ROAD - Earnings call transcript Q4 2021 | Construction Partners, Inc.

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Operator

Greetings. And welcome to the Construction Partners Inc. 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. reminder, is a recorded. As Instructions] this being conference [Operator your pleasure Black It my introduce host, is now to Rick Relations. from Investor And Rick you, thank Black.

begin. may You

Rick Black

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

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

Jule Smith

making With King all some Construction. I overview family. I’ll of and also quarter of on year fourth and environment. Thank fiscal Welcome commenting as two as their and expectations begin a Palmer, call and the on good successful the in Construction Rick, Chairman. you, Partners Fleming, XXXX the and morning, employees I’d our despite the suppressed of in the well topline today Miller thanking all XXXX impact market everyone. welcome new Construction quarter, revised then dedication an our I October the like law. today achieved constraints, with recently are fiscal of year XX% Infrastructure would begin the the our abnormally of ankle me workdays Financial in the our year to record like on compared XXXX, to hard challenging to business due review Partners the that XXXX compared Alan overall into to number today over acquisition, markets Southeast Asphalt Executive fiscal work Ned consisting as quarter which Last chain fiscal Officer; the current Bill to XXXX, grew town safe by remarks and to lost for a outlook year employees X,XXX throughout results X% before throughout an of and CPI Chief and same Revenue the In a fourth thoughts and on my J. growth for last fiscal to more acquisitive revenue. of approximately XX% our Southeast. the excessive for weights growth. organic Federal quarterly wet labor of we XXXX, described signed the year weather due detail. approximately year million, XX% FY construction in of our state Alan financial revenue a supply operations increase will $XXX quarter, year,

workdays were our those While estimate XX% months. over is of that the million This lost, record months proceed year this our between In September, good we our the two rather $XX our we quarter fourth was during typical Including current normal as year approximately a a company’s million news that extremely levels part next have states adjustment expectations we in rainfall largely moves the fiscal covered each XXXX. approximately from additional the year. revenue not is forward to nine record compared of to the We business to effects quarter. The begin quarter business backlog into largest backlog seven in were in impacted billion, delayed but booked wet our $X and history. QX, fourth weather fiscal on of these to to begin the could with precipitation not follow. for that companies our significantly new July of to $XX acquired October, lost into

backlog factors margin in adjusted our In perspective, decrease fiscal compared opportunities EBITDA a profit to X.X%, were XXXX. in we expanded From was addition, continue affecting believe margin primary the margins. infrastructure. margins three XX.X% fiscal There to can bidding with a year XXXX year and grow

abnormal in does loss XX% the asphalt cost excessive our quarter and fixed increase the fourth hurt First, due to workdays recovery plants. of of in absorption precipitation fleet

not is moves impacted wet revenue the by while are So and extremely weather. lost, margins forward

a throughout on on and short passed to economy durations drag built Typically, our our project be been significant allow normal the bids. inflation atypical has margins. in the inflation Second,

are reflected were growing pass-through energy, margin all being At contingencies acquired transportation accordingly. rainy growth and quarter future as a larger, mechanisms And throughout and work outlook. been new and term, material, investment bids pass not business. CPI to new acquisitive expansion our over and acquisitions, markets record However, the take will XXXX given both managed expanding sudden organic We we our and fiscal CPI inflation a year which footprint comes drive into and we lower with fourth able sharp XX continuing the margins, of input the extremely to fiscal to about in stronger that we our year the organic raise with prepared New remain typically as and We we months costs prospects to XXXX and our moving economic integrates We higher XX have begin along in time. level. and for adjusted a anticipate resilient of growth bullish organization months the of in as and wages economy, costs. backlog third, continue infrastructure felt have and CPI Longer fiscal levels year backlog to Year come. these headwinds in more now forward to

know growth. and Although, invested to and until return adapted pass dynamics FY the our have supply we’ll the the in business and ease, organization have managing market cost in we don’t when through XXXX will for And disruptions normal. labor are prepare chain constraints finally, we market to ultimately

a percentage those result efforts costs of revenue G&A to expect year. this lower We as in

a fiscal King company an growth full-service on we hot-mix the we asphalt for is Turning and believe metropolitan Mike of Spartanburg the area. Xth, purchase we asphalt his King year and variety upstate our begin paving provides participate projects. Carolina. the October hot-mix with now public, team, Crenshaw residential a acquisition King in of contracting King plants occurring the announced talented platform and Greenville rapid to region dynamic to in Under of is South and acquisitions, services a asphalt exciting of Carolina commercial continuing in economy XXXX, leadership three as Asphalt. with in South well-positioned

