1/24/2018 CFMA WINTER 2018 CONFINDEX REPORT Concern Grows Even As Economy Improves January 24, 2018 Tim Wilson Stuart Binstock National Industry Partner President & CEO BKD National Construction & Real Estate Group Construction Financial Management Association (CFMA) twilson@bkd.com sbinstock@cfma.org 1
1/24/2018 TO RECEIVE CPE CREDIT • Participate in entire webinar • Answer polls when they are provided • If you are viewing this webinar in a group Complete group attendance form All group attendance sheets must be submitted to training@bkd.com within 24 hours of live webinar Answer polls when they are provided • If all eligibility requirements are met, each participant will be emailed their CPE certificates within 15 business days of live webinar WHAT IS CONFINDEX? CONFINDEX is CFMA's proprietary confidence index survey of CFOs in the commercial construction sector. It is the only confidence index survey asking the level of confidence from important decision makers in a critical industry of the US economy. www.cfma.org/confindex 2
1/24/2018 WHAT IS CONFINDEX? CONFINDEX is compiled from four sub-indices measuring critical components of the financial health of a commercial construction company: • Business Conditions • Financial Conditions • Current Conditions • Current Year Outlook WHAT IS CONFINDEX? Measurements Taken Using 8 Questions • Current Business Conditions • Future (1 year) Business Conditions • Current Bank Credit Availability • Future (1 year) Bank Credit Availability • Future (1 year) Bonding Credit Availability • Line of Credit Status • Current Backlog • Future (1 year) Backlog 3
1/24/2018 WHAT IS CONFINDEX? CONFINDEX Survey Panel Composition 300+ randomly selected CFMA General Members with the title of CFO in non-residential construction companies WHAT IS CONFINDEX? What the CONFINDEX Number Indicates • Built using a “net confidence scoring” approach • Measures degree to which there is a more positive or negative outlook among survey panel members Neutral point is set at 100 Less than a 100 reading indicates pessimism among the survey participants, while a reading more than 100 indicates optimism among the survey participants 4
1/24/2018 QUARTERLY CONFINDEX READINGS SEPTEMBER ‘17 VS. DECEMBER ‘17 INDEX READINGS SEPTEMBER 2017 DECEMBER 2017 Overall Confidence Index 124 124 Business Conditions Index 128 130 Financial Conditions Index 121 119 Current Confidence Index 128 130 Year Ahead Outlook Index 120 117 5
1/24/2018 SEPTEMBER ‘17 VS. DECEMBER ‘17 INDEX READINGS SEPTEMBER 2017 DECEMBER 2017 Overall Confidence Index 124 124 Business Conditions Index 128 130 Financial Conditions Index 121 119 Current Confidence Index 128 130 Year Ahead Outlook Index 120 117 Business Conditions Index is closely tied to estimates of current and future backlog. SEPTEMBER ‘17 VS. DECEMBER ‘17 INDEX READINGS SEPTEMBER 2017 DECEMBER 2017 Overall Confidence Index 124 124 Business Conditions Index 128 130 Financial Conditions Index 121 119 Current Confidence Index 128 130 Year Ahead Outlook Index 120 117 Financial Conditions Index represents bank credit, bonding credit, and working capital line of credit availability. 6
1/24/2018 SEPTEMBER ‘17 VS. DECEMBER ‘17 INDEX READINGS SEPTEMBER 2017 DECEMBER 2017 Overall Confidence Index 124 124 Business Conditions Index 128 130 Financial Conditions Index 121 119 Current Confidence Index 128 130 Year Ahead Outlook Index 120 117 Current Confidence Index reflects all current business conditions— levels of bank credit availability, bonding, working capital, and backlog. SEPTEMBER ‘17 VS. DECEMBER ‘17 INDEX READINGS SEPTEMBER 2017 DECEMBER 2017 Overall Confidence Index 124 124 Business Conditions Index 128 130 Financial Conditions Index 121 119 Current Confidence Index 128 130 Year Ahead Outlook Index 120 117 Year Ahead Outlook Index pertains to anticipated future business conditions, future bank credit, bonding, and backlog. 7
