Summit Materials, Inc.

Good 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 2Q23 earnings call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press the star key followed by the number 1 on your telephone keypad. If you'd like to withdraw your question, press star 1 once again. Thank you, Andy Larkin, Vice President of Investor Relations. You may begin your conference.

Hello and welcome to the Summit Materials second 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 highlighting 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. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ in a material way. For 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, I'm pleased to be joined by Ann Noonan, Summit CEO, and Scott Anderson, our Chief Financial Officer. Ann will begin with the business update. Scott will then 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 Ann.

Thank 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 include several safety, operational, and financial records, clearly signal 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 zero harm. Financially, the second quarter extends momentum from 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 four, I'm pleased to review the financial highlights from the second quarter, 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. We 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. But 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 five. 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 three financial targets. Leverage at 2.3 times was flat sequentially and better versus the prior year. Maintaining 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 viewed 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. And 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 determined 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 can 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 sheet to strengthen the composition of our portfolio via value-creating M&A. In the second quarter, we completed three acquisitions that meet our criteria for portfolio optimization that we've previously outlined and can be seen on slide six. As we strive towards our Horizon 2 objective of at least 75% of adjusted EBITDA from aggregates or cement, we acquired two 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 the 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 second consecutive year, Population growth in Maricopa County was the largest of any county in the US. 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 onshoring 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. But 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 3.1 billion 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 purposefully, advancing the portfolio in line with a disciplined framework that enriches our portfolio mix and generates substantial value. With that, let me hand over to Scott to take you through the quarter in more detail.