GRANITE CONSTRUCTION INC — Call Transcript 2025

Good morning. My name is Steve, and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the Granite Construction Incorporated 2025 second quarter conference call. This call is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remark, there will be a question and answer period. To ask a question, please press star, then one. Please note, we will take one question and one follow-up question from each participant today. It is now my pleasure to turn the floor over to the Vice President of Investor Relations, Mike Barker. Good morning, and thank you for joining us. I'm pleased to be here today with President and Chief Executive Officer, Kyle Larkin, and Executive Vice President and Chief Financial Officer, Staci Woolsey. Please note that today's earnings presentation will be available on the Events and Presentations page of our Investor Relations website. We begin today with a brief discussion regarding forward-looking statements and non-GAAP measures. Some of the discussion today may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are estimates reflecting the current expectations and best judgment of senior management regarding the future events, occurrences, opportunities, targets, growth, demand, strategic plans, circumstances, activities, performance, shareholder value, outcomes, outlook, guidance, objectives, committed and awarded projects, or CAP, and results. Actual results could differ materially from statements made today. Please refer to Granite Construction's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these forward-looking statements. The company assumes no obligation to update forward-looking statements except as required by law. Certain non-GAAP measures may be discussed during today's call and from time to time by the company's executives. These include, but are not limited to, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, and cash gross profit. The required disclosures regarding our non-GAAP measures are included as part of our earnings press releases and in company presentations, which are available on our website, graniteconstruction.com, under Investor Relations. Now, I would like to turn the call over to Kyle Larkin. Good morning, and thank you for joining us. Before we discuss our second quarter results, I'd like to talk about the recently announced acquisitions of Warm Paving and Pavage Construction. These transactions are an exciting step forward for Granite as we continue to execute on our strategic plan. The strategic plan started with a focus on raising construction margins and driving organic growth by selecting the right projects in the right markets with the right owners, while standardizing execution practices across the business. We also revisited our capital deployment and shifted strategic investments to support our materials business as we work to maximize the benefits of our vertically integrated business model. Our strategy is working. Both our construction and materials businesses are seeing significantly higher margins, which in turn are driving strong cash generation. As we progress with our construction and materials strategy, we are continuing to grow and strengthen the company with M&A. We are using M&A to support, strengthen, and expand our home markets in the new geographies. Over the last year, we have built out our corporate development team with the expectation that we will be building our company through M&A. We have also been putting a lot of work into our integration framework. We are prepared to efficiently integrate these companies into our organization. We will continue to maintain a disciplined and targeted approach to M&A, only pursuing those targets to support our strategic plan. We remain committed to our vertical integration strategy, with target companies being primarily materials-focused, but within our current footprint and in new attractive geographies. The deals announced this week will add significant resources to our Southeast platform, with a large supply of high-quality aggregates on the Mississippi River, and will also strengthen our Central California operations by adding a leading vertically integrated contractor to our business portfolio. With a combined transaction price of $710 million, the acquisitions are expected to annually contribute approximately $425 million in revenue, with an approximate adjusted EBITDA margin of 18%. The acquisitions should provide a significant uplift to the materials segment by increasing annual aggregate volumes by approximately 5 million tons or 27% and increasing aggregate reserves and resources by more than 440 million tons or approximately 30%. The acquisitions are expected to be immediately accretive to adjusted EBITDA margin, with an annual uplift of approximately 60 basis points, driven by the increased aggregate exposure. Now, I will discuss each acquisition, starting with the new addition to the Southeast platform. Warm Paving, which owns the Slats Lucas Quarry, is the premier producer of construction materials and provider of construction services in Mississippi and the Gulf Coast regions of Louisiana and Alabama, and is a great addition to our Southeast platform. The Slats Lucas Quarry is strategically located on the Cumberland River, a tributary of the Mississippi, and has an estimated 400 million tons of very high-quality aggregate reserves and resources. Utilizing a distribution network of approximately 170 owned and leased barges and 11 aggregate yards, Warm Paving sells aggregates both internally, supplying its own asphalt plants, and externally. I am excited, not only because we are adding such a high-performing business to our Southeast platform, but also because of the future growth opportunities provided by the addition of Warm Paving. The combination of these high-quality aggregates and Warm Paving's logistics expertise should allow us to supply materials to certain Lamb & Roberts and Dickerson & Bowen asphalt plants and positions us to expand the distribution network as we continue to grow our Southeast platform. Investment in and further growth of the distribution network, in addition to building out additional outlets for the aggregates along the Mississippi River system, should have a compounding impact on the profitability of the Southeast platform by adding revenue and associated gross profit while driving increases in volumes and margin. We are actively evaluating opportunities to continue to build upon the platform, and I look forward to sharing progress that we make on our strategic plan in the coming quarters. With the acquisition of Warm Paving, the Southeast platform has grown to be a more significant component of Granite, and we are excited by the opportunities to continue that growth. The market from Memphis through Mississippi and into Louisiana is growing in terms of public funding and private investment. We view the region as a historically underfunded area, but recently, the Mississippi and Louisiana state legislatures have recognized the need for infrastructure investment and are working on initiatives that should support future growth. In addition to the expected continued increase in public funds, we believe private investment will ramp up in the region. Whether through data centers or other large commercial developments, the region is attractive due to affordable land, plentiful water, electricity, and labor availability. A number of large developments have begun in Mississippi, and we expect this trend to continue. Throughout Granite's history, we have found success by investing in markets that were historically underfunded but growing and expanding. We believe this region aligns well with that formula, and we are excited to be part of that growth. Now, let's move on to our acquisition in California. Pavage Construction is a leading producer of aggregates and asphalt in California's Central Coast and Central Valley and has expertise in infrastructure projects across the public and private sectors. The addition of more than 40 million tons of aggregate reserves and resources spread across the market is complementary to Granite's current operations in the area. With the combined footprint, we will be better positioned to serve the market in aggregate and asphalt sales, as well as construction projects. The addition of Pavage Construction is a great example of executing on a strategy of strengthening existing home markets with bolt-ons that will enhance our vertical integration in a home market that we know well. Looking forward, I believe that M&A will be a significant component of our growth. We are focused on generating cash while being prudent with CapEx, resulting in strong free cash flow. Whether it is through proactive outreach by our teams or bank-led auction processes, there is a robust listing of active M&A opportunities ahead of us. While we will continue to be selective in the coming quarters, I believe we will continue to execute on transactions that will further strengthen our national footprint. Now, let's discuss our strong second quarter results, starting with the materials segment. Our materials business completed another exceptional quarter. The strong public market environment is continuing to drive growth, as has been the case in previous quarters, with private market levels relatively unchanged. We continue to execute on our strategic plan, and we remain focused on continuing to raise the bar across all of our businesses. Part of our strategy involves restructuring our operational leadership to place our materials experts in charge of our materials business and centralized management functions such as sales and quality control. This realignment is helping us grow our materials margins. We're also investing in capital improvement projects such as aggregate plant automation to drive efficiency and reduce production costs. We are promoting best practices across all of our operations through the implementation of our materials playbook. These efforts are driving increases in volumes and prices per ton on aggregates and asphalt as we work to increase our margin. I'm proud of the accomplishments of the materials team and of our performance this quarter. We have a long runway of opportunities to capture additional potential gains in profitability in the business for the coming quarters and years. Now, let's move to the construction segment. During the quarter, our estimating teams did a great job capitalizing on the robust bidding environment by winning a number of high-quality projects that drove our CAP to a new record high of $6.1 billion. The new projects span across our footprint, including Nevada, Utah, California, and Alaska. In California, our largest market, the budget for the 2025-2026 fiscal year was finalized during Q2. Transportation funding for the upcoming fiscal year remains strong, with the key components of the transportation budget, capital outlay projects, and local assistance increasing budget allocations 9% over the fiscal year end of June 2025. In California and across our footprint, we continue to see a healthy list of project bidding opportunities in both the public and private market. Based on these encouraging signs, we believe we will continue to see CAP increase over the next several quarters. I am pleased with the segment performance during the quarter. Revenue during the quarter was strong, and we expect revenue growth to accelerate in the second half of the year as projects progress. In addition, I believe we are on track to achieve our gross margin expansion expectations of greater than 1% during 2025. Through the first half of 2025, we are seeing the benefits of the steps we have implemented to improve project performance, and I expect further gains in the construction segment in the future. Now, I'll turn it over to Staci to review our financial performance for the quarter. Thanks, Kyle. We had an outstanding second quarter and first half of 2025. In the second quarter, revenue increased $43 million, or 4%. Gross profit increased $34 million, or 21%. Adjusted net income improved $9 million, or 12%. Adjusted EBITDA improved $22 million, or 17%. We ended the second quarter with year-to-date operating cash flow of $5 million, which is on track for our 2025 target. In the construction segment, revenue increased $19 million, or 2% year-over-year, to $937 million, driven by the recently acquired Dickerson & Bowen and the strong CAP we are working through across the company. Heading into the third quarter with a record CAP balance, I believe we are on track to meet our revenue guidance for the year. Construction segment gross profit improved $18 million to $154 million, with a gross profit margin of 16%. This 170 basis point increase is largely due to improved execution and performance across our higher quality project portfolio, as well as increased claim settlement recognition year over year. In the first half of 2025, our CAP has increased approximately $800 million from a 2024 year-end balance of $5.3 billion. We continue to see CAP expand in our public markets across the company as we capitalize on opportunities at the federal, state, and local level. In the materials segment, we continue to realize year-over-year cash gross profit margin improvement led by our aggregates business. Year-over-year, aggregate volumes increased 11% for the quarter, at 13% year-to-date, driven by strong demand in our regions. These volume increases, coupled with higher aggregate prices, led to improved cash gross profit margin for both the quarter and year-to-date periods compared to the prior year. In asphalt, we are also seeing volume increases and cash gross profit improvement year over year. The materials business is executing on our plan to grow revenue while implementing initiatives such as automation and best practices to offset cost inflation. Now turning to cash flow and the balance sheet. We generated $5 million of operating cash flow through the first half of the year. Typically, the first half of the year is a slow period for cash flow as projects and operations ramp up. As we get further into the construction season, cash flow typically increases. I believe we will see this seasonal pattern this year and expect that we will achieve our operating cash flow target of 9% of revenue for the year. As of the end of Q2, cash and marketable securities were $483 million. With the closing of the two transactions this week, we amended our credit facility by adding a new Term Loan A of $600 million and expanding our revolver from $350 million to $600 million, of which $10 million was drawn in conjunction with the transactions. In addition to the new Term Loan, we have the ability to draw another Term Loan of $75 million within six months. We also utilized $100 million of cash on hand. After accounting for the transactions, our total debt outstanding is approximately $1.35 billion. With our expanded revolver, additional available Term Loans, and cash flow generation, we are in a great position to act on future M&A opportunities that bolt on to a home market or further expand our geographic reach. Now, let's discuss our guidance for the rest of this year and our 2027 targets. As a result of this week's acquisitions, we are increasing our annual revenue and adjusted EBITDA margin guidance for 2025. Our revised revenue range is now $4.35 billion-$4.55 billion, and our adjusted EBITDA margin range is now 11.25%-12.25%. This reflects an expected $150 million in revenue from the acquisitions for the remainder of the year, as well as an uplift of 25 basis points to our adjusted EBITDA margin range. Our annual guidance for SG&A as a percent of revenue is 9%. CapEx in the range of $140 