Vulcan Materials Company

Good morning. Welcome, everyone, to the Vulcan Materials Company second quarter 2025 earnings call. My name is David, and I will be your conference call coordinator today. Please be reminded that today's call is being recorded and will be available for replay later today on the company's website. All lines have been placed in a listen-only mode. After the company's prepared remarks, there will be a question and answer session. Now, I will turn the call over to your host, Mr. Mark Warren, Vice President of Investor Relations for Vulcan Materials. Mr. Warren, you may begin.

Mr. Thank you, Operator. With me today are Tom Hill, Chairman and CEO, and Mary Andrews Carlyle, Senior Vice President and Chief Financial Officer. Today's call is accompanied by a press release and a supplemental presentation posted to our website, VulcanMaterials.com. Please be reminded that today's discussion may include forward-looking statements which are subject to risks and uncertainties. These risks, along with other legal disclaimers, are described in detail in the company's earnings release and in other filings with the Securities and Exchange Commission. Reconciliations of non-GAAP financial measures are defined and reconciled in our earnings release, supplemental presentation, and other SEC filings. During the Q&A, we ask that you limit your participation to one question. This will allow us to accommodate as many as possible during our time we have available. And with that, I'll turn the call over to Tom.

Thank you, Mark, and thank all of you for your interest in Volcker Materials Company. I'm very proud of how our talented teams are delivering results that exhibit their commitment to continuous improvement through consistent execution of our strategic disciplines. Most importantly, they are doing so while keeping one another safe. Both our safety and financial performance through the first half of the year has been outstanding, despite a challenging operating environment. Extreme temperatures early in the year and excessive rainfall in the second quarter have all contributed to lower same store today shipments across all product lines. Nonetheless, our adjusted EBITDA has improved 16% margins have expanded 260 basis points, and aggregate cash gross profit per ton has grown 13 percent. Our two-pronged growth strategy to improve earnings through compounding profitability in our organic business and adding strategic assets to our portfolio is clearly working. In a quarter, we generated $660 million of adjusted VDOT. a 9% improvement over the prior year despite lower aggregate shipments. Rainfall in the southeast notched 10-year records in many key Vulcan states, namely Georgia, Tennessee, Alabama, and the Carolinas, disrupting both our aggregates and asphalt businesses in these markets. Aggregate shipments were impacted by an estimate 2 to 3 million tons in our most profitable markets. our reported cash gross product per ton expanded an impressive 9%. Our teams executed particularly well on our VolcanWeb operating disciplines to navigate the challenging operating environment, drive plant efficiencies, and tightly control operating costs. Rate-adjusted unit cash cost of sales increased only 1.5% while remaining lower on a year-to-date basis. Price improvements were geographically widespread, and freight-adjusted average selling prices improved 5%. On a mix-adjusted basis, average selling prices improved 8%. The difference was the anticipated impact of recent acquisitions and unfavorable geographic mix due to weather-impacted shipments in our attractive southeast markets. Consistent pricing discipline coupled with operating execution are yielding attractive unit profitability growth. as we move into the back half of the year. Let me share a few other thoughts about the second half. Residential construction activity, which accounts for about 20% of our shipments, remains weak with persistent affordability challenges across most of the U.S. markets. Starts and permits for single-family housing continue to accelerate. However, multifamily starts are showing signs of improvement with over half of our markets having turned positive on a turning three-month basis. This improvement should begin to help offset the weakness in single-family activity. In private, non-residential construction, higher rates for longer and macro uncertainty have been weighing on construction activity. But we are beginning to see several signs of recovery. With growth in data center activity and moderating declines in warehouse and other private non-residential categories, treading three-month starts have turned positive. This is an encouraging sign that private non-residential demand will soon begin to grow. Data centers remain a bright spot. We are currently serving a number of data center projects and actively discussing green-lit projects totaling over $35 billion. We're beginning to hear discussions of supporting power generation projects in areas with a heavy exposure to data centers. Nearly 80 percent of data center activity in the planning stage is within 30 miles of a Vulcan operation. On the public side, during 12 months, highway contractor wars in Vulcan markets have accelerated meaningfully. They were modestly down a year ago and were up over 20 percent at the end of June. IIJ funding, is continuing to benefit both highways and other public infrastructure activity. And we still have over 60% of the dollars yet to be spent. Importantly, the improvements we're beginning to see in both private and public demand environment are translating into accelerating bookings and growing backlogs to support volume growth in the back half of this year and into 2026. Therefore, we continue to expect to deliver between $2.35 and $2.55 billion of adjusted EBITDA. Now, I'll turn the call over to Mary Andrews for some additional commentary on our results and revised outlook. Mary Andrews?

