Martin Marietta Materials Inc (MLM) — Q1 2025 Earnings Call Transcript

Good morning, and welcome to Martin Marietta's first quarter 2025 earnings call. Joining me today are Ward Nye, Chair and Chief Executive Officer, and Bob Cardin, Senior Vice President, Interim Chief Financial Officer and Chief Accounting Officer. Today's discussion may include forward-looking statements related to future events, operating results, or financial performance. Like other businesses, Martin Marietta faces risks and uncertainties that could lead to actual results differing significantly. We have no obligation, except as legally required, to update or revise any forward-looking statements based on new information or future developments. Please refer to the legal disclaimers in today's earnings release and other public filings available on our own website and the Securities and Exchange Commission's website. Supplemental information summarizing our financial results and trends is available during this webcast and on the Investors section of our website. Non-GAAP measures are defined and reconciled to the most directly comparable GAAP measure in the appendix of the supplemental information as well as our SEC filings and on our website. Ward Nye will begin today's earnings call with an overview of our operating performance, 2025 outlook, and related market trends. Bob Cardin will then discuss our financial results and capital allocation, followed by closing comments from Ward. A question-and-answer session will follow. I will now turn the call over to Ward.

Thank you, Jacklyn. Good morning, and thank you all for joining today's teleconference. Before discussing our Q1 results, I'll take a moment to discuss our previously announced Chief Financial Officer transition. On April 10, we announced Jim Nickolas' departure as CFO to move his family back to their beloved hometown of Chicago. We're grateful to Jim for his nearly eight years of service to Martin Marietta, over which time he made meaningful contributions to our success. We wish him and his family the best in their next chapter. In partnership with a leading executive search firm, we've initiated a process to identify our company's next CFO and are considering both internal and external candidates. While the search is underway, we're pleased Bob Cardin will serve as our Interim CFO. Since joining Martin Marietta in 2019, Bob has been an integral member of our executive and finance teams. We're grateful he's willing to assume this role in addition to his responsibilities as Senior Vice President, Controller and Chief Accounting Officer and are confident that under Bob's leadership, we will not miss a beat during this transition period. Now turning to our financial results. I'm pleased to report this year is off to a strong start, highlighted by record first quarter aggregate revenues, gross profit, gross margin and gross profit per ton despite some challenging winter weather in January and February across key Southeast, Southwest and Midwest markets. This record-setting performance was driven by 7% pricing growth, disciplined cost control and margin-accretive acquisitions. Additionally, building upon its full year 2024 performance, Magnesia Specialties established new quarterly record revenues, gross profit and gross margin, with gross margin increasing 806 basis points compared with the prior year quarter. These results demonstrate why we have consistently said this business has earned the right to grow, and we'll continue to evaluate both organic and inorganic opportunities to do so. We also established several consolidated first quarter records, including consolidated gross profit of $335 million, a 23% increase; consolidated gross margin of 25%, an increase of 300 basis points; consolidated adjusted EBITDA of $351 million, a 21% increase and consolidated adjusted EBITDA margin of 26%, an increase of 274 basis points. These results underscore the resiliency of our differentiated business model and benefits of our 2024 portfolio optimization actions. Given current macro uncertainty, we continue to focus on matters within our control, most notably realizing fair value for our vital materials while appropriately managing our costs with product demand. Looking ahead, we're encouraged by the double-digit growth in organic March aggregate shipments, April daily shipment trends and realization of April 1 aggregate price increases in select markets, all of which provide us confidence in reaffirming our full year 2025 adjusted EBITDA guidance of $2.25 billion at the midpoint. Consistent with our past practice, the company will revisit its guidance at midyear. Moving to end market trends. We'll start with observations regarding infrastructure, which continues to benefit from robust federal and state investments, including the five-year Infrastructure and Investments and Jobs Act, or IIJA. As a result, the American Road and Transportation Builders Association, or ARPA, expects construction activity to grow in 2025 as work advances on projects supported by federal and state funding sources. Importantly, with only about one-third of the IIJA funds reimbursed to states through the end of February 2025, we expect IIJA spending will peak next year in 2026, followed by an extended tail thereafter. While contract award growth rates have moderated as reflected in the value of contract awards for the 12-month period ended February 28, 2025, the underlying baseline remains elevated. Funding certainty reinforced at both federal and state levels provides the impetus for steady product volume levels and underpins a strong pricing environment for years ahead in this countercyclical public end market. Importantly, too, Congressional priorities now appear to be increasingly shifting toward the reauthorization of federal surface transportation programs with key legislative discussions already underway. Early indications suggest the successor bill may emphasize projects with national or regional significance favoring roads, bridges and ports. Shifting to nonresidential construction, artificial intelligence, or AI, continues to drive strong demand for data centers across the United States as hyperscalers invest significant capital in new sites. Projects underway in our geographic footprint, including Stargate in Texas, Google in South Carolina and Meta's 4 million square foot facility in Louisiana underscore this momentum. While not yet a meaningful contributor to product shipments, we expect data center energy consumption requirements will drive ancillary demand for new aggregates-intensive power generation facilities across many of our key markets. Warehouse construction appears to have reached a cyclical bottom with more green shoots emerging, including large Amazon warehouse projects in Cleburne, Texas; Fort Myers, Florida; and Wilmington, North Carolina, to name a few. With respect to residential activity, affordability challenges continue to act as a natural governor on single-family housing starts. We don't expect this dynamic to resolve in the near term, absent either a modest home price contraction, lower mortgage rates or both. That said, long-term housing market fundamentals remain resilient, underpinned by demographic shifts and structurally underbuilt conditions in many of Martin Marietta's key Sunbelt markets. In summary, we anticipate demand for infrastructure in our public end markets and data centers in the nonresidential sector will remain robust, while portions of interest rate-sensitive private construction demand is expected to remain subdued in the near term. I'll now turn the call over to Bob to discuss our first quarter financial results. Bob?

