Martin Marietta Materials Inc (MLM) — Q1 2026 Earnings Call Transcript

Good morning, and thank you for joining Martin Marietta's First Quarter 2026 Earnings Call. With me today are Ward Nye, Chair, President and Chief Executive Officer; and Michael Petro, Senior Vice President and Chief Financial Officer. As a reminder, today's discussion may include forward-looking statements as defined by United States securities laws. These statements relate to future events, operating results or financial performance and are subject to risks and uncertainties that could cause actual results to differ materially. Martin Marietta undertakes no obligation to publicly update or revise any forward-looking statements, except as legally required, whether due to new information, future developments or otherwise. For additional details, please refer to the legal disclaimers contained in today's earnings release and other public filings, which are available on both our own and the Securities and Exchange Commission's website. Supplemental information summarizing our financial results and trends is available during this webcast and in the Investors section of our website. As a reminder, our full year 2026 guidance summary on Slide 5 reflects continuing operations only. Definitions and reconciliations of non-GAAP measures to the most directly comparable GAAP measure are provided in the appendix to the supplemental information in our SEC filings and on our website. Today's earnings call will begin with Ward Nye, who will discuss our first quarter operating performance, 2026 outlook and supporting market trends. Michael Petro will then review our financial results and capital allocation details, after which Ward will provide closing remarks. Please note that all comparisons are to the prior year's corresponding period. A question-and-answer session will follow. Please limit your Q&A participation to one question. I will now turn the call over to Ward.

Thank you, Jacklyn. Good morning, and thank you for joining today's teleconference. Before reviewing our first quarter results, I'll take a moment to discuss the leadership appointment we announced earlier this week. As you may have seen, Chris Samborski was appointed Martin Marietta's Chief Operating Officer, effective May 1. Chris is a highly respected and proven leader who most recently served as President of our West and Specialties division. Under his leadership, both businesses delivered meaningful growth and strong operational execution. Since joining Martin Marietta in 2018, Chris has consistently made a significant and positive impact in every role he's held. His deep operational experience, disciplined leadership style and strong commitment to our culture make him exceptionally well suited for this role. With Chris serving as COO, Kirk Light will assume leadership of our West and Specialties divisions while continuing in his role as President of our Southwest division. In addition, our East Division President, Oliver Brookes; Central Division President, Bill Padraic; Vice President of Operational Excellence, Ronnie Walker; and Vice President of Safety and Health, Jessica Cosan, will report directly to Chris. This appointment and enhanced leadership structure reflects a deep bench of talent across our divisions, districts and functions, all focused on consistent execution, continuous improvement and a shared commitment to our one culture. I'm pleased to welcome Chris to his new position, and I'm confident that as COO, he will continue to play a critical role in helping guide Martin Marietta to even greater success. With that, I'll now turn to the quarter. 2026 is off to a strong start with revenues increasing an impressive 17% to $1.4 billion, a new first quarter record. Organic aggregate shipments growth of 7.2% meaningfully exceeded our guidance, benefiting from an early start to the construction season in the Midwest and Colorado as well as continued strength in infrastructure and heavy nonresidential demand across our geographic footprint. As we look ahead, underlying fundamentals across the business remain favorable. Notably, the quarter's results reflect a 14% improvement in both adjusted EBITDA from continuing operations as well as adjusted earnings per diluted share from continuing operations. I'm especially pleased to report that our teams delivered the strongest first quarter safety performance in the company's history as measured by both total and lost time incident rates. This achievement reflects the strength of our culture, unwavering commitment to world-class safety and the operational discipline embedded throughout the organization. The quarter was also highlighted by the February 23 closing of the Quikrete Asset Exchange, our largest aggregates acquisition to date. Importantly, this transaction accelerated our aggregates strategy by shifting the portfolio away from more cyclical cement and concrete assets, enhancing the quality and durability of our earnings profile, while providing $450 million of cash to redeploy into aggregate acquisitions accordingly. And consistent with the company's SOAR 2030 strategic plan, on April 19, we entered into a definitive agreement to acquire New Frontier Materials, a complementary bolt-on to our central division that produces over 8 million tons of aggregates annually. This transaction is expected to close in the second half of the year subject to regulatory approvals and other customary closing conditions. Looking ahead, our M&A pipeline remains active and is primarily focused on pure-play aggregates opportunities across attractive SOAR aligned geographies. As highlighted in this morning's release, our core aggregates product line delivered record first quarter shipments of 43.9 million tons, a 12% increase and record revenues of $1.1 billion, representing a 14% increase. Our Specialties business also achieved new all-time quarterly records with revenues of $143 million, up 63% year-over-year and gross profit of $45 million, an increase of 17%. Despite ongoing macroeconomic uncertainty and volatility, we continue to benefit from a business intentionally built for durability and resilience, enabling us to remain focused on what we can control regardless of underlying economic trends. With April's continued strong product demand, the impact of April 1 price increases and ongoing optimization efforts, we're reaffirming our full year 2026 adjusted EBITDA from continuing operations guidance of $2.43 billion at the midpoint. Turning to market trends. We continue to see a constructive backdrop for U.S. infrastructure, our most aggregates-intensive and countercyclical end market. Sustained federal and state investment continues to provide meaningful multiyear funding visibility as we look ahead to the next surface transportation reauthorization. Notably, a significant portion of authorized funding under the Infrastructure Investment and Jobs Act, or IIJA, has yet to be deployed with nearly half of highway and bridge funding remaining undistributed as of late February. Policymakers are negotiating a 5-year successor surface transportation bill with committees targeting reauthorization by October 1, following the current IIJA's expiration on September 30. While the timing remains subject to the legislative process and could include an interim continuing resolution, industry commentary from the American Road and Transportation Builders of America indicates that state departments of transportation retain multiyear visibility into their project pipelines and continue to plan under assumptions of stable federal funding. As a result, we do not expect a short-term continuing resolution to disrupt construction activity in 2026 and for the near future. Beyond infrastructure, heavy nonresidential construction demand continues to be driven by robust data center and power generation activity. Aggregates-intensive LNG work along the Gulf Coast is also gaining momentum, including projects such as the one at Port Arthur LNG, which Martin Marietta is actively supplying. Warehouse and distribution construction trends continue to recover as shipments inflected positively in the third quarter of 2025 and have continued to trend favorably. By contrast, affordability pressures tied to higher interest rates continue to influence the pace of light nonresidential and residential construction activity. Taken together, all these trends underscore the durability of long-term construction demand across our footprint and bode well for our company and shareholders. I will now turn the call over to Michael to discuss our first quarter financial results. Michael, over to you.

