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Southland Announces Third Quarter 2023 Results

GRAPEVINE, Texas, Nov. 13, 2023 (GLOBE NEWSWIRE) -- 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 September 30, 2023.

  • Revenue of $312 million for the quarter ended September 30, 2023, down 6.8% from $335 million for the quarter ended September 30, 2022.
  • Gross profit of $30 million for the quarter ended September 30, 2023, compared to $62 million for the quarter ended September 30, 2022.
  • Net income attributable to stockholders of $4 million, or $0.08 per diluted share for the quarter ended September 30, 2023, compared to a net income attributable to stockholders of $35 million for the quarter ended September 30, 2022.
  • EBITDA of $22 million for the quarter ended September 30, 2023, compared to $60 million for the quarter ended September 30, 2022.
  • Backlog of $2.54 billion, up 7% compared to $2.37 billion as of September 30, 2022.

Southland’s President and Chief Executive Officer, Frank Renda, said, “This quarter’s results demonstrate positive contribution from recently awarded work in both our Civil and Transportation segments. While consolidated revenues declined this quarter compared to the same period last year, our core business delivered strong margins, offset by certain legacy projects as we work through completing lower margin backlog from prior years. We continue to see elevated bidding opportunities which we expect to carry into 2024 as funds from the Infrastructure Investment and Jobs Act (IIJA) are allocated towards critical infrastructure projects across the country.”

2023 Third Quarter Results

Condensed Consolidated Statements of Operations (unaudited)

      
 Three Months Ended
(Amounts in thousands)September 30, 2023 September 30, 2022
Revenue$312,472  $335,125 
Cost of construction 282,943   272,715 
Gross profit 29,529   62,410 
Selling, general, and administrative expenses 15,247   15,606 
Operating income 14,282   46,804 
Loss on investments, net (21)  (100)
Other income, net 2,151   2,292 
Interest expense (6,231)  (2,285)
Income before income taxes 10,181   46,711 
Income tax expense 5,390   10,588 
Net income 4,791   36,123 
Net income attributable to noncontrolling interests 991   924 
Net income attributable to Southland Stockholders$3,800  $35,199 
      
Net income per share attributable to common stockholders     
Basic(1)$0.08    
Diluted(1)$0.08    
Weighted average shares outstanding     
Basic(1) 47,856,114    
Diluted(1) 47,872,042    


(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.
   

Revenue for the three months ended September 30, 2023, was $312.5 million, a decrease of $22.7 million, or 6.8%, compared to the three months ended September 30, 2022.

Gross profit for the three months ended September 30, 2023, was $29.5 million, a decrease of $32.9 million, or 52.7%, compared to gross profit of $62.4 million for the three months ended September 30, 2022. Our gross profit margin decreased from 18.6% to 9.5% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

Selling, general, and administrative costs for the three months ended September 30, 2023 were $15.2 million, a decrease of $0.4 million, or 2.3%, compared to the three months ended September 30, 2022. Selling, general, and administrative costs as a percent of revenue were 4.9% for the three months ended September 30, 2023 compared to 4.7% for the three months ended September 30, 2022.

Condensed Consolidated Statements of Operations (unaudited)

      
 Nine Months Ended
(Amounts in thousands)September 30, 2023 September 30, 2022
Revenue$844,228  $866,627 
Cost of construction 829,550   761,549 
Gross profit 14,678   105,078 
Selling, general, and administrative expenses 47,266   43,395 
Operating income (loss) (32,588)  61,683 
Loss on investments, net (3)  (79)
Other income, net 23,559   936 
Interest expense (13,790)  (6,317)
Income (loss) before income taxes (22,822)  56,223 
Income tax expense (benefit) (11,446)  13,745 
Net income (loss) (11,376)  42,478 
Net income attributable to noncontrolling interests 2,314   1,474 
Net income (loss) attributable to Southland Stockholders$(13,690) $41,004 
      
Net loss per share attributable to common stockholders     
Basic(1)$(0.29)   
Diluted(1)$(0.29)   
Weighted average shares outstanding     
Basic(1) 46,771,938    
Diluted(1) 46,771,938    


(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 nine months ended September 30, 2023, because the inclusion of potential shares of common stock would have been anti-dilutive for the period presented.
   

Revenue for the nine months ended September 30, 2023 was $844.2 million, a decrease of $22.4 million, or 2.6%, compared to the nine months ended September 30, 2022.

