Q2 2024 Granite Construction Inc Earnings Call

Jason: Good day. My name is Jason, and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the Granite Construction Incorporated 2024 second quarter conference call. This call is being recorded. All lines have been placed on mute to prevent any background noise, and after the speaker's remarks, there will be a question and answer period. To ask a question, please press star, then one. Please note we will take one question and one follow-up question from each participant today. It is now my pleasure to turn the floor over to Vice President of Investor Relations, Mike Barker.

Jason: My name is Jason, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Granite Construction Inc. 2024 second quarter conference call. This call is being recorded. All lines have been placed on mute to prevent any background noise. And after the speaker's remarks, there will be a question and answer period. To ask a question, please press star, then one. Please note we will take one question and one follow-up question from each participant today.

Good day.

Jason: My name is Jason and I'll be your conference facilitator today.

Speaker Change: At this time, I would like to welcome everyone to the Granite Construction Incorporated 2024 Second Quarter Conference Call.

This call is being recorded. All lines have been placed on mute to prevent any background noise and after the speaker's remarks there will be a question and answer period. To ask a question, please press star then 1.

Please note we will take one question and one follow-up question from each participant today It is now my pleasure to turn the floor over to vice president of investor relations Mike Barker

Mike Barker: It is now my pleasure to turn the floor over to Vice President of Investor Relations Mike Barker. Good morning, and thank you for joining us. I'm pleased to be here today with President and Chief Executive Officer Kyle Larkin and Executive Vice President and Chief Financial Officer Lisa Curtis.

Mike Barker: Good morning, and thank you for joining us. I'm pleased to be here today with President and Chief Executive Officer Kyle Larkin and Executive Vice President and Chief Financial Officer Lisa Curtis. Please note that today's earnings presentation will be available on the Events and Presentations page of our Investor Relations website. We will begin today with a brief discussion regarding forward-looking statements and non-GAAP measures. Some of the discussion today may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Mike Barker: Good morning and thank you for joining us. I'm pleased to be here today with President and Chief Executive Officer Kyle Larkin and Executive Vice President and Chief Financial Officer Lisa Curtis.

Mike Barker: Please note that today's earnings presentation will be available on the Events and Presentations page of our Investor Relations website. We begin today with a brief discussion regarding forward-looking statements and non-GAAP measures. Some of the discussion today may include forward-looking statements within the meeting of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are estimates reflecting the current expectations and best judgment of senior management regarding future events, occurrences, opportunities, targets, growth, demand, strategic plans, circumstances, activities, performance, shareholder value, outcomes, outlook, guidance, objectives, committed and awarded projects were capped. And results. Actual results could differ materially from statements made today.

Please note that today's earnings presentation will be available on the events and presentations page of our investor relations website.

Mike Barker: These forward-looking statements are estimates reflecting the current expectations and best judgment of senior management regarding future events, occurrences, opportunities, targets, growth, demand, strategic plans, circumstances, activities, performance, shareholder value, outcomes, outlook, guidance, objectives, committed and awarded projects, or CAP, and results. However, actual results could differ materially from statements made today. Please refer to Granite's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these forward-looking statements.

We begin today with a brief discussion regarding forward-looking statements and non-GAAP measures.

Some of the discussion today may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are estimates reflecting the current expectations.

Mike Barker: and best judgment of senior management regarding future events, occurrences, opportunities, targets

Mike Barker: growth

Demand.

Mike Barker: strategic plans

circumstances, activities, performance,

Mike Barker: Actual results could differ materially from statements made today.

Mike Barker: Please refer to granted most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these forward-looking statements. The company assumes no obligation to update forward-looking statements, except as required by law. Certain non-GAAP measures may be discussed during today's call and from time to time by the company's executives. These include, but are not limited to adjusted. Adjusted even a margin, adjusted net income, adjusted earnings per share and material segment cash growth profit.

Granite: Please refer to Granite's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these forward-looking statements.

Mike Barker: The company assumes no obligation to update forward-looking statements except as required by law. Certain non-GATT measures may be discussed during today's call and from time to time by the company's executives. These include, but are not limited to, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings Per Share, and Material Segment Cash Gross Profit. The required disclosures regarding our non-GAAP measures are included as part of our earnings press releases and in-company presentations, which are available on our website, graniteconstruction.com, under Investor Relations. Now, I would like to turn the call over to Kyle Larkin.

The company assumes no obligation to update forward-looking statements except as required by law.

Mike Barker: Certain non-GAAP measures may be discussed during today's call and from time to time by the company's executives.

These include, but are not limited to, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, and material segment cash gross profit.

Mike Barker: To require disclosures regarding our non-GAAP measures are included as part of our earnings press releases and in company presentations, which are available on our website, grantedconstruction.com, under Investor Relations.

Speaker Change: The required disclosures regarding our non-GAAP measures are included as part of our earnings press releases and in-company presentations, which are available on our website, graniteconstruction.com, under Investor Relations.

Kyle Larkin: Now I would like to turn the call over to Karl Lark. Good morning and welcome to our second quarter conference call. Before I discuss our financial results for the quarter, I want to mention an exciting development and our ongoing work to expand our Berkeley integrated operations. This week, we entered into an agreement to acquire Dickerson and Bowen, the leading regional aggregates, asphalt, and highway construction company serving central and southern Mississippi. Subject to customary closing conditions. We expect the transaction to close in the third quarter. The acquisition is a highly complimentary bolt-on to our 2023 acquisition that layman Roberts and metastonic gravel as Dickerson and Bowen is also on materials focused for a weekly integrated operation.

Kyle Larkin: Good morning, and welcome to our second quarter conference call. Before I discuss our financial results for the quarter, I want to mention an exciting development in our ongoing work to expand our vertically integrated operations. This week, we entered into an agreement to acquire Dickerson & Bowen, a leading regional aggregates, asphalt, and highway construction company serving central and southern Mississippi. Subject to customary closing conditions, we expect the transaction to close in the third quarter.

Speaker Change: Now I would like to turn the call over to Kyle Larkin.

Kyle Larkin: Good morning, and welcome to our second quarter conference call. Before I discuss our financial results for the quarter, I want to mention the exciting development and our ongoing work to expand our vertically integrated operations.

Kyle Larkin: The acquisition is a highly complementary bolt-on to our 2023 acquisition of Langdon-Lobberts and Memphis Stone & Gravel, as Tickerson & Bowen is also a materials-focused, vertically integrated operation. The acquisition will bring three sand and gravel pits and four asphalt plants to our southeast home market, extending our footprint down the I-55 corridor through Jackson, Mississippi, and to the southern end of the state.

Kyle Larkin: This week, we entered into an agreement to acquire Dickerson & Bowen, a leading regional aggregates, asphalt, and highway construction company serving central and southern Mississippi.

Subject to customary closing conditions we expect the transaction to close in the third quarter. The acquisition is a highly complimentary bolt-on to our 2023 acquisition at Langdon-Lobberts and Memphis Stone & Gravel as Tickerson & Bowen is also a materials focused vertically integrated operation.

Kyle Larkin: We will have three sand gravel pits and four asphalt plants to our southeast home market. Extended our footprint down the 55 corridor through Jackson, Mississippi, into the southern end of the state. This purchase continues our strength and expand capital allocation strategy by investing in the types of materials focused for the integrated operations that have been our core business for over 100 years. I expect you're in it to continue to grow organically and through M&A to continue the strategy. But we are very selective. We are continually evaluating M&A opportunities within our existing footprint as well as in our new geographies.

Mike Barker: The acquisition will have three sand and gravel pits.

Mike Barker: and four asphalt plants to our southeast home market, extending our footprint down the I-55 corridor through Jackson, Mississippi, and to the southern end of the state.

Kyle Larkin: This purchase continues our strength and expands our capital allocation strategy by investing in the types of materials-focused, vertically integrated operations that have been our core business for over 100 years. I expect Granite to continue to grow organically and through M&A as we continue this strategy. While we are very selective, we are continually evaluating M&A opportunities within our existing footprint as well as in our new geography. Now, let's jump into the quarter.

Mike Barker: This purchase continues our strength and expand capital allocation strategy by investing in the types of materials focused early integrated operations that have been our core business for over a hundred years.

Mike Barker: I expect Granite to continue to grow organically and through M&A as we continue this strategy. While we are very selective, we are continually evaluating M&A opportunities within our existing footprint as well as in our new geographies.

Kyle Larkin: I'm pleased with our strong second quarter. We continue to build our capital, organically grow revenue, and our profitability, and while we have made notable progress, we remain focused on driving even higher levels of execution on our projects and in our plans as we continue to work to raise the bar on profitability. In the construction segment, the second quarter is typically when projects in the majority of our markets ramp up for the busy summer construction season. Entering Q2, with high levels of activity across our markets, allowed us to achieve a 22% increase in revenue over the prior year. Polls for businesses across our geographies showed revenue increases year-over-year.