Thank you, Ward, and good morning everyone. The Building Materials business posted revenues of $1.3 billion, an 8% increase. Gross profit increased 20% to $298 million, and gross margin improved by 229 basis points to nearly 24%, both first quarter records. As Ward mentioned, our aggregates business achieved record first quarter revenues, gross profit, gross margin and unit profitability of $1 billion, $297 million, 30% and $7.60 per ton, respectively. Notably, aggregates gross profit per ton improved over 16% and aggregates gross margin expanded 260 basis points as organic price cost improvement and the benefit of margin-accretive acquisitions more than offset headwinds from targeted inventory management efforts. As mentioned in our previous earnings call, we will continue to prudently manage our inventory levels. That said, we expect these inventory drawdown headwinds on gross margin will conclude by midyear as we began reducing inventory levels in the third quarter of last year. Cement and Concrete revenues decreased 12% to $233 million due to the threefold impact of the February 2024 divestiture of the South Texas cement plant and related concrete operations, winter weather this past February and slower residential demand. Gross profit decreased 23% to $24 million as the year-over-year gross profit improvement in cement was more than offset by a decline in ready-mix concrete gross profit due to higher raw material costs. Asphalt and paving revenues grew 37% to $80 million due to increased asphalt shipments in California. This business posted a $23 million gross loss due to customary winter shutdowns in Minnesota, consistent with typical first quarter seasonality trends as well as higher raw material costs in Colorado. Magnesia Specialties achieved all-time quarterly records for revenues, gross profit and gross margin of $87 million, $38 million and 44% respectively, driven by pricing improvement and continued cost discipline. Turning now to capital deployment. Martin Marietta's capital allocation priorities remain consistent and focused on prioritizing value-enhancing acquisitions, responsible reinvestment in the business and returning capital to shareholders. Relative to the latter, during the quarter, we repurchased nearly 911,000 shares at an average share price of $494 and paid $49 million of dividends. Since Martin Marietta's repurchase authorization announcement in February of 2015, we have returned a total of $3.8 billion to shareholders through dividends and share repurchases. Our $1.3 billion of total liquidity, free cash flow generation and net debt-to-EBITDA ratio of 2.5x as of March 31 provide ample balance sheet flexibility to capitalize on our active M&A pipeline. With that, I'll turn the call back over to Ward.

Thank you, Bob. We're pleased with our strong first quarter financial results and remain optimistic about the opportunities ahead in 2025. The foundational strengths in our resilient aggregates-led business, strong balance sheet, disciplined execution of our strategic plan and proven experience successfully navigating market cycles reinforce our confidence in delivering our full year adjusted EBITDA guidance. Longer term, in 2026 and beyond, we remain confident that Martin Marietta is exceptionally well positioned for sustainable growth and compelling value creation. To conclude these prepared remarks, I'll briefly touch on tariffs. Tariffs present both opportunities and challenges. Some enhance profitability, while others may increase certain input costs or impact product demand. However, it's worth noting that our company's supply chain is largely domestic. That said, given the uncertainty surrounding potential exemptions and retaliatory measures, our 2025 guidance neither assumes any material tariff-related tailwinds nor headwinds at this time. If the operator will provide the required instructions, we'll turn our attention to addressing your questions.

