Knife Riv Holding Co.

Good morning, everyone, and welcome to the Knife River Corporation first quarter results conference call. If you would like to ask a question today, please press star one on your telephone keypad. Also, today's call is being recorded. At this time, I would like to hand things over to Dara Dirks, VP of Investor Relations. Please go ahead, ma'am.

Good morning, everyone, and thank you for joining Knife River Corporation's first quarter results conference call. With me today are President and Chief Executive Officer Brian Gray and Chief Financial Officer Nathan Ring. A question and answer session will follow their prepared remarks. 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 disclosed 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 reference to certain non-GAAP information. These non-GAAP measures are defined and reconciled to the most directly comparable GAAP measure in today's earnings release and investor presentation. These materials are also available on our website. I would now like to turn the call over to Brian.

Thank you, Dara. Good morning, everyone, and thank you for joining us. We had a strong start to the year, and I look forward to discussing our first quarter in more detail. Also today, we'll spend some time highlighting key components of our growth strategy and what we see ahead in 2026. Starting with our first quarter results, I'm pleased to report we improved revenue by 16% and adjusted EBITDA by 16% year-over-year, while expanding adjusted EBITDA margins by 290 basis points. We saw increased activity in our markets, which helped drive double-digit volume growth across our product lines. Combined with our efforts to lower costs and optimize pricing, we realized margin growth for aggregates, ready mix, and asphalt. On the contracting services side, revenues were up, and we have secured record quarter backlog of $1.2 billion. We are just now entering the start of our construction season, and we are doing so from a position of strength. Lastly, we completed three aggregates-based acquisitions during the quarter. We expanded into Utah with a platform operation in Salt Lake City, and we strengthened our footprint in Montana. I'll talk more about our acquisition opportunities in a few minutes. We are growing. Our competitive edge initiatives are working, and we believe we are well positioned for another successful year. We're excited about 2026, and we're confident in our ability to deliver continued growth. Supporting that confidence is a clear improvement strategy that we believe makes us the employer, supplier, acquirer, and investment of choice. Turning to slide four on the deck, you can see the four pillars of Knife River's growth strategy. First is our midsize, higher growth markets. Second is vertical integration. Third is the opportunity for self-help to improve margins. And fourth is our life at Knife culture and relentless drive for excellence. We recently conducted a perception survey that provided a lot of encouraging feedback, including that investors value our strategy and want to learn more about it. Today, I will spend more time discussing two aspects of our strategy, our markets and vertical integrations. Starting with our unique footprint, we believe our strong position in mid-sized, higher growth markets presents a competitive advantage. Over the past decade, population growth in Knife River states has outpaced that of non-Knife River states, and this trend is expected to accelerate. From 2025 through 2050, our states are projected to grow two times faster than that of non-Knife River states. More people equates to more demand in our markets on essentials like transportation, housing, water, and energy infrastructure. You can see that demand already this year, as our states are investing in road and bridge infrastructure faster than other states. Collectively, DOT budgets in Knife River states increased approximately 15% this year, compared to flat in non-Knife River states. With this strong funding environment and clear need to continue repairing the nation's roads, we expect state and federal infrastructure funding to continue increasing over the long term. This represents a significant opportunity, as Knife River states collectively include over 3 million lane miles of roads. That is almost 40% of all US lane miles. Further, roads in our states are exposed to harsh conditions. As a result, they require routine maintenance, creating ongoing demand. In addition to public infrastructure, heavy materials demand across our markets is supported by a diverse set of structural drivers. Some of these drivers include energy projects, military spending, and data center development. We believe mid-sized markets like ours present an increasingly attractive opportunity for data center growth. We have some of the lowest cost industrial power in the country. greater availability of land and water, and attractive livability and affordability that support an expanding workforce. Over the last two decades, GDP in Knife River states has grown at roughly twice the pace of non-Knife River states, highlighting a proven track record of outperformance and a strong foundation for continued growth. Lastly, an important reason we