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 June 30, 2023.
- Revenue of $257 million for the quarter ended June 30, 2023,
down 5.9% from $273 million for the quarter ended June 30,
2022.
- Gross loss of $34 million for the quarter ended June 30, 2023,
compared to gross profit of $38 million for the quarter ended June
30, 2022.
- Net loss attributable to stockholders of $13 million, or
$(0.27) per share for the quarter ended June 30, 2023, compared to
a net income attributable to stockholders of $19 million for the
quarter ended June 30, 2022.
- Adjusted net loss of $35 million, or $(0.76) per share for the
quarter ended June 30, 2023, compared to an adjusted net income of
$19 million for the quarter ended June 30, 2022.(1)
- Adjusted EBITDA of negative $42 million for the quarter ended
June 30, 2023, compared to $35 million for the quarter ended June
30, 2022. (1)
- Backlog of $2.7 billion, up 36% compared to $2.0 billion as of
June 30, 2022.
- Positive cash flow from operating activities of $24 million for
the quarter ended June 30, 2023.
(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”
2023 Second Quarter
Results
Southland incurred significant unfavorable charges during the
quarter, primarily stemming from its legacy asphalt and concrete
materials production and paving business. In an effort to wind down
this component of its Transportation segment and reallocate
resources towards core operations, the Company sold various
materials production assets in the second quarter. As a result, the
Company recorded unfavorable charges in the quarter related to
additional expected future costs associated with procuring and
transporting materials from third parties. While work is expected
to be completed over the next one to two years, Southland has
recorded the increased estimated future costs to finish these
projects in this quarter in accordance with Generally Accepted
Accounting Principles. The negative impact to gross margin from
these charges were approximately $49 million for the second
quarter. At the end of the second quarter, approximately 12% of
Southland’s $2.7 billion backlog consists of legacy large-scale
paving work.
Condensed Consolidated
Statements of Operations (unaudited)
Three Months Ended
(Amounts in thousands)
June 30, 2023
June 30, 2022
Revenue
$
256,927
$
273,016
Cost of construction
290,721
235,279
Gross profit (loss)
(33,794)
37,737
Selling, general, and administrative
expenses
16,448
13,490
Operating income (loss)
(50,242)
24,247
Gain (loss) on investments, net
50
(259)
Other income (expense), net
24,007
(780)
Interest expense
(4,305)
(2,065)
Income (loss) before income
taxes
(30,490)
21,143
Income tax expense (benefit)
(18,589)
1,815
Net income (loss)
(11,901)
19,328
Net income (loss) attributable to
noncontrolling interests
925
(78)
Net income (loss) attributable to
Southland Holdings Stockholders
$
(12,826)
$
19,406
Net loss per share attributable to
common stockholders
Basic (1)
$
(0.27)
Diluted (1)
$
(0.27)
Weighted average shares
outstanding
Basic (1)
46,870,890
Diluted (1)
46,870,890
(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 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, 2023, was $256.9
million, a decrease of $16.1 million, or 5.9%, compared to the
three months ended June 30, 2022.
Gross loss for the three months ended June 30, 2023, was $33.8
million, a decrease of $71.5 million, or 189.6%, compared to gross
profit of $37.7 million for the three months ended June 30, 2022.
Our gross profit margin decreased from 13.8% to a negative 13.2%
for the three months ended June 30, 2023 compared to the three
months ended June 30, 2022.
Selling, general, and administrative costs for the three months
ended June 30, 2023 were $16.4 million, an increase of $3.0
million, or 21.9%, compared to the three months ended June 30,
2022. Selling, general, and administrative costs as a percent of
revenue were 6.4% for the three months ended June 30, 2023 compared
to 4.9% for the three months ended June 30, 2022.
Condensed Consolidated
Statements of Operations (unaudited)
Six Months Ended
(Amounts in thousands)
June 30, 2023
June 30, 2022
Revenue
$
531,756
$
531,502
Cost of construction
546,607
488,834
Gross profit (loss)
(14,851)
42,668
Selling, general, and administrative
expenses
32,019
27,789
Operating income (loss)
(46,870)
14,879
Gain on investments, net
18
21
Other income (expense), net
21,408
(1,356)
Interest expense
(7,559)
(4,032)
Income (loss) before income
taxes
(33,003)
9,512
Income tax expense (benefit)
(16,836)
3,157
Net income (loss)
(16,167)
6,355
Net income attributable to noncontrolling
interests
1,323
550
Net income (loss) attributable to
Southland Holdings Stockholders
$
(17,490)
$
5,805
Net loss per share attributable to
common stockholders
Basic (1)
$
(0.38)
Diluted (1)
$
(0.38)
Weighted average shares
outstanding
Basic (1)
46,043,878
Diluted (1)
46,043,878
(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 six
months ended 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, 2023 was $531.8
million, an increase of $0.3 million, or 0.0%, compared to the six
months ended June 30, 2022.
