Granite(US:GVA)2024-10-31 10:46Financial Performance Overview Third Quarter 2024 Results Granite reported strong third-quarter 2024 results with a 14% year-over-year revenue increase to $1.3 billion, with net income and earnings per share seeing significant growth, and record Committed and Awarded Projects (CAP) of $5.6 billion Q3 2024 Key Financial Metrics | Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $1.3 billion | $1.1 billion | +14% YoY | | Net Income | $79 million | $58 million | +36.2% YoY | | Diluted EPS | $1.57 | $1.13 | +38.9% YoY | | Adjusted Net Income | $91 million | $77 million | +18.2% YoY | | Adjusted Diluted EPS | $2.05 | $1.72 | +19.2% YoY | | Gross Profit | $203 million | $167 million | +21.6% YoY | | Adjusted EBITDA | $149 million | $126 million | +18.3% YoY | - Committed and Awarded Projects (CAP) reached a record $5.6 billion, showing a sequential increase of $44 million and a year-over-year increase of $35 million13 - The company expanded its southeast home market through the acquisition of Dickerson & Bowen, Inc1 Nine Months 2024 Results For the first nine months of 2024, Granite's revenue grew by $455 million to $3.0 billion, with net income surging to $85 million, a substantial increase from $18 million in the prior-year period Nine Months 2024 Key Financial Metrics | Metric | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $3.0 billion | $2.6 billion | +17.5% YoY | | Net Income | $85 million | $18 million | +372.2% YoY | | Diluted EPS | $1.79 | $0.40 | +347.5% YoY | | Adjusted Net Income | $158 million | $110 million | +43.6% YoY | | Adjusted Diluted EPS | $3.56 | $2.47 | +44.1% YoY | | Gross Profit | $422 million | $302 million | +39.7% YoY | | Adjusted EBITDA | $293 million | $204 million | +43.6% YoY | - Year-to-date operating cash flow increased by $249 million compared to the same period in the prior year1 Segment Performance Construction Segment The Construction segment delivered strong year-over-year growth in both the third quarter and the first nine months of 2024, driven by higher CAP levels, favorable weather, and contributions from acquisitions, with gross profit margin also expanding Construction Segment Performance (in thousands) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,080,705 | $945,698 | $2,593,872 | $2,198,527 | | Gross Profit | $170,685 | $137,162 | $362,885 | $253,021 | | Gross Profit Margin | 15.8% | 14.5% | 14.0% | 11.5% | - Committed and Awarded Projects (CAP) increased to a record $5.6 billion, providing a strong foundation for future revenue7 Materials Segment The Materials segment reported revenue growth of 13.8% in Q3 and 15.8% year-to-date, primarily due to contributions from acquired businesses and higher asphalt and aggregate sales prices, reflecting the positive impact of acquisitions and pricing power Materials Segment Performance (in thousands) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $194,805 | $171,122 | $436,399 | $376,913 | | Gross Profit | $32,264 | $29,481 | $59,060 | $49,067 | | Gross Profit Margin | 16.6% | 17.2% | 13.5% | 13.0% | | Cash Gross Profit | $43,202 | $36,203 | $89,718 | $67,581 | - Revenue growth was driven by acquired businesses and higher sales prices, which successfully offset a decrease in asphalt volumes8 Outlook and Strategy 2024 Full-Year Guidance Granite updated its full-year 2024 guidance, maintaining its revenue forecast while narrowing and raising the adjusted EBITDA margin range to 10%-11%, and increasing its SG&A expense forecast due to higher incentive compensation Updated 2024 Full-Year Guidance | Metric | Updated 2024 Guidance | Previous 2024 Guidance | | :--- | :--- | :--- | | Revenue | $3.9B - $4.0B | Unchanged | | Adjusted EBITDA Margin | 10% - 11% | 9.5% - 11.5% | | SG&A as % of Revenue | 8.3% - 8.5% | 7.5% - 8.0% | | Effective Tax Rate (Adjusted) | Mid-20s | Not specified | | Capital Expenditures | ~$130 million | Not specified | Long-Term Targets and Market View The CEO expressed a positive long-term outlook, targeting organic growth of 6-8% CAGR through 2027, supported by the federal infrastructure bill and a healthy private market, with plans for materials-focused acquisitions and share repurchases - The company's 2027 financial targets anticipate organic revenue growth at a CAGR of 6% to 8%, with continued adjusted EBITDA margin