Construction Partners, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This discussion and analysis of our financial condition and results of operations is intended to assist in understanding and assessing the trends and significant changes in our results of operations and financial condition during the period covered by this report. Historical results may not be indicative of future performance. This discussion includes forward-looking statements that reflect our plans, estimates and beliefs. Such statements involve risks and uncertainties. Our actual results may differ materially from those contemplated by these forward-looking statements as a result of various factors, including those set forth under the headings “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements”. This discussion should be read in conjunction with our unaudited consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto included in the 2024 Form 10-K. In this discussion, we use certain non-GAAP financial measures. 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. Overview 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 across the Sunbelt in Alabama, Florida, Georgia, North Carolina, Oklahoma, South Carolina, Tennessee and Texas. Our public projects are funded by federal, state and local governments and include roads, highways, bridges, airports and other forms of infrastructure. Public transportation infrastructure projects historically have been a relatively stable portion of state and federal budgets and represent a significant share of the U.S. construction market. Federal funds are allocated on a state-by-state basis, and each state is required to match a portion of the federal funds that it receives. Federal highway spending uses funds predominantly from the Highway Trust Fund, which derives its revenues from fuel taxes and other user fees. 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. Contract Backlog At June 30, 2025, our contract backlog was $2.9 billion. Contract backlog is a financial measure that reflects the dollar value of work that the Company expects to perform in the future. We include a construction project in our contract backlog at the time it is awarded and to the extent we believe funding is probable. Our backlog consists of uncompleted work on contracts in progress and contracts for which we have executed a contract but have not commenced the work. 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 $2.2 billion at June 30, 2025. 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 $0.7 billion at June 30, 2025. Recent Developments Business Acquisitions On May 1, 2025, we acquired all of the outstanding capital stock of "PRI". The transaction established our first platform company in Tennessee, with operations including an HMA plant and related crews and equipment serving northeastern Tennessee and a specialized pavement preservation and sitework business serving multiple southeastern states. For further discussion regarding this transaction, see Note 4 - Business Acquisitions to the unaudited consolidated financial statements included elsewhere in this report. On August 1, 2025, we acquired all the outstanding capital stock of Durwood Greene, an asphalt manufacturing and construction business headquartered in Stafford, Texas. The transaction expanded the our operations in Texas, adding three HMA plants and related crews and equipment serving the Houston, Texas metropolitan area. For further discussion regarding this transaction, see Note 20 - Subsequent Events to the unaudited consolidated financial statements included elsewhere in this report. 31 Table of Contents Amendment to Term Loan A / Revolver Credit Agreement On June 30, 2025, we entered into an amendment to the Term Loan A/ Revolver Credit Agreement to, among other things, (i) increase the existing Revolving Credit Facility thereunder from $400.0 million to $500.0 million, (ii) increase the existing Term Loan A thereunder from $400.0 million to $600.0 million, (iii) permit us to request one or more incremental term loans or an increase in the commitments under the Revolving Credit Facility on certain terms and conditions specified therein, and (iv) extend the maturity date for all outstanding borrowings under the Term Loan A / Revolver Credit Agreement to June 28, 2030. The amendment also (i) modified certain negative covenants, (ii) replaced the consolidated fixed charge coverage ratio covenant with a consolidated interest coverage ratio covenant, (iii) adjusted the maximum consolidated net leverage ratio permitted thereunder and (iv) removed the 0.10% adjustment to SOFR-based interest rates under the Term Loan A / Revolver Credit Agreement. A portion of the proceeds from the increased Term Loan A / Revolver Credit Agreement were used to pay off the outstanding principal balance under the Revolving Credit Facility. For further discussion regarding the amendment and the terms of the Term Loan A / Revolved Credit Agreement following the amendment, see Note 8 - Debt to the unaudited consolidated financial statements included elsewhere in this report. How We Assess Performance of Our Business Revenues We derive our revenues predominantly by providing construction products and services for both public and private infrastructure projects, with an emphasis on highways, roads, bridges, airports and commercial and residential sites. Our projects represent a mix of federal, state, municipal and private customers. We also derive revenues from the sale of HMA, aggregates and liquid asphalt cement to customers. We recognize revenues derived from projects as we satisfy our performance obligations over time, measured by the relationship of total cost incurred compared to total estimated contract costs (cost-to-cost input method). Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to estimated costs and income, and are recognized in the period in which the revisions are determined. Revenues derived from the sale of HMA, aggregates and liquid asphalt cement are recognized when the risks associated with ownership have passed to the customer. Gross Profit Gross profit represents revenues less cost of revenues. Cost of revenues consists of all direct and indirect costs associated with construction contracts, including raw materials, labor, equipment costs, depreciation, lease expenses, subcontract costs and other expenses at our HMA plants, aggregates mining facilities and liquid asphalt cement terminal. Our cost of revenues is directly affected by fluctuations in commodity prices, primarily liquid asphalt and diesel fuel. From time to time, when appropriate, we limit our exposure to changes in commodity prices by entering into forward purchase commitments. In addition, our public infrastructure contracts often provide for price adjustments based on fluctuations in certain commodity-related product costs. These price adjustment provisions are in place for most of our public infrastructure contracts, and we seek to include similar provisions in our private contracts. Depreciation, Depletion, Accretion and Amortization Property, plant and equipment are initially recorded at cost or, if acquired as a business combination, at fair value. Depreciation on property, plant and equipment is computed on a straight-line basis over the estimated useful life of the asset. Amortization expense is the periodic expense related to leasehold improvements and intangible assets. Leasehold improvements are amortized over the lesser of the life of the underlying asset or the remaining lease term. Our intangible assets were recognized as a result of certain acquisitions and are generally amortized on a straight-line basis over the estimated useful lives of the assets. Our unfavorable contract liabilities were recognized as a result of certain acquisitions and are amortized as the associated projects progress. Mineral reserves are depleted in accordance with the units-of-production method as aggregates are extracted, using the initial allocation of cost based on proven and probable reserves. General and Administrative Expenses General and administrative expenses include costs related to our operational offices that are not allocated to direct contract costs and expenses related to our corporate offices. 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 audit, consulting and professional fees, share-based compensation expense, travel, insurance, office space rental costs, property taxes and other corporate and overhead expenses. 32 Table of Contents 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 In the normal course of business, we sell assets for various reasons, including when the cost of maintaining the asset exceeds the cost of replacing it. 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. Interest Expense, Net Interest expense, net primarily represents interest incurred on our long-term debt, such as the Term Loans and the Revolving Credit Facility, fees associated with debt modifications and amortization of deferred debt issuance costs. 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, 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 transactions of a size that would require 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 transactions of a size that would require 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, 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. 33 Table of Contents 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, 2025 2024 2025 2024 Net income $ 44,047 $ 30,908 $ 45,211 $ 39,627 Interest expense, net 25,239 4,673 64,961 12,987 Provision for income taxes 13,903 10,108 14,364 12,905 Depreciation, depletion, accretion and amortization 39,294 23,507 107,741 67,468 Share-based compensation expense 8,564 4,039 18,156 10,586 Transformative acquisition expenses 663 — 19,347 — Adjusted EBITDA $ 131,710 $ 73,235 $ 269,780 $ 143,573 Revenues $ 779,277 $ 517,794 $ 1,912,507 $ 1,285,726 Adjusted EBITDA Margin 16.9 % 14.1 % 14.1 % 11.2 % The following table presents a reconciliation of net income, 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 June 30, For the Nine Months Ended June 30, 2025 2024 2025 2024 Net income $ 44,047 $ 30,908 $ 45,211 $ 39,627 Transformative acquisition expenses 663 — 19,347 — Financing fees related to transformative acquisition 920 — 3,977 — Tax impact due to above reconciling items (382) — (5,634) — Adjusted Net Income $ 45,248 $ 30,908 $ 62,901 $ 39,627 34 Table of Contents Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 The following table sets forth selected financial data for the three months ended June 30, 2025 and 2024 (unaudited, in thousands, except percentages): Change From the Three Months Ended For the Three Months Ended June 30, June 30, 2024 to the Three Months Ended 2025 2024 June 30, 2025 Dollars % of Revenues Dollars % of Revenues $ Change % Change Revenues $ 779,277 100.0 % $ 517,794 100.0 % $ 261,483 50.5 % Cost of revenues 647,467 83.1 % 434,302 83.9 % 213,165 49.1 % Gross profit 131,810 16.9 % 83,492 16.1 % 48,318 57.9 % General and administrative expenses (51,026) (6.6) % (37,987) (7.3) % (13,039) 34.3 % Acquisition-related expenses (1,816) (0.2) % (941) (0.2) % (875) 93.0 % Gain on sale of property, plant and equipment 3,975 0.5 % 1,093 0.2 % 2,882 263.7 % Operating income 82,943 10.6 % 45,657 8.8 % 37,286 81.7 % Interest expense, net (25,239) (3.2) % (4,673) (0.9) % (20,566) 440.1 % Other income 246 — % 32 — % 214 668.8 % Income before provision for income taxes and earnings from investment in joint venture 57,950 7.4 % 41,016 7.9 % 16,934 41.3 % Provision for income taxes 13,903 1.7 % 10,108 2.0 % 3,795 37.5 % Net income $ 44,047 5.7 % $ 30,908 5.9 % $ 13,139 42.5 % Adjusted EBITDA $ 131,710 16.9 % $ 73,235 14.1 % $ 58,475 79.8 % Adjusted Net Income $ 45,248 5.8 % $ 30,908 6.0 % $ 14,340 46.4 % Revenues. Revenues for the three months ended June 30, 2025 increased $261.5 million, or 50.5%, to $779.3 million from $517.8 million for the three months ended June 30, 2024. The increase included $235.7 million of revenues attributable to acquisitions completed during or subsequent to the three months ended June 30, 2024 and $25.8 million of revenues in our existing markets from contract work and sales of HMA and aggregates to third parties. The 5.0% increase in revenues 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, 2025 increased $48.3 million, or 57.9%, to $131.8 million from $83.5 million for the three months ended June 30, 2024. The increase in gross profit was primarily the result of a 50.5% increase in revenues for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 and a higher gross profit margin on such revenues due to efficient utilization of our plants, terminals 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, 2025 increased $13.0 million, or 34.3%, to $51.0 million from $38.0 million for the three months ended June 30, 2024. The increase was primarily attributable to general and administrative expenses associated with the operations of businesses acquired during or subsequent to June 30, 2024 and an increase in share-based compensation expense. Acquisition-Related Expenses. Acquisition-related expenses for the three months ended June 30, 2025 increased $0.9 million to $1.8 million from $0.9 million for the three months ended June 30, 2024. Gain on Sale of Property, Plant and Equipment . Gain on sale of property, plant and equipment for the three months ended June 30, 2025 increased $2.9 million, or 263.7%, to $4.0 million from $1.1 million for the three months ended June 30, 2024. The increase was primarily the result of higher disposals of equipment and components during the three months ended June 30, 2025. Interest Expense, Net. Interest expense, net for the three months ended June 30, 2025 increased $20.6 million, or 440.1%, to $25.2 35 Table of Contents million compared to $4.7 million for the three months ended June 30, 2024. The increase in interest expense, net was primarily related to borrowings under the Term Loan B Credit Agreement that we entered into on November 1, 2024 and fees associated with amendments to, and additional borrowings under, our Term Loan A/ Revolver Credit Agreement. Provision for Income Taxes. Our effective tax rate decreased to 24.0% for the three months ended June 30, 2025, from 24.6% for the three months ended June 30, 2024. Our lower effective tax rate during the three months ended June 30, 2025 was due to differences in state tax rates at our operating subsidiaries. Net Income. Net income increased $13.1 million to $44.0 million for the three months ended June 30, 2025, compared to $30.9 million for the three months ended June 30, 2024. The increase in net income was primarily the result of higher gross profit and gain on sale of property, plant and equipment, partially offset by higher general and administrative expenses, interest expense and provision for income taxes, all as described above. Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA and Adjusted EBITDA Margin were $131.7 million and 16.9%, respectively, for the three months ended June 30, 2025, compared to $73.2 million and 14.1%, respectively, for the three months ended June 30, 2024. The increase in Adjusted EBITDA and Adjusted EBITDA Margin resulted from an increase in gross profit and gain on sale of property, plant and equipment, 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 $14.3 million to $45.2 million for the three months ended June 30, 2025, compared to $30.9 million for the three months ended June 30, 2024. The increase in Adjusted Net Income was primarily a result of higher gross profit and gain on sale of property, plant and equipment, partially offset by higher general and administrative expenses and interest expense under the Term Loan B, all as described above. See the description of Adjusted Net Income, as well as a reconciliation of Adjusted Net Income to net income, under the heading “How We Assess Performance of Our Business”. 