million-$160 million, and adjusted effective tax rate in the mid-20s are unchanged. Through the second quarter, we have achieved the margin expansion expected in both of our segments, and with our busiest month ahead of us, I believe we are on track to meet our guidance for the year. Looking forward, we are also revisiting our 2027 financial targets with the addition of the acquisitions. Our organic revenue growth expectations are unchanged at a CAGR of 6% to 8% through 2027, as we see a robust market ahead of us that should provide for continued growth across the company. With an active deal pipeline, we believe we will be able to complete at least two to three deals each year to strengthen and expand our home market. While the timing of any transactions is difficult to predict, we believe we have the team, market, cash generation, and balance sheet to achieve this growth. Following the completion of two acquisitions this week, we are raising our 2027 targets for adjusted EBITDA margin, operating cash flow margin, and free cash flow margin ranges by 50 basis points. Now, I'll turn it back over to Kyle. Thanks, Staci. I'll close with the following points. I am excited by our performance in the second quarter and the first half of the year. We continue to execute on our strategic plan, and we are showing the earnings power of our company and our vertically integrated model. We continue to grow CAP, fueled by public market opportunities at the federal, state, and local levels. Our private markets also have a number of strong opportunities, which I believe will contribute to CAP growth in the future. Overall, in 2025, we have bid and won more work than in the previous year, just as we have done for the past several years. In both our construction and materials segments, our teams are meeting our margin expectations, and as we head into the third quarter, I believe we are on track to meet our 2025 guidance. The additions of Warm Paving and Pavage Construction are significant strategic transactions for Granite. Not only do they add great, high-performing businesses to our portfolio, but they also provide opportunities to continue to expand our home markets in a way that should compound returns by driving volumes. In what has historically been a seasonally slow quarter, we generated positive operating cash flow, and I believe we should reach our target for operating cash flow of 9% of revenue for 2025. Finally, with our CAP generation, upsized credit facility backed by our strong balance sheet, and a number of organic and inorganic investment opportunities ahead of us, we believe that Granite will continue to drive significant shareholder value. Operator, I'll now turn it back to you for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble a roster. The first question comes from Brent Thielman with D.A. Davidson. Please go ahead. Good morning. Congrats to the great quarter. On the transactions as well, I guess the first question would be, Kyle, on the construction segment, the growth through the first half may be less robust relative to what I think you're seeing in the markets, and obviously your CAP is picking up pretty nicely here. Maybe if you could just comment on the, obviously you'll have the transactions layering into the second half, but just the pace that you're now seeing on some of this work as you're starting to work through some of the stuff in CAP. There have been things that have held it back, and now you're starting to see it moving. Just wanted to get some color there. Yeah, good morning, Brent. Yeah, we agree, it was a great quarter. We're excited about the performance of our teams. Regarding just the revenue on top line for the company, it really just project starts and finishes. We feel really strongly about the back half of the year. You mentioned we have record CAP at $6.1 billion, and we've had a lot of projects that just have been ramping up. We do expect things to accelerate in the back half of the year. If you look at our overall guidance and our updated guidance for 2025, we left our legacy guidance alone, and we just added the contributions of the acquisitions to the guidance for the year. Okay. The materials profit margin expansion is particularly notable this quarter, and just wanted to get a sense of what might be transitory factors impacting that and what's kind of sustainable as we think about profitability of that business going forward. Yeah, we were pleased with certainly the volumes in the quarter and for the year to date. We're seeing nice volume improvements, and the 10% or better in both asphalt and aggregates. I think that's signs of a healthy market there as well. I'd say it's more supported by the public markets and the private than pretty much consistent year over year. As we mentioned on the last call and previously, we expected around a 3% gross profit margin improvement in our materials segment for the full year at a minimum, and we're certainly tracking a little ahead of that today. We'll see how the back half shakes out. I think there's good signs that we're seeing volume increases, and we're seeing the margin expansion that we expected in the year. I would say that holds true for construction as well. We mentioned that we expected a 1% or greater margin expansion in our construction business. Our teams have just done a fantastic job, and they're tracking well out of that too. Across the board, both construction and materials segments, we feel really good about our team's performance. Okay, thank you. Thank you. The next question comes from Steven Ramsey with Thompson Research Group. Please go ahead. Hey, good morning. This is actually Brian Barros on for Steven. Thank you for taking my questions today. On Pavage, can you just maybe touch on what that business, I guess, excels at? I think you mentioned expertise in infrastructure projects in the prepared marks, but just curious on what Pavage can add to you, what you can add to them, and why their margin profile is as strong as it is. Good morning, and thank you for the question. Pavage is very similar to Granite. Our businesses look similar in terms of mix of work. They're primarily a public works contractor. That's around 80% of their business spent on a given year, 20% private. They can be very strong in the private market. They fill an area within the state of California that we don't have the strongest presence. It's the Central Coast, kind of the central area of California. It's really complementary to our current footprint. It's in a state that we believe in and obviously has a really nice budget and funding behind it, even coming into the 2025-2026 cycles. I think the timing of it is really good for us as well. Our businesses in the central part of the state rely a lot on third-party material suppliers. Having Pavage's materials business is going to be really additive to our overall business as a company. We're excited about that. I think together we see this opportunity. We see opportunity to drive volume increases and bolting through their plants to internal sales. I think we can leverage our pricing strategies, have a look at automation, hit our plants' business today, and learn from some of the previous projects we've done, implement our materials playbook, our construction playbook. I think our legacy business can also learn a little bit from Pavage around private work and some of the customer relationships that they have and bring that into other areas as well. We're really excited about the acquisition. It's in a great market for us. I think, and I know Pavage is excited about being part of the Granite team. That sounds like a great pickup for you guys. Secondly, can you just compare and contrast maybe CAP trends year to date and the outlook, I guess, between the home regions of the West and then the Southeast? Thank you. We don't necessarily break it apart. I would say just in general, it's across the board. That record CAP at $6.1 billion, again, it's across the entire footprint. You can see some recent announcements that we put out. It could be some of our federal work in Guam, but we've been successful there. We were successful in Utah, Nevada, obviously in California, even up in Alaska. It's really across our entire footprint as a company, which isn't surprising because the overall market with the IIJA funding continues to be strong. I think that's pretty universal in all the markets that we're in. Just as a reminder, the spending to date on the IIJA is still less than 50%. We haven't seen, in our opinion, that peak yet. We think it's probably going to be sometime in 2026-2027. We still have a long runway ahead of us, and we do believe we can continue to build up our CAP across our footprint. The next question comes from Michael Dudas with Vertical Research Partners. Please go ahead. Morning, Mike. Michael, your line has been unmuted. Please go ahead with your question. Thank you. Good morning, Staci, Mike, and Kyle. Morning. Shifting to the Warm Paving acquisition, maybe you could share more perspective on the quality of the assets and some of these locations that you're picking up and how well capitalized have they been? Are the operations going to be additive, or is there things you could learn from the other parts of your business that you could take from this? How much helpful can it be to your Dickerson & Bowen and the acquisitions you've made in that Mississippi market? I think you're correct in assessing that not just on the public side, but there's certainly a lot of energy and data center investment in that region here over the next several years. Yeah, great. Thanks, Mike. Yes, we're excited about Warm Paving as part of our Southeast platform. Clearly, Warm Paving is a high-performing business just as Lamb & Roberts and Dickerson & Bowen. We're just as excited about having all three of these businesses together as part of this Southeast platform. Warm Paving is a little bit different. We mentioned we've been looking at these material-focused acquisitions. Warm Paving is actually material-centric. Of its revenue, around 75% is materials, and 25% is construction. Of that 75% in materials, 70% is aggregates, and about 30% is asphalt. It's really an aggregates-centric business, and that's going to provide a lot of opportunities for us down in the Southeast part of our company now. We're focused on pull-through. I think there's opportunities to drive volumes with internal sales. We think we can expand its distribution yard network, which is really impressive. We think there's obviously opportunities for pricing, even the automation that we can install, a business like Pavage, introducing liquid carbon materials playbook. We also think there's opportunities now that we have scale to even explore liquid asphalt options as well. I think another piece of this that's interesting is we can connect Warm Paving to our federal division. There's a lot of shoreline protection opportunities with the Army Corps in that part of the country that we could pursue both on the contracting side and also drive pull-through through the quarry. It is a great business alone, but we see tremendous opportunities as being part of the Granite Southeast platform. Sounds terrific and a great fit for the company. My follow-up would be, as you indicated or Staci talked about in the remarks on the 2027 targets, I just want to clarify. Those targets include the acquisitions you closed on this month. Is that also including potential or a percentage of potential opportunities of these two to three deals a year? Could there be wider upside from the low to high levels on revenue and margin? Just kind of could conceptualize so I can understand it clearly what the visibility is on 2027, at least as you look at it today. Yeah. What we provide in the updated guidance through 2027 is consistent organic growth at that 6% to 8%. We still feel confident in that. We still feel as though the underlying market, the public funding, the private market supports that range. We feel good there. We do believe that we're going to be able to continue to layer in acquisitions. We're set up to do that. We have the balance sheet. I think our business is operating very strong. That's going to give us what we need to continue to do deals. We didn't want to come out and put a dollar amount to those deals because it's really tough to predict the size and the timing of these things, as you know. Historically, now over the last couple of years, we've been able to get them across the finish line. I think it's starting to show the consistency in our business in that regard. I think two to three deals a year is just a good number for us to put out there. Obviously, we have the EBITDA margin improvement. That's all the benefit of these new acquisitions. That's the 50 basis points. Great. Just a quick follow-up on how was it just the period or the time in negotiating with these two companies? Are these not companies? I obviously know Pavage in the past, but you know, was it something happening recently, or has it happened over several months to years as your business development team has been much more active? Oh, how these came to fruition? Sorry, you're breaking up a little bit on our end. Yeah, how they came together. Yes. Pavage was the sole source deal, and Warm Paving was a banked process. Thank you, Kyle. Thank you. Thank you. This concludes our question and answer session. I would like to turn the conference back to Kyle Larkin for any closing remarks. Thank you for joining the call today. As always, we want to thank all of our employees for the work they do every day. We would also like to take this opportunity to welcome our newest team members from Warm Paving and Pavage Construction. We're excited to have you on the team and look forward to building better together. Thank you for joining the call and your interest in Granite. We look forward to speaking with you all soon. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker 3: Good morning. My name is Steve, and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the Granite Construction Incorporated 2025 second quarter conference call. This call is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remark, there will be a question and answer period. To ask a question, please press star, then one. Please note, we will take one question and one follow-up question from each participant today. It is now my pleasure to turn the floor over to the Vice President of Investor Relations, Mike Barker. Good morning. good morning My name is Steve, and I'll be your conference facilitator today. my name is steve and i'll be your conference facilitator today At this time, I would like to welcome everyone to the Granite Construction Incorporated 2025 second quarter conference call. at this time i would like to welcome everyone to the granite construction incorporated 2025 second quarter conference call This call is being recorded. this call is being recorded All lines have been placed on mute to prevent any background noise. all lines have been placed on mute to prevent any background noise After the speaker's remark, there will be a question and answer period. after the speaker's remark there will be a question and answer period To ask a question, please press star, then one. to ask a question please press star then one Please note, we will take one question and one follow-up question from each participant today. please note we will take one question and one follow-up question from each participant today It is now my pleasure to turn the floor over to the Vice President of Investor Relations, Mike Barker. it is now my pleasure to turn the floor over to the vice president of investor relations mike barker