Thank you, Ward, and good morning, everyone. As Ward noted, our core aggregates business delivered record first quarter revenues of $1.1 billion, up 14% year-over-year, driven by organic shipment growth of more than 7% and approximately one month of acquisition contributions. Daily shipments have continued to trend above expectations in April, led by infrastructure and nonresidential strength in our East Division. Organic pricing in the first quarter was negatively impacted by geographic mix driven primarily by robust organic shipment growth of more than 20% in our Central and West divisions, which carry lower average selling prices and gross margins than our East and Southwest divisions. Reported aggregates gross profit declined 3% to $288 million as stronger volumes and underlying organic pricing improvements were more than offset by geographic mix and purchase accounting impacts, including a noncash $22 million charge associated with the fair market value step-up of Quikrete inventory as well as higher depreciation, depletion and amortization expense, which is now disclosed within our product line reporting. Importantly, underlying organic cost of goods sold per ton, excluding pass-through freight cost and timing-related items, is tracking below our implied 3% guidance as cost optimization efforts continue. Other Building Materials revenues declined 5% to $116 million and, consistent with typical first quarter seasonality, posted a $16 million gross loss driven by customary asphalt plant winter shutdowns in both Colorado and Minnesota. Our Specialties business delivered revenues of $143 million and gross profit increased 17% to $45 million, both all-time quarterly records, reflecting contributions from the July 2025 Premier Magnesia acquisition and organic pricing gains, which were partially offset by lower organic shipments and higher energy costs. Turning to capital allocation. Completion of the Quikrete asset exchange on February 23 marked a significant milestone, concluding our SOAR 2025 divestiture program, providing $450 million in cash and simultaneously representing the largest aggregates acquisition in our history. With this transaction complete, we've now launched SOAR 2030 supported by a strong balance sheet and a focus on aggregates-led acquisitive growth. The Quikrete integration is progressing ahead of plan with results since closing exceeding both our EBITDA and margin expectations. Further, we expect to realize synergies of approximately $50 million over the coming years as we normalize unit profitability. Importantly, the $450 million of cash proceeds, combined with the company's significant free cash flow generation, provides ample capacity to advance our very active M&A pipeline and opportunistically repurchase shares during times of market volatility. Consistent with this capital deployment framework, we repurchased $200 million of shares in the first quarter and announced the acquisition of New Frontier Materials, which complements our differentiated position along the I-70 corridor from Kansas City to St. Louis. Please note that our reaffirmed 2026 guidance does not include contributions from New Frontier as the transaction has not yet closed. Consistent with historical practice, we will revisit guidance at midyear. With that, I will now turn the call back over to Ward.