36 Table of Contents Nine Months Ended June 30, 2025 Compared to Nine Months Ended June 30, 2024 The following table sets forth selected financial data for the nine months ended June 30, 2025 and 2024 (unaudited, in thousands, except percentages): Change From the Nine Months Ended For the Nine Months Ended June 30, June 30, 2024 to the Nine Months Ended 2025 2024 June 30, 2025 Dollars % of Revenues Dollars % of Revenues $ Change % Change Revenues $ 1,912,507 100.0 % $ 1,285,726 100.0 % $ 626,781 48.7 % Cost of revenues 1,632,776 85.4 % 1,111,553 86.5 % 521,223 46.9 % Gross profit 279,731 14.6 % 174,173 13.5 % 105,558 60.6 % General and administrative expenses (141,954) (7.2) % (109,422) (8.2) % (32,532) 29.7 % Acquisition-related expenses (22,174) (1.2) % (2,239) (0.4) % (19,935) 890.4 % Gain on sale of property, plant and equipment 8,437 0.4 % 2,960 0.2 % 5,477 185.0 % Operating income 124,040 6.5 % 65,472 5.1 % 58,568 89.5 % Interest expense, net (64,961) (3.4) % (12,987) (1.0) % (51,974) 400.2 % Other income 508 — % 50 — % 458 916.0 % Income before provision for income taxes and earnings from investment in joint venture 59,587 3.1 % 52,535 4.1 % 7,052 13.4 % Provision for income taxes 14,364 0.8 % 12,905 1.0 % 1,459 11.3 % Loss from investment in joint venture (12) 0.1 % (3) — % (9) 300.0 % Net income $ 45,211 2.4 % $ 39,627 3.1 % $ 5,584 14.1 % Adjusted EBITDA $ 269,780 14.1 % $ 143,573 11.2 % $ 126,207 87.9 % Adjusted Net Income $ 62,901 3.3 % $ 39,627 3.1 % $ 23,274 58.7 % Revenues. Revenues for the nine months ended June 30, 2025 increased $0.6 billion, or 48.7%, to $1.9 billion from $1.3 billion for the nine months ended June 30, 2024. The increase included $529.6 million of revenues attributable to acquisitions completed during or subsequent to the nine months ended June 30, 2024 and $97.2 million of revenues attributable to our existing markets from contract work and sales of HMA and aggregates to third parties. The 7.6% 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, 2025 increased $105.6 million, or 60.6%, to $279.7 million from $174.2 million for the nine months ended June 30, 2024. The increase in gross profit was primarily the result of a 48.7% increase in revenues for the nine months ended June 30, 2025 compared to the nine months ended June 30, 2024 and a higher gross profit margin on such revenues due to efficient utilization of our plants, terminals and equipment fleet and completion of new backlog with more favorable margins. General and Administrative Expenses. General and administrative expenses for the nine months ended June 30, 2025 increased $32.5 million, or 29.7%, to $141.9 million from $109.4 million for the nine months ended June 30, 2024. The increase was primarily attributable to general and administrative expenses associated with the operations of businesses acquired during or subsequent to June 30, 2024 and an increase in share-based compensation expense. Acquisition-Related Expenses. Acquisition-related expenses for the nine months ended June 30, 2025 increased $20.0 million to $22.2 million from $2.2 million for the nine months ended June 30, 2024. The increase was primarily due to the $19.0 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, 2025 increased $5.4 million, or 185.0%, to $8.4 million from $3.0 million for the nine months ended June 30, 2024. The increase was primarily the result of higher disposals of equipment and components during the nine months ended June 30, 2025. 37 Table of Contents Interest Expense, Net. Interest expense, net for the nine months ended June 30, 2025 increased $52.0 million, or 400.2%, to $65.0 million compared to $13.0 million for the nine months ended June 30, 2024. The increase in interest expenses, net was primarily related to borrowings under the Term Loan B Credit Agreement that we entered into on November 1, 2024, and fees associated with amendments to, and additional borrowings under, our Term Loan A / Revolver Credit Agreement. Provision for Income Taxes. Our effective tax rate decreased to 24.1% for the nine months ended June 30, 2025, from 24.6% for the nine months ended June 30, 2024. Our lower effective tax rate during the nine months ended June 30, 2025 was due to differences in state tax rates at our operating subsidiaries. Net Income. Net income increased $5.6 million to $45.2 million for the nine months ended June 30, 2025, compared to $39.6 million for the nine months ended June 30, 2024. The increase in net income was primarily a result of higher gross profit and gain on sale of property, plant and equipment, partially offset by an increase in general and administrative expenses, acquisition-related expenses, interest expense and provision for income taxes, all as described above. Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA and Adjusted EBITDA Margin were $269.8 million and 14.1%, respectively, for the nine months ended June 30, 2025, compared to $143.6 million and 11.2%, respectively, for the nine months ended June 30, 2024. The increase in Adjusted EBITDA and Adjusted EBITDA Margin resulted from an increase in gross profit and gain on sale of property, plant and equipment, 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 $23.3 million to $62.9 million for the nine months ended June 30, 2025, compared to Adjusted Net Income of $39.6 million for the nine months ended June 30, 2024. The increase in Adjusted Net Income was primarily a result of higher gross profit and gain on sale of property, plant and equipment, partially offset by higher general and administrative expenses and interest expense due to the Term Loan B, all as described above. See the description of Adjusted Net Income, as well as a reconciliation of adjusted net income to net income, under the heading “How We Assess Performance of Our Business”. Liquidity and Capital Resources Cash Flows Analysis The following table sets forth our cash flows for the periods indicated (unaudited, in thousands): For the Nine Months Ended June 30, 2025 2024 Net cash provided by operating activities, net of acquisitions $ 179,318 $ 113,181 Net cash used in investing activities (1,033,130) (199,098) Net cash provided by financing activities 893,433 95,280 Net change