GRANITE CONSTRUCTION INC 10-Q

Item 1. FINANCIAL STATEMENTS GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited - in thousands, except share and per share data) March 31, 2024 December 31, 2023 ASSETS Current assets Cash and cash equivalents ($ 137,121 and $ 120,224 related to consolidated construction joint ventures (“CCJVs”)) $ 321,752 $ 417,663 Short-term marketable securities 15,500 35,863 Receivables, net ($ 45,744 and $ 62,040 related to CCJVs) 429,830 598,705 Contract assets ($ 79,779 and $ 68,520 related to CCJVs) 306,004 262,987 Inventories 116,957 103,898 Equity in construction joint ventures 168,985 171,233 Other current assets ($ 5,780 and $ 5,590 related to CCJVs) 59,078 53,102 Total current assets 1,418,106 1,643,451 Property and equipment, net ($ 7,592 and $ 7,557 related to CCJVs) 665,524 662,864 Investments in affiliates 92,677 92,910 Goodwill 160,842 155,004 Intangible assets 113,201 117,322 Right of use assets 79,580 78,176 Deferred income taxes, net 8,108 8,179 Other noncurrent assets 56,997 55,634 Total assets $ 2,595,035 $ 2,813,540 LIABILITIES AND EQUITY Current liabilities Current maturities of long-term debt $ 39,986 $ 39,932 Accounts payable ($ 55,374 and $ 62,755 related to CCJVs) 347,382 408,363 Contract liabilities ($ 49,339 and $ 50,929 related to CCJVs) 223,964 243,848 Accrued expenses and other current liabilities ($ 6,573 and $ 5,426 related to CCJVs) 325,103 337,740 Total current liabilities 936,435 1,029,883 Long-term debt 513,203 614,781 Long-term lease liabilities 65,115 63,548 Deferred income taxes, net 3,636 3,708 Other long-term liabilities 72,041 74,654 Commitments and contingencies (see Note 17) Equity Preferred stock, $ 0.01 par value, authorized 3,000,000 shares, none outstanding — — Common stock, $ 0.01 par value, authorized 150,000,000 shares; issued and outstanding: 44,149,644 shares as of March 31, 2024 and 43,944,118 shares as of December 31, 2023 441 439 Additional paid-in capital 479,680 474,134 Accumulated other comprehensive income 1,290 881 Retained earnings 465,047 501,844 Total Granite Construction Incorporated shareholders’ equity 946,458 977,298 Non-controlling interests 58,147 49,668 Total equity 1,004,605 1,026,966 Total liabilities and equity $ 2,595,035 $ 2,813,540 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited - in thousands, except per share data) Three Months Ended March 31, 2024 2023 Revenue Construction $ 595,213 $ 503,416 Materials 77,062 56,652 Total revenue 672,275 560,068 Cost of revenue Construction 538,385 466,711 Materials 79,605 60,998 Total cost of revenue 617,990 527,709 Gross profit 54,285 32,359 Selling, general and administrative expenses 87,993 73,122 Other costs, net 11,010 4,523 Gain on sales of property and equipment, net ( 1,418 ) ( 2,037 ) Operating loss ( 43,300 ) ( 43,249 ) Other (income) expense Interest income ( 6,702 ) ( 3,762 ) Interest expense 8,083 2,891 Equity in income of affiliates, net ( 3,970 ) ( 5,187 ) Other income, net ( 1,743 ) ( 1,950 ) Total other income, net ( 4,332 ) ( 8,008 ) Loss before income taxes ( 38,968 ) ( 35,241 ) Benefit from income taxes ( 9,526 ) ( 9,469 ) Net loss ( 29,442 ) ( 25,772 ) Amount attributable to non-controlling interests ( 1,541 ) 2,749 Net loss attributable to Granite Construction Incorporated $ ( 30,983 ) $ ( 23,023 ) Net loss per share attributable to common shareholders (see Note 15): Basic $ ( 0.70 ) $ ( 0.53 ) Diluted $ ( 0.70 ) $ ( 0.53 ) Weighted average shares outstanding: Basic 43,988 43,764 Diluted 43,988 43,764 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited - in thousands) Three Months Ended March 31, 2024 2023 Net loss $ ( 29,442 ) $ ( 25,772 ) Other comprehensive income (loss), net of tax Net unrealized gain (loss) on cash flow hedges, net of tax $ 589 $ ( 192 ) Less: reclassification for net gains included in interest expense, net of tax 226 — Net change $ 815 $ ( 192 ) Foreign currency translation adjustments, net ( 406 ) 57 Other comprehensive income (loss), net of tax $ 409 $ ( 135 ) Comprehensive loss, net of tax $ ( 29,033 ) $ ( 25,907 ) Non-controlling interests in comprehensive (income) loss, net of tax ( 1,541 ) 2,749 Comprehensive loss attributable to Granite Construction Incorporated, net of tax $ ( 30,574 ) $ ( 23,158 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited - in thousands, except share data) Outstanding Shares Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Granite Shareholders’ Equity Non-controlling Interests Total Equity Balances at December 31, 2023 43,944,118 $ 439 $ 474,134 $ 881 $ 501,844 $ 977,298 $ 49,668 $ 1,026,966 Net loss — — — — ( 30,983 ) ( 30,983 ) 1,541 ( 29,442 ) Other comprehensive income — — — 409 — 409 — 409 Repurchases of common stock (1) ( 135,434 ) ( 1 ) ( 7,415 ) — — ( 7,416 ) — ( 7,416 ) RSUs vested 341,394 3 ( 3 ) — — — — — Dividends on common stock ($ 0.13 per share per quarter) — — 72 — ( 5,813 ) ( 5,741 ) — ( 5,741 ) Transactions with non-controlling interests — — — — — — 6,938 6,938 Stock-based compensation expense and other ( 434 ) — 12,891 — — 12,891 — 12,891 Balances at March 31, 2024 44,149,644 $ 441 $ 479,679 $ 1,290 $ 465,048 $ 946,458 $ 58,147 $ 1,004,605 Balances at December 31, 2022 43,743,907 $ 437 $ 470,407 $ 788 $ 481,384 $ 953,016 $ 32,129 $ 985,145 Net loss — — — — ( 23,023 ) ( 23,023 ) ( 2,749 ) ( 25,772 ) Other comprehensive loss — — — ( 135 ) — ( 135 ) — ( 135 ) Repurchases of common stock (1) ( 87,260 ) — ( 3,523 ) — — ( 3,523 ) — ( 3,523 ) RSUs vested 223,967 2 ( 2 ) — — — — — Dividends on common stock ($ 0.13 per share per quarter) — — 74 — ( 5,778 ) ( 5,704 ) — ( 5,704 ) Transactions with non-controlling interests — — — — — — 17,574 17,574 Stock-based compensation expense and other ( 390 ) — 4,826 — — 4,826 — 4,826 Balances at March 31, 2023 43,880,224 $ 439 $ 471,782 $ 653 $ 452,583 $ 925,457 $ 46,954 $ 972,411 (1) Represents shares withheld related to employee taxes for RSUs vested under our equity incentive plans. The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents GRANITE CONSTRUCTION INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ( Unaudited - in thousands ) Three Months Ended March 31, 2024 2023 Operating activities Net loss $ ( 29,442 ) $ ( 25,772 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation, depletion and amortization 29,068 19,733 Amortization related to long-term debt 758 472 Gain on sales of property and equipment, net ( 1,418 ) ( 2,037 ) Stock-based compensation 12,895 4,828 Equity in net income from unconsolidated construction joint ventures ( 2,290 ) ( 911 ) Net income from affiliates ( 3,970 ) ( 5,187 ) Other non-cash adjustments ( 691 ) ( 151 ) Changes in assets and liabilities: Receivables 169,965 66,800 Contract assets, net ( 62,882 ) ( 59,307 ) Inventories ( 13,066 ) ( 11,083 ) Contributions to unconsolidated construction joint ventures ( 2,000 ) ( 3,350 ) Distributions from unconsolidated construction joint ventures and affiliates 7,914 2,478 Other assets, net ( 7,134 ) ( 5,724 ) Accounts payable ( 60,029 ) ( 42,955 ) Accrued expenses and other liabilities, net ( 13,605 ) ( 14,522 ) Net cash