Construction Partners, Inc. (CPI), a leading infrastructure and road construction company, reported a record fiscal year 2024, showcasing significant financial growth and strategic expansion. The company's revenue saw a substantial increase, driven by both organic growth and acquisitions, with net income and adjusted EBITDA also experiencing notable rises. The acquisition of Lone Star Paving was highlighted as a transformative step for CPI, potentially accelerating its long-term goals. With a strong market outlook and a solid backlog, the company provided optimistic guidance for fiscal 2025.
Key Takeaways
- Construction Partners' revenue grew by 17% to $1.82 billion, with organic growth and acquisitions contributing 7% and 10%, respectively.
- Net income increased by 41% to $68.9 million, and adjusted EBITDA rose by 28% to $220.6 million.
- The EBITDA margin expanded to 12.1%, reflecting operational efficiency.
- CPI acquired Lone Star Paving, boosting its presence in Texas and enhancing its EBITDA margins.
- The company completed 8 acquisitions in fiscal 2024, expanding its market share in Sunbelt states.
- CPI provided fiscal 2025 guidance with anticipated revenue between $2.48 billion and $2.58 billion, and adjusted EBITDA between $347 million and $377 million.
- The company plans to invest $130-$140 million in capital expenditures focused on maintenance and growth.
Company Outlook
- CPI expects continued robust demand in commercial and public markets, supported by the Infrastructure Investment and Jobs Act (IIJA).
- A record backlog of $1.96 billion indicates 16 consecutive quarters of growth.
- CPI's fiscal 2025 guidance projects increased revenue and EBITDA margin, with a focus on strategic acquisitions and organic growth.
Bearish Highlights
- No bearish highlights were provided in the earnings call summary.
Bullish Highlights
- CPI's strategic acquisition of Lone Star Paving is expected to contribute significantly to EBITDA margins and accelerate Roadmap 2027 goals.
- The ongoing impact of the IIJA suggests a favorable environment for infrastructure investment.
Misses
- There were no reported misses in the earnings call summary.
Q&A Highlights
- Greg Hoffman, CFO, described the acquisition of Lone Star Paving as transformational for CPI.
- Ned Fleming, Executive Chairman, expressed confidence in the business's ability to continue driving margin growth.
- Jule Smith, CEO, conveyed enthusiasm for integrating Lone Star Paving into CPI's family of companies.
In the face of a dynamic infrastructure market, Construction Partners, Inc. stands poised for continued growth, leveraging strategic acquisitions and favorable market conditions to drive its financial and operational success. With a clear focus on maintaining its core values and seizing market opportunities, particularly in Texas, CPI's outlook for fiscal 2025 is notably optimistic.
Full transcript - Construction Partners Inc (NASDAQ:ROAD) Q4 2024:
Conference Operator: Greetings, and welcome to the Construction Partners 4th Quarter and Year End Fiscal 20 24 Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Black with Investor Relations.
Thank you, sir. You may begin.
Rick Black, Investor Relations, Construction Partners: Thank you, operator, and good morning, everyone. We appreciate you joining us for the Construction Partners conference call to review Q4 year end results for fiscal 2024. This call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the Investor Relations section of constructionpartners.net. Information recorded on this call speaks only as of today, November 21, 2024. Please be advised that any time sensitive information may no longer be accurate as of the date of any replay listening or transcript reading.
I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance, are forward looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. We will be making forward looking statements as part of today's call that by their nature are uncertain and outside of the company's control. Actual results may differ materially. Please refer to our earnings press release for our disclosure on forward looking statements. These factors as well as other risks and uncertainties, are described in detail in the company's filings with the Securities and Exchange Commission.
Management will also refer to non GAAP measures, including the adjusted EBITDA. Reconciliations to the nearest GAAP measures can be found at the end of our earnings release. Construction Partners assumes no obligation to publicly update or revise any forward looking statements. Now, I would like to turn the call over to Construction Partners' CEO, Jule Smith.
Jule Smith, CEO, Construction Partners: Jule? Thank you, Rick, and good morning, everyone. We appreciate you joining us on the call today. With me this morning is Greg Hoffman, our Chief Financial Officer and Ned Fleming, our Executive Chairman. We are pleased to report a strong finish to our fiscal year 2024, a record year with revenue growth of 17%, net income growth of 41%, adjusted EBITDA growth of 28% and an EBITDA margin percentage of 12.1% compared to 11% last year.
