Financial Data and Key Metrics Changes - Revenue for Q2 fiscal 2025 was $571.7 million, representing a 54% increase year-over-year [14] - Adjusted EBITDA grew by 135% to $69.3 million, with an adjusted EBITDA margin of 12.1%, up from 7.9% in the same quarter last year [17] - Net income was $4.2 million, compared to a net loss of $1.1 million in the same quarter last year [16] - General and administrative (G&A) expenses as a percentage of total revenue decreased to 8.2% from 9.7% year-over-year [15] Business Line Data and Key Metrics Changes - The revenue mix for the quarter included 7% organic revenue growth and 47% from recent acquisitions [15] - The company reported a project backlog of $2.84 billion, indicating strong demand for services [18] Market Data and Key Metrics Changes - The company continues to benefit from healthy federal and state project funding in the Sunbelt states, with no signs of degradation in market conditions [9] - The IIJA (Infrastructure Investment and Jobs Act) is expected to provide significant funds that have not yet been deployed, supporting a healthy bidding environment [10] Company Strategy and Development Direction - The company is focused on both organic and acquisitive growth, with a target of 15% to 20% annual top-line growth and 50 basis points EBITDA expansion per year through margin levers [12] - Recent acquisitions, including PRI in Tennessee, are expected to enhance the company's market share and operational capabilities [6][7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing operational performance and the ability to maintain a healthy bidding environment despite broader macroeconomic uncertainties [22][23] - The company is optimistic about the growth opportunities in Tennessee and other Southeastern states, driven by favorable economic conditions [7][11] Other Important Information - Capital expenditures for Q2 were $41.4 million, with total expected capital expenditures for fiscal 2025 in the range of $130 million to $140 million [20] - The company aims to reduce its debt to trailing twelve months EBITDA ratio to approximately 2.5 times in the next four quarters [19] Q&A Session Summary Question: Are there any project delays or cancellations due to macroeconomic uncertainty? - Management reported no significant delays, stating that business is operating as usual with a healthy bid sheet in commercial markets [22][23] Question: What are the margin differentials in recent acquisitions? - The management highlighted that the recent acquisitions, including PRI, have higher margin profiles and emphasized the importance of strong management teams for future growth [24][25] Question: How is capital allocation prioritized in 2025? - The company plans to pay down debt while also pursuing smart acquisitions, maintaining a focus on growth [32] Question: What is the outlook for organic growth and market conditions? - Management indicated that organic growth is expected to be strong, supported by ongoing bidding activity and market conditions [58][60] Question: Are there any inflation-related impacts from tariffs? - Management stated that tariffs have not significantly impacted the supply chain or costs, as most materials are sourced domestically [52] Question: How does the backlog compare to recognized profit margins? - Management noted that backlog margins remain healthy and that crews often find ways to grow margins during project execution [74] Question: What is the company's strategy for vertical integration? - The company continues to pursue vertical integration through both acquisitions and organic growth, focusing on services and infrastructure [77][78]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38479 Construction Partners, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 26-0758017 (S ...

Construction Partners (ROAD) came out with quarterly earnings of $0.08 per share, beating the Zacks Consensus Estimate of a loss of $0.04 per share. This compares to loss of $0.02 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 300%. A quarter ago, it was expected that this road and highway construction company would post earnings of $0.14 per share when it actually produced earnings of $0.25, delivering a surprise of 78.57%.O ...

