Construction Partners, Inc. Announces Fiscal 2020 Third Quarter Results
DOTHAN, Ala., Aug. 7, 2020 /PRNewswire/ -- Construction Partners, Inc. (NASDAQ: ROAD) (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 its third fiscal quarter ended June 30, 2020. Results for the quarter included revenues of $217.0 million, gross profit of $36.5 million, net income of $15.7 million, and adjusted EBITDA((1)) of $31.9 million.
Charles E. Owens, the Company's President and Chief Executive Officer, said, "We are pleased with our strong profitability in the third quarter, despite lower revenues. Our solid results were driven primarily by vertical integration synergies, lower costs of fuel, effective utilization of crews and equipment, a disciplined project bidding strategy and pricing of our integrated products.
Owens continued, "As an essential business engaged in critical infrastructure in each state within our footprint, we have continued to operate without significant delays related to state and local shelter-in-place orders. The resiliency of our employees and the effectiveness of our safety protocols have positioned us to effectively manage pandemic-related challenges in our day-to-day operations. Notwithstanding current top-line pressure from COVID-19 and its related effects in certain of our markets, we remain optimistic about the long-term prospects of our business and industry."
Project backlog at June 30, 2020 was $651.2 million, compared to $579.1 million at March 31, 2020 and $581.1 million at June 30, 2019.
Revised Fiscal Year 2020 Outlook
The Company has revised its outlook for fiscal year 2020 with regard to revenue, net income and Adjusted EBITDA, as follows:
- Revenue of $810 million to $820 million
- Net income of $36 million to $38 million
- Adjusted EBITDA ((1)) of $92.0 million to $94.5 million
Ned N. Fleming, III, the Company's Executive Chairman, stated, "This was an excellent quarter, especially given the current economic and COVID-19 backdrop. The team has successfully driven operational efficiencies, generating profitability and cash flow. The entire CPI team has exemplified a commitment to safety during this pandemic, and we remain vigilant in putting the health and welfare of our employees, as well as the communities in which we work, as first priority. With our geographically diverse footprint across the Southeast and vertically integrated business model, we believe that we are well-positioned to continue to execute on our proven strategy for long-term growth and value creation."
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, 2020. 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 14, 2020 by calling (201) 612-7415 and using passcode 13706244#. 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 35 hot-mix asphalt plants, nine 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 Dennard
Dennard Lascar Investor Relations
ROAD@DennardLascar.com
(713) 529-6600
- Financial Statements Follow -
CONSTRUCTION PARTNERS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except share and per share data)
For the Three Months Ended For the Nine Months Ended
June 30,
June 30,
---
2020 2019 2020 2019
---
Revenues $217,041 $227,290 $561,034 $545,921
Cost of revenues 180,549 189,198 479,814 466,900
---
Gross profit 36,492 38,092 81,220 79,021
General and administrative expenses (16,852) (15,968) (50,786) (45,170)
Gain on sale of equipment, net 390 58 1,134 1,085
---
Operating income 20,030 22,182 31,568 34,936
Interest expense, net (575) (615) (2,690) (1,509)
Other income (expense) 645 190 (43) 296
---
Income before provision for income taxes and 20,100 21,757 28,835 33,723
earnings from investment in joint venture
Provision for income taxes 4,772 4,941 6,622 8,080
Earnings from investment in joint venture 419 386 532 925
---
Net income $15,747 $17,202 $22,745 $26,568
Net income per share attributable to common
stockholders:
Basic $0.31 $0.33 $0.44 $0.52
Diluted $0.30 $0.33 $0.44 $0.52
Weighted average number of common shares
outstanding:
Basic 51,489,211 51,414,619 51,489,211 51,414,619
Diluted 51,646,385 51,422,899 51,623,627 51,414,887
CONSTRUCTION PARTNERS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
June 30,
September 30,
2020 2019
ASSETS
(unaudited)
Current assets:
Cash and cash equivalents $78,695 $80,619
Contracts receivable including retainage, net 133,086 139,882
Costs and estimated earnings in excess of billings on uncompleted contracts 15,604 12,030
Inventories 39,256 34,291
Prepaid expenses and other current assets 9,277 13,144
Total current assets 275,918 279,966
Property, plant and equipment, net 236,751 205,870
Operating lease right-of-use assets 7,879
Goodwill 46,348 38,546
Intangible assets, net 3,277 3,434
Investment in joint venture 528 496
Other assets 1,973 2,284
Deferred income taxes, net 1,171 1,173
Total assets $573,845 $531,769
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $57,579 $70,442
Billings in excess of costs and estimated earnings on uncompleted contracts 34,511 31,115
Current portion of operating lease liabilities 2,379
Current maturities of debt 10,200 7,538
Accrued expenses and other current liabilities 21,388 19,078
Total current liabilities 126,057 128,173
Long-term liabilities:
Long-term debt, net of current maturities 55,756 42,458
Operating lease liabilities, net of current portion 5,710
Deferred income taxes, net 11,281 11,480
Other long-term liabilities 7,793 6,108
Total long-term liabilities 80,540 60,046
Total liabilities 206,597 188,219
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $0.001; 10,000,000 shares authorized at June 30, 2020 and
September 30, 2019 and no shares issued and outstanding
