Good day. My name is Illy, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Granite Construction Investor Relations First Quarter 2021 Conference Call. This call is being recorded. All lines have been placed on mute to prevent any background noise, and after the speakers’ remarks, there will be a question-and-answer period. It is now my pleasure to turn the floor over to your host, Granite Construction Incorporated, Vice President of Investor Relations, Mike Barker. Sir, the floor is yours.

Good morning and thank you for joining us. I am pleased to be here today with Granite President, Kyle Larkin; and Executive Vice President and Chief Financial Officer, Lisa Curtis. Please note that today’s earnings presentation will be available on the Events and Presentations page of Granite’s Investor Relations website. We begin today with an overview of the company’s Safe Harbor language. Some of the discussion today may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are estimates, reflecting the current expectations and best judgment of senior management regarding future events, occurrences, growth, demand, strategic plans, circumstances, activities, performance, outcomes, outlook, guidance, backlog, committed and awarded projects, and results. Actual results could differ materially from statements made today. Please refer to Granite’s most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these forward-looking statements. The company assumes no obligation to update forward-looking statements, whether they are results of new information, future events or otherwise, except as required by law. Certain non-GAAP measures may be discussed during today’s call and from time to time by the company’s executives. These include, but are not limited to, adjusted EBITDA, adjusted EBITDA margin, adjusted net income or loss and adjusted earnings or loss per share. Reconciliations of non-GAAP measures are included as part of our earnings press releases and in company presentations, which are available on our Investor Relations website. Now I would like to turn the call over to Granite President, Kyle Larkin.