Hi, good morning and thank you for taking my question today. Thanks for the color that you gave in the prepared commentary and going to the earnings season broadly. We at TRG have been focused on talking to a wide range of construction value chain companies. And there certainly seem to be some that are doing better versus others in the heavy materials generally. Seem to be doing better, but it's still early days with the tariff debate that is ongoing. Against that backdrop, what gives you confidence with the volume guidance and maintaining it? And pulling the string a little bit further, we are seeing some green shoots of stabilization in certain end markets like distribution that previously had been weak. What are you seeing there? And are you seeing any projects canceled or delayed? Or any other upside that you're seeing, as you said, in the infrastructure market? Thanks so much.

Kathryn, good morning. Thank you for the question. Several things. One, I do believe heavy side materials in these types of circumstances fare better than most. And I think that's exactly what we're seeing. I think we've long been a safe haven for investors. I think we'll continue to be. If we're looking at the trends that I think are worth noting, Infrastructure, as we noted, is going to be good for the rest of this year. Infrastructure ought to be good going into next year as well. We talked about the fact that only 30-some percent of the state reimbursements have even occurred so far with IIJA. So there's lots of money to come in that. And the state DOTs in which we're doing business, if we look at our top 10 states, eight of the top 10 have budgets up year-over-year. Infrastructure is strong. It's going to remain strong. Equally, and you called it out, data centers and what's going to be coming behind data centers, will be at the moment. We're seeing that in a host of markets. As you know, they are terribly power generative. And as a consequence, we think we're going to see good energy activity in those markets as well. But the other thing that I called out in the prepared remarks and you noted is warehousing, we believe has found a bottom. And the fact is we have the largest Amazon project in North America underway right now just outside the Dallas-Fort Worth Metroplex. We're seeing good activity on the West Coast of Florida. We're seeing good activity in that respect on the coastal areas of North Carolina as well. But separate and distinct from that, if we're looking at customer backlogs right now, they're nicely up year-over-year and sequentially. So that's looking at work. It's also looking at prospective work. But here's what's important, too, because I think this is something that's really important. We're not seeing project cancellations. So the backlogs are building, projects are not being canceled. And so those three building blocks, I think, Kathryn, really give us a nice outlook for the year. The other thing that I think is important for us to remember is we really got washed out last year in Q2, particularly in the Southwest and in Dallas-Fort Worth, which is our largest single MSA market. So as we're looking at volume and we look at the trends in Q1, and I mentioned in my prepared remarks, the daily trends that we're seeing in April right now, all of that points to me to a very steady and attractive and appealing volume environment for heavy side building materials, particularly in the aggregate space. So Catherine, thank you. I hope that helps.

It does. Thank you very much.

Hey, good morning, Howard. Good morning, Bob.

Hi, Trey. Good morning.

Good morning.

So I did want to touch on the cement business. I mean it's a fairly small part of the overall business now. But if you look at the margins there in the segment, it looks like ready-mix, the headwinds there more than offset the improvement you may have seen in the cement margins. So how are you thinking about margins in that segment as we progress through the year, especially with any additional increases in cement pricing that we could see going forward? And then to that point, the Texas market is clearly an importer of cement. How do you think the tariff backdrop could play into that and potentially into the pricing outlook for your cement business? Thank you.

