Southland Holdings (NYSE: SLND) Q1 2026 revenue falls, losses deepen and equity turns more negative
Rhea-AI Filing Summary
Southland Holdings posted a much weaker quarter, swinging to a loss. For the three months ended March 31, 2026, revenue fell to $172.4 million from $239.5 million, as several Transportation projects neared completion. The company recorded a gross loss of $4.8 million versus a prior-year gross profit of $21.5 million, mainly due to unfavorable dispute resolutions and higher-than-expected project costs.
Net loss widened sharply to $28.2 million, or $0.52 per share, compared with a net loss of $2.8 million, or $0.08 per share, a year earlier. Cash and restricted cash declined to $32.0 million, driven by $133.9 million of cash used in operations and working capital swings. Total debt was $235.3 million, and surety-related advances and the $89.1 million Washington State Convention Center judgment contributed to a surety payable balance of $228.3 million, while total equity remained in a deficit of $160.6 million. The company reported Remaining Unsatisfied Performance Obligations of $1.9 billion, with 38% expected to convert to revenue over the next year.
Positive
- None.
Negative
- Sharp deterioration in profitability and margins, with revenue down 28% year over year, a swing from $21.5 million gross profit to a $4.8 million gross loss, and net loss widening to $28.2 million.
- Strained balance sheet and leverage profile, including a total equity deficit of $160.6 million, debt of $235.3 million, and surety payable of $228.3 million linked to advances and the $89.1 million WSCC judgment.
- Heavy operating cash outflows and reliance on waivers, with $133.9 million of cash used in operating activities and key surety and credit parties waiving principal and interest payments and covenant breaches only through negotiated forbearance periods.
Insights
Results show sharp margin deterioration, heavy cash burn, and rising balance-sheet stress despite a strong backlog.
Southland Holdings reported Q1 2026 revenue of $172.4 million, down 28% year over year, with a gross loss of $4.8 million. Transportation, including the Materials & Paving line, drove a segment gross loss of $19.4 million, highlighting execution and dispute-resolution pressure on key projects.
Net loss expanded to $28.2 million, and operating cash outflow of $133.9 million was driven largely by a $104.1 million reduction in payables and accrued liabilities and lower contract liabilities. Total debt stood at $235.3 million and surety payable rose to $228.3 million, reflecting $139.2 million of surety advances and the $89.1 million WSCC judgment now financed by sureties.
The company’s equity deficit deepened to $160.6 million, and it carries substantial valuation allowances of about $123.8 million for U.S. deferred tax assets. That said, Remaining Unsatisfied Performance Obligations of $1.9 billion—38% expected within 12 months—provide revenue visibility if projects perform as estimated. Actual impact on financial recovery will depend on project execution, dispute outcomes, and adherence to liquidity and covenant waivers tied to surety and credit arrangements.
Key Figures
Key Terms
Remaining Unsatisfied Performance Obligations financial
surety payable financial
valuation allowance financial
failed sale-leaseback financial
General Indemnity Agreements financial
going concern financial
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
EXCHANGE ACT OF 1934
For the quarterly period ended:
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of | (IRS Employer |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class | | Trading Symbol | | Name of Each Exchange on Which Registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |
☒ | Smaller reporting company | |||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of May 1, 2026, there were
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SOUTHLAND HOLDINGS, INC.
TABLE OF CONTENTS
Page | |
PART I – Financial Information | |
ITEM 1. Financial Statements | 1 |
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 |
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk | 32 |
ITEM 4. Controls and Procedures | 32 |
PART II – Other Information | 33 |
ITEM 1. Legal Proceedings | 33 |
ITEM 1A. Risk Factors | 33 |
ITEM 5. Other Information | 33 |
ITEM 6. Exhibits | 34 |
Signatures | 35 |
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Unless otherwise stated in this Quarterly Report on Form 10-Q (this “Quarterly Report”), references to the “Company,” “our,” “us,” “we,” or “Southland” refer to Southland Holdings, Inc. and its subsidiaries.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”), as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based on the reasonable beliefs and assumptions of our management. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates,” “intends” or similar expressions. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about our ability to:
● | Access, collect and use personal data about consumers; |
● | Execute our business strategy, including monetization of services provided and expansions in and into existing and new lines of business; |
● | Anticipate the uncertainties inherent in the development of new business lines and business strategies; |
● | Retain and hire necessary employees; |
● | Increase brand awareness; |
● | Attract, train and retain effective officers, key employees or directors; |
● | Upgrade and maintain information technology systems; |
● | Potential disruptions, failures or security breaches of the information technology systems on which we rely to conduct our business; |
● | Acquire, develop and protect intellectual property; |
● | Meet future liquidity requirements, maintain adequate working capital, and comply with restrictive covenants related to long-term indebtedness; |
● | Maintain adequate bonding capacity; |
● | Effectively respond to general economic, socioeconomic and other business conditions; |
● | Maintain the listing of our securities on the NYSE American LLC or another national securities exchange; |
● | Obtain additional capital, including use of debt and capital markets; |
● | Achieve or enhance future operating and financial results; |
● | Anticipate rapid technological changes; |
● | Comply with laws and regulations applicable to its business, including but not limited to laws and regulations related to data privacy and insurance operations; |
● | Stay abreast of modified or new laws and regulations applying to our business; |
● | Anticipate the impact of, and respond to, new accounting standards; |
● | Anticipate any change in interest rates which would change our cost of capital; |
● | Anticipate the significance and timing of contractual obligations; |
● | Maintain key strategic relationships with customers, partners and distributors; |
● | Respond to uncertainties associated with product and service development and market acceptance; |
● | Anticipate the ability of the renewable sector or any other current or potential sectors to develop to the size or at the rate it expects; |
● | Anticipate the impact of various federal, state, and local government funding initiatives; |
● | Manage to finance operations on an economically viable basis; |
● | Anticipate the impact of new U.S. federal income tax law, including the impact on deferred tax assets; |
● | Successfully defend, pursue or collect claims and litigation; and |
● | Anticipate and respond to changes in the domestic or international trade laws, including tariffs. |
Forward-looking statements are not guarantees of performance and speak only as of the date hereof. While we believe that these forward-looking statements are reasonable, there can be no assurance that we will achieve or realize these plans, intentions, or expectations. You should understand that the following important factors, in addition to those discussed under the heading “Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Annual Report”), “Item 1A. Risk Factors” to Part II in this Quarterly Report and other reports or documents we file with the
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Securities and Exchange Commission (“SEC”), could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements in this Quarterly Report:
● | Litigation, complaints, product liability claims and/or adverse publicity; |
● | The impact of changes in consumer spending patterns, consumer preferences, local, regional and national economic conditions, crime, weather, demographic trends and employee availability; |
● | Increases and decreases in utility and other energy costs, increased costs related to utility or governmental requirements; and |
● | Privacy and data protection laws, privacy or data breaches or the loss of data. |
These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this Quarterly Report are more fully described under the heading “Item 1A. Risk Factors” in the Annual Report and elsewhere in this Quarterly Report. The risks described under the heading “Item 1A. Risk Factors” in the Annual Report are not exhaustive. Other sections of this Quarterly Report may describe additional factors that could adversely affect our business, financial condition or results of operations. New risk factors emerge from time to time and it is not possible to predict all such risk factors, nor can we assess the impact of all such risk factors on the business, nor the extent to which any factor or combination of facts may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
In addition, statements of belief and similar statements reflect our reasonable beliefs and opinions on the relevant subject. These statements are based upon information available to us, as applicable, as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and such statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, involve risks and are subject to change based on various factors, including those discussed under the headings “Item 1A. Risk Factors” and “Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report.
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
SOUTHLAND HOLDINGS, INC.
Condensed Consolidated Balance Sheets (unaudited)
(Amounts in thousands, except share and per share data) | As of | ||||
ASSETS | March 31, 2026 | | December 31, 2025 | ||
Current assets | |||||
Cash and cash equivalents | $ | | $ | | |
Restricted cash |
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Accounts receivable, net |
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Retainage receivables |
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Contract assets |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use assets |
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Investments - unconsolidated entities |
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Investments - limited liability companies |
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Investments - private equity |
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Deferred tax asset | | | |||
Goodwill |
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Intangible assets, net |
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Other noncurrent assets |
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Total noncurrent assets |
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Total assets | $ | | $ | | |
LIABILITIES AND EQUITY | |||||
Current liabilities | |||||
Accounts payable | $ | | $ | | |
Retainage payable |
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Accrued liabilities |
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Current portion of long-term debt |
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Short-term operating lease liabilities |
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Contract liabilities |
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Total current liabilities |
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Long-term debt |
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Long-term operating lease liabilities |
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Deferred tax liabilities |
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Financing obligations, net | | | |||
Long-term accrued liabilities | | | |||
Surety payable | | | |||
Other noncurrent liabilities |
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Total long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 6) |
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Stockholders' equity (deficit) | |||||
Preferred stock, $ |
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Common stock, $ |
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Additional paid-in-capital |
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Accumulated deficit | ( | ( | |||
Accumulated other comprehensive loss |
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Total stockholders' equity (deficit) | ( | ( | |||
Noncontrolling interest |
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Total equity (deficit) |
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Total liabilities and equity | $ | | $ | | |
See notes to unaudited condensed consolidated financial statements
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SOUTHLAND HOLDINGS, INC.
Condensed Consolidated Statements of Operations (unaudited)
Three Months Ended | | |||||
(Amounts in thousands except shares and per share data) | March 31, 2026 | | March 31, 2025 | | ||
Revenue | $ | | $ | | ||
Cost of construction |
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Gross profit (loss) |
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Selling, general, and administrative expenses |
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Operating income (loss) |
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Gain on investments, net |
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Other income, net |
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Interest expense |
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Losses before income taxes |
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Income tax expense (benefit) |
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Net loss |
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Net income attributable to noncontrolling interests |
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Net loss attributable to Southland Stockholders | $ | ( | $ | ( | ||
Net loss per share attributable to common stockholders | ||||||
Basic | $ | ( | $ | ( | ||
Diluted | $ | ( | $ | ( | ||
Weighted average shares outstanding | ||||||
Basic | | | ||||
Diluted | | | ||||
See notes to unaudited condensed consolidated financial statements
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SOUTHLAND HOLDINGS, INC.
Condensed Consolidated Statements of Comprehensive Loss (unaudited)
Three Months Ended | | |||||
(Amounts in thousands) | March 31, 2026 | | March 31, 2025 | | ||
Net loss | $ | ( | $ | ( | ||
Foreign currency translation adjustment, net of tax |
| ( |
| ( | ||
Comprehensive loss, net of tax | ( | ( | ||||
Comprehensive income attributable to noncontrolling interest | | | ||||
Comprehensive loss attributable to Southland Stockholders | $ | ( | $ | ( | ||
See notes to unaudited condensed consolidated financial statements
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SOUTHLAND HOLDINGS, INC.
