Construction Partners Inc (ROAD) 2021 Q2 法說會逐字稿

Greetings, and welcome to the Construction Partners Second Quarter 2021 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Rick Black, 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 second quarter fiscal year 2021 results. This call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the Investor Relations section of constructionpartners.net.

Information on this call speaks only as of today, May 7, 2021, so please be advised that any time-sensitive information may no longer be accurate as of the date of any replay. I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance, are forward-looking statements made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. We will be making forward-looking statements as part of today's call that by their nature are uncertain and outside of the company's control. Actual results may differ materially.

Please refer to the earnings press release that was issued today for our disclosures on forward-looking statements. These factors and other risks and uncertainties can be found and 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 net loss and adjusted EBITDA. 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 the call over to Construction Partners' CEO, Jule Smith. Jule?

Thank you, Rick, and good morning, everyone. With me on the call today are Alan Palmer, our Chief Financial Officer; and Ned Fleming, our Executive Chairman.

Let me begin by thanking our over 2,500 employees throughout the Southeast for their hard work, dedication and commitment to maintaining safe work sites for themselves and their teammates. Because of them, CPI is well positioned heading into the second half of the year to meet our year-end goals. We ended the quarter with record high backlog, project lettings are up in many of our markets, our core operations are performing well, and our teams are motivated for the busy work season ahead. We are maintaining our outlook for the fiscal year, and we see significant opportunities for CPI, both near-term and long term.

In the second fiscal quarter, revenue grew 6.2% compared to the second quarter last year. While adverse weather caused substantial project delays in the quarter, that work is not lost but pushes forward, and we plan to complete that work in the second half of our fiscal year.

Halfway through the year, we are just slightly below our historical revenue pattern of 40% in the first half and 60% in the second half, even with the weather delays. It's also important to note that we ended the quarter with a record high project backlog of $773 million, including a record amount of backlog to be completed in our third and fourth quarters.

Moving into the seasonally stronger second half of the year, we continue to experience an extremely active bid environment due to strength in infrastructure funding programs and project lettings across our states and markets.

During the quarter, our core business performed very well. Overall margins were pressured by acquired backlog from recent acquisitions that was committed to by previous owners at lower margins. Historically, this is typical of new acquisitions, and we have consistently been able to increase project margins and grow market share in 12 to 18 months. Demand for our services, both public and private, remains high.

In addition, the funding mechanisms in place at the state level is strengthening. We currently expect in the next 12 months for potential upside of 20% overall in year-over-year infrastructure spending across our states. At the Federal level, we remain optimistic about the prospect of a significant infrastructure bill, considering the bipartisan support for infrastructure legislation. We are confident that our nation's infrastructure investing will continue to be a primary focus for our country, both as an economic driver and as a critical component of public safety.

Turning now to acquisitions. In the past 6 months, we have acquired a total of 13 hot-mix asphalt plants and added more than 300 employees. Looking forward, our pipeline for future acquisitions is robust. Within the states where we operate, we are having many conversations with potential sellers. And we're also having discussions with companies in other states as we look for opportunities to grow our footprint.

Our leadership team is actively working to identify and engage companies that fit well into our strategy and future growth plans. Today, we see more opportunities than we ever have at CPI. During the quarter, we have also extended our commitment to this future growth by evaluating and expanding our investment in our organization.

As a consolidator in our industry, we see more opportunities for bolt-on and strategic acquisitions, and we must be prepared to seamlessly integrate them into CPI. The most critical component of our success has always been our people. This means that we are investing in the people, processes and technology to take a larger and more geographically diverse company into the future. It's an exciting time for CPI.

I'd now like to turn the call over to Alan to discuss our financial results.

Thank you, Jule, and good morning, everyone. I want to start by highlighting our key performance metrics in the second quarter fiscal 2021. Compared to the second fiscal quarter of 2020, revenue was $179.1 million, up 6.2%. Acquisitions completed to the second quarter of 2020 contributed to $14.9 million of revenue. Gross profit was $18.1 million, down 10.4% compared to the second quarter of last year.

