Granite Construction announced results for the quarter ended Sept. 30. Net income totaled $73 million, or $1.44 per diluted share, compared to net income of $35 million, or $0.73 per diluted share, for the same period in the prior year. Adjusted net income totaled $63 million compared to adjusted net income of $43 million for the same period in the prior year.
- Revenue decreased $52 million to $1,010 million compared to $1,062 million in the prior year. Comparable revenue, which excludes Granite Inliner revenue of $65 million in the prior year, increased $13 million.
- Gross profit increased slightly to $120 million compared to the prior year; and gross profit margin increased to 11.9% compared to 11.3% in the prior year.
- Selling, general, and administrative (SG&A) expenses were $62 million or 6.1% of revenue, compared to $78 million or 7.3% of revenue in the prior year. The decrease in SG&A primarily relates to the sale of Granite Inliner and a decrease in incentive compensation.
Materials revenue in the third quarter increased compared to the same period in the prior year primarily due to aggregate sales volume and prices increases which more than offset lower asphalt sales volumes. During the quarter, revenue increases drove an increase in gross profit year over year. Although gross profit margin was down year over year, gross profit margin increased sequentially as we benefited from energy surcharges implemented in the second quarter.
Construction revenue in the third quarter decreased compared to the same period in the prior year. The decrease was primarily driven by a decrease in Central Group revenue, coupled with a slight decrease in Mountain Group revenue, offset by an increase in California Group revenue.
The decrease in Central Group revenue reflects the ongoing transformation of its project portfolio and timing as ORP projects are completed and new projects are awarded. The California Group carried record CAP into the third quarter driving an increase in revenue year over year.
While the Mountain Group reported a decrease in revenue year over year, comparable revenue excluding $60 million of Granite Inliner revenue in the third quarter of 2021 increased by $38 million driven by strong performance in our solar business and the Washington region and supported by the continued strength of the Utah region.
“During the third quarter, we continued to make progress towards achieving our 2024 strategic plan targets of 9% to 11% adjusted EBITDA margin,” said Kyle Larkin, Granite president and chief executive officer. “The overall market environment continues to be robust, and our teams are focused on driving improved profitability across our businesses. Our construction gross profit margin for the third quarter, excluding the ORP, was 14.8% following a gross margin of 14.1% in the second quarter. The continued strength of our construction gross profit margin reflects the work that has been underway over the last two years as we transform our project portfolio in alignment with our home market focus. Our third quarter CAP of over $4 billion is strong and is higher quality than prior years. We are raising our full year 2022 adjusted EBITDA margin guidance to 6% to 7% and expect the mid-point of our 2023 adjusted EBITDA margin guidance will be at least 8%. We are well positioned for success as we complete 2022 and move into 2023.”
Larkin continued, “I am also pleased with the progress we have made during the third quarter to collect cash and strengthen our excellent liquidity position. We are in position to opportunistically invest in our vertically integrated operations through organic investment and bolt-on acquisitions.”
For the nine months ended September 2022, net income totaled $78 million, or $1.56 per diluted share, compared to net income of $23 million, or $0.49 per diluted share, year over year. Adjusted net income totaled $88 million and adjusted diluted EPS totaled $1.93, compared to adjusted net income of $81 million and adjusted diluted EPS of $1.74, year over year.
- Revenue decreased $182 million to $2,514 million compared to $2,696 million year over year. Comparable revenue, which excludes Granite Inliner revenue of $36 million in the current year and $174 million in the prior year, decreased $44 million.
- Gross profit decreased $22 million to $278 million compared to $300 million year over year; and gross profit margin was relatively flat at 11.1%.
For the 2022 fiscal year, guidance is updated as noted below:
- Revenue updated to a range of $3.2 billion to $3.3 billion.
- SG&A expense unchanged in the range of 8.0% to 8.5% of revenue.
- Adjusted effective tax rate range unchanged at low-to-mid-20s.
- Raised adjusted EBITDA margin range of 6% – 7%.
- Capital expenditures updated to a range of $120 million to $130 million.