Granite Construction Incorporated (GVA) Q4 2025 Earnings Report, Transcript and Summary

Good morning. My name is Bailey, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Granite 2025 Fourth Quarter Conference Call. This call is being recorded. [Operator Instructions] It is now my pleasure to turn the floor over to Vice President of Investor Relations, Mike Barker.

Good morning, and thank you for joining us. I'm pleased to be here today with President and Chief Executive Officer, Kyle Larkin, and Executive Vice President and Chief Financial Officer, Staci Woolsey. Please note that today's earnings presentation will be available on the Events and Presentations page of our Investor Relations website. We begin today with a brief discussion regarding forward-looking statements and non-GAAP measures. Some of the discussion today may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are estimates reflecting the current expectations and best judgment of senior management regarding future events, occurrences, opportunities, targets, growth, demand, strategic plans, circumstances, activities, performance, shareholder value, outcomes, outlook, guidance, objectives, committed and awarded projects or CAP and results. Actual results could differ materially from statements made today. Please refer to Granite's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these forward-looking statements. The company assumes no obligation to update forward-looking statements, except as required by law. Certain non-GAAP measures may be discussed during today's call and from time to time by the company's executives. These include, but are not limited to, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share and cash gross profit. The required disclosures regarding our non-GAAP measures are included as part of our earnings press releases and in company presentations, which are available on our website, graniteconstruction.com under Investor Relations. Now I'd like to turn the call over to Kyle Larkin.

Good morning. Before we turn to the segment discussions, I'd like to discuss the progress we have been making to deliver on our strategic priorities. In 2025, we continue to focus on bidding and building the right projects, investing in our materials business and expanding our geographic footprint through targeted M&A. Our strategy to drive consistent, predictable financial performance across the company is working. We remain highly selective in the work we pursue, emphasizing best value in high-quality bid build opportunities in our home markets where we believe we can earn an appropriate return for the risk we assume in constructing these projects. This disciplined approach, combined with a strong funding environment underpinned our efforts to build a strong project portfolio even as we grew our CAP to a record $7 billion at year-end 2025, the highest in our history. Since 2020, our teams across the company are focused on pursuing the projects where we can leverage our home market advantages and consistently deliver higher margin work. This strategy enabled us to drive significant improvement in profitability from 8.8% Construction segment gross profit margin in 2020 to 15.7% in 2025, all while demonstrating the ability to organically grow the top line across our footprint. As I look at the landscape of the construction business entering 2026, I believe there are still significant public and private opportunities to capture work in our home markets, even as we maintain disciplined and work to continually drive excellence in execution in the bid room and every day on our job sites. During 2025, we also continued to invest in our materials business, both through acquisitions and CapEx. We've now completed the second year following our internal reorganization, where we restructure our businesses to place materials leaders over our materials business. This change has allowed these teams to direct our strategy across the segment as we work to unlock value through market-based pricing and through application of efficiencies across the segment. Over the last several years, we have focused our CapEx spend on the materials segment to improve plant performance, acquire additional aggregate reserves and expand our footprint. We have improved Materials segment cash gross profit from 19% in 2023 to 26% in 2025. The return on our investments has been exceptional. The team has many more initiatives in process, including partnering with our construction teams to drive more tons to our plants by leveraging our vertical integration, and we expect to spend another $50 million in strategic CapEx in the materials business in 2026 to continue the strong momentum we built. In 2025, we completed 3 acquisitions, both expanding and strengthening our Southeast platform with the Warren Paving acquisition and strengthening the whole markets in California and Nevada with the acquisitions of Papich Construction and Cinderlite. These margin accretive acquisitions and strong growing markets are representative of the acquisitions, I expect to continue to complete in 2026 in the future. We expect acquisitions will continue to be a major component of our growth that should enhance the performance of the business, the existing home markets and expand our footprint to new geographies. We expect to drive further gains and deliver significant shareholder value as we continue to execute on our strategic plan. We continue to build a larger, higher-quality project portfolio even as we invest in and grow our vertically integrated model. These efforts position Granite for continued organic growth, margin expansion and strong cash generation. We believe we are on track to achieve our 2027 financial targets supported by favorable market conditions, robust infrastructure funding and consistent execution across the business. Turning now to the Construction segment. First, I want to say how excited I am about the performance of our construction teams across the company. Their execution throughout the year was outstanding and a key driver of our strong finish to 2025. We entered the fourth quarter with record CAP and despite some delays on certain projects and wet weather at the end of the quarter, year-over-year revenue growth accelerated as expected. We continue to see sustained market strength and a healthy bidding environment across our footprint with California and Nevada, leading the way. With several significant awards in the quarter, CAP increased sequentially by $632 million, ending the year was $7 billion, a new record. In California, the newly proposed California budget for the 2026 to 2027 fiscal year represents a significant increase in the key capital outlay projects and local assistance components of the transportation funding for the original 2025 to 2026 budget, which itself was increased significantly in the latest January forecast update. Stable and protected funding for transportation infrastructure in California continues to grow despite concerns about overall deficits. The strength of state transportation budgets is broad, and we see many meaningful opportunities across our regions to continue to grow CAP in the first quarter of 2026 and throughout the year. Best value work continues to grow as a percentage of our portfolio ending the quarter at 48% of CAP. As we discussed in past quarters, best value procurement plays to Granite's home market strength. These projects tend to be awarded to teams with strong qualifications. Process is designed to promote risk mitigation during design and to reward collaboration, thereby enabling us to better manage construction risk, reduce disputes and deliver high-quality, complex projects more efficiently. Best value construction remains a key driver of our sustainable margin expansion strategy. This growth in best value work has been a core contributor to our derisked project portfolio and has allowed us to achieve consistent, predictable increases in our construction margins over the past several years, and we expect that trend to continue as more states adopt these procurement methods. The high-quality CAP portfolio, we have built helped deliver the gross profit margin increase that we expected in 2025. We expect continued gross profit improvement in 2026, consistent with our 2027 financial targets. Overall, performance in this segment has improved meaningfully. And with record level, higher quality CAP and favorable market conditions, we expect continued revenue growth and construction margin expansion in 2026, in line with our long-term financial targets. Moving to the Materials segment. 2025 was a transformational year for our materials business. We delivered both organic top line and bottom line growth, and we significantly expanded our addressable market through acquisitions most notably, through the acquisition of Warren Paving, which significantly expands our reserves and resources in the Southeast. This was our first full quarter including Warren Paving, and we see the numerous opportunities as we continue to integrate it into our Southeast platform. We expect to continue growing this platform organically as we work to expand its distribution network, improve logistics efficiency and leverage Warren's marine and river-based transportation capabilities. The expansion opportunities include potentially adding additional aggregate yards acquiring strategic assets to enhance both scale and margin profile of the platform. With the addition of Warren, along with the acquisitions of Cinderlite and Papich Construction, our aggregate reserves and resources increased 34% year-over-year to 2.1 billion tons, more than doubling Granite's reserves in the last 5 years. This growth and long-life reserves provides a strong foundation for sustained margin expansion in the Materials segment. We expect the growth of our materials business to continue throughout 2026 and in the years to follow, supported by strong market conditions, our proven vertically integrated operational model and our ongoing commitment to disciplined investment. Now I'll turn it over to Staci to review our financial performance for the quarter.

