struction Partners(ROAD) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $561.6 million, an increase of 41.6% year-over-year, with 11.2% organic growth and 30.4% from acquisitions [25][28] - Adjusted net income was$ 13.3 million, representing a 35% increase compared to the same quarter last year, with diluted earnings per share of $0.25 [27][28] - Adjusted EBITDA was$ 68.8 million, up 68% year-over-year, with an adjusted EBITDA margin of 12.3%, compared to 10.3% in the prior year [28] Business Line Data and Key Metrics Changes - The company reported a record project backlog of $2.66 billion as of December 31, 2024, indicating strong demand for infrastructure services [15][29] - General and administrative expenses as a percentage of total revenue decreased to 7.9% from 8.9% in the previous year [26] Market Data and Key Metrics Changes - Public infrastructure markets saw total lettings for roads and bridges increase by approximately 16% year-over-year across the company's eight-state footprint [16] - Florida's infrastructure funding grew by over 50% in the first half of the current state fiscal year due to the Moving Florida Forward program [17] Company Strategy and Development Direction - The company continues to focus on strategic acquisitions and organic growth, with a strong acquisition pipeline and a commitment to integrating new companies effectively [19][20] - The long-term strategy emphasizes investment in human capital to build a competitive advantage and ensure sustainable growth [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing demand for infrastructure services, supported by healthy funding mechanisms across states [66][72] - The company anticipates continued growth in funding, projecting mid to high single-digit increases due to the IIJA and state funding programs [105][106] Other Important Information - The company plans to maintain a strong balance sheet while pursuing acquisitions, aiming to reduce leverage to approximately 2.0 times within the next four to five quarters [32][50] - Capital expenditures for Q1 were$ 26.8 million, with expectations for total capital expenditures in the range of $130 million to$ 140 million for fiscal 2025 [35][36] Q&A Session Summary Question: Contribution of recent acquisitions to guidance - The combined revenue contribution from the two recent acquisitions is expected to be in the $120 million to$ 130 million range, with backlog contributions of $90 million to$ 100 million [42] Question: Comments on purchase price of acquisitions - The purchase prices for the acquisitions were in line with historical multiples, consistent with the company's acquisition strategy [45] Question: Impact of recent acquisitions on gross margins and SG&A - The new acquisitions are expected to have typical margins, and the company aims to improve margins through strategic bidding and integration [58] Question: Cost inflation outlook - The company expects construction inflation to be around 4% to 5%, with stable costs for materials and labor [61] Question: Updates on state DOT funding - All states have healthy funding mechanisms, with Texas and Florida leading in infrastructure funding [66] Question: Concerns about funding delays - Management has not heard of any pauses in funding for projects, with a focus on hard infrastructure [117] Question: Bidding environment and backlog management - The company is able to bid patiently due to a strong backlog, and there has been no significant change in the competitive landscape [122] Question: Breakdown of backlog between public and private activity - The current backlog consists of 58% public and 42% private projects, with expectations for a similar trend as seen in fiscal 2024 [133]