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DATE
Tuesday, Nov. 4, 2025 at 11 a.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Brian Gray
Chief Financial Officer — Nathan Ring
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TAKEAWAYS
Revenue -- $1.2 billion in the third quarter of 2025, representing a new all-time quarterly high, fueled by recent acquisitions.
Adjusted EBITDA -- $273 million in adjusted EBITDA, marking an all-time quarterly record, with margin expanding to 22.7%
Aggregate Prices -- with 50 basis points of margin improvement in the aggregates segment.
Ready-Mix Volumes and Prices -- Ready-mix volumes rose 16%
Contracting Services Backlog -- Company-wide backlog increased 32% year-over-year, with the Central segment increasing 83% year-over-year, primarily driven by Texas.
Mountain Segment Backlog -- Record levels reported, with backlog at least $100 million higher than a year ago
Asphalt Volumes and Prices -- Internal asphalt sales declined approximately 7%, overall pricing also declined due to lower liquid asphalt input costs, but Segment margins slightly improved.
SG&A Expenses -- Increased year-over-year due to acquisition overhead, but actual costs remain lower than forecasted due to asset sale gains and lower payroll incentives.
Capital Deployment -- $664 million invested in growth initiatives year-to-date, with anticipated additional organic project spending of approximately $32 million for the remainder of 2025.
Net Leverage -- Ended the quarter at 2.6 times, with $457 million in borrowing capacity on the revolver at quarter-end.
Full-Year Guidance Narrowed -- Consolidated revenue expected between $3.1 billion and $3.15 billion for the full year 2025; adjusted EBITDA between $475 million and $500 million for the full year 2025.
Oregon Performance -- Results improved in the third quarter, current backlog in Oregon is approximately 90% of the prior year's level, and a new $4.3 billion transportation funding package over ten years is expected to stabilize local activity.
Energy Services Results -- Segment revenue increased 34% and EBITDA increased 18%, mainly due to the Albina Asphalt acquisition and a new polymer-modified asphalt plant.
M&A Pipeline -- Management reports multiple quality acquisition deals currently under evaluation, targeting margin-accretive and aggregates-led businesses.
Backlog Mix -- Company highlights more paving work in backlog and expects higher-margin material pull-through to offset a slightly lower overall backlog margin year-over-year.
SUMMARY
Management stated that integrating Strata Corporation, the largest acquisition in company history, contributed significantly to both volume and margin performance, especially in the Central and Ready-Mix segments. Segment commentary emphasized that while some regions faced adverse weather and reduced asphalt paving activity, the company maintained and added to record backlogs, positioning for increased activity as project timing and weather conditions normalize. Revisions to SG&A chiefly stem from M&A-related support costs, and operational efficiencies are ongoing as part of the EDGE initiative.
CEO Gray indicated, "we have 32% more backlog than we did a year ago, and we're heading into the heart of our bidding season with some strong DOT budgets."
The company does not provide detailed state-by-state pricing, but CFO Ring stated, "Oregon overall is up in its pricing," signifying successful deployment of the dynamic pricing model even in historically optimized or challenged regions.
The Central segment's backlog increased 83% year-over-year, with major highway projects secured in Texas and North Dakota DOT bidding plans doubling to $750 million for 2026 versus $345 million in 2025, expanding Knife River's growth runway.
For aggregates, legacy operations' volumes remained down, but total segment demand increased 4%, with acquisitions notably offsetting regional headwinds.
The Mountain segment experienced more delays than the prior year, particularly in asphalt-related work, but all delayed work remains in backlog and additional capacity has been added to capture more projects into 2026.
Full-year 2025 aggregates pricing is expected to increase at a high single-digit rate, with management viewing mid-single-digit aggregate price growth as sustainable absent further market disruption.
Organic growth and disciplined acquisition remain at the center of the company's strategy, and management sees ample ongoing opportunities for infill and margin-rich target deals in existing and adjacent high-growth markets.
INDUSTRY GLOSSARY
Dynamic Pricing Model: Technology-enabled approach allowing real-time pricing adjustments based on demand, cost inputs, and local market conditions within construction materials businesses.
Vertical Integration: Structure where a company controls multiple stages of the supply chain, such as aggregate mining, processing, asphalt production, and contracting, reducing costs and improving margins.
