Good morning. Welcome everyone to the Vulcan Materials Company Fourth Quarter 2024 earnings call. My name is Sheyna, and I will be your conference call coordinator today. Please be reminded that today's call is being recorded and will be available for replay later today at the company's website. All lines have been placed in a listen-only mode. After the company's prepared remarks, there will be a question and answer session. Now I will turn the call over to your host, Mr. Mark Warren, Vice President of Investor Relations for Vulcan Materials. Mr. Warren, you may begin.

Thank you, operator. Good morning, everyone. With me today are Tom Hill, Chairman and CEO, and Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer. Today's call is accompanied by a press release and a supplemental presentation posted to our website vulcanmaterials.com. Please be reminded that today's discussion may include forward-looking statements, which are subject to risks and uncertainties. These risks, along with other legal disclaimers, are described in detail in the company's earnings release and in other filings with the Securities and Exchange Commission. Reconciliations of non-GAAP financial measures are defined and reconciled in our earnings release, supplemental presentation, and other SEC filings. During the Q&A, we ask that you limit your participation to one question. This will allow us to accommodate as many people as possible during our time we have available. And with that, I'll turn the call over to Tom.

Thank you, Mark, and thank all of you for your interest in Vulcan Materials today. 2024 was another year of successful execution. Our two-pronged growth strategy of enhancing our core and expanding our reach is working. We improved our industry-leading average cash gross profit per ton by 12% and deployed over $2 billion towards value-creating higher sled acquisitions. These acquisitions expanded our presence into new attractive growth areas and strengthened our existing franchise in three of our top ten revenue states. We finished the year strong. We plan to capitalize on our solid momentum and deliver attractive earnings growth again in 2025. Before discussing our outlook in more detail, I will provide you some key highlights from our fourth-quarter performance. Our teams delivered $550 million of adjusted EBITDA in the fourth quarter, a 16% improvement over the prior year. Importantly, adjusted EBITDA margin improved on a year-over-year basis for an eighth consecutive quarter. In the Aggregated segment, cash gross profit per ton expanded 16% to $11.50 through a combination of continued pricing momentum and moderating year-over-year unit cash cost of sales. Aggregate freight-adjusted price improved 11% in the quarter, consistent with full-year results. Price improvement remained geographically widespread. Our shipments were more mixed in the quarter across geographies and end uses. Shipments were 3% lower than the prior year. Growing public shipments and strong demand in storm-impacted areas of Western North Carolina and East Tennessee helped to particularly offset headwinds and private construction activity. With less disruption from weather and our consistent focus on maximizing efficiencies through our Vulcan Wave operating efforts, freight-adjusted unit cash cost of sales increased 5% compared to the prior year. This was a meaningful improvement compared to previous quarters, and a testament to the execution of our operating teams. This continued execution will be a focus for us in 2025. The pricing environment remains healthy, and we expect freight-adjusted AGUS price to grow between 5% and 7% in 2025. Now this includes an over 100 basis point negative mix impact from recent acquisitions. Inflationary cost pressures continue to moderate, and we're making progress in our evolving operating process intelligence adoption. We expect freight-adjusted aggregates unit cash cost to increase low to mid-single digits in 2025, leading to another year of double-digit year-over-year expansion in our aggregate unit profitability. We expect 2025 aggregate shipments to increase between 3% and 5% compared to last year. This growth outlook is driven by recent acquisitions, coupled with the expectation of stable demand for our legacy business. I expect that continued growth in public construction activity will offset ongoing or modest contraction in private activity. Over the last year, total highway starts have increased by another $7 billion to $122 billion. Ongoing highway input cost inflation and continued IJA-related spending support ongoing growth in highway shipments in 2025 and beyond. Additionally, $45 billion of funding initiatives were passed at the state and local level in the recent election cycle to spur additional transportation investment in local states. Affordability and elevated interest rates remain headwinds for residential construction activity. Increasing single-family starts over the past twelve months support modest growth in single-family housing in 2025. However, multifamily starts, data, and elevated vacancy rates point to another year of declining demand in multifamily housing. Because of demographics in Vulcan's market, there is a consistent need for additional housing; the timing of interest rate reductions and overall improvement in affordability will dictate when residential construction activity returns to growth. Likewise, our return to growth in private non-residential construction will also be a matter of timing. While we expect lower private non-residential demand in 2025, we currently anticipate that starts will bottom by mid-2025 and may begin to recover by the second half of the year, boding well for 2026 activity. Recent trends in both warehouse starts and data centers have been encouraging. Currently, twelve-month warehouse starts, the largest category in private non-residential construction, have continued to flatten out at pre-pandemic levels after a precipitous drop from historic highs throughout 2023. Current planned data centers activity in our markets remains robust. And according to CoStar data, approximately 7% of proposed data center activity is within 20 miles of a Vulcan facility. As I said earlier, the focus of our teams is execution. Controlling what we can control, against the demand backdrop I just described, we expect to deliver between $2.35 and $2.55 billion of adjusted EBITDA in 2025. Now I'll turn the call over to Mary Andrews to provide some more details around our 2025 outlook.

