Granite Construction Inc.
11/06/2025 | Press release | Distributed by Public on 11/06/2025 16:08
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024 (our "Annual Report") and the unaudited condensed consolidated financial statements and the accompanying notes thereto included herein.
Forward-Looking Disclosure
From time to time, Granite makes certain comments and disclosures in reports and statements, including in this Quarterly Report on Form 10-Q, or statements made by its officers or directors, that are not based on historical facts, including statements regarding future events, occurrences, opportunities, circumstances, strategy, activities, performance, outlook, outcomes, guidance, capital expenditures, committed and awarded projects, results and strategic actions, that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by words such as "future," "outlook," "assumes," "believes," "expects," "estimates," "anticipates," "intends," "plans," "appears," "may," "will," "should," "could," "would," "continue," and the negatives thereof or other comparable terminology or by the context in which they are made. In addition, other written or oral statements that constitute forward-looking statements have been made and may in the future be made by or on behalf of Granite. These forward-looking statements are based on management's current beliefs, assumptions and estimates. These expectations may or may not be realized. Some of these expectations may be based on beliefs, assumptions or estimates that may prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our business, financial condition, results of operations, cash flows and liquidity. Such risks and uncertainties include, but are not limited to, those more specifically described in our Annual Report under "Item 1A. Risk Factors." Due to the inherent risks and uncertainties associated with our forward-looking statements, the reader is cautioned not to place undue reliance on them. The reader is also cautioned that the forward-looking statements contained herein speak only as of the date of this Quarterly Report on Form 10-Q and, except as required by law, we undertake no obligation to revise or update any forward-looking statements for any reason.
Overview
We deliver infrastructure solutions for public and private clients primarily in the United States. We are one of the largest diversified, vertically integrated civil contractors and construction materials producers in the United States. Within the public sector, we primarily concentrate on infrastructure projects, including the construction of streets, roads, highways, mass transit facilities, airport infrastructure, bridges, dams, power-related facilities, utilities, tunnels, water well drilling and other infrastructure-related projects. Within the private sector, we perform various services such as site preparation, mining services and infrastructure services for commercial and industrial sites, railways, residential development, energy development, as well as provide construction management professional services. We own and lease aggregate reserves and own processing plants that are vertically integrated into our construction operations and we also produce construction materials for sale to third parties.
The five primary economic drivers of our business are (i) the overall health of the U.S. economy including access to resources (labor, supplies and subcontractors); (ii) federal, state and local public funding levels; (iii) population growth resulting in public and private development; (iv) the need to build, replace or repair aging infrastructure; and (v) the pricing of certain commodity related products. Changes in these drivers can either reduce our revenues and/or gross profit margins or provide opportunities for revenue growth and gross profit margin improvement.
Current Economic Environment and Outlook
Funding for our public work projects, which account for approximately 85% of our portfolio, is dependent on federal, state, regional and local revenues. At the federal level, the $1.2 trillion Infrastructure Investment and Jobs Act ("IIJA") has increased federal highway, bridge and transit funding to its highest level in more than six decades with $550 billion in incremental funding over five years. The increased multi-year spending commitment improved the programming visibility for state and local governments and drove an increase in project lettings that started in 2023, and has continued through 2025. With the IIJA ending in September of 2026, discussions have begun in Congress concerning a replacement bill.
At state, regional and local levels, voter-approved state and local transportation measures continue to support infrastructure spending. While each market is unique, we see a strong funding environment at the state and local levels aided by the IIJA. In California, our top revenue-generating state, despite overall budgetary concerns, a significant part of the state infrastructure spend is funded through Senate Bill 1 (SB-1), the Road Repair and Accountability Act of 2017, a 10-year, $54.2 billion program, which may only be used for transportation-related purposes, without any sunset provisions.
On October 1, 2025, the U.S. government shut down due to a failure to agree on funding for the new fiscal year. We have not experienced any material impacts to our operations, results of operations or financial condition, but continue to monitor the impacts, if any, of this shut down. Depending on the length of the shut down, our results of operations and/or financial condition could potentially be materially impacted. Over the last several years, inflation, supply chain and labor constraints have had a significant impact on the global economy including Granite and others in the construction industry in the United States. Recently, concerns over tariffs have been a major source of uncertainty in the economy. To date, we have not experienced a material financial impact due to tariffs. It is impossible to fully mitigate the potential impacts of the foregoing macro-economic factors and they may negatively impact us in the future. However, where practicable, we have applied proactive measures to mitigate these macro-economic factors, such as fixed forward purchase contracts of oil related inputs, energy surcharges, and adjustment of project schedules for constraints related to construction materials such as concrete.
