Q1 2025 Construction Partners Inc Earnings Call
Information recorded on this call speaks only as of today, which is February seven 2025. 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 statements made in today's discussion that are not historical facts, including statements of expectations or future events or future performance are forward looking statements made pursuant with the safe Harbor provision of the private Securities Litigation Reform Act of 1995, we will be making forward looking.
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 non-GAAP measures, including adjusted net income adjusted EBITDA and adjusted EBITDA margin reconciliations to the nearest GAAP measures can be found at the end of our earnings press release construction partners assumes no obligation to publicly update or revise any forward looking statements and now I would like to turn this call over to.
Speaker Change: Construction partners CEO, Joe Smith Jewel.
Speaker Change: Thank you Rick and good morning, everyone. We appreciate you joining us on the call today.
Speaker Change: With me. This morning is Greg Hoffman, our Chief Financial Officer, and Ned Fleming, our executive Chairman.
Speaker Change: We're pleased to report a strong start to our fiscal year 2025 with record revenue strong year over year growth in margins and another record quarter of backlog built on continued strong demand for our infrastructure services.
Speaker Change: I'd like to begin by welcoming two new companies to our CPI family of companies.
Speaker Change: Overland Corporation joined US on January <unk> as a platform company in our eight state as we entered Oklahoma.
Speaker Change: Headquartered in Ardmore Overland has a strong presence in southern and western Oklahoma with eight hot mix asphalt plants, creating a wide footprint from Durant, all the way west to the Texas Panhandle.
Speaker Change: Overland also participates in the vibrant economic activity occurring in North, Texas as Dallas Fort Worth continues to expand northward along I 35, and <unk> 75 towards the Oklahoma line.
Speaker Change: <unk> President Darren Rykowski leads a strong team of managers that are ready to execute our proven strategy of establishing a platform company in each state with CPI, providing resources and support for future growth opportunities.
Speaker Change: And just this week on Monday, we acquired mobile asphalt company in mobile Alabama.
Speaker Change: They have joined our Alabama platform company wide grass construction as a branded division retaining their brand and strong recognition.
Speaker Change: Built up over many decades.
Speaker Change: We welcome John Whitman, and the talented managers of mobile asphalt.
Speaker Change: As we add their large operation of five hot mix asphalt plants, and 130 employees to substantially strengthen our market share and establish a much wider operational footprint in southwest, Alabama, along the growing Gulf coast.
Speaker Change: As our CPI family of companies grows I want to thank all of our employees for their hard work and dedication to safety this past quarter.
Speaker Change: At <unk>, our first core values family and that reminds us that while we are a family of companies more importantly, we are a company of families.
Speaker Change: We want to make sure that all of our operations our policies and most importantly, our culture are supporting and strengthening the almost 6000 families that count on CPI each day.
Speaker Change: Turning now to first quarter results favorable weather gave us a few more work days than normal due to drought conditions in October and we were able to generate a record revenue quarter and grow year over year revenue by 42%.
Speaker Change: Transitioning this growth to profitability or EBITDA margins grew year over year by almost 200 basis points. Thanks to strong project execution by our construction teams.
Speaker Change: Our vertical integration strategy continues to enhance margins through both construction services and manufacturing asphalt.
Speaker Change: As well as contribution at our liquid asphalt terminals, both on rail in North, Alabama, and all water in Florida and Texas.
Speaker Change: Taking a closer look at market conditions throughout the Sun belt within our geographic footprint local markets are growing and our states remain focused on maintaining and improving the quality of their roads.
Speaker Change: As well as increasing capacity to handle the significant migration to sunbelt states.
Speaker Change: The evidence of this continued strong demand for our infrastructure services is represented by our project backlog that grew sequentially to a record $2 six 6 billion.
Speaker Change: We continue to have strong and steady bidding opportunities in the commercial and private markets with industrial and corporate facilities throughout the southeast continuing to be developed.
Speaker Change: And the public infrastructure markets total lettings for roads and bridges continue to increase year over year, approximately 16% on average across our eight state footprint.
Speaker Change: Last quarter due to our entry into Texas, we focused on the <unk> infrastructure program in the Lone Star State.
Speaker Change: This quarter, we highlight Florida, where the Sunshine States strong population growth led them to pass the moving Florida forward program in 2023.
Provided approximately $4 billion in infrastructure supplemental funding.
Speaker Change: Funding State County, and municipal programs already in place. This is led contract awards from all public funding sources in Florida.
