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Construction Partners Announces FY 2018 Third Quarter Results

Reports Record Third Quarter Revenue and Gross Profit

DOTHAN, Ala., Aug. 09, 2018 (GLOBE NEWSWIRE) -- 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 its fiscal 2018 third quarter ended June 30, 2018.

 Highlights – 3Q FY 2018 vs. 3Q FY 2017

  • Revenue was $195.1 million, up 32%
  • Gross profit was $29.5 million, up 23%
  • Net income was $13.4 million, up 109%
  • Diluted earnings per share were $0.29, up 93%
  • Adjusted EBITDA(1) was $22.7 million, up 29%
  • Backlog totaled $609 million at June 30, 2018

Charles E. Owens, CPI’s President and Chief Executive Officer, stated “We are very pleased with our strong year-over-year growth in the third quarter as our team continues to execute well on our growth strategy, with strong double-digit increases across all of our key financial metrics.  We are continuing to see strong demand in most of the markets where we compete, and we are maintaining our financial outlook for 2018.

“We have successfully completed the integration of The Scruggs Company, which we acquired mid-third quarter, serving the Georgia market. The Scruggs Company – our fifth platform company acquisition -- is performing very well and in-line with our expectations. We will continue to look for opportunities both to optimize their operations in order to boost profitability and to leverage new business development opportunities in its primary market areas.

“We intend to remain sharply focused on our strategy of delivering controlled, profitable growth through organic growth projects as well as from additional acquisitions in the highly fragmented, high-growth Southeast markets where we compete.”

(1) Adjusted EBITDA is a non-GAAP financial measure. Please see a reconciliation to the most directly comparable GAAP measure at the end of this news release. 

Ned Fleming, CPI’s Executive Chairman, added, “One of the strengths of our Company that helps drive our success is the fact that a majority of CPI’s public projects are maintenance related with an average project length of eight months in the fast-growing Southeastern portion of the U.S.  The bulk of our business comes from recurring roadway repair projects funded by federal, state and local governments, without reliance on large projects. These factors differentiate us from the other public companies in our industry. Another strength is our vertical integration, which gives us a competitive advantage over smaller competitors. We are pleased to have outperformed our expectations for the quarter, and we remain well positioned in the market for continued growth.”

Conference Call

CPI will conduct a conference call on Friday, August 10, 2018 at 10:00 a.m. Central Time, 11:00 a.m. Eastern Time, to discuss financial and operating results for the quarter ended June 30, 2018. 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 17, 2018 by calling (201) 612-7415 and using pass code 13681216#. A webcast of the call will also be available live and for later replay on CPI’s Investor Relations website at http://ir.constructionpartners.net.

About Construction Partners, Inc.
Construction Partners is a vertically integrated civil infrastructure company operating across five Southeastern states, operating 30 Hot Mix Asphalt plants and nine aggregate facilities.  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 CPI’s public projects are maintenance related. Private sector projects include paving and sitework for residential subdivisions, office and industrial parks, shopping centers and local businesses. To learn more, visit www.constructionpartners.net.

Contacts:
Rick Black / Ken Dennard
Dennard Lascar Investor Relations
ROAD@DennardLascar.com
(713) 529-6600

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,” “projects,” “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 successfully identify, manage and integrate acquisitions; 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 remediate material weaknesses in internal control over financial reporting identified in preparing our financial statements and to subsequently maintain effective internal control over financial reporting; and the risks, uncertainties and factors set forth under "Risk Factors" in Construction Partners' registration statement on Form S-1.  Forward-looking statements speak only as of the date they are made.  Construction Partners 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.

- Financial Statements Follow -

   
Construction Partners, Inc.
Consolidated Statements of Income
(Unaudited, in thousands, except share and per share data)
 
   
    For the three months
ended June 30,
    For the nine months
ended June 30,
 
    2018     2017     2018     2017  
Revenues   $ 195,075     $ 148,099     $ 464,395     $ 380,585  
Cost of revenues     165,606       124,117       398,379       323,513  
                                 
Gross profit     29,469       23,982       66,016       57,072  
General and administrative expenses     (14,788 )     (12,477 )     (40,572 )     (34,005 )
Settlement income     -       -       14,803       -  
Gain on sale of equipment, net     86       238       1,117       2,675  
                                 
Operating income     14,767       11,743       41,364       25,742  
Interest expense, net     (406 )     (659 )     (956 )     (2,802 )
Loss on extinguishment of debt     -       (1,638 )     -       (1,638 )
Other income (expense)     15       (3 )     (45 )     (134 )
                                 
Income before provision for income
taxes and earnings from investment
in joint venture
    14,376       9,443       40,363       21,168  
Provision for income taxes     1,409       3,031       5,382       7,395  
Earnings from investment in joint venture     436       -       666       -  
                                 