Condensed Consolidated Statements of Equity (unaudited)
Three Months Ended March 31, 2026 | |||||||||||||||||||||||||
Shares | |||||||||||||||||||||||||
Preferred | Common | Preferred | | Common | | | Additional | | Accumulated | | Noncontrolling | | Total | ||||||||||||
(Amounts in thousands) | stock | stock | Stock | Stock | AOCI | Paid-In Capital | Deficit | Interest | Equity | ||||||||||||||||
Balance as of December 31, 2025 | — | | $ | — | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | |||||||||
Issuance of shares - RSUs, net of tax | — | | — | — | — | ( | — | — | ( | ||||||||||||||||
Share based compensation | — | — | — | — | — | | — | — | | ||||||||||||||||
Distributions to members | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||
Net income (loss) | — | — |
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Other comprehensive loss | — | — |
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Balance as of March 31, 2026 | — | | $ | — | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | |||||||||
See notes to unaudited condensed consolidated financial statements
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SOUTHLAND HOLDINGS, INC.
Condensed Consolidated Statements of Equity (unaudited)
Three Months Ended March 31, 2025 | |||||||||||||||||||||||||
Shares | |||||||||||||||||||||||||
Preferred | Common | Preferred | | Common | | | Additional | | Accumulated | | Noncontrolling | | Total | ||||||||||||
(Amounts in thousands) | stock | stock | Stock | Stock | AOCI | Paid-In Capital | Deficit | Interest | Equity | ||||||||||||||||
Balance as of December 31, 2024 | — | | $ | — | $ | | $ | ( | $ | | $ | ( | $ | | | ||||||||||
Issuance of shares - RSUs, net of tax | — | | — | — | — | ( | — | — |
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Issuance of common stock | — | | — | — | — | — | — | — | — | ||||||||||||||||
Share based compensation | — | — | — | — | — | | — | — | | ||||||||||||||||
Net income (loss) | — | — |
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Other comprehensive income (loss) | — | — |
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Balance as of March 31, 2025 | — | | $ | — | $ | | $ | ( | $ | | $ | ( | $ | | $ | | |||||||||
See notes to unaudited condensed consolidated financial statements
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SOUTHLAND HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows (unaudited)
Three Months Ended | |||||
(Amounts in thousands) | March 31, 2026 | | March 31, 2025 | ||
Cash flows from operating activities: | |
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Net loss | $ | ( | $ | ( | |
Adjustments to reconcile net loss to net cash used in operating activities |
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Depreciation and amortization |
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Amortization of deferred financing costs | | — | |||
Deferred taxes |
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Share based compensation | | | |||
Gain on sale of assets |
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Foreign currency remeasurement (gain) loss |
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Earnings from equity method investments | ( | ( | |||
Gain on trading securities, net |
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Changes in assets and liabilities: | |||||
Accounts and retainage receivables |
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Contract assets |
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Other current assets |
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Right-of-use assets |
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Accounts payable, retainage payable and accrued liabilities |
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Contract liabilities |
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Operating lease liabilities |
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Other |
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Net cash provided by (used in) operating activities |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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Proceeds from sale of property and equipment |
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Distributions from other investments |
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Return of investment in limited liability company | | — | |||
Net cash provided by investing activities |
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Cash flows from financing activities: |
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Borrowings on notes payable |
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Payments on notes payable |
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Payments of deferred financing costs |
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Payments from related parties |
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Payments on finance lease and financing obligations |
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Distribution to members |
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Payment of taxes related to net share settlement of RSUs |
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Proceeds from advancement of surety funds | | — | |||
Net cash provided by (used in) financing activities |
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Effect of exchange rate on cash |
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Net decrease in cash and cash equivalents and restricted cash |
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Beginning of period |
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End of period | $ | | $ | | |
Supplemental cash flow information |
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Cash paid for income taxes | $ | | $ | | |
Cash paid for interest | $ | | $ | | |
Non-cash investing and financing activities: |
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Lease assets obtained in exchange for new leases | $ | | $ | — | |
Assets obtained in exchange for notes payable | $ | — | $ | | |
See notes to unaudited condensed consolidated financial statements
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SOUTHLAND HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Description of Business
Southland Holdings, Inc. and its consolidated subsidiaries (“Southland”, the “Company”, “we”, “us”, or “our”) is a diverse leader in specialty infrastructure construction with roots dating back to 1900. We design and construct projects in the bridges, tunnels, communications, data centers, transportation and facilities, marine, steel structures, water and wastewater treatment, and water pipelines end markets.
Southland is based in Grapevine, Texas. It is the parent company of Johnson Bros. Corporation, American Bridge Holding Company (“American Bridge”), Oscar Renda Contracting, Southland Contracting, Mole Constructors, Heritage Materials and other affiliates. With the combined capabilities of these
As previously announced, on May 25, 2022, Legato Merger Corp. II, a Delaware corporation (“Legato II”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Legato Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Legato II (“Merger Sub”), and Southland Holdings LLC, a Texas limited liability company (“Southland LLC”).
On February 14, 2023 (the “Closing Date”), as contemplated by the Merger Agreement, Merger Sub merged with and into Southland LLC, with Southland LLC surviving the merger as a wholly owned subsidiary of Legato II (the “Merger”). The transactions contemplated by the Merger Agreement are referred to herein collectively as the “Business Combination.” In connection with the Business Combination, Legato II changed its name to “Southland Holdings, Inc.” The Merger was accounted for as a reverse recapitalization with Southland LLC as the accounting acquirer and Legato II as the acquired company for accounting purposes.
On the Closing Date, the Company issued
Prior to the Merger, Southland LLC declared a $
Immediately after giving effect to the Business Combination, there were
Note 2. Basis of Presentation
Consolidated U.S. GAAP Presentation
These interim unaudited condensed consolidated financial statements have been prepared in conformity with United States Generally Accepted Accounting Principles (“GAAP”). The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) contains guidance that form GAAP. New guidance is released via Accounting Standards Update (“ASU”).
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The unaudited condensed consolidated financial statements have been prepared by us pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report which was filed on Form 10-K on March 26, 2026.
The accompanying consolidated balance sheet and related disclosures as of December 31, 2025, have been derived from the Form 10-K filed on March 26, 2026. The Company’s financial condition as of March 31, 2026, and operating results for the three months ended March 31, 2026, are not necessarily indicative of the financial conditions and results of operations that may be expected for any future interim period or for the year ending December 31, 2026.
In accordance with ASC 205-40, Presentation of Financial Statements—Going Concern, management has evaluated whether conditions or events, considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months after the date these financial statements are issued.
As of March 31, 2026, the Company had cash and cash equivalents of $
During the fourth quarter of the year ended December 31, 2025, the Company experienced certain liquidity-related challenges resulting primarily from an adverse court ruling related to the WSCC Project (defined below) that resulted in the Company being assessed a judgment of approximately $
Following the adverse ruling, certain sureties of the Company purchased and assumed rights and obligations as lenders under the Company’s Credit Agreement (defined in Note 5). In connection with the sureties’ assumption of rights and obligations under the Credit Agreement, the Company entered into side letters with the sureties, pursuant to which the sureties waived all events of default and breaches of covenants and all principal and interest payments under the Credit Agreement until maturity.
Additionally, under existing GIAs (defined below), certain sureties advanced funds to support bonded project obligations and ongoing project performance. As of March 31, 2026 and December 31, 2025, $
On March 27, 2026, the Company entered into a settlement agreement on the WSCC Project. Certain sureties of the Company previously paid a portion of the judgement against the Company and are required to pay an additional amount under the settlement agreement. The Company and the sureties are negotiating repayment terms for the amounts paid by the sureties on behalf of the Company under a long-term financing agreement. The sureties have agreed to forbear on seeking repayment for these amounts until at least May 13, 2027. The $
The unaudited condensed consolidated financial statements include the accounts of Southland Holdings, Inc., and our majority-owned and controlled subsidiaries and affiliates, as detailed below. All significant intercompany transactions are eliminated within the consolidations process. Investments in non-construction-related partnerships and less-than-majority owned subsidiaries that we do not control, but where we have significant influence, are accounted for under the equity method. Certain construction related joint ventures and partnerships that we do not control, nor do we have significant influence, are accounted for under the equity method for the balance sheet and under the proportionate consolidation method for the statement of operations.
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Reclassifications
Certain reclassifications have been made to the Company’s prior period consolidated financial information to conform to the current year presentation. These presentation changes did not impact the Company’s consolidated net loss, consolidated cash flows, total assets, total liabilities or total equity (deficit).
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management periodically evaluates estimates used in the preparation of the unaudited condensed consolidated financial statements for continued reasonableness. It is reasonably possible that changes may occur in the near term that would affect our estimates with respect to revenue recognition, the allowance for credit losses, recoverability of unapproved contract modifications, deferred tax assets, and other accounts for which estimates are required.
Cash, Cash Equivalents, and Restricted Cash
We consider all highly liquid instruments purchased with a maturity of three months or less as cash equivalents. We maintain our cash in accounts at certain financial institutions. The majority of our balances exceed federally insured limits.
We have not experienced any losses in these accounts, and we do not believe they are exposed to any significant credit risk.
Restricted cash and cash equivalents consist of amounts held in accounts in our name at certain financial institutions. These accounts are subject to certain control provisions in favor of various surety and insurance companies for purposes of compliance and security perfections.
(Amounts in thousands) | March 31, 2026 | | December 31, 2025 | ||
Cash and cash equivalents at beginning of period | $ | | $ | | |
Restricted cash at beginning of period |
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Total cash, cash equivalents, and restricted cash at beginning of period | $ | | $ | | |
Cash and cash equivalents at end of period | $ | | $ | | |
Restricted cash at end of period |
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Total cash, cash equivalents, and restricted cash at end of period | $ | | $ | | |
Goodwill and Indefinite-Lived Intangibles
Goodwill and indefinite-lived intangibles are tested for impairment annually in the fourth quarter, or more frequently if events or circumstances indicate that goodwill or indefinite-lived intangibles may be impaired. We evaluate goodwill at the reporting unit level (operating segment or one level below an operating segment). We identify our reporting unit and determine the carrying value of the reporting unit by assigning the assets and liabilities, including the existing goodwill and indefinite-lived intangibles, to the reporting unit. Our reporting units are based on our organizational and reporting structure. We currently identify
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Valuation of Long-Lived Assets
We review long-lived assets, including finite-lived intangible assets subject to amortization, for impairment upon the occurrence of events or changes in circumstances that would indicate that the carrying value of the asset or group of assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or group of assets to the future net cash flows expected to be generated by the asset or group of assets. If such assets are not considered to be fully recoverable, any impairment to be recognized is measured by the amount by which the carrying amount of the asset or group of assets exceeds its respective fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the three months ended March 31, 2026 and 2025, we did not identify any triggering events that would require a quantitative assessment.
