Martin Marietta (MLM) Q1 2026 Earnings Transcript

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Date

Thursday, April 30, 2026 at 10 a.m. ET

Call participants

• Chairman, President, and Chief Executive Officer — C. Howard Nye
• Executive Vice President and Chief Financial Officer — Michael J. Petro

Takeaways

• Total revenues -- $1.4 billion, marking a 17% increase and establishing a new first quarter record.
• Organic aggregates shipments -- Grew 7.2%, materially above guidance, enabled by early season activity in key regions and strength in infrastructure and heavy nonresidential markets.
• Adjusted EBITDA (continuing operations) -- Increased 14% for the period.
• Adjusted EPS (continuing operations) -- Rose 14%, in line with EBITDA growth.
• Core aggregates revenues -- $1.1 billion, a 14% increase, with record first quarter shipments of 43.9 million tons, up 12%.
• Aggregates gross profit -- Decreased 3% to $288 million as higher volumes and pricing were offset by geographic mix and a $22 million non-cash charge related to Quikrete inventory fair value step-up, plus increased depreciation, depletion, and amortization.
• Underlying organic COGS per ton -- Remained below implied 3% guidance as cost optimization initiatives progressed, excluding pass-through freight and one-time timing items.
• Specialties business revenues -- Achieved a record $143 million, up 63%, with gross profit up 17% to $45 million, reflecting acquisition impact and organic pricing gains.
• Other building materials revenues -- Declined 5% to $116 million, with a seasonal $16 million gross loss attributed to typical asphalt plant winter shutdowns in Colorado and Minnesota.
• Quikrete asset exchange -- Closed February 23, delivering $450 million of redeployable cash and representing the largest aggregates acquisition in company history.
• Synergy opportunity (Quikrete) -- Management expects approximately $50 million in synergies over the coming years as margin normalization takes effect.
• Share repurchases -- $200 million repurchased in the first quarter.
• New Frontier Materials acquisition -- Definitive agreement reached for an aggregates-focused bolt-on in the Central Division with over 8 million tons annual output, expected to close in the second half subject to regulatory approvals.
• April demand & pricing -- Management cited continued product demand strength, April 1 price increases, and a return to expected geographic sales mix trends, supporting full-year EBITDA guidance reaffirmation.
• Full-year adjusted EBITDA guidance -- Reaffirmed at $2.43 billion midpoint, excluding New Frontier contribution, with guidance subject to midyear review.
• Diesel fuel headwind -- Management projects a $36 million aggregates headwind, $50 million companywide (mainly Q2-weighted), but regards the impact as manageable and non-material.
• Aggregates organic pricing guide -- Management expects realization "towards the 4% [range] absent any midyears," with increased midyear price activity anticipated nationwide, especially in newly acquired markets.
• Capital expenditure guidance -- Lowered for the year due to previous years' substantial investment, leading to reduced repairs and supply costs.
• Leadership appointment -- Chris Samborski named Chief Operating Officer effective May 1, reporting structure reshuffled to drive execution and operation improvement.
• Safety performance -- Company achieved its best-ever first quarter safety results as measured by incident rates.

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Risks

• Aggregates gross profit declined 3% despite higher shipment volumes, due to geographic mix shifting toward lower-margin regions and a $22 million Quikrete purchase accounting charge, with higher depreciation and amortization further reducing profit.
• Affordability pressures and higher interest rates continue to constrain light nonresidential and residential construction activity, with management stating, "We came into the year with very low expectations of resi, and I do not think it is going to disappoint us."

Summary

The closing of the Quikrete Asset Exchange provided $450 million in cash and substantially accelerated Martin Marietta Materials (NYSE:MLM)'s aggregates-led transformation, launching SOAR 2030 with a streamlined, higher-quality portfolio. Integration of Quikrete has outperformed initial EBITDA and margin expectations, with $17 million EBITDA and a 42% EBITDA margin booked in one month post-acquisition. The confirmed acquisition of New Frontier Materials will further expand the Central Division’s production and aligns with the company's focus on pure-play aggregates in SOAR-aligned regions. April saw a continuation of strong volume and pricing trends, leading to reaffirmed full-year adjusted EBITDA guidance, despite recognized diesel cost headwinds and margin impacts from regional sales mix. Cost controls and recent leadership changes support operational agility, with active M&A and capital deployment remaining central to the long-term growth strategy.

