ROAD - Earnings call transcript Q3 2019 | Construction Partners, Inc.

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Operator

Greetings and welcome to the Construction Partners' Third Quarter 2019 Earnings Conference Call. [Operator Instructions]

It is now my pleasure to introduce your host, Rick Black with Investor Relations. Thank you, sir.

You may begin.

Rick Black

good and operator, you, morning everyone. Thank you call to appreciate joining quarter us conference Partners Construction the review for results. We fiscal third XXXX through the Investor also can section of the This webcast Relations and the accessed Events of is on audio page call Presentation constructionpartners.net. link being be and today of accurate that recorded information any Information of may this any as so XXXX, no speaks call X, on be of time-sensitive date the please replay. as longer only August be advised

the that statements you made remind future of to to like also Harbor’s of not are including would discussion the today’s facts, events performance, provision Act are XXXX. pursuant the of statements that statements financial I in or made Private forward-looking Safe Reform or Securities historical future expectations Litigation

making Please of control. We Company’s to in by and detail outside forward-looking call that uncertain part other in Commission. and materially. nature Company’s earnings uncertainties of with the statements. release the disclosure statements risks are filings differ Company’s refer and as their described Exchange may Company’s Securities on the are forward-looking and for the These the factors press results will Actual be

forward-looking over refer the Charles? measures And of Construction turn CEO, Mr. Reconciliation adjusted measures, Partners' non-GAAP the nearest statements. Owens. now, no obligation the to to assumes Partners Charles I Construction like call or GAAP Management including any our update President also can will revise at to found release. would be EBITDA. end to earnings and publicly to

Charles Owens

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

Finally, we before take questions. your Alan will review our financial results

has $XXX.X period million, from in our to reporting million, Revenue of quarter. last quarter strong of XX.X% been to year. same quarter, was consecutive up XX.X% quarter to the during EBITDA, our consistent increased and growth $XX.X marks our third our adjusted year attributable quarter the year. to In with strategy. success This pleased and to third revenue performance up are the and growth led This to which grew margin compared last growth for quarter the adjusted our solid XX.X% last We IPO XX.X% fiscal compared model in the last EBITDA third since sixth business year. execution

and execution hot utilized working in by profitability the Our was fueled with our with our and mix effective consistent higher which growth plants asphalt in operational contributed and by strong to strong equipment workforce conditions, quarter. we quarter favorable historical our performance project the throughout execution markets, effectively

with very for be I’m at the backlog in the end it the our fiscal addition, and to of and In beyond. quarter with year pleased opportunities available remainder

a the our more factors with for expectations, line we margins. longer from year improve factors. other normal able weather In due these working We days during typically we our of we have year and approximately the half. the of during our half mentioned of revenue XX% fiscal first benefit fiscal historically, before, annual our half were conditions to in patterns, quarter and As have favorable XX% benefited working and second to our in second third earned

year. more we completed growth asphalt Today hot have through work XX successful in we hot with since hot in and a now maintained of greenfields, by mid-July, operate doing asphalt have founding, we plant a markets expanding asphalt we of by announced strategic and fully controlled With the since in primary mix our integrated, states new complete through establish consistent we southeastern this strategy a XXth manufacturing current which northeast where acquisitions company five in our our initial market our Since In a by probable four making the acquisition levers plants mix and across founding mix we May acquisitions acquisition and operate. three public paving Alabama. offering last plant.

the opportunities continue we the that of prospects look and best evaluate to Clearly, the pipeline and fit acquisition robust, strategy. Company our will

are finding place fit. and patient We on good with importance acquisition high opportunities a

more Ned, Before to turning team like senior and us like the call their enables to would employees I would their for work leadership, that dedication for to management our and strategy. our thank over thank than also X,XXX I hard to execute

few comments. call to for over Ned additional Now the Ned? I’ll a turn

Ned Fleming

everyone. and continue Based strategy consistent to I’ve of you, continued as proven across maintaining seen the to sustainable very this two good our team high of at financial team nearly a operate results. a This quarter. throughout very was and for market organization, growth, enhancing Thank they on decades, good morning is Charles, The the and entire share level markets. deliver our performance Company the all

doing corporate the this of are culture an they its addition, that CPI incredible with at success fostered has In inception. support since

the provide on needs mentoring important proper training, for on opportunities is The consistent people. deliberate emphasis mobility There and to continuous talented support growth, Company and an creates workforce. a training and advancement We workforce. focus growing coupled and for with

sector. compared of others CPI success point quarter’s to marks again This in this differentiation a for great

important elements on model. roadway. this Two for apart set primarily focus with us recurring We public maintenance projects

project overall smaller sizes have as well as shorter We project duration.

