Kathryn Thompson

Kathryn Thompson asked about the current and projected five-year end market breakout between 'light non-res' (e.g., commercial buildings) and 'heavy industrial' (e.g., data centers, energy-supporting infrastructure), its implications for margin goals, and the role of artificial intelligence.

Answer

President and CEO Russ Becker stated that Specialty Services has a significant revenue component from heavy industrial markets, which is expected to continue strong organic growth. He noted that APi Group is better positioned for complex end markets like advanced manufacturing, data centers, semiconductors, and utilities. For 'light side' markets like office space, the focus remains on building the inspection and service business. Regarding AI, he views it as an enabler, not a job displacement tool, with an internal team focused on using AI to enhance field leaders' efficiency, free up time for customer sites, and ultimately support the growth of the inspection, service, and monitoring business.

Kathryn Thompson asked about the impact of U.S. reindustrialization, including AI, on APi Group's end market mix (light non-res vs. heavy/industrial) today versus five years from now, and the implications for margin goals.

Answer

President and CEO Russ Becker noted that the Specialty Services segment derives significant revenue from heavy industrial markets like data centers, advanced manufacturing, and semiconductors, which are expected to continue strong organic growth. He stated APi is well-suited for complex facilities. Regarding AI, he views it as an enabler for the business, focusing on empowering field leaders to enhance efficiency and customer engagement, ultimately supporting the growth of the inspection, service, and monitoring business by freeing up personnel from mundane tasks.

Kathryn Thompson inquired about APi Group's strategy for balancing growth priorities, specifically between benefiting from reindustrialization trends (e.g., data centers) and consolidating verticals like the elevator segment, and asked about end markets offering better margin opportunities.

Answer

Russ Becker, President and CEO, highlighted that the size, complexity, and geographic footprint of APi Group provide an advantage in large projects like data centers. He confirmed the company is pursuing both investing in inspection, service, and monitoring (ISM) and consolidating the elevator/escalator space, with sufficient bandwidth. Mr. Becker stated that current end markets offer the best margin opportunities due to project complexity, scale, and aggressive schedules, for which APi Group expects to be compensated appropriately.

Kathryn Thompson from Thompson Research Group asked how APi Group balances its growth priorities between capitalizing on reindustrialization trends in end markets like data centers and consolidating specific verticals such as the elevator and escalator segment. She also inquired about which end markets offer better margin opportunities for future growth.

Answer

President and CEO Russ Becker highlighted APi's advantage in large, complex projects due to its geographic footprint and scale, noting they are actively pursuing both inspection, service, and monitoring (ISM) growth and elevator/escalator consolidation. He stressed careful project selection to ensure adequate resources and appropriate pricing. Mr. Becker further clarified that current end markets provide the best margin opportunities due to project size, complexity, and demanding schedules, which allow for premium pricing.

Kathryn Thompson of Thompson Research Group asked for specific examples of how APi Group wins business related to the AI infrastructure buildout, both for new projects and ongoing services.

Answer

President and CEO Russ Becker explained that their existing inspection and service relationships at facilities give them a significant advantage in winning expansion projects. For new greenfield sites, their ability to handle large, complex projects safely and on schedule is key. He emphasized that for these opportunities, project complexity and execution capabilities are more critical than price, which aligns with APi's model of avoiding price-driven competition.

Kathryn Thompson of Thompson Research Group asked about APi's capital allocation priorities between M&A and share buybacks, given its strong cash flow and new repurchase program. She also asked for examples of how APi's services support the reindustrialization trend in North America.

Answer

President and CEO Russell Becker outlined the capital allocation hierarchy: first, deleveraging (now complete), second, accretive M&A, and third, opportunistic share repurchases. He noted a strong M&A pipeline and a 2025 target of $250 million in bolt-ons. Regarding reindustrialization, Becker explained that APi is well-positioned to handle large-scale life safety and security projects for new facilities like data centers, but stressed that the strategy is to use these projects to build long-term inspection, service, and monitoring relationships rather than overcommitting to any single end market.

Kathryn Thompson from Thompson Research Group asked about the resilience of APi's business model against economic slowdowns and sought clarification on the nature of recent project delays.

Answer

President and CEO Russ Becker explained that the business model's resilience is increasing due to the growing mix of recurring inspection and service revenue, which is less cyclical and allows for real-time price adjustments. He added that the cost structure is 70-75% variable, providing flexibility. Regarding project delays, he noted they are mostly resolved, with lingering issues from one government client now factored into the 2025 plan, and that Q1 faced more typical winter weather compared to the prior year.

Kathryn Thompson asked about APi's ability to maintain pricing power as inflation moderates and how the company fits into the reported pickup in non-residential repair and remodel (R&R) activity.

Answer

President and CEO Russ Becker affirmed their ability to continue taking price, particularly in the labor-driven service business, noting good stickiness. EVP and CFO Kevin Krumm added that the small ticket size on service work supports this. Regarding R&R, Becker stated their business has already normalized post-COVID, while Krumm pointed to strong backlog, proposal activity, and service portfolio growth as signs of positive momentum.

Kathryn Thompson from Thompson Research Group asked about the extent to which CRH's connected portfolio acts as a differentiator for its M&A pipeline and growth optionality, particularly in the context of the transportation, water infrastructure, and U.S. reindustrialization megatrends.