Our Committed and Awarded Projects ("CAP") balance continues to be strong with $6.3 billion at the end of the third quarter of 2025. Our CAP is supported by a positive public funding environment and strength in the private markets we serve, which we believe will provide further opportunities for continued CAP growth.
Acquisitions
Cinderlite
On October 3, 2025, we completed the acquisition of Cinderlite Trucking Corporation ("Cinderlite") for $58.5 million in cash, subject to customary closing adjustments. We purchased all of the outstanding equity interest of Cinderlite, which is a construction materials, landscape supply, and transportation company in Carson City, Nevada. This acquisition aligns with our strategy of enhancing our vertical integration by strengthening our existing home markets. The results of Cinderlite will be included in our consolidated results beginning in the fourth quarter of 2025 and are not expected to have a material impact on our results of operations.
Warren Paving
On August 5, 2025, we completed the acquisition of Slats Lucas, LLC and Warren Paving, Inc. (collectively, "Warren Paving") for $540.0 million in cash, subject to customary closing adjustments. Warren Paving is a vertically-integrated asphalt contractor and aggregate producer with operations along the Gulf Coast and Mississippi River. This acquisition aligns with our strategy to expand our presence into new geographies with future growth opportunities while supporting our existing operations, particularly the Materials segment.
Papich Construction
On August 5, 2025, we completed the acquisition of Papich Construction Company, Inc. ("Papich Construction") for $170.0 million in cash, subject to customary closing adjustments. Papich Construction is a provider of construction services and materials in California's Central Coast and Central Valley regions. This acquisition aligns with our strategy of enhancing our vertical integration by strengthening our existing home markets.
Dickerson & Bowen, Inc.
We acquired Dickerson & Bowen, Inc. ("D&B") on August 9, 2024. D&B is an aggregates, asphalt, and highway construction company serving central and southern Mississippi.
Our consolidated financial statements include the results of Warren Paving, Papich Construction and D&B from their respective acquisition dates forward, which impacts comparability to the applicable prior periods. See Note 3 of "Notes to the Condensed Consolidated Financial Statements" for further information.
2025 Acquisition Financing
On August 5, 2025, we entered into the Fifth Amended and Restated Credit Agreement (the "Credit Agreement"), which provides for (1) a $600.0 million senior secured revolving credit facility (the "Revolver"), (2) a $600.0 million senior secured term loan (the "Initial Term Loan") and (3) an additional $75.0 million senior secured term loan ("Delayed Draw Term Loan").
The Warren Paving, Papich Construction and Cinderlite acquisitions were funded with proceeds from the Initial Term Loan and the Delayed Draw Term Loan, a $10.0 million draw on our Revolver and from cash on hand. The $10.0 million Revolver draw was repaid during the third quarter and the $75.0 million Delayed Draw Term Loan was repaid on October 31, 2025.
Results of Operations
Our operations are typically affected more by inclement weather conditions during the first and fourth quarters of our fiscal year which may alter our construction schedules and can create variability in our revenues and profitability. Therefore, the results of operations of a given quarter are not indicative of the results to be expected for the full year.
