Construction Partners, Inc. Announces Fiscal 2023 Second Quarter Results

Revenue Up 34% Compared to Q2 FY2022

Record Backlog of $1.52 Billion

Company Raises FY2023 Outlook Ranges

DOTHAN, Ala., May 5, 2023 /PRNewswire/ -- Construction Partners, Inc. (NASDAQ: ROAD) ("CPI" or the "Company"), a vertically integrated civil infrastructure company specializing in the construction and maintenance of roadways across six southeastern states, today reported financial and operating results for the fiscal quarter ended March 31, 2023.

Fred J. (Jule) Smith, III, the Company's President and Chief Executive Officer, said, "We are pleased to report an excellent second quarter, typically a slower winter quarter in our seasonal business, with significant revenue growth, net loss improvement, and adjusted EBITDA growth compared to the second quarter last year. Milder-than-normal winter weather, along with lower energy costs, helped both our margins and fixed cost recovery.  Now, as we enter our busy work season, our pre-inflationary backlog is largely complete, and we are right on track with our annual plan for FY23."

Revenues were $324.9 million in the second quarter of fiscal 2023, an increase of 33.5% compared to $243.4 million in the same quarter last year. The mix of total revenue growth for the quarter was approximately 16.4% of revenue attributable to acquisitions completed subsequent to March 31, 2022 and approximately 17.1% of organic revenue in the Company's existing markets from contract work and sales of HMA and aggregates to third parties.

Gross profit was $26.3 million in the second quarter of fiscal 2023, an increase of 110.3% compared to $12.5 million in the same quarter last year.

General and administrative expenses were $32.0 million in the second quarter of fiscal 2023, compared to $25.0 million in the same quarter last year. General and administrative expenses were lower as a percentage of total revenue in the quarter at 9.9%, compared to 10.3% in the same quarter last year.

Net loss was $5.5 million in the second quarter of fiscal 2023, an improvement compared to a net loss of $9.4 million in the same quarter last year.  

Adjusted EBITDA(1) in the second quarter of fiscal 2023 was $20.8 million, an increase of 165.3% compared to the same quarter last year.

Project backlog was a record $1.52 billion at March 31, 2023, compared to $1.28 billion at March 31, 2022, and $1.47 billion at December 31, 2022.

Smith continued, "The demand environment remains robust, as our record backlog demonstrates.  Migration to the Southeast continues, providing new projects in both the public and private sectors. The Infrastructure Investment and Jobs Act (IIJA) is fully implemented now, creating investments in all six of our states' roads, bridges, and airports. CPI is well-positioned to meet this demand with our nearly 4,000 talented and dedicated employees.

"The construction industry's labor market and supply chains continue to slowly normalize throughout our Southeastern footprint.  Having outperformed in the second quarter and operating in a more consistent economic environment with a record high backlog and growth expectations for the second half of our fiscal year, we have raised and tightened the ranges in our Fiscal Year 2023 Outlook."

Revised Fiscal Year 2023 Outlook

The Company's outlook for fiscal year 2023 with regard to revenue, net income and Adjusted EBITDA is as follows:

  • Revenue in the range of $1.53 billion to $1.58 billion
  • Net income in the range of $34 million to $42 million
  • Adjusted EBITDA(1) in the range of $153 million to $165 million

 (1) Adjusted EBITDA is a financial measure not presented in accordance with generally accepted accounting principles ("GAAP"). Please see "Reconciliation of Non-GAAP Financial Measures" at the end of this press release.

Ned N. Fleming, III, the Company's Executive Chairman, stated, "We are pleased to see the external environment beginning to normalize, and we remain confident in the expectation of continued solid growth supported by strong demand and funding. Our business model is resilient, as demonstrated by our return to higher margins after overcoming pre-inflationary backlog and moving into higher-margin work. Our team has done an outstanding job managing the business through a challenging environment while continuing to execute our proven strategy. Today, the opportunity for growth and expansion represents the best longer-term visibility we have ever seen for the Company."

Conference Call

The Company will conduct a conference call on May 5, 2023 at 9:00 a.m. Central Time to discuss financial and operating results for the quarter ended March 31, 2023. 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 May 12, 2023 by calling (201) 612-7415 and using passcode ID: 13735455#. 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 six southeastern states. Supported by its hot-mix asphalt plants, aggregate facilities and liquid asphalt terminal, the company focuses on the construction, repair and maintenance of surface infrastructure. Publicly funded projects make up the majority of its business and include local and state roadways, interstate highways, airport runways and bridges. The company also performs private sector projects that 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 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 and its subsequently filed Quarterly Reports on Form 10-Q.  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 March 31,


