Construction Partners, Inc. (ROAD) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The company reported strong financial performance with a 35% revenue increase, a 39% rise in gross profit, and a stable backlog. The Q&A section highlighted growth opportunities in new regions, a strong backlog, and strategic acquisitions, with no major risks identified. Despite cautious guidance on energy costs, the overall sentiment remains positive due to record investments in infrastructure and a focus on high-margin projects. The market cap suggests a moderate reaction, leading to a positive stock price movement prediction of 2% to 8%.
Key Financial Performance
Revenue $769.2 million, an increase of 35% compared to last year. The breakdown of this revenue growth was 11% organic and 24% acquisitive.
Gross Profit $98.9 million, an increase of approximately 39% compared to last year. As a percentage of total revenues, gross profit was 12.9% compared to 12.5% last year.
Net Income $9.2 million and adjusted net income was $10.4 million.
Earnings Per Diluted Share $0.18 for adjusted net income.
Adjusted EBITDA $93.3 million, an increase of 35% compared to last year. Adjusted EBITDA margin for the quarter was 12.1%.
Cash Flow from Operations $65.2 million, up from $55.6 million in Q2 of fiscal 2025.
Project Backlog $3.14 billion at March 31, 2026, with approximately 80% to 85% of the next 12 months contract revenue covered in backlog.
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Operating Highlights
New Gastonia, North Carolina greenfield: Operations will begin this quarter, servicing a $60 million contract for expanding and widening I-85 through Gaston County near Charlotte.
Commercial project demand: Strong demand across footprint, including $100 million in data center projects in Texas, $28 million in warehouse projects in Tennessee, and $4 million in a data center project in Alabama.
Public infrastructure demand: Federal and state governments continue to invest in infrastructure, with notable projects including $150 million road widening in North Carolina, $27 million taxiway reconstruction in Florida, and multimillion-dollar projects in Houston for FIFA World Cup preparations.
Revenue growth: Achieved $769.2 million in revenue for Q2 2026, a 35% increase from last year, with 11% organic growth and 24% acquisitive growth.
Adjusted EBITDA: Reported $93.3 million in adjusted EBITDA for Q2 2026, a 35% increase from last year, with a margin of 12.1%.
Backlog: Backlog grew to $3.14 billion as of March 31, 2026, covering 80%-85% of the next 12 months' contract revenue.
Acquisition of Four Star Paving: Acquired Four Star Paving, a premier commercial paving contractor in Nashville Metro area, marking the fourth acquisition in fiscal 2026 and 17th since fiscal 2024.
ROAD 2030 growth plan: Aims to double company size, generate $1 billion in annual EBITDA, and expand EBITDA margins to approximately 17% by 2030.
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Risk or Challenges
Energy Volatility: Energy volatility had a limited impact on results due to the protection of the liquid asphalt index on more than 80% of total revenue, physical hedging of diesel fuel, and oil price hedging mechanisms. However, energy price fluctuations remain a potential risk.
Commodity Price Increases: The company's pass-through cost model reacts quickly to rising commodity prices, but sustained increases could still impact financial performance.
Federal Funding Uncertainty: While discussions on reauthorization of the Surface Transportation program are ongoing, delays or changes in federal funding could impact infrastructure projects and revenue.
Leverage Ratio: The company's debt to trailing 12-month EBITDA ratio is 3.23x, with plans to reduce it to 2.5x. High leverage could pose financial risks if not managed effectively.
Acquisition Integration: The company has completed multiple acquisitions, including Four Star Paving. Effective integration of these acquisitions is critical to achieving projected financial benefits and operational efficiencies.
Weather Dependency: Favorable weather conditions contributed to exceeding expectations in Q2. Adverse weather in the future could disrupt operations and impact revenue.
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Guidance & Outlook
Revenue Guidance: Revenue is projected to be in the range of $3.59 billion to $3.65 billion for fiscal year 2026.
Net Income Guidance: Net income is expected to range between $159 million and $162 million for fiscal year 2026.
Adjusted Net Income Guidance: Adjusted net income is projected to be between $170.4 million and $174.2 million for fiscal year 2026.
Adjusted EBITDA Guidance: Adjusted EBITDA is expected to range from $552 million to $564 million, with an adjusted EBITDA margin between 15.38% and 15.45%.
Organic Growth Expectation: The company anticipates organic growth of approximately 7% to 8% for fiscal year 2026.
Backlog Coverage: Approximately 80% to 85% of the next 12 months' contract revenue is covered in the current backlog of $3.14 billion.
Cash Flow Conversion: The company expects to convert 75% to 85% of EBITDA to cash flow from operations in fiscal year 2026.
ROAD 2030 Growth Plan: The company aims to double its size, generate $1 billion in annual EBITDA, and expand EBITDA margins to approximately 17% by 2030.
Federal Infrastructure Funding Outlook: A new 5-year federal Surface Transportation program authorization, ranging from $500 billion to $600 billion, is anticipated, representing a significant increase in transportation infrastructure investment.
Greenfield Expansion: New greenfield facilities are planned to come online later this year and early next year, including a facility in Gastonia, North Carolina, which will service a $60 million contract.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:How should we think about contribution from acquisitions, margin profile, and other factors for the back half of the year?
A:The company has had a busy year with M&A, creating opportunities in new states like Tennessee. They see growth opportunities in the Sunbelt region and fragmented industry. For the remaining 6 months, they expect $225 million to $235 million of acquisitive revenue, aligning with a 7%-8% organic growth guide.
