Construction Partners, Inc. · NASDAQ:ROAD
Construction Partners — Debt Investor Presentation (October 2024)
56 slides from Construction Partners's debt investor presentation, Oct 22, 2024
Slide 1: Lender Presentation October 22, 2024
Exhibit 99.1 Lender Presentation October 22, 2024 CONFIDENTIAL
Slide 2: Cautionary Statements About this Presentation
Cautionary Statements About this Presentation The information in this presentation is current only as of the date on its cover. For any time after the cover date of this presentation, the information, including information concerning the business, financial condition, results of operations and prosp
Slide 3: Management Presenters
Management Presenters Jule Smith Greg Hoffman Chief Executive Officer Chief Financial Officer CONFIDENTIAL 2
Slide 4: Today's Agenda
Today’s Agenda Transaction Overview 1 Construction Partners Overview 2 Lone Star Paving Overview 3 Key Credit Highlights 4 Financial Overview 5 CONFIDENTIAL 3
Slide 5: Transaction Overview
Transaction Overview CONFIDENTIAL
Slide 6: Executive Summary
Executive Summary • Construction Partners, Inc. (“CPI” or “Construction Partners”) entered into a Unit Purchase Agreement to acquire all of the outstanding membership units of Asphalt Inc., LLC dba Lone Star Paving (“LSP” or “Lone Star Paving”) on a cash-free, debt-free basis (1) • Aggregate conside
Slide 7: Sources & Uses and Combined Capitalization
Sources & Uses and Combined Capitalization Sources Uses ($mm) ($mm) Amount Amount (2) New Term Loan B $750 Purchase of LSP $908 (1) CPI Equity Issued to LSP Sellers 224 Paydown of Existing CPI Revolver 66 Total Sources $974 Total Uses $974 Combined Capitalization ($mm) Current (6/30/24) Combined (6/
Slide 8: Summary of Term Loan B
Summary of Term Loan B • Construction Partners, Inc., Wiregrass Construction Company, Inc., FSC II, LLC, C. W. Roberts Contracting, Incorporated, King Asphalt, Inc., Borrowers: The Scruggs Company, and Lone Star Paving Guarantees: • Each Borrower and each Borrower’s existing and future subsidiaries
Slide 9: Transaction Timeline
Transaction Timeline October 2024 November 2024 S M T W T F S S M T W T F S 1 2 3 4 5 1 2 Key transaction dates 6 7 8 9 10 11 12 3 4 5 6 7 8 9 13 14 15 16 17 18 19 10 11 12 13 14 15 16 Bank Holidays 20 21 22 23 24 25 26 17 18 19 20 21 22 23 27 28 29 30 31 24 25 26 27 28 29 30 Key Dates Events st Oct
Slide 10: Construction Partners Overview
Construction Partners Overview CONFIDENTIAL
Slide 11: CPI – At-A-Glance
CPI – At-A-Glance (1) Company Overview Key Statistics • Construction Partners is a vertically integrated civil infrastructure company that operates in the southeastern United States and is a market leader in each market it serves 12.1% $1,761mm $213mm • Specializes in the construction and maintenanc
Slide 12: CPI – Highly Integrated Across Value Chain
CPI – Highly Integrated Across Value Chain Materials HMA Manufacturing Liquid Asphalt (Sand, Rock, Reclaimed Asphalt Pavement) Bridges & Concrete Misc. Concrete Clearing & Grading Roadway Base HMA Pavement Storm Drainage Structures (curb, gutter, etc.) Signage & Roadway Guardrails, Barriers, Line St
Slide 13: CPI – A Family of Companies
CPI – A Family of Companies Charlotte, NC Raleigh, NC (1) (1) December 2022 January 2011 Dothan, AL Greenville, SC (1) (1) December 2002 October 2021 Tallahassee, FL Valdosta, GA (1) (1) May 2001 May 2018 75 HMA Plants 13 Aggregate Facilities 2 Liquid Asphalt Terminals (1) Represents the date the co
