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CP

Construction Partners, Inc. (ROAD)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered strong year-over-year growth: revenue up 54% to $571.7M, Adjusted EBITDA up 135% to $69.3M, and a record $2.84B backlog; diluted EPS turned positive to $0.08 from a loss in Q2 FY24 .
  • Guidance raised across all key metrics: FY25 revenue to $2.77–$2.83B, Adjusted EBITDA to $410–$430M, Adjusted EBITDA margin to 14.8%–15.2%, and Adjusted net income to $122.5–$133.5M .
  • Consensus vs actual: revenue modestly above Street ($571.7M actual vs $561.3M consensus*) and EPS materially above negative consensus ($0.079 actual vs -$0.055 consensus*), driven by margin execution and integration benefits; Street models likely need to reflect raised FY25 guidance and acquisition contributions .
  • Catalyst: sustained backlog strength, margin expansion, and raised FY25 outlook, alongside the PRI platform acquisition in Tennessee to support organic and acquisitive growth .

What Went Well and What Went Wrong

What Went Well

  • “Highest Q2 adjusted EBITDA margin in CPI’s history at 12.1%,” supported by strong plant and project performance, vertical integration, and scale effects .
  • Record backlog reached $2.84B, supported by healthy federal/state funding and steady commercial demand across fast-growing Sunbelt markets .
  • Strategic execution: addition of PRI as Tennessee platform (nearly 300 employees), with pavement preservation expertise and mid-teens margin profile; integration expected to enhance organic growth and services breadth .

What Went Wrong

  • Interest expense rose sharply to $21.6M vs $4.6M prior year, weighing on net income despite operating improvements .
  • Leverage elevated at 3.23x debt/TTM EBITDA post-transactions; management targets ~2.5x within four quarters via operating cash conversion of ~80–85% of EBITDA .
  • Input cost dynamics atypical: crude fell but liquid asphalt stayed flat in Q2; diesel down since quarter end but natural gas up—net cost environment “stable” yet volatile by line-item .

Financial Results

Quarterly progression vs prior quarter

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$538.2 $561.6 $571.7
Diluted EPS ($USD)$0.56 $(0.06) $0.08
Gross Profit ($USD Millions)$84.1 $76.6 $71.4
Adjusted EBITDA ($USD Millions)$77.0 $68.8 $69.3
Adjusted EBITDA Margin (%)14.3% 12.3% 12.1%
Net Income ($USD Millions)$29.3 $(3.1) $4.2
G&A Expense ($USD Millions)$39.8 $44.3 $46.7
Interest Expense ($USD Millions)$6.1 $18.1 $21.6

Q2 2025 vs Q2 2024 (YoY)

MetricQ2 2024Q2 2025
Revenue ($USD Millions)$371.4 $571.7
Diluted EPS ($USD)$(0.02) $0.08
Adjusted EBITDA ($USD Millions)$29.5 $69.3
Adjusted EBITDA Margin (%)7.9% 12.1%
Gross Profit ($USD Millions)$38.8 $71.4
G&A as % of Revenue (%)9.7% 8.2%

Consensus vs Actual (Q2 2025)

MetricConsensusActual
Revenue ($USD Millions)$561.3*$571.7
Primary EPS ($USD)$(0.055)*$0.079

Values with asterisk (*) retrieved from S&P Global.

KPIs and Balance Sheet

KPIQ4 2024Q1 2025Q2 2025
Backlog ($USD Billions)$1.96 $2.66 $2.84
Cash & Equivalents ($USD Millions)$74.7 $132.5 $101.9
LT Debt ($USD Millions)$487.0 $1,183.1 $1,319.3
Debt/TTM EBITDA (x)——3.23x
Credit Facility Availability ($USD Millions)——$248.4

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)FY 2025$2.66–$2.74 $2.77–$2.83 Raised
Net Income ($USD Millions)FY 2025$93.0–$105.6 $106.0–$117.0 Raised
Adjusted Net Income ($USD Millions)FY 2025$109.5–$122.1 $122.5–$133.5 Raised
Adjusted EBITDA ($USD Millions)FY 2025$375–$400 $410–$430 Raised
Adjusted EBITDA Margin (%)FY 202514.1%–14.6% 14.8%–15.2% Raised
Organic Growth (%)FY 20257%–8% (implied) 8%–10% (updated) Raised