Answer

CEO Jim Mintern explained that the connected portfolio is central to CRH's strategy and performance, not just M&A. He stated that the scale (4,000+ locations) and connected nature provide optionality for capital deployment across four growth platforms (aggregates, cementitious, roads, water). He emphasized that local sourcing and relationships often lead to exclusive deal opportunities and make CRH an acquirer of choice, supported by a proven integration capability. For performance, the connected portfolio enables a more complete customer offering, maximizing growth and value creation, particularly in areas like data centers and the Roads business, where it significantly increases profitability by supplying a broader range of connected products and services.

Kathryn Thompson asked about the extent to which CRH's connected portfolio differentiates its M&A pipeline and growth optionality, particularly in the context of key megatrends.

Answer

CEO Jim Mintern reiterated that the connected portfolio is central to both M&A and performance. For M&A, CRH's scale and local relationships provide optionality across four growth platforms and exclusive deal access, enabling rapid integration. For performance, it allows a more complete customer offering (e.g., data centers, roads), maximizing growth and value, and improving visibility and planning efficiencies, turning $1 in aggregates into $6 in connected products.

Kathryn Thompson questioned the outlook for the next highway bill reauthorization and asked for more specific details on the 'green shoots' observed in residential repair and remodel.

Answer

COO Randy Lake noted bipartisan support for a new highway bill, expecting a focus on surface transportation and a new sustainable funding mechanism. CEO Jim Mintern clarified that residential 'green shoots' are most prominent in Central and Eastern Europe due to rate cuts, while U.S. residential recovery is hampered by affordability issues and not expected to significantly impact results until late 2026.

Kathryn Thompson asked a two-part question regarding the M&A pipeline and capital allocation priorities amid macro uncertainty, and whether CRH is seeing increased state infrastructure lettings show up in its business.

Answer

Executive Jim Mintern confirmed no change in capital allocation priorities, highlighting a strong M&A start with 8 deals for $600M, a full pipeline, a dividend increase, and a continued share buyback program. Executive Randy Lake affirmed that increased infrastructure activity is reflected in their backlogs and bidding, noting that the company's geographic footprint is well-positioned to benefit from IIJA funding as it continues to be deployed.

Kathryn Thompson asked for CRH's perspective on balancing the very strong infrastructure funding at the state level, like in Texas and Florida, against potential concerns about federal funding continuity.

Answer

COO Randy Lake expressed confidence, noting infrastructure investment has historically been bipartisan. He emphasized the powerful combination of state funding and federal IIJA funds, of which only one-third has been deployed. He added that CRH's top five states are set to receive about 20% of total IIJA funding, and that the company's strong backlogs reflect this positive, long-term momentum.

Kathryn Thompson of Thompson Research Group requested a more detailed 2025 outlook for residential, non-residential, and public construction end markets. She also asked about CRH's ability to manage the availability of key inputs like cement and fly ash amid increasing project complexity.

Answer

Executive Randy Lake detailed strong U.S. demand driven by multi-year IIJA and onshoring projects, with a gradual residential recovery expected in H2 2025. Executive Jim Mintern added that European infrastructure is also robust and noted that CRH's global supply lines position it well to manage input availability, with no current bottlenecks being experienced.

Kathryn Thompson inquired about the drivers of outsized performance in the West and Mountain divisions during Q4, distinguishing between self-help initiatives and pricing, and sought broader color on the M&A pipeline and organic growth initiatives for 2026, along with capital deployment capacity.

Answer

Brian Gray, President and CEO, attributed Q4's strong performance to favorable weather, contributions from acquisitions (Strata, TexCrete), and operational execution through EDGE initiatives, including cost controls and recouping pre-production costs. He described a robust M&A pipeline focused on aggregates-based, vertically integrated bolt-ons in high-growth markets, alongside exciting organic projects. Nathan Ring, CFO, affirmed strong capital capacity with $75 million cash, $475 million on the revolver, solid cash flows, and a net leverage of 2.2x, supporting continued growth.

Kathryn Thompson inquired about the drivers of the outsized Q4 performance in the West and Mountain divisions, specifically the split between self-help initiatives and pricing, and then asked for broader color on the M&A pipeline and other organic growth initiatives for 2026, including capital deployment capacity.

Answer

Brian Gray (President and CEO, Knife River) attributed the strong Q4 performance (47% higher EBITDA) to favorable weather (especially in the Mountain region), strong contributions from acquisitions (led by Strata and TexCrete), and operational execution of EDGE initiatives, including recouping pre-production costs and tight cost controls. He described a robust M&A pipeline focused on aggregates-based, vertically integrated, infill bolt-ons in mid-sized, higher-growth markets, often negotiated directly at attractive multiples, leveraging a proven 30-year playbook. Organically, Knife River is pursuing high-return projects, expanding into new markets like Idaho, and adding capacity in Texas and South Dakota. Nathan Ring (CFO, Knife River) confirmed strong liquidity ($75M cash, $475M revolver), expected solid cash flow (two-thirds of EBITDA), and a net leverage of 2.2x (below target of 2.5x), providing ample capacity for growth.

Kathryn Thompson of Thompson Research Group inquired about the organic performance of the Strata and Albina acquisitions, their expected contribution in Q3, and their impact on the raised aggregates pricing guidance.

Answer

CEO Brian Gray stated that the Strata and Albina integrations are proceeding well, accounting for about 8% of Q2 revenue and adding to the company's seasonality. He noted that without them, organic revenue would have declined 5%. Gray confirmed the Strata acquisition is accretive to margins and contributed to the higher aggregates pricing outlook, but emphasized that the broader dynamic pricing initiative was the primary driver.