Accounts Receivable, Net
We provide an allowance for credit losses, which is based upon a review of outstanding receivables, historical collection information, existing economic conditions, and future expectations. Normal contract receivables are typically due 30 days after the issuance of the invoice. Retainages are due 30 days after completion of the project and acceptance by the contract owner. Warranty retainage receivables, where applicable, are typically due two years after completion of the project and acceptance by the contract owner. Receivables past due more than 120 days are considered delinquent. Delinquent receivables are written off based on individual credit evaluations and specific circumstances of the customer.
On January 1, 2025, we had accounts receivable, net and retainage receivables of $
As of March 31, 2026 and December 31, 2025, we had an allowance for credit losses of $
Real Estate Transaction
In July 2024, the Company closed a real estate purchase agreement to sell and leaseback
As of March 31, 2026, relating to the transaction noted above, the current outstanding liability is included in accrued liabilities and the long-term outstanding liability presented as financing obligations, net on the unaudited condensed consolidated balance sheets.
Recently Adopted Accounting Pronouncements
In August 2023, the FASB issued ASU 2023-05, “Business Combinations-Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement” (“ASU 2023-05”), which requires that a joint venture apply a new basis of accounting upon formation. As a result, a newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value. ASU 2023-05 is effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. ASU 2023-05 was adopted in the first quarter of 2025. Our adoption of ASU 2023-05 did not have a material impact on our consolidated financial statements.
In November 2023, FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which requires expanded disclosure of significant segment expenses and other segment items on an annual and interim basis. ASU 2023-07 will be applied retrospectively and is first effective for our annual reporting for 2024 and for quarterly reporting beginning in 2025. The adoption of ASU 2023-07 did not have a material impact on our consolidated financial statements and related disclosures.
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On December 14, 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which established new income tax disclosure requirements. Public business entities must apply the guidance to annual periods beginning after December 15, 2024. This standard was adopted as of the year ended December 31, 2025, on a prospective basis.
In July 2025, the FASB issued ASU 2025-05, “Financial Instruments – Credit Losses (Topic 326): Measurements of Credit Losses for Accounts Receivable and Contract Assets” (“ASU 2025-05”). The amendments in this update provide a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under FASB Accounting Standards Codification 606. Under ASU 2025-05, an entity is required to disclose whether it has elected to use the practical expedient. An entity that makes the accounting policy election is required to disclose the date through which subsequent cash collections are evaluated. ASU 2025-05 is effective for the Company beginning in the fiscal year ending December 31, 2026. This standard was adopted on a prospective basis effective January 1, 2026, but we did not elect practical expedient permitted under this ASU. Therefore, the adoption has no impact on our consolidated financial statements.
Recently Issued Accounting Pronouncements
In October 2023, the FASB issued ASU 2023-06 “Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative,” which amends GAAP to include 14 disclosure requirements that are currently required under SEC Regulation S-X or Regulation S-K. Each amendment will be effective on the date on which the SEC removes the related disclosure requirement from SEC Regulation S-X or Registration S-K. The Company has evaluated the new standard and determined that it will have no material impact on its consolidated financial statements or disclosures since the Company is already subject to the relevant SEC disclosure requirements.
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires public entities to disclose, in the notes to financial statements, certain costs and expenses, such as purchases of inventory, employee compensation, and costs related to depreciation and amortization. ASU 2024-03 is effective for our Annual Report on Form 10-K for the fiscal year ended December 31, 2027, and subsequent interim periods, with early adoption permitted. We do not expect ASU 2024-03 to have an impact on our financial position, results of operations and cash flows; however, we are currently evaluating the impact on our consolidated financial statement disclosures.
Significant Accounting Policies
The significant accounting policies followed by the Company are set forth in Note 2 to the 10-K filed on March 26, 2026, and contained elsewhere herein, other than the policy for warrants, which is included below. For the three months ended March 31, 2026, there were no significant changes in our use of estimates or significant accounting policies.
Warrants
Immediately after giving effect to the Business Combination, there were
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Note 3. Fair Value of Investments
Fair value of investments measured on a recurring basis as of March 31, 2026, and December 31, 2025, were as follows:
As of | |||||||||||
March 31, 2026 | |||||||||||
(Amounts in thousands) | Fair Value | | Level 1 | | Level 2 | | Level 3 | ||||
Investments Noncurrent |
| |
| |
| |
| | |||
Private equity | $ | | $ | — | $ | — | $ | | |||
Total noncurrent |
| |
| — |
| — |
| | |||
Overall Total | $ | | $ | — | $ | — | $ | | |||
As of | |||||||||||
December 31, 2025 | |||||||||||
(Amounts in thousands) | Fair Value | | Level 1 | | Level 2 | | Level 3 | ||||
Investments Noncurrent |
| |
| |
| |
| | |||
Private equity | $ | | $ | — | $ | — | $ | | |||
Total noncurrent |
| |
| — |
| — |
| | |||
Overall Total | $ | | $ | — | $ | — | $ | | |||
Note 4. Revenue
Revenue is recognized over time using the input method in accordance with ASC 606, measured by the percentage of cost incurred to date to the estimated total cost for each contract. This method is used because we believe expended cost to be the best available measure of progress on contracts.
Our contracts are primarily in the form of firm fixed-price and fixed-price per unit. A large portion of our contracts have scope defined adequately, which allows us to estimate total contract value upon the signing of a new contract. Upon signing a new contract, we allocate the total consideration across various contractual promises to transfer a distinct good or service to a customer. These are grouped into specific performance obligations. This process requires significant management judgement. Most of our contracts have a single performance obligation. For contracts with multiple performance obligations, we allocate the total transaction price based on the estimated standalone selling price, which is the total project costs plus a budgeted margin percentage, for each of the performance obligations.
Revenue is recognized when, or as, the performance obligations are satisfied. Our contracts do not include a significant financing component. Costs to obtain contracts are generally not significant and are expensed in the period incurred.
Estimating cost to complete of long-term contracts involves a significant amount of estimation and judgement. For long-term contracts, we use the calculated transaction price, estimated cost to complete the project, and the total costs incurred on the project to date to calculate the percentage of the project that is complete. The estimated costs to complete the project and the estimated transaction price can change due to unforeseen events that can either increase or decrease the margin on a particular project.
Our contract structures typically allow for variable consideration. A significant portion of this variable consideration comes in the form of change order requests and claims. Other variable consideration can include volume discounts, performance bonuses, incentives, liquidated damages, and other terms that can either raise or lower the total transaction price. We estimate variable consideration based on the probability of being entitled to collection of specific amounts. We include amounts that we believe we have an enforceable right to collect, based on our expected probability of success with specific claims or contractual rights. Our estimates of total variable consideration rely on all available information about our customer including historical, current, and forecasted information.
Many of our contracts require contract modifications resulting from a change in contract scope or requirements. Change orders are issued to document changes to the original contract. We can have approved and unapproved change orders. Unapproved change orders are contract modifications for which we or our customers have not agreed to terms, scope and price. Contract modifications are necessary for many reasons, including but not limited to, changes to the contract specifications or design from the customer, modification to the original scope, changes to engineering drawings, or other required deviation from
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the original construction plan. Contract modifications may also be necessary for reasons including, but not limited to, other changes to the contract which may be out of our control, such as rain or other weather delays, incomplete, insufficient, inaccurate engineering drawings, different site conditions from information made available during the estimating process, or other reasons. An unapproved change order may turn into a formal claim if we cannot come to an agreement with the owner but are contractually entitled to recovery of costs and profits for work performed. Costs incurred related to contract modifications are included in the estimated costs to complete and are treated as project costs when incurred. Unless the contract modification is distinct from the other goods and services included within the project, the contract modification is accounted for as part of the existing contract. The effect of any modifications on the transaction price, and our measure of the percentage-of-completion on specific performance obligations for which the contract modification relates, is recognized as a cumulative catch-up adjustment to revenue recognized. In some cases, contract modifications may not be fully settled until after the completion of work as specified in the original contract.
We review and update our contract estimates regularly on every construction project. Any adjustments in estimated profit, via changes in estimated revenues and estimated costs, on contracts is recognized under the cumulative catch-up method. Under this method, the cumulative impact of a revenue, cost, or profit adjustment is recognized in the period the updated estimates are identified, which may include a reversal of amounts recognized in prior periods. The input of actual costs is used in the percentage-of-completion formula that takes into account current changes in estimates that are treated on a prospective basis. Adjustments in contract estimates resulted in a decrease in gross profit of $
If a contract is deemed to be in a loss position, the projected loss is recognized in full, including reversal of any previously recognized margin, in the period in which the change in estimate is made. Losses are recognized as an accrued loss provision on the consolidated balance sheets in the accrued liabilities caption. For contract revenue after the date that the loss is accrued, the accrued loss provision is adjusted so that the gross profit for the contract remains zero in future periods, subject to future adjustments to the overall expected profit or loss as determined at such time. As of March 31, 2026 and December 31, 2025, we had $
We estimate the likelihood of collection during the bidding process for new contracts. Customers with a history of late or non-payment are typically avoided in the bidding process. We consider the necessity for write-down of receivable balances in conjunction with GAAP when evaluating our estimates of transaction price and estimated costs to complete our projects.
We bill our customers in conjunction with our contract terms. Our contracts have three main categories, (i) contracts that are billed based on a specific timeline, (ii) contracts that are billed upon the completion of certain phases of work, or milestones, and (iii) contracts that are billed as services are provided. Some of our contracts are billed following the recognition of certain revenue. This creates an asset on our consolidated balance sheets captioned “contract assets.” Other contracts’ schedules allow us to bill customers prior to recognizing revenue. These contracts create a liability on our consolidated balance sheets captioned “contract liabilities.”
We segregate our business into
Our business is managed using revenue and gross profit primarily. Our CODM regularly uses this information to review operating results, plan future bids, allocate resources, target customers, and plan future growth and capital allocations. To determine reportable segment gross profit, certain allocations, including allocations of shared and indirect costs, such as facility costs, equipment costs, and indirect operating expenses, were made.
Our Civil segment is comprised of Oscar Renda Contracting, Inc., Mole Constructors, Inc., Southland Contracting, Inc., Southland Holdings, LLC, Renda Pacific, LLC, Southland Renda JV, Southland RE Properties, Oscar Renda Contracting Canada, Southland Mole of Canada, and Southland Mole of Canada/Astaldi Canada Design & Construction JV (“Southland Astaldi”). This segment focuses on projects throughout North America that include the design and construction of water pipeline, pump stations, lift stations, water and wastewater treatment plants, concrete and structural steel, outfall, and tunneling.
