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Item 7. Management’s Discussion and Analysis

2024-11-25 compared with 2023-11-29 · 96 added, 64 removed, 284 unchanged (36% of the section changed)

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Our operations leverage a highly-skilled workforce, strategically located HMA plants, substantial construction assets and select material deposits.

We provide construction products and services to both public and private infrastructure projects, with an emphasis on highways, roads, bridges, airports and commercial and residential sites in the southeastern United States.

Our public projects are funded by federal, state and local governments and include roads, highways, bridges, airports and other forms of infrastructure.

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In addition to public infrastructure projects, we provide a wide range of large site work construction and HMA paving services to private construction customers, including commercial and residential developers and local businesses.

Fiscal 2023 Developments

Recent Developments

Contract Backlog

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Low bid/no contract backlog was $0.5 billion at September 30, 2024.

Business Acquisitions

During the 2023 fiscal year, we completed five acquisitions across four states, adding to or expanding our operations in Alabama, North Carolina, South Carolina and Tennessee.

As a result of these acquisitions, we added eight asphalt plants and a diverse fleet of equipment and vehicles, as well as skilled construction professionals.

2024 Fiscal Year Business Acquisitions

During the 2024 fiscal year, we completed eight acquisitions across four states, adding to or expanding our operations in Alabama, Georgia, North Carolina and South Carolina.

As a result of these acquisitions, we added eleven asphalt plants and a diverse fleet of equipment and vehicles, as well as skilled construction professionals.

For further discussion regarding these transactions, see Note 4 - Business Acquisitions to the consolidated financial statements included elsewhere in this report.

Inflationary and Supply Chain Trends

During the fiscal year ended September 30, 2023, we continued to experience an upward trend in certain inflation-sensitive inputs for our products and services, including upward pressure on wages and increases in the cost of raw materials used to produce HMA, such as liquid asphalt and aggregate materials.

We also experienced some disruptions from subcontractors, materials suppliers, equipment manufacturers and others in our supply chain, although to a lesser extent than in recent years.

We have been able to mitigate some of the effects of inflation, supply chain disruptions and labor constraints on our business by increasing prices for our products and including the anticipated cost increases in the construction projects we bid.

However, we are limited in our ability to pass through increased costs for projects already in our backlog and, under those circumstances, may be unable to recoup losses or diminished profit margins by passing these costs through to our customers.

Lone Star Paving Acquisition

On November 1, 2024, we acquired all of the outstanding membership units of Asphalt, Inc., LLC (doing business as Lone Star Paving) (“Lone Star Paving” and the acquisition, the “Lone Star Acquisition”), a vertically integrated asphalt manufacturing and paving company headquartered in Austin, Texas, with 10 HMA plants, four aggregate facilities, and one liquid asphalt terminal supporting its operations.

The aggregate consideration delivered at the closing of the Lone Star Acquisition consisted of (i) $654.2 million in cash (as adjusted pursuant to the Unit Purchase Agreement, dated as of October 20, 2024, by and among the Company, Lone Star Paving, the selling unit holders party thereto, and John J.

Wheeler, in his capacity as the selling unit holders’ representative thereunder) and (ii) 3.0 million shares of our Class A common stock.

In addition, we agreed to (i) pay cash to the selling unit holders in

an amount equal to the working capital remaining in Lone Star Paving at closing, as finally determined (subject to adjustments and offsets to satisfy certain indemnification obligations and any purchase price overpayments), to be paid out in quarterly installments over four quarters following the closing, and (ii) purchase from the selling unit holders for $30.0 million in cash an entity that owns certain real property following receipt of specified operational entitlements by such entity.

The cash paid at closing was funded from the proceeds of the Term Loan B (as defined below).

For more information about the Lone Star Acquisition, see Note 27 - Subsequent Events to the consolidated financial statements included elsewhere in this report.