crews markets recurring not our bid Company equipment markets. revenue consistent local financial in provide projects We do and mega results. and with outside our our models Our more the with consistent of and work

deliver well markets strengthening The sheet. to balance line to Company its as leading and growth industry top as margins, is in strategically positioned the all continue

fast built-in located public ongoing the markets. and for funding fuel continue eastern repair growing grow will in is expansion growth. both our in road demand states projects funding increasing to business demand, south as with well Our continue as that to will This

public model companies. continues believe unique market As the team execute, represents for our infrastructure consistently CPI that understand a to we will

generation for our to value are financial in the shareholders. We that will cash maximize business continue confident results and generate significant

I’d And to the with Alan? our to turn CFO, call Palmer. over Alan like that,

Alan Palmer

our subsequent Thank $XXX.X million, to financial revenue as acquisitions favorable you, and want and the performance third XXXX. in operational increased conditions, over Ned, includes XXth performance June morning standpoint, markets project led in increases to quarter. also XXth, demand quickly throughout public in in for working that XXXX year-over-year by June strong million approximately private mentioned, to a key highlighting up metrics everyone. or execution quarter. sector. the start growing Charles the quarter as quarter ended effective by the workforce completed were $XX.X existing The markets $XX.X both all From and good million attributable I result million quarter. our increased to the of the of our a increases $XX.X approximately to Revenues Revenue during

production utilization $X.XX the to addition Net year. Gross $XX.X million in $XX.X to of gross a revenue up $XX.X project quarter. profit percentage $X.X million, operational higher were our to million, of to and year, up year. in quarter increased profit period last per to increase primarily the HMA income last due share during result equipment the over The increased revenue. to was higher Earnings last effective compared workforce performance compared approximately the strong $X.XX and from same by the same execution million

higher the percentage. $X.X was of XX.X% prior profit and an in of year. a same EBITDA combination The EBITDA also Adjusted margin million, higher a the adjusted administrative in resulting adjusted margin period EBITDA and lower XX.X% increased expense margin for general gross compared to

between to margin During in terminal the quarter, margin basis XX XX we our in from This that Florida. our achieve were overall points acquired improvement terminal. liquid the shipments contributed use continue this increase believe we asphalt improvements to able through to and our of basis can points newly we and

or X% same $XX.X of quarter $XX.X revenue, General third the of year revenue. million quarter and or administrative last compared the approximately in expenses X.X% of were million to

backlog in on backlog was June our approximately or continued XXth, our approximately of with strong income completed future As and maintaining XXXX quarter. to operational year this consistent expected net be million. fiscal This representing during completed backlog XXXX million Based EBITDA. $XXX remainder for revenue, years. fiscal outlook performance, amount, backlog are – for regard $XXX historical with year. project our our is is we XX% The and backlog adjusted be this to XX% Of expected construction to of is the project

to of availability now million and June At of our sheet. under credit. balance the we Turning XXth, million credit $XX.X of cash have facility revolving million outstanding $XX $XX.X letters deducting after

Our debt to trailing ratio month was EBITDA XX X.XX.

Cash was seeing. compared strong sheet opportunities are very for activities $XX.X months million the operating support months June XXXX. XXth, ended a nine June provided we have nine We the XXth, for to by the to $XX.X ended growth balance million

terminal. increase million progress in higher of quarter higher the liquid an our million to receivable significantly in The compared decrease in quarter third $XX.X to $X and work is to quarterly same the Capex accounts year. inventory new due million asphalt the last balances operation in revenue, on related was $XX.X and

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

Lastly, had comments good I’d like to a quarter. very we Charles’s echo that third

our We’re pleased with also current backlog.

senior XX internal what to I’ve We by to This competitive business continue is market taking that basis. discuss management in on and occurring do weekly local As understanding we what action. mentioned this is overview manage before, requires exactly team which markets. highly our with exactly a each across – will is and be our we diligent constant a communication,

scale We revenue and take present efficiencies crews continue our favorable through markets in successfully to maintain while competitive and flexibility organization advantage as also to environment of maintain to steering EBITDA. themselves. Strategically, position stronger market margins to to this opportunities maximizes equipment move our and

now take we’ll that, With Operator? questions.