Slide 14: CPI – Successful Track Record of Acquisitions and Integration
CPI – Successful Track Record of Acquisitions and Integration Track Record of Value-Added Acquisitions and Successful Integration Strategy Ferebee Acquisition 32 (1) Acquisitions since IPO Entered TN Market King Asphalt Acquisition Asphalt Terminal Acquisition 12 Scruggs Greenfields Acquisition IPO
Slide 15: CPI – History of Controlled Profitable Growth: Pre-IPO
CPI – History of Controlled Profitable Growth: Pre-IPO Pre-IPO: 2001 – 2018 Same Proven Strategy Founded in 2001 with a Simple, 3-Point Thesis: Asphalt-Centered Infrastructure Company ü 1) Partner with experienced operators that know how to build a 1 great company… Regionally Focused in Sunbelt ü 2)
Slide 16: CPI – History of Controlled Profitable Growth: Post-IPO
CPI – History of Controlled Profitable Growth: Post-IPO In 2022, Exceeded 5-year Targets from IPO 2018 to 2024 – Consistent Growth Strategic Footprint since IPO Achieve revenue above $1 billion ü May 3, 2018 September 30, 2024 (day before IPO) (FY 2024) Annual revenue growth: single to low double di
Slide 17: CPI – Highly Experienced and Proven Management Team
CPI – Highly Experienced and Proven Management Team Deep Bench of Long-tenured, Experienced Management Talent Local Operators Greg Hoffman Jule Smith Chief Financial Officer Chief Executive Officer Reece Akins David Ferebee Bob Flowers Ty Johnson Brandon Owens Casey Schwager President, Scruggs Presi
Slide 18: CPI – Local Markets / Workforce Leads to High Relative Market Share
CPI – Local Markets / Workforce Leads to High Relative Market Share Local markets defined as ~50-mile radius around plants given temperature sensitivity of HMA HMA Plant Favorable Local Market Dynamic Aggregate Facility • Local market knowledge and relationships provides competitive moat • Hiring an
Slide 19: CPI – Our Customers
CPI – Our Customers Top Customers • Steady stream of maintenance-related contracts let by state DOTs, municipalities, military bases, and airport authorities • Publicly funded projects accounted for approximately 63% of FY 23 revenues • Long-standing relationships, turnkey capabilities, and reputati
Slide 20: CPI – Focus on Margin Expansion
CPI – Focus on Margin Expansion (1) Multiple Levers for Potential Margin Expansion Adjusted EBITDA and Adjusted EBITDA Margin • Establish leading position in each local market by • Leverage technology $213mm implementing best practices to provide improved Building Better and delivering quality marke
Slide 21: CPI – Risk Management Framework
CPI – Risk Management Framework Key Risk Management Principles Project Assessment Process • Focus on short-duration, low-risk, repeatable paving projects • Labor flexibility allows CPI to leverage the same crews for both private and public projects, with the ability to quickly pivot • Scope of work
Slide 22: Lone Star Paving Overview
Lone Star Paving Overview CONFIDENTIAL
Slide 23: Strategic Rationale For Transaction
Strategic Rationale For Transaction Complementary Geographic Expansion into Attractive Texas Market ü (1) • Adds a new platform, consistent with historic Sunbelt strategy LTM Revenue $1,761mm $466mm (1)(2) LTM EBITDA $213mm $112mm • Texas is the most well-funded state DOT; attractive “Texas Triangle
Slide 24: Introduction to Lone Star Paving
Introduction to Lone Star Paving Company Overview Strategic Footprint Around Growing MSAs • Lone Star Paving is a vertically integrated infrastructure company providing construction materials and paving services to public and private customers in Central and South Texas • Headquartered in Austin, TX