in cash and cash equivalents $ 39,621 $ 9,363 Operating Activities During the nine months ended June 30, 2025, cash provided by operating activities, net of acquisitions, was $179.3 million, primarily as a result of: • net income of $45.2 million, including $107.7 million of depreciation, depletion, accretion and amortization, $26.9 million of share-based compensation expense and $8.4 million of gain on sale of property, plant and equipment; • a decrease in contracts receivable including retainage, net of $6.2 million due to normal fluctuations resulting from the timing of processing transactions in our accounts receivable cycle; • an increase in inventories of $4.9 million due to 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 $34.6 million due to the timing of processing transactions in our accounts payable cycle; and 38 Table of Contents • a net decrease 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 $32.1 million due to the timing of performing and closing projects. During the nine months ended June 30, 2024, cash provided by operating activities, net of 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; • an increase in inventories of $17.0 million due to 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; and • 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 $22.8 million due to the timing of performing and closing projects. Investing Activities During the nine months ended June 30, 2025, cash used in investing activities was $1.0 billion, of which $935.7 million related to acquisitions completed in the period, $104.9 million was invested in property, plant and equipment and $12.2 million was invested in restricted investments by the Captive, partially offset by $11.3 million of proceeds from the sale of property, plant and equipment and $8.4 million of proceeds from the sale of restricted investments. 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 the sale of restricted investments. Financing Activities During the nine months ended June 30, 2025, cash provided by financing activities was $893.4 million. 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, and $218.4 million of net proceeds from our Revolving Credit Facility, which were primarily used for other acquisitions completed during the period. This cash flow was partially offset by $137.7 million of principal payments on long-term debt and purchase of treasury stock of $20.8 million. During the nine months ended June 30, 2024, cash provided by financing activities was $95.3 million. We received $149.4 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 $47.5 million of principal payments on long-term debt and purchase of treasury stock of $6.6 million. Capital Requirements and Sources of Liquidity During the nine months ended June 30, 2025 and 2024, our capital expenditures were approximately $104.9 million and $70.4 million, respectively. Our capital expenditures are typically made during the fiscal year in which they are approved. At June 30, 2025, 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. Historically, we have required significant amounts of cash in order to make capital expenditures, purchase materials, execute our growth strategy through acquisitions and fund our organic expansion into new markets. Our working capital needs are driven by the seasonality and growth of our business, with our cash requirements increasing in periods of growth. 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. Furthermore, on April 12, 2024, we announced that 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 39 Table of Contents 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 stock repurchase program does not obligate the Company 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 the Class A common stock, capital allocation alternatives, general market and economic conditions and other corporate considerations. During the nine months ended June 30, 2025, the Company purchased 119,370 shares of Class A common stock for aggregate consideration of approximately $8.7 million through open market transactions. 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. 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 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. There can be no assurance that operations and other capital resources will 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 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. 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 obligations outstanding as of June 30, 2025 (unaudited, in thousands): Payments Due by Fiscal Year Total 2025 2026 2027 2028 2029 2030 and Thereafter Debt obligations $ 1,445,750 $ 9,625 $ 38,500 $ 38,500 $ 38,500 $ 38,500 $ 1,282,125 Purchase agreement obligations due to sellers of Lone Star Paving 69,435 23,145 46,290 — — — — Lease obligations 80,839 5,579 21,367 20,470 15,808 9,479 8,136 Purchase commitments 2,216 952 1,264 — — — — Royalty payments 3,474 11 396 384 359 347 1,977 Asset retirement obligations 2,523 — — — — — 2,523 Total $ 1,604,237 $ 39,312 $ 107,817 $ 59,354 $ 54,667 $ 48,326 $ 1,294,761 40 Table of Contents Off-Balance Sheet Arrangements As of June 30, 2025, we had aggregate letters of credit outstanding in the amount of $6.5 million, future purchase commitments of diesel fuel and natural gas of $2.0 million and $0.2 million, respectively, and $3.5 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. See Note 17 - Commitments to our unaudited consolidated financial statements included elsewhere in this report for additional information.