CFMA’s 2019 CONSTRUCTION FINANCIAL BENCHMARKER ONLINE QUESTIONANNAIRE RESULTS
EXECUTIVE SUMMARY

GENERAL INFORMATION

CFMA and Industry Insights are pleased to present the Executive Summary from CFMA’s 2019 Construction Financial Benchmarker Online Questionnaire. The survey results fuel the industry’s only Financial Benchmarker tool (www.financialbenchmarker.com), whereby construction companies can compare their financial performance to others in the industry.

The 2019 Benchmarker Questionnaire was distributed to approximately 8,000 firms including CFMA member construction firms, non-member construction firms as well as member CPA and CICPAC firms who represent both member and non-member construction companies (mostly companies that are based in or have significant employment in the U.S. and Canada).¹ Responses were received in early 2019. In all, 1,506 companies submitted data for the study. Of those, 1,475 provided detailed and valid financial statements and other required information and thus were included in the financial portion of the results. Companies that submitted data for other sections of the Online Questionnaire and general information that enabled us to classify the respondents were included in those appropriate sections’ results.

CFMA’s Annual Construction Financial Benchmarker is confidential and unique to the industry and all results, accessible through the Benchmarker tool, are presented in composite form, segmented by type of construction work performed, region, revenues, and financial performance.

OVERALL RESULTS

Company Profile

The results compilation includes key data segmentations by company type. A respondent is determined to be of a particular “type” if the estimated percentage of 2018 revenue exceeded 50% for a grouping of NAICS codes. Of those that provided NAICS information, 44% of respondents are Specialty Trade, 31% are Industrial & Nonresidential, 20% are Heavy & Highway, and 5% are Residential Construction. The distribution of respondents by type is largely consistent with previous studies.

The Midwest and Northeast regions are the most widely represented regions of those that provided regional information (23.0% and 22.9%, respectively). The remaining companies are relatively equally distributed among the other U.S. regions. Canadian and foreign companies accounted for less than 1% of the sample. The average respondent earned more than 25% of construction-related revenue in the Midwest region.

Seventy-one percent of responding companies indicated they operate as an S-corporation. The next most common form of legal business entity is a regular C-Corporation, accounting for 14% of participating companies.

The typical company reported total annual revenue of $26,012,000 for the 2018 fiscal year and sales growth of 7% versus the prior year. Those with revenue under $10 million represented 24% of responding companies while 14% of respondents reported revenue of over $300 million.

Financial Information

The Return on Assets (ROA) for the typical respondent fell slightly in FY2018 to 9.5% when compare to the 10.2% return reported in FY2017. The typical respondent achieved a 27.1% Return on Equity (ROE) in FY2018.

The typical respondent reportedly needed 56 days to collect accounts receivable and 34 days to liquidate trade payables in FY2018.

Gross profits fell for the first time in 5 years 16.6% in FY2018 following a 5-year high of 17.1% as reported in FY2017 by the average respondent. The net income before taxes for the average company also fell slightly from 4.8% in FY2017 to 4.4% in FY2018.

The following table provides a detailed look at key ratios for all responding companies and companies by total revenue.

Key Ratios Detail

Revenue Volume
All
Companies
Under $10
Million
$10-25
Million
$25 - 50
Million
$50 - 100
Million
$100 -300
Million
Over $300
Million
All Shown as Medians except Inventory Days
LIQUIDITY RATIOS
Current Ratio 1.5 2.0 1.7 1.5 1.4 1.3 1.2
Quick Ratio 1.3 1.6 1.5 1.4 1.2 1.2 1.1
Days of Cash 20.0 21.3 20.1 20.3 18.5 18.5 20.8
Working Capital Turnover 8.9 5.6 7.5 9.2 11.6 13.1 16.6
PROFITABILITY RATIOS
Return on Assets 9.5% 8.4% 11.4% 12.0% 9.0% 9.2% 6.1%
Return on Equity 27.1% 17.4% 27.1% 29.8% 29.7% 29.3% 28.9%
Times Interest Earned 20.8 11.1 20.0 29.4 20.4 33.3 38.7
LEVERAGE RATIOS
Debt to Equity 1.5 0.9 1.2 1.5 2.2 2.3 3.8
Revenue to Equity 6.4 4.5 5.8 6.6 8.3 8.9 13.8
Asset Turnover 2.6 2.2 2.6 2.7 2.7 2.9 2.8
Fixed Asset Ratio 27.4% 32.8% 27.7% 27.6% 26.0% 22.1% 20.3%
Equity to SG&A Expenses 1.6 1.5 1.5 1.6 1.7 1.8 1.9
Underbillings to Equity 8.6% 4.2% 8.2% 9.9% 10.7% 11.8% 17.9%
Average Backlog to Equity 5.1 2.0 3.3 4.0 6.3 5.9 13.0
EFFICIENCY RATIOS
Average Backlog to Working Capital 6.8 1.9 4.2 6.2 8.7 8.5 16.4
Average Months in Backlog 7.4 5.5 6.3 7.1 8.1 7.9 11.6
Days in Accounts Receivable 55.9 54.4 57.2 54.6 53.8 58.7 56.5
Days in Inventory 3.6 5.5 4.0 3.2 2.5 2.0 2.0
Days in Accounts Payable 33.6 23.3 30.2 35.3 38.5 36.7 46.9
Operating Cycle 46.5 55.7 51.9 45.6 40.8 41.3 27.7
PRODUCTIVITY RATIOS
Revenue per FTE $377,423 $226,920 $309,668 $331,633 $398,760 $539,883 $1,058,593
Gross Profit per FTE $55,757 $47,818 $49,433 $55,455 $53,126 $64,120 $66,606
Revenue per Production FTE $495,911 $342,338 $407,246 $446,522 $524,722 $714,250 $1,353,147
Gross Profit per Production FTE $72,482 $65,346 $65,197 $72,131 $69,081 $78,667 $91,907
SALES PERFORMANCE
Sales Growth (vs. prior year) 7.4% 4.4% 8.6% 7.2% 5.7% 11.8% 8.8%

