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Granite (GVA) Delivers Impressive Q1 2024 Results, Raises EBITDA Margin Guidance
Published on September 24, 2024 | Ticker: GVA

Granite Construction Incorporated (NYSE: GVA) has reported strong financial results for the first quarter of 2024, showcasing the company's resilience and strategic initiatives. The civil construction and materials company delivered impressive year-over-year improvements across key financial metrics, positioning it for continued growth in the coming year.

Financials

In the first quarter of 2024, Granite Construction Incorporated reported revenue of $672.3 million, a 20% increase from the $560.1 million generated in the same period of 2023. This top-line growth was driven by a robust performance in the Construction segment, which saw revenue surge 18% to $595.2 million, as well as a 36% increase in Materials segment revenue to $77.1 million. The company attributed the Construction segment's strong results to higher levels of Committed and Awarded Projects (CAP) and more favorable weather conditions compared to the prior year.

Granite Construction Incorporated's gross profit for the quarter increased by 68% to $54.3 million, with the Construction segment's gross profit margin expanding to 9.5% from 7.3% in the prior-year period. This improvement was largely due to a decrease in negative net revisions and estimates, partially offset by seasonal gross losses from acquired businesses. In the Materials segment, gross profit increased to a loss of $2.5 million, an improvement from a loss of $4.3 million in the first quarter of 2023, driven by higher sales prices in both aggregates and asphalt, though offset by losses from acquired businesses.

The company's bottom-line performance also showed significant improvement, with the net loss attributable to Granite Construction Incorporated widening to $31.0 million, compared to a net loss of $23.0 million in the first quarter of 2023. Adjusted EBITDA, a key metric for the company, increased by $18 million year-over-year, reflecting the operational enhancements and cost management initiatives implemented by Granite Construction Incorporated's management team.

Recent Developments

Granite Construction Incorporated's President and Chief Executive Officer, Kyle Larkin, commented on the strong start to the year, stating, "The company started 2024 strong with significant growth in revenue, adjusted EBITDA and operating cash flow compared to 2023. This builds upon momentum carried into 2024 from the growth experienced in the second half of 2023."

The company's organizational restructuring, which aligned its operations more closely with the Construction and Materials reportable segments, has been a key driver of the improved financial performance. Larkin noted that the new structure "better positions the leadership team to manage the performance of these segments" and will "accelerate the ability to provide shareholders with higher levels of return."

Liquidity

Granite Construction Incorporated's liquidity position remains robust, with $337.2 million in cash, cash equivalents, and marketable securities as of March 31, 2024, and $333.3 million in available borrowing capacity under its credit facility. This strong financial flexibility allows the company to continue investing in organic growth initiatives, as well as pursue strategic acquisitions to further strengthen its market position.

Outlook

In terms of guidance, Granite Construction Incorporated has raised its adjusted EBITDA margin range for 2024 from 9% to 11% to 9.5% to 11.5%, primarily due to the exclusion of non-cash stock-based compensation from the adjusted EBITDA calculation. This change aligns the company's reporting with industry peers and reflects the underlying operational improvements.

Geographically, Granite Construction Incorporated's Construction segment saw strong performance in California, Utah, and the Midwest, which contributed to the 18% year-over-year revenue increase. The Materials segment also benefited from acquired businesses, as well as higher sales prices and volumes in both aggregates and asphalt.

Looking ahead, Granite Construction Incorporated's robust CAP balance of $5.5 billion as of March 31, 2024, up 7.7% year-over-year, provides a solid foundation for continued growth. The company's focus on best-value projects, which represented 46% of total CAP, further enhances its competitive positioning and risk profile.

Granite Construction Incorporated's strategic investments in the Materials segment, including reserve expansions, automation projects, and potential acquisitions, are expected to drive long-term value creation. The company's management team remains committed to pursuing selective bolt-on and expansion opportunities that will contribute to its cash flow generation and shareholder returns.

Conclusion

In conclusion, Granite Construction Incorporated's impressive first-quarter performance, organizational enhancements, and forward-looking initiatives position the company for continued success in 2024 and beyond. With a strong balance sheet, diversified revenue streams, and a focus on operational excellence, Granite Construction Incorporated is well-equipped to capitalize on the favorable market conditions and deliver sustainable growth for its shareholders.

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