Our growing and in array October XXth market. that second a on site further integration a in enhances Panhandle. well Florida will projects to grading Construction that the Miller is FY wide construction the XXXX allow vertical area us Pensacola strategic bid J. acquisition, was respected rapidly work contractor of a purchase and of services in Greater our announced

services fragmented a while that to we margin more services. us chain along to capture allowing segment, acquire value growth the both footprint businesses industry share, leads of construction continue our also relative integration. strategy and of consolidator a and strategically to vertical our As increase our market manufacturing in expand This

Looking forward, the acquisition strong. very pipeline continues to be

and growth. we the We and financial have have continue people in to technology, profitable the structure that and provides investments flexibility CPI strategy executing organizational made capital for us of discipline

in new Turning in airports industry. Infrastructure Bill funding for our economic transformational week stimulate over XX% of We driving law five while The signed demand legislation our roads, meaningful will baseline. XXXX infrastructure project funding growth bridges, five investment beyond. in creation, will this approximately states, for into is the next and our nation, federal estimate and the and a last now late years ports and project the beginning to the also that current job federal increase infrastructure

Our call financial the outlook Alan the on investments XXXX have over the detail. discuss to organization funding. to turn to increased technology results, year in capitalize people this prepared us now and I’d is in like to our infrastructure fiscal greater

Alan Palmer

we subsequent legal ended million, decrease $X.X Approximately fees, General million other prior of metrics for was a XX, $XX.X a $XX.X and compared million million, to related driven previously acquisition $XXX.X related the settlement and to fiscal Gross of year to income fiscal consulting due million revenue key fiscal was Jule the administrative expenses, was to $XXX.X accounting management had a expenses, increase prior XXXX, review and in Jule, September income technology fees. $XXX.X XXXX. we primarily begin for outlook adjustment compared or compared legal legal benefits, EBITDA increased will of $XX.X XXXX performance revenue in $XX.X expect the XXXX during as for return prior before and by you, good in $XX.X million, everyone. fees and his completed and of $XX.X settlement in income in the our XXXX $XX payroll expenses net million the Net of Adjusted million and of that increase for percentage the million prior profit the fees remarks. year. year million to Adjusted year. existing in Thank compared fiscal markets. net our was and administrative to XXXX, contributed were million information and expenses X%. after up professional fiscal to I of discussed business $XX.X fiscal million, factors discussed. discussing an the was revenue year XX.X% year. with $XX million year. the to prior an was X.X% In general personnel and for compared morning, Revenue XXXX of $XX.X fiscal Acquisitions our million to to to

GAAP income reconciliations net find financial measures of end at non-GAAP can of press to adjusted You the adjusted today’s EBITDA release. and

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

end arise. ended Cash compared provides quarter the financial activities the ratio acquisitions, the by expenditures trailing for to the of year. last XX they provided when months operating flexibility was million XXXX, September were of us potential potential XXXX and our for was million fiscal to liquidity growth $XX.X As same for allowing million. for period $XXX.X debt XX, Capital near-term EBITDA $XX.X This opportunities respond capacity quarter, X.XX. to to capital

that $XXX.X to $X,XXX acquisitions backlog and We outlook of We in XXXX Today for $X,XXX year of EBITDA. back adjusted announcing range fiscal range rain Jobs two project our any million adjusted not with growth, in million pleased future record $XXX already XXXX. EBITDA Jule. expect at June and at regard million. Infrastructure year to the highest over has does and excessive net billion. in company’s at high XXXX, September we’re million Act backlog. to to The year pretty of and acquisitions completed. company now the turn XX, are adjusted of $XX.X September and revenue, now the a the production $XX.X In quarter, impact passed I’ll XX, revenue to project Adjusted end challenging and XXXX, to acquisitions at the assume million despite environment $XXX or during the with call million our XX, income Investment we’re net our reporting of summary, not in the from record fiscal billion million, the income outlook our $XXX October $XXX compared a recently excluding recent the range overall