Gross loss for the six months ended June 30, 2022, was $14.9
million, a decrease of $57.5 million, or 134.8%, compared to gross
profit of $42.7 million for the six months ended June 30, 2022. Our
gross profit margin decreased from 8.0% to a negative 2.8% for the
six months ended June 30, 2023 compared to the six months ended
June 30, 2022.
Selling, general, and administrative costs for the six months
ended June 30, 2023 were $32.0 million, an increase of $4.2
million, or 15.2%, compared to the six months ended June 30, 2022.
Selling, general, and administrative costs as a percent of revenue
were 6.0% for the six months ended June 30, 2023 compared to 5.2%
for the six months ended June 30, 2022.
Segment Revenue
Three Months Ended
(Amounts in thousands)
June 30, 2023
June 30, 2022
% of Total
% of Total
Segment
Revenue
Revenue
Revenue
Revenue
Civil
$
65,567
25.5%
$
74,851
27.4%
Transportation
191,360
74.5%
198,165
72.6%
Total revenue
$
256,927
100.0%
$
273,016
100.0%
Six Months Ended
(Amounts in thousands)
June 30, 2023
June 30, 2022
% of Total
% of Total
Segment
Revenue
Revenue
Revenue
Revenue
Civil
$
138,556
26.1%
$
149,894
28.2%
Transportation
393,200
73.9%
381,608
71.8%
Total revenue
$
531,756
100.0%
$
531,502
100.0%
Segment Gross Profit
Three Months Ended
(Amounts in thousands)
June 30, 2023
June 30, 2022
% of Segment
% of Segment
Segment
Gross Profit
Revenue
Gross Profit
Revenue
Civil
$
5,906
9.0%
$
12,422
16.6%
Transportation
(39,700)
(20.7)%
25,315
12.8%
Gross profit (loss)
$
(33,794)
(13.2)%
$
37,737
13.8%
Six Months Ended
(Amounts in thousands)
June 30, 2023
June 30, 2022
% of Segment
% of Segment
Segment
Gross Profit
Revenue
Gross Profit
Revenue
Civil
$
14,672
10.6%
$
19,389
12.9%
Transportation
(29,523)
(7.5)%
23,279
6.1%
Gross profit (loss)
$
(14,851)
(2.8)%
$
42,668
8.0%
Adjusted EBITDA Reconciliation
Three Months Ended
Six Months Ended
(Amounts in thousands)
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Net income (loss) attributable to
Southland Holdings Stockholders
$
(12,826)
$
19,406
$
(17,490)
$
5,805
Depreciation and amortization
8,176
11,973
16,736
23,640
Income taxes (benefit)
(18,589)
1,815
(16,836)
3,157
Interest expense
4,305
2,065
7,559
4,032
Interest income
(161)
—
(298)
(11)
EBITDA
(19,095)
35,259
(10,329)
36,623
Transaction related costs
559
—
1,594
—
Contingent earnout consideration non-cash
expense reversal
(23,625)
—
(20,689)
—
Adjusted EBITDA
$
(42,161)
$
35,259
$
(29,424)
$
36,623
Backlog
(Amounts in thousands)
Backlog
Balance December 31, 2022
$
2,973,886
New contracts, change orders, and
adjustments
262,088
Gross backlog
3,235,974
Less: contract revenue recognized in
2023
(538,464)
Balance June 30, 2023
$
2,697,510
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, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Reconciliation of adjusted net income
(loss) attributable to common stock:
Net income (loss) attributable to common
stock (GAAP as reported)
$
(12,826)
$
19,406
$
(17,490)
$
5,805
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
$
(35,429)
$
19,406
$
(36,896)
$
5,805
Weighted average shares outstanding
(2)
Basic and diluted (2)
46,870,890
46,043,878
Net loss per share attributable to common
stockholders (2)
$
(0.27)
$
(0.38)
Adjusted net loss per share attributable
to common stockholders (2)
$
(0.76)
$
(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)
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 and six months ended 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, 2023
December 31, 2022
Current assets
Cash and cash equivalents
$
39,124
$
57,915
Restricted cash
14,984
14,076
Accounts receivable, net
183,439
135,678
Retainage receivables
125,220
122,682
Contract assets
508,378
512,906
Other current assets
28,340
24,047
Total current assets
899,485
867,304
Property and equipment, net
102,340
114,084
Right-of-use assets
16,551
16,893
Investments - unconsolidated entities
119,029
113,724
Investments - limited liability
companies
2,590
2,590
Investments - private equity
3,266
3,261
Deferred tax asset
21,458
—
Goodwill
1,528
1,528