Thanks, Tom, and good morning. Over the last six months, our year-over-year trailing 12-month aggregate rate-adjusted unit cash cost of sales has improved nearly 600 basis points, from 10 to 4%. The focus of our operating teams on utilizing our process intelligence system and other welcome way of operating tools to drive plan efficiencies is contributing to the attractive expansion in our aggregate cash growth profit per ton, even in a lower volume environment. The solid operating performance through the first six months of this year drove a 58% improvement in operating cash flow, and free cash flow on a trailing 12-month basis surpassed $1 billion. This attractive cash generation, coupled with our consistent, disciplined capital allocation, will enable us to continue to drive long-term value creation for shareholders. Through the first six months, we reinvested $207 million in maintenance and growth capital expenditures, returned $169 million to shareholders through dividends and share repurchases, and retired $400 million of debt. Our return on invested capital at June 30 was 15.9%. At quarter end, we reclassified $550 million of commercial paper borrowing from long-term to short-term debt, reflecting the likelihood that we will use some of the discretionary cash generation in the second half to repay those balances. Doing so will reduce our interest expense while maintaining the flexibility to reissue at any time to opportunistically capitalize on growth opportunities. At June 30, Net debt to trailing 12 months adjusted EBITDA leverage was 2.1 times. Given the cold and wet start to the year that slowed spending timelines on some projects, we now expect full year maintenance and growth capital expenditures of approximately $700 million with an acceleration of spending in the second half of the year. Our trailing 12 months SAG expenses of $550 million were flat to the prior year and 10 basis points lower as a percentage of revenue. Year-to-date expenses of $283 million were in line with our expectations. As Tom said, we are reaffirming our full-year adjusted EBITDA guidance of $2.35 to $2.55 billion. Double-digit year-over-year shipments thus far in July the exceptional execution of our teams in the first half of the year, and the improving private and public demand backdrop all give us confidence in an accelerating second half of the year. I'll now turn the call back over to Tom to provide a few closing remarks.

Thank you, Mary Andrews, and thank you to my Vulcan teammates who delivered a strong first half of 2025. Our 12-month aggregate cash growth profit of $11.25 per ton is now over 50 percent higher than just three years ago when we communicated a goal of $11 or $12 per ton. This clearly depicts the durability of our agri-slip business and our commitment to controlling what we can control to deliver consistent earnings growth for our shareholders, regardless of the demand backdrop. And now, Mayor Andrews and I will be happy to take your questions.

At this time, if you'd like to ask a question, please press the star and 1 keys on your telephone keypad. Keep in mind, you may remove yourself from the question queue at any time by pressing star and 2. Again, in the interest of time, we ask that you limit yourself to one question. If you have any follow-up questions, you may re-enter the queue. As a reminder, it is star and 1 to ask a question. We'll take our first question from Trey Grooms with Steven Please go ahead. Your line is open.

Hey, good morning, everyone. Thanks for taking my question. So, you know, clearly you all faced a heavily weather impacted first half of the year, which clearly impacted your volume and I'm sure had to hurt profitability as well to some degree. I guess what are you seeing or what gives you the confidence going into the second half to reaffirm your even dog guide for the year despite this kind of tough first half that we've been having to deal with, especially due to weather?

