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CP

Construction Partners, Inc. (ROAD)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 delivered strong growth despite heavy rainfall: revenue $779.3M (+51% y/y), Adjusted EBITDA $131.7M (+80% y/y), Adjusted EBITDA margin 16.9% (up 280 bps y/y), GAAP diluted EPS $0.79; Adjusted EPS $0.81 .
  • Backlog hit a record $2.94B at 6/30/25 (vs $2.84B at 3/31/25 and $1.86B a year ago); management said backlog covers ~80–85% of next 12 months’ revenue, supporting visibility into FY26 .
  • Guidance maintained for FY25: revenue $2.77–$2.83B, net income $106–$117M, Adjusted net income $124–$135M, Adjusted EBITDA $410–$430M, Adjusted EBITDA margin 14.8–15.2% .
  • Strategic expansion continues: Durwood Greene acquisition adds three HMA plants and a rail-served aggregates terminal in Houston; management sees robust Texas funding and demographic tailwinds .
  • Versus S&P Global consensus for Q3: revenue modestly below, Adjusted EPS in line, Adjusted EBITDA above Street definitions diverge; narrative catalysts include margin resilience in adverse weather, record backlog, and acquisitive contributions into Q4/FY26 (see Estimates Context). Values retrieved from S&P Global.*

What Went Well and What Went Wrong

What Went Well

  • Record margin and operating execution despite weather: “driving a record high Adjusted EBITDA margin of 16.9%” with strong cash flow from operations .
  • Backlog growth and demand: Backlog reached $2.94B; management cited “healthy state infrastructure budgets… and IIJA federal program funds” driving strong contract awards .
  • Strategic footprint expansion: Acquisition of Durwood Greene in Houston deepens Texas presence and vertical integration, with leadership continuity and rail-served aggregates terminal .

What Went Wrong

  • Weather headwinds limited paving days: “record or near-record rainfall… May marked the second-wettest month on record,” affecting project timing and fixed asset cost recoveries .
  • Higher interest expense with increased leverage post acquisitions: Q3 interest expense $25.2M vs $4.7M y/y; debt/TTM EBITDA 3.17x with plan to delever to ~2.5x by late FY26 .
  • GAAP EPS optics impacted by financing/transformative acquisition costs: GAAP diluted EPS $0.79; Adjusted net income removes acquisition/financing items to $45.2M ($0.81/sh) .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$517.8 $571.7 $779.3
Gross Profit ($USD Millions)$83.5 $71.4 $131.8
GAAP Net Income ($USD Millions)$30.9 $4.2 $44.0
GAAP Diluted EPS ($)$0.59 $0.08 $0.79
Adjusted Net Income ($USD Millions)$30.9 N/A$45.2
Adjusted EPS ($)$0.59 N/A$0.81
Adjusted EBITDA ($USD Millions)$73.2 $69.3 $131.7
Adjusted EBITDA Margin (%)14.1% 12.1% 16.9%
G&A as % of Revenue7.3% 8.2% 6.6%

Revenue mix decomposition (Q3 2025):

MetricQ3 2025
Revenue Increase y/y ($USD Millions)+$261.5 (to $779.3)
Acquisition-Driven Growth ($USD Millions)$235.7
Organic Growth ($USD Millions)$25.8 (~5% organic)

KPIs and Balance Sheet/CF highlights:

KPIQ3 2024Q2 2025 (3/31/25)Q3 2025 (6/30/25)
Backlog ($USD Billions)$1.86 $2.84 $2.94
Cash & Equivalents ($USD Millions)N/A$101.9 $114.3
Debt (LT + current) ($USD Millions)N/A$1,359.7 (approx., from BS) $1,431.1 (approx., $38.5 current + $1,392.6 LT)
Debt/TTM EBITDA (x)N/AN/A3.17x
CFO (Quarter) ($USD Millions)N/A$96.3 (six months) $83.0 (quarter)
Capex (Quarter) ($USD Millions)N/AN/A$36.7

Versus S&P Global consensus (Q3 2025):

MetricConsensusActual
Revenue ($USD)$783.6M*$779.3M
Primary EPS ($)$0.822*$0.81 (Adjusted EPS)
EBITDA ($USD)$127.9M*$131.7M Adjusted EBITDA