Operator

comes and of Our Ladies with with from question. Robert line question-and-answer Baird. Please proceed be will you. first question a session. W. [Operator gentlemen, Thank conducting Instructions] your Wittmann the now Andrew we

Andrew Wittmann

backlog. I for your questions touched this is – remarks, just the question here Thanks in of just some you guess, the on Great. had guys. my prepared in taking just I

for and You’ve how the But of can the continue you together of got since you about in that trends markets your the of mentioned from the your trials, activity fiscal next look have trends roadshow? year the growth head and you types this trends. not you next deliver can that organic with and markets another different kind historical your how you talk place amount about into year IPO evaluate is and in at guys backlog the backlog you it you year you’ve in in levels just do seasonal year as talked as have that the that to believe that

Charles Owens

double-digits think thank question, the in are we backlog. to and we’re for a of Yes, from before, know of kind growth Yes, stated really growth, not opportunities our work Andy. be that at as strategy that. where us to And we’re in in have way we’re the – we a you front and that digits be our changing, than we with as the of, in you to we’ve lot any satisfied going other for high-single that

Andrew Wittmann

fourth cash for business? of busy being guess, revenue and I Great. negative I of your evaluation for so, out for quarter And cash some far. I it. of a – capital my Got Alan. the year-to-year, expecting the another are kind similar quarter, free follow-up or just it’s question of to year-to-date we the I’ve then, is flow question come as is, the here working receivables of And kind here guess, look so burn. my second flow you got here know the at

cash of, if bit how year-to-date are I factor into you’re so So want kind are or you a evaluate you get factors going just that of, timing position other in back far? maybe the to that this sense holding there’s flow little a that

Alan Palmer

Andy. Yes,

inventory not I of increased should see that growth, you year added the enter there’s as compared this inventory the put fourth course some, to if made receivables, last one in because is the As in the a and not of $X quarter out we will, the terminal the have the should acquisition result fourth quarter. last and of has in then really flatten million and then more that sales, but of lot that of we in other quarter, cash any receivables said as did to a generation, that change percentage into the asphalt volume of year, accounts But the at we comments, in that about sales we the we receivable.

we of inventory So we the two expect at on out it that shipments that terminal. inventory most happen would in so end – and large came would be in very before had we the and shipped the of that likely October that just reload fourth and most it quarter be the June all

amount substantial change a between XXth. of should that September June So generate XXth and

Andrew Wittmann

since able you to you around – a to you quantify Okay. in to or That’s there? those to can you have sorry here, those are just shipments that shipments helpful. Can quantify – cited context willing jump little we

Alan Palmer

– mean I Yes,

Andrew Wittmann

In terms of the impact on inventory?

Alan Palmer

tow Yes, about worth of was a million inventory. single $X.X

the got of, when that capacity mean, that high and goes a we the tows you so much any and But and out. last the I we for inventory, which one-time. other is talked winter our time field, put the was materials comes would two that So of know, than and in pretty year, but week on million, flow it in June, at about $X tanks the just the not at inventory have it typically, of we’ve this before, timing

Andrew Wittmann

you context. helpful much. Thank That’s Okay. very

Operator

Please your proceed you. next comes The from Thank Stephens. Grooms with question. with question Trey

Trey Grooms

the great margins, know, I on guess, you question my is there. One, performance first

mentioned know longer what impacted new I kind guys of then looking you’re you on How much you about know, double-digit term through? about from terminal I today? from the as then of like the that – perspective, know, into with the, type line kind a you quantify may impacted, have you there now the little and in question and as that, and the but in term on kind the moving How follow thinking – how if here, may look for the terminal bit pieces we terminal – longer you benefited you growth, a looks know, EBITDA that you kind single-digit, footprint and have maybe thinking top maybe line play thinking flow of high are margins. Just quarter could top still margins are your of of other

