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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-38479
Construction Partners, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware26-0758017
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
290 Healthwest Drive, Suite 2
Dothan, Alabama
36303
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (334) 673-9763
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.001 per shareROADThe Nasdaq Stock Market LLC
(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No   ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer
Non-accelerated FilerSmaller Reporting Company
Emerging Growth Company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes      No  
As of May 8, 2024, the registrant had 43,828,855 shares of Class A common stock, $0.001 par value, and 8,998,511 shares of Class B common stock, $0.001 par value, outstanding.



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including, among other things, statements related to future events, business strategy, future performance, future operations, backlog, financial position, plans to repurchase shares of Class A common stock, estimated revenues and losses, projected costs, prospects, plans and objectives of management. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek,” “anticipate,” “plan,” “continue,” “estimate,” “expect,” “may,” “will,” “project,” “predict,” “potential,” “targeting,” “intend,” “could,” “might,” “should,” “believe,” “outlook” and variations of such words or their negative and similar expressions. Forward-looking statements should not be read as a guarantee of future performance or results, and may not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on management’s belief, based on currently available information, as to the outcome and timing of future events. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those expressed in such forward-looking statements. When evaluating forward-looking statements, you should consider the risk factors and other cautionary statements described in this Quarterly Report on Form 10-Q and under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. We believe the expectations reflected in the forward-looking statements contained in this report are reasonable, but no assurance can be given that these expectations will prove to be correct. Forward-looking statements should not be unduly relied upon.
Important factors that could cause actual results or events to differ materially from those expressed in forward-looking statements include, but are not limited to:
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 inquiries, requirements and initiatives, including those related to funding for public infrastructure construction, land use, environmental, health and safety matters, and government contracting requirements and other laws and regulations;
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;
climate change and related laws and regulations;
our substantial indebtedness and the restrictions imposed on us by the terms thereof;
our ability to manage our supply chain in a manner that ensures that we are able to obtain adequate raw materials, equipment and essential supplies;
our ability to retain key personnel and maintain satisfactory labor relations, and to manage or mitigate any labor shortages, turnover and labor cost increases;
the impact of inflation on costs of labor, raw materials and other items that are critical to our business, including fuel, concrete and steel;



unfavorable developments affecting the banking and financial services industry;
property damage and other claims and insurance coverage issues;
the outcome of litigation or disputes, including employment-related, workers’ compensation and breach of contract claims;
risks related to our information technology systems and infrastructure, including cybersecurity incidents;
our ability to maintain effective internal control over financial reporting; and
other events outside of our control.
These factors are not necessarily all of the important factors that could cause actual results or events to differ materially from those expressed in the forward-looking statements. Other unknown or unpredictable factors could also cause actual results or events to differ materially from those expressed in the forward-looking statements. Our future results will depend upon various other risks and uncertainties, including those described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements after the date on which any such statement is made, whether as a result of new information, future events or otherwise, except as required by law.


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TABLE OF CONTENTS



Table of Contents
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CONSTRUCTION PARTNERS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
March 31,September 30,
20242023
ASSETS(unaudited)
Current assets:
Cash and cash equivalents$47,957 $48,243 
Restricted cash2,479 837 
Contracts receivable including retainage, net275,570 303,704 
Costs and estimated earnings in excess of billings on uncompleted contracts36,120 27,296 
Inventories102,750 84,038 
Prepaid expenses and other current assets10,586 9,306 
Total current assets475,462 473,424 
Property, plant and equipment, net565,351 505,095 
Operating lease right-of-use assets26,721 14,485 
Goodwill181,467 159,270 
Intangible assets, net21,451 19,520 
Investment in joint venture84 87 
Restricted investments15,452 15,079 
Other assets27,412 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 contracts103,453 78,905 
   Current portion of operating lease liabilities5,564 2,338 
Current maturities of long-term debt15,000 15,000 
Accrued expenses and other current liabilities24,608 31,534 
Total current liabilities290,147 279,183 
Long-term liabilities:
Long-term debt, net of current maturities and deferred debt issuance costs423,388 360,740 
   Operating lease liabilities, net of current portion21,717 12,649 
Deferred income taxes, net35,438 37,121 
Other long-term liabilities17,727 13,398 
Total long-term liabilities498,270 423,908 
Total liabilities788,417 703,091 
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 capital272,669 267,330 
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, net14,381 18,694 
Retained earnings254,994 246,275 
Total stockholders’ equity524,983 516,574 
Total liabilities and stockholders’ equity$1,313,400 $1,219,665 
See notes to consolidated financial statements (unaudited).
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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,
2024202320242023
Revenues$371,427 $324,850 $767,932 $666,629 
Cost of revenues332,626 298,570 677,251 609,853 
Gross profit38,801 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, net1,031 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 income43 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, net2,478 (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:
Basic51,938,216 51,827,365 51,915,069 51,826,143 
  Diluted51,938,216 51,827,365 52,523,100 51,826,143 
See notes to consolidated financial statements (unaudited).