Thanks, Tom, and good morning. I commented a year ago that our balance sheet was a source of strength and provided us considerable financial flexibility to continue to grow. In 2024, we deployed approximately $2.3 billion towards strategic acquisitions. Also, we reinvested in our existing franchise and furthered our greenfield effort with $638 million of operating and maintenance and internal growth capital. We also returned $313 million to shareholders through dividends and share repurchases. At year-end, our net debt to adjusted EBITDA leverage was 2.3 times. In March, we redeemed our 2026 note at par for $550 million. In the fourth quarter, we issued $2 billion of notes across five, ten, and thirty-year tenors to fund our 2024 acquisition activity. Recently, we provided notice of our intent to redeem the $400 million of 2025 note with cash on hand effective March 28, 2025. Given another year of solid cash generation in 2024, we remain well-positioned to continue our long track record of growth through disciplined capital allocation and consistent execution. In 2024, our teams executed well in a challenging volume environment to expand adjusted EBITDA margin by 190 basis points and deliver $2.1 billion of adjusted EBITDA for the full year. Aggregates cash gross profit per ton grew by 12% to $10.61, demonstrating the durable compounding nature of the aggregates business, and our continued progress toward our $11 to $12 per ton goal. SAG expenses for the full year were 2% lower than the prior year. We remain focused on continuing to drive value for the business through disciplined investments in SAG expenses to support our organic growth initiatives and innovation through technology. SAG expenses as a percentage of revenue were 7.2% in 2024. Our return on invested capital at year-end was 16.2%. That's largely consistent with the prior year. The increase in invested capital was driven by fourth-quarter acquisitions, which provided very little earnings contribution given the closing date. Absent that timing impact, return on invested capital improved by 40 basis points. Bearing strong momentum into 2025, we anticipate another year of attractive margin expansion and earnings growth. Tom highlighted our views around demand, pricing, and aggregate unit profitability. Let me provide a few additional details around the 2025 guidance. We estimate that recent acquisitions will contribute approximately $150 million of adjusted EBITDA in 2025. We expect our downstream businesses to contribute approximately $360 million in cash gross profit, with an estimated two-thirds of the contribution from the asphalt segment and one-third from the concrete segment. These expectations reflect the expansion and cash unit contribution of recent acquisitions. We forecast SG expenses of between $550 and $560 million. We project depreciation, depletion, amortization, and accretion expenses of approximately $800 million, interest expense of approximately $245 million, and an effective tax rate between 22% and 23%. In 2025, we plan to reinvest in our franchise through operating and maintenance and internal growth capital expenditures between $750 million and $800 million. Included in this plan is approximately $125 million of spending on three sizable plant rebuild projects that are underway, in addition to capital for recently acquired businesses. Overall, we expect 2025 to mark another year of expansion in adjusted EBITDA margin, attractive growth in adjusted EBITDA, and strong cash generation. I'll now turn the call back over to Tom to provide a few closing remarks.