Thanks, Kyle. 2025 was a tremendous year of growth with year-over-year increases in a number of areas. Revenue increased 10% to $4.4 billion. Gross profit increased 24% to $711 million, adjusted net income increased 29% to $276 million. Adjusted EBITDA increased 31% to $527 million and operating cash flow increased 3% to $469 million. Our teams have done a great job executing in strong markets and positioning Granite for continued organic growth, margin expansion and cash generation in 2026 and beyond. Now let's discuss our results for the quarter. In the Construction segment, revenue increased $119 million or 14% year-over-year to $940 million. Throughout the year, CAP gradually increased, and we expected revenue conversion to accelerate in the second half of the year. In the fourth quarter, we saw this dynamic with organic revenue growth of 7% year-over-year as projects ramped up. In addition, our newly acquired companies, Warren Paving and Papich Construction contributed $59 million in Construction segment revenue. The significant increase in revenue drove a $15 million improvement in Construction segment gross profit to $143 million, with segment gross profit margin of 15%. The improvement in our portfolio mix continues to translate into higher margins, and we expect further expansion in 2026, consistent with our 2027 financial targets. In the Materials segment, revenue increased $69 million year-over-year to $225 million with gross profit up $2 million to $25 million. The increase in materials revenue was primarily due to the acquired businesses. Cash gross profit for the quarter increased $10 million year-over-year to $47 million or 21% of revenue despite wet weather conditions in certain geographies. For the full year, cash gross profit margin improved 490 basis points year-over-year to 26%. For the year, volumes for both aggregate and asphalt and aggregate cash gross profit per ton increased significantly, primarily due to the addition of Warren Paving in August of 2025. Adjusted EBITDA for the full year grew $125 million to $527 million or an adjusted EBITDA margin of 11.9% compared to 10% in 2024. Turning to cash flow. We had another outstanding quarter of cash generation and ended the year with operating cash flow of $469 million or 10.6% of annual revenue. Our disciplined focus on profitability and working capital efficiency is producing consistent high-quality cash flow that we are reinvesting to drive long-term value. Our 2025 operating cash flow benefited from the collection of a long outstanding contract retention balance and receipt of payment for several disputed claims in the first half of 2025. Excluding these nonrecurring cash collections in 2025, our operating cash flow as a percent of revenue was in line with our original target of 9%. With our expected profitability improvement in 2026 and sustained working capital management, our 2026 target for operating cash flow margin is 10% of revenue. In 2025, we executed on our capital allocation priorities with CapEx of $138 million, acquisitions of $778 million and dividends of $23 million. We also repurchased 300,000 shares under our Board-approved share repurchase program to offset dilution from our stock-based compensation. We ended the year with $650 million in cash and marketable securities, debt of $1.3 billion and $583 million in availability under our revolving credit facility. Going into 2026, our cash generation and strong balance sheet position us well to continue investing organically and through acquisitions while maintaining financial flexibility. We have a robust pipeline of acquisition opportunities that may either bolt-on to an existing home market or further expand our geographic footprint. While we are selective in our pursuits, we expect to achieve our goal of completing several strategic acquisitions in 2026. Now let's turn to our 2026 guidance. We expect revenue to grow to a range of $4.9 billion to $5.1 billion. This reflects our record CAP balance and the strong macro environment and places organic growth at the high end of our 2027 target CAGR of 6% to 8%. This range includes a full year of the acquisitions completed in 2025. As we grow, driving efficiency to manage SG&A continues to be a top priority. We expect our SG&A to be in a range of 8.5% and 9% of revenue, inclusive of an estimated $48 million in stock-based compensation expense. We expect our adjusted EBITDA margin to be in the range of 12% to 13% of revenue. With our high-quality CAP portfolio, strong market and high-performing materials business, we expect continued adjusted EBITDA margin expansion, in line with our 2027 financial target of 12.5% to 14.5% of revenue. Finally, we expect to invest in our business through CapEx in the range of $140 million to $160 million. Similar to 2025, this range contemplates approximately $50 million in strategic materials investments to expand reserves as well as investments in additional automation projects as we work to grow the materials business. Now I'll turn it back over to Kyle.