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CONSTRUCTION PARTNERS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited in thousands, except share data)
For the six months ended March 31, 2024
Class A Common StockClass B Common Stock
Additional
Paid-in
Capital
Treasury
Stock Class A Common Stock
Treasury
Stock Class B Common Stock
Retained
Earnings
Accumulated Other Comprehensive Income (Loss), netTotal Stockholders’ Equity
SharesAmountSharesAmount
September 30, 202343,760,546 $44 11,921,463 $12 $267,330 $(178)$(15,603)$246,275 $18,694 $516,574 
Net income — — — — — — — 9,843 — 9,843 
Share-based compensation expense— — — — 2,783 — — — — 2,783 
Issuance of stock grant awards135,471 — — — — — — — — — 
Purchase of treasury stock— — — — — (1,336)— — — (1,336)
Other comprehensive (loss)— — — — — — — — (6,705)(6,705)
December 31, 202343,896,017 $44 11,921,463 $12 $270,113 $(1,514)$(15,603)$256,118 $11,989 $521,159 
Net loss— — — — — — — (1,124)— (1,124)
Share-based compensation expense— — — — 2,556 — — — — 2,556 
Other comprehensive income— — — — — — — — 2,392 2,392 
March 31, 202443,896,017 $44 11,921,463 $12 $272,669 $(1,514)$(15,603)$254,994 $14,381 $524,983 
For the six months ended March 31, 2023
Class A Common StockClass B Common StockAdditional
Paid-in
Capital
Treasury
Stock Class A Common Stock
Treasury
Stock Class B Common Stock
Retained
Earnings
Accumulated Other Comprehensive Income (Loss), netTotal
Stockholders’
Equity
SharesAmountSharesAmount
September 30, 202241,195,730 $41 14,275,867 $15 $256,571 $(39)$(15,603)$197,274 $17,620 $455,879 
   Net income— — — — — — — 1,892 — 1,892 
   Share-based compensation expense— — — — 2,480 — — — — 2,480 
   Issuance of stock grant awards180,798 — — — — — — — — — 
   Purchase of treasury stock— — — — — (139)— — — (139)
   Other comprehensive (loss)— — — — — — — — (1,256)(1,256)
December 31, 202241,376,528 $41 14,275,867 $15 $259,051 $(178)$(15,603)$199,166 $16,364 $458,856 
Net loss— — — — — — — (5,481)— (5,481)
Share-based compensation expense— — — — 2,692 — — — — 2,692 
   Other comprehensive (loss)— — — — — — — — (3,379)(3,379)
March 31, 202341,376,528 $41 14,275,867 $15 $261,743 $(178)$(15,603)$193,685 $12,985 $452,688 
See notes to consolidated financial statements (unaudited).
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CONSTRUCTION PARTNERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited in thousands)
For the Six Months Ended March 31,
20242023
Cash flows from operating activities:
Net income (loss)$8,719 $(3,589)
Adjustments to reconcile net income (loss) to net cash, cash equivalents and restricted cash provided by operating activities:
Depreciation, depletion, accretion and amortization43,961 38,233 
Amortization of deferred debt issuance costs148 151 
Unrealized loss on derivative instruments194 2,286 
Provision for bad debt335 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 investments49 4 
Share-based compensation expense6,221 5,172 
Loss from investment in joint venture3  
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, net43,443 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 assets2,165 (3,246)
Other assets(585)(206)
Accounts payable(12,536)(12,764)
Billings in excess of costs and estimated earnings on uncompleted contracts22,412 7,415 
Accrued expenses and other current liabilities(11,976)(6,289)
Other long-term liabilities2,161 2,784 
Net cash provided by operating activities, net of business acquisitions78,550 45,696 
Cash flows from investing activities:
Purchases of property, plant and equipment(55,518)(60,399)
Proceeds from sale of property, plant and equipment4,962 8,301 
Proceeds from facility exchange 36,987 
Proceeds from sales, calls and maturities of restricted investments1,918 866 
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 facility90,000 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 activities61,164 46,611 
Net change in cash, cash equivalents and restricted cash1,356 (4,928)
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period49,080 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 
See notes to consolidated financial statements (unaudited).
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 1 - General
Business Description
Construction Partners, Inc. (the “Company”) is a civil infrastructure company that specializes in the construction and maintenance of roadways across Alabama, Florida, Georgia, North Carolina, South Carolina and Tennessee. The Company was formed in 2007 as a holding company to facilitate an acquisition growth strategy in the HMA paving and construction industry. Through its wholly-owned subsidiaries, the Company provides a variety of products and services to both public and private infrastructure projects, with an emphasis on highways, roads, bridges, airports and commercial and residential developments. The Company’s primary operations consist of (i) manufacturing and distributing hot mix asphalt (“HMA”) for both internal use and sales to third parties in connection with construction projects, (ii) paving activities, including the construction of roadway base layers and application of asphalt pavement, (iii) site development, including the installation of utility and drainage systems, (iv) mining aggregates, such as sand, gravel and construction stone, that are used as raw materials in the production of HMA and for sales to third parties, and (v) distributing liquid asphalt cement for both internal use and sales to third parties in connection with HMA production.
Seasonality
The use and consumption of the Company’s products and services fluctuate due to seasonality. The Company’s products are used, and its construction operations and production facilities are located, outdoors. Therefore, seasonal changes and other weather-related conditions, such as snowy, rainy or cold weather in the winter, spring or fall and major weather events, such as hurricanes, tornadoes, tropical storms and heavy snows, can adversely affect the Company’s business and operations through a decline in both the use of the Company’s products and demand for the Company’s services. In addition, construction materials production and shipment levels follow activity in the construction industry, which typically occurs in the spring, summer and fall. The first and second quarters of the Company’s fiscal year typically have lower levels of activity due to less favorable weather conditions. Warmer and drier weather during the Company's third and fourth fiscal quarters typically result in higher activity and revenues during those quarters.

Note 2 - Significant Accounting Policies
Basis of Presentation
These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. These interim consolidated statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), which permit reduced disclosure for interim periods. The Company's Consolidated Balance Sheets as of September 30, 2023 were derived from the Company's audited financial statements for the fiscal year then ended, but do not include all necessary disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) with respect to annual financial statements. In the opinion of management, these unaudited consolidated financial statements include all recurring adjustments and normal accruals necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the dates and periods presented. These consolidated financial statements and accompanying notes should be read in conjunction with the Company’s audited annual consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (the “2023 Form 10-K”). Results for interim periods are not necessarily indicative of the results to be expected for a full fiscal year or for any future period.
Management’s Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the recorded amounts of assets, liabilities, stockholders’ equity, revenues and expenses during the reporting period, and the disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates are used in accounting for items such as recognition of revenues and cost of revenues, investments, mineral reserves, goodwill and other intangible assets, business acquisitions, valuation of operating lease right-of-use assets, allowance for doubtful accounts, valuation allowances related to income taxes, accruals for potential liabilities related to lawsuits or insurance claims, asset retirement obligations, valuation of derivative instruments and valuation of share-based compensation awards. Estimates are continually evaluated based on historical information and actual experience; however, actual results could differ from these estimates.
A description of certain critical accounting policies of the Company is presented below. Additional critical accounting policies and the underlying judgments and uncertainties are described in the notes to the Company’s annual consolidated financial statements included in the 2023 Form 10-K.
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Cash and Cash Equivalents
Cash consists principally of currency on hand and demand deposits at commercial banks. Cash equivalents are short-term, highly liquid securities that are both readily convertible to known amounts of cash and are so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Cash equivalents include securities with original maturities of three months or less. The Company maintains demand accounts, money market accounts and certificates of deposit at several banks. From time to time, account balances have exceeded the maximum available federal deposit insurance coverage limit. The Company has not experienced any losses in such accounts and regularly monitors its credit risk.
Restricted Cash
Construction Partners Risk Management, Inc. (the “Captive”), a captive insurance company and wholly-owned subsidiary of the Company, provides general liability, automobile liability and workers’ compensation insurance coverage to the Company and its subsidiaries. Restricted cash represents cash held in a fiduciary capacity by the Captive for the payment of casualty insurance claims. The Company had restricted cash of $2.5 million and $0.8 million at March 31, 2024 and September 30, 2023, respectively.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows (unaudited, in thousands):

March 31, 2024March 31, 2023
Cash and cash equivalents$47,957 $30,512 
Restricted cash2,479 119 
Total cash, cash equivalents, and restricted cash$50,436 $30,631 