Trey, thank you for the question. I'd say several things. One, if we're looking just at cement, I mean, pricing was up 6% and profits and gross margin actually grew despite the fact that we had lower production volume in cement. So when we're looking at that business, it performed really well despite what was a pretty tough February simply because of the weather. The other thing that's worth noting is FM7 has obviously finished. It's operating well. Obviously, pricing growth in cement is moderating. That's totally as expected from the rates that we've seen in the past couple of years, but we expect good mid-single digit growth this year. And again, to that end, pricing was up 6% in Q1. If we're looking at ready-mix, I mean, ready-mix, several things were driving that portion of the business in Q1. Some of it was simply seasonality. And the other is, if we're looking at organic shipments, they were down 2% to prior year, and that's really due to continued softness largely driven by residential demand and degrees of weather headwind as well. The other thing that's happening there is in our downstream businesses, we're taking the increased aggregates and cement cost impacts as well. So keep in mind, that really ends up being a distribution chain for us more than anything else. Now relative to your question on Texas cement and tariffs, it's interesting, because I think that actually could provide some upside for us because that's going to further insulate Midlothian cement from the waterborne imports. And frankly, as I just think about tariffs generally for our business, I know I said in the prepared remarks that we're neither putting in a headwind nor a tailwind. If I really think about them, it's really in two different buckets, Trey, what happens from a revenue perspective and what happens from a cost perspective. And if I'm thinking about it from a revenue perspective, frankly, it's pretty helpful to aggregates because you end up passing the cost through. We talked about cement. The fact is in Magnesia Specialties, depending on what happens with steel production, the more steel production we see, the more dolomitic lime that's going to go out the gates as well. And of course, much of this is driven to drive more reshoring and manufacturing demand across the United States generally, which will help us specifically. And again, as I noted, our supply chain is largely domestic. So we really don't see a notable threat there. But I do think relative to tariffs and the essence of your question that was around cement, I don't see that there's any downside for us in that respect whatsoever, Trey. So again, I hope that's responsive.

Yep. Super helpful, Howard. Thank you and best of luck.

Thanks, Trey.

Yes, hi. Good morning everyone.

Hi, Jerry.

Good morning.

Howard, in your prepared remarks, you spoke about Magnesia Specialties has earned the right to grow organically and via M&A. Correct me if I'm wrong, but I believe this is the first time I recall you saying that. Can you just expand on what value-added M&A would look like in this line of business where you folks had value in aggregates very clear? What's that recipe for value-add if we see you move down that main trail for Magnesia Specialty?

Jerry, thank you for the question. To start with the basics, this business has consistently performed well for us. In recent years, the efforts made in pricing strategies, operational reliability, and efficiency have come together, leading to a positive outcome for the quarter. We believe this business has more potential for growth than risks at the moment. The reasons we feel this way are similar to those for aggregates; it has high barriers to entry and pricing power through different market conditions. This sector has endured what we consider to be the toughest chemical market we've encountered in my career and continues to achieve record results. Reflecting on the financial crisis, Martin Marietta remained profitable throughout that period and maintained our dividend, largely due to our distinctive Magnesia Specialties segment. Therefore, if we can responsibly expand that segment, we will certainly consider it. While we will continue to prioritize aggregates in our operations, we acknowledge that this differentiation is vital. I believe they've earned recognition for their expertise in this area, and as long as we can keep investing both organically and through acquisitions, it will benefit our shareholders significantly.

Thank you.

Jerry, thank you. Good to hear your voice.

Hey guys, congrats on the strong quarter. Howard, I mean, you sounded ultra bullish on infrastructure, which is great. With the new administration, certainly a lot of head stakes in terms of projects being paused and what's formula based and whatnot? So one, help educate us on what you're seeing out there? And then two, you kind of hinted that as we kind of look out to 2026, maybe we get a new Surface Transportation Act. There was some news the other day with Transportation and Infrastructure Chairman, Sam Graves, potentially pushing for a new source of funding for the Highway Trust Fund, which is the first on EV and hybrids. Wanted to get your thoughts on that opportunity and what that could mean for you guys?

Phil, thank you for your question. Let me highlight a few points. First, in heavy side construction regarding traditional highway funding, we have not seen any projects postponed. While a few grant projects have been pulled, they represent a very small portion of overall infrastructure and have not been a cause for concern. Looking at current data, highway contract awards from March 2023 to March 2025 are up 19%, which is a positive sign. Furthermore, $118 billion out of the $350 billion allocated for highways and bridge funds has been disbursed, meaning that just 34% of the total funds have been utilized so far. Historically, this aligns with my earlier comments about the outlook for 2025 and 2026, where we can expect substantial growth in the coming years. The supplemental materials illustrate projections for 2025, 2026, and 2027, as well as estimates for the following years, but they do not account for a potentially attractive successor bill. On that note, discussions surrounding the successor bill are underway in both the House Transportation and Infrastructure Committee and the EPW. There seems to be a focus on larger regional and national projects, suggesting a shift away from bicycle trails to more significant infrastructure like highways and bridges. Additionally, as you mentioned, Sam Graves, the Republican from Missouri who leads the House Transportation and Infrastructure Committee, has initiated a critical dialogue regarding electric and hybrid vehicles and their roles in funding infrastructure. This conversation is essential because these vehicles contribute to infrastructure wear and tear similar to or more than traditional gasoline cars. The proposed revenue package could kickstart necessary discussions and introduce new ideas to address a long-ignored issue. The gas and diesel taxes have not been adjusted for inflation since Bill Clinton's first term, leading us to rely heavily on the general fund — approximately $275 billion over the past 17 years. While we may still turn to the general fund in the future, it is essential to have various funding sources contributing to the Highway Trust Fund, which states have been effectively managing. Having this conversation at the national level is a significant step forward.

