Granite Construction Inc.

10/31/2024 | Press release | Distributed by Public on 10/31/2024 04:51

Granite Reports Third Quarter 2024 Results

Press Release

Granite Reports Third Quarter 2024 Results

Oct 31, 2024
  • Q3 revenue increased 14% year-over-year to $1.3 billion
  • Q3 diluted EPS of $1.57 and adjusted diluted EPS (1) of $2.05, compared to $1.13 and $1.72 in the prior year, respectively
  • Record Committed and Awarded Projects ("CAP") (2) of $5.6 billion, a sequential increase of $44 million
  • Year-to-date operating cash flow increased $249 million year-over-year
  • Expanded southeast home market with acquisition of Dickerson & Bowen, Inc.

WATSONVILLE, Calif.--(BUSINESS WIRE)--Granite Construction Incorporated (NYSE: GVA) today announced results for the quarter ended September 30, 2024.

Third Quarter 2024 Results

Net income attributable to Granite Construction Incorporated totaled $79 million, or $1.57 per diluted share, compared to $58 million, or $1.13 per diluted share, for the same period in the prior year. Adjusted net income attributable to Granite Construction Incorporated (1) totaled $91 million, or $2.05 per diluted share, compared to $77 million, or $1.72 per diluted share, for the same period in the prior year.

  • Revenue increased $159 million to $1.3 billion, compared to $1.1 billion for the same period in the prior year. The Construction and Materials segments each posted year-over-year increases of 14%.
  • Gross profit increased $36 million to $203 million, compared to $167 million for the same period in the prior year.
  • Selling, general, and administrative ("SG&A") expenses increased $17 million to $92 million, or 7.2% of revenue, compared to $75 million, or 6.7% of revenue, for the same period in the prior year.
  • Adjusted EBITDA (1) totaled $149 million, compared to $126 million for the same period in the prior year.
  • CAP (2) increased $44 million sequentially and $35 million year-over-year to $5.6 billion.

"In the third quarter, we continued to build on our momentum with revenue growth and margin expansion," said Kyle Larkin, Granite President and Chief Executive Officer. "Revenue grew 14% year-over-year, resulting in another record quarter. The market continues to be robust, and we added to our CAP despite the third quarter being our highest revenue quarter. Our new business model is producing strong operating cash flow, and we expect to significantly exceed our target of 7% of revenue for the year."

"For 2027, our financial targets contemplate organic growth at a CAGR of 6% to 8% and continued adjusted EBITDA margin expansion and operating cash flow growth. We believe we are still in the early stages of experiencing the benefits from the federal infrastructure bill that should continue to support the public market for years to come, and we see numerous opportunities to grow in a healthy private market over the next three years. I expect that our improved CAP, particularly when combined with initiatives underway in both the Materials and Construction segments, will continue to drive increases in gross profit margin. In addition, with our strong balance sheet, liquidity and cash generation, we will continue to pursue bolt-on and larger materials-focused, vertically-integrated acquisition opportunities, while also looking to return value to shareholders through share repurchases."

Nine Months Ended September 30, 2024 Results

Net income attributable to Granite Construction Incorporated totaled $85 million, or $1.79 per diluted share, compared to $18 million, or $0.40 per diluted share, for the same period in the prior year. Adjusted net income attributable to Granite Construction Incorporated (1) totaled $158 million, or $3.56 per diluted share, compared to $110 million, or $2.47 per diluted share, for the same period in the prior year.

  • Revenue increased $455 million to $3.0 billion, compared to $2.6 billion for the same period in the prior year. The Construction and Materials segments posted year-over-year increases of 18% and 16%, respectively.
  • Gross profit increased $120 million to $422 million, compared to $302 million for the same period in the prior year.
  • SG&A expenses increased $37 million to $250 million, or 8.2% of revenue, compared to $212 million, or 8.3% of revenue, for the same period in the prior year.
  • Adjusted EBITDA (1) totaled $293 million compared to $204 million for the same period in the prior year.

(1) Adjusted net income attributable to Granite Construction Incorporated, 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.

(2) 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.

