Core Viewpoint - Construction Partners (ROAD) experienced a stock pullback after a period of sideways trading, despite a strong earnings report in early February, indicating potential volatility in the market [1] Company Performance - Construction Partners reported a fiscal first-quarter earnings growth of 88% to $0.47 per share, with sales increasing by 44% to $809.5 million [1] - The company ended the quarter with a record project backlog of $3.09 billion, highlighting strong demand in the infrastructure sector [1] - The company raised its fiscal 2026 revenue guidance to a range of $3.48 billion to $3.56 billion, projecting organic growth of approximately 7% to 8% [1] Market Position and Strategy - Construction Partners operates 13 asphalt-focused infrastructure companies across eight states, primarily in the Sunbelt region, with a focus on Texas and Florida [1] - The company completed strategic acquisitions in Daytona Beach and Houston, enhancing its market presence [1] - The majority of its business is derived from publicly funded projects, with 94% of U.S. roads made from asphalt and in poor condition, indicating a significant addressable market [1] Future Outlook - The company aims to achieve $6 billion in sales by 2030, with analysts projecting a 32% increase in full-year 2026 profit to $2.91 per share and a 25% increase to $3.63 per share in 2027 [1] - Construction Partners holds high ratings, including an IBD Composite and Earnings Per Share Ratings of 99 each, reflecting strong financial health and growth potential [1]

Core Viewpoint - Nasdaq Texas officially launched with a ceremony at The Alamo, marking a significant milestone for the exchange and its commitment to Texas' economic growth and capital formation [1][2][3] Group 1: Launch and Significance - Nasdaq Texas is now fully operational as a dual listing exchange, legally domiciled in Texas, reflecting a long-term commitment to the state's economic leadership [3] - The launch coincides with the 190th anniversary of the Battle of the Alamo, symbolizing Texas' legacy of resilience and leadership in capital markets [1][2] Group 2: Features and Offerings - Nasdaq Texas aims to serve companies across various sectors, including technology, energy, industrials, life sciences, and financial services, providing access to deep liquidity and advanced market technology [4] - The exchange allows U.S. public companies to leverage Texas' business-friendly environment while maintaining access to Nasdaq's global platform and services [10][11] Group 3: First Cohort of Dual Listings - The inaugural group of companies dual listing on Nasdaq Texas includes APA Corporation, Construction Partners Inc., J.B. Hunt Transportation Services, Huntington Bancshares, and ProFrac Services [5][7] - Nasdaq, Inc. will also dual list on Nasdaq Texas, demonstrating confidence in the platform and aligning with the same structure offered to issuers [5] Group 4: Executive Commentary - Nasdaq's leadership emphasizes the importance of aligning with Texas' growth and resilience, highlighting the exchange's role in supporting companies that contribute to the U.S. economy [6][9] - Executives from participating companies express pride in being part of this historic launch and the opportunities it presents for growth and innovation in Texas [8][9]

Summary of Construction Partners FY Conference Call Company Overview - **Company Name**: Construction Partners, Inc. (Ticker: ROAD) - **Industry**: Road construction and maintenance - **Location**: Operates in the Sun Belt region of the United States with a presence in 110 local markets across eight states [6][7] Core Business Insights - **Business Model**: Construction Partners is a vertically integrated road construction maintenance contractor, involved in both public (65%) and private (35%) projects [7][33] - **Growth Strategy**: The company focuses on growth through acquisitions and organic expansion, aiming to be the largest or second-largest player in its markets [22][67] - **Market Dynamics**: The local nature of asphalt business creates unique competitive dynamics, as asphalt can only be transported a limited distance (40-50 miles) before it cools and is rejected by the Department of Transportation (DOT) [14][19] Asphalt and Recycling - **Asphalt Composition**: Asphalt is described as rocks glued together with liquid asphalt, with a significant portion (30%-40%) being recycled material [15][39] - **Recurring Business**: Roads require resurfacing approximately every 8-10 years, creating a consistent demand for asphalt services [37][39] Market Exposure and Customer Relationships - **Customer Base**: The company maintains long-term relationships with both public and private customers, allowing for flexibility in project types based on market conditions [32][33] - **Project Types**: Focuses on more complex projects that yield higher margins, avoiding low-margin residential work [34] Funding Mechanisms - **State Funding**: Each state has its own funding mechanisms primarily based on gas taxes, with indexed taxes to keep up with inflation [42][43] - **Federal Support**: The federal government contributes 30%-40% of state work programs, with ongoing discussions for reauthorization of infrastructure funding [44][46] Bidding Process - **Project Bidding**: The company participates in monthly bidding processes for state DOT projects, typically winning 8 out of 13 bids [49][51] - **Project Size**: Typical project sizes range from $1 million to $3 million, allowing for quicker turnaround and reduced estimation risk [51][53] Technology and AI Integration - **AI Utilization**: The company is leveraging AI for predictive modeling in bidding processes, aiming to reduce the average 10% left on the table in bids [59][60] Mergers and Acquisitions - **Acquisition Strategy**: The company targets local businesses for acquisition, capitalizing on generational transitions in ownership and a reputation for fair dealings [63][65] Future Goals - **Financial Targets**: The company aims to achieve EBITDA margins of 17% by 2030, with a revenue target of over $6 billion and $1 billion in EBITDA [68][67] Conclusion - Construction Partners is positioned for continued growth through strategic acquisitions and organic expansion, with a strong focus on maintaining competitive advantages in local markets and leveraging technology to enhance operational efficiency [68][67]