The following table presents a financial summary for the three and nine months ended September 30, 2025 and 2024:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| (in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Total revenue | $ | 1,433,498 | $ | 1,275,510 | $ | 3,259,009 | $ | 3,030,271 | |||||||||||||||
| Gross profit | $ | 260,548 | $ | 202,949 | $ | 543,496 | $ | 421,945 | |||||||||||||||
| Selling, general and administrative expenses | $ | 101,645 | $ | 91,650 | $ | 303,443 | $ | 249,695 | |||||||||||||||
| Other costs, net | $ | 16,019 | $ | 8,543 | $ | 38,698 | $ | 29,778 | |||||||||||||||
| Operating income | $ | 143,651 | $ | 104,298 | $ | 207,465 | $ | 146,819 | |||||||||||||||
| Total other (income) expense, net | $ | (3,874) | $ | (5,148) | $ | (7,536) | $ | 16,791 | |||||||||||||||
| Amount attributable to non-controlling interests | $ | (6,468) | $ | (5,026) | $ | (20,442) | $ | (8,529) | |||||||||||||||
| Net income attributable to Granite Construction Incorporated | $ | 102,929 | $ | 78,951 | $ | 140,973 | $ | 84,863 | |||||||||||||||
Revenue
Total Revenue by Segment
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||||||
| Construction | $ | 1,162,513 | 81.1 | % | $ | 1,080,705 | 84.7 | % | $ | 2,714,557 | 83.3 | % | $ | 2,593,872 | 85.6 | % | |||||||||||||||||||||||||||||||
| Materials | 270,985 | 18.9 | 194,805 | 15.3 | 544,452 | 16.7 | 436,399 | 14.4 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 1,433,498 | 100.0 | % | $ | 1,275,510 | 100.0 | % | $ | 3,259,009 | 100.0 | % | $ | 3,030,271 | 100.0 | % | |||||||||||||||||||||||||||||||
Construction Revenue
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||||||
| Public | $ | 880,416 | 75.7 | % | $ | 828,268 | 76.6 | % | $ | 1,928,224 | 71.0 | % | $ | 1,944,795 | 75.0 | % | |||||||||||||||||||||||||||||||
| Private | 282,097 | 24.3 | 252,437 | 23.4 | 786,333 | 29.0 | 649,077 | 25.0 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 1,162,513 | 100.0 | % | $ | 1,080,705 | 100.0 | % | $ | 2,714,557 | 100.0 | % | $ | 2,593,872 | 100.0 | % | |||||||||||||||||||||||||||||||
Construction revenue for the three and nine months ended September 30, 2025 increased by $81.8 million and $120.7 million, or 7.6% and 4.7%, respectively, when compared to 2024. These increases were primarily driven by $52.7 million of construction revenue from our recently acquired businesses, Warren Paving and Papich Construction, during the three and nine months ended September 30, 2025. Additionally, D&B construction revenue increased by $4.0 million and $31.1 million for the three and nine months ended September 30, 2025, respectively, when compared to 2024. Our remaining Construction revenue increased year-over-year driven primarily by higher CAP entering the quarter and year.
Materials Revenue
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||||||
| Aggregates | $ | 100,849 | 37.2 | % | $ | 57,086 | 29.3 | % | $ | 200,894 | 36.9 | % | $ | 147,522 | 33.8 | % | |||||||||||||||||||||||||||||||
| Asphalt | 169,290 | 62.5 | 137,658 | 70.7 | 342,353 | 62.9 | 287,843 | 66.0 | |||||||||||||||||||||||||||||||||||||||
| Other | 846 | 0.3 | 61 | - | 1,205 | 0.2 | 1,034 | 0.2 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 270,985 | 100.0 | % | $ | 194,805 | 100.0 | % | $ | 544,452 | 100.0 | % | $ | 436,399 | 100.0 | % | |||||||||||||||||||||||||||||||
Materials revenue for the three and nine months ended September 30, 2025 increased $76.2 million and $108.1 million, or 39.1% and 24.8%, when compared to 2024. This increase was primarily driven by higher sales volumes and prices in both aggregates and asphalt. Additionally, materials revenue from our recently acquired businesses, Warren Paving and Papich Construction, was $45.8 million for both the three and nine months ended September 30, 2025.
Committed and Awarded Projects
CAP consists of two components: (1) unearned revenue and (2) other awards. Unearned revenue includes the revenue we expect to record in the future on executed contracts, including 100% of our consolidated joint venture contracts and our proportionate share of unconsolidated joint venture contracts. We generally include a project in unearned revenue at the time a contract is awarded, the contract has been executed and to the extent we believe funding is probable. Contract options and task orders are included in unearned revenue when exercised or issued, respectively. Certain government contracts where funding is appropriated on a periodic basis are included in unearned revenue at the time of the award when it is probable the contract value will be funded and executed.
