SLND Southland Holdings Inc

Southland Holdings, Inc. (NYSE American: SLND and SLND WS) (“Southland”), a leading provider of specialized infrastructure construction services, today announced financial results for the quarter ended June 30, 2024.

• The Board of Directors has appointed Frank Renda as Interim Chairman of the Board.
• Revenue of $251.5 million for the quarter ended June 30, 2024, compared to $256.9 million for the quarter ended June 30, 2023.
• Gross loss of $40.0 million for the quarter ended June 30, 2024, compared to $33.8 million in gross loss for the quarter ended June 30, 2023.
• Net loss attributable to stockholders of $46.1 million, or $(0.96) per share for the quarter ended June 30, 2024, compared to a net loss attributable to stockholders of $12.8 million, or $(0.27) per share for the quarter ended June 30, 2023.
• Adjusted Net Loss attributable to stockholders of $46.1 million, or $(0.96) per share for the quarter ended June 30, 2024, compared to an Adjusted Net Loss attributable to stockholders of $35.4 million, or $(0.76) per share for the quarter ended June 30, 2023. (1)
• Adjusted EBITDA of $(49.9) million for the quarter ended June 30, 2024, compared to $(42.2) million for the quarter ended June 30, 2023. (1)
• New Awards of $374.8 million for the quarter ended June 30, 2024.
• Backlog of $2.74 billion, compared to $2.64 billion as of March 31, 2024.
• Positive cash flow from operations of $27.4 million for the quarter ended June 30, 2024.

(1)

Please refer to “Non-GAAP Measures” and reconciliations for our non-GAAP financial measures, including, “Adjusted Net Loss,” “Adjusted Net Loss Per Share,” and “Adjusted EBITDA”

Southland settled several contract disputes that are reflected in the second quarter 2024 income statement. These settlements resulted in approximately $58 million of cash that is expected to be collected in the third quarter 2024. As a result of these specific settlements, an approximate $40 million non-recurring charge was recorded in the second quarter. All of this non-recurring charge, related to dispute settlements, was in the Materials & Paving business.

Southland’s President & Chief Executive Officer, Frank Renda, said, “We continue to make strides in putting our legacy projects behind us and improving our balance sheet and liquidity profile. While we are disappointed about making the decision to settle for less than we believe we were owed in certain circumstances, it was the best decision for Southland’s long-term outlook. We will avoid a lengthy legal process on these disputes that could have tied up our resources for years. In addition to the $58 million of settlements, we closed on a real estate transaction that put approximately $25 million on the balance sheet in the third quarter. I’m also encouraged by the $27 million of positive cash flow from operations our teams generated in the second quarter before taking into consideration the recent dispute settlements. With the recent dispute settlements and other initiatives to strengthen our balance sheet, we are in a much stronger position today to negotiate our remaining legacy disputes and we will continue to vigorously pursue all of the money we are owed. Lastly, we had $375 million of new project awards in our core business in the quarter and continue to see strong demand across our core end markets. I remain extremely confident in our core business and the long-term outlook for Southland, despite the headwinds we face in the legacy business.”

2024 Second Quarter Results

Condensed Consolidated Statements of Operations (unaudited)

 

 

 

 

 

 

 

Three Months Ended

(Amounts in thousands)

June 30, 2024

 

June 30, 2023

Revenue

$

251,512

 

$

256,927

Cost of construction

 

291,534

 

 

290,721

Gross loss

 

(40,022)

 

 

(33,794)

Selling, general, and administrative expenses

 

15,680

 

 

16,448

Operating loss

 

(55,702)

 

 

(50,242)

Loss on investments, net

 

53

 

 

50

Other income, net

 

1,053

 

 

24,007

Interest expense

 

(6,720)

 

 

(4,305)

Losses before income taxes

 

(61,316)

 

 

(30,490)

Income tax benefit

 

(15,961)

 

 

(18,589)

Net loss

 

(45,355)

 

 

(11,901)

Net income attributable to noncontrolling interests

 

722

 

 

925

Net loss attributable to Southland Stockholders

$

(46,077)

 

$

(12,826)

 

 

 

 

 

 

Net loss per share attributable to common stockholders

 

 

 

 

 

Basic (1)

$

(0.96)

 

$

(0.27)

Diluted (1)

$

(0.96)

 

$

(0.27)

Weighted average shares outstanding

 

 

 

 

 

Basic (1)

 

48,030,951

 

 

46,870,890

Diluted (1)

 

48,030,951

 

 

46,870,890

(1)

Basic net loss per share is the same as diluted net loss per share attributable to common stockholders for the three months ended June 30, 2024, and June 30, 2023, because the inclusion of potential shares of common stock would have been anti-dilutive for the period presented.