Kyle Larkin: Now let's jump into the quarter. I'm pleased with our strong second quarter. We are executing on our plan. We continue to build CAP, your organically grew revenue and our profitability increased. While we have made notable progress, we remain focused on driving even higher levels of execution on our projects and in our plants. We continue to work to raise the bar on profitability. The construction segment, the second quarter, is typically when we see projects in the majority of our markets ramp up for the busy summer construction season. We're in Q2 with high levels of CAP across our markets.

Mike Barker: Now, let's jump into the quarter. I'm pleased with our strong second quarter we are executing on our plan. We continue to build cap, the organically grew revenue, and our profitability increased.

Mike Barker: While we have made notable progress, we remain focused on driving even higher levels of execution in our projects and in our plants as we continue to work to raise the bar on profitability.

Mike Barker: In the construction segment, the second quarter is typically when we see projects in the majority of our markets ramp up for the busy summer construction season. Entering Q2, with high levels of cap across our markets,

Kyle Larkin: Allow us to achieve a 22% increase in revenue over the prior year. Most of our businesses across our geographies posted revenue increases year-over-year. If we transition into the heart of the construction season, I expect this dynamic to continue through the third quarter. In addition to a strong quarter of revenue growth, we also added 77 million in CAP during the quarter to end at 5.6 billion. This is an increase of 139 million from the second quarter of 2023 and 1.4 billion from the second quarter of 2022. Our markets continue to be robust. Through June, the amount that we have bid on projects for both the second quarter and first half 2024 exceeds the amount bid for the same period in 2023.

Mike Barker: allowed us to achieve a 22% increase in revenue over the prior year. Polls for businesses across our geographies posted revenue increases year over year.

Kyle Larkin: As we transition into the heart of the construction season, I expect this dynamic to continue through the third quarter. In addition to a strong quarter of revenue growth, we also added $77 million in capital expenditures during the quarter to end at $5.6 billion. This is an increase of $139 million from the second quarter of 2023 and $1.4 billion from the second quarter of 2022. Our markets continue to be robust. Through June, the amount that we have bid on projects for both the second quarter and the first half of 2024 exceeds the amount bid for the same period in 2023. As mentioned previously, we continue to be very selective in the projects that we bid on, with a specific focus on two categories.

Mike Barker: As we transition into the heart of the construction season, I expect this dynamic to continue through the third quarter.

Mike Barker: In addition to a strong quarter of revenue growth, we also added 77 million in cap during the quarter to end at 5.6 billion. This is an increase of 139 million from the second quarter of 2023 and 1.4 billion from the second quarter of 2022.

Mike Barker: Our markets continue to be robust.

Kyle Larkin: As mentioned previously, we continue to be very selective in the projects that we bid, but the specific focus is on two categories. First, we are focused on our home markets with owners, vendors, and subcontractors, along with the robust employee base that we already know well. Second, we are focused on best value projects, where we can leverage our established relationships and our home markets to deliver larger projects while minimizing risk. Best value projects represent 2.3 billion per 42% of our total CAP at the end of the quarter. This is an increase of 98 million from the second quarter of 2023 and 584 million from the second quarter of 2022.

Kyle Larkin: First, we are focused on our home markets, with owners, vendors, and subcontractors, along with a robust employee base that we already know well. Second, we are focused on best value projects, where we can leverage our established relationships and our home markets to deliver larger projects while minimizing risk. Those value projects represent $2.3 billion, or 42% of our total cap at the end of the quarter. This is an increase of $98 million from the second quarter of 2023 and $584 million from the second quarter of 2022.

Kyle Larkin: The collaborative delivery methods utilize the best value projects like construction manager, general contractor, or progressive design build better position us for success by allowing us to work with our clients early to identify and mitigate risk. Larger best value projects are often separated into smaller work packages that are reviewed to multiple project workshops. This provides more opportunities to identify, assess, and address risk than large bid build projects. Here we have a history of successful best value projects and generally find that these projects are constructed more efficiently and significantly fewer claims compared to other contracting methods.

Kyle Larkin: The collaborative delivery methods utilized in best value projects like construction manager, general contractor, or progressive design build better position us for success by allowing us to work with our clients early to identify and mitigate risks. Larger best value projects are often separated into smaller work packages that are reviewed through multiple project workshops. This provides more opportunities to identify, assess, and address risks than large bid-bill projects.

Kyle Larkin: We have a history of successful best value projects and generally find that these projects are constructed more efficiently and with significantly fewer claims compared to other contracting methods. Our construction segment is growing, and I believe that in this market, we are in a strong position to win work and drive growth for the remainder of 2024 and into 2025. Moving to the materials segment, during the second quarter and through July, we continue to execute under the organizational changes announced last quarter.

Kyle Larkin: Our construction segment is growing, and I believe that in this market, we are in a strong position to win work and drive growth for the remainder of 2024 and in the 2025. Moving to the material segment during the second quarter and through July, we can continue to execute under the organizational changes announced last quarter. But the changes we centralize management functions such as sales and quality control, allowing for more consistency both in pricing decisions and in efforts to drive higher levels of efficiency and automation across our plants. We are already seeing increased profitability. The exciting news is that we are just getting started.

Kyle Larkin: With the changes, we centralize management functions, such as sales and quality control, allowing for more consistency both in pricing decisions and in efforts to drive higher levels of efficiency and automation across our plants. Our teams across the business are executing, and we are already seeing increased profitability. The exciting news is that we are just getting started.

Speaker Change: With the changes, we centralized management functions, such as sales and quality control, allowing for more consistency both in pricing decisions and in efforts to drive higher levels of efficiency and automation across our plants.

Mike Barker: Our teams across the business are executing. We are already seeing increased profitability. The exciting news is that we are just getting started. We have also continued our strategic investments in the materials business.

Kyle Larkin: We have also continued our strategic investments in the materials business, led by the materials-focused agreement to acquire Dickerson and Bowen in Mississippi. Growing our materials segment through vertical integration, both in new and existing markets, is central to our strategy. Also in Q2, we announced a new lease that we entered into in southwest Washington that will serve as an asphalt plant site. It will also allow us riverfront access to barge aggregates into the site via the Columbia River.

Kyle Larkin: We have also continued our strategic investments in materials business that I'm led by the materials focused agreement to acquire Dickerson and Bowen and Mississippi. Going on material segment through vertical integration, both the new and existing markets is central to our strategy.

Kyle Larkin: Also in Q2, we announced a new lease that we entered into in South Wales. With Washington, it will serve as an asphalt plant site. It will also allow us riverfront access to barge aggregates into the site via the Columbia River. In Salt Lake City, we place a new aggregate plan and a production to support the booming market there. We will continue to invest in our materials business both organically and through M&A, got you further margin expansion. As previously discussed, a focus of our material segment has been price increases and both aggregates and asphalt. The first half of 2024, we are realizing our targeted price increases of 10% in aggregates and 5% in asphalt on average across the segment.

Kyle Larkin: In Salt Lake City, we placed a new aggregate plant into production to support the booming market there. We will continue to invest in our materials business both organically and through M&A, driving further margin expansion. As previously discussed, a focus of our materials segment has been price increases in both aggregates and asphalt. In the first half of 2024, we are realizing our targeted price increases of 10% in aggregates and 5% in asphalt on average across the segment.

Mike Barker: In Salt Lake City, we placed a new aggregate plant into production to support the booming market there. We will continue to invest in our materials business both organically and through M&A, driving further margin expansion.

Mike Barker: As previously discussed, a focus of our materials segment has been price increases in both aggregates and asphalt. Through the first half of 2024, we are realizing our targeted price increases of 10% in aggregates and 5% in asphalt on average across the segment.

Kyle Larkin: We are also seeing the effects of these price increases and impact of acquisitions in our second quarter results, with profit margin increasing 180 basis points year over year. Material segment cash growth profit margin, which excludes material segment depreciation and amortization from growth profit of 10 million and 6 million in the second quarter of 2024 and 2023. Inspectively increased to 24% than 20%. We are executing on our strategy, and it is driving results.

Kyle Larkin: You're also seeing the effects of these price increases and the impact of acquisitions in our second quarter results, with profit margins increasing 180 basis points year over year. Material segment cash gross profit margin, which excludes material segment depreciation and amortization from gross profit, of $10,006,000 in the second quarter of 2024 and 2023 respectively increased to 24% from 20%. We're executing on our strategy, and it is driving results. Now, I'll turn it over to Lisa to discuss our financial performance for the quarter.

Lisa Curtis: Now, I'll turn it over to Lisa to discuss our financial performance for the quarter.

