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 10, 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 harbor's 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 GAAP 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, Jule Smith. Jule?

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 profit, 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 midyear 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 Department of Transportation 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 ROAD-Map 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 5 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 1 active hot mix asphalt plant in Auburn, Georgia and 1 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, a 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. 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 ROAD-Map 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 we're optimistic about the markets and current bidding environment. We are now well into our active spring work season, and 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.

Thank you, Jule, and good morning, everyone. I'll begin with a review of our key performance metrics for the fiscal second quarter compared to the fiscal second quarter in 2023. Revenue was $371.4 million, up 14.3%. The increase included $25.1 million of revenue from acquisitions completed during and subsequent to the 3 months ended March 31, 2023, and an increase of approximately $21.4 million of revenue in our existing markets from contract work and sales of HMA and aggregates to third parties. The mix of total revenue growth for the quarter was approximately 6.6% organic revenue and approximately 7.7% from these recent acquisitions. Gross profit was $38.8 million or 10.4% of revenue compared to $26.3 million or 8.1% of revenue in Q2 2023. General and administrative expenses were $36.7 million, and as a percentage of revenue were flat compared to the same period last year. We remain on pace for G&A expenses to end the fiscal year at approximately 8% of revenue. Net loss for the quarter was $1.1 million, compared to a net loss of $5.5 million in the same quarter last year. Adjusted EBITDA was $29.5 million, an increase of 45%. Adjusted EBITDA margin for the quarter was 7.9%, compared to 6.3% in the second quarter last year. You can find a reconciliation of net income to adjusted EBITDA financial measures in today's earnings release. In addition, we grew project backlog to $1.79 billion at March 31, up from $1.62 billion at the end of last quarter. We now estimate that we have 80% to 85% of the next 12 months contract revenue booked in backlog, which is up from 70% to 75% at this time last year. As a reminder, historically, CPI's backlog has declined sequentially during our heavy spring and summer work season. Turning now to the balance sheet. We had $47.9 million of cash and cash equivalents and $154 million available under the credit facility, net of a reduction for outstanding letters of credit. In addition, we have the ability to establish an incremental revolving credit facility up to an additional $200 million. We have $276 million of principal outstanding under the term loan and $163 million outstanding under the revolving credit facility. We continue to have flexibility and capacity for potential near-term acquisitions and high-value growth opportunities. As of the end of the quarter, our debt to trailing 12-month EBITDA ratio was 1.81x. Our expectation is the leverage ratio will maintain a range of $1.5 million to 2.5x while continuing to add sustained profitable growth. Cash provided by operating activities was $18.2 million. Year-to-date cash provided by operating activities for fiscal 2024 and 2023 was $78.6 million and $45.7 million, respectively. Trailing 12-month return on capital employed was just below 11% as of March 31. Net capital expenditures year-to-date were $50.6 million. We expect net capital expenditures for fiscal 2024 to be in the range of $90 million to $95 million. This includes maintenance CapEx of approximately 3.25% of revenue with the remaining amount invested in high-return growth initiatives. Today, we are raising our fiscal 2024 outlook. We expect revenue in the range of $1.81 billion to $1.85 billion, net income in the range of $71 million to $75 million and adjusted EBITDA in the range of $211 million to $225 million. This indicates adjusted EBITDA margin for fiscal '24 in the range of 11.7% to 12.2%. We anticipate the revenue and adjusted EBITDA split between Q3 and Q4 to be similar to fiscal year 2023. And with that, we are now ready to take your questions.

Great quarter. Can you give us a little more detail on the Sunbelt acquisition, possibly the revenue contribution, but also would be helpful is maybe the mix just between HMA and construction for them?

Well, I'll start with just telling you a little bit about Sunbelt then I'll let Greg give you the specifics on how much revenue we think we'll get. This is just a great private company. We've gotten to know these guys for a couple of years now. And so they really just have a great market north of Atlanta, in Auburn, right along I-85 and just a really great addition to be in North Georgia with them. They have a great young management team led by Jeremy Heidl, who's staying on as the President of Sunbelt. And so we're just excited. They really just benefit from the growth arising from Atlanta and moving up along that I-85 corridor. So we're really excited. They're going to contribute some to this year. I'm going to let Greg give you what he thinks for the specifics there, Greg.

