Good morning. My name is Betsy, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Granite Construction Incorporated 2022 First Quarter Conference Call. This call is being recorded. And after the speakers' remarks, there will be a question-and-answer period. It is now my pleasure to turn the floor over to Vice President of Investor Relations, Mike Barker.

Good morning and thank you for joining us. I'm pleased to be here today with President and Chief Executive Officer, 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 our Investor Relations website. We begin today with a brief discussion regarding forward-looking statements and non-GAAP measures. 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, opportunities, targets, growth, demand, strategic plans, circumstances, activities, performance, shareholder value, outcomes, outlook, guidance, objectives, committed and awarded projects, or CAP, 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, 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. The required disclosures regarding our 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 Kyle Larkin.

Thank you, Mike. Good morning. In our fourth quarter conference call, we briefly discussed our new strategic plan. Today, we will share more detail about our plan and how we believe it will position Granite for success. I want to start with an overview of the foundational strides we have made to deliver consistent profitability and measured growth. We have made substantial progress in derisking our project portfolio by narrowing the footprint of our former Heavy Civil group and introducing rigorous project selection criteria. This represents a transition away from mega design build and P3 projects to project delivery methods that more appropriately share project risk. This reduces Granite's exposure to the types of complex design build projects that we and others have struggled with recently. We believe that this transition has increased the quality of our committed and awarded projects, or CAP, and that our existing CAP portfolio positions us for increased profitability in 2022 and beyond. Our strategic plan contemplates a return to strong profitability by focusing on our core construction skills, the skills that we have developed and honed over the past 100 years. As part of this focus on core competencies and as previously announced, we are in the process of divesting our former Water and Mineral Services group businesses. Proceeds from these sales will add to our already strong cash position and support strategic investments and new opportunities to grow both organically and through M&A. Our new executive leadership team is in place and working to return Granite to the profitable company that our shareholders expect and that we insist upon. Recent key decisions include lowering SG&A and driving efficiencies across the company by restructuring our operating groups from five to three. These revised groups, California, Mountain, and Central are focused on a home market strategy to build on the strengths that made us one of the most respected contractors in the country. Before we get into the details of our strategy, let me revisit the four key themes of our strategic plan. First, develop our people. Developing our people is the foundation of Granite's strategy and success. The financial performance of Granite depends on engaged employees executing our strategy. In a strong macroeconomic environment with lower unemployment, there is unprecedented demand and competition for talent at all levels. We want to be the employer of choice for our industry, and we are committed to identifying, hiring, and retaining the best talent. We believe we can do this by modeling inclusive diversity, providing clear advancement to training and development, and accelerating opportunities for all employees throughout our talent pipelines. As we look to capitalize on increased funding from the federal infrastructure bill, it is critical to have skilled trained teams ready to execute work across the organization. To further this goal, we are investing in our college internship, co-op, and graduate recruitment programs. We are also focused on enhancing our craft recruiting. These efforts allow us to identify talent early, introduce them to the Granite family, and convert them to full-time employees. We are implementing more rigorous and standardized continuous training at all levels of the organization, which will enhance the flexibility of our workforce and promote the growth of our people. Additionally, for high-potential employees, we have developed and implemented a suite of leadership training programs focused on business acumen, managing people, and strategic planning, with a goal to graduate 250 employees annually, with 40% being people of color or women. We are proud of our inclusive diversity program; it is both the right thing to do for our people and a differentiator in the construction industry. We believe that we are an industry leader in inclusive diversity and we plan to continue our focus in this area. We set company-wide goals to increase total women's representation at Granite from 13% in 2021 to 18% in 2025. Our goal is to increase women in leadership from 15% in 2021 to 20% in 2025, and we are working to increase people of color in leadership from 17% in 2021 to 20% in 2025. We are well on our way to meet these targets as we continue to build on the foundation of Granite, our people. Second, raise the bar. In the Construction segment, we are focused on three key factors: appropriate project selection, accurate estimates on bid day, and execution during construction. To enhance our work on these factors, we established the Construction Leadership Council, or CLC, to identify and promulgate best practices in the bidding, estimating, and project execution processes. Through the CLC, we are focused on further strengthening these processes with increased training, enhanced standardization, improved database projections, and universal adoption of best practices. The construction industry overall has been slow to adopt technology-based solutions to augment the project teams, and we look to make this another differentiator for Granite. We believe these actions will translate to improvements in gross profit and gross profit margin. Within Construction Materials, we are raising the bar by automating our plants to increase production capacity, while lowering our per unit costs. Investment in technology to support our materials facilities is ongoing and a major component of the strategic plan. At the beginning of 2021, we opened two new aggregate and asphalt locations in California. Utilizing the latest technology, these facilities not only replaced aging plants but significantly increased production capacity and efficiency, thereby lowering our overall costs. Investment in materials facilities continues in 2022 with a variety of upgrades and enhancements to our hybrid plants, which will provide competitive advantages as we work to strengthen our home market positions. The third strategic theme is to grow market share. We will continue evolving towards a more client-centric culture and investing in our vertically integrated business model to strengthen and expand existing home markets and strategically establish new ones when the time is right. As I will discuss shortly, this