Summit Materials(SUM) - 2024 Q2 - Quarterly Results

Executive Summary Summit Materials reported strong Q2 2024 results, driven by the Argos USA acquisition and positive pricing, reaffirming full-year guidance and synergy targets Q2 2024 Performance Highlights Summit Materials, Inc. reported strong second-quarter 2024 results, driven by the Argos USA acquisition, positive pricing momentum across all business lines, and ongoing cost savings | Metric | Q2 2024 ($ thousands) | Q2 2023 ($ thousands) | % Change vs. PY | | :----------------------- | :-------------------- | :-------------------- | :-------------- | | Net revenue | 1,075,471 | 680,373 | 58.1 % | | Operating income | 172,896 | 129,633 | 33.4 % | | Net income | 106,075 | 84,728 | 25.2 % | | Basic EPS | $0.60 | $0.70 | (14.3)% | | Adjusted Cash Gross Profit | 368,253 | 236,747 | 55.5 % | | Adjusted EBITDA | 296,166 | 191,745 | 54.5 % | | Adjusted Diluted EPS | $0.66 | $0.71 | (7.0)% | - The resilient performance was supported by positive pricing momentum across all lines of business, ongoing cost savings initiatives, and a more durable portfolio[2] 2024 Guidance Reaffirmation The company reaffirmed its full-year 2024 Adjusted EBITDA and capital expenditures guidance, indicating confidence in achieving its financial targets, including at least $40 million in Argos USA synergies | Metric | 2024 Guidance Range | | :----------------- | :------------------ | | Adjusted EBITDA | $970M - $1,010M | | Capital Expenditures | $430M - $470M | - Summit is on track to generate at least $40 million dollars of Argos USA synergies and drive significant pro forma margin expansion[2] Second Quarter 2024 Financial Results This section details Summit Materials' Q2 2024 financial performance, covering total company, line of business, and segment-specific results Total Company Results Total company net revenue significantly increased by 58.1% to $1,075.5 million, primarily driven by the Argos USA acquisition | Metric | Q2 2024 ($ millions) | Q2 2023 ($ millions) | % Change | | :----------------- | :------------------- | :------------------- | :------- | | Net revenue | 1,075.5 | 680.4 | 58.1 % | | Operating income | 172.9 | 129.6 | 33.4 % | | Operating margin | 16.1 % | 19.1 % | (3.0) pp | | Net income | 106.1 | 83.6 | 26.9 % | | Basic EPS | $0.60 | $0.70 | (14.3)% | | Adjusted Diluted EPS | $0.66 | $0.71 | (7.0)% | | Adjusted EBITDA | 296.2 | 191.7 | 54.5 % | - The Argos USA transaction contributed $464.0 million to net revenue, while divestitures decreased net revenue by $46.6 million[4] Results by Line of Business Aggregates Business Aggregates net revenues increased slightly, and the adjusted cash gross profit margin expanded, despite sales volumes decreasing due to wet weather and restrained private end-market activity | Metric | Q2 2024 ($ millions) | Q2 2023 ($ millions) | % Change | | :------------------------- | :------------------- | :------------------- | :------- | | Net revenues | 187.1 | 182.5 | 2.5 % | | Adjusted cash gross profit margin | 54.1 % | 53.6 % | 0.5 pp | | Sales volume | (10.0)% | - | - | | Organic sales volume | (9.4)% | - | - | | Average selling prices | 11.8 % | - | - | | Organic pricing | 10.8 % | - | - | - Pricing growth was strong throughout the footprint, led by the East Segment, which increased 14.8%[6] Cement Business Cement net revenues increased significantly, but the adjusted cash gross profit margin decreased due to margin mix impacts from the Argos USA assets | Metric | Q2 2024 ($ millions) | Q2 2023 ($ millions) | % Change | | :------------------------- | :------------------- | :------------------- | :------- | | Net revenues | 324.8 | 111.9 | 190.3 % | | Adjusted cash gross profit margin | 49.4 % | 52.8 % | (3.4) pp | | Sales volume | 238.0 % | - | - | | Organic sales volume | (16.5)% | - | - | | Organic average selling prices | 7.3 % | - | - | - The decrease in adjusted cash gross profit margin was primarily due to margin mix impacts from the inclusion of Argos USA assets[7] Products Business Products net revenues increased substantially, but the adjusted cash gross profit margin decreased, with organic sales volumes for ready-mix concrete and asphalt declining due to adverse weather | Metric | Q2 2024 ($ millions) | Q2 2023 ($ millions) | % Change | | :------------------------- | :------------------- | :------------------- | :------- | | Net revenues | 495.5 | 309.6 | 60.0 % | | Adjusted cash gross profit margin | 17.3 % | 21.2 % | (3.9) pp | | Organic ready-mix concrete average sales price | 5.6 % | - | - | | Organic ready-mix concrete sales volume | (14.9)% | - | - | | Organic asphalt average selling prices | 0.5 % | - | - | | Organic asphalt sales volume | (6.6)% | - | - | - Adverse weather conditions in Houston and restrained private end-market activity impacted ready-mix concrete volumes[8] Results by Reporting Segment West Segment The West Segment experienced a decrease in operating income and Adjusted EBITDA, primarily due to unfavorable weather in the Houston market | Metric | Q2 2024 ($ millions) | % Change | | :--------------- | :------------------- | :------- | | Operating income | 70.7 | (5.2)% | | Adjusted EBITDA | 101.6 | (2.8)% | | Aggregates revenue | (4.9)% | - | | Aggregates volume | (12.2)% | - | | Aggregates pricing | 8.3 % | - | | Ready-mix concrete revenue | 16.7 % | - | | Organic ready-mix pricing | 5.3 % | - | | Organic ready-mix volume | (13.9)% | - | | Asphalt revenue | (6.1)% | - | - Unfavorable weather conditions in the Houston market largely reflected the decrease in West Segment's Adjusted EBITDA[9] East Segment The East Segment saw increases in operating income and Adjusted EBITDA, with aggregates revenue growing due to strong pricing and ready-mix concrete revenue significantly increasing from the Argos USA acquisition | Metric | Q2 2024 ($ millions) | % Change | | :--------------- | :------------------- | :------- | | Operating income | 46.9 | 48.4 % | | Adjusted EBITDA | 70.6 | 48.0 % | | Aggregates revenue | 6.0 % | - | | Aggregates volume | (8.9)% | - | | Aggregates pricing | 14.8 % | - | | Ready-mix concrete revenue | 191.9 | 600.0 % | | Asphalt revenue | (9.2)% | - | - Ready-mix concrete revenue increased $164.7 million due to the acquisition of Argos USA ready-mix concrete operations in Florida, Georgia, and the Carolinas[9] Cement Segment The Cement Segment reported substantial increases in operating income and Adjusted EBITDA, largely attributable to the Argos USA transaction, despite a decrease in Adjusted EBITDA margin | Metric | Q2 2024 ($ millions) | % Change | | :--------------- | :------------------- | :------- | | Operating income | 92.0 | 113.8 % | | Adjusted EBITDA | 140.8 | 166.0 % | | Adjusted EBITDA margin | 43.3 % | (4.0) pp | | Organic volume | (16.5)% | - | | Organic selling price | 7.3 % | - | - Adjusted EBITDA margin decreased due to margin mix from inclusion of the Argos USA cement assets and planned maintenance at certain cement plants[9] Liquidity and Capital Resources Summit Materials maintained a strong liquidity position as of June 29, 2024, with substantial cash and revolving credit availability, alongside operating cash flow and capital expenditures | Metric | As of June 29, 2024 ($ millions) | | :----------------------------------- | :------------------------------- | | Cash and cash equivalents | 538.7 | | Debt outstanding | 2,800.0 | | Revolving credit facility available | 592.7 | | Metric | Six months ended June 29, 2024 ($ millions) | | :----------------------------------- | :---------------------------------------- | | Cash flow provided by operations | 111.4 | | Cash paid for capital expenditures | 176.0 | - Approximately $149.0 million remained available for