Granite Construction Incorporated Q4 FY2025 earnings call

• Strategic Priorities: Focus on bidding and building right work, investing in materials business, and expanding geographic footprint via M&A. In 2025, CAP reached a record $7,000,000,000. Construction segment gross profit margin improved from 8.8% in 2020 to 15.7% in 2025.
• Materials Business: 2025 was transformational with organic and bottom-line growth. Completed acquisitions expanded addressable market. Cash gross profit improved from 19% in 2023 to 26% in 2025. Expect to spend $50,000,000 in strategic CapEx in Materials business in 2026.
• Acquisitions: Completed three acquisitions in 2025 (Warren Paving, Pappage Construction, CinderLite), expanding and strengthening platforms. Expect more acquisitions in 2026 to enhance performance and expand footprint.

Construction Segment

• 2025 Q4 revenue: $940,000,000, up 14% year over year. Organic revenue growth of 7% year over year in Q4 as projects ramped up. Newly acquired companies contributed $59,000,000 in Construction segment revenue. Gross profit for the segment was $143,000,000, with a segment gross profit margin of 15%. Over the full year, revenue increased 10% to $4,400,000,000, gross profit increased 24% to $711,000,000.

Materials Segment

• 2025 Q4 revenue: $225,000,000, up $69,000,000 year over year. Cash gross profit for the quarter increased $10,000,000 year over year to $47,000,000, or 21% of revenue. For the full year, cash gross profit margin improved 490 basis points year over year to 26%. Revenue increase was primarily due to acquired businesses.

• Revenue: Expect revenue to grow to a range of $4,900,000,000 to $5,100,000,000 in 2026, including full year of 2025 acquisitions.
• SG&A: Expected to be in the range of 8.5% to 9% of revenue, inclusive of stock-based compensation expense.
• Adjusted EBITDA Margin: Expected to be in the range of 12% to 13% of revenue, with continued expansion towards 2027 target of 12.5% to 14.5%.
• CapEx: Expect to invest in the range of $140,000,000 to $160,000,000, including approximately $50,000,000 in strategic Materials investments.

• Weather Impacts: Q1 and Q4 weather can impact execution; however, current Q1 weather is manageable but future quarters remain a risk.
• Execution Risks: Need to ensure successful execution of projects to hit guidance, though operational excellence is at a high level.
• IIJA Expiration: IIJA expires in September, and while spend to date is 50%, timing and details of future infrastructure legislation could impact federal contract opportunities.

Q: Thoughts on IIJA expiring in September and federal infrastructure legislation?

A: IIJA expires in September, spend to date is ~50%. Bipartisan support for new infrastructure investment, with discussions of higher investment amounts. Expect updates around March-April for draft bill review.

Q: Direct federal opportunities pipeline?

A: Have work in Guam, and significant border infrastructure opportunity with ~$40,000,000,000 program, including a $200,000,000 contract in southeastern Texas started in November, with work expected midyear.

Q: CAP dependence on 2027 targets?

A: CAP is ~50/50 between bid-build and best value, which is healthy. CAP is high-quality and margin profile is improving, aligning with 2027 targets.

Q: Warren integration and Materials CapEx?

A: Warren Paving integration is going well, performing well in 5 months. Strategic Materials CapEx of $50,000,000 is weighted towards legacy business for reserves and automation. Warren integration is expected to drive growth in Southeast business.

Q: 2026 vs 2025 margin outlook?

A: Construction margin expected to improve ~50 basis points, Materials ~1.5% over two years. Weighted average ~70 basis points improvement, offsetting some non-recurring items like claim recoveries and equipment sales gains.

Q: M&A pipeline in 2026?

A: M&A pipeline is robust, with corporate development team vetting opportunities. Target leverage of 2.5 times net debt, but willing to adjust for larger opportunities with a plan to reduce leverage back down.