Southland Holdings, LLC (“Southland”) announced financial results
for the quarter ended September 30, 2022.
- Revenue of $335 million, an increase of 6% compared to the
quarter ended September 30, 2021
- Operating income increased 228% to $46.8 million for the three
months ended September 30, 2022, compared to $14.3 million in the
three months ended September 30, 2021
- Operating income increased 89% to $61.7 million for the nine
months ended September 30, 2022, compared to $32.6 million in the
nine months ended September 30, 2021
- EBITDA increased 143% to $59.6 million for the three months
ended September 30, 2022, compared to $24.6 million in the three
months ended September 30, 2021
- EBITDA increased 44% to $96.2 million for the nine months ended
September 30, 2022, compared to $66.6 million in the nine months
ended September 30, 2021
- Gross profit margin of 19% for the three months ended September
30, 2022, compared to 9% in the quarter ended September 30,
2021
- Gross profit margin of 12% for the nine months ended September
30, 2022, compared to 8% in the nine months ended September 30,
2021
- Backlog increased to $2.37 billion as of September 30, 2022,
from $1.98 billion as of June 30, 2022
- Record new awards of $1.6 billion, year to date through the
date of this press release, an increase of approximately 154%
compared to the same period in the prior year. Approximately $900
million of these awards were included in backlog as of September
30, 2022
Frank Renda, Southland’s CEO said, “We are extremely pleased
with our third quarter results and our team’s execution throughout
North America. Revenue increased 6% compared to the same quarter
last year, which was driven by an increase in new project starts in
the quarter. We achieved record EBITDA in the quarter and our gross
profit margin expanded from 8% to 12% through the first nine months
of the year compared to the first nine months of last year. We
continue to see an improved bidding environment and a robust
project pipeline. We have been awarded $1.6 billion of new work
through today’s date for the year, which is an increase of 154%
compared to new awards through the same date in the prior year.
Backlog increased to $2.37 billion at the end of the quarter
compared to $1.98 billion last quarter as a result of strong
awards.”
“As we get closer to the consummation of our merger with Legato,
our strong financial performance, recent project awards, and future
opportunities continue to demonstrate the positive outlook we see
for Southland,” Mr. Renda continued. “The tailwinds of needed
investment in critical infrastructure across the geographies we
serve remain at an all-time high. Our Transportation segment was
recently awarded several bridge and lock projects and our Civil
segment was awarded various water pipeline and water treatment
projects across the country. We look forward to not only what these
projects will do for our customers, but their ability to deliver
value to our shareholders.”
2022 Third Quarter Results
Condensed Consolidated Statements of
Operations (unaudited)
| |
|
|
|
|
|
|
| |
|
Three Months Ended |
| (Amounts in thousands) |
|
September 30, 2022 |
|
September 30, 2021 |
|
Revenue |
|
$ |
335,125 |
|
|
$ |
315,411 |
|
| Cost of construction |
|
|
272,715 |
|
|
|
285,985 |
|
| Gross
profit |
|
|
62,410 |
|
|
|
29,426 |
|
| Selling, general, and
administrative expenses |
|
|
15,606 |
|
|
|
15,151 |
|
| Operating
income |
|
|
46,804 |
|
|
|
14,275 |
|
| (Loss) gain on investments,
net |
|
|
(100 |
) |
|
|
475 |
|
| Other expense (income),
net |
|
|
2,292 |
|
|
|
659 |
|
| Interest expense |
|
|
(2,285 |
) |
|
|
(1,579 |
) |
| Earnings before income
taxes |
|
|
46,711 |
|
|
|
13,830 |
|
| Income tax expense |
|
|
10,588 |
|
|
|
2,393 |
|
| Net
income |
|
|
36,123 |
|
|
|
11,437 |
|
| Net income attributable to
noncontrolling interests |
|
|
924 |
|
|
|
2,476 |
|
| Net income
attributable to Southland Holdings |
|
$ |
35,199 |
|
|
$ |
8,961 |
|
Revenue for the three months ended September 30, 2022, was
$335.1 million, an increase of $19.7 million, or 6%, compared to
the three months ended September 30, 2021.
