for non residential at flattish and public at up mid single digits for this year. Speaker 400:22:45If we were to add color to each, it would be that non residential growth will be project and timing dependent. If certain projects in our footprint commence in the second half, and growth will be positive, but that's still uncertain. And for public, we have strong conviction that will land well within our outlook and that's supported by robust backlogs in our largest public markets. Putting it all together, if before we were expecting volumes down mid single digit for this year, We are now low to mid single digit with aggregates and ready mix down, cement flattish and asphalt experiencing volume growth that proxies our public demand outlook. Lastly, on cost, we are reiterating our outlook for mid to high single digit variable cost inflation this year. Speaker 400:23:30Although as Scott said, we expect a moderation in the pace of inflation in the second half, consistent with easiest prior year cost comparisons. The main change to our previous cost outlook regards G and A, where we are now calling for between $205,000,000 $215,000,000 in G and A for 2023 or approximately $110,000,000 year to go spend largely to fully account for performance based compensation. Rounding out our outlook items, our midpoint assumptions for interest expense is approximately $110,000,000 to reflect a higher rate environment at CapEx of $250,000,000 which we increased to reflect capital spend for our recent acquisitions. Let me sum it up by coming back to one of our Elevate Summit metrics, adjusted EBITDA margin. For 2023, thanks to performance to date as well as upgraded expectations. Speaker 400:24:24We now feel confident raising our full year margin outlook to between 23.5% 24%, a sizable step up from 2022, and if achieved, would be an all time Summit record. No matter what way you look at it, we are pacing towards record year for our business. Operationally, strategically and financially, our Elevate plan is working. And when we stay true to and against the capabilities and priorities you see on Slide 15, we have a unique and sustainable model for meaningful growth. We want to thank our shareholders for their continued support and now Scott and I would be happy to answer your questions. Operator00:25:17We'll take our first question from Trey Grooms with Stephens. Your line is now open. Speaker 500:25:24Yes. Thanks and good morning, Anne, Scott and Andy. Nice work on the margins there in the quarter, particularly in the Cement business and I guess also the product side as well. Could you talk about the primary drivers there? I know you touched Some Speaker 200:25:42of them, but maybe you Speaker 500:25:44could dive into some specifically around cement and then maybe kind of discuss your thoughts on the sustainability of the margin improvements you're seeing there. Speaker 400:25:54Yes, Trey. So honestly speaking, our team have done a fantastic job on execution under David Looms leadership in Cement. And really, I will just add to the latter part of your question. I believe it is very sustainable. As you recall, we set our North and the team's been on a multiyear plan to achieve that. Speaker 400:26:21And if you look at where we are, just trailing 12 months right now, the team has achieved 36.7%. And that's really through a number of levers. And this journey started back in 2020, where the team was hyper focused on customer segmentation to expand margins and on our supply chain optimization. So between 2020 2021, the team really focused there and started this margin accretion path. More recently, it's really been driven by 4 key areas. Speaker 400:26:50So pricing, value pricing, working with our customers to really get the value of our products and expand margins has been very strong on execution. The second area I'd highlight is around our investment in the Davenport Dome, which as you recall, brought down our costs, again, margin accretive and made it more safe for our employees, while also providing our customers with security of supply. We also invested in our grinding capacity. And then the 3rd area, PLC, we were the 1st in the U. S. Speaker 400:27:18To move with the conversion to Portland limestone cement, which as you know is adds capacity, is good for our carbon base and also expands our margins by having a lower cost. And then the final area, which is extremely margin accretive is our Green America Recycling, which we've invested to expand. And in 2023 alone, that's generating $14,000,000 EBITDA on a base revenue of $25,000,000 so very margin accretive. And the path continues because we just announced last quarter our Davenport investment in non haz waste to get the Flex Fuel technology in, and that will allow us to convert up to 50% of our fossil fuels, reducing our costs even further by reducing coal and pet coke in our kiln. So overall, the Team has done a great job on this path to 40%, and we're very confident that we can get that sustainable trailing 12 month margins. Speaker 400:28:11But there's a number of levers, Trey, as you see from that list I just gave you. Speaker 100:28:16Yes. Thanks, Ann. That was Operator00:28:26Okay. Next, we'll go to Keith Hughes with Truist. Speaker 300:28:31Thank you. Questions on the volumes in ready mix. Had a problem for a couple of