Well, thanks for the question, Trey. I think Trey X rain. I WAS VERY PLEASED WITH THE QUARTER AND THE FIRST HALF OF THE YEAR. VOLUMES WERE DOWN 1% IN Q2 AND IN THE FIRST HALF. WITHOUT ACQUISITIONS, DOWN FIVE. AS WE'VE BEEN TALKING ABOUT, WE SAW SIGNIFICANT RAINFALL IN THE SOUTHEAST. WITH OUR OUTSIZED PERFORMANCE IN THE SOUTHEAST, WE WERE PROBABLY IMPACTED MORE THAN MOST. THAT'S THE TOUGH NEWS. For me, the good news is that even with the wet weather in Q2, the cold weather in Q1, volumes down, and the most impacted region being at southeast, which houses probably our highest prices and margins, we still saw first half prices up 6% and unit margins up 13%. And for me, that's really quality earnings in some tough conditions and one I think our people should be very proud of, of their performance in the first half. It gives us a lot of confidence for the second half because, you know, a bit of good weather in the southeast, like we saw in July, will really help improve what I thought was already a really good performance. When it's dry, we're shipping strong. You know, July had what I call normal weather patterns, and we saw very strong shipments. They were, as Mary Drew said, they were up double digit in July, and that's a little bit of catch-up probably and probably some easy comps. But importantly, what we know is that our backlogs and our booking pace and our shipping pace are all up and would support, you know, our full year of guidance of that 3% to 5%, which will have significant catch-up in the second half. And we always said this will be second half loaded from a volume perspective. I think the other thing that gives me confidence in it is that the underlying demand is there and it is improving. And so I think that we'll start to be on the edge of a turn for the private side.

Perfect. Okay. Thanks, Tom. That's encouraging. I'll keep it to one question and pass it on. Thank you very much. Thanks, Greg. Talk to you later.

See you. We'll take our next question from Anthony Petitari with Citigroup. Please go ahead. Your line is open.

Hi, Anthony. Good morning. Hey. Last quarter, I think you mentioned maybe delays in bids translating to bookings as something that maybe you were seeing a little bit more, and maybe we've seen some of that in national data. I'm just curious if that's accurate. Are you seeing project timelines stretch out or, you know, customer confidence, you know, improved? Or I'm just kind of curious how that kind of bid-to-booking timeline has trended.

Yeah, good question and an important one because it's turned. We are seeing them get greenlit. They're going. That's what's also building our booking pace and our backlogs. So I think we've seen the turn in that. Okay. Is that specific to private commercial or public or are you seeing it across end markets or? I think you're sitting across all in markets. The one I would call out that we're not sitting across would be single family. But, you know, as we talked about, the backlogs in booking pace and starts on the public side is very strong, and it continues to improve on the private side in all sectors except for single family. Okay. That's very helpful. I'll turn it over.

Thank you. We'll take our next question from Catherine Thompson with Thompson Research Group. Please go ahead. Hi, Catherine.

Good morning, and thank you for taking my question this morning. Just tagging on on the infrastructure question, you talked about the acceleration of dollars flowing out. How much of this, when you look, there are certain key states like Florida with the moving floor of Florida, which is $4 billion, and then Tennessee's Modernization Act, which added another $3.3 billion to DOT funding. Is it these types of states that have these big initiatives and you're starting to see dollars flow through? Or is it, you know, other types of projects that are more related to IJA and just seeing a more delay from those? Or is it a combination of all the above?

Yeah, it's all of the above. And, you know, the capital spending, as you pointed out, in all of our southeastern states, in fact, all of our biggest states are up and up considerably. That is coupled with IIJ funding. I think you're seeing both of them come together, along with some local funding that's been increasing over the last three or four years. So I think what we're seeing in the highway work is demand is very strong and getting better. We're seeing this in lettings. We're seeing bookings. We're seeing backlogs. You know, remember a year ago, the contract awards were down 2%. Now contract awards are up 22%. And so we're also seeing this in our shipments. We saw it in July. We really feel the impact in 2026. And this kind of growth in public demand should be a strong catalyst for 2026 pricing. because it's so visible. And so that gives you that visibility of future work, which really helps pricing.

Okay. And it leads to that contract rewards are up 22%. Is that for bulk conserved states, or is that more a national number?

Yes. That is bulk conserved. Yeah, that's highway for bulk conserved states.

You know, and Catherine, I think one of the, you know, things we're pleased to see is that shift from a Tom commented, you know, down a year ago to significantly up is distinctly different in Vulcan states versus other states where, you know, the awards have actually, you know, decelerated some.

Great. Thank you so much. I appreciate it.

Thank you.

Best of luck.

Thanks. We'll take our next question from Brian Brophy with Stiefel. Please go ahead.