Charles Owens

doing on XX regard basis close We to shipments impact it. were with a our Yes, it have able made would we and we terminal, be point quarter. quarterly positive what want to impact the a basis on get from did to a to approximately the

in was we quarter it it. full from service and for good the So outflow had

when full in said I’ve XX margins. annual basis, as year, we’ve and So got basis points before, points XX basis improvement between our an on we overall expect a

volume that that our should line was in quarter with in right and So increase future. the

through as gross steep our saw and increases it long-term as in part able improvement said improvement some an margin, expectations, through overhead that but of in in related to have before also of be As had expect for we percentage revenue – EBITDA overall increase we our to our some the to quarter. margin, profit, because lowering part of our of we our a of growth We going this public. that

it quarter the the think points asphalt course, as contributor increasing the the the busy to of is year. to XX to margin lower throughput and basis the XX a our plants. was into same a times, get And about last utilization equipment goes than of that I big we

margin of that because So the the lower a previous that quarters. of recovery in the quarter of in in of certainly some this was a driver offset

Trey Grooms

Okay.

other next bogey of XXXX role, ability of terminal? if looking a next better just didn’t year, sounds is not least So, and of or what given the necessarily not flows your could if weather as thinking way flow it’s way good seen or we be little kind that give there less but like know a given factors, ebbs range margin we’ve from – kind into year, I just us as do it it be was that even now to there about given know look quarter-to-quarter just to the as on but general some fiscal it that work I into of through as kind incremental about? you kind more of think but could kind just we guess, and a could of at

Charles Owens

to XX terminal the your basis going full the Yes, months I mean, in points. or points basis XX year, in for when months, your have the to there more nine we be XX in there’s

year percentage could probably – just that we’re on about G&A we and cost as high the no growth if think organic on revenue margin just other basis is there’s expect will make up I as acquisitions the with is stays declining then that the little as so at last level then, we other or ongoing. pick has the us to, than changes of bit there now, up we And continue would XX it more there been points then And because revenue to a this a we grow. and be that

Trey Grooms

All right. And M&A last on That’s helpful. one pipeline. from then is me

guys size any what acquisitions standpoint in type it of, was for job tuck-in good past? seeing and should of expect executing doing Are of done is for You appetite an or M&A a said your such out larger continued, guys opportunities M&A kind have there we you on robust. at that from you kind something the

Charles Owens

it Yes, Trey, like the the really take fit that this the though revenue like limiting for would is strategy profile, or at larger to does acquisitions just way But acquisition certain comes that anything really didn’t fit looked obviously, obviously, we’re along also in not like we’d if our of that that that. – Charles. profile, really our out we to fit. level bolt-on We a acquisition there acquisitions that’s some we we

our culture So that we’re and contribute to strategic line and make open to anything we fit fits bottom immediately. will

Trey Grooms

kind because the at see against, now? unreasonable totally guys wheel of you to of have you outside stuck totally that something Would house. guys be you to looking you have footprint your geographically Are it current

Charles Owens

the the got footprint and outside and we’re things. of to ability then looking footprint, has outside get make always our the and the Company the to want right of expand grow right acquisition evaluating we’ve We the personnel in, – We’re and be that platform another move sure we’re into held that but to you as have a got situation. we’re lot fit in to for now of, in other but companies privately areas also, markets we’re looking know we it’s based us we good

Trey Grooms

Thanks for my Good Okay. taking questions. luck.

Operator

James. comes Josh The Raymond you. with line of proceed your Wilson question. the next with Thank question from Please

Josh Wilson

and Alan Ned. Congrats quarter. Charles, morning, the Good on

Charles Owens

Thanks, Josh.

Ned Fleming

Thank you, Josh.

