Construction Partners Q3 2023 Earnings Call Transcript

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Provided by Quartr
August 2, 2023

There are 11 speakers on the call.

Operator

Greetings, and welcome to the Construction Partners Third Quarter 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. As a reminder, this conference is being recorded. It is now my pleasure To introduce your host, Rick Black with Investor Relations, please go ahead.

Speaker 1

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Construction Partners Conference Call to review Q3 results for fiscal 2023. 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, August 2, 2023. So please be advised that any time sensitive information may no longer be accurate as of the time of any replay listening or transcript reading.

Speaker 1

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 considered 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 today's earnings press release for our disclosures 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.

Speaker 1

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 And now, I would like to turn the call over to Construction Partners' CEO, Jule Smith. Jule? Thank you, Rick,

Speaker 2

and good morning, everyone. With me on the call today are Greg Hoffman, our Chief Financial Officer And Ned Fleming, our Executive Chairman. We are pleased to report an excellent quarter. In fact, it was a record quarter for CPI in numerous ways. I want to thank our over 4,000 employees for their hard work and expertise in delivering this record quarter Despite battling wetter than normal conditions, our employees are the key to our success at CPI.

Speaker 2

Not only did they deliver a great quarter, they also continued to set the table for future growth and success by adding strong backlog Throughout our 6 states and establishing several growth initiatives, which we will cover on the call today before Greg reviews our financial information. Q3 represented the single highest revenue quarter in our history of $422,000,000 As evidenced by our gross margins of more than 15%, our teams throughout 67 local markets were productive and efficient. When comparing year over year revenue, it's important not only to take into account the above normal precipitation this quarter, But also the abnormally high liquid asphalt index adjustment last year that produced $10,000,000 of additional revenue. CPI continues to produce strong organic and acquisitive growth, and our revised guidance announced today reflects an anticipated annual growth of over 18 As anticipated, in the Q3, substantially all of our work came from post inflationary backlog. Additionally, the company benefited from lower energy costs.

Speaker 2

The result of the hard work, backlog conversion And some lower costs with strong gross margins, net income, adjusted EBITDA and cash generation. Gross margins were 3.55 basis points higher than a year ago and adjusted EBITDA margin was 13.4%, A high single quarter margin in over 2 years. Cash flow from operations continues to be strong CPI's model has historically generated free cash conversion of over 50% and is available to invest in growth initiatives And compound shareholder value. In addition, we made significant progress in lowering our leverage ratio during the quarter. As we stated last quarter, our business is normalizing and we are now experiencing operational performance typical for CPI.

Speaker 2

We continue to pursue healthy sources of recurring revenue in a much more stable and normal cost environment. The expectation is for the business to maintain this performance trajectory. A great indicator of future growth is our growing backlog Even in a record revenue quarter, historically CPI's backlog might shrink in the busy work season. The fact that our teams produced a record backlog for the 10th quarter in a row is evidence of growing relative market share in our local markets And continued strong demand in both the public and private markets. The IIJA's investment in public infrastructure is now in effect throughout our states and creating opportunities for road widening and resurfacings, bridge replacements, airport taxiways And many other types of bid opportunities for CPI.

Speaker 2

In the private markets, migration to the Southeast United States Continues to produce demand for our services in industrial, non residential and residential projects. Our record backlog gives us great visibility into the future and allows us to remain patient in adding high quality new work at attractive margins. Turning now to CPI's strategic growth model. We announced this week 2 growth initiatives. First, we acquired a hot mix asphalt plant and related operations in Myrtle Beach, South Carolina from C.

Speaker 2

R. Jackson. Since we entered this market a year ago, we've been very impressed with the dynamic growth and opportunities in the 2nd fastest growing metro area South Carolina. This acquisition gives our local team additional resources to capitalize on those opportunities And grow our relative market share. 2nd, as we continue to focus on organic growth, We announced this week a new hot mix asphalt greenfield in Waycross, Georgia, a strategic location adjacent to our current South Georgia markets.

Speaker 2

This greenfield will allow us to extend our reach eastward toward the rapid growth emanating from the large port in Brunswick, Georgia. And finally, one of our key levers of margin expansion is vertical integration. And I'm pleased to announce Our new liquid asphalt terminal in North Alabama is now operational. This terminal will capture the margin dollars Between wholesale and retail, while servicing over 12 asphalt plants in Alabama and Tennessee. Just as we have been successfully executing for 4 years with our Gulf Coast terminal in the Panhandle of Florida.

