Construction Partners, Inc.

Greetings and welcome to the Construction Partners second quarter fiscal 2024 earnings 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's now my pleasure to introduce your host, Rick Black, with Investor Relations. Thank you. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the construction partners conference call to review second quarter results for fiscal 2024. 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, May 10th, 2024. Please be advised that any time-sensitive information may no longer be accurate as of the date of any replay listening 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 Harbors 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 our earnings press release for our disclosure on forward-looking statements. These factors as well as other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Management will also refer to certain non-GAAP measures, including adjusted EBITDA, and there are reconciliations to the nearest gap measures that can be found at the end of the 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. Joining me on the call today are Greg Hoffman, our Chief Financial Officer, and Ned Fleming, our Executive Chairman. I want to begin by thanking all of our 4,400 employees across the CPI family of companies for their hard work, dedication to safety, and outstanding operational performance in the second quarter. While this winter quarter is the slowest financially in our seasonal business, it's a crucial time of preparation for the busy work season in the third and fourth quarters. The CPI team did an outstanding job of training our work crews repairing our fleet of construction equipment, and preparing our asphalt plants to run both day and night, which now in early May is happening throughout the southeast as we have now entered our heavy work season. Strong operational performance in our second quarter led to growth in revenue, gross profits, adjusted EBITDA, and adjusted EBITDA margin that were all up substantially compared to last year, and we remain on pace for another strong year of growth. As we look to the balance of fiscal 2024, project demand remains extremely high, supported by elevated federal and state infrastructure funding, as well as a healthy commercial market in our states. All of these factors taken together give us confidence at our mid-year to raise guidance for FY 2024. Our backlog of $1.79 billion is a reflection of the continued strong demand environment for both public and private work. Some of the significant increase in backlog in the second quarter was simply due to the timing of each state's DOT lettings, as larger lettings commonly occur in the winter months in advance of the summer work season. One benefit our strong backlog continues to give us is the ability to bid patiently and continue to add work at healthy margins in this active bidding environment. This keeps us on track toward the goals laid out in our roadmap 2027. Now turning to our view of the current market conditions, the story remains the same. We continue to benefit from strong public investment across a variety of infrastructure types, which includes not only highways and bridges, but also airports, railroads, and military bases. We continue to see the IIJA funding translating to work in the field. In the commercial markets, the pace of projects and letting opportunities has remained strong across our states. Areas of particular strength in the private markets are manufacturing, corporate site development, large economic development projects, and residential. Our mix of public and private work so far this year is actually about 1% higher for private work than last year, evidence that our markets continue to benefit from strong migration to the southeastern United States. These are business-friendly environments that attract companies and residents to many of the local markets that comprise our footprint. The bidding opportunities are numerous, and though we have most of this year's revenue on the books already, Our local teams in all 70-plus markets are busy adding both public and private work for next year. Turning now to our strategic growth model, our primary focus remains organic growth and the expansion of market share in our current and adjacent markets. Recently, in several of our markets, we have invested in our fleet, equipment, and additional paving crews for the large and growing demand throughout our organization. This will not only drive more revenue, but also drive throughput volume at our asphalt plants, aggregate facilities, and liquid AC terminals. The other part of our growth model is acquisitions. And so far this fiscal year, we've completed five strategic acquisitions that have allowed us to enter new areas, expand current market share, and add capacity, services, and talented new team members to the CPI family. Last week, we announced the acquisition of Sunbelt Asphalt Surfaces in North Georgia in the suburbs of Atlanta. We acquired one active hot mix asphalt plant in Auburn, Georgia, and one greenfield hot mix asphalt plant in Commerce, Georgia, that we expect to begin operating later this year. We added crews and equipment to support our operations in these markets, as well as a talented young management team to lead our operations and future growth in this dynamic region. This acquisition allows us to grow our market coverage of a highly active Interstate 85 corridor from Atlanta to Charlotte, which continues to be a key strategic area of geographic focus for us. Sunbelt will operate as a new branded division of our Georgia platform company, the Scruggs Company, under its Sunbelt Asphalt Surfaces name, reinforcing the solid reputation for quality, and dependability that Sunbelt has built in North Georgia. We are pleased to welcome the Sunbelt employees into our growing CPI family. This is an active time on the acquisition front as we are having numerous conversations with potential sellers both inside and outside of our current states. The opportunities in our highly fragmented industry are substantial. However, we remain patient and focused on finding the best strategic acquisitions while maintaining and adding to the great culture of the CPI family of companies. As we grow through acquisitions, we want to maintain our reputation as the buyer of choice in our industry by treating sellers fairly and by providing attractive career opportunities and taking care of their employees. Overall, our strategy remains the same and straightforward. The need for the nation and our states to invest in deferred infrastructure maintenance and capacity has never been greater. CPI is well positioned for profitable growth as we organize in a growing number of local markets to perform this recurring revenue work for repeat customers. In addition, our industry is going through a generational transition, and we are the leader in building a scalable business by acquiring great privately held construction companies. We remain on track toward our roadmap 2027 goal of annual revenue growth of 15 to 20% and EBITDA margins in the range of 13 to 14% by 2027. In summary, we had a great second quarter and were optimistic about the markets and current bidding environment. We are now well into our active spring work season. Our teams are focused on safety, excellence in operations, and delivering on our raised guidance for fiscal year 2024. I'd now like to turn the call over to Greg.