Speaker Change: To grow by over 50% in the first half of the current state fiscal year.
Speaker Change: A J a continues to provide our eight states with healthy infrastructure funding.
Speaker Change: And I would highlight that as of the end of calendar year 2024.
Speaker Change: Only about 40% of the designated J a funds had been spent in the field.
Speaker Change: So we are just getting to the middle innings.
Turning now to our strategic growth model or <unk>.
Speaker Change: Acquisition pipeline continues to remain active with.
Speaker Change: With conversations ongoing both in our current eight states as well as potential new states.
Speaker Change: When we add a platform company and a new state it widens the playing field for acquisitive growth through attractive bolt on opportunities and we are already seeing that.
Speaker Change: Both Texas and Oklahoma.
Speaker Change: We will continue to stay patient and focused on adding the best strategic acquisitions to our family of companies.
Speaker Change: The other half of our strategic growth model is organic growth.
Speaker Change: And our strong 11% organic growth this quarter demonstrates our continued focus on growing the business in our current markets and building shareholder value, whether it be from adding crews and capacity at our asphalt plants or strategic Greenfield expansion.
Speaker Change: In conclusion, we are pleased to have begun our new fiscal year with a strong start.
Speaker Change: During this winter quarter, we're hard at work training, our people and preparing our fleet and manufacturing facilities to deliver on the record backlog ahead of us during the spring and summer work season.
Speaker Change: And in the long term, we remain focused and committed to attracting and retaining the best workforce throughout the sunbelt.
Speaker Change: As CPI, we know that investment in human capital is the key to building a durable competitive advantage.
Speaker Change: And delivering to our shareholders years of strong growth that is profitable and sustainable.
Greg Hoffman: I would now like to turn the call over to Greg.
Greg Hoffman: Thank you Joe and good morning, everyone.
Greg Hoffman: I'll begin with a review of our key performance metrics for the first quarter of fiscal 25 compared to the first quarter a year ago.
Greg Hoffman: I'll, then discuss our revised outlook for fiscal 2025.
Greg Hoffman: Revenue was 561 $6 million, an increase of 41, 6% compared to the same quarter a year ago.
Greg Hoffman: The mix of our total revenue growth for the year was 11, 2% organic revenue.
Greg Hoffman: And 34% from recent acquisitions.
Beginning this quarter, we are presenting acquisition related expenses separately from general and administrative expenses on our income statement.
Greg Hoffman: General and administrative expenses will now be presented in a manner that differentiate spend incurred to support day to day operations and separately those expenses associated with acquisitive activity within the quarter.
Greg Hoffman: The prior year quarter also reflects this presentation.
Greg Hoffman: Reflecting these changes general and administrative expenses as a percentage of total revenue in the first quarter of fiscal 2025 was seven 9%.
Greg Hoffman: Compared to eight 9% in the first quarter last year.
Greg Hoffman: Net loss was $3 $1 million during the quarter.
Greg Hoffman: This is due to nonrecurring expenses related to a transformative acquisition.
Greg Hoffman: That were incurred during the first quarter of fiscal 2025, and therefore are not comparable to the same quarter a year ago.
Greg Hoffman: Adjusted net income we believe more reflect more accurately reflects our first quarter results.
Greg Hoffman: Which exclude any onetime expenses related to the lone star paving acquisition.
Greg Hoffman: Adjusted net income was $13 3 million and diluted earnings per share using adjusted net income would have been 25 in the first quarter of fiscal 2025.
Greg Hoffman: This represents an increase of 35% compared to the first quarter of last year.
Greg Hoffman: Adjusted EBITDA was $68 8 million, an increase of 68% compared to the first quarter of fiscal 2024.
Greg Hoffman: Adjusted EBITDA margin for the first quarter was 12, 3%.
Greg Hoffman: Compared to 10, 3% in the first quarter of last year.
Greg Hoffman: You can find GAAP to non-GAAP reconciliations of net income to adjusted net income adjusted EBITDA and adjusted EBITDA margin financial measures at the end of today's earnings release.
Greg Hoffman: In addition, as Joe mentioned, we were reporting a record project backlog of $2 $66 billion.
Greg Hoffman: At December 31, 2024.
Greg Hoffman: Turning now to the balance sheet, we had $132 $5 million of cash and cash equivalents.
Greg Hoffman: And $393 $4 million available under our credit facility at quarter end net of a reduction for outstanding letters of credit.
