Granite Reports Third Quarter 2021 Results

·14 min read
  • Q3 revenue of $1.1 billion, essentially flat compared to the same period last year

  • Q3 diluted net income per share of $0.73, Q3 adjusted diluted net income per share of $0.93 (1)

  • Cash and marketable securities of $475 million, debt of $340 million

  • Committed and Awarded Projects ("CAP") up $135.4 million compared to the same period last year

  • Continued progress burning through the Old Risk Portfolio ("ORP") (2) reducing ORP CAP by $100 million during the quarter

WATSONVILLE, Calif., October 28, 2021--(BUSINESS WIRE)--Granite Construction Incorporated (NYSE: GVA) today announced results for the third quarter ended September 30, 2021.

Third Quarter 2021 Results

Net income increased to $35.0 million, or $0.73 per diluted share, compared to a net loss of ($91.2) million, or ($2.00) per diluted share, for the same period last year. Adjusted net income(1), which excludes other costs(3), non-cash impairments of goodwill, transaction costs (4), a gain on sale of property and amortization of debt discount related to our 2.75% convertible notes, totaled $43.2 million, or $0.93 per diluted share, compared to adjusted net income (1) of $53.8 million, or $1.16 per diluted share, for the same period last year.

  • Revenue of $1.1 billion, essentially flat compared to the same period last year.

  • Gross profit decreased to $119.9 million compared to $126.0 million for the same period last year, while gross profit margins remained relatively flat for the same period.

  • Selling, general, and administrative ("SG&A") expenses were $77.6 million or 7.3% of revenue, compared to $72.9 million or 6.8% of revenue for the same period last year, primarily driven by an increase in incentive compensation expense.

  • Diluted net income per share increased to $0.73 compared to a net loss per diluted share of ($2.00) for the same period last year.

  • Adjusted diluted net income per share decreased to $0.93 compared to $1.16 for the same period last year.

  • Adjusted EBITDA(1) declined to $80.7 million, compared to $95.1 million for the same period last year.

  • Committed and Awarded Projects ("CAP") (5) totaled $4.3 billion, up $135.4 million compared to the same period last year, and down $117.4 million since the second quarter of 2021.

  • Cash and marketable securities increased $80.9 million to $474.6 million compared to $393.7 million for the same period last year, while debt decreased $74.0 million to $339.9 million compared to $413.9 million for the same period last year.

"This quarter, we made progress by working through the challenging ORP projects in the Heavy Civil Operating Group and by growing high-quality CAP in our vertically-integrated California and Northwest Operating Groups," explained Kyle Larkin, Granite President and CEO. "There is more work to do with the ORP, and we remain focused on project execution across our business. Opportunities in our markets are robust, cash and liquidity remain a strength, and I am confident we are positioning the company to continue on its path for improved financial performance."

(1) Adjusted net income (loss), adjusted diluted income (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) The Heavy Civil Operating Group Old Risk Portfolio includes projects with risk criteria that do not align with Granite's new project selection criteria for the Heavy Civil Operating Group.

(3) Other costs include the settlement charge, legal and accounting investigation fees, integration expenses related to the acquisition of the Layne Christensen Company ("Layne"), and restructuring charges related to our Heavy Civil Operating Group.

(4) Transaction costs includes acquired intangible amortization expenses and acquisition-related depreciation related to the acquisition of Layne and LiquiForce.

(5) CAP is comprised of unearned revenue and other awards, as well as awarded construction management/general contractor, construction manager at-risk, and progressive design build projects for which contract execution and funding is probable.