Term Loan B Credit Agreement

On November 1, 2024, we entered into a Term Loan Credit Agreement with Bank of America, N.A., as administrative agent, BofA Securities, Inc., PNC Capital Markets LLC, Regions Capital Markets, a division of Regions Bank, and TD Securities (USA) LLC, each as joint lead arranger and joint bookrunner, and certain other lenders party thereto (the “Term Loan B Credit Agreement”).

The Term Loan B Credit Agreement provides for a senior secured first lien term loan facility in the aggregate principal amount of $850.0 million, which amount was fully drawn on November 1, 2024 (the “Term Loan B”).

A portion of the proceeds of the Term Loan B was used to finance the cash portion of the consideration for the Lone Star Acquisition, including the repayment of certain outstanding indebtedness of Lone Star Paving and its subsidiaries at closing.

The remaining loan proceeds were or will be used (i) to repay the Company’s outstanding borrowings under the revolving credit facility provided by the Term Loan A / Revolver Credit Agreement (as defined below), (ii) to pay fees and expenses incurred in connection with the foregoing debt financing transactions and Lone Star Acquisition and (iii) for working capital and other corporate purposes as permitted by the Term Loan B Credit Agreement.

For more information about the Term Loan B Credit Agreement, see Note 27 - Subsequent Events to the consolidated financial statements included elsewhere in this report.

Credit Agreement Amendments

In May 2024, we and certain of our wholly owned subsidiaries entered into a Third Amendment to our Third Amended and Restated Credit Agreement (as amended from time to time, the “Term Loan A / Revolver Credit Agreement”) to, among other things, (i) increase the aggregate commitments under the revolving credit facility from $325.0 million to $400.0 million, (ii) reallocate $125.0 million of borrowings previously outstanding under the revolving credit facility to our term loan, (iii) add three new banks to our lender syndicate, (iv) provide for an additional incremental credit facility of up to $200.0 million and (v) update certain affirmative and negative covenants thereunder.

Additionally, on October 30, 2024, we entered into a Fourth Amendment to the Term Loan A / Revolver Credit Agreement to, among other things, permit (i) the Lone Star Acquisition, (ii) entry into the Term Loan B Credit Agreement, and (iii) certain liens to be granted to secure the indebtedness incurred under the Term Loan B Credit Agreement on a pari passu basis with the liens securing the Company’s obligations under the Term Loan A / Revolver Credit Agreement.

For further discussion regarding the Term Loan A / Revolver Credit Agreement and the foregoing amendments, see Note 11 - Debt and Note 27 - Subsequent Events to the consolidated financial statements included elsewhere in this report.

Stock Repurchase Program

In April 2024, our board of directors authorized a stock repurchase program under which up to $40 million is available to purchase shares of our outstanding Class A common stock through September 30, 2025.

We utilize the stock repurchase program to minimize the dilutive impact of awards granted under our equity incentive plans and to repurchase shares opportunistically.

Shares of our Class A common stock may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws, including Rule 10b5-1 plans.

The stock repurchase program does not obligate us to repurchase any shares of Class A common stock, and the stock repurchase program may be modified, suspended, extended or terminated at any time by our board of directors.

The actual timing, number and value of shares of Class A common stock repurchased are determined by a committee of the board of directors at its discretion and depend on a number of factors, including the market price of our Class A common stock, capital allocation alternatives, general market and economic conditions and other corporate considerations.

During fiscal 2024, we repurchased a total of 173,741 shares of Class A common stock for an aggregate purchase price of $10.0 million.

The activity of our business fluctuates due to seasonality because our business is primarily conducted outdoors.

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Other Key Performance Indicators — Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA represents net income before, as applicable from time to time, (i) interest expense, net, (ii) provision (benefit) for income taxes, (iii) depreciation, depletion, accretion and amortization, (iv) equity-based compensation expense, (v) loss on the extinguishment of debt, and (vi) certain management fees and expenses.

Periods commencing subsequent to September 30, 2023 will not include an adjustment for management fees and expenses, which have historically related to our management services agreement with an affiliate of SunTx.