Pull-Through: The effect by which an increase in contracting or paving work drives additional demand for upstream owned materials, often at higher margins, within a vertically integrated business.
Full Conference Call Transcript
Brian will begin today's call with an overview of our third quarter 2025 results followed by a segment recap and an update on our competitive edge plan. Following his remarks, I will provide a product line summary, a capital update, and a review of our 2025 financial guidance. At the conclusion of our prepared remarks, we will open the line for a question and answer session. With that, I'll now turn the call over to Brian.
Brian Gray: Thank you, Nathan. Good morning, everyone. Thank you for joining us. The third quarter is typically our most profitable, and we're pleased to report record financial results. Our revenue of $1.2 billion and adjusted EBITDA of $273 million were all-time quarterly highs, thanks to strong contributions from our recent acquisitions. M&A is a core component of our competitive edge strategy to drive long-term value. Another pillar of our edge plan is to optimize prices and control costs. I'd like to thank our Knife River team members for making important strides in this area during the quarter. Their efforts helped us grow adjusted EBITDA margin to 22.7% for the quarter.
And equally impressive, we also improved gross margins across our aggregate, ready-mix, and asphalt product lines. We did all of this while facing headwinds that we didn't have last year, including wet weather, a sluggish Oregon economy, and less asphalt paving across our segment. Delivering improved results in adverse conditions points to the fundamental strength of our business. Even without the addition of Strata Corporation, which is our largest acquisition ever, our third quarter revenue and adjusted EBITDA would have been record. Looking ahead, we're excited about our future. We're still in the early innings of our self-help initiative, and we certainly expect the organic business to continue to grow as we fully implement dynamic pricing and operational improvements.
We also continue to pursue strategic acquisitions, and our team currently has multiple deals in the pipeline. We have a record third-quarter backlog, with more pull-through of higher-margin asphalt paving materials than we did last year. And our states continue to invest in public infrastructure at record levels. All in all, we expect the combination of our EDGE strategy and market fundamentals will continue to allow us to achieve profitable growth for our shareholders.
As we look more closely at our third quarter results, I'll start with an update on Oregon. We don't typically provide financial results for an individual state, but there's been a lot of attention on Oregon, so I wanted to follow up with some additional details. During the quarter, I'm pleased to say we saw year-over-year improvements in the state. As previously reported, this market was down in the first half of the year. And during that time, we moved quickly to right-size our team and reposition our crews to where the work is. We continue to optimize pricing and control costs, and we benefited from the financial contributions of recent acquisitions.
In addition, we began to see aggregate volumes improve as third-party sales resumed on several jobs that had been delayed earlier in the year. Finally, our current contracting services backlog in Oregon is approximately 90% of where it was last year at this time. These factors led to third-quarter financial results in Oregon that were higher than last year, suggesting the headwinds are beginning to calm. In addition, the recent passing of a ten-year $4.3 billion transportation funding package helped provide additional clarity in Oregon. One of the long-term fixes lawmakers originally proposed, we expect the bill at a minimum will help maintain current funding levels and improve upcoming bid schedules at the local agencies.
Half of the funding is earmarked for cities and counties for the types of projects we most often perform. The other half of the new revenue stream will be added to Oregon's DOT budget. Total funding for the next biennium is now projected to be $6.1 billion, slightly below the record $6.2 billion from the previous two-year cycle. Given the new funding, improving aggregate sales, management's commitment to keeping costs in check, and ongoing contributions from M&A, we expect the stabilization to continue and currently anticipate overall 2026 results in Oregon will be similar to this year. Switching from Oregon to Mountain, this segment remains one of the fastest-growing areas in our footprint.
And we continue to enjoy record backlog here. However, third-quarter results were impacted by less asphalt paving, related to project timing, type of work, competitive bid dynamics, and delays caused by weather and project phasing. We experienced more scheduling delays this year than last year. The overall decrease in asphalt paving in the segment not only impacted contracting services, but it also had a ripple effect through hot mix asphalt, aggregates, and the utilization of our equipment pool. Fortunately, this work remains in our backlog and we continue to add paving times for next year. DOT budgets are strong, backlog is at record levels, and we've added capacity in an effort to capture even more work heading into 2026.