provided by (used in) operating activities $ 24,073 $ ( 76,688 ) Investing activities Maturities of marketable securities 20,000 10,000 Purchases of property and equipment ( 27,871 ) ( 40,461 ) Proceeds from sales of property and equipment 2,535 4,518 Proceeds from company owned life insurance — 1,545 Return of investment in affiliates 693 — Cash paid for purchase price adjustments on business acquisition (See Note 3) ( 6,119 ) — Collection of notes receivable — 62 Net cash used in investing activities $ ( 10,762 ) $ ( 24,336 ) Financing activities Debt principal repayments ( 102,140 ) ( 256 ) Cash dividends paid ( 5,713 ) ( 5,687 ) Repurchases of common stock ( 7,416 ) ( 3,523 ) Contributions from non-controlling partners 10,000 17,600 Distributions to non-controlling partners ( 3,950 ) ( 1,350 ) Other financing activities, net ( 3 ) — Net cash provided by (used in) financing activities $ ( 109,222 ) $ 6,784 Net decrease in cash, cash equivalents ( 95,911 ) ( 94,240 ) Cash and cash equivalents at beginning of period 417,663 293,991 Cash and cash equivalents at end of period $ 321,752 $ 199,751 Supplementary Information Right of use assets obtained in exchange for lease obligations $ 6,498 $ 3,388 Cash paid during the period for: Operating lease liabilities $ 5,681 $ 5,824 Interest $ 4,099 $ 1,012 Income taxes $ 831 $ 166 Non-cash investing and financing activities: RSUs issued, net of forfeitures $ 17,987 $ 9,552 Dividends declared but not paid $ 5,739 $ 5,704 Contributions from non-controlling partners $ 888 $ 1,324 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1.   General Basis of Presentation: The condensed consolidated financial statements included herein have been prepared by Granite Construction Incorporated (“we,” “us,” “our,” the “Company” or “Granite”) pursuant to the rules and regulations of the Securities and Exchange Commission, are unaudited and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 (“Annual Report”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. Further, the condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to state fairly our financial position at March 31, 2024 and the results of our operations and cash flows for the periods presented. The December 31, 2023 condensed consolidated balance sheet data included herein was derived from audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. During the first quarter of 2024, we reorganized our operational structure to more closely align with our two reportable segments, Construction and Materials. Previously, leaders within our three operating groups of California, Central and Mountain managed both Construction and Materials operations within each group. This change will allow us to better leverage our expertise within each reportable segment with leadership having direct oversight of their respective segment operations. As a result of the reorganization, we will no longer disclose financial information by operating group. There were no material impacts to our unaudited condensed consolidated financial statements and no changes to our reportable segments. Due to the changes in our operational structure and the resulting changes to reporting units, we performed quantitative goodwill impairment tests, immediately before and after the reorganization, on the affected reporting units. These reporting units previously aligned with our operating group structure, but have now been combined into two reporting units, Construction and Materials. The reporting units associated with the acquisition of Lehman-Roberts Company and Memphis Stone & Gravel Company (collectively, "LRC/MSG") were not impacted by the reorganization. For each of the affected reporting units, we calculated the estimated fair value consistent with the annual impairment assessment using the discounted cash flows and market multiple methods. These tests indicated that the estimated fair values of the affected reporting units exceeded their carrying amounts with headroom in excess of 25 %. Seasonality: Our operations are typically affected more by 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 for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year. 2.   Recently Issued and Adopted Accounting Pronouncements We closely monitor all Accounting Standards Updates issued by the Financial Accounting Standards Board and other authoritative guidance. No new accounting pronouncements were adopted in the three months ended March 31, 2024 that had a material impact on our financial statements. 3.   Acquisitions On April 24, 2023, we acquired Coast Mountain Resources (2020) Ltd. (“CMR”). CMR is a construction aggregate producer based in British Columbia, Canada operating on Malahat First Nation land. CMR results are reported in the Materials segment. This acquisition did not have a material impact on our financial statements. On November 30, 2023 (“acquisition date”), we completed the acquisition of LRC/MSG for $ 278.0 million, subject to customary closing adjustments, plus an estimated amount related to tax make-whole agreements with the seller. We purchased all of the outstanding equity interests in LRC/MSG and the purchase price was funded by a $ 150.0 million senior secured term loan, as described further in Note 14, a draw of $ 100 million under our existing revolver, which was fully repaid during the three months ended March 31, 2024, and the remainder from cash on hand. The acquired businesses are longstanding asphalt paving and asphalt and aggregates producers and suppliers. LRC/MSG operates strategically located asphalt plants and sand and gravel mines serving the greater Memphis area and northern Mississippi. The buyer of LRC/MSG, Granite Southeast, is a wholly-owned subsidiary of Granite Construction Incorporated, and its results have been included in the Construction and Materials segments since the acquisition date. LRC/MSG’s customers are in both the public and private sectors. We have accounted for this transaction in accordance with Accounting Standards Codification ("ASC") Topic 805, Business Combinations (“ASC 805”). 