Q4 2025 Knife River Corp Earnings Call [BACKUP]

February 17, 2026

Brian Gray: which is also slightly up for this year in 2026 versus 2025. And we're out looking for work. And, you know, our crews have shown this last year to be nimble and pursue work that fits them, and that's, you can see that in the strong second half that Oregon had. And so I'm not worried, Brent, about the backlog in the West, but there definitely is a geographic shift of that backlog to states in the Mountain and the Central region.

Brent Thielman: Yep. Okay, understood. And I guess my follow-up, Brian or Nathan, I mean, this is the second year in a row you've been able to drive aggregates, average pricing at, you know, 9%. I, I know there's M&A sprinkled in there and yours and the industry expectations in the mid-single-digit range here for 2026. But maybe if you could just talk about, the potential levers to outperform that, just given what you've been able to do here in the last couple of years on the pricing front.

Nathan Ring: Yeah. Good morning, Brent. This is Nathan. I'll take the first part of that question with the increase that we've seen here in 2025 on the aggregate pricing, and then turn to Brian for the levers that we see going forward. You're right, very strong year for us in terms of aggregate pricing, high single digits. And as you maybe heard in the prepared remarks, part of that has to do with Strata. Strata does have higher pricing. Now, part of that does relate to the way in which we account for delivery revenue. So they do have areas that they reach, and there's revenue included in their average selling price. So it is higher as Strata laps itself here year over year. That's where I mentioned in the prepared remarks, we see that still continuing mid-single digits, so very strong for ongoing operations.

Nathan Ring: But you're right, high single digits this year, mid-single digits next year. Part of that just has to do with Strata overlapping its-- or lapping itself year over year. As far as the levers that we'll pull on, I'll turn that over to, Brian.

Brian Gray: Yeah, Brent, our commercial excellence teams have been very active, implementing the new dashboards and bidding tools to support our dynamic pricing. And, we spent a fair amount of time in the classrooms this year going through a lot of training, focused on commercial excellence. So as you know, our dynamic pricing allows us to bid work throughout the year, and so we don't have a single letter that goes out in November, December, or second one's mid-year. We'll do that throughout the year and continue to optimize prices. And so that rollout has been very successful. All of our legacy sites now have fully implemented dynamic pricing. As we bring on acquisitions, we'll roll that out into those new sites. But right now, very good traction on our dynamic pricing going into 2026.

Brent Thielman: Okay. Thank you.

Brian Gray: Yep.

Operator: Thank you. Just a reminder to limit yourself to one question and one follow-up. The next question comes from Trey Grooms of Stephens Inc. Please go ahead.

[Analyst] (Stephens Inc.): Yeah. Hey, Brian and Nathan. This is Ethan on for Trey. Thanks for taking the question. I wanted to dive further into the puts and takes on the margin outlook that's baked into the guidance, because the full year guidance seems to imply relatively modest, but down margin improvement. I know you've mentioned that there's a geographic mix shift within the backlog, but it sounds like materials margins will be strong and services margins will also see a step up. And of course, we know weather was a pretty large headwind to 2025. So any more color on the puts and takes on the margin guidance for 2026 would be helpful.

Trey Grooms: Yeah. Hey, Brian and Nathan. This is Ethan on for Trey. Thanks for taking the question. I wanted to dive further into the puts and takes on the margin outlook that's baked into the guidance, because the full year guidance seems to imply relatively modest, but down margin improvement. I know you've mentioned that there's a geographic mix shift within the backlog, but it sounds like materials margins will be strong and services margins will also see a step up. And of course, we know weather was a pretty large headwind to 2025. So any more color on the puts and takes on the margin guidance for 2026 would be helpful.

Brian Gray: Yeah, I'll, I'll take that one. And so, good talking to you. Yes, our EBITDA or mid-margin for the midpoint is going up, you know, 10 to 20 basis points from last year. And so if you look at our individual product lines, gross profit, as Nathan mentioned, we're expecting to see, you know, somewhere that 200 gross basis points margin improvement in aggregates. And frankly, we're seeing, you know, margin improvements in our budgets in all of our product lines. And that really is coming from our dynamic pricing model and our Pit Crew initiatives feeding into that.

Brian Gray: Because of the shift, I mean, and as we've mentioned, Oregon being flat this year and energy services being flat, we're definitely shifting more of our EBITDA contribution as a percent of, you know, total contribution to the Mountain and the Central regions. And those have slightly lower EBITDA margins, even though they too are seeing good traction and good movement in margin expansion in those regions. They are at a lower margin in the West. And so that's what's going on with that. But good traction, good movement on all of our product lines for gross profit improvements.

[Analyst] (Stephens Inc.): Got it. That's super helpful. And for the follow-up, quickly, just a question on Oregon. So at what point could we return to year-over-year growth in Oregon? And how important is funding clarity to achieving this sort of leveling out, given that the easy comps, especially in Q2 and Q3 of 2025, and also considering the private side in Oregon seems to be doing pretty well? So any more color there would be helpful. Thank you.

Trey Grooms: Got it. That's super helpful. And for the follow-up, quickly, just a question on Oregon. So at what point could we return to year-over-year growth in Oregon? And how important is funding clarity to achieving this sort of leveling out, given that the easy comps, especially in Q2 and Q3 of 2025, and also considering the private side in Oregon seems to be doing pretty well? So any more color there would be helpful. Thank you.

Brian Gray: Yeah, the private side definitely rebounded well in the late Q3 and benefited us well into the Q4, and was a big part of the success that we had in Oregon of, you know, quarter-over-quarter improvements in the Q4 and Q3. You know, public funding is a big part of our success also in Oregon, and clarity on that will be important. I can, I think, relatively safely say that we don't expect any major shifts at all at this point in time for 2026, and that a stable budget in Oregon with the tons that have already either been let or in the bidding schedule to be relatively flat to last year.

