Construction Partners, Inc.

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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Black of Investing Relations. Thank you, Rick. You may begin.

Thank you, Operator. And good morning, everyone. We appreciate you joining us for the Construction Partners conference call to review third quarter fiscal 2022 results. This call is also being webcast and can be accessed through the audio link on the events and presentations page of the investor relations section of constructionpartners.net. Information recorded on this call speaks only as of today, August 5th, 2022. So please be advised that any time sensitive information may no longer be accurate as of the date of any replay, or transcript reading. I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance, are considered forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. We will be making forward-looking statements as part of today's call that by their nature are uncertain and outside of the company's control. Actual results may differ materially. Please refer to the earnings press release that was issued today for our disclosure on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Management will also refer to non-GAAP measures, including adjusted EBITDA. Reconciliations to the nearest GAAP measures can be found at the end of our earnings release. Construction Partners assumes no obligation to publicly update or revise any forward-looking statements. And now, I would like to turn the call over to Construction Partners CEO, Jewel Smith. Jewel?

Thank you, Rick, and good morning, everyone. With me on the call today are Alan Palmer, our Chief Financial Officer, and Ned Fleming, our Executive Chairman, as well as other members of our Senior Management team. I'd like to start by recognizing our more than 3,800 CPI employees. including 200 new employees that we welcomed to CPI and King Asphalt earlier this week through our acquisition of Southern Asphalt in South Carolina. I want to thank our employees' commitment to safety at our job sites during a very busy work season in a challenging macro environment. We had a very good third quarter. We recorded record revenue, EBITDA, and project backlog. Clearly, demand is strong. and our growth of 45% from last year is broad-based and diverse. We grew through both organic and acquisitive revenue during the quarter. This is a result of our dual focus on growing relative market share in our existing markets and making good strategic acquisitions. Two additional factors that boosted the third quarter's top line were favorable weather across our region, as well as an approximately $10 million of revenue from liquid asphalt index adjustments due to the large increase in asphalt prices during the three-month period. Despite our strong performance in the third quarter, today's economic environment remains challenging in the three areas of labor, inflation, and supply chain. The labor market continues to be tight and very competitive. However, we believe our model is prevailing by offering local and steady work that allows our employees to be at home every night, have great benefits, and opportunities for advancement with that dynamic and growing company. On our last call, I discussed the inflation hitting the construction industry. We don't anticipate this inflation going away anytime soon. That said, our model of shorter-duration projects is allowing us to pass through more of these higher costs at the bid table and add backlog with more cost escalators built into our estimates. In regard to the supply chain, this area continues to be very inconsistent, and CPI is currently having to manage through this abnormal environment. Whether it is rock deliveries by railroad in South Georgia and Florida, cement in South Carolina, or pipe in North Carolina, It's a daily fight to be productive in this environment. With these challenges, I consider our results this quarter to be a testament to the perseverance of all of our employees and their ability to adapt to an ever-changing macro environment. As we move into the last quarter of our fiscal year, due to the high revenue in Q3 and the record high backlog, we are raising our FY22 outlook for revenue. We have also revised our outlook by tightening our adjusted EBITDA ranges, which maintains the same midpoint as before. From a margin perspective, we spoke last quarter about how margins would improve from Q2 to Q3 and from Q3 to Q4. That is still the case. The pre-inflationary backlog that we have had to work through has mostly been completed now, and we are steadily adding newer backlog at higher margins. We continue to see our pricing of new backlog being added, reflecting approximately 250 to 300 basis points higher margin compared to the previous year. We expect this trend of steady growth in margins to continue into FY 2023. Turning now to acquisitions. Earlier this week, we announced the purchase of Southern Asphalt, a bolt-on to our South Carolina platform, King Asphalt. This expands our footprint into the dynamic Myrtle Beach metro area. We've added two hot mix asphalt plants and more than 200 employees, serving an area that is considered among the fastest growing markets in the nation, providing us opportunities to bid on an attractive mix of public and commercial projects. In regard to future acquisitions, we continue to have conversations with potential sellers both inside and outside our current footprint. and we remain patient and focused on finding the right strategic acquisitions that expand our footprint and grow our relative market share. Before turning the call over to Alan to review the financials, I'd like to reiterate our optimism for the future of CPI. Despite having to adapt to a challenging operating environment the last 18 months, our long-term strategy has proven to be sound. and we have consistently stayed focused on executing that strategy and building value for our shareholders. We are well positioned throughout the Southeast to continue to grow in both the public and private markets. We are also poised to capitalize on the generational investment in infrastructure that the IIJA will create over the next decade as it becomes a significant factor later this calendar year. We begin the fourth quarter with the highest backlog in the company's history and expanding backlog margins. These positive dynamics, coupled with a continuing benefit of being the primary consolidator in our industry, will drive margin expansion as we move into FY 2023 and beyond. We are excited for the road ahead. I'd like to now turn the call over to Alan.