Speaker 4: Good morning, and thank you for joining us. I'm pleased to be here today with President and Chief Executive Officer, Kyle Larkin, and Executive Vice President and Chief Financial Officer, Staci Woolsey. Please note that today's earnings presentation will be available on the Events and Presentations page of our Investor Relations website. We begin today with a brief discussion regarding forward-looking statements and non-GAAP measures. Some of the discussion today may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are estimates reflecting the current expectations and best judgment of senior management regarding the future events, occurrences, opportunities, targets, growth, demand, strategic plans, circumstances, activities, performance, shareholder value, outcomes, outlook, guidance, objectives, committed and awarded projects, or CAP, and results. Actual results could differ materially from statements made today. Good morning, and thank you for joining us. good morning and thank you for joining us I'm pleased to be here today with President and Chief Executive Officer, Kyle Larkin, and Executive Vice President and Chief Financial Officer, Staci Woolsey. i'm pleased to be here today with president and chief executive officer kyle larkin and executive vice president and chief financial officer staci woolsey Please note that today's earnings presentation will be available on the Events and Presentations page of our Investor Relations website. please note that today's earnings presentation will be available on the events and presentations page of our investor relations website We begin today with a brief discussion regarding forward-looking statements and non-GAAP measures. we begin today with a brief discussion regarding forward-looking statements and non-gaap measures Some of the discussion today may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. some of the discussion today may include forward-looking statements within the meaning of the private securities litigation reform act of 1995 These forward-looking statements are estimates reflecting the current expectations and best judgment of senior management regarding the future events, occurrences, opportunities, targets, growth, demand, strategic plans, circumstances, activities, performance, shareholder value, outcomes, outlook, guidance, objectives, committed and awarded projects, or CAP, and results. these forward-looking statements are estimates reflecting the current expectations and best judgment of senior management regarding the future events occurrences opportunities targets growth demand strategic plans circumstances activities performance shareholder value outcomes outlook guidance objectives committed and awarded projects or cap and results Actual results could differ materially from statements made today. actual results could differ materially from statements made today Please refer to Granite Construction's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these forward-looking statements. The company assumes no obligation to update forward-looking statements except as required by law. Certain non-GAAP measures may be discussed during today's call and from time to time by the company's executives. These include, but are not limited to, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, and cash gross profit. The required disclosures regarding our non-GAAP measures are included as part of our earnings press releases and in company presentations, which are available on our website, graniteconstruction.com, under Investor Relations. Now, I would like to turn the call over to Kyle Larkin. Please refer to Granite Construction's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these forward-looking statements. please refer to granite construction's most recent 10-k and 10-q filings for a more complete description of risk factors that could affect these forward-looking statements The company assumes no obligation to update forward-looking statements except as required by law. the company assumes no obligation to update forward-looking statements except as required by law Certain non-GAAP measures may be discussed during today's call and from time to time by the company's executives. certain non-gaap measures may be discussed during today's call and from time to time by the company's executives These include, but are not limited to, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, and cash gross profit. these include but are not limited to adjusted ebitda adjusted ebitda margin adjusted net income adjusted earnings per share and cash gross profit The required disclosures regarding our non-GAAP measures are included as part of our earnings press releases and in company presentations, which are available on our website, graniteconstruction.com, under Investor Relations. the required disclosures regarding our non-gaap measures are included as part of our earnings press releases and in company presentations which are available on our website graniteconstruction.com under investor relations Now, I would like to turn the call over to Kyle Larkin. now i would like to turn the call over to kyle larkin