Okay. Appreciate the color.

Hey, good morning.

Hi, Taylor.

Hi, Taylor.

Hey, Bob, actually, cost performance was very solid in aggregates. I know that there is some discussion with peers that maybe some maintenance or stripping costs got pushed out on the weather. One, I guess I'm just curious if you saw the same thing. And two, can you just help us shape how we should think about cost inflation for the rest of the year? I know you lapped the inventory pressures midyear. And are you kind of looking at double-digit gross profit per ton each quarter? Appreciate it.

Yes. Thanks for the question. So in the first quarter, I would say that we saw just excellent cost management by our operations teams. In light of the inventory reduction, the team was very proactive. So if you look at energy and contract services on a per unit basis, they were down low-double digits. Supplies and repairs kind of down in the mid-single digit range, again, on a per unit basis. So overall, I think just effective management. We do have a diesel fuel tailwind that's helping us as well. The other thing I'll mention is if you back out the impact of the $0.72 per ton impact from the inventory drawdown, we were actually down 2.3% on a unit cost basis. So as we look forward, we expect in the future quarters that we will see continued healthy expansion in gross margin.

Perfect, yes. Thank you very much.

Thank you, Tyler.

Hi, thanks for taking my question. And again, congrats on a strong quarter here. Just maybe wanted to unpack a little bit more along the lines of that kind of 2Q and 3Q, but maybe more from a price perspective. So you had some of your pricing maybe get pushed out to April. So just curious, how should we think about the progression of price growth as we get into 2Q? And as part of that, could you talk about midyears, what you're seeing in terms of any pushback from perhaps those customers that have shifted out to April or anybody else perhaps pushing back on midyears?

Angel, good morning. Thank you for the question. So several things. One, if we look at the pricing as reported, up 6.8%. So that was a nice steady growth. Keep in mind, we do have some April increases that are going in as well. So that's primarily to certain select concrete customers. I think this is important, Angel, if we're looking at our organic business, the pricing was up about 7.4%. So actually, you saw a pretty healthy delta between as reported cumulatively and the organic business. That tells me several things. One, we continue to have some room ahead of us relative to the assets that we have bought to get them up to Martin Marietta pricing. I think that also tells us that they're going to be midyears in a number of markets. And keep in mind, the guide that we have given you does not assume any midyear price increases, and we're going to see degrees of midyear price increases. I think the other thing to keep in mind just from an optical perspective. During the first quarter, in particular, the Central division operations because they tend to be more northern climate are not operating and not selling as much. Those will now start coming on and into play more meaningfully, obviously, in Q2 and Q3. Their average selling prices tend to be modestly lower. Now all that said, really, as I'm looking at the ranges that we've given for pricing, at this point, I'm thinking we're probably going to be on the higher end of ASPs relative to the guide that we've given. And obviously, we'll come back and review the overall guide at half year as is our custom. But I think if you think about pricing in Q1, strong. If you think about pricing relative to the organic business, particularly strong. If you think about the price increases that we believe can be coming relative to the acquisitions, they look actually quite good. And I think I've given you a sense of how I think that's going to play out for the full year, Angel. So I hope that was responsive to your question.

Absolutely. Very helpful. Thank you.

Yes, take care, Angel.

Good morning.

Hi, Anthony.

Hey, Ward, you mentioned the historically bad weather in North Texas during the second quarter last year. Can you remind us of the impact that had? Is there a way to think about an adjustment for that? I'm trying to revisit this because you experienced impressive gross profit per ton growth in the first quarter. I'm curious about how that might translate to the second quarter given the various factors at play.