Kathryn Thompson requested a detailed breakdown of the Q1 SG&A increase and guidance for the full year, and also asked for justification of the full-year aggregate volume guidance given the Q1 decline.

Answer

CFO Nathan Ring broke down the $13 million Q1 SG&A increase into three parts: $8 million for strategic investments (M&A and EDGE initiatives), nearly $4 million from acquired companies' SG&A, and the remainder from inflation. For the full year, he advised adding Strata's SG&A to the previously guided figures. CEO Brian Gray addressed volumes, stating Q1 is a seasonally small quarter and the decline represents only about 1% of annual sales, expressing confidence in the high single-digit full-year guidance due to secured contracts and positive trends in most states.

Kathryn Thompson of Thompson Research Group sought clarification on the $20 million step-up in 2025 SG&A, asking what it covers, whether Strata-related costs are included, and how this investment differs from past practices. She also requested more detail on the contracting services outlook and the specific impact of the EDGE strategy on the segment.

Answer

President and CEO Brian Gray explained the $20 million investment is to accelerate EDGE initiatives and support a robust M&A pipeline. CFO Nathan Ring clarified that this cost is included in the 2025 guidance, in addition to normal mid-single-digit inflationary increases. Gray then highlighted the EDGE strategy's success, noting it improved adjusted EBITDA by 48% over two years, driven by disciplined bidding in contracting services. He stated the segment's outlook is strong, aligning with the low single-digit volume growth guided for materials.

Kathryn Thompson from Thompson Research Group inquired about the EBITDA margin performance of Knife River's geographic segments in Q3 and year-to-date, and sought clarification on the breakdown of increased SG&A costs between M&A activities and healthcare expenses.

Answer

President and CEO Brian Gray confirmed that geographic segment EBITDA margins improved by 90 basis points for the quarter and 170 basis points year-to-date. CFO Nathan Ring clarified that the SG&A increase was split roughly 50/50 between acquisition-related costs and higher health and welfare claims, noting a similar increase is expected in Q4, primarily from due diligence.

Kathryn Thompson focused on policy, asking how the expiring IIJA and potential reauthorization bill, along with states taking greater control of financing, are baked into the 2026 guidance. She also asked for clarification on whether divested Bay Area assets are excluded from the guide.

Answer

Ronnie Pruitt, Chief Executive Officer, stated that the guidance assumes a new IIJA bill will pass, likely higher than the previous, and noted that over 50% of current IIJA funding is yet to be spent, providing a tailwind through 2026 and 2027. He highlighted strong highway starts in Vulcan markets, particularly California and the Southeast, and double-digit increases in other public works. Mary Andrews Carlisle, Senior Vice President and Chief Financial Officer, confirmed that the ready-mix assets from the Bay Area divestiture are excluded from the 2026 guidance, implying over 10% growth on a same-store basis.

Kathryn Thompson questioned how the potential 'messiness' of the IIJA reauthorization bill and states' increasing control over financing are factored into guidance, and sought clarification on the exclusion of divested assets from the 2026 guide.

Answer

Ronnie Pruitt, SVP and COO, stated that guidance assumes a reauthorization bill will pass, likely at a higher funding level, and noted that over 50% of IIJA funds are yet to be spent, providing a tailwind through 2026 and 2027. He highlighted strong highway starts in Vulcan markets (up 24% year-over-year in 2025) and double-digit increases in other public works in 14 of 19 GM areas. Mary Andrews Carlisle, Senior VP and CFO, confirmed that ready-mix assets from the divestiture are excluded from the 2026 guidance, implying over 10% growth at the midpoint on a same-store basis.

Kathryn Thompson asked about Vulcan's ongoing portfolio shaping strategy, inquiring what fits or may not fit, considering product types or geographic focus, and how this approach will evolve.

Answer

Ronnie Pruitt, COO, expressed satisfaction with downstream asphalt businesses, noting the recent concrete divestiture in California was strategic due to private side challenges, aligning with an aggregate-led strategy. He affirmed that Vulcan will remain aggregate-focused, retaining expertise in asphalt and concrete for future M&A opportunities.

Kathryn Thompson of Thompson Research Group asked whether the acceleration in infrastructure spending is primarily driven by large state-level initiatives, like those in Florida and Tennessee, or by broader IIJA funding.

Answer

Chair & CEO J. Thomas Hill responded that it is a combination of all factors, including strong state capital spending, IIJA funding, and increased local funding. He highlighted that highway contract awards in Vulcan-served states are up 22%. CFO Mary Carlisle added that this award growth is significantly stronger in Vulcan's states compared to others.

Kathryn Thompson of Thompson Research Group inquired about any significant project cancellations or delays and how the 'Vulcan Way of Operating and Selling' provides a competitive advantage in an uncertain market.

Answer

CEO James Hill confirmed that projects already underway are not being canceled or delayed. However, he noted a 'pause' on new projects, with customers bidding on work but delaying the start due to macroeconomic volatility, which he sees as creating pent-up demand. He credited the 'Vulcan Way' disciplines for providing the clarity and forward-looking data necessary to consistently improve unit margins, noting the selling discipline is more mature while the operating discipline is in earlier stages but showing positive results.

Kathryn Thompson of Thompson Research Group asked about the drivers behind the record Q4 gross margin performance and how the 'Vulcan Way of operating' will contribute to margins in 2025.