Three and Nine Months ended September 30, 2024 (Unaudited - dollars in thousands)

Construction Segment

Three Months Ended September 30,

Nine Months Ended September 30,

2024

2023

Change

2024

2023

Change

Revenue

$

1,080,705

$

945,698

$

135,007

14.3

%

$

2,593,872

$

2,198,527

$

395,345

18.0

%

Gross profit

$

170,685

$

137,162

$

33,523

24.4

%

$

362,885

$

253,021

$

109,864

43.4

%

Gross profit as a percent of revenue

15.8

%

14.5

%

14.0

%

11.5

%

For the three and nine months ended September 30, 2024, revenue increased year-over-year by $135 million and $395 million, respectively, due to higher levels of CAP, more favorable weather conditions early in 2024 and revenue from acquired businesses. For the three and nine months ended September 30, 2024, gross profit increased year-over-year as a result of increases in revenue and an increase in net positive revisions in estimates.

CAP increased $44 million sequentially to $5.6 billion and increased $35 million year-over-year. Public and private markets are strong with opportunities to continue to build CAP in the fourth quarter.

Materials Segment

Three Months Ended September 30,

Nine Months Ended September 30,

2024

2023

Change

2024

2023

Change

Revenue

$

194,805

$

171,122

$

23,683

13.8

%

$

436,399

$

376,913

$

59,486

15.8

%

Gross profit

$

32,264

$

29,481

$

2,783

9.4

%

$

59,060

$

49,067

$

9,993

20.4

%

Gross profit as a percent of revenue

16.6

%

17.2

%

13.5

%

13.0

%

Cash gross profit (1)

$

43,202

$

36,203

$

6,999

19.3

%

$

89,718

$

67,581

$

22,137

32.8

%

Cash gross profit as a percent of revenue (1)

22.2

%

21.2

%

20.6

%

17.9

%

(1) Materials segment cash gross profit and cash gross profit as a percent of revenue are non-GAAP measures. Please refer to the description and reconciliation of non-GAAP measures in the attached tables.

For the three and nine months ended September 30, 2024, revenue increased year-over-year by $24 million and $59 million, respectively, driven by revenue from acquired businesses as well as higher asphalt and aggregate sales prices, which offset decreased asphalt volumes. Gross profit in the three and nine months ended September 30, 2024, increased due primarily to inclusion of the results of acquired businesses and higher materials sales prices. The impact to gross profit for the three and nine month periods ended September 30, 2024 from purchase accounting-related step-up depreciation and intangible asset amortization was $0.4 million and $3 million, respectively. Materials segment cash gross profit (1), which excludes the segment's depreciation, depletion and amortization, also increased for the same period year-over-year.

Outlook

Our updated guidance for 2024 is noted below:

  • Revenue unchanged in the range of $3.9 billion to $4.0 billion
  • Adjusted EBITDA margin in the range of 10% to 11%, narrowed from 9.5% to 11.5%
  • SG&A expense in a range from 8.3% to 8.5% of revenue from a range of 7.5% to 8.0% of revenue due to increased incentive compensation
  • Mid-20s effective tax rate for adjusted net income
  • Capital expenditures expected to be approximately $130 million

We do not provide a reconciliation of forward-looking adjusted EBITDA margin or the most directly comparable forward-looking GAAP measure of net income attributable to Granite Construction Incorporated because we cannot predict with a reasonable degree of certainty and without unreasonable efforts certain components or excluded items that are inherently uncertain and depend on various factors. For these reasons, we are unable to assess the potential significance of the unavailable information.

For a discussion of our 2027 targets, see the presentation posted on our Investor Relations website following our conference call.

Conference Call

Granite will conduct a conference call today, October 31, 2024, at 8:00 a.m. Pacific Time/11:00 a.m. Eastern Time to discuss the results of the quarter ended September 30, 2024. 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 7, 2024, by calling 1-877-344-7529, replay access code 8631298; 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 graniteconstruction.com, and connect with Granite on LinkedIn, X, 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, 2024 fiscal year guidance for revenue, adjusted EBITDA margin, SG&A expense, effective tax rate, and capital expenditures, our expectation that we significantly exceed our operating cash flow target of 7% for the year, our 2027 financial target assumptions, the federal infrastructure bill should continue to support the public markets for years to come, numerous opportunities to grow in a healthy private market over the next three years, improved CAP with initiatives underway will continue to drive increase in gross profit margin, pursuit of bolt-on and larger materials-focused, vertically integrated acquisition opportunities, returning value to shareholders through share repurchases, opportunities to build CAP in the fourth quarter, 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, 2024 fiscal year guidance for revenue, adjusted EBITDA margin, SG&A expense, effective tax rate, and capital expenditures, our expectation that we significantly exceed our operating cash flow target of 7% for the year, our 2027 financial target assumptions, the federal infrastructure bill should continue to support the public markets for years to come, numerous opportunities to grow in a healthy private market over the next three years, improved CAP with initiatives underway will continue to drive increase in gross profit margin, pursuit of bolt-on and larger materials-focused, vertically integrated acquisition opportunities, returning value to shareholders through share repurchases, opportunities to build CAP in the fourth quarter, 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, 2024

