Granite Construction Incorporated

Good morning. My name is Megan and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Granite Construction Incorporated 2024 first 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 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 Barger.

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 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 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. 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. 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 EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted earnings per share. The required disclosures regarding our non-GAAP measures are included as part of our earnings press releases and 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.

Good morning, and welcome to our first quarter conference call. I'm pleased to report that we are off to a strong start in 2024. Before diving into our first quarter results, I would like to share an update on our organizational structure. During the quarter, we reorganized our operations to more closely align with our reportable segments, construction and materials. We believe that this new structure better positions our leadership team to manage the performance of these segments. As a reminder, we previously organized into three operating groups, California, Mountain, and Central. In the prior structure, our leaders managed both construction and materials operations within their respective groups. Our new structure results and our construction experts overseeing construction operations, and our materials experts overseeing materials operations. Of course, our teams will continue to work together, but we believe the new structure will allow us to better leverage our expertise to drive top and bottom line growth. Construction leadership is focused on supporting regions with growth strategies and project execution, while leveraging resources across the company to better serve our national clients. For our materials segment, newly centralized management functions, such as sales and quality control, should drive consistency and improved financial performance. Granite has invested significantly in the materials segment over the last several years, with both acquisitions and strategic investments, and our materials segment leadership will be tasked with identifying opportunities to build shareholder value with further organic investments and M&A. Importantly, this new structure does not change our vertical integration strategy and our home markets. Regional leadership in both construction and material segments will maintain the partnership that has differentiated Granite for decades. I believe this organizational change sets the foundation for Granite's next chapter and will accelerate our ability to provide shareholders with higher levels of return. Moving to the construction segment, I'm very pleased with a strong start to the year. Winter weather means the first quarter is typically our slowest, but our teams are off to an outstanding start, in part because of more favorable weather conditions in 2024. So far in 2024, we have bid and won more work than in 2023, with cap remaining flat from the fourth quarter but increasing significantly year over year. While cap is unchanged during the quarter, the market has been consistent with our expectations. Our markets in the public and private sectors continue to be strong in California and across our geographies, we expect CAP to grow in 2024. Best value projects continue to be a focus and represent $2.5 billion, or 46% of our total CAP. The collaborative delivery methods captured in this number, like construction manager, general contractor, or progressive design build, better position us for success by allowing us to collaborate with our clients to mitigate risk. Larger best value projects are often separated and the smaller work packages that are reviewed through multiple project workshops. This provides more opportunities to assess and address risks for large bid-bill projects. In the last 15 years, we have completed or have under contract 87 best value projects. Generally, these projects are constructed more quickly and with fewer claims. In the first quarter, construction revenue increased 18% year-over-year, led by our teams in California, Utah, and the Midwest. This was primarily a result of the higher cap entering the year and the more favorable weather conditions compared to the first quarter of 2023. With our strong start to the year, our current cap, and the bidding opportunities ahead of us, we are on track to win the work needed to meet our revenue guidance in 2024 and continue our organic growth in 2025. Moving to the material segment, the first quarter benefited from price increases and higher volumes associated with more favorable weather in our most seasonally impacted quarter. As mentioned previously, we are focused on price increases, targeting a 10% increase on average in aggregates and 5% in asphalt. So far this year, our price increases align with this expectation. We will continue to monitor progress as the year continues when we approach the heart of the construction season. For the past three years, we have significantly invested in our material segment. We expect this pattern to continue in 2024 with approximately 50 million of planned strategic investments in further automation projects, plants, new reserve expansion, and a new aggregate plant that is expected to come online later this year. We ended 2023 with 1.3 billion tons of reserves, an increase of 294 million tons, or 30% since 2021. This includes 140 million tons of reserves added through acquisitions in 2023. In 2024, we will continue to explore M&A options for both bolt-on opportunities and possible expansion into new geographies. We remain very selective in our pursuits, but I'm hopeful we will complete additional materials M&A transactions in 2024. Now, I'll turn it over to Lisa to review our financial performance for the quarter.