Greetings, and welcome to the Construction Partners First Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Rick Black, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. We appreciate you for joining us for the Construction Partners conference call to review first quarter fiscal 2026 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 5, 2026. 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 the 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 Reform 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 our earnings press release for 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 and 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 with that, I would now like to turn the call over to Construction Partners' CEO, Jule Smith. Jule?

Thank you, Rick, and good morning, everyone. We appreciate you joining us for today's call. With me this morning are Greg Hoffman, our Chief Financial Officer; and Ned Fleming, our Executive Chairman. I'd like to begin by thanking the approximately 7,000 employees across our family of companies for their hard work, expertise and dedication to both safety and operational excellence. Our people are at the heart of everything we do, and they are also the stewards of our unique and strong family of companies' culture. one of our key competitive advantages as we continue to grow throughout the Sunbelt. Thanks to their efforts, along with favorable weather during the quarter, we delivered a strong start to fiscal 2026, exceeding our expectations and prompting us to raise our outlook for the year. First quarter revenue increased 44%, while adjusted EBITDA increased 63% compared to the prior year. Adjusted EBITDA margin reached 13.9%, the highest first quarter margin in our history. We also closed the quarter with a project backlog of $3.09 billion, underscoring the robust demand across our markets. Project demand throughout our footprint remains strong. On the commercial side of the business, steady project bidding is supported by ongoing population migration to the Sunbelt, reshoring trends as more manufacturing and supply chain capacity move back to the United States and the continued build-out of AI infrastructure. Our teams are actively bidding and building a wide range of commercial projects to reflect these macro trends. A few examples to highlight. In Southern Oklahoma, we are currently negotiating contracts to provide work for a large national retailer on a new distribution warehouse and a food manufacturing facility in Ardmore. In Central Texas, north of Austin, we're currently working on a facility to provide power to data centers in the area for one…

Thank you, Jule, and good morning, everyone. As Jule mentioned, we had a strong start to our fiscal year, which I will review in more detail before discussing our raised outlook ranges, and then we will open the call to questions. I'll start with a review of our key performance metrics for the first quarter of fiscal 2026. Revenue was $809.5 million, an increase of 44% compared to last year. The breakdown of this revenue growth was 3.5% organic growth and 40.6% acquisitive. Gross profit in the first quarter was $121.5 million, an increase of approximately 58% compared to last year. As a percentage of total revenues, gross profit was 15% compared to 13.6% last year. General and administrative expenses as a percentage of total revenue in the first quarter decreased to 7.7% compared to 7.9% last year. Net income was $17.2 million and adjusted net income was $26.4 million. Earnings per diluted share for adjusted net income was $0.47. Adjusted EBITDA was $112.2 million, an increase of 63% compared to last year. Adjusted EBITDA margin was 13.9% compared to 12.2% last year. You can find GAAP to non-GAAP reconciliations of net income and adjusted EBITDA financial measures at the end of today's earnings release. Turning now to the balance sheet. We had $104 million of cash and cash equivalents and $163 million available under our credit facility at December 31, net of a reduction for outstanding letters of credit. As of the end of the quarter, our debt to trailing 12-month EBITDA ratio was 3.18x. We remain on pace with our strategy of reducing the leverage ratio to approximately 2.5x by late 2026 to support sustained profitable growth. To that end, we anticipate cash flow generated to effectively fund this week's GMJ paving acquisition without the need for additional…

[Operator Instructions] Your first question comes from Adam Thalhimer with Thompson, Davis & Company.

Jule, can you give some more color on the acquisition pipeline? You said it was robust. I'm just curious what the mix there is between potential platform deals and potential tuck-ins.

Yes, Adam, as you know, we talk to a lot of folks all the time, and we look at a lot of things. And I would say we're continuing to be busy with that. We did 3 platform acquisitions last year. And so that's created a lot of new opportunities in Texas, Oklahoma and Tennessee now that we have a great management team in each state. So we're busy. But at the same time, we pass on a lot of things that aren't a good strategic cultural fit. So you're going to see us continue to make acquisitions that we think are just compelling and great strategic fits. Adam, why don't I let Ned weigh in on the big picture as we look toward our strategic growth model?