Intangible assets, net
1,956
2,218
Other noncurrent assets
3,298
3,703
Total noncurrent assets
272,016
258,001
Total assets
$
1,171,501
$
1,125,305
LIABILITIES AND EQUITY
Current liabilities
Accounts payable
$
133,736
$
126,385
Retainage payable
38,369
33,677
Accrued liabilities
131,001
121,584
Current portion of long-term debt
51,326
46,322
Short-term lease liabilities
15,598
16,572
Contract liabilities
197,336
131,557
Total current liabilities
567,366
476,097
Long-term debt
233,218
227,278
Long-term lease liabilities
8,483
10,032
Deferred tax liabilities
2,985
3,392
Other noncurrent liabilities
96,583
48,622
Total long-term liabilities
341,269
289,324
Total liabilities
908,635
765,421
Commitment and contingencies (Note
7)
Stockholders' equity
Preferred stock, $0.0001 par value,
authorized 50,000,000 share, none issued and outstanding in
2023
—
—
Preferred stock, $1.00 par value,
24,400,000 issued and outstanding in 2022
—
24,400
Common stock, $0.0001 par value,
authorized 500,000,000 share, 47,856,114 and none issued and
outstanding in 2023 and 2022, respectively
8
—
Additional paid-in-capital
269,436
—
Accumulated deficit
(17,490)
—
Accumulated other comprehensive income
(923)
(2,576)
Members’ capital
—
327,614
Total stockholders' equity
251,031
349,438
Noncontrolling interest
11,835
10,446
Total equity
262,866
359,884
Total liabilities and equity
$
1,171,501
$
1,125,305
Condensed Consolidated
Statement of Cash Flows (unaudited)
Six Months Ended
(Amounts in thousands)
June 30, 2023
June 30, 2022
Cash flows from operating
activities:
Net income (loss)
$
(16,167)
$
6,355
Adjustments to reconcile net income (loss)
to net cash used in operating activities
Depreciation and amortization
16,736
23,640
Deferred taxes
(21,866)
(92)
Change in fair value of earnout
liability
(20,689)
—
Gain on sale of assets
(85)
(1,208)
Foreign currency remeasurement gain
(3,641)
191
Earnings from equity method
investments
(140)
(3,803)
TZC investment present value accretion
(1,213)
(1,166)
Loss (gain) on trading securities, net
24
(357)
Changes in assets and liabilities:
Accounts receivable
(53,589)
(50,631)
Contract assets
4,803
(6,625)
Prepaid expenses and other current
assets
(4,093)
(3,502)
ROU assets
343
2,347
Accounts payable and accrued expenses
21,700
(30,934)
Contract liabilities
65,774
(13,899)
Operating lease liabilities
(126)
(2,298)
Other
1,593
67
Net cash used in operating activities
(10,636)
(81,915)
Cash flows from investing
activities:
Purchase of fixed assets
(4,953)
(2,679)
Proceeds from sale of fixed assets
7,214
2,726
Loss on investment in limited liability
company
—
335
Proceeds from the sale of trading
securities
(21)
814
Capital contribution to investees
—
(1,000)
Net cash provided by investing
activities
2,240
196
Cash flows from financing
activities:
Borrowings on line of credit
3,000
55,000
Borrowings on notes payable
248
695
Payments on notes payable
(27,701)
(21,294)
Advances from (to) related parties
215
(404)
Payments from related parties
5
7
Payments on finance lease
(2,396)
(3,430)
Distributions
(110)
(1,556)
Proceeds from merger of Legato II and
Southland Holdings, LLC
17,088
—
Net cash provided by (used in) financing
activities
(9,651)
29,018
Effect of exchange rate on cash
164
945
Net decrease in cash and cash equivalents
and restricted cash
(17,883)
(51,756)
Beginning of period
71,991
111,242
End of period
$
54,108
$
59,486
Supplemental cash flow
information
Cash paid for income taxes
$
2,903
$
4,127
Cash paid for interest
$
7,541
$
4,106
Non-cash investing and financing
activities:
Lease assets obtained in exchange for new
leases
$
8,528
$
6,771
Assets obtained in exchange for notes
payable
$
6,667
$
580
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 15, 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 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230814666825/en/
Southland Contacts: Cody Gallarda EVP, Chief Financial
Officer cgallarda@southlandholdings.com
Alex Murray Corporate Development & Investor Relations
amurray@southlandholdings.com
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