Construction Partners Announces FY 2018 Third Quarter Results
Reports Record Third Quarter Revenue and Gross Profit
DOTHAN, Ala., Aug. 09, 2018 (GLOBE NEWSWIRE) -- Construction Partners, Inc. (NASDAQ: ROAD) (“CPI” or 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 fiscal 2018 third quarter ended June 30, 2018.
Highlights – 3Q FY 2018 vs. 3Q FY 2017
- Revenue was $195.1 million, up 32%
- Gross profit was $29.5 million, up 23%
- Net income was $13.4 million, up 109%
- Diluted earnings per share were $0.29, up 93%
- Adjusted EBITDA(1) was $22.7 million, up 29%
- Backlog totaled $609 million at June 30, 2018
Charles E. Owens, CPI’s President and Chief Executive Officer, stated “We are very pleased with our strong year-over-year growth in the third quarter as our team continues to execute well on our growth strategy, with strong double-digit increases across all of our key financial metrics. We are continuing to see strong demand in most of the markets where we compete, and we are maintaining our financial outlook for 2018.
“We have successfully completed the integration of The Scruggs Company, which we acquired mid-third quarter, serving the Georgia market. The Scruggs Company – our fifth platform company acquisition -- is performing very well and in-line with our expectations. We will continue to look for opportunities both to optimize their operations in order to boost profitability and to leverage new business development opportunities in its primary market areas.
“We intend to remain sharply focused on our strategy of delivering controlled, profitable growth through organic growth projects as well as from additional acquisitions in the highly fragmented, high-growth Southeast markets where we compete.”
(1) Adjusted EBITDA is a non-GAAP financial measure. Please see a reconciliation to the most directly comparable GAAP measure at the end of this news release.
Ned Fleming, CPI’s Executive Chairman, added, “One of the strengths of our Company that helps drive our success is the fact that a majority of CPI’s public projects are maintenance related with an average project length of eight months in the fast-growing Southeastern portion of the U.S. The bulk of our business comes from recurring roadway repair projects funded by federal, state and local governments, without reliance on large projects. These factors differentiate us from the other public companies in our industry. Another strength is our vertical integration, which gives us a competitive advantage over smaller competitors. We are pleased to have outperformed our expectations for the quarter, and we remain well positioned in the market for continued growth.”
Conference Call
CPI will conduct a conference call on Friday, August 10, 2018 at 10:00 a.m. Central Time, 11:00 a.m. Eastern Time, to discuss financial and operating results for the quarter ended June 30, 2018. 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 17, 2018 by calling (201) 612-7415 and using pass code 13681216#. A webcast of the call will also be available live and for later replay on CPI’s Investor Relations website at http://ir.constructionpartners.net.
About Construction Partners, Inc.
Construction Partners is a vertically integrated civil infrastructure company operating across five Southeastern states, operating 30 Hot Mix Asphalt plants and nine aggregate facilities. 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 CPI’s public projects are maintenance related. Private sector projects include paving and sitework for residential subdivisions, office and industrial parks, shopping centers and local businesses. To learn more, visit www.constructionpartners.net.
Contacts:
Rick Black / Ken Dennard
Dennard Lascar Investor Relations
ROAD@DennardLascar.com
(713) 529-6600
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,” “projects,” “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 successfully identify, manage and integrate acquisitions; 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 our financial statements and to subsequently maintain effective internal control over financial reporting; and the risks, uncertainties and factors set forth under "Risk Factors" in Construction Partners' registration statement on Form S-1. Forward-looking statements speak only as of the date they are made. Construction Partners 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.
- Financial Statements Follow -
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Construction Partners, Inc. Consolidated Statements of Income (Unaudited, in thousands, except share and per share data) |
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For the three months ended June 30, |
For the nine months ended June 30, |
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| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Revenues | $ | 195,075 | $ | 148,099 | $ | 464,395 | $ | 380,585 | ||||||||
| Cost of revenues | 165,606 | 124,117 | 398,379 | 323,513 | ||||||||||||
| Gross profit | 29,469 | 23,982 | 66,016 | 57,072 | ||||||||||||
| General and administrative expenses | (14,788 | ) | (12,477 | ) | (40,572 | ) | (34,005 | ) | ||||||||
| Settlement income | - | - | 14,803 | - | ||||||||||||
| Gain on sale of equipment, net | 86 | 238 | 1,117 | 2,675 | ||||||||||||
| Operating income | 14,767 | 11,743 | 41,364 | 25,742 | ||||||||||||
| Interest expense, net | (406 | ) | (659 | ) | (956 | ) | (2,802 | ) | ||||||||
| Loss on extinguishment of debt | - | (1,638 | ) | - | (1,638 | ) | ||||||||||
| Other income (expense) | 15 | (3 | ) | (45 | ) | (134 | ) | |||||||||
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Income before provision for income taxes and earnings from investment in joint venture |
14,376 | 9,443 | 40,363 | 21,168 | ||||||||||||