quarters. Has the weather and the other issues cleared? What do you think that's going to look like in volumes in the second half of the year? Speaker 400:28:44Well, really the ready mix volumes are being driven primarily by our residential and our non residential segments. Clearly, we started the year out when we gave our first guide, saying residential will be down 30%. We upgraded that last quarter and we're upgrading it again to 20%. And last quarter, if you recall, Keith, it was very much about Houston being better than we thought. And really there, you've got those larger builders that are able to leaned into the rates, basically abate some of the concerns around affordability and spurred new market growth on homes. Speaker 400:29:20Salt Lake City started the year very with no with very bad weather, so really lost 50 days. Right at the beginning, we were very pleased to see it come back on here in Q2, but it's had a short season and it's coming from very high highs. There we're starting to see a pickup and you should Guide to Guide, the one that we've increased versus our last guide, and we remain confident in it. Now that being said, It's still down versus COVID era levels, but we think the fundamentals for residential are very strong. Demand is still being driven by household formation, by high income, by consumer confidence, supply has been driven, very low inventory. Speaker 400:30:11Those two markets, one has 2.6 months in Houston of inventory in Houston and Salt Lake City only has 2 months. You've got there also the resale market is very challenged and also you got builder confidence. So overall, we'll see ready mix improve, but we're not leaning into it very heavily at this point. Speaker 300:30:30Okay. Thank you. Operator00:30:34Thanks. Next, we'll go to Derek Shmois with Loop Capital. Your line is open. Speaker 300:30:39Hi, thanks. Congrats on the quarter and the outlook. I'm wondering if you could speak on M and A. You've made several acquisitions here recently. Thanks for the detail there. Speaker 300:30:50But your balance sheet now is below 3 times leverage, which is your goal. And I'm hoping you could talk a little bit about your desire perhaps to use your balance sheet to make additional acquisitions from here. Speaker 400:31:03Yes. So we were really pleased. If you recall the last few quarters, I've been talking about this rich pipeline, Garrick, that we were working on. And obviously, 3 of those acquisitions came to fruition, all with the ability to advance our materials led position and nothing changes. We're at 2.3x at the end of the quarter. Speaker 400:31:20We have a lot of headroom to grow. The pipeline is very strong. Our team is very active. They're disciplined, though, as we've said we would be. We've stated our Elevate goals. Speaker 400:31:31And the Arizona acquisition is a great example of we set about with key targets and key geographies that had strategic high growth and That's exactly what you can continue to see from us. You'll see materials led, going into strategic high growth markets just like Arizona, and the discipline that we've had before. So we have a lot of room. We feel this is the best value for our shareholders by reinvesting in the business in the form of M and A and also our Greenfields and organic growth. Operator00:32:07All right. We'll next go to Mike Dahl with RBC Capital Markets. Your line is now open. Speaker 100:32:14Thanks for taking my questions. Just a follow-up on the acquisitions. And can you just you outlined kind of the contribution the quarter and remainder of the year. So from a full year standpoint, on a pro form a basis, just help us fully quantify what these add in terms of EBITDA and maybe revenues as well. And then can you talk to get 2 of the acquisitions were existing markets, one was News in the existing markets, maybe talk to some Speaker 300:32:42of the synergy opportunities as well. Speaker 400:32:46Yes. I'll answer the latter part of that question, then let Scott give you the specifics on the actual contribution. So 2 of the aggregates acquisitions, one was in North Texas and is really one quarry. It helps us build out an market that we're in, improve our vertical integration, so good aggregates pull through, great example of extending our reserves. The other one was in Northwest Missouri and it's 3 quarries and that's a great example of being margin accretive, extending our materials led position in Missouri and it's right site our existing footprint. Speaker 400:33:17So we should be able to as we go into these, generally, we'll look to take 1 to 2 turns post synergies of and it's really back office, our pricing and our operational excellence that we put into these ags acquisitions. And as you know, it's in the DNA of the company, Mike, that we just do this very well and the team is already executing extremely well against that. Scott, maybe you'll talk to this specific contribution for Mike. Speaker 100:33:40Yes, Mike, just on the second quarter performance, you can use $7,000,000 EBITDA from the acquisitions. And then on the go forward outlook. You'll see it there in our slides that we've got $12,000,000 attributed to the M Speaker 300:34:00and A. Okay. Thank you. Speaker 400:34:02Does that answer your question, Mike? Speaker 100:34:05Yes, I guess the 1Q performance 1Q is usually