In addition, the CPI business model of expert local management teams generate recurring revenue for repeat customers continued to generate strong cash flow and we ended the year with cash flow from operations of $209,000,000 Finally, we completed 8 acquisitions in fiscal 2024 that expanded our geographic footprint into new growth markets and enhanced relative market share across our Sunbelt states. I want to congratulate the now more than 5,800 employees at CPI for their hard work and professionalism delivering a record year. As a family of companies, we are striving to live out our core values of family and respect, which creates an incredible place to work together each day. In addition, our growth strategy delivers on our core value of opportunity by providing numerous pathways for teammates to advance their careers and build better lives. Our final core value is excellence, a daily challenge to do ordinary things extraordinarily well, while also remaining vigilant to watch out for each other and to stay safe each and every day at our worksites.
Fiscal year 2025 has started off strong as earlier this month, we acquired Lone Star Paving, our new platform company in Texas. CPI has long evaluated opportunities to enter the state of Texas with its dynamic growth and well funded infrastructure program. The key for us was to find a great platform company in strong markets led by a talented management team and great people that culturally fit into our family of companies. Lone Star Paving certainly checks all of those boxes as Jack Wheeler has built not only one of the most dominant construction companies in Central Texas, but also an incredibly cohesive team of talented professionals that are obsessive in their dedication to taking care of both their customers and their employees. Our due diligence process over the last 6 months only confirmed the professionalism of the Lonestar team and allowed us to close the transaction earlier than expected and to include Lonestar into 11 months of our fiscal year 2025 guidance.
And this is impactful as Lonestar's 20% plus EBITDA margins have accelerated CPI's progress toward our roadmap 2027 goals by 2 years. Essentially, Lonestar is a proof of concept of the power and potential of the 3 margin expansion levers in our roadmap 2027 goals: building better markets, vertical integration and scale. We will continue to execute on this bottom line expansion strategy throughout the Sunbelt in both current and new markets as we grow in fiscal 2025 and beyond. For CPI moving forward, smart strategic acquisitions will continue to occur as we enter new areas, expand market share and add capacity services and talented new team members. Importantly, acquisitions made in 1 year fuel future organic growth in subsequent years, which is the 2nd part of our growth strategy.
Currently, we continue to see a very active environment for acquisition opportunities as our industry is going through a generational transition. We continue to build relationships with potential sellers both inside and outside of our current states, yet we remain patient and focused on finding the best strategic acquisitions that will bring operational excellence and add to the great culture of the CPI family companies. Turning now to an overview of the construction demand and funding environment across our Sunbelt states. Today, we are reporting a record backlog of $1,960,000,000 which represents 16 consecutive quarters of backlog growth. While we continue to remind stakeholders that CPI's historical norm is for backlog to shrink during the busy summer work season, the fact that backlog grew in the 4th quarter is evidence of a continued robust demand environment in both the commercial and public markets.
And regarding the IIJA, while the bill passed 4 years ago, the funding began flowing to the states 3 years ago and that led to construction project work lettings over the past 2 years. In many ways, we are still in the early stages of seeing the impact of this generational investment in infrastructure. Of the bill's $348,000,000,000 dedicated to highway funding, through August 2024 less than 50% has been committed to projects and only 27% of the funds have been reimbursed to the states for actual construction in place. It is important to note that while the IIJA was highlighted as an important down payment on our nation finally addressing its declining infrastructure, at the core of this program was the 5 year reauthorization of the Federal Transportation Highway Program. Previous authorizations were known by names such as SAFETY LOU and the FAST Act and have always been the primary federal funding mechanism with the states for road repair, maintenance and expansion projects.
The IIJA represented a significant increase in annual highway funding levels with a 40% increase from 2021 to 2022 and now increasing annually by an incremental amount as is normal for this Federal Highway program. It has also been the historical norm that after 5 years, the current funding level serves to set the new baseline for the next 5 year authorization. We fully expect this reauthorization at growing funding levels to happen in 2026 as the demand for repairing and maintaining our nation and state's infrastructure will continue to be an acute need and a high bipartisan priority. In addition, several states we operate in such as Tennessee, South Carolina, North Carolina and Florida have also recently passed additional supplemental infrastructure funding plans on top of their existing funding mechanisms to try and keep pace with their rapid growth and the needs of their states. Throughout our Sunbelt states, markets are growing and our states remain focused on maintaining and improving the quality of their roads as well as increasing capacity to handle the significant migration to the Sunbelt.
As we begin our new fiscal year, our team is focused on executing on this record backlog and evaluating both organic and acquisitive growth opportunities throughout the Sunbelt. We also remain focused on the long term challenges of attracting and retaining the best workforce and providing them a distinct family of companies culture, so we can deliver on the opportunities ahead of us to grow our business and create outstanding shareholder value. I'd now like to turn the call over to Greg.
