Greetings, and welcome to the Construction Partners Inc. Third Quarter Earnings Conference C all. At this time, all participants are on a listen-only mode. A brief Q&A session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Black, Investor Relations. Thank you, Rick. You may begin. Thank you, operator, and good morning, everyone. We appreciate you joining us for the Construction Partners conference call to review third quarter fiscal 2022 results. 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, August 5, 2022. Please be advised that any time-sensitive information may no longer be accurate as of the date of any replay 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 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 the earnings press release that was issued today for our disclosure on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Management will also refer to non-GAAP measures, including adjusted EBITDA. Reconciliations to the nearest GAAP measures can be found at the end of our earnings release. Construction Partners assumes no obligation to publicly update or revise any forward-looking statements. Now, I would like to turn the call over to Construction Partners' CEO, Jule Smith. Jule? Thank you, Rick, and good morning, everyone. With me on the call today are Alan Palmer, our Chief Financial Officer, and Ned Fleming, our Executive Chairman, as well as other members of our senior management team. I'd like to start by recognizing our more than 3,800 CPI employees, including 200 new employees that we welcomed to CPI and King Asphalt earlier this week through our acquisition of Southern Asphalt in South Carolina. I want to thank our employees' commitment to safety at our job sites during a very busy work season in a challenging macro environment. We had a very good third quarter. We recorded record revenue, EBITDA, and project backlog. Clearly, demand is strong and our growth of 45% from last year is broad-based and diverse. We grew through both organic and acquisitive revenue during the quarter. This is a result of our dual focus on growing relative market share in our existing markets and making good strategic acquisitions. Two additional factors that boosted the third quarter's top line were favorable weather across our region, as well as approximately $10 million of revenue from liquid asphalt index adjustments due to the large increase in asphalt prices during the three-month period. Despite our strong performance in the third quarter, today's economic environment remains challenging in the three areas of labor, inflation, and supply chain. The labor market continues to be tight and very competitive. However, we believe our model is prevailing by offering local and steady work that allows our employees to be at home every night, have great benefits and opportunities for advancement with a dynamic and growing company. On our last call, I discussed the inflation hitting the construction industry. We don't anticipate this inflation going away anytime soon. That said, our model of shorter duration projects is allowing us to pass through more of these higher costs at the bid table and add backlog with more cost escalators built into our estimates. In regard to the supply chain, this area continues to be very inconsistent, and CPI is currently having to manage through this abnormal environment. Whether it is rock deliveries by railroad in South Georgia and Florida, cement in South Carolina, or pipe in North Carolina, it's a daily fight to be productive in this environment. With these challenges, I consider our results this quarter to be a testament to the perseverance of all of our employees and their ability to adapt to an ever-changing macro environment. As we move into the last quarter of our fiscal year, due to the high revenue in Q3 and the record high backlog, we are raising our FY 2022 outlook for revenue. We have also revised our outlook by tightening our adjusted EBITDA ranges, which maintains the same midpoint as before. From a margin perspective, we spoke last quarter about how margins would improve from Q2 to Q3 and from Q3 to Q4. That is still the case. The pre-inflationary backlog that we have had to work through has mostly been completed now, and we are steadily adding newer backlog at higher margins. We continue to see our pricing of new backlog being added, reflecting approximately 250-300 basis points higher margin compared to the previous year. We expect this trend of steady growth in margins to continue into FY 2023. Turning now to acquisitions. Earlier this week, we announced the purchase of Southern Asphalt, a bolt-on to our South Carolina platform, King Asphalt. This expands our footprint into the dynamic Myrtle Beach metro area. We've added two hot mix asphalt plants and more than 200 employees, serving an area that's considered among the fastest-growing markets in the nation, providing us opportunities to bid on an attractive mix of public and commercial projects. In regard to future acquisitions, we continue to have