Southland Announces Fourth Quarter & Full Year 2023 Results
Southland Holdings, Inc. (NYSE American: SLND) reported financial results for Q4 2023 with revenue of $316.2 million, a 7% increase from the previous year. However, the company experienced a net loss of $5.6 million attributed to stockholders. For the full year 2023, revenue remained flat at $1.2 billion, with a gross profit of $35.8 million but a net loss of $19.3 million.
Positive
Revenue for Q4 2023 increased by 7% compared to Q4 2022.
New awards of approximately $600 million were secured in the fourth quarter of 2023.
Backlog increased by 12% to $2.83 billion compared to the previous quarter.
Gross profit for the full year 2023 was $35.8 million, a decrease from $140.9 million in 2022.
Adjusted net loss per share for the year ended December 31, 2023, was $(0.82), compared to a net income of $60.5 million in 2022.
Negative
Net loss of $5.6 million for Q4 2023 compared to a net income of $19.5 million in Q4 2022.
Gross profit decreased to $21.1 million in Q4 2023 from $35.9 million in Q4 2022.
Net loss attributable to stockholders of $19.3 million for the full year 2023.
Adjusted net loss attributable to stockholders of $38.7 million for the full year 2023.
Southland Holdings' reported revenue increase in the fourth quarter suggests a positive growth trajectory in terms of sales. However, the significant drop in gross profit and the shift from a net income to a net loss year-over-year is alarming. The decline in EBITDA further underscores operational challenges or increased costs that have not been offset by revenue growth. This performance could be indicative of margin compression, possibly due to rising material costs or lower project efficiency. Investors may be concerned about the company's profitability and the sustainability of its growth, particularly in the context of a flat annual revenue.
The backlog increase is a positive sign, indicating a strong future revenue stream. However, the quality and profitability of the backlog are key, as new awards do not necessarily translate to future profits. The market will likely focus on the company's ability to convert its backlog into profitable revenue and on management's strategies to address the profit erosion seen in the current report.
In the specialized infrastructure construction sector, backlog is a critical metric as it provides visibility into future work and potential revenue. Southland's 12% backlog increase suggests a competitive market position and an ability to secure new contracts. However, the industry is known for its cyclicality and sensitivity to economic conditions. Thus, the ability to maintain margins in the face of economic headwinds, such as inflation or potential recessions, will be crucial for Southland's long-term success.
Additionally, the construction industry is facing a tight labor market and supply chain disruptions. These factors could be contributing to Southland's reduced profitability and should be closely monitored by stakeholders. The company's strategy to navigate these challenges will be of particular interest in future quarters, as will its ability to ramp up new projects efficiently.
The reported financials of Southland Holdings reflect broader economic trends, including potential inflationary pressures that may have impacted costs, leading to reduced gross profit and net losses. The transition from net income to net loss year-over-year despite revenue growth is a red flag that may suggest inefficiencies or external cost pressures not adequately managed.
From an economic standpoint, the company's performance may also reflect the state of the infrastructure sector, which is heavily influenced by government spending and policies. As such, regulatory changes and fiscal stimulus can have significant impacts on companies like Southland. The firm's ability to adapt to these macroeconomic conditions will be critical in ensuring long-term viability and profitability.
03/04/2024 - 04:45 PM
GRAPEVINE, Texas --(BUSINESS WIRE)--
Southland Holdings, Inc. (NYSE American: SLND and SLND WS) (“Southland”), a leading provider of specialized infrastructure construction services, today announced financial results for the quarter and full year ended December 31, 2023.
Fourth Quarter 2023 Results Include:
Revenue of $316.2 million for the quarter ended December 31, 2023, up 7% from $294.8 million for the quarter ended December 31, 2022.
Gross profit of $21.1 million for the quarter ended December 31, 2023, compared to $35.9 million for the quarter ended December 31, 2022.
Net loss attributable to stockholders of $5.6 million , or $(0.12) per share for the quarter ended December 31, 2023, compared to a net income attributable to stockholders of $19.5 million for the quarter ended December 31, 2022.
EBITDA of $9.1 million for the quarter ended December 31, 2023, compared to $32.0 million for the quarter ended December 31, 2022.
New awards of approximately $600 million in the quarter.
Backlog of $2.83 billion , up 12% compared to $2.54 billion as of September 30, 2023.
Full Year 2023 Results Include:
Revenue of $1.2 billion for the year ended December 31, 2023, approximately flat from $1.2 billion for the year ended December 31, 2022.
Gross profit of $35.8 million for the year ended December 31, 2023, compared to $140.9 million for the year ended December 31, 2022.
Net loss attributable to stockholders of $19.3 million , or $(0.41) per share for the year ended December 31, 2023, compared to a net income attributable to stockholders of $60.5 million for the year ended December 31, 2022.
