Construction Partners, Inc. Announces Fiscal 2020 First Quarter Results

February 7, 2020 at 7:00 AM EST
 Company Maintains FY 2020 Outlook

DOTHAN, Ala., Feb. 07, 2020 (GLOBE NEWSWIRE) -- Construction Partners, Inc. (NASDAQ: ROAD) (the “Company”), a vertically integrated civil infrastructure company specializing in the construction and maintenance of roadways across five southeastern states, today reported financial and operating results for its first fiscal quarter ended December 31, 2019.

Key Metrics: First Quarter of Fiscal 2020 Compared to the First Quarter of Fiscal 2019

  • Revenue was $175.3 million, up 13.6%

  • Gross profit was $23.8 million, up 12.4%

  • Net income was $5.5 million, up 6.0%

  • Earnings per share were $0.11, up from $0.10

  • Adjusted EBITDA (1) was $17.2 million, up 17.0%

  • Adjusted EBITDA margin (1) was 9.8%, up 30 bps

Charles E. Owens, the Company’s President and Chief Executive Officer, stated, “We are pleased to report double-digit year-over-year growth in revenue, gross profit and Adjusted EBITDA for the first quarter of fiscal 2020.  This growth was driven both by improved performance in our existing markets and by recent strategic acquisitions in Florida and Alabama.  We are maintaining our full-year outlook for fiscal 2020 based on our historical experience of generating approximately forty percent of our revenue in the first half of the fiscal year and approximately sixty percent during the second half.”

Project backlog at December 31, 2019 was $539.1 million, compared to $531.6 million at September 30, 2019 and $575.2 million at December 31, 2018. Owens continued, “We maintain a construction backlog composed primarily of recurring, maintenance-related projects of the type that we typically prefer, and we continue to see opportunities to bid on these types of projects in our markets.”

Fiscal Year 2020 Outlook

The Company maintained its outlook for fiscal year 2020 with regard to revenue, net income and Adjusted EBITDA, as follows:

  • Revenue of $830 million to $870 million, compared to $783.2 million actual in FY 2019

  • Net income of $39 million to $44 million, compared to $43.1 million actual in FY 2019

  • Adjusted EBITDA (1) of $94 million to $102 million, compared to $92.3 million actual in FY 2019

The fiscal year 2020 outlook does not take into account the potential impact of any new federal or state infrastructure or highway-related legislation that could take effect in 2020.

Ned N. Fleming, III, the Company’s Executive Chairman, stated, “The Company continues to execute at a high level, led by seasoned and experienced operators across the organization.  Management is delivering strong results consistent with our strategy for achieving controlled, profitable growth. The positive supply and demand dynamics for our business endures, as deteriorating road conditions in our five rapidly growing southeastern states, coupled with the publicly funded demand for our services, continues. With a combination of projected Company growth and a number of potential acquisition candidates in markets of interest to us, we are excited about the future prospects for Construction Partners.”

Conference Call

The Company will conduct a conference call on Friday, February 7, 2020 at 9:00 a.m. Central Time to discuss financial and operating results for the quarter ended December 31, 2019. To access the call live by phone, dial (412) 902-0003 and ask for the Construction Partners call at least 10 minutes prior to the start time.  A telephonic replay will be available through February 14, 2020 by calling (201) 612-7415 and using passcode 13697985#. A webcast of the call will also be available live and for later replay on the Company’s Investor Relations website at www.constructionpartners.net.

About Construction Partners, Inc.

Construction Partners, Inc. is a vertically integrated civil infrastructure company operating across five southeastern states, with 33 hot-mix asphalt plants, nine aggregate facilities and one liquid asphalt terminal.  Publicly funded projects make up the majority of its business and include local and state roadways, interstate highways, airport runways and bridges. The majority of the Company’s public projects are maintenance-related. Private sector projects include paving and sitework for office and industrial parks, shopping centers, local businesses and residential developments. To learn more, visit www.constructionpartners.net.