a small quarter for you. So if I'm taking like the $19,000,000 that you're outlining, Should we just kind of round up to being a $20,000,000 a year type of contribution? Yes, that's fine. Speaker 300:34:23Okay. Speaker 400:34:26Thanks. Thanks, Mike. Operator00:34:28Next, we'll go to Anthony Pettinari with Citi. Your line is now open. Good morning. Speaker 400:34:37In Speaker 300:34:39cement, you talked about maybe some increased competitive intensity import exposed markets. And I'm just wondering, I mean, if that's a comment on pricing, is that something that you are seeing currently or that maybe you anticipate seeing in the second half or going forward or just wondering if you could give any more color on that comment. Speaker 400:35:05Yes. I think what's as I said in my prepared comments, first of all, our river markets are largely insulated from import exposure. The one area we have is Louisiana, which is about 10% of our volume, just to put in perspective. There you see Freight rates going down, you see high demand. And so there, I would say imports are pressuring a little bit more in Louisiana, and we saw that as we went for our mid year price increase. Speaker 400:35:31That being said, we had extremely strong execution along our river markets that are not import imposed. And so we're watching it. I don't think it's a huge factor to worry about moving forward. It just everyone had this very big price increase at the beginning of the year. We went for the mid year price increase. Speaker 400:35:48The team had excellent execution in all of our other markets. So, something to watch. Imports are always something we watch very carefully, but we're not overly exposed to it as a company. Speaker 300:36:00Okay. That's helpful. I'll turn it over. Speaker 400:36:03Thanks, Anthony. Operator00:36:04Next, we'll go to Phil Ng with Jefferies. Your line is now open. Okay, go ahead, Phil. Your line is now open. Speaker 600:36:26Sorry about that. Can you hear me now? Speaker 300:36:28Go ahead. Speaker 600:36:31Yes. Sorry about that. Congrats on another strong quarter. My question is for Scott. Aggregates, just from a demand and pricing has been really strong. Speaker 600:36:39Margin has been a little less robust. You talked about confidence in driving margin expansion. Should we expect that to come through by the back half? And you guys have talked about a North Star for Cement from a margin profile. How should we think about the path for margins in the aggregates business when we kind of look out in the back half going to 2024, that ability to kind of drive that expansion going forward. Speaker 100:37:04Yes, Phil, actually, I'm glad you asked the question about margin expansion in AgX. As you can see from our results here in Q2, we did improve over Q1 and it's something we're definitely intently focused on in getting that expansion. And as we look into Q3 and Q4, the back half of the year, really it comes down to 2 things. We've got a good read on price. So it really comes down to volumes and cost and volumes appear to be holding up relatively well. Speaker 100:37:35So really it's on the cost side and we are seeing the cost start to moderate, the inflation is starting to moderate and our operational excellence improvements that we are working towards are really starting to deliver now. So You can see we built up we narrowed that gap in Q2 and I think you'll see expansion in Q3. So that's where we're headed. We do have a North Star target. It's 60% for our ag's gross profit margins. Speaker 100:38:05And We are intently on focusing and continuing getting that expansion as we head towards that 60%. Speaker 400:38:11I'd just add, Phil, that as you look at the runway towards that, we have, As Scott pointed out, you got your operational, your commercial excellence. You also had the impact of our greenfields, which are extremely margin accretive. And then you've got like the acquisitions we did this quarter, accretive ags acquisitions will expand that margin as well. So you've got the 4 levers. And as we've talked before to operational excellence, that's one of the things that gives us some upside as a company because of our maturity and getting those Ags margins there. Speaker 400:38:38We remain very confident and glad to see the progress start this quarter. Speaker 600:38:43Okay. Appreciate all the great color. Operator00:38:47Next, we'll go to Adam Thalhimer with Thompson Davis. Your line is now open. Speaker 200:38:54Hey there, great quarter. Operator00:38:57Was that 60% on an annual basis or Speaker 600:38:59you're just saying there might be a quarter out there where you could hit 60% ags margin? Speaker 400:39:04It's on an LTM basis over time. It's a North Star objective. It's not within the year. So we've set a very lofty objective for our team. But as I said in my comments, you can get there through all the levers that we have. Speaker 400:39:18And I just kind of listed those out. But I think the operational excellence one is the one we talked about last quarter. We're just starting to get momentum on that and starting to drop dollars to the bottom line, and that's where we really feel we can make progress over time and get to 60% target. Thanks. Speaker 200:39:35Okay. Thanks, Ed. Great quarter. Speaker 400:39:37Thank you. Operator00:39:39Next, we'll go to Brent