Greg Hoffman: As a reminder, in connection with the Lone Star acquisition on November one.
Greg Hoffman: We entered into an agreement for an $850 million term loan B credit facility.
The proceeds of the term loan B, we used to finance the acquisition and related expenses and to pay down the balance of our revolving credit facility.
Greg Hoffman: This availability on our credit facility and cash generation will continue to provide flexibility and capacity to allow for near term acquisitions and high value growth opportunities in 2025.
Greg Hoffman: The company continues to benefit from an interest rate interest rate swap agreement that fixes sofa at 185%, which results in an interest rate on $300 million of term debt of three 6%.
Greg Hoffman: The maturity date of this swap is June 32027.
Greg Hoffman: As of the end of the quarter, our debt to trailing 12 months EBITDA ratio was 288 times.
Greg Hoffman: We remain on pace with our strategy of reducing the leverage ratio to approximately two five times in the next four to five quarters to support sustained profitable growth.
Greg Hoffman: Cash provided by operating activities was $40 $7 million.
Greg Hoffman: Compared to $60 million in the same quarter a year ago.
Greg Hoffman: The decrease year over year is related to a change in the weather that occurred from Q4 to Q1.
Greg Hoffman: This quarter had exceptional weather following the poor weather that finished fiscal 2024.
Greg Hoffman: This relationship increased outflows and reduced cash collections in Q1, we.
Greg Hoffman: We had the inverse of this dynamic in Q1 last year, which resulted in decreased outflows and increased collections during the comparable quarter.
Greg Hoffman: The higher than expected level of billings and revenue in Q1 will be realized as improved cash flow in later quarters, we remain on pace for FY 'twenty five to convert 80% to 85% of EBITDA to cash flow from operations.
Greg Hoffman: Capital expenditures for the first quarter were $26 $8 million.
Greg Hoffman: We continue to expect total capital expenditures for fiscal 2025 to be in the range of $130 million to $140 million.
Greg Hoffman: This includes maintenance capex of approximately 325% of revenue with the remaining amount invested in new growth initiatives.
Greg Hoffman: Turning now to our revised outlook, which reflects our latest expectations for fiscal year 2025 results, including the recent acquisitions of Overland Corporation and mobile asphalt.
Greg Hoffman: The increased ranges are as follows.
Greg Hoffman: Revenue in the range of 266 to $2 $74 billion net.
Greg Hoffman: Net income in the range of 93 to $105 6 million.
Greg Hoffman: Adjusted net income in the range of 109, five to $122 1 million.
Greg Hoffman: Adjusted EBITDA in the range of $375 million to $400 million.
Greg Hoffman: And adjusted EBIT margin in the range of $14, one to 14, 6% and with that we will open the call to questions operator.
Speaker Change: Thank you if you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Formation tone 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 and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, while we poll for questions.
Speaker Change: Our first question is from Andy Whitman with Robert W. Baird. Please proceed.
Andy Whitman: Oh, great. Thanks for taking my questions and good morning, everyone.
Speaker Change: Good morning, Andy.
<unk>.
Andy Whitman: Let's see here, where do I want to start.
Andy Whitman: I guess.
Andy Whitman: Maybe I guess the acquisitions that you've done is probably where I want to start.
Speaker Change: The thing that you can do here jeweler, Greg to help us understand the contribution of these two acquisitions that were closed subsequent to the quarter to guidance.
Speaker Change: I think it would be helpful. As it relates to the revenue contribution maybe for the fiscal year or their backlog contribution that we should expect to see next quarter I think we'd all be helpful. Cash outflow, maybe in total I know you probably don't want to disclose individually, but maybe in total so we can get an order of magnitude. Those are the types of things I think some investors are wondering about this morning.
Greg Hoffman: Yeah sure that sounds good Andy yes for the combined two acquisitions, we're looking at revenue for the remainder of the year.
Speaker Change: And the $120 million to $130 million range.
And so backlog just make sure we understand that none of that none of this backlog for those two acquisitions are in our 12 $31 24 backlog for.
Speaker Change: That backlog is going to be in the.
Speaker Change: 90 to 100 range.
Speaker Change: Okay.
Speaker Change: That's super helpful.
Speaker Change: Any comments on purchase price are you going to wait for the disclosure that we see later maybe.
Speaker Change: Andy I would just this is Joe I would just say we're excited about overland and mobile asphalt. Most of these were just two strategic opportunities that.
