ROAD - Earnings call transcript Q1 2019 | Construction Partners, Inc.

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Operator

Greetings, and welcome to Construction Partners, Inc.

First Quarter Fiscal 2019 Earnings Conference Call. [Operator Instructions] As a remainder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Black, Investor Relations. Thank you, Mr. begin. may you Black,

Rick Black

link through being constructionpartners.net. and and the everyone. to of Construction Presentations quarter is the XXXX Operator, joining accessed review appreciate today so on recorded this us the first be please forward-looking statements that also call expectations accurate This for like that the or only on facts, Partners' Relations February as XXXX, made advised I of of of Investor Events to results. and any good be audio the statements you, section future Information no time-sensitive can the We discussion historical morning, you also longer Safe page Harbor as fiscal including webcast not call Thank any speaks conference provision information XX, be are Securities XXXX. of to would made date of statements Litigation of that Act today's may remind pursuant you of performance, or the are Private events in future financial replay. call

forward-looking Charles call Construction like now, measures no And EBITDA. would Construction end be to to with call be today's the and as statements. differ Company's described Partners to President disclosure These Exchange Actual found Please release risks uncertainties press detail Commission. and may making other statements Charles? the to and Management their GAAP forward-looking that release. and Partners' to by are revise of Securities in I turn update to Owens. Mr. earnings or part refer obligation forward-looking our including also for CEO, control. the results are of will can issued was the yesterday the assumes materially. earnings the filings will outside any publicly of on nature Reconciliations We measures, uncertain over statements. that Company's refer the our factors nearest and non-GAAP adjusted in at

Charles Owens

morning, Alan our everyone. Chairman the remarks, to call quarter call on fiscal then good an I and for Ned are our Officer. and Rick, Ned our comments will I With In our turn opening on about Palmer, Financial today additional you, update give Thank and Board; Executive business. XXXX first Fleming, will comments. Chief the the few provide me of my over

Finally, Alan will results discuss and review our outlook. our financial

shorter utilization quarters and productivity higher our due fixed our factors. during increase that are plants other at confirming in gross not of XXXX. due put the markets During be for year, outlook November revenue patterns, to completed. note It our our of and increased workdays important to to prevent expectations, Those projects for a lost half is projects. than despite Historically, our across costs exceeded allowing Company productivity. profit anticipate asphalt over fiscal base January to XX% year we and Michael larger our related good in future as for We are and our revenue forward delays in second fiscal markets, are that will our our the of to normal the annual first projects revenue I October quarter, expect which to is experienced delays slower percentage be half simply profit first our year and of of in a sustained improved is December. when construction gross our fiscal in rainfall allocated Hurricane percentage many weather increased equipment. completion our weather seasonally certain our comes XXXX Weather of

remaining of three fiscal quarters XXXX. completed continue will will in year. maintain in our backlog We strong we XX% current our fiscal our Approximately backlog, work through project be to work our that of the

of construction we local as markets favorable, In during our From our a expect number standpoint, complete in the operational current remain projects to we year beyond. bid future projects an fiscal addition, remain and that markets competitive. for on opportunities both will

to However, be discipline. continue competitiveness on very we focused and maintaining our cost bidding

for funded projects local state and bridges. infrastructure include and projects airport roadways, government runways Our highways, interstate are publicly

include private Throughout site and for to Our our shopping development. related competitiveness local parks, workforce. the housing component industrial markets, of centers, and projects our paving local another X% our projects Construction is less to for account residential annual market primarily work businesses critical residential office, revenue. than our

Our Company is driven by culture people. great

of the economy. strategy. about growth has of It lot affected a hear tight markets our not today's we Although, job

is benefits working we opportunities We hard advantage because pay, also advancements. train offer are for always job obtain, locally, to This extension and good best and can an people. the retain and training

has We work close the and projects advantage profitability to to to constant nature home. that the our of perform is a we’ll impacts. also at people with capture reoccurring wage the to of the maintenance keeping the from projects. wage that year, be the Due This projects provide we start increase at protect of able of local, the are within increase

levers. now markets. and added primary area up the business either demand work expansions Currently, consolidated full attributable to XXXX. and to where We strategic pipeline positive on a doing basis XXXX, in in greenfields we outlook our asphalt year. acquisitions our combined on In to looks revenue footprint We or greenfield in XX% expand in growth. into growth plant drive million expand Turning operations. Three, growth through growth growth new three acquisitions based the acquisition to the existing adjacent in One, markets. our business remain all fiscal $XX opportunities integrated revenue fiscal with our an our for through by more we our led set that anticipate approximately good. about of vertically a three model. that organic new an pull to We through markets levers Two,