Q:Are you seeing any change in momentum with the reindustrialization trend, and how does your backlog look compared to two years ago?
A:The backlog still has a good mix of public and commercial projects, with commercial projects favoring manufacturing and corporate centers. The reindustrialization trend is a tailwind, with record investments in capital infrastructure, particularly in Sunbelt states. They expect this trend to continue for several years.
Q:Is there any timing delay between incurring costs for liquid AC and diesel and receiving rebates from DOTs?
A:No, there is no timing delay. Settlements are done monthly in the progress payments received from the states.
Q:Did the ROAD 2030 target assume funding levels of $500 billion to $600 billion?
A:No, the ROAD 2030 target did not assume such funding levels. The company anticipates mid-single-digit annual increases in federal infrastructure investment, consistent with historical trends.
Q:Is the data center business becoming a more sizable portion of your operations?
A:Yes, data centers are becoming a larger part of the business due to increased construction in their markets. The company is building relationships with data center developers, creating more opportunities to participate in these projects.
Q:What are the crude energy and liquid asphalt assumptions in the revised guidance, and what was the year-over-year impact?
A:The guidance is cautious but expects no major impact. Liquid asphalt prices were lower year-over-year, and the company has 2-2.5 months of availability in their terminals. Diesel and natural gas prices have been steady.
Q:How is the backlog evolving as you enter the busy season?
A:The company is bidding a lot of opportunities and expects state and local DOT contract awards to increase by 10%-15%. While backlog has historically decreased during the busy season, it has increased for the last 20 quarters. They are prepared for either scenario.
Q:Does the focus on larger projects like data centers change your risk profile?
A:No, the risk profile has not changed. The company continues to focus on smaller projects in the $2-$3 million range, which have less risk and higher margins, while also pursuing larger projects like data centers.
Q:How has the management of liquid asphalt changed compared to previous periods of inflation?
A:The company now has terminals and a more mature hedging program for diesel and natural gas, which helps manage risk. They aim to manage some risk but not eliminate it entirely.
Q:What would happen if there is a continuing resolution (CR) instead of a new infrastructure bill?
A:A CR would feel like business as usual, with states continuing to fund projects at record levels. Maintenance and small-to-medium-sized jobs would proceed, while mega projects might be delayed.
Q:Can you provide details on the Four Star acquisition in Tennessee?
A:Four Star has about 150 employees and is a premier commercial paving contractor in the Nashville Metro area. It complements the company's existing Tennessee assets by focusing on commercial work, while the platform company PRI focuses on public work.
Q:Do you have a goal to increase the percentage of liquid asphalt supplied internally?
A:Yes, the company aims to increase the percentage of liquid asphalt supplied internally as part of its vertical integration strategy to enhance margins.
Q:Review of Unclear Management Responses
A:None of the questions were avoided or lacked clarity. Management provided detailed and direct answers to all questions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AC relative
Air Force
Alabama Wiregrass
Base project
Burwood Green
CWR taxiway
Carolina Fred
Carolina greenfield
Central Tennessee
Charlotte greenfield
Construction Mag
Construction project
County Charlotte
Cup summer
Eglin Air
FIFA World
FY result
Florida Panhandle
Force Base
Four Star
Fred Smith
Gaston County
Green dollar
Hoffman Chief
Metro
Nashville
Star Paving
Today
center
contract value
cost
environment
folk
hedging
investment
weather
ROAD Transcript
Construction Partners, Inc. (ROAD) Q2 2026 Earnings Call Transcript
Positive5-8
The company reported strong financial performance with a 35% revenue increase, a 39% rise in gross profit, and a stable backlog. The Q&A section highlighted growth opportunities in new regions, a strong backlog, and strategic acquisitions, with no major risks identified. Despite cautious guidance on energy costs, the overall sentiment remains positive due to record investments in infrastructure and a focus on high-margin projects. The market cap suggests a moderate reaction, leading to a positive stock price movement prediction of 2% to 8%.
Construction Partners, Inc. (ROAD) Q1 2026 Earnings Call Transcript
Positive2-5
The company's earnings call reveals strong financial performance, with record project backlog and significant cash flow increase. The Q&A section indicates robust acquisition strategy and organic growth guidance, despite temporary deviations. Management's confidence in deleveraging and M&A funding is reassuring. The market cap suggests a moderate reaction, leading to a positive stock price movement of 2% to 8%.
Construction Partners, Inc. (ROAD) Q4 2025 Earnings Call Transcript
Positive11-20
The earnings call highlights strong financial performance with significant increases in net income, adjusted net income, and adjusted EBITDA. The company is benefiting from economic growth in key markets, and has a solid strategic plan with a focus on debt reduction and M&A. The Q&A reveals positive sentiment towards integration and market conditions, with no adverse impact from government shutdowns. Overall, the company's strategic initiatives, financial health, and market opportunities suggest a strong positive outlook for the stock price.
Construction Partners, Inc. (ROAD) Q3 2025 Earnings Call Transcript
Positive8-9
The earnings call highlighted strong financial performance, including a 51% revenue increase, improved EBITDA margins, and a solid project backlog. The Q&A reinforced positive sentiment with effective margin management despite weather challenges, robust growth projections, and strategic acquisitions. The company’s commitment to updating targets and deleveraging enhances its outlook. However, economic uncertainties and acquisition integration risks temper the optimism slightly. Overall, the strong financial results and positive guidance suggest a positive stock price reaction over the next two weeks, especially given the company's small-cap status.
ROAD Slides
ROAD Report
Frequently Asked Questions
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