Construction Partners (ROAD) Q4 2025: Backlog Up 18 Quarters, Sunbelt Expansion Drives 26% Growth Path
ROAD enters 2026 with record backlog visibility and a five-year plan to double revenue and EBITDA by 2030. Sunbelt demographic and industrial migration continues to fuel organic and acquisitive growth engines, while management’s focus on recurring maintenance and small-project risk discipline underpins margin expansion. With 80%+ next-year revenue in backlog and no need for transformative M&A, ROAD’s model signals compounding cash flow and scale leverage ahead.
Summary
- Backlog Momentum: ROAD’s 18 straight quarters of backlog growth anchor multi-year revenue visibility.
- Sunbelt Focus: Platform and bolt-on acquisitions in high-growth states accelerate recurring revenue and margin scale.
- Margin Expansion: Execution on small, high-return projects and integration discipline drive consistent EBITDA margin gains.
Performance Analysis
ROAD delivered a record fiscal 2025, with a 54% revenue surge powered by both organic expansion and the integration of 12 acquisitions, including the transformational Lone Star deal. The company’s Sunbelt-centric model—anchored in regions growing five times faster than the national average—continues to convert demographic and industrial migration into contract wins and recurring maintenance revenue. Notably, 80% to 85% of the next twelve months’ revenue is already secured in backlog, providing rare visibility and supporting management’s confidence in its tightened 2026 outlook.
EBITDA margin expansion outpaced even bullish expectations, with nearly 300 basis points of improvement, as ROAD’s disciplined focus on small, recurring projects and operational scale translated into cash flow conversion. Management highlighted that the cadence of acquisitions—12 in the past year, including recent entries into Houston and Florida’s east coast—now feels “normal and very manageable,” with integration processes running in parallel across platform companies. The company’s leverage ticked higher following the Lone Star acquisition, but management expects rapid deleveraging as cash generation accelerates in 2026 and beyond.
- Backlog Resilience: 18 consecutive quarters of sequential backlog growth, a rare feat in construction, supports forward revenue guidance.
- Organic Growth Engine: 8.4% organic growth in 2025, with 7%–8% targeted through 2030, underpins compounding scale.
- Cash Flow Conversion: Operating cash consistently tracks at 75%–85% of EBITDA, funding both M&A and internal initiatives.
With $450 million of acquisitive revenue carrying into 2026 and a 7% organic growth baseline, ROAD is positioned to deliver on its Road 2030 plan—doubling revenue and EBITDA without requiring further transformative deals.
Executive Commentary
"We are better prepared today to take advantage of that market strategically, organizationally, and financially... The opportunity is better than it's ever been, but the team that we have is better than it's ever been, and the leadership of that team is as good as it's ever been."
Ned Fleming, Founder and Executive Chairman
"We have said that we're going to grow 7% to 8% from fiscal 26 to 30. And how do we say that? And why are we confident to say that? It's because we've done it, right? 8.1% average annual organic growth since our IPO. And then more recently, 8.7% in 23 years... and now, as we announced yesterday, 8.4% organic growth in 2025."
Greg Hoffman, Chief Financial Officer
Strategic Positioning
1. Sunbelt Market Concentration
ROAD’s strategy remains tightly focused on the Sunbelt, where population and business migration drive outsized demand for both public and private infrastructure. The company now operates in eight states, including six of the top seven fastest-growing, and continues to avoid geographic sprawl—leadership states they can “double the size of this business and not leave the stage we’re in.” This market discipline ensures local density and recurring revenue from maintenance cycles.
2. Platform and Bolt-On Acquisition Model
Acquisitions remain a core lever, but ROAD’s approach is methodical: platform deals establish a base in new markets, while bolt-ons build scale and operational synergies. The recent P&S Paving (Florida) and Durwood Green (Houston) integrations exemplify this model, each bringing experienced local teams and immediate market share gains. Importantly, integration is decentralized—each unit absorbs acquisitions independently, accelerating value realization and margin capture.