As we have stated before, acquisitions initially create a headwind to our operating margins. With 4 acquisitions in the previous quarter, normal low volumes in this quarter and the acquisitions being in the challenging North Carolina market, these acquisitions had a negative $3 million margin in the quarter on $12.2 million of revenue.

General and administrative expenses were $24.5 million, consisting of a nonrecurring $3.2 million legal settlement unrelated to the company's core operations, associated legal expenses of $0.7 million and $20.6 million of other general and administrative expenses. This compares to a $20.1 million G&A expense in the first quarter of fiscal 2021. General and administrative expenses were $16.8 million in the fiscal second quarter of 2020.

In addition to the legal and settlement expenses, the sequential increase in general and administrative expenses was primarily due to a $1 million increase related to acquisitions made subsequent to the second quarter of 2020 and payroll expenses related to new corporate positions and compensation initiatives.

On a GAAP basis, the company had a net loss of $4.9 million in the fiscal second quarter compared to a net income of $1.5 million in the second quarter last year. On a non-GAAP basis, adjusted net loss was $2 million in the fiscal 2021 second quarter compared to an adjusted net income of $1.6 million in the second quarter last year.

Adjusted EBITDA for the fiscal second quarter of 2021 was $11 million compared to $14.3 million for the second quarter last year. You can find GAAP to non-GAAP reconciliations of adjusted net loss, adjusted net income and adjusted EBITDA financial measures at the end of today's press release.

As expected, we experienced price increases on liquid asphalt and diesel fuel during most of this quarter, but we are seeing some stabilization in prices for both of these products.

Turning now to the balance sheet. At March 31, 2021, we had $33.8 million of cash and $38.6 million of availability under our revolving credit facility after the reduction for outstanding letters of credit.

As of the end of our quarter, our debt to trailing 12 months EBITDA ratio was 1.0x. This liquidity provides financial flexibility and capital for potential near-term acquisitions, allowing us to respond to growth opportunities when they arise.

Cash provided by operating activities was $2.4 million for the 6 months ended March 31, 2021, compared to $20.6 million for the same period last year. Capital expenditures through the first half of 2021 were $26.9 million. We still anticipate total capital expenditures for the year of $47 million to $50 million. We are reporting a record backlog as of March 31, 2021 of $773.3 million compared to $655.6 million at December 31, 2020, and $579.8 million at March 31, 2020. Approximately 79% of the backlog will be completed in fiscal year 2021. And as Jule mentioned, we are maintaining our fiscal year 2021 outlook for the year.

In summary, we are pleased with our second quarter results, the recent acquisitions and our project backlog.

I'll now turn the call over to our Executive Chairman, Ned Fleming. Ned?

Thank you, Alan. Before we open the call to your questions, I want to reiterate that the company is performing well. Despite some weather delays, on operating expenses, the company is tracking to its internal targets for the year, and we are pleased to maintain the fiscal 2021 outlook. The company is very well positioned for growth in a highly fragmented market with strong industry demand and growing infrastructure funding. We continue to execute our proven strategy of profitable, disciplined growth. As a result, our relative market share in the rapidly growing Southeastern United States is growing.

It is also important to note that the Southeast has grown at a faster pace than the rest of the country over the last decade. We believe the effects of the recovery since the pandemic have actually accelerated that demographic growth pattern. Today, we continue to review more attractive acquisition targets than at any other point in the company's history.

Last week, in the Berkshire Hathaway Annual Meeting, Mr. Buffet mentioned that SPAC mergers have increased prices of potential acquisitions. But given the unique dynamics in our industry and our specific criteria, valuation multiples have not changed. We plan to stay disciplined in this regard, and we are confident that our long-term strategy will continue to provide value to all our stakeholders.

With that, we'll now take questions. Operator?

(Operator Instructions) Our first question is from Andy Wittmann with Baird.

Great. I wanted to start out by asking a little bit on this backlog. Obviously, the number is up a lot sequentially. And I guess, Alan, in your comments, I think you mentioned 79% of this is going to be burned in fiscal '21. I guess, just given that it's increased a lot, I was trying to get a little bit more detail on the composition of that backlog in terms of the size and the duration of the projects in it, just to hopefully get some more confidence around the attainability of the 2021. Is this 79% of this backlog unusually high or low for this time of the year in terms of how much can be completed still in this fiscal year?

