Southland Holdings, Inc.

Good morning, my name is Sergio and I will be your conference operator today. At this time, I would like to welcome everyone to the Southland Third Quarter 2023 conference call. All lines have been placed on mute 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, simply press star, then the number two. Thank you. Alex, you may begin your conference.

Good morning, everyone. This is Alex Murray, Director of Corporate Development and Investor Relations. Welcome to the Southland Third Quarter 2023 conference call. Joining me today are Frank Renda, President and Chief Executive Officer, and Cody Gallardo, 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 and 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 factors section of our form 10Q we filed last night and our form 10K for the year ended December 31st, 2022 and filed with the SEC on March 21st, 2023. We will also refer to non-GAAP financial measures and you will find reconciliations in the earnings release relating to this conference call, which could be found on the investment 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 third quarter 2023 conference call. Revenue for the quarter was $312 million. This is a decrease in revenue compared to the third quarter in the prior year of $335 million. The decrease in revenue in the quarter was driven by the timing of new project starts and the continued effort to close out legacy materials and paving projects. We are making good progress and have decreased the remaining M&P backlog to approximately $290 million, which is a decrease of 14% from last quarter. Gross profit margin for the quarter was 9.5%. Our core business had a strong performance, but was offset by challenges in our legacy projects. Although we still have more to do finishing out this legacy backlog, we have made significant strides this quarter to complete this work. We recognize that while we have made progress on this legacy work and have made necessary operational changes, challenges remain as we work towards completion. We're on track to putting this work behind us and focusing solely on the core business, which continues to perform well. We finished the quarter with $2.54 billion of backlog. This is an increase of 7% from $2.37 billion at the end of the third quarter last year. During the third quarter, we had $150 million in new awards, which included a marine project in our transportation segment for a private client in the Caribbean. We have a strong track record of completing technical marine projects and have a strong presence in the region. This project is very similar in scope to the existing project that we are currently building for another private client in the region. The new project is in the design phase and is anticipated to start by the second quarter of next year. The timing works well as the existing marine project is expected to wind down by the second quarter of next year, and we will start mobilizing crews to the new project at this time. Also included in the $150 million of new awards in the third quarter was the utility relocation project in our civil segment for the city of Denton, Texas. We have started mobilizing crews and expect construction to start late this year. We're off to a great start for new awards in the fourth quarter. Yesterday we announced the $77 million water pipeline project that we are awarded in North Dakota. The project includes installing over eight miles of 72 inch diameter pipe. This project is an initial phase of the over $1 billion Red River Valley water supply project. The project is expected to provide a sustainable water supply to a community that has experienced periods of drought and the total program is expected to benefit nearly 50% of the state's population. We anticipate there will be an additional opportunity to bid on remaining packages from this program over the next several quarters. I'm also pleased to announce the Southland Joint Venture has been selected as construction manager, general contractor, or CMGC for the earthquake-ready Burnside Bridge in Portland, Oregon. A Southland subsidiary was part of the fabrication team for the original Burnside Bridge in 1926, and we're excited to work with our partners in the county to help upgrade an essential route for the community. We will work collaboratively with the owner through the design phase over the next two years. We anticipate our portion of the total contract to range between $200 to $300 million. The construction contract execution is expected in late 2025 or early 2026 and will be added to backlog at that time. I would also like to remind you that a different Southwind joint venture was selected at CMGC for a broadband project in May of this year. Conversations with the owner have progressed well, and we anticipate booking our $40 million portion of this total expected $80 million project into backlog in the second quarter of 2024 when construction is expected to start. This brings our total pending CMGC contracts to approximately $300 million, which are not included in our $2.54 billion backlog today. We feel highly confident the CMGC pre-construction contracts will turn into construction awards as they typically do. We also believe the total dollar amount of these projects can grow as we finalize the pre-construction phases. Early in the fourth quarter, we have also completed several small emergency water and bridge repair projects in our key markets in the southeast and in Sunbelt states. These types of emergency projects are a reflection of our diverse capabilities and strong relationships with our clients and key markets. As anticipated, we had a significant bidding activity in the back half of the year. We currently have nearly $2 billion of bids or proposals pending. We anticipate being notified if we will be selected for these projects over the next several months. This includes the Lock and Dam 25 project in Missouri for the US Army Corps of Engineers, which has received partial funding from the IIJA. We are also awaiting notification on two projects submitted last week, including the RFK suspended span retrofit in New York and phase two of the north end treatment plant project in Winnipeg. We are currently working on phase one of this project. We also continue to see robust demand across our end market, despite macroeconomic uncertainty and higher cost of capital. As we have stated previously, approximately 80% of our revenue is generated from public agencies that are well-funded, have essential infrastructure projects that must be completed, and are not materially impacted by higher borrowing costs. Federal infrastructure spending has also yet to have a major impact on backlog today, although we are seeing increased bidding activities and expect to see more opportunities in 2024 and 2025 as IIJA funding continues to flow to federal, state, and local agencies. We believe this funding will provide us with consistent opportunities and to be a sustainable tailwind for the next decade. Additionally, we continue to see strong demand from blue chip private clients. Over the next two months, we expect to bid on over $1 billion of projects where we are shortlisted. We will compete for these project opportunities against a very limited number of competitors. In summary, bidding activities have increased in the second half of the year, and we are awaiting final notification on a significant number of bids. We continue to be optimistic about the exciting opportunities in front of us. There continues to be a high level of demand for our wide breadth of infrastructure services in spite of macroeconomic uncertainty and the rising cost of capital. With that, I will now turn this call over to Cody for a financial update.