Sign in

You're signed outSign in or to get full access.

CP

Construction Partners, Inc. (ROAD)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY25 delivered record revenue ($561.6M, +41.6% YoY) and record backlog ($2.66B), with adjusted EBITDA up 68% and margin at 12.3%; GAAP EPS was -$0.06 due to one-time acquisition costs, but adjusted EPS would have been $0.25 .
  • Guidance raised meaningfully: FY25 revenue lifted to $2.66–$2.74B and adjusted EBITDA to $375–$400M; adjusted net income introduced at $109.5–$122.1M, while GAAP net income range reduced given acquisition-related charges .
  • Strategic M&A (Lone Star in TX; Overland in OK; Mobile Asphalt in AL) expands footprint and contributes to growth; management targets deleveraging to ~2.5x within 4–5 quarters as pro forma leverage temporarily ticks ~3x .
  • Demand tailwinds persist across Sunbelt states with strong DOT and municipal funding; Florida highlighted for >50% growth in awards, and only ~40% of IIJA funds spent, supporting multi-year visibility .

What Went Well and What Went Wrong

What Went Well

  • Strong execution and weather tailwind drove revenue +41.6% YoY to $561.6M and adjusted EBITDA +68% to $68.8M; adjusted EBITDA margin improved to 12.3% vs 10.3% YoY .
  • Record backlog grew sequentially to $2.66B; management emphasized bidding discipline and visibility, noting 17th quarter of sequential backlog growth .
  • Strategic acquisitions broaden platform and vertical integration, with Lone Star’s higher margins and terminals contributing; management reiterated long runway for bolt-ons and organic expansion .

Quotes:

  • “Revenue growth of 42% and Adjusted EBITDA growth of 68%... exceptional first quarter Adjusted EBITDA margin of 12.25%” — CEO Jule Smith .
  • “We are reporting a record project backlog of $2.66 billion” — CFO Greg Hoffman .

What Went Wrong

  • GAAP net loss of $3.1M (-$0.06 diluted EPS) driven by $19.6M acquisition-related expenses and higher interest expense tied to Term Loan B; operating income fell to $13.8M .
  • Cash from operations declined YoY to $40.7M due to timing effects from exceptional Q1 activity following weaker Q4 weather; management expects later-quarter catch-up .
  • GAAP net income guidance lowered vs prior due to acquisition-related charges, even as revenue/adjusted EBITDA guidance increased .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$517.8 $538.2 $561.6
GAAP Diluted EPS ($)$0.59 $0.56 -$0.06
Adjusted EPS ($)N/AN/A$0.25
Adjusted EBITDA ($USD Millions)$73.2 $77.0 $68.8
Adjusted EBITDA Margin (%)14.1% 14.3% 12.3%
G&A as % of Revenue (%)7.5% 7.4% 7.9%
Operating Income ($USD Millions)$45.7 $45.8 $13.8
Net Income ($USD Millions)$30.9 $29.3 -$3.1
Backlog ($USD Billions)$1.86 $1.96 $2.66

Revenue mix

PeriodOrganic Growth (%)Acquisitions (%)
Q3 2024~13.0% ~9.7%
Q1 2025~11.2% ~30.4%

Public vs Private mix (revenue)

PeriodPublic (%)Private (%)
Q1 2025 start58% 42%
FY 2025 view63% 37%

Cash flow and leverage

MetricQ3 2024Q4 2024Q1 2025
Cash from Operations ($USD Millions)$35.0 $209.1 (FY) $40.7
Capex ($USD Millions)$70.4 (9M FY24) $88.0 (FY) $26.8
Debt / TTM EBITDA (x)1.81x 3.3x pro forma after Lone Star 2.88x at Q1; target ~2.5x in 4–5 quarters

Guidance Changes

MetricPeriodPrevious Guidance (11/21/2024)Current Guidance (2/7/2025)Change
Revenue ($USD Billions)FY 2025$2.48–$2.58 $2.66–$2.74 Raised
Net Income ($USD Millions)FY 2025$97–$113 $93.0–$105.6 Lowered (acq-related)
Adjusted Net Income ($USD Millions)FY 2025N/A$109.5–$122.1 New metric
Adjusted EBITDA ($USD Millions)FY 2025$347–$377 $375–$400 Raised
Adjusted EBITDA Margin (%)FY 202514.0–14.6 14.1–14.6 Raised low end / Maintained high end