Thielman with D. A. Davidson. Your line is open. Speaker 300:39:45Hey, great quarter as well. Thanks. Just I mean, not an insignificant amount of capital here put to work towards deals through the first half and clearly focused on and a platform expansion. I'm hoping you could just comment on what's sort of different about the M and A strategy couldn't work today versus what we that came to know about the legacy strategy at Summit. What about these transactions or the characteristics and composition of the deals or sort of different from the old strategy. Speaker 400:40:18Yes. Great question. Thanks, Brent. If we if you go back to when we launched Elevate, we said we're going to be very materials led, and we'd be very selective in the down and the big difference is, we have been very clear that we will only be in downstream markets where we can be leading positions. And the Arizona Materials acquisition is a great example of that, where we're entering a high growth market with a leading position in ready mix. Speaker 400:40:47We're really good at the downstream and we're unapologetic about being in it, but we're very selective. And so you saw the margins come out of that downstream. Our portfolio is so much better today with the divestitures that we did in some of the underperforming downstream businesses where we didn't have leading positions. So what we look for is this vertical integration model. And if you look at Phoenix, we look at it as an opportunity to maybe replicate Salt Lake City, which is the market where Vertically integrated, you compete along every point of the value chain with the same competitors, which allows you then to get these high profit, high return businesses. Speaker 400:41:23And we see that we have a pathway through this acquisition to actually replicate our Salt Lake City Downstream market in Phoenix. So we're very excited about this platform as we move forward. And that's a key difference. We will not go into positions where we're like sub positions in a market where you're number 4 or 5. It has to be a leading position and it has to lead to a path of being materials led just like the Phoenix acquisition where you have a strong ag space and ability to bolt on in a largely fragmented market. Speaker 300:41:57Okay, very good. Thank you, Anne. Speaker 400:41:59Thanks, Brent. Thanks, Brent. Operator00:42:05Star then the number one on your telephone keypad. Next, we'll go to a David MacGregor with Longbow Research. Your line is open. Speaker 300:42:14Yes. Good morning and nice quarter. Just to clarify on that last M and A question, are there other sort of new geographic regions that you're contemplating within your current M and A funnel. Obviously, you're not going to get into a lot of detail around that, but I'm just wondering if we're going to see you entering other new geos. And then I wanted to for my principal question, I wanted to ask about the aggregates cash gross margins, go back to that because in your prepared remarks, You cited a couple of drivers the prior year favorable cost recognition, there were some regional differences. Speaker 300:42:47I'm just trying to get a sense of the improvement you're expecting and those margins in the second half of this year. How much of it is just these year ago factors resolving and how much of it is operational improvement that you're achieving right now on a sequential basis. Speaker 400:43:01Yes. So let me ask the first part of your answer the first part of your question and then Scott will address your question on the market specific margin question. So David, as you recall, we announced 1, an acquisition in Ocala, Florida. That was a great example of a strategic growth market that we had identified and we're in the process of very active building that out right now. Phoenix is now our next one and we do have others. Speaker 400:43:25For competitive reasons, I obviously won't go into specifics on those. But we do have those. If you think about our M and A, it's a mix of that going into new platforms, strategic high growth platforms and it's building out from making the circle bigger from where we belong today. And The 2 ags acquisitions were a great example of that bolt on strategy as well. So expect more of the same is how I would to finance. Speaker 400:43:49Scott, maybe you want to address some of those margin questions? Speaker 100:43:52Yes. So David, you called out the favorable cost adjustment from a timing issue in the prior year. And really all that amounts to is, last year with the rapid pace of inflation, we had to pull forward the standard costing end of June. Usually, we do that in Q3. So it's a timing. Speaker 100:44:14It will smooth out in Q3. It really won't affect the annual performance at all. As far as the margin expansion though, when I think about the if I isolate the back half, I think about the cost coming down from that high single digit really to a mid single digit. And then on the pricing side, as we've talked about, Really the back half of the comp gets a little harder, so we're probably only going to be at the double digit. But I think that's where we're going to get our expansion that cost is going to be coming off in the back. Speaker 100:44:43And then as we've already talked about the operational improvement initiatives, we've got $20,000,000 identified