Knife River pany(US:KNF)2026-02-17 17:02Financial Data and Key Metrics Changes - In 2025, the company achieved a record Adjusted EBITDA of $497 million, representing a 7% increase year-over-year [4] - The fourth quarter saw a 47% increase in Adjusted EBITDA and a 340 basis point improvement in Adjusted EBITDA margin [18] - Gross profit for the fourth quarter increased by 27%, achieving a record gross margin of nearly 19% [18] Business Line Data and Key Metrics Changes - Aggregates volumes increased by 17% in the fourth quarter, with pricing up by 8% [18] - Ready-mix volumes rose by 20% in the fourth quarter, with gross margin lifting by 230 basis points [20] - Contracting services revenue grew by 15%, with the Mountain region experiencing nearly 20% growth [22] Market Data and Key Metrics Changes - The company entered 2026 with a record backlog of $1 billion, a 38% increase from the previous year [11] - Approximately 46% of IIJA funding remains to be disbursed across the company's 14 states, indicating strong public budgets [11] - The company is seeing increased private opportunities, including data centers and distribution facilities [11] Company Strategy and Development Direction - The company focuses on four growth components: markets, vertical integration, self-help initiatives, and a strong corporate culture [6] - The acquisition program ramped up in 2025 with five completed deals, and the company expects another busy year in 2026 [4][7] - The strategy emphasizes being an aggregates-based, end-to-end provider to enhance value and improve margins [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence entering 2026, citing strong momentum and favorable market conditions [5] - The company anticipates continued growth driven by infrastructure investments and a disciplined focus on cost control and pricing optimization [10][25] - Management expects consolidated revenue for 2026 to be between $3.3 billion and $3.5 billion, with Adjusted EBITDA between $520 million and $560 million [26] Other Important Information - The company invested $789 million in growth initiatives in 2025, including acquisitions and organic projects [23] - Maintenance capital expenditures were $170 million, or 6% of revenue, consistent with previous guidance [24] - The company ended the year with nearly $75 million in unrestricted cash and a net leverage position of 2.2x [25] Q&A Session Summary Question: Opportunities to build on backlog in the West region - Management acknowledged a geographic shift in backlog but expressed confidence in California, Hawaii, and Alaska's funding [32] Question: Potential levers to outperform aggregate pricing expectations - Management highlighted the success of dynamic pricing strategies and ongoing training to optimize pricing [38] Question: Margin outlook for 2026 - Management indicated expected margin improvements across all product lines, driven by dynamic pricing and operational excellence initiatives [44] Question: Return to year-over-year growth in Oregon - Management expects Oregon's performance in 2026 to be broadly in line with 2025 results, pending clarity on public funding [48] Question: Contribution of acquisitions to 2026 growth - Management stated that the full-year contribution from TexCrete would offset seasonal losses from Strata, indicating strong organic growth [90]