Construction Partners (ROAD)

Rick Black Investor Relations
Jule Smith President and Chief Executive Officer
Alan Palmer Executive Vice President and Chief Financial Officer and
Ned Fleming Executive Chairman
Michael Feniger Bank of America
Andy Whitman Baird
Stanley Elliott Stifel
Adam Thalhimer Thompson Davis
Brian Russo Sidoti
Call transcript
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Greetings and welcome to the Construction Partners Inc.

Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. to host, pleasure Black. my now introduce Rick your It’s Investor Relations. Thank Rick. you,

begin. may You

Rick Black

advised are information longer statements Act review Events so that events, performance future XXXX you, everyone. being link any you Construction for would of to any may this morning, time and of including time reading. call webcast like that Partners quarter XXXX. facts, only Harbor appreciate call Thank or accessed made the also to good or accurate us the and Reform expectations We Presentations considered are of as statements can of the operator, sensitive or I not is transcript the This of Litigation no please Information Investor results. of call through you that be be joining conference made financial third also remind fiscal at the provision and in constructionpartners.net. on Securities audio Relations to replay August pursuant discussion recorded Safe XXXX, statements X, today, forward-looking be on the Private future page section the of today's speaks the historical

can Jule? call found our including adjusted our Smith. as looking part the earnings statements. also press the to will their nearest at release We will in Management the making with Partners’ CEO, of on please detail company's to are forward- risks I Construction described like to the update now any EBITDA, GAAP assumes over today's Actual statements. earnings materially, revise Commission. obligation disclosure Partners refer and release. measures, would for forward- forward-looking the of and Jule looking Exchange other no in are to results or call that non-GAAP that control. and Securities And the turn be end reconciliations issued to by uncertain company's of statements These nature the uncertainties outside to be and may filings factors today publicly Construction measures differ was refer

Jule Smith

our of very chain. Rick. Palmer, job period. revenue well Carolina. The the quarter, asphalt challenging prices of and as Asphalt an market economic due in the third and additional you, like performance weather organic across demand our of earlier commitment thank is our Officer, supply last from our in approximately we revenue, very busy this tight be to our our employees me were welcome third a existing With to a is during other everyone. XX% our at as adjustments focus quarter, a We boosted our on backlog. acquisitions. into team. senior challenging of project want years safety more employees, in $XX South of Chairman, members asphalt markets had market the relative as our well recorded based X,XXX the Despite recognizing the both season record quarter. CPI increase year factors Alan Financial growing labor, sites the environment dual Palmer, line are is management making I new acquisition diverse. This and top and of to We start we Thank morning, call Ned during in Executive And growth million work labor today's as our continues good strategic acquisitive today through remains and revenue grew that third result our share and month large very from liquid strong. And CPI to EBITDA a including Southern week inflation XXX to good quarter’s Fleming, favorable strong in good and Chief that three and on Two by through than index environment. region, competitive. King a three employee’s Asphalt Clearly, during to macro broad I'd

call, by to built and cost be at CPI chain, regard the this us soon. of by our estimates. currently inflation through every local night, steady environment. the Whether is last productive our with South to I into industry. deliveries area is bid It's allowing cement table rock railroad it employees duration offering and these in our abnormal daily In work with inflation away Carolina. South Florida, and continues having hitting and at fight in is anticipate escalators However, to model Carolina, benefits has North be construction for in that in environment. or Georgia more home more that supply a allows and the be don't our of going we growing costs shorter anytime believe pipe this to said projects to inconsistent, discussed the have this add higher We to opportunities backlog manage model and dynamic very pass-through company. That our On prevailing advancement great this

results With perseverance our their ability and of a an quarter these environment. changing employees macro adapt ever to our be all consider this to of challenges, I to the testament to

the year, revenue. and in outlook to raising are As of we high last move QX for we fiscal the revenue the into quarter record due FYXX backlog, our our high

through been and at QX. adding margins. newer from That steadily EBITDA backlog And We to which improve now. mostly quarter The tightening would still our are have to the last we about how the QX spoke From QX perspective, ranges, higher pre-inflationary we outlook margin that is to as our completed backlog we adjusted from work had QX case. also by margins same have before. revised a maintains midpoint has

