Summit Materials : Q2 2023 Earnings Call Transcript

TRANSCRIPT

08 - 03 - 2023

Summit Materials, Inc.

2Q23 Live Earnings Call

TOTAL PAGES: 24

Summit Materials, Inc.

2Q23 Live Earnings Call

CORPORATE SPEAKERS:

Andy Larkin

Summit Materials Inc.; Vice President of Investor Relations

Anne Noonan

Summit Materials Inc.; Chief Executive Officer

Scott Anderson

Summit Materials Inc.; Chief Financial Officer

PARTICIPANTS:

Trey Grooms

Stephens; Analyst

Keith Hughes

Truist; Analyst

Garik Shmois

Loop Capital; Analyst

Mike Dahl

RBC Capital Markets; Analyst

Anthony Pettinari

Citigroup; Analyst

Philip Ng

Jefferies; Analyst

Adam Thalhimer

Thompson Davis; Analyst

Brent Thielman

D.A. Davidson; Analyst

David MacGregor

Longbow Research; Analyst

Jerry Revich

Goldman Sachs; Analyst

Brian Biros

Thompson Research Group; Analyst

PRESENTATION:

Operator^ Good morning. My name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Summit Materials 2Q23 earnings call. Today's conference is being recorded. All lines have been placed on mute to

Summit Materials, Inc.

2Q23 Live Earnings Call

prevent any background noise. After the speaker's remarks, there'll be a question and answer session.

(Operator Instructions) Thank you.

Andy Larkin, Vice President of Investor Relations, you may begin your conference.

Andy Larkin^ Hello and welcome to the Summit Materials second quarter 2023 results conference call. Yesterday afternoon, we issued a press release detailing our financial and operating results. Today's call is accompanied by an investor presentation and a supplemental workbook, highlighting key financial and operating data. All of these materials can be found on our Investor Relations website. Management's commentary and responses to questions of today's call may include forward-looking statements, which by their nature are uncertain and outside of Summit Materials' control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ in a material way.

For discussion of some of the factors that could cause actual results to differ, please see the risk factors section of Summit Materials' latest annual report on Form 10-K, which is filed with the SEC.

You can find reconciliations of the historical non-GAAP financial measures in today's call in our press release. Today, I'm pleased to be joined by Anne Noonan, Summit CEO, and Scott Anderson, our Chief Financial Officer.

Anne will begin with the business update. Scott will then review our financial performance, and then we'll conclude our prepared remarks with our view on the path forward. After that, we will open the line for questions.

Out of respect for other analysts and the time we have allotted, please limit yourself to one question, and then return to the queue so we can accommodate as many analysts as possible in the time we have available.

I'll now turn the call over to Anne.

Summit Materials, Inc.

2Q23 Live Earnings Call

Anne Noonan^ Thank you, Andy, and a warm welcome to everyone joining today's call. At Summit Materials, the teams across our footprint have a lot to be proud of. Our remarkable second quarter results, which includes several safety, operational, and financial records, clearly signal that our strategic focus, as well as our safety-first approach to everything we do, is culminating in tremendous success across all important measures of our business.

For safety, we are halfway through the year and our recordable incident rate is trending ahead of target as we collectively emphasize the leading metrics and technologies that help prevent injuries, minimize lost time, and keep our employees as well as our community safe.

Safety at Summit is a perpetual work in progress, but it is an everyday value where we empower our people and aim for continuous improvement on our journey towards zero harm.

Financially, the second quarter extends momentum from earlier in the year and puts us on very solid footing to again raise our financial commitments for 2023. And importantly, we have taken strategic steps that continue to strengthen our capabilities and our portfolio in a way that ensures we are building a summit that can meet tomorrow's challenges, seize its opportunities and deliver attractive growth and profitability for our shareholders.

On slide four, I'm pleased to review the financial highlights from the second quarter for which there are plenty to cover. Here you can see we delivered outstanding record- setting performance across nearly all metrics. Sustained pricing momentum for each of our lines of business and in each of our local markets was the primary fuel for revenue growth and even stronger profitability growth.

We realized mid-teens pricing growth in every business driven by inflation justified pricing actions in combination with sharp execution of value pricing principles. Cash gross profit and adjusted EBITDA each increased roughly 17%, the strongest second quarter growth rate since 2017, as positive price net of cost more than offset lower, albeit resilient organic volumes in the quarter.

Summit Materials, Inc.

2Q23 Live Earnings Call

Given the substantial performance tailwinds, a more constructive view on second half operating conditions, and contributions from recently completed acquisitions that I'll discuss momentarily, we are confident in again raising our adjusted EBITDA expectations for 2023.

I'll spend more time on the embedded components of the outlook later in our prepared remarks. But the bottom line is that we are capitalizing on market opportunities, raising the bar operationally, and well positioned to deliver significant profitable growth in 2023 for the organization and our shareholders.

Our progress is most evident in our summit scorecard on slide five. We grade ourselves in a very transparent and consistent manner to reinforce our strategic and financial direction externally. And despite inflationary impediments, we're delighted by the strides we're making against three financial targets.

Leverage at 2.3 times was flat sequentially and better versus the prior year. Maintaining our leverage while adding attractive assets to our portfolio is an especially positive story considering we remain well below target and therefore have the headroom available to aggressively pursue organic and inorganic growth opportunities.

ROIC at 10.1% is a new Elevate Summit high and crosses over our target threshold.

Having reached our goal minimum, we view this achievement not as a stopping point, but rather as a starting point we intend to build upon. Especially in a higher rate environment, we know it's critical to continuously scrutinize the returns of each of our assets and fortunately, that discipline is now a reliable part of for our organizational DNA.

And finally, our last 12-month adjusted EBITDA margin set a high watermark at 23.5%, up 70 basis points sequentially and more than a full percentage point better than at this point last year. This advancement clearly embodies positive trends for price and cost, executing against our self-help margin opportunities and reflecting a more advantaged portfolio where we're leading in the right markets and determined to achieve our 75% target for EBITDA generated from our upstream businesses.