10-K: Construction Partners Reports Strong FY25 Growth, $1.5B in Acquisitions

Construction Partners, Inc. announced significant revenue and profit growth in fiscal year 2025, driven by strategic acquisitions and an expanding project backlog.

Summary

• Revenues for fiscal year 2025 increased by $1.0 billion, or 54.2%, to $2.8 billion, up from $1.8 billion in fiscal year 2024.
• Net income rose by $32.9 million, or 47.6%, reaching $101.8 million in fiscal year 2025, compared to $68.9 million in fiscal year 2024.
• Adjusted EBITDA for fiscal year 2025 was $423.7 million, a 92.1% increase from $220.6 million in fiscal year 2024, with Adjusted EBITDA Margin improving to 15.1% from 12.1%.
• The company completed five acquisitions in fiscal year 2025 across Alabama, Oklahoma, Tennessee, and Texas, totaling approximately $1.5 billion in aggregate transaction consideration, adding 27 HMA plants, four aggregate facilities, and a liquid asphalt terminal.
• Contract backlog increased to $3.0 billion as of September 30, 2025, up from $2.0 billion at September 30, 2024, with approximately 78% expected to be completed in the next 12 months.
• Publicly funded projects and third-party sales accounted for approximately 65% of fiscal 2025 revenues, with state DOTs representing 43.4% of total revenues.
• Interest expense, net, increased significantly by $71.3 million, or 373.8%, to $90.4 million in fiscal year 2025, primarily due to new borrowings under the Term Loan B Credit Agreement and amendments to the Term Loan A/Revolver Credit Agreement.
• Acquisition-related expenses surged by $22.0 million, or 565.9%, to $25.9 million in fiscal year 2025, reflecting the high volume of transformative acquisitions.
• The company announced 'ROAD 2030,' a strategic plan targeting revenues exceeding $6 billion by the end of fiscal year 2030.

Sentiment

Score: 8

Explanation: The company demonstrated exceptional financial growth in revenues, net income, and Adjusted EBITDA, driven by successful strategic acquisitions and an expanding backlog. While indebtedness increased significantly, the company remains in compliance with covenants and has a clear growth strategy ('ROAD 2030'). The EPA penalty is noted but not expected to be material due to insurance coverage. Overall, the outlook is very positive, reflecting strong operational execution and market positioning.

Positives

• Substantial revenue growth of 54.2% in fiscal 2025, reaching $2.8 billion.
• Strong net income increase of 47.6% to $101.8 million.
• Adjusted EBITDA nearly doubled, growing 92.1% to $423.7 million, with an improved margin of 15.1%.
• Significant expansion through five strategic acquisitions in fiscal 2025, adding key assets and market presence in new states.
• Contract backlog increased by 50% to $3.0 billion, indicating strong future revenue visibility.
• Successful amendment of credit facilities, increasing the Revolving Credit Facility to $500.0 million and Term Loan A to $600.0 million, and extending maturity dates.
• Effective management of internal controls over financial reporting, as audited by RSM US LLP.

Negatives

• Interest expense, net, increased by 373.8% to $90.4 million due to increased borrowings.
• Acquisition-related expenses rose sharply by 565.9% to $25.9 million, impacting profitability.
• Consolidated leverage ratio increased to 3.10-to-1.00 at September 30, 2025, from 1.81-to-1.00 at September 30, 2024, indicating higher indebtedness.
• A subsidiary incurred a civil penalty of $450,000 and remediation costs related to Clean Water Act violations, although expected to be covered by insurance.