Brian Gray: I feel comfortable saying that, you know, the results for Oregon in 2026 should be in line with what we had in 2025. Yeah, we're very hopeful. The legislature is currently discussing infrastructure funding, literally in their short session. It's in session now. And expect that conversation will really build into next year's longer session, where we anticipate they would have a robust conversation and pass a longer-term, much larger bill than the $4.3 billion stopgap bill they passed earlier. That should happen in 2027 if you talk to the legislators in Salem, Oregon.

[Analyst] (Stephens Inc.): Got it. That, that's very helpful. Thank you, and I'll pass it on.

Trey Grooms: Got it. That, that's very helpful. Thank you, and I'll pass it on.

Operator: Thank you. The next question comes from Kathryn Thompson at Thompson Research Group. Please go ahead.

Kathryn Thompson: Hi, thank you for taking my questions today. You had, in your prepared commentary, talked a bit about, self-help versus pricing and transitioning from not just focusing on pricing, but also, acute focus on cost controls to drive margins. When you look at a regional standpoint for both your West and your Mountain divisions, which showed fairly outsized performance in the quarter, what drove these outsized gains, and how much was self-help versus pricing? Thank you.

Brian Gray: Well, I appreciate that, Kathryn. Yeah, we had a fantastic fourth quarter. It was up 47% over last year. And I would say, Kathryn, I think you could just put that in three big buckets, that variance year-over-year. The first one is we certainly had favorable weather, and in particular, in the Mountain region, which allowed us to do more asphalt paving. It benefited really a lot of our regions as it relates to just staying out working. Aggregate sales, ready-mix sales were solid. We were able to utilize our equipment pool more efficiently in that fourth quarter. And so, one of those large benefits and variances for the fourth quarter was definitely favorable weather. The second one was we had good contributions from our acquisitions, led by Strata.

Brian Gray: But we also had another, you know, four other very nice acquisitions last year. Texcrete came in mid-December, and very excited about that acquisition, and then other contributions from the acquisitions. That was part of our positive variance for Q4. And the last one was what you mentioned, just the operational execution and implementing EDGE initiatives. Now, we obviously had a partial benefit of, you know, recouping some of those pre-production costs that we incurred earlier in the year. Those came back to benefit us in Q4. But more importantly, it was our teams executing on our EDGE initiatives and really looking at their costs and controlling our costs very tightly.

Brian Gray: And very proud of the team and the work they did, and the focus on cost controls that really are gonna bleed into this year as a big part of our focus in 2026, to continue those cost controls measures. And, you know, looking at KPIs and just really focus specifically on aggregates, but frankly, all the product lines will benefit from that this year.

Kathryn Thompson: Okay, great. Thanks. Also talked about, you know, getting strong capital allocation, or capital, plenty of capital to deploy into calendar 2026. Could you just tell us a little bit more or give some broader stroke color on what you're seeing in your pipeline for M&A, for, so inorganic, and then other organic initiatives that you're hoping to execute and share? Thank you.

Brian Gray: Yeah, we're very excited about our growth strategy, and I'll start off talking about the pipeline and the organic opportunities, then turn it over to Nathan to talk about our strong balance sheet and capacity to go out and continue our growth strategy. So we have a very disciplined approach, and we're looking for strategic fits that fit, you know, both our cultural fit and a financial expectation that we'd have. All the deals we did last year, Kathryn, and the deals we're looking at in our pipeline, and our pipeline, when I say it looks very similar to last year, I'm talking about the types of deals in there, the size of the deals, and the location of the deals. They're aggregates-based. Many of them are vertically integrated. Most of them are infill bolt-ons to our existing operations.

Brian Gray: We certainly will look at states adjacent to our current footprint or current states or regions that we do business in. They're in these mid-sized, higher-growth markets, and we are, you know, looking to continue to balance our portfolio. And the nice thing about this is it all starts at the local level with local relationships. And just like all of the deals we did last year, they're negotiated deals directly with the sellers at those high single-digit multiples, very attractive multiples. So the pipeline is robust. The pipeline is full. I've talked about the hundreds of opportunities in our states that we do business in.

Brian Gray: Because we're vertically integrated, we will look at aggregates, ready-mix, asphalt, and contracting services opportunities, as long as we can continue to focus on the supply of aggregates to those operations, either from new resources or from our existing resources. I would say that the last thing before I turn it over to Nathan, that, you know, that is a very important part of this process, is just a playbook that is proven and one that we've been using for over 30 years. We continue to refine it. We've done almost 100 deals now, since the early 1990s. Really, it's just, it's very focused on getting the right deals in the pipeline, being very disciplined at the deals we put in the pipeline, and going out and courting those relationships...

Brian Gray: The second part of that, is doing a very thorough job, disciplined job of due diligence, and both of those activities are led by our local regional teams, which then feeds into the third phase, which is integration. And that is also, you know, heavy influence with the local team at the regional level, with oversight and support from corporate. So very proud of our, M&A program, our growth strategy, what we've done in the last two years since the spin. Organically, we have, identified a number of very exciting projects that have, frankly, higher returns than even our M&A opportunities, and continue to go out and execute on the organic growth. We've-- we, are entering new markets into Idaho, and we've expanded our, capacity as we see more asphalt paving coming on.

Brian Gray: We've added capacity to Texas and South Dakota, so certainly spending some money organically as well. So with that, Nathan, I'll just let you talk a little bit about the capacity.

