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Presentation

Construction Partners, Inc. misses on earnings expectations. Reported EPS is $0.23 EPS, expectations were $0.34.

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. [Operator Instructions] It is now my pleasure to introduce your host, Rick Black with Investor Relations. Please go ahead.

Rick Black: Thank you, operator, and good morning everyone. We appreciate you joining us for the Construction Partners conference call to review third quarter 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 2nd, 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. 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. 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’ CEO, Jule Smith.

Jule?

Jule Smith: Thank you, Rick, 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. Not only did they deliver a great quarter, they also continue to set the table for future growth and success by adding strong backlog throughout our six 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 at $422 million. 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 hot liquid asphalt index adjustment last year that produced $10 million 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% in FY ’23. As anticipated in the third quarter, substantially all of our work came from post-inflationary backlog. Additionally, the company benefited from lower energy costs.

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 355 basis points higher than a year ago and adjusted EBITDA margin was 13.4%, a high single quarter margin in over two years. Cash flow from operations continues to be strong as CPI’s model has historically generated free cash conversion of over 50% 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. 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 though a record revenue quarter. Our 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 in creating opportunities for road widenings and resurfacings, bridge replacements, airport taxiways, and many other types of good opportunities for CPI. In the private markets, migration to the Southeast United States continues to produce demand for our services in industrial, non-residential, and residential projects.

A 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 strategic growth model, we announced this week two growth initiatives. First, we acquired a hot-mix asphalt plant and related operations in Myrtle Beach, South Carolina from C.R. Jackson. We entered this market a year ago. We’ve been very impressed with the dynamic growth and opportunities in the second fastest growing metro area of South Carolina. This acquisition gives our local team additional resources to capitalize on those opportunities and grow our relative market share. Second, 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.

This greenfield will allow us to extend our reach eastward for 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 that 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 four years with our Gulf Coast terminal and the Panhandle of Florida. Before I turn the call over to Greg, I want to conclude, I reiterating how pleased we are with the quarter and the outlook for the remainder of FY ’23 as demonstrated by raising net income and adjusted EBITDA ranges.

As we look to FY ’24 and beyond, it’s great to see the resilience and quick recovery of the CPI model operating effectively. The company is ready for and benefiting from opportunities afforded by generational investment and infrastructure, a booming economy in the Southeast in numerous growth opportunities as we consolidate and strengthen our industry. We are indeed, and cited for the road ahead. I’d now like to turn the call over to Greg.

Greg Hoffman: Thank you, Jule, and good morning everyone. I’ll begin with a review of our key performance metrics in the third quarter of fiscal 2023 before discussing our raised outlook ranges. Q3 revenue was $421.9 million, an increase of 10.5%, compared to the same quarter last year. Excluding $10 million of additional revenue from liquid asphalt index reimbursements in the third quarter last year, due to the large increase in asphalt prices, revenue growth was 14%. Gross profit was $64.1 million, an increase of approximately 45% compared to the same quarter last year. As a percentage of total revenues, gross profit was 15.2% in the quarter, compared to 11.6% in the same quarter last year. 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 $21.7 million, an increase of 78%, compared to $12.2 million in the same quarter last year. Adjusted EBITDA was $56.4 million, an increase of 50%, compared to the same quarter last year. The 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. In addition, as Jule mentioned we are reporting a record project backlog of $1.59 billion at June 30th, 2023. Turning now to the balance sheet. We had $55 million of cash and cash equivalents and $182 million available under the credit facility, net of a reduction for outstanding letters of credit.

We have $277.5 million principal outstanding under the term loan and $143.1 million outstanding under the revolving credit facility. It is unchanged from March 31st except for term debt payments of $3.1 million. 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 fixed SOFR at 1.85%, results in an interest rate on $300 million of term debt of 3.35%. This is a reduction from 3.6% in prior quarters due to the decrease in our leverage ratio, which improved our surface spread. Maturity date of this swap is June 30th, 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 to trend downward at the fiscal year-end. Cash provided by operating activities was $48.8 million for the quarter, compared to the use of $13 million of cash in Q3 FY ’22. For the first three quarters of fiscal 2023, we have generated $94.5 million of cash flow from operating activities. Capital expenditures were $18.6 million for the quarter. We continue to expect capital expenditures for fiscal 2023 to be in the range of $85 million to $90 million. This includes maintenance CapEx of approximately 3.25% 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.

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 Jule 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 billion to $1.555 billion, net income in the range of $41 million to $46 million and adjusted EBITDA in the range of $161 million to $169 million.

And with that, we are now ready to take your questions. Operator?

Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Your first question comes from Tyler Brown with Raymond James. Please go ahead.

Tyler Brown: Hey, good morning guys.

Jule Smith: Good morning, Tyler.

Greg Hoffman: Good morning, Tyler.

Tyler Brown: Congrats on the — yes, hey, congrats on the quarter. Jule, is there any way you could quantify just how much weather did cost during the quarter? I mean I don’t normally ask because I get it, the 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.