Thank you, Mike. Good morning and thank you all for joining us on our call today. To start off the call, I would like to comment on our press release where we announced that we have reached a settlement to resolve securities litigation subject to court approval. Although it was a difficult decision, we concluded that it was in the best interest of the company, as well as our shareholders to move forward. Following court approval, we will be able to put this litigation behind us and focus on our business and people. Granite's portion of the settlement is insurance is $66 million, and we expect it to be paid from existing cash on hand. As Lisa will explain in further detail later in the call, despite this event, our liquidity and cash position remains strong. As I’ve discussed in previous calls, our core values guide us in our day-to-day operations and are serving as the foundation of our cultural reinvigoration. On the last call, I provided an overview of our sustainability core value and the efforts that are underway to drive sustainability forward at Granite. Today, I will touch on two more of our core values, safety and inclusion, and how we are integrating them into our day-to-day operations to drive desired behaviors. Granite’s choice to continue to include safety as a core value is embedded in our culture and reflects our belief that the safety and well-being of our people, our partners, and the public is our greatest responsibility. Every level of our organization supports our safety culture with training, planning, and engagement. We approach every task with safety built into the process, and we do not sacrifice anyone’s safety to get the job done. While safety is front of mind every day at Granite, it is particularly timely to talk about our safety commitment on the heels of safety week, which is just concluding today. Safety week is an industry-wide national event, and Granite was one of the founding members almost a decade ago. Across the country on Granite projects and in our offices, we conduct daily activities to reinforce and strengthen our commitment to safety. This week, I had the opportunity to visit Granite project teams and take part in safety meetings across the country. The planning and attention to detail that our teams presented in these safety meetings are impressive and demonstrate our focus on safety. Inclusion is a core value that was added this year, but it’s been an important focus since 2019. Since it’s a new core value, we want to provide additional details as to why we chose to recognize its importance. Inclusion is how we build value in our company by welcoming contributions from all of our employees. Our differences enhance creativity and innovation to create a high-performance culture and have a positive impact on how we achieve our business goals and objectives. At Granite, we value and respect the workforce's diverse perspectives, experience, knowledge, and culture, and we are committed to an inclusive environment where everyone feels a sense of belonging and can grow. To live this value, we must understand a couple of things. First, we know that diversity is the mix of our employees, clients, and community, and inclusion is how we make that mix work. We have made significant progress in our inclusive diversity journey, starting with our employee resource groups, Granite Resources and Opportunities for Women (GROW), and supporting and recognizing the veteran community for service. GROW advocates for and supports women who are mentoring, networking, and developing their careers, while also recognizing employees that have served, and the family members of employees that have served, in all branches of the military. We have also established executive inclusive diversity and multicultural councils, conducting leadership training and establishing relationships with historically black colleges and universities. In 2020, we had over 200 interns, and more than half were diverse. In addition, one-third of our executive team and nearly half of our Board of Directors are diverse. Looking forward, we will continue to create clarity around inclusive diversity by having discussions concerning how we can be more inclusive. We will continue to develop talent and strengthen our talent pipeline at all levels, with a focus on women and people of color. We know that cultivating an inclusive environment doesn’t happen overnight; it happens over time. I am proud of our inclusion efforts, and I am excited about the culture we are creating here at Granite. Okay, let’s switch gears and talk about our business segments, starting with Transportation. The first quarter is typically our slowest quarter, with cold and wet weather regularly hampering work in many of our markets. Even with the challenges of weather, I am pleased with the performance of the segment, not only on the top line but also at the gross profit level due to good execution across our operating groups. Some good news to share: we continue to burn through the backlog of Heavy Civil Operating Group's Old Risk Portfolio with a minimal impact on gross profit during the quarter. This was a marked improvement over the last two years. The remainder of the segment, which is primarily comprised of Vertically Integrated projects, also completed a solid first quarter, setting the stage for a busy remainder of the year. The bidding environment is strong with robust opportunities in our markets, resulting in an increase in our bid volume year-over-year. While we routinely share information about our larger project wins, we also continue to have success in winning smaller- to medium-sized projects that are the foundation of our portfolio. The first quarter of the year is historically a very competitive bidding environment with contractors more aggressively bidding to build backlog early in the year. We’ve seen this dynamic in the first quarter of 2021. We’ve increased bid volume and strong competition. As anticipated, transportation committed and awarded projects, or CAP, decreased year-over-year with the shift in the portfolio as Heavy Civil Operating Group CAP is burned and replaced with CAP from our Vertically Integrated businesses, including best value procurement work. The extension of the FAST Act, the $13.6 billion infusion to the Highway Trust Fund for 2021 and the enactment of Coronavirus Relief bills have combined to provide direct and indirect support for transportation funding. Funding is positive across our markets, and we are hopeful that a federal infrastructure bill will be signed into law this year. Turning to the Water segment, in the first quarter, we continued to see a recovery from the pandemic, but the deep freeze in Texas during the quarter interrupted the supply chain, resulting in a spike in resin costs. Resin is a product used in our trenchless cured-in-place pipe rehabilitation business, Granite Inliner. Although this segment was hardest hit by the pandemic, we are seeing an increase in bid opportunities, positive indications for the remainder of the year. As a result, the Water segment's CAP remains strong as of the end of the first quarter at $339 million. This figure does not include the recently awarded Leon Hurse Dam project in Texas for approximately $160 million, which will be included in our second quarter CAP. This award is a component of the overall Lake Ralph Hall project, which will be one of Texas's newest lakes and one of the state’s biggest water projects in the last 30 years. Granite has a long history of working on complex dam projects, and we are proud to continue this work on the Leon Hurse Dam. All levels of government recognize the critical need to repair and support water infrastructure across the country, as seen in the ongoing discussions around the federal infrastructure bill and the Senate recently passed $35 billion water infrastructure bill. We have been successful in winning water infrastructure projects, and there are multiple opportunities in the Water market that Granite is currently pursuing. We believe we are well-positioned to continue to procure work in this area. Moving on to the Specialty segment. Our team has turned in a solid quarter and ended with a record CAP of over $1 billion. In the first quarter, we added to CAP a significant new $267 million tunnel project in Columbus, Ohio. We are excited to continue our relationship with the City of Columbus, where we successfully completed a large tunnel project just a couple of years ago. Additionally, operating groups continue to foster new relationships and build upon existing relationships to expand our footprint with both public and private clients. Recent project wins include several projects with a variety of mining clients in different geographies across our business, a project to establish a new rail yard in the Port of Stockton, California, and a federal project to expand a military facility in Guam. Both the private and public markets within the diverse specialty segment continue to be strong, with investment driven by the overall positive economic outlook. The segment is a growing area of our business, and we look for that to continue in 2021 and beyond. Moving on to the Material segment. The first quarter results were terrific in our seasonally slowest quarter. We ended the quarter with significantly higher Material orders compared to the prior year, which resulted in higher sales volumes in 2021 led by the California Operating Group. As of the end of the quarter, Material orders continue to outpace the prior year with strong demand in both California and Northwest Operating Groups. This demand is a positive indicator for the remainder of 2021, not only in the Material segment, but also for our Vertically Integrated Construction businesses. As of the end of the first quarter, our consolidated CAP is $4.5 billion, an increase during the quarter of over $170 million compared to year-end levels. CAP in our Specialty and Water segments continues to grow as we pursue end market diversification. The Old Risk Portfolio, design-build CAP, continues to decline as our Risk Profile has transformed following our new project selection criteria. Finally, our CAP portfolio is more evenly distributed across operating group geographies. As I mentioned on previous calls, we have been transforming our CAP portfolio focused on reducing risk. Our teams have made significant progress and continue to execute on our plan. With that, I am going to turn it over to Lisa to discuss our financial results.