Nathan Ring: Yeah. Good morning, Kathryn. So good news here is that to support the capital deployment, all the, the good things we've got going on that Brian talked about, we've, we've been disciplined in how we've maintained our balance sheet, and we have solid cash flow. So, Kathryn, I'll put it into three buckets for you that give me confidence in what we've got from a balance sheet or support perspective for this growth that we've talked about. First, we have the liquidity to act quickly. As I mentioned, we've got end of the year with $75 million of cash on hand, $475 million available on our revolver. So as deals come up, we have the ability to move quickly on them. Secondly, we expect solid cash flows from our operations.

Nathan Ring: In fact, for this year, 2026, we expect our cash flow from operations to be about close to the historical average of two-thirds of EBITDA. And so we've got cash flow coming from operations. And then the third part is the balance sheet itself, the Net Leverage position. We ended the year at 2.2 times Net Leverage. As I've shared before, our target is 2.5 times, so we're below that. And I think for the right deal, fits our strategy, has the right financial metrics with it, we'd be willing to go higher than that, maybe closer to 3 for a short duration, and then see that long term go back to 2.5.

Nathan Ring: So we got the liquidity, the cash flows, and the balance sheet, all the support, deals, and that's where we want to put our capital to work, is growing this company that Brian outlined for us.

Kathryn Thompson: Great. Thanks very much for that, Colin. Good luck.

Brian Gray: Thank you.

Operator: Thank you. The next question comes from Garik Schmois at Loop Capital. Please go ahead.

Garik Shmois: Oh, hi. Thanks. Congrats on the quarter. First off, just on SG&A, just to piggyback off on the last set of questions, how should we think about SG&A inflation this year, both from an underlying standpoint, plus any incremental that you have with respect to the inorganic growth plan?

Nathan Ring: Yeah, I'll take that one. Good morning, Garik. Good to hear from you. So SG&A, the first part here is we take a look at 2025 and the increase that we had this year. I'll just identify the key buckets there. And we talked about them a fair amount throughout the year. And kind of back to the last question, they all relate to growing this company, which is the exciting part of it. So the largest increase that we had, the largest bucket for the increase we had in SG&A, was really related to the administrative costs that came with our acquisitions. Did five acquisitions last year, and they brought some SG&A with them. So that was the largest piece.

Nathan Ring: The second largest also relates to growth, and we talked about this throughout the year, that one-time step up related to our business development team and getting them in place to pursue acquisitions, as well as our EDGE teams to pursue, like, the Pit Crew and the opportunities they're going after. So the two largest components, really, of our SG&A increase relate to growing the company. The next piece really is, as I shared before, the, the ongoing costs, I'll call it, of the operations or the SG&A, grew mid-single digits, which is what I shared at the beginning of the year. So Garik, 24 to 25, those are the three buckets that caused the increases. As we look forward, I mentioned earlier that we expect SG&A as a percent of revenue, to be in line year over year.

Nathan Ring: If you look closer at that, again, similarly, the ongoing costs in there, we see growing mid-single digits, very comparable to what we see throughout the organization. Mid-single digit increase in cost, maybe towards the lower end of that range. And if you're wondering, well, what else could be impacting that? One thing that I'd add to it is that in 2025, we did have higher gains on the sale of assets, most notably that East Texas sale that we started a few years ago. We finished that, so that's a gain that we don't obviously anticipate for 2026. That would be part of the increase you see going from 2025 to 2026. But outside of that, the underlying cost increasing mid or maybe on the low end of that mid-range single digits. Hopefully, that's helpful.

Garik Shmois: No, that is. Thank you. My follow-up question is on volumes. Your guidance is considerably stronger than other public peers. I'm just wondering if you can unpack that a little bit more. You talked a little bit about the regions, a little bit about, you know, some of the infrastructure projects and the pull-through from contracting services. Wondering if there's anything else, maybe on the private side. And then also, is there any weather catch-up, considering there—that was such a headwind, particularly through the first three quarters of 2025?

Brian Gray: Yeah, Garik, just, we had that benefit a little bit in Q4 with positive, you know, favorable weather in Q4. And so I would say that, you know, the backlog that we've got going into next year would not be a lot of, you know, delayed work. It certainly impacted at the beginning of the year. It caused us some challenges at the beginning of the year, but we had a strong Q4 and have good backlog going into next year. The volumes being mid-single digits for aggregates, I'll start with that one, really is also related to ready mix volumes being up mid-teens. The addition of Texcrete more than doubles our supply in the Texas Triangle, and so that would be a large part of our mid-teen increase.

Brian Gray: And being supplying aggregates to that operation would also be part of the mid-single-digit increase on aggregates. But it's not just Texcrete. Nathan and I have talked about the additional asphalt paving that we have in our backlog. And so we see strong pull-through of aggregates going into our asphalt plants. And then the aggregate sales are just becoming stronger in markets like Oregon. And you saw that again in the Q4 results. Those higher margin, third-party aggregate sales in the metropolitan market in, you know, Portland, certainly benefited us. So we continue to focus additional third-party sales in central region. So I would say all of those factors give me good confidence in our volume projections of mid-single digits for aggregates and the mid-teens on ready-mix.

Garik Shmois: Great. That's helpful. Thank you very much.

Operator: Thank you. The next question comes from Ian Zaffino at Oppenheimer. Please go ahead, Ian.

Ian Zaffino: Hi, great. Thank you very much. Wanted to just kind of drill in on the comment about data centers. Can you give us a little bit more color there? You know, be it, you know, growth rates that you're seeing, kind of portion of the backlog you're seeing, or maybe how quickly these jobs convert, you know, so, so what's happening as far as backlog into conversion, and any other kind of margins and any other type of color you could give us on that? Thanks.

