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Granite Reports Third Quarter 2022 Results

  • Q3 comparable revenue (1) increased year over year led by increases in the California and Mountain Groups
  • Q3 diluted EPS of $1.44 and adjusted diluted EPS (2) of $1.41
  • Construction segment gross profit margin strong at 14.8% excluding the Old Risk Portfolio ("ORP")
  • Continued overall strong market and $4.1 billion in Committed and Awarded Projects ("CAP") (3)
  • Adjusted EBITDA margin (2) guidance for 2022 raised to 6% to 7% after inclusion of the Water Resources and Mineral Services businesses

Granite Construction Incorporated (NYSE: GVA) today announced results for the quarter ended September 30, 2022.

Third Quarter 2022 Results

Net income totaled $73 million, or $1.44 per diluted share, compared to net income of $35 million, or $0.73 per diluted share, for the same period in the prior year. Adjusted net income (2) totaled $63 million and adjusted diluted EPS (2) totaled $1.41, compared to adjusted net income (2) of $43 million and adjusted diluted EPS (2) of $0.93, for the same period in the prior year.

  • Revenue decreased $52 million to $1,010 million compared to $1,062 million in the prior year. Comparable revenue (1), which excludes Granite Inliner revenue of $65 million in the prior year, increased $13 million.
  • Gross profit increased slightly to $120 million compared to the prior year; and gross profit margin increased to 11.9% compared to 11.3% in the prior year.
  • Selling, general, and administrative (“SG&A”) expenses were $62 million or 6.1% of revenue, compared to $78 million or 7.3% of revenue in the prior year. The decrease in SG&A primarily relates to the sale of Granite Inliner and a decrease in incentive compensation.
  • Adjusted EBITDA (2) totaled $97 million compared to $81 million in the prior year.
  • CAP (3) totaled $4,078 million, down $135 million sequentially following the busiest quarter of the year.
  • Cash and marketable securities increased $75 million from the prior quarter to $317 million. Debt was flat from the prior quarter at $288 million with over 80% at a fixed interest rate.

"During the third quarter, we continued to make progress towards achieving our 2024 strategic plan targets of 9% to 11% adjusted EBITDA margin," said Kyle Larkin, Granite President and Chief Executive Officer. "The overall market environment continues to be robust, and our teams are focused on driving improved profitability across our businesses. Our construction gross profit margin for the third quarter, excluding the ORP, was 14.8% following a gross margin of 14.1% in the second quarter. The continued strength of our construction gross profit margin reflects the work that has been underway over the last two years as we transform our project portfolio in alignment with our home market focus. Our third quarter CAP of over $4 billion is strong and is higher quality than prior years. We are raising our full year 2022 adjusted EBITDA margin guidance to 6% to 7% and expect the mid-point of our 2023 adjusted EBITDA margin guidance will be at least 8%. We are well positioned for success as we complete 2022 and move into 2023."

Larkin continued, "I am also pleased with the progress we have made during the third quarter to collect cash and strengthen our excellent liquidity position. We are in position to opportunistically invest in our vertically integrated operations through organic investment and bolt-on acquisitions."

Nine Months Ended September 2022 Results

Net income totaled $78 million, or $1.56 per diluted share, compared to net income of $23 million, or $0.49 per diluted share, year over year. Adjusted net income (2) totaled $88 million and adjusted diluted EPS (2) totaled $1.93, compared to adjusted net income (2) of $81 million and adjusted diluted EPS (2) of $1.74, year over year.

  • Revenue decreased $182 million to $2,514 million compared to $2,696 million year over year. Comparable revenue (1), which excludes Granite Inliner revenue of $36 million in the current year and $174 million in the prior year, decreased $44 million.
  • Gross profit decreased $22 million to $278 million compared to $300 million year over year; and gross profit margin was relatively flat at 11.1%.
  • SG&A expenses were $192 million or 7.6% of revenue, compared to $227 million or 8.4% of revenue year over year.
  • Adjusted EBITDA (2) totaled $165 million compared to $178 million year over year.

(1) Comparable revenue excludes revenue attributable to Granite Inliner, which was sold in March 2022.

(2) Adjusted net income, 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.

(3) 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.