Risks

• Significant slowdown or decline in economic conditions, particularly in the Sunbelt, could reduce demand for infrastructure projects.
• Reductions in federal, state, and local government funding for public infrastructure construction could adversely affect results of operations.
• Loss of ability to competitively bid for or successfully contract with state DOTs, which are the largest customers.
• Government contracts are subject to regulations, requirements, and statutes, the violation of which could lead to termination, suspension, or debarment.
• Cancellation of a significant number of contracts, disqualification from bidding, and unpredictable timing of new project opportunities.
• Inability to accurately estimate overall risks, revenues, or costs on projects may lead to contract losses or lower profits.
• Inflation and supply chain disruptions may continue to result in increased costs that cannot be fully recouped.
• Capital-intensive business with significant fixed and semi-fixed costs makes profitability sensitive to changes in volume.
• Inability to successfully identify, manage, and integrate acquisitions, or retain key employees of acquired businesses.
• Inability to obtain or maintain sufficient bonding capacity could preclude bidding on certain projects.
• Business is seasonal and subject to adverse weather and climate conditions, which can impact operations.
• Dependence on information technology systems and processes, which are subject to cybersecurity and data leakage risks.
• Design-build contracts subject the company to the risk of design errors and omissions, potentially leading to liabilities.
• Joint venture contracts expose the company to risks of partner non-performance or capital shortfalls.
• Inability to hire, train, and retain qualified personnel and subcontractors in a competitive industry.
• Labor shortages, turnover, and labor cost increases could adversely affect results of operations.
• Dependence on third parties for equipment and supplies, with potential for reliability issues, supply constraints, and price fluctuations.
• Contract backlog is subject to reductions in scope and cancellations, making it an unreliable indicator of future earnings.
• Inability to secure sufficient aggregates reserves could negatively impact future results.
• Failure to obtain or maintain adequate insurance coverage could adversely affect results.
• Failure to maintain safe work sites could result in significant losses and damage reputation.
• Material costs and losses from claims that products do not meet regulatory requirements or contractual specifications.
• Involvement in routine litigation and government inquiries in the ordinary course of business.
• Environmental laws and regulations and changes thereto could have a material adverse effect.
• Climate change and related laws and regulations could adversely affect operations.
• Increased focus by stakeholders on ESG policies and practices could result in additional costs and impact reputation.
• Operations are subject to special hazards that may cause personal injury or property damage, potentially not covered by insurance.
• Failure to comply with immigration laws could result in liabilities, harm reputation, and disrupt operations.
• Federal, state, and local employment-related laws and regulations could increase costs and lead to lawsuits.
• Substantial indebtedness could adversely affect financial condition and prevent fulfillment of obligations.
• Volatility in credit markets, including interest rate changes, may increase interest payments.
• Credit agreements restrict ability to engage in some business and financial transactions.
• Need to raise additional capital in the future, which may not be available on favorable terms or at all.
• Requirement to record impairment charges if goodwill becomes impaired, involving significant judgments and assumptions.
• Earnings are affected by application of accounting standards and critical accounting policies, involving subjective judgments and estimates.
• Unfavorable developments affecting the banking and financial services industry could adversely affect business, liquidity, and financial condition.
• Force majeure events, such as natural disasters, pandemics, and terrorist attacks, and unexpected equipment failures could negatively impact business.
• Compliance with extensive regulatory and reporting obligations as a public company entails substantial costs and creates risks related to internal controls and investor confidence.
• Dual class structure concentrates voting control with Class B common stock holders, limiting influence of Class A holders.
• Future sales, or perception of future sales, of Class A common stock could cause market price to decline.
• SunTx Group controls the company, and their interests may conflict with other shareholders.
• Issuance of preferred stock with terms that could adversely affect voting power or value of Class A common stock.
• Provisions in governing documents and Delaware corporate law make it more difficult to effect a change in control.
• Exclusive forum clause could limit stockholders' ability to obtain a favorable judicial forum for disputes.
• Status as a controlled company means stockholders may not have certain corporate governance protections.
• No intention to pay cash dividends on Class A common stock in the foreseeable future, limiting return to price appreciation only.

Future Outlook

The company publicly announced 'ROAD 2030,' a comprehensive business plan outlining strategic initiatives and growth priorities through fiscal year 2030, with a goal of achieving revenues exceeding $6 billion by the end of fiscal year 2030. Capital expenditures for fiscal year 2026 are projected to be between $165.0 million and $185.0 million. The company believes its operating cash flow and available borrowings will be sufficient to fund operations and planned capital expenditures for at least the next 12 months.

Management Comments

• Management believes that the expectations reflected in the forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct.
• Management considers the cost-to-cost input method to be the best available measure of progress on construction contracts.
• Management believes the company maintains reasonable estimates of contract costs based on prior experience.
• Management believes that the company's operations and facilities are in substantial compliance with applicable environmental laws and regulations and that any existing non-compliance is not likely to have a material adverse effect.
• Management believes that liabilities associated with known or potential contamination at any facilities will not have a material adverse effect on operations or financial condition.
• Management believes that the outcomes of pending inquiries, litigation, disputes, or claims against the company, if decided adversely, would not have a material adverse effect on financial condition, cash flows, or results of operations on an individual basis.

Industry Context

The company operates in the large and growing highway and road construction industry, specifically within the asphalt paving materials and services segment. Industry growth is driven by federal, state, county, and local Department of Transportation (DOT) budgets, notably supported by the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act of 2022, which provide historically high levels of funding for infrastructure. The non-discretionary nature of highway and road construction services and materials supports stable and consistent industry funding. The company's vertical integration strategy and focus on the Sunbelt region position it to capitalize on these trends, although competition remains fragmented and local.

Comparison to Industry Standards

• The company's Adjusted EBITDA Margin of 15.1% in fiscal 2025 (up from 12.1% in 2024) indicates strong operational efficiency and profitability within the civil infrastructure sector, potentially outperforming some regional competitors.
• The significant increase in contract backlog to $3.0 billion suggests a robust pipeline of projects, which is a positive indicator compared to industry peers facing fluctuating demand.
• The company's strategy of acquiring complementary businesses (54 since inception, 5 in FY25, 2 post-FY25) demonstrates an aggressive growth strategy, potentially outpacing organic growth rates of less acquisitive competitors.
• The reliance on state DOTs for 43.4% of revenues aligns with typical industry structures where public funding is a primary driver, but also exposes the company to government spending fluctuations, similar to other public infrastructure contractors.