Thank you, Mary Andrews. I want to take a moment to thank the men and women of Vulcan Materials for your consistent and enduring commitment to excellence. Most importantly, you've kept one another safe and looked out for your brothers and sisters across the company and communities in which we live and work, particularly in the face of persistent inclement and sometimes severe weather. I am very proud of your consistent execution of the Vulcan Way operating and the Vulcan Way of selling strategic disciplines. You proved your mettle and increased cash gross profit per ton every quarter for the second year in a row. I'm excited about what we will achieve in 2025. Together, we remain focused on controlling what we can control and generating value for our customers, our communities, and our shareholders. Now, Mary Andrews and I will be happy to take your questions.

We will take our first question from Trey Grooms with Stephens. Mr. Grooms, you might be on mute. Your line is open.

Hey. I'm sorry. Sorry about that. Good morning, Tom. Good morning, Mary Andrews and Mark. Well done on the strong finish to the year. Thank you. I wanted to ask about aggregates pricing. It seems like some markets have seen a shift from January to April as far as just the timing. Can you talk a little bit about that and maybe it's the success of January increases that you've seen and how we should be thinking about the cadence of pricing this year?

Sure, Trey. So Q4 in the total year last year, pricing was up 11%. So that encourages us to carry really good pricing momentum into this year. As you saw, our guidance is 5% to 7%, but that's also negatively impacted by over 100 basis points from the acquisitions. You know, I'm not worried about those. We'll get those back up to our averages quickly. But our January 1 price increases, coupled with our booking and backlog, support our guidance, as did our January results. The timing of price increases will be very similar to last year, whether it was in bid work, asphalt, or ready-mixed pricing. The vast majority of our price increases took effect January 1. I think we will be in the range quarter to quarter throughout the year. Now remember, mix can impact a single quarter; it can then impact it up or down. But mix adjusted, I think we should be consistently in that 5% to 7% range.

Yeah. And Trey, I would add that most importantly, we expect that the consistent pricing improvement, coupled with moderating costs that we've talked about in the prepared remarks, will yield low double-digit improvement in cash gross profit per ton consistently each quarter as well. This extends what we've now strung together—a nine-quarter run of double-digit improvement. The underlying performance of the aggregates business is going to be the biggest driver of our 2025 EBITDA growth, which we expect to improve by about 12% on an organic basis. So we have a strong performance from the aggregates segment.

Yep. Well, thank you for all the color, and that's impressive and encouraging. So keep up the good work, and I'll pass it on. Thank you.

Thanks, Trey.

We will take our next question from Steven Fisher with UBS.

Thanks. Good morning. I think you mentioned on the aggregates volumes side sort of an organic steady pace. So I'm assuming that means about sort of flat organic volumes expectation. Is that correct? And feel free to correct me on that. But maybe just curious about the cadence of how that plays out during the year. And we've been observing this slowdown in overall non-residential construction. You mentioned the private side kind of being a little weak to start off. So just curious what you've assumed for the cadence of that organic trend in the first half of the year versus the second half? Do you have actual declines maybe in the first half before maybe easier comps and then growth in the second half? Thank you.

Yeah. I think you completely understand it. It is growing public shipments offsetting some challenged private ones. If you look back at 2024, we never really got out of the weather problems. The easiest comp will be Q3. If you look at January and February, we got a slow start. Some of that is cold and wet weather. But remember, it's just January and February, so I'm not too worried about that. I think regardless of the challenges, our bulk teams will perform. I have complete confidence in our full year guidance, but as you said, the back half is loaded probably with some easier comps coupled with some help from single-family and non-residential construction in the second half. Terrific. Thank you.

Thank you.

We will take our next question from Catherine Thompson with Thompson Research Group.

Hi. Thank you for taking my question today. Your volume guidance in the quarter was very close to ours, pricing exactly in line, but what jumps out at me is—and correct me if I'm wrong with this—but your gross margins came in at a record Q4 level. Could you articulate in the past the bulk of the way of operations? If you could parse out a little bit more for this quarter and how we should think about next year in terms of that margin—the why behind that record Q4, the components, and how that plays into the longer-term strategy, including for this year? Thank you.