Restricted Investments
The Company’s restricted investments consist of debt securities held in a fiduciary capacity by the Captive for the payment of casualty insurance claims. The Company determines the classification of its securities at the time of purchase and re-evaluates the determination at each balance sheet date. The Company has classified securities held by the Captive as available-for-sale. As a result, these securities are carried at their fair value. Purchases and sales of debt securities are recorded on the trade date. Interest income on debt securities is recorded when earned using an effective yield method. Unrealized gains and losses are reported as components of accumulated other comprehensive income (loss), net. These securities have been classified as non-current assets based on their respective maturity dates and the Company’s intent to reinvest sales proceeds into new restricted investments. The Company had restricted investments of $15.5 million and $15.1 million at March 31, 2024 and September 30, 2023, respectively.
The Company evaluates its available-for-sale debt securities quarterly to determine whether there has been a decline in the fair value below the amortized cost due to credit losses or other factors. This evaluation process entails judgement by the Company, and considers factors including the issuer’s financial condition and near-term prospects, future economic conditions, interest rate changes and changes in the rating of the security. When the Company has determined that it intends to sell, or that it is more likely than not that the Company will be required to sell a security before it recovers its amortized cost basis above fair value, the individual security is written down to fair value, with a corresponding charge to “Other income” within the Consolidated Statements of Comprehensive Income. For available-for-sale debt securities that do not meet the intent impairment criteria but for which the Company has determined that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss allowance is recorded for the credit loss, limited by the amount by which the fair value is less than the amortized cost basis. For the six months ended March 31, 2024 and 2023, the Company had no intent impairments or credit losses.
Contracts Receivable Including Retainage, Net
Contracts receivable are generally based on amounts billed and currently due from customers, amounts currently due but unbilled, and amounts retained by customers pending satisfactory completion of a project. It is common in the Company’s industry for a small portion of either progress billings or the contract price, typically 10%, to be withheld by the customer until the Company completes a project to the satisfaction of the customer in accordance with the applicable contract terms. Such amounts, defined as retainage, are included on the Consolidated Balance Sheets as “Contracts receivable including retainage, net.” Based on the Company’s experience with similar contracts in recent years, billings for such retainage balances are generally collected within one year of the completion of the project.
Contracts receivable including retainage, net is stated at the amount management expects to collect from outstanding balances. Management provides for uncollectible accounts through a charge to earnings and a credit to the allowance for doubtful accounts based
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on its assessment of the current status of individual accounts, type of service performed, current economic conditions, historical losses and other information available to management. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and an adjustment to the contract receivable.
Contract Assets and Contract Liabilities
Billing practices for the Company’s contracts are governed by the contract terms of each project based on (i) progress toward completion approved by the owner, (ii) achievement of milestones or (iii) pre-agreed schedules. Billings do not necessarily correlate with revenues recognized under the cost-to-cost input method. The Company records contract assets and contract liabilities to account for these differences in timing.
The contract asset, “Costs and estimated earnings in excess of billings on uncompleted contracts”, arises when the Company recognizes revenues for services performed under its construction projects, but the Company is not yet entitled to bill the customer under the terms of the contract. Amounts billed to customers are excluded from this asset and reflected on the Consolidated Balance Sheets as “Contracts receivable including retainage, net”. Included in costs and estimated earnings on uncompleted contracts are amounts the Company seeks or will seek to collect from customers or others for (i) errors, (ii) changes in contract specifications or design, (iii) contract change orders in dispute, unapproved as to scope and price, or (iv) other customer-related causes of unanticipated additional contract costs (such as claims). Such amounts are recorded to the extent that the amount can be reasonably estimated and recovery is probable. Claims and unapproved change orders made by the Company may involve negotiation and, in rare cases, litigation. Unapproved change orders and claims also involve the use of estimates, and revenues associated with unapproved change orders and claims are included in the transaction price for which it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is resolved. The Company did not recognize any material amounts associated with claims and unapproved change orders during the periods presented.
The contract liability, “Billings in excess of costs and estimated earnings on uncompleted contracts”, represents the Company’s obligation to transfer goods or services to a customer for which the Company has been paid by the customer or for which the Company has billed the customer under the terms of the contract. Revenue for future services reflected in this account are recognized, and the liability is reduced, as the Company subsequently satisfies the performance obligation under the contract.
Costs and estimated earnings in excess of billings on uncompleted contracts and billings in excess of costs and estimated earnings on uncompleted contracts are typically resolved within one year and are not considered significant financing components.
Concentration of Risks
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of contracts receivable including retainage. In the normal course of business, the Company provides credit to its customers and does not generally require collateral. The Company monitors concentrations of credit risk associated with these receivables on an ongoing basis. The Company has not historically experienced significant credit losses, due primarily to management’s assessment of customers’ credit ratings. The Company principally deals with recurring customers, state and local governments and well-known local companies whose reputations are known to management. The Company performs credit checks for significant new customers and generally requires progress payments for significant projects. The Company generally has the ability to file liens against the property if payments are not made on a timely basis. No single customer accounted for more than 10% of the Company’s contracts receivable including retainage, net balance at March 31, 2024 or September 30, 2023.
Projects performed for various departments of transportation accounted for 36.0% and 29.8% of consolidated revenues for the three months ended March 31, 2024 and 2023, respectively, and for 36.9% and 30.9% of consolidated revenues for the six months ended March 31, 2024 and 2023, respectively. Customers that accounted for more than 10% of consolidated revenues during the three and six months ended March 31, 2024 and 2023 are presented below:
% of Consolidated Revenues
For the Three Months Ended March 31,For the Six Months Ended March 31,
2024202320242023
Florida Department of Transportation15.8%11.3%14.2%*
* Less than 10%



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Revenues from Contracts with Customers
The Company derives revenues from contracts with its customers, predominantly by performing construction services for both public and private infrastructure projects, with an emphasis on highways, roads, bridges, airports and commercial and residential developments. These projects are performed for a mix of federal, state, municipal and private customers. In addition, the Company generates revenues from the sale of construction materials, including HMA, aggregates, liquid asphalt and ready-mix concrete, to third-party public and private customers pursuant to contracts with those customers. The following table reflects, for the periods presented, the percentage of (i) revenues generated from public infrastructure construction projects and the sale of construction materials to public customers and (ii) revenues generated from private infrastructure construction projects and the sale of construction materials to private customers.
% of Consolidated Revenues
For the Three Months Ended March 31,For the Six Months Ended March 31,
2024202320242023
Private42.3 %42.1 %41.7 %40.4 %
Public57.7 %57.9 %58.4 %59.6 %
Revenues derived from construction projects are recognized over time as the Company satisfies its performance obligations by transferring control of the asset created or enhanced by the project to the customer. Recognition of revenues and cost of revenues for construction projects requires significant judgment by management, including, among other things, estimating total costs expected to be incurred to complete a project and measuring progress toward completion. Management reviews contract estimates regularly to assess revisions of estimated costs to complete a project and measurement of progress toward completion.
Management believes the Company maintains reasonable estimates based on prior experience; however, many factors contribute to changes in estimates of contract costs. Accordingly, estimates made with respect to uncompleted projects are subject to change as each project progresses and better estimates of contract costs become available. All contract costs are recorded as incurred, and revisions to estimated total costs are reflected as soon as the obligation to perform is determined. Provisions are recognized for the full amount of estimated losses on uncompleted contracts whenever evidence indicates that the estimated total cost of a contract exceeds its estimated total revenue, regardless of the stage of completion. When the Company incurs additional costs related to work performed by subcontractors, the Company may be able to utilize contractual provisions to back charge the subcontractors for those costs. A reduction to costs related to back charges is recognized when estimated recovery is probable and the amount can be reasonably estimated. Contract costs consist of (i) direct costs on contracts, including labor, materials, and amounts payable to subcontractors and (ii) indirect costs related to contract performance, such as insurance, employee benefits, and equipment (primarily depreciation, fuel, maintenance and repairs).
Progress toward completion is estimated using the input method, measured by the relationship of total cost incurred through the measurement date to total estimated costs required to complete the project (cost-to-cost method). The Company believes this method best depicts the transfer of goods and services to the customer because it represents satisfaction of the Company’s performance obligation under the contract, which occurs as the Company incurs costs. The Company measures percentage of completion based on the performance of a single performance obligation under its construction projects. Each of the Company’s construction contracts represents a single performance obligation to complete a defined construction project. This is because goods and services promised for delivery to a customer are not distinct, as the customer cannot benefit from any individual portion of the services on its own. All deliverables under a contract are part of a project defined by a customer and represent a series of integrated goods and services that have the same pattern of delivery to the customer and use the same measure of progress toward satisfaction of the performance obligation as the customer’s asset is created or enhanced by the Company. The Company’s obligation is not satisfied until the entire project is complete.
Revenue recognized during a reporting period is based on the cost-to-cost input method applied to the total transaction price, including adjustments for variable consideration, such as liquidated damages, penalties or bonuses, related to the timeliness or quality of project performance. The Company includes variable consideration in the estimated transaction price at the most likely amount to which the Company expects to be entitled or the most likely amount the Company expects to incur, in the case of liquidated damages or penalties. Such amounts are included in the transaction price for which it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is resolved. The Company accounts for changes to the estimated transaction price using a cumulative catch-up adjustment.

The majority of the Company’s public construction contracts are fixed unit price contracts. Under fixed unit price contracts, the Company is committed to providing materials or services required by a contract at fixed unit prices (for example, dollars per ton of asphalt placed). The Company’s private customer contracts are primarily fixed total price contracts, also known as lump sum contracts, which require that the total amount of work be performed for a single price. Contract cost is recorded as incurred, and revisions in
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contract revenue and cost estimates are reflected in the accounting period when known. Changes in job performance, job conditions and estimated profitability, including those changes arising from contract change orders, penalty provisions and final contract settlements, may result in revisions to estimated revenues and costs and are recognized in the period in which the revisions are determined.
Change orders are modifications of an original contract that effectively change the existing provisions of the contract and become part of the single performance obligation that is partially satisfied at the date of the contract modification. This is because goods and services promised under change orders are generally not distinct from the remaining goods and services under the existing contract, due to the significant integration of services performed in the context of the contract. Accordingly, change orders are generally accounted for as a modification of the existing contract and single performance obligation. The Company accounts for the modification using a cumulative catch-up adjustment. Either the Company or its customers may initiate change orders, which may include changes in specifications or designs, manner of performance, facilities, equipment, materials, sites and period of completion of the work.