growth will be in two phases: the near-term support and strengthen phase, and the longer-term expand and transform phase. The final strategic theme is to maximize Granite Value Add, or GVA. This summarizes what we believe our mission is as Granite employees: work every day to bring value to our stakeholders and reward our employees. We intend to maximize value add by improving capital management, growing earnings, delivering consistent financial results and leading the industry in environmental, social, and governance performance. We will deliver value back to shareholders while simultaneously investing in growth organically and through M&A. You've heard us mention our home market strategy on multiple occasions. Now, I will walk you through the advantages of the strategy and how it differentiates Granite from our competitors. Through experience in markets where we have an established presence, we build market intelligence and insights, which allows us to read the competitive landscape, identify the best project opportunities, and implement the most effective strategy to win and execute work. In a home market, we are an active member of the community with longstanding trusted relationships with vendors and subcontractors. These hard-won relationships grant us the distinction of being the contractor of choice within our home markets. Our home markets have readily available resources, both in terms of quality construction materials and workforce. In these markets, we have many long-tenured employees, and we believe we are the employer of choice among contractors for both salaried and craft workforce. We can leverage our solid relationships with our union partners to obtain the workforce we need for our projects, even in the current challenging labor conditions. These relationships will be ever more important as funding for projects and demand for labor expand in the next several years. Finally, having strong relationships with project owners and regulators is crucial to driving our client-centric culture and is a key aspect of our home market strategy. Our goal of being the contractor of choice is not just to be selected for emergency work or best value procurement projects but to maximize collaboration with our stakeholders throughout the full life cycle of a construction project. In home markets, we know the clients and representatives we have worked with for many years. We enjoy strong relationships that support long-term success. In fact, we still work with clients that we have been partnered with for a century. This reduces disputes and legal claims, improves profitability, and helps us bring the most value to our clients. These critical components of the home market result in a balanced project portfolio, combining larger projects and increased retention and workforce stability with smaller quick-term projects. Home markets are also areas where we have built relationships with public and private owners. From 2018 to 2021, we increased the percentage of construction revenue from private owners from 17% to 24%. This growth was a result of building over several years and we see this investment further diversifying and potentially expanding our portfolio of private work in the future. A better balanced portfolio will allow us to maximize our capabilities and resources, driving better returns for all stakeholders. In 2022 and beyond, we will continue to strengthen existing home markets and develop new ones. Vertical integration is key to Granite's success. A fully developed vertically integrated model aligns the strength of our Construction Materials segment with our construction project acumen. In some markets, it is difficult to secure work at acceptable margins without access to quality materials. Vertical integration maximizes our project productivity and scheduling while allowing us to rely on high-quality materials without dependence on the capacity of other material suppliers with competing priorities. Vertical integration allows us to reduce costs in several ways. First, we can reduce costs through internal purchasing compared to relying on external pricing. Selling materials to our projects as well as to our external customers increases volumes for our materials plants, lowers our fixed costs per ton, and maximizes profit. Second, we collect materials from our projects to use as Recycled Asphalt Payment, or RAP, in future asphalt mixes. By reducing the amount of virgin material utilized, we lower the potential costs of projects, thereby increasing the profitability of our materials business. In addition, our aggregate quarry locations backhaul materials from construction projects and utilize fuel for use in future projects. This benefits the construction project that may otherwise need to pay to place the materials while also adding value to our aggregate plants. Finally, we achieve tax savings through the transfer of materials internally to construction projects rather than purchasing the materials externally and paying applicable sales taxes. Granite's materials business has been integral to our strategy for 100 years, and through vertical integration, it will continue to drive our sustainable, profitable growth in the future. Turning to our investment framework for growth over the next few years. Our liquidity, balance sheet, and cash generation allow us to invest in our business, which we will continue to do this year and moving forward. We intend to invest in our vertically integrated business model, both organically and through M&A, to strengthen and expand existing home markets and eventually establish new home markets. Our strategy is separated into two phases: support and strengthen, and expand and transform. Within the support and strengthen phase, we plan to invest over the next three years in solidifying and bolstering our core competencies and expanding within our existing markets. Within the materials business, we are making investments to upgrade production capacity in aggregate facilities while increasing automation and improving energy and water conservation. These investments are underway in 2022 and will continue in 2023 and 2024. In addition, we continue to invest in materials reserves to ensure that our facilities and markets have access to aggregates for today and into the future. In the near-term, we intend to strengthen and expand our current markets with bolt-on acquisitions. These acquisitions of construction materials or vertically integrated construction businesses will most likely be less than $100 million to complement our existing operations and provide uplift from utilization of adjacent facilities and assets. We are continually evaluating bolt-on acquisition opportunities and are excited to strengthen our home market footprints through future transactions. Looking to 2024 and beyond, we plan to expand and evolve through more transformative investments in new geographies through vertical integration expansions and platforms. As we move into this period of our plan, we want to build our M&A and integration capabilities through small to midsized bolt-on acquisitions and will expand to more transformative acquisitions by entering new markets or adding materials assets where we currently don't have a vertically integrated presence. Now, I'll turn it over to Lisa to go over some of our financial expectations within our strategic plan.