Revenue for the three months ended June 30, 2024, was $251.5 million, a decrease of $5.4 million, or 2.1%, compared to the three months ended June 30, 2023. Materials & Paving business contributed $8.9 million to revenue in the three months ended June 30, 2024.

Gross loss for the three months ended June 30, 2024, was $40.0 million, an increase of $6.2 million, or (18.4)%, compared to gross loss of $33.8 million for the three months ended June 30, 2023. Gross loss increased to (15.9)% from (13.2)% for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. Materials & Paving business negatively impacted gross loss by $46.8 million in the three months ended June 30, 2024.

Selling, general, and administrative costs for the three months ended June 30, 2024, were $15.7 million, a decrease of $0.8 million, or 4.7%, compared to the three months ended June 30, 2023. Selling, general, and administrative costs as a percent of revenue were 6.2% for the three months ended June 30, 2024, compared to 6.4% for the three months ended June 30, 2023.

Condensed Consolidated Statements of Operations (unaudited)

 

 

 

 

 

 

 

Six Months Ended

(Amounts in thousands)

June 30, 2024

 

June 30, 2023

Revenue

$

539,609

 

$

531,756

Cost of construction

 

559,210

 

 

546,607

Gross loss

 

(19,601)

 

 

(14,851)

Selling, general, and administrative expenses

 

30,074

 

 

32,019

Operating loss

 

(49,675)

 

 

(46,870)

Gain (loss) on investments, net

 

(23)

 

 

18

Other income, net

 

1,589

 

 

21,408

Interest expense

 

(12,375)

 

 

(7,559)

Losses before income taxes

 

(60,484)

 

 

(33,003)

Income tax benefit

 

(15,654)

 

 

(16,836)

Net loss

 

(44,830)

 

 

(16,167)

Net income attributable to noncontrolling interests

 

1,653

 

 

1,323

Net loss attributable to Southland Stockholders

$

(46,483)

 

$

(17,490)

 

 

 

 

 

 

Net loss per share attributable to common stockholders

 

 

 

 

 

Basic (1)

$

(0.97)

 

 

(0.38)

Diluted (1)

$

(0.97)

 

 

(0.38)

Weighted average shares outstanding

 

 

 

 

 

Basic (1)

 

47,978,012

 

 

46,043,878

Diluted (1)

 

47,978,012

 

 

46,043,878

(1)

Basic net loss per share is the same as diluted net loss per share attributable to common stockholders for the six months ended June 30, 2024, and June 30, 2023, because the inclusion of potential shares of common stock would have been anti-dilutive for the period presented.

Revenue for the six months ended June 30, 2024, was $539.6 million, an increase of $7.9 million, or 1.5%, compared to the six months ended June 30, 2023. Materials & Paving business contributed $47.5 million to revenue in the six months ended June 30, 2024.

Gross loss for the six months ended June 30, 2024, was $19.6 million, an increase of $4.8 million, or (32.0)%, compared to gross loss of $14.9 million for six months ended June 30, 2023. Gross loss margin increased from (2.8)% to (3.6)% for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. Materials & Paving business negatively impacted gross loss by $57.1 million in the six months ended June 30, 2024.

Selling, general, and administrative costs for the six months ended June 30, 2024, were $30.1 million, a decrease of $1.9 million, or 6.1%, compared to the six months ended June 30, 2023. Selling, general, and administrative costs as a percent of revenue were 5.6% for the six months ended June 30, 2024, compared to 6.0% for the six months ended June 30, 2023.

Segment Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

(Amounts in thousands)

 

June 30, 2024

June 30, 2023

 

 

 

 

 

% of Total

 

 

 

% of Total

Segment

 

Revenue

 

Revenue

Revenue

 

Revenue

Civil

 

$

79,368

 

31.6%

$

65,567

 

25.5%

Transportation

 

 

172,144

 

68.4%

 

191,360

 

74.5%

Total revenue

 

$

251,512

 

100.0%

$

256,927

 

100.0%

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

(Amounts in thousands)

 

June 30, 2024

June 30, 2023

 

 

 

 

 

% of Total

 

 

 

% of Total

Segment

 

Revenue

 

Revenue

Revenue

 

Revenue

Civil

 

$

163,641

 

30.3%

$

138,556

 

