Welcome to Martin Marietta's Q2 2023 Earnings Conference Call. All participants are now in a listen-only mode. A question-and-answer session will follow the company's prepared remarks. As a reminder, today's call is being recorded and will be available for replay on the company's website. I will now turn the call over to your host, Ms. Jennifer Park, Martin Marietta's Vice President of Investor Relations. Jennifer, you may begin. Thank you. It's my pleasure to welcome you to our Q2 2023 earnings call. Joining me today are Ward Nye, Chairman and Chief Executive Officer, and Jim Nickolas, Senior Vice President and Chief Financial Officer. Today's discussion may include forward-looking statements as defined by United States securities laws in connection with future events, future operating results, or financial performance. Like other businesses, Martin Marietta is subject to risks and uncertainties that could cause actual results to differ materially. We undertake no obligation, except as legally required, to publicly update or revise any forward-looking statements, whether resulting from new information, future developments, or otherwise. 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 websites. We have made available during this webcast and on the investor section of our website, supplemental information that summarizes our financial results and trends. As a reminder, all financial and operating results discussed today are for continuing operations. In addition, non-GAAP measures are defined and reconciled to the most directly comparable GAAP measure in the appendix to the supplemental information, as well as our filings with the SEC and are also available on our website. Ward will begin today's earnings call with a discussion of our operating performance. Jim Nickolas will then review our financial results and capital allocation, after which Ward will conclude with market trends and our outlook for the remainder of 2023. 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, Jenny. Welcome, everyone, thanks for joining this quarterly teleconference. I'm pleased to report Martin Marietta's exceptional performance across nearly every safety, financial, and operational measure in the Q2, which built upon our record Q1 performance. Given the overall challenging macroeconomic environment, including continued monetary policy tightening and the related residential housing slowdown, our strong quarterly performance is a testament to our team's focus and resiliency of our differentiated business model. In addition to our results and consistent with our aggregates-led product strategy, we also finalized the divestiture of our Stockton, California, cement import terminal in the Q2, further enhancing our company's margin profile and improving the durability of our business through cycles. As indicated in today's earnings release, we revised our 2023 guidance to reflect the company's results from the first half of the year and our current expectations for the second half. Notably, we raised our 2023 Adjusted EBITDA guidance to range from $2 billion-$2.1 billion, or a 28% increase at the midpoint as compared with the prior year. The core assumption underpinning the Adjusted EBITDA guidance is that accelerated commercial momentum will more than offset lower shipments and higher costs as we endeavor to continue managing the last two years of historic inflation. Further, given the typical lag effect between single-family housing starts and aggregates demand, we expect recent aggregate shipments declines will find a bottom in the Q3 of 2023. Against that backdrop, Martin Marietta Materials achieved strong Q2 results across a number of areas, including consolidated total revenues of $1.82 billion, an 11% increase, consolidated gross profit of $560 million, a 32% increase, Adjusted EBITDA of $596 million, a 25% increase, and aggregates gross profit per ton of $6.80, a 28% increase. These stellar results reflect the continued disciplined execution of our strategic plan through economic cycles. Shifting now to our Q2 shipment and pricing results, starting with aggregates. Aggregate shipments declined 5.7% as we experienced the expected lag between last year's decline in single-family housing starts and our shipments to the residential market. Predictably, though, aggregates pricing fundamentals remain attractive, with pricing increasing 18.6% or 17% on a mix-adjusted basis. The Texas cement market continues to experience robust demand and tight supply amid near-sold-out conditions, particularly in the Dallas-Fort Worth Metroplex. Q2 shipments were a record 1.1 million tons, and pricing grew 21.8%. We fully expect that favorable Texas cement commercial dynamics will continue for the foreseeable future and expect solid realization of the $10 per ton price increase, effective July 1. Shifting to our targeted downstream businesses, ready-mix concrete shipments decreased 1.7%, while pricing increased a robust 21.9%. Asphalt shipments increased 1.7%, and pricing improved 7.9%. Before discussing our outlook for the remainder of 2023, I'll turn the call over to Jim to conclude our Q2 discussion with a review of the company's financial results. Jim? Thank you, Ward, and good day to everyone. The building materials business posted record Q2 revenues of $1.74 billion an 11.6% increase over last year's comparable period, and a quarterly gross profit record of $536.1 million, a 34.3% increase. Aggregate's gross profit improved 20.7% relative to the prior year period, resulting in a quarterly record of $370.9 million, as strong pricing growth and lower diesel fuel expenses more than offset lower shipments and increased non-energy related costs. Our Texas cement business also continued its track record of exceptional performance. Revenues increased 21.7% to $197.7 million, and gross profit increased 84% to $93.3 million. As previously discussed, our Midlothian, Texas plant is installing a new finish mill that we expect to be finished in the Q3 of 2024. Upon completion, the new finish mill will provide 450,000 tons of incremental, high-margin annual production capacity in today's sold-out Dallas-Fort Worth marketplace. This project will achieve its first major milestone this month, as our new cement silos will begin loading customer trucks. The new silos and load-out system are dramatically improving customer service by reducing load-out cycle times by as much as 45-60 minutes per truck during periods of peak shipping. In addition, this project has increased cement storage capacity by over 60%. The process of converting our construction cement customers from Type I, Type II cement to a less carbon-intensive Portland-limestone cement, also known as Type