expansion3 - Management believes the public market will be supported for years by the federal infrastructure bill and sees numerous growth opportunities in the private market3 - Future capital allocation strategy includes pursuing bolt-on and larger materials-focused acquisitions and returning value to shareholders through share repurchases3 Financial Statements Condensed Consolidated Balance Sheets As of September 30, 2024, Granite's balance sheet showed total assets of $3.13 billion, an increase from $2.81 billion at the end of 2023, supported by increases in cash, receivables, and goodwill, while total liabilities also rose and total equity saw a modest increase Key Balance Sheet Items (in thousands) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $1,814,102 | $1,643,451 | | Total Assets | $3,130,925 | $2,813,540 | | Total Current Liabilities | $1,164,826 | $1,029,883 | | Total Liabilities | $2,061,246 | $1,786,574 | | Total Equity | $1,069,679 | $1,026,966 | Condensed Consolidated Statements of Operations The statement of operations for the third quarter and first nine months of 2024 reflects strong top-line growth translating to significantly improved profitability, with total revenue increasing to $3.03 billion and net income attributable to Granite surging to $84.9 million for the nine months ended September 30, 2024 Key Income Statement Items (in thousands) | Account | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $1,275,510 | $1,116,820 | $3,030,271 | $2,575,440 | | Gross Profit | $202,949 | $166,643 | $421,945 | $302,088 | | Operating Income | $104,298 | $73,818 | $146,819 | $59,429 | | Net Income Attributable to Granite | $78,951 | $57,624 | $84,863 | $17,601 | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, net cash provided by operating activities was $283.5 million, a significant improvement from the prior-year period, while investing activities used $211.1 million and financing activities used $27.8 million, resulting in a $44.6 million increase in cash and cash equivalents Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $283,549 | $34,198 | | Net Cash used in Investing Activities | ($211,107) | ($89,270) | | Net Cash provided by (used in) Financing Activities | ($27,819) | $53,205 | | Net Increase (Decrease) in Cash | $44,623 | ($1,867) | | Cash and Cash Equivalents at End of Period | $462,286 | $292,124 | Non-GAAP Financial Measures Reconciliation EBITDA and Adjusted EBITDA Reconciliation The company's non-GAAP measures show strong underlying performance, with Adjusted EBITDA increasing to $149.3 million in Q3 2024 and the margin improving to 11.7%, while for the nine-month period, Adjusted EBITDA grew to $293.2 million EBITDA and Adjusted EBITDA (in thousands) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Income Attributable to Granite | $78,951 | $57,624 | $84,863 | $17,601 | | EBITDA | $138,768 | $104,542 | $218,541 | $105,913 | | Adjusted EBITDA | $149,280 | $126,313 | $293,196 | $203,568 | | Adjusted EBITDA Margin | 11.7% | 11.3% | 9.7% | 7.9% | Adjusted Net Income Reconciliation After adjustments, Granite's adjusted net income for Q3 2024 was $90.5 million, or $2.05 per diluted share, compared to $76.7 million, or $1.72 per diluted share, in Q3 2023, with adjusted diluted EPS for the nine-month period reaching $3.56 Adjusted Net Income and EPS | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | GAAP Net Income (in thousands) | $78,951 | $57,624 | $84,863 | $17,601 | | Adjusted Net Income (in thousands) | $90,535 | $76,654 | $158,303 | $109,724 | | GAAP Diluted EPS | $1.57 | $1.13 | $1.79 | $0.40 | | Adjusted Diluted EPS | $2.05 | $1.72 | $3.56 | $2.47 | Materials Segment Cash Gross Profit Reconciliation The Materials segment's cash gross profit, a non-GAAP measure, was $43.2 million in Q3 2024, up from $36.2 million in Q3 2023, with the cash gross profit margin improving to 22.2% from 21.2%, indicating stronger operational profitability before non-cash charges Materials Segment Cash Gross Profit (in thousands) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Gross Profit | $32,264 | $29,481 | $59,060 | $49,067 | | Depreciation, Depletion & Amortization | $10,938 | $6,722 | $30,658 | $18,514 | | Cash Gross Profit | $43,202 | $36,203 | $89,718 | $67,581 | | Cash Gross Profit Margin | 22.2% | 21.2% | 20.6% | 17.9% |