Granite Reports Fourth Quarter and Fiscal Year 2022 Results

• Fiscal year diluted EPS of $1.70 and adjusted diluted EPS(1) of $2.31
• Fiscal year net income margin(2) of 2.5% and adjusted EBITDA margin(1) of 6.4%
• Fiscal year revenue of $3.3 billion; 2023 fiscal year guidance of $3.4 billion – $3.6 billion
• Committed and Awarded Projects (“CAP”)(3) of $4.5 billion, led by record California group CAP of $1.7 billion

WATSONVILLE, Calif.–(BUSINESS WIRE)–Granite Construction Incorporated (NYSE: GVA) today announced results for the fourth quarter and year ended December 31, 2022.

Fiscal Year 2022 Results

Fiscal year 2022 net income totaled $83 million, or $1.70 per diluted share, and net income margin(2) was 2.5% compared to net income of $10 million, or $0.21 per diluted share, and net income margin(2) of 0.3% in the prior fiscal year. Fiscal year 2022 adjusted net income(1) totaled $104 million, or $2.31 per diluted share, compared to adjusted net income(1) of $83 million, or $1.80 per diluted share, in the prior fiscal year.

• Revenue decreased $201 million to $3.3 billion in 2022, compared to $3.5 billion in the prior year. Comparable revenue(4), which excludes Granite Inliner revenue of $36 million and $224 million for 2022 and 2021, respectively, decreased $13 million year-over-year.
• Gross profit increased $6 million in 2022 to $369 million, compared to $363 million in the prior year. Comparable gross profit(4), which excludes Granite Inliner gross profit of $5 million and $22 million for 2022 and 2021, respectively, increased $23 million year-over-year.
• Selling, general & administrative (“SG&A”) expenses in 2022 were $273 million or 8.3% of revenue, compared to $303 million or 8.7% of revenue in the prior year. Comparable SG&A(4), which excludes Granite Inliner SG&A of $5 million and $31 million in 2022 and 2021, respectively, decreased $4 million year-over-year to $268 million or 8.2% of comparable revenue(4).
• Adjusted EBITDA margin(1) was 6.4% in 2022, an increase from 6.0% in 2021.
• CAP(3) totaled $4.5 billion in 2022, up $408 million sequentially, and up $475 million compared to the prior year.
• Cash and marketable securities totaled $360 million in 2022, up $43 million sequentially and down $51 million compared to the prior year reflecting share repurchases and debt repayment.

“In the first quarter of 2022, we introduced our 2024 strategic plan, the roadmap for the transformation of Granite and the path we intend to follow to achieve sustainable growth and increased profit margins,” said Kyle Larkin, Granite President and Chief Executive Officer. “During 2022, we were singularly focused on implementing our plan by, among other things, focusing on higher margin, less risky work in our home markets. I am delighted to report that this has enabled us to achieve improved adjusted EBITDA margin in 2022 and the highest quality CAP portfolio in recent history. We expect to continue improving our adjusted EBITDA margin in line with our 2024 target. As I have stated previously, the market environment is strong, and we believe it will strengthen in 2023 with increased IIJA funding providing us opportunities to continue to build high quality CAP in 2023. Our plan is working.”

Fourth Quarter 2022 Results

Fourth quarter 2022 net income totaled $22 million, or $0.46 per diluted share, compared to a net loss of $13 million, or $(0.29) per diluted share, in the same period of the prior year. Fourth quarter 2022 adjusted net income(1) totaled $25 million, or $0.56 per diluted share, compared to adjusted net income(1) of $2 million, or $0.04 per diluted share, in the same period of the prior year.

• Revenue decreased $17 million to $789 million in the fourth quarter of 2022, compared to $806 million in the same period in the prior year. Excluding Granite Inliner revenue of $50 million in 2021, comparable revenue(4) increased $33 million year-over-year.
• Gross profit increased $35 million in the fourth quarter of 2022 to $97 million, compared to $62 million in the same period of the prior year. Gross profit margin during the fourth quarter of 2022 was 12.3%, an improvement from 7.8% in the same period of the prior year.
• SG&A expenses in the fourth quarter of 2022 were $81 million or 10.2% of revenue, compared to $77 million or 9.5% of revenue in the prior year.
• Adjusted EBITDA(1) in the fourth quarter of 2022 totaled $50 million, compared to $32 million in the same period of the prior year.