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

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

Trey, thanks for the question. Good to hear your voice. So several things. One, as you noted, we are reaffirming our guidance for the year relative to EBITDA. We feel very confident in that. As you know, this actually excludes anything from New Frontier because that hasn't closed yet. Secondly, we tend to come back at midyear and reassess our guidance. I'll tell you right now, I'm feeling pretty optimistic about what that reassessment is going to look like. I would say several things. One, if we just think about some of the reasons why, if we're looking at our shipment trends. As you may recall, when we announced our guide in February for the year, we said if there was any place that we thought we were being a little bit probably conservative on. It may be on the shipment outlook. You can see how that came through in Q1. You can also tell from the prepared remarks today and the headlines to the release that April has come out of the box very attractively as well. So my guess is we're going to see shipments probably trending to the higher end of the guide. Relative to pricing, I'm not looking at pricing and having any concern about how I think that's going to roll out for the year. We did call out in the prepared remarks, I know Michael said that what we saw in the Central and West groups, in particular, was volumes of 21%. I mean that's a big number. And keep in mind pricing there is notably lower. And by that, I mean dollars per ton lower than it is in the East and the Southwest. And so what we've seen so far in April is we're seeing that mix flow back to the type of cadence that we would ordinarily expect. So we're seeing the East really catch up nicely with that. Keep in mind, too, I anticipate we're going to see a greater realization of midyear price increases this year than we saw last year. Clearly, the diesel impact and others will be a driver on that, that is not taken into account in our guide. So again, it's something that gives me a lot of confidence in what we're doing. I know part of your question very specifically with diesel and how we see that. So if you think about the fact that we're going to consume, let's call it, 55-ish million gallons of diesel fuel this year, that's assuming the diesel prices peak probably in Q2 and then return not to lower levels, but probably somewhat more moderated levels in Q3 and Q4. We feel like the overall impact from diesel headwinds, and that's including other items impacted by it, will be about $36 million in the aggregates business, probably $50 million for the entire company. So it's not going to be anything that's material. The other thing that I would remind you is if we go back in time and remember what diesel pricing looks like, back when Ukraine and Russia first started their conflict. Diesel spiked and then we saw that headwind for a while. And then we actually saw a nice margin expansion later that year. This is not as pronounced as that was at the time. So I feel like it's very manageable. And again, to your point, with what's going on in infrastructure and what's going on with heavy nonresidential activity, I think the volume backdrop will continue to be very attractive. But Trey, I hope that helps.

That did. That was super helpful, Ward. And specifically on that $36 million you're talking about for 2Q, I'm guessing it'd be more weighted there. Any color just for our modeling?

It is weighted more there. I'll turn it over to Michael to talk to you a little bit more about any modeling questions you may have.

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

I appreciated your color and prepared commentary on the reauthorization of the IIJA. We've been speaking to a wide variety of contacts about this reauthorization, and the general theme is that no bill is going backwards on funding. In the House, what we're hearing is $550 billion, which sounds pretty close to what you said. I think the important thing to clarify is how much of this will be true surface transportation versus the $350 billion from the prior bill that was for surface. Could you also suss out how much of the surface funding is specifically for highways and bridges versus other items that might fall into that category?

Welcome. Thank you for the question. So I would say several things. We're totally aligned with what you're hearing, and that is nothing in this is going backward. I think it's really important to note that as we're looking at what's likely to come out of the house and the Senate. Neither committees of jurisdiction are planning to include broader infrastructure components like energy, broadband programs or others that made up more than half of the 2021 infrastructure law. So I think to your point, this is going to be a highway, bridge and roads core infrastructure bill, and we don't see anything that's changing that overall notion. As we're looking at it right now, from my understanding of the House is targeting May to mark up the legislative text, so we'll certainly know more then, but I think the numbers that you've indicated are certainly what I've heard from Chairman Graves and others who are on that committee. I also think we're likely to see numbers notably ahead of that coming out of the Senate. So as this goes to a conference, I think we're going to see a nice solid, robust core surface transportation bill that's going to come out. I think they're still aiming to have this done in time so they don't have to have a continuing resolution. I do think if they have to have a continuing resolution, it's likely going to be one and relatively short. And of course, Kathryn, as you know, if they do end up with a continuing resolution, what that means is the federal highway funds will continue to flow to the states in an uninterrupted fashion and will remain at the current levels that are actually very high and attractive. The other thing that I think goes on here, but I think it's important to remember, is if we look at Martin Marietta state DOT budgets, those budgets, not in every instance, but in the vast majority of instances, are up year-over-year, which tells us that they're anticipating not seeing any interruptions from the federal side as well. So I've tried to address timing. I've tried to address what's looked like coming out of the house because I think that's going to lead. I tried to address what we see coming out of the Senate. And I've tried to address a continuing resolution that if we have one, frankly, we're not the least bit concerned about. So Kathryn, again, I hope that helps.