Speaker 2: Good morning, and thank you for joining us. Before we discuss our second quarter results, I'd like to talk about the recently announced acquisitions of Warm Paving and Pavage Construction. These transactions are an exciting step forward for Granite as we continue to execute on our strategic plan. The strategic plan started with a focus on raising construction margins and driving organic growth by selecting the right projects in the right markets with the right owners, while standardizing execution practices across the business. We also revisited our capital deployment and shifted strategic investments to support our materials business as we work to maximize the benefits of our vertically integrated business model. Our strategy is working. Both our construction and materials businesses are seeing significantly higher margins, which in turn are driving strong cash generation. Good morning, and thank you for joining us. good morning and thank you for joining us Before we discuss our second quarter results, I'd like to talk about the recently announced acquisitions of Warm Paving and Pavage Construction. before we discuss our second quarter results i'd like to talk about the recently announced acquisitions of warm paving and pavage construction These transactions are an exciting step forward for Granite as we continue to execute on our strategic plan. these transactions are an exciting step forward for granite as we continue to execute on our strategic plan The strategic plan started with a focus on raising construction margins and driving organic growth by selecting the right projects in the right markets with the right owners, while standardizing execution practices across the business. the strategic plan started with a focus on raising construction margins and driving organic growth by selecting the right projects in the right markets with the right owners while standardizing execution practices across the business We also revisited our capital deployment and shifted strategic investments to support our materials business as we work to maximize the benefits of our vertically integrated business model. we also revisited our capital deployment and shifted strategic investments to support our materials business as we work to maximize the benefits of our vertically integrated business model Our strategy is working. our strategy is working Both our construction and materials businesses are seeing significantly higher margins, which in turn are driving strong cash generation. both our construction and materials businesses are seeing significantly higher margins which in turn are driving strong cash generation As we progress with our construction and materials strategy, we are continuing to grow and strengthen the company with M&A. We are using M&A to support, strengthen, and expand our home markets in the new geographies. Over the last year, we have built out our corporate development team with the expectation that we will be building our company through M&A. We have also been putting a lot of work into our integration framework. We are prepared to efficiently integrate these companies into our organization. We will continue to maintain a disciplined and targeted approach to M&A, only pursuing those targets to support our strategic plan. We remain committed to our vertical integration strategy, with target companies being primarily materials-focused, but within our current footprint and in new attractive geographies. As we progress with our construction and materials strategy, we are continuing to grow and strengthen the company with M&A. as we progress with our construction and materials strategy we are continuing to grow and strengthen the company with m&a We are using M&A to support, strengthen, and expand our home markets in the new geographies. we are using m&a to support strengthen and expand our home markets in the new geographies Over the last year, we have built out our corporate development team with the expectation that we will be building our company through M&A. over the last year we have built out our corporate development team with the expectation that we will be building our company through m&a We have also been putting a lot of work into our integration framework. we have also been putting a lot of work into our integration framework We are prepared to efficiently integrate these companies into our organization. we are prepared to efficiently integrate these companies into our organization We will continue to maintain a disciplined and targeted approach to M&A, only pursuing those targets to support our strategic plan. we will continue to maintain a disciplined and targeted approach to m&a only pursuing those targets to support our strategic plan We remain committed to our vertical integration strategy, with target companies being primarily materials-focused, but within our current footprint and in new attractive geographies. we remain committed to our vertical integration strategy with target companies being primarily materials-focused but within our current footprint and in new attractive geographies The deals announced this week will add significant resources to our Southeast platform, with a large supply of high-quality aggregates on the Mississippi River, and will also strengthen our Central California operations by adding a leading vertically integrated contractor to our business portfolio. With a combined transaction price of $710 million, the acquisitions are expected to annually contribute approximately $425 million in revenue, with an approximate adjusted EBITDA margin of 18%. The acquisitions should provide a significant uplift to the materials segment by increasing annual aggregate volumes by approximately 5 million tons or 27% and increasing aggregate reserves and resources by more than 440 million tons or approximately 30%. The acquisitions are expected to be immediately accretive to adjusted EBITDA margin, with an annual uplift of approximately 60 basis points, driven by the increased aggregate exposure. The deals announced this week will add significant resources to our Southeast platform, with a large supply of high-quality aggregates on the Mississippi River, and will also strengthen our Central California operations by adding a leading vertically integrated contractor to our business portfolio. the deals announced this week will add significant resources to our southeast platform with a large supply of high-quality aggregates on the mississippi river and will also strengthen our central california operations by adding a leading vertically integrated contractor to our business portfolio With a combined transaction price of $710 million, the acquisitions are expected to annually contribute approximately $425 million in revenue, with an approximate adjusted EBITDA margin of 18%. with a combined transaction price of $710 million the acquisitions are expected to annually contribute approximately $425 million in revenue with an approximate adjusted ebitda margin of 18% The acquisitions should provide a significant uplift to the materials segment by increasing annual aggregate volumes by approximately 5 million tons or 27% and increasing aggregate reserves and resources by more than 440 million tons or approximately 30%. the acquisitions should provide a significant uplift to the materials segment by increasing annual aggregate volumes by approximately 5 million tons or 27% and increasing aggregate reserves and resources by more than 440 million tons or approximately 30% The acquisitions are expected to be immediately accretive to adjusted EBITDA margin, with an annual uplift of approximately 60 basis points, driven by the increased aggregate exposure. the acquisitions are expected to be immediately accretive to adjusted ebitda margin with an annual uplift of approximately 60 basis points driven by the increased aggregate exposure Now, I will discuss each acquisition, starting with the new addition to the Southeast platform. Warm Paving, which owns the Slats Lucas Quarry, is the premier producer of construction materials and provider of construction services in Mississippi and the Gulf Coast regions of Louisiana and Alabama, and is a great addition to our Southeast platform. The Slats Lucas Quarry is strategically located on the Cumberland River, a tributary of the Mississippi, and has an estimated 400 million tons of very high-quality aggregate reserves and resources. Utilizing a distribution network of approximately 170 owned and leased barges and 11 aggregate yards, Warm Paving sells aggregates both internally, supplying its own asphalt plants, and externally. I am excited, not only because we are adding such a high-performing business to our Southeast platform, but also because of the future growth opportunities provided by the addition of Warm Paving. Now, I will discuss each acquisition, starting with the new addition to the Southeast platform. now i will discuss each acquisition starting with the new addition to the southeast platform Warm Paving, which owns the Slats Lucas Quarry, is the premier producer of construction materials and provider of construction services in Mississippi and the Gulf Coast regions of Louisiana and Alabama, and is a great addition to our Southeast platform. warm paving which owns the slats lucas quarry is the premier producer of construction materials and provider of construction services in mississippi and the gulf coast regions of louisiana and alabama and is a great addition to our southeast platform The Slats Lucas Quarry is strategically located on the Cumberland River, a tributary of the Mississippi, and has an estimated 400 million tons of very high-quality aggregate reserves and resources. the slats lucas quarry is strategically located on the cumberland river a tributary of the mississippi and has an estimated 400 million tons of very high-quality aggregate reserves and resources Utilizing a distribution network of approximately 170 owned and leased barges and 11 aggregate yards, Warm Paving sells aggregates both internally, supplying its own asphalt plants, and externally. utilizing a distribution network of approximately 170 owned and leased barges and 11 aggregate yards warm paving sells aggregates both internally supplying its own asphalt plants and externally I am excited, not only because we are adding such a high-performing business to our Southeast platform, but also because of the future growth opportunities provided by the addition of Warm Paving. i am excited not only because we are adding such a high-performing business to our southeast platform but also because of the future growth opportunities provided by the addition of warm paving The combination of these high-quality aggregates and Warm Paving's logistics expertise should allow us to supply materials to certain Lamb & Roberts and Dickerson & Bowen asphalt plants and positions us to expand the distribution network as we continue to grow our Southeast platform. Investment in and further growth of the distribution network, in addition to building out additional outlets for the aggregates along the Mississippi River system, should have a compounding impact on the profitability of the Southeast platform by adding revenue and associated gross profit while driving increases in volumes and margin. We are actively evaluating opportunities to continue to build upon the platform, and I look forward to sharing progress that we make on our strategic plan in the coming quarters. The combination of these high-quality aggregates and Warm Paving's logistics expertise should allow us to supply materials to certain Lamb & Roberts and Dickerson & Bowen asphalt plants and positions us to expand the distribution network as we continue to grow our Southeast platform. the combination of these high-quality aggregates and warm paving's logistics expertise should allow us to supply materials to certain lamb & roberts and dickerson & bowen asphalt plants and positions us to expand the distribution network as we continue to grow our southeast platform Investment in and further growth of the distribution network, in addition to building out additional outlets for the aggregates along the Mississippi River system, should have a compounding impact on the profitability of the Southeast platform by adding revenue and associated gross profit while driving increases in volumes and margin. investment in and further growth of the distribution network in addition to building out additional outlets for the aggregates along the mississippi river system should have a compounding impact on the profitability of the southeast platform by adding revenue and associated gross profit while driving increases in volumes and margin We are actively evaluating opportunities to continue to build upon the platform, and I look forward to sharing progress that we make on our strategic plan in the coming quarters. we are actively evaluating opportunities to continue to build upon the platform and i look forward to sharing progress that we make on our strategic plan in the coming quarters With the acquisition of Warm Paving, the Southeast platform has grown to be a more significant component of Granite, and we are excited by the opportunities to continue that growth. The market from Memphis through Mississippi and into Louisiana is growing in terms of public funding and private investment. We view the region as a historically underfunded area, but recently, the Mississippi and Louisiana state legislatures have recognized the need for infrastructure investment and are working on initiatives that should support future growth. In addition to the expected continued increase in public funds, we believe private investment will ramp up in the region. Whether through data centers or other large commercial developments, the region is attractive due to affordable land, plentiful water, electricity, and labor availability. A number of large developments have begun in Mississippi, and we expect this trend to continue. With the acquisition of Warm Paving, the Southeast platform has grown to be a more significant component of Granite, and we are excited by the opportunities to continue that growth. with the acquisition of warm paving the southeast platform has grown to be a more significant component of granite and we are excited by the opportunities to continue that growth The market from Memphis through Mississippi and into Louisiana is growing in terms of public funding and private investment. the market from memphis through mississippi and into louisiana is growing in terms of public funding and private investment We view the region as a historically underfunded area, but recently, the Mississippi and Louisiana state legislatures have recognized the need for infrastructure investment and are working on initiatives that should support future growth. we view the region as a historically underfunded area but recently the mississippi and louisiana state legislatures have recognized the need for infrastructure investment and are working on initiatives that should support future growth In addition to the expected continued increase in public funds, we believe private investment will ramp up in the region. in addition to the expected continued increase in public funds we believe private investment will ramp up in the region Whether through data centers or other large commercial developments, the region is attractive due to affordable land, plentiful water, electricity, and labor availability. whether through data centers or other large commercial developments the region is attractive due to affordable land plentiful water electricity and labor availability A number of large developments have begun in Mississippi, and we expect this trend to continue. a number of large developments have begun in mississippi and we expect this trend to continue Throughout Granite's history, we have found success by investing in markets that were historically underfunded but growing and expanding. We believe this region aligns well with that formula, and we are excited to be part of that growth. Now, let's move on to our acquisition in California. Pavage Construction is a leading producer of aggregates and asphalt in California's Central Coast and Central Valley and has expertise in infrastructure projects across the public and private sectors. The addition of more than 40 million tons of aggregate reserves and resources spread across the market is complementary to Granite's current operations in the area. With the combined footprint, we will be better positioned to serve the market in aggregate and asphalt sales, as well as construction projects. Throughout Granite's history, we have found success by investing in markets that were historically underfunded but growing and expanding. throughout granite's history we have found success by investing in markets that were historically underfunded but growing and expanding We believe this region aligns well with that formula, and we are excited to be part of that growth. we believe this region aligns well with that formula and we are excited to be part of that growth Now, let's move on to our acquisition in California. now let's move on to our acquisition in california Pavage Construction is a leading producer of aggregates and asphalt in California's Central Coast and Central Valley and has expertise in infrastructure projects across the public and private sectors. pavage construction is a leading producer of aggregates and asphalt in california's central coast and central valley and has expertise in infrastructure projects across the public and private sectors The addition of more than 40 million tons of aggregate reserves and resources spread across the market is complementary to Granite's current operations in the area. the addition of more than 40 million tons of aggregate reserves and resources spread across the market is complementary to granite's current operations in the area With the combined footprint, we will be better positioned to serve the market in aggregate and asphalt sales, as well as construction projects. with the combined footprint we will be better positioned to serve the market in aggregate and asphalt sales as well as construction projects The addition of Pavage Construction is a great example of executing on a strategy of strengthening existing home markets with bolt-ons that will enhance our vertical integration in a home market that we know well. Looking forward, I believe that M&A will be a significant component of our growth. We are focused on generating cash while being prudent with CapEx, resulting in strong free cash flow. Whether it is through proactive outreach by our teams or bank-led auction processes, there is a robust listing of active M&A opportunities ahead of us. While we will continue to be selective in the coming quarters, I believe we will continue to execute on transactions that will further strengthen our national footprint. Now, let's discuss our strong second quarter results, starting with the materials segment. Our materials business completed another exceptional quarter. The addition of Pavage Construction is a great example of executing on a strategy of strengthening existing home markets with bolt-ons that will enhance our vertical integration in a home market that we know well. the addition of pavage construction is a great example of executing on a strategy of strengthening existing home markets with bolt-ons that will enhance our vertical integration in a home market that we know well Looking forward, I believe that M&A will be a significant component of our growth. looking forward i believe that m&a will be a significant component of our growth We are focused on generating cash while being prudent with CapEx, resulting in strong free cash flow. we are focused on generating cash while being prudent with capex resulting in strong free cash flow Whether it is through proactive outreach by our teams or bank-led auction processes, there is a robust listing of active M&A opportunities ahead of us. whether it is through proactive outreach by our teams or bank-led auction processes there is a robust listing of active m&a opportunities ahead of us While we will continue to be selective in the coming quarters, I believe we will continue to execute on transactions that will further strengthen our national footprint. while we will continue to be selective in the coming quarters i believe we will continue to execute on transactions that will further strengthen our national footprint Now, let's discuss our strong second quarter results, starting with the materials segment. now let's discuss our strong second quarter results starting with the materials segment Our materials business completed another exceptional quarter. our materials business completed another exceptional quarter The strong public market environment is continuing to drive growth, as has been the case in previous quarters, with private market levels relatively unchanged. We continue to execute on our strategic plan, and we remain focused on continuing to raise the bar across all of our businesses. Part of our strategy involves restructuring our operational leadership to place our materials experts in charge of our materials business and centralized management functions such as sales and quality control. This realignment is helping us grow our materials margins. We're also investing in capital improvement projects such as aggregate plant automation to drive efficiency and reduce production costs. We are promoting best practices across all of our operations through the implementation of our materials playbook. These efforts are driving increases in volumes and prices per ton on aggregates and asphalt as we work to increase our margin. The strong public market environment is continuing to drive growth, as has been the case in previous quarters, with private market levels relatively unchanged. the strong public market environment is continuing to drive growth as has been the case in previous quarters with private market levels relatively unchanged We continue to execute on our strategic plan, and we remain focused on continuing to raise the bar across all of our businesses. we continue to execute on our strategic plan and we remain focused on continuing to raise the bar across all of our businesses Part of our strategy involves restructuring our operational leadership to place our materials experts in charge of our materials business and centralized management functions such as sales and quality control. part of our strategy involves restructuring our operational leadership to place our materials experts in charge of our materials business and centralized management functions such as sales and quality control This realignment is helping us grow our materials margins. this realignment is helping us grow our materials margins We're also investing in capital improvement projects such as aggregate plant automation to drive efficiency and reduce production costs. we're also investing in capital improvement projects such as aggregate plant automation to drive efficiency and reduce production costs We are promoting best practices across all of our operations through the implementation of our materials playbook. we are promoting best practices across all of our operations through the implementation of our materials playbook These efforts are driving increases in volumes and prices per ton on aggregates and asphalt as we work to increase our margin. these efforts are driving increases in volumes and prices per ton on aggregates and asphalt as we work to increase our margin I'm proud of the accomplishments of the materials team and of our performance this quarter. We have a long runway of opportunities to capture additional potential gains in profitability in the business for the coming quarters and years. Now, let's move to the construction segment. During the quarter, our estimating teams did a great job capitalizing on the robust bidding environment by winning a number of high-quality projects that drove our CAP to a new record high of $6.1 billion. The new projects span across our footprint, including Nevada, Utah, California, and Alaska. In California, our largest market, the budget for the 2025-2026 fiscal year was finalized during Q2. Transportation funding for the upcoming fiscal year remains strong, with the key components of the transportation budget, capital outlay projects, and local assistance increasing budget allocations 9% over the fiscal year end of June 2025. I'm proud of the accomplishments of the materials team and of our performance this quarter. i'm proud of the accomplishments of the materials team and of our performance this quarter We have a long runway of opportunities to capture additional potential gains in profitability in the business for the coming quarters and years. we have a long runway of opportunities to capture additional potential gains in profitability in the business for the coming quarters and years Now, let's move to the construction segment. now let's move to the construction segment During the quarter, our estimating teams did a great job capitalizing on the robust bidding environment by winning a number of high-quality projects that drove our CAP to a new record high of $6.1 billion. during the quarter our estimating teams did a great job capitalizing on the robust bidding environment by winning a number of high-quality projects that drove our cap to a new record high of $6.1 billion The new projects span across our footprint, including Nevada, Utah, California, and Alaska. the new projects span across our footprint including nevada utah california and alaska In California, our largest market, the budget for the 2025-2026 fiscal year was finalized during Q2. in california our largest market the budget for the 2025-2026 fiscal year was finalized during q2 Transportation funding for the upcoming fiscal year remains strong, with the key components of the transportation budget, capital outlay projects, and local assistance increasing budget allocations 9% over the fiscal year end of June 2025. transportation funding for the upcoming fiscal year remains strong with the key components of the transportation budget capital outlay projects and local assistance increasing budget allocations 9% over the fiscal year end of june 2025 In California and across our footprint, we continue to see a healthy list of project bidding opportunities in both the public and private market. Based on these encouraging signs, we believe we will continue to see CAP increase over the next several quarters. I am pleased with the segment performance during the quarter. Revenue during the quarter was strong, and we expect revenue growth to accelerate in the second half of the year as projects progress. In addition, I believe we are on track to achieve our gross margin expansion expectations of greater than 1% during 2025. Through the first half of 2025, we are seeing the benefits of the steps we have implemented to improve project performance, and I expect further gains in the construction segment in the future. Now, I'll turn it over to Staci to review our financial performance for the quarter. In California and across our footprint, we continue to see a healthy list of project bidding opportunities in both the public and private market. in california and across our footprint we continue to see a healthy list of project bidding opportunities in both the public and private market Based on these encouraging signs, we believe we will continue to see CAP increase over the next several quarters. based on these encouraging signs we believe we will continue to see cap increase over the next several quarters I am pleased with the segment performance during the quarter. i am pleased with the segment performance during the quarter Revenue during the quarter was strong, and we expect revenue growth to accelerate in the second half of the year as projects progress. revenue during the quarter was strong and we expect revenue growth to accelerate in the second half of the year as projects progress In addition, I believe we are on track to achieve our gross margin expansion expectations of greater than 1% during 2025. in addition i believe we are on track to achieve our gross margin expansion expectations of greater than 1% during 2025 Through the first half of 2025, we are seeing the benefits of the steps we have implemented to improve project performance, and I expect further gains in the construction segment in the future. through the first half of 2025 we are seeing the benefits of the steps we have implemented to improve project performance and i expect further gains in the construction segment in the future Now, I'll turn it over to Staci to review our financial performance for the quarter. now i'll turn it over to staci to review our financial performance for the quarter