Our on to proven profitable that plan to execute deliver controlled is growth. strategy has to our continue

a few the additional Now, for over the comments. to Board Executive I'd like to turn our Chairman Ned? Fleming, it Ned of

Ned Fleming

the consistent to the predictable pay southeastern growing but both Thank work is where public fast only exists, in for is good business the you, morning Charles, not projects repair road and for everyone. ongoing operating growing. funding and demand states, a This it to and

led the grown are well two dedicated team have company operators they effective experienced, for Alan continued and excellent alongside managers. in positioned business We of consistently and highly leaders the decades. believe a are and for and Charles XXXX. work nearly we I growth and

the expected, communicate, to than seasonal, can continue not quarters be more We business it and individual is but cyclical. is impacted

seen founding have I and mentioned, business. Charles the of the since As

the why delays, about we our confirming is our team confident business weather, the better to during up therefore make and increase outlook is are is the growth reason year. exactly model Our which revenue what allows productivity for for company to doing

the execute market projects the business both Alan than Dothan believe As the platform business. and model. Construction Palmer. distinguishes CPI throughout team durations turn become apparent shorter funded to it risk the cost we Alan? recurring continues and our Through well companies, of Partners to to our publicly with to our experienced positioned execute from is many public the here I'd like more different leadership our the call CFO, our companies. grow over maintenance highly is that, lower input in plan our And even that model, and volatility The team, with of infrastructure of consistently will nature to our

Alan Palmer

was to And we've Thank quickly due not has for quarter. Charles first compared the by periods. profit down decline That margin construction from partially our the XXXX, performance Earnings mix lower as percentage metric million. second under-absorption $X.X decrease $XX.X in gross mentioned, on And Ned, of hot of as highlighting share, the X.X% margin quarter work cost in equipment $X an operations in From million impacted asphalt $X.X per existing $X.XX for production Compared the which was our of of some was and Scruggs, not Gross into we revenue and well the our quarter profitability. substantial want as go from the in and the financial utilization equipment as key our projects XX.X%. resulted lower good at This decline pushed to sales, the rainfall internal down. of those income adjusted than million, utilization sustained $X.XX The our of markets cost. rainfall is to XX.X%. forward in you, increased revenue lower year. share and during in start does down first share. standpoint, per from Revenue expected due improvement which morning, were simply down changed. was by November-December. up a million, was asphalt in a production million per approximately of prevented profit X.X% $XX.X was both hot primarily to acquired the resulting in to I and Revenue away decreased $XX.X deferred external discussed, million due last to of revenue to fiscal everyone. XXXX. prior $XXX.X that year million to Gross mix fixed profit construction Net level. revenue our offset EBITDA work down to due absorption quarter future of fixed project attributable was

despite fixed cost. did absorb during cost Let's take project of a quarter. cost our much volume, quarter not to the as fixed total from at not cost lack those perspective, We of just a increases the we where closer experience look in able and were the

$X.X pricing cement as to expectations in that quarter public million cost, and significant increase not we out have in our were and did the fourth in stabilized currently, mentioned don't General consistent company $X.X XXXX. quarter. acquisition year. on quarter Looking expenses our impact we of same due our to the input anticipate call, in and asphalt at an million And with last costs last have a changes due Scruggs our administrative we to included

markets. be margins. to we we're seeing understanding We continue must also To diligently exactly in in manage active this, our do what will

as industries, competition Our business can move with And very competitive. hot of around. spots is most

equipment an steering successfully working and scale efficiencies maintain with margin which our low backlog to to flexibility advantage through EBITDA. of but a crews to Of additional revenue maintain where next project does is during to to future maintain we same have present our external Backlog asphalt quarters projects define have market on million. themselves. XXXX XX our We is competitive for $XXX.X strong take amount, also currently not backlog any for was markets customer, not complete continue with have And up in or a make include move to contract, the organization are margins while We the months. and on mix backlog the Company's construction completed can higher be commitment the revenue opportunities we from during navigate XX are sales as $XXX either the bidder a and executed favorable of to contracts stronger our XXXX, and executed this during maintaining Strategically, We a XX, that million to will and squeeze we private three CPI work, environment, fiscal significant that visibility this EBITDA. fiscal be provides public We time position, the year or completed revenue at December of At a remaining projects the hot contract. percentage year. of or year. year. Backlog this last aggregate. we maximizes a fiscal the expected to represents

projects will projects In current both on and complete we as fiscal that favorable year a beyond. construction of to addition, for the in at future expect our be remained opportunities would during markets number we

cash XXXX, December of we letters Turning after under million cash now our credit had equivalents and million $XX.X facility and revolving balance to XX, $XX of million the outstanding deducting availability credit. $XX At of sheet.