Jule Smith: Yes, Tyler. There was a report that said in our local markets when measured around our — each of our asphalt plants, the precipitation was 30% higher than normal or 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 pulled through it and delivered a great quarter, and with record revenue. Clearly, the revenue would have been higher if we’d 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.

Tyler Brown: 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&A contribution was in the quarter to revenue?

Greg Hoffman: It was roughly 3%, but that’s — oh acquisitive I’m sorry 10%. I’m sorry, I thought you were asking organic, yes 10% acquisitive.

Tyler Brown: Okay, 10%. Perfect and then maybe on that going back to the asphalt adjustments, so I get it that there was a $10 million contribution last year, was there are actually a negative adjustment this year, because it seemed like to get to that 3% drag, you need — there is probably a negative this year.

Greg Hoffman: No, actually in the earnings release, we had revenue reconciliation for both this year and last year, it’s about a $1.5 million pickup for this year, so $8.5 million delta year-over-year.

Tyler Brown: Okay. All right. I’ll take a look at that. And just maybe lastly here I kind of do want to come back to margins. So I know this may be hard, but you mentioned 350 basis points of improvement year-over-year 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 zero-margin index revenue adjustments. So maybe that was a help, lower energy prices were help but I’d surmise that even with those tailwinds core margin still rose.

Greg Hoffman: 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, 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, is 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. 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.

Tyler Brown: Okay. Perfect, thank you guys so much for your time.

Greg Hoffman: All right, Tyler. Thank you.

Jule Smith: Thank you, man.

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

Brian Biros: Hey, good morning. This is actually Brian Biros on for Kathryn, thank you for taking my question.

Jule Smith: Hey, Brian, good morning.

Brian Biros: 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 is still going into design and engineering or kind of just funding projects that are already in process? Just what does that look like now and going forward for you?

Jule Smith: Yeah, Brian, good question. IIJA clearly is a big deal. It’s a generational investment in infrastructure for our industry. It’s a five-year plan, as we all know it started later than expected and so it’s really the lettings in our states, really just started happening last fall in 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 a ramp up and this is going to provide five years of really good demand, 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.

Brian Biros: Understood. And I think building off of the question from before. You guys had mentioned a return to kind of historical norm in terms of kind of the price cost volatility going forward with the headwind in the past year too, I guess, has all that — kind of work that was bid pre-inflationary environment, has that rolled off and now we’re kind of in this new cadence to return to basically the normal performance going forward or is there anything else to consider as we finish up the year here in the next few quarters?

Greg Hoffman: No, Brian, I really think our updated guidance reflects we feel really good about the fourth quarter. Our model is that we’re estimating and bidding jobs every day and our jobs have a typical duration of nine months to a year. And so we were able to burn through that pre-inflationary backlog that we got surprised when inflation hit, it took us about a year and we’re through that for the most part with very minimal left, and so we’re really just seeing now 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.

Brian Biros: Got it. Thank you.

Greg Hoffman: Okay, Brian. Thank you.

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

Andy Wittmann: Hey guys, thanks.

Jule Smith: Hey, good morning.

Andy Wittmann: Hey, so I just — I guess, I wanted to hear you Jule talk a little bit about labor in particular. So obviously, it’s has been a big factor over the last couple of years. You mentioned energy is 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?

Jule Smith: Hey, Andy, labor continues to be a big topic. So that’s a great question. We feel like the labor market in a sense is 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. We see that at CPI as an advantage. We’re going to do what it takes to attract and retain our workforce. So that we can continue to grow. And 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 we need and our local markets are doing a great job attracting labor.

Andy Wittmann: 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 the bidding environment in terms of the number of bids that are out there, that you’re chasing?

Jule Smith: 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 60-40 split is and you think that maybe it’s going to trend up with IJAA, but it’s really continued to remain right near that 60-40 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 come into the Southeast. And so going let Ned to speak a little bit more on the big picture, but I would say the split Andy has really just held very constant and we see that really remain pretty close to that.

Ned Fleming: Andy, I think one of 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 is a housing shortage. So there is a supply issue with houses, it’s not an interest issue, it’s a supply issue. There are more people who want to buy houses, even though the interest rates are up, and there our homes today, and we see that in market-after-market that we participate in. So 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 is growing. It’s actually accelerating since COVID, 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.

Andy Wittmann: Okay, great. That’s all the questions I had for today. I hope you all have a nice day.

Ned Fleming: All right, Andy.

Jule Smith: Thank you, Andy.

Operator: Your next question comes from Adam Thalhimer with Thompson Davis & Co. Please go ahead.

Adam Thalhimer: Hey, good morning guys. Nice quarter.

Jule Smith: Hey, Adam, good morning.

Greg Hoffman: Thanks, Adam.

Adam Thalhimer: Hey, can you comment on bid margins or margins in backlog, I’m just — I’m curious because you had a nice sequential backlog growth and you called that out. Just give us a little color on the type of work that you’re putting in backlog right now?

Jule Smith: Yeas, Adam, the backlog we added this quarter was really good margins — attractive margins, which tells us that people are busy and that 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 fourth quarter, but also really just, it’s going to really help FY ‘24 and beyond.

