Granite Construction Inc.

07/30/2026 | Press release | Distributed by Public on 07/30/2026 15:11

Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025 (our "Annual Report") and the unaudited condensed consolidated financial statements and the accompanying notes thereto included herein.
Forward-Looking Disclosure
From time to time, Granite makes certain comments and disclosures in reports and statements, including in this Quarterly Report on Form 10-Q, or statements made by its officers or directors, that are not based on historical facts, including statements regarding future events, occurrences, opportunities, circumstances, strategy, activities, performance, outlook, outcomes, guidance, capital expenditures, committed and awarded projects, results, the redemption and conversions of our 3.75% Convertible Notes and strategic actions, that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by words such as "future," "outlook," "assumes," "believes," "expects," "estimates," "anticipates," "intends," "plans," "appears," "may," "will," "should," "could," "would," "continue," and the negatives thereof or other comparable terminology or by the context in which they are made. In addition, other written or oral statements that constitute forward-looking statements have been made and may in the future be made by or on behalf of Granite. These forward-looking statements are based on management's current beliefs, assumptions and estimates. These expectations may or may not be realized. Some of these expectations may be based on beliefs, assumptions or estimates that may prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our business, financial condition, results of operations, cash flows and liquidity. Such risks and uncertainties include, but are not limited to, those more specifically described in our Annual Report under "Item 1A. Risk Factors." Due to the inherent risks and uncertainties associated with our forward-looking statements, the reader is cautioned not to place undue reliance on them. The reader is also cautioned that the forward-looking statements contained herein speak only as of the date of this Quarterly Report on Form 10-Q and, except as required by law, we undertake no obligation to revise or update any forward-looking statements for any reason.
Overview
We deliver infrastructure solutions for public and private clients primarily in the United States. We are one of the largest diversified, vertically integrated civil contractors and construction materials producers in the United States. Within the public sector, we primarily concentrate on infrastructure projects, including the construction of streets, roads, highways, mass transit facilities, airport infrastructure, bridges, dams, power-related facilities, utilities, tunnels, water well drilling and other infrastructure-related projects. Within the private sector, we perform various services such as site preparation, mining services and infrastructure services for commercial and industrial sites, railways, residential development, energy development, as well as provide construction management professional services. We own and lease aggregate reserves, and we own processing plants that are vertically integrated into our construction operations. We also produce construction materials for sale to third parties.
The five primary economic drivers of our business are (i) the overall health of the U.S. economy including access to resources (labor, supplies and subcontractors); (ii) federal, state and local public funding levels; (iii) population growth resulting in public and private development; (iv) the need to build, replace or repair aging infrastructure; and (v) the pricing of certain commodity related products. Changes in these drivers can either reduce our revenues and/or gross profit margins or provide opportunities for revenue growth and gross profit margin improvement.
Current Economic Environment and Outlook
Funding for our public work projects, which account for approximately 80% of our Committed and Awarded Projects ("CAP"), is dependent on federal, state, regional and local revenues. At the federal level, the $1.2 trillion Infrastructure Investment and Jobs Act ("IIJA") has increased federal highway, bridge and transit funding to its highest level in more than six decades with $550 billion in incremental funding over five years. The increased multi-year spending commitment improved the programming visibility for state and local governments and drove an increase in project lettings that started in 2023 and continued through the date of this filing. With the IIJA ending in September of 2026, discussions are ongoing in Congress concerning a replacement bill.
At state, regional and local levels, voter-approved state and local transportation measures continue to support infrastructure spending. While each market is unique, we see a strong funding environment at the state and local levels aided by the IIJA. In California, our top revenue-generating state, despite overall budgetary concerns, a significant part of the state infrastructure spend is funded through Senate Bill 1 (SB-1), the Road Repair and Accountability Act of 2017, a program without any sunset provisions that may only be used for transportation-related purposes.
Our CAP balance continues to be strong with $7.4 billion at the end of the second quarter of 2026. Our CAP is supported by a positive public funding environment and strength in the private markets we serve, which we believe will provide further opportunities for continued CAP growth.