Well, look, I think it will look attractive in Q2. Again, I'd have to go back and pull out exactly what the hit was last year in Q2 because of the weather in North Texas. But it was notable, Anthony. And I know I spoke to it last year very specifically. We can go back and maybe take offline what that was. But again, I think we should see a nice sequential build throughout this year. And keep in mind, the other thing that will happen by the time we're done with Q2 is the inventory headwinds that we're working our way through will have been totally dealt with. As Bob mentioned in his comments a few minutes ago, if we're simply looking at this quarter, the inventory headwind was $28 million. And we had indicated coming into the year that we thought it would be somewhere between $20 million and $30 million a quarter in both quarter 1 and quarter 2. So do I think quarter 2 ought to be more attractive simply because we don't anticipate something that's epic in North Texas in the quarter? Yes, I think we probably do. Do I think you've got a nice build also into quarter 3 because suddenly, you don't have that real headwind from what we're going through right now relative to the inventories. So Anthony, I hope that helps.

Yes, that is very helpful. I will turn it over.

Thanks, Anthony.

Hi, good morning guys.

Hi, Timna. Good morning.

Ward, could you help us notice the really strong share buyback in the quarter, bigger than all of last year. It might just be a question of just authorizing, but I didn't see a reauthorization to keep that level going forward. And just wanted any thoughts on the amount? Was it opportunistic because of where the share price is? Is it a commentary on a lull in M&A? Any more color would be great. Thank you.

Thank you for your question, Timna. My remarks were not about mergers and acquisitions, as I still find that area attractive for us this year. Instead, I was commenting on our belief that the share price was favorable, which led us to purchase 911,000 shares for $450 million. We viewed this as a great opportunity. When we bought TXI in 2014 and 2015, we had a buyback authorization for 20 million shares, and we’ve repurchased about half of that since then, so we have plenty of room left. Additionally, our debt-to-EBITDA ratio remains within our preferred range. We're entering a period where we typically generate significant profits. Therefore, this isn't an indication of a weak M&A pipeline, as that aspect actually looks quite promising. We simply saw this as a good point to invest in our stock, demonstrating our commitment. Thanks again for your question, Timna.

Thanks, Ward.

Thanks, good morning. Back in February, you referred to the guidance as conservative. How do you view that perspective today? Is there any caution you think needed to be applied in the first quarter or the first four months of the year, or any you anticipate for the second quarter? I remember you mentioned earlier that the guidance does not include midyear updates. I'm interested in how you would describe the current outlook, especially considering some changes in the macro environment.

Thank you for the question. The macro environment has shifted slightly. I agree that we characterized our guidance as measured or conservative at the beginning of the year, and I feel more optimistic about it now than I did in February. I believe we will still approach our midyear guidance revision, which is our usual practice. I anticipate our pricing will be at the higher end of our expectations. I'm not seeing any disappointments in how this year is progressing; our teams are performing well across various areas including cost management, pricing, and M&A considerations. The durability of the business is meeting my expectations, especially after the significant changes we made to our portfolio last year. The margin improvements are not surprising and affirm our business direction, providing a positive outlook for the future.

Perfect, thank you.

You're most welcome.

Good morning, Jacklyn, Bob, Ward.

Hi, good morning. Mike, we're having a hard time hearing if you can speak up just a little bit, please.

Can you hear me now?

Much better. Thank you so much.

Great. Terrific. Following up on Timna's question, turning to acquisitions. Has the macro environment looking at the sentiment amongst your acquisition pipeline changed materially? Have things been maybe pushed off a little bit because of the uncertainty? And what take your temperature on where you feel like you've transformed the portfolio quite a bit in the last 18 months? Are we at similar types of levels given where the cash flows are going to be in your balance sheet and the opportunities ahead of you, given there's going to be some pretty reasonably sized assets maybe coming on the market?

Great questions. I would note a couple of key points. First, the sentiment around businesses considering mergers and acquisitions remains largely unchanged. Generally, businesses aren't selling with market timing in mind; their decisions are often based on family succession and other motivating factors for M&A. Therefore, this hasn't been a major concern for us. Furthermore, I expect our typical annual M&A activity to hover around $1 billion. However, it won't occur in a linear fashion; some years will exceed that amount significantly. M&A opportunities can resemble our buybacks from this year, as they may be driven by chance. When compelling businesses become available, we will approach them with caution and intelligence, recognizing that such opportunities may not arise again. Is there anything that indicates a significant change? No. I anticipate that this year will remain favorable for us in aggregates-driven M&A, and I believe this trend will not just last for a few quarters, but for several years, likely extending into the 2030s. As I examine closely held aggregate businesses in our target growth markets, we have spotted companies that currently produce and sell around 250 million tons of stone annually. This indicates opportunities that exceed our current size, aligning with our strategic focus. There's significant work to be done in shaping and expanding our business in the coming years and decades. We aim to enhance profitability while also increasing margins and improving the overall quality of the business.

