Construction Partners, Inc. (NASDAQ:ROAD) Q4 2022 Earnings Call Transcript

Operator: Thank you. Our next questions come from the line of Brian Russo with Sidoti. Please proceed with your questions.

Brian Russo: Hi, good morning.

Jule Smith: Good morning, Brian.

Brian Russo: Just a follow-up on the entry into Tennessee with the three HMA plants and how that kind of triangulates with your M&A strategy. What’s it going to take to get you’re growing — now growing presence in Tennessee to kind of resemble the vertically integrated strategy you have in the other states in terms of scale and scope, do you need more labor or more scale and/or scope in other parts of the value chain there?

Jule Smith: Yes. Well, Brian, first of all, let me say we’re excited to be in Tennessee. We’re excited to in Nashville. When I first went to look at those asphalt plants, I wrote around Nashville for a day and I couldn’t believe all the construction activity and cranes I saw, and I live in Raleigh, North Carolina. So that shows you how much is going on there. And I noticed that the roads around the Nashville Metro area have got a lot of work to keep up with that growth. And so that was exciting to me. Blue Water Industries approached us with what I thought was a very attractive strategic opportunity to partner with them in two states. I’ve been very impressed just dealing with that whole organization, Ted Baker and his group.

And so we’re excited to be there and be partnered with them. These three asphalt plants sit in their quarries. So I see a lot of growth opportunities in Nashville. But one of the things you asked was the vertical integration. So I think this is a perfect example of that. That new liquid asphalt terminal we’re building in North Alabama, once we bought Good Hope last year, that gave us the critical mass to start really thinking about adding a liquid asphalt terminal there. With these three asphalt plants are going to be able to just drive more throughput through that facility. So we’re going to be able to supply that and capture more margin for that work in Nashville just buying this liquid asphalt terminal in Northern Alabama. So it’s just — that’s a great example of how, as we build relative market share, that vertical integration just allows us to capture more of that margin.

Alan Palmer: And on the construction side with our proximity to our North Alabama operations some of the other construction services that they’re not doing right now, we will be able to immediately begin to be able to do in that market and support it just like we would a greenfield when we do a greenfield with an asphalt plant a contiguous market. And then as that part of our work, some of those items that they have been subcontracting out, we’ll be able to grow the construction services side of that vertical integration also by doing it over the next couple of years and supporting that from having that North Alabama operations just across the state line.