December 31, 2023

ASSETS

Current assets:

Cash and cash equivalents

$

462,286

$

417,663

Short-term marketable securities

10,147

35,863

Receivables, net

733,018

598,705

Contract assets

321,653

262,987

Inventories

107,973

103,898

Equity in construction joint ventures

144,097

171,233

Other current assets

34,928

53,102

Total current assets

1,814,102

1,643,451

Property and equipment, net

719,678

662,864

Investments in affiliates

94,921

92,910

Goodwill

211,624

155,004

Intangible assets

131,579

117,322

Right of use assets

86,299

78,176

Deferred income taxes, net

4,990

8,179

Other noncurrent assets

67,732

55,634

Total assets

$

3,130,925

$

2,813,540

LIABILITIES AND EQUITY

Current liabilities:

Current maturities of long-term debt

$

1,099

$

39,932

Accounts payable

509,976

408,363

Contract liabilities

292,641

243,848

Accrued expenses and other current liabilities

361,110

337,740

Total current liabilities

1,164,826

1,029,883

Long-term debt

737,458

614,781

Long-term lease liabilities

70,981

63,548

Deferred income taxes, net

3,420

3,708

Other long-term liabilities

84,561

74,654

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: 43,704,841 shares as of September 30, 2024 and 43,944,118 shares as of December 31, 2023

437

439

Additional paid-in capital

437,343

474,134

Accumulated other comprehensive income

437

881

Retained earnings

568,877

501,844

Total Granite Construction Incorporated shareholders' equity

1,007,094

977,298

Non-controlling interests

62,585

49,668

Total equity

1,069,679

1,026,966

Total liabilities and equity

$

3,130,925

$

2,813,540

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,

2024

2023

2024

2023

Revenue:

Construction

$

1,080,705

$

945,698

$

2,593,872

$

2,198,527

Materials

194,805

171,122

436,399

376,913

Total revenue

1,275,510

1,116,820

3,030,271

2,575,440

Cost of revenue:

Construction

910,020

808,536

2,230,987

1,945,506

Materials

162,541

141,641

377,339

327,846

Total cost of revenue

1,072,561

950,177

2,608,326

2,273,352

Gross profit

202,949

166,643

421,945

302,088

Selling, general and administrative expenses

91,650

74,794

249,695

212,479

Other costs, net

8,543

19,843

29,778

37,973

Gain on sales of property and equipment, net

(1,542

)

(1,812

)

(4,347

)

(7,793

)

Operating income

104,298

73,818

146,819

59,429

Other (income) expense:

(Gain) loss on debt extinguishment

(272

)

-

27,552

51,052

Interest income

(7,513

)

(4,293

)

(17,815

)

(11,287

)

Interest expense

7,905

4,877

21,325

11,899

Equity in income of affiliates, net

(4,394

)

(7,147

)

(12,921

)

(19,378

)

Other (income) expense, net

(874

)

462

(1,350

)

(2,713

)

Total other (income) expense, net

(5,148

)

(6,101

)

16,791

29,573

Income before income taxes

109,446

79,919

130,028

29,856

Provision for income taxes

25,469

22,423

36,636

21,978

Net income

83,977

57,496

93,392

7,878

Amount attributable to non-controlling interests

(5,026

)

128

(8,529

)

9,723

Net income attributable to Granite

$

78,951

$

57,624

$

84,863

$

17,601

Net income per share attributable to common shareholders:

Basic

$

1.81

$

1.31

$

1.93

$

0.40

Diluted

$

1.57

$

1.13

$

1.79

$

0.40

Weighted average shares outstanding:

Basic

43,696

43,924

43,914

43,861

Diluted

52,366

53,612

52,585

44,447

GRANITE CONSTRUCTION INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - in thousands)

Nine Months Ended September 30,

2024

2023

Operating activities:

Net income

$

93,392

$

7,878

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and amortization

92,283

65,298

Amortization related to long-term debt

3,400

1,689

Loss on debt extinguishment

27,552

51,052

Gain on sales of property and equipment, net

(4,347

)

(7,793

)

Deferred income taxes

-

1,542

Stock-based compensation

17,325

8,630

Equity in net (income) loss from unconsolidated construction joint ventures

651

(4,535

)

Net income from affiliates

(12,921

)

(19,378

)

Other non-cash adjustments

(165

)

5,659

Changes in assets and liabilities

66,379

(75,844

)

Net cash provided by operating activities

$

283,549

$

34,198

Investing activities:

Purchases of marketable securities

(6,977

)

(9,740

)

Maturities of marketable securities

31,500

40,000

Purchases of property and equipment

(108,167

)

(108,963

)

Proceeds from sales of property and equipment

6,739

14,613

Acquisitions of businesses

(122,448

)

(26,933

)

Cash paid for purchase price adjustments on business acquisition

(13,183

)

-

Proceeds from company owned life insurance

-

1,545

Return of investment in affiliates

1,429

-

Collection of notes receivable

-

208

Net cash used in investing activities

$

(211,107

)

$

(89,270

)

Financing activities:

Proceeds from issuance of convertible notes

373,750

373,750

Proceeds from long-term debt

-

55,000

Debt principal repayments

(310,226

)

(304,851

)

Capped call transactions

(46,046

)

(53,035

)

Redemption of warrants

(497

)

(13,201

)

Debt issuance costs

(10,053

)

(10,024

)

Cash dividends paid

(17,131

)

(17,101

)

Repurchases of common stock

(21,384

)

(3,900

)

Contributions from non-controlling partners

20,500

35,400

Distributions to non-controlling partners

(18,072

)

(9,100

)

Other financing activities, net

1,340

267

Net cash provided by (used in) financing activities

$

(27,819

)

$

53,205

Net increase (decrease) in cash and cash equivalents

44,623

(1,867

)

Cash and cash equivalents at beginning of period

417,663

293,991

Cash and cash equivalents at end of period

$

462,286

$

292,124

Non-GAAP Financial Information

The tables below contain financial information calculated other than in accordance with U.S. generally accepted accounting principles ("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 (gain) loss on debt extinguishment, stock-based compensation expense and other costs, net, which include legal fees for the defense of a former Company officer in his ongoing civil litigation with the Securities and Exchange Commission, reorganization costs, strategic acquisition and divestiture expenses, and a litigation charge and non-cash impairment charges in 2023.

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

  • Other costs, net as described above;
  • Transaction costs which include acquired intangible amortization expense and acquisition-related depreciation;
  • Stock-based compensation expense;
  • (Gain) loss on debt extinguishment; and
  • Income taxes related to establishment of valuation allowance in 2023.

We also provide materials segment cash gross profit to exclude the impact of the segment's depreciation, depletion and amortization from the segment's gross profit. Management believes that non-GAAP financial measures such as materials segment cash gross profit 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.

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 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.

GRANITE CONSTRUCTION INCORPORATED

EBITDA AND ADJUSTED EBITDA(1)

(Unaudited - dollars in thousands)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2024

2023

2024

2023

EBITDA:

Net income attributable to Granite Construction

$

78,951

$

57,624

$

84,863

$

17,601

Net income margin (2)

6.2

%

5.2

%

2.8

%

0.7

%

Depreciation, depletion and amortization expense (3)

33,956

23,911

93,532

65,722

Provision for income taxes

25,469

22,423

36,636

21,978

Interest expense, net

392

584

3,510

612

EBITDA(1)

$

138,768

$

104,542

$

218,541

$

105,913

EBITDA margin(1)(2)

10.9

%

9.4

%

7.2

%

4.1

%

ADJUSTED EBITDA:

Other costs, net

8,543

19,843

29,778

37,973

Stock-based compensation (4)

2,241

1,928

17,325

8,630

(Gain) loss on debt extinguishment

(272

)

-

27,552

51,052

Adjusted EBITDA(1)

$

149,280

$

126,313

$

293,196

$

203,568

Adjusted EBITDA margin(1)(2)

11.7

%

11.3

%

9.7

%

7.9

%

(1) We define EBITDA as 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, (gain) loss on debt extinguishment and stock-based compensation expense, as described above.