Yes. So they're going to contribute approximately $20 million in revenue for the remainder of the year. And they're a typical bolt-on, Adam, conducting business, winning work, the same and similar to what we already are doing ourselves. So a good fit for us and a good addition to that particular area of our market.

Great. And then just as I'm trying to think through the comparison for next year, you guys probably had a little bit of a weather hit in the second quarter. I mean, I know it's a solid beat but that was with the weather impact, I think.

Yes, Adam, this quarter we really experienced two extremes with weather. January was really tough. March was wet somewhat, but February was great. We talk about weather evening out, and we saw that this quarter. We had just had a historically dry February, and we were able to work and be productive. So yes, probably all in all, when you add in, there might have been some weather impact this quarter. But what we really like to see and what we did see was that our crews throughout the Southeast in a lot of markets had great performance on projects. So we were able to really make some gains with them beating their budgets and productions on projects. And so that really helped offset the impact of the fixed cost recovery. And that's typical for CPI. As we've gotten into backlog that's, as we've talked about now for almost a year, it's really good to see that.

So Jule, you noted the M&A pipeline looks good, both inside and outside your states. I thought the comments about outside your states were quite interesting. Would you be looking at more of a larger platform outside those core states? Just trying to understand what you're signaling there?

Yes, Tyler, I'd like to share some insights on our current acquisition strategy. I would also like Ned to provide his thoughts on our overall growth strategy. We are engaged in numerous discussions with sellers both within and beyond our states. This is genuinely true as we continue to strengthen our relationships. We are not rushing to expand into another state, but if a strong opportunity arises for a platform company in a new location, we will seize it. At the same time, there remains significant potential for growth in the states we are currently operating in, as highlighted by your heat map. We are focused on achieving good, profitable growth wherever we can find it.

Thank you, Jule. The plan has always been to increase our market share in our current states while also expanding geographically, which presents many more opportunities. We're focused on growth throughout the entire Sunbelt, targeting areas where we can operate year-round. Today, we are in a strong position to seize these opportunities; we have the right personnel, financial resources, and strategic plan in place. Our goal is to grow both geographically and in terms of our market share. As we expand into new states, we aim to establish a strong foundation that allows for future acquisitions. We seek companies with a proven track record of success and growth potential that can support additional acquisitions. We believe these opportunities exist throughout the Sunbelt and will continue to pursue geographic growth with the right team in place.

Okay. That's extremely helpful. Greg, can you correct me if I'm wrong, but was the weather really tough last Q3? Can you help us set expectations for the second half, specifically from a revenue standpoint? Should we anticipate year-over-year growth to accelerate in Q3 and then decline in Q4? Essentially, will we expect both Q3 and Q4 to be roughly equal in revenue based on the guidance?

Yes. Q3 and Q4 of last year were both strong quarters, so comparing this year to those will be interesting. As always, we analyze our business by looking at the first and second halves of the year. Given that we operate outdoors, we must account for normal weather patterns in our projections. Therefore, we expect Q3 and Q4 this year to resemble last year in terms of the increase in revenue and EBITDA from Q3 to Q4.

Okay. Okay. That's helpful. And then my last one here. So Jule, it looks like you raised the midpoint of the margins by, say, 30 basis points. Curious just what you're seeing there, what's the key driver? Are you seeing some easing cost pressures maybe in labor, or are you having success bidding better given some of the analytical tools you're implementing? Just any color would be helpful there. And more specifically, where you are in that analytics journey. I know that was something you talked about at the Analyst Day.

Tyler, that's a great question. There are several aspects to consider. Firstly, I believe our annual EBITDA margin will benefit from the first two quarters since they are normal quarters where we are building a post-inflationary backlog, and we have already noticed that. As we move into the third and fourth quarter, our business is operating normally. We had a strong third and fourth quarter last year, and we anticipate similar performance ahead. We are consistently adding backlog at healthy margins and implementing our pass-through model, which is yielding positive results. We are actively working on leveraging technology across various areas of our business, particularly in analytics related to bidding and pricing strategies. We have updated the midpoint of our guidance, and as Greg mentioned, we expect a strong third and fourth quarter, with continued growth. This reflects our updated outlook. We are expanding into more markets and seeing genuine organic growth, all of which contributes to our current situation.

Just going to see if you could clarify the balance of price versus volumes in the quarter? And then along with that, how that plays into your outlook for 2024?