conversations with potential sellers, both inside and outside our current footprint, and we remain patient and focused on finding the right strategic acquisitions that expand our footprint and grow our relative market share. Before turning the call over to Alan to review the financials, I'd like to reiterate our optimism for the future of CPI. Despite having to adapt to a challenging operating environment the last 18 months, our long-term strategy has proven to be sound, and we have consistently stayed focused on executing that strategy and building value for our shareholders. We are well-positioned throughout the Southeast to continue to grow in both the public and private markets. We are also poised to capitalize on the generational investment in infrastructure that the IIJA will create over the next decade as it becomes a significant factor later this calendar year. We begin the fourth quarter with the highest backlog in the company's history and expanding backlog margins. These positive dynamics, coupled with the continuing benefit of being the primary consolidator in our industry, will drive margin expansion as we move into FY 2023 and beyond. We are excited for the road ahead. I'd like to now turn the call over to Alan. Thank you, Jule, and good morning, everyone. I will begin with a review of our key financial metrics in the third quarter of fiscal 2022. Revenue was $380.3 million, up 45% compared to the prior year. The increase included $53.1 million of revenue attributable to acquisitions completed subsequent to June 30, 2021, and an increase of approximately $65.5 million of revenue in our existing markets from contract work and sales of hot mix asphalt and aggregates to third parties. Gross profit was $45.3 million compared to $36.6 million in the same quarter last year. General and administrative expenses were $26.6 million or 7% of total revenue, compared to $23.2 million or 8.9% of total revenue in the prior year. Net income was $12.2 million for the third quarter, compared to net income of $9.3 million for the same quarter last year. Adjusted EBITDA for the third quarter was $37.6 million, an increase of 30% compared to $29 million in the third quarter last year. You can find GAAP to non-GAAP reconciliations of adjusted EBITDA financial measures at the end of today's press release. Turning now to the balance sheet. At June 30, 2022, we had $26.1 million of cash and $258.6 million of availability under our new amended credit facility after the reduction for outstanding letters of credit. As of the end of the quarter, our debt to trailing 12 months EBITDA ratio was 3.0. The new credit agreement that was entered into on June 30, 2022, provides additional liquidity and financial flexibility, allowing us to pursue organic and acquisitive growth opportunities. Capital expenditures for the third quarter of fiscal 2022 were $17.5 million. We expect capital expenditures for the fiscal year to be in the range of $60 million-$65 million. Finally, as Jule mentioned, we are reporting a record project backlog that was $1.33 billion at June 30, 2022, compared to $822.9 million at June 30, 2021, and $1.28 billion at March 31, 2022. With that, we are now ready to take your questions. Operator? Thank you. We will now be conducting a Q&A session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Michael Feniger with Bank of America. Please proceed with your question. Yes. Hey, everyone. Thanks for taking my questions. I'm curious, Alan. Good morning, everyone. If you don't do any other acquisitions going forward and all else being equal, how much growth do we get in 2023 just from the acquisitions this year that roll over? Good question, Michael. I mean, a couple of the acquisitions that we made this year were made at the beginning of the year, so they would not add any acquisitive revenue next year because they're in this year the full year. The additional acquisitions that we've made, including the one just announced, would probably add $75 million-$100 million of additional revenue or acquisitive revenue in next year. You've got that one that would be pretty much a full year's worth of revenue, and then you've got some others that were made later in the year that would have about six months worth of revenue going into next year. Great. How do we think with the organic growth that you guys just reported, the improving backlog, how does the organic growth look into next year? Is there signs of deceleration, or are we gonna start to see some of the funding kinda pick up based on your regions and how the DOT budgets look for 2023? Yeah, Michael, good morning. This is Jule. You know, as we've said before, we're focused on organic growth and growing relative market share in our markets. Clearly some of this year's numbers due to inflation, but it's also just due to us, you know, growing relative market share. We anticipate moving forward into next year that, you know, we're gonna continue to see a healthy organic growth. CPI has historically done, you know, between 6% and 10%. We