26.1%

Transportation

 

 

375,968

 

69.7%

 

393,200

 

73.9%

Total revenue

 

$

539,609

 

100.0%

$

531,756

 

100.0%

Segment Gross Profit (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

(Amounts in thousands)

 

June 30, 2024

June 30, 2023

 

 

 

 

% of Segment

 

 

% of Segment

Segment

 

Gross Profit

 

Revenue

Gross Profit

 

Revenue

Civil

 

$

9,160

 

11.5%

$

5,906

 

9.0%

Transportation

 

 

(49,182)

 

(28.6)%

 

(39,700)

 

(20.7)%

Gross profit

 

$

(40,022)

 

(15.9)%

$

(33,794)

 

(13.2)%

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

(Amounts in thousands)

 

June 30, 2024

June 30, 2023

 

 

 

 

% of Segment

 

 

 

% of Segment

Segment

 

Gross Profit

 

Revenue

Gross Profit

 

Revenue

Civil

 

$

27,030

 

16.5%

$

14,672

 

10.6%

Transportation

 

 

(46,631)

 

(12.4)%

 

(29,523)

 

(7.5)%

Gross profit

 

$

(19,601)

 

(3.6)%

$

(14,851)

 

(2.8)%

Adjusted EBITDA Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

(Amounts in thousands)

 

June 30, 2024

 

June 30, 2023

 

June 30, 2024

 

June 30, 2023

Net loss attributable to Southland Stockholders

 

$

(46,077)

 

$

(12,826)

 

$

(46,483)

 

$

(17,490)

Depreciation and amortization

 

 

5,572

 

 

8,176

 

 

11,149

 

 

16,736

Income tax benefit

 

 

(15,961)

 

 

(18,589)

 

 

(15,654)

 

 

(16,836)

Interest expense

 

 

6,720

 

 

4,305

 

 

12,375

 

 

7,559

Interest income

 

 

(176)

 

 

(161)

 

 

(360)

 

 

(298)

EBITDA

 

 

(49,922)

 

 

(19,095)

 

 

(38,973)

 

 

(10,329)

Transaction related costs

 

 

—

 

 

559

 

 

—

 

 

1,594

Contingent earnout consideration non-cash expense reversal

 

 

—

 

 

(23,625)

 

 

—

 

 

(20,689)

Adjusted EBITDA

$

(49,922)

 

$

(42,161)

$

(38,973)

 

$

(29,424)

Backlog

 

 

 

(Amounts in thousands)

 

Balance December 31, 2023

$

2,834,966

New contracts, change orders, and adjustments

 

475,655

Less: contract revenue recognized in 2024

 

(566,872)

Balance June 30, 2024

$

2,743,749

Adjusted Net Loss and Adjusted Net Loss Per Share Attributable to Common Stock Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

(Amounts in thousands except shares and per share data)

June 30, 2024

 

June 30, 2023

 

June 30, 2024

 

June 30, 2023

Reconciliation of adjusted net loss attributable to common stock:

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stock (GAAP as reported)

$

(46,077)

 

$

(12,826)

 

$

(46,483)

 

$

(17,490)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

Transaction related costs

 

—

 

 

559

 

 

—

 

 

1,594

Contingent earnout consideration non-cash expense

 

—

 

 

(23,625)

 

 

—

 

 

(20,689)

Income tax impact of adjustments (1)

 

—

 

 

463

 

 

—

 

 

(311)

Adjusted net loss attributable to common stockholders

$

(46,077)

 

$

(35,429)

 

$

(46,483)

 

$

(36,896)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding for diluted and adjusted diluted earnings per share (2)

 

48,030,951

 

 

46,870,890

 

 

47,978,012

 

 

46,043,878

 

 

 

 

 

 

 

 

 

 

 

 

Diluted loss per share attributable to common stock (2)

$

(0.96)

 

$

(0.27)

 

$

(0.97)

 

$

(0.38)

Adjusted diluted loss per share attributable to common stock (2)

$

(0.96)

 

$

(0.76)

 

$

(0.97)

 

$

(0.80)

(1)

The income tax impact of adjustments that are subject to tax is determined using the incremental statutory tax rates of the jurisdictions to which each adjustment relates for the respective periods.

 

 

(2)

Basic net loss per share is the same as diluted net loss per share attributable to common stockholders for three and six months ended June 30, 2024, and June 30, 2023, because the inclusion of potential shares of common stock would have been anti-dilutive for the period presented.