| Provision for income taxes | 1,409 | 3,031 | 5,382 | 7,395 | ||||||||||||
| Earnings from investment in joint venture | 436 | - | 666 | - | ||||||||||||
| Net income | $ | 13,403 | $ | 6,412 | $ | 35,647 | $ | 13,773 | ||||||||
| Net income per share attributable to common stockholders: | ||||||||||||||||
| Basic | $ | 0.29 | $ | 0.15 | $ | 0.82 | $ | 0.33 | ||||||||
| Diluted | $ | 0.29 | $ | 0.15 | $ | 0.81 | $ | 0.33 | ||||||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic | 46,557,785 | 41,538,989 | 43,648,309 | 41,514,656 | ||||||||||||
| Diluted | 46,988,359 | 41,566,344 | 43,932,546 | 41,541,447 | ||||||||||||
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Construction Partners, Inc. Consolidated Balance Sheets (in thousands, except share and per share data) |
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| June 30, 2018 | September 30, 2017 | ||||||||
| (unaudited) | |||||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash | $ |
75,183 |
$ | 27,547 | |||||
| Contracts receivable including retainage, net | 115,679 | 120,984 | |||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts |
12,747 | 4,592 | |||||||
| Inventories | 25,145 | 17,487 | |||||||
| Other current assets | 14,417 | 4,520 | |||||||
| Total current assets | 243,171 | 175,130 | |||||||
| Property, plant and equipment, net | 177,222 | 115,911 | |||||||
| Goodwill | 34,398 | 30,600 | |||||||
| Intangible assets, net | 2,325 | 2,550 | |||||||
| Investment in joint venture | 1,066 | - | |||||||
| Other assets | 14,562 | 2,483 | |||||||
| Deferred income taxes, net | 1,619 | 1,876 | |||||||
| Total assets | $ |
474,363 |
$ | 328,550 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 48,104 | $ | 52,402 | |||||
| Billings in excess of costs and estimated earnings on uncompleted contracts |
39,520 | 32,108 | |||||||
| Current maturities of debt | 14,788 | 10,000 | |||||||
| Accrued expenses and other current liabilities | 23,059 | 20,036 | |||||||
| Total current liabilities | 125,471 | 114,546 | |||||||
| Long-term liabilities: | |||||||||
| Long-term debt, net of current maturities | 51,786 | 47,136 | |||||||
| Deferred income taxes, net | 7,980 | 9,667 | |||||||
| Other long-term liabilities | 4,801 | 5,020 | |||||||
| Total long-term liabilities | 64,567 | 61,823 | |||||||
| Total liabilities | 190,038 | 176,369 | |||||||
| Commitments and contingencies | |||||||||
| Stockholders’ Equity | |||||||||
| Preferred stock, par value $0.001; 1,000,000 shares authorized and no shares issued and outstanding |
- | - | |||||||
| Class A common stock, par value $0.001; 400,000,000 shares authorized, 11,950,000 issued and outstanding at June 30, 2018, and no shares authorized, issued and outstanding at September 30, 2017 |
12 | - | |||||||
| Class B common stock, par value $0.001; 100,000,000 shares authorized, 42,387,571 issued and 39,464,619 outstanding at June 30, 2018, and no Shares authorized, issued and outstanding at September 30, 2017 |
42 | - | |||||||
| Common stock, $0.001 par value, no shares authorized, issued and outstanding at June 30, 2018 and 126,000,000 shares authorized, 44,987,575 issued and 41,691,541 outstanding at September 30, 2017 |
- | 45 | |||||||
| Additional paid-in capital | 242,493 | 142,385 | |||||||
| Treasury stock, at cost | (15,603) | (11,983 | ) | ||||||
| Retained earnings | 57,381 | 21,734 | |||||||
| Total stockholders’ equity | 284,325 | 152,181 | |||||||
| Total liabilities and stockholders’ equity | $ | 474,363 | $ | 328,550 | |||||
NON-GAAP Financial Measures - Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA represents net income before interest expense, net, provision (benefit) for income taxes, depreciation, depletion and amortization, equity-based compensation expense, loss on extinguishment of debt and certain management fees and expenses, and excludes income recognized in connection with a litigation settlement. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenues for each period. These metrics 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. We present Adjusted EBITDA and Adjusted EBITDA Margin as management uses these measures 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 between our measure of Adjusted EBITDA compared to other similar companies’ measures of Adjusted EBITDA 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 (unaudited, in thousands):
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For the three months ended June 30, |
For the nine months ended June 30, |
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| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net income | $ | 13,403 | $ | 6,412 | $ | 35,647 | $ | 13,773 | ||||||||
| Interest expense, net | 406 | 659 | 956 | 2,802 | ||||||||||||
| Provision for income taxes | 1,409 | 3,031 | 5,382 | 7,395 | ||||||||||||
| Depreciation, depletion and amortization of long-lived assets |
6,621 | 5,208 | 17,929 | 15,709 | ||||||||||||
| Equity-based compensation expense | 371 | 357 | 975 | 513 | ||||||||||||
| Loss on extinguishment of debt | - | 1,638 | - | 1,638 | ||||||||||||
| Settlement income (1) | - | - | (14,803 | ) | - | |||||||||||
| Management fees and expenses (2) | 468 | 315 | 1,119 | 999 | ||||||||||||
| Adjusted EBITDA | $ | 22,678 | $ | 17,620 | $ | 47,205 | $ | 42,829 | ||||||||
| Revenues | $ | 195,075 | $ | 148,099 | $ | 464,395 | $ | 380,585 | ||||||||
| Adjusted EBITDA Margin | 11.6 | % | 11.9 | % | 10.2% | % | 11.3 | % | ||||||||
| (1) | Represents pre-tax income recognized in connection with a litigation settlement. |
| (2) | Reflects fees and reimbursement of certain out-of-pocket-expenses under a management services agreement with an affiliate of SunTx Capital Partners (“SunTx”), our controlling stockholder. |
Released August 9, 2018