Effective October 1, 2023, the term of the management services agreement was extended to October 1, 2028.

As a result of the term extension, we no longer view the management fees and expenses paid under the management services agreement as a non-recurring expense.

Adjusted EBITDA represents net income before, as applicable from time to time, (i) interest expense, net, (ii) provision (benefit) for income taxes, (iii) depreciation, depletion, accretion and amortization, (iv) share-based compensation expense, (v) loss on the extinguishment of debt, and (vi) expenses associated with non-routine acquisitions.

Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenues for each period.

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Ended September 30,

2024 2023 (2)

Net income $ 68,935 $ 49,001

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Depreciation, depletion, accretion and amortization 92,920 79,100

Equity-based compensation expense 10,759 8,000

Management fees and expenses (1)

Share-based compensation expense 15,031 10,759

Acquisition-related expenses (1)

Adjusted EBITDA $ 220,573 $ 172,609

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Adjusted EBITDA Margin 12.1 % 11.0 %

(1) Reflects fees and reimbursement of certain out-of-pocket expenses under a management services agreement with SunTx (see Note 17 - Related Parties to the consolidated financial statements included elsewhere in this report).

(1) Reflects expenses associated with the Lone Star Acquisition, which management views as a non-routine acquisition.

(2) In periods commencing prior to September 30, 2023, we historically included within the definition of Adjusted EBITDA an adjustment for management fees and expenses related to our management services agreement with an affiliate of SunTx Capital Partners, a member of our control group.

Effective October 1, 2023, the term of the management services agreement was extended to October 1, 2028.

As a result of the term extension, we no longer view the management fees and expenses paid under the management services agreement as a non-recurring expense.

Accordingly, periods commencing subsequent to September 30, 2023 do not include an adjustment for management fees and expenses, and we have recast comparative Adjusted EBITDA and Adjusted EBITDA Margin for the fiscal year ended September 30, 2023 to conform to the current definition.

Results of Operations — Fiscal Year Ended September 30, 2024 Compared to Fiscal Year Ended September 30, 2023

The following table sets forth selected financial data for the fiscal years ended September 30, 2024 (“fiscal 2024”) and September 30, 2023 (“fiscal 2023”) (in thousands, except percentages).

Refer to the Annual Report on Form 10-K for the fiscal year ended September 30, 2022, filed with the SEC on November 22, 2022, for a discussion of results for the fiscal year ended September 30, 2021 (“fiscal 2021”) and a comparison of our financial results for fiscal 2022 to those for fiscal 2021.

Refer to the Annual Report on Form 10-K for the fiscal year ended September 30, 2023, filed with the SEC on November 29, 2023, for a discussion of results for fiscal 2023 and a comparison of our financial results for fiscal 2023 to those for the fiscal year ended September 30, 2022.

For the Fiscal Year Ended September 30, Change from Fiscal

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Interest expense, net (19,071) (1.0) % (17,346) (1.1) % (1,725) 9.9 %

Other income 875 — % 600 0.1 % 275 45.8 %

Other (expense) income (70) — % 875 — % (945) (108.0) %

Income before provision for income taxes and earnings from investment in joint venture 92,099 5.1 % 65,404 4.2 % 26,695 40.8 %

Provision for income taxes 23,161 1.3 % 16,403 1.0 % 6,758 41.2 %

Earnings (loss) from investment in

Loss from investment in

joint venture (3) — % — — % (3) — %

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Revenues for fiscal 2024 increased $260.3 million, or 16.7%, to $1.8 billion from $1.6 billion for fiscal 2023.

The increase included $148.5 million of revenues attributable to acquisitions completed during or subsequent to fiscal 2022 and an increase of approximately $113.4 million of revenues in our remaining markets from contract work and sales of HMA and aggregates to third parties.

The increase included $154.0 million of revenues attributable to acquisitions completed during or subsequent to fiscal 2023 and an increase of approximately $106.3 million of revenues in our existing markets from contract work and sales of HMA and aggregates to third parties.