8 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) Revenue and gross loss attributable to LRC/MSG for the three months ended March 31, 2024 was $ 14.0 million and $ 8.5 million, respectively. During the three months ended March 31, 2024, we incurred an immaterial amount of pre-tax integration expenses associated with the LRC/MSG acquisition which were primarily related to professional services. Preliminary Purchase Price Allocation In accordance with ASC 805, the total purchase price and assumed liabilities were allocated to the net tangible and identifiable intangible assets based on their estimated fair values as of the acquisition date, as presented in the table below. These estimates are subject to revision, which may result in adjustments to the values presented below. There are certain provisional estimates that are subject to finalization, one of which is related to tax make-whole agreements with the seller of approximately $ 24.0 million, which will be finalized upon the former owners of LRC/MSG paying their personal tax burden related to the sale of the businesses. During the three months ended March 31, 2024, we made measurement period adjustments to reflect facts and circumstances in existence as of the acquisition date. These adjustments included a $ 4.6 million net increase from net working capital adjustments and a $ 2.0 million increase in the estimated obligation associated with the tax make-whole agreements noted above, offset by a $ 0.6 million net increase in the value of the net tangible and identifiable intangible assets acquired. The impact of these adjustments was an increase in goodwill of $ 6.0 million. We paid $ 6.1 million during the three months ended March 31, 2024 for net working capital adjustments associated with the acquisition of LRC/MSG. As we continue to integrate the acquired business, we may obtain additional information on the acquired identifiable intangible assets which, if significant, may require revisions to preliminary valuation assumptions, estimates and resulting fair values. We expect to finalize these amounts within 12 months from the acquisition date. The following table presents the preliminary purchase price allocation: (in thousands) Assets Cash and cash equivalents $ 12,798 Receivables 18,373 Contract assets 3,388 Inventories 13,738 Other current assets 1,032 Property and equipment 86,329 Right of use assets 15,539 Other noncurrent assets 3,718 Total tangible assets 154,915 Identifiable intangible assets 110,360 Liabilities Accounts payable 6,806 Contract liabilities 3,213 Accrued expenses and other current liabilities 10,166 Long-term lease liabilities 15,558 Other long-term liabilities 5,960 Total liabilities assumed 41,703 Total tangible and identifiable intangible net assets acquired 223,572 Goodwill 86,780 Estimated purchase price $ 310,352 4.   Revisions in Estimates Our profit recognition related to construction contracts is based on estimates of transaction price and costs to complete each project. These estimates can vary significantly in the normal course of business as projects progress, circumstances develop and evolve, and uncertainties are resolved. Changes in estimates of transaction price and costs to complete may result in the 9 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) reversal of previously recognized revenue if the current estimate adversely differs from the previous estimate. In addition, the estimated or actual recovery related to estimated costs associated with unresolved affirmative claims and back charges may be recorded in future periods or may be at values below the associated cost, which can cause fluctuations in the gross profit impact from revisions in estimates. When we experience significant revisions in our estimates, we undergo a process that includes reviewing the nature of the changes to ensure that there are no material amounts that should have been recorded in a prior period rather than as revisions in estimates for the current period. For revisions in estimates, generally we use the cumulative catch-up method for changes to the transaction price that are part of a single performance obligation. Under this method, revisions in estimates are accounted for in their entirety in the period of change. There can be no assurance that we will not experience further changes in circumstances or otherwise be required to revise our estimates in the future. In our review of these changes for the three months ended March 31, 2024 and 2023, we did not identify any material amounts that should have been recorded in a prior period. During the three months ended March 31, 2024, there was one project with an increase from revisions in estimates which had an impact to gross profit of $ 7.4 million and a reduction of net loss of $ 5.6 million, none of which was attributable to non-controlling interests. The revision decreased the net loss per diluted share attributable to common shareholders by $ 0.13 . The increase was due to changes in the estimated transaction price related to unresolved contract modifications resulting from revisions to project work plans, permitting and schedule. There were no increases from revisions in estimates, which individually had an impact of $ 5.0 million or more on gross profit, for the three months ended March 31, 2023. The projects with decreases from revisions in estimates, which individually had an impact of $ 5.0 million or more on gross profit, are summarized as follows (dollars in millions, except per share data): Three Months Ended March 31, 2024 2023 Number of projects with downward estimate changes 1 2 Range of reduction in gross profit from each project, net $ 7.7 $ 6.2 - 11.4 Decrease to project profitability, net $ 7.7 $ 17.6 Increase to net loss $ 5.8 $ 13.1 Amounts attributable to non-controlling interests $ — $ 5.7 Increase to net loss attributable to Granite Construction Incorporated $ 5.8 $ 7.5 Increase to net loss per diluted share attributable to common shareholders $ 0.13 $ 0.17 The decrease during the three months ended March 31, 2024 was due to additional costs related to changes in project duration, lower productivity than originally anticipated and increased labor and materials costs. The decreases during the three months ended March 31, 2023 were due to additional costs related to extended project duration, increased labor and materials costs, lower productivity than originally anticipated and unfavorable weather. 5.   Disaggregation of Revenue As discussed in Note 1, during the first quarter of 2024, we reorganized our operational structure to more closely align with our two reportable segments, Construction and Materials. Previously, leaders within our three operating groups of California, Central and Mountain managed both Construction and Materials operations within each group. As a result of the reorganization, we will no longer disclose financial information by operating group and we have updated our presentation of disaggregated revenue. The prior year disaggregation of revenue amounts have been recast to conform with current period presentation. Revenue is disaggregated by reportable segment (see Note 18) and customer type, which we believe best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Customer Type Customers in our Construction segment are predominantly in the public sector which includes certain federal agencies, state departments of transportation, local transit authorities, county and city public works departments and school districts. Our private sector customers include, but are not limited to, developers, utilities and private owners of industrial, commercial and residential sites. Customers of our Materials segment include internal usage by our own construction 10 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) projects, as well as third-party customers. Based on the nature of the Materials business, it is not meaningful to disaggregate revenue by customer type. The following table presents our revenue disaggregated by reportable segment and by customer type for the Construction segment: Three Months Ended March 31, (in thousands) 2024 2023 Construction segment revenue: Public $ 419,816 $ 333,091 Private 175,397 170,325 Total Construction segment revenue 595,213 503,416 Materials segment revenue 77,062 56,652 Total revenue $ 672,275 $ 560,068 6.   