PR Newswire | Aug 6, 2021 07:01AM EDT

08/06 06:00 CDT

Construction Partners, Inc. Announces Fiscal 2021 Third Quarter ResultsCompany Reports Record Backlog of $823 MillionCompany Revises FY 2021 Outlook Ranges DOTHAN, Ala., Aug. 6, 2021

DOTHAN, Ala., Aug. 6, 2021 /PRNewswire/ -- Construction Partners, Inc. (NASDAQ: ROAD) ("CPI" or the "Company"), a vertically integrated civil infrastructure company specializing in the construction and maintenance of roadways across five southeastern states, today reported financial and operating results for the fiscal quarter ended June 30, 2021.

Fred J. (Jule) Smith, III, the Company's President and Chief Executive Officer, said, "Our business performed very well in the quarter, generating top-line revenue growth of more than 20% versus the comparable prior year quarter. Across our footprint, we continued to win new project work, and importantly, we grew backlog to a record $823 million by the end of the third quarter. This growth of backlog, combined with a bright outlook for infrastructure funding at both the state and federal levels, has compelled us to invest this fiscal year in our people and technology to prepare for and support future growth. While this investment for future growth adversely impacts profitability in the short term, we see these investments as vital as we continue to scale the business and grow through organic expansion and acquisition opportunities."

Revenues for the third fiscal quarter of 2021 were $261.7 million, an increase of 20.6% compared to the third fiscal quarter of last year. Gross profit was $36.6 million in the third fiscal quarter of 2021, compared to $36.9 million in the third fiscal quarter of last year.

General and administrative expenses were $23.2 million for the third fiscal quarter of 2021, compared to $16.9 million in the third fiscal quarter of last year. The increase in general and administrative expenses was primarily due to additional payroll costs associated with acquisitions completed during fiscal 2021, as well as compensation-related initiatives.

Net income was $9.3 million for the third fiscal quarter of 2021, compared to net income of $15.8 million in the third fiscal quarter of last year.

Adjusted EBITDA(1) for the third fiscal quarter of 2021 was $29.0 million, compared to $32.0 million for the third fiscal quarter of last year.

Project backlog was $822.9 million at June 30, 2021, compared to $651.2 million at June 30, 2020 and $773.3 million at March 31, 2021.

Smith continued, "Customer demand, project funding, and bidding activity remained strong throughout the quarter. However, similar to many construction and infrastructure businesses, we experienced project delays due to supply chain and labor constraints affecting CPI operations as well as our subcontractors and vendors. While CPI has a stable and experienced local workforce in our markets and strong purchasing power across our company, we are not immune to these current industry constraints. We believe supply chain disruptions will subside in the coming quarters as we move through fiscal 2022. Today, we have revised our fiscal 2021 financial outlook to reflect these transitory issues; however, our long-term growth strategy remains firmly intact."

Revised Fiscal Year 2021 Outlook

The Company revised its outlook for fiscal year 2021 with regard to revenue, Adjusted net income and Adjusted EBITDA, as follows:

* Revenue of $940 million to $960 million, compared to the prior range of $950 million to $1.0 billion. Revenue for fiscal year 2020 was $785.7 million. * Adjusted net income(1) of $36.9 million to $38.4 million, compared to the prior range for net income of $42.0 million to $46.5 million. Net income for fiscal year 2020 was $40.3 million. * Adjusted EBITDA(1) of $105.0 million to $108.3 million, compared to the prior range of $109.0 million to $118.0 million. Adjusted EBITDA for fiscal year 2020 was $98.4 million.

Ned N. Fleming, III, the Company's Executive Chairman, stated, "CPI generated strong growth in the quarter and continues to prudently invest in the right people, processes and technology to further strengthen and support a robust, yet disciplined, growth plan. Earlier this week, we announced meaningful acquisition transactions within our existing states, thereby expanding our relative market share across our footprint. We also focused on and enhanced our vertical integration strategy in both Alabama and North Carolina. As a significant consolidator in what continues to be a highly fragmented industry, we are maintaining momentum through important, strategic acquisitions that provide us with quality companies and people. Despite short-term headwinds, we expect to carry on with a successful execution of our long-term strategy of enhancing shareholder value in our Company."