Adjusted Net loss attributable to stockholders of $38.7 million , or $(0.82) per share for the year ended December 31, 2023, compared to a net income attributable to stockholders of $60.5 million for the year ended December 31, 2022. (1)
(1)
Please refer to “Non-GAAP Measures” and reconciliations for our non-GAAP financial measures, including, “Adjusted Net Loss,” and “Adjusted Net Loss Per Share”
Southland’s President and Chief Executive Officer, Frank Renda, said, “We fought many headwinds in 2023, yet continued to better position ourselves for the future. I'm proud of our teams for making solid operational headway in challenging circumstances as our legacy backlog continues to decline, and recently awarded new projects ramp up construction activities. We finished the year with approximately $600 million of new awards in the fourth quarter and we remain optimistic about the opportunities we are tracking in our core business fueled by local, state, and federal spending as we progress in 2024.”
2023 Fourth Quarter & Full Year Results
Condensed Consolidated Statements of Operations
Three Months Ended
(Amounts in thousands)
December 31, 2023
December 31, 2022
Revenue
$
316,189
$
294,804
Cost of construction
295,053
258,948
Gross profit
21,136
35,856
Selling, general, and administrative expenses
19,929
14,836
Operating income
1,207
21,020
Gain on investments, net
33
3
Other income, net
21
1,268
Interest expense
(5,681)
(2,574)
Earnings (losses) before income taxes
(4,420)
19,717
Income tax expense (benefit)
2,919
(455)
Net income (loss)
(7,339)
20,172
Net income (loss) attributable to noncontrolling interests
(1,776)
634
Net income (loss) attributable to Southland Stockholders
$
(5,563)
$
19,538
Net income per share attributable to common stockholders
Basic (1)
$
(0.12)
Diluted (1)
$
(0.12)
Weighted average shares outstanding
Basic (1)
47,877,558
Diluted (1)
47,877,558
(1)
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 December 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 December 31, 2023, was $316.2 million , an increase of $21.4 million , or 7.3% , compared to the three months ended December 31, 2022. Materials & Paving business contributed $45.7 million to revenue in the three months ended December 31, 2023.
Gross profit for the three months ended December 31, 2023, was $21.1 million , a decrease of $14.7 million , or 41.1% , compared to gross profit of $35.9 million for the three months ended December 31, 2022. Gross profit margin decreased from 12.2% to 6.7% for the three months ended December 31, 2023, compared to the three months ended December 31, 2022. Materials & Paving business negatively impacted gross profit by $15.9 million in the three months ended December 31, 2023.
Selling, general, and administrative costs for the three months ended December 31, 2023, were $19.9 million , an increase of $5.1 million , or 34.3% , compared to the three months ended December 31, 2022. Selling, general, and administrative costs as a percent of revenue were 6.3% for the three months ended December 31, 2023, compared to 5.0% for the three months ended December 31, 2022.
Condensed Consolidated Statements of Operations
Year Ended
(Amounts in thousands)
December 31, 2023
December 31, 2022
Revenue
$
1,160,417
$
1,161,431
Cost of construction
1,124,603
1,020,497
Gross profit
35,814
140,934
Selling, general, and administrative expenses
67,195
58,231
Operating income (loss)
(31,381)
82,703
Gain (loss) on investments, net
30
(76)
Other income, net
23,580
2,204
Interest expense
(19,471)
(8,891)
Earnings (losses) before income taxes
(27,242)
75,940
Income tax expense (benefit)
(8,527)
13,290
Net income (loss)
(18,715)
62,650
Net income attributable to noncontrolling interests
538
2,108
Net income (loss) attributable to Southland Stockholders
$
(19,253)
$
60,542
Net income (loss) per share attributable to common stockholders
Basic (1)
$
(0.41)
Diluted (1)
$
(0.41)
Weighted average shares outstanding
Basic (1)
47,088,813
Diluted (1)
47,088,813
(1)
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 twelve months ended December 31, 2023, because the inclusion of potential shares of common stock would have been anti-dilutive for the period presented.
Revenue for the year ended December 31, 2023, was $1,160.4 million , a decrease of $1.0 million , or 0.1% , compared to the year ended December 31, 2022. Materials & Paving business contributed $188.3 million to revenue in the year ended December 31, 2023.
Gross profit for the year ended December 31, 2023, was $35.8 million , a decrease of $105.1 million , or 74.6% , compared to gross profit of $140.9 million for the year ended December 31, 2022. Gross profit margin decreased from 12.1% to 3.1% for the year ended December 31, 2023, compared to the year ended December 31, 2022. Materials & Paving business negatively impacted gross profit by $86.6 million in the year ended December 31, 2023.