in operational improvement initiatives. Now that won't all hit this year, but definitely we're going to see some material impact from Speaker 200:44:59that in the Speaker 100:45:00business. Does that answer your question, David? Speaker 300:45:03It does, Scott. Thanks very much. Thanks, Andy. Speaker 400:45:07Yes. Thanks, David. Operator00:45:08Okay. Next, we'll go to Jerry Revich with Goldman Sachs. Your line is open. Speaker 700:45:14Yes. Hi. Good morning, good afternoon, everyone. I'm wondering if I could just ask regarding the margin progression Q3 versus Q2. So with the mid year price increases flowing through in Ags and Cement. Speaker 700:45:28It sounds like we should see margins proving more than the two points we would see under normal seasonality, 3Q versus 2Q, but I just want to make sure there's No other pieces to think about in that progression versus normal seasonality this quarter. Speaker 400:45:46Yes. I think all the factors that we've talked about and Scott just went through will continue to be margin progression. I don't think you should see any difference in our seasonality moving through because Q3 is our biggest quarter, you know that, Jerry. And so we would expect a compound see additional tailwinds on pricing in Q3. And as Scott referenced, the cost should start to moderate and come off and we have our self help initiatives, so you should expect to see margin expansion over time. Speaker 400:46:14And that's why we were confident putting the overall expansion of margins in our guide for the full year at 23.5% to 24%. Speaker 700:46:23Yes, absolutely. Just trying to gauge whether there's upside to that end. And then in terms of the pricing outlook. Obviously, super early for 2024, but conceptually, given the outsized inflation we're seeing this year. Are you folks thinking about for Aggregates and Cement more substantial January 1 price increases than what we've seen over Long term history in this industry of 4% to 5%. Speaker 400:46:50Yes. Scott said costs have not abated. While energy and logistics may have come off a bit, we still see a lot in equipment, labor and repair and maintenance. So the Speaker 700:47:09Thank you. Speaker 400:47:11Okay. Operator00:47:12Next, we'll go to Kathryn Thompson with Thompson Research Group. Your line is open. Speaker 800:47:17Hey, good afternoon. This is actually Brian Biros on for Catherine. Thank you for taking my question. On asphalt, can you just touch more on the outlook here for the segment? With public spending Coming, it seems like asphalt side could really be a pretty big growth engine for you guys. Speaker 800:47:30I think you've alluded to that before. Is this how much more can volumes go either in the second half or 2020 for the strength of public activity coming down and are there any headwinds that would kind of limit the growth here Speaker 300:47:41for you guys? Thank you. Speaker 400:47:44Yes. I mean, to your point, it's been very robust. And I look at our if you just look at the IIJ dollars, they're definitely going in. And for the first time, You actually see that in the Texas state budget, and that's our biggest market for asphalt. If I look at our backlogs, just what's in the backlog today, we're up 40 year on year and we've another pipeline coming in very strongly after that. Speaker 400:48:07And with federal funding of the IIJA dollars, we expect that in the second half, It will be strong and continued strength. 2024 should be a very much outsized growth market year on year for public spending, and we're seeing it across our entire footprint. So if you look at year to date, we're up on our contract highway and paving awards in Texas by about 41%, Kansas 85%, Colorado 71%, and Missouri and Utah are up 20% to 25%. So we're very bullish on the public side and feel that our asphalt will grow. To your question about headwinds, Clearly, labor is something we're working on. Speaker 400:48:45We're increasing the size of our crews. We're planning to be able to meet all the demand that comes, but it is a challenge and it will continue to be from a labor perspective. But we've got a great team and great positions in our public markets and are very encouraged by the long term outlook for Public moving forward. Speaker 300:49:03Thank you. Operator00:49:06There are no further questions at this time. And Noonan, I'll turn the call back over to you for any additional or closing remarks. Speaker 400:49:15Summit's on pace for a record setting year with operational and market tailwinds that should push us towards unprecedented levels of growth and profitability. Our more positive outlook in Ray's guidance incorporates strong pricing execution, the operational opportunities that we are actively pursuing across our footprint and the accretive acquisitions we've already completed. We are winning in a dynamic marketplace, thanks to an improved portfolio, a clear strategic direction and a talent rich organization. We have a full plate of opportunities ahead of us, but our team is animated by pushing our progress further and is intently focused on delivering the financial commitments we expressed today. As always, we thank you for your continued support for Summit Materials and hope you have a great day. Operator00:49:59This concludes today's conference call. You may now disconnect.Read morePowered by