Conference Call

The Company will conduct a conference call today at 9:00 a.m. Central Time to discuss financial and operating results for the quarter ended June 30, 2021. To access the call live by phone, dial (412) 902-0003 and ask for the Construction Partners call at least 10 minutes prior to the start time. A telephonic replay will be available through August 13, 2021 by calling (201) 612-7415 and using passcode 13720630#. A webcast of the call will also be available live and for later replay on the Company's Investor Relations website at www.constructionpartners.net.

About Construction Partners, Inc.

Construction Partners, Inc. is a vertically integrated civil infrastructure company operating across five southeastern states, with 52 hot-mix asphalt plants, 14 aggregate facilities and one liquid asphalt terminal. Publicly funded projects make up the majority of its business and include local and state roadways, interstate highways, airport runways and bridges. The majority of the Company's public projects are maintenance-related. Private sector projects include paving and sitework for office and industrial parks, shopping centers, local businesses and residential developments. To learn more, visit www.constructionpartners.net.

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained herein that are not statements of historical or current fact constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. These statements may be identified by the use of words such as "may," "will," "expect," "should," "anticipate," "intend," "project," "outlook," "believe" and "plan." The forward-looking statements contained in this press release include, without limitation, statements related to financial projections, future events, business strategy, future performance, future operations, backlog, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management. These and other forward-looking statements are based on management's current views and assumptions and involve risks and uncertainties that could significantly affect expected results. Important factors could cause actual results to differ materially from those expressed in the forward-looking statements, including, among others: our ability to successfully manage and integrate acquisitions; failure to realize the expected economic benefits of acquisitions, including future levels of revenues being lower than expected and costs being higher than expected; failure or inability to implement growth strategies in a timely manner; declines in public infrastructure construction and reductions in government funding, including the funding by transportation authorities and other state and local agencies; risks related to our operating strategy; competition for projects in our local markets; risks associated with our capital-intensive business; government requirements and initiatives, including those related to funding for public or infrastructure construction, land usage and environmental, health and safety matters; unfavorable economic conditions and restrictive financing markets; our ability to obtain sufficient bonding capacity to undertake certain projects; our ability to accurately estimate the overall risks, requirements or costs when we bid on or negotiate contracts that are ultimately awarded to us; the cancellation of a significant number of contracts or our disqualification from bidding for new contracts; risks related to adverse weather conditions; our substantial indebtedness and the restrictions imposed on us by the terms thereof; our ability to maintain favorable relationships with third parties that supply us with equipment and essential supplies; our 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 our information technology systems and infrastructure; our ability to maintain effective internal control over financial reporting; risks from the COVID-19 pandemic, and the risks, uncertainties and factors set forth under "Risk Factors" in the Company's most recent Annual Report on Form 10-K and its subsequently filed Quarterly Reports on Form 10-Q. Forward-looking statements speak only as of the date they are made. The Company assumes no obligation to update forward-looking statements to reflect actual results, subsequent events, or circumstances or other changes affecting such statements except to the extent required by applicable law.

Contacts:

Rick Black / Ken DennardDennard Lascar Investor RelationsROAD@DennardLascar.com(713) 529-6600

^ (1) Adjusted net income (loss) and Adjusted EBITDA are financial measures notpresented in accordance with generally accepted accounting principles ("GAAP").Please see "Reconciliation of Non-GAAP Financial Measures" at the end of thispress release.

- Financial Statements Follow -

Construction Partners, Inc.