Speaker 6: Thanks, Kyle. We had an outstanding second quarter and first half of 2025. In the second quarter, revenue increased $43 million, or 4%. Gross profit increased $34 million, or 21%. Adjusted net income improved $9 million, or 12%. Adjusted EBITDA improved $22 million, or 17%. We ended the second quarter with year-to-date operating cash flow of $5 million, which is on track for our 2025 target. In the construction segment, revenue increased $19 million, or 2% year-over-year, to $937 million, driven by the recently acquired Dickerson & Bowen and the strong CAP we are working through across the company. Heading into the third quarter with a record CAP balance, I believe we are on track to meet our revenue guidance for the year. Construction segment gross profit improved $18 million to $154 million, with a gross profit margin of 16%. Thanks, Kyle. thanks kyle We had an outstanding second quarter and first half of 2025. we had an outstanding second quarter and first half of 2025 In the second quarter, revenue increased $43 million, or 4%. in the second quarter revenue increased $43 million or 4% Gross profit increased $34 million, or 21%. gross profit increased $34 million or 21% Adjusted net income improved $9 million, or 12%. adjusted net income improved $9 million or 12% Adjusted EBITDA improved $22 million, or 17%. adjusted ebitda improved $22 million or 17% We ended the second quarter with year-to-date operating cash flow of $5 million, which is on track for our 2025 target. we ended the second quarter with year-to-date operating cash flow of $5 million which is on track for our 2025 target In the construction segment, revenue increased $19 million, or 2% year- over- year, to $937 million, driven by the recently acquired Dickerson & Bowen and the strong CAP we are working through across the company. in the construction segment revenue increased $19 million or 2% year- over- year to $937 million driven by the recently acquired dickerson & bowen and the strong cap we are working through across the company Heading into the third quarter with a record CAP balance, I believe we are on track to meet our revenue guidance for the year. heading into the third quarter with a record cap balance i believe we are on track to meet our revenue guidance for the year Construction segment gross profit improved $18 million to $154 million, with a gross profit margin of 16%. construction segment gross profit improved $18 million to $154 million with a gross profit margin of 16% This 170 basis point increase is largely due to improved execution and performance across our higher quality project portfolio, as well as increased claim settlement recognition year over year. In the first half of 2025, our CAP has increased approximately $800 million from a 2024 year-end balance of $5.3 billion. We continue to see CAP expand in our public markets across the company as we capitalize on opportunities at the federal, state, and local level. In the materials segment, we continue to realize year-over-year cash gross profit margin improvement led by our aggregates business. Year-over-year, aggregate volumes increased 11% for the quarter, at 13% year-to-date, driven by strong demand in our regions. These volume increases, coupled with higher aggregate prices, led to improved cash gross profit margin for both the quarter and year-to-date periods compared to the prior year. This 170 basis point increase is largely due to improved execution and performance across our higher quality project portfolio, as well as increased claim settlement recognition year over year. this 170 basis point increase is largely due to improved execution and performance across our higher quality project portfolio as well as increased claim settlement recognition year over year In the first half of 2025, our CAP has increased approximately $800 million from a 2024 year-end balance of $5.3 billion. in the first half of 2025 our cap has increased approximately $800 million from a 2024 year-end balance of $5.3 billion We continue to see CAP expand in our public markets across the company as we capitalize on opportunities at the federal, state, and local level. we continue to see cap expand in our public markets across the company as we capitalize on opportunities at the federal state and local level In the materials segment, we continue to realize year-over-year cash gross profit margin improvement led by our aggregates business. in the materials segment we continue to realize year-over-year cash gross profit margin improvement led by our aggregates business Year-over-year, aggregate volumes increased 11% for the quarter, at 13% year-to-date, driven by strong demand in our regions. year-over-year aggregate volumes increased 11% for the quarter at 13% year-to-date driven by strong demand in our regions These volume increases, coupled with higher aggregate prices, led to improved cash gross profit margin for both the quarter and year-to-date periods compared to the prior year. these volume increases coupled with higher aggregate prices led to improved cash gross profit margin for both the quarter and year-to-date periods compared to the prior year In asphalt, we are also seeing volume increases and cash gross profit improvement year over year. The materials business is executing on our plan to grow revenue while implementing initiatives such as automation and best practices to offset cost inflation. Now turning to cash flow and the balance sheet. We generated $5 million of operating cash flow through the first half of the year. Typically, the first half of the year is a slow period for cash flow as projects and operations ramp up. As we get further into the construction season, cash flow typically increases. I believe we will see this seasonal pattern this year and expect that we will achieve our operating cash flow target of 9% of revenue for the year. As of the end of Q2, cash and marketable securities were $483 million. In asphalt, we are also seeing volume increases and cash gross profit improvement year over year. in asphalt we are also seeing volume increases and cash gross profit improvement year over year The materials business is executing on our plan to grow revenue while implementing initiatives such as automation and best practices to offset cost inflation. the materials business is executing on our plan to grow revenue while implementing initiatives such as automation and best practices to offset cost inflation Now turning to cash flow and the balance sheet. now turning to cash flow and the balance sheet We generated $5 million of operating cash flow through the first half of the year. we generated $5 million of operating cash flow through the first half of the year Typically, the first half of the year is a slow period for cash flow as projects and operations ramp up. typically the first half of the year is a slow period for cash flow as projects and operations ramp up As we get further into the construction season, cash flow typically increases. as we get further into the construction season cash flow typically increases I believe we will see this seasonal pattern this year and expect that we will achieve our operating cash flow target of 9% of revenue for the year. i believe we will see this seasonal pattern this year and expect that we will achieve our operating cash flow target of 9% of revenue for the year As of the end of Q2, cash and marketable securities were $483 million. as of the end of q2 cash and marketable securities were $483 million With the closing of the two transactions this week, we amended our credit facility by adding a new Term Loan A of $600 million and expanding our revolver from $350 million to $600 million, of which $10 million was drawn in conjunction with the transactions. In addition to the new Term Loan, we have the ability to draw another Term Loan of $75 million within six months. We also utilized $100 million of cash on hand. After accounting for the transactions, our total debt outstanding is approximately $1.35 billion. With our expanded revolver, additional available Term Loans, and cash flow generation, we are in a great position to act on future M&A opportunities that bolt on to a home market or further expand our geographic reach. Now, let's discuss our guidance for the rest of this year and our 2027 targets. With the closing of the two transactions this week, we amended our credit facility by adding a new Term Loan A of $600 million and expanding our revolver from $350 million to $600 million, of which $10 million was drawn in conjunction with the transactions. with the closing of the two transactions this week we amended our credit facility by adding a new term loan a of $600 million and expanding our revolver from $350 million to $600 million of which $10 million was drawn in conjunction with the transactions In addition to the new Term Loan, we have the ability to draw another Term Loan of $75 million within six months. in addition to the new term loan we have the ability to draw another term loan of $75 million within six months We also utilized $100 million of cash on hand. we also utilized $100 million of cash on hand After accounting for the transactions, our total debt outstanding is approximately $1.35 billion. after accounting for the transactions our total debt outstanding is approximately $1.35 billion With our expanded revolver, additional available Term Loans, and cash flow generation, we are in a great position to act on future M&A opportunities that bolt on to a home market or further expand our geographic reach. with our expanded revolver additional available term loans and cash flow generation we are in a great position to act on future m&a opportunities that bolt on to a home market or further expand our geographic reach Now, let's discuss our guidance for the rest of this year and our 2027 targets. now let's discuss our guidance for the rest of this year and our 2027 targets As a result of this week's acquisitions, we are increasing our annual revenue and adjusted EBITDA margin guidance for 2025. Our revised revenue range is now $4.35 billion-$4.55 billion, and our adjusted EBITDA margin range is now 11.25%-12.25%. This reflects an expected $150 million in revenue from the acquisitions for the remainder of the year, as well as an uplift of 25 basis points to our adjusted EBITDA margin range. Our annual guidance for SG&A as a percent of revenue is 9%. CapEx in the range of $140 million-$160 million, and adjusted effective tax rate in the mid-20s are unchanged. Through the second quarter, we have achieved the margin expansion expected in both of our segments, and with our busiest month ahead of us, I believe we are on track to meet our guidance for the year. As a result of this week's acquisitions, we are increasing our annual revenue and adjusted EBITDA margin guidance for 2025. as a result of this week's acquisitions we are increasing our annual revenue and adjusted ebitda margin guidance for 2025 Our revised revenue range is now $4.35 billion- $4.55 billion, and our adjusted EBITDA margin range is now 11.25%- 12.25%. our revised revenue range is now $4.35 billion- $4.55 billion and our adjusted ebitda margin range is now 11.25%- 12.25% This reflects an expected $150 million in revenue from the acquisitions for the remainder of the year, as well as an uplift of 25 basis points to our adjusted EBITDA margin range. this reflects an expected $150 million in revenue from the acquisitions for the remainder of the year as well as an uplift of 25 basis points to our adjusted ebitda margin range Our annual guidance for SG&A as a percent of revenue is 9%. our annual guidance for sg&a as a percent of revenue is 9% CapEx in the range of $140 million- $160 million, and adjusted effective tax rate in the mid-20s are unchanged. capex in the range of $140 million- $160 million and adjusted effective tax rate in the mid-20s are unchanged Through the second quarter, we have achieved the margin expansion expected in both of our segments, and with our busiest month ahead of us, I believe we are on track to meet our guidance for the year. through the second quarter we have achieved the margin expansion expected in both of our segments and with our busiest month ahead of us i believe we are on track to meet our guidance for the year Looking forward, we are also revisiting our 2027 financial targets with the addition of the acquisitions. Our organic revenue growth expectations are unchanged at a CAGR of 6% to 8% through 2027, as we see a robust market ahead of us that should provide for continued growth across the company. With an active deal pipeline, we believe we will be able to complete at least two to three deals each year to strengthen and expand our home market. While the timing of any transactions is difficult to predict, we believe we have the team, market, cash generation, and balance sheet to achieve this growth. Following the completion of two acquisitions this week, we are raising our 2027 targets for adjusted EBITDA margin, operating cash flow margin, and free cash flow margin ranges by 50 basis points. Now, I'll turn it back over to Kyle. Looking forward, we are also revisiting our 2027 financial targets with the addition of the acquisitions. looking forward we are also revisiting our 2027 financial targets with the addition of the acquisitions Our organic revenue growth expectations are unchanged at a CAGR of 6% to 8% through 2027, as we see a robust market ahead of us that should provide for continued growth across the company. our organic revenue growth expectations are unchanged at a cagr of 6% to 8% through 2027 as we see a robust market ahead of us that should provide for continued growth across the company With an active deal pipeline, we believe we will be able to complete at least two to three deals each year to strengthen and expand our home market. with an active deal pipeline we believe we will be able to complete at least two to three deals each year to strengthen and expand our home market While the timing of any transactions is difficult to predict, we believe we have the team, market, cash generation, and balance sheet to achieve this growth. while the timing of any transactions is difficult to predict we believe we have the team market cash generation and balance sheet to achieve this growth Following the completion of two acquisitions this week, we are raising our 2027 targets for adjusted EBITDA margin, operating cash flow margin, and free cash flow margin ranges by 50 basis points. following the completion of two acquisitions this week we are raising our 2027 targets for adjusted ebitda margin operating cash flow margin and free cash flow margin ranges by 50 basis points Now, I'll turn it back over to Kyle. now i'll turn it back over to kyle