Condensed Consolidated Balance Sheets (unaudited)

 

 

 

 

 

 

(Amounts in thousands, except share and per share data)

As of

ASSETS

June 30, 2024

 

December 31, 2023

Current assets

 

 

 

 

 

Cash and cash equivalents

$

52,352

 

$

49,176

Restricted cash

 

16,817

 

 

14,644

Accounts receivable, net

 

244,174

 

 

194,869

Retainage receivables

 

123,942

 

 

109,562

Contract assets

 

526,379

 

 

554,202

Other current assets

 

16,894

 

 

20,083

Total current assets

 

980,558

 

 

942,536

 

 

 

 

 

 

Property and equipment, net

 

110,992

 

 

102,150

Right-of-use assets

 

10,615

 

 

12,492

Investments - unconsolidated entities

 

123,883

 

 

121,648

Investments - limited liability companies

 

2,590

 

 

2,590

Investments - private equity

 

3,115

 

 

3,235

Deferred tax asset

 

26,910

 

 

11,496

Goodwill

 

1,528

 

 

1,528

Intangible assets, net

 

1,505

 

 

1,682

Other noncurrent assets

 

1,711

 

 

1,711

Total noncurrent assets

 

282,849

 

 

258,532

Total assets

$

1,263,407

 

$

1,201,068

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

$

248,660

 

$

162,464

Retainage payable

 

41,688

 

 

40,950

Accrued liabilities

 

109,766

 

 

124,667

Current portion of long-term debt

 

134,534

 

 

48,454

Short-term lease liabilities

 

10,401

 

 

14,081

Contract liabilities

 

225,193

 

 

193,351

Total current liabilities

 

770,242

 

 

583,967

 

 

 

 

 

 

Long-term debt

 

173,239

 

 

251,906

Long-term lease liabilities

 

4,543

 

 

5,246

Deferred tax liabilities

 

2,017

 

 

2,548

Long-term accrued liabilities

 

50,081

 

 

49,109

Other noncurrent liabilities

 

47,735

 

 

47,728

Total long-term liabilities

 

277,615

 

 

356,537

Total liabilities

 

1,047,857

 

 

940,504

 

 

 

 

 

 

Commitment and contingencies (Note 7)

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

Preferred stock, $0.0001 par value, authorized 50,000,000 shares, none issued and outstanding as of June 30, 2024 and December 31, 2023

 

—

 

 

—

Common stock, $0.0001 par value, authorized 500,000,000 shares, 48,105,512 and 47,891,984 issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

 

5

 

 

5

Additional paid-in-capital

 

271,423

 

 

270,330

Accumulated deficit

 

(65,736)

 

 

(19,253)

Accumulated other comprehensive loss

 

(2,422)

 

 

(1,460)

Total stockholders' equity

 

203,270

 

 

249,622

Noncontrolling interest

 

12,280

 

 

10,942

Total equity

 

215,550

 

 

260,564

Total liabilities and equity

$

1,263,407

 

$

1,201,068

Condensed Consolidated Statement of Cash Flows (unaudited)

 

 

 

 

 

 

 

Six Months Ended

(Amounts in thousands)

June 30, 2024

 

June 30, 2023

Cash flows from operating activities:

 

 

 

 

 

Net loss

$

(44,830)

 

$

(16,167)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

Depreciation and amortization

 

11,149

 

 

16,736

Loss on extinguishment of debt

 

111

 

 

—

Deferred taxes

 

(15,870)

 

 

(21,866)

Change in fair value of earnout liability

 

—

 

 

(20,689)

Share based compensation

 

1,299

 

 

—

Gain on sale of assets

 

(2,855)

 

 

(85)

Foreign currency remeasurement (gain) loss

 

4

 

 

(3,641)

Earnings from equity method investments

 

(3,150)

 

 

(140)

TZC investment present value accretion

 

(2,234)

 

 

(1,213)

Loss on trading securities, net

 

23

 

 

24

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(64,672)

 

 

(53,589)

Contract assets

 

27,398

 

 

4,803

Other current assets

 

3,181

 

 

(4,093)

Right-of-use assets

 

1,873

 

 

343

Accounts payable and accrued liabilities

 

77,204

 

 

21,700

Contract liabilities

 

31,851

 

 

65,774

Operating lease liabilities

 

(1,608)

 

 

(126)

Other

 

(1,340)

 

 

1,593

Net cash provided by (used in) operating activities

 

17,534

 

 

(10,636)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchase of property and equipment

 

(4,232)

 

 

(4,953)

Proceeds from sale of property and equipment

 