Net income   $ 13,403     $ 6,412     $ 35,647     $ 13,773  
                                 
Net income per share attributable to common stockholders:                                
Basic   $ 0.29     $ 0.15     $ 0.82     $ 0.33  
Diluted   $ 0.29     $ 0.15     $ 0.81     $ 0.33  
                                 
Weighted average number of common shares outstanding:                                
Basic     46,557,785       41,538,989       43,648,309       41,514,656  
Diluted     46,988,359       41,566,344       43,932,546       41,541,447  
                                 


   
Construction Partners, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
 
   
    June 30, 2018     September 30, 2017  
    (unaudited)          
ASSETS                
Current assets:                
Cash   $
  75,183
    $ 27,547  
Contracts receivable including retainage, net       115,679       120,984  
Costs and estimated earnings in excess of billings
  on uncompleted contracts
      12,747       4,592  
Inventories       25,145       17,487  
Other current assets       14,417       4,520  
Total current assets       243,171       175,130  
                 
Property, plant and equipment, net       177,222       115,911  
Goodwill       34,398       30,600  
Intangible assets, net       2,325       2,550  
Investment in joint venture       1,066       -  
Other assets       14,562       2,483  
Deferred income taxes, net       1,619       1,876  
Total assets   $
  474,363
    $ 328,550  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable   $    48,104     $ 52,402  
Billings in excess of costs and estimated earnings on
  uncompleted contracts
      39,520       32,108  
Current maturities of debt       14,788       10,000  
Accrued expenses and other current liabilities       23,059       20,036  
Total current liabilities       125,471       114,546  
                 
Long-term liabilities:                
Long-term debt, net of current maturities       51,786       47,136  
Deferred income taxes, net       7,980       9,667  
Other long-term liabilities       4,801       5,020  
Total long-term liabilities       64,567       61,823  
Total liabilities       190,038       176,369  
                 
Commitments and contingencies                
Stockholders’ Equity                
Preferred stock, par value $0.001; 1,000,000 shares
  authorized and no shares issued and outstanding
      -        -  
Class A common stock, par value $0.001; 400,000,000 shares
  authorized, 11,950,000 issued and outstanding at June 30, 2018, and 
  no shares authorized, issued and outstanding at September 30, 2017
      12       -  
Class B common stock, par value $0.001; 100,000,000 shares authorized,
  42,387,571 issued and 39,464,619 outstanding at June 30, 2018, and no 
  Shares authorized, issued and outstanding at September 30, 2017
      42       -  
Common stock, $0.001 par value, no shares authorized, issued and outstanding
  at June 30, 2018 and 126,000,000 shares authorized, 44,987,575 issued and 
  41,691,541 outstanding at September 30, 2017
      -        45  
Additional paid-in capital       242,493       142,385  
Treasury stock, at cost       (15,603)       (11,983 )
Retained earnings       57,381       21,734  
Total stockholders’ equity       284,325       152,181  
Total liabilities and stockholders’ equity       474,363     $ 328,550  
                 

/EIN News/ -- NON-GAAP Financial Measures - Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA represents net income before interest expense, net, provision (benefit) for income taxes, depreciation, depletion and amortization, equity-based compensation expense, loss on extinguishment of debt and certain management fees and expenses, and excludes income recognized in connection with a litigation settlement. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenues for each period. These metrics 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. We present Adjusted EBITDA and Adjusted EBITDA Margin as management uses these measures 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 between our measure of Adjusted EBITDA compared to other similar companies’ measures of Adjusted EBITDA 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 (unaudited, in thousands):

             
    For the three months
ended June 30,
    For the nine months
ended June 30,
 
    2018     2017     2018     2017  
                                 
Net income   $   13,403     $ 6,412     $   35,647     $ 13,773  
Interest expense, net       406       659         956       2,802  
Provision for income taxes       1,409       3,031         5,382       7,395  
Depreciation, depletion and amortization of
  long-lived assets
      6,621       5,208         17,929       15,709  
Equity-based compensation expense       371       357         975       513  
Loss on extinguishment of debt       -        1,638         -        1,638  
Settlement income (1)       -        -         (14,803 )     -  
Management fees and expenses (2)       468       315         1,119        999  
Adjusted EBITDA   $   22,678     $ 17,620     $   47,205     $ 42,829  
                                 
Revenues   $   195,075     $ 148,099     $   464,395     $ 380,585  
Adjusted EBITDA Margin     11.6 %     11.9 %     10.2%     % 11.3 %
                                 


(1) Represents pre-tax income recognized in connection with a litigation settlement.
(2) Reflects fees and reimbursement of certain out-of-pocket-expenses under a management services agreement with an affiliate of SunTx Capital Partners (“SunTx”), our controlling stockholder.


 

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