Welcome to Martin Marietta Materials, Inc.'s Fourth Quarter and Full Year 2024 Earnings Conference Call. All participants are now in a listen-only mode. A question and answer session will follow the company's prepared remarks. As a reminder, today's call is being recorded and will be available for replay on the company's website. I will now turn the conference over to your host, Ms. Jacklyn Rooker, Martin Marietta Materials, Inc.'s Director of Investor Relations. Jacklyn, you may begin.

Thank you. Good morning, and thank you all for joining today's teleconference. Over the years, the disciplined execution of our proven strategic operating analysis and review or SOAR plan has significantly transformed our company by providing Martin Marietta Materials, Inc. with a coast-to-coast footprint, with the majority of our products and services going to areas exhibiting the highest growth potential, by demonstrating our ability to manage through uncontrollable circumstances, by adhering to our value-over-volume approach to meet customers' needs without discounting the value of our own assets, and generating a higher return on those assets, and by showing the resiliency of our business model no matter the macroeconomic backdrop. As a result, our business is superbly positioned for near, medium, and long-term success. 2024 was no exception to those themes. We once again delivered record aggregates financial performance and successfully completed nearly $6 billion of portfolio-enhancing transactions. Operationally, our team successfully managed many exogenous factors, including persistent inclement weather, tighter-than-expected monetary policy, and related modest private construction slowdown. The team's steadfast commitment to managing what they could control, namely commercial excellence, cost management, and portfolio optimization, enabled the fourth quarter delivery of record profits, margin expansion, and record cash flow from operations. Before discussing our full-year results and 2025 outlook, I'll highlight a few notable takeaways from 2024's fourth quarter. With the weather better cooperating in the fourth quarter, earnings growth and margin expansion resumed, evidenced by our record fourth quarter consolidated gross profit of $489 million, consolidated adjusted EBITDA of $545 million reflecting an increase of 8%, and consolidated adjusted EBITDA margin of 33%, an improvement of 210 basis points. Pricing gains more than offset the impact of inventory management efforts, driving fourth quarter record aggregates gross profit per ton of $7.92, an increase of 12%, and aggregates gross margin of 33%, an improvement of 120 basis points. In addition to our impressive financial results, we successfully completed three aggregates bolt-on acquisitions in Southwest Florida, Southern California, and West Texas, all of which are attractive SOAR-identified geographies. Our full-year results were notable given the year's extreme weather and the difficult macro economy. Aggregates revenues and gross profit both increased 5%. Despite these headwinds, we established new aggregates in Magnesia Specialties records, specifically to $4.5 billion and $1.4 billion respectively. Aggregates gross profit per ton increased over 9% to $7.58. Magnesia Specialties revenues increased 2% to $320 million, and Magnesia Specialties gross profit increased 10% to $107 million. Martin Marietta Materials, Inc.'s safety and enterprise excellence culture have long underpinned our financial results. I'm pleased to report we achieved our best full-year safety incident rates in our company's history, inclusive of our newly acquired businesses. Notably, this marks our eighth consecutive year of a world-class lost time incident rate and fourth consecutive year of world-class total injury incident rate. 2024 surpassed 2021 as our most active M&A year ever, with nearly $4 billion of aggregate split acquisitions and over $2 billion of non-core asset divestitures. We selectively pruned cyclical and non-strategic cement and ready-mix concrete operations and redeployed the proceeds into pure aggregate assets in attractive markets, adding nearly 1 billion tons of aggregate reserves to our footprint. These proactive portfolio actions created a more durable business, increased the gross profit contribution from our core aggregates product line, enhanced our margin profile, all while maintaining a strong balance sheet for continued acquisitive growth. Looking ahead, expect the reshaped portfolio together with our fourth quarter results, will provide a solid foundation for profitable growth in 2025 and beyond. Specifically, our full-year 2025 aggregate shipment guidance of 4% growth at the midpoint assumes that strong infrastructure and data center demand, a full year of 2024 acquisition contributions, and normalized weather patterns will all more than offset the slowdown in private construction, which is primarily interest rate-driven. Our full-year 2025 pricing guidance of 6.5% growth at the midpoint. These revenue drivers combined with moderating cost inflation, Magnesia Specialties, and a full year of contributions from our cement and downstream businesses, while lower than the last three years of double-digit growth, remains notably higher than the long-term industry average of 3% to 4%. 2024 acquisitions underpin our 2025 full-year adjusted EBITDA guidance of $2.25 billion at the midpoint, a 9% improvement compared with the prior year. Moving now to end markets. Start with infrastructure, our most aggregates-intensive and often countercyclical end market. Both building and maintaining our nation's heavy infrastructure remains a bipartisan national strategic priority. Three years into the five-year Infrastructure and Investment in Jobs Act or IIJA, nearly 70% of highway and bridge funds remain to be invested, indicating robust multi-year tailwinds. Importantly, according to the American Road and Transportation Builders Association or ARTBA, public highway, pavement, and street construction is expected to continue to grow, reaching $128.4 billion in 2025 compared with $119.1 billion in 2024, an 8% increase. Notably, based on recent state and government contract awards, ARTBA's 2025 transportation construction market outlook shows Texas, Florida, North Carolina, and South Carolina, key Martin Marietta Materials, Inc. states, are among the largest markets expected to show growth. Moving now to non-residential construction. Artificial intelligence or AI continues to drive unprecedented demand for digital and energy infrastructure, as evidenced by recent announcements from major tech companies. For example, Microsoft expects to invest $80 billion in fiscal 2025 on the construction of data centers that can handle AI workloads, with over half of that spend in the United States. Moreover, the new administration recently announced Stargate, which aims to simplify permitting and significantly boost data center through a massive investment of up to $500 billion. The build-out is already underway, with the data center in Abilene, Texas that Martin Marietta Materials, Inc. is supplying from its December acquisition of R. E. James Grovel Company. Moreover, Dodge Construction Network's warehouse square footage starts for the twelve months ended November 2024 inflected positively for the first time since December 2022, and Martin Marietta Materials, Inc. was recently awarded the material supply for two large Amazon warehouse projects in North Texas and Fort Myers, Florida, respectively. Shifting to residential activity, affordability and availability remain key issues impacting single-family demand. Neither is expected to resolve in the near term given the higher for longer interest rate environment. Relative to the availability issue alone, Realtor.com recently estimated that the US housing market is underserved by approximately 7 million homes. That said, when single-family residential construction inevitably rebounds, Martin Marietta Materials, Inc.'s leading positions in key Sunbelt MSAs provide attractive opportunities to capitalize on structurally underbuilt markets with pent-up demand. In summary, record state and federal investments, reshoring, the artificial intelligence infrastructure build-out, and the long-awaited single-family housing recovery should provide multi-year shipment stability and provide a healthy pricing environment for years to come. I'll now turn the call over to Jim to discuss our full-year financial results and liquidity.

