Operator, and good morning, everyone. We appreciate you joining us for the Construction Partners conference call to review fiscal 2019 Q1 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 recorded on this call speaks only as of today, February 12, 2019, 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's 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 yesterday for our disclosure 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.
Reconciliation to the nearest GAAP measures can be found at the end of our earnings sheet. 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' President and CEO, Mr. Charles Owens. Charles?
Thank you, Rick, and good morning, everyone. With me on the call today are Ned Fleming, our Executive Chairman of the Board and Alan Palmer, our Chief Financial Officer. In my opening remarks, I will provide comments about our fiscal 2019 Q1 and give an update on our business. I will then turn the call over to Ned for a few additional comments. Finally, Alan will review our financial results and discuss our outlook.
During our fiscal Q1, our construction projects exceeded gross profit percentage expectations despite delays related to Hurricane Michael and October and sustained rainfall experienced in many of our markets in November December. Weather improved in January across our markets, allowing for increased productivity. It is important to note that revenue is not lost when weather delays prevent the completion of certain projects. Those projects are simply pushed forward to be completed. I expect 2019 to be a good year for our company and we are confirming our outlook for 2019.
Historically, 40% of our annual revenue comes in the first half of our fiscal year, which is seasonally slower than the second half of our fiscal year due to normal weather patterns, shorter work days and other factors. We anticipate that our gross profit percentage will increase during future quarters as our fixed costs are allocated over a larger revenue base due to higher productivity at our asphalt plants and increased utilization of our equipment. We continue to maintain a strong backlog of project work that we will work through in the remaining three quarters of our fiscal year. Approximately 80% of our current backlog will be completed in fiscal 2019. In addition, opportunities for future projects in our markets remain favorable.
As we will bid on a number of construction projects that we expect to complete both during the current fiscal year and beyond. From an operational standpoint, our local markets remain competitive. However, we continue to be very focused on maintaining our cost competitiveness and bidding discipline. Our government infrastructure projects include publicly funded projects for local and state roadways, interstate highways, airport runways and bridges. Our private projects primarily include paving and site work for office, industrial parks, shopping centers, local businesses and residential development.
Construction projects related to the residential housing market accounts for less than 5% of our annual revenue. Throughout our local markets, another critical component to our competitiveness is our workforce. Our company culture is driven by great people, although we hear a lot about the tight job markets of today's economy, it has not affected our growth strategy. We are always working hard to obtain, train and retain the best people. This is also an advantage locally because we can offer good benefits and pay extensive job training and opportunities for advancements.
We also provide constant work that is local with the advantage of keeping our people close to home. Due to the nature of the reoccurring maintenance projects that we bid and perform within a year, we are able to capture wage increase at the start of the projects. This helps to protect the profitability of the projects from wage increase impacts. Turning now to growth. We drive growth through 3 primary levers in our business model.
1, by doing more work based on demand in our markets. 2, through strategic acquisitions that either expand our footprint into new markets or expand our vertically integrated operations 3, through new greenfields where we set up an asphalt plant in an area adjacent to our existing markets. We added approximately $51,000,000 in revenue attributable to acquisitions and greenfield expansions that combined with organic growth led to a 20% revenue growth on a consolidated basis in fiscal 20 18. Currently, the acquisition pipeline looks good. In fiscal 20 19, we anticipate opportunities to pull all of the 3 levers.
We remain positive about our business and growth outlook for the full year. Our plan is to continue to execute on our strategy that has proven to deliver controlled profitable growth. Now I'd like to turn it over to Ned Fleming, our Executive Chairman of the Board for a few additional comments. Ned?
Thank you, Charles, and good morning to everyone. This is a predictable and consistent business operating in fast growing southeastern states where both the demand for ongoing road repair projects and the public funding to pay for the work not only exists, but it is growing. We have led the company and consistently grown the business for nearly 2 decades. Charles and Alan are excellent operators and they work alongside a team of highly experienced, dedicated and effective leaders and managers. I believe we are well positioned for continued growth in 2019.
