Financial Data and Key Metrics Changes - Knife River Corporation achieved record full-year revenue, adjusted EBITDA, and adjusted EBITDA margin in 2024, with adjusted EBITDA growing by 48% and adjusted EBITDA margins increasing by 360 basis points over the last two years [8][9]. - The company reported a net leverage improvement to 1.0% at year-end, with a long-term target of 2.5% and 237millionofunrestrictedcashavailableforcapitalpriorities[52].BusinessLineDataandKeyMetricsChanges−Aggregates:Theaveragesellingpriceincreasedby71.4 billion and a gross margin of 13%, with a strong backlog compared to the previous year [47][48]. Market Data and Key Metrics Changes - The company's backlog increased by 13% year-over-year to 746million,withamajorityofcontractingworkbeingpublicprojects[14][16].−Infrastructurespendingremainsatornearrecordlevels,withnearlyhalfoftheIIJfundsyettobeobligatedinthestateswhereKnifeRiveroperates[17][48].CompanyStrategyandDevelopmentDirection−KnifeRiverisfocusedonitsEDGEstrategy,whichincludesdynamicpricing,operationalefficiencies,anddisciplinedbiddingtoenhancemarginsacrossallproductlines[8][10][28].−Thecompanyispursuingacquisitions,includingthependingacquisitionofStrataCorporationfor454 million, which is expected to close in the first half of 2025 [19][20]. - Organic growth projects are also underway, with 70millionapprovedfor2025,includingexpansionsinSouthDakotaandnewoperationsinIdaho[26][23].Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedoptimismaboutthestrongbacklogandthepotentialformarginimprovementsacrossallregions,particularlyinthePacificregion[65].−Thecompanyanticipatescontinueddemandforcontractingservicesdrivenbyrobustpublicfundingandinfrastructureprojects[88][90].−ManagementexpectsanotheryearofrecordrevenueandadjustedEBITDAin2025,withguidanceforconsolidatedrevenuebetween3 billion and 3.2 billion [54]. Other Important Information - SG&A expenses increased by 5% due to higher labor costs and acquisition-related expenses, with an additional 20 million allocated for acquisition support and EDGE initiatives in 2025 [49][50]. - The company streamlined its reporting segments from five to four to enhance regional support for local teams [30]. Q&A Session Summary Question: Which regions are expected to see more meaningful improvement in profitability and margins in 2025? - Management indicated that all regions are improving, with the Pacific region showing the most upside potential due to strong backlog and project opportunities [65]. Question: Can you elaborate on the 20millionstep−uprelatedtoacquisitioncosts?−Managementclarifiedthatthe20 million is aimed at supporting a robust pipeline of opportunities and enhancing EDGE initiatives, which are expected to generate strong returns [75][78]. Question: What is the outlook for raw material inflation in the ready-mix market? - Management expects mid-single-digit price increases to outpace costs, leading to continued margin expansion in the ready-mix segment [117]. Question: How is the cadence of the year expected to play out regarding EBITDA growth? - Management noted that the first quarter typically sees a 5% loss in annual EBITDA, with stronger performance expected in the second half of the year due to increased private work opportunities [128][130]. Question: What would it take for margins to reach the high end of the EBITDA margin guidance? - Management highlighted that private work opportunities and successful implementation of EDGE initiatives could significantly impact margins, particularly in aggregates and ready-mix [145].