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
IIJA & fundingHealthy public funding; 15 quarters of backlog growth; public backlog ~67–68% <50% IIJA highway dollars committed; 27% reimbursed; reauthorization expected in 2026 FL awards +50% in state FY H1; ~40% IIJA spent; strong DOT/municipal funding across footprint Persistent tailwind; visibility improving
M&A strategy & leverageActive pipeline; acquisitions fuel organic growth; FY25 roll-forward $90–$110M from 2024 deals Lone Star transformational; pro forma leverage ~3.3x; plan to reduce to 1–2.5x Overland (OK) and Mobile Asphalt (AL) added; leverage ~2.88x, likely near ~3x near term; target ~2.5x in 4–5 quarters Expansion with disciplined deleveraging
Margin drivers3 levers: better bidding, vertical integration, scale; adjusted EBITDA margin 14.1% Lone Star accelerates ROAD‑Map 2027 margin goals by ~2 years +200 bps YoY adjusted EBITDA margin; mix uplift from Lone Star and strong execution Upward margin trajectory
Public vs private mixSteady private; public strengthening with IIJA; 80–85% next-12-month revenue in backlog Backlog 1.96B; expect seasonal patterns to resume Q1 start 58/42 shifting toward 63/37 by year-end Public share rising
Liquid asphalt terminalsConsidering growth capex; vertical integration benefits Texas entry adds terminal capability 3 terminals now; higher internal sourcing; potential future investments Building integration density
Cost inflation & energyStable environment; productivity improvements noted Seasonality and weather balance Expect ~4–5% cost inflation; NG spiked; pass-through and hedging in place Manageable inflation, disciplined pricing

Management Commentary

  • Strategic positioning: “We operate in well-funded and growing Sunbelt states... supported by healthy state and federal funding programs.” — CEO Jule Smith .
  • Acquisition impact: “Lone Star was a transformative acquisition and put — moved us almost 2 years ahead on our ROAD‑Map 2027.” — CEO Jule Smith .
  • Balance sheet and swap: “Interest rate swap fixes SOFR at 1.85%, resulting in interest on $300M term debt of 3.6%; debt/TTM EBITDA 2.88x.” — CFO Greg Hoffman .
  • Bidding discipline: “Record backlog does allow us to bid patiently and to bid at good margins.” — CFO Greg Hoffman .

Q&A Highlights

  • M&A pacing and leverage: Management will integrate recent deals while keeping balance sheet “healthy,” aiming to delever to ~2.5x over 4–5 quarters; pro forma leverage near ~3x after subsequent deals .
  • Margin bridge: Margin expansion reflects both Lone Star’s mix and organic improvement plus fixed-cost recovery from strong volumes and weather .
  • Funding outlook: No evidence of funding pauses; expectation that more funds prioritize “hard infrastructure” under new administration .
  • Mix and awards: Public/private mix trending to 63/37 for FY25; steady commercial demand (manufacturing sites, Tesla expansion, Amazon facility) .
  • Liquid asphalt vertical integration: Internal sourcing rising with three terminals; potential for additional terminal investments as density increases .

Estimates Context

  • S&P Global consensus estimates (EPS, revenue) were unavailable due to SPGI daily request limit exceeded; therefore, a formal beat/miss comparison cannot be provided at this time.
  • Implication: With raised FY25 guidance and a record backlog, Street models may need to lift revenue and adjusted EBITDA trajectories to reflect acquisitions and organic momentum; GAAP EPS paths may incorporate acquisition-related charges near term .

Key Takeaways for Investors

  • Revenue momentum and backlog strength underpin FY25 growth; raised revenue and adjusted EBITDA guidance are positive narrative drivers despite GAAP net income pressure from one-time acquisition costs .
  • Mix upgrade via Lone Star and broader vertical integration should support margin expansion, with adjusted EBITDA margin guided to 14.1–14.6% for FY25 .
  • Deleveraging plan to ~2.5x over 4–5 quarters reduces balance sheet risk and supports continued M&A optionality .
  • Funding visibility remains robust across Sunbelt DOTs and municipalities; IIJA only ~40% spent suggests multi-year letting tailwinds .
  • Near-term trading: Expect focus on adjusted metrics and backlog/guidance trajectory; GAAP EPS optics may remain noisy due to acquisition-related items and interest expense .
  • Medium-term thesis: Scale and vertical integration drive sustained margin accretion; platform expansion in TX/OK/AL opens bolt-on pipeline and organic growth opportunities .
  • Watch items: Cash conversion back half, interest expense run-rate on Term Loan B, cost inflation pass-through, and any further guidance updates with integration progress .

Appendix: Additional Q1 2025 Press Releases (Context)

  • Acquired Mobile Asphalt Company (5 plants, SW Alabama) to expand AL platform (Wiregrass Construction) .
  • Acquired Overland Corporation (8 plants, OK and N. Texas), establishing Oklahoma platform .