certainly see that continuing into the future. I think the demand from the southeastern economy, but also from the infrastructure bill starting to come in, is going to, you know, drive organic growth. Ned, do you have any thoughts on that? Well, I mean, I think, Michael, how are you today? I'm good. We appreciate you taking the time. Making it. You know, in watching this model over 20-plus years, it's really resilient. Really what you're seeing is the model working through and passing on the costs, and what's now getting converted is at higher backlog. As you consolidate this market and you consolidate the different markets and grow the relative market share, what we've seen over time is ultimately that drives margins. We're gonna continue to see that. Our markets that we're in continue to get better, and they continue to grow. When you think about organic growth, you know, if you come to Raleigh-Durham, you can't go anywhere where there's not road construction. Same thing all throughout, parts of Alabama and parts of Georgia and parts of Florida. We're getting the benefit of that, from an organic growth. Historically, we've had about a 10% organic growth for almost 20+ years. Lastly on that, are you hearing and seeing your competitors, the smaller players in the region, having record backlogs as well? The point of the question is, you know, with bidding work potentially picking up, you know, with infrastructure next year, if you feel like there's more disciplined pricing on that work going forward. Thanks, and I'll pass it on. Yeah. Yeah, Michael. You know, obviously we don't know our competitors' backlog, but we can see how the bidding environment is. That tells us that people, due to the demand in our areas, they have a full plate too. We've seen pricing reflect that, and that's certainly showing in our backlog. You know, backlog typically during the work season historically has sometimes shrunk, and that would not surprise us at all next quarter. The fact that it's growing while we're creating record revenue in a quarter just shows the demand that's out there. The fact that we're able to expand margins in the backlog, I think shows that, you know, it's a healthy environment for a lot of contractors. Our next question comes from the line of Andy Wittmann with Baird. Please proceed with your question. Yeah, great. Thanks for taking my question, guys, and good morning. Good morning. Good morning Andy. Yeah, I just wanted to make sure that when you're talking about 250 to 300 basis points higher margin implicit in your backlog today, that's inclusive of also factoring in the higher inflation for materials, labor, and everything else. It's really 250, 300 plus the difference in cost as well. Is that the right way to think about that, Jule? It is, Andy. Just to clarify, as I said last quarter and this quarter, what we're seeing is in pricing over last summer, right? A year ago, that is 250-300 basis points higher. As we move forward into the future, that trajectory may not always be that steep. One of the things we're seeing is that pricing improving. You're right, that's in the margin. In the cost estimate side of our bids, we're trying to cover inflation. We're trying to put escalators into our bids. We've raised our equipment prices due to the diesel that we're buying in the shops. We're doing both. You know, as we said last quarter, the cost estimate side of our bid is where we're trying to tackle inflation. The pricing and the margin, we hope that all falls to the bottom line. If we've done a good job on the cost side, it will. Yeah. Okay. Just wanted to make sure. I guess the comment on the latest, the $10 million pickup from the liquid asphalt index adjustments, I guess we haven't heard you on a public conference call talk about that factor. I was just wondering specifically, are these index adjustments new? In other words, because inflation is high, you've put these clauses in and now you're benefiting from them as needed? Or have they always been in there, and we just haven't seen a spike in some of the input prices, for instance, in liquid asphalt, that's, you know, just different today? Yeah. Andy, good question. We specifically wanted to address that. These are not new indexes. They're in our state DOT budgets, and they've been a part of our mechanism and model for a long time. They typically aren't this much. In a quarter, it may be up a little bit, maybe $1 million-$2 million or down $1 million-$2 million. What's happened this quarter is asphalt adjusted, you know, just went up so much in the three months. We're finishing older work where the index in the bid was low. It just created this spike in revenue that we felt like was important to communicate. It doesn't add margin. It's just a dollar for dollar reimbursement, but it does add a lot of revenue. We don't see that moving forward being that high. You know, asphalt's moderated in price through the month of July, but it was a big factor this quarter in the top line, and we thought it was important to