Unearned Revenue The following table presents our unearned revenue disaggregated by customer type as of the respective periods: (in thousands) March 31, 2024 December 31, 2023 Public $ 2,976,856 $ 2,892,255 Private 629,848 704,421 Total $ 3,606,704 $ 3,596,676 All unearned revenue is in the Construction segment. Approximately $ 2.4 billion of the March 31, 2024 unearned revenue is expected to be recognized within the next twelve months and the remaining amount will be recognized thereafter. 7.   Contract Assets and Liabilities As a result of changes in contract transaction price related to performance obligations that were satisfied or partially satisfied prior to the end of the periods, we recognized revenue of $ 84.3 million and $ 44.2 million during the three months ended March 31, 2024 and 2023, respectively. The changes in contract transaction price for the three months ended March 31, 2024 and 2023 were from items such as executed or estimated change orders and unresolved contract modifications and claims. As of March 31, 2024 and December 31, 2023, the aggregate claim recovery estimates included in contract asset and liability balances were $ 75.1 million and $ 77.9 million, respectively. The components of the contract asset balances as of the respective dates were as follows: (in thousands) March 31, 2024 December 31, 2023 Costs in excess of billings and estimated earnings $ 142,853 $ 100,106 Contract retention 163,151 162,881 Total contract assets $ 306,004 $ 262,987 As of March 31, 2024 and December 31, 2023, contract retention receivable from Brightline Trains Florida LLC represented 9.5 % and 11.1 %, respectively, of total contract assets. No other contract retention receivable individually exceeded 10% of total contract assets at any of the presented dates. The majority of the contract retention balance is expected to be collected within one year. As work is performed, revenue is recognized and the corresponding contract liabilities are reduced. We recognized revenue of $ 198.3 million and $ 123.0 million during the three months ended March 31, 2024 and 2023, respectively, that was included in the contract liability balances at December 31, 2023 and 2022, respectively. 11 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) The components of the contract liability balances as of the respective dates were as follows: (in thousands) March 31, 2024 December 31, 2023 Billings in excess of costs and estimated earnings, net of retention $ 209,099 $ 227,913 Provisions for losses 14,865 15,935 Total contract liabilities $ 223,964 $ 243,848 8.   Receivables, net Receivables include billed and unbilled amounts for services provided to clients for which we have an unconditional right to payment as of the end of the applicable period and generally do not bear interest. The following table presents major categories of receivables: (in thousands) March 31, 2024 December 31, 2023 Contracts completed and in progress: Billed $ 191,530 $ 343,190 Unbilled 115,946 119,170 Total contracts completed and in progress 307,476 462,360 Materials sales 43,816 61,808 Other 79,359 76,084 Total gross receivables 430,651 600,252 Less: allowance for credit losses 821 1,547 Total net receivables $ 429,830 $ 598,705 Included in other receivables at March 31, 2024 and December 31, 2023 were items such as estimated recovery from back charge claims, notes receivable, fuel tax refunds and income tax refunds. Other receivables at March 31, 2024 and December 31, 2023 also included $ 24.9 million of working capital contributions in the form of a loan to a partner in one of our unconsolidated construction joint ventures, plus accrued interest at prime plus 3.0 % per annum. None of our customers had a receivable balance in excess of 10 % of our total net receivables as of March 31, 2024 or December 31, 2023. 9.   Fair Value Measurement The following tables summarize significant assets and liabilities measured at fair value in the condensed consolidated balance sheets on a recurring basis for each of the fair value levels (in thousands): Fair Value Measurement at Reporting Date Using March 31, 2024 Level 1 Level 2 Level 3 Total Cash equivalents Money market funds $ 30,484 $ — $ — $ 30,484 Other current assets Interest rate swap $ — $ 972 $ — $ 972 Commodity swaps — 1 — 1 Total assets $ 30,484 $ 973 $ — $ 31,457 Accrued and other current liabilities Diesel collars $ — $ 208 $ — $ 208 Total liabilities $ — $ 208 $ — $ 208 12 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) December 31, 2023 Cash equivalents Money market funds $ 101,275 $ — $ — $ 101,275 Total assets $ 101,275 $ — $ — $ 101,275 Accrued and other current liabilities Interest rate swap $ — $ 126 $ — $ 126 Commodity swaps — 153 — 153 Diesel collars — 802 — 802 Total liabilities $ — $ 1,081 $ — $ 1,081 Interest Rate Swap In connection with entering into Amendment No. 2 of the Fourth Amended and Restated Credit Agreement in November 2023, we entered into an interest rate swap designated as a cash flow hedge with an initial notional amount of $ 75.0 million and an effective date of December 2023 and a maturity date of June 2027. Commodity Derivatives In 2023, we entered into collar contracts and commodity swaps to reduce our price exposure on diesel consumption and heating oil consumption, respectively. The collars and swaps were not designated as hedges and will be treated as a mark-to-market derivative instruments through their maturity dates. The financial statement impact of the collar contracts and commodity swaps for the three months ended March 31, 2024 and 2023 was immaterial . In December 2022, we entered into a commodity swap designed as a cash flow hedge for crude oil with a notional amount of $ 7.0 million and a maturity date of October 31, 2023. The financial statement impact of this swap during the three months ended March 31, 2023 was immaterial . Other Assets and Liabilities The carrying values and estimated fair values of financial instruments that are not required to be recorded at fair value in the condensed consolidated balance sheets were as follows: March 31, 2024 December 31, 2023 (in thousands) Fair Value Hierarchy Carrying Value Fair Value Carrying Value Fair Value Assets: Held-to-maturity marketable securities (1) Level 1 $ 15,500 $ 15,176 $ 35,863 $ 35,357 Liabilities (including current maturities): 3.75 % Convertible Notes (2) Level 2 $ 373,750 $ 513,873 $ 373,750 $ 475,601 2.75 % Convertible Notes (2) Level 2 $ 31,338 $ 56,710 $ 31,338 $ 51,045 Fourth Amended and Restated Credit Agreement - Term Loan (2) Level 3 $ 148,125 $ 151,314 $ 150,000 $ 153,585 Fourth Amended and Restated Credit Agreement - Revolver (2) Level 3 $ — $ — $ 100,000 $ 102,317 (1) All marketable securities were classified as held-to-maturity and consisted of U.S. Government and agency obligations as of March 31, 2024 and December 31, 2023. (2) The fair values of our 2.75 % Convertible Notes and 3.75 % Convertible Notes are based on the median price of the notes in an active market. The fair value of the Fourth Amended and Restated Credit Agreement, as amended (the "Credit Agreement"), is based on borrowing rates available to us for long-term loans with similar terms, average maturities, and credit risk. See Note 14 for more information about the 2.75 % Convertible Notes, 3.75 % Convertible Notes and the Credit Agreement. During the three months ended March 31, 2024 and 2023, we had no material nonfinancial asset and liability fair value adjustments. 