IL, is now complete at both our Midlothian and Hunter, Texas, plants. We expect the Type IL conversion to provide additional production capacity of 5% this year as compared to 2022 and help reduce our carbon footprint. Our ready-mix concrete revenues increased 19.7% to $271.4 million, and gross profit increased 142.3% to $35.4 million, driven primarily by strong pricing gains in the quarter, more than offsetting higher upstream raw material costs. Our asphalt and paving revenues increased 11.7% to $240.9 million, and gross profit increased 37.9% to $36.5 million due to pricing improvement, coupled with lower bitumen costs as compared to the prior period. Magnesia Specialties revenues totaled $80.5 million in the Q2, in line with the prior year quarter. Gross profit increased 13% to $27.7 million. Notably, gross margin increased 440 basis points from the prior year quarter to 34.4%, driven by pricing growth and moderating energy expenses. As a general matter, energy costs are down from last year's highs and have now seemingly stabilized. Non-energy costs continue to grow at rates well above historical averages. We expect that to continue throughout the rest of this year. That said, expected mid-year price increases should serve to offset the expected cost inflation. During the quarter, we returned $116 million to shareholders through both dividend payments and share repurchases. We repurchased nearly 178,000 shares of common stock at an average price of approximately $422 per share in the Q2. Since our repurchase authorization announcement in February 2015, we have returned a total of $2.5 billion to shareholders through a combination of meaningful and sustainable dividends, as well as share repurchases. Our net debt-to-EBITDA ratio continued its downward trend and ended the quarter at 2.1 x, within our targeted range of 2x-2.5x. This balance sheet strength gives us ample flexibility to continue investing in the business and pursuing accretive acquisition opportunities, while at the same time extending our long record of returning capital to Martin Marietta shareholders. With that, I'll turn the call back to Ward. Thanks, Jim. With this year's construction season well underway, we're confident in Martin Marietta's bright prospects for the remainder of 2023. We continue to be encouraged by a number of factors that support sustainable demand for our products across the infrastructure and heavy non-residential construction sectors. As indicated in our supplemental materials, historic legislation, including the Infrastructure Investment and Jobs Act, or IIJA, Inflation Reduction Act, and CHIPS Act, are expected to provide funding certainty for large infrastructure, manufacturing, and energy projects for years to come. As such, we expect the related product demand for these key end-use segments to be largely insulated from any mild to moderate private sector contraction. We begin with infrastructure, which accounted for 36% of our Q2 aggregate shipments. The value of state and local government, highway, bridge, and tunnel contract awards, a leading indicator for our future product demand, is again meaningfully higher year-over-year, with growth of 25% to a record $114 billion for the 12-month period ending 31 May 2023. Importantly, in addition to incoming IIJA funding, state legislatures are choosing to commit considerable investment to transportation projects. For example, Texas and North Carolina have directed portions of sales tax collections to infrastructure, while Florida is transferring general funds to augment state Department of Transportation resources. We expect this increase in public sector investment to drive sustained multiyear demand for our products in this important, often countercyclical end market. Moving now to non-residential construction, which represented 35% of our Q2 aggregate shipments. As warehouse construction has moderated from its post-COVID peak, other heavy industrial projects led by onshore manufacturing and energy continue to drive demand in the segment, accounting for the majority of total non-residential shipments. Construction spending for manufacturing in the United States has accelerated to well above record levels, as the May seasonally adjusted annual rate of spending for 2023 is $194 billion, a 76% increase from the May 2022 value of $110 billion. Since 2021, supported by enhanced federal investment from the Inflation Reduction Act and CHIPS Act, private companies have announced over $500 billion in commitments to invest in critical sectors like semiconductors and electronics, electric vehicle and related batteries, and clean energy, as those projects are of both economic and national security consequence. Further, the nation's aim to be the global leader in artificial intelligence and machine learning is expected to drive substantial demand for new data centers for the foreseeable future. As a result, we expect an extended cycle within the aggregates intensive, heavy, non-residential sector. We also remain optimistic about Martin Marietta's light non-residential end markets, where we've yet to experience any notable weakness as shipments to end process projects continue. We're actively monitoring this portion of the segment, but expect any possible future softness to be partially offset by the relative strength of the more aggregates intensive, heavy, non-residential project pipeline. Moving to residential, shipments to this segment accounted for 24% of total aggregate shipments this past quarter. Given the structural housing deficit in key Martin Marietta markets, we correctly anticipated that the affordability-driven residential slowdown would be short-lived. We're encouraged by recent public home builder sentiment and single-family starts data, which are indicative of a near-term bottoming and inflection point. The significant underbuilding over the last decade, coupled with existing homeowners' reluctance to abandon their low rate mortgages, is exacerbating the housing deficit. Available home inventory is being disproportionately driven by new home construction, a notable trend that we expect to continue for the foreseeable future. Our record-setting Q2 performance provides outstanding momentum and a solid foundation for the balance of the year. We're confident in our ability to achieve our raised 2023 financial guidance. We believe our most recent results validate the secular durability of our proven aggregates-led business model and our team's steadfast commitment to health and safety, commercial and operational excellence, sustainable business practices, and the execution of our SOAR 2025 initiatives will support our success. We remain focused on building and maintaining the safest, most resilient, and best performing aggregates-led public company. If the operator will now provide the required instructions, we will turn our attention to addressing your questions. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request. Should you wish to remove yourself from the queue, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please, for your first question. The first question comes from Trey Grooms of Stephens. Please go ahead. Hey, good morning. Good morning, Jim. Good morning, Trey. I guess I wanted to touch on the cement volume board. It was, you know, seeing it was actually up slightly year-over-year on a tough comp and, you know, it's no secret that Texas weather wasn't particularly favorable in the quarter. You know, granted, I think, you know, maybe cement can hold up a little bit better in bad weather than maybe, you know, aggregates or asphalt, but that's still impressive. Could you give us, you know, a little more color on kind of the drivers there in Texas for cement, what you're seeing there with those end markets? With that, you mentioned, you know, you expect favorable traction on the mid-year cement increase. Any additional color you could give us around that? Happy to, Trey. Thank you for the question. First, you're right. It was wetter in Texas. We had 20 weather-impacted days this quarter, as opposed to 16 in the last quarter. I think what that does tell you is the essence of what you asked is right, and that is cement, because some of it's going to vertical construction as opposed to horizontal construction, can actually weather weather better than aggregates can or asphalt can, because they're both going down literally on the ground in most instances. What I would say relative to the business, number one, it is very durable in Texas. If we go back to our definition of strategic cement, the business we have in Dallas and the business we have in San Antonio fits it perfectly. If we think about Texas as a market all by itself, North Texas is the single healthiest market in Texas. If we look at the way Midlothian continues to perform, and it's performing very well, that was the single strongest cement performer that we had. That said, Hunter was a very solid performer as well. If we're looking at overall volumes of 1.1 million tons, the important thing to remember is that market's largely sold out. In essence, short of that capital project coming through next year, we're basically running at capacity. Having a cement business in Texas with the biggest piece of it in Dallas-Fort Worth, running at capacity is a really good start for a cement business. The second part of your question was relative to the mid-years. We have announced a $10 per ton mid-year price increase in cement in Texas. We think we're going to get very good traction on that, more to come on that as we come toward Q3. Again, a very solid performance by our team. They continue operationally to run that business extraordinarily well. Again, if you're looking at what the pricing has done, Q2 saw pricing up 21.8%. Even if you look at mix adjusted, it was still over 21%. As Jim outlined in his prepared remarks, we continue to see in different parts of the business, degrees of inflation. Part of what we're trying to do with our pricing is stay at least even or try to do some catch up on that. Trey, I hope that's responsive. Yep, absolutely. Thanks for the color, Ward, and keep up the good work. Thank you. Thank you, Trey. Thank you. The next question comes from Stanley Elliott of Stifel. Please go ahead. Good morning, Ward, Jim. Thank you guys for the question. Ward, you know, I guess we're getting halfway to the point of the SOAR 2025 program you outlined two years ago. Where do you think we are strategically, you know, and from an overall perspective? I say it in the context that now you have an infrastructure bill, there's other government programs that really weren't on the table at that time. Just like to see how you're thinking about things. Stanley, thanks for that question. A couple of things. One, if we think about what we outlined, it's important. We talked about value over volume. If we're looking at a price-cost spread, we're 200 basis points ahead of that today. I think from that perspective, we're where we thought we would be. If we're looking at bringing operational excellence to the enterprise, and we're looking at the best safety metric rates at this time of year we've ever seen, if we're looking at continued throughput and tons produced per working man hour, they continue to go up. If we also take a look at what we said we would do relative to growing our business, the short answer is we're ahead of plan on that. If in year one, in 2021, we bought Tiller and Lehigh West. We spent year two, really last year and the year before, doing portfolio shaping and really getting our leverage back down to the areas that we told you that we would. Keep in mind, in a post West Coast world, we were modestly over 3x levered. Today, we're down to 2.1x. When we're looking at our range of debt to EBITDA at 2x- 2.5x, we're at actually the lower end of that. Then I think importantly, if we're looking at the pipeline that we have today to continue growing our business, it's a very attractive pipeline. I think what's important in that, Stanley, is it's attractive in the areas that we've continued to say are most important to our business, and that's back to the notion of an aggregates-led business. Again, if, if we're measuring where we were from the perspective of, we said we thought during that five-year period, we could double our market cap, you know, math tells me we're like 60+% there, and we're about halfway through. Again, tactically, I like where we sit. If we look strategically on how we think it's coming together, look, I, I think at the end of the day, the plan works. Thank you so much for the question. Great. Thanks, guys. Best of luck. You bet. Thank you. The next question comes from Kathryn Thompson of Thompson Research. Please go ahead. Hi, thank you for taking my question today. Gave some good color on guidance, just a couple of clarification on the updated EBITDA guidance. Pricing is improving, volumes are adjusted, given today's results against that back. How much does pricing versus lower costs for certain categories play into the change? What are you seeing in key end markets? We know Texas and North Carolina are key states that are doing quite well, are there other end markets from geographic standpoint that are contributing to the change in that guidance? Thank you. Good morning, Kathryn. Thanks for the question, too. Look, if we're looking at really what the drivers are, clearly what we're seeing relative