Thank you, Ward, and good morning, everyone. The Building Materials business generated full-year 2024 revenues of $6.2 billion, a 4% decrease in gross profit of $1.8 billion, a 6% decrease. The decline in both metrics, which are comparing year-over-year results, is due to the February 2024 divestiture of our South Texas Cement and related concrete businesses, along with shipment declines in all product lines, partially offset by acquisition contributions. Our aggregates product line achieved all-time record revenues, gross profit, gross margin, and unit profitability in 2024. Contributions from acquired operations and strong pricing more than offset lower shipments. Importantly, this was the second consecutive year of margin expansion. In the fourth year in the last six, experiencing a price-cost widening. Over those six years, margins have expanded 870 basis points. In 2024, aggregates gross profit per ton improved 9% to a full-year record of $7.58 per ton. Cement and concrete revenues decreased 29% to $1.1 billion, and gross profit decreased 40% to $260 million, again, driven primarily by the divestiture of our South Texas cement plant and its related concrete operations. Cement margins held up nicely, the ready-mix business experienced margin compression from Q2 through year-end due to higher input costs, including aggregates and cement, outpacing pricing growth. Asphalt and paving revenues decreased 2% to $869 million due to slower market demand, gross profit decreased 7% to $101 million due to lower revenues and higher average input costs, partially offset by lower liquid asphalt costs. Magnesia Specialties established all-time records for revenues and gross profit of $320 million and $107 million respectively, as benefits from strong pricing more than offset lower chemical and lime shipments. Turning now to capital allocation and liquidity. We achieved record fourth-quarter cash flows from operations of $685 million, an increase of 23% compared with the prior year quarter, driven by improvements in working capital and deferred income tax payments due to the Internal Revenue Service providing disaster tax relief for North Carolina businesses affected by hurricanes Debbie and Houlin. Our capital allocation priorities remain focused on prioritizing value-enhancing acquisitions, reinvestment in our business, and returning capital to shareholders. In 2024, we returned $639 million to shareholders through dividend payments and share repurchases. Even with significant M&A activity, we ended the year with a net debt to EBITDA ratio of 2.3 times, well within our targeted range of 2 to 2.5 times. Our strong balance sheet offers ample flexibility to execute our active M&A pipeline and pursue value-enhancing investment opportunities. Finally, I will close my prepared remarks with some views on tariffs. The depth, breadth, and duration of tariffs, as they are currently levied, remain highly uncertain. As a result, our 2025 guidance assumes no impact from tariffs. There are some situations where tariffs might enhance the company's profitability and others which may lower it. The vast majority of our supply chain is sourced from US locations. The company was served well by that during the supply chain shocks of the COVID era and should serve us well going forward.

Thank you, Jim. To conclude, we're proud of our strong fourth-quarter financial results and industry-leading safety performance. Thanks to our team's collective commitment to Martin Marietta Materials, Inc.'s vision and strategic priorities, we have deliberately built an increasingly resilient, highly productive, coast-to-coast aggregates business, positioned to grow unit profitability through various end-market demand environments. We are enthusiastic about Martin Marietta Materials, Inc.'s prospects in 2025 and beyond. The fundamental strength and underlying drivers of our differentiated business, proven strategic plan, strong balance sheet with significant opportunities for growth, and long history of successfully managing through economic cycles, provide us great confidence in our ability to continue delivering strong financial, operational, and safety performance. If the operator will now provide the required instructions, we'll turn our attention to addressing your questions.

Thank you. We will now begin the question and answer session. To raise your hand and join the queue, press star one. If you would like to withdraw that question, again, press star one. For any additional questions, please re-queue. Your first question comes from the line of Trey Grooms with Stephens. Please go ahead.