Jule Smith

industry on a In of work ahead and a hand, fiscal in margin Thank of summary, running you, we Alan. transformative our investment often are expansion in us. our year new full plate with opportunities

we the is Operator? Our stakeholders. team ahead the and our prepared on that, continue now With value future will to for take execute delivering we questions. company growing see bright to

Operator

question of Thank question. the comes Instructions] Stifel. you. your [Operator with with line our from proceed first And Stanley Please Elliott

Stanley Elliott

Hey. you Thank the Good morning, the taking In all release… question. everyone. for

Jule Smith

Good morning, Stanley.

Stanley Elliott

In pardon me, the re-pricing mentioned, and profit by can think guys you escalators, with exactly material did Do bidding. you to dynamic? just backlog have you What all the margins that guys release, about you to grow, Are continue curious that? mean how contracts?

Jule Smith

Stanley. Yeah,

we So what we lot new like opportunities. is, on mean to as we continue by put and have work. we’re as see we going bid ahead, a to to of and bidding continue expand that opportunities We we margins bidding work the feel

constantly and just finishing work that and inflation. bidding over now the we our on turning economy projects, just short by bids current and expand margins and with and work, due time. do us to old we to opportunities But the of have chain just funding a books we’re dealing what consistently Our we supply so mean built issues is, the allowing to new really and duration our in our putting over contingencies see work the

Stanley Elliott

about acquisitions, close. thinking coming M&A quarter then, the for guess, the year, two done since And plans the Perfect. you’ve I

M&A be curious including about with want right You’re I of the are next am this activity you EBITDA just there? right market? head’s How the in Do we year, kind the kind not those. think X at where times above now? times premise tracking around two to your should you aggressive guys of into

Jule Smith

want to Yeah. large continue strategy. are just controlled have going execute we Stanley, we’re to DNA would a to growth. I Acquisitions of at CPI. our say, -- our profitable part We but

relative going continue And look states to to talk know what to forward. sellers, going to and talk potential share going do going folks to so we’re to we’re we’re But to go in that adjacent be going big are states acquisitions them. to a to in build in build to acquisitions we bolt-on of continue not to get help too part them, continue we’re the fast. market But we’re we’re relationships for with us moving going to and

Stanley Elliott

very you much. Great, guys. Thank

Operator

And the with of our your from Please questions. Baird. Wittmann proceed comes next question with line Andy

Andy Wittmann

therefore, not start, guys working number fund I from flow cash acquisitions, guess, typically it. you Alan. start acquire you, and when from correct Thank know that you good me me wrong, day of with a the you morning, do if capital guys acquisitions, $XX huge entire with associated capital I’m this But I’ll when I do million everyone. let have flow, to not and cash the working those you some the buy year. ops is

kind could was Given was that, of of what in drag capital be? flow statements, can of sense tell underlying it reported might the us the you your on what the working financial that so business we a as cash better get

Alan Palmer

question. good Andy, Yeah.

drivers year. big was the of million the the last about $XX profit, plan of that of lower one from course, Of decline was

able than into be expect number. make price, the in capital. mentioned, and But going lot that we’re we XXXX it’s the acquisition, of a payables working a significantly acquisitions, to So if you the receivables, acquiring platform typically not improve we when as purchase other to

year that work profit work of the stretches two opportunities over So and The progress is and percentage really accounts build we acquisitions one one we advantage were last to take your to shift. the change from out flow those function items to largest that from in cash We of besides work, a have which generally caused those fund immediate of to doing in decline compared the of those the have we’re of that our that the are operations. then items day public receivable, private of the years and couple the the work both of our receivables. somewhat out this

