Granite Reports First Quarter 2023 Results
05/02/2023 - 06:45 AM
Record Committed and Awarded Projects ("CAP") (1) of $5.1 billion $619 million $1.2 billion
Reiterating 2023 guidance
Bolt-on materials acquisitions completed in Vancouver, British Columbia and Carson City, Nevada in 2023
Q1 comparable revenue (2) decreased $58 million
Q1 diluted EPS of $(0.53) $(0.41)
WATSONVILLE, Calif. --(BUSINESS WIRE)--
Granite Construction Incorporated (NYSE:GVA) today announced results for the quarter ended March 31, 2023.
First Quarter 2023 Results
Net loss totaled $23 million $(0.53) $27 million $(0.58) $18 million $(0.41) $12 million $(0.26)
Revenue decreased $94 million $560 million $654 million $36 million $58 million
Gross profit decreased $28 million $32 million $60 million
Selling, general, and administrative (“SG&A”) expenses increased $3 million $73 million 13.1% of revenue, compared to $70 million 10.7% of revenue in the same period in the prior year. Comparable SG&A (3), which excludes Granite Inliner SG&A of $5 million $8 million
Adjusted EBITDA (3) was $(9) million $6 million
CAP (1) totaled $5.1 billion $619 million $1.2 billion
Cash and marketable securities decreased $104 million $256 million $288 million
"With extreme weather in parts of our business, this was not the start of the year that we were hoping for; however, I am confident that we are on the right path to realizing the targets of our strategic plan," said Kyle Larkin, Granite President and Chief Executive Officer. "We have made significant strides not only in de-risking our portfolio, but also rebuilding the portfolio with work aligned with our financial targets. Despite a slow first quarter of 2023 that was significantly impacted by weather across the western U.S. , I am very encouraged by the current market environment and opportunities ahead of us. Our first quarter CAP of $5.1 billion 14% from the fourth quarter and an increase of 30% from the first quarter of 2022. Impressively, this increase was achieved while being more selective and bidding fewer projects at improved margins than the first quarter of 2022."
Larkin continued, "In the first few months of 2023, we also completed two bolt-on materials acquisitions in support of our home markets in Nevada and the Pacific Northwest. These transactions are representative of the acquisitions contemplated in our strategic plan: bolt-on materials-focused acquisitions in or adjacent to established home markets which strengthen and provide our home markets with opportunities to grow with low integration risk."
(1) CAP is comprised of revenue we expect to record in the future on executed contracts, including 100% of our consolidated joint venture contracts and our proportionate share of unconsolidated joint venture contracts, as well as the general construction portion of construction manager/general contractor, construction manager/at risk and progressive design build contracts to the extent contract execution and funding is probable.
(2) Comparable revenue, gross profit and SG&A excludes amounts attributable to Granite Inliner, which was sold in March 2022.
(3) Adjusted net loss, adjusted diluted earnings per share, earnings before interest, taxes, depreciation, and amortization (“EBITDA”), EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin are non-GAAP measures. Please refer to the description and reconciliation of non-GAAP measures in the attached tables.
First Quarter 2023 Segment Results (Unaudited - dollars in thousands)
Construction Segment
Three Months Ended March 31,
As Restated
and Recast
2023
2022
Change
Revenue
$
503,416
$
578,266
$
(74,850
)
(12.9
)%
Gross profit
$
36,705
$
58,479
$
(21,774
)
(37.2
)%
Gross profit as a percent of revenue
7.3
%
10.1
%
As Restated
Committed and Awarded Projects
March 31,
2023
December 31,
2022
Change - Quarter
over Quarter
March 31,
2022
Change - Year
over Year
California
$
1,913,634
$
1,747,163
$
166,471
9.5
%
$
1,480,950
$
432,684
29.2
%
Central
1,750,375
1,661,613
88,762
5.3
%
1,430,522
319,853
22.4
%
Mountain
1,439,944
1,076,363
363,581
33.8
%
1,027,522
412,422
40.1
%
Total
$
5,103,953
$
4,485,139
$
618,814
13.8
%
$
3,938,994
$
1,164,959
29.6
%
Construction revenue in the first quarter decreased compared to the same period in the prior year primarily due to the wind down of several large projects in the Central Group, as well as the sale of Granite Inliner in the first quarter of 2022. Granite Inliner which is reported in the Mountain Group contributed $33 million $4 million $3 million $49 million U.S. Despite high levels of CAP entering the quarter, the extreme weather delayed work from starting and progressing, shifting the work from the first quarter.
