Construction Partners (ROAD 11.27%), a leading civil infrastructure company serving public and commercial clients across the Southeastern and Southwestern United States, released its third-quarter fiscal 2025 earnings on August 7, 2025. The most important news: Revenue (GAAP) rose to $779.3 million, marking a 51.0% increase from the year-ago period. However, the result fell short of the analyst consensus estimate of $783.6 million. Non-GAAP earnings per share were $0.81, just under the estimated $0.82 (non-GAAP). Despite narrowly missing expectations on both revenue (GAAP) and earnings (non-GAAP EPS), the company posted record backlog of $2.94 billion and significantly expanded Adjusted EBITDA margins in Q2 and Q3, signaling ongoing robust demand and successful execution of its acquisition-focused strategy.
| Metric | Q3 2025 | Q3 2025 Estimate | Q3 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.81 | $0.82 | $0.59 | 37.3% |
| Revenue | $779.3 million | N/A | $517.8 million | 50.5% |
| Adjusted EBITDA | $131.7 million | $73.2 million | 79.9% | |
| Adjusted EBITDA Margin | 16.9% | 14.1% | 2.8 pp | |
| Backlog | $2.94 billion | $1.86 billion | 58.1% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q2 2025 earnings report.
Business Overview and Strategic Focus
Construction Partners builds, repairs, and maintains infrastructure such as roads, highways, bridges, and airports, primarily for public clients. The company operates across eight states: Alabama, Florida, Georgia, North Carolina, Oklahoma, South Carolina, Tennessee, and Texas. It is known for its strong focus on government-funded projects, which made up around 63% of its FY2024 revenues.
In recent years, business growth has centered on two priorities: acquisitions and vertical integration. Acquisitions have driven rapid expansion into new markets and increased operational capacity. The acquisition strategy is essential for realizing economies of scale, securing local market expertise, and adding asphalt plants and aggregate facilities. Another key factor is the ability to win large, recurring infrastructure contracts, particularly in states with robust project funding.
Quarter Highlights and Key Developments
Revenue rose steeply compared to the prior year, primarily because of acquisitions. Acquired businesses contributed around 46% of the year-on-year revenue increase, while organic growth accounted for about 5%. The recently announced purchase of Durwood Greene Construction Company added nearly 200 employees, three hot-mix asphalt plants, and a rail-served aggregates terminal to the company's Texas operations. The closing of this deal just before the earnings call reflects the ongoing push to expand through strategic deals.
Margin expansion stood out as another highlight. Adjusted EBITDA jumped 80.0% from the prior year. Adjusted EBITDA margin (non-GAAP) rose 2.8 percentage points to 16.9%. Despite record rainfall causing delays in several Sunbelt markets, gross profit (GAAP) also saw significant growth. The company handled higher input costs and stronger interest expenses, as interest costs increased by $20.6 million year-over-year due to the rise in debt from recent acquisitions.
The total backlog reached an all-time high of $2.94 billion. As of June 30, 2025, backlog was up 58.1% compared to June 30, 2024. This backlog is mainly composed of public infrastructure contracts, driven by federal and state government funding programs. Management noted that demand remains strong in both public and private project segments, with healthy opportunity pipelines—and that contract awards increased around 15–16% year-over-year in its states in 2025. Approximately $133–134 million of Q2 FY2025 backlog growth came from acquisitions, with $50–60 million added organically.
The company’s approach to competition leans on its integrated capabilities: operating its own asphalt plants, aggregate sources, and specialized terminals provides cost advantages and supply chain control. This vertical integration underpins its ability to execute work efficiently and support acquired companies. By leveraging the experience of acquired management teams and investing in new services, Construction Partners aims to bolster both organic and acquisition-driven growth.
Financial Position, Risks, and Additional Detail
Capital allocation remains a key management focus. Financing of major acquisitions increased net debt to $1.39 billion at June 30, 2025, from $487 million at the end of FY2024, pushing the company’s leverage ratio (debt to EBITDA) to approximately 3.2x. Management stated its intention to reduce this leverage to about 2.5x within four quarters through operational cash flow and targeted debt repayment. Cash flow from operations (GAAP) was strong, with $179.3 million generated in the first nine months of FY2025, up from $113.2 million in the same period of FY2024.
Higher leverage means higher interest expense, with quarterly interest costs jumping to $25.2 million from $4.7 million year-over-year. This will remain a key factor for future quarters as the consolidation of recent acquisitions is digested. Despite higher costs, the company has kept general and administrative expenses under control, reducing these costs as a percentage of revenue to 6.6% from 7.3% year-over-year. No material impact was reported this quarter from tariffs, supply chain disruptions, or new regulatory compliance costs, Most supply chain inputs are US-sourced.
Backlog composition remains healthy, with both acquired and legacy businesses contributing to new project wins. New platforms in Tennessee and Texas have broadened the company’s market reach and service diversity.
Construction Partners continues to rely on federal and state government project funding—particularly important as changes or delays could affect future results. Management highlighted that ongoing government support through the Infrastructure Investment and Jobs Act and state initiatives forms the foundation for sustained contract opportunities. While integration risk from acquisitions and exposure to changes in public funding remain, shareholders should monitor operational efficiencies, future integration, and state-level funding trends. ROAD does not currently pay a dividend.
Outlook and What to Watch
Management reaffirmed its previous guidance for FY2025, targeting revenue between $2.77 billion and $2.83 billion. Net income (GAAP) is forecast in the range of $106 million to $117 million. Adjusted net income is projected between $124 million and $135 million. Adjusted EBITDA is expected to come in between $410 million and $430 million, implying Adjusted EBITDA margins of 14.8% to 15.2%. This guidance factors in continued contributions from recent acquisitions and anticipated demand across all markets. No upward revision to the outlook was made, despite margin gains and strong backlog, as management cited weather-related headwinds and the initial integration of new acquisitions.
Looking to the next few quarters, investors should pay attention to how quickly leverage declines and how recent acquisitions perform as they are fully integrated. Key data points will include organic revenue growth, progress on cost control, and the pace of new public project awards — especially as government contract funding remains central to the company's revenue base. Any material shifts in U.S. infrastructure program funding or visible organic growth acceleration may affect the broader outlook.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