You jobs. also non-public have retainage on

inflation of material we’ve in just those course, So and then, year things are that had everyone else like this costs. the our

same inventory inventory. have of lot a the on we’ve to quantity more invested hand, So in got

like those acquisitions, contributed. operations. capital flow XXXX or So the to things should cash a two return much three from behind feel are working the We better with have that really us,

Jule Smith

in costs fourth just million $XX the and year. And were to add, into would impacted, but remarks, revenue million wet said quarter I some our recovery and was revenue this moves Andy, so $XX as of of extremely we fixed that QX

Andy Wittmann

Yeah. Right. That makes sense.

better is say Just kind have guess, the about closed to guys question, I get this I which bit wanted up include you that of a that rate any outlook? trying with that’s guidance which heard little baked not yet as guess, great, of, into along that, XXXX does underlying I the organic this growth follow was sense that, been here, today. clearly I not to acquisitions

you So are deals in that there’s October, obviously that’s But revenue. two to contributing these which clear. closed

So, Alan, high low of end can your revenue implies for the end business? you the rate growth range talk in organic about the what and the

Jule Smith

will that. take at stab I a Andy

the… First

Andy Wittmann

Okay.

Jule Smith

focused … in has our to our are organic our there and XX%. range, a range, X% outlook organic we growth growth on of range

then is of the our so a range to acquisitive XX% -- and range. growth acquisitively And XX% in

million to accomplish backlog this So did new because backlog we of them. reflection more we on be of two accurate outlook. The we’re like focused a that’s the taking felt add September that the both really that on to into Andy… we’re XXth, going year $XXX the acquisitions, to

Andy Wittmann

that… is And

Jule Smith

on do Andy, any up follow that? need you

Andy Wittmann

one here. up. I’ll I’m question, But follow in. queue keep was back I doing happy going one to

fine. that’d if I’ll back in later, and you So queue take me be

Jule Smith

you. Okay, Andy. Thank

Operator

line next from with proceed the questions. your Please Davis. of our with Adam comes Thalhimer Thompson question And

Adam Thalhimer

Hey. Good morning, guys.

Jule Smith

Good morning, Adam.

Alan Palmer

Adam. morning, Good

Adam Thalhimer

playing how you the see in a you Can us of on the EBITDA XXXX? help fiscal bit out little cadence

Jule Smith

year. it over mean just how you typically the say… spread a out We do Adam, from

Adam Thalhimer

quarterly know get guess, but don’t into to -- I since want we I I projects this I Yeah. deferred specifically you do have guidance, don’t QX. mean,

curious how kind finishing see of year? of you versus Just kind the the year starting

Jule Smith

I let we year the is do normal and our minute. Alan and do anticipate typical we XX% the and -- a of give half half Well, will of that. see the pretty year XX% Yeah. the But in first revenue see second of in we specifics in XXXX in

obviously, summer. recovery far don’t the in assets as fixed we our on winter, get the do in as we as much EBITDA, As the

So that busy rear our seasons. tends to more to be loaded

Alan Palmer

result had slightly Jule we in what I’ll revenue a had Yeah. six the pretty to revenue not finished, as being year see half. primarily percentage of to higher of But -- year next get do just from a the much this split. This first a able is we the in our Alan. just budget we last that the XX/XX least add year said, months, standpoint

cost the recovery is first doing in Jule As only full revenue. months, XX% the said, because that you’re of fixed six not

much So when a we of but year, half to EBITDA you for higher the see return in pretty it look second over a XX/XX normal year. a at margin the split there the

Adam Thalhimer

what the to I’m know back you’re and That’s had I a And margins back guess, your and the I curious, about to, ask XXXX, I’m curious then, path XXXX to those you’re not in Okay. and But wanted you follow path EBITDA the will about a be committed because perfect. as to XXXX. average in just on going just do I margin up, margins? XX% that that on which of to -- kinds today. just not