• Management expects to realize approximately $50 million in Quikrete-related synergies as "we normalize unit profitability" over the next several years.
• Organic aggregates shipments were up 7.2%, driven by favorable Midwest and Colorado weather and robust heavy nonresidential demand, well above the initial shipment outlook communicated in prior guidance.
• The Specialties business, bolstered by the Premier Magnesia acquisition in July 2025, generated record first quarter revenue and profit, partially offset by lower shipments and elevated energy costs.
• Management stated that diesel cost headwinds would total about $36 million for aggregates and $50 million companywide, with "about $20 million to $25 million of it coming through in Q2," based on projected consumption of 55 million gallons in the year.
• State-level Department of Transportation budgets in core states are "up year over year," with management expressing no near-term funding interruption risk due to federal infrastructure reauthorization dynamics or potential continuing resolutions.
• First quarter public sector highway and street volume increased 23%, and warehousing and data center volumes rose 57% and 62%, respectively; LNG project activity was up 20% as the company supplies major Gulf Coast builds.
• Aggregates organic cost of goods sold per ton rose 2.7%, and consolidated COGS per ton increased 1.7% once one-time, freight, and Quikrete-related inventory impacts are excluded.
• Management expects midyear price increases in previously acquired and new markets, stating, "We have already put our correspondence to our customers indicating as much," and anticipates higher realization rates than the prior year.
• The company completed $200 million in share repurchases in the quarter as part of a flexible capital allocation strategy that includes active pursuit of further M&A transactions.
• The company’s concrete footprint is now concentrated in Arizona (about 1.2 million cubic yards annually), marking a continued shift away from more cyclical cement and ready-mix operations.

Industry glossary

• SOAR 2030: Martin Marietta’s strategic plan targeting portfolio optimization, aggregates-led growth, and operational excellence through 2030.
• Aggregates: Crushed stone, sand, and gravel used primarily in construction and infrastructure projects.
• Quikrete asset exchange: The company’s largest-ever aggregates acquisition that transferred certain assets and cash between Martin Marietta Materials (NYSE:MLM) and Quikrete Holdings, Inc.
• IIJA (Infrastructure Investment and Jobs Act): Major federal legislation authorizing multiyear funding for U.S. infrastructure, including surface transportation projects.
• FOB asphalt business: “Free On Board” model where Martin Marietta Materials (NYSE:MLM) sells manufactured asphalt at the plant gate, without performing installation.
• Premier Magnesia acquisition: Purchase completed in July 2025, adding specialty magnesia-based chemicals products to the company’s portfolio.

Full Conference Call Transcript

Ward Nye, who will discuss our first quarter operating performance, 2026 outlook, and supporting market trends. Michael J. Petro will then review our financial results and capital allocation, after which Ward will provide closing remarks. Please note that all comparisons are to the prior year's corresponding period. A question and answer session will follow. Please limit your Q&A participation to one question. I will now turn the call over to Ward.

C. Howard Nye: Thank you, Jacklyn. Good morning, and thank you for joining today's teleconference. Before reviewing our first quarter results, I will take a moment to discuss the leadership appointment we announced earlier this week. As you may have seen, Chris Samborski was appointed Martin Marietta Materials, Inc.'s Chief Operating Officer effective May 1. Chris is a highly respected and proven leader who most recently served as President of our West and Specialties divisions. Under his leadership, both businesses delivered meaningful growth and strong operational execution. Since joining Martin Marietta Materials, Inc. in 2018, Chris has consistently made a significant positive impact in every role he has held.

His deep operational experience, disciplined leadership style, and strong commitment to our culture make him exceptionally well suited for this role. With Chris serving as COO, Kirk Light will assume leadership of our West and Specialties divisions while continuing in his role as President of our Southwest Division. In addition, our East Division President, Oliver Brooks, Central Division President, Gov Adrozik, Vice President of Operational Excellence, Ronnie Walker, and Vice President of Safety and Health, Jessica Kosian, will report directly to Chris. This appointment and enhanced leadership structure reflect a deep bench of talent across our divisions, districts, and functions, all focused on consistent execution, continuous improvement, and a shared commitment to our One culture.

I am pleased to welcome Chris to his new position and I am confident that as COO, he will continue to play a critical role in helping guide Martin Marietta Materials, Inc. to even greater success. With that, I will now turn to the quarter. 2026 is off to a strong start with revenues increasing an impressive 17% to $1.4 billion, a new first quarter record. Organic aggregates shipments growth of 7.2% meaningfully exceeded our guidance, benefiting from an early start to the construction season in the Midwest and Colorado as well as continued strength in infrastructure and heavy nonresidential demand across our geographic footprint. As we look ahead, underlying fundamentals across the business remain favorable.

Notably, the quarter's results reflect a 14% improvement in both adjusted EBITDA from continuing operations as well as adjusted earnings per diluted share from continuing operations. I am especially pleased to report that our teams delivered the strongest first quarter safety performance in the company's history, as measured by both total and lost-time incident rates. This achievement reflects the strength of our culture, unwavering commitment to world-class safety, and the operational discipline embedded throughout the organization. The quarter was also highlighted by the February 23 closing of the Quikrete Asset Exchange, our largest aggregates acquisition to date.

Importantly, this transaction accelerated our aggregates-led strategy by shifting the portfolio away from more cyclical cement and concrete assets, enhancing the quality and durability of our earnings profile, while providing $450 million of cash to redeploy into aggregate acquisitions. Accordingly, and consistent with the company's SOAR 2030 strategic plan, on April 19, we entered into a definitive agreement to acquire New Frontier Materials, a complementary bolt-on in our Central Division that produces over 8 million tons of aggregates annually. This transaction is expected to close in the second half of the year, subject to regulatory approvals and other customary closing conditions. Looking ahead, our M&A pipeline remains active and is primarily focused on pure-play aggregates opportunities across attractive SOAR-aligned geographies.