Third Quarter 2021 Segment Results (Unaudited - dollars in thousands)

Transportation Segment

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

Change

2021

2020

Change

Revenue

$

568,186

$

623,999

$

(55,813

)

(8.9

)%

$

1,444,450

$

1,510,001

$

(65,551

)

(4.3

)%

Gross profit

58,503

54,322

4,181

7.7

%

153,886

110,888

42,998

38.8

%

Gross profit as a percent of revenue

10.3

%

8.7

%

10.7

%

7.3

%

September 30, 2021

June 30, 2021

Change - Quarter over Quarter

September 30, 2020

Change - Year over Year

Committed and Awarded Projects

$

2,914,206

$

2,894,115

$

20,091

0.7

%

$

3,222,829

$

(308,623

)

(9.6

)%

Transportation revenue in the third quarter decreased compared to the same period last year because of our efforts to narrow the footprint of the Heavy Civil Operating Group and because of decreased revenue in the California Operating Group. The decreased revenue in the California Operating Group was primarily due to an extended competitive bidding environment early in 2021 contrasted with an exceptional third quarter of 2020 which was bolstered by owner worksite accommodations. Third quarter gross profit increased compared to the same period last year primarily due to a decrease in project losses related to the Heavy Civil Group ORP.

In the third quarter, the ORP revenue totaled $99.5 million with a gross loss of ($10.4) million, or a loss of ($4.9) million, net of non-controlling interest ("NCI"), compared to ORP revenue of $102.7 million and gross loss of ($31.5) million, or loss of ($22.6) million, net of NCI for the same period last year. For the nine months ended September 30, 2021, ORP revenue totaled $319.3 million with a gross loss of ($8.6) million, or loss of ($0.4) million, net of NCI compared to ORP revenue of $339.8 million with a gross loss of ($79.9) million, or loss of ($61.5) million, net of NCI for the same period last year.

The decrease in Transportation CAP of $0.3 billion compared to the same period last year primarily reflects a decrease in our Heavy Civil Operating Group CAP of $0.5 billion. This was partially offset by an increase of $0.2 billion in CAP in our vertically-integrated businesses and the Midwest Operating Group.

Water Segment

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

Change

2021

2020

Change

Revenue

$

121,968

$

106,599

$

15,369

14.4

%

$

335,153

$

317,980

$

17,173

5.4

%

Gross profit

9,876

12,557

(2,681

)

(21.4

)%

29,005

34,483

(5,478

)

(15.9

)%

Gross profit as a percent of revenue

8.1

%

11.8

%

8.7

%

10.8

%

September 30, 2021

June 30, 2021

Change - Quarter over Quarter

September 30, 2020

Change - Year over Year

Committed and Awarded Projects

$

524,106

$

531,858

$

(7,752

)

(1.5

)%

$

346,253

$

177,853

51.4

%

Water revenue in the third quarter increased compared to the same period last year as there was continued strong demand for water supply and maintenance services within the Water & Mineral Services Group. Third quarter gross profit decreased slightly due to work on two previously disclosed challenging projects in the Heavy Civil and California Operating Groups.

Segment CAP increased $177.9 million compared to the same period last year to $524.1 million, primarily reflecting the addition of the $160 million Leon Hurse Dam project within Heavy Civil Operating Group CAP.

Specialty Segment

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

Change

2021

2020

Change

Revenue

$

234,300

$

205,134

$

29,166

14.2

%

$

590,245

$

513,087

$

77,158

15.0

%

Gross profit

30,858

33,292

(2,434

)

(7.3

)%

72,552

47,853

24,699

51.6

%

Gross profit as a percent of revenue

13.2

%

16.2

%

12.3

%

9.3

%

September 30, 2021

June 30, 2021

Change - Quarter over Quarter

September 30, 2020

Change - Year over Year

Committed and Awarded Projects

$

889,580

$

1,019,318

$

(129,738

)

(12.7

)%

$

623,452

$

266,128

42.7

%

Specialty revenue in the third quarter increased compared to the same period last year, led by work on a federal site development project in the Heavy Civil Operating Group and continued strength in mineral exploration within the mining industry in the Water and Mineral Services Operating Group. Third quarter gross profit decreased compared to the same period last year primarily due to the continued performance of disputed work on a previously disclosed tunnel project and project mix.

Segment CAP increased $266.1 million compared to the same period last year to $0.9 billion primarily due to a tunnel project in the Midwest Operating Group and mining related civil construction work in the Northwest Operating Group.