Gross profit for the three months ended September 30, 2022 was
$62.4 million, an increase of $33.0 million, or 112%, compared to
the three months ended September 30, 2021. Our gross profit margin
increased from 9% to 19% for the three months ended September 30,
2022 compared to the three months ended September 30, 2021.
Selling, general, and administrative costs for the three months
ended September 30, 2022 were $15.6 million, an increase of $0.5
million, or 3%, compared to the three months ended September 30,
2021.
Condensed Consolidated Statements of
Operations (unaudited)
| |
|
|
|
|
|
|
|
| |
|
Nine Months Ended |
|
| (Amounts in thousands) |
|
September 30, 2022 |
|
September 30, 2021 |
|
|
Revenue |
|
$ |
866,627 |
|
|
$ |
915,560 |
|
|
| Cost of construction |
|
|
761,549 |
|
|
|
840,950 |
|
|
| Gross
profit |
|
|
105,078 |
|
|
|
74,610 |
|
|
| Selling, general, and
administrative expenses |
|
|
43,395 |
|
|
|
42,021 |
|
|
| Operating
income |
|
|
61,683 |
|
|
|
32,589 |
|
|
| (Loss) gain on investments,
net |
|
|
(79 |
) |
|
|
752 |
|
|
| Other expense (income),
net |
|
|
936 |
|
|
|
1,570 |
|
|
| Interest expense |
|
|
(6,317 |
) |
|
|
(5,321 |
) |
|
| Earnings before income
taxes |
|
|
56,223 |
|
|
|
29,590 |
|
|
| Income tax expense |
|
|
13,745 |
|
|
|
2,215 |
|
|
| Net
income |
|
|
42,478 |
|
|
|
27,375 |
|
|
| Net income attributable to
noncontrolling interests |
|
|
1,474 |
|
|
|
3,489 |
|
|
| Net income
attributable to Southland Holdings |
|
$ |
41,004 |
|
|
$ |
23,886 |
|
|
Revenue for the nine months ended September 30, 2022 was $866.6
million, a decrease of $48.9 million, or 5%, compared to the nine
months ended September 30, 2021.
Gross profit for the nine months ended September 30, 2022, was
$105.1 million, an increase of $30.5 million, or 41%, compared to
the nine months ended September 30, 2021. Our gross profit margin
increased from 8% to 12% for the nine months ended September 30,
2022 compared to the nine months ended September 30, 2021.
Selling, general, and administrative costs for the nine months
ended September 30, 2022 were $43.4 million, an increase of $1.4
million, or 3%, compared to the nine months ended September 30,
2021. Selling, general, and administrative costs as a percent of
revenue were 5% for the nine months ended September 30, 2022
compared to 4.6% for the nine months ended September 30, 2021.