Slide 25: LSP – Company History
LSP – Company History Strategic acquisitions, significant investments in plants and equipment, and outfitting of new crews have expanded LSP’s geographical footprint and increased vertical integration capabilities • Acquired asphalt milling company • Built Florence HMA plant • Acquired Pinn Road HMA
Slide 26: LSP – Vertically Integrated Operations
LSP – Vertically Integrated Operations Paving Aggregate Liquid Hot Mix Asphalt Production Asphalt Production Services ~33% of aggregate internally ~86% of liquid asphalt ~82% of HMA internally ~3 million tons paved annually by 16 LSP paving sourced from 4 LSP internally sourced from 1 sourced from 1
Slide 27: LSP – State-of-the-Art Asset Portfolio
LSP – State-of-the-Art Asset Portfolio Lone Star Paving owns all assets at their locations and has invested ~$760mm in facilities and equipment since inception 10 HMA Plants 4 Aggregate Facilities 1 Liquid Asphalt Terminal Significant Embedded Value of Aggregate Reserves Aggregate Facility Estimated
Slide 28: LSP – Long-Standing Customer Relationships
LSP – Long-Standing Customer Relationships • Top 10 paving customers accounted for 41% - 45% of total paving revenue over the past three years • Topline growth driven by increased volume at key accounts as well as significant non-top 10 customer revenue growth ($mm) (1) Paving Customers End Market %
Slide 29: Attractive Texas Geography…
Attractive Texas Geography… Compared to the 10 largest MSAs in the U.S., LSP’s current addressable market ranks near the top for both population and employment growth over the next 10 years Current Addressable Market MSAs vs 10 Largest Populated MSAs 2023A – 2033 CAGR 2.0% Austin 1.5% Houston Phoeni
Slide 30: …with Strong Funding Tailwinds
…with Strong Funding Tailwinds (1) Government Funding May 2024 Infrastructure Investment and Jobs Act (“IIJA”) Highway Funding Update (2) State & Local Government Contract Awards for Highways • May 2024 marked the halfway mark of the five-year, $1.2 trillion landmark IIJA bill • Total funding of IIJ
Slide 31: CPI + LSP: At-A-Glance
CPI + LSP: At-A-Glance ~61% $2.2bn $325mm 14.6% 5,625+ 105 Revenue from Publicly- (1) (1)(2) (1)(2) LTM Revenue LTM EBITDA LTM EBITDA Margin Employees Production Facilities funded Projects Asphalt-Centered Infrastructure Company Regionally Focused in High-Growth Sunbelt (3) • ~94% of all paved roads
Slide 32: Key Credit Highlights
Key Credit Highlights CONFIDENTIAL
Slide 33: Key Credit Highlights
Key Credit Highlights 1 Stable, Non-Cyclical Revenue From Repeat Customers Attractive Geographic Footprint in Sunbelt Region 2 3 Strong Backlog Provides Consistent Revenue Visibility Short-Duration, Low-Risk, Repeatable Paving Projects 4 5 Attractive Industry Trends with Strong Funding Tailwinds Tra
Slide 34: Stable, Non-Cyclical Revenue from Repeat Customers
1 Stable, Non-Cyclical Revenue from Repeat Customers (2) Seasonal, Non-Cyclical Revenue Combined Top 10 Paving Customers Non-Cyclical Opportunity to pivot to high-demand markets (1) Historical CPI Revenue Split 37% 63% Non-Public Public Seasonal Outdoor operations impacted by daylight duration and w
Slide 35: Attractive Geographic Footprint in Sunbelt Region
2 Attractive Geographic Footprint in Sunbelt Region (1) Top 50 Fastest Growing Metros (2020 – 2023) • Well-positioned to capitalize on decades-long trends in population and business migration to the Southern U.S. Metros in Pro Forma CPI States 15 Metros in Other States • Population in Pro Forma CPI’
