Knife River Corp. announced financial results for the fourth quarter and full-year ended Dec. 31, 2023. For the three months ended Dec. 31, 2023, Knife River reported consolidated revenue of $646.9 million, a 20% increase from the prior-year period, driven by price increases across all core product lines and an extended construction season throughout its footprint.
Strong market fundamentals provided the backdrop to support price improvements and the company’s disciplined bidding strategy, contributing to a 15% year-over-year increase in net income to $20.7 million, and a 10% year-over-year increase in Adjusted EBITDA to $72.4 million. Contracting Services backlog was $662.2 million, with margins at levels above the prior-year period.
Knife River reported full-year 2023 consolidated revenue of $2.8 billion, a 12% increase from the prior-year period. Net income was $182.9 million, up 57% from the prior-year period. Adjusted EBITDA was $432.4 million, an increase of 38% versus the prior-year period, and Adjusted EBITDA margin increased 290 basis points on a year-over-year basis to 15.3% in 2023.
Pacific
Fourth quarter revenue improved 25% year-over-year to a record $114.1 million, led by an extended construction season in California, which resulted in contracting services revenues increasing 32% from the prior-year period. EBITDA improved $2.2 million year-over-year to $10.0 million. The segment continues to benefit from the early stages of EDGE-related pricing and operational initiatives. Full-year 2023 revenue improved 11% year-over-year to a record $462.2 million, while EBITDA improved 28% year-over-year to $56.2 million.
Northwest
Fourth quarter revenue improved 16% year-over-year to a record $161.8 million, with strong contracting services results benefiting from impact projects, greater availability of late-season jobs and improved pricing. EBITDA decreased 24% year-over-year to $18.4 million, as a non-cash aggregate impairment and lower gains on asset sales more than offset increases in material price and contracting margins. Full-year 2023 revenue improved 11% year-over-year to a record $666.1 million, while EBITDA improved 17% year-over-year to a record $121.1 million.
Mountain
Fourth quarter revenue improved 31% year-over-year to a record $142.5 million, as the region continued to benefit from sustained market demand, together with a longer construction season for both materials and services. Construction materials volumes increased meaningfully versus the prior-year period, while selling prices across all product lines also increased. EBITDA improved 35% year-over-year to $16.7 million. Full-year 2023 revenue improved 17% year-over-year to a record $634.0 million, while EBITDA improved 42% year-over-year to a record $103.2 million.
Central
Fourth quarter revenue improved 10% year-over-year to a record $181.4 million, benefiting from favorable weather that extended the construction season. Underlying market conditions, EDGE-related bidding strategies and strong operational performance continued to significantly lift margins. EBITDA improved 17% year-over-year to an all-time fourth quarter record of $29.3 million. Full-year 2023 revenue improved 6% year-over-year to a record $825.0 million, while EBITDA improved 35% year-over-year to a record $116.6 million. As a result of the reorganization, the company’s South operations and North Central operations now report within the new Central segment.
“Throughout 2023, our team demonstrated focused execution on the strategic priorities of our ‘Competitive EDGE’ value-creation framework, culminating in record fourth quarter and full-year performance,” said Brian Gray, Knife River president and CEO. “Our vertical integration and strategic positions in mid-sized, high-growth markets remain competitive advantages that position us to drive sustained value creation for Knife River shareholders.
“Our full-year 2023 results exceeded the high end of our revenue and Adjusted EBITDA financial guidance,” continued Gray. “Our team had a strong finish to a historic year, one highlighted by three consecutive quarters of record revenue and Adjusted EBITDA, resulting in full-year Adjusted EBITDA margins in excess of 15%, an increase of nearly 300 basis points versus the prior year. We are proud to have surpassed our 15% Adjusted EBITDA margin target two years ahead of plan, and we are on the path toward our long-term goal of Adjusted EBITDA margins greater than 20%.
“Looking ahead, the pace of public infrastructure project activity is accelerating across our markets,” Gray said. “Within the 14 states where we operate, state transportation departments have increased their 2024 spending authorizations by more than 16% from 2023 levels. We will continue to pursue work with a highly disciplined approach to our bidding, one that emphasizes backlog quality over quantity, consistent with our strategic focus on sustained Adjusted EBITDA margin expansion.”
To increase transparency into its operations, Knife River has updated its reporting segments effective with the fourth quarter 2023. The company has moved its liquid asphalt and related operations – Energy Services – into its own product line segment, which also includes the liquid asphalt business that previously reported to the Pacific segment. Going forward, the company will reference its Pacific, Northwest, Mountain and Central segments as geographic segments. Additionally, what previously was referred to as “All Other” has been renamed to Corporate Services and Eliminations.
Based on 2023 results and what the company sees ahead in 2024, Knife River also introduced full-year guidance for 2024.
“Our Adjusted EBITDA guidance of $425 million to $475 million is based on continued momentum from record results in our geographic segments, normalization of our Energy Services segment and a full year of recurring separation costs — as well as mid-to-high single-digit price growth and flat to low-single-digit volume declines on aggregates, ready-mix and asphalt,” said Nathan Ring, Knife River chief financial officer. “Included in this guidance, we are also initiating EBITDA guidance for our Energy Services segment of $50 million to $60 million in 2024, down from its historic 2023 results, and as we previously disclosed.
“The midpoint of our 2024 guidance would imply 11.5% growth over last year in our geographic segments, including corporate services costs,” Ring said. “The fundamentals of our business are strong, and we believe our disciplined approach to pricing, bidding and operational execution will further position us to drive margin expansion in the year ahead.
“With approximately $550 million in cash and available liquidity, we have the balance sheet to further advance our disciplined, returns-focused capital allocation strategy,” Ring continued. “We have bolstered our M&A team to be in a position to execute on strategic growth plans developed in each of our regions. We remain committed to our plan of acquiring aggregates-led operations in mid-sized, high-growth markets, including both bolt-on and platform opportunities.”
“Knife River became an independent company in 2023, and it has been an exciting, productive and rewarding year for us,” Gray said. “We are a people-first company, and I would like to thank our team for delivering these outstanding results. We are excited by the opportunities for our business in the year ahead and look forward to this next, exciting chapter of growth.”