Granite(GVA) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue increased 14% to $4 billion in 2024 [24] - Gross profit increased 44% to$ 573 million [24] - Adjusted net income increased 45% to $214 million [24] - Adjusted EBITDA increased 44% to$ 402 million [24] - Operating cash flow increased 148% to $456 million [24][31] Business Line Data and Key Metrics Changes Construction Segment - Revenue increased$ 28 million or 3% year-over-year to $821 million [26] - Gross profit improved$ 56 million to $128 million with a segment gross profit margin of 16% [27] - The increase in gross profit margin was driven by a higher quality project portfolio [27] Materials Segment - Revenue increased$ 16 million with gross profit up slightly to $23 million [28] - Cash gross profit increased$ 7 million year-over-year to $37 million or 21% for the quarter [29] - Cash gross profit margin improved by 240 basis points year-over-year to 21.4% for the full year [30] Market Data and Key Metrics Changes - State transportation budgets are near record levels, supported by the Federal Infrastructure Bill [14][15] - Approximately 75% of the construction segment is publicly funded, with strong opportunities in water infrastructure and commercial site development [16][18] Company Strategy and Development Direction - The company is focused on growing its businesses while generating strong cash flow and delivering consistent profitability [12] - Plans to explore potential acquisitions to expand its vertically integrated strategy into new markets [12][22] - Targeting two to three M&A deals per year to strengthen its Western and Southeastern footprints [22] Management Comments on Operating Environment and Future Outlook - The management believes the current construction market is the strongest seen in years, with significant opportunities for growth [14] - Expectations for organic revenue growth in the construction segment driven by a strong market environment [22] - Anticipated adjusted EBITDA margin range for 2025 is 11% to 12%, representing a 10% to 20% increase from 2024 [40] Other Important Information - The company ended the year with$ 586 million in cash and marketable securities [33] - Plans to invest in capital expenditures in the range of $140 million to$ 160 million for strategic materials investment and automation projects [37] Q&A Session Summary Question: Sales guidance and margin expansion - Management discussed that the low end of sales guidance implies a modest decline, but margin expansion is expected due to strong CAP and project quality [45][48] Question: Regional market outlook for 2025 - Management indicated strong performance across all geographies, with expectations for continued growth in CAP and project awards [62][65] Question: Free cash flow expectations for 2025 - Management expressed satisfaction with cash flow performance and targeted free cash flow around 50% of EBITDA going forward [80] Question: Inflation expectations in 2025 - Management anticipates inflation closer to 3%, which is already factored into pricing strategies [84] Question: Gain on sales of assets - Management confirmed that a gain on the sale of an asset expected in Q4 was pushed to 2025, which could positively impact guidance [90][91]