Adam, I would say over the last 25 years, it's as active now as it's ever been. I think what you're really starting to see both on the platform side as well as the tuck-ins. I mean, obviously, when you do 3 platforms in a year, it gives you a lot of opportunities for organic growth as well as tuck-in acquisitions. But the generational transfer continues to give us opportunities to do acquisitions, both what I would call tuck-ins as well as platforms. But obviously, given last year with the 3 platforms, we've got a lot of tuck-in acquisitions in those states as well as a lot of organic growth opportunities in those states. So I would say it's as robust as it's been in 25 years, maybe even to some extent because we did 3 platforms in 1 year, I see we've got more opportunities.

Awesome. And then, Jule, I wanted to ask you, you said in your prepared remarks, I think you mentioned this a site prep job for data centers. Just wondering -- I haven't heard that before. Just wondered if you could expand on the size of that project and what your scope might be.

Yes, Adam, we wanted to highlight just a few of the commercial projects we were doing currently because we talked about that there are several macro trends that are driving the commercial markets now. migration to the Sunbelt, but also the reshoring, which is creating a lot of manufacturing facilities moving back to America and people wanting to build in America. And so I just thought let's give a few highlights of these. And there's a long list to choose from. But data centers are part of that. And we're building more data centers than I had the time to list in the remarks, but it's one part of what we do, factories, distribution centers, there's a pretty strong demand for those things in our Southern and Southeastern markets. So we don't travel around and specialize in data centers, but they're a big part of what we do. And sometimes like in South Carolina, we're participating more in the site work and it's a larger contract. And sometimes we're doing the paving for a data center, just like we would do for an Amazon warehouse or a school project. So we did want to highlight just some of the commercial projects that are getting bid and built now.

Next question, Kathryn Thompson with Thompson Research Group.

Just first, I want to focus on organic growth, just reconfirm that you had kind of low to mid-single around 3.5% organic growth in the quarter, but you also gave guidance for a 7% to 8% organic growth range for the full year. Could you help us bridge what you're seeing today and also how much adverse weather in Q1 may impact or may have impacted the quarter?

Yes, Kathryn, good question. Our organic growth expectations for the fiscal year are still 7% to 8%, just as we normally do. In Q1, the difference between our organic growth and what sort of that 7% to 8% range was, was about $19 million. And when you looked at that, there were 2 factors that really created that. The first is in North Carolina, we had about 3 projects that we expected to do in Q1 that got a late start just due to the customer not being ready for us, and those are now underway. The second thing, as you can imagine, we -- in 110 local markets, we have competitive dynamics across the board. Some markets are healthy. Some markets are more competitive. We had one market where irrational competition, we said, you know what, let's move equipment and do work at higher margins in some adjacent markets. Which just so happened where that equipment moved was acquisitions we've made in the last 12 months. So that revenue was counted as acquisitive growth. So that happens from time to time, but we still anticipate our organic growth being in that normal range for the year.

Okay. Great. And as you -- maybe you have given color about obviously, very active M&A in calendar 2025 and into early '26. Could you give just maybe a little bit more color in terms of your strategy and thoughts in terms of integration and how that has progressed over the past 12 to 15 months?

Yes. Kathryn, we've done 7 acquisitions since the Lone Star acquisition last fall. And integration is a big part of what we do. As Ned has said on these calls before, it's a core competency that CPI has developed over 2 decades. And so we have to be good at integrating these companies. I would say, for example, in Houston, Derwood Greene has done a great job of integrating with Lone Star, our platform company since August. But then those guys have done a great job of integrating the Vulcan assets in October, and they just had a great Day One earlier this week with GMJ. And so as we can integrate these companies in, we start to create organic growth opportunities in the future. And when you have a great management team in that market, you can continue to add, that's where we start to compound both the top line and the bottom line and start to make 1 plus 1 equal 2.5. And that's part of our strategy. And I would say it's gone well.

