Southland Holdings, Inc.

Good morning, ladies and gentlemen, and welcome to the Southland Holdings Inc. 3rd Quarter 2024 Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press the star 0 for the operator. This call is being recorded on Wednesday, November 13, 2024. I would now like to turn the conference over to Alex Murray. Please go ahead.

Good morning, everyone, and welcome to the Southland third quarter 2024 conference call. This is Alex Murray, Director of Corporate Development and Investor Relations. Joining me today are Frank Runda, 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 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 the 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 on March 4th, 2024, and discussion on Form 10-Q for the quarter ended September 30th, 2024, 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 relating to this conference call, which can 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 third quarter 2024 conference call. Third quarter revenue was $173 million with a gross loss of $51 million. It is important to bifurcate our third quarter income statement between the M&P business certain legacy projects, and our new core business. Excluding unfavorable adjustments from the M&P business and certain legacy projects, our gross profit in the quarter was $20 million. The unfavorable adjustments, which were largely non-cash in the quarter, negatively impacted our results by $71 million. The unfavorable adjustments were driven by recent dispute resolutions, scheduled delays that increased completion costs on certain projects, and reduced expected recoveries on legacy projects. At the end of the quarter, we had approximately $180 million of remaining M&P backlog and approximately $105 million of non-M&P legacy backlog. We expect the remaining M&P backlog to be substantially complete by the end of 2025. Despite the significant impact of non-cash charges on this quarter's results, We are encouraged by the strong performance of our new core projects, which delivered double digit margins. This result underscores the strength of our strategic initiatives and gives us confidence in our direction. The solid performance of our new core projects aligns well with our long term strategy, as these initiatives are not only delivering strong margins now, but also positioning us for sustained success. I'm very excited about the new core work, which makes up approximately $2.5 billion of backlog. Our new core work is the best backlog we've ever had. This work provides us with great visibility heading into 2025 as our new core projects continue to ramp up and our legacy projects continue to burn off. Given the strength in our new core backlog and strategic improvements to internal processes, I expect we will return to profitability in 2025. During the third quarter, we also successfully executed upon several strategic initiatives to bolster our balance sheet. We closed the quarter with the strongest quarter in cash position we've ever had since going public. We closed the $42.5 million real estate transaction in July. We also closed $160 million senior secured term loan facility with Caledine Commercial Finance in the quarter. The initial term loan consisted of $140 million initial draw term loan and a committed $20 million delayed draw term loan. This refinance extended the maturity of a large portion of our debt to 2028. The real estate transaction and the new facility significantly strengthened our machine. This strength in balance sheet gives us additional flexibility, enabling us to capitalize on new opportunities, confidently execute on our backlog, and respond swiftly to market changes. With our enhanced cash position, we are better positioned to drive higher profitability and pursue attractive opportunities in our markets. We ended the quarter with $2.74 billion of backlog, essentially flat from last quarter and up from $2.54 billion at the end of the third quarter last year. We booked approximately $140 million of new awards during the quarter. This included $132 million water treatment plant for the Bureau of Reclamation. We also have several projects which we are the apparent low bidder on and expect to convert into backlog after finalizing contract negotiations. We are thrilled with the momentum of our new core backlog, but the pipeline we are tracking is truly exceptional, the most robust and promising we've ever seen. We believe we are well positioned to capitalize on this significant opportunity. We are experiencing sustained demand across our core markets, as demand for infrastructure construction services continues to outpace the supply of qualified contractors. This imbalance has created a unique opportunity for us to bid on projects with limited competition. Moving forward, we will remain selective, focusing on projects that align well with our strengths and objectives. A key component of our strategic plan is to focus on securing smaller dollar, shorter duration projects that yield quick cash flow. We're pursuing numerous shorter duration projects in the 30 to $150 million range that expect to bid over the next six months. Our civil segment market continues to be very attractive and is a key area of focus for us to pick up shorter duration projects. We're also tracking some larger projects in our civil segment, including the $600 million I-35 CapEx drainage relief tunnel in Austin, Texas, the $350 million Hydro One tunnel in Toronto, Canada, $120 million civil and utility package for Dallas-Fort Worth Airport's Terminal F, the $500 million Hudson River Gateway tunnel in between New York and New Jersey. In our transportation segment, Upcoming opportunities include the $300 million I-195 Washington Bridge replacement in Rhode Island and the $1 billion Garden City Parkway Sky Bridge in Ontario, Canada. We're also actively engaging with state and local officials in the southeast to explore ways we can support and contribute to rebuilding the region's infrastructure following the recent natural disasters. Additionally, we expect to have the opportunity to bid on smaller packages from large programs we are tracking over the coming quarters. This includes the $1 billion Red River Valley water supply program in North Dakota. We are currently working on an initial phase of this program. We're also tracking various packages from the approximately $7 billion GBRA water secure program A $2 billion program for the Northern Colorado Water District and a $440 million water program for the city of Thornton, Colorado. We're tracking over $20 billion of transportation projects in the Northeast. We're also following projects in some of our key transportation markets, including Texas and Florida, which are planning to spend tens of billions of dollars in the coming years. This robust pipeline gives us clear visibility into long-term growth opportunities that will drive our business for years to come. With unmatched resources and expertise, we are uniquely positioned to fully capitalize on this unprecedented potential. To recap, we faced several non-cash losses this quarter, largely due to the impacts of the M&P business and certain legacy projects. We are excited about how our new core work is performing and the visibility our new core backlog provides us as we head into 2025. We have also made significant strides to improve our balance sheet and into the quarter with the highest quarter in cash balance we have had since becoming a public company. The improvement in our balance sheet positions us well to perform on our great backlog and capitalize on the best pipeline of opportunities we have ever seen. Before closing, I'd like to highlight some recent achievements by our teams. Thanks to the hard work and dedication of our people, we have recently achieved several operational milestones, including opening the east and westbound lanes of a paving project in Arkansas and completing the final concrete deck placement on a challenging bridge project in the Midwest. Additionally, our Mill Creek Tunnel project team achieved an impressive safety milestone. surpassing 1.5 million work hours without a single lost time incident. Thank you to each of our team members for your unwavering commitment to safety and quality, which sets us up for a strong 2025 and beyond. With that, I'll now turn the call over to Cody for a financial update.