EX-99.1 2 southlandhold_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

Southland Announces First Quarter 2023 Results

 

GRAPEVINE, Texas, May 15, 2023 (Business 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 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%

 

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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 

 

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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   $— 

 

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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 

 

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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.

 

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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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