As highlighted in this morning's release, our core aggregates product line delivered record first quarter shipments of 43.9 million tons, a 12% increase, and record revenues of $1.1 billion, representing a 14% increase. Our Specialties business also achieved new all-time quarterly records with revenues of $143 million, up 63% year over year, and gross profit of $45 million, an increase of 17%. Despite ongoing macroeconomic uncertainty and volatility, we continue to benefit from a business intentionally built for durability and resilience, enabling us to remain focused on what we can control regardless of underlying economic trends.

With April's continued strong product demand, the impact of April 1 price increases, and ongoing optimization efforts, we are reaffirming our full-year 2026 adjusted EBITDA from continuing operations guidance of $2.43 billion at the midpoint. Turning to end-market trends, we continue to see a constructive backdrop for U.S. infrastructure, our most aggregates-intensive and countercyclical end market. Sustained federal and state investment continues to provide meaningful multiyear funding visibility as we look ahead to the next surface transportation reauthorization. Notably, a significant portion of authorized funding under the Infrastructure Investment and Jobs Act, or IIJA, has yet to be deployed, with nearly half of highway and bridge funding remaining undistributed as of late February.

Policymakers are negotiating a five-year successor surface transportation bill with committees targeting reauthorization by October 1, following the current IIJA's expiration on September 30. While the timing remains subject to the legislative process and could include an interim continuing resolution, industry commentary from the American Road and Transportation Builders Association, or ARTBA, indicates that state departments of transportation retain multiyear visibility into their project pipelines and continue to plan under assumptions of stable federal funding. As a result, we do not expect a short-term continuing resolution to disrupt construction activity in 2026 and for the near future. Beyond infrastructure, heavy nonresidential construction demand continues to be driven by robust data center and power generation activity.

Aggregates-intensive LNG work along the Gulf Coast is also gaining momentum, including projects such as the one at Port Arthur LNG, which Martin Marietta Materials, Inc. is actively supplying. Warehouse and distribution construction trends continue to recover as shipments inflected positively in 2025 and have continued to trend favorably. By contrast, affordability pressures tied to higher interest rates continue to influence the pace of light nonresidential and residential construction activity. Taken together, all these trends underscore the durability of long-term construction demand across our footprint and bode well for our company and shareholders. I will now turn the call over to Michael to discuss our first quarter financial results. Michael, over to you.

Michael J. Petro: Thank you, Ward, and good morning, everyone. As Ward noted, our core aggregates business delivered record first quarter revenues of $1.1 billion, up 14% year over year, driven by organic shipment growth of more than 7% and approximately one month of acquisition contributions. Daily shipments have continued to trend above expectations in April, led by infrastructure and nonresidential strength in our East Division. Organic pricing in the first quarter was negatively impacted by geographic mix, driven primarily by robust organic shipment growth of more than 20% in our Central and West Divisions, which carry lower average selling prices and gross margins than our East and Southwest Divisions.

Reported aggregates gross profit declined 3% to $288 million as stronger volumes and underlying organic pricing improvements were more than offset by geographic mix and purchase accounting impacts, including a non-cash $22 million charge associated with the fair market value step-up of Quikrete inventory, as well as higher depreciation, depletion and amortization expense, which is now disclosed within our product line reporting. Importantly, underlying organic cost of goods sold per ton, excluding pass-through freight costs and timing-related items, is tracking below our implied 3% guidance as cost optimization efforts continue.

Other Building Materials revenues declined 5% to $116 million and, consistent with typical first quarter seasonality, posted a $16 million gross loss driven by customary asphalt plant winter shutdowns in both Colorado and Minnesota. Our Specialties business delivered revenues of $143 million and gross profit increased 17% to $45 million, both all-time quarterly records, reflecting contributions from the July 2025 Premier Magnesia acquisition and organic pricing gains, which were partially offset by lower organic shipments and higher energy costs. Turning to capital allocation, completion of the Quikrete Asset Exchange on February 23 marked a significant milestone for the company, concluding our SOAR 2025 divestiture program, providing $450 million in cash and simultaneously representing the largest aggregates acquisition in our history.

With this transaction complete, we have now launched SOAR 2030, supported by a strong balance sheet and a focus on aggregates-led acquisitive growth. The Quikrete integration is progressing ahead of plan with results since closing exceeding both our EBITDA and margin expectations. Further, we expect to realize synergies of approximately $50 million over the coming years as we normalize unit profitability. Importantly, the $450 million of cash proceeds combined with the company's significant free cash flow generation provides ample capacity to advance our very active M&A pipeline and opportunistically repurchase shares during times of market volatility.

Consistent with this capital deployment framework, we repurchased $200 million of shares in the first quarter and announced the acquisition of New Frontier Materials, which complements our differentiated position along the I-70 Corridor from Kansas City to St. Louis. Please note that our reaffirmed 2026 guidance does not include contribution from New Frontier as the transaction has not yet closed. Consistent with historical practice, we will revisit guidance at midyear. With that, I will now turn the call back over to Ward.