Over the last several years, inflation, supply chain and labor constraints have had a significant impact on the global economy including Granite and others in the construction industry in the United States. Recently, concerns over tariffs and the conflict in Iran's impact on oil prices have been major sources of uncertainty in the economy. To date, we have not experienced a material financial impact due to tariffs or the conflict in Iran. It is impossible to fully mitigate the potential impacts of the foregoing macro-economic factors and they may negatively impact us in the future. However, where practicable, we have applied proactive measures to mitigate these macro-economic factors, such as fixed forward purchase contracts of oil related inputs, energy surcharges, and adjustment of project schedules for constraints related to construction materials.
Kenny Seng Construction Acquisition
We acquired KSC Utah Investments, Inc. ("Kenny Seng Construction") on April 23, 2026. The results of operations of Kenny Seng Construction are included in our consolidated financial statements from the date of acquisition, which impacts comparability to the applicable prior periods. See Note 3 of "Notes to the Condensed Consolidated Financial Statements" for further information.
Results of Operations
Our operations are typically affected more by inclement weather conditions during the first and fourth quarters of our fiscal year which may alter our construction schedules and can create variability in our revenues and profitability. Therefore, the results of operations of a given quarter are not indicative of the results to be expected for the full year.
The following table presents a financial summary for the three and six months ended June 30, 2026 and 2025:
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in thousands) 2026 2025 2026 2025
Revenue $ 1,455,872 $ 1,125,964 $ 2,368,337 $ 1,825,511
Gross profit $ 238,771 $ 199,099 $ 348,676 $ 282,948
Selling, general and administrative expenses $ 107,794 $ 85,887 $ 248,744 $ 201,798
Other costs, net $ 5,406 $ 13,253 $ 8,443 $ 22,679
Operating income $ 126,808 $ 103,565 $ 95,675 $ 63,814
Other (income) expense, net $ 366,144 $ (3,994) $ 383,519 $ (3,662)
Amount attributable to non-controlling interests $ (6,578) $ (8,645) $ (11,888) $ (13,974)
Net income (loss) attributable to Granite Construction Incorporated $ (278,162) $ 71,700 $ (319,861) $ 38,044
Revenue
Revenue by Segment
Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2026 2025 2026 2025
Construction $ 1,207,479 82.9 % $ 937,426 83.3 % $ 1,973,533 83.3 % $ 1,552,044 85.0 %
Materials 248,393 17.1 188,538 16.7 394,804 16.7 273,467 15.0
Total $ 1,455,872 100.0 % $ 1,125,964 100.0 % $ 2,368,337 100.0 % $ 1,825,511 100.0 %
Construction Revenue
Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2026 2025 2026 2025
Public $ 946,182 78.4 % $ 651,923 69.5 % $ 1,494,504 75.7 % $ 1,047,808 67.5 %
Private 261,297 21.6 285,503 30.5 479,029 24.3 504,236 32.5
Total $ 1,207,479 100.0 % $ 937,426 100.0 % $ 1,973,533 100.0 % $ 1,552,044 100.0 %
Construction revenue for the three and six months ended June 30, 2026 increased by $270.1 million and $421.5 million, or 28.8% and 27.2%, when compared to 2025. These increases were primarily driven by higher CAP entering the quarter and year, along with $98.4 million and $141.5 million of construction revenue from our recently acquired businesses, Warren Paving, Papich Construction, and Kenny Seng Construction during the three and six months ended June 30, 2026, respectively.
Materials Revenue
Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2026 2025 2026 2025
Aggregates $ 115,763 46.6 % $ 59,643 31.6 % $ 206,736 52.4 % $ 100,045 36.6 %
Asphalt 131,864 53.1 128,625 68.2 187,302 47.4 173,063 63.3
Other 766 0.3 270 0.1 766 0.2 359 0.1
Total $ 248,393 100.0 % $ 188,538 100.0 % $ 394,804 100.0 % $ 273,467 100.0 %
Materials revenue for the three and six months ended June 30, 2026 increased $59.9 million and $121.3 million, or 31.7% and 44.4%, when compared to 2025. This increase was primarily driven by materials revenue from our recently acquired
businesses, Warren Paving, Papich Construction, Cinderlite and Kenny Seng Construction, which was $59.9 million and $110.2 million for the three and six months ended June 30, 2026, respectively.
