Southland Holdings, Inc.

Good morning. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Southland fourth quarter and full year 2023 earnings 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, please press star followed by two. Thank you. Alex, you may begin your conference.

morning everyone and welcome to the southland fourth quarter and full year 2023 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 gallardo 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 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 10-K for the year ended December 31st, 2023 that was filed with the SEC last night. We will also refer to non-GAAP financial measures, and you will find reconciliations in the press release related to this conference call, which can be found on the investor relations page of our website. With that, I'll now turn the call over to Frank.

Thank you, Alex. Good morning and thank you for joining Southland's fourth quarter and full year 2023 conference call. Before discussing our quarterly and annual results, I'd like to take a moment to extend my gratitude to our exceptional teams throughout North America. Our employees, subcontractors, and clients have achieved significant milestones in the past year. Let's take a moment to highlight some of our operational successes in 2023. We completed the construction of 28 bridges as part of the expansive Brightline Rail Project in Florida, marking the much anticipated start of rail services from Miami to Orlando. We received multiple awards for our outstanding work, including E&R Merit Project of the Year Awards, for our SunTracks Connected Automated Vehicle Test Facility and the San Juan Lateral Water Supply Project. Our Bear Creek Tunnel Rehabilitation Project in Michigan also secured the AWWA Project of the Year Award, showcasing our proficiency in emergency repair work. Our Corporate Equipment Team was also honored by T-Mobile for our excellence in employee enablement during the year. These accomplishments underscore the commitment and capability of our teams across North America, demonstrating our unwavering dedication to delivering the highest quality work. Turning to our fourth quarter and full year results, we reported $316 million of revenue and a gross profit of $21 million in the fourth quarter. Revenue for the year was $1.2 billion and gross profit was $36 million. We posted mixed results in the fourth quarter driven by positive cash flow from operations of $26 million and strong performance in our civil segment offset by impacts in our transportation segment from unfavorable charges from our materials and paving business. We have brought the remaining M&P backlog down to approximately $240 million or 8.5% of our backlog. and expect to complete a substantial portion of the remaining work in 2024 with a smaller amount of work to be completed in 2025. We acknowledge the challenges from our legacy projects persist, and we continue to face headwinds completing this work. We continue to make progress on completing these projects and expect to have the opportunity to settle a considerable number of legacy claims with a focus on generating cash in 2024. We also continue to gain momentum with new projects in our core business which are demonstrating strong performance. We anticipate this trend to continue bolstering our confidence and sustained success moving forward. The projects that we won late in 2022 are ramping up and we expect them to contribute a larger amount to overall results in 2024 compared to 2023. This includes the $596 million SR23 or Shands Bridge in Jacksonville, Florida, the $70 million Denver International Airport Westgate Fond Expansion Project, the $42 million Atoco Water Pipeline Project in Oklahoma, the $243 million U.S. 19 Pinellas County Project in Clearwater, Florida, and the $155 million Elm Fork Water Treatment Plant Filter Complex in Dallas, Texas. We also continue to win work in a very favorable bidding environment with limited competition. We had $1 billion of new project awards in 2023. We ended the year with $2.8 billion of backlog. On our last call, we mentioned we had over $2 billion of bids and proposals pending. We did a great job converting on those opportunities and booked $600 million of new awards in the fourth quarter alone. Our backlog increased 12% sequentially from $2.54 billion at the end of the third quarter. In our transportation segment, we booked approximately $460 million of new awards during the quarter. This included the Robert F. Kennedy Bridge Rehab Project in New York City that was discussed on our last call. We constructed the original bridge, formerly known as the Triborough Bridge, in 1936. We were also awarded the San Francisco Oakland Bay Bridge Main Cable and Suspender Ropes Rehab Project in California. We also built the original western span of this bridge in 1936 and completed the eastern span of this bridge in 2014. These two projects demonstrate the need to upgrade and rehab these structures that were originally built nearly 100 years ago. We are seeing opportunities like this from aging infrastructure across the country. In our civil segment, we booked approximately $140 million of new awards during the quarter. This included a $77 million phase of the Red River Valley Water Supply Project in North Dakota. This project's an initial phase of the over $1 billion program. We also were awarded a tunnel project in Dallas and several water resource projects during the quarter. We continue to see a healthy bidding environment in all of our end markets. Local and state agencies are spending on critical infrastructure projects across the country. We've also seen an uptick in bidding opportunities in the past few months from the $1.2 trillion bipartisan IIJA bill that was passed by Congress, but are still in the early innings of the impact from this spending. Recently announced allocations from this bill include the $5.8 billion of funding for clean water infrastructure. The IIJA provides $50 billion of funding to support upgrades to the nation's water and wastewater infrastructure. This is the largest investment in clean water in American history, and less than half of the funding has been allocated. The Biden administration also recently announced a $16.4 billion allocation from the IIJA to repair and replace rail infrastructure in the Northeast to support 25 bridge and tunnel projects for Amtrak's Northeast corridor. We expect to bid on certain packages from these recent allocations as they come out to bid in the coming years. We're also tracking several components of large programs in some of our key geographical markets in the South, including Texas and Florida. These states are expanding transportation and water resource infrastructure in response to strong population growth in recent years. The states are utilizing substantial budget surpluses and grants from federal funding to expand critical infrastructure for their communities. In the coming months, we expect to bid on several billion dollars of work. This includes the San Juan Lateral Water Treatment Plant, which we expect to bid in March. We also expect to bid on packages from the Galveston Matox of Dean Pass in Texas and the SR 30 DuPont Bridge in Florida. In summary, 2023 was a challenging year for Southland, but I'm proud of the operational successes our teams accomplished. Our results were weighed down primarily by issues in our materials and paving business, which we continue to wind down. We look forward to putting these legacy issues behind us in the coming quarters and focusing solely on the great opportunities in our core business. We maintain a positive outlook about the robust opportunities in our markets and are excited about what local, state, and federal spending will have on our business over the coming years. With that, I will now turn the call over to Cody for a financial update.