Thanks, and good morning, Ward and Jim.

Hi, Trey. How are you?

Doing well. Thank you.

Good. As we look at the 2025 guide, could you walk us through any of the puts and takes around the overall guidance for the year, including your aggregates price and volume outlook? I'm happy to, Trey. Thanks for the question. Look, at the outset, I'd say we're taking a pretty measured approach to the guide this year. Look, there's uncertainty relative to monetary policy and whatever the other policy fluctuations may be during the course of the year. Look at the guidance, proves conservative, and frankly, I hope that it is. We can come back and adjust for upside later. Relative to volume in the first instance, obviously, we're looking at low single digits, and that includes, by the way, Trey, a full year of acquisition contributions if you think about what that's going to look like. BWI closed last April, so we'll see that fully in the first quarter. If we're looking at the transactions that we did in West Florida, in Southern California, and Texas, you know, those will clearly be added at quarters one through three. So again, if you're just thinking about the cadence on that. But if we think about end uses right now, I mean, overall, I think we should expect mid to high single digits growth in infrastructure. I think we're probably looking at low single digits at least right now relative to both non-res and res. And if we think about what the builders are under those, look, I do think infrastructure should stay strong. I mean, there's 70% of the dollars from IIJA that are still yet to come in our sector. It's a practical matter that has to roll out in 2025 and 2026. So that should be pretty constructive. The other thing that we're seeing is nice, steady, consistent, and frankly, growing activity relative to data centers. I know there was some concern there was a blip the other week relative to deep seek. We've actually seen most AI and others come back and double down since then. So we think that should be very healthy this year. Frankly, we're not planning for notable residential recovery in 2025 given the higher for longer mortgage rates that we're seeing because we think that will just continue to affect monthly affordability. That said, in some instances, we are seeing that home buyers are simply getting accustomed to this higher interest rate environment. So we're gonna see how that plays out. But here's something that I think is notable, and I've mentioned it in my prepared remarks. I mean, clearly, we're seeing green shoots in warehousing. The Claiborne, Texas facility that we have, the Fort Myers facility that we have are both large jobs. And that's not the type of activity that you would have seen for the majority of last year. So we've been waiting for warehousing to find bottom. We think it has. The other thing that I think is important to keep in mind is as we go throughout the year, we're gonna start lapping some pretty weather-impacted orders. Last year. I mean, if you think about it, Q2 was really a washout. In our southwest division, particularly in Dallas Fort Worth, which is the company's largest marketplace. And Q3 was a real challenge for us in portions of the east, including the Carolinas, which is a notable marketplace for us as well. So if you think about the way it rolls up, I mean, the gross profit guidance shows double-digit unit profit of what the growth and nice gross margin expansion. It's gonna be driven by pricing and what we think will be moderating inflation. Now relative to price, price is gonna be a little bit different this year as you simply think about the cadence. Because particularly in the cement market, we saw most cement producers rolled their first price increases back to April 1. Which meant as a practical matter, a lot of ready-mix players were looking for that. So what we've seen in our world is most hot mix and others had price increases effective January 1 as you become accustomed to. There are portions of the ready-mix community, in fact, most of it, that are seeing April 1 price increases. So the price increases will be outsized relative to what history has been, Pricing, I'm convinced, is still very solid, will be attractive for the year. But your cadence this year is likely to be a little bit different. So don't expect to see that same degree of pop in Q1 that we've seen in the last several years. You'll start seeing it building. In two and three, etcetera. So I hope that gives you a sense of it. One last thing I'd say is if we think about the estimated carryover effect from last year's pricing, it's about 80 basis points coming into the year, Trey. So I try to give you a sense of end markets. I tried to give you a sense of volume. I'll try to give you a sense of pricing. And how I think that's gonna play relative to margin. So I hope that helped.

Yep. That's extremely helpful. Thanks for that additional color. But just for some clarity, and correct me if I'm wrong, that pricing in April movement there for aggregates, if I remember, you know, going back historically, that's with the exception last few years, that that's not unusual for the industry. It seems like that was kind of a normal kind of timing that maybe have had kinda shifted a little bit more to January, just more recent years. Is that the right way to think about it?

That is the right way to think, Trey. I mean, you've been around this industry for a long time, and I have too. And that's the way that has typically worked. So yeah. I don't see anything there that's causing me any angst, but again, if you're looking at it and modeling, as I know you are, I just wanted to make sure that I was giving you and your colleagues the ability to model that with degrees of precision.

Yep. Well, that was super helpful. Thank you. I'll pass it on.

Thank you, Trey.

Your next question comes from the line of Kathryn Thompson with Thompson Research Group. Please go ahead.

Hi. Thank you for taking my question today. Appreciated your the color on the tariff impact in your prepared commentary, but wanted to follow-up on that. In a two-part way. One, just pull the string on what could be impacted from tariffs from your perspective. We certainly had some metals tariffs announced yesterday. But also to what did Martin Marietta Materials, Inc. do to diversify its supply chain in the wake of the first Trump administration and how are you a little bit better prepared today versus, say, 2016? Thank you.

