Fairfax Financial Holdings Limited

Good morning, everyone. My name is Jamie, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Granite Construction Incorporated 2024 fourth quarter conference call. Today's event 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 and 1. Please note that 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. Sir, you may begin.

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 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 in company presentations, which are available on our website, graniteconstruction.com under investor relations. Now I'd like to turn the call over to Kyle Larkin.

Good morning. First, I want to thank our teams across the company for enabling us to achieve another record year for Granite. Their dedication and hard work drives our success. From safety to revenue, profitability and cash flow, it was truly an outstanding year for the company. Before we dive into the results, I want to take a moment to acknowledge all the people impacted by the terrible fires in Southern California. Thankfully, our employees are safe and we are fortunate that there were no significant impacts to our projects. As we look ahead to 2025, I believe it is fair to say that Granite is a transformed company. Our teams are focused on growing our businesses while also generating strong cashflow and delivering consistent profitability. We also continue to explore potential acquisitions as we evaluate opportunities to build upon and expand our vertically integrated strategy into new markets. As we work towards our 2027 financial targets, we believe both the construction and material segments have many opportunities to grow revenue and increase margin in 2025 and over the coming years. Now, let's turn to the results from the fourth quarter, starting with the construction segment. As discussed in previous quarters, we believe that we continue to experience the strongest market that I've seen throughout my career, excluding only the short-lived housing bubble. State transportation budgets are near record levels across our footprint. These state budgets are supported by the Federal Infrastructure Bill, or IIJA. In California, our largest revenue state, The proposed 2025-2026 fiscal year transportation budget increased meaningfully in the key areas of local assistance and capital outlay projects from the 2024-2025 fiscal year forecast. California transportation funding is supported by the SB1 gas tax and the infrastructure bill, and these funding sources will generate further opportunities for growth in 2025 and beyond as allocations move to active projects and as, ultimately, payments are made to contractors. Regarding the IIJA, due to the difference between the timing of allocations of funds to states and when the money is spent on projects, we believe the infrastructure bill will continue to support our industry for many years to come, but the majority of funds remain to be spent when the bill terminates in 2026. These strong markets support our outlook as approximately 75% of our construction segment is publicly funded. The remainder comes from our private work, which primarily consists of water infrastructure services, drilling and infrastructure for mines, commercial site development, such as data centers, and rail infrastructure, including constructing intermodal facilities. These markets have been strong over the last several years, and we see a number of opportunities to continue to grow our presence in them in 2025 and beyond. During the fourth quarter, we once again bid on and won more work than the prior year. There are a number of projects where we are awaiting formal award, and those projects have not been included in our 2024 cap. I'm very pleased by the performance of our estimating teams in the quarter. Although we saw a decrease in CAP since the third quarter, we expect CAP to increase in 2025, and the quality of our backlog should continue to improve and strengthen to what we believe to be the best project portfolio in our history. With the work that we have in CAP and the opportunities in front of us on the bid schedule, we are in a good position to achieve our organic growth expectations and realize improvement in segment gross margin in excess of 1% in 2025. Moving to the materials segment, 2024 was a pivotal year. In the beginning of the year, we reorganized our operational structure to better align the materials leadership with the business. The materials organization made significant progress during 2024 as we implemented price increases in both aggregates and asphalt, improved efficiency by adding several new modernized plants, and completed multiple automation projects. All these efforts helped drive a year-over-year increase of cash gross profit margin. It was a great year for the material segment, and we expect even higher level of apartments going forward, starting with price increases in 2025, a high single digits for aggregates and low single digits for asphalt. Investment in our materials business has been a priority within our capital allocation strategy, as seen through materials led M&A, reserve expansion, and plant and facilities upgrades and enhancements. In 2024, we increased our aggregate reserves by 20% year over year to 1.6 billion tons. As in the construction segment, we believe that the market environment will drive organic revenue growth, and we are encouraged that we enter 2025 with an increase in materials backlog compared to 2024. In addition to strategic materials investments within CapEx, I expect we will grow the business through further M&A in 2025. We have a target of completing two or three deals a year as we focus on strengthening our western and southeastern footprints. There are numerous M&A opportunities in the market, and we have added experienced leadership to our corporate development team as we position ourselves to be more active in M&A. With the efforts of our centralized materials leadership, strategic CapEx investment, and M&A, I believe our margins will continue to expand over the next three years as we work towards our consolidated 2027 adjusted EBITDA margin target of 12% to 14%. Now, I'll turn it over to Stacey to review our financial performance for the quarter.