TRG | The Bottom Line - 5/2

After wrapping up a busy earnings week, Construction Partners (ROAD) capped the week off announcing its intention to acquire TN-based Pavement Restoration, Inc (PRI). This deal further enhances ROAD’s footprint in the TN market and represents a platform company in the state. This acquisition also expands ROAD’s reach in the southeast, effectively connecting operations from the Carolinas to Texas. PRI brings to the table asphalt preservation (which carries a structurally higher margin), enhancing the ROAD tool kit. PRI operates in AL, AR, MS, & TN, and given PRI’s strong TN presence, ROAD’s Blue Water Industries ops (acquired Nov. 2022) will now fall under the PRI umbrella from a regional operation management standpoint. While terms were not disclosed, we believe PRI top line is in the $80-90MM range with EBITDA margins above ROAD’s core mid-teens EBITDA margin given the nature of PRI’s work. As a reminder, ROAD remains regionally focused on the sunbelt as population growth in core CPI states continues to meaningfully outpace the national average. ROAD had outlined a strategy to focus on high-growth markets in the Southeast with entities maintaining dominant positions.