Three-part question on M&A. Can you give us any early thoughts? I know it's only been a couple of months on Quikrete. On New Frontier, are there any kind of unique synergy opportunities there? And then lastly, on the M&A pipeline and outlook for deals from here?

You're hitting us with a hat-trick right out of the box, so a few points. Quikrete has frankly exceeded expectations and the integration has gone really well. The business is performing better than we expected. We saw $17 million of EBITDA, which on an annualized basis will be well ahead of anything we've seen before. We have managed, and continue to manage, the inventory markup from purchase price accounting sensibly. When we announced that transaction, we said we expected around $50 million of synergies, and we don't see anything in that number that gives us any concern; hopefully we can realize even more. On New Frontier, we're really excited. With Quikrete we bought very attractive assets in Virginia, Missouri, Kansas and British Columbia. New Frontier adds more assets in a market where we already have a strong position in Missouri, and it brings a really high-quality team that we're eager to welcome to Martin Marietta. This transaction represents about 8.5 million tons annualized of aggregates and about 1.5 million tons annualized of asphalt. Like the tiller business we bought years ago, this is an FOB asphalt business, so we're not involved in lay down; it's truly a materials business. We expect it to be nicely accretive to our operations in the central U.S., and as Michael noted, it's a differentiator for us. Regarding the pipeline, as we discussed at last year's Capital Markets Day, we've identified at least 300 million tons per year of businesses in our target markets that we find compelling. We remain largely focused on pure aggregate transactions, and New Frontier is a great example — 8.5 million tons is a meaningful acquisition. We continue to see opportunities like this and look forward to pursuing them successfully this year and into next year and beyond. So Adam, I hope that addresses all three parts.

I look at the contract awards data that we can see, you've seen very strong contract awards growth in your states really for a number of years. And I think the last 12-month number looks good. But I think for some of the states, maybe we've seen a deceleration in some softer awards just looking at the last 3 to 6 months, if I look at the data. And understanding these awards are very, very chunky, especially in the beginning of the year, and you've got a big lag between awards and revenue recognition. I'm just wondering if there's any states where you've been surprised on the contract awards data either positively or negatively? Or just kind of like how we should think about that flowing through as the year progresses?

Anthony, thanks for the question. I would say several things. One, if we look at the data, there's nothing in that that's been surprising to me. I think the other thing that's worth noting is the data will typically say that value of contract awards can be particularly volatile in the first quarter. And that's really as state and local governments typically simply bid less work in the early parts of the year. I think importantly, and I'm trying to give you a guide on how to think about it going forward, as your question indicated, I look at the spending authority. And I think that's really important to look at relative to our leading states. So if I'm looking at Texas, which matters disproportionately to us, that's up almost 15%. If I'm looking at Colorado, which is one of our leading states in the west, it's up nearly 7%. If I'm looking at Georgia, which is a critically important state to us — we're the largest aggregates producer in Georgia — that's up almost 7.5%. And then in California, it's been interesting to watch that. They're up almost 6.5%. So again, as we're looking at what's coming out of the federal government and thinking about timing and choppiness, that's not unusual, particularly in Q1. As we're looking at that level of spending authority in our top DOT states on the public side, it actually gives me a great deal of confidence. The other thing that helps in that respect is simply looking at what's happened so far this year. Now keep in mind, if we're looking at Q1, about 18% of our volume for the full year is going to go in Q1. So it's not necessarily a driver of anything that's going to happen for the rest of the year, which is why we never, for example, update our guidance at the end of Q1. You have a much better feel for it when you get to half year. But I do think this is notable. If I'm looking at tonnage that went to highways and streets in Q1 versus the prior year quarter, they're up 23%. So I think that gives us a good sense of where it's heading right now and takes me back to some of the commentary that I gave early on — if we're being conservative anywhere, it's probably on the volume outlook. And I think as we look at the volume outlook, we're very bullish on the way public is going to pull through. So Anthony, again, I hope that helps you as well.

No, that's extremely helpful. I'll turn it over.

Hey, first off, congratulations to everybody on their new roles. It sounds like some movement there, so that's great. But hey, big picture, there are a lot of moving pieces in the numbers this morning. I think pricing was maybe flat on a reported basis. Gross profit per ton was down. You had Quikrete, geo mix, purchase accounting, I mean, all of that's having a big impact. So Michael, is there just any way that we could cut through the clutter, just get some color kind of how ASP and gross profit are looking like on more of a like-to-like basis? Is that mid-single-digit pricing, high single-digit unit profitability algorithm still very much intact. I've just been getting some questions this morning. Just some color there would be helpful.