like our markets is our position within them. Nearly 90% of our aggregate volume comes from markets where we have a leading position. This scale, in addition to our aggregate reserves and vertical integration, gives us a competitive advantage and enables better purchasing, pricing, and a reliable supply chain. To put our unique footprint into context, we thought it would be helpful to take a closer look at our three geographic operating segments and how they support our overall strategy. Starting with the West, on slide six, this segment includes California, Oregon, Washington, Alaska, and Hawaii. Over the next 25 years, this market is expected to grow its population by approximately 12%, which we believe will support sustained infrastructure investment and commercial activity. In 2026, state DOT budgets across the segment are approximately $34 billion, reflecting a 13% year-over-year increase. In addition to population growth and robust funding for public infrastructure, the West benefits from military spending, the build-out of data centers, and other market-specific growth opportunities. We are a preferred materials vendor for a data center hyperscaler that is active in this region, and we continue to work with them on a number of ongoing developments. Also throughout the Pacific Northwest, We are a premier supplier of pre-spread concrete products, including the data center projects for multiple repeat customers. In Hawaii, we are currently working on a large Navy project at Pearl Harbor, and the state is also seeing increased private investments on Maui and Oahu. In Alaska, we continue to see elevated levels of military and import investment. We are supplying materials up to the North Slope, where energy and mining-related projects are driving our optimism for growth in Alaska. Taken together, increased federal spending and improving economic activity across the West underpin our confidence in long-term demand in this segment. Turning the mountain segment, this includes Idaho, Montana, Wyoming, and our recently added operations in Utah. This segment benefits from some of the strongest demographic trends in the country, with population expected to grow 26% by 2050. These states are among the most desirable places to live in the U.S., supported by strong inbound migration, and in the case of Utah, one of the highest birth rates in the nation. This growth drives long-term demand fundamentals, Mountain has long been a leading asphalt paving market for us, and this segment also represents one of our strongest commercial construction profiles. It benefits from significant investment in wind and solar, data center development, and military infrastructure, along with advanced manufacturing growth. In Idaho's Treasure Valley, large-scale semiconductor investments are helping establish Boise as an emerging technology hub. With our strong footprint and local capabilities, we are well-positioned to support these growth projects. Turning to our central segment, this includes Iowa, Minnesota, North Dakota, South Dakota, and Texas. This segment is also benefiting from strong population growth, with our states expected to grow 21% over the next 25 years. Texas, North Dakota, and South Dakota rank in the top 10 in birth rates in the nation. This sustained expansion is driving broad-based growth across private and public markets. From an infrastructure standpoint, the central segment has a large and expanding public funding footprint. For 2026, total state DOT budgets across the region are approximately $31 billion, a 16% increase from last year. In North Dakota, the state's construction budget for 2026 is more than double than it was in 2025. With our strong operating presence, we are well positioned to capture increased opportunities. Meanwhile, Texas also represents an exciting opportunity within Knife River. Our operations are strategically positioned within the Texas Triangle. giving a strong exposure to the high-growth markets between Dallas, Houston, and San Antonio. Our triangle within the triangle enables us to serve some of the fastest-growing mid-sized markets in the nation. Development in these high-growth corridors is accelerating, and infrastructure demand is expanding beyond established urban boundaries. Overall, the central segment combines strong demographic tailwinds with a well-funded infrastructure pipeline. It has attractive growth opportunities across energy, commercial, and transportation sectors. We expect the region to remain an important contributor to our long-term value creation. The final point I'll make about our markets today is that we see substantial runway for growth through M&A. These markets are still highly fragmented with vertically integrated family-owned businesses, creating hundreds of potential opportunities at attractive multiples. Knife River has completed nearly 100 acquisitions. We are well-known, well-respected, and trusted. When a family-owned business decides it wants to sell, they often contact us first. They value our people-first culture and our commitment to the communities where we live and operate. We believe this combination of culture, credibility, and capabilities makes us the acquirer of choice. We are well positioned to continue