Speaker 2

Before I turn the call over to Greg, I want to conclude by reiterating how pleased we are with the quarter And the outlook for the remainder of FY2023 as demonstrated by raising of net income and adjusted EBITDA ranges. As we look to FY 'twenty four and beyond, it's great to see the resilience

Speaker 3

and

Speaker 2

quick recovery of the CPI model operating effectively. The company is ready for and benefiting from opportunities afforded by generational investment in infrastructure, A booming economy in the Southeast and numerous growth opportunities as we consolidate and strengthen our industry. We are indeed excited for the road ahead. I'd now like to turn the call over to Greg.

Speaker 3

Thank you, Jewel, and good morning, everyone. I'll begin with a review of our key performance metrics in the Q3 of fiscal 2023 We're discussing our raised outlook ranges. Q3 revenue was $421,900,000 Increase of 10.5% compared to the same quarter last year. Excluding $10,000,000 of additional revenue from liquid asphalt index reimbursements in the Q3 last year due to the large increase in asphalt prices, revenue growth was 14%. Gross profit was $64,100,000 an increase of approximately 45% compared to the same quarter last year.

Speaker 3

As a percentage of total revenues, gross profit was 15.2% in the quarter compared to 11.6% General and administrative expenses as a percentage of total revenue in the quarter were 7.6% Compared to 7.7% in the same quarter last year. In Q3, net income was $21,700,000 an increase of 78% compared to $12,200,000 in the same quarter last year. Adjusted EBITDA was $56,400,000 an increase of 50% compared to the same quarter last year. Adjusted EBITDA margin for the quarter increased to 13.4% compared to 9.9% in the same quarter 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.

Speaker 3

In addition, as Jule mentioned, we are reporting a record project backlog of 1.59 $1,000,000,000 at June 30, 2023. Turning now to the balance sheet. We had $55,000,000 of cash and cash equivalents And $182,000,000 available under the credit facility, net of a reduction of outstanding letters of credit. We have $277,500,000 principal outstanding under the term loan and $143,100,000 outstanding under the revolving credit facility, which is unchanged from March 31, except for term debt payments of $3,100,000 The availability on our credit facility and cash generation will continue to provide flexibility and capacity to allow for potential near term acquisitions and high value growth opportunities. As a reminder, the company entered into an interest rate swap agreement That fixes SOFR at 1.85 percent, which results in an interest rate on $300,000,000 of term debt of 3.35%.

Speaker 3

This is a reduction from 3.6% in prior quarters due to the decrease in our leverage ratio, Which improved our SOFR spread. Maturity date of this swap is June 30, 2027. As of the end of the quarter, our debt to trailing 12 months EBITDA ratio was 2.27. Our expectation is the leverage ratio will continue Trend downward at the fiscal year end. Cash provided by operating activities was $48,800,000 for the quarter.

Speaker 3

Compared to the use of $13,000,000 of cash in Q3 FY 2022. For the 1st 3 quarters of fiscal 2023, We have generated $94,500,000 of cash flow from operating activities. Capital expenditures were $18,600,000 for the quarter. We continue to expect capital expenditures for fiscal 2023 to be in the range of $85,000,000 to $90,000,000 This includes maintenance CapEx of approximately 3.25 percent of revenue, with the remaining amount invested in high return growth initiatives. Historically, we have converted retained cash flow in the range of 50% to 60% of adjusted EBITDA after subtracting interest expense and taxes.

Speaker 3

And we are on target to generate that amount in 2023. Retained cash flow has been invested in attractive long term investments, This generated 22% adjusted EBITDA growth in the last fiscal year despite a challenging macro environment. And this year is on track to generate 45% to 50% growth in adjusted EBITDA. These investments include the Alabama liquid asphalt terminal, expanding into Waycross, Georgia and acquiring an HMA plant in Myrtle Beach, South Carolina that Jewel mentioned earlier, as we continue to utilize this retained cash for high value growth investments, we expect margins to increase, Organic growth to continue and shareholder value to Compound. Today, we are tightening our revenue range And raising our net income and adjusted EBITDA ranges for our fiscal year 2023 outlook, and we now expect Revenue in the range of $1,535,000,000 to $1,555,000,000 Net income in the range of $41,000,000 to $46,000,000 and adjusted EBITDA in the range of $161,000,000 to $169,000,000 And with that, we are now ready to take your questions.

