Construction Partners, Inc. Announces Fiscal 2024 Second Quarter Results

Q2 Revenue Up 14% Compared to Q2 FY23

Q2 Adjusted EBITDA Up 45% Compared to Q2 FY23

Record Backlog of $1.79 Billion

Company Raises FY24 Outlook

DOTHAN, Ala., May 10, 2024 /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 its fiscal second quarter ended March 31, 2024.

Fred J. (Jule) Smith, III, the Company's President and Chief Executive Officer, said, "We are pleased to report a strong second quarter in the slowest winter quarter of our seasonal business, achieving year-over-year growth in revenue, gross profit and gross profit margin, Adjusted EBITDA and Adjusted EBITDA margin. In addition, we grew our project backlog to $1.79 billion as of March 31, 2024. Our continued revenue and backlog growth reflects the strong ongoing demand and funding environment for both public and private infrastructure projects across our geographic footprint. Because of our confidence in these sustained industry trends, strong operational performance across our 70 markets in the Southeast, and continued infrastructure tailwinds, we are raising our outlook for fiscal 2024."

Revenues were $371.4 million in the second quarter of fiscal 2024, an increase of 14% compared to $324.8 million in the same quarter last year. The increase included $25.1 million of revenues attributable to acquisitions completed during or subsequent to the three months ended March 31, 2023 and an increase of approximately $21.4 million of revenues in the Company's existing markets from contract work and sales of HMA and aggregates to third parties. The mix of total revenue growth for the quarter was approximately 6.6% organic revenue and approximately 7.7% from these recent acquisitions.

Gross profit was $38.8 million in the second quarter of fiscal 2024, an increase of 48% compared to $26.3 million in the same quarter last year.  Gross profit as a percentage of total revenue was 10.4% and 8.1% for the quarters ended March 31, 2024 and 2023, respectively, an increase of 220 basis points year over year.

General and administrative expenses were $36.7 million in the second quarter of fiscal 2024, compared to $32.0 million in the same quarter last year, and as a percentage of total revenue, were 9.9% in each quarter.

Net loss was $1.1 million in the second quarter of fiscal 2024, compared to net loss of $5.5 million in the same quarter last year.

Adjusted EBITDA(1) in the second quarter of fiscal 2024 was $29.5 million, an increase of 45% compared to $20.4 million in the same quarter last year.

Project backlog was $1.79 billion at March 31, 2024, compared to $1.52 billion at March 31, 2023 and $1.62 billion at December 31, 2023.

Smith added, "Across our six southeastern states, which represent many of the fastest-growing markets in the country, the project bidding and pricing environment remains positive. We remain focused on organic growth and gaining market share, which, in conjunction with our acquisition activity, grow our top line and expand our margins. Our team's hard work, operational efficiency, dedication to detail and focus on safety continue to support our strategy, and we progress toward our ROAD-Map 2027 goals and create value for our shareholders through improving returns on capital."

Fiscal Year 2024 Outlook

The Company is raising its outlook ranges for fiscal year 2024 with regard to revenue, net income, Adjusted EBITDA and Adjusted EBITDA Margin, as follows:

  • Revenue in the range of $1.81 billion to $1.85 billion
  • Net income in the range of $71 million to $75 million
  • Adjusted EBITDA(1) in the range of $211 million to $225 million
  • Adjusted EBITDA Margin(1) in the range of 11.7% to 12.2%

Ned N. Fleming, III, the Company's Executive Chairman, stated, "Construction Partners continues to benefit from strong public and private project demand. This demand is supported by elevated funding for public projects at the federal, state and local levels, in addition to a steady commercial project environment led by the continued migration to the southeastern United States. The overall backdrop of our strategy also remains constant in support of the nation's need to invest in deferred infrastructure maintenance and additional capacity. CPI is well positioned for growth as we steadily execute on our strategy and perform this work. The Board and I are pleased with the strength of the organization, its leadership and the commitment of our team to continue to grow the Company and enhance value for all of our stakeholders."