Continuing with our segments recap, let me move to the West. Since I already touched on Oregon, I'll focus on California, Hawaii, and Alaska. In these states, we saw healthy demand, pricing discipline, and strong execution driving our results. We'd increased ready-mix volumes and price in California, where we added capacity from some large impact projects that are just beginning construction. We are optimistic about continued growth in the West in 2026. In the Central segment, our results were supported by the integration of Strata, which contributed to volume and margin improvement. Third-quarter revenue and EBITDA were up substantially, and EBITDA margin was 23%, an all-time record.
The strong quarter in Central could have been even better if not for the rain. The wet weather we reported in the second quarter continued in the third, particularly in July and September. Backlog in this segment is up 83% year-over-year, driven primarily by an increase in Texas. We are seeing strong commercial and public work opportunities in our Texas footprint, and our teams there have secured major highway projects in the College Station area. In North Dakota, we're also set up favorably for 2026, with new infrastructure funding driving bidding opportunities and supporting the Knife River and Strata combined operations.
The North Dakota State DOT intends to bid about $750 million of construction work in 2026, which is more than twice the $345 million it put out for bid in 2025. Throughout the Central segment, our markets appear poised for growth and our expanded teams are working closely together. And finally, in Energy Services, the segment delivered a strong quarter with revenue up 34% and EBITDA up 18%, primarily due to the acquisition of Albina Asphalt and the new polymer-modified liquid asphalt plant in South Dakota. The segment continues to benefit from vertical integration and disciplined bidding and is on track to have another solid year.
While 2025 has had its share of challenges, we continue to focus on our edge strategy and the opportunities we have to improve our performance and finish the year strong. As mentioned, Edge includes acquisition growth, which contributed to our improved results for the quarter. M&A will remain an integral part of our strategy, and our corporate development team continues to add quality opportunities to the pipeline. We are focused on aggregates-led, margin-accretive targets in our midsize high-growth market. But M&A is just one component of Edge. During the quarter, our process improvement teams and field personnel were also hard at work implementing efficiencies across our operations.
At the same time, our sales teams continue to emphasize our dynamic pricing model, helping to better capture the full value of our products. These tandem efforts resulted in third-quarter improvements to our aggregates, ready-mix, and asphalt gross margin. While we are improving our processes, we are also improving our safety performance. I'm proud of the advances our team continues to make. We believe a safe and engaged team is vital to our success. Combined, we expect each of the ongoing efforts in our competitive edge plan to help drive consistent EBITDA growth and enable us to achieve our long-term goal of a 20% adjusted EBITDA margin.
Before I turn the call over to Nathan, the first was to build scale. The second was to enhance our vertical integration and generate industry-leading return on invested capital. The third was to position Knife River to become an independent publicly traded company. And the fourth is where we are today, and improve margin. And we are on track to meet our edge goals as well. Over the past three years, on a trailing twelve-month basis, adjusted EBITDA by 56%, Edge is working. The fundamentals of our business are only getting stronger. All this gives me great confidence that our dedicated team members will continue delivering profitable growth and create long-term value for our shareholders.
With that, I'll turn the call over to Nathan.
Nathan Ring: Thank you, Brian. As we take a closer look at our financial results, you'll see that it was also a positive turning point in the year for our materials product lines. In particular, aggregates, ready-mix, and asphalt saw margin improvement over the third quarter last year. In aggregates, prices increased 8% and margins improved 50 basis points. As we mentioned last quarter, we anticipated that the early season preproduction work and our team's ongoing efforts to create operating efficiencies would begin to produce improved financial results. We're taking these efficiencies and scaling them. As we assess our operations, we believe the upside in margins for aggregates provides one of the most compelling opportunities for earnings growth.
Volumes also increased in the quarter thanks to contributions from Strata as well as Alaska and Hawaii. Looking at the full year, we expect volumes to be flat as a result of the increased rainfall and less paving work performed earlier in the year. We anticipate that pricing will remain strong and increase high single digits for the full year. Switching to ready-mix, we had one of our best quarters ever. We had price increases of almost 6%, volumes were up 16%, and margins improved 160 basis points over the third quarter last year. Much of the improvement comes from our dynamic pricing model, along with operating efficiencies at the batch plants and product delivery.
