Granite Construction Q2 | FY 2021 Earnings Conference Call
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Granite Construction
Q2 | FY 2021 Earnings Conference Call
© 2021 Granite Construction. All Rights Reserved.
Safe Harbor Any statements contained in this looking statements are estimates to, those described in greater detail in our presentation that are not based on reflecting the best judgment of senior filings with the Securities and Exchange historical facts, including statements management and reflect our current Commission, particularly those described regarding future events, occurrences, expectations regarding future events, in our Annual Report on Form 10-K and circumstances, activities, performance, occurrences, circumstances, activities, Quarterly Reports on Form 10-Q. growth, demand, strategic plans, performance, growth, demand, strategic outcomes, outlook, guidance, Committed plans, outcomes, outlook, guidance, CAP, Due to the inherent risks and uncertainties and Awarded Projects (CAP), and results, and results. These expectations may or associated with our forward-looking constitute forward-looking statements may not be realized. Some of these statements, the reader is cautioned not to within the meaning of the Private expectations may be based on beliefs, place undue reliance on them. The reader Securities Litigation Reform Act of 1995. assumptions or estimates that may prove is also cautioned that the forward-looking These forward-looking statements are to be incorrect. In addition, our business statements contained herein speak only identified by words such as “future,” and operations involve numerous risks as of the date of this presentation and, “outlook,” “assumes,” “believes,” “expects,” and uncertainties, many of which are except as required by law; we undertake “estimates,” “anticipates,” “intends,” beyond our control, which could result in no obligation to revise or update any “plans,” “appears,” “may,” “will,” “should,” our expectations not being realized or forward-looking statements for any “could,” “would,” "guidance," “continue,” otherwise materially affect our business, reason. and the negatives thereof or other financial condition, results of operations, comparable terminology or by the context cash flows and liquidity. Such risks and in which they are made. These forward- uncertainties include, but are not limited © 2021 Granite Construction. All Rights Reserved. 2
Company Update
Kyle Larkin, President & CEO
© 2021 Granite Construction. All Rights Reserved.
Core Values © 2021 Granite Construction. All Rights Reserved. 4
Integrity – Know and do what is right
We operate with integrity and the highest ethical standards.
Honoring Commitment Holding Accountable Speak Up
Offer transparency and Create trust, build reputation, Act in united and
reliability to all stakeholders and grow our business wholehearted manner
Recent Progress and Events
✓ Clarified and strengthened commitment to integrity in everything we do
✓ Increased communication and opportunities for discussion
✓ Launched company-wide integrity core value campaign
© 2021 Granite Construction. All Rights Reserved. 5
Excellence – The Heart of Granite
We strive for a high-performance culture of continuous improvement, innovation, and
quality in all aspects of our work.
High-Performing Teams Right Way, First Time Active Lean Culture
Focus on safety, quality, Be customers’ Drive people-centric
and collaboration contractor of choice continuous improvement
Recent Progress and Events
✓ Investing in developing and implementing construction technology
✓ Running Lean Refocus Campaign identifying waste and eliminating rework
✓ Established Talent Summit and Centers of Excellence
© 2021 Granite Construction. All Rights Reserved. 6
Transportation Segment
• Continued execution on the Old Risk Portfolio and the Heavy Civil Group strategy
• Strong CAP led by the vertically-integrated California and Northwest Groups
• CA up 25% year-over-year and up 2% sequentially
• NW down 3% year-over-year and up 3% sequentially
• Positive funding environment providing opportunities across the segment
Q2’21 Revenue Q2’21 CAP
1%
6% 8%
33%
40%
30%
$525M 31% $2,894M
7% 5%
23% 16%
California Heavy Civil New Risk Portfolio Midwest
Heavy Civil Old Risk Portfolio Northwest Federal
© 2021 Granite Construction. All Rights Reserved. 7
Water Segment Overview
• Continued recovery from COVID-19 pandemic
• Water supply and maintenance services supports drought alleviation
• Water CAP continues to grow, up 129% year-over-year and up 57% sequentially
• Recently awarded $160 million Texas dam project added to Q2 CAP
Q2’21 Revenue Q2’21 CAP
7% 8%
1%
5%
30%
50% $532M
$113M
87% 12%
Water & Mineral Heavy Civil Federal
California Northwest
© 2021 Granite Construction. All Rights Reserved. 8
Specialty Segment Overview
• Recovery in mineral exploration supported by increased commodity prices
• Market strength in government works, mining, site development, and renewable/solar
energy projects
• CAP up 50% year-over-year with $267 million Ohio tunnel project added in Q1
• Leveraging horizontal civil construction expertise across end markets
Q2’21 Revenue Q2’21 CAP
9% 10% 15%
26%
13%
29% 17%
$200M $1,019M
13%
13%
29%
26%
California Northwest Water & Mineral
Heavy Civil Midwest Federal
© 2021 Granite Construction. All Rights Reserved. 9
Materials Segment Overview
• Revenue growth driven by volume improvement
• Quarterly aggregate volume increase of 42%
• Quarterly asphalt volume increase of 25%
• Strengthening position through new plants reinvestment and new technologies
Q2’21 Revenue*
1% California
10% 10% Nevada
9% Oregon
8% Q2 Utah
1% 2021
5% 56% Washington
Alaska
Arizona
Other
*Revenue includes external, intersegment, and intra-segment sales of materials.
