Construction Partners, Inc. Class A Aktie

Greetings, and welcome to the Construction Partners Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Rick Black, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Construction Partners conference call to review second quarter fiscal 2026 results. This call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the Investor Relations section of constructionpartners.net. Information recorded on this call speaks only as of today, May 8, 2026. Please be advised that any time-sensitive information may no longer be accurate as of the date of any replay listening or transcript reading.

I would also like to remind you that statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance are forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. We will be making forward-looking statements as part of today's call that, by their nature, are uncertain and outside of the company's control.

Actual results may differ materially. Please refer to our earnings press release for our disclosure on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Management will also refer to non-GAAP measures, including adjusted net income and adjusted EBITDA and adjusted EBITDA margin. Reconciliations to the nearest GAAP measures can be found at the end of our earnings press release. Construction Partners assumes no obligation to publicly update or revise any forward-looking statements.

And now I would like to turn the call over to Construction Partners' CEO, Jule Smith. Jule?

Thank you, Rick, and good morning, everyone. We appreciate you joining us for today's call. With me this morning are Greg Hoffman, our Chief Financial Officer; and Ned Fleming, our Executive Chairman.

I'd like to begin by thanking our approximately 7,000 employees for their hard work and excellence in achieving a great second quarter, exceeding profitability expectations and growing backlog, which allows us to meaningfully raise our outlook for FY '26. While the financial results of focusing on our family of company's culture are hard to measure, we know that building a great culture does have a real impact on bottom line results. At CPI, we hold ourselves accountable by constantly measuring several key areas of cultural health.

First, we focus on keeping a low turnover of employees, which increases the experience and stability of our workforce. Second, we strive to lower benefit costs, so we maximize the take-home pay to our employees' families. This helps us attract the most talented folks to our teams across all 110 local markets. And finally, every year, we survey all 7,000 employees for honest and candid feedback, which gives us vision on how to improve and innovate as a company. Maintaining this focus on our culture will continue to drive performance and produce great results.

In Q2, we grew revenue, adjusted EBITDA and backlog. Favorable weather in the quarter provided the ability to advance work efficiently and exceed expectations. We play an outdoor game. And when we have dry weather, we can work more days and consequently increase our volumes. Looking at the cost environment during Q2, energy volatility had a limited impact on results due to the protection of the liquid asphalt index on more than 80% of our total revenue, the physical hedging of diesel fuel and the oil price hedging mechanism inherent to our vertical integration at the liquid asphalt terminals. Today, we source more than 50% of our liquid AC needs internally. As we look to the future relative to building our backlog, our pass-through cost model reacts quickly to rising commodity prices.

Turning now to the demand environment. Construction project demand throughout our footprint remains strong for both public infrastructure work as well as commercial development for new construction. Our teams are actively bidding and building a wide range of commercial projects. A few examples to highlight. In Texas, Four Star Paving is working on a portfolio of eight data center projects totaling approximately $100 million of contract value. In Tennessee, our new acquisition, Four Star Paving currently is working on 12 warehouse projects in the dynamic Metro Nashville market, totaling a contract value of approximately $28 million.

And in Alabama, Wiregrass Construction is working on a Mag 7 data center in the Northeast region of the state valued at approximately $4 million.

Taken together, these projects reflect an expanded backlog and pipeline of opportunities entering the second half of our fiscal year. These are just a few examples of the approximately 1,000 commercial sector projects we will participate in building this year across our eight and over 110 local markets.

On the public side, both the federal and state governments are continuing their investment in infrastructure to keep up with the growing economies in the Sunbelt. This is particularly true with the small- and medium-sized recurring maintenance projects fora state DOTs, cities and counties that represent a majority of our work. Some examples new public projects include -- in the Houston area, Burwood Green has won several multimillion-dollar projects, which are part of the city's infrastructure preparations for the upcoming FIFA World Cup this summer.

North Carolina, Fred Smith Company won a contract for multiple road widenings and improvements valued at approximately $150 million to prepare for the U.S. opens returned to Pinehurst in 2029.

And in the Florida Panhandle, CWR is working on a taxiway reconstruction project at Eglin Air Force Base added approximately $27 million. These projects represent just a few of the different type of public projects we are working on today. With respect to federal funding for the Surface Transportation program, we continue to engage in productive discussions with key members of Congress regarding reauthorization.

Encouragingly, both parties and both chambers are actively working to release a markup of the bill this month to advance a new 5-year authorization somewhere in the $500 billion to $600 billion range. This would represent a substantial increase in investment in our nation's transportation infrastructure.

Turning to our growth strategy. Last month, we completed our latest strategic acquisition with the purchase of Four Star Paving, the premier commercial paving contractor in the Nashville Metro area. I want to welcome all the great folks at Four Star Paving to the CPI family of companies. Their assets and customer relationships across Central Tennessee will serve as a valuable extension of our platform company in the state, PRI.

Four Star represents our fourth acquisition in fiscal 2026 and our 17th since the beginning of fiscal 2024, underscoring the continued momentum of our disciplined M&A strategy. These acquisitions are all fully integrated and meaningfully contribute to the growth of our financial results. Today, the generational transition of family companies continues in our industry, and we have a robust pipeline of attractive acquisition opportunities across our existing footprint and adjacent states.

We remain in active dialogue with a number of prospective sellers. We also remain focused on organic growth as a strong driver of shareholder value. Our new Gastonia, North Carolina greenfield will begin operations this quarter and soon will be servicing a large $60 million contract expanding and widening 85 through Gaston County near Charlotte. As a key part of our organic growth, there are several more greenfield facilities that we plan to bring online later this year and early next year.

Before turning the call over to Greg, I want to reiterate that our family of companies is now in our busy work season, executing on a record backlog and continuing to deliver excellence to our customers in both the public and private markets. As reflected in our revised guidance, we expect fiscal year 2026 to be another strong year, reinforcing our confidence in achieving our ROAD 2030 growth plan to double the size of the company generate $1 billion of annual EBITDA and expand EBITDA margins to approximately 17%.

And with that, I'd like to now turn the call over to Greg. Greg?

Thanks, Jule, and good morning, everyone. As Jule mentioned, we reported a strong second quarter, maintaining the outperformance we experienced in Q1 to start the year. I will review the quarter in more detail before discussing our raised outlook ranges. I'll start with a review of our key performance metrics for the second quarter of fiscal 2026.

Revenue was $769.2 million, an increase of 35% compared to last year. The breakdown of this revenue growth was 11% organic and 24% acquisitive. For the fiscal 2026 year, we continue to anticipate organic growth of approximately 7% to 8%. Gross profit in the second quarter was $98.9 million, an increase of approximately 39% compared to last year. As a percentage of total revenues, gross profit was 12.9% compared to 12.5% last year. General and administrative expenses as a percentage of total revenue in the second quarter were 8.3% in FY '26 and 8.2% in FY '25.

Net income was $9.2 million and adjusted net income was $10.4 million. Earnings per diluted share for adjusted net income was $0.18. Adjusted EBITDA was $93.3 million, an increase of 35% compared to last year. Adjusted EBITDA margin for the quarter was 12.1%. You can find GAAP to non-GAAP reconciliations of net income and adjusted EBITDA financial measures at the end of today's earnings release.

Turning now to the balance sheet. We had $77 million of cash and cash equivalents and $150 million available under our credit facility at March 31, net of a reduction for outstanding letters of credit. As of the end of the quarter, our debt to trailing 12-month EBITDA ratio was 3.23x. We remain on pace with our strategy of reducing the leverage ratio to approximately 2.5x to support sustained profitable growth.

To that end, we anticipate cash flow generated during the third quarter to fund the Four Star Paving acquisition without the need for additional long-term debt. demonstrating the strength of cash flow from our operating model. In the second quarter of fiscal 2026, cash flow from operations was $65.2 million. up from $55.6 million in Q2 of fiscal 2025. We expect to convert 75% to 85% of EBITDA to cash flow from operations in FY '26.

These are our new ranges. Revenue in the range of $3.59 billion to $3.65 billion, net income in the range of $159 million to $162 million, adjusted net income in the range of $170.4 million to $174.2 million, adjusted EBITDA in the range of $552 million to $564 million and adjusted EBITDA margin in the range of 15.38% to 15.45%.

Lastly, as Jule mentioned, we had a project backlog of $3.14 billion at March 31, 2026. We have approximately 80% to 85% of the next 12 months contract revenue covered in backlog.

And with that, we will open the call to questions. Operator?

[Operator Instructions] Our first question will hear from Kathryn Thompson with Thompson Research Group.

We are having some technical difficulties. Please, standby.

Sorry, everyone. We appear to have technical difficulties right now. Operator, can you provide an update on being able to put in our questioners?

Just one moment, please, while we try to reconnect. [Operator Instructions]

I can take the next available question we have from Kathryn Thompson of Thompson Research Group.

All right. Well, it's the case of the Fridays. I wanted to follow up on -- this has been a fairly active year with M&A. And as we think about modeling for the back half of the year, in light of companies you've acquired, how should we think about contribution from acquisitions, margin profile and any other factor we should think about when taking into account these acquisitions.

Yes. Kathryn, I'll speak to just the M&A environment since you asked. And call on Ned, who works closely with us on just growth strategy. And then Greg can give you sort of the modeling question. But we've had a busy year with M&A. We continue to talk to a lot of folks in a number of states. I mean, we said that the three acquisition -- platform acquisitions we did last year, would create opportunities in those states. And you saw that happen in Tennessee this past 30 days with Four Star Paving. So we're busy. We're talking to a lot of folks trying to make good decisions. I'm going to turn the call over to Ned and then Greg.

Thank you, Jule. I think, Kathryn, it's really interesting, having been part of this now for 26 years. We continue to see an industry that's in growth mode. I don't think anybody goes anywhere where they say, "Wow, the roads are perfect." And so the demand curve for that with the voters has increased over time. So you've got a large growing industry. The demographics are still moving toward the Sunbelt, which is really our focus and will continue to be our focus.

We see more and more people moving there, more and more businesses moving there. if you were just to go chart even data centers, more and more data centers moving there, which creates opportunities for us. And you still have an industry that's very fragmented where generational transition is happening and people every year, people are getting older. And so we see more and more opportunities. It's almost amazing.

We see a lot of bolt-on opportunities because of the new states that we've entered. We're seeing real benefits in Texas from doing the acquisitions in Houston, and that's just a booming market, both from the standpoint of public services as well as private enterprise and commercial.

And the last piece is we still -- there's no technological obsolescence. I mean there are ways for us to utilize, and we're looking at that, utilizing technology and AI, and there's some really terrific benefits for the company, and I think we're way ahead of the curve on all of that. But AI is not going to lay asphalt or pave the road or greater road.

So for us, I think we see an environment that's almost better today than it was 25 years ago for growth. And we see a lot of opportunities that we pass on. So I think as you look to the back half of this year, you'll see us do some acquisitions that we think are strategic where it fits the culture where there are great long-term benefits as we move into those territories, both bolt-ons. We also see new platforms in new states. I don't know that we'll do any of those at this stage of the game, but we certainly see them. So growth is -- good at this stage of gaming continues to be a bright future.

Yes, Kathryn. As far as your modeling questions, so the remaining 6 months, we'll have about $225 million, $235 million of acquisitive revenue. If you do the math there on the center of our guide, that puts us about right in the heart of that 7% to 8% organic growth with our 11% in Q2. Organic growth, that kind of is a 7% to 8% organic guide all year.

Okay. That's very helpful. And then you touched on in your prepared commentary, some various jobs in major markets, Texas, to Tennessee and along the East Coast. Are you seeing any change in the momentum either positive or negative with that reindustrialization trend? And maybe putting a finer point to it. If you look at the types of jobs that you have in your backlog today, how does it look today versus 2 years ago?

Yes, Kathryn. When we look at our backlog, as we've talked about from several years ago, we still have a good breakdown of public and commercial projects, but the commercial projects are much more weighted and favoring manufacturing and corporate centers and warehouses. And so the reindustrialization trend that started with COVID supply chains and that has sped up this past year to 18 months is affecting our opportunities. There's no question.

I think Q1, our country had record investment in capital infrastructure, and the Sunbelt states are getting a lot of that investment. The article just came out this week at NVIDIA and Corning are investing $2.7 billion in three facilities in North Carolina and Texas. And those are two of our key states, and we're going to look to participate in that investment. So I would say, if you think the reindustrialization is going to be a tailwind for the next several years.

The next question is from Rohit Seth of B. Riley Securities.

This is just on the liquid AC and the diesel and the energy shock. Is there any sort of timing delay between when you incur those costs and when you get the rebates from the DOTs on the escalators as we think about going into the third quarter?

Yes, Rohit. No, actually not. They're settled monthly in the progress payment that we get from the states. So literally, they're taking from the time we bid the job, the date we bid the job, the index then and comparing that to the date we made it. And then in that month, that settlement is done in that month payment.

Okay. All right. And then just regards to the IIJA reauthorization and your ROAD 2030 target, when you contemplated that ROAD 2030, were you of the view that funding level is going to come out to the $500 billion to $600 billion that you mentioned on the prepared remarks?

Yes, Rohit, that's a good question. And I would say the answer to that is no. We anticipate that each year, the investment in infrastructure at the federal level will go up because it always has. And so -- but we don't assume some 20% to 30% to 40% increase that could be part of this reauthorization that we're hearing in the $500 billion to $600 billion range. That's not something that we model in. It would be nice. I think it would be good for our country. But no, we just assume a normal mid-single-digit bump each year, which is what's happened for the last 3 decades.

Okay, fantastic. And then on the data centers, you mentioned several data centers. Is that becoming a more sizable portion of your book? Like is there a way to frame the size of the impacts relative to the size of the business at the moment?

Yes. I would say, Rohit, that it is becoming more of a part of what we do because there's more being built in our markets. And as we get involved with the people building data centers, we build relationships and so that's allowing us to have more opportunity to participate up front and helping them plan their projects and participate in them as they're built. So we see data centers as a really good opportunity across a number of our states for -- I mean, you know the investment they're talking about for the next 5 years. So these are really nice opportunities for us.

The next question is from Michael Feniger of Bank of America.

I do apologize. It looks like Michael -- we just lost his connection. So we'll just go to the next questioner for now, Andrew Wittmann of Baird.

I guess I just wanted to dig in a little bit more on crude here. Maybe, Greg, first, can you -- can you talk about what the kind of crude energy at liquid asphalt assumptions are in this revised guidance? Obviously, the margin percentage range didn't really change very much, but I still wanted to understand how you're thinking about that?

And maybe just to kind of put a stake in the ground, can you talk about quantify maybe the impact year-over-year that those prices did have in the 1 month of the quarter that was affected?

Yes. Sure. So we're using diesel and natural gas to run our equipment in our plants. Liquid AC just for the audience goes into making hot mix asphalt. Our guide really certainly is cautious, and we're concerned about the future, like everybody is. But we don't think that it really is going to make a huge difference for us because I think liquid AC and what we have at our terminals is driving a little bit of the offset and maybe what we're seeing in diesel. And then natural gas has been steady. So no increases there that we're having to deal with. It really didn't have much impact, as Jule said in his remarks in the first quarter.

But my understanding I mean, presumably use first in, first down accounting on your liquid AC in your terminals. Can you maybe just remind us how many months of production you have there, recognizing that I think you said that you supply about 50% of your own liquid AC. So some of that -- are you bought under contract for the other 50%? Or -- and I know you got pass-through for 80% with the customers. But just trying to understand how the FIFO accounting is a factor, if at all.

Yes. It is, certainly. I mean, if you were following liquids in the quarter, it actually was going down for the first couple of months. In fact, our average pricing in the terminals was less than it was at $9.30 per ton and less than it was this time last year per ton. So kind of what I meant about what I said earlier is that as liquid -- as prices go up, but we have in that terminal, each of those terminals, the value increases. So that's powerful for us. But in terms of -- we have 2, 2.5 months this time of year of availability for liquidity.

Okay. And then just maybe a final one. I just wanted to, Jule, get a little bit more sense here as we're getting into the real busy season here. And just maybe you could talk about your April awards. The backlog, I think, sequentially, you had a lot of burn, but kind of sequentially kind of flattish organically. So just as we evolve into the real busy season, just thought I'd have your comments a little bit about what you've seen in April so far, getting a sense there.

And I know you always say that your outlook for backlog is lumpy. Obviously, your quarterly performance since the IPO has been almost entirely up and to the right every quarter. But I just want to kind of get your sense on how the quarter and the year are evolving if your expectation would continue to be for a book-to-bill from here on out for the year over 1.

Yes, Andy, I mean, as I've said many times, and it continues to be true, we're pleased with the amount of opportunities we have to bid. On the private side in our markets, we're still seeing a good amount of opportunities. And on the public side, our state and local DOT contract awards are going to be up this year. Somewhere between 10% and 15% overall.

So we're bidding a lot of opportunities. But with the size backlog we have, we can bid patiently, and which we're doing. So I feel like backlog is going to continue to build. Having said that, as we've said now for 20 quarters, historically, backlog has gone down sequentially in our busy work season. But for the last 20 quarters, it's gone up. But it would not surprise us or bother us if in our busy work season, it went down sequentially. That would be just fine. So we hope we have the weather and the opportunity to burn off a lot of backlog in these next 2 quarters, and we're going to continue to build it.

The next question is from Michael Feniger of Bank of America.

I guess the first question, just with these data centers, obviously, with these mega projects, big projects. Is this changing your overall average project? Does your risk profile, Jules, change at all as maybe you do more private work for these big projects? I'm just kind of putting that in context as we've kind of always known you guys as kind of doing a lot of these smaller scale projects. I'm just kind of curious if the risk profile is evolving with these larger projects.

Yes, Michael, that's a fair question because, obviously, when I give projects to highlight, I don't necessarily highlight the $2 million or $3 million county resurfacing, but that's still the vast majority of what we do. I don't think our risk profile has gone up. We always have and have had larger projects that we work on, on the commercial side and the public side.

But no, our overall average project size really hasn't changed at all other than inflation. So our strategy is still the same. We're going to work on a lot of projects in the $2 million to $3 million range and that have less risk, higher margins. But we are going to continue to do these projects where we have an opportunity to work on data centers in our markets.

Perfect. And Greg, maybe on just the liquid asphalt question with the run-up in diesel. Can you just help us -- some questions we're getting from the audience is from the investor community is there's been periods when you've seen a spike, and we would see it show up in the gross margin at some point in prior periods, we've seen a spike in oil and diesel.

So I guess, Greg, how have things kind of changed in terms of how you guys have managed liquid asphalt? I think you guys now have terminals, you guys have more storage capabilities. Just help us understand how things have maybe changed versus the last time we've seen spikes in inflation, particularly when it comes to diesel and how we should think about it going forward for you guys now?

Yes. Good question. So yes, let me start by just saying we've said for a while, and I'm sure we'll continue to say that when prices go up, there will be a slight headwind. When they go down, there will be a slight tailwind. So certainly not immune, but have evolved to your point, since the last spike, liquid AC certainly terminals and having that essentially inherent hedge in our vertical integration operation, but also a more mature hedging program of for liquid -- I mean, I'm sorry, for diesel and natural gas. So all of those things help. We're not managing to 100% trying to manage 100% of our risk away. We can't do it. But we certainly try to manage some of that risk.

Helpful. And just -- I guess I'll sneak one more in, Jules. Just if we do wake up in a couple of months and it's a CR, how do you -- continuing resolution, how do you see DOTs in your state responding? Do they pivot in terms of some of their projects? Do you pivot and say, all right, let's go after more private work? Or do you think it kind of continues to be status quo for a few more months until we hopefully get a actual bill? Just kind of curious how you're thinking about it, how people on the ground are thinking about this as we head into that October time period.

Yes, Michael, working under a continuing resolution or CR is something that we've done several times in our industry. And it largely feels like business as usual. The states continue to work because they are still funding, and you just fund at the same levels. So if there was to be a continuing resolution this fall going into 2027, it would be at record levels because 2026 is a record investment in infrastructure. And probably the states would continue to do the maintenance jobs, the small- and medium-sized jobs. They may on mega jobs, say, let's wait and see what happens. But for what we do, it's very much business as usual. I'm going to call them -- give it to Ned to.

It's an interesting question. But if we look at it from a historical perspective, I believe 6 of the 8 years of the Obama administration was continuing resolutions, and we continue to grow this business at over 20% a year. So it's going to be, as Jule said, business as usual. historically, we understand it. The states understand it. We don't -- hopefully, this time, we don't anticipate it certainly being the length of time that the last -- the Obama administration had.