13 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) 10.   Construction Joint Ventures We participate in various construction joint ventures. We have determined that certain of these joint ventures are consolidated because they are variable interest entities (“VIEs”) and we are the primary beneficiary. We continually evaluate whether there are changes in the status of the VIEs or changes to the primary beneficiary designation of the VIE. Based on our assessments during the three months ended March 31, 2024, we determined no change was required for existing joint ventures. Due to the joint and several nature of the performance obligations under the related owner contracts, if any of our partners fail to perform, we and the remaining partners, if any, would be responsible for performance of the outstanding work (i.e., we provide a performance guarantee). We are not able to estimate amounts that may be required beyond the current remaining forecasted cost of the work to be performed. These forecasted costs could be offset by billings to the customer or by proceeds from our partners’ corporate and/or other guarantees. See Note 13 for disclosure of the performance guarantee amounts recorded in the condensed consolidated balance sheets. Consolidated Construction Joint Ventures (“CCJVs”) As of March 31, 2024, we were engaged in ten active CCJV projects. Our proportionate share of the equity in these joint ventures was between 50.0 % and 70.0 %. During the three months ended March 31, 2024 and 2023, total revenue from CCJVs was $ 71.6 million and $ 61.3 million, respectively. During the three months ended March 31, 2024 and 2023, CCJVs provided $ 5.8 million and used $ 24.8 million of operating cash flows, respectively. As of March 31, 2024, our share of revenue remaining to be recognized on these CCJVs was $ 311.3 million and ranged from $ 1.3 million to $ 119.1 million by project. Unconsolidated Construction Joint Ventures As of March 31, 2024, we were engaged in five active unconsolidated construction joint venture projects. Our proportionate share of the equity in these unconsolidated construction joint ventures ranged from 30.0 % to 50.0 %. As of March 31, 2024, our share of the revenue remaining to be recognized on these unconsolidated construction joint ventures was $ 39.9 million and ranged from $ 1.2 million to $ 29.8 million by project. The following is summary financial information related to unconsolidated construction joint ventures: (in thousands) March 31, 2024 December 31, 2023 Assets Cash, cash equivalents and marketable securities $ 131,579 $ 117,962 Other current assets (1) 604,489 666,536 Noncurrent assets 51,157 52,580 Less: partners’ interest 538,637 574,723 Granite’s interest (1),(2) $ 248,588 $ 262,355 Liabilities Current liabilities $ 158,449 $ 191,175 Less: partners’ interest and adjustments (3) 66,078 85,131 Granite’s interest $ 92,371 $ 106,044 Equity in construction joint ventures (4) $ 156,217 $ 156,311 (1) Included in this balance and in accrued expenses and other current liabilities on the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 was $ 57.8 million related to performance guarantees (see Note 13). (2) Included in this balance as of March 31, 2024 and December 31, 2023 was $ 66.6 million related to Granite’s share of estimated cost recovery of customer affirmative claims. In addition, this balance included $ 1.7 million related to Granite’s share of estimated recovery of back charge claims as of March 31, 2024 and December 31, 2023, respectively. (3) Partners’ interest and adjustments includes amounts to reconcile total net assets as reported by our partners to Granite’s interest adjusted to reflect our accounting policies and estimates primarily related to contract forecast differences. (4) Included in this balance and in accrued expenses and other current liabilities on our condensed consolidated balance sheets was $ 12.8 million and $ 14.9 million as of March 31, 2024 and December 31, 2023, respectively, related to deficits in unconsolidated construction joint ventures, which includes provisions for losses. 14 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) Three Months Ended March 31, (in thousands) 2024 2023 Revenue Total $ 8,717 $ 38,174 Less: partners’ interest and adjustments (1) ( 1,513 ) 23,329 Granite’s interest $ 10,230 $ 14,845 Cost of revenue Total $ 18,751 $ 44,371 Less: partners’ interest and adjustments (1) 10,270 30,404 Granite’s interest $ 8,481 $ 13,967 Granite’s interest in gross profit $ 1,749 $ 878 Net Income (Loss) Total $ ( 8,149 ) $ ( 5,654 ) Less: partners’ interest and adjustments (1) ( 10,439 ) ( 6,565 ) Granite’s interest in net income (2) $ 2,290 $ 911 (1) Partners’ interest and adjustments includes amounts to reconcile total revenue and total cost of revenue as reported by our partners to Granite’s interest adjusted to reflect our accounting policies and estimates primarily related to contract forecast and/or actual differences. (2) These joint venture net income amounts exclude our corporate overhead required to manage the joint ventures and include taxes only to the extent the applicable states have joint venture level taxes. 11.   Investments in Affiliates Our investments in affiliates balance consists of equity method investments in the following types of entities: (in thousands) March 31, 2024 December 31, 2023 Foreign $ 69,945 $ 68,407 Real estate 5,425 7,136 Asphalt terminal 17,307 17,367 Total investments in affiliates $ 92,677 $ 92,910 The following table provides summarized balance sheet information for our affiliates accounted for under the equity method on a combined basis: (in thousands) March 31, 2024 December 31, 2023 Current assets $ 186,450 $ 204,897 Noncurrent assets 142,342 159,694 Total assets $ 328,792 $ 364,591 Current liabilities $ 64,786 $ 81,899 Long-term liabilities (1) 47,805 54,591 Total liabilities $ 112,591 $ 136,490 Net assets $ 216,201 $ 228,101 Granite’s share of net assets $ 92,677 $ 92,910 (1) This balance is primarily related to local bank debt for equipment purchases and debt associated with our real estate investments. Of the $ 328.8 million of total affiliate assets as of March 31, 2024, we had investments in two real estate entities with total assets of $ 40.6 million, our foreign affiliates had total assets of $ 250.2 million and the asphalt terminal entity had total assets of $ 38.0 million. As of March 31, 2024 and December 31, 2023, all of the investments in real estate affiliates were in residential real estate in Texas. As of March 31, 2024, our percent ownership in the real estate entities ranged from 10 % to 25 %. We have direct and indirect investments in our foreign affiliates, and our percent ownership in foreign affiliates 15 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) ranged from 25 % to 50 % as of March 31, 2024. Our percent ownership in the asphalt terminal entity was 50 % as of March 31, 2024. 