Speaker 3

Operator?

Operator

Thank you. We will now be conducting a question and answer Your first question comes from Tyler Brown with Raymond James. Please go ahead.

Speaker 4

Hey, good morning guys.

Speaker 3

Good Good morning, Tyler. Good morning, Tyler. Hey, congrats

Speaker 4

on the quarter. Jewel, is there any way you could quantify just how much weather did I mean, I don't normally ask because I get it that weather is a part of the business, but it just seemed like it was awfully wet this quarter, particularly in April. I think it maybe highlights just how strong the underlying business is.

Speaker 2

Yes, Tyler. There was a report that said in our local markets, when measuring around each of our asphalt plants that the Precipitation was 30% higher than normal, 130% of normal. So I think that's pretty accurate. And We can't quantify exactly how much that is, but I would just say it was significant. But the good news is our crews and our people fought through it and delivered a great quarter.

Speaker 2

And with record revenue, Clearly, the revenue would have been higher if we had had typical weather, but I was really impressed to see the margins Come through and I think that's what we anticipated and even with the precipitation we had that was a great result.

Speaker 4

Yes. Interesting. Okay, great. We're going to get to margins in just a sec. But real quick, Greg, do you I may have missed it, but did you have what the or did you State what the M and A contribution was in the quarter to revenue?

Speaker 3

It was roughly 3%,

Speaker 2

but that's

Speaker 3

I'm sorry, 10%. I'm sorry, I thought you're asking organic. Yes, 10% acquisitive.

Speaker 4

Okay. 10%. Perfect. And then maybe on that going back The asphalt adjustments, so I get it that there was a $10,000,000 contribution last year. Was there actually a negative adjustment this year?

Speaker 4

It seemed like to get to that 3% drag, you needed to have there is probably a negative this year?

Speaker 3

No. Actually in the earnings release, we had a revenue reconciliation for both this year and last year. It's about a $1,500,000 Pickup for this year, so $8,500,000 delta year over year.

Speaker 4

Okay. All right. I'll take a look at that. And just maybe lastly I kind of do want to come back to margins. So I know this may be hard, but you mentioned 3 50 basis points of improvement year over year.

Speaker 4

But can you kind of unpack what drove that? I mean, if we think about a margin bridge, I mean, I know that there was lower 0 margin index revenue adjustments, Maybe that was a help, lower energy prices were a help, but I surmise that even with those tailwinds, core margin still rose?

Speaker 2

Yes, Tyler. We did say energy costs as they trend down, it's a little bit of a tailwind. And But I would say overall, it's just CPI getting back to normal and being able to build work where we were able to bid the cost The way the world was. For over a year now, we've just been finishing that pre inflationary backlog that The cost just we didn't have the access to know it. And so as we build work where we knew the input costs And we're able to bid it that way.

Speaker 2

You're starting to see that just come through. And so in a sense, it's really just returning to what we've always done. And so I would say most of the margin improvement was that. It's just building work. We see that jobs are finishing higher than The bid margins, which is typical, so that to me would be most of it.

Speaker 2

As far as the bridge, I don't know, but that's I would say it's really just getting back to building typical backlog.

Speaker 4

Okay, perfect. Thank you guys so much for the time.

Speaker 2

All right, Tyler. Thank you. Thanks, man.

Operator

Your next question comes from Kathryn Thompson with Thompson Research Please go ahead.

Speaker 5

Hey, good morning. This is actually Brian Biros on for Catherine. Thank you for taking my question. Hey, Brian. Good morning.

Speaker 5

Good morning, everyone. To start, I guess, I think in the press release, you guys mentioned IIJA is fully implemented. Can you just provide some more context around what that means in the context for today? Are you actually seeing on the ground Projects, new projects being worked on that is funded from IIJA or is it more the money Still going to design and engineering or kind of just funding projects that are already in process? I guess, what does that look like now and going forward for you?

Speaker 2

Yes, Brian. Good question. IJA clearly is a big deal. It's a generational investment in infrastructure for our industry. So 5 year plan, as we all know, it started later than expected.

