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Southland Holdings, Inc. (SLND)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $267.3M, down 15.5% y/y; gross profit was $7.7M (2.9% margin); GAAP EPS was $(0.09); EBITDA was $(2.7)M. Core results excluding Materials & Paving (M&P) showed $231M revenue and ~$15M gross profit (6.5% margin), underscoring healthier underlying performance .
  • Results were negatively impacted by legacy/M&P items: M&P contributed $35.6M revenue but reduced gross profit by $7.6M; management cited dispute resolutions and increased completion costs on legacy projects as primary drivers .
  • Backlog ended at $2.57B with 39% expected to convert in 2025; “new core” backlog approximates $2.3B and is delivering double‑digit margins on projects; pending alternative delivery contracts of ~ $750M are not in backlog .
  • Balance sheet/tax/interest guide: founders converted $20M of notes into equity; 2025 tax rate expected at 20–24%; interest expense expected ~ $9.5M per quarter; management targets positive EBITDA by year-end 2025 .
  • S&P Global consensus estimates for Q4 2024 were unavailable at request time due to data access limits; no beat/miss assessment vs Street is included (see Estimates Context) [GetEstimates error].

What Went Well and What Went Wrong

  • What Went Well

    • Core projects produced “double‑digit margins” in Q4; core excluding M&P delivered ~$15M gross profit on $231M revenue (6.5% margin), validating portfolio shift and execution quality .
    • Backlog remained robust at $2.57B, with “new core” work at ~$2.3B and ~39% of backlog expected to burn in 2025—providing visibility into an improving 2025 trajectory .
    • Balance sheet actions: $20M of founder promissory notes converted to equity; SG&A fell $4.2M y/y in Q4, reflecting cost controls and alignment with core focus .

  • What Went Wrong

    • M&P and legacy projects weighed on results: M&P contributed $35.6M of Q4 revenue but reduced gross profit by $7.6M; transportation segment margin was (0.2)%; an unfavorable legacy dispute ruling also hit Civil .
    • EBITDA was negative $(2.7)M in Q4, and interest expense rose y/y to $9.6M on higher debt balances and rates; management still expects quarterly interest near $9.5M going forward .
    • Legacy backlog remains an overhang: M&P backlog ~$163M and non‑M&P legacy backlog ~$83M; management expects most non‑M&P legacy done by end of 2025, with one project potentially into 2026 .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($M)$316.2 $173.3 $267.3
Gross Profit ($M)$21.1 $(51.1) $7.7
Gross Margin (%)6.7% (29.5)% 2.9%
SG&A ($M)$19.9 $17.5 $15.7
Operating Income (Loss) ($M)$1.2 $(68.6) $(8.0)
Interest Expense ($M)$5.7 $7.5 $9.6
Net Income (Loss) to Stockholders ($M)$(5.6) $(54.7) $(4.2)
EPS (Diluted, $)$(0.12) $(1.14) $(0.09)
EBITDA ($M)$9.1 $(58.7) $(2.7)
Backlog ($B)—$2.74 $2.57

Segment revenue

Segment Revenue ($M)Q4 2023Q3 2024Q4 2024
Civil$108.3 $55.8 $103.8
Transportation$207.9 $117.5 $163.5
Total$316.2 $173.3 $267.3

Segment gross profit (loss) and margins

Segment GP ($M) / MarginQ4 2023Q3 2024Q4 2024
Civil$24.5 / 22.7% $(18.3) / (32.8)% $8.0 / 7.7%
Transportation$(3.4) / (1.6)% $(32.8) / (27.9)% $(0.4) / (0.2)%
Consolidated$21.1 / 6.7% $(51.1) / (29.5)% $7.7 / 2.9%

Core vs. reported (Q4 2024)

Q4 2024 ($M)RevenueGross ProfitMargin
Reported Consolidated$267.3 $7.7 2.9%
Excluding M&P (Consolidated Core)~$231.0 ~ $15.0 ~6.5%

KPIs and balance sheet

KPIQ4 2024Notes
Backlog$2.57B Burn ~39% in 2025
New Awards (Q4)~$105M Book-to-bill ~0.39x (derived from awards/revenue)
“New core” backlog~$2.3B Management: strong double‑digit margins on core
M&P backlog~$163M Target substantial completion by end 2025
Non‑M&P legacy backlog~$83M Majority done by end 2025; 1 project may tail into 2026
Net Debt (YE)~$213M Includes cash and restricted cash
Cash & Restricted (YE)$87.6M Cash $72.2M; restricted $15.4M
Interest expense run‑rate~$9.5M/quarter Management expectation
Effective tax rate guide20–24% Ongoing expectation