The next question is from Adam Thalhimer of Thompson, Davis & Company.

Can you provide some additional details on Four Star. I'm curious how it fits in with the existing Tennessee assets and how many employees they have?

Yes. Adam, if I remember correctly, there are about 150 employees in Tennessee. And they -- it's a great fit. I'm glad you asked that question. So PRI, our platform company in Tennessee does a lot of public work. There's a lot of payment preservation. And Four Star does a different type of work. We've known Four Star and those guys for years. They're a great FOB customer for us in Nashville, but they are the premier commercial paving contractor in the Nashville Metro area.

They work about a 70 to 80-mile radius around Nashville. And they just have deep relationships with the developers and general contractors and I mean you know how fast Nashville is growing. So these guys have just built a great reputation and business in that area. So we enjoyed getting to know these guys over the last few years and talking about what it might look like for them to join our family of companies, and we're really excited about what they bring to the table.

Nice. Thanks for that. And then liquid asphalt, you said over 50% supplied internally. Do you have a goal to raise that up? Or is that the right percentage for the business long term?

Well, good question. I will, first of all, say, just as I said in my prepared remarks, liquid asphalt, over 80% of our use is indexed. I think people might not realize that, but over half of our private contracts, we have an index. And so we want to make sure and call that out.

Liquid asphalt, over half of what we use now is internally sourced and we have -- it's our goal to grow it as part of our vertical integration strategy to enhance and grow our margin profile being able to source more of our liquid internally at the wholesale and pass it through at retail. That's a big part of our strategy. So our goal is to increase that percentage over time.

There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

We want to thank everybody for joining us today, and we look forward to talking in the future.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines, and have a wonderful day.

Greetings, and welcome to the Construction Partners First Quarter Earnings Conference Call.

[Operator Instructions]

As a reminder, this conference is being recorded. It is now my pleasure to introduce Rick Black, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. We appreciate you for joining us for the Construction Partners conference call to review first quarter fiscal 2026 results. This call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the Investor Relations section of constructionpartners.net. Information recorded on this call speaks only as of today, February 5, 2026.

Please be advised that any time-sensitive information may no longer be accurate as of the date of any replay listening or transcript reading. I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance are forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995.

We will be making forward-looking statements as part of today's call that, by their nature, are uncertain and outside of the company's control. Actual results may differ materially. Please refer to our earnings press release for disclosure on forward-looking statements. These factors as well as other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Management will also refer to non-GAAP measures, including adjusted net income and adjusted EBITDA and adjusted EBITDA margin. Reconciliations to the nearest GAAP measures can be found at the end of our earnings press release. Construction Partners assumes no obligation to publicly update or revise any forward-looking statements.

And with that, I would now like to turn the call over to Construction Partners' CEO, Jule Smith. Jule?

Thank you, Rick, and good morning, everyone. We appreciate you joining us for today's call. With me this morning are Greg Hoffman, our Chief Financial Officer; and Ned Fleming, our Executive Chairman.

I'd like to begin by thanking the approximately 7,000 employees across our family of companies for their hard work, expertise and dedication to both safety and operational excellence. Our people are at the heart of everything we do, and they are also the stewards of our unique and strong family of companies' culture. one of our key competitive advantages as we continue to grow throughout the Sunbelt. Thanks to their efforts, along with favorable weather during the quarter, we delivered a strong start to fiscal 2026, exceeding our expectations and prompting us to raise our outlook for the year.

First quarter revenue increased 44%, while adjusted EBITDA increased 63% compared to the prior year. Adjusted EBITDA margin reached 13.9%, the highest first quarter margin in our history. We also closed the quarter with a project backlog of $3.09 billion, underscoring the robust demand across our markets.

Project demand throughout our footprint remains strong. On the commercial side of the business, steady project bidding is supported by ongoing population migration to the Sunbelt, reshoring trends as more manufacturing and supply chain capacity move back to the United States and the continued build-out of AI infrastructure. Our teams are actively bidding and building a wide range of commercial projects to reflect these macro trends.

A few examples to highlight. In Southern Oklahoma, we are currently negotiating contracts to provide work for a large national retailer on a new distribution warehouse and a food manufacturing facility in Ardmore. In Central Texas, north of Austin, we're currently working on a facility to provide power to data centers in the area for one of the Magnificent 7. In Santa Rosa County in the panhandle of Florida, we have just completed work on a large distribution facility for a leading soft drink bottler. This new facility will bring in 350 to 400 new jobs to the area, fueling growth that will create more demand for our services.

Finally, in York, South Carolina, we are currently working on a large site work contract for a new data center in the Greater Charlotte metro area. These are just a few examples of the approximately 1,000 commercial sector projects we will participate in building this year across our 8 states and over 110 local markets.

On the public side, both the federal and state governments are continuing their investment in infrastructure to keep up with the growing economies in the Sunbelt. In Q1, we have seen strong public contract bidding throughout our 8 states and expect total federal, state and local contract awards in FY '26 to increase approximately 10% to 15% over FY '25. This is particularly true for the small- and medium-sized recurring maintenance projects for state DOTs, cities and counties that represent a majority of our work. On Capitol Hill, both houses of Congress continue to work with Secretary Duffy on completing a 5-year reauthorization of the Surface Transportation program by September 30. We expect the size and shape of this bill to be known this spring. From what we have heard so far, we expect the reauthorization to provide a significant increase in the annual funding amount going to the states by per capita formula, which is good news for CPI. Both the administration and many members of the Congressional Transportation Committees have stated that they believe the formula method to the states is the best means to prioritize hard infrastructure investments needed to support a growing economy and to ensure timeliness in building these projects.

Turning to our growth strategy. We began fiscal 2026 with 2 large and strategically important acquisitions that were completed in October in Houston and in Daytona Beach, Florida. Both businesses now have been fully integrated and are operating well. Earlier this week, we announced another acquisition in Houston. GMJ Paving Company, a leading asphalt paving contractor focused on public infrastructure projects across the Greater Houston metro area. GMJ's hot mix asphalt plant located in Baytown on the east side of Houston expands our coverage of this major metropolitan market and complements our existing Houston assets exceptionally well. This acquisition represents our 12th hot mix plant in the Houston market, further strengthen our geographic footprint and providing incremental throughput opportunities at our nearby liquid asphalt terminal at the Houston port.

Last August, we made our first entry into the Houston market with our acquisition of Derwood Greene Construction, and then we significantly expanded operations in October through the acquisition of Vulcan's asphalt construction assets in Houston. With the addition of GMJ, we are further strengthening our market position and expanding our team with highly skilled experienced operators who bring deep local market knowledge and strong customer relationships. This positions us well to serve one of the most dynamic and rapidly growing markets in the country.

Expanding our footprint into new markets while gaining market share exemplifies our model and underscores a core element of our growth strategy, entering the right markets with the right partners. Currently, we see a very robust pipeline of acquisition opportunities across our existing footprint and surrounding states, and we continue to have dialogue with a number of sellers as they determine the best future for their businesses and their valuable workforce. We believe our model as a family of companies with a strong organizational culture makes us the acquirer of choice in our industry.

We also remain focused on organic growth as a strong driver of building shareholder value. This quarter, we will bring online an HMA greenfield in Georgia. This new facility will serve the dynamic Brunswick, Georgia market with its port facility and migration to the Golden Isles regions of South Georgia. As a key part of our organic growth, there are several more greenfield facilities that we plan to bring online later this year and early next year.

Before turning the call over to Greg, I want to reiterate the vision we shared last October to our Road 2030 growth plan. This plan outlines our path to again double the size of the company to revenue of more than $6 billion by 2030, utilizing the same strategy we have successfully executed for over 2 decades. The plan also targets EBITDA margin growth to approximately 17% and is expected to generate more than $1 billion EBITDA dollars annually. And finally, we're excited about the start of this fiscal year as we prepare for a busy work season, building on a record backlog.

I'd like now to turn the call over to Greg.

Thank you, Jule, and good morning, everyone. As Jule mentioned, we had a strong start to our fiscal year, which I will review in more detail before discussing our raised outlook ranges, and then we will open the call to questions.

I'll start with a review of our key performance metrics for the first quarter of fiscal 2026. Revenue was $809.5 million, an increase of 44% compared to last year. The breakdown of this revenue growth was 3.5% organic growth and 40.6% acquisitive. Gross profit in the first quarter was $121.5 million, an increase of approximately 58% compared to last year. As a percentage of total revenues, gross profit was 15% compared to 13.6% last year. General and administrative expenses as a percentage of total revenue in the first quarter decreased to 7.7% compared to 7.9% last year. Net income was $17.2 million and adjusted net income was $26.4 million.

Earnings per diluted share for adjusted net income was $0.47. Adjusted EBITDA was $112.2 million, an increase of 63% compared to last year. Adjusted EBITDA margin was 13.9% compared to 12.2% last year. You can find GAAP to non-GAAP reconciliations of net income and adjusted EBITDA financial measures at the end of today's earnings release.

Turning now to the balance sheet. We had $104 million of cash and cash equivalents and $163 million available under our credit facility at December 31, net of a reduction for outstanding letters of credit. As of the end of the quarter, our debt to trailing 12-month EBITDA ratio was 3.18x. We remain on pace with our strategy of reducing the leverage ratio to approximately 2.5x by late 2026 to support sustained profitable growth. To that end, we anticipate cash flow generated to effectively fund this week's GMJ paving acquisition without the need for additional long-term debt, demonstrating the strength of cash flow from our operating model. In the first quarter of fiscal 2026, cash flow from operations was $82.6 million, up from $40.7 million in Q1 of fiscal 2025. We expect to convert 75% to 85% of EBITDA to cash flow from operations in fiscal year '26.

Turning now to our outlook. We have raised all of our ranges for fiscal year 2026. Revenue in the range of $3.48 billion to $3.56 billion, net income in the range of $154 million to $158 million, adjusted net income in the range of $163.5 million to $168.7 million, adjusted EBITDA in the range of $534 million to $550 and adjusted EBITDA margin in the range of 15.34% to 15.45%. Our revenue outlook for fiscal 2026 continues to anticipate organic growth of approximately 7% to 8%. Consistent with historical seasonality, we anticipate the first half of the fiscal year to contribute approximately 42% of the annual revenue and approximately 34% of the adjusted EBITDA.

In the second half of the year during our peak construction season, we expect to deliver the remaining 58% of revenue and approximately 66% of adjusted EBITDA. Lastly, as Jule mentioned, we had a project backlog of $3.09 billion at December 31, 2025. We have approximately 80% to 85% of the next 12 months contract revenue covered in backlog.

And with that, we will open the call to questions. Operator?

[Operator Instructions]

Your first question comes from Adam Thalhimer with Thompson, Davis & Company.

Jule, can you give some more color on the acquisition pipeline? You said it was robust. I'm just curious what the mix there is between potential platform deals and potential tuck-ins.

Yes, Adam, as you know, we talk to a lot of folks all the time, and we look at a lot of things. And I would say we're continuing to be busy with that. We did 3 platform acquisitions last year. And so that's created a lot of new opportunities in Texas, Oklahoma and Tennessee now that we have a great management team in each state. So we're busy. But at the same time, we pass on a lot of things that aren't a good strategic cultural fit. So you're going to see us continue to make acquisitions that we think are just compelling and great strategic fits.

Adam, why don't I let Ned weigh in on the big picture as we look toward our strategic growth model?

Adam, I would say over the last 25 years, it's as active now as it's ever been. I think what you're really starting to see both on the platform side as well as the tuck-ins. I mean, obviously, when you do 3 platforms in a year, it gives you a lot of opportunities for organic growth as well as tuck-in acquisitions. But the generational transfer continues to give us opportunities to do acquisitions, both what I would call tuck-ins as well as platforms. But obviously, given last year with the 3 platforms, we've got a lot of tuck-in acquisitions in those states as well as a lot of organic growth opportunities in those states. So I would say it's as robust as it's been in 25 years, maybe even to some extent because we did 3 platforms in 1 year, I see we've got more opportunities.

Awesome. And then, Jule, I wanted to ask you, you said in your prepared remarks, I think you mentioned this a site prep job for data centers. Just wondering -- I haven't heard that before. Just wondered if you could expand on the size of that project and what your scope might be.

Yes, Adam, we wanted to highlight just a few of the commercial projects we were doing currently because we talked about that there are several macro trends that are driving the commercial markets now. migration to the Sunbelt, but also the reshoring, which is creating a lot of manufacturing facilities moving back to America and people wanting to build in America. And so I just thought let's give a few highlights of these. And there's a long list to choose from. But data centers are part of that. And we're building more data centers than I had the time to list in the remarks, but it's one part of what we do, factories, distribution centers, there's a pretty strong demand for those things in our Southern and Southeastern markets.

So we don't travel around and specialize in data centers, but they're a big part of what we do. And sometimes like in South Carolina, we're participating more in the site work and it's a larger contract. And sometimes we're doing the paving for a data center, just like we would do for an Amazon warehouse or a school project. So we did want to highlight just some of the commercial projects that are getting bid and built now.

Next question, Kathryn Thompson with Thompson Research Group.

Just first, I want to focus on organic growth, just reconfirm that you had kind of low to mid-single around 3.5% organic growth in the quarter, but you also gave guidance for a 7% to 8% organic growth range for the full year. Could you help us bridge what you're seeing today and also how much adverse weather in Q1 may impact or may have impacted the quarter?

Yes, Kathryn, good question. Our organic growth expectations for the fiscal year are still 7% to 8%, just as we normally do. In Q1, the difference between our organic growth and what sort of that 7% to 8% range was, was about $19 million. And when you looked at that, there were 2 factors that really created that. The first is in North Carolina, we had about 3 projects that we expected to do in Q1 that got a late start just due to the customer not being ready for us, and those are now underway. The second thing, as you can imagine, we -- in 110 local markets, we have competitive dynamics across the board. Some markets are healthy. Some markets are more competitive. We had one market where irrational competition, we said, you know what, let's move equipment and do work at higher margins in some adjacent markets. Which just so happened where that equipment moved was acquisitions we've made in the last 12 months. So that revenue was counted as acquisitive growth.

So that happens from time to time, but we still anticipate our organic growth being in that normal range for the year.

Okay. Great. And as you -- maybe you have given color about obviously, very active M&A in calendar 2025 and into early '26. Could you give just maybe a little bit more color in terms of your strategy and thoughts in terms of integration and how that has progressed over the past 12 to 15 months?

Yes. Kathryn, we've done 7 acquisitions since the Lone Star acquisition last fall. And integration is a big part of what we do. As Ned has said on these calls before, it's a core competency that CPI has developed over 2 decades. And so we have to be good at integrating these companies. I would say, for example, in Houston, Derwood Greene has done a great job of integrating with Lone Star, our platform company since August. But then those guys have done a great job of integrating the Vulcan assets in October, and they just had a great Day One earlier this week with GMJ. And so as we can integrate these companies in, we start to create organic growth opportunities in the future. And when you have a great management team in that market, you can continue to add, that's where we start to compound both the top line and the bottom line and start to make 1 plus 1 equal 2.5. And that's part of our strategy. And I would say it's gone well.

Next question is Andrew Wittmann with Baird.

I guess maybe for Greg, I wanted to ask about the seasonality of the business. We heard your comments here about the first half, second half revenue and EBITDA splits here. And obviously, the first quarter came in very strong and ahead of at least the Street's expectations. But the ramification of that means that the second quarter guidance actually looks a little bit light. And so I was just wondering if there's something we need to understand there. Certainly, the weather here in the last couple of weeks in the South has been particularly notable. I'm wondering if that's a factor or if there's something else that explains the second quarter implied guidance there.

Yes. No, Andy, I think that our -- what we say a lot is that our first half of the year and the second half of the year are very similar year-over-year. And our weather within each half of that year balances out. You have some good weather and you have some bad weather. I think that we're essentially reiterating what we said from the beginning that it's going to be a standard year with the expectations that we gave to the market. So I don't think there's any negative connotation. I think it's just reiterating what we said at the beginning of the year.

Sorry, do you want to add to that?

Yes. I just want to say we don't try to overthink things like that. Yes, weather was good in the first quarter. We don't know what the second quarter will be. Certainly, the last 2 weeks throughout the Southeast and Texas, we've had some ice and snow. And so you think, well, that should affect January. But when you look, the first 2 weeks of January were really good. So we're right on kind of plan. And we expect winter weather in January. If you remember, last January, we had a lot of snow. We even had snow on the beaches in Pensacola. But by the end of the quarter, it turned out to be a really good quarter.

So I would just say we don't really try to overthink it. We're not in any way trying to communicate something about the second quarter. We're just sort of trying to say that's our normal revenue and EBITDA split in the course of a normal year.

Okay. That makes sense. I appreciate that. And then I guess you had a comment on your view on the public sector bidding. I think you said that you expected the awards to be up 10% to 15%. I don't know that you had a similar comment on commercial. certainly sounded like the projects that you're doing are keeping you positive there as well. But did you have a view on where the awards could be or the increase in backlog could be on the commercial side? Is it the same level of strength? Is the public stronger? Just maybe some context around how you're seeing that developing as the year plays out.

Yes. Andy, I would say the commercial market, we've continued to use the word steady. I would say, if anything, we feel like this spring and summer could be stronger on the commercial market. But the reality is when we look at our backlog, it stayed pretty steady. If anything, it's gone up, Greg, I think a couple of percent to public. But the reality is that could be just that the acquisitions we made last spring and summer with Overland and PRI focus a little more on the public side of things. What we do have is good data on the public awards from ARPDA, which says, look, the state, local and federal, when you look at the overall contract awards, it's going to be up 10% to 15% this year. And that's the data we really go by and what we see.

I see. Just a final cleanup question for me. Greg, I don't know if you could quantify how much of that revenue got switched between -- in that competitive market where you moved the crews out to the acquired market. Is that a quantifiable amount of revenue? I'm just kind of curious to help inform the understanding of the quarter a little bit better.

Yes. Jule, when he addressed that earlier, talked about $19 million of maybe moved in or addressed in different markets. I'd say it's about half and half.

Next question, Ethan Trollinger with Raymond James.

This is Ethan on for Tyler. Yes. So Greg, I know not a ton has changed on the M&A front. But just from a modeling perspective, could you update us on what the M&A rollover impact to revenue is in fiscal '26 based on the guidance?

Yes, absolutely, Ethan. About $260 million to $280 million in the remaining 3 quarters are from -- going to be from acquisitions.

Okay. Great. And then Jule, this is...

Ethan, I'm sorry, that does include GMJ, the acquisition we just made recently.

Okay. Very helpful. And then, Jule, just a bigger picture question. But you guys closed the GMJ acquisition in Houston earlier this week, which I think is maybe the third acquisition in Houston, say, the last 6 months. I was hoping to get a little more color on the evolution of that market. Could you maybe talk about how the margin profile in Houston has changed or is expected to change versus maybe the Derwood baseline? And do you guys see even more M&A opportunity in that market longer term?

Yes, Ethan, I love to talk about Houston. Houston, we're very pleased with how Brad, Greene and his management team, Jonathan, Daniel Green, those guys are third-generation Houston contractors. And so that management team, combined with the Lone Star management team, Houston has started off great. They've made a meaningful contribution to this quarter. Those guys did a great job of integrating the Vulcan workforce into their operation.

And then with GMJ, the acquisition we made this week, that's an example of where not only is their asphalt plant geographically helps us more on the east side of Houston, but Lupe Munoz and his family and his business, they really have a strong niche in the public infrastructure paving. They have great relationships with public grading contractors that do work in Texas. And so that's really very complementary to what Derwood Greene has historically done. And so this is an example of just adding not only management team and workforce, but it's also adding market share in Houston.

Okay. That's great color. And then just one last one. Obviously, Houston is uniquely big compared to some of your other markets. But are there other big metros that you aren't in today that could come together like Houston? Or did just the stars kind of align there? Could you maybe talk a little bit more about that?

Well, I mean, I think it's -- this is Ned, by the way. As a Board and as a company, strategically, we're always looking for metropolitan areas like Houston. We've historically, for the last 25 years, invested capital in growth areas. Houston is maybe the second fastest-growing city in the country. So yes, there are other metropolitan areas that are like that, that we've identified that we'll continue to look for the right companies, particularly on the platform side to be able to invest in those areas. So I think one of the things historically, we've done a really good job of is being in the areas where the demographic growth drives organic growth for the country.

Next question, Nandita Nayar with Bank of America.