Josh Wilson

to on comment was wanted quarter. a more about, that favorable utilization unusually to maybe or I more benefits referring the sustainable peel or layers not The that of repeatable? you in a that the talked seasonally gross is margin was little that weather back

Alan Palmer

in seasonality. wise to XX% quarters the the strictly and by the and of the equipment in margin negatively that the this quarter anything the occurred fourth, like utilization that’s in impacted just higher be not are in It’s saw third six both we plants the that’s compared lower and did was it those six of No, the When the months, the we quarters and to going first seasonality months. six then utilization months of first in the going unusual expand it was that quarter. margin is have what really second not to the

Josh Wilson

margins as the And the look at may drivers the looks would it it. like there? September step in Got – down I be there guidance. What quarter, your implication it some in for

Alan Palmer

sure and guidance in guidance there’s in that that or – on our not not update that. a I’m Well, we is a based quarterly do substantial change what considering

than we not the will, X.X% put So I’m margin together at if the looking the quarter. quarter fourth less difference, and you and third what in that is

the our in would the – that previous the implicated maybe in the Other compared a that, margin the down current the fourth for quarter midpoint there’s implies to be expectation would quarter nothing comparing in it not I’m sure of guidance. So it’s unless to one. that what that decline have than

Josh Wilson

Okay, last me. one And for it. then got

Should the what than backlog going running you’ve and drivers that Your the been the year. that some quarter to a continue forward higher expect the sales relative going we amount into of last might to little burn rate, of of had has be?

Alan Palmer

the acquisitions of to low said, sure organic the we’ve said, mean, question. at and not expect I’m our we single, both – high as revenue digits. double to continue as I Well, through Charles our grow,

timing and what or the contracts We or because third rate quarter, burn higher when XX% the Generally type the just recurring can than we XX% maintenance in of expect that replace sometimes continue. or smaller is Phonetic. be to fourth the less of the

we’ve pretty do years. existing that’s what of a So expect common. with seen operations in year to our our next And we percent what line much is pretty in past with backlog the as

it fourth norm. quarters don’t burn historical in your our would if something. what – That’s is typically add and I and the quarter. our So, know been that But fourth answer the be the in third but we rate greater question, than third

We’re second especially in second the and the quarter. first quarter,

bit fiscal lot complete we’ll Our of burn a than adding because rate year. the add our more same that within is in a usually good next work – we’re that that

Josh Wilson

taking Got my questions. it. for Thanks

Operator

you. Please with Thank from next question Thielman Brent question. proceed is The your D.A. Davidson. with

Brent Thielman

Thanks. Good morning. Great quarter.

Alan Palmer

Good Thank morning. you, Brent.

Brent Thielman

the or at shift backlog kind you seeing look or have of rate you some of more are prime run toward you thinking you’re that if Charles, about a the business on market. of more been just the of these Hey, any I’m today, versus taken the hitting contractor? larger work jobs subcontractor

in been range. of kind all? you’ve historically think that Is at changing that XX% I prime

Charles Owens

we No, shift. a haven’t that seen of much really

You and still really the that far projects really going markets sub a the are all as in we’ve of pretty direction. know, prime seen as shift we haven’t large versus lot XX in the our a consistent of of big been different and that not

Brent Thielman

favorable And see start Okay, think start this for – when think you? do in you that to opportunities when in some legislation that do you you great. Alabama, from materialize

Charles Owens

XXXX. fiscal I in start think seeing we’ll that

Alan Palmer

Typically, goes them start is before effective we expect nine Typically because Alan. some working this – about to before on it that really in October those. XX of months after Xst. it’s effect becomes – you But

their lead especially not of to county city typically and part that, of they the some are have We that tax increase appetite funded a those and strong is projects, that and to expect counties a some cities of that the going because long time. ones some include the to of have are done projects get with lettings roads spring and

Brent Thielman

in business sneak geographies? the just any private your if in you’re what there updates – within of one side of terms more I Okay. seeing – In could the

Alan Palmer

In commercial the slow and private don’t seen seen down. it operate, to strong there really that in areas be be slowdown and the fit they we little the to still is haven’t see very can’t we just anything out sector we

Brent Thielman

hear. for taking That’s to great Thanks the All questions. right.

Alan Palmer

you. Thank

Charles Owens

Thank you.

Operator

at Thank time. you. questions Owens, further Mr. this there are no

the to over to back like for I’d So additional floor you an comments. pass concluding

Charles Owens

Well, look Okay. be our for next want thank today, I’d our to on like Thank forward everyone call we just let to you know I we’ll next and to strategy update. joining you that and focused the executing conversation in the everyone.

Construction Partners (ROAD) 9 Aug 192019 Q3 Earnings call transcript