Consolidated Statements of Income

(unaudited, in thousands, except share and per share data)



For the Three Months For the Nine Months Ended June 30, Ended June 30,

2021 2020 2021 2020

Revenues $261,656 $217,041 $631,697 $561,034

Cost of revenues 225,039 180,155 546,414 480,217

Gross profit 36,617 36,886 85,283 80,817

General and (23,195) (16,852) (67,754) (50,786) administrative expenses

Gain on sale of 835 390 1,177 1,134 equipment, net

Operating income 14,257 20,424 18,706 31,165

Interest expense, net (568) (575) (1,334) (2,690)

Other income (expense) 252 251 661 360

Income before provision for income taxes and 13,941 20,100 18,033 28,835 earnings from investment in joint venture

Provision for income (4,600) (4,772) (5,767) (6,622) taxes

Earnings (loss) from investment in joint (1) 419 10 532 venture

Net income $9,340 $15,747 $12,276 $22,745



Net income per share attributable to common stockholders:

Basic $0.18 $0.31 $0.24 $0.44

Diluted $0.18 $0.30 $0.24 $0.44



Weighted average number of common shares outstanding:

Basic 51,686,73551,489,21151,620,14351,489,211

Diluted 51,864,40351,646,38551,726,99451,623,627

Construction Partners, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)



June 30, September 30,

2021 2020

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents $134,468 $148,316

Contracts receivable including retainage, net 164,305 131,770

Costs and estimated earnings in excess of billings15,770 7,873 on uncompleted contracts

Inventories 50,841 38,561

Prepaid expenses and other current assets 7,967 5,041

Total current assets 373,351 331,561



Property, plant and equipment, net 296,697 237,230

Operating lease right-of-use assets 6,661 7,383

Goodwill 78,444 46,348

Intangible assets, net 5,134 3,224

Investment in joint venture 108 198

Other assets 6,591 1,784

Deferred income taxes, net 386 386

Total assets $767,372 $628,114

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $82,817 $64,732

Billings in excess of costs and estimated earnings31,555 33,704 on uncompleted contracts

Current portion of operating lease liabilities 1,501 2,046

Current maturities of debt 10,000 13,000

Accrued expenses and other current liabilities 25,684 22,347

Total current liabilities 151,557 135,829

Long-term liabilities:

Long-term debt, net of current maturities 188,591 79,053

Operating lease liabilities, net of current 5,320 5,554 portion

Deferred income taxes, net 14,003 14,003

Other long-term liabilities 8,228 8,480

Total long-term liabilities 216,142 107,090

Total liabilities 367,699 242,919

Commitments and contingencies

Stockholders' equity:

Preferred stock, par value $0.001; 10,000,000 shares authorized at June 30, 2021 and September - - 30, 2020 and no shares issued and outstanding

Class A common stock, par value $0.001; 400,000,000 shares authorized, 36,506,570 shares issued and outstanding at June 30, 2021, and 36 34 33,875,884 shares issued and outstanding at September 30, 2020

Class B common stock, par value $0.001; 100,000,000 shares authorized, 18,708,860 shares issued and 15,785,908 outstanding at June 30, 202119 21 and 20,828,813 shares issued and 17,905,861 outstanding at September 30, 2020

Additional paid-in capital 247,224 245,022

Treasury stock, at cost, 2,922,952 shares of Class(15,603) (15,603) B common stock, par value $0.001

Retained earnings 167,997 155,721

Total stockholders' equity 399,673 385,195

Total liabilities and stockholders' equity $767,372 $628,114

Construction Partners, Inc.

