Knife River Corporation Q2 FY2025 earnings call

• Weather Impact: Unfavorable weather in Central, Montana, Wyoming; flooding in Texas disrupted Honey Creek quarry. - Oregon Challenges: Project delays in public/private sectors due to budget issues and macroeconomic factors. - Segment Performances: West region (CA, HI, AK) saw growth; Mountain region has strong backlog; Central region benefited from Strata acquisition; North Dakota/Texas have strong infrastructure funding. - Acquisitions: Kraemer Trucking/Excavating and High Desert Aggregates/Paving acquired, aligning with growth strategy. - PIT Crews/Pricing: Process improvement teams and dynamic pricing initiatives to boost margins.

Contracting Services: Revenue down 8.5% y-o-y due to wet weather and Oregon economy. Asphalt: Volume down 9% y-o-y, but gross profit per ton up ~8% via pricing discipline. Aggregate: Revenue up due to Strata acquisition and 12% price increase, but lower volumes and production costs affected gross margin. Ready-mix: Volume and price up, revenue up 15% y-o-y, impacted by revenue shift from higher-margin Oregon. Energy Services: Volumes down due to wet weather and Oregon, but EBITDA margin expected accretive.

Revised adjusted EBITDA guidance lowered by $55M to between $475M and $525M. Consolidated revenue between $3.1B and $3.3B. Geographic segments: Corporate Services $425M-$465M, Energy Services $50M-$60M. Guidance based on normal weather/economic conditions, with impacts from Oregon and Texas flooding included.

• Unfavorable weather disrupting operations and reducing volumes. - Project delays in Oregon affecting revenue. - Flooding in Texas halting Honey Creek quarry operations and impacting sales volumes.

Q: Brent Thielman asks about Oregon market outlook and Strata integration.

A: Brian Gray discusses Oregon project delays and Strata integration progress, noting Strata integration on track.

Q: Kathryn Thompson inquires about Strata and Albina acquisitions' performance.

A: Brian Gray states Strata and Albina accounted for ~8% of Q2 revenue, with positive impact on seasonality.

Q: Trey Grooms asks about seasonality and M&A.

A: Brian Gray discusses seasonality impact of weather and acquisitions, and continued M&A appetite.

Q: Ian Zaffino asks about dynamic pricing and 20% margin goal.

A: Brian Gray states 50% progress on dynamic pricing, multiple paths to 20% margin.

Q: Garik Shmois asks about larger jobs in backlog.

A: Brian Gray explains larger jobs are in wheelhouse, with risk profile similar to usual work.

Q: Chris Ellinghaus asks about Oregon's 2026 outlook and Strata's margin impact.

A: Brian Gray is hopeful for Oregon's 2026 recovery, and Strata integration on track.

Q: Gabe Hajde asks about backlog and acquisitions.

A: Nathan Ring discusses backlog growth and acquisition impacts.

Q: Ivan Yi asks about cadence of guidance and transportation costs.

A: Brian Gray and Nathan Ring discuss seasonality and transportation cost trends