pricing the to previous new our points of being added see to to continue higher XXX approximately We basis reflecting margin year. compared backlog XXX

growth We this to and steady FYXXXX. into expect continue margins of trend

area. to nation, and we the markets public conversations to share. Asphalt. in added Carolina bid two that expands acquisitions Earlier Turning and our In more our of acquisitions. hot-mix and an on footprint. have future and patient plants Southern This potential King and announced relative to footprint XXX growing the than that's fastest And our providing our area opportunities asphalt attractive footprint bolt-on metro acquisitions, current mix Asphalt, the regard this sellers an considered among platform into on market week, outside of commercial now strategic with to right to we Beach employees serving both purchase Myrtle the we the We've projects. our a continue South remain us inside focused finding expand grow dynamic

And of for have over months, shareholders. operating the to focused call to review Despite Alan strategy Before I'd reiterate the strategy like to adapt we challenging CPI. building our in having the long-term executing our to on future turning stayed last be financials, value and to environment a the proven consistently that our to optimism for has sound. XX

continue positioned both public in well are to the the and markets. to throughout grow We southeast private

industry to now beyond. FY it the are backlog turn also this began positive create a for to will year. and on These into and over being the will primary in of as XXXX We becomes decade move drive call Alan. significant history the over with the expansion We're company's highest the like next generational factor in the investment dynamics margins. road poised excited later expanding the capitalize benefit with backlog our as quarter in a continuing the that infrastructure the consolidator to IIJA we ahead. calendar coupled fourth margin I'd We

Alan Palmer

attributable of work hot-mix increase $XX.X acquisitions was third XXXX. everyone. and Thank of the Revenue $XX.X was Jule and million, XX, compared to included or I a third compared income for you, $XX.X sales million markets with XX% net last of the to quarter million XXXX. revenue good asphalt year. $XX.X to in to for fiscal aggregates to was The of year. of year. million, compared year. quarter the revenue the quarter last in third increase morning, financial metrics million of of quarter or prior expenses XX% to the the total quarter contract X% third EBITDA $XX.X Adjusted revenue $X.X total completed million compared third our begin million, to was the up in $XX.X quarter Gross of an and review $XX X.X% $XX.X million, in revenue, $XXX.X to General were from of and will compared income our existing June year. Net parties. subsequent million profit million And increase key for $XX.X prior the administrative million, last same approximately in same an

non-GAAP of at to measures of EBITDA today's reconciliations adjusted find can release. financial GAAP press the You end

reduction June availability for Turning of of under had million credit at facility credit. to XXXX, outstanding and after new amended our the letters XXth, sheet, $XX.X the of $XXX.X million now cash we balance

entered agreement financial allowing provides third debt to our A of of XX, were EBITDA on for into the was XXXX, acquisitive June of expenditures million. $XX.X credit Capital flexibility, to XX- end quarter quarter, and was X.X. and liquidity fiscal new the ratio the organic growth As opportunities. trailing pursue months XXXX that us additional

million was to mentioned, year as a the the that Jule And We fiscal million. expenditures record to your billion to that, XX, March we're compared questions. XXXX, at XXXX, ready to June And at Operator? $XXX.X for in backlog $XX of capital be $X.XX $XX XX, expect XXXX. range project million take at billion June now XX, reporting we finally, are with $X.XX and


the line Feniger with of first of Our from [Operator Instructions] Bank America. question Michael comes

Michael Feniger

questions. my taking morning, Good for thanks everyone. everyone, Hey, Yes.

you do do from get acquisitions forward, how don't and Just we that year, If in growth rollover? any going all equal, else this other XXXX? much being acquisitions

Alan Palmer

the the year. we Michael. the question, of made I acquisitions Good mean, at of were that beginning this year made couple

made year's about add in announced acquisitive you've acquisitions one made, this next others pretty some you've of revenue So they're year, year. And one revenue. additional worth million year. year, additional going year, next that got be would year a acquisitive any in that that six probably $XX just have revenue revenue of they to months’ But would because would into or the full would were full that including got not we've million the later add much of next then in $XXX revenue the worth that

Michael Feniger

you do regions? based organic are the DOT start did deceleration? the how look signs organic growth growth year? XXXX? that think there the up budgets look Is of for backlog? to your of to going some just Or on guys reported kind we And how into And of the How see funding Great. we improving pick with next

Jule Smith

morning, Michael, this is Yes, good Jule.