Thanks, Staci. I'll close with the following points. I have strong confidence in the future of Granite. I believe Granite is in position to capitalize on the numerous opportunities in both of our segments as we work to our sustainable, long-term value creation and as we focus on growing revenue and driving margin and cash flow expansion. The strong public construction market is fueling our CAP growth. We have the bidding opportunities ahead of us to enhance portfolio quality and support disciplined CAP expansion in 2026. In addition, while CAP growth has been concentrated in the public market, I believe our private markets such as rail and commercial site development remain robust and represent attractive incremental growth avenues for our Construction segment. In the Materials business, we have made outstanding strides over the last 2 years and I believe that will continue in 2026. With the addition of Warren Paving, Papich Construction and Cinderlite for the full year, I expect meaningful increases in revenue and profit in the segment in 2026. I believe we are on track for our 2027 financial targets for adjusted EBITDA margin and operating cash flow margin with 2026 being another important step in demonstrating consistent performance against our long-term targets. Finally, as we're integrating the acquisitions of 2025, I expect to add several more acquisitions in 2026 that will further strengthen our competitive position and support our ability to achieve our 2027 financial targets. We are evaluating bolt-ons in our existing markets and expansion opportunities in new markets as we continue to strengthen our position as America's infrastructure company. Operator, I will now turn it back to you for questions.

[Operator Instructions] Our first question comes from Brent Thielman with D.A. Davidson.

Great. Kyle, some of your peers had offered some comments just in terms of thoughts on federal legislation. Obviously, IIJA expiring here in September, maybe your latest thoughts on what you're hearing coming? When we could get maybe more detail on what's coming? Maybe you'd start there.

