Southland Announces Fourth Quarter and Full Year 2022 Results

Southland Holdings, Inc. (NYSE American: SLND and SLNDW) (“Southland”), a leading provider of specialized infrastructure construction services, today announced financial results for the quarter and year ended December 31, 2022.

• Gross profit margin of 12% for the year ended December 31, 2022, compared to 9% for the year ended December 31, 2021.
• Operating income increased 48% to $82.7 million for the year ended December 31, 2022, compared to $56.1 million for the year ended December 31, 2021.
• Operating income margin of 7% for the year ended December 31, 2022, compared to 4% for the year ended December 31, 2021.
• Net income increased 56% to $60.5 million for the year ended December 31, 2022, compared to $38.7 million for the year ended December 31, 2021.
• EBITDA increased 23% to $128.2 million for the year ended December 31, 2022, compared to $104.3 million for the year ended December 31, 2021.
• Backlog increased 34% to a record $2.97 billion as of December 31, 2022, compared to $2.22 billion as of December 31, 2021.
• Record new awards of $1.9 billion in 2022, an increase of approximately 220% compared to the prior year.
• Record new awards of $874 million in the fourth quarter of 2022.

“2022 was a great year for Southland. The efforts put forth by the men and women that make up our team led to Southland setting numerous company records. We achieved record new project awards, backlog, gross profit, operating income, and EBITDA in the year. Beyond the numbers, we had numerous operational successes delivering clean water solutions, completing flood and waterway control structures, constructing bridges that connect communities and facilitate commerce, and partnering with our customers to address vital infrastructure needs. I look forward to what the future holds for us,” said Southland Chief Executive Officer, Frank Renda.

2022 Fourth Quarter & Full Year Results

Condensed Consolidated Statements of Operations
		Three Months Ended
(Amounts in thousands)		December 31, 2022				December 31, 2021
Revenue		$	294,804			$	363,626
Cost of construction			258,948				324,048
Gross profit			35,856				39,578
Selling, general, and administrative expenses			14,836				16,115
Operating income			21,020				23,463
Gain on investments, net			(3	)			(146	)
Other income, net			(1,268	)			(1,210	)
Interest expense			2,574				1,934
Earnings before income taxes			19,717				22,885
Income tax expense (benefit)			(455	)			8,730
Net income			20,172				14,155
Net income (loss) attributable to noncontrolling interests			634				(679	)
Net income attributable to Southland Holdings		$	19,538			$	14,834

Revenue for the three months ended December 31, 2022 was $294.8 million, a decrease of $68.8 million, or 23%, compared to the three months ended December 31, 2021.

Gross profit for the three months ended December 31, 2022 was $35.9 million, a decrease of $3.7 million, or 10%, compared to the three months ended December 31, 2021. Our gross profit margin increased from 11% to 12% for the three months ended December 31, 2022 compared to the three months ended December 31, 2021.

Selling, general, and administrative expense for the three months ended December 31, 2022 were $14.8 million, a decrease of $1.3 million, or 8.6%, compared to the three months ended December 31, 2021.

Condensed Consolidated Statements of Operations
		Year Ended
(Amounts in thousands)		December 31, 2022				December 31, 2021
Revenue		$	1,161,431			$	1,279,186
Cost of construction			1,020,497				1,164,998
Gross profit			140,934				114,188
Selling, general, and administrative expenses			58,231				58,136
Operating income			82,703				56,052
(Gain) loss on investments, net			76				(898	)
Other income, net			(2,204	)			(2,780	)
Interest expense			8,891				7,255
Earnings before income taxes			75,940				52,475
Income tax expense			13,290				10,945
Net income			62,650				41,530
Net income attributable to noncontrolling interests			2,108				2,810
Net income attributable to Southland Holdings		$	60,542			$	38,720

Revenue for the year ended December 31, 2022 was $1,161.4 million, a decrease of $117.8 million, or 9.2%, compared to the year ended December 31, 2021.

Gross profit for the year ended December 31, 2022 was $140.9 million, an increase of $26.7 million, or 23.4%, compared to the year ended December 31, 2021. Our gross profit margin increased from 9% to 12% for the year ended December 31, 2022 compared to year ended December 31, 2021.