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Our Transportation segment is comprised of American Bridge, Heritage Materials, LLC, and Johnson Bros. Corporation. This segment operates throughout North America and specializes in services that include the design and construction of bridges, roadways, marine, dredging, ship terminals, and piers, and specialty structures and facilities.
Total assets by segment are not presented as our CODM, as defined by ASC 280, does not review or allocate resources based on segment assets. We do not have material intersegment revenue or gross profit. Joint ventures are classified into the segment with which the projects align.
Segment Revenue
Revenue by segment for the three months ended March 31, 2026 and 2025, was as follows:
Three Months Ended | |||||||||||
(Amounts in thousands) | March 31, 2026 | | March 31, 2025 |
| |||||||
| % of Total | | | % of Total |
| ||||||
Segment | Revenue | Revenue | Revenue | Revenue |
| ||||||
Civil | $ | |
| | % | $ | |
| | % | |
Transportation |
| |
| | % |
| |
| | % | |
Total revenue | $ | |
| | % | $ | |
| | % | |
Segment Cost of Construction
Cost of construction by segment three months ended March 31, 2026 and 2025, was as follows:
Three Months Ended | |||||||||||
(Amounts in thousands) | March 31, 2026 | | March 31, 2025 |
| |||||||
| % of Total | | | % of Total |
| ||||||
Cost of | Cost of | Cost of | Cost of | ||||||||
Segment | Construction | Construction | Construction | Construction |
| ||||||
Civil | $ | |
| | % | $ | |
| | % | |
Transportation |
| |
| | % |
| |
| | % | |
Total cost of construction | $ | |
| | % | $ | |
| | % | |
Segment Gross Profit (Loss)
Gross profit (loss) by segment for the three months ended March 31, 2026 and 2025, was as follows:
Three Months Ended | |||||||||||
(Amounts in thousands) | March 31, 2026 | | March 31, 2025 |
| |||||||
| % of Segment | | | % of Segment |
| ||||||
Segment | Gross Profit | Revenue | Gross Profit | Revenue |
| ||||||
Civil | $ | |
| | % | $ | |
| | % | |
Transportation |
| ( |
| ( | % |
| ( |
| ( | % | |
Gross profit (loss) | $ | ( |
| ( | % | $ | |
| | % | |
Revenue earned outside of the United States was
A reconciliation of gross profit (loss) from segments to losses before income taxes is as follows:
Three Months Ended | |||||
(Amounts in thousands) | March 31, 2026 | | March 31, 2025 | ||
Gross profit (loss) from segments |
| ( |
| | |
Selling, general, and administrative expenses |
| |
| | |
Total operating income (loss) | ( | | |||
Gain on investments, net |
| |
| | |
Other income, net |
| |
| | |
Interest expense |
| ( |
| ( | |
Losses before income taxes | $ | ( | $ | ( | |
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Note 5. Debt
Long-term debt and credit facilities consisted of the following as of March 31, 2026, and December 31, 2025:
As of | |||||
(Amounts in thousands) | March 31, 2026 | | December 31, 2025 | ||
Secured notes | $ | | $ | | |
Mortgage notes |
| |
| | |
Total debt |
| |
| | |
Unamortized deferred financing costs |
| ( |
| ( | |
Total debt, net |
| |
| | |
Less: Current portion |
| ( |
| ( | |
Total long-term debt | $ | | $ | | |
The weighted average interest rate on total debt outstanding as of March 31, 2026 and December 31, 2025, was
Secured Notes
We enter into secured notes in order to finance growth within our business. As of March 31, 2026, we had outstanding secured notes expiring between March 2027 and March 2033. Interest rates on the secured notes range between
On September 30, 2024, the Company entered into a term loan and security agreement (the “Credit Agreement”) with Callodine Commercial Finance, LLC as administrative agent and lender.
The Credit Agreement provides for a
After giving effect to the Assignment and Assumption Agreement (defined below), the Credit Facility has a maturity date of September 30, 2028.
The Credit Agreement requires quarterly principal payments on the Term Loan, which commenced on December 31, 2024. The required principal amortization is as follows: (i)
The interest on amounts drawn under the Credit Facility is payable monthly at a rate of
Any principal prepayments in the first
The Credit Agreement contains customary restrictive covenants and events of default, including financial covenants based on the Company’s Liquidity, as defined in the Credit Agreement, and trailing twelve-month earnings before interest expense, income taxes, depreciation and amortization (the “TTM EBITDA Covenants”). The TTM EBITDA Covenants will be tested and the Company must comply with the TTM EBITDA Covenants during any period where the Company’s Liquidity falls below $
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The obligations under the Credit Facility are unconditionally guaranteed by the Company and its subsidiaries. The obligations under the Credit Facility are secured by a first lien on all assets of the Company, subject to permitted liens and interests of other parties as described in the Credit Agreement.
On March 17, 2026, the Company entered into an assignment and assumption (the “Assignment and Assumption Agreement”) with Callodine Commercial Finance, LLC (the “Resigning Agent”), solely in its capacity as “Agent” under the Credit Agreement, lenders party to the Credit Agreement (individually, an “Assignor,” and collectively, the “Assignors”), the assignees parties thereto (individually, an “Assignee,” and collectively, the “Assignees”), and Alana Porrazzo, in her capacity as Trustee of the Southland Collateral Trust, as successor agent. The Assignees include the surety providers of the Company, Berkshire Hathaway Specialty Insurance Company (“Berkshire”), Markel Insurance Company (“Markel”), Zurich American Insurance Company (“Zurich”), Western Surety Company, Euler Hermes North America Insurance Company, Federal Insurance Company, and Hartford Fire Insurance Company.
Pursuant to the Assignment and Assumption Agreement, the Company paid the Resigning Agent, for the benefit of the Resigning Agent and the Assignors, approximately $
Concurrently with the assignment of the Assigned Interests, the delayed draw term loan commitment under the Credit Agreement was terminated and is of no further force or effect.
Additionally, pursuant to side letters executed after the Assignment and Assumption Agreement, the Assignees have agreed to waive quarterly principal and monthly interest payments for all periods until maturity. In addition, the Assignees have agreed to waive any and all defaults and potential defaults and covenant violations under the Credit Agreement, including any violations that existed as of March 31, 2026 or December 31, 2025. As consideration for the foregoing, the Company has agreed to dispose of idle equipment and other assets and pursue claim collections to use the proceeds from the aforementioned transactions to make payments towards the principal balance of the loan prior to maturity.
As of March 31, 2026, the Company was in compliance with all applicable covenants under the Credit Agreement, as amended, and after giving effect to the waiver granted by the sureties.
Mortgage Notes
We enter into mortgage notes in order to finance growth within our business. As of March 31, 2026, we had a mortgage note expiring in February 2029. The interest rate on the mortgage note was
Note 6. Commitments and Contingencies
Litigation
In the ordinary course of business, we and our affiliates are involved in various legal proceedings alleging, among other things, liability issues or breach of contract or tortious conduct in connection with the performance of services and/or materials provided, the outcomes of which cannot be predicted with certainty. We and our affiliates are also subject to government inquiries in the ordinary course of business seeking information concerning our compliance with government construction contracting requirements and various laws and regulations, the outcomes of which cannot be predicted with certainty.
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Some of the matters in which we or our joint ventures and affiliates are involved may involve compensatory, punitive, or other claims or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that are not currently probable to be incurred or cannot currently be reasonably estimated. In addition, in some circumstances, our government contracts could be terminated, we could be suspended or incur other administrative penalties or sanctions, or payment of our costs could be disallowed. While any of our pending legal proceedings may be subject to early resolution as a result of our ongoing efforts to resolve the proceeding, whether or when any legal proceeding will be resolved is neither predictable nor guaranteed.
Accordingly, it is possible that future developments in such proceedings and inquiries could require us to (i) adjust existing accruals, or (ii) record new accruals that we did not originally believe to be probable or that could not be reasonably estimated. Such changes could be material to our financial condition, results of operations, and/or cash flows in any particular reporting period. In addition to matters that are considered probable for which the loss can be reasonably estimated, disclosure is also provided when it is reasonably possible and estimable that a loss will be incurred, when it is reasonably possible that the amount of a loss will exceed the amount recorded, or a loss is probable but the loss cannot be estimated.
Liabilities relating to legal proceedings and government inquiries, to the extent that we have concluded such liabilities are probable and the amounts of such liabilities are reasonably estimable, are recorded on the consolidated balance sheets. A certain number of the claims are insured but subject to varying deductibles, and a certain number of the claims are uninsured. The aggregate range of possible loss related to (i) matters considered reasonably possible, and (ii) reasonably possible amounts in excess of accrued losses recorded for probable loss contingencies was immaterial, as of March 31, 2026, and December 31, 2025. Our estimates of such matters could change in future periods.
Washington State Convention Center Project
On March 7, 2018, Clark/Lewis, A Joint Venture (“CLJV”), awarded the Company a subcontract valued at approximately $
CLJV and the Washington State Convention Center (“WSCC”) submitted a counterclaim totaling approximately $
On December 1, 2025, we received an adverse ruling in the case of American Bridge Company v. Clark/Lewis Joint Venture, et al. In this litigation, the Superior Court of the State of Washington for King County, by order dated January 15, 2026, ruled in favor of CLJV and entered a judgment against American Bridge and certain of its sureties, jointly and severally, in the principal amount of $
In connection with the adverse ruling, the judge entered a sanctions order totaling $
While the Company intended to appeal the adverse ruling and the sanctions order, certain of its sureties subsequently entered into negotiations with CLJV on behalf of the Company in accordance with certain rights available to the sureties under certain General Indemnity Agreements (“GIAs”). On March 27, 2026, the Company entered into a settlement agreement on the WSCC Project. The Company and the sureties are negotiating repayment terms for amounts paid by the sureties on behalf of the
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Company under a long-term financing agreement. The sureties have agreed to forbear on seeking repayment for these amounts until at least May 13, 2027. The $
CityLYNX Project
On November 28, 2016, the City of Charlotte (“City”) awarded Contract Number 2017000790 to Johnson Bros. Corporation, a Southland subsidiary (“JBC”) for the project known as CityLYNX Gold Line Phase 2 – Streetcar Project which extended the previously constructed
During the course of the Project, JBC alleges numerous and continuous changes and interferences by the City and the City’s representatives which the City has refused to recognize as a contractual change.