(2) Represents net income, EBITDA and adjusted EBITDA divided by consolidated revenue of $1.3 billion and $1.1 billion, for the three months ended September 30, 2024 and 2023, respectively and $3.0 billion and $2.6 billion for the nine months ended September 30, 2024 and 2023, respectively.

(3) 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.

(4) In the first quarter of 2024, we revised the adjusted EBITDA calculation to exclude the impact of stock-based compensation expense. The prior period adjusted EBITDA has been recast to conform to current presentation.

GRANITE CONSTRUCTION INCORPORATED

ADJUSTED NET INCOME RECONCILIATION

(Unaudited - in thousands, except per share data)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2024

2023

2024

2023

Income before income taxes

$

109,446

$

79,919

$

130,028

$

29,856

Other costs, net

8,543

19,843

29,778

37,973

Transaction costs

5,546

92

15,378

5,046

Stock-based compensation (1)

2,241

1,928

17,325

8,630

(Gain) loss on debt extinguishment

(272

)

-

27,552

51,052

Adjusted income before income taxes

$

125,504

$

101,782

$

220,061

$

132,557

Provision for income taxes

$

25,469

$

22,423

$

36,636

$

21,978

Tax expense to establish valuation allowance

-

(1,542

)

-

(1,542

)

Tax effect of adjusting items (2)

4,474

4,375

16,593

12,120

Adjusted provision for income taxes

$

29,943

$

25,256

$

53,229

$

32,556

Net income attributable to Granite Construction

$

78,951

$

57,624

$

84,863

$

17,601

After-tax adjusting items

11,584

19,030

73,440

92,123

Adjusted net income attributable to Granite

$

90,535

$

76,654

$

158,303

$

109,724

Diluted weighted average shares of common stock

52,366

53,612

52,585

44,447

Less: dilutive effect of Convertible Notes (3)

(8,103

)

(9,099

)

(8,103

)

-

Adjusted diluted weighted average shares of common stock

44,263

44,513

44,482

44,447

Diluted net income per share attributable to common shareholders

$

1.57

$

1.13

$

1.79

$

0.40

After-tax adjusting items per share attributable to common shareholders

0.48

0.59

1.77

2.07

Adjusted diluted earnings per share attributable to common shareholders

$

2.05

$

1.72

$

3.56

$

2.47

(1) In the first quarter of 2024, we revised the adjusted net income calculation to exclude the impact of stock-based compensation expense. The prior period adjusted net income and diluted loss per share calculations have been recast to conform to current presentation.

(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 three and nine months ended September 30, 2024 includes an immaterial amount of the (gain) loss on debt extinguishment as it was almost entirely non-tax deductible. The nine months ended September 30, 2023 excludes the $51 million loss on debt extinguishment and three and nine months ended September 30, 2023 exclude $5.0 million of non-cash impairment charges included in "Other costs, net" which was non-tax deductible.

(3) When calculating diluted net income attributable to common shareholders, GAAP requires that we include potential share dilution from the convertible notes when not antidilutive. For the nine months ended September 30, 2023, the potential share dilution from the convertible notes would have been antidilutive and therefore was excluded from the calculation. For the purposes of calculating adjusted diluted net income per share attributable to common shareholders, the dilutive effect of the convertible notes is removed to reflect the impact of the purchased equity derivative instruments which economically offsets dilution risk.

GRANITE CONSTRUCTION INCORPORATED

MATERIALS SEGMENT CASH GROSS PROFIT RECONCILIATION

(Unaudited - in thousands)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2024

2023

2022

2024

2023

2022

Gross profit

$

32,264

$

29,481

$

22,038

$

59,060

$

49,067

$

40,965

Gross profit as a percent of revenue

16.6

%

17.2

%

13.6

%

13.5

%

13.0

%

11.0

%

Depreciation, depletion and amortization

10,938

6,722

6,211

30,658

18,514

18,163

Cash gross profit

$

43,202

$

36,203

$

28,249

$

89,718

$

67,581

$

59,128

Cash gross profit as a percent of revenue

22.2

%

21.2

%

17.5

%

20.6

%

17.9

%

15.8

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20241030745262/en/

Investors

Wenjun Xu, 831-761-7861

Or

Media

Erin Kuhlman, 831-768-4111

Source: Granite Construction Incorporated