Selling, general, and administrative expense for the year ended December 31, 2022 were $58.2 million, an increase of $0.1 million, or 0.1%, compared to the year ended December 31, 2021. Selling, general, and administrative expense as a percent of revenue were 5% for the year ended December 31, 2022 compared to 4.5% for the year ended December 31, 2021. For the year ended December 31, 2022 we incurred approximately $2.2 million of costs related to Southland becoming a public company.

Segment Revenue

		Three Months Ended
(Amounts in thousands)		December 31, 2022						December 31, 2021
					% of Total						% of Total
Segment		Revenue			Revenue			Revenue			Revenue
Civil		$	84,021		28.5	%		$	98,347		27.0	%
Transportation			210,783		71.5	%			265,279		73.0	%
Total revenue		$	294,804		100.0	%		$	363,626		100.0	%

		Year Ended
(Amounts in thousands)		December 31, 2022						December 31, 2021
					% of Total						% of Total
Segment		Revenue			Revenue			Revenue			Revenue
Civil		$	305,324		26.3	%		$	391,629		30.6	%
Transportation			856,107		73.7	%			887,557		69.4	%
Total revenue		$	1,161,431		100.0	%		$	1,279,186		100.0	%

Segment Gross Profit

		Three Months Ended
(Amounts in thousands)		December 31, 2022						December 31, 2021
					% of Segment						% of Segment
Segment		Gross Profit			Revenue			Gross Profit			Revenue
Civil		$	17,149		20.4	%		$	(1,800	)	(1.8	)%
Transportation			18,707		8.9	%			41,378		15.6	%
Gross profit		$	35,856		12.2	%		$	39,578		10.9	%

		Year Ended
(Amounts in thousands)		December 31, 2022						December 31, 2021
					% of Segment						% of Segment
Segment		Gross Profit			Revenue			Gross Profit			Revenue
Civil		$	45,464		14.9	%		$	40,913		10.4	%
Transportation			95,470		11.2	%			73,275		8.3	%
Gross profit		$	140,934		12.1	%		$	114,188		8.9	%

EBITDA Reconciliation

		Three Months Ended						Year Ended
(Amounts in thousands)		December 31, 2022			December 31, 2021			December 31, 2022			December 31, 2021
Net income		$	19,538		$	14,834		$	60,542		$	38,720
Depreciation and amortization			10,534			12,217			45,697			47,468
Income tax expense (benefit)			(455	)		8,730			13,290			10,945
Interest expense			2,574			1,934			8,891			7,255
Interest income			(143	)		17			(172	)		(47	)
EBITDA		$	32,048		$	37,732		$	128,248		$	104,341

Backlog

(Amounts in thousands)		Backlog
Balance December 31, 2021		$	2,218,573
New contracts, change orders, and adjustments			1,892,946
Gross backlog			4,111,519
Less: contract revenue recognized in 2022			(1,137,634	)
Balance December 31, 2022		$	2,973,885

Condensed Consolidated Balance Sheets
		As of
(Amounts in thousands)		December 31, 2022				December 31, 2021
Cash and cash equivalents		$	57,915			$	63,342
Restricted cash			14,076				47,900
Accounts receivable, net			135,678				126,702
Retainage receivables			122,682				110,971
Contract assets			512,906				374,624
Other current assets			24,047				22,977
Total current assets			867,304				746,516
Property and equipment, net			114,084				156,031
Right-of-use assets			16,893				15,816
Investments - unconsolidated entities			113,724				103,610
Investments - limited liability companies			2,590				1,926
Investments - private equity			3,261				3,925
Goodwill			1,528				1,528
Intangible assets, net			2,218				3,215
Other noncurrent assets			3,703				3,186
Total noncurrent assets			258,001				289,237
Total assets			1,125,305				1,035,753
Accounts payable		$	126,385			$	146,455
Retainage payable			33,677				32,706
Accrued liabilities			121,584				115,057
Current portion of long-term debt			46,322				41,333
Short-term lease liabilities			16,572				20,048
Contract liabilities			131,557				111,286
Total current liabilities			476,097				466,885
Long-term debt			227,278				195,597
Long-term lease liabilities			10,032				13,496
Deferred tax liabilities			3,392				5,962
Other noncurrent liabilities			48,622				51,462
Total long-term liabilities			289,324				266,517
Total liabilities			765,421				733,402
Noncontrolling Interest			10,446				11,057
Members’ capital			327,614				267,831
Preferred stock			24,400				24,400
Accumulated other comprehensive income			(2,576	)			(937	)
Total equity			359,884				302,351
Total liabilities and equity		$	1,125,305			$	1,035,753