The 6.8% increase in revenue in our existing markets was due to strong demand in both public and private work.

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General and administrative expenses for fiscal 2024 increased $24.6 million, or 19.3%, to $151.5 million from $126.9 million for fiscal 2023.

The increase in general and administrative expenses for fiscal 2023 compared to fiscal 2022 was the result of (i) a $7.7 million increase attributable to general and administrative expenses associated with the operations of businesses acquired subsequent to September 30, 2022, (ii) a $6.4 million increase in management personnel payroll and benefits, (iii) a $2.8 million increase in equity-based compensation expense, and (iv) a $2.5 million increase in other general and administrative expenses.

The increase in general and administrative expenses for fiscal 2024 compared to fiscal 2023 was the result of (i) an $8.1 million increase attributable to general and administrative expenses associated with the operations of businesses acquired subsequent to September 30, 2023, (ii) a $6.6 million increase in management personnel payroll and benefits, (iii) a $4.3 million increase in share-based compensation expense, and (iv) a $5.6 million increase in other general and administrative expenses.

Gain on Sale of Property, Plant and Equipment .

Gain on sale of property, plant and equipment for fiscal 2023 increased $3.4 million, or 91.9%, to $7.0 million from $3.7 million for fiscal 2022.

The increase was primarily the result of a $1.3 million gain on the sale of an excess office building and higher disposals of equipment and components during fiscal 2023.

Gain on sale of property, plant and equipment for fiscal 2024 decreased $2.6 million, or 36.4%, to $4.5 million from $7.0 million for fiscal 2023.

The decrease was primarily the result of a $1.3 million gain on the sale of an excess office building and higher disposals of equipment and components during fiscal 2023.

Gain on Facility Exchange .

Gain on facility exchange for fiscal 2023 was $5.4 million compared to $0.0 million for fiscal 2022.

The gain was the result of the disposition of a quarry in North Carolina.

In connection with this transaction, we acquired three HMA manufacturing plants and certain related assets located in the Nashville, Tennessee metro area.

There was no gain on facility exchange for fiscal 2024 compared to a gain on facility exchange of $5.4 million for fiscal 2023.

The gain in fiscal 2023 was the result of the disposition of a quarry in North Carolina.

In connection with

this transaction, we acquired three HMA manufacturing plants and certain related assets located in the Nashville, Tennessee metro area.

Interest Expense, Net.

Interest expense, net for fiscal 2024 increased $1.7 million, or 9.9%, to $19.1 million compared to $17.3 million for fiscal 2023.

The increase in interest expense, net was primarily due to an increase in the average principal debt balance outstanding and higher interest rates during fiscal 2023 compared to fiscal 2022.

The increase in interest expense, net was primarily due to an increase in the average principal debt balance outstanding.

Provision for Income Taxes.

Our effective tax rate increased to 25.1% for fiscal 2023, from 24.4% for fiscal 2022.

Our higher effective tax rate for fiscal 2023 was due to differences in state tax rates at our operating subsidiaries.

Our effective tax rate was 25.1% for fiscal 2024 and fiscal 2023.

Net income increased $19.9 million, or 40.7%, to $68.9 million for fiscal 2024 compared to $49.0 million for fiscal 2023.

The increase in net income was primarily a result of higher gross profit, gain on sale of property, plant and equipment and gain on facility exchange, partially offset by an increase in general and administrative expenses and interest expense, net, all as described above.

The increase in net income was primarily a result of higher gross profit, partially offset by an increase in general and administrative expenses and interest expense and decreased gains from the facility exchange and sales of property, plant and equipment, all as described above.

Adjusted EBITDA and Adjusted EBITDA Margin.

Adjusted EBITDA and Adjusted EBITDA Margin were $220.6 million and 12.1%, respectively, for fiscal 2024, compared to $172.6 million and 11.0%, respectively, for fiscal 2023.