Conference Call

The Company will conduct a conference call today at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) to discuss financial and operating results for the fiscal quarter ended March 31, 2024. 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 17, 2024 by calling (201) 612-7415 and using passcode ID: 13743799#. 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 terminals, 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 and Adjusted EBITDA Margin 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 Comprehensive Income (Loss)

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




For the Three Months
Ended March 31,


For the Six Months
Ended March 31,



2024


2023


2024


2023

Revenues


$   371,427


$    324,850


$   767,932


$   666,629

Cost of revenues


332,626


298,570


677,251


609,853

Gross profit


38,801


26,280


90,681


56,776

General and administrative expenses


(36,752)


(31,989)


(72,733)


(61,714)

Gain on sale of property, plant and equipment, net


1,031


3,158


1,867


3,326

Gain on facility exchange





5,389

Operating income (loss)


3,080


(2,551)


19,815


3,777

Interest expense, net


(4,568)


(4,802)


(8,314)


(8,762)

Other income


43


398


15


432

Income (loss) before provision for income taxes


(1,445)


(6,955)


11,516


(4,553)

Provision for income taxes


(321)


(1,474)


2,797


(964)

Net income (loss)


(1,124)


(5,481)


8,719


(3,589)

Other comprehensive income (loss), net of tax









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


2,478


(3,460)


(4,627)


(4,752)

Unrealized gain (loss) on restricted investments, net


(87)


81


313


117

Other comprehensive income (loss)


2,392


(3,379)


(4,313)


(4,635)

Comprehensive income (loss)


$       1,268


$       (8,860)


$        4,406


$     (8,224)



















Net income (loss) per share attributable to common stockholders:









 Basic


$        (0.02)


$         (0.11)


$          0.17


$        (0.07)

  Diluted


$        (0.02)


$         (0.11)


$          0.17


$        (0.07)










Weighted average number of common shares outstanding:









 Basic


51,938,216


51,827,365


51,915,069


51,826,143

  Diluted


51,938,216


51,827,365


52,523,100


51,826,143










 

Construction Partners, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)



March 31,


September 30,


2024


2023

ASSETS

(unaudited)



Current assets:




Cash and cash equivalents

$            47,957


$             48,243

Restricted cash

2,479


837

Contracts receivable including retainage, net

275,570


303,704

Costs and estimated earnings in excess of billings on uncompleted contracts

36,120


27,296

Inventories

102,750


84,038

Prepaid expenses and other current assets

10,586


9,306

Total current assets

475,462


473,424

Property, plant and equipment, net

565,351


505,095

Operating lease right-of-use assets

26,721


14,485

Goodwill

181,467


159,270

Intangible assets, net

21,451


19,520

Investment in joint venture

84


87

Restricted investments

15,452


15,079

Other assets

27,412


32,705

Total assets

$       1,313,400


$       1,219,665

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$          141,522


$           151,406

Billings in excess of costs and estimated earnings on uncompleted contracts

103,453


78,905

   Current portion of operating lease liabilities

5,564


2,338

Current maturities of long-term debt

15,000


15,000

Accrued expenses and other current liabilities

24,608


31,534

Total current liabilities

290,147


279,183

Long-term liabilities:




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

423,388


360,740

   Operating lease liabilities, net of current portion

21,717


12,649

Deferred income taxes, net

35,438


37,121

Other long-term liabilities

17,727


13,398

Total long-term liabilities

498,270


423,908

Total liabilities

788,417


703,091

Stockholders' equity:




Preferred stock, par value $0.001; 10,000,000 shares authorized and no shares issued and

outstanding at March 31, 2024 and September 30, 2023


Class A common stock, par value $0.001; 400,000,000 shares authorized, 43,896,017 shares

issued and 43,828,855 shares outstanding at March 31, 2024 and 43,760,546 shares issued

and 43,727,680 shares outstanding at September 30, 2023

44


44

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 March 31, 2024 and September 30, 2023

12


12

Additional paid-in capital

272,669


267,330

Treasury stock, Class A common stock, par value $0.001, at cost, 67,162 shares at March 31,

2024 and 32,866 shares at September 30, 2023

(1,514)


(178)

Treasury stock, Class B common stock, par value $0.001, at cost, 2,922,952 shares at March 31,

2024 and September 30, 2023

(15,603)


(15,603)

Accumulated other comprehensive income, net

14,381


18,694

Retained earnings

254,994


246,275

Total stockholders' equity

524,983


516,574

Total liabilities and stockholders' equity

$       1,313,400


$       1,219,665





 

Construction Partners, Inc.