This is Nandita Nayar on for Mike Feniger. So you mentioned leverage is currently around 3.18x, and you plan to delever to around 2.5-ish by the end of the year. Could you just talk a bit more about your confidence in hitting that target? And also, just could we see you guys doing more M&A this year? And I mean, I think the answer to that would probably be yes, just given the strong pipeline. But just curious, would those also mostly be funded by cash from ops just like GMJ?

Yes. Sure, Nandita. That's right. Yes, 3.18 is where we are currently. We're still very positive about hitting that guidance of getting closer to 2.5x by the end of the calendar year. And I think that what will continue -- what you'll see continuing is what you'll see in our cash flow is that we've had $215 million worth of purchase price and only borrowed $140 million. And like you said, GMJ, the expectation is that, that purchase price will be covered in cash as well. So we keep doing that. The business keeps generating cash like it has historically and why -- and what it does or what it has done throughout the beginning of this year, we should be good with that guidance.

Nandita, I would just reiterate, we're going to continue to look at opportunities. We're going to pass on opportunities that aren't strategically compelling. But we're not going to -- GMJ is a great example of one where we said, look, this is a great opportunity. And so we're going to continue to make acquisitions. We're going to continue to use cash more and more to pay for those. And you'll see as that EBITDA rolls through the leverage ratio will come down.

Got you. That's super helpful. And just another one, guys. We've been hearing a slight change in the tone regarding the reauthorization bill with some conversations around the CR potentially entering the discussion. Just curious what you -- what's the latest on the ground that you guys have been hearing regarding the reauthorization?

Well, as I said in the prepared remarks, we feel really good about both houses of Congress, both committees on transportation are working on the reauthorization and the expectation is they'll get that done by September 30. We like what we're hearing about the size and the scope of it and the fact that it's going to be focused more on hard infrastructure coming -- the funds coming to the states through the formula method. So -- but we've had CRs in the past, and that's really just a continuation of where we are.

But if you look back, what we expect is guided by history over the last 2 decades. And when you look at it, they've always reauthorized the 5-year plan, and they've always reauthorized it for higher than the previous bill. So we fully expect that history will continue to repeat and that we'll get a new surface transportation bill at a higher level for the next 5 years.

I would like to turn the floor over to management for closing remarks.

Right. We want to thank everyone for being with us today. We look forward to speaking again in the future.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.

Greetings. Welcome to Construction Partners' Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Rick Black, Investor Relations. Thank you. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Construction Partners conference call to review fiscal fourth quarter and year-end financial results for fiscal 2025. This call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the Investor Relations section of constructionpartners.net.

Information recorded on this call speaks only as of today, November 20, 2025, so please be advised that any time-sensitive information may no longer be accurate as of the date of any replay listening or transcript reading.

I would also like to remind you that statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance are forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. We will be making forward-looking statements as part of today's call that, by their nature, are uncertain and outside of the company's control. Actual results may differ materially. Please refer to our earnings press release for our disclosure on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission.

Management will also refer to non-GAAP measures including adjusted net income, adjusted EBITDA and adjusted EBITDA margin. Reconciliations to the nearest GAAP measures can be found at the end of our earnings press release. Construction Partners assumes no obligation to publicly update or revise any forward-looking statements.

And now I would like to turn the call over to Construction Partners' CEO, Jule Smith. Jule?

Thank you, Rick, and good morning, everyone. We appreciate you joining us on the call today. With me this morning is Greg Hoffman, our Chief Financial Officer; and Ned Fleming, our Executive Chairman.

I'd like to begin today by thanking the more than 6,800 employees and our family of companies for their hard work and dedication in fiscal 2025, a truly transformational year at CPI. Early in the year, we entered the states of Texas and Oklahoma through strategic platform acquisitions. And in May, we established a platform company in Tennessee. We also acquired 2 substantial subsidiary brands in the dynamic markets of Mobile, Alabama and Houston, Texas.

These 5 acquisitions, along with organic growth of 8.4%, transformed our top line with 54% total revenue growth. Even more importantly, we transformed our bottom line with a 92% increase in EBITDA year-over-year and a record EBITDA margin of 15%. Finally, we ended fiscal year 2025 with a record project backlog of $3 billion.

Our people and the culture they create and maintain are the key to our business and the primary differentiator for CPI in our more than 100 local markets and as a buyer of choice for new acquisitions. As a family of companies, we strive to live out our core values of family and respect which create an incredible place to work together each day.

In addition, our growth strategy delivers on our core value of opportunity by providing numerous pathways for teammates to advance their careers and build better lives. Our final core value is excellence, the daily challenge to do ordinary things extraordinarily well, and our entire team truly delivered excellence in 2025.

Turning now to the new year, I'm pleased to report that fiscal year 2026 has commenced at full speed with 2 large and significant acquisitions completed in the month of October. On October 20, we announced the acquisition of P&S Paving in Daytona Beach, Florida. P&S has dominant market share in a very fast-growing part of our country to East Coast of Florida. They're led by a great management team, Tim Phillips and Curtis Lang. Under their leadership, we are well positioned to grow organically north and south along Florida's dynamic East Coast. P&S is a great example of our strategy to get into the right markets with the right partner.

Now let's shift and talk about Texas. We began fiscal 2025 with the acquisition of Lone Star Paving, which was clearly a big step for CPI to enter Texas. Lone Star is a platform company that has an excellent management team who is ready to take advantage of the growth opportunities in the fastest-growing state in the country.

In August, we entered the Houston market with the Durwood Greene acquisition. Durwood Greene is led by an excellent management team who's President, Brad Greene, along with Jonathan and Daniel Greene, are all third-generation leaders and owners of the company. The Houston metro area population is more than many states. In addition, the geography is broad and its growth rate is #2 in the country. Again, we invested in the right market with the right partner. In October, we were able to significantly expand our Houston operation under Durwood Greene by acquiring 8 hot mix asphalt plants and construction crews and equipment from Vulcan Materials. This transaction builds scale in the market and provides the ability to have even more throughput and margin at the liquid asphalt terminal in Houston. In the span of 3 months, we entered and then tripled our relative market share in Houston, creating an excellent opportunity to grow margins in that market.

Last month, on October 22, we hosted our second ever Analyst Day in Raleigh, North Carolina. The webcast and presentation from that event are still available on our website. During our presentation that day, we reported that CPI eclipsed the Roadmap 2027 goals set forth in our 5-year plan just 24 months prior. We achieved our goals 2 years earlier than planned, and we felt it was important to provide updated goals to the market, a 5-year strategic plan called Road 2030. Same strategy just as it was for Road Map 2027.

Road 2030 positions CPI for continued growth and margin expansion. After a 23% budgeted growth year in 2026, we target to double the company again to more than $6 billion in revenue by 2030. We expect to expand EBITDA margins by 30 basis points in fiscal year 2026 and 30 to 50 basis points annually thereafter, reaching a 17% EBITDA margin by the end of the plan period.

With margins expanding and the top line compounding, our adjusted EBITDA is projected to grow from $423 million in fiscal year 2025 to more than $1 billion by 2030, an 18% compound annual growth rate. Road 2030 more than doubles the size of our company while staying in the Sunbelt and reflects the strength of our business model the demand across the Sunbelt and the opportunities we continue to unlock through pursuing both operational excellence and strategic growth initiatives.

Looking ahead to 2026 and supporting our 5-year plan, or 4 macro trends that you've heard us talk about, but they're still powerful, and we believe will continue to drive growth for our company. The first is the continued migration to the Sunbelt that has accelerated since COVID, both people and businesses moving to CPI states. This drives demand for private construction, including not only factories and corporate campuses, but numerous data center projects that CPI is well positioned to build out the complete site infrastructure.

As the private economy grows, our states are making sure that public infrastructure investment keeps up with the growth. This week, I attended a panel discussion of Sunbelt state governors talking about the importance of infrastructure staying ahead of the growth and the proactive measures they were taking to successfully support and fund the infrastructure of a growing economy for the foreseeable future.

The second macro trend that is driving this growth is the reshoring of companies moving their manufacturing facilities and business to the Sunbelt because they want to strengthen their supply chains and avoid tariffs. This reassuring trend in America will mean continued growth in the Sunbelt and CPI is well positioned to build those projects.

The third macro trend is related to funding. Both the federal and state governments are investing in infrastructure, and that's going to continue. We see strong public contract bidding throughout our 8 states and over 100 local markets and expect contract awards in FY '26 to increase approximately 15% over FY '25. This is particularly true for the small recurring maintenance projects that represent a large majority of the company's work.

Supporting this strong environment are healthy state infrastructure budgets, including many supplementary state programs as well as local city and county infrastructure programs and the IIJA federal program funds that will still take a few more years to be spent.

On Capitol Hill, both houses of Congress continue to work with Secretary [ Duffy ] on the 5-year reauthorization of the Surface Transportation program. We expect this deal to be voted on by spring as this administration continues to prioritize hard infrastructure investments and decreased permitting delays necessary to support a growing economy.

And the final trend is part of our acquisition strategy, which is we operate in a very fragmented industry of local market players composed primarily of family-owned companies, and this industry is going through a generational transition. As many private owners are getting to retirement age, CPI's opportunity to have conversations with sellers throughout the Sunbelt continues to grow.

Before turning the call over to Greg to review the financial results for FY '25, I want to emphasize that as we begin in the fiscal year, we remain focused on executing our record backlog in the field and evaluating growth opportunities throughout our Sunbelt footprint. We also remain focused on the crucial long-term challenge of attracting and retaining the best workforce. We will continue to create a competitive advantage by providing our employees with both attractive career growth and a distinct family of company's culture. At CPI, we know that our people are the key driver to grow our business and create outstanding shareholder value.

I'd now like to turn the call over to Greg. Greg?

Thank you, Jule, and good morning, everyone. As Jule mentioned, we had a strong finish to our fiscal year with a great fourth quarter that represented revenue of $900 million, an increase of 67% compared to the same quarter last year, of which 10.4% was organic revenue growth. Adjusted EBITDA in Q4 was $154 million, which was twice as much as Q4 last year. Adjusted EBITDA margin for Q4 was 17.1%.

Now I will review our key performance metrics for the fiscal year before discussing our outlook for fiscal 2026. Revenue was $2.812 billion, an increase of 54% compared to last year. The breakdown of this revenue growth for the year was 8.4% organic growth and 45.6% acquisitive growth. Gross profit in fiscal 2025 was $439.1 million, an increase of approximately 70% compared to last year. As a percentage of total revenues, gross profit was 15.6% compared to 14.2% last year.

General and administrative expenses as a percentage of total revenue in fiscal 2025 decreased to 7.1% compared to 8.1% last year. Net income was $101.8 million, an increase of 48% compared to last year. Adjusted net income was $122 million an increase of 73% compared to fiscal 2024. Adjusted EBITDA was $423.7 million an increase of 92% compared to last year. Adjusted EBITDA margin was 15% compared to 12.1% in fiscal 2024. You can find GAAP to non-GAAP reconciliations of net income and adjusted EBITDA financial measures at the end of today's earnings release.

Turning now to the balance sheet, we had $156 million of cash and cash equivalents and $303.5 million available under our credit facility at fiscal year-end, net of a reduction for outstanding letters of credit. As a reminder, on June 30, we amended our credit agreement by providing for a total facility size of $1.1 billion, consisting of a term loan in the amount of $600 million and a revolving credit facility in the amount of $500 million. We utilized the proceeds from the increased term loan to pay down the then outstanding balance on the revolving credit facility, realizing the full availability on the facility as of June 30. In addition, the amendment extended the facility maturity date to June 2030.

As of the end of the quarter, our debt to trailing 12 months EBITDA ratio was 3.1x. We remain on pace with our strategy of reducing the leverage ratio to approximately 2.5x by late 2026 to support sustained profitable growth. In fiscal 2025, cash flow from operations was $291 million, up from $209 million in fiscal 2024. We continue to expect to convert 75% to 85% of EBITDA to cash flow from operations in fiscal year '26.

Capital expenditures for fiscal 2025 were $137.9 million, within the range we provided of $130 million to $140 million. We expect total capital expenditures for fiscal 2026 to be in the range of $165 million to $185 million. This includes maintenance CapEx of approximately 3.25% of revenue, with the remaining amount invested in high-return growth initiatives.

Turning now to our outlook. As we reported last month, here are the ranges for our fiscal year 2026. Revenue in the range of $3.4 billion to $3.5 billion, net income in the range of $150 million to $155 million, adjusted net income in the range of $158.1 million to $164.2 million, adjusted EBITDA in the range of $520 million to $540 million, adjusted EBITDA margin in the range of 15.3% to 15.4%.

Consistent with historical seasonality, we anticipate the first half of the fiscal year to contribute approximately 40% to 42% of annual revenue and 30% to 34% of adjusted EBITDA. In the second half of the year, during our peak construction season, we expect to deliver the remaining 58% to 60% of revenue and 66% to 68% of the adjusted EBITDA.

Lastly, as Jule mentioned, we entered the new year with a record project backlog of $3 billion at September 30, 2025. We -- we have approximately 80% to 85% of the next 12 months contract revenue covered in backlog.

And with that, we will open the call to questions. Operator?

[Operator Instructions] Our first question is from Kathryn Thompson with Thompson Research Group.

You've done a very nice job of meeting the financial goals that you outlined in your previous Investor Day and late 2030 goals out in late October, and part of that is M&A, which you talked about, several acquisitions that you completed recently. As you build momentum with your growth trajectory and consolidation of the market. Could you talk a little bit more about what you're doing in terms of integration? And maybe what's different today versus, say, 5 years ago as you're going down this growth path in terms of smooth integrations.

Yes. Kathryn, 2025, as you noted, was a transformational year for us. And a lot of that was the acquisitions we did. We've been busy. But the strategy that we talked about in October hasn't changed. We're going to look for the right markets with the right partners. The sellers, there continues to be a generational consolidation.

One thing I will say has been busy this year and Ned who's with us, he's been right there with us on a lot of these acquisitions. So I'd love just to turn that question over to him and get his thoughts on just our acquisitions and strategy.

Kathryn, thank you. Thank you for your support. I think that a couple of things to start at a big picture. We've got a great team that really looks at all the acquisitions. They understand the strategic benefits of each acquisition. They understand how to do diligence so that we end up generally knowing more about the business than the people we purchased it from. They understand the organizational fit and the financial fit.

So I think it all begins with having really a [indiscernible] from the opportunity standpoint, we see more opportunities today than we did 5 years ago. I think it's important to note that. I think that has to do with the generational transition that's happening. But the opportunities today, we actually -- as we look at it through our acquisition working group, we see more opportunities now than we did 5 years ago, 3 years ago and 4 years ago. And that in large part is directed because we have a great team that's out there in the marketplace that people trust.

From an integration standpoint, we've always had a theory that if we buy the right companies that have a good cultural fit with management teams that are, I think, good listeners and good learners that, that's easier to integrate. But the other thing that we've always done and we're better at it today than we've ever been is we've included people throughout the company in that integration. It's not just 1 group. These people will get to know people that they're going to work with through the integration. They'll get to have people that can call to answer questions in the integration.

So for us, I think [indiscernible] better integration, it's smoother today than it ever was. It's also become a real honor for people to get to work on the integration teams throughout the company. So you may have somebody that's going to do the same position that you are as we acquire you, that you'll get to know in the process, and you'll have somebody that actually does that job that you can call and get to know.

The last piece of it is that Jule and Greg have done a terrific job of making sure that all the leaders of these businesses have gotten to know each other. They get together quarterly throughout the year to make sure -- for different reasons and with different focuses so that everybody knows each other. So when there's an issue or a problem, it's not just solved by corporate, it solved throughout the organization. And that's been a real important piece of it as we've gone there. But I would just say I am so impressed with the team that Jule's put together that acquired these businesses and how we've incorporated people throughout the company to integrate it.

Greg and Jule are happy to talk more about that. But I think as a Board, or to speak for the Board, I would just say, we see it being smoother and better than it's ever been, and we see more opportunities than we ever have.

It sounds like you've been building your muscle had a good footprint that also are building that muscle for integration with the companies you acquire.

One follow-up question then I'll hop back in the queue, is just with the government was shut down for a record amount of time that just confirm, did that impact your business? Where do you see it going forward in terms of how you plan your business?

Yes, Kathryn, the government shutdown, we're glad that everything is over, and we're back to normal, but the reality is it didn't really affect our industry because the funds go through the Highway Trust Fund. So we didn't really see any revenue impact or bidding impact for the 40 days that the government was shut down. .

Our next question is from Tyler Brown with Raymond James.

I know you addressed it a little bit upfront, but what is the confidence level around getting to a vote on that reauthorization bill by spring. I'm just curious if you're hearing that from lawmakers. Just -- it sounds like there's some real momentum there, but just any other color would be really helpful.

Sure. Yes. Tyler, the reality is, as we've often [indiscernible] is the most bipartisan thing in Washington. So that continues to be true. In September, I would have told you that -- and this is something I've heard from politicians on the Hill, they were running ahead of schedule compared to where they historically are on the 5-year authorization, they were well ahead of schedule. There was momentum. I think the government shutdown has gotten that that lead back to where they normally are.

So what I'm hearing is that both chambers are working on in committee the bill, they then will turn to what the [indiscernible], how they get it paid for, the highway trust funds, the major thing. And then the question is how they make up the difference. They're working with this administration, I've heard good things about just what this administration is prioritizing. They know that they need to spend the money wisely on infrastructure projects that are going to support the economy. So from what I reported in my prepared remarks is just what I'm hearing is that they're now choosing for voting to be done this spring in anticipation of an October 1 new fiscal year that this 5-year plan will start to fund.

Okay. That is extremely helpful. Greg, quick modeling or housekeeping item, but how much rollover M&A revenue should we be modeling just again, based on deals that are done to date? And will those be neutral, accretive or dilutive to margins, broadly speaking?

Yes. So let's kind of break it down by 2025 acquisitions and the 2026 acquisition. So the 2025 acquisitions will carry over about $240 million to $250 million in revenue. And then the acquisitions that occurred here in '26 will be another $200 million. And I would say that the combined impact of those are neutral to our current margin position than what we projected for '26.

I would -- just as we said at our Analyst Day, Tyler, we are -- the reason our margins have grown in addition to what our legacy business would have done. These -- the acquisitions we made in 2025 had good margins. And I would say that we continue to expect that the businesses we closed in 2026 will be the same way.

Okay. Yes. Very helpful. And then just if I can squeeze the last 1 in here on cash flow. So I think it was a little bit slow maybe here late in the fiscal '25. But it sounds like, Greg, do you expect cash from ops to be again roughly 80% of EBITDA, in that 75% to 80% range, right?

Yes, that's right. 75% to 85%. As a matter of fact, the last 3 years, on average, were 80% when you total those up. The positive fourth quarter of $25 million due to really great weather, really great performance also caused really large billings and large cash outflows. So the cash will come. It's just being pushed into the following year.

Okay. Great. And then conceptually -- and I know we'll get the detail in the K. But do you still expect to be kind of a de minimis cash taxpayer over the next few years? Is there any change in that big picture?

No, there's not. We talked a little bit about maybe in the last call about the One Big Beautiful Bill and what that did to our cash taxes. We talked -- maybe that was like in $15 million, $20 million savings for us this year. And yes, when you see the 10-K, you'll see that it was about $5 million in cash taxes where we thought it was going to be higher because we projected maybe not having some relief there. But obviously, we got it. And yes, going forward, will be more of the same.

Our next question is from Michael Feniger with Bank of America.

Yes. I apologize if I missed it, you guys have done some transformational M&A. Just Jule, is 2026 a little different in terms of the type of M&A? Is it more bolt-on versus platform? And I guess the genesis of the question is is the focus on '26 to get that leverage to that 2.5 by late [ 2026 ] and then you rev up the M&A engine back up again? Or are you kind of trying to fly 2 planes at once. So I think that's kind of the genesis of the question. Given some of the strong M&A you guys have done in the last year or so?

Yes, Michael, good question. I don't know if we're trying to fly 2 planes at once. That sounds a little dangerous. We're just trying to execute on our strategy. But the reality is 2025 when we say a transformational year, that's -- it's not a normal M&A year. It was a great year. I mean, to do 3 platform acquisitions in 1 year, that's not typical. But we just saw the opportunities present themselves with Lone Star, Overland and PRI.