Hello, this is Andrew on for Brian. Thank you for taking my question. I just had a question on CapEx. It looks like it took a step down in the quarter. I'm wondering if there's any particular drivers of that, and then are there any changes to how you're thinking about CapEx for the full year?

Yeah, so the CapEx in the first half, you know, being lighter than what we anticipate for the full year was really due to the slow start with the weather, just harder to get project timelines going. We do expect now that CapEx for the full year will be about $700 million, which is a bit lower than our original guide of $750 to $800 million.

Thank you.

We'll take our next question from Stephen Fisher with UBS. Please go ahead.

Hi, Steve. Hi. Thanks for taking the question. So, obviously, good cost performance in the quarter. And I'm just curious what your visibility is to the increases in the second half of the year and maybe what you experienced in July with the real kind of question around do you think you'll be able to be back growing cash growth profits per ton by double digits in Q3?

Yeah, so I've got a little cost. We would we would call it towards turning towards or guide you towards the low end of our guidance. You know, the cost in the first half was down 1% up 1% in Q2. I thought that was a really excellent operating performance. That's really hard to do when you have that kind of that kind of rain. So great performance by my operators. Their safety record was also record setting. So thanks and congratulations to all of them. What they're really doing is, to your point, is helping us take that price to the bottom line. To that point, our gross margins for aggregates was up 200 basis points, and it was up to 42.7% in Q2. So again, in spite of rain reduced volumes in the southeast and extremely wet quarter, I thought our folks should be very proud of not only the cost performance, but the unit margin performance. What it's telling me is the Volcan way of operating is making a difference. We've got a long ways to go on that, but we should see that improving. And also, to your point, we're just able to take all the price to the bottom line.

Yeah, I mean, if you look at the quarter, you know, with our price being up over $1 per ton, $1.11, and being able to take $0.95 of that to the bottom line in cash grows profit per ton was just a great performance. And we think that we'll carry that momentum into the back half.

Yeah, and remember, you know, this is in reduced volumes. The volume leverage as the volumes go up will really help us with that and really help push those unit margins up.

Terrific. Thank you. Thank you. We'll take our next question from Keith Hughes with Truist. Please go ahead. Your line is open.

Thank you. Thanks for taking the questions. I guess on the non-residential comments, some of the more bullish that I've heard. When do you think that would turn into following this review? Is that a 26-story, or what's the view?

You know, we'll feel a little bit of it in the second half. I think it is probably more of a 26 volume just because you've got a delay in those projects. But I mean, I think we're starting to see that. We are definitely seeing our backlogs. And we're starting to see a little bit of it in shipments, but I think it's more of a 26 play, 27 play. You know, we've been anticipating a recovery in non-res. Now I think we're starting to see signs of a turn. The data centers are accelerating quickly. We're seeing some green shoots in warehouses, and we're seeing some green shoots at traditional, like non-res, which we think is at the bottom. Our backlogs in non-res are up and support our encouraging comments. So I think we're encouraged about it. So, you know, let's hope that momentum continues, but it sure appears it's going to.

And the final question in the guide. What do you think about the second half for aggregate pricing?

I think that, you know, we we keep it we keep on with the momentum. You know, I think we'll be impacted some. because the highway sector is so strong right now, which has a larger portion of base, which is a cheaper product, but it's also a cheaper product to make. So I would point you to, I feel good about the unit margins, and I feel good about it on minimum pricing, but that sequential will be a little bit left in prior year because of product mix, because of the heavy highway sector. Thank you. Yeah, one of the things I would tell you I add to that was I thought when it came to pricing, we were really strong in the acquisitions, both on the East Coast and the West Coast. We got all we had planned in January, and I think we got all we had planned in mid-years, which will help us because, as you can see, the mix has been a drag on us. Yeah, right. Okay. Thanks very much.

Thanks. We'll take our next question from Ivan Yee with Wolf Research. Please go ahead.

Male Speaker 1 Yes, hi. Good morning. Thanks for taking my question. First, roughly what percentage of your agri to move on the rails? And I guess I just want to get your initial thoughts on the proposed Union Pacific-Morphic Southern merger. What impact would this have? Would you support or oppose the transaction? Thank you.

