8-K: Construction Partners Reports Record FY25, Bullish on FY26

Construction Partners, Inc. announced preliminary record financial results for fiscal year 2025 and introduced a strong outlook for fiscal year 2026, driven by strategic growth and favorable market conditions.

Summary

• Reported preliminary fiscal year 2025 revenue in the range of $2.800 billion to $2.820 billion, a significant increase from $1.824 billion in fiscal 2024.
• Preliminary fiscal year 2025 net income is expected to be between $101.0 million and $101.8 million, up from $68.9 million in fiscal 2024.
• Adjusted EBITDA for fiscal year 2025 is projected to be $421.0 million to $425.0 million, compared to $220.6 million in fiscal 2024, with Adjusted EBITDA Margin at 15.0% to 15.1%.
• Project backlog reached approximately $3.0 billion as of September 30, 2025, marking 18 consecutive quarters of growth.
• Introduced fiscal year 2026 outlook with revenue expected between $3.400 billion and $3.500 billion, and Adjusted EBITDA between $520.0 million and $540.0 million.
• The company's ROAD 2030 plan targets more than doubling revenue to $6.03 billion and Adjusted EBITDA to $1.03 billion, with an Adjusted EBITDA Margin of 17%.
• Achieved 8.4% organic revenue growth in fiscal 2025, entered two new states, and completed five strategic acquisitions.
• Net leverage ratio was 3.17x in FY25 Q3, with a target of 2.5-2.75x for FYE 26 and 1.5-2.5x for FYE 30F.

Sentiment

Score: 9

Explanation: The filing presents exceptionally strong preliminary results for FY25, a very positive outlook for FY26, and ambitious long-term targets for ROAD 2030. The company highlights successful strategic acquisitions, organic growth, and favorable market conditions in the Sunbelt, supported by significant government infrastructure spending. The tone is highly optimistic and growth-oriented, with clear plans for margin expansion and value creation.

Positives

• Achieved record year-end results for revenue and profitability in fiscal year 2025.
• Strong organic revenue growth of 8.4% in fiscal 2025, with an average annual organic growth rate of 8.1% since IPO.
• Successfully expanded into two new states and completed five strategic acquisitions in fiscal 2025.
• Projected significant growth in revenue (23% at midpoint) and Adjusted EBITDA (25% at midpoint) for fiscal year 2026.
• Robust project backlog of approximately $3.0 billion as of September 30, 2025, demonstrating 18 consecutive quarters of growth.
• Long-term ROAD 2030 plan targets substantial growth, aiming to more than double revenue to $6.03 billion and Adjusted EBITDA to $1.03 billion.
• Strong cash flow generation, with ~$658 million generated since 2023, targeting 75-85% of Adjusted EBITDA.
• Favorable market conditions in the Sunbelt, driven by population growth, reshoring, and well-funded transportation programs.
• State and local governments are increasing infrastructure spending, providing strong tailwinds (e.g., NC HB 130, TDOT's 10-Year Plan, SCDOT's Pavement Improvement Program, ALDOT's Rebuild Alabama, Georgia's additional $1.5 billion).
• Differentiated operating model and long acquisitive runway in a fragmented industry, with ~94% of HMA-producer companies being privately-owned.

Negatives

• The net leverage ratio increased to 3.17x in FY25 Q3, following transformative acquisitions, although a gradual stepdown is targeted for future periods.

Risks

• Preliminary financial information for fiscal year 2025 is subject to changes and finalization based on year-end closing procedures.
• Ability to successfully manage and integrate acquisitions, and the risk of not realizing expected economic benefits (e.g., lower revenues, higher costs).
• Failure or inability to implement growth strategies in a timely manner.
• Declines in public infrastructure construction and reductions in government funding, including from transportation authorities and state/local agencies.
• Competition for projects in local markets.
• Risks associated with the company's capital-intensive business.
• Government requirements and initiatives related to funding, land usage, and environmental, health, and safety matters.
• Unfavorable economic conditions and restrictive financing markets.
• Ability to obtain sufficient bonding capacity for certain projects.
• Ability to accurately estimate overall risks, requirements, or costs when bidding on or negotiating contracts.
• Cancellation of a significant number of contracts or disqualification from bidding for new contracts.
• Adverse weather conditions impacting operations.
• Substantial indebtedness and the restrictions imposed by its terms.
• Ability to maintain favorable relationships with third parties supplying equipment and essential supplies.
• Ability to retain key personnel and maintain satisfactory labor relations.
• Property damage, results of litigation and other claims, and insurance coverage issues.
• Risks related to information technology systems and infrastructure.
• Ability to maintain effective internal control over financial reporting.

Future Outlook

The company anticipates continued strong growth in fiscal year 2026, with revenue projected to reach $3.400 billion to $3.500 billion and Adjusted EBITDA of $520.0 million to $540.0 million. The long-term ROAD 2030 plan targets more than doubling revenue to $6.03 billion and Adjusted EBITDA to $1.03 billion, with an Adjusted EBITDA Margin of 17%. This growth is expected to be driven by continued execution of strategic growth plans, both organically and through acquisitions, focusing on margin expansion, vertical integration, and scaling corporate costs, supported by favorable Sunbelt market conditions and transportation funding programs.