Thank you, Kyle. Starting with revenue and gross profit, the first quarter delivered strong results on both measures. First quarter consolidated revenue grew 5% year-over-year to $670 million, with gross profit increasing 166% year-over-year to $63 million, resulting in a gross profit margin of just under 10%. Within our Transportation segment, revenue was up slightly year-over-year to $351 million, led by an increase from the California Operating Group, which offset a revenue decrease from the Heavy Civil Operating Group. Transportation gross profit for the quarter increased 41% to $36 million, resulting in a gross profit margin of 10%. The increase in gross profit was primarily due to a decrease in project losses from the Heavy Civil Operating Group's Old Risk Portfolio. Losses from the Old Risk Portfolio in the first quarter of 2021 were under $1 million compared to losses of $13 million in the first quarter of 2020. The Old Risk Portfolio backlog decreased by nearly $100 million during the quarter, which is on pace to meet our estimated project burn of $425 million to $475 million during 2021. Our team’s execution in the first quarter served to mitigate exposure in the Old Risk Portfolio, and we are optimistic this will continue in the future. In our Water segment, first quarter revenue was down 2% year-over-year as the segment continued its recovery from the COVID-19 pandemic. Water gross profit for the first quarter decreased 8% year-over-year to $9 million, resulting in a gross profit margin of 9%. This decrease in gross profit was primarily due to temporarily higher resin costs related to supply chain disruptions caused by winter weather events in Texas. Moving on to the Specialty segment, first quarter revenue increased 17% year-over-year to $156 million. Specialty gross profit increased 262% to $17 million, with a gross profit margin of 11%. As a reminder, there were significant write-downs during the first quarter of 2020 related to a dispute on a tunneling project that reduced gross profit in the prior year. Finally, the Materials segment completed an exceptional first quarter with a revenue increase of 26% year-over-year to $63 million in 2021. This increase was largely due to strong sales volumes in the east. Materials gross profit increased to $2 million, resulting in a gross profit margin of just under 3% compared to breakeven in the prior year. This increase in gross profit was also primarily related to higher volumes across the business. Turning now to our non-GAAP financial metrics, adjusted EBITDA for the first quarter increased $35 million year-over-year to $17 million, resulting in an adjusted EBITDA margin of over 2% for the quarter. The increase in adjusted EBITDA was driven in part by improvement in project execution, as we continue to burn through the Heavy Civil Operating Group's Old Risk Gross Portfolio during the first quarter of 2021. In addition, we also benefited from improvements in gross profit in the Specialty and Materials segments year-over-year. Our first quarter resulted in an adjusted net loss of $5 million, which was a $27 million improvement from an adjusted net loss of $32 million in the prior year. As a reminder, these non-GAAP financial metrics are adjusted to exclude other costs, which include the impact of the legal settlement and associated legal and accounting fees, non-cash impairments of goodwill, transaction costs, and amortization of debt discount. Now turning to cash and liquidity. We had another strong cash quarter with cash from operations of $38 million and a net increase in cash during the quarter of $17 million compared to year end. This was an outstanding result for the first quarter of the year. We ended the first quarter with cash and marketable securities of over $464 million, and our teams remain focused on working capital management. Upon court approval and finalization of the securities litigation settlement, we expect to pay our portion from existing cash on hand. While we anticipate seasonal cash trends to be consistent with prior year patterns, our 2021 cash projections for the remainder of the year remain solid. With the completion of the first quarter, we are reiterating our guidance for the full fiscal year 2021. There are opportunities within each of our markets and very active bid schedules across the company. We believe we can capitalize on these opportunities to achieve low-to-mid single-digit revenue growth. SG&A increased $2.5 million year-over-year to $76 million, which was 11.3% of revenue for the first quarter. This increase was primarily attributable to a change in the fair market value of our non-qualified deferred compensation plan liability of $5 million year-over-year. This increase is offset by corresponding investment gains and other income and expense net. For the full year, our guidance is unchanged with an expected SG&A expense of 8.5% to 9% of revenue. During the first quarter, we had solid execution across all groups and segments. We expect this execution will allow us to achieve an adjusted EBITDA margin range of 5.5% to 7.5%. With that, I will turn it back over to Kyle for closing remarks.

