Construction Partners, Inc. Q1 FY2025 earnings call

• Welcomed Oberlin Corporation on January 2 as a platform company in Oklahoma and acquired Mobile Asphalt Company in Alabama, strengthening market share and operational footprint.
• Fiscal year 2025 started strong with record revenue, 42% year-over-year revenue growth, and EBITDA margins up nearly 200 basis points due to strong project execution.
• Vertical integration strategy enhances margins through construction services, asphalt manufacturing, and liquid asphalt terminals.
• Strong market demand in Sunbelt states with local markets growing and states focusing on infrastructure improvement, leading to record backlog.
• Strategic growth model includes active acquisition pipeline and organic growth, with 11% organic growth in the quarter.

Revenue for the first quarter of fiscal 2025 was $561.6 million, an increase of 41.6% compared to the same quarter a year ago. The mix of total revenue growth was 11.2% organic revenue and 30.4% from recent acquisitions. Adjusted EBITDA was $68.8 million, an increase of 68% compared to the first quarter of fiscal 2024, with an adjusted EBITDA margin of 12.3% compared to 10.3% in the prior year. The company reported a record project backlog of $2.66 billion as of December 31, 2024.

• Revised outlook for fiscal 2025: Revenue in the range of $2.66 billion to $2.74 billion, net income $93 million to $105.6 million, adjusted net income $109.5 million to $122.1 million, adjusted EBITDA $335 million, and adjusted EBITDA margin 14.1% to 14.6%.
• Revenue from the two recent acquisitions (Oberlin and Mobile Asphalt) for the remainder of the year is expected to be in the $120 million to $130 million range, with backlog from these acquisitions in the $90 million to $100 million range.

Q: Andy Wittmann asked about the contribution of recent acquisitions to guidance, revenue, and backlog.

A: Greg Hoffman responded that revenue from the two acquisitions for the remainder of the year is in the $120 million to $130 million range, and backlog from these is $90 million to $100 million. Jules Smith mentioned the acquisitions were at typical multiples and fit the acquisition strategy.

Q: Catherine Thompson inquired about gross margins and SG&A integration for acquisitions.

A: Jules Smith stated acquisitions have typical margins and will trend upwards with strategy, and Greg Hoffman mentioned they are built into the new guidance.

Q: Tyler Brown asked about M&A pipeline in heritage markets and Oberlin's potential.

A: Jules Smith and Ned Fleming discussed ongoing acquisition opportunities in heritage markets, the importance of finding the right management teams for platform acquisitions, and Oberlin's potential to springboard into other areas of Oklahoma.

Q: Adam Thalhimer asked about monetizing assets from recent deals.

A: Jules Smith said the company is always looking to monetize excess equipment or land to pay down debt and fund future deals.

Q: Michael Feniger asked about funding pauses and backlog impact.

A: Jules Smith stated no pauses in funding for projects, and Greg Hoffman mentioned the record backlog allows patient bidding despite inflation factors.

Q: John Ramirez asked about commercial vs private activity in backlog.

A: Jules Smith highlighted healthy commercial activity in Sunbelt markets, and Greg Hoffman reported the breakdown of public vs private in backlog is similar to prior years, with a trend towards more public work.