Southland Holdings, Inc.

Good morning. My name is Chloe and I will be your conference operator today. At this time, I would like to welcome everyone to the Southland First Quarter 2025 Earnings Conference Call. All lights have been placed on me to prevent any background noise. After the speakers 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 the pound key. Thank you. Alex, you may begin your conference.

Good morning, everyone. Welcome to the Southland First Quarter 2025 Conference Call. This is Alex Murray, Vice President of Corporate Development and Investor Relations. Joining me today are Frank Renda, President and Chief Executive Officer, and Keith DeSanto, 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 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 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 a discussion of some of the risks that could affect results, please see the risk factors section of our Form 10K for the year ended December 31, 2024, that was filed with the SEC on March 5, 2025, and discussion on Form 10Q for the quarter ended March 31, 2025, that was filed with the SEC last night. We also refer to non-GAAP financial measures. You'll 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 not turn the call over to Frank.

Thank you, Alex. Good morning and thank you for joining Southland's first quarter 2025 conference call. Before we dive into our quarterly results, I'd like to begin by highlighting the additions we have made to our leadership team. As previously announced, Keith Bassano has been appointed our Chief Financial Officer. Keith brings more than 15 years of experience in the engineering and construction sector. Since joining the organization through our American Bridge subsidiary in 2008, he has consistently demonstrated outstanding leadership and financial discipline. We have also appointed Don Graal as Chief Strategy Officer. Don joined Southland following executive roles at AECOM, Parsons, and most recently as Chief Executive Officer of the Branch Group. With experience in infrastructure, construction, and engineering, Don has directly worked on some of the largest infrastructure projects worldwide, totaling over $60 billion in construction costs. These leadership additions are part of our broader strategic efforts to strengthen Southland and position ourselves for better performance over the long term. We believe Keith and Don's experience and leadership will be important assets for Southland moving forward, and I'm excited to have them in these key roles. I'd also like to recognize a remarkable milestone within Southland. American Bridge Company, founded in 1900 through a J.P. Morgan consolidation of several bridge and steel firms, celebrated its 125th anniversary this year. American Bridge has delivered many of the world's most iconic spans and steel landmarks, including the Oakland Bay Bridge, the Las Vegas High Roller, and so many more, consistently raising the bar for safety and engineering innovation. AB's commitment to excellence has remained unmatched. On behalf of the entire Southland team, I congratulate the American Bridge workforce, past and present, on more than 125 years of world-class performance. Now to discuss our quarterly results. We started the year with strong performance with revenue of $239 million, gross profit of $21.5 million, and positive cash flow from operations of $6.4 million. Consolidated gross profit margin was 9%, an increase from 7% in the prior year period. This improvement was driven by strong performance in our civil segment, which delivered a gross profit margin of 22%. Despite the adverse weather we faced in some key markets, we produced the highest first quarter consolidated gross profit margin since before COVID. Turning to the broader economic backdrop, I'd like to share our view on the potential impact of recent tariff actions and federal spending cut announcements. Based on what we know today, we do not expect the current tariffs to have a material effect on our current book of business. As we mentioned on our last call, our direct exposure to cross-border material procurement is minimal. While we don't anticipate a direct impact, there is a risk that tariffs could increase input costs over time. That said, Southland remains well positioned. We have strong risk management practices in place, including the ability to lock in major material contracts early in project life cycles, which helps protect against cost escalations. We also do not believe that government spending cuts will affect demand. The bridges, water pipelines, tunnels, and treatment facilities we build are critical. We have not had a project and backlog be affected by any spending cuts, and we do not expect a material impact on our pipeline. Demand for our business remains extremely strong for federal and state clients, and we expect this trend to continue. I'd also like to note that our historical client mix consists of approximately 80% government agencies and 20% private clients. Thanks to our diverse capabilities and strong relationships, we have the flexibility to adjust that mix in response to market demand. Because a substantial amount of our work is with government agencies and our projects are essential to the communities we work and live in, we are generally insulated from the effects of broader economic uncertainty. Combined with the sustained infrastructure investment robust demand, particularly at the federal and state levels, we believe these factors will serve as strong tailwinds for our business for years to come. During the quarter, we added approximately $137 million in new awards. This was led by two water resource projects totaling $97 million, bringing our total backlog to approximately $2.5 billion. We continue to have strong visibility into demand across our pipeline for both public and private clients with a robust pipeline. We are well positioned to win high quality work while remaining selective in our pursuit strategy. Upcoming opportunities in our civil segment include the $450 million Black Creek tunnel in Toronto. Packages from the $600 million Jordan Lake water supply program. Packages from the $2 billion Northern Colorado water glades reservoir program and numerous water and wastewater opportunities in the southwest and the southeast regions. Upcoming opportunities in our transportation segment includes several bridge projects in the northeast and Florida. We also hope to continue to develop our dedicated sub role to Kiewit on the rebuild of Francis Scott Key Bridge in Baltimore. In summary, we're off to a strong start in 2025 driven by a disciplined bidding approach, improved execution, driving strong margins and continued strength in our core business. With a deep bench of leadership and a strong pipeline of critical infrastructure opportunities ahead, we're confident in our ability to deliver value for our clients and for our stakeholders over the long term. Before turning it over to Keith, I would also like to thank our teams for participating in National Safety Week. Thanks to all employees for their continued commitment to safety. Your focus on making safety a priority every day is essential to our success. We appreciate the role each of you plays in maintaining safety.