If You Invested in Constr Partners (ROAD)

Construction Partners, Inc. (NASDAQ: ROAD) is a vertically integrated civil infrastructure company in the construction sector that focuses on highway, street, and bridge construction and related surface infrastructure. According to company disclosures, it specializes in the construction, repair and maintenance of roadways and other transportation infrastructure in local markets throughout the Sunbelt region of the United States. The company’s activities are supported by hot-mix asphalt plants, aggregate facilities and liquid asphalt terminals, which supply materials for its construction operations.

Construction Partners, Inc. operates in Alabama, Florida, Georgia, North Carolina, Oklahoma, South Carolina, Tennessee and Texas. In these states, publicly funded projects make up the majority of its business. These projects include local and state roadways, interstate highways, airport runways and bridges. In addition to its public sector work, the company performs private sector projects, including paving and sitework for office and industrial parks, shopping centers, local businesses and residential developments.

The company is described as a civil infrastructure business with an emphasis on road construction and maintenance. Its operations include manufacturing and distributing hot mix asphalt, performing paving activities such as constructing roadway base layers and applying asphalt pavement, and site development work that can involve installation of utility and drainage systems. Construction Partners, Inc. reports that its operations predominantly consist of infrastructure and road construction and are organized as a single segment.

Business model and vertical integration

Construction Partners, Inc. characterizes itself as vertically integrated in its civil infrastructure markets. Its hot-mix asphalt plants, aggregate facilities and liquid asphalt terminals support its construction, repair and maintenance activities. This structure allows the company to supply key construction materials internally for many of its projects. The company’s focus on local markets throughout the Sunbelt means that its operations are concentrated in specific geographic areas within Alabama, Florida, Georgia, North Carolina, Oklahoma, South Carolina, Tennessee and Texas.

Within these markets, the company works on a mix of public and private projects. Publicly funded work includes local and state roads, interstate highways, airport runways and bridges. Private work includes paving and sitework for office and industrial parks, shopping centers, local businesses and residential developments. The company’s disclosures emphasize that public infrastructure construction and maintenance represent a significant portion of its activity.

Geographic footprint and project types

Construction Partners, Inc. operates across multiple Sunbelt states. Its footprint includes Alabama, Florida, Georgia, North Carolina, Oklahoma, South Carolina, Tennessee and Texas. In these states, the company undertakes projects such as:

• Local and state roadways
• Interstate highways
• Airport runways
• Bridges
• Paving and sitework for office and industrial parks
• Paving and sitework for shopping centers and local businesses
• Paving and sitework for residential developments

The company’s news releases highlight that it expands its presence in certain markets through acquisitions. For example, it has reported acquisitions of hot-mix asphalt plants and related construction operations in the Houston, Texas metro area and in Florida, integrating these operations into its existing platform companies in those states. These transactions are described as expanding its footprint in high-growth areas and enhancing its ability to deliver asphalt and infrastructure services in those local markets.

Industry context

Within the broader construction industry, Construction Partners, Inc. operates in the highway, street, and bridge construction category and describes itself as a civil infrastructure company. Its work centers on surface transportation infrastructure and related site development. The company’s disclosures indicate that publicly funded transportation programs and infrastructure needs in its Sunbelt markets are important to its business, as public projects make up the majority of its work.

Because the company is listed on the Nasdaq Global Select Market under the symbol ROAD, it files regular reports and current reports with the U.S. Securities and Exchange Commission. These filings include information on its financial results, acquisitions, credit facilities and other material events. The company has also discussed non-GAAP financial measures such as Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income in its public communications, explaining that management uses these metrics as key performance indicators for its operations.

Capital structure and credit facilities

Construction Partners, Inc. and certain of its wholly owned subsidiaries are party to a Third Amended and Restated Credit Agreement, as amended, that provides a term loan facility and a revolving credit facility. A Fifth Amendment to this agreement increased the revolving credit facility and term loan amounts and extended the maturity date for outstanding borrowings. The amendment also adjusted certain financial covenants, including consolidated interest coverage and consolidated net leverage ratio requirements. These details are disclosed in the company’s Form 8-K describing the amendment to its credit agreement.