We growing to certainly we market XX%, organic share we've inflation, us, see relative share. also some forward year's Clearly, this continue has just we growth focused are into moving but future. that anticipate see CPI continuing X% we're that going to growth a the and between healthy historically next market before, year, done, organic into markets. our to to of numbers due As growing relative said due on in and it's

think demand to, to I bill economy, the thoughts start also on Ned, near infrastructure you any the come southeastern the from growth is from in, but that? have do organic going drive

Ned Fleming

share, in, to and this to over consolidate continue mean, markets, grow markets I this on passing higher is and the And market grow. Michael, better And ultimately And get our watching seen Well, today? backlog. really over We've been resilient. what you is at continue through we've is they you the model in see time XX that consolidate and how it's that to are you getting working we're continue really different think, now drops as plus and margins. I you're we're seeing converted costs. going to market what's to the years, what that And model relative

So anywhere Alabama think of where Georgia all can't come and when there's same parts you Florida. organic you if Durham, thing parts road about go throughout of construction, not and of you Raleigh to parts growth,

had from XX we've So XX% historically, we're inorganic getting growth. of that organic years. for the about growth benefit And almost a plus

Michael Feniger

going point are on just as pricing if you question potentially smaller the lastly backlogs I'll is, region the it you in seeing that on. up, picking more feel on competitors, with next The thanks. there's forward, and having work And your infrastructure disciplined of And that, with players record the bidding pass year, work, hearing like well?

Ned Fleming

Yes. Michael.

competitors our people that to us how but environment areas, that know have we tells the can plate full now, see is. they a And backlog, demand in So don't obviously, we bidding too. our the due

reflect shrunk. has that. showing pricing And backlog, our typically, historically, seen so during the season, certainly, in that backlog work sometimes And we've

not would all at next surprise so And quarter. that us

the fact creating so a just demand out able shows for And we're quarter, the to backlog, shows while record growing, environment fact that's a revenue that, I that And we're think the it's in of margins the a in lot there. healthy it's contractors. that expand


with Whitman Baird. line Andy Our of next question

Andy Whitman

morning. and implicit good That's Yes, question, inflation Yes, today. taking in just thanks guys. about I XXX margin great, XXX labor wanted also materials, you're points, factoring sure else. inclusive to higher everything in your my make of when basis for that higher backlog And to from the talking

the right it's that way difference as about Jule? So that to is the really XXX, XXX costs think plus in well,

Jule Smith

said is It higher. is year seeing points pricing we're XXX when, to as Andy. summer, last quarter, right clarify, And quarter, over what and I ago, that just to last a is this basis XXX in

shops. assessment due put We've our trying escalators to in forward to into As we're our the buying diesel we're that be may we're one But of side things trying we future, into In trajectory margin. always cost steep. we're pricing the to the the that bids, you're our prices not inflation, seeing the But equipment the cover that move of right, that's bids. in raised is that improving.

as side the we're falls trying inflation, the If is both, last bottom to tackle side said on we're the estimate good the cost all our we hope done cost quarter, where it pricing in a So job doing will. the line. bid to we that of margin, we've

Andy Whitman



seen have put Just comments the And just a index in we the million inflation liquid on been talked about heard guess sure. a for asphalt. adjustments, because high? In now And we was liquid pickup asphalt always wondering, then, index factor. haven't from specifically, haven't That's that some is input other in there, $XX the needed? as them spike I the on clauses these today. words, in of call prices, and benefiting from are wanted and you're to because just you just conference adjustments new? public in I make the different You've these instance, Or they list,