to average selling price is the single largest driver that we have right now. If we're looking at Q2 and aggregates up 18.6%, you know, a really nice performance, obviously, in cement. We talked about that over 20% ready-mix, tracking the same thing. You know, these are all important points relative to the revised EBITDA guidance, and it does give you a sense that in today's world, pricing is actually considerably more powerful than volume is. I think that's, to me, in so many respects, part of what's important to underline. To that end, if we're looking at the volume and we're seeing what some of the differences are, several things are worth noting. One, relative to volume, we think in the quarter, we lost about one million tons simply due to weather. If you were here in the Mid-Atlantic, what you saw is the second half of June was frankly, a washout. It rained nearly every day. When the Carolinas and Georgia are feeling that, we feel that on volume. I think importantly, too, if we're looking at value over volume and what we think that cost us relative to volume for the quarter, we think that was probably about one million tons. By the way, we think that was probably a pretty good trade. Equally, if we're looking at what Jim and I both spoke to in our prepared comments, and that is with respect to the residential market. Again, we think housing itself has found bottom, but we tend to lag in that on when the stone finds its way to new subdivisions. We think we're actually troughing in that as we sit here, probably today, going into the Q3, we think that probably cost us about half a million tons. Again, if you're looking at what the drivers are going to be, will price be the disproportionate driver? Yes. Have we given up some volume on occasion, intentionally and purposefully, because we feel like really holding firm on some pricing that we feel like is fair, is the right thing to do relative to our shareholders? We do. To the last part of your question, relative to how different markets look, here's what I would tell you. The Southeast remains strong. If we're looking at the Carolinas, if we're looking at Atlanta, if we're looking at coastal markets in the East, they continue to be quite good. If we're looking in Texas, in many respects, the results speak for themselves, but in particular, Dallas-Fort Worth in the north and Austin are strong. San Antonio and Houston are feeling degrees of residential weakness. I don't think that's a surprise anyplace. If we're looking at Colorado, Colorado had a very wet June, as I mentioned, it was the wettest June on record. If we're looking in California and Arizona, here's what we see, really strong demand in Phoenix. We see strong demand in Southern California. You know, the places that are a little bit weaker, it's a little bit weaker in San Francisco Bay Area. We thought it would be coming into the year. It's a little bit weaker in portions of the Midwest. That's a cold weather market that, in many respects, is just starting to hit its stride right now, but modestly weaker there. Overall, if we're doing a heat map across our markets in the United States, given how intentional we've been in building our business in areas that continue to have good population inflows, very good public spending, and good private growth, we're seeing better markets than not. Again, that's not a big surprise to us, Catherine. Again, I think I hit the points that you wanted to be raised, but I hope that helps. Yes. Thanks very much. Thank you, Kathryn. Thank you. The next question comes from David MacGregor of Longbow Research. Please go ahead. Good morning, everyone. Ward, I just wanted to maybe build on Catherine's question there about the tonnage. You walked through 1.5 million tons of displaced business that related to weather and other. I guess I just wanted to get your assessment of maybe the totality of what you might be behind in terms of tonnage here, just because of, you know, disruptive weather and construction projects generally running behind at this point of the year, and how much of that can realistically be captured in the second half of 2023? I guess just secondly, you know, how much availability is there in the current transportation and handling infrastructure capacity to support a Q4 volume surge in seasonal markets, if that's an option, if that's a possibility? David, good morning. Thanks for the question. Again, if I go through and tally them up, look, I think weather was one million. I think value over volume was another one million. I think residential market softening was probably 500,000. I think in some instances, frankly, just having availability of certain sizes was probably somewhere north of 500,000. Again, you start tallying those up, you're getting a lot closer to three million than two million, but by just some quick math. If I think about really what it looks like for the rest of the year, we did our best to try to capture in the revised guidance, how we thought that was gonna play. I do think it's important to reemphasize what I said in the commentary. Do I think we're likely because of housing and the timing on housing, to find volume in Q3, the most challenged of the year? I think so. Do I think we're likely to see an inflection in Q4? I do in large measure, because last year's Q4 was not a particularly compelling Q4. Again, as we see the build go through Q3, I think we've taken a very measured view, and of course, it's easier to do it in late July than it is in late February on how the year is going. I think we've captured pretty well how we think volume is gonna play out for the rest of the year. The other thing that I think is worth keeping in mind, David, is the way pricing is working now and how we see that working for the rest of the year. Because keep in mind, part of what happens at this time of year, as we report Q2, is the central part of the United States that tend to be cold weather markets, but equally don't tend to be as high priced markets as some of the ones that we have on the East Coast, simply roll in. What do I mean by that? Aggregates cost more in Charlotte than they do in Cincinnati. Remember, you're always going to have a little bit of an optical headwind relative to pricing at half year. Again, as we think about volume, we feel like we're in a perfectly good place on volume, and we think it's going to build going into four. We really like the way pricing is working. Keep in mind, we took so much of our pricing and accelerated that first price increase from January and April, almost exclusively to January. You had a number of different themes that are in play, that in some respects, the market is seeing for the very first time in this