Construction Partners, Inc. Announces Fiscal 2023 Third Quarter Results

Record Quarterly Revenue Up 11%, Net Income Up 78%, & Adjusted EBITDA Up 50% Compared to Q3 FY2022

Company Updates FY2023 Outlook - Narrows Revenue Range and Raises Net Income & Adjusted EBITDA Ranges

Record Backlog of $1.59 Billion

DOTHAN, Ala., Aug. 2, 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 June 30, 2023.

Fred J. (Jule) Smith, III, the Company's President and Chief Executive Officer, said, "We are pleased with our third quarter results, representing the single highest revenue quarter in the Company's history, despite a wetter-than-normal April and June. In addition, project backlog increased to $1.59 billion, a new record for CPI, and is reflective of continued strong demand momentum. Our team achieved margins 350 basis points higher than a year ago that led to significantly stronger net income, cash flow, and Adjusted EBITDA. Overall, our business is now experiencing operational performance typical for CPI, as we pursue healthy sources of recurring revenue and operate in a more stable cost environment. All of these factors continue to support our bullish outlook for near- and long-term profitable growth."

Revenues were $421.9 million in the third quarter of fiscal 2023, an increase of 11% compared to $380.3 million in the same quarter last year. Excluding the impact of approximately $10 million of additional revenue from higher state liquid asphalt price index reimbursements in the third quarter last year resulting from a large increase in asphalt prices during that quarter(1), revenue growth was 14% for the third quarter of fiscal 2023.

Gross profit was $64.1 million in the third quarter of fiscal 2023, an increase of 45% compared to $44.3 million in the same quarter last year.

General and administrative expenses were $32.2 million in the third quarter of fiscal 2023, compared to $26.6 million in the same quarter last year.

Net income was $21.7 million in the third quarter of fiscal 2023, an increase of 78% compared to $12.2 million in the same quarter last year.  

Net cash provided by operating activities in the third quarter was $48.9 million, compared to $13.0 million of net cash used in operating activities in the same quarter last year. 

Adjusted EBITDA(1) in the third quarter of fiscal 2023 was $56.4 million, an increase of 50% compared to $37.6 million in the same quarter last year. Adjusted EBITDA margin(1) for the third quarter of fiscal 2023 was 13.4%, compared to 9.9% in the same quarter last year.

Project backlog was $1.59 billion at June 30, 2023, compared to $1.33 billion at June 30, 2022 and $1.52 billion at March 31, 2023.

Smith continued, "The Infrastructure Investment and Jobs Act (IIJA) is fully implemented and is driving investment in all six of our states' roads, bridges, and airports, while the continued migration to the Southeast supports a vibrant commercial economy in our markets. CPI is well-positioned to meet this demand with our more than 4,000 talented and dedicated employees. Based on our increased profitability in the quarter and accounting for a wetter-than-normal April and June, we are narrowing our revenue range and raising our net income and Adjusted EBITDA ranges for our FY2023 Outlook."

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 $1.535 billion to $1.555 billion
  • Net income in the range of $41 million to $46 million
  • Adjusted EBITDA(1) in the range of $161 million to $169 million

Ned N. Fleming, III, the Company's Executive Chairman, stated, "The CPI business model is demonstrating its efficiency as we return to historical norms in terms of passing through costs and converting backlog reflective of the changing macro-environment compared to our prior fiscal year. We founded the company on a strategy of pursuing recurring infrastructure repair and maintenance projects, generating sustainable and profitable growth, and that strategy is as vibrant now as at any point in our history. Generating record quarterly revenue and another record backlog while achieving an Adjusted EBITDA margin of 13.4% in the quarter compared to 9.9% in the same quarter last year demonstrates the strength of the CPI business model.  Our team continues to do an outstanding job managing the business and executing on our proven strategy."

Conference Call

The Company will conduct a conference call on August 2, 2023 at 9:00 a.m. Central Time to discuss financial and operating results for the quarter ended June 30, 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 August 9, 2023 by calling (201) 612-7415 and using passcode ID: 13735456#. 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.

 (1) Adjusted EBITDA, Adjusted EBITDA margin and revenues adjusted for liquid asphalt index reimbursements are financial measures 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.

- Financial Statements Follow – 

Construction Partners, Inc.