(1) Adjusted net income (loss), adjusted diluted earnings (loss) 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.

(2) Represents Net income (loss) attributable to Granite Construction Incorporated divided by revenue for the respective period.

(3) CAP is comprised of the 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, in addition to the general construction portion of construction manager/general contractor, construction manager at risk and progressive design build contracts to the extent execution of, and funding for, such contracts are probable.

(4) Comparable revenue, gross profit and SG&A excludes amounts attributable to Granite Inliner, which was sold in March 2022.

Construction revenue in the fourth quarter and fiscal year decreased compared to the same periods 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, which is reported in the Mountain Group, during the first quarter of 2022. These decreases were partially offset by increases in our vertically-integrated businesses in our California and Mountain Groups. Central Group revenue decreased $22 million and $206 million for the three and twelve months ended December 31, 2022, respectively, as the group completes its Old Risk Portfolio (“ORP”) projects and pivots to the pursuit of smaller, less complex projects in their home markets. Mountain Group revenue decreased $34 million and $54 million for the three and twelve months ended December 31, 2022, respectively. Mountain Group revenue included Granite Inliner revenue of $33 million in 2022, and revenue of $46 million and $206 million for the three and twelve months ended December 31, 2021, respectively. Excluding Granite Inliner, Mountain Group revenue increased $12 million and $118 million for the three and twelve months ended December 31, 2022, respectively. For the year ended December 31, 2022, the Mountain Group benefited from strong performances by the Utah and Washington regions and the Water Resources division driving the increase in comparable revenue. California Group finished 2022 strong with a $14 million increase of revenue in the fourth quarter over the same period in the prior year. For the twelve months ended December 31, 2022, the California Group ended down $10 million compared to the same period in the prior year as it worked to overcome delays in project starts earlier in the year along with inclement weather conditions in the first quarter of 2022.

Gross profit and gross profit margin increased in the fourth quarter compared to the prior year primarily due to decreased losses in the ORP. During the fourth quarter, ORP revenue totaled $34 million with a gross loss of $6 million and breakeven net income after non-controlling interest (“NCI”), compared to ORP revenue of $66 million with a gross loss of $25 million and net loss, after NCI of $16 million, for the same period in the prior year. For 2022, ORP revenue totaled $207 million with a gross loss of $51 million and net loss after NCI of $35 million, compared to ORP revenue of $385 million with a gross loss of $33 million and net loss after NCI of $16 million in the prior fiscal year. For 2022, gross profit margin excluding ORP was 13.6% compared to 12.5% in the prior fiscal year, primarily driven by improved performance by the California and Mountain Groups.

CAP increased significantly both sequentially and year over year led by the California Group’s record CAP of $1.7 billion. All of our operating groups have benefited from the strong public funding environments across our geographies as well as a resilient private market.

The Materials segment finished the year strong in the fourth quarter with higher volumes and sales prices driving a revenue increase year-over-year. Gross profit and gross profit margin during the fourth quarter increased significantly as a result of sales price increases and cost efficiencies driven by higher volumes and decreases in fuel and energy costs. For 2022, materials revenue increased due to higher sales prices, which included energy surcharges implemented earlier in the year, across all of our operating groups as well as higher aggregate volumes. Gross profit increased in 2022 due to the higher revenue and greater volumes while gross profit margin decreased due to the impact of higher fuel and energy costs earlier in the year.

Outlook and Guidance

The Company’s expectations for 2023 are:

• Revenue in the range of $3.4 billion to $3.6 billion
• Adjusted EBITDA margin in the range of 7.5% to 9%
• 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 in the range of $100 million to $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 income (loss) attributable to Granite Construction Incorporated because the timing and amount of the excluded items are unreasonably difficult to fully and accurately estimate.