3. Margin Expansion Through Small-Project Discipline
ROAD’s project mix is deliberately skewed toward small, six-to-nine-month jobs, which offer higher margins and lower risk than large, multi-year contracts. This focus, combined with recurring maintenance and vertical integration (aggregates, terminals), is driving EBITDA margin expansion—targeting 17% by 2030. Management’s “CPI Way” framework (culture, parent power, innovation) underpins continuous improvement in bidding, execution, and workforce retention.
4. Recurring Revenue and Cash Flow Resilience
Maintenance cycles and recurring contracts are a structural moat, with most roads requiring repaving every 10–15 years. This, coupled with a growing base of lane miles and heavier vehicle traffic, ensures a durable revenue stream. Cash flow conversion remains robust, with 75%–85% of EBITDA translating to operating cash—funding both organic and acquisitive growth, while supporting rapid deleveraging post-Lone Star.
5. Conservative Capital Allocation and No Need for Transformative M&A
ROAD’s 2030 plan assumes no further transformative acquisitions, relying instead on a steady cadence of bolt-ons and organic growth. The company is sufficiently capitalized, with supportive bank partners, and expects leverage to normalize as scale and cash flow compound. This approach minimizes integration risk and avoids overextension.
Key Considerations
The quarter underscores ROAD’s disciplined execution and strategic consistency amid sector tailwinds. Investors should weigh the following:
- Backlog Visibility: 80%–85% of next-year revenue already secured, providing rare multi-quarter predictability.
- Integration Cadence: Decentralized integration model allows simultaneous absorption of multiple acquisitions without operational bottlenecks.
- Scale Leverage: Margin expansion is increasingly driven by scale, with fixed costs lagging top-line growth.
- Organic Growth Baseline: 7%–8% organic CAGR targeted, leveraging demographic and industrial migration trends.
- Capital Efficiency: Operating cash flow conversion remains strong, supporting both growth investments and deleveraging.
Risks
Key risks include potential disruptions to federal and state infrastructure funding, as the next surface transportation reauthorization approaches in 2026, though management expresses high confidence in bipartisan support. Integration risk from continued M&A, while well-managed to date, could strain systems if cadence accelerates or market conditions shift. Rising input costs (labor, materials) and competitive pressure in core Sunbelt markets could also test margin expansion goals if not offset by scale or pricing power.
Forward Outlook
For fiscal 2026, ROAD guided to:
- 26% revenue growth, including $450 million in acquisitive revenue carryover
- EBITDA margin expansion of 30+ basis points, sustaining the upward trajectory
For full-year 2030, management targets:
- $6 billion in revenue
- 17% EBITDA margin, exceeding prior targets
- Over $1 billion in adjusted EBITDA
Management highlighted:
- Backlog strength as the foundation for guidance confidence
- No reliance on transformative M&A; plan is achievable with current platform and bolt-on cadence
Takeaways
ROAD’s long-term value proposition is underpinned by recurring revenue, scale-driven margin expansion, and a disciplined Sunbelt focus.
- Backlog Anchors Visibility: 18 quarters of sequential backlog growth provide unmatched revenue predictability in an otherwise cyclical sector.
- Margin and Cash Flow Compounding: Small-project discipline, recurring maintenance, and decentralized M&A integration are driving both higher margins and robust cash conversion.
- Sunbelt Growth Engine: Continued demographic and industrial migration, plus generational industry consolidation, set up a multi-year runway for organic and acquisitive growth.
Conclusion
ROAD’s execution in 2025 validates its Sunbelt-centric, recurring revenue model, positioning the company to double in size by 2030 without strategic overreach. With backlog at record highs and integration discipline proven, ROAD offers investors rare multi-year visibility and compounding scale benefits in the infrastructure space.
Industry Read-Through
ROAD’s results and outlook reinforce the strength of Sunbelt infrastructure demand, with demographic and industrial migration outpacing national averages. Backlog-driven visibility and recurring maintenance cycles set a high bar for peers, suggesting that companies with local scale and disciplined M&A integration will outcompete those chasing large, risky projects or overextending geographically. The sector’s reliance on federal and state funding remains a macro watchpoint, but bipartisan consensus and historical funding growth suggest continued tailwinds for well-positioned operators.