Segment Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
| (Amounts in thousands) |
|
September 30, 2022 |
|
September 30, 2021 |
|
|
|
|
|
|
% of Total |
|
|
|
% of Total |
|
|
Segment |
|
Revenue |
|
Revenue |
|
Revenue |
|
Revenue |
|
| Civil |
|
$ |
71,409 |
|
21.3 |
% |
$ |
112,161 |
|
35.6 |
% |
| Transportation |
|
|
263,716 |
|
78.7 |
% |
|
203,250 |
|
64.4 |
% |
| Total revenue |
|
$ |
335,125 |
|
100.0 |
% |
$ |
315,411 |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended |
|
| (Amounts in thousands) |
|
September 30, 2022 |
|
September 30, 2021 |
|
| |
|
|
|
|
%of Total |
|
|
|
|
% of Total |
|
|
Segment |
|
Revenue |
|
Revenue |
|
Revenue |
|
Revenue |
|
| Civil |
|
$ |
221,303 |
|
25.5 |
% |
$ |
293,282 |
|
32.0 |
% |
| Transportation |
|
|
645,324 |
|
74.5 |
% |
|
622,278 |
|
68.0 |
% |
| Total revenue |
|
$ |
866,627 |
|
100.0 |
% |
$ |
915,560 |
|
100.0 |
% |
Segment Gross Profit
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
| (Amounts in thousands) |
|
September 30, 2022 |
|
September 30, 2021 |
|
| |
|
|
|
|
% of Segment |
|
|
|
|
%of Segment |
|
|
Segment |
|
Gross Profit |
|
Revenue |
|
Gross Profit |
|
Revenue |
|
|
Civil |
|
$ |
8,926 |
|
12.5 |
% |
$ |
33,822 |
|
|
30.2 |
|
% |
| Transportation |
|
|
53,484 |
|
20.3 |
% |
|
(4,396 |
) |
|
(2.2 |
) |
% |
| Gross profit |
|
$ |
62,410 |
|
18.6 |
% |
$ |
29,426 |
|
|
9.3 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended |
|
| (Amounts in thousands) |
|
September 30, 2022 |
|
September 30, 2021 |
|
|
|
|
|
|
%of Segment |
|
|
|
|
%of Segment |
|
|
Segment |
|
Gross Profit |
|
Revenue |
|
Gross Profit |
|
Revenue |
|
| Civil |
|
$ |
28,315 |
|
12.8 |
% |
$ |
42,713 |
|
14.6 |
% |
| Transportation |
|
|
76,763 |
|
11.9 |
% |
|
31,897 |
|
5.1 |
% |
| Gross profit |
|
$ |
105,078 |
|
12.1 |
% |
$ |
74,610 |
|
8.1 |
% |
EBITDA Reconciliation
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
Nine Months Ended |
| (Amounts in thousands) |
|
September 30, 2022 |
|
September 30, 2021 |
|
September 30, 2022 |
|
September 30, 2021 |
|
Net income |
|
$ |
35,199 |
|
|
$ |
8,961 |
|
|
$ |
41,004 |
|
|
$ |
23,886 |
|
| Depreciation and
amortization |
|
|
11,523 |
|
|
|
11,675 |
|
|
|
35,163 |
|
|
|
35,251 |
|
| Income taxes |
|
|
10,587 |
|
|
|
2,393 |
|
|
|
13,745 |
|
|
|
2,215 |
|
| Interest expense |
|
|
2,285 |
|
|
|
1,579 |
|
|
|
6,317 |
|
|
|
5,321 |
|
| Interest income |
|
|
(18 |
) |
|
|
(44 |
) |
|
|
(29 |
) |
|
|
(64 |
) |
| EBITDA |
|
$ |
59,576 |
|
|
$ |
24,564 |
|
|
$ |
96,200 |
|
|
$ |
66,609 |
|
Backlog
| |
|
|
|
| (Amounts in thousands) |
|
Backlog |
|
Balance December 31, 2021 |
|
$ |
2,218,573 |
|
| New contracts, change orders, and
adjustments |
|
|
1,018,825 |
|
| Gross backlog |
|
|
3,237,398 |
|
| Less: contract revenue recognized
in 2022 |
|
|
(866,977 |
) |
| Balance
September 30, 2022 |
|
$ |
2,370,421 |
|
Condensed Consolidated Balance Sheets
(unaudited)
| |
|
|
|
|
|
|
| |
|
As of |
| (Amounts in thousands) |
|
September 30, 2022 |
|
December 31, 2021 |
|