Revenues derived from the sale of HMA, aggregates, ready-mix concrete, and liquid asphalt are recognized at a point in time, which is when control of the product is transferred to the customer. Generally, that point in time is when the customer accepts delivery at its facility or receives product in its own transport vehicles from one of the Company’s HMA plants or aggregates facilities. Upon purchase, the Company generally provides an invoice or similar document detailing the goods transferred to the customer. The Company generally offers payment terms customary in the industry, which typically require payment ranging from point-of-sale to 30 days following purchase.
Income Taxes
The provision for income taxes includes federal and state income taxes. Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying values and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which the temporary differences are expected to be reversed or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. Management evaluates the realization of deferred tax assets and establishes a valuation allowance when it is more likely than not that all or a portion of the deferred tax assets will not be realized. Deferred tax assets and deferred tax liabilities are presented on a net basis by taxing authority and classified as non-current on the Consolidated Balance Sheets.
Earnings per Share
Basic net income per share attributable to common stockholders is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income per common share attributable to common stockholders is the same as basic net income per share attributable to common stockholders, but includes dilutive unvested stock awards using the treasury stock method.
Fair Value Measurements
The Company measures and discloses certain financial assets and liabilities at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs used to measure fair value are classified using the following hierarchy:
Level 1. Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly through corroboration with observable market data.
Level 3. Inputs are unobservable for the asset or liability and include situations in which there is little, if any, market activity for the asset or liability. The inputs used in the determination of fair value are based on the best information available under the circumstances and may require significant management judgment or estimation.
The Company endeavors to utilize the best available information in measuring fair value.
The Company’s financial instruments include cash and cash equivalents, restricted cash, contracts receivable including retainage, accounts payable and accrued expenses reflected as current assets and current liabilities on its Consolidated Balance Sheets at March 31, 2024 and September 30, 2023. Due to the short-term nature of these instruments, management considers their carrying value to approximate their fair value.
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The Company also has debt securities reflected as restricted investments on its Consolidated Balance Sheets at March 31, 2024 and September 30, 2023. These investments are adjusted to fair value at each balance sheet date and are considered Level 2 fair value measurements.
The Company also has a Term Loan and a Revolving Credit Facility, as defined and further described in Note 8 - Debt. The carrying value of amounts outstanding under these credit facilities is reflected as long-term debt, net of current maturities and deferred debt issuance cost and current maturities of long-term debt on the Company’s Consolidated Balance Sheets at March 31, 2024 and September 30, 2023. Due to the variable rate or short-term nature of these instruments, management considers their carrying value to approximate their fair value.
The Company also has derivative instruments. The fair value of commodity and interest rate swaps are based on forward and spot prices, as described in Note 16 - Fair Value Measurements.
Level 3 fair values are used to value acquired mineral reserves and leased mineral interests. The fair values of mineral reserves and leased mineral interests are determined using an excess earnings approach, which requires management to estimate future cash flows. The estimate of future cash flows is based on available historical information and forecasts determined by management, but is inherently uncertain. Key assumptions in estimating future cash flows include sales price, volumes and expected profit margins, net of capital requirements. The present value of the projected net cash flows represents the fair value assigned to mineral reserves and mineral interests. The discount rate is a significant assumption used in the valuation model and is based on the required rate of return that a hypothetical market participant would assume if purchasing the acquired business.
Management applies fair value measurement guidance to its impairment analysis for tangible and intangible assets, including goodwill.
Comprehensive Income (Loss)
The Company reports comprehensive income (loss) in its Consolidated Statements of Comprehensive Income (Loss) and Consolidated Statements of Stockholders’ Equity. Comprehensive income (loss) comprises two subsets: net income and other comprehensive income (loss) (“OCI”). OCI includes adjustments for changes in fair value of an interest rate swap contract derivative and available-for-sale restricted investments. For additional information about comprehensive income (loss), see Note 19 - Other Comprehensive Income (Loss).
Note 3 - Accounting Standards
The Company did not adopt any new accounting standards or updates during the six months ended March 31, 2024.

Note 4 - Business Acquisitions
Acquisitions - Provisional
On October 2, 2023, the Company acquired substantially all of the assets of Hubbard Paving & Grading, Inc., an asphalt and paving company headquartered in Walhalla, South Carolina, for $3.0 million. This transaction added an HMA plant and expanded the Company’s service market in the Upstate region of South Carolina.
On November 1, 2023, the Company acquired three HMA plants and certain related assets from Reeves Construction Company for $18.3 million. This transaction added HMA plants in Concord, North Carolina and Rock Hill and McConnells, South Carolina.
On December 29, 2023, the Company acquired all issued and outstanding membership interests of SJ&L General Contractor, LLC, an HMA and sitework company headquartered in Huntsville, Alabama, for $60.1 million. This transaction expanded the Company’s service capabilities in the Huntsville, Alabama metro area.
On January 2, 2024, the Company acquired substantially all of the assets of Littlefield Construction Company, a soil base, surface treatment and sitework company headquartered in Waycross, Georgia, for $6.4 million. This transaction expanded the Company’s service capabilities in the Waycross, Georgia area.
The total amount of consideration for these transactions remains subject to post-closing adjustments with respect to inventory quantities, settlement of working capital and other matters.
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Combined Acquisitions During the Six Months Ended March 31, 2024
The foregoing acquisitions were accounted for as business combinations in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“Topic 805”). As of March 31, 2024, the purchase price allocation had not yet been finalized due to the recent timing of these acquisitions, as certain information was pending on such date to finalize estimates of fair value of certain assets acquired and liabilities assumed. The Company consulted with independent third parties to assist in the valuation process. The Company expects to finalize the estimate of fair values as soon as practicable and no later than one year from their respective acquisition dates.
Identifiable assets acquired and liabilities assumed were recorded at their estimated fair values based on the methodology described
under "Fair Value Measurements" in Note 2 - Significant Accounting Policies. The amount of the purchase price exceeding the net fair
value of identifiable assets acquired and liabilities assumed was recorded as provisional goodwill in the amount of approximately
$22.2 million, which is deductible for income tax purposes. Goodwill primarily represents the assembled work force and
synergies expected to result from the acquisitions. Upon finalizing the accounting for these transactions, management
expects to ascribe value to other identifiable intangible assets, including customer relationships and customer backlog, which will
reduce the provisional amount allocated to goodwill.

Total consideration transferred for these acquisitions was $87.9 million, which was paid from available cash and a draw from the Revolving Credit Facility (as defined in Note 8 - Debt). The combined total consideration has been provisionally allocated as follows: $13.2 million of net working capital, $51.8 million of property, plant and equipment and $22.9 million of goodwill and intangibles.

The Consolidated Statements of Comprehensive Income (Loss) include $17.4 million of revenue and $0.9 million of net loss attributable to the operations of these acquisitions for the three months ended March 31, 2024 and $22.1 million of revenue and $1.2 million of net loss attributable to the operations of these acquisitions for the six months ended March 31, 2024. The Company recorded certain costs to effect the acquisitions as they were incurred, which are reflected in general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income in the amount of $0.3 million for the three months ended March 31, 2024 and $0.8 million for the six months ended March 31, 2024.

