Greetings, and welcome to Construction Partners' Fourth Quarter and Fiscal Year 2018 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation, [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host for today's call, Mr. Rick Black, Investor Relations. Thank you. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Construction Partners' Conference Call to review fourth quarter and fiscal year 2018 results. This call is also being webcast and can be accessed through the audio link on the Investor Presentation page of the IR section of constructionpartners.net. Information recorded on this call speaks only as of today, which is December 11, 2018, so please be advised that any time-sensitive information may no longer be accurate as of the date of any replay. 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 financial performance, those are considered forward-looking statements made pursuant to the Safe Harbor provision of the Private Securities Litigation Act of 1995. We will be making forward-looking statements as part of today's call and those that are nature are uncertain and outside of the company's control. Actual results may differ materially. Please refer to the earnings press release that we issued yesterday for our disclosure on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Management will also refer to non-GAAP measures, including adjusted EBITDA. Reconciliations to the nearest GAAP measures can be found at the end of our Q4 press release. Construction Partners assumes no obligation to publicly update or revise any forward-looking statements. And now, I would like to turn the call over to Construction Partners President and CEO, Mr. Charles Owens. Charles?

Thank you, Rick. And good morning, everyone. I'd like to thank you for joining us today on our conference call. I'm on the line here today with several members of our senior management team, including Ned Fleming, our Executive Chairman of the Board; and Alan Palmer, our Chief Financial Officer. In my opening remarks today, I will provide comments about our fiscal 2018 and again, review our strategy. I will then turn the call over to Ned for a few additional comments. Finally, Alan will review our fourth quarter and fiscal year financial results and discuss our outlook for 2019. We are extremely pleased with our first year performance, as a publicly traded company, meeting our outlook expectations for the year and achieving record annual revenue, net income and adjusted EBITDA results. In our fiscal year, we added $51 million of revenue attributable to acquisitions and greenfield expansions that, combined with organic growth, led to 20% revenue growth on a consolidated basis. Demand for our services remains very high in our 30 distinct market, supported by increased funding for roadways, repairs, maintenance projects, where we remain well positioned for continued growth in the 5 Southeastern states in which we operate. Our team achieved record annual revenue net income and adjusted EBITDA results despite weather-related delays in the fourth quarter that prevented the completion of certain projects. The revenue from those projects is not lost, it is pushed forward to be completed at a later time. I'd like to again, review our strategy and point out some specifics about how our strategy and operating model are different, especially compared to other publicly traded companies in the several infrastructures phase. A key point to realize about CPI is that our work and the bulk of our revenue comes from public projects that…

Thanks, Charles, and good morning to everybody. I'd like to start by congratulating Charles, Alan and the rest of the team for delivering excellent 2018 fiscal year results. As a founder, over the last 18 years I have witnessed this differentiated business model perform well in different economic conditions. Due to the nature of our work, which is primarily publicly funded maintenance-related projects with short durations, the company is able to better manage its input cost like labor and liquid asphalt. This factor differentiates us from other public and non-public companies in our industry, coupled with strong cost controls and discipline management, the team has driven strong growth and profitability year in, year out. We are pleased with our fiscal year 2018 results and with our outlook for 2019. We have the team to continue the execution toward our long-term targets of annual revenue growth in single to low double-digits, while maintaining double-digit adjusted EBITDA margins. In addition, we expect to complete strategic acquisitions and greenfields, which fit our strategy and contribute to profitable growth. CPI participates in a highly fragmented industry, and the 2019 pipeline for potential acquisitions is robust. Based on the proven strategy, the long-term profitable track record and the market opportunity, we expect the company to continue to grow and be profitable as we build this company in the future. The company has a very strong competitive position and is well positioned to continue the growth that we've started in 2018. And with that, I'd like to turn the call over to our CFO, Alan Palmer.