We continue to communicate the business is seasonal and individual quarters can be impacted more than expected, but it is not cyclical. As Charles mentioned, and I have seen since the founding of the business, our business model allows the company to increase productivity during better weather, therefore to make up for revenue delays, which is exactly what our team is doing and is the reason why we are confident about confirming our growth outlook for the year. As the team continues to consistently execute our business model, we believe it will become even more apparent to the market that CPI is different than many of the public infrastructure companies. The nature of our recurring publicly funded maintenance projects with shorter durations and lower volatility risk from input costs distinguishes our model. Through the leadership of our highly experienced team, both here in Dothan and throughout our platform companies, Construction Partners is well positioned to execute our plan and grow the business.
And with that, I'd like to turn the call over to our CFO, Alan Palmer. Alan?
Thank you, Ned, and good morning, everyone. I want to start by quickly highlighting our key metric performance in the Q1. From a financial standpoint, as we've discussed, lower than expected revenue due to sustained rainfall in our markets prevented the absorption of some of our fixed costs and impacted our profitability. And as Charles mentioned, that revenue does not go away and the margin on those projects has not changed, that work is simply pushed forward into future periods. Compared to the Q1 of 2018, our revenue was up 2.6 percent to $154,300,000 Revenue for the quarter increased $3,900,000 compared to last year due to $16,400,000 of revenue attributable to Scruggs, which we acquired in the Q2 of fiscal 2018.
Revenue in our existing operations was down. Gross profit was $21,100,000 which was down 7 point 3% from the prior year. Gross profit decreased approximately $3,000,000 primarily due to a decline in production of hot mix asphalt for both internal and external sales as well as lower utilization equipment resulting from construction project work deferred due to substantial rainfall during November December. The decline in production of hot mix asphalt and lower utilization of equipment resulted in under absorption of fixed costs. This decrease was partially offset by an improvement in gross profit margin percentage at the construction level.
Net income was $5,200,000 down 53.1 percent. Earnings per share were $0.10 per share, down from $0.26 per share and adjusted EBITDA was $14,700,000 down 10.9 percent. Let's take a closer look at the quarter from a cost perspective, where despite the lack of volume, we did not experience increases in our total fixed cost. We were just not able to absorb as much of those fixed costs and project costs during the quarter. Looking at our input cost, as we mentioned on our last call, asphalt cement pricing stabilized in our 4th quarter and currently we don't anticipate changes to have a significant impact in 2019.
General and administrative expenses in the quarter were consistent with our expectations and included an increase of $1,200,000 due to Scruggs acquisition and $700,000 due to public company costs that we did not have in the same quarter last year. We will continue to diligently manage margin. To do this, we must also be active in understanding exactly what we are seeing in our markets. Our business is very competitive and as with most industries, hotspots of competition can move around. We continue to successfully navigate the competitive environment, maintaining our market position, while also steering revenue to stronger markets as opportunities present themselves.
We can make up for margin squeeze with work, additional revenue to maintain our EBITDA. Strategically, our organization maximizes efficiencies through scale and flexibility to move crews and equipment to take advantage of favorable margins and to maintain our EBITDA. Backlog provides CPI with significant visibility in the next 12 to 18 months. We define backlog as projects for which we either have an executed contract and are currently working on that contract or where we are the low bidder on a public project or we have a commitment from a private customer, but have not executed a contract. Backlog does not include any future external sales of hot mix asphalt for aggregate.
We maintain a strong construction project backlog that we will complete during the remaining three quarters of the fiscal year. At December 31, 2018, the company's backlog was $575,200,000 Of this amount, dollars 459,000,000 is expected to be completed during the 2019 fiscal year. And this represents a higher percentage of revenue to be completed during this fiscal year than at the same time last year. In addition, opportunities for future projects in our markets remain favorable as we will bid on a number of construction projects that we would expect to complete both during the current fiscal year and beyond. Turning now to the balance sheet.
At December 31, 2018, we had $91,600,000 of cash and cash equivalents and $14,000,000 of availability under our $30,000,000 revolving credit facility after deducting outstanding letters of credit. Our debt to EBITDA ratio was 0.84. You can see we have a very strong balance sheet to support the growth opportunities that we're seeing. Cash provided by operating activities was $1,200,000 for the quarter ended December 31, 2018, compared to $19,500,000 for the quarter ended December 31, 2017. The decrease was primarily due to a decrease of $5,800,000 in net income and a $14,000,000 greater decrease in accounts payable due to the normal fluctuation in the timing of processing transactions in our accounts payable cycle.