Good morning, Kathryn. Thanks for the question. I'll take the last part first and say this. If we go back to the COVID years when really supply chains were a mess, we actually came through that pretty well. I mean, we were having record years during that period of time. And we were not running into supply chain issues largely because, as Jim noted in his prepared remarks, most of our supply chain is domestic. There were some outliers where we had things coming in from overseas. And to your point, we have moved very carefully in the intervening period time to make sure that we can look primarily to domestic production. And I think that served us well before. I think if we see something that's amped up from a tariff perspective, we'll be even better served right now. The second part of your question, you know, what are some of the specifics? Look, obviously, steel is something that we're going to watch. Steel tariffs, very frankly, could be pretty helpful to our Magnesia Specialties business. And we're supplying a lot of that material to domestic steel producers. So if they see steel production ramp up in the United States, that's gonna help us a lot on volume. And if we think about the Magnesia Specialties business, look, they just had a record year. And they had a record year with chemical and steel markets frankly, in pretty low spots. So again, I think tariffs, very selfishly for us on that, could be helpful. Equally, if we think about tariffs potentially on cement, look, we're a domestic cement producer. We're a long way away from water. But again, I think that would be helpful to our North Texas position. By the way, that business continues to perform extraordinarily well. So I think it would just get that business even more upside. Imports or tariffs relative to stone has a twofold effect. Number one, I think it actually adds value to what we're doing with our long-haul network, particularly relative to rail. So keep in mind, we're shipping more stone by rail than anybody else in the United States. About 30 million tons a year. It's going into coastal areas, principally of the United States. We think that could be helpful. To be perfectly transparent about it, we do have an operation in Canada that's coming into the United States by boat. So that would be one of the headwinds that we could potentially see from that. But again, it's not gonna be a material issue to the company. But again, in full disclosure, I think that's fair to say. If we think about more indirect impacts from tariffs, I mean, we could certainly see it drive more reshoring and more domestic manufacturing demand. And I think that goes back to your question relative to supply chain. And, you know, it could impact inflation in some degrees, and that could lead to maybe higher for longer, and that could have a negative impact on real estate or residential as we look at it. And I think it goes back to the observation that I shared with Trey. I think we have given a very measured guidance approach today. The fact is if we come back and adjust this, I sure would like to adjust it up. And I hope we put ourselves in the position that that's exactly what we can do, Kathryn.

Great. Thank you very much. Good luck.

You're welcome. Thank you.

Your next question comes from the line of Jerry Revich with Goldman Sachs. Please go ahead.

Yes. Hi. Good morning, everyone.

Hi, Jerry.

Hi. Ward, Jim, I'm wondering if you just talk about the per ton cost cadence that you expect. Obviously, it makes is moving around. And Ward, you spoke about timing of price increases normally. You know, price-cost spread is pretty consistent. Do you expect similar gross profit per ton growth in the first quarter as the full year you just give us a bit of color on the concept of the equation?

Yeah. I'll ask Jim to come back and give you some color relative to cadence. I wanna come back to the very first notion that you raised, and that is let's talk about what's happening with respect to cost per ton. Because I think this quarter was a really good example of what you can and you should expect going forward. And if you look at it, I thought we had good cost management. You know, if we're looking frankly at organic COGS, they were flat despite revenue being up nicely in the organization. But what I liked, Jerry, is when I go back and look at it, I mean, clearly, energy was down, and energy was down because diesel was better and a host of things. But what I'm moved by is I go through the different cost buckets, whether it was supplies or whether it was repairs or whether it was contract services or otherwise, they're all in the green for the quarter. So I like the way that that's shaping up. And the fact is we can continue to make these businesses that we bought increasingly efficient relative to ASP, but also relative to the cost profile. Now the other part of your question was relative to Cadence. And so for that, let me turn it over to Jim.

Yep. Thanks, Ward. Hey, Jerry. The cadence is gonna be there's two dynamics. One is the P&L effects, the temporary P&L effects of our inventory reduction. That will continue through the first half. So that it's already built into our guide, but that will show up more in the first half, not in the second half, really as much. Aside from that dynamic, the underlying COGS inflation are gonna be pretty consistent throughout the quarters. So that will be pretty evenly balanced. Q1, Q2, Q3, Q4. We're not anticipating anything changing dramatically on the underlying inflation piece. But again, the inventory worked down, the temporary P&L effects from that, we'll see in the first half, and then that should abate thereafter. Does that answer the question?

It does. So just to make sure we're on the same page with you, Jim, so it sounds like you're thinking of gross profit per ton up low single digits maybe in the first half, and then in the back half, maybe mid-teens given the comps on the inventory destock point. Is that range of expectations?

Probably lower variation than what you just described. I would say, you know, low teens kinda consistently, maybe a little bit lower plus or minus a couple of hundred basis points, but low teens growth, you know, I'd say pretty consistently quarter over quarter.

And, Jerry, let me add one more footnote to that because Jim mentioned the inventory reduction or management efforts that we've been going through. I mean, for the quarter, that was about a $20 million P&L impact. And my point with that is if you think about overall cost control and you think about pricing and you think about the margin expansion that we had in the quarter, given that $20 million headwind on inventory, that's my point. That was a pretty impressive quarter relative to cost control.

Thank you.

Thank you, Jerry.

Your next question comes from the line of Anthony Pettinari with Citi. Please go ahead.

Good morning, Anthony.

Good morning.