Answer

CEO Tom Hill attributed the strong Q4 cost control to favorable weather, less negative volumes, and improved efficiencies from the 'Vulcan Way of operating' initiatives. He guided to low-to-mid-single-digit cost increases in 2025. CFO Mary Andrews Carlisle added that she expects year-over-year gross margin improvement in each quarter of 2025, following the pattern seen in 2024.

Kathryn Thompson asked for a comparison of the factors driving double-digit cash gross profit per ton in Q3 versus the outlook for 2025, with a focus on cost dynamics.

Answer

Chairman and CEO James Hill credited the consistent execution of the 'Vulcan Way of Selling' and 'Vulcan Way of Operating' disciplines. For 2025, he anticipates continued strong pricing momentum will be complemented by moderating cost inflation and improved operating efficiencies. He expects cost pressures, which were exacerbated by weather in 2024, to ease, thereby supporting continued double-digit unit margin expansion.

Kathryn Thompson asked about the latest intelligence on the new highway bill, including likely funding levels, and the current criticality of federal funding given increased state and local municipality contributions.

Answer

Chair, President and CEO Ward Nye explained that the highway bill remains important, though less so than in the past due to robust state and local funding efforts. He anticipates a five-year reauthorization with a larger portion dedicated to highways, bridges, roads, and streets, likely to be completed on time by September 30th, 2026, or an interim measure maintaining record funding levels. He highlighted significant local funding examples like Mecklenburg County's $19.4 billion referendum.

Kathryn Thompson asked about the latest intelligence on the new highway bill, including likely funding levels, and the current criticality of federal funding compared to increasing state and local municipality initiatives for infrastructure.

Answer

Chair, President and CEO Ward Nye indicated that both the House and Senate intend to pursue a five-year reauthorization of highway public transportation programs, targeting spring for text release and on-time completion by September 30th. He noted that a larger portion of the bill is expected to go to highways, bridges, roads, and streets this time. Ward Nye also highlighted the growing importance of state and local funding, citing examples like Mecklenburg County's $19 billion sales tax referendum for infrastructure, underscoring broad bipartisan support for such measures.

Kathryn Thompson asked about the balance of Martin Marietta's aggregate pricing and volumes, specifically requesting a breakdown of total versus organic pricing and volumes for the quarter, and insights into future trends.

Answer

Chairman and CEO Ward Nye reported that total aggregate pricing was up 8% with organic pricing up 7.9%, indicating strong organic activity across both East and West Groups despite a product mix headwind from higher basestone shipments. Total aggregate shipments were up 8%, with organic shipments up 5.5%, attributing the performance to more normalized weather conditions.

Kathryn Thompson asked about the balance of aggregate pricing and volumes, specifically seeking a breakdown between total and organic pricing and volumes for the quarter, and how to think about these metrics going forward.

Answer

Ward Nye, Chairman and CEO, expressed satisfaction with the overall pricing and volume performance, noting reported pricing was up 8% (7.9% organic) and reported volumes were up 8% (5.5% organic). He highlighted that a heavy basestone quarter, despite being a product mix headwind, provides confidence for future clean stone demand, and normalized weather contributed to the results.

Kathryn Thompson asked for an update on July demand trends following a weather-impacted Q2, seeking assurance of fundamental market strength for the remainder of 2025 and into 2026.

Answer

CEO C. Howard Nye reported that July saw "nice double-digit volume up across the enterprise." He noted that with pricing trending toward the high end of the guide and volumes through July above the previous midpoint, the company has taken a measured approach to its updated guidance, hoping volume strength continues as pricing has.

Kathryn Thompson of Thompson Research Group inquired about Martin Marietta's confidence in its volume guidance amidst the ongoing tariff debate. She also asked about emerging green shoots in previously weak end markets like warehouses and whether any projects were being canceled or delayed.

Answer

Chair and CEO Ward Nye expressed confidence, stating that heavy-side materials are a 'safe haven' in the current environment. He highlighted strength in infrastructure, driven by IIJA funding with only about a third of funds reimbursed, and strong state DOT budgets. Nye noted that data centers and a bottoming warehouse market, evidenced by large projects in Texas, Florida, and North Carolina, provide further support. He confirmed that customer backlogs are up year-over-year and the company is not seeing project cancellations, which underpins the positive volume outlook.

Kathryn Thompson inquired about the potential impacts of tariffs on the business and what steps Martin Marietta has taken to diversify its supply chain since 2016.

Answer

CEO Ward Nye stated that the company is well-prepared for potential tariffs due to its predominantly domestic supply chain, a strategy refined since the COVID era. He noted that steel tariffs could positively impact the Magnesia Specialties business by boosting domestic steel production. Tariffs on cement could benefit their North Texas operations, and tariffs on stone could add value to their domestic rail network. A minor headwind could be their Canadian operation shipping into the U.S. Overall, Nye sees potential for tariffs to drive more reshoring and domestic manufacturing demand.

Kathryn Thompson asked about the quantitative impact of severe weather on Q3 2024 volumes and pricing, and inquired about shipment trends in October following the storms.

Answer

CEO C. Nye explained that Q3 was significantly impacted by hurricanes hitting high-margin Southeastern markets, which disproportionately hurt shipments, profitability, and the ability to secure mid-year price increases. He noted that October's more normal weather has driven a strong rebound, underpinning the Q4 forecast for a 5% increase in aggregate shipments. Nye cited growing customer backlogs and contractor hiring as further positive signs.