Selling, general, and administrative costs for the year ended December 31, 2023, were $67.2 million , an increase of $9.0 million , or 15.4% , compared to the year ended December 31, 2022. Selling, general, and administrative costs as a percent of revenue were 5.8% for the year ended December 31, 2023, compared to 5.0% for the year ended December 31, 2022.
Segment Revenue
Three Months Ended
(Amounts in thousands)
December 31, 2023
December 31, 2022
% of Total
% of Total
Segment
Revenue
Revenue
Revenue
Revenue
Civil
$
108,260
34.2%
$
84,021
28.5%
Transportation
207,929
65.8%
210,783
71.5%
Total revenue
$
316,189
100.0%
$
294,804
100.0%
Year Ended
(Amounts in thousands)
December 31, 2023
December 31, 2022
% of Total
% of Total
Segment
Revenue
Revenue
Revenue
Revenue
Civil
$
337,524
29.1%
$
305,324
26.3%
Transportation
822,893
70.9%
856,107
73.7%
Total revenue
$
1,160,417
100.0%
$
1,161,431
100.0%
Segment Gross Profit
Three Months Ended
(Amounts in thousands)
December 31, 2023
December 31, 2022
% of Segment
% of Segment
Segment
Gross Profit
Revenue
Gross Profit
Revenue
Civil
$
24,549
22.7%
$
17,149
20.4%
Transportation
(3,413)
(1.6)%
18,707
8.9%
Gross profit
$
21,136
6.7%
$
35,856
12.2%
Year Ended
(Amounts in thousands)
December 31, 2023
December 31, 2022
% of Segment
% of Segment
Segment
Gross Profit
Revenue
Gross Profit
Revenue
Civil
$
51,686
15.3%
$
45,464
14.9%
Transportation
(15,872)
(1.9)%
95,470
11.2%
Gross profit
$
35,814
3.1%
$
140,934
12.1%
Adjusted EBITDA Reconciliation
Three Months Ended
Year ended
(Amounts in thousands)
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Net income (loss) attributable to Southland Stockholders
$
(5,563)
$
19,538
$
(19,253)
$
60,542
Depreciation and amortization
5,825
10,534
30,529
45,697
Income taxes (benefit)
2,919
(455)
(8,527)
13,290
Interest expense
5,681
2,574
19,471
8,891
Interest income
215
(143)
(1,143)
(172)
EBITDA
9,077
32,048
21,077
128,248
Transaction related costs
—
—
1,594
—
Contingent earnout consideration non-cash expense reversal
—
—
(20,689)
—
Adjusted EBITDA
$
9,077
$
32,048
$
1,982
$
128,248
Backlog
(Amounts in thousands)
Backlog
Balance: December 31, 2022
$
2,973,885
New contracts, change orders, and adjustments
1,011,797
Gross backlog
3,985,682
Less: contract revenue recognized in 2023
(1,150,716)
Balance December 31, 2023
$
2,834,966
Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share Attributable to Common Stock Reconciliation
Three Months Ended
Year Ended
(Amounts in thousands except shares and per share data)
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Reconciliation of adjusted net income (loss) attributable to common stock:
Net income (loss) attributable to common stock (GAAP as reported)
$
(5,563)
$
35,199
$
(19,253)
$
60,542
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
$
(5,563)
$
35,199
$
(38,659)
$
60,542
Weighted average shares outstanding for diluted and adjusted diluted earnings per share (2)
47,877,558
47,088,813
Diluted earnings (loss) per share attributable to common stock (2)
$
(0.12)
$
(0.41)
Adjusted diluted earnings (loss) per share attributable to common stock (2)
$
(0.12)
$
(0.82)
(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)
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 December 31, 2023, because the inclusion of potential shares of common stock would have been anti-dilutive for the period presented
Condensed Consolidated Balance Sheets
(Amounts in thousands, except shares and per share data)
As of
ASSETS
December 31, 2023
December 31, 2022
Current assets
Cash and cash equivalents
$
49,176
$
57,915
Restricted cash
14,644
14,076
Accounts receivable, net
194,869
135,678
Retainage receivables
109,562
122,682
Contract assets
554,202
512,906
Other current assets
20,083
24,047
Total current assets
942,536
867,304
Property and equipment, net
102,150
114,084
Right-of-use assets
12,492
16,893
Investments - unconsolidated entities
121,648
113,724
Investments - limited liability companies
2,590
2,590
Investments - private equity
3,235
3,261
Deferred tax asset
11,496
—
Goodwill
1,528
1,528
Intangible assets, net
1,682
2,218
Other noncurrent assets
1,711
3,703
Total noncurrent assets
258,532
258,001
Total assets
1,201,068
1,125,305
LIABILITIES AND EQUITY
Current liabilities
Accounts payable
$
162,464
$
126,385
Retainage payable
40,950
33,677
Accrued liabilities
124,667
121,584
Current portion of long-term debt
48,454
46,322
Short-term lease liabilities
14,081
16,572