Cash and cash equivalents |
|
$ |
43,306 |
|
|
$ |
63,342 |
|
| Restricted cash |
|
|
14,218 |
|
|
|
47,900 |
|
| Accounts receivable, net |
|
|
148,125 |
|
|
|
126,702 |
|
| Retainage receivables |
|
|
116,122 |
|
|
|
110,971 |
|
| Contract assets |
|
|
447,549 |
|
|
|
374,624 |
|
| Other current assets |
|
|
23,976 |
|
|
|
22,977 |
|
| Total current
assets |
|
|
793,296 |
|
|
|
746,516 |
|
| |
|
|
|
|
|
|
| Property and equipment,
net |
|
|
126,893 |
|
|
|
156,031 |
|
| Right-of-use assets |
|
|
14,636 |
|
|
|
15,816 |
|
| Investments - unconsolidated
entities |
|
|
110,395 |
|
|
|
103,610 |
|
| Investments - limited
liability companies |
|
|
2,590 |
|
|
|
1,926 |
|
| Investments - private
equity |
|
|
3,345 |
|
|
|
3,925 |
|
| Goodwill |
|
|
1,528 |
|
|
|
1,528 |
|
| Intangible assets, net |
|
|
2,470 |
|
|
|
3,215 |
|
| Other noncurrent assets |
|
|
3,626 |
|
|
|
3,186 |
|
| Total noncurrent
assets |
|
|
265,483 |
|
|
|
289,237 |
|
| Total
assets |
|
|
1,058,779 |
|
|
|
1,035,753 |
|
| |
|
|
|
|
|
|
| Accounts payable |
|
$ |
132,806 |
|
|
$ |
146,455 |
|
| Retainage payable |
|
|
34,533 |
|
|
|
32,706 |
|
| Accrued liabilities |
|
|
124,371 |
|
|
|
115,057 |
|
| Current portion of long-term
debt |
|
|
44,678 |
|
|
|
41,333 |
|
| Short-term lease
liabilities |
|
|
16,444 |
|
|
|
20,048 |
|
| Contract liabilities |
|
|
81,930 |
|
|
|
111,286 |
|
| Total current
liabilities |
|
|
434,762 |
|
|
|
466,885 |
|
| |
|
|
|
|
|
|
| Long-term debt |
|
|
219,713 |
|
|
|
195,597 |
|
| Long-term lease
liabilities |
|
|
9,750 |
|
|
|
13,496 |
|
| Deferred tax liabilities |
|
|
5,601 |
|
|
|
5,962 |
|
| Other noncurrent
liabilities |
|
|
48,579 |
|
|
|
51,462 |
|
| Total long-term
liabilities |
|
|
283,643 |
|
|
|
266,517 |
|
| Total
liabilities |
|
|
718,405 |
|
|
|
733,402 |
|
| |
|
|
|
|
|
|
| Noncontrolling Interest |
|
|
10,155 |
|
|
|
11,057 |
|
| Members’ capital |
|
|
308,422 |
|
|
|
267,831 |
|
| Preferred stock |
|
|
24,400 |
|
|
|
24,400 |
|
| Accumulated other
comprehensive income |
|
|
(2,603 |
) |
|
|
(937 |
) |
| Total
equity |
|
|
340,374 |
|
|
|
302,351 |
|
| Total liabilities and
equity |
|
$ |
1,058,779 |
|
|
$ |
1,035,753 |
|
Condensed Consolidated Statement of Cash
Flows (unaudited)
| |
|
|
|
|
|
|
|
| |
|
Nine Months Ended |
|
| (Amounts in thousands) |
|
September 30, 2022 |
|
September 30, 2021 |
|
| Cash flows from operating
activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
42,478 |
|
|
$ |
27,375 |
|
|
| Adjustments to reconcile net
income to net cash used in operating activities |
|
|
|
|
|
|
|
| Depreciation and
amortization |
|
|
35,163 |
|
|
|
35,251 |
|
|
| Deferred taxes |
|
|
(440 |
) |
|
|
(77 |
) |
|
| Gain on sale of assets |
|
|
(1,343 |
) |
|
|
(4,225 |
) |
|
| Earnings from equity method
investments |
|
|
(7,346 |
) |
|
|
(5,439 |
) |
|
| Foreign currency remeasurement
loss |
|
|
746 |
|
|
|
108 |
|
|
| Gain on trading securities,
net |
|
|
(257 |
) |
|
|
(1,285 |
) |
|
| Increase in accounts
receivable |
|
|
(24,167 |
) |
|
|
(46,111 |
) |
|