The following tables present pro forma revenues and net income as though the acquisitions had occurred on October 1, 2022 (unaudited, in thousands):

For the Three Months Ended March 31,
20242023
Pro forma revenues$371,427 $342,209 
Pro forma net income (loss)$(1,124)$(7,536)

For the Six Months Ended March 31,
20242023
Pro forma revenues$784,706 $688,119 
Pro forma net income (loss)$9,214 $(5,836)
Pro forma financial information is presented as if the operations of the acquisitions had been included in the consolidated results of the Company since October 1, 2022, and gives effect to transactions that are directly attributable to the acquisitions, including adjustments to:
(a)include the pro forma results of operations of the acquisitions for the three and six months ended March 31, 2024 and 2023;
            
(b)include additional depreciation and depletion expense related to the fair value of acquired property, plant and equipment and reserves at aggregates facilities, as applicable, as if such assets were acquired on October 1, 2022 and consistently applied to the Company’s depreciation and depletion methodologies;

(c)include interest expense under the Revolving Credit Facility as if the funds borrowed to finance the purchase prices were borrowed on October 1, 2022 (interest expense calculations further assume that no principal payments were made during the period from October 1, 2022 through March 31, 2024, and that the interest rate in effect on the date the Company made the acquisitions was in effect for the period from October 1, 2022 through March 31, 2024); and

(d)exclude $0.8 million of acquisition-related expenses from the six months ended March 31, 2024, as though such expenses were incurred prior to the pro forma acquisition date of October 1, 2022.
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Pro forma information is presented for informational purposes and may not be indicative of revenue or net income that would have been achieved if these acquisitions had occurred on October 1, 2022.
Provisional Accounting
In April 2023, the Company acquired an HMA paving company headquartered in Anderson, South Carolina. In May 2023, the Company acquired an excavation, grading and utility company headquartered in Huntsville, Alabama. As of March 31, 2024, there had been no material adjustments to the September 30, 2023 provisional accounting for either acquisition as reported in the 2023 Form 10-K.
Note 5 - Contracts Receivable Including Retainage, Net
Contracts receivable including retainage, net consisted of the following at March 31, 2024 and September 30, 2023 (in thousands):
March 31, 2024September 30, 2023
(unaudited)
Contracts receivable$225,888 $251,324 
Retainage receivable50,844 53,286 
276,732 304,610 
Allowance for doubtful accounts(1,162)(906)
Contracts receivable including retainage, net$275,570 $303,704 
Retainage receivable has been billed and the Company has an unconditional right to payment, but such payment is not due until satisfactory contract completion and acceptance by the customer.

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Note 6 - Contract Assets and Liabilities
Costs and estimated earnings compared to billings on uncompleted contracts at March 31, 2024 and September 30, 2023 consisted of the following (in thousands):
March 31, 2024September 30, 2023
(unaudited)
Costs on uncompleted contracts$1,705,395 $1,831,106 
Estimated earnings to date on uncompleted contracts181,298 194,760 
1,886,693 2,025,866 
Billings to date on uncompleted contracts(1,954,025)(2,077,475)
Net billings in excess of costs and estimated earnings on uncompleted contracts$(67,332)$(51,609)
Significant changes to balances of costs and estimated earnings in excess of billings (contract asset) and billings in excess of costs and estimated earnings (contract liability) on uncompleted contracts from September 30, 2022 to March 31, 2023 and September 30, 2023 to March 31, 2024 are presented below (in thousands):
Costs and Estimated Earnings in Excess of Billings on
 Uncompleted Contracts
Billings in Excess of Costs and Estimated Earnings on
 Uncompleted Contracts
Net Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts
September 30, 2022$29,271 $(52,477)$(23,206)
Changes in revenue billed, contract price or cost estimates(145)(9,527)(9,672)
March 31, 2023 (unaudited)$29,126 $(62,004)$(32,878)
September 30, 2023$27,296 $(78,905)$(51,609)
Changes in revenue billed, contract price or cost estimates$8,825 $(24,547)$(15,722)
March 31, 2024 (unaudited)$36,120 $(103,453)$(67,332)

At March 31, 2024, the Company had unsatisfied or partially unsatisfied performance obligations under construction project contracts representing approximately $1.37 billion in aggregate transaction price. The Company expects to earn revenue as it satisfies its performance obligations under such contracts in the amount of approximately $743.7 million during the remainder of the fiscal year ending September 30, 2024 and $629.0 million thereafter.
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Note 7 - Property, Plant and Equipment
Property, plant and equipment at March 31, 2024 and September 30, 2023 consisted of the following (in thousands):
March 31, 2024September 30, 2023
(unaudited)
Construction equipment$511,111 $447,467 
Plants233,611 208,708 
Land and improvements79,903 76,396 
Mineral reserves69,405 69,405 
Buildings36,885 36,885 
Furniture and fixtures7,775 7,538 
Leasehold improvements1,268 1,268 
      Total property, plant and equipment, gross939,958 847,667 
Accumulated depreciation, depletion and amortization(391,453)(358,462)
Construction in progress16,846 15,890 
      Total property, plant and equipment, net$565,351 $505,095 
Depreciation, depletion and amortization expense related to property, plant and equipment was $23.1 million and $20.4 million for the three months ended March 31, 2024 and 2023, respectively, and $44.1 million and $39.7 million for the six months ended March 31, 2024 and 2023, respectively.

Note 8 - Debt
The Company maintains credit facilities to finance acquisitions, to fund the purchase of real estate, construction equipment, plants and other fixed assets, and for general working capital purposes. Debt at March 31, 2024 and September 30, 2023 consisted of the following (in thousands):
March 31, 2024September 30, 2023
(unaudited)
Long-term debt:
Term Loan$276,250 $283,750 
Revolving Credit Facility163,100 93,100 
Total long-term debt439,350 376,850 
Deferred debt issuance costs(962)(1,110)
Current maturities of long-term debt(15,000)(15,000)
Long-term debt, net of current maturities and deferred debt issuance costs$423,388 $360,740 
The Company and each of its subsidiaries are parties to a Third Amended and Restated Credit Agreement, dated June 30, 2022 with PNC Bank, National Association, as administrative agent and lender, PNC Capital Markets LLC, as joint lead arranger and sole bookrunner, Regions Bank and BofA Securities, Inc., each as a joint arranger, and certain other lenders (as amended and restated, the “Credit Agreement”). The Credit Agreement provides for (i) a term loan facility in an initial aggregate principal amount of $250.0 million (the “Term Loan”) the full amount of which was drawn at closing, (ii) a revolving credit facility in an initial aggregate principal amount of $325.0 million (the “Revolving Credit Facility”) and (iii) a delayed draw term loan facility in an initial aggregate principal amount of $50.0 million (the “Delayed Draw Term Loan”).
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All outstanding advances under the Term Loan and Revolving Credit Facility are due and payable in full on June 30, 2027 (the “Maturity Date”). The Term Loan (commencing on September 30, 2022) and the Delayed Draw Term Loan (commencing on December 31, 2023), amortize in quarterly installments in an amount (subject, in each case, to adjustments for prior mandatory and voluntary prepayments of principal) equal to: (a) 1.25% of the original principal amount on each of the following eleven quarter-end payment dates; (b) 1.875% of the original principal amount on each of the next eight quarter-end payment dates; and (c) all remaining principal on the Maturity Date. The annual interest rates applicable to advances will be calculated, at the Company’s option, by using either a base rate, Daily Simple SOFR plus 0.10%, or Term SOFR plus 0.10%, in each case, plus an applicable margin percentage that corresponds to the Company’s consolidated net leverage ratio. Subject to various requirements, the Company generally may (and, under certain circumstances, must), prepay all or a portion of the outstanding balance of the advances, together with accrued interest thereon, prior to their contractual maturity. The obligations of the Company and its subsidiaries under the Credit Agreement are secured by a first priority security interest in substantially all of the Company’s assets.
At March 31, 2024 and September 30, 2023, there was $276.3 million and $283.8 million, respectively, of principal outstanding under the Term Loan, $163.1 million and $93.1 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $153.7 million and $222.1 million, respectively, under the Revolving Credit Facility, including a reduction for outstanding letters of credit.
The Credit Agreement contains customary negative covenants for agreements of this type, including, but not limited to, restrictions on
the Company’s ability to make acquisitions, make loans or advances, make capital expenditures and investments, pay dividends, create
or incur indebtedness, create liens, wind up or dissolve, consolidate, merge or liquidate, or sell, transfer or dispose of assets. The Credit
Agreement also requires the Company to satisfy certain financial covenants, including a minimum fixed charge coverage ratio of 1.20-
to-1.00 and a maximum consolidated leverage ratio of 3.50-to-1.00, subject to certain adjustments. At March 31, 2024 and September 30, 2023, the Company’s fixed charge coverage ratio was 3.39-to-1.00 and 2.56-to-1.00, respectively, and the Company’s consolidated leverage ratio was 1.81-to-1.00 and 1.72-to-1.00, respectively. At both March 31, 2024 and September 30, 2023, the Company was in compliance with all covenants under the Credit Agreement.

