Financial Data and Key Metrics Changes - Revenue for the third quarter was $779.3 million, representing a 51% increase compared to the same quarter last year, with 5% from organic growth and 46% from acquisitions [11][12] - Adjusted EBITDA was $131.7 million, an increase of 80% year-over-year, with an adjusted EBITDA margin of 16.9%, up 280 basis points from the previous year [12][14] - Net income for the quarter was $44 million, with adjusted net income at $45.2 million, or $0.81 per diluted share [12][14] - Cash provided by operating activities was $83 million, compared to $35 million in the same quarter last year [14] Business Line Data and Key Metrics Changes - The company reported a project backlog of $2.94 billion, covering approximately 80% to 85% of the next twelve months' revenue [13] - General and administrative expenses as a percentage of total revenue decreased to 6.6% from 7.3% in the same quarter last year [11][12] Market Data and Key Metrics Changes - Strong public contract bidding was observed across eight states and over 100 local markets, supported by healthy state infrastructure budgets and federal program funds [8][9] - Contract awards for public funding are expected to grow substantially in fiscal year 2026, with a forecasted increase of about 14% year-over-year [8][9][37] Company Strategy and Development Direction - The company continues to focus on organic growth and strategic acquisitions in growing markets, with a commitment to maintaining operational excellence and leveraging vertical integration opportunities [6][10] - The acquisition of Durwood Green Construction is expected to enhance operational capabilities and market presence in Houston, a rapidly growing metro area [4][6] - The company aims to reduce its leverage ratio to approximately 2.5 times by late fiscal 2026 to support sustained profitable growth [14][45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining fiscal year 2025 guidance, citing strong public funding, a growing private economy, and a robust backlog [10][15] - The company anticipates continued economic growth driven by migration to Sunbelt states and significant investments in American manufacturing [9][10] - Management acknowledged the challenges posed by weather but highlighted the resilience and operational excellence of their teams [7][20] Other Important Information - The company amended its credit agreement, increasing the total facility size to $1.1 billion and extending the maturity date to June 2030 [13] - Capital expenditures for the quarter were $36.7 million, with expectations for total capital expenditures in fiscal year 2025 to be between $130 million and $140 million [14] Q&A Session Summary Question: How did the company navigate weather challenges this quarter? - Management noted that despite weather-related delays, the business performed well due to effective margin levers and operational excellence [20][21] Question: Will full utilization hinder organic growth next year? - Management clarified that full utilization does not indicate capacity constraints and that their CapEx program supports expected organic growth [22][23] Question: What is the expected M&A contribution for fiscal year 2025? - The Q4 acquisition revenue impact is projected to be between $270 million and $280 million, with a carryover into 2026 expected to be around $240 million to $250 million [24][25] Question: How is public spending for maintenance and lane expansion expected to trend? - Management indicated that contract awards for public funding are expected to increase significantly, based on state budgets and programs [36][37] Question: What is the outlook for labor availability? - Management reported that labor shortages have normalized, but there is a long-term concern regarding workforce demographics and the need to attract and retain talent [93][95]

Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $779.3 million, an increase of 51% compared to the same quarter last year, with 5% from organic growth and 46% from acquisitions [11][12] - Adjusted EBITDA was $131.7 million, an increase of 80% year-over-year, with an adjusted EBITDA margin of 16.9%, up 280 basis points from the previous year [12][14] - Net income for the quarter was $44 million, with adjusted net income at $45.2 million, or $0.81 per diluted share [12][14] - Cash provided by operating activities was $83 million, compared to $35 million in the same quarter last year [14] Business Line Data and Key Metrics Changes - The company reported a project backlog of $2.94 billion, covering approximately 80% to 85% of the next twelve months' revenue [13] - General and administrative (G&A) expenses as a percentage of total revenue decreased to 6.6% from 7.3% in the same quarter last year [11][12] Market Data and Key Metrics Changes - Strong public contract bidding was observed across eight states and over 100 local markets, supported by healthy state infrastructure budgets and federal program funds [8][9] - The company expects public spending on roads and bridges to grow substantially in fiscal year 2026, driven by state and local government initiatives [8][9] Company Strategy and Development Direction - The company continues to focus on organic growth and strategic acquisitions in growing markets, with a goal to maintain a leverage ratio of approximately 2.5 times by late fiscal 2026 [14][15] - The acquisition of Durwood Green Construction is expected to enhance operational excellence and provide vertical integration opportunities [5][6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining fiscal year 2025 guidance, citing strong public funding, a growing private economy, and a robust backlog [10][15] - The company anticipates continued economic growth in its current markets, particularly due to migration to Sunbelt states and new investments in American manufacturing [9][10] Other Important Information - The company amended its credit agreement to increase the total facility size to $1.1 billion, extending the maturity date to June 2030 [13] - Capital expenditures for the quarter were $36.7 million, with expectations for total capital expenditures in fiscal year 2025 to be between $130 million and $140 million [14] Q&A Session Summary Question: How did the company navigate weather challenges this quarter? - Management noted that despite weather-related delays, the business performed well due to effective margin levers and operational excellence [18][19] Question: Will full utilization hinder organic growth next year? - Management clarified that full utilization does not indicate capacity constraints and that the CapEx program supports expected organic growth [20][21] Question: What is the expected M&A contribution for fiscal year 2025? - The Q4 acquisition revenue impact is projected to be between $270 million and $280 million, with a rollover benefit of $240 million to $250 million into fiscal year 2026 [22][23] Question: How is public spending for maintenance and lane expansion expected to trend? - Management indicated that contract awards for public funding are expected to increase by about 14% in fiscal year 2026, based on current budgets and programs [34] Question: What is the outlook for labor availability? - Labor shortages from COVID have dissipated, but there is a long-term concern about workforce aging, prompting proactive measures to attract and retain labor [90][92]