Gross profit and gross profit margin in the first quarter decreased compared to the same period in the prior year primarily due to additional costs related to labor and material costs and extended project duration associated with winding down the I-64 High Rise Bridge project in Virginia and the impact of inclement weather. The impact to gross profit in the quarter from the project was $11 million $6 million
CAP increased $619 million $1.2 billion $364 million $166 million
Materials Segment
Three Months Ended March 31,
As Recast
2023
2022
Change
Revenue
$
56,652
$
75,620
$
(18,968
)
(25.1
)%
Gross profit
$
(4,346
)
$
1,613
$
(5,959
)
(369.4
)%
Gross profit as a percent of revenue
(7.7
)%
2.1
%
Materials revenue and gross profit in the first quarter decreased year-over-year primarily due to lower volumes in both asphalt and aggregates resulting from inclement weather during the quarter. Asphalt and aggregate volumes were down 39% and 21% , respectively, year-over-year with the greatest decreases in the California Group. Despite these volume decreases in the first quarter, order volumes remain strong going into the second quarter driven by the healthy public markets across our footprint.
Outlook
Our guidance for 2023 is unchanged as noted below:
Revenue in the range of $3.4 billion $3.6 billion
Adjusted EBITDA margin in the range of 7.5% to 9.0%
SG&A expense in the range of 8.0% to 8.5% of revenue
Low to mid-20s effective tax rate range for adjusted net income
Capital expenditures range of $100 million $120 million
The Company does not provide a reconciliation of forward-looking adjusted EBITDA margin to the most directly comparable forward-looking GAAP measure of net loss attributable to Granite Construction Incorporated because the timing and amount of the excluded items are unreasonably difficult to fully and accurately estimate.
Conference Call
Granite will conduct a conference call today, May 2, 2023, at 8:00 a.m. Pacific Time/11:00 a.m. Eastern Time to discuss the results of the quarter ended March 31, 2023. The Company invites investors to listen to a live audio webcast of the investor conference call on its Investor Relations website, https://investor.graniteconstruction.com
About Granite
Granite is America’s Infrastructure Company™. Incorporated since 1922, Granite (NYSE:GVA) is one of the largest diversified construction and construction materials companies in the United States as well as a full-suite civil construction provider. Granite’s Code of Conduct and strong Core Values guide the Company and its employees to uphold the highest ethical standards. Granite is an industry leader in safety and an award-winning firm in quality and sustainability. For more information, visit graniteconstruction.com, and connect with Granite on LinkedIn , Twitter , Facebook and Instagram .
Forward-looking Statements
Any statements contained in this news release that are not based on historical facts, including statements regarding future events, occurrences, opportunities, circumstances, activities, performance, growth, demand, strategic plans, shareholder value, outcomes, outlook, 2023 fiscal year guidance for revenue, adjusted EBITDA margin, SG&A expense, effective tax rate, and capital expenditures, Committed and Awarded Projects (“CAP”), results, the Company's on the right path to realizing its strategic plan targets, opportunities ahead and significant opportunities to continue to build CAP during 2023 constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by words such as “future,” “outlook,” “assumes,” “believes,” “expects,” “estimates,” “anticipates,” “intends,” “plans,” “appears,” “may,” “will,” “should,” “could,” “would,” “continue,” "guidance" and the negatives thereof or other comparable terminology or by the context in which they are made. These forward-looking statements are estimates reflecting the best judgment of senior management and reflect our current expectations regarding future events, occurrences, opportunities, circumstances, activities, performance, growth, demand, strategic plans, shareholder value, outcomes, outlook, 2023 fiscal year guidance for revenue, adjusted EBITDA margin, SG&A expense, effective tax rate, and capital expenditures, CAP, results, the Company's on the right path to realizing its strategic plan targets, opportunities ahead and significant opportunities to continue to build CAP during 2023. These expectations may or may not be realized. Some of these expectations may be based on beliefs, assumptions or estimates that may prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our business, financial condition, results of operations, cash flows and liquidity. Such risks and uncertainties include, but are not limited to, those described in greater detail in our filings with the Securities and Exchange Commission, particularly those described in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
Due to the inherent risks and uncertainties associated with our forward-looking statements, the reader is cautioned not to place undue reliance on them. The reader is also cautioned that the forward-looking statements contained herein speak only as of the date of this news release and, except as required by law; we undertake no obligation to revise or update any forward-looking statements for any reason.
