Q4 2023 Construction Partners Inc Earnings Call
Speaker 1: audio link on the events and presentations page of the investor relations section of constructionpartners.net
Since page of the Investor Relations section of construction partners Dot net.
Speaker 1: Information recorded on this call speaks only as it's today, November 29, 2023. So please be advised that any time-sensitive information may no longer be accurate as of the date of any replay or transcript reading.
Information recorded on this call speaks only as of today November 29, 2023. So please be advised that any time sensitive information may no longer be accurate as of the date of any replay or transcript reading.
Speaker 1: 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 for looking statements made pursuant to the safe harbor provisions of the Private Security's litigation reform act of 1995.
I would also like to remind you that the statements made in today's discussion that are not historical facts.
<unk> statements of expectations or future events or future financial performance are considered forward looking statements made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.
Speaker 1: 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 disclosures on forward-looking statements.
We'll 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 disclosures on forward looking statements. These factors and other risks and uncertainties are described in detail in the Companys filings with the Securities and Exchange Commission.
Speaker 1: These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission.
Speaker 1: 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 statement.
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.
Speaker 1: And now I would like to turn the call over to construction partner, CEO . Jewel Smith. Jewel?
And now I would like to turn the call over to construction partners CEO Jule Smith Joe.
Speaker 1: Thank you Rick and good morning everyone with me on the call today are Greg Hoffman, our chief financial officer and Ned Fleming, our executive chairman.
Thank you Rick and good morning, everyone.
With me on the call today are Greg Hoffman, our Chief Financial Officer, and Ned Fleming, our executive Chairman.
Speaker 2: I'll begin with an overview of the business, followed by Greg reviewing our financials in more detail.
Ill begin with an overview of the business followed by Greg reviewing our financials in more detail.
Speaker 2: We finished the year with a strong quarter that drove substantial year-over-year growth for both the fourth quarter and the year.
We finished the year with a strong quarter that drove substantial year over year growth for both the fourth quarter and the year.
Speaker 2: This school 2023 revenue was up 20% year every year and adjusted the $1.57% and that income was up over 129%.
Fiscal 2023 revenue was up 20% year over year, and adjusted EBITDA was up 57% and.
Net income was up over 129%.
Speaker 2: and consistent with our goal at the beginning of the year to return to double digit margins.
And consistent with our goal at the beginning of the year returned to double digit margins, we achieved a full year adjusted EBITDA margin of 11, 1%.
Speaker 2: We achieved a full year adjusted EBITDA margin of 11.1%.
Speaker 2: We also returned to the normal CPI business model of generating strong cash flow. We ended the year with cash flow from operations of 157 million and lowered our leverage ratio while continuing to drive both organic and a quiz of growth throughout the year.
We also returned to the normal CPI business model of generating strong cash flow.
We ended the year with cash flow from operations of $157 million and lowered our leverage ratio, while continuing to drive both organic and acquisitive growth throughout the year.
Speaker 2: Today we are reporting a record backlog of $1.6 billion.
Today, we are reporting a record backlog of $1 6 billion.
Speaker 2: This is evidence that the demand environment is greater than at any time in our past.
This is evidenced that the demand environment is greater than at any time in our past.
Speaker 2: supported by healthy public funding programs, as well as strong commercial markets throughout our six southeastern states.
Supported by a healthy public funding programs as well as strong commercial markets throughout our six southeastern states.
Speaker 2: and in regard to the IJA, while the bill passed three years ago, and the funding only began flowing to the states over the past two years, with construction project work starting.
And in regard to the JA, while the build path three years ago and the funding only began flowing to the states over the past two years.
With construction project work starting in the past year.
Speaker 2: We are still in the early innings on the construction side of this generational investment in our nation's infrastructure.
We are still in the early innings on the construction side of this generational investment in our nation's infrastructure.
Speaker 2: In the southeast, our states are growing and they remain focused on maintaining and improving the quality of their roads as well as increasing capacity to handle the significant migration to the southeastern United States.
In the southeast our states are growing and they remain focused on maintaining and improving the quality of their roads as well as increasing capacity to handle the significant migration to the southeastern United States.
Speaker 2: Both of these types of projects are in the sweet spot for CPI's operational capabilities, along with other types of projects such as airports, ports, and rail lines.
Both of these types of projects are in the sweet spot for <unk> operational capabilities.
Along with other types of projects, such as airports ports and rail lines.
Speaker 2: After decades of falling behind and neglecting infrastructure maintenance needs, we believe that IJA serves as a down payment on the maintenance and new construction needed to support our country's infrastructure.
After decades of fallen behind and neglecting infrastructure maintenance needs. We believe that JA serves as a down payment on the maintenance and new construction needed to support our country's infrastructure.
Speaker 2: After this initial down payment, there will remain a great deal of work needed in future years beyond the IJS.
After this initial down payment there will remain a great deal of work needed in future years beyond that JA.
Speaker 2: In addition, several states we operate in, such as Tennessee, South Carolina, North Carolina, and Florida, have also recently passed additional supplemental funding plans on top of their existing funding mechanisms to try and keep pace with their rapid growth in the needs of their state.
In addition, several states we operate in such as Tennessee, South Carolina, North Carolina and Florida.