Committed and Awarded Projects
CAP consists of two components: (1) unearned revenue and (2) other awards. Unearned revenue includes the revenue we expect to record in the future on executed contracts, including 100% of our consolidated joint venture contracts and our proportionate share of unconsolidated joint venture contracts. We generally include a project in unearned revenue at the time a contract is awarded, the contract has been executed and to the extent we believe funding is probable. Contract options and task orders are included in unearned revenue when exercised or issued, respectively. Certain government contracts where funding is appropriated on a periodic basis are included in unearned revenue at the time of the award when it is probable the contract value will be funded and executed.
Other awards include the general construction portion of construction management/general contractor ("CM/GC") contracts and awarded contracts with unexercised contract options or unissued task orders. The general construction portion of CM/GC contracts are included in other awards to the extent contract execution and funding is probable. Contracts with unexercised contract options or unissued task orders are included in other awards to the extent option exercise or task order issuance is probable. All CAP is in the Construction segment.
(dollars in thousands) June 30, 2026 March 31, 2026 December 31, 2025
Unearned revenue $ 5,056,462 68.2 % $ 4,930,788 68.8 % $ 4,123,113 59.2 %
Other awards 2,362,368 31.8 2,238,394 31.2 2,846,259 40.8
Total $ 7,418,830 100.0 % $ 7,169,182 100.0 % $ 6,969,372 100.0 %
(dollars in thousands) June 30, 2026 March 31, 2026 December 31, 2025
Customer type:
Public $ 6,064,511 81.7 % $ 6,235,198 87.0 % $ 6,058,998 86.9 %
Private 1,354,319 18.3 933,984 13.0 910,374 13.1
Total $ 7,418,830 100.0 % $ 7,169,182 100.0 % $ 6,969,372 100.0 %
CAP of $7.4 billion at June 30, 2026 was $249.6 million or 3.5% higher than at March 31, 2026. Significant additions to CAP during the three months ended June 30, 2026 included $117 million for a highway expansion project in Utah, $62 million for a data center project in Nevada, $50 million for a bridge project in Nevada, $50 million for a dam replacement project in California, $49 million for an airport runway project in California and $41 million for a roadway improvement project in Florida. Of these projects, the data center project in Nevada and the dam replacement project in California are in the private sector, while the remaining projects are in the public sector.
Non-controlling partners' share of CAP as of June 30, 2026, March 31, 2026 and December 31, 2025 was $308.7 million, $336.9 million and $361.4 million respectively.
At June 30, 2026, one contract with remaining CAP of $10 million or more had total forecasted losses with remaining revenue of $13.0 million, or 0.2%, of total CAP. Provisions are recognized in the consolidated statements of operations for the full amount of estimated losses on uncompleted contracts whenever evidence indicates that the estimated total cost of a contract exceeds its estimated total revenue.
Gross Profit
The following table presents gross profit by reportable segment for the respective periods:
Three Months Ended
June 30, 		Six Months Ended
June 30,
(dollars in thousands) 2026 2025 2026 2025
Construction $ 198,694 $ 153,666 $ 300,874 $ 239,104
Percent of segment revenue 16.5 % 16.4 % 15.2 % 15.4 %
Materials 40,077 45,433 47,802 43,844
Percent of segment revenue 16.1 % 24.1 % 12.1 % 16.0 %
Total gross profit $ 238,771 $ 199,099 $ 348,676 $ 282,948
Percent of total revenue 16.4 % 17.7 % 14.7 % 15.5 %
Construction gross profit for the three and six months ended June 30, 2026 increased by $45.0 million and $61.8 million, or 29.3% and 25.8%, when compared to 2025 primarily due to higher revenue and improved project execution across our project portfolio. For the six month period, gross profit margin decreased year-over-year primarily due to a reduction in the favorable impact of claim settlements.