Volumes were up mainly due to the addition of Strata's 24 ready-mix plants and also because of increased commercial work in Alaska, California, and Hawaii. We expect full-year volumes to be up by low double digits and pricing to increase mid-single digits. The asphalt product line was directly impacted by less paving work and contracting services. Almost 70% of asphalt volumes are sold internally, and internal sales were down approximately 7% for the quarter. Prices were also down compared to last year, directly related to lower liquid asphalt input costs. Despite the lower volumes and pricing, we have been able to manage our cost structure and slightly improve margins over the third quarter of last year.
For the full year, we expect volumes and pricing to be down by low single digits. In contracting services, the revenue and gross profit declines were largely related to less paving work for the quarter. Our contracting services margin was also down due to slightly lower margin available on the backlog work we performed, fewer project bonus opportunities because of the type of work, and delays in job site challenges from adverse weather. Looking ahead, our backlog is 32% higher than last year with significantly more paving work secured, and we are also seeing additional paving jobs in the upcoming bid schedule from what we did at this time last year.
Even though the expected margin in our backlog is slightly lower year-over-year, we expect this will be more than offset by the anticipated benefit of additional volumes of upstream higher-margin materials. Moving to SG&A, the increase over the third quarter last year is primarily related to overhead that came with acquisitions we have made in the last twelve months. Although costs are higher year-over-year, they are coming in lower than we had forecast, partly due to the benefit of higher gains recognized on the sale of assets and lower payroll incentives. As we look forward, we anticipate that fourth-quarter SG&A will be higher than last year by mid-single digits plus increases from the recent acquisitions.
As we look at our balance sheet, we ended the quarter with a net leverage position of 2.6 times and $457 million of borrowing capacity on the revolver. For capital deployment, we have invested $664 million on growth initiatives through the third quarter, including acquisitions, aggregates expansion, and greenfield projects. For the remainder of 2025, we expect to spend approximately $32 million on organic growth projects. For maintenance and improvement, we continue to expect capital expenditures to be between 5-7% of revenue for the full year. Our balance sheet remains strong, with available financial capacity for future acquisitions and new organic growth opportunities, which will be incremental to our outlined capital program.
As we consider the full year, we are narrowing our financial guidance. Our updated guide is based on normal weather, economic, and operating conditions for the remainder of the year and includes consolidated revenue between $3.1 billion and $3.15 billion and adjusted EBITDA between $475 million and $500 million. Our teams have done an excellent job managing through the challenges we faced this year, and the third-quarter results proved that the fundamentals of our operations are strong. Our edge strategy is working. The markets we operate in have solid public funding. Our pit crew initiatives are producing financial results, and we believe Knife River is well-positioned to deliver long-term value to our shareholders for years to come.
I would now like to open the call for questions.
Operator: Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. If you'd like to withdraw from the polling process, please press star followed by the number two. If you are using a speakerphone, please make sure to lift your handset before pressing any keys. Your first question comes from the line of Brent Thielman from D.A. Davidson. Please go ahead.
Brent Thielman: Good morning, Brian. Hey, maybe just, Brian, on I guess, shorter-term question, just kind of backing into the math for the fourth quarter. With revised guidance here, it implies decent year-on-year growth in EBITDA. Just wanted to maybe get a little more context of what you're seeing on the ground right now that gives you confidence in that year-on-year growth range. I know there's been challenges through the year and delays and pushouts with weather, but any more context there would be helpful.
Brian Gray: No. I appreciate that, Brent. And so yeah, three factors really: Oregon stabilization and their ability to actually produce more profit for the third quarter. That momentum will continue. That stabilization in Oregon will continue. A few of those jobs we talked about earlier in the year that were delayed have resumed construction. And so that is part of the fourth-quarter guide. The other thing is our record backlog and the additional paving that we have in our backlog with favorable weather, and I would say that we had a good October as far as weather. And so we also have two more months left.
That begins to change on us, but you know, if we get a couple more weeks of good weather, that gives us confidence we can get that work done. And so, really, it's the turn, the stabilization in Oregon, the strong backlog that we've got, that has additional pull-through of those higher-margin asphalt paving materials, and then, you know, normal weather, and we had a good month in October.
Brent Thielman: Got it. And I appreciate all the detail on what's going on in Oregon. I guess, Brian, I think you said you'd anticipated results would be similar in 2026 to what you should see this year. What are you looking for over the next several months that might dictate maybe something more than stable, maybe possibly some sort of rebound in Oregon next year? Just curious about the things you're looking at that might drive that.
