Construction Partners Inc (ROAD) 2025 Q1 法說會逐字稿

Greetings. Welcome to Construction Partners' first quarter 2025 earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Rick Black with Investor Relations. Thank you. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Construction Partners conference call to review first quarter results for fiscal 2025. 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, which is February 7, 2025. 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 statements made in today's discussion that are not historical facts, including statements of expectations or future events or future performance are forward-looking statements made pursuant with 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 our 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, 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 now I would like to turn this call over to Construction Partners' CEO, Jule Smith. Jule?

Thank you, Rick, and good morning, everyone. We appreciate you joining us on the call today. With me this morning is Greg Hoffman, our Chief Financial Officer; and Ned Fleming, our Executive Chairman. We're pleased to report a strong start to our fiscal year 2025 with record revenue, strong year-over-year growth in margins and another record quarter of backlog built on continued strong demand for our infrastructure services.

I'd like to begin by welcoming two new companies to our CPI family of companies. Overland Corporation joined us on January two as our platform company in our eight state is we entered Oklahoma. Headquartered in Ardmore, Overland has a strong presence in Southern and Western Oklahoma with eight hot mix asphalt plants creating a wide footprint from Durant all the way west to the Texas Panhandle. Overland also participates in the vibrant economic activity occurring in North Texas as Dallas-Fort Worth continues to expand northward along I-35 and I-75 toward Oklahoma line.

Overland's President Darren Ratoski leads a strong team of managers that are ready to execute our proven strategy of establishing a platform company in each state with CPI providing resources and support for future growth opportunities. And just this week on Monday, we acquired Mobile Asphalt Company in Mobile, Alabama. They have joined our Alabama platform company, Wiregrass Construction as a branded division retaining their brand and strong recognition built up over many decades.

We welcome John Whitman and the talented managers of Mobile Asphalt as we add their large operation of five hot mix asphalt plants and 130 employees to substantially strengthen our market share and establish a much wider operational footprint in Southwest Alabama along the growing Gulf Coast. As our CPI family of companies grows, I want to thank all of our employees for their hard work and dedication to safety this past quarter.

At CPI, our first core value is family. And that reminds us that while we are a family of companies, more importantly, we're a company of families. We want to make sure that all of our operations, our policies and most importantly, our culture are supporting and strengthening the almost 6,000 families that count on CPI each day.

Turning now to first quarter results. Favorable weather gave us a few more workdays than normal due to dry conditions in October and we were able to generate a record revenue quarter and grew year-over-year revenue by 42%.

Transitioning this growth to profitability, our EBITDA margins grew year-over-year by almost 200 basis points. Thanks to strong project execution by our construction teams. Our vertical integration strategy continues to enhance margins through both construction services and manufacturing asphalt as well as contribution at our liquid asphalt terminals, both on rail and North Alabama and on water in Florida and Texas.

Taking a closer look at market conditions throughout the Sunbelt within our geographic footprint, local markets are growing, and our states remain focused on maintaining and improving the quality of their roads as well as increasing capacity to handle the significant migration to Sunbelt states. The evidence of this continued strong demand for our infrastructure services is represented by our project backlog that grew sequentially to a record $2.66 billion. We continue to have strong and steady bidding opportunities in the commercial and private markets with industrial and corporate facilities throughout the Southeast continuing to be developed.

In the public infrastructure markets, total lettings for roads and bridges continue to increase year-over-year approximately 16% on average across our 8-state footprint. Last quarter, due to our entry into Texas, we focused on the immense infrastructure program in the Lone Star state. This quarter, we highlight Florida, where the sunshine states, strong population growth led them to pass the moving Florida forward program in 2023 that provided approximately $4 billion in infrastructure supplemental funding.

Funding state, county and municipal programs already in place. This has led contract awards from all public funding sources in Florida to grow by over 50% in the first half of the current state fiscal year. The IIJA continues to provide our eight states with healthy infrastructure funding. And I would highlight that as of the end of calendar year 2024, only about 40% of the designated IIJA funds have been spent in the field. So we are just getting to the middle innings.

Turning now to our strategic growth model. Our acquisition pipeline continues to remain active, with conversations ongoing both in our current eight states as well as potential new states. When we add a platform company in a new state, it widens the playing field for acquisitive growth, to attractive bolt-on opportunities, and we are already seeing that in both Texas and Oklahoma.