The company has also reported that it uses proceeds from its term loan facility in part to repay outstanding borrowings under its revolving credit facility. Its SEC filings note that the lenders under the credit agreement are full-service financial institutions that may provide various financial and non-financial services to the company and its affiliates.

Equity and incentive arrangements

Construction Partners, Inc. has an equity incentive plan under which it grants performance stock unit awards, referred to as LTIP-B awards. The company has disclosed that its Compensation Committee approved an amended form of award agreement that allows the committee, upon vesting of these awards, to settle them in cash equal to the value of the underlying shares of Class A common stock. Certain previously granted unvested LTIP-B awards were also amended to incorporate this cash settlement provision. These details are described in a Form 8-K filing regarding compensatory arrangements of certain officers.

Regulatory reporting and non-GAAP measures

In its SEC filings and press releases, Construction Partners, Inc. presents both GAAP and non-GAAP financial information. Non-GAAP measures discussed by the company include Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income. The company explains that these measures are supplemental and are used by management as key performance indicators. It also notes that these measures have limitations as analytical tools and should not be considered in isolation or as alternatives to GAAP measures.

The company’s current reports on Form 8-K frequently furnish press releases announcing quarterly and annual financial results, preliminary financial information, outlook ranges for future periods, and details of acquisitions. These filings also include cautionary notes regarding forward-looking statements, describing risks and uncertainties that could cause actual results to differ from expectations.

Stock information

Construction Partners, Inc.’s Class A common stock trades on the Nasdaq Global Select Market under the ticker symbol ROAD. The company identifies itself in SEC filings as a registrant under Section 12(b) of the Securities Exchange Act of 1934, with its Class A common stock registered and listed on this exchange.

FAQs about Construction Partners, Inc. (ROAD)

• What does Construction Partners, Inc. do?
  

  Construction Partners, Inc. is a civil infrastructure company that focuses on the construction, repair and maintenance of surface infrastructure. Its work includes roadways, interstate highways, airport runways and bridges, as well as paving and sitework for office and industrial parks, shopping centers, local businesses and residential developments.

• In which regions does Construction Partners, Inc. operate?
  

  The company operates in local markets throughout the Sunbelt region of the United States. It has disclosed operations in Alabama, Florida, Georgia, North Carolina, Oklahoma, South Carolina, Tennessee and Texas.

• What types of projects make up the majority of the company’s business?
  

  Publicly funded projects make up the majority of Construction Partners, Inc.’s business. These include local and state roadways, interstate highways, airport runways and bridges.

• Does Construction Partners, Inc. work on private sector projects?
  

  Yes. In addition to public infrastructure work, the company performs private sector projects that include paving and sitework for office and industrial parks, shopping centers, local businesses and residential developments.

• How is Construction Partners, Inc. vertically integrated?
  

  The company describes itself as vertically integrated because its construction activities are supported by its own hot-mix asphalt plants, aggregate facilities and liquid asphalt terminals. These facilities supply materials for its infrastructure and road construction projects.

• On which stock exchange is ROAD listed?
  

  The Class A common stock of Construction Partners, Inc. is listed on the Nasdaq Global Select Market under the trading symbol ROAD.

• What non-GAAP financial measures does the company highlight?
  

  In its public communications, the company discusses non-GAAP measures such as Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income. It states that management uses these measures as key performance indicators and provides reconciliations to the most directly comparable GAAP measures.

• How does Construction Partners, Inc. expand its footprint?
  

  The company has reported expanding its operations through acquisitions of hot-mix asphalt plants and related construction businesses in its Sunbelt markets, including transactions in the Houston, Texas metro area and in Florida. These acquisitions are integrated into its existing platform companies in those states.

• What is the company’s credit facility structure?
  

  Construction Partners, Inc. and certain subsidiaries are party to a credit agreement that includes a term loan facility and a revolving credit facility. A disclosed amendment increased the sizes of these facilities, extended their maturity and adjusted certain financial covenants, including consolidated interest coverage and net leverage ratios.

• Does Construction Partners, Inc. have an equity incentive plan?
  

  Yes. The company has an equity incentive plan under which it grants performance stock unit awards. An amended form of award agreement allows the Compensation Committee to settle certain performance awards in cash equal to the value of the underlying shares upon vesting.