Brian Gray: Yeah. Thanks, Ian. I would say that, I mean, virtually zero amount of dollars in our backlog are related to data centers. We have a lot of data centers that we're working on right now, but most of that would be on the material supply of the business. Have just some very small paving projects, but that would not move the dial at all on our record backlog of $1 billion. We are currently working on 21 data centers, and again, most of that would be through the supply of aggregates or concrete, mostly to those projects. And, you know, I think that is the tip of the iceberg.

Brian Gray: If you look at the amount of work that we have out there pending, bids that are out there that we have provided in the last, you know, say, two months, it's significantly more than what we currently have, supply contracts for. And so, a very big upside, you know, each one of our states, several of our states are, Wyoming has a lot of opportunities. North Dakota is currently working on some data centers. Oregon is working on data centers. So, you know, we're in the heart of our, some of our home operations, where we have local aggregates and ready-mix plants, data centers are being built. And so we see that as a very bright spot, frankly. Anything that we would be securing as new work would be on the upside of our range as a guidance.

Brian Gray: We've not baked in any expectations for our midpoint of our guide on data centers. But I can tell you that, in my career, I mean, just even the last two years, we've never seen this level of pending work and bids that we've got out there, and very good negotiations going on right now. And, you know, they're higher margin upstream materials. For the most part, it's aggregate supply, ready-mix supply, with either an on-site batch plant or a local batch plant close by, and then asphalt paving going into some of these new greenfield sites. So very excited about the opportunities in data centers.

And we're out looking for work and.

Our crews have shown this last year to be nimble.

Ian Zaffino: Okay, thanks. So, so then, you know, h-how do we then think about just margins going forward, right? So you're getting a favorable mix from, from this. You're getting, you know, success on the EDGE program. There's a lot of other initiatives that are kind of firing on, call it, all cylinders. And so how do we kind of put this all together as you try to hit your, your 20% margin target? You know, you know, is this-- are you accelerating it or, you know, w-when do we actually kind of see you achieve those levels? Thanks.

And pursue work that fits them and you can see that in the strong.

A second half that Oregon AD, so not worried Brent about the backlog in the west, but there definitely is a geographic shift of that backlog.

States in the mountain and the Central region.

Yes, okay understood.

Yes, my follow up.

Brian There Nathan this is the second year in a row, you've been able to drive.

Brian Gray: Yeah, I think, we are proud of the progress we've made in, you know, call it 2.5 years since we've spun, and 3 years, really, since we started implementing our Edge initiatives. And let me just give you the success, you know, some numbers here of the progress we've made in those 3 years. For gross profit margins on aggregates, we've improved 450 basis points in 3 years. On ready-mix, we've improved 300 basis points. Asphalt, 570 basis points, liquid asphalt, 450 basis points, and contracting services, 280 basis points from the end of 2022 to the end of 2025.

Aggregates.

Average pricing at 9% I know there is M&A sprinkled in there than yours in the industry expectations in the mid single digit range for 2026, but maybe if you could just talk about.

The potential levers to outperform that just given what <unk> been able to do here in the last couple of years on the pricing front.

Yes. Good morning, Brent This is Nathan I'll take the first part of that question with the increase that we've seen here in 2025 on the aggregate pricing and then turn to Bryan for the levers that we see going forward, you're right very strong year for us in terms of aggregate pricing high single digits and as you heard in the prepared remarks part of that has to do with Stratus strategy does have higher pricing.

Brian Gray: And so, Ian, I mean, I think we've been pulling hard on, obviously, the pricing dynamic, commercial excellence levers, shifting our attention more focused on the operational excellence and the cost controls. And it's not linear, as you know. I mean, you pick up some lower-hanging fruits, sometimes. And so we do expect margin expansion to continue in all of these product lines. And, you know, we're very excited about that. Now, yeah, I just-- I would leave it at that.

Now part of that does relate to the way, which we account for delivery revenue.

So they do have areas that they reach and Theres revenue included in their average selling price. So it is higher.

Straddle laps itself here year over year, that's what I mentioned in the prepared remarks, we see that still continuing mid single digits. So very strong core ongoing operations, but you're right high single digits. This year mid single digit next year part of that just has to do with strata overlapping as are lapping itself year over year as far as the levers that we'll pull on I'll turn that over to Brian.

Ian Zaffino: All right. Thank you very much.

Our commercial excellence teams have been very active implementing the new dashboards and bidding tools to support our dynamic pricing and we spent a fair amount of time in the classrooms. This year going through a lot of training focused on commercial excellence. So.

Brian Gray: Yep.

Operator: Thank you. Ladies and gentlemen, as a reminder, should you have any questions, please press star one. The next question comes from Garrett Greenblatt from JP Morgan. Please go ahead.

Garrett Greenblatt: Good morning. Thanks for taking my question. Just as we think about 2026 and the outlook you provided, I was wondering if you could go into a little more detail or quantification around the impact of acquisitions you did in 2025, and what that organic assumption look like in 2026. Thanks.

Our dynamic pricing allows us to bid work throughout the year and so we don't have a single letter that goes out in November December our second ones mid year, we will do that throughout the year and continue to optimize prices and so.

That rollout.

<unk> been very successful all of our legacy sites now have fully implemented dynamic pricing as we bring on acquisitions.

Brian Gray: Yeah, so I, I think that the acquisition that we did late in the year, Texcrete, you could look at the contributions from Texcrete in 2026, all of 2026, to offset the seasonal losses that we did not incur earlier in the year, last year, in the first quarter, from the acquisition of Strata that was in March. And so that comes with a headwind in the first three months that we will experience this year, and the benefits of the full year of Texcrete more than offsets that. And so if you look at our growth year-over-year, really, you could look at all that growth as being organic at this point in time. I mean, we've not included any future acquisitions in our guidance.

Roll that out into those new sites, but right now very good traction on our dynamic pricing going into 2026.