We will continue to stay patient and focused on adding the best strategic acquisitions to our family of companies. The other half of our strategic growth model is organic growth, and our strong 11% organic growth this quarter demonstrates our continued focus on growing the business in our current markets and building shareholder value, whether it be from adding crews and capacity at our asphalt plants or strategic greenfield expansion.

In conclusion, we are pleased to have begun our new fiscal year with a strong start. During this winter quarter, we're hard at work training our people and preparing our fleet and manufacturing facilities to deliver on the record backlog ahead of us during the spring and summer work season. And in the long term, we remain focused and committed to attracting and retaining the best workforce throughout the Sunbelt. At CPI, we know that investment in human capital is the key to building a durable competitive advantage and delivering to our shareholders years of strong growth that is profitable and sustainable.

I'd now like to turn the call over to Greg.

Thank you, Jule, and good morning, everyone. I'll begin with a review of our key performance metrics for the first quarter of fiscal '25 compared to the first quarter a year ago. I'll then discuss our revised outlook for fiscal 2025.

Revenue was $561.6 million, an increase of 41.6% compared to the same quarter a year ago. The mix of our total revenue growth for the year was 11.2% organic revenue and 30.4% from recent acquisitions. Beginning this quarter, we are presenting acquisition-related expenses separately from general and administrative expenses on our income statement.

General and administrative expenses will now be presented in a manner that differentiates spend incurred to support day-to-day operations and separately those expenses associated with acquisitive activity within the quarter. The prior year quarter also reflects this presentation. Reflecting these changes, general and administrative expenses as a percentage of total revenue in the first quarter of fiscal 2025 was 7.9%, compared to 8.9% in the first quarter last year.

Net loss was $3.1 million during the quarter. This is due to nonrecurring expenses related to a transformative acquisition that were incurred during the first quarter of fiscal 2025, and therefore, not comparable to the same quarter a year ago. Adjusted net income, we believe, will reflect more accurately reflects our first quarter results, which exclude any onetime expenses related to the Lone Star paving acquisition.

Adjusted net income was $13.3 million and diluted earnings per share using adjusted net income would have been $0.25 in the first quarter of fiscal 2025. This represents an increase of 35% compared to the first quarter last year. Adjusted EBITDA was $68.8 million, an increase of 68% compared to the first quarter of fiscal 2024.

Adjusted EBITDA margin for the first quarter was 12.3%, compared to 10.3% in the first quarter of last year. You can find GAAP to non-GAAP reconciliations of net income to adjusted net income, adjusted EBITDA and adjusted EBITDA margin financial measures at the end of today's earnings release.

In addition, as Jule mentioned, we were reporting a record project backlog of $2.66 billion at December 31, 2024. Turning now to the balance sheet. We had $132.5 million of cash and cash equivalents and $393.4 million available under our credit facility at quarter end, net of a reduction for outstanding letters of credit.

As a reminder, in connection with the Lone Star acquisition on November 1, we entered into an agreement for an $850 million Term Loan B credit facility. The proceeds of the Term Loan B were used to finance the acquisition and related expenses and to pay down the balance of our revolving credit facility. This availability on our credit facility and cash generation will continue to provide flexibility and capacity to allow for near-term acquisitions and high-value growth opportunities in 2025.

The company continues to benefit from an interest rate swap agreement that fixes SOFR at 1.85%, which results in an interest rate on $300 million of term debt of 3.6%. The 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 2.88 times. We remain on pace with our strategy of reducing the leverage ratio to approximately 2.5 times in the next four to five quarters to support sustained profitable growth.

Cash provided by operating activities was $40.7 million compared to $60 million in the same quarter a year ago. The decrease year-over-year is related to a change in the weather that occurred from Q4 to Q1. This quarter had exceptional weather following the poor weather that finished fiscal 2024. This relationship increased outflows and reduced cash collections in Q1.

We have the inverse of this dynamic in Q1 last year, which resulted in decreased outflows and increased collections during the comparable quarter. The higher-than-expected level of billings and revenue in Q1 will be realized as improved cash flow in later quarters. We remain on pace for FY25 to convert 80% to 85% of EBITDA to cash flow from operations.

Capital expenditures for the first quarter were $26.8 million. We continue to expect total capital expenditures for fiscal 2025 and to be in the range of $130 million to $140 million. This includes maintenance CapEx of approximately 3.25% of revenue, with the remaining amount invested in new growth initiatives.

