Construction Partners, Inc.

Greetings. Welcome to the Construction Partners Incorporated Fourth 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, Rick. You may begin.

Thank you, Operator, and good morning, everyone. We appreciate you joining us for the Construction Partners conference call to review fourth quarter and year-end 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, November 29, 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 considered forward-looking statements made pursuant to the safe harbor provisions 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 our 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 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 Greg Hoffman, our Chief Financial Officer, and Ned Fleming, our Executive Chairman. I'll begin with an overview of the business, followed by Greg reviewing our financials in more detail. We finished the year with a strong quarter that drove substantial year-over-year growth for both the fourth quarter and the year. Fiscal 2023 revenue was up 20% year-over-year, and adjusted EBITDA was up 57%, and net income was up over 129%. And consistent with our goal at the beginning of the year to return to double-digit margins, we achieved a full-year adjusted EBITDA margin of 11.1%. We also returned to the normal CPI business model of generating strong cash flow. We ended the year with cash flow from operations of $157 million and lowered our leverage ratio while continuing to drive both organic and acquisitive growth throughout the year. Today we are reporting a record backlog of $1.6 billion. This is evidence that the demand environment is greater than at any time in our past, supported by healthy public funding programs as well as strong commercial markets throughout our six southeastern states. And in regard to the IIJA, while the bill passed three years ago and the funding only began flowing to the states over the past two years, with construction project work starting in the past year. We are still in the early innings on the construction side of this generational investment in our nation's infrastructure. In the southeast, our states are growing, and they remain focused on maintaining and improving the quality of their roads, as well as increasing capacity to handle the significant migration to the southeastern United States. Both of these types of projects are in the sweet spot for CPI's operational capabilities, along with other types of projects such as airports, ports, and rail lines. After decades of falling behind and neglecting infrastructure maintenance needs, we believe the IIJA serves as a down payment on the maintenance and new construction needed to support our country's infrastructure. After this initial down payment, there will remain a great deal of work needed in future years beyond the IIJA. In addition, several states we operate in, such as Tennessee, South Carolina, North Carolina, and Florida, have also recently passed additional supplemental funding plans on top of their existing funding mechanisms to try and keep pace with their rapid growth and the needs of their states. Turning now to CPI's Strategic Growth Model. Subsequent to the end of our fiscal year of September 30th, we've completed two strategic acquisitions that enabled us to enter new growth markets and strengthen our market share in existing ones. First, on October 2nd, we expanded our operations in the upstate area of South Carolina by acquiring Hubbard Paving and Grading in Walhalla. The acquisition adds a hot mix asphalt plant and related construction operations to our South Carolina platform company, King Asphalt, and expands its service market westward in the upstate region. The second acquisition we announced on November 1st was the Reeves Construction Assets in the Charlotte, Rock Hill area that added three hot mix asphalt plants and related construction operations in Concord, North Carolina, and Rock Hill and McConnell's, South Carolina. We entered the Charlotte market last year through our acquisition of Fairby Corporation and the upstate region of South Carolina two years ago through our acquisition of King Asphalt. In both areas, we continue to experience a strong economic climate, favorable demographic trends, and other tailwinds supporting the need for infrastructure services. As we move into a new year, we continue to have numerous conversations with potential sellers both inside and outside of our current states, and we remain patient and focused on finding the best strategic acquisitions that expand our footprint and grow relative market share. We believe CPI is seen as the buyer of choice for many owners in the Southeast due to our reputation for treating sellers fairly, providing career opportunities for their employees, and our track record of successfully integrating and growing companies. Last month, we were pleased to host our first-ever Analyst Day in New York. And as we said then, the big news for CPI is that there is no new news. Our plan is to continue to execute on the same strategy the company was founded on, to capitalize on the substantial need to invest in infrastructure in the growing Sunbelt region of the U.S., Analyst Day allowed us to showcase our unique culture at CPI as a family of companies and to highlight our operating company presidents. They are the industry leaders that drive CPI's differentiated strategy of operating in distinct local markets with local workforces and generating stable recurring revenue from repeat customers while continuing to build smaller size projects with lower risk profiles and higher margins. Our analysts today also served as an opportunity to introduce our FY24 outlook as part of our five-year strategic plan that we call Roadmap 2027. This plan outlines our growth targets that represent annual revenue growth of 15% to 20% and EBITDA margins in the range of 13% to 14% by 2027. Our top-line growth strategy will continue to prioritize organic growth in our current markets, as well as finding opportunities for greenfielding facilities in adjacent markets, and finally, our third growth lever of strategic acquisitions. Margin expansion also has three levers, first by building better local markets with increased market share as the number one or two player in each of our local markets and improving our market intelligence. Secondly, we want to use vertical integration to continue to gain more margin along the value chain on materials and services. And finally, as our business continues to grow, there will be additional benefits of scale that will steadily contribute to margin expansion. Also crucial to our strategic plan is further widening a competitive advantage to our workforce by building on our strong organizational culture as a family of companies and providing superior benefits, career opportunities, which attract and retain the best construction professionals. At CPI, we're dedicated to building better lives and to building the infrastructure that keeps our communities connected. As we wrap up a successful fiscal year, I'd like to thank our hardworking board of directors, many of whom have been serving as directors since the founding of the company 24 years ago. Their expertise and experience continue to provide wise counsel to the company's leadership team. I want to conclude by also thanking the more than 4,200 employees at CPI for their hard work and professionalism in delivering a strong fiscal year 2023 and being prepared for dynamic growth in our new fiscal year 2024. Most importantly, thank you for watching out for your teammates and keeping each other safe each and every day in our work sites. I'd now like to turn the call over to Greg.