quarter, at least through an annual snapshot. David, what I try to do is give you a sense of how we think volumes will build, how we think the pricing is gonna come back to support that. I think it's important to note that we saw mid-year price increases in over 1/2 of our markets. I think if somebody had thought, you know what, that's what Martin Marietta is gonna see when we came out with our guidance in February, I think they would have been very pleased with that, and I know we are as a management team. Just on that, Ward, normally your mid-year pricing would be mid to high 20s traction. Is, in this environment, are we likely to see higher traction rates on these mid-years this year? What I think the traction rate will actually be good on the mid-years. You know what? As I'm sitting here looking at the guide, you know, honestly, if I'm wondering if there's some place that we might be a little bit light on it, it may be on that pricing guide. I think the pricing is going to actually look really good for the year, and I think we can exit the year, probably, in some instances, pretty close to a 20 figure this year, David. Great. Thanks very much. Thank you. Thank you. The next question comes from Jerry Revich of Goldman Sachs. Please go ahead. Thank you. Hi, good morning, everyone. Good morning, Jerry. Ward, I wonder if we could just pick up the discussion where you just left off in terms of the carryover effect of the mid-year price increases. You know, essentially, you know, with the bulk of the benefits coming in 2024, can you talk about what level of price carryover effect will we just naturally have in 2024 before taking into account the 1 January 2024 price increase based on the magnitude and the traction of the mid-years? Yeah, Jerry, that, that's a great question. I don't want to go into specific details on that yet because, obviously, we'll come out early next year and give good guidance for 2024. I think several things are worth thinking, Jerry. One, do I think it'll give us nice carryover into 2024? The answer is yes. Do I think we'll end up seeing good price increases in January that will help build on that? You know, the answer to that, again, is yes. I think what we're seeing is a pricing cycle right now that's going to be better than the pricing cycle that you've typically seen, even separate and apart from what has been a pretty high inflationary market. In other words, if you go back and look at what aggregates were doing at a normal rhythm and case cadence, even prior to the last, say, year and a half, I think what you can expect going forward is going to outkick that coverage that you would have historically seen. Again, do I think mid-years help with that? I do. Do I think the price increases that will come back in in January will help build upon that? Yes. Do I think we're going to continue to see good sticking on the mid-years that we put in place this year? You know, the answer to that is, again, a resounding yes, Jerry. I think from an outlook perspective, pricing has always been something that people have looked to Martin Marietta and said, "It broadly works." I think what they're gonna come to the conclusion of is, it's gonna work in the future even better than it has in the past, I think that's saying something. Ward, in one of the prepared materials that you folks have for the call, you spoke about pretty low pricing starting point in California, on the assets that you just acquired. Can you just talk about the pricing path and, you know, the decision not to put even, you know, more substantial price increases considering where the starting point is for that asset? I guess I just wanna make sure that my writing was clear, and in some instances, maybe it wasn't. What we're saying is, we've seen, since we bought that business, ASPs up around $4.50 a ton in that marketplace. By the way, that was a marketplace that, and we've talked about it, Jerry, it was below a Martin Marietta corporate average in a state that typically sees higher pricing. Seeing aggregate up since we've acquired that business, about $4.50 a ton, we think, given the barriers to entry, we think with the reserve depletion place that California sees, generally, that's a very responsible place for us to be on moving that. The other thing that I'll tell you is, as we're sitting here now, we're expecting probably another $2 a ton when we start getting closer to January 2024. Just as we've seen in different markets, when we bring the commercial philosophy to a business over an extended period of time, the pricing and the commercial aspects of the business tend to work quite well. Again, I haven't been surprised by anything that we've seen in California, and I'm pretty pleased with where that business is going. The other piece of it, Jerry, that you've watched very carefully, is our team has been superb at managing what we've had in discontinued operations since we bought the business. As you can tell, there's very little left now in disc ops. Again, we've been very intentional in skinning that business down to what we do, what we do best, very focused, and our work there, frankly, is almost done, and the commercial aspects have clearly worked. Jerry, I hope that helps. Absolutely. Thank you, Ward. Can I ask just one last one? Jim, in terms of, you know, COGS per ton for aggregates, it looks like they were up about 14% year-over-year in the Q2. I'm wondering, any items that you'd call out because, you know, diesel, I think, should have been a tailwind. You know, obviously, volumes were down, but any other factors [crosstalk] that impact the results? Let me ask Jim to respond to that. What you're gonna hear is, energy is a good guy, and then there's some other things that are a bit of a headwind. Yeah, no, the non-energy cost inflation is still with us, as I indicated in my prepared remarks. Things that are also above and beyond that, we did ship more tons via rail this quarter, and the rate per ton on those rails shipped stone was higher as well. That had a disproportionate effect. Again, it's only a quarter, so it's an outsized effect. That was a big piece of it, as well as additional repairs costs that we incurred in the quarter. Those are the two things that have probably helped drive that number up a bit, Jerry. All right. Got it. Thank you, and, congrats to the team. Jerry, thanks so much. Take care. Thank you. The next question comes from Garik Shmois of Loop Capital. Please go ahead. Hi, thanks. Wondering about cement gross margin. It's at all-time highs at this point. I know you're adding the finishing mill next year to Midlothian. Conceptually, you know, has the margin structure in that business been changed for the long