<unk> also recently passed additional supplemental funding plans on top of their existing funding mechanisms to try and keep pace with our rapid growth and the needs of their states.
Speaker 2: Turning down the CPI Strategic Growth Model. Subscribe to the end of our fiscal year of September 30th.
Turning now to CPI strategic growth model.
Subsequent to the end of our fiscal year of September 30.
Speaker 2: We've completed two strategic acquisitions that enabled us to enter new growth markets and strengthen our market share in existing ones.
We've completed two strategic acquisitions that enabled us to enter new growth markets and strengthen our market share in existing ones.
Speaker 2: 1st, on October 2nd, we expanded operations in the upstate area of South Carolina by acquiring Hubbard paving and grading in Oaxaca.
First on October 2nd we expanded operations in the upstate area of South Carolina by acquiring Hubbard, paving and grading and walhalla.
Speaker 2: The acquisition adds a hot-mick fast-fault plant and related construction operations to our South Carolina platform company, King Asphalt, and expands its service market westward in the upstate reach.
The acquisition adds a hot mix asphalt plant and related construction operations to our South Carolina platform company King asphalt.
And expands its service market westward in the upstate region.
Speaker 2: The second acquisition we announced on November 1st was the Reeves Construction Asset.
The second acquisition, we announced on November one was the Reeves construction assets.
Speaker 2: in the Charlotte-Rock Hill area that added three hot mix asphalt plants and related construction operations in Concord, North Carolina and Rock Hill and McConnell's South Carolina.
The Charlotte Rock Hill area that added three hot mix asphalt plants and related construction operations, and Concord, North Carolina, and Rock Hill, and Mcconnell's South Carolina.
Speaker 2: We entered the Charlotte Market last year through our acquisition of Fairview Corporation and the Upset Region of South Carolina two years ago through our acquisition of King Asphalt.
We entered the Charlotte market last year through our acquisition of fair bit Corporation in the upstate region of South Carolina, two years ago through our acquisition of King asphalt.
Speaker 2: In both areas, we continue to experience a strong economic climate.
In both areas, we continue to experience a strong economic climate.
Speaker 2: favorable demographic trends and other tailwinds supporting the need for infrastructure service.
Favorable demographic trends and other tailwind supporting the need for infrastructure services.
Speaker 2: As we move into a new year, we continue to have numerous conversations with potential sellers both inside and outside of our current state.
As we move into a new year, we continue to have numerous conversations with potential sellers, both inside and outside of our current states and.
Speaker 2: And we remain patient and focused on finding the best strategic acquisitions that expand our footprint and grow relative market share.
And we remain patient and focused on finding the best strategic acquisitions that expand our footprint and grow relative market share.
Speaker 2: We believe CPI is seen as the buyer of choice for many owners in the Southeast.
We believe CPI is seen as the buyer of choice for many owners in the southeast.
Speaker 2: You are our reputation for treating cellors fairly, providing career opportunities for their employees, and our track record of successfully integrating in growing companies.
Our reputation for treating sellers fairly providing.
Providing career opportunities for their employees and our track record of successfully integrating and growing companies.
Speaker 2: Last month, we were pleased to host our first-ever analyst day in New York.
Last month, we were pleased to host our first ever analyst day in New York.
Speaker 2: And as we said then, the big news for CPI is that there is no new news.
As we said in the Big news for CPI is as there is no new news.
Speaker 2: Our plan is to continue to execute on the same strategy the company was founded on.
Our plan is to continue to execute on the same strategy. The company was founded at all to.
Speaker 2: to capitalize on the substantial need to invest in infrastructure in the growing sunbelt region of the US.
To capitalize on the substantial need to invest in infrastructure and the growing sunbelt region of the U S.
Speaker 2: Analysts they allowed us to showcase our unique culture at CPI as a family of companies. And to highlight our operating company presence.
Analyst day allowed us to showcase our unique culture at CPI as a family of companies and to highlight our operating company presidents.
Speaker 2: They are the industry leaders that drive CPI's differentiated strategy of operating into state local markets with local workforce.
They are the industry leaders that drive CPI is differentiated strategy.
Of operating in distinct local markets with local Workforces and.
Speaker 2: and generating stable recurring revenue from repeat customers.
In generating stable recurring revenue from repeat customers.
Speaker 2: While continuing to build smaller size projects with lower risk profiles and higher margin.
While continuing to build smaller SaaS projects with lower risk profiles and higher margins.
Speaker 2: Our analyst also serves as an opportunity to introduce our FY24 Outlook as part of our five years strategic plan that we call Roadmap 2027.
Our analyst day also served as an opportunity to introduce.
Our FY 'twenty four outlook as part of our five year strategic plan that we call roadmap 2027.
Speaker 2: This plan outlines our growth targets that represent annual revenue growth of 15 to 20 percent and EVA margins in the range of 13 to 14 percent by 2027.
This plan outlined outlines our growth targets that represent annual revenue growth.
15% to 20%.
And EBITDA margins in the range of 13% to 14%.
2027.
Speaker 2: Our top-line growth strategy will continue to prioritize organic growth in our current markets, as well as finding opportunities for green-fielding facilities in adjacent markets, and finally, our third growth lever of strategic acquisition.