Materials gross profit for the three months ended June 30, 2026 decreased $5.4 million when compared to 2025. The decreased gross profit was primarily due to the impact of severe weather in the southeast and higher production costs associated with quarry development activities in the current year. The decrease was also driven by increased purchase accounting-related charges such as step-up depreciation and intangible asset amortization from our recently acquired businesses.
Materials gross profit for the six months ended June 30, 2026 increased $4.0 million when compared to 2025, despite the impact of severe weather in the southeast in the second quarter and higher production costs associated with quarry development activities in the current year. The increased gross profit was primarily driven by gross profit from our recently acquired businesses, Warren Paving, Papich Construction, Cinderlite and Kenny Seng Construction, of $4.4 million for the six months ended June 30, 2026, which included $9.9 million of purchase accounting-related charges such as step-up depreciation and intangible asset amortization.
See Note 3 of "Notes to the Condensed Consolidated Financial Statements" for further information about acquisitions.
Selling, General and Administrative Expenses
The following table presents the components of selling, general and administrative ("SG&A") expenses for the respective periods:
Three Months Ended
June 30, 		Six Months Ended
June 30,
(dollars in thousands) 2026 2025 2026 2025
Salaries and related expenses $ 53,771 $ 45,992 $ 116,488 $ 101,408
Incentive compensation 14,893 6,397 17,194 7,065
Stock-based compensation 2,208 2,126 44,600 32,179
Other SG&A expenses 36,922 31,372 70,462 61,146
Total SG&A expenses $ 107,794 $ 85,887 $ 248,744 $ 201,798
Percent of revenue 7.4 % 7.6 % 10.5 % 11.1 %
SG&A expenses include the costs for estimating and bidding, including offsetting customer reimbursements for portions of our selling/bid submission expenses (i.e., stipends), business development, materials facility permits, and costs related to our operational offices that are not allocated to direct contract costs and expenses related to our corporate functions. Other SG&A expenses include travel and entertainment, outside services, information technology, depreciation, occupancy, training, office supplies, changes in the fair market value of our non-qualified deferred compensation plan liability and other miscellaneous expenses. SG&A expenses can vary depending on the volume of projects in process and the number of employees assigned to estimating and bidding activities. As projects are completed or the volume of work slows down, we temporarily redeploy project employees to bid on new projects, moving their salaries and related costs from cost of revenue to selling expenses. SG&A expenses for the three months ended June 30, 2026 increased $21.9 million compared to the same period in 2025, primarily due to $7.8 million of higher salaries and related expenses due to increased labor costs and $8.5 million of increased incentive compensation due to improved financial performance. SG&A expenses for the three months ended June 30, 2026 related to our recently acquired businesses, Warren Paving, Papich Construction, Cinderlite, and Kenny Seng Construction were $8.7 million. SG&A expenses for the six months ended June 30, 2026 increased $46.9 million compared to the same period in 2025, primarily due to $15.1 million of higher salaries and related expenses due to increased labor costs, as well as a $12.4 million increase in stock-based compensation and a $10.1 million increase in incentive compensation, both due to improved financial performance. SG&A expenses for the six months ended June 30, 2026 related to our recently acquired businesses, Warren Paving, Papich Construction, Cinderlite, and Kenny Seng Construction were $13.6 million.
Other Costs, net
The following table presents other costs, net for the respective periods:
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in thousands) 2026 2025 2026 2025
Other costs, net $ 5,406 $ 13,253 $ 8,443 $ 22,679
Other costs, net mainly consists of acquisition and integration costs and, in the prior year, legal costs related to the defense of a former Company officer in his civil litigation with the SEC. The decrease of $7.8 million and $14.2 million for the three and six months ended June 30, 2026 was primarily driven by a reduction in legal costs following the resolution of our former officer's civil litigation in January 2026. The decreases were also driven by lower acquisition and integration costs in the current year. See Note 1 and Note 3 of the "Notes to the Condensed Consolidated Financial Statements" for information on our recent acquisitions.
