TRG | The Bottom Line – 2/7

Construction Partners (ROAD) ended the week reporting a Q1’25 earnings beat and raising FY’25 guidance. ROAD stock has had quite a round trip over the past two weeks on the heels of Spruce Point Capital’s January 23rd short report on the company. ROAD stock dropped 10% on the day of the report, and the stock has since round tripped, up ~10% from lows. TRG published a thought-piece report, leaning on TRG’s industry relationships developed over the past 15+ years to address what we, and ROAD management, believe to be inaccuracies contained in the report. Excluding 1x charges, ROAD’s Q1’25 EBITDA of $68.8MM (12.3% margin) compared against the Street’s $58.5MM. ROAD faced tough YOY comps, and Q1’25 organic revenues still improved a solid 11.2% YOY (vs. last year’s +16% comp) on solid core performance and favorable weather in the quarter. In conjunction with its earnings release, ROAD also raise FY’25 guidance. The mid-point of the adj EBITDA guidance range implies a 7% increase. ROAD stock intraday increased ~3% vs. an S&P 500 down ~1%. ROAD is now trading right back where it was pre-Spruce Point note from late January. Clearly, ROAD’s earnings results told a better story than the picture painted in the recent short report.