Our top line growth strategy will continue to prioritize organic growth in our current markets as well as finding opportunities for greenfield facilities in adjacent markets and finally, our third growth lever of strategic acquisitions.
Speaker 2: Margin Expansion also has three levers. First, by building better local markets, with increased market share as the number one or two player in each of our local markets. And improving...
Margin expansion also has three <unk> first by building better local markets with increased market share as the number one or two player in each of our local markets and.
And improving our market intelligence.
Speaker 2: Secondly, we want to use vertical integration to continue to gain more margin along the value chain on materials and services.
Secondly, we want to use vertical integration to continue to gain more margin along the value chain on materials and services.
Speaker 2: And finally, as our business continues to grow, there will be additional benefits of scale that will steadily contribute to margin expansion.
Finally, as our business continues to grow there will be additional benefits of scale.
We'll steadily contribute to margin expansion.
Speaker 2: Also, Crucial Tourist Strategic Plan is further widening a competitive advantage to our workforce by building on our strong organizational culture as a family of companies and providing superior benefits, career opportunities, which attract and retain the best construction professionals.
Also crucial to our strategic plan is further widening our competitive advantage through our workforce by building on our strong organizational culture.
As a family of companies and providing superior benefits career opportunities, which attract and retain the best construction professionals.
Speaker 2: At CPI, we're dedicated to building better lives, and to building the infrastructure that keeps our communities connected.
At CPI, we are dedicated to building better lives and to building the infrastructure that keeps our communities connected.
Speaker 2: As we wrap up a successful fiscal year, I'd like to make our hard working board of directors.
As we wrap up a successful fiscal year I'd like to thank our hard working board of directors.
Speaker 2: many of whom have been serving as directors since the founding of the company 24 years ago.
Many of whom had been serving as director since the founding of the company 24 years ago.
Speaker 2: Their expertise and experience continued to provide wise counsel to the company's leadership team.
Their expertise and experience continue to provide wise counsel to the company's leadership team.
Speaker 2: I want to conclude by also thanking the more than 4200 employees at CPI. For their hard work and professionalism and delivering a strong fiscal year 2023. And being prepared for dynamic growth in our new fiscal year 2024.
I want to conclude by also thanking the more than 4200 employees at CPI for their hard work and professionalism and delivering a strong fiscal year 2023 and.
And being prepared for dynamic growth in our new fiscal year 2024.
Speaker 2: Most importantly, thank you for watching out for your teammates and keeping each other safe each and every day in our work sites. I'd now like to turn them...
Most importantly, thank you for watching out for your teammates and keeping each other safe each and every day in our work sites.
Now like to turn the call over to Greg.
Speaker 1: Thank you, Jill. Good morning, everyone. I'll begin with the review of our key performance metrics for the fiscal year before discussing our outlook for fiscal 2024.
Thank you Jill and good morning, everyone I'll begin with a review of our key performance metrics for the fiscal year before discussing our outlook for fiscal 2024.
Speaker 2: Revenue was $1.56 billion dollars, an increase of 20% compared to last-
Revenue was $1 $5 6 billion, an increase of 20% compared to last year.
Speaker 2: The mix of our total revenue growth for the year was 8.7% organic revenue and 11.4% from recent acquisition.
The mix of our total revenue growth for the year was eight 7% organic revenue and 11.
4% from recent acquisitions.
Speaker 2: During the final quarter of the fiscal year, the weather across our states was better than seasonal averages and compared favorably to the fourth quarter last year.
During the final quarter of the fiscal year, the weather across our states was better than seasonal averages and compared favorably to the fourth quarter last year.
Speaker 2: I'd also point out that a liquid asphalt index reimbursements, we received this year the fourth quarter, were much lower than last year as liquid asphalt has trended down for most of the year.
I'd also point out that the liquid asphalt index reimbursements. We received this year the fourth quarter were much lower than last year as liquid asphalt has trended down for most of the year.
Speaker 1: Liquid asphalt prices were relatively flat in fiscal 2023.
Liquid asphalt prices were relatively flat in fiscal 2023.
Speaker 1: Consequently, we received $1.3 million for liquid asphalt index reimbursements in Q4 2023, compared to $10.7 million in Q4 last year.
Consequently, we received $1 $3 million for liquid asphalt index reimbursements in Q4, 2023 compared to $10 $7 million in Q4 of last year.
Speaker 1: Excluding the impact of these reimbursements, the company's organic growth rate would be 9.6% and the overall revenue growth would be 21%.
Excluding the impact of these reimbursements, the company's organic growth rate would be nine 6%.
And the overall revenue growth would be 21%.
Speaker 1: Gross profit in fiscal 2023 was $196.4 million, an increase of approximately 41% compared to last year.
Gross profit in fiscal 2023 was $196 4 million, an increase of approximately 41% compared to last year.
Speaker 1: As a percentage of total revenues, gross profit was 12.6% in fiscal 23 compared to 10.7%
As a percentage of total revenues gross profit was 12, 6% in fiscal 'twenty three compared to 10, 7% last year.
Speaker 1: general and administrative expenses as a percentage of total revenue in fiscal 2023 declined to 8.1% compared to 8.3% last year.
