Granite(US:GVA)2021-07-31 16:45Financial Data and Key Metrics Changes - Consolidated revenue for Q2 2021 grew 5% year-over-year to $964 million, with gross profit increasing 32% year-over-year to $117 million, resulting in a gross profit margin of 12% [26][32] - Adjusted EBITDA for Q2 increased by $30 million year-over-year to $80 million, with an adjusted EBITDA margin of 8% [32] - Adjusted net income for Q2 was $42 million, a $23 million improvement from $19 million in the same period last year [32] Business Line Data and Key Metrics Changes - Transportation Segment: Revenue decreased by $10 million year-over-year to $525 million, while gross profit increased 91% to $60 million, with a gross profit margin of 11% [27] - Water Segment: Revenue increased 3% year-over-year, driven by recovery from the pandemic and strong demand due to drought conditions, but gross profit decreased 16% to $11 million [29] - Specialty Segment: Revenue increased 15% year-over-year to $200 million, while gross profit decreased 4% to $24 million, resulting in a gross profit margin of 12% [30] - Materials Segment: Revenue increased 30% year-over-year to $125 million, with gross profit increasing 17% to $22 million, resulting in a gross profit margin of 18% [31] Market Data and Key Metrics Changes - The California Group's cap increased by 25% year-over-year to $1.2 billion, reflecting strong market conditions [16] - The Water segment's cap increased by 129% year-over-year to $532 million, including the addition of a $160 million project [20] - The Specialty segment's cap remained over $1 billion, driven by increased activity in mineral exploration and public works projects [21] Company Strategy and Development Direction - The company is focusing on transforming and de-risking its Heavy Civil Operating Group portfolio by pursuing projects with lower risk profiles [15] - Emphasis on integrity and excellence as core values, with a focus on continuous improvement and innovation [10][11] - The company is leveraging technology to enhance safety, efficiency, and project execution across all segments [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the funding environment in public markets and the strength of the economy in private markets, anticipating greater expansion with the completion of the federal infrastructure bill [39] - The company is well-positioned to grow in California, with expected infrastructure spending increasing from an average of $4.4 billion to $6 billion annually [17] - Management reiterated guidance for a full fiscal year adjusted EBITDA margin of 5.5% to 7.5% [37] Other Important Information - The company has a strong cash and marketable securities balance of $404 million, up $109 million year-over-year [34] - SG&A expenses for the quarter were $74 million, or just under 8% of revenue, compared to $78 million or 8.5% in the same prior year period [36] Q&A Session Summary Question: Thoughts on cap and its levels moving forward - Management noted a decrease in cap in the Heavy Civil Group as part of a strategic shift, but an increase in cap from vertically integrated businesses indicates a healthy pipeline of projects [46] Question: Expectations for the water business in the second half of the year - Management highlighted recovery in the water segment due to drought conditions and increased spending, expecting to return to pre-pandemic levels [49] Question: Concerns about materials profit margin and commodity prices - Management confirmed that they have been able to pass on cost increases to customers, maintaining margins in the materials business [60] Question: Observations on pricing and supply constraints - Management indicated that they have successfully passed on cost increases and are monitoring the market for potential future price increases [59] Question: SG&A outlook and drivers for sequential increase - Management expects a normal trend in SG&A expenses as the year progresses, with no significant anomalies anticipated [80] Question: Bid environment and competitive discipline - Management reported a robust pipeline of projects across all business segments, with a shift towards more favorable contracting methods [81]