Granite Construction Inc.
10/29/2026 | Press release | Distributed by Public on 10/29/2026 15:15
Quarterly Report for Quarter Ending September 30, 2026 (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, 2025 (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, which may prove to be incorrect, and our expectations may not be realized. 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 we own processing plants that are vertically integrated into our construction operations. 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 may adversely affect our revenue and gross profit margins or provide opportunities for growth and margin improvement.
Current Economic Environment and Outlook
Funding for our public work projects, which account for approximately 85% of our Committed and Awarded Projects ("CAP"), 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 and provided $550 billion in incremental funding over a five-year period. This multi-year funding commitment increased programming visibility for state and local governments and contributed to increased project lettings beginning in 2023, which have continued through the date of this filing. The IIJA's five-year surface transportation authorization expired on September 30, 2026. Congress has enacted a short-term extension of certain surface transportation programs through December 11, 2026, which maintains funding for federal agencies and programs at the current levels while Congress continues work on Fiscal Year 2027 appropriations and a longer-term surface transportation reauthorization.
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. In California, our top revenue-generating state, a significant portion of the state infrastructure spend is funded through Senate Bill 1 (SB-1), the Road Repair and Accountability Act of 2017, which has no sunset provisions and may only be used for transportation-related purposes.
Our CAP balance continues to be strong with $7.5 billion at the end of the third quarter of 2026. 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.
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 and the conflict in Iran's impact on oil prices have been major sources of uncertainty in the economy. 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, including fixed-price forward purchase contracts of oil-related inputs, energy surcharges and adjustments to project schedules in response to construction materials constraints.
Acquisitions and Comparability
The results of operations of our acquired businesses are included in our consolidated financial statements from the date of acquisition, which impacts comparability to the applicable prior periods. See Note 3 of "Notes to the Condensed Consolidated Financial Statements" for further information.
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, 2026 and 2025:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| (in thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Revenue | $ | 1,766,331 | $ | 1,433,498 | $ | 4,134,668 | $ | 3,259,009 | |||||||||||||||
| Gross profit | $ | 335,760 | $ | 260,548 | $ | 684,436 | $ | 543,496 | |||||||||||||||
| Selling, general and administrative expenses | $ | 104,124 | $ | 101,645 | $ | 352,868 | $ | 303,443 | |||||||||||||||
| Other costs, net | $ | 6,998 | $ | 16,019 | $ | 15,441 | $ | 38,698 | |||||||||||||||
| Operating income | $ | 224,338 | $ | 143,651 | $ | 320,013 | $ | 207,465 | |||||||||||||||
| Other (income) expense, net | $ | 157,181 | $ | (3,874) | $ | 540,700 | $ | (7,536) | |||||||||||||||
| Amount attributable to non-controlling interests | $ | (7,181) | $ | (6,468) | $ | (19,069) | $ | (20,442) | |||||||||||||||
| Net income (loss) attributable to Granite Construction Incorporated | $ | 3,210 | $ | 102,929 | $ | (316,651) | $ | 140,973 | |||||||||||||||
Revenue
Revenue by Segment
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||||||
| Construction | $ | 1,474,017 | 83.5 | % | $ | 1,162,513 | 81.1 | % | $ | 3,447,550 | 83.4 | % | $ | 2,714,557 | 83.3 | % | |||||||||||||||||||||||||||||||
| Materials | 292,314 | 16.5 | 270,985 | 18.9 | 687,118 | 16.6 | 544,452 | 16.7 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 1,766,331 | 100.0 | % | $ | 1,433,498 | 100.0 | % | $ | 4,134,668 | 100.0 | % | $ | 3,259,009 | 100.0 | % | |||||||||||||||||||||||||||||||
Construction Revenue
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||||||
| Public | $ | 1,203,336 | 81.6 | % | $ | 880,416 | 75.7 | % | $ | 2,697,840 | 78.3 | % | $ | 1,928,224 | 71.0 | % | |||||||||||||||||||||||||||||||
| Private | 270,681 | 18.4 | 282,097 | 24.3 | 749,710 | 21.7 | 786,333 | 29.0 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 1,474,017 | 100.0 | % | $ | 1,162,513 | 100.0 | % | $ | 3,447,550 | 100.0 | % | $ | 2,714,557 | 100.0 | % | |||||||||||||||||||||||||||||||
Construction revenue for the three and nine months ended September 30, 2026 increased $311.5 million and $733.0 million, or 26.8% and 27.0%, respectively, compared to 2025. These increases were primarily driven by higher CAP entering the respective periods, and increased revenue from our recently acquired businesses.
