Construction Partners, Inc. (ROAD) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The company's earnings call reveals strong financial performance, with record project backlog and significant cash flow increase. The Q&A section indicates robust acquisition strategy and organic growth guidance, despite temporary deviations. Management's confidence in deleveraging and M&A funding is reassuring. The market cap suggests a moderate reaction, leading to a positive stock price movement of 2% to 8%.
Key Financial Performance
Revenue $809.5 million, an increase of 44% compared to last year. The breakdown of this revenue growth was 3.5% organic growth and 40.6% acquisitive.
Gross Profit $121.5 million, an increase of approximately 58% compared to last year. As a percentage of total revenues, gross profit was 15% compared to 13.6% last year.
General and Administrative Expenses 7.7% of total revenue in the first quarter, decreased from 7.9% last year.
Net Income $17.2 million and adjusted net income was $26.4 million.
Earnings Per Diluted Share $0.47 for adjusted net income.
Adjusted EBITDA $112.2 million, an increase of 63% compared to last year. Adjusted EBITDA margin was 13.9% compared to 12.2% last year.
Cash Flow from Operations $82.6 million, up from $40.7 million in Q1 of fiscal 2025.
Project Backlog $3.09 billion at December 31, 2025, underscoring robust demand across markets.
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Operating Highlights
New Distribution Warehouse and Food Manufacturing Facility: Negotiating contracts in Southern Oklahoma for a large national retailer.
Facility for Data Centers: Working on a facility in Central Texas to provide power to data centers for one of the Magnificent 7.
Large Distribution Facility: Completed work in Florida for a leading soft drink bottler, creating 350-400 new jobs.
Data Center Site Work: Working on a large site work contract in York, South Carolina.
Acquisitions in Houston and Daytona Beach: Completed two large acquisitions in October 2025, fully integrated and operating well.
GMJ Paving Company Acquisition: Acquired GMJ Paving Company in Houston, expanding market coverage and adding a 12th hot mix plant in the area.
Greenfield Facility in Georgia: Bringing online a new HMA greenfield facility in Brunswick, Georgia to serve the local market.
Revenue Growth: Revenue increased by 44% in Q1 2026, with 3.5% organic growth and 40.6% acquisitive growth.
Adjusted EBITDA Margin: Achieved a record 13.9% adjusted EBITDA margin in Q1 2026.
Cash Flow from Operations: Generated $82.6 million in Q1 2026, up from $40.7 million in Q1 2025.
Road 2030 Growth Plan: Targeting $6 billion in revenue and $1 billion in EBITDA by 2030, with a focus on doubling company size.
Federal Infrastructure Investments: Expecting a 10%-15% increase in federal, state, and local contract awards in FY 2026.
Acquisition Strategy: Focused on expanding footprint and market share through strategic acquisitions.
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Risk or Challenges
Market Conditions: The company faces risks related to ongoing population migration to the Sunbelt, reshoring trends, and the build-out of AI infrastructure, which could lead to increased competition and potential overextension in bidding for projects.
Regulatory Hurdles: The reauthorization of the Surface Transportation program by September 30 is uncertain, and any delays or unfavorable changes could impact federal and state funding for infrastructure projects.
Supply Chain Disruptions: The company is expanding its operations and acquisitions, which could expose it to supply chain challenges, especially in rapidly growing markets like Houston.
Economic Uncertainties: The company’s growth strategy relies heavily on acquisitions and organic growth, which could be impacted by broader economic conditions, including inflation or a downturn in construction demand.
Strategic Execution Risks: The aggressive growth strategy, including doubling revenue by 2030 and achieving a $1 billion EBITDA target, poses risks related to integration of acquisitions, operational efficiency, and maintaining profitability.
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Guidance & Outlook
Revenue Outlook: Revenue for fiscal year 2026 is projected to be in the range of $3.48 billion to $3.56 billion, with organic growth anticipated at approximately 7% to 8%.
Adjusted EBITDA Outlook: Adjusted EBITDA is expected to range between $534 million and $550 million, with an adjusted EBITDA margin of 15.34% to 15.45%.
Backlog Coverage: The company has a project backlog of $3.09 billion as of December 31, 2025, covering approximately 80% to 85% of the next 12 months' contract revenue.
Seasonality Impact: The first half of fiscal 2026 is expected to contribute approximately 42% of annual revenue and 34% of adjusted EBITDA, while the second half will deliver 58% of revenue and 66% of adjusted EBITDA.
Cash Flow Conversion: The company expects to convert 75% to 85% of EBITDA to cash flow from operations in fiscal year 2026.
Federal and State Infrastructure Investment: Federal, state, and local contract awards in FY '26 are expected to increase by approximately 10% to 15% over FY '25, driven by ongoing infrastructure investments.
Surface Transportation Program Reauthorization: The reauthorization of the Surface Transportation program is expected to provide a significant increase in annual funding to states, with details anticipated in spring 2026.
Growth Strategy: The company plans to double its revenue to over $6 billion by 2030, targeting an EBITDA margin of approximately 17% and generating more than $1 billion in EBITDA annually.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you give more color on the acquisition pipeline, specifically the mix between potential platform deals and tuck-ins?
A:The acquisition pipeline is robust, with a mix of platform and tuck-in opportunities. Last year, the company completed 3 platform acquisitions, creating opportunities in Texas, Oklahoma, and Tennessee. The company continues to evaluate acquisitions that are strategic and culturally fitting, with a focus on organic growth and tuck-ins in these states.
Q:Can you expand on the site prep job for data centers mentioned in the prepared remarks?
A:The company highlighted commercial projects, including data centers, driven by macro trends like migration to the Sunbelt and reshoring. Data centers are a significant part of their work, with varying scopes such as site work or paving. These projects are part of a broader demand for factories and distribution centers in Southern and Southeastern markets.