Jule Smith

where DOT and that. to model up new quarter bit, down been Andy, And, months. in We're question. they've Yes. are for typically And indexes. quarter part was million $X not They a of in $X million a in little is they're just time. asphalt it long three wanted older a be -- to state much, may adjusted, so up $X the the they've are aren't this What's a index in much our happened low. good mechanism been or million to this budgets. We These specifically in They maybe bid million. finishing work address the $X went our a our

in communicate. felt for It so And it like was a It's margin. a add add revenue. lot revenue we does just to spike created that dollar doesn't just important of this dollar reimbursement, but it

don't we see forward moving that so being And that high.

to price in was factor this in it big July, was the moderated we important line a thought Asphalts top and the quarter month of point it out. to but it

Andy Whitman

be I these you amount your would final that. revenue question, of is do if you quarter. some has obviously prices EBITDA could drive up, fiscal as maybe guidance with about last guidance, get Thanks a My quarter. with would, wasn't basically up, revenue your you to with to guidance not would like Can talk somewhat least for the slightly, the decent to commensurately, the given that since think fallen least mentioned at clarifying at interplay that? have able there raise just fourth the EBITDA beneficial just maybe why or for in raised here

Jule Smith


we in third weather we So, April and saw, June. the Andy, quarter, in had really favorable what

tailwind this a well on was our as And really AC so adjustment. liquid that as revenue,

would. line. line thought was largely gave mid-year, guidance, we largely the quarter drove And out EBITDA so like the top it played that the But we with in our it

and third together. fourth quarter, interact they The typically,

said the normal, gotten like to a nothing that want QX. little we wetter we just was and we But But margins but quarter, the, supply out that light month QX we're we because there. precipitation August than of is it than the issues QX, quarter, And chain like July, better of it July, had that especially last we're have than we reasonable are see first anticipate last the know, just that now better our than like gave, we going wetter in we be of So unpredictability was historical through be the ranges in normal. was and we've seeing to just second September. QX still to as

Ned Fleming

is me we just saying question that certainly rise to seen crude But and the crude track is smaller near of by for you that. But at of let oil liquid down and And off closer. component mention thing, Andy, that seen price have up continued third that asphalt much much is tracks down. our And, quarter, Liquid asphalt one asphalt. still because throughout not have record than the with the diesel year. let highs that costs in we liquid doesn't exactly our of liquid a that asphalt The yet. this price


Stifel. next the with Elliott comes Stanley of line Our from question

Stanley Elliott

Hey, question. good taking the Quick Thank morning, for you everyone. all question.

You guys whether Could stays on it mentioned or anything that that you basis. hazard out favorable year-over-year quarter. a of kind like weather helped have in might the a guess

Jule Smith

just was at far don't that, little we and have that some a the wetter it little was last do compared know But as helped a normal. three wasn't No, really Stan, were year. of that as how last quarters, we've we look out. We it growing. exactly revenue, historic. May productivity. than week we It anything say, May to drier figure a especially that June been when the good were But April able bit. we wash I little know last would to a

guidance why growth. expected to That's our we raised we So the mid-year.

the weather factor. wouldn't say was so, major I And that

to want out. just weather factor acquisitively. do when it growing when was bad want point have we to organically we we weather, But have we the and major think like good pointed both I we we're out

Ned Fleming

talked second about September. the I'm year, midpoint as that mean in you a got and the half. in about we XX% to always million XX% Stanley, XX% historical that's second the go third Because we the we're had model, July, And August and you our last to if in year. $XX of better had full not which the with be noted, in we in half the XX:XX get out liquid a did quarter, the have actually XX:XX. off first to fourth half, I of a for percentage second from the to had what guidance, we the we is the Andy, up of XX% put But first our going we've And saying wet year, it slightly XX%, we're about than far we're for half sorry, did half And and you if quarter, of of at to last our that XX:XX the about revenue which in very midpoint about guidance, that the from a take the not we asphalt, going

Stanley Elliott

really on Yes, this fair. or that's than more I job you're market more tight help the you're was anything, doing broad having kind labor with work end of curious of internally. less

if work contract advantage a firms other and or larger things from out, force. you with then some curious all just Just you helping that the all are even like given have labor that,