After multiple failed attempts at negotiated settlement, JBC timely filed its original complaint in the General Court of Justice, Superior Court Division in Mecklenburg County, State of North Carolina (the “Court”) on February 20, 2023. JBC filed its First Amended Complaint on April 12, 2023. In the First Amended Complaint, JBC asserted
On June 1, 2023, the City filed its Motions to Dismiss, Answer to First Amended Verified Complaint and Counterclaim, seeking, in part, the dismissal of all of JBC’s claims (the “Motion to Dismiss”). The Court issued its Order and Opinion on the Motion to Dismiss on February 27, 2024. Among its rulings in the Order, the Court concluded that JBC’s Contract Claims were time-barred in part and dismissed those claims with prejudice “to the extent those claims [arose] from conduct occurring before 31 January 2021.”
JBC then filed Motions on April 17, 2024, seeking reconsideration of the Court’s partial dismissal of the Contract Claims with prejudice and, alternatively, leave to file a second amended complaint (the “Motion for Reconsideration”). After full briefing, the Court convened a hearing on the Motion for Reconsideration on May 30, 2024.
On June 7, 2024, the Court granted JBC’s Motion for Reconsideration in part by amending its previous Order and converting the dismissal to a “without prejudice” dismissal and granting JBC’s motion to file its proposed Second Amended Complaint.
On June 11, 2024, JBC filed its Second Amended Complaint which reiterates the Contract Claims resulting in damages “in an amount in excess of $
The Company continues to pursue all legal options and the parties continue to exchange information and engage in meetings.
Surety Bonds
We, as a condition for entering into a substantial portion of our construction contracts, had outstanding surety bonds as of March 31, 2026, and December 31, 2025. We have agreed to indemnify our sureties if they experience a loss on the bonds of any of our affiliates. Collectively, Berkshire, Zurich and Markel have advanced an aggregate of approximately $
Self-Insurance
We are self-insured up to certain limits with respect to workers’ compensation, general liability and auto liability matters, and health insurance. We maintain accruals for self-insurance retentions based upon third-party data and claims history.
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Note 7. Income Taxes
The federal statutory tax rate is
The Company is in a net deferred tax asset position for both U.S. federal and state income tax as of March 31, 2026. The Company assesses available positive and negative evidence to estimate whether sufficient taxable income will be generated to permit use of existing deferred income tax assets. The Company has incurred three years of cumulative losses in various jurisdictions including the U.S. Such objective evidence and recent changes in forecasts resulted in the Company establishing a valuation allowance against the net deferred tax assets related to U.S. federal and state income tax as of September 30, 2025, with the exception of the net deferred tax assets related to separate state filings for certain subsidiaries. As of March 31, 2026, the Company has recorded a valuation allowance of approximately $
As a result of financial losses incurred within the Canadian operations at certain subsidiaries, the Company maintains a valuation allowance against the net deferred tax assets as they are determined to not be more-likely-than-not to be utilized. As of March 31, 2026, the Company has a valuation allowance in the amount of $
The Company maintains a valuation allowance related to the net deferred tax assets recorded from United Kingdom operations from historic losses incurred that are determined to not be more-likely-than-not to be utilized. As of March 31, 2026, the valuation allowance related to United Kingdom operations is $
Note 8. Remaining Unsatisfied Performance Obligations
Remaining Unsatisfied Performance Obligations (“RUPO”) consists of two components: (1) unearned revenue and (2) contracts that are awarded but not started. Unearned revenue includes the revenue we expect to record in the future on in-progress contracts, including
Although RUPO reflects business that we consider to be firm, deferrals, cancellations and/or scope adjustments may occur. RUPO is adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate.
Fixed price contracts, particularly with federal, state and local government customers, are expected to continue to represent a majority of our total RUPO.
As of March 31, 2026, Southland had $
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Note 9. Cost and Estimated Earnings on Uncompleted Contracts
Contract assets as of March 31, 2026, and December 31, 2025, consisted of the following:
As of | |||||
(Amounts in thousands) | March 31, 2026 | | December 31, 2025 | ||
Costs in excess of billings | $ | | $ | | |
Costs to fulfill contracts, net |
| |
| | |
Contract assets | $ | | $ | | |
Costs and estimated earnings on uncompleted contracts were as follows as of March 31, 2026, and December 31, 2025:
As of | |||||
(Amounts in thousands) | March 31, 2026 | | December 31, 2025 | ||
Costs incurred on uncompleted contracts | $ | | $ | | |
Estimated earnings |
| |
| | |
Costs incurred and estimated earnings |
| |
| | |
Less: billings to date |
| ( |
| ( | |
Costs to fulfill contracts, net |
| |
| | |
Net contract position | $ | | $ | | |
Our net contract position is included on the unaudited condensed consolidated balance sheets under the following captions:
As of | |||||
(Amounts in thousands) | March 31, 2026 | | December 31, 2025 | ||
Contract assets | $ | | $ | | |
Contract liabilities |
| ( |
| ( | |
Net contract position | $ | | $ | | |
We periodically evaluate our project forecasts and the amounts recognized with respect to our claims and unapproved change orders, and other potential modifications under review (referred to collectively as “Unresolved Contract Modifications”). On certain projects we have assessed Unresolved Contract Modifications to recover additional costs and profits which we believe we are entitled under the terms of our contracts. This includes Unresolved Contract Modifications on completed projects and projects that are not yet complete. Until an Unresolved Contract Modification is finalized it is likely that additional costs will be incurred in future periods. Our customers, or other third parties, may disagree with some or all of our assessed Unresolved Contract Modifications. As of March 31, 2026 and December 31, 2025, we have recorded $
On January 1, 2026, we had contract liabilities of $
On January 1, 2025, we had contract liabilities of $
Note 10. Noncontrolling Interests Holders
Southland has several controlling interests including both joint ventures and partnerships. We have controlling interests and allocate earnings and losses in those entities to the noncontrolling interest holders based on our ownership percentages.
We own an
We own a
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American Bridge entered into a joint venture with Commodore Maintenance Corporation, forming American Bridge/Commodore Joint Venture. According to the joint venture agreement, each of the parties is paid in accordance with its respective work performed and has no responsibility for losses incurred by the other party in performance of its work. At March 31, 2026, American Bridge was responsible for approximately
We consolidated each of Oscar Renda Contracting of Canada, Southland Astaldi joint venture, and American Bridge/Commodore joint venture as a result of our control over the joint venture operations. We have fully consolidated revenue, cost of construction, and other costs on our unaudited condensed consolidated statements of operations and balances on the unaudited condensed consolidated balance sheets.
Note 11. Related Party Transactions
Southland occasionally enters into subcontracts with a subcontractor in which certain employees hold a minority ownership. Cost of construction related to this subcontractor was $
In July 2024, the Company closed a real estate purchase agreement to sell and leaseback
In the first quarter of 2026, the Company’s Chief Executive Officer, Frank Renda, Co-Chief Operating Officer Tim Winn, and Co-Chief Operating Officer, Rudy Renda, agreed to collateralize bonds issued in favor of the Company in the form of a cash deposit in the amount of $
Note 12. Share Based Compensation
On May 24, 2022, the Board of Directors of Legato Merger Corp. II, a Delaware corporation, adopted the Southland Holdings, Inc. 2022 Equity Incentive Plan (“2022 Plan”). A total of
Restricted Stock Units (“RSUs”): RSUs are issued for compensatory purposes. RSU stock compensation cost is measured at our common stock’s fair value based on the market price at the date of grant. We recognize stock compensation cost only for RSUs that we estimate will ultimately vest. We estimate the number of shares that will ultimately vest at each grant date based on our historical experience and adjust stock compensation cost based on changes in those estimates over time.
A summary of the changes in our RSUs during the three months ended March 31, 2026 and 2025 is as follows:
March 31, 2026 | March 31, 2025 | |||||||||||
| RSUs | | Weighted-Average | | RSUs | | Weighted-Average | |||||
Outstanding, beginning balance | | $ | | | $ | | ||||||
Granted | — |
| — | |
| | ||||||
Vested | ( | | ( | | ||||||||
Forfeited | ( | | ( | | ||||||||
Canceled | ( | | ( | | ||||||||
Outstanding, ending balance | | $ | | | $ | | ||||||
Performance Stock Units (“PSUs”): PSUs provide for the issuance of shares upon vesting, which occurs following the end of the performance period based on achievement of certain metrics as established by the Board of Directors. The Company recognizes expense for PSUs based on the forecasted achievement of Company performance metrics, multiplied by the fair value of the total number of shares of common stock that the Company anticipates will be issued based on such achievement.
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A summary of the changes in our PSUs during the three months ended March 31, 2026 and 2025 is as follows:
March 31, 2026 | March 31, 2025 | |||||||||||
| PSUs | | Weighted-Average | PSUs | | Weighted-Average | ||||||
Outstanding, beginning balance | | $ | | | $ | | ||||||
Granted | — |
| — | — |
| — | ||||||
Forfeited | ( | | ( | | ||||||||
Outstanding, ending balance | | $ | | | $ | | ||||||
Compensation cost was $
As of March 31, 2026, there was a total of $
Note 13. Loss per Share
Basic and diluted net loss per share for the three months ended March 31, 2026 and 2025 consisted of the following (in thousands, except shares and per share amounts):
Three Months Ended | |||||
March 31, 2026 | March 31, 2025 | ||||
Numerator: | |||||
Net loss | $ | ( | $ | ( | |
Less net income attributable to noncontrolling interests | | | |||
Net loss attributable to common stockholders, basic and diluted | ( | ( | |||
Denominator: | |||||
Weighted average common shares outstanding — basic | | | |||
Weighted average common shares outstanding — diluted | | | |||
Net loss per share — basic | $ | ( | $ | ( | |
Net loss per share — diluted | $ | ( | $ | ( | |
As the average market price of common stock for the three months ended March 31, 2026 did not exceed the exercise price of the Warrants, the potential dilution from the Warrants converting into
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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis contains forward-looking statements relating to future events or our future financial performance, which involve risk and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements. Please see the discussion regarding forward-looking statements included under the “Cautionary Note Regarding Forward-Looking Statements” section for a discussion of some of the uncertainties, risks, and assumptions associated with these statements.
The following discussion and analysis present information that we believe is relevant to an assessment and understanding of our unaudited condensed consolidated balance sheets, statements of cash flows, and results of operations. This information should be read in conjunction with the unaudited condensed consolidated financial statements and the notes related thereto.
Overview
Southland Holdings, Inc. (“Southland”) is a diverse leader in specialty infrastructure construction with roots dating back to 1900. The end markets for which we provide services cover a broad spectrum of specialty services within infrastructure construction. We design and construct projects in the bridges, tunnels, communications, data centers, transportation and facilities, marine, steel structures, water and wastewater treatment, and water pipelines end markets.