Brian Gray: Yeah. I mean, real pleased, Brent, with the management's reaction and quickly rightsizing to the new level of work there. Repositioning crews within the state where we're busier, and there's pockets within Oregon that are still healthy. Obviously, the Portland market is the large driver of our volumes. And so we're still looking for some additional market stability in there. I think, you know, the trade talks that are going on have an impact on that Portland economy with the imports, along with some of the larger employers in this state that are impacted by tariffs. And so I think looking for some stability there. The governor needs to sign, which we fully anticipate will happen, the transfer bill.
We need to see the bid lettings come out. That 50% is going to the counties and cities that we expect will benefit us. We're heading into our busier time of the year as far as bidding. Looking for some stability there. There's still, I mean, you know, I think that there's a lot of positive signs in Oregon over the last ninety days, and I think we want to see that momentum continue into next year. And then, you know, when we get to February, we'll give better guidance. But at this point in time, with what we see, we feel comfortable Oregon is stabilized and that results next year in 2026 should be flat with this year.
Brent Thielman: Okay. Just last one on Strata. I realize that conditions have been sort of atrocious in that region. Probably tough to get to that $45 million bogey for this year. But maybe kind of what's under the hood that you're seeing that you really like about that business and, you know, as we think about a year where we don't have some of these challenges from weather, is $45 million sort of contribution to EBITDA from that business still very, very reasonable to you?
Brian Gray: Yeah. Right. We're very pleased with what we've seen with the integration that our team and their teams are coming together as one. You look at the DOT budget in North Dakota, more than double than what we had this year, and we are well-positioned to take advantage of that. You look at our ready-mix results for this quarter, and Strata is a large contributor to that success. So they absolutely are performing as we had modeled, as we anticipated. They are in line with what we model, and it's really performing very well. We're excited about next year with the North Dakota bid lighting schedule coming up.
Brent Thielman: Okay. Great. Thanks, guys.
Operator: Your next question comes from the line of Kathryn Thompson from Thompson Research Group. Please go ahead.
Kathryn Thompson: Good morning, Brian. Nice increase there is solid contribution from public as is typical. But could you give a little bit more color in two different buckets? One, the type of project, you know, really colors specifically on contracting, and then the type of product so asphalt type.
Brian Gray: Let me start with the margins in our backlog. May that come from our pull-through of the downstream material. So when we're doing asphalt paving, and we have a lot of asphalt paving in our backlog, those margins more than offset the slight decline that we have in our backlog margins. So if you look at it from an enterprise level, from a set, but the benefits we get of higher volumes of asphalt paving because of that pull-through of the higher margin material. So Nathan also mentioned for this year, and we also did perform it partly because of weather, partly because of delays.
The good news is that backlog, I mean, it will benefit the asphalt, the liquid asphalt, the September. So 23% more backlog of asphalt pavement than we performed all of this year in the mountain region. That's one data point to kind of give you some context in our backlog. The central region, we obviously picked up some very large jobs. Their backlog is up 83% in the central region. And they have more than two times the amount of asphalt paving in their backlog that they'll perform next year than they had backlog a year ago.
So and that's just two data points to kind of last point I'd make really just entering the busiest time of the year for us as it relates to bidding. And so we have 32% more backlog than we did a year ago, and we're heading into the heart of our bidding season with some strong DOT budgets. Most of the backlog.
Kathryn Thompson: How do you feel about your backlog, the mix of your backlog today versus, say, a year ago? Let me is there anything changing in terms of that make overall?
Brian Gray: Yeah. I think the change is, but I mentioned is we have a lot of that higher mar set of our backlog off in twelve months. And so with the large amount of backlog we have, some of those larger jobs are multi-year jobs. And so you know, that burn rate now is at revenue.
Kathryn Thompson: Great. Thanks so much. I'll jump back in the queue.
Brian Gray: Kathryn. Asphalt paving. In mountain, you know, seeing some, you know, I would say that of work, whether our lack of bid dynamics and the bid room. We've obviously secured our fair share of work having backlog that's still up 32% with it's really a type of work that was being let out. It's the timing of the work that's getting built and the kind of the phasing of those large heavy civil interstate jobs that start off with a lot of dirt work that has paving in it. We have a lot of that paving on our books. And frankly, we thought some of that work was gonna go.