Thank you, Ned, and good morning, everyone. Before I get to the fiscal 2018 financials, I want to quickly highlight our performance in the fourth quarter. From a financial standpoint, the fourth quarter performance was very solid despite lower-than-expected revenues due to severe weather in our markets. While we did not sustain significant damages, we did incur more rain days than we had anticipated. And as Charles mentioned, that revenue does not go away, and the margins on those projects has not changed. That work has simply pushed forward into future periods. Compared to the fourth quarter of fiscal 2017, our 2018 revenue was $215.7 million, which is up 15%. Our gross profit was $33.5 million, down 1%. Our net income was $15.2 million, up 23%. Our earnings per share was $0.29, the same as the prior year, and our adjusted EBITDA was $28.3 million, up 7%. Taking a closer look at the decline in gross profit percentage in the quarter of 2.5% compared to the same quarter last year, this was primarily due to a lower gross profit percentage on contracts that were executed during the current quarter. As I've mentioned in previous calls, there is a natural ebb and flow of contract profit margins during the quarters and in the fourth quarter of this year, we did not achieve as greater gain in margin on contracts executed as compared to the prior year. I'd also like to mention that in the fourth quarter, asphalt cement pricing stabilized. In the fourth quarter, our gross profit was not negatively impacted as it had been in our prior three quarters. Currently, we do not anticipate significant changes in asphalt cement prices or for them to have a significant impact on our 2019 results. Our third and fourth fiscal quarters, which were…

Thank you. [Operator Instructions] Our first question comes from Joshua Wolfe [ph] with Raymond James. Please proceed with your question.

Good morning, Charles, Alan and Ned. Thanks for taking my questions.

Good morning.

In the September quarter, could you talk about what the win rate was? What percentage of your jobs were still profitable with the weather?

What percentage were profitable?

Yes.

Even with the weather? We didn't have any negative impact on our margins because of the weather. It just primarily delayed when we would be able to complete those jobs. So we saw gain on a number of jobs and very little faith on any jobs during - performed during that periods. So that was not - weather was not really an impact in the margins that we achieved.

Okay. And then, regarding backlog. Under normal seasonality, where would you look for the December ending backlog to be versus September? And where is it checking out this year?

Typically, we would see the backlog between June and September go down probably 10% to 15%, and we saw very little reduction of the backlog this year. And again, that's due to the work that we were not able to complete, and we estimated that to be approximately $15 million to $20 million, which would have - if we'd able to complete that, would have put us right at the initial guidance we gave for the year.

And regarding December backlog versus September, what's the normal seasonality? And how is that trending?

Typically, we begin to see our backlog grow in that December quarter through the March quarter. And then we normally would see it decline from March to June and from June to September because those are our busier months and a lot of the resurfacing work that we did was led in that December, January, February time period. So that's the normal ebb and flow of it.

Okay. I will get back in queue.

Thank you.

Our next question comes from Noah Merkousko with Stephens. Please proceed with your question.

Hi, yes. So you mentioned that the cadence of revenue is going to be 30% for the first half of the year. Could you talk about the cadence for EBITDA? Is that going to be similar?

Yes. Typically, the first 6 months is about 40% of our revenue and 60% in the second half of the year. And - but the EBITDA is generally going to be our substantially lower as a percentage in the first half because of the fixed cost that we have on equipment and our plans that we incur that we don't recover all of that fixed cost in the volume that we do. So typically, our first quarter margins are going to be - EBITDA margins are going to be 4%, 5% lower than what we would see later in the year when we have that over recovery of those fixed costs and also just the volume that we do with some more efficiencies in the second half of the year.

Got you. And just one follow-up. Can you guys quantify the amount of revenue that got delayed from weather? And kind of when you expect that to come back?

Yes. Based on the initial guidance that we gave back in June, we estimated our revenue would be $690 million to $710 million, and we ended up at $680 million. We feel like there was $15 million to $20 million of revenue that we were not able to complete contract work that will be completed throughout 2019. Our slower time being October through March, we won't make up a lot of that during that period, more of that will made up in the second half of the year. And that's what's reflected in our forecast for next year is the higher revenue - the increase in revenue, part of that is due to the contract work that we did not complete in 2018.

All right. Thanks. I’ll jump back in queue.

Thank you.

[Operator Instructions] Our next question comes from Brent Thielman with D.A. Davidson. Please proceed with your question.

Thanks. Good morning. Hey guys, the CapEx outlook, the $38 million to $42 million for F '19. Can you just talk about what might be embedded in that outside of kind of your normal recurring CapEx?

Yeah, we've got some equipment that we're adding, so we did a greenfield in Florida in 2000 - at the very end of 2017, they got cranked up in 2018. We also did a greenfield in North Carolina during that year, and so we're adding equipment. We did the plants during 2018 and now got them up and running. And now we're seeing that the amount of work that we have to do. We're adding equipment so we put the crews in place in those locations. So we got about 1% of that total CapEx or it equals about 1% of revenue is due to the growth opportunities that we have and we've also were in process of converting some of equipment that we have typically leased in the past. We're converting some of that into owned equipment. We're seeing that the demand is going to continue, so both of those are included in the CapEx number.

