Greetings, and welcome to Construction Partners, Inc. First Quarter Fiscal 2019 Earnings Conference Call. [Operator Instructions] As a remainder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Black, Investor Relations. Thank you, Mr. Black, you may begin.

Thank you, Operator, and good morning, everyone. We appreciate you joining us for the Construction Partners' conference call to review fiscal 2019 first quarter results. This call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the Investor Relations section of constructionpartners.net. Information recorded on this call speaks only as of today February 12, 2019, 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, are 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 that by their nature are uncertain and outside of the Company's control. Actual results may differ materially. Please refer to the earnings press release that was 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 earnings 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. With me on the call today are Ned Fleming, our Executive Chairman of the Board; and Alan Palmer, our Chief Financial Officer. In my opening remarks, I will provide comments about our fiscal 2019 first quarter and give an update on our business. I will then turn the call over to Ned for few additional comments. Finally, Alan will review our financial results and discuss our outlook. During our fiscal first quarter, our construction projects exceeded gross profit percentage expectations, despite delays related to Hurricane Michael in October and sustained rainfall experienced in many of our markets in November and December. Weather improved in January across our markets, allowing for increased productivity. It is important to note that revenue is not lost when weather delays prevent the completion of certain projects. Those projects are simply put forward to be completed. I expect 2019 to be a good year for our Company and we are confirming our outlook for 2019. Historically, 40% of our annual revenue comes in the first half of our fiscal year, which is seasonally slower than the second half of our fiscal year due to normal weather patterns, shorter workdays and other factors. We anticipate that our gross profit percentage will increase during future quarters as our fixed costs are allocated over a larger revenue base due to higher productivity at our asphalt plants and increased utilization of our equipment. We continue to maintain our strong backlog, our project work that we will work through in the remaining three quarters of our fiscal year. Approximately 80% of our current backlog will be completed in fiscal 2019. In addition, opportunities for future projects in our markets remain favorable, as we will bid on a number of construction projects that we expect…

Thank you, Charles, and good morning to everyone. This is a predictable and consistent business operating in fast growing southeastern states, where both the demand for ongoing road repair projects and the public funding to pay for the work not only exists, but it is growing. We have led the company and consistently grown the business for nearly two decades. Charles and Alan are excellent operators and they work alongside a team of highly experienced, dedicated and effective leaders and managers. I believe we are well positioned for continued growth in 2019. We continue to communicate, the business is seasonal, and individual quarters can be impacted more than expected, but it is not cyclical. As Charles mentioned, and I have seen since the founding of the business. Our business model allows the company to increase productivity during better weather, therefore to make up for revenue delays, which is exactly what our team is doing and is the reason why we are confident about confirming our growth outlook for the year. As the team continues to consistently execute our business model, we believe it will become even more apparent to the market that CPI is different than many of the public infrastructure companies. The nature of our recurring publicly funded maintenance projects with shorter durations and lower volatility risk from input cost distinguishes our model. Through the leadership of our highly experienced team, both here in Dothan and throughout our platform companies, Construction Partners is well positioned to execute our plan and grow the business. And with that, I'd like to turn the call over to our CFO, Alan Palmer. Alan?

Thank you, Ned, and good morning, everyone. I want to start by quickly highlighting our key metric performance in the first quarter. From a financial standpoint, as we've discussed, lower than expected revenue due to sustained rainfall in our markets prevented the absorption of some of our fixed cost and impacted our profitability. And as Charles mentioned, that revenue does not go away and the margin on those projects has not changed. That work is simply pushed forward into future periods. Compared to the first quarter of 2018, our revenue was up 2.6% to $154.3 million. Revenue for the quarter increased $3.9 million compared to the last year due to $16.4 million of revenue attributable to Scruggs, which we acquired in the second quarter of fiscal 2018. Revenue in our existing operations was down. Gross profit was $21.1 million, which was down 7.3% from the prior year. Gross profit decreased approximately $3 million primarily due to a decline in production of hot mix asphalt for both internal and external sales, as well as lower utilization equipment resulting from construction project work deferred due to substantial rainfall during November-December. The decline in production of hot mix asphalt and lower utilization of equipment resulted in under-absorption of fixed cost. This decrease was partially offset by an improvement in gross profit margin percentage at the construction level. Net income was $5.2 million down 53.1%. Earnings per share were $0.10 per share, down from $0.26 per share. And adjusted EBITDA was $14.7 million, down 10.9%. Let's take a closer look at the quarter from a cost perspective, where despite the lack of volume, we did not experience increases in our total fixed cost. We were just not able to absorb as much of those fixed cost and project cost during the quarter. Looking out…

[Operator Instructions] Our first question comes from the line of Josh Wilson with Raymond James. Please proceed with your question.

A few housekeeping items on my end first. One, you talked about the normal seasonality being 40% sales in the first half, do you expect to also follow that pattern in fiscal '19?

Yes. That would be our expectation at this time.

And regarding the comment that gross margins improve in future quarters, do you mean sequentially versus what you just reported or year-on-year?

Versus what we just reported.

And that includes the March quarter when there's still potentially some lower activity seasonally?

Josh, we get back to what we believe we can for the first six months, the 40%, then the margin in the second quarter should be similar to the margin in the first quarter, because we'd be doing approximately the same amount of revenue.