| (Increase) decrease in contract
assets |
|
|
(72,703 |
) |
|
|
25,677 |
|
|
| (Increase) decrease in prepaid
expenses and other current assets |
|
|
(1,001 |
) |
|
|
5,839 |
|
|
| Decrease in ROU assets |
|
|
930 |
|
|
|
3,621 |
|
|
| (Decrease) increase in accounts
payable, accrued expenses, and other current liabilities |
|
|
(6,997 |
) |
|
|
23,469 |
|
|
| Decrease in contract
liabilities |
|
|
(29,591 |
) |
|
|
(126,297 |
) |
|
| Decrease in operating lease
liabilities |
|
|
(1,206 |
) |
|
|
(3,663 |
) |
|
| Other |
|
|
(5,202 |
) |
|
|
173 |
|
|
| Net cash used in operating
activities |
|
|
(70,936 |
) |
|
|
(65,584 |
) |
|
| |
|
|
|
|
|
|
|
| Cash flows from investing
activities: |
|
|
|
|
|
|
|
| Purchase of property and
equipment |
|
|
(4,384 |
) |
|
|
(16,104 |
) |
|
| Proceeds from sale of property
and equipment |
|
|
3,897 |
|
|
|
10,066 |
|
|
| Loss on investment in limited
liability company |
|
|
336 |
|
|
|
248 |
|
|
| Proceeds from the sale of trading
securities |
|
|
840 |
|
|
|
— |
|
|
| Purchase of interest of other
investments |
|
|
— |
|
|
|
(150 |
) |
|
| Capital contribution to
unconsolidated investments |
|
|
(1,000 |
) |
|
|
(835 |
) |
|
| Net cash used in investing
activities |
|
|
(311 |
) |
|
|
(6,775 |
) |
|
| |
|
|
|
|
|
|
|
| Cash flows from financing
activities: |
|
|
|
|
|
|
|
| Borrowings on line of credit |
|
|
55,000 |
|
|
|
41,000 |
|
|
| Payments on line of credit |
|
|
— |
|
|
|
(72,000 |
) |
|
| Borrowings on notes payable |
|
|
115 |
|
|
|
204,819 |
|
|
| Payments on notes payable |
|
|
(31,161 |
) |
|
|
(141,785 |
) |
|
| Payments of deferred financing
costs |
|
|
— |
|
|
|
412 |
|
|
| Payments to related parties |
|
|
(405 |
) |
|
|
(674 |
) |
|
| Advances from related
parties |
|
|
— |
|
|
|
1,225 |
|
|
| Payments on capital lease |
|
|
(6,298 |
) |
|
|
(3,585 |
) |
|
| Capital contributions from
noncontrolling members |
|
|
— |
|
|
|
926 |
|
|
| Distributions |
|
|
(1,556 |
) |
|
|
(573 |
) |
|
| Preferred stock dividends |
|
|
— |
|
|
|
(97 |
) |
|
| Net cash provided by financing
activities |
|
|
15,695 |
|
|
|
29,668 |
|
|
| |
|
|
|
|
|
|
|
| Effect of exchange rate on
cash |
|
|
1,834 |
|
|
|
(1,769 |
) |
|
| |
|
|
|
|
|
|
|
| Net decrease in cash and cash
equivalents and restricted cash |
|
|
(53,718 |
) |
|
|
(44,460 |
) |
|
| Beginning of period |
|
|
111,242 |
|
|
|
180,396 |
|
|
| End of period |
|
$ |
57,524 |
|
|
$ |
135,936 |
|
|
| |
|
|
|
|
|
|
|
| Supplemental cash flow
information |
|
|
|
|
|
|
|
| Cash paid for income taxes |
|
$ |
6,153 |
|
|
$ |
13,882 |
|
|
| Cash paid for interest |
|
$ |
6,464 |
|
|
$ |
5,538 |
|
|
| Non-cash investing and financing
activities: |
|
|
|
|
|
|
|
| Lease assets obtained in exchange
for new leases |
|
$ |
12,537 |
|
|
$ |
10,296 |
|
|
About Southland
Southland is a leading provider of specialized infrastructure
construction services across North America including bridges,
tunneling, transportation and facilities, marine, steel structures,
water and wastewater treatment, and water pipeline end markets.