Hey. You know, you referenced the recent acquisitions, and I'm wondering if it's possible to put a finer point on the volume benefit that you expect in 2025, you know, either in terms of tons or, you know, percentage volume benefit or however you could be able to frame it.

No. Happy to, Anthony. As a practical matter, if you're looking just at what would have been organic, it's probably up, you know, a percent. And then if you're looking at the balance of it, it's largely acquisition-driven. So I think on a percentage basis, that's probably not a bad way to think about it.

Got it. Got it. Thank you.

Thank you.

Your next question comes from the line of Philip Ng with Jefferies. Please go ahead.

Hey, guys. I guess since Trump has stepped into office, certainly a lot of noise on the funding front. On the public side, but seems to be more centered around EV charging station and some of these IRA projects. My question to you, Ward, have you seen any pause in projects and any slowdown in bidding activity for new projects? Just kinda help us kinda think through any choppiness and noise on the public side, we look up 2025.

No. I appreciate the question. We've not seen any slowdown in that. And in fact, we think that's probably going to continue to be pretty constructive. And I would say for several reasons, one, if we just look at what we think is gonna happen relative to non-res square footage starts. And we're projecting 2025 for recovery of somewhere between 8% and 9%. But to contextualize that, that's still down 19% from 2022's peak and still below a 2021 level. And if we're looking at what we're seeing right now relative to Stargate that I mentioned in my opening comments, at the investments that Amazon is making. We're simply not seeing a slowdown in those sectors right now. If we look in our footprint more specifically, I mean, Google has activity right now both in Kansas City, which is an important market for us as well as in South Carolina. Microsoft, we talked about how much investment they have ahead of them, but they've already got projects underway in North Carolina. And, obviously, I've already mentioned the Amazon projects in both Claiborne, Texas and in Fort Myers. But you know, part of what I'm moved by is we think about the non-res sector is we think industrial construction is going to be pretty healthy. We think health care and education is going to be pretty healthy. And we think the broad commercial real estate sector is going to be the one that's going to come behind that single-family sector that we said is underbuilt by around 7 million homes today, at least according to Realtor.com. So we're not seeing a slowdown in that. We're actually seeing a nice steady pickup in that. And again, so much of what's going to happen in our business is gonna be driven by the locations that we have and the states in which we build leading positions, we believe, are going to be in the front end of much of this development.

The word, a lot of that commentary was more around private, but I guess in the public side, you haven't seen any choppiness in terms of funding being paused or any of that stuff. And then the IRA piece, you still have as great of appreciation, you know, how much of a good guy has it been and what it could what kind of impact that has on the road.

Yeah. We're not seeing anything choppy on the public side. We think public is actually going to be really constructive and expected to stay that way for a period of time. I mean, the fact is, if we're looking in Texas this year, Tex dot lettings are gonna be really robust. They were $13.5 billion last year. And they're expected to be in that same range again this year. Again, as you recall, Colorado actually has approved budget of nearly $2.1 billion. North Carolina's budget is gonna increase to I think it's about $7.6 billion. And part of that's driven by the fact that now we're seeing about 6% of sales taxes going into NCDOT. Today. So we think that's gonna be attractive. Equally, if we go to Georgia, I mean, their budget is up 7%. Florida is at record levels. If you take out one-time supplements, they've had. So if we're looking at our state DOT budgets in our top ten states, on a same-on-same basis, eight of the ten year over year up. So that's why when we're looking at the heavy side non-res, and on big infrastructure, we don't anticipate choppiness there. We expect pretty healthy good steady diets of work.

Okay. Really helpful, Ward. Appreciate it.

Thank you.

Your next question comes from the line of Garik Shmois with Loop Capital. Please go ahead.

Hi. Thank you. Just a follow-up question and a new one for me. Just a follow-up just on the inventory drawdown. I was wondering if you could perhaps quantify how much you still have remaining in the first half of the year. And then just broadly on the volume outlook, recognizing that it you're looking for low single-digit growth. Has any of the components changed either for the better or for the worst? Since you provided the preliminary outlook? Back after the third quarter.

So a couple of things I would say relative to the inventory drawdown, if you think about it, it's about a $30 million headwind in Q3, a $20 million headwind in Q4. We do think we're gonna be done with that by the time we get to half year. And, you know, what that Garik, if you think about bookings, that's probably not a bad way to think about bookending it. And the other part of your question, repeat that again for me, Garik.

Yeah. I was wondering if the volume outlook has changed at all since last quarter, you know, recognizing you're still speaking to a low single-digit growth. But, you know, has any component gotten better or worse? You know, maybe infrastructure sounds maybe to my ears a little bit better. Gotcha. You know, it's like yeah. Any other color there?

So what I would say is, I think people generally have felt like interest is higher for longer. So I think overall, there's a sense that degrees of public are probably gonna be a little bit more muted now than we would have thought several months ago. I mean, I'm sorry, private. But at the same time, I think we feel like public is gonna be pretty healthy. And I think we feel like it has to be. For several reasons, Garik. Number one, you have to assume this administration's gonna be looking at a reauthorization at the end of 2026. And having 70% of those dollars still hanging around the hoop don't sound like a really good idea. So our sense is that's probably gonna be a pretty aggressive play that we're gonna see on public in 2025 and 2026. So I think that probably feels, honestly, a little bit more robust, and I think portions of private probably feels modestly slower for something that feels like a wash.

