• Revenue: $561.6 million, an increase of 41.6% year-over-year.
• Organic Revenue Growth: 11.2%.
• Revenue from Acquisitions: 30.4%.
• EBITDA Margin: Increased by almost 200 basis points year-over-year.
• Adjusted EBITDA: $68.8 million, an increase of 68% year-over-year.
• Adjusted EBITDA Margin: 12.3%, compared to 10.3% last year.
• Net Loss: $3.1 million due to nonrecurring expenses.
• Adjusted Net Income: $13.3 million.
• Diluted EPS (Adjusted Net Income): $0.25, an increase of 35% year-over-year.
• Project Backlog: Record $2.66 billion.
• Cash and Cash Equivalents: $132.5 million.
• Available Credit Facility: $393.4 million.
• Cash Flow from Operations: $40.7 million, compared to $60 million last year.
• Capital Expenditures: $26.8 million for the quarter.
• Revised Revenue Outlook for FY 2025: $2.66 billion to $2.74 billion.
• Revised Net Income Outlook for FY 2025: $93 million to $105.6 million.
• Revised Adjusted Net Income Outlook for FY 2025: $109.5 million to $122.1 million.
• Revised Adjusted EBITDA Outlook for FY 2025: $375 million to $400 million.
• Revised Adjusted EBITDA Margin Outlook for FY 2025: 14.1% to 14.6%.

• Warning! GuruFocus has detected 7 Warning Signs with ROAD.

Release Date: February 07, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Construction Partners Inc (NASDAQ:ROAD) reported record revenue for the first quarter of fiscal 2025, with a 42% year-over-year increase.
• The company achieved a record project backlog of $2.66 billion, indicating strong demand for its infrastructure services.
• The acquisition of Overland Corporation and Mobile Asphalt Company expands the company's operational footprint and market share in Oklahoma and Alabama.
• The company's vertical integration strategy is enhancing margins, with adjusted EBITDA margin increasing to 12.3% from 10.3% in the previous year.
• Construction Partners Inc (NASDAQ:ROAD) is benefiting from strong infrastructure funding in its operating states, supported by programs like the IIJA and state-specific initiatives such as Florida's Moving Florida Forward program.

Negative Points

• The company reported a net loss of $3.1 million for the quarter due to nonrecurring expenses related to a transformative acquisition.
• There is a concern about the company's leverage, with a debt to trailing 12 months EBITDA ratio of 2.88x, which the company aims to reduce over the next 4 to 5 quarters.
• Cash provided by operating activities decreased to $40.7 million from $60 million in the same quarter a year ago, partly due to weather-related changes affecting cash collections.
• The company faces ongoing construction inflation, with expectations of 4% to 5% inflation across its cost structure, which it needs to manage through pricing strategies.
• There is a potential risk of overextension with recent large acquisitions, which may require careful integration and balance sheet management to maintain financial health.

Q & A Highlights

Q: Can you provide details on the revenue and backlog contributions from the recent acquisitions? A: Greg Hoffman, CFO, stated that the combined revenue from the two recent acquisitions is expected to be in the $120 million to $130 million range for the remainder of the year. The backlog contribution from these acquisitions is estimated to be between $90 million and $100 million.

Q: How do the recent acquisitions impact your leverage and future acquisition strategy? A: Jule Smith, CEO, mentioned that while the acquisitions were strategic and necessary, the company remains committed to maintaining a strong balance sheet. The leverage ratio is expected to tick up slightly to around 3x but will be reduced to approximately 2.5x over the next 4 to 5 quarters. The company will continue to explore acquisition opportunities but will integrate them at a pace that maintains organizational and financial health.

Q: What is the outlook for gross margins and SG&A following the integration of recent acquisitions? A: Jule Smith, CEO, explained that the margins from the new acquisitions are typical and are included in the updated guidance. The company expects margins to trend upwards over time as the acquisitions are integrated and benefit from CPI's resources and strategies.

Q: How is the current inflation environment affecting your operations and pricing strategy? A: Jule Smith, CEO, noted that they anticipate a typical year for construction inflation, estimating it at 4% to 5%. The company is incorporating these costs into bids and remains nimble to adjust quickly if inflation spikes. Current material and energy costs are stable, and any increases are being passed through in pricing.

Q: Are there any concerns about funding for infrastructure projects, especially with recent headlines about pauses in funding? A: Jule Smith, CEO, assured that there have been no issues with funding for infrastructure projects. The new administration is focused on directing funds towards hard infrastructure, which aligns with CPI's operations. The company has not experienced any delays or issues in accessing funding.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.