And so -- and frankly, our guidance for 2026, some of this transformational year is carrying over and affecting our new year in a positive way for us to be growing 23% already. Our M&A strategy, we continue to talk with a lot of sellers. I would say right now, we're having conversations in all 8 of the states we're in at different stages. We'll continue to try to make good decisions. We don't close every deal or with the people we talk with, we try to study and pick the best ones.

I would say for 2026, you're going to see us continue to do bolt-on acquisitions where we think that the strategy is the strategic positive. There's just too much to pass up on. But at the same time, as Greg said, we are focused on deleveraging as the cash flow and the EBITDA rolls through, that should naturally happen -- by late 2026 to be back around that 2.5x leverage.

Perfect. And Jule, just my follow-up, just can you kind of talk about what you guys are seeing on the cost inflation side? I would think liquids have been pretty tame, and really what you're seeing on the pricing side, so that price/cost spread as you guys kind of roll over into 2026, how you guys are feeling about that?

Michael, 2025, after a couple of years, a few years ago of record inflation, 2025 was about the most benign inflation year we've seen in a long time. The construction material costs went up a normal amount, but that's stuff that we put in our estimates as pass-through and there was no surprises. There was no real spikes. And then I'll let Greg answer for energy, he tracks that pretty closely, but it was really just a very -- just a very normal year I would say. .

Yes, I would say that you said it, Jule, when you're talking about inflation and if you see spikes, those are difficult to pass through, but it was pretty steady all year. And energy was no different. Liquid AC, pretty big component of our cost was pretty stable all year. Diesel was relatively stable all year. So I think that it was a pretty stable year overall.

Right. And Michael, I know we've talked about labor costs, our labor costs now are going up, what you would think in a typical year, that 3% to 4% that we can easily put in our estimates and predict.

Our next question is from Adam Thalhimer with Thompson Davis & Company.

I actually wanted to continue on Michael's pricing question. When you look at recent bids, does it feel like your competitors are pretty full and pricing still healthy?

I would say so, yes. the bidding environment, we're always in a competitive market, and that's not -- that's been the case since we were founded 22 years ago. I will tell you, it helps to be in growing markets. And so that's why when we say we want to get to the right markets with the right partner, we'd rather be bidding in a growing market where everyone has a chance to fill their backlogs and to bid patiently. And so I feel like that continues to be the case. We have a record backlog. But at the same time, you can tell in our guidance that we're expecting margins to expand and grow. And you can't do both of those if you don't have healthy markets to bid in.

Sounds good. And then, Jule, when you pull your operating guys, what do you hear back from them on private construction demand? How uniform are the responses on that?

Yes. the private economy, Adam, I would say, when Greg and I look at the backlog each quarter and we say, okay, what's the revenue split, I would say it's been pretty consistent. Maybe it's ticked up a little bit, 1% or 2% towards public versus private. We still got a very healthy 34% to 35% of our backlog is private. In all 100 of our markets, they're different economies, micro economies, so to speak. But we still see a lot of demand, as I said, from people and businesses migrating to the Southeast. And so we get a lot of opportunities to bid commercial projects. So that really hasn't changed a lot. We monitor it. We know we're going to get asked. But we're blessed to be in the Sunbelt where there's still -- the private economy is growing.

And just lastly for me. The other thing that's happening in the Sunbelt is just massive data center construction, and we're hearing that some of these campuses are just getting larger and larger. And it's a bit off the wall for you guys, but I'm just curious if those are big enough to actually pull some paving work.

Yes. I mentioned that in my prepared remarks. We get asked about data centers a lot. That's not something that we go around specializing in. We're organized in local markets. But there are data centers being built in a lot of our markets, and we participate in those. We put in the site infrastructure. We build the roads. And you're right, some of them are pretty large projects. But for us, they're similar to an Amazon warehouse or a distribution facility. The site has to be cleared, graded, the utilities have to go in, the storm water has to be maintained, and they have to have a good access road. So for us, data centers are a good opportunity to build when we can reach them in our local markets.

Our next question is from Jean Veliz with D.A. Davidson.

Outside any reauthorizations coming from Washington. Are there any potential revenue raising initiatives or ballot measures like a gas tax or sales tax that you guys are monitoring across your core markets?

Yes, Jean, I was just studying that this week. Every 1 of our states, all 8 states in the last year have had multiple ballot initiatives to fund infrastructure. Tennessee had probably the most. We had 8 different initiatives.

I was just talking to the Governor of Tennessee a few days ago about just what his state saw with the growth and the need to get ahead of it. So they passed the Transportation Modernization Act, which put billions of dollars toward transportation. They did a onetime transfer of $1 billion from the general fund this past year. And then things like they put tax, like a $0.01 tax or some percent tax on the sale of new and used tires to go toward transportation. And all of our states in some way, have taken steps to fund infrastructure, to invest in it.

And that's why I mentioned just in the Sunbelt, they see -- the governor see the growth coming there, they don't want to fall behind. And so they're taking supplemental measures to what the gas tax gives them and what Washington through the surface transportation program gives them.

Makes sense. And I wonder if I missed this, because you guys talked a little bit about energy pricing and all. But can you perhaps provide a little more color about asphalt mix prices? And what sort of levels are you guys currently seeing now? And what do you guys expect for fiscal '26. And is that in any way contemplated in your outlook?

Jean, could you repeat that? You broke up a little bit. What specifically were you asking about as far as pricing?

Yes, no problem. I was just asking about what sort of asphalt mix prices are you guys currently seeing today -- and what are you expecting in 2026? And then is that in any way contemplated in your fiscal 2026 guidance?

Yes. So our asphalt, we manufacture it. And so for us, we're going to raise prices as we get higher input costs and as we can pass that through in our projects. I'll let Greg speak the way he's seeing in terms of liquid asphalt, which is a major input cost in aggregates. But for us, hot mix asphalt is the key thing we produce.

Yes. As Jule said, we will pass through as we understand what pricing does. With liquid asphalt specifically, it's obviously a pretty big component of our asphalt mix, most of our states have a liquid AC index that's pegged to the day you bid the job. So certainly, that gives us some cost stability there that we can count on. But certainly, we're escalating costs as needed based on the extent and duration of the job in order to make sure that we've got our costs covered in a bid or if we're pricing out to a customer that's buying our asphalt third party.

We have reached the end of our question-and-answer session. I would like to turn the call back over to management for closing remarks.

We just want to thank everyone for being with us. We're excited that FY '26 is off and running. Thank you.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

All right. Here we go. Welcome, everyone. I'd like to welcome you all to Construction Partners' Analyst Day here, 2025. This is the second Analyst Day we've had in our history. We're very excited to have you all here. We'd like to thank you all in the room for being here in Raleigh and traveling and coming to see us. And I'd like to extend a thank you to all of our Construction Partners folks that are here that you've gotten to speak with during the tour and that are going to be here for the duration of the day and the lunch afterwards.

We'd also like to welcome everyone who is joining us via the live stream on our website. And just a reminder, with the webcast, that will be archived on our website, and you can access that later. We will also post a PDF of today's presentation after we're done here today.

Just a programming note, if we have the agenda slide up, I just want to note that we will have a short break that will occur after Greg Hoffman, our CFO's presentation. So we'll have a quick break there. And then if you don't mind, please save -- we're going to do Q&A at the end, and that will be the most expedient for everyone's time. So after we do our little panel discussion near the end of our agenda, then we'll do a Q&A session.

And now just to make sure that everyone is mirandized, I am going to talk about our disclosure here before we get started. So we'd like to remind everyone that this information today is being recorded. It only speaks as of today, October 22, 2025. So please be advised that any time-sensitive information may no longer be accurate as of the date of any replay or transcript reading.

I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance are considered forward-looking statements made pursuant to the safe harbor's provisions of the Private Securities Litigation Reform Act of 1995. We will be making forward-looking statements in today's presentation that are -- that their nature and beyond our control in certain matters. So actual results may differ materially.

Please refer to our press release that we put out yesterday afternoon that has all of our disclosures on forward-looking statements. Those factors and other risks and uncertainties are also described in detail in the company's filings with the Securities and Exchange Commission.

Management will also be referring today to non-GAAP measures, including adjusted net income, adjusted EBITDA, adjusted EBITDA margin and net debt. Reconciliations to the nearest GAAP measures, again, can be found at the end of our press release. Please note that references made to the company's fiscal year also represent that we're a September 30 year-end company. And again, all of this information will be on our website after this.

And now without further ado, I would like to introduce our Founder and Executive Chairman, Ned Fleming. Ned?

Thank you, Rick. Well, good morning. But for Construction People, this is afternoon because they've been up, working since about 5:00 in the morning. So I just want everybody to be reminded. I see all the Construction guys nodding.

Welcome to ROAD 2030. It's a terrific day. We're going to talk about how we're moving from a 3-lane road that crosses the Sunbelt to a 6-lane interstate. It seems like just yesterday, the other founder, Charles Owens and I were talking about this on the way home from losing out on bidding for the company that he had run. It was a Danish company, we had talked about last night, called Superfos. And I said, Charles, can we build another business like this? And I'll never forget we're on the airplane. We're flying home. We've lost out. We're both disappointed. He grabbed his wallet out of his pocket, and he picks it up, he says -- a little sheet of paper, and he says, "Absolutely, these are our next 10 acquisitions." And I think we bought six or seven of those businesses as we built this business. It has been better than we ever imagined, and the future is brighter today than it has ever been. And that's what we're going to talk about today is the future.

If we go to the next slide, so we talked about this slide when they brought it to me and I said, "Well, can't we just use the one from the last meeting," because the strategy has not changed. Today, we still look at a market that is large and growing in the asphalt business. We still see a market that is highly, highly fragmented. It's a relative market share business. And consolidation makes for a stronger, better business, and that comes through in the profits and the revenues and the people. It's exactly the same today as it was 25 years ago when we were riding on that airplane talking about doing this.

I will say, though, as you'll learn in this presentation, we are better prepared today to take advantage of that market, strategically, organizationally and financially, and we'll talk through that.

Infrastructure services continue to need to grow. I don't go anywhere in the country where somebody says, "Our roads are great. We don't need to invest any more capital." Nowhere. Does anybody have a -- live in that spot? Because I haven't seen it. They need to be done, and that demand is growing, and the voters are tired. They want their roads to be better, and they want them to be bigger and broader, so they don't have to spend as much time in traffic.

We focus not just in a highly fragmented industry, but on specific places that you'll see where we are doing recurring maintenance work. So if we turn to the next slide, it will amaze people. But 94% of all the roads in America are asphalt. And even when you're riding on a concrete road, it has underlayment that is asphalt. Kind of odd, that's why they're so much more expensive than asphalt roads. 94%, so if you're on a road, it's going to probably be asphalt.

The roadways are in poor condition. I don't know about you all, but in my family, when I grew up, if I came home with a D, I was in trouble and our country has had a D on the roads for a long, long time. It's something that we need to focus on. It's something that our elected officials know that we need to focus on, and you're hearing more and more about it as we move forward in this.

One of the things that's happened is our roadway system is deteriorating. So a road needs to be redone, replaced, repaved every 10 to 15 years. I'm going to talk about why the cycle time for that is actually increasing in a moment. But if you think about it, that's why maintaining the roads is recurring revenue for this business. This is a business that is going to continue to pave roads. There are roads we have paved in the Florida area 2 and 3 times since we started this company. That's going to continue.

And as we grow the roads, if we move to the next slide, what you're going to see is lane miles are expanding. They're up. So you -- one of the things we're going to talk about today is organic growth, and you're going to learn why the organic growth in this business is so dynamic. We get that question all the time, I got it last night as I was sitting at dinner with one of the analysts.

One of the reasons is the lanes are expanding all over. So we have more roads. We also have new roads because we're growing, particularly in the Sunbelt part of the United States. The other piece of it is we're traveling more. People are getting their cars and traveling more, which means the roads are getting used more, which means we have to replace the pavement. Those reasons, along with the fact that, yes, we have electric vehicles, they weigh more. They're heavier. We're -- also more people, believe it or not, are driving trucks and SUVs. Heavier vehicles, beat up the road more.

So let's just think about that. You've got more lanes increasing, gosh, that's growth. You've got cycle times increasing, that's growth. You've got new roads increasing and that's growth. So the reason we have organic growth is because of all of those things.

And we're doing it in a part of the country, we move to the next one, that is growing 5x faster than the rest of the part of the country, 5x faster. On this chart, it's interesting. We had an interesting discussion about it because we're in 6 of the top 7 states, top 6 of the top 10, but 6 of the top 7 states. We're investing in places like Houston, Texas, with Jack Wheeler, who's here today -- I mean, Austin, Texas with Jack; and Brad Greene, that's here today in Houston, for a reason. It's where the demographic growth for our country is growing.

It's speeding up. It's where young people want to be. It's where businesses are. It's where BMW is building plants. It's where Tesla built a plant in Austin, Texas, that Jack and his crew at Lone Star did all the paving work for. That's where the growth in our country is. This is a chart that we've been showing for the last 25 years. Yes, we've expanded it, but our focus has always been on the Sunbelt. As you walk in, you saw a chart today that shows all the dots. When we started, we had two dots. And today, as we've grown this business, what's great about growth here is I've talked about organic growth, but we also have acquisitive growth, and we're going to talk about that, too.

As you leave today, you could do all of us a favor, one of the founders, Charles Owens, is not here today, but he loved maps. If you ever went in Charles' office, he had a map of every single state we were in, and he would have people put dots where all the different asphalt plants were, and he would look about where [indiscernible]. So as you leave, there is a sharpie pen out there. I want everybody to write him a note. If you know him, write him a note. If not, just sign your name. I'm going to then fold that up and Jule and I will present that to him at one of the company meetings. So would you please do that.

This chart is not going to change. The growth in our country is really moving in this direction. So we're going to continue to stay focused on the Sunbelt. Don't expect us to do anything else. We can double the size of this business and not leave the states we're in. That's how much opportunity there is for us.

Move to the next one. This is my favorite chart. Today, this team is better. They continue to work harder. They have more opportunity and they're 10 years younger than they were when we started this business. Think about that. We're smarter, better, working harder and we're younger. That creates opportunity for the business. They are better prepared financially with the partners we have with our financial structure. They understand the strategy better than any team we've ever had. They understand how to execute it better than any team we've ever had.

And Jule Smith is doing the best job of anybody I have ever worked with. I started to count how many different management teams I've worked with and all the different things they've done, and I stopped counting at 36. He has built an organization that has kept culture. We talked about it last night. Culture is a strategic advantage for this company. It's one of the reasons we're able to buy the businesses we're able to buy. It's one of the reasons we're able to attract the talent we're able to attract. And he does that better than anybody I've ever worked with. He builds the organization ahead of the growth, and he keeps the culture. I'm not sure what the secret sauce is, but if I could get him to write a book, I would have him write a book.

So this team is, not only are they prepared but they're led well. And it's an important piece of this. We don't talk about it enough, but Jule is the quarterback, and he knows which player is open to throw the ball to and he throws it to the open player.

So as we move forward, what really excites me is not only is the opportunity better than it's ever been, but the team that we have is better than it's ever been, and the leadership of that team is as good as it's ever been. So for me, it is always a pleasure to get to introduce the Chief Executive Officer of Construction Partners, Jule Smith. Jule? I don't know why, but my picture, I look older in my picture, and you still look young. Thank you.

Yes, sir. Thank you, Ned. I'm not sure what to think about that analogy. There's a lot of pressure on quarterbacks these days.

So I'd just like to start by talking about a competitive advantage at CPI that we don't talk about a lot. But if I was an investor, it would certainly mean a lot to me, and that's our Board of Directors. I don't know many companies that can say we're 23 years old and five of our Board of Directors, the majority of our Board, including the two founders, have been there the entire time. They've been there since the beginning.

And that is great because there's a lot of wisdom and experience when we're in that room. But they also -- they think long term and they make sure that we're thinking long term, not quarter-to-quarter, not short-term fixes. And that is a real blessing for Greg and I and the leadership team that we can focus on what creates value in the long run.

And Ned is the leader of that, and he does a great job. And I'll tell you, back in the summer of 2024, I called Ned. I said, "Ned, I have found our Texas platform company. And all we've got to do is we got to find $1 billion." And after a couple of second pause Ned said -- he jumped right in and said, "Okay, let's find a way to get it done." So that is the attitude that we're led with. So Ned, thank you. Yes. We did it quickly. We did it quickly.

For those that were in New York, 2 years ago, you remember I spoke at this slide. I said, "Hey, that picture, I remember exactly when it was taken." It was 2 years ago at the time, the week before I stepped into this role, and I made a joke that, that guy looked so relaxed and naive. But I remember while I was talking about that, I was thinking at the back of my mind, okay, Jule, in 4 years, when we come back to New York and do this again, you cannot use that same picture. You have got to get a new picture. So there is some small benefit to accomplishing your plan 2 years early. No one's had time to think about get the new picture. So we'll see what happens in the next 5 years. Is this it? All right. Great.

So this was the map that we showed you 2 years ago in New York at our Analyst Day. We were in 6 states. We had 67 asphalt plants and 4,000 employees. And we said, hey, we're getting together 5 years after our IPO. We want to go over the things we said on the road show back in 2018. We've accomplished those, but we wanted to lay out a long-term plan of where the company was going using the same strategy on how we grow the top line and the bottom line. So I just want to review what we told you back in 2023.

The first bar is the year we had just finished, so sort of our trailing 12 months. So we were about a $1.6 billion company in October '23. And we said we're going to grow 15% to 20% annually, and that will get us to be somewhere between $2.7 billion and $3.2 billion. The first year, we had a typical CPI year. We grew 17%. And then last year, this year, we're finishing up was a transformational year, we grew 54%. We also said we're going to expand the bottom line. And we're going to -- we were at 11% EBITDA margins, and we said we're going to expand EBITDA about 50 basis points a year, and we're going to be between 13% and 14% by 2027.

Now I have to tell you that week in New York, my son, Gabriel, who was a ninth grader at the time, that was his fall break. So I talked to him and my wife, Alisa, who's here today, I said, "Hey, don't you want to go to New York for fall break?" So they came to the presentation. And Gabriel was sitting in the very back of the room, and I wasn't sure how much he was paying attention to this corporate presentation. So that night, at dinner, I said, "Gabriel, what do you think?" He said, Dad -- he said, when you were talking about revenue that made sense. He said, but when you started talking about EBITDA margins getting to between 13% and 14%, these two guys sitting in front of me look at each other and say, "Yes, that's not happening."

So I immediately knew what Wall Street thought would be the heavier lift for us. Now I want to tell you to relax. There's no [ Smith ] kids planted in the audience today. But we were able in the first year to grow in -- over 100 basis points. And then last year, this year, we were able to expand EBITDA margins almost 300 basis points. Now I will say this yellow bar -- we just pre-released our earnings yesterday. That is the midpoint to illustrate. So we're using the midpoint there.

And then as we expanded the top line, the EBITDA margin, the cash flow has expanded as well. So we said we'd get to between $350 million and $440 million of EBITDA, and this year, we're at $423 million.

So -- as Greg and I, just a year ago yesterday, as we announced our outlook for 2024, and clearly, we indicated that with the Lone Star Paving acquisition, we were entering a transformational year. Each quarter, as those dollars went from outlook to actual, we have started to get the question, where do you go from here? What's next? And that's why we're here today to answer what comes next for Construction Partners.

And so as Ned introduced, what we're going to roll out today, ROAD 2030, which is a 5-year plan of where the company is going. We also want to tell you how we plan on getting there and some of the things we're going to use to do that. And we're excited about this. ROAD 2030 in 5 years, CPI will be at another level in terms of size and scale, but also profitability and cash flow.

So this is our map today as we get started. The yellow dots are what the map was in 2023, and the blue dots are everything that's happened in the last 24 months, we've been busy. So since 2023, we've added 53 new facilities, whether it's a hot mix asphalt plant, a quarry or liquid asphalt terminal. We've added three new platform companies in Texas, Oklahoma and Tennessee that expand our map and start to create more conversations with potential sellers in those states. We've added seven new brands. So in addition to the three platform companies, we have four subsidiaries that give us another growth engine within a state in a geographic region. I'm going to be going over one example, and Nelson is going to be going over another where those subsidiary companies allow us to grow.

So as we start 2030, we're now in eight states of 109 asphalt plants, 17 quarries. So as we get started, we also have more growth engines, these platform companies and subsidiaries, more management teams to handle the growth to come.

What's the environment that we're operating in as we get started. There's four macro trends that you've heard us talk about but they're still powerful. What's been driving our growth and they're going to continue to drive our growth. The first is the migration to the Sunbelt that started during COVID to accelerate, it's continued to accelerate, both people and businesses moving to the states we're in. That drives demand not only for private construction, but also for public investment to keep up with the growth.