Thank you, Kyle. Over the next few slides, I will cover our financial targets and expectations through 2024, starting with revenue. Since the timing of M&A is highly dependent on the market and opportunities, these slides are focused on our continuing operations business and our expected organic growth. As we stated last quarter, our guidance for revenue in 2022 is for low single-digit growth from 2021. At the end of the first quarter of 2022, we are maintaining that guidance with growth from the California and Mountain groups expected to offset an intentional decline in revenue from the Central group as we continue to transform that portfolio. As we move into 2023 and 2024, we expect to benefit from a strengthening funding environment with the federal infrastructure bill, resulting in an increase in opportunities that will aid 2023 and continue to grow in 2024 and beyond. As we saw in California, when SB-1 was implemented, the full benefit of the infrastructure bill will take time to be realized, with maintenance projects funded first and expansion projects funded as design, right-of-ways, and other requirements are completed. Our focus is on driving sustainable growth in each of our groups by leveraging our home market strategy. We believe we are well-positioned to capitalize on the positive environment in our key vertically integrated markets, including California, Washington, Nevada, Utah, and Arizona. Given the public funding dynamics and strong private economic environment, we believe we will reach our target of $3.4 billion to $3.6 billion in revenue by 2024. This slide details the historical gross profit and gross profit margin, both including and excluding old risk portfolio losses for 2019 through 2021. In the Construction segment in 2022, we will work through most of the old risk portfolio, or ORP, with planned completion in 2023. As we move through 2022 and 2023, we anticipate improvements in gross profit margin as margin pressure from the ORP declines. In addition to the uplift from the completion of the ORP, we are focused on raising profit margins on our projects through multiple avenues, starting with the previously identified key factors of procuring the right project, maximizing profit on bid day, and executing every day to meet and exceed bid day margins. Our operations have previously achieved this level of profitability, and we are confident we can consistently reach this level again by 2024. Our strategic plan and related initiatives will drive best practices across our markets to increase the consistency of execution to reach the targeted 14% to 16% gross profit margins in 2024. Within the Materials segment, we are focused on increasing profitability through investment in technology, disciplined performance, and pricing. In 2020, the materials business benefited from low oil prices, with a gross profit margin of 17%. While lower commodity prices cannot be expected to repeat in future periods, through our investments and initiatives, we believe we will reach our target gross profit margin of 15% to 17% by 2024. Turning to SG&A. As noted on the slide, our SG&A as a percentage of revenue has been largely consistent over the last three years. Our new strategic plan centers on capitalizing on the return to our core businesses by maximizing standardized processes to accommodate future growth while minimizing increases in SG&A. We will achieve this efficiency by utilizing technology, reducing non-value-added activities, and leveraging our centralized structure. We have the people and resources in place to allow us to drive top-line growth while remaining at the low end of our SG&A range. We expect significant improvement in adjusted EBITDA margin from the 5.4% reported in 2021 to our target of 9% to 11% by 2024, driven primarily by the increase in Construction gross margin and a more moderate impact coming from improvement in Materials gross margin and SG&A efficiency. We expect our core vertically integrated businesses to achieve this level of profitability consistently across the company by 2024. Next, I want to review our capital allocation priorities. Underpinning our disciplined capital allocation strategy is our desire to deliver growth and return value to our stakeholders through our strategic plan. Our first priority continues to be steadily returning value to our shareholders. In this regard, since 2007, we have distributed a consistent dividend every quarter. Our next objective is supporting business operations through reinvestment. Maintenance CapEx historically has been 1.5% to 2% of annual revenue, and we expect that to continue in future years. Granite's ability to win and deliver a profitable project relies on the timely replacement and upgrade of equipment and facilities, so that our people can focus on sustainable project delivery. We expect to optimally keep our debt to capital ratio at 20% to 30% through debt repayment. We paid down just over $60 million of our term loan in the first quarter and expect to continue optimizing our capital structure through the upcoming planned facility refinancing. Next, we expect to drive growth and efficiencies through growth CapEx and M&A. Earlier, Kyle walked you through our home market strategy and our intention to invest in our vertically integrated business model organically and through M&A. Our markets are healthy and expecting strong growth, making it important to build upon our existing market positions through the right bolt-on acquisitions in the near-term and more transformative opportunities down the road. Finally, we announced an increased authorization in our share repurchase program last quarter, resulting in an authorization for up to $300 million in purchases. We repurchased approximately $19 million this quarter and intend to repurchase shares when our cash position is in excess of operational requirements and when a repurchase is highly accretive. Before I turn it back to Kyle to go over our first quarter results, this slide summarizes the key financial metrics we expect by 2024 from our strategic plan. We expect sustainable organic revenue growth with increased profitability while maintaining efficiency in our administrative support functions. The implementation of our strategic plan is well underway and will lead to our next period of transformation and expansion by 2024 and beyond.