Thanks, Lisa. Let me close with the following points. In what is typically a seasonally tough quarter, we are pleased with our first quarter performance across the company. Our teams have done a great job maintaining focus on execution, particularly in the Old Risk Portfolio. We believe the Securities litigation settlement is in the best interest of the company and our shareholders. This will allow us to focus on execution in 2021 as we work to refresh our longer-term strategic plan. Across our markets, we are seeing a healthy bidding environment, but we have opportunities to continue the transformation of our portfolio and build quality CAP. Finally, we are optimistic about the funding environment. The economy appears to be strong with continued investment from the private market, and the public funding environment has been supported by direct and indirect infrastructure legislation from several different measures. We remain hopeful the enactment of a federal infrastructure bill will occur this year and will serve to further strengthen the environment in 2021, 2022, and beyond. Operator, I will now turn it back to you for questions.

Thank you. Our first question comes from Brent Thielman with D. A. Davidson.

Yes. Thank you. Good morning.

Good morning, Brett.

Good morning.

I guess, first question is, pretty significant growth in CAP within the Specialty and Water segments in the first quarter, even on a sequential basis. Can you help us think about that through the timing of conversion of awarded work? I know water tends to be a little faster burn, but could we see the majority of that work in Specialty move through this year?

Yeah. So, this is Kyle. And what we can talk a little bit about that. Certainly, we anticipate in the Specialty segment that it’s going to convert relatively quickly. A big piece of that was the Specialty and the Specialty segment was the project in Ohio for the tunnel group, and that job has been awarded. We anticipate that we’ll get kicked off and that will convert relatively quickly. In general, a lot of the Specialty work is site development projects, data centers, and supporting commercial builders, and that converts relatively quickly as well.

Okay. And I guess my follow-up, I mean, the 10% gross margin in Transportation in a first quarter is particularly good for this time of the year, and I don’t think weather was entirely in your favor this period. So, I guess just looking for any additional color, is it the work that you’re pursuing, Kyle, just the execution? I would love to just get some more color on that margin this quarter?

Yeah. I would say, the weather was actually pretty good in the west. And so we saw similar weather this year in Q1 that we saw in 2020. So that’s certainly helped that segment. I think, in general, our teams executed very well in Q1, which they’ve kind of built on some really strong momentum coming from 2020.

Okay. Thank you.

Thank you.

Our next question comes from Michael Dudas with Vertical Research Partners.

Good morning, gentlemen, and Lisa.

Hey. Good morning, Mike.

Good morning.

Kyle, you mentioned about the first quarter competitive nature on bidding from the competitors and such, as you’ve gotten through April looking into May, are you still able to be more selective? Have competitors' backlogs been filling up rather quickly? And maybe as you talked about, as you indicated your range between 5.5% and 7.5% EBITDA for 2021, what are some of the drivers that might move you from one end of the range to the other?