Lisa Curtis: Thank you, Kyle. In the second quarter of 2024, our strong performance continued from the first quarter. The revenue increased 184 million, or 20%. Gross profit increased 62 million, or 60%. The best net income improved 30 million. Adjusted EBIDAW improved 48 million. And for the first half of 2024, operating cash flow improved 141 million. In the construction segment, revenue increased 169 million or 22% year over year to 918 million, primarily driven by higher levels of cap. Increase also includes approximately 30 million of incremental revenue from acquisitions. Multiple markets across the company entered the quarter with higher levels of cap, and our teams quickly ramped up work on projects.

Lisa Curtis: In the second quarter of 2024, our strong performance continued from the first quarter. Revenue increased $184 million, or 20%. Gross profit increased $62 million, or 60%. Suggested net income improved $30 million. Adjusted EBITDA improved $48 million.

Mike Barker: Gross profit increased $62 million or 60%. The best at net income improved $30 million.

Lisa Curtis: And for the first half of 2024, operating cash flow improved $141 million. In the construction segment, revenue increased $169 million, or 22% year-over-year, to $918 million, primarily driven by higher levels of capital. The increase also includes approximately $30 million of incremental revenue from acquisitions. Additionally, multiple markets across the company entered the quarter with higher levels of cap, and our teams quickly ramped up work on projects. The increases in revenue were led by California, Nevada, and Alaska, with a segment gross profit margin of 15%.

Mike Barker: And for the first half of 2024, operating cash flow improved $141 million.

Mike Barker: In the construction segment, revenue increased $169 million, or 22% year-over-year, to $918 million, primarily driven by higher levels of cap.

Lisa Curtis: The increases in revenue were led by California, Nevada, and Alaska. Construction segment gross profit improved 56 million to the segment gross profit margin of 15%. The increase in gross profit margin was largely driven by the transition to our higher quality project portfolio, which has been bolstered by our focus on project execution. In the material segment, revenue increased 15 million year over year to 165 million, with gross profit up 5 million to 29 million. The increase in materials revenue was primarily due to acquired businesses, as well as increased sales prices offsetting lower volumes. Inc. The increase in growth profit was led by increased margins resulting from higher sales prices in both aggregate and asphalt.

Mike Barker: The increases in revenue were led by California, Nevada, and Alaska.

Mike Barker: Construction segment gross profit improved $56 million with a segment gross profit margin of 15 percent.

Lisa Curtis: The increase in gross profit margin was largely driven by the transition to our higher quality project portfolio, which has been bolstered by our focus on project execution. In the materials segment, revenue increased $15 million year-over-year to $165 million, with gross profit up $5 million to $29 million. The increase in materials revenue was primarily due to acquired businesses, as well as increased sales prices offsetting lower volumes. The increase in gross profit was led by increased margins, resulting from higher sales prices for both aggregates and asphalt.

Mike Barker: In the material segment, revenue increased $15 million year-over-year to $165 million, with gross profit up $5 million to $29 million.

Lisa Curtis: Cash growth profit margin during the quarter increased from 20% in 2023 to 24% in 2024. Our investments and focus on the material segment are paying off, and we expect to see further gains in the future. Turning to cash, are operating cash flows significantly improved compared to the first half of 2023, with operating cash flow of 22 million or 141 million improvement year over year. Historically, the second quarter is seasonally our lowest cash period of the year, as many projects are ramping up for the summer construction season. We saw this dynamic again in the quarter, but we continue making important strides in this area.

Lisa Curtis: Cash growth profit margin during the quarter increased from 20% in 2023 to 24% in 2024. Our investments in and focus on the materials segment are paying off, and we expect to see further gains in the future. Turning to cash, our operating cash flows significantly improved compared to the first half of 2023, with operating cash flow of $22 million, or a $141 million improvement year-over-year. Historically, the second quarter is seasonally our lowest cash period of the year, as many projects are ramping up for the summer construction season.

Mike Barker: Cash Gross Profit Margin during the quarter increased from 20% in 2023 to 24% in 2024. Our investments in and focus on the material segment are paying off and we expect to see further gains in the future.

Mike Barker: Turning to cash, our operating cash flows significantly improved compared to the first half of 2023, with operating cash flow of $22 million, or $141 million improvement year-over-year.

Mike Barker: Historically the second quarter is seasonally our lowest cash period of the year as many projects are ramping up for the summer construction season.

Lisa Curtis: We saw this dynamic again in the quarter, but we continued making important strides in this area. Cash generation is a key focus at all levels of granite. With our performance in the first half of the year, I believe we remain on track to meet our operating cash flow target of 7% of revenue for 2024. During the quarter, total debt increased $186 million with the issuance of our $3.25 2030 convertible notes.

Mike Barker: We saw this dynamic again in the quarter, but we continued making important strides in this area.

Lisa Curtis: Cash generation is a key focus at all levels of granite. But our performance in the first half of the year, I believe, remains on track to meet our operating cash flow target of 7% of revenue for 2024. During the quarter, total debt increased 186 million with the issuance of our three and a quarter 2030 convertible notes. We executed the convertible note transaction during the quarter in order to take advantage of the positive convertible bond market and attractive interest rates. Following the transaction, we no longer have any borrowings on our credit facility, with revolver availability of 333 million.

Mike Barker: Cash generation is a key focus at all levels of Granite. With our performance in the first half of the year, I believe we remain on track to meet our operating cash flow target of 7% of revenue for 2024.

Mike Barker: During the quarter, total debt increased $186 million with the issuance of our three-and-a-quarter 2030 convertible notes.

Lisa Curtis: We executed the convertible note transaction during the quarter in order to take advantage of the positive convertible bond market and attractive interest rates. Following the transaction, we no longer have any borrowings on our credit facility, with revolver availability of $333 million. As Kyle mentioned earlier, we are excited to announce the agreement to acquire Dickerson & Bowen. We plan to fund the transaction using our cash on hand. With our cash generation, strong balance sheet, and secured barring capacity, we can be flexible and execute on further M&A opportunities in the future.

Mike Barker: We executed the convertible note transaction during the quarter in order to take advantage of the positive convertible bond market and attractive interest rates

Mike Barker: Following the transaction, we no longer have any borrowings on our credit facility with revolver availability of $333 million.

Lisa Curtis: As Kyle mentioned earlier, we are excited to announce the agreement to acquire Dickerson and Bowen. We plan to fund the transaction using our cash on hand, with our cash generation, strong balance sheet, and secured borrowing capacity. We can be flexible and execute further MNA opportunities in the future.

Mike Barker: With our cash generation, strong balance sheet, and secured borrowing capacity, we can be flexible and execute on further M&A opportunities in the future.

Lisa Curtis: Now I'll briefly touch on an update to our guidance for 2024, with the strong performance of our teams across the company through the first half of the year. We are narrowing the revenue guidance range to the upper half of the previously communicated range. Our revised revenue range for 2024 is now 3.9 billion to 4 billion. With our cap entering the busy second half of the year, I expect further organic revenue growth both in the remainder of 2024 and in 2025. There are no changes to our remaining guidance, including our adjusted EBITDA margin guidance range of 9.5% to 11.5%.

Lisa Curtis: Now, I'll briefly touch on an update to our guidance for 2024. With the strong performance of our teams across the company through the first half of the year, we are narrowing the revenue guidance range to the upper half of the previously communicated range. Our revised revenue range for 2024 is now $3.9 billion to $4 billion. With our company entering the busy second half of the year, I expect further organic revenue growth both in the remainder of 2024 and in 2025. There are no changes to our remaining guidance, including our adjusted EBITDA margin guidance range of 9.5% to 11.5%. We believe we are on track to meet that range with what are usually our busiest months ahead.

Mike Barker: Now I'll briefly touch on an update to our guidance for 2024. With the strong performance of our teams across the company through the first half of the year, we are narrowing the revenue guidance range to the upper half of the previously communicated range.

Mike Barker: With our cap entering the busy second half of the year, I expect further organic revenue growth both in the remainder of 2024 and in 2025.

Mike Barker: There are no changes to our remaining guidance, including our adjusted EBITDA margin guidance range of 9.5% to 11.5%.

Lisa Curtis: We believe we are on track to meet that range with what are usually our busiest months ahead.

Lisa Curtis: Before I turn it back over to Kyle, since this is my last earnings call, I would like to thank our teams across the company, as well as all of Granix's external stakeholders. Granit is a special organization, and I have been honored to be at CFO for the last several years. compared to where we were only three years ago. Granite is a transformed company. I couldn't be more proud and excited for where Granite is headed. I've worked with my successors, Stacy Wolfie, very closely for years. She is ready for the role, and we will have a seamless transition.