Company Performance - Construction Partners reported quarterly earnings of $0.81 per share, missing the Zacks Consensus Estimate of $0.87 per share, but showing an increase from $0.59 per share a year ago, resulting in an earnings surprise of -6.90% [1] - The company posted revenues of $779.28 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.87%, and up from $517.79 million year-over-year [2] - Over the last four quarters, Construction Partners has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] Stock Outlook - The immediate price movement of Construction Partners' stock will depend on management's commentary during the earnings call and future earnings expectations [3] - The stock has added about 5.6% since the beginning of the year, underperforming compared to the S&P 500's gain of 7.9% [3] - The current consensus EPS estimate for the coming quarter is $1.06 on revenues of $876.5 million, and for the current fiscal year, it is $2.13 on revenues of $2.77 billion [7] Industry Context - The Building Products - Miscellaneous industry, to which Construction Partners belongs, is currently in the bottom 37% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [5] - The unfavorable estimate revisions trend prior to the earnings release has resulted in a Zacks Rank 4 (Sell) for Construction Partners, suggesting expected underperformance in the near future [6]

[Third Quarter Fiscal 2025 Financial Highlights](index=1&type=section&id=Third%20Quarter%20Fiscal%202025%20Financial%20Highlights) Construction Partners, Inc. achieved significant year-over-year growth in Q3 FY2025, with revenue up 51% to $779.3 million and Adjusted EBITDA increasing 80% to $131.7 million, reaching a record 16.9% margin Q3 FY2025 Key Financial Metrics (vs. Q3 FY2024) | Metric | Q3 FY2025 | Q3 FY2024 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $779.3M | $517.8M | +51% | | Gross Profit | $131.8M | $83.5M | +58% | | Net Income | $44.0M | $30.9M | +42% | | Diluted EPS | $0.79 | $0.59 | +34% | | Adjusted EBITDA | $131.7M | $73.2M | +80% | | Adjusted EBITDA Margin | 16.9% | 14.1% | +280 bps | - The **$261.5 million revenue increase** was composed of **$235.7 million from acquisitions** and **$25.8 million from organic growth** in existing markets[2](index=2&type=chunk) - General and administrative expenses as a percentage of total revenues **decreased by 70 basis points to 6.6%** compared to 7.3% in the prior year's quarter[3](index=3&type=chunk) [Operational Highlights and Strategic Developments](index=1&type=section&id=Operational%20Highlights%20and%20Strategic%20Developments) The company achieved a record $2.94 billion project backlog and expanded its Texas footprint through the acquisition of Durwood Greene Construction Co., despite weather-related project delays - Project backlog reached a **record $2.94 billion** at June 30, 2025, a **significant increase from $1.86 billion** at June 30, 2024[1](index=1&type=chunk)[6](index=6&type=chunk) - The company successfully managed **persistent weather-related delays**, including **record or near-record rainfall** across many Sunbelt markets, which impacted project timelines and fixed asset cost recoveries[2](index=2&type=chunk) - Announced the **acquisition of Durwood Greene Construction Co.** in the Houston metropolitan area, adding **nearly 200 employees**, **three hot-mix asphalt plants**, and a rail-served aggregates terminal[2](index=2&type=chunk) [Fiscal 2025 Full-Year Outlook](index=2&type=section&id=Fiscal%202025%20Full-Year%20Outlook) The company maintained its full-year fiscal 2025 outlook, incorporating the Durwood Greene acquisition and accounting for Q3 weather impacts, anticipating strong demand Fiscal 2025 Full-Year Guidance | Metric | Low Range | High Range | | :--- | :--- | :--- | | Revenue | $2.77 billion | $2.83 billion | | Net Income | $106.0 million | $117.0 million | | Adjusted Net Income | $124.0 million | $135.0 million | | Adjusted