Turning now to our revised outlook, which reflects our latest expectations for fiscal year 2025 results, including the recent acquisitions of Overland Corporation and Mobile Asphalt. The increased ranges are as follows, revenue in the range of $2.66 billion to $2.74 billion, net income in the range of $93 million to $105.6 million. Adjusted net income in the range of $109.5 million to $122.1 million, adjusted EBITDA in the range of $375 million to $400 million and adjusted EBITDA margin in the range of 14.1% to 14.6%.

And with that, we will open the call to questions. Operator?

(Operator Instructions)

Andrew Whitman, Baird.

I guess, maybe, I guess, the acquisitions that you've done is probably where I want to start -- anything that you can do here, Jule or Greg, to help us understand the contribution of these two acquisitions that were closed subsequent to the quarter to guidance.

I think would be helpful as it relates to the revenue contribution maybe for the fiscal year or their backlog contribution that we should expect to see next quarter? I think would all be helpful cash outflow, maybe in total, I know you probably don't want to disclose it individually, but maybe in total, so we can get an order of magnitude. Those are the types of things that I think some investors are wondering about this morning.

Yes, sure. That sounds good, Andy. Yes, for the combined two acquisitions, we're looking at revenue for the remainder of the year in the $120 million to $130 million range. And so backlog, just to make sure we understand that none of this backlog for those two acquisitions are in our 12/31/24 backlog. But that backlog is going to be in the $90 to $100 range.

Okay. That's super helpful. Any comment on purchase price? Or you're going to wait for the disclosure that we see later maybe?

Andy, I would just -- this is Jule. I would just say we're excited about Overland and Mobile Asphalt. Both of these were just two strategic opportunities that aren't going to come along that often. I would say, from a purchase price standpoint, they were the multiples that have been historically what we've paid. And so they're very much our typical acquisition multiples and one of them was a platform company and one of them was a bolt-on. And so very much just in keeping with our acquisition strategy.

Yes. Okay. And then just maybe strategically here, Jule, you've done -- I mean these are it's pretty big bolt-on, five plants, new platform, Oklahoma, new platform recently, Texas. Do you just need -- I'm just kind of curious as how you're thinking about it. Does because you've done some larger M&A here in the last few months, Jule, do you need to digest and slow down maybe get the balance sheet a little healthier?

Or is it full steam ahead and you figure it out, you don't want to pass up an opportunity to find a good company? I'm just curious in terms of the operational impact as well as the financial impact in terms of just sorting this out and making sure the company is on steady footing to keep moving ahead.

Andy, I think it's a little bit of all that. I mean we clearly saw these two strategic opportunities as ones that we couldn't pass up. But we're also committed to having a strong balance sheet. And as Greg said, delevering over the next four to five quarters to get in our range that we like to be in.

So we're going to continue to have conversations and develop our acquisition pipeline, but we're also committed to integrating the companies well and we never want to go faster than we can organizationally integrate them, and we want to be healthy on the balance sheet.

Fair enough. And just maybe for a final point on that one, Greg, can you talk about where you see pro forma leverage today after the two subsequent to quarter end deals just so that investors have a sense of where you're standing.

Yes. I think it will tick up slightly, maybe closer to three. But I think, again, still we're looking to bring that down four, five over the next four or five quarters.

Kathryn Thompson, Thompson Research Group.

Just pulling string a little bit more on the newly acquired companies. Lone Star certainly changed the gross margin and profile in particular, but when looked combined for the three acquisitions, the two new ones and Lone Star. How should we think about gross margins and SG&A once integrated as we look into the full year for their -- really on a percentage basis in terms of how we should think about modeling?

Yes. Kathryn, I'll give the -- just the big picture of the margins and acquisitions and then let Greg talk about maybe the SG&A and the scale. Obviously, as we talked about last fall, Lone Star was a transformative acquisition and put -- moved us almost two years ahead on our road map 2027. And there it started just as you would expect. They're doing a great job. The management team in Austin is just doing wonderfully. These two new acquisitions, mobile asphalt and Overland have margins that are typical of what you would expect, and they're baked into our new guidance.

And so -- but the one thing that is true is what we -- our strategy is to -- for every acquisition to give them the tools to bid smarter, to bid more patiently to allow them to build more work. And so not only are they going to grow organically over time that margins are going to trend upwards. And so we fully envision that for both Overland and Mobile Asphalt. Greg?