C. Howard Nye: Thank you, Michael. 2026 marked the launch of SOAR 2030, an important milestone in the continued evolution of our company's portfolio. Our increasingly aggregates-led foundation was strengthened by the closing of the Quikrete Asset Exchange and further reinforced by additional bolt-on aggregates acquisition activity already announced this year. Combined with our high-performing, differentiated Specialties business, these actions have created a resilient and durable enterprise. This streamlined and focused portfolio, supported by attractive long-term demand drivers, advantaged market positions, and a culture deeply rooted in safety, commercial, and operational excellence, reinforces our confidence in SOAR 2030 and our ability to deliver sustainable growth and enduring value creation for our shareholders.

If the operator now provides the required instructions, we will return our attention to addressing your questions.

Operator: We will now open the call for questions. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press 1 a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it is 1 to join the queue. Our first question comes from the line of Trey Grooms with Stephens. Your line is open.

Trey Grooms: Hey. Good morning, Ward and Michael. Thanks for taking my question. So given the more challenging near-term cost environment, particularly around diesel and potentially softer residential demand backdrop, Ward, could you walk us through some of the key assumptions that are supporting your decision to reiterate the full-year EBITDA guidance, specifically maybe how you are thinking about cadence of pricing through the year, including any catch-up to the higher diesel costs? And what level maybe incremental or midyear increases is embedded in that outlook? Thank you.

C. Howard Nye: Trey, thanks for the question. Good to hear your voice. Several things. One, as you noted, we are reaffirming our guidance for the year relative to EBITDA. We feel very confident in that. As you know, this excludes anything from New Frontier because that has not closed yet. Secondly, we tend to come back at midyear and reassess our guidance. I will tell you right now, I am feeling pretty optimistic about what that reassessment is going to look like, so I am looking forward to that at midyear. I would say several things.

One, if we just think about some of the reasons why, if we are looking at our shipment trends, as you may recall, when we announced our guide in February for the year, we said if there was any place that we thought we were being a little bit conservative on, it may be on the shipment outlook. You can see how that came through in Q1. You can also tell from the prepared remarks today and the headlines to the release that April has come out of the box very attractively as well. So my guess is we are going to see shipments probably trending to the higher end of the guide.

Relative to pricing, I am not looking at pricing and having any concern about how I think that is going to roll out for the year. We did call out in the prepared remarks, I know Michael did, that what we saw in the Central and West groups in particular was volumes up 21%. That is a big number. Keep in mind, pricing there is notably lower, and by that, I mean per-ton lower, than it is in the East and the Southwest. What we have seen so far in April is we are seeing that mix flow back to the type of cadence that we would ordinarily expect. We are seeing the East really catch up nicely with that.

Keep in mind, too, I anticipate we are going to see a greater realization of midyear price increases this year than we saw last year. Clearly, the diesel impact and others will be a driver on that. That is not taken into account in our guide. Again, it is something that gives me a lot of confidence in what we are doing. I know part of your question dealt very specifically with diesel and how we see that.

If you think about the fact that we are going to consume, let us call it, 55 million gallons of diesel fuel this year, that is assuming the diesel prices peak probably in Q2 and then return not to lower levels, but probably somewhat more moderated levels in Q3 and Q4. We feel like the overall impact from diesel headwinds, and that is including other items impacted by it, will be about $36 million in the aggregates business, probably $50 million for the entire company. So it is not going to be anything that is material.

The other thing that I would remind you is if we go back in time and remember what diesel pricing looked like back when Ukraine and Russia first started their conflict, diesel spiked and then we saw that headwind for a while, and then we actually saw a nice margin expansion later that year. This is not as pronounced as that was at the time. I feel like it is very manageable. Again, to your point, what is going on in infrastructure and what is going on with heavy nonresidential activity, I think the volume backdrop will continue to be very attractive. Trey, I hope that helps.

Trey Grooms: That did. That was super helpful, Ward. And then specifically on that $36 million you are talking about, for Q2, I am guessing it would be more weighted there. Any color just for our modeling?

C. Howard Nye: It is weighted more there. I will turn it over to Michael to talk to you a little bit more about any modeling questions you may have.

Michael J. Petro: Yes, Trey, you are absolutely right. We are thinking about $20 million to $25 million of it coming through in Q2, given where spot rates are. But just in terms of the organic cost cadence as compared to last year, remember, in Q1 of last year, we had sub-2.5% COGS per-ton growth, then we had roughly 6% in Q2 and Q3 and 4% in Q4. We have now passed the tough cost comp growth, and so we feel very good about the implied COGS per ton through the balance of the year, assuming we do get a little bit of diesel headwind embedded in there as well. Thanks, Trey.

Operator: Our next question comes from the line of Kathryn Ingram Thompson with Thompson Research Group. Your line is open.

Kathryn Ingram Thompson: Hi. Thank you for taking my question today, and appreciated your color and prepared commentary on the reauthorization of IIJA. We have been speaking to a wide variety of contacts on this bill reauthorization, and the general theme is no bill is going backwards on funding. The House is what we are hearing is about $550 billion. Sounds like it puts pretty close to what you are also saying, but I think the important thing too just to clarify is how much of this is going to be true surface transportation versus the $350 billion from the prior bill that was for surface?