Core Thesis - Construction Partners, Inc. (ROAD) is positioned for significant growth, targeting to double its revenue to $6 billion by 2030, supported by a strong backlog and favorable market conditions [2][4] Company Overview - Construction Partners, Inc. operates in civil infrastructure, focusing on roadway construction and maintenance across several states including Alabama, Florida, and Texas [2] - As of February 19th, ROAD's share price was $131.21, with trailing and forward P/E ratios of 60.60 and 44.05 respectively [1] Growth Strategy - The company aims for a revenue growth of 54% to $2.8 billion in FY2025, leveraging its $3.03 billion backlog and the Infrastructure Investment and Jobs Act (IIJA) [2] - ROAD's growth strategy heavily relies on acquisitions, which poses a risk if M&A activity slows down [2] Market Positioning - ROAD benefits from its strategic positioning in the Sunbelt region, where population growth is above the national average, ensuring a stable demand for road maintenance [3] - The company operates a vertically integrated model, owning over 90 asphalt plants and aggregate facilities, which enhances its competitive edge and mitigates supply chain risks [3] Financial Performance - Adjusted EBITDA for FY2025 grew by 92%, with management targeting an increase in margins from 15.1% to 17% by 2030 through acquisitions and optimizing existing plant capacity [4] Capital Deployment - The company focuses on accretive acquisitions at low multiples, although it currently has debt levels at approximately 185% of equity [5] - In a favorable scenario, consolidating the Sunbelt could lead to revenues exceeding $10 billion with margins of 18% [5] Market Perception - The current market perception undervalues ROAD's logistics and manufacturing capabilities, presenting a compelling risk/reward opportunity for investors [6]

Group 1 - Construction Partners (ROAD) is gaining attention as a significant player in the heavy construction industry, particularly in the context of artificial intelligence advancements [1] - The company's stock is poised to enter a new buy zone, indicating potential for growth and investment opportunities [1] - Construction Partners has seen its composite rating rise to 98, reflecting strong performance metrics [1] Group 2 - The stock has experienced a notable rally of 25%, driven by AI-related projects that are fueling rapid growth [1] - Relative strength rating for Construction Partners has jumped to 85, indicating strong market performance compared to peers [1] - The company is mentioned alongside other notable firms like MasTec (MTZ) and Sterling Infrastructure (STRL), highlighting its competitive positioning in the sector [1]

Group 1: Market Overview - US equities experienced solid returns in 2025, with double-digit gains across all major indices, despite underlying conditions revealing extreme volatility and market leadership [1] - In Q4 2025, Conestoga Capital Advisors Small Cap Strategy returned -1.89% net-of-fees, trailing the Russell 2000 Growth Index's 1.22% return [1] Group 2: Company Focus - Construction Partners, Inc. - Construction Partners, Inc. (NASDAQ:ROAD) is a civil infrastructure company engaged in the construction and maintenance of roadways, with a market capitalization of $7.374 billion [2] - The stock closed at $130.48 per share on February 18, 2026, with a one-month return of 14.25% and a 69.65% increase over the past twelve months [2] - The company underperformed in Q4 2025 due to earnings per share missing analyst estimates, despite better-than-expected revenue growth and a record backlog [3] - Construction Partners, Inc. reported revenue of $809.5 million in Q1 2026, marking a 44% increase compared to Q1 of fiscal 2025 [5] Group 3: Investment Sentiment - Construction Partners, Inc. is not among the 30 most popular stocks among hedge funds, with 26 hedge fund portfolios holding the stock at the end of Q3, down from 27 in the previous quarter [5] - While the potential of Construction Partners, Inc. as an investment is acknowledged, certain AI stocks are believed to offer greater upside potential and carry less downside risk [5]