General and administrative expenses as a percentage of total revenue in fiscal 2023 declined to eight 1% compared to eight 3% last year.
Speaker 1: Net income was $49 million, an increase of 129%, compared to $21.4 million last year.
Net income was $49 million, an increase of 129% compared to $21 $4 million last year.
Speaker 1: Adjusted EBITDA was $174.1 million, an increase of 57% compared to last year.
Adjusted EBITDA was 170, $74 1 million, an increase of 57% compared to last year.
Speaker 1: Adjusted EBITDA margin for the year was 11.1%. Compared to 8.5% in fiscal 2022.
Adjusted EBITDA margin for the year was 11, 1%.
Compared to eight 5% in fiscal 2022.
Speaker 1: You can find GAP to non-GAP recommendations of net income and adjusted EBIDOT financial measures. At the end of today's earnings release.
You can find GAAP to non-GAAP reconciliations of net income and adjusted EBITDA financial measures at the end of today's earnings release.
Speaker 1: In addition, as Jule mentioned, we are reporting a record project backlog of $1.6 billion at $4.30 billion. September 30th, 2023.
In addition, as Joe mentioned, we are reporting a record project backlog of $1 $6 billion at 7% at September 32023.
Speaker 1: Turning now to the balance sheet, we had $48.2 million of cash and cash equivalents and $222.1 million available under the credit facility, net of a reduction for outstanding letters of credit.
Turning now to the balance sheet we.
We had $48 $2 million of cash and cash equivalents and $222 $1 million available under the credit facility net of a reduction for outstanding letters of credit.
Speaker 1: We have 283.8 million dollars of principal outstanding under the term loan and 93.1 million dollars outstanding under the revolving credit facility.
We have $283 $8 million of principal outstanding under the term loan and $93 $1 million outstanding under the revolving credit facility.
Speaker 1: The availability on our credit facility and cash generation will continue to provide flexibility and capacity to allow for potential near-term acquisitions and high-value growth opportunities.
The availability on our credit facility and cash generation will continue to provide flexibility and capacity to allow for potential near term acquisitions and high value growth opportunities.
Speaker 1: As a reminder, the company entered into an interest rate swap agreement that fixed the SOFR at 1.85%, which results in an interest rate on $300 million of term debt of 3.1%. This is a reduction of 50 basis points from 9-30-22.
As a reminder, the company entered into an interest rate swap agreement that fixed the sofa at 185%, which results in an interest rate on $300 million of term debt of three 1%.
This is a reduction of 50 basis points from $930 22.
Speaker 1: The maturity date of this walk is June 30th, 2027.
The maturity date of the swap is June 32027.
Speaker 1: As of the end of the quarter, our debt to trailing 12 months EVA-DA ratio was 1.72.
As of the end of the quarter, our debt to trailing 12 months EBITDA ratio was 172.
Speaker 1: As you all mentioned, we also reduced our leverage ratio year over year from 2.78 while continuing to grow organically and acquistedly.
As Joel mentioned, we also reduced our leverage leverage ratio year over year from $2 708, while continuing to grow organically and acquisitive Lee.
Speaker 1: Our expectation is the leverage ratio will maintain a range of 1.5 to 2.5 while continuing to add sustained profitable growth.
Our expectation is the leverage ratio will maintain a range of one five to two 5%, while continuing to add sustained profitable growth.
Speaker 1: Cash provided by operating activities was $157.2 million.
Cash provided by operating activities was $157 $2 million.
Speaker 1: Compared to the $16.5 million in fiscal 2020.
Compared to the $16 5 million in fiscal 2022.
Speaker 1: Net capital expenditures for fiscal 2023 were $80.1 million, consisting of $97.8 million in capital purchases.
Net capital expenditures for fiscal 2023 were $81 million consisting.
Consisting of $97 8 million in capital purchases.
Speaker 1: and $17.7 million of proceeds from the sale of property plant equipment.
$17 $7 million of proceeds from the sale of property plant and equipment.
Speaker 1: We expect net capital expenditures for fiscal 2024 to be on the range of 90 to 95 million dollars.
We expect net capital expenditures for fiscal 2024 to be in the range of $90 million to $95 million.
Speaker 1: This includes maintenance catbacks of approximately 3.25% of revenue, but the remaining amount invested in high return growth initiatives.
This includes maintenance capex of approximately three 5% of revenue with the remaining amount invested in high return growth initiatives.
Speaker 1: Today we are maintaining the fiscal year 2024 outlook that was introduced at our analyst day event last month on October 4th, 2023.
Today, we are maintaining the fiscal year 2024 outlook that was introduced at our annual analyst day event last month on October four 2023.
Speaker 1: We expect revenue in the range of 1.75 to 1.825 billion dollars.
We expect revenue in the range of $1 75 to $1 85 billion.
Speaker 1: net income in the range of $63 to $70 million.
Net income in the range of $63 million to $78 million.
Speaker 1: and adjusted EBIDA on the range of 197 to 219 million dollars.
And adjusted EBITDA in the range of $197 million to $219 million, which reflects adjusted EBITDA margin in the range of 11, 3% to 12%.
Speaker 1: which reflects adjusted EBITDA margin in the range of 11.3 to 12%.