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious Guidance (Q2 FY25)Current Guidance (Q3 FY25)Change
Revenue ($USD Billions)FY25$2.77–$2.83 $2.77–$2.83 Maintained
Net Income ($USD Millions)FY25$106–$117 $106–$117 Maintained
Adjusted Net Income ($USD Millions)FY25$122.5–$133.5 $124–$135 Raised (range midpoint)
Adjusted EBITDA ($USD Millions)FY25$410–$430 $410–$430 Maintained
Adjusted EBITDA Margin (%)FY2514.8–15.2% 14.8–15.2% Maintained
Capex ($USD Millions)FY25N/A$130–$140 (management expectation) Introduced (call)
Leverage target (Debt/EBITDA)FY26~2.5x by late FY26 ~2.5x by late FY26 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 FY25)Current Period (Q3 FY25)Trend
Weather impactFavorable weather aided Q1; Q2 is a winter quarter but strong execution; margins up 400+ bps y/y Heavy rainfall constrained paving days; still delivered 16.9% Adjusted margin via scale, vertical integration, and market selection Adverse weather, margin resilience improving
Public funding/IIJAStrong state/federal programs supporting backlog; record backlog $2.66B (Q1), $2.84B (Q2) Contract awards up ~14% in FY25 across CPI states; FY26 expected to grow similarly; backlog covers 80–85% of next 12 months revenue Demand tailwinds strengthening
Texas expansionLone Star acquisition in Q1; PRI in Q2; platform assembly across Sunbelt Durwood Greene acquisition (Houston) adds 3 HMA plants and aggregates terminal; bullish on Texas program Accelerating footprint
Cost/energyInflation manageable; margins expanding Liquid AC and diesel stable; NG slightly up but hedged; margin improvement expected 40–50 bps in backlog Stable inputs
Leverage/deleveragingFinancing for acquisitions raised debt; plan to delever Debt/TTM EBITDA 3.17x; target ~2.5x by late FY26; 80–85% EBITDA to CFO conversion Progressing to target
Tax/cash flow policyN/AOBVA 100% bonus depreciation: reduces cash taxes (federal) on qualifying post-1/15/25 acquisitions/equipment; lowers ~$15M guide to ~$10–$13M Cash flow uplift

Management Commentary

  • CEO on execution in adverse conditions: “Despite persistent weather-related delays… our teams executed with discipline and delivered robust operational results, generating significant cash flow… driving a record high Adjusted EBITDA margin of 16.9%.”
  • CEO on backlog and demand: “We continue to see customer demand for both publicly funded and commercial project work throughout our well-funded and growing Sunbelt states…”
  • CFO on scale benefits: “G&A expenses as a percentage of total revenue… were 6.6%… we are targeting G&A… approximately 7.2% to 7.3% of revenue” (FY25) .
  • Executive Chairman on strategy: “We’re trying to make great long-term decisions that continue to compound wealth… we will have a reset over the next few months as to what we think we’re going to do since we hit the projection so quickly.”
  • CEO on Texas: “We remain bullish on the State of Texas… well-funded transportation program and additional opportunities for acquisitive and organic growth.”

Q&A Highlights

  • Weather and margins: Management attributed resilient margins to three levers—building better markets, vertical integration, and scale—offsetting fixed-cost deleveraging in a wet quarter .
  • Acquisition contributions: CFO expects ~$270–$280M acquisition revenue in Q4 FY25, with ~$240–$250M rollover into FY26, supporting growth trajectory .
  • Framework update: Board intends to reset multi-year targets after hitting prior goals early post transformative acquisitions (Lone Star, PRI, Durwood Greene) .
  • FY26 public funding: Contract awards up ~14% in FY25; management sees similar growth into FY26 across states, sustaining backlog build .
  • Cash taxes and OBVA: 100% bonus depreciation on qualifying post-1/15/25 acquisitions/equipment lowers cash federal taxes to ~$10–$13M from ~$15M; state taxes unaffected .
  • July volumes: Strong July volumes after wet spring; Q4 guide assumes normal weather .

Estimates Context

  • Q3 FY25 actuals vs S&P Global consensus: revenue $779.3M vs $783.6M*, Adjusted EPS $0.81 vs $0.822*, Adjusted EBITDA $131.7M vs $127.9M*—a modest top-line miss, EPS essentially in line, and EBITDA above the Street’s baseline definition differs from company’s non-GAAP figure .
  • Implications: Street models likely raise near-term margin assumptions and backlog conversion while normalizing weather impact into Q4/Q1; acquisitive revenue carryover into FY26 and stable energy inputs support marginal upward revisions to FY26 EBITDA and EPS. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Margin resilience is the core story: 16.9% Adjusted EBITDA margin in a wet quarter underscores benefits of scale, integration, and disciplined bidding; expect continued margin tailwinds embedded in backlog (40–50 bps improvement) .
  • Backlog quality/visibility: $2.94B record backlog covering ~80–85% of next 12 months revenue de-risks FY26 trajectory even as macro varies .
  • Texas is an expanding growth platform: Durwood Greene enhances Houston presence and vertical integration; Texas funding program remains the nation’s largest and supportive of multi-year growth .
  • Deleveraging path intact: 3.17x debt/TTM EBITDA with targeted ~2.5x by late FY26; strong EBITDA-to-CFO conversion (80–85%) aids deleveraging while enabling selective M&A .
  • Near-term trading setup: Maintained FY25 guidance and strong July volumes set constructive expectations for Q4; watch weather cadence and acquisition integration throughput for incremental upside .
  • Medium-term thesis: Structural Sunbelt tailwinds (migration, IIJA/state programs, reshoring/tariffs) plus scalable platform and disciplined capital allocation position ROAD for sustained revenue and margin expansion .
  • Modeling notes: Align EPS definitions (Primary/Adjusted vs GAAP), incorporate acquisition revenue cadence ($270–$280M in Q4, ~$240–$250M rollover to FY26), and reflect stable energy inputs/hedging in margin assumptions .
Notes: 
* Values retrieved from S&P Global.