Core Viewpoint - Investors are evaluating Heidelberg Materials AG Unsponsored ADR (HDLMY) and Construction Partners (ROAD) for potential undervalued stock opportunities in the Building Products - Miscellaneous sector [1] Valuation Metrics - Both HDLMY and ROAD currently hold a Zacks Rank of 2 (Buy), indicating positive earnings estimate revisions and improving earnings outlooks [3] - HDLMY has a forward P/E ratio of 13.53, significantly lower than ROAD's forward P/E of 47.68, suggesting HDLMY may be undervalued [5] - The PEG ratio for HDLMY is 0.93, while ROAD's PEG ratio is 1.26, indicating that HDLMY has a more favorable earnings growth outlook relative to its valuation [5] - HDLMY's P/B ratio is 2.1, compared to ROAD's P/B of 7.8, further supporting the notion that HDLMY is undervalued [6] - Based on these valuation metrics, HDLMY is rated with a Value grade of B, while ROAD has a Value grade of D, indicating a stronger value proposition for HDLMY [6][7]

Financial Performance - For the three months ended December 31, 2025, revenues were $809.5 million, a 44% increase from $561.6 million in the same period of 2024 [145]. - Adjusted EBITDA for the same period was $112.2 million, representing an increase from $68.8 million year-over-year, with an adjusted EBITDA margin of 13.9% compared to 12.3% in 2024 [145]. - The company reported a net income of $17.2 million for the three months ended December 31, 2025, compared to a net loss of $3.1 million in the same period of 2024 [145]. - Adjusted net income for the three months ended December 31, 2025, was $26.4 million, up from $13.3 million in the same period of 2024 [145]. - Net income increased by $20.3 million, or 663.9%, to $17.2 million, primarily due to higher gross profit and reduced acquisition-related expenses [153]. Revenue and Profitability - Revenues for the three months ended December 31, 2025 increased by $247.9 million, or 44.1%, to $809.5 million from $561.6 million for the same period in 2024 [146]. - Gross profit for the same period increased by $44.9 million, or 58.7%, to $121.5 million, driven by higher revenues and improved gross profit margin [147]. Expenses and Costs - General and administrative expenses rose by $17.2 million, or 38.9%, to $61.5 million, attributed to expenses from acquired businesses and increased share-based compensation [148]. - Acquisition-related expenses decreased by $7.9 million to $11.6 million, reflecting lower transformative acquisition costs [149]. - Cost of revenues is influenced by fluctuations in commodity prices, particularly liquid asphalt and diesel fuel, with price adjustment provisions in place for public infrastructure contracts [138]. Acquisitions and Expansion - Recent acquisitions included the purchase of asphalt manufacturing and construction assets from Vulcan Materials Company, adding eight HMA plants in Texas, and the acquisition of P&S Paving, LLC, adding two HMA plants in Florida [134][135]. - The company also acquired GMJ Paving Company, LLC, adding an HMA plant in Baytown, Texas, further expanding operations in southeastern Texas [136]. Cash Flow and Capital Expenditures - Cash provided by operating activities, net of acquisitions, was $82.6 million, significantly up from $40.7 million in the same period of 2024 [156]. - Cash used in investing activities was $242.9 million, with $215.1 million related to acquisitions and $35.5 million for property, plant, and equipment [157]. - Capital expenditures for the three months ended December 31, 2025 were approximately $35.5 million, with expectations for total capital expenditures in fiscal 2026 to be between $165.0 million and $185.0 million [163]. Debt and Financing - As of December 31, 2025, the company has total debt obligations of $1.76 billion, with scheduled payments of $28.9 million in 2026 and $1.13 billion due thereafter [167]. - The company has $1.76 billion of variable rate debt, where a hypothetical 1% change in borrowing rates would result in a $17.6 million change in annual interest expense [171]. - The company’s interest payments on debt are projected to be $80.7 million in 2026, based on a weighted average SOFR-based floating rate of 6.16% [173]. - The company plans to utilize cash from operations and credit facilities to finance working capital and growth strategies [165]. Stock and Capital Management - The company has authorized a stock repurchase program of up to $40 million for Class A common stock, effective through March 5, 2026 [164]. - The company did not repurchase any Class A common stock during the three months ended December 31, 2024 [164]. Market and Economic Conditions - The company emphasizes a mix of federal, state, municipal, and private customers for its construction products and services, focusing on infrastructure projects [137]. - The company’s future cash flows are subject to variables such as inflation and supply chain constraints, impacting capital expenditures [166]. - The company’s ability to access outside capital sources is critical for future success and may be constrained by economic conditions [165]. - The company has $6.6 million in aggregate letters of credit and $3.6 million in minimum royalty payments related to aggregates facilities as of December 31, 2025 [169]. - The company has a conditional purchase agreement related to the Lone Star Acquisition for $30 million, which has expired as of December 31, 2025 [168].