12.   Property and Equipment, net Balances of major classes of assets and total accumulated depreciation and depletion are included in property and equipment, net in the condensed consolidated balance sheets as follows: (in thousands) March 31, 2024 December 31, 2023 Equipment and vehicles $ 1,150,677 $ 1,140,195 Quarry property 253,521 251,922 Land and land improvements 106,484 105,872 Buildings and leasehold improvements 102,672 102,676 Office furniture and equipment 72,835 72,098 Property and equipment $ 1,686,189 $ 1,672,763 Less: accumulated depreciation and depletion 1,020,665 1,009,899 Property and equipment, net $ 665,524 $ 662,864 13.   Accrued Expenses and Other Current Liabilities (in thousands) March 31, 2024 December 31, 2023 Accrued insurance $ 92,682 $ 81,936 Deficits in unconsolidated construction joint ventures 12,768 14,921 Payroll and related employee benefits 70,109 105,418 Performance guarantees 57,849 57,849 Short-term lease liabilities 16,266 16,826 Other 75,429 60,790 Total $ 325,103 $ 337,740 Other includes dividends payable, warranty reserves, asset retirement obligations, remediation reserves, the LRC/MSG tax make-whole liability (see Note 3), legal accruals and other miscellaneous accruals, none of which were greater than 5% of total current liabilities at any of the presented dates. 14.   Long-Term Debt and Credit Arrangements (in thousands) March 31, 2024 December 31, 2023 3.75 % Convertible Notes $ 373,750 $ 373,750 2.75 % Convertible Notes 31,338 31,338 Credit Agreement - Term Loan 148,125 150,000 Credit Agreement - Revolver — 100,000 Debt issuance costs and other ( 24 ) ( 375 ) Total debt $ 553,189 $ 654,713 Less: current maturities 39,986 39,932 Total long-term debt $ 513,203 $ 614,781 Credit Agreement In June 2022, we entered into the Credit Agreement which matures on June 2, 2027. The Credit Agreement consisted of a $ 350.0 million senior secured, five-year revolving credit facility (the “Revolver”), including an accordion feature allowing us to increase borrowings up to the greater of (a) $ 200.0 million and (b) 100 % of twelve-month trailing consolidated EBITDA, subject to lender approval. The Credit Agreement includes a $ 150.0 million sublimit for letters of credit ($ 75.0 million for financial letters of credit) and a $ 20.0 million sublimit for swingline loans. In May 2023, we entered into Amendment No. 1 to the Credit Agreement ("Amendment No. 1"). Amendment No. 1 amended the Credit Agreement to, 16 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) among other things, permit the Company to exchange its 2.75 % Convertible Notes for cash and shares of its common stock and to clarify that (i) the issuance of the 3.75 % Convertible Notes was permitted under the terms of the Credit Agreement and (ii) that a Swap Contract (as defined in the Credit Agreement) does not include any Permitted Call Spread Transaction (as defined in the Credit Agreement). In November 2023, we entered into Amendment No. 2 to the Credit Agreement ("Amendment No. 2") which amended the Credit Agreement to, among other things, provide for a $ 150.0 million senior secured term loan (the “Term Loan”), which was fully drawn on closing to fund the LRC/MSG acquisition. Borrowings under the Term Loan bear interest at term Secured Overnight Financing Rate (“SOFR”) with an interest period of one, three or six months (at our option), or such other period that is twelve months or less and consented to by all lenders subject to a credit spread adjustment of 0.10 % for one-month and three-month daily simple SOFR and term SOFR and 0.25 % for six-month term SOFR, or a base rate (at our option), in each case, plus an applicable margin of between 1.25 % and 2.25 % for term SOFR loans and 0.25 % and 1.25 % for base rate loans, in each case, based on the our Consolidated Leverage Ratio (as defined in our Credit Agreement). The Term Loan will mature on June 2, 2027 and will amortize 5 % per year payable in quarterly installments that began in the first quarter of 2024. We may borrow on the Revolver, at our option, at either (a) the SOFR term rate plus a credit adjustment spread plus applicable margin ranging from 1.0 % to 2.0 %, or (b) a base rate plus an applicable margin ranging from zero to 1.0 %. The applicable margin is based on our Consolidated Leverage Ratio (as defined in our Credit Agreement), calculated quarterly. As of March 31, 2024, the total unused availability under the Credit Agreement was $ 333.3 million, resulting from $ 16.7 million in issued and outstanding letters of credit and nothing drawn under the Revolver. The letters of credit had expiration dates between June 2024 and December 2027. 3.75 % Convertible Notes On May 11, 2023, we issued $ 373.8 million aggregate principal amount of our 3.75 % Convertible Notes. The 3.75 % Convertible Notes bear interest at a rate of 3.75 % per annum payable semiannually in arrears on May 15 and November 15 of each year, beginning on November 15, 2023 and mature on May 15, 2028, unless earlier converted, redeemed or repurchased. Prior to the close of business on the business day immediately preceding November 15, 2027, the 3.75 % Convertible Notes will be convertible at the option of the holders only upon the occurrence of certain events and during certain periods. Thereafter, the 3.75 % Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The initial conversion rate applicable to the 3.75 % Convertible Notes is 21.6807 shares of Granite common stock per $1,000 principal amount of the 3.75 % Convertible Notes, which is equivalent to an initial conversion price of approximately $ 46.12 per share of Granite common stock, subject to adjustment if certain events occur. Upon conversion, we will pay or deliver, as the case may be, cash, shares of Granite common stock or a combination of cash and shares of Granite common stock, at our election. In addition, upon the occurrence of a “fundamental change” as defined in the indenture governing the 3.75 % Convertible Notes, holders may require us to repurchase for cash all or any portion of their 3.75 % Convertible Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the 3.75 % Convertible Notes to be repurchased plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. If certain corporate events that constitute a “make-whole fundamental change” as set forth in the indenture governing the 3.75 % Convertible Notes occur prior to the maturity date of the 3.75 % Convertible Notes or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 3.75 % Convertible Notes in connection with such event or notice of redemption. We will not be able to redeem the 3.75 % Convertible Notes