Male Speaker 2 I don't know that it has any impact on us. We're customers of both those railroads, but the way agri shipments move, you're not going to commingle those. I don't see much of an impact for us. In other words, what we ship now, we're not a long hauler, so, you know, we're shipping to a market which is within each one of those railroads, not changing carriers.

Great. Thank you.

Sure. We'll take our next question from Angel Castillo with Morgan Stanley. Please go ahead. Your line is open.

Hi, Angel. Hi. Good morning. Good morning. Hi. How's it going? um thank you for taking my question just this is a bit of a multi-part one but just wanted to get a better sense of um you mentioned the bid to bookings conversions uh starting to improve here and sounds like uh you know some of that is just again an inflection point but curious what are you seeing change here is it just the market confidence is it the the tax bill and then you know you kind of uh respond to that i guess just curious it sounds like you're also still seeing some deferrals and delays so Are those also still at maybe a little bit elevated levels, or are you seeing inflection there where those are no longer kind of occurring?

I missed the second half of your question. I'm sorry.

Yeah, just curious, you know, as we think about that change in the bid to kind of bookings, it sounds like you are still seeing some deferrals and delays of projects that maybe make the volume inflection more of a 26-story. So just curious, is that also improving in terms of the number of kind of deferrals or delays? And just curious. You think about kind of the speed at which we can see these awards start to turn to real volumes?

Yeah, so I don't think we're seeing, I think the deferrals and delays have come to pass. We're seeing those jobs start. And so I think while that will build for 26, just because our backlogs are building, I think we're going to feel that in the second half. Now, where is that? It's a pretty broad spread. The highway And infrastructure work is very good. That is that all that money to IJ and state funding and local funding going to work. And so that we will definitely feel in the second half of 25 and into 26. Data centers are good and growing. We're shipping a number of them right now and have said there's $35 billion of greenlit projects that haven't, you know, they're going to go, but we're not feeling them at this point. Those are heavily in our markets on, as I said, on non-res, warehouses are, we think, are turning. So that will help us. Like res, we think, is bottom. That will help us. And then, interesting, we haven't talked about, but on multifamily residential, we've gone into growth mode in three-month starts. I think we're up 17 percent. So the only one we're struggling right now is single-family. not overbuilt, so at some point in time it'll turn, but we haven't seen signs of that at this point.

Yeah, and I think, Angel, overall there was just a bit of a, you know, post-liberation day lull that we seem to really be past now, and trailing three months contract awards and private non-res, you know, have turned positive. So that, to us, is encouraging that we've moved past some of that uncertainty.

That's very helpful. Thank you.

Thank you. We'll take our next question from Phil Ng with Jefferies. Please go ahead. Your line is open.

Hey, guys. Tom, you sounded pretty bullish on the pace of the infrastructure side of things. I think coming into the year, there was probably an expectation for infrastructure to be up mid-single digits. Now, given what you're seeing, is that still a good way to think about it? And does that rate of growth perhaps even accelerate more in 2026 and beyond?

I would tell you what, as I said, what we're seeing is just that money going to work. And the DOT's ability to get more work out, I think, is maturing. I do think that, you know, as I said, we see the upswing in 25. I think we see it grow even more into 26. And it wouldn't surprise me to see it grow more into 27.

Okay, that's helpful. And then your downstream business, you know, appreciate it's a smaller part of your business. It was a little softer than I would have thought. You know, how much of that is weather related, dynamic and, you know, ready mix, I would imagine is more tied to housing to a perspective. How's your outlook in terms of your profitability in your downstream business change from the start of the year?

So, Phil, you're right. You know, the first half was impacted really by the weather in our asphalt business in Tennessee and Alabama and the softer, you know, private demand did weigh on ReadyMix. I think, you know, overall in asphalt, you know, we still saw price improvement and the lower liquid helped, you know, offset the lower volume in the quarter. So I think a pretty, you know, solid performance there. You know, the good news is we've seen a good recovery already in July shipments where, you know, we were weather impacted. And I think the accelerating public demand and a little bit lower liquid level versus what we'd initially anticipated all bode well for the back half and asphalt. And then in ready mix, we certainly have some ground to make up, but we saw price improvement, unit margin improvement. even with the lower volumes, some of that, you know, in part to the quality of that recent Southern California acquisition. But we're encouraged and ready-mixed by some of the positive, you know, signs on the private side that Tom was just talking about and still think we have a shot at some improvement in the back half.