Materials Revenue
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||||||
| Aggregates | $ | 121,724 | 41.7 | % | $ | 100,849 | 37.2 | % | $ | 328,460 | 47.8 | % | $ | 200,894 | 36.9 | % | |||||||||||||||||||||||||||||||
| Asphalt | 170,556 | 58.3 | 169,290 | 62.5 | 357,858 | 52.1 | 342,353 | 62.9 | |||||||||||||||||||||||||||||||||||||||
| Other | 34 | - | 846 | 0.3 | 800 | 0.1 | 1,205 | 0.2 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 292,314 | 100.0 | % | $ | 270,985 | 100.0 | % | $ | 687,118 | 100.0 | % | $ | 544,452 | 100.0 | % | |||||||||||||||||||||||||||||||
Materials revenue for the three and nine months ended September 30, 2026 increased $21.3 million and $142.7 million, or 7.9% and 26.2%, respectively, compared to 2025. These increases were primarily driven by revenue from our recently acquired businesses.
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, 2026 | June 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||
| Unearned revenue | $ | 4,852,921 | 65.1 | % | $ | 5,056,462 | 68.2 | % | $ | 4,123,113 | 59.2 | % | |||||||||||||||||||||||
| Other awards | 2,602,549 | 34.9 | 2,362,368 | 31.8 | 2,846,259 | 40.8 | |||||||||||||||||||||||||||||
| Total | $ | 7,455,470 | 100.0 | % | $ | 7,418,830 | 100.0 | % | $ | 6,969,372 | 100.0 | % | |||||||||||||||||||||||
| (dollars in thousands) | September 30, 2026 | June 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||
|
Customer type:
|
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| Public | $ | 6,200,880 | 83.2 | % | $ | 6,064,511 | 81.7 | % | $ | 6,058,998 | 86.9 | % | |||||||||||||||||||||||
| Private | 1,254,590 | 16.8 | 1,354,319 | 18.3 | 910,374 | 13.1 | |||||||||||||||||||||||||||||
| Total | $ | 7,455,470 | 100.0 | % | $ | 7,418,830 | 100.0 | % | $ | 6,969,372 | 100.0 | % | |||||||||||||||||||||||
CAP was $7.5 billion at September 30, 2026, an increase of $36.6 million, or 0.5%, from June 30, 2026. Significant additions to CAP during the three months ended September 30, 2026 included $325 million for a sewer overflow storage tunnel in Ohio, $165 million for a defense system project in Guam, $73 million for a roadway improvement project in Washington, $40 million for a roadway improvement project in Utah and $31 million of infrastructure work for an energy
storage facility project in California. Each of these projects is in the public sector except for the infrastructure project in California.
Non-controlling partners' share of CAP as of September 30, 2026, June 30, 2026 and December 31, 2025 was $420.4 million, $308.7 million and $361.4 million, respectively.
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) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Construction | $ | 274,339 | $ | 192,346 | $ | 575,213 | $ | 431,450 | |||||||||||||||
| Percent of segment revenue | 18.6 | % | 16.5 | % | 16.7 | % | 15.9 | % | |||||||||||||||
| Materials | 61,421 | 68,202 | 109,223 | 112,046 | |||||||||||||||||||
| Percent of segment revenue | 21.0 | % | 25.2 | % | 15.9 | % | 20.6 | % | |||||||||||||||
| Total gross profit | $ | 335,760 | $ | 260,548 | $ | 684,436 | $ | 543,496 | |||||||||||||||
| Percent of total revenue | 19.0 | % | 18.2 | % | 16.6 | % | 16.7 | % | |||||||||||||||
Construction gross profit for the three and nine months ended September 30, 2026 increased $82.0 million and $143.8 million, or 42.6% and 33.3%, respectively, compared to 2025, primarily due to higher revenue and improved project execution across our project portfolio.
Materials gross profit for the three and nine months ended September 30, 2026 decreased $6.8 million and $2.8 million, or 9.9% and 2.5%, respectively, compared to 2025. Materials gross profit and gross profit margin decreased year over year for both periods, primarily due to the margin impact of energy surcharges offsetting elevated diesel costs.