That is a lot of rock out there, Ward. Good luck.

Thanks so much.

And congrats on the good quarter, Ward.

Thank you, David.

I wanted to check in on your views regarding M&A, specifically any changes you're observing in the permitting process that could enhance your ability to pursue acquisitions aimed at increasing reserves.

Yes, it's interesting, David. I don't see that changing notably, and I would say several reasons why. Obviously, there is a certain degree of aggressiveness relative to the regulatory state that's underway with the current administration. And frankly, I welcome that. The fact is the regulatory state that drives what's happening relative to permitting greenfields, adding reserves, et cetera, tends not to be a national issue. It tends to be a local issue. And when I say local, I don't mean at the state level, I mean at the city level or the county level. And the fact that those barriers to entry are notable, I think, is important. It also plays to the strength that we have relative to land use. Part of what you'll see us do, and you can see it in some of the CapEx numbers, is we will buy properties adjacent to our existing operations and recognize that we can go through a special use and a zoning process on those parcels that at times can take years. And that's okay because we typically have long-lived reserves. But when we get those adjacent reserves zoned and permitted, two things happen. One, the setbacks that we have on our existing quarries basically go away. And then we also have opened up to us the new reserves that we just bought. So the fact is we end up winning twice under those circumstances. So do I think it's changing relative to greenfielding? No, I don't. I think it's going to continue to be a challenge in many instances. Do I think it's changing relative to next door? No, I don't. And do I think there's opportunity at the national level to change that? Actually, I really don't because this ends up being a highly local issue. And it's an area in which Martin Marietta has long had I think a very capable resource, and we've done that well. So I hope that helps, David.

Yes it does. Thanks, Howard. Good luck.

Take care. Thank you.

Great. Thanks. Good morning.

Good morning.

Appreciate the detail. Appreciate all the color around the federal funding visibility here. That's really great. I think the other side of the question that we seem to get is on the state side. I mean, as you sort of scrutinize some of your largest states on the public infrastructure side and the mechanisms for funding infrastructure projects, I'd just be curious what's your assessment, your experience as to whether there's risk of reallocation within those state budgets away from transportation funding, especially if the economy begins to see a shortfall in tax revenue.

Brent, thank you for your question. Let me share a few points. In Texas, Florida, North Carolina, Indiana, Georgia, Colorado, Arizona, and Iowa, which are our top 10 states, eight are experiencing year-over-year budget increases, especially in their baseline budgets. Notably, Texas has approved a long-term program with a 4% increase for 2025, bringing their total to $104 billion. This is reflected in our March '25 aggregates backlog for customers in Texas, up about 18%. Colorado anticipates $3.7 billion available for FY '25, a significant rise compared to previous years. North Carolina's budget has also grown year-over-year, and they are shifting sales tax revenue to the highway fund, increasing it to 6% starting in 2025. Following Hurricane Helene, nearly $5 billion in work is needed in North Carolina, with $3 billion from the federal government and $2 billion from the state, which has a $6 billion rainy-day fund. This is why we focused on states with strong fiscal conditions when we began our SAR process in 2009 and 2010, as we saw the importance of their capacity for growth in the face of increasing population and infrastructure demands. Georgia is also seeing a 7% increase from its original FY '24 budget. Examining both federal and state budgets, eight of the top ten states are up, and within those, the outlook is quite positive.

Very good. Thank you.

Thank you.

Hey, good morning guys. Nice quarter.

Thanks, Adam.

When you talk about data centers and the associated power demand word, are those projects. Are you thinking about those as a driver in 2025? Or is that more 2026-plus.

I think that's more 2026 plus. So I think in the near term, you're going to see more activity on data centers, and I think that's going to be pretty significant. I think in the near term, you'll see growing activity on warehousing. I think in the medium to longer term, you're going to see more energy activity. I mean, for example, we've got local power companies talking about small nuclear facilities for the first time in years. And the fact is we're going to have to see a number of those types of things. It's been interesting to watch what's happened in Europe this week relative to Spain, Portugal and other countries. And I do think the United States is going to have to be really thoughtful about the way that we're going to continue to grow in light non-res. And we're going to continue to see population shifts and dynamics to the Southeast and Southwest. And these states, in particular, are going to have to be ready for that type of power transition.