Speaker 3: And with that, we are now ready to take your questions. Operator? Thank you. 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 a participant using speaker equipment and maybe necessary to pick up your handset before pressing the star key.
And with that we are now ready to take your questions operator.
Thank you Andy we'd like to ask a question. Please press star one on your telephone keypad.
Chantal will indicate your line is in the question queue. You May press star two if he 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.
Speaker 4: Our first question is from Catherine Owson with Thompson Research Group. Please proceed. Hey, good morning. It's actually Brian Byross, number two.
Our first question is from Kathryn Thompson with Thompson Research Group. Please proceed.
Hey, Good morning. This is actually Brian Biros on for Catherine. Thank you for taking my questions.
Hey, good morning, Brian Martin.
Speaker 4: First on the, on the even the guidance, you know, top end gets you back to 12% that'd be great. Low end, you know, more about 20 basis points off of kind of where you ended the current year. Can you just touch on the low end scenario there and kind of what?
First on the on the EBITDA guidance, yet top and gets you back to 12% that'd be great low end more about 20 basis points off of kind of where you ended the current year.
Can you just touch on the low end scenario, there and kind of what.
Are the building blocks to get to that kind of 20 basis points margin growth there.
Speaker 2: Yeah, Brian , you know, in our goddess.
Yes, Brian.
And our guidance.
Speaker 2: And in our roadmap 2027, you know, the week talked about last month at the analyst day, you know, we expect to have 50 to 75 basis points of margin improvement, you know, each year. That's what our roadmap 2027 calls for.
<unk>.
And in our roadmap 2027.
We talked about last year.
Month at the analyst day.
We expect to have 50% to 75 basis points of margin improvement.
Each year and that's what our roadmap 2027 calls for.
Speaker 2: But when we give guidance, we give a range, right, to encompass different scenarios. But our guidance that we give, we assume normal weather, a stable economy, and good execution. And so...
But when we give guidance, we give a range right too.
Encompass different scenarios, but our guidance.
That we give we assume normal weather.
Stable economy.
<unk>.
Good execution and so.
Speaker 2: We're just getting the year started and as we go through and see how the year is going, we'll update that guidance and as you saw last year, we'll tighten it and raise it accordingly.
We're just getting the year started and as we go through and see how the year has grown we'll update that guidance as you saw last year.
Tightened and raised it accordingly.
Okay.
Got it thank you.
Speaker 4: We followed descent on the mix between public and private.
My follow up just on the on the mix between public and private.
Yes.
Speaker 4: call even on the private side both good tailwinds going into the next year and mostly a year tailwind.
As mentioned in the call even on the private side, both good tailwind going into the next year.
Multiyear tailwind.
Speaker 4: Do you see the mix between the two changing at all going forward? We've had strength between the two.
Do you see the mix between the two changing at all going forward.
We have had strength between the two.
A little bit different public maybe a little bit stronger but.
Speaker 4: you're in good state in the southeast better seeing good trends on the private side too so just wondering how that that mixtip looks for you guys if it if any
Good states in the southeast that are seeing good trends on the private side too. So just wondering how that that mix shift looks for you guys. If any mix shift going forward. Thank you.
Speaker 1: Yeah sure Brian , yeah. Actually, I think what you'll see, we look at our filing that the mix has changed a little bit in 2023 overall from
Yes, sure Brian Yes.
Actually I think what Youll see when you look at our filing that the mix has changed a little bit in 2023 overall from.
Speaker 1: Basically, 60, 40 in prior years to roughly 63, public 37 private in 2023. So, I think that shows quite a bit of demand in the public environment, both state and federal level of what discussed and dual discussed.
Basically.
60, 40 in prior years too.
Roughly 63 public 37 private in 2023 so.
I think thats.
Shows.
Quite a bit of demand in the public environment, both both state and federal levels discussed as Joel discussed.
Speaker 1: So, you know, that could go up potentially in the public side based on what the demand provides in the marketplace, but I think we're comfortable with that mix going forward.
So.
That could go up.
<unk> and the public side based on what the what the demand provides in the marketplace, but I think we're comfortable with that mix going forward.
Thanks, Sam Thank you.
Thank you Brian.
Speaker 3: Our next question is from Michael Finiger with Bank of America. Please proceed.
Our next question is from Michael Feniger with Bank of America. Please proceed.
Speaker 5: Hey everyone, thanks for taking my question. Just following up on the conversation between public and private.
Hi, everyone. Thanks for taking my question just following up on on the conversation between public and private.
Speaker 5: I'm just curious on the on the private side. Can you just tell us what you're what you're actually seeing with activity there in in recent months and
I'm just curious on the on the private side can you just tell us what youre, what youre actually seeing with activity there and in recent months and do you still expect that that business on the private side are you expecting that to be up in.
Speaker 5: Do you still expect that, that business on the private side? Are you expecting that to be off?
Speaker 5: in in in in 2024, you know, high single digit. I we you guys are given great color on the public side. It seems like there's a nice tailwind there. I'm just curious. There's some concerns in the market around private, seeing higher rates, potentially impacting some some private construction activity. Just curious what you guys are seeing given your your your geographical.
2024.