share repurchases under the share repurchase program[10] Company Information This section provides Q2 2024 earnings webcast and conference call details, along with an overview of Summit Materials' business and market position Webcast and Conference Call Information Summit Materials will host a conference call on August 6, 2024, to discuss its second-quarter 2024 financial results, with details for accessing the live webcast and teleconference provided - Conference call scheduled for Tuesday, August 6, 2024, at 12:00 p.m. eastern time[11] - Webcast and presentation materials available in the Investors section of Summit's website[11] | Access Type | Details | | :---------------- | :------------------------------------ | | North America Toll-Free | 1-888-330-3416 | | International Toll | 1-646-960-0820 | | Conference ID | 1542153 | | Password | Summit | About Summit Materials Summit Materials is a leading producer of aggregates and cement with vertically integrated operations, supplying ready-mix concrete and asphalt, serving public infrastructure, residential, and non-residential markets - Summit Materials is a market-leading producer of aggregates and cement with vertically integrated operations that supply ready-mix concrete and asphalt in select markets[12] - The company serves public infrastructure, residential, and non-residential end markets in the United States and British Columbia, Canada[12] - Summit has a strong track record of successful acquisitions and continues to pursue high-return growth opportunities[12] Non-GAAP Financial Measures This section explains the use of non-GAAP financial measures such as Adjusted EBITDA, Adjusted Cash Gross Profit, and Adjusted Diluted EPS, which are provided to offer additional insights into performance and debt servicing ability - Non-GAAP measures like Adjusted Net Income (Loss), Adjusted Diluted Net Income (Loss), Adjusted Diluted EPS, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross Profit, Adjusted Cash Gross Profit Margin, and Free Cash Flow are provided to offer additional information for measuring performance and evaluating debt servicing ability[14] - These non-GAAP measures have important limitations, as they do not reflect cash expenditures, working capital needs, interest expense, or income tax payments[15] - Investors are strongly encouraged to review consolidated financial statements in their entirety and not rely on any single financial measure[16] Cautionary Statement Regarding Forward-Looking Statements This section outlines various risks and uncertainties that could impact Summit Materials' future performance, including industry dependence, acquisitions, and regulatory factors - Key risks include dependence on the construction industry and local economies, cyclical business nature, weather and seasonality, and capital-intensive operations[18] - Risks related to the integration of Argos USA, the ability to execute acquisition and portfolio optimization strategies, and securing aggregate reserves are highlighted[18] - Other significant risks involve rising interest rates, declines in public infrastructure funding, environmental regulations, rising prices for commodities and labor, and potential operational failures or litigation[18][19] Financial Statements Unaudited consolidated statements of operations, balance sheets, and cash flows are presented, detailing Summit Materials' financial position and performance Unaudited Consolidated Statements of Operations The consolidated statements of operations present the company's revenues, costs, and profitability for the three and six months ended June 29, 2024, and July 1, 2023, showing significant increases in net revenue and operating income year-over-year for the quarter | Metric ($ thousands) | Three months ended June 29, 2024 | Three months ended July 1, 2023 | Six months ended June 29, 2024 | Six months ended July 1, 2023 | | :------------------- | :------------------------------- | :------------------------------ | :----------------------------- | :---------------------------- | | Net revenue | 1,075,471 | 680,373 | 1,848,700 | 1,087,643 | | Operating income | 172,896 | 129,633 | 128,043 | 114,158 | | Net income | 106,075 | 84,728 | 38,805 | 53,516 | | Basic EPS | $0.60 | $0.70 | $0.23 | $0.44 | - Transaction and integration costs increased significantly to $10,265 thousand for Q2 2024, compared to $1,712 thousand in the prior year[22] Consolidated Balance Sheets The consolidated balance sheets provide a snapshot of the company's financial position as of June 29, 2024, and December 30, 2023, indicating substantial growth in total assets, primarily driven by property, plant and equipment, and goodwill | Metric ($ thousands) | June 29, 2024 | December 30, 2023 | | :--------------------------- | :------------ | :---------------- | | Total assets | 8,313,992 | 5,149,582 | | Cash and cash equivalents | 538,708 | 374,162 | | Property, plant and equipment, net | 4,354,088 | 1,976,820 | | Goodwill | 2,093,010 | 1,224,861 | | Total current liabilities | 573,860 | 322,965 | | Long-term debt | 2,771,463 | 2,283,639 | | Total liabilities | 3,981,248 | 2,833,002 | | Total stockholders' equity | 4,332,744 | 2,316,580 | - The significant increase in property, plant and equipment, and goodwill reflects the impact of acquisitions, particularly Argos USA[24] Consolidated Statements of Cash Flows The consolidated statements of cash flows detail the cash generated and used across operating, investing, and financing activities for the six months ended June 29, 2024, and July 1, 2023 | Metric ($ thousands) | Six months ended June 29, 2024 | Six months ended July 1, 2023 | | :----------------------------------- | :----------------------------- | :---------------------------- | | Net cash provided by operating activities | 111,404 | 94,042 | | Net cash used in investing activities | (1,212,449) | (360,651) | | Net cash provided by (used in) financing activities | 467,182 | (24,579) | | Net decrease in cash and cash equivalents and restricted cash | (635,454) | (290,441) | | Cash and cash equivalents and restricted cash—end of period | 538,708 | 230,010 | - Acquisitions, net of cash acquired, resulted in a cash outflow of $1,113,267 thousand for the six months ended June 29, 2024[27] - Proceeds from debt issuances amounted to $1,007,475 thousand, significantly contributing to financing cash flow[27] Supplemental Financial Data Detailed supplemental financial data is provided, including segment net revenue, line of business performance, volume, price, and gross to net revenue reconciliations Segment Net Revenue Segment net revenue data shows substantial growth in the East and Cement segments for Q2 2024, largely driven by the Argos USA acquisition, while the West segment experienced more modest growth | Segment ($ thousands) | Three months ended June 29, 2024 | Three months ended July 1, 2023 | Six months ended June 29, 2024 | Six months ended July 1, 2023 | | :-------------------- | :------------------------------- | :------------------------------ | :----------------------------- | :---------------------------- | | West | 423,680 | 400,038 | 707,285 | 634,408 | | East | 326,970 | 168,460 | 584,811 | 287,243 | | Cement | 324,821 | 111,875 | 556,604 | 165,992 | | Net Revenue | 1,075,471 | 680,373 | 1,848,700 | 1,087,643 | Line of Business Performance This section provides a detailed breakdown of net revenue, net cost of revenue, adjusted cash gross profit, and adjusted cash gross profit margin by line of business for the three and six months ended June 29, 2024, and July 1, 2023 | Metric ($ thousands) | Q2 2024 Net Revenue | Q2 2023 Net Revenue | Q2 2024 Net Cost of Revenue | Q2 2023 Net Cost of Revenue | Q2 2024 Adjusted