Okay. Thank you.

Okay.

Just a reminder to you limit yourself to one question and one follow up our next question comes from Trey Grooms of Stephens Inc. Please go ahead.

Yeah, Hey, Brian Nathan This is Ethan on for Trey. Thanks for taking the question I wanted to dive further into the puts and takes on the margin outlook, that's baked into the into the guidance because the full year guidance seems to imply relatively modest EBITDA margin improvement.

Brian Gray: Our guidance of midpoint of $540 would imply about a 9% growth rate, really, on that organic business. And then, you know, I've mentioned that Oregon is going to be flat, and you take, you know, Oregon being flat, that would imply that, you know, we're mid-single, mid-teens, you know, 14, 15% on the remainder part of that business, which would be Central, Mountain, Legacy Pacific. And so we see solid growth, going into this year, as it relates to, you know, the organic business, and the contributions from the acquisitions we did last year.

I know you've mentioned that there is a geographic mix shift within the backlog, but it sounds like materials margins will be strong in services margins. We'll also see a step up and then of course, we know weather was a pretty large headwind to 2025, so any more color on the puts and takes on the margin guidance for 2006, it would be helpful.

Yes, I'll take that one so good talking to you yes.

EBITDA.

Margin for the midpoint is going up.

10 to 20 basis points from last year, and so if you look at our individual product lines gross profit as Nathan mentioned, we are expecting to see somewhere in that 200 basis point margin improvement in aggregates and frankly, we're seeing margin improvements in our budget and all of our product lines and that really is coming from our dynamic pricing model.

Garik Shmois: Very helpful. Thank you.

Operator: Thank you. The next question comes from Ivan E. at Wolfe Research. Please go ahead.

And our <unk> initiatives fitting into that because of the shift.

Ivan Yi: Yes, good morning. Thanks for the time. Now, I know you guys don't provide quarterly guidance, but can you give some color on the trajectory of your full year guidance for 2026? What should we expect in terms of ag volumes, price, or margins in Q1, specifically? Anything outside of normal seasonality? Any additional color would be great. Thanks.

Ivan Ji: Yes, good morning. Thanks for the time. Now, I know you guys don't provide quarterly guidance, but can you give some color on the trajectory of your full year guidance for 2026? What should we expect in terms of ag volumes, price, or margins in Q1, specifically? Anything outside of normal seasonality? Any additional color would be great. Thanks.

We've mentioned, Oregon being flat.

This year in energy services being flat, we're definitely shifting more of our EBITDA contribution as a percent of total contribution to the mountain and the central regions and those have slightly lower EBITDA margins, even though they too are seeing good traction and good movement.

Nathan Ring: Yeah, I'll start with the seasonality piece of that, and then we can get into the ag volumes and the outlook for the maybe quarter and for the year. So we did share last year at this point, Ivan, you might be able to go back and take a look, of the seasonality change that we did have coming with Strata. And so that did increase. At that time, we said 8% would be the seasonal loss that we'd have for Q1, now with Strata in place. Now, Brian just mentioned two pieces that do kind of offset each other. He mentioned Texcrete for the full year, but he had mentioned that we do have that loss with Strata. That was baked in last year.

And margin expansion in those regions. They are at a lower margin in the west and so that's what's going on without a good traction good movement on all of our product lines for gross profit improvements.

Got it that's super helpful and then for the follow up quickly.

Quickly you just a question on Oregon, So at what point could we return to.

Year over year growth in Oregon.

And how important is funding clarity to achieving this sort of leveling out given the easy comps, especially in the <unk> and the <unk> of 2025 and also considering the private side in Oregon seems to be doing pretty well. So any more color that would be helpful. Thank you guys the private side definitely.

Nathan Ring: So maybe some of the benefit from Texcrete this year softens that 8%. But that does give you an idea of what the seasonality would be for Q1, and then the benefit of that coming later in the year, probably predominantly in Q3, maybe a little bit in Q4.

Rebounded well in the late third quarter and benefited us well into the fourth quarter and was a big part of the success that we had in Oregon.

Ivan Yi: Thank you.

Ivan Ji: Thank you.

Nathan Ring: Does that answer your question?

Ivan Yi: Yes.

Ivan Ji: Yes.

Nathan Ring: Okay.

Ivan Yi: As a follow-on, you've provided guidance on the volumes for Ready-Mix and Asphalt. Can you give more color and expectations for the pricing for those two segments? Thank you.

Ivan Ji: As a follow-on, you've provided guidance on the volumes for Ready-Mix and Asphalt. Can you give more color and expectations for the pricing for those two segments? Thank you.

Quarter over quarter improvements in the fourth quarter or third quarter.

Public funding is a big part of our success also in Oregon and clarity on that will be important.

Brian Gray: Yep. So as you know, the input costs have a pretty big impact on our costs, therefore, pricing. And so on Ready-Mix, the 2 biggest factors that really are outside of our control is the cement pricing and then the products that our customers are asking for, which would be mix design, you know, different mix designs. And so you could look at a job like we have right now, that P-209 project that I mentioned in Hawaii. The price of that material is much, much higher than it would be for, let's say, residential, which is a lot of what the Texcrete acquisition does.

I think relatively safely say that we don't expect any major shifts at all at this point in time for 2026 and that.

A stable budget.

And Oregon with the tons that have already been let or in the bidding schedule to be relatively flat to last year, and so I feel comfortable saying that the results for Oregon in 2026 should be in line with what we had in 2025 and so yes, we're very hopeful the legislature is currently discussing infrastructure fund.

<unk>.

Literally in their short session. It's in session now.