High single digits.
You guys have given great color on the public side. It seems like there is a nice tailwind there I'm just curious there's some concerns of the market around private seeing higher rates potentially impacting some some private construction activity. Just curious what you guys are seeing.
Given your your your geographical footprint.
Speaker 2: Yeah, Michael, that's a great question. And one that, you know, we've been getting and it's something that I watch very closely, look at the bid sheet each week to see, you know, and all of our local markets, what opportunities we're seeing. And, you know, the surprising thing for us is past year, and especially the last six months, it thinks on the commercial and private side of held up.
Yeah, Michael that's a great question and one that.
We've been getting is something that I'll watch very closely.
Look at the bid sheet each week to see on all of our local markets what opportunities we're seeing.
The surprising thing for us this past year, and especially the last six months of things on the commercial and private side have held up.
Speaker 2: very well. And as I said, you know, at our analyst day, the mix, I think, has evolved over the last year. Housing has remained steady, even though that's not a big part of what we do. I think the fact that so many people are not selling their existing homes, the customers we do support from a residential standpoint, the builders are experiencing good demand for their products.
Very well and as I've said.
Our analyst day.
The mix I think has evolved over the last year.
Housing has remained steady even though that's not a big part of what we do I think the fact that so many people who are not selling their existing homes. The customers. We do support from a residential standpoint.
The builders are experiencing good demand for their products.
Speaker 2: But what we've really seen in addition to the residential migration to the southeast is business migration to the southeast. Now I think you heard that from other customers or other companies in our industry. There's just a lot of heavy duty industrial demand where businesses are building manufacturing facilities, labs.
What we've really seen in addition to the residential migration to the south east as business migration to the South East and I think you've heard that from other customers or other companies in our industry. There's just a lot of heavy duty industrial demand where businesses are building manufacturing.
During facilities labs.
Speaker 2: and headquarters. And so that continues to just be a steady demand for the commercial environment. Ned, you want to weigh in on that? You know, Michael, it's interesting. We're in a relative market share business. So in the markets that we compete in and we see this.
In headquarters and so that continues to just be a steady demand for the commercial environment. Neither do you want to weigh in Orlando, Michael its interesting were in a relative market share business. So in the markets that we compete in and we see this.
Speaker 1: because the sun text invests really in the sunbells of the country. There's a continues to be a lot of growth. The demographic trends are driving that.
Because <unk> invest really in the sunbelt, where the country Theres a continues to be a lot of growth with demographic trends are driving that.
Speaker 1: Number one and number two, the business trends are driving that. So in a relative market, your business will worry about if the growth and the growl germ, the growth and hunt for Alabama. And in each of these 70 plus distinct markets, we continue to see growth commercially, residential, everything. In fact, in most of the places we're doing business, there's a housing shortage. There's a supply problem. And that supply problem is getting it solved for somewhere between six.
Number one and number two the business trends are driving that so in our relative market share business. We're worried about is the growth in Raleigh Durham the growth in Huntsville, Alabama.
And in each of these 70 plus distinct markets, we continue to see growth commercially.
Residential <unk> everything in fact in most of the places we are doing business. There is a housing shortage, there's a supply problem and that supply problem as it going it's all for somewhere between six and 10 years.
Oh good.
Speaker 5: Good to hear, guys, and just my follow-up.
Good to hear guys and just my follow up.
Speaker 5: We're still seeing pretty high price increases on, you know, aggregates and rocks and I'm curious what
We're still seeing pretty high price increases.
Aggregates and rocks and I'm curious what.
Speaker 5: you're seeing in terms of your input and your costs.
You are seeing in terms of your input and your costs.
Speaker 5: your competitors and basically how you feel the environment is still past that along. I know you kind of reference what you're seeing out there in terms of the bids and the prices. Just curious how you're kind of thinking with some of the inflation, you know, inflation is coming down but you're still seeing some high price increases in some of these more material spots, material inputs. Just curious how you feel like you guys and the competitors ability to kind of pass that along in 24. Thank you.
Your competitors and basically how you feel the environment is still pass that along I know you kind of reference what youre seeing out there in terms of the bids and the prices just curious how youre thinking with some of the inflation, even though inflation is coming down, but you're still seeing some high price increases in some of these more material.
<unk> spot material inputs, just curious how you feel like you guys in a competitor's ability to kind of pass it along and 24. Thank you.
Speaker 2: Well, Michael, you know, CPI, our model is just to pass through the inputs through our bids.
Well Michael.
Our model is just a pass through the inputs to our bids.
Speaker 2: And so you're right, we are continuing to see.
So youre right, we are continuing to see <unk>.
Speaker 2: price increases and our input costs and we believe that construction inflation is going to continue to be higher than what you might see CPI You know or consumer inflation be because of the demand environment the the IJA and Just the commercial economies creating so you're right I think that we'll continue to have inflation and we're just our model just passes that through to the customer
Price increases in our input costs and we believe the construction inflation is going to continue to be higher than what you might see CPI.
Or consumer inflation be because of the demand environment.
And.
Just two commercial economies, creating so.
Youre right I think that will continue to have inflation and we're just our model just passes through to the customers.
