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SM

Summit Materials, Inc. (SUM)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 delivered material margin expansion and integration momentum: net revenue $0.773B (+89.9% YoY), Adjusted EBITDA $121.2M (+194.2% YoY), Adjusted EBITDA margin 15.7% (+560 bps YoY), driven by Argos USA contribution, pricing strength, and operational improvements .
  • GAAP results were pressured by $61.3M transaction/integration costs tied to Argos; GAAP operating loss was $(44.9)M and GAAP basic EPS was $(0.40), while Adjusted diluted EPS improved to $(0.12) from $(0.26) YoY .
  • Guidance raised: FY24 Adjusted EBITDA range increased to $970–$1,010M (from $950–$1,010M) and 2024 synergies raised to at least $40M; capex maintained at $430–$470M .
  • Liquidity strong to support portfolio optimization and bolt-ons: cash $498.1M and debt $2.8B at quarter-end; net leverage at ~2.5x, below target, per call commentary .
  • Stock reaction catalysts: the synergy target raise, higher guidance low-end, and cement margin outperformance (25.7% segment Adjusted EBITDA margin in Q1) .

What Went Well and What Went Wrong

What Went Well

  • Cement margin step-change: Cement segment Adjusted EBITDA margin reached 25.7% in Q1 (vs. ~0% a year ago) on pricing, efficiencies, and favorable fuel costs; management highlighted extended seasonality from the Southeast footprint and strong turnarounds with no safety incidents .
  • Pricing momentum across lines: Aggregates ASP +10.8% YoY; Cement organic ASP +5.6%; Ready-mix +8.3% organically; Asphalt +5.8% organically, supporting +340 bps Adjusted cash gross margin expansion YoY .
  • Synergies ahead of plan: 2024 synergy target raised to ≥$40M (up $10M) with faster pull-through in cement and ready-mix, plus new Aggregates pull-through opportunities; “line of sight to at least $40 million in synergies this year” .

What Went Wrong

  • Organic volume softness: Aggregates volume −8.3% organically; Ready-mix −15.1%; Cement −2.7% organically, reflecting poor weather and restrained residential activity .
  • GAAP loss due to one-time costs: $61.3M in Argos transaction/integration costs drove operating loss and net loss; Adjusted results exclude these items .
  • Cost inflation not yet moderating: CFO noted cost moderation is gradual and more likely in 2H; company aims to hold aggregates cost/ton flat despite sticky inflation .

Financial Results

Headline Financials vs Prior Quarters and YoY

MetricQ3 2023Q4 2023Q1 2024YoY Change (Q1)
Net Revenue ($USD Millions)$741.960 $613.133 $773.229 +89.9%
Adjusted EBITDA ($USD Millions)$208.519 $136.545 $121.225 +194.2%
Adjusted EBITDA Margin %28.1% 22.3% 15.7% +560 bps
Basic EPS ($)$1.93 $0.02 $(0.40) (53.8)%
Adjusted Diluted EPS ($)$0.81 $0.31 $(0.12) +53.8%
Adjusted Cash Gross Profit Margin %33.9% 30.6% 23.4% +340 bps

Segment Net Revenue

Segment Net Revenue ($USD Millions)Q3 2023Q4 2023Q1 2024
West$461.094 $377.369 $283.605
East$159.547 $140.425 $257.841
Cement$121.319 $95.339 $231.783
Total Net Revenue$741.960 $613.133 $773.229

KPI Trends (Volumes and Pricing)

KPIQ3 2023Q4 2023Q1 2024
Aggregates Volume (k tons)15,654 13,784 11,654
Aggregates ASP ($/ton)$14.28 $13.87 $14.89
Cement Volume (k tons)746 574 1,739
Cement ASP ($/ton)$155.79 $155.05 $152.11
Ready-mix Volume (k cu yds)1,383 1,242 1,897
Ready-mix ASP ($/cu yd)$154.39 $155.10 $164.59
Asphalt Volume (k tons)1,385 920 319
Asphalt ASP ($/ton)$85.20 $82.76 $88.09

Liquidity and Cash Flow

MetricQ3 2023Q4 2023Q1 2024
Cash & Cash Equivalents ($USD Millions)$197.475 $374.162 $498.110
Total Debt ($USD Millions)$1,488.1 $2,283.6 $2,780.3
Cash From Operations ($USD Millions)$149.582 (quarter) $195.236 (quarter) $(40.245) (quarter)
Capital Expenditure ($USD Millions)$51.289 (quarter, net of asset sales) $68.773 (quarter, net of asset sales) $58.519 (cash paid)

Non-GAAP notes: Adjusted results exclude $61.3M Argos transaction/integration costs in Q1; reconciliations provided in press release tables .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA ($USD Millions)FY 2024$950–$1,010 $970–$1,010 Raised low end
Capital Expenditures ($USD Millions)FY 2024$430–$470 $430–$470 Maintained
Synergies ($USD Millions)FY 2024~$30 (prior forecast) ≥$40 Raised +$10
DD&A ($USD Millions)FY 2024n/a~$385 New disclosure
Share Count (diluted)FY 2024n/a~175M shares New disclosure