The increase in Adjusted EBITDA and Adjusted EBITDA Margin resulted from an increase in gross profit, gain on sale of property, plant and equipment and gain on facility exchange, partially offset by higher general and administrative expenses, all as described above.

For a description of Adjusted EBITDA and Adjusted EBITDA Margin, as well as a reconciliation of Adjusted EBITDA to net income, see “How We Assess Performance of Our Business.”

The increase in Adjusted EBITDA and Adjusted EBITDA Margin resulted primarily from a $19.9 million increase in net income and a $13.8 million increase in depreciation, depletion, accretion and amortization.

For a description of Adjusted EBITDA and Adjusted EBITDA Margin, as well as a reconciliation of Adjusted EBITDA to net income, see above under the heading “How We Assess Performance of Our Business — Other Key Performance Indicators — Adjusted EBITDA and Adjusted EBITDA Margin.”

Liquidity and Capital Resources

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During fiscal 2024, cash provided by operating activities, net of acquisitions, was $209.1 million, primarily as a result of:

• net income of $49.0 million, reflecting $79.1 million of depreciation, depletion, accretion and amortization, deferred income taxes of $11.2 million, equity-based compensation expense of $10.8 million, gain on sale of property, plant and equipment of $7.0 million, gain on facility exchange of $5.4 million;

• net income of $68.9 million, reflecting, among other things, $92.9 million of depreciation, depletion, accretion and amortization, deferred income taxes of $22.7 million, share-based compensation expense of $14.4 million, and gain on sale of property, plant and equipment of $4.5 million;

• an increase in contracts receivable including retainage of $6.6 million as a result of higher overall revenues due to acquisitions and growth in existing markets;

• an increase in inventories of $15.5 million due to increased inventories from acquisitions, growth in existing markets, higher inventory costs and normal fluctuations in our inventory cycle;

• a decrease in prepaid expenses and other current assets of $3.7 million, primarily due to the timing of payments under our insurance policies and other expenses;

• an increase in prepaid expenses and other current assets of $13.0 million, primarily due to the timing of payments under our insurance policies and other expenses;

• an increase in accounts payable and accrued expenses and other current liabilities of $18.3 million due to an increase in construction activity;

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During fiscal 2023, cash provided by operating activities, net of acquisitions, was $157.2 million, primarily as a result of:

• net income of $21.4 million, reflecting $65.7 million of depreciation, depletion, accretion and amortization, equity-based compensation expense of $8.0 million and unrealized gains on derivative instruments of $0.4 million;

• an increase in contracts receivable including retainage, net of $97.1 million as a result of higher overall revenues due to acquisitions and growth in existing markets;

• net income of $49.0 million, reflecting, among other things, $79.1 million of depreciation, depletion, accretion and amortization, deferred income taxes of $11.2 million, share-based compensation expense of $10.8 million, gain on sale of property, plant and equipment of $7.0 million, and gain on facility exchange of $5.4 million;

• an increase in contracts receivable including retainage of $26.0 million as a result of higher overall revenues due to acquisitions and growth in existing markets;

• an increase in inventories of $7.3 million due to increased inventories from acquisitions, growth in existing markets, higher inventory costs and normal fluctuations in our inventory cycle;

• an increase in prepaid expenses and other current assets of $4.9 million primarily due to the timing of deposits for federal and state income taxes and timing of payments under our insurance policies and other expenses;

• a decrease in prepaid expenses and other current assets of $3.7 million, primarily due to the timing of payments under our insurance policies and other expenses;

• an increase in accounts payable and accrued expenses and other current liabilities of $19.6 million due to an increase in construction activity;

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During fiscal 2024, cash used in investing activities was $307.6 million, of which $231.8 million related to acquisitions completed in the period, $87.9 million was invested in property, plant and equipment and $5.5 million was invested in restricted investments.