Speaker Change: Aren't going to come along that often I would say from a purchase price standpoint, they were the multiples there.
Speaker Change: That had been historically, what we've paid.
Speaker Change: And so they're very much our typical acquisition multiples and.
Speaker Change: One of them was a platform company and one of them was a bolt on and so very much in keeping with our acquisition strategy.
Okay, and then just maybe strategically here Joel you've done I mean these are.
Speaker Change: Pretty big bolt on five five plants, new platform, Oklahoma New platform recently taxes do you just need I'm, just kind of curious as how youre thinking about it does.
Speaker Change: You've done some larger M&A here in the last few months tools, you need to kind of digest and slow down.
Speaker Change: Maybe get the balance sheet, a little healthier or or is it kind of full steam ahead and figure it out when you don't want to pass it up an opportunity to.
Speaker Change: To find a good company I'm, just kind of curious in terms of the operational impact as well as the financial impact in terms of just kind of sorting this out and making sure. The company is on steady footing to keep moving ahead.
Speaker Change: Andy I think it's a little bit of all that I mean, we clearly saw these two strategic opportunities as ones that we couldn't pass up but we're also committed to having a strong balance sheet and as Greg said Delevering over the next four to five quarters to get in our range that we like to be and so we're going to continue to have conversations.
Speaker Change: And develop our acquisition pipeline, but we're also committed to <unk>.
Speaker Change: Integrating the companies well and we never want to go faster than we can organizationally integrate them and we want to be healthy on the balance sheet.
Speaker Change: Fair enough and just maybe for a final point on that one Greg can you talk about.
Speaker Change: Where you see pro forma leverage.
Speaker Change: Today after after the two subsequent to quarter end deals just so that investors have a sense of where youre standing.
Speaker Change: Yes, I think it will tick up slightly maybe closer to three but.
Speaker Change: Think again still we're looking to bring it down over the next four or five quarters.
Speaker Change: Got it.
Speaker Change: Alright, I'll leave it there you have the floor and thanks for your time guys.
Speaker Change: Thank you Andy.
Speaker Change: Our next question is from Kathryn Thompson with Thompson Research Group. Please proceed.
Kathryn Thompson: Hi, Thank you very much for taking my questions today.
Just plain string a little bit more on.
Kathryn Thompson: The newly acquired companies.
Kathryn Thompson: Lonestar certainly change the gross margin.
Kathryn Thompson: And profound take you long, but when looked combined.
Kathryn Thompson: For the three acquisitions, two new links and Lone Star how should we think about gross margins.
Kathryn Thompson: On SG&A once integrated as we look into the full year.
Kathryn Thompson: Poor.
Pleasure.
Kathryn Thompson: Really on a percentage basis Kim said.
Kathryn Thompson: How we should think about modeling.
Speaker Change: Yes, Catherine I'll give.
Speaker Change: Just a big picture.
Speaker Change: Margins in the acquisitions and then let Greg talk about maybe the SG&A and the scale.
Speaker Change: Obviously as we talked about last fall Lone Star was a transformative acquisition and puts it moved us almost two years ahead on our roadmap 2027 and <unk>.
It started just as you would expect they're doing a great job the management team in Austin.
Speaker Change: I was just doing wonderfully.
Speaker Change: These two new acquisitions.
Speaker Change: Mobile asphalt and overland.
Have margins that are typical of what you would expect.
Speaker Change: And they're baked into our new guidance and so but the one thing that is true is what we our strategy is to for every acquisition to give them the tools to bid smarter to bid more patiently.
Speaker Change: All of them to bid more work and so not only are they going to grow organically over time that margins are going to.
Speaker Change: Trend upwards, and so we fully envision that for both overland and mobile asphalt Greg Yes. So I would just follow up to that with that.
Speaker Change: Hey.
Speaker Change: They are built into the new guidance so.
Speaker Change: Think about what Andy just asked me to go that 120 $130 million in revenue and then backing into the EBITDA I think that'll give you some pretty good information as to what we think those companies are going to do in the short and long term.
Speaker Change: Okay great.
Speaker Change: Could you talk a little bit more about just your cost inflation outlook and price cost spread.
Speaker Change: As you look ahead to this year it will be a tailwind headwind.
Speaker Change: You had some commentary yesterday from earnings and seeing that <unk> in.
Speaker Change: Particular could be a potential tailwind.
Speaker Change: Yeah.
