Granite Construction Incorporated

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 Parker.

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 Grant'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, 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, grantandconstruction.com, under investor relations. Now, I would like to turn the call over to 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. 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 of Lehman Roberts and Memphis Stone & Gravel, as Dickerson & Bowen is also a materials-focused, vertically integrated operation. The acquisition will add 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. This purchase continues our strength and expand 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 the strategy. While we are very selective, we are continually evaluating M&A opportunities within our existing footprint as well as in our new geographies. 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, we 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 plans as we continue to work to raise the bar on profitability. 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 allowed us to achieve a 22% increase in revenue over the prior year. Those for businesses across our geographies posted revenue increases year over year. 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 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. As mentioned previously, we continue to be very selective in the projects that we bid with a specific focus on two categories. 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. Best 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. 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 risk. 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. 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 continued to execute under the organizational changes announced last quarter. With the changes, we centralized management functions, such as sales and quality control, allowing for more consistency both in pricing decisions and efforts to drive higher levels of efficiency and automation across our plants. 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. as I'm led by the materials focused agreement to acquire Dickerson and Bowen in Mississippi. Growing our material 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. 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. For 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. 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 gross profit margin, which excludes material segment depreciation and amortization from gross profit of $10 million and $6 million in the second quarter of 2024 and 2023, respectively, increased to 24% from 20%. We are 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.