point it out. Thanks for clarifying that. My final question, if you would, has to do with basically your guidance, obviously, revenue guidance up, EBITDA guidance not up. Like you just mentioned there, you know, some of these crude derived prices have fallen a decent amount since last quarter. I would think that would be somewhat beneficial here for your fiscal fourth quarter. Can you just maybe talk about the interplay as to maybe why the EBITDA wasn't able to get raised commensurately with or at least slightly at least with the raise in the revenue given that? Yeah. You know, Andy, in the third quarter, what we saw, we had really favorable weather in April and June. That really was a tailwind on our revenue as well as this liquid AC adjustment. That drove the top line. Our EBITDA was largely in line with the guidance we gave at mid-year. You know, the quarter largely played out like we thought it would. The third and fourth quarter, you know, typically, they interact together sort of like our first and second quarter. We now know, because we've gotten through the month of July that it was a little wetter than normal. Nothing like the historical precipitation we had last July, but it was wetter than normal. We still have to see August and September. You know, we anticipate, just like we said last quarter, just as Q3 was better than Q2, we're seeing that Q4 is gonna be better margins than Q3. We want to be reasonable in the ranges that we gave, especially in light of the, you know, just unpredictability of the supply chain issues that are out there. Andy, let me just mention one thing because you led off that question by saying that crude oil is down, and certainly that we have seen that, but we have not seen that in the price of liquid asphalt yet. Liquid asphalt doesn't track exactly with the up and down of the crude price. Diesel tracks much closer, but that is a much smaller component of our cost than liquid asphalt. Liquid asphalt continued to rise throughout our third quarter and is still at near record highs for this year. That's great context, guys. Thank you for those answers. Have a good day. Thank you Our next question comes from the line of Stanley Elliott with Stifel. Stifel, see what your question is. Hey, good morning, everyone. Thank you all for taking the question. Morning, Stan. Quick question. You guys mentioned favorable weather in the quarter. Can you hazard a guess, you know, was it whether it's days or anything like that that might have kinda helped you out on a year-over-year basis? No, Stan, we hadn't really figured that, you know, as far as exactly how it compared to last year. We do know that April and June were a little drier than normal. It wasn't anything historic, but we were able to have some good productivity. May was a little wetter, especially that last week of May was a washout. When we look at the revenue, you know, we know that it helped a little bit. I would just say, you know, the last three quarters we've been growing. We expected growth. That's why we raised our guidance at the mid-year. I wouldn't say that weather was the major factor. I think the major factor was we're growing both organically and acquisitively. When we have good weather, we wanna point it out, just like when we have bad weather, we point it out. Andy, I mean, Stanley, I'm sorry. From a historical model, we've always talked about a 60/40 in the second half and the first half. You know, with what we have guided to for the full year, that's gonna put about 59% of our revenue in the second half and 41% in the first half, which is actually slightly better for the second half than the percentage we had last year. 'Cause last year, we had a very wet July, August, and September. You know, we did not get up to that 60/40, but we had about 30%. If you go to the midpoint of our guidance, we did about 30% of that in the third quarter, and we're at the midpoint of our guidance. We're seeing about 29% in the fourth quarter, which as you noted, if you take out the $10 million of the liquid asphalt, we're not gonna be that far off from a 30/30. Yeah, that's fair. I was really more curious than anything. With the tight labor market, are you all having less subs brought in to kinda help on jobs? You're doing more work internally? Yeah, just curious. Even if you all are helping out, you know, other firms with some, you know, some contract work or things like that, just given that you all have the advantage from a larger labor force. Yeah, Stanley, I think the labor force continues to be tight, and there are some cases where we're self-performing work that our subs can't get to. I think, you know, we're just continuing to just use our model to give, you know, to give us an advantage in labor. Because if you don't have labor, you can't bid. In this demand environment, the ability to get workers and the ability to have a workforce is what allows you to grow the top line and to generate revenue. We're pressing our advantage with having a local workforce, with having opportunities