“In 2023, we expect continued progress with revenue growth and improvement in adjusted EBITDA margin in line with our 2024 strategic plan targets,” said Lisa Curtis, Executive Vice President and Chief Financial Officer. “I believe our high quality CAP and strong market environment will support both our revenue growth and increase in profitability in 2023. Additionally, we will continue to invest in our businesses to support our organic growth through capital expenditures. Our CAPEX investments will have an emphasis in our materials operations to maximize efficiency with automation as well as bolstering material reserves to support longer-term growth.”

Conference Call

Granite will conduct a conference call today, February 16, 2023, at 8:00 a.m. Pacific Time/11:00 a.m. Eastern Time to discuss the results for the quarter and year ended December 31, 2022. The Company invites investors to listen to a live audio webcast on its Investor Relations website, investor.graniteconstruction.com. The live call is available by calling 1-877-328-5503; international callers may dial 1-412-317-5472. An archive of the webcast will be available on the website approximately one hour after the call. A replay will be available after the live call through February 23, 2023, by calling 1-877-344-7529, replay access code 1394844; international callers may dial 1-412-317-0088.

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 the Granite website, 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, declines, demand, strategic plans, shareholder value, outcomes, outlook, revenue, adjusted EBITDA margin, SG&A, effective tax rate, and capital expenditures guidance for 2023, our 2024 strategic plan is the path we intend to follow to achieve sustainable growth and increased profit margins, that we expect to continue improving our adjusted EBITDA margins in line with our 2024 target, we believe the market environment will strengthen in 2023 providing opportunities to continue to win high quality CAP in 2023, that we continue to invest in our business to support organic growth through capital expenditures, we expect continued progress with revenue growth and improvement in adjusted EBITDA margin in line with our 2024 strategic plan targets, our high quality CAP and strong market environment will support revenue growth and increased profitability in 2023, our CAPEX investments, the Central Group pivoting to pursue smaller, less complex projects in their home markets, CAP, results, that the Company does not expect the errors described herein to impact the results for the three months and year ended December 31, 2022 that were reported in this press release or to any previously reported annual periods or quarterly results within those annual periods and the preparation, timing and filing of our financial statements 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, declines, demand, strategic plans, shareholder value, outcomes, outlook, revenue, adjusted EBITDA margin, SG&A, effective tax rate, and capital expenditures guidance for 2023, our 2024 strategic plan is the path we intend to follow to achieve sustainable growth and increased profit margins, that we expect to continue improving our adjusted EBITDA margins in line with our 2024 target, we believe the market environment will strengthen in 2023 providing opportunities to continue to win high quality CAP in 2023, that we continue to invest in our business to support organic growth through capital expenditures, we expect continued progress with revenue growth and improvement in adjusted EBITDA margin in line with our 2024 strategic plan targets, our high quality CAP and strong market environment will support revenue growth and increased profitability in 2023, our CAPEX investments, the Central Group pivoting to pursue smaller, less complex projects in their home markets, CAP, results, that the Company does not expect the errors described herein to impact the results for the three months and year ended December 31, 2022 that were reported in this press release or to any previously reported annual periods or quarterly results within those annual periods and the preparation, timing and filing of our financial statements. 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 (“SEC”), 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.

(1) In connection with the preparation of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, we identified (A) errors related to deferred taxes and the calculation of income tax expense of $12.3 million in connection with the sale of Inliner, which was completed in the first quarter of 2022 and was classified within discontinued operations in the Company’s condensed consolidated statement of operations during the first and second quarters of 2022 and (B) other immaterial errors, including certain errors that had previously been adjusted for as out of period corrections. As a result, the Company’s Audit/Compliance Committee has concluded that the Company’s previously issued condensed consolidated financial statements and related disclosures for each of the first three quarters in the year ended December 31, 2022 should no longer be relied upon due to errors contained in such interim financial statements. The Company does not expect these errors to impact the results for the three months and year ended December 31, 2022 that were reported in this press release or to any previously reported annual periods or quarterly results within those annual periods.

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