There was one job even in Idaho that had 70,000 tons of paving on it that we thought would go this summer. But it's gotten pushed a little bit into the fourth quarter depending on weather. And then into next year. The location of work, you know, it was not necessarily right in our core markets. In the Montana area, we talked about that last time. Know, the type of work again, the DOTs, they rotate the dollars between bridges, Wyoming, so that mountain region. The good news is that mountain region, it has record backlog. I mean, it has a $100 million or more backlog than it had a year ago. And it's still one of our faster-growing regions.
And so I'm not concerned about the future of that. We certainly lack asphalt paving to keep our crew really keep the asphalt plant. Yeah. I could get plants busy. Not changed much. New competition. It has and our margins being slightly lower again are more than offset with the benefit of the higher pull-through of material.
Kathryn Thompson: That's helpful. And then on the ready-mix business, you know, your margins there are up nicely year over year. I'm sure there's, you know, some benefits from acquisition and whatnot, but as we're thinking about the ready-mix business, looking kind of going forward, what's your thoughts around kind of the puts and takes on price as you look at that? I mean, asphalt kind of, you know, it's based and it's headwinds which we've talked about. But ready-mix seems to be performing pretty well, given the have a lot to do with that success. So, obviously, Strata is a large, you know, to that. But even both, you know, internally, and our customers have received that model and well.
Long as we're providing the value of the materials through quality and customer service, you know, they will pay the prices that, you know, we are asking for our dynamic pricing. And you couple that with, you know, dispatch efficiencies, some new KPIs, I like the position that we're in for Ready Mix going forward. With prices exceeding costs.
Kathryn Thompson: And if I could just sneak one more in there. Aggregates, price patience for aggregates around, you know, pricing and volume. Just given the markets you're in, is there anything that maybe you give us just from a high-level standpoint commercial excellence and dynamic pricing model that mid-single digits for aggregate pricing is something that's sustainable. We've been enjoying high single-digit price increases this year, and that has a lot to do with the acquisition of Strata and their trade pricing cost structure up in that market with the rail. Keep in mind, our average selling price includes delivery and freight and you know, that's been a little bit of a different story still down.
And that is primarily due to the again, the two-factor. The less asphalt paving and the pull-through that brings. And then the weather. And so you look at the DOT budgets, you look at our backlog going forward, Yeah. I look forward to providing specific guidance on volume that there the next quarter's call.
Operator: From the line of Garik Shmois from Loop Capital. Please ask your question.
Garik Shmois: Hi. Can you hear me?
Brian Gray: Yep.
Operator: Can hear you now.
Garik Shmois: Sorry. Okay. I'll just clear. We got you there.
Brian Gray: Okay. Yeah. Apologies.
Garik Shmois: I wanted to ask on the fourth-quarter guidance. What's gonna have to happen for you to hit the upper end or a lower end of the guidance range?
Brian Gray: Yeah. I would say that, you know, we based our mid the low end of So whether it is a big factor on that. You know, I think the continuation of the we're gonna stabilize, you know, stabilizing and work that third-party private work continuing into the Providing a lot of stone on the project down in Southern California called Pier G. The p and it got pushed to the fourth quarter. We're still not in full production on that. And so that right now could if they get going and actually exceed their production rates, that would push us to the high end.
If it continues to be, you know, slow to get going, that could be on the low end. So there's a few things there. Nathan, did I forget anything that you would wanna add?
Nathan Ring: Oh, I think we've I got most of those, Garik.
Garik Shmois: Okay. That's helpful. Follow-up question is just on some of the private construction projects you'd earlier in the year spoken to. Nonresidential delays in particular. You sound a little bit more positive on that. Based on your prepared remarks. Just wanna confirm that and if you could speak to some of those projects. Trying to come back.
Brian Gray: Yeah. There was, you know, close to a dozen projects that we had secured purchase orders, actually had begun construction on some of them. Early in the year. I mean, this is back in January, February. Then we're delayed. And we've talked a lot about that kind of in the first quarter, second quarter, and now here we are in the third quarter. Few of those projects have resumed construction. And so you know, I think there's a good slide in our deck that shows that our aggregate volumes in Oregon year over year were down 3%. And if you look at that in the prior quarters, we were down 25, 26% quarter over quarter last in the second quarter.