Reshoring. We talked about that a lot since COVID. Companies moving their manufacturing facilities and businesses to the Sunbelt because they wanted to strengthen their supply chain. We believe that with this administration and the tariffs that are being implemented, that's going to continue that trend of companies saying, "I want to move to the United States to manufacture my product." And the Sunbelt is going to get more than its fair share of those companies. So that's a trend driving growth. And then, as Ned said, the federal and the state governments are saying, we've got to invest in infrastructure, and that's going to continue. And I'll talk a little more about that here in a minute.

And then part of our acquisition strategy, and it's been the same since Charles and Ned founded the company is our industry is going through a generational consolidation. A lot of the private owners are getting to retirement age, and that's driving the chance to talk to them. CPI is seen as the major consolidator in our industry, and a lot of sellers would like to talk to us about joining our family of companies.

So just a minute on federal infrastructure funding. I want to focus for a minute on what is the main part of that for us. And that is the Surface Transportation Program. Now contrary to a popular misconception, that did not start with the IIJA. It started decades ago. As you can see here, it was MAP-21, the FAST Act. And it was part of the IIJA. It was really only 1/3 of that at $350 billion. 2026 is the last year of that program. And so they're now on Capitol Hill talking about a 5-year reauthorization.

We are very confident that there's going to be a reauthorization and we're very confident that it's going to be at a higher level than the previous 5 years. And why do we have confidence in that? Because that's what's always happened. That's what's always happened. The program has never gone down. It's never not been reauthorized. And that's because infrastructure is the most bipartisan thing in Washington. Republicans and Democrats agree, we've got to invest in our infrastructure, and they know that it also grows the economy and creates jobs.

So we are in the process. This administration is very focused on hard infrastructure, which is good for construction partners. And we had one of our own, Ty Johnson, just a couple of months ago, the President of Fred Smith Company, was on Capitol Hill, testifying about the reauthorization. So that is the main funding mechanism for what Construction Partners does.

Our strategy as we get started on 2030. We, on purpose use the same slide we showed 2 years ago. And 2 years ago, we got up there and said, Greg and I, the big news today is there's no new news. And what we were trying to say is, hey, we know you've got a fairly new CEO and a fairly new CFO. And what we're communicating is we're not here today to announce some grand new strategy or big ideas. Strategy that CPI was founded upon 20 years ago is even more powerful today. So why would we try to change that. We're going to continue to execute on that strategy.

And that is the same thing we're communicating today. We're going to continue to be an asphalt-centered infrastructure company in the Sunbelt region of the United States. We organize in our local markets. We're going to do repeat revenue for recurring customers. We're going to focus on small projects, 6 to 9 months in duration that have higher margins and lower risk. And in doing that, we're going to generate a lot of cash, and we're going to take that cash and we're going to invest it in high-return growth initiatives. That's the strategy, and it's not changing.

But I want to make sure today I want to communicate that the fact that the strategy is not changing doesn't mean that CPI is not changing. We are always changing on how we execute that strategy.

To illustrate that, I want to show you something that we use internally to help keep us dialed in on how we execute that strategy, and we call it the CPI way. It's a simple acronym that we use, the C is for culture of the local company. P stands for power of the parent, the I stands for innovative mindset. I want to focus on the third point here, we're going to talk about the first two in a minute.

Innovative mindset. Jim Collins defines innovation as a good idea done. And that's the mindset we want to have. What are the good ideas? How do we improve? How do we get better? That drives us to use technology like in our fleet. We are trying to put in the hands of our superintendents as they're on a paving crew to be able to see in real time where their trucks are, so they can plan their work and know when that truck will get through the current traffic to get there. Where we're running our asphalt plants, we're building right now a platform that you can see in real time exactly what's happening at every asphalt plant across the company. And a superintendent can see, is the plant keeping up with my crew.

We've said before, we're in the process now of implementing an artificial intelligence tool to help us be able to bid better and to leave less money on the table and to make more margin. But it's not just technology. We're also looking for innovation in how we create employee benefits and incentive systems to attract and retain the best workforce. So we're constantly changing on how we execute a strategy that's not changing.

As you would imagine, if the strategy is not changing, the next 5 years, the levers we use to grow the top line and bottom line aren't changing either. Our top line levers will continue to be organic growth. That's what we focus on the most. Part of that is greenfield facilities, which you'll hear about that later today. And then finally, acquisitions. Nelson is going to cover those more. I'm going to focus a little more on the bottom line, levers.

The first is scale. As we're growing the top line, how do we keep fixed costs growing slower and capture more of that on the bottom line. And that's powerful over time. Clearly, this year, it was a huge step forward in scale, but each year as we grow normally, we hope to collect 5 to 10 basis points on the bottom line just to building scale.

Vertical integration. Nelson is going to show you on his map, there's over 1,000 service companies in our states that do grading and utilities that can be acquisitions that expand our construction service capabilities. We can also build it organically like we're doing in upstate of South Carolina, building grading capabilities. We can also capture through construction materials, through aggregates and liquid asphalt. You're going to hear later today how we're expanding a liquid asphalt terminal to capture more margin as we grow our volumes.

I want to focus today with you on the most powerful of the three levers, and that's building better markets. We've already talked about. I just told you, part of that is using technology to bid better, to be a better player in that market. But the most powerful aspect of building better markets is simply getting to the right markets with the right partner, getting to the right markets with the right partner.

This is the markets we've entered and the partners we've been in with just in the last 12 months, we've been able to study these markets, study the growth that's happening there and say, "Can we create organic growth there? Are there opportunities to make value-added acquisitions there? And are these the right partners, their character, their people, are these the right partners for us?" And so as we build better markets, we've got to get to the right markets with the right partners.

I've lived this, and this is where the C and the P come in. In 2011, when my family business joined CPI, they were able to get to Raleigh, Durham. Dynamic growing market. They were able to partner with a management team that new Raleigh, Durham intimately. The company had been operating at that time for over 80 years in this market.

But they were smart. They didn't come in and change everything. They said, "We want you to continue being who you are, keep your culture, you know this market." But then they brought the power of the parent. They said, "Here are some tools and some technology to help you know your business better. We're going to put that in your hands. Where there are opportunities to bid more work, we're going to increase your bonding capacity. And where there is value in growing organically, here's the capital to do that."

And so when they brought those tools to us, the power of the parent, and we were able to keep our culture, it was like rocket fuel. We grew organically double digits every year for a decade. And at the same time, we were able to expand our margins. And that's what we mean as a margin lever by building better markets. Getting to the right markets with the right people.

I want to go over two examples just in the last 60 days. So Monday, we announced the acquisition of P&S Paving, who has a dominant market share on a very fast-growing part of our country, the East Coast of Florida. They're headquartered in Daytona Beach. They're led by a great management team, Tim Phillips, who's with us today, and Curtis Long. So they have a great management team, and that's what sets the stage for growing. So now they'll be our East Coast division in Florida and that creates opportunities to grow organically north into Jacksonville and south toward Palm Beach, getting in the right markets with the right partner.

Now go back 60 days ago, we entered Houston with Durwood Greene. Houston, I really didn't know this 1.5 years ago as much as I do now, Houston is an incredible part of our country. The metro area of Houston is bigger than three of our entire states. But not only is it a huge metropolitan area, both in population and geography, it has a faster growth rate than almost everywhere in the country. So that is clearly a place that we want it to be. But we don't want to be there if we can't have the right partner.

And so for us to be able to partner with Durwood Greene, Brad Greene is with us today, a third-generation business with three Greenes, Brad; his brother, Jonathan; and brother, Daniel; and his cousin, Jonathan, all in their 40s that have grown up in this business, who have a great management team underneath them, that sets the stage for us not only be into Houston, but grow organically and grow margins.

Well, 60 days later, we were able to bolt on and expand in Houston. We were able to buy the construction assets, the equipment, the plants and hire the people from Vulcan Materials. That immediately built scale into the market. It immediately gave us the ability to have throughput even more so than when we first went to Houston through the Pelican asphalt terminal, the yellow dot, to capture all that margin. But if you look at the dots on the page you see, it tripled the relative market share for Durwood Greene. And that creates the ability to really grow margins in that market.

So let's talk now about ROAD 2030, the numbers. So the first three bars we've already gone over, that was road map '27, and the blue bars are the beginning of ROAD 2030. The first bar is the guidance, our initial outlook for this year. And again, we're using the midpoint for illustration. So our first year for ROAD 2030, we're going to grow 26% (sic) [ 23% ] over the year we just finished. That includes the two acquisitions we announced this month. So we've set the table for a great growth year in 2026.

Moving forward through the other 4 years, we're modeling in this model, 15% growth, which by 2030, would make CPI over $6 billion in revenue. So continuing to do exactly what we do. This growth rate, those next 4 years, like always, it's going to be a combination of organic growth, which you'll hear more about today, and acquisitions. It is -- does not need or include in this model, another transformative acquisition such as Lone Star. This just assumes we're doing our normal bolt-on small- and medium-sized acquisitions.

Now there are numerous other transformative acquisitions out there that might happen, but we're not modeling that because we don't know when those would happen. So that's our revenue, to get to $6 billion by 2030.

Our EBITDA margins. This year, we accomplished achieving over 15% EBITDA margins. What we want to do is grow margins over 30 basis points in 2026 and then continue to grow then between 30 to 50 basis points over the next 4 years after that to achieve an EBITDA margin in 2030 of 17%. And so if we're growing the top line, and we're expanding margins, as you can imagine, that creates a really nice growing cash flow.

For our adjusted EBITDA, after getting to $423 million this year, our guidance for 2026, the midpoint is to be at $530 million or growth of about 25%. As you can see, the next 4 years, we're for growing the top line 15%, but we're expanding margins, that creates a compounded annual growth rate of 18%. So that by 2030, Construction Partners would have an EBITDA of over $1 billion. And that's a good thing. And that cash starts to really fund -- as Greg is going to go over, fund more and more of our growth initiatives through the use of cash.

So that's the 5-year plan. We more than double the size of the company on the top and bottom line to be at $6 billion of revenue and $1 billion of EBITDA.

Now today, just like 2 years ago, we're not going to put a slide up there that says this is what we expect our market cap to be or our share price to be, we know that you guys are smart and can do math. But we did say 2 years ago, if we can accomplish road map 2027, that's going to create a lot of shareholder value, and I think that's come true. And the same holds true today, if we can accomplish ROAD 2030, that's going to create enormous shareholder value.

But four big-picture things to take away as I wrap up today, ROAD 2030 really is another 5 years of CPI operating as CPI. There's really nothing new. There's nothing that really is any different than CPI being who we are. We're going to continue to operate the same strategy. We're going to continue to generate a lot of cash, and we're going to invest those back in growth opportunities that create shareholder value. We're going to continue to focus on our culture as a competitive advantage.

Even with the scale, in 2030, these numbers predict that our employee count will be over 11,000 people in 2030. And so we're going to focus on our culture as a way to attract and retain the best workforce.

And then finally, we've got a management team, a leadership team that's established to execute on this. And as Ned said, one of the things you'll notice when these five operating companies get up here at the end, who knows, not only do they -- are they experienced, they're great leaders, but they're young. And before them, Nelson is going to talk, he's one of the most hard-working important people in the company. The thing you'll notice is he's young.

Before him, Greg is going to talk. And Greg is blessed to just look really young. So Greg, come on up here. I just want to tell you, it is a real blessing to this company to have a Chief Financial Officer that understands operations as much as Greg does. And understands the mindset of our operating companies, that is a blessing to me. So Greg, I'll turn it over to you.

Thanks, Jule. Good morning, everyone. Yes. So the picture, if you physically are unable to see the color gray in my hair, this looks just like me. So thank you for being here today. It's really great to be in front of you. It's great to talk about Construction Partners and what we have done and what we expect to do. So let's talk about what we have done. Some of these will be a little bit of repeat, but I'll put a little color in them that maybe you can take the nuggets away from Jule's high-level view.

Transformational year, record year. I mean -- I think we all knew that was going to happen when we talked about the Lone Star acquisition. But it just wasn't Lone Star. I'll get into that in a minute. So 54% revenue increase year-over-year is tremendous, 296 basis points and then 92% increase in margin dollars is an incredible year. But there are lots of companies represented in this room today that had a hand in that. Certainly, Lone Star was a big part of it.

As a matter of fact, contributing to the 2025 results were 12 different acquisitions that were made in '24 and in '25. So you can see that it's some -- yes, of course, Lone Star was one of those 12, but just one of those 12. So every company in here, represented in here today had some sort of a hand in this growth, not just the acquisitive side, but as -- the organic side as well. We'll talk about that in just a minute.

To drill into that a little bit more specifically, so Lone Star is today, Greg Morisey, Dean Lundquist. Brad Greene is here. They've just made an acquisition in Houston, Vulcan's operations in Houston. They're busy integrating that, right? We just made another acquisition. Jule mentioned Tim Phillips, P&S Paving by our Florida platform company. They're busy integrating starting as of Monday.

Neither one of those companies is impacted at all by the other one's integration activities. This is the beauty Jule talked about just a minute ago, the growth engine. That's the growth engine in action, not just finding the acquisition candidate, but then the hard work of integrating that acquisition candidate.

But when I look back on '25, there was a lot going on, no question. But it feels normal. I mean, we've integrated 12 companies throughout '25. So I think that's the normal cadence. Maybe not the dollars, obviously, there was a transformational acquisition in there. But the cadence of acquisitive activity feels normal to me and very manageable.

So let's move to '26. So again, by the way, Jule mentioned this, these are implied midpoints from the revised outlook, which was tightened yesterday for '25 as well as for 2026. And this does include all acquisitions closed through Monday, so P&S. Vulcan operation in Houston is in there as well.

We talked about last quarter, what was carrying over into fiscal 2026. We've talked about that being about $240 million, $250 million worth of revenue. And all in now, that increase is 16%, it's about $450 million in acquisitive revenue carrying into '26, as well as then 7% organic growth. We'll talk a little bit about that in just a minute. But I think that one thing that is consistent when we talk about outlooks, is that the backlog plays such a critical role in us understanding how to have confidence to talk about these outlooks.

So we've said and it remains true that about 80% to 85% of the next 12 months revenue is in our backlog. So it gives us a lot of confidence to put these outlooks out there and feel good about the margin piece as well as the revenue piece for purposes of discussion.

So backlog, just mentioned it. We keep saying this that there has been now 18 sequential quarters or sequential growth quarter-over-quarter for 18 consecutive quarters. Not normal. We keep trying to say that, too, that usually, as you're working through the construction season, you're burning off a tremendous amount of backlog, right, and maybe not adding back as much as you're burning off. We have seen consistent growth in backlog in more -- in construction season quarters and not-construction season quarters.

So I throw that qualifier out there just to say, at some point, we will see probably a reduction in backlog. We are fine with backlog year-over-year, growing at the growth of the revenue, right? But sequentially, it may dip down from time to time, but it is not a concern.

So road map or ROAD 2030. So Jule covered a couple of these things, but I really want to talk about just maybe a little more detail, some of the assumptions that went into ROAD 2030. This assumes a normal funding environment, right? Nothing crazy, obviously not going down, but just a normal funding environment. There's no entry into new states in ROAD 2030. We can do this and achieve this in the existing eight states that we're in.

And then capital -- from a capital standpoint, we're sufficiently capitalized to be able to engage in this activity, growth activity, both acquisitive and organic. Our bank partners are with -- some of our bank partners are with us today. They have our back. But we'll talk also about how we're helping ourselves as it relates to generating cash flow, okay? So those two things together get us to road map 2030 -- to ROAD 2030.

And then finally, we're not assuming any transformational acquisition. Jule said that, but I think it's important that this is just your rinse-and-repeat acquisitions that we have consistently done throughout the history of the company, and we can continue to do. 12 acquisitions, right, impacting 2025, we can do that all day long.

Let's talk organic growth for a minute. So we believe that organic growth is the key for CPI to generate shareholder value. We know that shareholders appreciate that, and we want to make sure that we deliver on that.

So we have said that we're going to grow 7% to 8% from fiscal '26 to '30. I mean, how do we say that? And why are we confident to say that? It's because we've done it, right? 8.1% average annual organic growth since our IPO. And then more recently, 8.7% in '23; and 6.8%, '24. And now as we announced yesterday, 8.4% organic growth in 2025. These -- the platform companies and the bolt-ons that come after them are those engines for not only more acquisitive growth, but engines for organic growth, Nelson and some of the guys will get up and talk about that in just a second.

Cash flow. This is the other engine I said that we're going to use from a capitalization or from a capital standpoint to fuel the growth. This business has a fundamental strength of generating cash. We have done it historically, and we'll continue to do it.

If you look at just the last 3 years, $658 million generated over those 3 years as a percent of cash flow from operations -- I'm sorry, cash flow from operation is 75% to 85% of the EBITDA. So that's what we're converting to cash, okay? And we're using that to fund high-growth initiatives. We're also using it in our M&A activity. We expect that to continue, and we see that continuing through 2030.

And then as a part of the effect of generating that cash, we can positively impact our balance sheet. So the column in the middle is obviously strikingly different from the other columns. We had a significant acquisition. We felt like it was worth this short-term higher leverage ratio in order to be able to enter the state of Texas. We believe it's going to pay off handsomely. But in the short term, we do have a higher leverage ratio.

But I think 2024 is instructive. I think the issue is a difference in scale, okay? And what do I mean by that is, in '24, we entered fiscal '24 at a sub-2x leverage ratio, 1.72x, okay? We made eight acquisitions that year, about $240 million, $250 million worth of purchase price and then exited the year at 1.81x.

So obviously, the scale is a little bit different. But the strategy, and I believe what will happen is the same. We have levered up in the short term, and we'll delever over time. In fact, we expect to be at 2.5x to 2.75x at the end of '26. And then we'll continue to talk about where we're comfortable with our leverage ratio going forward through 2030 at 1.5x to 2.5x.

Okay. Rick, 10 minutes. We have a 10-minute break until we hear from Nelson and the operating company presidents. So see you guys in a minute.

[Break]

Just a quick reminder, those of you that reached out to me about the bus, we've got you all booked. So we'll do that at 12:30. As you can see, we're going to have lunch afterwards, we're happy to hang around for whoever has time to hang around.

And now I'd like to introduce our Head of M&A, Business Development, so many things that Nelson Fleming does.

It's a long title.

It's a long title, and he is a valued asset. And Nelson Fleming.

Thank you, Rick. So I feel the need to comment on my picture because everybody else has. And what you cannot tell from this heavily air-brushed photo is this was one kid and a couple of pant sizes ago. So I still look mostly the same, but beneath -- around the waist, not so much.

So welcome back from break, everybody. My name is Nelson Fleming. It's a privilege that I get to take you through our growth strategy in deeper detail and expound upon some of the things that Jule and Greg have talked about, specifically those revenue growth levers of acquisitive, organic and greenfield.

So this first slide, an alternate slide title could have been, we've busy because we have. We've done 35 acquisitions since 2020. We've entered four new states with four more platform companies. And as you can imagine, we're having more conversations with owners and evaluating more businesses than we ever have before. And there's two big things that we've learned in those conversations that I want to hit upon.

Number one, our parent's platform model, where we, as the parent company, are supporting our operating companies, allowing them to maintain their local leadership and way of operating in their local market, that is a very different message than other buyers out there are delivering. And number two, we don't apologize for being contractors first. That's our DNA, and we're one of apparently very few people delivering that message, and it resonates with the type of companies that we talk to day in, day out that are owners of these asphalt and construction companies out there.

And it's an obvious outcome, but being in twice the number of states that we're in now as we were in 2020, there's a larger opportunity set than ever before. And one thing I want to point out that's important is our M&A effort, it is a team effort. It's not just Jule, it's not just myself going out there and meeting with owners and thinking strategically, we've got regional presidents and operating company presidents that have long-standing relationships in the states that they're in. And they're great long-term strategic thinkers as well that are helping us get a seat at the table when these owners move to sell their companies.

And as I think Greg mentioned earlier, every new platform company we add, it's an additional growth engines. Now we've got eight growth engines. And it's not just that expanded opportunity set I just mentioned, it's the capability of their teams to not only diligence but integrate these acquisitions, it's that added resource as we expand and add platform companies.