For the Six Months
Ended March 31,



2023


2022


2023


2022

Revenues


$   324,850


$    243,385


$   666,629


$   528,349

Cost of revenues


298,570


230,888


609,853


482,888

Gross profit


26,280


12,497


56,776


45,461

General and administrative expenses


(31,989)


(25,000)


(61,714)


(49,946)

Gain on sale of property, plant and equipment


3,158


1,014


3,326


1,455

Gain on facility exchange




5,389


Operating income (loss)


(2,551)


(11,489)


3,777


(3,030)

Interest expense, net


(4,802)


(859)


(8,762)


(2,123)

Other income


398


43


432


159

Loss before provision for income taxes


(6,955)


(12,305)


(4,553)


(4,994)

Provision for income taxes


(1,474)


(2,887)


(964)


(1,087)

Net loss


(5,481)


(9,418)


(3,589)


(3,907)

Other comprehensive income (loss), net of tax









Unrealized gain (loss) on interest rate swap contract, net


(3,460)


5,580


(4,752)


7,025

Unrealized gain (loss) on restricted investments, net


81


(122)


117


(122)

Other comprehensive income (loss)


(3,379)


5,458


(4,635)


6,903

Comprehensive income (loss)


$     (8,860)


$       (3,960)


$      (8,224)


$       2,996



















Net loss per share attributable to common stockholders:









Basic


$        (0.11)


$         (0.18)


$        (0.07)


$        (0.08)

  Diluted


$        (0.11)


$         (0.18)


$        (0.07)


$        (0.08)










Weighted average number of common shares outstanding:









Basic


51,827,365


51,793,443


51,826,143


51,744,052

  Diluted


51,827,365


51,793,443


51,826,143


51,744,052










 

Construction Partners, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)



March 31,


September 30,


2023


2022

ASSETS

(unaudited)



Current assets:




Cash and cash equivalents

$       30,512


$             35,531

Restricted cash

119


28

Contracts receivable including retainage, net

243,261


265,207

Costs and estimated earnings in excess of billings on uncompleted contracts

29,126


29,271

Inventories

86,197


74,195

Prepaid expenses and other current assets

16,900


12,957

Total current assets

406,115


417,189

Property, plant and equipment, net

502,985


481,412

Operating lease right-of-use assets

16,792


13,985

Goodwill

163,385


129,465

Intangible assets, net

15,399


15,976

Investment in joint venture

87


87

Restricted investments

11,303


6,866

Other assets

24,755


30,541

Total assets

$  1,140,821


$        1,095,521

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$     121,422


$           130,468

Billings in excess of costs and estimated earnings on uncompleted contracts

62,004


52,477

   Current portion of operating lease liabilities

2,243


2,209

Current maturities of long-term debt

13,500


12,500

Accrued expenses and other current liabilities

26,158


28,484

Total current liabilities

225,327


226,138

Long-term liabilities:




Long-term debt, net of current maturities and deferred debt issuance costs

408,967


363,066

   Operating lease liabilities, net of current portion

14,982


12,059

Deferred income taxes, net

24,938


26,713

Other long-term liabilities

13,919


11,666

Total long-term liabilities

462,806


413,504

Total liabilities

688,133


639,642

Stockholders' equity:




Preferred stock, par value $0.001; 10,000,000 shares authorized at March 31, 2023 and
September 30, 2022 and no shares issued and outstanding


Class A common stock, par value $0.001; 400,000,000 shares authorized, 41,376,528 shares
issued and 41,366,691 shares outstanding at March 31, 2023 and 41,195,730 shares issued and
41,193,024 shares outstanding at September 30, 2022

41


41

Class B common stock, par value $0.001; 100,000,000 shares authorized, 14,275,867 shares
issued and 11,352,915 shares outstanding at March 31, 2023 and September 30, 2022

15


15

Additional paid-in capital

261,743


256,571

Treasury stock, at cost, 9,837 shares of Class A common stock at March 31, 2023 and 2,706
shares at September 30, 2022, par value $0.001

(178)


(39)

Treasury stock, at cost, 2,922,952 shares of Class B common stock at March 31, 2023 and
September 30, 2022, par value $0.001

(15,603)


(15,603)

Accumulated other comprehensive income, net

12,985


17,620

Retained earnings

193,685


197,274

Total stockholders' equity

452,688


455,879

Total liabilities and stockholders' equity

$  1,140,821


$        1,095,521

 

Construction Partners, Inc.