Lisa Curtis: Before I turn it back over to Kyle, since this is my last earnings call, I would like to thank our teams across the company, as well as all of Granite's external stakeholders. Granite is a special organization, and I have been honored to be a CFO for the last several years. Compared to where we were only three years ago, Granite is a transformed company. I couldn't be more proud and excited for where Granite is headed. I've worked with my successor, Stacey Woolsey, very closely for years. She is ready for the role, and we will have a seamless transition. And now I'll turn it back over to Kyle for his closing remarks.

Mike Barker: Before I turn it back over to Kyle, since this is my last earnings call, I would like to thank our teams across the company, as well as all of Granix's external stakeholders.

Kyle Larkin: Granite is a special organization and I have been honored to be a CFO for the last several years.

Mike Barker: Compared to where we were only three years ago, Granite is a transformed company. I couldn't be more proud and excited for where Granite is headed. I have worked with my successor, Stacy Woolsey, very closely for years.

Kyle Larkin: She is ready for the role and we will have a seamless transition.

Kyle Larkin: And now I'll turn it back over to Kyle for closing remarks. Thanks, Lisa. I can say on behalf of the board and all Granite members that we thank you for everything you've done to lead Granite. We'll miss you. We wish you all the best in your time.

Kyle Larkin: Thanks Lisa. I can say on behalf of the board and all Granite team members that we thank you for everything you've done to lead Granite. We'll miss you, and we wish you all the best in retirement. I'll close with the following point.

Kyle Larkin: Hold close with the following points. As expected, we experienced strong revenue growth in the second quarter, largely as a result of the high-level cap we carried into the quarter. We expect our revenue growth to continue and update our point 24 guidance to range at 3.9 billion to 4 billion. Our cap of 5.6 billion is a testament to the continued strong public and private market environment supported by the I.I.J.A. healthy state budgets across our geographies and our experienced teams when you work in our home markets. I believe there are opportunities available in the coming months for us to continue to build cap and remainder of 2024 and in the 2025.

Kyle Larkin: As expected, we experienced strong revenue growth in the second quarter largely as a result of the high level of capital we carried into the quarter. We expect our revenue growth to continue and updated our 2024 guidance to a range of $3.9 billion to $4 billion. Our cap of $5.6 billion is a testament to the continued strong public and private market environment supported by the IIJA, healthy state budgets across our geographies, and our experienced teams when we work in our home markets. I believe there are opportunities available in the coming months for us to continue to build CAP in the remainder of 2024 and in 2025. Our adjusted EBITDA margin guidance for 2024 is unchanged for this quarter.

Speaker Change: As expected, we experienced strong revenue growth in the second quarter largely as a result of the high level of cap we carried into the quarter. We expect our revenue growth to continue and updated our 2024 guidance to a range of $3.9 billion to $4 billion.

Kyle Larkin: We are adjusted EBITDA margin guidance for 2024 is unchanged for this quarter. We are executing in both the construction and material segments, and I believe we are on track to meet our guidance. To our de-risk portfolio, we are seeing improvement in our ability to generate cash. We are well ahead of the prior year in operating cash flow, and I expect to reach our target of operating cash flow of 7% of revenue for 2024.

Kyle Larkin: They're executing in both the construction and material segments, and I believe we are on track to meet our guidance. With our DRIS portfolio, we are seeing improvement in our ability to generate cash. We are well ahead of the prior year in operating cash flow, and I expect to reach our target of operating cash flow of 7% of revenue for 2024. Finally, I'm very excited to be able to welcome the team members from Dickerson and Bowen to Granite soon.

Speaker Change: They're executing in both the construction and material segments and I believe we are on track to meet our guidance.

Kyle Larkin: With our de-risk portfolio, we are seeing improvement in our ability to generate cash. We are well ahead of the prior year in operating cash flow and I expect to reach our target of operating cash flow of 7% of revenue for 2024.

Kyle Larkin: Finally, I am very excited to be able to welcome the team members from Dickerson and Bowen to grant it soon. This is another important materials focus acquisition for Granted. We will further expand our reach and the South Eastern market. We are continually assessing further opportunities to strengthen and expand our footprint. Our strategy is working, and I believe our M&A will draw by increased cash flows and shareholder value operators.

Speaker Change: Finally, I'm very excited to be able to welcome the team members from Dickerson and Bowen to Granite soon.

Kyle Larkin: This is another important materials-focused acquisition for Granite that will further expand our reach in the southeastern market. We are continually assessing further opportunities to strengthen and expand our footprint. Our strategy is working, and I believe our M&A will drive increased cash flows and shareholder value. Operator, I will now turn it back to you for questions. Thank you.

Speaker Change: This is another important materials-focused acquisition for granite that will further expand our reach in the southeastern market. We are continually assessing further opportunities to strengthen and expand our footprint. Our strategy is working. And I believe our M&A is working.

Kyle Larkin: I will now turn it back to you for questions. Thank you.

Kyle Larkin: We'll drive increased cash flows and shareholder value operator. I will now turn it back to you for questions

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2.

Operator: We will now begin the question and answer session. Tastic question. You may press star then one on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To draw your question, please press star, then two.

Speaker Change: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we'll pause momentarily to assemble our roster.

Operator: At this time, we'll pause momentarily to assemble a roster.

Brent Sealman: Our first question comes from Brent Sealman from DA Davidson. Please go ahead.

Operator: At this time, we will pause momentarily to assemble our roster, and our first question comes from Brent Thielman from D.A. Davidson. Please go ahead.

Kyle Larkin: And our first question comes from Brent Thielman from DA Davidson, please go ahead

Brent Thielman: Hey, thanks. You know, Lisa, obviously, a huge difference in where Granite is today versus when you came into the role. So, fantastic job and congratulations. Thank you, Brent.

Brent Sealman: Thanks, Lisa. Obviously, huge difference in where granted is today versus when you came into the role.

Brent Thielman: Hey, thanks. You know, Lisa, obviously huge difference in where Granted is today versus when you came into the role, so fantastic job and congrats.

Kyle Larkin: So fantastic job and congrats. Thank you, Brent. I guess, you know, first question would just be, you know, it looks as a grant, it's really moved past this ORP portfolio overhang. It seems like you see in better leverage of the new work you've added in recent years. Kyle, maybe just your assessment of the progress of that part of the portfolio in terms of margins. And I guess just the overall bid margin environment as you see it today from the construction segment. Is it advantageous? Is it more advantageous if you could just talk around that? Yeah, yeah, thanks, Brent.

Kyle Larkin: I guess, you know, the first question would just be, you know, it looks as though Granite's really moved past this ORP portfolio overhang. It seems like you're seeing better leverage of the new work you've added in recent years. Kyle, maybe just your assessment of the progress of that part of the portfolio in terms of margins, and I guess just the overall bid margin environment as you see it today for the construction segment. Is it advantageous? Is it more advantageous if you could just talk around that?

Lisa Curtis: Thank you, Brent. I guess.

Brent Thielman: You know, first question would just be, you know, it looks as though Granite's really moved past this ORP portfolio.

Speaker Change: overhang it. It seems like you're seeing better leverage.

Speaker Change: of the new work you've added in recent years. Kyle, maybe just your assessment of the progress of that part of the portfolio in terms of margins.

Kyle Larkin: And I guess just the overall bid margin environment as you see it today for the construction segment, is it advantageous? Is it more advantageous? If you could just talk around that.

Kyle Larkin: Yeah, yeah, thanks, Brent. And thanks for certainly recognizing Lisa, as well.

Kyle Larkin: And thanks are certainly recognizing Lisa as well. So you know she mentioned in our remarks, and we are a transformed company. And so we're in a much better position today. We were last year, and certainly two or three years ago. And so what I think the performance she's seen today really reflects that. As we look at the cab we have in our portfolio, it's certainly de-risked. It's a higher quality. We've been able to replace the risky type of projects we were pursuing years ago. And that's really allowing us to drive higher profitability. The consistent profitability is a company.

Kyle Larkin: Yeah, yeah, thanks Brent and thanks for certainly recognizing Lisa as well. So we know she mentioned in her remarks

Kyle Larkin: So we know she mentioned in her remarks that we are a transformed company, and so we're in a much better position today than we were last year and certainly two or three years ago. And so I think the performance you're seeing today really reflects that. As we look at the cap we have in our portfolio, it's certainly de-risked, and it's of higher quality.

Speaker Change: And we are a transformed company, and so we're in a much better position today.

Speaker Change: We were last year and certainly two or three years ago And so what I think the performance you're seeing today really reflects that

Kyle Larkin: As we look at the cap we have in our portfolio, it's certainly de-risked. It's of higher quality. We've been able to replace the risky type of projects that we were pursuing years ago.

