Granite Construction (NYSE:GVA) reported higher second-quarter revenue, profit and operating cash flow, citing growth in both its construction and materials operations, a record committed and awarded projects balance and contributions from acquisitions.
Revenue rose 29% from a year earlier to $1.5 billion, while gross profit increased 20% to $239 million, Chief Financial Officer Staci Woolsey said during the company’s second-quarter earnings call. Adjusted net income increased by $15 million to $101 million, and adjusted EBITDA climbed $34 million to $186 million. Year-to-date cash provided by operating activities reached $142 million, compared with $5 million in the prior-year period.
Record Project Balance Supports Growth Outlook
President and Chief Executive Officer Kyle Larkin said Granite’s committed and awarded projects, or CAP, increased by $250 million sequentially to a record $7.4 billion. Project wins exceeded revenue burn during the quarter, with the acquisition of Kenny Seng Construction also contributing to the balance.
“This record CAP underscores the strength of our end markets, the effectiveness of our growth initiatives, and provides strong visibility into future revenue,” Larkin said.
Construction-segment revenue increased 29% to $1.2 billion. Acquired businesses contributed $98 million of the growth, while organic growth accounted for $172 million. Woolsey said gross profit margin rose slightly year over year despite a difficult comparison with the prior-year period, when the company also recognized favorable claim recoveries.
Granite pointed to public transportation infrastructure, federal projects, rail and transit work, and data center site development as important avenues for growth. Larkin said the company expects infrastructure funding to remain supportive whether through new legislation or an extension of existing programs.
The company said the proposed Build America 250 Act, intended as a successor to the Infrastructure Investment and Jobs Act that expires in September, would shift more funding toward formula-based programs and bridge investments rather than larger discretionary projects. Granite views that framework favorably because it aligns with its markets and capabilities, according to Larkin.
Data center-related CAP rose to $223 million at the end of the second quarter, from $65 million a year earlier. Granite launched a dedicated data center division earlier this year and said it has more than a decade of experience serving civil infrastructure needs for data center construction, particularly in the Pacific Northwest and Nevada. Larkin said the company aims for data center work to represent about 10% or more of annual revenue and believes it is progressing toward that target.
Materials Revenue Rises Despite Weather and Cost Pressure
Materials-segment revenue increased by $60 million year over year to $248 million, with acquired businesses, led by Warren Paving, accounting for the increase. Aggregate and asphalt revenue before intersegment consolidation adjustments increased $111 million, including a $42 million, or 73%, increase in internal asphalt sales.
Aggregate and asphalt volumes increased both through acquisitions and organically, Granite said. Demand remained healthy, with orders ahead of prior-year levels, while aggregate pricing was tracking at targeted mid-single-digit increases through the second quarter.
However, severe weather in the Southeast disrupted production and sales activity during the latter half of the quarter. Woolsey said the materials segment’s gross profit margin declined 800 basis points and cash gross profit margin fell 310 basis points, reflecting weather-related disruption and higher quarry-development production costs.
Larkin estimated that severe weather represented about a $10 million impact during the quarter, while plant setup and quarry development activities accounted for approximately $5 million. He said the company does not expect a similar quarry-development drag in the third and fourth quarters and expects volumes affected by weather to shift later in the year.
Granite said higher liquid asphalt and diesel costs had a minimal impact in the quarter, as the company used fixed forward contracts, storage, financial hedges and energy surcharges to mitigate volatility. Larkin said the company was “a little bit more positive than negative” on energy costs overall.
Debt Actions and Acquisition Plans
During the quarter, Granite secured inaugural credit ratings from Moody’s and S&P, completed a $600 million senior unsecured notes offering and called its remaining 3.75% convertible notes. The company intends to use most of the notes proceeds to settle the convertible notes.
Granite expects to use approximately $570 million in cash, net of proceeds from the unwind and termination of related cap call transactions, to settle conversions, with the remainder to be settled in shares. Woolsey said the approach is expected to reduce adjusted diluted shares outstanding by approximately 2 million shares under current assumptions.
The company recorded $363 million of non-operating charges related to the convertible notes during the quarter, which it excluded from adjusted net income and adjusted EBITDA. Granite expects the remaining $270 million debt discount to be recognized as interest expense in the third quarter.
Management also said merger-and-acquisition activity remains active. Granite closed the Kenny Seng Construction acquisition during the quarter, which added roughly $150 million of CAP. Larkin said the company expects to complete additional deals in 2026 and estimated acquisition spending for the remainder of the year could be in a range of $200 million to $400 million.
About Granite Construction (NYSE:GVA)
Granite Construction Inc is a publicly traded heavy civil contractor and construction materials producer based in Watsonville, California. The company specializes in delivering large-scale infrastructure projects for government and private clients, focusing on the development, rehabilitation and maintenance of transportation, water resource and industrial facilities. Its turnkey solutions span the full project lifecycle, from preconstruction and design-build to construction management and facilities maintenance.
In its construction segment, Granite undertakes highway and bridge building, airport runway and taxiway construction, marine terminal and port improvements, dam and reservoir projects, transit systems and underground utilities.