Kathryn Thompson from Thompson Research Group sought clarification on Construction Partners' organic growth, specifically reconciling the 3.5% organic growth in Q1 with the 7%-8% full-year guidance and the impact of any adverse weather. She also inquired about the company's M&A integration strategy and its progress over the last 12-15 months.

Answer

CEO Jule Smith explained that the Q1 organic growth difference was due to delayed North Carolina projects and strategic equipment redeployment to acquired markets, which shifted revenue from organic to acquisitive. He reiterated the 7%-8% full-year organic growth target. On M&A integration, CEO Jule Smith emphasized it as a core competency, citing successful integrations in Houston (Durwood Greene with Vulcan and GMJ) as examples of compounding growth.

Kathryn Thompson asked for clarification on Construction Partners' organic growth, reconciling the 3.5% reported in Q1 with the 7%-8% full-year guidance, and inquired about the impact of adverse weather. She also sought more color on the strategy and progress of M&A integration over the past 12-15 months.

Answer

CEO Jule Smith explained that the Q1 organic growth difference was due to late project starts in North Carolina and strategic equipment reallocation to higher-margin acquired markets due to competitive dynamics, with full-year organic growth still expected at 7%-8%. He highlighted M&A integration as a core competency, citing successful integration examples in Houston (Durwood Greene, Vulcan assets, GMJ Paving) as key to compounding top-line and bottom-line growth.

Kathryn Thompson asked about Construction Partners' M&A integration strategy, specifically what has changed in their approach over the last five years, and the impact of the recent government shutdown on their business.

Answer

Jule Smith (CEO) and Ned Fleming (Executive Chairman) explained that 2025 was a transformational year for acquisitions, driven by finding the right markets and partners amidst generational consolidation. Ned Fleming highlighted an improved, smoother integration process involving employees across the company, leading to more opportunities. He also confirmed that the government shutdown did not impact their industry due to Highway Trust Fund financing.

Kathryn Thompson asked about Construction Partners' M&A integration process, specifically what has changed and improved over the last five years to ensure smoother integrations as the company builds growth momentum and consolidates the market. She also inquired if the recent government shutdown impacted the business and how the company plans for such events going forward.

Answer

CEO Jule Smith noted that fiscal year 2025 was transformational due to acquisitions, emphasizing the strategy of finding the right markets with the right partners. Executive Chairman Ned Fleming elaborated on the integration process, highlighting a strong team for strategic assessment and due diligence, an increase in acquisition opportunities due to generational transitions, and the importance of cultural fit. He stressed involving employees across the company in integration teams and quarterly meetings for leaders of acquired businesses to foster collaboration. Ned Fleming also confirmed that the government shutdown did not impact the industry or the company's business, as funds are channeled through the Highway Trust Fund.

Kathryn Thompson of Thompson Research Group inquired about the impact of macro uncertainty on projects, the strategic rationale and margin profile of recent acquisitions, and the company's 2025 capital allocation priorities.

Answer

Executive F. Smith reported no project delays, stating that platform acquisitions like PRI are chosen for strong management and bring valuable expertise. Executive Chairman Ned Fleming highlighted CPI's selective M&A strategy and integration capabilities. F. Smith confirmed the capital allocation plan involves debt reduction and strategic acquisitions, aiming to return to the target leverage ratio within four quarters.

Kathryn Thompson inquired about the expected gross margin and SG&A profile of the three recent acquisitions once fully integrated. She also asked about the outlook for cost inflation, the price-cost spread, and any updates on state DOT funding beyond Florida, including potential post-election impacts.

Answer

Executive F. Smith explained that the new acquisitions have margins typical for the industry and are factored into the updated guidance, with a long-term strategy to improve them. He anticipates 4-5% cost inflation, which is being passed through in bids. He also noted that all of the company's states have healthy, growing funding programs. Executive Chairman Ned Fleming added that infrastructure spending has strong bipartisan support at all levels of government.

Kathryn Thompson asked for a breakdown of the fiscal 2025 EBITDA margin guidance, seeking to understand the contribution from the Lone Star acquisition versus organic growth initiatives. She also requested commentary on the Texas Department of Transportation's (TxDOT) funding visibility and growth outlook.

Answer

President and CEO F. Smith stated that CPI was on track for 50-60 basis points of organic margin expansion in FY25, driven by its strong backlog, vertical integration, and scale, even before the Lone Star acquisition. Executive Chairman Ned Fleming added that Lone Star's high margins demonstrate the potential of a fully integrated model and that its people and culture were key acquisition criteria. Both executives highlighted that TxDOT benefits from robust, state-level funding mechanisms, including oil and gas revenues, making its infrastructure program less dependent on federal funds and creating significant growth opportunities.

Kathryn Thompson asked about the growth strategy for integrating the LSI and Elgen acquisitions into the Worthington network, focusing on complementary top-line opportunities and cost synergies. She also inquired about Worthington's exposure to data center-centric opportunities across its portfolio and the estimated percentage of sales these contribute.

Answer

President & CEO Joseph Hayek explained that the Worthington Business System leverages M&A, innovation, and transformation, applying playbooks for safety, equipment, and operational flow to acquired companies like Elgen and LSI. CFO Colin Souza detailed LSI's fit with acquisition criteria, highlighting its market-leading position in commercial metal roofing clips, resilient retrofit demand, strong margins, and cultural alignment. Souza further clarified Worthington's broad exposure to data centers through products from WAVE, ClarkDietrich, Elgen, and LSI, estimating it to be less than 10% of sales for the mentioned businesses but a fast-growing area.