These amounts were partially offset by $14.1 million of proceeds from the sale of equipment and $3.6 million of proceeds from the sale of restricted investments.

During fiscal 2023, cash used in investing activities was $143.4 million, of which $91.8 million related to acquisitions completed in the period, $97.8 million was invested in property, plant and equipment and $11.4 million was invested in restricted investments.

These amounts were partially offset by $17.7 million of proceeds from the sale of equipment, $37.0 million of proceeds from the facility exchange and $2.9 million of proceeds from the sale of restricted investments.

During fiscal 2022, cash used in investing activities was $197.3 million, of which $128.6 million related to acquisitions completed in the period and $68.9 million was invested in property, plant and equipment.

These amounts were partially offset by $7.5 million of proceeds from the sale of equipment.

Financing Activities

During fiscal 2023, cash used in financing activities was $0.3 million.

We received $103.0 million in proceeds from the issuance of long-term debt, net of debt issuance costs and discounts, which was offset by $103.1 million of principal payments on long-term debt and purchase of treasury stock of $0.2 million.

During fiscal 2024, cash provided by financing activities was $126.1 million.

We received $167.3 million in proceeds on long-term debt, net of debt issuance costs and discounts, which was partially offset by $8.1 million of principal payments on long-term debt.

Credit Agreement

We and each of our subsidiaries are parties to the Credit Agreement, which provides for the Term Loans and the Revolving Credit Facility.

At September 30, 2023 and 2022, we had $283.8 million and $271.9 million, respectively, of principal outstanding under the Term Loans, $93.1 million and $105.1 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $221.1 million and $208.6 million, respectively, under the Revolving Credit Facility, including reduction for outstanding letters of credit.

The obligations of our subsidiaries under the Term Loans and the Revolving Credit Facility are secured by a first priority security interest in substantially all of our assets.

The Credit Agreement requires us to satisfy certain financial covenants, including a minimum fixed charge coverage ratio of 1.20-to-1.00 and a maximum consolidated leverage ratio of 3.50-to-1.00, subject to certain adjustments.

We received $210.2 million in proceeds from the issuance of long-term debt, net of debt issuance costs and discounts, which was partially offset by $72.8 million of principal payments on long-term debt and purchase of treasury stock of $11.3 million.

During fiscal 2023, cash used in financing activities was $0.3 million.

Term Loan A / Revolver Credit Agreement

During fiscal 2024 and fiscal 2023, we and each of our subsidiaries were parties to the Term Loan A / Revolver Credit Agreement, which provides for the Term Loan A and the Revolving Credit Facility.

At September 30, 2024 and 2023, we had $392.2 million and $283.8 million, respectively, of principal outstanding under the Term Loan A, $122.9 million and $93.1 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $268.8 million and $222.1 million, respectively, under the Revolving Credit Facility, including reduction for outstanding letters of credit.

The obligations of our subsidiaries under the Term Loan A and the Revolving Credit Facility are secured by a first priority security interest in substantially all of our assets.

The Term Loan A / Revolver Credit Agreement requires us to satisfy certain financial covenants, including a minimum fixed charge coverage ratio of 1.20-to-1.00 and a maximum consolidated leverage ratio of 3.50-to-1.00, subject to certain adjustments.

At September 30, 2024 and 2023, our fixed charge coverage ratio was 3.15-to-1.00 and 2.56-to-1.00, respectively, and our consolidated leverage ratio was 1.81-to-1.00 and 1.72-to-1.00, respectively.

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At September 30, 2024 and 2023, the aggregate notional value of these interest rate swap agreements was $300.0 million, and the fair value was $11.6 million and $26.9 million, respectively, which is included within other assets on our Consolidated Balance Sheets.

For more information about the Credit Agreement, see Note 11 - Debt to the consolidated financial statements included elsewhere in this report.

For more information about the Term Loan A / Revolver Credit Agreement, see Note 11 - Debt and Note 27 - Subsequent Events to the consolidated financial statements included elsewhere in this report.