Kathryn Thompson: Kathryn right now, we're expecting a pretty typical year from construction inflation standpoint.
Speaker Change: We've said that we think.
Speaker Change: Inflation could be anywhere from 4% to 5% if you look across our total cost structure.
We are everyday at the estimating table, we're putting those in our bids and passing those through.
Speaker Change: Clearly from a few years ago, we learned to be nimble and so if we see inflation.
Speaker Change: Spike up we're going to we're going to react quickly, but right now we're seeing a pretty stable environment.
Speaker Change: And our cost structure for materials aggregates and concrete pipe labor.
Speaker Change: Energy costs are pretty pretty steady natural gas.
Speaker Change: Spiked up this quarter, a little more than diesel.
Speaker Change: Both through hedging into adjusting our input cost we.
Speaker Change: We've just learned just pass those increased costs through.
Speaker Change: Okay great.
Speaker Change: And have you seen.
Speaker Change: Just some quick color on IAA.
Speaker Change: Awesome.
Speaker Change: Color.
Speaker Change: Prepared commentary talking about.
Speaker Change: Florida taken their funding.
Speaker Change: Any other update.
Speaker Change: Updates or changes you want to say for me state.
Speaker Change: Funding for.
Speaker Change: For the states that are important to you and along with that.
Speaker Change: Have you seen any meaningful change in terms of how we should think about funding going forward. Thank you.
Speaker Change: Well I would say Catherine.
Speaker Change: All of our states have healthy funding mechanisms, clearly, Texas, which we talked about last quarter is just in a whole different stratosphere from an infrastructure funding standpoint.
Speaker Change: Florida is right behind it in terms of that and we wanted to highlight that this quarter, but when you look at Alabama, Tennessee, North Carolina, Georgia, South Carolina. They all have really good funding programs are all up year over year on contract awards and so.
Speaker Change: We feel we feel blessed to be in states. It takes infrastructure seriously and if passed supplemental funding costs are growing.
Speaker Change: As far as <unk> J a.
Speaker Change: At the heart of it is really just the five year surface transportation Bill it's not some unique bill.
Speaker Change: Bill.
Speaker Change: The federal government passed.
Speaker Change: We think that.
Speaker Change: We're in the middle innings is still a lot of spur.
Speaker Change: Spending that's got to come through on that Bill but.
Speaker Change: I can tell you I was just in Washington last week.
Speaker Change: And they're already starting to talk about the reauthorization is coming up here in the next year and a half and so we fully expect that they will have another five year reauthorization.
Speaker Change: And then it will go up like it always has.
Speaker Change: So I feel like that the roads need repair and I think our state and federal governments get that.
Speaker Change: And I think the new administration, which I'd like to just ask Ned to speak a little bit about the new administration, but we're excited about just some of the things we're hearing out of Washington net Catherine.
Speaker Change: Katherine does that answer your question.
Speaker Change: Yes.
Speaker Change: From an administration standpoint, after 25 years I think if there's anything we've learned regardless of political affiliation the leaders of both parties understand that the roads need work. They are graded very poorly throughout the country.
Speaker Change: The demand is high voters do not want to sit and congestion anymore.
Speaker Change: And so not just the federal government to states and municipalities to cities counties continue to find.
Speaker Change: More and more capital to be able to put into the roads and for US. That's a wonderful thing because it gives us an opportunity to continue to acquire the businesses to move closer to a more vertically integrated to improve efficiencies and increase margins. It would say the thing on the acquisitions in mobile this is our second act.
Speaker Change: Acquisition within a year.
Speaker Change: And that's an important thing to note because it allows us to have a whole lot more great people and assets in a territory thats one of the fastest growing territories in Alabama.
Speaker Change: But as far as this administration or any administration and our job is to be the best bidder and to provide efficient effective roadwork.
Speaker Change: Okay. Thank you so much.
Speaker Change: Thank you Catherine.
Our next question is from Tyler Brown with Raymond James. Please proceed.
Tyler Brown: Hey, good morning, guys.
Speaker Change: Good morning.
Speaker Change: Hey.
Speaker Change: Hey, Greg I wanted to come up the guidance, maybe a little bit different right.
Speaker Change: Right.
Speaker Change: Revenue from M&A that we know.
Speaker Change: What is that incremental dollar contribution or could you give it as a percentage growth.
Speaker Change: Just for fiscal 'twenty, yes, yes.
Speaker Change: So total total growth from acquisitions for the year is going to be somewhere in the 730 747 50 range.