Gross profit for the nine months ended September 30, 2022, was $14.7 million, a decrease of $90.4 million, or 86.0%, compared to gross profit of $105.1 million for the nine months ended September 30, 2022. Our gross profit margin decreased from 12.1% to 1.7% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

Selling, general, and administrative costs for the nine months ended September 30, 2023 were $47.3 million, an increase of $3.9 million, or 8.9%, compared to the nine months ended September 30, 2022. Selling, general, and administrative costs as a percent of revenue were 5.6% for the nine months ended September 30, 2023 compared to 5.0% for the nine months ended September 30, 2022.

Segment Revenue

             
 Three Months Ended 
(Amounts in thousands)September 30, 2023 September 30, 2022 
     % of Total     % of Total 
SegmentRevenue Revenue Revenue Revenue 
Civil$90,708  29.0%$71,409  21.3%
Transportation 221,764  71.0% 263,716  78.7%
Total revenue$312,472  100.0%$335,125  100.0%


             
 Nine Months Ended 
(Amounts in thousands)September 30, 2023 September 30, 2022 
     % of Total     % of Total 
SegmentRevenue Revenue Revenue Revenue 
Civil$229,264  27.2%$221,303  25.5%
Transportation 614,964  72.8% 645,324  74.5%
Total revenue$844,228  100.0%$866,627  100.0%
             

Segment Gross Profit

             
 Three Months Ended 
(Amounts in thousands)September 30, 2023 September 30, 2022 
     % of Segment     % of Segment 
SegmentGross Profit Revenue Gross Profit Revenue 
Civil$12,465  13.7%$8,926  12.5%
Transportation 17,064  7.7% 53,484  20.3%
Gross profit$29,529  9.5%$62,410  18.6%


            
 Nine Months Ended 
(Amounts in thousands)September 30, 2023 September 30, 2022 
    % of Segment     % of Segment 
SegmentGross Profit Revenue Gross Profit Revenue 
Civil$27,137  11.8 %$28,315  12.8%
Transportation (12,459) (2.0)% 76,763  11.9%
Gross profit$14,678  1.7 %$105,078  12.1%
              

Adjusted EBITDA Reconciliation

            
 Three Months Ended Nine Months Ended
(Amounts in thousands)September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022
Net income (loss) attributable to Southland Stockholders$3,800  $35,199  $(13,690) $41,004 
Depreciation and amortization 7,968   11,523   24,704   35,163 
Income taxes expense (benefit) 5,390   10,588   (11,446)  13,745 
Interest expense 6,231   2,285   13,790   6,317 
Interest income (1,060)  (18)  (1,358)  (29)
EBITDA 22,329   59,577   12,000   96,200 
Transaction related costs       1,594    
Contingent earnout consideration non-cash expense reversal       (20,689)   
Adjusted EBITDA$22,329  $59,577  $(7,095) $96,200 
                

Backlog

   
(Amounts in thousands)Backlog
Balance December 31, 2022$2,973,886 
New contracts, change orders, and adjustments 412,756 
Gross backlog 3,386,642 
Less: contract revenue recognized in 2023 (845,323)
Balance September 30, 2023$2,541,319 
    

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, 2023 September 30, 2022 September 30, 2023 September 30, 2022
Reconciliation of adjusted net income (loss) attributable to common stock:              
Net income (loss) attributable to common stock (GAAP as reported)$3,800  $35,199  $(13,690) $41,004 
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$3,800  $35,199  $(33,096) $41,004 
               
Weighted average shares outstanding for diluted and adjusted diluted earnings per share(2) 47,872,042       46,771,938     
               
Diluted earnings (loss) per share attributable to common stock(2)$0.08      $(0.29)    
Adjusted diluted earnings (loss) per share attributable to common stock(2)$0.08      $(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) 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 nine months ended September 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
ASSETSSeptember 30, 2023 December 31, 2022
Current assets     
Cash and cash equivalents$32,211  $57,915 
Restricted cash 14,541   14,076 
Accounts receivable, net 198,967   135,678 
Retainage receivables 125,196   122,682 
Contract assets 515,361   512,906 
Other current assets 22,635   24,047 
Total current assets 908,911   867,304 
      
Property and equipment, net 100,558   114,084 
Right-of-use assets 12,858   16,893 
Investments - unconsolidated entities 123,666   113,724 
Investments - limited liability companies 2,590   2,590 
Investments - private equity 3,219   3,261 
Deferred tax asset 21,631    
Goodwill 1,528   1,528 
Intangible assets, net 1,822   2,218 
Other noncurrent assets 3,171   3,703 
Total noncurrent assets 271,043   258,001 
Total assets$1,179,954  $1,125,305 
      