Brian Gray: And so what I can tell you on ready-mix pricing and asphalt pricing, because it's a big influence by liquid asphalt, is that our commercial excellence initiatives, our teams, our sales teams, are totally focused on optimizing prices. They're continuing to use dynamic pricing, and we see that momentum that we've had in the previous years, you know, continue forward as we roll out and continue to implement the new dashboards and tools that we've given to our sales team. Solid traction on pricing going forward, but heavily influenced by product mix and by input costs such as cement and liquid asphalt.

And expect that that conversation will really built into next years longer session, where we anticipate they would have a robust conversation and passed a longer term much larger bill to the $4 3 billion.

<unk> got really passed earlier that should happen in 2027, if you talk to the legislators and Salem, Oregon.

Got it that's very helpful. Thank you and I'll pass it on.

Okay.

Thank you. Our next question comes from Kathryn Thompson Thompson Research Group. Please go ahead.

Alright, Thank you for taking my questions today.

You had in your prepared commentary.

About.

Self help versus pricing and transitioning from not just focusing on pricing, but also.

Ivan Yi: Great. Thank you.

Ivan Ji: Great. Thank you.

Brian Gray: Yep.

Operator: Thank you. We have no further questions. I will turn the call back over to Brian Gray for closing comments.

Acute focus on cost controls to drive margins when you look at a regional standpoint.

Brian Gray: Well, thank you again for joining us today. Thank you to our Knife River team members. A fantastic job last year. We really appreciate that. We have good momentum going into 2026. I'm excited for what we accomplish in the year ahead. With that, I'll say goodbye. Thank you.

Do you have left in your mountain divisions, which.

Fairly outsized.

Performance in the quarter, what drove these outside gains and how much with self help versus pricing. Thank you.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.

No I appreciate that Kathryn.

Yes, we had a fantastic fourth quarter it was up 47%.

Over last year, and I would say Katherine I think you could just put that in three big buckets that variance year over year. The first one is we certainly had favorable weather and in particular in the mountain region, which allowed us to do more asphalt paving.

We also benefited really a lot of our regions as it relates to just stay out working aggregate sales ready mix sales were solid we were able to utilize our equipment pool more efficiently in that fourth quarter and so.

One of those large benefits variances for the fourth quarter was definitely favorable weather. The second one was we had good contributions from our acquisitions led by strata.

We also had another four other very nice acquisitions last year tax rate came in mid December and very excited about that acquisition and then other contributions from the acquisitions that was part of our.

Positive variance for the fourth quarter and the last one was what you mentioned just the operational execution and implementing edge initiatives now, we obviously had a partial or.

The full benefit of that.

Recouping some of those pre production costs that we incurred earlier in the year. This came back to benefit us in the fourth quarter, but more importantly, it was our team's executing on our edge initiatives and really looking at their cost and controlling our costs very tightly and very proud of the team and the work they did in the <unk>.

<unk> on cost controls that really are going to bleed into this year is a big part of our focus in 2026.

Continue those.

Cost control measures.

Looking at Kpis, and just really focus specifically on aggregates, but frankly, all the product lines.

We'll benefit from that this year.

Okay, great. Thanks.

I'll talk about getting.

<unk>.

Capital allocation our capital planning.

Plenty of capital to deploy into calendar 2020.

Could you just tell us a little bit more or give some broader.

Color on.

What youre seeing in your pipeline for M&A.

And organic and then other organic initiatives that.

Youre, hoping to execute and sure. Thank you.

Yes, we're very excited about our growth strategy and I'll start off talking about the pipeline and the organic opportunities and then turn it over to Nathan If you can talk about our strong balance sheet and capacity to go out and continue our growth strategy.

We have a very disciplined approach.

Looking for strategic fits that fit both our cultural fit in our financial expectation that wed have all of the deals we did last year, Catherine and new deals that we're looking at our pipeline and our pipeline when I say it looks very similar to last year I'm talking about the types of deals and there the size of the deals and the location of the deals they're aggregates based.

Many of them are vertically integrated.

A them are infill bolt ons to our existing operations.

We certainly will look at states adjacent to our current footprint of current states or regions that we do business in.

And these mid size higher growth markets and we are looking to continue to balance our portfolio and the nice thing about this is it all starts at the local level with local relationships and just like all of the deals. We did last year. They are negotiated deals directly with the sellers at those high single digit.

Multiples very attractive multiples. So the pipeline is robust the pipeline is full I've talked about the hundreds of opportunities in our states that we do business in it because we are vertically integrated we will look at aggregates ready mix asphalt contracting services opportunities as long as we can continue to focus on the supply of aggregates to those operations either from.

New resources or from our existing resources.

I'd say that the last thing before I turn it over to Nathan.

It is very important part of this process is this a playbook that has proven and one that we've been using for over 30 years, we continue to refine it we've done almost 100 deals now since the early nineties and really it's very focused on getting the right deals in the pipeline being very disciplined at the deals we put in there.

Pipeline and going out and courting those relationships the second part of that.

Doing a very thorough job disciplined job of due diligence and both of those activities are led by our local regional teams, which then feeds into the third phase which is integration.

And that is also.

Heavy influence with a local team at the regional level with oversight and support from corporate so very proud of our.

M&A program, our growth strategy, what we've done the last two years since the spin.

Organically, we have identified a number of very exciting projects that have frankly higher returns than even our M&A opportunities and continue to go out and execute on the organic growth.

Entering new markets and the Idaho.

Expanded our.

Capacity as we see more asphalt paving coming on we've added capacity to Texas and South Dakota. So, it's certainly spending some money organically as well so with that maybe I'll just let you talk a little bit about the capacity, yes. Good morning Catherine.

The good news here is that to support the capital deployment all the the good things, we've got going on that Brian talked about.

We've been disciplined in how we have maintained our balance sheet and we have solid cash flow. So Catherine I'll put it into three buckets for you.