Best in Class (BIC) Information

The top performing contractors (top 25%), or Best in Class (BIC), is based on a composite ranking of five key performance metrics. The Best in Class companies outperformed the typical respondent’s performance for essentially all financial metrics. The highest achievers reported a 25.1% Return on Assets figure and a 58.5% Return on Equity, compared against all respondents who reported 9.5% and 27.1% rates of return on Assets and Equity, respectively. Best in Class companies also reported less debt (1.1x debt to equity for BIC companies versus 1.5x for all respondents) and a more stable fixed asset ratio (14.3% for BIC companies versus 27.4% for all respondents).

The typical Best in Class company also outperformed the typical respondent in terms of employee productivity with a reported $533,554 in revenue per FTE employee versus $377,423 for all respondents. The gross profit per employee figure for Best in Class exceeded the typical respondent by more than $20,000 ($77,397 vs. $55,757).

The Best in Class companies particularly excelled in the margins they achieved. While all respondents averaged a 16.6% gross profit margin, Best in Class companies reached a 20.3% margin. Further, all respondents earned a 4.4% net income before taxes on average, compared with the 10% figure for the average Best in Class company.

INDUSTRIAL & NONRESIDENTIAL

Profile

The largest grouping of Industrial & Nonresidential respondents reported revenue between $10 and $25 million (21%) followed by the $50 to $100 million group which represented 20% of the sample. The typical company reported total annual revenue of $45 Million for the 2018 fiscal year and sales growth of 4%.

The predominant legal form of business entity for Industrial & Nonresidential companies is an S Corporation (68%) followed by a limited liability company (LLC) as reported by 17% of respondents.

A large majority of Industrial & Nonresidential respondents reported private – domestic ownership (91%) followed by 7% indicating an employee stock ownership plan (ESOP).

Nearly 60% of companies indicated they operate as a General/Prime Contractor (More than 20% of construction work self-performed) and 41% primarily operated in a Construction Management (20% or less of construction work self-performed) capacity.

The average Industrial & Nonresidential company reported 86.4% of revenues were derived from NAICS 236220 (Commercial and Institutional Building Construction)

Of the Industrial & Nonresidential companies that provided regional information, 24% were headquartered in the Midwest. The Far West was the next best represented region, with 23% of respondents. Canadian and Foreign companies accounted for less than 1% of respondents. More than a quarter of the average respondent’s annual construction-related revenue was earned in the Midwest.

Profit Model Ratios

An analysis of profits reveals that Industrial & Nonresidential companies overall experienced a 3.0% net income before taxes, which remained flat when compared the rate reported in FY2017. Return on Assets (ROA) declined to 7.3%, when compared to FY2017 (7.8%). The Industrial & Nonresidential respondents used their assets to generate 3.3 times more sales than assets, maintained a leverage ratio (total assets / net worth) of 3.8 and achieved a return on equity of 29.7%.

Net Income before Taxes

HEAVY & HIGHWAY

Profile

The largest grouping of Heavy & Highway respondents reported revenue under $10 million (24%) followed by the $10 to $25 million group which represents 23% of the total Heavy & Highway respondents. The typical company reported total annual revenue of $27,963,000 and sales growth of 8% for the 2018 fiscal year.

The predominant legal form of business entity is an S Corporation (76%) while Regular C Corporations represent 15% of responding Heavy & Highway companies.