Other awards include the general construction portion of construction management/general contractor ("CM/GC") contracts and awarded contracts with unexercised contract options or unissued task orders. The general construction portion of CM/GC contracts are included in other awards to the extent contract execution and funding is probable. Contracts with unexercised contract options or unissued task orders are included in other awards to the extent option exercise or task order issuance is probable. All CAP is in the Construction segment.
| (dollars in thousands) | September 30, 2025 | June 30, 2025 | December 31, 2024 | September 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||
| Unearned revenue | $ | 4,325,329 | 68.2 | % | $ | 4,113,553 | 67.8 | % | $ | 3,584,378 | 67.7 | % | $ | 3,884,146 | 69.1 | % | |||||||||||||||||||||||||||||||
| Other awards | 2,012,387 | 31.8 | 1,950,878 | 32.2 | 1,711,689 | 32.3 | 1,735,649 | 30.9 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 6,337,716 | 100.0 | % | $ | 6,064,431 | 100.0 | % | $ | 5,296,067 | 100.0 | % | $ | 5,619,795 | 100.0 | % | |||||||||||||||||||||||||||||||
| (dollars in thousands) | September 30, 2025 | June 30, 2025 | December 31, 2024 | September 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||
|
Customer type:
|
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| Public | $ | 5,268,799 | 83.1 | % | $ | 4,960,672 | 81.8 | % | $ | 4,120,821 | 77.8 | % | $ | 4,365,669 | 77.7 | % | |||||||||||||||||||||||||||||||
| Private | 1,068,917 | 16.9 | 1,103,759 | 18.2 | 1,175,246 | 22.2 | 1,254,126 | 22.3 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 6,337,716 | 100.0 | % | $ | 6,064,431 | 100.0 | % | $ | 5,296,067 | 100.0 | % | $ | 5,619,795 | 100.0 | % | |||||||||||||||||||||||||||||||
CAP of $6.3 billion at September 30, 2025 was $273.3 million or 4.5% higher than at June 30, 2025. Significant additions to CAP during the three months ended September 30, 2025 included $350 million for a drainage improvement project in Illinois, $158 million for a federal project in Guam, $72 million for a port project in Alaska and $39 million for a flood prevention project in California. All of these projects are in the public sector.
Non-controlling partners' share of CAP as of September 30, 2025, June 30, 2025, December 31, 2024 and September 30, 2024 was $325.7 million, $300.1 million, $331.1 million and $355.2 million, respectively.
At September 30, 2025, one contract with remaining CAP of $10 million or more per project had total forecasted losses with remaining revenue of $35.1 million, or 0.6%, of total CAP. Provisions are recognized in the consolidated statements of operations for the full amount of estimated losses on uncompleted contracts whenever evidence indicates that the estimated total cost of a contract exceeds its estimated total revenue.
Gross Profit
The following table presents gross profit by reportable segment for the respective periods:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| (dollars in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Construction | $ | 192,346 | $ | 170,685 | $ | 431,450 | $ | 362,885 | |||||||||||||||
| Percent of segment revenue | 16.5 | % | 15.8 | % | 15.9 | % | 14.0 | % | |||||||||||||||
| Materials | 68,202 | 32,264 | 112,046 | 59,060 | |||||||||||||||||||
| Percent of segment revenue | 25.2 | % | 16.6 | % | 20.6 | % | 13.5 | % | |||||||||||||||
| Total gross profit | $ | 260,548 | $ | 202,949 | $ | 543,496 | $ | 421,945 | |||||||||||||||
| Percent of total revenue | 18.2 | % | 15.9 | % | 16.7 | % | 13.9 | % | |||||||||||||||
Construction gross profit for the three and nine months ended September 30, 2025 increased by $21.7 million and $68.6 million, or 12.7% and 18.9%, respectively, when compared to 2024 primarily due to improved project execution across our project portfolio. For the year to date period in 2025, we also recognized net increases from revisions in estimates due to claim settlements. For further discussion of projects with revisions in estimates which individually had an impact of $5.0 million or more on gross profit, see Note 4 of "Notes to the Condensed Consolidated Financial Statements." Additionally, construction gross profit from our recently acquired businesses, Warren Paving and Papich Construction, was $7.2 million for both the three and nine months ended September 30, 2025, which included $1.3 million of purchase accounting-related charges such as step-up depreciation and intangible asset amortization. See Note 3 of "Notes to the Condensed Consolidated Financial Statements" for further information about acquisitions.
Materials gross profit for the three and nine months ended September 30, 2025 increased by $35.9 million, or 111.4%, and $53.0 million, or 89.7%, respectively, when compared to 2024. The increased profit was primarily driven by higher volumes and sales prices in both aggregates and asphalt. The increase was also driven by gross profit from our recently acquired businesses, Warren Paving and Papich Construction, of $9.6 million for both the three and nine months ended September 30, 2025, which included $2.2 million of purchase accounting-related charges such as step-up depreciation and intangible asset amortization. See Note 3 of "Notes to the Condensed Consolidated Financial Statements" for further information about acquisitions.
