DEF 14A: Construction Partners Exceeds Targets, Unveils Ambitious 2030 Growth Plan

Construction Partners, Inc. reports exceeding fiscal 2025 financial and strategic goals, driven by key acquisitions and strong performance, while setting a new target to double revenue by 2030.

Summary

• The 2026 Annual Meeting of Stockholders will be held on March 24, 2026, to elect two Class II directors and ratify RSM US LLP as the independent registered public accountant for fiscal year ending September 30, 2026.
• The SunTx Group, holding 61.4% of total voting power, maintains control over director elections and other stockholder proposals due to the Company's dual-class common stock structure.
• Fiscal year 2025 was transformative, marked by five key acquisitions across four states, adding 27 asphalt plants, four aggregates facilities, a liquid asphalt terminal, and a rail-served aggregates terminal, totaling approximately $1.5 billion in aggregate transaction value.
• The Company achieved or surpassed all financial targets and strategic goals outlined in its 'ROAD Map 2027' plan.
• A new five-year framework, 'ROAD 2030,' aims to more than double revenue to $6 billion and reach a 17% Adjusted EBITDA margin by the end of fiscal 2030.
• Significant capital was secured through an $850.0 million senior secured first-lien term loan in November 2024 and an amended credit agreement in June 2025, increasing the revolving credit facility to $500.0 million and the term loan to $600.0 million, with maturity extended to June 28, 2030.
• Actual Adjusted EBITDA for fiscal 2025 was approximately $423.7 million, exceeding the target of $420.0 million, resulting in a 100% payout for the Adjusted EBITDA component of annual cash incentives.
• 2023 Long-Term Incentive Plan B (LTIP-B) awards, covering the performance period ending September 30, 2025, achieved a 150% payout for both compound aggregate revenue growth rate (21.4% vs. 18.0% target) and average Adjusted EBITDA margin (12.7% vs. 10.5% target).
• The Company's Total Stockholder Return (TSR) for the 2023-2025 performance period ranked in the 96th percentile relative to the Russell 2000, leading to an additional 15% increase in vested PSUs.
• The CEO's total annual compensation for fiscal 2025 was $6,410,129, while the median employee's was $49,013, resulting in a pay ratio of 130.8 to 1.
• Related party transactions include a $2.8 million management services fee paid to SunTx Capital Management and a $400,000 access agreement fee paid to Island Pond Corporate Services, LLC, both affiliates of the Executive Chairman.

Sentiment

Score: 9

Explanation: The company demonstrated exceptional performance in fiscal 2025, exceeding financial targets, successfully integrating significant acquisitions, and outlining an aggressive growth strategy for the future. Strong TSR performance relative to the Russell 2000 further underscores its operational and strategic success.

Positives

• Achieved or surpassed all financial targets and strategic goals set forth in 'ROAD Map 2027'.
• Unveiled 'ROAD 2030' with ambitious targets to more than double revenue to $6 billion and reach a 17% Adjusted EBITDA margin by fiscal 2030.
• Successfully completed five key acquisitions in fiscal 2025, adding significant assets and expanding operations across four states, representing approximately $1.5 billion in aggregate transaction value.
• Secured substantial capital through an $850.0 million senior secured first-lien term loan and an amended credit agreement, increasing revolving credit to $500.0 million and term loan to $600.0 million, extending maturity to June 28, 2030.
• Actual Adjusted EBITDA for fiscal 2025 was approximately $423.7 million, exceeding the target of $420.0 million, leading to a 100% payout for the Adjusted EBITDA component of annual cash incentives.
• 2023 LTIP-B awards achieved 150% payout for both revenue growth (21.4% vs. 18.0% target) and Adjusted EBITDA margin (12.7% vs. 10.5% target).
• The Company's Total Stockholder Return (TSR) for the 2023-2025 performance period ranked in the 96th percentile relative to the Russell 2000, resulting in an additional 15% increase in vested PSUs.
• Continued focus on sustainability within the asphalt pavement and aggregate industries, supporting 'The Road Forward' initiative and leading in Environmental Product Declarations.
• The Compensation Committee concluded that risks arising from compensation policies and practices for employees are not reasonably likely to have a material adverse effect on the Company as a whole.