Speaker 2

And so it's really the lettings In our states, really just started happening last fall and this past winter On a regular basis. So I would just say that we're seeing it come through in the lettings. It is funding projects. I don't think it's going to be as impactful this year as it will be next year. I think you're going to continue to see it ramp up, And this is going to provide 5 years of really good demand.

Speaker 2

And it's not just roads, it's airports, railroads, ports, Charging stations, all of that infrastructure CPI is going to be able to participate in.

Speaker 5

Understood. And then I think building off of the question from before, you guys have mentioned this Return to kind of the historical norm in terms of kind of the price cost volatility going forward was a headwind in the past year or 2. I guess, has all that Hello. Works that was bid pre inflationary environment. Has that rolled off and now we're kind of And this new cadence to return to basically the normal performance going forward, is there anything else to consider as we finish up the year here in the next few quarters?

Speaker 2

No, Brian. I really think our updated guidance reflects we feel really good about the 4th quarter. Our model is that we're estimating and bidding jobs every day, and our jobs have a typical duration of 9 months to a year. And so we were able to burn through that pre inflationary backlog that we got surprised when inflation hit. It The results are just getting back to our normal model, which is being able to bid jobs and the cost reflect the world as it is.

Speaker 5

Got it. Thank you.

Speaker 2

Okay, Brian. Thank you.

Operator

Your next question, Andy Wittmann with Robert W. Baird. Please go ahead.

Speaker 3

Hey guys, thanks.

Speaker 2

Hi, Andy. Good morning.

Speaker 1

Hey. So I just I guess I wanted to hear you You'll talk

Speaker 6

a little bit about labor in particular. So obviously, it's been a big factor over the last couple of years. You mentioned energy as a benefit. But just Can you just talk about your ability to find that labor and how the wages are comparing to the prior year?

Speaker 2

Andy, labor continues to be a big topic, so that's a great question. We feel like the labor market, In a sense, it's normalized. It's still in our industry. We have to compete for workforce. And in the long term, as you know, we're going to have to compete as our workforce ages out and retires.

Speaker 2

We see that as CPI is an advantage. We're going to do what it takes to attract and retain a workforce, so that we can continue to grow. So we're doing a lot of things on that. But in the short term, I would say the labor market is really not any impediment now. We're able to find the workers Our local markets are doing a great job attracting labor.

Speaker 6

Got it. I was also hoping you could comment on your view on The mix between the private sector and the public sector work that you do, do you expect that Your company is going to be doing more work in the public sector as the impact of higher rates takes hold this year and next year. So maybe address it that way or also just talk about kind of what you're seeing from your private sector customers today in terms of Bidding environment in terms of the number of bids that are out there that you're chasing?

Speaker 2

Yes, Andy. Greg and I, when we were closing The quarter, we look at those numbers and we were it's really surprising just how steady that sixty-forty split is. And you think that maybe it's going to trend up with IIJA, but it's really continued to remain right at near that sixty-forty split Between public and private, and we really see that's just an indication that the Southeast private market continues to be steady. And I would just tell you, we really haven't seen any drop off significantly in the amount of private opportunities. You've got businesses coming to the Southeast.

Speaker 2

And so I'm going to let Ned speak a little bit more on the big picture. But I would say the split, Andy, is really just held very constant and we see that really remaining pretty close to that. Andy, I think one of

Speaker 7

the things we've done well for 20 plus years is we're in growing markets. I mean, if you come to Greenville or you go to the markets that we're in, they're all growing. And there's a housing shortage. So there's a supply issue with houses. It's not an interest issue.

Speaker 7

It's a supply issue. There are more people who want to buy houses even though the interest rates are up than there are homes today. And we see that in market after market that we participate in. I think the private markets and the commercial markets for us are going to continue to stay really strong because the demographic growth of the areas that we're in It's growing. It's actually accelerating since COVID.

Speaker 7

So we feel really good about the fact that We continue to be able to pick projects that we want to do on both sides of that curve.

Speaker 6

Okay, great. That's all the questions I had for today. I hope you all have a nice day.

Speaker 2

All right, Andy. Thank you.

Operator

Your next question comes from Adam Thalhimer with Thompson Davis and Company. Please go ahead.

Speaker 5

Hey, good morning guys. Nice quarter.

Speaker 2

Hey, Adam. Good morning. Adam, hey.

