U.S. Concrete, Inc. (NASDAQ:USCR) Q2 2017 Earnings Conference Call - Final Transcript

Aug 08, 2017 • 10:00 am ET

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U.S. Concrete, Inc. (NASDAQ:USCR) Q2 2017 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] And our first question comes from the line of Trey Grooms from Stephens Inc. Your line is now open.

Analyst
Trey Grooms

Hey, good morning gentlemen.

Executive
Kevin Kohutek

Hey Trey.

Executive
Bill Sandbrook

Good morning Trey.

Analyst
Trey Grooms

Thanks and congrats great quarter.

Executive
Bill Sandbrook

Thanks. Thank you.

Analyst
Trey Grooms

Bill, you mentioned good visibility for 12 to 18 months. When you look at your backlog there, do you see any type of change in the project type or anything noteworthy on that front?

Executive
Bill Sandbrook

Sure. As I've discussed Trey, on previous calls, we anticipated a shift, to some degree, into additional infrastructure projects as the FAST Act comes to fruition and all these state initiatives, with the defining funding mechanisms through gas taxes, or whatever means. We have additional revenues flowing into that sector in all of our major regions, and we are seeing that shift to some extent.

In our backlog, for instance, we are shifting. I believe it's the 21% in infrastructure now, in our forward backlog on a volume basis, that's up from 17% to second quarter 2017. So we are seeing that shift and some shift into the residential sector too as the single-family homes continue to expand and multifamily homes stay at a high level.

So there is some shifting there. So on the mix, we have somewhat of a decline on the commercial industrial side and more towards residential infrastructure. But as I've said repeatedly on these calls, concrete is fungible. I don't need highways for concrete. I can build buildings. I can build airports. We can build roads.

We can build schools. And wherever we get the highest margin opportunities, at any part of the cycle, we will direct our capacity utilization towards that. Now there's more opportunities in infrastructure and residential, so it's kind of moving in the exact direction that we've anticipated over the last two years.

Analyst
Trey Grooms

It sounds like from your comments that you're expecting continued price improvement, of course, volume, and then also, margins over time. So it would suggest, I guess, that little shift that you've seen, or that shift that you've seen in backlog into different end markets is not going to really impact you from a margin standpoint, as you continue to think that's going to improve?

Executive
Bill Sandbrook

Yeah. Infrastructure projects are very high-margin business, as we've been able to consolidate our major markets and we're rationalizing our existing plant network, we're getting efficiencies on delivery. So it's not just a material margin, it's on overall marginal contribution that we can continue to expand total EBITDA margin, based on our purchasing power and aggregates of cement, and our regional plant networks and when we look at New York, for instance, we haven't even lapped a couple of those acquisitions yet.

And when you think that the normal time to fully integrate these and synergize them are 18 to 24 months. We haven't even lapped two of those acquisitions yet. So I continue to focus on increased margin expansion as we go forward. And this somewhat minor shift that I just