Negatives

• One Section 16(a) report filed jointly by SunTx and Messrs. Fleming, Matteson, and Jennings in December 2024 was filed subsequent to the applicable deadline, covering eight reportable transactions.

Risks

• The Board oversees an enterprise-wide approach to risk management, including financial, operational, legal compliance, reputation, and cybersecurity risks.
• The Compensation Committee assesses and monitors risks in the Company's compensation program.
• Risks arising from compensation policies and practices for employees are not reasonably likely to have a material adverse effect on the Company as a whole.
• The Company is a 'controlled company' under Nasdaq rules due to the SunTx Group holding a majority of voting power, exempting it from certain governance requirements (e.g., majority independent board, independent compensation/nominating committees), which could be a concern for minority shareholders.
• Fred J. (Jule) Smith, III pledged 341,941 shares of Class B common stock as security for personal financial arrangements, which could pose a risk if the stock price declines significantly.

Future Outlook

The Company has outlined an ambitious 'ROAD 2030' framework, aiming to more than double its revenue to $6 billion and achieve a 17% Adjusted EBITDA margin by the end of fiscal 2030. This plan follows the successful achievement or surpassing of all targets in the previous 'ROAD Map 2027.' The Company expects to continue its acquisitive growth strategy, supported by recently secured capital, and maintain its focus on sustainability initiatives within the industry.

Management Comments

• Our executive compensation program for the 2025 fiscal year reflected the following developments and circumstances: Incentive-Based Compensation Structure, Acquisitive Growth, Financial Performance / ROAD Map, Credit Facility Developments, Sustainability.
• Our goal is to attract and retain talented executives who deliver value to our stockholders through the achievement of the Company's specific business objectives, such as consistent, sustained growth in revenue and adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA), among other objectives.
• Management remained focused on our core business while taking advantage of these growth opportunities and successfully integrating the acquired businesses after completion of the respective transactions.
• The Compensation Committee believes that the Company's overall compensation programs, including our long-term incentive opportunities and performance-based compensation structure, remain competitive and appropriately aligned with stockholder interests.
• The Compensation Committee further believes that these programs are sufficient to attract, motivate, and retain highly qualified executive leadership without the need for individual employment agreements.
• The Board believes that the current separation of the roles of Executive Chairman and Chief Executive Officer allows the Company to benefit from the knowledge and leadership of two experienced business veterans and is advantageous to independence, oversight and objectivity.

Industry Context

The filing highlights the Company's position in the asphalt pavement and aggregate industries, noting its acquisitive growth strategy and focus on sustainability. The industry appears to be consolidating, with Construction Partners actively participating through significant acquisitions. The Company's commitment to 'The Road Forward' initiative and Environmental Product Declarations suggests a proactive stance on environmental stewardship, potentially setting it apart in an industry often associated with heavy environmental impact. The comparison of the Company's TSR to the Dow Jones U.S. Heavy Construction Index (Russell 2000) indicates its competitive landscape within the broader heavy construction sector.

Comparison to Industry Standards

• The Company's Total Stockholder Return (TSR) over the performance period ending September 30, 2025, ranked in the 96th percentile relative to the Russell 2000 Index, indicating superior performance compared to a broad market index of small-cap companies.
• The Company utilizes the Dow Jones U.S. Heavy Construction Index as its peer group for TSR comparison in its stock performance graph, suggesting it benchmarks itself against this specific industry index.
• The Company's compensation philosophy aims to provide competitive compensation, acknowledging the unique nature of its industry, which primarily consists of smaller private companies and significantly larger multinational corporations, rather than a direct peer group.

Management Changes

Corporate Governance

Legal Proceedings

• None of our directors or executive officers have been involved in any legal proceedings during the past 10 years that are material to an evaluation of the ability or integrity of such person.
• None of our directors, executive officers or 5% stockholders or any associate of any of the foregoing has been involved in any legal proceedings in which such person has or had a material interest adverse to the Company or any of our subsidiaries.