[Management Commentary & Strategic Developments](index=1&type=section&id=Management%20Commentary%20%26%20Strategic%20Developments) Management highlighted strong Q2 performance, organic growth, and acquisitions, resulting in a record $2.84 billion project backlog and strategic expansion into Tennessee - Project backlog grew to a record **$2.84 billion** at March 31, 2025, compared to **$1.79 billion** a year prior[2](index=2&type=chunk)[5](index=5&type=chunk) - Announced the acquisition of PRI, establishing a new platform company in Tennessee to capitalize on the state's strong economic growth and healthy transportation funding program[2](index=2&type=chunk) - Q2 revenue growth was composed of approximately **7% organic growth** and **47% from recent acquisitions**[2](index=2&type=chunk) - The company is experiencing healthy federal and state project funding and a steady workflow of commercial projects in fast-growing Sunbelt MSAs[2](index=2&type=chunk)[7](index=7&type=chunk) [Q2 Fiscal 2025 Financial Performance](index=1&type=section&id=Q2%20Fiscal%202025%20Financial%20Performance) Construction Partners reported a 54% revenue increase to $571.7 million, achieving $4.2 million net income and 135% Adjusted EBITDA growth to $69.3 million in Q2 FY2025 Q2 Fiscal 2025 Key Financial Metrics vs. Q2 Fiscal 2024 | Metric | Q2 FY2025 | Q2 FY2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $571.7M | $371.4M | +54.0% | | Gross Profit | $71.4M | $38.8M | +84.0% | | Net Income (Loss) | $4.2M | ($1.1M) | N/A | | Diluted EPS | $0.08 | ($0.02) | N/A | | Adjusted EBITDA | $69.3M | $29.5M | +135% | | Adjusted EBITDA Margin | 12.1% | 7.9% | +420 bps | - General and administrative expenses as a percentage of total revenues decreased by **150 basis points** to **8.2%** from **9.7%** in the prior-year quarter[4](index=4&type=chunk) [Updated Fiscal 2025 Outlook](index=2&type=section&id=Fiscal%202025%20Outlook) The company raised its full-year fiscal 2025 guidance, projecting revenues between $2.77 billion and $2.83 billion and Adjusted EBITDA between $410.0 million and $430.0 million Updated Fiscal Year 2025 Guidance | Metric | Low Range | High Range | | :--- | :--- | :--- | | Revenue | $2.77B | $2.83B | | Net Income | $106.0M | $117.0M | | Adjusted Net Income | $122.5M | $133.5M | | Adjusted EBITDA | $410.0M | $430.0M | | Adjusted EBITDA Margin | 14.8% | 15.2% | [Financial Statements](index=4&type=section&id=Financial%20Statements) This section presents the company's consolidated statements of comprehensive income, balance sheets, and cash flows for the specified periods [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) For the three months ended March 31, 2025, revenues increased 54% to $571.7 million, with operating income reaching $27.3 million and net income at $4.2 million Q2 Income Statement Highlights (in thousands) | Account | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenues | $571,650 | $371,427 | | Gross Profit | $71,350 | $38,801 | | Operating Income | $27,289 | $3,080 | | Net Income (Loss) | $4,215 | $(1,124) | | Diluted EPS | $0.08 | $(0.02) | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets increased to $2.75 billion, primarily due to acquisitions, with total liabilities rising to $1.95 billion, largely from increased long-term debt Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Total Assets | $2,753,526 | $1,542,135 | | Goodwill | $745,040 | $231,656 | | Total Liabilities | $1,945,657 | $968,395 | | Long-term debt, net | $1,319,325 | $486,961 | | Total Stockholders' Equity | $807,869 | $573,740 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended March 31, 2025, operating activities provided $96.3 million in cash, while investing activities used $893.2 million, primarily for acquisitions, funded by $823.8 million from financing Six-Month Cash Flow Summary (in thousands) | Cash Flow Activity | For the Six Months Ended March 31, 2025 | | :--- | :--- | | Net cash provided by operating activities | $96,297 | | Net cash used in investing activities | $(893,233) | | Net cash provided by financing activities | $823,836 | | Net change in cash | $26,900 | | Cash, end of period | $103,584 | - The primary use of cash in investing activities was **$828.7 million** for business acquisitions, net of cash acquired[19](index=19&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=9&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section provides reconciliations for non-GAAP measures, including the Q2 FY25 Adjusted EBITDA of $69.3 million from Net Income of $4.2 million, and the updated FY25 outlook - Adjusted EBITDA is defined as net income adjusted for interest, taxes, depreciation & amortization (D&A), share-based compensation, and certain nonrecurring acquisition expenses[20](index=20&type=chunk) Q2 FY25 Net Income to Adjusted EBITDA Reconciliation (in thousands) | Reconciliation Item | Amount | | :--- | :--- | | Net income (loss) | $4,215 | | Interest expense, net | $21,592 | | Provision (benefit) for income taxes | $1,310 | | Depreciation, depletion, accretion and amortization | $37,263 | | Share-based compensation expense | $4,672 | | Transformative acquisition expenses | $221 | | **Adjusted EBITDA** | **$69,273** |

Core Viewpoint - Construction Partners (ROAD) is anticipated to report a year-over-year decline in earnings despite an increase in revenues for the quarter ended March 2025, which could significantly influence its stock price depending on the actual results compared to estimates [1][2]. Financial Performance Expectations - The earnings report is scheduled for release on May 9, 2025, with expectations of a quarterly loss of $0.04 per share, indicating a year-over-year change of -100%. Revenues are projected to be $540 million, reflecting a 45.4% increase from the previous year [3][2]. - The consensus EPS estimate has been revised down by 5.49% over the last 30 days, indicating a bearish sentiment among analysts regarding the company's earnings prospects [4][10]. Earnings Surprise Prediction - The Zacks Earnings ESP model shows a negative Earnings ESP of -150% for Construction Partners, suggesting that the Most Accurate Estimate is lower than the Zacks Consensus Estimate, complicating predictions of an earnings beat [11][10]. - Despite the negative Earnings ESP, the company holds a Zacks Rank of 3, which indicates a hold position, making it challenging to predict a positive earnings surprise [11][10]. Historical Performance - In the last reported quarter, Construction Partners exceeded the consensus EPS estimate of $0.14 by delivering earnings of $0.25, resulting in a surprise of +78.57%. Over the past four quarters, the company has consistently beaten consensus EPS estimates [12][13]. Industry Comparison - Another company in the Zacks Building Products - Miscellaneous industry, Installed Building Products (IBP), is expected to report earnings of $2.18 per share for the same quarter, reflecting a year-over-year decline of -11.7%. Its revenues are projected to be $673.24 million, down 2.8% from the previous year [17]. - Installed Building Products has an unchanged consensus EPS estimate over the last 30 days, but it also has a negative Earnings ESP of -1.53% and a Zacks Rank of 4, indicating a sell position, which complicates predictions of an earnings beat [18].