Yes. And so I would just follow up to that -- with that and say that this -- they are built into the new guidance. So if we think about what Andy just asked me to go, that $120 million, $130 million revenue and then backing into the EBITDA, I think that will give you some pretty good information as to what we think those companies are going to do in the short and long term.

Okay. Great. And could you talk a little bit more about just your cost inflation outlook and price cost spread as you look into this year will be a tailwind headwind. We had some commentary yesterday from earnings is seeing that fuel in particular, could be a potential tailwind.

Yeah. Kathryn, right now, we're expecting a pretty typical year from a construction inflation standpoint. We've said that we think inflation could be anywhere from 4% to 5%. If you look across our total cost structure and we -- every day at the estimating table, we're putting those in our bids and passing those through.

Clearly, from a few years ago, we learned to be nimble. And so if we see inflation spike up, we're going to react quickly. But right now, we're seeing a pretty stable environment in our cost structure for materials, aggregates, concrete pipe, labor, energy costs are pretty steady. Natural gas spiked up this quarter a little more than diesel. And both through hedging and through adjusting our input costs, we just learned, just pass those increased costs through.

Great. And have you seen -- just as the great color on IIJA, and you also gave some good color in the prepared commentary talking about Florida, in particular for funding. Any other updates or changes do you want to say, from a state DOT funding for the states that are important to you? And along with that, have you seen any meaningful change in terms of how we should think about funding going forward post election?

Well, I would say, Kathryn, all of our states have healthy funding mechanisms. Clearly, Texas, which we talked about last quarter is just in a whole different stratosphere from an infrastructure funding standpoint. Florida is right behind it in terms of that, and we wanted to highlight that this quarter.

But when you look at Alabama, Tennessee, North Carolina, Georgia, South Carolina, they all have really good funding programs. They're all up year-over-year on contract awards. And so we feel blessed to be in states that take infrastructure seriously and have passed supplemental funding costs they're growing.

As far as IIJA, at the heart of it is really just a five-year surface transportation bill. It's not some unique bill that the federal government passed. We think that we're in the middle innings. There's still a lot of spending that's got to come through on that bill. But I can tell you I was just in Washington last week and they're already starting to talk about the reauthorization that's coming up here in the next 1.5 years. And so we fully expect that they'll have another five-year reauthorization and that it will go up, like it always has.

Kathryn, did that answer your question?

Yes, it did.

From an administration standpoint, after 25 years, I think if there's anything we've learned regardless of political affiliation, the leaders of both parties understand that the roads need work. They're graded very poorly throughout the country. The demand is high, voters do not want to sit in congestion anymore.

And so not just the federal government, the states, the municipalities, the cities, the counties continue to find more and more capital to be able to put into the roads. And for us, it's a wonderful thing because it gives us an opportunity to continue to acquire the businesses to move closer to more vertically integrated to improve efficiencies and increase margins.

I would say the thing on the acquisitions in Mobile, this is our second acquisition within a year. And that's an important thing to note because it allows us to have a whole lot more great people and assets in a territory that's one of the fastest-growing territories in Alabama. But as far as this administration or any administration, our job is to be the best bidder and to provide efficient, effective road work.

Tyler Brown, Raymond James.

Greg, I want to come at the guidance maybe a little bit different. But how much revenue from M&A that we know of -- what is that incremental dollar contribution? Or could you give it as a percentage growth just for fiscal '25.

Yeah, yeah. So total growth from acquisitions for the year is going to be somewhere in the $730 million, $740 million, $750 million range. So that puts acquisitive revenue for the remainder of the year, somewhere at $610 million, $630 million, somewhere around in there.

Okay. And then I know it's early, but I would have seen some of that rolls into '26 for the first half of '26 also has a little bit of a benefit.

It certainly will. Yes.

Okay. Okay. Jule, there's, call it, maybe some concerns out there that your move in Texas and Oklahoma were a function of be running out of, let's call it, space M&A space in your heritage Southeastern market. I mean I think the Mobile acquisition seems to maybe counter that. But can you just talk about that M&A pipeline maybe in the more heritage markets?

