• Revenue guidance is unchanged despite year-to-date revenue decrease compared to the same period in the prior year as portfolio shifts to smaller, less risky projects
• Old Risk Portfolio ("ORP") projected burn for 2022 remains on track but impacted gross profit margin during the period
• Non-ORP gross profit margin improved compared to the same period in the prior year
• Committed and Awarded Projects ("CAP") (1) increased $279 million sequentially ending at $4.2 billion
• Investments in construction materials assets completed and entered into an amended credit facility to support investment and growth plan for home markets

Granite Construction Incorporated (NYSE: GVA) today announced results for the quarter ended June 30, 2022.

Second Quarter 2022 Results

Net loss from continuing operations totaled $(2) million, or $(0.05) per diluted share, compared to net income from continuing operations of $25 million, or $0.52 per diluted share, in the same period in the prior year. Adjusted net income from continuing operations (2) totaled $17 million, or $0.38 per diluted share, compared to adjusted net income from continuing operations (2) of $30 million, or $0.66 per diluted share, in the same period in the prior year.

• Revenue decreased $67 million to $768 million compared to $835 million in the prior year.
• Gross profit decreased $20 million to $78 million compared to $98 million in the prior year; and gross profit margin decreased to 10.2% compared to 11.8% in the prior year.
• Selling, general, and administrative (“SG&A”) expenses were $53 million or 6.9% of revenue, compared to $59 million or 7.0% of revenue in the prior year.
• Adjusted EBITDA (2) from continuing operations totaled $39 million compared to $62 million in the prior year.
• CAP (2) totaled $4.2 billion, which was up $279 million sequentially and up $33 million compared to the same period in the prior year.
• Cash and marketable securities decreased $146 million to $242 million compared to $388 million in the same period in the prior year, while debt decreased $52 million to $288 million from $340 million in the same period in the prior year.

"During the second quarter, we continued to implement our strategic plan," said Kyle Larkin, Granite President and Chief Executive Officer. "The divestiture of the remaining businesses of the legacy Water and Mineral Services group are moving forward. We also announced strategic investments in our home markets with the purchase of aggregates in Salt Lake City and a liquid asphalt terminal in California. Additionally, we secured long-term capital to support investment and growth with the execution of our amended credit facility and we executed on a $50 million accelerated share repurchase. Second quarter results were impacted by additional costs in the ORP as the portfolio continues to be challenging with our teams working to complete them as expeditiously as possible. Our estimate of remaining ORP work going into 2023 is on track and remains largely unchanged. Looking beyond the ORP, our core business is getting stronger, illustrated by improved gross profit margins excluding the ORP and higher quality CAP in mix and margin. I am pleased with our CAP of $4.2 billion as of the end of the quarter and I am optimistic about the overall environment in our markets as we move into our busiest quarter. While we still have work to do to improve margins on bid day and in project execution, we are making progress and are tracking to the strategic plan projections provided in our last earnings call. We also took an important step forward this quarter as we accrued $12 million for an expected resolution of the SEC investigation."

Larkin continued, "With our strong balance sheet and liquidity, we expect to continue to invest in our home markets organically as we also actively explore opportunistic bolt-on acquisitions. These investments should bolster and expand existing home markets and position the company for consistent profitable growth."

Six Months Ended June 2022 Results

Net loss from continuing operations totaled $(21) million, or $(0.47) per diluted share, compared to a net loss from continuing operations of $(38) million, or $(0.84) per diluted share, in the prior year. Adjusted net income from continuing operations (2) totaled $6 million, or $0.12 per diluted share, compared to adjusted net income from continuing operations (2) of $23 million, or $0.51 per diluted share, in the prior year.

• Revenue from continuing operations decreased $85 million to $1.3 billion compared to $1.4 billion in the prior year.
• Gross profit from continuing operations decreased $24 million to $128 million compared to $152 million in the prior year; and gross profit margin decreased to 9.7% compared to 10.8% in the prior year.
• SG&A expenses from continuing operations were $112 million or 8.5% of revenue, compared to $120 million or 8.6% of revenue in the prior year.
• Adjusted EBITDA (2) from continuing operations totaled $43 million compared to $71 million in the prior year.