EBITDA | $410.0 million | $430.0 million | | Adjusted EBITDA Margin | 14.8% | 15.2% | - The company is **well-positioned** to capitalize on **long-term infrastructure investment** and **population migration** into the Sunbelt region[8](index=8&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) Consolidated financial statements show significant growth from acquisitions, with Q3 revenue up 51%, total assets nearly doubling to $2.9 billion, and strong operating cash flow of $179.3 million for the nine-month period [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Q3 2025 revenues grew 51% to $779.3 million and net income increased 42% to $44.0 million, with nine-month revenues reaching $1.91 billion and operating income nearly doubling Income Statement Highlights (in thousands) | Metric | Q3 2025 | Q3 2024 | Nine Months 2025 | Nine Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $779,277 | $517,794 | $1,912,507 | $1,285,726 | | Gross Profit | $131,810 | $83,492 | $279,731 | $174,173 | | Operating Income | $82,943 | $45,657 | $124,040 | $65,472 | | Net Income | $44,047 | $30,908 | $45,211 | $39,627 | | Diluted EPS | $0.79 | $0.59 | $0.82 | $0.75 | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets reached $2.93 billion, a significant increase from $1.54 billion, primarily driven by acquisitions and funded by a rise in long-term debt to $1.39 billion Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | Sept 30, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | **$809,443** | **$585,006** | | Property, plant and equipment, net | $1,147,613 | $629,924 | | Goodwill | $775,756 | $231,656 | | **Total Assets** | **$2,925,841** | **$1,542,135** | | **Total Current Liabilities** | **$552,198** | **$380,454** | | Long-term debt, net | $1,392,639 | $486,961 | | **Total Liabilities** | **$2,072,513** | **$968,395** | | **Total Stockholders' Equity** | **$853,328** | **$573,740** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended June 30, 2025, operating cash flow was $179.3 million, with $1.03 billion used in investing activities, primarily for acquisitions, funded by $893.4 million from financing activities Cash Flow Summary (Nine Months Ended June 30, in thousands) | Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $179,318 | $113,181 | | Net cash used in investing activities | ($1,033,130) | ($199,098) | | Net cash provided by financing activities | $893,433 | $95,280 | | **Net change in cash** | **$39,621** | **$9,363** | [Reconciliation of Non-GAAP Financial Measures](index=9&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) The company reconciles GAAP Net Income to non-GAAP Adjusted EBITDA and Adjusted Net Income, showing Q3 2025 Adjusted EBITDA of $131.7 million and providing similar adjustments for the full-year 2025 outlook Q3 Net Income to Adjusted EBITDA Reconciliation (in thousands) | Line Item | Q3 2025 | Q3 2024 | | :--- | :--- | :--- | | Net income | $44,047 | $30,908 | | Interest expense, net | $25,239 | $4,673 | | Provision for income taxes | $13,903 | $10,108 | | Depreciation, depletion, etc. | $39,294 | $23,507 | | Share-based compensation | $8,564 | $4,039 | | Transformative acquisition expenses | $663 | $— | | **Adjusted EBITDA** | **$131,710** | **$73,235** | FY2025 Outlook Net Income to Adjusted EBITDA Reconciliation (in thousands) | Line Item | Low | High | | :--- | :--- | :--- | | Net income | $106,000 | $117,000 | | Interest expense, net | $86,000 | $86,000 | | Provision for income taxes | $32,000 | $36,000 | | Depreciation, depletion, etc. | $143,000 | $145,000 | | Share-based compensation | $23,250 | $26,250 | | Transformative acquisition expenses | $19,750 | $19,750 | | **Adjusted EBITDA** | **$410,000** | **$430,000** | - **Adjusted Net Income for Q3 2025 was $45.2 million**, after adding back transformative acquisition expenses and related financing fees to the **GAAP Net Income of $44.0 million**[26](index=26&type=chunk)