Speaker Change: So that puts.
Speaker Change: Acquisition acquisitive revenue for the remainder of the year somewhere <unk> 10 to <unk> 30 somewhere around in there.
Speaker Change: Okay and then.
Speaker Change: I know, it's early but I would assume some of that rolls into 'twenty six.
Speaker Change: So the first half of 2006 also has a little bit of a benefit.
Speaker Change: It certainly will yes.
Speaker Change: Okay. Okay.
Speaker Change: Sure.
Speaker Change: Call it maybe some concerns out there.
Your move in Texas, and Oklahoma, where function will be running out of let's call. It stage M&A.
Speaker Change: And the nice thing on your in your heritage Frothy for market.
Speaker Change: I think the mobile acquisition since maybe counter that but can you just talk about that M&A pipeline, maybe in the more heritage market.
Tyler Brown: Yes, Tyler good question.
Tyler Brown: And I would just say last year, we grew 17% about half of it was acquisitive in.
Tyler Brown: Half of it was organic clearly this year with lone star is going to be a much larger but we're going to continue in the long term to be a growth company.
Tyler Brown: Youre right.
Tyler Brown: There is a lot of.
Tyler Brown: White space in the states we were in the six states, we were in before Texas and Oklahoma.
Tyler Brown: And.
Tyler Brown: As mobile showed last year, we did.
Tyler Brown: Eight acquisitions, so there's a lot of there's a lot of runway and a lot of room in the states. We're in so net.
Speaker Change: Hi, Tyler we just I just had this conversation with Charles Owens and we were speaking at the last board meeting and commenting that after 25 years of doing this I would say there was more acquisition opportunities today.
Tyler Brown: And we've ever seen.
Tyler Brown: The fragmentation continues to be large.
Tyler Brown: The patriarchs and Matriarchs and families are getting older and they want to sell so interestingly enough. Even after all this time. This market is still a large highly fragmented market and we're seeing more opportunity not just in Texas, and Oklahoma, but in Alabama and Georgia.
Tyler Brown: South Carolina, North Carolina, and Florida, So we would anticipate being pretty picky, we're seeing so many acquisitions Tyler one more thing just to add to that.
Tyler Brown: No.
Tyler Brown: When we add a platform acquisition, it's more it's more a function of finding the right management team to be the face of our business in that state and those are those the timing of those is really when we can meet the right. The right group that's ready to <unk>.
Tyler Brown: Joining our family of companies and so.
Tyler Brown: With.
Tyler Brown: Lone Star and overland, we feel blessed to have found those management teams, but that's really the key with a platform acquisition in those that's the key the timing of that.
Tyler Brown: Alright and background overland.
Tyler Brown: The true platform, so I get it the south Oklahoma into North Dallas is growing but we.
Tyler Brown: We should see springboard ultimately maybe into okay see Tulsa eventually that'd be the idea.
Speaker Change: Yes, I think we've got a proven track record once we get a platform.
Tyler Brown: And an entrepreneurial management team.
Speaker Change: Theyre going to with CPI behind them, they're going to start looking around for <unk>.
Speaker Change: Greenfield opportunities organic growth, but also bolt on acquisitions.
Speaker Change: We've got a 20 year proven track record of that model and so I don't see anything different in Texas, and Oklahoma impulses growth City is growing in a big way as as many parts of Oklahoma.
Speaker Change: And my last one here and it's actually back on liquid asphalt.
Speaker Change: Thank you guys are up to three liquid asphalt terminal Lone star So number one.
Speaker Change: How much of your of your asphalt are you foreseeing through those terminal.
Speaker Change: Do you think.
Speaker Change: With the railroads clear desire.
Speaker Change: Clearly want to grow you got maybe an administration, it's gonna be a little bit easier on some permitting I mean could we see some additional investment.
Speaker Change: On that side over the next couple of years.
Tyler Brown: Tyler I do think that liquid asphalt terminals.
Tyler Brown: A key part of our vertical integration strategy.
Tyler Brown: In our legacy States before we added the terminal in Houston.
Tyler Brown: Say, we were probably.
Tyler Brown: Third of our liquid asphalt was internally sourced from our terminals in Florida and North Alabama.
Tyler Brown: Lone Star.
Speaker Change: Supplies most of their liquid asphalt from their terminals. So it's a much higher percentage.