(1) CAP is comprised of 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, as well as the general construction portion of construction manager/general contractor, construction manager/at risk and progressive design build contracts to the extent contract execution and funding is probable.

(2) Adjusted net income (loss) from continuing operations, adjusted diluted income (loss) per share from continuing operations, earnings before interest, taxes, depreciation, and amortization (“EBITDA”) from continuing operations, EBITDA margin from continuing operations, adjusted EBITDA from continuing operations, and adjusted EBITDA margin from continuing operations are non-GAAP measures. Please refer to the description and reconciliation of non-GAAP measures in the attached tables.

Second Quarter 2022 Segment Results (Unaudited - dollars in thousands)

Construction revenue in the second quarter decreased compared to the same period in the prior year primarily due to an $81 million decrease in revenue in the Central group as the transformation of its portfolio continues and ORP projects continue to move towards completion. The California group revenue decrease of $30 million in the second quarter was mostly offset by an increase of $28 million in revenue in the Mountain group. In the California Group, delays in project starts impacted revenue during the quarter despite a strong macro environment in the state. The California group ended the quarter with record CAP of $1.6 billion. Gross profit in the second quarter decreased compared to the same period in the prior year due to losses in the ORP. During the second quarter, ORP revenue totaled $49 million with a gross loss of $(21) million and net loss, after non-controlling interest ("NCI"), of $(18) million, compared to ORP revenue of $115 million with a gross profit of $2 million and net profit, after NCI of $4 million, in the same period in the prior year. While the ORP continued to progress during the quarter, the complex nature of the projects resulted in unanticipated cost increases which impacted gross profit for the quarter. Excluding the impact of ORP losses during the quarter, Construction gross profit margin was 14.1% compared to 12.3% in the prior year. For the six months ended June 30, 2022, ORP revenue totaled $129 million with a gross loss of $(24) million and net loss, after NCI of $(21) million, compared to ORP revenue of $220 million with a gross profit of $2 million and net profit, after NCI of $5 million.

CAP was up $279 million sequentially and up $33 million compared to the prior year. The $433 million year over year increase in CAP in the California and Mountain groups was partially offset by the $400 million decrease in Central group CAP.

Materials revenue in the second quarter increased compared to the same period in the prior year as price increases in both aggregates and asphalt more than offset volume decreases in aggregates and asphalt. Gross profit and gross profit margin were negatively impacted year over year by higher fuel and liquid asphalt costs as many sales completed in the second quarter were fulfilling orders placed prior to the energy surcharges being implemented in early April. This price impact associated with the timing difference is expected to decline in the third quarter.

Outlook

For the 2022 fiscal year, the Company is revising adjusted EBITDA margin guidance to a range of 5.5% - 6.5% from a range of 6% - 8%. The remaining guidance below is unchanged:

• Low single digit growth in revenue from continuing operations
• SG&A expense from continuing operations in the range of 8.0% to 8.5% of revenue
• Low-to-mid-20s effective tax rate range
• Capital expenditures in the range of $100 million to $115 million

Conference Call

Granite will conduct a conference call today, July 28, 2022, at 8:00 a.m. Pacific Time/11:00 a.m. Eastern Time to discuss the results of the quarter ended June 30, 2022. The Company invites investors to listen to a live audio webcast of the investor conference call on its Investor Relations website, https://investor.graniteconstruction.com. The investor conference call will also be available by calling 1-877-328-5503; international callers may dial 1-412-317-5472. An archive of the webcast will be available on Granite's Investor Relations website approximately one hour after the call. A replay will be available after the live call through August 4, 2022, by calling 1-877-344-7529, replay access code 2178808; international callers may dial 1-412-317-0088.

About Granite

Granite is America’s Infrastructure Company™. Incorporated since 1922, Granite (NYSE:GVA) is one of the largest diversified construction and construction materials companies in the United States as well as a full-suite civil construction provider. Granite’s Code of Conduct and strong Core Values guide the Company and its employees to uphold the highest ethical standards. Granite is an industry leader in safety and an award-winning firm in quality and sustainability. For more information, visit the graniteconstruction.com, and connect with Granite on LinkedIn, Twitter, Facebook and Instagram.