Kyle Larkin: We've been able to replace the risky types of projects that we were pursuing years ago, and that's really allowing us to drive higher profitability. And consistent profitability as a company. I would say that the bid environment remains extremely strong. And we have a healthy pipeline of bid opportunities in front of us. We have already won more work this year than we did last year. And we've been able to raise our margins as well.

Brent Thielman: and that's really allowing us to drive higher profitability and consistent profitability as a company. I would say that the bid environment remains extremely strong.

Kyle Larkin: I would say that the bid environment remains extremely strong. We have a healthy pipeline of bid opportunities in front of us. We bid more work, as we mentioned already this year than we did last year. And we've been able to raise our margins as well. And we've been able to do that pretty consistently now since about 2021. So that's really helping improve the cap and giving us what we believe is the highest quality cap we've had in the history of the company. So we continue to work through newer cap. And of course that's higher quality cap.

Kyle Larkin: And we have a healthy pipeline of bid opportunities in front of us. We bid more work, as we mentioned, already this year than we did last year. And we've been able to raise our margins as well. And we've been able to do that pretty consistently now.

Kyle Larkin: And we've been able to do that pretty consistently now, since about 2021. So that's really helping improve the cap and giving us what we believe to be the highest quality cap we've had in the history of the company. So we continue to work through newer cap, and of course, that's higher quality cap, and we think that's going to help drive improved margin progression for this year and into 2025 and beyond.

Brent Thielman: now since about 2021. So that's really helping improve the cap and giving us what we believe to be the highest quality cap we've had in history of the company. So we continue to work through newer cap and of course that's higher quality cap and we think that's going to help drive.

Kyle Larkin: And we think that's going to help drive improved margin progression for this year and into 2025 and beyond. Okay.

Kyle Larkin: improve margin progression for this year and into 2025 and beyond.

Kyle Larkin: Okay, um, and then, just off this call, it sounds like Dickerson and Bowen's acquisition isn't quite completed, presumably may not be in the guidance, maybe it is, but I mean, any. [inaudible] Thank you for joining us for this presentation.

Kyle Larkin: And then I guess just off this call it sounds like Dickerson and Bone acquisition isn't quite completed; presumably, may not be in the guidance. Maybe it is, but I mean any kind of financial details. Things we can chew on just around that acquisition and what it could contribute. I didn't see anything here in the release or representation. Yeah. Thank you. Yeah, Brown, let me let me add a little bit. I mean, first of all, we're really excited about Dickerson and Bowen and having that business part of our grand team and truly just executing on that.

Speaker Change: Okay, and then I guess just off this call it sounds like Dickerson and Bone acquisition isn't quite completed, presumably may not be in the

Speaker Change: The guidance maybe it is but I mean any kind of financial details Things we can chew on just around that acquisition and what it could contribute. I didn't see anything here in the release or

Kyle Larkin: Yeah, Brent, let me add a little bit. I mean, first off, I'm really excited about Dickerson and Bowen and having that business part of our Granite team. And it's really just executing on that platform strategy that started last year with Lehman Roberts and Memphis Stone and Gravel. And so, that business, Tickerson & Bowen, annual revenue is around $80 to $100 million. And to your point, that is not in our guidance that we narrow the range on.

Speaker Change: These presentations. Yeah, I could find

Speaker Change: Yeah, Brad, let me add a little bit. I mean, first off, we're really excited about Dickerson and Bowen and having that business part of our Granite team. And it's really just executing on that platform strategy that started last year with Lehman Roberts and Memphis Stone & Gravel.

Kyle Larkin: That platform of strategy that started last year with Lehman Roberts and met the stony gravel. And so that business, Dickerson and Bowen, annual revenues around 80 to $100 million. And to your point, that is not in our guidance that we narrow the range on. So we expect at the close in the quarter. Now being Q3 and depending on the timing of that, it could add around 30 million to the range. And so we'll take a look at the timing. We'll look at our progression in Q3, and if we have the opportunity to raise up behind of our range after Q3, then we'll take a look at doing that.

Speaker Change: And so that business, Tickerson & Bowen, annual revenues around 80 to 100 million dollars.

Kyle Larkin: And to your point, that is not in our guidance that we narrow the range on.

Kyle Larkin: So, we expect that to close in the quarter, being Q3, and depending on the timing of that, it could add around $30 million to the range. And so, we'll take a look at the timing. We'll look at our progress in Q3, and if we have the opportunity to raise the high end of our range after Q3, then we'll take a look at doing that.

Speaker Change: We expect that to close in the quarter, now being Q3, and depending on the timing of that, it could add around $30 million to the range, and so we'll take a look at the timing, we'll look at our progression in Q3, and if we have the opportunity to raise behind of our range after Q3, then we'll take a look at doing that.

Brent Sealman: Okay, I'll pass it along. Thank you. All right. Thanks. Thank you.

Brent Thielman: Got it. Okay, I'll pass it along. Thank you.

Kyle Larkin: Thanks, Brent. Thank you.

Speaker Change: Okay, I'll pass it along. Thank you.

Operator: The next question comes from Stephen Ramsey from Thompson Research Group. Please go ahead.

Stephen Rancy: The next question comes from Stephen Rancy from Thompson Research Group. Please go ahead.

Stephen Ramsey: Thanks, Brent. Thank you.

Speaker Change: The next question comes from Stephen Ramsey from Thompson Research Group. Please go ahead.

Stephen Rancy: Good morning and want to echo the best wishes to you, Lisa, on the next chapter. Maybe to start with on Western markets, clearly still a big focus for you. Channel checks that we've done in large, a large rental company publicly traded, called out that the West, the demand there had slowed a little bit, not in a dramatic way, but had slowed a little bit and trying to connect the dots to your results with lower material volumes, but caps still growing. Curious your assessment of Western markets demand how it's shaping up year to date and looking forward.

Stephen Ramsey: Good morning, and I want to echo the best wishes for you, Lisa, on the next chapter. Maybe to start with, on Western markets, clearly still a big focus for you. Channel checks that we've done, and a large rental company, publicly traded, called out that the West... The demand there had slowed a little bit, not in a dramatic way, but it had slowed a little bit. In trying to connect the dots to your results with lower material volumes but caps still growing, I'd be curious about your assessment of the Western market's demand, how it's shaping up year to date and looking forward.

Stephen Ramsey: Good morning, and I want to echo the best wishes to you, Lisa, on the next chapter. Maybe to start with on...

Stephen Ramsey: Yeah, on Western markets clearly is still a big focus for you. Channel checks that we've done and a large rental company publicly traded called out that the West

Kyle Larkin: Yeah, I mean, I think the bottom line is we still, we see demand remain very strong, and I think you can see that certainly in our cap results. You know, I don't know how to reconcile perhaps what you're seeing from the rental companies that could be more on the private side, certainly maybe tied to residential, which is not a market that we're really correlated with, certainly on the construction side. So, yeah, we still see it being really strong. As I mentioned, we're bidding more work today through the first half of the year than we did last year.

Kyle Larkin: Yeah, I mean, I think the bottom line is we still see demand remaining very strong. And I think you can see that certainly in our cap result. You know, I don't know how to reconcile, perhaps, what you're seeing from the rental companies.

Kyle Larkin: It could be more on the private side, certainly maybe tied to residential, which is not a market that we're really correlated with, certainly on the construction side. So, yeah, we still see it being really strong. As I mentioned, we're bidding more work today through the first half of the year than we did last year, and it's not because our teams are casting a wider net. We're still staying very disciplined and focused. We're still taking advantage of our home market strategy. So, yeah, we're not necessarily seeing that. I know some questions have always seemed to come up around California specifically.

Kyle Larkin: So, yeah, we still see it being really strong. As I mentioned, we're bidding more work today through the first half of the year than we did last year. And it's not because our teams...

Kyle Larkin: And it's not because our teams are casting a wider net. We were still staying very disappointed, focused. We're still taking advantage of our home market strategy. So, yeah, we're not necessarily seeing that. I know some questions have always seemed to come up around California, specifically. And certainly, our California market continues to be strong as well. The last three budget cycles. Now we've seen the Caltrans budget for local assistance and capital outweigh projects only increase. So that budget continues. To increase certainly the budget cycle that we're into now. So that's really encouraging for us. If you look at it, what gets interesting for last year is they actually allocated more funds than what they originally budgeted, which, which our project we're actually pursuing today.

Kyle Larkin: And certainly, our California market continues to be strong as well. Over the last three budget cycles now, we've seen the Caltrans budget for local assistance and capital outlay projects only increase. So that budget continues to increase during the budget cycle that we're into now, so that's really encouraging for us. If you look at it, what's interesting about last year is they actually allocated more funds than what they originally budgeted, which are projects we're actually pursuing today. So if you look at it just simply year over year, it could show a little bit of a slowdown, but that's actually a little misleading. Year over year, the budget's only...

