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Item 2. Management’s Discussion and Analysis

2025-02-07 compared with 2024-08-09 · 103 added, 144 removed, 131 unchanged (65% of the section changed)

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In this discussion, we use certain non-GAAP financial measures.

Investors should not consider non-GAAP financial measures in isolation or as substitutes for financial information presented in compliance with GAAP.

Explanations of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures are included in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Investors should not consider non-GAAP financial measures in isolation or as substitutes for financial information presented in compliance with GAAP.

We are a civil infrastructure company that specializes in the building and maintenance of transportation networks.

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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Contract Backlog

At June 30, 2024, our contract backlog was $1.9 billion.

At December 31, 2024, our contract backlog was $2.66 billion.

Contract backlog is a financial measure that reflects the dollar value of work that the Company expects to perform in the future.

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For uncompleted work on contracts in progress, we include (i) executed change orders, (ii) pending change orders for which we expect to receive confirmation in the ordinary course of business and (iii) claims that we have made against our customers for which we have determined we have a legal basis under existing contractual arrangements and as to which we consider collection to be probable.

Backlog of uncompleted work on contracts under which work was either in progress or had not yet begun was $1.5 billion at June 30, 2024.

Backlog of uncompleted work on contracts under which work was either in progress or had not yet begun was $2.1 billion at December 31, 2024.

Our contract backlog also includes low bid/no contract projects, which consist of (i) public bid projects for which we were the low bidder and no contract has been executed and (ii) private work projects for which we have been notified that we are the low bidder or have been given a notice to proceed, but no contract has been executed.

Low bid/no contract backlog was $0.4 billion at June 30, 2024.

Low bid/no contract backlog was $0.6 billion at December 31, 2024.

Recent Developments

Business Acquisitions

During the three months ended June 30, 2024, we completed two acquisitions, expanding our operations in Georgia and North Carolina.

As a result of these acquisitions, we added two asphalt plants, a greenfield asphalt plant site, 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 unaudited consolidated financial statements included elsewhere in this report.

Stock Repurchase Plan

On April 12, 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 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 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 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 our Class A common stock, capital allocation alternatives, general market and economic conditions and other corporate considerations.

During the three months ended December 31, 2024, we acquired Lone Star Paving, establishing our first platform company in Texas.

As a result of this acquisition, we added 10 HMA plants, four aggregate facilities, and one liquid asphalt terminal.

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

On January 2, 2025, we acquired all of the outstanding capital stock of Overland Corporation, establishing our first platform company in Oklahoma.

As a result of this acquisition, we added eight HMA plants in southern and western Oklahoma.

Overland Corporation also provides paving services in northern Texas.

For further discussion regarding this transaction, see Note 20 - Subsequent Events to the unaudited consolidated financial statements included elsewhere in this report.

On February 3, 2025, we acquired substantially all of the assets of Mobile Asphalt Company LLC, an HMA manufacturing and paving company headquartered in Theodore, Alabama.

As a result of this acquisition, we added five HMA plants and expanded our operations in the greater Mobile and southwestern Alabama market areas.

For further discussion regarding this transaction, see Note 20 - Subsequent Events to the unaudited 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.

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.

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 used to repay the Company’s outstanding borrowings under the Revolving Credit Facility provided by the Term Loan A / Revolver Credit Agreement and to pay fees and expenses incurred in connection with the Lone Star Acquisition and related debt financing transaction.

For more information about the Term Loan B Credit Agreement, see Note 8 - Debt to the consolidated financial statements included elsewhere in this report.

How We Assess Performance of Our Business

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These expenses consist primarily of salaries and personnel costs for our administration, finance and accounting, legal, information systems, human resources and certain managerial employees.

General and administrative expenses also include acquisition expenses, audit, consulting and professional fees, share-based compensation expense, travel, insurance, office space rental costs, property taxes and other corporate and overhead expenses.

General and administrative expenses also include audit, consulting and professional fees, share-based compensation expense, travel, insurance, office space rental costs, property taxes and other corporate and overhead expenses.