Selling, General and Administrative Expenses
The following table presents the components of selling, general and administrative expenses for the respective periods:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| (dollars in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Salaries and related expenses | $ | 56,827 | $ | 42,080 | $ | 158,235 | $ | 128,110 | |||||||||||||||
| Incentive compensation | 19,315 | 21,495 | 26,380 | 24,898 | |||||||||||||||||||
| Stock-based compensation | 1,750 | 1,824 | 33,929 | 15,928 | |||||||||||||||||||
| Other selling, general and administrative expenses | 23,753 | 26,251 | 84,899 | 80,759 | |||||||||||||||||||
| Total selling, general and administrative expenses | $ | 101,645 | $ | 91,650 | $ | 303,443 | $ | 249,695 | |||||||||||||||
| Percent of revenue | 7.1 | % | 7.2 | % | 9.3 | % | 8.2 | % | |||||||||||||||
Selling, general and administrative ("SG&A") expenses include the costs for estimating and bidding, including offsetting customer reimbursements for portions of our selling/bid submission expenses (i.e., stipends), business development, materials facility permits, and costs related to our operational offices that are not allocated to direct contract costs and expenses related to our corporate functions. Other SG&A expenses include travel and entertainment, outside services, information technology, depreciation, occupancy, training, office supplies, changes in the fair market value of our non-qualified deferred compensation plan liability and other miscellaneous expenses. SG&A expenses can vary depending on the volume of projects in process and the number of employees assigned to estimating and bidding activities. As projects are completed or the volume of work slows down, we temporarily redeploy project employees to bid on new projects, moving their salaries and related costs from cost of revenue to selling expenses. SG&A expenses for the three months ended September 30, 2025 increased $10.0 million compared to the same period in 2024, primarily due to $14.7 million of higher salaries and related expenses due to increased labor costs and partially offset by a $2.5 million decrease in other selling, general and administrative expenses. SG&A expenses for the nine months ended September 30, 2025 increased $53.7 million compared to the same period in 2024, primarily due to $30.1 million of higher salaries and related expenses due to increased labor costs, as well as an $18.0 million increase in stock-based compensation due to improved financial performance.
Other Costs, net
The following table presents other costs, net for the respective periods:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| (in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Other costs, net | $ | 16,019 | $ | 8,543 | $ | 38,698 | $ | 29,778 | |||||||||||||||
Other costs, net mainly consist of acquisition and integration costs and legal costs related to the defense of a former Company officer in his ongoing civil litigation with the Securities and Exchange Commission. The increases of $7.5
million and $8.9 million for the three and nine months ended September 30, 2025 were primarily due to acquisition and integration costs in the current year. See Note 1 and Note 3 of the "Notes to the Condensed Consolidated Financial Statements" for information on our recent acquisitions.
Other (Income) Expense, net
The following table presents other (income) expense, net for the respective periods:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| (in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| (Gain) loss on debt extinguishment | $ | - | $ | (272) | $ | - | $ | 27,552 | |||||||||||||||
| Interest income | (5,986) | (7,513) | (18,015) | (17,815) | |||||||||||||||||||
| Interest expense | 13,367 | 7,905 | 29,051 | 21,325 | |||||||||||||||||||
| Equity in income of affiliates, net | (4,946) | (4,394) | (9,738) | (12,921) | |||||||||||||||||||
| Other income, net | (6,309) | (874) | (8,834) | (1,350) | |||||||||||||||||||
| Total other (income) expense, net | $ | (3,874) | $ | (5,148) | $ | (7,536) | $ | 16,791 | |||||||||||||||
During the three months ended September 30, 2025, total other (income) expense, net remained relatively flat. During the nine months ended September 30, 2025, total other (income) expense, net improved $24.3 million, primarily due to the $27.6 million loss on debt extinguishment in 2024 that did not reoccur in 2025.