I mean it's pretty typical as far as what percentage we're going to complete in this year. It's just because it's larger, it obviously represents a lot more dollars. But maybe to answer what I think your question is, Andy, at this point of the remaining revenue that we think we're going to need to get to -- contract revenue that we're going to need to get to the guidance that we've given, it's 91% of that. Where last year at this time, we only had 82% of our remaining year backlog teed up.

So it is at the highest in several years as far as a percentage of the remaining contract revenue to get to our guidance. So -- but 78% generally at this point of the year, 75% to 80% completed in the next 6 months is not unusual.

Okay. All right. That's helpful. I guess just the next question I had is, I wanted to dig into, Jule, a comment that you had in your prepared remarks talking about how in the states where you're operating that you're eyeing down potentially a 20% increase in infrastructure spending. I was just hoping you could elaborate a little bit more on that. I hadn't heard you guys say that number before. And just kind of wondering where you got that and some of the things that are contributing to that outlook for your states And frankly, how certain is this? Are these initiatives that are already passed or user fees that are already there? Or are they waiting for legislation and/or other appropriations to achieve that?

Sure, Andy. The 20% increase year-over-year is really looking forward into the next 12 months. And as we've studied the states that we're in, what we're really seeing is the economic activity at the state levels, their state budgets are still healthy. But really, it's the several different COVID relief bills, the money that was passed that helped the states that's really starting to flow through. If you remember when they passed, we said it typically takes 9 months to a year. So when we start to see what the states are forecasting to let in their state fiscal year 2022, that money is really starting to have an impact, and we think it will increase project lettings overall 20%.

Now some states like Florida and Georgia, it's a higher percentage that we think, North Carolina and Alabama, it's a little less. But overall, it looks like about a 20% increase, looking over the next 12 months.

Got it. I'll do one more here, and I have some other ones maybe for later if they don't get asked. But I guess I wanted to ask on the recently acquired companies. And as it relates to their profit margins, I think I heard you say that they were a minus $3 million hit to EBITDA in this quarter. And I was just wondering if there isn't anything unusual about it if these companies that you acquired typically run at an EBITDA loss in the March quarter as well as your prospects in the time line for getting those margins back to more typical construction partners type levels?

Yes, Andy, good question. What I wanted to convey is that, typically, we make acquisitions multiple times during the year, and we've always talked about when we acquire them, there's a headwind, their backlog is lower, some of their fixed costs kick in earlier. But the reason for pointing it out with these is having made 4, that obviously is magnified 4x as much. But there's nothing unusual in these that we don't experience. The backlog we acquire is lower than our profit margins. You put on a lot of additional fixed expenses.

Those companies, the backlog made a little profit, but we had the worst -- we have a bad quarter always for all of the operating company in the quarter January through December -- I mean through March because that's when we typically only do about 20% of our business.

So the gross profit loss that they experienced all was the underutilization of running tons through the asphalt plant because typically you do a lot less asphalt paving work in the winter because not just rain, but cold. And then it was also the underutilization of their equipment.

So the jobs had a profit. It was as we've said before, less than what we typically would have on that type of backlog. But it was also those fixed cost is really what drove that negative gross profit, the slow conditions that we had in this quarter.

And Andy, I just want to add as far as those 4 acquisitions. We're excited about their prospects long term, and that's why we make acquisitions is for the long term. But whether it's the Sand Hills markets or the Northeast, Rose Brothers territories with outer banks, we are seeing a lot of opportunities there for growth and growing the relative market share of those markets. So long term, we're really excited about being there.

Our next question comes from Stanley Elliott with Stifel.

Is there a way to kind of parse out the 230 basis points on EBITDA, how much of that was weather versus how much was kind of the lower mix coming in from the other businesses? And then do we think that the -- you mentioned kind of 12 to 18 months in terms of when things would normalize. I mean do we think that this backlog that you have, is it going to be disproportionately at a lower margin versus the core business?

