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Southland Announces First Quarter 2023 Results

Southland Holdings, Inc. (NYSE American: SLND and SLND WS) (“Southland”), a leading provider of specialized infrastructure construction services, today announced financial results for quarter ended March 31, 2023.

  • Revenue increased to $275 million, up 6% from $258 million for the quarter ended March 31, 2022.
  • Gross profit margin of 6.9%, compared to 1.9% for the quarter ended March 31, 2022.
  • Operating income increased to $3.4 million, compared to an operating loss of $9.4 million for the quarter ended March 31, 2022.
  • Net loss of $4.7 million, compared to a net loss of $13.6 million for the quarter ended March 31, 2022.
  • Adjusted net loss of $1.5 million, or $(0.03) per share, compared to an adjusted net loss of $13.6 million for the quarter ended March 31, 2022.(1)
  • Adjusted EBITDA increased to $12.7 million, compared to $1.4 million for the quarter ended March 31, 2022. (1)
  • Backlog of $2.9 billion, up 43% compared to $2.0 billion as of March 31, 2022.
  • New awards of $170 million, compared to $41 million for the quarter ended March 31, 2022.
(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’s President and Chief Executive Officer, Frank Renda, said, “Our first quarter results for 2023 reflect a good start to the year, with revenue increasing by 6% and margins expanding from 1.9% to 6.9% from the prior year. We continue to see elevated demand for our services with limited competition as opportunities with funding from the Infrastructure Investment and Jobs Act accelerate."

2023 First Quarter Results

Condensed Consolidated Statements of Operations (unaudited)

 

 

 

Three Months Ended

 

(Amounts in thousands except shares and per share data)

 

March 31, 2023

 

March 31, 2022

 

Revenue

 

$

274,829

 

 

$

258,486

 

 

Cost of construction

 

 

255,886

 

 

 

253,555

 

 

Gross profit

 

 

18,943

 

 

 

4,931

 

 

Selling, general, and administrative expenses

 

 

15,571

 

 

 

14,299

 

 

Operating income (loss)

 

 

3,372

 

 

 

(9,368

)

 

(Loss) gain on investments, net

 

 

(32

)

 

 

280

 

 

Other expense, net

 

 

(2,599

)

 

 

(576

)

 

Interest expense

 

 

(3,254

)

 

 

(1,967

)

 

Loss before income taxes

 

 

(2,513

)

 

 

(11,631

)

 

Income tax expense

 

 

1,753

 

 

 

1,342

 

 

Net loss

 

 

(4,266

)

 

 

(12,973

)

 

Net income attributable to noncontrolling interests

 

 

398

 

 

 

628

 

 

Net loss attributable to Southland Holdings Stockholders

 

$

(4,664

)

 

$

(13,601

)

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common stockholders

 

 

 

 

 

 

 

Basic (1)

 

$

(0.11

)

 

 

 

 

Diluted (1)

 

$

(0.11

)

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

Basic (1)

 

 

44,407,831

 

 

 

 

 

Diluted (1)

 

 

44,407,831

 

 

 

 

 

(1)

The structure of Southland’s historical common equity structure was in the form of membership percentages and no shares were issued. As such, reporting periods prior to the three months ended March 31, 2023 will not present share or per share data. Basic net loss per share is the same as diluted net loss per share attributable to common stockholders for the three months ended March 31, 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 March 31, 2023, was $274.8 million, an increase of $16.3 million, or 6%, compared to the three months ended March 31, 2022.

Gross profit for the three months ended March 31, 2023, was $18.9 million, an increase of $14.0 million, or 284%, compared to the three months ended March 31, 2022. Our gross profit margin increased from 1.9% to 6.9% for the three months ended March 31, 2023.

Selling, general, and administrative costs for the three months ended March 31, 2023, were $15.6 million, an increase of $1.3 million, or 9%, compared to the three months ended March 31, 2022. The increase was driven by $1.0 million of expenses related to becoming a public company.

Segment Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

(Amounts in thousands)

 

March 31, 2023

 

March 31, 2022

 

 

 

 

 

% of Total

 

 

 

% of Total

 

Segment

 

Revenue

 

Revenue

 

Revenue

 

Revenue

 

Civil

 

$

72,989

 

26.6

%

$

75,043

 

29.0

%

Transportation

 

 

201,840

 

73.4

%

 

183,443

 

71.0

%

Total revenue

 

$

274,829

 

100.0

%

$

258,486

 

100.0

%

Segment Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

(Amounts in thousands)

 

March 31, 2023

 

March 31, 2022

 

 

 

 

 

 

% of Segment

 

 

 

 

% of Segment

 

Segment

 

Gross Profit

 

Revenue

 

Gross Profit

 

Revenue

 

Civil

 

$

8,766

 

