struction Partners(ROAD) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Construction Partners achieved record quarterly revenue of $285 million, a 49% increase compared to the same quarter last year [12] - Adjusted EBITDA in the first quarter was $26.4 million, up 12% compared to the same quarter last year [13][29] - Net income was $5.5 million for the first quarter, compared to net income of $7.9 million for the same quarter last year [28] Business Line Data and Key Metrics Changes - Approximately 30% of the revenue increase was from organic growth, while 19% was from acquisitions [12] - Gross profit was $33 million, an increase of 7.7% compared to the same quarter last year [28] Market Data and Key Metrics Changes - The company reported a record project backlog of $1.09 billion, compared to $966.2 million at September 30, 2021 [31] - The backlog margins are continuing to grow, which is expected to help future profit margins as the backlog is converted [15] Company Strategy and Development Direction - The company is focused on growing services and market share in current markets, with a strategy of both organic and acquisitive growth [12][25] - Construction Partners plans to capitalize on future infrastructure demand created by the $1.2 trillion bipartisan infrastructure bill passed in November [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from inflation, supply chain disruptions, and labor market issues but expressed confidence in managing through these challenges [18][20] - The leadership team is committed to investing in the right people, processes, and technology to support disciplined growth [37][38] Other Important Information - Capital expenditures for the first quarter were $15.1 million, with expectations for the fiscal year to be in the range of $60 million to $65 million [31] - The company is monitoring the allocation of federal and state funds from the infrastructure bill, anticipating meaningful project demand beginning in late 2022 [17] Q&A Session Summary Question: Year-on-year decline in gross margin - Management noted that the decline was due to supply disruptions, labor market issues, and rising energy prices [44] Question: Labor environment risks to full-year guidance - Management acknowledged the labor market as a challenge but indicated that they have factored this uncertainty into their outlook [55] Question: Drivers of strong organic growth - Organic growth was driven by vertical integration of services, expansion into more markets, and strong demand from both private and public sectors [58][60] Question: Anticipated Q2 cash flow - Management expects a much more positive cash flow in Q2 due to revenue growth and collection of receivables [66] Question: Comfort level on leverage and acquisitions - Management is mindful of using leverage smartly and sees it as a tool for growth, with bank covenants allowing up to 3x cash flow [75] Question: North Carolina DOT business recovery - Management reported a healthy recovery in North Carolina, benefiting from a strong program of lettings and recent acquisitions [95] Question: Trajectory of margins - Management expects margins to improve in the second half of the year as higher margin jobs are completed [100]