Consolidated Statements of Cash Flows

(unaudited, in thousands)



For the Six Months
Ended March 31,


2023


2022

Cash flows from operating activities:




Net loss

$              (3,589)


$              (3,907)

Adjustments to reconcile net income to net cash, cash equivalents and restricted cash provided
by operating activities:




Depreciation, depletion, accretion and amortization of long-lived assets

38,233


33,047

Amortization of deferred debt issuance costs and debt discount

151


128

Unrealized loss (gain) on derivative instruments

2,286


(2,130)

Provision for bad debt

70


130

Gain on sale of property, plant and equipment

(3,326)


(1,455)

Gain on facility exchange

(5,389)


Realized losses on restricted investments

4


Equity-based compensation expense

5,172


3,246

Deferred income tax benefit

(224)


(245)

  Other non-cash adjustments

(69)


39

Changes in operating assets and liabilities, net of acquisition:




Contracts receivable including retainage

34,092


(3,821)

Costs and estimated earnings in excess of billings on uncompleted contracts

743


(1,261)

Inventories

(10,152)


(13,665)

Prepaid expenses and other current assets

(3,246)


(8,150)

Other assets

(206)


350

Accounts payable

(12,764)


(2,426)

Billings in excess of costs and estimated earnings on uncompleted contracts

7,415


12,304

Accrued expenses and other current liabilities

(6,289)


(11,957)

Other long-term liabilities

2,784


3,067

Net cash provided by operating activities, net of acquisitions

45,696


3,294

Cash flows from investing activities:




Purchases of property, plant and equipment

(60,399)


(34,703)

Proceeds from sale of property, plant and equipment

8,301


3,777

Proceeds from facility exchange

36,987


Proceeds from restricted investments

866


Business acquisitions, net of cash acquired

(77,842)


(102,893)

Purchase of restricted investments

(5,148)


(6,358)

Net cash used in investing activities

(97,235)


(140,177)

Cash flows from financing activities:




Net proceeds from revolving credit facility

38,000


116,000

Proceeds from issuance of long-term debt, net of debt issuance costs and discount

15,000


Repayments of long-term debt

(6,250)


(5,000)

Purchase of treasury stock

(139)


(39)

Net cash provided by financing activities

46,611


110,961

Net change in cash and cash equivalents

(4,928)


(25,922)

Cash, cash equivalents and restricted cash:




Cash, cash equivalents and restricted cash, beginning of period

35,559


57,251

Cash, cash equivalents and restricted cash, end of period

$             30,631


$             31,329





Supplemental cash flow information:




Cash paid for interest

$                9,047


$                3,375

Cash paid for income taxes

$                   626


$                1,076

Operating lease right-of-use assets obtained in exchange for operating lease liabilities

$                4,062


$                5,983

Cash paid for operating lease liabilities

$                1,204


$                1,144

Non-cash items:




Property, plant and equipment included with accounts payable at period end

$                3,448


$                1,042

Amounts payable to seller in business combination

$                     —


$                   600

 

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA represents net income (loss) before, as applicable from time to time, (i) interest expense, net, (ii) provision (benefit) for income taxes, (iii) depreciation, depletion, accretion and amortization, (iv) equity-based compensation expense, (v) loss on the extinguishment of debt, (vi) certain management fees and expenses and (vii) nonrecurring legal settlement costs and associated legal expenses unrelated to the Company's core operations. Adjusted EBITDA is a supplemental measure of our operating performance that is neither required by, nor presented in accordance with, GAAP. This measure has limitations as an analytical tool and should not be considered in isolation or as an alternative to net income or any other performance measure derived in accordance with GAAP as an indicator of our operating performance. We present Adjusted EBITDA because management uses this measure as a key performance indicator, and we believe that securities analysts, investors and others use this measure to evaluate companies in our industry. Our calculation of Adjusted EBITDA 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 (loss), the most directly comparable measure calculated in accordance with GAAP, to Adjusted EBITDA for the periods presented:

Construction Partners, Inc.

Net Loss to Adjusted EBITDA Reconciliation

Fiscal Quarters Ended March 31, 2023 and 2022

(unaudited, in thousands)



For the Three Months
Ended March 31,


2023


2022

Net loss

$              (5,481)


$             (9,418)

Interest expense, net

4,802


859

Provision for income taxes

(1,474)


(2,887)

Depreciation, depletion, accretion and amortization

19,858


17,144

Equity-based compensation expense

2,692


1,742

Management fees and expenses (1)

359


384

Adjusted EBITDA

$              20,756


$               7,824





(1)  Reflects fees and reimbursement of certain out-of-pocket 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 2023 Updated Outlook

(unaudited, in thousands)



For the Fiscal Year Ending
September 30, 2023


Low


High

Net income

$           34,000


$           42,000

Interest expense, net

19,100


19,500

Provision for income taxes

11,400


14,100

Depreciation, depletion, accretion and amortization

77,000


77,300

Equity-based compensation expense

9,800


10,400

Management fees and expenses (1)

1,700


1,700

Adjusted EBITDA

$         153,000


$         165,000





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

 

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SOURCE Construction Partners, Inc.