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 ("SG&A") expenses for the respective periods:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| (dollars in thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Salaries and related expenses | $ | 49,616 | $ | 49,942 | $ | 166,104 | $ | 158,235 | |||||||||||||||
| Incentive compensation | 18,902 | 19,315 | 36,096 | 26,380 | |||||||||||||||||||
| Stock-based compensation | 2,258 | 1,750 | 46,858 | 33,929 | |||||||||||||||||||
| Other SG&A expenses | 33,348 | 30,638 | 103,810 | 84,899 | |||||||||||||||||||
| Total SG&A expenses | $ | 104,124 | $ | 101,645 | $ | 352,868 | $ | 303,443 | |||||||||||||||
| Percent of revenue | 5.9 | % | 7.1 | % | 8.5 | % | 9.3 | % | |||||||||||||||
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, 2026 remained relatively flat compared to the same period in 2025. SG&A expenses for the nine months ended September 30, 2026 increased $49.4 million compared to the same period in 2025, primarily due to a $12.9 million increase in stock-based compensation and a $9.7 million increase in incentive compensation, both due to improved financial performance, and $7.9 million of higher salaries and related expenses due to increased labor costs. SG&A expenses also increased due to the timing of acquisitions of our recently
acquired businesses, Warren Paving, Papich Construction, Cinderlite and Kenny Seng Construction which added $18.5 million during the nine months ended September 30, 2026.
SG&A expenses as a percentage of revenue decreased for both the three and nine months ended September 30, 2026 compared to the same periods in 2025 as revenue growth outpaced the increase in SG&A expenses.
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) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Other costs, net | $ | 6,998 | $ | 16,019 | $ | 15,441 | $ | 38,698 | |||||||||||||||
Other costs, net decreased $9.0 million and $23.3 million for the three and nine months ended September 30, 2026, respectively, compared to 2025, primarily due to lower legal costs following the resolution of our former officer's civil litigation in January 2026 and lower acquisition and integration costs. See Note 3 of "Notes to the Condensed Consolidated Financial Statements" for further 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) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| (Gain) loss on convertible debt transactions, net | $ | (108,571) | $ | - | $ | 260,852 | $ | - | |||||||||||||||
| Interest income | (6,468) | (5,986) | (17,464) | (18,015) | |||||||||||||||||||
| Interest expense | 291,328 | 13,367 | 329,421 | 29,051 | |||||||||||||||||||
| Equity in income of affiliates, net | (4,586) | (4,946) | (13,756) | (9,738) | |||||||||||||||||||
| Other income, net | (14,522) | (6,309) | (18,353) | (8,834) | |||||||||||||||||||
| Total other (income) expense, net | $ | 157,181 | $ | (3,874) | $ | 540,700 | $ | (7,536) | |||||||||||||||
During the three and nine months ended September 30, 2026, total other expense, net increased $161.1 million and $548.2 million, respectively, compared to 2025. The increases were primarily driven by interest expense and gains and losses associated with our 3.75% Convertible Notes.
(Gain) loss on convertible debt transactions, net was a gain of $108.6 million and a loss of $260.9 million for the three and nine months ended September 30, 2026, respectively, related to the 3.75% Convertible Notes. See Note 14 of "Notes to the Condensed Consolidated Financial Statements" for further information.
Interest expense increased $278.0 million and $300.4 million for the three and nine months ended September 30, 2026, respectively, primarily due to $270.2 million and $273.7 million, respectively, of non-cash interest expense related to the amortization of the debt discount associated with the 3.75% Convertible Notes. Interest expense also increased due to higher borrowings under our Credit Agreement and the issuance of $600.0 million aggregate principal amount of our 6.375% Senior Notes during the second quarter of 2026.
Other income increased $8.2 million and $9.5 million for the three and nine months ended September 30, 2026, respectively, primarily due to a $13.5 million gain recognized upon the remeasurement of previously held equity method investment to its acquisition-date fair value. See Note 3 and Note 11 of "Notes to the Condensed Consolidated Financial Statements" for further information.
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) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Provision for income taxes | $ | 56,766 | $ | 38,128 | $ | 76,895 | $ | 53,586 | |||||||||||||||
| Effective tax rate | 84.5 | % | 25.8 | % | (34.8 | %) | 24.9 | % | |||||||||||||||
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.
See Note 17 of "Notes to the Condensed Consolidated Financial Statements" for further information.
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 or financing transactions or sell one or more business units or assets. See Note 14 of "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. During the nine months ended September 30, 2026, we issued $600.0 million aggregate principal amount of our 6.375% Senior Notes and completed a series of transactions that resulted in the settlement of all outstanding 3.75% Convertible Notes and the related 2023 capped call transactions. See Note 14 of "Notes to the Condensed Consolidated Financial Statements" for information on these transactions. 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, 2026, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions and marketable securities consisting of corporate notes and bonds and municipal notes and bonds.
As of September 30, 2026, the total unused availability under our Revolver was $588.8 million, resulting from $11.2 million in issued and outstanding letters of credit and no amount drawn under the Revolver.