I'll try to answer both questions there, Stanley. I mean as far as the backlog that we've got, there was, fortunately, in one hand, there was minimal backlog that we acquired with these acquisitions because they're in North Carolina, and last year in North Carolina, the DOT let 1/10 of their normal. So they were faced with the same conditions that we were in our North Carolina operations. But because a substantial amount of their work was DOT, and they didn't do a lot of private work or other things like we do, where we're vertically integrated, they were impacted pretty significantly on their backlog profit. And so that was part of the impact.

And then the work that they've picked up since then, we're beginning to see an improvement in the bid margins in North Carolina. So as far as this backlog at March 31, very little of that was acquired backlog from these acquisitions. We completed in the part of the first quarter that we had we own them. And in this last quarter, a substantial portion of the inherited backlog.

So the backlog going forward, when factored in with the backlog of all the rest of the company, it's pretty insignificant. So we don't see that as a big problem.

I gave the $3 million negative gross profit, of course, on an EBITDA basis, that would not all flow down; you'd add back depreciation. But it had a pretty substantial impact on our net income and our EBITDA. The other core operations, although their revenue was down slightly this quarter compared to the prior year due to the weather that affected our core operations and these acquisitions, I mean our margins there and our EBITDA there were right in line with the prior year. So most of the EBITDA line impact was the impact of these acquisitions, but $3 million of the gross profit line was. And then we disclosed it was in this quarter, there was approximately $1 million worth of overhead that was added that was related to these acquisitions and the one acquisition that was made in March last year.

So had a significant impact. But one thing I just want to indicate from our expectations for what we would do revenue-wise and what we would do profit wise because we anticipated all of this with the new acquisitions. We are very close to what our expectation was of both revenue and EBITDA at this time and that's one of the reasons that we maintained our guidance because while these acquisitions significantly impacted this quarter, the full year, they're going to have a positive impact. As Jule alluded to earlier, nothing has changed there, but we recognize that you all don't have all of that detail about the sequence of the earnings and the revenue of these acquisitions and so we're still very happy with them.

That's fantastic color. And then thinking about kind of over the rest of the year in terms of the capital spend piece. Are you all having problems or OEMs having problems or delays getting machinery to you all that you would need for the heart of the construction season? Just curious because a lot of those guys are having backlogs, big backlogs as well as even some supply chain issues?

Yes, Stanley, that's a good question. The -- we are clearly seeing supply chains in a lot of areas of pressure. We have great relationships with equipment suppliers, and we're managing through it. But there's definitely a delay in getting construction equipment. We have made the decision to delay the normal pace of disposals and holding on to our equipment to make sure that we can do this backlog. So it's a factor, but it's not affected our business. But it's a -- you hear about this in a new number of industries, and it's certainly affecting ours.

Stanley, one comment there. We are definitely ordering equipment earlier because the lead time to get it in is longer. So even the CapEx, we've spent less this year at this point than we have in the prior year due to that delay. But as Jule said, we have the benefit of keeping the equipment we have and continuing to run it and then disposing the bit after we get the new piece in.

Our next question comes from Josh Wilson with Raymond James.

I wanted to dig into the guidance assumptions a little more. I think last quarter, you said for the full year sales growth, you thought half of it would come from the core business and half would come from the acquisitions. Is that still the case or is the balance between the 2 changed?

Yes. That's pretty much what our projection, internal projection shows for the rest of the year is that the acquisitions will be on target with what we initially expected and that the organic growth will be consistent with what we originally expected.

And in terms of the increase in the potential M&A pipeline, is that mostly bolt-ons? Or are you seeing the potential for platform acquisitions increase as well?

Yes, Josh. So as I said in the prepared remarks, we're having a lot of conversations in the states we're in with potential bolt-on acquisitions, and we feel very good about that. But we're also having conversations in adjacent states with potential platform acquisitions. And so they're really both very active right now.

And last one for me. Could you give us an update on what you're seeing in terms of private activity in each state and maybe what your outlook is there?