And if you could further suss out how much of that surface is true highways and bridges versus other things that could potentially fall into that category. Thanks very much.

C. Howard Nye: Nathan, you are welcome. Thank you for the question. I would say several things. We are totally aligned with what you are hearing, and that is nothing in this is going backward. I think it is really important to note that as we are looking at what is likely to come out of the House and the Senate, neither committees of jurisdiction are planning to include broader infrastructure components like energy, broadband programs, or others that made up more than half of the 2021 infrastructure law. To your point, this is going to be a highways, bridges, roads, streets core infrastructure bill, and we do not see anything that is changing that overall notion.

As we are looking at it right now, from my understanding, the House is targeting May to mark up the legislative text, so we will certainly know more then. I think the numbers that you have indicated are certainly what I have heard from Chairman Graves and others on that committee. I also think we are likely to see numbers notably ahead of that coming out of the Senate. As this goes to a conference, I think we are going to see a nice, solid, robust core surface transportation bill that is going to come out. I think they are still aiming to have this done in time so they do not have to have a CR.

I do think if they have to have a CR, it is likely going to be one, likely to be relatively short. Of course, Kathryn, as you know, if they do end up with a CR, what that means is the federal highway funds will continue to flow to the states in an uninterrupted fashion and will remain at the current levels that are actually very high and attractive.

The other thing that I think goes unheralded, but I think it is important to remember, is if we look at Martin Marietta Materials, Inc.'s state DOT budgets, those budgets, not in every instance but in the vast majority of instances, are up year over year, which tells us that they are anticipating not seeing any interruptions from the federal side as well. I have tried to address what timing looks like, what it looks like coming out of the House because I think that is going to lead, what we see coming out of the Senate, and a CR that, if we have one, frankly, we are not the least bit concerned about. Kathryn, again, I hope that helps.

Kathryn Ingram Thompson: It does. Thank you.

C. Howard Nye: Thank you, Kathryn.

Operator: Our next question comes from the line of Adam Robert Thalhimer with Thompson Davis. Your line is open.

Adam Robert Thalhimer: Hey, good morning, guys. Nice quarter. Three-part question on M&A. Can you give us any early thoughts—I know it has only been a couple months—on Quikrete? On New Frontier, are there any kind of unique synergy opportunities there? And then lastly, on the M&A pipeline and outlook for deals from here.

C. Howard Nye: You are hitting us with a hat trick coming out of the box, Adam. I would say several things. Quikrete has frankly exceeded expectations. The integration has gone really well. The business is performing better than we expected. We saw $17 million of EBITDA, which on an annualized basis is going to be well ahead of anything that we saw. We worked through, and are continuing to work through very sensibly, the markup in the inventory. That is the tyranny of purchase price accounting that we always have to manage. We came out with that transaction, as you recall, saying we thought we would have around $50 million of synergies.

I do not think we see anything in that number that causes us any degree of heartache whatsoever, and hopefully we can see more on that. Relative to New Frontier, we are really excited about that transaction. If you think about what that is doing again, the purchase of Quikrete bought very attractive assets in Virginia, attractive assets in Missouri, Kansas, and attractive assets in British Columbia. What New Frontier is doing is adding more assets in what for us is a very attractive market position in Missouri right now. We are excited about the transaction not just because of where it is, but the really high-quality team that is coming with that as well.

We are excited to welcome them to Martin Marietta Materials, Inc., hopefully sooner rather than later. It is an interesting transaction because, as we noted in the prepared remarks, this is about 8.5 million tons annualized of aggregates and about 1.5 million tons annualized of asphalt. Keep in mind, this business is a lot like the Tiller business that we bought years ago, meaning it is an FOB asphalt business, so we are not involved in laydown there. It is truly a materials business. We think this is going to be nicely accretive to what we are doing in the middle part of the country. As Michael called out in his commentary, it is really a differentiator for us.

Relative to the pipeline, it is looking pretty attractive. As we discussed at last year’s Capital Markets Day, we have identified at least 300 million tons a year of businesses that are in SOAR-related markets that we think are compelling to us. As I indicated in my commentary as well, we continue to be focused largely on pure aggregate transactions. New Frontier is a great example of that. I mean, 8.5 million tons is not a trifling acquisition, and we continue to see that opportunity for more. We look forward to doing that very successfully this year and into next year and beyond. Adam, I hope that hit the three parts.

Adam Robert Thalhimer: Perfect. Thank you, Ward.

C. Howard Nye: You are very welcome.

Operator: Our next question comes from the line of Anthony James Pettinari with Citi.

Anthony James Pettinari: Good morning.

C. Howard Nye: Hi, Anthony.

Anthony James Pettinari: If I look at the contract awards data that we can see, you have seen very strong contract awards growth in your states really for a number of years, and I think the last twelve-month number looks good. But I think for some of the states, maybe we have seen a deceleration and some softer awards just looking at the last three to six months.