More than 90% of Heavy & Highway companies reported private – domestic ownership followed by 7% indicating an employee stock ownership plan (ESOP).

More than 80% of companies indicated they operate as a General/Prime Contractor (More than 20% of construction work self-performed) while 16% primarily operated as a subcontractor (50% or more of construction work performed for another contractor).

The average Heavy & Highway company reported 48% of revenues were derived from NAICS 237310 (Highway, Street, and Bridge Construction) followed by 31% of revenues from NAICS 237990 (Other Heavy and Civil Engineering Construction).

Of the Heavy & Highway companies that provided regional information, 21% were headquartered in the Far West. The Southwest was the next best represented region, with 20% of respondents. Canadian and Foreign companies accounted for less than 1% of total companies.

Profit Model Ratios

An analysis of profits reveals that Heavy & Highway companies overall experienced a 5.6% net income before taxes, which remained relatively flat when compared with FY2017 results. Return on Assets fell to 9.1%, compared with to the 10.7% return reported for FY2017. The typical Heavy & Highway respondent used their assets to generate 1.9 times more sales than assets, maintained a leverage ratio (total assets / net worth) of 2.0 and achieved a return on equity of 19.1%.

Net Income before Taxes

SPECIALTY TRADE

Profile

The largest grouping of Specialty Trade respondents reported revenue between $10 million and 25 Million (31%) followed by the under $10 million group which represented 30% of respondents. The typical Specialty Trade company reported total annual revenue of $18,642,000 and sales growth of 8% for the 2018 fiscal year.

S-corporation is the legal business entity of 72% of responding organizations. The next most common form of legal business entity was a Regular C Corporation, accounting for 18% of total participating companies.

Eighty-eight percent of Specialty Trade respondents reported private – domestic ownership followed by 10% reporting an employee stock ownership plan (ESOP).

The average Specialty Trade company reported 27% of revenues were derived from NAICS 238210 (Electrical Contractors) followed by 24% of revenues from NAICS 238220 (Plumbing, Heating, and Air-Conditioning Contractors).

A large majority (87%) of Specialty Trade respondents stated that they primarily act as a subcontractor (50% or more of construction work performed for another contractor). General/prime contracting (More than 20% of construction work self-performed) as a primary role was the second most selected response among participants at 11%.

Of the Specialty Trade companies that provided regional information, 24% were headquartered in the Midwest. The Northeast was the next best represented region, with 20% of respondents.

Profit Model Ratios

Specialty Trade companies overall experienced a 5.1% net income before taxes, which decreased from 5.8% in FY2017, and a 11.8% return on assets figure. The typical Specialty Trade company used their assets to generate 2.6 times more sales than assets and maintained a leverage ratio (total assets / net worth) of 2.1. Return on equity remained flat in FY2018 with the typical respondent reporting a 29.0% return.

Net Income before Taxes

ABOUT THE RESULTS

The results of CFMA’s 2019 Annual Financial Survey Online Questionnaire provide critical benchmarking data and financial information about the construction industry. To remain competitive, contractors should review these results in their entirety, with particular focus on company classification, geographic region, and annual revenue data.

The Construction Financial Benchmarker at www.financialbenchmarker.com is CFMA’s online tool that allows users to compare their companies’ financial performance with the Annual Financial Survey Online Questionnaire results. With flexibility in selecting benchmarks and easy data entry, the financial results include graphic presentations of key financial data going back to 2010.

For more information on CFMA’s Construction Financial Benchmarker tool, contact Mike Elek (melek@cfma.org or 609-452-8000).

CFMA’s 2019 Annual Financial Survey Online Questionnaire was conducted and analyzed by Industry Insights² and the Financial Survey & Benchmarker Committee. The Committee wishes to thank all respondents and encourages CFMA General Members, CPA Firms, and all other construction companies to participate in future Online Questionnaire data collection efforts.

Endnotes

  1. Results of CFMA’s 2019 Construction Industry Annual Financial Survey Online Questionnaire are not intended to be, nor do they provide, a statistically valid representation of the construction industry as a whole. Rather, it’s representative of 1,475 CFMA General Members and non-members who provided detailed and valid financial statements and other required information. The level of participant overlap from year to year can impact the financial results. Differences in the financial statements between years are due in part to market influences and individual company performance, as well as to the different participant makeup each year.
  2. Industry Insights was not engaged to and did not audit this information, and accordingly, does not express an opinion or any other form of assurance on it.


If you have any questions, contact Mike Elek at melek@cfma.org or 609-945-2412, ext. 232.

For technical questions, please contact Matthew Chaffin at mchaffin@industryinsights.com or 614.389.2100, ext. 115.

©2019 CFMA