Give me confidence in what we've got from our balance sheet. Our support perspective for this growth that we've talked about first we have the liquidity to act quickly as I mentioned, we've got ended the year with $75 million of cash on hand $475 million available on our revolver. So as deals come up we have the ability to move quickly on them.

Secondly, we expect solid cash flows from our operations in fact for this year 2026, we expect our cash flow from operations to be about supposedly the historical average of two thirds of EBITDA and so we've got cash flow coming from operations and then the third part is the balance sheet itself. The net leverage position. We ended the year at two two times net leverage.

As I've shared before our target is two five times. So we're below that and I think for the right deal fits our strategy has the right financial metrics with it we'd be willing to go higher than that maybe closer to three for a short duration and then see that long term go back to two five so we got the liquidity the cash flows and the balance sheet all of the support.

Deals and that's where we want to put our capital work is growing this company that Brian outlined for us.

Great. Thanks, very much for that color good luck.

Thank you.

Thank you next question comes from Derek Schmidt at Loop capital. Please go ahead.

Oh, hi, Thanks, Scott Congrats on the quarter first of all just on SG&A just to piggyback on the off on the left.

<unk>, how should we think about SG&A inflation.

This year, both from an underlying standpoint, plus any incremental that you have with respect to the inorganic growth plan.

Yes, I'll take that one good morning Garrett good to hear from you also.

So SG&A. The first part here is we take a look at 2025 and the increase that we had this year I will just identified the key buckets, there and we talked about them a fair amount throughout the year.

And kind of back to the last question. They all relate to growing this company, which is the exciting part of it. So the the largest increase that we had the largest bucket for the increase we had in SG&A was really related to the administrative costs that came with our acquisitions did five acquisitions last year and they brought some SG&A with them. So that was the largest piece the.

The second largest also relates to growth and we talked about this throughout the year that onetime step up related to our business development team and getting them in place to pursue acquisitions as well as our edge teams to pursue like the pit crew and the opportunities. They are going after so the two largest components really of our SG&A increase relate to growing the company.

The next piece really is as I shared before the the ongoing costs ocado the operations or the SG&A grew mid single digits, which is what I shared at the beginning of the year. So garrick, 24% to 25 those are the three buckets that caused the increases as we look forward I mentioned earlier that we expect SG&A as a percent of revenue.

To be in line year over year, if you look closer at that again similarly, the ongoing costs and there we see growing mid single digits very comparable to what we see throughout the organization a mid single digit increase in cost maybe towards the lower end of that range and if you're wondering well what else could be impacting that one thing that I'd add to it is that in 'twenty five.

Did have higher gains on the sale of assets, most notably that east, Texas sale that we started a few years ago. We finished that so that's a game that we don't obviously anticipate for 'twenty six that would be part of the increase you see going from 25 to 26, but outside of that the underlying costs, increasing mid or maybe even the low end of that mid range single digits hopefully.

Thats helpful.

Thank you my follow up question is on volumes on your guidance.

Considerably stronger than the other public peers.

Wondering if you're kind of popped out a little bit more you talked a little bit about the regions a little bit about.

Some of the infrastructure projects and the pull through from our contracting services.

Im wondering if theres anything else maybe on the private side and then also is there any weather catch up considering that was such a headwind, particularly through the first three quarters of 'twenty five.

Thank you Eric.

<unk> had that benefit a little bit in the fourth quarter with positive favor.

Favorable weather in the fourth quarter, and so I would say that the backlog that we've got going into next year.

Would not be a lot of <unk>.

Delayed work.

Certainly impacted us at the beginning of the year because of some challenges at the beginning of the year, but we had a strong fourth quarter and have a good backlog going into next year the volumes being up mid single digits for aggregates I'll start with that one really is also related to ready mix volumes being up mid teens. The addition of <unk> more than doubled.

<unk> our supply in the Texas triangle.

So that would be a large part of our mid teen increase.

And being supplying aggregates to that operation would also be part of the mid single digit increase on aggregates, but if not just Tex creat Nathan that I've talked about the additional asphalt paving that we have in our backlog as we see strong pull through of aggregates going into our asphalt plants.

And then the aggregate sales are just are becoming stronger end markets like Oregon and.

You saw that again in the fourth quarter results those higher margin third party aggregate sales in the metropolitan market in Portland, certainly benefited us. So we continue to focus additional third party sales in central region.

So I would say all of those factors gives me good confidence in our volume projections of mid single digits for aggregates in the mid teens on ready mix.

Great. That's helpful. Thank you very much.

Thank you. The next question comes from Ian Zaffino of Oppenheimer. Please go ahead.

Okay, great. Thank you very much.

Why don't you just kind of drilling in on the comment about data centers.

Give us a little bit more color there.

Propane.

Being kind of a portion of the backlog youre seeing or maybe.

How quickly these jobs convert.

And what's happening as far as backlog into conversion.

And then the other kind of margins and any other type of color you can give us on that thanks.

Thanks, Ian I would say that virtually.

Zero amount of dollars in our backlog are related to data centers. We have a lot of data centers that were working on right now, but most of that would be on the material supply of the business.

Just some very small paving projects, but that would not move the dial at all on our record backlog of a $1 billion. We are currently working on 'twenty, one data centers and again most of that would be through the supply of aggregates or concrete mostly to those projects.

And I think that is the tip of the iceberg. If you look at the amount of work that we have out there pending.

Bids that are out there that we have provided in the last say two months.

It's significantly more than what we currently have supply contracts for it so.

Very big upside.

Each one of our states several of our states, our Wyoming has a lot of opportunities.

North Dakota is currently working on some Datacenters Oregon's working on data centers. So we're in the heart of our some of our home operations, where we have local aggregates and ready mix plants.