As of September 30, 2026, one of the conditions permitting the holders of the 3.25% Convertible Notes to convert continued to be 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 ended on September 30, 2026 (the last trading day of the calendar quarter). The holders of the 3.25% Convertible Notes have the right to convert through December 31, 2026, at which point we 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 remains classified as a current liability as of September 30, 2026 in the Condensed Consolidated Balance Sheets. 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, 2026 | December 31, 2025 | |||||||||
| Cash and cash equivalents excluding CCJVs | $ | 330,582 | $ | 383,636 | |||||||
| CCJV cash and cash equivalents (1) | 149,707 | 145,584 | |||||||||
| Total consolidated cash and cash equivalents | 480,289 | 529,220 | |||||||||
| Short-term marketable securities (2) | 32,084 | 71,021 | |||||||||
| Long-term marketable securities (2) | 13,018 | 49,534 | |||||||||
| Total cash, cash equivalents and marketable securities | $ | 525,391 | $ | 649,775 | |||||||
(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 corporate notes and bonds and municipal notes and bonds as of September 30, 2026 and consisted of commercial paper, corporate notes and bonds, municipal notes and bonds and U.S. Government and agency obligations as of December 31, 2025.
Granite's portion of CCJV cash and cash equivalents was $93.3 million and $90.6 million as of September 30, 2026 and December 31, 2025, respectively. Excluded from the table above is $28.0 million and $35.0 million as of September 30, 2026 and December 31, 2025, 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, 2026, we had capital expenditures of $89.9 million, compared to $87.7 million during the nine months ended September 30, 2025. We currently anticipate 2026 capital expenditures to be between approximately $140.0 million and $160.0 million, including approximately $50.0 million in planned strategic materials investments.
Cash Flows
| Nine Months Ended September 30, | |||||||||||
| (in thousands) | 2026 | 2025 | |||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | 404,270 | $ | 289,612 | |||||||
| Investing activities | $ | (155,857) | $ | (947,793) | |||||||
| Financing activities | $ | (297,344) | $ | 521,655 | |||||||
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 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 increased $114.7 million to $404.3 million for the nine months ended September 30, 2026, compared to $289.6 million for the same period of 2025. The increase was primarily attributable to an $86.6 million increase in net income adjusted for non-cash items, an $18.7 million increase in net distributions from unconsolidated construction joint ventures and affiliates, and a $9.3 million increase in cash provided by other working capital activity,
including changes in receivables, net contract assets, inventories, other assets, accounts payable and accrued expenses and other liabilities.
Investing activities
Cash used in investing activities decreased $791.9 million to $155.9 million for the nine months ended September 30, 2026, compared to $947.8 million for the same period in 2025. The decrease was primarily attributable to $521.0 million less cash used for acquisitions, $243.8 million less net purchases of marketable securities and the collection of a $25.0 million note receivable.
Financing activities
Cash used in financing activities was $297.3 million for the nine months ended September 30, 2026, compared to cash provided by financing activities of $521.7 million for the same period in 2025. The change was primarily attributable to $797.3 million of net cash used in connection with the exchange, redemption and settlement of our 3.75% Convertible Notes, net of the related proceeds from the 2023 capped call transactions in 2026 and a $34.2 million increase in cash used for repurchases of common stock, partially offset by $25.4 million of decreased net distributions to non-controlling partners. Both periods included significant proceeds from debt issuances, including $600.0 million from the issuance of our 6.375% Senior Notes in 2026 and $600.0 million from borrowings under our Credit Agreement in 2025.
Derivatives
We use derivative instruments to manage certain risks associated with our operations and financing activities. Certain of these derivative instruments are recognized as assets or liabilities in the Condensed Consolidated Balance Sheets at fair value using Level 2 or Level 3 inputs. See Note 9 of "Notes to the Condensed Consolidated Financial Statements" for further information. We also have capped call transactions associated with our 3.25% Convertible Notes that are designed to reduce potential dilution to our common stock upon conversion of the notes and/or offset any cash payments we may be required to make in excess of the principal amount of converted notes, as the case may be. These capped call transactions are classified as equity and are not subsequently remeasured at fair value. See Note 14 of "Notes to the Condensed Consolidated Financial Statements" for further information.
Surety Bonds and Other Indebtedness
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, 2026, approximately $4.2 billion of our $7.5 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 and the indentures governing our notes contain various covenants and events of default. As of September 30, 2026, we were in compliance with the applicable covenants. See Note 14 of "Notes to the Condensed Consolidated Financial Statements" for further information regarding our debt agreements, covenants and events of default.
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"). During the three and nine months ended September 30, 2026 there were 300,000 shares repurchased under the 2022 authorization, compared to 51,120 shares and 51,320 shares repurchased in three and nine months ended September 30, 2025, respectively. As of September 30, 2026, $121.0 million remained available under the 2022 authorization.
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 SEC. From time to time, we may use our website as a distribution channel for material company information. 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 October 29, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 29, 2026 at 21:15 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]