CFMA’s 2017 CONSTRUCTION FINANCIAL BENCHMARKER ONLINE QUESTIONANNAIRE RESULTS
EXECUTIVE SUMMARY

GENERAL INFORMATION

CFMA and Industry Insights are pleased to present the Executive Summary from CFMA’s 2017 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 2017 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 2017. In all, 1,496 companies submitted data for the study. Of those, 1,483 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 Benchmarker Questionnaire 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.

ALL RESPONDENTS PROFILE

Of the nearly 1,100 companies that provided NAICS information, 32% of the respondents were Industrial & Nonresidential contractors, 20% of the respondents were Heavy & Highway contractors, 46% were Specialty Trade contractors, and 2% were classified as “Other.” This compares fairly evenly to the respondent types of prior studies.

Nearly 25% of responding companies that provided regional information were headquartered in the Midwest. The Far West was the second highest represented region, with 24% of respondents. The remaining companies were relatively equally distributed among the other U.S. regions. Canadian and foreign companies accounted for less than 1% of all companies.

S-corporations were the legal business entity of 68% of responding organizations. The next most common form of legal business entity were regular C-Corporations, accounting for nearly 17% of total participating companies.

The typical company reported total annual sales of $25,297,000 for the 2016 fiscal year. Those with sales under $10 million represented 25% of responding companies while 6% of respondents reported sales of over $300 million.

OVERALL RESULTS

Financial Information

Return on Assets (ROA) once again increased in FY2016 to 10.1% when compared to 9.0% in FY2015, 6.9% in FY2014 and 6.2% in FY2013. Return on Equity (ROE) was 29.4% in FY2016, increasing from 25.3% in FY2015, 19.0% in FY2014 and 17.3% in FY2013.

Average days in A/R fell to 53.2 in FY2016 following a 3-year increase in fiscal years 2015, 2014, and 2013 (55.2, 53.8 and 51.4, respectively). Average days in A/P also declined to 31.5 in FY2016, when compared to the reported 33.4 days in FY2015.

Gross profits for all companies increased from 15% in FY2015 to 16.7% in FY2016. Additionally, net income before taxes increased from 4.4% in FY2015 to 5.2% in FY2016.

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

Key Ratios Detail
    All Companies – By Sales Volume
  All Companies Under $10 Million $10-25 Million $25-50 Million $50-100 Million $100-300 Million Over $300 Million
             
LIQUIDITY RATIOS              
Current Ratio 1.5 2 1.6 1.5 1.5 1.3 1.2
Quick Ratio 1.3 1.8 1.5 1.3 1.2 1.2 1.1
Days of Cash 18.9 18.4 19.3 18.1 20.2 20.1 19.1
Working Capital Turnover 9.7 6.2 8.7 10.1 13.1 15.2 17.1
               
PROFITABILITY RATIOS              
Return on Assets 10.1% 13.10% 12.00% 10.70% 9.30% 8.40% 7.20%
Return on Equity 29.4% 26.80% 29.20% 32.50% 30.20% 28.50% 31.20%
Times Interest Earned 26.3 18.3 25.2 28.2 38.3 47 49.7
               
LEVERAGE RATIOS              
Debt to Equity 1.6 0.8 1.4 1.8 2.1 2.5 3.5
Revenue to Equity 7.1 4.9 6.5 8.1 8.9 10.6 14.1
Asset Turnover 2.8 2.5 2.7 2.8 2.9 3 2.9
Fixed Asset Ratio 27.8% 30.70% 35.10% 26.40% 25.50% 23.30% 18.60%
Equity to SG&A Expenses 1.5 1.4 1.4 1.4 1.5 1.7 1.7
Underbillings to Equity 8.9% 5.00% 8.20%  9.70% 9.30% 12.70% 14.90%
Average Backlog to Equity 4.9 2.1 3 4.3 6.2 8.2 11.7
               
EFFICIENCY RATIOS              
Average Backlog to Working Capital 6.3 2.6 3.3 5.4 8 11.6 15
Average Months in Backlog 7 5 4.5 6.5 7.7 8.9 10.6
Days in Accounts Receivable 53.2 51.8 52.1 54.3 54 55.1 52.3
Days in Inventory 3.6 4.2 5.3 2.6 2.1 1.8 4.5
Days in Accounts Payable 31.5 22.4 28.3 34 36.9  37.2 43.3
Operating Cycle 44.9 60.1 48.2 44.7 37.3 34.6 30.8
               
PRODUCTIVITY RATIOS              
Revenue per FTE Employee $351,894 $210,919 $270,698 $338,891 $372,099 $599,396 $562,482
Gross Profit per FTE Employee $51,073 $44,998 $50,209 $53,412 $50,410 $54,841 $50,387
               
Revenue per Production FTE Employee $485,357 $278,877 $348,253 $418,388 $502,090 $928,573 $987,221
Gross Profit per Production FTE Employee $66,438 $60,487 $61,763 $68,408 $63,209 $75,097 $63,638

Best in Class (BIC) Information

The top performing contractors (top 25%), or best in class, 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 26.3% Return on Assets figure and 59% Return on Equity, compared against all respondents who reported 10.1% and 29.4% rates of Return on Assets and Equity, respectively. Best in Class companies also reported less debt (1.2 times debt to equity for BIC companies versus 1.6 times for all respondents) and a more stable fixed asset ratio (17.1% for BIC companies versus 27.8% for all respondents).

