Summit Materials, Inc.

And thank you for standing by. Welcome to the Summit Materials Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Carly Anderson. Please go ahead.

Welcome to Summit Materials' third quarter 2021 results conference call. We issued a press release yesterday detailing our financial and operating results. This call is accompanied by our investor presentation and an updated supplemental workbook highlighting key financial and operating data, all of which are posted on the investor section of our 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. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may vary in a material way. For a discussion of some of the factors that could cause actual results to differ, please see the Risk Factors section of Summit Materials' latest annual report on Form 10-K, which is filed with the SEC. you can find reconciliations of the historical non-GAAP financial measures discussed in today's call in our press release. Today's call will begin with a business update from our CEO, Ann Noonan. Then our CFO, Brian Harris, will provide a financial review, and Ann will provide concluding remarks. We will then open the line for questions. Please limit your asks to one question and then return to the queue so we can accommodate as many analysts as possible in the time we have available. With that, I'll turn the call over to Ann.

Good morning, everyone, and thank you for joining our third quarter 2021 earnings call. I'll start today as we start all things at Summit with safety. We are striving for a zero-harm, safety-first mindset among all of Summit's 6,000 employees. As part of our Safety Center of Excellence, we have transitioned to a tech-enabled risk assessment tool that should help both the process of assessing risk as well as for audit and oversight purposes. We are setting high expectations for safety performance, and are committed to continuous improvement. Now let's turn to slide four for an overview of our third quarter financial and operating performance. Net revenue of $662.3 million reflected an increase of 2.6% and adjusted cash gross profit margin expanded by 260 basis points versus the prior year period. The market leadership theme in our Elevate Summit strategy is beginning to be reflected in our results. Q3 adjusted EBITDA increased 7.3%. I'll discuss three factors that drove this performance. First is our team's ongoing commitment to commercial excellence, which is having a real positive impact on how we go to market, especially with respect to value pricing. In Q3, we reported pricing growth in all lines of business. Second is the strong and persistent demand dynamics in our rural and ex-urban markets. This includes a resumption of more normalized letting and operating conditions in the markets that we serve, such as Kentucky and Missouri, with continued strength in residential markets such as Salt Lake City and Houston. And third has been our ability to stay ahead of inflation thus far through a combination of pricing actions, our energy hedging program, and the pursuit of operational excellence. To put a finer point on that topic, we are very mindful of the challenges presented by supply chain constraints and cost inflation in the current operating environment. We are very focused on price execution and cost mitigation to ensure that we continue to expand our margins, as we have done in Q3. For example, we've placed early orders for equipment, purchased some energy forward, and driven multiple price increases in targeted markets. We acknowledge that Summit is not immune to the challenges presented by the global economy, but we can assure you that Summit will take every action possible to address them. Q3 volume growth in materials was robust, with aggregate volumes up 9.2% and cement volumes increasing 2%. Ready mix volumes were slightly lower, due primarily to wet conditions in Texas, where they had fewer than expected working days. Asphalt volumes were down 11.3%, resulting primarily from a divestiture of the business. We reported mid-single-digit pricing growth in aggregate, cement, and ready mix, combined with more modest gains in asphalt. Stepping back to look at the big picture, we continue to make progress across all Elevate Summit goals. First, our leverage improved to 2.7 times net debt to EBITDA, an improvement of 0.8 times versus the prior year. Our leverage is now well below our three times target, as we retired our 2025 notes and paid down $300 million in debt in the third quarter. Next, our adjusted EBITDA margin increased 120 basis points, to 28.7% in Q3, while on a trailing 12-month basis we improved to 23.3%. Summit is currently progressing several strategic divestitures in addition to the five that were completed in the first half of 2021. These are part of Horizon 1 of our Elevate Summit strategy. We are in the process of exiting non-core or non-leading market positions. generating proceeds for more strategic use, and converting some of those businesses to an asset-like model to drive higher aggregates