Speaker 8

Hey, can you comment on bid margins or margins in backlog? I'm just I'm curious because you had nice sequential Backlog growth and you

Speaker 9

called that out. Just give us

Speaker 8

a little color on the type of work that you're putting in backlog right now.

Speaker 2

Yes, Adam, the backlog we added this quarter was really good margins, tried to margins, which tells us that people are busy And the demand out there is strong. And so we're continuing to see healthy margins that continue to Grow in our backlog. And so that's what gives us confidence to Raise our guidance for the Q4, but also really just is going to really help FY 'twenty four and beyond.

Speaker 9

Well, that's where I was going, Joel.

Speaker 7

I was

Speaker 8

curious, maybe it's a little early, but just curious if you think you might get back to historical EBITDA margins, which I think were more like 11%, 12% on an annual basis.

Speaker 2

Yes. Well, FY 'twenty four is coming, so it's probably a good question and time to talk about. As we've said, Adam, and we still feel this way, we'd like to get back to 12% EBITDA margins in 2024, at least take a big step toward that. We wanted to get back to double digit margins in 2023 and you can see now With our updated guidance, we're really our expectations have grown since the beginning of the year. So We're excited about the next year.

Speaker 8

Okay. Good to hear. And then just a last one On the M and A outlook, what's the attitude among sellers right now?

Speaker 2

Well, I've been on the road a lot lately, Adam. So M and A activity continues to be strong. We're having a lot of good conversations with I would say it really hasn't changed a lot. Most of the people that we're talking to about selling, they're busy also. They have good backlogs, but our sellers are really thinking more about their long term family planning And generational issues, and that really hadn't changed.

Speaker 2

So we're excited about the conversations we're having and future acquisitions. And So, it's a big part of our growth strategy, both organic growth and acquisitive. So you're going to continue to see us do acquisitions at a steady rate.

Speaker 5

Great. I'll turn

Speaker 8

it over. Thanks.

Speaker 2

All right, Dan. Thank you.

Operator

Next question, Stanley Elliott with Stifel. Please go ahead.

Speaker 9

Good morning, everyone. Thank you for the question.

Speaker 5

Good morning, Dan.

Speaker 2

Quick question on the

Speaker 9

backlog For you guys increasing sequentially, was that weather? Was it maybe a little bit slower on the organic side? And then Curious too on the composition, we've talked a lot about the price cost you guys have in there. Are you all bidding larger size jobs? Just curious Kind of how old is shaking out?

Speaker 2

I'll answer sequentially and then I'll let Greg answer as far as the makeup of the jobs in it. I would say, Stanley, that weather was not a big factor in our backlog growth. We grew to a record backlog. And as you know, Historically, CPI's backlog has shrunk in the busy work season where we're burning off a lot of revenue. So the fact that we grew it over $70,000,000 I think is evidence of growing relative market share and just a strong demand.

Speaker 2

So I'll let Greg speak to sort of the makeup of the jobs that we're seeing in the backlog. But I would say our guys did a really good job of growing the backlog.

Speaker 3

Yes, Stanley. So yes, we track that. We want to know what how our jobs stratify and we look back Earlier than we went public, but if you go back to one of our earlier years 2018 2019, it hasn't changed hardly at all. Even though from the 19, 10 ks, we've doubled our revenue or will double our revenue in terms of what our guidance is showing for this fiscal year, But that makeup has not changed at all.

Speaker 9

That's great news. And then, you mentioned kind of healthy sources of recurring revenue. Could you kind of flush that out a little bit more? I mean, is it kind of more talking about just the resurfacing nature of the work that you all do? Or was there something else Besides that?

Speaker 2

Yes, Stanley, good question. One of the big parts of CPI strategy is recurring revenue in local markets, right? And so for us, what that means is the City of Huntsville is going to let a resurfacing contract every year. Developers in Pensacola are going to do a certain amount of work Every year. And so we have repeat customers that we know are going to spend a certain amount of money.

Speaker 2

And so We build our local teams in our 67 markets, just build those relationships. And we have that's why we have a very steady Revenue, that's why we can keep crews busy and build a local workforce as they know they're going to do a So that's what we mean by recurring revenues, both on the public and the private. It's just We know there's going to be a certain amount of demand in each of our markets.