Kathryn Thompson inquired about the drivers behind the margin improvement in the wholly-owned building products segment, its expected glide path, and a normalized margin level. She also asked about the sustained outperformance of WAVE and its expected contribution in future quarters. Finally, Thompson questioned the impact of tariffs on Worthington's competitive position as a domestic manufacturer, seeking an update on customer conversations and quantifiable wins.

Answer

CEO Joe Hayek attributed building products' margin growth to strong execution in normalizing markets, particularly in heating, cooking, cooling, and construction, with a long-term EBITDA margin target of 12-13%. CFO Colin Souza noted WAVE's continued strong performance, driven by healthy end markets like education and healthcare, with Q4 and Q1 being their strongest quarters. Hayek explained that tariffs, while costing the consumer business, create a more level playing field for Worthington's domestic manufacturing, enhancing its value proposition with customers, though direct quantifiable wins are hard to pinpoint.

Kathryn Thompson asked about the drivers behind the margin expansion in the wholly-owned building product segment, the expected glide path for these margins, and what a normalized level might look like. She also inquired about the consistent outperformance of WAVE, its key drivers, and whether this level of contribution is sustainable. Finally, Thompson questioned the impact of tariffs on Worthington's domestic manufacturing advantage, seeking an update on customer conversations and any quantifiable wins.

Answer

Joseph Hayek (President, CEO & Director) attributed building products margin improvement to strong execution, market normalization, and growth in heating, cooking, cooling, and construction, highlighting the Paducah facility's A2L refrigerant cylinder production. He projected wholly-owned EBITDA margins to trend towards 12-13% over time. Colin Souza (VP & CFO) explained WAVE's strong performance by its healthy end markets (education, healthcare, data centers) and its operating model focused on contractor value. Joseph Hayek and Colin Souza discussed tariffs, noting a direct cost impact on the consumer business but also a competitive advantage for Worthington's domestic manufacturing, leading to more compelling customer value propositions.

Kathryn Thompson inquired about the drivers behind the margin improvement in the wholly-owned building product segment, its expected glide path, and a normalized level. She also asked about the performance drivers for WAVE and its expected contribution in future quarters. Finally, she sought an update on how Worthington Enterprises' domestic manufacturing footprint is benefiting from tariffs, including any quantifiable wins.

Answer

Joe Hayek (President and CEO) attributed building products' margin growth to strong execution, market normalization, and growth in heating, cooking, cooling, and construction, targeting 12-13% EBITDA margin over time. Colin Souza (CFO) noted WAVE's strong performance driven by healthy end markets like education and healthcare, expecting steady contributions. Joe Hayek explained that tariffs create a complex environment, directly impacting the consumer business with charges, but also leveling the playing field for Worthington's domestic manufacturing, enhancing its value proposition though direct wins are hard to quantify.

Kathryn Thompson from Thompson Research Group inquired about the key drivers behind the significant gross margin expansion, seeking to distinguish between one-time effects and sustainable company initiatives. She also asked about the performance drivers for the WAVE and ClarkDietrich joint ventures and the sustainability of their recent results.

Answer

CFO Colin Souza explained that roughly half of the 450 basis point gross margin improvement was due to the deconsolidation of the SES business, with the remainder driven by strong volume growth and favorable product mix in their building products segment. CEO Joseph Hayek added that SG&A reduction is a key focus, with long-term goals of achieving over 30% gross margin and SG&A under 20% of sales. Regarding the JVs, Hayek noted WAVE's strength is broad-based and likely steady, while he characterized ClarkDietrich's strong quarter as a potential near-term "aberration" and guided for Q1 results to be closer to the prior year.

Kathryn Thompson inquired about how Worthington is navigating current and potential tariffs, whether they present a pricing opportunity, and if there are any supply disruptions. She also asked for details on the contributing factors to Building Products' EBITDA margin and the outlook for the JVs, ClarkDietrich and WAVE.

Answer

CEO Joseph Hayek stated that as a primarily domestic manufacturer, Worthington is well-positioned to handle tariffs and would be a net beneficiary, having already announced some pending price increases. He noted an increase in inquiries but no material uptick in demand yet. CFO Colin Souza highlighted that the wholly-owned Building Products business saw its EBITDA margin rise from 6% to 11% year-over-year, driven by positive mix and a return to normal seasonal demand, which helped offset an $8 million year-over-year decline in equity earnings from ClarkDietrich. Hayek added that WAVE is performing steadily in a flat market with growth opportunities in data centers, while ClarkDietrich benefits from steel price volatility.

Kathryn Thompson of Thompson Research Group inquired about the primary drivers behind the significant gross margin improvement, the expected trajectory for SG&A expenses following the Ragasco acquisition, the factors contributing to the strong performance of the WAVE joint venture, and recent trends in business activity across the construction and industrial value chains.

Answer

CFO Colin Souza attributed the 580 basis point gross margin increase to the absence of a prior-year product recall, the deconsolidation of the lower-margin SES business, the inclusion of the Ragasco acquisition, and a positive product mix shift, stating the current 27% margin is in line with expectations. CEO Joseph Hayek added that SG&A is being evaluated as part of a broader optimization strategy. He credited the WAVE JV's success to its strong value proposition in labor-saving solutions for end markets like education, healthcare, and data centers, and confirmed a recent pickup in activity driven by infrastructure-related spending.