Acquisition-Related Expenses

Acquisition-related expenses include costs incurred in connection with our business acquisitions.

These expenses typically include legal, accounting, tax, other professional costs and employee transaction bonuses.

Gain on Sale of Property, Plant and Equipment

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The gain or loss on the sale of property, plant and equipment reflects the difference between the carrying value at the date of disposal and the net consideration received from the sale during the period.

Gain on Facility Exchange

As part of our continued growth strategy, we may exchange or sell other facilities in order to generate capital for use in connection with other strategic initiatives.

The gain or loss on the exchange or sale of a facility reflects the difference between the net carrying value of the facility at the date of disposal and the consideration received from the exchange or sale during the period.

Interest Expense, Net

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These amounts are partially offset by interest income earned on short-term investments of cash balances in excess of our current operating needs.

Other Key Performance Indicators - Adjusted EBITDA and Adjusted EBITDA Margin

Other Key Performance Indicators - Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income

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) nonrecurring expenses related to transformative acquisitions, which management considers to include acquisitions requiring clearance under federal antitrust laws, such as the Lone Star Acquisition.

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

Adjusted net income represents net income before (i) nonrecurring expenses related to transformative acquisitions, which management considers to include acquisitions requiring clearance under federal antitrust laws, such as the Lone Star Acquisition, and (ii) nonrecurring fees associated with financing arrangements incurred in connection with transformative acquisitions, such as a bridge loan associated with the Lone Star Acquisition.

These metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP.

These measures have limitations as analytical tools and should not be considered in isolation or as an alternative to net income or any other performance measure derived in accordance with GAAP as an indicator of our operating performance.

We present Adjusted EBITDA and Adjusted EBITDA Margin because management uses these measures as key performance indicators, and we believe that securities analysts, investors and others use these measures to evaluate companies in our industry.

Our calculation of Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to similarly named measures reported by other companies.

We present Adjusted EBITDA, Adjusted EBITDA margin and Adjusted net income because management uses these measures as key performance indicators, and we believe that securities analysts, investors and others use these measures to evaluate companies in our industry.

Our calculation of Adjusted EBITDA, Adjusted EBITDA margin and Adjusted net income may not be comparable to similarly named measures reported by other companies.

Potential differences may include differences in capital structures, tax positions and the age and book depreciation of intangible and tangible assets.

The following table presents a reconciliation of net income, the most directly comparable measure calculated in accordance with GAAP, to Adjusted EBITDA and the calculation of Adjusted EBITDA Margin for the periods presented (unaudited, in thousands, except percentages):

For the Three Months Ended June 30, For the Nine Months Ended June 30,

2024 2023 (1)

Net income $ 30,908 $ 21,677 $ 39,627 $ 18,088

The following table presents a reconciliation of net income (loss), the most directly comparable measure calculated in accordance with GAAP, to Adjusted EBITDA and the calculation of Adjusted EBITDA margin for the periods presented (unaudited, in thousands, except percentages):

For the Three Months Ended December 31,

Net income (loss) $ (3,051) $ 9,843

Interest expense, net 18,130 3,746

Provision for income taxes 10,108 7,117 12,905 6,153

Provision (benefit) for income taxes (849) 3,118

Depreciation, depletion, accretion and amortization 31,184 21,121

Share-based compensation expense 4,920 3,046

Transformative acquisition expenses 18,463 —

Adjusted EBITDA $ 68,797 $ 40,874

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Adjusted EBITDA margin 12.3 % 10.3 %

(1) The Company has historically included within the definition of Adjusted EBITDA an adjustment for management fees and expenses related to the Company’s management services agreement with an affiliate of SunTx Capital Partners, a member of the Company’s 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, the Company no longer views 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 the Company has recast comparative Adjusted EBITDA and Adjusted EBITDA Margin for the three and nine months ended June 30, 2023 to conform to the current definition.