Okay. Hopeful color. Thank you. Thank you. We'll take our next question from Garrick Schmoys with Loop Capital. Please go ahead. Your line is open.

Great. Thanks. I had a question on agribusiness pricing. How should we think about mid-year increases this year? Can I just look a little bit to traction on acquired markets? Just wondering how widespread the mid-years were. And then also, you know, on the mix side, we appreciate the product mix headwinds with more base. But I'm wondering about geographic mix, especially with the southeast snap stack here, as it has in July. How does that impact pricing in the second half of the year?

Yeah. So on mid-years, I'd call it, you know, some products in some markets, which is not that unusual. You know, everybody wants it to have an impact on same year, as we'll say it have a little bit of impact on 25, but it's really a 26 play. And it's really trying to set you up for your 26 price increases. So, you know, it's more tailwind for 26. As I said, I was very pleased with the pricing we got on both in, you know, in North Carolina and in California on the acquisitions. They're behind, and we'll quickly get them up to Vulcan standards, but that's going to take a little while. And as you saw in the mix, that was a part of, you know, the difference in reported and mixed. The other part, to your point, was the southeast, where our volumes were hit hard with record rainfall in a number of our key states. I think that, you know, the fact that we performed as well as we did in the first half based on mix and based on challenging conditions gives me a lot of confidence with the second half where I think we'll see better volumes and that we can continue that momentum and we carry a lot of that into 26. So I think while we've had a challenge from outside forces, I thought our internal performance was quite disciplined and done quite well.

Yeah. And Derek, I think we will see, you know, some modest sequential growth, but it really will just come down to geographic mix and product mix and where those land. You know, what's important to us mostly is just the underlying pricing momentum with the eight percent mix adjusted in the quarter and how strong that remains.

Yeah. The one thing you brought up base that I would point out, well, you know, people tend to, I guess, kind of look down on base. It is a really important product for us and it has great margins and it balances our plants and, you know, will help our costs. So while it may be, well, flexible base is lower price, it's still really good margins and really important. So I'm, you know, for me as an operator, I think the base volumes look fantastic.

That's encouraging. Thank you.

Thank you. We'll take our next question from Michael Dudas with Vertical Research Partners. Please go ahead. Your line is open.

Good morning, Mary Andrews, Mark, Tom.

Hey.

Good morning. I want to hear your thoughts on Big Beautiful Bill legislation and how that, maybe from your clients, or how you assess it from a Vulcan standpoint, and maybe to follow on to that, what are you hearing your thoughts on IIJ 2.0?

I'll start first maybe with the recent tax legislation. There are certainly some benefits in there for us. Those will mainly come from 100% bonus depreciation and the expensing of domestic research costs. So, you know, we currently estimate a cash tax benefit of over $40 million for June year-to-date activity, and we would expect, you know, the full-year benefit could approach $100 million. We don't expect any, you know, material impacts to our effective tax rate, but definitely a cash tax benefit for 2025 and going forward.

Yeah, on a new highway bill, I think the good news, what I'm encouraged about is that Congress are working on one. They're trying to pin it. They are aggressively pursuing it. I think, you know, to tell you what the magnitude is, versus IJ is probably too early to call. It will be bigger. Now, whether that's 5% or 20%, I don't we don't know yet. We're voting for 20. But I'd take five. The, I think, importantly, remember, the IIJ funding, as I commented, we've only spent 60% of that funding. So, and, you know, we're a year and a half away from the bill expiring. So, there will be a tail to this, and we'll have substantial highway work based on IIJ dollars that will go past the expiration date. of of ija so we got a kind of what i call an insurance policy or a timeline uh that will protect us on trying to get that new bill but we'll get one it'll be at higher funding well let's settle for 12 and a half percent time we'll call it a day thank you okay we'll take our next question from david mcgregor with longbow research please go ahead your line is open

Thanks, and good morning, everyone. Thanks for taking the questions. Tom, you talked about 2 to 3 million tons that were lost in the quarter. How much incremental tons do you think you'll ship in 3Q that was of that 2 to 3 million? How much can you recover? And I guess also on that question, I appreciate all the conversation and discussion around the backlogs. I know normally you don't open that up and get into a lot of detail, but given we seem to be at a Fairly important inflection point in terms of what you're seeing there. I wonder if you could maybe just dig in a little further on the backlog and share with us a little more detail. Maybe, you know, growth numbers year over year versus last quarter, if you can table pricing growth in the backlog. I think anything there would be helpful. Thanks.