Got it. For that, El Paso, and best of luck.

Thank you, Garik.

Your next question comes from the line of Angel Castillo with Morgan Stanley. Please go ahead.

Hi. Thanks for taking my question. I'm sorry to be a dead horse here, but just wanted to clarify on the organic growth side. You talked about maybe 1% and the rest was on the volume side. It was maybe driven by the M&A front. But when you walk through your end markets, you highlighted single digits for infra and then low single-digit growth in resi non-resi. So it seems to imply that the end markets and sales are maybe growing closer to above that 1% if you kinda put that all together. So just curious, is that just conservatism, or is there anything that we should kind of consider there as to why maybe that organic growth is only 1%?

Yeah. That it's Jim. That was not organic. That was meant to be kind of a year-over-year view inclusive of the acquisitions.

Sorry. The 1% on volume?

No. No. The slides that show, you know, mid-single digits for infra and etcetera, low single digits for the other categories. Those were inclusive of acquisitions.

Janine, I think to your point and I think to your point, look, we're as I said in my comments, we're trying to be really measured. In this guide, right now. So if we come back to you, we'd like to be guiding up, not sideways or down.

Got it. Understood. That's helpful. And then you just wanted to go back to your comments around, you know, the industry pricing and in some pockets perhaps you're trying to April first and maybe a little bit more of a smooth cadence through the first half. Should we take that to mean that midyear's, we're kinda moving as an industry from midyear's, or do you still expect to, you know, see midyears in aggregates?

I would say a couple of things. One, the guide that we've given you does not assume midyear. But we believe that there will be degrees of midyears just as they were last year. And keep in mind, where we saw them mostly last year were in the new acquisitions. We think we will likely see that again this year. And part of what we'll just have to watch for next year is to see, again, how does cement roll out next year? Because what that did as this year came into play is it really made that January one challenging specifically relative to ready-mix concrete. So again, the January one price increases are broadly in for products going into hot mix. So it's really more of a basically, a ready-mix issue and a cement issue than anything else. But, yes, it does not include midyears in the guide. Do think there will be some midyears. We'll be back to you to talk more about that.

Thank you.

Thank you.

Your next question comes from the line of Tyler Brown with Raymond James. Please go ahead.

Hey. Good morning.

Good morning, Tyler.

Hey. Ward. Hey. As it relates to capital allocation priorities, can you guys talk a little bit about the M&A pipeline? Does a change in the regulatory environment impact anything there? And if that were not to materialize, what's the appetite on debt pay down versus the buyback? Just given the balance sheet health?

So number one, if you think about, Tyler, $6 billion worth of transactions last year, we ended the year at 2.3 times. Number one. Number two, there's still a lot of work to be done in this industry relative to M&A. And look, I'm gonna see it for the rest of my career, my successor will see it for the rest of their career, and my bet is my successor's successor will see that for a good part of their career as well. As we've indicated before, we firmly identified over 200 million tons of businesses on a per annum basis that are in geographies in which we would have an interest in being. And then to your point, that we believe we can get cleared regulatory. Look, do I think this is gonna be a $6 billion year? No. Probably not. If so, a few things break, could it be? I suppose it always could because it tends to be opportunistic. But my sense is, Tyler, we're looking just in a year-in, year-out circumstance. We're doing around a billion dollars a year of transactions. And we think that's a good steady number. And there are gonna be instances where you may well see it above that. Because you might have something opportunistically that comes along. But if we think back to it as well relative to different administrations, etcetera, one thing that Martin Marietta Materials, Inc. has always been very consistent in doing is being in a position that we look at the market very thoughtfully. And we understand businesses that we believe we can buy regulatory, ones that we can't, and we tend to move very purposely on the ones that we can. Now relative to other uses of cash, let me turn it over to Jim so he can talk a little bit about that.

Yeah. Good question, Tyler. We do have a bond coming due in December this year. It's quite small. Whether that's repaid cash and balance sheet or refinance, we'll see going forward, but it's relatively small. And I would anticipate share buybacks to outstrip any kind of debt reduction, if there's any debt reduction at all. So we, you know, we've been in the market last year, bought a fair bit of shares. We'll be in the market again this year, as we are every year, buying back stock. But that would come before a debt pay down.

Yeah. Okay. And then super quick, Jim, it sounds like there's some a few dynamics in first half versus second half, FIFO, pricing cadence, M&A, etcetera. Can you just shape first half and second half EBITDA mix with slightly skew second half any help would be very helpful for remodel. Thanks.

Yeah. I think it will skew second half as it traditionally does. Perhaps less so this year than last year though.

Okay. Okay. That's helpful.

Okay. Thank you.

Thank you, Tyler.

Your next question comes from the line of Michael Dudas with Vertical Research. Please go ahead.

Good morning, gentlemen, Jacklyn.

Good morning, Michael.

Yeah, I'm great. It's a little chilly here in the northeast, but we're suffering through it. So it's all good.

I would expect nothing else.

No. Thank you. You have the residential market. Just a little bit more thought on, you know, it's been frustrating, I think, for most in the industry, you know, that we've seen the affordability and the rate issues. Is it is there sensitivity on, like, if the economy picks up or rates fall just a little bit that there's this pent-up demand will flow through? Are you anticipating that? And is there any shift in say multi versus single that you might portray, say, heading in I know, you know, you got the longer-term numbers, but certainly as things normalize, what kind of a benefit that could be in the regions that you're in.

