Southland Holdings, Inc.

Music Music Music Good day, ladies and gentlemen, and welcome to the Stealth and Holdings Inc. Second Quarter 2023 Earnings Conference Call. At this time, online signing is anonymous. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, August 15th, 2023. I would now like to turn the conference over to Alex Moray. Please go ahead.

Good morning, everyone. This is Alex Murray, Director of Corporate Development and Investor Relations. Welcome to the Southland Second Quarter 2023 Conference Call. Joining me today are Frank Renda, President and Chief Executive Officer, and Cody Gallarda, Executive Vice President and Chief Financial Officer. I'd like to begin with a gentle reminder this conference call may contain forward-looking statements within the meaning 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 Southland's 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 We do not undertake any duty to update these statements. For discussion of some of the risks that could affect results, please see the risk factor section of our Form 10-Q we filed last night and our Form 10-K for the year ended December 31st, 2022, and filed with the SEC on March 21st, 2023. We also refer to non-GAAP financial measures, and you will find reconciliation in the earnings release related to this conference call, which may 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 second quarter 2023 conference call. We had a disappointing second quarter with revenue of $257 million, a decrease of $16 million compared to last year. We reported a gross loss of $34 million in the quarter, which compares to a gross profit of $38 million in the same period last year. In this quarter, we generated $24 million of operating cash driven by new project starts, which are performing well. We faced adversity this quarter, primarily driven by unfavorable charges related to the legacy materials production and paving component of our transportation segment. We made the decision to exit this business so that we can focus on the unprecedented opportunities in our core market. We are pursuing work in key markets with teams that have historically executed well and are no longer pursuing large scale paving work or aggregate production. Our core business is strong and we remain confident in our backlog. It is important to provide insight into our materials and paving business and the changes we have made as a company over the past few years. In 2016, we developed a plan to produce our own asphalt and concrete to sell to third parties. and to support our paving business. We made large CapEx investment in aggregate quarries, pits, and batch plants while pursuing large-scale roadway paving projects. By the end of 2019, our paving projects accounted for approximately 39% of our then $2.3 billion backlog. Over the last several years, our materials and paving business underperformed due to poor execution unprecedented inflation, challenging geographical locations, and supply chain issues. This end market became increasingly less attractive, and we decided to substantially shrink the size of this business to focus on more profitable end markets. At the end of the second quarter of this year, our large-scale paving work was only 12% of our $2.7 billion backlog. In the second quarter, in an effort to wind down our materials and paving business, we disposed of several assets, including asphalt batch plants, which supported a small amount of third-party sales and multiple large-scale paving projects. As a result, we recognize unfavorable charges in the quarter related to additional expected future costs to complete these projects. These additional costs are related to procuring and transporting materials from third parties. We did these paving projects several years ago with the intention to produce our own materials. Now that we are no longer producing materials for the existing paving work, we must pay elevated and inflated market prices from vendors. We took the charges this quarter for the future expected cost of completing the work. It was best to lock in prices with vendors now and mitigate the long run cost uncertainty associated with producing our own material. Large-scale materials production tied up our key people, including members of our management team, and would require significant resources to maintain. We have also shrunk the paving business to the point that it no longer makes sense to continue to operate the production assets. Ultimately, divesting from large-scale materials production and reallocating resources to our core operations is best for the long-term success of the business. We look forward to putting this legacy work behind us as we focus on the unprecedented opportunities in our core business. As a result of record awards last year, our backlog increased 36% to $2.7 billion from $2 billion at the end of the second quarter last year. Now turning to upcoming bidding opportunities in our transportation segment, We've been shortlisted on three large projects in the Northeast with combined engineers estimates exceeding $1.5 billion, which include the Livingston Avenue Bridge replacement in Albany, the RFK Suspended Span Retrofit in New York, and Connecticut River Bridge for Amtrak. We expect these projects to bid in the fourth quarter of this year. Two of these projects only have two bidders shortlisted. We are also pursuing over $2.5 billion of new pursuits on the West Coast, some of which include the earthquake-ready Burnside Bridge in Oregon, which is expected to bid this month, and the Golden Gate Bridge seismic retrofit in California. Notable opportunities in our civil segment with combined engineers estimates of approximately $1.4 billion include the San Juan Lateral Water Treatment Plant for the Bureau of Reclamation bidding in late summer, the department of defense and saw tank farm facility project bidding this fall and phase two of the North end treatment plant project in Winnipeg. We're currently working on phase one of this project. We continue to be excited about what new federal funding will do for our business over the next decade. That being said, the new federal spending has yet to have a major impact on our financial results. We have seen an elevated amount of bidding, but have not seen a large impact in our backlog from these funds. At this point, we expect to begin to see the impact to revenue in late 2024 into 2025. With that, I will now turn the call over to Cody for a financial update.