Third Quarter 2022 Segment Results (Unaudited - dollars in thousands)

Construction Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

Revenue

 

$

848,267

 

 

$

924,454

 

 

$

(76,187

)

 

 

(8.2

)%

 

$

2,141,009

 

 

$

2,369,848

 

 

$

(228,839

)

 

 

(9.7

)%

Gross profit

 

$

98,329

 

 

$

99,237

 

 

$

(908

)

 

 

(0.9

)%

 

$

237,060

 

 

$

255,443

 

 

$

(18,383

)

 

 

(7.2

)%

Gross profit as a percent of revenue

 

 

11.6

%

 

 

10.7

%

 

 

 

 

 

 

 

 

 

 

11.1

%

 

 

10.8

%

 

 

 

 

 

 

 

 

Committed and Awarded Projects

 

September 30, 2022

 

 

June 30, 2022

 

 

Change - Quarter over Quarter

 

 

September 30, 2021

 

 

Change - Year over Year

 

California

 

$

1,555,977

 

 

$

1,629,765

 

 

$

(73,788

)

 

 

(4.5

)%

 

$

1,493,015

 

 

$

62,962

 

 

 

4.2

%

Central

 

 

1,525,672

 

 

 

1,518,970

 

 

 

6,702

 

 

 

0.4

%

 

 

1,755,779

 

 

 

(230,107

)

 

 

(13.1

)%

Mountain

 

 

996,685

 

 

 

1,064,925

 

 

 

(68,240

)

 

 

(6.4

)%

 

 

1,079,098

 

 

 

(82,413

)

 

 

(7.6

)%

Total

 

$

4,078,334

 

 

$

4,213,660

 

 

$

(135,326

)

 

 

(3.2

)%

 

$

4,327,892

 

 

$

(249,558

)

 

 

(5.8

)%

Construction revenue in the third quarter decreased compared to the same period in the prior year. The decrease was primarily driven by a decrease in Central Group revenue, coupled with a slight decrease in Mountain Group revenue, offset by an increase in California Group revenue. The decrease in Central Group revenue reflects the ongoing transformation of its project portfolio and timing as ORP projects are completed and new projects are awarded. The California Group carried record CAP into the third quarter driving an increase in revenue year over year. While the Mountain Group reported a decrease in revenue year over year, comparable revenue excluding $60 million of Granite Inliner revenue in the third quarter of 2021 increased by $38 million driven by strong performance in our solar business and the Washington region and supported by the continued strength of the Utah region.

Gross profit in the third quarter slightly decreased compared to the same period in the prior year as losses in the ORP were partially offset by strong performance in the vertically integrated businesses. During the third quarter, ORP revenue totaled $44 million with a gross loss of $21 million and net loss, after non-controlling interest ("NCI"), of $13 million, compared to ORP revenue of $99 million with a gross loss of $10 million and net loss, after NCI of $5 million, for the same period in the prior year. The ORP losses during the quarter primarily related to one project that experienced cost increases and schedule extensions. Excluding the impact of ORP losses during the quarter, Construction gross profit margin was 14.8% compared to 13.3% in the prior year. The year over year increase in the gross profit margin excluding ORP was driven by improved performance by the California and Mountain Groups. For the nine months ended September 30, 2022, ORP revenue totaled $172 million with a gross loss of $45 million and net loss, after NCI of $34 million, compared to ORP revenue of $319 million with a gross loss of $9 million and net loss, after NCI of $0.4 million.

CAP was down $135 million sequentially and down $250 million year over year. Excluding Granite Inliner CAP as of September 30, 2021, our CAP as of September 30, 2022 was down $45 million year over year. Following Granite's busiest quarter of the year, we carried approximately $4 billion of CAP into the fourth quarter and expect CAP to continue to grow in this strong funding environment.

Materials Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

Revenue

 

$

161,539

 

 

$

137,675

 

 

$

23,864

 

 

 

17.3

%

 

$

373,185

 

 

$

326,366

 

 

$

46,819

 

 

 

14.3

%

Gross profit

 

$

22,038

 

 

$

20,698

 

 

$

1,340

 

 

 

6.5

%

 

$

40,965

 

 

$

44,756

 

 

$

(3,791

)

 

 

(8.5

)%

Gross profit as a percent of revenue

 

 

13.6

%

 

 

15.0

%

 

 

 

 

 

 

 

 

 

 

11.0

%

 

 

13.7

%

 

 

 

 

 

 

 

 

Materials revenue in the third quarter increased compared to the same period in the prior year primarily due to aggregate sales volume and prices increases which more than offset lower asphalt sales volumes. During the quarter, revenue increases drove an increase in gross profit year over year. Although gross profit margin was down year over year, gross profit margin increased sequentially as we benefited from energy surcharges implemented in the second quarter.