Consolidated Statements of Cash Flows

(unaudited, in thousands)



For the Six Months Ended
March 31,


2024


2023

Cash flows from operating activities:




Net income (loss)

$                8,719


$              (3,589)

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




  Depreciation, depletion, accretion and amortization

43,961


38,233

  Amortization of deferred debt issuance costs

148


151

  Unrealized loss on derivative instruments

194


2,286

  Provision for bad debt

335


70

  Gain on sale of property, plant and equipment

(1,867)


(3,326)

  Gain on facility exchange


(5,389)

  Realized loss on sales, calls and maturities of restricted investments

49


4

  Share-based compensation expense

6,221


5,172

  Loss from investment in joint venture

3


  Deferred income tax benefit

(306)


(224)

  Other non-cash adjustments

(224)


(69)

Changes in operating assets and liabilities, net of business acquisitions:




  Contracts receivable including retainage, net

43,443


34,092

  Costs and estimated earnings in excess of billings on uncompleted contracts

(7,799)


743

  Inventories

(15,968)


(10,152)

  Prepaid expenses and other current assets

2,165


(3,246)

  Other assets

(585)


(206)

  Accounts payable

(12,536)


(12,764)

  Billings in excess of costs and estimated earnings on uncompleted contracts

22,412


7,415

  Accrued expenses and other current liabilities

(11,976)


(6,289)

  Other long-term liabilities

2,161


2,784

Net cash provided by operating activities, net of business acquisitions

78,550


45,696

Cash flows from investing activities:




Purchases of property, plant and equipment

(55,518)


(60,399)

Proceeds from sale of property, plant and equipment

4,962


8,301

Proceeds from facility exchange


36,987

Proceeds from sales, calls and maturities of restricted investments

1,918


866

Business acquisitions, net of cash acquired

(87,850)


(77,842)

Purchase of restricted investments

(1,870)


(5,148)

Net cash used in investing activities

(138,358)


(97,235)

Cash flows from financing activities:




Proceeds from revolving credit facility

90,000


38,000

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


15,000

Repayments of long-term debt

(27,500)


(6,250)

Purchase of treasury stock

(1,336)


(139)

Net cash provided by financing activities

61,164


46,611

Net change in cash, cash equivalents and restricted cash

1,356


(4,928)

Cash, cash equivalents and restricted cash:




Cash, cash equivalents and restricted cash, beginning of period

49,080


35,559

Cash, cash equivalents and restricted cash, end of period

$             50,436


$             30,631





Supplemental cash flow information:




Cash paid for interest

$                9,569


$                9,047

Cash paid for income taxes

$                3,155


$                   626

Cash paid for operating lease liabilities

$                1,435


$                1,204

Non-cash items:




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

$                9,999


$                4,062

Property, plant and equipment financed with accounts payable

$                2,554


$                3,448

 

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, and (v) loss on the extinguishment of debt.  Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenues for each period. These metrics are supplemental measures of the Company's 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 the Company's operating performance. The Company presents Adjusted EBITDA and Adjusted EBITDA Margin because management uses these measures as key performance indicators, and the Company believes that securities analysts, investors and others use these measures to evaluate companies in the Company's industry. The Company's 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 table presents 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 March 31, 2024 and 2023

(unaudited, in thousands)



For the Three Months
Ended March 31,


2024


2023 (1)

Net income (loss)

$       (1,124)


$       (5,481)

Interest expense, net

4,568


4,802

Provision for income taxes

(321)


(1,474)

Depreciation, depletion, accretion and amortization

22,840


19,858

Share-based compensation expense

3,553


2,692

Adjusted EBITDA

$       29,516


$       20,397

Revenues

$     371,427


$     324,850

Adjusted EBITDA Margin

7.9 %


6.3 %



(1)

The Company has historically included within the definition of Adjusted EBITDA an adjustment for management fees and expenses related to the Company's management services agreement with an affiliate of SunTx Capital Partners, a member of the Company's control group. Effective October 1, 2023, the term of the management services agreement was extended to October 1, 2028. As a result of the term extension, the Company no longer views the management fees and expenses paid under the management services agreement as a non-recurring expense. Accordingly, periods commencing subsequent to September 30, 2023 do not include an adjustment for management fees and expenses, and the Company has recast comparative Adjusted EBITDA and Adjusted EBITDA Margin for the three months ended March 31, 2023 to conform to the current definition.

 

Construction Partners, Inc.

Net Income to Adjusted EBITDA Reconciliation

Fiscal Year 2024 Updated Outlook

(unaudited, in thousands, except percentages)



For the Fiscal Year Ending
September 30, 2024


Low


High

Net income

$        71,000


$        75,000

Interest expense, net

19,000


20,000

Provision for income taxes

23,793


25,134

Depreciation, depletion, accretion and amortization

84,507


91,766

Share-based compensation expense

12,700


13,100

Adjusted EBITDA

$      211,000


$      225,000

Revenues

$  1,810,000


$  1,850,000

Adjusted EBITDA Margin

11.7 %


12.2 %

 

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SOURCE Construction Partners, Inc.