Construction Partners Q3 Earnings Call Highlights

Key Points

• Strong Q3 performance: Construction Partners reported 28.2% revenue growth to $999.4 million, with adjusted EBITDA up 24% to $163 million. Growth was driven by 8.9% organic expansion, acquisitions and resilient execution despite wet weather and higher energy costs.
• Full-year outlook raised: Management increased fiscal 2026 guidance to $3.64 billion–$3.68 billion in revenue and $559 million–$569 million in adjusted EBITDA. Record backlog reached $3.36 billion, covering roughly 80%–85% of expected revenue over the next 12 months.
• Growth pipeline remains favorable: Management cited constructive infrastructure funding prospects, expanding data-center opportunities in existing markets and the Ellsworth acquisition. The company also maintained its expectation for strong fiscal 2027 organic growth while targeting leverage reduction to approximately 2.5 times EBITDA.

Construction Partners NASDAQ: ROAD reported third-quarter fiscal 2026 revenue growth of 28.2% and raised its full-year outlook, citing organic expansion, acquisitions, record backlog and continued demand for public infrastructure and commercial projects.

Revenue for the quarter ended June 30 was $999.4 million, up from the prior year, including 8.9% organic growth and 19.3% acquisitive growth, Chief Financial Officer Greg Hoffman said. Gross profit increased about 28% to $168.4 million, while gross margin was 16.8%, compared with 16.9% a year earlier. General and administrative expenses declined as a percentage of revenue to 6.3% from 6.5%.

Net income was $59.6 million and adjusted net income was $60.6 million, or $1.08 per diluted share. Adjusted EBITDA rose 24% to $163 million, producing an adjusted EBITDA margin of 16.3%.

CEO Jule Smith said the company maintained strong execution despite energy-cost inflation and unusually wet weather across many markets during May. Construction Partners’ cost pass-through model and local operating teams helped offset those pressures, he said.

Guidance Raised as Backlog Reaches Record

Construction Partners raised its fiscal 2026 outlook to include third-quarter outperformance and the contribution from its acquisition of Ellsworth Construction. The company now expects:

• Revenue of $3.64 billion to $3.68 billion;
• Net income of $165 million to $168 million;
• Adjusted net income of $177.6 million to $181.4 million;
• Adjusted EBITDA of $559 million to $569 million; and
• Adjusted EBITDA margin of 15.35% to 15.46%.

The company ended the quarter with a record project backlog of $3.36 billion and said backlog covers approximately 80% to 85% of expected contract revenue over the next 12 months.

Smith said the updated outlook reflects more than 30% growth in both revenue and bottom-line margins for the year. He also said Construction Partners expects strong organic growth in fiscal 2027, which begins Oct. 1, and has about $140 million of acquisition-related revenue expected to carry into that year.

In response to an analyst question, Hoffman said higher liquid asphalt costs contributed roughly $8 million to $10 million of revenue during the third quarter. The impact was distributed across both acquired and organic operations. Smith said acquisition-related growth at the midpoint of full-year guidance was expected to total roughly $780 million to $790 million.

Infrastructure Funding Outlook Remains Constructive

Management addressed investor questions surrounding the federal surface transportation funding reauthorization process. Smith said the company expects Congress ultimately to approve a new multiyear transportation bill with higher funding levels, although the timing of final passage remains uncertain.

The BUILD America 250 Act, which advanced from a House committee with bipartisan support, would provide approximately 7.2% more funding over its life than highway and public transportation funding under the Infrastructure Investment and Jobs Act, according to Smith. He added that funds targeted specifically to hard-infrastructure projects would see a greater increase than the overall comparison suggests.

Smith said Construction Partners does not expect disruption to federal funding or project activity in fiscal 2026 or fiscal 2027, even if Congress initially operates under a continuing resolution. A continuing resolution would extend federal highway funding at fiscal 2026 levels, which management described as the highest annual program funding levels in history.

Executive Chairman Ned Fleming said prior periods under continuing resolutions did not disrupt company operations. Such periods can lead to more maintenance and short-term projects while agencies await long-term funding decisions, he said, but state and local governments have historically stepped up funding efforts.

Smith said state transportation departments across the company’s eight-state footprint continue to have healthy programs, with Florida and Texas representing particularly large programs. The company continues to see healthy project lettings and contract awards, supported by the fact that management estimates about 45% of IIJA funding has yet to be deployed.

Data Centers and Acquisitions Support Growth Strategy

Construction Partners said AI data-center construction is becoming a growing part of its commercial opportunity set, although Smith said the company’s operating model has not changed. Its local teams pursue projects within their existing geographies and allocate employees and equipment toward higher-margin opportunities.

Management estimates that 70% to 75% of new U.S. data-center construction is expected to occur in the company’s existing states. In Central Texas, Lone Star Paving is working on a portfolio of data-center projects and has an opportunity pipeline exceeding $100 million in contract value. In Oklahoma, the company is building AI data-center projects totaling about $100 million and has a pipeline exceeding $130 million.

During the quarter, Construction Partners completed the acquisition of Ellsworth Construction, an Oklahoma asphalt manufacturing and construction company. The deal expands the company’s presence in the Tulsa and Oklahoma City metropolitan areas through its Overland Construction platform and adds capabilities in the data-center market, Smith said.

Management said recent acquisitions, including Lone Star Paving, Durwood Greene, GMJ, Four Star Paving and Ellsworth, have supported profitability because they brought well-run operations and backlogs with favorable margins. The company also expects to open several greenfield facilities later this year to expand capacity and reach underserved high-growth markets.

On the balance sheet, Construction Partners had $95 million in cash and cash equivalents and $599 million available under its credit facility at June 30. The company expanded its revolving credit facility to $700 million and refinanced its Term Loan B while adding $300 million of incremental term loans. Debt to trailing 12-month EBITDA declined to 3.17 times, and management reiterated its goal of reducing leverage to about 2.5 times. Cash flow from operations rose to $93.1 million from $83 million a year earlier.

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.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.

Continue following MarketBeat

Add MarketBeat as your preferred source on Google to see our latest stories in your feed.

Add As Preferred Source