Construction Partners (ROAD) Q1 2026 earnings review
A Paving Powerhouse in High Gear
Construction Partners delivered a blowout first quarter, defying typical winter seasonality. Revenue surged 44% YoY to $809.5M, driven by an aggressive M&A strategy and strong execution. More importantly, the company demonstrated massive operating leverage: Adjusted EBITDA jumped 63%, expanding margins to a Q1 record of 13.9%. With a record $3.09B backlog and a raised FY26 outlook, the 'Road 2030' growth thesis is fully intact, though the balance sheet remains stretched.
🐂 Bull Case
The company proved its vertical integration strategy is working. Despite Q1 typically being a lower-margin winter quarter, Adjusted EBITDA margin expanded 160 bps YoY to 13.9%. This creates high confidence in achieving the full-year target of ~15.4%.
Backlog hit $3.09 billion, up significantly from $2.66 billion a year ago. This provides exceptional visibility for FY26 and validates the demand environment in the Sunbelt, supported by public infrastructure funding.
🐻 Bear Case
The aggressive acquisition pace (including recent moves in Texas) keeps leverage elevated. While FY25 ended at ~3.43x net debt/EBITDA, the company must execute flawlessly on cash flow to deleverage toward its 2.5x target while integrating new assets.
CPI has completed eight strategic acquisitions in under 15 months. While they call integration a 'core competency,' ingesting this much operational complexity rapidly increases the risk of culture clashes or operational slippage in newly entered markets like Texas.
⚖️ Verdict: 🟢🟢
Strong Buy. This was a 'thumping' beat. The combination of 44% top-line growth with expanding margins in a seasonally weak quarter is rare. The raised guidance suggests management sees no slowdown in the Sunbelt super-cycle.
Key Themes
M&A Supercharging Growth
Inorganic growth is the primary engine. The company closed two acquisitions in the quarter and announced another in Houston this week. Revenue grew 44% YoY, heavily influenced by these additions. The swift expansion into high-growth markets like Houston and Daytona Beach is rapidly scaling the platform.
Sunbelt Infrastructure Demand
The macro backdrop remains perfect. 'Strong industry tailwinds' persist across the 8-state footprint, driven by IIJA funding and population migration. The record $3.09B backlog confirms that both public roadwork and private commercial projects remain abundant.
Leverage Watch
While specific Q1 leverage ratios weren't explicitly tabled in the release, the prior quarter ended at 3.43x net leverage, well above the long-term 1.5x-2.5x target. With continued acquisitions in Q1 and early Q2, debt load remains a key monitorable, though growing EBITDA helps the ratio naturally.
Seasonality is shifting
The company typically posts losses or thin margins in Q1 (Dec 31 end). Posting $17.2M in Net Income (vs -$3.1M loss prior year) and 13.9% EBITDA margin signals that the platform's scale and geographic diversity (expanding further south into FL/TX) are dampening winter weather risks.
Other KPIs
Accelerating. Up from 12.3% in 25Q1. This is the highest Q1 margin in company history, driven by operational leverage and favorable weather.
Reversing. A dramatic turnaround from a Net Loss of -$3.1M in the prior year period. EPS swung from -$0.06 to $0.31.
Improving. Down from 7.9% in 25Q1. This demonstrates that revenue growth is outpacing overhead growth, validating the platform scalability thesis.
Guidance
Accelerating. The guidance was raised from the prior outlook. Comparing to FY25 actuals of ~$2.81B, this implies ~25% YoY growth at the midpoint. Management cites organic growth of 7-8%, implying the rest is acquisition-driven.
Accelerating. Raised from prior outlook. Represents ~28% growth over FY25's $423M. The implied margin of ~15.4% indicates continued expansion from FY25's 15.0%.
Accelerating. Raised significantly. Represents ~53% growth at the midpoint vs FY25's $101.8M. This outpacing of revenue growth highlights the flow-through of higher margins and cost control.
Key Questions
Organic Growth Clarity
With 44% total revenue growth but guidance implying 7-8% organic, can you break down the exact organic vs. acquired contribution in Q1 to confirm underlying market health versus just buying revenue?
Deleveraging Timeline
Given the continued acquisition activity in Q1 and Q2 (Houston), has the timeline to return to the 2.5x net leverage target been pushed out beyond late FY26?
Texas Margin Profile
As the Texas footprint expands rapidly (Houston acquisitions), is the margin profile of these new assets accretive or dilutive to the current 15.4% corporate average?