Speaker 2: Thanks, Staci. I'll close with the following points. I am excited by our performance in the second quarter and the first half of the year. We continue to execute on our strategic plan, and we are showing the earnings power of our company and our vertically integrated model. We continue to grow CAP, fueled by public market opportunities at the federal, state, and local levels. Our private markets also have a number of strong opportunities, which I believe will contribute to CAP growth in the future. Overall, in 2025, we have bid and won more work than in the previous year, just as we have done for the past several years. In both our construction and materials segments, our teams are meeting our margin expectations, and as we head into the third quarter, I believe we are on track to meet our 2025 guidance. Thanks, Staci. thanks staci I'll close with the following points. i'll close with the following points I am excited by our performance in the second quarter and the first half of the year. i am excited by our performance in the second quarter and the first half of the year We continue to execute on our strategic plan, and we are showing the earnings power of our company and our vertically integrated model. we continue to execute on our strategic plan and we are showing the earnings power of our company and our vertically integrated model We continue to grow CAP, fueled by public market opportunities at the federal, state, and local levels. we continue to grow cap fueled by public market opportunities at the federal state and local levels Our private markets also have a number of strong opportunities, which I believe will contribute to CAP growth in the future. our private markets also have a number of strong opportunities which i believe will contribute to cap growth in the future Overall, in 2025, we have bid and won more work than in the previous year, just as we have done for the past several years. overall in 2025 we have bid and won more work than in the previous year just as we have done for the past several years In both our construction and materials segments, our teams are meeting our margin expectations, and as we head into the third quarter, I believe we are on track to meet our 2025 guidance. in both our construction and materials segments our teams are meeting our margin expectations and as we head into the third quarter i believe we are on track to meet our 2025 guidance The additions of Warm Paving and Pavage Construction are significant strategic transactions for Granite. Not only do they add great, high-performing businesses to our portfolio, but they also provide opportunities to continue to expand our home markets in a way that should compound returns by driving volumes. In what has historically been a seasonally slow quarter, we generated positive operating cash flow, and I believe we should reach our target for operating cash flow of 9% of revenue for 2025. Finally, with our CAP generation, upsized credit facility backed by our strong balance sheet, and a number of organic and inorganic investment opportunities ahead of us, we believe that Granite will continue to drive significant shareholder value. Operator, I'll now turn it back to you for questions. The additions of Warm Paving and Pavage Construction are significant strategic transactions for Granite. the additions of warm paving and pavage construction are significant strategic transactions for granite Not only do they add great, high-performing businesses to our portfolio, but they also provide opportunities to continue to expand our home markets in a way that should compound returns by driving volumes. not only do they add great high-performing businesses to our portfolio but they also provide opportunities to continue to expand our home markets in a way that should compound returns by driving volumes In what has historically been a seasonally slow quarter, we generated positive operating cash flow, and I believe we should reach our target for operating cash flow of 9% of revenue for 2025. in what has historically been a seasonally slow quarter we generated positive operating cash flow and i believe we should reach our target for operating cash flow of 9% of revenue for 2025 Finally, with our CAP generation, upsized credit facility backed by our strong balance sheet, and a number of organic and inorganic investment opportunities ahead of us, we believe that Granite will continue to drive significant shareholder value. finally with our cap generation upsized credit facility backed by our strong balance sheet and a number of organic and inorganic investment opportunities ahead of us we believe that granite will continue to drive significant shareholder value Operator, I'll now turn it back to you for questions. operator i'll now turn it back to you for questions

Speaker 3: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble a roster. The first question comes from Brent Thielman with D.A. Davidson. Please go ahead. Thank you. thank you We will now begin the question and answer session. we will now begin the question and answer session To ask a question, you may press star, then one on your touch-tone phone. to ask a question you may press star then one on your touch-tone phone If you are using a speakerphone, please pick up your handset before pressing the keys. if you are using a speakerphone please pick up your handset before pressing the keys If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. if at any time your question has been addressed and you would like to withdraw your question please press star then two At this time, we will pause momentarily to assemble a roster. at this time we will pause momentarily to assemble a roster The first question comes from Brent Thielman with D.A. the first question comes from brent thielman with d.a Davidson. davidson Please go ahead. please go ahead

Speaker 1: Good morning. Congrats to the great quarter. On the transactions as well, I guess the first question would be, Kyle, on the construction segment, the growth through the first half may be less robust relative to what I think you're seeing in the markets, and obviously your CAP is picking up pretty nicely here. Maybe if you could just comment on the, obviously you'll have the transactions layering into the second half, but just the pace that you're now seeing on some of this work as you're starting to work through some of the stuff in CAP. There have been things that have held it back, and now you're starting to see it moving. Just wanted to get some color there. Good morning. good morning Congrats to the great quarter. congrats to the great quarter On the transactions as well, I guess the first question would be, Kyle, on the construction segment, the growth through the first half may be less robust relative to what I think you're seeing in the markets, and obviously your CAP is picking up pretty nicely here. on the transactions as well i guess the first question would be kyle on the construction segment the growth through the first half may be less robust relative to what i think you're seeing in the markets and obviously your cap is picking up pretty nicely here Maybe if you could just comment on the, obviously you'll have the transactions layering into the second half, but just the pace that you're now seeing on some of this work as you're starting to work through some of the stuff in CAP. maybe if you could just comment on the obviously you'll have the transactions layering into the second half but just the pace that you're now seeing on some of this work as you're starting to work through some of the stuff in cap There have been things that have held it back, and now you're starting to see it moving. there have been things that have held it back and now you're starting to see it moving Just wanted to get some color there. just wanted to get some color there

Speaker 2: Yeah, good morning, Brent. Yeah, we agree, it was a great quarter. We're excited about the performance of our teams. Regarding just the revenue on top line for the company, it really just project starts and finishes. We feel really strongly about the back half of the year. You mentioned we have record CAP at $6.1 billion, and we've had a lot of projects that just have been ramping up. We do expect things to accelerate in the back half of the year. If you look at our overall guidance and our updated guidance for 2025, we left our legacy guidance alone, and we just added the contributions of the acquisitions to the guidance for the year. Yeah, good morning, Brent. yeah good morning brent Yeah, we agree, it was a great quarter. yeah we agree it was a great quarter We're excited about the performance of our teams. we're excited about the performance of our teams Regarding just the revenue on top line for the company, it really just project starts and finishes. regarding just the revenue on top line for the company it really just project starts and finishes We feel really strongly about the back half of the year. we feel really strongly about the back half of the year You mentioned we have record CAP at $6.1 billion, and we've had a lot of projects that just have been ramping up. you mentioned we have record cap at $6.1 billion and we've had a lot of projects that just have been ramping up We do expect things to accelerate in the back half of the year. we do expect things to accelerate in the back half of the year If you look at our overall guidance and our updated guidance for 2025, we left our legacy guidance alone, and we just added the contributions of the acquisitions to the guidance for the year. if you look at our overall guidance and our updated guidance for 2025 we left our legacy guidance alone and we just added the contributions of the acquisitions to the guidance for the year

