Granite Construction Q1 Earnings Call Highlights

Key Points

• Granite delivered a strong Q1 with revenue up 30% to $912 million, gross profit up 31% to $110 million, adjusted EBITDA of $58 million, and raised 2026 guidance to $5.2–$5.4 billion in revenue and an adjusted EBITDA margin of 12.25%–13.25%.
• The company closed the bolt‑on acquisition of Kenny Seng Construction, expected to add about $150 million of annual revenue with an “accretive” adjusted EBITDA margin in the high teens and to expand Granite’s materials and mission‑critical (education, healthcare, data center) end‑market exposure.
• Committed and Awarded Projects (CAP) grew to $7.2 billion despite a ~$300 million California project cancellation, with federal CAP at $1.3 billion (including $640 million of Tactical Infrastructure) and growing emphasis on private‑market opportunities like rail and data centers.

Granite Construction NYSE: GVA reported a “strong start” to 2026, highlighted by sharp year-over-year revenue growth, improved profitability measures, and raised full-year guidance, according to management’s remarks on the company’s first-quarter earnings call. Executives also discussed the company’s acquisition of Kenny Seng Construction, progress in building its project portfolio, and demand trends in its materials business.

Acquisition focus: Kenny Seng Construction

President and CEO Kyle Larkin opened by detailing Granite’s latest acquisition, Kenny Seng Construction, which he described as a “leading provider of infrastructure construction services and construction materials in Utah County, Utah.” Larkin said the deal fits Granite’s “disciplined investment framework” for capital allocation across capital expenditures and M&A, emphasizing the company’s ability to both self-source and integrate bolt-on deals while also pursuing larger transactions.

Larkin said Kenny Seng Construction, founded in 1985, operates a “vertically integrated business model” with capabilities including earthwork and site preparation, concrete work, utility installation, project management and contracting, aggregate production, and materials processing. He said more than half of the company’s revenue is tied to education infrastructure, with the remainder from civil infrastructure and private-sector work.

Granite expects Kenny Seng Construction to add about $150 million of annual revenue, with an “accreted Adjusted EBITDA Margin in the high teens,” according to Larkin. In the Q&A, Larkin said Granite views the business as a “specialty contractor of choice” in its market and outlined several areas where Granite expects to support growth, including scaling the materials business and sharing client relationships within and outside Utah. He also said the acquired company brings exposure to end markets such as education, healthcare, and “some mission-critical work around data centers.”

Construction segment: CAP grows despite a California cancellation

Larkin said Granite ended the quarter with Committed and Awarded Projects (CAP) of $7.2 billion, up $200 million from the fourth quarter. He noted the increase came despite a roughly $300 million reduction tied to the cancellation of a public-sector highway project in California after “expanded scope exceeded available funding.” Larkin called that type of cancellation “very rare” in Granite’s experience.

In response to analyst questions, Larkin characterized the California cancellation as “very unique,” noting the project had been selected in 2020 and that cost expectations from that period did not match “2026 dollars.” He said he believes the project will return, but “not sure in what form and what size.”

More broadly, Larkin pointed to what he called a robust bidding environment across federal, state, local, and private markets. He said the company added a second Tactical Infrastructure project to CAP and ended the quarter with $1.3 billion of federal CAP, including $640 million tied to Tactical Infrastructure projects.

Looking ahead, Larkin said he believes Granite’s federal business is positioned to generate more than 15% of construction segment revenue as it grows. In the Q&A, he said Granite’s federal revenue contribution had previously grown from “less than 5%” to “around 10%,” and that with additional Tactical Infrastructure work at the border it could be “right around that 15%.” He also cited opportunities in Guam, military installations in Granite’s home markets, and shoreline protection work in the Southeast as potential drivers that could keep federal exposure above 15% even as border projects wind down over the next two years.

Private-market opportunities: rail and data centers

Larkin said Granite is also pursuing private-sector end markets intended to “drive growth and further improve the quality of CAP,” including rail and mission-critical data centers.

• Rail: Larkin cited opportunities in intermodal facilities for Class I railroads, noting Granite’s experience and customer relationships and that it has completed multiple intermodal projects.
• Data centers: Larkin described “growing opportunities” that can include civil site development as well as water and solar power generation. He said Granite formed a dedicated team to support pursuits and execution and believes it is “uniquely positioned” for schedule-intensive data center work.

In the Q&A, Larkin said Granite is already “successfully delivering and/or supplying materials” to projects in Washington, Oregon, Nevada, Arizona, Louisiana, and Mississippi. He said Granite can participate through civil work, water work (including through its Lane business), or supplying materials. Larkin added that mission-critical work could grow to around 10% of overall revenue “moving forward,” depending on performance.

Materials segment: strong start, oil price volatility addressed

Larkin said the materials segment had a “fantastic start to the year,” despite the first quarter typically being seasonally slower. He said demand has been encouraging across Granite’s geographies, supported by newly acquired companies led by Warren Paving.