Yes. No, sure, Patrick. What I would say is, on an organic basis, our guide for the full year would still remain firmly intact, which would see a gross profit up, call it, double digits for the year. Now how that plays out through the balance of the year, as Ward mentioned, there's probably going to be more volume. So volume trending to the high end. In fact, as we sit here closing April, we're at the high end of a full year guide with how much volume we've already banked. And with the pricing, it's just difficult to make up in a calendar year the pricing that we saw in Q1 given the geo mix over the balance of the next three quarters. So what we said is, look, we're seeing that broaden out with the East division, higher ASP leading the way in April. So we're starting to see that geo mix shift on ASP, which also flows through to the margin because it's not only higher ASP, it's lower cost to produce in the East as well. So we're going to see that come through here in Q2 and into the balance of the year. But making that up might be difficult. So we're saying, organic pricing might be towards the 4% absent any mid-years, but we're going to be out, and in fact, we're already out with midyears pretty much across the entire country, where we expect to see a lot of that is also in the East and where we completed acquisitions this year. So there's nothing in the organic guide that gives us any pause. In fact, we feel pretty confident in that. And then getting to the full year EBITDA guide, as Ward mentioned, Quikrete has actually come out of the gate much better than expected in just one month with $17 million of EBITDA, 42% EBITDA margin, so nicely accretive and their volume is actually exceeding expectations, but at a little bit lower reported ASP. But remember, we always said it was ASP dilutive but margin accretive. So what do we mean by that, is a relatively low cost of production operations. So we're going to start to see that flow through. Once we eat through the inventory markup, which, as Ward mentioned, there's about $44 million of that left to chew through in Q2. But of course, that's an add back to EBITDA, but it's going to be a hit to gross profit in Q2 just for modeling purposes. But does that answer your question, Patrick? Or any more color you need?

Yes. Just that the algorithm that you guys laid out at Capital Markets Day is firmly intact. That's kind of the takeaway.

Yes. On a price-cost spread basis, absolutely. And think about that really over a five-year period, not in a quarter or a year. So what we said is there's a long history in this industry — Martin Marietta specifically — of delivering 200 basis points of spread over a five-year interval. And what we're saying is this 5-year period, we expect to expand that by about 50 basis points. So look at that over a five-year period and not in any particular quarter.

And Patrick, let me add one more thing because I think this is more — because you nailed it in that there are a lot of moving parts right now. So cutting through and trying to get to really clear numbers is important. And the cost performance is something that I want to make sure you have a clear look at too, because I'm looking at that through two different lenses. Number one, what does it look like organically? Number two, what does it look like on a consolidated basis? And here's what I would tell you. If we're looking at organic aggregates cost of goods, I would say several things. One, take out the external freight because that's simply a pass-through. We had some odd one-offs on rail maintenance and track repair expenses. If we're really looking at it same on same, COGS per ton went up about 2.7% organically. If we're looking at it on a consolidated basis and again, taking out the fair market inventory markup, the external freight and just the acquired DD&A, COGS were up around 1.7%. So I think to midpoint, that cost-price spread that we anticipate seeing is fully intact. And part of what I'm taken by, as you may recall, we actually took our CapEx guide down very purposely coming into the year because we felt like we had invested in the business really responsibly the last several years, and that really came through in what we're seeing in lower repairs and supply expenses as well. I wanted to come back and give you even more color relative to, okay, these are the things that we talked about at Capital Markets Day. These are the things that you built into a model over time and are they firmly intact. I don't think there's any question as we drilled in and look at these that they are.

Yes. No, very, very helpful and very much appreciate the D&A disclosure.

It's Jesse on for Phil. Just on Quikrete, was there any disruption in them announcing pricing to start the year just with the pending transaction? And I know it kind of closed a little bit later than maybe you expected. Are you still able to announce kind of mid-years in some of those territories that you just acquired?

Thank you for the question. And the short answer is, we are expecting mid-years in those markets. We have already put our correspondence to our customers indicating as much. And obviously, as we've indicated, the ASPs overall that Quikrete had in their business were not at the same level that Martin Marietta typically is. So our aim is to try to get that closer to something that looks normal across our enterprise. So yes, that is very specifically one of the areas in which we anticipate midyear price increases.

Okay. Great. And then just one quick follow-up. You've had Specialties and the Premier business for a couple of quarters now. Anything that's kind of sticking out to you, either incremental opportunities or anything that you're kind of more convicted in having owned it for a couple of quarters?

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

I just wanted to go back to the midyears. I was hoping you could talk a little bit about what you're seeing perhaps in the asphalt markets versus ready mix. I think ready mix has seen some push out to April. I guess are you able to try to get mid-years in the ready-mix side as well? Or are those — how do you kind of address the energy or inflation that you're seeing across those markets?