3,206

 

 

7,214

Contributions to other investments

 

(13)

 

 

(21)

Distributions from other investments

 

110

 

 

—

Distributions from investees

 

4,161

 

 

—

Capital contribution to unconsolidated investments

 

(250)

 

 

—

Net cash provided by investing activities

 

2,982

 

 

2,240

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Borrowings on revolving credit facility

 

5,000

 

 

3,000

Payments on revolving credit facility

 

(5,000)

 

 

—

Borrowings on notes payable

 

24,678

 

 

248

Payments on notes payable

 

(36,910)

 

 

(27,701)

Payments of deferred financing costs

 

(31)

 

 

—

Pre-payment premium

 

(111)

 

 

—

Advances from related parties

 

138

 

 

215

Payments from related parties

 

—

 

 

5

Payments on finance lease

 

(2,656)

 

 

(2,396)

Distribution to members

 

—

 

 

(110)

Payment of taxes related to net share settlement of RSUs

 

(206)

 

 

—

Other

 

—

 

 

17,088

Net cash used in financing activities

 

(15,098)

 

 

(9,651)

 

 

 

 

 

 

Effect of exchange rate on cash

 

(69)

 

 

164

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents and restricted cash

 

5,349

 

 

(17,883)

Beginning of period

 

63,820

 

 

71,991

End of period

$

69,169

 

$

54,108

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

Cash paid for income taxes

$

203

 

$

2,903

Cash paid for interest

$

11,970

 

$

7,541

Non-cash investing and financing activities:

 

 

 

 

 

Lease assets obtained in exchange for new leases

$

4,272

 

$

8,528

Assets obtained in exchange for notes payable

$

16,009

 

$

6,667

Related party payable exchanged for note payable

$

3,797

 

$

—

Issuance of post-merger earn out shares

$

—

 

$

35,000

Dividend financed with notes payable

$

—

 

$

50,000

Conference Call

Southland will host a conference call at 10:00 a.m. Eastern Time on Tuesday, August 13, 2024. The call may be accessed here, or at www.southlandholdings.com. Following the conference call, a replay will be available on Southland’s website.

About Southland

Southland is a leading provider of specialized infrastructure construction services. With roots dating back to 1900, Southland and its subsidiaries form one of the largest infrastructure construction companies in North America, with experience throughout the world. The company serves the bridges, tunnelling, communications, transportation and facilities, marine, steel structures, water and wastewater treatment, and water pipeline end markets. Southland is headquartered in Grapevine, Texas.

For more information, please visit Southland’s website at www.southlandholdings.com.

Non-GAAP Financial Measures

This press release includes certain unaudited financial measures not presented in accordance with generally accepted accounting principles (“GAAP”), including but not limited to earnings before interest, taxes, depreciation, and amortization (“EBITDA”), adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”), backlog, adjusted net income (loss), adjusted net income (loss) per share and certain ratios and other metrics derived therefrom. Note that other companies may calculate these non-GAAP financial measures differently, and therefore such financial measures may not be directly comparable to similarly titled measures of other companies. Further, these non-GAAP financial measures are not measures of financial performance in accordance with GAAP and may exclude items that are significant in understanding and assessing financial results. Therefore, these measures should not be considered in isolation or as an alternative to net income, cash flows from operations or other measures of profitability, liquidity or performance under GAAP. Southland believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to Southland’s financial condition and results of operations. Southland also believes that these non-GAAP financial measures provide an additional tool for investors to use in evaluating ongoing operating results and trends. These non-GAAP financial measures are subject to inherent limitations as they reflect the exercise of judgments by management about which items of expense and income are excluded or included in determining these non-GAAP financial measures.

Please see the accompanying tables for reconciliations of the following non-GAAP financial measures for Southland’s current and historical results: adjusted net income (loss) per share attributable to common stock (a non-GAAP financial measure) to net income (loss) per share attributable to common stock; and adjusted net income (loss) attributable to common stock, and Adjusted EBITDA (non-GAAP financial measures) to net income (loss) attributable to common stock.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on Southland’s current beliefs, expectations and assumptions regarding the future of Southland’s business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of Southland’s control. Southland’s actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements.

Any forward-looking statement made by Southland in this press release is based only on information currently available to Southland and speaks only as of the date on which it is made. Southland undertakes no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

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Cody Gallarda EVP, Chief Financial Officer cgallarda@southlandholdings.com

Alex Murray Corporate Development & Investor Relations amurray@southlandholdings.com