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Southland Holdings, Inc. (SLND)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered margin recovery despite lower revenue: revenue $239.486M vs $288.097M in Q1 2024 and $267.250M in Q4 2024; gross margin improved to 9.0% (from 7.1% y/y and 2.9% q/q) as Civil posted 22% gross margin while Transportation was held back by Materials & Paving (M&P) losses .
  • Net loss per share was $(0.08) (vs $(0.01) y/y; $(0.09) q/q); EBITDA turned positive at $10.084M after two weak quarters (Q4 $(2.725)M; Q3 $(58.740)M) as legacy drag moderated .
  • Backlog ended at $2.470B (down from $2.573B in Q4 on revenue recognition outpacing awards); management expects ~40% of backlog to convert over the next 12 months, with stronger activity in 2H 2025 .
  • No formal guidance; directional items reiterated: interest expense ≈$9.5M/quarter, tax rate 20–24%, M&P substantially complete by end of 2025; catalysts include Civil mid-teens margin sustainability, major Transportation project ramps (Shands Bridge, RFK), and potential cash from claim settlements (timing uncertain) .

What Went Well and What Went Wrong

  • What Went Well

    • Civil segment execution drove the quarter: Civil revenue rose to $102.916M (from $84.273M y/y) with gross margin at 22.0% (21.2% y/y). “Without the impacts from legacy write-downs, this business can consistently deliver mid-teen results.” .
    • EBITDA inflected positive to $10.084M as consolidated gross margin reached its highest first-quarter level since before COVID, aided by strong Civil performance and core backlog quality .
    • Backlog quality and pipeline: New awards of ~$137M lifted total backlog to ~$2.5B; upcoming opportunities cited across Civil (e.g., Black Creek Tunnel, Jordan Lake, Glades Reservoir) and Transportation (bridges in Northeast/Florida) .

  • What Went Wrong

    • Transport segment losses tied to M&P: Transportation posted a $(1.151)M gross loss (vs $2.551M y/y) with M&P contributing $18.1M of revenue and $(9.1)M gross profit, including a $3.5M non-cash charge .
    • Revenue declined versus both Q4 and y/y as certain projects approached completion and the M&P exit reduced volume (Q1 revenue $239.486M vs $288.097M y/y; $267.250M q/q) .
    • Legacy wind-down and disputes still weigh on predictability: management reiterated no formal guidance given dispute settlement timing uncertainty, though it expects positive operating cash flow weighted to 2H 2025 .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$173.320 $267.250 $239.486
EPS (Basic) ($)$(1.14) $(0.09) $(0.08)
Gross Profit ($USD Millions)$(51.105) $7.666 $21.480
Gross Margin (%)(29.5)% 2.9% 9.0%
EBITDA ($USD Millions)$(58.740) $(2.725) $10.084

Segment performance (Q1 2025 vs Q1 2024):

SegmentQ1 2024 Revenue ($M)Q1 2025 Revenue ($M)Q1 2024 GP ($M)Q1 2025 GP ($M)Q1 2024 GM%Q1 2025 GM%
Civil$84.273 $102.916 $17.870 $22.631 21.2% 22.0%
Transportation$203.824 $136.570 $2.551 $(1.151) 1.3% (0.8)%

Key KPIs and balance sheet:

KPIQ3 2024Q4 2024Q1 2025
Backlog (period-end, $USD Billions)$2.737 $2.573 $2.470
Cash & Equivalents ($USD Millions)$91.378 $72.185 $65.052

Additional notes:

  • Operating cash flow: +$6.429M in Q1 2025 .
  • M&P in Q1 2025: revenue $18.1M; gross profit impact $(9.1)M; includes ~$3.5M non-cash contract closeout charge .
  • “Core” excluding M&P in Q1: consolidated revenue $221M; gross profit $31M; margin 14% .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Interest expenseOngoing≈$9.5M per quarter (Q4 call) ≈$9.5M per quarter (reiterated) Maintained
Effective tax rateOngoing20%–24% (Q4 call) 20%–24% (reiterated) Maintained
M&P completionThrough 2025Substantially complete by end of 2025 (Q3/Q4 calls) Substantially complete by end of 2025 (reiterated) Maintained
Backlog conversionNext 12 months~39% of backlog expected in 2025 (Q4) ~40% expected over next 12 months (Q1) Slightly raised
Formal revenue/EPS guidance2025None (company refrains due to dispute timing) None (reiterated; dispute timing uncertain) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Civil marginsEmphasis on mid-teen margins absent legacy impacts (Q3) ; new core projects delivering double-digit margins (Q4) 22% Civil margin; can “consistently deliver mid-teen results” Improving/consistent
M&P/legacy wind-downM&P backlog ~$180M, substantially complete by end 2025 (Q3) ; M&P ~$163M; non-M&P legacy ~$83M (Q4) M&P backlog ~$139M; $(9.1)M gross profit impact incl. $3.5M non-cash; substantial completion by end 2025 Shrinking drag
Tariffs & gov. spendingMinimal cross-border exposure, “Made in America” sourcing; IIJA tailwinds (Q4) No material tariff impact expected; gov’t spending cuts not expected to affect demand Neutral
LiquidityRecord quarter-end cash; Callodine $160M term loan enhances flexibility (Q3) Unrestricted cash >2x y/y; access to delayed draw; ample liquidity Strengthening
Claims/disputesExpect significant cash inflows in 2025 from settlements; ~half of contract assets in claims on completed jobs (Q3) Progress continues; timing uncertain; expect meaningful cash in coming quarters Potential upside; timing risk
Backlog conversionExpect ~39% burn in 2025 (Q4) Expect ~40% over next 12 months (Q1) Slight uptick
Project rampsQ4 pointed to Shands and RFK ramps in 2025 Ramps to replace legacy drag; expect 2H pickup Positive setup 2H

Management Commentary

  • “We started the year with a strong performance, with revenue of $239 million, gross profit of $21.5 million, and positive cash flow from operations of $6.4 million... Civil segment... delivered a gross profit margin of 22%” .
  • “During the quarter, we added approximately $137 million in new awards… bringing our total backlog to approximately $2.5 billion” .
  • “Based on what we know today, we do not expect the current tariffs to have a material effect on our current book of business… our direct exposure to cross-border material procurement is minimal” .
  • “Our new core backlog makes up over 90% of our total backlog… new core projects continue to deliver strong double-digit margins” .

Q&A Highlights

  • Civil cadence and sustainability: Management expects Civil to sustain mid-teens margins, noting 22% is a “high bar” but achievable absent legacy impacts; revenues likely to pick up in the back half due to seasonality .
  • M&P profit impact and path: Q1 gross profit impact $(9)M (incl. ~$3.5M non-cash); backlog appropriately stated; aim to substantially complete M&P by end 2025 while generating positive operating cash flow from claim resolutions .
  • Transportation bookings and Key Bridge: Pipeline remains robust across regions; potential subcontract opportunity on Francis Scott Key Bridge as Kiewit advances design .
  • Alternative delivery updates: Winnipeg and Burnside Bridge preconstruction phases progressing; target conversion to construction contracts within ~12 months .
  • Liquidity and leverage: Ample liquidity with unrestricted cash more than double y/y; access to delayed draw facility; selective bidding emphasized .
  • Free cash flow timing: Positive operating cash flow in Q1; expected to be more heavily weighted to back half of 2025 .

Estimates Context

  • Wall Street consensus via S&P Global for Q1 2025 revenue, EPS, and EBITDA was unavailable in our query window (no estimates returned), so we cannot assess beats/misses this quarter. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Civil is the engine: Double-digit margins (22% in Q1) and management’s confidence in sustaining mid-teens margins underpin the gross margin recovery even as revenue normalizes from legacy and M&P exits .
  • Transportation should improve as project ramps replace M&P drag: Shands Bridge and RFK ramps are expected to offset the wind-down; M&P still a near-term headwind but shrinking and slated for substantial completion by end 2025 .
  • Cash catalysts exist, but timing uncertain: Management continues to work claims/disputes, expects significant cash inflows over coming quarters; model conservatively on timing .
  • Backlog solid, conversion slightly faster: Backlog is $2.470B with ~40% burn expected over next 12 months—watch 2H conversion and bookings pace to gauge 2026 visibility .
  • Interest and tax run-rate reiterated: Use ~$9.5M/quarter for interest expense and 20–24% effective tax rate for modeling until debt or rate changes warrant revisions .
  • Liquidity supports selective growth: Unrestricted cash has more than doubled y/y; delayed draw available; focus remains on higher-margin, shorter-duration Civil projects and selective large Transportation awards .
  • Near-term trading lens: Stock may react to evidence of sustained Civil margins, resolution of larger claims, visible ramps on Shands/RFK, and any Baltimore Key Bridge subcontract award; conversely, further M&P charges or delayed claims could weigh on sentiment .