Slide 36: Strong Backlog Provides Consistent Revenue Visibility
3 Strong Backlog Provides Consistent Revenue Visibility • Approximately 85% of next twelve months revenue is covered by existing backlog • CPI has had 15 consecutive quarters of growth; generally, however, there is seasonality to the burn/build (1) (2) CPI Backlog LSP Backlog $1.9bn $1.6bn $1.4bn $1
Slide 37: Short-Duration, Low-Risk, Repeatable Paving Projects
4 Short-Duration, Low-Risk, Repeatable Paving Projects ~94% ~10 – 15 Years D (1) (2) (3) Roads in the U.S. Made with Asphalt Cycle for Routine Road Maintenance ASCE Road Grade Completed Projects by Size - FY 21 - FY 23 Risk Policy $0-1mm 75% • Focus on short-duration, low-risk paving projects $1-2mm
Slide 38: Attractive Industry Trends with Strong Funding Tailwinds
5 Attractive Industry Trends with Strong Funding Tailwinds Public Investment in Aging Infrastructure • Landmark legislation by federal and state governments provides funding certainty • IIJA increased funding for pavement-related infrastructure by approximately 38% over FAST Act • Approximately 35%
Slide 39: Track Record of Controlled Profitable Growth Through Multiple Layers
6 Track Record of Controlled Profitable Growth Through Multiple Layers (1) Combined EBITDA $325mm • Paving crews • Expansion of services or • Utilities crews facilities in existing $259mm Organic $112mm • Grading crews markets • Facility upgrades $86mm $146mm $131mm $36mm $42mm $213mm • HMA plants •
Slide 40: Strong Cash Flow Conversion Model
7 Strong Cash Flow Conversion Model Record-high LTM 6/30/2024 operating cash flow highlights operational efficiency and organizational emphasis on cash flow generation Investing in Growth (1) Adjusted EBITDA + Reported EBITDA Stable and growing cash flow base with reoccurring revenue sources. Progre
Slide 41: Financial Overview
Financial Overview CONFIDENTIAL
Slide 42: CPI – Q3 2024 Performance Update
CPI – Q3 2024 Performance Update Key Observations from Q3 Earnings Revenue +23% YoY Growth • Revenues were $518 million in the third quarter of fiscal 2024, an increase of $518mm 23% compared to $422 million in the same quarter last year $422mm • Gross profit was $84 million in the third quarter of
Slide 43: Historical Financial Performance – CPI Standalone
Historical Financial Performance – CPI Standalone (1) Revenue FCF Conversion +30% | FY 21 - LTM 6/30/2024 CAGR -10bps | FY 21 - LTM 6/30/2024 $1.8bn 54.5% 54.4% $1.6bn $1.3bn 51.0% 48.1% $911mm FY 21A FY 22A FY 23A LTM 6/30/2024 FY 21A FY 22A FY 23A LTM 6/30/2024 Growth 15.9% 42.9% 20.1% 12.6% (2) A
Slide 44: Historical Financial Performance – LSP Standalone
Historical Financial Performance – LSP Standalone (1) Revenue FCF Conversion +26%| FY 21 - LTM 6/30/2024 CAGR +583bps | FY 21 - LTM 6/30/2024 80.0% 78.4% $466mm 74.2% $410mm $327mm $263mm 61.7% FY 21A FY 22A FY 23A LTM 6/30/2024 FY 21A FY 22A FY 23A LTM 6/30/2024 Growth 12.2% 24.6% 25.3% 13.5% (2) R
Slide 45: Historical Financial Performance – Combined CPI + LSP
Historical Financial Performance – Combined CPI + LSP (1) Revenue FCF Conversion $2.2bn $2.0bn $466mm 63.3% $1.6bn 60.8% 60.1% $410mm $1.2bn $327mm 51.5% $263mm $1.8bn $1.6bn $1.3bn $911mm FY 21A FY 22A FY 23A LTM 6/30/2024 FY 21A FY 22A FY 23A LTM 6/30/2024 Growth 15.1% 38.8% 21.2% 12.8% (2) Backlo
Slide 46: Financial Guidance