Speaker 1: Okay. The materials profit margin expansion is particularly notable this quarter, and just wanted to get a sense of what might be transitory factors impacting that and what's kind of sustainable as we think about profitability of that business going forward. Okay. okay The materials profit margin expansion is particularly notable this quarter, and just wanted to get a sense of what might be transitory factors impacting that and what's kind of sustainable as we think about profitability of that business going forward. the materials profit margin expansion is particularly notable this quarter and just wanted to get a sense of what might be transitory factors impacting that and what's kind of sustainable as we think about profitability of that business going forward

Speaker 2: Yeah, we were pleased with certainly the volumes in the quarter and for the year to date. We're seeing nice volume improvements, and the 10% or better in both asphalt and aggregates. I think that's signs of a healthy market there as well. I'd say it's more supported by the public markets and the private than pretty much consistent year over year. As we mentioned on the last call and previously, we expected around a 3% gross profit margin improvement in our materials segment for the full year at a minimum, and we're certainly tracking a little ahead of that today. We'll see how the back half shakes out. I think there's good signs that we're seeing volume increases, and we're seeing the margin expansion that we expected in the year. I would say that holds true for construction as well. Yeah, we were pleased with certainly the volumes in the quarter and for the year to date. yeah we were pleased with certainly the volumes in the quarter and for the year to date We're seeing nice volume improvements, and the 10% or better in both asphalt and aggregates. we're seeing nice volume improvements and the 10% or better in both asphalt and aggregates I think that's signs of a healthy market there as well. i think that's signs of a healthy market there as well I'd say it's more supported by the public markets and the private than pretty much consistent year over year. i'd say it's more supported by the public markets and the private than pretty much consistent year over year As we mentioned on the last call and previously, we expected around a 3% gross profit margin improvement in our materials segment for the full year at a minimum, and we're certainly tracking a little ahead of that today. as we mentioned on the last call and previously we expected around a 3% gross profit margin improvement in our materials segment for the full year at a minimum and we're certainly tracking a little ahead of that today We'll see how the back half shakes out. we'll see how the back half shakes out I think there's good signs that we're seeing volume increases, and we're seeing the margin expansion that we expected in the year. i think there's good signs that we're seeing volume increases and we're seeing the margin expansion that we expected in the year I would say that holds true for construction as well. i would say that holds true for construction as well We mentioned that we expected a 1% or greater margin expansion in our construction business. Our teams have just done a fantastic job, and they're tracking well out of that too. Across the board, both construction and materials segments, we feel really good about our team's performance. We mentioned that we expected a 1% or greater margin expansion in our construction business. we mentioned that we expected a 1% or greater margin expansion in our construction business Our teams have just done a fantastic job, and they're tracking well out of that too. our teams have just done a fantastic job and they're tracking well out of that too Across the board, both construction and materials segments, we feel really good about our team's performance. across the board both construction and materials segments we feel really good about our team's performance

Speaker 1: Okay, thank you. Okay, thank you. okay thank you

Speaker 2: Thank you. Thank you. thank you

Speaker 3: The next question comes from Steven Ramsey with Thompson Research Group. Please go ahead. The next question comes from Steven Ramsey with Thompson Research Group. the next question comes from steven ramsey with thompson research group Please go ahead. please go ahead

Speaker 5: Hey, good morning. This is actually Brian Barros on for Steven. Thank you for taking my questions today. On Pavage, can you just maybe touch on what that business, I guess, excels at? I think you mentioned expertise in infrastructure projects in the prepared marks, but just curious on what Pavage can add to you, what you can add to them, and why their margin profile is as strong as it is. Hey, good morning. hey good morning This is actually Brian Barros on for Steven. this is actually brian barros on for steven Thank you for taking my questions today. thank you for taking my questions today On Pavage, can you just maybe touch on what that business, I guess, excels at? on pavage can you just maybe touch on what that business i guess excels at I think you mentioned expertise in infrastructure projects in the prepared marks, but just curious on what Pavage can add to you, what you can add to them, and why their margin profile is as strong as it is. i think you mentioned expertise in infrastructure projects in the prepared marks but just curious on what pavage can add to you what you can add to them and why their margin profile is as strong as it is

Speaker 2: Good morning, and thank you for the question. Pavage is very similar to Granite. Our businesses look similar in terms of mix of work. They're primarily a public works contractor. That's around 80% of their business spent on a given year, 20% private. They can be very strong in the private market. They fill an area within the state of California that we don't have the strongest presence. It's the Central Coast, kind of the central area of California. It's really complementary to our current footprint. It's in a state that we believe in and obviously has a really nice budget and funding behind it, even coming into the 2025-2026 cycles. I think the timing of it is really good for us as well. Our businesses in the central part of the state rely a lot on third-party material suppliers. Good morning, and thank you for the question. good morning and thank you for the question Pavage is very similar to Granite. pavage is very similar to granite Our businesses look similar in terms of mix of work. our businesses look similar in terms of mix of work They're primarily a public works contractor. they're primarily a public works contractor That's around 80% of their business spent on a given year, 20% private. that's around 80% of their business spent on a given year 20% private They can be very strong in the private market. they can be very strong in the private market They fill an area within the state of California that we don't have the strongest presence. they fill an area within the state of california that we don't have the strongest presence It's the Central Coast, kind of the central area of California. it's the central coast kind of the central area of california It's really complementary to our current footprint. it's really complementary to our current footprint It's in a state that we believe in and obviously has a really nice budget and funding behind it, even coming into the 2025-2026 cycles. it's in a state that we believe in and obviously has a really nice budget and funding behind it even coming into the 2025-2026 cycles I think the timing of it is really good for us as well. i think the timing of it is really good for us as well Our businesses in the central part of the state rely a lot on third-party material suppliers. our businesses in the central part of the state rely a lot on third-party material suppliers Having Pavage's materials business is going to be really additive to our overall business as a company. We're excited about that. I think together we see this opportunity. We see opportunity to drive volume increases and bolting through their plants to internal sales. I think we can leverage our pricing strategies, have a look at automation, hit our plants' business today, and learn from some of the previous projects we've done, implement our materials playbook, our construction playbook. I think our legacy business can also learn a little bit from Pavage around private work and some of the customer relationships that they have and bring that into other areas as well. We're really excited about the acquisition. It's in a great market for us. I think, and I know Pavage is excited about being part of the Granite team. Having Pavage's materials business is going to be really additive to our overall business as a company. having pavage's materials business is going to be really additive to our overall business as a company We're excited about that. we're excited about that I think together we see this opportunity. i think together we see this opportunity We see opportunity to drive volume increases and bolting through their plants to internal sales. we see opportunity to drive volume increases and bolting through their plants to internal sales I think we can leverage our pricing strategies, have a look at automation, hit our plants' business today, and learn from some of the previous projects we've done, implement our materials playbook, our construction playbook. i think we can leverage our pricing strategies have a look at automation hit our plants' business today and learn from some of the previous projects we've done implement our materials playbook our construction playbook I think our legacy business can also learn a little bit from Pavage around private work and some of the customer relationships that they have and bring that into other areas as well. i think our legacy business can also learn a little bit from pavage around private work and some of the customer relationships that they have and bring that into other areas as well We're really excited about the acquisition. we're really excited about the acquisition It's in a great market for us. it's in a great market for us I think, and I know Pavage is excited about being part of the Granite team. i think and i know pavage is excited about being part of the granite team

Speaker 5: That sounds like a great pickup for you guys. Secondly, can you just compare and contrast maybe CAP trends year to date and the outlook, I guess, between the home regions of the West and then the Southeast? Thank you. That sounds like a great pickup for you guys. that sounds like a great pickup for you guys Secondly, can you just compare and contrast maybe CAP trends year to date and the outlook, I guess, between the home regions of the West and then the Southeast? secondly can you just compare and contrast maybe cap trends year to date and the outlook i guess between the home regions of the west and then the southeast Thank you. thank you

Speaker 2: We don't necessarily break it apart. I would say just in general, it's across the board. That record CAP at $6.1 billion, again, it's across the entire footprint. You can see some recent announcements that we put out. It could be some of our federal work in Guam, but we've been successful there. We were successful in Utah, Nevada, obviously in California, even up in Alaska. It's really across our entire footprint as a company, which isn't surprising because the overall market with the IIJA funding continues to be strong. I think that's pretty universal in all the markets that we're in. Just as a reminder, the spending to date on the IIJA is still less than 50%. We haven't seen, in our opinion, that peak yet. We think it's probably going to be sometime in 2026-2027. We don't necessarily break it apart. we don't necessarily break it apart I would say just in general, it's across the board. i would say just in general it's across the board That record CAP at $6.1 billion, again, it's across the entire footprint. that record cap at $6.1 billion again it's across the entire footprint You can see some recent announcements that we put out. you can see some recent announcements that we put out It could be some of our federal work in Guam, but we've been successful there. it could be some of our federal work in guam but we've been successful there We were successful in Utah, Nevada, obviously in California, even up in Alaska. we were successful in utah nevada obviously in california even up in alaska It's really across our entire footprint as a company, which isn't surprising because the overall market with the IIJA funding continues to be strong. it's really across our entire footprint as a company which isn't surprising because the overall market with the iija funding continues to be strong I think that's pretty universal in all the markets that we're in. i think that's pretty universal in all the markets that we're in Just as a reminder, the spending to date on the IIJA is still less than 50%. just as a reminder the spending to date on the iija is still less than 50% We haven't seen, in our opinion, that peak yet. we haven't seen in our opinion that peak yet We think it's probably going to be sometime in 2026-2027. we think it's probably going to be sometime in 2026-2027 We still have a long runway ahead of us, and we do believe we can continue to build up our CAP across our footprint. We still have a long runway ahead of us, and we do believe we can continue to build up our CAP across our footprint. we still have a long runway ahead of us and we do believe we can continue to build up our cap across our footprint

Speaker 3: The next question comes from Michael Dudas with Vertical Research Partners. Please go ahead. The next question comes from Michael Dudas with Vertical Research Partners. the next question comes from michael dudas with vertical research partners Please go ahead. please go ahead

Speaker 2: Morning, Mike. Morning, Mike. morning mike

Speaker 3: Michael, your line has been unmuted. Please go ahead with your question. Michael, your line has been unmuted. michael your line has been unmuted Please go ahead with your question. please go ahead with your question

Speaker 7: Thank you. Good morning, Staci, Mike, and Kyle. Thank you. thank you Good morning, Staci, Mike, and Kyle. good morning staci mike and kyle