Yes, Kathryn, as I mentioned with Tyler, I will ask Greg to provide more specific details. We are experiencing growth, targeting an annual increase of 15%-20%. This growth is generally split evenly between acquisitions and organic development, though sometimes one may be slightly higher than the other. We are witnessing tangible organic growth. Our pricing model reflects increases in the construction industry, including materials and aggregates, which we incorporate into our pricing. Therefore, some of our organic growth stems from price hikes, while the rest is genuine organic growth. I will turn it over to Greg to share some numbers that illustrate what we're observing. Greg?

Yes. Regarding the midpoint of our guidance, I mentioned earlier about the acquisitive side. Last quarter, we reported $120 million to $125 million and added another 20%. This suggests we are looking at approximately 9.3% to 9.6% acquisitive growth. Jule mentioned that our organic growth should be around 7.5% to 7.8%. We are implementing price increases across our sector, and we're also improving our margins at the same time.

In your prepared commentary, you mentioned having 80% to 85% of your backlog booked compared to 70% to 75% from last year. Could you explain how much of this increase is attributed to the larger private projects you've mentioned versus your usual public work? Additionally, what factors are contributing to this change in the percentage balance?

We've always mentioned that we don't want our backlog to equal 100% of the next 12 months' revenue. Our aim is to manage customer needs effectively while also accommodating ongoing work. Currently, our backlog is increasing, which we view positively as it provides us with greater visibility and allows for more patient bidding. We're continuously adding projects that fit our usual profile, partnering with the same clients and focusing on recurring work in our sectors. There hasn't been a significant change in project sizes; we occasionally take on larger projects, but that aligns with our typical operations. On average, we are adding projects valued between $3 million and $5 million, with durations of 6 to 9 months. We believe that there is strong demand in our industry, leading customers to be more patient, which gives us the flexibility to bid effectively. This is why our backlog percentage is somewhat higher than normal. However, we intend to remain patient and focus on adding profitable work, rather than simply chasing backlog. We are examining our resources and capacity, which is a natural part of our growth. Our preference is to secure the right projects and increase our backlog selectively rather than indiscriminately.

Perfect. Just one clarification regarding the dynamic nature of cost and pricing in the backlog. How do you approach pricing and managing inflation?

Yes. A few years ago, when inflation began to rise, we realized that even though our model had always been about passing through costs, we needed to speed up and enhance our input updates. Our area managers and estimators across all 70-plus markets adapted very well. However, we certainly gained a valuable insight. I must credit Ned for reminding me that inflation is not going away, particularly in our industry with the existing demand. This awareness keeps us proactive. While inflation has moderated, it is still not under control, so we ensure that we are accurately passing through costs. This is reflected in our backlog. The bids and projects in our backlog still incorporate the same assumptions for labor and material increases that we began including in the summer of 2021 when inflation started to rise. Difficult periods foster good practices, and we have certainly learned from this experience, making our pass-through model more effective now.

I'm curious about the strong performance in Q3 and Q4 and looking at the guidance. Are we suggesting there won't be any margin expansion in the second half? Is this related to the mix, perhaps more M&A, or is it connected to diesel or liquid asphalt? I'm interested in how this strong growth in the latter half translates to EBITDA and margins.

Yes, Michael, that's a great question. We've considered this because, over the last four quarters, we've experienced significant gross margin expansion, and that trend is continuing. However, in the third and fourth quarters of this year, there is a notable difference from last year due to our active engagement in mergers and acquisitions. We've completed five acquisitions, with potential for more before the year ends. As we've mentioned, acquiring businesses means taking on their backlog, which we didn't bid for but are now responsible for. While we don’t anticipate any issues with the backlog we've acquired, we recognize the need to manage and strengthen it. We're factoring this into our guidance as we work through it. Additionally, we implement our technology and bidding systems in these acquisitions, which helps quickly align their margins with our historical levels. Our guidance reflects the activity we've had in M&A.

That makes sense. It seems like you reiterated the CapEx, but your cash from operations is up significantly in the first half, over 70% year-over-year. You're converting a lot of that EBITDA to cash flow. Is that sustainable? What are your thoughts for the second half? With the increase in EBITDA, should we expect a similar increase in cash flow? Any insights would be helpful.