Next question is Andrew Wittmann with Baird.

I guess maybe for Greg, I wanted to ask about the seasonality of the business. We heard your comments here about the first half, second half revenue and EBITDA splits here. And obviously, the first quarter came in very strong and ahead of at least the Street's expectations. But the ramification of that means that the second quarter guidance actually looks a little bit light. And so I was just wondering if there's something we need to understand there. Certainly, the weather here in the last couple of weeks in the South has been particularly notable. I'm wondering if that's a factor or if there's something else that explains the second quarter implied guidance there.

Yes. No, Andy, I think that our -- what we say a lot is that our first half of the year and the second half of the year are very similar year-over-year. And our weather within each half of that year balances out. You have some good weather and you have some bad weather. I think that we're essentially reiterating what we said from the beginning that it's going to be a standard year with the expectations that we gave to the market. So I don't think there's any negative connotation. I think it's just reiterating what we said at the beginning of the year. Sorry, do you want to add to that?

Yes. I just want to say we don't try to overthink things like that. Yes, weather was good in the first quarter. We don't know what the second quarter will be. Certainly, the last 2 weeks throughout the Southeast and Texas, we've had some ice and snow. And so you think, well, that should affect January. But when you look, the first 2 weeks of January were really good. So we're right on kind of plan. And we expect winter weather in January. If you remember, last January, we had a lot of snow. We even had snow on the beaches in Pensacola. But by the end of the quarter, it turned out to be a really good quarter. So I would just say we don't really try to overthink it. We're not in any way trying to communicate something about the second quarter. We're just sort of trying to say that's our normal revenue and EBITDA split in the course of a normal year.

Okay. That makes sense. I appreciate that. And then I guess you had a comment on your view on the public sector bidding. I think you said that you expected the awards to be up 10% to 15%. I don't know that you had a similar comment on commercial. certainly sounded like the projects that you're doing are keeping you positive there as well. But did you have a view on where the awards could be or the increase in backlog could be on the commercial side? Is it the same level of strength? Is the public stronger? Just maybe some context around how you're seeing that developing as the year plays out.

Yes. Andy, I would say the commercial market, we've continued to use the word steady. I would say, if anything, we feel like this spring and summer could be stronger on the commercial market. But the reality is when we look at our backlog, it stayed pretty steady. If anything, it's gone up, Greg, I think a couple of percent to public. But the reality is that could be just that the acquisitions we made last spring and summer with Overland and PRI focus a little more on the public side of things. What we do have is good data on the public awards from ARPDA, which says, look, the state, local and federal, when you look at the overall contract awards, it's going to be up 10% to 15% this year. And that's the data we really go by and what we see.

I see. Just a final cleanup question for me. Greg, I don't know if you could quantify how much of that revenue got switched between -- in that competitive market where you moved the crews out to the acquired market. Is that a quantifiable amount of revenue? I'm just kind of curious to help inform the understanding of the quarter a little bit better.

Yes. Jule, when he addressed that earlier, talked about $19 million of maybe moved in or addressed in different markets. I'd say it's about half and half.

Next question, Ethan Trollinger with Raymond James.

This is Ethan on for Tyler. Yes. So Greg, I know not a ton has changed on the M&A front. But just from a modeling perspective, could you update us on what the M&A rollover impact to revenue is in fiscal '26 based on the guidance?

Yes, absolutely, Ethan. About $260 million to $280 million in the remaining 3 quarters are from -- going to be from acquisitions.

Okay. Great. And then Jule, this is...

Ethan, I'm sorry, that does include GMJ, the acquisition we just made recently.

Okay. Very helpful. And then, Jule, just a bigger picture question. But you guys closed the GMJ acquisition in Houston earlier this week, which I think is maybe the third acquisition in Houston, say, the last 6 months. I was hoping to get a little more color on the evolution of that market. Could you maybe talk about how the margin profile in Houston has changed or is expected to change versus maybe the Derwood baseline? And do you guys see even more M&A opportunity in that market longer term?