Consolidated Statements of Income

(unaudited, in thousands, except share and per share data)




For the Three Months
Ended June 30,


For the Nine Months
Ended June 30,



2023


2022


2023


2022

Revenues


$   421,893


$    380,272


$                   1,088,522


$   908,621

Cost of revenues


357,821


336,022


967,674


818,910

Gross profit


64,072


44,250


120,848


89,711

General and administrative expenses


(32,231)


(26,584)


(93,945)


(76,530)

Gain on sale of property, plant and equipment


1,499


333


4,825


1,788

Gain on facility exchange




5,389


Operating income


33,340


17,999


37,117


14,969

Interest expense, net


(5,039)


(2,054)


(13,801)


(4,177)

Other income


493


178


925


337

Income before provision for income taxes


28,794


16,123


24,241


11,129

Provision for income taxes


7,117


3,955


6,153


2,868

Net income


21,677


12,168


18,088


8,261

Other comprehensive income (loss), net of tax









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


4,127


1,729


(625)


8,754

Unrealized loss on restricted investments, net


(129)


(154)


(12)


(276)

Other comprehensive income (loss)


3,998


1,575


(637)


8,478

Comprehensive income


$     25,675


$      13,743


$     17,451


$     16,739



















Net income per share attributable to common stockholders:









Basic


$          0.42


$           0.23


$          0.35


$          0.16

  Diluted


$          0.41


$           0.23


$          0.35


$          0.16










Weighted average number of common shares outstanding:









Basic


51,827,448


51,793,245


51,826,578


51,760,384

  Diluted


52,293,846


51,888,511


52,114,438


51,928,427










 

Construction Partners, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)



June 30,


September 30,


2023


2022

ASSETS

(unaudited)



Current assets:




Cash and cash equivalents

$            54,878


$             35,531

Restricted cash

71


28

Contracts receivable including retainage, net

254,972


265,207

Costs and estimated earnings in excess of billings on uncompleted contracts

33,449


29,271

Inventories

88,233


74,195

Prepaid expenses and other current assets

9,694


12,957

Total current assets

441,297


417,189

Property, plant and equipment, net

502,732


481,412

Operating lease right-of-use assets

17,484


13,985

Goodwill

157,289


129,465

Intangible assets, net

21,169


15,976

Investment in joint venture

87


87

Restricted investments

13,353


6,866

Other assets

30,428


30,541

Total assets

$       1,183,839


$       1,095,521

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$          126,745


$           130,468

Billings in excess of costs and estimated earnings on uncompleted contracts

68,748


52,477

   Current portion of operating lease liabilities

2,385


2,209

Current maturities of long-term debt

14,000


12,500

Accrued expenses and other current liabilities

28,935


28,484

Total current liabilities

240,813


226,138

Long-term liabilities:




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

405,416


363,066

   Operating lease liabilities, net of current portion

15,607


12,059

Deferred income taxes, net

25,700


26,713

Other long-term liabilities

15,203


11,666

Total long-term liabilities

461,926


413,504

Total liabilities

702,739


639,642

Stockholders' equity:




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


Class A common stock, par value $0.001; 400,000,000 shares authorized, 43,760,546 shares
issued and 43,728,310 shares outstanding at June 30, 2023 and 41,195,730 shares issued
and 41,193,024  shares outstanding at September 30, 2022

44


41

Class B common stock, par value $0.001; 100,000,000 shares authorized, 11,921,463 shares
issued and 8,998,511 shares outstanding at June 30, 2023 and 14,275,867 shares issued
and 11,352,915 shares outstanding at September 30, 2022

12


15

Additional paid-in capital

264,480


256,571

Treasury stock, at cost, 32,236 shares of Class A common stock at June 30, 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 June 30, 2023 and
September 30, 2022, par value $0.001

(15,603)


(15,603)

Accumulated other comprehensive income, net

16,983


17,620

Retained earnings

215,362


197,274

Total stockholders' equity

481,100


455,879

Total liabilities and stockholders' equity

$       1,183,839


$       1,095,521





 

Construction Partners, Inc.