prior to May 20, 2026. On or after May 20, 2026, we have the option to redeem for cash all or any portion of the 3.75 % Convertible Notes if the last reported sale price of our common stock is equal to or greater than 130 % of the conversion price for a specified period of time at a redemption price equal to 100 % of the principal amount of the 3.75 % Convertible Notes to be redeemed, plus any accrued but unpaid interest to, but excluding, the redemption date. The indenture governing the 3.75 % Convertible Notes contains customary events of default. In the case of an event of default arising from certain events of bankruptcy, insolvency or reorganization, with respect to us or our significant subsidiaries, all outstanding 3.75 % Convertible Notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, then the trustee or the holders of at least 25 % in aggregate principal amount of the 3.75 % Convertible Notes then outstanding may declare the 3.75 % Convertible Notes due and payable immediately. The net proceeds from the sale of the 3.75 % Convertible Notes were approximately $ 364.4 million, after deducting the initial purchasers’ discount. We used approximately $ 53.0 million of the net proceeds from the offering to pay the cost of the Capped Call Transactions (as described below). In addition, we used approximately $ 198.8 million of the net proceeds 17 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) and issued 1,390,500 shares of Granite common stock in exchange for approximately $ 198.7 million aggregate principal amount of our 2.75 % Convertible Notes concurrent with the offering in separate and individually negotiated transactions (the "Exchange Transaction"). In connection with the Exchange Transaction, we entered into partial unwind agreements (the "Unwind Agreements") with certain financial institutions to unwind a portion of the convertible note hedge and warrant transactions entered into in connection with the offering of the 2.75 % Convertible Notes. Pursuant to the Unwind Agreements, we received 1,390,516 shares of our common stock (and cash in lieu of any fractional shares) in respect of the unwind of the portion of the existing convertible note hedge transactions that correspond to the 2.75 % Convertible Notes that were exchanged in the Exchange Transaction described above and paid $ 13.2 million in cash in respect of the unwind of the portion of the existing warrant transactions that correspond to the 2.75 % Convertible Notes that were exchanged in the Exchange Transaction described above. Capped Call Transactions In May 2023, we entered into capped call transactions (the "Capped Call Transactions") in connection with the offering of the 3.75 % Convertible Notes. The Capped Call Transactions are expected generally to reduce the potential dilution to Granite’s common stock upon conversion of the 3.75 % Convertible Notes and/or offset any cash payments Granite is required to make in excess of the principal amount of converted 3.75 % Convertible Notes, as the case may be. If, however, the market price per share of Granite’s common stock, as measured under the terms of the Capped Call Transactions, exceeds the cap price ($ 79.83 ) of the Capped Call Transactions, there would nevertheless be dilution and/or there would not be an offset of such cash payments, in each case, to the extent that such market price exceeds the cap price of the Capped Call Transactions. 2.75 % Convertible Notes The 2.75 % Convertible Notes were issued in November 2019 in an aggregate principal amount of $ 230.0 million, with an interest rate of 2.75 % and a maturity date of November 1, 2024, unless earlier converted, redeemed or repurchased. The 2.75 % Convertible Notes are convertible at the option of the holders prior to the close of business on the business day before May 1, 2024 only during certain periods and upon the occurrence of certain events. After May 1, 2024, the 2.75 % Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The conversion rate applicable to the 2.75 % Convertible Notes is 31.7776 shares of Granite common stock per $1,000 principal amount of 2.75 % Convertible Notes, which is equivalent to a conversion price of approximately $ 31.47 per share of Granite common stock. Upon conversion, we will pay or deliver, as the case may be, cash, shares of Granite common stock or a combination of cash and shares of Granite common stock, at our election. In addition, upon the occurrence of a “make-whole fundamental change” as defined in the indenture governing the 2.75 % Convertible Notes prior to the maturity date of the 2.75 % Convertible Notes or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder that elects to convert its 2.75 % Convertible Notes in connection with such a make-whole fundamental change or notice of redemption. We have the option to redeem for cash all or any portion of the 2.75 % Convertible Notes if the last reported sale price of our common stock is equal to or greater than 130 % of the conversion price for a specified period of time at a redemption price equal to 100 % of the principal amount of the 2.75 % Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. Upon the occurrence of a “fundamental change” as defined in the indenture governing the 2.75 % Convertible Notes, holders may require us to repurchase for cash all or any portion of their 2.75 % Convertible Notes at a price equal to 100 % of the principal amount of the 2.75 % Convertible Notes to be repurchased plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. The indenture governing the 2.75 % Convertible Notes contains customary events of default. In the case of an event of default arising from certain events of bankruptcy, insolvency or reorganization, with respect to us or our significant subsidiaries, all outstanding 2.75 % Convertible Notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, then the trustee or the holders of at least 25 % in aggregate principal amount of the 2.75 % Convertible Notes then outstanding may declare the notes due and payable immediately. At March 31, 2024, $ 31.3 million remained outstanding of our 2.75 % Convertible Notes. 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 would constitute an event of default under the Credit Agreement. Additionally, the 2.75 % Convertible Notes and 3.75 % Convertible Notes are governed by the terms and conditions of their respective indentures. Our failure to pay principal, interest or other amounts when due or within the relevant grace period on our 2.75 % Convertible Notes, our 3.75 % Convertible Notes or our Credit Agreement would 18 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) constitute an event of default under the 2.75 % Convertible Notes indenture, the 3.75 % Convertible Note 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) termination of such facility; (iii) the requirement that any letters of credit under such facility be cash collateralized; (iv) acceleration of amounts owed under the Credit Agreement; and/or (v) foreclosure on any collateral securing the obligations under such facility. A default under the 2.75 % Convertible Notes indenture or the 3.75 % Convertible Notes indenture could result in acceleration of the maturity of the notes. The most significant financial covenants under the terms of our Credit Agreement require the maintenance of a minimum Consolidated Interest Coverage Ratio and a maximum Consolidated Leverage Ratio. As of March 31, 2024, we were in compliance with all covenants contained in the Credit Agreement. We are not aware of any non-compliance by any of our unconsolidated real estate entities with the covenants contained in their debt agreements. Debt Issuance Costs During the three months ended March 31, 2024 and 2023, we recorded $ 0.6 million and $ 0.3 million, respectively, of amortization related to debt issuance costs. 