Thanks, Lisa. I know you are as excited as I am for where Granite is headed over the next few years. We have laid the foundation and are set on making incremental enhancements that will allow us to reach our 2024 targets. Now, let's shift the discussion to the first quarter, starting with the Construction segment. While we saw an overall decrease in revenue in the first quarter from the same period last year, I'm encouraged by the mix of our results for the quarter. The primary reason for the year-over-year decline in revenue was the expected decrease in the Central group as ORP projects continue to move towards completion. In the Central group, this decrease was partially offset by a good performance in the Arizona region, which entered the year with a strong backlog. Taking advantage of temperate climates allowed the region to work throughout the first quarter and expect the vertically integrated Arizona region to have a strong year in 2022. This team continues to benefit from a positive and growing market. In California, while there was a revenue decrease year-over-year, this is primarily due to weather in early California and delays in project starts. We have seen an extension of the period between the award of a project and project start that impacted revenue during the quarter. As we stated in our guidance, although there was a year-over-year decrease in revenue in the California group, we expect that the turnaround in following quarters will result in an increase in revenue for the 2022 fiscal year compared to 2021. Inclement weather earlier in the year had the most significant impact on our Mountain group as compared to the others. For the Mountain group, because of where their operations are located, the construction season generally does not begin until after winter. But even with that limitation, the group turned in a strong quarter with revenue increasing in multiple regions, led in particular by our Utah region. Over the last two years, a key component of the Utah region's success has been its work on the Granite joint venture on a $350 million progressive design build project for the Utah Department of Transportation. The project has been another example of Granite's success in partnering with owners and delivering value through best value procurement projects. In February of this year, we announced another progressive design build Granite-led joint venture for the Utah Department of Transportation. The construction for that project is expected to start in 2023 with a value of $155 million. We believe that this project reflects our formula for success on our projects. It is the best value procurement project in our home market, where we know the owners, vendors, and subcontractors, and where the project will be built by experienced Granite crews. Turning to CAP, I am pleased with what I see. While there was an overall decrease in CAP since the prior quarter and from the prior year driven by the Central group, both the California and Mountain groups ended the quarter with increases in CAP sequentially and over 2021. This CAP growth in our vertically integrated regions demonstrates continued resilience and strength in our markets from both public funding and private markets. While the first quarter of the year is always competitive, we have seen a better environment compared to the beginning of last year. We are bidding more work and seeing margin improvements as pricing pressures lessen. While inflation concerns persist, in general, it seems our markets continue to be healthy. We are optimistic there will be further improvement later in the year with more opportunities funded by the infrastructure bill that will allow us to continue to build CAP going into 2023. In the Materials segment, aggregates and asphalt volumes increased year-over-year in all three groups. The first quarter provided a strong start to the year and is an encouraging sign for the health of our markets, even with the impact of inflation and high oil prices. Although oil prices increased and remained high during the quarter, cost mitigation strategies such as bulk purchases and forward contracts partially offset the increase in oil-related prices and pressure on margins. In addition to cost containment measures, we have implemented price increases, some of which were not reflected until April, which will help to offset the rising prices of liquid asphalt and diesel. While it is expected that inflation in oil prices will continue to be elevated and volatile, we believe that resilient market demand for construction materials will continue driving revenue throughout 2022. Now, I'll turn it back to Lisa to discuss our financial results for the quarter.

Thank you, Kyle. In the first quarter, revenue decreased 3% from the prior year while gross profit decreased 7%, resulting in a gross profit margin of 9%. In the Construction segment, revenue declined $32 million year-over-year to $475 million. This decline was primarily due to a $29 million decrease in the Central group year-over-year. The decrease in the Central group in the quarter was consistent with the continuing transformation of the group as the projects within the ORP move closer to completion. The decrease in quarterly revenue in the California group was largely offset by an increase in the Mountain group. The California group was impacted by work start delays, while the Mountain group completed a strong first quarter. The Construction segment's gross profit for the quarter decreased 9%, resulting in a gross profit margin of 10%. This decrease in gross profit was primarily driven by lower revenue in the quarter with a slight decrease in gross profit margin. The ORP ended the quarter with remaining CAP of $246 million, a decrease of $73 million from $319 million in the prior quarter. The burn during the quarter was consistent with expectations and is on pace for the expected progression in 2022, leaving approximately $50 million going into 2023. First quarter net ORP losses to Granite, which excludes non-controlling interest, were $3 million on revenue of $80 million compared to breakeven on revenue of $105 million in the prior year. The Materials segment's revenue increased $13 million or 22%, led by strong demand and volumes, as well as price increases in both asphalt and aggregates over the prior year. Materials gross profit increased $1 million, with a slight year-over-year increase in gross profit margin to 2%. Although cost pressures due to increased liquid asphalt and diesel prices impacted the first quarter, both bulk purchases, forward contracts, and financial hedges partially mitigated the effects of the cost increases. We continuously monitor the market and will remain proactive to mitigate exposure from oil inflation. Turning now to our non-GAAP financial metrics. Adjusted EBITDA and EBITDA margin from continuing operations for the first quarter was $4 million and 1% compared to $9 million and 2% in the prior year. Adjusted net loss from continuing operations for the quarter increased $6 million year-over-year to $13 million or an adjusted diluted loss per share of $0.28 compared to an adjusted net loss of $7 million and adjusted diluted loss per share of $0.15 in the prior year. For the year, our adjusted EBITDA margin guidance of 6% to 8% is unchanged. Our business is seasonal and ramps up as we enter the spring, and we expect continued improvement in profitability in 2022. Now onto our cash and financial position. Cash used by operations during the first quarter was $50 million compared to cash provided by operations of $38 million in the prior year. Typically, cash is used by operations in the first half of the year due to seasonality as projects begin and ramp up. In the first quarter of 2021, cash flows benefited primarily from the timing of cash collections from receivables. At the end of the first quarter, our liquidity remains strong, with cash and marketable securities of $398 million and revolver availability standing at $242 million with no debt currently drawn on the revolver. Our fixed interest rate debt at the end of the quarter is $299 million, down from $340 million at the end of the first quarter of 2021, reflecting the early paydown of half of our term loan. This change is inclusive of the adoption of ASU 2020-06, which will be discussed in our Form 10-Q that will be filed later today. During the first quarter, we closed the sale of the Inliner business and made progress in the divestiture process of the Water Resources and Mineral Services businesses. There is significant interest in these businesses and we believe that we will reach agreements to sell both in 2022. While it is still early to definitively say the amount that will be received from the transactions, we believe that the combined value of these businesses is greater than that of the Inliner business. In March, we executed share repurchases of 611,000 shares for approximately $19 million, leaving $281 million remaining of the $300 million share repurchase authorization. We continually evaluate share repurchases while balancing our capital allocation priorities. With our strong cash position and expected cash inflows from the sale of the remaining Water Resources and Mineral Services businesses, we will evaluate the continued repurchases of shares that will provide immediate value back to shareholders in 2022, as long as the share repurchases are highly accretive.

With that, I will turn it back to Kyle. Thanks, Lisa. I'll close with the following points. We are excited about our strategic plan and where Granite is headed. We expect our plan to unlock tremendous value through consistent profitability and cash flows. We plan to sustainably grow our businesses, strengthen and expand our current footprint, and then pursue more transformative platform acquisitions in the longer term. While investing in our business, we are also focused on utilizing our strong cash position to return immediate value to our shareholders. The markets in which we operate continue to be robust, as we have seen during the first quarter. While we are keeping a close eye on the overall economic climate, we have not seen a slowdown in activity in 2022 and demand is strong. As increased funding is expected to flow into the market later this year, we expect our CAP to expand with the opportunities leading to organic growth in 2023 and 2024. Operator, I will now turn it back to you for questions.

We will now begin the question-and-answer session. Our first question today comes from Steven Ramsey with Thompson Research Group. Please go ahead.

Hey, good morning. Maybe to jump in kind of big picture, it looks like Granite has a great setup in the year with a lot of excess capital from the divestitures and then the ORP burning off to a very low level. You talked about two phases to growth and deploying capital over the long term. So, given you'll be in this excess capital position should the divestitures play out, how do you expect to deploy capital in 2023? So, it's early, but just how you're thinking about it from a high level?

Hey, Steve. It's Kyle. And you said 2023?

Just thinking about the excess capital position you would be to end this year and how you think about philosophically deploying capital.

Yeah. So, thanks for the question. From an investment framework perspective, over the next two, three years, we're really focused on supporting and strengthening our existing home markets. That's our priority today and there's kind of a couple of pieces to that. First is around automation and reserve expansion in our materials business. So, we need to continue to ensure we have access to aggregates for our materials business. At the same time, we also think we can drive down our cost to produce through automation. So that's a primary focus for us, let's say, over the next two or three years. And then from there, we're looking at some bolt-on acquisitions. So, we're looking at getting into acquisitions around civil construction and materials within the existing footprint that we're in today. And there's a few reasons for that. One, it complements our current operations. We think it's easier to capitalize on synergies and drive utilization, but it's also easier for us to integrate. So, we think that that's going to give us an opportunity to go out and do some deals, demonstrate our ability to do the deals and integrate the deals, and set ourselves up down the road, where we want to do something more transformative. And I would expect that our goal will be doing somewhere around maybe one to two deals a year and all those deals will be under around $100 million.

Okay. Helpful. And then, thinking about CapEx this year above levels we've seen in the past three years. Talking about raising CapEx in the next couple of years, does that imply that CapEx in 2023 and 2024 will be higher given the plans for the Materials segment? Or if there's just a way to bogey the level of CapEx that you guys have embedded in the plan?

No. I believe the capital expenditures guidance we provided will remain fairly stable. We do have our maintenance capital expenditures that Lisa mentioned. The majority of the anticipated investment will primarily be in our materials business as we progress. Overall, I think the guidance for this year is in line with what we can expect in the coming years.

Okay. Helpful. And then one more, thinking about the near-term, good to hear the bidding environment year-to-date is better than last year. A couple of questions. How does this compare to pre-COVID levels? And are the benefits of this better environment baked into the margin guidance? Does this imply that margins could go to the high side of the EBITDA margin?

We are aiming for about a 2% margin improvement by 2024, excluding the ORP. This improvement will come from two main areas: increasing the bids we secure and enhancing execution across the board. The market is currently healthy, and although our bid hit rate has not yet improved significantly, we have started to see more bidding opportunities and better margins this year compared to last. We're now noticing an improved hit rate alongside these higher margins. Additionally, our materials business is experiencing increased volumes and margins, indicating a much healthier market than we observed a year ago. This is promising, especially with the upcoming infrastructure bill anticipated to take effect later this year. Overall, the market conditions look strong right now, and while we remain cautiously optimistic, things are looking favorable.

Understood. Thank you.

Thank you.

Good morning, gentlemen, and Lisa.

Hi, Mike.

Good morning, Mike.

Kyle, regarding your revenue and margin goals for 2024 compared to where we currently stand, you've provided some helpful milestones. What are a couple of uncertainties or risk factors you need to address to reach those targets, setting the economy aside given the negative GDP report this morning? How much of your workforce and asset capacity do you have available to meet those objectives? Can you achieve this without significant investment? I know you plan to invest, but those should ideally yield positive results. Do you have the necessary resources to obtain the market share growth you mentioned in your prepared remarks?

Yeah. I would say that we do have the capacity. I think we've been demonstrating that with our California and Mountain teams over the last couple of years; they've been growing their CAP. And we believe those teams are well-positioned. They've been in those markets for a long time. They are the employer of choice. We think we can recruit the people we need in those businesses to deliver on the growth. I think as we wind down the ORP, we're actually in a position this year where we can take those employees and resources and put them on to these projects that we're going to see that are going to allow us to grow our company; they are going to be quality projects. So, the timing is working out quite well for us, assuming the infrastructure bill starts to flow into good opportunities late this year and we can actually turn those into construction projects in 2023. So that winding down of the ORP really allows us to take that Central group team and put them to work on projects that will create value for the company. So, I think that's probably the opportunity for us.

Certainly, your California and Mountain businesses have shown strong historical performance and effective execution. How does the Central division fit into this plan over the next three years? You mentioned Texas and Florida. How significantly will these contribute to your goals? What strategies do you have in place to ensure that once the ORP projects are completed, the Central division can achieve the quality and results similar to those delivered by your other two divisions historically?

Sure. A good question. And the Central group today includes our Arizona region. It also includes the team up in Illinois and our talent division. So, it's got a whole different mix than what we probably used to when we talked about, say, the Heavy Civil group, which is a little bit different. And we did that to help move in some of the BI business-type work and help them create that type of environment within Florida and Texas. And so, we knew that it was going to take some time as we wind down the ORP to transition the Central group into more of a BI-type business. And I don't know if that's even the ultimate goal today or being in the near-term, but we really are pushing them to look at different types of work. So, we talked about really resetting the type of work that we're pursuing. So, no longer pursuing these big large mega projects, design-build projects that got us into trouble. So now we're focused on smaller work, and we even went further with this home market strategy. So, they're no longer even called the Southeast region as the Florida region or the Central region, it's now the Texas region. So, we're really starting to narrow in on their home market because we know they can procure work in their home market. They have the resources; they have the relationships—all the components to go into a home market, which can facilitate more success. So that transition isn't going to happen overnight. They've been working really hard on it over the last year, year and a half, and I think they're doing a nice job. And I do think as we sit through today in 2022, that team is starting to procure the right kind of work that will help the company achieve its goals.

Are those margins related to the construction side or the business intelligence side? What is the potential for a 200 basis point improvement in the next few years from that area? Or is it primarily about accurately bidding and ensuring successful execution in the market?

Yeah. The margin profile of the Central group really shouldn't be any different than the margin profile of the California and Mountain group. So, we don't see a difference there. As we get to the margin improvement: if you go back the last couple of years, we've been there before, so it's not a matter of can we get to the margins that we're talking about getting to; it's really monitoring more sustained performance levels to where we're at that mid-teen margin consistently. So, again, it's really about—you can look at it as a percent on bid day and a percent better in terms of execution as a company outside the ORP, and we're there.

Thanks, Kyle.

Thank you.

Yeah. Hi, good morning.

Good morning.

Good morning.

Just a follow-up on the last question regarding the top line and margin guidance through 2024. Regarding the top line, is there any assumption related to the IIJA funding, or do you require mergers and acquisitions or smaller acquisitions to achieve that top-line target? Is the expected mid-single-digit growth rate from a 2021 base considered to be more organic in nature?

Yeah. So, what we provided was a 6% to 8% CAGR, and that's our revenue growth rate organically. So that does not have any sort of M&A or inorganic growth within it. And I think maybe the way to level set that is if you look at the infrastructure bill and really the highway funding portion, we look at that as around a 6% CAGR. So, our 6% kind of marries up with the highway portion of the infrastructure bill. And then for us to get up to around 8%, it implies that we're going to gain a little bit more market share than we have today.

Okay. Got it. And in the near to intermediate term, are there specific regions where you see more opportunities to vertically integrate the businesses versus other regions currently in the portfolio?

I think there probably are. I mean, I think it's—there are certainly markets that we see where we could strengthen our vertically integrated position. There are some markets where we don't have vertical integration currently, say, Texas or in Florida; those would be opportunities for us. But right now, I think there—I don't want to tip our hand too much in terms of where we're looking, but we certainly are looking at our existing footprint. When it gets back to that integration piece for us, we really want to do it in markets where we have really strong teams in place so that the integration is a lot easier for us as we do it. So, I think it's mostly going to be out on the West Coast today.

Okay. And then lastly, your DoT relationships and customers with the sharp increase in inflation. Has there been any impact on lettings or the DoTs having to do some re-engineering on projects in the pipeline just given the sharp increase we're seeing in raw material costs, etc.?

No. We saw the dip last year. I think we saw a little bit of a pullback with supply chain, inflationary pressures, and even with COVID. We're not seeing that today. We had a much better late 2021 or early 2022 letting in terms of volume. This year, again, we're seeing—through today, we're seeing a really nice improvement in our ability to capture works; our hit rates are up and the margins of the work that we're picking up have gone up as well. So what we're seeing coming out is showing a very strong market, and I'll point back to our materials business; volumes are up, and that's another good indicator. So everything is indicating that we're moving in the right direction from a market standpoint.

Great. Thank you very much.

Thank you.

Hey, good morning, Kyle and Lisa.

Good morning.

So, first off, I'm going to talk about the quarter a little bit here, but 1Q had stronger than anticipated materials revenue and gross profit. But now looking forward, to what degree and to what level is the company targeting for materials margins through the year? And can you elaborate a bit more on how the business is overcoming the higher diesel and liquid asphalt costs? And how you believe those inflationary costs will impact you guys throughout the rest of the year?

Yeah. So, let me start, and if I forget part of that, Lisa can jump in there. But we are pleased with our materials business in the first quarter. Our volumes are up. We're seeing our aggregate margins improve. Our asphalt margins are down slightly, which kind of gets back to your question around supply chain and some of the costs on the inflation side on commodities. And we did pretty well as a company, I think, in getting out front of a lot of what we see in terms of oil, diesel, and natural gas to some level in the company. And that's where we have the biggest impacts today. We've been navigating some of the supply chain issues across the company for quite a while, and I think our teams on the field are doing a really nice job of that, rescheduling projects, dealing with ready-mix issues and the like, or different shipping issues that they had. So, we've been navigating that. Nothing's really changed there. I would say late last year, we put in place our new diesel pricing into our equipment rate, so we were able to get out in front of that quite a bit. And so, a lot of our newer work did have higher costs in the estimates for diesel, as well as our pricing on the liquid asphalt side. We do a lot of DoT work, and a lot of our DoT clients have escalators and de-escalators, so we're somewhat protected on that end of things. Our team puts in place physical inventory of liquid asphalt, and we do some financial hedges. So, we do a lot to try and mitigate this risk for us in the business, and I think it's paid off for us. And then, we also do some supply contracts with diesel and large earth-moving contracts as well. The one area where I think we did struggle a little bit in the first quarter was just on the burned fuel. That's where we use energy to dry out the aggregates before we introduce liquid asphalt. So, we did have a little bit of a natural gas bump in the first quarter. As we talked about in the prepared remarks, we have an energy surcharge notice that went out that goes into place on April 1. So, we're going to try and recover some of those costs moving forward. But I think in general, our teams have done a nice job of ensuring that we're covering those costs and we can pass those on. So, what did I miss in your question?

No. That was pretty solid. Just to understand how the margins could look from a historical or seasonal perspective this year versus last will be the only other point that could be elaborated on.

Yeah. I mean, I think we feel good about the margin profile in the materials business. I think, it's going to be in line with our guidance. In general, around kind of mid-teen margins is kind of the goal for our business. Two years ago, we had the benefit of liquid asphalt and diesel dropping. Last year, it came back up, and we couldn't really pass that margin expansion on. I think this year, in general, we're able to pass those costs on. And Q1 is—we're pleased with Q1's results and we're looking forward to seeing we can continue that into Q2.

Okay. Thank you for that. My second question is just a little bit more on the ORP. But I recognize the progress made so far. But looking forward, how should we think about ORP backlog and expected revenue burn for 2022 and into 2023?

So, I think the way to look at it, we're pretty much in alignment with what we had guided towards: just around $70 million is what we burned through Q1. We have another $250 million still in ORP CAP and we expect to burn through another $200 million, which will leave us with $50 million going into 2023.

Okay. Thank you for that.

This is Adam on for Jerry today. Thanks for taking my questions. Outside of bolt-on acquisitions, can you talk about if there are any specific areas of your business you'd like to expand either in competency or geographic exposure, and which areas are those?

Yeah. No. I think what we're really focusing on in our strategic plan is getting back to our core civil construction and materials business. I think longer term, we're looking at more of a geographic diversification. I don't think that's going to be something we're focused on over the next couple of years. I think that's longer term to get into the markets that we're not in today. I think our first step is to stay focused on what we do well, get even better at it, and strengthen the positions that we have today. So that's our focus, I would say, in the next two, three years. We'll be better prepared to go out and take on new markets and grow home markets outside of our current footprint.

Got it. And can you provide any more color on the expected timeline for the completion of the water resources and mineral resources divestiture?

Yeah. This is Lisa. So, we classified at the end of the year and announced earlier this year the divestiture of the businesses within the WMS Group. As you know, we completed the Inliner sale, which closed out on March 16th. We are continuing to progress on the other two divisions within WMS. Still early, still looking at information that's rolling in. So, we anticipate that to be done with those by the end of this year.

Great. Thanks so much.

Thank you.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Larkin for any closing remarks.

Okay. Well, thank you for joining the call today. We are well on our way in the implementation of our future plan that will build upon the strengths that make Granite one of the best contractors in the country for 100 years. To our employees, thank you for everything you do and I know we will be building better together. And to the investors and analysts, thank you for your continued interest in Granite. We look forward to speaking with you soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.