Construction Partners, Inc. Q2 FY2025 earnings call

• The company surpassed 6,000 employees and has approximately 100 distinct market areas in eight states. - Local market model with local management teams driving higher margin, lower risk projects and recurring revenue. - Acquired PRI as a platform company in Tennessee, which expands coverage and brings pavement preservation expertise. - Q2 saw year-over-year revenue growth of 54% and adjusted EBITDA growth of 135%, with the highest Q2 adjusted EBITDA margin in history at 12.1%. - Focus on organic and acquisitive growth, with an active acquisition pipeline and recent entries into Texas, Oklahoma, and Tennessee. - Aim to achieve top-line growth of 15% to 20% annually and EBITDA expansion of 50 basis points per year through building better markets, vertical integration, and scale.

In the second quarter of fiscal 2025, revenue was $571.7 million, an increase of 54% compared to the same quarter a year ago. The mix of total revenue growth was 7% organic revenue and 47% from recent acquisitions. Adjusted EBITDA was $69.3 million, an increase of 135% compared to the second quarter of fiscal 2024, with an adjusted EBITDA margin of 12.1%. The company's backlog grew to a record $2.84 billion at March 31, 2025.

• Raised fiscal 2025 ranges: Revenue in the range of $2.77 billion to $2.83 billion. - Organic revenue expected to be in the range of 8% to 10%, up from prior expectations of 7% to 8%. - Net income in the range of $106 million to $117 million, adjusted net income in the range of $122.5 million to $133.5 million, adjusted EBITDA in the range of $410 million to $430 million, and adjusted EBITDA margin in the range of 14.8% to 15.2%.

• Tariffs have not been and are not expected to be a significant issue for the business as most supply chain and raw material inputs are sourced domestically.

Q: What project delays or cancellations are you seeing given broader macro uncertainty?

A: For us, we're seeing just business as usual. We haven't seen any delays and still have a healthy bid sheet in commercial markets.

Q: Could you tell more about acquisitions and margin differential?

A: Look for great management teams in platform acquisitions. PRI has a nice margin profile and pavement preservation expertise. Integration is a core competency.

Q: How should we think about capital allocation priorities?

A: On track to get back within leverage ratio target. Will pay down debt, make smart acquisitions, and continue growth strategy.

Q: About PRI's operations in Tennessee?

A: PRI stretches across Tennessee, does pavement preservation, has good relationships with producers in the West, and will expand over time.

Q: Any inflation related to tariffs?

A: Not seeing any as most supply chain is domestic. Tariffs haven't been a real factor.

Q: Organic growth and market slowing?

A: Markets are still very strong. Acquisitions generate new organic growth.

Q: Funding and reauthorization?

A: Current funding is good, administration focused on hard infrastructure. White House budget increased transportation budget.

Q: Backlog margins and acquisition breakdown?

A: Backlog margins are healthy. Backlog breakdown: ~$133M-$134M due to acquisitions, $50M-$60M due to organic growth.

Q: Vertical integration progress?

A: Vertical integration strategy includes services, liquid asphalt terminals, and aggregates. Growing services organically and through acquisitions.

Q: Sellers' attitudes and balance sheet?

A: Active pipeline, sellers focused on long-term best for their business. Aim to pay down debt and maintain cash on balance sheet around 3%-5% of revenue.