Core Insights - Construction Partners, Inc. reported a 51% increase in revenue for Q3 FY25, reaching $779.3 million compared to $517.8 million in the same quarter last year [1][4] - Adjusted EBITDA rose by 80% to $131.7 million, with an adjusted EBITDA margin of 16.9%, up from 14.1% in the previous year [5][4] - The company has a record project backlog of $2.94 billion, significantly higher than $1.86 billion a year ago [5][4] Financial Performance - Revenue for Q3 FY25 was $779.3 million, a 51% increase from $517.8 million in Q3 FY24, with $235.7 million attributed to acquisitions and $25.8 million from existing markets [1][2] - Gross profit increased to $131.8 million from $83.5 million year-over-year, while general and administrative expenses rose to $51.0 million but decreased as a percentage of total revenues [3][4] - Net income for Q3 FY25 was $44.0 million, or $0.79 per diluted share, compared to $30.9 million, or $0.59 per diluted share, in the same quarter last year [4][5] Operational Highlights - The company faced weather-related challenges, including record rainfall, but managed to maintain operational discipline and cash flow generation [2][6] - The acquisition of Durwood Greene Construction Co. added nearly 200 employees and is expected to enhance operational capabilities in the Houston area [2][6] - The company is maintaining its fiscal 2025 outlook, anticipating continued demand for infrastructure projects in the Sunbelt region [6][11] Outlook - The company maintains its fiscal 2025 outlook for revenue in the range of $2.77 billion to $2.83 billion, net income between $106 million and $117 million, and adjusted EBITDA between $410 million and $430 million [11][21] - The strategic focus remains on scaling operations and expanding geographic footprint in a fragmented market, capitalizing on infrastructure investment trends [7][6]

Company Overview - Construction Partners, Inc. is a vertically integrated civil infrastructure company operating in local markets across the Sunbelt, including Alabama, Florida, Georgia, North Carolina, Oklahoma, South Carolina, Tennessee, and Texas [3] - The company specializes in the construction, repair, and maintenance of surface infrastructure, focusing primarily on publicly funded projects such as local and state roadways, interstate highways, airport runways, and bridges [3] Recent Acquisition - Construction Partners has acquired Durwood Greene Construction Co. and G&S Asphalt, Inc., enhancing its operations in the Houston metro area with three hot-mix asphalt plants and a rail-serviced aggregates terminal [1] - The acquisition adds nearly 200 employees from Durwood Greene, a well-respected family business known for its operational excellence in the Houston market [2] Strategic Benefits - The integration of Durwood Greene is expected to provide vertical integration opportunities, including the ability to purchase liquid asphalt cement from Lone Star Paving's terminal in Channelview, Texas [2] - The company is optimistic about growth in Texas, citing strong economic conditions, favorable demographics, and a well-funded transportation program as key factors for future expansion [2]

Core Insights - Polaris Off Road has announced its 2026 off-road vehicle lineup, celebrating the 40th anniversary of its all-terrain vehicles (ATVs) and emphasizing its commitment to innovation and American engineering [1][3][34] - The new lineup includes various models designed to enhance rider experience and performance, catering to both work and recreational needs [1][3] Product Highlights - The 2026 RANGER 500 is introduced as a new utility vehicle starting at a U.S. MSRP of $9,999, aimed at a broader consumer base with its compact and practical design [2][17] - The Sportsman 570 Premium 40th Anniversary Edition is a limited release that features nostalgic design elements and modern performance enhancements [3][5] - The GENERAL lineup is recognized as the best-selling crossover side-by-side, featuring a 999cc engine and a 600-pound capacity dump box, with refreshed colors based on consumer feedback [7][8][10] - The Polaris XPEDITION offers adventure-ready features with a 114 HP engine and a refined interior experience, catering to riders seeking rugged versatility [11][12][15] - The RZR lineup continues to dominate the sport side-by-side market with advanced suspension technology and customizable features for enhanced performance [21][23][27] Youth Lineup - Polaris is committed to fostering the next generation of riders with its 2026 Youth lineup, which includes safety features like Helmet Aware Technology and customizable speed limits [28][29] - The lineup features vehicles tailored for young riders, such as the Outlaw 70 EFI and RZR 200 EFI, designed to provide a safe and empowering riding experience [30][31][32] Pricing and Availability - The 2026 Polaris vehicle lineup will begin shipping to dealers in August, with various models starting at different price points, including the RANGER lineup starting at $9,999 and the XPEDITION at $39,499 [6][10][16][20][27][32]