Materials Segment

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

Change

2021

2020

Change

Revenue

$

137,675

$

129,457

$

8,218

6.3

%

$

326,366

$

275,819

$

50,547

18.3

%

Gross profit

20,698

25,826

(5,128

)

(19.9

)%

44,756

44,915

(159

)

(0.4

)%

Gross profit as a percent of revenue

15.0

%

19.9

%

13.7

%

16.3

%

Materials revenue in the third quarter increased compared to the same period last year led by continued strong demand and volumes in the vertically-integrated California and Northwest Operating Groups. Third quarter gross profit decreased compared to the same period last year as oil related costs returned to 2019 levels and the current year pricing did not benefit from low fuel and liquid asphalt costs experienced during the third quarter of 2020.

Outlook

For the 2021 fiscal year, the Company reaffirms revenue guidance of low- to mid-single digit revenue growth for the 2021 fiscal year and amends adjusted EBITDA margin guidance from a range of 5.5% to 7.5 % to a range of 6.0% to 7.0%.

Conference Call

Granite will conduct a conference call today, October 28, 2021, at 8:00 a.m. Pacific Time/11:00 a.m. Eastern Time to discuss the results of the quarter ended September 30, 2021. 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 1-866-807-9684; international callers may dial 1-412-317-5415. 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 4, 2021, by calling 1-877-344-7529, replay access code 10159883; 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 provider in the transportation, water infrastructure and mineral exploration markets. 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, demand, strategic plans, shareholder value, outcomes, outlook, guidance, Committed and Awarded Projects ("CAP") and results, 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, guidance, CAP and results. 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, 2021

December 31, 2020

September 30, 2020

ASSETS

Current assets

Cash and cash equivalents

$

464,049

$

436,136

$

388,024

Receivables, net

684,822

540,812

661,948

Contract assets

204,046

164,939

159,939

Inventories

77,412

82,362

102,111

Equity in construction joint ventures

195,354

188,798

184,980

Other current assets

39,749

42,199

48,300

Total current assets

1,665,432

1,455,246

1,545,302

Property and equipment, net

510,658

527,016

536,256

Long-term marketable securities

10,600

5,200

5,700

Investments in affiliates

72,415

75,287

76,464

Goodwill

116,788

116,777

116,691

Right of use assets

58,226

62,256

68,276

Deferred income taxes, net

41,228

41,839

39,439

Other noncurrent assets

86,409

96,375

100,145

Total assets

$

2,561,756

$

2,379,996

$

2,488,273

LIABILITIES AND EQUITY

Current liabilities

Current maturities of long-term debt

$

8,718

$

8,278

$

8,253

Accounts payable

397,152

359,160

385,259

Contract liabilities

195,267

171,321

189,430

Accrued expenses and other current liabilities

499,214

404,497

391,651

Total current liabilities

1,100,351

943,256

974,593

Long-term debt

331,192

330,522

405,644

Long-term lease liabilities

39,908

46,769

51,879

Deferred income taxes, net

3,168

3,155

3,417

Other long-term liabilities

64,783

64,684

63,741

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: 45,826,409 shares as of September 30, 2021, 45,668,541 shares as of December 31, 2020 and 45,655,682 shares as of September 30, 2020

458

457

457

Additional paid-in capital

558,121

555,407

554,303

Accumulated other comprehensive loss

(3,468

)

(5,035

)

(6,000

)

Retained earnings

430,074

424,835

422,846

Total Granite Construction Incorporated shareholders’ equity

985,185

975,664

971,606

Non-controlling interests

37,169

15,946

17,393

Total equity

1,022,354

991,610

988,999

Total liabilities and equity

$

2,561,756

$

2,379,996

$

2,488,273

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,

2021

2020

2021

2020

Revenue

Transportation

$

568,186

$

623,999

$

1,444,450

$

1,510,001

Water

121,968

106,599

335,153

317,980

Specialty

234,300

205,134

590,245

513,087

Materials

137,675

129,457

326,366

275,819

Total revenue

1,062,129

1,065,189

2,696,214

2,616,887

Cost of revenue

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