Granite Construction's Q4 2024: Contradictions in EBITDA Margins, Organic Growth, and Pricing Strategies

These are the key contradictions discussed in Granite Construction's latest 2024Q4 earnings call, specifically including: EBITDA Margin Expansion Expectations, Impact of Selectivity on Organic Growth, Bid Margin Environment and Construction Segment Margin Improvement, and Materials Segment Pricing Strategy:



Record Year and Strong Financial Performance:
- Granite Construction reported record revenue of $4 billion for 2024, a 14% increase year-over-year, with a 44% increase in gross profit to $573 million and adjusted EBITDA rising 44% to $402 million.
- The growth was driven by robust performance in both the Construction and Materials segments and strategic investments in vertical integration.

Construction Segment Growth and Margin Expansion:
- The Construction segment achieved a 3% increase in revenue to $821 million year-over-year, with a significant improvement in gross profit margin from 14.5% to 16%.
- This was attributed to higher-quality project pursuits, strong market conditions, and effective bidding strategies.

Materials Segment Performance and Pricing Strategy:
- Materials revenue increased by 21.4% year-over-year to $156 million, with a record cash gross profit margin improvement of 240 basis points to 21.4%.
- The segment benefited from operational restructuring, price increases, and efficiency improvements, resulting in strong cash flow generation.

Cash Flow and Operational Efficiency:
- Operating cash flow increased dramatically by 148% to $456 million, representing 11% of revenue, up from 5% in 2023.
- This improvement was due to enhanced business model implementation, process improvements, and better days sales outstanding (DSO) management.