Company Overview - Construction Partners, Inc. is a vertically integrated civil infrastructure company operating in local markets throughout the Sunbelt, including Alabama, Florida, Georgia, North Carolina, Oklahoma, South Carolina, Tennessee, and Texas [2] - The company specializes in the construction, repair, and maintenance of surface infrastructure, primarily focusing on publicly funded projects such as local and state roadways, interstate highways, airport runways, and bridges [2] - In addition to public projects, the company also engages in private sector projects, including paving and sitework for office and industrial parks, shopping centers, local businesses, and residential developments [2] Upcoming Financial Results - The company will release its fiscal 2025 third quarter results on August 7, 2025, before the market opens [1] - A conference call to discuss the results is scheduled for 10:00 a.m. Eastern Time on the same date, accessible via phone or webcast [1] - Participants can access the conference call by dialing (412) 902-0003 or through the company's Investor Relations website [1]

Core Insights - Construction Partners, Inc. (ROAD) is trading at a premium with a forward 12-month P/E ratio of 40.7, significantly higher than the broader Construction sector (18.76) and the S&P 500 index (22.64) [2][4] - The company's vertically integrated business model and diverse product offerings are enhancing its prospects amid favorable public infrastructure spending [4][18] - ROAD stock has increased by 37.1% over the past three months, outperforming both the industry and notable competitors [5] Business Model and Growth Strategy - The vertically integrated model reduces supply-chain risks and supports an EBITDA margin of 15.2% [6] - The Lone Star acquisition has expanded ROAD's geographic reach and added 10 HMA plants, aiding in the execution of its ROAD-Map 2027 strategy [6][10] - The company aims for annual revenue growth of 15-20% and EBITDA margin expansion of 13-14% through its strategic business model [8] Financial Outlook - For fiscal 2025, ROAD expects revenues between $2.77 billion and $2.83 billion, indicating a year-over-year growth of 52.2-55.5% [12] - Adjusted EBITDA is forecasted to be between $410 million and $430 million, reflecting a year-over-year growth of 85.9-94.9% [12] - Earnings per share (EPS) estimates for fiscal 2025 and 2026 have increased to $2.17 and $2.73, representing growth of 63.2% and 25.7% respectively [13] Technical Indicators - ROAD stock is trading above both the 50-day and 200-day simple moving averages, indicating a bullish trend and positive market sentiment [15] Analyst Sentiment - Analysts show optimism towards ROAD, with 60% of recommendations classified as "Strong Buy" [19][22]

Industry Overview - The Zacks Building Products - Miscellaneous industry is experiencing growth due to increased government infrastructure spending, which is driving demand for construction-related products and services [1] - Key players in the industry, such as United Rentals, Inc., Masco Corporation, Construction Partners, Inc., Hillman Solutions Corp., and Quanex Building Products Corporation, are well-positioned to capitalize on these trends [1] Current Challenges - The industry faces near-term challenges from high mortgage rates, affordability concerns, and inflation-related cost pressures, including tariffs on raw materials like iron, steel, and copper [2] - Despite these challenges, proactive cost management and pricing strategies are helping to mitigate headwinds [2] Industry Description - The industry comprises manufacturers, designers, and distributors of home improvement and building products, including ceiling systems, doors, windows, flooring, and metal products [3] - Companies also provide solutions for rehabilitating aging infrastructure and rent equipment to a diverse customer base [3] Future Trends - Strong global trends in infrastructure modernization and energy transition are expected to benefit industry players [4] - Improving residential construction markets are anticipated to drive growth, with builders cautiously optimistic for 2025 due to a lack of existing inventory [4] Operational Strategies - Industry participants are implementing cost-saving initiatives, including business consolidation and supply chain improvements, to boost profitability [5] - Strategic investments in new products and acquisitions are being pursued to supplement organic growth [5] Tariff Impact - U.S. tariff policies are increasing costs and disrupting supply chains, leading to heightened inflation [6] - Overall construction input prices were reported to be 1.1% higher in June compared to the previous year [6] Market Performance - The Zacks Building Products - Miscellaneous industry has underperformed the S&P 500 Composite and the broader Zacks Construction sector over the past year, losing 8.4% [12] - The industry is currently trading at a forward P/E ratio of 16.7X, lower than the S&P 500's 22.61X and the sector's 18.76X [15] Company Highlights - **Construction Partners**: Positioned for strong growth with a record project backlog of $2.84 billion and significant revenue growth from acquisitions [20][21] - **Quanex**: Benefiting from the acquisition of Tyman, contributing to a 67.3% year-over-year increase in consolidated sales [24][25] - **United Rentals**: Growth driven by strong demand in infrastructure projects and a stable customer sentiment, with a reaffirmed full-year guidance [27][28][29] - **Masco**: Facing a potential $400 million tariff headwind but expects to offset 50%-65% through pricing and cost reduction efforts [31][32] - **Hillman**: Aiming to reduce reliance on Chinese suppliers and maintain sales growth despite macroeconomic challenges [35][36]