Outlook

For the 2022 fiscal year, guidance is updated as noted below:

  • Revenue updated to a range of $3.2 billion to $3.3 billion
  • SG&A expense unchanged in the range of 8.0% to 8.5% of revenue
  • Adjusted effective tax rate range unchanged at low-to-mid-20s
  • Raised adjusted EBITDA margin (2) range of 6% - 7%
  • Capital expenditures updated to a range of $120 million to $130 million

Conference Call

Granite will conduct a conference call today, October 27, 2022, at 8:00 a.m. Pacific Time/11:00 a.m. Eastern Time to discuss the results of the quarter ended September 30, 2022. 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. The investor conference call will also be available by calling 1-877-328-5503; international callers may dial 1-412-317-5472. An archive of the webcast will be available on Granite's Investor Relations website approximately one hour after the call. A replay will be available after the live call through November 3, 2022, by calling 1-877-344-7529, replay access code 4451949; 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 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, 2022 fiscal year guidance for revenue, adjusted EBITDA margin, SG&A expense, effective tax rate, and capital expenditures, 2023 adjusted EBITDA margin guidance, Committed and Awarded Projects (“CAP”), results, 2024 strategic plan targets, the Company's focus on driving improved profitability to achieve the Company's strategic plan targets, 9 to 11 percent adjusted EBITDA margin in 2024, higher quality CAP, the Company is well positioned for success, the addition of CAP in this strong funding environment, the Company is in position to be opportunistic with bolt-on acquisitions that will bolster and expand the Company's vertically integrated operations 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, 2022 fiscal year guidance for revenue, adjusted EBITDA margin, SG&A expense, effective tax rate, and capital expenditures, 2023 adjusted EBITDA margin guidance, CAP, results, 2024 strategic plan targets, the Company's focus on driving improved profitability to achieve the Company's strategic plan targets, 9 to 11 percent adjusted EBITDA margin in 2024, higher quality CAP, the Company is well positioned for success, the addition of CAP in this strong funding environment, the Company is in position to be opportunistic with bolt-on acquisitions that will bolster and expand the Company's vertically integrated operations. 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)

 

 

 

September 30,

2022

 

 

December 31,

2021

 

 

September 30,

2021

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

255,084

 

 

$

395,647

 

 

$

464,049

 

Short-term marketable securities

 

 

39,873

 

 

 

 

 

 

 

Receivables, net

 

 

618,144

 

 

 

464,588

 

 

 

684,822

 

Contract assets

 

 

241,238

 

 

 

145,437

 

 

 

204,046

 

Inventories

 

 

81,296

 

 

 

61,965

 

 

 

77,412

 

Equity in construction joint ventures

 

 

186,824

 

 

 

189,911

 

 

 

195,354

 

Other current assets

 

 

157,231

 

 

 

177,210

 

 

 

39,749

 

Current assets held-for-sale

 

 

 

 

 

392,641

 

 

 

 

Total current assets

 

 

1,579,690

 

 

 

1,827,399

 

 

 

1,665,432

 

Property and equipment, net

 

 

500,827

 

 

 

433,504

 

 

 

510,658

 

Long-term marketable securities

 

 

21,575

 

 

 

15,600

 

 

 

10,600

 

Investments in affiliates

 

 

78,663

 

 

 

23,368

 

 

 

72,415

 

Goodwill

 

 

73,704

 

 

 

53,715

 

 

 

116,788

 

Right of use assets

 

 

49,590

 

 

 

49,312

 

 

 

58,226

 

Deferred income taxes, net

 

 

45,650

 

 

 

24,141

 

 

 

41,228

 

Other noncurrent assets

 

 

58,265

 

 

 

67,888

 

 

 

86,409

 

Total assets

 

$

2,407,964

 

 

$

2,494,927

 

 

$

2,561,756

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

1,438

 

 

$

8,727

 

 

$

8,718

 

Accounts payable

 

 

398,285

 

 

 

324,313

 

 

 

397,152

 

Contract liabilities

 

 

191,037

 

 

 

200,041

 

 

 

195,267

 

Accrued expenses and other current liabilities

 

 

450,223

 

 

 

452,829

 

 

 

499,214

 

Current liabilities held-for-sale

 

 

 

 

 

83,408

 

 

 

 

Total current liabilities

 

 

1,040,983

 

 

 

1,069,318

 

 

 

1,100,351

 

Long-term debt

 

 

286,872

 

 

 

331,191

 

 

 

331,192

 

Long-term lease liabilities

 

 

32,701

 

 