Consolidated Statements of Cash Flows

(unaudited, in thousands)



For the Nine Months Ended June 30,

2021 2020

Cash flows from operating activities:

Net income $ 12,276 $ 22,745

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and amortization 36,011 29,065 of long-lived assets

Amortization of deferred debt issuance 190 115 costs and debt discount

Unrealized (gain) loss on derivative (3,141) 1,989 instruments

Provision for bad debt 440 451

Gain on sale of equipment, net (1,177) (1,134)

Equity-based compensation expense 2,202 1,175

Earnings from investment in joint venture (10) (532)

Distribution of earnings from investment 100 139 in joint venture

Deferred income taxes - (197)

Other non-cash adjustments (57) (12)

Changes in operating assets and liabilities, net of acquisition:

Contracts receivable including retainage, (32,975) 6,345 net

Costs and estimated earnings in excess of (7,897) (3,574) billings on uncompleted contracts

Inventories (8,061) (1,878)

Prepaid expenses and other current assets (1,723) 3,867

Other assets (4,123) 311

Accounts payable 16,789 (12,863)

Billings in excess of costs and estimated (2,149) 3,396 earnings on uncompleted contracts

Accrued expenses and other current 2,970 2,029 liabilities

Other long-term liabilities (331) (23)

Net cash provided by operating activities,9,334 51,414 net of acquisitions

Cash flows from investing activities:

Purchases of property, plant and equipment(39,588) (41,535)

Proceeds from sale of equipment 2,361 2,182

Business acquisitions, net of cash (92,303) (30,191) acquired

Return of investment in joint venture - 361

Net cash used in investing activities (129,530) (69,183)

Cash flows from financing activities:

Proceeds from issuance of long-term debt, 199,198 42,719 net of debt issuance costs and discount

Repayments of long-term debt (92,850) (26,874)

Net cash provided by financing activities 106,348 15,845

Net change in cash and cash equivalents (13,848) (1,924)

Cash and cash equivalents:

Beginning of period 148,316 80,619

End of period $ 134,468 $ 78,695



Supplemental cash flow information:

Cash paid for interest $ 1,950 $ 1,416

Cash paid for income taxes $ 3,568 $ 5,600

Operating lease right-of-use assets obtained in exchange for operating lease $ 1,089 $ 1,241 liabilities

Cash paid for operating lease liabilities $ 1,795 $ 2,464

Non-cash items:

Property, plant and equipment included $ 778 $ 1,073 with accounts payable at period end

Non-compete agreements to seller in $ 1,700 $ - business combination

Amounts payable to sellers in business $ 1,296 $ - combinations

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA represents net income before, as applicable from time to time, (i) interest expense, net, (ii) provision (benefit) for income taxes, (iii) depreciation, depletion and amortization of long-lived assets, (iv) equity-based compensation expense, (v) loss on the extinguishment of debt, (vi) certain management fees and expenses and (vii) nonrecurring legal settlement costs and associated legal expenses unrelated to the Company's core operations. Adjusted net income (loss) represents net income (loss) before nonrecurring legal settlement costs and associated legal expenses unrelated to the Company's core operations, net of tax impact. These metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures have limitations as analytical tools and should not be considered in isolation or as an alternative to net income (loss) or any other performance measure derived in accordance with GAAP as an indicator of our operating performance. We present Adjusted EBITDA and Adjusted net income (loss) because management uses these measures as key performance indicators, and we believe that securities analysts, investors and others use these measures to evaluate companies in our industry. Our calculation of these measures may not be comparable to similarly named measures reported by other companies. Potential differences may include differences in capital structures, tax positions and the age and book depreciation of intangible and tangible assets. The following tables present a reconciliation of net income (loss), the most directly comparable measure calculated in accordance with GAAP, to Adjusted EBITDA for the periods presented:

Construction Partners, Inc.

Net Income to Adjusted EBITDA Reconciliation

Fiscal Quarters Ended June 30, 2021 and 2020

(unaudited, in thousands)



For the Three Months Ended June 30,

2021 2020

Net income (loss) $9,340 $15,747

Interest expense, net 568 575

Provision for income taxes 4,600 4,772

Depreciation, depletion and amortization of long-lived assets12,626 10,034

Equity-based compensation expense 1,347 390

Management fees and expenses^ (1) 412 355

Settlement of legal claim and associated legal expenses ^(2) 134 119

Adjusted EBITDA $29,027 $31,992

^ Reflects fees and reimbursement of certain out-of-pocket expenses under a(1) management services agreement with an affiliate of SunTx Capital Partners, the Company's controlling stockholder.