Yes. So I think as we spoke before on previous calls, the IIJA expires, I think everybody knows now in September of this year. And then all the funds we expect to be allocated out. Now the spend to date is right around 50%. That's as of November. So there's still a really nice runway of spending to go. So that will last likely for a few more years. I think what we hear really from industry today is that there's still bipartisan support. There's still a huge focus on coming up with another investment mechanism. And I think the really good news is the investment amount is significantly higher, at least that's what's in discussions today higher than what is in the IIJA. So it's all positive. In terms of timing of when we might hear, I think we're going to start getting maybe some updates, I would say, around March, April, if they start -- if they can get a draft bill put in place for the Transportation Infrastructure Committee to review. So I think that's kind of the next step in terms of when we get the next update.

Got it. Appreciate that, Kyle. And I guess my follow-up, Kyle, just in terms of -- you've got a great sort of book of business here that seems to continue to build or looks like it will continue to build. Can you talk about some of the direct federal opportunities that are out there that you've spoken about before? What does that pipeline look like? Are you optimistic that there could be some meaningful things that could get picked up there this year?

So when you mean federal, are you talking to a few more around the border infrastructure, Brent, or just the kind of the federal program in general?

Yes. Yes. I mean, I guess, border infrastructure, anything beyond that, directly related to the federal government contracting. I think we've spoken to some large things before there.

Right. So we do have quite a bit of work with the federal government in Guam and that work continues to be going very well. We believe we'll continue to pick up work in Guam as part of that program. With regards to the border, there is a huge border infrastructure program that is probably about $40 billion, and there's around 11 contractors or so pursuing that work, and we're one of them. We actually have one contract today in Southeastern Texas. It's just under $200 million. And we started that work last November. So there is a huge program and opportunity in front of us. One of the things that changed is the government is looking to get that work out and awarded, we believe, midyear, so sometime around June and July. And to help with that, these contracts are getting larger than what we originally contemplated. So the risk profile is changing a little bit on those to one that's just giving us reason to be more disciplined in our pursuits and ensuring that we can not only just win the work, but be successful in delivering for ourselves and for our clients. So we'll see. What I can tell you is but we don't have any additional border infrastructure work in the guidance that we provided you today.

Our next question comes from Steven Ramsey with Thompson Research Group.

I wanted to think high level that you're tracking to your 2027 targets, did you expect CAP to be at this level when you laid those targets out? Or would you say those targets were predicated on a CAP level that was lower or higher than this? I guess I'm trying to get a sense of how CAP dependent those targets are.

Yes. I don't know if we necessarily came out and said, here's what our CAP needs to be in order to hit those '27 targets. Simply because it's a balance of bid build and best value. And obviously, the burn rates on those 2 are very different. One being a lot shorter burn of a couple of years and the best value could be up to about a 5-year burn. In the CAP today, it's back to about 50-50 between those 2, if we think it's very healthy. So that gives us a lot of confidence, not just in our ability to hit our numbers from an organic growth rate of around 8% in 2026, but it should allow us to continue to have that growth rate into 2027. So I think the best way to answer is we feel really good about the CAP. The $7 billion is a really high-quality CAP. The margin profile within our CAP continues to improve, and that's going to also get us to those 2027 targets. So I think our CAP is right on track to where we want to be.

Okay. That's helpful. And then I wanted to think about the CapEx, the strategic CapEx of $50 million geared towards the Materials segment. Can you talk a bit about how much of that is in the legacy Western markets? How much of that is the recently acquired Warren assets? And maybe to tag along with that, how the Warren integration is going and how that is shaping up for growth in both sales and profits within the Southeast business?

Steven, I'll start and talk a little bit about the strategic materials CapEx of $50 million. That's more heavily weighted towards the legacy business and expanding reserves and doing automation projects there. And also in our acquisition from a couple of years ago with Lehman-Roberts and Memphis Stone & Gravel and doing some investment there. So -- but really more heavily weighted towards the legacy Granite business. And then as we think about the Warren integration, they performed really well so far this year in the 5 months that we've had them on board, and we're really excited about that and feel good about that going forward. And then the opportunities is going to present to continue to expand in the overall Southeast.

Yes. Maybe I'll add a little bit to the integration. We made an investment. So we have dedicated resources in our integration team today to help with these acquisitions. And Warren Paving is off to a strong start, similar to the Papich Construction and Cinderlite. So all 3 of our acquisitions last year are performing very well, outperforming where we thought they were going to be. Again, we're excited about the teams that came with those companies, the leadership that came with those companies in the markets that they're in continue to be healthy and growing. So we really look forward to having them in our full year of business this year in '26.

Our next question comes from Kevin Gainey with Thompson, Davis.

Great quarter, guys. Maybe if you want to dive into the project bidding opportunities and more so maybe by vertical. I'm just kind of interested in what you guys are seeing out there for mining, rail, maybe, renewables, water.