Well, the bid environment is very active right now on the public side, but on the private side as well in a lot of our markets. And as Ned said, the Southeast is growing, and we're seeing that. There is a lot of residential activity, but there's also a lot of commercial activity, warehouses, data centers. So those continue to be a lot there. And also, when we say infrastructure, the spending that's happening with infrastructure is more than just roads. And we are bidding a lot of airport work, railroad work. So it's very busy on a lot of fronts right now, public and private.

Our next question is coming from the line of Adam Thalhimer with Thompson, Davis.

The -- okay. So we feel good about revenue because so much of that -- revenue for the back half, because so much of that already is in backlog. Help us gauge your confidence in the margins, though, for the back half.

Well, what we're seeing in our backlog margin is virtually no change. So we feel good about that. The area where we will pick up a lot of margin in the second half is currently, we're at 38% of our annual revenue. When we do that 62% in the back half, then the asphalt plants, the equipment accounts, all of those are going to show a very strong add to that gross profit because we're going to be utilizing them at a much faster rate and they have pretty significant fixed cost. So I would say we have a high confidence level that we can get near that completion of that backlog that we've got scheduled that will have a very positive impact of that. We've talked about some of the headwinds with rising petroleum prices, and we experienced that a little bit in this quarter, which is what we anticipated. We've certainly seen that stabilize toward the end of the quarter at those levels and going into this quarter. So I'd say we have a pretty high confidence level in being able to get to that margin that we've kept in that guidance.

Okay. Good answer. And then on the North Carolina acquisitions, is it fair to say that -- I mean look, if the near-term outlook was really good for those businesses, they probably wouldn't have sold. Is that fair to say? I mean you're willing to take a long view?

Well, Adam, I would say this. We do take the long view on acquisitions. Most of the people, the sellers we deal with are really doing more strategic family planning versus making just near-term decisions. And I would say that was the case with these 4. It really was relationships that we've had for a long time. And when they felt like it was in their family's best interest to sell, CPI was able to take advantage of that and to create a win-win situation for them.

So I think we're very excited to be there. These markets have great long-term upside. Clearly, North Carolina has had a tough last 12 months, but we see the bidding environment there, the DOT is letting work at a normal pace now. As Alan said, we see the margins getting back to normal now. And so we're very excited about those 4 acquisitions and what they're going to add to CPI in the future.

And as just another point there...

And Apple is coming to town.

And Apple is coming to town. That is really an exciting thing for the Raleigh-Durham area. CPI has done most of the work over the last 10 years in the Research Triangle Park. So that is going to create a huge amount of opportunity for our North Carolina markets.

And then last question, there's so much -- there's -- I can't -- you said something on the stimulus and it takes 9 months, but I can't -- there's been so much stimulus. I don't even know what that was referring to. And then I'm curious on the $1.9 trillion that Biden just did, a lot of that was supposed to go to municipalities of hundreds of billions of dollars. I was thinking that could help you guys for some kind of muni or town projects. Like, maybe you can just roll through some of the stimulus you're seeing and help break it down for us.

Yes, Adam, you're exactly right. The -- it gets a little confused looking back to the -- what passed in March 2020, what passed in December, what passed just recently in March. They all have different cash flow streams to the states and to the cities, and we're seeing that help in the near term. The different plans at the federal level that are going around Washington right now can be a little confusing. And I'm trying to keep up with it and talk to folks in Washington between Republican plans, the Democrat plans, the House, the Senate. They have different time frames; some are 5 years, some are 8 years.

But overall, the big picture is that there is bipartisan support to have a significant investment in infrastructure. And whether it's resurfacing and surface transportation or airports, railroads or money to municipalities, if it's going to infrastructure, that's going to be a good thing for CPI.

Okay. But that specific comment, which bill is that where you said it was a 9-month lag?

That was the stimulus bill that put, I think it was $100-something million. Jule, was that right?

Yes, it was -- it had $10 billion in money to the states for transportation. And about $1.5 billion in...

Okay. December last year. I got it.