Contract liabilities
193,351
131,557
Total current liabilities
583,967
476,097
Long-term debt
251,906
227,278
Long-term lease liabilities
5,246
10,032
Deferred tax liabilities
2,548
3,392
Long-term accrued liabilities
49,109
47,219
Other noncurrent liabilities
47,728
1,403
Total long-term liabilities
356,537
289,324
Total liabilities
940,504
765,421
Commitments and contingencies (see Note 17)
Stockholders' equity
Preferred stock, $0.00 01 par value, authorized 50,000,000 shares, none issued and outstanding in 2023
—
—
Preferred stock, $1.00 par value, authorized 24,400,000 shares issued and outstanding in 2022
—
24,400
Common stock, $0.00 01 par value, authorized 500,000,000 shares, 47,891,984 and none issued and outstanding in 2023 and 2022, respectively
5
—
Additional paid-in-capital
270,330
—
Accumulated deficit
(19,253)
—
Accumulated other comprehensive loss
(1,460)
(2,576)
Members’ capital
—
327,614
Total stockholders' equity
249,622
349,438
Noncontrolling interest
10,942
10,446
Total equity
260,564
359,884
Total liabilities and equity
$
1,201,068
$
1,125,305
Condensed Consolidated Statement of Cash Flows
Year Ended
(Amounts in thousands)
December 31, 2023
December 31, 2022
Cash flows from operating activities:
Net income (loss)
$
(18,715)
$
62,650
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization
30,529
45,697
Loss on extinguishment of debt
631
—
Deferred taxes
(12,341)
(2,103)
Change in fair value of earnout liability
(20,689)
—
Share-based compensation
891
—
Gain on sale of assets
(1,328)
(3,377)
Foreign currency remeasurement loss (gain)
(109)
548
Earnings from equity method investments
(7,740)
(9,299)
TZC investment present value accretion
(2,449)
(2,355)
Gain on trading securities, net
(26)
(260)
Changes in assets and liabilities:
Accounts receivable
(48,971)
(18,432)
Contract assets
(42,921)
(138,677)
Other current assets
4,136
(1,293)
Right-of-use assets
4,402
(1,315)
Accounts payable and accrued liabilities
46,608
(13,546)
Contract liabilities
61,775
20,049
Operating lease liabilities
(4,314)
1,264
Other
367
(5,753)
Net cash used in operating activities
(10,264)
(66,202)
Cash flows from investing activities:
Purchase of property and equipment
(10,846)
(4,765)
Proceeds from sale of property and equipment
8,813
10,064
Loss on investment in limited liability company
—
336
Proceeds from the sale of trading securities
61
927
Distributions received from equity method investees
7,000
—
Capital contribution to investees
(540)
(1,000)
Net cash provided by (used in) investing activities
4,488
5,562
Cash flows from financing activities:
Borrowings on revolving credit facility
8,000
75,000
Payments on revolving credit facility
(13,000)
—
Borrowings on notes payable
115,265
281
Payments on notes payable
(123,720)
(42,934)
Payments of deferred financing costs
(565)
—
Pre-payment premium
(471)
—
Advances to related parties
(242)
(1,603)
Payments from related parties
—
5
Payments on finance lease
(4,835)
(8,157)
Distribution to members
(110)
(2,457)
Proceeds from merger of Legato II and Southland LLC
17,088
—
Net cash provided by financing activities
(2,590)
20,135
Effect of exchange rate on cash
195
1,254
Net decrease in cash and cash equivalents and restricted cash
(8,171)
(39,251)
Beginning of period
71,991
111,242
End of period
$
63,820
$
71,991
Supplemental cash flow information
Cash paid for income taxes
$
7,587
$
10,392
Cash paid for interest
$
18,277
$
9,044
Non-cash investing and financing activities:
Lease assets obtained in exchange for new leases
$
13,875
$
19,558
Assets obtained in exchange for notes payable
$
10,884
$
4,091
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, March 5, 2024. 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240304918788/en/
Cody Gallarda
EVP, Chief Financial Officer
cgallarda@southlandholdings.com
Alex Murray
Corporate Development & Investor Relations
amurray@southlandholdings.com
Source: Southland Holdings, Inc.
What was Southland Holdings' revenue for Q4 2023?
Southland Holdings reported revenue of $316.2 million for Q4 2023.
What was the net loss for Southland Holdings in Q4 2023?
Southland Holdings experienced a net loss of $5.6 million for Q4 2023.
How much was the backlog for Southland Holdings as of December 31, 2023?
Southland Holdings' backlog was $2.83 billion as of December 31, 2023.
What was the adjusted net loss per share for Southland Holdings in 2023?
The adjusted net loss per share for Southland Holdings in 2023 was $(0.82).