Southland’s President & Chief Executive Officer, Frank Renda, said, "While this quarter was disappointing due to legacy project impacts, I remain very confident in Southland's long-term outlook. We finished the quarter with the highest quarter end cash balance we have had since becoming a public company and backlog of $2.7 billion. This positions us to capitalize on a promising pipeline of opportunities as demand for our services continues to be robust."
Revenue for the three months ended September 30, 2024, was $173.3 million, a decrease of $139.2 million, or 44.5%, compared to the three months ended September 30, 2023. Materials & Paving business contributed $17.5 million to revenue in the three months ended September 30, 2024.
Gross loss for the three months ended September 30, 2024, was $51.1 million, compared to gross profit of $29.5 million for the three months ended September 30, 2023. Gross margin decreased from 9.5% to (29.5)% for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. Materials & Paving business negatively impacted gross loss by $18.3 million in the three months ended September 30, 2024.
Selling, general, and administrative costs for the three months ended September 30, 2024, were $17.5 million, an increase of $2.2 million, or 14.7%, compared to the three months ended September 30, 2023. Selling, general, and administrative costs as a percent of revenue were 10.1% for the three months ended September 30, 2024, compared to 4.9% for the three months ended September 30, 2023.
| Condensed Consolidated Statements of Operations (unaudited) |
| | | | | | |
| | Nine Months Ended |
| (Amounts in thousands) | September 30, 2024 | | September 30, 2023 |
| Revenue | $ | 712,929 | | $ | 844,228 |
| Cost of construction | | 783,635 | | | 829,550 |
| Gross profit (loss) | | (70,706) | | | 14,678 |
| Selling, general, and administrative expenses | | 47,566 | | | 47,266 |
| Operating loss | | (118,272) | | | (32,588) |
| Loss on investments, net | | (18) | | | (3) |
| Other income, net | | 2,430 | | | 23,559 |
| Interest expense | | (19,895) | | | (13,790) |
| Losses before income taxes | | (135,755) | | | (22,822) |
| Income tax benefit | | (32,796) | | | (11,446) |
| Net loss | | (102,959) | | | (11,376) |
| Net income (loss) attributable to noncontrolling interests | | (1,749) | | | 2,314 |
| Net loss attributable to Southland Stockholders | $ | (101,210) | | $ | (13,690) |
| | | | | | |
| Net loss per share attributable to common stockholders | | | | | |
| Basic (1) | $ | (2.11) | | | (0.29) |
| Diluted (1) | $ | (2.11) | | | (0.29) |
| Weighted average shares outstanding | | | | | |
| Basic (1) | | 48,020,822 | | | 46,771,938 |
| Diluted (1) | | 48,020,822 | | | 46,771,938 |
| ______________________________ |
| (1) | | Basic net loss per share is the same as diluted net loss per share attributable to common stockholders for the nine months ended September 30, 2024, and September 30, 2023, because the inclusion of potential shares of common stock would have been anti-dilutive for the periods presented. |
Revenue for the nine months ended September 30, 2024, was $712.9 million, a decrease of $131.3 million, or 15.6%, compared to the nine months ended September 30, 2023. Materials & Paving business contributed $65.0 million to revenue in the nine months ended September 30, 2024.
Gross loss for the nine months ended September 30, 2024, was $70.7 million, compared to gross profit of $14.7 million for the nine months ended September 30, 2023. Gross margin decreased from 1.7% to (9.9)% for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. Materials & Paving business negatively impacted gross loss by $75.4 million in the nine months ended September 30, 2024.
Selling, general, and administrative costs for the nine months ended September 30, 2024, were $47.6 million, an increase of $0.3 million, or 0.6%, compared to the nine months ended September 30, 2023. Selling, general, and administrative costs as a percent of revenue were 6.7% for the nine months ended September 30, 2024, compared to 5.6% for the nine months ended September 30, 2023.
