Knife River pany(US:KNF)2024-05-07 19:45Financial Data and Key Metrics Changes - The company reported a consolidated revenue increase of 7% compared to the same period last year, although adjusted EBITDA decreased by $4 million due to increased pre-construction expenses [44][58] - Adjusted EBITDA for the quarter was a loss of $17.7 million, compared to a loss of $13.7 million in the prior year period, attributed to higher pre-construction expenses and standalone costs [58][44] - The company ended the quarter with $128 million of available cash, compared to $7.2 million at the same time last year, and a net leverage position of 1.3 times adjusted EBITDA [47][48] Business Line Data and Key Metrics Changes - Contracting services backlog increased by nearly $423 million during the quarter, up from approximately $255 million captured during the same period last year, reflecting a 66% increase [15][42] - The average selling price for aggregates increased by 15%, while ready-mix prices rose by 9%, although asphalt pricing saw a slight decrease [41][73] - The Energy Services segment, which includes liquid asphalt operations, experienced solid revenue growth due to strong demand in California and Texas markets [34] Market Data and Key Metrics Changes - The transportation departments in Knife River's 14 states increased their total spending authority for this year by 16% from 2023, contributing to a favorable market environment [9] - Approximately 85% of the company's backlog is related to public projects with lower risk, providing a stable revenue stream [43] Company Strategy and Development Direction - The company is focused on its competitive EDGE strategy, which aims to improve adjusted EBITDA margins and deliver long-term shareholder value through initiatives in margin improvement, discipline, growth, and excellence [59] - Knife River is committed to disciplined capital allocation towards strategic growth projects, with plans to utilize $40 million to $50 million from its CapEx budget for EDGE-related growth initiatives [19][12] - The acquisition pipeline remains active, with a focus on aggregates and materials-led operations in high-growth markets [21][102] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the 2024 construction season, citing strong markets, improved backlog, and favorable materials pricing as key drivers [7][50] - The company anticipates that higher expenses incurred in the first quarter will align with prior year levels on an annualized basis, indicating a stable outlook moving forward [45][46] - Management reaffirmed financial guidance for 2024, expecting consolidated revenue between $2.75 billion and $2.95 billion and adjusted EBITDA between $425 million and $475 million [51][50] Other Important Information - The company has implemented new tools to analyze daily margins at the transactional level and is committed to a company-wide sales training program to enhance sales professionals' skills [10][22] - The company is focused on improving safety performance and maintaining a people-first approach [23] Q&A Session Summary Question: Variability in volumes across different product lines - Management noted that the variability in volumes is typical for the first quarter and attributed it to seasonal factors, with aggregates down 13% and asphalt volumes up significantly [68][69] Question: Margin profile in backlogs - Management indicated that the backlog is similar to last year but at higher margins, suggesting a positive outlook for future performance [71][72] Question: Repair and maintenance expenses - Management confirmed that some repair and maintenance expenses were pulled forward into the first quarter, which would benefit the second and third quarters [77][80] Question: Pricing outlook and dynamic pricing implementation - Management discussed the ongoing rollout of dynamic pricing and its impact on pricing guidance, emphasizing that the process is gradual and integrated into their overall strategy [88][89] Question: Acquisition environment and multiples - Management expressed excitement about growth opportunities through both organic growth and acquisitions, noting that multiples can vary widely depending on the specifics of each deal [99][102]