Q3 2024 Summary
Published Feb 18, 2025, 5:24 PM UTC- The company is experiencing strong organic growth, with 13% organic revenue growth this quarter, driven by market share gains, expansion into adjacent markets, and high demand in their markets .
- Backlog has increased for 15 consecutive quarters, reaching a record level, providing strong visibility into future revenues, and the company is maintaining or improving margins alongside backlog growth.
- Adjusted EBITDA margins increased to 14.1% this quarter, showing margin expansion driven by operational excellence, cost controls, vertical integration, scale efficiencies, and disciplined bidding strategies .
- Weather disruptions, such as hurricanes, may negatively impact the company's operations and financial performance. In the first week of August, a hurricane passed through four of their states, potentially affecting project timelines. Future weather events could pose similar risks.
- Increased competition in public sector projects could pressure margins as contractors shift from slowing private sectors to public work. While the company hasn't observed significant changes yet, there is a risk that continued shifts could affect their competitiveness and profitability.
- The company acknowledges that their backlog growth of 15 consecutive quarters is abnormal, raising concerns about the sustainability of this growth. A slowdown in backlog accumulation could impact future revenue and growth prospects.
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Margin Improvement Drivers
Q: What drove the 14+% margin this quarter?
A: Margin expansion was due to three factors: building better markets and putting more money on bids; vertical integration, with terminals and aggregate facilities contributing more each year; and scale. Additionally, increased productivity from our workforce has been a huge benefit to margins. -
M&A Impact on Growth
Q: How much growth from 2024 acquisitions will roll into 2025?
A: We estimate that $90 to $110 million from acquisitions completed in 2024 will roll into 2025, providing incremental growth next year. -
Guidance Philosophy on M&A
Q: Will unannounced M&A be included in 2025 guidance?
A: We typically don't include unannounced acquisitions in our guidance. Last year we did for Analyst Day, but we plan to return to including only announced acquisitions in our 2025 guidance. -
Backlog Composition and IIJA Impact
Q: Can you clarify the public versus private end markets in the backlog?
A: Our backlog has increased for 15 quarters. The percentage of public backlog rose from 65% to 67–68%, reflecting the IIJA being in full gear. We're seeing strong demand in both public and private markets, with states receiving IIJA funding and passing supplemental funding. -
Organic Growth vs Peers
Q: Why is your organic growth so positive compared to others?
A: We're growing market share and working in adjacent markets. With a strong demand environment, we're adding crews and doing more work. Acquisitions from a year or two ago are creating opportunities for organic growth. We've always been a growth company of 15% to 20%, about half organic. -
Private Market Trends
Q: Are you experiencing a slowdown in the private market?
A: We haven't seen much change; the private market is steady, perhaps even better this year than last. We're bidding on both public and private projects and haven't seen a big slowdown in commercial opportunities. -
Participation in Larger Projects
Q: Are you increasing work as a subcontractor on larger projects?
A: Yes, we're participating in larger IIJA projects as subcontractors or JV partners. While we don't want the risk of being prime contractor on mega projects, participating as a subcontractor is very good work for us. -
Sequential Backlog Growth
Q: How much of sequential backlog growth was organic vs acquired?
A: About $40 million came from acquisitions this quarter; the rest was organic. This is a similar mix to revenue. -
Residential Market Changes
Q: Any changes in residential construction markets?
A: Residential is not a big part of what we do, but where we're involved, we've seen no significant changes; it's been steady. -
Weather Impact on Guidance
Q: Has weather affected your quarter or guidance?
A: Weather tends to balance out over time. July was better than normal, though we've had a hurricane in August. We anticipate that the quarter will balance out, and our guidance reflects that. -
Productivity Improvements
Q: What's driving crew productivity increases?
A: It's about great leadership and people. We've focused on workforce development, training, and retaining the best workforce. With great people, we see better results. -
Non-DOT Public Projects
Q: Any initiatives to increase work in non-DOT public areas like airports and military bases?
A: Yes, we're pursuing these projects, which require expertise and have fewer bidders. Our acquisition of Robinson Paving, near Fort Moore, adds valuable experience in this area.