The following table presents a reconciliation of net income (loss), the most directly comparable measure calculated in accordance with GAAP, to adjusted net income for the periods presented (in thousands):

For the Three Months Ended December 31,

Net income (loss) $ (3,051) $ 9,843

Transformative acquisition expenses 18,463 —

Financing fees related to transformative acquisition 3,057 —

Tax impact due to above reconciling items (5,199) —

Adjusted net income $ 13,270 $ 9,843

Results of Operations

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

The following table sets forth selected financial data for the three months ended June 30, 2024 and 2023 (unaudited, in thousands, except percentages):

Three Months Ended December 31, 2024 Compared to Three Months Ended December 31, 2023

The following table sets forth selected financial data for the three months ended December 31, 2024 and 2023 (unaudited in thousands, except percentages):

Change From the Three Months Ended

For the Three Months Ended June 30, June 30, 2023

For the Three Months Ended December 31, December 31, 2023

to the Three Months Ended

2024 2023 June 30, 2024

Revenues Dollars % of

Revenues $ 517,794 100.0 % $ 421,893 100.0 % $ 95,901 22.7 %

Cost of revenues 434,302 83.9 % 357,821 84.8 % 76,481 21.4 %

Gross profit 83,492 16.1 % 64,072 15.2 % 19,420 30.3 %

General and administrative expenses (38,928) (7.5) % (32,231) (7.7) % (6,697) 20.8 %

Gain on sale of property, plant and equipment 1,093 0.2 % 1,499 0.4 % (406) (27.1) %

Operating income 45,657 8.8 % 33,340 7.9 % 12,317 36.9 %

Interest expense, net (4,673) (0.9) % (5,039) (1.2) % 366 (7.3) %

Other income 32 — % 493 0.1 % (461) (93.5) %

Income before provision for income taxes 41,016 7.9 % 28,794 6.8 % 12,222 42.4 %

Provision for income taxes 10,108 1.9 % 7,117 1.7 % 2,991 42.0 %

Net income $ 30,908 6.0 % $ 21,677 5.1 % $ 9,231 42.6 %

Adjusted EBITDA $ 73,235 14.1 % $ 56,106 13.3 % $ 17,129 30.5 %

Revenues for the three months ended June 30, 2024 increased $95.9 million, or 22.7%, to $517.8 million from $421.9 million for the three months ended June 30, 2023.

The increase included $40.9 million of revenues attributable to acquisitions subsequent to June 30, 2023, and an increase of approximately $55.0 million of revenues in our existing markets from contract work and sales of HMA and aggregates to third parties.

The 13.0% increase in revenue in our existing markets was due to strong demand in both public and private work.

Gross Profit.

Gross profit for the three months ended June 30, 2024 increased $19.4 million, or 30.3%, to $83.5 million from $64.1 million for the three months ended June 30, 2023.

The increase in gross profit was primarily the result of a 22.7% increase in revenues for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 and a higher gross profit margin.

The higher gross profit margin was due to efficient utilization of our plants and equipment fleet and completion of new backlog with more favorable margins.

General and Administrative Expenses.

General and administrative expenses for the three months ended June 30, 2024 increased $6.7 million, or 20.8%, to $38.9 million from $32.2 million for the three months ended June 30, 2023.

The increase was the result of (i) a $1.3 million increase in share-based compensation expense, (ii) a $2.6 million increase attributable to general and administrative expenses associated with the operations of businesses acquired subsequent to June 30, 2023, (iii) a $1.3 million increase in management personnel payroll and benefits, and (iv) a $1.5 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 the three months ended June 30, 2024 decreased $0.4 million, or 27.1%, to $1.1 million from $1.5 million for the three months ended June 30, 2023.

The decrease was attributable to lower disposals of equipment and components during the quarter.

Interest Expense, Net.

Interest expense, net for the three months ended June 30, 2024 decreased $0.3 million, or 7.3%, to $4.7 million compared to $5.0 million for the three months ended June 30, 2023.

The decrease in interest expense, net was primarily due to an increase in interest income from an overnight sweep program established in fiscal 2024.

This increase in interest income was primarily offset by an increase in interest expense due to an increase in the average principal debt balance outstanding during the three months ended June 30, 2024 compared to the corresponding period in 2023.

Provision for Income Taxes.

