GRANITE CONSTRUCTION INC Q1 FY2025 earnings call

• Markets are in line with expectations for another record year, with CAP increasing to a record $5.7 billion in Q1. - The Materials segment has seen investments in organic growth and M&A, increasing reserves by 56% to 1.6 billion tons, adding 11 aggregate crushing plants and 10 asphalt plants, and improving margin in aggregates and asphalt. - The Construction segment had a strong start in 2025, with teams winning more work than the prior year, and CAP benefiting from a strong public market environment supported by the IIJA. - Focus on locking in pricing at bid time to mitigate inflation risk, monitoring commodities like natural gas and diesel, and derisking the project portfolio away from long-term design-build mega projects. - Targeting 2-3 materials-focused M&A deals in 2025, with ongoing pursuits to strengthen home markets and geographic footprint.

Materials Segment: In 2024, investments in aggregates led to year-over-year improvements in gross profit margin (260 basis points) and cash gross profit margin (550 basis points). In Q1 2025, consolidated Materials segment revenue increased $8 million year-over-year to $85 million, with gross loss decreasing by $1 million to $2 million. Volume and aggregate sales price increases contributed to gross profit and cash gross profit improvement. Construction Segment: Revenue increased $19 million or 3% year-over-year to $615 million in Q1 2025, driven by strong CAP and favorable weather early in the quarter. Construction segment gross profit improved $29 million to $85 million with a 14% gross profit margin. CAP increased to a record $5.7 billion in Q1.

• Maintaining 2025 guidance: revenue $4.2 billion to $4.4 billion and adjusted EBITDA margin 11% to 12%. - Expecting CAP to continue increasing throughout 2025. - Operating cash flow target of 9% of revenue for the year remains on track. - Confident in meeting growth and margin expectations for 2025, with a busy construction season ahead.

• Macro-economic uncertainty, including potential project disruptions and tariffs. - Impact of tariffs on costs, though not significantly impacting results to date. - Weather impacts on construction projects, particularly in Western markets affecting project progression and revenue recognition in March.

Q: Congrats on a great start, talk about bidding environment and CAP trajectory.

A: The market is strong, especially in the public market, with CAP increasing to a record in Q1. Teams are winning more work with higher margins, and the IIJA continues to provide strong spending with bipartisan support for future legislation.

Q: Discuss Construction segment margins despite weather adversity.

A: Q1 is seasonal, but improved execution and focus on higher-quality projects drove gross profit margin improvement. Expect continued margin improvement in 2025 relative to 2024.

Q: Talk about CAP mix, materials revenue percentage, and M&A.

A: Bid build and best value projects have a healthy mix, with materials revenue expected to stay in the 17%-18% range relative to construction revenue. M&A integration in the Southeast has gone well, providing confidence for future deals.

Q: Ask about federal business, Southeast acquisitions, and M&A focus.

A: Federal business is strong, with successes in Guam and Texas. Southeast acquisitions are performing well, with focus on vertically integrated businesses and strengthening platforms. Targeting materials-focused M&A in the West, Southeast, and other potential platforms.

Q: Inquire about materials unit profitability, April demand, and tariff impacts.

A: Materials unit profitability has improved, with cash gross profit per ton showing progress. April has been strong, and tariffs are navigated by preauthorizing CapEx early to mitigate cost increases.