Income Taxes
The following table presents the provision for income taxes for the respective periods:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| (dollars in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Provision for income taxes | $ | 38,128 | $ | 25,469 | $ | 53,586 | $ | 36,636 | |||||||||||||||
| Effective tax rate | 25.8 | % | 23.3 | % | 24.9 | % | 28.2 | % | |||||||||||||||
We calculate our income tax provision or benefit at the end of each interim period by estimating our annual effective tax rate, applying that rate to our income or loss before taxes and adjusting for discrete items not included in our estimate of the annual effective tax rate. The effect of changes in enacted tax laws, tax rates or tax status is recognized in the interim period in which the change occurs.
On July 4, 2025, Public Law No. 119-21 known as the "One Big Beautiful Bill Act" ("OBBBA") was signed into law. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act of 2017. For 2025, we expect to realize a current year benefit associated with accelerated depreciation but do not expect any material impact on our effective tax rate.
See Note 16 of "Notes to the Condensed Consolidated Financial Statements" for more information.
Amount Attributable to Non-controlling Interests
The following table presents the amount attributable to non-controlling interests in consolidated subsidiaries for the respective periods:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| (in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Amount attributable to non-controlling interests | $ | (6,468) | $ | (5,026) | $ | (20,442) | $ | (8,529) | |||||||||||||||
The amount attributable to non-controlling interests represents the non-controlling owners' share of the net (income) or loss of our consolidated construction joint ventures. During the three and nine months ended September 30, 2025 the increase was primarily due to increased profitability on joint venture projects.
Liquidity and Capital Resources
Our primary sources of liquidity are cash and cash equivalents, investments, available borrowing capacity under our Credit Agreement and cash generated from operations. We may also from time-to-time issue and sell equity, debt or hybrid
securities or engage in other capital markets transactions or sell one or more business units or assets. See Note 14 of the "Notes to the Condensed Consolidated Financial Statements" for information on our long-term debt.
Our material cash requirements include paying the costs and expenses associated with our operations, servicing outstanding indebtedness, making capital expenditures and paying dividends on our capital stock. We may also from time to time prepay or repurchase outstanding indebtedness, repurchase shares of our common stock or acquire assets or businesses that are complementary to our operations. See Note 3 of "Notes to the Condensed Consolidated Financial Statements" for information on our recent acquisitions.
We believe our primary sources of liquidity will be sufficient to meet our expected working capital needs, capital expenditures, financial commitments, cash dividend payments and other liquidity requirements associated with our existing operations for the next twelve months. We also believe our primary sources of liquidity, access to debt and equity capital markets and cash expected to be generated from operations will be sufficient to meet our long-term requirements and plans. However, there can be no assurance that sufficient capital will continue to be available or that it will be available on terms acceptable to us.
As of September 30, 2025, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions and marketable securities consisting of commercial paper, corporate notes and bonds, Municipal notes and bonds and U.S. Government and agency obligations.
On August 5, 2025, we entered into the Credit Agreement, which provides for (1) a $600.0 million Revolver, (2) a $600.0 million Initial Term Loan and (3) an additional $75.0 million Delayed Draw Term Loan. As of September 30, 2025, the total unused availability under our Revolver was $580.4 million, resulting from $19.6 million in issued and outstanding letters of credit and no amount drawn under the Revolver. Related to the acquisition of Cinderlite on October 3, 2025, we drew the additional $75.0 million Delayed Draw Term Loan, all of which has been repaid as of the date of this report. As of the date of this report, the $600.0 million Initial Term Loan is outstanding and no amount was drawn under the Revolver. See Note 3 and Note 14 of "Notes to the Condensed Consolidated Financial Statements."
As of September 30, 2025, one of the conditions permitting the holders of the 3.25% Convertible Notes to convert was met. Our common stock traded above 130% of the $77.88 conversion price for at least 20 trading days during the period of 30 consecutive trading days ending on September 30, 2025 (the last trading day of the calendar quarter). The holders of the 3.25% Convertible Notes have the right to convert through December 31, 2025, at which point the Company will re-evaluate whether the 3.25% Convertible Notes will continue to be convertible in the subsequent calendar quarter. In the event the holders of the 3.25% Convertible Notes elect to convert a portion, or all of their 3.25% Convertible Notes, the principal amount is required to be settled in cash. As a result, the $373.8 million principal amount has been classified as a current liability as of September 30, 2025 in the condensed consolidated balance sheet. Any conversion premium will be satisfied with cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. At current market prices of our common stock, we do not expect holders to elect to convert their notes as the trading price of the notes in the secondary market exceeds the value a holder would receive upon conversion of such notes. In the unlikely event a holder elects to convert, we would use cash on hand or draw on our Revolver as needed.