Southland is based in Grapevine, Texas. It is the parent company of Johnson Bros. Corporation, American Bridge Company, Oscar Renda Contracting, Southland Contracting, Mole Constructors, and Heritage Materials. With the combined capabilities of these six primary subsidiaries, Southland has become a diversified industry leader with projects spanning North America in various end markets.
Key Factors Affecting Results of Operations
Business Environment
We segregate our business into two reportable segments: Transportation and Civil. Our Civil segment primarily operates throughout North America and specializes in services that include the design and construction of water pipeline, pump stations, lift stations, water and wastewater treatment plants, concrete and structural steel, outfall, and tunneling.
Our Transportation segment primarily operates throughout North America and specializes in services that include the design and construction of bridges, roadways, marine, dredging, ship terminals and piers, and specialty structures and facilities. Our Transportation segment is responsible for the construction of bridges and structures including many of the most recognizable bridges, convention centers, sports stadiums, marine facilities, and Ferris wheels in the world.
Both our Civil and Transportation segments continue to identify new opportunities to grow our business, and the future outlook of the end markets we serve remains positive. Although risk and uncertainty exist, including, but not limited to, the items addressed within our forward-looking statements and risk factors, we believe that we are well positioned to compete on new infrastructure projects in both the public and private sectors.
Market Trends and Uncertainties
In both our Transportation and Civil segments, we have competitors within the individual markets and geographic areas in which we operate, ranging from small, local companies to larger regional, national, and international companies. Although the construction business is highly competitive, there are few, if any, companies which compete in all of our market areas, both geographically and from an end market perspective. The degree and type of competition is influenced by the type and scope of construction projects within individual markets. Equipment ownership and ability to self-perform across numerous disciplines are two of our significant competitive advantages. We believe that the primary factors influencing competition in our industry are price, reputation for quality, safety, schedule certainty, relevant experience, availability of field supervision and skilled labor, machinery and equipment, financial strength, as well as knowledge of local markets and conditions.
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Many of our competitors have the ability to perform work in either the private or public sectors. When opportunities for work in one sector are reduced, competitors tend to look for opportunities in the other sector. This migration has the potential to reduce revenue growth and/or increase pressure on gross profit margins.
We have seen an increase in demand for specialty construction projects in recent years at the federal, state, and local level. We anticipate further spending on infrastructure related to economic stimulus spending including the Infrastructure Investment and Jobs Act that was passed in 2021, and other federal, state, or local initiatives.
We believe that the combination of our experience, reputation, and technical expertise are unmatched among companies of our size. This combination of skills has allowed us to pursue complex projects with fewer competitors.
During the first half of 2025, the U.S. government announced a variety of tariff actions in response to which many countries have announced retaliatory trade actions, including tariffs on U.S. exports. The tariffs and retaliatory trade actions have increased the cost of importing certain construction materials into the U.S. and have caused disruption and uncertainty to both international trade, supply chains and financial markets. It is unclear to what extent, when and for how long announced trade actions will be in place. To date, these trade actions have had no meaningful impact on the results of our operations or the projects currently underway as the construction materials and equipment used for our current projects have generally been sourced and/or secured upon project inception. However, we are evaluating the potential impacts of these proposed tariffs, including potential impacts to our customers, as well as our ability to mitigate their related impacts. In addition, economic experts and policy makers have expressed concerns that increased tariffs and retaliatory trade actions could increase inflation or the risk of a recession, which could also affect our customers’ use of capital and demand for our services.
Seasonality, Cyclicality, and Variability
The results of our operations are subject to quarterly variations. Much of the variation is the result of weather, particularly rain, ice, snow, heat, wind, and named storms, which can impact our ability to perform construction activities. These weather impacts can affect revenue and profitability in either of our business segments. Any quarter can be affected either negatively or positively by atypical weather patterns in any part of North America, or other areas in which we operate. Traditionally, our first quarter is the most weather-affected; however, this may or may not necessarily be true in future periods.
Our business may also be affected by overall economic market conditions, including but not limited to declines in spending by project owners, delays in new projects, changes in client schedules, or for other reasons.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with the United States Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses earned and incurred, respectively, during the reporting period. Critical accounting estimates are fundamental to the portrayal of both our financial condition and results of operations and often require difficult, subjective, and complex estimates and judgments by management. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which we believe to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates will be reflected in the financial statements in future periods. The following discussion addresses the items we have identified as our critical accounting estimates. There have been no material developments or changes from the policies and estimates discussed in our annual disclosures.
More information about our accounting policies can be found in Note 2 of our audited consolidated financial statements, and Management’s Discussion and Analysis, for the year ended December 31, 2025 on our Annual Report on Form 10-K, as filed with the SEC on March 26, 2026.
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Materials and Paving
In the second quarter of 2023, Southland decided to discontinue certain types of projects in its Materials & Paving business line (“M&P”) and sold assets related to producing large scale concrete and asphalt. M&P is reported in the Transportation segment. 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. The Company has concluded this action with M&P does not qualify for Discontinued Operations treatment and presentation under ASC 205-20 as it does not represent a strategic shift in the Company’s business.
For the three months ended March 31, 2026, M&P contributed $11.0 million to revenue and $13.1 million to gross loss. There is additional information on the M&P gross loss in the Transportation portion of the Segment Results section of this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This compares to $18.1 million to revenue and $9.1 million to gross loss for the three months ended March 31, 2025. As of March 31, 2026, approximately 3.8% of Southland’s backlog was in M&P and Southland estimates most of this work to be substantially completed in 2026.
Results of Operations
The following table sets forth summary financial information for the three months ended March 31, 2026 and 2025:
Three Months Ended | ||||||
(Amounts in thousands) | March 31, 2026 | | March 31, 2025 | |||
Revenue | $ | 172,405 | $ | 239,486 | ||
Cost of construction |
| 177,161 |
| 218,006 | ||
Gross profit (loss) |
| (4,756) |
| 21,480 | ||
Selling, general, and administrative expenses |
| 14,943 |
| 16,465 | ||
Operating income (loss) |
| (19,699) |
| 5,015 | ||
Gain on investments, net |
| 147 |
| 17 | ||
Other income, net |
| 74 |
| 743 | ||
Interest expense |
| (8,681) |
| (8,874) | ||
Losses before income taxes |
| (28,159) |
| (3,099) | ||
Income tax expense (benefit) |
| 19 |
| (313) | ||
Net loss |
| (28,178) |
| (2,786) | ||
Net income attributable to noncontrolling interests |
| 174 |
| 1,766 | ||
Net loss attributable to Southland Stockholders | $ | (28,352) | $ | (4,552) | ||
Revenue
Revenue for the three months ended March 31, 2026, was $172.4 million, a decrease of $67.1 million, or 28.0%, compared to the three months ended March 31, 2025. The decrease was attributable to a $68.0 million decrease in revenue in our Transportation segment primarily due to projects approaching completion, offset by a $0.9 million increase in revenue in our Civil segment primarily due to a new project substantially started after March 31, 2025.
Cost of construction
Cost of construction for the three months ended March 31, 2026, was $177.2 million, a decrease of $40.8 million, or 18.7%, compared to the three months ended March 31, 2025. The decrease was attributable to a $49.7 million decrease in our Transportation segment primarily due to projects approaching completion, offset by an $8.9 million increase in our Civil segment primarily due to new projects substantially started after March 31, 2025.
Gross profit (loss)
Gross loss for the three months ended March 31, 2026, was $4.8 million, a decrease in gross profit of $26.2 million, or 122.1%, compared to the three months ended March 31, 2025. The decrease was attributable to an $18.2 million increase in gross loss in our Transportation segment primarily due to unfavorable adjustments related to unfavorable dispute resolutions and an $8.0 million decrease in gross profit in our Civil segment primarily due to higher-than-expected project costs.
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Selling, general, and administrative expenses
Selling, general, and administrative expenses for the three months ended March 31, 2026, were $14.9 million, a decrease of $1.5 million, or 9.2%, compared to the three months ended March 31, 2025. The decrease was primarily due to a $2.4 million decrease in compensation expense, a $0.6 million decrease in professional fees and a $0.5 million decrease in real estate and personal property taxes, offset by a $2.1 million increase in business transformation expenses, compared to the same period in 2025.
Interest expense
Interest expense for the three months ended March 31, 2026, was $8.7 million, a decrease of $0.2 million, or 2.2%, compared to the three months ended March 31, 2025. The decrease was primarily driven by the decrease of total debt compared to the same period in 2025.
Income tax expense (benefit)
The Company is in a net deferred tax asset position for both U.S. federal and state income tax as of March 31, 2026. The Company assesses available positive and negative evidence to estimate whether sufficient taxable income will be generated to permit use of existing deferred income tax assets. The Company has incurred three years of cumulative losses in various jurisdictions including the U.S. Such objective evidence and recent changes in forecasts resulted in the Company establishing a valuation allowance against the net deferred tax assets related to U.S. federal and state income tax as of September 30, 2025, with the exception of the net deferred tax assets related to separate state filings for certain subsidiaries. As of March 31, 2026, the Company has recorded a valuation allowance of approximately $123.8 million, inclusive of current year, related to its US federal and state net deferred tax assets, inclusive of current year activity, as they are determined to be more-likely-than-not to not be utilized
Income tax expense for the three months ended March 31, 2026, had an effective rate of (0.1%). The primary differences between the federal statutory tax rate of 21% and the effective rate were valuation allowance adjustments against subsidiaries’ net deferred tax assets and state income taxes.
Income tax benefit for the three months ended March 31, 2025, had an effective rate of 10.1%. The primary differences between the federal statutory tax rate of 21% and the effective rate were state income taxes, the recording of a valuation allowance against certain subsidiaries’ net deferred tax assets, federal tax credits, the income earned in foreign jurisdictions with a zero tax rate; however, that foreign income is included within U.S. taxable income through global intangible low taxed income (“GILTI”), and the impact of worldwide forecast on the interim calculations under ASC 740.