Kyle Larkin: If you look at it, what gets interesting for last year is they actually allocated more funds than what they originally budgeted, which are projects we're actually pursuing today. So if you look at it just simply year over year, it could show a little bit of a slow, but that's actually a little misleading. Over year over year, the budget's only increased.

Kyle Larkin: So, if you look at it, simply, you're over a year. It could show a little bit of a slow, but that's actually a little misleading over year. The budget's only increased.

Kyle Larkin: Okay, that's great. And then thinking about the material segment, the lower volume and better pricing. Can you talk if that dynamic was in both the West and Southeast operations? And do you think the second half has the same drivers, or do volumes and pricing both become positive? Well, I would say across the board, I would say that certainly overseeing on the pricing side of things, you know, we came out this year and we were looking to have pricing pieces of 10% on aggregates and 5% on asphalt. And we've been able to get that done. And we, of course, still see some opportunities in certain markets to raise prices still this year and will obviously continue to do that.

Kyle Larkin: Okay, that's great. And then thinking about the material segment, the lower volume and better pricing, can you talk about whether that dynamic was in both the West and Southeast operations, and do you think the second half has the same drivers, or do volumes and pricing both become possible?

Speaker Change: Can you talk if that dynamic was in both the West and Southeast operations, and do you think the second half has the same drivers, or do volumes and pricing both become positive?

Kyle Larkin: Well, I would say it's across the board. I would say that certainly what we're seeing on the pricing side of things. You know, we came out this year and we were looking to have price increases of 10% on aggregates and 5% on asphalt, and we've been able to get that done. And, of course, we still see some opportunities in certain markets to raise prices this year, and we'll obviously continue to do that.

Kyle Larkin: From a volume perspective, we expect our aggregate business to be relatively flat this year relative to last year, and last year was a healthy year from a volume perspective. We do believe that it's going to be flat, if not maybe a little bit down overall, and that's just kind of across the board. On the asphalt side, we expected it to be a little bit higher and mostly out in the west. We thought our California market would have higher volumes of asphalt, and we still believe that to be the case along the way this year. So, I guess the bottom line is it's really across the board. Ag should be flat, maybe a little bit down. The asphalt should be flat, if anything, a little bit higher.

Kyle Larkin: From a volume perspective, we expected our aggregates business to be relatively flat this year relative to last year, and last year was a healthy year from a volume perspective. We do believe that it's going to be flat, if not maybe a little bit down overall. And that's kind of across the board. On the asphalt side, we expected it to be a little bit up and mostly out in the West. We've got a hard job for your market, but have higher volumes on the asphalt, and we still believe that to be the case along the way this year.

Kyle Larkin: this year and we'll obviously continue to do that.

Kyle Larkin: From a volume perspective, we expected our aggregate business to be relatively flat this year relative to last year, and last year was a healthy year from a volume perspective.

Stephen Ramsey: Excellent. And then there is one last quick one for me.

Speaker Change: On the asphalt side we expected it to be a little bit up and mostly out in the west We thought our California market would have higher volumes on the asphalt And we still believe that to be the case along the way this year So I guess the bottom line is it's really across the board actually flat. It may be a little bit down

Kyle Larkin: So I get that bottom line is it's really across the board.

Kyle Larkin: Actually, flat if maybe a little bit down; asphalt should be flat if anything a little bit up.

Stephen Ramsey: Asphalt should be flat if anything a little bit up

Kyle Larkin: Excellent.

Kyle Larkin: You're tightening the full year sales range to a pretty narrow hundred million or so, yet the margin profile stays at a pretty wide range. Can you talk about the dynamic there of why you're keeping it wide? Maybe how much is just Q4 weather swinging things or any other key impacts to that margin range?

Kyle Larkin: And then one last quick one for me, you're tightening the full year sales range to a pretty narrow 100 million or so, yet the margin profile. So staying at a pretty wide range, can you talk to the dynamic there of why you're keeping it wide, maybe how much is just cue for weather swinging things or any other key impacts to that margin range? Yeah, I would say that we can certainly, if you look at the revenue growth in Q2 and kind of progression through the first half of the year, we do have a lot of confidence that will be in the higher end of the previously disclosed range.

Kyle Larkin: a hundred million or so, yet the margin profile staying at a pretty wide range. Can you talk to the dynamic there of why you're keeping it wide? Maybe how much is just cued for weather swinging things or any other key impacts to that margin range?

Kyle Larkin: Yeah, I would say that certainly if you look at the revenue growth in Q2 and kind of progression through the first half of the year, we do have a lot of confidence that we'll be in the higher end of the previously disclosed range, so that's why we narrowed that up. Again, it doesn't include Dickerson-Bowen, so it depends on the timing of that deal and our momentum in our business. We'll take another look at the top end of our range in Q3. But, I would say from a margin perspective, we feel good.

Kyle Larkin: Yeah, I would say that certainly if you look at the revenue growth in Q2 and kind of progression through the first half of the year, we do have a lot of confidence that we'll be in the higher end of the previously disclosed range so that's why we narrowed that up. Again, it doesn't include Dickerson-Bowen so depending on the timing of that

Kyle Larkin: So that's why we narrow that up. Again, it doesn't include diggers and bones. So, depending on the timing of that deal and a momentum in our business, we'll take a look at the top end of a range in Q3. I would say from a margin perspective, we feel good. We think that the range still is a good reflection of where we're headed directionally for the year. I would say that whether it's definitely the number one factor that could impact things one way or the other, is it always does. And Q4, we expect to have some weather.

Kyle Larkin: We think that the range still is a good reflection of where we're headed directionally for the year. I would say that weather is definitely the number one factor that could impact things one way or the other, as it always does. In Q4, we expect to have some weather. It just comes down to whether it's going to be abnormally wet or abnormally dry, or pretty much what we expect.

Kyle Larkin: It just comes down to whether it's going to be abnormally wet or abnormally dry, or pretty much what we expect. So some more to come in Q4. I would say execution is really the other piece. that we have to consider. So, we have opportunities on our projects, and we also have risk. So, I think the good news for us is we're not the same company that we used to be. So, although we do have execution risk in our business, it's not the risk that we've kind of seen maybe one, two, or three years ago.

Kyle Larkin: So, some more to come in Q4. I would say execution is really the other piece that we have to consider. So we have opportunities in our projects, and we also have risks. So I think the good news for us is we're not the same company that we used to be. So although we do have execution risk in our business, it's not the risk that we saw maybe one, two, or three years ago.

Kyle Larkin: and that we have to consider. So we have opportunities on our projects and we also have risk. So I think the good news for us is we're not the same company that we used to be. So although we do have execution risk in our business, it's not the risk that we've kind of seen maybe one, two or three years ago.

Kyle Larkin: That's excellent. Thank you.

Operator: That's excellent.

Operator: Thank you.

Operator: All right.

Michael Dudas: Thank you. The next question comes from Michael Dudas from Vertical Research Partners. Please go ahead.

Operator: The next question comes from Michael Dudas from Vertical Research Partners. Please go ahead.

Michael Dudas: Thank you.

Michael Dudas: Good morning, everybody, and well done, Liza. Good morning. Thank you. Two questions.

Michael Dudas: Good morning, everybody, and well done, Lucy. Good morning. Thank you. [inaudible] Two questions, one, Kyle, maybe some thoughts on driving business to home markets and your mix of business on the best value. Could you maybe look for the next several quarters, which home market is better than others and how much more of a mix do you anticipate working through on the best value project?

Michael Dudas: Good morning, everybody, and well done, Lisa.

Speaker Change: Good morning, thank you.

Kyle Larkin: One, Kyle, maybe some thoughts on you talked about driving a business, the home markets and your mix of business on the best value. Could you maybe look for the next several quarters? What home markets better than others and, you know, how much more of a mix do you anticipate working through on the best value projects? So, you know, fortunately, all of our home markets are performing very well. So, I think that, you know, I think we're comfortable with certainly the home markets that we have. Maybe in terms of just legacy home markets, I think our teams have certainly embraced the concept for those that maybe weren't home market based that were historically large project base.

Michael Dudas: [inaudible]

Michael Dudas: Two questions. One, Kyle, maybe some thoughts on, you talked about

Kyle Larkin: Well, you know, fortunately, all of our home markets are performing very well. So I think that, you know, I think we were comfortable with the home markets that we have, maybe in terms of just legacy home markets. I think our teams have certainly embraced the concept for those that maybe weren't home market-based, that were historically large project-based. So we continue to see that transformation, I would say, particularly in Texas. So our offices in Dallas, Fort Worth, as well as Houston are seeing the benefits of that shift, and that's paying off for us.