In evaluating our liquidity position and needs, we also consider cash and cash equivalents held by our consolidated construction joint ventures ("CCJVs"). The following table presents our cash, cash equivalents and marketable securities, including amounts from our CCJVs, as of the respective dates:
| (in thousands) | September 30, 2025 | December 31, 2024 | |||||||||
| Cash and cash equivalents excluding CCJVs | $ | 276,270 | $ | 404,436 | |||||||
| CCJV cash and cash equivalents (1) | 165,534 | 173,894 | |||||||||
| Total consolidated cash and cash equivalents | 441,804 | 578,330 | |||||||||
| Short-term marketable securities (2) | 105,437 | 7,311 | |||||||||
| Long-term marketable securities (2) | 69,303 | - | |||||||||
| Total cash, cash equivalents and marketable securities | $ | 616,544 | $ | 585,641 | |||||||
(1)The volume and stage of completion of contracts from our CCJVs may cause fluctuations in joint venture cash and cash equivalents between periods. The assets of each consolidated and unconsolidated construction joint venture relate solely to that joint venture. The decision to distribute joint venture assets must generally be made jointly by a majority of the members and, accordingly, these assets, including those associated with estimated cost recovery of customer affirmative claims and back charge claims, are generally not available for the working capital needs of Granite until distributed.
(2)All marketable securities were classified as held-to-maturity and consisted of commercial paper, corporate notes and bonds, Municipal notes and bonds and U.S. Government and agency obligations as of September 30, 2025 and U.S. Government and agency obligations as of December 31, 2024.
Granite's portion of CCJV cash and cash equivalents was $103.0 million and $106.0 million as of September 30, 2025 and December 31, 2024, respectively. Excluded from the table above is $36.0 million and $28.7 million as of September 30, 2025 and December 31, 2024, respectively, of Granite's portion of unconsolidated construction joint venture cash and cash equivalents.
Capital Expenditures
Major capital expenditures are typically for aggregate and asphalt production facilities, aggregate reserves, construction equipment, buildings and leasehold improvements and investments in our information technology systems. The timing and amount of such expenditures can vary based on the progress of planned capital projects, the type and size of construction projects, changes in business outlook and other factors. During the nine months ended September 30, 2025, we had capital expenditures of $87.7 million, compared to $108.2 million during the nine months ended September 30, 2024. We currently anticipate 2025 capital expenditures to be approximately $130 million.
Cash Flows
| Nine Months Ended September 30, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | 289,612 | $ | 283,549 | |||||||
| Investing activities | $ | (947,793) | $ | (211,107) | |||||||
| Financing activities | $ | 521,655 | $ | (27,819) | |||||||
Operating activities
As a large infrastructure contractor and construction materials producer, our revenue, gross profit and the resulting operating cash flows can differ significantly from period to period due to a variety of factors, including project progression toward completion, outstanding contract change orders and affirmative claims, and the payment terms of our contracts. Additionally, operating cash flows are impacted by the timing related to funding construction joint ventures and the resolution of uncertainties inherent in the complex nature of the construction work we perform, including claim and back charge settlements. Our working capital assets result from both public and private sector projects. Customers in the private sector can be slower paying than those in the public sector; however, private sector projects generally have higher gross profit as a percentage of revenue. While we typically invoice our customers on a monthly basis, our construction contracts frequently provide for retention that is a specified percentage withheld from each payment by our customers until the contract is completed and the work accepted by the customer.
Cash provided by operating activities of $289.6 million for the nine months ended September 30, 2025 represents a $6.1 million increase in cash provided by operating activities when compared to the same period of 2024. The change was primarily attributable to an increase in net income after adjusting for non-cash items of $77.0 million. Partially offsetting this was a $45.3 million decrease in cash provided by working capital, which includes receivables, net contract assets, inventories, other assets, accounts payable and accrued expenses and other liabilities. Additionally, distributions from, net of contributions to, unconsolidated construction joint ventures and affiliates decreased $25.6 million when compared to the same period of 2024.
