Construction Partners Q1 Earnings Call Highlights

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]