pulled through. All of these activities are resulting in a meaningful improvement in ROIC, now standing at 8.8%, up from 8% at year-end. Summit's asset-light approach is grounded in principles of capital efficiency. In addition to the divestitures I just described, our team has also surfaced asset disposition ideas upon which we are executing. These asset dispositions contribute to reducing our capital base, helping our management teams narrow their focus to the highest returning parts of the business, and serve our broader goal to increase Summit's return on invested capital. As we evaluate our full-year outlook, we believe Summit's organic growth profile and asset-like conversion model position the company to absorb the impact of the approximately $5.6 million in foregone EBITDA from those divested businesses. Another consideration for our outlook involves comparing our 2020 performance. Last year included 53 reporting weeks, which provided Summit with approximately $10 million of incremental EBITDA. By contrast, 2021 is a standard 52-week reporting year. And in any fourth quarter, the construction season can be cut short by weather, and we need to be mindful of that uncertainty. While we are very encouraged by our team's ability to control what we can control in terms of staying ahead of inflation through price realization and self-help, and while backlogs are very strong, we operate in some northern markets where there is always risk of an early end to the season. In consideration of these factors, we are leaving our full year 2021 adjusted EBITDA guidance unchanged. Turning to slide 5 for performance at a segment level, we saw a nice rebound in the East and Cement segments in Q3 2021 versus the year-ago quarter. The West reported third quarter net revenue and adjusted EBITDA down 3.7% and 3.3% respectively versus the year-ago quarter. Revenue growth in aggregates and ready mix was more than offset by a divestiture-driven decrease in asphalt and paving revenues. Moreover, wet conditions, primarily in Texas, resulted in fewer days available to complete ready mix and asphalt jobs. Net revenue in the east benefited from higher aggregates and asphalt volumes, as well as pricing growth across all lines of business. This growth was partially offset by lower ready-mix concrete volume on fewer wind farm projects relative to the year-ago quarter. Despite this, our east segment delivered excellent performance for net revenue and adjusted EBITDA, which were up 10.7% and 21.3% respectively. And finally, our cement business had a strong quarter as organic volume gains at 4.4% pricing growth helped drive 9% higher net revenue and 15% adjusted EBITDA improvement. Our Green America recycling facility, which provides alternative fuel for one of our cement plants, is now operational and wrapping up to full production. Turning to slide six, you will see the four key strategic priorities that we laid out earlier this year as part of our Elevate Summit strategy. First is enhancing our market leadership as we aim to be number one or number two in ex-urban and rural markets where we can invest and grow our position. The divestitures we completed through September of this year included businesses where Summit did not have a leading position and did not have a clear path forward to improve that situation, or Summit was simply not the ideal owner of the business. We currently have several more divestitures in process, and we will update you on progress each quarter when we report financial results. We converted some of the divestitures to an asset-light approach, which is our second strategic pillar. These were asset-intensive businesses where we were not the ideal owner. However, we still retained our strong aggregates position. In the coming quarters, you will start to see the impact of those asset-life deals as they have a favorable impact on both ROIC and margin. Our third strategic pillar is social responsibility, as our vision is to be the most socially responsible integrated construction materials solution provider. We recently took a critical step towards reaching that goal with the release of our first SASB compliance sustainability report. In that report, you'll find we are taking a value creation and innovation approach to social responsibility that we believe presents significant opportunities to grow our business, including several initiatives aimed at reducing the emissions from cement production. And although it's still early, we have some notable early accomplishments to point to, including completing our first SASB compliant baseline for emissions, water, and waste impact. We are capturing methane gas at our landfill business in Kansas, with scoping underway to potentially expand that solution to additional landfills in the network. And we have achieved gender parity on the board and among executive officers. So while it's still early in our sustainability journey, we are encouraged by the progress thus far and eager to tackle the challenges in front of us as we plan to publish our future impact