Speaker 1: Yeah, I would add to that that part of the sharp spike in inflation that occurred 18 months ago is difficult for anybody to absorb. But...
Yes, I would add to that that part of the.
This sharp spike in inflation that occurred 18 months ago is difficult for anybody to absorb.
Speaker 1: Whatever level inflation is at, as long as it's relatively stable, we can pass that along.
Whatever level of inflation is at.
Long as it's relatively stable, we can pass that along.
Thank you.
Thank you Michael.
Speaker 3: Our next question is from Adam Salimer with Thompson Davis in company.
Our next question is from Adam <unk> with Thompson Davis <unk> Company. Please proceed.
Hey, good morning, guys.
Speaker 6: More nada out of eight. Jules, are you fully passed the supply chain issues now?
More on that.
Jos are you fully passed the supply chain issues now.
Speaker 2: I would say Adam that the supply chain, yes, I mean, is it like it was in 2019 or 2020? No, but I would say we've just gotten to where we can do business in a normal way in the new world. So it's not something we talk about at all now. So I guess the answer to questions, yes.
I would say Adam the supply chain, yes, I mean is it like it was in 2019 or 2020, no, but I would say, we've just gotten to where we can do business in a normal way in the new world. So it's not a it's not something we talk about it all now so.
I guess to answer two questions yes.
Speaker 6: Good. Okay. And then I'm curious on the large project side, you know, where you guys would be part of a JV just to do the paving work. Are you seeing more of those types of opportunities with the IIJA?
Okay, and then I'm curious on the large project side.
As would be part of a JV just to do the paving work are you seeing more of those types of opportunities with III JA.
Speaker 2: Well, you know, Adam, I was recently at a conference and I heard an industry economist break down the use of the IJA funds in the different states and regions.
Well.
Adam I was recently at a conference in a herd and industry economists breakdown.
The use of that JA funds in the different states and regions and I was really.
Speaker 2: And I was really just, it was interesting to see and really encouraging for me that in the southeast, most of the money for the IJF funds are going to either maintenance or capacity increase to existing infrastructure.
Just it was interesting to see and it really encouraging for me that.
In the southeast most of the money for the JA funds are going to either maintenance or capacity increase to existing infrastructure.
Speaker 2: And so, and that's exactly, as I said, my prepared remarks, that's exactly what CPI, you know, that's our specialty. And so...
And so and Thats exactly as I said in my prepared remarks, that's exactly what CPI.
That's our specialty and so.
Speaker 2: you know, maybe in future years there might be some bigger projects but right now we're seeing a lot of the states that we're in, use it to do maintenance and capacity increase. And so that's what we're bidding on.
Maybe in future years, there might be some bigger projects, but right now we're seeing a lot of the states.
And use it to do maintenance and capacity increase and so that's that.
That's what we're bidding on.
And it sounds like Thats, what you prefer.
Speaker 2: Well, I mean, and certainly on larger projects, you know, you know, we'll participate as a subcontractor or the JV partner, but, you know, our specialties to do smaller projects with higher margins. And so maintenance and capacity and widening of roads, those are the projects that they're right now are wheelhouse.
Well I mean and.
Certainly on larger projects as you know, we will participate as a subcontractor as a JV partner, but.
Our specialty to do smaller.
<unk> with higher margins, and so maintenance and capacity in a widening of roads those are the projects.
Right in our wheelhouse.
Speaker 6: Great, and then Greg just real quick for you. The S-TNA leverage was particularly strong. Thank you for anything unusual in there.
Great and then Greg just real quick for you the SG&A leverage was particularly strong.
Q4 was there anything unusual in there.
Speaker 1: No, I think it's just a normal trend that we talked about that 15, 20 basis points year over year. Of course, the fourth quarter was certainly better than last year, 6.9% I believe is what it was this year. So, but just a normal trend, I think we're going to continue to see. Great. Okay.
No I think it's just a normal <unk>.
Trends that we talked about 15 to 20 basis points year over year of course.
In the fourth quarter was certainly better than last year.
Six 9% I believe is what it was this year so with just a normal normal trend I think we're going to continue to see.
Great. Okay. Thanks, guys.
Thanks, Adam.
Speaker 3: Our next question is from Brian Russo with Sudoti and Company. Please proceed.
Our next question is from Brian Russo with Sidoti <unk> Company. Please proceed.
Hi, good morning.
Good morning, Brian Hey, Brian Hey.
Speaker 7: Hey, maybe you could just elaborate on the September backlog of 1.6 billion, you know, still showing a lot of resilience, you know, despite the DOT, you know, lettings, you know, seasonality and just the overall, you know, construction, seasonality of the business, just, you know, just curious, you know, how that triangulates, you know, to your reaffirmed 2024, you know, guidance, just any insight there would be great.
Maybe you could just elaborate on the September backlog of $1 6 billion.
Still showing a lot of resilience.
Despite dot's lettings.
Seasonality and just the overall.
Construction seasonality of the business just curious.
How that Triangulates to your reaffirmed 2024 guidance just any insight there would be great.
Speaker 2: Yeah, Brian , I'm glad you asked that. You know, our backlog has grown now for 12 straight quarters.
Yeah, Brian I'm glad you asked that our backlog.
Has grown now for 12 straight quarters.
