Executive Summary

Q3 2025 showed clear operational improvement but a headline GAAP loss driven by a one-time non-cash tax valuation allowance; revenue rose 23% YoY to $213.3M while gross margin improved to 1.5% from (29.5)% YoY, yet GAAP EPS was $(1.39) due to a $57.2M tax expense from the valuation allowance .
Civil segment performance was the bright spot (10.5% segment GM), while Transportation remained loss-making but improved materially YoY; backlog ended at $2.26B (RUPO $2.3B) supporting forward visibility .
Management emphasized winding down legacy projects (including Materials & Paving losses) and focusing on core civil/transportation work; SG&A leverage continued (6.8% of revenue) .
Consensus from S&P Global was unavailable for Q3; third-party transcript pages indicated revenue and EPS misses vs external expectations, with the one-time tax charge and legacy project adjustments likely the main stock-reaction catalysts .

What Went Well and What Went Wrong

What Went Well
- Civil segment delivered 10.5% gross margin and $10.4M gross profit, a $28.8M YoY improvement on new starts and absence of prior-year unfavorable adjustments .
- Company-level gross profit turned positive ($3.3M) from a $(51.1)M loss in Q3’24; SG&A decreased 16.6% YoY and fell to 6.8% of revenue, showing discipline and leverage .
- CEO emphasized core execution momentum as legacy backlog winds down: “While this quarter’s results reflect a one-time non-cash tax charge and unfavorable adjustments related to certain legacy projects and dispute resolutions, these items do not impact the momentum we are seeing across our core business” .
What Went Wrong
- Transportation remained negative gross profit at $(7.2)M (−6.3% margin), though improved vs last year; M&P continued to be a drag (−$3.0M to Q3 gross profit) .
- Large non-cash tax valuation allowance ($62.5M established; $57.2M Q3 expense) produced the $(1.39) GAAP EPS despite operating improvements .
- Interest expense rose to $9.2M in Q3 amid higher rates and financing costs; cash declined YTD with $6.9M cash from operations vs higher debt service outflows .

Financial Results

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025	Q3 2025 (Consensus)
Revenue ($USD Millions)	$173.32	$239.49	$215.38	$213.34	$241.52 (implied by miss of $28.18M)
Gross Profit ($USD Millions)	$(51.11)	$21.48	$13.36	$3.28	n/a
Gross Margin (%)	(29.5)%	9.0%	6.2%	1.5%	n/a
Net Loss Attrib. to Stockholders ($USD Millions)	$(54.73)	$(4.55)	$(10.31)	$(75.27)	n/a
Diluted EPS ($)	$(1.14)	$(0.08)	$(0.19)	$(1.39)	$(0.19) (implied by miss of $1.20)
EBITDA ($USD Millions)	$(58.74)	$10.08	$4.19	$(3.50)	n/a
SG&A ($USD Millions)	$17.49	$16.46	$13.57	$14.59	n/a
SG&A as % of Revenue	10.1%	6.9%	6.3%	6.8%	n/a

Notes: S&P Global consensus unavailable for Q3 2025; consensus shown is from third-party transcript page (Seeking Alpha). Values retrieved from S&P Global were unavailable.

Segment Breakdown – Revenue and Gross Profit (Loss)

Segment	Q3 2024 Revenue ($M)	Q3 2025 Revenue ($M)	Q3 2024 GP ($M)	Q3 2025 GP ($M)
Civil	$55.85	$99.48	$(18.34)	$10.43
Transportation	$117.47	$113.86	$(32.77)	$(7.15)
Total	$173.32	$213.34	$(51.11)	$3.28

KPIs and Balance Sheet Snapshot

KPI	Q3 2024	Q3 2025
Backlog ($USD Billions)	n/a	$2.26
Remaining Unsatisfied Performance Obligations (RUPO)	n/a	$2.3B; ~39% next 12 months
Cash & Cash Equivalents ($M)	$72.19 (12/31/24 ref)	$40.48
Total Debt, Net ($M)	$300.15 (12/31/24 net)	$267.80 (net)
Cash from Operations (YTD, $M)	$12.24 (9M’24)	$6.89 (9M’25)
Interest Expense (Quarter, $M)	$7.52	$9.17

Guidance Changes

Southland did not issue formal quantitative guidance for revenue, margins, EPS, or other line items in Q3 2025 materials.