| Segment Revenue |
| | | | | | | | | | | |
| | | Three Months Ended |
| (Amounts in thousands) | | September 30, 2024 | | September 30, 2023 |
| | | | | | % of Total | | | | | % of Total |
| Segment | | Revenue | | Revenue | | Revenue | | Revenue |
| Civil | | $ | 55,849 | | 32.2% | | $ | 90,708 | | 29.0% |
| Transportation | | | 117,471 | | 67.8% | | | 221,764 | | 71.0% |
| Total revenue | | $ | 173,320 | | 100.0% | | $ | 312,472 | | 100.0% |
| | | | | | | | | | | |
| | | |
| | | Nine Months Ended |
| (Amounts in thousands) | | September 30, 2024 | | September 30, 2023 |
| | | | | | % of Total | | | | | % of Total |
| Segment | | Revenue | | Revenue | | Revenue | | Revenue |
| Civil | | $ | 219,490 | | 30.8% | | $ | 229,264 | | 27.2% |
| Transportation | | | 493,439 | | 69.2% | | | 614,964 | | 72.8% |
| Total revenue | | $ | 712,929 | | 100.0% | | $ | 844,228 | | 100.0% |
| | | | | | | | | | | |
| Segment Gross Profit (Loss) |
| | | |
| | | Three Months Ended |
| (Amounts in thousands) | | September 30, 2024 | | September 30, 2023 |
| | | | | % of Segment | | | | % of Segment |
| Segment | | Gross Loss | | Revenue | | Gross Profit | | Revenue |
| Civil | | $ | (18,336) | | (32.8)% | | $ | 12,465 | | 13.7% |
| Transportation | | | (32,769) | | (27.9)% | | | 17,064 | | 7.7% |
| Gross profit (loss) | | $ | (51,105) | | (29.5)% | | $ | 29,529 | | 9.5% |
| | | | | | | | | | | |
| | | |
| | | Nine Months Ended |
| (Amounts in thousands) | | September 30, 2024 | | September 30, 2023 |
| | | | | % of Segment | | | | | % of Segment |
| Segment | | Gross Profit | | Revenue | | Gross Profit | | Revenue |
| Civil | | $ | 8,694 | | 4.0% | | $ | 27,137 | | 11.8% |
| Transportation | | | (79,400) | | (16.1)% | | | (12,459) | | (2.0)% |
| Gross profit (loss) | | $ | (70,706) | | (9.9)% | | $ | 14,678 | | 1.7% |
| Adjusted EBITDA Reconciliation |
| | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| (Amounts in thousands) | | September 30, 2024 | | September 30, 2023 | | September 30, 2024 | | September 30, 2023 |
| Net income (loss) attributable to Southland Stockholders | | $ | (54,727) | | $ | 3,800 | | $ | (101,210) | | $ | (13,690) |
| Depreciation and amortization | | | 5,776 | | | 7,968 | | | 16,925 | | | 24,704 |
| Income tax expense (benefit) | | | (17,142) | | | 5,390 | | | (32,796) | | | (11,446) |
| Interest expense | | | 7,520 | | | 6,231 | | | 19,895 | | | 13,790 |
| Interest income | | | (167) | | | (1,060) | | | (527) | | | (1,358) |
| EBITDA | | | (58,740) | | | 22,329 | | | (97,713) | | | 12,000 |
| Transaction related costs | | | — | | | — | | | — | | | 1,594 |
| Contingent earnout consideration non-cash expense reversal | | | — | | | — | | | — | | | (20,689) |
| Adjusted EBITDA | | $ | (58,740) | | $ | 22,329 | | $ | (97,713) | | $ | (7,095) |
| Backlog | | |
| | |
| (Amounts in thousands) | |
| Balance December 31, 2023 | $ | 2,834,966 |
| New contracts, change orders, and adjustments | | 615,151 |
| Less: contract revenue recognized in 2024 | | (712,928) |
| Balance September 30, 2024 | $ | 2,737,189 |
| Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share Attributable to Common Stock Reconciliation |
| | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| (Amounts in thousands except shares and per share data) | | September 30, 2024 | | September 30, 2023 | | September 30, 2024 | | September 30, 2023 |
| Reconciliation of adjusted net loss attributable to common stock: | | | | | | | | | | | | |
| Net income (loss) attributable to common stock (GAAP as reported) | | $ | (54,727) | | $ | 3,800 | | $ | (101,210) | | $ | (13,690) |
| Adjustments: | | | | | | | | | | | | |
| Transaction related costs | | | — | | | — | | | — | | | 1,594 |
| Contingent earnout consideration non-cash expense | | | — | | | — | | | — | | | (20,689) |
| Income tax impact of adjustments (1) | | | — | | | — | | | — | | | (311) |