Yes. Tyler, good question. And I would just say -- last year, we grew 17%, about half of it was acquisitive and half of it was organic. Clearly, this year with Lone Star is going to be much larger. But we're going to continue in the long term to be a growth company, you're right. There's a lot of white space in the states we were in, the six states we were in before Texas and Oklahoma. And as Mobile showed last year, we did eight acquisitions. So there's a lot of runway and a lot of room in the states we're in.

So Ned, do you want to take that one?

Tyler, we just -- I just had this conversation with Charles Owens, and we were speaking at the last Board meeting and commenting that after 25 years of doing this, I would say there is more acquisition opportunity today than we've ever seen.

The fragmentation continues to be large. The Patroits and Matrix and families are getting older and they want to sell. So interestingly enough, even after all this time, this market is still a large, highly fragmented market and we're seeing more opportunity not just in Texas and Oklahoma, but in Alabama and Georgia, South Carolina, North Carolina and Florida. So we would anticipate being pretty picky. We're seeing so many acquisitions.

Tyler, one more thing, just to add to that. As you know, when we add a platform acquisition, it's more a function of finding the right management team to be the face of our business in that state. And those -- the timing of those is really when we can meet the right group that's ready to join our family of companies. And so with Lone Star and Overland, we feel blessed to have found those management teams. But that's really the key with a platform acquisition. And those -- that's the key to timing of that.

Right. And back on Overland, I mean this is a true platform. So I get it to South Oklahoma into North Dallas is growing, but we should see SpringBoard ultimately median to OKC, Tulsa eventually. That would be the idea.

Yeah. I think we've got a proven track record once we get a platform and an entrepreneurial management team, they're going to -- with CPI behind them, they're going to start looking around for greenfield opportunities, organic growth but also bolt-on acquisitions. And we've got a 20-year proven track record of that model. And so I don't see anything different in Texas and Oklahoma.

In Tulsa, a growth its growing in a big way as is many parts of Oklahoma.

Yeah. And my last one here is actually back on liquid asphalt. So I think you guys are up to three liquid asphalt terminals with Lone Star. So number one, roughly how much of your asphalt are you sourcing through those terminals? And do you think with the railroads clear desire, those -- they clearly want to grow. You've got maybe an administration that's going to be a little bit easier on permitting. I mean could we see some additional investments organically on that side over the next couple of years?

Tyler, I do think that liquid asphalt terminals are a key part of our vertical integration strategy. In our legacy states before we added the terminal in Houston, I would say we were probably a third of our liquid asphalt was internally sourced from our terminals in Florida and North Alabama.

Lone Star supplies most of their liquid asphalt from their terminals. So it's a much higher percentage. Clearly, as we build a density in a certain area, it makes sense to look at vertically integrated into the liquid asphalt space. We're already buying the liquid asphalt, it just gives us a chance to capture more of the margin along the value chain.

Adam Thalhimer, Thompson Davis.

Jule, the 200 basis point increase in adjusted EBITDA margin year-over-year in Q1, was that entirely organic? I mean you talked about good project execution in your script? Or was that pulled up by Lone Star?

Adam, I think it's both. I think Lone Star, clearly, as we disclosed last fall, has really good margins. And so adding them into the mix certainly helps. But we also said we expect that our business, even without Lone Star to grow the 50 to 60 basis points that annually. And so our legacy businesses grew their margins as well.

And then finally, when you have good weather, you're going to get more fixed cost recovery. We ran hard this quarter. And so -- that certainly helps when you can recover your fleet and your manufacturing facilities at the level we did.

And then as you look at DOTs budgets in your states. Do you have any opinion on how much the spending might grow this year?

I think, Adam, you know the funding, and it's always important to understand whether you're talking about funding or lettings because lettings can be a little lumpy, where the funding is a little more consistent. But when we look at the state funding mechanisms combined with IIJA, we fully expect our -- the funding to grow mid-to-high single digits.

And then when you look at the lettings as I said, they're already on average, if you look back on calendar year '24, it was up about 16% and then finally, you have to look at each state and say what's the total funding picture. And that's why in Florida, we want to make sure to highlight that to get a full picture of Florida, you have to look not only at the Florida DOT, but the counties and the municipalities and we look at that, it's really up year-over-year. So I think that we're going to expect overall for the funding to continue to grow like with IIJA at the mid-to-high single digits.

