Summit Materials, Inc.

Good day and thank you for standing by. Welcome to Summit Materials' fourth quarter and full year 2021 earnings conference call. At this time, all participants are in the listen-only mode. After the speaker's 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 zero. I would now like to hand the conference over to Carly Anderson. Thank you. Please go ahead.

Hello and welcome to Summit Materials' fourth quarter and full year 2021 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 highlighting key financial and operating data. All of these materials can be found on our investor relations website. Management commentary and responses to questions on today's call may include four different statements, which by their nature are uncertain and outside of summit materials control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ 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. Ann Noonan, our CEO, will begin today's discussion with a business update. Brian Harris, our CFO, will briefly review financial performance. Ann will close our prepared remarks with our outlook for 2022. 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.

Thanks, Carly, and good morning, everyone. I'll start today's call with safety. In 2021, Summit achieved a nearly 10% reduction in our recordable incident rate versus 2020. However, one incident is too many. In 2022, we will continue on our journey towards a zero-harm culture, which demands that we expect more from ourselves and our teammates to drive higher performance. Now let's turn to slide four for a look at the progress we made during the year. In 2021, Summit achieved several high watermarks with record levels of net revenue, net income, adjusted EBITDA, and adjusted gross profit. These results are evidence that our Elevate Summit strategy is driving improved performance and execution. They indicate that we are on the path to becoming a more efficient and better positioned company today than we were one year ago. Thanks in large part to the hard work of our dedicated employees, Our strategy is gaining traction and our shareholders are benefiting. In 2021, our total shareholder return was nearly 100%, outpacing our peers and more than three times the S&P 500. Brian will go into more detail on our Q4 performance, but let me highlight three key reasons for our strong full year results. First and foremost is the pricing discipline that is now firmly established throughout the organization. At the center of our commercial excellence capability is value pricing. By taking a data-driven approach to segmentation, we are making better pricing decisions at the local level to reflect market conditions and best serve our customer needs. The second contributor to our 2021 success is related to operational excellence. Like others, we faced cost inflation throughout the year, But through a combination of pass-through pricing, standardization, cost reduction initiatives, and effective diesel hedging, our teams did a great job controlling what we could control in 2021. And finally, I'll highlight our ongoing efforts to drive growth and optimize the portfolio. When viewed through a market leadership and asset-light lens, we have made several no-regret portfolio moves in 2021. Those moves better position us to expand our presence in priority markets and facilitate our efforts to attain our Horizon One targets. I wanted to highlight these three key reasons for our strong performance because they are all self-help initiatives and have been instrumental in helping to grow our 2021 top line while expanding margins. That leads us right into our Elevate Summit scorecard on slide five. There you'll see our leverage continue to improve in Q4, moving to an all-time low of 2.5 times net debt to EBITDA, one half term below our three times target. Rowing and EBITDA margin improved by 80 and 70 basis points respectively in 2021. And relative to Q3, we held steady on return on invested capital and training 12-month EBITDA margin despite ongoing inflationary headwinds. Now on slide six, you see the four strategic priorities at the center of our Elevate Summit strategy. I'll spend more time on market leadership and asset-light pillars in a moment, But first, an update on our sustainability and innovation agendas. In April, we plan to share our sustainability roadmap, which will present our 2030 and 2050 targets to enhance our social impact, improve our land use practices, and reduce and ultimately eliminate our carbon emissions. That report will include a credible path to achieving each of those goals. We'll also present some of our more recent accomplishments, including the commercialization of Portland limestone cement, our implementation of a dashboard to track and address fuel efficiency and consumption in every Summit-owned vehicle, and the launch of a Summit-wide water metering and conservation project. The report will show that we are pursuing both near-term and long-term strategies to become the most socially responsible integrated construction materials solution provider. And on innovation, we're in the process of building internal innovation muscle with the imminent addition of a chief growth officer. We believe pairing this internal capability with university and industry partnerships has the potential to really accelerate our strategic growth. Returning to market leadership, where our progress on achieving number one or number two positions in strategically targeted rural and ex-urban markets is most evident through the portfolio optimization work shown on slide seven. Here we identify underperforming or non-core businesses or assets that do not meet or have no clear path to reach margin and return targets, and we find better owners for these businesses. In Q4, we completed three divestitures and generated roughly $25 million in proceeds to bring our 2021 total to eight non-core divestitures, yielding approximately $128 million in proceeds. We are currently progressing additional divestitures and have strong visibility towards reaching our Horizon One ambitions of 10 to 12 divestitures and at least 200 million in total proceeds. And furthermore, we've bolstered our M&A pipeline and will aggressively pursue attractive opportunities that strengthen the portfolio and advance our market leadership strategy. We field a lot of investor questions on what asset-light means in practice. So to crystallize our approach, we provided a real-world example on slide eight. The starting point for these projects is a diligent and objective evaluation against our five-point asset-like criteria. First, we assess whether there's an existing foundation of trust between Summit and the counterparty. In our view, having mutual trust is a critical component and highly predictive of whether a partnership will ultimately be successful. Next, we look at the business case. we determine whether the proposed relationship advances our strategic and financial goals. Specifically, we look at its aggregate intensity, whether it provides market entry or expansion, increases our strategic flexibility, and whether it reduces complexity. In reality, not all five of these criteria will be met 100% of the time. But by staying rooted in a disciplined approach, we are increasing the probability of a successful relationship. In this specific example, our assessment identified an attractive opportunity to move forward with an asset swap agreement, whereby we exchanged one of our downstream businesses for aggregates quarries. We then negotiated a long-term supply agreement with the counterparty, thereby ensuring strong and reliable aggregates pull-through. Stepping back, you can see that our asset-light approach places a tremendous emphasis on strategic and financial fit. The criteria we apply is thoughtful, rigorous, and when executed, our asset-light partnerships strengthen our market position in aggregates, fortify existing customer relationships, reduce capital deployed, and are margin accretive. This framework is now part of our organizational DNA, and our continued focus on market leadership and an asset-light operating model will play an important role in driving towards our ROIC target of 10-plus percent and even down margin target of 30 plus percent. Turning to slide nine, where we map out our Elevate Summit horizons. We are currently in horizon one, building capabilities, making no regret portfolio decisions, and freeing up capital to support sustainable growth. And thanks to the relentless effort of our people and teams over the last year, I'm extremely pleased with our progress to date. having already achieved our Horizon 1 leverage target and well on our way to reaching Horizon 1 targets for ROIC and EBITDA. Now, before handing off to Brian, I'd like to acknowledge a transition underway on our cement leadership team. Following 25 years of distinguished service at Continental Cement, including the last nine as president of Summit's Continental Cement Company, Tom Beck will become an executive vice president of Summit Materials. focusing on key strategic growth initiatives as part of a planned succession for Continental Cement. During his tenure at Continental Cement, Tom's unwavering commitment to safety, leadership, and commercial excellence serves as a model to Summit employees everywhere. I want to congratulate Tom for an excellent final year leading our cement business and welcome him into his new role, where he can continue to maximize growth and deliver value for Summit and our shareholders. As part of this plan succession, David Looms, Senior Vice President, Sales and Supply Chain at Continental Cement, will become president effective March 1st, 2022. David joined Continental Cement in 2020. In addition to his more than 23 years of experience in operations and sales leadership roles in cement companies, David has been instrumental in developing the PCA's roadmap to carbon neutrality and currently serves on the board of the Inland Waterways Commission. David's experience, in-depth industry knowledge, as well as his proven leadership credentials will ensure a smooth transition and strong ongoing leadership of our cement business moving forward. With that, let me pass it to Brian for a financial review.