expanding our distinct footprint through disciplined, value-accretive acquisitions. Moving from our markets to vertical integration, this is another part of our strategy that makes Knife River unique. We believe our aggregates-based, end-to-end operating model drives value creation. First, it enhances our financial performance by being a profit multiplier. This is achieved in two significant ways. One, we are able to capture higher margins on the pull-through of upstream materials to our construction projects. And two, being vertically integrated creates meaningful synergies across business units, including equipment utilization, overhead absorption, and labor efficiencies, all of which contribute to industry-leading margins on our downstream product lines. Our balanced mix of aggregates, ready mix, asphalt, liquid asphalt, and contracting services also supports resiliency across economic cycles. It enhances our ability to flex between public and private work and gives us more opportunities to provide our products and services. For our customers, vertical integration represents a one-stop shop that translates into greater supply chain reliability, improved coordination at the job site, and more consistent execution across multiple projects. Moving to slide 11, you can see how vertical integration also gives us more opportunities to win profitable work. On any given construction project, we can have over a dozen distinct pathways to capture profits. This can be as a general contractor or as a subcontractor that performs asphalt paving, site development, grading, or other construction services. Or it can be by supplying materials directly to ourselves, to the project owner, to another prime contractor, or to a competing producer of downstream materials. Every one of these entry points gives us another chance to compete and another way to create value. Vertical integration also gives us flexibility to adapt to our markets and position ourselves where we have the most opportunity for growth, both organic and through M&A. On the organic growth side, we can expand our market position by adding complementary products and services to an existing footprint. In Texas, for example, we green-fielded our Honey Creek quarry near Austin a few years ago as a means of providing high-quality aggregates to our downstream product lines and to third parties. Today, that investment makes it possible for us to support our newly expanded asphalt plant in Bryan, where we have added capacity to serve a large paving job on Highway 6. Honey Creek is also providing materials for our recently acquired Tex Creek Ready Mix operation in College Station, allowing us to expand our operations in this dynamic market. On the acquisition side, being vertically integrated also gives us more opportunity, as we aren't limited to a single product line to grow. While our M&A strategy will continue to be focused on aggregates-based opportunities, we have a healthy acquisition pipeline that includes all product lines, including aggregates, ready mix, asphalt, pre-spressed concrete, and contracting businesses that we believe would enhance our portfolio and support long-term growth. Thank you for letting me provide more detail on our strategy. In particular, why we're confident in the markets where we operate and the advantage of the vertical integration. Next, I'll quickly recap the quarter results for our segments. Starting with the West, the segment benefited during the quarter from higher private market activity, which drove increased aggregate volumes. For the third straight quarter, Oregon continued its recovery, meeting our expectations for the start of the year. We expect this trend to continue and believe the segment is well positioned for ongoing growth. Performance in the Mountain segment benefited from higher available backlog, better weather, and solid execution. The team delivered improved cost discipline across all product lines while optimizing material pricing. In addition to strong organic performance, the Mountain segment completed three acquisitions during the quarter, Morgan Asphalt in the Salt Lake City market, and both Spiro Enterprises and Donaldson Brothers Ready Mix in Montana. Performance in the Central segment reflected impacts from acquisitions completed in 2025. The addition of Texcrete helped the region nearly double its ready mix volumes. These benefits were partially offset by two additional months of expected seasonal losses at Strata in January and February. During the quarter, we continued to make meaningful progress on strengthening operational execution, and we entered the second quarter with strong backlog, positioning the business for further growth as the year progresses. Lastly, turning to the energy services, favorable market conditions in our western states supported higher sales volume and improved fixed cost absorption during the quarter. We also continue to capture synergies by merging our West Coast operations and ended the quarter with a 40% improvement in EBITDA. All in all, we had a strong performance in the first quarter and continue to be well positioned for growth in 2026. With that, I'll turn the call over to Nathan to walk through our product line financial results.