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share and per share data)
March 31, 2023
December 31, 2022
ASSETS
Current assets
Cash and cash equivalents
$
199,751
$
293,991
Short-term marketable securities
39,754
39,374
Receivables, net
397,231
463,987
Contract assets
288,146
241,916
Inventories
97,893
86,809
Equity in construction joint ventures
182,063
183,808
Other current assets
41,397
37,411
Total current assets
1,246,235
1,347,296
Property and equipment, net
531,457
509,210
Long-term marketable securities
16,575
26,569
Investments in affiliates
83,335
80,725
Goodwill
73,703
73,703
Right of use assets
43,886
49,079
Deferred income taxes, net
22,080
22,208
Other noncurrent assets
60,116
59,143
Total assets
$
2,077,387
$
2,167,933
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt
$
1,456
$
1,447
Accounts payable
295,125
334,392
Contract liabilities
160,245
173,286
Accrued expenses and other current liabilities
266,541
288,469
Total current liabilities
723,367
797,594
Long-term debt
287,000
286,934
Long-term lease liabilities
27,934
32,170
Deferred income taxes, net
1,678
1,891
Other long-term liabilities
64,997
64,199
Commitments and contingencies
Equity
Preferred stock, $0.01
—
—
Common stock, $0.01
439
437
Additional paid-in capital
471,782
470,407
Accumulated other comprehensive income
653
788
Retained earnings
452,583
481,384
Total Granite Construction Incorporated shareholders’ equity
925,457
953,016
Non-controlling interests
46,954
32,129
Total equity
972,411
985,145
Total liabilities and equity
$
2,077,387
$
2,167,933
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
Three Months Ended March 31,
As Restated and
Recast(1)
2023
2022
Revenue
Construction
$
503,416
$
578,266
Materials
56,652
75,620
Total revenue
560,068
653,886
Cost of revenue
Construction
466,711
519,787
Materials
60,998
74,007
Total cost of revenue
527,709
593,794
Gross profit
32,359
60,092
Selling, general and administrative expenses
73,122
70,120
Other costs, net
4,523
6,279
Gain on sales of property and equipment, net
(2,037
)
(598
)
Operating loss
(43,249
)
(15,709
)
Other (income) expense
Interest income
(3,762
)
(570
)
Interest expense
2,891
3,585
Equity in income of affiliates, net
(5,187
)
(1,289
)
Other (income) expense, net
(1,950
)
1,308
Total other (income) expense, net
(8,008
)
3,034
Loss before income taxes
(35,241
)
(18,743
)
Provision for (benefit from) income taxes
(9,469
)
6,352
Net loss
(25,772
)
(25,095
)
Amount attributable to non-controlling interests
2,749
(1,638
)
Net loss attributable to Granite Construction Incorporated
$
(23,023
)
$
(26,733
)
Net loss per share attributable to common shareholders:
Basic
$
(0.53
)
$
(0.58
)
Diluted
$
(0.53
)
$
(0.58
)
Weighted average shares outstanding:
Basic
43,764
45,730
Diluted
43,764
45,730
(1) As previously disclosed in our 2022 Annual Report on Form 10-K filed on February 21, 2023, the restatement of our unaudited quarterly financial information for the first three quarters in the year ended December 31, 2022 was necessary. In addition to those restatements, the financial information for the three months ended March 31, 2022 presented herein includes adjustments to retrospectively reclassify the results of the former Water and Mineral Services businesses from discontinued operations to continuing operations.
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands )
As Restated
Three Months Ended March 31,
2023
2022
Operating activities
Net loss
$
(25,772
)
$
(25,095
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion and amortization
19,733
16,737
Amortization related to long-term debt
472
652
Gain on sale of business
—
(3,278
)
Gain on sales of property and equipment, net
(2,037
)
(598
)
Deferred income taxes
—
2,545
Stock-based compensation
4,828
2,614
Equity in net (income) loss from unconsolidated joint ventures
(911
)
3,627
Net income from affiliates
(5,187
)
(1,289
)
Other non-cash adjustments
(151
)
(299
)
Changes in assets and liabilities
(67,663
)
(45,796
)
Net cash used in operating activities
$
(76,688
)
$
(50,180
)
Investing activities
Purchases of marketable securities
—
(19,940
)
Maturities of marketable securities
10,000
—
Purchases of property and equipment
(40,461
)
(31,269
)
Proceeds from sales of property and equipment
4,518
2,483
Proceeds from company owned life insurance
1,545
—
Proceeds from the sale of business
—
142,571
Issuance of notes receivable
—
(4,560
)
Collection of notes receivable
62
111
Net cash provided by (used in) investing activities
$
(24,336
)
$
89,396
Financing activities
Debt principal repayments
(256
)
(63,059
)
Cash dividends paid
(5,687
)
(5,959
)
Repurchases of common stock
(3,523
)
(20,212
)
Contributions from non-controlling partners
17,600
6,325
Distributions to non-controlling partners
(1,350
)
—
Other financing activities, net
—
1
Net cash provided by (used in) financing activities
$
6,784
$
(82,904
)
Net decrease in cash, cash equivalents and restricted cash
(94,240
)
(43,688
)
Cash, cash equivalents and $0 $1,512
293,991
413,655
Cash, cash equivalents and $0 $1,512
$
199,751
$
369,967
Non-GAAP Financial Information
The tables below contain financial information calculated other than in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Specifically, management believes that non-GAAP financial measures such as EBITDA and EBITDA margin are useful in evaluating operating performance and are regularly used by securities analysts, institutional investors and other interested parties, and that such supplemental measures facilitate comparisons between companies that have different capital and financing structures and/or tax rates. We are also providing adjusted EBITDA and adjusted EBITDA margin, non-GAAP measures, to indicate the impact of Other costs, net, which include investigation-related legal fees, reorganization costs, strategic acquisition and divestiture expenses, and a gain on sale of a business in 2022.