Core Insights - The company reported a strong start to fiscal 2026, with first-quarter revenue increasing by 44% year-over-year, driven by favorable weather and ongoing demand in the Sun Belt region [5][4][7] - The project backlog as of December 31, 2025, stood at $3.09 billion, covering approximately 80% to 85% of the expected contract revenue for the next 12 months [2][7] - Adjusted EBITDA rose by 63% to $112.2 million, with an adjusted EBITDA margin reaching a record 13.9% for the first quarter [4][7] Financial Performance - First-quarter revenue was reported at $809.5 million, with organic growth at 3.5% and acquisitive growth contributing 40.6% [3][7] - Net income for the quarter was $17.2 million, while adjusted net income was $26.4 million, translating to adjusted earnings per diluted share of $0.47 [2] - Gross profit increased by 58% to $121.5 million, with the gross profit margin improving to 15% from 13.6% year-over-year [3] Strategic Outlook - The company raised its fiscal 2026 revenue outlook to a range of $3.48 billion to $3.56 billion, with adjusted EBITDA expected between $534 million and $550 million [7][20] - Management anticipates a 10% to 15% increase in total federal, state, and local contract awards for fiscal 2026, primarily driven by recurring maintenance work [8] - The company is focused on mergers and acquisitions (M&A) as a central growth strategy, having completed significant acquisitions in Houston and Daytona Beach [6][10] Cash Flow and Leverage - The company ended the quarter with $104 million in cash and $163 million available under its credit facility, with a leverage ratio of 3.18x [15][16] - Management aims to reduce leverage to approximately 2.5x by late 2026, funding acquisitions through operating cash flow [16] Market Dynamics - The company is experiencing strong contract bidding across its eight-state footprint, with expectations for increased federal funding through the highway program reauthorization [9][8] - The integration of recent acquisitions is progressing well, with management emphasizing their core competency in this area [14][13]

Acquisition Strategy - The company has completed its twelfth hot mix plant acquisition in the Houston market, enhancing its geographic footprint and throughput opportunities at the nearby liquid asphalt terminal [1][2] - The recent acquisition of GMJ Paving Company, a leading asphalt contractor in Houston, complements existing assets and strengthens market position [2][39] - The company has a robust pipeline of acquisition opportunities across its footprint and surrounding states, focusing on strategic cultural fits [5][44] Financial Performance - For fiscal 2026, the company reported revenue of $809.5 million, a 44% increase year-over-year, with 3.5% from organic growth and 40.6% from acquisitions [8] - Gross profit for Q1 was $121.5 million, up approximately 58% compared to the previous year, with a gross profit margin of 15% [8] - Adjusted EBITDA increased by 63% to $112.2 million, with an adjusted EBITDA margin of 13.9% [9] Market Outlook - The company anticipates a 10-15% increase in total federal, state, and local contract awards in FY '26, particularly for small and medium-sized maintenance projects [4][32] - The revenue outlook for fiscal 2026 is projected between $3.48 billion and $3.56 billion, with adjusted EBITDA expected to range from $534 million to $550 million [11] - The company expects organic growth of approximately 7% to 8% for the fiscal year [11][21] Operational Efficiency - General and administrative expenses as a percentage of total revenue decreased to 7.7% in Q1, down from 7.9% the previous year [9] - The company aims to reduce its debt to trailing twelve-month EBITDA ratio to approximately 2.5 times by late 2026, currently at 3.18 times [10][42] - Cash flow from operations for 2026 was reported at $82.6 million, up from $40.7 million in 2025, with expectations to convert 75% to 85% of EBITDA to cash flow [10][11] Growth Strategy - The company is focused on both organic growth and strategic acquisitions to build shareholder value, with plans to bring online several greenfield facilities [6][5] - The Road 2030 growth plan aims to double the company's size to over $6 billion in revenue by 2030, targeting an EBITDA margin growth to approximately 17% [6][7] - The company is actively integrating recent acquisitions to create organic growth opportunities and enhance operational efficiency [24][39]