Core Viewpoint - Quanex Building Products (NX) is currently viewed as a more attractive investment option compared to Construction Partners (ROAD) due to its stronger valuation metrics and earnings outlook [3][7]. Valuation Metrics - NX has a forward P/E ratio of 6.35, significantly lower than ROAD's forward P/E of 39.58, indicating that NX is potentially undervalued [5]. - The PEG ratio for NX is 0.45, while ROAD's PEG ratio is 0.99, suggesting that NX offers better value relative to its expected earnings growth [5]. - NX's P/B ratio stands at 0.79, compared to ROAD's P/B of 5.34, further highlighting NX's superior valuation [6]. Earnings Outlook - NX holds a Zacks Rank of 1 (Strong Buy), indicating a positive earnings estimate revision trend, while ROAD has a Zacks Rank of 3 (Hold), suggesting a less favorable earnings outlook [3][7]. - The solid earnings outlook for NX contributes to its classification as the superior value option in the current market [7].

Group 1 - Investors are considering Quanex Building Products (NX) and Construction Partners (ROAD) as potential undervalued stocks in the Building Products - Miscellaneous sector [1] - NX has a Zacks Rank of 1 (Strong Buy), indicating a stronger improvement in earnings outlook compared to ROAD, which has a Zacks Rank of 3 (Hold) [3] - Value investors utilize various traditional metrics to identify undervalued companies, including P/E ratio, P/S ratio, earnings yield, and cash flow per share [4] Group 2 - NX has a forward P/E ratio of 6.52, significantly lower than ROAD's forward P/E of 36.45, indicating better valuation [5] - NX's PEG ratio is 0.47, while ROAD's PEG ratio is 0.92, suggesting NX is expected to grow earnings at a more favorable rate relative to its price [5] - NX has a P/B ratio of 0.81, compared to ROAD's P/B of 4.91, further highlighting NX's undervaluation [6] Group 3 - Based on the valuation metrics, NX holds a Value grade of B, while ROAD has a Value grade of C, making NX a more attractive option for value investors [6]

Core Insights - Investors are evaluating the value opportunities between Quanex Building Products (NX) and Construction Partners (ROAD) in the Building Products - Miscellaneous sector [1] Valuation Metrics - NX has a forward P/E ratio of 7.78, significantly lower than ROAD's forward P/E of 37.71 [5] - NX's PEG ratio is 0.56, while ROAD's PEG ratio is 0.95, indicating NX's better valuation relative to its expected earnings growth [5] - NX's P/B ratio stands at 0.96, compared to ROAD's P/B of 5.08, suggesting NX is more undervalued based on market value versus book value [6] Zacks Rank and Value Grades - NX holds a Zacks Rank of 1 (Strong Buy), indicating a positive earnings outlook, while ROAD has a Zacks Rank of 3 (Hold) [3] - NX has a Value grade of B, whereas ROAD has a Value grade of C, further supporting NX as the more attractive option for value investors [6]

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying strong candidates involves navigating inherent risks and volatility [1] Group 1: Company Overview - Construction Partners (ROAD) is highlighted as a recommended growth stock with a favorable Growth Score and a top Zacks Rank [2] - The company has a historical EPS growth rate of 14.2%, with projected EPS growth of 50.1% this year, significantly surpassing the industry average of 8.3% [5] Group 2: Financial Metrics - Cash flow growth for Construction Partners stands at 27.2% year-over-year, well above the industry average of 1.9% [6] - The company's annualized cash flow growth rate over the past 3-5 years is 17%, compared to the industry average of 5.5% [7] Group 3: Earnings Estimates - There has been a positive trend in earnings estimate revisions for Construction Partners, with the Zacks Consensus Estimate for the current year increasing by 1.9% over the past month [9] - The combination of a Zacks Rank 2 and a Growth Score of A positions Construction Partners as a potential outperformer for growth investors [11]

Core Viewpoint - Construction Partners (ROAD) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive outlook based on rising earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system emphasizes the importance of earnings estimate revisions, which are strongly correlated with near-term stock price movements [4][6]. - An increase in earnings estimates typically leads to higher fair value calculations by institutional investors, resulting in stock price movements [4]. Company Performance and Outlook - Construction Partners is projected to earn $2 per share for the fiscal year ending September 2025, reflecting a year-over-year increase of 50.4% [8]. - Over the past three months, the Zacks Consensus Estimate for Construction Partners has risen by 6.6%, indicating a positive trend in earnings expectations [8]. Zacks Rating System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks, which have averaged a +25% annual return since 1988 [7]. - The upgrade of Construction Partners to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].