Construction Partners, Inc.

Greetings, and welcome to the Construction Partners' fourth quarter and year-end fiscal 2024 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, with 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 fourth quarter and year-end 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, November 21st, 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 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 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 non-GAAP measures, including the adjusted EBITDA. Reconciliation to the nearest gap 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. Now, I would like to turn the call over to Construction Partners CEO, Jewel Smith. Jewel?

Thank you, Rick, and good morning, everyone. We appreciate you joining us on the call today. With me this morning is Greg Hoffman, our Chief Financial Officer, and Ned Fleming, our Executive Chairman. We are pleased to report a strong finish to our fiscal year 2024, a record year with revenue growth of 17%, net income growth of 41%, adjusted EBITDA growth of 28%, and an EBITDA margin percentage of 12.1% compared to 11% last year. In addition, the CPI business model of expert local management teams generating recurring revenue for repeat customers continued to generate strong cash flow, and we ended the year with cash flow from operations of $209 million. Finally, we completed eight acquisitions in fiscal 2024 that expanded our geographic footprint into new growth markets and enhanced relative market share across our Sunbelt states. I want to congratulate the now more than 5,800 employees at CPI for their hard work and professionalism delivering a record year. As a family of companies, we are striving to live out our core values of family and respect, which creates an incredible place to work together each day. In addition, our growth strategy delivers on our core value of opportunity by providing numerous pathways for teammates to advance their careers and build better lives. Our final core value is excellence, a daily challenge to do ordinary things extraordinarily well, while also remaining vigilant to watch out for each other and to stay safe each and every day at our work sites. Fiscal year 2025 has started off strong, as earlier this month we acquired Lone Star Paving, our new platform company in Texas. CPI has long evaluated opportunities to enter the state of Texas with its dynamic growth and well-funded infrastructure program. The key for us was to find a great platform company in strong markets led by a talented management team and great people that culturally fit into our family of companies. Lone Star Paving certainly checks all of those boxes, as Jack Wheeler has built not only one of the most dominant construction companies in Central Texas, but also an incredibly cohesive team of talented professionals that are obsessive in their dedication to taking care of both their customers and their employees. Our due diligence process over the last six months only confirmed the professionalism of the Lone Star team and allowed us to close the transaction earlier than expected and to include Lone Star into 11 months of our fiscal year 2025 guidance. And this is impactful as Lone Star's 20% plus EBITDA margins have accelerated CPI's progress toward our roadmap 2027 goals by two years. Essentially, Lone Star is a proof of concept of the power and potential of the three margin expansion levers in our roadmap 2027 goals, building better markets, vertical integration, and scale. We will continue to execute on this bottom line expansion strategy throughout the Sun Belt in both current and new markets as we grow in fiscal 2025 and beyond. For CPI moving forward, Smart strategic acquisitions will continue to occur as we enter new areas, expand market share, and add capacity services and talented new team members. Importantly, acquisitions made in one year fuel future organic growth in subsequent years, which is the second part of our growth strategy. Currently, we continue to see a very active environment for acquisition opportunities as our industry is going through a generational transition. We continue to build relationships with potential sellers both inside and outside of our current states, yet we remain patient and focused on finding the best strategic acquisitions that will bring operational excellence and add to the great culture of the CPI family of companies. Turning now to an overview of the construction demand and funding environment across our Sunbelt states. Today we are reporting a record backlog of $1.96 billion. which represents 16 consecutive quarters of backlog growth. While we continue to remind stakeholders that CPI's historical norm is for backlog to shrink during the busy summer work season, the fact that backlog grew in the fourth quarter is evidence of a continued robust demand environment in both the commercial and public markets. And regarding the IIJA, while the bill passed four years ago, The funding began flowing to the states three years ago, and that led to construction project work lettings over the past two years. In many ways, we are still in the early stages of seeing the impact of this generational investment in infrastructure. Of the bill's $348 billion dedicated to highway funding, through August 2024, less than 50% has been committed to projects and only 27% of the funds have been reimbursed to the states for actual construction in place. It is important to note that while the IIJA was highlighted as an important down payment on our nation finally addressing its declining infrastructure, at the core of this program was the five-year reauthorization of the Federal Transportation Highway Program. Previous authorizations were known by names such as Safety Lou and the FAST Act. and have always been the primary federal funding mechanism with the states for road repair, maintenance, and expansion projects. The IIJA represented a significant increase in annual highway funding levels with a 40% increase from 2021 to 2022, and now increasing annually by an incremental amount as is normal for this federal highway program. It has also been the historical norm that after five years, The current funding level serves to set the new baseline for the next five-year authorization. We fully expect this reauthorization at growing funding levels to happen in 2026 as the demand for repairing and maintaining our nation and state's infrastructure will continue to be an acute need and a high bipartisan priority. In addition, several states we operate in, such as Tennessee, South Carolina, North Carolina, and Florida, have also recently passed additional supplemental infrastructure funding plans on top of their existing funding mechanisms to try and keep pace with their rapid growth and the needs of their states. Throughout our Sunbelt states, markets are growing and our states remain focused on maintaining and improving the quality of their roads, as well as increasing capacity to handle the significant migration to the Sunbelt. As we begin our new fiscal year, our team is focused on executing on this record backlog and evaluating both organic and acquisitive growth opportunities throughout the Sun Belt. We also remain focused on the long-term challenges of attracting and retaining the best workforce and providing them a distinct family of companies culture so we can deliver on the opportunities ahead of us to grow our business and create outstanding shareholder value. I'd now like to turn the call over to Greg.