Sure. In general, the market is strong. It's been strong. It remains strong. I think over the last 6 months, we did more work. We capture more work with slightly higher margins. So that's kind of at the high level, really good news and obviously driving a very strong CAP for us. But the public market with the IIJA is still a big part of our business, around 85% or more today. And so I think that's more a reflection of really strong IIJA and public funding. We see mining continue to be strong, whether it's our involvement on the processed water side or actually just doing work for the miners on-site development side of things. Rail is an opportunity. We continue to see intermodal opportunities in our future. And hopefully, we'll continue to capture some of those that could maybe shift things back a little bit more weighted towards private than public as an overall company. Renewable stays strong. We're seeing solar projects continue to come out, and we continue to pursue them. And I think we're going to continue to grow that part of our segment in construction in the next year or 2. So I think, all in all, we feel really good about the market. We don't participate a whole lot in the residential market, but the markets that we are in the private side outside of that continue to be really strong. I would say we're starting to look a little bit harder in some of the data center work. We do, do data center projects up in the Pacific Northwest, Nevada. Today, we're pursuing some projects outside of those markets down into Texas and even in Ohio. So hopefully there's some new opportunities for us that we can capture in the future here.

And then as we sit here and we think about the $7 billion CAP, do you guys have any concerns operationally or from maybe whether it's labor or equipment or anything like that, that could cause you -- cause an issue in executing on the project pipeline?

Not at all. Yes. That $7 billion of CAP, again, half of that is best value, half of its bid build. So the progression of that work is going to vary a little bit. Historically, we've been as high as, if you look at burning of our contract backlog in any given year, close to 50% of our CAP. This year, it's going to be closer to just over 40% of our CAP. So we don't have any execution concerns at all in that regard.

That sounds good. And then maybe just one more, just on the EBITDA guidance for margins. What would it take from to be able to get to the high end of that range? And maybe if you could talk about the low end as well.

Well, in any given year, there's a few factors. Obviously, we talked before about weather Q1, Q4, weather can always be an opportunity or it can be a hindrance for us. So far in Q1, it's been okay. There were some big weather issues in the Southeast. As we all know, earlier this year, we don't think that's going to impact our ability to hit our guidance. And we'll obviously, have to see how the rest of this quarter shakes out as well as Q4. We still have to win and actually bid -- build some of the work that we're going to need this year to get our revenue numbers. So it's always a risk in the first half of the year actually capturing that work and getting started on that work. And then execution, that's an opportunity for us and a risk as well. We have to perform. But I think today, our operational excellence is at a really high level. And it's a very different business than what we were several years ago. And I see execution as more of an opportunity today than the risk. We tend to outperform our projects more than we underperform today. And then there's some unknown, unknowns. And we'll have to see if any of those show up. But I feel as though the things that we control, we're in really good shape, and this should be a really nice year for us.

Our next question comes from Michael Dudas with Vertical Research Partners.

Kyle, the best value practice backlog getting close to 50%. Very helpful. And you mentioned in your prepared remarks, other states are engaging in those types of contracts. Maybe you could share a little bit more what -- how much of a percentage of your backlog would that type of contract be? And given how it's allocated and led throughout the process because of its building, is that going to provide some more project or award opportunities or revenue opportunities a little longer in the cycle, given that's been built up so high and that could give some more visibility to later this year into next year and beyond because of how big and how large that part of that backlog will grow?

Yes. So maybe you're breaking up a little bit. Let me see -- I think I can answer the question based on what I think you said there, Mike. But if I get it wrong, let me know. The questions has come up before around what's the right balance between best value and bid build. And I don't think we necessarily know the answer to. I think we like what we have today is that 50-50 feels pretty good. And to your point, as more states pass legislation to allow CMGC or CMAR or progressive design build, we could see that increase. And I think that's okay. It allows us to do some more complex larger contracts in a derisked manner, and we tend to perform very well on those. So I think that if that progression happens, that would be a good thing for us. I think that it is the future of contracting is to be more collaborative, to be partners with our clients, and it really fits us well as we have a home market strategy. So we'd like to know the customers that we're working for and having the resources to ensure that we can deliver these projects for them the way that we both would expect us to. So if it does increase, I think that's a good thing. I think another good thing about our CAP being about 50% of best value, it gives us some insight into the future. And so we know that we're going to progress through a portion of that work this year, but it gives us confidence as we start working towards those 2027 numbers and beyond. So I think we feel really good about our CAP today, and we'll see what happens in terms of the best value over time.