| Adjusted net income (loss) attributable to common stockholders | | $ | (54,727) | | $ | 3,800 | | $ | (101,210) | | $ | (33,096) |
| | | | | | | | | | | | | |
| Weighted average shares outstanding for diluted and adjusted diluted earnings per share (2) | | | 48,105,512 | | | 47,872,042 | | | 48,020,822 | | | 46,771,938 |
| | | | | | | | | | | | | |
| Diluted income (loss) per share attributable to common stock (2) | | $ | (1.14) | | $ | 0.08 | | $ | (2.11) | | $ | (0.29) |
| Adjusted diluted income (loss) per share attributable to common stock (2) | | $ | (1.14) | | $ | 0.08 | | $ | (2.11) | | $ | (0.71) |
| ____________________________ |
| (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 income (loss) per share is the same as diluted net income (loss) per share attributable to common stockholders for the three and nine months ended September 30, 2024, and the nine months ended September 30, 2023, because the inclusion of potential shares of common stock would have been anti-dilutive for the periods presented. |
| Condensed Consolidated Balance Sheets (unaudited) |
| | | | | | | |
| (Amounts in thousands, except share and per share data) | | As of |
| ASSETS | | September 30, 2024 | | December 31, 2023 |
| Current assets | | | | | | |
| Cash and cash equivalents | | $ | 91,378 | | $ | 49,176 |
| Restricted cash | | | 15,370 | | | 14,644 |
| Accounts receivable, net | | | 193,124 | | | 194,869 |
| Retainage receivables | | | 108,651 | | | 109,562 |
| Contract assets | | | 456,176 | | | 554,202 |
| Other current assets | | | 19,223 | | | 20,083 |
| Total current assets | | | 883,922 | | | 942,536 |
| | | | | | | |
| Property and equipment, net | | | 114,034 | | | 102,150 |
| Right-of-use assets | | | 13,584 | | | 12,492 |
| Investments - unconsolidated entities | | | 125,588 | | | 121,648 |
| Investments - limited liability companies | | | 2,590 | | | 2,590 |
| Investments - private equity | | | 3,095 | | | 3,235 |
| Deferred tax asset | | | 39,334 | | | 11,496 |
| Goodwill | | | 1,528 | | | 1,528 |
| Intangible assets, net | | | 1,418 | | | 1,682 |
| Other noncurrent assets | | | 1,701 | | | 1,711 |
| Total noncurrent assets | | | 302,872 | | | 258,532 |
| Total assets | | $ | 1,186,794 | | $ | 1,201,068 |
| | | | | | | |
| LIABILITIES AND EQUITY | | | | | | |
| Current liabilities | | | | | | |
| Accounts payable | | $ | 164,897 | | $ | 162,464 |
| Retainage payable | | | 35,954 | | | 40,950 |
| Accrued liabilities | | | 101,939 | | | 124,667 |
| Current portion of long-term debt | | | 43,072 | | | 48,454 |
| Short-term lease liabilities | | | 8,829 | | | 14,081 |
| Contract liabilities | | | 243,505 | | | 193,351 |
| Total current liabilities | | | 598,196 | | | 583,967 |
| | | | | | | |
| Long-term debt | | | 275,237 | | | 251,906 |
| Long-term lease liabilities | | | 6,085 | | | 5,246 |
| Deferred tax liabilities | | | 1,952 | | | 2,548 |
| Long-term accrued liabilities | | | 58,075 | | | 49,109 |
| Financing obligations, net | | | 41,464 | | | — |
| Other noncurrent liabilities | | | 47,751 | | | 47,728 |
| Total long-term liabilities | | | 430,564 | | | 356,537 |
| Total liabilities | | | 1,028,760 | | | 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 September 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 September 30, 2024 and December 31, 2023, respectively | | | 5 | | | 5 |
| Additional paid-in-capital | | | 271,798 | | | 270,330 |
| Accumulated deficit | | | (120,463) | | | (19,253) |
| Accumulated other comprehensive loss | | | (2,276) | | | (1,460) |
| Total stockholders' equity | | | 149,064 | | | 249,622 |
| Noncontrolling interest | | | 8,970 | | | 10,942 |
| Total equity | | | 158,034 | | | 260,564 |
| Total liabilities and equity | | $ | 1,186,794 | | $ | 1,201,068 |
| Condensed Consolidated Statement of Cash Flows (unaudited) |
| | | | | | | |
| | | Nine Months Ended |
| (Amounts in thousands) | | September 30, 2024 | | September 30, 2023 |
| Cash flows from operating activities: | | | | | | |