 

32,928

 

 

 

39,908

 

Other long-term liabilities

 

 

60,664

 

 

 

65,927

 

 

 

67,951

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value, authorized 3,000,000 shares, none outstanding

 

 

 

 

 

 

 

 

 

Common stock, $0.01 par value, authorized 150,000,000 shares; issued and outstanding: 43,723,658 shares as of September 30, 2022, 45,840,260 shares as of December 31, 2021 and 45,826,409 shares as of September 30, 2021

 

 

437

 

 

 

458

 

 

 

458

 

Additional paid-in capital

 

 

468,662

 

 

 

559,752

 

 

 

558,121

 

Accumulated other comprehensive income (loss)

 

 

535

 

 

 

(3,359

)

 

 

(3,468

)

Retained earnings

 

 

481,489

 

 

 

410,831

 

 

 

430,074

 

Total Granite Construction Incorporated shareholders’ equity

 

 

951,123

 

 

 

967,682

 

 

 

985,185

 

Non-controlling interests

 

 

35,621

 

 

 

27,881

 

 

 

37,169

 

Total equity

 

 

986,744

 

 

 

995,563

 

 

 

1,022,354

 

Total liabilities and equity

 

$

2,407,964

 

 

$

2,494,927

 

 

$

2,561,756

 

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited - in thousands, except per share data)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

$

848,267

 

 

$

924,454

 

 

$

2,141,009

 

 

$

2,369,848

 

Materials

 

 

161,539

 

 

 

137,675

 

 

 

373,185

 

 

 

326,366

 

Total revenue

 

 

1,009,806

 

 

 

1,062,129

 

 

 

2,514,194

 

 

 

2,696,214

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

749,938

 

 

 

825,217

 

 

 

1,903,949

 

 

 

2,114,405

 

Materials

 

 

139,501

 

 

 

116,977

 

 

 

332,220

 

 

 

281,610

 

Total cost of revenue

 

 

889,439

 

 

 

942,194

 

 

 

2,236,169

 

 

 

2,396,015

 

Gross profit

 

 

120,367

 

 

 

119,935

 

 

 

278,025

 

 

 

300,199

 

Selling, general and administrative expenses

 

 

61,795

 

 

 

77,603

 

 

 

192,036

 

 

 

227,400

 

Other costs, net

 

 

(490

)

 

 

3,759

 

 

 

19,445

 

 

 

85,547

 

Gain on sales of property and equipment, net

 

 

(949

)

 

 

(5,159

)

 

 

(10,462

)

 

 

(39,349

)

Operating income

 

 

60,011

 

 

 

43,732

 

 

 

77,006

 

 

 

26,601

 

Other (income) expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(1,894

)

 

 

(293

)

 

 

(3,246

)

 

 

(737

)

Interest expense

 

 

2,519

 

 

 

5,131

 

 

 

10,003

 

 

 

16,019

 

Equity in income of affiliates, net

 

 

(3,491

)

 

 

(2,539

)

 

 

(9,656

)

 

 

(10,578

)

Other (income) expense, net

 

 

77

 

 

 

106

 

 

 

4,646

 

 

 

(3,018

)

Total other (income) expense, net

 

 

(2,789

)

 

 

2,405

 

 

 

1,747

 

 

 

1,686

 

Income before income taxes

 

 

62,800

 

 

 

41,327

 

 

 

75,259

 

 

 

24,915

 

Provision for (benefit from) income taxes

 

 

(6,489

)

 

 

8,904

 

 

 

(777

)

 

 

2,068

 

Net income

 

 

69,289

 

 

 

32,423

 

 

 

76,036

 

 

 

22,847

 

Amount attributable to non-controlling interests

 

 

4,104

 

 

 

2,620

 

 

 

1,569

 

 

 

462

 

Net income attributable to Granite Construction Incorporated

 

$

73,393

 

 

$

35,043

 

 

$

77,605

 

 

$

23,309

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to common shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

1.67

 

 

$

0.76

 

 

$

1.73

 

 

$

0.51

 

Diluted earnings per share

 

$

1.44

 

 

$

0.73

 

 

$

1.56

 

 

$

0.49

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

43,973

 

 

 

45,821

 

 

 

44,739

 

 

 

45,773

 

Diluted

 

 

51,863

 

 

 

47,906

 

 

 

52,613

 

 

 

47,522

 

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - in thousands)

 

Nine Months Ended September 30,

 

 

2022

 

 

 

2021

 

Operating activities

 

 

 

 

