Granite(US:GVA)2019-10-25 19:24Financial Data and Key Metrics Changes - Granite's consolidated third quarter 2019 revenues were $1.1 billion, up more than 3% year-over-year, while year-to-date revenues were $2.5 billion, also up modestly compared to last year [35] - Third quarter 2019 earnings per share were $0.43 compared to $1.17 last year, with a year-to-date loss of $2.39 per share compared to earnings of $0.84 per share in the prior year [36] - Third quarter 2019 gross profit was $91.4 million compared to $144.5 million last year, with year-to-date gross profit down from $281.1 million in 2018 to $79.5 million [36][37] Business Line Data and Key Metrics Changes - Transportation segment revenue was $598.6 million, down about 2% from $610.8 million in 2018, with year-to-date revenue down about 9% [39] - Water segment revenues increased to $135.9 million compared to $124.3 million in 2018, with year-to-date revenues up more than 50% from last year [41][42] - Specialty segment revenue grew nearly 18% year-over-year to $224.5 million in the third quarter, with year-to-date revenue up more than 17% from 2018 [43][44] - Materials segment revenue was $129.1 million, down slightly from last year, with year-to-date revenues down about 3% [45] Market Data and Key Metrics Changes - Granite's Committed and Awarded Projects (CAP) increased 44.5% to $4.7 billion, with a greater mix of smaller, best-value negotiated work [38][32] - The backlog composition is shifting to shorter duration lower value contracts due to a diversification and risk reduction strategy [33] Company Strategy and Development Direction - The company is focused on turning around the Heavy Civil operating group, which has faced challenges, particularly with large fixed price design build projects [15][21] - A strategic review has led to a narrowing of market focus and a decision to cease bidding on large design build jobs in markets lacking competitive advantages [22][24] - The company aims to align operational capabilities with strategic opportunities and has implemented risk and scope reduction parameters for the Heavy Civil group [24][26] Management's Comments on Operating Environment and Future Outlook - Management noted that the Heavy Civil industry faces structural issues impacting project delivery and profitability [51] - The company anticipates improved profitability and cash flow for the foreseeable future, driven by strong core operational performance in healthy markets [14][30] - Preliminary expectations for 2020 include mid single-digit consolidated revenue growth and an adjusted EBITDA margin of 6.5% to 8.5% [49] Other Important Information - The company has been recognized as a great place to work for the second consecutive year, reflecting its commitment to employee engagement [10] - Safety performance has improved significantly, with year-to-date safety incident tracking at the lowest rate in the company's history [11][12] Q&A Session Summary Question: Can you elaborate on the third quarter charges taken in Heavy Civil? - Management indicated that the charges were a result of a strategic review and included a combination of legacy projects and new issues identified [58] Question: What is the preliminary guidance for 2020? - The guidance is conservative, focusing on stabilizing the Heavy Civil business without expecting it to contribute to the bottom line in 2020 [60][61] Question: How strong was the vertical business performance? - The vertical business showed strong operating performance, offsetting losses in the Heavy Civil segment, with a reported $69 million loss in that business [68][70] Question: What proportion of the Heavy Civil backlog is booked under new parameters? - Approximately $700 million of the backlog has been booked under new, lower-risk parameters since 2017 [119][121] Question: What is the cash that has yet to be collected from disputes? - Management indicated that the amount is significant, involving hundreds of millions, but specific figures were not disclosed [147]