| Net loss | | $ | (102,959) | | $ | (11,376) |
| Adjustments to reconcile net loss to net cash used in operating activities | | | | | | |
| Depreciation and amortization | | | 16,925 | | | 24,704 |
| Loss on extinguishment of debt | | | 246 | | | — |
| Deferred taxes | | | (28,379) | | | (22,148) |
| Change in fair value of earnout liability | | | — | | | (20,689) |
| Share based compensation | | | 1,674 | | | 484 |
| Gain on sale of assets | | | (3,279) | | | (118) |
| Foreign currency remeasurement gain | | | (53) | | | (37) |
| Loss (earnings) from equity method investments | | | 2,453 | | | (5,102) |
| TZC investment present value accretion | | | (3,367) | | | (1,828) |
| Loss on trading securities, net | | | 18 | | | 3 |
| Changes in assets and liabilities: | | | | | | |
| Accounts receivable | | | 2,196 | | | (69,471) |
| Contract assets | | | 97,801 | | | (4,376) |
| Other current assets | | | 859 | | | 1,564 |
| Right-of-use assets | | | (1,096) | | | 4,034 |
| Accounts payable and accrued liabilities | | | (22,659) | | | 20,584 |
| Contract liabilities | | | 50,115 | | | 53,048 |
| Operating lease liabilities | | | 1,227 | | | (3,991) |
| Other | | | 520 | | | (1,873) |
| Net cash provided by (used in) operating activities | | | 12,242 | | | (36,588) |
| | | | | | | |
| Cash flows from investing activities: | | | | | | |
| Purchase of property and equipment | | | (6,210) | | | (7,475) |
| Proceeds from sale of property and equipment | | | 4,453 | | | 7,461 |
| Contributions to other investments | | | (59) | | | — |
| Distributions from other investments | | | 181 | | | 47 |
| Distributions from investees | | | 4,183 | | | — |
| Capital contribution to unconsolidated investments | | | (250) | | | (540) |
| Net cash provided by (used in) investing activities | | | 2,298 | | | (507) |
| | | | | | | |
| Cash flows from financing activities: | | | | | | |
| Borrowings on revolving credit facility | | | 5,000 | | | 3,000 |
| Payments on revolving credit facility | | | (95,000) | | | (8,000) |
| Borrowings on notes payable | | | 167,784 | | | 115,355 |
| Payments on notes payable | | | (80,613) | | | (111,908) |
| Proceeds from financing obligations | | | 42,500 | | | — |
| Payments of deferred financing costs | | | (5,468) | | | (578) |
| Pre-payment premium | | | (246) | | | — |
| Advances from related parties | | | — | | | 425 |
| Payments to related parties | | | — | | | (4) |
| Payments on finance lease and financing obligations | | | (5,314) | | | (3,538) |
| Distribution to members | | | — | | | (110) |
| Payment of taxes related to net share settlement of RSUs | | | (206) | | | — |
| Proceeds from merger of Legato II and Southland Holdings, LLC | | | — | | | 17,088 |
| Net cash provided by financing activities | | | 28,437 | | | 11,730 |
| | | | | | | |
| Effect of exchange rate on cash | | | (49) | | | 126 |
| | | | | | | |
| Net increase (decrease) in cash and cash equivalents and restricted cash | | | 42,928 | | | (25,239) |
| Beginning of period | | | 63,820 | | | 71,991 |
| End of period | | $ | 106,748 | | $ | 46,752 |
| | | | | | | |
| Supplemental cash flow information | | | | | | |
| Cash paid for income taxes | | $ | 1,079 | | $ | 3,033 |
| Cash paid for interest | | $ | 18,886 | | $ | 12,704 |
| Non-cash investing and financing activities: | | | | | | |
| Lease assets obtained in exchange for new leases | | $ | 9,881 | | $ | 8,529 |
| Assets obtained in exchange for notes payable | | $ | 23,286 | | $ | 8,626 |
| 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 Wednesday, November 13, 2024. The call may be accessed here, or at 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 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20241112061906/en/
Contacts
Southland Contacts:
Cody Gallarda
EVP, Chief Financial Officer
cgallarda@southlandholdings.com
Alex Murray
Corporate Development & Investor Relations
amurray@southlandholdings.com
