Construction Partners’ Earnings Call Highlights Robust Growth

Construction Partners ((ROAD)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call for Construction Partners painted a positive picture for fiscal year 2025, showcasing impressive revenue and EBITDA growth. The company has effectively leveraged strategic acquisitions and organic growth to achieve these results. Despite the optimistic outlook, there are some concerns regarding leverage levels and potential impacts from government activities that investors should keep in mind.

Record Revenue Growth

Construction Partners reported an impressive 54% total revenue growth for fiscal year 2025. This growth was fueled by 8.4% organic growth and a substantial 45.6% from strategic acquisitions. These figures underscore the company’s successful expansion strategies and market penetration.

Significant EBITDA Increase

The company achieved a remarkable 92% increase in EBITDA year over year, reaching a record EBITDA margin of 15%. This significant growth in EBITDA highlights the company’s operational efficiency and profitability improvements over the past year.

Strategic Acquisitions

Construction Partners completed several acquisitions in key markets such as Texas, Oklahoma, Tennessee, and Alabama. These acquisitions have been pivotal in expanding the company’s market presence and contributing to its robust revenue growth.

Project Backlog

The fiscal year 2025 ended with a record project backlog of $3 billion. This backlog indicates a strong pipeline of future projects, providing visibility and confidence in sustained revenue growth.

Future Growth Plans

The company outlined its “Road 2030” strategic plan, aiming to double its revenue to over $6 billion by 2030 with a target EBITDA margin of 17%. This ambitious plan reflects the company’s long-term growth aspirations and strategic direction.

Strong Q4 Financial Performance

In the fourth quarter, Construction Partners reported revenue of $900 million, marking a 67% increase compared to the same quarter last year. The adjusted EBITDA for the quarter was $154 million, showcasing strong financial performance.

Healthy Cash Flow

Cash flow from operations was reported at $291 million, up from $209 million in fiscal 2024. This increase in cash flow demonstrates the company’s ability to generate cash from its operations, supporting further investments and growth.

Leverage Concerns

The company’s debt to trailing twelve months EBITDA ratio stood at 3.1 times. While the company is focused on reducing leverage to approximately 2.5 times by late 2026, this remains an area of concern for investors.

Potential Impact of Government Shutdown

Although the recent government shutdown did not significantly impact the industry, it did reset the lead on the five-year reauthorization bill schedule. This could have implications for future government-related projects.

Forward-Looking Guidance

Looking ahead, Construction Partners provided optimistic guidance for fiscal year 2026. They anticipate revenue to reach between $3.435 billion, with adjusted EBITDA expected to be between $520 million to $540 million. The company also plans to expand EBITDA margins by 30 basis points annually, aiming for a 17% margin by 2030. Additionally, contract awards are expected to rise by approximately 15%, driven by strong construction demand in their Sunbelt markets.

In summary, Construction Partners’ earnings call highlighted a robust fiscal year 2025 with significant growth in revenue and EBITDA, driven by strategic acquisitions and organic growth. While the company is well-positioned for future growth, investors should be mindful of leverage concerns and potential impacts from government activities. The company’s forward-looking guidance suggests continued optimism and strategic focus on expanding its market presence and profitability.