Okay, great. Thanks, Alan. And then, I guess, I suspect the private side of the business might be getting a little more scrutiny ahead. But can you just talk about what you're seeing there in your respective geographies? Are there any evident pockets of slowdown in either residential or sort of commercial site developments that you guys do?

Brent, this is Charles. We're not seeing much of a slowdown right now. They're still pretty robust. I know that I'm hearing a lot of homebuilder that's basically that could be slowing down, but that's something that we do. We do develop a lot but it's not in all of our markets. We have several markets that we do very little bit of dealing with residential.

Okay. Thanks, Charles.

We have no further questions. At this time, I’d like to turn the floor back over to Charles Owens for closing comment. Excuse me, we have a couple of people who jumped back into queue.

Okay.

Okay. Our first question comes from Brent Thielman with D.A. Davidson. Please proceed with your question.

Thanks, guys. It's Brent again. Just a follow-up, I guess. There's been a lot of - I guess what I'd call really large projects awarded, call it North Carolina. Several other southeastern markets here in the last several months in particular. I know you're not the prime necessarily on this, but do these give you visibility as well in terms of opportunities? And do you embed some of that in the outlook as you look out at '19?

Yes. As far as the outlook or the amounts, we've not really baked in getting any extraordinarily large projects. I'll let Charles talk about the possibilities that we have there. But as we've said before, typically, if there is a project that we have the people and the equipment available to do, this in our market area, we're going to pursue that. And sometimes that would be as a prime or a joint venture like the one we had this year that we're still working on. It also might be as a subcontractor to do the asphalt paving or some other aspect of that large job.

Alan's correct on that. And especially, in the Carolinas, there have been some large projects, and we are looking at that work that's coming up and we are evaluating our personnel and our equipment. And the main thing that we're looking at is that we're not going to lose focus on our core business and not just because it's a large project there. But we are capable of building these projects, and we'll be looking at some of them as they come up.

Okay. Great. Maybe just a quick follow-up. Obviously, the Scruggs acquisition is now - Scruggs several months behind you. Are you more actively looking at M&A opportunities? And may be how likely is that we see something get done in fiscal '19?

We're having several conversations that we continue to have that we're very optimistic that as one of the levers that we'll have represent growth and when those opportunities come, we're going to take advantage of them.

All right. Thanks, guys.

Okay.

The next question comes from Josh Wolfe [ph] with Raymond James. Please proceed with your question.

Thanks for taking a few more from me.

Yeah, absolutely.

You mentioned investments in additional equipment in some of the greenfields. Could you talk about how labor availability is trending both there and the rest of your business?

Yeah. From the labor side, you know we're obviously - we're no different in a lot of other people. We've been in this business for a long time. I guess ever since someone build a bulldozer, there's always been labor issues, but we're very fortunate. We have our - we're filling the seats, and we have retained a lot of our workers and our goal is to train a lot of these people and promote them. And so we have not really experienced any major issues but are there shortages out there? Yes, I think there's shortages out there, and that's one reason why we look at the work that in our market, make sure that we have the labor and equipment to service those markets and so it's worked well for us so far.

And then...

And one thing there, we have the ability with our locations to move people around when certain markets are more robust than others. And one of our strategies in the greenfields is being able to service those for a period of time from an existing market discontinuous to the greenfields. And then, just gradually, add people that are permanent in that market, in that equipment, and that's what we're seeing the opportunity to do in 2019 in the two greenfields that we had. So our strategy of doing that and then sort of a step basis gives us flexibility to do that, so we're not having to just add all those crews at onetime.

Got it. And then I appreciate the seasonality you gave us in terms of first half and second half. Given that there is, call it, two weeks or so left in the December quarters, are there any other guidance you can give us on sales and EBITDA for the December quarter?

No, we don't have any specific and it's had good periods and it's had snow periods. So we don't know how it will finish, but we're going to keep working till the very last day of the quarter, I can tell you that.

Okay. Thanks.

There are no further questions at this time. I'd like to turn the call back to Charles Owens for closing comments.

Okay. Thank you. And we intend to remain sharply focused on executing our strategy. And thank you all for joining us today and, we look forward to speaking with you on the next conference call.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.