Speaker 2: and you've heard me say this and I'm glad you gave me the opportunity to say it again. It is not atypical at CPI for our backlog to go down sequentially, especially in the busy work season.
And you've heard me say this and I want to.
I'm glad you gave me the opportunity to say it again it.
It is not a typical CPI for our backlog to go down sequentially, especially in the busy work season.
Speaker 2: And so at some point that's going to happen and that's not going to surprise us at all because the DOT leddings are not, you know, in a steady state, they're coming at different times of the year and we do work at different levels. We're a seasonal business.
And so at some point, that's going to happen and that's not going to surprise us at all because the dot lettings or not.
Sure.
In a steady.
State they coming at different times of the year and that we do work at different levels were seasonal business.
Speaker 2: I think the backlog being at the level it is shows the demand that we have. But we've sold a large percentage of our capacity. And we've said, you know, our next 12 month revenue is a lot of its own backlog. And that gives us good visibility.
Thank the backlog being.
At the level of his shows the demand that we have but we sold a large percentage of our capacity we've said.
Our next 12 month revenue is a lot of it's on backlog and that gives us good visibility, but we can only we can only book so much of our capacity.
Speaker 2: But we can only, you know, we can only book so much of our capacity at any one time. So...
At any one time so.
Speaker 2: We're we feel good about our backlog, but you know at some point in time it's going to go down to quench lean and that's not going to be anything to surprise.
We feel good about our backlog, but at some point in time, its going to go down sequentially in dollars and thats not going to be anything that surprises us.
Speaker 1: Yep, Brian , I would say that we still think that 75% of the next 12 months revenue was covered by a backlog that that hasn't changed.
Yes, Brian I would say that we are still.
I think that 75% of the next <unk>.
12 months revenue is covered by our backlog that hasnt changed.
Speaker 7: Okay, great. And you mentioned earlier about the business model and the repeat customers, could you possibly quantify what percent of the overall business is considered recurring revenue? Is it just the public market of 63% or is...
Okay, Great and you mentioned earlier about the business model and the repeat customers.
Could you possibly quantify.
What percent of the overall business is considered recurring revenue.
Is it just.
The public market of 63% or is the kind of.
Speaker 7: kind of, you know, the strong relationships you have on the commercial side and what's, you know, the all the economic development. Does that also create another, you know, level of recurring revenue for construction partners?
The strong relationships you have on the commercial side and whats.
The economic development does that also create another level of recurring revenue for construction perhaps.
Speaker 2: Yeah, Brian , absolutely. So the public revenue, virtually all of that's repeat customers. But on the commercial side, a large part of that is repeat customers and longstanding relationships where we do work, whether it be in the panel of Florida for St. Joe's or Pultee Corporation in Raleigh, North Carolina, there's just customers that you build relationships with and provide good service. And those are repeat customers year after year.
Yes, Brian absolutely. So the public revenue virtually all of that is repeat customers, but on the commercial side a large part of that is repeat customers and long standing relationships, where we do work whether it be in the Panhandle of Florida for St Joe's or Pulte Corporation.
In Raleigh, North Carolina, Theres, just customers that you build relationships with and provide good service.
And those are repeat customers year after year.
Speaker 7: And then just lastly, on the CAPEX, the 1990-95 million in 2024, is any of that growth CAPEX earmarked for any specific projects at this point, or is that still kind of being evaluated?
Okay, and then just lastly on the Capex, the $90 $90 million to $95 million.
In 2024.
Is any of that gross capex earmarked for any specific projects at this point or is that still kind of being evaluated.
No it is.
It is earmarked.
We go through that process.
Our budget time, and so yes, there was.
Process of.
A value, adding various projects for future growth and that has now been identified and <unk>.
Put in the books, but we're not prepared to announce anything specifically at this time.
Speaker 2: And Brian , I would just say Greg does a great job of leaving that process, but that...
But Brian I would just say, Greg does a great job of leading that process, but that's that's just really.
Speaker 2: That's just really, just where we highlight organic growth. We want to prioritize organic growth. And so each of our local markets, you know, submits their initiatives for what they see is organic growth. And we fund the best initiatives there. And so that's, you know, one of our growth levers and that's the process that we make it happen.
Just where we highlight organic growth, we want to prioritize organic growth and so each of our local markets.
<unk>.
Submit their initiatives for what they what they see is organic growth.
The best initiatives, there and so that's.
One of our growth levers and that's the process that we make it happen.
Okay, great. Thank you very much.
Thank you Brian.
Speaker 3: As a reminder to start one on your telephone keypad if you would like to ask a question we will just pause for a brief moment to see if there's any final questions.
As a reminder, this star one on your telephone keypad, if he would like to ask a question. We will just pause for a brief moment.
Any final questions.
Speaker 3: There are no further questions at this time. I would like to hand the conference back over to management for closing comments.
There are no further questions at this time I would like to hand, the conference back over to management for closing comments.
Speaker 2: Just like to thank everyone for joining us today. We look forward to having a good fiscal year 2024. Thank you.
Just like to thank everyone for joining us today, we look forward to having a good fiscal year 2024. Thank you.
Speaker 3: Thank you, this will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Okay.
Okay.