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Interest expense2025 (quarterly)~ $9.5M/quarter (Q3 commentary) ~ $9.5M/quarter Maintained
Effective tax rate2025+20–24% (Q3) 20–24% Maintained
Backlog conversion2025Not specified~39% of YE backlog to burn in 2025 New metric disclosed
EBITDA trajectory2025Return to profitability in 2025 (Q3) Expect positive EBITDA by end‑2025 Refined timing
Legacy wind‑down (non‑M&P)Through 2025Substantial completion over next few quarters; some items post‑2025 (Q3) Majority done by end‑2025; one project may extend into 2026 Updated detail
M&P wind‑downThrough 2025Substantially complete by mid‑2025 (Q2) Remaining M&P backlog ~$163M; expect immaterial post‑2025 (implied) Timing broadened; backlog reduced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Core vs legacy mixQ2: large non‑cash charges to settle legacy disputes; pivot to core work Core projects delivering double‑digit margins; consolidated core ex‑M&P margin ~6.5% Improving core profitability as legacy burns down
M&P wind‑downQ2: target mid‑2025 substantial completion M&P backlog ~$163M; consolidated impact –$7.6M gross in Q4 Shrinking but still a drag; completion expected by end‑2025
Claims/collectionsQ2: $58M settlements collected in Q3; significant claims on completed jobs Expect significant cash flow from claims in coming quarters; net contract position ~>$200M Potential cash catalyst; timing uncertain
Backlog & pipelineQ2/Q3: Backlog ~$2.74B; robust pipeline; shift to alternative delivery YE backlog $2.57B; ~39% burn in 2025; pending alt‑delivery ~$750M High visibility; AD pipeline supports 2025–26
Large project rampsQ3: delayed starts but ramp expected 2025 ramps: $600M Shands Bridge (FL), $410M RFK Bridge rehab (NY), $243M US‑19 (FL) Ramps later in 2025; supports H2 improvement
Macro/supply chain/tariffsQ3: not a primary driver Minimal tariff impact due to Made‑in‑USA sourcing; lock material pricing; monitoring fuel/costs Manageable risk profile
Weather/seasonalityQ2/Q3: weather headwinds noted Some unusual weather; diversified footprint limits disruption Ongoing variable but diversified
Interest/taxQ3: interest ~$9.5M/qtr; tax 20–24% Interest ~$9.5M/qtr; tax 20–24% Stable guidance

Management Commentary

  • “Fourth quarter revenue was $267 million with a gross profit of $8 million. Excluding unfavorable adjustments from the M&T business and certain legacy projects, our gross profit in the quarter was $35 million” .
  • “Our new core work makes up approximately $2.3 billion of backlog… projects that we expect to ramp up this year… Shands Bridge… RFK Bridge… US 19” .
  • “We… executed another strategic initiative to bolster our balance sheet. We converted $20 million of certain promissory notes… to common stock” .
  • “We ended the quarter with $2.57 billion of backlog… approximately $750 million of pending alternative delivery contracts not included in backlog” .
  • “We expect interest expense to remain in the $9.5 million per quarter range going forward” .
  • “On a go‑forward basis, we expect the tax rate to be in the 20% to 24% range” .

Q&A Highlights

  • Backlog conversion and awards cadence: Book‑to‑burn was sub‑1.0x in Q4 with ~$100M awards; management expects back‑half awards to pick up and pending ~$750M AD contracts to convert .
  • EBITDA trajectory: “We expect to return to positive EBITDA numbers by the end of this year (2025)… cadence uncertain early in the year” .
  • Contract assets/liabilities and claim cash: Net contract position slightly over $200M; expect significant cash inflows from claim settlements as negotiations progress .
  • Civil segment and legacy impacts: Core civil performing strongly with double‑digit margins; an unfavorable dispute ruling on a legacy civil project pressured results .
  • Legacy wind‑down timing: Majority of non‑M&P legacy done by end‑2025; one project could extend into 2026 .
  • Tariffs/supply chain inflation: Limited exposure due to Buy America sourcing and early price locks; not expected to be material .

Estimates Context

  • S&P Global consensus for Q4 2024 EPS, revenue, and EBITDA was unavailable at request time due to a temporary data‑access limit on the S&P Global API; therefore, we cannot benchmark reported results against Wall Street consensus for this quarter [GetEstimates error].
  • Management provided no formal 2025 revenue/EPS guidance; Street models may revisit cadence to positive EBITDA (now targeted by year‑end 2025) and legacy loss burn‑down pace following Q4 disclosures .

Key Takeaways for Investors

  • Core operations are improving beneath the surface: ex‑M&P core delivered ~6.5% gross margin in Q4 with project‑level double‑digit margins; as legacy burns off, reported metrics should converge toward core .
  • 2025 setup: ~39% of $2.57B backlog expected to convert, with ramps on Shands, RFK Bridge, and US‑19; watch for H2‑weighted inflection and positive EBITDA by year‑end 2025 .
  • Cash catalysts: Management expects significant claim‑related cash inflows over coming quarters; monitoring net contract position and collections is key to de‑risking the balance sheet .
  • M&P and legacy drag persists near‑term: M&P backlog ~$163M and non‑M&P legacy ~$83M remain headwinds; majority non‑M&P legacy done by end‑2025, one project may extend into 2026 .
  • Cost structure and financing visibility: SG&A down y/y; interest expense guided at ~$9.5M/quarter; tax rate 20–24%; founders’ $20M note conversion supports equity and flexibility .
  • Pipeline/AD opportunities: ~$750M pending AD contracts not in backlog plus strong IIJA/state programs underpin multi‑year opportunity; disciplined bidding should support margin quality .
  • Risk monitor: Weather variability, timing of dispute resolutions, transportation segment execution, and any further legacy adjustments remain watch items; tariff exposure currently minimal due to domestic sourcing and early price locks .

Appendix: Additional Q4 2024 Details (from 8‑K)

  • M&P in Q4: $35.6M revenue; $(7.6)M gross profit impact; consolidated gross margin 2.9% .
  • Segment margins Q4: Civil 7.7%; Transportation (0.2)%; consolidated $7.7M gross profit .
  • Full‑year 2024: Revenue $980.2M; gross loss $(63.0)M; net loss $(105.4)M; Adjusted EBITDA $(100.4)M; YE cash & restricted $87.6M; YE net debt ~$213M .