From time to time, the Company has entered into interest rate swap agreements to hedge against the risk of changes in interest rates. At
both March 31, 2024 and September 30, 2023, the aggregate notional value of these interest rate swap agreements was $300.0 million, and the fair value was $21.0 million and $26.9 million, respectively, which is included within other assets on the Company’s Consolidated Balance Sheets.

Note 9 - Equity
Shares of Class A common stock and Class B common stock are identical, except with respect to voting rights, conversion rights and transfer restrictions applicable to shares of Class B common stock. The holders of Class A common stock are entitled to one vote per share, and the holders of Class B common stock are entitled to ten votes per share. The holders of Class A common stock and Class B common stock vote together as a single class on all matters submitted to a vote of stockholders, including the election of directors, unless otherwise required by applicable law or the Company’s certificate of incorporation or bylaws. Shares of Class B common stock are convertible into shares of Class A common stock at any time at the option of the holder or upon any transfer, subject to certain limited exceptions. In addition, upon the election of the holders of a majority of the then-outstanding shares of Class B common stock, all outstanding shares of Class B common stock will be converted into shares of Class A common stock. Once converted into shares of Class A common stock, shares of Class B common stock will not be reissued. Class A common stock is not convertible into any other class of the Company’s capital stock.
Treasury Stock
During the six months ended March 31, 2024, the Company received a total of 33,772 shares of Class A common stock from employees for reimbursement of income taxes paid by the Company on behalf of these employees related to the vesting of restricted stock awards and 524 shares of Class A common stock through forfeitures of restricted stock awards by terminated employees.
Restricted Stock Awards
During the six months ended March 31, 2024, the Company awarded a total of 80,113 restricted shares of Class A common stock to certain directors, officers and employees of the Company under the Construction Partners, Inc. 2018 Equity Incentive Plan (the “Equity Incentive Plan”).
Performance Stock Units
During the six months ended March 31, 2024, the Company issued a total of 55,358 shares of Class A common stock in settlement of vested performance stock units ("PSUs") under the Equity Incentive Plan.
Additional information about these transactions is set forth in Note 13 - Share-Based Compensation.
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Note 10 - Earnings Per Share
As discussed in Note 9 - Equity, the Company has Class A common stock and Class B common stock. Because the only differences between the two classes of common stock are related to voting rights, conversion rights and transfer restrictions applicable to shares of Class B common stock, the Company has not presented earnings per share under the two-class method, as the earnings per share are the same for both Class A common stock and Class B common stock. The following table summarizes the weighted-average number of basic common shares outstanding and the calculation of basic earnings per share for the periods presented (unaudited in thousands, except share and per share amounts):
For the Three Months Ended March 31,For the Six Months Ended March 31,
2024202320242023
Numerator
Net income (loss) attributable to common stockholders$(1,124)$(5,481)$8,719 $(3,589)
Denominator
Weighted average number of common shares outstanding, basic 51,938,216 51,827,365 51,915,069 51,826,143 
Net income (loss) per common share attributable to common stockholders, basic$(0.02)$(0.11)$0.17 $(0.07)
The following table summarizes the calculation of the weighted-average number of diluted common shares outstanding and the calculation of diluted earnings per share for the periods presented (unaudited in thousands, except share and per share amounts):
For the Three Months Ended March 31,For the Six Months Ended March 31,
2024202320242023
Numerator
Net income (loss) attributable to common stockholders$(1,124)$(5,481)$8,719 $(3,589)
Denominator
Weighted average number of basic common shares outstanding, basic 51,938,216 51,827,365 51,915,069 51,826,143 
Effect of dilutive securities:
Restricted stock grants  608,031  
Weighted average number of diluted common shares outstanding:51,938,216 51,827,365 52,523,100 51,826,143 
Net income (loss) per diluted common share attributable to common stockholders$(0.02)$(0.11)$0.17 $(0.07)

Note 11 - Provision for Income Taxes
The Company files a consolidated United States federal income tax return and income tax returns in various states. Management evaluated the Company’s tax positions based on appropriate provisions of applicable tax laws and regulations and believes that they are supportable based on their specific technical merits and the facts and circumstances of the respective transactions.                                                                
The Company’s effective income tax rate for the three months ended March 31, 2024 and 2023 was 22.2% and 21.1%, respectively. The Company’s effective tax rate for the six months ended March 31, 2024 and 2023 was 24.3% and 21.1%, respectively. The changes in the Company’s effective rates are due to differences in state tax rates at its operating subsidiaries.



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Note 12 - Related Parties
On December 31, 2017, the Company sold an indirect wholly owned subsidiary to an immediate family member of an executive officer of the Company (“Purchaser of Subsidiary”) in consideration for a note receivable in the amount of $1.0 million, which approximated the net book value of the disposed entity. At March 31, 2024, $0.1 million and $0.2 million was reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets, respectively, representing the remaining balances on this note receivable. In connection with this transaction, the Company also received a note receivable from the disposed entity (“Disposed Entity”) on December 31, 2017 in the amount of $1.0 million representing certain accounts payable of the Disposed Entity that were paid by the Company. At March 31, 2024, $0.1 million and $0.1 million was reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets, respectively, representing the remaining balances on this note receivable. Remaining principal and interest payments are scheduled to be made in periodic installments during fiscal year 2024 through fiscal year 2026.

Prior to its acquisition by the Company, a current subsidiary of the Company advanced funds to an entity owned by an immediate family member of an officer of the Company in connection with a land development project. The obligations of the borrower entity to repay the advances were guaranteed by a separate entity owned by the same family member of the officer. Amounts outstanding under the advances did not bear interest and matured in full in March 2021. In March 2021, the subsidiary of the Company amended and restated the terms of the repayment obligation, as a result of which the officer personally assumed the remaining balance of the obligation. No new amounts were advanced to the officer by the Company or any subsidiary or affiliate thereof in connection with the transaction. Under the amended and restated terms, the officer executed a promissory note in favor of the Company’s subsidiary in the principal amount of $0.8 million. The note bears simple interest at a rate of 4.0% and requires annual minimum payments of $0.1 million inclusive of principal and accrued interest, with any remaining principal and accrued interest due and payable in full on December 31, 2027. Amounts outstanding under the note are reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets (“Land Development Project”).