Sure. You know, I cost increase in the fourth quarter, which must improve over the prior three quarters, three reasons why. One was weather was not a negative. Two, volumes were not as negative, and three, our involvement with operating technology and tools and disciplines are improving our efficiencies. And as we look to 2025, we believe we'll continue to mature the work we have operating, which will continue to enhance our operating efficiencies. I would guide you to kind of low to mid-single-digit increases in 2025. That is a substantial improvement over the past couple of years, but really kind of closer to what we've seen in history. So I think what you're seeing is the Vulcan Way of operating at work, offsetting some of the headwinds we would see.

And, Catherine, on gross margin, we saw improvement on a year-over-year basis each quarter in 2024. That's what I would expect for you to see in 2025. In terms of the cadence of gross margin, I would think about it as typically lowest in Q1, highest in Q2 or Q3. We did have an outstanding fourth quarter and plan to carry that momentum into 2025.

Great. Thank you very much.

Thank you.

We will take our next question from Anthony Pettinari with Citi.

Hi. This is Ashley Sotto on behalf of Anthony. Thanks for taking my question. I just wanted to ask about administrative policy. Have you seen any kind of pressure on the pace of ISA rollout or for project starts from any of the policy decisions or executive orders we've seen? And then on tariffs, what kind of impact could we expect on your business soon?

I don't think we see any impact from policy on public demand. What you're seeing is the growth in public projects going to work, and that money is protected through dedicated long-term funding, so it's not going to be disrupted. Looking forward, we think this government will support traditional, agriculture-sensitive public work legislation, which is likely a positive from that perspective. On tariffs, in terms of aggregate tariffs directly, we see very little impact. For others, we've looked at things like steel and rubber; I'm not sure anyone can predict what's going to happen, but I don't think it's a big impact for us. The flip side of it is I’m confident that our materials teams will navigate whatever comes at us. We’ve seen a pandemic, record inflation, and our teams consistently grow unit margins and earnings, and that’s exactly why we developed the Vulcan Way of selling—we can consistently grow our unit profitability regardless of external challenges. So I think the government will support infrastructure, and we'll handle whatever comes from tariffs.

Great. Thanks. I'll send it over. Thank you.

We will take our next question from Jerry Revich with Goldman Sachs.

Hey, good morning, everyone. I just wanted to pull the thread on the cost performance. If we back out the period cost absorption, your variable costs were essentially flat in the quarter. So I'm wondering if you could just expand on what part of your cost structure is actually inflationary now. And, if we just straight-line the performance into the first quarter, with normal seasonality, that would imply cost per ton are about flat year over year in the first quarter. I just want to make sure that’s right considering the pricing outlook relative to that is.

I would not call costs flat. I would call them up mid to single digits, and I think that will be pretty consistent throughout the year. Now remember, quarter to quarter cost is going to be choppy. It’s essential to look at it on a trailing twelve-month basis. The fourth quarter was encouraging, but we have to string that together. If you look at inflation, I don’t think there’s any deflation out there. As we guide to 2025, I would tell you diesel is up slightly, wages are mid-single digits, and electricity is up high single digits—all of that partially offset by improved operating efficiencies. So, I would not guide you to flat; I think you would stay in that longer term with low to mid-single-digit cost performance.

Nice performance. Thank you.

Thank you.

We will take our next question from Angel Castillo with Morgan Stanley.

Hi. Good morning. Thanks for taking my question. I just wanted to go back to the comments on private non-residential. You mentioned the potential for starts to maybe bottom in the middle of the year and perhaps even rebound in the second half. Can you help us understand what you’re seeing or hearing from your customers regarding quoting activity and what gives you confidence on that kind of cadence?

Let me be clear: we do see non-residential construction shipments still down in 2025. The good news is we’re starting to see some turn in that performance. Data centers will be a bright spot, and most of the planned data centers are in our footprint. While warehouses have been a big drag and will continue being a drag for the near future, I think that’s changing. In several of our markets, we’ve seen that turn positive on a trailing three-month basis—not everywhere, but it’s starting to turn. So I think you're beginning to see some green shoots and improvement. A lot of money is sitting on the sidelines, and traditional non-res is still a drag, but that’s going to follow subdivision, so it’s going to take time. Non-residential construction will be negative in 2025, but we feel that it should gradually get better as we progress through the year, which prepares us for a more positive outlook for 2026.

Any insights into quoting activity?