Kathryn Thompson of Thompson Research Group inquired about the drivers of ClarkDietrich's recent weakness, seeking clarity on project timing versus cancellations, specific end-market performance, and inventory levels in the field. She also asked about ClarkDietrich's competitive advantages in securing large-scale 'mega-projects.'

Answer

President and CEO Andy Rose and CFO and COO Joe Hayek explained that the weakness was primarily due to margin compression from declining steel prices, where smaller competitors buying on the spot market had a temporary advantage. They noted that demand is relatively steady, not driven by project cancellations. Rose highlighted that ClarkDietrich's national scale, broad product line, and rapid delivery capabilities position it to win mega-projects. Hayek added that customer inventory is typically low as products are job-specific, mitigating inventory risk.

Kathryn Thompson asked for more color on the increased cost synergy target of $25 million, whether it includes revenue synergies, and an early assessment of potential revenue synergies. She also inquired about which end market buckets are most impacted by data center buildout and reindustrialization trends, and if the government shutdown impacted state departments of transportation.

Answer

CFO Kristin Schultes confirmed the $25 million synergy target is purely cost-driven, primarily from back-office optimization, and that revenue synergies are an area of intense focus with internal targets being set. Kristin Schultes, CEO Tal Pizzey, and COO Ben Heraud highlighted growth opportunities in renewables, manufacturing/fabrication, rope access, and the layering of services for data centers. Kristin Schultes and Ben Heraud reiterated that the impact of the government shutdown on state DOTs and infrastructure has been non-significant.

Kathryn Thompson inquired about the increased cost synergy target of $25 million, asking for drivers behind the upside and whether revenue synergies were included. She also asked for an early assessment of potential revenue synergies and which end market segments, beyond data centers, are benefiting from reindustrialization trends and data center buildouts.

Answer

Kristin Schultes, CFO of Acuren, confirmed the $25 million synergy target is purely cost-driven, primarily from back-office support, organizational efficiencies, and sales/execution support, with no revenue synergies included. Ms. Schultes noted that revenue synergies are a key focus area with early momentum, but no external targets are available yet. She highlighted renewables (with wind business up 30% year-over-year) and manufacturing/fabrication as key growth areas. Tal Pizzey, CEO, and Ben Heraud, COO, further elaborated on opportunities in commissioning, power delivery, utilities, and layering additional services like substation design and structural engineering to enhance data center revenue per megawatt.

Kathryn Thompson of Thompson Research Group inquired about the definition of a 'normalized business mix' and its impact on margins, the distinction between one-time transaction costs and the future benefits of business transformation initiatives, and how Acurin is positioned to benefit from the build-out of AI and data center infrastructure.

Answer

CEO Tal Pizi explained that the business mix is generally stable, with Q2 and Q3 being similar and typical, unlike a suppressed Q1. CFO Kristen Schultes noted one-time costs relate to the public company build-up and the NV5 transaction. President & COO Ben Hurad highlighted cross-selling opportunities and NV5's strong position in the data center market, particularly in Asia Pacific and the US, as key growth drivers.

Asked for clarification on the 'normalized business mix' and its margin impact, details on one-time transaction and transformation costs, the future benefits of these initiatives including cross-selling, and how Acurin is positioned to benefit from AI and data center growth.

Answer

The company stated the business mix is stable, with Q2/Q3 margins being typical. One-time costs relate to the public company build-up and the NV5 transaction. They are very optimistic about cross-selling synergies with NV5, creating turnkey solutions. NV5's existing strength in the data center market, combined with Acurin's services, positions the company well to capitalize on AI-related growth.

Kathryn Thompson of Thompson Research Group inquired about the drivers of Acurin's 'normalized business mix,' the nature of one-time costs versus future benefits from business transformation, and the company's strategic positioning to capitalize on AI, data center, and energy infrastructure growth.

Answer

CEO Talman Pizzey clarified that Q2 margins are typical and stable, attributing Q1's lower margin to staffing and utilization. CFO Kristin Schultes identified one-time costs related to the public company build-out and the NV5 acquisition. President & COO Benjamin Heraud provided specific examples of early cross-selling wins with NV5 in geospatial, pipeline, and building digitization, and highlighted strong growth in the data center business, which will be enhanced by Acurin's power delivery expertise.

Kathryn Thompson asked about the current percentage of North American production for North American sales compared to 6-8 years ago, how the company might benefit from a recent tax bill, and how channel shifts are impacting market share.

Answer

CFO James Brunk stated that approximately 85% of U.S. business is produced in North America today but found a historical comparison difficult due to product mix changes like the rise of LVT. He confirmed Mohawk will leverage tax benefits like accelerated depreciation. Chairman & CEO Jeffrey Lorberbaum reviewed channel performance, noting commercial continues to outperform while residential remodeling remains at a low point.

Kathryn Thompson asked for details on the $20 million in synergies, opportunities in the infrastructure and geospatial segments, and the nature of services provided to the fast-growing data center market.

Answer

Kristin Schultes (Executive) stated the $20M synergy target is a conservative initial estimate covering back-office, real estate, and public company cost savings. Ben Heraud (Executive) and Dickerson Wright (Executive) highlighted that infrastructure work is driven by non-discretionary spending on aging assets. Wright provided a specific example of using NV5's geospatial tech to survey bridges, which then drives NDE work for Acuren. For data centers, they explained NV5 provides design, commissioning, and even power source development for international clients, creating a new, high-growth client base for Acuren's services.