Adam Thalhimer: Well, that’s where I was going Jule. I was 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.

Jule Smith: Yes. Yes, well FY ’24 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 ’24, at least take a big step toward that. We wanted to get back to double-digit margins in ’23 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.

Adam Thalhimer: Okay. Good to hear. And then just a last one, on the M&A outlook, what’s the attitude among sellers right now?

Jule Smith: Well, I’ve been on the road a lot lately Adam, so M&A activity continues to be strong. We’re having a lot of good conversations with potential sellers, I would say, it really hasn’t changed a lot. Most of the people that we’re talking to about selling, they are their 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 hasn’t changed. So we’re excited about the conversations we’re having in 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.

Adam Thalhimer: Great. I’ll turn it over. Thanks.

Jule Smith: Adam, thank you.

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

Stanley Elliott: Good morning, everyone. Thank you for the question. Quick question on the backlog — quick question on the 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 will bidding larger size jobs? Just curious kind of how that — how all this is shaking out?

Jule Smith: 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 when we’re burning off a lot of revenue. So the fact that we grew it over $70 million, I think is evidence of growing relative market share in just a strong demand. 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.

Greg Hoffman: Yes, Stanley. So yes, we track that, we want to know what — how our job stratify, and we look back to earlier than when we went public, but if you go back to one of our earlier years ’18, ’19, it hasn’t changed hardly at all. Even though from the ’19 10-K, 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.

Stanley Elliott: Great news. And then you mentioned kind of healthy sources of recurring revenue. Could you kind of flush that, add a little bit more, I mean, does it — kind of more talking about just the resurfacing nature of the work that you all do or was there something else besides that?

Jule Smith: 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 going are 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 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 certain amount of work every year. So that’s what we mean by recurring revenues both on the public and the private is just we know there’s going to be a certain amount of demand in each of our markets.

Stanley Elliott: 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 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?

Jule Smith: Yeah, 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’ve just adapted our ordering in our business model, our relationships with the equipment manufacturer certainly help. So it’s really, we are getting the equipment we need, you see this year, we’ve sold some equipment that maybe we held onto 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 asphalt plant to the road.

It’s just things five or 10 years ago, you wouldn’t have — we wouldn’t have dreamed up but that’s really helping us run our business, is going to help us be able to grow our margins in the future as we can operate more efficiently. And so it’s something we really try to stay ahead of the curve.

Stanley Elliott: Perfect, guys. Thanks so much and congratulations.

Jule Smith: Thank you, Stanley.

Ned Fleming: Thank you, Stanley.

Operator: Your next question comes from Brian Russo with Sidoti & Company. Please go ahead.

Brian Russo: Yes, hi, good morning. I’m sorry if I missed this, but what was the year-over-year organic growth, year-over-year?

Greg Hoffman: So if you adjust for the liquid asphalt adjustment Brian, that we talked about at 3%.

Brian Russo: Okay, 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?

Jule Smith: Brian, I would just say when we look at our volumes year-over-year, year-to-date were up pretty substantially in our equipment hours and we’re up in our asphalt tons. We’ve had a wetter first quarter than last year, we’ve had a wetter third quarter than last year, so that our two biggest quarters of the three we’ve had so far been wetter than typical but we are experiencing real volume increases were growing as a business. And when you look at our revised revenue outlook, it’s 18% to 20% up 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.

Brian Russo: Okay, great. And is there any difference in the margins on the private side versus the public side?

Jule Smith: No, they’re pretty comparable, Brian, the margin profile really changes more about market. Some markets have a higher margin profile than others, but when you look at public versus private they’re pretty comparable.

Brian Russo: Okay. And I suppose that you’re actively involved in all of this re-shoring and electric vehicle battery facilities being built down in the Southeast I assume?

Jule Smith: Absolutely, do re-shoring, we are working on several manufacturing facilities right now where businesses are moving into the Southeast. And then on the electric battery facility right here in North Carolina, we have Toyota building a huge battery facility just a few miles up the road from one of our asphalt plants, that’s provided good work and then you have VinFast, which is building a huge electric car facility in Sanford. So — that we’re participating in and working around. So, yes, and you see that throughout the Southeast, it’s just a lot of businesses moving as well as people. And so that creates a lot of industrial opportunities for us to work on those sites.

Brian Russo: Great. And then lastly, just to follow up on the IIJA spending. Obviously, the first funding rate 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 flow into to more complex projects? You referenced bridges and maybe airports that might be bigger or more complex that might allow some higher margins.

Jule Smith: Yes, Brian, IIJA is a lot of different types of infrastructure. 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 — that they are better projects with lower risk and higher margins but you’ll see us participate as an asphalt subcontractor or grading subcontractor on those projects. So IIJA is going to produce revenue for us and a lot of different ways.

Brian Russo: Okay, great, thanks a lot.

Jule Smith: Thank you, Brian.

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

Jule Smith: Thank you, everyone, for your time this morning, we’re looking forward to a good fourth quarter 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.