We’ve quoted a lot of non-res work that is still sitting on the sidelines. There’s pent-up demand, but people want to see more certainty. They’re hoping interest rates will go down, but that’s good news. At some point, that money will go to work.

Very helpful. Thank you.

Thank you.

We will take our next question from Phil Ng with Jefferies.

Hey, guys. Tom, congrats on another strong quarter. I had a few questions around the pricing commentary. You talked about a hundred basis point drag on pricing mix from these recent deals. Can you give us a sense of how much lower ASP for some of these deals is versus the corporate average? And how quickly do you think you can narrow that over time?

It is substantially lower. I'm not going to quote numbers on that, but given that it's had over a hundred basis points on the whole company, it is lower. We've already started that work. I think we were successful with January price increases in those markets, and we’ll continue that as we progress the next few quarters and years. I don't believe it takes long to get it back up to where a more reasonable bulk market would look.

And then separately from a pricing standpoint, if I account for the hundred basis points, you're still talking about really good pricing, but perhaps a little softer than the high single-digit framework you gave us last quarter? Any insights you want to share on the marketplace pricing?

I think we were pretty consistent throughout our geographies on price increases. While you might be a little lower than double-digit, you’re still looking at high single-digit prices. You also are not looking at double-digit cost increases but rather mid to lower. So we continue that trend of taking margin to the bottom line, which is the most important thing we can do to grow our unit margins. You’ve seen us do that over the last couple of years, and I believe you’ll see us do that again in 2025.

Okay. Appreciate the color. Thank you.

Thank you.

We will take our next question from Mike Dahl with RBC.

Hi. Thanks for taking my question. You’ve obviously put a lot of capital to work with the acquisitions, which did come with some mix of downstream businesses. Can you help us understand how you view the downstream portion—whether those are businesses that are likely to stay within the portfolio, and what is or is not incorporated into the guide with respect to that?

The acquisitions are quite new, but they have been run very successfully with good management teams and good assets. We are going to assess these as a set of assets. If it aligns with us, we will manage it. If it earns an appropriate return that suits us, we'll run it. If it is of greater value to someone else, then we will divest of that and reinvest in aggregates.

In terms of the guide, Mike, we commented in the prepared remarks that $150 million of EBITDA contribution from the acquisitions—that's about 60% in the aggregate segment, and about 40% of that will be contributing to the downstream businesses.

Okay. Great. Thank you.

We will take our next question from Adam Thalhimer with Thompson Davis.

Hey, good morning, guys. Congrats on the Q4 beat. Mary Andrews, do you have the—well, I was also curious about the downstream portion because that saw a pretty big increase year over year. So that looks like it's from acquisitions. I was curious if you have the $360 million in cash gross profit—do you have that on a reported basis?

You know, let’s stick with the $360 million for now, and we can talk offline about some specifics. But what would be helpful to you is that the improvement in cash gross profit contribution from the downstream business is about 75% of that overall improvement, which is from the acquisitions. We also see improvement in the underlying business in both segments, which accounts for about 25% of the improvement year over year.

That helps. Okay. Thank you.

We will take our next question from Timna Stanners.

Yeah. Hey. Good morning. I wanted to ask you a little bit about the M&A landscape after the deal you just finished. How you're looking at 2025 and the potential for building from what you just accomplished. And then if I could sneak in a question on Mexico, any update on the Calico quarry restitution efforts with the USMCA panel? Thank you.

There's still a very healthy pipeline of M&A. There are a number of projects we're working on. It will take some, you know, time, but I think we'll continue to be successful as we go through 2025. On Mexico, the short answer is no real news. We’re still waiting on the tribunal to make a decision. We feel very good about our case and think we will win that. Once they make a decision, we’ll let you know, and we are expecting that sometime this year.

Okay. Thank you.

We will take our next question from Garik Smois with Loop Capital.

Great. Thanks for taking my question. We spoke to the pricing cadence being similar this year compared to last. What are your thoughts on midyear increases, what opportunities you see there potentially, and what the timeframe could be?

They are not included in our guide, but we will certainly announce mid-year price increases. We will announce those probably towards the end of the first quarter, so we have time for conversations. As I always remind you, mid-year increases will have a more significant effect on 2026 than they will in 2025. It’s too early to predict how successful those will be, but we will certainly initiate them and have discussions with customers to see how that develops.