Metric	Period	Previous Guidance	Current Guidance	Change
Company revenue	FY/Quarter	Not provided	Not provided	Maintained no formal guidance
Margins	FY/Quarter	Not provided	Not provided	Maintained no formal guidance
EBITDA	FY/Quarter	Not provided	Not provided	Maintained no formal guidance
Tax rate	FY/Quarter	Not provided	One-time valuation allowance recorded in Q3 (non-cash)	New one-time item

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 and Q2 2025)	Current Period (Q3 2025)	Trend
Core execution/margins	Q1: “improved margins and positive operating cash flow”; robust pipeline . Q2: “sustained margin improvement” via discipline; IIJA tailwind .	Civil margins strong; Transportation improved YoY but negative; emphasis on “new core work” .	Improving in Civil; Transportation stabilizing off lows.
Legacy projects & M&P wind-down	Ongoing wind-down, refocus on core .	Legacy project adjustments and M&P still a drag (−$3.0M Q3 GP); winding down legacy backlog .	Headwind diminishing; nearing completion.
Backlog/visibility	Backlog $2.47B (Q1) ; $2.32B (Q2) .	Backlog $2.26B; RUPO $2.3B; ~39% next 12 months .	Solid, slightly lower as work burns.
Tax/valuation allowance	n/a	$62.5M valuation allowance recorded; $57.2M Q3 tax expense .	One-time non-cash; not recurring run-rate.
Macro/tariffs/supply chain	IIJA tailwind cited (Q2) .	Tariff actions monitored; no meaningful impact to date on ongoing projects .	Neutral.
Liquidity/covenants	Term loan in place; financing updates through 2024 .	In covenant compliance; $18.7M delayed draw availability .	Stable liquidity; higher interest burden.

Management Commentary

CEO Frank Renda: “Our core business continues to perform well, evidenced by the strength in our civil segment and the continued execution of our new core work… While this quarter’s results reflect a one-time non-cash tax charge and unfavorable adjustments related to certain legacy projects and dispute resolutions, these items do not impact the momentum we are seeing across our core business” .
On tax: Company established a $62.5M valuation allowance against U.S. federal/state deferred tax assets, driving a $57.2M Q3 tax expense; management views this as non-cash and potentially reversible if profitability supports realization in future years .
On M&P: Materials & Paving reduced gross profit by $3.0M in Q3; most of remaining M&P work is expected to substantially complete in the near term, with a few projects extending into 2026 .

Q&A Highlights

Topics addressed on the public call included core business momentum, legacy project wind-down, backlog quality, and the non-cash tax valuation allowance that impacted GAAP EPS; transcript venues posted the full discussion .
Management reiterated discipline in bidding and operational execution, consistent with prior quarters, and pointed to IIJA and public spending as demand support (echoing Q2 messaging) .
Liquidity and covenant compliance were confirmed; availability under the delayed draw and minimum liquidity requirements were discussed in filings .

Estimates Context

S&P Global consensus estimates for Q3 2025 EPS and revenue were unavailable at retrieval time. Values retrieved from S&P Global were unavailable.
Third-party transcript page reported: revenue of $213.34M missed by $28.18M (implying ~$241.52M consensus) and EPS of $(1.39) missed by $1.20 (implying consensus of ~$(0.19)); note the one-time non-cash tax valuation allowance as a key driver of GAAP EPS .

Key Takeaways for Investors

Civil momentum is real: double-digit segment gross margin underscores core strength; Transportation is still negative but far less loss-making than last year as legacy projects burn off .
Headline GAAP EPS was dominated by a non-cash tax allowance; underlying operating trajectory improved YoY with SG&A leverage and positive gross profit; watch for progression toward sustained positive EBITDA and margin in Transportation .
Backlog/RUPO provide multi-quarter visibility; focus on mix shift toward higher-margin core projects as legacy/M&P work winds down .
Interest costs remain elevated; cash generation (YTD CFO $6.9M) and covenant compliance are key monitoring items amid a 9%+ weighted-average debt cost .
Near-term trading: external consensus “misses” were driven partly by the tax allowance and legacy adjustments—investors should parse non-recurring vs core trends; incremental updates on legacy claims/adjustments and Transportation margin progression are likely stock movers .
Medium-term thesis: if Civil strength persists and Transportation margins normalize while backlog converts, the earnings power could inflect; execution on bid discipline, claim resolutions, and working capital remains central to equity upside .

Sources

Q3 2025 8-K with earnings press release (Exhibit 99.1): revenue, profitability, segment data, EBITDA, backlog, SG&A, cash flow .
Q3 2025 10-Q: valuation allowance and tax details, RUPO, segment narratives, liquidity/covenants .
Q2 2025 8-K press release: results and segment detail .
Q1 2025 8-K press release: results and segment detail .
External transcript/press release postings: Seeking Alpha transcript summary (miss details), Business Wire/FT press release mirror .

Southland Holdings, Inc. (SLND)·Q3 2025 Earnings Summary