So I would say several things. As we think about hot mix for itself, several things that are worth noting. Number one, we can actually store a lot of liquid. So if we're looking at our position today, particularly in Minnesota because part of what we bought when we bought Tiller, a very significant tank farm. We use winter fill to go through that. I think from an energy perspective and otherwise, we're going to be in a very good position in our asphalt business. Equally, if we think about the asphalt business, it's not a huge portion of it that's in California, but California also has indexing that's basically there. So as it flows through, we're going to be in fine shape on that. And again, keep in mind from an EBITDA or other perspective, these downstream businesses are not going to add huge amounts of EBITDA — in some respects, more to take the stone and push it through those markets. So I think we're going to be in a perfectly good spot there. I think relative to concrete, again, if you're looking at where we have concrete now, it's really a pretty concise marketplace. It's really in Arizona. We're talking about a concrete business now that on an annualized basis is going to have about 1.2 million cubic yards. So if you go back several years, this used to be about a 10 million cubic yard business and now it's down to about 1.2 million cubic yards. Arizona is an attractive ready-mix market for us. We are seeing some price increases there. So we would anticipate that business performing very much in line with the way that we indicated. And again, given what we can do on asphalt and liquid storage, we don't feel like the energy component is going to be a threat to that business on the hot mix side either.

Very helpful. And then what I wanted to follow up on your comments that April is off to a very good start and pushing your shipment volumes perhaps to the higher end. I guess can you talk a little bit more, particularly on the private side, I think you've given a lot on the public side, that's really helpful. But just as it pertains to what you're seeing here in April and what you saw in — sounds like weather a little bit maybe of activity to start earlier on, but are you seeing projects that maybe weren't in the backlog move forward faster, just greater confidence? Or how do we kind of reconcile the strength in some of that volume what you might be seeing on the private side, just with some of the rising costs, rising interest rates and other factors that we're hearing?

Sure. I'll pivot to the private side and say several things. One, if we're looking in the quarter on what we saw relative to warehousing — warehousing was up 57%. If we're looking at what we saw relative to data centers — data centers were up 62%. If we're looking at what we're seeing in different forms of energy, for example, LNG for us during the quarter was up 20%. If we go and take a look at what's going on in shale — shale was up on a percentage basis a large percentage simply because it's coming from such a low base. But part of what I think is important to remind people: back in 2010 or 2011, we were sending about 7.5 million tons of stone per annum to the different shale plays across the United States. So think about what that means. That's about 1 million tons less than the New Frontier business that we just bought. So again, as I'm looking at what's happening with warehousing and data centers and what's going on relative to energy, those are the types of things that give us that degree of confidence on the private side. But what I'm taking on warehousing in particular, this isn't just an Amazon show anymore. It's much broader than that. We're seeing it with Walmart. We're seeing large distribution centers. To be even more specific, if we go through and look at the LNG project pipeline today, on projects that are currently supplied by Martin Marietta, they're going to consume about 10.6 million tons. So if we look at projects we believe are potentially coming our way relative to LNG and otherwise, that's another 33 million tons. Data centers are right at 3.27 million tons estimated and well over 2 million just for this year. So again, if we're looking at the heavy side of nonres, there's nothing there that doesn't look pretty attractive to us. Now to your point, on residential and light nonres, those are highly interest rate affected areas. They are not booming in any respect right now. So what I'm really taken by is we're putting up double-digit volume growth, and we've got those interest rate sensitive portions of our business that are not doing anything right now. But here's what we know: if we're looking at the overall housing market in the United States generally and Martin Marietta states specifically, everything that I've seen indicates that it's going to require about 4 million additional homes simply to restore a balance. So as I'm looking at these areas that are more interest rate sensitive, to me, it's not a matter of whether they return — they're going to return. It's a matter of when they return. And then if we come back to the notion I shared before: do I think infrastructure is in a place that it's going to be steady for a while — and by that, I don't mean quarters and months, but years — I think it is. If we look at the rate of growth in energy, data centers, warehousing, etc., that too looks like it's probably a multiyear run. And I think somewhere in there, you're going to see private decide they're going to stop being spectators and get in the game. So Angel, I hope that gives you some specifics around the areas you asked about.

Just wanted to follow up again on the midyear price increases. It sounds like you're pretty confident in them. Can you just remind us how much of that is sort of an automatic — I think you mentioned California has indexing. So how much of that from a process perspective just flows through versus negotiated? And have you gotten any preliminary feedback from customers on this, are people just sort of resolved that this is going to happen because of all the inflationary pressures on fuel and everything? So that's one question. And then just a clarification on what you assume for the residential markets for your residential business in the second half of the year?