If I look at the ARTBA data, and understanding these awards are very, very chunky in the beginning of the year, and you have got a big lag between awards and revenue recognition, I am just wondering if there are any states where you have been surprised by the contract awards data, either positively or negatively? Or just how we should think about that flowing through as the year progresses?

C. Howard Nye: Anthony, thanks for the question. I would say several things. One, if we look at the ARTBA data, there is nothing in that has surprised me. ARTBA will typically say that value contract awards can be particularly volatile in the first quarter, as state and local governments typically bid less work in the early parts of the year. Importantly, as I try to give you a guide on how to think about it going forward, look at the spending authority, and I think that is really important to look at relative to our leading states. If I am looking at Texas, which matters disproportionately to us, that is up almost 15%.

If I am looking at Colorado, which is one of our leading states in the West, that is up nearly 7%. If I am looking at Georgia, which is a critically important state to us—we are the largest aggregates producer in Georgia—that is up almost 7.5%. In California, it has been interesting to watch; they are up almost 6.5%. As we are looking at what is coming out of the federal government and thinking about timing and that level of spending authority, choppiness is not unusual, particularly in Q1. In our top DOT states on the public side, it actually gives me a great deal of confidence.

The other thing that helps in that respect is simply looking at what has happened so far this year. Keep in mind, if we are looking at Q1, about 18% of our volume for the full year is going to go in Q1. It is not necessarily a driver of anything that is going to happen for the rest of the year, which is why we never, for example, update our guidance at the end of Q1. You have a much better feel for it when you get to half year. But I do think this is notable: if I am looking at tonnage that went to highways and streets in Q1 versus the prior-year quarter, they are up 23%.

I think that gives us a good sense of where it is heading right now and takes me back to the commentary that I gave early on. If we are being conservative anywhere, it is probably on the volume outlook. As we look at the volume outlook, we are very bullish on the way public is going to pull through. Anthony, I hope that helps you as well.

Anthony James Pettinari: That is extremely helpful. I will turn it over.

C. Howard Nye: Thanks, Anthony. Take care.

Operator: Our next question comes from Tyler Brown with Raymond James. Your line is open.

Tyler Brown: Hey. Good morning.

C. Howard Nye: Tyler, how are you?

Tyler Brown: I am good. First off, congratulations to everybody on their new roles. Sounds like some movement there, so that is great. Big picture, there are a lot of moving pieces in the numbers this morning. I think pricing was maybe flat on a reported basis. Gross profit per ton was down. You had Quikrete, geo mix, purchase accounting. All of that is having big impacts. So, Michael, is there any way that we could cut through the clutter—just get some color on how ASP and gross profit are looking like on more of a like-for-like basis? Is that mid-single-digit pricing, high-single-digit unit algorithm still very much intact? Just been getting some questions this morning. Some color there would be helpful.

Michael J. Petro: Sure, Tyler. What I would say is, on an organic basis, our guide for the full year would still remain firmly intact, which would see aggregates gross profit up, call it, double digits for the year. How that plays out through the balance of the year is, as Ward mentioned, there is probably going to be more volume—so volume trending to the high end. In fact, as we sit here closing April, we are at the high end of a full-year guide with how much volume we have already banked.

With the pricing, it is just difficult to make up in a calendar year the pricing that we saw in Q1, given the geo mix over the balance of the next three quarters. What we said is, look, we are seeing that broaden out with the East Division, higher ASP leading the way in April. We are starting to see that geo mix shift on ASP, which also flows through to the margin because it is not only higher ASP, it is lower cost to produce in the East as well. We are going to see that come through here in Q2 and into the balance of the year.

But making that up might be difficult, so we are saying, hey, look, organic pricing might be towards the 4% absent any midyears, but we are going to be out—and in fact we are already out—with midyears pretty much across the entire country. We expect to see a lot of that in the East and where we completed acquisitions this year. There is nothing in the organic guide that gives us any pause. In fact, we feel pretty confident in that. Getting to the full-year EBITDA guide, as Ward mentioned, Quikrete has actually come out of the gate much better than expected. In just one month with $17 million of EBITDA and a 42% EBITDA margin—so nicely accretive.

Their volume is actually exceeding expectations but at a little bit lower reported ASP. Remember, we always said it was ASP dilutive but margin accretive. What do we mean by that? These are relatively low cost-of-production operations, so we are going to start to see that flow through. Once we eat through the inventory markup—which, as Ward mentioned, there is about $44 million of that left to chew through in Q2—of course, that is an add-back to EBITDA. It is going to be a hit to aggregates gross profit in Q2, just for modeling purposes. Does that answer your question, Tyler? Or any more color you need?

Tyler Brown: The algorithm that you guys laid out at Capital Markets Day is firmly intact. That is the takeaway.

Michael J. Petro: On a price-cost spread basis, absolutely. Think about that really over a five-year period, not in a quarter or a year. What we said is there is a long history in this industry, and at Martin Marietta Materials, Inc. specifically, of delivering 200 basis points spread over a five-year interval, and we expect to expand that by about 50 basis points this period. Look at that over five years and not in any particular quarter.