^ Reflects legal expenses associated with a $3.2 million legal settlement(2) unrelated to the Company's core operations.

Construction Partners, Inc.

Net Income to Adjusted EBITDA Reconciliation

Fiscal Year Ended September 30, 2020

(in thousands)



Net income $40,297

Interest expense, net 3,113

Provision for income taxes 12,760

Depreciation, depletion and amortization of long-lived assets39,301

Equity-based compensation expense 1,570

Management fees and expenses^ (1) 1,403

Adjusted EBITDA $98,444

^ Reflects fees and reimbursement of certain out-of-pocket expenses under a(1) management services agreement with an affiliate of SunTx Capital Partners, the Company's controlling stockholder.

Construction Partners, Inc.

Net Income to Adjusted EBITDA Reconciliation

Fiscal Year 2021 Updated Outlook

(unaudited, in thousands)



For the Fiscal Year Ending September 30, 2021

Low High

Net income $32,500 $34,000

Interest expense, net 2,000 2,100

Provision for income taxes 12,650 13,150

Depreciation, depletion and amortization of long-lived assets48,000 49,000

Equity-based compensation expense 3,500 3,600

Management fees and expenses^ (1) 1,950 2,000

Settlement of legal claim and associated legal expenses ^(2) 4,350 4,400

Adjusted EBITDA $104,950 $108,250

^ Reflects fees and reimbursement of certain out-of-pocket expenses under a(1) management services agreement with an affiliate of SunTx Capital Partners, the Company's controlling stockholder.

^ Reflects a $3.2 million legal settlement unrelated to the Company's core(2) operations and associated legal expenses.

Construction Partners, Inc.

Net Income to Adjusted EBITDA Reconciliation

Fiscal Year 2021 Original Outlook (Prior to Update)

(unaudited, in thousands)



For the Fiscal Year Ending September 30, 2021

Low High

Net income $42,000 $46,500

Interest expense, net 2,500 2,700

Provision for income taxes 14,000 15,600

Depreciation, depletion and amortization of long-lived assets47,600 50,200

Equity-based compensation expense 1,570 1,600

Management fees and expenses^ (1) 1,330 1,400

Adjusted EBITDA $109,000 $118,000

^ Reflects fees and reimbursement of certain out-of-pocket expenses under a(1) management services agreement with an affiliate of SunTx Capital Partners, the Company's controlling stockholder.

The following tables present a reconciliation of net income, the most directly comparable measure calculated in accordance with GAAP, to adjusted net income for the periods presented:

Construction Partners, Inc.

Net Income to Adjusted Net Income Reconciliation

Fiscal Quarters Ended June 30, 2021 and 2020

(unaudited, in thousands)



For the Three Months Ended June 30,

2021 2020

Net income $9,340 $15,747

Settlement of legal claim - -

Legal fees associated with settlement of legal claim ^(1)134 119

Adjusted net income (loss) $9,474 $15,866

^ Reflects legal expenses associated with a $3.2 million legal settlement(1) unrelated to the Company's core operations.

Construction Partners, Inc.

Net Income to Adjusted Net Income Reconciliation

Fiscal Year 2021 Updated Outlook

(unaudited, in thousands)



For the Fiscal Year Ending September 30, 2021

Low High

Net income $32,500 $34,000

Settlement of legal claim ^(1) 3,200 3,200

Legal fees associated with settlement of legal claim ^(2)1,150 1,200

Adjusted net income $36,850 $38,400

^ Reflects a $3.2 million legal settlement unrelated to the Company's core(1) operations.

^ Reflects legal expenses associated with a $3.2 million legal settlement(2) unrelated to the Company's core operations.

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SOURCE Construction Partners, Inc.