Our effective tax rate decreased to 24.6% for the three months ended June 30, 2024, from 24.7% for the three months ended June 30, 2023.

Our lower effective tax rate during the three months ended June 30, 2024 was due to differences in state tax rates at our operating subsidiaries.

Net income increased $9.2 million to $30.9 million for the three months ended June 30, 2024, compared to $21.7 million for the three months ended June 30, 2023.

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

Adjusted EBITDA and Adjusted EBITDA Margin.

Adjusted EBITDA and Adjusted EBITDA Margin were $73.2 million and 14.1%, respectively, for the three months ended June 30, 2024, compared to $56.1 million and 13.3%, respectively, for the three months ended June 30, 2023.

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

See the description of Adjusted EBITDA and Adjusted EBITDA Margin, as well as a reconciliation of Adjusted EBITDA to net income, under the heading “How We Assess Performance of Our Business”.

Nine Months Ended June 30, 2024 Compared to Nine Months Ended June 30, 2023

The following table sets forth selected financial data for the nine months ended June 30, 2024 and 2023 (unaudited, in thousands, except percentages):

Change From the Nine Months Ended

For the Nine Months Ended June 30, June 30, 2023

to the Nine Months Ended

2024 2023 June 30, 2024

2024 2023 December 31, 2024

Revenues Dollars % of

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General and administrative expenses (44,266) (7.9) % (35,454) (8.9) % (8,812) 24.9 %

Acquisition-related expenses (19,552) (3.5) % (527) (0.1) % (19,025) 3610.1 %

Gain on sale of property, plant and equipment 1,055 0.2 % 836 0.2 % 219 26.2 %

Gain on facility exchange — — % 5,389 0.5 % (5,389) (100.0) %

Operating income 13,808 2.5 % 16,735 4.2 % (2,927) (17.5) %

Interest expense, net (18,130) (3.2) % (3,746) (0.9) % (14,384) 384.0 %

Other income 47 — % 925 0.1 % (878) (94.9) %

Income before provision for income taxes 52,532 4.1 % 24,241 2.2 % 28,291 116.7 %

Provision for income taxes 12,905 1.0 % 6,153 0.6 % 6,752 109.7 %

Net income $ 39,627 3.1 % $ 18,088 1.6 % $ 21,539 119.1 %

Other income (expense) 421 0.1 % (28) — % 449 (1603.6) %

Income (loss) before provision for income taxes (3,901) (0.7) % 12,961 3.3 % (16,862) (130.1) %

Provision (benefit) for income taxes (849) (0.2) % 3,118 0.8 % (3,967) (127.2) %

Earnings from investment in joint venture 1 — % — — % 1 — %

Net income (loss) $ (3,051) (0.5) % $ 9,843 2.5 % $ (12,894) (131.0) %

Adjusted EBITDA $ 68,797 12.3 % $ 40,874 10.3 % $ 27,923 68.3 %

Revenues for the nine months ended June 30, 2024 increased $197.2 million, or 18.1%, to $1.3 billion from $1.1 billion for the nine months ended June 30, 2023.

The increase included $95.6 million of revenues attributable to acquisitions completed subsequent to June 30, 2023 and $101.6 million of revenues in our existing markets from contract work and sales of HMA and aggregates to third parties.

The 9.3% increase in revenues in our existing markets compared to the prior year period was due to strong demand in both public and private work.

Adjusted net income $ 13,270 2.4 % $ 9,843 2.5 % $ 3,427 34.8 %

Revenues for the three months ended December 31, 2024 increased $165.1 million, or 41.6%, to $561.6 million from $396.5 million for the three months ended December 31, 2023.

The increase included $120.9 million of revenues attributable to acquisitions completed during or subsequent to the three months ended December 31, 2023 and an increase of approximately $44.2 million of revenues in our existing markets from contract work and sales of HMA and aggregates to third parties.

The 11.2% increase in revenues in our existing markets was due to strong demand in both public and private work.

Gross Profit.

Gross profit for the nine months ended June 30, 2024 increased $53.4 million, or 44.1%, to $174.2 million from $120.8 million for the nine months ended June 30, 2023.