Yeah. So on the weather related, it will be spread out in the second half. I mean, you just don't get a big slug of that. We probably saw the slug we saw was probably in July. That probably helped. that double-digit number, but most of it will be spread out over the quarter. So, you know, I think we catch that up and do fine with it and move ahead. If I look at our backlogs, I would call them up in all sectors except for single-family, and they're kind of what I call flat, maybe down a little bit in single-family. But the one that, you know, non-res is up and highways is up substantially. So I think that gives us a lot of confidence in continuing our guide to the three or five, but also gives us confidence that we start, we're going to start 26 off on the right foot.

Thanks very much.

Thank you. And we'll take our last question today from Michael Finnegar with Bank of America. Please go ahead.

Hey, Michael. Morning. Morning, guys. Thanks for squeezing me in. Tom, you mentioned with the second half, the product mix with highways kind of weighs on sequential pricing. It sounds like a mixed impact. Is there anything we should keep in mind for 2026 if growth is led more by highways and data centers? Does that headline pricing number look a little bit more modest with a price versus cost spread? It's still the same in terms of 60% incrementals, kind of double-digit gross profit per ton. Just kind of wondering as the mix and your end markets kind of evolve, do we have to think about differently if it impacts the pricing or the profitability metrics at all?

Well, over the last couple of years, we've got a lot of headwinds on the private side, and we've been slow getting growth on the highways, about where we thought. But what's encouraging me about pricing 26 is two things. Number one, the highways are so strong, and you've got a lot of visibility to come and work in highways. not just what we have in our backlogs but what's the funding and the and the capital spending levels for for our states couple that with the ij money maturing and the dots being able to get that that work out all those are really impactors but remember how we once they say it's going to go it's going to go it does it's not going to get paused it's not going to get pushed back unless you have a permitting issue so it does a lot of clarity to what's going on that if you layer on top of that if we're making the turn on the private side, then that gives us a lot of tailwinds for people who have the confidence in more work to come and taking risk on pricing going forward. So that's what's given me a better feeling than maybe what I had six, you know, three or four, six months ago when we were a little bit of a lull on the private side and the public side did not kick in as strong.

Great. Thanks, Tom. Just lastly, from a second question, You guys are looking, we're looking like a billion dollars of free cash flow. Is that the new baseline for you guys going forward, rebates and the free cash flow, this billion number and moving that higher? And if that is the case, this is your new baseline, which would be a record for the company. Like, does that change at all how you're thinking of capital allocation? I appreciate that. I think you're at, you know, two times leverage But I'm just kind of curious, that new baseline, does that kind of change or how aggressive you'll be on the capital allocation side? Thank you.

Yeah, I would tell you, you know, our capital allocation priorities don't change. But I think the level to which we can allocate capital to each of those priorities, you know, does change. And even as you think about the back half of the year, you know, given the current balance sheet profile and, you know, the strong cash generation, you know, I think returning cash, you know, to shareholders is likely and that level will, you know, be dependent upon, you know, how the M&A discussions that we've been having continue to develop.

Yeah, I thought we were, you know, we were very pleased with the two acquisitions we got. We closed on the end of 25. We're pleased with our integration, particularly on the pricing side. You know, M&A was a bit slow in the first months of the year. We're starting to have some conversations now that hopefully will be meaningful to us. So I'm encouraged. I'm more encouraged about the M&A than maybe I was four or five months ago. But also, like I said, Once you buy one, you better execute, and I'm pleased with the execution of what we've done until we closed it in the last year. Thank you.

Thank you.

There are no further questions on the line at this time. We'll turn the program back to Tom Hill, Chairman and CEO, for any closing or remaining remarks.

Again, thank you for your interest in Vulcan Materials. We appreciate your time. We look forward to talking to you throughout the quarter, and we hope you stay safe and your family stay safe. Thank you.

This does conclude today's program. Thank you again for your participation, and you may now disconnect.