Data centers are being built and so we see that as a very bright spot frankly.

Anything that we would be securing new work would be on the upside of our range of guidance and so we have not baked in any.

Our expectations.

For our midpoint of our guide on data centers, but I can tell you that.

In my career I mean, just even the last two years, we've never seen.

This level of pending.

Work in bids that we've got out there and very good negotiations going on right now.

They are higher margin upstream materials for the most part.

Aggregate supply ready mix supply with either an onsite batch plant or a local batch plant close by and then asphalt paving going into some of these new Greenfield site. So very excited about the opportunities in data centers.

Okay. Thanks. So then how do we then think about margins going forward right. So you're getting a favorable mix from unless you are getting.

<unk> on the edge program was a lot of other initiatives that are kind of firing on all cylinders and so how do we kind of puts us all together as you chime in.

The 20% margin target.

Accelerating it or no.

When do we actually see you achieve those levels.

Yes, I think.

We are proud of the progress we've made in call.

Call it two and a half years since we spun in three years really since we started implementing our edge initiatives.

Let me just give you the success.

Some numbers here of the progress we've made in those three years four.

<unk> gross profit margins on aggregates, we've improved 450 basis points in three years on ready mix, we've improved 300 basis points ASP.

Asphalt 570 basis points liquid asphalt 450 basis points and contracting services 280 basis points from the end of 2022 to the end of 2025 and so in I mean, I think we've been pulling hard on obviously the pricing dynamic commercial excellence levers.

Shifting our attention more focus on the operational excellence and cost controls.

And it's not linear as you know.

You pick up some lower hanging fruit, sometimes and so we do expect margin expansion to continue in all of these product lines and we're very excited about that now.

Yes, I would.

I'll leave it at that.

Alright, Thank you very much Jeff.

Yep.

Ladies and gentlemen, as a reminder, should you have any questions. Please press star one.

Next question comes from Garik <unk> from total Michael Please go ahead.

Hey, good morning, Thanks for taking my question just as we think about 2026 and the outlook you provided I was wonder if you go into little more detail or quantification around the impact of acquisitions you did in 2025.

What that organic.

Look like for 2026.

Yes, So I think the acquisition that we did late in the year Techs Creed.

You could look at the contributions from <unk> in 2026 all of 2026.

To offset.

Seasonal losses that we did not incur earlier in the year last year in the first quarter from the acquisition of strata that was in March and so that comes with a headwind in the first three months that we will experience this year and the benefits of the full year of tax credit more than offsets that so if you look at our growth.

Year over year really you could look at all of that growth as being organic at this point in time I mean, we've not included any future acquisitions.

In our guidance and our guidance midpoint of $5 40 would imply about a 9% growth rate really on that organic business.

And then I've mentioned that Oregon is going to be flat and you take Oregon being flat that would imply that we're mid single or mid teens.

2014, and 15% on the remainder part of that business, which would be central mountain legacy Pacific.

And so we see solid growth going into this year as it relates to.

The organic business and the contributions from the acquisitions, we did last year.

Very helpful. Thank you.

Thank you. The next question comes from iPhone.

Research. Please go ahead.

Yes. Good morning. Thanks for the time now I know you guys don't provide quarterly guidance, but can you give some color on the trajectory of your full year guidance for 2006.

What should we expect in terms of AG volumes price or margins and <unk>, specifically anything outside of normal seasonality any additional color would be great. Thanks.

Yes, I'll start with the seasonality piece of that and then we can get into the AG volumes and the outlook for the quarter and for the year. So we did share last year at this point Ivan you might be able to go back and take a look of the seasonality change that we did have coming with strategy.

And so that did increase at that time, we said, 8% would be the seasonal loss that we would have for the first quarter now with strata in place now Brian just mentioned two pieces that do kind.

Kind of offset each other he mentioned X feet for the full year, but he had mentioned that you do have that loss of a strategy that was baked in last year. So maybe some of the benefit from tax credit this year softens that 8%, but that does give you an idea of what the seasonality would be for the first quarter and then the benefit of that coming later in the year, probably predominantly in the third quarter.

Maybe a little bit in the fourth.

Yeah.

Thank you.

Yes, okay.

Okay.

As my follow on you got you're providing guidance on the volumes for ready mix and asphalt can you give more color on expectations for pricing for those two segments. Thank you.

So as you know the input costs have a pretty big impact on our costs and therefore pricing and so on ready mix. The two biggest factors that really are outside of our control.

As the cement pricing and then the products that our customers are asking for which it would be mixed design.

Different mixes and so you could look at a job like we have right now that <unk> hundred nine projects that I mentioned in Hawaii. The price of that material is much much higher than it would be for let's say residential which is a lot of what the <unk> acquisition does and so what I can tell you on ready mix pricing and asphalt pricing because it is.

A big influence.

By liquid asphalt is that our commercial excellence initiatives our teams our sales teams are.

Totally focused on optimizing prices there continue to use dynamic pricing and we see that momentum that we've had in the previous years.

Continue forward as we roll out and continue to implement new dashboards and tools that we've given to our sales team. So solid traction on pricing going forward, but heavily influenced by product mix and by input costs, such as cement and liquid asphalt.

Okay.

Alright, thank you.

Chip.

Thank you we have no further questions I will turn the call back over to Brian Kearney for closing comments.

Well. Thank you again for joining us today. Thank you to our nature of our team members are fantastic job last year. We really appreciate that we have good momentum going into 2026 I'm excited for what we accomplished in the year ahead with that I'll say goodbye. Thank you.

Ladies and gentlemen, this concludes your conference call quite cobalt, we thank you for participating on the Apple. Please disconnect your lines.

Okay.

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