Cash Gross Profit | Q2 2023 Adjusted Cash Gross Profit | | :------------------- | :------------------ | :------------------ | :-------------------------- | :-------------------------- | :--------------------------------- | :--------------------------------- | | Aggregates | 187,100 | 182,512 | 85,845 | 84,713 | 101,255 | 97,799 | | Cement | 311,188 | 103,607 | 150,727 | 44,568 | 160,461 | 59,039 | | Products | 495,453 | 309,595 | 409,658 | 243,854 | 85,795 | 65,741 | | Services | 81,730 | 84,659 | 60,988 | 70,491 | 20,742 | 14,168 | | Metric (Margin %) | Q2 2024 | Q2 2023 | | :------------------------- | :------ | :------ | | Aggregates | 54.1 % | 53.6 % | | Cement | 49.4 % | 52.8 % | | Products | 17.3 % | 21.2 % | | Services | 25.4 % | 16.7 % | | Total Adjusted Cash Gross Profit Margin | 34.2 % | 34.8 % | Unaudited Volume and Price Statistics This section provides detailed volume and pricing statistics for aggregates, cement, ready-mix concrete, and asphalt, including year-over-year comparisons both with and without the impact of acquisitions and divestitures | Product | Q2 2024 Volume (thousands) | Q2 2023 Volume (thousands) | Q2 2024 Pricing ($) | Q2 2023 Pricing ($) | | :------------------- | :------------------------- | :------------------------- | :------------------ | :------------------ | | Aggregates (tons) | 14,758 | 16,396 | 15.26 | 13.65 | | Cement (tons) | 2,376 | 703 | 153.43 | 149.10 | | Ready-mix concrete (cubic yards) | 2,376 | 1,333 | 165.51 | 149.91 | | Asphalt (tons) | 911 | 1,096 | 85.25 | 83.90 | | Product | Q2 YoY Volume Change (%) | Q2 YoY Pricing Change (%) | | :------------------- | :----------------------- | :------------------------ | | Aggregates (per ton) | (10.0)% | 11.8 % | | Cement (per ton) | 238.0 % | 2.9 % | | Ready-mix concrete (per cubic yards) | 78.2 % | 10.4 % | | Asphalt (per ton) | (16.9)% | 1.6 % | | Product (Excl. A&D) | Q2 YoY Organic Volume Change (%) | Q2 YoY Organic Pricing Change (%) | | :------------------- | :------------------------------- | :-------------------------------- | | Aggregates (per ton) | (9.4)% | 10.8 % | | Cement (per ton) | (16.5)% | 7.3 % | | Ready-mix concrete (per cubic yards) | (14.9)% | 5.6 % | | Asphalt (per ton) | (6.6)% | 0.5 % | Unaudited Reconciliations of Gross Revenue to Net Revenue by Line of Business This section provides a reconciliation of gross revenue to net revenue for aggregates, cement, and products, detailing intercompany eliminations and delivery adjustments for the three and six months ended June 29, 2024 | Product | Q2 2024 Volumes (thousands) | Q2 2024 Pricing ($) | Q2 2024 Gross Revenue by Product ($ thousands) | Q2 2024 Intercompany Elimination/Delivery ($ thousands) | Q2 2024 Net Revenue ($ thousands) | | :------------------- | :-------------------------- | :------------------ | :--------------------------------------------- | :------------------------------------------------------ | :-------------------------------- | | Aggregates | 14,758 | 15.26 | 225,148 | (38,048) | 187,100 | | Cement | 2,376 | 153.43 | 364,477 | (53,289) | 311,188 | | Ready-mix concrete | 2,376 | 165.51 | 393,294 | (16) | 393,278 | | Asphalt | 911 | 85.25 | 77,701 | (77) | 77,624 | - Intercompany eliminations and delivery adjustments are significant, particularly for materials, impacting the final net revenue figures[36][37] Non-GAAP Reconciliations This section provides reconciliations of GAAP to non-GAAP financial measures, including Adjusted EBITDA, Adjusted Diluted EPS, Adjusted Cash Gross Profit, and Free Cash Flow Reconciliation of Net Income (Loss) to Adjusted EBITDA by Segment This section provides detailed reconciliations of net income (loss) to Adjusted EBITDA for each segment and on a consolidated basis for the three and six months ended June 29, 2024, and July 1, 2023 | Metric ($ thousands) | West Q2 2024 | East Q2 2024 | Cement