Release Date: November 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Construction Partners Inc (ROAD, Financial) reported a record year with revenue growth of 17%, net income growth of 41%, and adjusted EBITDA growth of 28%.
- The company completed eight acquisitions in fiscal 2024, expanding its geographic footprint and enhancing market share across Sunbelt states.
- A record project backlog of $1.96 billion was reported, marking 16 consecutive quarters of backlog growth.
- The acquisition of Lone Star Paving in Texas is expected to accelerate the company's progress toward its Roadmap 2027 goals by two years.
- The company has a strong cash flow from operations, ending the year with $209 million, providing flexibility for future acquisitions and growth opportunities.
Negative Points
- General and administrative expenses increased slightly to 8.3% of total revenue, partly due to transaction expenses related to the Lone Star acquisition.
- The company's debt to trailing 12 months EBITDA ratio increased to 1.81, with expectations to rise to 3.3 times post-acquisition.
- Capital expenditures for fiscal 2025 are expected to increase significantly to a range of $130 million to $140 million.
- The company faces long-term challenges in attracting and retaining a skilled workforce.
- There is uncertainty regarding the full impact and timing of the Infrastructure Investment and Jobs Act (IIJA) funding on future projects.
Q & A Highlights
Q: For your guidance for fiscal '25, you have solid EBITDA margin growth. Could you bridge the gap of how much of the margin progression is from Lone Star versus organic growth?
A: Without Lone Star, we would have continued to make strides toward our Roadmap 2027 goals of 50 to 60 basis points of expansion. Lone Star accelerates this progress by two years, but even without it, our business was making great progress toward those goals.
Q: Any color on the perspective of TxDOT and visibility for revenues and top-line growth in Texas?
A: Texas benefits from outsized federal funding and has created supplemental programs to enhance its infrastructure program. This creates opportunities for organic growth and bolt-on acquisitions. The team at Lone Star is well-equipped to capitalize on these opportunities.
Q: Can you give us any EBITDA parameters for Q1, given the earlier acquisition closure?
A: We closed earlier, so now we include 11 months of EBITDA from Lone Star. Typically, 30% of EBITDA is in the first half of the year and 70% in the second half, which our guidance reflects. Interest expense from the new facility will also be reflected for 11 months.
Q: Cash flow was strong in Q4. Do you have any thoughts on cash from operations in '25 and proceeds from asset sales?
A: We expect to convert EBITDA to cash flow from operations in the 85% to 90% range for '25. Asset disposals will likely trend down as supply chains have improved, allowing for more timely equipment acquisition.
Q: How much of the backlog is from Lone Star?
A: The reported backlog of $1.96 billion as of September 30 does not include Lone Star, as they joined us on November 1. Their backlog will be included at the end of the current quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