Yeah. No. Michael, it's a great question. I would say several things. As we talk to customers and we talk to builders right now, they're focused on buying and entitling land. So number one, I think that's a really good sign. Number two, that tends to be a really good sign relative to single-family residential. And selfishly, we like to skew toward that because that's two to three times more aggregates intensive than this multifamily. The other thing that strikes me is, while it's been a long slog, builder confidence in places like Texas, Colorado, North Carolina, and Georgia is clearly getting better. So we think that's a very good sign. I think they believe starts and permits are expected to pick up more broadly across the marketplace today. And the other thing that I think is worth noting, and I said in the earlier response as well. I do think two degrees buyers are adjusting to higher rates, and I think to your point, I think cuts could actually see a pretty significant surge in demand. It's all gonna be a matter of timing because they're not gonna turn on with immediacy. When we go back to the notion of 7 million homes that are underbuilt, and a disproportionate number of them in states in which or MSAs in which we have a leading position, that's a pretty attractive place to be. So I hope that helps.

Sure does. Thank you.

You're welcome.

Your next question comes from the line of David MacGregor with Longbow Research. Please go ahead.

Yes. Good morning, everyone. Thanks for taking the questions. I apologize for that. I have no other than the airport. I'm in an airport here.

Good morning.

Ward, I guess on infrastructure right here, you when you say that you're not seeing any interruption in orders right now, but I just sent the elephant in the room is how safe is federal funding for infrastructure construction projects. And I just wanted you to share with us how you would characterize the risk of federal government deoff funds for state DOT projects?

David, it's a perfectly good question, and I don't see that as a big threat. And here's one of the reasons why. I mean, if you think about the overall IIJA, $1.2 trillion. Right? But $350 billion to highways, bridges, roads, and streets. The things that you and I look at as hardcore construction. And if we think back to when IIJA was going through its debate process in the Senate and in the House. Then former President Trump was not in favor of IIJA because he did not think enough of it was going toward what he would refer to as real infrastructure. So if we look at what's going on with that and we think about what I believe his marching orders have been to Secretary Duffy, and that is to build big. And build big in this context, I think, means highways. Roads, streets, airports, and big heavy infrastructure in the United States. So I think if they do anything with that, I'm not sure that they will, I think it'll be nuanced. And I think if it's nuanced, it's not going to be in those areas that you and I think about as being nicely aggregates intensive and oftentimes countercyclical. So I think if we think of IIJA through that lens, I think that's probably the right place to be. If we think about IRAs, so many of those funds have already been obligated, obviously, a much smaller program anyway. So as I'm sitting here measuring risk, and thinking about the way the administration may be thinking about a reauthorization, I just view bad things happening there as having a relatively low likelihood. So, David, I hope that helps.

It does. Thanks very much, Ward.

You're welcome.

Your next question comes from the line of Adam Thalhimer with Thompson Davis. Please go ahead.

Hey. Good morning, guys. Congrats on the Q4 beat.

Thank you, Adam. Good to hear your voice.

I have two things. I have some confused clients on pricing, and I think you said aggregates pricing up a little bit sequentially in Q1 with a bigger pop in Q2.

Yeah.

And then my other question was, vis a vis what somebody else said about the weather. It's been a pretty tough winter. Just curious if we should bake in a conservative Q1.

You know, I wouldn't go over your skis on baking in a conservative Q1. I think Q1 is gonna be just fine. So I wouldn't lean too hard there. And look, I think you nailed it on the pricing. I'm not at all worried about pricing as Trey indicated in his question too. I mean, an April price increase for some portions of a marketplaces where this industry has resided for a long time. And my only commentary around pricing was I'm trying to make sure from a modeling perspective, to your same point, yeah, I'm not wanting people to get over their skis on certain components as they go through in a month-by-month basis. But if I break yours down, no. I don't think you need to build anything draconian at all into Q1. And I do think if you've got price increases layering in in a more robust way post Q1, your model will hold together in a better fashion.

Perfect. Thanks, Ward.

Thank you, Adam.

Your next question comes from the line of Avi Yaroslavich with UBS. Please go ahead.

Hi. Good morning.

Good morning.

Given all the volatility and fluctuations with policymaking these days, just curious how that's affecting your own capital planning and strategic decision-making.