Jule Smith

give get the ability bid. you allows can't have continues in workers, some to to tight. a to line you use I work the to workforce ability and the just labor can't grow generate if we're advantage cases think, don't self-performing have get because think to there top and to, labor, us our is environment, this our what in And that continuing to And I Stanley, model subs to an just you revenue. where the labor, are we're force be demand

opportunities pressing we're workforce local grow. having having our a advantage so to And with with

changing Ned, thoughts? soon, and And so that see don't demand. any the have think anytime that's, do because you I of we

Ned Fleming

with I numbers some people. think, other y lost think, I thing, Well, gets acquisitions with of Stanley, as the each gotten in acquisitions, we've the these terrific

we employer in, that ability people. And higher. communities, workforce we are choice, of a have treat grow great in been the And most able have how and so we've profitability got revenues we we've people healthcare of and our I we for the coming to our coming And is way in. think advancement in our

So, the I it think ago. actually, see was business, the months overall, market we whole six today than labor better

each to XXX part be recent about expect of from it opportunities. the that don't in of the employees terrific that months being six better most lose one, We sight about of excited these fact several the CPI, are but we've acquisitions, now, excited got

Stanley Elliott

think the guess. that about Yes, more makes slow it OEMs given kind on next would in would of are like if delivering the CaPex some probably taken my equipment, housekeeping just side. And the in have It one we sense. sounds inflation? How year of you could be do

And Just helpful? how any do sales or that? anything, to of was a balance of percent be guardrails we sort

Alan Palmer

being are Stanley, that thing X.XX% our CapEx end we're difference our so like to X.XX% growth margin to the our in envision be toward in typically I this of initiatives it's that business, we revenue low create doesn't a lot about our is financials, growth future. it and CaPex, right Because spending now, going in of maintain that of to is going CapEx sales. X%. our one are show the the sales, on around going think X% we year of maintenance typically that the our But next through to and is CaPex year,

greenfields going We several off. have

so is, really but is investing get buy capex at gets we're we're on lost maintenance And when budget, I one think that lean CaPex looking the that's we pretty company. thing in


with Thompson Davis. from comes Thalhimer question of Adam the next line Our

Adam Thalhimer

guys. morning, What cash flow? one on Congrats strong good for the your QX. Alan, thoughts are first Hey, on you. QX

Alan Palmer

at with that positive you when revenue because a operations very from that is days networking a the then, of down, revenue, with $XXX should QX, obviously, capital third having capital. a million though to cash growth strong basically very million that cash have Well, QX up moderating growth you're midpoint relatively is not the operations. flow hit down working $XXX slightly finance average to the our third growth what in quarter fourth from chew went grow even flat, to quarter-over-quarter a from from or quarter Part should But quarter-over-quarter. revenue quarter us growth of in quarter-over-quarter going revenue generate lot the being we

Adam Thalhimer

I was what these the line you're abate? headwinds, That's have you sight do then, to chain going of starting say. Jule, to particularly And on hoping any to supply

Jule Smith

I wish Adam, I that. answer could

in what do not get trying it, good in is right. as to abating, productive. some environment, said is We've daily I that mean, great happening on just we've a to in at At to anytime counting going got point got our backlog. to We just good on we're adapting backlog. we struggle, normalize. prepared margin not time future this are our counting in the we're be remarks It's soon. But

Ned Fleming

two to sometimes numbers. in that learning Alan, management through flexible be Jule, have grow whole flexible supply to this that credit aren't really environment day. be came in for the when from on team. on this to that me that real working a are to been team done project in workforce, all place to management way this terrific opportunity is one and move up and to on spot, dynamic, good brag working are synergies utilize has to the they a keep they the to it pipe It the productivity away, it with to work the one of continue have But the able continue every how Adam, down is going job another, to way has been the an out and you continue in business. they ran day an of one move people to projects could every disruptions

chain. I a to the competitive So we've as has consolidate from given us believe, that supply we've what synergies a very and advantage put market this and continue together gained, to is company disruptive market

Adam Thalhimer

come QX. Jule, bidding And environment in And last guess that today? me, one then characterize it for was I you for nice the overall to would through see how