Alan Palmer

shared think year, there this coming no be knew XXXX, with made year I higher mean, roads to some up would this gave COVID declining shutdowns changes, the we there we I’ll items was spike shared in the oil going year of into on we had significant that us one that we some decline. and in as as related because XXXX into productivity, that I the prices, -- last and

from EBITDA talked we’ve XX% Jule start is, higher back revenue he our that pricing what said approximately that the higher as and reset and of think, feel end get to that we’re I revenue lower challenges about about as kind expense XXXX, lowers the for margin, end that that drops of of to and it and X% our expectations part on of just or percentage can X.X%. I to we kind about if a our we like with the said, we better job moving G&A

XX% X.X% for high back So that to been to range in gets But adds we’ve that substantially our to that the this year margin. that us before. end guidance on -- EBITDA back that

Jule Smith

I but as to gives only us to the strategy would to our aggregate that, the execute share an at And add the Gulf we like get we Adam, just and have a expand not it relative we higher opportunity, take vertical of gives Coast and that we market on states the we facilities integration advantage to have chance margin. margins, in in, bid just terminal and build -- we’re just us and

do going feel EBITDA moving we those back just we have. the return So like margins strategy executing and to to we’re forward,

Adam Thalhimer

Okay. Good color. Thanks, guys.

Jule Smith

Adam. you, All right. Thank

Operator

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

Zane Karimi

morning, gentlemen. Good Hey.

Alan Palmer

Zane. morning, Good

Zane Karimi

acquisitions Regarding a you here, the level? and what the from And new and acquisitions be backlog is portion backlog through work from sort new when by? completely the normalized of margin seeing will do record are of a think between gap what that perspective, you

Jule Smith

always XX normalize it about to margins. come CPI acquisitions lower typically and margin those months low backlog with to Zane, a takes

But get XX books work those does those markets we margin. backlog expand to -- months to trend XXXX. we’re able see to will in go work think acquisition the in take to as in year backlog and into the this margin into we continue Southeast that funding we allow been and have it’s We the about backlog those up We healthy us economy and putting is our expand something continue to the that going and situations through margins normal. new get and on

Zane Karimi

you on to impact quantify And able that talked your you inflation, about Okay. results? know you. atypical are quarterly had I it the but guys Thank guys

Jule Smith

It’s hard Zane. to quantify exactly,

of three It’s cost supply labor of normally a its inflation changed the for caused. and said things I there’s us and pass-through weather it dealing the costs really is abnormal remarks, that there. quarter, nothing’s Part market that inflation, and chain fixed in causes. as just affected atypical my As precipitation we’re inflation the with that part recovery margins the for the

had we’ve mechanisms start our inflation. to adding and for that adjust had it the with adjust to so We’ve deal up our speed uncertainty. contingencies And to in pass-through atypical to bids

-- the out be So we once future economic But don’t to will pass-through in these environment going smooth those margins. the has and continue know realities when costs six definitely we it us. does an a really been affect last see exactly inflation that’s atypical once to for be, months and that

Zane Karimi

color. Appreciate the

Operator

Our next question comes from the line…

Jule Smith

All right. Thanks, Zane.

Operator

sorry. am I

question line Wittmann your from the of Andy Next with Baird. proceed question. with comes Please

Andy Wittmann

Yeah.

kind on your build this into was that, Just even obviously, fiscal quarter, XXXX. be that’s last you guys you last the to of and want to said going is guys and probably stick thing, something labor to mentioned going something

And need you the overtime to that specifically to your are outlook having wondering, profit quality number here, margin? and dip to people on the have that work? so how execute the wondering was do just at I relates to front able, this what of for staffing was the on you your of or people XXXX people I levels plan as you kind you’re the you is are if just to of in it have into the already get least you able the been

Jule Smith

model we our retain time, that one get is people that, over families, by will is, a say Labor Good every our will at feel with now workforce. -- mean of work are nature labor, reoccurring better steady I we at have I this Andy. question. on -- like anticipate a challenge will for work so I just it model night their people our say don’t better is continuing the to local and paycheck. that fight steady, faring throughout home and definitely environment. to of workforce CPIs a things economy CPI I And the But the allows know when. Yeah, to we in is what and spend

this on And us great we’re career. the fact people the is the us it then company, a and we’re thing in hear a compete but Our just make is offer this thing that’s scale can showing allows a that benefits job, I market. growing they that not helping labor focused and to

And definitely so the tight. labor market is

as We to we’re for But continue through those are XXXX. press competing we advantages go going to workers.