to grow. I think that's, you know. We don't see that changing anytime soon because of the demand. Ned, do you have any thoughts? Well, I think, Stanley, the other thing that I think gets lost in the numbers with acquisitions is with each of these acquisitions, we've gotten some terrific people. We've been able to grow our workforce in a way that we have revenues coming in, we have profitability coming in, and we've got great people. I think in most of our communities, we are the employer of choice. You know, our healthcare and how we treat people and the ability for advancement is higher. You know, I think actually overall, the whole business, we see the labor market better today than it was six months ago, and we expect it to be better six months from now. Don't lose sight of the fact that in each of these acquisitions, the most recent one, we got several hundred terrific employees that are excited about being part of CPI, excited about the opportunities. Yep. That makes sense. One just kind of on the housekeeping side, how do we think about CapEx into next year, given the inflation? You know, it sounds like some of the OEMs were slow in delivering equipment. You probably would've taken more if you could, would be my guess. Just how do we balance that, you know, as a percentage of sales or anything, any sort of guardrails would be helpful. Yeah, Stanley. Our CapEx, we envision next year being, like it typically is, about 5% of our sales. You know, one thing that I think, doesn't show through in the financials, is the difference in our maintenance CapEx and our growth CapEx. You know, to maintain our business, we typically are 3.25%-3.5% of sales. This year, it's gonna be on the low end of that, around 3%, because a lot of our CapEx that we're spending right now is going toward growth initiatives that are gonna create revenue and margin in the future. We have several greenfields going on. I think that's one thing that gets lost is, you know, when we're looking at CapEx, is we really get by on a pretty lean maintenance CapEx budget, but we're investing in the company. That's great, guys. Thank you very much, and best of luck. Thanks, Stanley. Our next question comes from the line of Adam Thalhimer with Thompson Davis. Please proceed with your question. Hey, good morning, guys. Congrats on the strong Q3. Morning, Adam. Morning, Adam. Alan, first one for you. What are your thoughts on Q4 cash flow? Well, with the revenue growth moderating from Q3 to Q4, we should have a very strong cash flow from operations. Part of what hit us, obviously, in the third quarter is when you grow revenue quarter-over-quarter, you know, basically, $100 million, then, you know, even though our average days in net working capital went down, that $100 million of revenue growth quarter-over-quarter is gonna chew up a lot of working capital. With the fourth quarter being relatively flat, or at midpoint down slightly from the third quarter, that should generate a very positive cash flow from operations because you're not having to finance that revenue growth quarter-over-quarter. That's what I was hoping you were gonna say. Jule, do you have any line of sight to these headwinds, particularly on the supply chain starting to abate? You know, Adam, I wish I could answer that. We're not counting on it abating. What we're trying to do is just get good at adapting to this environment, right? It is a struggle, as we said in our prepared remarks, daily just to be productive. I mean, we've got a great backlog. We've got good margin in our backlog. At some point in time in the future, it's gonna normalize, but we're not counting on that happening anytime soon. Adam, this is an opportunity for me to brag on this management team, but the supply disruptions aren't going away. The way that they have been able to utilize the workforce, move it, synergies from one place to another. When they ran out of pipe in one spot, they could move and continue to work and continue to keep good productivity up, has really been dynamic, and it came through in the numbers. Jule, Alan, the whole management team has done a terrific job of learning how to be flexible in an environment that you have to be flexible to continue to grow this business. It is, it's a real credit to all of them, all the way down to the people that are working. Every day on every project that we're sometimes working on two projects in one day. The synergies that we've gained, I believe, as we've put together and continue to consolidate this company from market to market, has given us a competitive advantage in what is a very disruptive supply chain. It was nice to see that come through in Q3. Then, last one for me, I guess for Jule, how would you characterize overall the bidding environment today? I think the bidding environment right now, Adam, is still strong. You know, we really haven't seen any change. We frankly can't bid everything that comes in. We think that, you know, as the IIJA, the infrastructure bill, starts to come into full force, that we