Granite(US:GVA)2022-02-25 21:28Financial Data and Key Metrics Changes - For fiscal year 2021, revenues from continuing operations decreased by 4% year-over-year, while gross profit improved slightly, resulting in a gross profit margin of 10% [43][44] - Adjusted EBITDA from continuing operations for fiscal 2021 was $163 million with a margin of 5.4%, compared to $153 million and 4.9% in the prior year [51] - Operating cash flow for fiscal 2021 decreased to $22 million compared to $268 million in 2020, impacted by various factors including legal fees [53] Business Line Data and Key Metrics Changes - In the Construction segment, full-year revenue from continuing operations declined by $162 million year-over-year to $2.6 billion, primarily due to lower revenue in the Central and California Groups [44] - The Materials segment saw a revenue increase of 12% over the prior year, driven by higher volumes across operating groups, although gross profit margin declined from 17% to 14% [49][40] Market Data and Key Metrics Changes - The Infrastructure Investment and Jobs Act signed in November 2021 provides $550 billion in incremental funding over five years, which is expected to benefit various infrastructure projects [41] - The California market is seeing increased opportunities, with Caltrans lettings up year-over-year and an improving budget outlook due to SB1 [98] Company Strategy and Development Direction - The company announced a strategic plan focusing on core competencies in civil construction and materials, leading to the divestiture of non-core businesses [10][12] - The new strategic plan includes themes such as developing people, raising execution standards, growing market share, and maximizing Granite Value Add (GVA) [22][25] - The company plans to invest in technology and aggregate reserves to enhance its vertically integrated business model [62] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market outlook, anticipating low-single-digit revenue growth in 2022, with more significant impacts expected in 2023 and beyond due to federal funding [56][58] - The company expects to complete the majority of the ORP projects in 2022, which should lead to improved margins moving forward [59][66] Other Important Information - The company has increased its share repurchase program authorization to $300 million, reflecting a strong cash and liquidity position [20][55] - The ORP ended the year with remaining CAP of $319 million, with expectations to burn through this amount in 2022 [46][48] Q&A Session Summary Question: Rationale for selling water portfolio and expected capital from remaining businesses - Management indicated that the decision to divest the WMS businesses was based on a strategic focus on core competencies in civil construction and materials, with the amount from remaining businesses yet to be determined [72][73] Question: Expectations for EBITDA margins post-ORP - Management anticipates long-term EBITDA margins to trend towards 9% to 10% as the ORP is completed and focus shifts back to core operations [76] Question: SG&A expectations excluding ORP - Management expects SG&A to improve as the Central Group transforms and focuses on home markets, with a potential increase in efficiency [78] Question: Market competitiveness and CAP margin expectations - Management noted that the quality of CAP heading into 2022 is better than in previous years, with a shift towards less risky projects expected to improve margins [86][87] Question: Share repurchase program and liquidity management - Management confirmed a strong liquidity position with plans to balance share repurchases and debt paydown following the completion of divestitures [92][94]