So one last point here on this accelerating generational transition. Our founder, former CEO, current Vice Chairman, Charles Owens, he used to joke that a big driver of our M&A pipeline was birthdays, which was a clever way of saying that as people get older and reach retirement age, that's really when they move to sell their business. And that is truer today than ever before as you've got the baby boomer generation reaching retirement and even the older end of Gen X reaching retirement. And all these owners, they want the same thing. They want a fair price for their business. They want to sell to somebody that really knows their company and what they do, which is construction primarily. They want to sell to somebody that's going to take care of them and their people and ultimately, their legacy as well.

Turning the page here. We've been busy but we still have plenty more road to hoe in our core business and in our core geography. I want to just kind of camp out on this slide over here to the right because it's a lot of dots. It kind of looks like a Verizon cell map. But all of these dots on the page are all the privately-owned HMA plants in those 15 states. And in those 15 states, 94% of the companies that are HMA producers are privately-held companies. That totals to more than 300 potential targets for us.

And then as Jule mentioned, there's thousands more materials businesses and services-only contractors out there that fit what we're doing and could be added benefit and allow us to capture additional margin in that road construction value chain. So to summarize the point of this slide, in the last 25 years, we've done around 60 acquisitions. And we've only made a very small dent in what remains a very fragmented industry.

Jule touched on briefly the funding situation. I want to give a little additional color to that. So there's a lot of numbers and a lot of maps on these slides. IIJA obviously set a new baseline for infrastructure spending in our markets. And states and municipalities are also stepping up and putting a lot of money towards the roads and bridges. And each of our states have very strong highway funding programs. We've got a slide in the appendix that actually details some of the recent legislation in each of our states that increased their funding for maintaining and building the roads and bridges. But I want to camp out on two of our states, in particular, our two largest ones in terms of population. And that's Florida and the state of Texas.

So Florida in percentage terms, it is the fastest-growing state in the U.S., and it has the second-largest highway program. The state and local contract awards in 2024 were nearly $10 billion. And in 2023, as part of its Moving Florida Forward initiative, they put forth an additional $7 billion to be spent over 4 years to better maintain and build the roads and really accelerate a lot of projects as you've got all the growth coming in and businesses moving to Florida.

And this map here on the right, everybody loves maps. We've had a lot up here. But this is our HMA plant network in the state of Florida. We've got 10 plants spread throughout the state. And that will position us very well to capitalize on all the opportunities that's going to be happening in the state of Florida.

So moving from the Sunshine State to the large -- to the Lone Star State, there's the phrase everything is bigger in Texas. And I don't know who said it. But when it comes to a transportation program, the shoe fits, no state has more lane miles in Texas, and no state spends more money to maintain its roads and bridges in Texas -- than Texas does. So in 2024, state and local contract awards totaled $17.4 billion. That was $7.7 billion more than second place Florida.

So you might be asking, where are they coming up with all of this extra money? And it's a great question. They have two funding mechanisms that are really unique to the state of Texas. It's Prop 1 and Prop 7. And Prop 1 allocates a portion of oil and gas production taxes to the state highway fund which contributes about $3 billion annually. And then Prop 7, which allocates a portion of sales and use taxes and vehicle taxes and rental taxes to the state highway fund also contributes $3 billion annually.

So we got another map for you. So picture here on the right is what is known as the Texas Triangle. And in that Texas Triangle are all the biggest metro areas in the state of Texas. So that's Dallas-Fort Worth, beginning in the north; going down I-35, that's Austin; and then further South, San Antonio; and then to the east, Houston. And you can see that we're we've got really good strategically located assets that we're going to be able to capitalize on a very fast-growing part of the state. And having entered the state in 2024 and having done a couple more acquisitions since then, we've got the best team in Texas to go do that.

One more thing to drive home the point about being in the places we are. So the big idea that I'm trying to get across here is we are positioned in markets that have some wind at their back. So cities like Atlanta, Georgia; like Nashville; like Huntsville, Alabama; Pensacola, Florida, these cities are far outpacing the national average as far as GDP growth and population growth, which is a big driver for what we do. So we've been thoughtful about executing our organic and acquisitive growth strategy and investing in places that are growing because it is greater demand for the services we offer, and it's also a tailwind for organic growth as well.

So let me give you a real-world example of what I mean here. So in May of 2024, the Scruggs Company, which is our Georgia platform, acquired Sunbelt Asphalt. It's a one-plant operation in Atlanta. They operate as our Atlanta subsidiary. And in our industry, smaller privately-held businesses, they're not always able to capitalize on every single bidding opportunity in their market. There's reasons for that. But that is one of the reasons that people go to sell to CPI. And in the case of Sunbelt, this was exactly the case.

So in their first full year as part of our family, they increased revenue by 50%. And and their asphalt tonnage by more than 2/3. Now they didn't expand in any new market. We didn't put up any new facilities. Sunbelt just grew their piece of the pie in the market they're in, and that pie is growing larger because they're in a high-growth corridor of Atlanta. They're along I-85, going northeast, out of Atlanta towards South Carolina.

So this is a great illustration of two things. How joining CPI can unlock the opportunity for acquired companies to do more in the markets they're already in, and how being in a growing market can really fuel organic growth. And no different than any other time in our company's history. Organic growth remains a big strategic priority. It's been part and parcel to our success over the years. And we're going to hear from five of our operating company presidents here shortly. But I want to give everybody a brief refresher, if you will, of the three lanes of organic growth that we have.

So greenfields, his is where we're just putting in a new facility, erecting a new facility in a new or adjacent market. We've done that over the years. We've done a lot of HMA plant greenfields. We've even done AC terminal greenfields. We did one in 2023 in Huntsville, Alabama, which is just north of Birmingham. The second one we've got here is additional crews or services. We do this year in, year out. We're adding crews every single year. In some cases, through the year as the need is there, and the market demand is there. And then the last one is facility upgrades. So -- this is where we would be putting a meaningful investment in an asphalt plant, an AC terminal or an aggregates facility to meaningfully increase our capacity to meet our own needs or meet market demand.

So all the opportunities you're going to hear about here shortly from Casey, Darren, Ty, Brad and Greg. They're all fully funded for 2026 and offer you an example of all three of these growth levers. They're not the only ideas that are funded this year, but they're some of the best. They have some of the best return profile and just great strategic fits for what we're doing. And we run a competitive process for deciding kind of how we allocate this money. And so you're going to hear from five of the lucky winners this year.

So Casey, you're up first, my friend. If you don't mind, just introduce yourself and talk a little bit about the opportunity you're looking at in Charlotte.

Yes. So good morning. My name is Casey Schwager, I'm the Platform President for King Asphalt. We're located in South Carolina, but we also cover the Charlotte metro area, which is part of North Carolina as well.

So Nelson teed it up very well talking about the I-85 corridor and the high growth of the I-85 corridor with Sunbelt and that growth towards South Carolina. The same thing is happening in I-85 corridor in the Charlotte area as well. Atlanta and Charlotte are basically growing together, and we're well positioned along the 85 corridor in South Carolina to take advantage of that growth.

So why in particular is our Gastonia greenfield, that we're getting ready to be putting up, important to us? There's two different reasons. There is a very heavy commercial growth that is happening in that Gastonia-Kings Mountain area right now. And you can see how we're spread out with our existing facilities through the center of Charlotte, but we have a geographical barrier at the Catawba River that I'm going to talk about in a minute. But from a commercial growth standpoint, there's a lot of great things happening in that area that we're accessing, but we're not accessing it quite as efficiently as we could.

Kings Mountain, for instance, is a very large casino that is spurring all kinds of commercial growth around it. So we're excited about the commercial growth in that market. But from the public market, when you hit the Catawba River where it says Belmont right there, the interstate right now collapses from a 4-lane interstate in both directions, to a 3-land interstate. Anytime I'm in Charlotte, and I'm leaving Charlotte to go back home to Greenville, South Carolina, it is backed up for miles.

So over the next few years, you're going to have two separate projects that come out, they're estimating around $800 million total that will expand the next 8 miles of interstate going towards this Gastonia facility from a 3-lane interstate, each direction, to a 4-lane interstate, each direction. So that bottleneck that is actually stopping our plants from getting over there and being as efficient as we want is a tremendous opportunity for us on the public side as well, and we're very excited to have an opportunity to take part in those projects.

So we started clearing on this facility 2 weeks ago or turning dirt. We will take delivery of the asphalt plant in December, and we should be operational by March of 2026. So very excited about this opportunity. Total investment, $10 million, and we estimate the return on investment in 3.7 years.

Yes. That's great. Casey, can I ask you one question? Do you mind if I put you on the spot?

Yes, sir, you can.

Talk about that anchor project that is in process that you guys could potentially be working on.

Yes. So the first 4-mile section from Belmont, moving west, is a design-build project, and it is under contract with the Department of Transportation already, and we verbally were low on that project and are in the position to have the asphalt for the entire project, about 400,000 tons of asphalt that will go in about 3.5 years. And right now, we're just working through the contract details. So hopefully, we'll have that signed here shortly.

Great. Great. Well, thank you. Thank you for taking us through the opportunity, Casey. Great -- Darren, you're up next to my friend, I'll put your map up here, so we can orient some folks. Introduce yourself.

Yes, sir. Thank you. So good morning. It's an honor to be here. I've really enjoyed the past 1.5 days with all the analysts and all the investment folks that have been here. I've learned probably just as much as you all have learned as well. So I appreciate you taking the time to be here on behalf of Overland.

So my name is Darren Ratajski. I serve as the Group President for Overland Corporation. On January 2, Construction Partners, Inc., acquired Overland Corporation, of this year. So we are no longer the new kid on the block, as you all can see. So...

That doesn't last long.

Exactly. But what is interesting about that is we've done so many fantastic things just in the short period of time that we've been part of Construction Partners, Inc. So to give you a quick thumbnail sketch of what Overland consists of. I'll walk you through just a little bit on what Nelson has shown here.

So Overland Corporation is based out of Ardmore, Oklahoma. We have two primary office locations. The headquarters is in Ardmore, Oklahoma. Our area office, the second office is located about 1.5 hours west of Oklahoma City on I-40. So we have eight asphalt plant assets that cover Southern and Western Oklahoma, not all eight are shown on this map. But that allows us to cover 44,000 of the 66,000 square miles within the state of Oklahoma.

Of those eight assets, four of those assets are strategically located along the Oklahoma-Texas border, which allows us to do two things. Number one, we currently sell FOB asphalt to the Texas Department of Transportation for when they self-perform some of their own maintenance contracts. So we're able to target the Texas market from an FOB standpoint.

The other thing that we have going on currently as we speak, is Overland has active projects within the North Texas market area where we are serving ourselves as we lay down that asphalt ourselves, self-performing that work. We're able to service ourselves through those strategic assets along the Southern Oklahoma border.

What we have found that in addition to that, that's an underserved market in a lot of areas. We constantly get phone calls. "Hey, can you come here and perform the work. We have a current contractor base that's not willing to do the work or they're full or their backlogs are too high or they can't get to the work." So it's really complemented what we've done. We've had a strategic initiative for a few years now to really get into the North Texas market because of some of the information that's been presented here today.

In addition to that, in this fiscal year, on June 8, specifically of this year, we expanded into an additional paving crew, an organic growth initiative that we took on with the help of CPI, but it almost took almost 0 capital to do that because we were able to utilize existing assets that we had to grow into that additional paving crew. That crew actually targets most of our Southern Oklahoma work and they go into North Texas to perform some of their work as well.

So we're able to leverage existing assets, which improves our utilization rate on those pieces of equipment, which is extremely important to us as operating presidents.

Great.

So the organic growth initiative that we've brought to the table that was approved by CPI was to expand into an additional paving crew specifically targeted on Texas. So our paving crew will be based out of North Texas. We already have a pretty good idea of who that's going to be. And that will also complement other greenfield initiatives that we are currently working on as we speak, a little bit of foreshadowing there. I don't know if I'm allowed to say that, a little bit of foreshadowing there. But it will complement some of the things that we're working on. We have that crew identified.

One of the great things that probably hasn't been emphasized enough throughout the last 1.5 days in my opinion, is the relationship, the power of the parent that Jule refers to. Since Overland was acquired by Construction Partners Inc., our phone has literally been ringing off the hook by other companies that want to be part of this fantastic journey. Crews, labor force, they see what's happening in the marketplace. They see our vehicles, they see our equipment running up and down the interstates, paving on the roads, and they understand what's happening in the market, and they want to be part of something much larger, solely, I believe, because of the cultural aspect that we bring.

Jule talks about the culture. We have labor and management teams always contacting us saying, "Hey, we want to be part of something that's really special. So we're going to be able to capitalize on that here.

Our total investment is $3.2 million. We think we're going to do much better on the payback of the 2.3. We have the backlog to go ahead and execute this work. And as I said, we have some other opportunities, greenfield opportunities that we're actively engaged on that will help with that throughput. And that is also going to help the benefit for us. It will help the top line and then being more efficient with a truly Texas-based crew will obviously help the bottom line for us as well.

That's great. Can I flip back to this slide and put you on the spot again? So obviously, this is where Dallas is. Talk about just the growth in that suburban sprawl and the markets that you guys are targeting?

Absolutely, yes, sir. So within the triangle that Nelson referenced here a moment ago, the DFW area is its own animal as well, much like Houston and Austin. The majority of the growth within the North Texas area is occurring between U.S. 75 and I-35, heading north in a northeasterly fashion.

So we are well positioned to accept that growth with our two assets in Ardmore, Oklahoma. And then as you're looking at the map to your right, the Durant, Oklahoma area, where we have an asset staged there as well. So as the growth is coming to us, we're able to target that growth. We're well positioned to attack it. And then also as we head further south, the majority of our work that we are self-performing is within that I-35, U.S.-75 corridor today. That's where the majority of the growth has taken place in the DFW area.

That's terrific, Darren. Appreciate that. Thank you very much.

Thank you.

Okay. Next up, Ty.

Good morning, everyone. I'm Ty Johnson, I'm the President of Fred Smith Company. And for all of you that made it out to the asphalt plant this morning, I appreciate you all taking the time to come. It was a privilege and honor to be able to show off what we do a little bit and educate you a little bit. So thank you for taking out the time.

So Fred Smith Company is one of the largest asphalt paving and site work contractors in Old Carolina. We work -- operate from -- about Greensboro, which is about in the middle of the state, all the way to the Atlantic Ocean, you can see where our plants that are located out there, and we're headquartered here in Raleigh. So welcome to Raleigh.

And one of our growth initiatives for this year is to -- go back to the -- is to increase our grading capabilities in the Greenville area. So Greenville, North Carolina, right there, is the economic hub for Eastern North Carolina in Greenville. It's fueled by a large public university. There's a major hospital center there. So a lot of Eastern North Carolina kind of central on Greenville and it feeds off of Greenville. So it's a thriving market in that area.

So we established ourselves there about 5 years ago. We acquired a company that was primarily asphalt paving and asphalt manufacturing, and one of their asphalt plants was in Greenville. So it's been a really good paving market for us for about 5 years. We've grown that market, and it's been really good to us. And we were primarily paving, but Fred Smith Company has a long history of doing turnkey site work, grading utilities, walls, just delivering the whole product.

So we wanted to take that expertise and expand our opportunities in Greenville. We've done a little bit of that, but we need more resources to expand that more and take advantage of a lot of the opportunities there. And Eastern North Carolina may be a little different than some parts of the country where most of our major asphalt producers also have large grading operations. So they're competing in that turnkey -- in a turnkey world. So we need to be able to compete there as well. So we need more resources.

So adding another grading crew will open up more opportunities for us in Greenville. And we've got some great guys that know how to build in Eastern North Carolina. They can -- they just routinely turned mediocre jobs into outstanding jobs. So we want to take advantage of that knowledge and those skills that we have in our employees there and expand it in Greenville to deliver more revenue and deliver more margin.

So the investment for a smaller grading crew for Greenville is $1.6 million, and we expect to pay back on that in about 3.4 years. And like I said, we've done -- Fred Smith Company has done this for years and years, and we want to lean on one of our strengths of site work and increase that capabilities here in Greenville.

Yes. That's terrific. And it is a huge strength of Fred Smith. You guys are the turnkey contractor in the state. So a quick question for you. So how does -- vertically integrating into this additional service, how does it help you at the bid table and then in the field?

So at the bid table, now if we can self-perform work, we can control our costs, and we can keep our cost down, so it keeps our bids lower. And also, we can figure out ways to do better and improve during the job that will increase our margins, even increase the margins from bid day.

Yes. Yes, that's great. Thank you, Ty. It was awesome. Okay. Next up, I believe it's you, Brandon. Brandon Owens with Wiregrass Construction.

All right. Good morning. How are you all? I'm Brandon Owens. I'm President of Wiregrass Construction. And we are based in Dothan, Alabama, which you can see is in the southeast corner of the state right here. We are a site work contractor, pavement contractor, and we are also an aggregates producer.

So I've been with the company over 20 years. And I'll say I was looking at this picture, it's -- when I started, there was a lot less dots on this map 22 years ago. So -- but we are -- we do perform a special service. We actually have aggregates within Wiregrass Construction, hard rock aggregates and also sand and gravel. So today, I'm going to be talking about the sand and gravel opportunity, facility upgrade that we have.

And so basically, the facility upgrade is we are spending almost $8 million on an aggregates, sand and gravel wash plant. So what does that mean? We are digging aggregates out of the ground, watching them, cleaning them and we are sizing them. We're sizing them. The larger aggregates get sold externally to our decorative landscape markets throughout our neighboring states. That brings a very high cost per ton -- or price per ton, sales price per ton.

Then we also have like the mid-level size aggregates and the fine or coarse -- or the coarse-size sands that we're using in construction materials. And that is what is important to us to, to Wiregrass Construction, are those size aggregates because that is the lever we pull with a vertical integration piece of being able to use that in our hot mix asphalt facilities.

If you'll go back, Nelson, the slide before, I'll show you. So the yellow is the location of this sand and gravel operation. And we are supplying all -- most all of these blue dots in the south part of Alabama, which is -- which we're using 30% to 40% of this material inside of our own hot mix asphalt.

So -- why is this facility important? Well, the good news is it helps us put a plant in a part of the area where we've extended our reserves by -- for the next 12 to 15 years, which is a really big deal. And just the whole vertical integration of being able to use our own aggregates and control our own aggregates.

So we're really excited that CPI has given us the opportunity to invest this. The additional throughput, the plant has actually got some more efficiencies, so we're going to be able to add some more efficiencies in the payback period of 3.5 years. So...

That's great, Brandon. So let's get into the nitty-gritty operational aspect of things. Explain sort of what surface rock or solicitous material, as you guys call it, is and why it's important as a hot [indiscernible] producer?

Sure. Thanks. Well, so in the State of Alabama, there is skid resistance on our surface of our roadways. So we have to have certain aggregates that meet certain criteria for skid resistance. And this is one of the few products in the State of Alabama that meets that skid resistance for that. So...

Terrific. Thank you very much.

Thank you.

Greg, fellow Texan, come on up here, my friend.

All right. There's the map. I'm Greg Morisey, President of Lone Star Paving. Our founder, Jack Wheeler, is here. I'm a little embarrassed even say President, Jack did not do titles. There were three, four, five of us that ran the business. Jack took a lot of pride in that no one had a title, right? The value is in the workers and our employees.

We operate on I-35 corridor. Basically, actually, we go a little higher on the map to Waco, come all way to San Antonio. It's 200 miles of I-35. If you understand what's happening in Texas, it's the epicenter. Darren touched on something, same things happen up north, on the north section of I-35.

Our business, we're pavers, right? We're a little bit different than some of these other businesses that we've talked about today. They do site work, they do grading. I've learned so much from these guys. Their businesses are fabulous. They're in different markets. We pave asphalt. And we go out every day and lay more asphalt than you can imagine. We'll do potholes. We're paving subdivisions today. We're paving on I-35 today.

If any of you guys watched the race last weekend, F1, we paved the F1 track. Echelon 3 pavers paving. We will pave anything that we get a call on. We're not selective. We'll take anything. We're aggressive. Jack created a company that's founded on if it is asphalt and we can make it black, we will do it. We take a lot of pride in that.

Right side of the screen is Houston. So we've got Durwood Greene, and we got Vulcan. Brad Greene is here. [indiscernible] I do have some gray hair, one of the only guys with gray hair here. It's a very young, young group, very excited about that. I'm pumped because I think there's so much opportunity with CPI, and where we can go as a company, it's rejuvenated me, and so I'm really excited to be here. Thank you.

So talk a little bit about that Lone Star liquid terminal there in Channelview.