Other (Income) Expense, net
The following table presents Other (income) expense, net for the respective periods:
Three Months Ended
June 30, 		Six Months Ended
June 30,
(in thousands) 2026 2025 2026 2025
Loss on convertible debt transactions, net $ 359,719 $ - $ 369,423 $ -
Interest income (5,147) (5,761) (10,996) (12,029)
Interest expense 21,761 7,927 38,093 15,684
Equity in income of affiliates, net (5,697) (3,698) (9,170) (4,792)
Other income, net (4,492) (2,462) (3,831) (2,525)
Total other (income) expense, net $ 366,144 $ (3,994) $ 383,519 $ (3,662)
During the three and six months ended June 30, 2026, total other expense, net increased $370.1 million and $387.2 million, respectively, compared to 2025. The increase was primarily due to losses on convertible debt transactions of $359.7 million and $369.4 million during the three and six months ended June 30, 2026, respectively (see Note 14 of "Notes to the Condensed Consolidated Financial Statements"). Interest expense increased by $13.8 million and $22.4 million for the three and six months periods, respectively, primarily due to increased borrowings under our credit agreement and the issuance of $600.0 million of our 6.375% senior notes due 2034 (the "6.375% Senior Notes") during the second quarter and also included $3.5 million of interest expense related to the amortization of the debt discount associated with the 3.75% Convertible Notes (see Note 14 of "Notes to the Condensed Consolidated Financial Statements").
Income Taxes
The following table presents the provision for income taxes for the respective periods:
Three Months Ended
June 30, 		Six Months Ended
June 30,
(dollars in thousands) 2026 2025 2026 2025
Provision for income taxes $ 32,248 $ 27,214 $ 20,129 $ 15,458
Effective tax rate (13.5 %) 25.3 % (7.0 %) 22.9 %
We calculate our income tax provision or benefit at the end of each interim period by estimating our annual effective tax rate, applying that rate to our income or loss before taxes and adjusting for discrete items not included in our estimate of the annual effective tax rate. The effect of changes in enacted tax laws, tax rates or tax status is recognized in the interim period in which the change occurs.
See Note 17 of "Notes to the Condensed Consolidated Financial Statements" for more information.
Liquidity and Capital Resources
Our primary sources of liquidity are cash and cash equivalents, investments, available borrowing capacity under our Credit Agreement and cash generated from operations. We may also from time to time issue and sell equity, debt or hybrid securities or engage in other capital markets transactions or sell one or more business units or assets. See Note 14 of the "Notes to the Condensed Consolidated Financial Statements" for information on our long-term debt.
Our material cash requirements include paying the costs and expenses associated with our operations, servicing outstanding indebtedness, making capital expenditures and paying dividends on our capital stock. We may also from time to time prepay or repurchase outstanding indebtedness, repurchase shares of our common stock or acquire assets or businesses that are complementary to our operations. During the three months ended June 30, 2026, we issued $600.0 million aggregate principal amount of our 6.375% Senior Notes and called for redemption all of our 3.75% Convertible Notes. See Note 14 of "Notes to the Condensed Consolidated Financial Statements" for information on the 6.375% Senior Notes, exchange transactions related to our 3.75% Convertible Notes, the redemption of our 3.75% Convertible Notes, the Conversion Election and the related accounting treatment and effects of the Conversion Election. See Note 3 of "Notes to the Condensed Consolidated Financial Statements" for information on our recent acquisitions.
We believe our primary sources of liquidity will be sufficient to meet our expected working capital needs, capital expenditures, financial commitments, including the redemption and conversions of our 3.75% Convertible Notes, cash dividend payments and other liquidity requirements associated with our existing operations for the next twelve months. We also believe our primary sources of liquidity, access to debt and equity capital markets and cash expected to be generated from operations will be sufficient to meet our long-term requirements and plans. However, there can be no assurance that sufficient capital will continue to be available or that it will be available on terms acceptable to us.
As of June 30, 2026, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions and marketable securities consisting of commercial paper, corporate notes and bonds, Municipal notes and bonds and U.S. Government and agency obligations.
As of June 30, 2026, the total unused availability under our Revolver was $584.9 million, resulting from $15.1 million in issued and outstanding letters of credit and no amount drawn under the Revolver. During the second quarter, we borrowed and repaid $170.0 million on the Revolver.