So Steven, I would say several things. One, let's make sure we're keeping buckets really clear. When we're talking about the indexing of things, that's really more relative to liquid and what's going on in asphalt and places like California. So really put that in the same bucket that I do midyear pricing in stone. We saw midyear pricing last year in aggregates. We saw it principally in areas where we had done new acquisitions. I think we will certainly see that again. But I think it's going to be more broad-based than that because of the inflationary trends that you've highlighted. So if you want to say we're not going to be extreme, but we'll be somewhere in a meaningful band. I think it's going to be an attractive percentage for all the reasons that you said. I think customers are seeing inflation in what they're trying to manage from their cost perspective. We are as well. And this is just something that if we're going to be responsible stewards of our business, we need to do this. So I wanted to break out and differentiate what you spoke specifically in California from what we're talking about on midyear and give you a sense of what realization I think we're likely to see in that respect. On residential, we came into the year with very low expectations of residential, and I don't think it's going to disappoint us. I think it's going to continue to be muted — there's just not going to be anything that's going to be a real pop on that this year. That's exactly why we came into the year with the case the way that we did. So residential is moving exactly as we thought it would. And that's why with the rest of it you're seeing a nice volume pop with residential not yet at the party. At the same time, Martin Marietta has built its business very purposefully in states that have significant population inflows. The housing markets in most of our MSAs are pretty tight. So I think it's a matter of time, but it's not going to be this year.

You started talking about the network optimization a couple of quarters ago. I want to get an update on how things are trending in the first quarter.

Thanks for the question. It continues to go quite well. And as you recall, we said at the time we would probably come back at half year and give you a good sense of how that's working. But again, if we go back to the numbers I went through a little while ago, really looking at organic costs up 2.7% and consolidated costs up about 1.7% after the adjustments we discussed, looking at repairs and supplies — if anything, those are in a favorable position for the quarter. So we continue to feel like the program itself is working. It still has some maturity to go through, and we look forward to having a more robust conversation with you about that at half year.

All right. And just to clarify on the guidance, in terms of the upside leverage that you guys have, it's the mid-year pricing that's not in the guidance, the network optimization that you're going to address at midyear is also not in the guidance and then the New Frontier Materials acquisition as well, correct?

That's exactly right. So those are all potential upsides to the guide. Those will all be meaningful upside to the guide.

This is actually Zack Pacheco on for Garik today. Just a quick one on the bidding environment. Just curious, given oil inflation pressure, are you seeing any rebidding right now? Or is that not really something popping out?

It's a good question. And the short answer is no. We really haven't seen that. It's been pretty steady, pretty consistent. No real surprises there. If we see anything different, we'll obviously talk about it at half year. But as we're sitting here toward the end of April, it has largely been a nonevent.

Maybe one for Michael, looking at the balance sheet and before you ended the quarter and on a pro forma basis, given the acquisition and any working capital or cash flow changes, will net leverage levels be fairly similar? How should we think about that when we see the close of the transaction? On the acquisition and the capacity you have for further acquisitions, Ward, is the pipeline weighted and your thoughts weighted towards adding to some of your existing levels or maybe some of the levels that you just recently purchased — or is Martin Marietta really to step out in some other areas to put store into place outside of its current regions?

Let me take the second part of that, and Michael will come back and take the balance sheet question. So here's part of the position that we find ourselves in today. With the coast-to-coast business now that we have, particularly after transactions that put us in California and Arizona, that's put us number one coast-to-coast and in every mega region. And now with transactions like Quikrete, we have an even more significant footprint in the Northwestern United States as well. So I think what's going to happen practically is transactions that we would do will tend to have a bolt-on feel relative to how close they are to an overall Martin Marietta business. I like that because the most dangerous transactions are when you go into a brand-new area of the country where you don't have a team or a history. I don't think we're in a position that we need to do that anymore. Now does that mean the transactions financially on occasion won't look like a platform transaction? No, it doesn't mean that at all. So what I'm taken by is the size and the scope of some potential transactions that we're looking at. We may come to you with transactions that look financially like a platform transaction, but geographically they'll act like a bolt-on. That might be the best of both worlds. Michael, can you talk about the balance sheet?

Yes. From a balance sheet standpoint, these transactions, New Frontier pro forma specifically to your question, would not really move the needle on our leverage ratio because remember, we had the cash proceeds coming in from the Quikrete transaction, number one. And number two, we just sit here at the end of 2025, generating over $1 billion of free cash flow after dividends that we've said we'd put back to work, primarily in aggregate-led M&A. So the pipeline that we're talking about here, we think fits right within that free cash flow generation and redeployment.