Greg Hoffman, Chief Financial Officer, Construction Partners: Thank you, Jewel, and good morning, everyone. I'll begin with a review of our key performance metrics for the fiscal year before discussing our outlook for fiscal 2025. Revenue was $1,820,000,000 an increase of 17% compared to last year. The mix of our total revenue growth for the year was 7% organic revenue and 10% from recent acquisitions. Gross profit in fiscal 2024 was $258,300,000 an increase of approximately 32% compared to last year.
As a percentage of our total revenues, gross profit was 14.2% compared to 12.6% last year. General and administrative expenses as a percentage of total revenue in fiscal 2024 increased slightly to 8.3% compared to 8.1% last year. This increase included transaction expenses related to our acquisition of Lonestar Paving. Net income was $68,900,000 an increase of 41% compared to last year. Adjusted EBITDA was $220,600,000 an increase of 28% compared to last year.
Adjusted EBITDA margin for the year was 12.1% compared to 11% in fiscal 2023. You can find GAAP to non GAAP reconciliations of net income and adjusted EBITDA financial measures at the end of today's earnings release. In addition, as Jule mentioned, we were reporting a record project backlog of $1,960,000,000 at September 30, 2024. Turning now to the balance sheet. We had $74,700,000 of cash and cash equivalents and $265,500,000 available under our credit facility at fiscal year end, net of a reduction for outstanding letters of credit.
In connection with the Lone Star acquisition on November 1, we entered into an agreement for an $850,000,000 Term Loan B credit facility. Subsequent to year end, the proceeds of the senior secured notes were used to finance the acquisition and related expenses and to pay down the balance of our revolving credit facility. This additional availability on our credit facility and cash generation will continue to provide the flexibility and capacity to allow for potential near term acquisitions and high value growth opportunities. As a reminder, the company has an interest rate swap agreement that fixes SOFR at 1.85 percent, which results in an interest rate on $300,000,000 of term debt of 3.1%. The maturity date of the swap is June 30, 2027.
As of the end of the quarter, our debt to trailing 12 months EBITDA ratio was 1.81. We expect pro form a leverage ratio for the transaction will result in a debt to trailing 12 months EBITDA ratio of 3.3 times. Lonestar clearly represents a transformational acquisition for CPI and we expect over the next 4 to 6 quarters to bring that ratio down in line with our long term sustainable target of 1 to 2.5 times. Cash provided by operating activities was $209,000,000
: compared to
Greg Hoffman, Chief Financial Officer, Construction Partners: $157,000,000 in fiscal 2023. Capital expenditures for fiscal 2024 were approximately $88,000,000 We expect total capital expenditures for fiscal 2025 to be in the range of $130,000,000 to $140,000,000 This includes maintenance CapEx of approximately 3.25 percent of revenue with the remaining amount invested in high return growth initiatives. Turning now to our outlook. As we reported earlier this month, here are the ranges for our fiscal year 2025. Revenue in the range of $2,480,000,000 to $2,580,000,000 net income in the range of $97,000,000 to $113,000,000 adjusted EBITDA in the range of 3.47 dollars to $377,000,000 and adjusted EBITDA margin in the range of 14% to 14.6%.
And with that, we will open the call to questions. Operator?
Conference Operator: Thank you. We will now be conducting a question and answer session. Thank you. Our first question comes from the line of Kathryn Thompson with Thompson Research Group. Please proceed with your question.
Kathryn Thompson, Analyst, Thompson Research Group: Hi. Thank you for taking my questions today. Good morning. You have for your guidance for fiscal 2025, you have very solid EBITDA margin growth between 2024 2025. Could you bridge the gap of how much of the margin progression is from Lonestar versus bogeys that are set just for organic growth with EBITDA margin?
Jule Smith, CEO, Construction Partners: Hey, Catherine. Good morning. We Without Lone Star, we still feel like that and we know just from doing our budgeting for the new fiscal year, we would have continued to make the same strides we expected toward our roadmap 2027 goals of 50 to 60 basis points of expansion even after growing 110 basis points this year. So we feel like our backlog and our vertical integration and scale were all going to create that. And then when you add Lonestar in there, clearly it moves us 2 years down the road of that.
But even without Lone Star, our business was continuing to make great progress toward those goals.
Kathryn Thompson, Analyst, Thompson Research Group: Okay. So would you say that maybe half of the expansion could just be internal versus Lone Star? Just trying to get some type of thumbnail of guesstimation.