Jule Smith

come the that Adam strong. starts We drop more bill infrastructure private bill But think that, less haven't everything good the that force, public bidding right bids from create. of seen of haven't bid IIJA as really of seen full comes just to we're jobs, and few in. the we is now the can't bids really may frankly I bid jobs think any change. We still because continued pricing the see into we've that environment a to number anything getting. opportunities number will a we off, in We

it from hasn't quarter. a changed really So lot last the


Sidoti. next of question the our comes Russo And from with line Brian

Brian Russo

Hi, Yes, you. thank morning. good

is Just environment to money, bidding to reason it and be Meaning, or activity, there's the DOTs, that with bidding on of like that up the any to will lot to there especially believe going the activity seems funding? flowing follow margins a other states curious, change I'm in capture in? out just just work And, to a for if of because a going operate pressured, you sense fragmented be there -- industry you are lot players to to be such there's top going for just the IIJA line.

Jule Smith

and experienced money continue in the to we've the has relief is continue going that to really, budgets, all the to been IIJA this XX-months, year, state the last envision states We the money. COVID extra strong, going bidding be healthy in have morning. Good Brian. environments them Yes, given past we're what

infrastructure just do bill, going there's think we have we be the project that our to so going really to that, continue some in And in seeing projecting funding. been increase

to demand is by making to investment going eight it big is so as lot going continue be to And last, really is see these that public on a to in projects infrastructure a time of done. six the our we the side, get nation, years,

bill. workforce And our have did. available And needed infrastructure I now. and the So and resources invest for to Last we in continuing And saw the think this we're said take we we're we organization. prepared coming, growth of year, it. happening to we to that's advantage prepared to get

Brian Russo

just flexibility your about or to your gives this the size? larger the you mentioned, sheet remind leverage me or facility pursue more maybe trying And great. three Or is more acquisitions, max of Okay, ratio the then is in leverage think I get times, facilities? balance credit Xx, sense under a in to agreement, is aggressively capacity credit the allowed mentioned you current at that you max is new

Ned Fleming

Yes, us cushion, quarters quarter think very that of for, great at make gives allows, X. hit actually lower guidance, that question. up going Because I an not facility a if provides were X.X bringing -- to I ratio our X.X, the flex us year. it's event should plans. to we one Yes, acquisition good with it it should from down, if a as providing enrolling believe, much larger to X.X. three into don't total puts really we our high max also off availability, as a we're quarter can from some new that credit it midpoint It's come change on us our more down come and he leverage EBITDA last our standpoint, it

with the even the home back playing for the acquisition, X.X XXXX and come down. And acquisition that or made then week see the earlier we should down we around as should we X.X. southern be So back out, this borrowing that

or utilization good team conjunction the of And Alan Jule capital been flexible for So this lot organic to growth we of for our say advantage and ones be, also the Brian, with one a continue I patient that historically even far We've that's of levered spent because also. we that us. taking has focus less. leverage I year acquisitions, of two structure mentioned is the we've From us. Jule strategy our And can a we in that growth. sense, top CapEx organic with whole of we've support ratio liked being a changing don't is money to a make finance opportunities, though and job very see come doing as to a down. capital got done great leverage standpoint, creating will really of think line that a as what that higher see our at earlier, things

So standpoint pricing we better the we not down one things flexibility did to any to business. as come of think terrific we very job. continuing the a to is to concerned a do have and have a you allows agreement a the continue But a credit focus that the could agreement we anticipate this have see team, as done, us Alan, They have is flexible management business or benefit. really that from continue huge that board acquisitions, we'd grow as that I have pull as hit which to to standpoint, if we a overtime. be grow credit But team a the our and like standpoint. timing don't from go


And reached will of end we session. the closing the answer for question turn comments. and the have floor back Therefore, management to I

Jule Smith

to for the Have to everyone next thank on being today. you like weekend. just And we call. talking a forward we with us to good look Yes,


gentlemen, and your you participation. concludes teleconference. today's thank for ladies This And

wonderful a You your lines. may have And day. disconnect