Ward, you were asked earlier about bidding. I guess I wanted to come back to that bigger topic and get your sense of how you're seeing state DOTs responding to project cost inflation. Are you seeing them skew the resources to larger or smaller projects? Maybe how much push forward to 2027 are you seeing — any cancellations as they focus limited resources on their top priority projects? And maybe how quickly they're revising engineers' estimates?

So great questions all there. No, we're not seeing anything pushed out. Number one, we continue to see them trend toward larger as opposed to smaller projects, which underscores the view that the IIJA successor will be a core surface transportation bill and that states want to get funding deployed. When I went through those numbers earlier about streets and highways being up 23% in Q1, and remembering that much of that funding is yet to be deployed, I think state DOTs want to get that in play and they want to get it in place sooner rather than later. When we look at specific state DOTs and think about what's Texas thinking, what's North Carolina thinking, what's Georgia thinking, what's Florida thinking — these are states that need to add capacity. I think they're very focused on capacity, which takes us to increasingly aggregates-intensive work. States that are not seeing the same degree of population inflows tend to default to more maintenance and repair, which is not as aggregates intensive as building new roads or lanes. I continue to think that's where our DOTs are largely focused right now. Did I answer all your questions, or is there another component I did not address?

No, that was pretty good, Ward. Maybe just — I wanted to get your temperature on midyear pricing as well and any features of how you're pursuing the increases this year that could make it more impactful to second half realizations than they would normally be — post just the compounding benefit into the new year?

Well, I think we'll clearly see the compounding benefit into the new year. That's always there. Historically, we typically realize about 25% of a midyear price increase during the course of the year in which it was put in, then you'd have the compounding benefit going into the next year. If we continue to see this rate and pace of work on nonres and res, I think you could see a higher realization than that historical 25%. I'm not willing to get too far out on that at this point, so I would ask you not to model that in, but at least that's what it looks like historically. Again, given the numbers we're seeing on infrastructure, warehouse, data, energy, I don't see that abating over the next few months, which makes me think there's a likelihood you might see greater realization.

Last week, CSX on the earnings call highlighted a large expansion of a Martin aggregates loading facility in Florida. Can you just comment on this a little more, how much are volumes increasing through this facility? And is this supporting data center growth in particular? And lastly, what are the cost advantages you're experiencing from shipping more rail versus truck?

Ivan, I'll take the front end of that and Michael will add some specifics. If you go back and think about it, we ship more stone by rail than any other producer in the country. We're going to ship about 30 million tons per annum by rail. Obviously, we'd like to do more of that because you have to have two things to make that work: a rail-producing quarry and a rail yard in a market that needs the product. What we're primarily doing in Florida historically is an infrastructure play. We are the largest importer of granite into that marketplace. So we bring granite in by rail using railroads and by vessel imports. Those are the vehicles to bring granite into a granite-starved state. If you look at Florida DOT and the way it's continuing to grow, asphalt producers in that state will prefer a granite product because it's not as absorptive of liquid asphalt. Given liquid asphalt prices, if you can put an asphalt mix down and reduce the liquid, that's helpful. Granite also tends not to polish the same way limestone does, so for a top coat on asphalt, it's better. On data center and related activity in Florida, we've grown our presence in that market with recent transactions. We now have the ability to serve more of that market by truck and we're ramping up our ability to hit it by rail. Michael, anything to add on the terminals and economics?

Yes, I would just add given our rail network, not specifically only in Florida but more so in Texas and East Texas in particular, one thing we started seeing in Q1 is the Haynesville shale coming back online. That's the direct pipeline down to the LNG export facilities. So we have rail terminals in East Texas and West Louisiana that we can reach that others simply can't. We also have West Texas terminals where we can reach Abilene and around other markets to serve large data center projects. What you'll start seeing is those projects come online over the balance of the year. You will actually see that ASP mix headwind we had in Q1 start reversing into a tailwind as we sell those products FOB out of terminals, which typically have attractive ASPs because you have embedded rail freight in those. So I hope that answers your question.

Thank you, and thank you all for joining today's earnings conference call. We're very pleased with the company's strong start to 2026 marked by outstanding safety results, solid operational execution and resilient financial performance. The results reflect the strength of our strategy, the quality of our portfolio, and most importantly, the dedication of our employees across the organization. Heading into the year's busier construction months, Martin Marietta enters the remainder of 2026 in a position of strength. Our aggregates-led portfolio concentrated in the nation's most attractive markets, supported by a differentiated Specialties business and a strong balance sheet provides us with the resilience and flexibility to perform consistently across cycles and continue compounding long-term value for our shareholders. We look forward to sharing our second quarter 2026 results in the summer. As always, we're available for any follow-up questions. Thank you again for your time and your continued support of Martin Marietta.