Management Comments

• Fred J. (Jule) Smith, III, President and CEO, stated: 'Today we are announcing our preliminary fiscal 2025 financial results, reflecting strong fourth quarter operational performance across our footprint that led to record year-end results for revenue and profitability.'
• Fred J. (Jule) Smith, III, President and CEO, commented: 'Fiscal 2025 has been a dynamic year of growth for our company as we entered two new states while making five strategic acquisitions and growing organic revenue by 8.4 percent compared to our last fiscal year.'
• Fred J. (Jule) Smith, III, President and CEO, noted: 'Moving into fiscal 2026, we see strong indicators in the Sunbelt for continued economic growth, favorable demographic trends, well-funded transportation programs, and additional opportunities for acquisitive and organic growth.'
• Fred J. (Jule) Smith, III, President and CEO, remarked: 'As our family of companies continues executing on our strategic growth plan, both organically and through acquisitions, we remain focused on expanding margins by enhancing operational performance and strategic bidding in our markets, increasing vertical integration opportunities of construction materials and services, and scaling corporate costs across the organization.'
• Fred J. (Jule) Smith, III, President and CEO, added: 'Our fiscal 2026 outlook represents another strong year of expected growth, and we are bullish about the future of CPI as we continue to build value for all of our stakeholders.'

Industry Context

The company operates in the Sunbelt region, which is experiencing significant population growth and reshoring trends, driving increased demand for both public and private construction. The U.S. infrastructure market, particularly roadways, is characterized by a large addressable market with 94% of roads made with asphalt and an average road grade of D+, indicating a substantial need for ongoing maintenance and repair. Historic public infrastructure investments, such as the IIJA and various state-level funding programs, provide a strong and recurring demand for the company's services. The industry remains highly fragmented, offering ample opportunities for strategic acquisitions and organic expansion.

Comparison to Industry Standards

• The U.S. roadway system, with 94% of roads made with asphalt, has an average road grade of D+, highlighting a significant and ongoing need for construction and maintenance services.
• U.S. lane miles increased by 8% and vehicle miles traveled by 16% from 2001 to 2023, accelerating roadway deterioration and increasing the addressable market.
• The average weight of U.S. manufactured vehicles increased by 13%, contributing to faster wearing of roads.
• The company operates in 6 of the top 10 states by population growth (2020-2024), including Texas (2.1 million), Florida (1.8 million), North Carolina (0.6 million), Georgia (0.4 million), South Carolina (0.3 million), and Tennessee (0.3 million), indicating strong regional demand.
• Florida's state and local government awards for infrastructure were $9.7 billion in 2024, ranking second nationally, while Texas led with $17.4 billion in awards.
• The Infrastructure Investment and Jobs Act (IIJA) is estimated to create approximately 1.0 million jobs over five years and contribute $226 billion to $90 billion to GDP by 2027, providing a robust federal funding environment.
• State-specific funding initiatives, such as North Carolina's HB 130 reallocating $600 million in sales tax revenue, Tennessee DOT's updated 10-Year Plan with over $1.0 billion in new funding, South Carolina DOT's $576 million Pavement Improvement Program, Alabama DOT's $27 million Rebuild Alabama Annual Grant Program, and Georgia's additional $1.5 billion for local transportation projects, demonstrate strong state-level commitment to infrastructure.

Management Changes

Stakeholder Impact

• Shareholders are likely to benefit from the strong financial performance, robust growth outlook, and long-term value creation strategy outlined in the ROAD 2030 plan.
• Employees are positively impacted by the company's growth, expansion into new states, and focus on retaining key personnel and maintaining satisfactory labor relations.
• Customers will benefit from expanded service capabilities, improved operational excellence, and the company's focus on delivering high-quality surface infrastructure projects.
• Suppliers are important stakeholders, as the company's ability to maintain favorable relationships with third parties for equipment and essential supplies is crucial for operations.
• Creditors are impacted by the company's substantial indebtedness; however, the projected stepdown in the net leverage ratio towards target levels indicates a manageable debt profile in the context of strong cash generation and growth.

Next Steps

• Host Analyst Day on October 22, 2025, in Raleigh, North Carolina, to discuss strategic initiatives, growth priorities, and business outlook.
• Finalize financial results for the fiscal year ended September 30, 2025, following year-end closing procedures and review adjustments.
• Continue executing the strategic growth plan, focusing on both organic expansion and disciplined acquisitions.
• Expand margins by enhancing operational performance, strategic bidding, increasing vertical integration opportunities, and scaling corporate costs.
• Invest in high-return organic growth opportunities, including greenfields, new crews/services, and facility upgrades.
• Maintain focus on company culture to attract and retain a skilled workforce.

Key Dates

Recommendation

The company reported record preliminary financial results for fiscal year 2025, significantly exceeding previous year's performance across all key metrics including revenue, net income, and Adjusted EBITDA. The fiscal year 2026 outlook projects continued robust growth, and the long-term ROAD 2030 plan outlines ambitious targets to more than double revenue and Adjusted EBITDA. The company's strategic focus on organic growth, disciplined acquisitions in the high-growth Sunbelt region, vertical integration, and margin expansion levers positions it favorably. The strong project backlog and supportive macro environment with well-funded transportation programs further bolster confidence in future performance. While the net leverage ratio increased in Q3 FY25, the company projects a stepdown towards target levels, indicating a manageable debt profile in the context of strong cash generation and growth. This combination of strong current performance, clear growth strategy, and favorable market dynamics makes it a compelling investment.

Keywords

Construction Partners, CPI, ROAD, civil infrastructure, roadways, Sunbelt, asphalt, acquisitions, organic growth, financial results, outlook, Analyst Day, infrastructure spending, public funding, M&A, vertical integration, project backlog, EBITDA, net income, capital allocation