In the first quarter, year over year, we were down 26% also. And for the third quarter, we're only down 2%. And so we have seen that begin to stabilize the quarter over quarter comps. I mean, some of those headwinds, we were starting to feel those a little bit starting about this time last year, frankly, in the fourth quarter. And so that kind of gives me confidence that you know, our that aggregate volumes are beginning to stabilize and we will continue some of that work on that private work in specifically our large market it that drives most of volume for aggregates is in Portland, Oregon, and we have a very strong market position.
And we are seeing of that work resume construction.
Garik Shmois: Okay. Very good. I appreciate all the color and best of luck.
Operator: Your next question is from the line of Ian Zaffino from Oppenheimer. Please go ahead.
Ian Zaffino: Hi, great. Thank you. On Oregon, can you maybe tell us what the pricing that you realized in the past quarter? Just trying to understand this because it's to me, it's always been viewed, I guess, as an optimized area. Which you know, I would imagine the pricing would be more optimized. But maybe kind of give us some little bit of color on that. And then also, you know, on the funding package, right, the funding package is a third of what it should have been. So does that then mean, you know, just given kind of your near-term guidance that we would see, like, a faster roll-off of that business?
You know, or was just the business supposed to be up so much with the $12 billion package? And now it's just kind of, like you said, flattish, give or take. You know, versus previously. Thanks.
Brian Gray: Yeah. Yeah. I'll just start with that one. So and I'll let Nathan talk about the pricing in Oregon. We don't provide specific pricing results and guidance by state, obviously, but there's certainly momentum in a lot of positive things that come from our dynamic pricing that was really born in that region. And so good news there. As far as the Oregon and that's a ten-year bill. And it's substantially less than what the legislature wanted. It's substantially less than what is needed to maintain the current level of repair in Oregon, which is not great. And so to start making progress, I mean, they need a lot of funding additional funding each year. Going into that.
So, yeah, it's substantially less. Really, you take ODOT gets half of that, gas tax, the other half of that $4.3 billion. So over ten years, and you start doing the math, it's $430 million if you just did it evenly. It's not always exactly even. Know, half that goes to the states and the other half goes to the cities and counties. Half that goes to the cities and counties, we expect that will benefit us beginning next year. Those are real jobs, real benefits in small communities, mid-sized markets that we operate in throughout the entire state. Those are those 2 to $5 million overlay type of projects, some small bridge repairs that are 2 to $5 million.
That is really our bread and butter. We do a lot of that work. In a lot of our states, frankly. That will have an immediate impact on us next year. Not as much as we had hoped, with the larger bill at $12.1 billion, but meaningful that will help us out. The other half of that revenue stream going to ODOT I frankly don't see that improving the construction that much. It really is without it, they would have had to lay off hundreds of DOT workers that really are maintaining the roads, plowing the snow.
So I would say I would look at the $4.3 billion as a stopgap at the state level and will require the legislature and the governor and the taxpayers to continue having the conversation as to how do we add more dollars to the budget through another transportation bill in order to start making progress on the deferred maintenance as been happening in Oregon for years. The roads I live there and I can tell you they need fixing. And I'm driving on a lot of very old bridges that are well past their design life, and so the Oregonians, we need to fix this problem.
So with that, I'll just turn it over to Nathan to talk about pricing real quick. Good morning, Ian. Good to hear from you.
Nathan Ring: On the pricing, first, just as Brian said, I mean, we don't necessarily give the pricing for any particular market. But maybe to help you understand how the markets are performing. So Brian talked a moment ago about some of the key markets that are impacting volumes year over year. If you look at those markets, they are seeing pricing improvement over last year. And if you look at Oregon overall, including both the larger key markets where he mentioned in the Portland area, but even the other ones, you'll see that Oregon overall is up in its pricing. So an indication that dynamic pricing model is working even in those markets where you may see downward volumes.
Ian Zaffino: Okay. Thank you. And then maybe just touch upon M&A. As you look kind of at the landscape over the next twelve months, you know, what type of M&A activity do you think we'd see from you guys and you know, where would it be? I mean, would it be infills? Would it be new markets? Any other kind of color on what you're thinking about as far as future M&A? Thanks.
