struction Partners(ROAD) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q2 2019 was $164.3 million, an increase of 38.2% compared to the same quarter last year [8] - Gross profit was $19.8 million, up 44% year-over-year [9] - Adjusted EBITDA increased to $13.9 million, a rise of 74.2% compared to the previous year [9] - Net income was $4.2 million, down from the same period last year, but adjusted for a nonrecurring settlement, it was up $3.7 million [25] - Earnings per share decreased to $0.08 from $0.27, impacted by the legal settlement last year [26] - Adjusted EBITDA margin improved to 8.5% from 6.7% year-over-year [26] Business Line Data and Key Metrics Changes - The company reported strong project opportunities across all markets, with no specific geographic market standing out [43] - The backlog grew to $584.8 million, with approximately $380 million expected to be completed during the current fiscal year [9][32] - The company continues to focus on maintenance-type projects, which are recurring and supported by increased state funding [47] Market Data and Key Metrics Changes - Alabama's recent gas tax increase is expected to generate approximately $320 million in additional annual funding for infrastructure projects [13] - The company operates in fast-growing southeastern states, benefiting from ongoing road repair projects and increased public funding [19] Company Strategy and Development Direction - The company is pursuing growth through strategic acquisitions and greenfield expansions [12] - Recent acquisitions include a liquid asphalt terminal and an asphalt production company, enhancing vertical integration and geographic presence [11] - The company aims to maximize efficiencies through scale and flexibility in operations [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the favorable project demand and funding environment, with a strong growth outlook for 2019 and beyond [22] - The company anticipates achieving margin improvements through the use of the new asphalt terminal [27] - The effective tax rate for 2019 is expected to be approximately 25%, compared to 17.2% in the previous fiscal year [38] Other Important Information - The company has a strong balance sheet with $61.9 million in cash and a debt-to-EBITDA ratio of 0.88 [33] - Capital expenditures for fiscal 2019 are expected to be in the range of $38 million to $42 million [35] Q&A Session Summary Question: Where were you seeing the upside in the quarter? - Management noted that all markets had favorable working conditions, contributing to performance [43] Question: What are you seeing on the private side of the business? - The company has a strong backlog in commercial private work, having intentionally lowered residential work [44] Question: Can you break down the public business? - The core business remains maintenance-type projects, with no significant changes in large project participation [47] Question: What is the outlook for labor and freight costs? - Labor costs are stable, and while trucking is tight, the company does not foresee significant issues [50] Question: How confident are you in capturing the remaining work needed for the year? - Management expressed confidence, noting that the remaining backlog is comparable to previous years [54] Question: What are the opportunities for future growth? - The company is seeing activity in potential acquisitions and greenfield expansions, remaining selective in its approach [56] Question: What was the rationale behind the conversion of Class B shares to Class A shares? - The conversion was aimed at qualifying for key indices, which is considered beneficial for the company [61] Question: What is the current state of the balance sheet and liquidity for potential transactions? - The company has substantial liquidity and could incur additional debt while maintaining a strong balance sheet [75] Question: Are there any state legislative initiatives being tracked? - All states the company operates in have passed funding increases in recent years, with built-in escalators for future growth [77]