Knife River pany(KNF) - 2024 Q3 - Quarterly Results

Performance Summary Knife River Corporation achieved record third-quarter and nine-month financial results, driven by strategic initiatives Key Financial Results Knife River Corporation reported record third-quarter and nine-month financial results, with revenue increasing to $1.105 billion in Q3 2024 and net income growing to $148.1 million | Indicator | Q3 2024 (in millions) | Q3 2023 (in millions) | % Change | Nine Months 2024 (in millions) | Nine Months 2023 (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,105.3 million | $1,090.4 million | 1% | $2,241.8 million | $2,183.5 million | 3% | | Gross Profit | $273.0 million | $269.4 million | 1% | $455.7 million | $426.5 million | 7% | | Net Income | $148.1 million | $146.7 million | 1% | $178.4 million | $162.2 million | 10% | | Adjusted EBITDA | $245.2 million | $247.5 million | (1)% | $381.8 million | $360.0 million | 6% | | Net Income per Share | $2.60 | $2.58 | 1% | $3.14 | $2.86 | 10% | Management Commentary Management highlighted the company's fundamental strength and segment diversity, driving record quarterly results and active growth through acquisitions - Geographic segments (Pacific, Northwest, Mountain, Central) contributed a combined record EBITDA of $224.6 million, a 6% year-over-year increase, offsetting the expected decline in the Energy Services segment[3] - The company has deployed $129.3 million on six acquisitions through Nov. 2, 2024, focusing on aggregate reserves and construction materials. Recent acquisitions include Frank B. Marks & Son, Rock Products Manufacturing, a sand reserve in Sioux Falls, and Albina Asphalt[3] - The company's backlog stands at $755 million, higher than the same period last year, with expected margins improving for the sixth consecutive quarter due to the 'EDGE' strategy[4] - Full-year 2024 guidance has been narrowed to a revenue range of $2.85 billion to $2.95 billion and an adjusted EBITDA range of $445 million to $465 million[4] Detailed Financial Performance Analysis of Knife River's consolidated and segment-specific Q3 2024 financial results, detailing key performance indicators Consolidated Third Quarter 2024 Results Knife River achieved record consolidated revenue of $1.1 billion in Q3 2024, driven by price increases and strong geographic segment EBITDA - Record Q3 revenue of $1.1 billion was primarily driven by price increases in aggregates and ready-mix product lines, along with increased contracting services revenues[5] - EBITDA contributions from geographic segments increased by 6% year-over-year for the quarter and 14.8% for the first nine months of 2024, offsetting decreased EBITDA at the Energy Services segment[5] Segment Performance Geographic segments demonstrated strong Q3 2024 performance, with Northwest leading in EBITDA growth, while Energy Services saw an anticipated decline Pacific The Pacific segment reported record Q3 revenue of $165.0 million, with EBITDA increasing by 3% due to improved margins and contracting services | Metric | Q3 2024 (in millions) | Q3 2023 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Revenue | $165.0 million | $157.3 million | 5% | | Gross Profit | $34.3 million | $33.3 million | 3% | | EBITDA | $29.5 million | $28.6 million | 3% | Northwest The Northwest segment achieved record Q3 revenue of $218.1 million and record EBITDA of $55.9 million, driven by public-agency work and asphalt volumes | Metric | Q3 2024 (in millions) | Q3 2023 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Revenue | $218.1 million | $209.4 million | 4% | | Gross Profit | $57.4 million | $50.2 million | 14% | | EBITDA | $55.9 million | $48.5 million | 15% | Mountain The Mountain segment's Q3 revenue increased 2% to $261.1 million, though EBITDA remained flat due to offsetting volume declines | Metric | Q3 2024 (in millions) | Q3 2023 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Revenue | $261.1 million | $255.1 million | 2% | | Gross Profit | $61.1 million | $59.7 million | 2% | | EBITDA | $59.4 million | $59.4 million | 0% | Central The Central segment's Q3 revenue was flat at $354.9 million, but EBITDA improved by 7% to a record $79.8 million from disciplined bidding | Metric | Q3 2024 (in millions) | Q3 2023 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Revenue | $354.9 million | $354.9 million | 0% | | Gross Profit | $85.4 million | $80.4 million | 6% | | EBITDA | $79.8 million | $74.8 million | 7% | Energy Services The Energy Services segment's Q3 revenue decreased 10% to $125.9 million, with EBITDA falling 26% due to lower liquid asphalt pricing | Metric | Q3 2024 (in millions) | Q3 2023 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Revenue | $125.9 million | $140.6 million | (10)% | | Gross Profit | $34.7 million | $46.7 million | (26)% | | EBITDA | $33.7 million | $45.7 million | (26)% | Capital Management and Outlook Review of Knife River's capital allocation strategy, liquidity, and updated full-year 2024 financial guidance Capital Allocation & Liquidity Knife River maintains a disciplined capital allocation strategy, investing $129.3 million in acquisitions, and boasts strong liquidity with $220.4 million cash - Capital