Brian Gray: Yeah. I would say that I'll start with looking just for a second in the rearview mirror and the success that we've had at integrating the acquisitions that we've done when we restarted our program. I really could not be happier with the due diligence process that's being done at the local regional level that then feeds into our integration. And that playbook has worked well for us and gives me good confidence going into next year in that there are more opportunities. Our business, our corporate development team, I talked about a robust pipeline, and there are ample opportunities in the markets we're currently in.
Our number one priority is to continue to infill our existing markets but also look at markets that are adjacent to our current state. Gonna be focused on the higher margin materials-led type of companies specifically aggregates. We continue to like the mid-sized high-growth markets that we're in. And I would just tell you that with the addition of Strata, we've been talking about seasonality in the first quarter and second quarter. That I want to level out that seasonality and look at some of the states that we're currently in the southern part of our footprint. Along with states that we're not currently in the southern part of our footprint.
So I think our strategy has been pretty consistent and clear from when we first laid out our capital deployment strategy. And very happy to report that there are ample opportunities that continue to come our way. All the deals we've done so far have been negotiated deals. They've all been with multiples. They've been very attractive and kind of meet our discipline modeling criteria. And so would say that the future is gonna look a lot like the past. If you look at the step-up this year that we spent, in SG&A, it was primarily to support our M&A activity. That $20 million step-up in SG&A was primarily for M&A.
And we project that same dollar amount to continue forward in the future years. So I think that would kind of give you an indication of what we're looking at as far as the amount of capital deployment and number deals we're looking.
Ian Zaffino: Alright. Thank you very much.
Operator: Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star followed by the number one on your touch-tone phone. If you are using a speakerphone, please make sure to lift your handset before you press any keys. Your next question comes from the line of Ivan Yi from Wolfe Research. Please go ahead.
Ivan Yi: Hey, guys. Good morning. Thanks for taking my question. First, can you discuss what were organic aggregate volumes and pricing in 3Q ex any acquisitions? Thanks.
Brian Gray: Yeah. I would say so on the pricing, we on aggregate specifically, and that's where I'll kind of focus on. That's the largest piece of what we all talk about. Our pricing continues to be at that high single with the addition of Strata. Our legacy operations would be in mid-single. And I think that's a sustainable look ahead. We like that mid-single we enjoy that in most all the markets that we're in right now. On a volume, we show for the quarter that we were up 4%.
I would say that if you look at legacy operations because of the headwinds related to the lack of asphalt paving weather, and the Oregon headwinds that we faced the first half of this year, but we are down. We continue to be down with those legacy operations. I think you offset that even by looking at our backlog and the local DOT budgets. That, you know, that gives me good hope that's beginning to turn at the legacy operations. And just with some, you know, normal weather, I think our you have seen our aggregate business lines performing much better from a volume standpoint.
Ivan Yi: Great. That's helpful. And also, appreciate that you're breaking out the Oregon volumes by quarter. Any insight into 4Q at all? Have you reached an inflection here? Given the nice improvement we saw in 3Q?
Brian Gray: Yes. I think that when we say that Oregon has stabilized, I'm certainly looking at what happened in October and what we project continuing to move forward. As I look at and provide a little bit of a look ahead into 2026 and having flat that we do feel good about where we're at in Oregon. Really, this comes down to how quick our team was able to navigate these headwinds and change kind of where crews were stationed and moving equipment around rightsizing the team and the crews, being creative, and finding work that maybe we would traditionally not bid if we had strong DOT budgets.
We had an acquisition in July that performed better than we actually had even modeled for. And so that's good strong momentum. It's a nice well paving company in Central Oregon. Central Oregon is one of the hottest spots within Oregon. So yes, there's a number of things that we like that's going on in Oregon that gives us confidence to talk about the stability that state is now enjoying and then kind of look ahead into 2024 or 2026.
Ivan Yi: Thank you.
Operator: Thank you very much. There are no further questions at this time. So I'd like to turn the call back to Mr. Brian Gray for closing comments. Sir, please go ahead.
Brian Gray: Just want to thank you all again for joining us today. Just equally important, I want to thank our team for delivering record results in the third quarter. Our Edge plan is working. The fundamentals of our business are strong, and we believe we are well-positioned for long-term success. We appreciate your continued interest and support. And with that, we'll turn the call back over to the operator.
Operator: Thank you, sir. Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.