Do you have any idea how much 2024 midyear impacts will affect 2025?

It’s hard to quantify. They definitely do help. Providing notice to your customers gives them more time to react, improving our chances of success come January. Some of it is about the pricing and some about timing; but it definitely helps both aspects.

Understood. Thanks for that, and best of luck.

Thank you.

We will take our next question from Keith Hughes with Truist.

Thank you. I guess I have a short-term weather question that everybody asked me: whether it’s supportive of shipments or if we still had delays year over year from the storms.

So short-term, January and February have been very cold. We’re going to see some cold and snow this week. So it's not a great start, but when we put together a plan, we realize weather impacts at some point in the year. We expect to get lucky in some quarters, and we’re trying to project more normalized weather in our guidance, as Q3 was particularly challenging last year. Hopefully, that will lead to an easier comparison in the middle of the season. So I’m hopeful that will help us.

One other question on the Southern California acquisition: is that mix well with current operations at Vulcan, or does it operate more as a standalone entity?

If you look at the overall structure, it fits us very well, particularly from an aggregate perspective. We know we don’t have a lot of downstream ready mix in those markets, but it also has some asphalt that fits. Part of it aligns with aggregates and asphalt as far as our operations. For the Ready-Mix segment, they have an excellent position in those markets, but we were not involved in Ready-Mix in those markets.

Okay. Thank you.

We will take our next question from Brent Thalmann with D. A. Davidson.

Tom, I had a question about the direct impacts of tariffs on your business, and then Mexico is not really in the conversation, but we’re thinking more along the West Coast and what Vulcan's response is going to be to the extent that tariffs are implemented on some of your assets shipping down from Canada.

We plan to follow the letter of the law. We’ve looked at this, and it is a pretty negligible impact for us. Whatever it is, we'll handle it. I wouldn't say it moves the needle.

We will take our next question from Michael Dudas with Vertical Research.

Morning, Tom and Mary Andrews. Tom, with the very solid pricing, it looks like for 2025, even though it's accelerated from 2024, do you sense this is more normalized pricing relative to the historical span, or is there still room for upside on that going forward? Thank you.

There’s always upside on price; you have to earn that with your customers. Growing demand always helps that. We haven’t seen growing demand for a few years, which puts pressure on pricing. But look at the Vulcan Way of selling and the way we service our customers; we earn price. I can see that from our performance in 2024 and I anticipate continued success in 2025.

We will take our final question from David MacGregor with Longbow Research.

Good morning, Tom. Congratulations on a really strong quarter. I wanted to ask you about pricing and the Vulcan Way of selling. Clearly, this process has been successful and delivered visible results, but your market's evolved. I'm thinking specifically about your Ready-Mix and fixed plant customers who are often paying more for their limestone than they are for cement. Secondly, your Vulcan Way of operating process is giving you better incremental unit cost. Does the profitability algorithm adjust at some point to rely on slightly smaller price increases in favor of larger unit shift gains achieved through market share gains from competitors who are continuing to push hard on price increases?

Let me clarify: the pricing for aggregates is much lower, and that cost is much lower. As you look forward, I think our strategic initiatives, both of selling and the Vulcan Way of operating provide us a much better way to understand what's happening in the market. Our salespeople have the tools to price better and logistics tools to better serve our customers. On the Vulcan Way of operating, it allows for better training and operators to inspect our equipment to reduce downtime, and technology allows for better throughput. Combining these allows for significant opportunities to improve unit margins, and this has been evident over the last nine quarters with double-digit improvement. That's not accidental, and it won't happen by accident going forward. As volumes recover, you have even better opportunities to improve your unit margins on both the price and cost side.

Okay. Thanks, Tom.

Thank you.

Thank you. It appears we have no further questions in the queue. I will turn the program back to our presenters for any additional closing remarks.

Thank you for your time and interest in Vulcan Materials today. We appreciate the relationship. We hope that you and your family stay safe, particularly with all the weather we're experiencing. We look forward to talking to you throughout the quarter. Thank you.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.