I will begin by addressing the first question concerning the bid environment. We are experiencing a robust bid environment across our entire portfolio, particularly within our BI business, where we are increasing the volume of bids, even for some of the large projects under our new Risk Portfolio Profile and in the Water segment. We are pleased with the opportunities ahead of us, and our bid schedule is stronger than it was at this time last year, which is encouraging. In terms of competition, the landscape is varied. There are still many competitors on bid day, but we are finding opportunities in specific markets, allowing us to gradually raise prices. However, we are being selective with some larger projects, as we aim to advance our business according to the new Risk Profile, exemplified by the Leon Hurse Dam project. The second part of your question pertains to the key drivers influencing our guidance, which can be categorized into three components. The first is project execution. We are deeply focused on execution across all business areas, predominantly in the Heavy Civil Group regarding the Old Risk Portfolio. We are satisfied with our performance; our burn rate aligns with our prior forecasts, and while we’ve seen some fluctuations in margin data, there have also been gains. This situation has not drastically affected our gross profit for the quarter, and our execution in Q1 has been commendable. The second component is weather, which notably impacts Q1 and Q4. We navigated Q1 with favorable weather similar to 2020, but we remain uncertain about Q4, though we are optimistic it will be beneficial for us. Lastly, our ability to win and execute work in 2021 is crucial. Our teams are focused on the opportunities available, which is encouraging, and now they need to work on securing and successfully delivering these projects this year. If we can align these three factors, we will likely reach the upper end of our guidance.

It sounds like you’ve got comfortable with your revenue coverage, like what you have in the pipeline relative to your revenue potential for 2021?

Yeah. Yeah. I think we feel good.

We do. And Mike, this is Lisa. Just to add a little bit on CAP. We’re continuing to see the shift in mix that started last year, so while the Heavy Civil Group portion of the portfolio continues to decrease as expected, we’re still maintaining our overall CAP balance. We’re seeing an increase in the Vertically Integrated business and our Water business. What we have at the end of Q1 does not even include the $160 million Hurse Dam project. Of course, specialty is up, and we’re still seeing a strong market for the CMGC work. When we look at the pipeline for the Heavy Civil Group, a large component of that is the CMGC kind of best value procurement work. It’s nice to see that strategy continuing to work for us.

I appreciate it. And then just my quick follow up would be on the Material side. Certainly, a very good start in Q1. We’ve been hearing from other building product providers about good pricing and good volume expectations. Do you see that in your world of asphalt side, and any price-cost issues that we might see roll through? But I would think that given your opportunities for the bidding and for the good start, that that Materials segment could see some upside as we move through 2021.

Yeah. We think that we are encouraged by what we saw in Q1. I think that’s more indicative of overall better market, and we do think that there will be opportunities for us to push pricing in certain markets this year.

Our next question comes from Steven Ramsey with Thompson Research Group.

Hey, good morning.

Hey. Good morning, Steven.

Maybe to start with, I guess, just to think about winning work in a competitive bidding environment. I know it’s always competitive. I mean, is the bidding environment now similar to the past all in and in what ways is it different in maybe a good or bad way? And then, lastly there, in what segment is bidding most challenging?

Okay. Well, I would say, I have mentioned before that the bidding environment goes through different stages throughout the year where contractors' backlogs may midyear, they burn through it and they get a little more aggressive in Q4 and Q1. We’re seeing that normal pattern today. Although I’d say, maybe, it’s a little bit more intensified in Transportation today just because a lot of contractors burn through backlog, and with the pandemic, some agencies just held back on lettings. So we are seeing competition in many of our markets extend a little further than typical. But our teams have done a really nice job of continuing to capture work. Some markets have already shown improvement, and so we’re able to be a little more selective in building the right backlog and our business in those markets. I would say, Transportation is where we see the most competition in our segments today.

But overall lettings, what the states municipalities are putting out, is very strong.

Okay. Okay. Good. And then thinking about the Material segment, maybe to ask a little bit differently than it was. Orders are up in Materials and how much of that is due to the vertically integrated business being up strongly, and how much of that is external customers? And turning to kind of combine your thoughts on the last question, tough bidding environment and transportation combined with rising costs, does that present price-cost challenges down the road, or are you factoring that into your positive pricing outlook?

Okay. Let me start with the Materials question. The sales volumes are up, and demand is up externally and internally for our BI business, as well as our external sales. So we’re seeing it on both sides. I think that’s even better news if you look at our Materials business. In terms of rising costs, we do have the ability to price that into our work. Certainly, the one that jumps out today would be more around diesel, and we anticipated that we would see diesel increases in 2021. So the work that we’re pursuing today has those anticipated increases already built in for the most part. A lot of our customers have escalation clauses, certainly around things like steel, which we’ve seen, and there are some steel increases out there, cement and others as applicable.

Great. Thank you.

Thank you.

Thank you.

Our next question comes from Jerry Revich with Goldman Sachs.

Yeah. Hi. Good morning.

Good morning.

Good morning.

I am wondering if you could talk about just the overall bid pursuit pipeline that you folks are looking at today. And just to quantify some of the prior comments on the bid environment, Kyle, if you don’t mind. How does that compare today versus last year as you look across the footprint based on everything you’re tracking?

I’d say it’s up. So, just in general, on projects under about $150 million, we’re up probably about $400 million to $500 million for this month versus what we’ve seen in the prior year, so quite a bit. Projects over $150 million, again, we’ve been a lot more selective in what we’re pursuing and how we’re pursuing it. As Lisa mentioned, the type of work that we’re pursuing over $150 million, a lot of that is best value procurement. Almost three quarters of it is best value procurement. Even with the new constraints we have put on ourselves, the projects over $150 million, the pipeline is very consistent with last year if not up slightly.

Okay. And in terms of the business model transition, it’s been nice to see the pipeline up with the more strict standards. Can you talk about whether that’s a function of the market evolving on risk terms overall, or are you seeing, in other words, the same level of discipline out of your competitors, or is it just a function of the market for this type of procurement is just larger than what the company has viewed as possible in the past?

I think it's just a shift. Instead of focusing on mega projects, we are now pursuing smaller large projects that enable our teams to estimate more work and secure more projects. While the dollar amount on the large project side may be smaller today, our average job size in pursuit is around $300 million. This is considerably less than it was before, and that decision was made internally.

Yeah. Jerry, this is Lisa. Those higher risk projects are still out there. We’ve made the internal decision to not pursue them.

Okay. Thank you. And then in terms of the execution on the legacy projects, really excellent performance this quarter, can you just talk about what went right for you folks? Because obviously for these types of projects, history would dictate that there is a risk of write-downs from an accounting standpoint as you progress toward project completion, and you folks were able to avoid that this quarter. So can you just talk about where productivity improved and just could you give us a little bit more context on what went well?

Yeah. And unfortunately, we were out this week with safety week, and we got to meet a lot of our teams on some of these tough jobs, and I mean credit to them. They’re working really hard to focus on bringing these jobs to completion. I think through all of our work over the last year, bidding processes and controls, and ultimately, getting our forecast right. I think that’s a contributor as well. We did have a couple of fades in terms of our forecast margin, and we had some gain margins that offset each other to the point we are. I do, obviously, recognize and respect the risks associated with that portfolio. But I believe our teams are asking at a high level on those projects, as I said, they are focused on bringing those things to completion.

Yeah. Thank you.

Yeah. Jerry, just to add on to what Kyle was saying, as just a reminder, we still have approximately $600 million in our portfolio to work through. So, again, it was a really good first quarter, and we’ve been relentless on many fronts dealing with these riskier projects, so good to get through Q1.

Yeah. Great. Thank you.

This will end our Q&A session. I’d like to turn the call back over to Mr. Larkin.

Okay. Well, thank you for your questions. As always, I want to thank all of our employees for everything you do every day for Granite and for our customers. Your hard work and dedication is the cornerstone of Granite's success. And with that, thank you for your continued interest in Granite. We look forward to speaking with everyone very soon. Thank you.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.