Construction Partners, Inc.

First 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, Investor Relations. Thank you, sir. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the construction partners conference call to review the first quarter results for fiscal 2023. 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, February 10th, 2023. 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 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 yesterday's earnings press release for our disclosures 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 press 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 thanking our approximately 4,000 dedicated employees throughout our now six states in the southeast for their focus on safety and taking care of their teammates each day at our job sites and plant sites. I believe our talented workforce is our most valuable asset and will continue to create a competitive advantage for our company. CPI had a good first quarter to begin our fiscal year 2023. with revenue growth of 20% year-over-year, a positive sign that our efforts to capture inflation and new bids is working and will continue throughout the year to positively impact the results. This quarter, throughout our footprint, we experienced inclement weather for two-thirds of the quarter, with above-average precipitation in November and December resulting in a reduced number of productive workdays. These weather impacts show up mainly in fixed cost recovery at our plants and fleet and create extra project costs. We approximate an abnormal weather impact in Q1 of approximately $4 million. However, weather impacts can go both ways, such as last year's first quarter, which had below average precipitation that allowed us to over-recover our fixed assets. In our line of work, usually over the course of a full year, the weather tends to even out. Another factor this quarter that we did plan for was the completion of the majority of our remaining low gross margin projects from our preinflationary backlog that was bid prior to October 1st, 2021. Our customers typically need their projects to complete the final paving before winter. So as expected, most of these older projects wrapped up construction in our first quarter and represented approximately $50 million of revenue with little or no gross profit. In our annual financial plan for FY23, the combination of completing these older projects in the first half of the year and then moving almost exclusively to higher margin backlog during the work season creates a margin profile more heavily weighted toward the second half than normal. Over the past five years, CPI's average split of EBITDA has been 33% in the first half of the year and 67% in the second half of the year. In FY23, we anticipate this being close to 27% in the first half and 73% in the second half. We are right on track with our plan for the year, and our external environment is slowly but surely returning to normal. Both of these factors give us confidence today to revise our annual guidance and raised the midpoints for revenue, EBITDA, and net income. We are pleased to report another record backlog this quarter of $1.47 billion, demonstrating that the demand environment remains strong in both the public and private sectors. Public infrastructure lettings are beginning to deploy the IIJA funding, impacting each of our six states for their highway and bridge projects, airport renovations and expansions, and other types of infrastructure. Over the last two years, CPI has focused on preparing our organization and workforce, and we're now ready to capitalize on this generational investment in infrastructure over the next six to eight years. We continue to see a steady amount of commercial bid opportunities on both non-residential and residential projects. We believe the private markets will continue to be bolstered in our southeast footprint by the strong migration of new residents and businesses into these states. This month, a National Association of Realtors study measured the top states in 2022 for net migration gains, and five of the top six were CPI states. This strong demand for our services not only continues to keep revenue backlog high, but also has allowed pricing in the new backlog to remain at the higher margins in line with backlog added the previous three quarters. We will continue to leverage this demand environment and our southeastern footprint to add future work at attractive margins. During the first quarter, we also integrated two strategic acquisitions, a bolt-on company in Nashville, Tennessee, our first interest into that state, and a new platform company in North Carolina. Both of these expansions represent excellent new markets for CPI, adding six asphalt plants while expanding our workforce. We welcome Farabee Corporation and 150 new teammates to the CPI family as a platform company in the Charlotte metro area and western North Carolina. The Farabee team is an impressive group of construction professionals, and the company will continue to be led by Chris and David Farabee. Throughout CPI's history, a platform company, once established, has served as a catalyst for dynamic growth throughout a state or region. as demonstrated last year with the addition of King Asphalt in South Carolina. We're excited that with Bearby Corporation, we now have a well-run platform company with a great reputation in one of the fastest growing regions in the country. Right before Thanksgiving and our last earnings call, CPI entered the Nashville metro area with a purchase of three HMA plants and a construction operation from Blue Water Industries. I'm pleased to report that the initial integration, led by our Wiregrass construction team in nearby Huntsville, has gone very well. The construction operation is staffed with experienced and talented personnel, and we will be entering the first heavy work season in Tennessee with a full backlog of good work. And as you would expect in the fast-growing Nashville suburbs, we are pleased with the amount of bidding opportunities and potential for future organic growth. Turning now to growth initiatives, we continue to evaluate attractive investment opportunities in all three of our levers for growth. First, organic growth in our existing markets, such as last year's 24% organic growth and 8.7% in our first quarter. Secondly, greenfield investments in new asphalt plants and vertical integration facilities, such as the new asphalt terminal in Alabama we announced last quarter. And finally, strategic acquisitions in new markets, such as our recent entry into Charlotte and Nashville. CPI will continue to carefully evaluate each opportunity and to use all three of these types of growth in making smart, long-term investments that continue to grow the company. To fund these growth investments, we will continue to generate strong cash flow from ongoing operations. CPI, throughout its history, has generated strong pre-cash flow, with a typical pre-cash flow conversion rate in the range of 50% to 60% of adjusted EBITDA. Over the last two years, CPI has invested this cash flow into numerous attractive long-term investments, which have generated 22% adjusted EBITDA growth last fiscal year, despite a challenging macro environment, and this year is on track to generate 35 to 40% growth in adjusted EBITDA. As CPI expands its footprint and continues to consolidate markets, margins will increase, growth will continue, and shareholder value will compound. As CPI grows, we benefit from scale in our fixed costs. After significant investments in our organization to prepare for growth over the last two years, we now anticipate in our revised outlook that general and administrative expense will be in the range of 8 to 8.2% or 20 to 30 basis points lower than last year. As a growth company, we must stay ahead of the curve in preparing and investing for future growth as we did in FY21 and FY22. This will allow us to capitalize on efficiencies of scale at CPI over time and expand bottom line margins. This fiscal year should have our typical seasonality of revenue being realized approximately 40% in the first half of the year and 60% in the second half and our fixed asset recovery having our normal under recovery in the first half of the year and over recovery in the second half of the year during our busy work season. We are excited for the year ahead and we expect to achieve significant top line and bottom line growth supported by strong customer demand and project funding. I'd now like to turn the call over to Alan.