CapEx in the Q1 was $7,400,000 down from $9,500,000 in the same quarter last year. For fiscal year 2019, we expect our capital expenditures to be in the range of $38,000,000 to $42,000,000 which compares to $42,800,000 in fiscal 2018. Before we turn the call over for your questions, I'd like to review our financial outlook for the full fiscal year 2019, which ends September 30. We are continuing to target annual revenue growth of high single to low double digits over the long term to maintain the double digit adjusted EBITDA margin. Our outlook for 2019 calls for revenue in the range of $760,000,000 to $810,000,000 compared to $680,100,000 in fiscal year 2018.
Our net income, we expect to be in the range of $38,000,000 to $43,000,000 compared to $50,800,000 in fiscal year 2018. As a reminder, net income in fiscal 2018 included a non recurring $10,600,000 after tax settlement. Adjusted EBITDA is expected to be in the range of $85,000,000 to $91,500,000 compared to $75,500,000 in fiscal year 2018. And finally, our fiscal year 20 19 outlook does not take into account any future acquisitions or greenfield expansions that may occur during the year. The outlook also does not include the potential impact of any new federal or state infrastructure or highway related legislation that could be passed in 2019.
From a modeling perspective, I'd also like to mention that our effective tax rate in 20 19 will be approximately 25% compared to our effective tax rate of 17.2% in fiscal year 2018. With that, we'll now take any questions. Operator?
Thank you. We will now be conducting a question and answer Our first question comes from the line of Josh Wilson with Raymond James. Please proceed with your question.
Thanks for taking my question and good morning to all of you.
Good morning. Good morning, Josh.
A few housekeeping items on my end first. 1, you talked about the normal seasonality being 40% of sales in the first half. Do you expect to also follow that pattern in fiscal 2019?
Yes. That would be our expectation at this time.
And regarding the comment that gross margins improve in future quarters, do you mean sequentially versus what you just reported or year on year?
Versus what we just reported.
And that includes the March quarter when there's still potentially some lower activity seasonally?
Well, if we get back, Josh, if we get back to what we believe we can for the 1st 6 months, the 40% then the margin in the quarter should be similar to the margin in the Q1, because we'd be doing approximately the same amount of revenue.
Got it. And then you called out some of the impacts on operating cash flow. I also saw the inventory turns were down or more of a use of cash than I had expected. Anything to call out there?
No, I think a
lot of it was just we didn't do the revenue that we had anticipated in December. So we had the plants and the quarries loaded up ready to do in the last couple of weeks of the month, we just did no work.
Got it. Thanks and good luck with the next quarter. Thank you.
Our next question comes from the line of Justin Hauke with Robert W. Baird and Company. Please proceed with your question.
Yes. Good morning, guys. I guess, maybe just something to help quantify exactly how much weather related revenue was deferred. Do you have a number for that for the Q1? Because I think in the Q4, you'd said $15,000,000 to $20,000,000 from weather then.
What was it in the Q1?
Justin, it had been over
$20,000,000 We were about $25,000,000 short of our budgeted revenue for the quarter. What we had lined up and what we saw on the jobs that we had scheduled out. So it was over $20,000,000
Great. That's helpful. I guess the second question is just the seasonality. It seems like this year is going to be a little bit different than maybe what we would normally expect, which would normally have the 2nd quarter being a little bit lower revenue contribution than the Q1. But given the commentary on January weather being better and the productivity improving and the 40% of revenue that you typically generate in the first half, I think that implies at least $150,000,000 of revenue here in the second quarter, if you were to hit that normal pattern.
So is that how we should be thinking about the 2nd quarter, at least at this point that revenue is more similar to the Q1 on a numeric basis? Yes.
Yes.
Okay, great.
We've got our jobs, so that's what we've got to complete to get back on track.