LIABILITIES AND EQUITY     
Current liabilities     
Accounts payable$137,347  $126,385 
Retainage payable 39,059   33,677 
Accrued liabilities 125,236   121,584 
Current portion of long-term debt 47,825   46,322 
Short-term lease liabilities 13,922   16,572 
Contract liabilities 184,627   131,557 
Total current liabilities 548,016   476,097 
      
Long-term debt 261,236   227,278 
Long-term lease liabilities 5,314   10,032 
Deferred tax liabilities 2,876   3,392 
Other noncurrent liabilities 96,343   48,622 
Total long-term liabilities 365,769   289,324 
Total liabilities 913,785   765,421 
      
Commitment and contingencies (Note 7)     
      
Stockholders' equity     
Preferred stock, $0.0001 par value, authorized 50,000,000 shares, none issued and outstanding in 2023     
Preferred stock, $1.00 par value, 24,400,000 shares issued and outstanding in 2022    24,400 
Common stock, $0.0001 par value, authorized 500,000,000 shares, 47,856,114 and none issued and outstanding in 2023 and 2022, respectively 8    
Additional paid-in-capital 269,920    
Accumulated deficit (13,690)   
Accumulated other comprehensive loss (2,551)  (2,576)
Members’ capital    327,614 
Total stockholders' equity 253,687   349,438 
Noncontrolling interest 12,482   10,446 
Total equity 266,169   359,884 
Total liabilities and equity$1,179,954  $1,125,305 
        

Condensed Consolidated Statement of Cash Flows (unaudited)

      
 Nine Months Ended
(Amounts in thousands)September 30, 2023 September 30, 2022
Cash flows from operating activities:     
Net income (loss)$(11,376) $42,478 
Adjustments to reconcile net income (loss) to net cash used in operating activities     
Depreciation and amortization 24,704   35,163 
Deferred taxes (22,148)  (440)
Change in fair value of earnout liability (20,689)   
Share based compensation 484    
Gain on sale of assets (118)  (1,343)
Foreign currency remeasurement (gain) loss (37)  746 
Earnings from equity method investments (5,102)  (7,346)
TZC investment present value accretion (1,828)  (1,758)
Loss (gain) on trading securities, net 3   (257)
Changes in assets and liabilities:     
Accounts receivable (69,471)  (24,167)
Contract assets (4,376)  (72,703)
Prepaid expenses and other current assets 1,564   (1,001)
ROU assets 4,034   930 
Accounts payable and accrued expenses 20,584   (6,997)
Contract liabilities 53,048   (29,591)
Operating lease liabilities (3,991)  (1,206)
Other (1,873)  (3,444)
Net cash used in operating activities (36,588)  (70,936)
      
Cash flows from investing activities:     
Purchase of fixed assets (7,475)  (4,384)
Proceeds from sale of fixed assets 7,461   3,897 
Loss on investment in limited liability company    336 
Proceeds from the sale of trading securities 47   840 
Capital contribution to unconsolidated investments (540)  (1,000)
Net cash used in investing activities (507)  (311)
      
Cash flows from financing activities:     
Borrowings on line of credit 3,000   55,000 
Payments on line of credit (8,000)   
Borrowings on notes payable 115,355   115 
Payments on notes payable (111,908)  (31,161)
Payments of deferred financing costs (578)   
Advances from related parties 425    
Payments to related parties (4)  (405)
Payments on finance lease (3,538)  (6,298)
Distributions (110)  (1,556)
Proceeds from merger of Legato II and Southland Holdings, LLC 17,088    
Net cash provided by financing activities 11,730   15,695 
      
Effect of exchange rate on cash 126   1,834 
      
Net decrease in cash and cash equivalents and restricted cash (25,239)  (53,718)
Beginning of period 71,991   111,242 
End of period$46,752  $57,524 
      
Supplemental cash flow information     
Cash paid for income taxes$3,033  $6,153 
Cash paid for interest$12,704  $6,464 
Non-cash investing and financing activities:     
Lease assets obtained in exchange for new leases$8,529  $12,537 
Assets obtained in exchange for notes payable$8,626  $3,397 
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, November 14, 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, 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.

Southland Contacts:

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

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

 


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