As of June 30, 2026, one of the conditions permitting the holders of the 3.25% Convertible Notes to convert continued to be met. Our common stock traded above 130% of the $77.88 conversion price for at least 20 trading days during the period of 30 consecutive trading days ended on June 30, 2026 (the last trading day of the calendar quarter). The holders of the 3.25% Convertible Notes have the right to convert through September 30, 2026, at which point we will re-evaluate whether the 3.25% Convertible Notes will continue to be convertible in the subsequent calendar quarter. In the event the holders of the 3.25% Convertible Notes elect to convert a portion, or all of their 3.25% Convertible Notes, the principal amount is required to be settled in cash. As a result, the $373.8 million principal amount remains classified as a current liability as of June 30, 2026 in the Condensed Consolidated Balance Sheets. Any conversion premium will be satisfied with cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. At current market prices of our common stock, we do not expect holders to elect to convert their notes as the trading price of the notes in the secondary market exceeds the value a holder would receive upon conversion of such notes. In the unlikely event a holder elects to convert, we would use cash on hand or draw on our Revolver as needed.
On the Call Notice Date, we called the outstanding $273.7 million aggregate principal amount of 3.75% Convertible Notes for redemption on August 10, 2026. We expect that all or substantially all of the holders of the 3.75% Convertible Notes will elect to convert their notes in connection with the notice of redemption. We expect to settle such conversion requests on August 12, 2026 in cash up to approximately $716.5 million, or $2,617.40 per each $1,000 principal amount of the 3.75% Convertible Notes (which, on an as-converted basis, corresponds to approximately $120.00 per share of our common stock), with any remaining conversion consideration to be paid in shares of our common stock. The actual amount of consideration that we will be required to pay to settle such conversion requests will depend on our stock price during the relevant observation period and therefore remains subject to change. If our stock price during the observation period declines, or if not all holders of the 3.75% Convertible Notes elect to convert their notes in connection with the notice of redemption, the amount of cash (and number of shares, if applicable) we would use to settle such conversion requests would be correspondingly reduced. Net proceeds from the issuance of the 6.375% Senior Notes are expected to fund cash settlements associated with conversions and redemption of the 3.75% Convertible Notes. As a result of calling the 3.75% Convertible Notes, we have classified the 3.75% Convertible Notes as a current liability as of June 30, 2026 in the Condensed Consolidated Balance Sheets. See Note 14 of "Notes to the Condensed Consolidated Financial Statements" for information regarding the redemption of the 3.75% Convertible Notes.
Additionally, in connection with the redemption and conversions of the 3.75% Convertible Notes, we expect to unwind and terminate the capped call transactions we entered into in connection with the offering of the 3.75% Convertible Notes (the "2023 capped call transactions"). In such unwind and termination, we expect to receive an amount from the financial institutions that are counterparties to the 2023 capped call transactions equal to the fair value of such transactions, with such amount and the form of consideration determined at the time of the unwind and termination. The 2023 capped call transactions were entered into to reduce dilution and/or offset cash payments we are required to make in excess of the principal amount of any converted 3.75% Convertible Notes up to a cap price of $79.83 per share of our common stock.
In evaluating our liquidity position and needs, we also consider cash and cash equivalents held by our consolidated construction joint ventures ("CCJVs"). The following table presents our cash, cash equivalents and marketable securities, including amounts from our CCJVs, as of the respective dates:
(in thousands) June 30, 2026 December 31, 2025
Cash and cash equivalents excluding CCJVs $ 722,584 $ 383,636
CCJV cash and cash equivalents (1) 154,537 145,584
Total consolidated cash and cash equivalents 877,121 529,220
Short-term marketable securities (2) 36,852 71,021
Long-term marketable securities (2) 17,550 49,534
Total cash, cash equivalents and marketable securities $ 931,523 $ 649,775
(1)The volume and stage of completion of contracts from our CCJVs may cause fluctuations in joint venture cash and cash equivalents between periods. The assets of each consolidated and unconsolidated construction joint venture relate solely to that joint venture. The decision to distribute joint venture assets must generally be made jointly by a majority of the members and, accordingly, these assets, including those associated with estimated cost recovery of customer affirmative claims and back charge claims, are generally not available for the working capital needs of Granite until distributed.