Jule Smith, CEO, Construction Partners: I think when you say expansion of the EBITDA margins from 2024 to 2025, is that what you're asking, Catherine?
Kathryn Thompson, Analyst, Thompson Research Group: Yes, that's correct.
Jule Smith, CEO, Construction Partners: Yes. I think Lonestar clearly as a transformational acquisition, people know what those margins are and can add. But when you look at what our business was doing, I think those three levers we continue to work just with our backlog margins, building better markets, our terminals, both in Panama City and in and now in Hanceville, North Alabama, we're continuing to just add incrementally to the bottom line. And then we grew 17 percent. We're going to grow another 14% this year even before adding potential new acquisitions.
So we just continue to build scale. I would like just Catherine, just to give you a sense of the progress of the business, I'd love to get Ned just to give you a sense of from a big picture standpoint what Lone Star means and just where the business is. Ned?
Ned Fleming, Executive Chairman, Construction Partners: Thank you, Jewel. Hello, Catherine. How are you today?
Kathryn Thompson, Analyst, Thompson Research Group: Doing great. Thank you.
Ned Fleming, Executive Chairman, Construction Partners: I think a couple of things. On your margin question, we've been driving margins up for a long time. It's part of a core philosophy we have as we consolidate the markets. Well, I don't think we've put percentages to it, so to speak. Obviously, Lonestar is an indication of where a company like that is fully vertically integrated in that business can be.
But we anticipate the current business to continue to drive margins up also. As far as the acquisition of Lonestar, I think Jule put it very well in his opening remarks. It's a place that Charles and I've been looking at for years. And there were 3 big key things that we looked at. And 1 was the people and the culture of the business.
And obviously, this business checks that box. We also needed it to be big enough to really compete in Texas. Texas as a state is one of the largest, if not the largest infrastructure spending in the country. And it needed to have operational excellence in that piece. And Lonestar does that beautifully and being vertically integrated is a real benefit to that.
And we wanted to be in great markets. And in Texas, we're in the best markets. And so I think bringing that in is something that we've looked at for a long time. This business checks all the boxes. I think the most pleasing thing for us as a Board was the great cultural fit and the fact that this is an acquisition that not only fits well, but the people are going to continue to grow Texas.
So that platform you will see grow. And as a result, we'll learn things from them and it will help us improve margins and they'll continue to drive their margins up. So we're really excited about it. But it's a old fashioned thing to say, but the key to it all was the people that they had and how dynamic those people are. And there is a lot of growth opportunities as a result of that organization that we will have in Texas.
Kathryn Thompson, Analyst, Thompson Research Group: Great. Thank you very much. And just one follow on question. Any color or your thoughts on the perspective of TxDOT and visibility for revenues and top line growth, not only for LUNDSTONE, but for LUNSRUP, but other opportunities that may be in Texas. Just so in other words, just a little bit more color on TxDOT and what you're seeing in terms of their budgeting?
Thank you.
Jule Smith, CEO, Construction Partners: Yes. Catherine, so Texas has a lot of growth and they also from the IJA, as you know, those funds flow by formula to the states and so Texas gets an outsized portion of the federal funding. But then what Texas has done that's just really incredible is create supplemental programs of oil and gas and other funding mechanisms to really just supercharge their infrastructure program. And so I think as Ned said, you're going to see just as what happens normally when a platform company joins CPI, you're going to see lots of opportunities for organic growth and you're going to see them look for bolt on acquisitions and to grow market share and to move into new markets in Texas. And so for that to happen, as Ned said, it's about the people.
And when you take the team Jack Wheeler built with Dean Lundquist and Greg Morrissey and Ben Liggett and Steve Spin and just their division presidents in their markets, I mean, they're just incredible construction people. And that's what you need to be able to grow in a state like Texas. And so we're very excited to have them in the family of companies.
Ned Fleming, Executive Chairman, Construction Partners: And Catherine, if I can add 2 things. I think number 1 is, this is a management team with a lot of young people and a lot of bench strength. That is one of the things that having that that is
Kathryn Thompson, Analyst, Thompson Research Group: one of the things that having
Ned Fleming, Executive Chairman, Construction Partners: that capacity allows us to be able to grow and to take on other businesses acquisitively as well as greenfields. I think number 2 is that the key to TxDOT and one of the reasons they have so much money is they have different buckets. So for example, they actually take money from the oil and gas business and it goes into infrastructure and transportation. And really no other state in the country that I'm aware of does that. So that's what's one of the dynamic things about Texas is they are not dependent on Washington to do infrastructure and they have different sources of revenue for us to be able to grow and build.
