Knife Riv Holding Co.

Good morning, ladies and gentlemen, and welcome to the Knife River Corporation first quarter results conference call. At this time, note that all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. And if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on Tuesday, May 6, 2025. And I would like to turn the conference over to Nathan Ring, Chief Financial Officer. Please go ahead, sir.

Thank you, and welcome to everyone joining us for the Knife River Corporation first quarter results conference call. My name is Nathan Ring, Chief Financial Officer of Knife River, and I'm joined by our President and Chief Executive Officer, Brian Gray. Today's discussion will contain forward-looking statements about future operational and financial expectations Actual results may differ materially from those projected in today's forward-looking statements. For further detail, please refer to today's earnings release and the risk factors discussed in our most recent filings with the SEC, which are available on our website and the SEC website. Except as required by law, we undertake no obligation to update our forward-looking statements. During this presentation, we will make references to certain non-GAAP information. These non gap measures are defined and reconciled to the most directly comparable gap measure in today's earnings release and investor presentation these materials are also available on our website. Brian will begin today's call with an overview of our first quarter 2025 results, followed by an update on our competitive edge plan and a segment recap. Following his remarks, I will provide a product line summary a capital update in a review of our 2025 financial guidance. At the conclusion of our prepared remarks, we will open the line for a question and answer session. With that, I'll now turn the call over to Brian.