We provide adjusted loss before income taxes, adjusted provision for (benefit from) income taxes, adjusted net loss attributable to Granite Construction Incorporated, and adjusted diluted loss per share attributable to common shareholders, non-GAAP measures, to indicate the impact of the following:
Other costs, net;
Transaction costs which includes acquired intangible amortization expense and acquisition related depreciation related to the acquisition of Layne and Liquiforce; and
Income taxes related to the disposal of Inliner goodwill.
Management believes that these additional non-GAAP financial measures facilitate comparisons between industry peer companies and management uses these non-GAAP financial measures in evaluating the Company's performance. However, the reader is cautioned that any non-GAAP financial measures provided by the Company are provided in addition to, and not as alternatives for, the Company's reported results prepared in accordance with U.S. GAAP. Items that may have a significant impact on the Company's financial position, results of operations and cash flows must be considered when assessing the Company's actual financial condition and performance regardless of whether these items are included in non-GAAP financial measures. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures provided by the Company may not be comparable to similar measures provided by other companies. The Company does not provide a reconciliation of forward-looking adjusted EBITDA margin to the most directly comparable forward-looking GAAP measure of net loss attributable to Granite Construction Incorporated because the timing and amount of the excluded items are unreasonably difficult to fully and accurately estimate.
GRANITE CONSTRUCTION INCORPORATED
EBITDA AND ADJUSTED EBITDA(1)
(Unaudited - dollars in thousands)
Three Months Ended March 31,
As Restated
and Recast
2023
2022
EBITDA:
Net loss attributable to Granite Construction Incorporated
$
(23,023
)
$
(26,733
)
Net loss margin(2)
-4.1
%
-4.1
%
Depreciation, depletion and amortization expense(3)
19,874
17,058
Provision for (benefit from) income taxes
(9,469
)
6,352
Interest (income) expense, net
(871
)
3,015
EBITDA(1)
$
(13,489
)
$
(308
)
EBITDA margin(1)(2)
-2.4
%
0.0
%
ADJUSTED EBITDA:
Other costs, net
$
4,523
$
6,279
Adjusted EBITDA(1)
$
(8,966
)
$
5,971
Adjusted EBITDA margin(1)(2)
-1.6
%
0.9
%
(1) We define EBITDA as U.S. GAAP net loss attributable to Granite Construction Incorporated, adjusted for net interest expense, taxes, depreciation, depletion and amortization. Adjusted EBITDA and adjusted EBITDA margin exclude the impact of Other costs, net, as described above.
(2) Represents net income (loss), EBITDA and adjusted EBITDA divided by consolidated revenue of $560 million $654 million
(3) Amount includes the sum of depreciation, depletion and amortization which are classified as cost of revenue and selling, general and administrative expenses in the condensed consolidated statements of operations.
GRANITE CONSTRUCTION INCORPORATED
ADJUSTED NET LOSS RECONCILIATION
(Unaudited - in thousands, except per share data)
Three Months Ended March 31,
As Restated
and Recast
2023
2022
Loss before income taxes
$
(35,241
)
$
(18,743
)
Other costs, net
4,523
6,279
Transaction costs
2,494
—
Adjusted loss before income taxes
$
(28,224
)
$
(12,464
)
Provision for (benefit from) income taxes
$
(9,469
)
$
6,352
Tax effect of goodwill disposal related to sale of business
—
(10,070
)
Tax effect of adjusting items(1)
1,824
1,633
Adjusted benefit from income taxes
$
(7,645
)
$
(2,085
)
Net loss attributable to Granite Construction Incorporated
$
(23,023
)
$
(26,733
)
After-tax adjusting items(1)
5,193
14,716
Adjusted net loss attributable to Granite Construction Incorporated
$
(17,830
)
$
(12,017
)
Diluted weighted average shares of common stock
43,764
45,730
Diluted net loss per share attributable to common shareholders
$
(0.53
)
$
(0.58
)
After-tax adjusting items per share attributable to common shareholders
0.12
0.32
Adjusted diluted loss per share attributable to common shareholders
$
(0.41
)
$
(0.26
)
(1) The tax effect of adjusting items was calculated using the Company’s estimated annual statutory tax rate.
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