That's right. Exactly. We're starting to see the DOTs actually give us their indications of what projects and when they're going to spend that money. And that's a significant part of what we're seeing this 20% increase in state spending over the next year is just some of that COVID relief money finally making its way to project lettings.

Our next question is coming from the line of Michael Feniger with Bank of America.

Just to put a finer point on this, to be clear, the backlog of the acquisitions where historically, the margins are lower, did that surprise you at all? Did you know going into the guidance after you guys completed those acquisitions that, that was going to be the mix for the margins? And when do we cycle off of those lower margin projects?

Yes. Michael, in our due diligence, and when we put together our forecast for this year, we had completed all 4 of those acquisitions. So we knew what the backlog was that we were acquiring. So the amount of backlog, the margins in that was not any surprise. And as I said earlier, on the projects themselves, we made at or near the profit margin that we expected and that was in the backlog because that's what we built our budget for the year on. What impacted us the most was, again, if we had bought those acquisitions at the end of March, when we're starting our busy season, we would have had positive impact at the gross profit line from the plants and equipment. So the negative impact is the same kind of impact that we have in our existing operations, which is the difference between our wintertime margin and our summertime margin. It has nothing to do with the backlog or the projects we completed, it has to do with the fixed cost at the plants and the equipment level and the G&A.

So there were not huge surprises. There are always surprises, but there were not significant surprises with the amount of backlog. In the first and second quarter on the North Carolina operations, we completed about $14 million of backlog -- of contract backlog about $19 million of total revenue.

So we've completed a substantial portion of what we acquired. We started bidding, obviously, in those markets and we're picking up backlog going forward, but it was not acquired. So the 3/30 -- the 12/31 backlog had all of the acquired backlog already in our backlog. Everything we picked up since then in those markets and all of the others has been new bid work. And so the amount of acquired backlog in our 12 -- excuse me, 3/31/21 backlog is fairly minimal from those acquisitions because, as I said earlier, they had a pretty small backlog compared to historical.

Typically, they would have 5 to 6 months of backlog, most of the small companies like that. These probably had about 3 months of normal month backlog. So we've completed a substantial portion of that as of March 31, and it was the backlog we acquired. What we have mostly now in those markets is what we bid ourselves.

Okay. And I mean the quarter ended, obviously, in March, we're now in mid-May. Are you seeing the absorption starting to recover, do you feel confident? I understand that you're going into your seasonally more important part of the fiscal year here. So are you starting to see that the absorption is starting to pick up? Or is that still too early for us to see right now?

We saw that in March. March was a very good revenue month for us because that's usually what we call a swing month depending on the weather. So we saw in March, getting our volume up. We're in January and February, especially February, we had extremely low volume. So we began to see that in March and certainly, our volume in April, while we haven't completely closed out the books, we know what our revenue is. And so once that revenue gets up, the jobs -- think of the job portion is fairly consistent throughout the year. It's the plants and equipment and that fixed cost recovery that really moves that margin needle.

And we saw a significant improvement in March over what we had seen in December, January and February, and that's what will continue throughout the rest of this year.

Okay. Fair enough. And just to -- just to be clear, the 20% pickup in infrastructure spending you guys are talking about, that does not include the Federal package that's being talked about now? And I guess, how should we think about the fact that you could be growing your top line at 30% to 40% in the fourth quarter, you could be exiting the year with 30% or 40% revenue growth. You're talking about 20% pickup of infrastructure spending in these states. I mean are we entering -- are we thinking about starting point for 2022, really like 15%, 20%? Is that what we should be kind of thinking about on an organic basis just with some of these numbers that we're starting to talk about and throw around and give them what you're exiting the year at?

Yes. Michael, just to -- good question. The 20% increase year-over-year in state spending is really looking out forward. And it's really just the state budget. So it doesn't have anything to do with the Federal discussions that are ongoing. The -- as far as our revenue, we try to grow year-over-year in the high single digits and low double digits. Clearly, with the amount of government investment in infrastructure, we're bullish and optimistic about what the future is. But that -- our guidance really is not -- that 20% is really looking out into the future, the next 12 months. Most of our backlog for 2021 is already sold.