Segment Results
The following table sets forth segment information for the three months ended March 31, 2026 and 2025:
Three Months Ended |
| ||||||||||
(Amounts in thousands) | March 31, 2026 | | March 31, 2025 |
| |||||||
| % of Total | | | % of Total |
| ||||||
Segment | Revenue | Revenue | Revenue | Revenue |
| ||||||
Civil | $ | 103,792 |
| 60.2 | % | $ | 102,916 |
| 43.0 | % | |
Transportation |
| 68,613 |
| 39.8 | % |
| 136,570 |
| 57.0 | % | |
Total revenue | $ | 172,405 |
| 100.0 | % | $ | 239,486 |
| 100.0 | % | |
Three Months Ended |
| ||||||||||
(Amounts in thousands) | March 31, 2026 | March 31, 2025 |
| ||||||||
| % of Segment | | | % of Segment |
| ||||||
Segment | Gross Profit |
| Revenue | Gross Profit |
| Revenue | |||||
Civil | $ | 14,652 |
| 14.1 | % | $ | 22,631 |
| 22.0 | % | |
Transportation |
| (19,408) |
| (28.3) | % |
| (1,151) |
| (0.8) | % | |
Gross profit (loss) | $ | (4,756) |
| (2.8) | % | $ | 21,480 |
| 9.0 | % | |
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Civil
Revenue for the three months ended March 31, 2026, was $103.8 million, an increase of $0.9 million, or 0.9%, compared to the three months ended March 31, 2025. The increase was primarily attributable to increased revenues of $14.3 million from a data center project in the West due to the project being substantially started after March 31, 2025, offset by a $6.4 million decrease from a tunnel project in the West due to the project approaching completion and a $6.2 million decrease from a water facility project in the Northwest due to the project approaching completion.
Gross profit for the three months ended March 31, 2026, was $14.7 million, or 14.1% of segment revenue, compared to gross profit of $22.6 million, or 22.0%, of segment revenue, for the three months ended March 31, 2025. The primary driver to the decrease in gross profit of $8.0 million for the three months ended March 31, 2026 versus the same period in 2025 was primarily due to decreases in gross profit contributions of $3.1 million from a water facility project in the Northwest, $2.9 million from a water pipeline project in the Southwest and $2.7 million from a water treatment plant project in the Southwest, all of which decreased due to higher-than-expected project costs.
Transportation
Revenue for the three months ended March 31, 2026, was $68.6 million, a decrease of $68.0 million, or 49.8%, compared to the three months ended March 31, 2025. The decrease was primarily attributable to decreased revenues of $23.6 million from an elevated roadway and bridge project in the Southeast, $9.0 million from a project in the Bahamas, $5.0 million from a Bridge project in the Southeast and $4.7 million from a bridge repair project in the West, all of which decreased due to the projects approaching completion. The decrease was also primarily related to decreased revenues of $13.0 million from a canal widening project in the South due to an unfavorable adjustment related to dispute resolutions and $7.1 million from the M&P business line.
Gross loss for the three months ended March 31, 2026, was $19.4 million, or (28.3)% of segment revenue, compared to gross loss of $1.2 million, or (0.8)% of segment revenue, for the three months ended March 31, 2025. The primary driver to the increase in gross loss of $18.3 million was primarily due to decreases in profit contributions of $13.0 million from a canal widening project in the South and $6.4 million from a M&P project in the Southeast, both due to unfavorable adjustments related to dispute resolutions.
Key Business Metrics
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operational performance. We use the following non-GAAP measures to evaluate our ongoing operations and for internal planning, forecasting and compensation purposes. We believe that the non-GAAP financial information may be helpful in assessing our operating performance and facilitates an alternative comparison between fiscal periods. The non-GAAP financial measures are not, and should not be viewed as, a substitute for GAAP reporting measures.
EBITDA
In our industry, it is customary to manage our business using earnings before interest expense, income taxes, depreciation and amortization (“EBITDA”). EBITDA assists management and the Board of Directors and may be useful to investors in comparing our operating performance consistently over time as it removes the impact of our capital structure and expenses that do not relate to our core operations.
Non-GAAP financial measures should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP financial measures on a supplemental basis. The reconciliation of net loss to non-GAAP financial measures below should be reviewed, and no single financial measure should be relied upon to evaluate our business. Below is a reconciliation of net loss to these non-GAAP financial measures.
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Three Months Ended | ||||||
(Amounts in thousands) | March 31, 2026 |
| March 31, 2025 | |||
Net loss attributable to Southland Stockholders | $ | (28,352) | $ | (4,552) | ||
Depreciation and amortization |
| 5,644 |
| 6,525 | ||
Income tax expense (benefit) |
| 19 |
| (313) | ||
Interest expense |
| 8,681 |
| 8,874 | ||
Interest income |
| (98) |
| (450) | ||
EBITDA | (14,106) | 10,084 | ||||
Backlog
We define contract backlog (“Backlog”) as a measure of the total amount of revenue remaining to be earned on projects that have been awarded. Backlog consists of two components: (1) unearned revenue and (2) contracts awarded but not started. Unearned revenue includes the revenue we expect to record in the future on in-progress contracts, including 100% of our consolidated joint venture contracts and our proportionate share of unconsolidated joint venture contracts. Contracts that are awarded, but not yet started, are included in Backlog once a contract has been fully executed and/or we have received a formal “Notice to Proceed” from the project owner.
(Amounts in thousands) | ||
Balance December 31, 2025 | $ | 2,031,080 |
New contracts, change orders, and adjustments |
| 18,887 |
Less: contract revenue recognized in 2026 |
| (172,405) |
Balance March 31, 2026 | $ | 1,877,562 |
Backlog should not be considered a comprehensive indicator of future revenue as many of our contracts can be terminated by our customers on relatively short notice, and Backlog does not include future work for which we may be awarded or new awards for which we are awaiting an executed contract or an authorized “Notice to Proceed.” In the event of a termination, we are typically reimbursed for all of our costs through a specific contractual date, our costs to demobilize from the project site, and in certain cases overhead costs and profit associated with the contract through the termination date. Costs may include preconstruction and engineering services as well as that of our subcontractors. Our contracts do not typically grant us rights to revenue reflected in Backlog. Projects may remain in the Backlog for extended periods of time as a result of schedule delays, regulatory requirements, project specific issues, or other reasons. Contract amounts from contracts where a transaction price cannot be reasonably estimated are not included within our Backlog amount.
The following tables set forth our Backlog by segment:
Civil
(Amounts in thousands) | ||
Balance December 31, 2025 | $ | 798,818 |
New contracts, change orders, and adjustments |
| 8,060 |
Less: contract revenue recognized in 2026 |
| (103,170) |
Balance March 31, 2026 | $ | 703,708 |
Transportation
(Amounts in thousands) | ||
Balance December 31, 2025 | $ | 1,232,262 |
New contracts, change orders, and adjustments |
| 10,827 |
Less: contract revenue recognized in 2026 |
| (69,235) |
Balance March 31, 2026 | $ | 1,173,854 |
Liquidity, Capital Commitments and Resources
Our principal sources of liquidity are cash generated from operations, funds from borrowings, including amounts funded to support projects under certain GIAs, and existing cash on hand. Our principal uses of cash typically include the funding of working capital obligations, debt service, and investment in machinery and equipment for our projects.
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We will receive the proceeds from the exercise of Warrants for cash. We believe the likelihood that Warrant holders will exercise their Warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of our common stock. On May 1, 2026, the closing price of our common stock was $1.18 per share. To the extent the market price of our common stock remains below the exercise price of $11.50 per share, we believe that Warrant holders will be unlikely to exercise their Warrants for cash, resulting in little or no cash proceeds to us for any such exercise. To the extent we receive any cash proceeds, we expect to use such proceeds for general corporate and working capital purposes, which would increase our liquidity. However, we do not expect to rely materially on the cash exercise of Warrants to fund our operations.
Based on historical and anticipated future operating results, we believe cash flow from operations, available cash, and other financing sources will be adequate to meet our liquidity needs for at least the next twelve months, including any anticipated requirements for working capital, capital expenditures, and scheduled debt service.
Our current and future liquidity is greatly dependent upon our operating results, which are largely determined by overall economic conditions, our current contracts and Backlog. Our liquidity could be adversely affected by a disruption in the availability of credit. If such an event were to occur, we may be required to seek additional financing. In addition, we may be required to seek additional financing to refinance all or a significant portion of our existing debt on or prior to maturity. We may also seek to access the public or private equity markets to support our liquidity whenever required or conditions are favorable to us. We have filed a shelf registration statement on Form S-3 with the SEC that was declared effective by the SEC on April 8, 2024 (File No. 333-278008), which allows us to offer and sell up to an aggregate amount of $150.0 million of any combination of common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, or units of these securities from time to time subject to Instruction I.B.6 to Form S-3 which limits the aggregate market value of securities we may sell during any 12 consecutive months to one-third of our public float for so long as our public float is less than $75.0 million. There can be no assurance that we will be able to raise additional capital or obtain additional financing when needed or on terms that are favorable to us.
We are exposed to market risks relating to fluctuations in interest rates and currency exchange risks. Significant changes in market conditions could cause interest rates to increase and have a material impact on the financing needed to operate our business.
During the fourth quarter of the year ended December 31, 2025, the Company experienced certain liquidity-related challenges resulting primarily from an adverse court ruling related to the WSCC Project (defined below) that resulted in the Company being assessed a judgment of approximately $89.1 million, inclusive of principal, fees, and interest. The ruling limited the Company’s enforceable right to recover amounts previously expected to be realized from claims associated with the project.
Following the adverse ruling, certain sureties of the Company purchased and assumed rights and obligations as lenders under the Company’s Credit Agreement. In connection with the sureties’ assumption of rights and obligations under the Credit Agreement, the Company entered into side letters with the sureties, pursuant to which the sureties waived all events of default and breaches of covenants and all principal and interest payments under the Credit Agreement until maturity.
Additionally, under existing GIAs, certain sureties advanced funds to support bonded project obligations and ongoing project performance. As of March 31, 2026 and December 31, 2025, the sureties had advanced $139.2 million and $14.1 million, respectively. These amounts are included in surety payable on our unaudited condensed consolidated balance sheets. Repayment of these amounts is not required prior to at least May 13, 2027.
On March 27, 2026, the Company entered into a settlement agreement on the WSCC Project. Certain sureties of the Company previously paid a portion of the judgement against the Company and are required to pay an additional amount under the settlement agreement. The Company and the sureties are negotiating repayment terms for the amounts paid by the sureties on behalf of the Company under a long-term financing agreement. The sureties have agreed to forbear on seeking repayment for these amounts until at least May 13, 2027. The $89.1 million judgment is included in surety payable on our unaudited condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025.
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Based on the Company’s current cash position, expected operating cash flows, existing backlog, and the actions taken by management to address recent liquidity challenges, management believes that the Company has sufficient liquidity to meet its operational and financial obligations as they come due for at least the next twelve months.