Speaker 2: Morning. Morning. morning

Speaker 7: Shifting to the Warm Paving acquisition, maybe you could share more perspective on the quality of the assets and some of these locations that you're picking up and how well capitalized have they been? Are the operations going to be additive, or is there things you could learn from the other parts of your business that you could take from this? How much helpful can it be to your Dickerson & Bowen and the acquisitions you've made in that Mississippi market? I think you're correct in assessing that not just on the public side, but there's certainly a lot of energy and data center investment in that region here over the next several years. Shifting to the Warm Paving acquisition, maybe you could share more perspective on the quality of the assets and some of these locations that you're picking up and how well capitalized have they been? shifting to the warm paving acquisition maybe you could share more perspective on the quality of the assets and some of these locations that you're picking up and how well capitalized have they been Are the operations going to be additive, or is there things you could learn from the other parts of your business that you could take from this? are the operations going to be additive or is there things you could learn from the other parts of your business that you could take from this How much helpful can it be to your Dickerson & Bowen and the acquisitions you've made in that Mississippi market? how much helpful can it be to your dickerson & bowen and the acquisitions you've made in that mississippi market I think you're correct in assessing that not just on the public side, but there's certainly a lot of energy and data center investment in that region here over the next several years. i think you're correct in assessing that not just on the public side but there's certainly a lot of energy and data center investment in that region here over the next several years

Speaker 2: Yeah, great. Thanks, Mike. Yes, we're excited about Warm Paving as part of our Southeast platform. Clearly, Warm Paving is a high-performing business just as Lamb & Roberts and Dickerson & Bowen. We're just as excited about having all three of these businesses together as part of this Southeast platform. Warm Paving is a little bit different. We mentioned we've been looking at these material-focused acquisitions. Warm Paving is actually material-centric. Of its revenue, around 75% is materials, and 25% is construction. Of that 75% in materials, 70% is aggregates, and about 30% is asphalt. It's really an aggregates-centric business, and that's going to provide a lot of opportunities for us down in the Southeast part of our company now. We're focused on pull-through. I think there's opportunities to drive volumes with internal sales. We think we can expand its distribution yard network, which is really impressive. Yeah, great. yeah great Thanks, Mike. thanks mike Yes, we're excited about Warm Paving as part of our Southeast platform. yes we're excited about warm paving as part of our southeast platform Clearly, Warm Paving is a high-performing business j ust as Lamb & Roberts and Dickerson & Bowen. clearly warm paving is a high-performing business j ust as lamb & roberts and dickerson & bowen We're just as excited about having all three of these businesses together as part of this Southeast platform. we're just as excited about having all three of these businesses together as part of this southeast platform Warm Paving is a little bit different. warm paving is a little bit different We mentioned we've been looking at these material-focused acquisitions. we mentioned we've been looking at these material-focused acquisitions Warm Paving is actually material-centric. warm paving is actually material-centric Of its revenue, around 75% is materials, and 25% is construction. of its revenue around 75% is materials and 25% is construction Of that 75% in materials, 70% is aggregates, and about 30% is asphalt. of that 75% in materials 70% is aggregates and about 30% is asphalt It's really an aggregates-centric business, and that's going to provide a lot of opportunities for us down in the Southeast part of our company now. it's really an aggregates-centric business and that's going to provide a lot of opportunities for us down in the southeast part of our company now We're focused on pull-through. we're focused on pull-through I think there's opportunities to drive volumes with internal sales. i think there's opportunities to drive volumes with internal sales We think we can expand its distribution yard network, which is really impressive. we think we can expand its distribution yard network which is really impressive We think there's obviously opportunities for pricing, even the automation that we can install, a business like Pavage, introducing liquid carbon materials playbook. We also think there's opportunities now that we have scale to even explore liquid asphalt options as well. I think another piece of this that's interesting is we can connect Warm Paving to our federal division. There's a lot of shoreline protection opportunities with the Army Corps in that part of the country that we could pursue both on the contracting side and also drive pull-through through the quarry. It is a great business alone, but we see tremendous opportunities as being part of the Granite Southeast platform. We think there's obviously opportunities for pricing, even the automation that we can install, a business like Pavage, introducing liquid carbon materials playbook. we think there's obviously opportunities for pricing even the automation that we can install a business like pavage introducing liquid carbon materials playbook We also think there's opportunities now that we have scale to even explore liquid asphalt options as well. we also think there's opportunities now that we have scale to even explore liquid asphalt options as well I think another piece of this that's interesting is we can connect Warm Paving to our federal division. i think another piece of this that's interesting is we can connect warm paving to our federal division There's a lot of shoreline protection opportunities with the Army Corps in that part of the country that we could pursue both on the contracting side and also drive pull-through through the quarry. there's a lot of shoreline protection opportunities with the army corps in that part of the country that we could pursue both on the contracting side and also drive pull-through through the quarry It is a great business alone, but we see tremendous opportunities as being part of the Granite Southeast platform. it is a great business alone but we see tremendous opportunities as being part of the granite southeast platform

Speaker 7: Sounds terrific and a great fit for the company. My follow-up would be, as you indicated or Staci talked about in the remarks on the 2027 targets, I just want to clarify. Those targets include the acquisitions you closed on this month. Is that also including potential or a percentage of potential opportunities of these two to three deals a year? Could there be wider upside from the low to high levels on revenue and margin? Just kind of could conceptualize so I can understand it clearly what the visibility is on 2027, at least as you look at it today. Sounds terrific and a great fit for the company. sounds terrific and a great fit for the company My follow-up would be, as you indicated or Staci talked about in the remarks on the 2027 targets, I just want to clarify. my follow-up would be as you indicated or staci talked about in the remarks on the 2027 targets i just want to clarify Those targets include the acquisitions you closed on this month. those targets include the acquisitions you closed on this month Is that also including potential or a percentage of potential opportunities of these two to three deals a year? is that also including potential or a percentage of potential opportunities of these two to three deals a year Could there be wider upside from the low to high levels on revenue and margin? could there be wider upside from the low to high levels on revenue and margin Just kind of could conceptualize so I can understand it clearly what the visibility is on 2027, at least as you look at it today. just kind of could conceptualize so i can understand it clearly what the visibility is on 2027 at least as you look at it today

Speaker 2: Yeah. What we provide in the updated guidance through 2027 is consistent organic growth at that 6% to 8%. We still feel confident in that. We still feel as though the underlying market, the public funding, the private market supports that range. We feel good there. We do believe that we're going to be able to continue to layer in acquisitions. We're set up to do that. We have the balance sheet. I think our business is operating very strong. That's going to give us what we need to continue to do deals. We didn't want to come out and put a dollar amount to those deals because it's really tough to predict the size and the timing of these things, as you know. Historically, now over the last couple of years, we've been able to get them across the finish line. Yeah. yeah What we provide in the updated guidance through 2027 is consistent organic growth at that 6% to 8%. what we provide in the updated guidance through 2027 is consistent organic growth at that 6% to 8% We still feel confident in that. we still feel confident in that We still feel as though the underlying market, the public funding, the private market supports that range. we still feel as though the underlying market the public funding the private market supports that range We feel good there. we feel good there We do believe that we're going to be able to continue to layer in acquisitions. we do believe that we're going to be able to continue to layer in acquisitions We're set up to do that. we're set up to do that We have the balance sheet. we have the balance sheet I think our business is operating very strong. i think our business is operating very strong That's going to give us what we need to continue to do deals. that's going to give us what we need to continue to do deals We didn't want to come out and put a dollar amount to those deals because it's really tough to predict the size and the timing of these things, as you know. we didn't want to come out and put a dollar amount to those deals because it's really tough to predict the size and the timing of these things as you know Historically, now over the last couple of years, we've been able to get them across the finish line. historically now over the last couple of years we've been able to get them across the finish line I think it's starting to show the consistency in our business in that regard. I think two to three deals a year is just a good number for us to put out there. Obviously, we have the EBITDA margin improvement. That's all the benefit of these new acquisitions. That's the 50 basis points. I think it's starting to show the consistency in our business in that regard. i think it's starting to show the consistency in our business in that regard I think two to three deals a year is just a good number for us to put out there. i think two to three deals a year is just a good number for us to put out there Obviously, we have the EBITDA margin improvement. obviously we have the ebitda margin improvement That's all the benefit of these new acquisitions. that's all the benefit of these new acquisitions That's the 50 basis points. that's the 50 basis points

Speaker 7: Great. Just a quick follow-up on how was it just the period or the time in negotiating with these two companies? Are these not companies? I obviously know Pavage in the past, but you know, was it something happening recently, or has it happened over several months to years as your business development team has been much more active? Great. great Just a quick follow-up on how was it just the period or the time in negotiating with these two companies? just a quick follow-up on how was it just the period or the time in negotiating with these two companies Are these not companies? are these not companies I obviously know Pavage in the past, but you know, was it something happening recently, or has it happened over several months to years as your business development team has been much more active? i obviously know pavage in the past but you know was it something happening recently or has it happened over several months to years as your business development team has been much more active

Speaker 2: Oh, how these came to fruition? Sorry, you're breaking up a little bit on our end. Oh, how these came to fruition? oh how these came to fruition Sorry, you're breaking up a little bit on our end. sorry you're breaking up a little bit on our end

Speaker 7: Yeah, how they came together. Yeah, how they came together. yeah how they came together

Speaker 2: Yes. Pavage was the sole source deal, and Warm Paving was a banked process. Yes. yes Pavage was the sole source deal, and Warm Paving was a banked process. pavage was the sole source deal and warm paving was a banked process

Speaker 7: Thank you, Kyle. Thank you, Kyle. thank you kyle

Speaker 2: Thank you. Thank you. thank you

Speaker 3: Thank you. This concludes our question and answer session. I would like to turn the conference back to Kyle Larkin for any closing remarks. Thank you. thank you This concludes our question and answer session. this concludes our question and answer session I would like to turn the conference back to Kyle Larkin for any closing remarks. i would like to turn the conference back to kyle larkin for any closing remarks

Speaker 2: Thank you for joining the call today. As always, we want to thank all of our employees for the work they do every day. We would also like to take this opportunity to welcome our newest team members from Warm Paving and Pavage Construction. We're excited to have you on the team and look forward to building better together. Thank you for joining the call and your interest in Granite. We look forward to speaking with you all soon. Thank you for joining the call today. thank you for joining the call today As always, we want to thank all of our employees for the work they do every day. as always we want to thank all of our employees for the work they do every day We would also like to take this opportunity to welcome our newest team members from Warm Paving and Pavage Construction. we would also like to take this opportunity to welcome our newest team members from warm paving and pavage construction We're excited to have you on the team and look forward to building better together. we're excited to have you on the team and look forward to building better together Thank you for joining the call and your interest in Granite. thank you for joining the call and your interest in granite We look forward to speaking with you all soon. we look forward to speaking with you all soon

Speaker 3: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you. thank you The conference has now concluded. the conference has now concluded Thank you for attending today's presentation. thank you for attending today's presentation You may now disconnect. you may now disconnect