The increase in gross profit was primarily the result of a 18.1% increase in revenues for the nine months ended June 30, 2024 compared to the nine months ended June 30, 2023 and a higher gross profit margin.

The higher gross profit margin was due to efficient utilization of our plants and equipment fleet and completion of new backlog with more favorable margins.

Gross profit for the three months ended December 31, 2024 increased $24.7 million, or 47.6%, to $76.6 million from $51.9 million for the three months ended December 31, 2023.

The increase in gross profit was primarily the result of the 41.6% increase in revenues for the three months ended December 31, 2024 compared to the three months ended December 31, 2023 and a

higher gross profit margin.

The higher gross profit margin was due to (i) efficient utilization of our plants, terminals and equipment fleet and (ii) completion of new backlog with more favorable margins.

General and Administrative Expenses.

General and administrative expenses for the nine months ended June 30, 2024 increased $17.7 million, or 18.9%, to $111.6 million from $93.9 million for the nine months ended June 30, 2023.

The increase was primarily the result of (i) a $2.7 million increase in share-based compensation expense, (ii) a $6.2 million increase attributable to general and administrative expenses associated with the operations of businesses acquired subsequent to June 30, 2023, (iii) a $5.1 million increase in management personnel payroll and benefits, and (iv) a $3.7 million increase in other general and administrative expenses.

General and administrative expenses for the three months ended December 31, 2024 increased $8.8 million, or 24.9%, to $44.3 million from $35.5 million for the three months ended December 31, 2023.

The increase was attributable to general and administrative expenses associated with the operations of businesses acquired during or subsequent to December 31, 2023 and an increase in share-based compensation expense.

Acquisition-related expenses.

Acquisition-related expenses for the three months ended December 31, 2024 increased $19.1 million to $19.6 million from $0.5 million for the three months ended December 31, 2023.

The increase was primarily due to the $18.5 million of acquisition-related expenses attributable to the Lone Star Acquisition.

Gain on Sale of Property, Plant and Equipment.

Gain on sale of property, plant and equipment for the nine months ended June 30, 2024 decreased $1.8 million, or 38.7%, to $3.0 million from $4.8 million for the nine months ended June 30, 2023.

The decrease was attributable to lower disposals of equipment and components during the period.

Gain on Facility Exchange .

There was no gain on facility exchange for the nine months ended June 30, 2024 compared to a gain of $5.4 million for the nine months ended June 30, 2023.

The gain was the result of the disposition of a quarry located near Goldston, North Carolina.

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

Gain on sale of property, plant and equipment for the three months ended December 31, 2024 increased $0.2 million, or 26.2%, to $1.0 million from $0.8 million for the three months ended December 31, 2023.

Interest Expense, Net.

Interest expense, net for the nine months ended June 30, 2024 decreased $0.8 million, or 5.9%, to $13.0 million compared to $13.8 million for the nine months ended June 30, 2023.

The decrease in interest expense, net was primarily due to an increase in interest income from an overnight sweep program established in fiscal 2024.

This increase in interest income was primarily offset by an increase in interest expense due to an increase in the average principal debt balance outstanding during the nine months ended June 30, 2024 compared to the corresponding period in 2023.

Interest expense, net for the three months ended December 31, 2024 increased $14.4 million, or 384.0%, to $18.1 million compared to $3.7 million for the three months ended December 31, 2023.

The increase in interest expense, net was primarily related to borrowings under the Term Loan B Credit Agreement that was entered into on November 1, 2024 and $3.1 million of fees associated with the Bridge Facility.

Provision for Income Taxes.

Our effective tax rate decreased to 24.6% for the nine months ended June 30, 2024, from 25.4% for the nine months ended June 30, 2023.

Our higher effective tax rate during the nine months ended June 30, 2023 was due to differences in state tax rates at our operating subsidiaries.

Net income increased $21.5 million to $39.6 million for the nine months ended June 30, 2024, compared to $18.1 million for the nine months ended June 30, 2023.

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

Our effective tax rate decreased to 21.8% for the three months ended December 31, 2024, from 24.1% for the three months ended December 31, 2023.