Financial Guidance Outlook / Commentary CPI FY 24 Guidance • Business continues to perform well as we close out FYE 2024 (on FY 24 September 30th) Low High Revenue $1,821mm $1,825mm • Increased funding for public projects continues at the federal, state and local levels Adj. EBITDA $219mm $222mm Adj
Slide 47: Financial Policy
Financial Policy We target 1.5x – 2.5x as a healthy leverage ratio for sustained, profitable growth (2)(3) CPI Net Debt to Adjusted EBITDA Cash – As of 6/30/24 ~$56mm 3.4x 3.1x Interest Rate Swap – Fixing the Company’s rate at 3.6% $300mm on $300 million of term debt; swap matures in 2027 1.9x 1.8x
Slide 48: Appendix
Appendix CONFIDENTIAL
Slide 49: CPI Historical Adj. EBITDA Reconciliation
CPI Historical Adj. EBITDA Reconciliation ($ in 000’s) FY 21A FY 22A FY 23A LTM 6/30/2024 Net Income $20,177 $21,376 $49,001 $70,540 Interest expense, net 2,404 7,701 17,346 16,532 Provision for income taxes 8,349 6,915 16,403 23,155 Depreciation, depletion, accretion and 49,806 65,730 79,100 88,799
Slide 50: LSP Historical Reported EBITDA Reconciliation
LSP Historical Reported EBITDA Reconciliation ($ in 000’s) FY 21A FY 22A FY 23A LTM 6/30/2024 Net Income $26,666 $18,121 $60,847 $82,902 Interest expense, net 2,059 2,846 4,676 6,464 Provision for income taxes 228 315 668 861 Depreciation and amortization 12,998 14,770 20,291 22,174 Reported EBITDA
Slide 51: CPI Historical Free Cash Flow Reconciliation
CPI Historical Free Cash Flow Reconciliation ($ in 000’s) FY 21A FY 22A FY 23A LTM 6/30/2024 Adjusted EBITDA $88,647 $109,722 $172,609 $212,514 Maintenance Capex (3.25% of Revenue) (29,599) (42,304) (50,815) (57,224) (2,404) (7,701) (17,346) (16,532) Interest Taxes (8,349) (6,915) (16,403) (23,155)
Slide 52: LSP Historical Free Cash Flow Reconciliation
LSP Historical Free Cash Flow Reconciliation ($ in 000’s) FY 21A FY 22A FY 23A LTM 6/30/2024 Reported EBITDA $41,951 $36,052 $86,482 $112,401 (8,543) (10,644) (13,341) (15,139) Maintenance Capex (3.25% of Revenue) (2,059) (2,846) (4,676) (6,464) Interest Taxes (228) (315) (668) (861) Retained Cash F
Slide 53: Combined LTM EBITDA Reconciliation
Combined LTM EBITDA Reconciliation ($ in 000’s) CPI – LTM 6/30/2024 LSP – LTM 6/30/2024 Combined – LTM 6/30/2024 Net Income $70,540 $82,902 $153,442 Interest expense, net 16,532 6,464 22,996 Provision for income taxes 23,155 861 24,016 Depreciation, depletion, accretion and amortization 88,799 22,17
Slide 54: Combined LTM Free Cash Flow Reconciliation
Combined LTM Free Cash Flow Reconciliation ($ in 000’s) CPI – LTM 6/30/2024 LSP – LTM 6/30/2024 Combined – LTM 6/30/2024 CPI Adjusted EBITDA / LSP Reported EBITDA $212,514 $112,401 $324,915 (15,139) (72,363) Maintenance Capex (3.25% of Revenue) (57,224) (16,532) (6,464) (22,996) Interest Taxes (23,1
Slide 55: CPI Adj. EBITDA Guidance Reconciliation
CPI Adj. EBITDA Guidance Reconciliation FY 24 Guidance FY 25 Guidance ($ in 000’s) Low High Low High Net Income $68,000 $70,000 $90,363 $105,636 Interest expense, net 18,750 18,900 65,000 65,000 Provision for income taxes 22,850 23,000 30,137 35,864 Depreciation, depletion, accretion and 93,000 93,1
Slide 56: Pro Forma Corporate Structure at Closing
Pro Forma Corporate Structure at Closing Construction Partners, Inc. (DE) Construction Wiregrass C.W. Roberts Asphalt Inc., LLC Construction King Asphalt, Inc. The Scruggs Partners Risk Construction Contracting, FSC II, LLC (NC) d/b/a Lone Star Partners Risk (SC) Company (GA) Management, Inc. Compan
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