expenditures are categorized into 'Discipline' (maintenance, improvements) and 'Growth' (organic, acquisitions)[14][15][16] - As of Nov. 4, the company has invested $129.3 million in six acquisitions and has approved an additional $23.1 million for greenfield projects for the remainder of the year[17] - As of September 30, 2024, the company had $220.4 million in cash, $329.4 million available under its revolving credit facility, and a net leverage ratio of 1.0x[18] 2024 Financial Guidance Knife River narrowed its full-year 2024 guidance, expecting consolidated revenue between $2.85 billion and $2.95 billion and Adjusted EBITDA from $445 million to $465 million Reconciliation of Forecasted Net Income to Adjusted EBITDA (2024 Guidance) | (In millions) | Low (in millions) | High (in millions) | | :--- | :--- | :--- | | Net income | $190.0 | $205.0 | | Interest expense, net | $46.0 | $46.0 | | Income taxes | $65.0 | $70.0 | | Depreciation, depletion and amortization | $135.9 | $135.9 | | EBITDA | $436.9 | $456.9 | | Other Adjustments | $8.1 | $8.1 | | Adjusted EBITDA | $445.0 million | $465.0 million | - The company anticipates price increases of high single digits for aggregates and ready-mix, and low single digits for asphalt, partially offset by volume declines[19] Financial Statements Presentation of Knife River's consolidated statements of operations, balance sheets, and cash flows Consolidated Statements of Operations The Consolidated Statements of Operations detail the company's revenues, costs, and expenses, resulting in a net income of $148.1 million for Q3 2024 | (In millions) | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $1,105.3 | $1,090.4 | $2,241.8 | $2,183.5 | | Gross Profit | $273.0 | $269.4 | $455.7 | $426.5 | | Operating Income | $209.1 | $210.2 | $272.1 | $259.2 | | Net Income | $148.1 | $146.7 | $178.4 | $162.2 | | Diluted EPS | $2.60 | $2.58 | $3.14 | $2.86 | Consolidated Balance Sheets The balance sheet as of September 30, 2024, shows total assets of $2.88 billion, with total stockholders' equity growing to $1.45 billion | (In millions) | Sept 30, 2024 | Sept 30, 2023 | | :--- | :--- | :--- | | Total Current Assets | $1,159.6 | $1,011.4 | | Total Assets | $2,884.1 | $2,680.9 | | Total Current Liabilities | $426.1 | $425.0 | | Total Liabilities | $1,435.2 | $1,437.9 | | Total Stockholders' Equity | $1,448.9 | $1,243.0 | Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, net cash provided by operating activities was $149.9 million, with a net increase in cash of $5.1 million | (In millions) | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $149.9 | $152.9 | | Net cash used in investing activities | ($137.8) | ($82.9) | | Net cash provided by (used in) financing activities | ($7.0) | $36.1 | | Increase in cash, cash equivalents and restricted cash | $5.1 | $106.1 | Supplemental Financial Data Additional financial insights including backlog information and detailed product line sales and pricing trends Backlog Information As of September 30, 2024, the company's total backlog was $755.1 million, with expected higher margins and 87% publicly funded projects | Segment (In millions) | Sept 30, 2024 | Sept 30, 2023 | | :--- | :--- | :--- | | Pacific | $114.9 | $69.8 | | Northwest | $168.0 | $227.4 | | Mountain | $279.9 | $251.1 | | Central | $192.3 | $183.9 | | Total | $755.1 | $732.2 | Product Line Sales and Pricing In Q3 2024, sales volumes for key products decreased, while average selling prices increased across all three product lines Sales Volumes (Thousands) | Product | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Aggregates (tons) | 11,169 | 12,022 | | Ready-mix concrete (cubic yards) | 1,148 | 1,271 | | Asphalt (tons) | 3,150 | 3,349 | Average Selling Price | Product | Q3 2024 (per unit) | Q3 2023 (per unit) | | :--- | :--- | :--- | | Aggregates (per ton) | $17.32 | $16.10 | | Ready-mix concrete (per cubic yard) | $185.97 | $169.98 | | Asphalt (per ton) | $68.28 | $66.51 | Non-GAAP Financial Measures Explanation and reconciliation of non-GAAP financial measures used to assess operational performance Explanation and Reconciliation of Non-GAAP Measures The company uses non-GAAP measures like EBITDA and Adjusted EBITDA to provide investors with meaningful information about operational efficiency and financial health - The company uses non-GAAP measures like EBITDA and Adjusted EBITDA to provide insight into operational efficiency, compare performance against peers, and assess borrowing capacity[35] Reconciliation of Forecasted Net Income to Adjusted EBITDA (2024 Guidance) | (In millions) | Low (in millions) | High (in millions) | | :--- | :--- | :--- | | Net income | $190.0 | $205.0 | | Interest expense, net | $46.0 | $46.0 | | Income taxes | $65.0 | $70.0 | | Depreciation, depletion and amortization | $135.9 | $135.9 | | EBITDA | $436.9 | $456.9 | | Other Adjustments | $8.1 | $8.1 | | Adjusted EBITDA | $445.0 million | $465.0 million | Net Leverage Calculation (as of Sept 30, 2024) | (In millions) | Amount | | :--- | :--- | | Total debt, gross | $691.7 | | Less: Cash and cash equivalents | $220.4 | | Total debt, net | $471.3 | | Trailing-twelve-months Adjusted EBITDA | $454.2 | | Net leverage | 1.0x |