Our lower effective tax rate during the three months ended December 31, 2024 was due to differences in state tax rates at our operating subsidiaries.

Net Income (loss).

Net income (loss) decreased $12.9 million, or 131.0%, to a net loss $3.1 million for the three months ended December 31, 2024, compared to net income of $9.8 million for the three months ended December 31, 2023.

The decrease in net income was primarily a result of higher general and administrative expenses, acquisition-related expenses and interest expense,net partially offset by an increase in gross profit, all as described above.

Adjusted EBITDA and Adjusted EBITDA Margin.

Adjusted EBITDA and Adjusted EBITDA Margin were $143.6 million and 11.2%, respectively, for the nine months ended June 30, 2024, compared to $103.7 million and 9.5%, respectively, for the nine months ended June 30, 2023.

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

Adjusted EBITDA and Adjusted EBITDA Margin were $68.8 million and 12.3%, respectively, for the three months ended December 31, 2024, compared to $40.9 million and 10.3%, respectively, for the three months ended December 31, 2023.

The increase in Adjusted EBITDA and Adjusted EBITDA Margin resulted from an increase in gross profit, partially offset by higher general and administrative expenses, all as described above.

See the description of Adjusted EBITDA and Adjusted EBITDA Margin, as well as a reconciliation of Adjusted EBITDA to net income, under the heading “How We Assess Performance of Our Business.”

Adjusted Net Income.

Adjusted Net Income increased $3.5 million or 34.8%, to adjusted net income of $13.3 million for the three months ended December 31, 2024, from $9.8 million for the three months ended December 31, 2023.

The increase in adjusted net income was primarily a result of higher gross profit partially offset by higher general and administrative expenses and interest expense due to the Term Loan B, all as described above.

Liquidity and Capital Resources

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The following table sets forth our cash flows for the periods indicated (unaudited, in thousands):

For the Nine Months Ended June 30,

For the Three Months Ended December 31,

Net cash provided by operating activities, net of acquisitions $ 40,663 $ 60,378

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Operating Activities

During the nine months ended June 30, 2024, cash provided by operating activities, net of business acquisitions, was $113.2 million, primarily as a result of:

• net income of $39.6 million, including $67.5 million of depreciation, depletion, accretion and amortization, $10.2 million of share-based compensation expense and $3.0 million of gain on sale of property, plant and equipment;

• an increase in contracts receivable including retainage, net of $11.3 million due to normal fluctuations resulting from the timing of processing transactions in our accounts receivable cycle;

During the three months ended December 31, 2024, cash provided by operating activities, net of acquisitions, was $40.7 million, primarily as a result of:

• net loss of $3.1 million, including $31.2 million of depreciation, depletion, accretion and amortization and $14.4 million of share-based compensation expense, $1.1 million of gain on sale of property, plant and equipment, and $1.4 million of deferred income tax benefit;

• a decrease in contracts receivable including retainage, net of $62.6 million due to normal fluctuations resulting from the timing of processing transactions in our accounts receivable cycle;

• an increase in inventories of $10.4 million due to increased inventories from acquisitions, growth in existing markets, higher inventory costs and normal fluctuations in our inventory cycle;

• an increase in accounts payable and accrued expenses and other current liabilities of $6.0 million due to the timing of processing transactions in our accounts payable cycle;

• a decrease in accounts payable and accrued expenses and other current liabilities of $54.0 million due to the timing of processing transactions in our accounts payable cycle;

• a net increase in the difference between costs and estimated earnings in excess of billings on uncompleted contracts and billings in excess of costs and estimated earnings on uncompleted contracts of $0.5 million due to the timing of performing and closing projects.

