Granite Construction Incorporated

Good morning. My name is Dhawan and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Granite 2025 first quarter conference call. This call is being recorded. All lines have been placed on mute to prevent any background noise. And after 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 your host, Granite Vice President of Investor Relations, Mike Barco.

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, Stacey Woolsey. 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 judgments 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 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.

Good morning, and thank you for joining us today. I'm excited to talk about our first quarter performance and would also like to take an opportunity to share our expectations for the year. Four months into the year, our markets and performance are in line with our expectations for another record year. As a result, we are confirming our 2025 guidance and our 2027 financial targets. Although there is a lot of uncertainty in today's macroeconomic environment, Granite's markets have largely performed as we were expecting. Coming into 2025, we expected a strong bidding environment with federal and state funding fueling opportunities across the public sector. We also expected to be in position to pursue a number of strong opportunities in the private sector. At this point, the market has met our expectations and we have won more work than in the first four months of 2024. This is a continuation of the trend that we have seen over the last several years. While we're in the second half of the Federal Infrastructure Bill, the opportunities funded by the bill continue to increase because of the timing delay between allocations of states and funding for specific projects. The benefit from the bill should extend well beyond its termination in September of 2026. In addition, despite reports of project disruptions on certain federally funded work, the change in administration, we have not experienced any delays. Concern over tariffs has been a major source of uncertainty. Granite, like all companies, is not immune to the direct and indirect impacts of tariffs. However, to date, they have not significantly impacted our results or our strategy. We will, of course, continue to closely monitor tariffs and work to mitigate negative impacts to the company where possible. Since 2020, we have talked a lot about our efforts to de-risk Granite's project portfolio. Among other things, we turned our focus away from long-term design build mega projects where contractors are not only responsible for all design risks, but also the risk of vendor or subcontractor price increases over the contract life, which can often extend well over five years. In a time of uncertain price increases, those types of contracts amplify the risks borne by the contractor. In the current environment and with our project portfolio, our teams are focused on locking in on pricing at bid time to mitigate the risk of inflation or other price increases. While it is impossible to eliminate all inflation risks in our contracts, we believe that our portfolio in CAAT has significantly reduced risk compared to our portfolio from only a few years ago. We also work to limit the risk on tariff-related inflation with commodities used in our work like natural gas, diesel, and liquid asphalt. We monitor these markets in the normal course of business throughout the year and apply measures to mitigate the risk of price fluctuations. In summary, we are winning high quality projects that should support our growth and margin expectations. We are continuing to strategically invest in our materials business. There are tremendous opportunities to strengthen our footprint in order to drive volumes and higher margins in our materials business. We are acting on those opportunities. And finally, We continue to pursue accretive M&A that will strengthen our home markets or expand our geographic footprint. The timing of M&A is difficult to predict, but the deal environment is active with numerous pursuits ongoing. We continue to target materials-focused Ferugia integrated companies and smaller bolt-ons to strengthen our home markets. Our target of completing two to three deals in 2025 is unchanged. Now, let's turn to our first quarter results, starting with the materials segment. In our press release this quarter, we included product level disclosures for aggregates and asphalt for the first time. This is another important step in the evolution of our materials business. After years of underinvestment, we have committed to strengthening and growing the materials segment that is core to a vertically integrated strategy. From 2022 through 2024, we have invested organically and through M&A in the materials business. This has increased our reserves by 56% to 1.6 billion tons. We also added 11 new aggregate crushing plants and 10 new asphalt plants during this three-year span. In addition, we completed numerous capital improvement projects to drive efficiency and reduce production costs, such as aggregate plant automation projects. One year ago, we completed the realignment of our operational leadership, placing materials experts over our materials business and centralizing management functions, such as sales and quality control. The team has made impressive progress over the last year in margin improvement in both aggregates and asphalt. I expect the team to continue to raise the bar, drive profitability, and increase shareholder value in 2025 and over the next several years. Demand in the materials business remains strong, and our expectations are for volumes in 2025 to be consistent year over year, with price increases on aggregates in the high single digits and low single-digit increases on asphalts. Now, let's move to the construction segment. We were off to a strong start to 2025, despite a wet march in many of our western markets. As I mentioned earlier, our markets are strong, and this strength is reflected in our cap. In the first quarter, cap has increased $444 million to $5.7 billion, which is a new granite record. As we discussed in the last call, there were a number of projects that were awaiting formal award, which are now included in cap. Building off the fourth quarter of 2024, the first quarter has been another busy period in the bid room. Across the company, our teams have delivered again and are winning more work than the prior year. While markets across the company are strong, California, Texas, and the federal division have been highlights in the number of opportunities and wins during the quarter. As I look at the bid list over the next several months, I am encouraged by the number of excellent quality project opportunities ahead of us. We have a great opportunity to continue to build CAP in 2025 we built what we believe is the highest quality project portfolio in grants history by focusing on our home markets and best value projects that better position us for success. With the work that we have in cap, the project opportunities ahead of us, and the continued emphasis on operational excellence, I expect to meet our growth and margin expectations in 2025. Now, I'll turn it over to Stacey to review our financial performance for the quarter.