The following table sets forth summary change in cash, cash equivalent and restricted cash for the three months ended March 31, 2026 and 2025:
Three Months Ended | ||||||
(Amounts in thousands) | March 31, 2026 | | March 31, 2025 | |||
Net cash provided by (used in) operating activities | $ | (133,865) | $ | 6,429 | ||
Net cash provided by investing activities |
| 1,319 |
| 1,117 | ||
Net cash provided by (used in) financing activities |
| 96,987 |
| (13,989) | ||
Effect of exchange rate changes |
| 43 |
| (2) | ||
Net change in cash, cash equivalents, and restricted cash | $ | (35,516) | $ | (6,445) | ||
Net cash used in operating activities was $133.9 million during the three months ended March 31, 2026. During the three months ended March 31, 2026, the primary drivers in cash used in operating activities were a decrease of $104.1 million in accounts payable, retainage payable and accrued liabilities and $28.2 million in net loss. Net cash provided by operating activities was $6.4 million during the three months ended March 31, 2025. During the three months ended March 31, 2025, the primary drivers in cash provided by operating activities were an increase of $10.4 million in accounts payable and accrued liabilities, a decrease of $8.6 million in accounts receivable, and an increase of $6.9 million in contract liabilities, offset by an increase of $10.7 million in contract assets and an increase of $7.5 million in other current assets.
Net cash provided by investing activities was $1.3 million during the three months ended March 31, 2026. During the three months ended March 31, 2026, the primary drivers in cash provided by investing activities were $1.0 million in proceeds from sale of property and equipment and by $0.3 million in distributions from other investments. Net cash provided by investing activities was $1.1 million during the three months ended March 31, 2025. During the three months ended March 31, 2025, the primary drivers in cash provided by investing activities were $2.9 million in proceeds from sale of property and equipment offset by $1.8 million in purchases of property and equipment.
Net cash provided by financing activities was $97.0 million for the three months ended March 31, 2026. During the three months ended March 31, 2026, the primary drivers in cash provided by financing activities were $125.1 million in proceeds from advancement of surety funds, offset by $27.4 million in payments on notes payable. Net cash used in financing activities was $14.0 million for the three months ended March 31, 2025. During the three months ended March 31, 2025, the primary drivers in cash used in financing activities were $13.6 million in payments on notes payable and $0.3 million in payments of finance lease and financing obligations.
As of March 31, 2026, we had total debt of $230.8 million, of which $56.1 million is due within the next twelve months.
Secured Notes
We enter into secured notes in order to finance growth within our business. As of March 31, 2026, we had outstanding secured notes expiring between March 2027 and March 2033. Interest rates on the secured notes range between 0.00% and 12.90%. The secured notes are collateralized by certain assets of Southland’s fleet of equipment.
On September 30, 2024, the Company entered into a term loan and security agreement (the “Credit Agreement”) with Callodine Commercial Finance, LLC as administrative agent and lender. The Credit Agreement provides for a four-year secured $160.0 million term loan facility (the “Credit Facility”), consisting of a $140.0 million initial draw term loan (the “Term Loan”).
The Credit Facility replaced the revolving credit facility with Frost Bank that was originally entered into in July 2021 (as subsequently amended, the “Revolving Credit Facility”). A portion of the proceeds from the Term Loan was used to pay in full all outstanding amounts under the Revolving Credit Facility, and the Revolving Credit Facility was terminated.
After giving effect to the Assignment and Assumption Agreement (defined below), the Credit Facility has a maturity date of September 30, 2028.
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The Credit Agreement requires quarterly principal payments on the Term Loan, which commenced on December 31, 2024. The required principal amortization is as follows: (i) 5.0% in the first year (1.25% per quarter), (ii) 10.0% in the second year (2.50% per quarter), (iii) 15.0% in the third and fourth years (3.75% per quarter), and (iv) the remaining balance at maturity.
The interest on amounts drawn under the Credit Facility is payable monthly at a rate of 7.25% per annum plus the higher of (i) 90-day Secured Overnight Financing Rate (“SOFR”) with a credit adjustment spread of 0.15% or (ii) 3%.
Any principal prepayments in the first three years, other than mandatory prepayments pursuant to the Credit Agreement, will be subject to additional fees. In the first year, any prepayments will incur fees of 3% or the make-whole premium, whichever is higher. The make-whole premium is the interest and fees that would have been earned for the full year less interest and fees paid to date during the year. In the second and third years, any prepayments will incur fees of 2% and 1%, respectively. There are no fees for prepayments made in the fourth year.
The Credit Agreement contains customary restrictive covenants and events of default, including financial covenants based on the Company’s Liquidity, as defined in the Credit Agreement, and trailing twelve-month earnings before interest expense, income taxes, depreciation and amortization (the “TTM EBITDA Covenants”). The TTM EBITDA Covenants will be tested and the Company must comply with the TTM EBITDA Covenants during any period where the Company’s Liquidity falls below $30.0 million until the Company’s Liquidity exceeds $30.0 million for a period of at least 30 days. The Credit Agreement requires the Company to maintain Liquidity of at least $20.0 million at all times. The Credit Agreement also stipulates that the outstanding principal cannot be greater than the specified advance rates against eligible collateral.
The obligations under the Credit Facility are unconditionally guaranteed by the Company and its subsidiaries. The obligations under the Credit Facility are secured by a first lien on all assets of the Company, subject to permitted liens and interests of other parties as described in the Credit Agreement.
On March 17, 2026, the Company entered into an assignment and assumption (the “Assignment and Assumption Agreement”) with Callodine Commercial Finance, LLC (the “Resigning Agent”), solely in its capacity as “Agent” under the Credit Agreement, lenders party to the Credit Agreement (individually, an “Assignor,” and collectively, the “Assignors”), the assignees parties thereto (individually, an “Assignee,” and collectively, the “Assignees”), and Alana Porrazzo, in her capacity as Trustee of the Southland Collateral Trust, as successor agent. The Assignees include the surety providers of the Company, Berkshire Hathaway Specialty Insurance Company (“Berkshire”), Markel Insurance Company (“Markel”) and Zurich American Insurance Company (“Zurich”), Western Surety Company, Euler Hermes North America Insurance Company, Federal Insurance Company, and Hartford Fire Insurance Company.
Pursuant to the Assignment and Assumption Agreement, the Company paid the Resigning Agent, for the benefit of the Resigning Agent and the Assignors, approximately $15.4 million with respect to the loans of which approximately $14.4 million consisted of principal and approximately $1.0 million consisted of accrued interest and fees. Also, each Assignor sold and assigned to the Assignees, and each Assignee purchased and assumed from the Assignors, all of each such Assignor’s (i) right, title and interest to loans under the Credit Agreement, and (ii) rights and obligations, solely as a lender, under the Credit Agreement and related loan documents (including the Assignor’s right, title and interest in any collateral securing obligations under the Credit Agreement) (the “Assigned Interest”). The aggregate principal amount of loans comprising the Assigned Interest is approximately $110.0 million, and the Assignees agreed to pay an aggregate purchase price of approximately $110.0 million to the Resigning Agent for the ratable benefit of the Assignors.
Concurrently with the assignment of the Assigned Interests, the delayed draw term loan commitment under the Credit Agreement was terminated and is of no further force or effect.
Additionally, pursuant to side letters executed after the Assignment and Assumption Agreement, the Assignees have agreed to waive quarterly principal and monthly interest payments for all periods until maturity. In addition, the Assignees have agreed to waive any and all defaults and potential defaults and covenant violations under the Credit Agreement, including any violations that existed as of March 31, 2026 or December 31, 2025. As consideration for the foregoing, the Company has agreed to dispose of idle equipment and other assets and pursue claim collections to use the proceeds from the aforementioned transactions to make payments towards the principal balance of the loan prior to maturity.
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As of March 31, 2026, the Company was in compliance with all applicable covenants under the Credit Agreement, as amended, and after giving effect to the waiver granted by the sureties.
Mortgage Notes
We enter into mortgage notes in order to finance growth within our business. As of March 31, 2026, we had a mortgage note expiring in February 2029. The interest rate on the mortgage note was 5.99%. The mortgage note is collateralized by certain real estate owned by Southland.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
It is management’s responsibility to establish and maintain adequate disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the company’s principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Our management, including our Chief Executive Officer and our Chief Financial Officer, have reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report. Following this review and evaluation, our management determined that as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2026 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
See Note 6 – “Commitments and Contingencies”, included in the notes to our unaudited condensed consolidated financial statements included under Part I of this Quarterly Report.
Item 1A. Risk Factors
There have been no additional risk factors identified and no material changes with regard to the risk factors previously disclosed under “Item 1A. Risk Factors” to Part I of our Annual Report on Form 10-K as of the fiscal year ended December 31, 2025.
Item 5. Other Information
During the last fiscal quarter,
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Item 6. Exhibits
Exhibit No. | Description | ||
2.1 | Agreement and Plan of Merger, dated as of May 25, 2022, by and among the Company, Legato Merger Sub, Inc. and Southland Holdings, LLC (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 25, 2022). | ||
3.1 | Second Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2023). | ||
3.2 | Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2023). | ||
3.3 | Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 12, 2025). | ||
3.4 | Amendment No. 1 to Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.4 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 12, 2025). | ||
4.1 | Specimen Warrant Certificate (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-1 (File No. 333-260816) filed with the SEC on November 5, 2021). | ||
4.2 | Warrant Agreement between American Stock Transfer & Trust Company and the Company (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 23, 2021). | ||
4.3 | Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1 (File No. 333-260816) filed with the SEC on November 5, 2021). | ||
10.1* | Settlement Agreement and Release of Claims dated as of March 27, 2026, by and among Clark/Lewis, a Joint Venture; American Bridge Company; the sureties issuing Payment and Performance Bond Nos. 9196529/387007832 on behalf of American Bridge, Zurich American Insurance Company, Fidelity and Deposit Company of Maryland, and Liberty Mutual Insurance Company; the Washington State Convention Center; and Smith Currie Oles LLP. | ||
31.1* | Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 Sarbanes Oxley Act of 2002. | ||
31.2* | Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 Sarbanes Oxley Act of 2002. | ||
32.1** | Certification of Principal Executive Officer pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. | ||
32.2** | Certification of Principal Financial Officer pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. | ||
101* | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets (Unaudited); (ii) Condensed Consolidated Statements of Operations (unaudited); (iii) Condensed Consolidated Statements of Comprehensive Income (unaudited); (iv) Condensed Consolidated Statements of Equity (unaudited); (v) Condensed Consolidated Statements of Cash Flows (unaudited); and (vi) Notes to Condensed Consolidated Financial Statements (unaudited), tagged as blocks of text and including detailed tags. | ||
104* | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). | ||
*Filed herewith.
**Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized.
Date: May 12, 2026
SOUTHLAND HOLDINGS, INC. | ||
By: | /s/ Frank Renda | |
Name: | Frank Renda | |
Title: | President, Chief Executive Officer | |
(Principal Executive Officer) | ||
By: | /s/ Keith Bassano | |
Name: | Keith Bassano | |
Title: | Chief Financial Officer and Treasurer | |
(Principal Financial and Accounting Officer) | ||
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