Class A common stock, par value $0.001; 400,000,000 shares authorized, 33,430,364 34 33
shares issued and outstanding at June 30, 2020, and 32,597,736 shares issued and outstanding
at September 30, 2019
Class B common stock, par value $0.001; 100,000,000 shares authorized, 21,274,333 21 22
shares issued and 18,351,381 outstanding at June 30, 2020, and 22,106,961 shares issued and
19,184,009 shares outstanding at September 30, 2019
Additional paid-in capital 244,627 243,452
Treasury stock, at cost, 2,922,952 shares of Class B common stock, par value $0.001 (15,603) (15,603)
Retained earnings 138,169 115,646
Total stockholders' equity 367,248 343,550
Total liabilities and stockholders' equity $573,845 $531,769
CONSTRUCTION PARTNERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
For the Nine Months Ended June 30,
2020 2019
Cash flows from operating activities:
Net income $22,745 $26,568
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization of long-lived assets 29,065 22,698
Amortization of deferred debt issuance costs and debt discount 115 83
Loss on derivative instruments 1,989 543
Provision for bad debt 451 421
Gain on sale of equipment, net (1,134) (1,085)
Equity-based compensation expense 1,175 146
Earnings from investment in joint venture (532) (925)
Distribution of earnings from investment in joint venture 139
Deferred income taxes (197) (136)
Other non-cash adjustments (12)
Changes in operating assets and liabilities, net of acquisition:
Contracts receivable including retainage, net 6,345 (14,839)
Costs and estimated earnings in excess of billings on uncompleted contracts (3,574) (4,709)
Inventories (1,878) (11,992)
Prepaid expenses and other current assets 3,867 604
Other assets 311 3,978
Accounts payable (12,863) 1,722
Billings in excess of costs and estimated earnings on uncompleted contracts 3,396 (6,394)
Accrued expenses and other current liabilities 2,029 1,497
Other long-term liabilities (23) (217)
Net cash provided by operating activities, net of acquisition 51,414 17,963
Cash flows from investing activities:
Purchases of property, plant and equipment (41,535) (31,744)
Proceeds from sale of equipment 2,182 2,898
Business acquisitions, net of cash acquired (30,191) (8,854)
Acquisition of liquid asphalt terminal assets (10,848)
Return of investment in joint venture 361 2,200
Net cash used in investing activities (69,183) (46,348)
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net of debt issuance costs and discount 42,719
Repayments of long-term debt (26,874) (11,104)
Net cash provided by (used in) financing activities 15,845 (11,104)
Net change in cash and cash equivalents (1,924) (39,489)
Cash and cash equivalents:
Beginning of period 80,619 99,137
End of period $78,695 $59,648
Supplemental cash flow information:
Cash paid for interest 1,416 1,998
Cash paid for income taxes 5,600 3,232
Operating lease right-of-use assets obtained in exchange for operating lease liabilities 1,241
Cash paid for operating lease liabilities 2,464
Non-cash items:
Property, plant and equipment included with accounts payable at period end 1,073 332
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 and (v) certain management fees and expenses, and excludes income recognized in connection with a legal settlement between certain of the Company's subsidiaries and a third party that did not directly relate to the Company's business and that the Company does not expect to reoccur. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenues for each period. Adjusted EBITDA and Adjusted EBITDA Margin are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP as an indicator of our operating performance. Management uses Adjusted EBITDA and Adjusted EBITDA Margin as key performance indicators, and we believe they are measures frequently used by securities analysts, investors and other parties to evaluate companies in our industry. These measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP.
Our calculation of Adjusted EBITDA and Adjusted EBITDA Margin 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, the most directly comparable measure calculated in accordance with GAAP, to Adjusted EBITDA, and the calculation of Adjusted EBITDA Margin for each of the periods presented:
Construction Partners, Inc.
Net Income to Adjusted EBITDA Reconciliation
Fiscal Quarters Ended June 30, 2020 and 2019
(unaudited, in thousands, except percentages)
For the Three Months Ended June 30,
2020 2019
---
Net income $
15,747 $
17,202
Interest expense, net 575 615
Provision for income taxes 4,772 4,941
Depreciation, depletion and amortization of long-lived assets 10,034 8,059
Equity-based compensation expense 390 146
Management fees and expenses (1) 355 316
Adjusted EBITDA $
31,873 $
31,279
Revenues $
217,041 $
227,290
Adjusted EBITDA Margin 14.7 13.8
% %
--- ---
(1) Reflects fees and reimbursement of certain travel expenses under a 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 2020 Updated Outlook
(unaudited, in thousands)
For the Fiscal Year
Ending
September 30, 2020
Low High
Net
income $36,000 $38,000
Interest
expense,
net 3,300 3,300
Provision
for
income
taxes 10,700 11,200
Depreciation,
depletion
and
amortization
of
long-
lived
assets 39,000 39,000
Equity-
based
compensation
expense 1,600 1,600
Management
fees
and
expenses
(1) 1,400 1,400
Adjusted
EBITDA $92,000 $94,500
(1) Reflects fees and reimbursement of certain travel
expenses under a management services agreement with an
affiliate of SunTx Capital Partners, the Company's
controlling stockholder.
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SOURCE Construction Partners, Inc.