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained herein that are not statements of historical or current fact constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. These statements may be identified by the use of words such as “may,” “will,” “expect,” “should,” “anticipate,” “intend,” “project,” “outlook,” “believe” and “plan.” The forward-looking statements contained in this press release include, without limitation, statements related to financial projections, future events, business strategy, future performance, future operations, backlog, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management. These and other forward-looking statements are based on management’s current views and assumptions and involve risks and uncertainties that could significantly affect expected results. Important factors could cause actual results to differ materially from those expressed in the forward-looking statements, including, among others: our ability to successfully manage and integrate acquisitions; failure to realize the expected economic benefits of acquisitions, including future levels of revenues being lower than expected and costs being higher than expected; failure or inability to implement growth strategies in a timely manner; declines in public infrastructure construction and reductions in government funding, including the funding by transportation authorities and other state and local agencies; risks related to our operating strategy; competition for projects in our local markets; risks associated with our capital-intensive business; government requirements and initiatives, including those related to funding for public or infrastructure construction, land usage and environmental, health and safety matters; unfavorable economic conditions and restrictive financing markets; our ability to obtain sufficient bonding capacity to undertake certain projects; our ability to accurately estimate the overall risks, requirements or costs when we bid on or negotiate contracts that are ultimately awarded to us; the cancellation of a significant number of contracts or our disqualification from bidding for new contracts; risks related to adverse weather conditions; our substantial indebtedness and the restrictions imposed on us by the terms thereof; our ability to maintain favorable relationships with third parties that supply us with equipment and essential supplies; our ability to retain key personnel and maintain satisfactory labor relations; property damage, results of litigation and other claims and insurance coverage issues; risks related to our information technology systems and infrastructure; our ability to remediate material weaknesses in internal control over financial reporting identified in preparing prior financial statements and to subsequently maintain effective internal control over financial reporting; and the risks, uncertainties and factors set forth under “Risk Factors” in the Company’s most recent Annual Report on Form 10-K.  Forward-looking statements speak only as of the date they are made.  The Company assumes no obligation to update forward-looking statements to reflect actual results, subsequent events, or circumstances or other changes affecting such statements except to the extent required by applicable law.

Contacts:

Rick Black / Ken Dennard
Dennard Lascar Investor Relations
ROAD@DennardLascar.com
(713) 529-6600

- Financial Statements Follow –


CONSTRUCTION PARTNERS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except share and per share data)

           
  For the Three Months Ended
December 31,
  2019      2018   
Revenues $ 175,314      $ 154,327   
Cost of revenues 151,557      133,199   
Gross profit 23,757      21,128   
General and administrative expenses (17,113 )   (14,431 )
Gain on sale of equipment, net 309      334   
Operating income 6,953      7,031   
Interest expense, net (281 )   (515 )
Other income (expense) 65      (17 )
Income before provision for income taxes and earnings from investment in joint venture 6,737      6,499   
Provision for income taxes 1,319      1,651   
Earnings from investment in joint venture 43      306   
Net income $ 5,461      $ 5,154   
       
Net income per share attributable to common stockholders:      
Basic $ 0.11      $ 0.10   
 Diluted $ 0.11      $ 0.10   
       
Weighted average number of common shares outstanding:      
Basic 51,489,211      51,414,619   
 Diluted 51,609,380      51,414,619   
           


CONSTRUCTION PARTNERS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

  December 31,
2019 
  September 30,
2019 
  (unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 49,443      $ 80,619   
Contracts receivable including retainage, net 118,548      139,882   
Costs and estimated earnings in excess of billings on uncompleted contracts 14,152      12,030   
Inventories 36,271      34,291   
Prepaid expenses and other current assets 16,087      13,144   
Total current assets 234,501      279,966   
       
Property, plant and equipment, net 229,502      205,870   
Operating lease right of use assets 8,532      —   
Goodwill 45,467      38,546   
Intangible assets, net 3,381      3,434   
Investment in joint venture 39      496   
Other assets 1,953      2,284   
Deferred income taxes 1,173      1,173   
Total assets $ 524,548      $ 531,769   
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 48,627      $ 70,442   
Billings in excess of costs and estimated earnings on uncompleted contracts 31,169      31,115   
Current portion of operating lease liabilities 2,930      —   
Current maturities of debt 8,511      7,538   
Accrued expenses and other current liabilities 11,649      19,078   
Total current liabilities 102,886      128,173   
Long-term liabilities:      
Long-term debt, net of current maturities 49,149      42,458   
Operating lease liabilities, net of current portion 5,818      —   
Deferred income taxes 11,480      11,480   
Other long-term liabilities 6,031      6,108   
Total long-term liabilities 72,478      60,046   
Total liabilities 175,364      188,219   
       
Commitments and contingencies      
       
Stockholders’ Equity:      
Preferred stock, par value $0.001; 10,000,000 shares authorized at December 31, 2019 and September 30, 2019 and no shares issued and outstanding —      —   
Class A common stock, par value $0.001; 400,000,000 shares authorized, 32,705,418 shares issued and outstanding at December 31, 2019, and 32,597,736 shares issued and outstanding at September 30, 2019 33      33   
Class B common stock, par value $0.001; 100,000,000 shares authorized, 21,999,279 shares issued and 19,076,327 outstanding at December 31, 2019, and 22,106,961 shares issued and 19,184,009 shares outstanding at September 30, 2019 22      22   
Additional paid-in capital 243,847      243,452   
Treasury stock, at cost, 2,922,952 shares of Class B common stock, par value $0.001 (15,603 )   (15,603 )
Retained earnings 120,885      115,646   
Total stockholders’ equity 349,184      343,550   
Total liabilities and stockholders’ equity $ 524,548      $ 531,769   
               


CONSTRUCTION PARTNERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)

