Construction Partners, Inc. Q1 FY2026 earnings call

• Thanked approximately 7,000 employees for their hard work, expertise, and dedication. - Delivered strong start to fiscal 2026 with revenue up 44% and adjusted EBITDA up 63%, adjusted EBITDA margin at 13.9%. - Project backlog of $3.09 billion. - Commercial side driven by population migration to Sunbelt, reshoring, and AI infrastructure build-out; examples include projects in Southern Oklahoma, Central Texas, Florida, and South Carolina. - Public side受益于联邦和州政府对基础设施的投资，预计FY '26联邦、州和地方合同奖励较FY '25增长约10%-15%。 - Began fiscal 2026 with 2 acquisitions, and recently acquired GMJ Paving Company in Houston. - Plan to bring online HMA greenfield in Georgia and several more greenfield facilities later this year and early next year. - Road 2030 growth plan targets doubling company size to over $6 billion revenue by 2030 with EBITDA margin to ~17%.

First quarter revenue was $809.5 million, an increase of 44% compared to the prior year. Adjusted EBITDA was $112.2 million, an increase of 63% compared to the prior year. Adjusted EBITDA margin reached 13.9%, the highest first quarter margin in history. Gross profit in the first quarter was $121.5 million, an increase of approximately 58% compared to last year. General and administrative expenses as a percentage of total revenue in the first quarter decreased to 7.7% compared to 7.9% last year. Net income was $17.2 million and adjusted net income was $26.4 million. Earnings per diluted share for adjusted net income was $0.47. Cash flow from operations in the first quarter of fiscal 2026 was $82.6 million, up from $40.7 million in Q1 of fiscal 2025.

• Raised all ranges for fiscal year 2026: revenue $3.48 billion to $3.56 billion, net income $154 million to $158 million, adjusted net income $163.5 million to $168.7 million, adjusted EBITDA $534 million to $550 million, adjusted EBITDA margin 15.34% to 15.45%. - Anticipates organic growth of approximately 7% to 8% in fiscal year '26. - First half of fiscal year to contribute approximately 42% of annual revenue and 34% of adjusted EBITDA; second half to contribute remaining 58% of revenue and approximately 66% of adjusted EBITDA. - Project backlog of $3.09 billion at December 31, 2025, with 80% to 85% of next 12 months' contract revenue covered in backlog.

• Forward-looking statements are uncertain and outside of company's control; actual results may differ materially. - Risks and uncertainties described in detail in company's filings with the Securities and Exchange Commission.

Q: Can you give some more color on the acquisition pipeline?

A: Yes, continuing to be busy with acquisitions, passing on those not a good strategic cultural fit, with 3 platform acquisitions last year creating new opportunities in Texas, Oklahoma, and Tennessee, and acquisition pipeline as robust as it's been in 25 years.

Q: Could you expand on the size of the site prep job for data centers and your scope?

A: Data centers are a big part of commercial projects, with site work and paving for data centers being part of what's done, including a large site work contract in York, South Carolina for a new data center in the Greater Charlotte metro area.

Q: Could you help bridge the organic growth guidance for the full year with Q1?

A: Organic growth expectations for fiscal year are still 7% to 8%, with $19 million difference in Q1 due to projects starting late in North Carolina and equipment moved to adjacent markets due to competition, which is counted as acquisitive growth.

Q: Could you give more color on integration of acquisitions over the past 12 to 15 months?

A: Done 7 acquisitions since last fall, integration is a core competency, with great management teams in acquired markets creating organic growth opportunities, and integration of companies like Derwood Greene, Vulcan, and GMJ going well.

Q: Could you talk about the seasonality of the business and second quarter guidance?

A: First half and second half of year are very similar year-over-year with weather balancing out, no negative connotation, just normal revenue and EBITDA split in a normal year.

Q: Could you quantify how much revenue got switched between competitive markets?

A: About $19 million, half and half.

Q: Could you update on M&A rollover impact to revenue in fiscal '26?

A: About $260 million to $280 million in remaining 3 quarters from acquisitions, including the recent GMJ acquisition.

Q: Could you talk about the evolution of the Houston market, margin profile, and M&A opportunity?

A: Houston market has great management teams from acquired companies, GMJ acquisition complements Derwood Greene, adding management, workforce, and market share, with more M&A opportunity in big metros like Houston.

Q: Could you talk about confidence in hitting leverage target and M&A funding?

A: Confident in hitting leverage target of ~2.5x by end of 2026 using cash flow from operations, with acquisitions like GMJ funded by cash, and will continue to make acquisitions using cash.

Q: What's the latest on the reauthorization bill?

A: Feel good about both houses of Congress working on reauthorization to be done by September 30, expecting higher funding through formula method for hard infrastructure as history shows previous reauthorizations have been higher.