All right. We acquired this in June of '21 from Summit Materials.

Do you want to go back to the map?

So our plants along this corridor, we were already purchasing the majority of our liquid asphalt from the Gulf. You'll either -- it will either be Mid-Con or it will be Gulf. We've always been Gulf-based, picking up a majority of our asphalt. So it's nothing new to us to come down to the Gulf. Valero has a terminal, martin has a terminal, numerous suppliers have terminals in this area. So we were already coming down here, so it wasn't a change.

When we got and acquired the terminal, it's simply just we went from basically picking up here from here to here to picking up the asphalt. So the vertical integration part of it was obviously tremendous for us.

Fast forward to the acquisition we just did. Now we've got 11 more plants. There's 10 in the original legacy company, 11 more plants that will now be pulling out of Pelican. Since 2021 to now, we've almost tripled the capacity of Pelican. There is plenty of room still.

And now with this next initiative, which is an investment of a little over $7 million, there is a land acquisition here, and then we're going to add two additional tanks which should add us 25% to 30% additional storage that will come online probably spring of '27. With that, the cement stabilization and grading part of this project, we will also do two additional tank locations and pads that will be built for further expansion moving forward.

And so this investment, part of it is that land acquisition that's going to give us more opportunity in future years to add additional tanks because going from 11 plants in Austin, San Antonio, Waco, to now 11 plants also in Houston. I mean the additional demand is pretty intense.

Well, it's an untapped market. Brad's business and what he's going to be able to do with Durwood Greene and adding the Vulcan assets. And this circle, we currently will stretch to Giddings and La Grange. With Brad's new plants and locations, we will within 3 to 4 years, close this gap all the way in. There's no doubt in my mind, the growth that's going to come from this. The strategic value of having Pelican, I think, is going to go a long way in supporting that initiative.

Yes. So this is really phase 1?

This is phase 1. Yes, sir. Yes, it's definitely phase 1. And you can't tell from this drawing, this is a peninsula that comes out into the Houston Ship Channel when it comes around to this side. We will now own the entire peninsula. And there are some other initiatives that are planned that could go along with that.

Yes. Awesome, awesome.

And piece of property like this just on this ship channel does not come available very often.

Yes. Yes. Thank you, Greg. Appreciate it.

You're welcome. Thank you.

Okay. I think Jule, Greg, Q&A and closing remarks. Thank you, guys, for the time. Thank you, Operating Company Presidents, you all did a fantastic job. I'm sure everybody enjoyed that.

Great job, Nelson.

Thank you.

Okay. The way this works, I'll take the easy questions and give Greg the hard questions.

That's called a partnership.

Yes. All right. Is there a microphone? Okay. Kathryn, there you go.

Kathryn Thompson, TRG. I'm going to ask you a question I asked last night. I heard it from the panel, I would like to hear from your perspective. When we look at a lot of different industries, there's a magic point of a tipping point in consolidation. And this is an industry that's been around for a long time. But it does seem that it's at more of a tipping point now in terms of consolidation. Why is that? Like why is now the magic time?

And then along with that, there are other companies in the industry that view asphalt paving as a conduit for aggregates. How do you see this differently? And how does that differentiate your view in the realm of consolidation of the industry?

Yes. Well, I'll take the second question first because I think it provides some answer to the first. We are -- at Construction Partners, we're contractors first and foremost. That's -- I think someone said earlier, it's part of our DNA. That's the way the company was founded by Charles and Ned. We have spent decades building up expertise in this area, our workforce, the ability to know how to do this work and communicate, as Nelson said, to sellers what we're all about.

And so we look at aggregates as a vertical integration and a value-add that we can capture margin, as Brandon does it and Lone Star does it very well. But we are -- at our core, we're contractors. And we think that the growth opportunities that are going to be available to us and our industry as contractors are just great, which leads me to the first question you asked is why? Why is this generational consolidation happening?

I think history shows us that a lot of these contractors, these companies really got started in the road construction business in the '50s when our federal government said, we've got to have an interstate highway system to be able to move military assets and other things quickly. It was the beginning of the Cold War. So this federal highway investment program in the '50s with the Eisenhower program, was the beginning of a lot of these family businesses starting.

And those families who have done very well for three and four generations, a lot of them are reaching, as Nelson said, retirement age, they want to retire and slow down, but there are some unique aspects of our industry that it's hard for them to pass the business along or split it up to their heirs. And so we provide the opportunity for them to talk to CPI and to be able to move their business, turn it into cash and take care of their employees as their legacy.

So I think a large part of this is just the families hitting that third and fourth generation. And then as you heard last night from some of the sellers and what motivated them is, as we consolidate, the business -- the private businesses are left are faced with, okay, to compete, you have to have scale to be able to compete. I think, something Brad Greene has mentioned to me several times. He's certainly not at retirement age. I certainly hope he's not. But he was competing with two major players in the Houston market, and we wanted to grow. And so he was looking for a partner that could come alongside him and provide capital, and that's what we can offer.

Tyler Brown, Raymond James. First question for Greg. Just real quick. I didn't see it in the deck, but what is the CapEx profile through the 2030?

It's the same. So no change there. We are usually talking about, and we'll continue to talk about 3.25% of our revenue spent on maintenance CapEx. And then the growth CapEx that Nelson was talking about, the organic growth measures is another 2%, 2.25%.

Okay. So 3.25% plus 2%, roughly?

Yes.

I want to talk a little bit about technology. So Jule, you talked about bidding-better innovation. You've got some of the best pavers literally in the world, maybe sitting in this room. What's the next generation for technology? And how does that apply to your business, which is obviously considered a dirty, maybe boring business, but maybe there's opportunities there.

Yes. Well, I can tell you just since I entered this industry 15 years ago, the way we planned work, the way we thought about what we're going to do the next day compared to the way they do it now and the technology tools they have to think through exactly how they need to stage the work and plan, it's already dramatically different.

So -- and with our equipment, and the ability to predict catastrophic failure at the asphalt plants. I mean before you just wait until it broke. But now we can actually predict. We have technology that can tell us this asphalt plant, this piece of it is vibrating too much. This is a problem. You can fix it before you have a major problem. That kind of technology is amazing.

And as we talked about, the ability for AI to help us. The same things you could do in the old days with a lot of spreadsheets and research, it can tell you now this is -- on this project, what your competitors are likely to bid. This is what you should be looking at. This is -- now, it's not foolproof, but it's a heck of a powerful tool to help us think, this is the bid that is likely to win and not leave as much money on the table. Those are just some examples of the technology that are changing our industry.

Andy Wittmann from Baird. So I guess I wanted to build on that with just the same question a little bit different way. It's like big growth plans, getting to $1 billion of EBITDA in just 5 years. The benefit of scale, you talked about 10, 15 basis points per year. But what are the things are you looking at or can you do to even scale this further? Is it technology and systems? Is it HR systems? Is it the vertical integration? What other things can you do to scale this that you're thinking about to just help build this thing out as it really gets some horsepower behind it?

Andy, I'll answer and then I'll let Greg take that. I do believe that there are certain aspects of our business, I think someone told me mentioned just in the last day that they heard -- it might have been my wife last night, said she heard the NVIDIA CEO was getting interviewed and said, "Hey, AI is going to transform a lot of businesses. It's going to take a lot of jobs. But construction was one of the businesses that was somewhat insulated from that." I do believe that we're going to be able to continue scaling the business, but it's not going to be revolutionary. It's going to be -- we're going to continue to build the scale running the same strategy that we have been.

I do believe that I see now as we get larger, there's a certain amount of momentum to having these platform companies. It's like there's just more people with their shoulder to the plow. And it almost becomes easier for Nelson and I because you have Jack and Brad and Darren, I mean, Jon Hargett in Tennessee and the platform presidents in our legacy states, they're also helping be able to build scale and grow. So it sort of builds momentum to it.

I don't know that we're going to use technology to revolutionize our business. But I do think it will drive consolidation because the things we're investing in, and I'm sure some of the other larger companies that are doing, some of the privately-owned businesses are not going to say that's an investment worth making. And so I think at some point in time, they say, "You know what, I don't want to try to compete with Construction Partners or some other. This is a good time for us to exit." But it's still going to be at its heart, the people and our business are going to be what's the competitive advantage. Who can hire and find the best people.

Yes. I was going to add two points to that. I think there's a couple of things that we've talked about today that have been really instructive. Ty Johnson talked about one of them. So obviously, other than the growth CapEx that we've talked about and the M&A component of our growth, rounding out in each market, different services that yes, create new revenue; yes, create new margin, but also create new opportunities. I mean, things that maybe Ty couldn't have bid on in Greenville, he now can because now he's not just going to be quoting somebody else who won the business. He's actually able to bid it and then control who he wants to sub it out to or do the work himself.

And the other thing is -- you mentioned it, is the labor. I mean, we have to win at labor. It's the biggest inhibitor potentially but also the biggest way we can have -- or the best way we can have success. We have to win at labor.

I do think as we scale and use technology, it is going to drive margins. I'll tell you, the ROAD 2030 goal of 17%, that's not Ned's goal for me. He thinks, hey, we can do much higher as we build and grow the business. So I think that's something exciting.

Adam Seiden from Barclays. A couple of numerical questions here, and I appreciate the color on the backlog. Can you just talk about whether that backlog is added on an organic basis? Or is that including the inorganic side? How would that look if it was adjusted for organic?

Then on the margin component, can you talk about how the gross margin and the backlog sits today? And in '26, I think you're talking about 30 basis points of growth -- of margin growth. Your long-term range of 30 to 50. So what drives you from the low end of the range to the high end over the period?

You want to take the first one...

Yes. So the backlog is flat pretty much quarter-over-quarter without the additional acquisitive backlog that was brought in, in August. What it also, though, doesn't include is the two companies that we acquired in October. So that will be added into the next distribution of our -- that information.

I'll take the second part. And just to answer what Greg said, our backlog, we always include organic growth and inorganic growth. And sometimes in these last 4 years, it's grown in the fourth quarter because of an acquisition. Sometimes it's grown just organically. But it still amazes us that for 4 years, it's grown in the work season. So one day, it won't, as Greg said, and we don't want everyone to think anything's wrong, but it shows that the company is growing.

Specifically, to the margins, that range of 30 to 50 basis points tells you it's not going to be a linear occasion. There'll be some years where it will grow faster, and some years where it will grow slower. But on an average of around 40 basis points a year, that's what gets us to 17%.

And to your question about what drives it from the low end to the high end, it could be the margins of the companies we acquire. It could be do we bring on a vertical integration initiative like Greg was talking about, or brand [ them ] with our aggregates that we capture more margin. Those kind of things are what can make it vary between that range.

Adam Thalhimer with Thompson, Davis. Two questions. Number one, can you unpack organic growth? How much of that is greenfields and stuff within your control versus assumptions you've made about DOT spending? And the second question is just if you can comment on acquisition multiples today versus prior periods.

The organic growth, I'll take...

Yes. So I may not be able to answer it exactly as you've asked it. But I will say the percent of organic growth that we've had and that we're projecting, so first of all, from a price standpoint, 3% or 4% from an inflationary standpoint, the rest would be new volume.

But I think it's -- first of all, it's different every year. And every year is going to have different ways of improving or increasing the growth but also year-over-year, we're going to use different methodologies to get there. But I think the important thing to know is that as M&A growth moves forward in that 12-year -- sorry, 12-month measurement period of what's acquisitive growth, these companies are then using new capital, maybe taking off some restrictions that were related to bonding. And essentially, we're manufacturing our own growth.

So I think if you think about our organic growth over time, as we talked earlier, it's so consistent, not because there's been this consistent pretty growth curve from an economic standpoint or from a funding standpoint, we're generating our own organic growth as we get through that acquisitive period.

Yes. When we were putting together this ROAD 2030, Adam, and we said we're going to continue to grow 7% to 8%, we didn't say, for that to happen, we've got to have this federal reauthorization go up double digits. What we just need is a normal funding environment for that to happen.

To your question about multiples. The multiples in our industry, are largely still the same. Clearly, for companies with high-quality markets and high margins, that might be on the upper end of the range that we have between 5 and 6 or 6.5. If they have aggregates, as we've said before, it's a little higher. But largely, they've stayed pretty constant.

Nandita Nayar, Bank of America. So the first one that I had was, I'm sure we can all agree, you guys have had a transformational year last year, but I think a really underrated part is also when it comes to the type of acquisitions you guys have done, like the step change in the fact that these acquisitions, for example, like Lone Star or PRI are also higher-margin acquisitions, right, like around 20% mid-teens. Just curious, is this something that we can kind of expect going forward as well?

Yes. I think Greg and I both have liked the math of the new companies averaging us up. That certainly helps. I do think that it does -- as our EBITDA margins grow higher, it does make us more selective in looking and saying, "Hey, we want to add companies that are higher-margin companies." And the there are plenty of them out there.

I do think that it doesn't -- the fact that 2024 was a transformational year, it doesn't make us any more eager to do a transformation or a big, large acquisition, right? We -- what we're trying to find is what's the right market, what's the right partner, right? It could be a $50 million acquisition, $100 million or $500 million.

The thing that's amazing when you look at this year, we grew 54% and Lone Star was a transformational acquisition. But if you took Lone Star Paving out, it just didn't happen, and you make the assumption, and we didn't redeploy that capital in any other way, CPI would still have grown over 26% this year. So Lone Star was big, but it was still a great growth year, even aside from that transformational acquisition. So we're just going to keep executing the same strategy.

Yes. I think another way to answer that question is what we saw in Lone Star, and I've said this before, ended up being a proof of concept to our building margin, right? The three levers that we pull for that. So as soon as we had a Investor Day and Analyst Day in 2023 and said those things, here comes Lone Star to essentially prove what we said, right?

So yes, there are opportunities out there that you're describing at higher margins, and we can be selective. But there's also confidence in knowing that we continue to drive margins higher in an existing business.

Got it. And I guess just the next question I had was you guys laid out your 5-year plan out to 2030, but not to get too greedy here, but like say, we're looking on maybe 10 years, like what would you say is ROAD's kind of long-term growth strategy, just like when it comes to maybe geographic reach or just kind of you mentioned vertical integration, like in -- like PRI, you guys are -- you're like in pavement restoration work, right? Is there like other kind of verticals we should be looking at? Is that kind of more of the focus, geographic vertical? Is it both?

And also, I guess, the other question I just wanted to add on is when it comes to -- is the focus -- could that be maybe dividend or like share repurchase at some point? Is that also kind of like part of the plan, like 10 years out? Just curious.

Yes. There's a lot to unpack there. I guess, Nandita, the -- to look into our crystal ball, I would make the projection that in 5 years, we're going to do this again. You're probably going to hear very much the same growth story, the same strategy. You're going to hear the same levers still working and taking us to another level. And Greg and I probably will have different pictures by there. So beyond that, it will be exciting. The 5 years after that as we generate cash, how we deploy that. That's a good problem for us to think about.

So we appreciate all of you being here. Thank you for your attention, and we look forward to executing on that strategy. I think we have lunch in the back. So thank you very much.

Greetings, and welcome to the Construction Partners Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Rick Black, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Construction Partners conference call to review third quarter results for fiscal 2025. This call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the Investor Relations section of constructionpartners.net.

Information recorded on this call speaks only as of today, August 7, 2025. Please be advised that any time-sensitive information may no longer be accurate as of the date of any replay listening or transcript reading.

I would also like to remind you that statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance are forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. We will be making forward-looking statements as part of today's call that, by their nature, are uncertain and outside of the company's control. Actual results may differ materially. Please refer to our earnings press release for our disclosure on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission.

Management will also refer to non-GAAP measures, including adjusted net income, adjusted EBITDA and adjusted EBITDA margin. Reconciliations to the nearest GAAP measures can be found at the end of our earnings release. Construction Partners assumes no obligation to publicly update or revise any forward-looking statements.

And with that, I would now like to turn the call over to Construction Partners' CEO, Jule Smith. Jule?

Thank you, Rick, and good morning, everyone. We appreciate you all being on the call today. With me this morning are Greg Hoffman, our Chief Financial Officer; and Ned Fleming, our Executive Chairman.

I'd like to begin today by welcoming the 200 employees of Durwood Greene Construction in the Houston area that joined our family of companies earlier this week. As a third-generation family business that will continue to be led by Brad, Jonathan and Daniel Greene, the company has earned its reputation as a well-respected market leader in Houston, the fifth largest and one of the fastest-growing metro areas in the nation. Led by an entire team of knowledgeable and experienced industry veterans, the company operates 3 hot-mix asphalt plants and a rail service aggregates terminal.

Durwood Greene provides construction and paving services for a variety of public and private projects throughout the Houston metro area. We expect Durwood Greene to continue its legacy of operational excellence and to benefit from vertical integration opportunities as a subsidiary to our Texas platform company, Lone Star Paving. In Texas, our first year has been exactly as we had hoped. And I want to thank the Lone Star team for their outstanding leadership and dedication as we begin expanding to new markets. We continue to see strong economic growth, favorable demographic trends and a well-funded transportation program as well as additional opportunities for acquisitive and organic growth. The Durwood Greene acquisition is a great example of our continued execution of the CPI strategy of seeking out growing markets and partnering with an experienced and talented local management team.

Turning now to the third quarter. Our results demonstrate the strength of our people, where despite persistent weather-related delays in the quarter, our teams executed with discipline and delivered robust operational results, driving a record adjusted EBITDA margin of 16.9%. In the Southeast alone, May marked the second wettest month on record, leading to project delays and impacting fixed asset cost recoveries. While we can't control the weather, our team's resilience and operational excellence enabled us to still gain margin on many of our projects, generate strong operational cash flow and build backlog to $2.94 billion.

Now let's take a closer look at the current market conditions that are driving our ability to build backlog even during our busy construction work season. On the public side of our business, we see strong public contract bidding throughout our 8 states in over 100 local markets. Supporting this strong environment are healthy state infrastructure budgets, including many supplementary state programs as well as local city and county infrastructure programs and the IIJA federal program funds that all add up to significant year-over-year increases in contract awards.

As we begin to look to fiscal year 2026, beginning October 1, public spending on roads and bridges, particularly for maintenance and lane expansions is forecasted to once again grow substantially as state and local governments strive to build and maintain the infrastructure necessary to keep up with the migration of both residents and businesses to our Sunbelt footprint. On Capitol Hill, both houses of Congress continue to work with Secretary Duffy on the 5-year reauthorization of the IIJA and Surface Transportation program, and this administration continues to prioritize hard infrastructure investments and decrease permitting delays necessary to support a growing economy.

In the commercial markets, we continue to have a steady amount of bidding opportunities with developers and general contractors in our local markets. The makeup of our backlog and percentage of public, private work continues to stay remarkably steady over the last several quarters, which indicates that our Sunbelt markets continue to have healthy private economic growth and activity. Our bidding activity remains focused on the nonresidential type projects such as warehouses, industrial parks, schools and manufacturing facilities. We expect economic growth to continue in our current markets, driven by migration to the Sunbelt states by both families and businesses.

Finally, we expect to benefit from significant new investments in American manufacturing and our business-friendly states as new tariffs begin to incentivize and accelerate the reshoring trend that began after the pandemic several years ago. Fiscal year 2025 has been a dynamic year of growth for CPI as we've increased the size of our business over 50% through both organic growth and acquisitions. We understand the benefits of and remain laser-focused on organic growth. We also continue to focus on the best strategic acquisitions in growing markets, and we are having numerous conversations with potential sellers who would like for their employees to experience the culture and opportunities provided by joining the CPI family of companies.

In closing, we are now in the heart of our busy work season and all of our local markets are at full capacity and utilization. Having a record backlog to build, adding the Durwood Greene organization and now knowing that our July volumes were strong, gives us the confidence to maintain our FY '25 guidance. As we head toward a new fiscal year in the next 60 days, we're excited about the tailwinds at our back, including strong public funding, a growing private economy and a long strategic growth runway ahead.

I'd now like to turn the call over to Greg. Greg?

Thank you, Jule. Good morning, everyone. I'll begin with a review of our key performance metrics for the third quarter of fiscal 2025 compared to the third quarter a year ago. Revenue was $779.3 million, an increase of 51% compared to the same quarter a year ago. The mix of our total revenue growth for the quarter was 5% organic revenue and 46% from recent acquisitions. G&A expenses as a percentage of total revenue in the quarter were 6.6% compared to 7.3% in the third quarter last year. As we continue to build scale, we are targeting G&A expenses for the fiscal year to be approximately 7.2% to 7.3% of revenue. As a reminder, FY '24 G&A expenses were 8.3% of revenue.