Tyler Brown:
Tyler Brown: Clearly as we build density in a certain area. It makes sense to look at vertically integrating into the liquid asphalt space, we're already buying the liquid asphalt, which is just gives us a chance to capture more of the margin along the value chain.
Tyler Brown: Okay perfect. Thank you guys.
Speaker Change: Our next question is from Adam Thalheimer with Thompson Davis and company. Please proceed.
Adam Thalheimer: Hey, good morning, guys. Congrats on the strong start to the year.
Speaker Change: Thank you Adam.
Speaker Change: Joe The 200 basis point increase in adjusted EBITDA margin year over year in Q1.
Speaker Change: Was that entirely organic I mean, you talked about good project execution in your script.
Speaker Change: Or was that pulled up by Lone star.
Adam Thalheimer: Adam I think it's both.
Speaker Change: Lonestar clearly.
Speaker Change: As we disclosed last fall has really good margins and so adding them into the mix certainly helps but.
Speaker Change: But we also said we expected our business, even without lone star to grow the 50 to 60 basis points that annually.
Speaker Change: And so our legacy businesses.
Speaker Change: Grew their margins as well and then finally when you have good weather, you're going to get more fixed cost recovery, we ran hard this quarter.
Speaker Change: So that certainly helps when you can recover your fleet and your manufacturing facilities at the level we did.
Speaker Change: And then as you look at.
Speaker Change: D O Ts.
Speaker Change: Budgets in your states do you have any opinion on.
Speaker Change: How much the spending might grow this year.
Speaker Change: I think <unk>.
Speaker Change: Adam you know the funding and it's always important to understand whether you're talking about funding or lettings, because lettings can be a little lumpy, where its funding is a little more consistent but when we look at the state funding mechanism combined with a J a.
Speaker Change: Fully expect our funding to grow.
Speaker Change: Mid to high single digits, and then when you look at the Lettings as I've said.
Speaker Change: They're already on average if you look back on calendar year 'twenty four it was up about 16%.
Speaker Change: And then finally, you have to look at each state and say, what's the total funding picture and that's why in Florida, We wanted to make sure to highlight that to get a full picture of Florida, you have to look not only at the Florida dot, but the counties and the municipalities.
Speaker Change: And we look at that.
Speaker Change: It's really up year over year so.
Speaker Change: I think that we're going to expect overall for the funding to continue to grow.
Speaker Change: Like with <unk> at the mid to high single digits.
Speaker Change: That's good and lastly.
Speaker Change: Curious if you picked up any assets from the three most recent deals that maybe you could monetize I know.
Speaker Change: I don't know if they have any excess land or aggregates quarry I know youre not as focused there.
Speaker Change: Just to help pay down debt.
Speaker Change: <unk>.
Speaker Change: Reload for future deals.
Speaker Change: Yes.
Always looking.
Speaker Change: To monetize wherever we can whether it's excess equipment excess land certainly we're wanting to make sure. We utilize the cash for the assets that are generating EBITDA right. So yeah, we would definitely look for that.
Speaker Change: Okay. Thanks, guys.
Adam Thalheimer: It's Adam.
Speaker Change: Our next question is from Michael Feniger with Bank of America. Please proceed.
Michael Feniger: Yes, hi, everyone. Thanks for squeezing me in and taking my questions appreciate it.
Michael Feniger: I just wanted to switch pleasure yeah. Thanks, guys. Just I just wanted to be clear in Doubleclick on something there's been some headlines guys about some pauses on funding to IRI and even IH IHA projects now it sounds like that's more tied to maybe clean clean energy.
Michael Feniger: I just wanted to hear from you guys like are you or your customers the dot's or the hearing anything about issues accessing funding delays on payments.
Michael Feniger: If youre hearing of that kind of filtering through to your core work yet.
Mike: Mike we have not heard a thing about any pause on funding for projects or for work the speed and let.
Michael Feniger: What we have heard which I think is good for CPI.
Michael Feniger: As the New administration is looking for ways to.
Michael Feniger: Put more of the funds that they can toward hard infrastructure and that's what we do so we feel like that.
Michael Feniger: The new Secretary of Transportation Secretary Duffy has been very clear they want to try to move funds to the highest and best use.
Michael Feniger: President Trump's always prioritized hard infrastructure, so we feel like that could.
Michael Feniger: Bode well for us.
Speaker Change: That's helpful and I just wanted to ask you also I mean, you guys have a record backlog.
Michael Feniger: How is this kind of informing.