During the nine months ended June 30, 2023, cash provided by operating activities, net of business acquisitions, was $94.5 million, primarily as a result of:

• net income of $18.1 million, including $57.8 million of depreciation, depletion, accretion and amortization of long-lived assets, unrealized losses on derivative instruments of $1.4 million, gain on sale of property, plant and equipment of $4.8 million, gain on facility exchange of $5.4 million and share-based compensation expense of $7.9 million;

During the three months ended December 31, 2023, cash provided by operating activities, net of acquisitions, was $60.4 million, primarily as a result of:

• net income of $9.8 million, including $21.1 million of depreciation, depletion, accretion and amortization and $2.9 million of share-based compensation expense, and $0.8 million gain on sale of property, plant and equipment;

• a decrease in contracts receivable including retainage, net of $63.5 million due to normal fluctuations resulting from the timing of processing transactions in our accounts receivable cycle;

• an increase in prepaid expenses and other current assets of $3.2 million primarily due to the timing of payments under our insurance policies and other expenses;

• an increase in inventories of $9.9 million due to increased inventories from acquisitions, growth in existing markets, higher inventory costs and normal fluctuations in our inventory cycle;

• a decrease in accounts payable and accrued expenses and other current liabilities of $34.7 million due to the timing of processing transactions in our accounts payable cycle;

• a net increase of $10.6 million in the difference between billings in excess of costs and estimated earnings on uncompleted contracts and costs and estimated earnings in excess of billings on uncompleted contracts and due to the timing of performing and closing projects.

• a net increase in the difference between costs and estimated earnings in excess of billings on uncompleted contracts and billings in excess of costs and estimated earnings on uncompleted contracts of $6.4 million due to the timing of performing and closing projects.

Investing Activities

During the nine months ended June 30, 2024, cash used in investing activities was $199.1 million, of which $135.2 million related to acquisitions completed in the period, $70.4 million was invested in property, plant and equipment and $4.4 million was invested in restricted investments by the Captive, partially offset by $8.0 million of proceeds from the sale of property, plant and equipment and $2.9 million of proceeds from sales, calls and maturities of restricted investments.

During the nine months ended June 30, 2023, cash used in investing activities was $118.6 million, of which $82.7 million related to acquisitions completed in the period, $79.0 million was invested in property, plant and equipment and $7.9 million was invested in restricted investments by the Captive, partially offset by $12.6 million of proceeds from the sale of property, plant and equipment, $37.0 million of proceeds from the facility exchange and $1.4 million of proceeds from sales, calls and maturities of restricted investments.

During the three months ended December 31, 2024, cash used in investing activities was $679.0 million, of which $654.2 million related to acquisitions completed in the period, $26.8 million was invested in property, plant and equipment and $2.3 million was purchases of restricted investments, partially offset by $1.8 million of proceeds from the sale of property, plant and equipment and $2.4 million of proceeds from the sale of restricted investments.

During the three months ended December 31, 2023, cash used in investing activities was $104.7 million, of which $81.4 million related to acquisitions completed in the period and $26.8 million was invested in property, plant and equipment, partially offset by $2.5 million of proceeds from the sale of property, plant and equipment and $1.0 million of proceeds from the sale of restricted investments.

Financing Activities

During the nine months ended June 30, 2024, cash provided by financing activities was $95.3 million.

During the three months ended December 31, 2024, cash provided by financing activities was $694.8million.

We received $835.0 million of net proceeds from our Term Loan B, which were primarily used for the Lone Star Acquisition completed in the period.

This cash flow was partially offset by $128.2 million of principal payments on long-term debt and purchase of treasury stock of $12.1 million.

During the three months ended December 31, 2023, cash provided by financing activities was $64.9 million.

We received $90.0 million of proceeds from our Revolving Credit Facility, which were primarily used for acquisitions completed in the period.

This cash flow was partially offset by $23.8 million of principal payments on long-term debt and purchase of treasury stock of $1.3 million.

During the nine months ended June 30, 2023, cash provided by financing activities was $43.5 million.

We received $53.0 million of proceeds from our Credit Facility, which were primarily used for acquisitions completed in the period.

This cash flow was partially offset by $9.4 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

At June 30, 2024 and September 30, 2023, there was $397.5 million and $283.8 million, respectively, of principal outstanding under the Term Loans, $81.9 million and $93.1 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $309.7 million and $222.1 million, respectively, under the Revolving Credit Facility, including a reduction for outstanding letters of credit.

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.