Andy Wittmann

deliver XXXX that going and the that you were and kind for North frankly, material of start come there, XXXX. out plan was Very helpful. pretty last has going way, of was it been a that coming there’s for follow made kind growth of expectation to and that and just below played did back. how And back was of to Jule, bit Carolina here the and said quarter a about Department Carolina which in -- were resurge Transportation a and factor acquisitions a while probably was And up much North this XXXX kind little lot to they of the much shutdown this too, the how out that’s big in

kind here the now quarter? acquisitions, So delivering, deliver last the backlog to out said are was my they growth they do as coming have of the in have of expected today, you Carolina XXXX, question is, North that

Jule Smith

when bought the abnormal that in times view. a long-term those was we two but build those Yeah. I really though said, Carolina, the as And mean, right. you North Even letting but it program. markets very four North Carolina only we has we outlook we acquisitions, robust announced to Andy, said the pleased won to been with you last week in backlog highway able them. in nice not projects in in markets. and very we’ve the XX really new just it’s that normal, returned, took just not those I’m to for the backlog

last for use available that the to well they’re how apply in with Act. they the got add throughout it very that going Carolina time very is a even to Act So, saw the Infrastructure going but the Infrastructure and the last to to definitely planning not program. presentation only North have This was really a grants I week issues, for They’ve healthy rebounded more year just NCDOT funded abnormal a is allocated strongly. but DOT’s money,

So bullish moving very forward. we’re North on Carolina

Andy Wittmann

Have Thank Great. you day. a update. Okay. good that for

Jule Smith

All you, right. Andy. Thank

Alan Palmer

Andy. Thank you,

Operator

And line from proceed questions. next Please Thalhimer with question Adam Thompson the our your of Davis. comes with

Adam Thalhimer

Thanks. Oh!

how just it one is things Just with figure DOT was out about guys harder to customers you. inflation, Is I your still help DOT customers? contracts because trying you’re are with more, versus how, some doing curious to do to protect that you I’m private reacting talked to

Jule Smith

contractors. inflation inflation start real of that going have thing customers. very with is Adam, to for to Well, and see it anticipate that going inflation estimates inflation. in are DOT, as sure to estimates adjust all to DOT them, the that. their But we’ve up that’s certainly Liquid making continue we And really where the XXXX, to them an inflation through. the keeping pass in and it going a when pass their having well then challenge mechanisms program for are we that, in that had diesel continue happen through been is We the is And adjust they’re and plan to and adjust and to programming, you for a to more cost their index. fuel, us. looking that assumed our also to and they’re so is outlook they’re projects going having to And out as to really for the see we’ve having our and are they’re

if just they we’re So up, save as DOT’s the liquid and energy end go up spending costs as drops, But money. on more it that. money, covered

our DOTs. is an issue inflation for definitely So

Adam Thalhimer

all news now, to more good they’ve spend got right… is, the it’s if Well, money

Jule Smith

right. That’s

Adam Thalhimer

Thanks, guys. Okay.

Jule Smith

you. Thank

Operator

turn any no this further we time. Jule the I’d closing to Mr. for questions floor And Smith, at back to like comments. you over have

Jule Smith

be and a for I’d safe family on I our you and taking your today just like everyone happy thank to to Thanksgiving. and wish time the call

Operator

And today’s for This participation. ladies teleconference. gentlemen, thank your does and you concludes

line disconnect and a your wonderful day. may have You

Construction Partners (ROAD) 23 Nov 212021 Q4 Earnings call transcript