With roots dating back to 1900, Southland and its subsidiaries form
one of the largest infrastructure construction companies in North
America, with experience throughout the world. Southland is
headquartered in Grapevine, Texas.
On May 25th, 2022, Southland entered into an Agreement and Plan
of Merger (the “Agreement”) with publicly-traded Legato Merger
Corp. II, a special purpose acquisition company (NASDAQ: LGTO,
LGTOU, and LGTOW) (“Legato”). Pursuant to the terms of the
Agreement, a subsidiary of Legato will merge with and into
Southland, with Southland surviving the merger as a wholly-owned
subsidiary of Legato. The existing Southland management team will
remain in place upon the closing of the merger. At such time,
Legato’s name is expected to change to Southland Holdings, Inc.
Non-GAAP Financial Measures
This press release includes certain unaudited financial measures
not presented in accordance with generally accepted accounting
principles (“GAAP”), including but not limited to earnings before
interest, taxes, depreciation, and amortization (“EBITDA”) and
certain ratios and other metrics derived therefrom. Note that other
companies may calculate these non-GAAP financial measures
differently, and therefore such financial measures may not be
directly comparable to similarly titled measures of other
companies. Further, these non-GAAP financial measures are not
measures of financial performance in accordance with GAAP and may
exclude items that are significant in understanding and assessing
financial results. Therefore, these measures should not be
considered in isolation or as an alternative to net income, cash
flows from operations or other measures of profitability, liquidity
or performance under GAAP. Southland believes that these non-GAAP
measures of financial results provide useful information to
management and investors regarding certain financial and business
trends relating to Southland’s financial condition and results of
operations. Southland believes that these non-GAAP financial
measures provide an additional tool for investors to use in
evaluating ongoing operating results and trends, and in comparing
Southland’s financial measures with those of other similar
companies. These non-GAAP financial measures are subject to
inherent limitations as they reflect the exercise of judgments by
management about which items of expense and income are excluded or
included in determining these non-GAAP financial measures. The
non-GAAP measures may also be presented differently in the SEC
filings by Legato due to SEC rules.
Forward-Looking Statements
This press release contains “forward-looking statements” within
the meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are neither historical facts nor assurances of future
performance. Instead, they are based only on Southland’s current
beliefs, expectations and assumptions regarding the future of
Southland’s business, future plans and strategies, projections,
anticipated events and trends, the economy and other future
conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict and many of
which are outside of Southland’s control. Southland’s actual
results and financial condition may differ materially from those
indicated in the forward-looking statements. Therefore, you should
not rely on any of these forward-looking statements.
Any forward-looking statement made by Southland in this press
release is based only on information currently available to
Southland and speaks only as of the date on which it is made.
Southland undertakes no obligation to publicly update any
forward-looking statement, whether written or oral, that may be
made from time to time, whether as a result of new information,
future developments or otherwise.
Southland Contacts:
Cody GallardaEVP, Chief Financial
Officercgallarda@southlandholdings.com
Alex MurrayCorporate Development & Investor
Relationsamurray@southlandholdings.com
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