Construction Partners Q1 Earnings Call Highlights

Key Points

• Construction Partners delivered a strong Q1 with $809.5M revenue (up 44% YoY), $112.2M adjusted EBITDA (up 63%) and a record first-quarter adjusted EBITDA margin of 13.9%, closing the quarter with a $3.09B backlog that covers roughly 80–85% of the next 12 months' contract revenue.
• The company raised its fiscal 2026 outlook, now targeting $3.48B–$3.56B in revenue and $534M–$550M in adjusted EBITDA with an expected margin of about 15.34%–15.45%.
• M&A remains central to growth—recent deals include the acquisition of GMJ Paving Company (adding the twelfth Houston hot-mix plant); management says GMJ will be funded from operating cash, as the company finished the quarter with $104M cash, $163M available on its credit facility, and leverage of 3.18x with a goal to reduce to ~2.5x by late 2026.

Construction Partners NASDAQ: ROAD reported a strong start to fiscal 2026 and raised its full-year outlook after first-quarter results exceeded management’s expectations, driven by favorable weather, ongoing demand across its Sun Belt footprint, and contributions from recent acquisitions.

First-quarter results and backlog

CEO Jule Smith said the company delivered a “strong start” to the year, pointing to a 44% year-over-year increase in first-quarter revenue and a 63% jump in adjusted EBITDA. Adjusted EBITDA margin reached 13.9%, which Smith said was the highest first-quarter margin in company history.

CFO Greg Hoffman reported first-quarter revenue of $809.5 million, up 44% from the prior year. Organic growth was 3.5%, while acquisitive growth contributed 40.6%. Gross profit rose about 58% to $121.5 million, and gross profit margin improved to 15% from 13.6% a year earlier. General and administrative expenses were 7.7% of revenue, down from 7.9%.

Net income was $17.2 million, while adjusted net income was $26.4 million. Adjusted earnings per diluted share were $0.47. Adjusted EBITDA totaled $112.2 million, and adjusted EBITDA margin rose to 13.9% from 12.2%.

The company ended the quarter with a project backlog of $3.09 billion as of December 31, 2025. Hoffman said approximately 80% to 85% of the next 12 months’ contract revenue is covered by backlog.

Demand trends: commercial projects and public funding

Management described steady commercial demand supported by population migration to the Sun Belt, reshoring of manufacturing and supply chains, and continued build-out of AI-related infrastructure. Smith cited examples of projects the company is bidding or executing, including work tied to distribution facilities, manufacturing, and data-center-related infrastructure.

On the public side, Smith said contract bidding remained strong across the company’s eight-state footprint. The company expects total federal, state, and local contract awards in fiscal 2026 to increase approximately 10% to 15% over fiscal 2025, driven largely by recurring maintenance work for state DOTs, cities, and counties, which he said represents a majority of the company’s work.

Smith also discussed the federal highway program reauthorization process. He said both houses of Congress were working with Transportation Secretary Duffy on completing a five-year reauthorization by September 30, and that the “size and shape” of the bill is expected to become clearer in the spring. Smith added that based on what the company has heard so far, it expects a significant increase in annual funding to states through per-capita formula allocations.

M&A activity and integration progress

Construction Partners continues to emphasize acquisitions alongside organic expansion. Smith said the company began fiscal 2026 with two “large and strategically important” acquisitions completed in October—one in Houston and one in Daytona Beach, Florida—and that both were fully integrated and operating well.

Earlier in the week of the call, the company announced another acquisition in Houston: GMJ Paving Company, an asphalt paving contractor focused on public infrastructure projects across the Greater Houston metro area. Smith said GMJ’s hot mix asphalt plant in Baytown expands Construction Partners’ coverage on the east side of Houston and complements the company’s existing assets, including its liquid asphalt terminal at the Port of Houston.

Smith said the GMJ deal represents the company’s twelfth hot mix plant in the Houston market. The company entered Houston in August with the acquisition of Durwood Greene Construction and expanded in October through the acquisition of Vulcan’s asphalt construction assets in Houston.

In response to analyst questions, management described an active acquisition environment. Executive Chairman Ned Fleming said acquisition opportunities are “as robust as it’s been in 25 years,” citing generational transfer dynamics and opportunities created by prior platform acquisitions. Smith added the company continues to evaluate many opportunities but passes on deals that do not fit strategically or culturally.

Smith also described integration as a “core competency” developed over two decades, noting the company has completed seven acquisitions since the Lone Star acquisition last fall. He said integration efforts in Houston have gone well, including Durwood Greene’s integration with Lone Star, the subsequent integration of Vulcan assets, and what he called a successful “day one” for GMJ.

Cash flow, leverage, and updated guidance

Hoffman said Construction Partners ended the quarter with $104 million in cash and cash equivalents and $163 million available under its credit facility (net of letters of credit). Leverage, measured as debt to trailing twelve-month EBITDA, was 3.18x at quarter-end.

Management reiterated its goal of reducing leverage to approximately 2.5x by late 2026. Hoffman said the company anticipates funding the GMJ acquisition with cash flow “without the need for additional long-term debt,” reflecting the company’s operating cash generation.

Cash flow from operations was $82.6 million in the quarter, up from $40.7 million in the prior-year period. For fiscal 2026, the company expects to convert 75% to 85% of EBITDA into operating cash flow.

The company raised all ranges in its fiscal 2026 outlook, calling for:

• Revenue: $3.48 billion to $3.56 billion
• Net income: $154 million to $158 million
• Adjusted net income: $163.5 million to $168.7 million
• Adjusted EBITDA: $534 million to $550 million
• Adjusted EBITDA margin: 15.34% to 15.45%

Hoffman said the revenue outlook still assumes organic growth of approximately 7% to 8%. He also reiterated typical seasonality, with the first half expected to generate about 42% of annual revenue and 34% of adjusted EBITDA, while the second half contributes roughly 58% of revenue and 66% of adjusted EBITDA.

On organic growth, management addressed why first-quarter organic growth of 3.5% was below the full-year expectation. Smith said about $19 million of the difference related to three projects in North Carolina that started late because the customer was not ready, and a shift of equipment away from a market with “irrational competition” to adjacent markets—work that, due to the location, was recorded as acquisitive revenue. Hoffman later said the $19 million impact was “about half and half” between those factors.

About Construction Partners NASDAQ: ROAD

Construction Partners, Inc NASDAQ: ROAD is a specialty contractor and infrastructure solutions provider focused on road building, paving, site development and aggregate production. The company delivers a comprehensive suite of civil construction services, including roadway paving and milling, site grading and preparation, stormwater and utility installation, and full-scale asphalt plant operations. By integrating materials production with contracting capabilities, the firm aims to streamline project delivery and maintain quality control across its contracting and materials businesses.

At the heart of Construction Partners' operations are its network of asphalt plants, quarries and aggregate production facilities.

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