And then you called out some of the impacts on operating cash flow. I also saw the inventory turns were down or more of a use of cash than I'd expected, anything to call out there?

No, I think a lot of it was just, we didn't do the revenue that we had anticipated in December. So we have the plans and the quarry is loaded up ready to do in the last couple of weeks of the month, we just did no - no work.

Our next question comes from the line of Justin Hauke with Robert W. Baird & Company. Please proceed with your question.

I guess, maybe just something to help quantify exactly how much weather-related revenue was deferred. Do you have a number for that for the first quarter, because I think in the fourth quarter, you had said $15 million to $20 million from weather then. What was it in the first quarter?

Justin, we've been over $20 million. We were about $25 million short of our budgeted revenue for the quarter. What we had lined up and what we saw on the jobs that we have scheduled out, so it was over $20 million.

I guess the second question is just the seasonality, it seems like this year is going to be a little bit different than maybe what we would normally expect, which would normally have the second quarter being a little bit lower revenue contribution than the first quarter. But given the commentary on January weather being better and the productivity improving and the 40% of revenue that you typically generate in the first half. I think that implies at least $150 million of revenue here in the second quarter if you were to hit that normal pattern. So is that how we should be thinking about the second quarter at least at this point that revenue is more similar to the first quarter on a numeric basis?

Yes, yes.

Okay, great.

We didn't do our jobs, so that's what we've got to complete to get back on track.

And I guess just the last question on the backlog, normally this would be kind of a build quarter. Although you mentioned that the - in your backlog is higher than it was last year. Was there something last year in the backlog, maybe large projects or multi-year projects that was kind of artificially pushing that up, or how should we think that the backlog being down?

Yes, that's exactly right. Last year in the first quarter, most of the backlog increase that we had from September 30 was backlog for future years. And actually, our backlog to be completed in the next nine months and the remainder of the fiscal year went down between December and - September and December of '17, because we were running off that revenue. This year, the work to be completed in that remaining nine months is only slightly lower than what we had at September 30 completed in '12. We did not add any backlog for future years. And that's really a more typical pattern we've had in prior years and last year was - last year, the backlog for future years in that quarter went up about $70 million. In prior years, generally, we're not adding future years backlog. So it's really a function of last year we got some larger multi-year projects in that quarter, while this year, all of the backlog we booked in - from October 1st to December 31st was work to be completed this year.

So is that a metric that you will continue to disclose? I mean, can we track that so we have a better clean in year backlog number? Or is this just something you're calling out for this quarter?

We can provide that. I mean, obviously, the backlog to be completed the remainder of the year goes down dollar wise in the backlog for future years build, if you work through. But we have, - I think, we have disclosed in the past at year-end what percentage of our backlog is going to be completed this year and next year and future years. So we'll continue to do that and we can do it on quarterly basis.

Our next question comes from the line of Zane Karimi with D.A. Davidson. Please proceed with your question.

So first off, what are you seeing on the M&A front? Are you guys seeing more or less sellers in the market versus this time last year? And then kind of with public valuations for some of these civil players under pressure, have you seen that permeating into the private environment at all?

Zane, what we're seeing on the M&A side is we're seeing a lot of activity and a lot of - we've seen a lot of opportunities out there. And as I stated in my opening remarks that we're grow our business through by doing more work in the areas that we operate in and through acquisitions and greenfield and we anticipate all of those - pulling all of those levers this year.

And then one more on that, any color you have on how the Scruggs acquisition has gone thus far and is going relative to your expectations?

The acquisition is going very well. Met all of our expectations. We knew we would get in a great management team and a great workforce. And they performed very well and we are very pleased with the acquisition with that company.

Our next question comes from the line of Trey Grooms with Stephens. Please proceed with your question.

This is actually Noah Mekousko on for Trey Grooms. So my first question, you guys mentioned that you had some delayed projects due to weather and you're expecting to complete those. Can you maybe talk about that cadence throughout the year, like when you're going to expect to complete those?

We would expect that the part that we didn't complete in the first quarter, we would be able to complete in the second quarter. So we expect our second quarter to be much stronger than it was last year and to be able to get back pretty close to our first six months. We feel like we'll be able to get to that 40%, 60% split. So particular jobs that were delay would be the things that we're working on now. And many of those, we were able to get in a good January and so far February has been very favorable.

And then, just wanted to get a little bit more detail on the growth levers that you guys talked about. Could you maybe quantify how many greenfields you're looking to do this year?

We basically are looking at several different growth like I've talked about our three levers. And at this point, we are not seeing that many acquisitions. So our greenfields are in what areas, but things are looking very, very positive and very attractive markets that we want to be.

And my last question, did the government shutdown affect any of the demand in your market?

It has not affected us at this point. I think you'll probably hear different areas that could be affected maybe on the larger projects and getting things out, but as far as our contacts that we've had with the DOTs that we worked, we do not anticipate any impact that's going to affect us materially.

There are no further questions in the queue. I'd like to hand the call back to management for closing comments.

Okay. I would like to thank everyone for being on the call today. And just keep in mind that management team and we will stay focused on our strategy and we look forward to speaking to you on the next conference call. Thank you very much.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.