C. Howard Nye: Let me add one more thing. There are a lot of moving parts right now, so cutting through to really clear numbers is important. The cost performance is something that I want to make sure you have a clear look at, because I am looking at that through two different lenses: what it looks like organically and what it looks like on a consolidated basis. Here is what I would tell you. Looking at organic aggregates COGS, take out the external freight because that is simply a pass-through. We had some one-offs on rail maintenance and track repair expenses. If we are really looking at it same-on-same, COGS per ton went up about 2.7% organically.

On a consolidated basis, again taking out the fair market inventory markup, the external freight, and just the acquired D, D & A, COGS were up around 1.7%. To Michael’s point, that cost-price spread that we anticipate seeing is fully intact. We actually took our CapEx guide down very purposely coming into the year because we felt like we had invested in the business really responsibly the last several years, and that really came through in what we are seeing in lower repairs and supply expenses as well.

I wanted to come back and give you even more color relative to the things we talked about at Capital Markets Day and that you built into a model over time—are they firmly intact? I do not think there is any question as we drill down and look at these that they are.

Tyler Brown: Very helpful, and very much appreciate the disclosure. Thank you.

C. Howard Nye: Thank you, Tyler.

Operator: Our next question comes from the line of Philip H. Ng with Jefferies. Your line is open.

Analyst: Hey, guys. Good morning. It is Jesse on for Phil. Just on Quikrete, was there any disruption in them announcing pricing to start the year with the pending transaction? And I know it kind of closed a little bit later than maybe you had expected. Are you still able to announce kind of midyears in some of those territories that you just acquired? Thanks.

C. Howard Nye: Thank you for the question. The short answer is we are expecting midyears in those markets. We have already put our correspondence to our customers indicating as much. As we have indicated before, the ASPs overall that Quikrete had in their business were not at the same level that Martin Marietta Materials, Inc. typically is. Our aim is to try to get that closer to something that looks normal across our enterprise. That is very specifically one of the areas in which we anticipate midyear price increases.

Analyst: Okay. Great. And then just one quick follow-up. You have had Specialties and the Premier business for a couple quarters now. Anything that is sticking out to you, either incremental opportunities or anything that you are more convicted in having owned it for a couple quarters?

C. Howard Nye: I would say that our conviction remains the same. It was a very attractive business. Now we have the synthetic and natural magnesia. It is a business that continues to have earned the right to grow. They are executing against their plan very, very well. It is not necessarily a seasonal business, which is important to have within a seasonal business because it gives you such good stability all the way through portions of the year. Everything we look at in that we like. Their safety culture is becoming more aligned with ours. Their margins still have room for improvement, and the core business is running very well. Nothing there to be concerned about from my perspective.

Analyst: Appreciate the color. Thanks.

C. Howard Nye: You bet.

Operator: Our next question comes from the line of Angel Castillo with Morgan Stanley.

Angel Castillo: Hi. Thanks for taking my question, and good morning. Just wanted to go back to the midyears conversation. I was hoping you could talk a little bit about what you are seeing perhaps in the asphalt markets versus ready-mix. I think ready-mix has seen some pushout to April. Are you able to try to get midyears in the ready-mix side as well? Or how do you address the energy or inflation that you are seeing across those markets?

C. Howard Nye: I would say several things. As we think about hot mix for itself, several things are worth noting. We can actually store a lot of liquid. If we are looking at our physical position today, particularly in Minnesota—because part of what we bought when we bought Tiller was a very significant tank farm—we used winter fill to go through that. From an energy perspective and otherwise, we are going to be in a very good position in our asphalt business. Equally, if we think about the asphalt business, a portion in California also has indexing that is basically there, so as it flows through, we are going to be in fine shape on that.

Angel Castillo: Again, to keep in mind from an EBITDA or other perspective, these downstream businesses are not going to add huge amounts of EBITDA. It is really, in some respects, more to take the stone and push it through those markets. So you think you are going to be in a perfectly good spot there?

C. Howard Nye: I do. Relative to concrete, if you are looking at where we have concrete now, it is really a pretty concise marketplace. It is really in Arizona. We are talking about a concrete business now that on an annualized basis is going to have, let us call it, about 1.2 million cubic yards. If you go back several years and remember, this used to be about a 10 million cubic yard business, and now it is down to about 1.2 million cubic yards. Arizona is an attractive ready-mix market for us. We are seeing some price increases there, so we would anticipate that business performing very much in line with the way that we indicated.

Given what we can do on asphalt and liquid storage, we do not feel like the energy component is going to be a threat to that business on the hot mix side either.

Angel Castillo: That is very helpful. And then, Ward, I wanted to follow up on your comments that April is off to a very good start and pushing your shipment volumes perhaps to the higher end. Can you talk a little bit more, particularly on the private side—I think you have given a lot on the public side. That is really helpful. But just as it pertains to what you are seeing here in April and what you saw in Q1, sounds like weather allowed a little bit of activity to start earlier. Are you seeing projects that maybe were not in the backlog move forward faster, just greater confidence?