Yes, that's perfect. And my follow-up is on the material side, since your reorganization of the business, certainly, the pricing and volumes have been quite good, organic and some of your acquisitions. How do you feel you are relative to pricing 2 years later with this change relative to the market? Is there still upside relative to market in certain regions? And what are you anticipating or budgeting for aggregate and asphalt pricing generally for 2026?

Yes. I'd say, in 2026, I'll start with the pricing first, probably mid-single-digit price improvements on the ag side and low single digit on the asphalt. Every market is different. We look at every project, every market uniquely and discretely. And so I think that there is still opportunities. I think our team consistently looks at that. And one of the things we did with reorg a couple of years ago is we bring some of that sales strategy and feedback we're up to a higher level. And so we can look at things a little bit more broad and ensure that we're looking at things without maybe a little bit less motion. And so I think there's still work to be done. I think that our teams have done fantastic job. I'm impressed with what they've done. They've obviously unlocked a tremendous amount of value in our materials business, but I think there's still some more to do. In the 2027 targets we've talked about another 3% or better cash gross profit over the next 2 years. So that's -- we expect to continue to see that this year. That's contributing to our EBITDA margin expansion this year. And so I think we're right on track with all that.

And just quick follow-up on your -- and what about your cost, what you're budgeting in the materials business on a percentage basis relative to the pricing you're sharing?

Well, we've done a really, really nice job in legacy business, keeping costs under control. I think that's one of the real highlights that our team is costs year-over-year actually been flat. And in last 2 years. So I think the automation efforts we put in place, the standardization of our materials playbook. I think all that is paying off for us as well. Obviously, there are some cost inputs, some of the variable costs that will go up with inflation. But all in all, last year, mix adjusted, I think we ended up close to about 8% -- 8% level net price increase.

Net 8% price increase over. I appreciate it.

Our final question comes from Adam Bubes with Goldman Sachs.

Can you help us think through the '26 versus 2025 margin outlook? I think the guide is just over 50 basis points of margin expansion at the midpoint. How much of that margin expansion is coming from price versus better execution versus -- I know you have some favorable M&A rollover? And then what are some of the offsets? I think you had a favorable claim last year. It looks like maybe slightly outsized equipment sales this year that you could be lapping just trying to think through the puts and takes.

Yes. Yes. Thanks, Adam. I think the easiest way to look at it is we have been talking about a 1% construction margin improvement over the next 2 years and split really between '26 and '27. So it's around 50 basis points improvement in our construction margins. Materials, we've been talking about at least 3% over the next 2 years. So about 1.5% each year. So on a weighted average basis, that's around 20 basis points. So you put the 2 together, it's around a 70 basis point improvement between Construction and Materials. As Staci mentioned in her remarks, there's about a 50 basis point improvement on SG&A. So it's about 120 basis point improvement in margin. But then you have to net out the things you talked about. So we have some claim recoveries, we have a little bit larger gain on sale. So that nets out to about a 50 basis point improvement, if that answers that question. I think the other thing to think about is to get to the midpoint of our 2027 EBITDA margin guidance, it's about a 100 basis point improvement from here. So we're on track with where we thought we'd be this year and right on track to get into that midpoint of our EBITDA margin in 2027.

Terrific. And then can you just talk about -- it sounds like the M&A pipeline is still pretty robust. What's the range of outcomes that you're contemplating for M&A in 2026? And can you just talk about how you view M&A in context of leverage as well if there are larger opportunities out there? Would you feel comfortable moving above the leverage target of 2.5 or nothing of size that would really move the needle in the medium term on that front?

Well, as I mentioned previously, all 3 of the recent transactions have gone very well. So that gives us a lot of confidence as we move forward and look to do more deals. We've invested in our corporate development team, which has been great, so we can really bet through a whole lot of opportunities that come our way. We can also self-source a lot of our deals. So I do expect and we expect to get several things done this year. I think from a leverage perspective, we are still targeting that 2.5x net debt. If there was something larger that came out, you'd probably go up from there with a plan obviously to come back down. But I think that leverage kind of still holds. And yes, we're busy. I think our team is busy. I hope that we come back sometime in Q2 and provide you with some sort of update there.

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

Okay. Well, thank you for joining the call today. As always, we want to thank our teams for everything they did to make 2025 such a success. Most importantly, we would like to thank our teams for making 2025 our safest year yet. We are an industry leader in safety, and we expect to get even better in 2026. Thank you for joining the call and your interest in Granite. We look forward to speaking with you all soon.

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