Thank you, Nathan. Good morning, everyone, and thank you for joining us. Our construction season is just getting started. As we look at the opportunities in the year ahead, we are excited about three key points. First, Knife River is in a position to have our most profitable year in history, including record revenue, net income, and adjusted EBITDA. Second, our acquisition program is in full swing. We close on Strata Corporation, and we have additional deals in our pipeline with a focus on materials-led companies. And third, we continue to invest in our competitive edge strategy to drive excellence and long-term profitable growth. While there are some macro-level uncertainties in the economy, we have been insulated from any direct impacts related to tariffs. With our vertical integration and our ability to flex between public and private work, Night River is a resilient business model. We are focused on what we can control, including operational improvements and working hard to deliver results for our shareholders. We are entering the construction season with confidence in our long-term strategy, and we are forecasting record results for the full year. The fundamentals of our business are strong, and we are excited about the acquisition program and edge initiatives. We believe the investments we made during the first quarter will benefit Knife River this year and beyond. On the year-end call, we highlighted a step up in SG&A for 2025 as we invest in our business to drive future success. We spent approximately $8 million of that in the first quarter, largely related to acquisitions and business development activity. Nathan will provide more detail on SG&A in his remarks. As we look at the first quarter overall, results were in line with our expectations. Because of our unique footprint in northern states, Knife River has historically recorded a seasonal loss in the first quarter of approximately 5% of annual EBITDA. With the addition of Strata and Albina, which are also in northern states, we anticipate the 8% seasonal loss we experienced this quarter to be more reflective of our first quarter results going forward. We expect the investments we made in Strata and Albina to begin positively impacting our financial results in the second quarter. It's exciting to see the progress we're making in integrating these two companies, including the efficiencies they're finding as we bring our teams together. Also during the first quarter, we closed on the acquisition of the Kalamakori. This property includes 50 million tons of strategically located reserves and supports our ability to serve the growth corridor north of Vancouver, Washington. Our business development team continues to be hard at work in each Knife River segment, evaluating potential materials-led acquisitions in mid-size, high-growth markets. In addition to our M&A growth, we continue to make progress on multiple organic investments and edge improvements. A few highlights of these projects include the continued build-out of an aggregates expansion project in South Dakota, along with a new asphalt plant in the Sioux Falls market, a greenfield ready mix plant in Twin Falls, which is a new market for us in southern Idaho, and the installation of larger silos or asphalt plant in Boise, which will increase capacity as we serve more third-party customers. We expect each of these opportunities will help drive margin growth, which is a key component of our edge strategy. Let me provide a quick update on other edge efforts. In the first quarter, our teams improved pricing on aggregates and rated mix, as we continued to focus on dynamic pricing. We also deployed best-in-class pricing and analytic software for our materials operations. By investing in cutting-edge technology for our sales teams, We aim to optimize pricing, support margin growth, and provide exceptional customer service. Also during the quarter, we identified operational improvements at multiple aggregate sites. Our pit crews identified opportunities to increase throughput and reduce production costs at plants in Hawaii, Oregon, Texas, and Wyoming. We fully expect to see the benefits of these first quarter expenses during the upcoming construction season. The team is visiting several more operations this year across our footprint focused on controlling our costs, increasing production capacity, and implementing best practices. I look forward to sharing their additional successes throughout the year. Lastly, at EDGE, we are excited about the rollout of our new safety program, which is based on the belief that safety is a personal choice and that all injuries are preventable. Safety is a core value at Knife River and part of our Life at Knife culture. We are committed to excellence, starting with the health and well-being of our team members. As our operations ramp up for the year, we stand to benefit from infrastructure investment, Roads, bridges, and runways need to be repaired. The funding is there to support it, and NYFER is well-positioned to perform the work. In March, the American Society of Civil Engineers published its much-anticipated report card for America's infrastructure, giving U.S. roads a grade of D+. The report estimates that the country will need $2.2 trillion in funding over the next decade to maintain the current roadway system. Budgets at the local, state, and federal levels remain at or near all-time records. Night River states still have about 60% of federal IAJ funding to spend. And at the state level, we're tracking 51 transportation funding bills. In late April, Washington passed a fuel tax that is expected to raise $3 billion in transportation funding over the next six years. In Idaho, two transportation bills have been approved totaling over $1 billion in funding, primarily to relieve congestion and expand its current transportation system. And just a few days ago, North Dakota passed a $400 million increase to its two-year DOT budget. Finally, the Oregon legislature is currently working on a much needed funding plan for the state's infrastructure, which could benefit us yet this year. Public projects represent 87% of our backlog and perfectly fit our vertically integrated business model. They give us the opportunity to not only perform the work as a prime or subcontractor, but to also utilize upstream materials. Backlog at the end of the first quarter was near our record from a year ago and at similar expected margins. Starting in late March and throughout April, We saw increased bidding activity compared to last year, and the work we secured in that timeframe is not reflected in our first quarter backlog. This work included dozens of public projects, including three jobs totaling $170 million of subcontract work that we expect will be awarded soon. As I've mentioned over the last year, we continue to see states lighting larger multi-year projects. However, we've remained disciplined in the bid room, fully vetting the type of projects we pursue. We are focused on materials pull-through opportunities, on optimizing contracting margins, and on minimizing our risk profile. We believe asphalt paving projects that are publicly funded will remain the largest part of our backlog for the foreseeable future. On the private side, we've seen a slowdown in some markets as developers and owners weigh uncertainty around tariffs and the economy. We will continue to monitor these delays, but we do see some private projects picking up in the second half of the year in each segment. As you recall, we reorganized our segments to better align with our business strategy. The segments are now West, Mountain, Central, and Energy Services. In the West, our operations in Hawaii and California helped drive revenue and EBITDA increases. We saw higher demand in Hawaii for cement and ready mix, and we implemented price increases across the region in all product lines. In California, we added to our public backlog and have seen an increase in residential and commercial work coming out for bid. This more than offset decreased demand in Oregon, which is mostly related to less highway funding and delayed private jobs that are impacting material sales. We will continue to track Oregon's funding solution and will make operational adjustments as needed. Overall, we believe the West is poised to have another solid year with meaningful improvements coming from our operations in Alaska, California, and Hawaii. In Mountain, the $96 million farmway road project in Idaho is just getting started, and we continue to add backlog to our first quarter record. The recent passing of two transportation bills in Idaho should support additional growth in this very strong market. Bid lettings in Montana have been delayed this year, but we've seen more opportunities in the past few weeks that should positively impact our backlog going forward. And in Wyoming, we see good potential for data center jobs and related commercial construction in the second half of the year. In Central, we've been actively integrating Strata and look forward to the positive impact it will have on our financial performance. We continue to find synergies with this acquisition, and the additional transportation funding in North Dakota bodes well for our combined operations. We've been securing public work in each of our markets, and we see strong commercial work ahead in Texas, specifically in the College Station area. Finally, at Energy Services, we are excited about having a full year of contributions from the Albina acquisition that closed late last year. We also expect to benefit from the startup in the second quarter of our new polymer modified plant in South Dakota. We had a slower start to the year related to weather impacts in Texas, but we expect another strong year from Energy Services with margins that continue to lead our segments. In conclusion, We're in a strong position to have another record year. We reinvested in our business during the first quarter as we prepared for the start of the construction season. Our acquisition program is active, and we continue to invest in self-help through our edge initiatives. I'm proud of our team for all their efforts, and I'm looking forward to what's ahead in 2025. With that, I'll turn the call over to Nathan.