was debt-to-EBITDA X.XX. Our ratio

$X.X XXXX. of was decrease cycle. transactions to sheet in operating payable was and have a CapEx from XXXX, $X.X same payable by balance seeing. strong million $X.X in $XX.X in accounts to see you timing quarter So a primarily to support processing million due can we're quarter accounts down quarter Cash decrease income activities to in million very growth the decrease last for for December year. the December we first XX, ended XX, that million, the the provided opportunities was the ended the million $X.X compared quarter net a the our million due of greater normal and $XX in fluctuation The

expenditures capital million our the expect XXXX. to million of in range compares $XX $XX.X fiscal which million, $XX we XXXX, year in fiscal be to to For

our the ends review Before your for full I'd XX. over year outlook financial call XXXX, the we fiscal to turn for which like questions, September

target long-term to annual high-single to continuing to the of low-double margin. We the are revenue over maintain adjusted double-digit growth EBITDA digits

in million, for $XXX.X million year fiscal million XXXX of Our calls in outlook XXXX. the for revenue range to $XXX compared to $XXX

the range million in we year to $XX compared Our fiscal expect of million, $XX.X million net to income be XXXX. to $XX in

does not From federal legislation any questions. take or XX.X% in or to our to could any net be new year the does the $XX.X in a range infrastructure that fiscal a EBITDA any during income XXXX in our the finally, future impact we'll XXXX be effective expected also highway-related XXXX. fiscal fiscal million be our million rate of not With to account compared take of reminder, occur 'XX. to acquisitions non-recurring in approximately modeling in I'd tax is tax outlook after-tax that million $XX year. mention perspective, also included And Adjusted XXXX. year to may year $XX.X $XX.X a settlement. or As in million, expansions now like greenfield compared of fiscal that Operator? effective XX% outlook into The include potential XXXX that, will passed state

Operator

first Wilson with [Operator James. proceed of question. Instructions] line the Please Our Josh from your question Raymond with comes

Josh Wilson

first. normal about items housekeeping do pattern expect you on few A to follow being my sales that the seasonality in fiscal One, first you XX% 'XX? in end also talked the half,

Alan Palmer

Yes. time. our expectation at this That would be

Josh Wilson

margins you just that versus mean improve reported or year-on-year? quarters, comment the regarding do gross future you And what in sequentially

Alan Palmer

Versus just what reported. we

Josh Wilson

there's that And quarter still some includes when March activity lower seasonally? the potentially

Alan Palmer

back revenue. can the XX%, months, then six the because we same the the similar we believe we'd for in first first approximately Josh, we margin amount of quarter, the the the get in second doing be margin should be quarter to to what

Josh Wilson

of the than expected, cash I operating to flow. of impacts more call I'd there? use were inventory the called on then And turns saw or also out a some of down out you cash anything

Alan Palmer

I we that didn't No, of think a the in do we anticipated revenue December. just, had lot was it

- up in weeks have we plans of So to work. the do last we quarry month, is no couple just the the no and ready the of loaded did

Operator

question. the Our Company. Please question proceed next from your comes Baird Justin & Hauke with with of line Robert W.

Justin Hauke

I guess, quarter, that Do because first What $XX maybe deferred. exactly just think how for the then. quarter, number you was something to in million $XX fourth million you the was said weather-related the to revenue from had help weather have first a much it I quantify for in quarter?

Alan Palmer

what jobs it so $XX $XX over scheduled budgeted short saw we What million. up we about on were have our Justin, $XX we've been We we quarter. for revenue the million the of million. that had over lined out, and was

Justin Hauke

normally it the I we going seems contribution different little lower of the January the second being question revenue which would normally typically improving to the second commentary quarter. a productivity the year quarter is given the little like this be generate better is bit weather seasonality, guess just the in bit would being a what than have half. maybe XX% and and first you revenue on than first But the expect, that

second quarter least at normal implies in that were that the hit to here pattern. think of I if $XXX million revenue you

quarter point a that is least about we at basis? how on be at that the first similar numeric to revenue the more second quarter thinking is So should this

Alan Palmer

Yes, yes.