Yes, Ethan, I love to talk about Houston. Houston, we're very pleased with how Brad, Greene and his management team, Jonathan, Daniel Green, those guys are third-generation Houston contractors. And so that management team, combined with the Lone Star management team, Houston has started off great. They've made a meaningful contribution to this quarter. Those guys did a great job of integrating the Vulcan workforce into their operation. And then with GMJ, the acquisition we made this week, that's an example of where not only is their asphalt plant geographically helps us more on the east side of Houston, but Lupe Munoz and his family and his business, they really have a strong niche in the public infrastructure paving. They have great relationships with public grading contractors that do work in Texas. And so that's really very complementary to what Derwood Greene has historically done. And so this is an example of just adding not only management team and workforce, but it's also adding market share in Houston.

Okay. That's great color. And then just one last one. Obviously, Houston is uniquely big compared to some of your other markets. But are there other big metros that you aren't in today that could come together like Houston? Or did just the stars kind of align there? Could you maybe talk a little bit more about that?

Well, I mean, I think it's -- this is Ned, by the way. As a Board and as a company, strategically, we're always looking for metropolitan areas like Houston. We've historically, for the last 25 years, invested capital in growth areas. Houston is maybe the second fastest-growing city in the country. So yes, there are other metropolitan areas that are like that, that we've identified that we'll continue to look for the right companies, particularly on the platform side to be able to invest in those areas. So I think one of the things historically, we've done a really good job of is being in the areas where the demographic growth drives organic growth for the country.

Next question, Nandita Nayar with Bank of America.

This is Nandita Nayar on for Mike Feniger. So you mentioned leverage is currently around 3.18x, and you plan to delever to around 2.5-ish by the end of the year. Could you just talk a bit more about your confidence in hitting that target? And also, just could we see you guys doing more M&A this year? And I mean, I think the answer to that would probably be yes, just given the strong pipeline. But just curious, would those also mostly be funded by cash from ops just like GMJ?

Yes. Sure, Nandita. That's right. Yes, 3.18 is where we are currently. We're still very positive about hitting that guidance of getting closer to 2.5x by the end of the calendar year. And I think that what will continue -- what you'll see continuing is what you'll see in our cash flow is that we've had $215 million worth of purchase price and only borrowed $140 million. And like you said, GMJ, the expectation is that, that purchase price will be covered in cash as well. So we keep doing that. The business keeps generating cash like it has historically and why -- and what it does or what it has done throughout the beginning of this year, we should be good with that guidance.

Nandita, I would just reiterate, we're going to continue to look at opportunities. We're going to pass on opportunities that aren't strategically compelling. But we're not going to -- GMJ is a great example of one where we said, look, this is a great opportunity. And so we're going to continue to make acquisitions. We're going to continue to use cash more and more to pay for those. And you'll see as that EBITDA rolls through the leverage ratio will come down.

Got you. That's super helpful. And just another one, guys. We've been hearing a slight change in the tone regarding the reauthorization bill with some conversations around the CR potentially entering the discussion. Just curious what you -- what's the latest on the ground that you guys have been hearing regarding the reauthorization?

Well, as I said in the prepared remarks, we feel really good about both houses of Congress, both committees on transportation are working on the reauthorization and the expectation is they'll get that done by September 30. We like what we're hearing about the size and the scope of it and the fact that it's going to be focused more on hard infrastructure coming -- the funds coming to the states through the formula method. So -- but we've had CRs in the past, and that's really just a continuation of where we are. But if you look back, what we expect is guided by history over the last 2 decades. And when you look at it, they've always reauthorized the 5-year plan, and they've always reauthorized it for higher than the previous bill. So we fully expect that history will continue to repeat and that we'll get a new surface transportation bill at a higher level for the next 5 years.

I would like to turn the floor over to management for closing remarks.

Right. We want to thank everyone for being with us today. We look forward to speaking again in the future.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.