may bid more public jobs and a few less private jobs just because of the number of opportunities that bill will create. We really haven't seen anything from a number of bids drop off. We've continued to see good pricing in the bids we're getting. It really hasn't changed a lot from the last quarter. Sounds good. Thanks, guys. Talk to you later. Bye, Adam. Thank you. Our next question comes from the line of Brian Russo with Sidoti. Please proceed with your question. Hi, good morning. Hey, Brian. Good morning, Brian. Glad to have you on board. Yeah. Thank you. Just to follow up on the bidding activity, is there any reason to believe that the bidding environment or activity will change with IIJA funding? You know, meaning it seems like there's gonna be a lot of money, especially flowing to the states and DOTs that you operate in. You know, I'm just curious, you know, if you sense margins were gonna be pressured because there's just gonna be a lot of work out there for in such a fragmented industry for other players to just capture, you know, the top line. Yeah, Brian. Good morning. We envision that the bidding environment's gonna continue to be strong and the IIJA is gonna continue, really what we've been experiencing in the last 12 months. You know, the states we're in all have healthy state budgets. The COVID relief money this past year has given them extra money. We really have been projecting and are seeing that the infrastructure bill is just gonna continue that. We do think there's gonna be some increase in project funding. It's gonna continue to be a lot of demand on the public side as our nation, you know, is making a really big investment in infrastructure that we see is gonna last, you know, six to eight years by the time these projects get done. We're prepared for it. You know, last year, we said we saw growth coming and we needed to invest in our organization, and we did. I think that's happening now. We're continuing to get prepared to have the workforce and the resources available to take advantage of this infrastructure bill. Okay, great. I think you mentioned your current leverage is at 3x. Remind me, is that the max leverage ratio allowed in your credit facilities, or is this new facility you mentioned give you more flexibility or the max is above 3x? Just trying to get a sense of, you know, the balance sheet capacity under the credit agreement, you know, to pursue acquisitions, you know, maybe more aggressively or larger in size. Yeah, great question. The new credit facility puts that max at 3.5. It also allows if we were to make a larger acquisition that for, I believe, three quarters, it can actually flex up as high as 4. I don't think it's going to change our plans. It's not really providing us. While it provides us with more total availability and gives us some cushion, our leverage ratio should come down if we hit even the midpoint of our guidance. It should come down into 2.6-2.7 because we're bringing on a very good quarter from an EBITDA standpoint and rolling off a much lower quarter from last year. Even with the acquisition and the borrowing we made earlier this week for the southern acquisition, we should be back down around that 2.6 or 2.7. Then as we see the 2023 playing out, that should come on back down. Even though we've got a higher top line of what that leverage can be, you know, we don't see that changing our strategy as far as being patient with acquisitions, doing ones that make sense, and taking advantage of also the organic growth opportunities, because that's really a focus for us. You know, Jule mentioned earlier, we've spent a lot of our CapEx money this year to support organic growth, and we see that as you know, a good utilization of capital also. Hey, Brian, I think one of the things I will say is Alan and the whole finance team in conjunction with Jule, has done a great job of creating a very flexible capital structure for us. You know, from our standpoint, we like that leverage ratio to continue to come down. We've historically been levered at two or less. You know, we anticipate continuing to have that focus as we grow this business. One of the things that Alan and the team have done, if you pull the credit agreement, is we have a very flexible credit agreement that allows us to continue to grow the business and really not have to be concerned as we do acquisitions, which is a huge benefit. They did a terrific job. I don't think we could hit the timing any better from a pricing standpoint or a flexibility standpoint. From our standpoint, as a board and as a management team, we'd like to see that continue to come down over time. Okay, great. My other questions were asked and answered. Thank you very much. Thank you. We have reached the end of the Q&A session. Therefore, I will turn the floor back to management for closing comments. Yes, we'd just like to thank everyone for being with us today, and we look forward to talking to you on the next call. Have a good weekend. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.