Speaker 9

Perfect. And then lastly for me, it Seems like some of the OEMs are talking about the supply chain getting a little bit better. Are you all getting the equipment that you need? Help us with kind of lead times and availability and then also kind of maybe speak to some of the technologies that you guys are implementing to help with the overall productivity.

Speaker 2

Yes. Stanley, I would say the lead times have improved from a year ago quite a bit. And while they might still be longer than what you historically have, we just adapted our ordering and our business model. Our relationships with the equipment manufacturers certainly help. So it's really we are getting the equipment we need.

Speaker 2

You This year, we've sold some equipment that maybe we held on to a year longer because of lead times. So that's been a really good development. As far as the technology, that is an ever constant keeping up with the technology, whether it be The equipment the telematics, the equipment telling us when it needs to be repaired and keeping up with that to Fleet tracking systems where it can really tell you in real time how your trucks are doing going to and from the fault plant to the road. It's just things that 5 or 10 years ago, we wouldn't have dreamed of, but that's It's really helping us run our business. It's going to help us be able to grow our margins in the future as we can operate more efficiently.

Speaker 2

So it's something we really try to stay ahead of the curve on.

Speaker 9

Perfect, guys. Thanks so much and congratulations.

Speaker 2

Thank you, Stanley. Thank you, Stanley.

Operator

Your next question comes from Brian Russo with Sidoti and Company. Please go ahead.

Speaker 10

Yes. Hi, good morning. I'm sorry if I missed this. Good morning. But what was the year over year organic growth Year over year?

Speaker 3

So if you adjust for the liquid asphalt adjustment, Brian, that we talked about, it's 3%.

Speaker 2

Okay.

Speaker 10

And you mentioned this thanks. And you mentioned this last quarter, how does that triangulate with Volumes of asphalt tons or maybe equipment hours year over year?

Speaker 2

Yes. Brian, I would just say, when we look at our volumes year over year, year to date, we're up Pretty substantially in our equipment hours, and we're up in our asphalt tons. We've had a wetter first quarter than last It's been wetter than typical, but we are experiencing real volume increases. We're growing as a business. And when you look at our revised revenue outlook, it's 18% to 20% up.

Speaker 2

And last year's growth of 40% to 42%, That's not the typical CPI year this is, growing 18% to 20%. And it's going to end up being about half acquisitive and half organic, which is what we historically have done.

Speaker 10

Okay, great. And is there any difference In the margins on the private side versus the public side?

Speaker 2

No. They're pretty comparable, Brian. The margin profile really changes more by market. Some markets have Higher margin profile than others. But when you look at public versus private, they're pretty comparable.

Speaker 10

Okay. And I suppose that you're actively involved in all of this reshoring and Electric vehicle battery facilities being built down in the Southeast, I assume?

Speaker 2

Absolutely. The reshoring, we're working on several manufacturing facilities right now Our businesses are moving to the Southeast. And then on the electric battery facility, right here in North Carolina, we have Toyota building a huge battery Just a few miles up the road from one of our asphalt plants, this provided good work. And then you have VinFast, We've been building a huge electric car facility in Sanford, so that we're participating and working around. So yes, And you see that throughout the Southeast, it's just a lot of businesses moving as well as people.

Speaker 2

And so that creates a lot of industrial opportunities for us to work on those sites.

Speaker 10

Great. And then lastly, just a follow-up on the IIJA spending. Obviously, The first funding, right, would go to roadways and resurfacing for the DOTs to Put it to work quickly and get the matching of funds. Are you seeing funds now flowing to more complex Projects, you referenced bridges and maybe airports that might be bigger or More complex that might allow some higher margins?

Speaker 2

Yes. Brian, the IJA is a lot of different And right now throughout the Southeast, we're working on a number of airports. And so those are really good jobs for us. And you're going to see bigger projects where even though we don't pursue the mega projects, we think those There are better projects with lower risk and higher margins, but you'll see us participate as an asphalt subcontractor or a grading subcontractor on those Projects. So, the IJA is going to produce revenue for us in a lot of different ways.

Speaker 10

Okay, great. Thanks a lot.

Speaker 2

Thank you, Brian.

Operator

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

Speaker 2

Thank you, everyone, for your time this morning. We're looking forward to a good Q4 and talking to you again. Have a good day.

Operator

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

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Construction Partners Q3 2023
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