 

 

 

 

Net income

 

$

76,036

 

 

$

22,847

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

61,714

 

 

 

81,008

 

Amortization related to long-term debt

 

 

1,901

 

 

 

7,038

 

Gain on sale of business

 

 

(6,234

)

 

 

 

Gain on sales of property and equipment, net

 

 

(10,462

)

 

 

(39,349

)

Deferred income taxes

 

 

(17,819

)

 

 

 

Stock-based compensation

 

 

6,151

 

 

 

5,181

 

Equity in net (income) loss from unconsolidated joint ventures

 

 

23,585

 

 

 

(8,027

)

Net income from affiliates

 

 

(9,656

)

 

 

(10,578

)

Other non-cash adjustments

 

 

38

 

 

 

664

 

Changes in assets and liabilities

 

 

(139,885

)

 

 

1,138

 

Net cash provided by (used in) operating activities

 

$

(14,631

)

 

$

59,922

 

Investing activities

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(59,810

)

 

 

(5,000

)

Maturities of marketable securities

 

 

15,000

 

 

 

 

Purchases of property and equipment

 

 

(97,753

)

 

 

(72,964

)

Proceeds from sales of property and equipment

 

 

21,110

 

 

 

58,002

 

Proceeds from the sale of business

 

 

142,571

 

 

 

 

Issuance of notes receivable

 

 

(7,560

)

 

 

 

Collection of notes receivable

 

 

316

 

 

 

2,581

 

Net cash provided by (used in) investing activities

 

$

13,874

 

 

$

(17,381

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

50,000

 

 

 

 

Debt principal repayments

 

 

(124,911

)

 

 

(6,795

)

Cash dividends paid

 

 

(17,587

)

 

 

(17,846

)

Repurchases of common stock

 

 

(70,724

)

 

 

(2,603

)

Contributions from non-controlling partners

 

 

11,925

 

 

 

15,701

 

Distributions to non-controlling partners

 

 

(6,725

)

 

 

(3,022

)

Other financing activities, net

 

 

208

 

 

 

(63

)

Net cash used in financing activities

 

$

(157,814

)

 

$

(14,628

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

$

(158,571

)

 

$

27,913

 

Cash, cash equivalents and $1,512 in restricted cash at beginning of each period

 

 

413,655

 

 

 

437,648

 

Cash, cash equivalents and $0 and $1,512 in restricted cash at end of period

 

$

255,084

 

 

$

465,561

 

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 a legal settlement charge, legal and accounting investigation fees, net costs relating to the resolution of the SEC investigation, strategic acquisition and divestiture expenses, and a gain on sale of property.

We provide adjusted income before provision for (benefit from) income taxes, adjusted provision for (benefit from) income taxes, adjusted net income attributable to Granite Construction Incorporated, and adjusted diluted earnings per share attributable to common shareholders, non-GAAP measures, to indicate the impact of the following:

  • Other costs, net, which include a legal settlement charge, legal and accounting investigation fees, net costs relating to the resolution of the SEC investigation, and strategic acquisition and divestiture expenses;
  • Interest expense and amortization of debt discount related to our 2.75% Convertible Notes;
  • Transaction costs which includes acquired intangible amortization expense and acquisition related depreciation related to the acquisition of Layne and Liquiforce;
  • Gain on sale of a business and sale of property; and
  • The tax benefit from no longer having businesses classified as held for sale.

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 income (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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Granite Construction Incorporated

 

$

73,393

 

 

$

35,043

 

 

$

77,605

 

 

$

23,309

 

Depreciation, depletion and amortization expense(2)

 

 

29,533

 

 

 

28,476

 

 

 

62,437

 

 

 

81,970

 

Provision for (benefit from) income taxes

 

 

(6,489

)

 

 

8,904

 

 

 

(777

)

 

 

2,068

 

Interest expense, net of interest income

 

 

625

 

 

 

4,838

 

 

 

6,757

 

 

 

15,282

 

EBITDA(1)

 

$

97,062

 

 

$

77,261

 

 

$

146,022

 

 

$

122,629

 

EBITDA margin(1)(3)

 

 

9.6

%

 

 

7.3

%

 

 

5.8

%

 

 

4.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADJUSTED EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other costs, net

 

$

(490

)

 

$

3,759

 

 

$

19,445

 

 

$

85,547

 

Gain on sale of property

 

 

 

 

 

 

 

 

 

 

 

(29,688

)

Adjusted EBITDA(1)

 

$

96,572

 

 

$

81,020

 

 

$

165,467

 

 

$

178,488

 

Adjusted EBITDA margin(1)(3)

 

 

9.6

%

 

 

7.6

%

 

 

6.6

%

 

 

6.6

%

(1)

We define EBITDA as U.S. GAAP net income 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, and gain on sale of property as described above.