The typical Best in Class company also outperformed the typical respondent in terms of employee productivity with a reported $377,986 in revenue per FTE employee versus just $351,894 for all respondents. The Best in Class gross profit per employee figures exceeded the typical respondent by nearly $13,000 ($63,978 vs. $51,073).

The Best in Class companies particularly excelled in the margins they achieved. While all respondents averaged a 16.7% gross profit margin, Best in Class companies reached a 20.9% margin. Further, all respondents earned a 5.2% net income before taxes, compared with the Best in Class companies which averaged a 10.2% net income before taxes.

INDUSTRIAL & NONRESIDENTIAL

Profile

The largest grouping of Industrial & Nonresidential respondents reported sales between $25 and $50 million (19.4%) followed by the $50 to $100 million group which represented 18.8% of the sample.

The predominant legal form of business entity for Industrial & Nonresidential companies is a privately held S Corporation (69.6%). The next most common form of legal entity is a LLC (15.5%).

A vast majority of Industrial & Nonresidential respondents reported private – domestic ownership (92.3%) followed by 6.0% indicating an employee stock ownership plan.

Nearly 55% of respondents were general/prime contractors while Construction Management as a primary role was the second most selected response among respondents at 39.9%.

Of the Industrial & Nonresidential companies that provided regional information, 30.8% were headquartered in the Far West. The Midwest was the 2nd best represented region, with 20.4% of respondents. The remaining companies were relatively equally distributed among the rest of the U.S. regions. Canadian and Foreign companies accounted less than 1% of total companies.

Profit Model Ratios

An analysis of profits reveals that Industrial & Nonresidential companies overall experienced a 3.4% net income before taxes, which increased from 2.5% in FY2015, and an 8.1% return on assets figure. They used their assets to generate 3.3 times more sales than assets, while maintaining a leverage ratio (total assets / net worth) of 3.9. The typical Industrial and Nonresidential respondent’s return on equity was 33.0% in 2016 which increased when compared to the average respondent’s rate reported for 2015 (27.9%).

Net Income before Taxes Industrial Nonresidential Net Income Before Taxes

HEAVY & HIGHWAY

Profile

The largest grouping of Heavy & Highway respondents reported sales between $10 and $25 million (27.4%) followed by the $25 to $50 million group which encompasses 20.4% of respondents.

The predominant legal form of business entity for Heavy & Highway companies is a privately held S Corporation (67.3%). The next most common form of legal entity is C Corporation (20.8%).

A vast majority of Heavy & Highway respondents reported private – domestic ownership (88.3%) followed by 7.8% indicating an employee stock ownership plan (ESOP).

Nearly 81% of respondents reported general/prime contractor as the primary role of the company. The subcontractor role was the second most selected response among respondents at 18.2%.

Of the Heavy & Highway companies that provided regional information, 25% were headquartered in the Far West. The Midwest was the 2nd best represented region, with 20.5% of respondents. The remaining companies were relatively equally distributed among the rest of the U.S. regions.

Profit Model Ratios

An analysis of profits reveals that Heavy & Highway companies overall experienced a 5.8% net income before taxes, which increased from 5.5% in FY2015, and a 9.6% return on assets figure. They used their assets to generate 2.0 times more sales than assets, while maintaining a leverage ratio (total assets / net worth) of 2.1. The typical Heavy & Highway respondent’s return on equity was 22.9% in FY2016 which increased slightly when compared to the average respondent’s rate reported for FY2015 (21.2%).

Net Income before Taxes Heavy and Highway Net Income Before Taxes

SPECIALTY TRADE

Profile

The largest grouping of Specialty Trade respondents reported sales under $10 million (32.6%) followed by the $10 to $25 million group which represented 29.7% of respondents.

The predominant legal form of business entity for Specialty Trade companies is a privately held S Corporation (67.1%). The next most common form of legal entity is C Corporation (20.1%).

A vast majority of Specialty Trade respondents reported private – domestic ownership (91.3%) followed by 6.9% indicating an employee stock ownership plan (ESOP).

A majority (87.9%) of Specialty Trade respondents stated that they primarily act as subcontractors. General/prime contracting as a primary role was the second most selected response among participants at 11.6%.

Of the Specialty Trade companies that provided regional information, 27.9% were headquartered in the Far West. The Midwest was the 2nd best represented region, with 25.0% of respondents.

Profit Model Ratios

An analysis of profits reveals that Specialty Trade companies overall experienced a 6.2% net income before taxes, which increased from 5.4% in FY2015, and a 13.5% return on assets figure. They used their assets to generate 2.7 times more sales than assets, while maintaining a leverage ratio (total assets / net worth) of 2.1. The typical Specialty Trade respondent’s return on equity was 31.5% in in FY2016 which represents an increase when compared to the average respondent’s rate reported for FY2015 (24.7%).

Net Income before Taxes Specialty Trade Net Income Before Taxes

ABOUT THE RESULTS

The results of CFMA’s 2017 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 2017 Annual Financial Survey Online Questionnaire was conducted by CFMA’s Financial Survey & Benchmarker Committee and results were compiled 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 2017 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 1,496 CFMA General Members and non-members who provided detailed 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.

©2018 CFMA