Kyle Larkin: Well you know fortunately all of our home markets are performing very well so I think that you know I think we were comfortable with certainly the home markets that we have maybe in terms of just legacy home markets I think our teams have

Kyle Larkin: So, we continue to see that transformation. I would say particularly in Texas. So, our office and Dallas part words as well. We're seeing the benefits of that shift. And us paying off for us.

Kyle Larkin: It comes to the balance of the work around best value. We've been pretty consistent now at best value being just under 50% of our cap. We'll kind of see what that thing progresses over time, but I think it'll kind of hang in there pretty close to around 50%. I think that's a good balance between most of our projects being the bid build. Now, our typical projects that we burn within say 12, 12 months or so, you know, average job size is around $5 million. Then we have some more complex projects that we get to talk broken down in smaller contracts that we can manage better and manage that risk through best value.

Kyle Larkin: When it comes to the balance of the work around best value, we've been pretty consistent now, with best value being just under 50% of our cap. We'll kind of see where that progresses over time. But I think it'll kind of hang in there pretty close to around 50%. I think that's a good balance between Most of our projects being the bid build. Our typical projects that we burn within, say, 12 months or so, the average job size is around $5 million, then we have some more complex projects that we get some talk broken down into smaller contracts that we can manage better and manage that risk through best value. So I think what you see today in terms of our cap and how it's, between the two, I think it's going to be pretty consistent moving forward.

Kyle Larkin: So, I think what you see today in terms of our cap and how it spread between the two. I think it's going to be pretty consistent moving forward.

Kyle Larkin: spread between the two, I think it's going to be pretty consistent moving forward.

Michael Dudas: That's great. Thanks, Kyle.

Kyle Larkin: That's great. Thanks, Kyle. Thank you. Thank you.

Jerry Revich: Thank you. The next question comes from Jerry Reffich from Goldman Sachs. Please go ahead. Yes. Hi. Good morning, everyone. And Lisa, congratulations. Thank you.

Speaker Change: Thank you. Thank you.

Speaker Change: The next question comes from Jerry Revitch from Goldman Sachs. Please go ahead.

Operator: Yes, hi, good morning, everyone, and Lisa, congratulations. Thank you.

Speaker Change: Yes, hi, good morning everyone, and Lisa, congratulations.

Jerry Revich: And as you folks close out the prior risk projects completely, you know, what should we be looking for in terms of even without the free cash flow this year in the updated guidance and how does that? What's the range of outcomes in 2025 as you get the more consistent performance? Yeah. So, so we've been communicating that we're targeting 7% operating cash flow for the year. And clearly saw our cash results in the quarter where we're progressing quite nicely in terms of really generating higher operating cash flow as a company. So I think that we still feel very confident around that 7%.

Speaker Change: completely, you know, what should we be looking for in terms of even without the free cash flow this year and the updated guidance and how does that, what's the range of outcomes in 2025 as you get the more consistent performance?

Lisa Curtis: Yeah, so we've been communicating that we're targeting 7% operating cash flow for the year. And clearly, you saw that our cash results in the quarter were progressing quite nicely in terms of really generating higher operating cash flow as a company. So I think that we still feel very confident around that 7%. I think our team has done a really nice job of taking care of the fundamentals and the operations.

Lisa Curtis: and clearly you saw our cash results in the quarter. We're progressing quite nicely in terms of really generating higher operating cash flow as a company. So I think that we still feel very confident around that seven percent.

Lisa Curtis: I think our team has done a really nice job of taking care of the fundamentals and the operations. I think our business models also shifting away from these claims and be to claim positions on projects, which is going to help drive continuing results. You know, our Cap X is just over 3% revenue. So you look at it from a 70 to 3 end of around 4%, and so it's around 40% conversion to our even a margin at that helps. And so I think as we look forward, I mean, it's still an opportunity for us to improve.

Lisa Curtis: I think our business model is also shifting away from these claims and towards taking positions on projects, which is going to help drive continued results. Our CapEx is just over 3% of revenue. So you look at it from a big of 7 and a 3, you end up around 4%.

Lisa Curtis: I think our team has done a really nice job of taking care of the fundamentals and the operations. I think our business model is also shifting away from these claims and being a claim positions on projects, which is going to help drive continued results. You know, our CapEx is just over three percent.

Lisa Curtis: And so it's around a 40% conversion to our EBITDA margin, if that helps. And so, as we look forward, I think there's still an opportunity for us to improve. And certainly, as we continue with our new business model, we think we can get to a range higher than 7%. And I think I know a lot of questions are out there around just guidance for 25, or 26, and 27. And so one of the things we're going to come back with in Q3 is some targets, just as we did in Q1 of 2022, what are some targets in 25 and 26, 27 that we believe we can deliver on? So we'll come back in Q3 with those, and we'll include an outlook around operations.

Lisa Curtis: Now, certainly as we continue down with our new business model, we think we can get to a range higher than the 7%, and I mean, I know a lot of questions are out there around just guidance for 25 or 26 and 27.

Lisa Curtis: certainly as we continue down with our new business model we think we can get to a range higher than 7% and I think I know a lot of questions are out there around just guidance for 25 or 26 and 27 and so one things we're going to come back with in Q3 is

Lisa Curtis: So one of these we're going to come back with. Thank you 3. is. Some targets.

Lisa Curtis: This is what we did in Q1 2022. We'll learn some targets in 25 and 26, 27 that we believe we can deliver on. So we'll come back in Q3 with those, and we'll include an outlook around operating cash flow. Got it.

Lisa Curtis: Got it. And, you know, as your folks are putting out bids for contract work in 2025, at this point, can you just talk about what level of construction materials, aggregates, asphalt, price increases you're putting through areas where you're vertically integrated? And what sort of price increases are you pricing in, in areas where you're sourcing third-party materials for bids that are starting for bids for work starting in 2025?

Kyle Larkin: And you know, as your folks are putting out, it's for contract work in 2025 at this point. Can you just talk about what level of construction materials aggregate asphalt price increases you're putting through areas where you're vertically integrated and what sort of price increases. Are you pricing in in areas where you're sourcing third party materials for bids that are starting for bids for work starting in 25. Yeah, so when it comes to how we're pricing materials into the bids that we have, we're taking the pricing. We continue to get those fixed on bid day. So we'll get quotes from third party suppliers, and those will be firm quotes for the contract, with they might have escalators built in, but that would be included in the bid.

Speaker Change: It got it.

Lisa Curtis: And, you know, as your folks are putting out...

Lisa Curtis: Can you just talk about what level of construction materials, aggregates, asphalt, price increases you're putting through?

Lisa Curtis: areas where you're vertically integrated and what sort of price increases are you pricing in in areas where you're sourcing third-party materials for bids that are starting for bids for work starting in 25.

Lisa Curtis: Yeah, so when it comes to how we're pricing materials into the bids that we have, we're taking the pricing, we tend to get those fixed on bid day. So we'll get quotes from third-party suppliers, and those will be firm quotes for the contract, with escalators built in, but that would be included in the bid. Last year we did price increases in October; that's when we started for our following year's price increases, and we haven't solidified those yet. So I'll have to come back, and we can speak better about those price increases, probably in

Lisa Curtis: Yeah, so when it comes to how we're pricing materials into the bids that we have, we're taking the pricing, we tend to get those fixed on bid day. So we'll get quotes from third-party suppliers and those will be firm quotes for the contract.

Kyle Larkin: Last year we did pricing creases in October. That's when we started for our following year price increases, and we haven't solidified those yet.

Lisa Curtis: with they might have escalators built in but that would be included in the bid. Last year we did price increases in October that's when we started for our following year price increases and we haven't solidified those yet.

Kyle Larkin: So I'll come back and we can speak better to those pricing creases probably in Q3.

Lisa Curtis: So I'll have to come back and we can speak better to those price increases probably in Q3.

Lisa Curtis: And lastly, the California initial budget for Fiscal 25 is down year-over-year from obviously really high levels that we've seen, and it takes a while to flow into bids, but I'm wondering what your view is on opportunities for that California Fiscal 25 budget to be revised higher over time? Are there discrete additional funding mechanisms that are being discussed? Can you step us through that?

Kyle Larkin: And lastly, you know, the California initial budget for fiscal 25 is down year to year from obviously really high levels that we've seen, and it takes a while to flow into bids, but I'm wondering what's your view on opportunities for that California fiscal 25 budget to be revised. Is higher over time? Are there discrete initial additional funding mechanisms that are being discussed. Can you step us through that? Well, the current budget cycle that we're in is higher than the original budget prepared for the prior budget cycle, which is 2324. So, as I mentioned, we've seen consistent budget allocation increases over the last three budget cycles.