1/24/2018 CONSTRUCTION INDUSTRY BUSINESS CONDITIONS DECEMBER ‘16 VS. DECEMBER ‘17 DECEMBER ‘17 VS. DECEMBER ‘18 Significantly Better 13% Significantly Better 5% Slightly Better Slightly Better 40% 31% Same Same 35% 37% Slightly Worse 10% Slightly Worse 26% Significantly Worse 2% Significantly Worse 0% Don't Know/NA Don't Know/NA 0% 1% 0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% PROFIT MARGINS DECEMBER ‘16 VS. DECEMBER ‘17 DECEMBER ‘17 VS. DECEMBER ‘18 Significantly Better 3% Significantly Better 6% Slightly Better Slightly Better 43% 36% Same 30% Same 43% Slightly Worse 19% Slightly Worse 14% Significantly Worse 5% Significantly Worse 0% Don't Know/NA Don't Know/NA 0% 1% 0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% 50% 8
1/24/2018 CONSTRUCTION MATERIALS’ PRICES DECEMBER ‘16 VS. DECEMBER ‘17 DECEMBER ‘17 VS. DECEMBER ‘18 Significantly Better 0% Significantly Better 0% Slightly Better Slightly Better 5% 2% Same Same 33% 35% Slightly Worse 51% Slightly Worse 55% Significantly Worse 7% Significantly Worse 4% Don't Know/NA Don't Know/NA 3% 3% 0% 10% 20% 30% 40% 50% 60% 0% 10% 20% 30% 40% 50% 60% BANK CREDIT AVAILABILITY DECEMBER ‘16 VS. DECEMBER ‘17 DECEMBER ‘17 VS. DECEMBER ‘18 Significantly Better 7% Significantly Better 5% Slightly Better Slightly Better 21% 12% Same 63% Same 71% Slightly Worse 2% Slightly Worse 5% Significantly Worse 0% Significantly Worse 0% Don't Know/NA Don't Know/NA 6% 6% 0% 20% 40% 60% 80% 0% 20% 40% 60% 80% 9
1/24/2018 COMPANY TOTAL BACKLOG REVENUE DECEMBER ‘16 VS. DECEMBER ‘17 DECEMBER ‘17 VS. DECEMBER ‘18 Higher Than Higher Than 60% 40% About the Same 20% About the Same 48% Lower Than Lower Than 19% 12% 0% 20% 40% 60% 80% 0% 10% 20% 30% 40% 50% 60% AVAILABILITY OF BONDING CREDIT DECEMBER ‘16 VS. DECEMBER ‘17 DECEMBER ‘17 VS. DECEMBER ‘18 Significantly Better 9% Significantly Better 4% Slightly Better Slightly Better 19% 13% Same 66% Same 76% Slightly Worse 1% Slightly Worse 1% Significantly Worse 0% Significantly Worse 0% Don't Know/NA Don't Know/NA 5% 5% 0% 20% 40% 60% 80% 0% 20% 40% 60% 80% 10
1/24/2018 WORKING CAPITAL LINE OF AVAILABLE CREDIT (DEC ‘16 THRU DEC ’17) Increased 21% Remained the Same 69% Decreased 6% Not Applicable 4% 0% 10% 20% 30% 40% 50% 60% 70% 80% RANK YOUR LEVEL OF CONCERN Rank your level of concern for demand for Not concerned construction for the upcoming year Not concerned Watching Watching with some Watching with some concern concern Very or highly concerned Very or N/a highly concerned concerned 11
1/24/2018 LEVEL OF CONCERN FOR INDUSTRY CHALLENGES FOR THE UPCOMING YEAR Demand for Demand for Construction Dec. ‘17 Construction Sep. ‘17 5% 6% Not Concerned Not Concerned at 23% 26% All Some Concern Some Concern Very or Highly Very or Highly 69% 71% Concerned Concerned LEVEL OF CONCERN FOR INDUSTRY CHALLENGES FOR THE UPCOMING YEAR DEMAND FOR CONSTRUCTION “Good market, think will go into 2019. But waiting for the volatility in • government to end is getting old.” “I am worried about the overall economy slowing down over the next 18 • months.” “Length of current market is a concern; this will turn downward at some point in • the next couple of years.” “Non-residential work seems to be fairly competitive - still seems like there is • plenty of supply.” “Local area is saturated now but moving forward, not sure how public side will • affect general construction.” The comments above are attributed to CONFINDEX respondents and do not reflect the viewpoint of either CFMA or BKD. 12
1/24/2018 RANK YOUR LEVEL OF CONCERN Not Rank your level of concern for availability of concerned financing for projects for the upcoming year Not concerned Watching Watching with some Watching with some concern concern Very or highly concerned Very or N/a highly concerned concerned LEVEL OF CONCERN FOR INDUSTRY CHALLENGES FOR THE UPCOMING YEAR Availability of Financing Availability of Financing for Projects Dec. ‘17 for Projects Sep. ‘17 2% 1% Not Concerned Not Concerned 3% 5% Some Concern Some Concern 35% 40% Very or Highly Very or Highly 55% 58% Concerned Concerned NA NA 13
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