Related Party Transactions

• Management services agreement with SunTx Capital Management (an affiliate of SunTx), for which the Company paid approximately $2.8 million in fiscal 2025. The agreement expires October 1, 2028.
• Indemnification agreements have been entered into with each of our current directors and executive officers.
• Note receivable from Reid Smith (brother of CEO Fred J. (Jule) Smith, III) for approximately $1.0 million from a 2017 subsidiary sale, with a remaining principal balance of approximately $170,000 as of September 30, 2025, due through fiscal 2026.
• Subcontract work with Austin Trucking, LLC (owned by Jacob R. Austin, brother-in-law of CEO Fred J. (Jule) Smith, III), incurring costs of approximately $9.5 million in fiscal 2025, with approximately $951,000 due as of September 30, 2025.
• Promissory note from Fred J. (Jule) Smith, III to Fred Smith Company (a subsidiary) for approximately $774,000 (principal amount) at 4.0% interest. The largest outstanding amount in fiscal 2025 was approximately $548,000, and the remaining balance was paid in full subsequent to September 30, 2025.
• Access agreement with Island Pond Corporate Services, LLC (an affiliate of Executive Chairman Ned N. Fleming, III) for use of land in Baker County, Georgia, for which the Company paid $400,000 in fiscal 2025.
• Brandon Owens (son of Vice Chairman Charles E. Owens) serves as President of Wiregrass Construction Company, Inc., receiving approximately $620,000 in total compensation in fiscal 2025.
• Matthew Baugnon (son of SVP Robert G. Baugnon) serves as Director of HMA Plants for Fred Smith Company, receiving approximately $252,500 in total compensation in fiscal 2025.
• Joey Armstrong (brother of Regional President M. Brett Armstrong) serves as Business Development Manager of Wiregrass, receiving approximately $148,000 in total compensation in fiscal 2025.

Stakeholder Impact

• Shareholders: Direct impact through voting on directors and auditor, and indirect impact through company performance, executive compensation alignment, and the dual-class voting structure which concentrates control with the SunTx Group. Strong financial performance and future outlook are positive for shareholders.
• Employees: Impacted by compensation programs, benefit plans, and the company's growth strategy which may create new opportunities. The median employee pay ratio provides transparency.
• Customers: Benefit from the company's focus on sustainability and product performance, as well as expanded operations through acquisitions.
• Suppliers/Creditors: Affected by the company's financial health, capital structure, and ability to meet obligations. The new credit facilities indicate strong financial backing.
• Regulatory Authorities: The company's compliance with SEC and Nasdaq rules, including independence requirements for the Audit Committee and insider trading policies, is important for regulatory oversight.

Next Steps

• Elect two Class II directors at the Annual Meeting on March 24, 2026.
• Ratify the appointment of RSM US LLP as the independent registered public accountant for the fiscal year ending September 30, 2026.
• Implement 'ROAD 2030' framework to achieve $6 billion in revenue and 17% Adjusted EBITDA margin by fiscal 2030.
• Continue to review the executive compensation program and consider stockholder views.
• Hold the next stockholder advisory vote on executive compensation at the Annual Meeting in 2028.
• Continue to focus on sustainability goals within the asphalt pavement and aggregate industries.
• Remaining payments on the note receivable from Reid Smith are scheduled to be made in periodic installments through the 2026 fiscal year.

Key Dates

Recommendation

The filing reveals exceptional financial and strategic performance in fiscal 2025, exceeding all prior targets and setting ambitious new growth objectives for 'ROAD 2030.' Significant acquisitions and successful capital raises demonstrate strong operational execution and strategic foresight. The company's TSR outperformance against the Russell 2000, coupled with a clear growth trajectory and commitment to sustainability, positions it favorably. While the controlled company status and related party transactions warrant monitoring, the overall picture points to robust growth and value creation potential, making it a strong buy for long-term investors.

Keywords

Construction Partners Inc., SEC Filing, Proxy Statement, Annual Meeting, Corporate Governance, Executive Compensation, Acquisitions, Adjusted EBITDA, Revenue Growth, ROAD 2030, Capital Structure, Dual-Class Stock, SunTx Group, Sustainability, Risk Management, Related Party Transactions, Nasdaq, Financial Performance