Or how do we reconcile the strength in some of that volume and what you might be seeing on the private side with some of the rising costs, rising interest rates, and other factors that we are hearing?

C. Howard Nye: Sure. I will pivot to the private side and say several things. If we are looking in the quarter at what we saw relative to warehouse, warehousing was up 57%. If we are looking at what we saw relative to data centers, data centers were up 62%. If we are looking at what we are seeing in different forms of energy, for example, LNG for us during the quarter was up 20%. If we look at what is going on in shale, shale was up on a percentage basis a very large amount simply because it is coming from such a low base.

Part of what is important to remind people: back in 2010 or 2011, we were sending about 7.5 million tons of stone per annum to the different shale plays across the United States. That is about a million tons less than the New Frontier business that we just bought. As I look at what is happening with warehousing, data centers, and energy, those are the types of things on the private side that give us confidence. On warehousing in particular, this is not just an Amazon show anymore. It is much broader than that. We are seeing it with Walmart. We are seeing Ross distribution centers. Delhaize is building a nice distribution center in North Carolina right now.

To be even more specific, if we look at the LNG project pipeline today on projects that are currently supplied by Martin Marietta Materials, Inc., they are going to consume about 10.6 million tons. If we look at projects that we believe are potentially coming our way relative to LNG and otherwise, that is another 33 million tons. I am sorry—that first number I gave you was in fact LNG on projects, and that was 10.6 million. Data centers are right at 3.27 million tons that are estimated and well over 2 million just for this year. If we are looking at the heavy side of nonres, there is nothing there that does not look pretty attractive to us.

Now to your point, on residential and light nonres, those are highly interest rate–affected areas. They are not booming right now. What I am taken by is we are putting up double-digit volume growth, and those interest rate–sensitive portions of our business are frankly not doing anything right now. Here is what we know: if we are looking at the overall housing market in the United States generally, and Martin Marietta Materials, Inc. states specifically, everything that I have seen indicates that it is going to require about 4 million additional homes simply to restore balance.

As I am looking at these areas that are more interest rate sensitive, to me, it is not a matter of whether they return—they are going to return. It is a matter of when they return. Do I think infrastructure is in a place that it is going to steady for a while—and by that, I do not mean quarters or months, but years? I think it is. If we look at the rate of growth in energy, data centers, warehousing, etc., that too, to me, looks like it is probably a multiyear run. Somewhere in there, you are going to see private decide they are going to stop being spectators and get in the game.

Angel, I hope that gives you some specifics around the areas in which you asked.

Angel Castillo: Very helpful. Thanks so much.

C. Howard Nye: Thank you.

Operator: Our next question comes from the line of Steven Michael Fisher with UBS. Your line is open.

Steven Michael Fisher: Thanks. Good morning. I wanted to follow up again on the midyear price increases. It sounds like you are pretty confident in them. Can you remind us how much of that is sort of automatic? I think you mentioned California has indexing. So how much of that, from a process perspective, just flows through versus negotiated? Have you gotten any preliminary feedback from customers on this? Are people just resolved that this is going to happen because of all the inflationary pressures on fuel and everything? That is one question. And then just a clarification on what you assume for the residential market for your residential business in the second half of the year? Thank you.

C. Howard Nye: Thank you for the question, Steven. I would say several things. Let us keep buckets really clear. When we are talking about the indexing, that is really more relative to liquid and what is going on in asphalt in places like California. I do not put that in the same bucket that I do midyear pricing in stone. We saw midyear pricing last year in aggregates, principally in areas where we had done new acquisitions. I think we will certainly see that again, but I think it is going to be more broad-based this year because of the inflationary trends that you have highlighted.

We are not going to bat a thousand on it, but if you say we batted .300 last year—that would have put you in the Hall of Fame—we are not going to be at .300, and we are not going to be at 1.000, but we will be somewhere between those two. I think it is going to be a really attractive percentage for all the reasons that you said. Customers are seeing inflation in what they are trying to manage from their cost perspective. We are as well. If we are going to be responsible stewards of our business, we need to do this.

I wanted to differentiate what you spoke of specifically in California with what we are talking about on midyears and give you a sense of what realization I think we are likely to see. Steven, I hope that helped.

Steven Michael Fisher: That was very helpful. If you had a comment on the resi business expectation for the second half, that would be great as well.

C. Howard Nye: We came into the year with very low expectations of resi, and I do not think it is going to disappoint us. I think it is going to continue—there is just not going to be anything that is going to be, at least in my view, a real pop on that. That is exactly why we came into the year with it forecasted the way that we did. So resi is moving exactly as we thought it would, and that is why I am taken with the rest of it. You are seeing a nice volume pop with resi not yet at the party. At the same time, we go back to that notion I shared before.

Martin Marietta Materials, Inc. has built its business very purposefully in states that have significant population inflows coming in, and the housing markets in most of our MSAs are pretty tight, so I think it is a matter of time. But it is not going to be this year.

Steven Michael Fisher: Thank you so much.

C. Howard Nye: Thank you.

Operator: Our next question comes from the line of Analyst with B. Riley Securities. Your line is open.

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