Q2 2024 | Corporate Q2 2024 | Consolidated Q2 2024 | | :------------------- | :----------- | :----------- | :------------- | :---------------- | :------------------- | | Net income (loss) | 82,939 | 51,434 | 98,787 | (127,085) | 106,075 | | EBITDA | 106,329 | 68,867 | 140,725 | (27,802) | 288,119 | | Adjusted EBITDA | 101,585 | 70,554 | 140,769 | (16,742) | 296,166 | | Metric ($ thousands) | West Q2 2023 | East Q2 2023 | Cement Q2 2023 | Corporate Q2 2023 | Consolidated Q2 2023 | | :------------------- | :----------- | :----------- | :------------- | :---------------- | :------------------- | | Net income (loss) | 78,354 | 34,648 | 47,871 | (76,145) | 84,728 | | EBITDA | 104,338 | 47,012 | 52,851 | (15,048) | 189,153 | | Adjusted EBITDA | 104,517 | 47,617 | 52,872 | (13,261) | 191,745 | | Segment | Q2 2024 Adjusted EBITDA Margin | Q2 2023 Adjusted EBITDA Margin | | :------------- | :----------------------------- | :----------------------------- | | West | 24.0 % | 26.1 % | | East | 21.6 % | 28.3 % | | Cement | 43.3 % | 47.3 % | | Consolidated | 27.5 % | 28.2 % | Reconciliation of Net Income Per Share to Adjusted Diluted EPS This reconciliation adjusts GAAP net income per share to Adjusted Diluted EPS by accounting for noncontrolling interests, acquisition and integration costs, and gains/losses on business sales and debt financings | Metric | Q2 2024 Net Income Per Equity Unit | Q2 2023 Net Income Per Equity Unit | | :----------------------------------------- | :--------------------------------- | :--------------------------------- | | Net income attributable to Summit Materials, Inc. | $0.60 | $0.70 | | Adjustments: | | | | Argos USA acquisition and integration costs, net of tax | $0.05 | — | | Loss (gain) on sale of businesses, net of tax | $0.01 | — | | Adjusted diluted net income | $0.66 | $0.71 | - Adjustments for Argos USA acquisition and integration costs (net of tax) were $6,723 thousand for Q2 2024[46] Reconciliation of Operating Income to Adjusted Cash Gross Profit This reconciliation shows the adjustments made from operating income to arrive at Adjusted Cash Gross Profit, providing a measure of gross profitability before certain overheads and non-cash items | Metric ($ thousands) | Q2 2024 | Q2 2023 | | :----------------------------------- | :-------- | :-------- | | Operating income | 172,896 | 129,633 | | General and administrative expenses | 83,875 | 53,838 | | Depreciation, depletion, amortization and accretion | 104,397 | 54,787 | | Transaction and integration costs | 10,265 | 1,712 | | Gain on sale of property, plant and equipment | (3,180) | (3,223) | | Adjusted Cash Gross Profit | 368,253 | 236,747 | | Adjusted Cash Gross Profit Margin | 34.2 % | 34.8 % | Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow This reconciliation details the calculation of Free Cash Flow from net cash provided by operating activities, by adjusting for non-cash items, changes in working capital, and capital expenditures net of asset sales | Metric ($ thousands) | Q2 2024 | Q2 2023 | Six months ended June 29, 2024 | Six months ended July 1, 2023 | | :----------------------------------- | :-------- | :-------- | :----------------------------- | :---------------------------- | | Net cash provided by operating activities | 151,649 | 93,707 | 111,404 | 94,042 | | Capital expenditures, net of asset sales | (105,888) | (59,326) | (161,743) | (121,133) | | Free cash flow | 45,761 | 34,381 | (50,339) | (27,091) | - Free cash flow for the six months ended June 29, 2024, was negative $50,339 thousand, compared to negative $27,091 thousand in the prior year period[50] Contact Information Contact details for investor relations are provided for inquiries regarding Summit Materials, Inc - For investor relations inquiries, contact Andy Larkin, VP, Investor Relations, at andy.larkin@summit-materials.com or 720-618-6013[51]