Okay. And then I guess what I'm -- I'd like to get a feel for is inflation is a big topic. You guys discuss raw materials. What you're seeing with asphalt prices in diesel, it sounds like it's in line with what you guys are kind of expecting. If we're going into this higher growth environment, can you start to be more selective? Can we think about what are the inflationary pressures we have to think about with the road maintenance business? And if you are going to see this higher increase of Federal investment, can you be more selective? And can we see pricing power actually come through with what you're going to be bidding on going forward?

Michael, I'll answer something on that. I mean historically, if you go back 20 years, when there has been an abundance of work, then margins generally are higher, bid margins are generally higher. When you have the situation like was in North Carolina last year when there is a extreme shortage of projects or even a significant shortage of projects to bid, then margins are much more compressed because everybody has got to get some work.

So to your point, history has shown that if there is a significant surge in the amount of work that's out there, then margins go up historically, and that's what we would anticipate. It's a function of how fast can the market meet that demand versus what kind of price can they get at the bid table. And eventually, margins come back down as more capacity is added, just like in any other business.

But for a period of time, if there is an extremely significant amount of additional money going in, then it's not that you're more selective. It's just that you're working everyone harder and you're able to bid at a little bit better margin because if you don't get that project, there will be another one coming up.

We'll move on to our next question, which is coming from the line of Zane Karimi with D.A. Davidson.

So real quick, we did talk about weather earlier on in the remarks. But understanding of the work that wasn't able to be completed in 2Q, I feel like the weather is still available. Can you quantify how much revenue or EBITDA was pushed into the second half from these weather impacts? And are you going to be able to complete all or most of that in the third quarter? And how would that impact fourth quarter as well?

Yes. Zane, I mean roughly $20 million of revenue -- we would have liked to have completed in the first 6 months about $20 million more revenue. So -- and most of that was in the second quarter, where we had anticipated being able to grow our revenue slightly over the first quarter. So there was about $20 million of contract revenue that we did not do that moved forward.

Historically, when that happens earlier in the year, we're able to make that up in the third and fourth quarter. And so that's what we have -- our expectation is now. Our crews are -- we've got them all in good shape. We're ready to move. And in fact, as said earlier in April, we saw a significant increase in the amount of work that they've completed. So right now, we feel fairly confident that we can complete that and get to our guidance as far as revenue.

And we certainly have, as Jule has said, and I have -- we've got the backlog to do that. So we're confident that we've got -- we had 6 months to make it up. It won't all be made up in the third quarter; some of that is going to the fourth quarter. But we feel good about the amount we've got to do.

And Zane, I would just add, we're not saying that blindly. As we typically do, we always at the midyear, the midpoint is we forecast and assess where we are. And so our -- maintaining our guidance is based upon that assessment at midyear. So we feel good about being able to complete that work in the next 2 quarters.

Of course. And then I also appreciate the color around SG&A earlier and the reasons for the elevated levels this quarter. But given the payroll increases, should we assume that SG&A ex-legal fees and whatnot, as a percent of revenue, would remain over 11% moving forward?

No. It will go down significantly as that revenue comes through. So part of that is not just the increase, but generally, our SG&A is fairly consistent throughout the year other than when we make acquisitions, and they come in and other midyear things that typically happen. But it should drop back down to a much more historical level than what you see in this short period when it's always significantly elevated percentage-wise.

Our run rate for the last 2 quarters will be higher than it was in the first 2 quarters in just absolute dollars because of some initiatives that we've done. Jule mentioned, and we've commented about, we're building the management team and everything for our future growth that we see. We can't wait until we make acquisitions or we have that organic growth staff for that. So we generally try to do that ahead of time.

And those costs end up in G&A until all of that comes into being. But as a percentage of revenue, it will go down significantly because we'll do 60% of our revenue or 62% in the last 6 months with relatively flat overhead cost.

We have no additional questions at this time. So I would like to turn the floor back over to management for any additional closing comments.

Okay. Thank you, operator. I just want to thank everyone for joining today's call, and we look forward to speaking with you on the next conference call.

Ladies and gentlemen, we thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.