Justin Hauke

Okay, great.

Alan Palmer

our back jobs, on so to complete we've track. get do that's didn't got We what to

Justin Hauke

kind just would normally guess I build backlog, on a last And this of the question the quarter. be

backlog up, you - kind higher pushing that the your than was large or that was last we Although of in last projects the year. the should multi-year in or being year something that is mentioned that projects Was artificially backlog, think it there maybe backlog how down?

Alan Palmer

a backlog And not prior the only the future because to Yes, actually, in had were that that's about prior went add pattern we backlog the that had more year year, years. that slightly completed first remaining XX September the that years at year, from our in future most Last years. we In And is down off really future backlog months completed that's backlog. years last and September 'XX. we This did quarter adding of next in be years than any XX the for December and the $XX up right. of - typical generally, lower was be in for year exactly revenue. and backlog quarter, in for what September future the 'XX, in December we're year backlog between We nine had last work running million. years, was of completed we've went - nine fiscal to months remainder and not increase

December booked it's So last was year multi-year year. to function in October some Xst really a larger projects year, quarter, of backlog the to we from in we completed be that got this of work all XXst while - this

Justin Hauke

clean disclose? have track number? you're this you Or we something that is quarter? so will in a year that can just for we mean, calling I better out metric this continue to backlog is that So a

Alan Palmer

- We I remainder think, the backlog and dollar can percentage for backlog to be to backlog provide of going years. wise years build, our past the the next the year be year work that. future I if in mean, completed is down obviously, you at goes But future in we completed year the and have, year-end we this of disclosed what have through.

we'll So to that we quarterly and it basis. can on do do continue

Operator

next line Our comes with question Zane D.A. your proceed from question. Please the with Davidson. of Karimi

Zane Karimi

valuations you all? the kind this on what market you year? at off, time or And these private front? have last the civil you the players sellers seen in more into permeating pressure, versus first So M&A for Are guys seeing under less some of seeing with are that of public then environment

Charles Owens

in what and - a year. levers all operate lot and of pulling the work in through greenfield and areas seeing grow - in that out on of opportunities we're those a opening acquisitions I And is as and business anticipate lot of seen this more the a we're all those there. stated through that my of doing we we're of our seeing side we've by activity Zane, we M&A remarks lot

Zane Karimi

has then relative thus is And have any to how going color acquisition one far your you on on Scruggs that, and more the gone expectations?

Charles Owens

The acquisition very in of our all great with the acquisition and that We are And company. is with well. pleased very workforce. we they a performed management team would knew well get a going Met expectations. we and great very

Operator

line Our with Grooms your Please next with Trey Stephens. the from question. question of comes proceed

Noah Mekousko

actually is for Grooms. Mekousko on This Trey Noah

you question, you those? maybe delayed to like complete due to expect cadence that So projects and had about you're some mentioned those. my that when first expecting you talk to weather going to you're the throughout Can year, guys complete

Alan Palmer

We expect that we first be part the quarter. complete able the would we would second that didn't in the in to quarter, complete

So we year get to pretty like we'll XX%, to back expect and stronger to second was quarter We close our able our first be to be to that than to much be XX% split. months. able six get it feel last

jobs get So on would those, be particular the February delay were and a things And to of has been very in good were that that we're we working able favorable. so far January many now.

Noah Mekousko

little And you you to talked on wanted do more guys looking levers then, bit year? just Could how to about. maybe this that the you're greenfields many get a quantify detail growth

Charles Owens

looking at acquisitions. about not different we many several seeing three are are growth point, at basically We levers. like this And I've talked our that

markets to what very very things So areas, are be. positive our want are looking attractive greenfields very, in but that we and

Noah Mekousko

question, last any your the my demand shutdown market? And of the government did affect in

Charles Owens

this affected It has us not point. at

contacts on affect affected getting anticipate had worked, out, different to and probably projects DOTs with that's not as far the impact hear we be that going you'll do that materially. as think maybe any things we we've us our the could that I areas larger but

Operator

the management closing in I'd are hand further There to the back questions call like queue. for to comments. no

Charles Owens

just look call. thank we you everyone and you call we strategy will Okay. that And in management to on very for on Thank I on the conference keep mind to much. to the like being forward team focused stay speaking our would today. and next

Operator

you Ladies for and gentlemen, this Thank does conclude teleconference. participation. today's your

lines You wonderful have your time, disconnect and this may a day. at

Construction Partners (ROAD) 12 Feb 192019 Q1 Earnings call transcript