You know, the nice thing about this industry is I can tell you this company has always been profitable. This company has never cut a dividend. And even when we went through the financial crisis and lost, let's call it, 40, 45% of our volume, we always have pricing power. So when we look at history and let some of the history dictate how we look at the future going ahead. Look, there are gonna be some policy things that will move around. I think the policy issues that I believe we'll see from this administration relative to public and infrastructure will be constructive to what we're doing. I think the quality decisions we may or may not see from this administration relative to tariffs, whether it be cement, steel, or otherwise, will probably be constructive to what we're doing. When I think about where I think this administration would like to see interest rates, and what that can do to single-family housing, I think that ought to be constructive to what we're doing. When I think about a company that has proven itself to be actually very capable at M&A, yeah. I think we're likely to be in a time with availability of potential transactions. And administration that that's frankly gonna be will look more favorably upon transactions going forward than we've seen in the more recent past. So are we watching carefully? Yes. Are we gonna remain agile? Yes. But as we look at it, really start thinking about, you know, what are gonna be potential pluses here? What are gonna be potential minuses here? You know, we see a lot of pluses here. And we see that relative to M&A will look like. We see that relative to what we think monetary policy is going to look like. And frankly, I think we're likely to see it in the way a reauthorization works. And the way that I think about that is I think this administration, while they have control, of a House of Representatives and the United States Senate, are likely to want to get a reauthorization done before midterms. Because it passes prologue, usually, midterms don't work terribly well for the party that's in the White House. So the current administration is looking at having the White House and the Senate and the House of Representatives and is consistent with telling Secretary Duffy to build big. Again, as we're watching the policy decisions that have been announced and policy decisions that we anticipate, I think on a whole, we feel like they're gonna be pretty positive for Martin Marietta Materials, Inc.

Alright. Very helpful. Thank you.

Thank you.

Your next question comes from the line of Michael Feniger with Bank of America. Please go ahead.

Great. Thanks for squeezing me in, guys.

Of course.

You mentioned you mentioned price versus call spread has widened in recent years. I'm just curious, Ward, if we are in a higher for longer rate environment and that private side is still somewhat under pressure. Is it inevitable that as you turn the page to 2026 that pricing comes back down to that long-term 3% to 4% average? Or, you know, just qualitatively, do you think that price versus cost spread remains wider than maybe what we historically seen, you know, outside of just the last three years?

So I'm gonna answer your last question first. Look, I think the price-cost spread continues to work in our favor. And I think for a couple of reasons, I think actually twofold on the sentiments. One. And Jim can talk to what we're seeing broadly on inflation. I think inflation is moderating. Inflation is coming down, so that's going to help. But I think the bigger driver is pricing is going to remain in a fundamentally better place going forward than pricing was at least in my view. For all the years up until, let's call it, last two or three. And I think that's a fundamental change. I don't see that changing. Look. If you're looking to face some financial statements as I am, you're seeing ASPs around $22 a ton per aggregates. That's had a nice run. But, Michael, I'm gonna say again, what you've heard me say in the past, there are very few things that you want in your life that you can buy for $22 a ton except our product. And I continue to believe that we're gonna be in a position that we can get an appropriate value for our product going forward. I think we'll see that spread continue. I'll ask Jim to give you a little bit of color relative to what we're seeing with respect to inflation.

Yeah. So it's as we indicated late last year, we're still of the same view COGS per ton inflation's mid-single digits, you know, and then, you know, trailing by a fair bit the ASP growth we're expecting. So, you know, based on our guidance, I would say we would expect gross margins to widen that spread by another 100 basis points. In 2025, over 2024, that's even after overcoming the temporary P&L effects of the inventory reduction. So I think that bodes well for 2025, bodes well for 2026. And beyond. So over the arc of history, we've widened. The price-cost spread, it's not a straight line. But it's pretty consistent over time, and I don't see why that would end.

Right. Great, Jim. And, Ward, maybe just to one of your earlier comments. I think you said on Q4, you know, the cement margin was healthier relative to what you saw on ready mix. Just how is that evolving in 2025? I mean, I think Nat Gas cement versus ready mix in 2025.

Well, I would tell you, I think considerably better about cement than about ready mix in 2025 even as we're looking cement for the quarter, I mean, pricing was constructive. You know, the fact is the business really performed well despite pretty significant headwinds from a weather perspective in both November and December. And we saw nice revenues in cement. We saw good gross profit. We saw good gross margins, good EBITDA. Importantly, that FM7 operation that we opened, it was running at greater than 90% of availability. There in the fourth quarter after we opened that up. So again, you know, we're not gonna be cement every place. We're gonna be cement where it's really strategic to us. And in Dallas Fort Worth, it is really strategic. And Midlothian is a fantastic cement plant. Now if you think about what's happening relative to ready mix, your volume is relatively flat there. The dilemma that Ready Mix has is Ready Mix is taking significant aggregate price increases. It's taking cement price increases, and it's hard for Ready Mix to keep pricing ahead of that. So if we think about what the combination is gonna look like, you're gonna see some margin compression in ready mix. But again, if we think about Ready Mix, it's so much of a shock absorber for our company. We have it in very select markets. It's important to us in places like Dallas Fort Worth, Arizona. But, you know, your question really was geared around cement, and I wanted to make sure I gave you a good robust snapshot of the way cement is performing because if you could really see it at a granular basis, you'd be very comfortable with it as are we.

Thank you.

You're most welcome.

And that concludes our question and answer session. And I will now turn the conference back over to Ward Nye for closing comments.

Thank you, Kristen. Thank you all for joining today's earnings conference call. As we close the chapter on our thirtieth year as a public company and look forward to the next thirty years, you should expect Martin Marietta Materials, Inc. to continue building on its solid foundation of past successes. With our world-class teams and proven strategic priorities underpinned by our resilient aggregate business and unparalleled markets, Martin Marietta Materials, Inc. is well poised to deliver sustainable growth and shareholder value. For years to come. We look forward to sharing our first quarter 2025 results in a few months and are always available for any follow-up questions you may have. Thank you again for your time, and continued support of Martin Marietta Materials, Inc.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.