Consolidated Statements of Cash Flows

(unaudited, in thousands)



For the Nine Months Ended
June 30,


2023


2022

Cash flows from operating activities:




Net income

$           18,088


$             8,261

Adjustments to reconcile net income to net cash, cash equivalents and restricted cash
provided by (used in) operating activities:




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

57,769


50,291

Amortization of deferred debt issuance costs and debt discount

225


198

Unrealized loss (gain) on derivative instruments

1,408


(2,589)

Provision for bad debt

450


(1,077)

Gain on sale of property, plant and equipment

(4,825)


(1,788)

Gain on facility exchange

(5,389)


Realized losses on restricted investments

10


Equity-based compensation expense

7,909


5,094

Deferred income tax benefit

(145)


(193)

  Other non-cash adjustments

(117)


97

Changes in operating assets and liabilities, net of acquisition:




Contracts receivable including retainage

22,777


(71,865)

Costs and estimated earnings in excess of billings on uncompleted contracts

(3,580)


(9,487)

Inventories

(11,999)


(21,726)

Prepaid expenses and other current assets

3,214


(2,327)

Other assets

(283)


(2,893)

Accounts payable

(7,441)


30,025

Billings in excess of costs and estimated earnings on uncompleted contracts

14,159


13,379

Accrued expenses and other current liabilities

(1,741)


(6,946)

Other long-term liabilities

4,053


3,825

Net cash provided by (used in) operating activities, net of acquisitions

94,542


(9,721)

Cash flows from investing activities:




Purchases of property, plant and equipment

(79,046)


(52,236)

Proceeds from sale of property, plant and equipment

12,640


4,184

Proceeds from facility exchange

36,987


Proceeds from restricted investments

1,403


Business acquisitions, net of cash acquired

(82,740)


(102,893)

Purchase of restricted investments

(7,882)


(7,662)

Net cash used in investing activities

(118,638)


(158,607)

Cash flows from financing activities:




Net proceeds from revolving credit facility

38,000


142,300

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

15,000


Repayments of long-term debt

(9,375)


(5,000)

Purchase of treasury stock

(139)


(39)

Net cash provided by financing activities

43,486


137,261

Net change in cash, cash equivalents and restricted cash

19,390


(31,067)

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

$           54,949


$           26,184





Supplemental cash flow information:




Cash paid for interest

$           14,319


$             5,727

Cash paid for income taxes

$              1,021


$             1,372

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

$              5,417


$             6,209

Cash paid for operating lease liabilities

$              1,802


$             1,783

Non-cash items:




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

$              2,078


$             1,236

Amounts payable to seller in business combination

$                   —


$                600

 

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, accretion and amortization, (iv) equity-based compensation expense, (v) loss on the extinguishment of debt and (vi) certain management fees and expenses. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenues for each period. Revenues adjusted for liquid asphalt index reimbursements represent revenues net of payments received as reimbursement for increases in the index price of liquid asphalt during the period. These metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures have limitations as analytical tools 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 these metrics because management uses these measures as key performance indicators, and we believe that securities analysts, investors and others use these measures to evaluate companies in our industry. Our calculation of these metrics 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 the periods presented:

Construction Partners, Inc.

Net Income to Adjusted EBITDA Reconciliation

Fiscal Quarters Ended June 30, 2023 and 2022

(unaudited, in thousands, except percentages)



For the Three Months Ended
June 30,


2023


2022

Net income

$          21,677


$         12,168

Interest expense, net

5,039


2,054

Provision for income taxes

7,117


3,955

Depreciation, depletion, accretion and amortization

19,536


17,244

Equity-based compensation expense

2,737


1,848

Management fees and expenses (1)

383


370

Adjusted EBITDA

$          56,489


$         37,639

Revenues

$        421,893


$       380,272

Adjusted EBITDA Margin

13.4 %


9.9 %



(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

$           41,000


$           46,000

Interest expense, net

18,000


18,400

Provision for income taxes

13,800


15,500

Depreciation, depletion, accretion and amortization

76,700


77,000

Equity-based compensation expense

9,800


10,400

Management fees and expenses (1)

1,700


1,700

Adjusted EBITDA

$         161,000


$         169,000







(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.

The following table presents a reconciliation of revenues, the most directly comparable measure calculated in accordance with GAAP, to revenues adjusted for liquid asphalt index reimbursements for the periods presented:

Construction Partners, Inc.

Revenues Adjusted for Liquid Asphalt Index Reimbursements

Fiscal Quarters Ended June 30, 2023 and 2022

(unaudited, in thousands)



For the Three Months Ended
June 30,


2023


2022

Revenues

$            421,893


$           380,272

Impact of liquid asphalt index reimbursements

(1,599)


(10,013)

Revenues adjusted for liquid asphalt index reimbursements

$            420,294


$           370,259





 

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SOURCE Construction Partners, Inc.