Investing activities
Cash used in investing activities of $947.8 million for the nine months ended September 30, 2025 represents a $736.7 million increase in cash used in investing activities when compared to the same period of 2024. The change was primarily due to a $569.6 million increase in cash used for acquisitions net of cash acquired and purchase price adjustments and $192.5 million in purchases of marketable securities net of maturities, partially offset by $24.6 million less of purchases of property and equipment, net of sales.
Financing activities
Cash provided by financing activities of $521.7 million for the nine months ended September 30, 2025 represents a $549.5 million increase in cash provided by financing activities when compared to the same period of 2024. The change was primarily due to increased proceeds from debt issuances, net of debt repayments and related charges of $589.7 million. This increase was partially offset by increased distributions to non-controlling partners, net of contributions of $38.7 million.
Derivatives
We recognize derivative instruments as either assets or liabilities in the condensed consolidated balance sheets at fair value using Level 2 inputs. See Note 9 to "Notes to the Condensed Consolidated Financial Statements" for further information. The capped call transactions related to the 3.75% Convertible Notes and 3.25% Convertible Notes were recorded to equity on our condensed consolidated balance sheets based on the cash proceeds. See Note 14 to "Notes to the Condensed Consolidated Financial Statements" for further information.
Surety Bonds and Real Estate Mortgages
We are generally required to provide various types of surety bonds that provide an additional measure of security under certain public and private sector contracts. At September 30, 2025, approximately $3.9 billion of our $6.3 billion CAP was bonded. Performance bonds do not have stated expiration dates; rather, we are generally released from the bonds when the obligations of the underlying contract have been fulfilled. The ability to maintain bonding capacity requires that we maintain cash and working capital balances satisfactory to our sureties.
Our investments in real estate ventures are subject to mortgage indebtedness. This indebtedness is non-recourse to Granite but is recourse to the real estate venture. The terms of this indebtedness are typically renegotiated to reflect the evolving nature of the real estate projects as they progress through acquisition, entitlement, development and leasing. Modification of these terms may include changes in loan-to-value ratios requiring the real estate venture to repay portions of the debt. Our equity method investments in our foreign affiliates are subject to local bank debt primarily for equipment purchases. This debt is non-recourse to Granite, but it is recourse to the affiliates. The debt associated with our equity method investments is included in Note 11 of "Notes to the Condensed Consolidated Financial Statements."
Covenants and Events of Default
Our Credit Agreement requires us to comply with various affirmative, restrictive and financial covenants, including the financial covenants described below. Our failure to comply with these covenants would constitute an event of default under the Credit Agreement. Additionally, the 3.25% Convertible Notes and 3.75% Convertible Notes are governed by the terms and conditions of their respective indentures. Our failure to pay principal, interest or other amounts when due or within the relevant grace period on our 3.25% Convertible Notes, our 3.75% Convertible Notes or our Credit Agreement would constitute an event of default under the 3.25% Convertible Notes indenture, the 3.75% Convertible Notes indenture or the Credit Agreement. A default under our Credit Agreement could result in (i) us no longer being entitled to borrow under such facility; (ii) the termination of such facility; (iii) the requirement that any letters of credit under such facility be cash collateralized; (iv) the acceleration of amounts owed under the Credit Agreement; and/or (v) the foreclosure on any collateral securing the obligations under such facility. A default under the 3.25% Convertible Notes indenture or the 3.75% Convertible Notes indenture could result in acceleration of the maturity of the notes.
The financial covenants under the terms of the Credit Agreement require the maintenance of a minimum Consolidated Interest Coverage Ratio and a maximum Consolidated Leverage Ratio. As of September 30, 2025, we were in compliance with the covenants in the Credit Agreement.
Share Repurchase Program
As announced on February 3, 2022, on February 1, 2022, the Board of Directors authorized us to purchase up to $300.0 million of our common stock at management's discretion (the "2022 authorization"). There were 51,120 and 51,320 shares repurchased under the 2022 authorization in the three and nine months ended September 30, 2025, respectively, and $183.9 million remained available under the 2022 authorization as of September 30, 2025.
The specific timing and amount of any future repurchases will vary based on market conditions, securities law limitations and other factors.
Website Access
Our website address is www.graniteconstruction.com. On our website we make available, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission ("SEC"). The information on our website is not incorporated into, and is not part of, this report. These reports, and any amendments to them, are also available at the website of the SEC, www.sec.gov.
Granite Construction Inc. published this content on November 06, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 06, 2025 at 22:08 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]