Corporate Governance

Legal Proceedings

• A subsidiary executed a consent decree with the EPA regarding Clean Water Act violations related to sediment discharges from two sand and gravel quarries in eastern Alabama.
• The company agreed to pay a civil penalty of $450,000, remediate the conditions, and monitor the sites.
• The total cost of remedial and preventative measures is expected to be covered in whole or significant part by the company's preexisting insurance policies.
• Management believes that none of the pending inquiries, litigation, disputes, or claims against the company, if decided adversely, would have a material adverse effect on its financial condition, cash flows, or results of operations on an individual basis.

Related Party Transactions

• The company sold an indirect wholly-owned subsidiary to an immediate family member of an executive officer for a $1.0 million note receivable (remaining balance $0.1 million at Sept 30, 2025).
• The company received a $1.0 million note from the disposed entity for certain accounts payable (remaining balance $0.1 million at Sept 30, 2025).
• A subsidiary advanced funds to an entity owned by an immediate family member of an officer for a land development project; the officer personally assumed the remaining $0.8 million obligation in March 2021, with annual minimum payments and full maturity by December 31, 2027.
• Entities owned by immediate family members of an executive officer perform subcontract work (trucking and grading services) for a subsidiary, incurring $9.5 million in expenses in fiscal 2025.
• The company has an access agreement with Island Pond Corporate Services, LLC (owned by the Executive Chairman), incurring $400,000 in general and administrative expenses in fiscal 2025.
• The company pays SunTx $0.30 million per fiscal quarter ($2.776 million in fiscal 2025) and reimburses expenses under a management services agreement.

Stakeholder Impact

• **Shareholders (Class A Common Stock)**: Experience significant dilution from new share issuances for acquisitions and potential future capital raises. The dual-class structure and anti-takeover provisions limit their influence on corporate matters and potential for control premiums. No cash dividends are anticipated in the foreseeable future, meaning returns are solely dependent on stock price appreciation.
• **Shareholders (Class B Common Stock / SunTx Group)**: Maintain concentrated voting control (64.1% as of Nov 20, 2025), allowing them to control corporate policies and operations, including director elections and strategic transactions. Their interests may not always align with Class A holders.
• **Employees**: Benefit from growth through acquisitions, which adds skilled construction professionals. The company emphasizes promoting from within and offers advancement opportunities. Share-based compensation plans (Equity Incentive Plan, Restricted Stock Plan, ESPP) provide incentives. However, labor shortages and increased turnover are noted industry-wide challenges.
• **Customers (Public & Private)**: Benefit from expanded operations and increased capacity due to acquisitions, potentially leading to more comprehensive service offerings. Public customers (DOTs) remain a significant revenue source, benefiting from federal infrastructure funding. The company's ability to manage costs and project schedules is critical to customer satisfaction.
• **Suppliers & Subcontractors**: The company relies heavily on third parties for raw materials, equipment, and subcontracted work. Supply chain disruptions, price increases, and labor disputes affecting suppliers could impact the company's ability to complete projects, potentially affecting relationships and payment terms.
• **Creditors**: The company's substantial indebtedness ($1.6 billion outstanding) and increased leverage ratio (3.10x) indicate higher financial risk. However, the company remains in compliance with debt covenants, and the extended maturity dates provide some stability. The secured nature of the debt offers protection to lenders.

Next Steps

• Complete the 'ROAD 2030' comprehensive business plan, targeting revenues exceeding $6 billion by the end of fiscal year 2030.
• Integrate the two acquisitions completed subsequent to fiscal 2025 year-end (Vulcan Materials Company assets and P&S Paving, LLC).
• Include the fiscal 2025 acquired businesses in management's assessment of the effectiveness of internal controls over financial reporting as of September 30, 2026.
• Continue to monitor and manage the consolidated net leverage ratio, which steps down to 4.25-to-1.00 as of March 31, 2026, and further in subsequent periods.
• Execute planned capital expenditures of $165.0 million to $185.0 million for fiscal 2026.
• Continue to utilize the stock repurchase program to minimize dilution and repurchase shares opportunistically through March 5, 2026.

Key Dates

Recommendation

Construction Partners, Inc. demonstrates robust financial performance with substantial revenue and net income growth, significantly exceeding prior periods. The strategic acquisition spree, totaling $1.5 billion in fiscal 2025 and an additional $262.1 million post-fiscal year, has successfully expanded its operational footprint and asset base, positioning it for continued market share gains in the growing Sunbelt infrastructure market. The impressive 50% increase in contract backlog to $3.0 billion provides strong revenue visibility and indicates sustained demand. While the increased debt and interest expense are notable, the company remains compliant with its financial covenants, and the 'ROAD 2030' plan outlines an ambitious yet achievable growth trajectory. The improved Adjusted EBITDA margin reflects operational efficiencies. The company's strong market position, coupled with favorable industry tailwinds from federal infrastructure spending, makes it an attractive long-term investment despite the increased leverage and acquisition-related costs.

Keywords

Civil Infrastructure, Road Construction, Asphalt Paving, Hot Mix Asphalt (HMA), Aggregates, Liquid Asphalt, SEC Filing, 10-K, Acquisitions, Financial Performance, Revenue Growth, Adjusted EBITDA, Contract Backlog, Public Infrastructure, DOT Contracts, Debt Financing, Corporate Governance, Risk Factors, ROAD 2030, Construction Partners