(2)All marketable securities were classified as held-to-maturity and consisted of commercial paper, corporate notes and bonds, Municipal notes and bonds and U.S. Government and agency obligations as of June 30, 2026 and December 31, 2025.
Granite's portion of CCJV cash and cash equivalents was $95.9 million and $90.6 million as of June 30, 2026 and December 31, 2025, respectively. Excluded from the table above is $31.2 million and $35.0 million as of June 30, 2026 and December 31, 2025, respectively, of Granite's portion of unconsolidated construction joint venture cash and cash equivalents.
Capital Expenditures
Major capital expenditures are typically for aggregate and asphalt production facilities, aggregate reserves, construction equipment, buildings and leasehold improvements and investments in our information technology systems. The timing and amount of such expenditures can vary based on the progress of planned capital projects, the type and size of construction projects, changes in business outlook and other factors. During the six months ended June 30, 2026, we had capital expenditures of $55.9 million, compared to $61.0 million during the six months ended June 30, 2025. We currently anticipate 2026 capital expenditures to be between approximately $140.0 million and $160.0 million, including approximately $50.0 million in planned strategic materials investments.
Cash Flows
Six Months Ended June 30,
(in thousands) 2026 2025
Net cash provided by (used in):
Operating activities $ 141,544 $ 5,438
Investing activities $ (114,428) $ (207,255)
Financing activities $ 320,785 $ (54,496)
Operating activities
As a large infrastructure contractor and construction materials producer, our revenue, gross profit and the resulting operating cash flows can differ significantly from period to period due to a variety of factors, including project progression toward completion, outstanding contract change orders and affirmative claims, and the payment terms of our contracts. Additionally, operating cash flows are impacted by the resolution of uncertainties inherent in the complex nature of the construction work we perform, including claim and back charge settlements. Our working capital assets result from both public and private sector projects. Customers in the private sector can be slower paying than those in the public sector; however, private sector projects generally have higher gross profit as a percentage of revenue. While we typically invoice our customers on a monthly basis, our construction contracts frequently provide for retention that is a specified percentage withheld from each payment by our customers until the contract is completed and the work accepted by the customer.
Cash provided by operating activities of $141.5 million for the six months ended June 30, 2026 represents a $136.1 million increase in cash provided by operating activities when compared to the same period of 2025. The change was primarily attributable to an $83.4 million increase in cash provided by working capital, which includes receivables, net contract assets, inventories, other assets, accounts payable and accrued expenses and other liabilities. Additionally, net income after
adjusting for non-cash items increased $34.5 million and an increase in distributions from, net of contributions to, unconsolidated construction joint ventures and affiliates of $18.2 million when compared to the same period of 2025.
Investing activities
Cash used in investing activities of $114.4 million for the six months ended June 30, 2026, compared to cash used in investing activities of $207.3 million for the same period in 2025, represents an $92.8 million decrease in cash used in investing activities. The change was primarily due to $221.5 million less purchases of marketable securities net of maturities, $25.0 million collection of note receivable and $7.8 million less purchases of property and equipment, net of sales. This was partially offset by $162.1 million of cash used for the acquisition of Kenny Seng Construction.
Financing activities
Cash provided by financing activities of $320.8 million for the six months ended June 30, 2026 represents a $375.3 million increase in cash provided by financing activities when compared to the same period of 2025. The increase was primarily driven by $600.0 million from the issuance of our 6.375% Senior Notes, $170.0 million of proceeds from the Revolver, $56.7 million in proceeds from the partial unwind of the capped call transactions and $25.5 million of decreased net distributions to non-controlling partners. This was partially offset by $288.5 million of repayments of a portion of our 3.75% Convertible Notes and $170.0 million repayment on the Revolver in the current year.