term? Yeah, hey, Jerry, Jim, I, Garik, sorry. It definitely has changed. I think the margins you're seeing today are not anomalous. I would expect them to continue. The only thing that might affect that is if we saw a spike in natural gas prices, of course. But that's, you know, I would say at this point, it's performing where we'd like it at. We think there's other ways to improve it further down the road, but I would view today's margins as repeatable and enduring. To that end, part of what the team has done so well in Texas, they've been focused on reliability, they've been focused on utilization, and they've also been focused on making sure commercially, again, they're getting the right value for that product. Remember, that marketplace is largely sold out, that certainly helps us. Coming back, as we will here over the next year, with the Midlothian FM7 project and adding much needed tonnage to that, on top of reliability, on top of utilization, should put that business in an even more enviable position. Part of what I think we can be so proud of as a team, has been the evolution of what that cement business has looked like in North Texas since the 2014, 2015 timeframe. It's consistently gotten better, and we think it can continue to do just that, Garik. Makes sense. Thanks. Thank you. Thank you. The next question comes from Keith Hughes of Truist. Please go ahead. Thank you. With the implied guidance in aggregates in the second half of the year, is there any way to tease out what infrastructure is gonna be? We're looking for the influence of the, you know, infrastructure law, what role it's playing in the second half of the year? Yeah. Thank you for the call, Keith. As we just think through the way that we think that's going to look, we think infrastructure for the year is likely to be up mid-single digits. Previously, we had been at mid-single to high single. Again, we continue to see this roll out. We think, particularly as we get toward the end of Q3 and Q4, and remember, we said we thought this would be a back half loaded from an infrastructure perspective. We see that continuing to play the same way. When we came out early in the year, we said we thought single-family would be down low double- digits. I think that's exactly what we're going to see, so no big surprise there. Again, if we look at non-res for the quarter that just ended, we had a basic breakdown of 55% heavy, 45% light. What we actually think we're going to see is that heavy piece of it is actually going to get heavier. As we watch that roll out and we see some of these large manufacturing jobs come in, again, we think that's likely to be overall for the year, probably down mid-single digits. We do think, looking at the end uses, infrastructure is the one that's really starting to move at this point. We think the primary volume play is that switches that we talked about a minute ago, and that is where we are with housing found, we believe, having found bottom, but shipments not yet having caught up with that. Keith, I hope that helps you think about the end uses and at least the way we're looking at it on a percentage basis. Okay, great. That's helpful. Thank you very much. You bet. Thank you. The next question comes from Phil Ng of Jefferies. Please go ahead. Hey, guys, congrats on a really strong quarter. Cement results were really good, guys. Were there any one-time drivers, maybe timing of maintenance that led to that upside? Or can we just kind of take that run rate in the first half and build off of that? Jim, you talked about how you're unlocking potentially some storage capacity and the ramp up on PLC. Will that be bigger contributors on the volume side and back half of this year, or are you already started seeing it this year already? Well, to answer your first question, there's not really any one-time good guy in this quarter for cement. That's why, when I answered the question earlier, I think it's enduring. Again, there's no anomalous things happening this quarter, we can expect these margins to repeat. As it relates to the cement storage capacity, that helps us throughout the year, that will going forward. It's in our guidance. Of course, Finish Mill 7, when it comes online next year, that will be another boost to our capacity and our volumes. Our guidance number includes those volumes at this point for this year. Just one footnote to that. Yeah. As we said, the transition to PLC or Type IL, does give us modestly more volume at this year as compared to last. You know, it's not a huge mover. We're talking, again, mid-single digits on a percentage basis. Gotcha. Sorry, just to sneak one more in. Implicit in your guidance, Jim, are you baking in mid-year price increases for cement and aggs in the numbers? Along with what are you assuming on your assumptions on energy? I think previously, you were talking about diesel being kind of flattish in the Q4. How are you thinking about it at this point of the, at this point in your guide? For the first part of the answer to your question is yes, mid-years are in for both ag and cement in the guidance. On energy, we use, again, really late Q2 energy levels and assume that continues for the rest of the year. That's sort of the foundation for the guidance. Of course, oil prices have come up a bit since then, but, you know, we don't know if that's gonna stick or not, but that's how we think about it. I would say in total, this guidance versus prior guidance, energy is a bit of a larger tailwind than we thought. Non-energy costs were a bit of a larger headwind than we thought. They kind of net out, leaving us with the upside is largely price-driven, and some of that's taken back with lower volumes. That's how I would think about it in the broad buckets, Phil. Okay. Real helpful. Appreciate it. Yep. Thank you, Phil. Thank you. The next question comes from Timna Tanners from Wolfe Research. Please go ahead. Yeah, hey, good morning, and thanks for the detail. Hi, Timna. Hello. I was wondering if you could provide a little bit more color on Slide 11. Two questions on these categories. One is if you could talk to us about the aggregates intensity of them, in particular, trying to focus on warehouses, since that's been such a big delta with some of the starts data coming through a lot lower. Then trying to also get color on each of these categories on what you're seeing in your order books or your backlogs, particularly in some of these big categories. Thanks a lot. Timna, thank you so much for that. I, I guess I would say several things. One, if we're looking at domestic manufacturing and energy and data centers, so those are items one, two, and three on Slide 11. What I would say is, number one, we caption all of those