Inquired about the details of the $20 million in synergies, including public company cost savings, and explored the complementary opportunities in the infrastructure, geospatial, and data center segments.

Answer

The company stated the $20 million synergy figure is a conservative estimate covering back-office, real estate, and public company cost savings. They detailed significant crossover opportunities: combining NV5's infrastructure work with Acuren's NDT services, leveraging NV5's geospatial data analytics for Acuren's clients, and using NV5's data center design and commissioning work as an entry point for Acuren's services.

Brian Biros, on behalf of Kathryn Thompson, asked about the levers within Ferguson's control that help support gross margins, such as private label initiatives, and also requested an update on the HVAC expansion plan's progress and its potential performance in a stronger residential market.

Answer

CFO Bill Brundage identified own-brand products (just under 10% of revenue) as a key lever for improving gross margins, alongside pricing analytics and charging for value-added services. CEO Kevin Murphy emphasized that enhancing contractor productivity is the best long-term path to gross margin expansion. On HVAC, Murphy expressed pleasure with the 10% growth and detailed the plan to expand HVAC offerings to over 500 counters by year-end and over 650 in the next 24 months, expecting performance to improve further with a residential market recovery.

Kathryn Thompson inquired about the momentum in the municipal and non-residential end markets heading into 2025, particularly concerning IIJA funding, and asked for a breakdown of the drivers for the raised full-year guidance.

Answer

CEO Steve LeClair described the municipal market as stable with modest growth, noting that IIJA-funded projects are beginning to materialize for 2025. He added that non-residential activity remains strong in areas like roads and bridges. CFO Mark Witkowski explained that the guidance increase was primarily driven by recent acquisitions, supplemented by a stronger-than-expected third quarter and general optimism about end markets.

Kathryn Thompson inquired about the components of the SG&A increase in the quarter, future expectations for SG&A, and how the company is managing headwinds like lower pricing, soft demand, and weather, including any shifts in commodity product mix.

Answer

CFO Mark Witkowski clarified that the SG&A increase was almost entirely due to acquisitions, which have a higher initial cost structure, and that organic SG&A was flat. CEO Stephen LeClair added that while weather created a significant headwind of about $50 million, the company offset challenges through M&A performance, gross margin initiatives, and private label growth, viewing the market softness as temporary.

Kathryn Thompson of Thompson Research Group asked for a high-level view of Owens Corning's 'value over volume' philosophy across its portfolio, especially in light of its strategic exits from Asia and focus on nearshoring.

Answer

CEO Brian Chambers explained that the company's strategy is not a trade-off, but rather an investment in innovation, quality, and service to create value that ultimately drives volume. He emphasized the philosophy of manufacturing close to customers ('local for local'), which underpins the strategic focus on North America and Europe and ensures a superior service platform that commands a value premium in the market.

Kathryn Thompson inquired about the current state and momentum of non-residential repair and remodel activity heading into 2025 compared to the prior year. She also asked for a breakdown of the strong Americas order growth across different verticals or products.

Answer

CEO Laurel Hurd stated that Interface is outpacing the market, with 18% net sales growth in the Americas, and expressed growing optimism about the corporate office environment. CFO Bruce Hausmann added that year-to-date, all three product lines saw growth in both price and volume, underscoring the business momentum. In response to the follow-up, Laurel Hurd noted that while detailed breakouts are not provided, healthcare orders experienced strong double-digit growth in the quarter, which will convert to revenue in the future.

Kathryn Thompson requested more color on the WAVE joint venture's acquisition in the data center space, the company's M&A focus on this vertical, and the go-to-market strategy for data centers.

Answer

CEO Vic Grizzle described data centers as a key emerging vertical. The small acquisition builds on their strength in grid systems, which are critical for data center design. He explained that the go-to-market model is similar to traditional markets, as it is specification-driven by architects, which plays to Armstrong's core strengths and is supported by their PROJECTWORKS design tool.

Kathryn Thompson followed up on the 'pent-up demand' analogy, asking if the return metrics for kitchen remodels have changed relative to outdoor projects post-COVID. She also asked about the typical lag time to realize financial benefits from share gains and inquired about the M&A market.

Answer

Executive M. Culbreth stated he has not seen a shift in return metrics and believes indoor projects remain highly relevant. He explained the financial lag for share gains varies, taking longer in new construction and potentially a couple of quarters in home centers. On M&A, he confirmed there was no activity the company was currently pursuing.

Questioned the Cement segment, asking about pricing trends in markets beyond the Mississippi River (like South Texas), any changes in import activity, and how weather delays in Houston are affecting market dynamics.

Answer

Cement pricing is described as 'noisy'. Inland river markets drove Q2's organic price growth. In the Houston import market, pricing actions have been delayed by weather. Across legacy Argos assets, pricing is being adjusted on a market-by-market basis. The company expects to end the year with an average price in the mid-$150s, representing mid-single-digit growth.

Asked about the company's priorities for pruning non-core assets, how the Argos acquisition has influenced this strategy, and for the top criteria used in these divestiture decisions.

Answer

Portfolio optimization is an ongoing process, not a one-time project. The strategy remains focused on achieving key financial metrics (ROIC >10%, EBITDA margin >30%) and strengthening their materials-led position, which the Argos deal accelerated. Assets in non-strategic geographies that don't have a clear path to these metrics will be considered for divestiture. The top criteria are alignment with the materials-led strategy and the ability to meet financial targets.