Derivatives
We recognize derivative instruments as either assets or liabilities in the Condensed Consolidated Balance Sheets at fair value using Level 2 or Level 3 inputs. See Note 9 to "Notes to the Condensed Consolidated Financial Statements" for further information. The capped call transactions related to the 3.75% Convertible Notes and 3.25% Convertible Notes were recorded to equity on our Condensed Consolidated Balance Sheets based on the cash proceeds. See Note 14 to "Notes to the Condensed Consolidated Financial Statements" for further information.
Surety Bonds and Real Estate Mortgages
We are generally required to provide various types of surety bonds that provide an additional measure of security under certain public and private sector contracts. At June 30, 2026, approximately $4.4 billion of our $7.4 billion CAP was bonded. Performance bonds do not have stated expiration dates; rather, we are generally released from the bonds when the obligations of the underlying contract have been fulfilled. The ability to maintain bonding capacity requires that we maintain cash and working capital balances satisfactory to our sureties.
Our investments in real estate ventures are subject to mortgage indebtedness. This indebtedness is non-recourse to Granite but is recourse to the real estate venture. The terms of this indebtedness are typically renegotiated to reflect the evolving nature of the real estate projects as they progress through acquisition, entitlement, development and leasing. Modification of these terms may include changes in loan-to-value ratios requiring the real estate venture to repay portions of the debt. Our equity-method investments in our foreign affiliates are subject to local bank debt primarily for equipment purchases. This debt is non-recourse to Granite, but it is recourse to the affiliates. The debt associated with our equity-method investments is included in Note 11 of "Notes to the Condensed Consolidated Financial Statements."
Covenants and Events of Default
Our Credit Agreement requires us to comply with various affirmative, restrictive and financial covenants, including the financial covenants described below. Our failure to comply with these covenants following any relevant cure periods would constitute an event of default under the Credit Agreement. The indentures governing our 3.25% Convertible Notes, our 3.75% Convertible Notes and our 6.375% Senior Notes also require us to comply with various covenants. Our failure to comply with these covenants following any relevant cure periods would constitute an event of default under the indentures governing our 3.25% Convertible Notes, our 3.75% Convertible Notes and our 6.375% Senior Notes. Additionally, our failure to pay principal, interest or other amounts when due or within the relevant grace period on our 6.375% Senior Notes, 3.25% Convertible Notes, our 3.75% Convertible Notes or our Credit Agreement would constitute an event of default under the 6.375% Senior Notes indenture, the 3.25% Convertible Notes indenture, the 3.75% Convertible Notes indenture or the Credit Agreement. A default under our Credit Agreement could result in (i) us no longer being entitled to borrow under such facility; (ii) the termination of such facility; (iii) the requirement that any letters of credit under such facility be cash collateralized; (iv) the acceleration of amounts owed under the Credit Agreement; and/or (v) the foreclosure on any collateral securing the obligations under such facility. A default under the 6.375% Senior Notes indenture, the 3.25% Convertible Notes indenture or the 3.75% Convertible Notes indenture could result in acceleration of the maturity of the notes.
The financial covenants under the terms of the Credit Agreement require the maintenance of a minimum Consolidated Interest Coverage Ratio and a maximum Consolidated Leverage Ratio. As of June 30, 2026, we were in compliance with the covenants in the Credit Agreement and in the indentures governing our notes.
Share Repurchase Program
As announced on February 3, 2022, on February 1, 2022, the Board of Directors authorized us to purchase up to $300.0 million of our common stock at management's discretion (the "2022 authorization"). There were no shares repurchased under the 2022 authorization in the six months ended June 30, 2026 and 2025, and $157.6 million remained available under the 2022 authorization as of June 30, 2026.
The specific timing and amount of any future repurchases will vary based on market conditions, securities law limitations and other factors.
Website Access
Our website address is www.graniteconstruction.com. On our website we make available, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. From time to time, we may use our website as a distribution channel for material company information. The information on our website is not incorporated into, and is not part of, this report. These reports, and any amendments to them, are also available at the website of the SEC, www.sec.gov.
Granite Construction Inc. published this content on July 30, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on July 30, 2026 at 21:11 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]