Forward-looking Statements

Any statements contained in this news release that are not based on historical facts, including statements regarding future events, occurrences, opportunities, circumstances, activities, performance, growth, demand, strategic plans, shareholder value, outcomes, outlook, 2022 fiscal year guidance for revenue from continuing operations, Adjusted EBITDA margin from continuing operations, SG&A expense from continuing operations, effective tax rate, and capital expenditures, Committed and Awarded Projects (“CAP”), results, the expected sale of the Water Resources and Mineral Services businesses, expected full-year revenue growth to be unchanged, the ORP projected burn for 2022, the expected resolution of the SEC investigation, continued investments in our home markets both organically and through bolt-on transactions and that pricing impacts resulting from timing differences are expected to decline in the third quarter 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,” "guidance" and the negatives thereof or other comparable terminology or by the context in which they are made. These forward-looking statements are estimates reflecting the best judgment of senior management and reflect our current expectations regarding future events, occurrences, opportunities, circumstances, activities, performance, growth, demand, strategic plans, shareholder value, outcomes, outlook, 2022 fiscal year guidance for revenue from continuing operations, Adjusted EBITDA margin from continuing operations, SG&A expense from continuing operations, effective tax rate, and capital expenditures, CAP, results, the expected sale of the Water Resources and Mineral Services businesses, expected full-year revenue growth to be unchanged, the ORP projected burn for 2022, the expected resolution of the SEC investigation, continued investments in our home markets both organically and through bolt-on transactions and that pricing impacts resulting from timing differences are expected to decline in the third quarter. 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 described in greater detail in our filings with the Securities and Exchange Commission, particularly those described in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

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 news release and, except as required by law; we undertake no obligation to revise or update any forward-looking statements for any reason.

Non-GAAP Financial Information

The tables below contain financial information calculated other than in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Specifically, management believes that non-GAAP financial measures such as EBITDA from continuing operations and EBITDA margin from continuing operations are useful in evaluating operating performance and are regularly used by securities analysts, institutional investors and other interested parties, and that such supplemental measures facilitate comparisons between companies that have different capital and financing structures and/or tax rates. We are also providing adjusted EBITDA from continuing operations and adjusted EBITDA margin from continuing operations, non-GAAP measures, to indicate the impact of Other costs which include a legal settlement charge, legal and accounting investigation fees, an accrual relating to the expected resolution of the SEC investigation, divestiture expenses and restructuring charges.

We provide adjusted income (loss) before provision for (benefit from) income taxes from continuing operations, adjusted provision for (benefit from) income taxes, adjusted net income (loss) attributable to Granite Construction Incorporated from continuing operations, and adjusted diluted earnings per share attributable to common shareholders from continuing operations, non-GAAP measures, to indicate the impact of the following:

• Other costs which include a legal settlement charge, legal and accounting investigation fees, an accrual relating to the expected resolution of the SEC investigation, divestiture expenses and restructuring charges; and
• Interest expense and amortization of debt discount related to our 2.75% Convertible Notes.

Management believes that these additional non-GAAP financial measures facilitate comparisons between industry peer companies and management uses these non-GAAP financial measures in evaluating the Company's performance. However, the reader is cautioned that any non-GAAP financial measures provided by the Company are provided in addition to, and not as alternatives for, the Company's reported results prepared in accordance with U.S. GAAP. Items that may have a significant impact on the Company's financial position, results of operations and cash flows must be considered when assessing the Company's actual financial condition and performance regardless of whether these items are included in non-GAAP financial measures. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures provided by the Company may not be comparable to similar measures provided by other companies. The Company does not provide a reconciliation of forward-looking adjusted EBITDA margin from continuing operations to the most directly comparable forward-looking GAAP measure of net income (loss) attributable to Granite Construction Incorporated from continuing operations because the timing and amount of the excluded items are unreasonably difficult to fully and accurately estimate.

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