Southland Holdings, Inc.

Good morning, ladies and gentlemen. My name is Sergio, and I will be your conference operator today. At this time, I would like to welcome everyone to the Southland fourth quarter and Fuji 2022 earnings conference call. All lines have been placed on you to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star, too. Thank you. Alex, you may begin your conference.

Good morning, everyone, and welcome to the Southam fourth quarter and full year 2022 earnings conference call. This is Alex Murray, Director of Corporate Development and Investor Relations. Joining me today are Frank Renda, President and Chief Executive Officer, and Cody Gallarda, Executive Vice President and Chief Financial Officer. Before we begin, I'd like to remind everyone that this conference call may contain forward-looking statements within the meeting of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Forward-looking statements are uncertain and outside of Southwest control. Southland's actual results and financial condition may differ materially from those projected in forward-looking statements. Therefore, you should not rely on any of these forward-looking statements, and we do not undertake any duty to update these statements. For discussion of some of the risks that could affect the results, please see the risk factor section of our Form 10-K for the year ended December 31, 2022, and filed with the SEC on March 21, 2023. We also refer to non-GAAP financial measures. You will find reconciliation in the earnings release relating to this conference call, which could be found on the investor relations page of our website. With that, I will now turn the call over to Frank.

Thank you, Alex. Good morning and thank you for joining Southland's first call as a publicly traded company. I want to start off by thanking the generations of hardworking individuals that made Southland who we are today and helped us to get to this historic milestone as a public company. I recently had the opportunity to ring the opening bell at the New York Stock Exchange with some of our longest tenured employees to celebrate this milestone. It was a great moment for all of our employees whose dedication has put Southland in an optimal position to succeed for many years to come. Turning to our 2022 results, we executed on our strategic initiatives and achieved record financial results amid a challenging macroeconomic backdrop and uncertainty. Our success is a testament to our employees' persistence and expertise navigating challenging environments, along with the increased demand for our services and strong secular tailwinds driving growth in our industry. We remain in a unique position as a company in an industry that has proven and continues to prove to be resilient through economic downturns. Our employees, alongside our customers, accomplished a lot this past year. I'd like to reflect on some of our success in 2022. We achieved the highest net income in EBITDA and company history. We completed SunTracks Connected, an automated vehicle test facility in Florida. We also finished tunneling one of the largest water drainage tunnels in North America and a water pipeline project in New Mexico that brought ready access to water for many parts of the Navajo Nation for the first time. We're also successfully executing our strategy and seeing increased margins as a result. Our gross margin improved from 9% in 2021 to 12% in 2022. Although our year-over-year revenue decreased 9% from approximately $1.3 billion in 2021 to $1.2 billion in 2022, we're encouraged by the improved profitability with EBITDA increasing 23% to $128 million. We will remain focused on margins and sustainable growth over the long term. We believe this is the best approach to create value and long-term returns for our shareholders. We're seeing increased bidding opportunities with fewer competitors, but we continue to be diligent and selective. We are pursuing projects with increased bid margins than in previous years. We had $1.9 billion of new project awards in 2022, which is the largest amount in any year in company history. This represents an increase of 220% compared to 2021. We ended 2022 with record backlog of nearly $3 billion, which is up 34% year over year from $2.2 billion. We booked a quarterly record of $874 million of new projects in the fourth quarter alone, and our backlog increased 25% sequentially from $2.4 billion at the end of the third quarter. We want a great mix of new projects ranging across our end market and geographies that we expect to continue to ramp up as we head into the spring and summer months. As a result of recent new awards, record backlog, and a robust pipeline, we expect revenue to increase in 2023 and beyond in line with our historical growth rates previous to 2022. We recorded approximately $500 million of new project awards in our civil segment, including several water resource projects in Oklahoma and the Southwest. We were also awarded a $70 million tunnel project for the Denver International Airport's West Gates expansion, and a $155 million water treatment plant filter complex in Dallas, Texas. In our transportation segment, we booked approximately $1.4 billion of new project awards during the year. We won two projects in Florida, including the $596 million SR23 Shands Bridge, and the $243 million U.S. 19 Pinellas County Elevated Roadway. We're also awarded two gate and lock replacement projects for the U.S. Army Corps of Engineers, totaling approximately $200 million. We're off to a great start in 2023 with $150 million of publicly announced awards as well. We could not be more excited about our outlook and the opportunities in our market. On the public client side, we're starting to see an increase in bidding opportunities as funds have begun flowing to state and local governments from the $1.2 trillion bipartisan IIJA bill that was passed by Congress. We expect this to be a catalyst for our business over the next several years. In the coming months, we expect to bid on the Golden Gate Bridge Rehab Project in California and the Livingston Bridge Project in New York. We also expect a large opportunity to bid on packages from the $20 billion Texas Gulf Coast Resiliency Flood Protection Program. We're seeing an increase in the amount of water pipeline project lettings across the Southwest as local water authorities are developing plans to increase ready access to water for their communities. We're also seeing a shift in the way our public customers are delivering projects versus previous years. Some customers are moving away from the low bid model and using an alternative delivery method. We believe this could lend to a more cooperative relationship, allowing us to partner with our customers earlier in project life cycles. Alternative delivery contracts typically get awarded based on a number of factors, including price, schedule, resume, and technical score. Roughly half of the new awards we won in 2022 in terms of dollar value. included another factor other than price in determining the project award. We believe our resume and over 120-year history of delivering specialty infrastructure projects will continue to position us well to compete and win alternative delivery projects in the coming years. On the private client side, we are seeing a strong demand from recent reshoring efforts for manufacturing semiconductor, electric vehicle, and electric vehicle battery plants. We're also seeing increased demand for several data centers and stadiums across the U.S. We expect to bid on packages from the $4 billion Panasonic electric vehicle battery plant in Kansas and the $5 billion Rivian plant in Georgia. We're also seeing opportunities to bid on packages from the new Tennessee Titans and Buffalo Bills football stadiums. In summary, 2022 was a challenging but record year for Southland. We remain optimistic about our outlook and the robust opportunities in our markets. We feel the diversity in our service offerings, along with self-performing capabilities, position us well to capitalize on the greatest infrastructure rebuild of our generation over the next several years. With that, I will turn the call over to Cody for a financial update.