That's good. And lastly, curious if you picked up any assets from the three most recent deals that maybe you could monetize? I know -- I don't know if you have any excess land or aggregate quarries. I know you're not as focused there just to help pay down debt and reload for future deals?

Yeah. Adam, we're always looking to monetize whatever we can, whether it's excess equipment, excess land, certainly, we're wanting to make sure we utilize the cash for the assets that are generating EBITDA, right? So yes, we'd definitely look for that.

Michael Feniger, Bank of America.

I just want to be clear and double-click on something. There's been some headlines, guys, about some pauses on funding to IRA and even IIJA projects. Now it sounds like that's more tied to maybe green energy. I just want to hear from you guys, like are you or your customers, the DOTs are they hearing anything about issues accessing funding, delays on payments, if you're hearing of that kind of filtering through to your core work yet?

Mike, we have not heard a thing about any pause on funding for projects or for work that's being left. What we have heard, which I think is good for CPI is the new administration is looking for ways to put more of the funds that they can toward hard infrastructure. And that's what we do. So we feel like that the new Secretary of Transportation Secretary Duffy has been very clear they want to try to move funds to the highest and best use and President Trump's always prioritized hard infrastructure. So we feel like that could bode well for us.

Helpful. And I just want to ask Jule. I mean you guys have a record backlog -- how is this kind informing you guys in the bidding environment right now? I mean, I think you talked about, look, there's still some inflation out there in terms of materials, aggregates a little bit of energy. It feels like liquid asphalt and diesel has been a good guy. But I'm just curious how that's informing you.

Could we expect actually the backlog maybe to plateau at some point because you're being more aggressive and you guys are trying to digest. I'm just kind of thinking about that record backlog with inflation, how that's kind of informing what you're seeing in the market? Are you seeing competitors out there? How are they -- how is it informing their bidding environment if everyone is acting accordingly.

Yeah. Mike, good question. The -- as we've said, the key to having a good backlog is to have a good backlog and to be able to bid patiently, and that's what we've done. We've done it for quite a few quarters now and the backlog has continued to grow sequentially.

I think, Greg, this is the 17th quarter, which is not typical. And we keep saying that would not surprise us for the backlog, this busy work season where we're burning off a lot of revenue to go down sequentially, and that wouldn't bother us at all because that's been the historical norm before these last few years.

I think our competitors are busy. We haven't really seen any change at all in the competitive landscape, but the fact that we're able to win work at good margins means that they're busy and bidding smart as well. So we've still got plenty of bidding opportunities. Our record backlog does allow us to bid patiently and to bid at good margins.

I'd add one thing to that, too. I think 12/31/24 is may be instructive as well and that we did have a significantly better revenue quarter than we expected because of the weather. But Along with that, we were able to, again, grow the backlog sequentially. So I think that tells you a little bit about demand.

Jean Ramirez, D.A. Davidson.

In the past in fiscal '24, you guys saw a pretty good commercial activity. I just want to know, based on your backlog, what is the level of commercial and in private activity versus fiscal '24. What do you guys expect there? And I just -- and I guess second part for a little bit of clarification of this backlog, how much of that is organic in the private sector versus, I guess, some contributions from Lone Star.

Jean, I'll give you just a high-level picture of the commercial markets and then let Greg sort of give you what he expects in terms of the breakdown. But we are continuing to see very healthy markets throughout the Sunbelt in the commercial and private markets. We certainly feel like in the last few months. There's been an increase in activity in terms of projects getting started. Just to give you a flavor some of the things we bid on just in the last couple of months and one.

North Carolina, Amgen is building a new pharmaceutical facility in Holly Springs. In Florida, we're working on a new Amazon facility in Palm City, in Texas and all, we're working on an expansion at the Tesla manufacturing facility. And so those are just some examples of the variety of projects that CPI works on in bids in the commercial market and the amount of commercial activity from a corporate manufacturing standpoint that we're seeing throughout the Sunbelt.

Greg, do you want to review how you see the numbers?

Yeah. So the numbers in terms of how the first quarter of '25 as it relates to the breakdown between public and private is very similar to the way it started 2024. So 58% public, 42% private. What happened last year was that move to -- by the end of the year, 63% public, 37% private. So we see that same trend happening in 2025, 63% public. It's just still a very strong environment and our backlog is supporting both of those numbers, and we'll continue to support that.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing remarks

We'd like to thank everyone for joining us today, and we look forward to speaking again next quarter.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.