reduction targets and strategy in 2022. And finally, our fourth strategic priorities around innovation. Utilizing industry and university partnerships, we plan to enhance our products and services portfolio to help move us to achieve our adjusted EBITDA target. Underpinning these strategic priorities are critical enablers, including our centers of excellence and standardization efforts. Together, these enablers will enhance business performance and advance business critical capabilities across the summit enterprise. On slide seven, you'll see a graphic that we introduced during our Elevate Summit Investor Day that summarizes our strategic execution plan and deliverables over three horizons. We're in horizon one, where we are building tomorrow's summit with a focus on shedding underperforming and or non-core businesses, standardizing best practices across the business, and cultivating social responsibility and innovation expertise. On slide eight, you see the full Elevate Summit scorecard. Our leverage ratio of 2.7 times net debt to EBITDA exceeded our target of three times in Q3. And we believe with continued strategic execution, there is room for even further improvement. Achieving a net leverage below three times was cited as one of the primary investor priorities when we conducted our listening tour a year ago. We hope our progress in this area will enhance financial flexibility and investor confidence. Our third quarter ROIC of 8.8% is 80 basis points better than year-end and up 30 basis points versus Q2. We believe that by conducting and acting on regular portfolio reviews, maximizing asset utilization, and actively pursuing an asset-light model where it makes strategic sense, our goal of greater than 10% return on invested capital is achievable. Our Q3 adjusted EBITDA margin of 28.7% was up 120 basis points versus the comparable 2020 period, and 220 basis points sequentially, reflecting strong pricing gains, volume growth, and lower G&A expenses versus the prior year quarter. On a last 12-month basis, adjusted EBITDA margin is 23.3%. a 40 basis point improvement versus the trailing 12-month period as of Q3 2020. This performance was driven by strong pricing trends and a resumption of normalized letting activities that more than offset the impacts of cost inflation and wet conditions in Texas. While our Q3 results are getting us closer to our Elevate Summit objectives, we continue to play the long game. Although we have notched good progress, The future path may not always be linear. However, we can promise that as a team, we view steady improvement in net leverage, ROIC, and adjusted EBITDA margin as essential to how we operate the business and align our interests with shareholders. On slide 9, we provided a snapshot of our portfolio optimization progress, where we remain on track with our Horizon 1 goals. We're roughly halfway towards our goal to divest 10 to 12 non-core or underperforming assets. We have several divestitures currently in process, and we will update on completion each quarter when we report. To date, the divestitures have generated 103.6 million in proceeds, so we are just over halfway towards our stated goal of 200 million. Our use of proceeds will follow our capital allocation priorities, which center on maximizing strategic flexibility reducing leverage, entering or expanding priority markets through M&A, and ultimately enabling our long-term growth objectives. And finally, on slide 10, we are pursuing an aggregate greenfield development strategy focused on priority markets underpinned by strong growth fundamentals that will foster sustainable organic growth. The picture on slide 10 is of our Jefferson Quarry, where we hosted an investor tour in September. Strategically located in northern Georgia, its aggregates are marketed as Georgia Stone products, and its position is a terrific example of a summit location that provides that connective tissue between rural and exurban markets. At Jefferson, we put a very labor-efficient plant in a high-growth market, giving us several benefits. The plant design is flexible, so we can adjust production to address demand changes quickly and optimize inventory returns to best manage working capital. The site was also designed to optimize low-unit cost production in a clean, well-situated environment for employees and customers. The entire plant site is graded and developed to minimize waste and maximize usable acreage, minimize water runoff, and plant water discharge. It is estimated that Summit will generate $45 million of adjusted EBITDA on an annualized basis by 2024 from these projects once they are in full operation. with approximately 18 million generated in 2021. Expected investment in greenfields is 25 to 35 million in 2021 as part of a cumulative capital spending of approximately 200 million on greenfields. These greenfield projects complement our existing business and provide another avenue for long-term sustainable organic growth. With that, I'll turn the call over to Brian for a discussion of our financial results.