At June 30, 2024 and September 30, 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.

We have entered into an interest rate swap agreement to hedge against the risk of changes in interest rates.

At June 30, 2024 and September 30, 2023, the notional value of the interest rate swap agreement was $300.0 million, and the fair value was $20.5 million and $26.9 million, respectively, which amounts are included within other assets on our Consolidated Balance Sheets.

For more information about the Credit Agreement, see Note 8 - Debt to the unaudited consolidated financial statements included elsewhere in this report.

Capital Requirements and Sources of Liquidity

During the nine months ended June 30, 2024 and 2023, our capital expenditures were approximately $70.4 million and $79.0 million, respectively.

During the three months ended December 31, 2024 and 2023, our capital expenditures were approximately $26.8 million and $26.8 million, respectively.

Our capital expenditures are typically made during the fiscal year in which they are approved.

At June 30, 2024, our commitments for capital expenditures were not material to our financial condition or results of operations on a consolidated basis.

For fiscal 2024, we expect total capital expenditures to be $90.0 million to $95.0 million.

At December 31, 2024, our commitments for capital expenditures were not material to our financial condition or results of operations on a consolidated basis.

For fiscal 2025, we expect total capital expenditures to be approximately $130.0 million to $140.0 million.

Our capital expenditure budget is an estimate and is subject to change.

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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 the nine months ended June 30, 2024, the Company purchased 93,408 shares of Class A common stock for aggregate consideration of approximately $5.3 million through open market transactions.

During the three months ended December 31, 2024, the Company did not purchase any Class A common stock through our stock repurchase program.

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.

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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, make planned capital expenditures and opportunistically repurchase shares of Class A common stock 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 will be sufficient to fund our operations, make planned capital expenditures, opportunistically repurchase shares of Class A common stock and fulfill other material contingent contractual obligations for at least the next 12 months.

Such material contingent contractual obligations include, without limitation, obligations that we assumed in connection with the Lone Star Acquisition, such as contingent requirements to (i) pay to the former unit holders of Lone Star Paving the amount of working capital remaining in Lone Star Paving at the closing, as finally determined (subject to certain adjustments and offsets) over four quarterly installments and (ii) purchase from the selling unit holders of Lone Star Paving, upon the receipt of necessary governmental entitlements, an entity that owns certain real property located in central Texas for aggregate consideration of $30.0 million.

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.

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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 or other credit facilities, 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 Term Loan A / Revolver Credit Agreement or other credit facilities, 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.

We cannot guarantee that additional capital will be

available on acceptable terms or at all.

We cannot guarantee that additional capital will be available on acceptable terms or at all.

If we are unable to obtain the funds we need, we may not be able to complete acquisitions that may be favorable to us or finance the capital expenditures necessary to conduct our operations.

Contractual Obligations

The following table summarizes our significant contractual obligations outstanding as of June 30, 2024 (unaudited, in thousands):

The following table summarizes our significant obligations outstanding as of December 31, 2024 (unaudited, in thousands):

Payments Due by Fiscal Year

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Debt obligations $ 1,236,875 $ 27,625 $ 40,375 $ 342,250 $ 8,500 $ 8,500 $ 809,625

Purchase agreement obligations due to sellers of Lone Star Paving 116,000 116,000 — — — — —

Lease obligations 48,957 9,809 12,388 11,499 7,375 3,214 4,672

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Off-Balance Sheet Arrangements

As of June 30, 2024, we had aggregate letters of credit outstanding in the amount of $8.5 million, future purchase commitments of diesel fuel and natural gas of $2.7 million and $0.2 million, respectively, and $2.4 million of minimum royalty payments related to aggregates facilities.

As of December 31, 2024, we had aggregate letters of credit outstanding in the amount of $6.6 million, future purchase commitments of diesel fuel and natural gas of $3.3 million and $0.4 million, respectively, and $2.4 million of minimum royalty payments related to aggregates facilities.

Other than the letters of credit, future purchase commitments and minimum royalty payments, we do not currently have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, changes in our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

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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-Q

Item 2. Management’s Discussion and Analysis