Okay. That makes sense. And I guess just the last question on the backlog. Normally this would be kind of a build quarter, although you mentioned that the in year backlog is higher than it was last year. Was there something last year in the backlog, maybe large projects or multiyear projects that was kind of artificially pushing that up or
how
should we think about the
backlog being down?
Yes, that's exactly right. Last year in the Q1, most of the backlog increase that we had from September 30 was backlog for future years. And actually, our backlog to be completed in the next 9 months in the remainder of the fiscal year went down between September December 'seventeen because we were running off that revenue. This year, the work to be completed in the remaining 9 months is only slightly lower than what we had at September 30, complete in 'twelve. We did not add any backlog for future years.
And that's really a more typical pattern that we've had in prior years than last year was. Last year, the backlog for future years in that quarter went up about $70,000,000 In prior years, generally, we're not adding future years backlog. So it's really a function of last year, we got some larger multiyear projects in that quarter, where this year, all of the backlog we booked in from October 1 to December 31 was work to be completed this year.
So is that a metric that you'll continue to disclose? I mean, can we track that so we have a better clean in year backlog number? Or is this just something you're calling out for this quarter?
We can provide that. I mean, obviously, the backlog to be completed the remainder of the year goes down dollar wise in the backlog for future years' bills if you work through. But we have I think we have disclosed in the past at year end what percentage of our backlog is going to be completed this year and next year in future years. So we'll continue to do that and we can do it on quarterly basis.
Yes, that would be helpful. Thank you very much. And I will turn it over here.
Our next question comes from the line of Zane Karimi with D. A. Davidson. Please proceed with your question.
Hey, good morning, everyone.
Good morning, Zach.
So first off, what are you seeing on the M and A front? Are you guys seeing more or less sellers in the market versus time last year? And then kind of with public valuations for some of these civil players under pressure, how do you see that permeating into the private environment at all?
Same, what we're seeing on the M and A side is we're seeing a lot of activity and a lot of we've seen a lot of opportunities out there. And as I stated in my opening remarks that we're going to grow our business through By doing more work in the areas that we operate in and through acquisitions and greenfield, and we anticipate all of those pulling all of those levers this year.
Got you. And then one more on that. Any color you have on how the Scruggs acquisition has gone thus far and is going relative to your expectations?
The acquisition is going very well. It met all of our expectations. We knew we were getting a great management team and a great workforce, and they performed very well, and we are very pleased with the acquisition with that company.
Great. Thank you, guys. I'll turn it back over.
Our next question comes from the line of Trey Grooms with Stephens. Please proceed with your question.
Good morning, guys. This is actually Noah Merkowsko on for Trey Grooms.
Okay, Noah. Good to talk to you.
You guys too. So my first question, you guys mentioned that you had some delayed projects due to weather and you're expecting to complete those. Can you maybe talk about that cadence throughout the year, like when you're going to expect to complete those?
We would expect that the part that we didn't complete in our Q1, we would be able to complete in the second quarter. So we expect our Q2 to be much stronger than it was last year and to be able to get back pretty close to our 1st 6 months, we feel like we'll be able to get to that 40%, 60% split. So particular jobs that were delayed would be the things that we're working on now. And many of those we were able to get in a good January and so far February has been very favorable.
Got you. That makes sense. And then I just wanted to get a little bit more detail on the growth levers that you guys talked about. Could you maybe quantify how many greenfields you're looking to do this year?
Norman, we basically are looking at several different growth, like I've talked about our 3 levers. And at this point, we're not saying how many acquisitions or greenfields are in what areas, but things are looking very, very positive and very attractive markets that we want to be.
All right. And my last question, did the government shutdown affect any of the demand in your markets?
It has not affected us at this point. I think you'll probably hear different areas that could be affected maybe on larger projects and getting things out. But as far as our contacts that we've had with the DOTs that we've worked, we do not anticipate any impact that's going to affect us materially.
All right. Thanks. That's all my questions. I'll turn it back over.
There are no further questions in the queue. I'd like to hand the call back for management for closing comments.
Okay. I would like to thank everyone for being on
the call today. And just keep in mind that management team and we will stay focused on our strategy and we look forward to speaking with you on the next conference call. Thank you very much.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.