Knife River Corp Q1 FY2025 earnings call

• Knife River expects most profitable year in history with record revenue, net income, and adjusted EBITDA. - Acquisition program in full swing with closure of Strata and pipeline of materials-led deals. - Invested in Competitive EDGE strategy, including dynamic pricing, pit crew improvements, and new safety program. - Seasonally, first quarter historically a loss, but inclusion of Strata and Albina changes this; expect second quarter benefits from integrations. - Organic investments in aggregates expansion, asphalt plants, and ready-mix plants. - Segment updates: West sees strength in HI and CA; Mountain benefits from Idaho projects; Central integrates Strata; Energy Services expects full year contribution from Albina and new plant in SD.

Aggregate: Lower profitability in Q1 due to preproduction and pit crew improvements, but volumes expected to increase high single digits full year with 6% year-over-year average selling price increase, maintaining mid-single digit price increase guidance. Ready Mix: 9% revenue increase in Q1 from higher prices and volume growth in CA, HI, TX; full year volumes expected to increase high teens, reaffirming mid-single digit price increase guidance. Asphalt: Light activity in Q1, typical for the season; expected to pick up in Q2, guiding for low single digit volume and price increase. Contracting Services: Higher revenues in Q1, particularly Mountain segment, but lower gross profit; full year margins expected in line with 2024 results.

• Consolidated revenue guidance: $3.25B - $3.45B. - Adjusted EBITDA guidance: $530M - $580M; geographic segments/corporate: $465M - $505M; Energy Services: $65M - $75M. - SG&A step up of $20M frontloaded, with $8M invested in Q1. - Aggregate volumes expected to increase high single digits full year; ready mix volumes high teens; asphalt low single digit volume/price increase. - Contracting services margins expected in line with 2024.

• Macro economic uncertainties impacting private construction. - Tariffs affecting private projects in some markets. - Weather impacts on volumes in Q1. - Delays in private projects, particularly on the West Coast. - Potential downward pressure on margins due to bid dynamics in some markets.

Q: Brian, Nathan, thanks for all the detail on taking the question. I just wanted to ask you on the $6 million that you called out specifically. I think, Nathan, on the increase related to, diligence and integration. Just curious how that relates to maybe prior years spend. And really what I'm trying to understand is, I think you talked about Strata as being maybe towards the upper end in terms of size and scope of sort of deals that were in the pipeline; A, if you can confirm that; B, maybe give us a sense for, what you're seeing today in terms of price expectations as if anything has changed, from a seller buyer standpoint, would be helpful. Thank you.

A: Nathan Ring explained $6M Q1 costs relate to current acquisitions, prior year costs nominal; Brian Gray confirmed Strata is a large deal, pipeline has materials-led deals at mid-single to high single digit multiples.

Q: Brian, Nathan, thanks for all the detail on taking the question. Is there anything odd as it relates to like inventory step ups, that you didn't call out as like a one-time item in your press release? And then are you willing to -- I mean, I guess, the increase in EBITDA guide for this year, that $45 million that you called out, are we safe to assume all or of that is related to Strata? Thank you.

A: Nathan Ring said inventory step ups from Strata are immaterial; Brian Gray confirmed $45M EBITDA increase is reflective of Strata acquisition.