From time to time, the Company conducts or has conducted business with the following related parties:
Entities owned by immediate family members of an executive officer of the Company perform subcontract work for a subsidiary of the Company, including trucking and grading services (“Subcontracting Services”).
Since June 1, 2014, the Company has been a party to an access agreement with Island Pond Corporate Services, LLC, which provides a location for the Company to conduct business development activities from time to time on a property owned by the Executive Chairman of the Company’s Board of Directors (“Island Pond”).
The Company is party to a management services agreement with SunTx Capital Partners, a private equity firm based in Dallas, Texas and a member of the Company’s controlling group ("SunTx"), under which the Company pays SunTx $0.30 million per fiscal quarter and reimburses certain travel and other out-of-pocket expenses associated with services rendered under the management services agreement.
The following table presents revenues earned and expenses incurred by the Company during the three and six months ended March 31, 2024 and 2023, and accounts receivable and payable balances at March 31, 2024 and September 30, 2023, related to transactions with the related parties described above (in thousands):
Revenue Earned (Expense Incurred)Accounts Receivable (Payable)
For the Three Months Ended March 31,For the Six Months Ended March 31,March 31,September 30,
202420232024202320242023
(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)
Purchaser of Subsidiary$ $ $ $ $311 $311 
Disposed Entity    198 198 
Land Development Project    540 632 
Subcontracting Services(705)(1)(1,173)(1)(2,618)(1)(2,992)(1)(247)(593)
Island Pond(100)(2)(80)(2)(200)(2)(160)(2)  
SunTx(451)(2)(359)(2)(882)(2)(726)(2)  
(1) Cost is reflected as cost of revenues on the Company’s Consolidated Statements of Comprehensive Income (Loss).
(2) Cost is reflected as general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income (Loss).

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Note 13 - Share-Based Compensation
The following table summarizes the components of share-based compensation expense included in general and administrative expenses in the Consolidated Statements of Comprehensive Income during the three and six months ended March 31, 2024 and 2023 (unaudited, in thousands):
For the Three Months Ended March 31,
20242023
Equity classified awards$2,556 $2,692 
Liability classified awards776  
Employee stock purchase plan221  
Total share-based compensation expense$3,553 $2,692 
For the Six Months Ended March 31,
20242023
Equity classified awards$5,339 $5,172 
Liability classified awards882  
Employee stock purchase plan378  
Total share-based compensation expense$6,599 $5,172 
Restricted Stock - Equity Classified Awards
During the six months ended March 31, 2024, the Company awarded a total of 80,113 restricted shares of Class A common stock to certain members of Company management and consultants under the Equity Incentive Plan. The grants are classified as equity awards. The aggregate grant date fair value of these restricted stock awards was $3.5 million. During the three and six months ended March 31, 2024, the Company recorded compensation expense in connection with these and prior restricted stock grants in the amount of $2.0 million and $4.4 million, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income (Loss). At March 31, 2024, there was approximately $8.9 million of unrecognized compensation expense related to these awards, which will be recognized over a remaining weighted-average period of 2.6 years.
Performance Stock Units - Equity Classified Awards
PSUs provide for the issuance of shares of Class A common stock upon vesting, which occurs following the end of the performance period based on achievement of certain Company performance metrics established by the Compensation Committee of the Company’s Board of Directors. The final number of shares of Class A common stock issuable upon vesting of PSUs can range from 0% to 150% of the number of PSUs initially granted, depending on the level of achievement, as determined by the Compensation Committee of the Company’s Board of Directors. The achievement of performance goals is modified by the total shareholder return ranking of the Company against the Russell 2000 Index over the performance period and can increase or decrease the achieved award by up to 15%. The Company recognizes expense, net of estimated forfeitures, for PSUs based on the forecasted achievement of Company performance metrics, multiplied by the fair value of the total number of shares of common stock that the Company anticipates will be issued based on such achievement.
During the six months ended March 31, 2024, the Company issued 55,358 shares of Class A common stock as a result of the vesting of PSUs granted to certain members of Company management on December 29, 2021.
During the six months ended March 31, 2024, the Company awarded PSUs representing a target of 83,044 shares and forecasted vesting of 62,283 shares of Class A common stock to certain members of Company management. The grants are classified as equity awards. The aggregate grant date fair value of these awards was $2.7 million. During the three and six months ended March 31, 2024, the Company recorded compensation expense in connection with these type awards in the amount of $0.6 million and $1.0 million, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income (Loss). At March 31, 2024, there was approximately $4.1 million of unrecognized compensation expense related to these awards, which will be recognized over a remaining weighted-average period of 2.3 years.
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Cash-Settled Restricted Stock Units - Liability Classified Awards
During the six months ended March 31, 2024, the Company granted 114,264 of cash-settled restricted stock units ("RSUs") to employees of the Company under the Equity Incentive Plan. The aggregate grant date fair value of these awards was $5.1 million. Compensation expense associated with these awards for the three and six months ended March 31, 2024 was $0.8 million and $0.9 million, respectively, and is included in general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss). As of March 31, 2024 and September 30, 2023, the liability for cash-settled RSUs was $0.9 million and $0.0 million and is included in other long-term liabilities. At March 31, 2024, there was approximately $4.2 million of unrecognized compensation expense related to these awards, which will be recognized over a remaining weighted-average period of 3.5 years.
The grant date fair value of these awards is based on the price of the Company’s Class A common stock and the number of RSUs awarded on the date of grant. The awards must be settled in cash and are accounted for as liability-type awards. The expense is recognized over the requisite service period with remeasurement at the end of each reporting period at fair value until settlement. The requisite service period is based on the vesting provisions of the awards, which generally occurs in four equal annual installments beginning on the date of the first fiscal year-end after the grant date.
Employee Stock Purchase Plan
The Construction Partners, Inc. Employee Stock Purchase Plan ("ESPP") became effective on May 13, 2021. The ESPP is intended to provide eligible employees of the Company an opportunity to purchase shares of the Company’s Class A common stock at a discounted rate using funds withheld through payroll deductions. The total number of shares offered under the ESPP is 1,000,000. The first offering period under the ESPP commenced on July 1, 2023. Since that date, the Company has purchased 29,899 shares under the ESPP. Compensation expense associated with the ESPP for the three and six months ended March 31, 2024 was $0.2 million and $0.4 million, respectively, and is included in general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss).

Note 14 - Leases
The Company leases certain facilities, office space, vehicles and equipment. As of March 31, 2024, operating leases under ASC Topic 842, Leases (“Topic 842”) were included in (i) operating lease right-of use assets, (ii) current portion of operating lease liabilities and (iii) operating lease liabilities, net of current portion on the Company’s Consolidated Balance Sheets in the amounts of $26.7 million, $5.6 million and $21.7 million, respectively. As of March 31, 2024, the Company did not have any lease contracts that had not yet commenced but had created significant rights and obligations.

The components of lease expense were as follows (unaudited, in thousands):

For the Three Months Ended March 31,
20242023
Operating lease cost$1,471 $788 
Short-term lease cost5,906 4,733 
Total lease expense$7,377 $5,521 

For the Six Months Ended March 31,
20242023
Operating lease cost$2,374 $1,514 
Short-term lease cost11,282 10,768 
Total lease expense$13,656 $12,282 

Short-term leases (those with terms of 12 months or less) are not capitalized but are expensed on a straight-line basis over the lease term. The majority of the Company's short-term leases relate to equipment used on construction projects. These leases are entered into at periodic rental rates for an unspecified duration and typically have a termination for convenience provision.

As of March 31, 2024, the weighted-average remaining term of the Company’s leases was 5.9 years, and the weighted-average discount rate was 5.09%. As of March 31, 2024, the lease liability was equal to the present value of the remaining lease payments,
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discounted using the incremental borrowing rate on the Company’s secured debt using a single maturity discount rate, as such rate is not materially different from the discount rate applied to each of the leases in the portfolio.

The following table summarizes the Company’s undiscounted lease liabilities outstanding as of March 31, 2024 (unaudited, in thousands):

Fiscal YearAmount
Remainder of 2024$3,450 
20256,530 
20266,234 
20275,486 
20283,150 
2029 and thereafter6,277 
Total future minimum lease payments$31,128 
Less: imputed interest3,846 
Total$27,282 


Note 15 - Investment in Derivative Instruments

Interest Rate Swap Contracts
The Company uses derivative instruments as part of its overall strategy to manage its exposure to market risks associated with fluctuations in interest rates. The Company regularly monitors the financial stability and credit standing of the counterparties to its derivative instruments. The Company does not enter into derivative financial instruments for speculative purposes.

