Construction Partners Q2 Earnings Call Highlights

Key Points

• Construction Partners posted a strong fiscal Q2, with revenue up 35% year over year to $769.2 million and adjusted EBITDA also rising 35%, helped by favorable weather, strong demand, and acquisition contributions.
• The company raised full-year fiscal 2026 guidance, now expecting revenue of $3.59 billion to $3.65 billion and adjusted EBITDA of $552 million to $564 million, while still targeting about 7% to 8% organic growth.
• Backlog and demand remain robust, with $3.14 billion in backlog and management saying 80% to 85% of the next 12 months of contract revenue is already covered; the company also continues to expand through acquisitions, including Four Star Paving.

Construction Partners NASDAQ: ROAD reported higher fiscal second-quarter revenue, adjusted EBITDA and backlog, and management raised its fiscal 2026 outlook, citing favorable weather, strong public and private demand, and contributions from acquisitions.

On the company’s earnings call, CEO Jule Smith said the quarter exceeded profitability expectations and helped support a higher full-year forecast. “In Q2, we grew revenue, adjusted EBITDA, and backlog,” Smith said. He added that favorable weather allowed crews to advance work efficiently because “when we have dry weather, we can work more days and consequently increase our volumes.”

CFO Greg Hoffman said revenue for the second quarter of fiscal 2026 was $769.2 million, up 35% from the prior year. Of that growth, 11% was organic and 24% came from acquisitions. Gross profit rose about 39% to $98.9 million, while gross profit margin increased to 12.9% from 12.5% a year earlier.

Net income was $9.2 million, and adjusted net income was $10.4 million. Adjusted net income per diluted share was $0.18. Adjusted EBITDA was $93.3 million, up 35% from last year, with an adjusted EBITDA margin of 12.1%.

Company Raises Fiscal 2026 Guidance

Hoffman said Construction Partners is raising its fiscal 2026 outlook to reflect second-quarter outperformance and the expected contribution from Four Star Paving, the company’s latest acquisition.

• Revenue: $3.59 billion to $3.65 billion
• Net income: $159 million to $162 million
• Adjusted net income: $170.4 million to $174.2 million
• Adjusted EBITDA: $552 million to $564 million
• Adjusted EBITDA margin: 15.38% to 15.45%

Hoffman said the company still expects organic growth of about 7% to 8% for fiscal 2026. In response to an analyst question, he said the company expects about $225 million to $235 million of acquisitive revenue over the remaining six months of the fiscal year.

Construction Partners reported project backlog of $3.14 billion as of March 31, 2026. Hoffman said about 80% to 85% of the next 12 months of contract revenue is covered by backlog.

Backlog Reflects Public and Private Demand

Smith said demand remains strong across the company’s Sunbelt footprint for both public infrastructure work and commercial development. He highlighted several commercial projects, including eight data center projects in Texas totaling about $100 million of contract value, 12 warehouse projects in the Nashville market totaling about $28 million, and a data center project in northeast Alabama valued at about $4 million.

Smith said those examples are part of roughly 1,000 commercial sector projects the company expects to participate in this year across eight states and more than 110 local markets. He said commercial backlog has become more weighted toward manufacturing, corporate centers and warehouses compared with several years ago, reflecting what he described as a reindustrialization trend in the Sunbelt.

On the public side, Smith cited projects tied to the FIFA World Cup in Houston, road widening and improvement work in North Carolina related to the U.S. Open’s return to Pinehurst in 2029, and a taxiway reconstruction project at Eglin Air Force Base in the Florida Panhandle.

Smith also said federal and state governments continue to invest in infrastructure to support growing Sunbelt economies. Regarding federal surface transportation funding, he said management is engaged in discussions with members of Congress about reauthorization and noted that both parties and both chambers were working toward a bill in the $500 billion to $600 billion range. In response to an analyst question, Smith said that level of funding was not assumed in the company’s Road 2030 plan, which instead assumes normal mid-single-digit annual increases in federal infrastructure investment.

Acquisition Activity Continues

Smith said the company completed its acquisition of Four Star Paving in April, describing it as the “premier commercial paving contractor in the Nashville metro area.” He said Four Star is Construction Partners’ fourth acquisition in fiscal 2026 and its 17th since the beginning of fiscal 2024.

In response to an analyst question, Smith said Four Star has about 150 employees and fits with the company’s existing Tennessee platform, PRI. He said PRI performs significant public and pavement preservation work, while Four Star adds commercial paving relationships across a 70- to 80-mile radius around Nashville.

Executive Chairman Ned Fleming said the company continues to see acquisition opportunities because the industry remains fragmented and many family-owned businesses are undergoing generational transitions. He said Construction Partners sees bolt-on opportunities in states it has recently entered, as well as possible new platform opportunities in new states, though he did not say the company would complete any new platform acquisitions in the near term.

Smith also pointed to organic growth initiatives, including a new greenfield facility in Gastonia, North Carolina, that is expected to begin operations this quarter. He said the facility will service a $60 million contract to expand and widen I-85 through Gaston County near Charlotte.

Energy Costs and Balance Sheet

Smith said energy volatility had a limited impact on the second quarter because more than 80% of total revenue is protected by a liquid asphalt index, the company physically hedges diesel fuel, and its vertically integrated liquid asphalt terminals provide an oil price hedging mechanism. He said the company now sources more than 50% of its liquid asphalt needs internally and aims to increase that percentage over time.

Hoffman said Construction Partners had $77 million of cash and cash equivalents and $150 million available under its credit facility as of March 31, net of outstanding letters of credit. The company’s debt-to-trailing-12-month EBITDA ratio was 3.23x at quarter-end. Hoffman said management remains on pace to reduce the leverage ratio to about 2.5x.

Cash flow from operations was $65.2 million in the second quarter, compared with $55.6 million in the prior-year period. Hoffman said the company expects to convert 75% to 85% of EBITDA into operating cash flow in fiscal 2026 and anticipates that third-quarter cash flow will fund the Four Star Paving acquisition without additional long-term debt.

Smith said the company is entering its busy work season with a record backlog and reiterated confidence in the company’s Road 2030 plan, which targets doubling the size of the company, generating $1 billion of annual EBITDA and expanding EBITDA margins to about 17%.

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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