12.0

%

$

6,967

 

 

9.3

 

%

Transportation

 

 

10,177

 

5.0

%

 

(2,036

)

 

(1.1

)

%

Gross profit

 

$

18,943

 

6.9

%

$

4,931

 

 

1.9

 

%

Condensed Consolidated Balance Sheets (unaudited)

 

 

 

 

 

 

 

 

 

As of

(Amounts in thousands)

 

March 31, 2023

 

December 31, 2022

Cash and cash equivalents

 

$

28,930

 

 

$

57,915

 

Restricted cash

 

 

14,621

 

 

 

14,076

 

Accounts receivable, net

 

 

178,723

 

 

 

135,678

 

Retainage receivables

 

 

126,092

 

 

 

122,682

 

Contract assets

 

 

543,147

 

 

 

512,906

 

Other current assets

 

 

24,083

 

 

 

24,047

 

Total current assets

 

 

915,596

 

 

 

867,304

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

108,857

 

 

 

114,084

 

Right-of-use assets

 

 

18,657

 

 

 

16,893

 

Investments - unconsolidated entities

 

 

116,920

 

 

 

113,724

 

Investments - limited liability companies

 

 

2,590

 

 

 

2,590

 

Investments - private equity

 

 

3,319

 

 

 

3,261

 

Goodwill

 

 

1,528

 

 

 

1,528

 

Intangible assets, net

 

 

2,057

 

 

 

2,218

 

Other noncurrent assets

 

 

3,391

 

 

 

3,703

 

Total noncurrent assets

 

 

257,319

 

 

 

258,001

 

Total assets

 

 

1,172,915

 

 

 

1,125,305

 

 

 

 

 

 

 

 

Accounts payable

 

$

166,203

 

 

$

126,385

 

Retainage payable

 

 

34,828

 

 

 

33,677

 

Accrued liabilities

 

 

114,184

 

 

 

121,584

 

Current portion of long-term debt

 

 

52,718

 

 

 

46,322

 

Short-term lease liabilities

 

 

16,678

 

 

 

16,572

 

Contract liabilities

 

 

138,800

 

 

 

131,557

 

Total current liabilities

 

 

523,411

 

 

 

476,097

 

 

 

 

 

 

 

 

Long-term debt

 

 

242,669

 

 

 

227,278

 

Long-term lease liabilities

 

 

10,556

 

 

 

10,032

 

Deferred tax liabilities

 

 

2,878

 

 

 

3,392

 

Other noncurrent liabilities

 

 

119,981

 

 

 

48,622

 

Total long-term liabilities

 

 

376,084

 

 

 

289,324

 

Total liabilities

 

 

899,495

 

 

 

765,421

 

 

 

 

 

 

 

 

Noncontrolling interest

 

 

10,712

 

 

 

10,446

 

Members’ capital

 

 

 

 

 

327,614

 

Preferred stock

 

 

 

 

 

24,400

 

Common stock

 

 

8

 

 

 

 

APIC

 

 

269,436

 

 

 

 

Accumulated deficit

 

 

(4,664

)

 

 

 

Accumulated other comprehensive income

 

 

(2,072

)

 

 

(2,576

)

Total equity

 

 

273,420

 

 

 

359,884

 

Total liabilities and equity

 

$

1,172,915

 

 

$

1,125,305

 

Condensed Consolidated Statement of Cash Flows (unaudited)

 

 

 

 

 

Year Ended

(Amounts in thousands)

 

March 31, 2023

 

March 31, 2022

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(4,266

)

 

$

(12,973

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

8,560

 

 

 

11,667

 

Deferred taxes

 

 

(514

)

 

 

63

 

Change in fair value of earnout liability

 

 

2,936

 

 

 

 

Gain on sale of assets

 

 

(967

)

 

 

(251

)

Foreign currency remeasurement gain

 

 

(5

)

 

 

(156

)

Earnings from equity method investments

 

 

(3,242

)

 

 

(765

)

TZC Investment present value accretion

 

 

(603

)

 

 

(580

)

Loss (gain) on trading securities, net

 

 

32

 

 

 

(280

)

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(49,278

)

 

 

(19,363

)

Contract assets

 

 

(30,306

)

 

 

(3,029

)

Prepaid expenses and other current assets

 

 

119

 

 

 

2,602

 

ROU assets

 

 

(1,764

)

 

 

(2,371

)

Accounts payable and accrued expenses

 

 

33,705

 

 

 

786

 

Contract liabilities

 

 

7,241

 

 

 

(12,247

)

Operating lease liabilities

 

 

1,820

 

 

 

2,347

 

Other

 

 

1,753

 

 

 

(3,137

)

Net cash used in operating activities

 

 

(34,779

)

 

 

(37,687

)

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of fixed assets

 