© 2021 Granite Construction. All Rights Reserved. 10CAP Update | Reshaping the Project Portfolio, Q2 CAP at $4.4B
Exposure to Key End Markets Allocating Risk Diversified Operating Groups
2% 2%
6%
12%
12% 30%
33%
23% Q2 65% Q2 Q2
2021 2021 2021
52%
28%
16% 22%
Transportation | $2,894M Bid Build | $2,318M California | $1,352M Midwest | $526M
Specialty | $1,019M Design Build | $571M Heavy Civil | $957M Water & Mineral | $264M
Water | $532M Best-value* | $1,468M Northwest | $1,236M Federal | $110M
Other | $88M
$ in millions
*Best value procurement work includes construction management/general contractor, construction management at-risk, and progressive design build projects.
© 2021 Granite Construction. All Rights Reserved. 11Q2 2021 Financial Results
Lisa Curtis, EVP, Chief Financial Officer
© 2021 Granite Construction. All Rights Reserved.Q2 2021 Financial Highlights
Revenue Gross Profit
+5% +32%
Transportation
Strong performance in vertically-integrated
businesses offset by reduced revenue from
$117 Heavy Civil Group
$964 ORP backlog burn on track
$916 $24
$88
$200 Water
$175 $22
$25 Continued recovery from COVID-19
$96 $125
$11
$110 $113
$19 Materials
$13 Strong volumes driving
$535 $525 $60 top-and bottom-line growth
$31
Specialty
Recovery of mineral exploration and federal
site development project drove growth
GP decrease due to ongoing disputed work
Q2 2020 Q2 2021 Q2 2020 Q2 2021 on a tunnel project
$ in millions
Note: Numbers may not add up due to rounding.
© 2021 Granite Construction. All Rights Reserved. 13Q2 2021 Financial Performance
Q2 Q2
Key Non-GAAP 1 Metrics
2021 2020
Adjusted EBITDA $79.9 $49.9
Adjusted EBITDA Margin 8.3% 5.4%
Adjusted Net Income (Loss) $42.3 $19.1
Adjusted EPS $0.91 $0.41
$ in millions except per share
1See appendix for reconciliation of these Non-GAAP figures
© 2021 Granite Construction. All Rights Reserved. 14Balance Sheet and Cash Flow
Operating Cash Flow Liquidity Total Debt
$631 $414
$539 $340
$227
$12 $244
$404
$295
($31)
YTD 2020 YTD 2021 Q2 2020 Q2 2021 Q2 2020 Q2 2021
Revolver Availability
Cash and Marketable Securities
$ in millions
© 2021 Granite Construction. All Rights Reserved. 15Concluding Remarks
Kyle Larkin, President & CEO
© 2021 Granite Construction. All Rights Reserved.Concluding Remarks Concluding Remarks
• Execution in the ORP and progress made towards mid-teens gross margins
• CAP balance demonstrating strength as a diversified horizontal civil contractor
across end markets
• Strong cash and balance sheet
• Positive public and private environment with optimism for expansion from a
federal infrastructure bill
© 2021 Granite Construction. All Rights Reserved. 17Q&A © 2021 Granite Construction. All Rights Reserved.
Appendix
Non-GAAP Financial Information expenses related to the acquisition of the Layne and significantly from methods used by other companies to
The tables below contain financial information restructuring charges related to our Heavy Civil compute similar measures. As a result, any non-GAAP
calculated other than in accordance with U.S. generally Operating Group; financial measures provided by the Company may not
accepted accounting principles (“U.S. GAAP”). • Non-cash impairments related to goodwill and be comparable to similar measures provided by other
Specifically, management believes that non-GAAP investments in affiliates in 2020; companies. The Company does not provide a
financial measures such as EBITDA and EBITDA margin • Gain on sale of a property; reconciliation of forward-looking adjusted EBITDA
are useful in evaluating operating performance and are • Transaction costs which includes acquired intangible margin to the most directly comparable forward-
regularly used by securities analysts, institutional amortization expenses and acquisition related looking GAAP measure of net income (loss)
investors and other interested parties, and that such depreciation related to the acquisition of Layne and attributable to Granite Construction Incorporated
supplemental measures facilitate comparisons between LiquiForce; because the timing and amount of the excluded items
companies that have different capital and financing • Amortization of debt discount related to our 2.75% are unreasonably difficult to fully and accurately
structures and/or tax rates. We are also providing convertible notes; estimate.
adjusted EBITDA and adjusted EBITDA margin non- • The impact of the purchased equity derivative
GAAP measures to indicate the impact of: instrument which offsets any potential- dilution from
• Other costs which includes the settlement charge, the 2.75% convertible notes above the $31.47
legal and accounting investigation fees, integration conversion price up to a share price of $53.44.
expenses related to the acquisition of Layne and
restructuring charges related to our Heavy Civil Management believes that these additional non-GAAP
Operating Group; financial measures facilitate comparisons between
• Non-cash impairments related to goodwill and industry peer companies and management uses these
investments in affiliates in 2020; and non-GAAP financial measures in evaluating the
• Gain on sale of a property. Company's performance. However, the reader is
cautioned that any non-GAAP financial measures
We provide adjusted net income (loss) before provision provided by the Company are provided in addition to,
for (benefit from) income taxes, adjusted provision for and not as alternatives for, the Company's reported
(benefit from) income taxes, adjusted net income (loss) results prepared in accordance with U.S. GAAP. Items
attributable to Granite Construction Incorporated, that may have a significant impact on the Company's
adjusted diluted weighted average shares of common financial position, results of operations and cash flows
stock, and adjusted diluted net income (loss) per share, must be considered when assessing the Company's
non-GAAP measures, to indicate the impact of the actual financial condition and performance regardless
following: of whether these items are included in non-GAAP
• Other costs which includes the settlement charge, financial measures. The methods used by the Company
legal and accounting investigation fees, integration to calculate its non-GAAP financial measures may differ
© 2021 Granite Construction. All Rights Reserved. 19Adjusted EBITDA and NI Reconciliations © 2021 Granite Construction. All Rights Reserved. 20
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