Kathryn Thompson, Analyst, Thompson Research Group: Great. Thanks so much and best of luck.
Jule Smith, CEO, Construction Partners: Thanks, Catherine.
Conference Operator: Our next question comes from the line of Adam Thalhimer with Thompson Davis. Please proceed with your question.
Greg Hoffman, Chief Financial Officer, Construction Partners: Hey, good morning, guys. Nice quarter.
Jule Smith, CEO, Construction Partners: Thanks, Adam. Good morning.
: Given the fact you closed the acquisition a little sooner, I hate to ask, but can you give us any EBITDA parameters for Q1, just so we're all on the same page?
Jule Smith, CEO, Construction Partners: Adam, I'm going to turn it over to our esteemed Chief Financial Officer, Greg Hoffman to give you that.
: I'll take whatever you want to give us, Greg.
Greg Hoffman, Chief Financial Officer, Construction Partners: Understood. So, yes, we did close LoRa earlier. Now when we put out our first guidance, it only included 9 months of EBITDA. Now we are including 11 months. So you will see too much more from Lone Star.
But I think generally, Adam, what we have said is that 30% EBITDA in the first half of the year, 70% in the second half of the year is pretty much going to fall right in line. And I think our guidance would reflect that. So from a net income standpoint, we do have the facility that we've talked about, dollars 850,000,000 was the facility, essentially only $650,000,000 of that will be reflected in interest expense because we used the difference to pay down the revolver. So that picks up right starting on elevenone as well. So you're going to see certainly 11 months of EBITDA, but also 11 months of interest expense from that facility flowing through our results.
Jule Smith, CEO, Construction Partners: Adam, I would just say, just to add to that as we look, obviously Central Texas, we'll be getting to know that this year. But when you look at from a seasonality standpoint, it looks a lot like Alabama and South Carolina and Georgia. So we just we feel like from a percentage standpoint per month and per quarter, our modeling just we're using the same sort of cadence that our legacy business has.
: And then cash flow was really strong in Q4, stronger than we expected. Do you have any thoughts on cash from ops in 2025? And then also curious if you have any thoughts on proceeds from the sale of assets in 2025?
Rick Black, Investor Relations, Construction Partners: Yes. So
Greg Hoffman, Chief Financial Officer, Construction Partners: we typically talk about converting EBITDA to cash flow from operations in the 85% range. So I would think that would be 85% to 90%. So that would be probably what we would expect in 2025. Yes, we did get a little bit more than that in 2024 just because I think it's some of it's just timing issues. But I think on average you're going to see that's how we flow out year over year.
I'm sorry, what was the other question Adam?
: Asset sales.
Greg Hoffman, Chief Financial Officer, Construction Partners: Yes, yes, so disposals probably continue to trend down. Again, as we've talked about before as the supply chains have healed and we were getting equipment more timely compared to what we've seen in the past couple of years. I think the disposal numbers will come down as well.
Kathryn Thompson, Analyst, Thompson Research Group: Okay, perfect. Thanks guys.
Jule Smith, CEO, Construction Partners: Thanks Adam.
Conference Operator: Our next question comes from the line of John Ramirez with D. A. Davidson. Please proceed with your question.
Greg Hoffman, Chief Financial Officer, Construction Partners: Hi. Thank you and good morning.
Rick Black, Investor Relations, Construction Partners: Hey John.
Greg Hoffman, Chief Financial Officer, Construction Partners: Good morning. Good morning. I just wanted to just clarify, it's from the backlog, is how much of it is from Lone Star?
Jule Smith, CEO, Construction Partners: Yes, John. Just to clarify, Yes, John, just to clarify, the
Kathryn Thompson, Analyst, Thompson Research Group: backlog that we reported today of
Jule Smith, CEO, Construction Partners: $1,960,000,000 was as of September 30. So Lonestar is not included in that. Since they joined us on November 1, we'll include their backlog at the end of this current quarter.
Greg Hoffman, Chief Financial Officer, Construction Partners: Got it. Understood. Thank you so much. Yes, that's it for me. I'll jump back in.
Okay, John. Thank you.
Conference Operator: Thank you. We have reached the end of the question and answer session. I would now like to turn the floor back over to management for closing comments.
Jule Smith, CEO, Construction Partners: Thanks everyone for joining us today. We hope you have a wonderful Thanksgiving with your families and we look forward to talking soon.
Conference Operator: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time.
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