 

(1,166

)

 

 

(714

)

Proceeds from sale of fixed assets

 

 

1,295

 

 

 

521

 

Purchase of trading securities

 

 

(81

)

 

 

 

Proceeds from the sale of trading securities

 

 

 

 

 

357

 

Capital contribution to investees

 

 

 

 

 

(1,000

)

Net cash provided by (used in) investing activities

 

 

48

 

 

 

(836

)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings on line of credit

 

 

3,000

 

 

 

30,000

 

Borrowings on notes payable

 

 

181

 

 

 

115

 

Payments on notes payable

 

 

(12,382

)

 

 

(10,367

)

Advances from related parties

 

 

(493

)

 

 

(247

)

Payments to related parties

 

 

6

 

 

 

1,252

 

Payments on finance lease

 

 

(1,189

)

 

 

(2,088

)

Distributions

 

 

(110

)

 

 

(1,542

)

Proceeds from merger of Legato II and Southland Holdings, LLC

 

 

17,088

 

 

 

 

Net cash provided by financing activities

 

 

6,101

 

 

 

17,123

 

 

 

 

 

 

 

 

Effect of exchange rate on cash

 

 

190

 

 

 

(401

)

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents and restricted cash

 

 

(28,440

)

 

 

(21,801

)

Beginning of period

 

 

71,991

 

 

 

111,242

 

End of period

 

$

43,551

 

 

$

89,441

 

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

 

Cash paid for income taxes

 

$

87

 

 

$

421

 

Cash paid for interest

 

$

3,230

 

 

$

5,415

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Lease assets obtained in exchange for new leases

 

$

6,416

 

 

$

6,894

 

Assets obtained in exchange for notes payable

 

$

2,299

 

 

$

 

Issuance of post-merger earn out shares

 

 

35,000

 

 

 

 

Dividend financed with notes payable

 

$

50,000

 

 

$

 

 

 

 

 

 

 

 

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

 

Three Months Ended

(Amounts in thousands except shares and per share data)

March 31, 2023

 

March 31, 2022

Reconciliation of adjusted net loss attributable to common stock:

 

Net loss attributable to common stock (GAAP as reported)

 

$

(4,664

)

 

$

(13,601

)

Adjustments:

Transaction related costs

 

 

1,035

 

 

 

-

 

Contingent earnout consideration non-cash expense

2,936

 

-

 

Income tax impact of adjustments (1)

 

 

(774

)

 

 

-

 

Adjusted net loss attributable to common stockholders

$

(1,467

)

$

(13,601

)

 

 

 

 

 

 

 

Weighted average shares outstanding (2)

Basic and diluted (2)

 

 

44,407,831

 

 

 

 

 

Net loss per share attributable to common stockholders (2)

 

$

(0.11

)

 

 

 

Adjusted net loss per share attributable to common stockholders (2)

$

(0.03

)

 

(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) The structure of Southland’s historical common equity structure was in the form of membership percentages and no shares were issued. As such, reporting periods prior to the three months ended March 31, 2023 will not present share or per share data. Basic net loss per share is the same as diluted net loss per share attributable to common stockholders for the three months ended March 31, 2023, because the inclusion of potential shares of common stock would have been anti-dilutive for the period presented

Adjusted EBITDA Reconciliation

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

(Amounts in thousands)

 

March 31, 2023

 

March 31, 2022

 

Net loss

 

$

(4,664

)

 

$

(13,601

)

 

Depreciation and amortization

 

 

8,560

 

 

 

11,667

 

 

Income taxes

 

 

1,753

 

 

 

1,342

 

 

Interest expense

 

 

3,254

 

 

 

1,967

 

 

Interest income

 

 

(137

)

 

 

(11

)

 

Transaction related costs

 

 

1,035

 

 

 

-

 

 

Contingent earnout consideration non-cash expense

 

 

2,936

 

 

 

-

 

 

Adjusted EBITDA

 

$

12,737

 

 

$

1,364

 

 

Backlog

 

 

 

 

 

(Amounts in thousands)

 

Backlog

Balance December 31, 2022

 

$

2,973,886

 

New contracts, change orders, and adjustments

 

 

170,070

 

Gross backlog

 

 

3,143,956

 

Less: contract revenue recognized in 2023

 

 

(282,122

)

Balance March 31, 2023

 

$

2,861,834

Conference Call

Southland will host a conference call at 10:00 a.m. Eastern Time on Tuesday, May 16, 2023. 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, tunneling, 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 adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”), backlog, adjusted net loss, adjusted net 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 loss per share attributable to common stock (a non-GAAP financial measure) to net loss per share attributable to common stock; and adjusted net loss attributable to common stock, and Adjusted EBITDA (non-GAAP financial measures) to net 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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