Earnings Call Themes & Trends

TopicQ4 2024 (Prev Mentions)Q1 2025 (Prev Mentions)Q2 2025 (Current)Trend
Funding/IIJAFY24 momentum; FY25 outlook framed by IIJA/state funding Raised FY25 outlook; strong Sunbelt funding backdrop Confident on federal/state programs and reauthorization; active awards up 15–16% YoY Improving
Vertical IntegrationEmphasis on terminals/aggregates supporting margins Integration of Lone Star; expanding services Assets performed well; services expansion (grading/utilities) underway Expanding
Acquisitions PipelineTexas platform (Lone Star) completed Oklahoma platform (Overland), Mobile Asphalt added Tennessee platform (PRI) added; active pipeline; disciplined selection Accelerating
MarginsFY24 Adj. EBITDA margin 12.1% Q1 margin 12.3% Record Q2 margin 12.1%; guide to 14.8–15.2% FY25 Improving
Tariffs/Supply ChainNot highlightedStable markets; no notable issues Tariffs a non-issue; inputs mixed but overall stable costs Stable
Leverage/Capital AllocationModest leverage; strong FY24 cash generation Raised debt to fund acquisitions; plan deleveraging 3.23x leverage; plan to ~2.5x in 4 quarters; 80–85% EBITDA-to-CFO Deleveraging in progress

Management Commentary

  • CEO: “Outstanding operational performance led to Q2 year-over-year revenue growth of 54% and adjusted EBITDA growth of 135%… highest Q2 adjusted EBITDA margin in CPI’s history at 12.1%… Our backlog… grew to a record $2.84 billion” .
  • Funding/tailwinds: “Sunbelt states continue to benefit from healthy federal and state project funding… we are not currently seeing any sign of degradation” .
  • Strategy: “Road Map 2027 goals of top line growth of 15% to 20% annually and EBITDA expansion of 50 bps per year… via building better markets, vertical integration and scale” .
  • CFO: “We are raising all of our ranges for fiscal year 2025… organic revenue now expected at 8% to 10%” .
  • Executive Chairman: Confident in integration and margin expansion from acquisitions; benefits from “generational investment in infrastructure” in the Sunbelt .

Q&A Highlights

  • Acquisition strategy and margins: PRI brings pavement preservation capabilities and mid-teens margin profile; focus on disciplined platforms with strong leadership; significant bolt-on opportunity in Tennessee .
  • Modeling and M&A contribution: ~$150–$160M revenue “hangover” into FY26 from completed deals; organic growth revised up to 8%–10% for FY25 .
  • Leverage and cash deployment: 3.23x debt/TTM EBITDA; plan to delever to ~2.5x over four quarters with 80–85% EBITDA converting to CFO; maintain cash at ~3–5% of revenue .
  • Cost/pricing dynamics: Crude down but liquid asphalt flat in Q2; diesel down since quarter end; natural gas up; overall cost environment “stable” .
  • Funding/reauthorization: Encouraging signs from Washington; IIJA formula funding predominant in CPI markets; state budgets supportive; contract awards up ~15–16% YoY in 2025 across CPI states .

Estimates Context

  • Q2 2025: Beat on revenue ($571.7M actual vs $561.3M consensus*) and a major surprise on EPS ($0.079 actual vs -$0.055 consensus*), indicating stronger-than-modeled margin execution and acquisition uplift .
  • FY 2025: Guidance (Revenue $2.77–$2.83B; Adj. EBITDA $410–$430M) brackets/aligns with Street (Revenue $2.812B*; EBITDA $422.6M*); normalized net income/normalized EPS Street ($122.9M*, $2.154*) broadly consistent with raised Adjusted net income guidance ($122.5–$133.5M) .
  • Implication: Consensus likely moves up for net income/EBITDA bands and organic growth trajectory given backlog and acquisition contributions.
    Values with asterisk (*) retrieved from S&P Global.

FY25 Consensus Snapshot

MetricFY 2025 Consensus
Revenue ($USD Billions)$2.812*
EBITDA ($USD Millions)$422.6*
Net Income Normalized ($USD Millions)$122.9*
EPS Normalized ($USD)$2.154*
Target Price (USD)$131.17* (6 estimates*)

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Execution and integration are driving margin outperformance; Q2 Adj. EBITDA margin of 12.1% and raised FY25 margin guide to 14.8%–15.2% signal continued improvement .
  • Backlog at $2.84B provides revenue visibility into the heavy construction season and into FY26, underpinned by supportive public funding trends across CPI’s footprint .
  • Acquisitions remain a core growth lever (PRI in Tennessee post Lone Star in Texas/Overland in Oklahoma), with management emphasizing quality platforms and bolt-ons to expand services and market share .
  • Elevated interest costs and leverage are watch items, but deleveraging plan (to ~2.5x in ~4 quarters) looks supported by high EBITDA-to-CFO conversion (80–85%) .
  • Input costs are mixed but stable overall; pricing discipline and vertical integration should sustain margin trajectory into H2 FY25 .
  • Near-term trading setup: raised guidance and Street beats support positive sentiment; watch for acquisition pipeline updates and H2 margin execution as catalysts .
  • Medium-term thesis: structurally advantaged Sunbelt footprint, vertical integration, and disciplined M&A underpin ROAD-Map 2027 targets (15–20% revenue CAGR; ~50 bps annual margin expansion) .