  For the Three Months Ended
December 31,
  2019      2018   
Cash flows from operating activities:      
Net income $ 5,461      $ 5,154   
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation, depletion and amortization of long-lived assets 9,438      7,138   
Amortization of deferred debt issuance costs and debt discount 36      27   
Provision for bad debt 145      145   
Gain on sale of equipment (309 )   (334 )
Equity-based compensation expense 395      —   
Earnings from investment in joint venture (43 )   (306 )
 Other non-cash adjustments (6 )   —   
Changes in operating assets and liabilities, net of acquisition:      
Contracts receivable including retainage, net 21,981      26,174   
Costs and estimated earnings in excess of billings on uncompleted contracts (2,122 )   (858 )
Inventories (1,535 )   (3,982 )
Prepaid expenses and other current assets (2,943 )   (2,277 )
Other assets 331      298   
Accounts payable (21,815 )   (25,290 )
Billings in excess of costs and estimated earnings on uncompleted contracts 54      733   
Accrued expenses and other current liabilities (7,444 )   (5,402 )
Other long-term liabilities (77 )   (9 )
Net cash provided by operating activities 1,547      1,211   
Cash flows from investing activities:      
Purchases of property, plant and equipment (23,595 )   (7,406 )
Proceeds from sale of equipment 492      536   
Business acquisition, net of cash acquired (17,748 )   —   
Distributions received from investment in joint venture 500      1,800   
Net cash used in investing activities (40,351 )   (5,070 )
Cash flows from financing activities:      
Proceeds from issuance of long-term debt, net of debt issuance costs and discount 9,777      —   
Repayments of long-term debt (2,149 )   (3,711 )
Net cash provided by (used in) financing activities 7,628      (3,711 )
Net change in cash and cash equivalents (31,176 )   (7,570 )
Cash and cash equivalents:      
Beginning of period 80,619      99,137   
End of period $ 49,443      $ 91,567   
Supplemental cash flow information:      
Cash paid for interest $ 496      $ 747   
Cash paid for income taxes $ 300      $ 60   
Operating lease right of use assets obtained in exchange for operating lease liabilities $ 217      $ —   
Cash paid for operating lease liabilities $ 870      $ —   
Non-cash items:      
Property, plant and equipment financed with accounts payable $ 391      $ 178   
               

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA represents net income before, as applicable from time to time, (i) interest expense, net, (ii) provision (benefit) for income taxes, (iii) depreciation, depletion and amortization of long-lived assets, (iv) equity-based compensation expense and (v) certain management fees and expenses, and excludes income recognized in connection with a legal settlement between certain of the Company’s subsidiaries and a third party that did not directly relate to the Company’s business and that the Company does not expect to reoccur. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenues for each period. Adjusted EBITDA and Adjusted EBITDA Margin are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP as an indicator of our operating performance. Management uses Adjusted EBITDA and Adjusted EBITDA Margin as key performance indicators, and we believe they are measures frequently used by securities analysts, investors and other parties to evaluate companies in our industry. These measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP.

Our calculation of Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to similarly named measures reported by other companies. Potential differences may include differences in capital structures, tax positions and the age and book depreciation of intangible and tangible assets.

The following tables present a reconciliation of net income, the most directly comparable measure calculated in accordance with GAAP, to Adjusted EBITDA, and the calculation of Adjusted EBITDA Margin for each of the periods presented:

Construction Partners, Inc.
Net Income to Adjusted EBITDA Reconciliation
Fiscal Quarters Ended December 31, 2019 and 2018
(unaudited, in thousands, except percentages)

  For the Three Months Ended
December 31,
  2019      2018   
Net income $ 5,461      $ 5,154   
Interest expense, net 281      515   
Provision for income taxes 1,319      1,651   
Depreciation, depletion and amortization of long-lived assets 9,438      7,138   
Equity-based compensation expense 395      —   
Management fees and expenses (1) 314      254   
Adjusted EBITDA $ 17,208      $ 14,712   
Revenues $ 175,314      $ 154,327   
Adjusted EBITDA Margin 9.8  %   9.5  %

(1) Reflects fees and reimbursement of certain travel expenses under a management services agreement with an affiliate of SunTx Capital Partners, the Company’s controlling stockholder.


Construction Partners, Inc.
Net Income to Adjusted EBITDA Reconciliation
Fiscal Year 2020 Outlook
(unaudited, in thousands)

  For the Fiscal Year Ending
September 30, 2020
  Low   High
Net income $ 39,000   $ 44,000
Interest expense, net   1,400     1,500
Provision for income taxes   12,700     14,400
Depreciation, depletion and amortization of long-lived assets   38,000     39,200
Equity-based compensation expense   1,600     1,600
Management fees and expenses (1)   1,300     1,300
Adjusted EBITDA $ 94,000   $ 102,000

(1) Reflects fees and reimbursement of certain travel expenses under a management services agreement with an affiliate of SunTx Capital Partners, the Company’s controlling stockholder.

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Construction Partners, Inc.