Net income for the quarter was $44 million, and adjusted net income was $45.2 million and $0.81 per diluted share in Q3. Adjusted EBITDA was $131.7 million, an increase of 80% compared to Q3 last year. Our adjusted EBITDA margin was 16.9% for the quarter, up 280 basis points over the same quarter last year. In addition, as Jule mentioned, we are reporting a project backlog of $2.94 billion at June 30, 2025. We have approximately 80% to 85% of the next 12 months revenue covered in backlog.

Turning now to the balance sheet. We had $114.3 million of cash and cash equivalents and $493.5 million available under our credit facility at quarter end, net of reduction for outstanding letters of credit. On June 30, we amended our credit agreement by providing for a total facility size of $1.1 billion, consisting of a term loan in the amount of $600 million and a revolving credit facility in the amount of $500 million. We utilized the proceeds from the increased term loan to pay down the outstanding balance on the revolving credit facility, realizing the full availability on the facility net of reduction for outstanding letters of credit. In addition, the amendment extends the facility maturity date to June 2030.

As of the end of the quarter, our debt to trailing 12 months EBITDA ratio was 3.17x. We remain on pace with our strategy of reducing the leverage ratio to approximately 2.5x by late fiscal 2026 to support sustained profitable growth. Cash provided by operating activities was $83 million compared to $35 million in the same quarter a year ago. We remain on pace to convert 80% to 85% of EBITDA to cash flow from operations in FY '25. Capital expenditures for the quarter were $36.7 million. We continue to expect total capital expenditures for fiscal 2025 to be in the range of $130 million to $140 million. This includes maintenance CapEx of approximately 3.25% of revenue, with the remaining amount invested in new growth initiatives.

And finally, we are maintaining our prior outlook with revenue in the range of $2.77 billion to $2.83 billion. In regard to our overall revenue mix for the year, we continue to expect organic revenue to be in the range of 8% to 10%. Net income in the range of $106 million to $117 million. Adjusted net income in the range of $124 million to $135 million. Adjusted EBITDA in the range of $410 million to $430 million, and adjusted EBITDA margin in the range of 14.8% to 15.2%.

And with that, we will open the call to questions. Operator?

[Operator Instructions] Your first question comes from Tyler Brown with Raymond James.

Jule, so obviously, very solid quarter in the face of what was very challenging weather. I think you talked a little bit about the fixed cost deleveraging, but it doesn't really seem that you guys missed a beat. I mean gross margins were maybe the best they've been in 20 quarters on my math. Can you just kind of talk about how you navigated weather so well? I mean how do you flex costs when you have that lack of paving days?

Yes, Tyler, we were very pleased with how the quarter -- how the margins came through this quarter. I mean there's no question when you have a quarter with that weather, it's an impact, and we play an outdoor game and weather can impact us negatively or if it's really dry, can impact us positively. But I would say we just really -- our business is clicking on all cylinders. We talk about the 3 margin levers of building better markets, vertical integration and scale. And all of those really are kicking in at the same time, which we expected.

So even though we had a wet quarter, it didn't really stop those from coming through. It affected the top line, it affected some fixed asset recovery, but those 3 margin levers are starting to work really well together. And we're expecting that to continue in the fourth quarter.

Okay. That's great. Curious about your comments. I think in the prepared remarks, right at the end, you mentioned that you were, "Roughly at full utilization." So how do we read that? Will that be a bit of a hindrance to organic growth next year? Or are you going to need to step up CapEx to support that growth? Just any color there.

Yes. No, I wasn't trying to signal any capacity constraints. I just was basically saying we have a full backlog, and we're on full cylinders. And our CapEx program supports our organic growth that we expect. As you know, Greg runs a pretty robust program to look for the best organic growth opportunities and that's where the CapEx dollars flow. So I wasn't trying to communicate any capacity constraints just that as normal, we are at full utilization and building that record backlog.

Okay. Okay. I just wanted to make sure I had that. And then just a quick modeling question, Greg. Just on the M&A contribution, what will the contribution be here in '25 that's expected in the guidance? And then again, kind of based on what we know today with deals that have closed, how much rollover benefit should we see in fiscal '26 already?

Yes. So Tyler, the Q4 acquisition revenue impact is going to be somewhere in the $270 million, $280 million range. And then carrying over into 2026, we should see somewhere in the neighborhood of $240 million to $250 million.

Okay. So a good kick start into '26. Okay, my last one. Yes, so I think you guys are going to do something, call it, like $2.8 billion in revenue, $420 million or so of EBITDA. Those numbers are actually right at or above the targets that you set out less than 2 years ago and you're achieving them 2 years early. So just I know the complexion of the business has obviously changed a lot, but does it make sense to maybe reset those targets maybe here in the next couple of months?

Yes. Tyler, I do think that the Lone Star acquisition was a transformative acquisition, as we said last October, PRI that joined us in May has had a great 2 months. The Durwood Greene acquisition is going to be very additive. So yes, I mean, we're -- we need to update and communicate what our business looks like moving forward now after those transformative acquisitions.

I'm going to throw it to Ned who's got some big picture thoughts. I think that's a good time to let him weigh in on this.

Tyler, you're a great straight man, I appreciate it. Thank you, sir. But the honest truth is we're trying to make great long-term decisions. We don't run this business on a 90-day increments. We're trying to make great decisions that continue to compound wealth. A good example of that is Houston, and we probably see every transaction that you can see in this space, and we made a decision to invest in Houston. Houston has 7.2 million people. It was the fastest, more people moved there last year than any metropolitan area in the country, except for Dallas, and Dallas beat it by 16,000 people, I believe. And it looks like it's going to continue to grow. That's more people than a lot of states in the country with that kind of growth.

And so the first step is we've got great people there. We've got great growth. You're going to see more things happen in growing areas. So we're trying and we'll continue as we have from the very start to make great long-term decisions that continue to compound wealth, not just for 1 or 2 quarters, but for the next 5 to 10 years. So the answer is yes, you will just, I would say, stay tuned. We will have a little bit of a reset here over the next few months as to what we think we're going to do since we hit the projections so quickly. But make no mistake about it, the Board is paying attention to where we invest it. The several members of the Board met the team in Houston. We're paying attention to who we're in business with, that's our first step, where we're placing capital, and we're going to continue to allocate capital that can compound wealth for the next 5 to 10 years.

Next question, Michael Feniger with Bank of America.

Just I am curious, Jule, you made a comment earlier about public spending for maintenance and lane expansion is forecast to grow substantially in 2026. Is this based on conversations with customers? Or is this based on your understanding of where budgets are looking as we fast forward to next year? I just want to get a sense if you can kind of flesh out your confidence around that comment.

Yes. Michael, and you and I have discussed, when we're talking about public funding, there are several different ways to measure it, and it can get a little confusing. So we're talking about contract awards. When you add the state programs, which include federal money, local and county programs because that's all part of our backlog and our bidding. We feel like even though nationally, the numbers move around, our states this year in FY '25, contract awards are up about 14%. And so when we look at those programs, the budgets that they have, where they're going in FY '26, we think it's going to be up a similar amount. And so that's what I was speaking to is really the contract awards as we look at the budgets and programs in place on the public funding side.

Perfect. And when we think of 2026, I know you're not guiding Jule and Greg, just kind of following up on Tyler's question about the M&A. Just any other puts and takes we should think about for next year? I mean, obviously, if weather normalizes a positive there. Anything on costs that you're seeing on the liquid side, pricing in the backlog, just kind of thinking of the puts and takes as we kind of start looking at the building blocks for 2026.

Yes. Well, Mike, it's getting about that time. So I'll talk to the backlog, and I'll let Greg speak to the cost that he's seeing. As we look forward into 2026, obviously, as Greg just said, we've got a lot of acquisitive revenue rolling over into '26. We expect organically to be up high single digits like we expect to be this year. We don't really see any change in that. So from a growth standpoint, 2026 is looking like a typical CPI year, being up 15% to 20%, if not a little more. So that's good on the top line side.

Greg, do you want to speak to what you see on the margin and cost side?

Sure. I said in the remarks that our backlog covers the next 80% to 85% of our 12-month revenue. And the cost is built in there for the appropriate margin as we think about 40 to 50 basis point improvement in margin. So those costs are set and built in. Certainly, there's some energy pricing that could impact that. We do talk about a slight headwind if energy prices go up and the reverse is true if they go down. And so currently, right now, what we see is liquid AC being very stable. Diesel has been very stable. Natural gas is up a little bit, but we do, do enough hedging to make that a minimal impact on us. So we feel pretty good about cost in the future.

Great. And I'll just sneak one more in there. Just the free cash flow was really strong in the quarter. Just when we look at that and we think about your leverage, any update on the time line on where you -- when you think you get inside your range? And Jule, do you feel okay still doing some acquisitions while also trying to deleverage? Or are they mutually kind of exclusive as we kind of turn the page and go through one more quarter and go into 2026?

Yes, Michael, good question. It's something we think about a lot. We're committed to getting back into the target range on our leverage. But at the same time, we want to continue to run our business. As Ned said, we're making decisions for 5, 10, 15 years. And so as we look at the acquisitive opportunities, we're passing on some. We're working with sellers to accommodate our timing as much as we can. But at the same time, there are several -- as we've made this year, there are several key strategic acquisitions that we think are crucial and important to the long-term health of our business. And so we're going to delever, and at the same time, we're going to continue to make good strategic decisions for the business.

And so in terms of our -- what I mentioned in my remarks, Mike, leverage ratio is 3.17x, we're expecting based on normal cash generation through to the end of fiscal 2026 to be near that 2.5x leverage ratio. So yes, to your point, we're going to generate 80% to 85% cash flow from operations -- 80% to 85% -- I'm sorry, 80% to 85% of our EBITDA into cash flow from operations. And the trailing 12 months right now is almost there, 79%. So we'll continue to do what we've done, deleverage over time.

Next question, Andy Wittmann with Robert W. Baird.

With all the good demand for your services in your markets driving good growth, I was just wondering how this is affecting the competitive environment as it relates to your competitors, maybe also realizing that the services are scarce and they might have some pricing power. Obviously, Jule, this has been a really important part of your strategy to build these better markets. And I was just wondering if you could assess for us what you're seeing in your markets to the extent that you've been able to or see the building of those markets being better and what you're seeing in the marketplace today?

Yes, Andy, you're right. One of our 3 margin levers is building better markets, and we see that the demand side is helping us with that. When there's a good bidding environment, as you would expect, margins stay healthy. And I think you saw that rolling through this quarter, is even though our crews and our teams really did a great job growing margin on projects, which we expect, and they had a great quarter doing that. It's really nice to start off with healthy margins at the beginning. And so the demand environment on the public side and the private side gives us the opportunity to be patient at the bid table to add projects in our backlog at good margins.

And so I think we continue to see that. It's been something that's been pretty steady for several years now, and we're busy and able to stay patient at the bid table and our competitors are also.

And Andy, strategically, Jule and the team have done a great job of picking markets that are healthy. That's an important part of it, growing healthy markets. Houston is a great example.

Yes. And you heard that in Jule's response previously, there are some key markets that you guys want to be in. It sounds like you've identified the next ones that are the good markets that you want to be in as well, right, Jule?

Yes. Andy, as Ned said, Houston is a great example. You say metro area and you think they're all pretty much the same. Houston, I mean, it's just incredible the amount of people there and the rate of growth when you look at how fast that metro area is growing on an annual basis. So not all states are equal, not all metro areas are equal. And so for us to generate organic growth, which is a big part of our story, we need to be in places that are growing.

And so as we look to allocate capital, Ned and I talk a lot about where do we want to be in the United States. Where do we want to direct our growth? We've got a lot of opportunities, we can't do them all. And so we just try to make the best decisions on where we can be that allows our business to grow and have healthy margins.

Okay. Greg, a follow-up one for you. The One Big Beautiful allows 100% bonus depreciation, and so we're seeing a lot of companies that buy things, equipment like you do. Increasing their cash flow guidance as a result of that. I was wondering if you could help us understand what the benefit is to your cash flow from this year or maybe on an ongoing basis, at least while this law is in effect from that bonus depreciation. And maybe refresh my memory, but I don't know that you updated your cash flow guidance for this. So maybe you did, maybe you didn't, but could you just clarify if there was any change to your cash flow guidance as a result of the OBBA?

Yes. I think the guide we've been saying is, like I said earlier, 80% to 85% converting that EBITDA to cash flow. So I think we still fall within that range, Andy. How it specifically impacts us, yes, we do take bonus depreciation. This year, it is down to 60% so that was certainly reflected in what we originally talked about in our guide. When asked about what that -- what our cash taxes would be, I've said in the $15 million range. Now that this bill has passed, interestingly, it's acquisitions for us and/or equipment purchases that have occurred after January 15, '25. So unfortunately, we don't get to pull Lone Star in that so it's still at 60%. But other acquisitions post 1/15/25 as well as those equipment purchases will be at 100% bonus depreciation. So that $15 million goes down dramatically, probably 10 or 12 or 13. I mean, obviously, we're still going to pay state, it doesn't impact the state. So yes, a nice lift.

Yes. So you're down from $15 million, down $12 million. So you're repaying just a few million dollars in federal taxes, what you're saying?

That's right.

Next question, Brian Biros with Thompson Research Group.

This is Brian on for Kathryn Thompson. Q2 obviously had some tough weather, you guys put up a great result, though. I was curious to hear about trends in July so far. We've heard that July was a great quarter for many in the industry. I'm seeing volumes up double digits. So just curious if you could touch on how July trended for you?

Yes. Brian, so as I said in my prepared remarks, July had really good volumes. And it started out the first week, especially in North Carolina and Texas, it was wet. But the last 3 weeks and especially the last 2 weeks were really good volume months. So as we look at how to guide for the fourth quarter, we obviously don't know the weather in August and September. Our guide normally just -- we assume normal weather, right? But we know July, we had really good volumes, and so we felt like it was important to communicate that. So we saw what, as you said, some of the other folks in our industry have seen is that after a very wet spring quarter, it was nice for July to be -- to have some weather that we could get out and work.

Got it. And then so Q2 record margins, I think, up 280 basis points, again, in a tough weather quarter. I mean is there a way to frame how much they would have been without weather? I know you mentioned the 3 levers that are really kind of just driving the performance, not irregardless of weather, but taking the weather impact to be not as great. But just trying to think through the exercise of if you had normal weather in Q2, what kind of numbers could we have seen, trying to think then for Q3 and even just for next year?

Yes. That's a good question, Brian, and it's not an exact science. Greg and I could sit here and argue for an hour about exactly what may have happened had we had normal weather. But there's no question, our quarter would have been better. We would have had more revenue in the summer where we over-recover on our fixed assets, it would have been higher. And so that's what we're looking forward to happening in the fourth quarter.

Got it. And then last one for me, maybe on the Houston market. You touched a bit on the call so far, massive market. Can you touch on how you plan that market now, kind of like what services you offer and kind of what adjacent services are still out there for bolt-ons? I guess, really just the opportunity set there and maybe how that market looks between public and private trends?

Yes. So Brian, as we start in Houston here this week, really is our first week with the Durwood Greene organization, they look a lot like our typical CPI company. They do paving services, they do some other concrete paving services, which is a characteristic of the Houston market. And they run 3 asphalt plants, do a lot of FOB sales. So very much like a typical CPI company. And as we've said, as we get going in that market, today's acquisitions drive tomorrow's organic growth. So we're going to look for organic growth opportunities in the Houston market, just like we do everywhere else.

Next question, Brent Thielman with D.A. Davidson.

Congrats working through some tough conditions here, good showing here. Jule, I wanted to maybe ask a different way around the weather and that I'm trying to think about the markets that were less impacted for you through the quarter. And really, this is kind of in the context of kind of the bigger organic growth outlook for the year. But I mean, do you -- could you give any context on markets that are just really hitting on all cylinders right now, maybe potentially beyond kind of this 8% to 10% organic growth rate you've talked about for the year? Just trying to think through where are you really seeing some great momentum in the business.

Yes, Brent, we've got 100 different markets. And so I'm trying to think of which ones I would call out because there's a lot of them doing really well. Clearly, Florida and Texas are great growth states, but so is South Carolina, North Carolina, I mean Tennessee, there's a lot of -- I would say, clearly, the Lone Star markets of Austin and San Antonio and Temple-Calen are big growth areas, the Panhandle of Florida, the Research Triangle here in North Carolina. But we see a lot of growth in all of our markets. They're not all equal, but it's hard to call out just a few.

The Southeast as a whole, just the region as I said in the prepared remarks, just continues to see a lot of migration. The states are trying to keep up with the growth, and that's what you see coming through on the public side in the funding. And then as I said, I think with this -- the tariffs incentivizing American manufacturing, I think CPI is going to be a big beneficiary of companies saying, "Hey, we're going to make things in America." And where do we want to locate, I think the Southeast and the Sunbelt is going to get an outsized share of that investment.

Okay. Yes, that's interesting and kind of a good follow-on there, Jule. I guess what I wanted to ask is as that likely plays out here over the next few years, does the acquisition strategy that you have in place today, I mean, the types of companies that you're buying go quite well into leveraging that -- those private markets that could certainly pick up in your geographies? In other words, can you continue under the same program you're doing? Are you looking at different types of deals that could potentially leverage those -- that opportunity down the road?

Yes, Brent, I would tell you, we're talking to a lot of potential sellers right now as we have been. That's a big part of my job is just to get to know these sellers. And I would tell you, they look very much just like the businesses we have for 20 years that CPI has looked at. They're good construction companies. Some of them don't have hot-mix asphalt, they're more service related. Those are very value-added acquisitions in the -- where we're already in the market. But when you look at PRI or a Mobile Asphalt or Durwood Greene, there's just really some still -- a lot of still strategic opportunities in our space that do exactly what we do.

Next question, Adam Thalhimer with Thompson, Davis.

Nice quarter considering the weather. I was curious, given how wet the summer has been, Jule, would you say you have any color or thoughts on the potential that the construction season could extend further into the December quarter?

Well, Adam, that's an interesting thought. I mean, obviously, every year, when we get into November and December, we have customers that are just begging us to get their projects done. It's a very, very busy time for our different markets. So we're going to extend into the winter as much as we can. Obviously, weather starts to play a factor but I don't envision us going into November and December without a full plate of work with the backlog we already have and what we're bidding now. I think it's going to be very busy and if we get a good warm November and December, you're going to see us make a lot of hay in those months.

That's what I figured. And then I wanted to ask about your recently acquired states. So Texas, Oklahoma, to some extent, Tennessee. How would you say that transportation spending is trending versus your initial expectation?

I think that there -- we try to study the spending and the budgets before making acquisitions. And so I would say that on all 3 states, it's playing out exactly as we expected. Texas, Oklahoma and Tennessee all have very healthy programs. I think Tennessee is up quite a bit year-over-year. So we're seeing a lot of bidding activity there. And Texas, I mean, frankly, their program draws every other state in the nation. And so -- and we're benefiting from that, and we're happy to be in Houston. So I would say all 3 states are doing very well.

That's good to hear. And then lastly, I wanted to ask on labor. There's got to be a lot of value in your assembled labor force of 6,200 plus. I'm just curious, there's been any changes in the availability of labor either for you or your competitors? What's your sense on that?

I think, Adam, with labor, it's a twofold answer. The labor shortages we saw coming out of COVID, those have dissipated. We're back to a normal labor market when we were struggling to find truck drivers 3 and 4 years ago, that's gone. And labor is available, we're able to build our backlog. But the longer-term picture, as you've heard me say before, is we're going through a generational shrinking slowly but surely of our workforce, and we have a lot of gray hair out on our crews that are retiring. And so that has forced CPI to be proactive in saying how do we attract and retain a workforce, whether it be the culture that we have in our companies, whether it be the compensation that we offer our workers or whether it be the career opportunities. We call it the 3Cs, Culture, Compensation and Career.

And we feel like that if we can do a good job attracting and retaining a workforce, it's actually going to become a competitive advantage for us because the businesses in our industry that can attract and retain a workforce are going to be able to keep bidding and growing. And those that don't attract and retain a workforce are not going to be able to keep bidding and growing. And so it's something long term that we know we have to be proactive. And if we are proactive, it's actually going to help us be one of the winners in our industry. And so workforce is a huge part of what we focus on every day.

I would like to turn the floor over to management for closing remarks.

Yes. Thanks to everyone for being with us, and we look forward to speaking with you next quarter. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.