Condensed Consolidated Statement of Cash Flows
		Year Ended
(Amounts in thousands)		December 31, 2022				December 31, 2021
Cash flows from operating activities:
Net income		$	62,650			$	41,530
Adjustments to reconcile net income to net cash used in operating activities
Depreciation and amortization			45,697				47,468
Deferred taxes			(2,103	)			(271	)
Gain on sale of assets			(3,377	)			(5,168	)
Foreign currency remeasurement loss (gain)			548				136
(Earnings) from equity method investments			(9,299	)			(7,239	)
TZC Investment present value accretion			(2,355	)			(2,265	)
Gain on trading securities, net			(260	)			(1,145	)
(Increase) decrease in accounts receivable			(18,432	)			(7,412	)
Increase in contract assets			(138,677	)			(2,116	)
Increase in prepaid expenses and other current assets			(1,293	)			(765	)
(Increase) decrease in ROU assets			(1,315	)			5,990
(Decrease) increase in accounts payable and accrued expenses			(13,546	)			26,480
Increase (decrease) in contract liabilities			20,049				(188,654	)
Increase (decrease) in operating lease liabilities			1,264				(5,974	)
Other			(5,753	)			8,832
Net cash used in operating activities			(66,202	)			(90,573	)
Cash flows from investing activities:
Purchase of fixed assets			(4,765	)			(18,797	)
Proceeds from sale of fixed assets			10,064				11,251
Loss on investment in limited liability company			336				248
Purchase of trading securities			—				(391	)
Proceeds from the sale of trading securities			927				175
Purchase of interest of other investments			—				(150	)
Capital contribution to investees			(1,000	)			(835	)
Net cash provided by (used in) investing activities			5,562				(8,499	)
Cash flows from financing activities:
Borrowings on line of credit			75,000				67,000
Payments on line of credit			—				(82,000	)
Borrowings on notes payable			281				206,172
Payments on notes payable			(42,934	)			(153,587	)
Payments of deferred financing costs			—				(260	)
Advances to related parties			(1,603	)			(1,571	)
Payments from related parties			5				1,260
Payments on finance lease			(8,157	)			(4,716	)
Capital contributions from noncontrolling members			—				926
Distributions			(2,457	)			(2,620	)
Net cash provided by financing activities			20,135				30,604
Effect of exchange rate on cash			1,254				(686	)
Net decrease in cash and cash equivalents and restricted cash			(39,251	)			(69,154	)
Beginning of period			111,242				180,396
End of period		$	71,991			$	111,242
Supplemental cash flow information
Cash paid for income taxes		$	10,392			$	14,093
Cash paid for interest		$	9,044			$	7,519
Non-cash investing and financing activities:
Lease assets obtained in exchange for new leases		$	19,558			$	16,051
Assets obtained in exchange for notes payable		$	4,091			$	—

Conference Call

Southland will host a conference call at 10:00 a.m. Eastern Time on Thursday, March 23, 2023. The call may be accessed here, or at www.southlandholdings.com . Following the conference call, a replay will be available on Southland’s website.

About Southland

Southland is a leading provider of specialized infrastructure construction services. 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. The company serves the bridges, tunneling, transportation and facilities, marine, steel structures, water and wastewater treatment, and water pipeline end markets. Southland is headquartered in Grapevine, Texas.

For more information, please visit Southland’s website at www.southlandholdings.com.

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”), backlog, 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 also believes that these non-GAAP financial measures provide an additional tool for investors to use in evaluating ongoing operating results and trends. 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.

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.

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