struction Partners(ROAD) - 2025 Q4 - Annual Report

Revenue Growth and Strategic Plans - The company aims to exceed $6 billion in revenues by the end of fiscal year 2030 as part of its "ROAD 2030" strategic plan[19]. - Revenues for fiscal 2025 increased by $988.5 million, or 54.2%, to $2.8 billion from $1.8 billion in fiscal 2024, driven by $835.2 million from acquisitions and $153.2 million from existing markets[178]. - The company recorded $943.3 million in goodwill on its balance sheet as of September 30, 2025, which is subject to impairment assessments that could materially impact financial statements[112]. Acquisitions and Expansion - In fiscal year 2025, the company completed five acquisitions for approximately $1.5 billion, adding 27 HMA plants and expanding operations in Alabama, Tennessee, Texas, and Oklahoma[19]. - The company acquired eight HMA plants in October 2025 for approximately $262.1 million, further expanding its operations[19]. - The company has acquired 54 businesses to support growth and is evaluating further strategic acquisitions, particularly in the southern United States[67]. Financial Performance - Gross profit for fiscal 2025 rose by $180.8 million, or 70.0%, to $439.1 million, attributed to higher revenues and improved gross profit margins[179]. - Adjusted EBITDA for fiscal 2025 was $423.7 million, with an Adjusted EBITDA Margin of 15.1%, compared to $220.6 million and 12.1% in fiscal 2024[186]. - Net income increased by $32.9 million, or 47.6%, to $101.8 million for fiscal 2025, primarily due to higher gross profit and gains from asset sales[185]. Contract Backlog and Project Management - The company's contract backlog increased to $3.0 billion as of September 30, 2025, up from $2.0 billion a year earlier, with $2.2 billion attributed to uncompleted work on contracts[32]. - Approximately 78% of the contract backlog is expected to be completed within the next 12 months[33]. - The company maintains a contract management strategy that includes detailed bid preparation and monitoring of project progress to ensure financial performance[24][28]. Funding and Debt Management - The company entered into a Term Loan Credit Agreement for $850 million in November 2024, with proceeds used for acquisitions and debt repayment[19]. - As of September 30, 2025, the company had $592.5 million in principal outstanding under Term Loan A and $843.6 million under Term Loan B, totaling $1.436 billion in debt[105]. - The company is exposed to variability in interest payments due to SOFR-based floating rate borrowings, which may increase interest payments amid credit market volatility[106]. Labor and Workforce Management - The company employs 1,639 salaried employees and 4,773 hourly employees as of September 30, 2025, with hourly personnel averaging 4,184 employees throughout the fiscal year[49]. - Labor shortages and increased turnover rates could lead to higher costs, including increased overtime and wage rates, negatively impacting project completion and operational efficiency[82]. - The tightening labor market may hinder the company's ability to attract and retain qualified personnel, affecting project execution and strategic plans[79]. Regulatory and Compliance Risks - Government contracts are subject to various regulations, and violations could materially affect the company's financial condition and operations[60]. - The company has incurred costs related to environmental compliance and may face increased expenditures due to new regulations[45]. - The company must navigate potential legal and regulatory risks, including compliance with environmental laws, which could lead to increased operational costs[96]. Market Conditions and Economic Factors - The company faces potential risks from economic slowdowns, particularly in the Sunbelt region, which could reduce demand for infrastructure projects[54]. - Federal highway funding is subject to uncertainties, including budget deficits and government shutdowns, which could adversely affect the company's operations[57]. - Inflation and supply chain disruptions have increased costs, which may not be fully recoverable, impacting profit margins[65]. Cybersecurity and Technology Risks - Cybersecurity risks pose a threat to information technology systems, which could negatively affect operations and financial condition[75]. - The company has implemented a comprehensive cybersecurity program, including regular scans and vulnerability assessments, to manage material risks from cybersecurity threats[130]. - The board of directors oversees strategic risks and receives periodic reports on cybersecurity risks from management and third-party providers[135]. Shareholder and Stock Information - As of November 20, 2025, the company had 47,947,509 shares of Class A common stock and 8,579,118 shares of Class B common stock, with Class B shares representing approximately 64.1% of the total voting power[117]. - The SunTx Group controls approximately 61.2% of the combined voting power of the company's outstanding common stock, allowing them to elect all board members and control corporate policies[119]. - The company does not intend to pay cash dividends on Class A common stock in the foreseeable future, meaning returns will rely solely on stock price appreciation[127].