Q:Can you confirm the organic growth guidance of 7%-8% for the full year and explain the Q1 performance?
A:The organic growth guidance for the fiscal year remains at 7%-8%. In Q1, organic growth was impacted by $19 million due to delayed projects in North Carolina and strategic equipment relocation to higher-margin markets. These factors caused a temporary deviation but are expected to normalize.
Q:Can you provide more color on your M&A strategy and integration progress over the past 12-15 months?
A:The company has completed 7 acquisitions since last fall, with integration being a core competency. Examples include successful integrations in Houston, where acquisitions have created organic growth opportunities. The strategy focuses on compounding top-line and bottom-line growth through effective integration.
Q:Why does the second quarter guidance appear light despite strong Q1 performance?
A:The company reiterated that the first and second halves of the year are typically balanced, with weather variations normalizing over time. Strong Q1 performance was partly due to favorable weather, but the company does not overthink short-term variations and maintains its annual guidance.
Q:What is your view on public sector bidding and commercial market trends?
A:Public sector awards are expected to increase by 10%-15% this year, supported by data from ARPDA. The commercial market is described as steady, with potential for stronger performance in spring and summer. Backlog has remained steady or slightly increased, partly due to acquisitions.
Q:Can you quantify the revenue impact of moving crews to acquired markets?
A:Approximately $19 million in revenue was shifted, with about half attributed to moving crews to acquired markets.
Q:What is the M&A rollover impact to revenue in fiscal '26 based on guidance?
A:The M&A rollover impact to revenue is estimated at $260 million to $280 million for the remaining three quarters, including the recent GMJ acquisition.
Q:Can you provide more color on the Houston market and its evolution?
A:Houston has seen significant growth with recent acquisitions, contributing meaningfully to the quarter. The market benefits from strong management teams and complementary acquisitions like GMJ, which adds geographic coverage and public infrastructure paving expertise. The company sees long-term M&A opportunities in Houston.
Q:Are there other big metropolitan areas similar to Houston that you are targeting?
A:The company is strategically focused on high-growth metropolitan areas like Houston. They continue to identify and evaluate opportunities in similar markets for potential platform investments.
Q:Can you discuss your confidence in deleveraging to 2.5x by year-end and the funding of future M&A?
A:The company is confident in achieving a leverage ratio of 2.5x by year-end, supported by strong cash flow and disciplined M&A funding. Recent acquisitions, like GMJ, were funded with cash, and the company plans to continue this approach.
Q:What is the latest on the reauthorization bill and its potential impact?
A:The company is optimistic about the reauthorization bill, expecting it to be completed by September 30. They anticipate a focus on hard infrastructure with increased funding levels, consistent with historical trends. A continuing resolution (CR) would maintain current funding levels temporarily.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the size and scope of the data center project mentioned in the prepared remarks. Additionally, while discussing the second quarter guidance, they did not provide a clear explanation for the implied lightness, instead reiterating general trends and weather impacts.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI infrastructure
Act press
Ardmore Central
Austin facility
Baytown side
Black Investor
Brunswick Georgia
CPI administration
Carolina site
Central Texas
Chairman employee
Charlotte metro
Committees formula
Conference reminder
Congressional Transportation
Construction acquisition
County panhandle
GMJ
Greater
Greg
Houston market
South
acquisition Houston
asset
center
company culture
distribution
greenfield
investment
manufacturing
metro area
model
plan
project state
size
start
ROAD Transcript
Construction Partners, Inc. (ROAD) Q1 2026 Earnings Call Transcript
Positive2-5
The company's earnings call reveals strong financial performance, with record project backlog and significant cash flow increase. The Q&A section indicates robust acquisition strategy and organic growth guidance, despite temporary deviations. Management's confidence in deleveraging and M&A funding is reassuring. The market cap suggests a moderate reaction, leading to a positive stock price movement of 2% to 8%.
Construction Partners, Inc. (ROAD) Q4 2025 Earnings Call Transcript
Positive11-20
The earnings call highlights strong financial performance with significant increases in net income, adjusted net income, and adjusted EBITDA. The company is benefiting from economic growth in key markets, and has a solid strategic plan with a focus on debt reduction and M&A. The Q&A reveals positive sentiment towards integration and market conditions, with no adverse impact from government shutdowns. Overall, the company's strategic initiatives, financial health, and market opportunities suggest a strong positive outlook for the stock price.
Construction Partners, Inc. (ROAD) Q3 2025 Earnings Call Transcript
Positive8-9
The earnings call highlighted strong financial performance, including a 51% revenue increase, improved EBITDA margins, and a solid project backlog. The Q&A reinforced positive sentiment with effective margin management despite weather challenges, robust growth projections, and strategic acquisitions. The company’s commitment to updating targets and deleveraging enhances its outlook. However, economic uncertainties and acquisition integration risks temper the optimism slightly. Overall, the strong financial results and positive guidance suggest a positive stock price reaction over the next two weeks, especially given the company's small-cap status.
Construction Partners, Inc. (NASDAQ:ROAD) Q2 2025 Earnings Call Transcript
Positive5-10
The earnings call presents a strong financial performance with a 54% increase in revenue and a significant improvement in net income. The backlog remains robust, indicating strong demand. While there are concerns about debt levels, the company has a clear strategy to reduce leverage. The Q&A section reveals no project delays and healthy market conditions. Despite some lack of clarity in management responses, the overall sentiment is positive, supported by strong financial metrics, optimistic guidance, and a focus on debt reduction. The market cap suggests a moderate reaction, leading to a positive prediction.
ROAD Slides
ROAD Report
Frequently Asked Questions
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