CONSTRUCTION PARTNERS INC earnings calls

asphalt revenue impact and M&A carryover

Q (Patrick Brown · Raymond James): He asked how much the asphalt pass-through added to revenue and whether that was counted as organic growth. He also asked what M&A contributes in the '26 guidance and whether $140 million carries into next year.

A: Management said the asphalt indexing added "probably $8 million to $10 million of additional revenue for the quarter" and that impact showed up both on the acquisitive and organic sides depending on geography. They said midpoint guidance implies around 30% overall growth, with 8% organic and about 22% acquisitive, roughly $780 million to $790 million at the midpoint. They confirmed about $140 million of acquisition revenue carries into FY '27.

"We're probably $8 million to $10 million of additional revenue for the quarter." — Gregory Hoffman (CFO)

funding uncertainty and project mix

Q (Ned Fleming): He asked whether funding uncertainty (continuing resolutions) shifts work toward smaller, short-term resurfacing projects instead of larger multiyear projects.

A: Management said yes, historically continuing resolutions lead to more maintenance and short-term projects as people wait on longer-term funding. They said capital still flows, states and local governments step up to create funding, operations were not disrupted in the past, and those years were some of the company's best for acquisition opportunities.

Q4 margin drivers and cost pressures

Q (Andrew J. Wittmann · Baird): He asked whether the Q4 margin step-up is just seasonal fixed-cost leverage or if acquisitions like Ellsworth and other factors also help. He also asked if there are other inflationary or deflationary cost factors, especially labor.

A: Management said Ellsworth and other acquisitions help as they integrate in Q4 and start contributing revenue and margin, and seasonal fixed-cost absorption also boosts Q4 margins. They added they see normal cost adjustments for labor, concrete and pipe and that their pass-through model and indexed pricing (including energy) are being applied in bids.

"Other acquisitions we've made throughout the year are a help and become fully integrated in the fourth quarter and start turning on the revenue and the margin." — Gregory Hoffman (CFO)

how acquisitions lift margins; DOT planning

Q (Kathryn Thompson · Thompson Research Group): She asked how much recent acquisitions (past 6–12 months) have improved margins and operations. She also asked what state DOTs are saying about planning around federal highway bill reauthorization.

A: Management said the 2025 Lone Star Paving deal was transformational and moved EBITDA margin from 12% to 15%, and recent adds like Durwood Greene, GMJ, Lone Star Paving in Tennessee and Ellsworth have good margin backlogs and are helping profitability. On DOTs, they said states generally don't expect interruptions in planning, may do more short-term projects early, and expect a 5-year bill late this fall with no interruption to state programs.

"It took us from 12% to 15% EBITDA margins." — F. Smith (CEO)

data center work and cost pass-throughs

Q (Michael Feniger · BofA): He asked whether data center projects require different approaches, if size or pricing differ, and whether cost inflation (fuel, liquid asphalt) shows up in private bidding and affects the firm's storage/terminal plans for 2027.

A: Management said their model hasn't changed: data centers fit into local markets and the teams pursue them like other commercial work. They said data centers are a growing part of the business (70% to 75% of data centers are in their 8 states), project sizes vary from a few million to $30 million–$40 million, and they allocate people and equipment to the highest-margin opportunities. They also said short-term protections include hedging, terminals and indexes and that pass-through pricing is being applied in bids.

"So they're a growing part of our business, but it's simply -- we're simply allocating people and equipment to the highest-margin opportunities." — F. Smith (CEO)

which local markets are strong or weak

Q (Rohit Seth · B. Riley): He asked which markets in the company's footprint are performing better or lagging.

A: Management said they operate in 115 local markets with different competitive dynamics and margin profiles. Overall, they said most, almost all, markets are doing really well, they won't discuss specifics, and they expect markets to keep growing and become more profitable into 2027.

"But overall, most of the markets, almost all the markets are doing really well." — F. Smith (CEO)

drivers of strong Q4 margins

Q (Keith Hughes · Truist): He asked if there are any specific factors driving the implied strong Q4 margins year-over-year.

A: Management said the Q4 guide reflects what they expected for the work season, with pass-throughs helping recover impacts from weather and diesel, and they don't guide for weather. They emphasized their longer-term view: what they're guiding to is a 30 to 40 basis point increase in margins annually, and they focus on annual progress.

"And -- so -- and if you look at it annually, what we're guiding to is that 30 to 40 basis point increase in our margins annually." — F. Smith (CEO)

state DOT budgets, M&A pipeline, cash flow

Q (Adam Thalhimer · Thompson, Davidson & Company): He asked whether state DOT budgets are uniformly healthy across the 8 states, for an update on the M&A pipeline (tuck-ins vs. platforms), and about the Q4 free cash flow outlook.

A: Management said none of their 8 states are "bad" and all have healthy programs; Florida and Texas have outsized programs. On M&A, they said the pipeline is very active, they're in many discussions, seeing both tuck-ins and platforms, and the company is an acquirer of choice. For cash flow, management said strong June billings will flow through and make Q4 the best quarter for operating and free cash flow.

"I would say of our 8 states, Adam, I wouldn't characterize any as bad." — F. Smith (CEO)