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’23 and Q4’23)Current Period (Q1’24)Trend
SynergiesTransaction expected to accelerate materials-led strategy; integration costs rising ahead of Argos close Synergy target raised to ≥$40M with faster cement and ready-mix pull-through; added Aggregates pull-through Improving
Pricing strategyStrong ASP gains across lines; midyear pricing actions in 2023 Agg midyear price increases planned (low single digits to ~7%); cement tiered actions in Apr/Jun/Jul, mid-single-digit organic ASP for 2024 Positive momentum
Demand by end-marketPublic strength; residential softness; nonresidential project timing sensitivities Public mid-single-digit+ volumes; residential flat-to-down; privately funded commercial flat-to-down; cautious on rates Mixed; public tailwinds
Import exposure (cement)Lower import mix supported margins Imports modestly impacting Gulf/Houston; overall footprint low import exposure; pricing rational Manageable
Cost/InflationInflation elevated; margins supported by pricing Cost moderation gradual; goal to hold aggregates cost/ton flat; energy tailwinds Gradual moderation
Seasonality/footprintPortfolio reshaped; presence in faster-growing MSAs Reduced seasonality with Southeast footprint; more profitable Q1 profile Structural improvement
Balance sheet/leverageAmended credit facilities; increased revolver; strong cash flow Net leverage ~2.5x; capacity for accretive aggregates bolt-ons Strengthened

Management Commentary

  • “Our transformative combination with Argos USA is off to a strong start… pricing momentum is healthy and persistent… we expect… meaningful synergies, self-help operational improvements, and a more profitable portfolio will catalyze superior value creation” .
  • “We now have line of sight to at least $40 million in synergies this year, up $10 million from our prior forecast… we have increased the lower end of our 2024 EBITDA guidance range” .
  • “First quarter adjusted EBITDA margins increased 560 basis points year-on-year… puts us firmly ahead of pace to comfortably achieve our full year 2024 EBITDA margin range of between 23% and 24%” .
  • “Pricing remains a prominent and primary lever… midyear price increases [Aggregates] across our markets… cement pricing… tiered and surgical” .

Q&A Highlights

  • Demand outlook: Guidance embeds guarded volumes; residential flat-to-down pending rate relief; public mid-single-digit+ volumes; nonresidential privately funded projects seeing push-outs (e.g., BC; Salt Lake) .
  • Cement pricing cadence: January +$15/ton in river markets with ~70% realization in northern geographies; April +$4–$6/ton selective in Mid-Atlantic/Southeast; additional June/July actions anticipated; mid-single-digit 2024 organic ASP as a floor .
  • Import dynamics: Exposure limited (Gulf, Houston, smaller in Florida); imports behaving as expected; impact not increasing; rational market behavior .
  • Guidance philosophy: Raised low end after Q1 beat but maintained conservatism given integration year and cost variability; management views FY24 guide as “achievable but beatable” .
  • Cost and aggregates margins: Operational excellence/continuous improvement to hold unit costs flat; inflation moderation likely back half; North Star aggregates cash gross margin at 60% over time .
  • Commercial synergies detail: Aggregates pull-through in Houston (example uplift from 14% to 69% on specific metric); cement contract resets (underpriced ~$10/ton on ~15% of volume) driving $20–$25M cement synergy, half from commercial .
  • Cement margin trajectory and accounting: Target cement EBITDA margin 45%; purchase accounting increased DD&A to ~$385M; goodwill ~$700M expected .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2024 EPS/revenue/EBITDA was unavailable via SPGI due to a mapping issue; no estimate comparison provided. Attempted retrieval failed to map SUM to CIQ company ID (S&P Global) — estimates unavailable.
  • Implications: The raise of FY24 EBITDA low-end to $970M and synergy target to ≥$40M suggests upward bias to consensus models on margins and EBITDA, particularly with cement and midyear aggregates pricing; however, without S&P Global figures, we do not quantify revisions .

Key Takeaways for Investors

  • Q1 confirms synergy acceleration and pricing power; cement margins inflected ahead of plan, strengthening the 2024 margin trajectory .
  • Expect midyear aggregates price actions (low-single digits to ~7%) and tiered cement increases (Apr/Jun/Jul) to support 2H margins; monitor realization across markets .
  • Volume recovery hinges on private end-market activity and rates; public backlogs and awards provide visibility; trading skew likely “up and to the right” if rates ease .
  • Integration costs are front-loaded; adjusted results better reflect underlying performance; watch for additional synergy updates at Q2 .
  • Balance sheet capacity and low net leverage (~2.5x) enable aggregates-focused bolt-ons and portfolio optimization to compound earnings quality .
  • Cost environment remains sticky; management targets flat unit costs via OpEx programs; energy tailwinds help, but broader moderation is gradual .
  • Near-term catalyst set: synergy raise, higher guidance low-end, cement margin step-up; medium-term thesis: portfolio durability, pricing discipline, and self-help drive margin expansion toward stated North Star targets .

Appendix: Additional Detail

  • Q1 Segment performance: West Adjusted EBITDA $43.4M (+32.8% YoY), East $37.5M (+18.6M YoY), Cement $59.5M (+$59.4M YoY); corporate Adjusted EBITDA $(19.1)M .
  • Liquidity: $604.1M available under revolver post letters of credit (Q1); cash used in operations $(40.2)M in seasonally weak Q1; capex cash $58.5M .
  • Non-GAAP reconciliations and methodology highlighted in press release (Adjusted EBITDA, Adjusted Cash Gross Profit, Adjusted EPS) .