15.   Weighted Average Shares Outstanding and Net Loss Per Share The following table presents a reconciliation of the weighted average shares of common stock used in calculating basic and diluted net loss per share as well as the calculation of basic and diluted net loss per share: Three Months Ended March 31, (in thousands, except per share amounts) 2024 2023 Numerator Net loss attributable to common shareholders $ ( 30,983 ) $ ( 23,023 ) Denominator Weighted average common shares outstanding, basic 43,988 43,764 Weighted average common shares outstanding, diluted 43,988 43,764 Net loss per share, basic $ ( 0.70 ) $ ( 0.53 ) Net loss per share, diluted $ ( 0.70 ) $ ( 0.53 ) Due to net losses for the three months ended March 31, 2024 and 2023, both the unvested RSUs representing 573,000 and 583,000 shares, respectively, and the potential dilution from the convertible notes converting into 9,099,000 and 7,309,000 shares, respectively, of common stock have been excluded from the calculation of diluted earnings per share, as their inclusion would have been antidilutive. In connection with the issuance of the 3.75 % Convertible Notes in May 2023, we entered into Capped Call Transactions, which were not included for purposes of calculating the number of diluted shares outstanding, as their effect would have been anti-dilutive. 16.   Income Taxes The following table presents the benefit from income taxes for the respective periods: Three Months Ended March 31, (dollars in thousands) 2024 2023 Benefit from income taxes $ ( 9,526 ) $ ( 9,469 ) Effective tax rate 24.4 % 26.9 % Our effective tax rate for the three months ended March 31, 2024 is lower than the prior year primarily due to an increased year-over-year benefit of permanent tax adjustments. 17.   Contingencies - Legal Proceedings Liabilities relating to legal proceedings and government inquiries, to the extent that we have concluded such liabilities are probable and the amounts of such liabilities are reasonably estimable, are recorded in the consolidated balance sheets. Disclosure is required when a material loss is probable but not reasonably estimable, a material loss is reasonably possible but not probable, or when it is reasonably possible that the amount of a loss will exceed the amount recorded. The total 19 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) liabilities recorded in our condensed consolidated balance sheets for legal proceedings and government inquiries were immaterial as of March 31, 2024 and December 31, 2023. It is possible that future developments in our legal proceedings and inquiries could require us to (i) adjust or reverse existing accruals, or (ii) record new accruals that we did not originally believe to be probable or that could not be reasonably estimated. Such changes could be material to our financial condition, results of operations and/or cash flows in any particular reporting period. Ordinary Course Legal Proceedings In the ordinary course of business, we and our affiliates are involved in various legal proceedings alleging, among other things, liability issues or breach of contract or tortious conduct in connection with the performance of services and/or materials provided, the various outcomes of which often cannot be predicted with certainty. For information on our accounting policies regarding affirmative claims and back charges that we are party to in the ordinary course of business, see Note 1 of our Annual Report. We and our affiliates are also subject to government inquiries in the ordinary course of business seeking information concerning our compliance with government construction contracting requirements and various laws and regulations, the outcomes which often cannot be predicted with certainty. Some of the matters in which we or our joint ventures and affiliates are involved may involve compensatory, punitive, or other claims or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that are not probable to be incurred or cannot currently be reasonably estimated. In addition, in some circumstances our government contracts could be terminated, we could be suspended, debarred or incur other administrative penalties or sanctions, or payment of our costs could be disallowed. While any of our pending legal proceedings may be subject to early resolution as a result of our ongoing efforts to resolve the proceedings, whether or when any legal proceeding will be resolved is neither predictable nor guaranteed. 18.  Reportable Segment Information Our reportable segments are the same as our operating segments and correspond with how our chief operating decision maker, or decision-making group (our “CODM”), regularly reviews financial information to allocate resources and assess performance. We identified our CODM as our Chief Executive Officer and our Chief Operating Officer. Our reportable segments are: Construction and Materials. Summarized segment information is as follows (in thousands): Three Months Ended March 31, Construction Materials Total 2024 Total revenue from reportable segments $ 595,213 $ 88,704 $ 683,917 Elimination of intersegment revenue — ( 11,642 ) ( 11,642 ) Revenue from external customers $ 595,213 $ 77,062 $ 672,275 Gross profit (loss) $ 56,828 $ ( 2,543 ) $ 54,285 Depreciation, depletion and amortization $ 13,703 $ 10,477 $ 24,180 Segment assets as of period end $ 594,437 $ 562,581 $ 1,157,018 2023 Total revenue from reportable segments $ 503,416 $ 71,920 $ 575,336 Elimination of intersegment revenue — ( 15,268 ) ( 15,268 ) Revenue from external customers $ 503,416 $ 56,652 $ 560,068 Gross profit (loss) $ 36,705 $ ( 4,346 ) $ 32,359 Depreciation, depletion and amortization $ 9,755 $ 6,122 $ 15,877 Segment assets as of period end $ 430,045 $ 390,741 $ 820,786 20 Table of Contents GRANITE CONSTRUCTION INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Unaudited) A reconciliation of segment gross profit to consolidated loss before income taxes is as follows: Three Months Ended March 31, (in thousands) 2024 2023 Total gross profit from reportable segments $ 54,285 $ 32,359 Selling, general and administrative expenses 87,993 73,122 Other costs, net 11,010 4,523 Gain on sales of property and equipment, net ( 1,418 ) ( 2,037 ) Total other income, net ( 4,332 ) ( 8,008 ) Loss before income taxes $ ( 38,968 ) $ ( 35,241 ) 21 Table of Contents