as heavy non-res. Again, in today's world, probably 55% of our non-res book of business. Number two, if we compare that to what maybe light commercial, retail, and hospitality would look like, I have to tell you, it's probably 7x-9x more intensive than a single-standing big box store, maybe. If you're looking at the overall square footage, number one, and you're looking at the nature of the construction, number two, meaning what do the roads look like going in there? Almost all concrete. What do the walls look like? They're almost all concrete. What do the floors look like? They're concrete. Then if we throw a bone to our Magnesia Specialties business, oftentimes, the roofing is TPO. These large domestic manufacturing and data centers are almost Martin Marietta envelopes. Obviously, energy does not because it's typically open. If we also think about what's going on with those very large energy projects along the Gulf Coast of the United States, again, the notices to proceed are coming on those. The tonnage that's required on those is very significant tonnage, and we're starting to see movement in letting of those contracts. Again, if we look at Slide 11 and we look at the outlook for those top three, that shows full green, and we look at the outlook for the lighter piece of it, that's showing yellow, it doesn't mean that those that are in yellow are not going forward. They are. It just doesn't have the same rate and pace. What we have at the top of the page tends to be some of the more aggregates intensive, and again, from a percentage perspective, I would say oftentimes 7x- 9x more aggregate intensive than other light non-res activity. That's helpful. Just to be clear, on the warehouses in particular, we heard that was a huge contributor, you know, in the past several years to demand, and now seeing those starts come down in the most recent data as much as over 50%. I'm just wondering if you've seen the big swing there. It doesn't look like it from the yellow color, but I just wanted a little more information. No, I appreciate it. In the prepared remarks, I actually said that we haven't seen it, even on the light side of it, that big of a change yet. We're watching it, and we're sensitive to what could happen because of the way interest rates are moving, because that tends to be something, A, that's more interest rate sensitive. Obviously, some of that was driving simply because of COVID, the way that people were shopping and the way some of that worked. Obviously, Amazon was very clear that they said they were pulling back on some of that. The fact is, there were others who, frankly, had some catch-up that they needed to do. I think one reason we haven't felt it as acutely as others, Timna, is how intentional we've been in building on corridors. If you look at the Martin Marietta footprint, you're gonna see I-5 as a major corridor. You're gonna see I-25 in the Rockies as a major corridor. You're gonna see I-35 through the middle of Texas as a major corridor, not to mention 85 and 95 on the east. Then another component of it that I think is important, we're the largest shipper of stone by rail in the United States, so we'll ship almost 2x what our closest competitor will by rail. The reason I mention that is distribution up and down rail networks, we think is gonna be pretty notable as well. When we go through those and you see yellow in areas that you otherwise might think based on commentary, it might be trending toward red, I think a lot of that's driven by the where and the how that we're moving our stone. Okay, great. Thanks for the detail. Thank you, Timna. Thank you. The next question comes from Tyler Brown of Raymond James. Please go ahead. Hey, good morning. Hi, Tyler. Hey, Jim, first in aggregate. I think you answered my question on baseline diesel, but what is the expected non-fuel unit cost inflation expected to be for this fiscal year that's based in the guide? Because it feels very high. Secondly, Ward, just given that supply chain issues have eased, it feels like the OEs seem to be improving deliveries, whether it's yellow iron or trucks, and we've seen some part price disinflation. Basically, my question is: Is there any building optimism that repairs and supplies could be a good story into 2024 on the cost side, or am I maybe a little bit out of my skis on that? Thanks, sorry for the double question. Sure. I'd say that on the non-energy inflation front, high single- digits is what we're looking at for the rest of the year. I do expect that to taper a bit as we go into the year, into next year, and I would expect it to be lower next year, more closer to normal. In, from that perspective, there may be a tailwind. The repairs expense that we're incurring this year, I wouldn't view it as just for the quarter, that it's gonna cause a much of a comparison, good or bad, for next year, if that was answering your question. I think, Tyler, going back to your other question on supply chain and how that's working. Look, we're seeing contract services up almost 10%. As Jim indicated, supplies up closer to 15%. Do I think we could see some degree of moderation in that as we go into 2024? The short answer is yeah, I think we probably will. Has it been at what we feel like are unnaturally elevated levels over the last 18 to 24 months? Again, I think the answer is yes. I think part of what our business has shown is a high degree of agility when we're faced with those, to be able to come back and address them from a commercial perspective. I think we will continue to be able to do that. I think your point on, are supply chains getting better? Yes. Are we likely to see some easing in that dimension? Probably so. Obviously, we'll give you more detail on that as we come into 2024, but at least those are some top-side thoughts. Yep. No, that's good stuff. Thank you. Thank you, Tyler. Thank you. The next question comes from Michael Dudas of Vertical Research. Please go ahead. Morning, Ward, Jim, Jennifer. Hey, Michael. Ward, you and Jim talked in your prepared remarks, you've done a really good job of getting the leverage down and where your net debt ratios are today, and you highlighted about, you know, your portfolio optimization. Where do you stand today relative to the optimization and looking at the pipeline for acquisitions, is that something that might be a little bit more pulled forward as, you know, you look at some of the opportunities at the market, you know, that you need to serve, given what should be a pretty reasonable recovery in volumes and business as we move into 2024 and beyond? You know, the short answer is I agree with you. Number one, kudos to Jim, the finance group, and our operating team to find