He reiterated that Granite’s 2026 margin improvement expectations for materials were based on full-year inclusion of acquisitions, modest volume growth, mid-single-digit aggregate price increases, and improved cost efficiency through automation and process improvements. “Through the first four months of the year,” Larkin said he believes Granite is “on track to meet or exceed” expectations, adding that aggregate and asphalt orders are ahead of the prior year and pricing is meeting expectations.

Management also addressed oil price increases during the quarter, which Larkin attributed to conflict in Iraq. He said Granite’s primary exposures are liquid asphalt purchases and diesel usage in equipment and barge transport. Larkin said Granite uses several tools to mitigate energy volatility, including fixed forward contracts, physical storage, financial hedges, and energy surcharges on material sales. He said the company does not “presently expect” the oil price increases to have a significant impact on its annual outlook.

In the Q&A, Larkin added that Granite has not seen a negative impact from volatility in liquid asphalt, diesel, and natural gas, and said that “if anything, it’s been slightly positive.” He highlighted an energy surcharge implemented after the first quarter of 2021 in the materials business and noted that public owners often include “escalators and de-escalators” tied to inputs such as liquid asphalt and diesel.

Financial results and raised 2026 guidance

Executive Vice President and CFO Staci Woolsey said Granite’s first-quarter revenue rose 30% year-over-year to $912 million, while gross profit increased 31% to $110 million. She said adjusted net income increased by $12 million to $12 million, and adjusted EBITDA increased by $30 million to $58 million.

Construction segment revenue increased 25% year-over-year to $766 million, with Woolsey attributing $43 million of growth to acquired businesses and $108 million to organic growth. She noted that gross profit margin declined year-over-year due to a prior-year benefit from a favorable claim settlement that did not recur, though gross profit rose with higher revenue.

Materials segment revenue increased to $146 million, up $61 million year-over-year, with gross profit up $9 million to $8 million. Woolsey said $50 million of the revenue increase came from acquired businesses led by Warren Paving. She added that cash gross profit rose $15 million year-over-year to $26 million, representing 18% of revenue, which she called “a great result” for a quarter that is typically the most weather-impacted. Woolsey said the segment also saw organic volume increases “ahead of expectations.”

On cash flow, Woolsey said Granite used $31 million in operating cash in the quarter, compared with an inflow of $4 million in the prior year. She attributed the prior-year comparison to the collection of a long-outstanding contract retention balance and receipt of funds from a settled legal dispute. Woolsey said Granite’s full-year operating cash flow expectation of about 10% of revenue remains unchanged.

Woolsey also discussed capital structure actions, including privately negotiated settlements of $100 million principal amount of convertible bonds due 2028, leaving $274 million outstanding. She said the total cash used to settle the bonds, net of capped call unwind proceeds, was $233 million. After the quarter, Granite used its revolving credit facility to fund the Kenny Seng Construction purchase and now has $1.4 billion of debt outstanding with $415 million available under the revolver.

With the first-quarter performance and new project activity, Woolsey said Granite raised full-year 2026 guidance:

• Revenue: $5.2 billion to $5.4 billion, up from $4.9 billion to $5.1 billion, reflecting $200 million from a new Tactical Infrastructure contract and $100 million from Kenny Seng Construction.
• SG&A as a percentage of revenue: 8.25% to 8.75%, down from 8.5% to 9%, inclusive of about $48 million in stock-based compensation.
• Adjusted EBITDA margin: 12.25% to 13.25%, up from 12% to 13%.
• CapEx: $140 million to $160 million (unchanged).
• Adjusted effective tax rate: mid-20% range (unchanged).

Asked about what drove SG&A leverage in the updated outlook, Woolsey said the improvement is “being driven a lot by the revenue increase,” while noting the company continues to work on efficiency improvements.

During Q&A on Tactical Infrastructure projects, Larkin said Granite has one project in southeastern Texas with about $140 million remaining and a recent win in Laredo, Texas, of about $500 million. He said the Laredo project is expected to “burn over around 14 months” and be about 40% complete in 2026. Larkin said the company remains disciplined and described key risks as schedule, remoteness/logistics, and managing subcontractors and suppliers, adding that Granite is being “very selective” about project partners.

In closing remarks, Larkin said the first quarter reinforced his confidence in Granite’s ability to achieve its 2026 and 2027 financial goals, citing continued growth in CAP across public and private markets and ongoing transformation in the materials segment tied to Warren Paving. He also said Granite’s M&A pipeline “continues to evolve,” and that the company believes it has opportunities for “several acquisitions this year” to bolt on to existing businesses or expand its footprint.

About Granite Construction NYSE: GVA

Granite Construction Inc is a publicly traded heavy civil contractor and construction materials producer based in Watsonville, California. The company specializes in delivering large-scale infrastructure projects for government and private clients, focusing on the development, rehabilitation and maintenance of transportation, water resource and industrial facilities. Its turnkey solutions span the full project lifecycle, from preconstruction and design-build to construction management and facilities maintenance.

In its construction segment, Granite undertakes highway and bridge building, airport runway and taxiway construction, marine terminal and port improvements, dam and reservoir projects, transit systems and underground utilities.

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