Yes, I believe there is a relationship. We have discussed the conversion of 75% to 80% of EBITDA to cash flow from operations, and we still expect that to continue. The calculations indicate a potential additional $95 million in the second half. Jule mentioned earlier the guidance and year-over-year performance. The fourth quarter was exceptionally strong, and as a result, we carried forward significant cash collections into the first quarter of 2024 from that robust quarter. This strong start has set the tone for the year. Overall, we are still anticipating the traditional conversion rates I just mentioned.

Great. I'd like to ask one more question. There is concern that inflation may remain elevated for a longer period and that interest rates could also stay high for an extended time. Six to twelve months ago, we might have been surprised by the resilience of the private market, which may be specific to Southeast. I'm curious about your thoughts for 2025 if we don't see any relief from the Federal Reserve regarding rates. What insights do you have about the private market? Do you expect it to begin slowing, or are there certain structural factors that you believe will continue to support that segment of the market and your business activity?

Yes, Michael, that's the key question we've been monitoring for over a year now. We've been closely observing both the private and commercial markets. This year, we anticipate it could be 1% higher than last year. This suggests that our markets remain active commercially. Our states are attracting many residents and businesses, whether they are relocating for tax advantages or reshoring. We are constructing numerous data centers, corporate campuses, and manufacturing facilities, which generates significant commercial opportunities. So far, we haven't seen any noticeable slowdown. However, our resources are adaptable. If the commercial market were to slow down in 2025, we would simply pivot to focus more on public work, as there is considerable demand in that sector that we can't fully address right now. The distribution between private and public work has remained steady over the past few years, and if the private side were to slow in the future, we would increase our public work efforts.

Could you guys comment on, I guess, earlier last month, you guys had the share repurchase announcement out. Are you all looking to be active in the market? Is it more to just offset dilution? Just trying to think about how you're thinking about that? And then weighing that repurchase piece versus what sounds like a pretty healthy M&A pipeline.

Yes. Stanley, I think Ned should answer that. And so I'm going to let him answer that and then I'll give a little more color as to sort of the strategic reasons for that. Ned?

Yes, Stanley, we are really trying to circumvent the dilution that's coming from the management stock incentive plan. And we think the management stock incentive plan is important for us to motivate, retain talent throughout the organization. And we really would like to utilize this simply to make sure that in that process, we're not diluting our current shareholders beyond what we think is normal and ordinary course. So for us, it's really a program designed simply to allow us to continue without diluting the shareholders to continue to motivate management and everybody in the organization. We have pushed the stock plan pretty far down in the organization. And I think Jule will tell you, it is a very motivating tool that we have, and we don't want that to dilute the shareholders, we want that to enhance the shareholder value.

Yes. So Stanley, I would just add to that, just as Ned said, for us to deliver on this ROAD-Map 2027 and the growth targets we have, both on the top line and bottom line, our organization is the key to that. It's not the equipment. It's not the asphalt plant. It's the people. And we've talked about now for almost 3 years that the CPIC is a competitive advantage, our ability to attract and retain the workforce. And so these stock awards are a huge part of that and it's been extremely effective since we've started but we want to do it in a way that doesn't hurt our existing shareholders.

Great. Regarding the margin aspect, it has been very strong. You previously mentioned your performance in exceeding some of the budget. Have you made any adjustments in your approach to the bidding environment, especially considering the increased pass-throughs in your model? I'm really impressed with how well the margins have performed over the past year.

Yes, Stanley, nothing has changed. Our model remains a pass-through model. We estimate jobs today just as we did five and ten years ago, with adjustments only to our assumptions for inflation, escalators, and contingencies. We still need to be competitive on bid day, so we incorporate potential outcomes into our bids. The ability to add work at healthy margins indicates that our competitors are likely doing the same. This process allows us to operate our model effectively. When we provide our teams with a budget that accounts for their costs, we see them consistently exceeding their budgets throughout the Southeast, leading to a substantial number of projects. Historically, when we offer a fair budget, we have observed that more projects at CPI finish ahead of budget, resulting in these gains.

Jule, do you think this helps your team work towards the '27 targets, possibly exceeding the 50 to 75 basis point goal you mentioned at the Analyst Day? Or is this mainly a matter of timing?

Well, I would say we're on track, Stanley. Certainly, our guidance. We've got a busy second half of the year to do. We feel good about our updated guidance and that we're right on track. We'll see how the second half of the year plays out.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to management for any closing comments.

I'd like to thank everyone for joining us today, and we look forward to talking again next quarter.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.