(2)

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.

(3)

Represents EBITDA and adjusted EBITDA divided by consolidated revenue of $1,010 million, $1,062 million, $2,514 million and $2,696 million for the three and nine months ended September 30, 2022 and 2021, respectively.

GRANITE CONSTRUCTION INCORPORATED

ADJUSTED NET INCOME RECONCILIATION

(Unaudited - in thousands, except per share data)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Income before income taxes

 

$

62,800

 

 

$

41,327

 

 

$

75,259

 

 

$

24,915

 

Interest expense related to 2.75% Convertible Notes (1)

 

 

1,912

 

 

 

 

 

 

5,738

 

 

 

 

Other costs, net

 

 

(490

)

 

 

3,759

 

 

 

19,445

 

 

 

85,547

 

Amortization of debt discount

 

 

 

 

 

1,772

 

 

 

 

 

 

5,240

 

Transaction costs

 

 

8,012

 

 

 

5,435

 

 

 

8,012

 

 

 

16,201

 

Gain on sale of property

 

 

 

 

 

 

 

 

 

 

 

(29,688

)

Adjusted income before income taxes

 

$

72,234

 

 

$

52,293

 

 

$

108,454

 

 

$

102,215

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for (benefit from) income taxes

 

$

(6,489

)

 

$

8,904

 

 

$

(777

)

 

$

2,068

 

Tax benefit from no longer having assets held for sale

 

 

17,691

 

 

 

 

 

 

17,691

 

 

 

 

Tax effect of adjusting items (2)

 

 

2,453

 

 

 

2,851

 

 

 

5,511

 

 

 

20,098

 

Adjusted provision for income taxes

 

$

13,655

 

 

$

11,755

 

 

$

22,425

 

 

$

22,166

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Granite Construction Incorporated

 

$

73,393

 

 

$

35,043

 

 

$

77,605

 

 

$

23,309

 

After-tax adjusting items

 

 

(10,710

)

 

 

8,115

 

 

 

9,993

 

 

 

57,202

 

Adjusted net income attributable to Granite Construction Incorporated

 

$

62,683

 

 

$

43,158

 

 

$

87,598

 

 

$

80,511

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares of common stock

 

 

51,863

 

 

 

47,906

 

 

 

52,613

 

 

 

47,522

 

Less: dilutive effect of 2.75% Convertible Notes (3)

 

 

(7,309

)

 

 

(1,522

)

 

 

(7,309

)

 

 

(1,226

)

Adjusted diluted weighted average shares of common stock

 

 

44,554

 

 

 

46,384

 

 

 

45,304

 

 

 

46,296

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per share attributable to common shareholders

 

$

1.44

 

 

$

0.73

 

 

$

1.56

 

 

$

0.49

 

After-tax adjusting items per share attributable to common shareholders

 

 

(0.03

)

 

 

0.20

 

 

 

0.37

 

 

 

1.25

 

Adjusted diluted earnings per share attributable to common shareholders

 

$

1.41

 

 

$

0.93

 

 

$

1.93

 

 

$

1.74

 

(1)

On January 1, 2022, we adopted ASU 2020-06 that requires the application of the if-converted method for calculating diluted earnings per share. In accordance with the if-converted method, during 2022 interest expense related to the 2.75% Convertible Notes is added back to income in order to calculate adjusted diluted earnings per share attributable to common shareholders.

(2)

The tax effect of adjusting items was calculated using the Company’s estimated annual statutory tax rate. The tax effect of adjusting items for the nine months ended September 30, 2022 excludes the $12 million payment for the resolution of the SEC investigation which is not tax deductible.

(3)

When calculating diluted net income per share attributable to common shareholders, U.S. GAAP requires that we include potential share dilution from the 2.75% Convertible Notes as though the shares were converted at the beginning of the period. For the purposes of calculating adjusted diluted net income per share attributable to common shareholders, the dilutive effect from the 2.75% Convertible Notes is removed to reflect the impact of the purchased equity derivative instrument which offsets any potential share dilution from the 2.75% Convertible Notes if they were to be converted.

 

Contacts

Investors

Wenjun Xu, 831-761-7861

Or

Media

Erin Kuhlman, 831-768-4111

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