Term Loan B Credit Agreement

On November 1, 2024, we entered into the Term Loan B Credit Agreement, which provides for a senior secured first lien term loan facility in the aggregate principal amount of $850.0 million, which amount was fully drawn on November 1, 2024.

A portion of the proceeds of the Term B Loan was used to finance the cash portion of the consideration for the Lone Star Acquisition, including the repayment of certain outstanding indebtedness of Lone Star Paving and its subsidiaries at closing.

The remaining loan proceeds were or will be used (i) to repay a portion of our outstanding borrowings under the revolving credit facility provided by the Term Loan A / Revolver Credit Agreement, (ii) to pay fees and expenses incurred in connection with the foregoing debt financing transactions and Lone Star Acquisition and (iii) for working capital and other corporate purposes as permitted by the Term Loan B Credit Agreement.

For more information about the Term Loan B Credit Agreement, see Note 27 - Subsequent Events to the consolidated financial statements included elsewhere in this report.

Capital Requirements and Sources of Liquidity

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Additional cash requirements resulting from our growth include the costs of additional personnel, production and distribution facilities, enhancements to our information systems, integration costs related to any acquisitions and our compliance with laws and rules applicable to public companies.

We have historically relied on cash available through credit facilities, in addition to cash from operations, to finance our working capital requirements and to support our growth.

Furthermore, on April 12, 2024, we announced that our board of directors authorized a stock repurchase program under which up to $40.0 million is available to purchase shares of our outstanding Class A common stock through September 30, 2025.

We intend to utilize the stock repurchase program to minimize the dilutive impact of awards granted under our equity incentive plans and to repurchase shares opportunistically.

Shares of Class A common stock may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws, including Rule 10b5-1 plans.

The actual timing, number and value of shares of Class A common stock repurchased will be determined by a committee of the board of directors at its discretion and will depend on a number of factors, including the market price of the Class A common stock, capital allocation alternatives, general market and economic conditions and other corporate considerations.

During fiscal 2024, we repurchased a total of 173,741 shares of Class A common stock for an aggregate purchase price of $10.0 million.

We have typically relied on cash available through credit facilities, in addition to cash from operations, to finance our working capital requirements and to support our growth.

We regularly monitor potential capital sources, including equity and debt markets, in an effort to meet our planned capital expenditures and liquidity requirements.

Our future success will depend on our ability to access outside sources of capital.

We believe that our operating cash flow and available borrowings under the Credit Agreement will be sufficient to fund our operations and planned capital expenditures for at least the next 12 months.

We believe that our operating cash flow and available borrowings under the Term Loan A / Revolver Credit Agreement and the Term Loan B Credit Agreement (together, the “Credit Agreements”) will be sufficient to fund our operations and planned capital expenditures for at least the next 12 months.

However, future cash flows are subject to a number of variables, including the potential impacts of inflation and supply chain constraints, and significant additional capital expenditures will be required to conduct our operations.

There can be no assurance that operations and other capital resources will provide sufficient cash to maintain planned or future levels of capital expenditures.

Our operations and other capital resources may not provide sufficient cash to maintain planned or future levels of capital expenditures.

In the event that we make one or more acquisitions and the amount of capital required is greater than the amount of cash on hand we have available for acquisitions at that time, we could be required to reduce the expected level of capital expenditures and/or seek additional capital.

If we seek additional capital, we may do so through borrowings under the Credit Agreement, joint ventures, asset sales, offerings of debt or equity securities or other means.

If we seek additional capital, we may do so through borrowings under the Credit Agreements, joint ventures, asset sales, offerings of debt or equity securities or other means.

However, our ability to engage in any such transactions may be constrained by economic conditions and other factors outside of our control.