Lisa Curtis: Super. And lastly, you know, the California initial budget for Fiscal 25 is down year-over-year from obviously really high levels that we've seen.

Lisa Curtis: It takes a while to flow into bids, but I'm wondering what's your view on opportunities for that California fiscal 25 budget to be revised?

Speaker Change: are there discrete additional funding mechanisms that are being discussed?

Kyle Larkin: Well, the current budget cycle that we're in is higher than the original budget prepared for the prior budget cycle, which was through 23 and 24. So, as I mentioned, we've seen consistent budget allocation increases over the last three budget cycles or even four. What happened in the last budget cycle is the state over allocated, so they went above what was budgeted and forecasted, which is good news for us. Again, because we're starting to see a ramp up in terms of projects and lettings for us to pursue and ultimately build.

Kyle Larkin: Well the current budget cycle that we're in is is higher than the original budget prepared for the prior budget cycle which is through 23 and 24 so as I mentioned we've seen consistent

Kyle Larkin: What happened in the last budget cycle is the state over allocated, so they went above what was budget and forecast it, which is good news for us. Again, because we're starting to see a ramp up in terms of projects and letting us for us to pursue and ultimately build. So it does create the step down, but it's really only because there was a spike in spending in 2024. So we continue to see a really healthy market in terms of what we see in California. We have a lot of opportunity in front of us to expect to continue to build our cap and that state specifically.

Kyle Larkin: budget allocation increases over the last three budget cycles or even four. What happened in the last budget cycle is the state overallocated, so they went above what was budgeted and forecasted, which is good news for us.

Kyle Larkin: again because we're starting to see a ramp up in terms of projects and lettings for us to pursue and ultimately build. So it does create this step down but it's really it's really only because there was a spike in spending in 23-24. So we continue to see

Kyle Larkin: So it does create this step down, but it's really only because there was a spike in spending in 23-24. So we continue to see really healthy markets in terms of what we see in California. We have a lot of opportunity in front of us and expect to continue to build our presence in that state specifically.

Kyle Larkin: Really healthy market in terms of what we see in California And we have really a lot of opportunity in front of us and expect to continue to build our cap in that state specifically

Jerry Revich: I appreciate it. Thank you.

Kyle Larkin: I appreciate it. Thank you.

Kyle Larkin: I appreciate it. Thank you.

Brent Sealman: And our final question comes from Brent. It is a follow-up from Brent Seuleman from DA Davidson.

Operator: And our final question is a follow-up from Brent Thielman from D.A. Davidson. Please go ahead.

Brent Thielman: Yeah, thank you.

Speaker Change: Our final question is a follow-up from Brent Thielman from D.A. Davidson.

Brent Sealman: Please go ahead. Kyle, just as a follow-up on materials, I mean, you're putting some real money to work to expand operation here. Maybe overall just more of an emphasis on commercial discipline that maybe seen in the past and also looks like some additional emphasis on KPIs like cash gross profit. Obviously, some of your peers provide that.

Brent Thielman: Hey Kyle, just as a follow-up on materials, I mean you're putting some real money to work to expand operations here, maybe overall just more of an emphasis on commercial discipline that may be seen in the past.

Brent Thielman: also looks like some additional emphasis on KPIs like cash gross profit. Obviously, some of your peers provide that. Maybe just an update strategically, where do you envision this business becoming over the next few years as we think about the overall thesis for Granite?

Brent Thielman: Kyle, just as a follow-up on materials, I mean you're putting some real money to work to expand operations here, maybe overall just more of an emphasis on commercial discipline that may have been seen in the past and also looks like some additional emphasis on KPIs like cash gross profit. Obviously, some of your peers provide that. What, maybe just an update strategically, where do you imagine this business becoming over the next few years as we think about kind of Yeah, so if you

Kyle Larkin: Maybe just in that day, strategically, where do you envision this business becoming over the next few years as we think about kind of the overall. for Granite.

Kyle Larkin: So, if you remember last quarter, I announced how we reorganized; we lined our business up better around construction and materials. And that was very intentional. We wanted to get our construction experts leading construction. We wanted our materials experts to lead Materials. We can do a couple of things. We're going to let our construction teams focus on growth and continued operational excellence in the business in really funny ways. We can sort of national clients really go across all our geographies. It's better, but it was really also going to allow our materials teams to focus on centralizing functions, say sales or quality.

Kyle Larkin: Yeah, so if you remember, last quarter, we announced how we reorganized; we lined our business up better around construction and materials. And that was, that was very intentional.

Kyle Larkin: Yeah, so if you remember last quarter we announced how we reorganized, we lined our business up better around construction and materials and that was it was very intentional. We wanted to get our construction experts leading construction. We wanted our materials experts to lead materials. We can do a couple things. It was going to let our construction teams focus on growth.

Kyle Larkin: We wanted to get our construction experts leading construction, we wanted our materials experts to lead materials. We could do a couple things. It was going to let our construction teams focus on growth. [inaudible] That's one of the primary drivers that's helping drive that cash-grows-profit improvement that we shared with all of you today. And then there are still opportunities for operational excellence within the materials business, and we continue to make investments. One thing I do want to point out is that we are definitely a very big integrated business.

Kyle Larkin: on continued operational excellence in the business and really finding ways we can serve national clients really go across all our geographies better but it was really also going to allow our materials teams to focus on centralizing functions, say sales or quality. So we're already seeing the benefits, certainly the price increases.

Kyle Larkin: So, we're already seeing the benefits, sort of the price increases. That's one of primary drivers that's helping drive that cash growth profit improvement that we share with all of you today. And then there's still opportunities for operational excellence within the materials business. And then we continue to make investments.

Kyle Larkin: That's one of the primary drivers that's helping drive that cash grows profit improvement that we shared with all of you today. And then there's still opportunities for operational excellence within the materials business and then we continue to make investments. One thing I do want to point out is we are definitely a very big integrated business.

Kyle Larkin: One thing I do want to point out is we are definitely a very big integrated business. Maybe this is really only enhances the value of our brick and integrated model in that way.

Kyle Larkin: And anything, this just really only enhances the value of our vertically integrated model in that way. So I think overall, you know, we want to come back again in Q3. I think that's going to help, and has put some targets out there for, again, 25, 26, and 27. But what I can tell you is we expect top- and bottom-line growth. I think you can expect that.

Kyle Larkin: If anything, this just really only enhances the value of our vertically integrated model in that way. So I think overall, you know, we want to come back again in Q3. I think that's going to help.

Kyle Larkin: So, I think overall, we want to come back again in Q3. I think that's going to help us put some targets out there for, again, 25, 26, and 27. But what I can tell you is we expect top and bottom line growth. I think you can expect that, but we want to hold off on. I'm really putting out there what we think we can do. I will also add that one of the things we're looking to do in 2025 is increasing this closures around materials. So, we think there's an opportunity for us to share more information around our materials business and really get greater visibility into our financial performance.

Kyle Larkin: Let's put some targets out there for again 25, 26, and 27, but what I can tell you is we expect top and bottom line growth. I think you can expect that, but we're going to hold off on. I'm really putting out there what we think we can do. I will also add that one of the things we're looking to do in 2025 is increasing disclosures around materials.

Kyle Larkin: But we're going to hold off on really putting out there what we think we can do. I will also add that one of the things we're looking to do in 2025 is increase disclosures. So we do think there's an opportunity for us to share more information around our materials business and really get greater visibility into our financial performance.

Kyle Larkin: So we do think there's an opportunity for us to share more information around our materials business and really get greater visibility into our financial performance.

Kyle Larkin: Thank you.

Kyle Larkin: Thank you.

Operator: This concludes our questioning answer session.

Kyle Larkin: This concludes our question and answer session. I would like to turn the conference back over to Kyle Larkin for any closing remarks.

Kyle Larkin: Thanks, Brent.

Kyle Larkin: I would like to turn the conference back over to Kyle Larkin for any closing remarks. Okay. Well, thank you for joining the call today. As always, we want to thank all of our employees for the work they do every day and for delivering a great second quarter in the first half of the year. Thank you for your interest in granted. We look forward to speaking with you all soon.

Kyle Larkin: This concludes our question and answer session. I would like to turn the conference back over to Kyle Larkin for any closing remarks.

Kyle Larkin: Okay, well, thank you for joining the call today. As always, we want to thank all of our employees for the work they do every day and for delivering a great second quarter and first half of the year. Thank you for your interest in Granite. We look forward to speaking with you all. The conference is now concluded. Thank you for attending today's presentation.

Kyle Larkin: Okay, well thank you for joining the call today. As always, we want to thank all of our employees for the work they do every day and for delivering a great second quarter and first half of the year. Thank you for your interest in Granite. We look forward to speaking with you all soon.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you.

Music: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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