Got it. Thank you.

Thank you, Adam.

Thank you. Howard, I want to go back to your comment on potential new legislation. Is there any kind of timeline emerging when that would only be introduced in Congress and potentially push down the law?

There hasn't been anything formal, Keith, that's come out, but I'll tell you anecdotally what I'm hearing, and that is I think there's going to be a push to get that done before the midterms next year. I think there are practical reasons that people are going to want to see that done. I think the other thing that it does is it makes the takeoff for the next bill much smoother. I would not be surprised to see a headline bill that's less than $1.2 trillion, but I'd be really surprised to see within that bill, the same geography that we saw this last time, $1.2 trillion bill that had $350 billion dedicated to Highways Bridges, Roads and streets. That's not the way I think this is going to come out. So I think we're going to see several things. One, I think what you've seen in House T&I this week relative to funding is a good part of an overall conversation. We'll probably see House T&I take the lead on putting this out. That's the way that historically has worked. So they've taken the lead. EPW has followed, but I still think it's going to be something that we will see done before midterms, Keith.

Okay. Is the discussion around trade routes suggesting something more extensive for roads, bridges, and streets than the $348 billion we observed in the IIJA?

I think that's certainly where people are trending, yes, Keith.

All right. Thank you.

Thank you so much.

Hi, thanks. Congrats on the quarter. I wanted to just follow-up on the comment you made that you feel better now on the outlook than you did after 4Q. I wanted to kind of specifically drill down on the volume piece. Given the concern on private construction with affordability and consumer confidence issues, is it fair to assume the outlook had a lot of discussion on infrastructure, but is it fair to assume that your outlook for infrastructure this year may be directionally stronger than it was coming out of the fourth quarter?

Yes, Garik. I think that's a completely reasonable assessment. Looking at Q1, the breakdown showed 33% infrastructure, 36% non-residential, and 24% residential. Moving forward, I expect that the infrastructure portion will increase, and it should given the number of projects available and their overall intensity. That percentage is typically influenced by seasonal trends. At the same time, it might surprise some that non-residential made up 36% of our projects. The heavy side of that segment is performing quite well, and interestingly, some lighter sectors are exceeding expectations. Currently, we are not heavily relying on residential alone. It's important to note that, at least in our markets, the residential sector is far from being overbuilt. Builders are currently focused on securing zoning and special use permits for subdivisions, which is crucial for land acquisition and entitlement processes. I still believe we should be cautious about investing heavily in housing during the latter half of this year. However, it won't take much movement in interest rates or home prices to significantly impact our markets. We are well positioned to respond when that change occurs.

Good. Thank you.

Thank you, Garik.

This is Andrew Maser on for Brian. I just had a quick one on pricing opportunities for prior M&A. I believe some of the M&A you completed in the past year generally had ASPs below corporate averages. I was wondering where you stand on closing that gap? And then separately, how are you thinking about the potential for mid-year price increases in markets where last year's M&A won't be a tailwind? Thank you.

Thank you so much, Andrew. I would say several things. As I indicated, organic pricing was up 7.4%. Reported was up 6.8%. That gives you a pretty good snapshot right there on what's the difference between the M&A sites that we've had and the organic that we've had. There are some places, for example, California, where we have now closed that gap. But the fact is, from my perspective, California shouldn't be at a corporate average. Barriers to entry in California are higher. The difficulty in doing business in California is higher. So the fact that we've closed that gap is nice, but it doesn't indicate to me that we finished the journey that we started on there. I do think we will see a number of midyear price increases, as I indicated before. I think the quantum will probably look a bit like it did last year. More to come on that. We'll talk more about that when we're together at half year. But directionally, I hope that gives you a sense of where we are and where I think we're going.

Great. Thank you.

You're welcome.

Abby, thank you, and thank you all for joining today's earnings call. While the unpredictability of policy shifts heightens broader economic uncertainty, we remain confident about Martin Marietta's ability to appropriately navigate these conditions. Since 2010, we've transformed the durability of our portfolio and positioned our business in attractive markets through disciplined execution of our store plans. We built a strong foundation to continue extending Martin Marietta's long track record of delivering sustainable growth and superior value creation for investors for years to come. We look forward to sharing our second quarter 2025 results in the summer. As always, we're available for any follow-up questions. Again, thank you for your time and continued support of Martin Marietta.