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Total $ 569,107 $ 41,079 $ 44,033 $ 466,734 $ 6,331 $ 2,511 $ 8,419

In addition to the items set forth in the table above, subsequent to September 30, 2024 and in connection with the Lone Star Acquisition, we entered into a conditional purchase agreement pursuant to which we agreed to purchase from the sellers of Lone Star Paving, upon the receipt of certain permits and governmental entitlements, an entity that owns certain real property located in central Texas for aggregate consideration of $30.0 million.

Critical Accounting Policies and Estimates

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These critical accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.

Estimates made in accordance with U.S.

GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition are discussed further below.

Estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition are discussed further below.

Revenue Recognition

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Costs associated with claims are included in the estimated costs to complete the contracts and are treated as project costs when incurred.

For the majority of our contracts, upon completion and final acceptance of the services that we were contracted to perform, we receive our final payment upon completion of the necessary contract closing documents, and our obligations to the owner are complete at that

For the majority of our contracts, we receive our final payment when projects are near completion or fully completed.

The accuracy of our revenues and profit recognition in a given period depends on the accuracy of our estimates of the revenues and costs to finish uncompleted contracts.

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Many of the contracts under which we perform work contain retainage provisions.

Retainage refers to amounts that we have billed to the customer and the Company has an unconditional right to payment, but are being held for payment by the customer pending satisfactory completion of the project.

Retainage refers to amounts earned by the Company but held by customers until contracts are near completion or fully completed.

Retainage on active contracts is classified as a current asset regardless of the term of the contract and is generally collected within one year of the completion of a contract.

At September 30, 2023 and 2022, contracts receivable included $53.3 million and $44.3 million, respectively, of retainage, which was being contractually withheld by customers until satisfactory completion of the associated contracts.

At September 30, 2024 and 2023, contracts receivable included $52.7 million and $53.3 million, respectively, of retainage.

Because the majority of our construction contracts are entered into with federal, state or municipal government customers, credit risk is minimal.

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While most of our public contracts are subject to termination at the election of the government entity, in the event of any such termination, we are entitled to receive the contract price for completed work and reimbursement of termination-related costs.

Credit risk with private owners is minimized because of statutory mechanic’s liens, which give us high priority in the event of lien foreclosures following financial difficulties of private owners.

We maintain an allowance for doubtful accounts, which has historically been sufficient to cover accounts that are not collected.

Credit risk with private customers is minimized because of statutory mechanic’s liens, which give us high priority in the event of lien foreclosures following financial difficulties of private customers.

We maintain an allowance for credit losses, which has historically been sufficient to cover accounts that are not collected.

Valuation of Long-Lived Assets and Goodwill

10 unchanged sentences

Our market capitalization could be impacted because we are a controlled company, which impacts the control premium we apply to the market price of our common stock.

One of the largest uncertainties relates to federal, state and local government spending, which management expects to increase in the upcoming years.

One of the largest uncertainties relates to federal, state and local government spending, which management expects to continue to increase in the coming years.

There are a number of other uncertainties with respect to our future financial performance that could impact estimated future cash flows, including those discussed under the heading “Risk Factors” elsewhere in this report.

19 unchanged sentences

We carry insurance policies to cover various risks, primarily including general liability, automobile liability and workers’ compensation, under which we are liable to reimburse the insurance company for a portion of each claim paid.

Since October 1, 2021, the Captive has retained the first $1,000,000 per claim liability for each claim paid.

Since October 1, 2021, Construction Partners Risk Management, Inc., a captive insurance company and wholly owned subsidiary of the Company, has retained the first $1,000,000 per claim liability for each claim paid.

Also effective October 1, 2021, we became a member of a group captive insurance company that retains the next $550,000 per claim liability for each claim paid.

We utilize various

primary and excess insurance companies to cover the liability for claims in excess of the retained amounts.

We utilize various primary and excess insurance companies to cover the liability for claims in excess of the retained amounts.

Changes in loss assumptions caused by changes in actual experience would affect the assessment of the ultimate liability and could have an effect on our operating results and financial position up to $1,000,000 per occurrence for general liability, automobile liability and workers’ compensation claims.

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis