Executive Summary

Q2 2025 delivered an EPS beat and slight revenue miss vs consensus: adjusted diluted EPS was $1.93 vs $1.70 consensus (beat), while revenue was $1.13B vs $1.16B consensus (miss). Management raised FY25 guidance and highlighted strong Construction and Materials margin expansion ; estimates marked with asterisks and retrieved from S&P Global: EPS* and revenue* [Values retrieved from S&P Global].
Record CAP grew sequentially by $324M to $6.1B, positioning revenue to accelerate in 2H as project starts ramp; construction margin reached 16.4% on improved execution and favorable claim settlements .
Two acquisitions closed (Warren Paving, Papich Construction) for ~$710M, expected to add ~$150M of FY25 revenue and lift adjusted EBITDA margin by ~25bps in FY25; structurally, they add ~$425M annual revenue at ~18% adjusted EBITDA margin and expand aggregates volumes and reserves materially .
Guidance raised: FY25 revenue $4.35B–$4.55B (from $4.2B–$4.4B) and adjusted EBITDA margin to 11.25%–12.25% (from 11.0%–12.0%); SG&A ~9%, CapEx $140M–$160M, adjusted tax rate mid‑20s unchanged .

What Went Well and What Went Wrong

What Went Well

Materials segment delivered strong margin expansion on higher volumes and pricing; aggregate volumes +11% YoY and asphalt volumes +8% YoY, with Materials gross profit up 55% YoY and cash gross profit up 50% YoY in Q2 .
Construction segment margin improved to 16.4% (up ~170bps YoY) on “improved execution … higher quality project portfolio” and favorable claim settlements; CAP reached a new record of $6.1B .
Strategic M&A accelerates vertical integration: “Acquisitions … expected to annually contribute approximately $425 million of revenue with an approximate adjusted EBITDA margin of 18% … immediately accretive to adjusted EBITDA margin with an annual uplift of ~60 bps” .
Quote: “Our strategy is working. Both our construction and materials businesses are seeing significantly higher margins, which in turn are driving strong cash generation” — CEO Kyle Larkin .

What Went Wrong

Revenue modestly missed consensus* ($1.126B actual vs $1.156B est.) despite strength in margins; Construction top-line growth was +2% YoY with stronger acceleration expected in 2H as projects progress ; revenue estimate marked with asterisk [Values retrieved from S&P Global].
SG&A increased YoY to $86M (7.6% of revenue) largely due to salaries and incentive comp; year-to-date SG&A $202M (11.1% of revenue) reflects higher stock-based comp .
Seasonally low operating cash flow YTD ($5M) and pro forma leverage up post-acquisitions (pro forma net debt ~$967M) though liquidity remains strong; reported net debt at Q2 was $257M before pro forma adjustments .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($USD)	$1,082,486,000	$699,547,000	$1,125,964,000
Gross Profit ($USD)	$164,711,000	$83,849,000	$199,099,000
Adjusted EBITDA ($USD)	$129,866,000	$28,072,000	$152,426,000
Adjusted EBITDA Margin (%)	12.0%	4.0%	13.5%
Diluted EPS (GAAP)	$0.76	$(0.77)	$1.42
Adjusted Diluted EPS	$1.73	$0.01	$1.93

Segment breakdown (Q2 2025 vs Q2 2024):

Segment Metric	Q2 2024	Q2 2025
Construction Revenue ($USD)	$917,954,000	$937,426,000
Construction Gross Profit ($USD)	$135,372,000	$153,666,000
Construction Gross Margin (%)	14.7%	16.4%
Materials Revenue ($USD)	$164,532,000	$188,538,000
Materials Gross Profit ($USD)	$29,339,000	$45,433,000
Materials Gross Margin (%)	17.8%	24.1%
Materials Cash Gross Profit ($USD)	$39,300,000	$59,001,000
Materials Cash GP Margin (%)	23.9%	31.3%

Materials KPIs (product-line, Q2 2025 vs Q2 2024):

KPI	Q2 2024	Q2 2025
Aggregates Sales Tons (000s)	5,658	6,299
Aggregates ASP ($/ton)	$16.36	$16.76
Asphalt Sales Tons (000s)	2,163	2,329
Asphalt ASP ($/ton)	$79.49	$79.85

Backlog/Liquidity KPIs:

KPI	Q2 2024	Q2 2025
CAP ($USD Billions)	$5.6 (approx; Q3 2024 to Q4 2024 decreased; YoY +$0.488B to $6.1B)	$6.1
Cash & Marketable Securities ($USD Millions)	N/A	$483
YTD Operating Cash Flow ($USD Millions)	N/A	$5

Prior-quarter (Q1 2025) context:

Construction revenue $615M; gross profit $85M; margin ~14% .
Materials revenue $85M; gross loss $(2)M; cash gross profit $10.5M .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2025	$4.20B–$4.40B	$4.35B–$4.55B	Raised
Adjusted EBITDA Margin	FY 2025	11.0%–12.0%	11.25%–12.25%	Raised (~25 bps)
SG&A (% of Revenue)	FY 2025	~9.0% (incl. est. $45M SBC)	~9.0% (incl. est. ~$40M SBC)	Maintained
CapEx	FY 2025	$140M–$160M	$140M–$160M	Maintained
Adjusted Effective Tax Rate	FY 2025	Mid-20s	Mid-20s	Maintained
Acquisition Revenue Contribution	FY 2025	N/A	~$150M added in 2H	New
Adjusted EBITDA Margin Target	FY 2027	12.0%–14.0% (prior)	12.5%–14.5%	Raised (+50 bps)
Operating Cash Flow Margin Target	FY 2027	9.0%–11.0% (implied prior)	9.5%–11.5%	Raised (+50 bps)
Free Cash Flow Margin Target	FY 2027	N/A	6.5%–8.5%	New/Updated
Organic Revenue CAGR	Through 2027	6%–8%	6%–8%	Maintained
M&A Pace	Through 2027	2–3 deals/year (target)	2–3 deals/year	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024)	Previous Mentions (Q1 2025)	Current Period (Q2 2025)	Trend
Vertical integration & Materials excellence	Reorg and investment drove cash GP margin +240bps in FY24; plan for high single-digit aggregates price increases	Product-level disclosures; targeting +300bps cash GP margin expansion in 2025	Materials margins strengthened; automation and best practices driving efficiency and price per ton	Improving
CAP quality and growth	Strong market; expect CAP to increase in 2025 despite Q4 sequential decline	Record CAP $5.7B; robust bidding; expect further increases	Record CAP $6.1B; expect continued CAP build over next several quarters	Improving
Tariffs/macro risk	Expect funding to persist beyond IIJA; macro uncertainty monitored	Tariff impacts limited so far; inflation ~3% assumed; risk mitigated via contract and supplier coverage	No notable tariff disruptions; public funding and private data-center investment tailwinds in Southeast	Stable/benign
M&A strategy & integration	Target materials‑focused VI businesses; 2–3 deals/year; integration success in Southeast	Active pipeline; selective deals; reinforcing West and Southeast footprints	Closed Warren Paving and Papich; immediate margin accretion; framework built to integrate efficiently	Accelerating
California funding backdrop	SB‑1 and IIJA support; Caltrans budget increases	Reinforced state funding strength; CAP growth expected	FY25/26 California transportation budget outlines support; revenue mix broad across NV/UT/CA/AK	Supportive
Federal division	Guam and Texas opportunities highlighted	Federal projects across geographies; strong pipeline	Army Corps shoreline protection opportunities via Warren Paving logistics	Expanding

Management Commentary

Strategy and operating model: “We continue to execute on our strategic plan and we are showing the earnings power of our company in our vertically integrated model” — CEO Kyle Larkin .
Materials execution: “These efforts are driving increases in volumes and prices per ton on aggregates and asphalt as we work to increase our margin” — CEO Kyle Larkin .
Construction performance: “Revenue during the quarter was strong and we expect revenue growth to accelerate in the second half of the year … on track to achieve our gross margin expansion expectations of greater than 1% during 2025” — CEO Kyle Larkin .
Guidance and targets: “We are increasing our annual revenue and adjusted EBITDA margin guidance for 2025 … and raising our 2027 targets … by 50 basis points” — CFO Staci Woolsey .
Southeast platform vision: “The combination of high quality aggregates and logistics expertise should allow us to supply materials … and positions us to expand the distribution network” — CEO Kyle Larkin .

Q&A Highlights

Construction cadence: Management expects 2H revenue acceleration as project starts ramp and record CAP converts; legacy guidance unchanged with acquisitions layered in .
Materials margin sustainability: Volumes rising double-digit, pricing firm; management tracking “well ahead” of the +300bps cash GP margin plan for 2025, with structural initiatives (automation, centralized sales/quality) underpinning durability .
M&A details: Warren Paving is ~75% materials (70% aggregates), logistics network enables pull‑through and pricing opportunities; Papich strengthens Central California vertical integration (aggregates/asphalt plus public/private work) .
2027 targets and deal cadence: Organic CAGR 6%–8% intact; expectation of 2–3 deals annually but unwilling to size future deals; margin targets raised by 50bps post acquisitions .
Regional CAP trends: CAP growth broad-based across NV/UT/CA/AK; IIJA spend still <50% deployed, peak expected around 2026–2027 .

Estimates Context

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue Consensus Mean ($USD)	$1,008,471,330*	$706,150,330*	$1,155,160,500*
Revenue Actual ($USD)	$1,082,486,000	$699,547,000	$1,125,964,000
Primary EPS Consensus Mean ($)	1.385*	-0.455*	1.695*
EPS Actual (Adjusted Diluted EPS) ($)	1.73	0.01	1.93

Q2 2025: EPS beat (+$0.23 vs consensus*) and revenue miss (~$29M vs consensus*). Q1 2025 showed EPS beat vs negative estimate* and slight revenue miss. Q2 2024 had both revenue and EPS beats vs consensus*.
Values with asterisks retrieved from S&P Global.

Implication: Consensus likely needs to lift FY25 EPS and margin assumptions (given raised guidance and immediate accretion from acquisitions), while recalibrating near-term revenue cadence to reflect project timing and 2H ramp .

Key Takeaways for Investors

Margin story is intact and strengthening: Construction gross margin 16.4% and Materials cash GP margin 31.3% demonstrate execution and pricing discipline; FY25 adjusted EBITDA margin guide raised to 11.25%–12.25% .
Backlog visibility is robust: Record $6.1B CAP with broad geographic wins supports revenue acceleration in 2H; IIJA spend runway extends into 2026–2027 .
M&A is a catalyst: Warren Paving and Papich increase aggregates exposure and vertical integration, expected to be immediately margin-accretive and add ~$150M to FY25 revenue .
Liquidity and funding are ample post-deal: Upsized credit facility and pro forma liquidity ~$1.0B position GVA to continue bolt-ons; net leverage targeted <2.5x over time .
Near-term trading setup: Expect narrative to focus on 2H revenue ramp and acquisition synergies; any incremental data-center or Southeast funding headlines likely positive sentiment drivers .
Medium-term thesis: Execution on VI strategy plus disciplined best‑value procurement should sustain margin expansion toward the raised 2027 targets (Adj. EBITDA margin 12.5%–14.5%, FCF margin 6.5%–8.5%) .
Watch items: SG&A discipline (esp. stock-based comp), integration milestones, and cash conversion as construction season progresses; pro forma leverage management against deal flow .

Additional Notes

Non-GAAP adjustments: Adjusted EBITDA and adjusted EPS exclude stock-based compensation, other costs, transaction costs, and prior debt extinguishment impacts; Materials “cash gross profit” adds back DDA to highlight operating performance .
Relevant Q2 press releases building CAP: Tahoe Cedars PDB preconstruction (~$3M; construction ~~$60M) and Rice Pumping Station & Pipeline preconstruction (~~$2M; construction ~$100–$120M, GVA portion ~$70M) to be incorporated into CAP .

GRANITE CONSTRUCTION INC (GVA)·Q2 2025 Earnings Summary