Michael Feniger: You guys in the bidding environment right now I mean, I think you talked about look there's still some inflation out there in terms of materials aggregates, a little bit of energy.
Michael Feniger: It feels like liquid asphalt diesels.
Michael Feniger: <unk> been a good guy, but I'm just curious how that's kind of informing you could we expect actually the backlog maybe to plateau at some point because you are being more aggressive and you guys are trying to digest I mean, just kind of thinking about that record backlog with inflation, how does kind of informing what youre seeing in the market are you seeing competitors out there how are they.
Michael Feniger: How is that informing their bidding environment, if everyone's acting accordingly, thanks guys.
Michael Feniger: Yes.
Michael Feniger: Good question.
Michael Feniger: As we've said the key to having a good backlog is to have a good backlog and to be able to bid patiently and that's what we've done we've done it for so.
Michael Feniger: Quite a few quarters now.
Michael Feniger: The backlog has continued to grow sequentially I think Greg this is the 17th quarter.
Michael Feniger: Which is not typical and we keep saying that.
Michael Feniger: It would not surprise us for the backlog. This busy work season, where we're burning off a lot of revenue to go down sequentially and that wouldn't bother us at all because thats been the historical norm before these last few years.
Michael Feniger: Our competitors are busy.
Michael Feniger: We haven't really seen any change at all in the competitive landscape.
Michael Feniger: But the fact that we're able to win work at good margins means that they're busy and bidding smart as well so.
Michael Feniger: We've still got plenty of bidding opportunities our record backlog does allow us to bid patiently and to bid it.
Michael Feniger: Good margins.
Michael Feniger: One thing to that too I think 12 to $31 24, as maybe instructive as well and that we did have a significantly better revenue quarter than we expected because of the weather.
Michael Feniger: But.
Michael Feniger: Along with that we were able to again grow backlog sequentially. So.
Michael Feniger: I think that tells you a little bit about demand.
Michael Feniger: Okay.
Speaker Change: Our next question is from Jim Ramirez with D. A Davidson. Please proceed.
Jim Ramirez: Good morning, and thank you for the time.
Speaker Change: Sure.
Speaker Change: In the past in fiscal 'twenty or are you guys saw a pretty good commercial activity.
Speaker Change: I just wanted to know based on your backlog.
Speaker Change: What is the level of commercial and <unk>.
Speaker Change: In private activity versus fiscal 'twenty four what do you guys expect there and I, just and I guess second part for a little bit of clarification. This backlog how much of that is organic.
Speaker Change: In the private sector versus.
Some contributions from the start.
Speaker Change: Thank you.
Speaker Change: Yes, I'll give you just a high level picture of the commercial markets and then let Greg sort of give us what he expects in terms of the breakdown but.
But we are continuing to see very healthy markets throughout the sunbelt.
Speaker Change: In the commercial and private markets.
Speaker Change: Certainly feel like.
Speaker Change: In the last few months there has been.
Speaker Change: An increase in activity.
Speaker Change: In terms of.
Speaker Change: Projects getting started.
Speaker Change: Gave flame.
Flavor of some of the things we bid on just in the last couple of months and won.
Speaker Change: North Carolina Amgen.
Speaker Change: As building a new pharmaceutical facility in Holly Springs.
Speaker Change: Florida, we're working on a new Amazon facility in Palm City.
Speaker Change: And Texas and we're working on our expansion at the Tesla manufacturing facility.
Speaker Change: And so those are just some examples of the variety of projects.
Speaker Change: CPI works on and bids in the commercial market and the amount of commercial activity from a corporate and manufacturing standpoint that we're seeing throughout the sunbelt, Greg you want to review sort of how you see the numbers, yes. So the numbers in terms of how the first quarter of 'twenty five.
Speaker Change: As it relates to the breakdown between public and private was very similar to the way. It started at 22024, so 58% public 42% private what happened last year was that move too.
Speaker Change: By the end of the year, 63% public.
Speaker Change: 37% private so.
Speaker Change: We see that same trend happening in 2025, 63% public.
Speaker Change: It's just still a very strong environment and our.
Speaker Change: Backlog is supporting both of those numbers and we will continue to support that.
Speaker Change: Thank you I appreciate the time.
Speaker Change: Sure.
Speaker Change: We have reached the end of our question and answer session I would like to turn the conference back over to management for closing remarks.
Speaker Change: We'd like to thank everyone for joining us today, and we look forward to speaking again next quarter.
Speaker Change: Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
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