ourselves to a 2.1x leverage ratio. I mean, that's nice delevering after what had been some of the largest M&A that the company's ever done. To your point on future growth, part of what's attractive now about having a coast-to-coast business in markets that have been carefully curated by us and where we want to be, is two things happen now. One, our aperture relative to bolt-on transactions has been opened considerably. Of course, bolt-on transactions, if you think about a return on investment, being able to get very quick synergies, that's really the best type of transaction you can do. Here's the glory of it: Almost any transaction we would do now is going to be a bolt-on, whether it's a single site or whether it's multiple sites. I think where we positioned ourselves tactically and strategically for future growth is actually very important. I will tell you, we are engaged in a number of what we feel like are very meaningful conversations today, separate and distinct from the dialogue that's ongoing relative to our discontinued operations that I mentioned before. The dialogues in which we're engaged are primarily, if not almost exclusively, on the aggregate side. Should you expect us to continue growing our aggregates footprint? Absolutely. Will we ever surprise you? I think not, because we've largely said where we want to grow and why we want to grow there. Do we have an appetite for it? We do. One reason we have an appetite for it, and I mean this as a compliment to our team, they're good at it. They're good at identifying businesses, they're good at the contracting phase of it, and they're good at the integration phases of it as well. I hope to be able to tell you at some point in the year, some good stories that we can talk about specifically in the M&A, and by that, I mean the buy side, not the sell side. Excellent, Ward. Thank you. Thank you. Thank you. The next question comes from Kevin Gainey of Thompson Davis. Please go ahead. Good morning, everyone. It's Kevin in for Adam. Hi, Kevin. I wanted to maybe touch on ready-mix. Looks like it's probably the best margin since maybe 2016. I don't wanna make too much of one quarter, but as far as that business, is there any structurally improvement there that maybe changed things after a number of challenging years? Yeah, I would say several things. One, the pricing worked well in ready-mix, number one. Number two, the ready-mix business that we have is largely a Texas ready-mix business and an Arizona ready-mix business. Number one, they tend to be warm weather states. Number two, keep in mind, particularly in Texas, we're selling aggregates to that business, we're selling cement to that business. About 30% of our cement is going to find its way to our own ready-mix business. We're selling degrees of our own cement in Arizona, though not the same degree. If we look at what the drivers were, I mean, you saw shipments were relatively flat. ASP was up 21%. Part of what we're seeing, and this is not a surprise, is strength in infrastructure and non-res really served to offset what had been degrees of residential softness, particularly around San Antonio and Texas. Again, you saw a very nice rise in gross profit. You saw gross margin increase 660 basis points. Again, what you're seeing is that business get back to a point that's largely consistent with the way that we told you we thought that business would work. We told you we thought the margins would be in that low to mid-teens. Part of what we have done over time, again, I'm going to use a word I used before, we've curated the business, and we really have ready-mix where for our overall enterprise, it makes the single most sense, Kevin. I hope that gives you an answer to your question. Yeah, perfect. Thank you, Ward. Kevin, thank you. Thank you. Once again, ladies and gentlemen, if you do have a question, please press star one at this time. The next question comes from David MacGregor, Longbow Research. Please go ahead. Yeah, just thanks for taking my follow-up question. There's been a few questions here about cement margins. I'm just wondering, to what extent are the cement margins benefiting from Martin's kind of unique position as a large-scale supplier of both cement and aggregates to large Texas projects. Your ability to just extract maybe a synergistic, margin by winning on both materials? First of all, you, you sly devil, coming back for a second question here, David. No, look, I think your question is a really good one. I think you're right, and I think it goes back to our view of what strategic cement. Strategic cement is in a marketplace where we are the leading aggregates player. Strategic cement is where we have a notable downstream business. Strategic cement is where the market is overall, built that way, and it's not close to water. That's exactly what Dallas-Fort Worth is. That's exactly what San Antonio is. When we go back to the way that we defined strategic cement almost nine years ago and what we thought we could do with the business with those attributes, the cement business is benefiting from that. Clearly, we've got a very healthy concrete business in North Texas and Central Texas that has benefited from some large projects, for example, in South Texas, what we did with Tesla, what we're doing in North Texas right now on any number of large projects. I think there have been any number of issues, David, that have come together nicely, but I'm going to add, it hasn't been by accident or happenstance. This has been a business that we have very carefully built and turned into something that's a very powerful aspect of who we are. It's not our aim to be a nationwide global cement player or otherwise, but an aggregates-led business with strategic cement that fits the definition that we have is what we have in Texas, and you can see what the financial results are. I hope that helps. Thanks very much. Thank you, David. Thank you. There are no further questions. I will turn the call back to Ward Nye for closing remarks. Michelle, thanks so much for you, for your hosting this today. Thank you all for joining today's earnings conference call. Martin Marietta's track record of success proves the resiliency and durability of our aggregates-led business model. We continue to strive for safety, commercial, and operational excellence, and are confident in Martin Marietta's prospects to continue driving attractive growth and enhanced shareholder value now and into the future. We look forward to sharing our Q3 2023 results with you in the fall. As always, we're available for any follow-up questions. Thank you again for your time and continued support of Martin Marietta. Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.