The Company records all derivatives at fair value. On the date the derivative contract is entered into, the Company may designate the derivative as one of the following: (i) a hedge of a forecasted transaction or the variability of cash flows to be paid (“cash flow hedge”) or (ii) a hedge of the fair value of a recognized asset or liability (“fair value hedge”).

Changes in the fair value of a derivative that is qualified and designated as a cash flow hedge or net investment hedge are recorded in other comprehensive income (loss) in the Company’s Consolidated Statements of Comprehensive Income (Loss) until they are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

Changes in the fair value of a derivative that is qualified and designated as a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings.

If the Company does not specifically designate a derivative as one of the above, changes in the fair value of the undesignated derivative instrument are reported in current period earnings. Cash flows from designated derivative financial instruments are classified within the same category as the item being hedged in the Consolidated Statements of Cash Flows, while cash flows from undesignated derivative financial instruments are included as an investing activity.

If the Company determines that it qualifies for and will designate a derivative as a hedging instrument, the Company formally documents all relationships between hedging activities, including the risk management objective and strategy for undertaking various hedge transactions. This process includes matching all derivatives that are designated as cash flow hedges to specific forecasted transactions and linking all derivatives designated as fair value hedges to specific assets and liabilities in the Consolidated Balance Sheets.

The Company performs an initial prospective assessment of hedge effectiveness on a quantitative basis between the inception date and the earlier of the first quarterly hedge effectiveness date or the issuance of the financial statements that include the hedged transaction. On a quarterly basis, the Company assesses the effectiveness of its designated hedges in offsetting the variability in the cash flows or fair values of the hedged assets or obligations using the Hypothetical Derivative Method. The Hypothetical Derivative Method compares the change in fair value or cash flows of the hedging instrument with the change in fair value or cash flows of a hypothetical derivative that represents the hedged risk. The Company would discontinue hedge accounting prospectively when the derivative is no longer highly effective as a hedge, the underlying hedged transaction is no longer probable or the hedging instrument expires, is sold, terminated or exercised.



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Commodity Swap Contracts

The Company’s operations expose it to a variety of market risks, including the effects of changes in commodity prices. As part of its risk management process, the Company has entered into commodity swap transactions through regulated commodity exchanges. The Company does not enter into derivative financial instruments for speculative purposes. Changes in fair value of commodity swaps are recognized in earnings.

The following table represents the approximate amount of realized and unrealized gains (losses) and changes in fair value recognized in earnings on commodity derivative contracts for the three and six months ended March 31, 2024 and 2023 and the fair value of these derivatives as of March 31, 2024 and September 30, 2023 (in thousands):

For the Three Months Ended March 31,
20242023
(unaudited)(unaudited)
Change inChange in
Income Statement ClassificationRealized Gain (Loss)Unrealized Gain (Loss)Total Gain (Loss)Realized Gain (Loss)Unrealized Gain (Loss)Total Gain (Loss)
Cost of revenues$(42)$32 $(10)$456 $(1,279)$(823)
Interest expense, net2,646  2,646 2,007  2,007 
Total$2,604 $32 $2,636 $2,463 $(1,279)$1,184 

For the Six Months Ended March 31,
20242023
(unaudited)(unaudited)
Change inChange in
Income Statement ClassificationRealized Gain (Loss)Unrealized Gain (Loss)Total Gain (Loss)Realized Gain (Loss)Unrealized Gain (Loss)Total Gain (Loss)
Cost of revenues$(61)$(194)$(255)$1,057 $(2,286)$(1,229)
Interest expense, net5,284  5,284 3,342  3,342 
Total$5,223 $(194)$5,029 $4,399 $(2,286)$2,113 


March 31, 2024September 30, 2023
Balance Sheet Classification(unaudited)
Prepaid expenses and other current assets - commodity swaps$ $204 
Other assets - interest rate swaps (1)
21,031 26,909 
Accrued expense and other current liabilities - commodity swaps(10)(20)
Net unrealized gain position$21,021 $27,093 
(1) Includes designated cash flow hedge of $21.0 million and $26.9 million as of March 31, 2024 and September 30, 2023, respectively.













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Note 16 - Fair Value Measurements

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and September 30, 2023 under ASC 820, Fair Value Measurements (in thousands):

March 31, 2024September 30, 2023
(unaudited)
Level 2Level 2
Assets:
Commodity swap contracts$ $204 
Interest rate swaps21,031 26,909 
U.S. government securities6,788 6,549 
Corporate debt securities5,773 5,605 
Municipal government securities1,696 1,748 
Agency backed securities1,195 1,177 
Total assets36,483 42,192 
Liabilities:
Commodity swap contracts$10 $20 
Total liabilities$10 $20 

The fair value of the interest rate swap contract is based on a model-driven valuation using the observable components (e.g., interest rates), which are observable at commonly quoted intervals for the full term of the contracts. The fair value of the Company’s commodity swap contracts is based on an analysis of the expected cash flow of the contract in combination with observable forward price inputs obtained from a third-party pricing source. The calculations are adjusted for credit risk. Therefore, the Company’s derivative assets and liabilities are classified within Level 2 of the fair value hierarchy. Derivative assets are included within “Prepaid expenses and other current assets” and “Other assets” on the Company’s Consolidated Balance Sheets. Derivative liabilities are included within “Accrued expense and other current liabilities” and “Other long-term liabilities” on the Company’s Consolidated Balance Sheets.

Note 17 - Commitments
Letters of Credit

Under the Revolving Credit Facility, the Company had a total capacity of $325.0 million at March 31, 2024 that may be used for a combination of cash borrowings and letter of credit issuances. At March 31, 2024, the Company had aggregate letters of credit outstanding in the amount of $8.2 million, primarily related to certain insurance policies as described in Note 2 - Significant Accounting Policies.
Purchase Commitments
As of March 31, 2024, the Company had unconditional purchase commitments for diesel fuel and natural gas in the normal course of business in the aggregate amount of $2.4 million. Management does not expect any significant changes in the market value of these goods during the commitment period that would have a material adverse effect on the financial condition, results of operations and cash flows of the Company. As of March 31, 2024, the Company’s purchase commitments for the remainder of fiscal 2024 and in 2025 were as follows (unaudited, in thousands):
Fiscal YearAmount
Remainder of 2024$1,734 
2025696 
Total$2,430 

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Minimum Royalties

The Company has lease agreements associated with aggregates facilities under which the Company makes royalty payments. These agreements are outside the scope of Topic 842. The payments are generally based on tons sold in a particular period; however, certain agreements have minimum annual payments. The Company had commitments in the form of minimum royalties as of March 31, 2024 in the amount of $2.5 million, due as follows (unaudited, in thousands):

Fiscal YearAmount
Remainder of 2024$238 
2025256 
2026192 
2027180 
2028145 
Thereafter1,470 
Total$2,481 

Royalty expense recorded in cost of revenue was $0.4 million for each of three months ended March 31, 2024 and 2023, and $0.8 million for each of the six months ended March 31, 2024 and 2023.

Note 18 - Restricted Investments
The following is a summary of the Company’s debt securities as of March 31, 2024 and September 30, 2023 (in thousands):
March 31, 2024
(unaudited)
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
U.S. government securities$6,975 $ $187 $6,788 
Corporate debt securities5,907  134 5,773 
Municipal government securities1,758  62 1,696 
Agency backed securities1,263  68 1,195 
Total$15,903 $ $451 $15,452 
September 30, 2023
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
U.S government securities$6,869 $ $320 $6,549 
Corporate debt securities5,931  326 5,605 
Municipal government securities1,853  105 1,748 
Agency backed securities1,273  96 1,177 
Total$15,926 $ $847 $15,079 
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The amortized cost and fair value of debt securities classified as available for sale by contractual maturity, as of March 31, 2024, are as follows (unaudited, in thousands):
Amortized CostFair Value
Due within one year$2,085 $2,070 
Due after one year through three years4,493